Professional Documents
Culture Documents
The passengers, who had put on their life jackets, struggled to get out of
the boat. Upon seeing the captain, Matute and the other passengers who
reached the surface asked him what they could do to save the people who
were still trapped under the boat. The captain replied "Iligtas niyo na lang
ang sarili niyo" (Just save yourselves).
Help came after about 45 minutes when two boats owned by Asia Divers in
Sabang, Puerto Galera passed by the capsized M/B Coco Beach III. Boarded
on those two boats were 22 persons, consisting of 18 passengers and four
crew members, who were brought to Pisa Island. Eight passengers,
including petitioners son and his wife, died during the incident.
At the time of Ruelitos death, he was 28 years old and employed as a
contractual worker for Mitsui Engineering & Shipbuilding Arabia, Ltd. in
Saudi Arabia, with a basic monthly salary of $900.3
Petitioners, by letter of October 26, 2000,4 demanded indemnification from
respondent for the death of their son in the amount of at least P4,000,000.
The stay of the newly wed Ruelito and his wife at the Resort from
September 9 to 11, 2000 was by virtue of a tour package-contract with
respondent that included transportation to and from the Resort and the
point of departure in Batangas.
In its Answer,7 respondent denied being a common carrier, alleging that its
boats are not available to the general public as they only ferry Resort
On September 11, 2000, as it was still windy, Matute and 25 other Resort guests and crew members. Nonetheless, it claimed that it exercised the
guests including petitioners son and his wife trekked to the other side of utmost diligence in ensuring the safety of its passengers; contrary to
the Coco Beach mountain that was sheltered from the wind where they petitioners allegation, there was no storm on September 11, 2000 as the
boarded M/B Coco Beach III, which was to ferry them to Batangas.
Coast Guard in fact cleared the voyage; and M/B Coco Beach III was not
filled to capacity and had sufficient life jackets for its passengers. By way of
Shortly after the boat sailed, it started to rain. As it moved farther away Counterclaim, respondent alleged that it is entitled to an award for
from Puerto Galera and into the open seas, the rain and wind got stronger, attorneys fees and litigation expenses amounting to not less than
causing the boat to tilt from side to side and the captain to step forward to P300,000.
the front, leaving the wheel to one of the crew members.
Carlos Bonquin, captain of M/B Coco Beach III, averred that the Resort
The waves got more unwieldy. After getting hit by two big waves which customarily requires four conditions to be met before a boat is allowed to
came one after the other, M/B Coco Beach III capsized putting all sail, to wit: (1) the sea is calm, (2) there is clearance from the Coast
passengers underwater.
Guard, (3) there is clearance from the captain and (4) there is clearance
from the Resorts assistant manager.8 He added that M/B Coco Beach III
TRANSPO | 06Dec | 2
met all four conditions on September 11, 2000,9 but a subasco or squall,
characterized by strong winds and big waves, suddenly occurred, causing
the boat to capsize.10
By Decision of February 16, 2005,11 Branch 267 of the Pasig RTC dismissed
petitioners Complaint and respondents Counterclaim.
Petitioners Motion for Reconsideration having been denied by Order dated
September 2, 2005,12 they appealed to the Court of Appeals.
By Decision of August 19, 2008,13 the appellate court denied petitioners
appeal, holding, among other things, that the trial court correctly ruled that
respondent is a private carrier which is only required to observe ordinary
diligence; that respondent in fact observed extraordinary diligence in
transporting its guests on board M/B Coco Beach III; and that the
proximate cause of the incident was a squall, a fortuitous event.
Petitioners Motion for Reconsideration having been denied by Resolution
dated January 16, 2009,14 they filed the present Petition for Review.15
Petitioners maintain the position they took before the trial court, adding
that respondent is a common carrier since by its tour package, the
transporting of its guests is an integral part of its resort business. They
inform that another division of the appellate court in fact held respondent
liable for damages to the other survivors of the incident.
Upon the other hand, respondent contends that petitioners failed to present
evidence to prove that it is a common carrier; that the Resorts ferry
services for guests cannot be considered as ancillary to its business as no
income is derived therefrom; that it exercised extraordinary diligence as
shown by the conditions it had imposed before allowing M/B Coco Beach III
to sail; that the incident was caused by a fortuitous event without any
contributory negligence on its part; and that the other case wherein the
appellate court held it liable for damages involved different plaintiffs, issues
and evidence.16
That respondent does not charge a separate fee or fare for its ferry services
is of no moment. It would be imprudent to suppose that it provides said
services at a loss. The Court is aware of the practice of beach resort
operators offering tour packages to factor the transportation fee in arriving
TRANSPO | 06Dec | 3
at the tour package price. That guests who opt not to avail of respondents
ferry services pay the same amount is likewise inconsequential. These
guests may only be deemed to have overpaid.
As De Guzman instructs, Article 1732 of the Civil Code defining "common
carriers" has deliberately refrained from making distinctions on whether the
carrying of persons or goods is the carriers principal business, whether it is
offered on a regular basis, or whether it is offered to the general public. The
intent of the law is thus to not consider such distinctions. Otherwise, there
is no telling how many other distinctions may be concocted by unscrupulous
businessmen engaged in the carrying of persons or goods in order to avoid
the legal obligations and liabilities of common carriers.
Under the Civil Code, common carriers, from the nature of their business
and for reasons of public policy, are bound to observe extraordinary
diligence for the safety of the passengers transported by them, according to
all the circumstances of each case.19 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 due regard for all the
circumstances.20
When a passenger dies or is injured in the discharge of a contract of
carriage, it is presumed that the common carrier is at fault or negligent. In
fact, there is even no need for the court to make an express finding of fault
or negligence on the part of the common carrier. This statutory presumption
may only be overcome by evidence that the carrier exercised extraordinary
diligence.21
Respondent nevertheless harps on its strict compliance with the earlier
mentioned conditions of voyage before it allowed M/B Coco Beach III to sail
on September 11, 2000. Respondents position does not impress.
The evidence shows that PAGASA issued 24-hour public weather forecasts
and tropical cyclone warnings for shipping on September 10 and 11, 2000
advising of tropical depressions in Northern Luzon which would also affect
the province of Mindoro.22 By the testimony of Dr. Frisco Nilo, supervising
weather specialist of PAGASA, squalls are to be expected under such
weather condition.23
A very cautious person exercising the utmost diligence would thus not
brave such stormy weather and put other peoples lives at risk. The
extraordinary diligence required of common carriers demands that they
take care of the goods or lives entrusted to their hands as if they were their
own. This respondent failed to do.
Respondents insistence that the incident was caused by a fortuitous event
does not impress either.
The elements of a "fortuitous event" are: (a) the cause of the unforeseen
and unexpected occurrence, or the failure of the debtors to comply with
their obligations, must have been independent of human will; (b) the event
that constituted the caso fortuito must have been impossible to foresee or,
if foreseeable, impossible to avoid; (c) the occurrence must have been such
as to render it impossible for the debtors to fulfill their obligation in a
normal manner; and (d) the obligor must have been free from any
participation in the aggravation of the resulting injury to the creditor.24
To fully free a common carrier from any liability, the fortuitous event must
have been the proximate and only cause of the loss. And it should have
exercised due diligence to prevent or minimize the loss before, during and
after the occurrence of the fortuitous event.25
Respondent cites the squall that occurred during the voyage as the
fortuitous event that overturned M/B Coco Beach III. As reflected above,
however, the occurrence of squalls was expected under the weather
condition of September 11, 2000. Moreover, evidence shows that M/B Coco
Beach III suffered engine trouble before it capsized and sank.26 The
incident was, therefore, not completely free from human intervention.
The Court need not belabor how respondents evidence likewise fails to
demonstrate that it exercised due diligence to prevent or minimize the loss
before, during and after the occurrence of the squall.
Article 176427 vis--vis Article 220628 of the Civil Code holds the common
carrier in breach of its contract of carriage that results in the death of a
passenger liable to pay the following: (1) indemnity for death, (2)
indemnity for loss of earning capacity and (3) moral damages.
Petitioners are entitled to indemnity for the death of Ruelito which is fixed
at P50,000.29
As for damages representing unearned income, the formula for its
computation is:
Net Earning Capacity = life expectancy x (gross annual income - reasonable
and necessary living expenses).
Life expectancy is determined in accordance with the formula:
2 / 3 x [80 age of deceased at the time of death]30
The first factor, i.e., life expectancy, is computed by applying the formula
(2/3 x [80 age at death]) adopted in the American Expectancy Table of
Mortality or the Actuarial of Combined Experience Table of Mortality.31
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The second factor is computed by multiplying the life expectancy by the net
earnings of the deceased, i.e., the total earnings less expenses necessary in
the creation of such earnings or income and less living and other incidental
expenses.32 The loss is not equivalent to the entire earnings of the
deceased, but only such portion as he would have used to support his
dependents or heirs. Hence, to be deducted from his gross earnings are the
necessary expenses supposed to be used by the deceased for his own
needs.33
In computing the third factor necessary living expense, Smith Bell
Dodwell Shipping Agency Corp. v. Borja34 teaches that when, as in this
case, there is no showing that the living expenses constituted the smaller
percentage of the gross income, the living expenses are fixed at half of the
gross income.
Applying the above guidelines,
expectancy as follows:
the
Court
determines
Ruelito's
life
Life expectancy =
2/3 x [80 - age of deceased at the time of death]
2/3 x [80 - 28]
2/3 x [52]
Life expectancy =
35
Documentary evidence shows that Ruelito was earning a basic monthly
salary of $90035 which, when converted to Philippine peso applying the
annual average exchange rate of $1 = P44 in 2000,36 amounts to P39,600.
Ruelitos net earning capacity is thus computed as follows:
Net Earning Capacity = life expectancy x (gross annual income reasonable and necessary living expenses).
= 35 x (P475,200 - P237,600)
= 35 x (P237,600)
Net Earning Capacity = P8,316,000
Respecting the award of moral damages, since respondent common
carriers breach of contract of carriage resulted in the death of petitioners
son, following Article 1764 vis--vis Article 2206 of the Civil Code,
petitioners are entitled to moral damages.
Since respondent failed to prove that it exercised the extraordinary
diligence required of common carriers, it is presumed to have acted
recklessly, thus warranting the award too of exemplary damages, which are
granted in contractual obligations if the defendant acted in a wanton,
fraudulent, reckless, oppressive or malevolent manner.37
Under the circumstances, it is reasonable to award petitioners the amount
of P100,000 as moral damages and P100,000 as exemplary
damages.381avvphi1
Pursuant to Article 220839 of the Civil Code, attorney's fees may also be
awarded where exemplary damages are awarded. The Court finds that 10%
of the total amount adjudged against respondent is reasonable for the
purpose.
Finally, Eastern Shipping Lines, Inc. v. Court of Appeals40 teaches that
when an obligation, regardless of its source, i.e., law, contracts, quasicontracts, delicts or quasi-delicts is breached, the contravenor can be held
liable for payment of interest in the concept of actual and compensatory
damages, subject to the following rules, to wit
1. When the obligation is breached, and it consists in the payment of a sum
of money, i.e., a loan or forbearance of money, the interest due should be
that which may have been stipulated in writing. Furthermore, the interest
due shall itself earn legal interest from the time it is judicially demanded. In
the absence of stipulation, the rate of interest shall be 12% per annum to
be computed from default, i.e., from judicial or extrajudicial demand under
and subject to the provisions of Article 1169 of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of money, is
breached, an interest on the amount of damages awarded may be imposed
at the discretion of the court at the rate of 6% per annum. No interest,
however, shall be adjudged on unliquidated claims or damages except when
or until the demand can be established with reasonable certainty.
Accordingly, where the demand is established with reasonable certainty, the
interest shall begin to run from the time the claim is made judicially or
extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so
reasonably established at the time the demand is made, the interest shall
begin to run only from the date the judgment of the court is made (at
which time the quantification of damages may be deemed to have been
reasonably ascertained). The actual base for the computation of legal
interest shall, in any case, be on the amount finally adjudged.
3. When the judgment of the court awarding a sum of money becomes final
and executory, the rate of legal interest, whether the case falls under
paragraph 1 or paragraph 2, above, shall be 12% per annum from such
finality until its satisfaction, this interim period being deemed to be by then
an equivalent to a forbearance of credit. (emphasis supplied).
Since the amounts payable by respondent have been determined with
certainty only in the present petition, the interest due shall be computed
upon the finality of this decision at the rate of 12% per annum until
satisfaction, in accordance with paragraph number 3 of the immediately
cited guideline in Easter Shipping Lines, Inc.
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The appellate court did not err in finding petitioner, a customs broker, to be
also a common carrier, as defined under Article 1732 of the Civil Code, to
wit, Art. 1732. Common carriers are persons, corporations, firms or
associations engaged in the business of carrying or transporting passengers
or goods or both, by land, water, or air, for compensation, offering their
services to the public.
xxxx
Article 1732 does not distinguish between one whose principal business
activity is the carrying of goods and one who does such carrying only as an
ancillary activity. The contention, therefore, of petitioner that it is not a
common carrier but a customs broker whose principal function is to prepare
the correct customs declaration and proper shipping documents as required
by law is bereft of merit. It suffices that petitioner undertakes to deliver the
goods for pecuniary consideration.
And in Calvo v. UCPB General Insurance Co. Inc., this Court held that as the
transportation of goods is an integral part of a customs broker, the customs
broker is also a common carrier. For to declare otherwise "would be to
deprive those with whom [it] contracts the protection which the law affords
them notwithstanding the fact that the obligation to carry goods for [its]
customers, is part and parcel of petitioners business."21
That OFII is a common carrier is buttressed by the testimony of its own
witness, Mr. Loveric Panganiban Cueto, that part of the services it offers to
clients is cargo forwarding, which includes the delivery of the shipment to
the consignee.22 Thus, for undertaking the transport of cargoes from ATI to
SMCs warehouse in Calamba, Laguna, OFII is considered a common carrier.
As long as a person or corporation holds itself to the public for the purpose
of transporting goods as a business, it is already considered a common
carrier regardless of whether it owns the vehicle to be used or has to
actually hire one.
As a common carrier, OFII is mandated to observe, under Article 1733 of
the Civil Code,23 extraordinary diligence in the vigilance over the goods24
it transports according to the peculiar circumstances of each case. In the
event that the goods are lost, destroyed or deteriorated, it is presumed to
have been at fault or to have acted negligently unless it proves that it
observed extraordinary diligence.25 In the case at bar it was established
that except for the six containers/skids already damaged OFII received the
cargoes from ATI in good order and condition; and that upon its delivery to
SMC additional nine containers/skids were found to be in bad order as
noted in the Delivery Receipts issued by OFII and as indicated in the Report
of Cares Marine Cargo Surveyors. Instead of merely excusing itself from
liability by putting the blame to ATI and SMC it is incumbent upon OFII to
prove that it actively took care of the goods by exercising extraordinary
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April 6, 1995
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opportunities" under which the EDSA LRT III project falls, amounts to a
ratification of the prior award of the EDSA LRT III contract under the BOT
Law. Indeed, where there is a lack of qualified bidders or contractors, the
award of government infrastructure contracts may be made by negotiation.
Presidential Decree No. 1594 is the general law on government
infrastructure contracts while the BOT Law governs particular arrangements
or schemes aimed at encouraging private sector participation in
government infrastructure projects. The two laws are not inconsistent with
each other but are in pari materia and should be read together accordingly.
8.
ID.; ID.; RA 7718; QUALIFIED APPLICANT MAY ENTER INTO ANY
SCHEME INCLUDING A BLT ARRANGEMENT. Republic Act No. 7718
recognizes and defines a BLT scheme in Section 2 thereof. Section 5-A of
the law, expressly allows direct negotiation of contracts. From the law itself,
once an applicant has prequalified, it can enter into any of the schemes
enumerated in Section 2, RA 7718, including a BLT arrangement,
enumerated and defined therein (Sec. 3). Republic Act No. 7718 is a
curative statute. It is intended to provide financial incentives and "a climate
of minimum government regulations and procedures and specific
government undertakings in support of the private sector" (Sec. 1). A
curative statute makes valid that which before enactment of the statute
was invalid. Thus, whatever doubts and alleged procedural lapses private
respondent and DOTC may have engendered and committed in entering
into the questioned contracts, these have now been cured by R.A. No.
7718.
9.
ID.; ID.; ID.; AGREEMENTS BETWEEN PRIVATE RESPONDENT AND
DOTC, PRESUMED WELL-TAKEN AND TO THE ADVANTAGE OF BOTH
PARTIES; GOVERNMENT OFFICIALS CONCERNED, PRESUMED TO HAVE
PERFORMED THEIR FUNCTIONS REGULARLY. The determination by the
proper administrative agencies and officials who have acquired expertise,
specialized skills and knowledge in the performance of their functions
should be accorded respect, absent any showing of grave abuse of
discretion. Government officials are presumed to perform their functions
with regularity and strong evidence is necessary to rebut this presumption.
Petitioners have not presented evidence on the reasonable rentals to be
paid by the parties to each other. The matter of valuation is an esoteric field
which is better left to the experts and which this Court is not eager to
undertake. That the grantee of a government contract will profit therefrom
and to that extent the government is deprived of the profits if it engages in
the business itself, is not worthy of being raised as an issue. In all cases
where a party enters into a contract with the government, he does so, not
out of charity and not to lose money, but to gain pecuniarily. Definitely, the
agreements in question have been entered into by DOTC in the exercise of
its governmental function. DOTC is the primary policy, planning,
programming, regulating and administrative entity of the Executive branch
of government in the promotion, development and regulation of dependable
TRANSPO | 06Dec | 13
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matter." It must, upon the one hand, be noted that the special law Republic
Act No. 6957 made absolutely no mention of negotiated contracts being
permitted to displace the requirement of public bidding. Upon the other
hand, Section 5-a, inserted in Republic Act No. 6957 by the amending
statute Republic Act No. 7718, does not purport to authorize direct
negotiation of contracts except in four (4) situations where there is a lack of
pre-qualified contractors or complying bidders. Thus, even under the
amended special statute, entering into contracts by negotiation is not
permissible in the other two (2) categories of cases referred to in Section 4
of Presidential Decree No. 1594, i.e., "in exceptional cases where time is of
the essence" and "when there is conclusive evidence that greater economy
and efficiency would be achieved through these arrangements, etc." The
result I reach is that insofar as BOT, etc. types of contracts are
concerned, the applicable public bidding requirement is that set out in
Republic Act No. 6957 and, with respect to such type of contracts opened
for pre-qualification and bidding after the date of effectivity of republic Act
No. 7718, the provisions of Republic Act No. 7718. The assailed contract
was entered into before Republic Act No. 7718 was enacted. The difficulties
of applying the provisions of Presidential Decree No. 1594 to the Edsa LRTtype of contracts are aggravated when one considers the detailed
"Implementing Rules and Regulations as amended April 1988" issued under
that Presidential Decree. There is no reference at all in these Presidential
Decree No. 1594 Implementing Rules and Regulations to absence of prequalified applicants and bidders as justifying negotiation of contracts as
distinguished from requiring public bidding or a second public bidding. Note
also the following provision of the same Implementing Rules and
Regulations: "IB 1 Prequalification. The following may become contractors
for government projects: 1. Filipino a. Citizens (single proprietorship) b.
Partnership or corporation duly organized under the laws of the Philippines,
and at least seventy five percent (75%) of the capital stock of which
belongs to Filipino citizens. 2. Contractors forming themselves into a joint
venture, i.e., a group of two or more contractors that intend to be jointly
and severally responsible for a particular contract, shall for purposes of
bidding/tendering comply with LOI 630, and, aside from being currently and
properly accredited by the Philippine Contractors Accreditation Board, shall
comply with the provisions of R.A. 4566, provided that joint ventures in
which Filipino ownership is less than seventy five percent (75%) may be
prequalified where the structures to be built require the application of
techniques and/or technologies which are not adequately possessed by a
Filipino entity as defined above. The record of this case is entirely silent on
the extent of Philippine equity in the Edsa LRT Corporation; there is no
suggestion that this corporation is organized under Philippine law and is at
least seventy-five (75%) percent owned by Philippine citizens.
2.
ID.; ID.; ID.; PUBLIC BIDDING, AN IMPORTANT REQUIREMENT.
Public bidding is the normal method by which a government keeps
contractors honest and is able to assure itself that it would be getting the
best possible value for its money in any construction or similar project. It is
not for nothing that multilateral financial organizations like the World Bank
and the Asian Development Bank uniformly require projects financed by
them to be implemented and carried out by public bidding. Public bidding is
much too important a requirement casually to loosen by a latitudinarian
exercise in statutory construction.
DAVIDE, JR., J., dissenting opinion:chanrob1es virtual 1aw library
1.
POLITICAL LAW; NATIONAL ECONOMY AND PATRIMONY; PUBLIC
UTILITY (EDSA LRT III); RA 6957 (BOT LAW); BUILD-LEASE-ANDTRANSFER (BLT) SCHEME, NOT INCLUDED THEREIN. Respondents admit
that the assailed contract was entered into under R.A. 6957. This law,
fittingly entitled "An Act Authorizing the Financing, Construction, Operation
and Maintenance of Infrastructure Projects by the Private Sector, and For
Other Purposes," recognizes only two (2) kinds of contractual arrangements
between the private sector and government infrastructure agencies: (a) the
Build-Operate-and-Transfer (BOT) scheme and (b) the Build-and-Transfer
(BT) scheme. This conclusion finds support in Section 2 thereof which
defines only the BOT and BT schemes, in Section 3 which explicitly provides
for said schemes and in Section 5 which requires public bidding of projects
under both schemes. All prior acts and negotiations leading to the
perfection of the challenged contract were clearly intended and pursued for
such schemes. A Build-Lease-and-Transfer (BLT) scheme is not authorized
under the said law, and none of the aforesaid prior acts and negotiations
were designed for such unauthorized scheme. Hence, the DOTC is without
any power or authority to enter into the BLT contract in question. If it is
intended to include a BLT scheme in RA 6957, then it should have so stated,
for contracts of lease are not unknown in our jurisdiction, and Congress has
enacted several laws relating to leases. That the BLT scheme was never
intended as a permissible variation "within the context" of the BOT and BT
schemes is conclusively established by the passage of R.A. No. 7718 which
amends: a) Section 2 by adding to the original BOT and BT schemes the
following schemes: (1) Build-own-and operate (BOO) (2) Build-Lease-andtransfer (BLT) (3) Build-transfer-and-operate (BTO) (4) Contract-add-andoperate (CAO) (5) Develop-operate-and-transfer (DOT) (6) Rehabilitateoperate-and-transfer (ROT) (7) Rehabilitate-own-and-operate (ROO) b)
Section 3 of R.A. No. 6957 by deleting therefrom the phrase "through the
build-operate-and-transfer or build-and-transfer scheme."cralaw virtua1aw
library
2.
ID.; ID.; ID.; PUBLIC BIDDING THEREIN, MANDATORY; RA 7718
FOREGOING THE SAME DOES NOT PROVIDE FOR RETROACTIVE
APPLICATION. Public bidding is mandatory in R.A. No. 6957 under
Section 5 thereof. The requirement of public bidding is not an idle
ceremony. It has been aptly said that in our jurisdiction "public bidding is
the policy and medium adhered to in Government procurement and
TRANSPO | 06Dec | 15
QUIASON, J.:
This is a petition under Rule 65 of the Revised Rules of Court to prohibit
respondents from further implementing and enforcing the "Revised and
Restated Agreement to Build, Lease and Transfer a Light Rail Transit System
for EDSA" dated April 22, 1992, and the "Supplemental Agreement to the
22 April 1992 Revised and Restated Agreement To Build, Lease and Transfer
a Light Rail Transit System for EDSA" dated May 6, 1993.
