CALTEX (PHILIPPINES), INC. petitioner, vs. SULPICIO LINES, INC.
, GO SIOC SO, On March 22, 1988, the board of marine inquiry in BMI Case No. 653-87
ENRIQUE S. GO, EUSEBIO S. GO, CARLOS S. GO, VICTORIANO S. GO,
DOMINADOR S. GO, RICARDO S. GO, EDWARD S. GO, ARTURO S. GO,
EDGAR S. GO, EDMUND S. GO, FRANCISCO SORIANO, VECTOR
SHIPPING CORPORATION, TERESITA G. CAEZAL AND SOTERA E.
CAEZAL, respondents.
DECISION
PARDO, J.:
Is the charterer of a sea vessel liable for damages resulting from a
collision between the chartered vessel and a passenger ship?
When MT Vector left the port of Limay, Bataan, on December 19, 1987
carrying petroleum products of Caltex (Philippines), Inc. (hereinafter Caltex)
no one could have guessed that it would collide with MV Doa Paz, killing
almost all the passengers and crew members of both ships, and thus resulting
in one of the countrys worst maritime disasters.
The petition before us seeks to reverse the Court of Appeals
decision[1]holding petitioner jointly liable with the operator of MT Vector for
damages when the latter collided with Sulpicio Lines, Inc.s passenger ship MV
Doa Paz.
The facts are as follows:
On December 19, 1987, motor tanker MT Vector left Limay, Bataan, at
about 8:00 p.m., enroute to Masbate, loaded with 8,800 barrels of petroleum
products shipped by petitioner Caltex.[2] MT Vector is a tramping motor tanker
owned and operated by Vector Shipping Corporation, engaged in the
business of transporting fuel products such as gasoline, kerosene, diesel and
crude oil. During that particular voyage, the MT Vector carried on board
gasoline and other oil products owned by Caltex by virtue of a charter
contract between them.[3]
On December 20, 1987, at about 6:30 a.m., the passenger ship MV Doa
Paz left the port of Tacloban headed for Manila with a complement of 59
crew members including the master and his officers, and passengers totaling
1,493 as indicated in the Coast Guard Clearance.[4] The MV Doa Paz is a
passenger and cargo vessel owned and operated by Sulpicio Lines, Inc.
plying the route of Manila/ Tacloban/ Catbalogan/ Manila/ Catbalogan/
Tacloban/ Manila, making trips twice a week.
At about 10:30 p.m. of December 20, 1987, the two vessels collided in the
open sea within the vicinity of Dumali Point between Marinduque and Oriental
Mindoro. All the crewmembers of MV Doa Paz died, while the two survivors
from MT Vector claimed that they were sleeping at the time of the incident.
The MV Doa Paz carried an estimated 4,000 passengers; many indeed,
were not in the passenger manifest. Only 24 survived the tragedy after having
been rescued from the burning waters by vessels that responded to distress
calls.[5] Among those who perished were public school teacher Sebastian
Caezal (47 years old) and his daughter Corazon Caezal (11 years old), both
unmanifested passengers but proved to be on board the vessel.
after investigation found that the MT Vector, its registered operator Francisco
Soriano, and its owner and actual operator Vector Shipping Corporation,
were at fault and responsible for its collision with MV Doa Paz. [6]
On February 13, 1989, Teresita Caezal and Sotera E. Caezal, Sebastian
Caezals wife and mother respectively, filed with the Regional Trial Court,
Branch 8, Manila, a complaint for Damages Arising from Breach of Contract of
Carriage against Sulpicio Lines, Inc. (hereafter Sulpicio). Sulpicio, in turn, filed a
third party complaint against Francisco Soriano, Vector Shipping Corporation
and Caltex (Philippines), Inc. Sulpicio alleged that Caltex chartered MT Vector
with gross and evident bad faith knowing fully well that MT Vector was
improperly manned, ill-equipped, unseaworthy and a hazard to safe
navigation; as a result, it rammed against MV Doa Paz in the open sea setting
MT Vectors highly flammable cargo ablaze.
On September 15, 1992, the trial court rendered decision dismissing the
third party complaint against petitioner. The dispositive portion reads:
WHEREFORE, judgement is hereby rendered in favor of plaintiffs and against
defendant-3rd party plaintiff Sulpicio Lines, Inc., to wit:
1. For the death of Sebastian E. Caezal and his 11-year old daughter Corazon
G. Caezal, including loss of future earnings of said Sebastian, moral and
exemplary damages, attorneys fees, in the total amount of P 1,241,287.44 and
finally;
2. The statutory costs of the proceedings.
Likewise, the 3rd party complaint is hereby DISMISSED for want of
substantiation and with costs against the 3rd party plaintiff.
IT IS SO ORDERED.
DONE IN MANILA, this 15th day of September 1992.
ARSENIO M. GONONG
Judge[7]
On appeal to the Court of Appeals interposed by Sulpicio Lines, Inc., on
April 15, 1997, the Court of Appeal modified the trial courts ruling and included
petitioner Caltex as one of the those liable for damages. Thus:
WHEREFORE, in view of all the foregoing, the judgment rendered by the
Regional Trial Court is hereby MODIFIED as follows:
WHEREFORE, defendant Sulpicio Lines, Inc., is ordered to pay the heirs of
Sebastian E. Caezal and Corazon Caezal:
1. Compensatory damages for the death of Sebastian E.Caezal and Corazon
Caezal the total amount of ONE HUNDRED THOUSAND PESOS (P100,000);
2. Compensatory damages representing the unearned income of Sebastian E.
Caezal, in the total amount of THREE HUNDRED SIX THOUSAND FOUR HUNDRED
EIGHTY (P306,480.00) PESOS;
3. Moral damages in the amount of THREE HUNDRED THOUSAND PESOS (P
300,000.00);
4. Attorneys fees in the concept of actual damages in the amount of FIFTY
THOUSAND PESOS (P 50,000.00);
5. Costs of the suit.
1
Third party defendants Vector Shipping Co. and Caltex (Phils.), Inc. are held
equally liable under the third party complaint to reimburse/indemnify
defendant Sulpicio Lines, Inc. of the above-mentioned damages, attorneys
fees and costs which the latter is adjudged to pay plaintiffs, the same to be
shared half by Vector Shipping Co. (being the vessel at fault for the collision)
and the other half by Caltex (Phils.), Inc. (being the charterer that negligently
caused the shipping of combustible cargo aboard an unseaworthy vessel).
SO ORDERED.
JORGE S. IMPERIAL
Associate Justice
WE CONCUR:
RAMON U. MABUTAS. JR. PORTIA ALIO HERMACHUELOS
Associate Justice Associate Justice[8]
Hence, this petition.
We find the petition meritorious.
First: The charterer has no liability for damages under Philippine Maritime
laws.
The respective rights and duties of a shipper and the carrier depends not
on whether the carrier is public or private, but on whether the contract of
carriage is a bill of lading or equivalent shipping documents on the one hand,
or a charter party or similar contract on the other.[9]
Petitioner and Vector entered into a contract of affreightment, also
known as a voyage charter.[10]
A charter party is a contract by which an entire ship, or some principal
part thereof, is let by the owner to another person for a specified time or use;
a contract of affreightment is one by which the owner of a ship or other vessel
lets the whole or part of her to a merchant or other person for the
conveyance of goods, on a particular voyage, in consideration of the
payment of freight.[11]
A contract of affreightment may be either time charter, wherein the
leased vessel is leased to the charterer for a fixed period of time, or voyage
charter, wherein the ship is leased for a single voyage. In both cases, the
charter-party provides for the hire of the vessel only, either for a determinate
period of time or for a single or consecutive voyage, the ship owner to supply
the ships store, pay for the wages of the master of the crew, and defray the
expenses for the maintenance of the ship.[12]
Under a demise or bareboat charter on the other hand, the charterer
mans the vessel with his own people and becomes, in effect, the owner for
the voyage or service stipulated, subject to liability for damages caused by
negligence.
If the charter is a contract of affreightment, which leaves the general
owner in possession of the ship as owner for the voyage, the rights and the
responsibilities of ownership rest on the owner. The charterer is free from liability
to third persons in respect of the ship.[13]
Second : MT Vector is a common carrier
Charter parties fall into three main categories: (1) Demise or bareboat,
(2) time charter, (3) voyage charter. Does a charter party agreement turn the
common carrier into a private one? We need to answer this question in order
to shed light on the responsibilities of the parties.
In this case, the charter party agreement did not convert the common
carrier into a private carrier. The parties entered into a voyage charter, which
retains the character of the vessel as a common carrier.
In Planters Products, Inc. vs. Court of Appeals,[14] we said:
It is therefore imperative that a public carrier shall remain as such,
notwithstanding the charter of the whole or portion of a vessel by one or more
persons, provided the charter is limited to the ship only, as in the case of a
time-charter or voyage charter. It is only when the charter includes both the
vessel and its crew, as in a bareboat or demise that a common carrier
becomes private, at least insofar as the particular voyage covering the
charter-party is concerned. Indubitably, a ship-owner in a time or voyage
charter retains possession and control of the ship, although her holds may, for
the moment, be the property of the charterer.
Later, we ruled in Coastwise Lighterage Corporation vs. Court of
Appeals:[15]
Although a charter party may transform a common carrier into a private one,
the same however is not true in a contract of affreightment xxx
A common carrier is a person or corporation whose regular business is to
carry passengers or property for all persons who may choose to employ and
to remunerate him.[16] MT Vector fits the definition of a common carrier under
Article 1732 of the Civil Code. In Guzman vs. Court of Appeals,[17] we ruled:
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 for 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 an ancillary activity (in local idiom, as a sideline). Article 1732
also carefully avoids making any distinction between a person or enterprise
offering transportation service on a regular or scheduled basis and one
offering such services on a 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.
It appears to the Court that private respondent is properly characterized as a
common carrier even though he merely back-hauled goods for other
merchants from Manila to Pangasinan, although such backhauling was done
on a periodic, occasional rather than regular or scheduled manner, and even
though respondents principal occupation was not the carriage of goods for
2
others. There is no dispute that private respondent charged his customers a
fee for hauling their goods; that the fee frequently fell below commercial
freight rates is not relevant here.
Under the Carriage of Goods by Sea Act :
Sec. 3. (1) The carrier shall be bound before and at the beginning of the
voyage to exercise due diligence to -
(a) Make the ship seaworthy;
(b) Properly man, equip, and supply the ship;
xxx xxx xxx
Thus, the carriers are deemed to warrant impliedly the seaworthiness of
the ship. For a vessel to be seaworthy, it must be adequately equipped for the
voyage and manned with a sufficient number of competent officers and
crew. The failure of a common carrier to maintain in seaworthy condition the
vessel involved in its contract of carriage is a clear breach of its duty
prescribed in Article 1755 of the Civil Code.[18]
The provisions owed their conception to the nature of the business of
common carriers. This business is impressed with a special public duty. The
public must of necessity rely on the care and skill of common carriers in the
vigilance over the goods and safety of the passengers, especially because
with the modern development of science and invention, transportation has
become more rapid, more complicated and somehow more
hazardous.[19] For these reasons, a passenger or a shipper of goods is under no
obligation to conduct an inspection of the ship and its crew, the carrier being
obliged by law to impliedly warrant its seaworthiness.
This aside, we now rule on whether Caltex is liable for damages under the
Civil Code.
Third: Is Caltex liable for damages under the Civil Code?
We rule that it is not.
Sulpicio argues that Caltex negligently shipped its highly combustible fuel
cargo aboard an unseaworthy vessel such as the MT Vector when Caltex:
1. Did not take steps to have M/T Vectors certificate of inspection
and coastwise license renewed;
2. Proceeded to ship its cargo despite defects found by Mr. Carlos
Tan of Bataan Refinery Corporation;
3. Witnessed M/T Vector submitting fake documents and certificates
to the Philippine Coast Guard.
Sulpicio further argues that Caltex chose MT Vector to transport its cargo
despite these deficiencies:
1. The master of M/T Vector did not posses the required Chief Mate
license to command and navigate the vessel;
2. The second mate, Ronaldo Tarife, had the license of a Minor
Patron, authorized to navigate only in bays and rivers when the
subject collision occurred in the open sea;
3. The Chief Engineer, Filoteo Aguas, had no license to operate the
engine of the vessel;
4. The vessel did not have a Third Mate, a radio operator and a
lookout; and
5. The vessel had a defective main engine.[20]
As basis for the liability of Caltex, the Court of Appeals relied on Articles
20 and 2176 of the Civil Code, which provide:
Article 20. - Every person who contrary to law, willfully or negligently causes
damage to another, shall indemnify the latter for the same.
Article 2176. - Whoever by act or omission causes damage to another, there
being fault or negligence, is obliged to pay for the damage done. Such fault
or negligence, if there is no pre-existing contractual relation between the
parties, is called a quasi-delict and is governed by the provisions of this
Chapter.
And what is negligence?
The Civil Code provides:
Article 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 Article 1171 and
2201 paragraph 2, 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.
In Southeastern College, Inc. vs. Court of Appeals,[21] we said that
negligence, as commonly understood, is conduct which naturally or
reasonably creates undue risk or harm to others. It may be the failure to
observe that degree of care, precaution, and vigilance, which the
circumstances justly demand, or the omission to do something which ordinarily
regulate the conduct of human affairs, would do.
The charterer of a vessel has no obligation before transporting its cargo
to ensure that the vessel it chartered complied with all legal requirements. The
duty rests upon the common carrier simply for being engaged in public
service.[22] The Civil Code demands diligence which is required by the nature
of the obligation and that which corresponds with the circumstances of the
persons, the time and the place.Hence, considering the nature of the
obligation between Caltex and MT Vector, the liability as found by the Court
of Appeals is without basis.
The relationship between the parties in this case is governed by special
laws. Because of the implied warranty of seaworthiness,[23] shippers of goods,
when transacting with common carriers, are not expected to inquire into the
vessels seaworthiness, genuineness of its licenses and compliance with all
maritime laws. To demand more from shippers and hold them liable in case of
failure exhibits nothing but the futility of our maritime laws insofar as the
protection of the public in general is concerned. By the same token, we
cannot expect passengers to inquire every time they board a common
carrier, whether the carrier possesses the necessary papers or that all the
carriers employees are qualified. Such a practice would be an absurdity in a
3
business where time is always of the essence. Considering the nature of
transportation business, passengers and shippers alike customarily presume
that common carriers possess all the legal requisites in its operation.
Thus, the nature of the obligation of Caltex demands ordinary diligence
like any other shipper in shipping his cargoes.
A cursory reading of the records convinces us that Caltex had reasons to
believe that MT Vector could legally transport cargo that time of the year.
Atty. Poblador: Mr. Witness, I direct your attention to this portion here
containing the entries here under VESSELS DOCUMENTS
1. Certificate of Inspection No. 1290-85, issued December 21, 1986,
and Expires December 7, 1987, Mr. Witness, what steps did you
take regarding the impending expiry of the C.I. or the Certificate
of Inspection No. 1290-85 during the hiring of MT Vector?
Apolinar Ng: At the time when I extended the Contract, I did nothing
because the tanker has a valid C.I. which will expire on December 7,
1987 but on the last week of November, I called the attention of Mr.
Abalos to ensure that the C.I. be renewed and Mr. Abalos, in turn,
assured me they will renew the same.
Q: What happened after that?
A: On the first week of December, I again made a follow-up from Mr.
Abalos, and said they were going to send me a copy as soon as
possible, sir.[24]
xxx xxx xxx
Q: What did you do with the C.I.?
A: We did not insist on getting a copy of the C.I. from Mr. Abalos on the first
place, because of our long business relation, we trust Mr. Abalos and
the fact that the vessel was able to sail indicates that the documents
are in order. xxx[25]
On cross examination -
Atty. Sarenas: This being the case, and this being an admission by you, this
Certificate of Inspection has expired on December 7. Did it occur to
you not to let the vessel sail on that day because of the very
approaching date of expiration?
Apolinar Ng: No sir, because as I said before, the operation Manager
assured us that they were able to secure a renewal of the Certificate
of Inspection and that they will in time submit us a copy.[26]
Finally, on Mr. Ngs redirect examination:
Atty. Poblador: Mr. Witness, were you aware of the pending expiry of the
Certificate of Inspection in the coastwise license on December 7,
1987. What was your assurance for the record that this document was
renewed by the MT Vector?
Atty. Sarenas: xxx
Atty. Poblador: The certificate of Inspection?
A: As I said, firstly, we trusted Mr. Abalos as he is a long time business
partner; secondly, those three years, they were allowed to sail by the
Coast Guard. That are some that make me believe that they in fact
were able to secure the necessary renewal.
Q: If the Coast Guard clears a vessel to sail, what would that mean?
Atty. Sarenas: Objection.
Court: He already answered that in the cross examination to the effect that
if it was allowed, referring to MV Vector, to sail, where it is loaded and
that it was scheduled for a destination by the Coast Guard, it means
that it has Certificate of Inspection extended as assured to this witness
by Restituto Abalos. That in no case MV Vector will be allowed to sail if
the Certificate of Inspection is, indeed, not to be extended. That was
his repeated explanation to the cross-examination. So, there is no
need to clarify the same in the re-direct examination.[27]
Caltex and Vector Shipping Corporation had been doing business since
1985, or for about two years before the tragic incident occurred in 1987. Past
services rendered showed no reason for Caltex to observe a higher degree of
diligence.
Clearly, as a mere voyage charterer, Caltex had the right to presume
that the ship was seaworthy as even the Philippine Coast Guard itself was
convinced of its seaworthiness. All things considered, we find no legal basis to
hold petitioner liable for damages.
As Vector Shipping Corporation did not appeal from the Court of
Appeals decision, we limit our ruling to the liability of Caltex alone. However,
we maintain the Court of Appeals ruling insofar as Vector is concerned .
WHEREFORE, the Court hereby GRANTS the petition and SETS ASIDE the
decision of the Court of Appeals in CA-G. R. CV No. 39626, promulgated on
April 15, 1997, insofar as it held Caltex liable under the third party complaint to
reimburse/indemnify defendant Sulpicio Lines, Inc. the damages the latter is
adjudged to pay plaintiffs-appellees. The Court AFFIRMS the decision of the
Court of Appeals insofar as it orders Sulpicio Lines, Inc. to pay the heirs of
Sebastian E. Caezal and Corazon Caezal damages as set forth therein. Third-
party defendant-appellee Vector Shipping Corporation and Francisco Soriano
are held liable to reimburse/indemnify defendant Sulpicio Lines, Inc. whatever
damages, attorneys fees and costs the latter is adjudged to pay plaintiffs-
appellees in the case.
No costs in this instance.
SO ORDERED.
[G.R. No. 137775. March 31, 2005]
FGU INSURANCE CORPORATION, petitioner, vs. THE COURT OF APPEALS, SAN
MIGUEL CORPORATION, and ESTATE OF ANG GUI, represented by
LUCIO, JULIAN, and JAIME, all surnamed ANG, and CO
TO, respondents.
[G.R. No. 140704. March 31, 2005]
ESTATE OF ANG GUI, Represented by LUCIO, JULIAN and JAIME, all surnamed
ANG, and CO TO, petitioners, vs. THE HONORABLE COURT OF APPEALS,
SAN MIGUEL CORP., and FGU INSURANCE CORP., respondents.
4
DECISION
CHICO-NAZARIO, J.:
Before Us are two separate Petitions for review assailing the Decision [1] of
the Court of Appeals in CA-G.R. CV No. 49624 entitled, San Miguel
Corporation, Plaintiff-Appellee versus Estate of Ang Gui, represented by Lucio,
Julian and Jaime, all surnamed Ang, and Co To, Defendants-Appellants,
ThirdParty Plaintiffs versus FGU Insurance Corporation, Third-Party Defendant-
Appellant, which affirmed in toto the decision[2] of the Regional Trial Court of
Cebu City, Branch 22. The dispositive portion of the Court of Appeals decision
reads:
WHEREFORE, for all the foregoing, judgment is hereby rendered as follows:
1) Ordering defendants to pay plaintiff
the sum of P1,346,197.00 and an interest of 6% per annum to be
reckoned from the filing of this case on October 2, 1990;
2) Ordering defendants to pay plaintiff
the sum of P25,000.00 for attorneys fees and an additional sum of
P10,000.00 as litigation expenses;
3) With cost against defendants.
For the Third-Party Complaint:
1) Ordering third-party defendant FGU Insurance Company to pay and
reimburse defendants the amount of P632,700.00.[3]
The Facts
Evidence shows that Anco Enterprises Company (ANCO), a partnership
between Ang Gui and Co To, was engaged in the shipping business. It owned
the M/T ANCO tugboat and the D/B Lucio barge which were operated as
common carriers. Since the D/B Lucio had no engine of its own, it could not
maneuver by itself and had to be towed by a tugboat for it to move from one
place to another.
On 23 September 1979, San Miguel Corporation (SMC) shipped from
Mandaue City, Cebu, on board the D/B Lucio, for towage by M/T ANCO, the
following cargoes:
Bill of Lading No. Shipment Destination
1 25,000 cases Pale Pilsen Estancia, Iloilo
350 cases Cerveza Negra Estancia, Iloilo
2 15,000 cases Pale Pilsen San Jose, Antique
200 cases Cerveza Negra San Jose, Antique
The consignee for the cargoes covered by Bill of Lading No. 1 was SMCs
Beer Marketing Division (BMD)-Estancia Beer Sales Office, Estancia, Iloilo, while
the consignee for the cargoes covered by Bill of Lading No. 2 was SMCs BMD-
San Jose Beer Sales Office, San Jose, Antique.
The D/B Lucio was towed by the M/T ANCO all the way from Mandaue
City to San Jose, Antique. The vessels arrived at San Jose, Antique, at about
one oclock in the afternoon of 30 September 1979. The tugboat M/T ANCO
left the barge immediately after reaching San Jose, Antique.
When the barge and tugboat arrived at San Jose, Antique, in the
afternoon of 30 September 1979, the clouds over the area were dark and the
waves were already big. The arrastre workers unloading the cargoes of SMC
on board the D/B Lucio began to complain about their difficulty in unloading
the cargoes. SMCs District Sales Supervisor, Fernando Macabuag, requested
ANCOs representative to transfer the barge to a safer place because the
vessel might not be able to withstand the big waves.
ANCOs representative did not heed the request because he was
confident that the barge could withstand the waves. This, notwithstanding the
fact that at that time, only the M/T ANCO was left at the wharf of San Jose,
Antique, as all other vessels already left the wharf to seek shelter. With the
waves growing bigger and bigger, only Ten Thousand Seven Hundred Ninety
(10,790) cases of beer were discharged into the custody of the arrastre
operator.
At about ten to eleven oclock in the evening of 01 October 1979, the
crew of D/B Lucio abandoned the vessel because the barges rope attached
to the wharf was cut off by the big waves. At around midnight, the barge run
aground and was broken and the cargoes of beer in the barge were swept
away.
As a result, ANCO failed to deliver to SMCs consignee Twenty-Nine
Thousand Two Hundred Ten (29,210) cases of Pale Pilsen and Five Hundred
Fifty (550) cases of Cerveza Negra. The value per case of Pale Pilsen was Forty-
Five Pesos and Twenty Centavos (P45.20). The value of a case of Cerveza
Negra was Forty-Seven Pesos and Ten Centavos (P47.10), hence, SMCs claim
against ANCO amounted to One Million Three Hundred Forty-Six Thousand
One Hundred Ninety-Seven Pesos (P1,346,197.00).
As a consequence of the incident, SMC filed a complaint for Breach of
Contract of Carriage and Damages against ANCO for the amount of One
Million Three Hundred Forty-Six Thousand One Hundred Ninety-Seven Pesos
(P1,346,197.00) plus interest, litigation expenses and Twenty-Five Percent (25%)
of the total claim as attorneys fees.
Upon Ang Guis death, ANCO, as a partnership, was dissolved hence, on
26 January 1993, SMC filed a second amended complaint which was
admitted by the Court impleading the surviving partner, Co To and the Estate
of Ang Gui represented by Lucio, Julian and Jaime, all surnamed Ang. The
substituted defendants adopted the original answer with counterclaim of
ANCO since the substantial allegations of the original complaint and the
amended complaint are practically the same.
ANCO admitted that the cases of beer Pale Pilsen and Cerveza Negra
mentioned in the complaint were indeed loaded on the vessel belonging to
ANCO. It claimed however that it had an agreement with SMC that ANCO
would not be liable for any losses or damages resulting to the cargoes by
reason of fortuitous event. Since the cases of beer Pale Pilsen and Cerveza
Negra were lost by reason of a storm, a fortuitous event which battered and
sunk the vessel in which they were loaded, they should not be held liable.
ANCO further asserted that there was an agreement between them and SMC
to insure the cargoes in order to recover indemnity in case of loss. Pursuant to
that agreement, the cargoes to the extent of Twenty Thousand (20,000) cases
5
was insured with FGU Insurance Corporation (FGU) for the total amount of
Eight Hundred Fifty-Eight Thousand Five Hundred Pesos (P858,500.00) per
Marine Insurance Policy No. 29591.
Subsequently, ANCO, with leave of court, filed a Third-Party Complaint
against FGU, alleging that before the vessel of ANCO left for San Jose, Antique
with the cargoes owned by SMC, the cargoes, to the extent of Twenty
Thousand (20,000) cases, were insured with FGU for a total amount of Eight
Hundred Fifty-Eight Thousand Five Hundred Pesos (P858,500.00) under Marine
Insurance Policy No. 29591. ANCO further alleged that on or about 02
October 1979, by reason of very strong winds and heavy waves brought
about by a passing typhoon, the vessel run aground near the vicinity of San
Jose, Antique, as a result of which, the vessel was totally wrecked and its
cargoes owned by SMC were lost and/or destroyed. According to ANCO, the
loss of said cargoes occurred as a result of risks insured against in the
insurance policy and during the existence and lifetime of said insurance
policy. ANCO went on to assert that in the remote possibility that the court will
order ANCO to pay SMCs claim, the third-party defendant corporation should
be held liable to indemnify or reimburse ANCO whatever amounts, or
damages, it may be required to pay to SMC.
In its answer to the Third-Party complaint, third-party defendant FGU
admitted the existence of the Insurance Policy under Marine Cover Note No.
29591 but maintained that the alleged loss of the cargoes covered by the
said insurance policy cannot be attributed directly or indirectly to any of the
risks insured against in the said insurance policy. According to FGU, it is only
liable under the policy to Third-party Plaintiff ANCO and/or Plaintiff SMC in
case of any of the following:
a) total loss of the entire shipment;
b) loss of any case as a result of the sinking of the vessel; or
c) loss as a result of the vessel being on fire.
Furthermore, FGU alleged that the Third-Party Plaintiff ANCO and Plaintiff
SMC failed to exercise ordinary diligence or the diligence of a good father of
the family in the care and supervision of the cargoes insured to prevent its loss
and/or destruction.
Third-Party defendant FGU prayed for the dismissal of the Third-Party
Complaint and asked for actual, moral, and exemplary damages and
attorneys fees.[1]
The trial court found that while the cargoes were indeed lost due to
fortuitous event, there was failure on ANCOs part, through their
representatives, to observe the degree of diligence required that would
exonerate them from liability. The trial court thus held the Estate of Ang Gui
and Co To liable to SMC for the amount of the lost shipment. With respect to
the Third-Party complaint, the court a quo found FGU liable to bear Fifty-Three
Percent (53%) of the amount of the lost cargoes. According to the trial court:
. . . Evidence is to the effect that the D/B Lucio, on which the cargo insured,
run-aground and was broken and the beer cargoes on the said barge were
swept away. It is the sense of this Court that the risk insured against was the
cause of the loss.
...
Since the total cargo was 40,550 cases which had a total amount of
P1,833,905.00 and the amount of the policy was only for
P858,500.00, defendants as assured, therefore, were considered co-insurers of
third-party defendant FGU Insurance Corporation to the extent of 975,405.00
value of the cargo. Consequently, inasmuch as there was partial loss of only
P1,346,197.00, the assured shall bear 53% of the loss[4] [Emphasis ours]
The appellate court affirmed in toto the decision of the lower court and
denied the motion for reconsideration and the supplemental motion for
reconsideration.
Hence, the petitions.
The Issues
In G.R. No. 137775, the grounds for review raised by petitioner FGU can
be summarized into two: 1) Whether or not respondent Court of Appeals
committed grave abuse of discretion in holding FGU liable under the
insurance contract considering the circumstances surrounding the loss of the
cargoes; and 2) Whether or not the Court of Appeals committed an error of
law in holding that the doctrine of res judicata applies in the instant case.
In G.R. No. 140704, petitioner Estate of Ang Gui and Co To assail the
decision of the appellate court based on the following assignments of error: 1)
The Court of Appeals committed grave abuse of discretion in affirming the
findings of the lower court that the negligence of the crewmembers of the
D/B Lucio was the proximate cause of the loss of the cargoes; and 2) The
respondent court acted with grave abuse of discretion when it ruled that the
appeal was without merit despite the fact that said court had accepted the
decision in Civil Case No. R-19341, as affirmed by the Court of Appeals and
the Supreme Court, as res judicata.
Ruling of the Court
First, we shall endeavor to dispose of the common issue raised by both
petitioners in their respective petitions for review, that is, whether or not the
doctrine of res judicata applies in the instant case.
It is ANCOs contention that the decision in Civil Case No. R-
19341,[5] which was decided in its favor, constitutes res judicata with respect to
the issues raised in the case at bar.
The contention is without merit. There can be no res judicata as between
Civil Case No. R-19341 and the case at bar. In order for res judicata to be
made applicable in a case, the following essential requisites must be present:
1) the former judgment must be final; 2) the former judgment must have been
rendered by a court having jurisdiction over the subject matter and the
parties; 3) the former judgment must be a judgment or order on the merits;
and 4) there must be between the first and second action identity of parties,
identity of subject matter, and identity of causes of action.[6]
There is no question that the first three elements of res judicata as
enumerated above are indeed satisfied by the decision in Civil Case No. R-
6
19341. However, the doctrine is still inapplicable due to the absence of the last
essential requisite of identity of parties, subject matter and causes of action.
The parties in Civil Case No. R-19341 were ANCO as plaintiff and FGU as
defendant while in the instant case, SMC is the plaintiff and the Estate of Ang
Gui represented by Lucio, Julian and Jaime, all surnamed Ang and Co To as
defendants, with the latter merely impleading FGU as third-party defendant.
The subject matter of Civil Case No. R-19341 was the insurance contract
entered into by ANCO, the owner of the vessel, with FGU covering the vessel
D/B Lucio, while in the instant case, the subject matter of litigation is the loss of
the cargoes of SMC, as shipper, loaded in the D/B Lucio and the resulting
failure of ANCO to deliver to SMCs consignees the lost cargo. Otherwise
stated, the controversy in the first case involved the rights and liabilities of the
shipowner vis--vis that of the insurer, while the present case involves the rights
and liabilities of the shipper vis--vis that of the shipowner. Specifically, Civil
Case No. R-19341 was an action for Specific Performance and Damages
based on FGU Marine Hull Insurance Policy No. VMF-MH-13519 covering the
vessel D/B Lucio, while the instant case is an action for Breach of Contract of
Carriage and Damages filed by SMC against ANCO based on Bill of Lading
No. 1 and No. 2, with defendant ANCO seeking reimbursement from FGU
under Insurance Policy No. MA-58486, should the former be held liable to pay
SMC.
Moreover, the subject matter of the third-party complaint against FGU in
this case is different from that in Civil Case No. R-19341. In the latter, ANCO
was suing FGU for the insurance contract over the vessel while in the former,
the third-party complaint arose from the insurance contract covering the
cargoes on board the D/B Lucio.
The doctrine of res judicata precludes the re-litigation of a particular fact
or issue already passed upon by a court of competent jurisdiction in a former
judgment, in another action between the same parties based on a different
claim or cause of action. The judgment in the prior action operates as
estoppel only as to those matters in issue or points controverted, upon the
determination of which the finding or judgment was rendered. [7] If a particular
point or question is in issue in the second action, and the judgment will
depend on the determination of that particular point or question, a former
judgment between the same parties or their privies will be final and conclusive
in the second if that same point or question was in issue and adjudicated in
the first suit.[8]
Since the case at bar arose from the same incident as that involved in
Civil Case No. R-19341, only findings with respect to matters passed upon by
the court in the former judgment are conclusive in the disposition of the instant
case. A careful perusal of the decision in Civil Case No. R-19341 will reveal that
the pivotal issues resolved by the lower court, as affirmed by both the Court of
Appeals and the Supreme Court, can be summarized into three legal
conclusions: 1) that the D/B Lucio before and during the voyage was
seaworthy; 2) that there was proper notice of loss made by ANCO within the
reglementary period; and 3) that the vessel D/B Lucio was a constructive total
loss.
Said decision, however, did not pass upon the issues raised in the instant
case. Absent therein was any discussion regarding the liability of ANCO for the
loss of the cargoes. Neither did the lower court pass upon the issue of the
alleged negligence of the crewmembers of the D/B Lucio being the cause of
the loss of the cargoes owned by SMC.
Therefore, based on the foregoing discussion, we are reversing the
findings of the Court of Appeals that there is res judicata.
Anent ANCOs first assignment of error, i.e., the appellate court
committed error in concluding that the negligence of ANCOs representatives
was the proximate cause of the loss, said issue is a question of fact assailing
the lower courts appreciation of evidence on the negligence or lack thereof
of the crewmembers of the D/B Lucio. As a rule, findings of fact of lower
courts, particularly when affirmed by the appellate court, are deemed final
and conclusive. The Supreme Court cannot review such findings on appeal,
especially when they are borne out by the records or are based on substantial
evidence.[9] As held in the case of Donato v. Court of Appeals,[10] in this
jurisdiction, it is a fundamental and settled rule that findings of fact by the trial
court are entitled to great weight on appeal and should not be disturbed
unless for strong and cogent reasons because the trial court is in a better
position to examine real evidence, as well as to observe the demeanor of the
witnesses while testifying in the case.[11]
It is not the function of this Court to analyze or weigh evidence all over
again, unless there is a showing that the findings of the lower court are totally
devoid of support or are glaringly erroneous as to constitute palpable error or
grave abuse of discretion.[12]
A careful study of the records shows no cogent reason to fault the
findings of the lower court, as sustained by the appellate court, that ANCOs
representatives failed to exercise the extraordinary degree of diligence
required by the law to exculpate them from liability for the loss of the cargoes.
First, ANCO admitted that they failed to deliver to the designated
consignee the Twenty Nine Thousand Two Hundred Ten (29,210) cases of Pale
Pilsen and Five Hundred Fifty (550) cases of Cerveza Negra.
Second, it is borne out in the testimony of the witnesses on record that
the barge D/B Lucio had no engine of its own and could not maneuver by
itself. Yet, the patron of ANCOs tugboat M/T ANCO left it to fend for itself
notwithstanding the fact that as the two vessels arrived at the port of San
Jose, Antique, signs of the impending storm were already manifest. As stated
by the lower court, witness Mr. Anastacio Manilag testified that the captain or
patron of the tugboat M/T ANCO left the barge D/B Lucio immediately after it
reached San Jose, Antique, despite the fact that there were already big
waves and the area was already dark. This is corroborated by defendants
own witness, Mr. Fernando Macabueg.[13]
The trial court continued:
7
At that precise moment, since it is the duty of the defendant to exercise and
observe extraordinary diligence in the vigilance over the cargo of the plaintiff,
the patron or captain of M/T ANCO, representing the defendant could have
placed D/B Lucio in a very safe location before they left knowing or sensing at
that time the coming of a typhoon. The presence of big waves and dark
clouds could have warned the patron or captain of M/T ANCO to insure the
safety of D/B Lucio including its cargo. D/B Lucio being a barge, without its
engine, as the patron or captain of M/T ANCO knew, could not possibly
maneuver by itself. Had the patron or captain of M/T ANCO, the
representative of the defendants observed extraordinary diligence in placing
the D/B Lucio in a safe place, the loss to the cargo of the plaintiff could not
have occurred. In short, therefore, defendants through their representatives,
failed to observe the degree of diligence required of them under the provision
of Art. 1733 of the Civil Code of the Philippines.[14]
Petitioners Estate of Ang Gui and Co To, in their Memorandum, asserted
that the contention of respondents SMC and FGU that the crewmembers of
D/B Lucio should have left port at the onset of the typhoon is like advising the
fish to jump from the frying pan into the fire and an advice that borders on
madness.[15]
The argument does not persuade. The records show that the D/B Lucio
was the only vessel left at San Jose, Antique, during the time in question. The
other vessels were transferred and temporarily moved to Malandong, 5
kilometers from wharf where the barge remained.[16] Clearly, the transferred
vessels were definitely safer in Malandong than at the port of San Jose,
Antique, at that particular time, a fact which petitioners failed to dispute
ANCOs arguments boil down to the claim that the loss of the cargoes
was caused by the typhoon Sisang, a fortuitous event (caso fortuito), and
there was no fault or negligence on their part. In fact, ANCO claims that their
crewmembers exercised due diligence to prevent or minimize the loss of the
cargoes but their efforts proved no match to the forces unleashed by the
typhoon which, in petitioners own words was, by any yardstick, a natural
calamity, a fortuitous event, an act of God, the consequences of which
petitioners could not be held liable for.[17]
The Civil Code provides:
Art. 1733. Common carriers, from the nature of their business and for reasons of
public policy are bound to observe extraordinary diligence in the vigilance
over the goods and for the safety of the passengers transported by them,
according to all the circumstances of each case.
Such extraordinary diligence in vigilance over the goods is further expressed in
Articles 1734, 1735, and 1745 Nos. 5, 6, and 7 . . .
Art. 1734. 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;
...
Art. 1739. In order that the common carrier may be exempted from
responsibility, the natural disaster must have been the proximate and only
cause of the loss. However, the common carrier must exercise due diligence
to prevent or minimize loss before, during and after the occurrence of flood,
storm, or other natural disaster in order that the common carrier may be
exempted from liability for the loss, destruction, or deterioration of the goods . .
. (Emphasis supplied)
Caso fortuito or force majeure (which in law are identical insofar as they
exempt an obligor from liability)[18] by definition, are extraordinary events not
foreseeable or avoidable, events that could not be foreseen, or which though
foreseen, were inevitable. It is therefore not enough that the event should not
have been foreseen or anticipated, as is commonly believed but it must be
one impossible to foresee or to avoid.[19]
In this case, the calamity which caused the loss of the cargoes was not
unforeseen nor was it unavoidable. In fact, the other vessels in the port of San
Jose, Antique, managed to transfer to another place, a circumstance which
prompted SMCs District Sales Supervisor to request that the D/B Lucio be
likewise transferred, but to no avail. The D/B Lucio had no engine and could
not maneuver by itself. Even if ANCOs representatives wanted to transfer it,
they no longer had any means to do so as the tugboat M/T ANCO had
already departed, leaving the barge to its own devices. The captain of the
tugboat should have had the foresight not to leave the barge alone
considering the pending storm.
While the loss of the cargoes was admittedly caused by the
typhoon Sisang, a natural disaster, ANCO could not escape liability to
respondent SMC. The records clearly show the failure of petitioners
representatives to exercise the extraordinary degree of diligence mandated
by law. To be exempted from responsibility, the natural disaster should have
been the proximate and only cause of the loss.[20] There must have been no
contributory negligence on the part of the common carrier. As held in the
case of Limpangco Sons v. Yangco Steamship Co.:[21]
. . . To be exempt from liability because of an act of God, the tug must be free
from any previous negligence or misconduct by which that loss or damage
may have been occasioned. For, although the immediate or proximate cause
of the loss in any given instance may have been what is termed an act of
God, yet, if the tug unnecessarily exposed the two to such accident by any
culpable act or omission of its own, it is not excused.[22]
Therefore, as correctly pointed out by the appellate court, there was
blatant negligence on the part of M/T ANCOs crewmembers, first in leaving
the engine-less barge D/B Lucio at the mercy of the storm without the
assistance of the tugboat, and again in failing to heed the request of SMCs
representatives to have the barge transferred to a safer place, as was done
by the other vessels in the port; thus, making said blatant negligence the
proximate cause of the loss of the cargoes.
We now come to the issue of whether or not FGU can be held liable
under the insurance policy to reimburse ANCO for the loss of the cargoes
8
despite the findings of the respondent court that such loss was occasioned by
the blatant negligence of the latters employees.
