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G.R. No.

97412 July 12, 1994


EASTERN SHIPPING LINES, INC., petitioner,
vs.
HON. COURT OF APPEALS AND MERCANTILE INSURANCE
COMPANY, INC., respondents.
FACTS:
This is an action against defendants shipping company, arrastre
operator and broker-forwarder for damages sustained by a shipment
while in defendants' custody, filed by the insurer-subrogee who paid
the consignee the value of such losses/damages.
two fiber drums of riboflavin were shipped from Yokohama, Japan for
delivery to manila, Upon arrival it was discharged unto the custody of
defendant Metro Port Service, Inc. The latter excepted to one drum,
said to be in bad order, which damage was unknown to plaintiff.
defendant Allied Brokerage Corporation received the shipment from
defendant Metro Port Service, Inc., one drum opened and without seal
(per "Request for Bad Order Survey. defendant Allied Brokerage
Corporation made deliveries of the shipment to the consignee's
warehouse. The latter excepted to one drum which contained
spillages, while the rest of the contents was adulterated/fake Plaintiff
contended that due to the losses/damage sustained by said drum, the
consignee suffered losses totaling P19,032.95, due to the fault and
negligence of defendants. Claims were presented against defendants
who failed and refused to pay the same As a consequence of the
losses sustained, plaintiff was compelled to pay the consignee
1.

2.
3.

Eastern Shipping it alleged that the shipment was


discharged in good order from the vessel unto the custody of
Metro Port Service so that any damage/losses incurred after
the shipment was incurred after the shipment was turned
over to the latter, is no longer its liability
Metroport averred that although subject shipment was
discharged unto its custody, portion of the same was already
in bad order
Allied Brokerage alleged that plaintiff has no cause of action
against it, not having negligent or at fault for the shipment
was already in damage and bad order condition when
received by it, but nonetheless, it still exercised extra
ordinary care and diligence in the handling/delivery of the
cargo to consignee in the same condition shipment was
received by it.

ISSUE:
1. Whether or not the shipment sustained losses/damages;
2. Whether or not these losses/damages were sustained while in the
custody of defendants (in whose respective custody, if determinable);
3. Whether or not defendant(s) should be held liable for the
losses/damages

HELD:
1.

2.

As to the first issue, there can be no doubt that the shipment


sustained losses/damages. The two drums were shipped in
good order and condition, as clearly shown by the Bill of
Lading and Commercial Invoice which do not indicate any
damages drum that was shipped (Exhs. B and C). But when
on December 12, 1981 the shipment was delivered to
defendant Metro Port Service, Inc., it excepted to one drum
in bad order.
Correspondingly, as to the second issue, it follows that the
losses/damages were sustained while in the respective
and/or successive custody and possession of defendants
carrier (Eastern), arrastre operator (Metro Port) and broker
(Allied Brokerage). This becomes evident when the Marine

Cargo Survey Report (Exh. G), with its "Additional Survey


Notes", are considered. In the latter notes, it is stated that
when the shipment was "landed on vessel" to dock of Pier #
15, South Harbor, Manila on December 12, 1981, it was
observed that "one (1) fiber drum (was) in damaged
condition, covered by the vessel's Agent's Bad Order Tally
Sheet No. 86427." The report further states that when
defendant Allied Brokerage withdrew the shipment from
defendant arrastre operator's custody on January 7, 1982,
one drum was found opened without seal, cello bag partly
torn but contents intact. Net unrecovered spillages was
15 kgs. The report went on to state that when the drums
reached the consignee, one drum was found with
adulterated/faked contents. It is obvious, therefore, that
these losses/damages occurred before the shipment
reached the consignee while under the successive custodies
of defendants. Under Art. 1737 of the New Civil Code, the
common carrier's duty to observe extraordinary diligence in
the vigilance of goods remains in full force and effect even if
the goods are temporarily unloaded and stored in transit in
the warehouse of the carrier at the place of destination, until
the consignee has been advised and has had reasonable
opportunity to remove or dispose of the goods (Art. 1738,
NCC). Defendant Eastern Shipping's own exhibit, the "TurnOver Survey of Bad Order Cargoes" (Exhs. 3-Eastern) states
that on December 12, 1981 one drum was found "open"
3. The common carrier's duty to observe the requisite
diligence in the shipment of goods lasts from the time the
articles are surrendered to or unconditionally placed in the
possession of, and received by, the carrier for transportation
until delivered to, or until the lapse of a reasonable time for
their acceptance by, the person entitled to receive them
(Arts. 1736-1738, Civil Code; Ganzon vs. Court of Appeals,
161 SCRA 646; Kui Bai vs. Dollar Steamship Lines, 52 Phil.
863). When the goods shipped either are lost or arrive in
damaged condition, a presumption arises against the carrier
of its failure to observe that diligence, and there need not be
an express finding of negligence to hold it liable (Art. 1735,
Civil Code; Philippine National Railways vs. Court of
Appeals, 139 SCRA 87; Metro Port Service vs. Court of
Appeals, 131 SCRA 365). There are, of course, exceptional
cases when such presumption of fault is not observed but
these cases, enumerated in Article 1734 1 of the Civil Code,
are exclusive, not one of which can be applied to this case.
Fireman's Fund Insurance vs. Metro Port Services : The
legal relationship between the consignee and the arrastre
operator is akin to that of a depositor and warehouseman
(Lua Kian v. Manila Railroad Co., 19 SCRA 5 [1967]. The
relationship between the consignee and the common carrier
is similar to that of the consignee and the arrastre operator
(Northern Motors, Inc. v. Prince Line, et al., 107 Phil. 253
[1960]). Since it is the duty of the ARRASTRE to take good
care of the goods that are in its custody and to deliver them
in good condition to the consignee, such responsibility also
devolves upon the CARRIER. Both the ARRASTRE and the
CARRIER are therefore charged with the obligation to
deliver the goods in good condition to the consignee.
We do not, of course, imply by the above pronouncement
that the arrastre operator and the customs broker are
themselves always and necessarily liable solidarily with the
carrier, or vice-versa, nor that attendant facts in a given case
may not vary the rule. The instant petition has been brought
solely by Eastern Shipping Lines, which, being the carrier
and not having been able to rebut the presumption of fault,
is, in any event, to be held liable in this particular case. A
factual finding of both the court a quo and the appellate
court, we take note, is that "there is sufficient evidence that
the shipment sustained damage while in the successive
possession of appellants" (the herein petitioner among
them). Accordingly, the liability imposed on Eastern Shipping
Lines, Inc., the sole petitioner in this case, is inevitable
regardless of whether there are others solidarily liable with it.
G.R. No. 94149 May 5, 1992

AMERICAN HOME ASSURANCE, COMPANY, petitioner,


vs.
THE COURT OF APPEALS and NATIONAL MARINE
CORPORATION and/or NATIONAL MARINE CORPORATION
(Manila), respondents.
FACTS:
Cheng Hwa Pulp Corporation shipped 5,000 bales (1,000 ADMT) of
bleached kraft pulp from Haulien, Taiwan on board "SS Kaunlaran",
which is owned and operated by herein respondent National Marine
Corporation with Registration No. PID-224. The said shipment was
consigned to Mayleen Paper, Inc. of Manila, which insured the
shipment with herein petitioner American Home Assurance Co. as
evidenced by Bill of Lading No. HLMN-01.
the shipment arrived in Manila and was discharged into the custody of
the Marina Port Services, Inc., for eventual delivery to the consigneeassured. However, upon delivery of the shipment to Mayleen Paper,
Inc., it was found that 122 bales had either been damaged or lost. The
loss was calculated to be 4,360 kilograms with an estimated value of
P61,263.41.
Respondent, National Marine Corporation, filed a motion to dismiss
dated August 7, 1989 stating that American Home Assurance
Company had no cause of action based on Article 848 of the Code of
Commerce which provides "that claims for averages shall not be
admitted if they do not exceed 5% of the interest which the claimant
may have in the vessel or in the cargo if it be gross average and 1% of
the goods damaged if particular average, deducting in both cases the
expenses of appraisal, unless there is an agreement to the contrary." It
contended that based on the allegations of the complaint, the loss
sustained in the case was P35,506.75 which is only .18% of
P17,420,000.00, the total value of the cargo.
On the other hand, petitioner countered that Article 848 does not apply
as it refers to averages and that a particular average presupposes that
the loss or damages is due to an inherent defect of the goods, an
accident of the sea, or a force majeure or the negligence of the crew of
the carrier, while claims for damages due to the negligence of the
common carrier are governed by the Civil Code provisions on Common
Carriers.
ISSUE:
the pivotal issue to be resolved is the application of the law on
averages (Articles 806, 809 and 848 of the Code of Commerce).
HELD:
This issue has been resolved by this Court in National Development
Co. v. C.A. (164 SCRA 593 [1988]; citingEastern Shipping Lines,
Inc. v. I.A.C., 150 SCRA 469, 470 [1987] where it was held that "the
law of the country to which the goods are to be transported persons
the liability of the common carrier in case of their loss, destruction or
deterioration." (Article 1753, Civil Code). Thus, for cargoes transported
to the Philippines as in the case at bar, the liability of the carrier is
governed primarily by the Civil Code and in all matters not regulated by
said Code, the rights and obligations of common carrier shall be
governed by the Code of Commerce and by special laws (Article 1766,
Civil Code).
Corollary thereto, the Court held further that under Article 1733 of the
Civil Code, common carriers from the nature of their business and for
reasons of public policy are bound to observe extraordinary diligence

in the vigilance over the goods and for the safety of passengers
transported by them according to all circumstances of each case.
Thus, under Article 1735 of the same Code, in all cases other than
those mentioned in Article 1734 thereof, the common carrier shall be
presumed to have been at fault or to have acted negligently, unless it
proves that it has observed the extraordinary diligence required by law
(Ibid., p. 595).
But more importantly, the Court ruled that common carriers cannot limit
their liability for injury or loss of goods where such injury or loss was
caused by its own negligence. Otherwise stated, the law on averages
under the Code of Commerce cannot be applied in determining liability
where there is negligence (Ibid., p. 606).
Under the foregoing principle and in line with the Civil Code's
mandatory requirement of extraordinary diligence on common carriers
in the car care of goods placed in their stead, it is but reasonable to
conclude that the issue of negligence must first be addressed before
the proper provisions of the Code of Commerce on the extent of
liability may be applied.
The records show that upon delivery of the shipment in question of
Mayleen's warehouse in Manila, 122 bales were found to be
damaged/lost with straps cut or loose, calculated by the so-called
"percentage method" at 4,360 kilograms and amounting to P61,263.41
(Rollo, p. 68). Instead of presenting proof of the exercise of
extraordinary diligence as required by law, National Marine Corporation
(NMC) filed its Motion to Dismiss dated August 7, 1989, hypothetically
admitting the truth of the facts alleged in the complaint to the effect that
the loss or damage to the 122 bales was due to the negligence or fault
of NMC (Rollo, p. 179). As ruled by this Court, the filing of a motion to
dismiss on the ground of lack of cause of action carries with it the
admission of the material facts pleaded in the complaint (Sunbeam
Convenience Foods, Inc. v. C.A., 181 SCRA 443 [1990]). Such being
the case, it is evident that the Code of Commerce provisions on
averages cannot apply.
On the other hand, Article 1734 of the Civil Code provides that
common carriers are responsible for loss, destruction or deterioration
of the goods, unless due to any of the causes enumerated therein. It is
obvious that the case at bar does not fall under any of the exceptions.
Thus, American Home Assurance Company is entitled to
reimbursement of what it paid to Mayleen Paper, Inc. as insurer.
G.R. No. 177116