Petitioners Francisco S. Tatad, John H. Osmena and Rodolfo G. Biazon are
members of the Philippine Senate and are suing in their capacities as
Senators and as taxpayers. Respondent Jesus B. Garcia, Jr. is the
incumbent Secretary of the Department of Transportation and
Communications (DOTC), while private respondent EDSA LRT Corporation,
Ltd. is a private corporation organized under the laws of Hongkong.
I
In 1989, DOTC planned to construct a light railway transit line along EDSA,
a major thoroughfare in Metropolitan Manila, which shall traverse the cities
of Pasay, Quezon, Mandaluyong and Makati. The plan, referred to as EDSA
Light Rail Transit III (EDSA LRT III), was intended to provide a mass transit
system along EDSA and alleviate the congestion and growing transportation
problem in the metropolis.
On March 3, 1990, a letter of intent was sent by the Eli Levin Enterprises,
Inc., represented by Elijahu Levin to DOTC Secretary Oscar Orbos,
proposing to construct the EDSA LRT III on a Build-Operate-Transfer (BOT)
basis.
On March 15, 1990, Secretary Orbos invited Levin to send a technical team
to discuss the project with DOTC.
On July 9, 1990, Republic Act No. 6957 entitled "An Act Authorizing the
Financing, Construction, Operation and Maintenance of Infrastructure
Projects by the Private Sector, and For Other Purposes," was signed by
TRANSPO | 06Dec | 16
Republic Act No. 6957 provides for two schemes for the financing,
construction and operation of government projects through private initiative
and investment: Build-Operate-Transfer (BOT) or Build-Transfer (BT).
In accordance with the provisions of R.A. No. 6957 and to set the EDSA LRT
III project underway, DOTC, on January 22, 1991 and March 14, 1991,
issued Department Orders Nos. 91-494 and 91-496, respectively creating
the Prequalification Bids and Awards Committee (PBAC) and the Technical
Committee.
After its constitution, the PBAC issued guidelines for the prequalification of
contractors for the financing and implementation of the project The notice,
advertising the prequalification of bidders, was published in three
newspapers of general circulation once a week for three consecutive weeks
starting February 21, 1991.
The deadline set for submission of prequalification documents was March
21, 1991, later extended to April 1, 1991. Five groups responded to the
invitation namely, ABB Trazione of Italy, Hopewell Holdings Ltd. of
Hongkong, Mansteel International of Mandaue, Cebu, Mitsui & Co., Ltd. of
Japan, and EDSA LRT Consortium, composed of ten foreign and domestic
corporations: namely, Kaiser Engineers International, Inc., ACER
Consultants (Far East) Ltd. and Freeman Fox, Tradeinvest/CKD Tatra of the
Czech and Slovak Federal Republics, TCGI Engineering All Asia Capital and
Leasing Corporation, The Salim Group of Jakarta, E. L. Enterprises, Inc.,
A.M. Oreta & Co. Capitol Industrial Construction Group, Inc, and F. F. Cruz &
co., Inc.
On the last day for submission of prequalification documents, the
prequalification criteria proposed by the Technical Committee were adopted
by the PBAC. The criteria totalling 100 percent, are as follows: (a) Legal
aspects 10 percent; (b) Management/Organizational capability 30
percent; and (c) Financial capability 30 percent; and (d) Technical
capability 30 percent (Rollo, p. 122).
On April 3, 1991, the Committee, charged under the BOT Law with the
formulation of the Implementation Rules and Regulations thereof, approved
the same.
After evaluating the prequalification, bids, the PBAC issued a Resolution on
May 9, 1991 declaring that of the five applicants, only the EDSA LRT
Consortium "met the requirements of garnering at least 21 points per
criteria [sic], except for Legal Aspects, and obtaining an over-all passing
mark of at least 82 points" (Rollo, p. 146). The Legal Aspects referred to
TRANSPO | 06Dec | 17
According to the agreements, the EDSA LRT III will use light rail vehicles
from the Czech and Slovak Federal Republics and will have a maximum
carrying capacity of 450,000 passengers a day, or 150 million a year to be
achieved-through 54 such vehicles operating simultaneously. The EDSA LRT
III will run at grade, or street level, on the mid-section of EDSA for a
distance of 17.8 kilometers from F.B. Harrison, Pasay City to North Avenue,
Quezon City. The system will have its own power facility (Revised and
Restated Agreement, Sec. 2.3 (ii); Rollo p. 55). It will also have thirteen
(13) passenger stations and one depot in 16-hectare government property
at North Avenue (Supplemental Agreement, Sec. 11; Rollo, pp. 91-92).
II
(1)
THE AGREEMENT OF APRIL 22, 1992, AS AMENDED BY THE
SUPPLEMENTAL AGREEMENT OF MAY 6, 1993, INSOFAR AS IT GRANTS
EDSA LRT CORPORATION, LTD., A FOREIGN CORPORATION, THE
OWNERSHIP OF EDSA LRT III, A PUBLIC UTILITY, VIOLATES THE
CONSTITUTION AND, HENCE, IS UNCONSTITUTIONAL;
(2)
THE BUILD-LEASE-TRANSFER SCHEME PROVIDED IN THE
AGREEMENTS IS NOT DEFINED NOR RECOGNIZED IN R.A. NO. 6957 OR
ITS IMPLEMENTING RULES AND REGULATIONS AND, HENCE, IS ILLEGAL;
(3)
THE AWARD OF THE CONTRACT ON A NEGOTIATED BASIS
VIOLATES R; A. NO. 6957 AND, HENCE, IS UNLAWFUL;
Private respondents shall undertake and finance the entire project required
for a complete operational light rail transit system (Revised and Restated
Agreement, Sec. 4.1; Rollo, p. 58). Target completion date is 1,080 days or
approximately three years from the implementation date of the contract
inclusive of mobilization, site works, initial and final testing of the system
(Supplemental Agreement, Sec. 5; Rollo, p. 83). Upon full or partial
completion and viability thereof, private respondent shall deliver the use
and possession of the completed portion to DOTC which shall operate the
same (Supplemental Agreement, Sec. 5; Revised and Restated Agreement,
Sec. 5.1; Rollo, pp. 61-62, 84). DOTC shall pay private respondent rentals
on a monthly basis through an Irrevocable Letter of Credit. The rentals shall
be determined by an independent and internationally accredited inspection
firm to be appointed by the parties (Supplemental Agreement, Sec. 6;
Rollo, pp. 85-86) As agreed upon, private respondent's capital shall be
recovered from the rentals to be paid by the DOTC which, in turn, shall
come from the earnings of the EDSA LRT III (Revised and Restated
Agreement, Sec. 1, p. 5; Rollo, p. 54). After 25 years and DOTC shall have
completed payment of the rentals, ownership of the project shall be
transferred to the latter for a consideration of only U.S. $1.00 (Revised and
Restated Agreement, Sec. 11.1; Rollo, p. 67).
(4)
THE AWARD OF THE CONTRACT IN FAVOR OF RESPONDENT EDSA
LRT CORPORATION, LTD. VIOLATES THE REQUIREMENTS PROVIDED IN THE
IMPLEMENTING RULES AND REGULATIONS OF THE BOT LAW AND, HENCE,
IS ILLEGAL;
(3)
The scheme adopted in the Agreements is actually a build-transfer
scheme allowed by the BOT Law;
(5)
THE AGREEMENTS VIOLATE EXECUTIVE ORDER NO 380 FOR THEIR
FAILURE TO BEAR PRESIDENTIAL APPROVAL AND, HENCE, ARE ILLEGAL
AND INEFFECTIVE; AND
(6)
THE AGREEMENTS ARE GROSSLY DISADVANTAGEOUS TO THE
GOVERNMENT (Rollo, pp. 15-16).
Secretary Garcia and private respondent filed their comments separately
and claimed that:
(1)
Petitioners are not the real parties-in-interest and have no legal
standing to institute the present petition;
(2)
The writ of prohibition is not the proper remedy and the petition
requires ascertainment of facts;
TRANSPO | 06Dec | 18
(4)
The nationality requirement for public utilities mandated by the
Constitution does not apply to private respondent;
(5)
The Agreements executed by and between respondents have been
approved by President Ramos and are not disadvantageous to the
government;
(6)
The award of the contract to private respondent through negotiation
and not public bidding is allowed by the BOT Law; and
(7)
Granting that the BOT Law requires public bidding, this has been
amended by R.A No. 7718 passed by the Legislature On May 12, 1994,
which provides for direct negotiation as a mode of award of infrastructure
projects.
III
Respondents claimed that petitioners had no legal standing to initiate the
instant action. Petitioners, however, countered that the action was filed by
them in their capacity as Senators and as taxpayers.
The prevailing doctrines in taxpayer's suits are to allow taxpayers to
question contracts entered into by the national government or governmentowned or controlled corporations allegedly in contravention of the law
(Kilosbayan, Inc. v. Guingona, 232 SCRA 110 [1994]) and to disallow the
same when only municipal contracts are involved (Bugnay Construction and
Development Corporation v. Laron, 176 SCRA. 240 [1989]).
(3)
the contract to construct the EDSA LRT III was awarded to private
respondent not through public bidding which is the only mode of awarding
infrastructure projects under the BOT law; and
(4)
1.
Private respondent EDSA LRT Corporation, Ltd. to whom the
contract to construct the EDSA LRT III was awarded by public respondent,
is admittedly a foreign corporation "duly incorporated and existing under
the laws of Hongkong" (Rollo, pp. 50, 79). There is also no dispute that
once the EDSA LRT III is constructed, private respondent, as lessor, will
turn it over to DOTC, as lessee, for the latter to operate the system and pay
rentals for said use.
The question posed by petitioners is:
Can respondent EDSA LRT Corporation, Ltd., a foreign corporation own
EDSA LRT III; a public utility? (Rollo, p. 17).
The phrasing of the question is erroneous; it is loaded. What private
respondent owns are the rail tracks, rolling stocks like the coaches, rail
stations, terminals and the power plant, not a public utility. While a
franchise is needed to operate these facilities to serve the public, they do
not by themselves constitute a public utility. What constitutes a public utility
is not their ownership but their use to serve the public (Iloilo Ice & Cold
Storage Co. v. Public Service Board, 44 Phil. 551, 557 558 [1923]).
IV
In the main, petitioners asserted that the Revised and Restated Agreement
of April 22, 1992 and the Supplemental Agreement of May 6, 1993 are
unconstitutional and invalid for the following reasons:
(1)
the EDSA LRT III is a public utility, and the ownership and operation
thereof is limited by the Constitution to Filipino citizens and domestic
corporations, not foreign corporations like private respondent;
(2)
the Build-Lease-Transfer (BLT) scheme provided in the agreements
is not the BOT or BT Scheme under the law;
TRANSPO | 06Dec | 19
with emergencies, collection, counting and securing cash from the fare
collection system (Revised and Restated Agreement, Annex E, Secs. 2-3).
Personnel of DOTC will work under the direction and control of private
respondent only during training (Revised and Restated Agreement, Annex
E, Sec. 3.1). The training objectives, however, shall be such that upon
completion of the EDSA LRT III and upon opening of normal revenue
operation, DOTC shall have in their employ personnel capable of
undertaking training of all new and replacement personnel (Revised and
Restated Agreement, Annex E Sec. 5.1). In other words, by the end of the
three-year construction period and upon commencement of normal revenue
operation, DOTC shall be able to operate the EDSA LRT III on its own and
train all new personnel by itself.
Fees for private respondent' s services shall be included in the rent, which
likewise includes the project cost, cost of replacement of plant equipment
and spare parts, investment and financing cost, plus a reasonable rate of
return thereon (Revised and Restated Agreement, Sec. 1; Rollo, p. 54).
Since DOTC shall operate the EDSA LRT III, it shall assume all the
obligations and liabilities of a common carrier. For this purpose, DOTC shall
indemnify and hold harmless private respondent from any losses, damages,
injuries or death which may be claimed in the operation or implementation
of the system, except losses, damages, injury or death due to defects in the
EDSA LRT III on account of the defective condition of equipment or facilities
or the defective maintenance of such equipment facilities (Revised and
Restated Agreement, Secs. 12.1 and 12.2; Rollo, p. 68).
In sum, private respondent will not run the light rail vehicles and collect
fees from the riding public. It will have no dealings with the public and the
public will have no right to demand any services from it.
It is well to point out that the role of private respondent as lessor during
the lease period must be distinguished from the role of the Philippine
Gaming Management Corporation (PGMC) in the case of Kilosbayan Inc. v.
Guingona, 232 SCRA 110 (1994). Therein, the Contract of Lease between
PGMC and the Philippine Charity Sweepstakes Office (PCSO) was actually a
collaboration or joint venture agreement prescribed under the charter of the
PCSO. In the Contract of Lease; PGMC, the lessor obligated itself to build,
at its own expense, all the facilities necessary to operate and maintain a
nationwide on-line lottery system from whom PCSO was to lease the
facilities and operate the same. Upon due examination of the contract, the
Court found that PGMC's participation was not confined to the construction
and setting up of the on-line lottery system. It spilled over to the actual
operation thereof, becoming indispensable to the pursuit, conduct,
administration and control of the highly technical and sophisticated lottery
system. In effect, the PCSO leased out its franchise to PGMC which actually
operated and managed the same.
TRANSPO | 06Dec | 20
Indeed, a mere owner and lessor of the facilities used by a public utility is
not a public utility (Providence and W.R. Co. v. United States, 46 F. 2d 149,
152 [1930]; Chippewa Power Co. v. Railroad Commission of Wisconsin, 205
N.W. 900, 903, 188 Wis. 246 [1925]; Ellis v. Interstate Commerce
Commission, Ill 35 S. Ct. 645, 646, 237 U.S. 434, 59 L. Ed. 1036 [1914]).
Neither are owners of tank, refrigerator, wine, poultry and beer cars who
supply cars under contract to railroad companies considered as public
utilities (Crystal Car Line v. State Tax Commission, 174 p. 2d 984, 987
[1946]).
Even the mere formation of a public utility corporation does not ipso facto
characterize the corporation as one operating a public utility. The moment
for determining the requisite Filipino nationality is when the entity applies
for a franchise, certificate or any other form of authorization for that
purpose (People v. Quasha, 93 Phil. 333 [1953]).
2.
Petitioners further assert that the BLT scheme under the
Agreements in question is not recognized in the BOT Law and its
Implementing Rules and Regulations.
Section 2 of the BOT Law defines the BOT and BT schemes as follows:
(a)
Build-operate-and-transfer scheme A contractual arrangement
whereby the contractor undertakes the construction including financing, of
a given infrastructure facility, and the operation and maintenance thereof.
The contractor operates the facility over a fixed term during which it is
allowed to charge facility users appropriate tolls, fees, rentals and charges
sufficient to enable the contractor to recover its operating and maintenance
expenses and its investment in the project plus a reasonable rate of return
thereon. The contractor transfers the facility to the government agency or
local government unit concerned at the end of the fixed term which shall
not exceed fifty (50) years. For the construction stage, the contractor may
obtain financing from foreign and/or domestic sources and/or engage the
services of a foreign and/or Filipino constructor [sic]: Provided, That the
ownership structure of the contractor of an infrastructure facility whose
operation requires a public utility franchise must be in accordance with the
Constitution: Provided, however, That in the case of corporate investors in
the build-operate-and-transfer corporation, the citizenship of each
stockholder in the corporate investors shall be the basis for the computation
of Filipino equity in the said corporation: Provided, further, That, in the case
of foreign constructors [sic], Filipino labor shall be employed or hired in the
different phases of the construction where Filipino skills are available:
Provided, furthermore, that the financing of a foreign or foreign-controlled
contractor from Philippine government financing institutions shall not
exceed twenty percent (20%) of the total cost of the infrastructure facility
or project: Provided, finally, That financing from foreign sources shall not
TRANSPO | 06Dec | 21
Exconde, 101 Phil. 1125 [1957]; United States v. Tupasi Molina, 29 Phil.
119 [1914]).
3.
The fact that the contract for the construction of the EDSA LRT III
was awarded through negotiation and before congressional approval on
January 22 and 23, 1992 of the List of National Projects to be undertaken
by the private sector pursuant to the BOT Law (Rollo, pp. 309-312) does
not suffice to invalidate the award.
TRANSPO | 06Dec | 22
xxx
xxx
xxx
TRANSPO | 06Dec | 23
4.
Lastly, petitioners claim that the agreements are grossly
disadvantageous to the government because the rental rates are excessive
and private respondent's development rights over the 13 stations and the
depot will rob DOTC of the best terms during the most productive years of
the project.
It must be noted that as part of the EDSA LRT III project, private
respondent has been granted, for a period of 25 years, exclusive rights over
the depot and the air space above the stations for development into
commercial premises for lease, sublease, transfer, or advertising
(Supplemental Agreement, Sec. 11; Rollo, pp. 91-92). For and in
consideration of these development rights, private respondent shall pay
DOTC in Philippine currency guaranteed revenues generated therefrom in
the amounts set forth in the Supplemental Agreement (Sec. 11; Rollo, p.
93). In the event that DOTC shall be unable to collect the guaranteed
revenues, DOTC shall be allowed to deduct any shortfalls from the monthly
rent due private respondent for the construction of the EDSA LRT III
(Supplemental Agreement, Sec. 11; Rollo, pp. 93-94). All rights, titles,
interests and income over all contracts on the commercial spaces shall
revert to DOTC upon expiration of the 25-year period. (Supplemental
Agreement, Sec. 11; Rollo, pp. 91-92).
April 9, 2003
TRANSPO | 06Dec | 24
vs.
PKS SHIPPING COMPANY, respondent.
fortuitous event, negating any liability on the part of PKS Shipping to the
shipper.
VITUG, J.:
In the instant appeal, Philamgen contends that the appellate court has
committed a patent error in ruling that PKS Shipping is not a common
carrier and that it is not liable for the loss of the subject cargo. The fact
that respondent has a limited clientele, petitioner argues, does not militate
against respondents being a common carrier and that the only way by
which such carrier can be held exempt for the loss of the cargo would be if
the loss were caused by natural disaster or calamity. Petitioner avers that
typhoon "APIANG" has not entered the Philippine area of responsibility and
that, even if it did, respondent would not be exempt from liability because
its employees, particularly the tugmaster, have failed to exercise due
diligence to prevent or minimize the loss.
The petition before the Court seeks a review of the decision of the Court of
Appeals in C.A. G.R. CV No. 56470, promulgated on 25 June 2001, which
has affirmed in toto the judgment of the Regional Trial Court (RTC), Branch
65, of Makati, dismissing the complaint for damages filed by petitioner
insurance corporation against respondent shipping company.
Davao Union Marketing Corporation (DUMC) contracted the services of
respondent PKS Shipping Company (PKS Shipping) for the shipment to
Tacloban City of seventy-five thousand (75,000) bags of cement worth
Three
Million
Three
Hundred
Seventy-Five
Thousand
Pesos
(P3,375,000.00). DUMC insured the goods for its full value with petitioner
Philippine American General Insurance Company (Philamgen). The goods
were loaded aboard the dumb barge Limar I belonging to PKS Shipping. On
the evening of 22 December 1988, about nine oclock, while Limar I was
being towed by respondents tugboat, MT Iron Eagle, the barge sank a
couple of miles off the coast of Dumagasa Point, in Zamboanga del Sur,
bringing down with it the entire cargo of 75,000 bags of cement.
DUMC filed a formal claim with Philamgen for the full amount of the
insurance. Philamgen promptly made payment; it then sought
reimbursement from PKS Shipping of the sum paid to DUMC but the
shipping company refused to pay, prompting Philamgen to file suit against
PKS Shipping with the Makati RTC.
The RTC dismissed the complaint after finding that the total loss of the
cargo could have been caused either by a fortuitous event, in which case
the ship owner was not liable, or through the negligence of the captain and
crew of the vessel and that, under Article 587 of the Code of Commerce
adopting the "Limited Liability Rule," the ship owner could free itself of
liability by abandoning, as it apparently so did, the vessel with all her
equipment and earned freightage.
Philamgen interposed an appeal to the Court of Appeals which affirmed in
toto the decision of the trial court. The appellate court ruled that evidence
to establish that PKS Shipping was a common carrier at the time it
undertook to transport the bags of cement was wanting because the
peculiar method of the shipping companys carrying goods for others was
not generally held out as a business but as a casual occupation. It then
concluded that PKS Shipping, not being a common carrier, was not
expected to observe the stringent extraordinary diligence required of
common carriers in the care of goods. The appellate court, moreover, found
that the loss of the goods was sufficiently established as having been due to
PKS Shipping, in its comment, urges that the petition should be denied
because what Philamgen seeks is not a review on points or errors of law but
a review of the undisputed factual findings of the RTC and the appellate
court. In any event, PKS Shipping points out, the findings and conclusions
of both courts find support from the evidence and applicable jurisprudence.
The determination of possible liability on the part of PKS Shipping boils
down to the question of whether it is a private carrier or a common carrier
and, in either case, to the other question of whether or not it has observed
the proper diligence (ordinary, if a private carrier, or extraordinary, if a
common carrier) required of it given the circumstances.
The findings of fact made by the Court of Appeals, particularly when such
findings are consistent with those of the trial court, may not at liberty be
reviewed by this Court in a petition for review under Rule 45 of the Rules of
Court.1 The conclusions derived from those factual findings, however, are
not necessarily just matters of fact as when they are so linked to, or
inextricably intertwined with, a requisite appreciation of the applicable law.
In such instances, the conclusions made could well be raised as being
appropriate issues in a petition for review before this Court. Thus, an issue
whether a carrier is private or common on the basis of the facts found by a
trial court or the appellate court can be a valid and reviewable question of
law.
The Civil Code defines "common carriers" in the following terms:
"Article 1732. Common carriers are persons, corporations, firms or
associations engaged in the business of carrying or transporting passengers
or goods or both, by land, water, or air for compensation, offering their
services to the public."
TRANSPO | 06Dec | 25
very well be just a private carrier. A typical case is that of a charter party
which includes both the vessel and its crew, such as in a bareboat or
demise, where the charterer obtains the use and service of all or some part
of a ship for a period of time or a voyage or voyages4 and gets the control
of the vessel and its crew.5 Contrary to the conclusion made by the
appellate court, its factual findings indicate that PKS Shipping has engaged
itself in the business of carrying goods for others, although for a limited
clientele, undertaking to carry such goods for a fee. The regularity of its
activities in this area indicates more than just a casual activity on its part.6
Neither can the concept of a common carrier change merely because
individual contracts are executed or entered into with patrons of the carrier.
Such restrictive interpretation would make it easy for a common carrier to
escape liability by the simple expedient of entering into those distinct
agreements with clients.
Addressing now the issue of whether or not PKS Shipping has exercised the
proper diligence demanded of common carriers, Article 1733 of the Civil
Code requires common carriers to observe extraordinary diligence in the
vigilance over the goods they carry. In case of loss, destruction or
deterioration of goods, common carriers are presumed to have been at fault
or to have acted negligently, and the burden of proving otherwise rests on
them.7 The provisions of Article 1733, notwithstanding, common carriers
are exempt from liability for loss, destruction, or deterioration of the goods
due to any of the following causes:
(1) Flood, storm, earthquake, lightning, or other natural disaster or
calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the
containers; and
(5) Order or act of competent public authority.8
The appellate court ruled, gathered from the testimonies and sworn marine
protests of the respective vessel masters of Limar I and MT Iron Eagle, that
there was no way by which the barges or the tugboats crew could have
prevented the sinking of Limar I. The vessel was suddenly tossed by waves
of extraordinary height of six (6) to eight (8) feet and buffeted by strong
winds of 1.5 knots resulting in the entry of water into the barges hatches.
