G.R. No.

92288 February 9, 1993

BRITISH AIRWAYS, INC., Petitioner, vs. THE HON. COURT OF APPEALS, Twelfth Division, and FIRST INTERNATIONAL TRADING
AND GENERAL SERVICES, Respondents.
Quasha, Asperilla, Ancheta, Pea & Nolasco for petitioner.
Monina P. Lee for private respondent.

NOCON, J.:
This is a petition for review on certiorari to annul and set aside the decision dated November 15, 1989 of the Court of Appeals 1affirming
the decision of the trial court 2in ordering petitioner British Airways, Inc. to pay private respondent First International Trading and General
Services actual damages, moral damages, corrective or exemplary damages, attorney's fees and the costs as well as the Resolution
dated February 15, 1990 3denying petitioner's Motion for Reconsideration in the appealed decision.
It appears on record that on February 15, 1981, private respondent First International Trading and General Services Co., a duly licensed
domestic recruitment and placement agency, received a telex message from its principal ROLACO Engineering and Contracting Services
in Jeddah, Saudi Arabia to recruit Filipino contract workers in behalf of said principal. 4c
During the early part of March 1981, said principal paid to the Jeddah branch of petitioner British Airways, Inc. airfare tickets for 93
contract workers with specific instruction to transport said workers to Jeddah on or before March 30, 1981.
As soon as petitioner received a prepaid ticket advice from its Jeddah branch to transport the 93 workers, private respondent was
immediately informed by petitioner that its principal had forwarded 93 prepaid tickets. Thereafter, private respondent instructed its travel
agent, ADB Travel and Tours. Inc., to book the 93 workers with petitioner but the latter failed to fly said workers, thereby compelling
private respondent to borrow money in the amount of P304,416.00 in order to purchase airline tickets from the other airlines as
evidenced by the cash vouchers (Exhibits "B", "C" and "C-1 to C-7") for the 93 workers it had recruited who must leave immediately since
the visas of said workers are valid only for 45 days and the Bureau of Employment Services mandates that contract workers must be
sent to the job site within a period of 30 days.
Sometime in the first week of June, 1981, private respondent was again informed by the petitioner that it had received a prepaid ticket
advice from its Jeddah branch for the transportation of 27 contract workers. Immediatety, private respondent instructed its travel agent to
book the 27 contract workers with the petitioner but the latter was only able to book and confirm 16 seats on its June 9, 1981 flight.
However, on the date of the scheduled flight only 9 workers were able to board said flight while the remaining 7 workers were rebooked
to June 30, 1981 which bookings were again cancelled by the petitioner without any prior notice to either private respondent or the
workers. Thereafter, the 7 workers were rebooked to the July 4,1981 flight of petitioner with 6 more workers booked for said flight.
Unfortunately, the confirmed bookings of the 13 workers were again cancelled and rebooked to July 7,
1981.chanroblesvirtualawlibrarychanrobles virtual law library
On July 6, 1981, private respondent paid the travel tax of the said workers as required by the petitioner but when the receipt of the tax
payments was submitted, the latter informed private respondent that it can only confirm the seats of the 12 workers on its July 7, 1981
flight. However, the confirmed seats of said workers were again cancelled without any prior notice either to the private respondent or said

workers. The 12 workers were finally able to leave for Jeddah after private respondent had bought tickets from the other
airlines.chanroblesvirtualawlibrarychanrobles virtual law library
As a result of these incidents, private respondent sent a letter to petitioner demanding compensation for the damages it had incurred by
the latter's repeated failure to transport its contract workers despite confirmed bookings and payment of the corresponding travel
taxes.chanroblesvirtualawlibrarychanrobles virtual law library
On July 23, 1981, the counsel of private respondent sent another letter to the petitioner demanding the latter to pay the amount of
P350,000.00 representing damages and unrealized profit or income which was denied by the
petitioner.chanroblesvirtualawlibrarychanrobles virtual law library
On August 8, 1981, private respondent received a telex message from its principal cancelling the hiring of the remaining recruited
workers due to the delay in transporting the workers to Jeddah. 5chanrobles virtual law library
On January 27, 1982, private respondent filed a complaint for damages against petitioner with the Regional Trial Court of Manila, Branch
1 in Civil Case No. 82-4653.chanroblesvirtualawlibrarychanrobles virtual law library
On the other hand, petitioner, alleged in its Answer with counterclaims that it received a telex message from Jeddah on March 20, 1981
advising that the principal of private respondent had prepaid the airfares of 100 persons to transport private respondent's contract
workers from Manila to Jeddah on or before March 30, 1981. However, due to the unavailability of space and limited time, petitioner had
to return to its sponsor in Jeddah the prepaid ticket advice consequently not even one of the alleged 93 contract workers were booked in
any of its flights.chanroblesvirtualawlibrarychanrobles virtual law library
On June 5, 1981, petitioner received another prepaid ticket advice to transport 16 contract workers of private respondent to Jeddah but
the travel agent of the private respondent booked only 10 contract workers for petitioner's June 9, 1981 flight. However, only 9 contract
workers boarded the scheduled flight with 1 passenger not showing up as evidenced by the Philippine Airlines' passenger manifest for
Flight BA-020 (Exhibit "7", "7-A", "7-B" and "7-C"). 6chanrobles virtual law library
Thereafter, private respondent's travel agent booked seats for 5 contract workers on petitioner's July 4, 1981 flight but said travel agent
cancelled the booking of 2 passengers while the other 3 passengers did not show up on said flight.chanroblesvirtualawlibrarychanrobles
virtual law library
Sometime in July 1981, the travel agent of the private respondent booked 7 more contract workers in addition to the previous 5 contract
workers who were not able to board the July 4, 1981 flight with the petitioner's July 7, 1981 flight which was accepted by petitioner
subject to reconfirmation.chanroblesvirtualawlibrarychanrobles virtual law library
However on July 6, 1981, petitioner's computer system broke down which resulted to petitioner's failure to get a reconfirmation from
Saudi Arabia Airlines causing the automatic cancellation of the bookings of private respondent's 12 contract workers. In the morning of
July 7, 1981, the computer system of the petitioner was reinstalled and immediately petitioner tried to reinstate the bookings of the 12
workers with either Gulf Air or Saudi Arabia Airlines but both airlines replied that no seat was available on that date and had to place the
12 workers on the wait list. Said information was duly relayed to the private respondent and the 12 workers before the scheduled
flight.chanroblesvirtualawlibrarychanrobles virtual law library
After due trial on or on August 27, 1985, the trial court rendered its decision, the dispositive portion of which reads as follows:

WHEREFORE, in view of all the foregoing, this Court renders judgment:chanrobles virtual law library
1. Ordering the defendant to pay the plaintiff actual damages in the sum of P308,016.00;chanrobles virtual law library
2. Ordering defendant to pay moral damages to the plaintiff in the amount of P20,000.00;chanrobles virtual law library
3. Ordering the defendant to pay the plaintiff P10,000.00 by way of corrective or exemplary damages;chanrobles virtual law library
4. Ordering the defendant to pay the plaintiff 30% of its total claim for and as attorney's fees; andchanrobles virtual law library
5. To pay the costs. 7chanrobles virtual law library
On March 13, 1986, petitioner appealed said decision to respondent appellate court after the trial court denied its Motion for
Reconsideration on February 28, 1986.chanroblesvirtualawlibrarychanrobles virtual law library
On November 15, 1989, respondent appellate court affirmed the decision of the trial court, the dispositive portion of which reads:
WHEREFORE, the decision appealed from is hereby AFFIRMED with costs against the appellant. 8chanrobles virtual law library
On December 9, 1989, petitioner filed a Motion for Reconsideration which was also denied.chanroblesvirtualawlibrarychanrobles virtual
law library
Hence, this petition.chanroblesvirtualawlibrarychanrobles virtual law library
It is the contention of petitioner that private respondent has no cause of action against it there being no perfected contract of carriage
existing between them as no ticket was ever issued to private respondent's contract workers and, therefore, the obligation of the
petitioner to transport said contract workers did not arise. Furthermore, private respondent's failure to attach any ticket in the complaint
further proved that it was never a party to the alleged transaction.chanroblesvirtualawlibrarychanrobles virtual law library
Petitioner's contention is untenable.chanroblesvirtualawlibrarychanrobles virtual law library
Private respondent had a valid cause of action for damages against petitioner. A cause of action is an act or omission of one party in
violation of the legal right or rights of the other. 9Petitioner's repeated failures to transport private respondent's workers in its flight despite
confirmed booking of said workers clearly constitutes breach of contract and bad faith on its part. In resolving petitioner's theory that
private respondent has no cause of action in the instant case, the appellate court correctly held that:
In dealing with the contract of common carriage of passengers for purpose of accuracy, there are two (2) aspects of the same, namely:
(a) the contract "to carry (at some future time)," which contract is consensual and is necessarily perfected by mere consent (See Article
1356, Civil Code of the Philippines), and (b) the contract "of carriage" or "of common carriage" itself which should be considered as a real
contract for not until the carrier is actually used can the carrier be said to have already assumed the obligation of a carrier. (Paras, Civil
Code Annotated, Vol. V, p. 429, Eleventh Ed.)chanrobles virtual law library
In the instant case, the contract "to carry" is the one involved which is consensual and is perfected by the mere consent of the
parties.chanroblesvirtualawlibrarychanrobles virtual law library
There is no dispute as to the appellee's consent to the said contract "to carry" its contract workers from Manila to Jeddah. The appellant's
consent thereto, on the other hand, was manifested by its acceptance of the PTA or prepaid ticket advice that ROLACO Engineering has
prepaid the airfares of the appellee's contract workers advising the appellant that it must transport the contract workers on or before the
end of March, 1981 and the other batch in June, 1981.chanroblesvirtualawlibrarychanrobles virtual law library

Even if a PTA is merely an advice from the sponsors that an airline is authorized to issue a ticket and thus no ticket was yet issued, the
fact remains that the passage had already been paid for by the principal of the appellee, and the appellant had accepted such payment.
The existence of this payment was never objected to nor questioned by the appellant in the lower court. Thus, the cause or consideration
which is the fare paid for the passengers exists in this case.chanroblesvirtualawlibrarychanrobles virtual law library
The third essential requisite of a contract is an object certain. In this contract "to carry", such an object is the transport of the passengers
from the place of departure to the place of destination as stated in the telex.chanroblesvirtualawlibrarychanrobles virtual law library
Accordingly, there could be no more pretensions as to the existence of an oral contract of carriage imposing reciprocal obligations on
both parties.chanroblesvirtualawlibrarychanrobles virtual law library
In the case of appellee, it has fully complied with the obligation, namely, the payment of the fare and its willingness for its contract
workers to leave for their place of destination.chanroblesvirtualawlibrarychanrobles virtual law library
On the other hand, the facts clearly show that appellant was remiss in its obligation to transport the contract workers on their flight
despite confirmation and bookings made by appellee's travelling agent.
xxx xxx xxxchanrobles virtual law library
Besides, appellant knew very well that time was of the essence as the prepaid ticket advice had specified the period of compliance
therewith, and with emphasis that it could only be used if the passengers fly on BA. Under the circumstances, the appellant should have
refused acceptance of the PTA from appellee's principal or to at least inform appellee that it could not accommodate the contract workers.
xxx xxx xxxchanrobles virtual law library
While there is no dispute that ROLACO Engineering advanced the payment for the airfares of the appellee's contract workers who were
recruited for ROLACO Engineering and the said contract workers were the intended passengers in the aircraft of the appellant, the said
contract "to carry" also involved the appellee for as recruiter he had to see to it that the contract workers should be transported to
ROLACO Engineering in Jeddah thru the appellant's transportation. For that matter, the involvement of the appellee in the said contract
"to carry" was well demonstrated when
the appellant upon receiving the PTA immediately advised the appellee thereof. 10chanrobles virtual law library
Petitioner also contends that the appellate court erred in awarding actual damages in the amount of P308,016.00 to private respondent
since all expenses had already been subsequently reimbursed by the latter's principal.chanroblesvirtualawlibrarychanrobles virtual law
library
In awarding actual damages to private respondent, the appellate court held that the amount of P308,016.00 representing actual damages
refers to private respondent's second cause of action involving the expenses incurred by the latter which were not reimbursed by
ROLACO Engineering. However, in the Complaint 11filed by private respondent, it was alleged that private respondent suffered actual
damages in the amount of P308,016.00 representing the money it borrowed from friends and financiers which is P304,416.00 for the 93
airline tickets and P3,600.00 for the travel tax of the 12 workers. It is clear therefore that the actual damages private respondent seeks to
recover are the airline tickets and travel taxes it spent for its workers which were already reimbursed by its principal and not for any other
expenses it had incurred in the process of recruiting said contract workers. Inasmuch as all expenses including the processing fees
incurred by private respondent had already been paid for by the latter's principal on a staggered basis as admitted in open court by its

managing director, Mrs. Bienvenida Brusellas. 12We do not find anymore justification in the appellate court's decision in granting actual
damages to private respondent.chanroblesvirtualawlibrarychanrobles virtual law library
Thus, while it may be true that private respondent was compelled to borrow money for the airfare tickets of its contract workers when
petitioner failed to transport said workers, the reimbursements made by its principal to private respondent failed to support the latter's
claim that it suffered actual damages as a result of petitioner's failure to transport said workers. It is undisputed that private respondent
had consistently admitted that its principal had reimbursed all its expenses.chanroblesvirtualawlibrarychanrobles virtual law library
Article 2199 of the Civil Code provides that:
Except as provided by law or by stipulations, one is entitled to an adequate compensation only for such pecuniary loss suffered by him as
he has duly proved. Such compensation is referred to as actual or compensatory damages.
Furthermore, actual or compensatory damages cannot be presumed, but must be duly proved, and proved with reasonable degree of
certainty. A court cannot rely on speculation, conjecture or guesswork as to the fact and amount of damages, but must depend upon
competent proof that they have suffered and on evidence of the actual amount thereof. 13chanrobles virtual law library
However, private respondent is entitled to an award of moral and exemplary damages for the injury suffered as a result of petitioner's
failure to transport the former's workers because of the latter's patent bad faith in the performance of its obligation. As correctly pointed
out by the appellate court:
As evidence had proved, there was complete failure on the part of the appellant to transport the 93 contract workers of the appellee on or
before March 30, 1981 despite receipt of the payment for their airfares, and acceptance of the same by the appellant, with specific
instructions from the appellee's principal to transport the contract workers on or before March 30, 1981. No previous notice was ever
registered by the appellant that it could not comply with the same. And then followed the detestable act of appellant in unilaterally
cancelling, booking and rebooking unreasonably the flight of appellee's contract workers in June to July, 1981 without prior notice. And all
of these actuations of the appellant indeed constitute malice and evident bad faith which had caused damage and besmirched the
reputation and business image of the appellee. 14chanrobles virtual law library
As to the alleged damages suffered by the petitioner as stated in its counterclaims, the record shows that no claim for said damages was
ever made by the petitioner immediately after their alleged occurrence therefore said counterclaims were mere afterthoughts when
private respondent filed the present case.chanroblesvirtualawlibrarychanrobles virtual law library
WHEREFORE, the assailed decision is hereby AFFIRMED with the MODIFICATION that the award of actual damages be deleted from
said decision.chanroblesvirtualawlibrarychanrobles virtual law library
SO ORDERED.

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[G.R. No. 114061. August 3, 1994.]

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[G.R. No. 113842. August 3, 1994.]
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KOREAN AIRLINES CO., LTD., Petitioner, v. COURT OF APPEALS and JUANITO C. LAPUZ, Respondents.

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JUANITO C. LAPUZ, Petitioner, v. COURT OF APPEALS and KOREAN AIRLINES CO., LTD., Respondents.

1. REMEDIAL LAW; EVIDENCE; CREDIBILITY; FINDINGS OF FACTS OF THE COURT OF APPEALS, GENERALLY BINDING ON
APPEAL. It is evident that the issues raised in these petitions relate mainly to the correctness of the factual findings of the Court of
Appeals and the award of damages. The Court has consistently affirmed that the findings of fact of the Court of Appeals and the other
lower courts are as a rule binding upon it, subject to certain exceptions. As nothing in the record indicates any of such exceptions, the
factual conclusions of the appellate court must be affirmed.

2. CIVIL LAW; CONTRACT OF CARRIAGE; BREACH THEREOF MANIFEST WHERE CONFIRMED PASSENGER WAS NOT
ALLOWED TO BOARD THE AIRLINE; CASE AT BAR. The status of Lapuz as standby passenger was changed to that of a confirmed
passenger when his name was entered in the passenger manifest of KAL for its Flight No. KE 903. His clearance through immigration
and customs clearly shows that he had indeed been confirmed as a passenger of KAL in that flight. KAL thus committed a breach of the
contract of carriage between them when it failed to bring Lapuz to his destination. The evidence presented by Lapuz shows that he had
indeed checked in at the departure counter, passed through customs and immigration, boarded the shuttle bus and proceeded to the
ramp of KALs aircraft. In fact, his baggage had already been loaded in KALs aircraft, to be flown with him to Jeddah. The contract to
carriage between him and KAL had already been perfected when he was summarily and insolently prevented from boarding the aircraft.

3. ID.; MORAL DAMAGES; PASSENGER; SUBJECTED TO DISCOURTEOUS CONDUCT BY AIRLINE OFFICER ENTITLED
THERETO. This Court has held that a contract to transport passengers is different in kind and degree from any other contractual
relation. The business of the carrier is mainly with the traveling public. It invites people to avail themselves of the comforts and
advantages it offers. The contract of air carriage generates a relation attended with a public duty. Passengers have the right to be treated
by the carriers employees with kindness, respect, courtesy and due consideration. They are entitled to be protected against personal
misconduct, injurious language, indignities and abuses from such employees So it is that any discourteous conduct on the part of these
employees toward a passenger gives the latter an action for damages against the carrier. The breach of contract was aggravated in this
case when, instead of courteously informing Lapuz of his being a "wait-listed" passenger, a KAL officer rudely shouted "Down! Down!"
while pointing at him, thus causing him embarrassment and public humiliation.

4. ID.; ID.; DEPEND UPON THE DISCRETION OF THE COURT; AWARD OF P100,000 AS MORAL AND EXEMPLARY DAMAGES IN A
BREACH OF CONTRACT, REASONABLE AND REALISTIC; CASE AT BAR. The well-entrenched principle is that moral damages
depend upon the discretion of the court based on the circumstances of each case. This discretion is limited by the principle that the
"amount awarded should not be palpably and scandalously excessive" as to indicate that it was the result of prejudice or corruption on
the part of the trial court. Damages are not intended to enrich the complainant at the expense of the defendant. They are awarded only to
alleviate the moral suffering that the injured party had undergone by reason of the defendants culpable action. There is no hard-and-fast
rule in the determination of what would be a fair amount damages since each case must be governed by its own peculiar facts. A review
of the record of this case shows that the injury suffered by Lapuz is not so serious or extensive as to warrant an award of P1.5 million.
The assessment of P100,000 as moral and exemplary damages in his favor is, in our view, reasonable and realistic.

5. REMEDIAL LAW; COURTS; CLOTHED WITH AMPLE AUTHORITY TO REVIEW MATTERS EVEN IF THEY ARE NOT ASSIGNED AS
ERROS IN THEIR APPEAL; PROPRIETY OF AWARD OF ACTUAL DAMAGES, JUSTIFIED. Lapuz likewise claims that the
respondent court could not rule upon the propriety of the award of actual damages because it had not been assigned as an error by KAL.
Not so. The rule is that only errors specifically assigned and properly argued in the brief will be considered except errors affecting
jurisdiction over the subject matter and plain as well as clerical errors. But this is not without qualification for, as the Court held in Vda. de
Javellana v. Court of Appeals: . . . [T]he Court is clothed with ample authority to review matters, even if they are not assigned as errors in
their appeal, if it finds that their consideration is necessary in arriving at a just decision of the case. A similar pronouncement was made in
Baquiran v. Court of Appeals in this wise: Issues, though not specifically raised in the pleading in the appellate court, may, in the interest
of justice, be properly considered by said court in deciding a case, if they are questions raised in the trial court and are matters of record
having some bearing on the issue submitted which the parties failed to raise or the lower court ignored. The Court of Appeals was
therefore justified in decreasing the award of actual damages even if the issue was not assigned as an error by KAL Consideration of this
question was necessary for the just and complete resolution of the present case. Furthermore, there was enough evidence to warrant the
reduction of the original award,

6. ID.; ACTIONS; JUDGMENT; LEGAL INTEREST ADJUDGED IN FAVOR OF PARTY ACCRUES FROM THE DATE OF RENDITION OF
JUDGMENT. We disagree with the respondent court, however, on the date when the legal interest should commence to run. The rule
is that the legal interest of six percent (6%) on the amounts adjudged in favor of Lapuz should resume from the time of rendition of the
trial courts decision instead of November 28, 1980, the date of the filing of the complaint.

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DECISION
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CRUZ, J.:

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Sometime in 1980, Juanito C. Lapuz, an automotive electrician, was contracted for employment is Jeddah, Saudi Arabia, for a period of
one year through Pan Pacific Overseas Recruiting Services, Inc. Lapuz was supposed to leave on November 8, 1980, via Korean
Airlines. Initially, he was "waitlisted," which meant that he could only be accommodated if any of the confirmed passengers failed to show
up at the airport before departure. When two of such passengers did not appear, Lapuz and another person by the name of Perico were
given the two unclaimed seats.chanroblesvirtualawlibrary

According to Lapuz, he was allowed to check in with one suitcase and one shoulder bag at the check-in counter of KAL. He passed
through the customs and immigration sections for routine check-up and was cleared for departure as Passenger No. 157 of KAL Flight
No. KE 903. Together with the other passengers, he rode in the shuttle bus and proceeded to the ramp of the KAL aircraft for boarding.
However, when he was at the third or fourth rung of the stairs, a KAL officer pointed to him and shouted "Down! Down!" He was thus
barred from taking the flight. When he later asked for another booking, his ticket was canceled by KAL. Consequently, he was unable to
report for his work in Saudi Arabia within the stipulated 2-week period and so lost his employment.