February 27, 2013

ASIAN TERMINALS, INC., Petitioner,


vs.
SIMON ENTERPRISES, INC., Respondent.
FACTS:
On October 25, 1995, Contiquincybunge Export Company loaded
6,843.700 metric tons of U.S. Soybean Meal in Bulk on board the
vessel MN "Sea Dream" at the Port of Darrow, Louisiana, U.S.A., for
delivery to the Port of Manila to respondent Simon Enterprises, Inc., as
consignee. When the vessel arrived at the South Harbor in Manila, the
shipment was discharged to the receiving barges of petitioner Asian
Terminals, Inc. (ATI), the arrastre operator. Respondent later received
the shipment but claimed having received only 6,825.144 metric tons
of U.S. Soybean Meal, or short by 18.556 metric tons, which is
estimated to be worth US$7,100.16 or P186,743.20.3
In their Answer,7 the unknown owner of the vessel M/V "Tern" and its
local agent Inter-Asia Marine Transport, Inc., prayed for the dismissal

of the complaint essentially alleging lack of cause of action and


prescription. They alleged as affirmative defenses the following: that
the complaint does not state a cause of action; that plaintiff and/or
defendants are not the real parties-in-interest; that the cause of action
had already prescribed or laches had set in; that the claim should have
been filed within three days from receipt of the cargo pursuant to the
provisions of the Code of Commerce; that the subject shipment was
discharged in Manila in the same condition and quantity as when
loaded at the port of loading; that defendants responsibility ceased
upon discharge from the ships tackle; that the damage or loss was
due to the inherent vice or defect of the goods or to the insufficiency of
packing thereof or perils or dangers or accidents of the sea, preshipment damage or to improper handling of the goods by plaintiff or
its representatives after discharge from the vessel, for which
defendants cannot be made liable; that damage/loss occurred while
the cargo was in the possession, custody or control of plaintiff or its
representative, or due to plaintiffs own negligence and careless
actuations in the handling of the cargo; that the loss is less than 0.75%
of the entire cargo and assuming arguendo that the shortage exists,
the figure is well within the accepted parameters when loading this
type of bulk cargo; that defendants exercised the required diligence
under the law in the performance of their duties; that the vessel was
seaworthy in all respects; that the vessel went straight from the port of
loading to Manila, without passing through any intermediate ports so
there was no chance for any loss of the cargo; the plaintiffs claim is
excessive, grossly overstated, unreasonable and a mere paper loss
and is certainly unsubstantiated and without any basis; the terms and
conditions of the relevant bill of lading and the charter party, as well as
the provisions of the Carriage of Goods by Sea Act and existing laws,
absolve the defendants from any liability
HELD:
Though it is true that common carriers are presumed to have been at
fault or to have acted negligently if the goods transported by them are
lost, destroyed, or deteriorated, and that the common carrier must
prove that it exercised extraordinary diligence in order to overcome the
presumption,21 the plaintiff must still, before the burden is shifted to the
defendant, prove that the subject shipment suffered actual shortage.
This can only be done if the weight of the shipment at the port of origin
and its subsequent weight at the port of arrival have been proven by a
preponderance of evidence, and it can be seen that the former weight
is considerably greater than the latter weight, taking into consideration
the exceptions provided in Article 173422 of the Civil Code.
In this case, respondent failed to prove that the subject shipment
suffered shortage, for it was not able to establish that the subject
shipment was weighed at the port of origin at Darrow, Louisiana,
U.S.A. and that the actual weight of the said shipment was 3,300
metric tons.
Soybean meal is difficult to handle because of poor flow ability and
bridging characteristics. Soybean meal tends to settle or
consolidate over time. This phenomenon occurs in most granular
materials and becomes more severe with increased moisture, time and
small particle size x x x. that loss of weight of the subject cargo cannot
be avoided because of the shift in temperature from the colder United
States weather to the warmer Philippine climate
More importantly, the 199.863 metric-ton shortage that respondent
alleges is a minimal 6.05% of the weight of the entire Soy Bean Meal
shipment. Taking into consideration the previously mentioned option of
the shipper to ship 10% more or less than the contracted shipment,
and the fact that the alleged shortage is only 6.05% of the total quantity
of 3,300 metric tons, the alleged percentage loss clearly does not
exceed the allowable 10% allowance for loss, as correctly argued by

petitioner. The alleged loss, if any, not having exceeded the allowable
percentage of shortage, the respondent then has no cause of action to
claim for shortages.
ABOITIZ SHIPPING G.R. No. 168402
CORPORATION, VS
INSURANCE COMPANY OF NORTH AMERICA,

The RTC ruled that ICNA failed to prove that it is the real party-ininterest to pursue the claim against Aboitiz. The trial court noted that
Marine Policy No. 87GB 4475 was issued by ICNA UK Limited with
address at Cigna House, 8 Lime Street, London EC3M 7NA.However,
complainant ICNA Phils. did not present any evidence to show that
ICNA UK is its predecessor-in-interest, or that ICNA UK assigned the
insurance policy to ICNA Phils. Moreover, ICNA Phils. claim that it had
been subrogated to the rights of the consignee must fail because the
subrogation receipt had no probative value for being hearsay
evidence.
The trial court also found that ICNA failed to produce evidence that it
was a foreign corporation duly licensed to do business in
thePhilippines. Thus, it lacked the capacity to sue before Philippine
Courts,
On the other hand, Aboitiz reiterated that ICNA lacked a cause of
action. It argued that the formal claim was not filed within the period
required under Article 366 of the Code of Commerce; that ICNA had no
right of subrogation because the subrogation receipt should have been
signed by MSAS, the assured in the open policy, and not Willig, who is
merely the representative of the consignee.
The CA opined that the right of subrogation accrues simply upon
payment by the insurance company of the insurance claim. As
subrogee, ICNA is entitled to reimbursement from Aboitiz, even
assuming that it is an unlicensed foreign corporation.
ISSUE:
won ICNA HAS A CAUSE OF ACTION AGAINST ABOITIZ BY
VIRTUE OF THE RIGHT OF SUBROGATION
HELD: YES
A foreign corporation not licensed to do business in
the Philippines is not absolutely incapacitated from filing a suit in
local courts. Only when that foreign corporation is transacting or
doing business in the country will a license be necessary before it can
institute suits.[24]It may, however, bring suits on isolated business
transactions, which is not prohibited under Philippine law.[25] Thus, this
Court has held that a foreign insurance company may sue in Philippine
courts upon the marine insurance policies issued by it abroad to cover
international-bound cargoes shipped by a Philippine carrier, even if it
has no license to do business in this country. It is the act of engaging in
business without the prescribed license, and not the lack of license per
se, which bars a foreign corporation from access to our courts.[26]
In any case, We uphold the CA observation that while it was the ICNA
UK Limited which issued the subject marine policy, the present suit
was filed by the said companys authorized agent in Manila. It was the
domestic corporation that brought the suit and not the foreign
company. Its authority is expressly provided for in the open policy
which includes the ICNA office in the Philippines as one of the foreign
companys agents.

As found by the CA, the RTC erred when it ruled that there
was no proper indorsement of the insurance policy by MSAS, the
shipper, in favor of STIP of Don Bosco Technical High School, the
consignee.
The terms of the Open Policy authorize the filing of any claim on the
insured goods, to be brought against ICNA UK, the company who
issued the insurance, or against any of its listed agents worldwide.
[27]
MSAS accepted said provision when it signed and accepted the
policy. The acceptance operated as an acceptance of the authority of
the agents. Hence, a formal indorsement of the policy to the agent in
thePhilippines was unnecessary for the latter to exercise the rights of
the insurer.
Respondents cause of action is founded on it being subrogated to
the rights of the consignee of the damaged shipment. The right of
subrogation springs from Article 2207 of the Civil Code, which states:
Article 2207. If the plaintiffs property has
been insured, and he has received indemnity from
the insurance company for the injury or loss
arising out of the wrong or breach of contract
complained of, the insurance company shall be
subrogated to the rights of the insured against the
wrongdoer or the person who has violated the
contract. If the amount paid by the insurance
company does not fully cover the injury or loss, the
aggrieved party shall be entitled to recover the
deficiency from the person causing the loss or
injury.
As this Court held in the case of Pan Malayan Insurance Corporation v.
Court of Appeals,[28] payment by the insurer to the assured operates as
an equitable assignment of all remedies the assured may have against
the third party who caused the damage. Subrogation is not dependent
upon, nor does it grow out of, any privity of contract or upon written
assignment of claim. It accrues simply upon payment of the insurance
claim by the insurer.[29]
Upon payment to the consignee of indemnity for damage to the insured
goods, ICNAs entitlement to subrogation equipped it with a cause of
action against petitioner in case of a contractual breach or negligence.
[30]
This right of subrogation, however, has its limitations. First, both the
insurer and the consignee are bound by the contractual stipulations
under the bill of lading.[31] Second, the insurer can be subrogated only
to the rights as the insured may have against the wrongdoer. If by its
own acts after receiving payment from the insurer, the insured releases
the wrongdoer who caused the loss from liability, the insurer loses its
claim against the latter.[32]
The shipment arrived in the port of Manila and was received
by petitioner for carriage on July 26, 1993. On the same day, it was
stripped from the container van. Five days later, on July 31, 1993, it
was re-stuffed inside another container van. On August 1, 1993, it was
loaded onto another vessel bound for Cebu. During the period
between July 26 to 31, 1993, the shipment was outside a container van
and kept in storage by petitioner.
The bill of lading issued by petitioner on July 31,
1993 contains the notation grounded outside warehouse, suggesting
that from July 26 to 31, the goods were kept outside the
warehouse. And
since
evidence
showed
that
rain
fell
over Manila during the same period, We can conclude that this was
when the shipment sustained water damage.
To prove the exercise of extraordinary diligence, petitioner
must do more than merely show the possibility that some other party
could be responsible for the damage. It must prove that it used all
reasonable means to ascertain the nature and characteristic of the
goods tendered for transport and that it exercised due care in handling
them.[42] Extraordinary diligence must include safeguarding the
shipment from damage coming from natural elements such as rainfall.
Aside from denying that the grounded outside warehouse
notation referred not to the crate for shipment but only to the carrier
van, petitioner failed to mention where exactly the goods were stored
during the period in question. It failed to show that the crate was
properly stored indoors during the time when it exercised custody
before shipment to Cebu.

Petitioner is thus liable for the water damage sustained by the goods
due to its failure to satisfactorily prove that it exercised the
extraordinary diligence required of common carriers.
G.R. No. 80936 October 17, 1990
EASTERN SHIPPING LINES, INC., petitioner,
vs.
COURT OF APPEALS, HONGKONG & SHANGHAI BANKING
CORPORATION, AND CONSOLIDATED MINES, INC., respondents.
on the basis of an Undertaking for Delivery of Cargo but without the
surrender of the original bill of lading presented by CMI, petitionercarrier released the shipment in question to CMI.
the Bill of Lading which was issued by the carrier but contained articles
furnished by the Shipper, shows on its face that the Shipment is
consigned "TO SHIPPER'S ORDER" with "ADDRESS ARRIVAL
NOTICE TO CONSOLIDATED MINES INC. 6799 AYALA AVE.
MAKATI, METRO MANILA PHILIPPINES" (Annex A of Complaint, p. 7,
Original Records). Nowhere did the Bill of Lading refer to respondent
HSBC as the consignee or the one to be notified.