The official Certificate of Inspection of the barge issued by the Philippine
Coastguard and the Coastwise Load Line Certificate would attest to the
seaworthiness of Limar I and should strengthen the factual findings of the
appellate court.
TRANSPO | 06Dec | 26
Findings of fact of the Court of Appeals generally conclude this Court; none
of the recognized exceptions from the rule - (1) when the factual findings of
the Court of Appeals and the trial court are contradictory; (2) when the
conclusion is a finding grounded entirely on speculation, surmises, or
conjectures; (3) when the inference made by the Court of Appeals from its
findings of fact is manifestly mistaken, absurd, or impossible; (4) when
there is a grave abuse of discretion in the appreciation of facts; (5) when
the appellate court, in making its findings, went beyond the issues of the
case and such findings are contrary to the admissions of both appellant and
appellee; (6) when the judgment of the Court of Appeals is premised on a
misapprehension of facts; (7) when the Court of Appeals failed to notice
certain relevant facts which, if properly considered, would justify a different
conclusion; (8) when the findings of fact are themselves conflicting; (9)
when the findings of fact are conclusions without citation of the specific
evidence on which they are based; and (10) when the findings of fact of the
Court of Appeals are premised on the absence of evidence but such findings
are contradicted by the evidence on record would appear to be clearly
extant in this instance.
All given then, the appellate court did not err in its judgment absolving PKS
Shipping from liability for the loss of the DUMC cargo.
WHEREFORE, the petition is DENIED. No costs.
SO ORDERED.
TRANSPO | 06Dec | 27
vs.
SPOUSES TERESITA PHILIPPINE NICOLAS and L. ZARATE,
NATIONAL RAILWAYS, and the COURT OF APPEALS Respondents.
DECISION
BERSAMIN, J.:
The operator of a. school bus service is a common carrier in the eyes of the
law. He is bound to observe extraordinary diligence in the conduct of his
business. He is presumed to be negligent when death occurs to a
passenger. His liability may include indemnity for loss of earning capacity
even if the deceased passenger may only be an unemployed high school
student at the time of the accident.
The Case
By petition for review on certiorari, Spouses Teodoro and Nanette Perefia
(Perefias) appeal the adverse decision promulgated on November 13, 2002,
by which the Court of Appeals (CA) affirmed with modification the decision
rendered on December 3, 1999 by the Regional Trial Court (RTC), Branch
260, in Paraaque City that had decreed them jointly and severally liable
with Philippine National Railways (PNR), their co-defendant, to Spouses
Nicolas and Teresita Zarate (Zarates) for the death of their 15-year old son,
Aaron John L. Zarate (Aaron), then a high school student of Don Bosco
Technical Institute (Don Bosco).
Antecedents
The Pereas were engaged in the business of transporting students from
their respective residences in Paraaque City to Don Bosco in Pasong Tamo,
Makati City, and back. In their business, the Pereas used a KIA Ceres Van
(van) with Plate No. PYA 896, which had the capacity to transport 14
students at a time, two of whom would be seated in the front beside the
driver, and the others in the rear, with six students on either side. They
employed Clemente Alfaro (Alfaro) as driver of the van.
In June 1996, the Zarates contracted the Pereas to transport Aaron to and
from Don Bosco. On August 22, 1996, as on previous school days, the van
picked Aaron up around 6:00 a.m. from the Zarates residence. Aaron took
his place on the left side of the van near the rear door. The van, with its airconditioning unit turned on and the stereo playing loudly, ultimately carried
all the 14 student riders on their way to Don Bosco. Considering that the
students were due at Don Bosco by 7:15 a.m., and that they were already
running late because of the heavy vehicular traffic on the South
Superhighway, Alfaro took the van to an alternate route at about 6:45 a.m.
by traversing the narrow path underneath the Magallanes Interchange that
TRANSPO | 06Dec | 28
1996, within the vicinity of the Magallanes Interchange in Makati City, Metro
Manila, Philippines;
(4) At the time of the vehicular/train collision, the subject site of the
vehicular/train collision was a railroad crossing used by motorists for
crossing the railroad tracks;
(4) Whether or not defendant spouses Perea are liable for breach of the
contract of carriage with plaintiff-spouses in failing to provide adequate and
safe transportation for the latter's son;
(5) During the said time of the vehicular/train collision, there were no
appropriate and safety warning signs and railings at the site commonly
used for railroad crossing;
(5) Whether or not defendants spouses are liable for actual, moral
damages, exemplary damages, and attorney's fees;
(6) At the material time, countless number of Makati bound public utility
and private vehicles used on a daily basis the site of the collision as an
alternative route and short-cut to Makati;
(7) The train driver or operator left the scene of the incident on board the
commuter train involved without waiting for the police investigator;
(8) The site commonly used for railroad crossing by motorists was not in
fact intended by the railroad operator for railroad crossing at the time of the
vehicular collision;
(9) PNR received the demand letter of the spouses Zarate;
(10) PNR refused to acknowledge any liability for the vehicular/train
collision;
(11) The eventual closure of the railroad crossing alleged by PNR was an
internal arrangement between the former and its project contractor; and
(10) Whether or not defendant PNR should pay plaintiffs directly and fully
on the amounts claimed by the latter in their Complaint by reason of its
gross negligence;
(12) The site of the vehicular/train collision was within the vicinity or less
than 100 meters from the Magallanes station of PNR.
B. ISSUES
The Zarates claim against the Pereas was upon breach of the contract of
carriage for the safe transport of Aaron; but that against PNR was based on
quasi-delict under Article 2176, Civil Code.
(1) Whether or not defendant-driver of the van is, in the performance of his
functions, liable for negligence constituting the proximate cause of the
vehicular collision, which resulted in the death of plaintiff spouses' son;
(2) Whether or not the defendant spouses Perea being the employer of
defendant Alfaro are liable for any negligence which may be attributed to
defendant Alfaro;
(3) Whether or not defendant Philippine National Railways being the
operator of the railroad system is liable for negligence in failing to provide
adequate safety warning signs and railings in the area commonly used by
In their defense, the Pereas adduced evidence to show that they had
exercised the diligence of a good father of the family in the selection and
supervision of Alfaro, by making sure that Alfaro had been issued a drivers
license and had not been involved in any vehicular accident prior to the
collision; that their own son had taken the van daily; and that Teodoro
Perea had sometimes accompanied Alfaro in the vans trips transporting
the students to school.
For its part, PNR tended to show that the proximate cause of the collision
had been the reckless crossing of the van whose driver had not first
TRANSPO | 06Dec | 29
stopped, looked and listened; and that the narrow path traversed by the
van had not been intended to be a railroad crossing for motorists.
Ruling of the RTC
On December 3, 1999, the RTC rendered its decision,3 disposing:
WHEREFORE, premises considered, judgment is hereby rendered in favor of
the plaintiff and against the defendants ordering them to jointly and
severally pay the plaintiffs as follows:
(1) (for) the death of Aaron- Php50,000.00;
(2) Actual damages in the amount of Php100,000.00;
(3) For the loss of earning capacity- Php2,109,071.00;
(4) Moral damages in the amount of Php4,000,000.00;
(5) Exemplary damages in the amount of Php1,000,000.00;
(6) Attorneys fees in the amount of Php200,000.00; and
(7) Cost of suit.
SO ORDERED.
On June 29, 2000, the RTC denied the Pereas motion for reconsideration,4
reiterating that the cooperative gross negligence of the Pereas and PNR
had caused the collision that led to the death of Aaron; and that the
damages awarded to the Zarates were not excessive, but based on the
established circumstances.
The CAs Ruling
Both the Pereas and PNR appealed (C.A.-G.R. CV No. 68916).
PNR assigned the following errors, to wit:5
The Court a quo erred in:
1. In finding the defendant-appellant Philippine National Railways jointly
and severally liable together with defendant-appellants spouses Teodorico
and Nanette Perea and defendant-appellant Clemente Alfaro to pay
plaintiffs-appellees for the death of Aaron Zarate and damages.
TRANSPO | 06Dec | 30
van driver, by seeing to it that Alfaro had a drivers license and that he had
not been involved in any vehicular accident prior to the fatal collision with
the train; that they even had their own son travel to and from school on a
daily basis; and that Teodoro Perea himself sometimes accompanied Alfaro
in transporting the passengers to and from school. The RTC gave scant
consideration to such defense by regarding such defense as inappropriate in
an action for breach of contract of carriage.
We find no adequate cause to differ from the conclusions of the lower
courts that the Pereas operated as a common carrier; and that their
standard of care was extraordinary diligence, not the ordinary diligence of a
good father of a family.
Although in this jurisdiction the operator of a school bus service has been
usually regarded as a private carrier,9 primarily because he only caters to
some specific or privileged individuals, and his operation is neither open to
the indefinite public nor for public use, the exact nature of the operation of
a school bus service has not been finally settled. This is the occasion to lay
the matter to rest.
A carrier is a person or corporation who undertakes to transport or convey
goods or persons from one place to another, gratuitously or for hire. The
carrier is classified either as a private/special carrier or as a common/public
carrier.10 A private carrier is one who, without making the activity a
vocation, or without holding himself or itself out to the public as ready to
act for all who may desire his or its services, undertakes, by special
agreement in a particular instance only, to transport goods or persons from
one place to another either gratuitously or for hire.11 The provisions on
ordinary contracts of the Civil Code govern the contract of private
carriage.The diligence required of a private carrier is only ordinary, that is,
the diligence of a good father of the family. In contrast, a common carrier is
a person, corporation, firm or association engaged in the business of
carrying or transporting passengers or goods or both, by land, water, or air,
for compensation, offering such services to the public.12 Contracts of
common carriage are governed by the provisions on common carriers of the
Civil Code, the Public Service Act,13 and other special laws relating to
transportation. A common carrier is required to observe extraordinary
diligence, and is presumed to be at fault or to have acted negligently in
case of the loss of the effects of passengers, or the death or injuries to
passengers.14
In relation to common carriers, the Court defined public use in the following
terms in United States v. Tan Piaco,15 viz:
"Public use" is the same as "use by the public". The essential feature of the
public use is not confined to privileged individuals, but is open to the
indefinite public. It is this indefinite or unrestricted quality that gives it its
TRANSPO | 06Dec | 31
TRANSPO | 06Dec | 32
to observe for the protection of the interests of another person, that degree
of care, precaution, and vigilance which the circumstances justly demand,
whereby such other person suffers injury."33
There is no question that the Pereas did not overturn the presumption of
their negligence by credible evidence. Their defense of having observed the
diligence of a good father of a family in the selection and supervision of
their driver was not legally sufficient. According to Article 1759 of the Civil
Code, their liability as a common carrier did not cease upon proof that they
exercised all the diligence of a good father of a family in the selection and
supervision of their employee. This was the reason why the RTC treated this
defense of the Pereas as inappropriate in this action for breach of contract
of carriage.
The Pereas were liable for the death of Aaron despite the fact that their
driver might have acted beyond the scope of his authority or even in
violation of the orders of the common carrier.27 In this connection, the
records showed their drivers actual negligence. There was a showing, to
begin with, that their driver traversed the railroad tracks at a point at which
the PNR did not permit motorists going into the Makati area to cross the
railroad tracks. Although that point had been used by motorists as a
shortcut into the Makati area, that fact alone did not excuse their driver into
taking that route. On the other hand, with his familiarity with that shortcut,
their driver was fully aware of the risks to his passengers but he still
disregarded the risks. Compounding his lack of care was that loud music
was playing inside the air-conditioned van at the time of the accident. The
loudness most probably reduced his ability to hear the warning horns of the
oncoming train to allow him to correctly appreciate the lurking dangers on
the railroad tracks. Also, he sought to overtake a passenger bus on the left
side as both vehicles traversed the railroad tracks. In so doing, he lost his
view of the train that was then coming from the opposite side of the
passenger bus, leading him to miscalculate his chances of beating the bus
in their race, and of getting clear of the train. As a result, the bus avoided a
collision with the train but the van got slammed at its rear, causing the
fatality. Lastly, he did not slow down or go to a full stop before traversing
the railroad tracks despite knowing that his slackening of speed and going
to a full stop were in observance of the right of way at railroad tracks as
defined by the traffic laws and regulations.28 He thereby violated a specific
traffic regulation on right of way, by virtue of which he was immediately
presumed to be negligent.29
The omissions of care on the part of the van driver constituted
negligence,30 which, according to Layugan v. Intermediate Appellate
Court,31 is "the omission to do something which a reasonable man, guided
by those considerations which ordinarily regulate the conduct of human
affairs, would do, or the doing of something which a prudent and
reasonable man would not do,32 or as Judge Cooley defines it, (t)he failure
TRANSPO | 06Dec | 33
would have become or what he would have wanted to be if not for his
untimely death, but the minimum wage in effect at the time of his death.
Moreover, the RTCs computation of Aarons life expectancy rate was not
reckoned from his age of 15 years at the time of his death, but on 21 years,
his age when he would have graduated from college.
We find the considerations taken into account by the lower courts to be
reasonable and fully warranted.
Yet, the Pereas submit that the indemnity for loss of earning capacity was
speculative and unfounded.1wphi1 They cited People v. Teehankee, Jr.,37
where the Court deleted the indemnity for victim Jussi Leinos loss of
earning capacity as a pilot for being speculative due to his having graduated
from high school at the International School in Manila only two years before
the shooting, and was at the time of the shooting only enrolled in the first
semester at the Manila Aero Club to pursue his ambition to become a
professional pilot. That meant, according to the Court, that he was for all
intents and purposes only a high school graduate.
We reject the Pereas submission.
First of all, a careful perusal of the Teehankee, Jr. case shows that the
situation there of Jussi Leino was not akin to that of Aaron here. The CA
and the RTC were not speculating that Aaron would be some highly-paid
professional, like a pilot (or, for that matter, an engineer, a physician, or a
lawyer). Instead, the computation of Aarons earning capacity was premised
on him being a lowly minimum wage earner despite his being then enrolled
at a prestigious high school like Don Bosco in Makati, a fact that would have
likely ensured his success in his later years in life and at work.
And, secondly, the fact that Aaron was then without a history of earnings
should not be taken against his parents and in favor of the defendants
whose negligence not only cost Aaron his life and his right to work and earn
money, but also deprived his parents of their right to his presence and his
services as well. Our law itself states that the loss of the earning capacity of
the deceased shall be the liability of the guilty party in favor of the heirs of
the deceased, and 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."38 Accordingly, we emphatically hold in favor of the indemnification
for Aarons loss of earning capacity despite him having been unemployed,
because compensation of this nature is awarded not for loss of time or
earnings but for loss of the deceaseds power or ability to earn money.39
This favorable treatment of the Zarates claim is not unprecedented. In
Cariaga v. Laguna Tayabas Bus Company and Manila Railroad Company,40
fourth-year medical student Edgardo Carriagas earning capacity, although
TRANSPO | 06Dec | 34
3.
Were the amounts of damages excessive?
The Pereas plead for the reduction of the moral and exemplary damages
awarded to the Zarates in the respective amounts of P 2,500,000.00 and P
1,000,000.00 on the ground that such amounts were excessive.
The plea is unwarranted.
The moral damages of P 2,500,000.00 were really just and reasonable
under the established circumstances of this case because they were
intended by the law to assuage the Zarates deep mental anguish over their
sons unexpected and violent death, and their moral shock over the
senseless accident. That amount would not be too much, considering that it
would help the Zarates obtain the means, diversions or amusements that
would alleviate their suffering for the loss of their child. At any rate,
reducing the amount as excessive might prove to be an injustice, given the
passage of a long time from when their mental anguish was inflicted on
them on August 22, 1996.
Anent the P 1,000,000.00 allowed as exemplary damages, we should not
reduce the amount if only to render effective the desired example for the
public good. As a common carrier, the Pereas needed to be vigorously
reminded to observe their duty to exercise extraordinary diligence to
prevent a similarly senseless accident from happening again. Only by an
award of exemplary damages in that amount would suffice to instill in them
and others similarly situated like them the ever-present need for greater
and constant vigilance in the conduct of a business imbued with public
interest.
TRANSPO | 06Dec | 35
passes, they were informed by Cebu Pacific personnel that nine (9)[17] of
them could not be admitted because their tickets were for the 1005 (or
10:05 a.m.)[18] flight earlier that day.[19] Jose informed the ground
personnel that he personally purchased the tickets and specifically
instructed the ticketing agent that all 20 of them should be on the 4:15
p.m. flight to Manila.[20]
Upon checking the tickets, they learned that only the first two (2) pages
had the schedule Jose specified.[21] They were left with no other option but
to rebook their tickets.[22] They then learned that their return tickets had
been purchased as part of the promo sales of the airline, and the cost to
rebook the flight would be P7,000.00 more expensive than the promo
tickets.[23] The sum of the new tickets amounted to P65,000.00.[24]
They offered to pay the amount by credit card but were informed by the
ground personnel that they only accepted cash.[25] They then offered to
pay in dollars, since most of them were balikbayans and had the amount on
hand, but the airline personnel still refused.[26]
Eventually, they pooled enough cash to be able to buy tickets for five (5) of
their companions.[27] The other four (4) were left behind in Palawan and
had to spend the night at an inn, incurring additional expenses.[28] Upon
his arrival in Manila, Jose immediately purchased four (4) tickets for the
companions they left behind, which amounted to P5,205.[29]
Later in July 2008, Jose went to Cebu Pacific's ticketing office in Robinsons
Galleria to complain about the allegedly erroneous booking and the rude
treatment that his group encountered from the ground personnel in
Palawan.[30] He alleged that instead of being assured by the airline that
someone would address the issues he raised, he was merely "given a run
around."[31]
Jose and his companions were frustrated and annoyed by Cebu Pacific's
handling of the incident so they sent the airline demand letters dated
September 3, 2008[32] and January 20, 2009[33] asking for a
reimbursement of P42,955.00, representing the additional amounts spent
to purchase the nine (9) tickets, the accommodation, and meals of the four
(4) that were left behind.[34] They also filed a complaint[35] before the
Department of Trade and Industry.[36]
On February 24, 2009, Cebu Pacific, through its Guest Services
Department, sent petitioners' counsel an email[37] explaining that
"ticketing agents, like Alou, recap [the] flight details to the purchaser to
avoid erroneous booking[s]."[38] The recap is given one other time by the
cashier.[39] Cebu Pacific stated that according to its records, Jose was
given a full recap and was made aware of the flight restriction of promo
tickets,[40] "which included [the] promo fare being non-refundable."[41]
TRANSPO | 06Dec | 36
Jose and his companions were unsatisfied with Cebu Pacific's response so
they filed a Complaint[42] for Damages against Cebu Pacific before Branch
59 of the Metropolitan Trial Court of Mandaluyong.[43] The Complaint
prayed for actual damages in the amount of P42,955.00, moral damages in
the amount of P45,000.00, exemplary damages in the amount of
P50,000.00, and attorney's fees.[44]
In its Answer,[45] Cebu Pacific essentially denied all the allegations in the
Complaint and insisted that Jose was given a full recap of the tickets.[46] It
also argued that Jose had possession of the tickets 37 days before the
scheduled flight; hence, he had sufficient time and opportunity to check the
flight information and itinerary.[47] It also placed a counterclaim of
PI00,000.00 by reason that it was constrained to litigate and it incurred
expenses for litigation.[48]
On December 15, 2011, the Metropolitan Trial Court rendered its Decision
ordering Cebu Pacific to pay Jose and his companions P41,044.50 in actual
damages and P20,000.00 in attorney's fees with costs of suit.[49] The
Metropolitan Trial Court found that as a common carrier, Cebu Pacific should
have exercised extraordinary diligence in performing its contractual
obligations.[50] According to the Metropolitan Trial Court, Cebu Pacific's
ticketing agent "should have placed markings or underlined the time of the
departure of the nine passengers"[51] who were not in the afternoon flight
since it was only logical for Jose to expect that all of them would be on the
same flight.[52] It did not find merit, however, in the allegation that the
airline's ground personnel treated Jose and his companions rudely since this
allegation was unsubstantiated by evidence.[53]
Cebu Pacific appealed to the Regional Trial Court, reiterating that its
ticketing agent gave Jose a full recap of the tickets he purchased.[54]
On November 6, 2012, Branch 212 of the Regional Trial Court of
Mandaluyong rendered the Decision dismissing the appeal.[55] The
Regional Trial Court affirmed the findings of the Metropolitan Trial Court but
deleted the award of attorney's fees on the ground that this was granted
without stating any ground under Article 2208 of the Civil Code to justify its
grant.[56]
Cebu Pacific appealed to the Court of Appeals, arguing that it was not at
fault for the damages caused to the passengers.[57]
On December 13, 2013, the Court of Appeals rendered the Decision
granting the appeal and reversing the Decisions of the Metropolitan Trial
Court and the Regional Trial Court.[58] According to the Court of Appeals,
the extraordinary diligence expected of common carriers only applies to the
carriage of passengers and not to the act of encoding the requested flight
TRANSPO | 06Dec | 37
22, 2008, 1005 flight to Manila.[79] It argues that Jose, et al. have not
been able to present any evidence to substantiate their allegation that their
intent was to be on the July 22, 2008 1615 flight to Manila.[80]
From the arguments in the parties' pleadings, the sole issue before this
Court is whether respondent Cebu Air, Inc. is liable to petitioners Alfredo
Manay, Jr., Fidelino San Luis, Adrian San Luis, Annalee San Luis, Mark
Andrew Jose, Melissa Jose, Charlotte Jose, Dan John De Guzman, Paul Mark
Baluyot, and Carlos S. Jose for damages for the issuance of a plane ticket
with an allegedly erroneous flight schedule.
I
Although it was not mentioned by the parties, a procedural issue must first
be addressed before delving into the merits of the case.
Petitioners received the assailed Court of Appeals Decision on December 27,
2013.[81] They chose to forego the filing of a motion for reconsideration.
Instead, petitioners filed before this Court a Motion for Extension of
Time[82] on January 13, 2014.
Under Rule 45, Section 2 of the Rules of Court,[83] petitioners only had 15
days or until January 11, 2014 to file their petition. Since January 11, 2014
fell on a Saturday, petitioners could have filed their pleading on the
following Monday, or on January 13, 2014.
In their Motion for Extension of Time, however, petitioners requested an
additional 30 days from January 13, 2014 within which to file their petition
for review on certiorari.[84]
This Court already clarified the periods of extension in A.M. No. 00-2-14SC:[85]
Whereas, Section 1, Rule 22 of the 1997 Rules of Civil Procedure provides:
Section 1. How to compute time. - In computing any period of time
prescribed or allowed by these Rules, or by order of the court, or by any
applicable statute, the day of the act or event from which the designated
period of time begins to run is to be excluded and the date of performance
included. If the last day of the period, as thus computed, falls on a
Saturday, a Sunday, or a legal holiday in the place where the court sits, the
time shall not run until the next working day.
Whereas, the aforecited provision applies in the matter of filing of pleadings
in courts when the due date falls on a Saturday, Sunday or legal holiday, in
which case, the filing of the said pleading on the next working day is
deemed on time;
Whereas, the question has been raised if the period is extended ipso jure to
the next working day immediately following where the last day of the period
is a Saturday, Sunday or a legal holiday, so that when a motion for
extension of time is filed, the period of extension is to be reckoned from the
next working day and not from the original expiration of the period.