KAL, on the other hand, alleged that on November 8, 1980, Pan Pacific Recruiting Services Inc. coordinated with KAL for the departure
of 30 contract workers, of whom only 21 were confirmed and 9 were wait-listed passengers. The agent of Pan Pacific, Jimmie Joseph,
after being informed that there was a possibility of having one or two seats becoming available, gave priority to Perico, who was one of
the supervisors of the hiring company in Saudi Arabia. The other seat was won through lottery by Lapuz. However, only one seat became
available and so, pursuant to the earlier agreement that Perico was to be given priority, he alone was allowed to board.chanrobles law
library : red

After trial, the Regional Trial Court of Manila, Branch 30, 1 adjudged KAL liable for damages, disposing as follows:chanrob1es virtual 1aw
library

WHEREFORE, in view of the foregoing consideration, judgment is hereby rendered sentencing the defendant Korean Air Lines to pay
plaintiff Juanito C. Lapuz the following:chanrob1es virtual 1aw library

1. The amount of TWO HUNDRED SEVENTY-TWO THOUSAND ONE HUNDRED SIXTY (P272,160.00) PESOS as actual/
compensatory damages, will legal interest thereon from the date of the filing of the complaint until fully paid.

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2. The sum of TWENTY-FIVE THOUSAND (P25,000.00) PESOS as and for attorneys fees; and
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3. The costs of suit.

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The case is hereby dismissed with respect to defendant Pan Pacific Overseas Recruiting Services, Inc.
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The counterclaims and cross-claim of defendant Korean Air Lines Co., Ltd. are likewise dismissed.
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On appeal, this decision was modified by the Court of Appeals 2 as follows:chanrob1es virtual 1aw library
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WHEREFORE, in view of all the foregoing, the appealed judgment is hereby AFFIRMED with the following modifications: the amount of
actual damages and compensatory damages is reduced to P60,000.00 and defendant-appellant is hereby ordered to pay plaintiffappellant the sum of One Hundred Thousand Pesos (P100,000.00) by way of moral and exemplary damages, at 6% interest per annum
from the date of filing of the Complaint until fully paid.

KAL and Lapuz filed their respective motions for reconsideration, which were both denied for lack of merit. Hence, the present petitions
for review which have been consolidated because of the identity of the parties and the similarity of the issues.cralawnad

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In G.R. No. 114061, KAL assails the decision of the appellant court on the following grounds:chanrob1es virtual 1aw library
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1. That the Court of Appeals erred in concluding that petitioner committed a breach of contract of carriage notwithstanding lack of proper,
competent and sufficient evidence of the existence of such contract.

2. That the Court of Appeals erred in not according the proper evidentiary weight to some evidence presented and the fact that private
respondent did not have any boarding pass to prove that he was allowed to board and to prove that this airline ticket was confirmed.

3. That the Court of Appeals erred in concluding that the standby passenger status of private respondent Lapuz was changed to a
confirmed status when his name was entered into the passenger manifest.

4. That the Court of Appeals abused its discretion in awarding moral and exemplary damages in the amount of P100,000.00 in favor of
private respondent notwithstanding its lack of basis and private respondent did not state such amount in his complaint nor had private
respondent proven the said damages.cralawnad

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5. That the Court of Appeals erred in dismissing the counterclaims.
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6. That the Court of Appeals erred in dismissing the counterclaim of petitioner against Pan Pacific.
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7. That the Court of Appeals erred in ruling that the 6% per annum legal interest on the judgment shall be computed from the filing of the
complaint.

In G.R. No. 113842, Lapuz seeks: (a) the setting aside of the decision of the Court of Appeals insofar as it modifies the award of
damages; b) actual and compensatory damages in the sum equivalent to 5 years loss of earnings based on the petitioners month salary
of 1,600 Saudi rials at the current conversion rate plus the cost of baggage and personal belongings worth P2,000 and the service fee of
P3,000 paid to the recruiting agency, all with legal interest from the filing of the complaint until fully paid; c) moral damages of not less
than P1 million and exemplary damages of not less than P500,000.00, both with interest at 6% per annum from the filing of the complaint;
and d) attorneys fees in the sum equivalent to 30% of the award of damages.

It is evident that the issues raised in these petitions relate mainly to the correctness of the factual findings of the Court of Appeals and the
award of damages. The Court has consistently affirmed that the findings of fact of the Court of Appeals and the other lower courts are as
a rule binding upon it, subject to certain exceptions. As nothing in the record indicates any of such exceptions, the factual conclusions of
the appellate court must be affirmed.

The status of Lapuz as standby passenger was changed to that of a confirmed passenger when his name was entered in the passenger
manifest of KAL for its Flight No. KE 903. His clearance through immigration and customs clearly shows that he had indeed been
confirmed as a passenger of KAL in that flight. KAL thus committed a breach of the contract of carriage between them when it failed to
bring Lapuz to his destination.chanrobles.com:cralaw:red

This Court has held that a contract to transport passengers is different in kind and degree from any other contractual relation. 3 The
business of the carrier is mainly with the traveling public. It invites people to avail themselves of the comforts and advantages it offers.
The contract of air carriage generates a relation attended with a public duty. Passengers have the right to be treated by the carriers
employees with kindness, respect, courtesy and due consideration. They are entitled to be protected against personal misconduct,
injurious language, indignities and abuses from such employees. 4 So it is that any discourteous conduct on the part of these employees
toward a passenger gives the latter an action for damages against the carrier.

The breach of contract was aggravated in this case when, instead of courteously informing Lapuz of his being a "wait-listed" passenger, a
KAL officer rudely shouted "Down! Down!" while pointing at him, thus causing him embarrassment and public humiliation.

KAL argues that "the evidence of confirmation of a chance passenger status is not through the entry of the name of a chance passenger
in the passenger manifest nor the clearance from the Commission on Immigration and Deportation, because they are merely means of
facilitating the boarding of the chance passenger in case his status is confirmed." We are not persuaded.

The evidence presented by Lapuz shows that he had indeed checked in at the departure counter, passed through customs and
immigration, boarded the shuttle bus and proceeded to the ramp of KALs aircraft. In fact, his baggage had already been loaded in KALs
aircraft, to be flown with him to Jeddah. The contract to carriage between him and KAL had already been perfected when he was
summarily and insolently prevented from boarding the aircraft.chanrobles.com:cralaw:red

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KALs allegation that the respondent court abused its discretion in awarding moral and exemplary damages is also not tenable.
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The Court of Appeals granted moral and exemplary damages because:chanrob1es virtual 1aw library
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The findings of the court a quo that the defendant-appellant has committed breach of contract of carriage in bad faith and in wanton,
disregard of plaintiff-appellants rights as passenger laid the basis and justification of an award for moral damages.

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In the instant case, we find that defendant-appellant Korean Air Lines acted in a wanton, fraudulent, reckless, oppressive or malevolent
manner when it "bumped off" plaintiff-appellant on November 8, 1980, and in addition treated him rudely and arrogantly as a "patay
gutom na contract worker fighting Korean Air Lines," which clearly malice and bad faith, thus entitling plaintiff-appellant to moral
damages.
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Considering that the plaintiff-appellants entitlement to moral damages has been fully established by oral and documentary evidence,
exemplary damages may be awarded. In fact, exemplary damages may be awarded, even though not so expressly pleaded in the
complaint (Kapoe v. Masa, 134 SCRA 231). By the same token, to provide an example for the public good, an award of exemplary
damages is also proper (Armovit v. Court of Appeals, supra).

On the other hand, Lapuzs claim that the award of P100,000.00 as moral and exemplary damages is inadequate is not acceptable either.
His prayer for moral damages of not less than P1 million and exemplary of not less than P500,000.00 is overblown.chanrobles virtual
lawlibrary

The well-entrenched principle is that moral damages depend upon the discretion of the court based on the circumstances of each case. 5
This discretion is limited by the principle that the "amount awarded should not be palpably and scandalously excessive" as to indicate

that it was the result of prejudice or corruption on the part of the trial court. 6 Damages are not intended to enrich the complainant at the
expense of the defendant. They are awarded only to alleviate the moral suffering that the injured party had undergone by reason of the
defendants culpable action. 7 There is no hard-and-fast rule in the determination of what would be a fair amount damages since each
case must be governed by its own peculiar facts.

A review of the record of this case shows that the injury suffered by Lapuz is not so serious or extensive as to warrant an award of P1.5
million. The assessment of P100,000 as moral and exemplary damages in his favor is, in our view, reasonable and realistic.

Lapuz likewise claims that the respondent court could not rule upon the propriety of the award of actual damages because it had not
been assigned as an error by KAL. Not so. The rule is that only errors specifically assigned and properly argued in the brief will be
considered except errors affecting jurisdiction over the subject matter and plain as well as clerical errors. 8 But this is not without
qualification for, as the Court held in Vda. de Javellana v. Court of Appeals: 9

. . . [T]he Court is clothed with ample authority to review matters, even if they are not assigned as errors in their appeal, if it finds that
their consideration is necessary in arriving at a just decision of the case.

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A similar pronouncement was made in Baquiran v. Court of Appeals 10 in this wise:chanrobles law library : red
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Issues, though not specifically raised in the pleading in the appellate court, may, in the interest of justice, be properly considered by said
court in deciding a case, if they are questions raised in the trial court and are matters of record having some bearing on the issue
submitted which the parties failed to raise or the lower court ignored.

The Court of Appeals was therefore justified in decreasing the award of actual damages even if the issue was not assigned as an error by
KAL Consideration of this question was necessary for the just and complete resolution of the present case. Furthermore, there was
enough evidence to warrant the reduction of the original award, as the challenged decision correctly observed:chanrob1es virtual 1aw
library

A perusal of the plaintiff-appellants contract of employment shows that the effectivity of the contract is for only one year, renewable every
year for five years. Although plaintiff-appellant intends to renew his contract, such renewal will still be subject to his foreign employer.
Plaintiff-appellant had not yet started working with his foreign employer, hence, there can be no basis as to whether his contract will be
renewed by his foreign employer or not. Thus, the damages representing the loss of earnings of plaintiff-appellant in the renewal of the
contract of employment is at most speculative. Damages may not be awarded on the basis of speculation or conjecture (Gachalian v.
Delim, 203 SCRA 126). Hence, Defendant-Appellants liability is limited to the one year contract only. Plaintiff-appellant is, therefore,

entitled only to his lost earnings for one year, i.e., P60,000.00, which is 1/5 of P300,000.00, the total amount of actual damages,
representing lost earnings for five years prayed for in the Complaint.

Plaintiff-appellants contention that in computing his lost earnings, the current rate of Saudi Rial to the Philippine Peso at the time of
payment should be used, is untenable, considering that in his Complaint, plaintiff-appellant has quantified in Philippine Pesos his lost
earnings for five years.chanrobles virtualawlibrary chanrobles.com:chanrobles.com.ph

We disagree with the respondent court, however, on the date when the legal interest should commence to run. The rule is that the legal
interest of six percent (6%) on the amounts adjudged in favor of Lapuz should resume from the time of rendition of the trial courts
decision instead of November 28, 1980, the date of the filing of the complaint.

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On this matter, the Court has held:chanrob1es virtual 1aw library
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If suit were for payment of a definite sum of money, the contention might be tenable. However, if it is for damages, unliquidated and not
known until definitely ascertained, assessed and determined by the courts after proof, interest should be from the date of the decision. 11

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The obligation to pay interest on a sum of filed in a judgment exists from the date of the sentence, when so declared; for until the net
amount of the debtors liability has been determined, he cannot he considered delinquent in the fulfillment of his obligation to pay the debt
with interest thereon. 12

Finally, we find that the respondent court did not err in sustaining the trial courts dismissal of KALs counterclaim against Pan Pacific
Overseas Recruiting Recruiting Services Inc., whose responsibility ended with the confirmation by KAL of Lapuz as its passenger in its
Flight No. 903.chanrobles.com.ph : virtual law library

This is still another case of the maltreatment of our overseas contract workers, this time by the airline supposed to bring the passenger of
his foreign assignment. Our OCWs sacrifice much in seeking employment abroad, where they are deprived of the company of their loved
ones, the direct protection of our laws, and the comfort of our own native culture and way of life. This Court shall exert every effort to
vindicate their rights when they are abused and shall accord them the commensurate reparation of their injuries consistent with their
dignity and worth as members of the working class.

WHEREFORE, the appealed judgment is AFFIRMED, but with the modification that the legal interest on the damages awarded to private
respondent should commence from the date of the decision of the trial court on November 14, 1990. The parties shall bear their own
costs.

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SO ORDERED.
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G.R. No. L-18965

October 30, 1964
COMPAIA MARITIMA, Petitioner, vs. INSURANCE COMPANY OF NORTH AMERICA, Respondent.
Rafael Dinglasan for petitioner.
Ozaeta Gibbs & Ozaeta for respondent.
BAUTISTA ANGELO, J.:
Sometime in October, 1952, Macleod and Company of the Philippines contracted by telephone the services of the Compaia Maritima, a
shipping corporation, for the shipment of 2,645 bales of hemp from the former's Sasa private pier at Davao City to Manila and for their
subsequent transhipment to Boston, Massachusetts, U.S.A. on board the S.S. Steel Navigator. This oral contract was later on confirmed
by a formal and written booking issued by Macleod's branch office in Sasa and handcarried to Compaia Maritima's branch office in
Davao in compliance with which the latter sent to Macleod's private wharf LCT Nos. 1023 and 1025 on which the loading of the hemp
was completed on October 29, 1952. These two lighters were manned each by a patron and an assistant patron. The patrons of both
barges issued the corresponding carrier's receipts and that issued by the patron of Barge No. 1025 reads in part:
Received in behalf of S.S. Bowline Knot in good order and condition from MACLEOD AND COMPANY OF PHILIPPINES, Sasa Davao,
for transhipment at Manila onto S.S. Steel Navigator.chanroblesvirtualawlibrarychanrobles virtual law library
FINAL DESTINATION: Boston.
Thereafter, the two loaded barges left Macleod's wharf and proceeded to and moored at the government's marginal wharf in the same
place to await the arrival of the S.S. Bowline Knot belonging to Compaia Maritima on which the hemp was to be loaded. During the night
of October 29, 1952, or at the early hours of October 30, LCT No. 1025 sank, resulting in the damage or loss of 1,162 bales of hemp
loaded therein. On October 30, 1952, Macleod promptly notified the carrier's main office in Manila and its branch in Davao advising it of
its liability. The damaged hemp was brought to Odell Plantation in Madaum, Davao, for cleaning, washing, reconditioning, and redrying.
During the period from November 1-15, 1952, the carrier's trucks and lighters hauled from Odell to Macleod at Sasa a total of 2,197.75
piculs of the reconditioned hemp out of the original cargo of 1,162 bales weighing 2,324 piculs which had a total value of 116,835.00.
After reclassification, the value of the reconditioned hemp was reduced to P84,887.28, or a loss in value of P31,947.72. Adding to this
last amount the sum of P8,863.30 representing Macleod's expenses in checking, grading, rebating, and other fees for washing, cleaning
and redrying in the amount of P19.610.00, the total loss adds up to P60,421.02.chanroblesvirtualawlibrarychanrobles virtual law library
All abaca shipments of Macleod, including the 1,162 bales loaded on the carrier's LCT No. 1025, were insured with the Insurance
Company of North America against all losses and damages. In due time, Macleod filed a claim for the loss it suffered as above stated
with said insurance company, and after the same had been processed, the sum of P64,018.55 was paid, which was noted down in a
document which aside from being a receipt of the amount paid, was a subrogation agreement between Macleod and the insurance
company wherein the former assigned to the latter its rights over the insured and damaged cargo. Having failed to recover from the
carrier the sum of P60,421.02, which is the only amount supported by receipts, the insurance company instituted the present action on
October 28, 1953. After trial, the court a quo rendered judgment ordering the carrier to pay the insurance company the sum of
P60,421.02, with legal interest thereon from the date of the filing of the complaint until fully paid, and the costs. This judgment was

affirmed by the Court of Appeals on December 14, 1960. Hence, this petition for review.chanroblesvirtualawlibrarychanrobles virtual law
library
The issues posed before us are: (1) Was there a contract of carriage between the carrier and the shipper even if the loss occurred when
the hemp was loaded on a barge owned by the carrier which was loaded free of charge and was not actually loaded on the S.S. Bowline
Knot which would carry the hemp to Manila and no bill of lading was issued therefore?; (2) Was the damage caused to the cargo or the
sinking of the barge where it was loaded due to a fortuitous event, storm or natural disaster that would exempt the carrier from liability?;
(3) Can respondent insurance company sue the carrier under its insurance contract as assignee of Macleod in spite of the fact that the
liability of the carrier as insurer is not recognized in this jurisdiction?; (4) Has the Court of Appeals erred in regarding Exhibit NNN-1 as an
implied admission by the carrier of the correctness and sufficiency of the shipper's statement of accounts contrary to the burden of proof
rule?; and (5) Can the insurance company maintain this suit without proof of its personality to do so?chanrobles virtual law library
1. This issue should be answered in the affirmative. As found by the Court of Appeals, Macleod and Company contracted by telephone
the services of petitioner to ship the hemp in question from the former's private pier at Sasa, Davao City, to Manila, to be subsequently
transhipped to Boston, Massachusetts, U.S.A., which oral contract was later confirmed by a formal and written booking issued by the
shipper's branch office, Davao City, in virtue of which the carrier sent two of its lighters to undertake the service. It also appears that the
patrons of said lighters were employees of the carrier with due authority to undertake the transportation and to sign the documents that
may be necessary therefor so much so that the patron of LCT No. 1025 signed the receipt covering the cargo of hemp loaded therein as
follows: .
Received in behalf of S.S. Bowline Knot in good order and condition from MACLEOD AND COMPANY OF PHILIPPINES, Sasa Davao,
for transhipment at Manila onto S.S. Steel Navigator.chanroblesvirtualawlibrarychanrobles virtual law library
FINAL DESTINATION: Boston.
The fact that the carrier sent its lighters free of charge to take the hemp from Macleod's wharf at Sasa preparatory to its loading onto the
ship Bowline Knot does not in any way impair the contract of carriage already entered into between the carrier and the shipper, for that
preparatory step is but part and parcel of said contract of carriage. The lighters were merely employed as the first step of the voyage, but
once that step was taken and the hemp delivered to the carrier's employees, the rights and obligations of the parties attached thereby
subjecting them to the principles and usages of the maritime law. In other words, here we have a complete contract of carriage the
consummation of which has already begun: the shipper delivering the cargo to the carrier, and the latter taking possession thereof by
placing it on a lighter manned by its authorized employees, under which Macleod became entitled to the privilege secured to him by law
for its safe transportation and delivery, and the carrier to the full payment of its freight upon completion of the voyage.
The receipt of goods by the carrier has been said to lie at the foundation of the contract to carry and deliver, and if actually no goods are
received there can be no such contract. The liability and responsibility of the carrier under a contract for the carriage of goods commence
on their actual delivery to, or receipt by, the carrier or an authorized agent. ... and delivery to a lighter in charge of a vessel for shipment
on the vessel, where it is the custom to deliver in that way, is a good delivery and binds the vessel receiving the freight, the liability
commencing at the time of delivery to the lighter. ... and, similarly, where there is a contract to carry goods from one port to another, and
they cannot be loaded directly on the vessel and lighters are sent by the vessel to bring the goods to it, the lighters are for the time its

substitutes, so that the bill of landing is applicable to the goods as soon as they are placed on the lighters. (80 C.J.S., p. 901, emphasis
supplied)chanrobles virtual law library
... The test as to whether the relation of shipper and carrier had been established is, Had the control and possession of the cotton been
completely surrendered by the shipper to the railroad company? Whenever the control and possession of goods passes to the carrier and
nothing remains to be done by the shipper, then it can be said with certainty that the relation of shipper and carrier has been established.
Railroad Co. v. Murphy, 60 Ark. 333, 30 S.W. 419, 46 A. St. Rep. 202; Pine Bluff & Arkansas River Ry. v. MaKenzie, 74 Ark. 100, 86 S.W.
834; Matthews & Hood v. St. L., I.M. & S.R. Co., 123 Ark. 365, 185 S.W. 461, L.R.A. 1916E, 1194. (W.F. Bogart & Co., et al. v. Wade, et
al., 200 S.W. 148).
The claim that there can be no contract of affreightment because the hemp was not actually loaded on the ship that was to take it from
Davao City to Manila is of no moment, for, as already stated, the delivery of the hemp to the carrier's lighter is in line with the contract. In
fact, the receipt signed by the patron of the lighter that carried the hemp stated that he was receiving the cargo "in behalf of S.S. Bowline
Knot in good order and condition." On the other hand, the authorities are to the effect that a bill of lading is not indispensable for the
creation of a contract of carriage.
Bill of lading not indispensable to contract of carriage. - As to the issuance of a bill of lading, although article 350 of the Code of
Commerce provides that "the shipper as well as the carrier of merchandise or goods may mutua-lly demand that a bill of lading is not
indispensable. As regards the form of the contract of carriage it can be said that provided that there is a meeting of the minds and from
such meeting arise rights and obligations, there should be no limitations as to form." The bill of lading is not essential to the contract,
although it may become obligatory by reason of the regulations of railroad companies, or as a condition imposed in the contract by the
agreement of the parties themselves. The bill of lading is juridically a documentary proof of the stipulations and conditions agreed upon
by both parties. (Del Viso, pp. 314-315; Robles vs. Santos, 44 O.G. 2268). In other words, the Code does not demand, as necessary
requisite in the contract of transportation, the delivery of the bill of lading to the shipper, but gives right to both the carrier and the shipper
to mutually demand of each other the delivery of said bill. (Sp. Sup. Ct. Decision, May 6, 1895). (Martin, Philippine Commercial Laws,
Vol. II, Revised Edition, pp. 12-13)chanrobles virtual law library
The liability of the carrier as common carrier begins with the actual delivery of the goods for transportation, and not merely with the formal
execution of a receipt or bill of lading; the issuance of a bill of lading is not necessary to complete delivery and acceptance. Even where it
is provided by statute that liability commences with the issuance of the bill of lading, actual delivery and acceptance are sufficient to bind
the carrier. (13 C.J.S., p. 288)
2. Petitioner disclaims responsibility for the damage of the cargo in question shielding itself behind the claim of force majeure or storm
which occurred on the night of October 29, 1952. But the evidence fails to bear this out.chanroblesvirtualawlibrarychanrobles virtual law
library
Rather, it shows that the mishap that caused the damage or loss was due, not to force majeure, but to lack of adequate precautions or
measures taken by the carrier to prevent the loss as may be inferred from the following findings of the Court of Appeals:
Aside from the fact that, as admitted by appellant's own witness, the ill-fated barge had cracks on its bottom (pp. 18-19, t.s.n., Sept. 13,
1959) which admitted sea water in the same manner as rain entered "thru tank man-holes", according to the patron of LCT No. 1023