ISSUE
who the consignee is in the bin of lading in question.
HELD
The foregoing information, without more, in effect makes respondent
CMI for all practical intents and purposes the party named and ordered
to receive the goods. The petitioner-carrier, not being privy to any
transaction between HSBC and CMI, cannot be expected to look
beyond what is contained on the face of the bill of lading in question
and guess which of the many banks in Metro Manila or some other
unrevealed corporation could possibly be the consignee. To consider
otherwise would not be sound business practice as petitioner would be
forced to wait for the real owner of the goods to show up, perhaps in
vain.
But assuming that CMI may not be considered consignee, the
petitioner cannot be faulted for releasing the goods to CMI under the
circumstances, due to its lack of knowledge as to who was the real
consignee in view of CMI's strong representations and letter of
undertaking wherein it stated that the bill of lading would be presented
later. This is precisely the situation covered by the last paragraph of
Art. 353 of the Corporation CoGde to wit:
If in case of loss or for any other reason
whatsoever, the consignee cannot return upon
receiving the merchandise the bin of lading
subscribed by the carrier, he shall give said carrier
receipt of the goods delivered this receipt
producing the same effects as the return of the bill
of lading.
Notwithstanding that respondent HSBC admits even in its
memorandum filed with the trial court that Consolidated Mines, Inc. is
the consignee (p. 168, Original Records), yet HSBC pinpoints liability
to the petitioner carrier by relying on the provisions of Article 1736 of
the Civil Code of the Philippines which provides that:

The extraordinary responsibility of the common


carrier lasts from the time the goods are
unconditionally placed in the possession of, and
received by the carrier for transportation until the
same are delivered, actually or constructively, by
the carrier to the consignee, or to the person who
has a right to receive them, without prejudice to
the provisions of Article 1738.
Respondent HSBC wittingly or unwittingly overlooked the fact that the
same article uses the conjunction "or" in reference to whom the goods
may be delivered, that is, to the consignee, or to the person who has a
right to receive them.
For almost six months from the arrival of the goods HSBC did not do
anything to claim the cargo. It could not possibly be left around lying
Idle when on the face of the bill of lading, there was a named owner to
be notified.
G.R. No. 125524

August 25, 1999

BENITO MACAM doing business under the name and style BENMAC ENTERPRISES, petitioner,
vs.
COURT OF APPEALS, CHINA OCEAN SHIPPING CO., and/or
WALLEM PHILIPPINES SHIPPING, INC.,respondents.
Benito Macam, doing business under name Ben-Mac Enterprises,
shipped on board vessel Nen-Jiang, owned and operated by
respondent China Ocean Shipping Co. through local agent Wallem
Philippines Shipping Inc., 3,500 boxes of watermelon covered by Bill of
Lading No. HKG 99012, and 1,611 boxes of fresh mangoes covered
by Bill of Lading No. HKG 99013. The shipment was bound for
Hongkong with PAKISTAN BANK as consignee and
Great Prospect Company of Rowloon (GPC) as notify party.
Upon arrival in Hongkong, shipment was delivered by respondent
WALLEM directly to GPC, not to PAKISTAN BANK and without the
required bill of lading having been surrendered. Subsequently, GPC
failed to payPAKISTAN BANK, such that the latter, still in possession of
original bill of lading, refused to pay petitioner thru SOLIDBANK. Since
SOLIDBANK already pre-paid the value of shipment, it demanded
payment from respondent WALLEM but was refused. MACAM
constrained to return the amount paid by SOLIDBANK and demanded
payment from WALLEM but to no avail.
WALLEM submitted in evidence a telex dated 5 April 1989 as basis for
delivering the cargoes to GPC without the bills of lading and bank
guarantee. The telex instructed delivery of various shipments to the
respective consignees without need of presenting the bill of lading and
bank guarantee per the respective shippers request since for prepaid
shipt ofrt charges already fully paid. MACAM, however, argued that,
assuming there was such an instruction, the consignee referred to was
PAKISTAN BANK and not GPC.
The RTC ruled for MACAM and ordered value of shipment.
CA reversedRTCs decision.

requiring presentation of bill of lading as that usually takes time. Thus,


taking into account that subject shipment consisted of perishable
goods and SOLIDBANK pre-paid the full amount of value thereof, it is
not hard to believe the claim of respondent WALLEM that petitioner
indeed requested the release of the goods to GPC without
presentation of the bills of lading and bank guarantee.
To implement the said telex instruction, the delivery of the shipment
must be to GPC, the notify party or real importer/buyer of the goods
and not the PAKISTANI BANK since the latter can very well present the
original Bills of Lading in its possession. Likewise, if it were the
PAKISTANI BANK to whom the cargoes were to be strictly delivered, it
will no longer be proper torequire a bank guarantee as a substitute for
the Bill of Lading. To construe otherwise will render meaningless the
telex instruction. After all, the cargoes consist of perishable fresh fruits
and immediate delivery thereof the buyer/importer is essentially a
factor to reckon with.
We emphasize that the extraordinary responsibility of the common
carriers lasts until actual or constructive delivery of the cargoes to the
consignee or to the person who has a right to receive them. PAKISTAN
BANK was indicated in the bills of lading as consignee whereas GPC
was the notify party. However, in the export invoices GPC was clearly
named as buyer/importer. Petitioner also referred to GPC as such in
his demand letter to respondent WALLEM and in his complaint before
the trial court. This premise draws us to conclude that the delivery of
the cargoes to GPC as buyer/importer which, conformably with Art.
1736 had, other than the consignee, the right to receive them was
proper.
IRON BULK SHIPPING CO LTD v. REMINGTON INDUSTRIAL
SALES CORP.
FACTS:
> Remington Industrial ordered 194 hot rolled steel sheets from
Wangs. Wangs forwarded the order to its supplier Burwill. The sheets
were loaded on MV Indian Reliance in Poland and shipped to
the Philippines under a Bill of Lading. Iron Bulk Shipping represented
the charterer in the Philippines.
> Upon discharge of the cargo, the sheets were found to be wet
and with rust extending to 50 to 60% of each sheet.
> No one honored the claims of loss and as recourse, Remington
filed an action for collection. Both lower and appellate courts ruled
in favor of Remington.
> The charterers defense (Iron Bulk) was that the sheets were
already rusty when they were loaded on the ship. However, the Bill of
Lading it issued was found to be a clean bill of lading (i.e. it does
not indicate any defect on the goods covered by it). The sheets
were found to be in a fair, usually accepted condition.
> The suppliers defense (Wangs) was that Iron Bulk did not
exercise extraordinary diligence in shipping the sheets.
> The appellate court dismissed the case against Wangs and now,
only Iron Bulk raised the case on certiorari.

ISSUES:
1. Whether or not Iron Bulk exercised extraordinary diligence?
No.

Issue: Are the respondents liable to the petitioner for releasing the
goods to GPC without the bills of lading or bank guarantee?

Held: It is a standard maritime practice when immediate delivery is of


the essence, for shipper to request or instruct the carrier to deliver the
goods to the buyer upon arrival at the port of destination without

> Diligence required: Even if the cargo was already in a damaged


condition at the time it was accepted for transportation, the carrier is
not relieved from its responsibility to exercise due care in handling
the merchandise and in employing the necessary precautions
to prevent the cargo from further deteriorating. Extraordinary diligence
requires the common carrier to know and to follow the required
precaution for avoiding damage to, or destruction of the goods
entrusted to it for safe carriage and delivery. The common carrier must

exercise due diligence to forestall or lessen the loss (by


applying additional safety measures to make sure that the cargo
is protected from corrosion).

the latter filed a complaint for Damages against APL, UTI and
petitioner with the RTC of Makati.

> Presumption: Except in the cases mentioned under Art. 1734, if the
goods are lost, destroyed or deteriorated, common carriers are
presumed to have been at fault or to have acted negligently unless
they prove that they observed extraordinary diligence.

Issue: Whether or not petitioner is a common carrier.

2. Whether or not the CA erred in relying on the pro forma Bill of


Lading? No.
> Two-fold character: A bill of lading operates as both a receipt and a
contract. It is a receipt for the goods shipped (dates, place, description,
quality and value) and a contract to transport and deliver the same as
therein stipulated.
Estoppel: Since Iron Bulk shipping failed to annotate in the bill of lading
the alleged damaged condition of the cargo when it was loaded, they
are bound by the description contained therein and they are now
estopped from denying the contents of the said bill of lading.
G.R. No. 166250

July 26, 2010

UNSWORTH TRANSPORT INTERNATIONAL (PHILS.),


INC., Petitioner,
vs.
COURT OF APPEALS and PIONEER INSURANCE AND SURETY
CORPORATION, Respondents.

Facts: On August 31, 1992, the shipper Sylvex Purchasing


Corporation delivered to UTI a shipment of 27 drums of various raw
materials for pharmaceutical manufacturing, consisting of: "1) 3 drums
(of) extracts, flavoring liquid, flammable liquid x x x banana flavoring; 2)
2 drums (of) flammable liquids x x x turpentine oil; 2 pallets. STC: 40
bags dried yeast; and 3) 20 drums (of) Vitabs: Vitamin B Complex
Extract." UTI issued Bill of Lading No. C320/C15991-2, covering the
aforesaid shipment. The subject shipment was insured with private
respondent Pioneer Insurance and Surety Corporation in favor of
Unilab against all risks in the amount of P1,779,664.77 under and by
virtue of Marine Risk Note Number MC RM UL 0627 92 and Open
Cargo Policy No. HO-022-RIU.
On the same day that the bill of lading was issued, the
shipment was loaded in a sealed 1x40 container van, with no. APLU982012, boarded on APLs vessel M/V "Pres. Jackson," Voyage 42,
and transshipped to APLs M/V "Pres. Taft" for delivery to petitioner in
favor of the consignee United Laboratories, Inc. (Unilab).
On September 30, 1992, the shipment arrived at the port of
Manila. On October 6, 1992, petitioner received the said shipment in its
warehouse after it stamped the Permit to Deliver Imported
Goods procured by the Champs Customs Brokerage. Three days
thereafter, or on October 9, 1992, Oceanica Cargo Marine Surveyors
Corporation (OCMSC) conducted a stripping survey of the shipment
located in petitioners warehouse.
Consequently, Unilabs quality control representative
rejected one paper bag containing dried yeast and one steel drum
containing Vitamin B Complex as unfit for the intended purpose. On
November 7, 1992, Unilab filed a formal claim for the damage against
private respondent and UTI. On November 20, 1992, UTI denied
liability on the basis of the gate pass issued by Jardine that the goods
were in complete and good condition; while private respondent paid
the claimed amount on March 23, 1993. By virtue of the Loss and
Subrogation Receipt issued by Unilab in favor of private respondent,