NOW THEREFORE, the Court Resolves, for the guidance of the Bench and
the Bar, to declare that Section 1, Rule 22 speaks only of "the last day of
the period" so that when a party seeks an extension and the same is
granted, the due date ceases to be the last day and hence, the provision no
longer applies. Any extension of time to file the required pleading should
therefore be counted from the expiration of the period regardless of the fact
that said due date is a Saturday, Sunday or legal holiday. (Emphasis
supplied)
Thus, petitioners' request for extension of time should have been reckoned
from the original due date on January 11, 2014, even if this day fell on a
Saturday. A request for extension of 30 days would have ended on February
10, 2014.[86]
Petitioners subsequently filed their Petition for Review on Certiorari on
February 12, 2014.[87] Pursuant to A.M. No. 00-2-14-SC,[88] this Petition
would have been filed out of time.
We are not, however, precluded from granting the period of extension
requested and addressing the Petition filed on its merits, instead of outright
dismissing it. After all, "[l]itigations should, as much as possible, be decided
on the merits and not on technicalities."[89]
However, it does not follow that in the relaxation of the procedural rules,
this Court automatically rules in favor of petitioners. Their case must still
stand on its own merits for this Court to grant the relief petitioners pray for.
II
Common carriers are required to exercise extraordinary diligence in the
performance of its obligations under the contract of carriage. This
extraordinary diligence must be observed not only in the transportation of
goods and services but also in the issuance of the contract of carriage,
including its ticketing operations.
Article 1732 of the Civil Code defines a common carrier as "persons,
corporations or firms, or associations engaged in the business of carrying or
transporting passengers or goods or both, by land, water or air, for
compensation, offering their services to the public." Articles 1733, 1755,
and 1756 of the Civil Code outline the degree of diligence required of
common carriers:
TRANSPO | 06Dec | 38
....
ARTICLE 1733. Common carriers, from the nature of their business and for
reasons of public policy, are bound to observe extraordinary diligence in the
vigilance over the goods and for the safety of the passengers transported
by them, according to all the circumstances of each case.
ARTICLE 1755. A common carrier is bound to carry the passengers safely as
far as human care and foresight can provide, using the utmost diligence of
very cautious persons, with a due regard for all the circumstances.
ARTICLE 1756. In case of death of or injuries to passengers, common
carriers are presumed to have been at fault or to have acted negligently,
unless they prove that they observed extraordinary diligence as prescribed
in articles 1733 and 1755.
Respondent, as one of the four domestic airlines in the country,[90] is a
common carrier required by law to exercise extraordinary diligence.
Extraordinary diligence requires that the common carrier must transport
goods and passengers "safely as far as human care and foresight can
provide," and it must exercise the "utmost diligence of very cautious
persons . . . with due regard for all the circumstances."[91]
When a common carrier, through its ticketing agent, has not yet issued a
ticket to the prospective passenger, the transaction between them is still
that of a seller and a buyer. The obligation of the airline to exercise
extraordinary diligence commences upon the issuance of the contract of
carriage.[92] Ticketing, as the act of issuing the contract of carriage, is
necessarily included in the exercise of extraordinary diligence.
A contract of carriage is defined as "one whereby a certain person or
association of persons obligate themselves to transport persons, things, or
news from one place to another for a fixed price."[93] In Cathay Pacific
Airways v. Reyes:[94]
[W]hen an airline issues a ticket to a passenger confirmed on a particular
flight, on a certain date, a contract of carriage arises, and the passenger
has every right to expect that he would fly on that flight and on that date.
If he does not, then the carrier opens itself to a suit for breach of contract
of carriage.[95] (Emphasis supplied)
Once a plane ticket is issued, the common carrier binds itself to deliver the
passenger safely on the date and time stated in the ticket. The contractual
obligation of the common carrier to the passenger is governed principally by
what is written on the contract of carriage.
In this case, both parties stipulated[96] that the flight schedule stated on
the nine (9) disputed tickets was the 10:05 a.m. flight of July 22, 2008.
According to the contract of carriage, respondent's obligation as a common
carrier was to transport nine (9) of the petitioners safely on the 10:05 a.m.
flight of July 22, 2008.
Petitioners, however, argue that respondent was negligent in the issuance
of the contract of carriage since the contract did not embody their intention.
They insist that the nine (9) disputed tickets should have been scheduled
for the 4:15 p.m. flight of July 22, 2008. Respondent, on the other hand,
denies this and states that petitioner Jose was fully informed of the
schedules of the purchased tickets and petitioners were negligent when
they failed to correct their ticket schedule.
Respondent relies on the Parol Evidence Rule in arguing that a written
document is considered the best evidence of the terms agreed on by the
parties. Petitioners, however, invoke the exception in Rule 130, Section 9(b)
of the Rules of Court that evidence may be introduced if the written
document fails to express the true intent of the parties:[97]
Section 9. Evidence of written agreements. When the terms of an
agreement have been reduced to writing, it is considered as containing all
the terms agreed upon and there can be, between the parties and their
successors in interest, no evidence of such terms other than the contents of
the written agreement.
However, a party may present evidence to modify, explain or add to the
terms of the written agreement if he puts in issue in his pleading:
(a) An intrinsic ambiguity, mistake, or imperfection in the written
agreement;
(b) The failure of the written agreement to express the true intent and
agreement of the parties thereto;
(c) The validity of the written agreement; or
(d) The existence of other terms agreed to by the parties or their
successors in interest after the execution of the written agreement.
In ACI Philippines, Inc. v. Coquia:[98]
It is a cardinal rule of evidence, not just one of technicality but of
substance, that the written document is the best evidence of its own
contents. It is also a matter of both principle and policy that when the
written contract is established as the repository of the parties stipulations,
any other evidence is excluded and the same cannot be used as a
TRANSPO | 06Dec | 39
substitute for such contract, nor even to alter or contradict them. This rule,
however, is not without exception. Section 9, Rule 130 of the Rules of Court
states that a party may present evidence to modify, explain or add to the
terms of the agreement if he puts in issue in his pleading the failure of the
written agreement to express the true intent and agreement of the parties.
[99]
It is not disputed that on June 13, 2008, petitioner Jose purchased 20
Manila-Palawan-Manila tickets from respondent's ticketing agent. Since all
20 tickets were part of a single transaction made by a single purchaser, it is
logical to presume that all 20 passengers would prefer the same flight
schedule, unless the purchaser stated otherwise.
The third page contained the names of nine (9) passengers.[107] In the
Information box, it reads:
Sunday, July 20, 2008
HK PHP999.00 PHP
5J637MNL-PPS 08:20-09:35
Tuesday, July 22, 2008 HK PHP999.00 PH
5J638PPS-MNL 10:05-11:20[108]
In the Comments box, it reads:
R - FULL RECAP GVNT O JOSE//CARLOS AWRE
R - NON-REFUNDBLE//VALID TIL 15 OCT08 O[109]
The first page of the tickets contained the names of eight (8) passengers.
[101] In the Information box on the left side of the ticket, it reads:
The only evidence petitioners have in order to prove their true intent of
having the entire group on the 4:15 p.m. flight is petitioner Jose's selfserving testimony that the airline failed to recap the last page of the tickets
to him. They have neither shown nor introduced any other evidence before
the Metropolitan Trial Court, Regional Trial Court, Court of Appeals, or this
Court.
Even assuming that the ticketing agent encoded the incorrect flight
information, it is incumbent upon the purchaser of the tickets to at least
check if all the information is correct before making the purchase. Once the
ticket is paid for and printed, the purchaser is presumed to have agreed to
all its terms and conditions. In Ong Yiu v. Court of Appeals:[110]
While it may be true that petitioner had not signed the plane ticket, he is
nevertheless bound by the provisions thereof. "Such provisions have been
held to be a part of the contract of carriage, and valid and binding upon the
passenger regardless of the latter's lack of knowledge or assent to the
regulation." It is what is known as a contract of "adhesion," in regards
which it has been said that contracts of adhesion wherein one party
imposes a ready made form of contract on the other, as the plane ticket in
the case at bar, are contracts not entirely prohibited. The one who adheres
TRANSPO | 06Dec | 40
Petitioners' flight information was not written in fine print. It was clearly
stated on the left portion of the ticket above the passengers' names. If
petitioners had exercised even the slightest bit of prudence, they would
have been able to remedy any erroneous booking.
This is not the first time that this Court has explained that an air passenger
has the correlative duty to exercise ordinary care in the conduct of his or
her affairs.
This Court, while ruling that a travel agency was not a common carrier and
was not bound to exercise extraordinary diligence in the performance of its
obligations, also laid down the degree of diligence concurrently required of
passengers:
Traveling by air for leisure is a fairly new concept to the average Filipino.
From 1974, there was only one local airline commanding a monopoly on
domestic air travel.[120] In 1996, respondent introduced the concept of a
budget airline in the Philippines, touting "low-cost services to more
destinations and routes with higher flight frequency within the Philippines
III
TRANSPO | 06Dec | 41
4.1 An air carrier shall cause the disclosure under this Section to be printed
on or attached to the passenger ticket and/or boarding pass, or the
incorporation of such terms and conditions of carriage by reference.
Incorporation by reference means that the ticket and/or boarding pass shall
clearly state that the complete terms and conditions of carriage are
available for perusal and/or review on the air carrier's website, or in some
other document that may be sent to or delivered by post or electronic mail
to the passenger upon his/her request.
....
4.3 Aside from the printing and/or publication of the above disclosures, the
same shall likewise be verbally explained to the passenger by the air carrier
and/or its agent/s in English and Filipino, or in a language that is easily
understood by the purchaser, placing emphasis on the limitations and/or
restrictions attached to the ticket.
.....
4.5 Any violation of the afore-stated provisions shall be a ground for the
denial of subsequent applications for approval of promotional fare, or for
the suspension or recall of the approval made on the advertised fare/rate.
(Emphasis in the original)
The Air Passenger Bill of Rights recognizes that a contract of carriage is a
contract of adhesion, and thus, all conditions and restrictions must be fully
explained to the passenger before the purchase of the ticket:
WHEREAS, such a contract of carriage creates an asymmetrical relationship
between an air carrier and a passenger, considering that, while a passenger
has the option to buy or not to buy the service, the decision of the
passenger to buy the ticket binds such passenger, by adhesion, to all the
conditions and/or restrictions attached to the air carrier ticket on an all-ornothing basis, without any say, whatsoever, with regard to the
reasonableness of the individual conditions and restrictions attached to the
air carrier ticket;[132]
Section 4.4 of the Air Passenger Bill of Rights requires that "all rebooking,
refunding, baggage allowance and check-in policies" must be stated in the
tickets:
4.4 The key terms of a contract of carriage, which should include, among
others, the rebooking, refunding, baggage allowance and check-in policies,
must be provided to a passenger and shall substantially be stated in the
following manner and, if done in print, must be in bold letters:
(English)
"NOTICE:
TRANSPO | 06Dec | 42
are
purchasing
is
subject
to
the
following
1. _______________
2. _______________
3. _______________
TRANSPO | 06Dec | 43
MARTINEZ, J.:
This petition for review on certiorari assails the Decision of the Court of
Appeals dated November 29, 1995, in CA-G.R. SP No. 36801, affirming the
decision of the Regional Trial Court of Batangas City, Branch 84, in Civil
Case No. 4293, which dismissed petitioners' complaint for a business tax
refund imposed by the City of Batangas.
Petitioner is a grantee of a pipeline concession under Republic Act No. 387,
as amended, to contract, install and operate oil pipelines. The original
pipeline concession was granted in 1967 1 and renewed by the Energy
Regulatory Board in 1992. 2
Sometime in January 1995, petitioner applied for a mayor's permit with the
Office of the Mayor of Batangas City. However, before the mayor's permit
could be issued, the respondent City Treasurer required petitioner to pay a
local tax based on its gross receipts for the fiscal year 1993 pursuant to the
Local Government Code 3. The respondent City Treasurer assessed a
business tax on the petitioner amounting to P956,076.04 payable in four
installments based on the gross receipts for products pumped at GPS-1 for
the fiscal year 1993 which amounted to P181,681,151.00. In order not to
hamper its operations, petitioner paid the tax under protest in the amount
of P239,019.01 for the first quarter of 1993.
On January 20, 1994, petitioner filed a letter-protest addressed to the
respondent City Treasurer, the pertinent portion of which reads:
Please note that our Company (FPIC) is a pipeline operator with a
government concession granted under the Petroleum Act. It is engaged in
the business of transporting petroleum products from the Batangas
refineries, via pipeline, to Sucat and JTF Pandacan Terminals. As such, our
Company is exempt from paying tax on gross receipts under Section 133 of
the Local Government Code of 1991 . . . .
Moreover, Transportation contractors are not included in the enumeration of
contractors under Section 131, Paragraph (h) of the Local Government
Code. Therefore, the authority to impose tax "on contractors and other
independent contractors" under Section 143, Paragraph (e) of the Local
Government Code does not include the power to levy on transportation
contractors.
The imposition and assessment cannot be categorized as a mere fee
authorized under Section 147 of the Local Government Code. The said
section limits the imposition of fees and charges on business to such
TRANSPO | 06Dec | 44
Art. 1732 of the Civil Code defines a "common carrier" as "any person,
corporation, firm or association engaged in the business of carrying or
transporting passengers or goods or both, by land, water, or air, for
compensation, offering their services to the public."
Even the Local Government Code imposes a tax on franchise holders under
Sec. 137 of the Local Tax Code. Such being the situation obtained in this
case (exemption being unclear and equivocal) resort to distinctions or other
considerations may be of help:
The test for determining whether a party is a common carrier of goods is:
1.
That the exemption granted under Sec. 133 (j) encompasses only
common carriers so as not to overburden the riding public or commuters
with taxes. Plaintiff is not a common carrier, but a special carrier extending
its services and facilities to a single specific or "special customer" under a
"special contract."
2.
The Local Tax Code of 1992 was basically enacted to give more and
effective local autonomy to local governments than the previous
enactments, to make them economically and financially viable to serve the
people and discharge their functions with a concomitant obligation to accept
certain devolution of powers, . . . So, consistent with this policy even
franchise grantees are taxed (Sec. 137) and contractors are also taxed
under Sec. 143 (e) and 151 of the Code. 9
Petitioner assailed the aforesaid decision before this Court via a petition for
review. On February 27, 1995, we referred the case to the respondent
Court of Appeals for consideration and adjudication. 10 On November 29,
1995, the respondent court rendered a decision 11 affirming the trial
court's dismissal of petitioner's complaint. Petitioner's motion for
reconsideration was denied on July 18, 1996. 12
1.
He must be engaged in the business of carrying goods for others as
a public employment, and must hold himself out as ready to engage in the
transportation of goods for person generally as a business and not as a
casual occupation;
2.
He must undertake to carry goods of the kind to which his business
is confined;
3.
He must undertake to carry by the method by which his business is
conducted and over his established roads; and
4.
The above article (Art. 1732, Civil Code) makes no distinction between one
whose principal business activity is the carrying of persons or goods or
Hence, this petition. At first, the petition was denied due course in a both, and one who does such carrying only as an ancillary activity (in local
Resolution dated November 11, 1996. 13 Petitioner moved for a idiom, as a "sideline"). Article 1732 . . . avoids making any distinction
reconsideration which was granted by this Court in a Resolution 14 of between a person or enterprise offering transportation service on a regular
January 22, 1997. Thus, the petition was reinstated.
or scheduled basis and one offering such service on an occasional, episodic
or unscheduled basis. Neither does Article 1732 distinguish between a
Petitioner claims that the respondent Court of Appeals erred in holding that carrier offering its services to the "general public," i.e., the general
(1) the petitioner is not a common carrier or a transportation contractor, community or population, and one who offers services or solicits business
and (2) the exemption sought for by petitioner is not clear under the law.
only from a narrow segment of the general population. We think that Article
1877 deliberately refrained from making such distinctions.
There is merit in the petition.
So understood, the concept of "common carrier" under Article 1732 may be
A "common carrier" may be defined, broadly, as one who holds himself out seen to coincide neatly with the notion of "public service," under the Public
to the public as engaged in the business of transporting persons or property Service Act (Commonwealth Act No. 1416, as amended) which at least
from place to place, for compensation, offering his services to the public partially supplements the law on common carriers set forth in the Civil
generally.
Code. Under Section 13, paragraph (b) of the Public Service Act, "public
service" includes:
TRANSPO | 06Dec | 45
every person that now or hereafter may own, operate. manage, or control
in the Philippines, for hire or compensation, with general or limited
clientele, whether permanent, occasional or accidental, and done for
general business purposes, any common carrier, railroad, street railway,
traction railway, subway motor vehicle, either for freight or passenger, or
both, with or without fixed route and whatever may be its classification,
freight or carrier service of any class, express service, steamboat, or
steamship line, pontines, ferries and water craft, engaged in the
transportation of passengers or freight or both, shipyard, marine repair
shop, wharf or dock, ice plant, ice-refrigeration plant, canal, irrigation
system gas, electric light heat and power, water supply and power
petroleum, sewerage system, wire or wireless communications systems,
wire or wireless broadcasting stations and other similar public services.
(Emphasis Supplied)
Also, respondent's argument that the term "common carrier" as used in
Section 133 (j) of the Local Government Code refers only to common
carriers transporting goods and passengers through moving vehicles or
vessels either by land, sea or water, is erroneous.
As correctly pointed out by petitioner, the definition of "common carriers" in
the Civil Code makes no distinction as to the means of transporting, as long
as it is by land, water or air. It does not provide that the transportation of
the passengers or goods should be by motor vehicle. In fact, in the United
States, oil pipe line operators are considered common carriers. 17
Under the Petroleum Act of the Philippines (Republic Act 387), petitioner is
considered a "common carrier." Thus, Article 86 thereof provides that:
Art. 86. Pipe line concessionaire as common carrier. A pipe line shall have
the preferential right to utilize installations for the transportation of
petroleum owned by him, but is obligated to utilize the remaining
transportation capacity pro rata for the transportation of such other
petroleum as may be offered by others for transport, and to charge without
discrimination such rates as may have been approved by the Secretary of
Agriculture and Natural Resources.
xxx
xxx
(j)
Taxes on the gross receipts of transportation contractors and
persons engaged in the transportation of passengers or freight by hire and
common carriers by air, land or water, except as provided in this Code.
The deliberations conducted in the House of Representatives on the Local
Government Code of 1991 are illuminating:
MR. AQUINO (A). Thank you, Mr. Speaker.
Mr. Speaker, we would like to proceed to page 95, line
1.
It states: "SEC. 121 [now Sec. 131]. Common Limitations on the
Taxing Powers of Local Government Units." . . .
MR. AQUINO (A.). Thank you Mr. Speaker.
TRANSPO | 06Dec | 46
Now, Mr. Speaker, if the Gentleman would care to go to page 98 of Book II,
one can see there that provinces have the power to impose a tax on
business enjoying a franchise at the rate of not more than one-half of 1
percent of the gross annual receipts. So, transportation contractors who are
enjoying a franchise would be subject to tax by the province. That is the
exception, Mr. Speaker.
What we want to guard against here, Mr. Speaker, is the imposition of taxes
by local government units on the carrier business. Local government units
may impose taxes on top of what is already being imposed by the National
Internal Revenue Code which is the so-called "common carriers tax." We do
not want a duplication of this tax, so we just provided for an exception
under Section 125 [now Sec. 137] that a province may impose this tax at a
specific rate.
MR. AQUINO (A.). Thank you for that clarification, Mr. Speaker. . . . 18
It is clear that the legislative intent in excluding from the taxing power of
the local government unit the imposition of business tax against common
carriers is to prevent a duplication of the so-called "common carrier's tax."
Petitioner is already paying three (3%) percent common carrier's tax on its
gross sales/earnings under the National Internal Revenue Code. 19 To tax
petitioner again on its gross receipts in its transportation of petroleum
business would defeat the purpose of the Local Government Code.
WHEREFORE, the petition is hereby GRANTED. The decision of the
respondent Court of Appeals dated November 29, 1995 in CA-G.R. SP No.
36801 is REVERSED and SET ASIDE.
SO ORDERED.
TRANSPO | 06Dec | 47
SO ORDERED. 3
The Facts
STEEL
CORPORATION,
PANGANIBAN, J.:
The Court finds occasion to apply the rules on the seaworthiness of private
carrier, its owner's responsibility for damage to the cargo and its liability for
demurrage and attorney's fees. The Court also reiterates the well-known
rule that findings of facts of trial courts, when affirmed by the Court of
Appeals, are binding on this Court.
The Case
Before us are two separate petitions for review filed by National Steel
Corporation (NSC) and Vlasons Shipping, Inc. (VSI), both of which assail
the August 12, 1993 Decision of the Court of Appeals. 1 The Court of
Appeals modified the decision of the Regional Trial Court of Pasig, Metro
Manila, Branch 163 in Civil Case No. 23317. The RTC disposed as follows:
WHEREFORE, judgment is hereby rendered in favor of defendant and
against the plaintiff dismissing the complaint with cost against plaintiff, and
ordering plaintiff to pay the defendant on the counterclaim as follows:
1.
The sum of P75,000.00 as unpaid freight and P88,000.00 as
demurrage with interest at the legal rate on both amounts from April 7,
1976 until the same shall have been fully paid;
2.
Attorney's
P100,000.00; and
fees
and
expenses
of
litigation
in
the
sum
of
...
2.
Cargo: Full cargo of steel products of not less than 2,500 MT, 10%
more or less at Master's option.
3.
...
4.
Freight/Payment: P30.00/metric ton, FIOST basis. Payment upon
presentation of Bill of Lading within fifteen (15) days.
5.
Laydays/Cancelling:
6.
Loading/Discharging Rate: 750 tons per WWDSHINC. (Weather
Working Day of 24 consecutive hours, Sundays and Holidays Included).
7.
Demurrage/Dispatch:
SO ORDERED. 2
8.
...
9.
Cargo Insurance: Charterer's and/or Shipper's must insure the
cargoes. Shipowners not responsible for losses/damages except on proven
willful negligence of the officers of the vessel.
3.
Costs of suit.
TRANSPO | 06Dec | 48
10.
Other terms: (a) All terms/conditions of NONYAZAI C/P [sic] or
other internationally recognized Charter Party Agreement shall form part of
this Contract.
xxx
xxx
xxx
TRANSPO | 06Dec | 49
inasmuch as she was under voyage charter contract with the plaintiff as
charterer under the charter party; that in the course of the voyage from
Iligan City to Manila, the MV "VLASONS I" encountered very rough seas,
strong winds and adverse weather condition, causing strong winds and big
waves to continuously pound against the vessel and seawater to overflow
on its deck and hatch covers, that under the Contract of Voyage Charter
Hire, defendant shall not be responsible for losses/damages except on
proven willful negligence of the officers of the vessel, that the officers of
said MV "VLASONS I" exercised due diligence and proper seamanship and
were not willfully negligent; that furthermore the Voyage Charter Party
provides that loading and discharging of the cargo was on FIOST terms
which means that the vessel was free of risk and expense in connection
with the loading and discharging of the cargo; that the damage, if any, was
due to the inherent defect, quality or vice of the cargo or to the insufficient
packing thereof or to latent defect of the cargo not discoverable by due
diligence or to any other cause arising without the actual fault or privity of
defendant and without the fault of the agents or servants of defendant;
consequently, defendant is not liable; that the stevedores of plaintiff who
discharged the cargo in Manila were negligent and did not exercise due care
in the discharge of the cargo; land that the cargo was exposed to rain and
seawater spray while on the pier or in transit from the pier to plaintiff's
warehouse after discharge from the vessel; and that plaintiff's claim was
highly speculative and grossly exaggerated and that the small stain marks
or sweat marks on the edges of the tinplates were magnified and
considered total loss of the cargo. Finally, defendant claimed that it had
complied with all its duties and obligations under the Voyage Charter Hire
Contract and had no responsibility whatsoever to plaintiff. In turn, it alleged
the following counterclaim:
(a)
That despite the full and proper performance by defendant of its
obligations under the Voyage Charter Hire Contract, plaintiff failed and
refused to pay the agreed charter hire of P75,000.00 despite demands
made by defendant;
(b)
That under their Voyage Charter Hire Contract, plaintiff had agreed
to pay defendant the sum of P8,000.00 per day for demurrage. The vessel
was on demurrage for eleven (11) days in Manila waiting for plaintiff to
discharge its cargo from the vessel. Thus, plaintiff was liable to pay
defendant demurrage in the total amount of P88,000.00.