(exh. JJJ-4) - conclusively showing that the barge was not seaworthy - it should be noted that on the night of the nautical accident there
was no storm, flood, or other natural disaster or calamity. Certainly, winds of 11 miles per hour, although stronger than the average 4.6
miles per hour then prevailing in Davao on October 29, 1952 (exh. 5), cannot be classified as storm. For according to Beaufort's wind
scale, a storm has wind velocities of from 64 to 75 miles per hour; and by Philippine Weather Bureau standards winds should have a
velocity of from 55 to 74 miles per hour in order to be classified as storm (Northern Assurance Co., Ltd. vs. Visayan Stevedore
Transportation Co., CA-G.R. No. 23167-R, March 12, 1959).
The Court of Appeals further added: "the report of R. J. del Pan & Co., Inc., marine surveyors, attributes the sinking of LCT No. 1025 to
the 'non-water-tight conditions of various buoyancy compartments' (exh. JJJ); and this report finds confirmation on the above-mentioned
admission of two witnesses for appellant concerning the cracks of the lighter's bottom and the entrance of the rain water 'thru manholes'."
We are not prepared to dispute this finding of the Court of Appeals.chanroblesvirtualawlibrarychanrobles virtual law library
3. There can also be no doubt that the insurance company can recover from the carrier as assignee of the owner of the cargo for the
insurance amount it paid to the latter under the insurance contract. And this is so because since the cargo that was damaged was
insured with respondent company and the latter paid the amount represented by the loss, it is but fair that it be given the right to recover
from the party responsible for the loss. The instant case, therefore, is not one between the insured and the insurer, but one between the
shipper and the carrier, because the insurance company merely stepped into the shoes of the shipper. And since the shipper has a direct
cause of action against the carrier on account of the damage of the cargo, no valid reason is seen why such action cannot be asserted or
availed of by the insurance company as a subrogee of the shipper. Nor can the carrier set up as a defense any defect in the insurance
policy not only because it is not a privy to it but also because it cannot avoid its liability to the shipper under the contract of carriage which
binds it to pay any loss that may be caused to the cargo involved therein. Thus, we find fitting the following comments of the Court of
Appeals:
It was not imperative and necessary for the trial court to pass upon the question of whether or not the disputed abaca cargo was covered
by Marine Open Cargo Policy No. MK-134 isued by appellee. Appellant was neither a party nor privy to this insurance contract, and
therefore cannot avail itself of any defect in the policy which may constitute a valid reason for appellee, as the insurer, to reject the claim
of Macleod, as the insured. Anyway, whatever defect the policy contained, if any, is deemed to have been waived by the subsequent
payment of Macleod's claim by appellee. Besides, appellant is herein sued in its capacity as a common carrier, and appellee is suing as
the assignee of the shipper pursuant to exhibit MM. Since, as above demonstrated, appellant is liable to Macleod and Company of the
Philippines for the los or damage to the 1,162 bales of hemp after these were received in good order and condition by the patron of
appellant's LCT No. 1025, it necessarily follows that appellant is likewise liable to appellee who, as assignee of Macleod, merely stepped
into the shoes of and substi-tuted the latter in demanding from appellant the payment for the loss and damage aforecited.
4. It should be recalled in connection with this issue that during the trial of this case the carrier asked the lower court to order the
production of the books of accounts of the Odell Plantation containing the charges it made for the loss of the damaged hemp for
verification of its accountants, but later it desisted therefrom on the claim that it finds their production no longer necessary. This
desistance notwithstanding, the shipper however pre-sented other documents to prove the damage it suffered in connection with the
cargo and on the strength thereof the court a quo ordered the carrier to pay the sum of P60,421.02. And after the Court of Appeals

affirmed this award upon the theory that the desistance of the carrier from producing the books of accounts of Odell Plantation implies an
admission of the correctness of the statements of accounts contained therein, petitioner now contends that the Court of Appeals erred in
basing the affirmance of the award on such erroneous interpretation.chanroblesvirtualawlibrarychanrobles virtual law library
There is reason to believe that the act of petitioner in waiving its right to have the books of accounts of Odell Plantation presented in court
is tantamount to an admission that the statements contained therein are correct and their verification not necessary because its main
defense here, as well as below, was that it is not liable for the loss because there was no contract of carriage between it and the shipper
and the loss caused, if any, was due to a fortuitous event. Hence, under the carrier's theory, the correctness of the account representing
the loss was not so material as would necessitate the presentation of the books in question. At any rate, even if the books of accounts
were not produced, the correctness of the accounts cannot now be disputed for the same is supported by the original documents on
which the entries in said books were based which were presented by the shipper as part of its evidence. And according to the Court of
Appeals, these documents alone sufficiently establish the award of P60,412.02 made in favor of
respondent.chanroblesvirtualawlibrarychanrobles virtual law library
5. Finally, with regard to the question concerning the personality of the insurance company to maintain this action, we find the same of no
importance, for the attorney himself of the carrier admitted in open court that it is a foreign corporation doing business in the Philippines
with a personality to file the present action.chanroblesvirtualawlibrarychanrobles virtual law library
WHEREFORE, the decision appealed from is affirmed, with costs against petitioner.

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G.R. No. L-48757 May 30, 1988

MAURO GANZON, Petitioner, vs. COURT OF APPEALS and GELACIO E. TUMAMBING, Respondents.
Antonio B. Abinoja for petitioner.chanrobles virtual law library
Quijano, Arroyo & Padilla Law Office for respondents.

SARMIENTO, J.:
The private respondent instituted in the Court of First Instance of Manila 1 an action against the petitioner for damages based on culpa
contractual. The antecedent facts, as found by the respondent Court, 2 are undisputed: chanrobles virtual law library
On November 28, 1956, Gelacio Tumambing contracted the services of Mauro B. Ganzon to haul 305 tons of scrap iron from Mariveles,
Bataan, to the port of Manila on board the lighter LCT "Batman" (Exhibit 1, Stipulation of Facts, Amended Record on Appeal, p. 38).
Pursuant to that agreement, Mauro B. Ganzon sent his lighter "Batman" to Mariveles where it docked in three feet of water (t.s.n.,
September 28, 1972, p. 31). On December 1, 1956, Gelacio Tumambing delivered the scrap iron to defendant Filomeno Niza, captain of
the lighter, for loading which was actually begun on the same date by the crew of the lighter under the captain's supervision. When about
half of the scrap iron was already loaded (t.s.n., December 14, 1972, p. 20), Mayor Jose Advincula of Mariveles, Bataan, arrived and
demanded P5,000.00 from Gelacio Tumambing. The latter resisted the shakedown and after a heated argument between them, Mayor
Jose Advincula drew his gun and fired at Gelacio Tumambing (t.s.n., March 19, 1971, p. 9; September 28, 1972, pp. 6-7). The gunshot
was not fatal but Tumambing had to be taken to a hospital in Balanga, Bataan, for treatment (t.s.n., March 19, 1971, p. 13; September
28, 1972, p. 15).chanroblesvirtualawlibrary chanrobles virtual law library
After sometime, the loading of the scrap iron was resumed. But on December 4, 1956, Acting Mayor Basilio Rub, accompanied by three
policemen, ordered captain Filomeno Niza and his crew to dump the scrap iron (t.s.n., June 16, 1972, pp. 8-9) where the lighter was
docked (t.s.n., September 28, 1972, p. 31). The rest was brought to the compound of NASSCO (Record on Appeal, pp. 20-22). Later on
Acting Mayor Rub issued a receipt stating that the Municipality of Mariveles had taken custody of the scrap iron (Stipulation of Facts,
Record on Appeal, p. 40; t.s.n., September 28, 1972, p. 10.) chanrobles virtual law library
On the basis of the above findings, the respondent Court rendered a decision, the dispositive portion of which states:
WHEREFORE, the decision appealed from is hereby reversed and set aside and a new one entered ordering defendant-appellee Mauro
Ganzon to pay plaintiff-appellant Gelacio E. Tumambimg the sum of P5,895.00 as actual damages, the sum of P5,000.00 as exemplary
damages, and the amount of P2,000.00 as attorney's fees. Costs against defendant-appellee Ganzon. 3
In this petition for review on certiorari, the alleged errors in the decision of the Court of Appeals are: chanrobles virtual law library
Ichanrobles virtual law library
THE COURT OF APPEALS FINDING THE HEREIN PETITIONER GUILTY OF BREACH OF THE CONTRACT OF TRANSPORTATION
AND IN IMPOSING A LIABILITY AGAINST HIM COMMENCING FROM THE TIME THE SCRAP WAS PLACED IN HIS CUSTODY AND
CONTROL HAVE NO BASIS IN FACT AND IN LAW.chanroblesvirtualawlibrary chanrobles virtual law library
IIchanrobles virtual law library

THE APPELLATE COURT ERRED IN CONDEMNING THE PETITIONER FOR THE ACTS OF HIS EMPLOYEES IN DUMPING THE
SCRAP INTO THE SEA DESPITE THAT IT WAS ORDERED BY THE LOCAL GOVERNMENT OFFICIAL WITHOUT HIS
PARTICIPATION.chanroblesvirtualawlibrary chanrobles virtual law library
IIIchanrobles virtual law library
THE APPELLATE COURT FAILED TO CONSIDER THAT THE LOSS OF THE SCRAP WAS DUE TO A FORTUITOUS EVENT AND THE
PETITIONER IS THEREFORE NOT LIABLE FOR LOSSES AS A CONSEQUENCE THEREOF. 4 chanrobles virtual law library
The petitioner, in his first assignment of error, insists that the scrap iron had not been unconditionally placed under his custody and
control to make him liable. However, he completely agrees with the respondent Court's finding that on December 1, 1956, the private
respondent delivered the scraps to Captain Filomeno Niza for loading in the lighter "Batman," That the petitioner, thru his employees,
actually received the scraps is freely admitted. Significantly, there is not the slightest allegation or showing of any condition, qualification,
or restriction accompanying the delivery by the private respondent-shipper of the scraps, or the receipt of the same by the petitioner. On
the contrary, soon after the scraps were delivered to, and received by the petitioner-common carrier, loading was
commenced.chanroblesvirtualawlibrary chanrobles virtual law library
By the said act of delivery, the scraps were unconditionally placed in the possession and control of the common carrier, and upon their
receipt by the carrier for transportation, the contract of carriage was deemed perfected. Consequently, the petitioner-carrier's
extraordinary responsibility for the loss, destruction or deterioration of the goods commenced. Pursuant to Art. 1736, such extraordinary
responsibility would cease only upon the delivery, actual or constructive, by the carrier to the consignee, or to the person who has a right
to receive them. 5 The fact that part of the shipment had not been loaded on board the lighter did not impair the said contract of
transportation as the goods remained in the custody and control of the carrier, albeit still unloaded.chanroblesvirtualawlibrary chanrobles
virtual law library
The petitioner has failed to show that the loss of the scraps was due to any of the following causes enumerated in Article 1734 of the Civil
Code, namely: chanrobles virtual law library
(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity; chanrobles virtual law library
(2) Act of the public enemy in war, whether international or civil; chanrobles virtual law library
(3) Act or omission of the shipper or owner of the goods; chanrobles virtual law library
(4) The character of the goods or defects in the packing or in the containers; chanrobles virtual law library
(5) Order or act of competent public authority.chanroblesvirtualawlibrary chanrobles virtual law library
Hence, the petitioner is presumed to have been at fault or to have acted negligently. 6 By reason of this presumption, the court is not
even required to make an express finding of fault or negligence before it could hold the petitioner answerable for the breach of the
contract of carriage. Still, the petitioner could have been exempted from any liability had he been able to prove that he observed
extraordinary diligence in the vigilance over the goods in his custody, according to all the circumstances of the case, or that the loss was
due to an unforeseen event or to force majeure. As it was, there was hardly any attempt on the part of the petitioner to prove that he
exercised such extraordinary diligence.chanroblesvirtualawlibrary chanrobles virtual law library

It is in the second and third assignments of error where the petitioner maintains that he is exempt from any liability because the loss of
the scraps was due mainly to the intervention of the municipal officials of Mariveles which constitutes a caso fortuito as defined in Article
1174 of the Civil Code. 7 chanrobles virtual law library
We cannot sustain the theory of caso fortuito. In the courts below, the petitioner's defense was that the loss of the scraps was due to an
"order or act of competent public authority," and this contention was correctly passed upon by the Court of Appeals which ruled that:
... In the second place, before the appellee Ganzon could be absolved from responsibility on the ground that he was ordered by
competent public authority to unload the scrap iron, it must be shown that Acting Mayor Basilio Rub had the power to issue the disputed
order, or that it was lawful, or that it was issued under legal process of authority. The appellee failed to establish this. Indeed, no authority
or power of the acting mayor to issue such an order was given in evidence. Neither has it been shown that the cargo of scrap iron
belonged to the Municipality of Mariveles. What we have in the record is the stipulation of the parties that the cargo of scrap iron was
accilmillated by the appellant through separate purchases here and there from private individuals (Record on Appeal, pp. 38-39). The fact
remains that the order given by the acting mayor to dump the scrap iron into the sea was part of the pressure applied by Mayor Jose
Advincula to shakedown the appellant for P5,000.00. The order of the acting mayor did not constitute valid authority for appellee Mauro
Ganzon and his representatives to carry out.
Now the petitioner is changing his theory to caso fortuito. Such a change of theory on appeal we cannot, however, allow. In any case, the
intervention of the municipal officials was not In any case, of a character that would render impossible the fulfillment by the carrier of its
obligation. The petitioner was not duty bound to obey the illegal order to dump into the sea the scrap iron. Moreover, there is absence of
sufficient proof that the issuance of the same order was attended with such force or intimidation as to completely overpower the will of the
petitioner's employees. The mere difficulty in the fullfilment of the obligation is not considered force majeure. We agree with the private
respondent that the scraps could have been properly unloaded at the shore or at the NASSCO compound, so that after the dispute with
the local officials concerned was settled, the scraps could then be delivered in accordance with the contract of
carriage.chanroblesvirtualawlibrary chanrobles virtual law library
There is no incompatibility between the Civil Code provisions on common carriers and Articles 361 8 and 362 9 of the Code of Commerce
which were the basis for this Court's ruling in Government of the Philippine Islands vs. Ynchausti & Co.10 and which the petitioner
invokes in tills petition. For Art. 1735 of the Civil Code, conversely stated, means that the shipper will suffer the losses and deterioration
arising from the causes enumerated in Art. 1734; and in these instances, the burden of proving that damages were caused by the fault or
negligence of the carrier rests upon him. However, the carrier must first establish that the loss or deterioration was occasioned by one of
the excepted causes or was due to an unforeseen event or to force majeure. Be that as it may, insofar as Art. 362 appears to require of
the carrier only ordinary diligence, the same is .deemed to have been modified by Art. 1733 of the Civil Code.chanroblesvirtualawlibrary
chanrobles virtual law library
Finding the award of actual and exemplary damages to be proper, the same will not be disturbed by us. Besides, these were not
sufficiently controverted by the petitioner.chanroblesvirtualawlibrary chanrobles virtual law library
WHEREFORE, the petition is DENIED; the assailed decision of the Court of Appeals is hereby AFFIRMED. Costs against the
petitioner.chanroblesvirtualawlibrary chanrobles virtual law library

This decision is IMMEDIATELY EXECUTORY.

Yap, C.J., Paras and Padilla, JJ., concur.
chanrobles virtual law library

Separate Opinions
MELENCIO-HERRERA, J., dissenting: chanrobles virtual law library
I am constrained to dissent.chanroblesvirtualawlibrary chanrobles virtual law library
It is my view that petitioner can not be held liable in damages for the loss and destruction of the scrap iron. The loss of said cargo was
due to an excepted cause an 'order or act of competent public authority" (Article 1734[5], Civil Code).chanroblesvirtualawlibrary
chanrobles virtual law library
The loading of the scrap iron on the lighter had to be suspended because of Municipal Mayor Jose Advincula's intervention, who was a
"competent public authority." Petitioner had no control over the situation as, in fact, Tumambing himself, the owner of the cargo, was
impotent to stop the "act' of said official and even suffered a gunshot wound on the occasion.chanroblesvirtualawlibrary chanrobles virtual
law library
When loading was resumed, this time it was Acting Mayor Basilio Rub, accompanied by three policemen, who ordered the dumping of
the scrap iron into the sea right where the lighter was docked in three feet of water. Again, could the captain of the lighter and his crew
have defied said order? chanrobles virtual law library
Through the "order" or "act" of "competent public authority," therefore, the performance of a contractual obligation was rendered
impossible. The scrap iron that was dumped into the sea was "destroyed" while the rest of the cargo was "seized." The seizure is
evidenced by the receipt issues by Acting Mayor Rub stating that the Municipality of Mariveles had taken custody of the scrap iron.
Apparently, therefore, the seizure and destruction of the goods was done under legal process or authority so that petitioner should be
freed from responsibility.
Art. 1743. If through order of public authority the goods are seized or destroyed, the common carrier is not responsible, provided said
public authority had power to issue the order.chanroblesvirtualawlibrary chanrobles virtual law library

Separate Opinions
MELENCIO-HERRERA, J., dissenting:
I am constrained to dissent.chanrobles virtual law library
It is my view that petitioner can not be held liable in damages for the loss and destruction of the scrap iron. The loss of said cargo was
due to an excepted cause an 'order or act of competent public authority" (Article 1734[5], Civil Code).chanrobles virtual law library
The loading of the scrap iron on the lighter had to be suspended because of Municipal Mayor Jose Advincula's intervention, who was a
"competent public authority." Petitioner had no control over the situation as, in fact, Tumambing himself, the owner of the cargo, was
impotent to stop the "act' of said official and even suffered a gunshot wound on the occasion.chanrobles virtual law library

When loading was resumed, this time it was Acting Mayor Basilio Rub, accompanied by three policemen, who ordered the dumping of
the scrap iron into the sea right where the lighter was docked in three feet of water. Again, could the captain of the lighter and his crew
have defied said order?
Through the "order" or "act" of "competent public authority," therefore, the performance of a contractual obligation was rendered
impossible. The scrap iron that was dumped into the sea was "destroyed" while the rest of the cargo was "seized." The seizure is
evidenced by the receipt issues by Acting Mayor Rub stating that the Municipality of Mariveles had taken custody of the scrap iron.
Apparently, therefore, the seizure and destruction of the goods was done under legal process or authority so that petitioner should be
freed from responsibility.
Art. 1743. If through order of public authority the goods are seized or destroyed, the common carrier is not responsible, provided said
public authority had power to issue the order.