One of the purposes for taking out insurance is to protect the insured
against the consequences of his own negligence and that of his agents. Thus,
it is a basic rule in insurance that the carelessness and negligence of the
insured or his agents constitute no defense on the part of the insurer. [23] This
rule however presupposes that the loss has occurred due to causes which
could not have been prevented by the insured, despite the exercise of due
diligence.
The question now is whether there is a certain degree of negligence on
the part of the insured or his agents that will deprive him the right to recover
under the insurance contract. We say there is. However, to what extent such
negligence must go in order to exonerate the insurer from liability must be
evaluated in light of the circumstances surrounding each case. When
evidence show that the insureds negligence or recklessness is so gross as to be
sufficient to constitute a willful act, the insurer must be exonerated.
In the case of Standard Marine Ins. Co. v. Nome Beach L. & T. Co.,[24] the
United States Supreme Court held that:
The ordinary negligence of the insured and his agents has long been held as a
part of the risk which the insurer takes upon himself, and the existence of
which, where it is the proximate cause of the loss, does not absolve the insurer
from liability. But willful exposure, gross negligence, negligence amounting to
misconduct, etc., have often been held to release the insurer from such
liability.[25] [Emphasis ours]
...
In the case of Williams v. New England Insurance Co., 3 Cliff. 244, Fed. Cas.
No. 17,731, the owners of an insured vessel attempted to put her across the
bar at Hatteras Inlet. She struck on the bar and was wrecked. The master
knew that the depth of water on the bar was such as to make the attempted
passage dangerous. Judge Clifford held that, under the circumstances, the
loss was not within the protection of the policy, saying:
Authorities to prove that persons insured cannot recover for a loss occasioned
by their own wrongful acts are hardly necessary, as the proposition involves an
elementary principle of universal application. Losses may be recovered by the
insured, though remotely occasioned by the negligence or misconduct of the
master or crew, if proximately caused by the perils insured against, because
such mistakes and negligence are incident to navigation and constitute a
part of the perils which those who engage in such adventures are obliged to
incur; but it was never supposed that the insured could recover indemnity for
a loss occasioned by his own wrongful act or by that of any agent for whose
conduct he was responsible.[26] [Emphasis ours]
From the above-mentioned decision, the United States Supreme Court
has made a distinction between ordinary negligence and gross negligence or
negligence amounting to misconduct and its effect on the insureds right to
recover under the insurance contract. According to the Court, while mistake
and negligence of the master or crew are incident to navigation and
constitute a part of the perils that the insurer is obliged to incur, such
negligence or recklessness must not be of such gross character as to amount
to misconduct or wrongful acts; otherwise, such negligence shall release the
insurer from liability under the insurance contract.
In the case at bar, both the trial court and the appellate court had
concluded from the evidence that the crewmembers of both the D/B Lucio
and the M/T ANCO were blatantly negligent. To wit:
There was blatant negligence on the part of the employees of defendants-
appellants when the patron (operator) of the tug boat immediately left the
barge at the San Jose, Antique wharf despite the looming bad weather.
Negligence was likewise exhibited by the defendants-appellants
representative who did not heed Macabuags request that the barge be
moved to a more secure place. The prudent thing to do, as was done by the
other sea vessels at San Jose, Antique during the time in question, was to
transfer the vessel to a safer wharf. The negligence of the defendants-
appellants is proved by the fact that on 01 October 1979, the only simple
vessel left at the wharf in San Jose was the D/B Lucio.[27] [Emphasis ours]
As stated earlier, this Court does not find any reason to deviate from the
conclusion drawn by the lower court, as sustained by the Court of Appeals,
that ANCOs representatives had failed to exercise extraordinary diligence
required of common carriers in the shipment of SMCs cargoes. Such blatant
negligence being the proximate cause of the loss of the cargoes amounting
to One Million Three Hundred Forty-Six Thousand One Hundred Ninety-Seven
Pesos (P1,346,197.00)
This Court, taking into account the circumstances present in the instant
case, concludes that the blatant negligence of ANCOs employees is of such
gross character that it amounts to a wrongful act which must exonerate FGU
from liability under the insurance contract.
WHEREFORE, premises considered, the Decision of the Court of Appeals
dated 24 February 1999 is hereby AFFIRMED with MODIFICATION dismissing the
third-party complaint.
SO ORDERED.
G.R. No. 101503 September 15, 1993
PLANTERS PRODUCTS, INC., petitioner,
vs.
COURT OF APPEALS, SORIAMONT STEAMSHIP AGENCIES AND KYOSEI KISEN
KABUSHIKI KAISHA, respondents.
Gonzales, Sinense, Jimenez & Associates for petitioner.
Siguion Reyna, Montecillo & Ongsiako Law Office for private respondents.
BELLOSILLO, J.:
Does a charter-party 1 between a shipowner and a charterer transform a
common carrier into a private one as to negate the civil law presumption of
negligence in case of loss or damage to its cargo?
9
Planters Products, Inc. (PPI), purchased from Mitsubishi International
Corporation (MITSUBISHI) of New York, U.S.A., 9,329.7069 metric tons (M/T) of
Urea 46% fertilizer which the latter shipped in bulk on 16 June 1974 aboard the
cargo vessel M/V "Sun Plum" owned by private respondent Kyosei Kisen
Kabushiki Kaisha (KKKK) from Kenai, Alaska, U.S.A., to Poro Point, San
Fernando, La Union, Philippines, as evidenced by Bill of Lading No. KP-1 signed
by the master of the vessel and issued on the date of departure.
On 17 May 1974, or prior to its voyage, a time charter-party on the vessel M/V
"Sun Plum" pursuant to the Uniform General Charter 2 was entered into
between Mitsubishi as shipper/charterer and KKKK as shipowner, in Tokyo,
Japan. 3Riders to the aforesaid charter-party starting from par. 16 to 40 were
attached to the pre-printed agreement. Addenda Nos. 1, 2, 3 and 4 to the
charter-party were also subsequently entered into on the 18th, 20th, 21st and
27th of May 1974, respectively.
Before loading the fertilizer aboard the vessel, four (4) of her holds 4 were all
presumably inspected by the charterer's representative and found fit to take a
load of urea in bulk pursuant to par. 16 of the charter-party which reads:
16. . . . At loading port, notice of readiness to be
accomplished by certificate from National Cargo Bureau
inspector or substitute appointed by charterers for his
account certifying the vessel's readiness to receive cargo
spaces. The vessel's hold to be properly swept, cleaned and
dried at the vessel's expense and the vessel to be presented
clean for use in bulk to the satisfaction of the inspector before
daytime commences. (emphasis supplied)
After the Urea fertilizer was loaded in bulk by stevedores hired by and under
the supervision of the shipper, the steel hatches were closed with heavy iron
lids, covered with three (3) layers of tarpaulin, then tied with steel bonds. The
hatches remained closed and tightly sealed throughout the entire voyage. 5
Upon arrival of the vessel at her port of call on 3 July 1974, the steel pontoon
hatches were opened with the use of the vessel's boom. Petitioner unloaded
the cargo from the holds into its steelbodied dump trucks which were parked
alongside the berth, using metal scoops attached to the ship, pursuant to the
terms and conditions of the charter-partly (which provided for an F.I.O.S.
clause). 6 The hatches remained open throughout the duration of the
discharge. 7
Each time a dump truck was filled up, its load of Urea was covered with
tarpaulin before it was transported to the consignee's warehouse located
some fifty (50) meters from the wharf. Midway to the warehouse, the trucks
were made to pass through a weighing scale where they were individually
weighed for the purpose of ascertaining the net weight of the cargo. The port
area was windy, certain portions of the route to the warehouse were sandy
and the weather was variable, raining occasionally while the discharge was in
progress. 8 The petitioner's warehouse was made of corrugated galvanized
iron (GI) sheets, with an opening at the front where the dump trucks entered
and unloaded the fertilizer on the warehouse floor. Tarpaulins and GI sheets
were placed in-between and alongside the trucks to contain spillages of the
ferilizer. 9
It took eleven (11) days for PPI to unload the cargo, from 5 July to 18 July 1974
(except July 12th, 14th and 18th). 10 A private marine and cargo surveyor,
Cargo Superintendents Company Inc. (CSCI), was hired by PPI to determine
the "outturn" of the cargo shipped, by taking draft readings of the vessel prior
to and after discharge. 11 The survey report submitted by CSCI to the
consignee (PPI) dated 19 July 1974 revealed a shortage in the cargo of
106.726 M/T and that a portion of the Urea fertilizer approximating 18 M/T was
contaminated with dirt. The same results were contained in a Certificate of
Shortage/Damaged Cargo dated 18 July 1974 prepared by PPI which showed
that the cargo delivered was indeed short of 94.839 M/T and about 23 M/T
were rendered unfit for commerce, having been polluted with sand, rust and
dirt. 12
Consequently, PPI sent a claim letter dated 18 December 1974 to Soriamont
Steamship Agencies (SSA), the resident agent of the carrier, KKKK, for
P245,969.31 representing the cost of the alleged shortage in the goods
shipped and the diminution in value of that portion said to have been
contaminated with dirt. 13
Respondent SSA explained that they were not able to respond to the
consignee's claim for payment because, according to them, what they
received was just a request for shortlanded certificate and not a formal claim,
and that this "request" was denied by them because they "had nothing to do
with the discharge of the shipment." 14 Hence, on 18 July 1975, PPI filed an
action for damages with the Court of First Instance of Manila. The defendant
carrier argued that the strict public policy governing common carriers does
not apply to them because they have become private carriers by reason of
the provisions of the charter-party. The court a quo however sustained the
claim of the plaintiff against the defendant carrier for the value of the goods
lost or damaged when it ruled thus: 15
. . . Prescinding from the provision of the law that a common
carrier is presumed negligent in case of loss or damage of the
goods it contracts to transport, all that a shipper has to do in
a suit to recover for loss or damage is to show receipt by the
carrier of the goods and to delivery by it of less than what it
received. After that, the burden of proving that the loss or
damage was due to any of the causes which exempt him
from liability is shipted to the carrier, common or private he
may be. Even if the provisions of the charter-party
aforequoted are deemed valid, and the defendants
considered private carriers, it was still incumbent upon them
to prove that the shortage or contamination sustained by the
cargo is attributable to the fault or negligence on the part of
the shipper or consignee in the loading, stowing, trimming
and discharge of the cargo. This they failed to do. By this
omission, coupled with their failure to destroy the presumption
10
 of negligence against them, the defendants are liable
(emphasis supplied).
On appeal, respondent Court of Appeals reversed the lower court and
absolved the carrier from liability for the value of the cargo that was lost or
damaged. 16 Relying on the 1968 case of Home Insurance Co. v. American
Steamship Agencies, Inc., 17 the appellate court ruled that the cargo vessel
M/V "Sun Plum" owned by private respondent KKKK was a private carrier and
not a common carrier by reason of the time charterer-party. Accordingly, the
Civil Code provisions on common carriers which set forth a presumption of
negligence do not find application in the case at bar. Thus
. . . In the absence of such presumption, it was incumbent
upon the plaintiff-appellee to adduce sufficient evidence to
prove the negligence of the defendant carrier as alleged in
its complaint. It is an old and well settled rule that if the
plaintiff, upon whom rests the burden of proving his cause of
action, fails to show in a satisfactory manner the facts upon
which he bases his claim, the defendant is under no
obligation to prove his exception or defense
(Moran, Commentaries on the Rules of Court, Volume 6, p. 2,
citing Belen v. Belen, 13 Phil. 202).
But, the record shows that the plaintiff-appellee dismally
failed to prove the basis of its cause of action, i.e. the alleged
negligence of defendant carrier. It appears that the plaintiff
was under the impression that it did not have to establish
defendant's negligence. Be that as it may, contrary to the
trial court's finding, the record of the instant case discloses
ample evidence showing that defendant carrier was not
negligent in performing its obligation . . . 18 (emphasis
supplied).
Petitioner PPI appeals to us by way of a petition for review assailing the
decision of the Court of Appeals. Petitioner theorizes that the Home
Insurance case has no bearing on the present controversy because the issue
raised therein is the validity of a stipulation in the charter-party delimiting the
liability of the shipowner for loss or damage to goods cause by want of due
deligence on its part or that of its manager to make the vessel seaworthy in all
respects, and not whether the presumption of negligence provided under the
Civil Code applies only to common carriers and not to private
carriers. 19 Petitioner further argues that since the possession and control of the
vessel remain with the shipowner, absent any stipulation to the contrary, such
shipowner should made liable for the negligence of the captain and crew. In
fine, PPI faults the appellate court in not applying the presumption of
negligence against respondent carrier, and instead shifting the onus
probandi on the shipper to show want of due deligence on the part of the
carrier, when he was not even at hand to witness what transpired during the
entire voyage.
As earlier stated, the primordial issue here is whether a common carrier
becomes a private carrier by reason of a charter-party; in the negative,
whether the shipowner in the instant case was able to prove that he had
exercised that degree of diligence required of him under the law.
It is said that etymology is the basis of reliable judicial decisions in commercial
cases. This being so, we find it fitting to first define important terms which are
relevant to our discussion.
A "charter-party" is defined as a contract by which an entire ship, or some
principal part thereof, is let by the owner to another person for a specified
time or use; 20 a contract of affreightment by which the owner of a ship or
other vessel lets the whole or a part of her to a merchant or other person for
the conveyance of goods, on a particular voyage, in consideration of the
payment of freight; 21 Charter parties are of two types: (a) contract of
affreightment which involves the use of shipping space on vessels leased by
the owner in part or as a whole, to carry goods for others; and, (b) charter by
demise or bareboat charter, by the terms of which the whole vessel is let to
the charterer with a transfer to him of its entire command and possession and
consequent control over its navigation, including the master and the crew,
who are his servants. Contract of affreightment may either be time charter,
wherein the vessel is leased to the charterer for a fixed period of time, or
voyage charter, wherein the ship is leased for a single voyage. 22 In both
cases, the charter-party provides for the hire of vessel only, either for a
determinate period of time or for a single or consecutive voyage, the
shipowner to supply the ship's stores, pay for the wages of the master and the
crew, and defray the expenses for the maintenance of the ship.
Upon the other hand, the term "common or public carrier" is defined in Art.
1732 of the Civil Code. 23 The definition extends to carriers either by land, air or
water which hold themselves out as ready to engage in carrying goods or
transporting passengers or both for compensation as a public employment
and not as a casual occupation. The distinction between a "common or
public carrier" and a "private or special carrier" lies in the character of the
business, such that if the undertaking is a single transaction, not a part of the
general business or occupation, although involving the carriage of goods for
a fee, the person or corporation offering such service is a private carrier. 24
Article 1733 of the New Civil Code mandates that common carriers, by reason
of the nature of their business, should observe extraordinary diligence in the
vigilance over the goods they carry. 25 In the case of private carriers, however,
the exercise of ordinary diligence in the carriage of goods will suffice.
Moreover, in the case of loss, destruction or deterioration of the goods,
common carriers are presumed to have been at fault or to have acted
negligently, and the burden of proving otherwise rests on them. 26 On the
contrary, no such presumption applies to private carriers, for whosoever
alleges damage to or deterioration of the goods carried has the onus of
proving that the cause was the negligence of the carrier.
It is not disputed that respondent carrier, in the ordinary course of business,
operates as a common carrier, transporting goods indiscriminately for all
11
persons. When petitioner chartered the vessel M/V "Sun Plum", the ship
captain, its officers and compliment were under the employ of the shipowner
and therefore continued to be under its direct supervision and control. Hardly
then can we charge the charterer, a stranger to the crew and to the ship,
with the duty of caring for his cargo when the charterer did not have any
control of the means in doing so. This is evident in the present case considering
that the steering of the ship, the manning of the decks, the determination of
the course of the voyage and other technical incidents of maritime
navigation were all consigned to the officers and crew who were screened,
chosen and hired by the shipowner. 27
It is therefore imperative that a public carrier shall remain as such,
notwithstanding the charter of the whole or portion of a vessel by one or more
persons, provided the charter is limited to the ship only, as in the case of a
time-charter or voyage-charter. It is only when the charter includes both the
vessel and its crew, as in a bareboat or demise that a common carrier
becomes private, at least insofar as the particular voyage covering the
charter-party is concerned. Indubitably, a shipowner in a time or voyage
charter retains possession and control of the ship, although her holds may, for
the moment, be the property of the charterer. 28
Respondent carrier's heavy reliance on the case of Home Insurance
Co. v. American Steamship Agencies, supra, is misplaced for the reason that
the meat of the controversy therein was the validity of a stipulation in the
charter-party exempting the shipowners from liability for loss due to the
negligence of its agent, and not the effects of a special charter on common
carriers. At any rate, the rule in the United States that a ship chartered by a
single shipper to carry special cargo is not a common carrier, 29 does not find
application in our jurisdiction, for we have observed that the growing concern
for safety in the transportation of passengers and /or carriage of goods by sea
requires a more exacting interpretation of admiralty laws, more particularly,
the rules governing common carriers.
We quote with approval the observations of Raoul Colinvaux, the learned
barrister-at-law 30
As a matter of principle, it is difficult to find a valid distinction
between cases in which a ship is used to convey the goods of
one and of several persons. Where the ship herself is let to a
charterer, so that he takes over the charge and control of
her, the case is different; the shipowner is not then a carrier.
But where her services only are let, the same grounds for
imposing a strict responsibility exist, whether he is employed
by one or many. The master and the crew are in each case
his servants, the freighter in each case is usually without any
representative on board the ship; the same opportunities for
fraud or collusion occur; and the same difficulty in discovering
the truth as to what has taken place arises . . .
In an action for recovery of damages against a common carrier on the goods
shipped, the shipper or consignee should first prove the fact of shipment and
its consequent loss or damage while the same was in the possession, actual or
constructive, of the carrier. Thereafter, the burden of proof shifts to respondent
to prove that he has exercised extraordinary diligence required by law or that
the loss, damage or deterioration of the cargo was due to fortuitous event, or
some other circumstances inconsistent with its liability. 31
To our mind, respondent carrier has sufficiently overcome, by clear and
convincing proof, the prima faciepresumption of negligence.
The master of the carrying vessel, Captain Lee Tae Bo, in his deposition taken
on 19 April 1977 before the Philippine Consul and Legal Attache in the
Philippine Embassy in Tokyo, Japan, testified that before the fertilizer was
loaded, the four (4) hatches of the vessel were cleaned, dried and fumigated.
After completing the loading of the cargo in bulk in the ship's holds, the steel
pontoon hatches were closed and sealed with iron lids, then covered with
three (3) layers of serviceable tarpaulins which were tied with steel bonds. The
hatches remained close and tightly sealed while the ship was in transit as the
weight of the steel covers made it impossible for a person to open without the
use of the ship's boom. 32
It was also shown during the trial that the hull of the vessel was in good
condition, foreclosing the possibility of spillage of the cargo into the sea or
seepage of water inside the hull of the vessel. 33 When M/V "Sun Plum" docked
at its berthing place, representatives of the consignee boarded, and in the
presence of a representative of the shipowner, the foreman, the stevedores,
and a cargo surveyor representing CSCI, opened the hatches and inspected
the condition of the hull of the vessel. The stevedores unloaded the cargo
under the watchful eyes of the shipmates who were overseeing the whole
operation on rotation basis. 34
Verily, the presumption of negligence on the part of the respondent carrier
has been efficaciously overcome by the showing of extraordinary zeal and
assiduity exercised by the carrier in the care of the cargo. This was confirmed
by respondent appellate court thus
. . . Be that as it may, contrary to the trial court's finding, the
record of the instant case discloses ample evidence showing
that defendant carrier was not negligent in performing its
obligations. Particularly, the following testimonies of plaintiff-
appellee's own witnesses clearly show absence of
negligence by the defendant carrier; that the hull of the
vessel at the time of the discharge of the cargo was sealed
and nobody could open the same except in the presence of
the owner of the cargo and the representatives of the vessel
(TSN, 20 July 1977, p. 14); that the cover of the hatches was
made of steel and it was overlaid with tarpaulins, three layers
of tarpaulins and therefore their contents were protected
from the weather (TSN, 5 April 1978, p. 24); and, that to open
these hatches, the seals would have to be broken, all the
seals were found to be intact (TSN, 20 July 1977, pp. 15-16)
(emphasis supplied).
12
The period during which private respondent was to observe the degree of
diligence required of it as a public carrier began from the time the cargo was
unconditionally placed in its charge after the vessel's holds were duly
inspected and passed scrutiny by the shipper, up to and until the vessel
reached its destination and its hull was reexamined by the consignee, but
prior to unloading. This is clear from the limitation clause agreed upon by the
parties in the Addendum to the standard "GENCON" time charter-party which
provided for an F.I.O.S., meaning, that the loading, stowing, trimming and
discharge of the cargo was to be done by the charterer, free from all risk and
expense to the carrier. 35 Moreover, a shipowner is liable for damage to the
cargo resulting from improper stowage only when the stowing is done by
stevedores employed by him, and therefore under his control and supervision,
not when the same is done by the consignee or stevedores under the employ
of the latter. 36
Article 1734 of the New Civil Code provides that common carriers are not
responsible for the loss, destruction or deterioration of the goods if caused by
the charterer of the goods or defects in the packaging or in the containers.
The Code of Commerce also provides that all losses and deterioration which
the goods may suffer during the transportation by reason of fortuitous
event, force majeure, or the inherent defect of the goods, shall be for the
account and risk of the shipper, and that proof of these accidents is
incumbent upon the carrier. 37 The carrier, nonetheless, shall be liable for the
loss and damage resulting from the preceding causes if it is proved, as against
him, that they arose through his negligence or by reason of his having failed to
take the precautions which usage has established among careful persons. 38
Respondent carrier presented a witness who testified on the characteristics of
the fertilizer shipped and the expected risks of bulk shipping. Mr. Estanislao
Chupungco, a chemical engineer working with Atlas Fertilizer, described Urea
as a chemical compound consisting mostly of ammonia and carbon
monoxide compounds which are used as fertilizer. Urea also contains 46%
nitrogen and is highly soluble in water. However, during storage, nitrogen and
ammonia do not normally evaporate even on a long voyage, provided that
the temperature inside the hull does not exceed eighty (80) degrees
centigrade. Mr. Chupungco further added that in unloading fertilizer in bulk
with the use of a clamped shell, losses due to spillage during such operation
amounting to one percent (1%) against the bill of lading is deemed "normal"
or "tolerable." The primary cause of these spillages is the clamped shell which
does not seal very tightly. Also, the wind tends to blow away some of the
materials during the unloading process.
The dissipation of quantities of fertilizer, or its daterioration in value, is caused
either by an extremely high temperature in its place of storage, or when it
comes in contact with water. When Urea is drenched in water, either fresh or
saline, some of its particles dissolve. But the salvaged portion which is in liquid
form still remains potent and usable although no longer saleable in its original
market value.
The probability of the cargo being damaged or getting mixed or
contaminated with foreign particles was made greater by the fact that the
fertilizer was transported in "bulk," thereby exposing it to the inimical effects of
the elements and the grimy condition of the various pieces of equipment
used in transporting and hauling it.
The evidence of respondent carrier also showed that it was highly improbable
for sea water to seep into the vessel's holds during the voyage since the hull of
the vessel was in good condition and her hatches were tightly closed and
firmly sealed, making the M/V "Sun Plum" in all respects seaworthy to carry the
cargo she was chartered for. If there was loss or contamination of the cargo, it
was more likely to have occurred while the same was being transported from
the ship to the dump trucks and finally to the consignee's warehouse. This may
be gleaned from the testimony of the marine and cargo surveyor of CSCI who
supervised the unloading. He explained that the 18 M/T of alleged "bar order
cargo" as contained in their report to PPI was just an approximation or
estimate made by them after the fertilizer was discharged from the vessel and
segregated from the rest of the cargo.
The Court notes that it was in the month of July when the vessel arrived port
and unloaded her cargo. It rained from time to time at the harbor area while
the cargo was being discharged according to the supply officer of PPI, who
also testified that it was windy at the waterfront and along the shoreline where
the dump trucks passed enroute to the consignee's warehouse.
Indeed, we agree with respondent carrier that bulk shipment of highly soluble
goods like fertilizer carries with it the risk of loss or damage. More so, with a
variable weather condition prevalent during its unloading, as was the case at
bar. This is a risk the shipper or the owner of the goods has to face. Clearly,
respondent carrier has sufficiently proved the inherent character of the goods
which makes it highly vulnerable to deterioration; as well as the inadequacy
of its packaging which further contributed to the loss. On the other hand, no
proof was adduced by the petitioner showing that the carrier was remise in
the exercise of due diligence in order to minimize the loss or damage to the
goods it carried.
WHEREFORE, the petition is DISMISSED. The assailed decision of the Court of
Appeals, which reversed the trial court, is AFFIRMED. Consequently, Civil Case
No. 98623 of the then Court of the First Instance, now Regional Trial Court, of
Manila should be, as it is hereby DISMISSED.
Costs against petitioner.
SO ORDERED.
VIRGINES CALVO doing business under the name and style TRANSORIENT
CONTAINER TERMINAL SERVICES, INC., petitioner, vs. UCPB GENERAL
INSURANCE CO., INC. (formerly Allied Guarantee Ins. Co.,
Inc.) respondent.
DECISION
MENDOZA, J.:
13
 This is a petition for review of the decision,[1] dated May 31, 2001, of the
Court of Appeals, affirming the decision[2] of the Regional Trial Court, Makati
City, Branch 148, which ordered petitioner to pay respondent, as subrogee,
the amount of P93,112.00 with legal interest, representing the value of
damaged cargo handled by petitioner, 25% thereof as attorneys fees, and
the cost of the suit.
The facts are as follows:
Petitioner Virgines Calvo is the owner of Transorient Container Terminal
Services, Inc. (TCTSI), a sole proprietorship customs broker. At the time material
to this case, petitioner entered into a contract with San Miguel Corporation
(SMC) for the transfer of 114 reels of semi-chemical fluting paper and 124 reels
of kraft liner board from the Port Area in Manila to SMCs warehouse at the
Tabacalera Compound, Romualdez St., Ermita, Manila. The cargo was insured
by respondent UCPB General Insurance Co., Inc.
On July 14, 1990, the shipment in question, contained in 30 metal vans,
arrived in Manila on board M/V Hayakawa Maru and, after 24 hours, were
unloaded from the vessel to the custody of the arrastre operator, Manila Port
Services, Inc. From July 23 to July 25, 1990, petitioner, pursuant to her contract
with SMC, withdrew the cargo from the arrastre operator and delivered it to
SMCs warehouse in Ermita, Manila. On July 25, 1990, the goods were
inspected by Marine Cargo Surveyors, who found that 15 reels of the semi-
chemical fluting paper were wet/stained/torn and 3 reels of kraft liner board
were likewise torn. The damage was placed at P93,112.00.
SMC collected payment from respondent UCPB under its insurance
contract for the aforementioned amount. In turn, respondent, as subrogee of
SMC, brought suit against petitioner in the Regional Trial Court, Branch 148,
Makati City, which, on December 20, 1995, rendered judgment finding
petitioner liable to respondent for the damage to the shipment.
The trial court held:
It cannot be denied . . . that the subject cargoes sustained damage while in
the custody of defendants. Evidence such as the Warehouse Entry Slip (Exh. E);
the Damage Report (Exh. F) with entries appearing therein, classified as TED
and TSN, which the claims processor, Ms. Agrifina De Luna, claimed to be
tearrage at the end and tearrage at the middle of the subject damaged
cargoes respectively, coupled with the Marine Cargo Survey Report (Exh. H -
H-4-A) confirms the fact of the damaged condition of the subject
cargoes. The surveyor[s] report (Exh. H-4-A) in particular, which provides
among others that:
. . . we opine that damages sustained by shipment is attributable to improper
handling in transit presumably whilst in the custody of the broker . . . .
is a finding which cannot be traversed and overturned.
The evidence adduced by the defendants is not enough to sustain [her]
defense that [she is] are not liable. Defendant by reason of the nature of [her]
business should have devised ways and means in order to prevent the
damage to the cargoes which it is under obligation to take custody of and to
forthwith deliver to the consignee. Defendant did not present any evidence
on what precaution [she] performed to prevent [the] said incident, hence the
presumption is that the moment the defendant accepts the cargo [she] shall
perform such extraordinary diligence because of the nature of the cargo.
....
Generally speaking under Article 1735 of the Civil Code, if the goods are
proved to have been lost, destroyed or deteriorated, common carriers are
presumed to have been at fault or to have acted negligently, unless they
prove that they have observed the extraordinary diligence required by law.
The burden of the plaintiff, therefore, is to prove merely that the goods he
transported have been lost, destroyed or deteriorated. Thereafter, the burden
is shifted to the carrier to prove that he has exercised the extraordinary
diligence required by law. Thus, it has been held that the mere proof of
delivery of goods in good order to a carrier, and of their arrival at the place of
destination in bad order, makes out a prima facie case against the carrier, so
that if no explanation is given as to how the injury occurred, the carrier must
be held responsible. It is incumbent upon the carrier to prove that the loss was
due to accident or some other circumstances inconsistent with its liability.
(cited in Commercial Laws of the Philippines by Agbayani, p. 31, Vol. IV, 1989
Ed.)
Defendant, being a customs brother, warehouseman and at the same time a
common carrier is supposed [to] exercise [the] extraordinary diligence
required by law, hence the extraordinary responsibility lasts from the time the
goods are unconditionally placed in the possession of and received by the
carrier for transportation until the same are delivered actually or constructively
by the carrier to the consignee or to the person who has the right to receive
the same.[3]
Accordingly, the trial court ordered petitioner to pay the following
amounts
1. The sum of P93,112.00 plus interest;
2. 25% thereof as lawyers fee;
3. Costs of suit.[4]
The decision was affirmed by the Court of Appeals on appeal. Hence this
petition for review on certiorari.
Petitioner contends that:
I. THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE
ERROR [IN] DECIDING THE CASE NOT ON THE EVIDENCE
PRESENTED BUT ON PURE SURMISES, SPECULATIONS AND
MANIFESTLY MISTAKEN INFERENCE.
II. THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE
ERROR IN CLASSIFYING THE PETITIONER AS A COMMON CARRIER
AND NOT AS PRIVATE OR SPECIAL CARRIER WHO DID NOT HOLD
ITS SERVICES TO THE PUBLIC.[5]
It will be convenient to deal with these contentions in the inverse order,
for if petitioner is not a common carrier, although both the trial court and the
Court of Appeals held otherwise, then she is indeed not liable beyond what
ordinary diligence in the vigilance over the goods transported by her, would
14
require.[6] Consequently, any damage to the cargo she agrees to transport
cannot be presumed to have been due to her fault or negligence.
Petitioner contends that contrary to the findings of the trial court and the
Court of Appeals, she is not a common carrier but a private carrier because,
as a customs broker and warehouseman, she does not indiscriminately hold
her services out to the public but only offers the same to select parties with
whom she may contract in the conduct of her business.
The contention has no merit. In De Guzman v. Court of Appeals, [7] the
Court dismissed a similar contention and held the party to be a common
carrier, thus
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.
The above article makes no distinction between one whose principal business
activity is the carrying of persons or goods or both, and one who does such
carrying only as an ancillary activity . . . Article 1732 also carefully avoids
making any distinction between a person or enterprise offering transportation
service on a regular or scheduled basis and one offering such service on
an occasional, episodic or unscheduled basis. Neither does Article 1732
distinguish between a carrier offering its services to the general public, i.e., the
general community or population, and one who offers services or solicits
business only from a narrow segment of the general population. We think that
Article 1732 deliberately refrained from making such distinctions.
So understood, the concept of common carrier under Article 1732 may be
seen to coincide neatly with the notion of public service, under the Public
Service Act (Commonwealth Act No. 1416, as amended) which at least
partially supplements the law on common carriers set forth in the Civil
Code. Under Section 13, paragraph (b) of the Public Service Act, public
service includes:
x x x every person that now or hereafter may own, operate, manage, or
control in the Philippines, for hire or compensation, with general or limited
clientele, whether permanent, occasional or accidental, and done for
general business purposes, any common carrier, railroad, street railway,
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. x x x [8]
There is greater reason for holding petitioner to be a common carrier
because the transportation of goods is an integral part of her business. To
uphold petitioners contention would be to deprive those with whom she
contracts the protection which the law affords them notwithstanding the fact
that the obligation to carry goods for her customers, as already noted, is part
and parcel of petitioners business.
Now, as to petitioners liability, Art. 1733 of the Civil Code provides:
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. . . .
In Compania Maritima v. Court of Appeals, [9] the meaning of
extraordinary diligence in the vigilance over goods was explained thus:
The extraordinary diligence in the vigilance over the goods tendered for
shipment requires the common carrier to know and to follow the required
precaution for avoiding damage to, or destruction of the goods entrusted to it
for sale, carriage and delivery. It requires common carriers to render service
with the greatest skill and foresight and to use all reasonable means to
ascertain the nature and characteristic of goods tendered for shipment, and
to exercise due care in the handling and stowage, including such methods as
their nature requires.
In the case at bar, petitioner denies liability for the damage to the
cargo. She claims that the spoilage or wettage took place while the goods
were in the custody of either the carrying vessel M/V Hayakawa Maru, which
transported the cargo to Manila, or the arrastre operator, to whom the goods
were unloaded and who allegedly kept them in open air for nine days from
July 14 to July 23, 1998 notwithstanding the fact that some of the containers
were deformed, cracked, or otherwise damaged, as noted in the Marine
Survey Report (Exh. H), to wit:
MAXU-2062880 - rain gutter deformed/cracked
ICSU-363461-3 - left side rubber gasket on door distorted/partly loose
PERU-204209-4 - with pinholes on roof panel right portion
TOLU-213674-3 - wood flooring we[t] and/or with signs of water
soaked
MAXU-201406-0 - with dent/crack on roof panel
ICSU-412105-0 - rubber gasket on left side/door panel partly detached
loosened.[10]
In addition, petitioner claims that Marine Cargo Surveyor Ernesto
Tolentino testified that he has no personal knowledge on whether the
container vans were first stored in petitioners warehouse prior to their delivery
to the consignee. She likewise claims that after withdrawing the container
vans from the arrastre operator, her driver, Ricardo Nazarro, immediately
delivered the cargo to SMCs warehouse in Ermita, Manila, which is a mere
thirty-minute drive from the Port Area where the cargo came from. Thus, the
damage to the cargo could not have taken place while these were in her
custody.[11]
Contrary to petitioners assertion, the Survey Report (Exh. H) of the Marine
Cargo Surveyors indicates that when the shipper transferred the cargo in
15
question to the arrastre operator, these were covered by clean Equipment
Interchange Report (EIR) and, when petitioners employees withdrew the
cargo from the arrastre operator, they did so without exception or protest
either with regard to the condition of container vans
or their contents. The Survey Report pertinently reads
Details of Discharge:
Shipment, provided with our protective supervision was noted discharged ex
vessel to dock of Pier #13 South Harbor, Manila on 14 July 1990, containerized
onto 30 x 20 secure metal vans, covered by clean EIRs. Except for slight dents
and paint scratches on side and roof panels, these containers were deemed
to have [been] received in good condition.
....
Transfer/Delivery:
On July 23, 1990, shipment housed onto 30 x 20 cargo containers was
[withdrawn] by Transorient Container Services, Inc. . . . without exception.
[The cargo] was finally delivered to the consignees storage warehouse
located at Tabacalera Compound, Romualdez Street, Ermita, Manila from
July 23/25, 1990.[12]
As found by the Court of Appeals:
From the [Survey Report], it [is] clear that the shipment was discharged from
the vessel to the arrastre, Marina Port Services Inc., in good order and
condition as evidenced by clean Equipment Interchange Reports (EIRs). Had
there been any damage to the shipment, there would have been a report to
that effect made by the arrastre operator. The cargoes were withdrawn by
the defendant-appellant from the arrastre still in good order and condition as
the same were received by the former without exception, that is, without any
report of damage or loss. Surely, if the container vans were deformed,
cracked, distorted or dented, the defendant-appellant would report it
immediately to the consignee or make an exception on the delivery receipt
or note the same in the Warehouse Entry Slip (WES). None of these took
place. To put it simply, the defendant-appellant received the shipment in
good order and condition and delivered the same to the consignee
damaged. We can only conclude that the damages to the cargo occurred
while it was in the possession of the defendant-appellant. Whenever the thing
is lost (or damaged) in the possession of the debtor (or obligor), it shall be
presumed that the loss (or damage) was due to his fault, unless there is proof
to the contrary. No proof was proffered to rebut this legal presumption and
the presumption of negligence attached to a common carrier in case of loss
or damage to the goods.[13]
Anent petitioners insistence that the cargo could not have been
damaged while in her custody as she immediately delivered the containers to
SMCs compound, suffice it to say that to prove the exercise of extraordinary
diligence, petitioner must do more than merely show the possibility that some
other party could be responsible for the damage. It must prove that it used all
reasonable means to ascertain the nature and characteristic of goods
tendered for [transport] and that [it] exercise[d] due care in the handling
[thereof]. Petitioner failed to do this.
Nor is there basis to exempt petitioner from liability under Art. 1734(4),
which provides
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:
....
(4) The character of the goods or defects in the packing or in the containers.
....
For this provision to apply, the rule is that if the improper packing or, in this
case, the defect/s in the container, is/are known to the carrier or his
employees or apparent upon ordinary observation, but he nevertheless
accepts the same without protest or exception notwithstanding such
condition, he is not relieved of liability for damage resulting therefrom.[14] In this
case, petitioner accepted the cargo without exception despite the apparent
defects in some of the container vans. Hence, for failure of petitioner to prove
that she exercised extraordinary diligence in the carriage of goods in this case
or that she is exempt from liability, the presumption of negligence as provided
under Art. 1735[15] holds.
WHEREFORE, the decision of the Court of Appeals, dated May 31, 2001, is
AFFIRMED.
SO ORDERED.
PHILIPPINE AIRLINES, INC., petitioner, vs. CIVIL AERONAUTICS BOARD and
GRAND INTERNATIONAL AIRWAYS, INC., respondents.
DECISION
TORRES, JR., J.:
This Special Civil Action for Certiorari and Prohibition under Rule 65 of the
Rules of Court seeks to prohibit respondent Civil Aeronautics Board from
exercising jurisdiction over private respondent's Application for the issuance of
a Certificate of Public Convenience and Necessity, and to annul and set
aside a temporary operating permit issued by the Civil Aeronautics Board in
favor of Grand International Airways (GrandAir, for brevity) allowing the same
to engage in scheduled domestic air transportation services, particularly the
Manila-Cebu, Manila-Davao, and converse routes.
The main reason submitted by petitioner Philippine Airlines, Inc. (PAL) to
support its petition is the fact that GrandAir does not possess a legislative
franchise authorizing it to engage in air transportation service within the
Philippines or elsewhere. Such franchise is, allegedly, a requisite for the
issuance of a Certificate of Public Convenience or Necessity by the
respondent Board, as mandated under Section 11, Article XII of the
Constitution.
16
 Respondent GrandAir, on the other hand, posits that a legislative
franchise is no longer a requirement for the issuance of a Certificate of Public
Convenience and Necessity or a Temporary Operating Permit, following the
Court's pronouncements in the case of Albano vs. Reyes,[1] as restated by the
Court of Appeals in Avia Filipinas International vs. Civil Aeronautics
Board[2] and Silangan Airways, Inc. vs. Grand International Airways, Inc., and
the Hon. Civil Aeronautics Board.[3]
On November 24, 1994, private respondent GrandAir applied for a
Certificate of Public Convenience and Necessity with the Board, which
application was docketed as CAB Case No. EP-12711.[4] Accordingly, the
Chief Hearing Officer of the CAB issued a Notice of Hearing setting the
application for initial hearing on December 16, 1994, and directing GrandAir
to serve a copy of the application and corresponding notice to all scheduled
Philippine Domestic operators. On December 14, 1994, GrandAir filed its
Compliance, and requested for the issuance of a Temporary Operating
Permit. Petitioner, itself the holder of a legislative franchise to operate air
transport services, filed an Opposition to the application for a Certificate of
Public Convenience and Necessity on December 16, 1995 on the following
grounds:
"A. The CAB has no jurisdiction to hear the petitioner's application until the
latter has first obtained a franchise to operate from Congress.
B. The petitioner's application is deficient in form and substance in that:
1. The application does not indicate a route structure including a
computation of trunkline, secondary and rural available seat kilometers (ASK)
which shall always be maintained at a monthly level at least 5% and 20% of
the ASK offered into and out of the proposed base of operations for rural and
secondary, respectively.