(c)
For filing a clearly unfounded civil action against defendant, plaintiff
should be ordered to pay defendant attorney's fees and all expenses of
litigation in the amount of not less than P100,000.00.
(8)
From the evidence presented by both parties, the trial court came
out with the following findings which were set forth in its decision:
(a)
The MV "VLASONS I" is a vessel of Philippine registry engaged in
the tramping service and is available for hire only under special contracts of
charter party as in this particular case.
(b)
That for purposes of the voyage covered by the Contract of Voyage
Charter Hire (Exh. "1"), the MV VLASONS I" was covered by the required
seaworthiness certificates including the Certification of Classification issued
by an international classification society, the NIPPON KAIJI KYOKAI (Exh.
"4"); Coastwise License from the Board of Transportation (Exh. "5");
International Loadline Certificate from the Philippine Coast Guard (Exh.
"6"); Cargo Ship Safety Equipment Certificate also from the Philippine Coast
Guard (Exh. "7"); Ship Radio Station License (Exh. "8"); Certificate of
Inspection by the Philippine Coast Guard (Exh. "12"); and Certificate of
Approval for Conversion issued by the Bureau of Customs (Exh. "9"). That
being a vessel engaged in both overseas and coastwise trade, the MV
"VLASONS I" has a higher degree of seaworthiness and safety.
(c)
Before it proceeded to Iligan City to perform the voyage called for
by the Contract of Voyage Charter Hire, the MV "VLASONS I" underwent
drydocking in Cebu and was thoroughly inspected by the Philippine Coast
Guard. In fact, subject voyage was the vessel's first voyage after the
drydocking. The evidence shows that the MV "VLASONS I" was seaworthy
and properly manned, equipped and supplied when it undertook the
voyage. It has all the required certificates of seaworthiness.
(d)
The cargo/shipment was securely stowed in three (3) hatches of the
ship. The hatch openings were covered by hatchboards which were in turn
covered by two or double tarpaulins. The hatch covers were water tight.
Furthermore, under the hatchboards were steel beams to give support.
(e)
The claim of the plaintiff that defendant violated the contract of
carriage is not supported by evidence. The provisions of the Civil Code on
common carriers pursuant to which there exists a presumption of
negligence in case of loss or damage to the cargo are not applicable. As to
the damage to the tinplates which was allegedly due to the wetting and
rusting thereof, there is unrebutted testimony of witness Vicente Angliongto
that tinplates "sweat" by themselves when packed even without being in
contract (sic) with water from outside especially when the weather is bad or
raining. The trust caused by sweat or moisture on the tinplates may be
considered as a loss or damage but then, defendant cannot be held liable
for it pursuant to Article 1734 of the Civil Case which exempts the carrier
from responsibility for loss or damage arising from the "character of the
goods . . ." All the 1,769 skids of the tinplates could not have been
damaged by water as claimed by plaintiff. It was shown as claimed by
plaintiff that the tinplates themselves were wrapped in kraft paper lining
and corrugated cardboards could not be affected by water from outside.
TRANSPO | 06Dec | 50
(f)
The stevedores hired by the plaintiff to discharge the cargo of
tinplates were negligent in not closing the hatch openings of the MV
"VLASONS I" when rains occurred during the discharging of the cargo thus
allowing rainwater to enter the hatches. It was proven that the stevedores
merely set up temporary tents to cover the hatch openings in case of rain
so that it would be easy for them to resume work when the rains stopped
by just removing the tent or canvas. Because of this improper covering of
the hatches by the stevedores during the discharging and unloading
operations which were interrupted by rains, rainwater drifted into the cargo
through the hatch openings. Pursuant to paragraph 5 of the NANYOSAI [sic]
Charter Party which was expressly made part of the Contract of Voyage
Charter Hire, the loading, stowing and discharging of the cargo is the sole
responsibility of the plaintiff charterer and defendant carrier has no liability
for whatever damage may occur or maybe [sic] caused to the cargo in the
process.
(g)
It was also established that the vessel encountered rough seas and
bad weather while en route from Iligan City to Manila causing sea water to
splash on the ship's deck on account of which the master of the vessel (Mr.
Antonio C. Dumlao) filed a "Marine Protest" on August 13, 1974 (Exh.
"15"); which can be invoked by defendant as a force majeure that would
exempt the defendant from liability.
(h)
Plaintiff did not comply with the requirement prescribed in
paragraph 9 of the Voyage Charter Hire contract that it was to insure the
cargo because it did not. Had plaintiff complied with the requirement, then
it could have recovered its loss or damage from the insurer. Plaintiff also
violated the charter party contract when it loaded not only "steel products",
i.e. steel bars, angular bars and the like but also tinplates and hot rolled
sheets which are high grade cargo commanding a higher freight. Thus
plaintiff was able to ship grade cargo at a lower freight rate.
(i)
As regards defendant's counterclaim, the contract of voyage charter
hire under Paragraph 4 thereof, fixed the freight at P30.00 per metric ton
payable to defendant carrier upon presentation of the bill of lading within
fifteen (15) days. Plaintiff has not paid the total freight due of P75,000.00
despite demands. The evidence also showed that the plaintiff was required
and bound under paragraph 7 of the same Voyage Charter Hire contract to
pay demurrage of P8,000.00 per day of delay in the unloading of the
cargoes. The delay amounted to eleven (11) days thereby making plaintiff
liable to pay defendant for demurrage in the amount of P88,000.00.
The trial court erred in finding that the MV "VLASONS I" was seaworthy,
properly manned, equipped and supplied, and that there is no proof of
willful negligence of the vessel's officers.
II
The trial court erred in finding that the rusting of NSC's tinplates was due to
the inherent nature or character of the goods and not due to contact with
seawater.
III
The trial court erred in finding that the stevedores hired by NSC were
negligent in the unloading of NSC's shipment.
IV
The trial court erred in exempting VSI from liability on the ground of force
majeure.
V
The trial court erred in finding that NSC violated the contract of voyage
charter hire.
VI
The trial court erred in ordering NSC to pay freight, demurrage and
attorney's fees, to VSI. 4
As earlier stated, the Court of Appeals modified the decision of the trial
court by reducing the demurrage from P88,000.00 to P44,000.00 and
deleting the award of attorneys fees and expenses of litigation. NSC and
VSI filed separate motions for reconsideration. In a Resolution 5 dated
October 20, 1993, the appellate court denied both motions. Undaunted,
NSC and VSI filed their respective petitions for review before this Court. On
motion of VSI, the Court ordered on February 14, 1994 the consolidation of
these petitions. 6
The Issues
Appealing the RTC decision to the Court of Appeals, NSC alleged six errors:
Questions of Law
TRANSPO | 06Dec | 51
1.
Whether or not a charterer of a vessel is liable for demurrage due
to cargo unloading delays caused by weather interruption;
The foregoing issues raised by the parties will be discussed under the
following headings:
2.
Whether or not the alleged "seaworthiness certificates" (Exhibits
"3", "4", "5", "6", "7", "8", "9", "11" and "12") were admissible in evidence
and constituted evidence of the vessel's seaworthiness at the beginning of
the voyages; and
1.
Questions of Fact
2.
3.
3.
Whether or not a charterer's failure to insure its cargo exempts the
shipowner from liability for cargo damage.
4.
Questions of Fact
1.
The Court affirms the assailed Decision of the Court of Appeals, except in
respect of the demurrage.
2.
Whether or not vessel's officers and crew were negligent in handling
and caring for NSC's cargo;
3.
Whether or not NSC's cargo of tinplates did sweat during the
voyage and, hence, rusted on their own; and
4.
Whether or not NSC's stevedores were negligent and caused the
wetting[/]rusting of NSC's tinplates.
In its separate petition, 9 VSI submits for the consideration of this Court
the following alleged errors of the CA:
A.
The respondent Court of Appeals committed an error of law in
reducing the award of demurrage from P88,000.00 to P44,000.00.
B.
The respondent Court of Appeals committed an error of law in
deleting the award of P100,000 for attorney's fees and expenses of
litigation.
Amplifying the foregoing,
memorandum: 10
VSI
raises
the
following
issues
in
its
I.
Whether or not the provisions of the Civil Code of the Philippines on
common carriers pursuant to which there exist[s] a presumption of
negligence against the common carrier in case of loss or damage to the
cargo are applicable to a private carrier.
II.
Whether or not the terms and conditions of the Contract of Voyage
Charter Hire, including the Nanyozai Charter, are valid and binding on both
contracting parties.
Preliminary Matter:
TRANSPO | 06Dec | 52
Supply, Inc., vs. Court of Appeals and Seven Brothers Shipping Corporation,
16 the Court ruled:
inherent defect of the things, shall be for the account and risk of the
shipper.
Art. 362.
The carrier, however, shall be liable for damages arising
from the cause mentioned in the preceding article if proofs against him
show that they occurred on account of his negligence or his omission to
take the precautions usually adopted by careful persons, unless the shipper
committed fraud in the bill of lading, making him to believe that the goods
were of a class or quality different from what they really were.
Because the MV Vlasons I was a private carrier, the shipowner's obligations
are governed by the foregoing provisions of the Code of Commerce and not
by the Civil Code which, as a general rule, places the prima facie
presumption of negligence on a common carrier. It is a hornbook doctrine
that:
In an action against a private carrier for loss of, or injury to, cargo, the
burden is on the plaintiff to prove that the carrier was negligent or
unseaworthy, and the fact that the goods were lost or damaged while in the
carrier's custody does not put the burden of proof on the carrier.
Since . . . a private carrier is not an insurer but undertakes only to exercise
due care in the protection of the goods committed to its care, the burden of
proving negligence or a breach of that duty rests on plaintiff and proof of
loss of, or damage to, cargo while in the carrier's possession does not cast
on it the burden of proving proper care and diligence on its part or that the
loss occurred from an excepted cause in the contract or bill of lading.
However, in discharging the burden of proof, plaintiff is entitled to the
benefit of the presumptions and inferences by which the law aids the bailor
in an action against a bailee, and since the carrier is in a better position to
know the cause of the loss and that it was not one involving its liability, the
law requires that it come forward with the information available to it, and
its failure to do so warrants an inference or presumption of its liability.
However, such inferences and presumptions, while they may affect the
burden of coming forward with evidence, do not alter the burden of proof
which remains on plaintiff, and, where the carrier comes forward with
evidence explaining the loss or damage, the burden of going forward with
the evidence is again on plaintiff.
Where the action is based on the shipowner's warranty of seaworthiness,
the burden of proving a breach thereof and that such breach was the
proximate cause of the damage rests on plaintiff, and proof that the goods
were lost or damaged while in the carrier's possession does not cast on it
the burden of proving seaworthiness. . . . Where the contract of carriage
exempts the carrier from liability for unseaworthiness not discoverable by
TRANSPO | 06Dec | 53
due diligence, the carrier has the preliminary burden of proving the exercise
of due diligence to make the vessel seaworthy. 20
In the instant case, the Court of Appeals correctly found the NSC "has not
taken the correct position in relation to the question of who has the burden
of proof. Thus, in its brief (pp. 10-11), after citing Clause 10 and Clause 12
of the NANYOZAI Charter Party (incidentally plaintiff-appellant's [NSC's]
interpretation of Clause 12 is not even correct), it argues that 'a careful
examination of the evidence will show that VSI miserably failed to comply
with any of these obligation's as if defendant-appellee [VSI] had the burden
of
proof." 21
First Issue:
Questions of Fact
As noted earlier, the NSC had the burden of proving that the damage to the
cargo was caused by the negligence of the officers and the crew of MV
Vlasons I in making their vessel seaworthy and fit for the carriage of
tinplates. NSC failed to discharge this burden.
Before us, NSC relies heavily on its claim that MV Vlasons I had used an old
and torn tarpaulin or canvas to cover the hatches through which the cargo
was loaded into the cargo hold of the ship. It faults the Court of Appeals for
failing to consider such claim as an "uncontroverted fact" 26 and denies
that MV Vlasons I "was equipped with new canvas covers in tandem with
the old ones as indicated in the Marine Protest . . ." 27 We disagree.
The records sufficiently support VSI's contention that the ship used the old
tarpaulin, only in addition to the new one used primarily to make the ship's
hatches watertight. The foregoing are clear from the marine protest of the
master of the MV Vlasons I, Antonio C. Dumlao, and the deposition of the
ship's boatswain, Jose Pascua. The salient portions of said marine protest
read:
. . . That the M/V "VLASONS I" departed Iligan City or about 0730 hours of
August 8, 1974, loaded with approximately 2,487.9 tons of steel plates and
tin plates consigned to National Steel Corporation; that before departure,
the vessel was rigged, fully equipped and cleared by the authorities; that on
or about August 9, 1974, while in the vicinity of the western part of Negros
and Panay, we encountered very rough seas and strong winds and Manila
office was advised by telegram of the adverse weather conditions
encountered; that in the morning of August 10, 1974, the weather
condition changed to worse and strong winds and big waves continued
pounding the vessel at her port side causing sea water to overflow on deck
andhatch (sic) covers and which caused the first layer of the canvass
covering to give way while the new canvass covering still holding on;
That the weather condition improved when we reached Dumali Point
protected by Mindoro; that we re-secured the canvass covering back to
position; that in the afternoon of August 10, 1974, while entering
Maricaban Passage, we were again exposed to moderate seas and heavy
rains; that while approaching Fortune Island, we encountered again rough
seas, strong winds and big waves which caused the same canvass to give
way and leaving the new canvass holding on;
xxx
xxx
xxx 28
TRANSPO | 06Dec | 54
No, sir.
What
How many hatch beams were there placed across the opening?
q
And will you describe how the canvas cover was secured on the
hatch opening?
WITNESS
a
It was placed flat on top of the hatch cover, with a little canvas
flowing over the sides and we place[d] a flat bar over the canvas on the
side of the hatches and then we place[d] a stopper so that the canvas could
not be removed.
a
Plenty, sir, because there are several pieces on top of the hatch
beam.
q
q
And will you tell us the size of the hatch opening? The length and
the width of the hatch opening.
Yes, sir.
How tight?
xxx
xxx
How was the canvas supported in the middle of the hatch opening?
xxx
q
Now, on top of the hatch boards, according to you, is the canvass
cover. How many canvas covers?
That due diligence was exercised by the officers and the crew of the MV
Vlasons I was further demonstrated by the fact that, despite encountering
rough weather twice, the new tarpaulin did not give way and the ship's
hatches and cargo holds remained waterproof. As aptly stated by the Court
of Appeals, ". . . we find no reason not to sustain the conclusion of the
lower court based on overwhelming evidence, that the MV 'VLASONS I' was
seaworthy when it undertook the voyage on August 8, 1974 carrying on
board thereof plaintiff-appellant's shipment of 1,677 skids of tinplates and
92 packages of hot rolled sheets or a total of 1,769 packages from NSC's
pier in Iligan City arriving safely at North Harbor, Port Area, Manila, on
August 12, 1974; . . . 30
q
And aside from the hatch board, is there any other material there to
cover the hatch?
a
q
Is the beam that was placed in the hatch opening covering the
whole hatch opening?
Two, sir. 29
Indeed, NSC failed to discharge its burden to show negligence on the part
of the officers and the crew of MV Vlasons I. On the contrary, the records
TRANSPO | 06Dec | 55
reveal that it was the stevedores of NSC who were negligent in unloading
the cargo from the ship.
The stevedores employed only a tent-like material to cover the hatches
when strong rains occasioned by a passing typhoon disrupted the unloading
of the cargo. This tent-like covering, however, was clearly inadequate for
keeping rain and seawater away from the hatches of the ship. Vicente
Angliongto, an officer of VSI, testified thus:
ATTY ZAMORA:
Q
Now, during your testimony on November 5, 1979, you stated on
August 14 you went on board the vessel upon notice from the National
Steel Corporation in order to conduct the inspection of the cargo. During
the course of the investigation, did you chance to see the discharging
operation?
What was used in order to protect the cargo from the weather?
A
A base of canvas was used as cover on top of the tin plates, and
tents were built at the opening of the hatches.
Q
You also stated that the hatches were already opened and that
there were tents constructed at the opening of the hatches to protect the
cargo from the rain. Now, will you describe [to] the Court the tents
constructed.
A
The tents are just a base of canvas which look like a tent of an
Indian camp raise[d] high at the middle with the whole side separated
down to the hatch, the size of the hatch and it is soaks [sic] at the middle
because of those weather and this can be used only to temporarily protect
the cargo from getting wet by rains.
WITNESS:
Q
Now, is this procedure adopted by the stevedores of covering tents
proper?
A
Yes, sir, upon my arrival at the vessel, I saw some of the tinplates
already discharged on the pier but majority of the tinplates were inside the
hall, all the hatches were opened.
A
No, sir, at the time they were discharging the cargo, there was a
typhoon passing by and the hatch tent was not good enough to hold all of it
to prevent the water soaking through the canvass and enter the cargo.
Q
place.
Q
In the course of your inspection, Mr. Anglingto [sic], did you see in
fact the water enter and soak into the canvass and tinplates.
At the Pier.
Q
As owner of the vessel, did you not advise the National Steel
Corporation [of] the procedure adopted by its stevedores in discharging the
cargo particularly in this tent covering of the hatches?
ATTY LOPEZ:
We object, your Honor, this question was already asked. This particular
matter . . . the transcript of stenographic notes shows the same was
covered in the direct examination.
ATTY ZAMORA:
Precisely, your Honor, we would like to go on detail, this is the serious part
of the testimony.
COURT:
All right, witness may answer.
ATTY LOPEZ:
A
Yes, sir, I did the first time I saw it, I called the attention of the
stevedores but the stevedores did not mind at all, so, called the attention of
the representative of the National Steel but nothing was done, just the
same. Finally, I wrote a letter to them. 31
NSC attempts to discredit the testimony of Angliongto by questioning his
failure to complain immediately about the stevedores' negligence on the
first day of unloading, pointing out that he wrote his letter to petitioner only
seven days later. 32 The Court is not persuaded. Angliongto's candid
answer in his aforequoted testimony satisfactorily explained the delay.
Seven days lapsed because he first called the attention of the stevedores,
then the NSC's representative, about the negligent and defective procedure
adopted in unloading the cargo. This series of actions constitutes a
reasonable response in accord with common sense and ordinary human
experience. Vicente Angliongto could not be blamed for calling the
TRANSPO | 06Dec | 56
The trial court relied on the testimony of Vicente Angliongto in finding that
". . . tinplates 'sweat' by themselves when packed even without being in
contact with water from outside especially when the weather is bad or
raining . . ." 35 The Court of Appeals affirmed the trial court's finding.
A discussion of this issue appears inconsequential and unnecessary. As
previously discussed, the damage to the tinplates was occasioned not by
airborne moisture but by contact with rain and seawater which the
stevedores negligently allowed to seep in during the unloading.
In the THIRD assigned error, [NSC] claims that the trial court erred in
finding that the stevedores hired by NSC were negligent in the unloading of
NSC's shipment. We do not think so. Such negligence according to the trial
court is evident in the stevedores hired by [NSC], not closing the hatch of
MV 'VLASONS I' when rains occurred during the discharging of the cargo
thus allowing rain water and seawater spray to enter the hatches and to
drift to and fall on the cargo. It was proven that the stevedores merely set
up temporary tents or canvas to cover the hatch openings when it rained
during the unloading operations so that it would be easier for them to
resume work after the rains stopped by just removing said tents or
canvass. It has also been shown that on August 20, 1974, VSI President
Vicente Angliongto wrote [NSC] calling attention to the manner the
stevedores hired by [NSC] were discharging the cargo on rainy days and
the improper closing of the hatches which allowed continuous heavy rain
water to leak through and drip to the tinplates' covers and [Vicente
Angliongto] also suggesting that due to four (4) days continuos rains with
strong winds that the hatches be totally closed down and covered with
canvas and the hatch tents lowered. (Exh. "13"). This letter was received
by [NSC] on 22 August 1974 while discharging operations were still going
on (Exhibit "13-A"). 33
The fact that NSC actually accepted and proceeded to remove the cargo
from the ship during unfavorable weather will not make VSI liable for any
damage caused thereby. In passing, it may be noted that the NSC may
seek indemnification, subject to the laws on prescription, from the
stevedoring company at fault in the discharge operations. "A stevedore
company engaged in discharging cargo . . . has the duty to load the
cargo . . . in a prudent manner, and it is liable for injury to, or loss of, cargo
caused by its negligence . . . and where the officers and members and crew
of the vessel do nothing and have no responsibility in the discharge of cargo
by stevedores . . . the vessel is not liable for loss of, or damage to, the
cargo caused by the negligence of the
stevedores . . ." 34 as in the instant case.
1.
2.
3.
4.
Do Tinplates "Sweat"?
5.
Certificate of Approval for Conversion issued by the Bureau of
Customs 36
NSC argues that the certificates are hearsay for not having been presented
in accordance with the Rules of Court. It points out that Exhibits 3, 4 and
11 allegedly are "not written records or acts of public officers"; while
Exhibits 5, 6, 7, 8, 9, 11 and 12 are not "evidenced by official publications
TRANSPO | 06Dec | 57
or certified true copies" as required by Sections 25 and 26, Rule 132, of the
Rules of Court. 37
After a careful examination of these exhibits, the Court rules that Exhibits
3, 4, 5, 6, 7, 8, 9 and 12 are inadmissible, for they have not been properly
offered as evidence. Exhibits 3 and 4 are certificates issued by private
parties, but they have not been proven by one who saw the writing
executed, or by evidence of the genuineness of the handwriting of the
maker, or by a subscribing witness. Exhibits, 5, 6, 7, 8, 9, and 12 are
photocopies, but their admission under the best evidence rule have not
been demonstrated.
We find, however, that Exhibit 11 is admissible under a well-settled
exception to the hearsay rule per Section 44 of Rule 130 of the Rules of
Court, which provides that "(e)ntries in official records made in the
performance of a duty by a public officer of the Philippines, or by a person
in the performance of a duty specially enjoined by law, are prima facie
evidence of the facts therein stated." 38 Exhibit 11 is an original certificate
of the Philippine Coast Guard in Cebu issued by Lieutenant Junior Grade
Noli C. Flores to the effect that "the vessel 'VLASONS I' was drydocked . . .
and PCG Inspectors were sent on board for inspection . . . After completion
of drydocking and duly inspected by PCG Inspectors, the vessel 'VLASONS
I', a cargo vessel, is in seaworthy condition, meets all requirements, fitted
and equipped for trading as a cargo vessel was cleared by the Philippine
Coast Guard and sailed for Cebu Port on July 10, 1974." (sic) NSC's claim,
therefore, is obviously misleading and erroneous.