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G.R. No. 95582 October 7, 1991

DANGWA TRANSPORTATION CO., INC. and THEODORE LARDIZABAL y MALECDAN, petitioners,
vs.
COURT OF APPEALS, INOCENCIA CUDIAMAT, EMILIA CUDIAMAT BANDOY, FERNANDO CUDLAMAT, MARRIETA CUDIAMAT,
NORMA CUDIAMAT, DANTE CUDIAMAT, SAMUEL CUDIAMAT and LIGAYA CUDIAMAT, all Heirs of the late Pedrito Cudiamat
represented by Inocencia Cudiamat, respondents.
Francisco S. Reyes Law Office for petitioners.
Antonio C. de Guzman for private respondents.
REGALADO, J.:p
On May 13, 1985, private respondents filed a complaint 1 for damages against petitioners for the death of Pedrito Cudiamat as a result of
a vehicular accident which occurred on March 25, 1985 at Marivic, Sapid, Mankayan, Benguet. Among others, it was alleged that on said
date, while petitioner Theodore M. Lardizabal was driving a passenger bus belonging to petitioner corporation in a reckless and
imprudent manner and without due regard to traffic rules and regulations and safety to persons and property, it ran over its passenger,
Pedrito Cudiamat. However, instead of bringing Pedrito immediately to the nearest hospital, the said driver, in utter bad faith and without
regard to the welfare of the victim, first brought his other passengers and cargo to their respective destinations before banging said victim
to the Lepanto Hospital where he expired.
On the other hand, petitioners alleged that they had observed and continued to observe the extraordinary diligence required in the
operation of the transportation company and the supervision of the employees, even as they add that they are not absolute insurers of
the safety of the public at large. Further, it was alleged that it was the victim's own carelessness and negligence which gave rise to the
subject incident, hence they prayed for the dismissal of the complaint plus an award of damages in their favor by way of a counterclaim.
On July 29, 1988, the trial court rendered a decision, effectively in favor of petitioners, with this decretal portion:
IN VIEW OF ALL THE FOREGOING, judgment is hereby pronounced that Pedrito Cudiamat was negligent, which negligence was the
proximate cause of his death. Nonetheless, defendants in equity, are hereby ordered to pay the heirs of Pedrito Cudiamat the sum of
P10,000.00 which approximates the amount defendants initially offered said heirs for the amicable settlement of the case. No costs.
SO ORDERED. 2
Not satisfied therewith, private respondents appealed to the Court of Appeals which, in a decision 3 in CA-G.R. CV No. 19504
promulgated on August 14, 1990, set aside the decision of the lower court, and ordered petitioners to pay private respondents:
1. The sum of Thirty Thousand (P30,000.00) Pesos by way of indemnity for death of the victim Pedrito Cudiamat;
2. The sum of Twenty Thousand (P20,000.00) by way of moral damages;
3. The sum of Two Hundred Eighty Eight Thousand (P288,000.00) Pesos as actual and compensatory damages;
4. The costs of this suit. 4

Petitioners' motion for reconsideration was denied by the Court of Appeals in its resolution dated October 4, 1990, 5 hence this petition
with the central issue herein being whether respondent court erred in reversing the decision of the trial court and in finding petitioners
negligent and liable for the damages claimed.
It is an established principle that the factual findings of the Court of Appeals as a rule are final and may not be reviewed by this Court on
appeal. However, this is subject to settled exceptions, one of which is when the findings of the appellate court are contrary to those of the
trial court, in which case a reexamination of the facts and evidence may be undertaken. 6
In the case at bar, the trial court and the Court of Appeal have discordant positions as to who between the petitioners an the victim is
guilty of negligence. Perforce, we have had to conduct an evaluation of the evidence in this case for the prope calibration of their
conflicting factual findings and legal conclusions.
The lower court, in declaring that the victim was negligent, made the following findings:
This Court is satisfied that Pedrito Cudiamat was negligent in trying to board a moving vehicle, especially with one of his hands holding
an umbrella. And, without having given the driver or the conductor any indication that he wishes to board the bus. But defendants can
also be found wanting of the necessary diligence. In this connection, it is safe to assume that when the deceased Cudiamat attempted to
board defendants' bus, the vehicle's door was open instead of being closed. This should be so, for it is hard to believe that one would
even attempt to board a vehicle (i)n motion if the door of said vehicle is closed. Here lies the defendant's lack of diligence. Under such
circumstances, equity demands that there must be something given to the heirs of the victim to assuage their feelings. This, also
considering that initially, defendant common carrier had made overtures to amicably settle the case. It did offer a certain monetary
consideration to the victim's heirs. 7
However, respondent court, in arriving at a different opinion, declares that:
From the testimony of appellees'own witness in the person of Vitaliano Safarita, it is evident that the subject bus was at full stop when the
victim Pedrito Cudiamat boarded the same as it was precisely on this instance where a certain Miss Abenoja alighted from the bus.
Moreover, contrary to the assertion of the appellees, the victim did indicate his intention to board the bus as can be seen from the
testimony of the said witness when he declared that Pedrito Cudiamat was no longer walking and made a sign to board the bus when the
latter was still at a distance from him. It was at the instance when Pedrito Cudiamat was closing his umbrella at the platform of the bus
when the latter made a sudden jerk movement (as) the driver commenced to accelerate the bus.
Evidently, the incident took place due to the gross negligence of the appellee-driver in prematurely stepping on the accelerator and in not
waiting for the passenger to first secure his seat especially so when we take into account that the platform of the bus was at the time
slippery and wet because of a drizzle. The defendants-appellees utterly failed to observe their duty and obligation as common carrier to
the end that they should observe extra-ordinary diligence in the vigilance over the goods and for the safety of the passengers transported
by them according to the circumstances of each case (Article 1733, New Civil Code). 8
After a careful review of the evidence on record, we find no reason to disturb the above holding of the Court of Appeals. Its aforesaid
findings are supported by the testimony of petitioners' own witnesses. One of them, Virginia Abalos, testified on cross-examination as
follows:
Q It is not a fact Madam witness, that at bunkhouse 54, that is before the place of the incident, there is a crossing?

A The way going to the mines but it is not being pass(ed) by the bus.
Q And the incident happened before bunkhouse 56, is that not correct?
A It happened between 54 and 53 bunkhouses. 9
The bus conductor, Martin Anglog, also declared:
Q When you arrived at Lepanto on March 25, 1985, will you please inform this Honorable Court if there was anv unusual incident that
occurred?
A When we delivered a baggage at Marivic because a person alighted there between Bunkhouse 53 and 54.
Q What happened when you delivered this passenger at this particular place in Lepanto?
A When we reached the place, a passenger alighted and I signalled my driver. When we stopped we went out because I saw an umbrella
about a split second and I signalled again the driver, so the driver stopped and we went down and we saw Pedrito Cudiamat asking for
help because he was lying down.
Q How far away was this certain person, Pedrito Cudiamat, when you saw him lying down from the bus how far was he?
A It is about two to three meters.
Q On what direction of the bus was he found about three meters from the bus, was it at the front or at the back?
A At the back, sir. 10 (Emphasis supplied.)
The foregoing testimonies show that the place of the accident and the place where one of the passengers alighted were both between
Bunkhouses 53 and 54, hence the finding of the Court of Appeals that the bus was at full stop when the victim boarded the same is
correct. They further confirm the conclusion that the victim fell from the platform of the bus when it suddenly accelerated forward and was
run over by the rear right tires of the vehicle, as shown by the physical evidence on where he was thereafter found in relation to the bus
when it stopped. Under such circumstances, it cannot be said that the deceased was guilty of negligence.
The contention of petitioners that the driver and the conductor had no knowledge that the victim would ride on the bus, since the latter
had supposedly not manifested his intention to board the same, does not merit consideration. When the bus is not in motion there is no
necessity for a person who wants to ride the same to signal his intention to board. A public utility bus, once it stops, is in effect making a
continuous offer to bus riders. Hence, it becomes the duty of the driver and the conductor, every time the bus stops, to do no act that
would have the effect of increasing the peril to a passenger while he was attempting to board the same. The premature acceleration of
the bus in this case was a breach of such duty. 11
It is the duty of common carriers of passengers, including common carriers by railroad train, streetcar, or motorbus, to stop their
conveyances a reasonable length of time in order to afford passengers an opportunity to board and enter, and they are liable for injuries
suffered by boarding passengers resulting from the sudden starting up or jerking of their conveyances while they are doing so. 12
Further, even assuming that the bus was moving, the act of the victim in boarding the same cannot be considered negligent under the
circumstances. As clearly explained in the testimony of the aforestated witness for petitioners, Virginia Abalos, th bus had "just started"
and "was still in slow motion" at the point where the victim had boarded and was on its platform. 13
It is not negligence per se, or as a matter of law, for one attempt to board a train or streetcar which is moving slowly. 14 An ordinarily
prudent person would have made the attempt board the moving conveyance under the same or similar circumstances. The fact that

passengers board and alight from slowly moving vehicle is a matter of common experience both the driver and conductor in this case
could not have been unaware of such an ordinary practice.
The victim herein, by stepping and standing on the platform of the bus, is already considered a passenger and is entitled all the rights
and protection pertaining to such a contractual relation. Hence, it has been held that the duty which the carrier passengers owes to its
patrons extends to persons boarding cars as well as to those alighting therefrom. 15
Common carriers, from the nature of their business and reasons of public policy, are bound to observe extraordina diligence for the safety
of the passengers transported by the according to all the circumstances of each case. 16 A common carrier is bound to carry the
passengers safely as far as human care and foresight can provide, using the utmost diligence very cautious persons, with a due regard
for all the circumstances. 17
It has also been repeatedly held that in an action based on a contract of carriage, the court need not make an express finding of fault or
negligence on the part of the carrier in order to hold it responsible to pay the damages sought by the passenger. By contract of carriage,
the carrier assumes the express obligation to transport the passenger to his destination safely and observe extraordinary diligence with a
due regard for all the circumstances, and any injury that might be suffered by the passenger is right away attributable to the fault or
negligence of the carrier. This is an exception to the general rule that negligence must be proved, and it is therefore incumbent upon the
carrier to prove that it has exercised extraordinary diligence as prescribed in Articles 1733 and 1755 of the Civil Code. 18
Moreover, the circumstances under which the driver and the conductor failed to bring the gravely injured victim immediately to the
hospital for medical treatment is a patent and incontrovertible proof of their negligence. It defies understanding and can even be
stigmatized as callous indifference. The evidence shows that after the accident the bus could have forthwith turned at Bunk 56 and
thence to the hospital, but its driver instead opted to first proceed to Bunk 70 to allow a passenger to alight and to deliver a refrigerator,
despite the serious condition of the victim. The vacuous reason given by petitioners that it was the wife of the deceased who caused the
delay was tersely and correctly confuted by respondent court:
... The pretension of the appellees that the delay was due to the fact that they had to wait for about twenty minutes for Inocencia
Cudiamat to get dressed deserves scant consideration. It is rather scandalous and deplorable for a wife whose husband is at the verge of
dying to have the luxury of dressing herself up for about twenty minutes before attending to help her distressed and helpless husband. 19
Further, it cannot be said that the main intention of petitioner Lardizabal in going to Bunk 70 was to inform the victim's family of the
mishap, since it was not said bus driver nor the conductor but the companion of the victim who informed his family thereof. 20 In fact, it
was only after the refrigerator was unloaded that one of the passengers thought of sending somebody to the house of the victim, as
shown by the testimony of Virginia Abalos again, to wit:
Q Why, what happened to your refrigerator at that particular time?
A I asked them to bring it down because that is the nearest place to our house and when I went down and asked somebody to bring
down the refrigerator, I also asked somebody to call the family of Mr. Cudiamat.
COURT:
Q Why did you ask somebody to call the family of Mr. Cudiamat?
A Because Mr. Cudiamat met an accident, so I ask somebody to call for the family of Mr. Cudiamat.

Q But nobody ask(ed) you to call for the family of Mr. Cudiamat?
A No sir. 21
With respect to the award of damages, an oversight was, however, committed by respondent Court of Appeals in computing the actual
damages based on the gross income of the victim. The rule is that the amount recoverable by the heirs of a victim of a tort is not the loss
of the entire earnings, but rather the loss of that portion of the earnings which the beneficiary would have received. In other words, only
net earnings, not gross earnings, are to be considered, that is, the total of the earnings less expenses necessary in the creation of such
earnings or income and minus living and other incidental expenses. 22
We are of the opinion that the deductible living and other expense of the deceased may fairly and reasonably be fixed at P500.00 a
month or P6,000.00 a year. In adjudicating the actual or compensatory damages, respondent court found that the deceased was 48
years old, in good health with a remaining productive life expectancy of 12 years, and then earning P24,000.00 a year. Using the gross
annual income as the basis, and multiplying the same by 12 years, it accordingly awarded P288,000. Applying the aforestated rule on
computation based on the net earnings, said award must be, as it hereby is, rectified and reduced to P216,000.00. However, in
accordance with prevailing jurisprudence, the death indemnity is hereby increased to P50,000.00. 23
WHEREFORE, subject to the above modifications, the challenged judgment and resolution of respondent Court of Appeals are hereby
AFFIRMED in all other respects.
SO ORDERED.

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G.R. No. 145804. February 6, 2003

LIGHT RAIL TRANSIT AUTHORITY & RODOLFO ROMAN, petitioners, vs. MARJORIE NAVIDAD, Heirs of the Late NICANOR
NAVIDAD & PRUDENT SECURITY AGENCY, Respondents.
DECISION
VITUG, J.:
The case before the Court is an appeal from the decision and resolution of the Court of Appeals, promulgated on 27 April 2000 and 10
October 2000, respectively, in CA-G.R. CV No. 60720, entitled Marjorie Navidad and Heirs of the Late Nicanor Navidad vs. Rodolfo
Roman, et. al., which has modified the decision of 11 August 1998 of the Regional Trial Court, Branch 266, Pasig City, exonerating
Prudent Security Agency (Prudent) from liability and finding Light Rail Transit Authority (LRTA) and Rodolfo Roman liable for damages on
account of the death of Nicanor Navidad.
On 14 October 1993, about half an hour past seven oclock in the evening, Nicanor Navidad, then drunk, entered the EDSA LRT station
after purchasing a token (representing payment of the fare). While Navidad was standing on the platform near the LRT tracks, Junelito
Escartin, the security guard assigned to the area approached Navidad. A misunderstanding or an altercation between the two apparently
ensued that led to a fist fight. No evidence, however, was adduced to indicate how the fight started or who, between the two, delivered
the first blow or how Navidad later fell on the LRT tracks. At the exact moment that Navidad fell, an LRT train, operated by petitioner
Rodolfo Roman, was coming in. Navidad was struck by the moving train, and he was killed instantaneously.
On 08 December 1994, the widow of Nicanor, herein respondent Marjorie Navidad, along with her children, filed a complaint for damages
against Junelito Escartin, Rodolfo Roman, the LRTA, the Metro Transit Organization, Inc. (Metro Transit), and Prudent for the death of her
husband. LRTA and Roman filed a counterclaim against Navidad and a cross-claim against Escartin and Prudent. Prudent, in its answer,
denied liability and averred that it had exercised due diligence in the selection and supervision of its security guards.
The LRTA and Roman presented their evidence while Prudent and Escartin, instead of presenting evidence, filed a demurrer contending
that Navidad had failed to prove that Escartin was negligent in his assigned task. On 11 August 1998, the trial court rendered its decision;
it adjudged:
WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the defendants Prudent Security and Junelito Escartin
ordering the latter to pay jointly and severally the plaintiffs the following:
a) 1) Actual damages of P44,830.00;
2) Compensatory damages of P443,520.00;
3) Indemnity for the death of Nicanor Navidad in the sum of P50,000.00;
b) Moral damages of P50,000.00;
c) Attorneys fees of P20,000;
d) Costs of suit.
The complaint against defendants LRTA and Rodolfo Roman are dismissed for lack of merit.
The compulsory counterclaim of LRTA and Roman are likewise dismissed.1crlwvirtualibrry

Prudent appealed to the Court of Appeals. On 27 August 2000, the appellate court promulgated its now assailed decision exonerating
Prudent from any liability for the death of Nicanor Navidad and, instead, holding the LRTA and Roman jointly and severally liable thusly:
WHEREFORE, the assailed judgment is hereby MODIFIED, by exonerating the appellants from any liability for the death of Nicanor
Navidad, Jr. Instead, appellees Rodolfo Roman and the Light Rail Transit Authority (LRTA) are held liable for his death and are hereby
directed to pay jointly and severally to the plaintiffs-appellees, the following amounts:
a) P44,830.00 as actual damages;
b) P50,000.00 as nominal damages;
c) P50,000.00 as moral damages;
d) P50,000.00 as indemnity for the death of the deceased; and
e) P20,000.00 as and for attorneys fees.2crlwvirtualibrry
The appellate court ratiocinated that while the deceased might not have then as yet boarded the train, a contract of carriage theretofore
had already existed when the victim entered the place where passengers were supposed to be after paying the fare and getting the
corresponding token therefor. In exempting Prudent from liability, the court stressed that there was nothing to link the security agency to
the death of Navidad. It said that Navidad failed to show that Escartin inflicted fist blows upon the victim and the evidence merely
established the fact of death of Navidad by reason of his having been hit by the train owned and managed by the LRTA and operated at
the time by Roman. The appellate court faulted petitioners for their failure to present expert evidence to establish the fact that the
application of emergency brakes could not have stopped the train.
The appellate court denied petitioners motion for reconsideration in its resolution of 10 October 2000.
In their present recourse, petitioners recite alleged errors on the part of the appellate court; viz:
I.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED BY DISREGARDING THE FINDINGS OF FACTS BY THE TRIAL COURT
II.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT PETITIONERS ARE LIABLE FOR THE DEATH OF
NICANOR NAVIDAD, JR.
III.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT RODOLFO ROMAN IS AN EMPLOYEE OF LRTA.
3crlwvirtualibrry
Petitioners would contend that the appellate court ignored the evidence and the factual findings of the trial court by holding them liable on
the basis of a sweeping conclusion that the presumption of negligence on the part of a common carrier was not overcome. Petitioners
would insist that Escartins assault upon Navidad, which caused the latter to fall on the tracks, was an act of a stranger that could not
have been foreseen or prevented. The LRTA would add that the appellate courts conclusion on the existence of an employer-employee
relationship between Roman and LRTA lacked basis because Roman himself had testified being an employee of Metro Transit and not of
the LRTA.

Respondents, supporting the decision of the appellate court, contended that a contract of carriage was deemed created from the moment
Navidad paid the fare at the LRT station and entered the premises of the latter, entitling Navidad to all the rights and protection under a
contractual relation, and that the appellate court had correctly held LRTA and Roman liable for the death of Navidad in failing to exercise
extraordinary diligence imposed upon a common carrier.
Law and jurisprudence dictate that a common carrier, both from the nature of its business and for reasons of public policy, is burdened
with the duty of exercising utmost diligence in ensuring the safety of passengers.4 The Civil Code, governing the liability of a common
carrier for death of or injury to its passengers, provides:
Article 1755. A common carrier is bound to carry the passengers safely as far as human care and foresight can provide, using the utmost
diligence of very cautious persons, with a due regard for all the circumstances.
Article 1756. In case of death of or injuries to passengers, common carriers are presumed to have been at fault or to have acted
negligently, unless they prove that they observed extraordinary diligence as prescribed in articles 1733 and 1755.
Article 1759. Common carriers are liable for the death of or injuries to passengers through the negligence or willful acts of the formers
employees, although such employees may have acted beyond the scope of their authority or in violation of the orders of the common
carriers.
This liability of the common carriers does not cease upon proof that they exercised all the diligence of a good father of a family in the
selection and supervision of their employees.
Article 1763. A common carrier is responsible for injuries suffered by a passenger on account of the willful acts or negligence of other
passengers or of strangers, if the common carriers employees through the exercise of the diligence of a good father of a family could
have prevented or stopped the act or omission.
The law requires common carriers to carry passengers safely using the utmost diligence of very cautious persons with due regard for all
circumstances.5 Such duty of a common carrier to provide safety to its passengers so obligates it not only during the course of the trip but
for so long as the passengers are within its premises and where they ought to be in pursuance to the contract of carriage.6 The statutory
provisions render a common carrier liable for death of or injury to passengers (a) through the negligence or wilful acts of its
employees or b) on account of wilful acts or negligence of other passengers or of strangers if the common carriers employees
through the exercise of due diligence could have prevented or stopped the act or omission.7 In case of such death or injury, a
carrier is presumed to have been at fault or been negligent, and8 by simple proof of injury, the passenger is relieved of the duty to still
establish the fault or negligence of the carrier or of its employees and the burden shifts upon the carrier to prove that the injury is due to
an unforeseen event or to force majeure.9 In the absence of satisfactory explanation by the carrier on how the accident occurred, which
petitioners, according to the appellate court, have failed to show, the presumption would be that it has been at fault,10 an exception from
the general rule that negligence must be proved.11crlwvirtualibrry
The foundation of LRTAs liability is the contract of carriage and its obligation to indemnify the victim arises from the breach of that
contract by reason of its failure to exercise the high diligence required of the common carrier. In the discharge of its commitment to
ensure the safety of passengers, a carrier may choose to hire its own employees or avail itself of the services of an outsider or an

independent firm to undertake the task. In either case, the common carrier is not relieved of its responsibilities under the contract of
carriage.
Should Prudent be made likewise liable? If at all, that liability could only be for tort under the provisions of Article 217612 and related
provisions, in conjunction with Article 2180,13 of the Civil Code. The premise, however, for the employers liability is negligence or fault on
the part of the employee. Once such fault is established, the employer can then be made liable on the basis of the presumption juris
tantum that the employer failed to exercise diligentissimi patris families in the selection and supervision of its employees. The liability is
primary and can only be negated by showing due diligence in the selection and supervision of the employee, a factual matter that has not
been shown. Absent such a showing, one might ask further, how then must the liability of the common carrier, on the one hand, and an
independent contractor, on the other hand, be described? It would be solidary. A contractual obligation can be breached by tort and when
the same act or omission causes the injury, one resulting in culpa contractual and the other in culpa aquiliana, Article 219414 of the Civil
Code can well apply.15 In fine, a liability for tort may arise even under a contract, where tort is that which breaches the contract.16 Stated
differently, when an act which constitutes a breach of contract would have itself constituted the source of a quasi-delictual liability had no
contract existed between the parties, the contract can be said to have been breached by tort, thereby allowing the rules on tort to apply.
17crlwvirtualibrry
Regrettably for LRT, as well as perhaps the surviving spouse and heirs of the late Nicanor Navidad, this Court is concluded by the factual
finding of the Court of Appeals that there is nothing to link (Prudent) to the death of Nicanor (Navidad), for the reason that the negligence
of its employee, Escartin, has not been duly proven x x x. This finding of the appellate court is not without substantial justification in our
own review of the records of the case.
There being, similarly, no showing that petitioner Rodolfo Roman himself is guilty of any culpable act or omission, he must also be
absolved from liability. Needless to say, the contractual tie between the LRT and Navidad is not itself a juridical relation between the latter
and Roman; thus, Roman can be made liable only for his own fault or negligence.
The award of nominal damages in addition to actual damages is untenable. Nominal damages are adjudicated in order that a right of the
plaintiff, which has been violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose of indemnifying
the plaintiff for any loss suffered by him.18 It is an established rule that nominal damages cannot co-exist with compensatory damages.
19crlwvirtualibrry
WHEREFORE, the assailed decision of the appellate court is AFFIRMED with MODIFICATION but only in that (a) the award of nominal
damages is DELETED and (b) petitioner Rodolfo Roman is absolved from liability. No costs.
SO ORDERED.

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[G.R. No. 80447. January 31, 1989.]

BALIWAG TRANSIT, INC., Petitioner, v. HON. COURT OF APPEALS and SPS. SOTERO CAILIPAN, JR. and ZENAIDA LOPEZ and
GEORGE L. CAILIPAN, Respondents.

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Sta. Maria & Associates for Petitioner.
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Punzalan and Associates Law Office for Respondents.
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1. REMEDIAL LAW; CIVIL ACTIONS; ACTION FOR BREACH OF CONTRACT; RELEASE OF CLAIMS EXECUTED BY INJURED
PARTY OF LEGAL AGE, VALID. We hold that since the suit is one for breach of contract of carriage, the Release of Claims executed
by him, as the injured party, discharging Fortune Insurance and Baliwag from any and all liability is valid. He was then of legal age, a
graduating student of Agricultural Engineering, and had the capacity to do acts with legal effect (Article 37 in relation to Article 402, Civil
Code). Thus, he could sue and be sued even without the assistance of his parents.