2. It does not contain a project/feasibility study, projected profit and loss
statements, projected balance sheet, insurance coverage, list of personnel,
list of spare parts inventory, tariff structure, documents supportive of financial
capacity, route flight schedule, contracts on facilities (hangars, maintenance,
lot) etc.
C. Approval of petitioner's application would violate the equal protection
clause of the constitution.
D. There is no urgent need and demand for the services applied for.
E. To grant petitioner's application would only result in ruinous competition
contrary to Section 4(d) of R.A. 776."[5]
At the initial hearing for the application, petitioner raised the issue of lack
of jurisdiction of the Board to hear the application because GrandAir did not
possess a legislative franchise.
On December 20, 1994, the Chief Hearing Officer of CAB issued an Order
denying petitioner's Opposition. Pertinent portions of the Order read:
"PAL alleges that the CAB has no jurisdiction to hear the petitioner's
application until the latter has first obtained a franchise to operate from
Congress.
The Civil Aeronautics Board has jurisdiction to hear and resolve the
application. In Avia Filipina vs. CAB, CA G.R. No. 23365, it has been ruled that
under Section 10 (c) (I) of R.A. 776, the Board possesses this specific power
and duty.
In view thereof, the opposition of PAL on this ground is hereby denied.
SO ORDERED."
Meantime, on December 22, 1994, petitioner this time, opposed private
respondent's application for a temporary permit maintaining that:
"1. The applicant does not possess the required fitness and capability of
operating the services applied for under RA 776; and,
2. Applicant has failed to prove that there is clear and urgent public need for
the services applied for."[6]
On December 23, 1994, the Board promulgated Resolution No. 119(92)
approving the issuance of a Temporary Operating Permit in favor of Grand
Air[7] for a period of three months, i.e., from December 22, 1994 to March 22,
1994. Petitioner moved for the reconsideration of the issuance of the
Temporary Operating Permit on January 11, 1995, but the same was denied in
CAB Resolution No. 02 (95) on February 2, 1995.[8] In the said Resolution, the
Board justified its assumption of jurisdiction over GrandAir's application.
"WHEREAS, the CAB is specifically authorized under Section 10-C (1) of
Republic Act No. 776 as follows:
'(c) The Board shall have the following specific powers and duties:
(1) In accordance with the provision of Chapter IV of this Act, to issue, deny,
amend revise, alter, modify, cancel, suspend or revoke, in whole or in part,
upon petitioner-complaint, or upon its own initiative, any temporary operating
permit or Certificate of Public Convenience and Necessity; Provided,
however; that in the case of foreign air carriers, the permit shall be issued with
the approval of the President of the Republic of the Philippines."
WHEREAS, such authority was affirmed in PAL vs. CAB, (23 SCRA 992), wherein
the Supreme Court held that the CAB can even on its own initiative, grant a
TOP even before the presentation of evidence;
WHEREAS, more recently, Avia Filipinas vs. CAB, (CA-GR No. 23365),
promulgated on October 30, 1991, held that in accordance with its mandate,
the CAB can issue not only a TOP but also a Certificate of Public Convenience
and Necessity (CPCN) to a qualified applicant therefor in the absence of a
legislative franchise, citing therein as basis the decision of Albano vs. Reyes
(175 SCRA 264) which provides (inter alia) that:
a) Franchises by Congress are not required before each and every public
utility may operate when the law has granted certain administrative agencies
the power to grant licenses for or to authorize the operation of certain public
utilities;
b) The Constitutional provision in Article XII, Section 11 that the issuance of a
franchise, certificate or other form of authorization for the operation of a
public utility does not necessarily imply that only Congress has the power to
grant such authorization since our statute books are replete with laws granting
17
specified agencies in the Executive Branch the power to issue such
authorization for certain classes of public utilities.
WHEREAS, Executive Order No. 219 which took effect on 22 January 1995,
provides in Section 2.1 that a minimum of two (2) operators in each route/link
shall be encouraged and that routes/links presently serviced by only one (1)
operator shall be open for entry to additional operators.
RESOLVED, (T)HEREFORE, that the Motion for Reconsideration filed by
Philippine Airlines on January 05, 1995 on the Grant by this Board of a
Temporary Operating Permit (TOP) to Grand International Airways, Inc.
alleging among others that the CAB has no such jurisdiction, is hereby DENIED,
as it hereby denied, in view of the foregoing and considering that the grounds
relied upon by the movant are not indubitable."
On March 21, 1995, upon motion by private respondent, the temporary
permit was extended for a period of six (6) months or up to September 22,
1995.
Hence this petition, filed on April 3, 1995.
Petitioners argue that the respondent Board acted beyond its powers
and jurisdiction in taking cognizance of GrandAirs application for the issuance
of a Certificate of Public Convenience and Necessity, and in issuing a
temporary operating permit in the meantime, since GrandAir has not been
granted and does not possess a legislative franchise to engage in scheduled
domestic air transportation. A legislative franchise is necessary before anyone
may engage in air transport services, and a franchise may only be granted by
Congress. This is the meaning given by the petitioner upon a reading of
Section 11, Article XII,[9] and Section 1, Article VI,[10] of the Constitution.
To support its theory, PAL submits Opinion No. 163, S. 1989 of the
Department of Justice, which reads:
Dr. Arturo C. Corona
Executive Director
Civil Aeronautics Board
PPL Building, 1000 U.N. Avenue
Ermita, Manila
Sir:
This has reference to your request for opinion on the necessity of a legislative
franchise before the Civil Aeronautics Board (CAB) may issue a Certificate of
Public Convenience and Necessity and/or permit to engage in air commerce
or air transportation to an individual or entity.
You state that during the hearing on the application of Cebu Air for a
congressional franchise, the House Committee on Corporations and
Franchises contended that under the present Constitution, the CAB may not
issue the abovestated certificate or permit, unless the individual or entity
concerned possesses a legislative franchise. You believe otherwise, however,
for the reason that under R.A. No. 776, as amended, the CAB is explicitly
empowered to issue operating permits or certificates of public convenience
and necessity and that this statutory provision is not inconsistent with the
current charter.
We concur with the view expressed by the House Committee on Corporations
and Franchises. In an opinion rendered in favor of your predecessor-in-office,
this Department observed that,-
xxx it is useful to note the distinction between the
franchise to operate and a permit to commence
operation. The former is sovereign and legislative in
nature; it can be conferred only by the lawmaking
authority (17 W and P, pp. 691-697). The latter is
administrative and regulatory in character (In re
Application of Fort Crook-Bellevue Boulevard Line, 283
NW 223); it is granted by an administrative agency, such
as the Public Service Commission [now Board of
Transportation], in the case of land transportation, and
the Civil Aeronautics Board, in case of air services. While
a legislative franchise is a pre-requisite to a grant of a
certificate of public convenience and necessity to an
airline company, such franchise alone cannot constitute
the authority to commence operations, inasmuch as
there are still matters relevant to such operations which
are not determined in the franchise, like rates, schedules
and routes, and which matters are resolved in the
process of issuance of permit by the administrative.
(Secretary of Justice opn No. 45, s. 1981)
Indeed, authorities are agreed that a certificate of public convenience and
necessity is an authorization issued by the appropriate governmental agency
for the operation of public services for which a franchise is required by law
(Almario, Transportation and Public Service Law, 1977 Ed., p. 293; Agbayani,
Commercial Law of the Phil., Vol. 4, 1979 Ed., pp. 380-381).
Based on the foregoing, it is clear that a franchise is the legislative
authorization to engage in a business activity or enterprise of a public nature,
whereas a certificate of public convenience and necessity is a regulatory
measure which constitutes the franchises authority to commence operations.
It is thus logical that the grant of the former should precede the latter.
Please be guided accordingly.
(SGD.) SEDFREY A. ORDOEZ
Secretary of Justice"
Respondent GrandAir, on the other hand, relies on its interpretation of the
provisions of Republic Act 776, which follows the pronouncements of the Court
of Appeals in the cases of Avia Filipinas vs. Civil Aeronautics Board, and
Silangan Airways, Inc. vs. Grand International Airways (supra).
In both cases, the issue resolved was whether or not the Civil Aeronautics
Board can issue the Certificate of Public Convenience and Necessity or
Temporary Operating Permit to a prospective domestic air transport operator
who does not possess a legislative franchise to operate as such. Relying on the
Court's pronouncement in Albano vs. Reyes (supra), the Court of Appeals
upheld the authority of the Board to issue such authority, even in the absence
18
of a legislative franchise, which authority is derived from Section 10 of
Republic Act 776, as amended by P.D. 1462.[11]
The Civil Aeronautics Board has jurisdiction over GrandAir's Application
for a Temporary Operating Permit. This rule has been established in the case of
Philippine Air Lines Inc., vs. Civil Aeronautics Board, promulgated on June 13,
1968.[12] The Board is expressly authorized by Republic Act 776 to issue a
temporary operating permit or Certificate of Public Convenience and
Necessity, and nothing contained in the said law negates the power to issue
said permit before the completion of the applicant's evidence and that of the
oppositor thereto on the main petition. Indeed, the CAB's authority to grant a
temporary permit "upon its own initiative" strongly suggests the power to
exercise said authority, even before the presentation of said evidence has
begun. Assuming arguendo that a legislative franchise is prerequisite to the
issuance of a permit, the absence of the same does not affect the jurisdiction
of the Board to hear the application, but tolls only upon the ultimate issuance
of the requested permit.
The power to authorize and control the operation of a public utility is
admittedly a prerogative of the legislature, since Congress is that branch of
government vested with plenary powers of legislation.
"The franchise is a legislative grant, whether made directly by the legislature
itself, or by any one of its properly constituted instrumentalities. The grant,
when made, binds the public, and is, directly or indirectly, the act of the
state."[13]
The issue in this petition is whether or not Congress, in enacting Republic
Act 776, has delegated the authority to authorize the operation of domestic
air transport services to the respondent Board, such that Congressional
mandate for the approval of such authority is no longer necessary.
Congress has granted certain administrative agencies the power to
grant licenses for, or to authorize the operation of certain public utilities. With
the growing complexity of modern life, the multiplication of the subjects of
governmental regulation, and the increased difficulty of administering the
laws, there is a constantly growing tendency towards the delegation of
greater powers by the legislature, and towards the approval of the practice
by the courts.[14] It is generally recognized that a franchise may be derived
indirectly from the state through a duly designated agency, and to this extent,
the power to grant franchises has frequently been delegated, even to
agencies other than those of a legislative nature.[15] In pursuance of this, it has
been held that privileges conferred by grant by local authorities as agents for
the state constitute as much a legislative franchise as though the grant had
been made by an act of the Legislature.[16]
The trend of modern legislation is to vest the Public Service Commissioner
with the power to regulate and control the operation of public services under
reasonable rules and regulations, and as a general rule, courts will not
interfere with the exercise of that discretion when it is just and reasonable and
founded upon a legal right.[17]
It is this policy which was pursued by the Court in Albano vs. Reyes. Thus,
a reading of the pertinent issuances governing the Philippine Ports
Authority,[18] proves that the PPA is empowered to undertake by itself the
operation and management of the Manila International Container Terminal,
or to authorize its operation and management by another by contract or
other means, at its option. The latter power having been delegated to the
PPA, a franchise from Congress to authorize an entity other than the PPA to
operate and manage the MICP becomes unnecessary.
Given the foregoing postulates, we find that the Civil Aeronautics Board
has the authority to issue a Certificate of Public Convenience and Necessity,
or Temporary Operating Permit to a domestic air transport operator, who,
though not possessing a legislative franchise, meets all the other requirements
prescribed by the law. Such requirements were enumerated in Section 21 of
R.A. 776.
There is nothing in the law nor in the Constitution, which indicates that a
legislative franchise is an indispensable requirement for an entity to operate as
a domestic air transport operator. Although Section 11 of Article XII recognizes
Congress' control over any franchise, certificate or authority to operate a
public utility, it does not mean Congress has exclusive authority to issue the
same. Franchises issued by Congress are not required before each and every
public utility may operate.[19] In many instances, Congress has seen it fit to
delegate this function to government agencies, specialized particularly in their
respective areas of public service.
A reading of Section 10 of the same reveals the clear intent of Congress
to delegate the authority to regulate the issuance of a license to operate
domestic air transport services:
SECTION 10. Powers and Duties of the Board. (A) Except as otherwise provided
herein, the Board shall have the power to regulate the economic aspect of air
transportation, and shall have general supervision and regulation of, the
jurisdiction and control over air carriers, general sales agents, cargo sales
agents, and air freight forwarders as well as their property rights, equipment,
facilities and franchise, insofar as may be necessary for the purpose of
carrying out the provision of this Act.
In support of the Board's authority as stated above, it is given the
following specific powers and duties:
(C) The Board shall have the following specific powers and duties:
(1) In accordance with the provisions of Chapter IV of this Act, to issue, deny,
amend, revise, alter, modify, cancel, suspend or revoke in whole or in part
upon petition or complaint or upon its own initiative any Temporary Operating
Permit or Certificate of Public Convenience and Necessity: Provided however,
That in the case of foreign air carriers, the permit shall be issued with the
approval of the President of the Republic of the Philippines.
Petitioner argues that since R.A. 776 gives the Board the authority to issue
"Certificates of Public Convenience and Necessity", this, according to
petitioner, means that a legislative franchise is an absolute requirement. It
cites a number of authorities supporting the view that a Certificate of Public
19
Convenience and Necessity is issued to a public service for which a franchise
is required by law, as distinguished from a "Certificate of Public Convenience"
which is an authorization issued for the operation of public services for which
no franchise, either municipal or legislative, is required by law. [20]
This submission relies on the premise that the authority to issue a
certificate of public convenience and necessity is a regulatory measure
separate and distinct from the authority to grant a franchise for the operation
of the public utility subject of this particular case, which is exclusively lodged
by petitioner in Congress.
We do not agree with the petitioner.
Many and varied are the definitions of certificates of public convenience
which courts and legal writers have drafted. Some statutes use the terms
"convenience and necessity" while others use only the words "public
convenience." The terms "convenience and necessity", if used together in a
statute, are usually held not to be separable, but are construed together. Both
words modify each other and must be construed together. The word
'necessity' is so connected, not as an additional requirement but to modify
and qualify what might otherwise be taken as the strict significance of the
word necessity. Public convenience and necessity exists when the proposed
facility will meet a reasonable want of the public and supply a need which
the existing facilities do not adequately afford. It does not mean or require an
actual physical necessity or an indispensable thing.[21]
"The terms 'convenience' and 'necessity' are to be construed together,
although they are not synonymous, and effect must be given both. The
convenience of the public must not be circumscribed by according to the
word 'necessity' its strict meaning or an essential requisites."[22]
The use of the word "necessity", in conjunction with "public convenience"
in a certificate of authorization to a public service entity to operate, does not
in any way modify the nature of such certification, or the requirements for the
issuance of the same. It is the law which determines the requisites for the
issuance of such certification, and not the title indicating the certificate.
Congress, by giving the respondent Board the power to issue permits for
the operation of domestic transport services, has delegated to the said body
the authority to determine the capability and competence of a prospective
domestic air transport operator to engage in such venture. This is not an
instance of transforming the respondent Board into a mini-legislative body,
with unbridled authority to choose who should be given authority to operate
domestic air transport services.
"To be valid, the delegation itself must be circumscribed by legislative
restrictions, not a "roving commission" that will give the delegate unlimited
legislative authority. It must not be a delegation "running riot" and "not
canalized with banks that keep it from overflowing." Otherwise, the delegation
is in legal effect an abdication of legislative authority, a total surrender by the
legislature of its prerogatives in favor of the delegate." [23]
Congress, in this instance, has set specific limitations on how such
authority should be exercised.
Firstly, Section 4 of R.A. No. 776, as amended, sets out the following
guidelines or policies:
"SECTION 4. Declaration of policies. In the exercise and performance of its
powers and duties under this Act, the Civil Aeronautics Board and the Civil
Aeronautics Administrator shall consider the following, among other things, as
being in the public interest, and in accordance with the public convenience
and necessity:
(a) The development and utilization of the air potential of the Philippines;
(b) The encouragement and development of an air transportation system
properly adapted to the present and future of foreign and domestic
commerce of the Philippines, of the Postal Service and of the National
Defense;
(c) The regulation of air transportation in such manner as to recognize and
preserve the inherent advantages of, assure the highest degree of safety in,
and foster sound economic condition in, such transportation, and to improve
the relations between, and coordinate transportation by, air carriers;
(d) The promotion of adequate, economical and efficient service by air
carriers at reasonable charges, without unjust discriminations, undue
preferences or advantages, or unfair or destructive competitive practices;
(e) Competition between air carriers to the extent necessary to assure the
sound development of an air transportation system properly adapted to the
need of the foreign and domestic commerce of the Philippines, of the Postal
Service, and of the National Defense;
(f) To promote safety of flight in air commerce in the Philippines; and,
(g) The encouragement and development of civil aeronautics.
More importantly, the said law has enumerated the requirements to
determine the competency of a prospective operator to engage in the
public service of air transportation.
SECTION 12. Citizenship requirement. Except as otherwise provided in the
Constitution and existing treaty or treaties, a permit authorizing a person to
engage in domestic air commerce and/or air transportation shall be issued
only to citizens of the Philippines.[24]
SECTION 21. Issuance of permit. The Board shall issue a permit authorizing the
whole or any part of the service covered by the application, if it finds: (1) that
the applicant is fit, willing and able to perform such service properly in
conformity with the provisions of this Act and the rules, regulations, and
requirements issued thereunder; and (2) that such service is required by the
public convenience and necessity; otherwise the application shall be denied.
Furthermore, the procedure for the processing of the application of a
Certificate of Public Convenience and Necessity had been established to
ensure the weeding out of those entities that are not deserving of public
service.[25]
In sum, respondent Board should now be allowed to continue hearing
the application of GrandAir for the issuance of a Certificate of Public
Convenience and Necessity, there being no legal obstacle to the exercise of
its jurisdiction.
20
 ACCORDINGLY, in view of the foregoing considerations, the Court
RESOLVED to DISMISS the instant petition for lack of merit. The respondent Civil
Aeronautics Board is hereby DIRECTED to CONTINUE hearing the application
of respondent Grand International Airways, Inc. for the issuance of a
Certificate of Public Convenience and Necessity.
SO ORDERED.
6, G.R. No. L-19857 March 2, 1923
THE ILOILO ICE AND COLD STORAGE COMPANY, petitioner,
vs.
PUBLIC UTILITY BOARD, respondent.
This action in certiorari is for the purpose of reviewing a decision of the Public
Utility Commissioner, affirmed by the Public Utility Board, holding that the
petitioner, the Iloilo Ice and Cold Storage Company, is a public utility and, as
such, subject to the control and jurisdiction of the Public Utility Commissioner.
The case can be best understood by a consideration of its various phases,
under the following topic: Statement of the issue, statement of the case,
statement of the facts, statement of the law, statement of the authorities,
statement of the petitioner's case, and of the government's case, and
judgment.
STATEMENT OF THE ISSUE
The issue is whether the Iloilo Ice and Cold Storage Company is a public utility,
as that term is defined by section 9 of Act No. 2694.
STATEMENT OF THE CASE
Francisco Villanueva, Jr., secretary of the Public Utility Commission,
investigated the operation of ice plants in Iloilo early in November, 1921. He
reported to the Public Utility Commissioner that the Iloilo Ice and Cold Storage
Company should be considered a public utility, and that, accordingly, the
proper order should issue.
Agreeable to the recommendation of Secretary Villanueva, the Public Utility
Commissioner promulgated an order on December 19, 1921, reciting the facts
abovementioned, and directing the Iloilo Ice and Cold Storage Company to
show cause why it should not be considered a public utility and as such
required to comply with each and every duty of public utilities provided in Act
No. 2307, as amended by Act No. 2694. To this order, John Bordman, treasurer
of the Iloilo Ice and Cold Storage Company, interposed a special answer, in
which it was alleged that the company is, and always has been operated as
a private enterprise.
Hearing was then had, at which the testimonies of Francisco Villanueva, Jr.,
and of John Bordman were received. Various exhibits were presented and
received in evidence. Mr. Bordman, as the managing director and treasurer
of the company, later submitted an affidavit.
The Public Utility Commissioner rendered a decision holding in effect that the
Iloilo Ice and Cold Storage Company was a public utility, and that,
accordingly, it should file in the office of the Public Utility Commissioner, a
statement of its charges for ice. This decision was affirmed on appeal to the
Public Utility Board. From this last decision, petitioner has come before this
court, asking that the proceeding below be reviewed, and the decisions set
aside.
STATEMENT OF THE FACTS
The petitioner, the Iloilo Ice and Cold Storage Company, is a corporation
organized under the laws of the Philippine Islands in 1908, with a capital stock
of P60,000. Continuously since that date, the company has maintained and
operated a plant for the manufacture and sale of ice in the City of Iloilo. It
also does business to a certain extent in the Provinces of Negros, Capiz, and
Antique, and with boats which stop at the port of Iloilo. At the time its
operation were started, two additional ice plants were operating in Iloilo.
Subsequently, however, the other plants ceased to operate, so that the
petitioner now has no competitor in the field.
The normal production of ice of the Iloilo Ice and Cold Storage Company is
about 3 tons per day. In the month of January, 1922, a total of 83,837 kilos of
ice were sold, of which 56,400 kilos were on written contracts in the City of
Iloilo and adjoining territory, 14,214 kilos, also on written contracts, to steamers
calling at the port of Iloilo, and 13,233 kilos on verbal contracts. Although new
machinery has been installed in the plant, this was merely for replacement
purposes, and did not add to its capacity. The demand for ice has usually
been much more than the plant could produce and no effort has been made
to provide sufficient ice to supply all who might apply.
Since 1908, the business of the Iloilo Ice and Cold Storage Company,
accordingly to its managing director and treasurer, has been carried on with
selected customers only. Preference, however, is always given to hospitals,
the request of practicing physicians, and the needs of sick persons. The larger
part of the company's business is perfected by written contracts signed by the
parties served, which, in the present form, includes an agreement that no right
to future service is involved.
The coupon books of the company contain on the outside the following:
This agreement witnesseth, that The Iloilo Ice and Cold Storage Co.
will furnish the undersigned with ice as indicated herein at the rate of
one coupon per day. These coupons are not transferable. It is further
agreed that the company is not obligated to similar service in future
except by special agreement.
Iloilo, ......................................................................................., 192 ......
(Signed) ....................................................................... No. ..................
Cash sales of ice are accomplished on forms reading: "In receiving the ice
represented by this ticket I hereby agree that the Iloilo Ice and Cold Storage
Co. is not bound in future to extend to me further service." A notice posted in
the Iloilo store reads: "No ice is sold to the public by this plant. Purchases can
only be made by private contract." In August, 1918, all storage facilities were
abolished, and resumed in 1920 only with contracts, a copy of the form at
present in use waiving any right to continued service.
On only one point of fact is there any divergence, and this is relatively
unimportant. Secretary Villanueva reported, and the Public Utility
21
Commissioner found, that the Iloilo Ice and Cold Storage Company sold ice to
the public, and advertised its sale through the papers; while managing
director Bordman claims that only once have the instructions of the board of
directors prohibiting public advertising been violated.
STATEMENT OF THE LAW
The original public utility law, Act No. 2307, in its section 14, 1n speaking of the
jurisdiction of the Board of Public Utility Commissioner, and in defining the term
"public utility," failed to include ice, refrigeration, and cold storage plants. This
deficiency was, however, remedied by Act No. 2694, enacted in 1917, which
amended section 14 of A ct No. 2307, to read as follows:
* * * The term "public utility" is hereby defined to include every
individual, copartnership, association, corporation or joint stock
company, whether domestic or foreign, their lessee, trustees or
receivers appointed by any court whatsoever, or any municipality,
province or other department of the Government of the Philippine
Islands, that now or hereafter may own, operate, manage or control
within the Philippine Islands any common carrier, railroad, street
railway, traction railway, steamboat or steamship line, small water
craft, such as bancas, virais, lorchas, and others, engaged in the
transportation of passengers and cargo, line of freight and passenger
automobiles, shipyard, marine railway, marine repair shop, ferry,
freight or any other car services, public warehouse, public wharf or
dock not under the jurisdiction of the Insular Collector of Customs, ice,
refrigeration, cold storage, canal, irrigation, express, subway, pipe
line, gas, electric light, heat, power, water, oil sewer, telephone, wire
or wireless telegraph system, plant or equipment, for public
use: Provided, That the Commission or Commissioner shall have no
jurisdiction over ice plants, cold storage plants, or any other kind of
public utilities operated by the Federal Government exclusively for its
own and not for public use. . . .
It will thus be noted that the term "public utility," in this jurisdiction, includes
every individual, copartnership, association, corporation, or joint stock
company that now or hereafter may own, operate, manage, or control, within
the Philippine Islands, any ice, refrigeration, cold storage system, plant, or
equipment, for public use. Particular attention is invited to the last phrase, "for
public use."
STATEMENT OF THE AUTHORITIES
The authorities are abundant, although some of them are not overly
instructive. Selection is made of the pertinent decisions coming from our own
Supreme Court, the Supreme Court of the United States, and the Supreme
Court of California.
In the case of United States vs. Tan Piaco ([1920], 40 Phil., 853), the facts were
that the trucks of the defendant furnished service under special agreements
to carry particular persons and property. Following the case of Terminal
Taxicab Co. vs. Kutz ([1916], 241 U. S., 252), it was held that since the
defendant did not hold himself out to carry all passengers and freight for all
persons who might offer, he was not a public utility and, therefore, was not
criminally liable for his failure to obtain a license from the Public Utility
Commissioner. It was said:
Under the provisions of said section, two things are necessary: (a) The
individual, copartnership, etc., etc., must be a public utility; and (b)
the business in which such individual, copartnership, etc., etc., is
engaged must be for public use. So long as the individual or
copartnership, etc., etc., is engaged in a purely private enterprise,
without attempting to render service to all who may apply, he can in
no sense be considered a public utility, for public use.
"Public use" means the same as "use by the public." The essential
feature of the public use is that it is not confined to privileged
individuals, but is open to the indefinite public. It is this indefinite or
unrestricted quality that gives it its public character. In determining
whether a use is public, we must look not only to the character of the
business to be done, but also to the proposed mode of doing it. If the
use is merely optional with the owners, or the public benefit is merely
incidental, it is not a public use, authorizing the exercise of the
jurisdiction of the public utility commission. There must be, in general,
a right which the law compels the owner to give to the general public.
It is not enough that the general prosperity of the public is promoted.
Public use is not synonymous with public interest. The true criterion by
which to judge of the character of the use is whether the public may
enjoy it by right or only by permission.
In the decision of the Supreme Court of the United States in Terminal Taxicab
Company vs. Kutz, supra, it was held: "A taxicab company is a common
carrier within the meaning of the Act of March 4, 1913 (37 Stat. at L., 938,
chap. 150), sec. 8, and hence subject to the jurisdiction of the Public Utilities
Commission of the District of Columbia as a "public utility" in respect of its
exercise of its exclusive right under lease from the Washington Terminal
Company, the owner of the Washington Union Railway Station, to solicit livery
and taxicab business from persons passing to or from trains, and of its exclusive
right under contracts with certain Washington hotels to solicit taxicab business
from guest, but that part of its business which consists in furnishing automobiles
from its central garage on individual orders, generally by telephone, cannot
be regarded as a public utility, and the rates charged for such service are
therefore not open to inquiry by the Commission." Mr. Justice Holmes,
delivering the opinion of the court, in part said:
The rest of the plaintiff's business, amounting to four tenths, consists
mainly in furnishing automobiles from its central garage on orders,
generally by telephone. It asserts the right to refuse the service, and
no doubt would do so it the pay was uncertain, but it advertises
extensively, and, we must assume, generally accepts any seemingly
solvent customer. Still, the bargains are individual, and however much
they may tend towards uniformity in price, probably have not quite
the mechanical fixity of charges that attends the use of taxicabs from
22
 the station and hotels. There is no contract with a third person to serve
the public generally. The question whether, as to this part of its
business, it is an agency for public use within the meaning of the
statute, is more difficult. . . . Although I have not been able to free my
mind from doubt, the court is of opinion that this part of the business is
not to be regarded as a public utility. It is true that all business, and,
for the matter of that, every life in all its details, has a public aspect,
some bearing upon the welfare of the community in which it is
passed. But, however it may have been in earlier days as to the
common callings, it is assumed in our time that an invitation to the
public to buy does not necessarily entail an obligation to sell. It is
assumed an ordinary shopkeeper may refuse his wares arbitrary to a
customer whom he dislikes, and although that consideration is not
conclusive (233 U. S., 407), it is assumed that such a calling is not
public as the word is used. In the absence of clear language to the
contrary it would be assumed that an ordinary livery stable stood on
the same footing as a common shop, and there seems to be no
difference between the plaintiff's service from its garage and that of a
livery stable. It follows that the plaintiff is not bound to give information
as to its garage rates.
The Supreme Court of California in the case of Thayer and Thayer vs. California
Development Company ([1912], 164 Cal., 117), announced, among other
things, that the essential feature of a public use is that "it is not confined to
privileged individuals, but is open to the indefinite public. It is this indefiniteness
or unrestricted quality that gives it its public character." Continuing, reference
was made to the decision of the United States Supreme Court in Fallbrook
Irrigation District vs. Bradley ([1896], 164 U. S., 161), where the United States
Supreme Court considered the question of whether or not the water
belonging to an irrigation district organized under the California statute of
1887, and acquired for and applied to its authorized uses and purposes, was
water dedicated to a public use. Upon this question, the Supreme Court on
appeal said:
The fact that the use of the water is limited to the landowner is not
therefore a fatal objection to this legislation. It is not essential that the
entire community, or even any considerable portion thereof, should
directly enjoy or participate in an improvement in order to constitute
a public use. All landowners in the district have the right to a
proportionate share of the water, and no one landowner is favored
above his fellow in his right to the use of the water. It is not necessary,
in order that the use should be public, that every resident in the district
should have the right to the use of the water. The water is not used for
general, domestic, or for drinking purposes, and it is plain from the
scene of the act that the water is intended for the use of those who
will have occasion to use it on their lands. . . . We think it clearly
appears that all who by reason of their ownership of or connection
with any portion of the lands would have occasion to use the water,
would in truth have the opportunity to use it upon the same terms as
all others similarly situated. In this away the use, so far as this point is
concerned, is public because all persons have the right to use the
water under the same circumstances. This is sufficient.
The latest pronouncement of the United States Supreme Court here available
is found in the case of Producers Transportation Company vs. Railroad
Commission of the State of California ([1920], 251 U. S., 228). Mr. Justice Van
Devander, delivering the opinion of the court, in part said:
It is, of course, true that if the pipe line was constructed solely to carry
oil for particular procedures under strictly private contracts and never
was devoted by its owner to public use, that is, to carrying for the
public, the State could not by mere legislative fiat or by any
regulating order of a commission convert it into a public utility or
make its owner a common carrier; for that would be taking private
property for public use without just compensation, which no State can
do consistently with the due process of law clause of the Fourteenth
Amendment. . . . On the other hand, if in the beginning or during its
subsequent operation the pipe line was devoted by its owner to
public use, and if the right thus extended to the public has not been
withdrawn, there can be no doubt that the pipe line is a public utility
and its owner a common carrier whose rates and practices are
subject to public regulation. Munn vs. Illinois, supra.
The state court, upon examining the evidence, concluded that the
company voluntarily had devoted the pipe line to the use of the
public in transporting oil, and it rested this conclusion upon the
grounds . . . that, looking through the maze of contracts, agency
agreements and the like, under which the transportation was
effected, subordinating form to substance, and having due regard to
the agency's ready admission of new members and its exclusion of
none, it was apparent that the company did in truth carry oil for all
producers seeking its service, in other words, for the public. (See Pipe
Line Cases, 234 U. S., 548.)
Lastly, we take note of the case of Allen vs. Railroad Commission of the State
of California ([1918], 179 Cal., 68; 8 A. L. R., 249). It was here held that a water
company does not, by undertaking to furnish a water supply to a municipality
which will require only a small percentage of its product, become a public
utility as to the remainder, which it sells under private contracts. The court
observed that its decision fully recognized that a private water company may
be organized to sell water for purposes of private gain, and that in doing, it
does not become a public utility. "To hold that property has been dedicated
to a public use," reads the opinion, "is not a trivial thing, and such dedication is
never presumed without evidence of unequivocal intention." Continuing, the
court discusses what is a public utility in the following language:
What is a public utility, over which the state may exercise its regulatory
control without regard to the private interest which may be affected
thereby? It its broadest sense everything upon which man bestows
23
 labor for purpose other than those for the benefits of his immediate
family is impressed with a public use. No occupation escapes it, no
merchant can avoid it, no professional man can deny it. As an
illustrative type one may instance the butcher. He deals with the
public; he invites and is urgent that the public should deal with him.
The character of his business is such that, under the police power of
the state, it may well be subject to regulation, and in many places
and instances is so regulated. The preservation of cleanliness, the
inspection of meats to see that they are wholesome, all such matters
are within the due and reasonable regulatory powers of the state or
nation. But these regulatory powers are not called into exercise
because the butcher has devoted his property to public service so as
to make it a public utility. He still has the unquestionable right to fix his
prices; he still has the questioned right to say that he will or will not
contract with any member of the public. What differentiates all such
activities from a true public utility is this and this only: That the devotion
to public use must be of such character that the public generally, or
that part of it which has been served and which has accepted the
services, has the right to demand that that service shall be
conducted, so long as it is continued, with reasonable efficiency
under reasonable charges. Public use, then, means the use by the
public and be every individual member of it, as a legal right.
STATEMENT OF THE PETITIONER'S CASE AND OF THE GOVERNMENT'S CASE
Petitioner contends on the facts, that the evidence shows that the petitioner is
operating a small ice plant in Iloilo; that no attempt has been made to supply
the needs of all who may apply for accommodation or to expand the plant to
meet all demands; that sales have been made to selected customers only,
and that the right has been freely exercised to refuse sales not only to whole
districts, but constantly to individuals as wells; that the greater portion of the
business is conducted through signed contracts with selected individuals, and
on occasions, when there is a surplus, the same is sold for cash to selected
applicants; that no sales are made except to persons who have waived all
claim of right to similar accommodation in the future; and that no offer,
agreement, or tender of service to the public has ever been made. Petitioner
contends, as to the law, that the decisions heretofore referred to are
controlling.
The Government has no quarrel with the petitioner as to the facts. But the
Attorney-General attempts to differentiate the authorities from the instant
situation. The Attorney-General also argues that to sanction special contracts
would "open a means of escape from the application of the law."
The result is, therefore, that we have substantial agreement between the
petitioner and the government as to the issue, as to the facts, as to the law,
and as to the applicable authorities. The question, however, remains as
puzzling as before.
Planting ourselves of the authorities, which discuss the subject of public use,
the criterion by which to judge of the character of the use is whether the
public may enjoy it by right or only by permission. (U. S. vs. Tan Piaco, supra.)
The essential feature of a public use is that it is not confined to privileged
individuals, but is open to the indefinite public. (Thayler and
Thayler vs. California Development Company, supra.) The use is public if all
persons have the right to the use under the same circumstances. (Fall brook
Irrigation District vs. Bradley, supra.) If the company did in truth sell ice to all
persons seeking its service, it would be a public utility. But if on the other hand,
it was organized solely for particular persons under strictly private contracts,
and never was devoted by its owners to public use, it could not be held to be
a public utility without violating the due process of law clause of the
Constitution. (Producers Transportation Co. vs. Railroad Commission, supra.)
And the apparent and continued purpose of the Iloilo Ice and Storage
Company has been, and is, to remain a private enterprise and to avoid
submitting to the Public Utility law.
The argument for the Government, nevertheless, merits serious consideration.
The attempt of the Public Utility Commissioner to intervene in corporate affairs,
to protect the public, is commendable. Sympathetic thought should always
be given to the facts laid before the Commissioner, with reference to the law
under which he is acting.
Aware of the foregoing situation, the members of the Court are of the opinion
that the present case is governed by the authorities mentioned in this
decision, which means, of course, that, upon the facts shown in the record,
the Iloilo Ice and Storage Company is not a public utility within the meaning of
the law. Like Mr. Justice Holmes, in his opinion in Terminal Taxicab
Company vs. Kutz, supra, when, in speaking for himself personally, he
admitted that he had not been able to free his mind from doubt, so has the
writer not been able to free his mind from doubt, but is finally led to accept
the authorities as controlling.
JUDGMENT
It is declared that the business of the Iloilo Ice and Cold Storage Company is
not a public utility, subject to the control and jurisdiction of the Public Utility
Commissioner, and that, accordingly, the decisions of the Public Utility
Commissioner and of the Public Utility Board must be revoked, without special
finding as to costs. So ordered.
SPOUSES TEODORO1 and NANETTE PERENA, Petitioners,
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
24
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 air-
conditioning 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 was then commonly used by
Makati-bound vehicles as a short cut into Makati. At the time, the narrow path
was marked by piles of construction materials and parked passenger
jeepneys, and the railroad crossing in the narrow path had no railroad
warning signs, or watchmen, or other responsible persons manning the
crossing. In fact, the bamboo barandilla was up, leaving the railroad crossing
open to traversing motorists.
At about the time the van was to traverse the railroad crossing, PNR
Commuter No. 302 (train), operated by Jhonny Alano (Alano), was in the
vicinity of the Magallanes Interchange travelling northbound. As the train
neared the railroad crossing, Alfaro drove the van eastward across the
railroad tracks, closely tailing a large passenger bus. His view of the oncoming
train was blocked because he overtook the passenger bus on its left side. The
train blew its horn to warn motorists of its approach. When the train was about
50 meters away from the passenger bus and the van, Alano applied the
ordinary brakes of the train. He applied the emergency brakes only when he
saw that a collision was imminent. The passenger bus successfully crossed the
railroad tracks, but the van driven by Alfaro did not. The train hit the rear end
of the van, and the impact threw nine of the 12 students in the rear, including
Aaron, out of the van. Aaron landed in the path of the train, which dragged
his body and severed his head, instantaneously killing him. Alano fled the
scene on board the train, and did not wait for the police investigator to arrive.
Devastated by the early and unexpected death of Aaron, the Zarates
commenced this action for damages against Alfaro, the Pereas, PNR and
Alano. The Pereas and PNR filed their respective answers, with cross-claims
against each other, but Alfaro could not be served with summons.
At the pre-trial, the parties stipulated on the facts and issues, viz:
A. FACTS:
(1) That spouses Zarate were the legitimate parents of Aaron
John L. Zarate;
(2) Spouses Zarate engaged the services of spouses Perea
for the adequate and safe transportation carriage of the
former spouses' son from their residence in Paraaque to his
school at the Don Bosco Technical Institute in Makati City;
(3) During the effectivity of the contract of carriage and in
the implementation thereof, Aaron, the minor son of spouses
Zarate died in connection with a vehicular/train collision
which occurred while Aaron was riding the contracted carrier
Kia Ceres van of spouses Perea, then driven and operated
by the latter's employee/authorized driver Clemente Alfaro,
which van collided with the train of PNR, at around 6:45 A.M.
of August 22, 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;
(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;
(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;
25
 (11) The eventual closure of the railroad crossing alleged by
PNR was an internal arrangement between the former and its
project contractor; and
(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
(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 motorists for
railroad crossings, constituting the proximate cause of the
vehicular collision which resulted in the death of the plaintiff
spouses' son;
(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) Whether or not defendants spouses are liable for actual,
moral damages, exemplary damages, and attorney's fees;
(6) Whether or not defendants spouses Teodorico and
Nanette Perea observed the diligence of employers and
school bus operators;
(7) Whether or not defendant-spouses are civilly liable for the
accidental death of Aaron John Zarate;
(8) Whether or not defendant PNR was grossly negligent in
operating the commuter train involved in the accident, in
allowing or tolerating the motoring public to cross, and its
failure to install safety devices or equipment at the site of the
accident for the protection of the public;
(9) Whether or not defendant PNR should be made to
reimburse defendant spouses for any and whatever amount
the latter may be held answerable or which they may be
ordered to pay in favor of plaintiffs by reason of the action;
(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;
(11) Whether or not defendant PNR is liable to defendants
spouses for actual, moral and exemplary damages and
attorney's fees.2
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.
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 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.
2. In giving full faith and merit to the oral testimonies of
plaintiffs-appellees witnesses despite overwhelming
26
 documentary evidence on record, supporting the case of
defendants-appellants Philippine National Railways.
The Pereas ascribed the following errors to the RTC, namely:
The trial court erred in finding defendants-appellants jointly and severally liable
for actual, moral and exemplary damages and attorneys fees with the other
defendants.