Held: Admittedly, petitioner is a freight forwarder. The term "freight


forwarder" refers to a firm holding itself out to the general public (other
than as a pipeline, rail, motor, or water carrier) to provide transportation
of property for compensation and, in the ordinary course of its
business, (1) to assemble and consolidate, or to provide for
assembling and consolidating, shipments, and to perform or provide for
break-bulk and distribution operations of the shipments; (2) to assume
responsibility for the transportation of goods from the place of receipt
to the place of destination; and (3) to use for any part of the
transportation a carrier subject to the federal law pertaining to common
carriers.
A freight forwarders liability is limited to damages arising
from its own negligence, including negligence in choosing the carrier;
however, where the forwarder contracts to deliver goods to their
destination instead of merely arranging for their transportation, it
becomes liable as a common carrier for loss or damage to goods. A
freight forwarder assumes the responsibility of a carrier, which actually
executes the transport, even though the forwarder does not carry the
merchandise itself.
Undoubtedly, UTI is liable as a common carrier. Common
carriers, as a general rule, are presumed to have been at fault or
negligent if the goods they transported deteriorated or got lost or
destroyed. That is, unless they prove that they exercised extraordinary
diligence in transporting the goods. In order to avoid responsibility for
any loss or damage, therefore, they have the burden of proving that
they observed such diligence. Mere proof of delivery of the goods in
good order to a common carrier and of their arrival in bad order at their
destination constitutes a prima facie case of fault or negligence against
the carrier. If no adequate explanation is given as to how the
deterioration, loss, or destruction of the goods happened, the
transporter shall be held responsible.
Valenzuela Hardwood & Industrial Supply v. Court of Appeals
274 SCRA 642
Facts:
Valenzuela Hardwood & Industrial Supply (VHIS), plaintiff
herein, hired the services of Seven Brothers Shipping Corporation
(SBC) to transport 940 round logs. VHIS shipped the logs at the port in
Isabella and said logs were placed on the M/V Seven Ambassador
owned by SBC for transport. VHIS insured the logs against loss or
damage with South Sea Surety and Insurance Co. for the amount of
P2,000,000. Subsequently the M/V Seven Ambassador sank which
resulted in the loss of the logs on board the same. The plaintiff then
filed a claim with the insurance company and the SBC. However both
claims were denied. The insurance company denied liability under the
policy and SBC denied liability claiming that they are a private carrier
and that they cannot be held liable due to the stipulation that the
owners shall not be responsible for the loss, split, short-landing,
breakages and any kind of damages to the cargo.
Plaintiff filed a case in order to claim damages for the loss it
incurred. The lower court rendered a decision in favor of the plaintiff
and ordered the insurance company and SBC to pay the plaintiff. On
appeal, the Court of Appeals affirmed the decision but set aside the
decision against SBC holding that the stipulation between the parties is
valid. Hence this petition.
Issue:
1.
2.

Whether or not the stipulation between the parties is valid.


Whether or not SBC is liable for the loss of VHIS.

Held:
The Court held that the stipulation between the parties is
valid. It is clear in this case that the SBC is a private carrier and
therefore a stipulation between the parties limiting the liability of the
carrier is valid. In a contract of private carriage, the parties may validly
stipulate that the responsibility of the cargo rests solely on the
charterer. Such stipulations shall be valid as long as they are not
contrary to law, morals, good customs, public order and public policy.
It is a fact that the loss of the logs was due to the sinking of
the M/V Seven Ambassador. The sinking of the vessel was caused by
the snapping of the iron chains holding the logs. Said snapping was

the consequence of the negligence of the captain in securing the logs.


However, since there is a stipulation between the parties regarding the
responsibility of the loss of the cargo, the SBC cannot be held liable for
the loss of the logs.

overboard. The records show that the subject cargoes fell overboard
the ship and petitioner should not vary the facts of the case on appeal.

PHIL CHARTER vs. NEPTUNE ORIENT


FACTS
L.T. Garments Manufacturing Corp. Ltd. shipped from Hong Kong 3
sets of warp yarn on returnable beams aboard respondent Neptune
Orient Lines' vessel, M/V Baltimar Orion, for transport and delivery to
Fukuyama Manufacturing Corporation (Fukuyama) in Manila.

The said cargoes were loaded in a container under a bill of lading.


Fukuyama insured the shipment against all risks with petitioner
Philippine Charter Insurance Corporation (PCIC) under Marine Cargo
Policy. During the course of the voyage, the container with the cargoes
fell overboard and was lost.

Thus, Fukuyama wrote a letter to respondent Overseas Agency


Services, Inc, the agent of Neptune Orient, and claimed for the value of
the lost cargoes. However, Overseas Agency ignored the claim.
Hence, Fukuyama sought payment from its insurer, PCIC, for the
insured value which claim was fully satisfied by PCIC. PCIC then
demanded from respondents reimbursement of the entire amount it
paid to Fukuyama, but respondents refused payment. Hence, PCIC
filed a complaint for damages against respondents.

Respondents denied liability and alleged that during the voyage, the
vessel encountered strong winds and heavy seas making the vessel
pitch and roll, which caused the subject container with the cargoes to
fall overboard. They claim that the occurrence was a fortuitous event
which exempted them from any liability, and that their liability, if any,
should not exceed US$500 or the limit of liability in the bill of lading,
whichever is lower.

The RTC held that respondents, as common carrier, failed to prove


that they observed the required extraordinary diligence to prevent loss
of the subject cargoes and ordered them to pay the plaintiff the amount
claimed. The CA on the other hand found respondents liability to be
only US$1,500 or US$500 per package under the limited liability
provision of the Carriage of Goods by Sea Act (COGSA). Hence, the
instant appeal.

Petitioners Contention: The vessel committed a "quasi deviation"


which is a breach of the contract of carriage when it intentionally
threw overboard the container for its own benefit. Such breach of
contract resulted in the abrogation of respondents' rights under the
contract and COGSA including the US$500 per package limitation.
ISSUE
W/N the liability of the respondents is only US$1,500 or US$500 per
package as provided in the COGSA - Yes
RULING
The facts as found by the RTC do not support the new allegation
regarding the intentional throwing overboard of the subject cargoes
and quasi deviation. The Court notes that the petitioner's Complaint
and the survey report provide that the shipment were lost/fell

Since the subject cargoes were lost while being transported by


respondent common carrier from Hong Kong to the RP - Philippine law
applies pursuant to the Civil Code. The rights and obligations of
respondent common carrier are thus governed by the provisions of the
Civil Code, and the COGSA, which is a special law applying
suppletorily.

The pertinent provisions of the Civil Code applicable to this case are as
follows:

Art. 1749. A stipulation that the common carrier's 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 fairly and freely agreed upon.

In addition, Sec. 4, paragraph (5) of the COGSA, which is applicable to


all contracts for the carriage of goods by sea to and from Philippine
ports in foreign trade, provides: Neither the carrier nor the ship shall in
any event be or become liable for any loss or damage to or in
connection with the transportation of goods in an amount exceeding
$500 per package lawful money of the United States, or in case of
goods not shipped in packages, per customary freight unit, or the
equivalent of that sum in other currency, unless the nature and value of
such goods have been declared by the shipper before shipment and
inserted in the bill of lading. This declaration, if embodied in the bill of
lading shall be prima facie evidence, but shall be conclusive on the
carrier.

In this case, Bill of Lading stipulates: Neither the Carrier nor the vessel
shall in any event become liable for any loss of or damage to or in
connection with the transportation of Goods in an amount exceeding
US$500 (which is the package or shipping unit limitation under U.S.
COGSA) unless the nature and value of such Goods have been
declared by the Shipper before shipment and inserted in this Bill
of Lading and the Shipper has paid additional charges on such
declared value. . . .

The bill of lading submitted in evidence by petitioner did not show that
the shipper in Hong Kong declared the actual value of the goods as
insured by Fukuyama before shipment and that the said value was
inserted in the Bill of Lading, and so no additional charges were paid.
Hence, the stipulation in the bill of lading that the carrier's liability shall
not exceed US$500 per package applies.

A stipulation in the bill of lading limiting the common carrier's liability for
loss or destruction of a cargo to a certain sum, unless the shipper or
owner declares a greater value, is sanctioned and allowed by law. 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.
Yao Ka Sin Trading vs Court of Appeals

In 1973, Constancio Maglana, president of Prime White Cement


Corporation, sent an offer letter to Yao Ka Sin Trading. The offer states
that Prime White is willing to sell 45,000 bags of cement at P24.30 per
bag. The offer letter was received by Yao Ka Sins manager, Henry
Yao. Yao accepted the letter and pursuant to the letter, he sent a check
in the amount of P243,000.00 equivalent to the value of 10,000 bags of
cement. However, the Board of Directors of Prime White rejected the
offer letter sent by Maglana but it considered Yaos acceptance letter
as a new contract offer hence the Board sent a letter to Yao telling him
that Prime White is instead willing to sell only 10,000 bags to Yao Ka
Sin and that he has ten days to reply; that if no reply is made by Yao
then they will consider it as an acceptance and that thereafter Prime
White shall deposit the P243k check in its account and then deliver the
cements to Yao Ka Sin. Henry Yao never replied.
Later, Yao Ka Sin sued Prime White to compel the latter to comply with
what Yao Ka Sin considered as the true contract, i.e., 45,000 bags at
P24.30 per bag. Prime White in its defense averred that although
Maglana is empowered to sign contracts in behalf of Prime White, such
contracts are still subject to approval by Prime Whites Board, and then
it still requires further approval by the National Investment and
Development Corporation (NIDC), a government owned and controlled
corporation because Prime White is a subsidiary of NIDC.
Henry Yao asserts that the letter from Maglana is a binding contract
because it was made under the apparent authority of Maglana. The
trial court ruled in favor of Yao Ka Sin. The Court of Appeals reversed
the trial court.
ISSUE: Whether or not the president of a corporation is clothed with
apparent authority to enter into binding contracts with third persons
without the authority of the Board.
HELD: No. The Board may enter into contracts through the president.
The president may only enter into contracts upon authority of the
Board. Hence, any agreement signed by the president is subject to
approval by the Board. Unlike a general manager (like the case of
Francisco vs GSIS), the president has no apparent authority to enter
into binding contracts with third persons. Further, if indeed the by-laws
of Prime White did provide Maglana with apparent authority, this was
not proven by Yao Ka Sin.
As a rule, apparent authority may result from (1) the general manner,
by which the corporation holds out an officer or agent as having power
to act or, in other words, the apparent authority with which it clothes
him to act in general or (2) acquiescence in his acts of a particular
nature, with actual or constructive knowledge thereof, whether within or
without the scope of his ordinary powers. These are not present in this
case.
Also, the subsequent letter by Prime White to Yao Ka Sin is binding
because Yao Ka Sins failure to respond constitutes an acceptance,
per stated in the letter itself which was not contested by Henry Yao
during trial.

JAPAN AIRLINES vs. SIMANGAN


GR No. 170141

April 22, 2008

Third Division

Reyes

FACTS:
Respondent needed to go to the US to donate his kidney
to his ailing cousin. Having obtained an emergency US Visa,
respondent purchased a round trip ticket from petitioner JAL. He
was scheduled to a flight bound for LA via Japan. On the date of
his flight, respondent passed through rigid immigration and
security routines before being allowed to board a JAL plane.
While inside the plane, respondent was asked to show
his travel documents. After which he was ordered by the crew to
leave the plane, imputing that respondent is carrying falsified
travel documents. Respondent pleaded but was ignored and
under constraint he gets off the plane. The plane took off and
respondent was left behind.
Respondent was refunded with the cost of his ticket
minus 500 USD, when JAL found out eventually that his travel
documents were not falsified and in order. Respondent filed an
action for damages against JAL.

RTC RULING:
JAL is liable for beach of contract of carriage, and
should pay 1M as MD, 500K as ED, 250K as AF + cost of suit. JAL
appealed contending it is not guilty of breach of contract of
carriage and not liable for damages.

CA RULING:
Affirmed RTC decision with modification as to amount
of damages for being scandalously excessive. 500K MD, 250K ED
and NO AT.