2. CIVIL LAW; COMMON CARRIERS; CARRIER LIABLE FOR INQUIRIES CAUSED ITS PASSENGERS. The contract of carriage
was actually between George, as the paying passenger, and Baliwag, as the common carrier. As such carrier, Baliwag was bound to
carry its passengers safely as far as human care and foresight could provide, and is liable for injuries to them through the negligence or
wilful acts of its employees (Articles 1755 and 1759, Civil Code). Thus, George had the right to be safely brought to his destination and
Baliwag had the correlative obligation to do so. Since a contract may be violated only by the parties thereto, as against each other, in an
action upon that contract, the real parties in interest, either as plaintiff or as defendant, must be parties to said contract (Marimperio
Compania Naviera, S.A. v. Court of Appeals, No. L-40234, December 14, 1987, 156 SCRA 368).

3. REMEDIAL LAW; CIVIL ACTIONS; REAL PARTY-IN-INTEREST, DEFINED. A real party-in-interest-plaintiff is one who has a legal
right while a real party-in-interest-defendant is one who has a correlative legal obligation whose act or omission violates the legal right of
the former (Lee v. Romillo, Jr., G.R. No. 60973, May 28, 1988).

4. ID.; ID.; ACTION FOR BREACH OF CONTRACT, PERSONS NOT PARTIES TO CONTRACT, NOT REAL PARTIES-IN-INTEREST.
In the absence of any contract of carriage between Baliwag and Georges parents, the latter are not real parties-in-interest in an action
for breach of that contract.

5. STATUTORY CONSTRUCTION; IF THE TERMS OF THE CONTRACT ARE CLEAR AND LEAVES NO ROOM FOR DOUBT, THE
LITERAL MEANING OF STIPULATION CONTROLS. If the terms of a contract are clear and leave no doubt upon the intention of the
contracting parties, the literal meaning of its stipulations shall control (Article 1370, Civil Code).

6. ID.; ID.; CASE AT BAR. The phraseology "any and all claims or causes of action" is broad enough to include all damages that may
accrue to the injured party arising from the unfortunate accident.

7. REMEDIAL LAW; CIVIL ACTIONS; RELEASE OF CLAIMS HAD THE EFFECT OF COMPROMISE AGREEMENT. The Release of
Claims had the effect of a compromise agreement since it was entered into for the purpose of making a full and final compromise
adjustment and settlement of the cause of action involved.

8. ID.; ID.; COMPROMISE AGREEMENT; CONSTRUED. A compromise is a contract whereby the parties, by making reciprocal
concessions, avoid a litigation or put an end to one already commenced (Article 2028, Civil Code). The Release of Claims executed by
the injured party himself wrote finish to this litigation.

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DECISION

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MELENCIO-HERRERA, J.:

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On 10 April 1985 a Complaint for damages arising from breach of contract of carriage was filed by private respondents, the Spouses
Sotero Cailipan, Jr. and Zenaida Lopez, and their son George, of legal age, against petitioner Baliwag Transit (Baliwag, for brevity). The
Complaint alleged that George, who was a paying passenger on a Baliwag bus on 17 December 1984, suffered multiple serious physical
injuries when he was thrown off said bus driven in a careless and negligent manner by Leonardo Cruz, the authorized bus driver, along
Barangay Patubig, Marilao, Bulacan. As a result, he was confined in the hospital for treatment, incurring medical expenses, which were
borne by his parents, the respondent Spouses, in the sum of about P200,000.00 plus other incidental expenses of about P10,000.00.
On 26 April 1985 an Answer was filed by petitioner alleging that the cause of the injuries sustained by George was solely attributable to
his own voluntary act in that, without warning and provocation, he suddenly stood up from his seat and headed for the door of the bus as
if in a daze, opened it and jumped off while said bus was in motion, in spite of the protestations by the driver and without the knowledge
of the conductor.

Baliwag then filed a Third-Party Complaint against Fortune Insurance & Surety Company, Inc., on its third-party liability insurance in the
amount of P50,000.00. In its Answer, Fortune Insurance claimed limited liability, the coverage being subject to a Schedule of Indemnities
forming part of the insurance policy.

On 14 November 1985 and 18 November 1985, respectively, Fortune Insurance and Baliwag each filed Motions to Dismiss on the ground
that George, in consideration of the sum of P8,020.50 had executed a "Release of Claims" dated 16 May 1985. These Motions were
denied by the Trial Court in an Order dated 13 January 1986 as they were filed beyond the time for pleading and after the Answer were
already filed.chanrobles.com : virtual law library

On 5 February 1986 Baliwag filed a Motion to Admit Amended Answer, which was granted by the Trial Court. The Amended Answer
incorporated the affirmative defense in the Motion to Dismiss to the effect that on 16 May 1985, George had been paid all his claims for
damages arising from the incident subject matter of the complaint when he executed the following "Release of
Claims" :jgc:chanrobles.com.ph

"For and in consideration of the payment to me/us of the sum of EIGHT THOUSAND TWENTY and 50/100 PESOS ONLY (P8,020.50),
the receipt of which is hereby acknowledged, I/we, being of lawful age, do hereby release, acquit and forever discharge Fortune
Insurance and/or Baliwag Transit, Inc. his/her heirs, executors and assigns, from any and all liability now accrued or hereafter to accrue
on account of any and all claims or causes of action which I/we now or may hereafter have for personal injuries, damage to property, loss
of services, medical expenses, losses or damages of any and every kind or nature whatsoever, now known or what may hereafter
develop by me/us sustained or received on or about 17th day of December, 1984 through Reckless Imprudence Resulting to Physical
Injuries, and I/we hereby declare that I/we fully understand the terms of this settlement and voluntarily accept said sum for the purpose of
making a full and final compromise adjustment and settlement of the injuries and damages, expenses and inconvenience above
mentioned." (Rollo, p. 11)

During the preliminary hearing on the aforementioned affirmative defense, Baliwag waived the presentation of testimonial evidence and
instead offered as its Exhibit "1" the "Release of Claims" signed by George and witnessed by his brother Benjamin L. Cailipan, a licensed
engineer.

By way of opposition to petitioners affirmative defense, respondent Sotero Cailipan, Jr. testified that he is the father of George, who at
the time of the incident was a student, living with his parents and totally dependent on them for their support; that the expenses for his
hospitalization were shouldered by his parents; and that they had not signed the "Release of Claims."cralaw virtua1aw library

In an Order dated 29 August 1986, the Regional Trial Court of Bulacan, Branch 20, 1 dismissed the Complaint and Third-party Complaint,
ruling that since the contract of carriage is between Baliwag and George L. Cailipan, the latter, who is of legal age, had the exclusive right

to execute the Release of Claims despite the fact that he is still a student and dependent on his parents for support. Consequently, the
execution by George of the Release of Claims discharges Baliwag and Fortune Insurance.chanrobles virtual lawlibrary

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Aggrieved, the Spouses appealed to respondent Court of Appeals.
!

On 22 October 1987, the Appellate Court rendered a Decision 2 setting aside the appealed Order and holding that the "Release of
Claims" cannot operate as a valid ground for the dismissal of the case because it does not have the conformity of all the parties,
particularly Georges parents, who have a substantial interest in the case as they stand to be prejudiced by the judgment because they
spent a sizeable amount for the medical bills of their son; that the Release of Claims was secured by Fortune Insurance for the
consideration of P8,020.50 as the full and final settlement of its liability under the insurance policy and not for the purpose of releasing
Baliwag from its liability as a carrier in this suit for breach of contract. The Appellate Court also ordered the remand of the case to the
lower Court for trial on the merits and for George to return the amount of P8,020.50 to Fortune Insurance.

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Hence, this Petition for Review on Certiorari by Baliwag assailing the Appellate Court judgment.
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The issue brought to the fore is the legal effect of the Release of Claims executed by George during the pendency of this case.
!

We hold that since the suit is one for breach of contract of carriage, the Release of Claims executed by him, as the injured party,
discharging Fortune Insurance and Baliwag from any and all liability is valid. He was then of legal age, a graduating student of
Agricultural Engineering, and had the capacity to do acts with legal effect (Article 37 in relation to Article 402, Civil Code). Thus, he could
sue and be sued even without the assistance of his parents.

Significantly, the contract of carriage was actually between George, as the paying passenger, and Baliwag, as the common carrier. As
such carrier, Baliwag was bound to carry its passengers safely as far as human care and foresight could provide, and is liable for injuries
to them through the negligence or wilful acts of its employees (Articles 1755 and 1759, Civil Code). Thus, George had the right to be
safely brought to his destination and Baliwag had the correlative obligation to do so. Since a contract may be violated only by the parties
thereto, as against each other, in an action upon that contract, the real parties in interest, either as plaintiff or as defendant, must be
parties to said contract (Marimperio Compania Naviera, S.A. v. Court of Appeals, No. L-40234, December 14, 1987, 156 SCRA 368). A
real party-in-interest-plaintiff is one who has a legal right while a real party-in-interest-defendant is one who has a correlative legal
obligation whose act or omission violates the legal right of the former (Lee v. Romillo, Jr., G.R. No. 60973, May 28, 1988). In the absence
of any contract of carriage between Baliwag and Georges parents, the latter are not real parties-in-interest in an action for breach of that
contract.chanrobles virtual lawlibrary

"The general rule of the common law is that every action must be brought in the name of the party whose legal right has been invaded or
infringed." 15 Enc. P1. & Pr. p. 484. "For the immediate wrong and damage the person injured is the only one who can maintain the
action." Id. p. 578. "The person who sustains an injury is the person to bring an action for the injury against the wrongdoer." Dicey, parties
to Actions, 347. (Cited in Green v. Shoemaker, 73 A 688, 23 L.R.A., N.S. 667).

There is no question regarding the genuineness and due execution of the Release of Claims. It is a duly notarized public document. It
clearly stipulates that the consideration of P8,020.50 received by George was "to release and forever discharge Fortune Insurance and/
or Baliwag from any and all liabilities now accrued or to accrue on account of any and all claims or causes of action . . . for personal
injuries, damage to property, loss of services, medical expenses, losses or damages of any and every kind or nature whatsoever,
sustained by him on 17 December 1984 thru Reckless Imprudence Resulting to Physical Injuries." Consequently, the ruling of respondent
Appellate Court that the "Release of Claims" was intended only as the full and final settlement of a third-party-liability for bodily injury
claim and not for the purpose of releasing Baliwag from its liability, if any, in a breach of a contract of carriage, has to be rejected for
being contrary to the very terms thereof. If the terms of a contract are clear and leave no doubt upon the intention of the contracting
parties, the literal meaning of its stipulations shall control (Article 1370, Civil Code). The phraseology "any and all claims or causes of
action" is broad enough to include all damages that may accrue to the injured party arising from the unfortunate accident.

The Release of Claims had the effect of a compromise agreement since it was entered into for the purpose of making a full and final
compromise adjustment and settlement of the cause of action involved. A compromise is a contract whereby the parties, by making
reciprocal concessions, avoid a litigation or put an end to one already commenced (Article 2028, Civil Code). The Release of Claims
executed by the injured party himself wrote finish to this litigation.

WHEREFORE, the Decision dated 22 October 1987 of respondent Court of Appeals is SET ASIDE, the Decision of the Regional Trial
Court of Bulacan, Branch 20, is REINSTATED, and the Complaint and Third-Party-Complaint are hereby ordered DISMISSED. No costs.

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SO ORDERED.
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[G.R. No. 122494. October 8, 1998]

EVERETT STEAMSHIP CORPORATION, petitioner, vs. COURT OF APPEALS and HERNANDEZ TRADING CO. INC., respondents.
DECISION
MARTINEZ, J.:
Petitioner Everett Steamship Corporation, through this petition for review, seeks the reversal of the decision[if !supportFootnotes][1][endif] of
the Court of Appeals, dated June 14, 1995, in CA-G.R. No. 428093, which affirmed the decision of the Regional Trial Court of Kalookan
City, Branch 126, in Civil Case No. C-15532, finding petitioner liable to private respondent Hernandez Trading Co., Inc. for the value of
the lost cargo.
Private respondent imported three crates of bus spare parts marked as MARCO C/No. 12, MARCO C/No. 13 and MARCO C/No.
14, from its supplier, Maruman Trading Company, Ltd. (Maruman Trading), a foreign corporation based in Inazawa, Aichi, Japan. The
crates were shipped from Nagoya, Japan to Manila on board ADELFAEVERETTE, a vessel owned by petitioners principal, Everett Orient
Lines. The said crates were covered by Bill of Lading No. NGO53MN.
Upon arrival at the port of Manila, it was discovered that the crate marked MARCO C/No. 14 was missing. This was confirmed and
admitted by petitioner in its letter of January 13, 1992 addressed to private respondent, which thereafter made a formal claim upon
petitioner for the value of the lost cargo amounting to One Million Five Hundred Fifty Two Thousand Five Hundred (Y1,552,500.00) Yen,
the amount shown in an Invoice No. MTM-941, dated November 14, 1991. However, petitioner offered to pay only One Hundred
Thousand (Y100,000.00) Yen, the maximum amount stipulated under Clause 18 of the covering bill of lading which limits the liability of
petitioner.
Private respondent rejected the offer and thereafter instituted a suit for collection docketed as Civil Case No. C-15532, against
petitioner before the Regional Trial Court of Caloocan City, Branch 126.
At the pre-trial conference, both parties manifested that they have no testimonial evidence to offer and agreed instead to file their
respective memoranda.
On July 16, 1993, the trial court rendered judgment[if !supportFootnotes][2][endif] in favor of private respondent, ordering petitioner to pay: (a)
Y1,552,500.00; (b) Y20,000.00 or its peso equivalent representing the actual value of the lost cargo and the material and packaging cost;
(c) 10% of the total amount as an award for and as contingent attorneys fees; and (d) to pay the cost of the suit. The trial court ruled:
Considering defendants categorical admission of loss and its failure to overcome the presumption of negligence and fault, the Court
conclusively finds defendant liable to the plaintiff. The next point of inquiry the Court wants to resolve is the extent of the liability of the
defendant. As stated earlier, plaintiff contends that defendant should be held liable for the whole value for the loss of the goods in the
amount of Y1,552,500.00 because the terms appearing at the back of the bill of lading was so written in fine prints and that the same was
not signed by plaintiff or shipper thus, they are not bound by the clause stated in paragraph 18 of the bill of lading. On the other hand,
defendant merely admitted that it lost the shipment but shall be liable only up to the amount of Y100,000.00.
The Court subscribes to the provisions of Article 1750 of the New Civil Code Art. 1750. 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.

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 Art. 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 at bar, the Court is of the view that the requirements of said article have not been met. The fact that those conditions are
printed at the back of the bill of lading in letters so small that they are hard to read would not warrant the presumption that the plaintiff or
its supplier was aware of these conditions such that he had fairly and freely agreed to these conditions. It can not be said that the plaintiff
had actually entered into a contract with the defendant, embodying the conditions as printed at the back of the bill of lading that was
issued by the defendant to plaintiff.
On appeal, the Court of Appeals deleted the award of attorneys fees but affirmed the trial courts findings with the additional
observation that private respondent can not be bound by the terms and conditions of the bill of lading because it was not privy to the
contract of carriage. It said:
As to the amount of liability, no evidence appears on record to show that the appellee (Hernandez Trading Co.) consented to the terms of
the Bill of Lading. The shipper named in the Bill of Lading is Maruman Trading Co., Ltd. whom the appellant (Everett Steamship Corp.)
contracted with for the transportation of the lost goods.
Even assuming arguendo that the shipper Maruman Trading Co., Ltd. accepted the terms of the bill of lading when it delivered the cargo
to the appellant, still it does not necessarily follow that appellee Hernandez Trading Company as consignee is bound thereby considering
that the latter was never privy to the shipping contract.
xxxxxxxxx
Never having entered into a contract with the appellant, appellee should therefore not be bound by any of the terms and conditions in the
bill of lading.
Hence, it follows that the appellee may recover the full value of the shipment lost, the basis of which is not the breach of contract as
appellee was never a privy to the any contract with the appellant, but is based on Article 1735 of the New Civil Code, there being no
evidence to prove satisfactorily that the appellant has overcome the presumption of negligence provided for in the law.
Petitioner now comes to us arguing that the Court of Appeals erred (1) in ruling that the consent of the consignee to the terms and
conditions of the bill of lading is necessary to make such stipulations binding upon it; (2) in holding that the carriers limited package
liability as stipulated in the bill of lading does not apply in the instant case; and (3) in allowing private respondent to fully recover the full
alleged value of its lost cargo.
We shall first resolve the validity of the limited liability clause in the bill of lading.
A stipulation in the bill of lading limiting the common carriers liability for loss or destruction of a cargo to a certain sum, unless the
shipper or owner declares a greater value, is sanctioned by law, particularly Articles 1749 and 1750 of the Civil Code which provide:
ART. 1749. A stipulation that the common carriers liability is limited to the value of the goods appearing in the bill of lading, unless the
shipper or owner declares a greater value, is binding.
ART. 1750. 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 freely and fairly agreed upon.

Such limited-liability clause has also been consistently upheld by this Court in a number of cases.[if !supportFootnotes][3][endif] Thus, in Sea
Land Service, Inc. vs Intermediate Appellate Court[if !supportFootnotes][4][endif], we ruled:
It seems clear that even if said section 4 (5) of the Carriage of Goods by Sea Act did not exist, the validity and binding effect of the liability
limitation clause in the bill of lading here are nevertheless fully sustainable on the basis alone of the cited Civil Code Provisions. That said
stipulation is just and reasonable is arguable from the fact that it echoes Art. 1750 itself in providing a limit to liability only if a greater
value is not declared for the shipment in the bill of lading. To hold otherwise would amount to questioning the justness and fairness of the
law itself, and this the private respondent does not pretend to do. But over and above that consideration, the just and reasonable
character of such stipulation is implicit in it giving the shipper or owner the option of avoiding accrual of liability limitation by the simple
and surely far from onerous expedient of declaring the nature and value of the shipment in the bill of lading..
Pursuant to the afore-quoted provisions of law, it is required that the stipulation limiting the common carriers liability for loss must be
reasonable and just under the circumstances, and has been freely and fairly agreed upon.
The bill of lading subject of the present controversy specifically provides, among others:
18. All claims for which the carrier may be liable shall be adjusted and settled on the basis of the shippers net invoice cost plus freight
and insurance premiums, if paid, and in no event shall the carrier be liable for any loss of possible profits or any consequential loss.
The carrier shall not be liable for any loss of or any damage to or in any connection with, goods in an amount exceeding One Hundred
Thousand Yen in Japanese Currency (Y100,000.00) or its equivalent in any other currency per package or customary freight unit
(whichever is least) unless the value of the goods higher than this amount is declared in writing by the shipper before receipt of the goods
by the carrier and inserted in the Bill of Lading and extra freight is paid as required. (Emphasis supplied)
The above stipulations are, to our mind, reasonable and just. In the bill of lading, the carrier made it clear that its liability would only
be up to One Hundred Thousand (Y100,000.00) Yen. However, the shipper, Maruman Trading, had the option to declare a higher
valuation if the value of its cargo was higher than the limited liability of the carrier. Considering that the shipper did not declare
a higher valuation, it had itself to blame for not complying with the stipulations.
The trial courts ratiocination that private respondent could not have fairly and freely agreed to the limited liability clause in the bill of
lading because the said conditions were printed in small letters does not make the bill of lading invalid.
We ruled in PAL, Inc. vs. Court of Appeals[if !supportFootnotes][5][endif] that the jurisprudence on the matter reveals the consistent holding
of the court that contracts of adhesion are not invalid per se and that it has on numerous occasions upheld the binding effect thereof.
Also, in Philippine American General Insurance Co., Inc. vs. Sweet Lines , Inc.[if !supportFootnotes][6][endif] this Court , speaking through the
learned Justice Florenz D. Regalado, held:
x x x Ong Yiu vs. Court of Appeals, et.al., instructs us that contracts of adhesion wherein one party imposes a ready-made form of
contract on the other x x x 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. In the present case, not even an allegation of ignorance of a party excuses non-compliance with the
contractual stipulations since the responsibility for ensuring full comprehension of the provisions of a contract of carriage devolves not on
the carrier but on the owner, shipper, or consignee as the case may be. (Emphasis supplied)

It was further explained in Ong Yiu vs Court of Appeals[if !supportFootnotes][7][endif] that stipulations in contracts of adhesion are valid and
binding.
While it may be true that petitioner had not signed the plane ticket x x, 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 latters lack
of knowledge or assent to the regulation. 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. x x x , 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. (Emphasis supplied)
Greater vigilance, however, is required of the courts when dealing with contracts of adhesion in that the said contracts must be
carefully scrutinized in order to shield the unwary (or weaker party) from deceptive schemes contained in ready-made covenants,[if !
supportFootnotes][8][endif] such as the bill of lading in question. The stringent requirement which the courts are enjoined to observe is in
recognition of Article 24 of the Civil Code which mandates that (i)n all contractual, property or other relations, when one of the parties is
at a disadvantage on account of his moral dependence, ignorance, indigence, mental weakness, tender age or other handicap,
the courts must be vigilant for his protection.
The shipper, Maruman Trading, we assume, has been extensively engaged in the trading business. It can not be said to be ignorant
of the business transactions it entered into involving the shipment of its goods to its customers. The shipper could not have known, or
should know the stipulations in the bill of lading and there it should have declared a higher valuation of the goods shipped. Moreover,
Maruman Trading has not been heard to complain that it has been deceived or rushed into agreeing to ship the cargo in petitioners
vessel. In fact, it was not even impleaded in this case.
The next issue to be resolved is whether or not private respondent, as consignee, who is not a signatory to the bill of lading is
bound by the stipulations thereof.
Again, in Sea-Land Service, Inc. vs. Intermediate Appellate Court (supra), we held that even if the consignee was not a
signatory to the contract of carriage between the shipper and the carrier, the consignee can still be bound by the contract. Speaking
through Mr. Chief Justice Narvasa, we ruled:
To begin with, there is no question of the right, in principle, of a consignee in a bill of lading to recover from the carrier or shipper for loss
of, or damage to goods being transported under said bill, although that document may have been- as in practice it oftentimes isdrawn up only by the consignor and the carrier without the intervention of the consignee. x x x.
x x x the right of a party in the same situation as respondent here, to recover for loss of a shipment consigned to him under a
bill of lading drawn up only by and between the shipper and the carrier, springs from either a relation of agency that may exist
between him and the shipper or consignor, or his status as stranger in whose favor some stipulation is made in said contract,
and who becomes a party thereto when he demands fulfillment of that stipulation, in this case the delivery of the goods or
cargo shipped. In neither capacity can he assert personally, in bar to any provision of the bill of lading, the alleged
circumstance that fair and free agreement to such provision was vitiated by its being in such fine print as to be hardly readable.