The trial court erred in dismissing the cross-claim of the appellants Pereas
against the Philippine National Railways and in not holding the latter and its
train driver primarily responsible for the incident.
The trial court erred in awarding excessive damages and attorneys fees.
The trial court erred in awarding damages in the form of deceaseds loss of
earning capacity in the absence of sufficient basis for such an award.
On November 13, 2002, the CA promulgated its decision, affirming the findings
of the RTC, but limited the moral damages to P 2,500,000.00; and deleted the
attorneys fees because the RTC did not state the factual and legal bases, to
wit:6
WHEREFORE, premises considered, the assailed Decision of the Regional Trial
Court, Branch 260 of Paraaque City is AFFIRMED with the modification that
the award of Actual Damages is reduced to P 59,502.76; Moral Damages is
reduced to P 2,500,000.00; and the award for Attorneys Fees is Deleted.
SO ORDERED.
The CA upheld the award for the loss of Aarons earning capacity, taking
cognizance of the ruling in Cariaga v. Laguna Tayabas Bus Company and
Manila Railroad Company,7 wherein the Court gave the heirs of Cariaga a
sum representing the loss of the deceaseds earning capacity despite
Cariaga being only a medical student at the time of the fatal incident.
Applying the formula adopted in the American Expectancy Table of
Mortality:
2/3 x (80 - age at the time of death) = life expectancy
the CA determined the life expectancy of Aaron to be 39.3 years upon
reckoning his life expectancy from age of 21 (the age when he would have
graduated from college and started working for his own livelihood) instead of
15 years (his age when he died). Considering that the nature of his work and
his salary at the time of Aarons death were unknown, it used the prevailing
minimum wage of P 280.00/day to compute Aarons gross annual salary to
be P 110,716.65, inclusive of the thirteenth month pay. Multiplying this annual
salary by Aarons life expectancy of 39.3 years, his gross income would
aggregate to P 4,351,164.30, from which his estimated expenses in the sum
of P 2,189,664.30 was deducted to finally arrive at P 2,161,500.00 as net
income. Due to Aarons computed net income turning out to be higher than
the amount claimed by the Zarates, only P 2,109,071.00, the amount expressly
prayed for by them, was granted.
On April 4, 2003, the CA denied the Pereas motion for reconsideration.8
Issues
In this appeal, the Pereas list the following as the errors committed by the CA,
to wit:
I. The lower court erred when it upheld the trial courts decision holding the
petitioners jointly and severally liable to pay damages with Philippine National
Railways and dismissing their cross-claim against the latter.
II. The lower court erred in affirming the trial courts decision awarding
damages for loss of earning capacity of a minor who was only a high school
student at the time of his death in the absence of sufficient basis for such an
award.
III. The lower court erred in not reducing further the amount of damages
awarded, assuming petitioners are liable at all.
Ruling
The petition has no merit.
1.
Were the Pereas and PNR jointly
and severally liable for damages?
The Zarates brought this action for recovery of damages against both the
Pereas and the PNR, basing their claim against the Pereas on breach of
contract of carriage and against the PNR on quasi-delict.
The RTC found the Pereas and the PNR negligent. The CA affirmed the
findings.
We concur with the CA.
To start with, the Pereas defense was that they exercised the diligence of a
good father of the family in the selection and supervision of Alfaro, the 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,9primarily 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
27
gratuitously or for hire.11The 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.12Contracts 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,15viz:
"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 public
character. In determining whether a use is public, we must look not only to the
character of the business to be done, but also to the proposed mode of doing
it. If the use is merely optional with the owners, or the public benefit is merely
incidental, it is not a public use, authorizing the exercise of the jurisdiction of
the public utility commission. There must be, in general, a right which the law
compels the owner to give to the general public. It is not enough that the
general prosperity of the public is promoted. Public use is not synonymous with
public interest. The true criterion by which to judge the character of the use is
whether the public may enjoy it by right or only by permission.
In De Guzman v. Court of Appeals,16 the Court noted that Article 1732 of the
Civil Code avoided any distinction between a person or an enterprise offering
transportation on a regular or an isolated basis; and has not distinguished a
carrier offering his services to the general public, that is, the general
community or population, from one offering his services only to a narrow
segment of the general population.
Nonetheless, the concept of a common carrier embodied in Article 1732 of
the Civil Code coincides neatly with the notion of public service under the
Public Service Act, which supplements the law on common carriers found in
the Civil Code. Public service, according to Section 13, paragraph (b) of the
Public Service Act, includes:
x x x every person that now or hereafter may own, operate, manage, or
control in the Philippines, for hire or compensation, with general or limited
clientle, whether permanent or occasional, and done for the 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, 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. x x x.17
Given the breadth of the aforequoted characterization of a common carrier,
the Court has considered as common carriers pipeline operators,18 custom
brokers and warehousemen,19 and barge operators20 even if they had limited
clientle.
As all the foregoing indicate, the true test for a common carrier is not the
quantity or extent of the business actually transacted, or the number and
character of the conveyances used in the activity, but whether the
undertaking is a part of the activity engaged in by the carrier that he has held
out to the general public as his business or occupation. If the undertaking is a
single transaction, not a part of the general business or occupation engaged
in, as advertised and held out to the general public, the individual or the
entity rendering such service is a private, not a common, carrier. The question
must be determined by the character of the business actually carried on by
the carrier, not by any secret intention or mental reservation it may entertain
or assert when charged with the duties and obligations that the law imposes.21
Applying these considerations to the case before us, there is no question that
the Pereas as the operators of a school bus service were: (a) engaged in
transporting passengers generally as a business, not just as a casual
occupation; (b) undertaking to carry passengers over established roads by
the method by which the business was conducted; and (c) transporting
students for a fee. Despite catering to a limited clientle, the Pereas
operated as a common carrier because they held themselves out as a ready
transportation indiscriminately to the students of a particular school living
within or near where they operated the service and for a fee.
The common carriers standard of care and vigilance as to the safety of the
passengers is defined by law. Given the nature of the business and for reasons
of public policy, the common carrier is 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."22 Article 1755 of the Civil Code specifies that the common carrier
should "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." To successfully fend off liability in an action
upon the death or injury to a passenger, the common carrier must prove his or
its observance of that extraordinary diligence; otherwise, the legal
presumption that he or it was at fault or acted negligently would stand. 23 No
device, whether by stipulation, posting of notices, statements on tickets, or
otherwise, may dispense with or lessen the responsibility of the common carrier
as defined under Article 1755 of the Civil Code. 24
And, secondly, the Pereas have not presented any compelling defense or
reason by which the Court might now reverse the CAs findings on their
liability. On the contrary, an examination of the records shows that the
evidence fully supported the findings of the CA.
28
As earlier stated, the Pereas, acting as a common carrier, were already
presumed to be negligent at the time of the accident because death had
occurred to their passenger.25 The presumption of negligence, being a
presumption of law, laid the burden of evidence on their shoulders to establish
that they had not been negligent.26 It was the law no less that required them
to prove their observance of extraordinary diligence in seeing to the safe and
secure carriage of the passengers to their destination. Until they did so in a
credible manner, they stood to be held legally responsible for the death of
Aaron and thus to be held liable for all the natural consequences of such
death.
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 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
The test by which to determine the existence of negligence in a particular
case has been aptly stated in the leading case of Picart v. Smith,34 thuswise:
The test by which to determine the existence of negligence in a particular
case may be stated as follows: Did the defendant in doing the alleged
negligent act use that reasonable care and caution which an ordinarily
prudent person would have used in the same situation? If not, then he is guilty
of negligence. The law here in effect adopts the standard supposed to be
supplied by the imaginary conduct of the discreet paterfamilias of the Roman
law. The existence of negligence in a given case is not determined by
reference to the personal judgment of the actor in the situation before him.
The law considers what would be reckless, blameworthy, or negligent in the
man of ordinary intelligence and prudence and determines liability by that.
The question as to what would constitute the conduct of a prudent man in a
given situation must of course be always determined in the light of human
experience and in view of the facts involved in the particular case. Abstract
speculation cannot here be of much value but this much can be profitably
said: Reasonable men govern their conduct by the circumstances which are
before them or known to them. They are not, and are not supposed to be,
omniscient of the future. Hence they can be expected to take care only
when there is something before them to suggest or warn of danger. Could a
prudent man, in the case under consideration, foresee harm as a result of the
course actually pursued? If so, it was the duty of the actor to take precautions
to guard against that harm. Reasonable foresight of harm, followed by the
ignoring of the suggestion born of this prevision, is always necessary before
negligence can be held to exist. Stated in these terms, the proper criterion for
determining the existence of negligence in a given case is this: Conduct is
said to be negligent when a prudent man in the position of the tortfeasor
would have foreseen that an effect harmful to another was sufficiently
probable to warrant his foregoing the conduct or guarding against its
consequences. (Emphasis supplied)
Pursuant to the Picart v. Smith test of negligence, the Pereas driver was
entirely negligent when he traversed the railroad tracks at a point not allowed
for a motorists crossing despite being fully aware of the grave harm to be
thereby caused to his passengers; and when he disregarded the foresight of
harm to his passengers by overtaking the bus on the left side as to leave
himself blind to the approach of the oncoming train that he knew was on the
opposite side of the bus.
Unrelenting, the Pereas cite Phil. National Railways v. Intermediate Appellate
Court,35 where the Court held the PNR solely liable for the damages caused to
29
a passenger bus and its passengers when its train hit the rear end of the bus
that was then traversing the railroad crossing. But the circumstances of that
case and this one share no similarities. In Philippine National Railways v.
Intermediate Appellate Court, no evidence of contributory negligence was
adduced against the owner of the bus. Instead, it was the owner of the bus
who proved the exercise of extraordinary diligence by preponderant
evidence. Also, the records are replete with the showing of negligence on the
part of both the Pereas and the PNR. Another distinction is that the
passenger bus in Philippine National Railways v. Intermediate Appellate Court
was traversing the dedicated railroad crossing when it was hit by the train, but
the Pereas school van traversed the railroad tracks at a point not intended
for that purpose.
At any rate, the lower courts correctly held both the Pereas and the PNR
"jointly and severally" liable for damages arising from the death of Aaron. They
had been impleaded in the same complaint as defendants against whom the
Zarates had the right to relief, whether jointly, severally, or in the alternative, in
respect to or arising out of the accident, and questions of fact and of law
were common as to the Zarates.36 Although the basis of the right to relief of
the Zarates (i.e., breach of contract of carriage) against the Pereas was
distinct from the basis of the Zarates right to relief against the PNR (i.e., quasi-
delict under Article 2176, Civil Code), they nonetheless could be held jointly
and severally liable by virtue of their respective negligence combining to
cause the death of Aaron. As to the PNR, the RTC rightly found the PNR also
guilty of negligence despite the school van of the Pereas traversing the
railroad tracks at a point not dedicated by the PNR as a railroad crossing for
pedestrians and motorists, because the PNR did not ensure the safety of
others through the placing of crossbars, signal lights, warning signs, and other
permanent safety barriers to prevent vehicles or pedestrians from crossing
there. The RTC observed that the fact that a crossing guard had been
assigned to man that point from 7 a.m. to 5 p.m. was a good indicium that the
PNR was aware of the risks to others as well as the need to control the
vehicular and other traffic there. Verily, the Pereas and the PNR were joint
tortfeasors.
2.
Was the indemnity for loss of
Aarons earning capacity proper?
The RTC awarded indemnity for loss of Aarons earning capacity. Although
agreeing with the RTC on the liability, the CA modified the amount. Both lower
courts took into consideration that Aaron, while only a high school student,
had been enrolled in one of the reputable schools in the Philippines and that
he had been a normal and able-bodied child prior to his death. The basis for
the computation of Aarons earning capacity was not what he 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 he survived the accident but his injuries rendered him
permanently incapacitated, was computed to be that of the physician that
he dreamed to become. The Court considered his scholastic record sufficient
to justify the assumption that he could have finished the medical course and
would have passed the medical board examinations in due time, and that he
could have possibly earned a modest income as a medical practitioner. Also,
in People v. Sanchez,41 the Court opined that murder and rape victim Eileen
Sarmienta and murder victim Allan Gomez could have easily landed good-
30
paying jobs had they graduated in due time, and that their jobs would
probably pay them high monthly salaries from P 10,000.00 to P 15,000.00 upon
their graduation. Their earning capacities were computed at rates higher than
the minimum wage at the time of their deaths due to their being already
senior agriculture students of the University of the Philippines in Los Baos, the
countrys leading educational institution in agriculture.
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.
WHEREFORE, we DENY the petition for review on certiorari; AFFIRM the decision
promulgated on November 13, 2002; and ORDER the petitioners to pay the
costs of suit.
SO ORDERED.
9, G.R. No. L-56487 October 21, 1991
REYNALDA GATCHALIAN, petitioner,
vs.
ARSENIO DELIM and the HON. COURT OF APPEALS, respondents.
At noon time on 11 July 1973, petitioner Reynalda Gatchalian boarded, as a
paying passenger, respondent's "Thames" mini bus at a point in San Eugenio,
Aringay, La Union, bound for Bauang, of the same province. On the way,
while the bus was running along the highway in Barrio Payocpoc, Bauang,
Union, "a snapping sound" was suddenly heard at one part of the bus and,
shortly thereafter, the vehicle bumped a cement flower pot on the side of the
road, went off the road, turned turtle and fell into a ditch. Several passengers,
including petitioner Gatchalian, were injured. They were promptly taken to
Bethany Hospital at San Fernando, La Union, for medical treatment. Upon
medical examination, petitioner was found to have sustained physical injuries
on the leg, arm and forehead, specifically described as follows: lacerated
wound, forehead; abrasion, elbow, left; abrasion, knee, left; abrasion, lateral
surface, leg, left. 1
On 14 July 1973, while injured. passengers were confined in the hospital, Mrs.
Adela Delim, wife of respondent, visited them and later paid for their
hospitalization and medical expenses. She also gave petitioner P12.00 with
which to pay her transportation expense in going home from the hospital.
However, before Mrs. Delim left, she had the injured passengers, including
petitioner, sign an already prepared Joint Affidavit which stated, among other
things:
That we were passengers of Thames with Plate No. 52-222 PUJ
Phil. 73 and victims after the said Thames met an accident at
Barrio Payocpoc Norte, Bauang, La Union while passing
through the National Highway No. 3;
That after a thorough investigation the said Thames met the
accident due to mechanical defect and went off the road
and turned turtle to the east canal of the road into a creek
causing physical injuries to us;
xxx xxx xxx
That we are no longer interested to file a complaint, criminal
or civil against the said driver and owner of the said Thames,
because it was an accident and the said driver and owner of
the said Thames have gone to the extent of helping us to be
treated upon our injuries.
xxx xxx xxx 2
(Emphasis supplied)
Notwithstanding this document, petitioner Gathalian filed with the then Court
of First Instance of La Union an action extra contractu to recover
compensatory and moral damages. She alleged in the complaint that her
injuries sustained from the vehicular mishap had left her with a conspicuous
white scar measuring 1 by 1/2 inches on the forehead, generating mental
suffering and an inferiority complex on her part; and that as a result, she had
to retire in seclusion and stay away from her friends. She also alleged that the
scar diminished her facial beauty and deprived her of opportunities for
employment. She prayed for an award of: P10,000.00 for loss of employment
and other opportunities; P10,000.00 for the cost of plastic surgery for removal
of the scar on her forehead; P30,000.00 for moral damages; and P1,000.00 as
attorney's fees.
In defense, respondent averred that the vehicular mishap was due to force
majeure, and that petitioner had already been paid and moreover had
waived any right to institute any action against him (private respondent) and
his driver, when petitioner Gatchalian signed the Joint Affidavit on 14 July
1973.
After trial, the trial court dismissed the complaint upon the ground that when
petitioner Gatchalian signed the Joint Affidavit, she relinquished any right of
31
action (whether criminal or civil) that she may have had against respondent
and the driver of the mini-bus.
On appeal by petitioner, the Court of Appeals reversed the trial court's
conclusion that there had been a valid waiver, but affirmed the dismissal of
the case by denying petitioner's claim for damages:
We are not in accord, therefore, of (sic) the ground of the trial
court's dismissal of the complaint, although we conform to
the trial court's disposition of the case its dismissal.
IN VIEW OF THE FOREGOING considerations, there being no
error committed by the lower court in dismissing the plaintiff-
appellant's complaint, the judgment of dismissal is hereby
affirmed.
Without special pronouncement as to costs.
SO ORDERED. 3
In the present Petition for Review filed in forma pauperis, petitioner assails the
decision of the Court of Appeals and ask this Court to award her actual or
compensatory damages as well as moral damages.
We agree with the majority of the Court of Appeals who held that no valid
waiver of her cause of action had been made by petitioner. The relevant
language of the Joint Affidavit may be quoted again:
That we are no longer interested to file a complaint, criminal
or civil against the said driver and owner of the said Thames,
because it was an accident and the said driver and owner of
the said Thames have gone to the extent of helping us to be
treated upon our injuries. (Emphasis supplied)
A waiver, to be valid and effective, must in the first place be couched
in clear and unequivocal terms which leave no doubt as to the
intention of a person to give up a right or benefit which legally
pertains to him. 4 A waiver may not casually be attributed to a person
when the terms thereof do not explicitly and clearly evidence an
intent to abandon a right vested in such person.
The degree of explicitness which this Court has required in purported waivers is
illustrated in Yepes and Susaya v. Samar Express Transit (supra), where the
Court in reading and rejecting a purported waiver said:
. . . It appears that before their transfer to the Leyte Provincial
Hospital, appellees were asked to sign as, in fact, they signed
the document Exhibit I wherein they stated that "in
consideration of the expenses which said operator has
incurred in properly giving us the proper medical
treatment, we hereby manifest our desire to waive any and
all claims against the operator of the Samar Express Transit."
xxx xxx xxx
Even a cursory examination of the document mentioned
above will readily show that appellees did not actually waive
their right to claim damages from appellant for the latter's
failure to comply with their contract of carriage. All that said
document proves is that they expressed a "desire" to make
the waiver which obviously is not the same as making an
actual waiver of their right. A waiver of the kind invoked by
appellant must be clear and unequivocal (Decision of the
Supreme Court of Spain of July 8, 1887) which is not the
case of the one relied upon in this appeal. (Emphasis
supplied)
If we apply the standard used in Yepes and Susaya, we would have
to conclude that the terms of the Joint Affidavit in the instant case
cannot be regarded as a waiver cast in "clear and unequivocal"
terms. Moreover, the circumstances under which the Joint Affidavit
was signed by petitioner Gatchalian need to be considered.
Petitioner testified that she was still reeling from the effects of the
vehicular accident, having been in the hospital for only three days,
when the purported waiver in the form of the Joint Affidavit was
presented to her for signing; that while reading the same, she
experienced dizziness but that, seeing the other passengers who had
also suffered injuries sign the document, she too signed without
bothering to read the Joint Affidavit in its entirety. Considering these
circumstances there appears substantial doubt whether petitioner
understood fully the import of the Joint Affidavit (prepared by or at
the instance of private respondent) she signed and whether she
actually intended thereby to waive any right of action against private
respondent.
Finally, because what is involved here is the liability of a common carrier for
injuries sustained by passengers in respect of whose safety a common carrier
must exercise extraordinary diligence, we must construe any such purported
waiver most strictly against the common carrier. For a waiver to be valid and
effective, it must not be contrary to law, morals, public policy or good
customs. 5 To uphold a supposed waiver of any right to claim damages by an
injured passenger, under circumstances like those exhibited in this case, would
be to dilute and weaken the standard of extraordinary diligence exacted by
the law from common carriers and hence to render that standard
unenforceable. 6 We believe such a purported waiver is offensive to public
policy.
Petitioner Gatchalian also argues that the Court of Appeals, having by
majority vote held that there was no enforceable waiver of her right of action,
should have awarded her actual or compensatory and moral damages as a
matter of course.
We have already noted that a duty to exercise extraordinary diligence in
protecting the safety of its passengers is imposed upon a common carrier. 7 In
case of death or injuries to passengers, a statutory presumption arises that the
common carrier was at fault or had acted negligently "unless it proves that it
[had] observed extraordinary diligence as prescribed in Articles 1733 and
1755." 8 In fact, because of this statutory presumption, it has been held that a
court need not even make an express finding of fault or negligence on the
32
part of the common carrier in order to hold it liable. 9 To overcome this
presumption, the common carrier must slow to the court that it had exercised
extraordinary diligence to prevent the injuries. 10 The standard of
extraordinary diligence imposed upon common carriers is considerably more
demanding than the standard of ordinary diligence, i.e., the diligence of a
good paterfamilias established in respect of the ordinary relations between
members of society. A common carrier is bound to carry its passengers
safely" as far as human care and foresight can provide, using the utmost
diligence of a very cautious person, with due regard to all the
circumstances". 11
Thus, the question which must be addressed is whether or not private
respondent has successfully proved that he had exercised extraordinary
diligence to prevent the mishap involving his mini-bus. The records before the
Court are bereft of any evidence showing that respondent had exercised the
extraordinary diligence required by law. Curiously, respondent did not even
attempt, during the trial before the court a quo, to prove that he had indeed
exercised the requisite extraordinary diligence. Respondent did try to
exculpate himself from liability by alleging that the mishap was the result
of force majeure. But allegation is not proof and here again, respondent
utterly failed to substantiate his defense of force majeure. To exempt a
common carrier from liability for death or physical injuries to passengers upon
the ground of force majeure, the carrier must clearly show not only that the
efficient cause of the casualty was entirely independent of the human will, but
also that it was impossible to avoid. Any participation by the common carrier
in the occurrence of the injury will defeat the defense of force
majeure. In Servando v. Philippine Steam Navigation Company, 12 the Court
summed up the essential characteristics of force majeure by quoting with
approval from the Enciclopedia Juridica Espaola:
Thus, where fortuitous event or force majeure is the
immediate and proximate cause of the loss, the obligor is
exempt from liability non-performance. The Partidas, the
antecedent of Article 1174 of the Civil Code, defines "caso
fortuito" as 'an event that takes place by accident and could
not have been foreseen. Examples of this are destruction of
houses, unexpected fire, shipwreck, violence of robber.
In its dissertation on the phrase "caso fortuito" the
Enciclopedia Juridica Espaola says: 'In legal sense and,
consequently, also in relation to contracts, a "caso fortuito"
presents the following essential characteristics: (1) the cause
of the unforeseen and unexpected occurence, or of the
failure of the debtor to comply with his obligation, must be
independent of the human will; (2) it must be impossible to
foresee the event which constitutes the "caso fortuito", or if it
can be foreseen, it must be impossible to avoid; (3) the
occurrence must be such as to render it impossible for the
debtor to fulfill his obligation in a normal manner; and (4) the
obligor must be free from any participation in the
aggravation of the injury resulting to the creditor.
Upon the other hand, the record yields affirmative evidence of fault or
negligence on the part of respondent common carrier. In her direct
examination, petitioner Gatchalian narrated that shortly before the vehicle
went off the road and into a ditch, a "snapping sound" was suddenly heard at
one part of the bus. One of the passengers, an old woman, cried out, "What
happened?" ("Apay addan samet nadadaelen?"). The driver replied,
nonchalantly, "That is only normal" ("Ugali ti makina dayta"). The driver did not
stop to check if anything had gone wrong with the bus. Moreover, the driver's
reply necessarily indicated that the same "snapping sound" had been heard in
the bus on previous occasions. This could only mean that the bus had not
been checked physically or mechanically to determine what was causing the
"snapping sound" which had occurred so frequently that the driver had gotten
accustomed to it. Such a sound is obviously alien to a motor vehicle in good
operating condition, and even a modicum of concern for life and limb of
passengers dictated that the bus be checked and repaired. The obvious
continued failure of respondent to look after the roadworthiness and safety of
the bus, coupled with the driver's refusal or neglect to stop the mini-bus after
he had heard once again the "snapping sound" and the cry of alarm from
one of the passengers, constituted wanton disregard of the physical safety of
the passengers, and hence gross negligence on the part of respondent and
his driver.
We turn to petitioner's claim for damages. The first item in that claim relates to
revenue which petitioner said she failed to realize because of the effects of
the vehicular mishap. Petitioner maintains that on the day that the mini-bus
went off the road, she was supposed to confer with the district supervisor of
public schools for a substitute teacher's job, a job which she had held off and
on as a "casual employee." The Court of Appeals, however, found that at the
time of the accident, she was no longer employed in a public school since,
being a casual employee and not a Civil Service eligible, she had been laid
off. Her employment as a substitute teacher was occasional and episodic,
contingent upon the availability of vacancies for substitute teachers. In view
of her employment status as such, the Court of Appeals held that she could
not be said to have in fact lost any employment after and by reason of the
accident. 13 Such was the factual finding of the Court of Appeals, a finding
entitled to due respect from this Court. Petitioner Gatchalian has not
submitted any basis for overturning this finding of fact, and she may not be
awarded damages on the basis of speculation or conjecture. 14
Petitioner's claim for the cost of plastic surgery for removal of the scar on her
forehead, is another matter. A person is entitled to the physical integrity of his
or her body; if that integrity is violated or diminished, actual injury is suffered for
which actual or compensatory damages are due and assessable. Petitioner
Gatchalian is entitled to be placed as nearly as possible in the condition that
she was before the mishap. A scar, especially one on the face of the woman,
resulting from the infliction of injury upon her, is a violation of bodily integrity,
33
giving raise to a legitimate claim for restoration to her conditio ante. If the scar
is relatively small and does not grievously disfigure the victim, the cost of
surgery may be expected to be correspondingly modest. In Araneta, et al. vs.
Areglado, et al., 15 this Court awarded actual or compensatory damages for,
among other things, the surgical removal of the scar on the face of a young
boy who had been injured in a vehicular collision. The Court there held:
We agree with the appellants that the damages awarded by
the lower court for the injuries suffered by Benjamin Araneta
are inadequate. In allowing not more than P1,000.00 as
compensation for the "permanent deformity and
something like an inferiority complex" as well as for the
"pathological condition on the left side of the jaw" caused to
said plaintiff, the court below overlooked the clear evidence
on record that to arrest the degenerative process taking
place in the mandible and restore the injured boy to a nearly
normal condition, surgical intervention was needed, for which
the doctor's charges would amount to P3,000.00, exclusive of
hospitalization fees, expenses and medicines. Furthermore,
the operation, according to Dr. Dio, would probably have to
be repeated in order to effectuate a complete cure, while
removal of the scar on the face obviously demanded plastic
surgery.
xxx xxx xxx
The father's failure to submit his son to a plastic operation as
soon as possible does not prove that such treatment is not
called for. The damage to the jaw and the existence of the
scar in Benjamin Araneta's face are physical facts that can
not be reasoned out of existence. That the injury should be
treated in order to restore him as far as possible to his original
condition is undeniable. The father's delay, or even his
negligence, should not be allowed to prejudice the son who
has no control over the parent's action nor impair his right to a
full indemnity.
. . . Still, taking into account the necessity and cost of
corrective measures to fully repair the damage; the pain
suffered by the injured party; his feelings of inferiority due to
consciousness of his present deformity, as well as the
voluntary character of the injury inflicted; and further
considering that a repair, however, skillfully conducted, is
never equivalent to the original state, we are of the opinion
that the indemnity granted by the trial court should be
increased to a total of P18,000.00. (Emphasis supplied)
Petitioner estimated that the cost of having her scar surgically removed was
somewhere between P10,000.00 to P15,000.00. 16 Upon the other hand, Dr. Fe
Tayao Lasam, a witness presented as an expert by petitioner, testified that the
cost would probably be between P5,000.00 to P10,000.00. 17 In view of this
testimony, and the fact that a considerable amount of time has lapsed since
the mishap in 1973 which may be expected to increase not only the cost but
also very probably the difficulty of removing the scar, we consider that the
amount of P15,000.00 to cover the cost of such plastic surgery is not
unreasonable.
Turning to petitioner's claim for moral damages, the long-established rule is
that moral damages may be awarded where gross negligence on the part of
the common carrier is shown. 18 Since we have earlier concluded that
respondent common carrier and his driver had been grossly negligent in
connection with the bus mishap which had injured petitioner and other
passengers, and recalling the aggressive manuevers of respondent, through
his wife, to get the victims to waive their right to recover damages even as
they were still hospitalized for their injuries, petitioner must be held entitled to
such moral damages. Considering the extent of pain and anxiety which
petitioner must have suffered as a result of her physical injuries including the
permanent scar on her forehead, we believe that the amount of P30,000.00
would be a reasonable award. Petitioner's claim for P1,000.00 as atttorney's
fees is in fact even more modest. 19
WHEREFORE, the Decision of the Court of Appeals dated 24 October 1980, as
well as the decision of the then Court of First Instance of La Union dated 4
December 1975 are hereby REVERSED and SET ASIDE.Respondent is hereby
ORDERED to pay petitioner Reynalda Gatchalian the following sums: 1)
P15,000.00 as actual or compensatory damages to cover the cost of plastic
surgery for the removal of the scar on petitioner's forehead; 2) P30,000.00 as
moral damages; and 3) P1,000.00 as attorney's fees, the aggregate amount to
bear interest at the legal rate of 6% per annum counting from the
promulgation of this decision until full payment thereof. Costs against private
respondent.
SO ORDERED.
10. G.R. No. L-31379 August 29, 1988
COMPAIA MARITIMA, petitioner,
vs.
COURT OF APPEALS and VICENTE CONCEPCION, respondents.
Petitioner Compaia Maritima seeks to set aside through this petition for
review on certiorari the decision 1 of the Court of Appeals dated December 5,
1965, adjudging petitioner liable to private respondent Vicente E. Concepcion
for damages in the amount of P24,652.97 with legal interest from the date said
decision shall have become final, for petitioner's failure to deliver safely
private respondent's payloader, and for costs of suit. The payloader was
declared abandoned in favor of petitioner.
The facts of the case are as follows:
Private respondent Vicente E. Concepcion, a civil engineer doing business
under the name and style of Consolidated Construction with office address at
Room 412, Don Santiago Bldg., Taft Avenue, Manila, had a contract with the
Civil Aeronautics Administration (CAA) sometime in 1964 for the construction
of the airport in Cagayan de Oro City Misamis Oriental.
34
Being a Manila based contractor, Vicente E. Concepcion had to ship his
construction equipment to Cagayan de Oro City. Having shipped some of his
equipment through petitioner and having settled the balance of P2,628.77
with respect to said shipment, Concepcion negotiated anew with petitioner,
thru its collector, Pacifico Fernandez, on August 28, 1964 for the shipment to
Cagayan de Oro City of one (1) unit payloader, four (4) units 6x6 Reo trucks
and two (2) pieces of water tanks. He was issued Bill of Lading 113 on the
same date upon delivery of the equipment at the Manila North Harbor. 2
These equipment were loaded aboard the MV Cebu in its Voyage No. 316,
which left Manila on August 30, 1964 and arrived at Cagayan de Oro City in
the afternoon of September 1, 1964. The Reo trucks and water tanks were
safely unloaded within a few hours after arrival, but while the payloader was
about two (2) meters above the pier in the course of unloading, the swivel pin
of the heel block of the port block of Hatch No. 2 gave way, causing the
payloader to fall. 3 The payloader was damaged and was thereafter taken to
petitioner's compound in Cagayan de Oro City.
On September 7, 1964, Consolidated Construction, thru Vicente E.
Concepcion, wrote Compaia Maritima to demand a replacement of the
payloader which it was considering as a complete loss because of the extent
of damage. 4 Consolidated Construction likewise notified petitioner of its claim
for damages. Unable to elicit response, the demand was repeated in a letter
dated October 2, 1964. 5
Meanwhile, petitioner shipped the payloader to Manila where it was weighed
at the San Miguel Corporation. Finding that the payloader weighed 7.5 tons
and not 2.5 tons as declared in the B-111 of Lading, petitioner denied the
claim for damages of Consolidated Construction in its letter dated October 7,
1964, contending that had Vicente E. Concepcion declared the actual
weight of the payloader, damage to their ship as well as to his payloader
could have been prevented. 6
To replace the damaged payloader, Consolidated Construction in the
meantime bought a new one at P45,000.00 from Bormaheco Inc. on
December 3, 1964, and on July 6, 1965., Vicente E. Concepcion filed an
action for damages against petitioner with the then Court of First Instance of
Manila, Branch VII, docketed as Civil Case No. 61551, seeking to recover
damages in the amount of P41,225.00 allegedly suffered for the period of 97
days that he was not able to employ a payloader in the construction job at
the rate of P450.00 a day; P34,000.00 representing the cost of the damaged
payloader; Pl 1, 000. 00 representing the difference between the cost of the
damaged payloader and that of the new payloader; P20,000.00 representing
the losses suffered by him due to the diversion of funds to enable him to buy a
new payloader; P10,000.00 as attorney's fees; P5,000.00 as exemplary
damages; and cost of the suit. 7
After trial, the then Court of First Instance of Manila, Branch VII, dismissed on
April 24, 1968 the complaint with costs against therein plaintiff, herein private
respondent Vicente E. Concepcion, stating that the proximate cause of the
fall of the payloader was Vicente E. Concepcion's act or omission in having
misrepresented the weight of the payloader as 2.5 tons instead of its true
weight of 7.5 tons, which underdeclaration was intended to defraud
Compaia Maritima of the payment of the freight charges and which likewise
led the Chief Officer of the vessel to use the heel block of hatch No. 2 in
unloading the payloader. 8
From the adverse decision against him, Vicente E. Concepcion appealed to
the Court of Appeals which, on December 5, 1965 rendered a decision, the
dispositive portion of which reads:
IN VIEW WHEREOF, judgment must have to be as it is hereby
reversed; defendant is condemned to pay unto plaintiff the
sum in damages of P24,652.07 with legal interest from the
date the present decision shall have become final; the
payloader is declared abandoned to defendant; costs
against the latter. 9
Hence, the instant petition.
The principal issue in the instant case is whether or not the act of private
respondent Vicente E. Concepcion in furnishing petitioner Compaia
Maritima with an inaccurate weight of 2.5 tons instead of the payloader's
actual weight of 7.5 tons was the proximate and only cause of the damage
on the Oliver Payloader OC-12 when it fell while being unloaded by
petitioner's crew, as would absolutely exempt petitioner from liability for
damages under paragraph 3 of Article 1734 of the Civil Code, which provides:
Art. 1734. 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:
xxx xxx xxx
(3) Act or omission of the shipper or owner of the goods.
Petitioner claims absolute exemption under this provision upon the reasoning
that private respondent's act of furnishing it with an inaccurate weight of the
payloader constitutes misrepresentation within the meaning of "act or
omission of the shipper or owner of the goods" under the above- quoted
article. It likewise faults the respondent Court of Appeals for reversing the
decision of the trial court notwithstanding that said appellate court also found
that by representing the weight of the payloader to be only 2.5 tons, private
respondent had led petitioner's officer to believe that the same was within the
5 tons capacity of the heel block of Hatch No. 2. Petitioner would thus insist
that the proximate and only cause of the damage to the payloader was
private respondent's alleged misrepresentation of the weight of the machinery
in question; hence, any resultant damage to it must be borne by private
respondent Vicente E. Concepcion.
The general rule under Articles 1735 and 1752 of the Civil Code is that
common carriers are presumed to have been at fault or to have acted
negligently in case the goods transported by them are lost, destroyed or had
deteriorated. To overcome the presumption of liability for the loss, destruction
or deterioration of the goods under Article 1735, the common carriers must
prove that they observed extraordinary diligence as required in Article 1733 of
35
the Civil Code. The responsibility of observing extraordinary diligence in the
vigilance over the goods is further expressed in Article 1734 of the same Code,
the article invoked by petitioner to avoid liability for damages.
Corollary is the rule that mere proof of delivery of the goods in good order to a
common carrier, and of their arrival at the place of destination in bad order,
makes out prima facie case against the common carrier, so that if no
explanation is given as to how the loss, deterioration or destruction of the
goods occurred, the common carrier must be held responsible. 10 Otherwise
stated, it is incumbent upon the common carrier to prove that the loss,
deterioration or destruction was due to accident or some other circumstances
inconsistent with its liability.
In the instant case, We are not persuaded by the proferred explanation of
petitioner alleged to be the proximate cause of the fall of the payloader while
it was being unloaded at the Cagayan de Oro City pier. Petitioner seems to
have overlooked the extraordinary diligence required of common carriers in
the vigilance over the goods transported by them by virtue of the nature of
their business, which is impressed with a special public duty.
Thus, Article 1733 of the Civil Code provides:
Art. 1733. Common carriers, from the nature of their business
and for reason of public policy, are bound to observe
extraordinary diligence in the vigilance over the goods and
for the safety of the passengers transported by them
according to all the circumstances of each case.
Such extraordinary diligence in the vigilance over the goods
is further expressed in Articles 1734, 1735 and 1745, Nos. 5, 6
and 7, ...
The extraordinary diligence in the vigilance over the goods tendered for
shipment requires the common carrier to know and to follow the required
precaution for avoiding damage to, or destruction of the goods entrusted to it
for safe carriage and delivery. It requires common carriers to render service
with the greatest skill and foresight and "to use all reasonable means to
ascertain the nature and characteristic of goods tendered for shipment, and
to exercise due care in the handling and stowage including such methods as
their nature requires." 11 Under Article 1736 of the Civil Code, the responsibility
to observe extraordinary diligence commences and lasts from the time the
goods are unconditionally placed in the possession of, and received by the
carrier for transportation until the same are delivered, actually or
constructively, by the carrier to the consignee, or to the person who has the
right to receive them without prejudice to the provisions of Article 1738.
Where, as in the instant case, petitioner, upon the testimonies of its own crew,
failed to take the necessary and adequate precautions for avoiding damage
to, or destruction of, the payloader entrusted to it for safe carriage and
delivery to Cagayan de Oro City, it cannot be reasonably concluded that the
damage caused to the payloader was due to the alleged misrepresentation
of private respondent Concepcion as to the correct and accurate weight of
the payloader. As found by the respondent Court of Appeals, the fact is that
petitioner used a 5-ton capacity lifting apparatus to lift and unload a visibly
heavy cargo like a payloader. Private respondent has, likewise, sufficiently
established the laxity and carelessness of petitioner's crew in their methods of
ascertaining the weight of heavy cargoes offered for shipment before loading
and unloading them, as is customary among careful persons.
It must be noted that the weight submitted by private respondent
Concepcion appearing at the left-hand portion of Exhibit 8 12 as an
addendum to the original enumeration of equipment to be shipped was
entered into the bill of lading by petitioner, thru Pacifico Fernandez, a
company collector, without seeing the equipment to be shipped. 13 Mr.
Mariano Gupana, assistant traffic manager of petitioner, confirmed in his
testimony that the company never checked the information entered in the bill
of lading. 14 Worse, the weight of the payloader as entered in the bill of lading
was assumed to be correct by Mr. Felix Pisang, Chief Officer of MV Cebu. 15
The weights stated in a bill of lading are prima facie evidence of the amount
received and the fact that the weighing was done by another will not relieve
the common carrier where it accepted such weight and entered it on the bill
of lading. 16 Besides, common carriers can protect themselves against
mistakes in the bill of lading as to weight by exercising diligence before issuing
the same. 17
While petitioner has proven that private respondent Concepcion did furnish it
with an inaccurate weight of the payloader, petitioner is nonetheless liable,
for the damage caused to the machinery could have been avoided by the
exercise of reasonable skill and attention on its part in overseeing the
unloading of such a heavy equipment. And circumstances clearly show that
the fall of the payloader could have been avoided by petitioner's crew.
Evidence on record sufficiently show that the crew of petitioner had been
negligent in the performance of its obligation by reason of their having failed
to take the necessary precaution under the circumstances which usage has
established among careful persons, more particularly its Chief Officer, Mr. Felix
Pisang, who is tasked with the over-all supervision of loading and unloading
heavy cargoes and upon whom rests the burden of deciding as to what
particular winch the unloading of the payloader should be
undertaken. 18 While it was his duty to determine the weight of heavy cargoes
before accepting them. Mr. Felix Pisang took the bill of lading on its face value
and presumed the same to be correct by merely "seeing" it. 19 Acknowledging
that there was a "jumbo" in the MV Cebu which has the capacity of lifting 20
to 25 ton cargoes, Mr. Felix Pisang chose not to use it, because according to
him, since the ordinary boom has a capacity of 5 tons while the payloader
was only 2.5 tons, he did not bother to use the "jumbo" anymore. 20
In that sense, therefore, private respondent's act of furnishing petitioner with
an inaccurate weight of the payloader upon being asked by petitioner's
collector, cannot be used by said petitioner as an excuse to avoid liability for
the damage caused, as the same could have been avoided had petitioner
utilized the "jumbo" lifting apparatus which has a capacity of lifting 20 to 25
tons of heavy cargoes. It is a fact known to the Chief Officer of MV Cebu that
36
the payloader was loaded aboard the MV Cebu at the Manila North Harbor
on August 28, 1964 by means of a terminal crane. 21 Even if petitioner chose
not to take the necessary precaution to avoid damage by checking the
correct weight of the payloader, extraordinary care and diligence compel
the use of the "jumbo" lifting apparatus as the most prudent course for
petitioner.