ISSUE:
WON JAL is guilty of breach of contract of carriage.
WON Simangan is entitled to moral and exemplary
damages.

HELD:

JAL is guilty of breach of contract of carriage and is


liable for damages. Petition of JAL was denied. CA decision was
affirmed with modification. 500K ED, 100K ED, 200K AF.

RATIO:
Breach of contract of carriage
In an action for breach of contract of carriage, all that is
required of plaintiff is to prove the existence of such contract and
its non-performance by the carrier through the failure to carry the
passenger safely to his destination. Simangan complied with
these requisites. Damage was accrued by JAL when Simangan
was bumped off despite his protestations and valid travel
documents and notwithstanding his contract of carriage with JAL.

Award of moral damages in breach of contract of carriage.


As a general rule, moral damages are not recoverable in
actions for damages predicated on a breach of contract for it is
not enumerated under Art 2219 NCC. As an exception, such
damages are recoverable in:
1.

Mishaps resulting to a death of a passenger (Art. 1764


NCC)

2.

When carrier is guilty of fraud or bad faith (Art. 2220)

JAL breached its contract of carriage with respondent in


bad faith, when its crew ordered respondent to disembark while
the latter is already settled in his assigned seat under the guise of
verifying the genuineness of his travel documents. Inattention to
and lack of care for the interest of its passengers who are entitled
ot its utmost consideration, particularly as to their convenience,
amount to bad faith which entitles the passenger to award of
moral damages.

Award of exemplary damages in breach of contract of carriage.


Exemplary damages maybe recovered in contractual
obligations as a way of example or correction for the public
good.JAL is liable for exemplary damages as its acts constitute
wanton, oppressive and malevolent acts against respondent.
Passengers have the right to be treated by the carriers
employees with kindness, respect, courtesy and due
consideration and are entitled to be protected against personal
misconduct, injurious language, indignities and abuses from
such employees.
Trans-Asia Shipping Lines vs. CA (GR 118126, 4 March 1996)
Third Division, Davide Jr. (J): 4 concur

Facts: Atty. Renato Arroyo, a public attorney, bought a ticket TransAsia Shipping Lines Inc., a corporation engaged in inter-island
shipping, for the voyage of M/V Asia Thailand vessel to Cagayan de

Oro City from Cebu City on 12 November 1991. At around 5:30p.m of


the said day, Arroyo boarded the M/V Asia Thailand vessel. At that
instance, Arroyo noticed that some repair work were being undertaken
on the engine of the vessel. The vessel departed at around 11:00 p.m.
with only 1 engine running. After an hour of slow voyage, the vessel
stopped near Kawit Island and dropped its anchor thereat. After half an
hour of stillness, some passengers demanded that they should be
allowed to return to Cebu City for they were no longer willing to
continue their voyage to Cagayan de Oro City. The captain acceded
[sic] to their request and thus the vessel headed back to Cebu City. At
Cebu City, Arroyo, together with the other passengers who requested
to be brought back to Cebu City, were allowed to disembark.
Thereafter, the vessel proceeded to Cagayan de Oro City. Arroyo, the
next day, boarded the M/V Asia Japan for its voyage to Cagayan de
Oro City, likewise a vessel of Trans-Asia.
On account of the failure of Trans-Asia to transport him to the place of
destination on 12 November 1991, Arroyo filed before the trial court a
complaint for damages against Trans-Asia. After due trial, the trial court
rendered its decision and ruled that the action was only for breach of
contract, with Articles 1170, 1172, and 1173 of the Civil Code as
applicable law not Article 2180 of the same Code. The Court
dismissed the complaint as it did not appear that Arroyo was left in the
Port of Cebu because of the fault, negligence, malice or wanton
attitude of Trans-Asias employees; and likewise dismissed TransAsias counterclaim is likewise dismissed it not appearing also that
filing of the case by Arroyo was motivated by malice or bad faith.
Unsatisfied, Arroyo appealed to the Court of Appeals (CA-GR CV
39901). In its decision of 23 November 1994, the Court of Appeals
reversed the trial courts decision by applying Article 1755 in relation to
Articles 2201, 2208, 2217, and 2232 of the Civil Code and, accordingly,
awarded (1) P20,000.00 as moral damages; (2) P10,000.00 as
exemplary damages; (3) P5,000.00 as attorneys fees; and (4) Cost of
suit. Trans-Asia instituted the petition for review on certiorari.
The Supreme Court denied the petition, and affirmed the challenged
decision of the Court of Appeals, subject to the modification as to the
award for attorneys fees which is set aside; with costs against TransAsia.
1.
Laws
applicable
Undoubtedly, there was, between Trans-Asia and Arroyo, a contract of
common carriage. The laws of primary application then are the
provisions on common carriers under Section 4, Chapter 3, Title VIII,
Book IV of the Civil Code, while for all other matters not regulated
thereby, the Code of Commerce and special laws.
2.
Article 1733 NCC, Extraordinary diligence; Article 1755,
Utmost
diligence
of
very
cautious
persons
Under Article 1733 of the Civil Code, Trans-Asia was bound to observe
extraordinary diligence in ensuring the safety of Arroyo. That meant
that Trans-Asia was, pursuant to Article 1755 of the said Code, bound
to carry Arroyo safely as far as human care and foresight could
provide, using the utmost diligence of very cautious persons, with due
regard for all the circumstances. Herein, Trans-Asia failed to discharge
this
obligation.
3.
Vessel was unseaworthy even before voyage began;
Unseaworthiness defined, a clear breach of duty of carrier
Before commencing the contracted voyage, Trans-Asia undertook
some repairs on the cylinder head of one of the vessels engines. But
even before it could finish these repairs, it allowed the vessel to leave
the port of origin on only one functioning engine, instead of two.
Moreover, even the lone functioning engine was not in perfect
condition as sometime after it had run its course, it conked out. This

caused the vessel to stop and remain adrift at sea, thus in order to
prevent the ship from capsizing, it had to drop anchor. Plainly, the
vessel was unseaworthy even before the voyage began. For a vessel
to be seaworthy, it must be adequately equipped for the voyage and
manned with a sufficient number of competent officers and crew. The
failure of a common carrier to maintain in seaworthy condition its
vessel involved in a contract of carriage is a clear breach of is duty
prescribed in Article 1755 of the Civil Code.
4.
Article
1764
NCC;
Liability
for
damages
As to its liability for damages, Article 1764 of the Civil Code expressly
provides that Damages in cases comprised in this Section shall be
awarded in accordance with Title XVIII of this Book, concerning
Damages. Article 2206 shall also apply to the death of a passenger
caused by the breach of contract by common carrier. The damages
comprised in Title XVIII of the Civil Code are actual or compensatory,
moral, nominal, temperate or moderate, liquidated, and exemplary.
5.
Actual
and
compensatory
damages
Actual or compensatory damages represent the adequate
compensation for pecuniary loss suffered and for profits the obligee
failed
to
obtain.
6.
Damages resulting in contracts or quasi-contracts
In contracts or quasi-contracts, the obligor is liable for all the damages
which may be reasonably attributed to the non- performance of the
obligation if he is guilty of fraud, bad faith, malice, or wanton attitude.
7.
Moral
damages
Moral damages include moral suffering, mental anguish, fright, serious
anxiety, besmirched reputation, wounded feelings, moral shock, social
humiliation, or similar injury. They may be recovered in the cases
enumerated in Article 2219 of the Civil Code, likewise, if they are the
proximate result of, as herein, Trans-Asias breach of the contract of
carriage. Anent a breach of a contract of common carriage, moral
damages may be awarded if the common carrier acted fraudulently or
in bad faith.
8.
Exemplary
damages;
not
a
matter
of
right
Exemplary damages are imposed by way of example or correction for
the public good, in addition to moral, temperate, liquidated or
compensatory damages. In contracts and quasi-contracts, exemplary
damages may be awarded if the defendant acted in a wanton
fraudulent, reckless, oppressive or malevolent manner. It cannot,
however, be considered as a matter of right; the court having to decide
whether or not they should be adjudicated. Before the court may
consider an award for exemplary damages, the plaintiff must first show
that he is entitled to moral, temperate or compensatory damages; but it
is not necessary that he prove the monetary value thereof.
9.
Article
1169
not
applicable
The Court of Appeals did not grant Arroyo actual or compensatory
damages, reasoning that no delay was incurred since there was no
demand, as required by Article 1169 of the Civil Code. This article,
however, finds no application in the case because, as there was in fact
no delay in the commencement of the contracted voyage. If any delay
was incurred, it was after the commencement of such voyage, more
specifically, when the voyage was subsequently interrupted when the
vessel had to stop near Kawit Island after the only functioning engine
conked
out.
10. Article 698 of the Code of Commerce applies suppletorily to
Article 1766 NCC; Rights and duties of parties arising out of delay
As to the rights and duties of the parties strictly arising out of such
delay, the Civil Code is silent. However, as correctly pointed out by the
petitioner, Article 698 of the Code of Commerce specifically provides

for such a situation. It reads In case a voyage already begun should


be interrupted, the passengers shall be obliged to pay the fare in
proportion to the distance covered, without right to recover for losses
and damages if the interruption is due to fortuitous event or force
majeure, but with a right to indemnity if the interruption should have
been caused by the captain exclusively. If the interruption should be
caused by the disability of the vessel and a passenger should agree to
await the repairs, he may not be required to pay any increased price of
passage, but his living expenses during the stay shall be for his own
account. This article applies suppletorily pursuant to Article 1766 of
the Civil Code.
11. Article 698 of the Code of Commerce must be read with
Articles 2199, 2200, 2201, and 2208 in relation to Article 21 NCC;
Arroyo not entitled to actual or compensatory damages
The cause of the delay or interruption was Trans-Asias failure to
observe extraordinary diligence. Article 698 must then be read together
with Articles 2199, 2200, 2201, and 2208 in relation to Article 21 of the
Civil Code. In so reading, it means that Trans-Asia is liable for any
pecuniary loss or loss of profits which Arroyo may have suffered by
reason thereof. For Arroyo, such would be the loss of income if unable
to report to his office on the day he was supposed to arrive were it not
for the delay. This, however, assumes that he stayed on the vessel and
was with it when it thereafter resumed its voyage; but he did not. As he
and some passengers resolved not to complete the voyage, the vessel
had to return to its port of origin and allow them to disembark. Arroyo
then took Trans-Asias other vessel the following day, using the ticket
he had purchased for the previous days voyage. Any further delay
then in Arroyos arrival at the port of destination was caused by his
decision to disembark. Had he remained on the first vessel, he would
have reached his destination at noon of 13 November 1991, thus been
able to report to his office in the afternoon. He, therefore, would have
lost only the salary for half of a day. But actual or compensatory
damages must be proved, which Arroyo failed to do. There is no
convincing evidence that he did not receive his salary for 13 November
1991 nor that his absence was not excused.
12.
Trans-Asia is liable for moral and exemplary damages
Trans-Asia is liable for moral and exemplary damages. In allowing its
unseaworthy M/V Asia Thailand to leave the port of origin and
undertake the contracted voyage, with full awareness that it was
exposed to perils of the sea, it deliberately disregarded its solemn duty
to exercise extraordinary diligence and obviously acted with bad faith
and in a wanton and reckless manner.
13. Trans-Asias assertion shows lack of genuine concern for
safety of passengers; Trans-Asia cannot expect passengers to act
in
manner
it
desired
Trans-Asias assertions that the safety of the vessel and passengers
was never at stake because the sea was calm in the vicinity where it
stopped as faithfully recorded in the vessels log book demonstrates
beyond cavil Trans-Asias lack of genuine concern for the safety of its
passengers. It was, perhaps, only providential than the sea happened
to be calm. Even so, Trans-Asia should not expect its passengers to
act in the manner it desired. The passengers were not stoics;
becoming alarmed, anxious, or frightened at the stoppage of a vessel
at sea in an unfamiliar zone a nighttime is not the sole prerogative of
the faint-hearted. More so in the light of the many tragedies at sea
resulting in the loss of lives of hopeless passengers and damage to
property simply because common carriers failed in their duty to
exercise extraordinary diligence in the performance of their obligations.
14.
Article
2208
NCC
Article 2208 of the Civil Code provides that In the absence of
stipulation, attorney s fees and expenses of litigation, other than
judicial costs cannot be recovered except: (1) When exemplary
damages are awarded; (2) When the defendants act or omission has