Parenthetically, it may be observed that in one comparatively recent case (Phoenix Assurance Company vs. Macondray & Co., Inc., 64
SCRA 15) where this Court found that a similar package limitation clause was printed in the smallest type on the back of the bill of
lading, it nonetheless ruled that the consignee was bound thereby on the strength of authority holding that such provisions on
liability limitation are as much a part of a bill of lading as though physically in it and as though placed therein by agreement of
the parties.
There can, therefore, be no doubt or equivocation about the validity and enforceability of freely-agreed-upon stipulations in a contract of
carriage or bill of lading limiting the liability of the carrier to an agreed valuation unless the shipper declares a higher value and
inserts it into said contract or bill. This proposition, moreover, rests upon an almost uniform weight of authority. (Underscoring
supplied)
When private respondent formally claimed reimbursement for the missing goods from petitioner and subsequently filed a case
against the latter based on the very same bill of lading, it (private respondent) accepted the provisions of the contract and thereby made
itself a party thereto, or at least has come to court to enforce it.[if !supportFootnotes][9][endif] Thus, private respondent cannot now reject or
disregard the carriers limited liability stipulation in the bill of lading. In other words, private respondent is bound by the whole stipulations
in the bill of lading and must respect the same.
Private respondent, however, insists that the carrier should be liable for the full value of the lost cargo in the amount of
Y1,552,500.00, considering that the shipper, Maruman Trading, had "fully declared the shipment x x x, the contents of each crate, the
dimensions, weight and value of the contents,"as shown in the commercial Invoice No. MTM-941.
This claim was denied by petitioner, contending that it did not know of the contents, quantity and value of "the shipment which
consisted of three pre-packed crates described in Bill of Lading No. NGO-53MN merely as 3 CASES SPARE PARTS.
The bill of lading in question confirms petitioners contention. To defeat the carriers limited liability, the aforecited Clause 18 of the bill
of lading requires that the shipper should have declared in writing a higher valuation of its goods before receipt thereof by the carrier
and insert the said declaration in the bill of lading, with the extra freight paid. These requirements in the bill of lading were never
complied with by the shipper, hence, the liability of the carrier under the limited liability clause stands. The commercial Invoice No.
MTM-941 does not in itself sufficiently and convincingly show that petitioner has knowledge of the value of the cargo as contended by
private respondent. No other evidence was proffered by private respondent to support is contention. Thus, we are convinced that
petitioner should be liable for the full value of the lost cargo.
In fine, the liability of petitioner for the loss of the cargo is limited to One Hundred Thousand (Y100,000.00) Yen, pursuant to Clause
18 of the bill of lading.
WHEREFORE, the decision of the Court of Appeals dated June 14, 1995 in C.A.-G.R. CV No. 42803 is hereby REVERSED and SET
ASIDE.
SO ORDERED.

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[G.R. No. 106279. July 14, 1995.]

SULPICIO LINES, INC., Petitioner, v. THE HONORABLE COURT OF APPEALS (Twelfth Division) and JACINTA L. PAMALARAN,
Respondents.

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Angara, Abella, Concepcion, Regala, & Cruz Law Offices for Petitioner.
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Caballero, Armentado, & Hubahilo Law Offices for Private Respondent.
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COMMERCIAL LAWS; TRANSPORTATION; CONTRACT OF CARRIAGE; DAMAGES; PARTIES LIABLE. This Court agrees with the
Court of Appeals that although Pamalaran was never a passenger of Sulpicio Lines, Inc. (herein petitioner) still the latter is liable as a
common carrier for his death. The Court of Appeals relied on Canas v. Dabatos, 8 Court of Appeals Report 918 (1965). Ago Lumber
Company (ALC) had a contract of carriage with petitioner. The presence of the stevedores sent by ALC on board the barge of petitioner
was called for by the contract of carriage. For how else would its lumber be transported unless it is placed on board? And by whom? Of
course, the stevedores. Definitely, petitioner could not expect the shipper itself to load the lumber without the aid of the stevedores.
Furthermore, petitioner knew of the presence and role of the stevedores in its barge and thus consented to their presence. Hence,
petitioner was responsible for their safety while on board the barge. Petitioner next claims that its employees even warned the stevedores
and tried to prevent their entry into the storeroom. Such argument, again, is demolished by the findings of the Court of Appeals, thus:
". . .. However, appellant failed to prove that its employees were actually trained or given specific instructions to see to it that the barge is
fit and safe not only in transporting goods but also for people who would be loading the cargo into the bodega of the barge. It is not
enough that appellants employees have warned the laborers not to enter the barge after the hatch was opened. Appellants employees
should have been sufficiently instructed to see to it that the hatch of the barge is not opened by any unauthorized person and that the
hatch is not easily opened by anyone. At the very least, precautionary measures should have been observed by appellants employees to
see to it that no one could enter the bodega of the barge until after they have made sure that it is safe for anyone to enter the same.
Failing to exercise due diligence in the supervision of its employees, the lower court was correct in holding appellant liable for damages."

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DECISION
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QUIASON, J.:

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This is a petition for review on certiorari under Rule 45 of the Revised Rules of Court to reverse the Decision dated April 8, 1992 of the
Court of Appeals in CA-G.R. CV No. 21919, affirming the decision of the Regional Trial Court of Bohol, Branch 2, Tagbilaran City, which
awarded the claim for damages filed by private respondent against CBL, Timber Corporation.(CBL), AGO Lumber Company (ALC),
Sulpicio Lines, Inc. (SLI) and Ernie Santiago (Civil Case No. 2864).chanrobles.com.ph : virtual law library
We deny the petition.

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A contract of carriage was entered into between petitioner and ALC for the transport of the latters timber from Pugad, Lianga, Surigao del
Sur.

On March 17, 1976, petitioner sent its tugboat "MT Edmund and barge "Solid VI" to Lianga to pick up ALCs timber. However, no loading
could be made because of the heavy downpour. The next morning, several stevedores of CBL, who were hired by ALC, boarded the
"Solid VI" and opened its storeroom. The stevedores were warned of the gas and heat generated by the copra stored in the holds of the
ship. Not heeding the warning, a stevedore entered the storeroom and fell unconscious. Two other stevedores followed, one of whom
was Leoncio L. Pamalaran. He also lost consciousness and eventually died of gas poisoning.

Thus, Civil Case No. 2864 for damages was filed with the Regional Trial Court of Bohol, Branch 2, Tagbilaran by Pamalarans heirs
against petitioner CBL, ALC and its manager, Ernie Santiago. The trial court ruled in favor of plaintiffs, disposing as
follows:jgc:chanrobles.com.ph

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"WHEREFORE, finding a preponderance of evidence in favor of the plaintiffs, judgment is hereby rendered:jgc:chanrobles.com.ph
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"Ordering defendants CBL Timber Corporation, AGO Lumber Company, Sulpicio Lines, Inc. and Ernie Santiago to pay plaintiffs jointly
and severally:jgc:chanrobles.com.ph

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"1. Actual and compensatory damages of P40,000;
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2. Moral damages of P 50,000.00;
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3. Attorneys fees of P 20,000.00 and the costs of the suit" (Rollo, p. 57).
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On appeal, the Court of Appeals in its Decision dated April 8, 1992 in CA-G.R. No. CV No. 21919, affirmed the lower courts decision, the
dispositive portion of which reads:jgc:chanrobles.com.ph

"WHEREFORE, WE AFFIRM the appealed judgment there being no justifiable reason that warrants the reversal thereof. Costs against
defendant-appellant" (Rollo, p. 32).

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Not satisfied with the appellate courts decision, petitioner filed this petition.
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II
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Petitioner raises the following arguments:chanrob1es virtual 1aw library
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1. Pamalaran was never a passenger of petitioner. Therefore, it is not liable as a common carrier;
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2. Petitioner and its employees were not negligent in the series of events which led to the death of Pamalaran;
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3. Petitioner is not liable under Article 2180 of the New Civil Code;
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4. It is CBL and/or ALC which should be held liable for the death of-the victim; and,
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5. Petitioner should have been granted its just and valid counterclaims and cross claims.
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We agree with the Court of Appeals that although Pamalaran was never a passenger of petitioner, still the latter is liable as a common
carrier for his death. The Court of Appeals relied on Canas v. Dabatos, 8 Court of Appeals Report 918 (1965). In said case, 13 persons
were on board the vessel of defendant not as passengers but as cargadores of the shippers goods. They were there with the consent
and knowledge of the owner of the vessel. Despite the absence of a passenger-carrier relationship between them, the appellate court,
just the same, held the patron thereof liable as a common carrier. The appellate court ruled:jgc:chanrobles.com.ph

"There is no debate as to the fact that not one of the thirteen passengers have paid an amount of money as fare for their conveyance
from Hingotanan to Cebu. The undisputed fact, however, is that all of them were in the boat with the knowledge and consent of the
patron. The eleven passengers, other than Encarnacion and Diosdado, were in the boat because they have helped in loading the
cargoes in the boat, and to serve as cargadores of the cargoes, presumably, in unloading them at the place of destination, For those
services they were permitted to be in the boat and to proceed to their destination in Cebu. The services rendered were the valuable

consideration in exchange for the transportation fare.In onerous contracts the cause is understood to be, for each contracting party, the
prestation or promise of a thing or service by the other; . . ." (at p. 925; Emphasis supplied).

ALC had a contract of carriage with petitioner. The presence of the stevedores sent by ALC on board the barge of petitioner was called
for by the contract of carriage. For how else would its lumber be transported unless it is placed on board? And by whom? Of course, the
stevedores. Definitely, petitioner could not expect the shipper itself to load the lumber without the aid of the stevedores. Furthermore,
petitioner knew of the presence and role of the stevedores in its barge and thus consented to their presence. Hence, petitioner was
responsible for their safety while on board the barge.

Petitioner next claims that its employees even warned the stevedores and tried to prevent their entry into the storeroom. Such argument,
again, is demolished by the findings of the Court of Appeals, thus:jgc:chanrobles.com.ph

". . . However, appellant failed to prove that its employees were actually trained or given specific instructions to see to it that the barge is
fit and safe not only in transporting goods but also for people who would be loading the cargo into the bodega of the barge. It is not
enough that appellants employees have warned the laborers not to enter the barge after the hatch was opened. Appellants employees
should have been sufficiently instructed to see to it that the hatch of the barge is not opened by any unauthorized person and that the
hatch is not easily opened by anyone. At the very least, precautionary measures should have been observed by appellants employees to
see to it that no one could enter the bodega of the barge until after they have made sure that it is safe for anyone to enter the same.
Failing to exercise due diligence in the supervision of its employees, the lower court was correct in holding appellant liable for
damages" (Rollo, pp. 31-32; Emphasis supplied).

Inasmuch as the findings of the Court of Appeals are merely an affirmance of the findings of the trial court, which findings are supported
by the evidence, we do not find any reason to reverse the same.

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There is no quarrel that ALC and CBL are also liable as they were in fact held liable by both the trial and appellate courts.
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Both the counterclaims and cross claims of petitioner are without legal basis. The counterclaims and cross claims were based on the
assumption that the other defendants are the ones solely liable. However, inasmuch as its solidary liability with the other defendants has
clearly been established by both the trial and the appellate courts, which we find to be in order, we cannot make a different conclusion
contrary to that of the said courts.chanrobles.com:cralaw:red

Finally, the indemnity for the death of Leoncio L. Pamalaran is increased from P40,000.00 to P50,000.00 in accordance with our ruling in
People v. Flores, 237 SCRA 653 (1994).

WHEREFORE, the Decision of the Court of Appeals is AFFIRMED with the MODIFICATION that the award of actual and compensatory
damages is increased to P50,000.00.

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SO ORDERED.
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[G.R. No. L-46558 : July 31, 1981.]

PHILIPPINE AIR LINES, INC., Petitioner, vs. THE COURT OF APPEALS and JESUS V. SAMSON, Respondents.
DECISION
GUERRERO, J.:
This is a petition for review on Certiorari of the decision of the Court of Appeals 1 dated April 18, 1977, affirming with modification the
decision of the Court of First Instance of Albay in Civil Case No. 1279, entitled Jesus V. Samson, plaintiff, vs. Philippine Air Lines, Inc.,
defendant, for damages.
The dispositive portion of the trial courts decision reads:
WHEREFORE, for all the foregoing considerations, judgment is hereby rendered in favor of the plaintiff and against the defendant
ordering the defendant to pay the plaintiff, the following sums: P1988,000.00 as unearned income or damages; P50,000.00 for moral
damages; P20,000.00 as attorneys fees and P5,000.00 as expenses of litigation, or a total of P273,000.00. Costs against the
defendant.
The appellate court modified the above decision, to wit:
However, Plaintiff-Appellee, who has been deprived of his job since 1954, is entitled to the legal rate of interest on the P198,000.00
unearned income from the filing of the complaint cranad(Sec. 8, Rule 51, Rules of Court).
WHEREFORE, with the modification indicated above, the judgment appealed from is affirmed, with costs against defendant-appellant.
The complaint filed on July 1, 1954 by plaintiff Jesus V. Samson, private respondent herein, averred that on January 8, 1951, he flew as
co-pilot on a regular flight from Manila to Legaspi with stops at Daet, Camarines Norte and Pili, Camarines Sur, with Captain Delfin
Bustamante as commanding pilot of a C-47 plane belonging to defendant Philippine Air Lines, Inc., now the herein petitioner; that on
attempting to land the plane at Daet airport, Captain Delfin Bustamante due to his very slow reaction and poor judgment overshot the
airfield and as a result, notwithstanding the diligent efforts of the plaintiff co-pilot to avert an accident, the airplane crashlanded beyond
the runway; that the jolt caused the head of the plaintiff to hit and break through the thick front windshield of the airplane causing him
severe brain concussion, wounds and abrasions on the forehead with intense pain and suffering cranad(par. 6, complaint).:onad
The complaint further alleged that instead of giving plaintiff expert and proper medical treatment called for by the nature and severity of
his injuries, defendant simply referred him to a company physician, a general medical practitioner, who limited the treatment to the
exterior injuries without examining the severe brain concussion of plaintiff cranad(par. 7, complaint); that several days after the accident,
defendant Philippine Air Lines called back the plaintiff to active duty as co-pilot, and inspite of the latters repeated request for expert
medical assistance, defendant had not given him any cranad(par. 8, complaint); that as a consequence of the brain injury sustained by
plaintiff from the crash, he had been having periodic dizzy spells and had been suffering from general debility and nervousness
cranad(par. 9, complaint); that defendant airline company instead of submitting the plaintiff to expert medical treatment, discharged the
latter from its employ on December 21, 1953 on grounds of physical disability, thereby causing plaintiff not only to lose his job but to

become physically unfit to continue as aviator due to defendants negligence in not giving him the proper medical attention cranad(pars.
10-11, complaint). Plaintiff prayed for damages in the amount of P180,000.00 representing his unearned income, P50,000.00 as moral
damages, P20,000.00 as attorneys fees and P5,000.00 as expenses, or a total of P255,000.00.
In its answer filed on July 28, 1954, defendant PAL denied the substantial averments in the complaint, alleging among others, that the
accident was due solely and exclusively to inevitable unforeseen circumstances whereby plaintiff sustained only superficial wounds and
minor injuries which were promptly treated by defendants medical personnel cranad(par. 5, answer); that plaintiff did not sustain brain
injury or cerebral concussion from the accident since he passed the annual physical and medical examination given thereafter on April
24, 1951; that the headaches and dizziness experienced by plaintiff were due to emotional disturbance over his inability to pass the
required up-grading or promotional course given by defendant company cranad(par. 6, answer), and that, as confirmed by an expert
neuro-surgeon, plaintiff was suffering-from neurosis and in view of this unfitness and disqualification from continuing as a pilot, defendant
had to terminate plaintiffs employment cranad(pars. 7, 9, answer).
Further, defendant alleged that by the very nature of its business as a common carrier, it is bound to employ only pilots who are proficient
and in good mental, emotional and physical condition; that the pilot, Captain Delfin Bustamante, was a competent and proficient pilot, and
although he was already afflicted with a tumor of the nasopharynx even before the accident of January 8, 1951, the Civil Aeronautics
Administration, in passing upon the fitness of pilots, gave Capt. Bustamante a waiver of physical standards to enable him to retain his
first class airman certificate since the affliction had not in the least affected his proficiency cranad(pars. 16-17, answer). By way of
counterclaim, defendant prayed for P10,000.00 as expenses for the litigation.
On March 25, 1958, defendant filed a Motion to Dismiss on the ground that the complaint is essentially a Workmens Compensation
claim, stating a cause of action not cognizable within the general jurisdiction of the court. The Motion to Dismiss was denied in the order
of April 14, 1958. After the reception of evidence, the trial court rendered on January 15, 1973 the decision, the dispositive portion of
which has been earlier cited.
The defendant Philippine Air Lines, Inc. appealed the decision to the Court of Appeals as being contrary to law and unsupported by the
evidence. It raised as errors of the trial court cranad(a) the holding that the damages allegedly suffered by plaintiff are attributable to the
accident of January 8, 1951 which was due to the negligence of defendant in having allowed Capt. Delfin Bustamante to continue flying
despite his alleged slow reaction and poor judgment; cranad(b) the finding that defendant was negligent in not having given plaintiff
proper and adequate expert medical treatment and assistance for the injuries allegedly sustained in the accident of January 8, 1951; and
cranad(c) in ordering defendant to pay actual or compensatory damages, moral damages and attorneys fees to the plaintiff.
On April 18, 1977, the Court of Appeals rendered its decision affirming the judgment of the lower court but modified the award of
damages by imposing legal rate of interest on the P198,000.00 unearned income from the filing of the complaint, citing Sec. 8, Rule 51 of
the Rules of Court.
Its motion for reconsideration of the above judgment having been denied, Philippine Air Lines, Inc. filed this instant petition for Certiorari
on the ground that the decision is not in accord with law or with the applicable jurisprudence, aside from its being replete with findings in
the nature of speculation, surmises and conjectures not borne out by the evidence on record thereby resulting to misapprehension of
facts and amounting to a grave abuse of discretion cranad(p. 7, Petition).

Petitioner raises the fundamental question in the case at bar as follows: Is there a causal connection between the injuries suffered by
private respondent during the accident on 8 January 1951 and the subsequent periodic dizzy spells, headache and general debility of
which private respondent complained every now and then, on the one hand, and such periodic dizzy spells, headache and general
debility allegedly caused by the accident and private respondents eventual discharge from employment, on the other? PAL submits that
respondent courts award of damages to private respondent is anchored on findings in the nature of speculations, surmises and
conjectures and not borne out by the evidence on record, thereby resulting in a misapprehension of facts and amounting to a grave
abuse of discretion.
Petitioners submission is without merit.
As found by the respondent court, the following are the essential facts of the case:
It appears that plaintiff, a licensee aviator, was employed by defendant a few years prior to January 8, 1951 as a regular co-pilot on a
guaranteed basic salary of P750.00 a month. He was assigned to and/or paired with pilot Delfin Bustamante.
Sometime in December 1950, he complained to defendant through its authorized official about the slow reaction and poor judgment of
pilot Delfin Bustamante. Notwithstanding said complaint, defendant allowed the pilot to continue flying.
On January 8, 1951, the two manned the regular afternoon flight of defendants plane from Manila to Legaspi, with stops at Daet,
Camarines Norte, and Pili, Camarines Sur. Upon making a landing at Daet, the pilot, with his slow reaction and poor judgment,
overshot the airfield and, as a result of and notwithstanding diligent efforts of plaintiff to avert an accident, the airplane crashlanded beyond the runway into a mangrove. The jolt and impact caused plaintiff to hit his head upon the front windshield of the
plane thereby causing his brain concussions and wounds on the forehead, with concomittant intense pain.
Plaintiff was not given proper medical attention and treatment demanded by the nature and severity of his injuries. Defendant merely
referred him to its clinic attended by general practitioners on his external injuries. His brain injury was never examined, much
less treated. On top of that negligence, defendant recalled plaintiff to active duty as a co-pilot, completely ignoring his plea for
expert medical assistance.
Suffering periodic dizzy spells, headache and general debility, plaintiff every now and then complained to defendant. To make matters
worst for plaintiff, defendant discharged him from his employment on December 21, 1953. In consequence, plaintiff has been
beset with additional worries, basically financial. He is now a liability instead of a provider, of his family.
On July 1, 1954, plaintiff filed a complaint for damages. Defendant vainly sought to dismiss the complaint after filing an answer. Then, the
judgment and this appeal.
Continuing, the respondent Court of Appeals further held:
There is no question about the employment of plaintiff by defendant, his age and salary, the overshooting by pilot Bustamante of the
airfield and crashlanding in a mangrove, his hitting his head on the front windshield of the plane, his intermittent dizzy spells,
headache and general debility for which he was discharged from his employment on December 21, 1953. As the lower court
aptly stated:
From the evidence adduced by the parties, the Court finds the following facts to be uncontroverted: That the plaintiff Jesus V. Samson,
on January 8, 1951 and a few years prior thereto, December 21, 1953, was a duly licensed pilot employed as a regular

co-pilot of the defendant with assignment in its domestic air service in the Philippines; that on January 8, 1951, the
defendants airplane met an accident in crashlanding at the Daet Airport, Camarines Norte by overshooting the runway
and reaching the mangroves at the edge of the landing strip; that the jolt caused plaintiffs head to hit the front
windshield of the airplane causing him to suffer wounds and abrasion on the forehead; that the defendant, instead of
giving the plaintiff expert and proper medical treatment called for by the nature and severity of the injuries of the
plaintiff, simply referred him to the clinic of the defendants physicians who are only general medical practitioners and
not brain specialists; that the defendants physicians limited their treatment to the exterior injuries on the forehead of
the plaintiff and made no examination of the severe concussion of the brain of the plaintiff; that the Medical Director
and Flight Surgeon of the defendant were not able to definitely determine the cause of the complaint of the plaintiff as
to the periodic attack of dizziness, spells and headache; that due to this laxity of the defendants physician and the
continuous suffering of the ailment of the plaintiff complained of, he demanded for expert medical assistance for his
brain injury and to send him to the United States, which demand was turned down and in effect denied by the
defendant; that instead the defendant referred the plaintiff to a neurologist, Dr. Victor Reyes; that from the time that said
accident occurred on January 21, 1953, he was ordered grounded on several occasions because of his complaint of
dizzy spells and headache; that instead of submitting the plaintiff to expert medical treatment as demanded by him and
denied by the defendant, he was discharged from its employment on December 21, 1953 on the ground of physical
disability, and that the plaintiff, at the time when the defendants plane met the accident, up to the time he was
discharged, was regularly employed as a co-pilot and receiving a basic salary of P750.00 a month plus extra pay for
flying time, and bonuses amounting to P300.00 a month.
Even defendant-appellant itself admits as not controverted the following facts which generally admit what have been stated above as not
controverted.
In the case at bar, the following facts are not the subject of controversy:
(1) First, that from July 1950 to 21 December 1953, plaintiff was employed with defendant company as a first officer or co-pilot and
served in that capacity in defendants domestic services.
(2) Second, that on January 1951, plaintiff did fly on defendants PI-C 94, as first officer or co-pilot, with the late Capt. Delfin Bustamante
in command as pilot; that while making a landing at the Daet airport on that date, PI-C 94 did meet an accident as
stated above.
(3) Third, that at or about the time of the discharge from defendant company, plaintiff had complained of spells of dizziness,
headaches and nervousness, by reason of which he was grounded from flight duty. In short, that at that time, or
approximately from November 1953 up to the date of his discharge on 21 December 1953, plaintiff was actually
physically unfit to discharge his duties as pilot.
(4) Fourth, that plaintiffs unfitness for flight duty was properly established after a thorough medical examination by competent medical
experts.cralaw cranad(pp. 11-12, appellants brief)
hence, there can hardly be an issue, factual, legal or medical.