While the act of private respondent in furnishing petitioner with an inaccurate
weight of the payloader cannot successfully be used as an excuse by
petitioner to avoid liability to the damage thus caused, said act constitutes a
contributory circumstance to the damage caused on the payloader, which
mitigates the liability for damages of petitioner in accordance with Article
1741 of the Civil Code, to wit:
Art. 1741. If the shipper or owner merely contributed to the
loss, destruction or deterioration of the goods, the proximate
cause thereof being the negligence of the common carrier,
the latter shall be liable in damages, which however, shall be
equitably reduced.
We find equitable the conclusion of the Court of Appeals reducing the
recoverable amount of damages by 20% or 1/5 of the value of the payloader,
which at the time the instant case arose, was valued at P34,000. 00, thereby
reducing the recoverable amount at 80% or 4/5 of P34,000.00 or the sum of
P27,200.00. Considering that the freight charges for the entire cargoes shipped
by private respondent amounting to P2,318.40 remained unpaid.. the same
would be deducted from the P27,000.00 plus an additional deduction of
P228.63 representing the freight charges for the undeclared weight of 5 tons
(difference between 7.5 and 2.5 tons) leaving, therefore, a final recoverable
amount of damages of P24,652.97 due to private respondent Concepcion.
Notwithstanding the favorable judgment in his favor, private respondent
assailed the Court of Appeals' decision insofar as it limited the damages due
him to only P24,652.97 and the cost of the suit. Invoking the provisions on
damages under the Civil Code, more particularly Articles 2200 and 2208,
private respondent further seeks additional damages allegedly because the
construction project was delayed and that in spite of his demands, petitioner
failed to take any steps to settle his valid, just and demandable claim for
damages.
We find private respondent's submission erroneous. It is well- settled that an
appellee, who is not an appellant, may assign errors in his brief where his
purpose is to maintain the judgment on other grounds, but he may not do so if
his purpose is to have the judgment modified or reversed, for, in such case, he
must appeal. 22 Since private respondent did not appeal from the judgment
insofar as it limited the award of damages due him, the reduction of 20% or
1/5 of the value of the payloader stands.
WHEREFORE, in view of the foregoing, the petition is DENIED. The decision of
the Court of Appeals is hereby AFFIRMED in all respects with costs against
petitioner. In view of the length of time this case has been pending, this
decision is immediately executory.
11. G.R. No. 84458 November 6, 1989
ABOITIZ SHIPPING CORPORATION, petitioner,
vs.
HON. COURT OF APPEALS, ELEVENTH DIVISION, LUCILA C. VIANA, SPS. ANTONIO
VIANA and GORGONIA VIANA, and PIONEER STEVEDORING
CORPORATION, respondents.
In this appeal by certiorari, petitioner Aboitiz Shipping Corporation seeks a
review of the decision 1 of respondent Court of Appeals, dated July 29, 1988,
the decretal portion of which reads:
WHEREFORE, the judgment appealed from as modified by the
order of October 27, 1982, is hereby affirmed with the
modification that appellant Aboitiz Shipping is hereby
ordered to pay plaintiff-appellees the amount of P30,000.00
for the death of Anacleto Viana; actual damages of
P9,800.00; P150,000.00 for unearned income; P7,200.00 as
support for deceased's parents; P20,000.00 as moral
damages; P10,000.00 as attorney's fees; and to pay the costs.
The undisputed facts of the case, as found by the court a quo and adopted
by respondent court, are as follows: .
The evidence disclosed that on May 11, 1975, Anacleto Viana
boarded the vessel M/V Antonia, owned by defendant, at
the port at San Jose, Occidental Mindoro, bound for Manila,
having purchased a ticket (No. 117392) in the sum of P23.10
(Exh. 'B'). On May 12, 1975, said vessel arrived at Pier 4, North
Harbor, Manila, and the passengers therein disembarked, a
gangplank having been provided connecting the side of the
vessel to the pier. Instead of using said gangplank Anacleto
Viana disembarked on the third deck which was on the level
with the pier. After said vessel had landed, the Pioneer
Stevedoring Corporation took over the exclusive control of
the cargoes loaded on said vessel pursuant to the
Memorandum of Agreement dated July 26, 1975 (Exh. '2')
between the third party defendant Pioneer Stevedoring
Corporation and defendant Aboitiz Shipping Corporation.
The crane owned by the third party defendant and operated
by its crane operator Alejo Figueroa was placed alongside
the vessel and one (1) hour after the passengers of said vessel
had disembarked, it started operation by unloading the
cargoes from said vessel. While the crane was being
operated, Anacleto Viana who had already disembarked
from said vessel obviously remembering that some of his
cargoes were still loaded in the vessel, went back to the
vessel, and it was while he was pointing to the crew of the
said vessel to the place where his cargoes were loaded that
the crane hit him, pinning him between the side of the vessel
37
 and the crane. He was thereafter brought to the hospital
where he later expired three (3) days thereafter, on May 15,
1975, the cause of his death according to the Death
Certificate (Exh. "C") being "hypostatic pneumonia secondary
to traumatic fracture of the pubic bone lacerating the urinary
bladder" (See also Exh. "B"). For his hospitalization, medical,
burial and other miscellaneous expenses, Anacleto's wife,
herein plaintiff, spent a total of P9,800.00 (Exhibits "E", "E-1", to
"E-5"). Anacleto Viana who was only forty (40) years old when
he met said fateful accident (Exh. 'E') was in good health. His
average annual income as a farmer or a farm supervisor was
400 cavans of palay annually. His parents, herein plaintiffs
Antonio and Gorgonia Viana, prior to his death had been
recipient of twenty (20) cavans of palay as support or P120.00
monthly. Because of Anacleto's death, plaintiffs suffered
mental anguish and extreme worry or moral damages. For
the filing of the instant case, they had to hire a lawyer for an
agreed fee of ten thousand (P10,000.00) pesos. 2
Private respondents Vianas filed a complaint 3 for damages against petitioner
corporation (Aboitiz, for brevity) for breach of contract of carriage.
In its answer. 4 Aboitiz denied responsibility contending that at the time of the
accident, the vessel was completely under the control of respondent Pioneer
Stevedoring Corporation (Pioneer, for short) as the exclusive stevedoring
contractor of Aboitiz, which handled the unloading of cargoes from the vessel
of Aboitiz. It is also averred that since the crane operator was not an
employee of Aboitiz, the latter cannot be held liable under the fellow-servant
rule.
Thereafter, Aboitiz, as third-party plaintiff, filed a third-party
complaint 5 against Pioneer imputing liability thereto for Anacleto Viana's
death as having been allegedly caused by the negligence of the crane
operator who was an employee of Pioneer under its exclusive control and
supervision.
Pioneer, in its answer to the third-party complaint, 6 raised the defenses that
Aboitiz had no cause of action against Pioneer considering that Aboitiz is
being sued by the Vianas for breach of contract of carriage to which Pioneer
is not a party; that Pioneer had observed the diligence of a good father of a
family both in the selection and supervision of its employees as well as in the
prevention of damage or injury to anyone including the victim Anacleto
Viana; that Anacleto Viana's gross negligence was the direct and proximate
cause of his death; and that the filing of the third-party complaint was
premature by reason of the pendency of the criminal case for homicide
through reckless imprudence filed against the crane operator, Alejo Figueroa.
In a decision rendered on April 17, 1980 by the trial court, 7 Aboitiz was
ordered to pay the Vianas for damages incurred, and Pioneer was ordered to
reimburse Aboitiz for whatever amount the latter paid the Vianas. The
dispositive portion of said decision provides:
WHEREFORE, judgment is hereby rendered in favor of the
plantiffs:
(1) ordering defendant Aboitiz Shipping Corporation to pay to
plaintiffs the sum of P12,000.00 for the death of Anacleto
Viana P9,800.00 as actual damages; P533,200.00 value of the
10,664 cavans of palay computed at P50.00 per cavan;
P10,000.00 as attorney's fees; F 5,000.00, value of the 100
cavans of palay as support for five (5) years for deceased
(sic) parents, herein plaintiffs Antonio and Gorgonia Viana
computed at P50.00 per cavan; P7,200.00 as support for
deceased's parents computed at P120.00 a month for five
years pursuant to Art. 2206, Par. 2, of the Civil Code;
P20,000.00 as moral damages, and costs; and
(2) ordering the third party defendant Pioneer Stevedoring
Corporation to reimburse defendant and third party plaintiff
Aboitiz Shipping Corporation the said amounts that it is
ordered to pay to herein plaintiffs.
Both Aboitiz and Pioneer filed separate motions for reconsideration wherein
they similarly raised the trial court's failure to declare that Anacleto Viana
acted with gross negligence despite the overwhelming evidence presented in
support thereof. In addition, Aboitiz alleged, in opposition to Pioneer's motion,
that under the memorandum of agreement the liability of Pioneer as
contractor is automatic for any damages or losses whatsoever occasioned by
and arising from the operation of its arrastre and stevedoring service.
In an order dated October 27, 1982, 8 the trial court absolved Pioneer from
liability for failure of the Vianas and Aboitiz to preponderantly establish a case
of negligence against the crane operator which the court a quo ruled is never
presumed, aside from the fact that the memorandum of agreement
supposedly refers only to Pioneer's liability in case of loss or damage to goods
handled by it but not in the case of personal injuries, and, finally that Aboitiz
cannot properly invoke the fellow-servant rule simply because its liability stems
from a breach of contract of carriage. The dispositive portion of said order
reads:
WHEREFORE, judgment is hereby modified insofar as third
party defendant Pioneer Stevedoring Corporation is
concerned rendered in favor of the plaintiffs-,:
(1) Ordering defendant Aboitiz Shipping Corporation to pay
the plaintiffs the sum of P12,000.00 for the death of Anacleto
Viana; P9,000.00 (sic) as actual damages; P533,200.00 value
of the 10,664 cavans of palay computed at P50.00 per
cavan; P10,000.00 as attorney's fees; P5,000.00 value of the
100 cavans of palay as support for five (5) years for
deceased's parents, herein plaintiffs Antonio and Gorgonia
Viana,computed at P50.00 per cavan; P7,200.00 as support
for deceased's parents computed at P120.00 a month for five
38
 years pursuant to Art. 2206, Par. 2, of the Civil Code;
P20,000.00 as moral damages, and costs; and
(2) Absolving third-party defendant Pioneer Stevedoring
Corporation for (sic) any liability for the death of Anacleto
Viana the passenger of M/V Antonia owned by defendant
third party plaintiff Aboitiz Shipping Corporation it appearing
that the negligence of its crane operator has not been
established therein.
Not satisfied with the modified judgment of the trial court, Aboitiz appealed
the same to respondent Court of Appeals which affirmed the findings of of the
trial court except as to the amount of damages awarded to the Vianas.
Hence, this petition wherein petitioner Aboitiz postulates that respondent court
erred:
(A) In holding that the doctrine laid down by this honorable
Court in La Mallorca vs. Court of Appeals, et al. (17 SCRA 739,
July 27, 1966) is applicable to the case in the face of the
undisputable fact that the factual situation under the La
Mallorca case is radically different from the facts obtaining in
this case;
(B) In holding petitioner liable for damages in the face of the
finding of the court a quo and confirmed by the Honorable
respondent court of Appeals that the deceased, Anacleto
Viana was guilty of contributory negligence, which, We
respectfully submit contributory negligence was the
proximate cause of his death; specifically the honorable
respondent Court of Appeals failed to apply Art. 1762 of the
New Civil Code;
(C) In the alternative assuming the holding of the Honorable
respondent Court of Appears that petitioner may be legally
condemned to pay damages to the private respondents we
respectfully submit that it committed a reversible error when it
dismissed petitioner's third party complaint against private
respondent Pioneer Stevedoring Corporation instead of
compelling the latter to reimburse the petitioner for whatever
damages it may be compelled to pay to the private
respondents Vianas. 9
At threshold, it is to be observed that both the trial court and respondent
Court of Appeals found the victim Anacleto Viana guilty of contributory
negligence, but holding that it was the negligence of Aboitiz in prematurely
turning over the vessel to the arrastre operator for the unloading of cargoes
which was the direct, immediate and proximate cause of the victim's death.
I. Petitioner contends that since one (1) hour had already elapsed from the
time Anacleto Viana disembarked from the vessel and that he was given
more than ample opportunity to unload his cargoes prior to the operation of
the crane, his presence on the vessel was no longer reasonable e and he
consequently ceased to be a passenger. Corollarily, it insists that the doctrine
in La Mallorca vs. Court of Appeals, et al. 10 is not applicable to the case at
bar.
The rule is that the relation of carrier and passenger continues until the
passenger has been landed at the port of destination and has left the vessel
owner's dock or premises. 11 Once created, the relationship will not ordinarily
terminate until the passenger has, after reaching his destination, safely
alighted from the carrier's conveyance or had a reasonable opportunity to
leave the carrier's premises. All persons who remain on the premises a
reasonable time after leaving the conveyance are to be deemed
passengers, and what is a reasonable time or a reasonable delay within this
rule is to be determined from all the circumstances, and includes a
reasonable time to see after his baggage and prepare for his
departure. 12 The carrier-passenger relationship is not terminated merely by the
fact that the person transported has been carried to his destination if, for
example, such person remains in the carrier's premises to claim his baggage. 13
It was in accordance with this rationale that the doctrine in the aforesaid case
of La Mallorca was enunciated, to wit:
It has been recognized as a rule that the relation of carrier
and passenger does not cease at the moment the passenger
alights from the carrier's vehicle at a place selected by the
carrier at the point of destination, but continues until the
passenger has had a reasonable time or a reasonable
opportunity to leave the carrier's premises. And, what is a
reasonable time or a reasonable delay within this rule is to be
determined from all the circumstances. Thus, a person who,
after alighting from a train, walks along the station platform is
considered still a passenger. So also, where a passenger has
alighted at his destination and is proceeding by the usual
way to leave the company's premises, but before actually
doing so is halted by the report that his brother, a fellow
passenger, has been shot, and he in good faith and without
intent of engaging in the difficulty, returns to relieve his
brother, he is deemed reasonably and necessarily delayed
and thus continues to be a passenger entitled as such to the
protection of the railroad company and its agents.
In the present case, the father returned to the bus to get one
of his baggages which was not unloaded when they alighted
from the bus. Racquel, the child that she was, must have
followed the father. However, although the father was still on
the running board of the bus waiting for the conductor to
hand him the bag or bayong, the bus started to run, so that
even he (the father) had to jump down from the moving
vehicle. It was at this instance that the child, who must be
near the bus, was run over and killed. In the circumstances, it
cannot be claimed that the carrier's agent had exercised the
'utmost diligence' of a 'very cautious person' required by
39
 Article 1755 of the Civil Code to be observed by a common
carrier in the discharge of its obligation to transport safely its
passengers. ... The presence of said passengers near the bus
was not unreasonable and they are, therefore, to be
considered still as passengers of the carrier, entitled to the
protection under their contract of carriage. 14
It is apparent from the foregoing that what prompted the Court to rule as it
did in said case is the fact of the passenger's reasonable presence within the
carrier's premises. That reasonableness of time should be made to depend on
the attending circumstances of the case, such as the kind of common carrier,
the nature of its business, the customs of the place, and so forth, and therefore
precludes a consideration of the time element per se without taking into
account such other factors. It is thus of no moment whether in the cited case
of La Mallorca there was no appreciable interregnum for the passenger
therein to leave the carrier's premises whereas in the case at bar, an interval
of one (1) hour had elapsed before the victim met the accident. The primary
factor to be considered is the existence of a reasonable cause as will justify
the presence of the victim on or near the petitioner's vessel. We believe there
exists such a justifiable cause.
It is of common knowledge that, by the very nature of petitioner's business as
a shipper, the passengers of vessels are allotted a longer period of time to
disembark from the ship than other common carriers such as a passenger bus.
With respect to the bulk of cargoes and the number of passengers it can load,
such vessels are capable of accommodating a bigger volume of both as
compared to the capacity of a regular commuter bus. Consequently, a ship
passenger will need at least an hour as is the usual practice, to disembark
from the vessel and claim his baggage whereas a bus passenger can easily
get off the bus and retrieve his luggage in a very short period of time. Verily,
petitioner cannot categorically claim, through the bare expedient of
comparing the period of time entailed in getting the passenger's cargoes,
that the ruling in La Mallorca is inapplicable to the case at bar. On the
contrary, if we are to apply the doctrine enunciated therein to the instant
petition, we cannot in reason doubt that the victim Anacleto Viana was still a
passenger at the time of the incident. When the accident occurred, the
victim was in the act of unloading his cargoes, which he had every right to do,
from petitioner's vessel. As earlier stated, a carrier is duty bound not only to
bring its passengers safely to their destination but also to afford them a
reasonable time to claim their baggage.
It is not definitely shown that one (1) hour prior to the incident, the victim had
already disembarked from the vessel. Petitioner failed to prove this. What is
clear to us is that at the time the victim was taking his cargoes, the vessel had
already docked an hour earlier. In consonance with common shipping
procedure as to the minimum time of one (1) hour allowed for the passengers
to disembark, it may be presumed that the victim had just gotten off the
vessel when he went to retrieve his baggage. Yet, even if he had already
disembarked an hour earlier, his presence in petitioner's premises was not
without cause. The victim had to claim his baggage which was possible only
one (1) hour after the vessel arrived since it was admittedly standard
procedure in the case of petitioner's vessels that the unloading operations
shall start only after that time. Consequently, under the foregoing
circumstances, the victim Anacleto Viana is still deemed a passenger of said
carrier at the time of his tragic death.
II. Under the law, common carriers are, from the nature of their business and
for reasons of public policy, 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. 15 More particularly, 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. 16 Thus, where a
passenger dies or is injured, the common carrier is presumed to have been at
fault or to have acted negligently. 17 This gives rise to an action for breach of
contract of carriage where all that is required of plaintiff is to prove the
existence of the contract of carriage and its non-performance by the carrier,
that is, the failure of the carrier to carry the passenger safely to his
destination, 18 which, in the instant case, necessarily includes its failure to
safeguard its passenger with extraordinary diligence while such relation
subsists.
The presumption is, therefore, established by law that in case of a passenger's
death or injury the operator of the vessel was at fault or negligent, having
failed to exercise extraordinary diligence, and it is incumbent upon it to rebut
the same. This is in consonance with the avowed policy of the State to afford
full protection to the passengers of common carriers which can be carried out
only by imposing a stringent statutory obligation upon the latter.
Concomitantly, this Court has likewise adopted a rigid posture in the
application of the law by exacting the highest degree of care and diligence
from common carriers, bearing utmost in mind the welfare of the passengers
who often become hapless victims of indifferent and profit-oriented carriers.
We cannot in reason deny that petitioner failed to rebut the presumption
against it. Under the facts obtaining in the present case, it cannot be gainsaid
that petitioner had inadequately complied with the required degree of
diligence to prevent the accident from happening.
As found by the Court of Appeals, the evidence does not show that there was
a cordon of drums around the perimeter of the crane, as claimed by
petitioner. It also adverted to the fact that the alleged presence of visible
warning signs in the vicinity was disputable and not indubitably established.
Thus, we are not inclined to accept petitioner's explanation that the victim
and other passengers were sufficiently warned that merely venturing into the
area in question was fraught with serious peril. Definitely, even assuming the
existence of the supposed cordon of drums loosely placed around the
unloading area and the guard's admonitions against entry therein, these were
at most insufficient precautions which pale into insignificance if considered vis-
a-vis the gravity of the danger to which the deceased was exposed. There is
40
no showing that petitioner was extraordinarily diligent in requiring or seeing to
it that said precautionary measures were strictly and actually enforced to
subserve their purpose of preventing entry into the forbidden area. By no
stretch of liberal evaluation can such perfunctory acts approximate the
"utmost diligence of very cautious persons" to be exercised "as far as human
care and foresight can provide" which is required by law of common carriers
with respect to their passengers.
While the victim was admittedly contributorily negligent, still petitioner's
aforesaid failure to exercise extraordinary diligence was the proximate and
direct cause of, because it could definitely have prevented, the former's
death. Moreover, in paragraph 5.6 of its petition, at bar, 19 petitioner has
expressly conceded the factual finding of respondent Court of Appeals that
petitioner did not present sufficient evidence in support of its submission that
the deceased Anacleto Viana was guilty of gross negligence. Petitioner
cannot now be heard to claim otherwise.
No excepting circumstance being present, we are likewise bound by
respondent court's declaration that there was no negligence on the part of
Pioneer Stevedoring Corporation, a confirmation of the trial court's finding to
that effect, hence our conformity to Pioneer's being absolved of any liability.
As correctly observed by both courts, Aboitiz joined Pioneer in proving the
alleged gross negligence of the victim, hence its present contention that the
death of the passenger was due to the negligence of the crane operator
cannot be sustained both on grounds, of estoppel and for lack of evidence
on its present theory. Even in its answer filed in the court below it readily
alleged that Pioneer had taken the necessary safeguards insofar as its
unloading operations were concerned, a fact which appears to have been
accepted by the plaintiff therein by not impleading Pioneer as a defendant,
and likewise inceptively by Aboitiz by filing its third-party complaint only after
ten (10) months from the institution of the suit against it. Parenthetically,
Pioneer is not within the ambit of the rule on extraordinary diligence required
of, and the corresponding presumption of negligence foisted on, common
carriers like Aboitiz. This, of course, does not detract from what we have said
that no negligence can be imputed to Pioneer but, that on the contrary, the
failure of Aboitiz to exercise extraordinary diligence for the safety of its
passenger is the rationale for our finding on its liability.
WHEREFORE, the petition is DENIED and the judgment appealed from is hereby
AFFIRMED in toto.
SO ORDERED.
12. [G.R. No. 118126. March 4, 1996]
TRANS-ASIA SHIPPING LINES, INC., petitioner, vs. COURT OF APPEALS and ATTY.
RENATO T. ARROYO, respondents.
DECISION
DAVIDE, JR., J.:
As formulated by the petitioner, the issue in this petition for review
on certiorari under Rule 45 of the Rules of Court is as follows:
In case of interruption of a vessels voyage and the consequent delay in that
vessels arrival at its port of destination, is the right of a passenger affected
thereby to be determined and governed by the vague Civil Code provision
on common carriers, or shall it be, in the absence of a specific provision
thereon, governed by Art. 698 of the Code of Commerce?[1]
The petitioner considers it a novel question of law.
Upon a closer evaluation, however, of the challenged decision of the
Court of Appeals of 23 November 1994,[2] vis-a-vis, the decision of 29 June
1992 in Civil Case No. 91-491 of the Regional Trial Court (RTC) of Cagayan de
Oro City, Branch 24,[3] as well as the allegations and arguments adduced by
the parties, we find the petitioners formulation of the issue imprecise. As this
Court sees it, what stands for resolution is a common carriers liability for
damages to a passenger who disembarked from the vessel upon its return to
the port of origin, after it suffered engine trouble and had to stop at sea,
having commenced the contracted voyage on one engine.
The antecedents are summarized by the Court of Appeals as follows:
Plaintiff [herein private respondent Atty. Renato Arroyo], a public attorney,
bought a ticket [from] defendant [herein petitioner], a corporation engaged
in x x x inter-island shipping, for the voyage of M/V Asia Thailand vessel to
Cagayan de Oro City from Cebu City on November 12, 1991.
At around 5:30 in the evening of November 12, 1991, plaintiff boarded the
M/V Asia Thailand vessel. At that instance, plaintiff noticed that some repair
works [sic] were being undertaken on the engine of the vessel. The vessel
departed at around 11:00 in the evening with only one (1) engine running.
After an hour of slow voyage, the vessel stopped near Kawit Island and
dropped its anchor thereat. After half an hour of stillness, some passengers
demanded that they should be allowed to return to Cebu Cityfor they were
no longer willing to continue their voyage to Cagayan de Oro City. The
captain acceded [sic] to their request and thus the vessel headed back
to Cebu City.
At Cebu City, plaintiff together with the other passengers who requested to be
brought back to Cebu City, were allowed to disembark. Thereafter, the vessel
proceeded to Cagayan de Oro City. Plaintiff, the next day, boarded the M/V
Asia Japan for its voyage to Cagayan de Oro City, likewise a vessel of
defendant.
On account of this failure of defendant to transport him to the place of
destination on November 12, 1991, plaintiff filed before the trial court a
complaint for damages against defendant.[4]
In his complaint, docketed as Civil Case No. 91-491, plaintiff (hereinafter
private respondent) alleged that the engines of the M/V Asia Thailand conked
out in the open sea, and for more than an hour it was stalled and at the
mercy of the waves, thus causing fear in the passengers. It sailed back
to Cebu City after it regained power, but for unexplained reasons, the
passengers, including the private respondent, were arrogantly told to
disembark without the necessary precautions against possible injury to them.
They were thus unceremoniously dumped, which only exacerbated the
41
private respondents mental distress. He further alleged that by reason of the
petitioners wanton, reckless, and willful acts, he was unnecessarily exposed to
danger and, having been stranded in Cebu City for a day, incurred additional
expenses and loss of income. He then prayed that he be awarded P1,100.00,
P50,000.00, and P25,000.00 as compensatory, moral, and exemplary
damages, respectively.[5]
In his pre-trial brief, the private respondent asserted that his complaint
was an action for damage&arising from bad faith, breach of contract and
from tort, with the former arising from the petitioners failure to carry [him] to his
place of destination as contracted, while the latter from the conduct of the
[petitioner] resulting [in] the infliction of emotional distress to the private
respondent.[6]
After due trial, the trial court rendered its decision [7] and ruled that the
action was only for breach of contract, with Articles 1170, 1172, and 1173 of
the Civil Code as applicable law - not Article 2180 of the same Code. It was of
the opinion that Article 1170 made a person liable for damages if, in the
performance of his obligation, he was guilty of fraud, negligence, or delay, or
in any manner contravened the tenor thereof; moreover, pursuant to Article
2201 of the same Code, to be entitled to damages, the non-performance of
the obligation must have been tainted not only by fraud, negligence, or
delay, but also bad faith, malice, and wanton attitude. It then disposed of the
case as follows:
WHEREFORE, it not appearing from the evidence that plaintiff was left in
the Port of Cebu because of the fault, negligence, malice or wanton attitude
of defendants employees, the complaint is DISMISSED. Defendants
counterclaim is likewise dismissed it not appearing also that filing of the case
by plaintiff was motivated by malice or bad faith.[8]
The trial court made the following findings to support its disposition:
In the light of the evidence adduced by the parties and of the above
provisions of the New Civil Code, the issue to be resolved, in the resolution of
this case is whether or not, defendant thru its employee in [sic] the night of
November 12, 1991, committed fraud, negligence, bad faith or malice when it
left plaintiff in the Port of Cebu when it sailed back to Cagayan de Oro City
after it has [sic] returned from Kawit Island.
Evaluation of the evidence of the parties tended to show nothing that
defendant committed fraud. As early as 3:00 p.m. of November 12, 1991,
defendant did not hide the fact that the cylinder head cracked. Plaintiff even
saw during its repair. If he had doubts as to the vessels capacity to sail, he had
time yet to take another boat. The ticket could be returned to defendant and
corresponding cash [would] be returned to him.
Neither could negligence, bad faith or malice on the part of defendant be
inferred from the evidence of the parties. When the boat arrived at
[the] Port of Cebu after it returned from Kawit Island, there was an
announcement that passengers who would like to disembark were given ten
(10) minutes only to do so. By this announcement, it could be inferred that the
boat will [sic] proceed to Cagayan de Oro City. If plaintiff entertained doubts,
he should have asked a member of the crew of the boat or better still, the
captain of the boat. But as admitted by him, he was of the impression only
that the boat will not proceed to Cagayan de Oro that evening so he
disembarked. He was instead, the ones [sic] negligent. Had he been prudent,
with the announcement that those who will disembark were given ten minutes
only, he should have lingered a little by staying in his cot and inquired whether
the boat will proceed to Cagayan de Oro City or not. Defendant cannot be
expected to be telling [sic] the reasons to each passenger. Announcement
by microphone was enough.
The court is inclined to believe that the story of defendant that the boat
returned to the Port of Cebu because of the request of the passengers in view
of the waves. That it did not return because of the defective engines as shown
by the fact that fifteen (15) minutes after the boat docked [at]
the Port of Cebu and those who wanted to proceed to Cagayan de Oro
disembarked, it left for Cagayan de Oro City.
The defendant got nothing when the boat returned to Cebu to let those who
did not want to proceed to Cagayan de Oro City including plaintiff
disembarked. On the contrary, this would mean its loss instead because it will
have to refund their tickets or they will use it the next trip without paying
anymore. It is hard therefore, to imagine how defendant by leaving plaintiff
in Cebu could have acted in bad faith, negligently, want only and with
malice.
If plaintiff, therefore, was not able to [m]ake the trip that night of November
12, 1991, it was not because defendant maliciously did it to exclude him [from]
the trip. If he was left, it was because of his fault or negligence.[9]
Unsatisfied, the private respondent appealed to the Court of Appeals
(CA-G.R. CV No. 39901) and submitted for its determination the following
assignment of errors: (1) the trial court erred in not finding that the defendant-
appellee was guilty of fraud, delay, negligence, and bad faith; and (2) the
trial court erred in not awarding moral and exemplary damages.[10]
In its decision of 23 November 1994,[11] the Court of Appeals reversed the
trial courts decision by applying Article 1755 in relation to Articles 2201, 2208,
2217, and 2232 of the Civil Code and, accordingly, awarded compensatory,
moral, and exemplary damages as follows:
WHEREFORE, premises considered, the appealed decision is hereby REVERSED
and SET ASIDE and another one is rendered ordering defendant-appellee to
pay plaintiff-appellant:
1. P20,000.00 as moral damages;
2. P10,000.00 as exemplary damages;
3. P5,000.00 as attorneys fees;
4. Cost of suit.
SO ORDERED.[12]
It did not, however, allow the grant of damages for the delay in the
performance of the petitioners obligation as the requirement of demand set
forth in Article 1169 of the Civil Code had not been met by the private
respondent. Besides, it found that the private respondent offered no evidence
42
to prove that his contract of carriage with the petitioner provided for liability in
case of delay in departure, nor that a designation of the time of departure
was the controlling motive for the establishment of the contract. On the latter,
the court a quo observed that the private respondent even admitted he was
unaware of the vessels departure time, and it was only when he boarded the
vessel that he became aware of such. Finally, the respondent Court found no
reasonable basis for the private respondents belief that demand was useless
because the petitioner had rendered it beyond its power to perform its
obligation; on the contrary, he even admitted that the petitioner had been
assuring the passengers that the vessel would leave on time, and that it could
still perform its obligation to transport them as scheduled.
To justify its award of damages, the Court of Appeals ratiocinated as
follows:
It is an established and admitted fact that the vessel before the voyage had
undergone some repair work on the cylinder head of the engine. It is likewise
admitted by defendant-appellee that it left the port of Cebu City with only
one engine running. Defendant-appellee averred:
x x x The dropping of the vessels anchor after running slowly on only one
engine when it departed earlier must have alarmed some nervous passengers
xxx
The entries in the logbook which defendant-appellee itself offered as
evidence categorically stated therein that the vessel stopped
at Kawit Island because of engine trouble. It reads:
2330 HRS STBD ENGINE EMERGENCY STOP
2350 HRS DROP ANCHOR DUE TO. ENGINE TROUBLE, 2 ENGINE STOP.
The stoppage was not to start and synchronized [sic] the engines of the
vessel as claimed by defendant-appellee. It was because one of the engines
of the vessel broke down; it was because of the disability of the vessel which
from the very beginning of the voyage was known to defendant-appellee.
Defendant-appellee from the very start of the voyage knew for a fact
that the vessel was not yet in its sailing condition because the second engine
was still being repaired. Inspite of this knowledge, defendant-appellee still
proceeded to sail with only one engine running.
Defendant-appellee at that instant failed to exercise the diligence which
all common carriers should exercise in transporting or carrying passengers. The
law does not merely require extraordinary diligence in the performance of the
obligation. The law mandates that common carrier[s] should exercise utmost
diligence in the transport of passengers.
Article 1755 of the New Civil Code provides:
ART. 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.
Utmost diligence of a VERY CAUTIOUS person dictates that defendant-
appellee should have pursued the voyage only when its vessel was already fit
to sail. Defendant-appellee should have made certain that the vessel [could]
complete the voyage before starting [to] sail. Anything less than this, the
vessel [could not] sail x x x with so many passengers on board it.
However, defendant-appellant [sic] in complete disregard of the safety
of the passengers, chose to proceed with its voyage even if only one engine
was running as the second engine was still being repaired during the voyage.
Defendant-appellee disregarded the not very remote possibility that because
of the disability of the vessel, other problems might occur which would
endanger the lives of the passengers sailing with a disabled vessel.
As expected, x x x engine trouble occurred. Fortunate[ly] for defendant-
appellee, such trouble only necessitated the stoppage of the vessel and did
not cause the vessel to capsize. No wonder why some passengers requested
to be brought back to Cebu City. Common carriers which are mandated to
exercise utmost diligence should not be taking these risks.
On this premise, plaintiff-appellant should not be faulted why he chose to
disembark from the vessel with the other passengers when it returned back
to Cebu City. Defendant-appellee may call him a very panicky passenger or
a nervous person, but this will not relieve defendant-appellee from the liability
it incurred for its failure to exercise utmost diligence.[13]
xxx xxx xxx
As to the second assigned error, we find that plaintiff-appellant is entitled
to the award of moral and exemplary damages for the breach committed by
defendant-appellee.
As discussed, defendant-appellee in sailing to Cagayan de Oro City with
only one engine and with full knowledge of the true condition of the vessel,
acted in bad faith with malice, in complete disregard for the safety of the
passengers and only for its own personal advancement/interest.
The Civil Code provides:
Art 2201.
xxx xxx xxx
In case of fraud, bad faith, malice or wanton attitude, the obligor shall be
responsible for all damages which may be reasonably attributed to the non-
performance of the obligation.
Plaintiff-appellant is entitled to moral damages for the mental anguish,
fright and serious anxiety he suffered during the voyage when the vessels
engine broke down and when he disembarked from the vessel during the
wee hours of the morning at Cebu City when it returned.[14]
Moral damages are recoverable in a damage suit predicated upon a
breach of contract of carriage where it is proved that the carrier was guilty of
fraud or bad faith even if death does not result.[15]
Fraud and bad faith by defendant-appellee having been established,
the award of moral damages is in order.[16]
To serve as a deterrent to the commission of similar acts in the future,
exemplary damages should be imposed upon defendant-
appellee.[17] Exemplary damages are designed by our civil law to permit the
courts to reshape behavior that is socially deleterious in its consequence by
creating x x x negative incentives or deterrents against such behavior.[18]
43
 Moral damages having been awarded, exemplary damages maybe
properly awarded. When entitlement to moral damages has been
established, the award of exemplary damages is proper.[19]
The petitioner then instituted this petition and submitted the question of
law earlier adverted to.
Undoubtedly, there was, between the petitioner and the private
respondent, a contract of common carriage. The laws of primary application
then are the provisions on common carriers under Section 4, Chapter 3, Title
VIII, Book IV of the Civil Code, while for all other matters not regulated thereby,
the Code of Commerce and special laws.[20]
Under Article 1733 of the Civil Code, the petitioner was bound to observe
extraordinary diligence in ensuring the safety of the private respondent. That
meant that the petitioner was, pursuant to Article 1755 of the said Code,
bound to carry the private respondent safely as far as human care and
foresight could provide, using the utmost diligence of very cautious persons,
with due regard for all the circumstances. In this case, we are in full accord
with the Court of Appeals that the petitioner failed to discharge this
obligation.
Before commencing the contracted voyage, the petitioner undertook
some repairs on the cylinder head of one of the vessels engines. But even
before it could finish these repairs, it allowed the vessel to leave the port of
origin on only one functioning engine, instead of two. Moreover, even the
lone functioning engine was not in perfect condition as sometime after it had
run its course, it conked out. This caused the vessel to stop and remain adrift at
sea, thus in order to prevent the ship from capsizing, it had to drop anchor.
Plainly, the vessel was unseaworthy even before the voyage began. For a
vessel to be seaworthy, it must be adequately equipped for the voyage and
manned with a sufficient number of competent officers and crew. [21] The
failure of a common carrier to maintain in seaworthy condition its vessel
involved in a contract of carriage is a clear breach of is duty prescribed in
Article 1755 of the Civil Code.
As to its liability for damages to the private respondent, Article 1764 of the
Civil Code expressly provides:
ART. 1764. Damages in cases comprised in this Section shall be awarded in
accordance with Title XVIII of this Book, concerning Damages. Article 2206
shall also apply to the death of a passenger caused by the breach of
contract by common carrier.
The damages comprised in Title XVIII of the Civil Code are actual or
compensatory, moral, nominal, temperate or moderate, liquidated, and
exemplary.
In his complaint, the private respondent claims actual or compensatory,
moral, and exemplary damages.
Actual or compensatory damages represent the adequate
compensation for pecuniary loss suffered and for profits the obligee failed to
obtain.[22]
In contracts or quasi-contracts, the obligor is liable for all the damages
which may be reasonably attributed to the non-performance of the
obligation if he is guilty of fraud, bad faith, malice, or wanton attitude. [23]
Moral damages include moral suffering, mental anguish, fright, serious
anxiety, besmirched reputation, wounded feelings, moral shock, social
humiliation, or similar injury. They may be recovered in the cases enumerated
in Article 2219 of the Civil Code, likewise, if they are the proximate result of, as
in this case, the petitioners breach of the contract of carriage.[24] Anent a
breach of a contract of common carriage, moral damages may be awarded
if the common carrier, like the petitioner, acted fraudulently or in bad faith.[25]
Exemplary damages are imposed by way of example or correction for
the public good, in addition to moral, temperate, liquidated or compensatory
damages.[26] In contracts and quasi-contracts, exemplary damages may be
awarded if the defendant acted in a wanton fraudulent, reckless, oppressive
or malevolent manner.[27] It cannot, however, be considered as a matter of
right; the court having to decide whether or not they should be
adjudicated.[28] Before the court may consider an award for exemplary
damages, the plaintiff must first show that he is entitled to moral, temperate or
compensatory damages; but it is not necessary that he prove the monetary
value thereof.[29]
The Court of Appeals did not grant the private respondent actual or
compensatory damages, reasoning that no delay was incurred since there
was no demand, as required by Article 1169 of the Civil Code. This article,
however, finds no application in this case because, as found by the
respondent Court, there was in fact no delay in the commencement of the
contracted voyage. If any delay was incurred, it was after the
commencement of such voyage, more specifically, when the voyage was
subsequently interrupted when the vessel had to stop near KawitIsland after
the only functioning engine conked out.
As to the rights and duties of the parties strictly arising out of such delay,
the Civil Code is silent. However, as correctly pointed out by the petitioner,
Article 698 of the Code of Commerce specifically provides for such a situation.
It reads:
In case a voyage already begun should be interrupted, the passengers shall
be obliged to pay the fare in proportion to the distance covered, without right
to recover for losses and damages if the interruption is due to fortuitous event
or force majeure, but with a right to indemnity if the interruption should have
been caused by the captain exclusively. If the interruption should be caused
by the disability of the vessel and a passenger should agree to await the
repairs, he may not be required to pay any increased price of passage, but
his living expenses during the stay shall be for his own account.
This article applies suppletorily pursuant to Article 1766 of the Civil Code.