compelled the plaintiff to litigate with third persons or to incur expenses


to protect his interest.
15.
Award
of
attorneys
fees
not
justified
Under Article 2208 of the Civil Code, Attorneys fees are recoverable
only in the concept of actual damages, not as moral damages nor
judicial costs. Hence, to merit such an award, it is settled that the
amount thereof must be proven. Moreover, such must be specifically
prayed for and may not be deemed incorporated within a general
prayer for such other relief and remedy as the court may deem just
and equitable. The statement that the plaintiff was forced to litigate in
order that he can claim moral and exemplary damages for the suffering
he incurred does not satisfy the benchmark of factual, legal and
equitable justification needed as basis for an award of attorneys fees.
In sum, for lack of factual and legal basis, the award of attorneys fees
must be deleted.

Dangwa Transportation Co. Inc. V. CA Et Al. (1991)


FACTS: On March 25, 1985, Pedrito Cudiamat was ran over by a bus
operated by Dangwa Transportation Company, and driven by Theodore
Lardizabal. Lardizabal, being reckless and negligent, has prematurely
stepped on the accelerator of the bus just as when Cudiamat boarded
the same. The sudden jerk movement caused Cudiamat to fall from the
platform and was ran over by they bus. Moreover, the driver did not
immediately brought the victim to the nearest hospital for medical
attention.

May 13, 1985: Theodore M. Lardizabal was driving a


passenger bus belonging to Dangwa Transportation Co. Inc.
(Dangwa)

The bus was at full stop bet. Bunkhouses 53 and


54 when Pedro alighted

Pedro Cudiamat fell from the platform of


the bus when it suddenly accelerated forward

Pedro was ran over by the


rear right tires of the vehicle

Theodore first brought his other passengers and


cargo to their respective destinations before bringing Pedro to
Lepanto Hospital where he expired

Private respondents filed a complaint for damages against


Dangwa for the death of Pedro Cudiamat

Dangwa: observed and continued to observe the


extraordinary diligence required in the operation of the co. and the
supervision of the employees even as they are not absolute
insurers of the public at large

RTC: in favour of Dangwa holding Pedrito as negligent and


his negligence was the cause of his death but still ordered to pay in
equity P 10,000 to the heirs of Pedrito

CA: reversed and ordered to pay Pedrito indemnity, moral


damages, actual and compensatory damages and cost of the suit
ISSUE: W/N Dangwa should be held liable for the negligence of its
driver Theodore
HELD: YES. CA affirmed.
A public utility once it stops, is in effect making a continuous
offer to bus riders (EVEN when moving as long as it is still slow in
motion)

Duty of the driver: do NOT make acts that would


have the effect of increasing peril to a passenger while he is
attempting to board the same

Premature acceleration of the bus in this


case = breach of duty

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

Duty extends to boarding and alighting

GR: 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
EX: carrier to prove that it has exercised extraordinary
diligence as prescribed in Art. 1733 and 1755 of the Civil Code
Failure to immediately bring Pedrito to the hospital despite
his serious condition = patent and incontrovertible proof of their
negligence
Hospital was in Bunk 56
1st proceeded to Bunk 70 to allow a passenger
(who later called the family of Pedrito on his own will) to alight and
deliver a refrigerator
In tort, actual damages is based on net earnings
They are liable.
Common carriers, from the nature of their business and reasons of
public policy, are bound to observe extraordinary diligence for the
safety of the passengers transported by the according to all the
circumstances of each case. 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.
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.
Philippine Airlines vs. Court of Appeals
185 SCRA 110
Facts:
The Stralight Flight of Philippine Airlines (PAL) with 33
passengers took off from Iloilo bpund for Manila. An hour and fifteen
after it crashed in Mindoro. The plane was manufacture 1942 and was
acquired by the airline 1948. It has been certified as airworthy by the
Civil Aeronautics Administration.
Passenger Nicanor Padilla is 29 years old, single and dead.
His only legal heir is his mother Natividad Padilla who filed for
damages. She demanded Php600,000 as actual and compensatory
damages, exemplary damages and Php60,000 attorney;s fees.
Issue:
How are damages computed.
Held:
The award of damages for death is computed on the life
expectancy of the deceased and not of the beneficiary. Artcle 1764 of
the Civil Code provides that article 2206 shall also applu to death of
passenger caused by the breach of contract by the common carrier.
The manner of computing damages is taken from Davila vs.
CA. Net yearly income multiplied by the Life Expectancy of the
deceased. The Life Expectancy is based on the American Expectancy
Table of Mortality formula (2/3x[80-30]) cited from Villa Rey Transit Inc.
vs. CA.
The income and salary of Nicanor Padilla is evidenced by
witnesses, the auditor and manager of Allied Overseas Trading, pay
rolls of the companies and his income tax returns.
The trial court determined the deceased gross annual
income to be Php23,100 from his yearly salary from Padilla shipping
Company and Allied Overseas Trading Company.
The court
considered that he is single and thus deducted Php9, 200 as yearly
living expenses.
His NET INCOME is thus, 13,900 with a life expectancy of
30 years. (Net income x Life Expectancy) is Php417, 000. This is the
amount of indemnity his mother is to receive.

This includes a legal rate of interest of 6% annum from date


of judgment on 31August1973 until fully paid.
Heirs of de los Santos vs. CA (GR 51165, 21 June 1990) First
Division, Medialdea (J): 4 concur
Facts: On 2 November 1967, Mauricio de los Santos accompanied his
common-law wife, Amparo delos Santos, and children, namely:
Romeo, Josie, Hernani (10 years old), Abella (7 years old), Maria
Lemia (5 years old) and Melany (5 months old), to pier 8, North Harbor,
Manila, to board the M/V Mindoro, owned by Compania Maritima,
bound for Aklan. Amparo delos Santos and the aforesaid children
brought all their belongings, including household utensils valued at
P1,000.00, with the intention of living in Aklan permanently. On the
other hand, as to spouses Diego Salim and Teresa Pamatian, Diego
brought with him P200 in cash and some belongings, while Teresa
brought some cash and personal belongings worth P250. Diego
boarded the vessel even if he did not have yet a ticket. As to Ruben
Reyes, he brought with him personal belongings and cash in the
amount of P2,900. M/V Mindoro sailed from pier 8 North Harbor,
Manila, at about 6:00 p.m. (should have sailed at 2:00 p.m.) of said day
bound for New Washington, Aklan, with many passengers aboard
(about 200). Amparo was not included in the manifest as she boarded
the boat without ticket, but appeared to have purchased one in the
vessel. It appears that said vessel met typhoon Welming on the
Sibuyan Sea, Aklan, at about 5:00 a.m. of 4 November 1967 causing
the death of many of its passengers, including Amparo delos Santos
and her children. Other drowned victims include spouses Teresa
Pamatian and Diego Salim, and also Felix Reyes Jakusalam. 136
survived the accident, including Ruben Reyes and Eliadora Crisostomo
de Justo. Eliandora was able to board a balsa, while Ruben was able
to swim to an island and with others, rescued later on and brought to
the hospital.
The petition has merit. At the outset, We note that there is no dispute
as to the finding of the captain's negligence in the mishap. The present
controversy centers on the questions of Maritima's negligence and of
the application of Article 587 of the Code of Commerce. The said
article provides:
Art. 587. The ship agent shall also be civilly liable
for indemnities in favor of third persons which may
arise from the conduct of the captain in the care of
the goods which he loaded on the vessel, but he
may exempt himself therefrom by abandoning the
vessel with all her equipments and the freight it
may have earned during the voyage.
Under this provision, a shipowner or agent has the right of
abandonment; and by necessary implication, his liability is confined to
that which he is entitled as of right to abandon-"the vessel with all her
equipments and the freight it may have earned during the voyage"
(Yangco v. Laserna, et al., 73 Phil. 330, 332). Notwithstanding the
passage of the New Civil Code, Article 587 of the Code of Commerce
is still good law. The reason lies in the peculiar nature of maritime law
which is 94 exclusively real and hypothecary that operates to limit such
liability to the value of the vessel, or to the insurance thereon, if any
(Yangco v. Laserna, Ibid). As correctly stated by the appellate court,
"(t)his rule is found necessary to offset against the innumerable
hazards and perils of a sea voyage and to encourage shipbuilding and
marine commerce. (Decision, Rollo, p. 29). Contrary to the petitioners'
supposition, the limited liability doctrine applies not only to the goods
but also in all cases like death or injury to passengers wherein the
shipowner or agent may properly be held liable for the negligent or
illicit acts of the captain (Yangco v. Laserna,Ibid). It must be stressed at
this point that Article 587 speaks only of situations where the fault or
negligence is committed solely by the captain. In cases where the
shipowner is likewise to be blamed, Article 587 does not apply (see
Manila Steamship Co., Inc. v. Abdulhanan, et al., 100 Phil. 32, 38).
Such a situation will be covered by the provisions of the New Civil
Code on Common Carriers. Owing to the nature of their business and
for reasons of public policy, common carriers are tasked to observe
extraordinary diligence in the vigilance over the goods and for the
safety of its passengers (Article 1733, New Civil Code). Further, they