At any rate, it should be stressed that NSC has the burden of proving that
MV Vlasons I was not seaworthy. As observed earlier, the vessel was a
private carrier and, as such, it did not have the obligation of a common
carrier to show that it was seaworthy. Indeed, NSC glaringly failed to
discharge its duty of proving the willful negligence of VSI in making the ship
seaworthy resulting in damage to its cargo. Assailing the genuineness of
the certificate of seaworthiness is not sufficient proof that the vessel was
not seaworthy.
Fourth Issue:
xxx
xxx
2.
Cargo: Full cargo of steel products of not less than 2,500 MT, 10%
more or less at Master's option.
xxx
xxx
xxx
6.
Loading/Discharging Rate:
7.
Demurrage/Dispatch:
TRANSPO | 06Dec | 58
At bottom, this appeal really hinges on a factual issue: when, how and who
caused the damage to the cargo? Ranged against NSC are two formidable
truths. First, both lower courts found that such damage was brought about
during the unloading process when rain and seawater seeped through the
cargo due to the fault or negligence of the stevedores employed by it. Basic
is the rule that factual findings of the trial court, when affirmed by the
Court of Appeals, are binding on the Supreme Court. Although there are
settled exceptions, NSC has not satisfactorily shown that this case is one of
them. Second, the agreement between the parties the Contract of
Voyage Charter Hire placed the burden of proof for such loss or damage
upon the shipper, not upon the shipowner. Such stipulation, while
disadvantageous to NSC, is valid because the parties entered into a
contract of private charter, not one of common carriage. Basic too is the
doctrine that courts cannot relieve a parry from the effects of a private
contract freely entered into, on the ground that it is allegedly one-sided or
unfair to the plaintiff. The charter party is a normal commercial contract
and its stipulations are agreed upon in consideration of many factors, not
the least of which is the transport price which is determined not only by the
actual costs but also by the risks and burdens assumed by the shipper in
regard to possible loss or damage to the cargo. In recognition of such
factors, the parties even stipulated that the shipper should insure the cargo
to protect itself from the risks it undertook under the charter party. That
NSC failed or neglected to protect itself with such insurance should not
adversely affect VSI, which had nothing to do with such failure or neglect.
WHEREFORE, premises considered, the instant consolidated petitions are
hereby DENIED. The questioned Decision of the Court of Appeals is
AFFIRMED with the MODIFICATION that the demurrage awarded to VSI is
deleted. No pronouncement as to costs.
SO ORDERED.
TRANSPO | 06Dec | 59
VALENZUELA
HARDWOOD
AND INDUSTRIAL SUPPLY
INC.,
petitioner,
vs.
COURT
OF
APPEALS
AND
SEVEN
BROTHERS
SHIPPING
CORPORATION, respondents.
PANGANIBAN, J.:
Is a stipulation in a charter party that the "(o)wners shall not be
responsible for loss, split, short-landing, breakages and any kind of
damages to the cargo" 1 valid? This is the main question raised in this
petition for review assailing the Decision of Respondent Court of Appeals 2
in CA-G.R. No. CV-20156 promulgated on October 15, 1991. The Court of
Appeals modified the judgment of the Regional Trial Court of Valenzuela,
Metro Manila, Branch 171, the dispositive portion of which reads:
WHEREFORE, Judgment is hereby rendered ordering South Sea Surety and
Insurance Co., Inc. to pay plaintiff the sum of TWO MILLION PESOS
(P2,000,000.00) representing the value of the policy of the lost logs with
legal interest thereon from the date of demand on February 2, 1984 until
the amount is fully paid or in the alternative, defendant Seven Brothers
Shipping Corporation to pay plaintiff the amount of TWO MILLION PESOS
(2,000,000.00) representing the value of lost logs plus legal interest from
the date of demand on April 24, 1984 until full payment thereof; the
reasonable attorney's fees in the amount equivalent to five (5) percent of
the amount of the claim and the costs of the suit.
Plaintiff is hereby ordered to pay defendant Seven Brothers Shipping
Corporation the sum of TWO HUNDRED THIRTY THOUSAND PESOS
(P230,000.00) representing the balance of the stipulated freight charges.
Defendant South Sea Surety and Insurance Company's counterclaim is
hereby dismissed.
In its assailed Decision, Respondent Court of Appeals held:
WHEREFORE, the appealed judgment is hereby AFFIRMED except in so far
(sic) as the liability of the Seven Brothers Shipping Corporation to the
plaintiff is concerned which is hereby REVERSED and SET ASIDE. 3
The Facts
The factual antecedents of this case as narrated in the Court of Appeals
Decision are as follows:
TRANSPO | 06Dec | 60
C.
The lower court erred in holding defendant-appellant Seven
Brothers
Shipping
Corporation
liable
in
the
alternative
and
ordering/directing it to pay plaintiff-appellee the amount of two million
(2,000,000.00) pesos representing the value of the logs plus legal interest
from date of demand until fully paid.
D.
The lower court erred in ordering defendant-appellant Seven
Brothers Shipping Corporation to pay appellee reasonable attorney's fees in
the amount equivalent to 5% of the amount of the claim and the costs of
the suit.
H.
The trial court erred in not awarding to the defendant-appellant the
attorney's fees alleged and proven in its counterclaim.
The primary issue to be resolved before us is whether defendants shipping
corporation and the surety company are liable to the plaintiff for the latter's
lost logs. 4
E.
The lower court erred in not awarding defendant-appellant Seven
Brothers Corporation its counter-claim for attorney's fees.
The Court of Appeals affirmed in part the RTC judgment by sustaining the
liability of South Sea Surety and Insurance Company ("South Sea"), but
modified it by holding that Seven Brothers Shipping Corporation ("Seven
Brothers") was not liable for the lost cargo. 5 In modifying the RTC
judgment, the respondent appellate court ratiocinated thus:
F.
The lower court erred in not dismissing the complaint against Seven
Brothers Shipping Corporation.
It appears that there is a stipulation in the charter party that the ship
owner would be exempted from liability in case of loss.
Defendant-appellant South Sea Surety and Insurance Co., Inc. assigns the
following errors:
The court a quo erred in applying the provisions of the Civil Code on
common carriers to establish the liability of the shipping corporation. The
provisions on common carriers should not be applied where the carrier is
not acting as such but as a private carrier.
A.
The trial court erred in holding that Victorio Chua was an agent of
defendant-appellant South Sea Surety and Insurance Company, Inc. and
likewise erred in not holding that he was the representative of the insurance
broker Columbia Insurance Brokers, Ltd.
B.
The trial court erred in holding that Victorio Chua received
compensation/commission on the premiums paid on the policies issued by
the defendant-appellant South Sea Surety and Insurance Company, Inc.
C.
Code.
D.
The trial court erred in disregarding the "receipt of payment clause"
attached to and forming part of the Marine Cargo Insurance Policy No.
84/24229.
E.
The trial court in disregarding the statement of account or bill
stating the amount of premium and documentary stamps to be paid on the
policy by the plaintiff-appellee.
F.
The trial court erred in disregarding the endorsement of cancellation
of the policy due to non-payment of premium and documentary stamps.
G.
The trial court erred in ordering defendant-appellant South Sea
Surety and Insurance Company, Inc. to pay plaintiff-appellee P2,000,000.00
representing value of the policy with legal interest from 2 February 1984
until the amount is fully paid,
TRANSPO | 06Dec | 61
That the goods are transported at the risk of the owner or shipper;
(2)
That the common carrier will not be liable for any loss, destruction,
or deterioration of the goods;
(3)
That the common carrier need not observe any diligence in the
custody of the goods;
(4)
That the common carrier shall exercise a degree of diligence less
than that of a good father of a family, or of a man of ordinary prudence in
the vigilance over the movables transported;
(5)
That the common carrier shall not be responsible for the acts or
omissions of his or its employees;
(6)
That the common carrier's liability for acts committed by thieves, or
of robbers who do not act with grave or irresistible threat, violence or force,
is dispensed with or diminished;
(7)
That the common carrier is not responsible for the loss, destruction,
or deterioration of goods on account of the defective condition of the car,
vehicle, ship, airplane or other equipment used in the contract of carriage.
Petitioner Valenzuela adds that the stipulation is void for being contrary to
Articles 586 and 587 of the Code of Commerce 14 and Articles 1170 and
1173 of the Civil Code. Citing Article 1306 and paragraph 1, Article 1409 of
the Civil Code, 15 petitioner further contends that said stipulation "gives no
duty or obligation to the private respondent to observe the diligence of a
good father of a family in the custody and transportation of the cargo."
The Court is not persuaded. As adverted to earlier, it is undisputed that
private respondent had acted as a private carrier in transporting petitioner's
lauan logs. Thus, Article 1745 and other Civil Code provisions on common
carriers which were cited by petitioner may not be applied unless expressly
stipulated by the parties in their charter party. 16
In a contract of private carriage, the parties may validly stipulate that
responsibility for the cargo rests solely on the charterer, exempting the
shipowner from liability for loss of or damage to the cargo caused even by
the negligence of the ship captain. Pursuant to Article 1306 17 of the Civil
Code, such stipulation is valid because it is freely entered into by the
parties and the same is not contrary to law, morals, good customs, public
order, or public policy. Indeed, their contract of private carriage is not even
a contract of adhesion. We stress that in a contract of private carriage, the
parties may freely stipulate their duties and obligations which perforce
would be binding on them. Unlike in a contract involving a common carrier,
private carriage does not involve the general public. Hence, the stringent
provisions of the Civil Code on common carriers protecting the general
public cannot justifiably be applied to a ship transporting commercial goods
as a private carrier. Consequently, the public policy embodied therein is not
contravened by stipulations in a charter party that lessen or remove the
protection given by law in contracts involving common carriers.
The issue posed in this case and the arguments raised by petitioner are not
novel; they were resolved long ago by this Court in Home Insurance Co. vs.
American Steamship Agencies, Inc. 18 In that case, the trial court similarly
nullified a stipulation identical to that involved in the present case for being
contrary to public policy based on Article 1744 of the Civil Code and Article
587 of the Code of Commerce. Consequently, the trial court held the
TRANSPO | 06Dec | 62
shipowner liable for damages resulting for the partial loss of the cargo. This even from the neglect or fault of the captain or crew or some other person
Court reversed the trial court and laid down, through Mr. Justice Jose P. employed by the owner on
Bengzon, the following well-settled observation and doctrine:
board, for whose acts the owner would ordinarily be liable except for said
paragraph." 22 Undoubtedly, Home Insurance is applicable to the case at
The provisions of our Civil Code on common carriers were taken from bar.
Anglo-American law. Under American jurisprudence, a common carrier
undertaking to carry a special cargo or chartered to a special person only, The naked assertion of petitioner that the American rule enunciated in
becomes a private carrier. As a private carrier, a stipulation exempting the Home Insurance is not the rule in the Philippines 23 deserves scant
owner from liability for the negligence of its agent is not against public consideration. The Court there categorically held that said rule was
policy, and is deemed valid.
"reasonable" and proceeded to apply it in the resolution of that case.
Petitioner miserably failed to show such circumstances or arguments which
Such doctrine We find reasonable. The Civil Code provisions on common would necessitate a departure from a well-settled rule. Consequently, our
carriers should not be applied where the carrier is not acting as such but as ruling in said case remains a binding judicial precedent based on the
a private carrier. The stipulation in the charter party absolving the owner doctrine of stare decisis and Article 8 of the Civil Code which provides that
from liability for loss due to the negligence of its agent would be void if the "(j)udicial decisions applying or interpreting the laws or the Constitution
strict public policy governing common carriers is applied. Such policy has no shall form part of the legal system of the Philippines."
force where the public at large is not involved, as in this case of a ship
totally chartered for the used of a single party. 19 (Emphasis supplied.)
In fine, the respondent appellate court aptly stated that "[in the case of] a
private carrier, a stipulation exempting the owner from liability even for the
Indeed, where the reason for the rule ceases, the rule itself does not apply. negligence of its agents is valid." 24
The general public enters into a contract of transportation with common
carriers without a hand or a voice in the preparation thereof. The riding Other Arguments
public merely adheres to the contract; even if the public wants to, it cannot
submit its own stipulations for the approval of the common carrier. Thus, On the basis of the foregoing alone, the present petition may already be
the law on common carriers extends its protective mantle against one-sided denied; the Court, however, will discuss the other arguments of petitioner
stipulations inserted in tickets, invoices or other documents over which the for the benefit and satisfaction of all concerned.
riding public has no understanding or, worse, no choice. Compared to the
general public, a charterer in a contract of private carriage is not similarly Articles 586 and 587, Code of Commerce
situated. It can and in fact it usually does enter into a free and
voluntary agreement. In practice, the parties in a contract of private Petitioner Valenzuela insists that the charter party stipulation is contrary to
carriage can stipulate the carrier's obligations and liabilities over the Articles 586 and 587 of the Code of Commerce which confer on petitioner
shipment which, in turn, determine the price or consideration of the charter. the right to recover damages from the shipowner and ship agent for the
Thus, a charterer, in exchange for convenience and economy, may opt to acts or conduct of the captain. 25 We are not persuaded. Whatever rights
set aside the protection of the law on common carriers. When the charterer petitioner may have under the aforementioned statutory provisions were
decides to exercise this option, he takes a normal business risk.
waived when it entered into the charter party.
Petitioner contends that the rule in Home Insurance is not applicable to the
present case because it "covers only a stipulation exempting a private
carrier from liability for the negligence of his agent, but it does not apply to
a stipulation exempting a private carrier like private respondent from the
negligence of his employee or servant which is the situation in this case."
20 This contention of petitioner is bereft of merit, for it raises a distinction
without any substantive difference. The case Home Insurance specifically
dealt with "the liability of the shipowner for acts or negligence of its captain
and crew" 21 and a charter party stipulation which "exempts the owner of
the vessel from any loss or damage or delay arising from any other source,
Article 6 of the Civil Code provides that "(r)ights may be waived, unless the
waiver is contrary to law, public order, public policy, morals, or good
customs, or prejudicial to a person with a right recognized by law." As a
general rule, patrimonial rights may be waived as opposed to rights to
personality and family rights which may not be made the subject of waiver.
26 Being patently and undoubtedly patrimonial, petitioner's right conferred
under said articles may be waived. This, the petitioner did by acceding to
the contractual stipulation that it is solely responsible or any damage to the
cargo, thereby exempting the private carrier from any responsibility for loss
or damage thereto. Furthermore, as discussed above, the contract of
private carriage binds petitioner and private respondent alone; it is not
TRANSPO | 06Dec | 63
imbued with public policy considerations for the general public or third
persons are not affected thereby.
Articles 1170 and 1173, Civil Code
Petitioner likewise argues that the stipulation subject of this controversy is
void for being contrary to Articles 1170 and 1173 of the Civil Code 27 which
read:
Art. 1170.
Those who in the performance of their obligations are guilty
of fraud, negligence, or delay, and those who in any manner contravene the
tenor thereof, are liable for damages
Art. 1173.
The fault or negligence of the obligor consists in the
omission of that diligence which is required by the nature of the obligation
and corresponds with the circumstances of the persons, of the time and of
the place. When negligence shows bad faith, the provisions of articles 1171
and 2201, shall apply.
If the law does not state the diligence which is to be observed in the
performance, that which is expected of a good father of a family shall be
required.
The Court notes that the foregoing articles are applicable only to the obligor
or the one with an obligation to perform. In the instant case, Private
Respondent Seven Brothers is not an obligor in respect of the cargo, for this
obligation to bear the loss was shifted to petitioner by virtue of the charter
party. This shifting of responsibility, as earlier observed, is not void. The
provisions cited by petitioner are, therefore, inapplicable to the present
case.
Moreover, the factual milieu of this case does not justify the application of
the second paragraph of Article 1173 of the Civil Code which prescribes the
standard of diligence to be observed in the event the law or the contract is
silent. In the instant case, Article 362 of the Code of Commerce 28 provides
the standard of ordinary diligence for the carriage of goods by a carrier. The
standard of diligence under this statutory provision may, however, be
modified in a contract of private carriage as the petitioner and private
respondent had done in their charter party.
Cases Cited by Petitioner Inapplicable
Petitioner cites Shewaram vs. Philippine Airlines, Inc. 29 which, in turn,
quoted Juan Ysmael & Co. vs. Gabino Barreto & Co. 30 and argues that the
public policy considerations stated there vis-a-vis contractual stipulations
limiting the carrier's liability be applied "with equal force" to this case. 31 It
also cites Manila Railroad Co. vs. Compaia Transatlantica 32 and contends
TRANSPO | 06Dec | 64
amount paid by the insurance company does not fully cover the loss. Article
2207 of the Civil Code provides:
Art. 2207.
If the plaintiff's property has been insured, and he has
received indemnity for 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 form the person
causing the loss or injury.
WHEREFORE, premises considered, the petition is hereby DENIED for its
utter failure to show any reversible error on the part of Respondent Court.
The assailed Decision is AFFIRMED.
SO ORDERED.
TRANSPO | 06Dec | 65
The Facts
The CA Ruling
In a Decision15 dated May 31, 2013, the CA affirmed the ruling of the RTC
in toto.16 It held that the killing of Battung cannot be deemed as a
fortuitous event, considering that such killing happened right inside
petitioner's bus and that petitioner, et al. did not take any safety measures
in ensuring that no deadly weapon would be smuggled inside the bus.17
In their defense, petitioner, et al. maintained that they had exercised the
extraordinary diligence required by law from common carriers. In this
relation, they claimed that a common carrier is not an absolute insurer of
its passengers and that Battung's death should be properly deemed a
fortuitous event. Thus, they prayed for the dismissal of the complaint, as
I.
TRANSPO | 06Dec | 66
Thus, it is clear that neither the law nor the nature of the business of a
transportation company makes it an insurer of the passenger's safety, but
that its liability for personal injuries sustained by its passenger rests upon
its negligence, its failure to exercise the degree of diligence that the law
requires.23
(Emphases
and
underscoring
supplied)ChanRoblesVirtualawlibrary
Therefore, it is imperative for a party claiming against a common carrier
under the above-said provisions to show that the injury or death to the
passenger/s arose from the negligence of the common carrier and/or its
employees in providing safe transport to its passengers.
In Pilapil v. CA,24 the Court clarified that where the injury sustained by the
passenger was in no way due (1) to any defect in the means of transport or
in the method of transporting, or (2) to the negligent or willful acts of the
common carrier's employees with respect to the foregoing - such as when
the injury arises wholly from causes created by strangers which the carrier
had no control of or prior knowledge to prevent there would be no issue
regarding the common carrier's negligence in its duty to provide safe and
suitable care, as well as competent employees in relation to its transport
business; as such, the presumption of fault/negligence foisted under Article
1756 of the Civil Code should not apply:
First, as stated earlier, the presumption of fault or negligence against the
carrier is only a disputable presumption.[The presumption] gives in where
contrary facts are established proving either that the carrier had exercised
the degree of diligence required by law or the injury suffered by the
passenger was due to a fortuitous event. Where, as in the instant case, the
injury sustained by the petitioner was in no way due to any defect in the
means of transport or in the method of transporting or to the negligent or
wilful acts of [the common carrier'sl employees, and therefore involving no
issue of negligence in its duty to provide safe and suitable [care] as well as
competent employees, with the injury arising wholly from causes created by
strangers over which the carrier had no control or even knowledge or could
not have prevented, the presumption is rebutted and the carrier is not and
ought not to be held liable. To rule otherwise would make the common
carrier the insurer of the absolute safety of its passengers which is not the
intention of the lawmakers. (Emphasis and underscoring supplied)
In this case, Battung's death was neither caused by any defect in the
means of transport or in the method of transporting, or to the negligent or
willful acts of petitioner's employees, namely, that of Duplio and Daraoay, in
their capacities as driver and conductor, respectively. Instead, the case
involves the death of Battung wholly caused by the surreptitious act of a
co-passenger who, after consummating such crime, hurriedly alighted from
the vehicle.25 Thus, there is no proper issue on petitioner's duty to observe
TRANSPO | 06Dec | 67
ensure the safety of its passengers. There was also no showing that during
the course of the trip, Battung's killer made suspicious actions which would
have forewarned petitioner's employees of the need to conduct thorough
checks on him or any of the passengers. Relevantly, the Court, in Nocum v.
Laguna Tayabas Bus Company,29 has held that common carriers should be
given sufficient leeway in assuming that the passengers they take in will not
bring anything that would prove dangerous to himself, as well as his copassengers, unless there is something that will indicate that a more
stringent inspection should be made, viz.:
In this particular case before Us, it must be considered that while it is true
the passengers of appellant's bus should not be made to suffer for
something over which they had no control, as enunciated in the decision of
this Court cited by His Honor, fairness demands that in measuring a
common carrier's duty towards its passengers, allowance must be given to
the reliance that should be reposed on the sense of responsibility of all the
passengers in regard to their common safety. It is to be presumed that a
Case law states that the concept of diligence of a good father of a family passenger will not take with him anything dangerous to the lives and limbs
"connotes reasonable care consistent with that which an ordinarily prudent of his co-passengers, not to speak of his own. Not to be lightly considered
person would have observed when confronted with a similar situation. The must be the right to privacy to which each passenger is entitled. He cannot
test to determine whether negligence attended the performance of an be subjected to any unusual search, when he protests the innocuousness of
obligation is: did the defendant in doing the alleged negligent act use that his baggage and nothing appears to indicate the contrary, as in the case at
reasonable care and caution which an ordinarily prudent person would have bar. In other words, inquiry may be verbally made as to the nature of a
used in the same situation? If not, then he is guilty of negligence."26
passenger's baggage when such is not outwardly perceptible, but beyond
this, constitutional boundaries are already in danger of being transgressed.
In ruling on this case, the CA cited Fortune Express, Inc. v. Court of Calling a policeman to his aid, as suggested by the service manual invoked
Appeals27 (Fortune) in ascribing negligence on the part of petitioner, by the trial judge, in compelling the passenger to submit to more rigid
ratiocinating that it failed to implement measures to detect if its passengers inspection, after the passenger had already declared that the box contained
were carrying firearms or deadly weapons which would pose a danger to mere clothes and other miscellaneous, could not have justified invasion of a
the other passengers.28 However, the CA's reliance was plainly misplaced constitutionally protected domain. Police officers acting without judicial
in view of Fortune's factual variance with the case at bar.
authority secured in the manner provided by law are not beyond the pale of
constitutional inhibitions designed to protect individual human rights and
In Fortune, the common carrier had already received intelligence reports liberties. Withal, what must be importantly considered here is not so much
from law enforcement agents that certain lawless elements were planning the infringement of the fundamental sacred rights of the particular
to hijack and burn some of its buses; and yet, it failed to implement the passenger herein involved, but the constant threat any contrary ruling
necessary precautions to ensure the safety of its buses and its passengers. would pose on the right of privacy of all passengers of all common carriers,
A few days later, one of the company's buses was indeed hijacked and considering how easily the duty to inspect can be made an excuse for
burned by the lawless elements pretending as mere passengers, resulting in mischief and abuse. Of course, when there are sufficient indications that
the death of one of the bus passengers. Accordingly, the Court held that the the representations of the passenger regarding the nature of his baggage
common carrier's failure to take precautionary measures to protect the may not be true, in the interest of the common safety of all, the assistance
safety of its passengers despite warnings from law enforcement agents of the police authorities may be solicited, not necessarily to force the
showed that it failed to exercise the diligence of a good father of a family in passenger to open his baggage, but to conduct the needed investigation
preventing the attack against one of its buses; thus, the common carrier consistent with the rules of propriety and, above all, the constitutional
was rightfully held liable for the death of the aforementioned passenger.
rights of the passenger. It is in this sense that the mentioned service
manual issued by appellant to its conductors must be understood.30
In contrast, no similar danger was shown to exist in this case so as to impel (Emphases and underscoring supplied)
petitioner or its employees to implement heightened security measures to
TRANSPO | 06Dec | 68
In this case, records reveal that when the bus stopped at San Jose City to
let four (4) men ride petitioner's bus (two [2] of which turned out to be
Battung's murderers), the bus driver, Duplio, saw them get on the bus and
even took note of what they were wearing. Moreover, Duplio made the bus
conductor, Daraoay, approach these men and have them pay the
corresponding fare, which Daraoay did.31 During the foregoing, both Duplio
and Daraoay observed nothing which would rouse their suspicion that the
men were armed or were to carry out an unlawful activity. With no such
indication, there was no need for them to conduct a more stringent search
(i.e., bodily search) on the aforesaid men. By all accounts, therefore, it
cannot be concluded that petitioner or any of its employees failed to employ
the diligence of a good father of a family in relation to its responsibility
under Article 1763 of the Civil Code. As such, petitioner cannot altogether
be held civilly liable.