Of course, this does not suffice for a resolution of the case at bench for,
as earlier stated, the cause of the delay or interruption was the petitioners
failure to observe extraordinary diligence. Article 698 must then be read
together with Articles 2199, 2200, 2201, and 2208 in relation to Article 21 of the
44
Civil Code. So read, it means that the petitioner is liable for any pecuniary loss
or loss of profits which the private respondent may have suffered by reason
thereof. For the private respondent, such would be the loss of income if
unable to report to his office on the day he was supposed to arrive were it not
for the delay. This, however, assumes that he stayed on the vessel and was
with it when it thereafter resumed its voyage; but he did not. As he and some
passengers resolved not to complete the voyage, the vessel had to return to
its port of origin and allow them to disembark. The private respondent then
took the petitioners other vessel the following day, using the ticket he had
purchased for the previous days voyage.
Any further delay then in the private respondents arrival at the port of
destination was caused by his decision to disembark. Had he remained on the
first vessel, he would have reached his destination at noon of 13 November
1991, thus been able to report to his office in the afternoon. He, therefore,
would have lost only the salary for half of a day. But actual or compensatory
damages must be proved,[30] which the private respondent failed to do. There
is no convincing evidence that he did not receive his salary for 13 November
1991 nor that his absence was not excused.
We likewise fully agree with the Court of Appeals that the petitioner is
liable for moral and exemplary damages. In allowing its unseaworthy M/V Asia
Thailand to leave the port of origin and undertake the contracted voyage,
with full awareness that it was exposed to perils of the sea, it deliberately
disregarded its solemn duty to exercise extraordinary diligence and obviously
acted with bad faith and in a wanton and reckless manner. On this score,
however, the petitioner asserts that the safety of the vessel and passengers
was never at stake because the sea was calm in the vicinity where it stopped
as faithfully recorded in the vessels log book (Exhibit 4). Hence, the petitioner
concludes, the private respondent was merely over-reacting to the situation
obtaining then.[31]
We hold that the petitioners defense cannot exculpate it nor mitigate its
liability. On the contrary, such a claim demonstrates beyond cavil the
petitioners lack of genuine concern for the safety of its passengers. It was,
perhaps, only providential that the sea happened to be calm. Even so, the
petitioner should not expect its passengers to act in the manner it desired. The
passengers were not stoics; becoming alarmed, anxious, or frightened at the
stoppage of a vessel at sea in an unfamiliar zone at nighttime is not the sole
prerogative of the faint-hearted. More so in the light of the many tragedies at
sea resulting in the loss of lives of hopeless passengers and damage to
property simply because common carriers failed in their duty to exercise
extraordinary diligence in the performance of their obligations.
We cannot, however, give our affirmance to the award of attorneys fees.
Under Article 2208 of the Civil Code, these are recoverable only in the
concept of actual damages,[32] not as moral damages[33] nor judicial
costs.[34] Hence, to merit such an award, it is settled that the amount thereof
must be proven.[35] Moreover, such must be specifically prayed for - as was
not done in this case - and may not be deemed incorporated within a
general prayer for such other relief and remedy as this court may deem just
and equitable.[36] Finally, it must be noted that aside from the following, the
body of the respondent Courts decision was devoid of any statement
regarding attorneys fees:
Plaintiff-appellant was forced to litigate in order that he can claim moral and
exemplary damages for the suffering he encurred [sic]. He is entitled to
attorneys fees pursuant to Article 2208 of the Civil Code. It states:
Article 2208. In the absence of stipulation, attorney s fees and expenses of
litigation, other than judicial costs cannot be recovered except:
1. When exemplary damages are awarded;
2. When the defendants act or omission has compelled the
plaintiff to litigate with third persons or to incur expenses to
protect his interest.
This Court holds that the above does not satisfy the benchmark of factual,
legal and equitable justification needed as basis for an award of attorneys
fees.[37] In sum, for lack of factual and legal basis, the award of attorneys fees
must be deleted.
WHEREFORE, the instant petition is DENIED and the challenged decision
of the Court of Appeals in CA-G.R. CV No. 39901 is AFFIRMED subject to the
modification as to the award for attorneys fees which is hereby SET ASIDE.
Costs against the petitioner.
SO ORDERED.
13. [G.R. No. 110398. November 7, 1997]
NEGROS NAVIGATION CO., INC., petitioner, vs. THE COURT OF APPEALS,
RAMON MIRANDA, SPS. RICARDO and VIRGINIA DE LA
VICTORIA, respondents.
DECISION
MENDOZA, J.:
This is a petition for review on certiorari of the decision of the Court of
Appeals affirming with modification the Regional Trial Courts award of
damages to private respondents for the death of relatives as a result of the
sinking of petitioners vessel.
In April of 1980, private respondent Ramon Miranda purchased from the
Negros Navigation Co., Inc. four special cabin tickets (#74411, 74412, 74413
and 74414) for his wife, daughter, son and niece who were going to Bacolod
City to attend a family reunion. The tickets were for Voyage No. 457-A of the
M/V Don Juan, leaving Manila at 1:00 p.m. on April 22, 1980.
The ship sailed from the port of Manila on schedule.
At about 10:30 in the evening of April 22, 1980, the Don Juan collided off
the Tablas Strait in Mindoro, with the M/T Tacloban City, an oil tanker owned
by the Philippine National Oil Company (PNOC) and the PNOC Shipping and
Transport Corporation (PNOC/STC). As a result, the M/V Don Juan sank.
Several of her passengers perished in the sea tragedy. The bodies of some of
the victims were found and brought to shore, but the four members of private
respondents families were never found.
45
 Private respondents filed a complaint on July 16, 1980 in the Regional Trial
Court of Manila, Branch 34, against the Negros Navigation, the Philippine
National Oil Company (PNOC), and the PNOC Shipping and Transport
Corporation (PNOC/STC), seeking damages for the death of Ardita de la
Victoria Miranda, 48, Rosario V. Miranda, 19, Ramon V. Miranda, Jr., 16, and
Elfreda de la Victoria, 26.
In its answer, petitioner admitted that private respondents purchased
ticket numbers 74411, 74412, 74413 and 74414; that the ticket numbers were
listed in the passenger manifest; and that the Don Juan left Pier 2, North
Harbor, Manila on April 22, 1980 and sank that night after being rammed by
the oil tanker M/T Tacloban City, and that, as a result of the collision, some of
the passengers of the M/V Don Juan died. Petitioner, however, denied that
the four relatives of private respondents actually boarded the vessel as shown
by the fact that their bodies were never recovered. Petitioner further averred
that the Don Juan was seaworthy and manned by a full and competent
crew, and that the collision was entirely due to the fault of the crew of the
M/T Tacloban City.
On January 20, 1986, the PNOC and petitioner Negros Navigation Co.,
Inc. entered into a compromise agreement whereby petitioner assumed full
responsibility for the payment and satisfaction of all claims arising out of or in
connection with the collision and releasing the PNOC and the PNOC/STC from
any liability to it. The agreement was subsequently held by the trial court to be
binding upon petitioner, PNOC and PNOC/STC. Private respondents did not
join in the agreement.
After trial, the court rendered judgment on February 21, 1991, the
dispositive portion of which reads as follows:
WHEREFORE, in view of the foregoing, judgment is hereby rendered in favor of
the plaintiffs, ordering all the defendants to pay jointly and severally to the
plaintiffs damages as follows:
To Ramon Miranda:
P42,025.00 for actual damages;
P152,654.55 as compensatory damages for loss of earning capacity of his
wife;
P90,000.00 as compensatory damages for wrongful death of three (3)
victims;
P300,000.00 as moral damages;
P50,000.00 as exemplary damages, all in the total amount of P634,679.55;
and
P40,000.00 as attorneys fees.
To Spouses Ricardo and Virginia de la Victoria:
P12,000.00 for actual damages;
P158,899.00 as compensatory damages for loss of earning capacity;
P30,000.00 as compensatory damages for wrongful death;
P100,000.00 as moral damages;
P20,000.00 as exemplary damages, all in the total amount of P320,899.00;
and
P15,000.00 as attorneys fees.
On appeal, the Court of Appeals[1] affirmed the decision of the Regional
Trial Court with modification
1. Ordering and sentencing defendants-appellants, jointly and
severally, to pay plaintiff-appellee Ramon Miranda the amount
of P23,075.00 as actual damages instead of P42,025.00;
2. Ordering and sentencing defendants-appellants, jointly and
severally, to pay plaintiff-appellee Ramon Miranda the amount
of P150,000.00, instead of P90,000.00, as compensatory damages
for the death of his wife and two children;
3. Ordering and sentencing defendants-appellants, jointly and
severally, to pay plaintiffs-appellees Dela Victoria spouses the
amount of P50,000.00, instead of P30,000.00, as compensatory
damages for the death of their daughter Elfreda Dela Victoria;
Hence this petition, raising the following issues:
(1) whether the members of private respondents families were
actually passengers of the Don Juan;
(2) whether the ruling in Mecenas v. Court of Appeals,[2] finding the
crew members of petitioner to be grossly negligent in the
performance of their duties, is binding in this case;
(3) whether the total loss of the M/V Don Juan extinguished
petitioners liability; and
(4) whether the damages awarded by the appellate court are
excessive, unreasonable and unwarranted.
First. The trial court held that the fact that the victims were passengers of
the M/V Don Juan was sufficiently proven by private respondent Ramon
Miranda, who testified that he purchased tickets numbered 74411, 74412,
74413, and 74414 at P131.30 each from the Makati office of petitioner for
Voyage No. 47-A of the M/V Don Juan, which was leaving Manila on April 22,
1980. This was corroborated by the passenger manifest (Exh. E) on which the
numbers of the tickets and the names of Ardita Miranda and her children and
Elfreda de la Victoria appear.
Petitioner contends that the purchase of the tickets does not necessarily
mean that the alleged victims actually took the trip. Petitioner asserts that it is
common knowledge that passengers purchase tickets in advance but do not
actually use them. Hence, private respondent should also prove the presence
of the victims on the ship. The witnesses who affirmed that the victims were on
the ship were biased and unreliable.
This contention is without merit. Private respondent Ramon Miranda
testified that he personally took his family and his niece to the vessel on the
day of the voyage and stayed with them on the ship until it was time for it to
leave. There is no reason he should claim members of his family to have
perished in the accident just to maintain an action. People do not normally lie
about so grave a matter as the loss of dear ones. It would be more difficult for
private respondents to keep the existence of their relatives if indeed they are
alive than it is for petitioner to show the contrary. Petitioners only proof is that
46
the bodies of the supposed victims were not among those recovered from the
site of the mishap. But so were the bodies of the other passengers reported
missing not recovered, as this Court noted in the Mecenas[3] case.
Private respondent Mirandas testimony was corroborated by Edgardo
Ramirez. Ramirez was a seminarian and one of the survivors of the collision. He
testified that he saw Mrs. Miranda and Elfreda de la Victoria on the ship and
that he talked with them. He knew Mrs. Miranda who was his teacher in the
grade school. He also knew Elfreda who was his childhood friend and
townmate. Ramirez said he was with Mrs. Miranda and her children and niece
from 7:00 p.m. until 10:00 p.m. when the collision happened and that he in
fact had dinner with them. Ramirez said he and Elfreda stayed on the deck
after dinner and it was there where they were jolted by the collision of the two
vessels. Recounting the moments after the collision, Ramirez testified that
Elfreda ran to fetch Mrs. Miranda. He escorted her to the room and then tried
to go back to the deck when the lights went out. He tried to return to the
cabin but was not able to do so because it was dark and there was a
stampede of passengers from the deck.
Petitioner casts doubt on Ramirez testimony, claiming that Ramirez could
not have talked with the victims for about three hours and not run out of
stories to tell, unless Ramirez had a storehouse of stories. But what is incredible
about acquaintances thrown together on a long journey staying together for
hours on end, in idle conversation precisely to while the hours away?
Petitioner also points out that it took Ramirez three (3) days before he
finally contacted private respondent Ramon Miranda to tell him about the
fate of his family. But it is not improbable that it took Ramirez three days before
calling on private respondent Miranda to tell him about the last hours of Mrs.
Miranda and her children and niece, in view of the confusion in the days
following the collision as rescue teams and relatives searched for survivors.
Indeed, given the facts of this case, it is improper for petitioner to even
suggest that private respondents relatives did not board the ill-fated vessel
and perish in the accident simply because their bodies were not recovered.
Second. In finding petitioner guilty of negligence and in failing to exercise
the extraordinary diligence required of it in the carriage of passengers, both
the trial court and the appellate court relied on the findings of this Court
in Mecenas v. Intermediate Appellate Court,[4] which case was brought for
the death of other passengers. In that case it was found that although the
proximate cause of the mishap was the negligence of the crew of the
M/T Tacloban City, the crew of the Don Juan was equally negligent as it found
that the latters master, Capt. Rogelio Santisteban, was playing mahjong at the
time of collision, and the officer on watch, Senior Third Mate Rogelio De Vera,
admitted that he failed to call the attention of Santisteban to the imminent
danger facing them. This Court found that Capt. Santisteban and the crew of
the M/V Don Juan failed to take steps to prevent the collision or at least delay
the sinking of the ship and supervise the abandoning of the ship.
Petitioner Negros Navigation was found equally negligent in tolerating
the playing of mahjong by the ship captain and other crew members while on
board the ship and failing to keep the M/V Don Juan seaworthy so much so
that the ship sank within 10 to 15 minutes of its impact with the M/T Tacloban
City.
In addition, the Court found that the Don Juan was overloaded. The
Certificate of Inspection, dated August 27, 1979, issued by the Philippine Coast
Guard Commander at Iloilo City stated that the total number of persons
allowed on the ship was 864, of whom 810 are passengers, but there were
actually 1,004 on board the vessel when it sank, 140 persons more than the
maximum number that could be safely carried by it.
Taking these circumstances together, and the fact that the M/V Don
Juan, as the faster and better-equipped vessel, could have avoided a
collision with the PNOC tanker, this Court held that even if the Tacloban
City had been at fault for failing to observe an internationally-recognized rule
of navigation, the Don Juan was guilty of contributory negligence. Through
Justice Feliciano, this Court held:
The grossness of the negligence of the Don Juan is underscored when one
considers the foregoing circumstances in the context of the following
facts: Firstly, the Don Juan was more than twice as fast as the Tacloban City.
The Don Juans top speed was 17 knots; while that of the Tacloban City was
6.3. knots. Secondly, the Don Juan carried the full complement of officers and
crew members specified for a passenger vessel of her class. Thirdly, the Don
Juan was equipped with radar which was functioning that night. Fourthly, the
Don Juans officer on-watch had sighted the Tacloban City on his radar screen
while the latter was still four (4) nautical miles away. Visual confirmation of
radar contact was established by the Don Juan while the Tacloban City was
still 2.7 miles away. In the total set of circumstances which existed in the instant
case, the Don Juan, had it taken seriously its duty of extraordinary diligence,
could have easily avoided the collision with the Tacloban City. Indeed, the
Don Juan might well have avoided the collision even if it had
exercised ordinary diligence merely.
It is true that the Tacloban City failed to follow Rule 18 of the International
Rules of the Road which requires two (2) power-driven vessels meeting end on
or nearly end on each to alter her course to starboard (right) so that each
vessel may pass on the port side (left) of the other. The Tacloban City, when
the two (2) vessels were only three-tenths (0.3) of a mile apart, turned (for the
second time) 15o to port side while the Don Juan veered hard to starboard. . .
. [But] route observance of the International Rules of the Road will not relieve a
vessel from responsibility if the collision could have been avoided by proper
care and skill on her part or even by a departure from the rules.
In the petition at bar, the Don Juan having sighted the Tacloban City when it
was still a long way off was negligent in failing to take early preventive action
and in allowing the two (2) vessels to come to such close quarters as to render
the collision inevitable when there was no necessity for passing so near to the
Tacloban City as to create that hazard or inevitability, for the Don Juan could
choose its own distance.It is noteworthy that the Tacloban City, upon turning
hard to port shortly before the moment of collision, signalled its intention to do
47
so by giving two (2) short blasts with its horn. The Don Juan gave no answering
horn blast to signal its own intention and proceeded to turn hard to starboard.
We conclude that Capt. Santisteban and Negros Navigation are properly
held liable for gross negligence in connection with the collision of the Don
Juan and Tacloban City and the sinking of the Don Juan leading to the death
of hundreds of passengers. . . .[5]
Petitioner criticizes the lower courts reliance on the Mecenas case,
arguing that, although this case arose out of the same incident as that
involved in Mecenas, the parties are different and trial was conducted
separately. Petitioner contends that the decision in this case should be based
on the allegations and defenses pleaded and evidence adduced in it or, in
short, on the record of this case.
The contention is without merit. What petitioner contends may be true
with respect to the merits of the individual claims against petitioner but not as
to the cause of the sinking of its ship on April 22, 1980 and its liability for such
accident, of which there can only be one truth. Otherwise, one would be
subscribing to the sophistry: truth on one side of the Pyrenees, falsehood on
the other!
Adherence to the Mecenas case is dictated by this Courts policy of
maintaining stability in jurisprudence in accordance with the legal
maxim stare decisis et non quieta movere (Follow past precedents and do not
disturb what has been settled.) Where, as in this case, the same questions
relating to the same event have been put forward by parties similarly situated
as in a previous case litigated and decided by a competent court, the rule of
stare decisis is a bar to any attempt to relitigate the same issue. [6] In Woulfe v.
Associated Realties Corporation,[7] the Supreme Court of New Jersey held that
where substantially similar cases to the pending case were presented and
applicable principles declared in prior decisions, the court was bound by the
principle of stare decisis. Similarly, in State ex rel. Tollinger v. Gill, [8] it was held
that under the doctrine of stare decisis a ruling is final even as to parties who
are strangers to the original proceeding and not bound by the judgment
under the res judicata doctrine. The Philadelphia court expressed itself in this
wise: Stare decisis simply declares that, for the sake of certainty, a conclusion
reached in one case should be applied to those which follow, if the facts are
substantially the same, even though the parties may be different.[9] Thus, in J.
M. Tuason v. Mariano, supra, this Court relied on its rulings in other cases
involving different parties in sustaining the validity of a land title on the
principle of stare decisis et non quieta movere.
Indeed, the evidence presented in this case was the same as those
presented in the Mecenas case, to wit:
Document Mecenas case This case
Decision of Commandant Exh. 10[10] Exh. 11-B-NN/X
Phil. Coast Guard in BMI Case
No. 415-80 dated 3/26/81
Decision of the Minister Exh. 11[11] Exh. ZZ
of National Defense dated 3/12/82
Resolution on the motion Exh. 13[12] Exh. AAA
for reconsideration of the (private respondents)
decision of the Minister of
National Defense dated 7/24/84
Certificate of inspection Exh. 1-A[13] Exh. 19-NN
dated 8/27/79
Certificate of Stability Exh. 6-A[14] Exh. 19-D-NN
dated 12/16/76
Nor is it true that the trial court merely based its decision on
the Mecenas case. The trial court made its own independent findings on the
basis of the testimonies of witnesses, such as Senior Third Mate Rogelio de
Vera, who incidentally gave substantially the same testimony on petitioners
behalf before the Board of Marine Inquiry. The trial court agreed with the
conclusions of the then Minister of National Defense finding both vessels to be
negligent.
Third. The next issue is whether petitioner is liable to pay damages
notwithstanding the total loss of its ship. The issue is not one of first
impression. The rule is well-entrenched in our jurisprudence that a shipowner
may be held liable for injuries to passengers notwithstanding the exclusively
real and hypothecary nature of maritime law if fault can be attributed to the
shipowner.[15]
In Mecenas, this Court found petitioner guilty of negligence in (1)
allowing or tolerating the ship captain and crew members in playing mahjong
during the voyage, (2) in failing to maintain the vessel seaworthy and (3) in
allowing the ship to carry more passengers than it was allowed to
carry. Petitioner is, therefore, clearly liable for damages to the full extent.
Fourth. Petitioner contends that, assuming that the Mecenas case
applies, private respondents should be allowed to claim only P43,857.14 each
as moral damages because in the Mecenas case, the amount of P307,500.00
was awarded to the seven children of the Mecenas couple. Under petitioners
formula, Ramon Miranda should receive P43,857.14, while the De la Victoria
spouses should receive P97,714.28.
Here is where the principle of stare decisis does not apply in view of
differences in the personal circumstances of the victims. For that matter,
differentiation would be justified even if private respondents had joined the
private respondents in the Mecenas case. The doctrine of stare decisis works
as a bar only against issues litigated in a previous case. Where the issue
involved was not raised nor presented to the court and not passed upon by
the court in the previous case, the decision in the previous case is not stare
decisis of the question presently presented.[16] The decision in
the Mecenas case relates to damages for which petitioner was liable to the
claimants in that case.
In the case at bar, the award of P300,000.00 for moral damages is
reasonable considering the grief petitioner Ramon Miranda suffered as a result
of the loss of his entire family. As a matter of fact, three months after the
collision, he developed a heart condition undoubtedly caused by the strain of
48
the loss of his family. The P100,000.00 given to Mr. and Mrs. de la Victoria is
likewise reasonable and should be affirmed.
As for the amount of civil indemnity awarded to private respondents, the
appellate courts award of P50,000.00 per victim should be sustained. The
amount of P30,000.00 formerly set in De Lima v. Laguna Tayabas Co., [17] Heirs
of Amparo delos Santos v. Court of Appeals,[18] and Philippine Rabbit Bus
Lines, Inc. v. Intermediate Appellate Court [19] as benchmark was subsequently
increased to P50,000.00 in the case of Sulpicio Lines, Inc. v. Court of
Appeals,[20] which involved the sinking of another interisland ship on October
24, 1988.
We now turn to the determination of the earning capacity of the
victims. With respect to Ardita Miranda, the trial court awarded damages
computed as follows:[21]
In the case of victim Ardita V. Miranda whose age at the time of the accident
was 48 years, her life expectancy was computed to be 21.33 years, and
therefore, she could have lived up to almost 70 years old.Her gross earnings for
21.33 years based on P10,224.00 per annum, would be P218,077.92. Deducting
therefrom 30% as her living expenses, her net earnings would be P152,654.55,
to which plaintiff Ramon Miranda is entitled to compensatory damages for the
loss of earning capacity of his wife. In considering 30% as the living expenses of
Ardita Miranda, the Court takes into account the fact that plaintiff and his
wife were supporting their daughter and son who were both college students
taking Medicine and Law respectively.
In accordance with the ruling in Villa-Rey Transit, Inc. v. Court of
Appeals,[22] we think the life expectancy of Ardita Miranda was correctly
determined to be 21.33 years, or up to age 69.Petitioner contends, however,
that Mrs. Miranda would have retired from her job as a public school teacher
at 65, hence her loss of earning capacity should be reckoned up to 17.33
years only.
The accepted formula for determining life expectancy is 2/3 multiplied by
(80 minus the age of the deceased). It may be that in the Philippines the age
of retirement generally is 65 but, in calculating the life expectancy of
individuals for the purpose of determining loss of earning capacity under Art.
2206(1) of the Civil Code, it is assumed that the deceased would have earned
income even after retirement from a particular job. In this case, the trial court
took into account the fact that Mrs. Miranda had a masters degree and a
good prospect of becoming principal of the school in which she was
teaching. There was reason to believe that her income would have increased
through the years and she could still earn more after her retirement, e.g., by
becoming a consultant, had she not died. The gross earnings which Mrs.
Miranda could reasonably be expected to earn were it not for her untimely
death was, therefore, correctly computed by the trial court to be P218,077.92
(given a gross annual income of P10,224.00 and life expectancy of 21.33
years).
Petitioner contends that from the amount of gross earnings, 60% should
be deducted as necessary living expenses, not merely 30% as the trial court
allowed. Petitioner contends that 30% is unrealistic, considering that Mrs.
Mirandas earnings would have been subject to taxes, social security
deductions and inflation.
We agree with this contention. In Villa-Rey Transit, Inc. v. Court of
Appeals,[23] the Court allowed a deduction of P1,184.00 for living expenses
from the P2,184.00 annual salary of the victim, which is roughly 54.2%
thereof. The deceased was 29 years old and a training assistant in the
Bacnotan Cement Industries. In People v. Quilaton,[24] the deceased was a 26-
year old laborer earning a daily wage. The court allowed a deduction
of P120,000.00 which was 51.3% of his annual gross earnings
of P234,000.00. In People v. Teehankee,[25] the court allowed a deduction
of P19,800.00, roughly 42.4% thereof from the deceaseds annual salary
of P46,659.21. The deceased, Maureen Hultman, was 17 years old and had just
received her first paycheck as a secretary. In the case at bar, we hold that a
deduction of 50% from Mrs. Mirandas gross earnings (P218,077.92) would be
reasonable, so that her net earning capacity should be P109,038.96. There is
no basis for supposing that her living expenses constituted a smaller
percentage of her gross income than the living expenses in the decided
cases. To hold that she would have used only a small part of her income for
herself, a larger part going to the support of her children would be conjectural
and unreasonable.
As for Elfreda de la Victoria, the trial court found that, at the time of her
death, she was 26 years old, a teacher in a private school in Malolos, Bulacan,
earning P6,192.00 per annum.Although a probationary employee, she had
already been working in the school for two years at the time of her death and
she had a general efficiency rating of 92.85% and it can be presumed that, if
not for her untimely death, she would have become a regular
teacher. Hence, her loss of earning capacity is P111,456.00, computed as
follows:
net earning capacity (x) = life expectancy x [ gross annual
income less reasonable & necessary living expenses (50%) ]
x = [ 2 (80-26) ] x [P6,192.00 - P3,096.00]
3
= 36 x 3,096.00
= P111,456.00
On the other hand, the award of actual damages in the amount
of P23,075.00 was determined by the Court of Appeals on the basis of receipts
submitted by private respondents. This amount is reasonable considering the
expenses incurred by private respondent Miranda in organizing three search
teams to look for his family, spending for transportation in going to places such
as Batangas City and Iloilo, where survivors and the bodies of other victims
were found, making long distance calls, erecting a monument in honor of the
four victims, spending for obituaries in the Bulletin Today and for food, masses
and novenas.
Petitioners contention that the expenses for the erection of a monument
and other expenses for memorial services for the victims should be considered
49
included in the indemnity for death awarded to private respondents is without
merit. Indemnity for death is given to compensate for violation of the rights of
the deceased, i.e., his right to life and physical integrity.[26] On the other hand,
damages incidental to or arising out of such death are for pecuniary losses of
the beneficiaries of the deceased.
As for the award of attorneys fees, we agree with the Court of Appeals
that the amount of P40,000.00 for private respondent Ramon Miranda
and P15,000.00 for the de la Victoria spouses is justified. The appellate court
correctly held:
The Mecenas case cannot be made the basis for determining the award for
attorneys fees. The award would naturally vary or differ in each case. While it is
admitted that plaintiff-appellee Ramon Miranda who is himself a lawyer,
represented also plaintiffs-appellees Dela Victoria spouses, we note that
separate testimonial evidence were adduced by plaintiff-appellee Ramon
Miranda (TSN, February 26, 1982, p. 6) and plaintiffs-appellees spouses Dela
Victoria (TSN, August 13, 1981, p. 43). Considering the amount of work and
effort put into the case as indicated by the voluminous transcripts of
stenographic notes, we find no reason to disturb the award of P40,000.00 for
plaintiff-appellee Ramon Miranda and P15,000.00 for plaintiffs-appellees Dela
Victoria spouses.[27]
The award of exemplary damages should be increased to P300,000.00 for
Ramon Miranda and P100,000.00 for the de la Victoria spouses in accordance
with our ruling in the Mecenascase:
Exemplary damages are designed by our civil law to permit the courts to
reshape behaviour that is socially deleterious in its consequence by creating
negative incentives or deterrents against such behaviour.In requiring
compliance with the standard of extraordinary diligence, a standard which is
in fact that of the highest possible degree of diligence, from common carriers
and in creating a presumption of negligence against them, the law seeks to
compel them to control their employees, to tame their reckless instincts and to
force them to take adequate care of human beings and their property. The
Court will take judicial notice of the dreadful regularity with which grievous
maritime disasters occur in our waters with massive loss of life. The bulk of our
population is too poor to afford domestic air transportation.So it is that
notwithstanding the frequent sinking of passenger vessels in our waters,
crowds of people continue to travel by sea. This Court is prepared to use the
instruments given to it by the law for securing the ends of law and public
policy. One of those instruments is the institution of exemplary damages; one
of those ends, of special importance in an archipelagic state like the
Philippines, is the safe and reliable carriage of people and goods by sea. [28]
WHEREFORE, the decision of the Court of Appeals is AFFIRMED with
modification and petitioner is ORDERED to pay private respondents damages
as follows:
To private respondent Ramon Miranda:
P23,075.00 for actual damages;
P109,038.96 as compensatory damages for loss of earning capacity
of his wife;
P150,000.00 as compensatory damages for wrongful death of three
(3) victims;
P300,000.00 as moral damages;
P300,000.00 as exemplary damages, all in the total amount
of P882,113.96; and
P40,000.00 as attorneys fees.
To private respondents Spouses Ricardo and Virginia de la Victoria:
P12,000.00 for actual damages;
P111,456.00 as compensatory damages for loss of earning capacity;
P50,000.00 as compensatory damages for wrongful death;
P100,000.00 as moral damages;
P100,000.00 as exemplary damages, all in the total amount
of P373,456.00; and
P15,000.00 as attorneys fees.
Petitioners are further ordered to pay costs of suit.
In the event the Philippine National Oil Company and/or the PNOC
Shipping and Transport Corporation pay or are required to pay all or a portion
of the amounts adjudged, petitioner Negros Navigation Co., Inc. shall
reimburse either of them such amount or amounts as either may have paid,
and in the event of failure of Negros Navigation Co., Inc., to make the
necessary reimbursement, PNOC and/or PNOC/STC shall be entitled to a writ
of execution without need of filing another action.
SO ORDERED.
14. G.R. No. 73835 January 17, 1989
CHINA AIRLINES, LTD., petitioner,
vs.
INTERMEDIATE APPELLATE COURT and CLAUDIA B. OSORIO, respondent
respondents.
This is a petition to review the decision 1 dated January 21, 1986 of the then
Intermediate Appellate Court in AC-G.R. No. 00915 entitled, "Claudia B. Osorio
v. China Airlines, Ltd.", as well as the resolution of February 28, 1986 denying
petitioner's motion for reconsideration of said decision.
It is worthwhile noting at the outset that there exists in this case a conflict in the
findings of facts of the trial and appellate courts which made a thorough
review of the records of the case imperative. Such exercise disclosed that:
On April 14, 1980, after a four-day delay caused by an engine malfunction,
private respondent Claudia B. Osorio boarded in Manila Flight No. CI-812 of
petitioner China Airlines, Ltd., for Taipei. Said flight, as originally scheduled, was
to bring private respondent and nine (9) other passengers to Taipei in time for
petitioner airline's Flight No. CI-002 for Los Angeles (LAX). As this schedule had
been rendered impossible by the delay, it was agreed, prior to their departure
from Manila that private respondent and the nine (9) other passengers
similarly situated would spend the night in Taipei at petitioner's expense and
50
would be brought the following day to San Francisco (SF), U.S.A., where they
would be furnished an immediate flight connection to LAX.
This arrangement went well until private respondent and her co-passengers
arrived in San Francisco, U.S.A. on April 15, 1980 at around 1:31 p.m., SF local
time. No instructions having been received regarding them by petitioner's SF
Office due to the delay in the transmission of the telex messages from Manila,
private respondent and her co-passengers were asked to deplane and wait
while contact with Manila was being made. This, however, could not be done
immediately because of the time difference between the two (2) places.
Later, when it appeared that private respondent and her co-passengers
might have to spend the night in San Francisco, they asked that they be
provided food and overnight accommodations as transit passengers, but
were refused by petitioner's passenger service agent, Dennis Cheng.
Apparently irked by this refusal, in addition to the information that their
luggage were not unloaded, private respondent and some of her fellow
passengers angrily left petitioner's SF Office without leaving a contact address.
Thus, when word from Manila came at 6:45 p.m. authorizing the issuance of
tickets for LAX to private respondent and her companions, the latter could not
be informed thereof.
It was only on the following day, April 16, 1980, after spending the night at the
YMCA, paying a fee of $5.00 therefor, that private respondent learned thru
her companions Atty. Laud and Mrs. Sim that her ticket for LAX and luggage
were ready for pick-up any time. Notwithstanding, private respondent
preferred to pick up her luggage on April 17, 1980 and fly to LAX on said date
with a Western Airlines ticket which she purchased for $56.00. Private
respondent spent the night of April 16, 1980 in the house of Mrs. Sims friend
who did not charge anything. Private respondent, however, bought some
groceries for her hostess.
On June 30, 1980, private respondent filed before the then Court of First
Instance of Manila a complaint for damages arising from breach of contract
against petitioner airline. After trial, the court a quo rendered judgment 2on
October 7, 1981, absolving petitioner airline from any liability for damages to
private respondent, except for the sum of Pl,248.00 representing
reimbursement of the $100.00 spent by private respondent as an involuntarily
rerouted passenger in San Francisco, California, U.S.A and the $56.00 paid by
her for her SFC-LAX Western Airlines ticket. 3
On appeal, respondent Intermediate Appellate Court reversed the lower
court's decision. Finding a palpable breach of contract of carriage to have
been committed by petitioner airlines, the respondent court ordered the latter
to pay to private respondent, in addition to the actual damages imposed by
the trial court, moral and exemplary damages in the amounts of P100,000 and
P20,000, respectively, with attorney's fees of P5,000. 4
Its motion for reconsideration having been denied, petitioner airline brought
the instant petition for review, alleging that:
THE RESPONDENT COURT WRONGLY INCLUDED FROM THE
PROVEN FACTS AND, INDEED WENT AGAINST THE EVIDENCE,
WHEN IT FOUND THE PETITIONER AS HAVING COMMITTED A
PALPABLE BREACH OF THE CONTRACT OF CARRIAGE.
'THE RESPONDENT COURT COMMITTED AN ERROR OR LAW
CORRECTIBLE BY REVIEW ON CERTIORARI WHEN IT AWARDED
MORAL AND EXEMPLARY DAMAGES IN FAVOR OF THE PRIVATE
RESPONDENT. 5
The issues posed for determination are; did the failur1e of petitioner airline to
arrange for private respondent's immediate flight to Los Angeles constitute a
palpable breach of contract of carriage? Was the treatment of private
respondent by petitioner's agent in San Francisco characterized by malice or
bad faith?
The records manifest that it was upon petitioner's traffic agent Mrs. Diana Lim's
assurance of an immediate flight connection from San Francisco that private
respondent agreed to be re-routed to San Francisco, thus:
Q. What was the condition before leaving Manila, how would
these passengers be flown to Taipei? Since their destination
petition is Los Angeles?
A. From Manila to Taipei, they would still take the China
Airlines, the night where they were really booked on. They still
stay overnight in Taipei. From Taipei they will connect the next
day to San Francisco. Then from San Francisco we promised
that we would give them tickets from San Francisco to Los
Angeles.
Q. That same day?
A. To San Francisco, that would be the next day.
Q. Then what happened next?
A. We told them that before they left.
Q. How about the flights for them from San Francisco to
Angeles?
A. It would be immediate connection. As soon as they arrive,
they would be given tickets so that they could catch up on
the next available flights. '
Q. What airlines?
A. These was no airlines because they will make the booking.
Q. Who would make the booking?
A. Our reservation sir.
Q. So do you wish to inform this Honorable Court that these
ten (10) passengers were informed that they would be flown
to Taipei and from Taipei they will be flown to San Francisco
and will be furnished transportation from San Francisco to Los
Angeles?
A. Yes, sir.
Q. All at the expense of China Airlines?
A. Yes, sir. .
xxx xxx xxx
51
 Q. Did they agree to this condition before departing for
Taipei?
A. For the Sims they had no objection at all. In fact, they
wanted to stay longer in San Francisco.
Q. How about the plaintiff?
A. For Osorio and Laud, at first they did not agree, until I told
them that San Francisco would issue them the new tickets
from San Francisco to Los Angeles.
Q. So that when Laud and Osorio were informed by you that
they would be furnished tickets from San Francisco to Los
Angeles, did they still continue to object?
A. No more sir.
Q. But were you sure that there would be booking for them
for immediate connection?
A. The reservation would do that because from San Francisco
to Los Angeles there would be flight every hour. As soon as
they arrive and they. . . if they would not catch up with the
very first flight, they would catch the next one.
Q. So, accommodation of flight from San Francisco to Los
Angeles is no problem?
A. No problem because there is flight every hour. 6
Due, however, to the delay in the receipt of the telex messages regarding
private respondent's status and the arrangements to be made for her, the
promised immediate flight connection was not reaped. The testimony of Mrs.
Lim on the circumstances surrounding the transmission of the telex messages in
question is as follows:
Q. Would you know Mrs. Lim whether the Manila office had
been sending Telexes on April 14, 1980 regarding these
passengers?
A. Yes, sir.
xxx xxx xxx
Q Now, are there any other Telexes sent by the Manila office
in connection with this case by you personally and by Mr.
Austria the Sales Director?
A Here sir, (Witness handing to Atty. de Santos two Telexes)
xxx xxx xxx
Q. These Telexes Mrs. Lim intended for San Francisco, they
were duly received?
Court:
A. In other words, they were sent out?
Q. Yes, sir but we have had a lot of experiences wherein the
messages would be received late. We sent out the messages
immediately but sometimes the Hongkong link will be down
so the messages would arrive late. It stuck there sir.
A. Did you have any understanding with these passengers
including the plaintiff on how they would subsist in San
Francisco should there be a delay in the transmission of
messages?
Q. No sir because I did not expect any delay. It was very
sudden. I did not expect any delay at all from San Francisco. I
knew all the time they would connect immediately.
A. What I mean is that should the communication sent out
from Manila be not received on time in San Francisco, did
you cover that . . . or did you take some steps to answer for
that contingency?
Q. No sir, we did not. We never thought of it that way. We
always took it for granted that everything would be alright. It
has never happened before. In other cases where we had
cases like this, they were always on time. We never had this
problem where the passengers would be stranded. This is the
first time.
A. There would be a time lag of around two days. Because
one night in Taipei. They left Manila April 14?
Q. They arrived Taipei April 14. They arrived San Francisco April
15.
A. So the 24-hour or more time gap would be normally
sufficient for all your messages to reach San Francisco?
Q. Yes, sir.
A. And never before did you experience such a delay?
Q. Yes, sir. 7
The respondent court considered petitioner airline as wanting in human care
and foresight in providing for the care and safety of its passengers in not
having taken other steps to ensure receipt by its San Francisco Office of the
instructions about the re-routed passengers, notwithstanding its previous
experience with delayed transmission of messages. For respondent court, this
omission on the part of petitioner, coupled with what respondent court
received as rude and arrogant behavior of petitioner's passenger service
agent Dennis Cheng, constituted a palpable breach of contract of carriage
entitling private respondent to an award of actual, moral and exemplary
damages as well as attorney's fees. We are not in complete agreement.
Verily, petitioner airlines committed a breach of contract in failing to secure
an immediate flight connection for private respondent. Under Article 1755 of
the Civil Code of the Philippines, petitioner, as a common carrier, is duty
bound to "carry 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." The reliance of petitioner on the subject telex
communications falls short of the utmost diligence of a very cautious person
expected of it, thereby rendering it liable for its failure to abide by the
promised immediate connection. 8
Be that as it may, we, however, find that the breach of contract committed
by petitioner was not attended by gross negligence, recklessness or wanton
disregard of the rights of private respondent as a passenger. Telex was the
52
established mode of communication between petitioner's Manila and San
Francisco offices. Contact by telephone was not a practice due to the time
difference between the two places. Thus, while petitioner's Manila office was
aware of the possibility of transmission delay, it bad to avail itself of this mode
of communication. For this course of action, we do not find petitioner to have
acted wantonly or recklessly. Considering the gap of more than 24 hours
between the time the telex messages were sent out and private respondent's
expected arrival at San Francisco, it was not unreasonable for petitioner to
expect that this time gap would cover whatever delay might be encountered
at the Hongkong Link. 9 Thus, while petitioner may have been remiss in its total
reliance upon the telex communications and therefore considered negligent
in view of the degree of diligence required of it as a common carrier, such
negligence cannot under the obtaining circumstances be said to be so gross
as to amount to bad faith.
As regards petitioners passenger service agent Dennis Cheng's treatment of
private respondent, we share the trial court's observation, thus:
Neither is the court impressed with plaintiffs (private
respondent) allegation that she was ill-treated by defendant's
(petitioner) personnel at the San Francisco airport area. Her
self-serving declaration on this score does not suffice to
contradict the straightforward and detailed deposition of
Dennis Cheng (see Exhs. 10 to 10-1), let along the well-known
custom and policy of Chinese businessmen and employees of
being courteous and attentive to customers... 10
The respondent appellate court chose to believe private respondent's
allegation of rudeness and arrogance over Dennis Cheng's categorical denial
contained in his deposition 11 on the ground that said deposition is hearsay.