are 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 1755, New
Civil Code). Whenever death or injury to a passenger occurs, common
carriers are presumed to have been at fault or to have acted
negligently unless they prove that they observed extraordinary
diligence as prescribed by Articles 1733 and 1755 (Article 1756, New
Civil Code).
Guided by the above legal provisions, We painstakingly reviewed the
records of the case and found imprints of Maritima's negligence which
compel Us to reverse the conclusion of the appellate court.
Maritima claims that it did not have any information about typhoon
'Welming' until after the boat was already at sea. Modem technology
belie such contention. The Weather Bureau is now equipped with
modern apparatus which enables it to detect any incoming
atmospheric disturbances. In his summary report on tropical cyclone
'Welming' which occurred within the Philippine Area of Responsibility,
Dr. Roman L. Kintanar, Weather Bureau Director, stated that during the
periods of November 15, 1967, the Bureau issued a total of seventeen
(17) warnings or advisories of typhoon 'Welming' to shipping
companies. Additionally, he reported that:
By 11:15 a.m. of November lst, or in less than
twenty four hours, the storm intensified into a
typhoon. It was by then located at 8.7 N 137.3 E
with sea level pressure of 978 millibars, an eye
diameter of about 18.53 kilometers and a
maximum surface wind of 139 kilometers per hour.
"As it moved along in the open sea, it intensified
further and by 11.07 a.m. of November 2, when its
center was at 103 N 131.4 E, it had attained
surface winds of about 240 kilometers per hour. ...
(Exh. Z, p. 131, Index of Exhibits, p. 11 5,
Emphasis supplied).
Considering the above report and the evidence on record showing the
late departure of the ship at 6:00 p.m. (instead of the scheduled 2:00
p.m. departure) on November 2, 1967, We find it highly improbable
that the Weather Bureau had not yet issued any typhoon bulletin at any
time during the day to the shipping companies. Maritima submitted no
convincing evidence to show this omission. It's evidence showing the
Weather Bureau's forecast of November 3, 1967 is not persuasive. It
merely indicated the weather bulletin of that day. Nowhere could We
find any statement therein from the Weather Bureau that it had not
issued any forecast on November I and 2, 1967 (Exh. 6, Records, p.
257). Significantly, the appellate court found that the ship's captain
through his action showed prior knowledge of the typhoon. The court
said:
... It cannot be true that he was apprised of the
typhoon only at about 11:00 o'clock the following
morning on November 3, 1967 when the Weather
report was transmitted to him from the Weather
Bureau at which time he plotted its position. For in
his radiogram sent to defendant-appellee's office
in Manila as early as 8:07 in the morning of
November 3, 1967 (Exh. D) he states in the
concluding portion 'still observing weather
condition.' thereby implicitly suggesting that he
had known even before departure of the unusual
weather condition. ... (Decision, Rollo, p. 26)
If the captain knew of the typhoon beforehand, it is inconceivable for
Maritima to be totally in the dark of 'Welming.' In allowing the ship to

depart late from Manila despite the typhoon advisories, Maritima


displayed lack of foresight and minimum concern for the safety of its
passengers taking into account the surrounding circumstances of the
case.
While We agree with the appellate court that the captain was negligent
for overloading the ship, We, however, rule that Maritima shares
equally in his negligence. We find that while M/V Mindoro was already
cleared by the Bureau of Customs and the Coast Guard for departure
at 2:00 p.m. the ship's departure was, however, delayed for four hours.
Maritima could not account for the delay because it neither checked
from the captain the reasons behind the delay nor sent its
representative to inquire into the cause of such delay. It was due to this
interim that the appellate court noted that "(i)ndeed there is a great
probability that unmanifested cargo (such as dump truck, 3 toyota cars,
steel bars, and 6,000 beer cases) and passengers (about 241 more
than the authorized 193 passengers) were loaded during the four (4)
hour interval" (Decision, p. 13, Rollo, p. 26). Perchance, a closer
supervision could have prevented the overloading of the ship. Maritima
could have directed the ship's captain to immediately depart in view of
the fact that as of 11:07 in the morning of November 2, 1967, the
typhoon had already attained surface winds of about 240 kilometers
per hour. As the appellate court stated, '(v)erily, if it were not for have
reached (its) destination and this delay, the vessel could thereby have
avoided the effects of the storm" (Decision, Rollo p. 26). This
conclusion was buttressed by evidence that another ship, M/V
Mangaren, an interisland vessel, sailed for New Washington, Aklan on
November 2, 1967, ahead of M/V Mindoro and took the same route as
the latter but it arrived safely (Exh. BB-2, Index of Exhibits, pp. 143-144
and Exh. 4-A, Ibid, p. 254).
Maritima presents evidence of the seaworthy condition of the ship prior
to its departure to prove that it exercised extraordinary diligence in this
case. M/V Mindoro was drydocked for about a month. Necessary
repairs were made on the ship. Life saving equipment and navigational
instruments were installed.
While indeed it is true that all these things were done on the vessel,
Maritima, however, could not present evidence that it specifically
installed a radar which could have allowed the vessel to navigate
safely for shelter during a storm. Consequently, the vessel was left at
the mercy of ''Welming' in the open sea because although it was
already in the vicinity of the Aklan river, it was unable to enter the
mouth of Aklan River to get into New Washington, Aklan due to
darkness and the Floripon Lighthouse at the entrance of the Aklan
River was not functioning or could not be seen at all (Exh. 3-H, Index
of Exhibits, p. 192-195; see also Exh. 2-A, Ibid, p. 160). Storms and
typhoons are not strange occurrences. In 1967 alone before 'Welming,'
there were about 17 typhoons that hit the country (Exh. M, Index of
Exhibits, p. 115), the latest of which was typhoon Uring which occurred
on October 20-25, which cost so much damage to lives and properties.
With the impending threat of 'Welming,' an important device such as
the radar could have enabled the ship to pass through the river and to
safety.
The foregoing clearly demonstrates that Maritima's lack of
extraordinary diligence coupled with the negligence of the captain as
found by the appellate court were the proximate causes of the sinking
of M/V Mindoro.
ARMANDO
G.
YRASUEGUI,
PHILIPPINE AIRLINES, INC., respondents.

petitioners,

G.R. No. 168081, October 17, 2008 (569 SCRA 467)


VERSION 1:

vs.

FACTS: THIS case portrays the peculiar story of an international flight


steward who was dismissed because of his failure to adhere to the
weight standards of the airline company.
The proper weight for a man of his height and body structure is from
147 to 166 pounds, the ideal weight being 166 pounds, as mandated
by the Cabin and Crew Administration Manual of PAL.
In 1984, the weight problem started, which prompted PAL to send him
to an extended vacation until November 1985. He was allowed to
return to work once he lost all the excess weight. But the problem
recurred. He again went on leave without pay from October 17, 1988 to
February 1989.
Despite the lapse of a ninety-day period given him to reach his ideal
weight, petitioner remained overweight. On January 3, 1990, he was
informed of the PAL decision for him to remain grounded until such
time that he satisfactorily complies with the weight standards. Again,
he was directed to report every two weeks for weight checks, which he
failed to comply with.
On April 17, 1990, petitioner was formally warned that a repeated
refusal to report for weight check would be dealt with accordingly. He
was given another set of weight check dates, which he did not report
to.
On November 13, 1992, PAL finally served petitioner a Notice of
Administrative Charge for violation of company standards on weight
requirements. Petitioner insists that he is being discriminated as those
similarly situated were not treated the same.
On June 15, 1993, petitioner was formally informed by PAL that due to
his inability to attain his ideal weight, and considering the utmost
leniency extended to him which spanned a period covering a total of
almost five (5) years, his services were considered terminated
effective immediately.
LABOR ARBITER: held that the weight standards of PAL are
reasonable in view of the nature of the job of petitioner. However, the
weight standards need not be complied with under pain of dismissal
since his weight did not hamper the performance of his duties.
NLRC affirmed.
CA: the weight standards of PAL are reasonable. Thus, petitioner was
legally dismissed because he repeatedly failed to meet the prescribed
weight standards. It is obvious that the issue of discrimination was only
invoked by petitioner for purposes of escaping the result of his
dismissal for being overweight.
ISSUE: WON he was validly dismissed.
HELD: YES
A reading of the weight standards of PAL would lead to no other
conclusion than that they constitute a continuing qualification of an
employee in order to keep the job. The dismissal of the employee
would thus fall under Article 282(e) of the Labor Code.
In the case at bar, the evidence on record militates against petitioners
claims that obesity is a disease. That he was able to reduce his weight
from 1984 to 1992 clearly shows that it is possible for him to lose
weight given the proper attitude, determination, and self-discipline.
Indeed, during the clarificatory hearing on December 8, 1992,
petitioner himself claimed that [t]he issue is could I bring my weight
down to ideal weight which is 172, then the answer is yes. I can do it
now.
Petitioner has only himself to blame. He could have easily availed the
assistance of the company physician, per the advice of PAL.
In fine, We hold that the obesity of petitioner, when placed in the
context of his work as flight attendant, becomes an analogous cause
under Article 282(e) of the Labor Code that justifies his dismissal from
the service. His obesity may not be unintended, but is nonetheless
voluntary. As the CA correctly puts it, [v]oluntariness basically means
that the just cause is solely attributable to the employee without any
external force influencing or controlling his actions. This element runs
through all just causes under Article 282, whether they be in the nature
of a wrongful action or omission. Gross and habitual neglect, a
recognized just cause, is considered voluntary although it lacks the
element of intent found in Article 282(a), (c), and (d).
NOTES:
The dismissal of petitioner can be predicated on the bona fide
occupational qualification defense. Employment in particular jobs may

not be limited to persons of a particular sex, religion, or national origin


unless the employer can show that sex, religion, or national origin is an
actual qualification for performing the job. The qualification is called a
bona fide occupational qualification (BFOQ). In short, the test of
reasonableness of the company policy is used because it is parallel to
BFOQ. BFOQ is valid provided it reflects an inherent quality
reasonably necessary for satisfactory job performance.
The business of PAL is air transportation. As such, it has committed
itself to safely transport its passengers. In order to achieve this, it must
necessarily rely on its employees, most particularly the cabin flight
deck crew who are on board the aircraft. The weight standards of PAL
should be viewed as imposing strict norms of discipline upon its
employees.
The primary objective of PAL in the imposition of the weight standards
for
cabin
crew
is
flight
safety.
Separation pay, however, should be awarded in favor of the employee
as an act of social justice or based on equity. This is so because his
dismissal is not for serious misconduct. Neither is it reflective of his
moral character.
VERSION 2:
Facts: Complainant was an international flight steward who was
dismissed because of his failure to adhere to the weight standards of
the company.
Issue: Was the dismissal valid?
Held: SC upheld the legality of dismissal. Separation pay, however,
should be awarded in favor of the employee as an act of social justice
or based on equity. This is so because his dismissal is not for serious
misconduct. Neither is it reflective of his moral character.
The obesity of petitioner, when placed in the context of his work as
flight attendant, becomes an analogous cause under Article 282(e) of
the Labor Code. His obesity may not be unintended, but is nonetheless
voluntary. [V]oluntariness basically means that the just cause is solely
attributable to the employee without any external force influencing or
controlling his actions. This element runs through all just causes under
Article 282, whether they be in the nature of a wrongful action or
omission. Gross and habitual neglect, a recognized just cause, is
considered voluntary although it lacks the element of intent found in
Article 282(a), (c), and (d).
Employment in particular jobs may not be limited to persons of a
particular sex, religion, or national origin unless the employer can show
that sex, religion, or national origin is an actual qualification for
performing the job.

Bona fide occupational qualification (BFOQ)


The Constitution, the Labor Code, and RA No. 7277 or the Magna
Carta for Disabled Persons contain provisions similar to BFOQ.

Argument that BFOQ is a statutory defense must fail


Meiorin Test (US jurisprudence)
employment policy is justified:

in

determining

whether

an

(1) the employer must show that it adopted the standard for a purpose
rationally connected to the performance of the job;
2) the employer must establish that the standard is reasonably
necessary to the accomplishment of that work-related purpose; and
(3) the employer must establish that the standard is reasonably
necessary in order to accomplish the legitimate work-related purpose.