WHEREFORE, the petition is GRANTED. Accordingly, the Decision dated May
31, 2013 and the Resolution dated August 23, 2013 of the Court of Appeals
in CA-G.R. CV No. 97757 are hereby REVERSED and SET ASIDE.
Accordingly, the complaint for damages filed by respondents heirs of Romeo
L. Battung, Jr. is DISMISSED for lack of merit.
SO ORDERED.
TRANSPO | 06Dec | 69
Reyes, Wilfredo
J76TH
Reyes, Juanita
HDWC3
H9VZF
Lapuz, Sixta
HTFMG4
On 12 April 1997, Wilfredo, together with his wife Juanita Reyes (Juanita),
son Michael Roy Reyes (Michael) and mother-in-law Sixta Lapuz (Sixta),
flew to Adelaide, Australia without a hitch.
One week before they were scheduled to fly back home, Wilfredo
reconfirmed his familys return flight with the Cathay Pacific office in
Adelaide. They were advised that the reservation was "still okay as
scheduled."
On the day of their scheduled departure from Adelaide, Wilfredo and his
family arrived at the airport on time. When the airport check-in counter
opened, Wilfredo was informed by a staff from Cathay Pacific that the
Reyeses did not have confirmed reservations, and only Sixtas flight booking
was confirmed. Nevertheless, they were allowed to board the flight to
HongKong due to adamant pleas from Wilfredo. When they arrived in
HongKong, they were again informed of the same problem. Unfortunately
this time, the Reyeses were not allowed to board because the flight to
Manila was fully booked. Only Sixta was allowed to proceed to Manila from
HongKong. On the following day, the Reyeses were finally allowed to board
the next flight bound for Manila.
Upon arriving in the Philippines, Wilfredo went to Sampaguita Travel to
report the incident. He was informed by Sampaguita Travel that it was
actually Cathay Pacific which cancelled their bookings.
On 16 June 1997, respondents as passengers, through counsel, sent a
letter to Cathay Pacific advising the latter of the incident and demanding
payment of damages.
After a series of exchanges and with no resolution in sight, respondents
filed a Complaint for damages against Cathay Pacific and Sampaguita Travel
and prayed for the following relief: a) P1,000,000.00 as moral damages;
b) P300,000.00 as actual damages; c) P100,000.00 as exemplary
damages; and d) P100,000.00 as attorneys fees.5
In its Answer, Cathay Pacific alleged that based on its computerized booking
system, several and confusing bookings were purportedly made under the
names of respondents through two (2) travel agencies, namely:
Sampaguita Travel and Rajah Travel Corporation. Cathay Pacific explained
that only the following Passenger Name Records (PNRs) appeared on its
system: PNR No. H9V15, PNR No. HTFMG, PNR No. J9R6E, PNR No. J76TH,
and PNR No. H9VSE. Cathay Pacific went on to detail each and every
booking, to wit:
1. PNR No. H9V15
Agent: Sampaguita Travel Corp.
Party: Ms. J Reyes, Mr. M R Reyes, Mr. W Reyes
Itinerary: CX902/CX105 MNL/HKG/ADL 12 APR.
The itinerary listed above was confirmed booking. However, the itinerary did
not include booking for the return flights. From information retrieved from
TRANSPO | 06Dec | 70
ABACUS (the booking system used by agents), the agent has, on 10 April,
added segments CX104/CX905 ADL/HKG/MNL 04 MAY on MK status, which
was not a confirmed booking. MK function is used for synchronizing records
or for ticketing purposes only. It does not purport to be a real booking. As a
result, no booking was transmitted into CPAs system.
2. PNR No. HTFMG
Itinerary:
CX902/CX105
ADL/HKG/MNL 04/05 MAY.
12
APR,
CX104/CX907
The above itinerary is the actual itinerary that the passenger has flown.
However, for the return sector, HKG/MNL, the original booking was on
CX905 of 04 May. This original booking was confirmed on 21 Mar. and
ticketed on 11 Apr.
This booking was cancelled on 04 May at 9:03 p.m. when CX905 was
almost scheduled to leave at the behest of the passenger and she was rebooked on CX907 of 05 May at the same time.
3. PNR No. J9R6E
Agent: Rajah Travel Corp.
Party: Mrs. Julieta Gaspar, Mrs. Sixta Lapuz, Mrs. Juanita Reyes,
Mr. Michael Roy Reyes, Mr. Wilfredo Reyes.
Itinerary: CX900 & CX902 MNL/HKG 12 APR, CX105 HKG/ADL 12 APR,
CX104/CX905 ADL/HKG/MNL 04 MAY & 07 MAY
TRANSPO | 06Dec | 71
PNR No.
Lapuz, Sixta
H9V15/ J76TH
Reyes, Wilfredo
H9V15/HDWC3
H9V15/H9VZF
Reyes, Juanita
HTFMG7
Sampaguita Travel explained that the Reyeses had two (2) PNRs each
because confirmation from Cathay Pacific was made one flight segment at a
time. Sampaguita Travel asserted that it only issued the tickets after Cathay
Pacific confirmed the bookings. Furthermore, Sampaguita Travel exonerated
itself from liability for damages because respondents were claiming for
damages arising from a breach of contract of carriage. Sampaguita Travel
likewise filed a cross-claim against Cathay Pacific and a counterclaim for
damages.
During the pre-trial, the parties agreed on the following stipulation of facts:
1. That the plaintiffs did not deal directly with Cathay Pacific
Airways;
2. That the plaintiffs did not make their bookings directly with
Cathay Pacific Airways;
3. That the plaintiffs did not purchase and did not get their tickets
from Cathay Pacific Airways;
4. That Cathay Pacific Airways has promptly replied to all
communications sent by the plaintiffs through their counsel;
5. That the plane tickets issued to plaintiffs were valid, which is why
they were able to depart from Manila to Adelaide, Australia and that
the reason why they were not able to board their return flight from
Adelaide was because of the alleged cancellation of their booking by
Cathay Pacific Airways at Adelaide, save for that of Sixta Lapuz
whose booking was confirmed by Cathay Pacific Airways;
6. That several reservations and bookings for the plaintiffs were
done by defendant Sampaguita Travel Corporation through the
After trial on the merits, the Regional Trial Court (RTC) rendered a
Decision,9 the dispositive part of which reads:
WHEREFORE, premises considered, judgment is hereby rendered in favor of
the defendants and against the herein plaintiff. Accordingly, plaintiffs
complaint is hereby ordered DISMISSED for lack of merit. Defendants
counterclaims and cross-claims are similarly ordered dismissed for lack of
merit. No pronouncement as to cost.10
The trial court found that respondents were in possession of valid tickets
but did not have confirmed reservations for their return trip to Manila.
Additionally, the trial court observed that the several PNRs opened by
Sampaguita Travel created confusion in the bookings. The trial court
however did not find any basis to establish liability on the part of either
Cathay Pacific or Sampaguita Travel considering that the cancellation was
not without any justified reason. Finally, the trial court denied the claims for
damages for being unsubstantiated.
Respondents appealed to the Court of Appeals. On 22 October 2008, the
Court of Appeals ordered Cathay Pacific to pay P25,000.00 each to
respondents as nominal damages.
TRANSPO | 06Dec | 72
Upon denial of their motion for reconsideration, Cathay Pacific filed the
instant petition for review assigning the following as errors committed by
the Court of Appeals:
A.
WHETHER OR NOT THE COURT OF APPEALS COMMITTED A CLEAR
AND REVERSIBLE ERROR IN HOLDING THAT CATHAY PACIFIC
AIRWAYS IS LIABLE FOR NOMINAL DAMAGES FOR ITS ALLEGED
INITIAL BREACH OF CONTRACT WITH THE PASSENGERS EVEN
THOUGH CATHAY PACIFIC AIRWAYS WAS ABLE TO PROVE BEYOND
REASONABLE DOUBT THAT IT WAS NOT AT FAULT FOR THE
PREDICAMENT OF THE RESPONDENT PASSENGERS.
B.
WHETHER OR NOT THE COURT OF APPEALS COMMITTED A CLEAR
AND REVERSIBLE ERROR IN RELYING ON MATTERS NOT PROVED
DURING THE TRIAL AND NOT SUPPORTED BY THE EVIDENCE AS
BASIS FOR HOLDING CATHAY PACIFIC AIRWAYS LIABLE FOR
NOMINAL DAMAGES.
C.
At the outset, it bears pointing out that respondent Sixta had no cause of
action against Cathay Pacific or Sampaguita Travel. The elements of a cause
of action consist of: (1) a right existing in favor of the plaintiff, (2) a duty
on the part of the defendant to respect the plaintiffs right, and (3) an act
or omission of the defendant in violation of such right. 12 As culled from the
records, there has been no violation of any right or breach of any duty on
the part of Cathay Pacific and Sampaguita Travel. As a holder of a valid
booking, Sixta had the right to expect that she would fly on the flight and
on the date specified on her airplane ticket. Cathay Pacific met her
expectations and Sixta was indeed able to complete her flight without any
trouble. The absence of any violation to Sixtas right as passenger
effectively deprived her of any relief against either Cathay Pacific or
Sampaguita Travel.
E.
TRANSPO | 06Dec | 73
TRANSPO | 06Dec | 74
actual amount of loss. Credence can be given only to claims which are duly
supported by receipts.17
We echo the findings of the trial court that respondents failed to show proof
of actual damages. Wilfredo initially testified that he personally incurred
losses amounting to P300,000.00 which represents the amount of the
contract that he was supposedly scheduled to sign had his return trip not
been cancelled. During the cross-examination however, it appears that the
supposed contract-signing was a mere formality and that an agreement had
already been hatched beforehand. Hence, we cannot fathom how said
contract did not materialize because of Wilfredos absence, and how
Wilfredo incurred such losses when he himself admitted that he entered
into said contract on behalf of Parsons Engineering Consulting Firm, where
he worked as construction manager. Thus, if indeed there were losses,
these were losses suffered by the company and not by Wilfredo. Moreover,
he did not present any documentary evidence, such as the actual contract
or affidavits from any of the parties to said contract, to substantiate his
claim of losses. With respect to the remaining passengers, they likewise
failed to present proof of the actual losses they suffered.
Under Article 2220 of the Civil Code of the Philippines, an award of moral
damages, in breaches of contract, is in order upon a showing that the
defendant acted fraudulently or in bad faith. 18 What the law considers as
bad faith which may furnish the ground for an award of moral damages
would be bad faith in securing the contract and in the execution thereof, as
well as in the enforcement of its terms, or any other kind of deceit. In the
same vein, to warrant the award of exemplary damages, defendant must
have acted in wanton, fraudulent, reckless, oppressive, or malevolent
manner.19
In the instant case, it was proven by Cathay Pacific that first, it extended all
possible accommodations to respondents.1wphi1 They were promptly
informed of the problem in their bookings while they were still at the
Adelaide airport. Despite the non-confirmation of their bookings,
respondents were still allowed to board the Adelaide to Hong Kong flight.
Upon arriving in Hong Kong, they were again informed that they could not
be accommodated on the next flight because it was already fully booked.
They were however allowed to board the next available flight on the
following day. Second, upon receiving the complaint letter of respondents,
Cathay Pacific immediately addressed the complaint and gave an
explanation on the cancellation of their flight bookings.
The Court of Appeals is correct in stating that "what may be attributed to x
x x Cathay Pacific is negligence concerning the lapses in their process of
confirming passenger bookings and reservations, done through travel
agencies. But this negligence is not so gross so as to amount to bad
faith."20 Cathay Pacific was not motivated by malice or bad faith in not
allowing respondents to board on their return flight to Manila. It is evident
and was in fact proven by Cathay Pacific that its refusal to honor the return
flight bookings of respondents was due to the cancellation of one booking
and the two other bookings were not reflected on its computerized booking
system.
Likewise, Sampaguita Travel cannot be held liable for moral damages. True,
Sampaguita Travel was negligent in the conduct of its booking and ticketing
which resulted in the cancellation of flights. But its actions were not proven
to have been tainted with malice or bad faith. Under these circumstances,
respondents
are
not
entitled
to
moral
and
exemplary
damages.1wphi1 With respect to attorneys fees, we uphold the appellate
courts finding on lack of factual and legal justification to award attorneys
fees.
We however sustain the award of nominal damages in the amount
of P25,000.00 to only three of the four respondents who were aggrieved by
the last-minute cancellation of their flights. Nominal damages are
recoverable where a legal right is technically violated and must be
vindicated against an invasion that has produced no actual present loss of
any kind or where there has been a breach of contract and no substantial
injury or actual damages whatsoever have been or can be shown. 21 Under
Article 2221 of the Civil Code, nominal damages may be awarded to a
plaintiff whose right has been violated or invaded by the defendant, for the
purpose of vindicating or recognizing that right, not for indemnifying the
plaintiff for any loss suffered.
Considering that the three respondents were denied boarding their return
flight from HongKong to Manila and that they had to wait in the airport
overnight for their return flight, they are deemed to have technically
suffered injury. Nonetheless, they failed to present proof of actual damages.
Consequently, they should be compensated in the form of nominal
damages.
The amount to be awarded as nominal damages shall be equal or at least
commensurate to the injury sustained by respondents considering the
concept and purpose of such damages. The amount of nominal damages to
be awarded may also depend on certain special reasons extant in the
case.22
The amount of such damages is addressed to the sound discretion of the
court and taking into account the relevant circumstances, 23 such as the
failure of some respondents to board the flight on schedule and the slight
breach in the legal obligations of the airline company to comply with the
terms of the contract, i.e., the airplane ticket and of the travel agency to
TRANSPO | 06Dec | 75
make the correct bookings. We find the award of P25,000.00 to the Reyeses
correct and proper.
Cathay Pacific and Sampaguita Travel acted together in creating the
confusion in the bookings which led to the erroneous cancellation of
respondents bookings. Their negligence is the proximate cause of the
technical injury sustained by respondents. Therefore, they have become
joint tortfeasors, whose responsibility for quasi-delict, under Article 2194 of
the Civil Code, is solidary.
Based on the foregoing, Cathay Pacific and Sampaguita Travel are jointly
and solidarily liable for nominal damages awarded to respondents Wilfredo,
Juanita and Michael Roy.
WHEREFORE, the Petition is DENIED. The 22 October 2008 Decision of the
Court of Appeals is AFFIRMED with MODIFICATION that Sampaguita Travel
is held to be solidarily liable with Cathay Pacific in the payment of nominal
damages of ~25,000.00 each for Wilfredo Reyes, Juanita Reyes, and
Michael Rox Reyes. The complaint of respondent Sixta
Lapuz is DISMISSED for lack of cause of action.
SO ORDERED.
TRANSPO | 06Dec | 76
of LOADSTAR and its employees. It also prayed that PGAI be ordered to pay
the insurance proceeds from the loss the vessel directly to MIC, said
amount to be deducted from MIC's claim from LOADSTAR.
In its answer, LOADSTAR denied any liability for the loss of the shipper's
goods and claimed that sinking of its vessel was due to force majeure.
PGAI, on the other hand, averred that MIC had no cause of action against
it, LOADSTAR being the party insured. In any event, PGAI was later
dropped as a party defendant after it paid the insurance proceeds to
LOADSTAR.
As stated at the outset, the court a quo rendered judgment in favor of MIC,
prompting LOADSTAR to elevate the matter to the court of Appeals, which,
however, agreed with the trial court and affirmed its decision in toto.
2)
As a common carrier, it is the Code of Commerce, not the Civil
Code, which should be applied in determining the rights and liabilities of the
parties.
b)
c)
The goods, amounting to P6,067,178, were insured for the same amount
with MIC against various risks including "TOTAL LOSS BY TOTAL OF THE
LOSS THE VESSEL." The vessel, in turn, was insured by Prudential
Guarantee & Assurance, Inc. (hereafter PGAI) for P4 million. On 20
November 1984, on its way to Manila from the port of Nasipit, Agusan del
Norte, the vessel, along with its cargo, sank off Limasawa Island. As a
result of the total loss of its shipment, the consignee made a claim with
LOADSTAR which, however, ignored the same. As the insurer, MIC paid
P6,075,000 to the insured in full settlement of its claim, and the latter
executed a subrogation receipt therefor.
On 4 February 1985, MIC filed a complaint against LOADSTAR and PGAI,
alleging that the sinking of the vessel was due to the fault and negligence
3)
The vessel was not seaworthy because it was undermanned on the
day of the voyage. If it had been seaworthy, it could have withstood the
"natural and inevitable action of the sea" on 20 November 1984, when the
condition of the sea was moderate. The vessel sank, not because of force
majeure, but because it was not seaworthy. LOADSTAR'S allegation that the
sinking was probably due to the "convergence of the winds," as stated by a
PAGASA expert, was not duly proven at the trial. The "limited liability" rule,
therefore, is not applicable considering that, in this case, there was an
actual finding of negligence on the part of the carrier. 5
4)
Between MIC and LOADSTAR, the provisions of the Bill of Lading do
not apply because said provisions bind only the shipper/consignee and the
carrier. When MIC paid the shipper for the goods insured, it was subrogated
to the latter's rights as against the carrier, LOADSTAR. 6
5)
There was a clear breach of the contract of carriage when the
shipper's goods never reached their destination. LOADSTAR's defense of
"diligence of a good father of a family" in the training and selection of its
crew is unavailing because this is not a proper or complete defense in culpa
contractual.
TRANSPO | 06Dec | 77
6)
"Art. 361 (of the Code of Commerce) has been judicially construed
to mean that when goods are delivered on board a ship in good order and
condition, and the shipowner delivers them to the shipper in bad order and
condition, it then devolves upon the shipowner to both allege and prove
that the goods were damaged by reason of some fact which legally exempts
him from liability." Transportation of the merchandise at the risk and
venture of the shipper means that the latter bears the risk of loss or
deterioration of his goods arising from fortuitous events, force majeure, or
the inherent nature and defects of the goods, but not those caused by the
presumed negligence or fault of the carrier, unless otherwise proved. 7
The errors assigned by LOADSTAR boil down to a determination of the
following issues:
(1)
(2)
Did LOADSTAR observe due and/or ordinary diligence in these
premises.
Regarding the first issue, LOADSTAR submits that the vessel was a private
carrier because it was not issued certificate of public convenience, it did not
have a regular trip or schedule nor a fixed route, and there was only "one
shipper, one consignee for a special cargo."
In refutation, MIC argues that the issue as to the classification of the M/V
"Cherokee" was not timely raised below; hence, it is barred by estoppel.
While it is true that the vessel had on board only the cargo of wood
products for delivery to one consignee, it was also carrying passengers as
part of its regular business. Moreover, the bills of lading in this case made
no mention of any charter party but only a statement that the vessel was a
"general cargo carrier." Neither was there any "special arrangement"
between LOADSTAR and the shipper regarding the shipment of the cargo.
The singular fact that the vessel was carrying a particular type of cargo for
one shipper is not sufficient to convert the vessel into a private carrier.
Finally, LOADSTAR avers that MIC's claim had already prescribed, the case
having been instituted beyond the period stated in the bills of lading for
instituting the same suits based upon claims arising from shortage,
damage, or non-delivery of shipment shall be instituted within sixty days
from the accrual of the right of action. The vessel sank on 20 November
1984; yet, the case for recovery was filed only on 4 February 1985.
Secondly, LOADSTAR did not raise the issue of prescription in the court
below; hence, the same must be deemed waived.
LOADSTAR also maintains that the vessel was seaworthy. Before the fateful
voyage on 19 November 1984, the vessel was allegedly dry docked at
Keppel Philippines Shipyard and was duly inspected by the maritime safety
engineers of the Philippine Coast Guard, who certified that the ship was fit
to undertake a voyage. Its crew at the time was experienced, licensed and
unquestionably competent. With all these precautions, there could be no
MIC, on the other hand, claims that LOADSTAR was liable, notwithstanding
that the loss of the cargo was due to force majeure, because the same
concurred with LOADSTAR's fault or negligence.
Thirdly, the " limited liability " theory is not applicable in the case at bar
because LOADSTAR was at fault or negligent, and because it failed to
maintain a seaworthy vessel. Authorizing the voyage notwithstanding its
knowledge of a typhoon is tantamount to negligence.
We find no merit in this petition.
TRANSPO | 06Dec | 78
Anent the first assigned error, we hold that LOADSTAR is a common carrier.
It is not necessary that the carrier be issued a certificate of public
convenience, and this public character is not altered by the fact that the
carriage of the goods in question was periodic, occasional, episodic or
unscheduled.
In support of its position, LOADSTAR relied on the 1968 case of Home
Insurance Co. v. American Steamship Agencies, Inc., 11 where this Court
held that a common carrier transporting special cargo or chartering the
vessel to a special person becomes a private carrier that is not subject to
the provisions of the Civil Code. Any stipulation in the charter party
absolving the owner from liability for loss due to the negligence of its agent
is void only if the strict policy governing common carriers is upheld. Such
policy has no force where the public at is not involved, as in the case of a
ship totally chartered for the use of a single party. LOADSTAR also cited
Valenzuela Hardwood and Industrial Supply, Inc. v. Court of Appeals 12 and
National Steel Corp. v. Court of Appeals, 13 both of which upheld the Home
Insurance doctrine.
These cases invoked by LOADSTAR are not applicable in the case at bar for
the simple reason that the factual settings are different. The records do not
disclose that the M/V "Cherokee," on the date in question, undertook to
carry a special cargo or was chartered to a special person only. There was
no charter party. The bills of lading failed to show any special arrangement,
but only a general provision to the effect that the M/V"Cherokee" was a
"general cargo carrier." 14 Further, the bare fact that the vessel was
carrying a particular type of cargo for one shipper, which appears to be
purely coincidental, is not reason enough to convert the vessel from a
common to a private carrier, especially where, as in this case, it was shown
that the vessel was also carrying passengers.
Under the facts and circumstances obtaining in this case, LOADSTAR fits the
definition of a common carrier under Article 1732 of the Civil Code. In the
case of De Guzman v. Court of Appeals, 15 the Court juxtaposed the
statutory definition of "common carriers" with the peculiar circumstances of
that case, viz.:
The Civil Code defines "common carriers" in the following terms:
Art. 1732.
Common carriers are persons, corporations, firms or
associations engaged in the business of carrying or transporting passengers
or goods or both, by land, water, or air for compensation, offering their
services to the public.
The above article makes no distinction between one whose principal
business activity is the carrying of persons or goods or both, and one who
does such carrying only as ancillary activity (in local idiom, as "a sideline".