This is an error on respondent court's part. The deposition was taken in
accordance with the Rules of Court and is admissible under the Rules of
Evidence. It is a material and vital evidence that the appellate court had
overlooked, nay, ignored; a factor which calls for the Court's review powers
and which excludes the case from the general rule that findings of facts of the
Court of Appeals are binding on this court.
We are convinced that petitioner's personnel were not motivated by ill will or
malice in their dealings with private respondent. Their refusal to accede to her
demands for a flight connection to Los Angeles and/or food and hotel
accommodations was due primarily to lack of information or knowledge upon
which to act upon and not from a deliberate intent to ignore or disregard
private respondent's rights as a passenger. They cannot be faulted for wanting
to verify with Manila private respondent's status before acting upon her
request as tickets for Los Angeles cannot be used in going to San Francisco,
and possession of a ticket with Los Angeles as destination was not an
indication that one was a transit or an involuntarily re-routed passenger.
Contact thru telephone with Manila could not immediately be made
because of the time difference and private respondent was accordingly
advised that information from Manila could be expected at around 6:30 p.m.,
the time that the Manila Office would have begun its office hours. 12 This
repeated advise, notwithstanding, private respondent left the airport without
leaving a contact address. In this sense, it was private respondent herself who
rendered it impossible for petitioner airlines to perform its obligation of bringing
her to Los Angeles as contracted for.
The breach of contract under consideration having been incurred in good
faith, petitioner airlines is liable for damages which are the natural and
probable consequences of said breach and which the parties have foreseen
at the time the obligation was constituted. 13 These damages consist of the
actual damages awarded by the trial court to private respondent.
With respect to moral damages, the rule is that the same are recoverable in a
damage suit predicated upon a breach of contract of carriage only where
[1] the mishap results in the death of a passenger 14 and [2] it is proved that
the carrier was guilty of fraud or bad faith, even if death does not result. 15 As
the present case does not fall under either of the cited instances, the award
of moral damages should be, as it is hereby disallowed.
The award of exemplary damages must likewise be deleted, as it has not
been shown that petitioner, in committing the breach of contract of carriage,
acted in a wanton, fraudulent, reckless, oppressive or malevolent manner. 16
The award of attorney's fees is justified under Article 2208(2) of the Civil Code
which states that the same may be recovered when the defendant's act or
omission has compelled the plaintiff to litigate with third persons or to incur
expenses to protect his interest. The amount of P6,000.00 awarded by
respondent court should be increased to P10,000.00 considering that the case
has reached this Tribunal.
WHEREFORE, the decision under review is hereby MODIFIED in that the award
of moral and exemplary damages to private respondent Claudia B. Osorio is
eliminated and the attorney's fees is increased to P10,000.00. No
pronouncement as to costs.
SO ORDERED.
15. G.R. No. 101089. April 7, 1993.
ESTRELLITA M. BASCOS, petitioners,
vs.
COURT OF APPEALS and RODOLFO A. CIPRIANO, respondents.
1. CIVIL LAW; COMMON CARRIERS; DEFINED; TEST TO DETERMINE COMMON
CARRIER. Article 1732 of the Civil Code defines a common carrier as "(a)
person, corporation or 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." The test to determine a
common carrier is "whether the given undertaking is a part of the business
engaged in by the carrier which he has held out to the general public as his
occupation rather than the quantity or extent of the business transacted." . . .
The holding of the Court in De Guzman vs. Court of Appeals is instructive. In
referring to Article 1732 of the Civil Code, it held thus: "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
53
an ancillary activity (in local idiom, as a "sideline"). Article 1732 also carefully
avoids making any distinction between a person or enterprise offering
transportation service on a regular or scheduled basis and one offering such
service on an occasional, episodic or unscheduled basis. Neither does Article
1732 distinguished between a carrier offering its services to the "general
public," i.e., the general community or population, and one who offers
services or solicits business only from a narrow segment of the general
population. We think that Article 1732 deliberately refrained from making such
distinctions."
2. ID.; ID.; DILIGENCE REQUIRED IN VIGILANCE OVER GOODS TRANSPORTED;
WHEN PRESUMPTION OF NEGLIGENCE ARISES; HOW PRESUMPTION OVERCAME;
WHEN PRESUMPTION MADE ABSOLUTE. Common carriers are obliged to
observe extraordinary diligence in the vigilance over the goods transported
by them. Accordingly, they are presumed to have been at fault or to have
acted negligently if the goods are lost, destroyed or deteriorated. There are
very few instances when the presumption of negligence does not attach and
these instances are enumerated in Article 1734. In those cases where the
presumption is applied, the common carrier must prove that it exercised
extraordinary diligence in order to overcome the presumption . . . The
presumption of negligence was raised against petitioner. It was petitioner's
burden to overcome it. Thus, contrary to her assertion, private respondent
need not introduce any evidence to prove her negligence. Her own failure to
adduce sufficient proof of extraordinary diligence made the presumption
conclusive against her.
3. ID.; ID.; HIJACKING OF GOODS; CARRIER PRESUMED NEGLIGENT; HOW
CARRIER ABSOLVED FROM LIABILITY. In De Guzman vs. Court of Appeals, the
Court held that hijacking, not being included in the provisions of Article 1734,
must be dealt with under the provisions of Article 1735 and thus, the common
carrier is presumed to have been at fault or negligent. To exculpate the carrier
from liability arising from hijacking, he must prove that the robbers or the
hijackers acted with grave or irresistible threat, violence, or force. This is in
accordance with Article 1745 of the Civil Code which provides: "Art. 1745. Any
of the following or similar stipulations shall be considered unreasonable, unjust
and contrary to public policy . . . (6) That the common carrier's liability for acts
committed by thieves, or of robbers who do not act with grave or irresistible
threat, violences or force, is dispensed with or diminished"; In the same case,
the Supreme Court also held that: "Under Article 1745 (6) above, a common
carrier is held responsible and will not be allowed to divest or to diminish
such responsibility even for acts of strangers like thieves or robbers, except
where such thieves or robbers in fact acted "with grave of irresistible threat,
violence of force," We believe and so hold that the limits of the duty of
extraordinary diligence in the vigilance over the goods carried are reached
where the goods are lost as a result of a robbery which is attended by "grave
or irresistible threat, violence or force."
4. REMEDIAL LAW; EVIDENCE; JUDICIAL ADMISSIONS CONCLUSIVE. In this
case, petitioner herself has made the admission that she was in the trucking
business, offering her trucks to those with cargo to move. Judicial admissions
are conclusive and no evidence is required to prove the same.
5. ID.; ID.; BURDEN OF PROOF RESTS WITH PARTY WHO ALLEGES A FACT.
Petitioner presented no other proof of the existence of the contract of lease.
He who alleges a fact has the burden of proving it.
6. ID.; ID.; AFFIDAVITS NOT CONSIDERED BEST EVIDENCE IF AFFIANTS AVAILABLE
AS WITNESSES. While the affidavit of Juanito Morden, the truck helper in the
hijacked truck, was presented as evidence in court, he himself was a witness
as could be gleaned from the contents of the petition. Affidavits are not
considered the best evidence if the affiants are available as witnesses.
7. CIVIL LAW; OBLIGATIONS AND CONTRACTS; CONTRACT IS WHAT LAW
DEFINES IT TO BE. Granting that the said evidence were not self-serving, the
same were not sufficient to prove that the contract was one of lease. It must
be understood that a contract is what the law defines it to be and not what it
is called by the contracting parties.
DECISION
CAMPOS, JR., J p:
This is a petition for review on certiorari of the decision ** of the Court of
Appeals in "RODOLFO A. CIPRIANO, doing business under the name CIPRIANO
TRADING ENTERPRISES plaintiff-appellee, vs. ESTRELLITA M. BASCOS, doing
business under the name of BASCOS TRUCKING, defendant-appellant," C.A.-
G.R. CV No. 25216, the dispositive portion of which is quoted hereunder:
"PREMISES considered, We find no reversible error in the decision appealed
from, which is hereby affirmed in toto. Costs against appellant." 1
The facts, as gathered by this Court, are as follows:
Rodolfo A. Cipriano representing Cipriano Trading Enterprise (CIPTRADE for
short) entered into a hauling contract 2 with Jibfair Shipping Agency
Corporation whereby the former bound itself to haul the latter's 2,000 m/tons
of soya bean meal from Magallanes Drive, Del Pan, Manila to the warehouse
of Purefoods Corporation in Calamba, Laguna. To carry out its obligation,
CIPTRADE, through Rodolfo Cipriano, subcontracted with Estrellita Bascos
(petitioner) to transport and to deliver 400 sacks of soya bean meal worth
P156,404.00 from the Manila Port Area to Calamba, Laguna at the rate of
P50.00 per metric ton. Petitioner failed to deliver the said cargo. As a
consequence of that failure, Cipriano paid Jibfair Shipping Agency the
amount of the lost goods in accordance with the contract which stated that:
"1. CIPTRADE shall be held liable and answerable for any loss in bags due to
theft, hijacking and non-delivery or damages to the cargo during transport at
market value, . . ." 3
Cipriano demanded reimbursement from petitioner but the latter refused to
pay. Eventually, Cipriano filed a complaint for a sum of money and damages
with writ of preliminary attachment 4 for breach of a contract of carriage. The
prayer for a Writ of Preliminary Attachment was supported by an affidavit 5
which contained the following allegations:
54
"4. That this action is one of those specifically mentioned in Sec. 1, Rule 57 the
Rules of Court, whereby a writ of preliminary attachment may lawfully issue,
namely:
"(e) in an action against a party who has removed or disposed of his property,
or is about to do so, with intent to defraud his creditors;"
5. That there is no sufficient security for the claim sought to be enforced by the
present action;
6. That the amount due to the plaintiff in the above-entitled case is above all
legal counterclaims;"
The trial court granted the writ of preliminary attachment on February 17, 1987.
In her answer, petitioner interposed the following defenses: that there was no
contract of carriage since CIPTRADE leased her cargo truck to load the cargo
from Manila Port Area to Laguna; that CIPTRADE was liable to petitioner in the
amount of P11,000.00 for loading the cargo; that the truck carrying the cargo
was hijacked along Canonigo St., Paco, Manila on the night of October 21,
1988; that the hijacking was immediately reported to CIPTRADE and that
petitioner and the police exerted all efforts to locate the hijacked properties;
that after preliminary investigation, an information for robbery and
carnapping were filed against Jose Opriano, et al.; and that hijacking, being
a force majeure, exculpated petitioner from any liability to CIPTRADE.
After trial, the trial court rendered a decision *** the dispositive portion of
which reads as follows:
"WHEREFORE, judgment is hereby rendered in favor of plaintiff and against
defendant ordering the latter to pay the former:
1. The amount of ONE HUNDRED FIFTY-SIX THOUSAND FOUR HUNDRED FOUR
PESOS (P156,404.00) as an (sic) for actual damages with legal interest of 12%
per cent per annum to be counted from December 4, 1986 until fully paid;
2. The amount of FIVE THOUSAND PESOS (P5,000.00) as and for attorney's fees;
and
3. The costs of the suit.
The "Urgent Motion To Dissolve/Lift preliminary Attachment" dated March 10,
1987 filed by defendant is DENIED for being moot and academic.
SO ORDERED." 6
Petitioner appealed to the Court of Appeals but respondent Court affirmed
the trial court's judgment.
Consequently, petitioner filed this petition where she makes the following
assignment of errors; to wit:
"I. THE RESPONDENT COURT ERRED IN HOLDING THAT THE CONTRACTUAL
RELATIONSHIP BETWEEN PETITIONER AND PRIVATE RESPONDENT WAS CARRIAGE
OF GOODS AND NOT LEASE OF CARGO TRUCK.
II. GRANTING, EX GRATIA ARGUMENTI, THAT THE FINDING OF THE RESPONDENT
COURT THAT THE CONTRACTUAL RELATIONSHIP BETWEEN PETITIONER AND
PRIVATE RESPONDENT WAS CARRIAGE OF GOODS IS CORRECT, NEVERTHELESS,
IT ERRED IN FINDING PETITIONER LIABLE THEREUNDER BECAUSE THE LOSS OF THE
CARGO WAS DUE TO FORCE MAJEURE, NAMELY, HIJACKING.
III. THE RESPONDENT COURT ERRED IN AFFIRMING THE FINDING OF THE TRIAL
COURT THAT PETITIONER'S MOTION TO DISSOLVE/LIFT THE WRIT OF PRELIMINARY
ATTACHMENT HAS BEEN RENDERED MOOT AND ACADEMIC BY THE DECISION
OF THE MERITS OF THE CASE." 7
The petition presents the following issues for resolution: (1) was petitioner a
common carrier?; and (2) was the hijacking referred to a force majeure?
The Court of Appeals, in holding that petitioner was a common carrier, found
that she admitted in her answer that she did business under the name A.M.
Bascos Trucking and that said admission dispensed with the presentation by
private respondent, Rodolfo Cipriano, of proofs that petitioner was a common
carrier. The respondent Court also adopted in toto the trial court's decision
that petitioner was a common carrier, Moreover, both courts appreciated the
following pieces of evidence as indicators that petitioner was a common
carrier: the fact that the truck driver of petitioner, Maximo Sanglay, received
the cargo consisting of 400 bags of soya bean meal as evidenced by a cargo
receipt signed by Maximo Sanglay; the fact that the truck helper, Juanito
Morden, was also an employee of petitioner; and the fact that control of the
cargo was placed in petitioner's care.
In disputing the conclusion of the trial and appellate courts that petitioner was
a common carrier, she alleged in this petition that the contract between her
and Rodolfo A. Cipriano, representing CIPTRADE, was lease of the truck. She
cited as evidence certain affidavits which referred to the contract as "lease".
These affidavits were made by Jesus Bascos 8 and by petitioner herself. 9 She
further averred that Jesus Bascos confirmed in his testimony his statement that
the contract was a lease contract. 10 She also stated that: she was not
catering to the general public. Thus, in her answer to the amended complaint,
she said that she does business under the same style of A.M. Bascos Trucking,
offering her trucks for lease to those who have cargo to move, not to the
general public but to a few customers only in view of the fact that it is only a
small business. 11
We agree with the respondent Court in its finding that petitioner is a common
carrier.
Article 1732 of the Civil Code defines a common carrier as "(a) person,
corporation or 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." The test to determine a
common carrier is "whether the given undertaking is a part of the business
engaged in by the carrier which he has held out to the general public as his
occupation rather than the quantity or extent of the business transacted." 12
In this case, petitioner herself has made the admission that she was in the
trucking business, offering her trucks to those with cargo to move. Judicial
admissions are conclusive and no evidence is required to prove the same. 13
But petitioner argues that there was only a contract of lease because they
offer their services only to a select group of people and because the private
respondents, plaintiffs in the lower court, did not object to the presentation of
55
affidavits by petitioner where the transaction was referred to as a lease
contract.
Regarding the first contention, the holding of the Court in De Guzman vs.
Court of Appeals 14 is instructive. In referring to Article 1732 of the Civil Code, it
held thus:
"The above article makes no distinction between one whose principal business
activity is the carrying of persons or goods or both, and one who does such
carrying only as an ancillary activity (in local idiom, as a "sideline"). Article 1732
also carefully avoids making any distinction between a person or enterprise
offering transportation service on a regular or scheduled basis and one
offering such service on an occasional, episodic or unscheduled basis. Neither
does Article 1732 distinguish between a carrier offering its services to the
"general public," i.e., the general community or population, and one who
offers services or solicits business only from a narrow segment of the general
population. We think that Article 1732 deliberately refrained from making such
distinctions."
Regarding the affidavits presented by petitioner to the court, both the trial
and appellate courts have dismissed them as self-serving and petitioner
contests the conclusion. We are bound by the appellate court's factual
conclusions. Yet, granting that the said evidence were not self-serving, the
same were not sufficient to prove that the contract was one of lease. It must
be understood that a contract is what the law defines it to be and not what it
is called by the contracting parties. 15 Furthermore, petitioner presented no
other proof of the existence of the contract of lease. He who alleges a fact
has the burden of proving it. 16
Likewise, We affirm the holding of the respondent court that the loss of the
goods was not due to force majeure.
Common carriers are obliged to observe extraordinary diligence in the
vigilance over the goods transported by them. 17 Accordingly, they are
presumed to have been at fault or to have acted negligently if the goods are
lost, destroyed or deteriorated. 18 There are very few instances when the
presumption of negligence does not attach and these instances are
enumerated in Article 1734. 19 In those cases where the presumption is
applied, the common carrier must prove that it exercised extraordinary
diligence in order to overcome the presumption.
In this case, petitioner alleged that hijacking constituted force majeure which
exculpated her from liability for the loss of the cargo. In De Guzman vs. Court
of Appeals, 20 the Court held that hijacking, not being included in the
provisions of Article 1734, must be dealt with under the provisions of Article
1735 and thus, the common carrier is presumed to have been at fault or
negligent. To exculpate the carrier from liability arising from hijacking, he must
prove that the robbers or the hijackers acted with grave or irresistible threat,
violence, or force. This is in accordance with Article 1745 of the Civil Code
which provides:
"Art. 1745. Any of the following or similar stipulations shall be considered
unreasonable, unjust and contrary to public policy;
xxx xxx xxx
(6) That the common carrier's liability for acts committed by thieves, or of
robbers who do not act with grave or irresistible threat, violences or force, is
dispensed with or diminished;"
In the same case, 21 the Supreme Court also held that:
"Under Article 1745 (6) above, a common carrier is held responsible and will
not be allowed to divest or to diminish such responsibility even for acts of
strangers like thieves or robbers except where such thieves or robbers in fact
acted with grave or irresistible threat, violence or force. We believe and so
hold that the limits of the duty of extraordinary diligence in the vigilance over
the goods carried are reached where the goods are lost as a result of a
robbery which is attended by "grave or irresistible threat, violence or force."
To establish grave and irresistible force, petitioner presented her accusatory
affidavit, 22 Jesus Bascos' affidavit, 23 and Juanito Morden's 24 "Salaysay".
However, both the trial court and the Court of Appeals have concluded that
these affidavits were not enough to overcome the presumption. Petitioner's
affidavit about the hijacking was based on what had been told her by Juanito
Morden. It was not a first-hand account. While it had been admitted in court
for lack of objection on the part of private respondent, the respondent Court
had discretion in assigning weight to such evidence. We are bound by the
conclusion of the appellate court. In a petition for review on certiorari, We are
not to determine the probative value of evidence but to resolve questions of
law. Secondly, the affidavit of Jesus Bascos did not dwell on how the hijacking
took place. Thirdly, while the affidavit of Juanito Morden, the truck helper in
the hijacked truck, was presented as evidence in court, he himself was a
witness as could be gleaned from the contents of the petition. Affidavits are
not considered the best evidence if the affiants are available as witnesses. 25
The subsequent filing of the information for carnapping and robbery against
the accused named in said affidavits did not necessarily mean that the
contents of the affidavits were true because they were yet to be determined
in the trial of the criminal cases.
The presumption of negligence was raised against petitioner. It was
petitioner's burden to overcome it. Thus, contrary to her assertion, private
respondent need not introduce any evidence to prove her negligence. Her
own failure to adduce sufficient proof of extraordinary diligence made the
presumption conclusive against her.
Having affirmed the findings of the respondent Court on the substantial issues
involved, We find no reason to disturb the conclusion that the motion to
lift/dissolve the writ of preliminary attachment has been rendered moot and
academic by the decision on the merits.
In the light of the foregoing analysis, it is Our opinion that the petitioner's claim
cannot be sustained. The petition is DISMISSED and the decision of the Court
of Appeals is hereby AFFIRMED.
SO ORDERED.
16. G.R. No. 52159 December 22, 1989
56
JOSE PILAPIL, petitioner,
vs.
HON. COURT OF APPEALS and ALATCO TRANSPORTATION COMPANY,
INC., respondents.
This is a petition to review on certiorari the decision* rendered by the Court of
Appeals dated 19 October 1979 in CA-G.R. No. 57354-R entitled "Jose Pilapil,
plaintiff-appellee versus Alatco Transportation Co., Inc., defendant-appellant,"
which reversed and set aside the judgment of the Court of First Instance of
Camarines Sur in Civil Case No. 7230 ordering respondent transportation
company to pay to petitioner damages in the total sum of sixteen thousand
three hundred pesos (P 16,300.00).
The record discloses the following facts:
Petitioner-plaintiff Jose Pilapil, a paying passenger, boarded respondent-
defendant's bus bearing No. 409 at San Nicolas, Iriga City on 16 September
1971 at about 6:00 P.M. While said bus No. 409 was in due course negotiating
the distance between Iriga City and Naga City, upon reaching the vicinity of
the cemetery of the Municipality of Baao, Camarines Sur, on the way to Naga
City, an unidentified man, a bystander along said national highway, hurled a
stone at the left side of the bus, which hit petitioner above his left eye. Private
respondent's personnel lost no time in bringing the petitioner to the provincial
hospital in Naga City where he was confined and treated.
Considering that the sight of his left eye was impaired, petitioner was taken to
Dr. Malabanan of Iriga City where he was treated for another week. Since
there was no improvement in his left eye's vision, petitioner went to V. Luna
Hospital, Quezon City where he was treated by Dr. Capulong. Despite the
treatment accorded to him by Dr. Capulong, petitioner lost partially his left
eye's vision and sustained a permanent scar above the left eye.
Thereupon, petitioner instituted before the Court of First Instance of Camarines
Sur, Branch I an action for recovery of damages sustained as a result of the
stone-throwing incident. After trial, the court a quo rendered judgment with
the following dispositive part:
Wherefore, judgment is hereby entered:
1. Ordering defendant transportation
company to pay plaintiff Jose Pilapil the sum
of P 10,000.00, Philippine Currency,
representing actual and material damages
for causing a permanent scar on the face
and injuring the eye-sight of the plaintiff;
2. Ordering further defendant transportation
company to pay the sum of P 5,000.00,
Philippine Currency, to the plaintiff as moral
and exemplary damages;
3. Ordering furthermore, defendant
transportation company to reimburse plaintiff
the sum of P 300.00 for his medical expenses
and attorney's fees in the sum of P 1,000.00,
Philippine Currency; and
4. To pay the costs.
SO ORDERED 1
From the judgment, private respondent appealed to the Court of Appeals
where the appeal was docketed as CA-G.R. No. 57354R. On 19 October 1979,
the Court of Appeals, in a Special Division of Five, rendered judgment
reversing and setting aside the judgment of the court a quo.
Hence the present petition.
In seeking a reversal of the decision of the Court of Appeals, petitioner
contends that said court has decided the issue not in accord with law.
Specifically, petitioner argues that the nature of the business of a
transportation company requires the assumption of certain risks, and the
stoning of the bus by a stranger resulting in injury to petitioner-passenger is one
such risk from which the common carrier may not exempt itself from liability.
We do not agree.
In consideration of the right granted to it by the public to engage in the
business of transporting passengers and goods, a common carrier does not
give its consent to become an insurer of any and all risks to passengers and
goods. It merely undertakes to perform certain duties to the public as the law
imposes, and holds itself liable for any breach thereof.
Under Article 1733 of the Civil Code, common carriers are required to observe
extraordinary diligence for the safety of the passenger transported by them,
according to all the circumstances of each case. The requirement of
extraordinary diligence imposed upon common carriers is restated in 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 due regard for all the circumstances." Further, in case of
death of or injuries to passengers, the law presumes said common carriers to
be at fault or to have acted negligently. 2
While the law requires the highest degree of diligence from common carriers
in the safe transport of their passengers and creates a presumption of
negligence against them, it does not, however, make the carrier an insurer of
the absolute safety of its passengers. 3
Article 1755 of the Civil Code qualifies the duty of extraordinary care,
vigilance and precaution in the carriage of passengers by common carriers to
only such as human care and foresight can provide. what constitutes
compliance with said duty is adjudged with due regard to all the
circumstances.
Article 1756 of the Civil Code, in creating a presumption of fault or negligence
on the part of the common carrier when its passenger is injured, merely
relieves the latter, for the time being, from introducing evidence to fasten the
negligence on the former, because the presumption stands in the place of
evidence. Being a mere presumption, however, the same is rebuttable by
proof that the common carrier had exercised extraordinary diligence as
57
required by law in the performance of its contractual obligation, or that the
injury suffered by the passenger was solely due to a fortuitous event. 4
In fine, we can only infer from the law the intention of the Code Commission
and Congress to curb the recklessness of drivers and operators of common
carriers in the conduct of their business.
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. 5
Petitioner contends that respondent common carrier failed to rebut the
presumption of negligence against it by proof on its part that it exercised
extraordinary diligence for the safety of its passengers.
We do not agree.
First, as stated earlier, the presumption of fault or negligence against the
carrier is only a disputable presumption. It 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 willful acts of private
respondent's employees, and therefore involving no issue of negligence in its
duty to provide safe and suitable cars 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.
Second, while as a general rule, common carriers are bound to exercise
extraordinary diligence in the safe transport of their passengers, it would seem
that this is not the standard by which its liability is to be determined when
intervening acts of strangers is to be determined directly cause the injury,
while the contract of carriage Article 1763 governs:
Article 1763. A common carrier is responsible for injuries
suffered by a passenger on account of the wilful acts or
negligence of other passengers or of strangers, if the
common carrier's employees through the exercise of the
diligence of a good father of a family could have prevented
or stopped the act or omission.
Clearly under the above provision, a tort committed by a stranger which
causes injury to a passenger does not accord the latter a cause of action
against the carrier. The negligence for which a common carrier is held
responsible is the negligent omission by the carrier's employees to prevent the
tort from being committed when the same could have been foreseen and
prevented by them. Further, under the same provision, it is to be noted that
when the violation of the contract is due to the willful acts of strangers, as in
the instant case, the degree of care essential to be exercised by the common
carrier for the protection of its passenger is only that of a good father of a
family.
Petitioner has charged respondent carrier of negligence on the ground that
the injury complained of could have been prevented by the common carrier
if something like mesh-work grills had covered the windows of its bus.
We do not agree.
Although the suggested precaution could have prevented the injury
complained of, the rule of ordinary care and prudence is not so exacting as
to require one charged with its exercise to take doubtful or unreasonable
precautions to guard against unlawful acts of strangers. The carrier is not
charged with the duty of providing or maintaining vehicles as to absolutely
prevent any and all injuries to passengers. Where the carrier uses cars of the
most approved type, in general use by others engaged in the same
occupation, and exercises a high degree of care in maintaining them in
suitable condition, the carrier cannot be charged with negligence in this
respect. 6
Finally, petitioner contends that it is to the greater interest of the State if a
carrier were made liable for such stone-throwing incidents rather than have
the bus riding public lose confidence in the transportation system.
Sad to say, we are not in a position to so hold; such a policy would be better
left to the consideration of Congress which is empowered to enact laws to
protect the public from the increasing risks and dangers of lawlessness in
society.
WHEREFORE, the judgment appealed from is hereby AFFIRMED.
SO ORDERED.
17. THE PHILIPPINE AMERICAN GENERAL INSURANCE CO., INC., petitioner, vs.
MGG MARINE SERVICES, INC. and DOROTEO GAERLAN, respondents.
This petition for review seeks the reversal of the Decision, dated
September 23, 1998, of the Court of Appeals in CA-G.R. CV No. 43915,[1] which
absolved private respondents MCG Marine Services, Inc. and Doroteo
Gaerlan of any liability regarding the loss of the cargo belonging to San
Miguel Corporation due to the sinking of the M/V Peatheray Patrick-G owned
by Gaerlan with MCG Marine Services, Inc. as agent.
On March 1, 1987, San Miguel Corporation insured several beer bottle
cases with an aggregate value of P5,836,222.80 with petitioner Philippine
American General Insurance Company.[2] The cargo were loaded on board
the M/V Peatheray Patrick-G to be transported from Mandaue City to Bislig,
Surigao del Sur.
After having been cleared by the Coast Guard Station in Cebu the
previous day, the vessel left the port of Mandaue City for Bislig, Surigao del Sur
on March 2, 1987. The weather was calm when the vessel started its voyage.
The following day, March 3, 1987, M/V Peatheray Patrick-G listed and
subsequently sunk off Cawit Point, Cortes, Surigao del Sur. As a consequence
thereof, the cargo belonging to San Miguel Corporation was lost.
58
 Subsequently, San Miguel Corporation claimed the amount of its loss
from petitioner.
Upon petitioners request, on March 18, 1987, Mr. Eduardo Sayo, a
surveyor from the Manila Adjusters and Surveyors Co., went to Taganauan
Island, Cortes, Surigao del Sur where the vessel was cast ashore, to investigate
the circumstances surrounding the loss of the cargo. In his report, Mr. Sayo
stated that the vessel was structurally sound and that he did not see any
damage or crack thereon. He concluded that the proximate cause of the
listing and subsequent sinking of the vessel was the shifting of ballast water
from starboard to portside. The said shifting of ballast water allegedly affected
the stability of the M/V Peatheray Patrick-G.
Thereafter, petitioner paid San Miguel Corporation the full amount of
P5,836,222.80 pursuant to the terms of their insurance contract.
On November 3, 1987, petitioner as subrogee of San Miguel Corporation
filed with the Regional Trial Court (RTC) of Makati City a case for collection
against private respondents to recover the amount it paid to San Miguel
Corporation for the loss of the latters cargo.
Meanwhile, the Board of Marine Inquiry conducted its own investigation
of the sinking of the M/V Peatheray Patrick-G to determine whether or not the
captain and crew of the vessel should be held responsible for the
incident.[3] On May 11, 1989, the Board rendered its decision exonerating the
captain and crew of the ill-fated vessel for any administrative liability. It found
that the cause of the sinking of the vessel was the existence of strong winds
and enormous waves in Surigao del Sur, a fortuitous event that could not have
been forseen at the time the M/V Peatheray Patrick-G left the port of
Mandaue City.It was further held by the Board that said fortuitous event was
the proximate and only cause of the vessels sinking.
On April 15, 1993, the RTC of Makati City, Branch 134, promulgated its
Decision finding private respondents solidarily liable for the loss of San Miguel
Corporations cargo and ordering them to pay petitioner the full amount of the
lost cargo plus legal interest, attorneys fees and costs of suit.[4]
Private respondents appealed the trial courts decision to the Court of
Appeals. On September 23, 1998, the appellate court issued the assailed
Decision, which reversed the ruling of the RTC. It held that private respondents
could not be held liable for the loss of San Miguel Corporations cargo
because said loss occurred as a consequence of a fortuitous event, and that
such fortuitous event was the proximate and only cause of the loss.[5]
Petitioner thus filed the present petition, contending that:
(A)
IN REVERSING AND SETTING ASIDE THE DECISION OF RTC BR. 134 OF
MAKATI CITY ON THE BASIS OF THE FINDINGS OF THE BOARD OF
MARINE INQUIRY, APPELLATE COURT DECIDED THE CASE AT BAR NOT
IN ACCORD WITH LAW OR WITH THE APPLICABLE DECISIONS OF THE
HONORABLE COURT;
(B)
IN REVERSING THE TRIAL COURTS DECISION, THE APPELLATE COURT
GRAVELY ERRED IN CONTRADICTING AND IN DISTURBING THE
FINDINGS OF THE FORMER;
(C)
THE APPELLATE COURT GRAVELY ERRED IN REVERSING THE DECISION
OF THE TRIAL COURT AND IN DISMISSING THE COMPLAINT.[6]
Common carriers, from the nature of their business and for reasons of
public policy, are mandated to observe extraordinary diligence in the
vigilance over the goods and for the safety of the passengers transported by
them.[7] Owing to this high degree of diligence required of them, common
carriers, as a general rule, are presumed to have been at fault or negligent if
the goods transported by them are lost, destroyed or if the same
deteriorated.[8]
However, this presumption of fault or negligence does not arise in the
cases enumerated under Article 1734 of the Civil Code:
Common carriers are responsible for the loss, destruction, or deterioration of
the goods, unless the same is due to any of the following causes only:
(1) Flood, storm, earthquake, lightning or other natural disaster or calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the containers;
(5) Order or act of competent public authority.
In order that a common carrier may be absolved from liability where the
loss, destruction or deterioration of the goods is due to a natural disaster or
calamity, it must further be shown that the such natural disaster or calamity
was the proximate and only cause of the loss;[9] there must be an entire
exclusion of human agency from the cause of the injury of the loss.[10]
Moreover, even in cases where a natural disaster is the proximate and
only cause of the loss, a common carrier is still required to exercise due
diligence to prevent or minimize loss before, during and after the occurrence
of the natural disaster, for it to be exempt from liability under the law for the
loss of the goods.[11] If a common carrier fails to exercise due diligence--or that
ordinary care which the circumstances of the particular case demand [12] --to
preserve and protect the goods carried by it on the occasion of a natural
disaster, it will be deemed to have been negligent, and the loss will not be
considered as having been due to a natural disaster under Article 1734 (1).
In the case at bar, the issues may be narrowed down to whether the loss
of the cargo was due to the occurrence of a natural disaster, and if so,
whether such natural disaster was the sole and proximate cause of the loss or
whether private respondents were partly to blame for failing to exercise due
diligence to prevent the loss of the cargo.
The parties do not dispute that on the day the M/V Peatheray Patrick-G
sunk, said vessel encountered strong winds and huge waves ranging from six
to ten feet in height. The vessel listed at the port side and eventually sunk at
Cawit Point, Cortes, Surigao del Sur.
59
 The Court of Appeals, citing the decision of the Board of Marine Inquiry in
the administrative case against the vessels crew (BMI--646-87), found that the
loss of the cargo was due solely to the existence of a fortuitous event,
particularly the presence of strong winds and huge waves at Cortes, Surigao
del Sur on March 3, 1987:
xxx
III. WHAT WAS THE PROXIMATE CAUSE OF SINKING?
Evidence shows that when "LCT Peatheray Patrick-G" left the port of
Mandawe, Cebu for Bislig, Surigao del Sur on March 2, 1987 the Captain had
observed the fair atmospheric condition of the area of the pier and confirmed
this good weather condition with the Coast Guard Detachment of Mandawe
City. However, on March 3, 1987 at about 10:00 o'clock in the evening, when
the vessel had already passed Surigao Strait. the vessel started to experience
waves as high as 6 to 7 feet and that the Northeasterly wind was blowing at
about five (5) knot velocity. At about 11:00 o'clock P.M. when the vessel was
already about 4.5 miles off Cawit Point, Cortes, Surigao del Sur, the vessel was
discovered to be listing 15 degrees to port side and that the strength of the
wind had increased to 15 knots and the waves were about ten (10) feet high
[Ramilo TSN 10-27-87 p. 32). Immediately thereafter, emergency measures
were taken by the crew. The officers had suspected that a leak or crack might
had developed at the bottom hull particularly below one or two of the empty
wing tanks at port side serving as buoyancy tanks resulting in ingress of sea
water in the tanks was confirmed when the Captain ordered to use the cargo
pump. The suction valves to the said tanks of port side were opened in order
to suck or draw out any amount of water that entered into the tanks. The
suction pressure of the pump had drawn out sea water in large quantity
indicating therefore, that a leak or crack had developed in the hull as the
vessel was continuously batted and pounded by the huge waves. Bailing out
of the water through the pump was done continuously in an effort of the crew
to prevent the vessel from sinking. but then efforts were in vain. The vessel still
continued to list even more despite the continuous pumping and discharging
of sea water from the wing tanks indicating that the amount of the ingress of
sea water was greater in volume that that was being discharged by the
pump. Considering therefore, the location of the suspected source of the
ingress of sea water which was a crack or hole at the bottom hull below the
buoyancy tank's port side which was not acessible (sic) for the crew to check
or control the flow of sea water into the said tank. The accumulation of sea
water aggravated by the continuous pounding, rolling and pitching of the
vessel against huge waves and strong northeasterly wind, the Captain then
had no other recourse except to order abandonship to save their lives.[13]
The presence of a crack in the ill-fated vessel through which water
seeped in was confirmed by the Greutzman Divers who were commissioned
by the private respondents to conduct an underwater survey and inspection
of the vessel to determine the cause and circumstances of its sinking. In its
report, Greutzman Divers stated that along the port side platings, a small hole
and two separate cracks were found at about midship.[14]
The findings of the Board of Marine Inquiry indicate that the attendance
of strong winds and huge waves while the M/V Peatheray Patrick-G was
sailing through Cortes, Surigao del Norte on March 3, 1987 was indeed
fortuitous. A fortuitous event has been defined as one which could not be
foreseen, or which though foreseen, is inevitable.[15] An event is considered
fortuitous if the following elements concur:
xxx (a) the cause of the unforeseen and unexpected occurrence, or the
failure of the debtor to comply with his obligations, must be independent of
human will; (b) it must be impossible to foresee the event which constitutes
the caso fortuito, or if it can be foreseen, it must be impossible to avoid; (c)
the occurrence must be such as to render it impossible for the debtor to fulfill
his obligation in a normal manner; and (d) the obligor must be free from any
participation in the aggravation of the injury resulting to the creditor. xxx [16]
In the case at bar, it was adequately shown that before the M/V
Peatheray Patrick-G left the port of Mandaue City, the Captain confirmed
with the Coast Guard that the weather condition would permit the safe travel
of the vessel to Bislig, Surigao del Sur. Thus, he could not be expected to have
foreseen the unfavorable weather condition that awaited the vessel in Cortes,
Surigao del Sur. It was the presence of the strong winds and enormous waves
which caused the vessel to list, keel over, and consequently lose the cargo
contained therein. The appellate court likewise found that there was no
negligence on the part of the crew of the M/V Peatheray Patrick-G, citing the
following portion of the decision of the Board of Marine Inquiry:
I. WAS LCT PEATHERAY PATRICK-G SEAWORTHY WHEN SHE LEFT THE PORT OF
MANDAWE, CEBU AND AT THE TIME OF SINKING?
Evidence clearly shows that the vessel was propelled with three (3) diesel
engines of 250 BHP each or a total of 750 BHP. It had three (3) propellers which
were operating satisfactorily from the time the vessel left the port of Mandawe
up to the time when the hull on the double bottom tank was heavily floaded
(sic) by uncontrollable entry of sea water resulting in the stoppage of
engines. The vessel was also equipped with operating generator pumps for
emergency cases. This equipment was also operating satisfactorily up to the
time when the engine room was heavily floaded (sic) with sea water. Further,
the vessel had undergone emergency drydocking and repair before the
accident occurred (sic) on November 9, 1986 at Trigon Shipyard, San
Fernando, Cebu as shown by the billing for the Drydocking and Repair and
certificate of Inspection No. 2588-86 issued by the Philippine coast Guard on
December 5, 1986 which expired on November 8, 1987.
LCT Peatheray Patrick-G was skippered by Mr. Manuel P. Ramilo, competent
and experienced licensed Major Patron who had been in command of the
vessel for more than three (3) years from July 1984 up to the time of sinking
March 3, 1987. His Chief Mate Mr. Mariano Alalin also a licensed Major Patron
had been the Chief Mate of " LCT Peatheray Patrick-G" for one year and three
months at the time of the accident. Further Chief Mate Alalin had
commanded a tanker vessel named M/T Mercedes of MGM Corporation for
almost two (2) years from 1983-1985 (Alalin TSN-4-13-88 pp. 32-33).
60
That the vessel was granted SOLAS clearance by the Philippine Coast Guard
on March 1, 1987 to depart from Mandawe City for Bislig, Surigao del Sur as
evidenced by a certification issued to D.C. Gaerlan Oil Products by Coast
Guard Station Cebu dated December 23, 1987.
Based on the foregoing circumstances, "LCT Peatheray Patrick-G" should be
considered seaworthy vessel at the time she undertook that fateful voyage on
March 2, 1987.