In Star Paper Corporation v. Simbol, this Court held that in order to


justify a BFOQ, the employer must prove:
(1) the employment qualification is reasonably related to the essential
operation of the job involved; and

(2) that there is factual basis for believing that all or substantially all
persons meeting the qualification would be unable to properly perform
the duties of the job.
In short, the test of reasonableness of the company policy is used
because it is parallel to BFOQ. BFOQ is valid provided it reflects an
inherent quality reasonably necessary for satisfactory job
performance.
The weight standards of PAL are reasonable. A common carrier, from
the nature of its business and for reasons of public policy, is bound to
observe extraordinary diligence for the safety of the passengers it
transports.
The primary objective of PAL in the imposition of the weight standards
for cabin crew is flight safety. It cannot be gainsaid that cabin
attendants must maintain agility at all times in order to inspire
passenger confidence on their ability to care for the passengers when
something goes wrong.
Exceptionally, separation pay is granted to a legally dismissed
employee as an act social justice, or based on equity. Provided the
dismissal:
Entitled to separation pay, even if terminated for just cause
(1)
was
not
for
serious
misconduct;
(2) does not reflect on the moral character of the employee.

and

Thus, he was granted separation pay equivalent to one-half (1/2)


months pay for every year of service.
SULPICIO LINES, INC., -versus - DOMINGO E. CURSO
On October
23,
1988,
Dr. Curso boarded
at
the port of Manila the MV Doa Marilyn, an inter-island vessel owned
and operated by petitionerSulpicio Lines, Inc., bound for Tacloban City.
Unfortunately, the MV Doa Marilyn sank in the afternoon of October 24,
1988 while at sea due to the inclement sea and weather conditions
brought about by Typhoon Unsang. The body of Dr. Curso was not
recovered, along with hundreds of other passengers of the ill-fated
vessel. At the time of his death, Dr. Curso was 48 years old, and
employed as a resident physician at the Naval District Hospital in
Naval, Biliran. He had a basic monthly salary of P3,940.00, and would
have retired from government service by December 20, 2004 at the
age of 65.
On January 21, 1993, the respondents, allegedly the surviving brothers
and sisters of Dr. Curso, sued the petitioner in the RTC in
Naval,Biliran to claim damages based on breach of contract of carriage
by sea, averring that the petitioner had acted negligently in transporting
Dr.Curso and the other passengers. They stated, among others, that
their parents had predeceased Dr. Curso, who died single and without
issue; and that, as such, they were Dr. Cursos surviving heirs and
successors in interest entitled to recover moral and other damages.
[1]
They prayed for judgment, as follows: (a) compensatory damages
of P1,924,809.00; (b) moral damages of P100,000.00; (c) exemplary or
corrective damages in the amount deemed proper and just; (d)
expenses of litigation of at least P50,000.00; (e) attorneys fees
of P50,000.00; and (f) costs of suit.
The petitioner denied liability, insisting that the sinking of the vessel
was due to force majeure (i.e., Typhoon Unsang), which exempted a
common carrier from liability. It averred that the MV Doa Marilyn was
seaworthy in all respects, and was in fact cleared by the Philippine
Coast Guard for the voyage; and that after the accident it conducted
intensive search and rescue operations and extended assistance and
aid to the victims and their families.
Issues
ARE THE BROTHERS AND SISTERS OF A
DECEASED PASSENGER IN A CASE OF
BREACH OF CONTRACT OF CARRIAGE
ENTITLED TO AN AWARD OF MORAL
DAMAGES AGAINST THE CARRIER?
ASSUMING (THAT) THEY ARE ENTITLED TO
CLAIM MORAL DAMAGES, SHOULD THE
AWARD BE GRANTED OR GIVEN TO THE
BROTHER OR SISTER NOTWITHSTANDING

(THE) LACK OF EVIDENCE AS REGARDS HIS


OR HER PERSONAL SUFFERING?

persons entitled to recover moral damages, as enumerated in Article


2219 of the Civil Code, viz:

HELD
As a general rule, moral damages are not recoverable in actions for
damages predicated on a breach of contract, unless there is fraud or
bad faith.[8] As an exception, moral damages may be awarded in case
of breach of contract of carriage that results in the death of a
passenger,[9]in accordance with Article 1764, in relation to Article 2206
(3), of the Civil Code, which provide:
Article 1764. Damages in cases comprised in this
Section shall be awarded in accordance with Title
XVIII of this Book, concerning Damages. Article
2206 shall also apply to the death of a passenger
caused by the breach of contract by a common
carrier.

Article 2219. Moral damages may be


recovered in the following and analogous cases:
(1) A criminal offense resulting in physical
injuries;
(2) Quasi-delicts causing
injuries;

(3) Seduction, abduction, rape or other


lascivious acts;
(4) Adultery or concubinage;
(5) Illegal or arbitrary detention or arrest;

Article 2206. The amount of damages for


death caused by a crime or quasi-delict shall be at
least three thousand pesos, even though there
may have been mitigating circumstances. In
addition:

(6) Illegal search;


(7) Libel, slander or any other form of
defamation;

(1) The defendant shall be liable for the


loss of the earning capacity of the deceased, and
the indemnity shall be paid to the heirs of the
latter; such indemnity shall in every case be
assessed and awarded by the court, unless the
deceased on account of permanent physical
disability not caused by the defendant, had no
earning capacity at the time of his death;

(8) Malicious prosecution;


(9) Acts mentioned in article 309;
(10) Acts and actions referred to in articles
21, 26, 27, 28, 29, 30, 32, 34 and 35.
The parents of the female seduced,
abducted, raped or abused referred to in No. 3 of
this article, may also recover moral damages.

(2) If the deceased was obliged to give


support according to the provisions of article 291,
the recipient who is not an heir called to the
decedent's inheritance by the law of testate or
intestate succession, may demand support from
the person causing the death, for a period not
exceeding five years, the exact duration to be
fixed by the court;
(3) The spouse, legitimate and illegitimate
descendants and ascendants of the deceased
may demand moral damages for mental anguish
by reason of the death of the deceased.
The foregoing legal provisions set forth the persons entitled to moral
damages. The omission from Article 2206 (3) of the brothers and
sisters of the deceased passenger reveals the legislative intent to
exclude them from the recovery of moral damages for mental anguish
by
reason
of
the
death
of
the
deceased. Inclusio unius est exclusio alterius.[10] The solemn power
and duty of the courts to interpret and apply the law do not include the
power to correct the law by reading into it what is not written therein.
[11]
Thus, the CA erred in awarding moral damages to the respondents.
The petitioner has correctly relied on the holding in Receiver for North
Negros Sugar Company, Inc. v. Ybaez,[12] to the effect that in case of
death caused by quasi-delict, the brother of the deceased was not
entitled to the award of moral damages based on Article 2206 of
the Civil Code.
Essentially, the purpose of moral damages is indemnity or reparation,
that is, to enable the injured party to obtain the means, diversions, or
amusements that will serve to alleviate the moral suffering he has
undergone by reason of the tragic event. According to Villanueva v.
Salvador,[13] the conditions for awarding moral damages are: (a) there
must be an injury, whether physical, mental, or psychological, clearly
substantiated by the claimant; (b) there must be a culpable act or
omission factually established; (c) the wrongful act or omission of the
defendant must be the proximate cause of the injury sustained by the
claimant; and (d) the award of damages is predicated on any of the
cases stated in Article 2219 of the Civil Code.
To be entitled to moral damages, the respondents must have
a right based upon law. It is true that under Article 1003 [14] of the Civil
Code they succeeded to the entire estate of the late Dr. Curso in the
absence of the latters descendants, ascendants, illegitimate children,
and surviving spouse. However, they were not included among the

physical

The spouse, descendants, ascendants and


brothers and sisters may bring the action
mentioned in No. 9 of this article, in the order
named.
Article 2219 circumscribes the instances in which moral
damages may be awarded. The provision does not include succession
in the collateral line as a source of the right to recover moral damages.
The usage of the phrase analogous cases in the provision means
simply that the situation must be held similar to those expressly
enumerated
in
the
law
in
question [15] following
the ejusdem generis rule. Hence, Article 1003 of the Civil Code is not
concerned with recovery of moral damages.
In fine, moral damages may be recovered in an action upon breach of
contract of carriage only when: (a) where death of a passenger
results,or (b) it is proved that the carrier was guilty of fraud and bad
faith, even if death does not result. [16] Article 2206 of the Civil
Code entitles the descendants, ascendants, illegitimate children, and
surviving spouse of the deceased passenger to demand moral
damages for mental anguish by reason of the death of the deceased.[17]
Philippine National Railways vs. CA
139 SCRA 87
Facts:
Winifredo Tupang was a paying passenger who boarded
Train No. 516 f the Philippine National Railways at Camarines Sur
bound for Manila. Due to some mechanical defect, the train stopped
which took two hours before the train could resume its trip to Manila.
Unfortunately, upon passing Iyam Bridge at Lucena, Tupang fell off the
train resulting to his death. Alarm was raised by the passengers that
somebody fell but the train did not stop. Instead, the train conductor
called the station agent and requested for verification of the
confirmation. Rosario Tupang, the deceaseds widow filed a cmplaint
against PNR for breach of contract f carriage. However, PNR raised as
a defense hat it was a mere agency of the Philippine government
without distinct or separate personality of it own. Likewise, they
contended that their funds are governmental in character, thus they are
not subject to garnishment or execution.
Issue:

Whether or not PNR could be held liable for damages for the
death of Winifredo Tupang.
Held:
The Supreme Court held that PNR should be held liable. The
Philippine National Railways is not exempt from garnishment. It
descends to a level of a citizen, thus it cannot assail non-suability as a
bar for damages. Under PA 4156, PNR was created generally with all
powers of a corporation under the Corporation Law. Hence, the
characteristics and attributes of a corporation is fully applicable to
PNR. PNR may sue and be sued and could be subjected to court
processes just like any other corporation. The Supreme Court held that
PNR should be held liable for the death of Winifredo Tupang because it
acted in bad faith as it did not stop despite the alarm raised by its
passengers. PNR has the obligation to transport its passengers to their
destination and to observe extraordinary diligence in doing so.
Philtranco Service Enterprise v. Court of Appeals
273 SCRA 563
Facts:
The victim herein, Ramon Asuesta was riding in his easy
rider tricycle along Calbayog City. Also in the city, herein defendant
Philtrancos bus was driven by defendant Rogasiones Dolira Manilbing
was being pushed by some persons in order to start its engine. As the
bus was pushed, its engine started thereby the bus continued on its
running motion and it occurred at the time when Ramon Asuesta, who
was still riding on his bicycle was directly (was) in front of the said bus.
Due to the abrupt start of the bus engine, it thereby bumped on the
victim Ramon. As a result, he fell and was run over by the bus

Still, the bus did not halt after hitting the victim. Thereafter
P/Sgt. Yabao, who was then jogging approached the driver defendant
and signaled him to stop, but the driver only stopped when the former
introduced himself as a police officer. The trial court rendered a
decision ordering the petitioner (Philtranco) to jointly and severally pay
the private respondents. On appeal, the CA affirmed the decision.
Issue:
Whether or not the court erred in holding Philtranco liable
being the registered owner of a public service for the
tortuous act of the driver.
Held:
The courts ruled the negative. The Appellate court was
correct in holding herein petitioner liable. Article 2176 of the New Civil
Code provides that whoever by act or omission causes damage to
another, these being fault or negligence, is obligated to pay for the
damage done. Such fault or negligence, if there is no pre-existing
contractual relation between the parties is called a quasi-delict.
Further, Article 2180 of the Civil Code states that The obligation
imposed by Article 2176 is demandable not only for ones owns acts or
omissions, but for whom one is responsible.
In the case at bar, the liability of the registered owner of a
public service vehicle, like petitioner Philtranco, for damages arising
from the tortuous acts of the driver are primary, direct and joint and
solidary, its only recourse if the judgement for damages is satisfied by
it is to be recovered what it has paid from its employee who committed
the fault or negligence which gave rise to the action based on the
quasi-delict.