Taking exception from the rest of the essential facts of the case as found by the respondent court PAL claims said facts are not fully
borne out by the evidence on record and insists that the injuries suffered by private respondent during the accident on January 8, 1951
were superficial in nature; that the periodic spells, headache, and general debility complaint of every now and then by private
respondent subsequent to the Jan. 8, 1951 incident were due to emotional disturbances and that no negligence can be attributed to Capt.
Delfin Bustamante much less to PAL for the occurrence on January 8, 1951, hence PAL cannot be held liable for damages.
Petitioner claims absence of any causal connection between private respondents superficial injuries and his alleged subsequent
periodic spells, headache and general debility, pointing out that these subsequent ailments were found by competent physician,
including an expert neuro-surgeon, to be due to emotional disturbances insights the conclusions of Dr. Trajano V. Bernardo that
respondents complaints were psychosomatic symptoms on the basis of declarations made by respondent himself, which conclusions
are supported by similar diagnosis made by Drs. Damaceno J. Ago and Villaraza stating that respondent Samson was suffering from
neurosis as well as the report of Dr. Victor Reyes, a neurological specialist, indicating that the symptoms were probably, most probably
due to psychogenic factors and have no organic basis.
In claiming that there is no factual basis for the finding of the respondent court that the crash-landing caused respondents brain
concussion . cra ., with concomittant intense pain, for on the contrary, testimonial evidence establish the superficiality of the injuries
sustained by respondent during the accident of January 8, 1951, petitioner quotes portions of the testimony of Dr. Manuel S. Sayas, who
declared that he removed the band-aid on the forehead of respondent and that he found out after removal that the latter had two
contussed superficial wounds over the supra orbiter regions or just above the eyes measuring one centimeter long and one millimeter
deep. He examined and found his blood pressure normal, no discharges from the nose and ears. Dr. Trajano V. Bernardo also testified
that when he examined respondent Samson three days after the accident, the wound was already healed and found nothing wrong with
his ears, nose and throat so that he was declared fit for duty after the sixth day.
Petitioner goes further. It contends that there is no causal connection between respondents superficial injuries sustained during the
accident on January 8, 1951 and plaintiffs discharge from employment with PAL on December 21, 1953. According to PAL, it was the
repeated recurrence of respondents neurasthenic symptoms cranad(dizzy spells, headache, nervousness) which prompted PALs Flight
Surgeon, Dr. Bernardo, to recommend that plaintiff be grounded permanently as respondent was psychologically unfit to resume his
duties as pilot. PAL concludes that respondents eventual discharge from employment with PAL was effected for absolutely valid
reasons, and only after he was thoroughly examined and found unfit to carry out his responsibilities and duties as a pilot.:onad
We agree with the respondent court in finding that the dizzy spells, headache and general debility of private respondent Samson was an
after-effect of the crash-landing and We find that such holding is supported by substantial evidence, which We quote from the courts
decision, to wit:
Defendant would imply that plaintiff suffered only superficial wounds which were treated and not brain injury. It would, by the opinion of
its company doctors, Dr. Bernardo and Dr. Reyes, attribute the dizzy spells and headache to organic or as phychosomatic,
neurasthenic or psychogenic, which we find outlandishly exaggerated.
That plaintiffs condition as psychosomatic rather than organic in nature is allegedly confirmed by the fact that on six cranad(6) separate
occasions after the accident he passed the required CAA physical examination for airmans certificate. cranad(Exhs. 78, 79, 80,

81, 83 and 92). We noticed, however, that there were other similar physical examinations conducted by the CAA on the person
of plaintiff the report on which were not presented in evidence. Obviously, only those which suited defendants cause were handpicked and offered in evidence.
We hesitate to accept the opinion of the defendants two physicians, considering that Dr. Bernardo admittedly referred to Dr. Reyes
because he could not determine the cause of the dizzy spells and headache and the latter admitted that it is extremely hard to
be certain of the cause of his dizzy spells, and suggested a possibility that it was due to postraumatic syndrome, evidently due
to the injuries suffered by the plaintiff in hitting the forehead against the windshield of the plane during the accident. Judgment
are not based on possibilities.
The admitted difficulty of defendants doctors in determining the cause of the dizzy spells and headache cannot be a sound basis for
finding against the plaintiff and in favor of defendant. Whatever it might be, the fact is that such dizzy spells, headache and
general debility was an after-effect of the crash-landing. Be it brain injury or psychosomatic, neurasthenic or psychogenic, there
is no gainsaying the fact that it was caused by the crash-landing. As an effect of the cause, not fabricated or concocted, plaintiff
has to be indemnified. The fact is that such effect caused his discharge.
We are prone to believe the testimony of the plaintiffs doctors.
Dr. Morales, a surgeon, found that blood was coming from plaintiffs ears and nose. He testified that plaintiff was suffering from cerebral
concussion as a result of traumatic injury to the brain caused by his head hitting on the windshield of the plane during the crashlanding cranad(Exhibit G).
Dr. Conrado Aramil, a neurologist and psychiatrist with experience in two hospitals abroad, found abnormality reflected by the
electroencephalogram examination in the frontal area on both sides of plaintiffs head cranad(Exhibits K, K-1).
The opinion of these two specialist renders unnecessary that of plaintiffs wife who is a physician in her own right and because of her
relation to the plaintiff, her testimony and opinion may not be discussed here, although her testimony is crystallized by the
opinions of Dr. Ador Dionisio, Dr. Marquez, Dr. Jose O. Chan, Dr. Yambao and Dr. Sandico.
Even the doctors presented by defendant admit vital facts about plaintiffs brain injury. Dr. Bernardo admits that due to the incident, the
plaintiff continuously complained of his fainting spells, dizziness and headache everytime he flew as a co-pilot and everytime he
went to defendants clinic no less than 25 times cranad(Exhibits 15 to 36), that he complained of the same to Dr. Reyes; that
he promised to help send plaintiff to the United States for expert medical assistance provided that whatever finding thereat
should not be attributed to the crash-landing incident to which plaintiff did not agree and that plaintiff was completely ignored by
the defendant in his plea for expert medical assistance. They admitted that they could not determine definitely the cause of the
fainting spells, dizziness and headache, which justifies the demand for expert medical assistance.
We also find the imputation of gross negligence by respondent court to PAL for having allowed Capt. Delfin Bustamante to fly on that
fateful day of the accident on January 8, 1951 to be correct, and We affirm the same, duly supported as it is by substantial evidence,
clearly established and cited in the decision of said court which states as follows:

The pilot was sick. He admittedly had tumor of the nasopharynx cranad(nose). He is now in the Great Beyond. The spot is very near the
brain and the eyes. Tumor on the spot will affect the sinus, the breathing, the eyes which are very near it. No one will certify the
fitness to fly a plane of one suffering from the disease.
. cra . The fact First Pilot Bustamante has a long standing tumor of the Nasopharynx for which reason he was grounded since November
1947 is admitted in the letter cranad(Exh. 69-A) of Dr. Bernardo to the Medical Director of the CAA requesting waiver of physical
standards. The request for waiver of physical standards is itself a positive proof that the physical condition of Capt. Bustamante
is short of the standard set by the CAA. The Deputy Administrator of the CAA granted the request relying on the representation
and recommendation made by Dr. Bernardo cranad(See Exh. 69). We noted, however, that the request cranad(Exh. 69-A) says
that it is believed that his continuing to fly as a co-pilot does not involve any hazard.cralaw cranad(Italics supplied). Flying as a
First Officer entails a very different responsibility than flying as a mere co-pilot. Defendant requested the CAA to allow Capt.
Bustamante to fly merely as a co-pilot and it is safe to conclude that the CAA approved the request thus allowing Bustamante to
fly only as a co-pilot. For having allowed Bustamante to fly as a First Officer on January 8, 1951, defendant is guilty of gross
negligence and therefore should be made liable for the resulting accident.
As established by the evidence, the pilot used to get treatments from Dr. Sycangco. He used to complain of pain in the face more
particularly in the nose which caused him to have sleepless nights. Plaintiffs observation of the pilot was reported to the Chief Pilot who
did nothing about it. Captain Carbonel of the defendant corroborated plaintiff of this matter. The complaint against the slow reaction of the
pilot at least proved the observation. The observation could be disregarded. The fact that the complaint was not in writing does not
detract anything from the seriousness thereof, considering that a miscalculation would not only cause the death of the crew but also of
the passengers.
One month prior to the crash-landing, when the pilot was preparing to land in Daet, plaintiff warned him that they were not in the vicinity
of Daet but above the town of Ligao. The plane hit outside the airstrip. In another instance, the pilot would hit the Mayon Volcano had not
plaintiff warned him. These more than prove what plaintiff had complained of. Disregard thereof by defendant is condemnable.
To bolster the claim that Capt. Bustamante has not suffered from any kind of sickness which hampered his flying ability, appellant
contends that for at least one or more years following the accident of January 8, 1951, Capt. Bustamante continued to fly for defendant
company as a pilot, and did so with great skill and proficiency, and without any further accident or mishap, citing tsn. pp. 756-765,
January 20, 1965. We have painstakingly perused the records, particularly the transcript of stenographic notes cited, but found nothing
therein to substantiate appellants contention. Instead, We discovered that the citation covers the testimony of Dr. Bernardo on the
physical condition of Bustamante and nothing about his skills or proficiency to fly nor on the mishaps or accidents, matters which are
beyond Dr. Bernardos competence anyway.
Assuming that the pilot was not sick or that the tumor did not affect the pilot in managing the plane, the evidence shows that the
overshooting of the runway and crash-landing at the mangrove was caused by the pilot for which acts the defendant must answer for
damages caused thereby. And for this negligence of defendants employee, it is liable cranad(Joaquin vs. Aniceto, 12 SCRA 308). At
least, the law presumes the employer negligent imposing upon it the burden of proving that it exercised the diligence of a good father of a
family in the supervision of its employees.

Defendant would want to tie plaintiff to the report he signed about the crash-landing. The report was prepared by his pilot and because
the latter pleaded that he had a family too and would have nowhere to go if he lost his job, plaintiffs compassion would not upturn the
truth about the crash-landing. We are for the truth not logic of any argumentation.
At any rate, it is incorrect to say that the Accident Report cranad(Exh. 12 & 12-A), signed by plaintiff, exculpated Capt. Bustamante from
any fault. We observed that the Report does not categorically state that Capt. Bustamante was not at fault. It merely relates in
chronological sequence what Capt. Bustamante and plaintiff did from the take-off from Manila to the landing in Daet which resulted in an
accident. On the contrary, we may infer the negligence of Bustamante from the following portion of the Report, to wit:
. cra . I felt his brakes strong but as we neared the intersection of the NE-SW runway, the brakes were not as strong and I glanced at the
system pressure which indicated 900 lbs. per sq. m.
It was during the above precise instance that Capt. Bustamante lost his bearing and disposition. Had he maintained the pressure on the
brakes the plane would not have overshot the runway. Verily, Bustamante displayed slow reaction and poor judgment. cranad(CA
decision, pp. 8-12).
This Court is not impressed by, much less can We accept petitioners invocation to calibrate once again the evidence testified to in detail
and plucked from the voluminous transcript to support petitioners own conclusion. It is not the task of this Court to discharge the
functions of a trier of facts much less to enter into a calibration of the evidence, notwithstanding petitioners wail that the judgment of the
respondent court is based entirely on speculations, surmises and conjectures. We are convinced that respondent courts judgment is
supported by strong, clear and substantial evidence.:onad
Petitioner is a common carrier 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, as defined in Art. 1732, New Civil Code. The law is clear in requiring a common carrier
to exercise the highest degree of care in the discharge of its duty and business of carriage and transportation under Arts. 1733, 1755 and
1756 of the New Civil Code. These Articles provide:
Art. 1733. 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 the circumstances of
each case.
Such extraordinary diligence in the vigilance over the goods is further expressed in Articles 1734, and 1745, Nos. 5, 6, and 7, while the
extraordinary diligence for the safety of the passengers is further set forth in articles 1755 and 1756.
Art. 1755. A common carrier is bound to carry the passenger safely as far as human care and foresight can provide, using the utmost
diligence of very cautious persons, with a due regard for all the circumstances.
Art. 1756. In case of death of or injuries to passengers, common carriers are presumed to have been at fault or to have acted negligently,
unless they prove that they observed extraordinary diligence as prescribed in Articles 1733 and 1755.
The duty to exercise the utmost diligence on the part of common carriers is for the safety of passengers as well as for the members of the
crew or the complement operating the carrier, the airplane in the case at bar. And this must be so for any omission, lapse or neglect
thereof will certainly result to the damage, prejudice, nay injuries and even death to all aboard the plane, passengers and crew members
alike.

Now to the damages. The Court of Appeals affirmed the award of damages made by the trial court, stating that the damages awarded
plaintiff by the lower court are in accordance with the facts, law and jurisprudence. The court further observed that defendant-appellant
is still fortunate, considering that the unearned income was reckoned with only up to 1968 and not up to the present as plaintiff-appellee
is still living. Whatever mathematical error defendant-appellant could show by abstract argumentation, the same must be compensated
by such deficiency of the damages awarded to plaintiff-appellee.
As awarded by the trial court, private respondent was entitled to P198,000.00 as unearned income or compensatory damages;
P50,000.00 for moral damages, P20,000.00 as attorneys fees and P5,000.00 as expenses of litigation, or a total of P273,000.00.
The trial court arrived at the sum of P198,000.00 as unearned income or damages by considering that respondent Samson could have
continued to work as airline pilot for fifteen more years, he being only 38 years at the time the services were terminated by the defendant
cranad(PAL) and he would have earned P120,000.00 from 1954 to 1963 or a period of ten cranad(10) years at the rate of one thousand
per month cranad(P750.00 basic salary plus P300.00 extra pay for extra flying time and bonuses; and considering further that in 1964 the
basic pay of defendants pilot was increased to P12,000.00 annually, the plaintiff could have earned from 1964 to 1968 the sum of
P60,000.00 in the form of salaries and another P18,000.00 as bonuses and extra pay for extra flying time at the same rate of P300 a
month, or a grand total of P198,000.00 for the entire period. This claim of the plaintiff for loss or impairment of earning capacity is based
on the provision of Article 2205 of the New Civil Code of the Philippines which provides that damages may be recovered for loss or
impairment of earning capacity in cases of temporary or permanent personal injury. This provision of law has been construed and
interpreted in the case of Aureliano Ropato, et al. vs. La Mallorca General Partnership, 56 O.G., 7812, which rules that law allows the
recovery of damages for loss or impairment of earning capacity in cases of temporary or permanent personal injury.
chanroblesvirtualawlibrary(Decision, CFI, pp. 98-99, Record on Appeal)
The respondent appellate court modified the above award by ordering payment of legal interest on the P198,000.00 unearned income
from the filing of the claim, citing Sec. 8, Rule 51 of the Rules of Court.
Petitioner assails the award of the total sum of P198,000.00 as unearned income up to 1968 as being tenuous because firstly, the trial
courts finding affirmed by the respondent court is allegedly based on pure speculation and conjecture and secondly, the award of
P300.00 a month as extra pay for extra flying time from 1954 to 1968 is likewise speculative. PAL likewise rejects the award of moral
damages in the amount of P50,000.00 on the ground that private respondents action before the trial court does not fall under any of the
cases enumerated in the law cranad(Art. 2219 of the New Civil Code) for which moral damages are recoverable and that although private
respondents action gives the appearance that it is covered under quasi-delict as provided in Art. 21 of the New Civil Code, the definition
of quasi-delict in Art. 2176 of the New Civil Code expressly excludes cases where there is a pre-existing contractual relation between the
parties, as in the case under consideration, where an employer-employee relationship existed between PAL and private respondent. It is
further argued that private respondents action cannot be deemed to be covered by Art. 21, inasmuch as there is no evidence on record
to show that PAL wilfully cause(d) loss or injury to cranad(private respondent) in a manner that is contrary to morals, good customs or
public policy . cra . Nor can private respondents action be considered analogous to either of the foregoing, for the reasons are obvious
that it is not. chanroblesvirtualawlibrary(Memorandum of petitioner, pp. 418-421, Records)

Having affirmed the gross negligence of PAL in allowing Capt. Delfin Bustamante to fly the plane to Daet on January 8, 1951 whose slow
reaction and poor judgment was the cause of the crash-landing of the plane which resulted in private respondent Samson hitting his head
against the windshield and causing him injuries for which reason PAL terminated his services and employment as pilot after refusing to
provide him with the necessary medical treatment of respondents periodic spells, headache and general debility produced from said
injuries, We must necessarily affirm likewise the award of damages or compensation under the provisions of Art. 1711 and Art. 1712 of
the New Civil Code which provide:
Art. 1711. Owners of enterprises and other employers are obliged to pay compensation for the death or injuries to their laborers,
workmen, mechanics or other employees, even though the event may have been purely accidental or entirely due to a fortuitous cause, if
the death or personal injury arose out of and in the course of the employment. The employer is also liable for compensation if the
employee contracts any illness or disease caused by such employment or as the result of the nature of the employment. If the mishap
was due to the employees own notorious negligence, or voluntary act, or drunkenness, the employer shall not be liable for
compensation. When the employees lack of due care contributed to his death or injury, the compensation shall be equitably reduced.
Art. 1712. If the death or injury is due to the negligence of a fellow-worker, the latter and the employer shall be solidarily liable for
compensation. If a fellow-workers intentional or malicious act is the only cause of the death or injury, the employer shall not be
answerable, unless it should be shown that the latter did not exercise due diligence in the selection or supervision of the plaintiffs fellowworker.
The grant of compensatory damages to the private respondent made by the trial court and affirmed by the appellate court by computing
his basic salary per annum at P750.00 a month as basic salary and P300.00 a month for extra pay for extra flying time including bonus
given in December every year is justified. The correct computation however should be P750 plus P300 x 12 months = P12,600 per
annum x 10 years = P126,000.00 cranad(not P120,000.00 as computed by the court a quo). The further grant of increase in the basic
pay of the pilots to P12,000 annually for 1964 to 1968 totalling P60,000.00 and another P18,000.00 as bonuses and extra pay for extra
flying time at the same rate of P300.00 a month totals P78,000.00. Adding P126,000.00 cranad(1964 to 1968 compensation) makes a
grand total of P204,000.00 cranad(not P198,000.00 as originally computed).
As to the grant of moral damages in the sum of P50,000.00 We also approve the same. We have noted and considered the holding of the
appellate court in the matter of bad faith on the part of PAL, stated hereunder, this wise:
None of the essential facts material to the determination of the case have been seriously assailed: the overshooting of runway and
crash-landing into the mangroves; the hitting of plaintiffs head to the front windshield of the plane; the oozing of blood out of his
ears, nose and mouth; the intermittent dizzy spells, headaches and general debility thereafter for which he was discharged from
his employment; the condition of not to attribute the cause of the ailment to the crash-landing imposed in bad faith for a
demanded special medical service abroad; and the resultant brain injury which defendants doctors could not understand nor
diagnose.
xxx
The act of defendant-appellant in unjustly refusing plaintiff-appellees demand for special medical service abroad for the reason that
plaintiff-appellees deteriorating physical condition was not due to the accident violates the provisions of Article 19 of the Civil

Code on human relations to act with justice, give everyone his due, and observe honesty and good faith.
chanroblesvirtualawlibrary(CA Resolution, pp. 151-152, Records)
We reject the theory of petitioner that private respondent is not entitled to moral damages. Under the facts found by the trial court and
affirmed by the appellate court and under the law and jurisprudence cited and applied, the grant of moral damages in the amount of
P50,000.00 is proper and justified.
The fact that private respondent suffered physical injuries in the head when the plane crash-landed due to the negligence of Capt.
Bustamante is undeniable. The negligence of the latter is clearly a quasi-delict and therefore Article 2219, cranad(2) New Civil Code is
applicable, justifying the recovery of moral damages.
Even from the standpoint of the petitioner that there is an employer-employee relationship between it and private respondent arising from
the contract of employment, private respondent is still entitled to moral damages in view of the finding of bad faith or malice by the
appellate court, which finding We hereby affirm, applying the provisions of Art. 2220, New Civil Code which provides that 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.
The justification in the award of moral damages under Art. 19 of the New Civil Code on Human Relations which requires that every
person must, in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and observe
honesty and good faith, as applied by respondent court is also well-taken and We hereby give Our affirmance thereto.
With respect to the award of attorneys fees in the sum of P20,000.00 the same is likewise correct. As pointed out in the decision of the
Court of Appeals, the plaintiff is entitled to attorneys fees because he was forced to litigate in order to enforce his valid claim
cranad(Ganaban vs. Bayle, 30 SCRA 365; De la Cruz vs. De la Cruz, 22 SCRA 33; and many others); defendant acted in bad faith in
refusing plaintiffs valid claim cranad(Filipino Pipe Foundry Corporation vs. Central Bank, 23 SCRA 1044); and plaintiff was dismissed and
was forced to go to court to vindicate his right cranad(Nadura vs. Benguet Consolidated, Inc., 5 SCRA 879).
We also agree with the modification made by the appellate court in ordering payment of legal interest from the date judicial demand was
made by Pilot Samson against PAL with the filing of the complaint in the lower court. We affirm the ruling of the respondent court which
reads:
Lastly, the defendant-appellant claims that the legal rate of interest on the unearned compensation should be computed from the date of
the judgment in the lower court, not from the filing of the complaint, citing a case where the issue raised in the Supreme Court
was limited to when the judgment was rendered in the lower court or in the appellate court, which does not mean that it should
not be computed from the filing of the complaint.
Articles 1169, 2209 and 2212 of the Civil Code govern when interest shall be computed. Thereunder interest begins to accrue upon
demand, extrajudicial or judicial. A complaint is a judicial demand cranad(Cabarroguis vs. Vicente, 107 Phil. 340). Under Article
2212 of the Civil Code, interest due shall earn legal interest from the time it is judicially demanded, although the obligation may
be silent upon this point. chanroblesvirtualawlibrary(CA Resolution, pp. 153-154, Records).
The correct amount of compensatory damages upon which legal interest shall accrue from the filing of the complaint is P204,000.00 as
herein computed and not P198,000.00.