Article 1732 also carefully avoids making any distinction between a person
or enterprise offering transportation service on a regular or scheduled basis
and one offering such service on an occasional, episodic or unscheduled
basis. Neither does Article 1732 distinguish between a carrier offering its
services to the "general public," i.e., the general community or population,
and one who offers services or solicits business only from a narrow
segment of the general population. We think that Article 1733 deliberately
refrained from making such distinctions.
xxx
xxx
xxx
TRANSPO | 06Dec | 79
Since the stipulation in question is null and void, it follows that when MIC
paid the shipper, it was subrogated to all the rights which the latter has
against the common carrier, LOADSTAR.
Neither is there merit to the contention that the claim in this case was
barred by prescription. MIC's cause of action had not yet prescribed at the
time it was concerned. Inasmuch as neither the Civil Code nor the Code of
Commerce states a specific prescriptive period on the matter, the Carriage
of Goods by Sea Act (COGSA) which provides for a one-year period of
limitation on claims for loss of, or damage to, cargoes sustained during
transit may be applied suppletorily to the case at bar. This one-year
prescriptive period also applies to the insurer of the goods. 22 In this case,
the period for filing the action for recovery has not yet elapsed. Moreover, a
stipulation reducing the one-year period is null and void; 23 it must,
accordingly, be struck down.
WHEREFORE, the instant petition is DENIED and the challenged decision of
30 January 1997 of the Court of Appeals in CA-G.R. CV No. 36401 is
AFFIRMED. Costs against petitioner.1wphi1.nt
SO ORDERED.
TRANSPO | 06Dec | 80
MELENCIO-HERRERA, J.:
These two cases, both for the recovery of the value of cargo insurance,
arose from the same incident, the sinking of the M/S ASIATICA when it
caught fire, resulting in the total loss of ship and cargo.
On June 16, 1978, respondents Nisshin Fire & Marine Insurance Co.
NISSHIN for short), and Dowa Fire & Marine Insurance Co., Ltd. (DOWA, for
brevity), as subrogees of the insured, filed suit against Petitioner Carrier for
the recovery of the insured value of the cargo lost with the then Court of
First Instance of Manila, Branch 11 (Civil Case No. 116151), imputing
unseaworthiness of the ship and non-observance of extraordinary diligence
by petitioner Carrier.
In G.R. No. 69044, sometime in or prior to June, 1977, the M/S ASIATICA,
a vessel operated by petitioner Eastern Shipping Lines, Inc., (referred to
hereinafter as Petitioner Carrier) loaded at Kobe, Japan for transportation to
Manila, 5,000 pieces of calorized lance pipes in 28 packages valued at
P256,039.00 consigned to Philippine Blooming Mills Co., Inc., and 7 cases of
spare parts valued at P92,361.75, consigned to Central Textile Mills, Inc.
Both sets of goods were insured against marine risk for their stated value
with respondent Development Insurance and Surety Corporation.
In G.R. No. 71478, during the same period, the same vessel took on board
128 cartons of garment fabrics and accessories, in two (2) containers,
consigned to Mariveles Apparel Corporation, and two cases of surveying
instruments consigned to Aman Enterprises and General Merchandise. The
128 cartons were insured for their stated value by respondent Nisshin Fire
& Marine Insurance Co., for US $46,583.00, and the 2 cases by respondent
Dowa Fire & Marine Insurance Co., Ltd., for US $11,385.00.
Enroute for Kobe, Japan, to Manila, the vessel caught fire and sank,
resulting in the total loss of ship and cargo. The respective respondent
Insurers paid the corresponding marine insurance values to the consignees
concerned and were thus subrogated unto the rights of the latter as the
insured.
Petitioner Carrier denied liability on the principal grounds that the fire which
caused the sinking of the ship is an exempting circumstance under Section
4(2) (b) of the Carriage of Goods by Sea Act (COGSA); and that when the
loss of fire is established, the burden of proving negligence of the vessel is
shifted to the cargo shipper.
On September 15, 1980, the Trial Court rendered judgment in favor of
NISSHIN and DOWA in the amounts of US $46,583.00 and US $11,385.00,
respectively, with legal interest, plus attorney's fees of P5,000.00 and
costs. On appeal by petitioner, the then Court of Appeals on September 10,
1984, affirmed with modification the Trial Court's judgment by decreasing
the amount recoverable by DOWA to US $1,000.00 because of $500 per
package limitation of liability under the COGSA.
Hence, this Petition for Review on certiorari by Petitioner Carrier.
TRANSPO | 06Dec | 81
Both Petitions were initially denied for lack of merit. G.R. No. 69044 on
January 16, 1985 by the First Division, and G. R. No. 71478 on September
25, 1985 by the Second Division. Upon Petitioner Carrier's Motion for
Reconsideration, however, G.R. No. 69044 was given due course on March
25, 1985, and the parties were required to submit their respective
Memoranda, which they have done.
Under 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 goods, according to all the circumstances of
each case. 8 Common carriers are responsible for the loss, destruction, or
deterioration of the goods unless the same is due to any of the following
causes only:
(1)
Flood, storm, earthquake, lightning or other natural disaster or
calamity;
At the outset, we reject Petitioner Carrier's claim that it is not the operator
of the M/S Asiatica but merely a charterer thereof. We note that in G.R. No.
69044, Petitioner Carrier stated in its Petition:
There are about 22 cases of the "ASIATICA" pending in various courts
where various plaintiffs are represented by various counsel representing
various consignees or insurance companies. The common defendant in
these cases is petitioner herein, being the operator of said vessel. ... 1
Petitioner Carrier should be held bound to said admission. As a general rule,
the facts alleged in a party's pleading are deemed admissions of that party
and binding upon it. 2 And an admission in one pleading in one action may
be received in evidence against the pleader or his successor-in-interest on
the trial of another action to which he is a party, in favor of a party to the
latter action. 3
The threshold issues in both cases are: (1) which law should govern the
Civil Code provisions on Common carriers or the Carriage of Goods by Sea
Act? and (2) who has the burden of proof to show negligence of the carrier?
On the Law Applicable
The law of the country to which the goods are to be transported governs
the liability of the common carrier in case of their loss, destruction or
deterioration. 4 As the cargoes in question were transported from Japan to
the Philippines, the liability of Petitioner Carrier is governed primarily by the
Civil Code. 5 However, 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. 6 Thus, the Carriage of Goods by Sea Act, a
special law, is suppletory to the provisions of the Civil Code. 7
On the Burden of Proof
xxx
xxx
xxx 9
Petitioner Carrier claims that the loss of the vessel by fire exempts it from
liability under the phrase "natural disaster or calamity. " However, we are of
the opinion that fire may not be considered a natural disaster or calamity.
This must be so as it arises almost invariably from some act of man or by
human means. 10 It does not fall within the category of an act of God
unless caused by lightning 11 or by other natural disaster or calamity. 12 It
may even be caused by the actual fault or privity of the carrier. 13
Article 1680 of the Civil Code, which considers fire as an extraordinary
fortuitous event refers to leases of rural lands where a reduction of the rent
is allowed when more than one-half of the fruits have been lost due to such
event, considering that the law adopts a protection policy towards
agriculture. 14
As the peril of the fire is not comprehended within the exception in Article
1734, supra, Article 1735 of the Civil Code provides that all cases than
those mention in Article 1734, 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 deligence required by law.
In this case, the respective Insurers. as subrogees of the cargo shippers,
have proven that the transported goods have been lost. Petitioner Carrier
has also proved that the loss was caused by fire. The burden then is upon
Petitioner Carrier to proved that it has exercised the extraordinary diligence
required by law. In this regard, the Trial Court, concurred in by the
Appellate Court, made the following Finding of fact:
The cargoes in question were, according to the witnesses defendant placed
in hatches No, 2 and 3 cf the vessel, Boatswain Ernesto Pastrana noticed
that smoke was coming out from hatch No. 2 and hatch No. 3; that where
the smoke was noticed, the fire was already big; that the fire must have
started twenty-four 24) our the same was noticed; that carbon dioxide was
ordered released and the crew was ordered to open the hatch covers of No,
2 tor commencement of fire fighting by sea water: that all of these effort
were not enough to control the fire.
TRANSPO | 06Dec | 82
xxx
xxx
xxx
In this case, both the Trial Court and the Appellate Court, in effect, found,
as a fact, that there was "actual fault" of the carrier shown by "lack of
diligence" in that "when the smoke was noticed, the fire was already big;
that the fire must have started twenty-four (24) hours before the same was
noticed; " and that "after the cargoes were stored in the hatches, no
regular inspection was made as to their condition during the voyage." The
foregoing suffices to show that the circumstances under which the fire
originated and spread are such as to show that Petitioner Carrier or its
servants were negligent in connection therewith. Consequently, the
complete defense afforded by the COGSA when loss results from fire is
unavailing to Petitioner Carrier.
On the US $500 Per Package Limitation:
Petitioner Carrier avers that its liability if any, should not exceed US $500
per package as provided in section 4(5) of the COGSA, which reads:
(5)
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 bill of lading. This declaration if embodied in the
bill of lading shall be prima facie evidence, but all be conclusive on the
carrier.
By agreement between the carrier, master or agent of the carrier, and the
shipper another maximum amount than that mentioned in this paragraph
may be fixed: Provided, That such maximum shall not be less than the
figure above named. In no event shall the carrier be Liable for more than
the amount of damage actually sustained.
xxx
xxx
xxx
Article 1749 of the New Civil Code also allows the limitations of liability in
this wise:
Art. 1749.
A stipulation that the common carrier's liability as limited to
the value of the goods appearing in the bill of lading, unless the shipper or
owner declares a greater value, is binding.
It is to be noted that the Civil Code does not of itself limit the liability of the
common carrier to a fixed amount per package although the Code expressly
permits a stipulation limiting such liability. Thus, the COGSA which is
suppletory to the provisions of the Civil Code, steps in and supplements the
Code by establishing a statutory provision limiting the carrier's liability in
the absence of a declaration of a higher value of the goods by the shipper in
the bill of lading. The provisions of the Carriage of Goods by.Sea Act on
limited liability are as much a part of a bill of lading as though physically in
it and as much a part thereof as though placed therein by agreement of the
parties. 16
In G.R. No. 69044, there is no stipulation in the respective Bills of Lading
(Exhibits "C-2" and "I-3") 1 7 limiting the carrier's liability for the loss or
destruction of the goods. Nor is there a declaration of a higher value of the
TRANSPO | 06Dec | 83
goods. Hence, Petitioner Carrier's liability should not exceed US $500 per
package, or its peso equivalent, at the time of payment of the value of the
goods lost, but in no case "more than the amount of damage actually
sustained."
The actual total loss for the 5,000 pieces of calorized lance pipes was
P256,039 (Exhibit "C"), which was exactly the amount of the insurance
coverage by Development Insurance (Exhibit "A"), and the amount affirmed
to be paid by respondent Court. The goods were shipped in 28 packages
(Exhibit "C-2") Multiplying 28 packages by $500 would result in a product of
$14,000 which, at the current exchange rate of P20.44 to US $1, would be
P286,160, or "more than the amount of damage actually sustained."
Consequently, the aforestated amount of P256,039 should be upheld.
With respect to the seven (7) cases of spare parts (Exhibit "I-3"), their
actual value was P92,361.75 (Exhibit "I"), which is likewise the insured
value of the cargo (Exhibit "H") and amount was affirmed to be paid by
respondent Court. however, multiplying seven (7) cases by $500 per
package at the present prevailing rate of P20.44 to US $1 (US $3,500 x
P20.44) would yield P71,540 only, which is the amount that should be paid
by Petitioner Carrier for those spare parts, and not P92,361.75.
In G.R. No. 71478, in so far as the two (2) cases of surveying instruments
are concerned, the amount awarded to DOWA which was already reduced to
$1,000 by the Appellate Court following the statutory $500 liability per
package, is in order.
In respect of the shipment of 128 cartons of garment fabrics in two (2)
containers and insured with NISSHIN, the Appellate Court also limited
Petitioner Carrier's liability to $500 per package and affirmed the award of
$46,583 to NISSHIN. it multiplied 128 cartons (considered as COGSA
packages) by $500 to arrive at the figure of $64,000, and explained that
"since this amount is more than the insured value of the goods, that is
$46,583, the Trial Court was correct in awarding said amount only for the
128 cartons, which amount is less than the maximum limitation of the
carrier's liability."
We find no reversible error. The 128 cartons and not the two (2) containers
should be considered as the shipping unit.
In Mitsui & Co., Ltd. vs. American Export Lines, Inc. 636 F 2d 807 (1981),
the consignees of tin ingots and the shipper of floor covering brought action
against the vessel owner and operator to recover for loss of ingots and floor
covering, which had been shipped in vessel supplied containers. The U.S.
District Court for the Southern District of New York rendered judgment for
the plaintiffs, and the defendant appealed. The United States Court of
Appeals, Second Division, modified and affirmed holding that:
TRANSPO | 06Dec | 84
polyester goods are packed into cardboard cartons which are then placed in
containers, the cartons and not the containers are the packages.
xxx
xxx
xxx
The foregoing would explain the use of the estimate "Say: Two (2)
Containers Only" in the Bill of Lading, meaning that the goods could
probably fit in two (2) containers only. It cannot mean that the shipper had
furnished the containers for if so, "Two (2) Containers" appearing as the
first entry would have sufficed. and if there is any ambiguity in the Bill of
Lading, it is a cardinal principle in the construction of contracts that the
interpretation of obscure words or stipulations in a contract shall not favor
the party who caused the obscurity. 20 This applies with even greater force
in a contract of adhesion where a contract is already prepared and the
other party merely adheres to it, like the Bill of Lading in this case, which is
draw. up by the carrier. 21
On Alleged Denial of Opportunity to Present Deposition of Its Witnesses: (in
G.R. No. 69044 only)
Petitioner Carrier claims that the Trial Court did not give it sufficient time to
take the depositions of its witnesses in Japan by written interrogatories.
We do not agree. petitioner Carrier was given- full opportunity to present its
evidence but it failed to do so. On this point, the Trial Court found:
xxx
xxx
xxx
Indeed, since after November 6, 1978, to August 27, 1979, not to mention
the time from June 27, 1978, when its answer was prepared and filed in
Court, until September 26, 1978, when the pre-trial conference was
conducted for the last time, the defendant had more than nine months to
prepare its evidence. Its belated notice to take deposition on written
interrogatories of its witnesses in Japan, served upon the plaintiff on August
25th, just two days before the hearing set for August 27th, knowing fully
well that it was its undertaking on July 11 the that the deposition of the
witnesses would be dispensed with if by next time it had not yet been
obtained, only proves the lack of merit of the defendant's motion for
postponement, for which reason it deserves no sympathy from the Court in
that regard. The defendant has told the Court since February 16, 1979, that
it was going to take the deposition of its witnesses in Japan. Why did it take
until August 25, 1979, or more than six months, to prepare its written
interrogatories. Only the defendant itself is to blame for its failure to
adduce evidence in support of its defenses.
xxx
xxx
xxx 22
TRANSPO | 06Dec | 85
Petitioner Carrier was afforded ample time to present its side of the case.
23 It cannot complain now that it was denied due process when the Trial
Court rendered its Decision on the basis of the evidence adduced. What due
process abhors is absolute lack of opportunity to be heard. 24
On the Award of Attorney's Fees:
Petitioner Carrier questions the award of attorney's fees. In both cases,
respondent Court affirmed the award by the Trial Court of attorney's fees of
P35,000.00 in favor of Development Insurance in G.R. No. 69044, and
P5,000.00 in favor of NISSHIN and DOWA in G.R. No. 71478.
Courts being vested with discretion in fixing the amount of attorney's fees,
it is believed that the amount of P5,000.00 would be more reasonable in
G.R. No. 69044. The award of P5,000.00 in G.R. No. 71478 is affirmed.
WHEREFORE, 1) in G.R. No. 69044, the judgment is modified in that
petitioner Eastern Shipping Lines shall pay the Development Insurance and
Surety Corporation the amount of P256,039 for the twenty-eight (28)
packages of calorized lance pipes, and P71,540 for the seven (7) cases of
spare parts, with interest at the legal rate from the date of the filing of the
complaint on June 13, 1978, plus P5,000 as attorney's fees, and the costs.
2)
SO ORDERED.
TRANSPO | 06Dec | 86
At the time of the filing of the complaint, the luggage with its content has
not been found.
SAN
AGUSTIN,
VITUG, J.:p
The appeal before the Court involves the issue of an airline's liability for lost
luggage. The petition for review assails the decision of the Court of Appeals,
1 dated 27 February 1992, affirming an award of damages made by the
trial court in a complaint filed by private respondent against petitioner.
The factual background of the case, narrated by the trial court and
reproduced at length by the appellate court, is hereunder quoted:
On August 21, 1987, plaintiff was a passenger on board Flight SN 284 of
defendant airline originating from Casablanca to Brussels, Belgium on her
way back to Manila. Plaintiff checked in her luggage which contained her
valuables, namely: jewelries valued at $2,350.00; clothes $1,500.00
shoes/bag $150; accessories $75; luggage itself $10.00; or a total of
$4,265.00, for which she was issued Tag No. 71423. She stayed overnight
in Brussels and her luggage was left on board Flight SN 284.
Plaintiff arrived at Manila International Airport on September 2, 1987 and
immediately submitted her Tag No. 71423 to facilitate the release of her
luggage but the luggage was missing. She was advised to accomplish and
submit a property Irregularity Report which she submitted and filed on the
same day.
She followed up her claim on September 14, 1987 but the luggage
remained to be missing.
On September 15, 1987, she filed her formal complaint with the office of
Ferge Massed, defendant's Local Manager, demanding immediate attention
(Exh. "A").
On September 30, 1987, on the occasion of plaintiffs following up of her
luggage claim, she was furnished copies of defendant's telexes with an
information that the Burssel's Office of defendant found the luggage and
that they have broken the locks for identification (Exhibit "B"). Plaintiff was
assured by the defendant that it has notified its Manila Office that the
luggage will be shipped to Manila on October 27, 1987. But unfortunately
plaintiff was informed that the luggage was lost for the second time
(Exhibits "C" and "C-1").
Plaintiff demanded from the defendant the money value of the luggage and
its contents amounting to $4,265.00 or its exchange value, but defendant
refused to settle the claim.
Defendant asserts in its Answer and its evidence tend to show that while it
admits that the plaintiff was a passenger on board Flight No. SN 284 with a
piece of checked in luggage bearing Tag No. 71423, the loss of the luggage
was due to plaintiff's sole if not contributory negligence; that she did not
declare the valuable items in her checked in luggage at the flight counter
when she checked in for her flight from Casablanca to Brussels so that
either the representative of the defendant at the counter would have
advised her to secure an insurance on the alleged valuable items and
required her to pay additional charges, or would have refused acceptance of
her baggage as required by the generally accepted practices of international
carriers; that Section 9(a), Article IX of General Conditions of carriage
requiring passengers to collect their checked baggage at the place of stop
over, plaintiff neglected to claim her baggage at the Brussels Airport; that
plaintiff should have retrieved her undeclared valuables from her baggage
at the Brussels Airport since her flight from Brussels to Manila will still have
to visit for confirmation inasmuch as only her flight from Casablanca to
Brussels was confirmed; that defendant incorporated in all Sabena Plane
Tickets, including Sabena Ticket No. 082422-72502241 issued to plaintiff in
Manila on August 21, 1987, a warning that "Items of value should be
carried on your person" and that some carriers assume no liability for
fragile, valuable or perishable articles and that further information may be
obtained from the carrier for guidance;' that granting without conceding
that defendant is liable, its liability is limited only to US $20.00 per kilo due
to plaintiffs failure to declare a higher value on the contents of her checked
in luggage and pay additional charges thereon. 2
The trial court rendered judgment ordering petitioner Sabena Belgian World
Airlines to pay private respondent Ma. Paula San Agustin
(a)
(b)
(c)
(d)
(e)
TRANSPO | 06Dec | 87
Sabena appealed the decision of the Regional Trial Court to the Court of
Appeals. The appellate court, in its decision of 27 February 1992, affirmed
in toto the trial court's judgment.
Passengers shall not include in his checked baggage, and the carrier may
refuse to carry as checked baggage, fragile or perishable articles, money,
jewelry, precious metals, negotiable papers, securities or other valuable. 4
The above rules remain basically unchanged even when the contract is
breached by tort 6 although noncontradictory principles on quasi-delict may
then be assimilated as also forming part of the governing law. Petitioner is
not thus entirely off track when it has likewise raised in its defense the tort
doctrine of proximate cause. Unfortunately for petitioner, however, the
doctrine cannot, in this particular instance, support its case. Proximate
cause is that which, in natural and continuous sequence, unbroken by any
efficient intervening cause, produces injury and without which the result
would not have occurred. The exemplification by the Court in one case 7 is
simple and explicit; viz:
(1)
Flood, storm, earthquake, lightning, or other natural disaster or
calamity;
(2)
(3)
(4)
The character of the goods or defects in the packing or in the
containers;
(5)
(T)he proximate legal cause is that acting first and producing the injury,
either immediately or by setting other events in motion, all constituting a
natural and continuous chain of events, each having a close causal
connection with its immediate predecessor, the final event in the chain
immediately affecting the injury as a natural and probable result of the
cause which first acted, under such circumstances that the person
responsible for the first event should, as an ordinarily prudent and
intelligent person, have reasonable ground to expect at the moment of his
act or default that an injury to some person might probably result
therefrom.
It remained undisputed that private respondent's luggage was lost while it
was in the custody of petitioner. It was supposed to arrive on the same
flight that private respondent took in returning to Manila on 02 September
TRANSPO | 06Dec | 88
1987. When she discovered that the luggage was missing, she promptly
accomplished and filed a Property Irregularity Report. She followed up her
claim on 14 September 1987, and filed, on the following day, a formal
letter-complaint with petitioner. She felt relieved when, on 23 October
1987, she was advised that her luggage had finally been found, with its
contents intact when examined, and that she could expect it to arrive on 27
October 1987. She then waited anxiously only to be told later that her
luggage had been lost for the second time. Thus, the appellate court, given
all the facts before it, sustained the trial court in finding petitioner
ultimately guilty of "gross negligence" in the handling of private
respondent's luggage. The "loss of said baggage not only once but twice,
said the appellate court, "underscores the wanton negligence and lack of
care" on the part of the carrier.
The above findings, which certainly cannot be said to be without basis,
foreclose whatever rights petitioner might have had to the possible
limitation of liabilities enjoyed by international air carriers under the
Warsaw Convention (Convention for the Unification of Certain Rules Relating
to International Carriage by Air, as amended by the Hague Protocol of 1955,
the Montreal Agreement of 1966, the Guatemala Protocol of 1971 and the
Montreal Protocols of 1975). In Alitalia vs. Intermediate Appellate Court, 8
now Chief Justice Andres R. Narvasa, speaking for the Court, has explained
it well; he said:
The Warsaw Convention however denies to the carrier availment of the
provisions which exclude or limit his liability, if the damage is caused by his
wilful misconduct or by such default on his part as, in accordance with the
law of the court seized of the case, is considered to be equivalent to wilful
misconduct, or if the damage is (similarly) caused . . . by any agent of the
carrier acting within the scope of his employment. The Hague Protocol
amended the Warsaw Convention by removing the provision that if the
airline took all necessary steps to avoid the damage, it could exculpate
itself completely, and declaring the stated limits of liability not applicable if
it is proved that the damage resulted from an act or omission of the carrier,
its servants or agents, done with intent to cause damage or recklessly and
with knowledge that damage would probably result. The same deletion was
effected by the Montreal Agreement of 1966, with the result that a
passenger could recover unlimited damages upon proof of wilful
misconduct.