WHEREFORE, in view of all the foregoing, the judgment of the appellate court is hereby affirmed with slight modification in that the
correct amount of compensatory damages is P204,000.00. With costs against petitioner.
SO ORDERED.

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G.R. No. L-16567 March 27, 1961

DELGADO BROTHERS, INC., Petitioner, vs. HOME INSURANCE COMPANY and THE COURT OF APPEALS, Respondents.
Leocadio de Asis and A.C. Cruz for petitioner.
William H. Quasha for respondents.

BARRERA, J.:chanrobles virtual law library

This is an appeal by certiorari to review the decision of the Court of Appeals (in CA-G.R. No. 20441-R), reversing the judgment of
dismissal of the Court of First Instance of Manila (in Civil Case No. 29144) and, instead, ordering petitioner-defendant Delgado Brothers,
Inc. to pay to respondent-plaintiff Home Insurance Company, the sum of P1,436.86, plus 6% per annum interest from the commencement
of the action until fully paid.chanroblesvirtualawlibrarychanrobles virtual law library
On March 7, 1956, respondent Home Insurance Company filed with the Court of First Instance of Manila a complaint against petitioner
Delgado Brothers, Inc. alleging that on February 17, 1955, Victor Bijou & Co. of 14 East 37th Street, New York 16, New York, U.S.A.,
shipped at New York for Manila aboard the vessel S.S. Leoville and consigned to the Judy Philippines, Inc. of Manila, a shipment of 1
case Linen Handkerchiefs and 2 cases cotton piece goods, for which, the New York agent of said vessel, the Barber Steamship Lines,
Inc., issued Bill of Lading No. 119; that said shipment as insured with herein respondent by the shipper and/or consignee; that said vessel
arrived at the Port of Manila on March 30, 1955 and, thereafter, said shipment was unloaded complete and in good order from said
vessel by petitioner, but the latter delivered the same to the consignee with 1 case of Linen Handkerchiefs in bad order, with a shortage
of 503 yards of Linen Print Handkerchiefs, to the prejudice, loss and damage of shipper and or consignee in the sum of P1,287.20; that
the shipper and/or consignee filed its claim with petitioner for said loss in the sum of $713.08 (P1,436.86); and since respondent dent
paid the amount to the shipper and\or consignee, the former was subrogated to the shipper's and/or consignee's rights and interests; that
notwithstanding respondent's claim against petitioner, the latter failed and refused to pay the shipper and/or consignee and/or respondent
the total claim of P1,287.20; and that as it result of petitioner's gross and evident bad faith to pay the claim of the shipper and/or
consignee and/or respondent, it was compelled to file the Case and will incur attorney's fees in the sum of P478.95. Respondent prayed
that petitioner pay to it the sum of P1,287.20, with legal interest thereon from the filing of the complaint until fully, paid; P149.66, the
difference between P1,436.86 paid by respondent to the shipper and/or consignee and the said sum of P1,287.20; and P478.95 as
attorney's fees, plus costs.chanroblesvirtualawlibrarychanrobles virtual law library
To this complaint, petitioner filed its answer on March 27, 1956, alleging as special defense that since no claim whatsoever was filed by
respondent or the consignee, or their representatives against petitioner within the 15-day period from the date of the arrival of the goods
before they could file a suit in the court of proper jurisdiction within 1 year from the date of said arrival at the Port of Manila, petitioner is
completely relieved and released of any and all liability for loss or damage under the law and in accordance with the pertinent provisions
of the management Contract with the Bureau of Customs, covering the operation of the Arrastre Service for the Port of Manila; and that
petitioner in no way acts as an agent of the carrying vessel or of the importer or consignee. Petitioner, therefore, prayed for the dismissal
of respondent's complaint.chanroblesvirtualawlibrarychanrobles virtual law library

On October 16, 1956, petitioner filed a motion to dismiss the complaint, on the ground that "the court has no jurisdiction over the subject
matter of the complaint", to which, respondent filed an opposition on October 19, 1956, alleging that since the case is an action in
admiralty, it is within the original jurisdiction of the court. On October 20, 1956, the court issued an order denying petitioner's motion to
dismiss.chanroblesvirtualawlibrarychanrobles virtual law library
The case was, thereafter, tried and, after trial, the court, on March 6, 1957, rendered a decision dismissing the case and absolving
petitioner from liability to respondent, not on the ground of lack of jurisdiction raised by petitioner-defendant, but on the merits of the
latter's special defenses invoked in its answer.chanroblesvirtualawlibrarychanrobles virtual law library
Not satisfied with said decision, respondent appealed to the Court of Appeals which court, on December 29, 1959, rendered as already
adverted to, a decision reversing the judgment of the Court of First Instance of Manila and ordering petitioner to pay to respondent the
sum of P1,436.86, plus 6% per annum interest thereon from the commencement of the action until fully paid. Hence, this
appeal.chanroblesvirtualawlibrarychanrobles virtual law library
Petitioner, in this instance, claims that the Court of Appeals (as did the Court of First Instance of Manila) erred in not dismissing
respondent's complaint on the specific ground that it (Court of First Instance) had no jurisdiction over the subject matter of the action, the
same not being an admiralty case, and the amount sought to be recovered falling within the exclusive original jurisdiction of the Municipal
Court of Manila.chanroblesvirtualawlibrarychanrobles virtual law library
Appellant's contention is meritorious. In the case of Macondray & Company, Inc. v. Delgado Brothers, Inc. (G.R. No. L-13116, prom. April
28, 1960), the facts and issues of which are identical, mutatis mutandis, to the case at bar, we held:
The case at bar does not deal with any maritime or with the administration and application of any maritime law. As custodian of the sixtyeight (68) cartons of paints it had received from the MS Pleasantville, it was defendant's duty, like that of any ordinary depositary, to take
good care of said goods and to turn the same over to the party entitled to its possession, subject to such qualifications as may have
validly been imposed in the contract between the parties concerned. Such duty on the part of the defendant would be the same if the final
destination of the goods were Manila, not Iloilo, and the goods had not been imported from another state. The only issues raised in the
pleadings are (1) whether or not defendant had fully discharged its obligation to deliver the aforementioned sixty-eight (68) cartons of
paint; and (2) in the negative case, the amount of indemnity due the plaintiff therefor. The determination of those questions does not
require the application of any maritime law and cannot affect either navigation or maritime commerce. The foreign origin of the goods is under the attending circumstances - immaterial to the law applicable to this case or the rights of the parties herein, or the procedure for
the settlement of their disputes. Indeed, it is well settled that -chanrobles virtual law library
In case of controversy involving both maritime and nonmaritime subject matter, where the principal matter involved belongs to the
jurisdiction of a court of common law or of equity, admiralty will not take cognizance of incidental maritime matters connected therewith
but will relegate the whole controversy to the appropriate tribunal. (2 C.J.S. 66.). (Emphasis supplied.)
Respondent, however, submits that the above-quoted ruling is wrong and urges a re-examination of the issue, arguing that petitioner's
arrastre service is maritime in nature and, therefore, actions against petitioner arrastre operator properly come under the jurisdiction of
the Court of First Instance of Manila.chanroblesvirtualawlibrarychanrobles virtual law library

We have carefully considered respondent's argument but found nothing to justify a departure from our conclusion in the Macondray case,
supra. Section 2 of the Management Contract entered into between petitioner an the Bureau of Customs on October 21, 1950 (effective
January 1, 1951), reads as follows:
2. During the period while this agreement remains in force and effect, the CONTRACTOR (herein petitioner Delgado Brothers, Inc.) shall
be, and the shall manager of the Arrastre Service at the Port of Manila, subject always, how ever, to the terms conditions, restrictions,
subjections, supervisions and provisions in this agreement contained, with the exclusive right or privilege of receiving, handling, caring
for, and delivering all merchandise, imported and exported, upon or passing over, the Philippine Government-owned wharves and piers in
the Port of Manila; as also, the recording or checking of all merchandise which may be delivered to the Port of Manila at shipside, except
coal, lumber and firebricks in quantity case crude oil and kerosene and gasoline in lots of over ten thousand cases or its equivalent, and
whole cargoes of on commodity when consigned to one consignee only as hereafter provided, and in general to furnish lighting and water
services and other incidental services, in order to undertake such work and with full power to fix the number and salaries of, and to
appoint and dismiss, all officers, employees and laborers temporary and permanent, which may be necessary, and to do all acts and
things which said CONTRACTOR may consider conclusive to the interests of the Arrastre Service. (Emphasis supplied.)
Under this provision, petitioner's functions as arrastre operator are (1) to receive, handle, care for, and deliver all merchandise imported
and exported, upon or passing over Government-owned wharves and piers in the Port of Manila, (2) as well as to record or cheek all
merchandise which may be delivered to said port at shipside, and in general, (3) to furnish light and water services and other incidental
services in order to undertake its arrastre service. Note that there is nothing in those functions which relate to the trade and business of
navigation (1 Am. Jur. 564), nor to the use or operation of vessels (Id. at 568). Both as to the nature of the functions and the place of their
performance (upon wharves and piers shipside), petitioner's services are clearly not maritime. As we held in the Macondray case, they
are no different from those of a depositary or warehouseman. Granting, arguendo, that petitioner's arrastre service depends on, assists,
or furthers maritime transportation (Id. at 565), it may be deemed merely incidental to its aforementioned functions as arrastre operator
and does not, thereby, make petitioner's arrastre service maritime in character.
To give admiralty jurisdiction over a contract as maritime, such contract must relate to the trade and business of the sea; it must be
essentially and fully maritime in its character; it must provide for maritime services, maritime transactions, or maritime casualties. (The
James T. Furber, 129 Fed. 808, cited in 66 L.R.A. 212; emphasis supplied.) See also 2 C.J.S. 66, supra.
The case of Cebu Arrastre Service v. Collector of Internal Revenue (G.R. No. L-7444, prom. May 30, 1956) cited by respondent is
irrelevant to the present case, considering that the functions of the Cebu Arrastre Service involve the loading, and unloading of coastwise
vessels calling at the port of Cebu and, are, therefore, of a "stevedore", subject to the percentage tax under Section 191 of the Tax Code.
Similarly, the case of American Stevedores v. Porello (330 U.S. 446, 91 L. Ed. 1011) is inapplicable, involving as it does, stevedores or
longshoremen, not an arrastre operator. In the instant case, Delgado Brothers, Inc. has nothing to do with the loading or unloading of
cargoes to and from the ships. Its operation on and its responsibility for the merchandise and goods begins from the time they are placed
upon the wharves or piers or delivered along sides of ships. Evans v. New York & Pacific Steamship Co., Ltd., et al. (145 F. 841) cited by
respondent is, likewise, not in point. It should be noted that in said case, the New York & Pacific Steamship Co. Ltd. (owner of the
steamship "Capac" and with whom appellant Evans has a contract evidenced by a bill of lading) and not the warehouseman or depositary

Beards Erie Basin Stores, was the one sued by said appellant Evans for recovery of the value of 20 bales of rubber which said steamship
failed to deliver. Hence, the District Court of New York properly held that the contract with the steamship company was maritime in
nature, over which it had jurisdiction to entertain and decide. Undoubtedly, the Court of First Instance of Manila has jurisdiction in cases
where suit is brought directly against the carrier or shipowner.chanroblesvirtualawlibrarychanrobles virtual law library
Respondent cannot invoke the rule against multiplicity of suits, for the simple reason that said rule has to be subservient to the superior
requirement that the court must have jurisdiction. (See International Harvester Company of the Philippines v. Judge Aragon, et al., G.R.
No. L-2372, prom. August 26, 1949, 84 Phil. 363.)chanrobles virtual law library
With these conclusions, it is needless to discuss the other points raised in the briefs.chanroblesvirtualawlibrarychanrobles virtual law
library
WHEREFORE, the decision of the Court of Appeals appealed from is hereby reversed and set aside, and case dismissed, with costs
against the respondent. So ordered.

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[G.R. No. 124050. June 19, 1997]

MAYER STEEL PIPE CORPORATION and HONGKONG GOVERNMENT SUPPLIES DEPARTMENT, petitioners, vs. COURT OF
APPEALS, SOUTH SEA SURETY AND INSURANCE CO., INC. and the CHARTER INSURANCE CORPORATION, respondents.

DECISION
PUNO, J.:
This is a petition for review on certiorari to annul and set aside the Decision of respondent Court of Appeals dated December 14, 1995[if !
supportFootnotes][1][endif] and its Resolution dated February 22, 1996[if !supportFootnotes][2][endif] in CA-G.R. CV No. 45805 entitled Mayer Steel Pipe
Corporation and Hongkong Government Supplies Department v. South Sea Surety Insurance Co., Inc. and The Charter Insurance
Corporation.[if !supportFootnotes][3][endif]
In 1983, petitioner Hongkong Government Supplies Department (Hongkong) contracted petitioner Mayer Steel Pipe Corporation (Mayer)
to manufacture and supply various steel pipes and fittings. From August to October, 1983, Mayer shipped the pipes and fittings to
Hongkong as evidenced by Invoice Nos. MSPC-1014, MSPC-1015, MSPC-1025, MSPC-1020, MSPC-1017 and MSPC-1022.[if !
supportFootnotes][4][endif]

Prior to the shipping, petitioner Mayer insured the pipes and fittings against all risks with private respondents South Sea Surety and
Insurance Co., Inc. (South Sea) and Charter Insurance Corp. (Charter). The pipes and fittings covered by Invoice Nos. MSPC-1014,
1015 and 1025 with a total amount of US$212,772.09 were insured with respondent South Sea, while those covered by Invoice Nos.
1020, 1017 and 1022 with a total amount of US$149,470.00 were insured with respondent Charter.
Petitioners Mayer and Hongkong jointly appointed Industrial Inspection (International) Inc. as third-party inspector to examine whether the
pipes and fittings are manufactured in accordance with the specifications in the contract. Industrial Inspection certified all the pipes and
fittings to be in good order condition before they were loaded in the vessel. Nonetheless, when the goods reached Hongkong, it was
discovered that a substantial portion thereof was damaged.
Petitioners filed a claim against private respondents for indemnity under the insurance contract. Respondent Charter paid petitioner
Hongkong the amount of HK$64,904.75. Petitioners demanded payment of the balance of HK$299,345.30 representing the cost of repair
of the damaged pipes. Private respondents refused to pay because the insurance surveyor's report allegedly showed that the damage is
a factory defect.
On April 17, 1986, petitioners filed an action against private respondents to recover the sum of HK$299,345.30. For their defense, private
respondents averred that they have no obligation to pay the amount claimed by petitioners because the damage to the goods is due to
factory defects which are not covered by the insurance policies.
The trial court ruled in favor of petitioners. It found that the damage to the goods is not due to manufacturing defects. It also noted that
the insurance contracts executed by petitioner Mayer and private respondents are "all risks" policies which insure against all causes of
conceivable loss or damage. The only exceptions are those excluded in the policy, or those sustained due to fraud or intentional
misconduct on the part of the insured. The dispositive portion of the decision states:
WHEREFORE, judgment is hereby rendered ordering the defendants jointly and severally, to pay the plaintiffs the following:

1. the sum equivalent in Philippine currency of HK$299,345.30 with legal rate of interest as of the filing of the complaint;
2. P100,000.00 as and for attorney's fees; and
3. costs of suit.
SO ORDERED.[if !supportFootnotes][5][endif]

Private respondents elevated the case to respondent Court of Appeals.

Respondent court affirmed the finding of the trial court that the damage is not due to factory defect and that it was covered by the "all
risks" insurance policies issued by private respondents to petitioner Mayer. However, it set aside the decision of the trial court and
dismissed the complaint on the ground of prescription. It held that the action is barred under Section 3(6) of the Carriage of Goods by
Sea Act since it was filed only on April 17, 1986, more than two years from the time the goods were unloaded from the vessel. Section
3(6) of the Carriage of Goods by Sea Act provides that "the carrier and the ship shall be discharged from all liability in respect of loss or
damage unless suit is brought within one year after delivery of the goods or the date when the goods should have been delivered."
Respondent court ruled that this provision applies not only to the carrier but also to the insurer, citing Filipino Merchants Insurance Co.,
Inc. vs. Alejandro.[if !supportFootnotes][6][endif]
Hence this petition with the following assignments of error:
1. The respondent Court of Appeals erred in holding that petitioners' cause of action had already prescribed on the mistaken application
of the Carriage of Goods by Sea Act and the doctrine of Filipino Merchants Co., Inc. v. Alejandro (145 SCRA 42); and
2. The respondent Court of Appeals committed an error in dismissing the complaint.[if !supportFootnotes][7][endif]
The petition is impressed with merit. Respondent court erred in applying Section 3(6) of the Carriage of Goods by Sea Act.
Section 3(6) of the Carriage of Goods by Sea Act states that the carrier and the ship shall be discharged from all liability for loss or
damage to the goods if no suit is filed within one year after delivery of the goods or the date when they should have been delivered.
Under this provision, only the carrier's liability is extinguished if no suit is brought within one year. But the liability of the insurer is not
extinguished because the insurer's liability is based not on the contract of carriage but on the contract of insurance. A close reading of the
law reveals that the Carriage of Goods by Sea Act governs the relationship between the carrier on the one hand and the shipper, the
consignee and/or the insurer on the other hand. It defines the obligations of the carrier under the contract of carriage. It does not,
however, affect the relationship between the shipper and the insurer. The latter case is governed by the Insurance Code.
Our ruling in Filipino Merchants Insurance Co., Inc. v. Alejandro[if !supportFootnotes][8][endif] and the other cases[if !supportFootnotes][9][endif] cited therein
does not support respondent court's view that the insurer's liability prescribes after one year if no action for indemnity is filed against the
carrier or the insurer. In that case, the shipper filed a complaint against the insurer for recovery of a sum of money as indemnity for the
loss and damage sustained by the insured goods. The insurer, in turn, filed a third-party complaint against the carrier for reimbursement
of the amount it paid to the shipper. The insurer filed the third-party complaint on January 9, 1978, more than one year after delivery of
the goods on December 17, 1977. The court held that the Insurer was already barred from filing a claim against the carrier because
under the Carriage of Goods by Sea Act, the suit against the carrier must be filed within one year after delivery of the goods or the date
when the goods should have been delivered. The court said that "the coverage of the Act includes the insurer of the goods."[if !
supportFootnotes][10][endif]

The Filipino Merchants case is different from the case at bar. In Filipino Merchants, it was the insurer which filed a claim against the
carrier for reimbursement of the amount it paid to the shipper. In the case at bar, it was the shipper which filed a claim against the insurer.
The basis of the shipper's claim is the "all risks" insurance policies issued by private respondents to petitioner Mayer.
The ruling in Filipino Merchants should apply only to suits against the carrier filed either by the shipper, the consignee or the insurer.
When the court said in Filipino Merchants that Section 3(6) of the Carriage of Goods by Sea Act applies to the insurer, it meant that the
insurer, like the shipper, may no longer file a claim against the carrier beyond the one-year period provided in the law. But it does not
mean that the shipper may no longer file a claim against the insurer because the basis of the insurer's liability is the insurance contract.
An insurance contract is a contract whereby one party, for a consideration known as the premium, agrees to indemnify another for loss or
damage which he may suffer from a specified peril.[if !supportFootnotes][11][endif] An "all risks" insurance policy covers all kinds of loss other than
those due to willful and fraudulent act of the insured.[if !supportFootnotes][12][endif] Thus, when private respondents issued the "all risks" policies to
petitioner Mayer, they bound themselves to indemnify the latter in case of loss or damage to the goods insured. Such obligation
prescribes in ten years, in accordance with Article 1144 of the New Civil Code.[if !supportFootnotes][13][endif]
IN VIEW WHEREOF, the petition is GRANTED. The Decision of respondent Court of Appeals dated December 14, 1995 and its
Resolution dated February 22, 1996 are hereby SET ASIDE and the Decision of the Regional Trial Court is hereby REINSTATED. No
costs.
SO ORDERED.