To be seaworthy, a vessel must not only be staunch and fit in the hull for the
voyage to be undertaken but also must be properly equipped and for that
purpose there is a duty upon the owner to provide a competent master and a
crew adequate in number and competent for their duty and equals in
disposition and seamanship to the ordinary in that calling. (Ralph 299 F-52,
1924 AMC 942). American President 2td v. Ren Fen Fed 629. AMC 1723 LCA 9
CAL 1924).[17]
Overloading was also eliminated as a possible cause of the sinking of the
vessel, as the evidence showed that its freeboard clearance was substantially
greater than the authorized freeboard clearance.[18]
Although the Board of Marine Inquiry ruled only on the administrative
liability of the captain and crew of the M/V Peatheray Patrick-G, it had to
conduct a thorough investigation of the circumstances surrounding the sinking
of the vessel and the loss of its cargo in order to determine their responsibility, if
any. The results of its investigation as embodied in its decision on the
administrative case clearly indicate that the loss of the cargo was due solely
to the attendance of strong winds and huge waves which caused the vessel
accumulate water, tilt to the port side and to eventually keel over. There was
thus no error on the part of the Court of Appeals in relying on the factual
findings of the Board of Marine Inquiry, for such factual findings, being
supported by substantial evidence are persuasive, considering that said
administrative body is an expert in matters concerning marine casualties.[19]
Since the presence of strong winds and enormous waves at Cortes,
Surigao del Sur on March 3, 1987 was shown to be the proximate and only
cause of the sinking of the M/V Peatheray Patrick-G and the loss of the cargo
belonging to San Miguel Corporation, private respondents cannot be held
liable for the said loss.
WHEREFORE, the assailed Decision of the Court of Appeals is hereby
AFFIRMED and the petition is hereby DENIED.
SO ORDERED.
18. G.R. No. L-48757 May 30, 1988
MAURO GANZON, petitioner,
vs.
COURT OF APPEALS and GELACIO E. TUMAMBING, respondents.
The private respondent instituted in the Court of First Instance of Manila 1 an
action against the petitioner for damages based on culpa contractual. The
antecedent facts, as found by the respondent Court, 2 are undisputed:
On November 28, 1956, Gelacio Tumambing contracted the services of
Mauro B. Ganzon to haul 305 tons of scrap iron from Mariveles, Bataan, to the
port of Manila on board the lighter LCT "Batman" (Exhibit 1, Stipulation of Facts,
Amended Record on Appeal, p. 38). Pursuant to that agreement, Mauro B.
Ganzon sent his lighter "Batman" to Mariveles where it docked in three feet of
water (t.s.n., September 28, 1972, p. 31). On December 1, 1956, Gelacio
Tumambing delivered the scrap iron to defendant Filomeno Niza, captain of
the lighter, for loading which was actually begun on the same date by the
crew of the lighter under the captain's supervision. When about half of the
scrap iron was already loaded (t.s.n., December 14, 1972, p. 20), Mayor Jose
Advincula of Mariveles, Bataan, arrived and demanded P5,000.00 from
Gelacio Tumambing. The latter resisted the shakedown and after a heated
argument between them, Mayor Jose Advincula drew his gun and fired at
Gelacio Tumambing (t.s.n., March 19, 1971, p. 9; September 28, 1972, pp. 6-
7).<re||an1w> The gunshot was not fatal but Tumambing had to be
taken to a hospital in Balanga, Bataan, for treatment (t.s.n., March 19, 1971, p.
13; September 28, 1972, p. 15).
After sometime, the loading of the scrap iron was resumed. But on December
4, 1956, Acting Mayor Basilio Rub, accompanied by three policemen, ordered
captain Filomeno Niza and his crew to dump the scrap iron (t.s.n., June 16,
1972, pp. 8-9) where the lighter was docked (t.s.n., September 28, 1972, p. 31).
The rest was brought to the compound of NASSCO (Record on Appeal, pp.
20-22). Later on Acting Mayor Rub issued a receipt stating that the
Municipality of Mariveles had taken custody of the scrap iron (Stipulation of
Facts, Record on Appeal, p. 40; t.s.n., September 28, 1972, p. 10.)
On the basis of the above findings, the respondent Court rendered a decision,
the dispositive portion of which states:
WHEREFORE, the decision appealed from is hereby reversed
and set aside and a new one entered ordering defendant-
appellee Mauro Ganzon to pay plaintiff-appellant Gelacio E.
Tumambimg the sum of P5,895.00 as actual damages, the
sum of P5,000.00 as exemplary damages, and the amount of
P2,000.00 as attorney's fees. Costs against defendant-
appellee Ganzon. 3
In this petition for review on certiorari, the alleged errors in the decision of the
Court of Appeals are:
I
THE COURT OF APPEALS FINDING THE HEREIN PETITIONER GUILTY OF BREACH OF
THE CONTRACT OF TRANSPORTATION AND IN IMPOSING A LIABILITY AGAINST
HIM COMMENCING FROM THE TIME THE SCRAP WAS PLACED IN HIS CUSTODY
AND CONTROL HAVE NO BASIS IN FACT AND IN LAW.
II
THE APPELLATE COURT ERRED IN CONDEMNING THE PETITIONER FOR THE ACTS
OF HIS EMPLOYEES IN DUMPING THE SCRAP INTO THE SEA DESPITE THAT IT WAS
ORDERED BY THE LOCAL GOVERNMENT OFFICIAL WITHOUT HIS PARTICIPATION.
III
61
THE APPELLATE COURT FAILED TO CONSIDER THAT THE LOSS OF THE SCRAP WAS
DUE TO A FORTUITOUS EVENT AND THE PETITIONER IS THEREFORE NOT LIABLE
FOR LOSSES AS A CONSEQUENCE THEREOF. 4
The petitioner, in his first assignment of error, insists that the scrap iron had not
been unconditionally placed under his custody and control to make him
liable. However, he completely agrees with the respondent Court's finding
that on December 1, 1956, the private respondent delivered the scraps to
Captain Filomeno Niza for loading in the lighter "Batman," That the petitioner,
thru his employees, actually received the scraps is freely admitted.
Significantly, there is not the slightest allegation or showing of any condition,
qualification, or restriction accompanying the delivery by the private
respondent-shipper of the scraps, or the receipt of the same by the petitioner.
On the contrary, soon after the scraps were delivered to, and received by the
petitioner-common carrier, loading was commenced.
By the said act of delivery, the scraps were unconditionally placed in the
possession and control of the common carrier, and upon their receipt by the
carrier for transportation, the contract of carriage was deemed perfected.
Consequently, the petitioner-carrier's extraordinary responsibility for the loss,
destruction or deterioration of the goods commenced. Pursuant to Art. 1736,
such extraordinary responsibility would cease only upon the delivery, actual or
constructive, by the carrier to the consignee, or to the person who has a right
to receive them. 5 The fact that part of the shipment had not been loaded on
board the lighter did not impair the said contract of transportation as the
goods remained in the custody and control of the carrier, albeit still unloaded.
The petitioner has failed to show that the loss of the scraps was due to any of
the following causes enumerated in Article 1734 of the Civil Code, namely:
(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the containers;
(5) Order or act of competent public authority.
Hence, the petitioner is presumed to have been at fault or to have acted
negligently. 6 By reason of this presumption, the court is not even required to
make an express finding of fault or negligence before it could hold the
petitioner answerable for the breach of the contract of carriage. Still, the
petitioner could have been exempted from any liability had he been able to
prove that he observed extraordinary diligence in the vigilance over the
goods in his custody, according to all the circumstances of the case, or that
the loss was due to an unforeseen event or to force majeure. As it was, there
was hardly any attempt on the part of the petitioner to prove that he
exercised such extraordinary diligence.
It is in the second and third assignments of error where the petitioner maintains
that he is exempt from any liability because the loss of the scraps was due
mainly to the intervention of the municipal officials of Mariveles which
constitutes a caso fortuito as defined in Article 1174 of the Civil Code. 7
We cannot sustain the theory of caso fortuito. In the courts below, the
petitioner's defense was that the loss of the scraps was due to an "order or act
of competent public authority," and this contention was correctly passed
upon by the Court of Appeals which ruled that:
... In the second place, before the appellee Ganzon could
be absolved from responsibility on the ground that he was
ordered by competent public authority to unload the scrap
iron, it must be shown that Acting Mayor Basilio Rub had the
power to issue the disputed order, or that it was lawful, or that
it was issued under legal process of authority. The appellee
failed to establish this. Indeed, no authority or power of the
acting mayor to issue such an order was given in evidence.
Neither has it been shown that the cargo of scrap iron
belonged to the Municipality of Mariveles. What we have in
the record is the stipulation of the parties that the cargo of
scrap iron was accilmillated by the appellant through
separate purchases here and there from private individuals
(Record on Appeal, pp. 38-39). The fact remains that the
order given by the acting mayor to dump the scrap iron into
the sea was part of the pressure applied by Mayor Jose
Advincula to shakedown the appellant for P5,000.00. The
order of the acting mayor did not constitute valid authority
for appellee Mauro Ganzon and his representatives to carry
out.
Now the petitioner is changing his theory to caso fortuito. Such a change of
theory on appeal we cannot, however, allow. In any case, the intervention of
the municipal officials was not In any case, of a character that would render
impossible the fulfillment by the carrier of its obligation. The petitioner was not
duty bound to obey the illegal order to dump into the sea the scrap iron.
Moreover, there is absence of sufficient proof that the issuance of the same
order was attended with such force or intimidation as to completely
overpower the will of the petitioner's employees. The mere difficulty in the
fullfilment of the obligation is not considered force majeure. We agree with
the private respondent that the scraps could have been properly unloaded at
the shore or at the NASSCO compound, so that after the dispute with the local
officials concerned was settled, the scraps could then be delivered in
accordance with the contract of carriage.
There is no incompatibility between the Civil Code provisions on common
carriers and Articles 361 8 and 362 9 of the Code of Commerce which were the
basis for this Court's ruling in Government of the Philippine Islands vs. Ynchausti
& Co.10 and which the petitioner invokes in tills petition. For Art. 1735 of the
Civil Code, conversely stated, means that the shipper will suffer the losses and
deterioration arising from the causes enumerated in Art. 1734; and in these
instances, the burden of proving that damages were caused by the fault or
negligence of the carrier rests upon him. However, the carrier must first
establish that the loss or deterioration was occasioned by one of the
62
excepted causes or was due to an unforeseen event or to force majeure. Be
that as it may, insofar as Art. 362 appears to require of the carrier only ordinary
diligence, the same is .deemed to have been modified by Art. 1733 of the
Civil Code.
Finding the award of actual and exemplary damages to be proper, the same
will not be disturbed by us. Besides, these were not sufficiently controverted by
the petitioner.
WHEREFORE, the petition is DENIED; the assailed decision of the Court of
Appeals is hereby AFFIRMED. Costs against the petitioner.
This decision is IMMEDIATELY EXECUTORY.
19. [G.R. No. 119197. May 16, 1997]
TABACALERA INSURANCE CO., PRUDENTIAL GUARANTEE & ASSURANCE, INC.,
and NEW ZEALAND INSURANCE CO., LTD., petitioners, vs. NORTH FRONT
SHIPPING SERVICES, INC., and COURT OF APPEALS, respondents.
TABACALERA INSURANCE CO., Prudential Guarantee & Assurance, Inc.,
and New Zealand Insurance Co., Ltd., in this petition for review on certiorari,
assail the 22 December 1994 decision of the Court of Appeals and its
Resolution of 16 February 1995 which affirmed the 1 June 1993 decision of the
Regional Trial Court dismissing their complaint for damages against North Front
Shipping Services, Inc.
On 2 August 1990, 20,234 sacks of corn grains valued at P3,500,640.00
were shipped on board North Front 777, a vessel owned by North Front
Shipping Services, Inc. The cargo wasconsigned to Republic Flour Mills
Corporation in Manila under Bill of Lading No. 001[1] and insured with the
herein mentioned insurance companies. The vessel was inspected prior to
actual loading by representatives of the shipper and was found fit to carry the
merchandise. The cargo was covered with tarpaulins and wooden
boards. The hatches were sealed and could only be opened by
representatives of Republic Flour Mills Corporation.
The vessel left Cagayan de Oro City on 2 August 1990 and arrived Manila
on 16 August 1990. Republic Flour Mills Corporation was advised of its arrival
but it did not immediately commence the unloading operations. There were
days when unloading had to be stopped due to variable weather conditions
and sometimes for no apparent reason at all. When the cargo was eventually
unloaded there was a shortage of 26.333 metric tons. The remaining
merchandise was already moldy, rancid and deteriorating. The unloading
operations were completed on 5 September 1990 or twenty (20) days after
the arrival of the barge at the wharf of Republic Flour Mills Corporation in Pasig
City.
Precision Analytical Services, Inc., was hired to examine the corn grains
and determine the cause of deterioration. A Certificate of Analysis was issued
indicating that the corn grains had 18.56% moisture content and the wetting
was due to contact with salt water. The mold growth was only incipient and
not sufficient to make the corn grains toxic and unfit for consumption. In fact
the mold growth could still be arrested by drying.
Republic Flour Mills Corporation rejected the entire cargo and formally
demanded from North Front Shipping Services, Inc., payment for the damages
suffered by it. The demands however were unheeded. The insurance
companies were perforce obliged to pay Republic Flour Mills
Corporation P2,189,433.40.
By virtue of the payment made by the insurance companies they were
subrogated to the rights of Republic Flour Mills Corporation. Thusly, they
lodged a complaint for damages against North Front Shipping Services, Inc.,
claiming that the loss was exclusively attributable to the fault and negligence
of the carrier. The Marine Cargo Adjusters hired by the insurance companies
conducted a survey and found cracks in the bodega of the barge and heavy
concentration of molds on the tarpaulins and wooden boards. They did not
notice any seals in the hatches. The tarpaulins were not brand new as there
were patches on them, contrary to the claim of North Front Shipping Services,
Inc., thus making it possible for water to seep in. They also discovered that the
bulkhead of the barge was rusty.
North Front Shipping Services, Inc., averred in refutation that it could not
be made culpable for the loss and deterioration of the cargo as it was never
negligent. Captain Solomon Villanueva, master of the vessel, reiterated that
the barge was inspected prior to the actual loading and was found adequate
and seaworthy. In addition, they were issued a permit to sail by the Coast
Guard. The tarpaulins were doubled and brand new and the hatches were
properly sealed. They did not encounter big waves hence it was not possible
for water to seep in. He further averred that the corn grains were farm wet
and not properly dried when loaded.
The court below dismissed the complaint and ruled that the contract
entered into between North Front Shipping Services, Inc., and Republic Flour
Mills Corporation was a charter-party agreement. As such, only ordinary
diligence in the care of goods was required of North Front Shipping Services,
Inc. The inspection of the barge by the shipper and the representatives of the
shipping company before actual loading, coupled with the Permit to
Sail issued by the Coast Guard, sufficed to meet the degree of diligence
required of the carrier.
On the other hand, the Court of Appeals ruled that as a common carrier
required to observe a higher degree of diligence North Front 777 satisfactorily
complied with all the requirements hence was issued a Permit to Sail after
proper inspection. Consequently, the complaint was dismissed and the motion
for reconsideration rejected.
The charter-party agreement between North Front Shipping Services, Inc.,
and Republic Flour Mills Corporation did not in any way convert the common
carrier into a private carrier. We have already resolved this issue with finality
in Planters Products, Inc. v. Court of Appeals[2] thus -
A 'charter-party' is defined as a contract by which an entire ship, or some
principal part thereof, is let by the owner to another person for a specified
time or use; a contract of affreightment by which the owner of a ship or other
vessel lets the whole or a part of her to a merchant or other person for the
63
conveyance of goods, on a particular voyage, in consideration of the
payment of freight x x x x Contract of affreightment may either be time
charter, wherein the vessel is leased to the charterer for a fixed period of time,
or voyage charter, wherein the ship is leased for a single voyage. In both
cases, the charter-party provides for the hire of the vessel only, either for a
determinate period of time or for a single or consecutive voyage, the ship
owner to supply the ship's store, pay for the wages of the master of the crew,
and defray the expenses for the maintenance of the ship.
Upon the other hand, the term 'common or public carrier' is defined in Art.
1732 of the Civil Code. The definition extends to carriers either by land, air or
water which hold themselves out as ready to engage in carrying goods or
transporting passengers or both for compensation as a public employment
and not as a casual occupation x x x x
It is therefore imperative that a public carrier shall remain as such,
notwithstanding the charter of the whole or portion of a vessel by one or more
persons, provided the charter is limited to the ship only, as in the case of a
time-charter or voyage-charter (underscoring supplied).
North Front Shipping Services, Inc., is a corporation engaged in the
business of transporting cargo and offers its services indiscriminately to the
public. It is without doubt a common carrier. As such it is required to
observe extraordinary diligence in its vigilance over the goods it
transports.[3]. When goods placed in its care are lost or damaged, the carrier is
presumed to have been at fault or to have acted negligently.[4] North Front
Shipping Services, Inc., therefore has the burden of proving that it
observed extraordinary diligence in order to avoid responsibility for the lost
cargo.
North Front Shipping Services, Inc., proved that the vessel was inspected
prior to actual loading by representatives of the shipper and was found fit to
take a load of corn grains. They were also issued Permit to Sail by the Coast
Guard. The master of the vessel testified that the corn grains were farm wet
when loaded. However, this testimony was disproved by the clean bill of
lading issued by North Front Shipping Services, Inc., which did not contain a
notation that the corn grains were wet and improperly dried. Having been in
the service since 1968, the master of the vessel would have known at
the outset that corn grains that were farm wet and not properly dried would
eventually deteriorate when stored in sealed and hot compartments as in
hatches of a ship. Equipped with this knowledge, the master of the vessel and
his crew should have undertaken precautionary measures to avoid or lessen
the cargo's possible deterioration as they were presumed knowledgeable
about the nature of such cargo. But none of such measures was taken.
In Compania Maritima v. Court of Appeals[5] we ruled -
x x x x Mere proof of delivery of the goods in good order to a common carrier,
and of their arrival at the place of destination in bad order, makes out prima
facie case against the common carrier, so that if no explanation is given as to
how the loss, deterioration or destruction of the goods occurred, the common
carrier must be held responsible. Otherwise stated, it is incumbent upon the
common carrier to prove that the loss, deterioration or destruction was due to
accident or some other circumstances inconsistent with its liability x x x x
The extraordinary diligence in the vigilance over the goods tendered for
shipment requires the common carrier to know and to follow the required
precaution for avoiding damage to, or destruction of the goods entrusted to it
for safe carriage and delivery. It requires common carriers to render service
with the greatest skill and foresight and 'to use all reasonable means to
ascertain the nature and characteristics of goods tendered for shipment, and
to exercise due care in the handling and stowage, including such methods as
their nature requires' (underscoring supplied).
In fine, we find that the carrier failed to observe the
required extraordinary diligence in the vigilance over the goods placed in its
care. The proofs presented by North Front ShippingServices, Inc., were
insufficient to rebut the prima facie presumption of private respondent's
negligence, more so if we consider the evidence adduced by petitioners.
It is not denied by the insurance companies that the vessel was indeed
inspected before actual loading and that North Front 777 was issued a Permit
to Sail. They proved the fact of shipment and its consequent loss or damage
while in the actual possession of the carrier. Notably, the carrier failed to
volunteer any explanation why there was spoilage and how it occurred. On
the other hand, it was shown during the trial that the vessel had rusty
bulkheads and the wooden boards and tarpaulins bore heavy concentration
of molds. The tarpaulins used were not new, contrary to the claim of North
Front Shipping Services, Inc., as there were already several patches on them,
hence, making it highly probable for water to enter.
Laboratory analysis revealed that the corn grains were contaminated
with salt water. North Front Shipping Services, Inc., failed to rebut all these
arguments. It did not even endeavor to establish that the loss, destruction or
deterioration of the goods was due to the following: (a) flood, storm,
earthquake, lightning, or other natural disaster or calamity; (b) act of the
public enemy in war, whether international or civil; (c) act or omission of the
shipper or owner of the goods; (d) the character of the goods or defects in
the packing or in the containers; (e) order or act of competent public
authority.[6] This is a closed list. If the cause of destruction, loss or deterioration
is other than the enumerated circumstances, then the carrier is rightly liable
therefor.
However, we cannot attribute the destruction, loss or deterioration of the
cargo solely to the carrier. We find the consignee Republic Flour Mills
Corporation guilty of contributorynegligence. It was seasonably notified of the
arrival of the barge but did not immediately start the unloading
operations. No explanation was proffered by the consignee as to why there
was a delay of six (6) days. Had the unloading been commenced
immediately the loss could have been completely avoided or at least
minimized. As testified to by the chemist who analyzed the corn samples, the
mold growth was only at its incipient stage and could still be arrested by
drying. The corn grains were not yet toxic or unfit for consumption. For its
64
contributory negligence, Republic Flour Mills Corporation should share at least
40% of the loss.[7]
WHEREFORE, the Decision of the Court of Appeals of 22 December 1994
and its Resolution of 16 February 1995 are REVERSED and
SET ASIDE. Respondent North Front Shipping Services, Inc., is ordered to pay
petitioners Tabacalera Insurance Co., Prudential Guarantee & Assurance, Inc.,
and New Zealand Insurance Co. Ltd., P1,313,660.00 which is 60% of the
amount paid by the insurance companies to Republic Flour Mills Corporation,
plus interest at the rate of 12% per annum from the time this judgment
becomes final until full payment.
SO ORDERED.
22. G.R. No. 95536 March 23, 1992
ANICETO G. SALUDO, JR., MARIA SALVACION SALUDO, LEOPOLDO G. SALUDO
and SATURNINO G. SALUDO, petitioners,
vs.
HON. COURT OF APPEALS, TRANS WORLD AIRLINES, INC., and PHILIPPINE
AIRLINES, INC., respondents.
Assailed in this petition for review on certiorari is the decision in CA-G.R. CV
No. 20951 of respondent Court of Appeals 1 which affirmed the decision of the
trial court 2 dismissing for lack of evidence herein petitioners' complaint in Civil
Case No R-2101 of the then Court of First Instance of Southern Leyte, Branch I.
The facts, as recounted by the court a quo and adopted by respondent court
after "considering the evidence on record," are as follows:
After the death of plaintiffs' mother, Crispina Galdo Saludo, in
Chicago Illinois, (on) October 23, 1976 (Exh. A), Pomierski and
Son Funeral Home of Chicago, made the necessary
preparations and arrangements for the shipment, of the
remains from Chicago to the Philippines. The funeral home
had the remains embalmed (Exb. D) and secured a permit for
the disposition of dead human body on October 25, 1976
(Exh. C), Philippine Vice Consul in Chicago, Illinois, Bienvenido
M. Llaneta, at 3:00 p.m. on October 26, 1976 at the Pomierski
& Son Funeral Home, sealed the shipping case containing a
hermetically sealed casket that is airtight and waterproof
wherein was contained the remains of Crispina Saludo Galdo
(sic) (Exb. B). On the same date, October 26, 1976, Pomierski
brought the remains to C.M.A.S. (Continental Mortuary Air
Services) at the airport (Chicago) which made the necessary
arrangements such as flights, transfers, etc.; C.M.A.S. is a
national service used by undertakers to throughout the nation
(U.S.A.), they furnish the air pouch which the casket is
enclosed in, and they see that the remains are taken to the
proper air freight terminal (Exh. 6-TWA). C.M.A.S. booked the
shipment with PAL thru the carrier's agent Air Care
International, with Pomierski F.H. as the shipper and Mario
(Maria) Saludo as the consignee. PAL Airway Bill No. 079-
01180454 Ordinary was issued wherein the requested routing
was from Chicago to San Francisco on board TWA Flight 131
of October 27, 1976 and from San Francisco to Manila on
board PAL Flight No. 107 of the same date, and from Manila
to Cebu on board PAL Flight 149 of October 29, 1976 (See
Exh. E., Also Exh. 1-PAL).
In the meantime, plaintiffs Maria Salvacion Saludo and
Saturnino Saludo, thru a travel agent, were booked with
United Airlines from Chicago to California, and with PAL from
California to Manila. She then went to the funeral director of
Pomierski Funeral Home who had her mother's remains and
she told the director that they were booked with United
Airlines. But the director told her that the remains were
booked with TWA flight to California. This upset her, and she
and her brother had to change reservations from UA to the
TWA flight after she confirmed by phone that her mother's
remains should be on that TWA flight. They went to the airport
and watched from the look-out area. She saw no body being
brought. So, she went to the TWA counter again, and she was
told there was no body on that flight. Reluctantly, they took
the TWA flight upon assurance of her cousin, Ani Bantug, that
he would look into the matter and inform her about it on the
plane or have it radioed to her. But no confirmation from her
cousin reached her that her mother was on the West Coast.
Upon arrival at San Francisco at about 5:00 p.m., she went to
the TWA counter there to inquire about her mother's remains.
She was told they did not know anything about it.
She then called Pomierski that her mother's remains were not
at the West Coast terminal, and Pomierski immediately called
C.M.A.S., which in a matter of 10 minutes informed him that
the remains were on a plane to Mexico City, that there were
two bodies at the terminal, and somehow they were
switched; he relayed this information to Miss Saludo in
California; later C.M.A.S. called and told him they were
sending the remains back to California via Texas (see Exh. 6-
TWA).
It-turned out that TWA had carried a shipment under PAL
Airway Bill No. 079-ORD-01180454 on TWA Flight 603 of
October 27, 1976, a flight earlier than TWA Flight 131 of the
same date. TWA delivered or transferred the said shipment
said to contain human remains to PAL at 1400H or 2:00 p.m. of
the same date, October 27, 1976 (Bee Exh. 1- TWA). "Due to a
switch(ing) in Chicago", this shipment was withdrawn from
PAL by CMAS at 1805H (or 6:05 p.m.) of the same date,
October 27 (Exh. 3-PAL, see Exh. 3-a-PAL).
65
 What transpired at the Chicago (A)irport is explained in a
memo or incident report by Pomierski (Exh. 6-TWA) to
Pomierski's lawyers who in turn referred to said' memo and
enclosed it in their (Pomierski's lawyers) answer dated July 18,
1981 to herein plaintiff's counsel (See Exh. 5-TWA). In that
memo or incident report (Exh. 6-TWA), it is stated that the
remains (of Crispina Saludo) were taken to CMAS at the
airport; that there were two bodies at the (Chicago Airport)
terminal, and somehow they were switched, that the remains
(of Crispina Saludo) were on a plane to Mexico City; that
CMAS is a national service used by undertakers throughout
the nation (U.S.A.), makes all the necessary arrangements,
such as flights, transfers, etc., and see(s) to it that the remains
are taken to the proper air freight terminal.
The following day October 28, 1976, the shipment or remains
of Crispina Saludo arrived (in) San Francisco from Mexico on
board American Airlines. This shipment was transferred to or
received by PAL at 1945H or 7:45 p.m. (Exh. 2-PAL, Exh. 2-a-
PAL). This casket bearing the remains of Crispina Saludo,
which was mistakenly sent to Mexico and was opened
(there), was resealed by Crispin F. Patagas for shipment to the
Philippines (See Exh. B-1). The shipment was immediately
loaded on PAL flight for Manila that same evening and
arrived (in) Manila on October 30, 1976, a day after its
expected arrival on October 29, 1976. 3
In a letter dated December 15, 1976, 4 petitioners' counsel informed private
respondent Trans World Airlines (TWA) of the misshipment and eventual delay
in the delivery of the cargo containing the remains of the late Crispin Saludo,
and of the discourtesy of its employees to petitioners Maria Salvacion Saludo
and Saturnino Saludo. In a separate letter on June 10, 1977 addressed to co-
respondent Philippine Airlines (PAL), 5 petitioners stated that they were holding
PAL liable for said delay in delivery and would commence judicial action
should no favorable explanation be given.
Both private respondents denied liability. Thus, a damage suit 6 was filed by
petitioners before the then Court of First Instance, Branch III, Leyte, praying for
the award of actual damages of P50,000.00, moral damages of P1,000,000.00,
exemplary damages, attorney's fees and costs of suit.
As earlier stated, the court below absolved the two respondent airlines
companies of liability. The Court of Appeals affirmed the decision of the lower
court in toto, and in a subsequent resolution, 7 denied herein petitioners'
motion for reconsideration for lack of merit.
In predictable disagreement and dissatisfaction with the conclusions reached
by respondent appellate court, petitioners now urge this Court to review the
appealed decision and to resolve whether or not (1) the delay in the delivery
of the casketed remains of petitioners' mother was due to the fault of
respondent airline companies, (2) the one-day delay in the delivery of the
same constitutes contractual breach as would entitle petitioners to damages,
(3) damages are recoverable by petitioners for the humiliating, arrogant and
indifferent acts of the employees of TWA and PAL, and (4) private respondents
should be held liable for actual, moral and exemplary damages, aside from
attorney's fees and litigation expenses. 8
At the outset and in view of the spirited exchanges of the parties on this
aspect, it is to be stressed that only questions of law may be raised in a
petition filed in this Court to review on certiorari the decision of the Court of
Appeals. 9 This being so, the factual findings of the Court of Appeals are final
and conclusive and cannot be reviewed by the Supreme Court. The rule,
however, admits of established exceptions, to wit: (a) where there is grave
abuse of discretion; (b) when the finding is grounded entirely on speculations,
surmises or conjectures;(c) when the inference made is manifestly-mistaken,
absurd or impossible; (d) when the judgment of the Court of Appeals was
based on a misapprehension of facts; (e) when the factual findings are
conflicting; (f) when the Court of Appeals, in making its findings, went beyond
the issues of the case and the same are contrary to the admissions of both
appellant and appellee; 10 (g) when the Court of Appeals manifestly
overlooked certain relevant facts not disputed by the parties and which, if
properly considered, would justify a different conclusion; 11 and (h) where the
findings of fact of the Court of Appeals are contrary to those of the trial court,
or are mere conclusions without citation of specific evidence, or where the
facts of set forth by the petitioner are not disputed by the respondent, or
where the findings of fact of the Court of Appeals are premised on the
absence of evidence and are contradicted by the evidence on record. 12
To distinguish, a question of law is one which involves a doubt or controversy
on what the law is on a certain state of facts; and, a question of fact,
contrarily, is one in which there is a doubt or difference as to the truth or
falsehood of the alleged facts. 13 One test, it has been held, is whether the
appellate court can determine the issue raised without reviewing or
evaluating the evidence, in which case it is a question of law, otherwise it will
be a question of fact. 14
Respondent airline companies object to the present recourse of petitioners on
the ground that this petition raises only factual questions. 15 Petitioners
maintain otherwise or, alternatively, they are of the position that, assuming
that the petition raises factual questions, the same are within the recognized
exceptions to the general rule as would render the petition cognizable and
worthy of review by the Court. 16
Since it is precisely the soundness of the inferences or conclusions that may be
drawn from the factual issues which are here being assayed, we find that the
issues raised in the instant petition indeed warrant a second look if this
litigation is to come to a reasonable denouement. A discussion seriatim of said
issues will further reveal that the sequence of the events involved is in effect
disputed. Likewise to be settled is whether or not the conclusions of the Court
of Appeals subject of this review indeed find evidentiary and legal support.
66
I. Petitioners fault respondent court for "not finding that private respondents
failed to exercise extraordinary diligence required by law which resulted in the
switching and/or misdelivery of the remains of Crispina Saludo to Mexico
causing gross delay in its shipment to the Philippines, and consequently,
damages to petitioners." 17
Petitioner allege that private respondents received the casketed remains of
petitioners' mother on October 26, 1976, as evidenced by the issuance of PAL
Air Waybill No. 079-01180454 18 by Air Care International as carrier's agent; and
from said date, private respondents were charged with the responsibility to
exercise extraordinary diligence so much so that for the alleged switching of
the caskets on October 27, 1976, or one day after private respondents
received the cargo, the latter must necessarily be liable.
To support their assertion, petitioners rely on the jurisprudential dictum, both
under American and Philippine law, that "(t)he issuance of a bill of lading
carries the presumption that the goods were delivered to the carrier issuing
the bill, for immediate shipment, and it is nowhere questioned that a bill of
lading is prima facie evidence of the receipt of the goods by the carrier. . . . In
the absence of convincing testimony establishing mistake, recitals in the bill of
lading showing that the carrier received the goods for shipment on a
specified date control (13 C.J.S. 235)." 19
A bill of lading is a written acknowledgment of the receipt of the goods and
an agreement to transport and deliver them at a specified place to a person
named or on his order. Such instrument may be called a shipping receipt,
forwarder's receipt and receipt for transportation. 20 The designation, however,
is immaterial. It has been hold that freight tickets for bus companies as well as
receipts for cargo transported by all forms of transportation, whether by sea or
land, fall within the definition. Under the Tariff and Customs Code, a bill of
lading includes airway bills of lading. 21 The two-fold character of a bill of
lading is all too familiar; it is a receipt as to the quantity and description of the
goods shipped and a contract to transport the goods to the consignee or
other person therein designated, on the terms specified in such instrument. 22
Logically, since a bill of lading acknowledges receipt of goods to be
transported, delivery of the goods to the carrier normally precedes the
issuance of the bill; or, to some extent, delivery of the goods and issuance of
the bill are regarded in commercial practice as simultaneous
acts. 23 However, except as may be prohibited by law, there is nothing to
prevent an inverse order of events, that is, the execution of the bill of lading
even prior to actual possession and control by the carrier of the cargo to be
transported. There is no law which requires that the delivery of the goods for
carriage and the issuance of the covering bill of lading must coincide in point
of time or, for that matter, that the former should precede the latter.
Ordinarily, a receipt is not essential to a complete delivery of goods to the
carrier for transportation but, when issued, is competent and prima facie, but
not conclusive, evidence of delivery to the carrier. A bill of lading, when
properly executed and delivered to a shipper, is evidence that the carrier has
received the goods described therein for shipment. Except as modified by
statute, it is a general rule as to the parties to a contract of carriage of goods
in connection with which a bill of lading is issued reciting that goods have
been received for transportation, that the recital being in essence a receipt
alone, is not conclusive, but may be explained, varied or contradicted by
parol or other evidence. 24
While we agree with petitioners' statement that "an airway bill estops the
carrier from denying receipt of goods of the quantity and quality described in
the bill," a further reading and a more faithful quotation of the authority cited
would reveal that "(a) bill of lading may contain constituent elements of
estoppel and thus become something more than a contract between the
shipper and the carrier. . . . (However), as between the shipper and the
carrier, when no goods have been delivered for shipment no recitals in the bill
can estop the carrier from showing the true facts . . . Between the consignor of
goods and receiving carrier, recitals in a bill of lading as to the goods shipped
raise only a rebuttable presumption that such goods were delivered for
shipment. As between the consignor and a receiving carrier, the fact must
outweigh the recital." 25 (Emphasis supplied)
For this reason, we must perforce allow explanation by private respondents
why, despite the issuance of the airway bill and the date thereof, they deny
having received the remains of Crispina Saludo on October 26, 1976 as
alleged by petitioners.
The findings of the trial court, as favorably adopted by the Court of Appeals
and which we have earner quoted, provide us with the explanation that
sufficiently over comes the presumption relied on by petitioners in insisting that
the remains of their mother were delivered to and received by private
respondents on October 26, 1976. Thus
. . . Philippine Vice Consul in Chicago, Illinois, Bienvenido M.
Llaneta, at 3:00 p.m. on October 26, 1976 at the Pomierski &
Son Funeral Home, sealed the shipping case containing a
hermetically sealed casket that is airtight and waterproof
wherein was contained the remains of Crispina Saludo Galdo
(sic) (Exh. B). On the same date October 26, 1976, Pomierski
brought the remains to C.M.A.S. (Continental Mortuary Air
Services) at the airport (Chicago) which made the necessary
arrangements such as flights, transfers, etc; C.M.A.S. is a
national service used by undertakers throughout the nation
(U.S.A.), they furnish the air pouch which the casket is
enclosed in, and they see that the remains are taken to the
proper air freight terminal (Exh. G-TWA). C.M.A.S. booked the
shipment with PAL thru the carrier's agent Air Care
International, with Pomierski F.H. as the shipper and Mario
(Maria) Saludo as the consignee. PAL Airway Bill No. 079-
01180454 Ordinary was issued wherein the requested routing
was from Chicago to San Francisco on board TWA Flight-131
of October 27;1976, and from San Francisco to Manila on
board PAL Flight No. 107 of the same date, and from Manila
67
 to Cebu on board PAL Flight 149 of October 29, 1976 (See
Exh. E, also Exh. 1-PAL). 26(Emphasis ours.)
Moreover, we are persuaded to believe private respondent PAL's account as
to what transpired October 26, 1976:
. . . Pursuant thereto, on 26 October 1976, CMAS acting upon
the instruction of Pomierski, F.H., the shipper requested
booking of the casketed remains of Mrs. Cristina (sic) Saludo
on board PAL's San Francisco-Manila Flight No. PR 107 on
October 27, 1976.
2. To signify acceptance and confirmation of said booking,
PAL issued to said Pomierski F.H., PAL Airway Bill No. 079-
01180454 dated October 27, 1976 (sic, "10/26/76"). PAL
confirmed the booking and transporting of the shipment on
board of its Flight PR 107 on October 27, 1976 on the basis of
the representation of the shipper and/or CMAS that the said
cargo would arrive in San Francisco from Chicago on board
United Airlines Flight US 121 on 27 October 1976. 27
In other words, on October 26, 1976 the cargo containing the casketed
remains of Crispina Saludo was booked for PAL Flight Number PR-107 leaving
San Francisco for Manila on October 27, 1976, PAL Airway Bill No. 079-01180454
was issued, not as evidence of receipt of delivery of the cargo on October 26,
1976, but merely as a confirmation of the booking thus made for the San
Francisco-Manila flight scheduled on October 27, 1976. Actually, it was not
until October 28, 1976 that PAL received physical delivery of the body at San
Francisco, as duly evidenced by the Interline Freight Transfer Manifest of the
American Airline Freight System and signed for by Virgilio Rosales at 1945H, or
7:45 P.M. on said date. 28
Explicit is the rule under Article 1736 of the Civil Code that the extraordinary
responsibility of the common carrier begins from the time the goods are
delivered to the carrier. This responsibility remains in full force and effect even
when they are temporarily unloaded or stored in transit, unless the shipper or
owner exercises the right of stoppage in transitu, 29 and terminates only after
the lapse of a reasonable time for the acceptance, of the goods by the
consignee or such other person entitled to receive them. 30 And, there is
delivery to the carrier when the goods are ready for and have been placed in
the exclusive possession, custody and control of the carrier for the purpose of
their immediate transportation and the carrier has accepted them. 31 Where
such a delivery has thus been accepted by the carrier, the liability of the
common carrier commences eo instanti. 32
Hence, while we agree with petitioners that the extraordinary diligence
statutorily required to be observed by the carrier instantaneously commences
upon delivery of the goods thereto, for such duty to commence there must in
fact have been delivery of the cargo subject of the contract of carriage. Only
when such fact of delivery has been unequivocally established can the
liability for loss, destruction or deterioration of goods in the custody of the
carrier, absent the excepting causes under Article 1734, attach and the
presumption of fault of the carrier under Article 1735 be invoked.
As already demonstrated, the facts in the case at bar belie the averment that
there was delivery of the cargo to the carrier on October 26, 1976. Rather, as
earlier explained, the body intended to be shipped as agreed upon was really
placed in the possession and control of PAL on October 28, 1976 and it was
from that date that private respondents became responsible for the agreed
cargo under their undertakings in PAL Airway Bill No. 079-01180454.
Consequently, for the switching of caskets prior thereto which was not caused
by them, and subsequent events caused thereby, private respondents cannot
be held liable.
Petitioners, proceeding on the premise that there was delivery of the cargo to
private respondents on October 26,1976 and that the latter's extraordinary
responsibility had by then become operative, insist on foisting the blame on
private respondents for the switching of the two caskets which occurred on
October 27, 1976. It is argued that since there is no clear evidence establishing
the fault Continental Mortuary Air Services (CMAS) for the mix-up, private
respondents are presumably negligent pursuant to Article 1735 of the Civil
Code and, for failure to rebut such presumption, they must necessarily be held
liable; or, assuming that CMAS was at fault, the same does not absolve private
respondents of liability because whoever brought the cargo to the airport or
loaded it on the plane did so as agent of private respondents.
This contention is without merit. As pithily explained by the Court of Appeals:
The airway bill expressly provides that "Carrier certifies goods
described below were received for carriage", and said cargo
was "casketed human remains of Crispina Saludo," with
"Maria Saludo as Consignee; Pomierski F.H. as Shipper; Air
Care International as carrier's agent." On the face of the said
airway bill, the specific flight numbers, specific routes of
shipment and dates of departure and arrival were
typewritten, to wit: Chicago TWA Flight 131/27 to San
Francisco and from San Francisco by PAL 107 on, October 27,
1976 to Philippines and to Cebu via PAL Flight 149 on October
29, 1976. The airway bill also contains the following
typewritten words, as follows: all documents have been
examined (sic). Human remains of Crispina Saludo. Please
return back (sic) first available flight to SFO.
But, as it turned out and was discovered later the casketed
human remains which was issued PAL Airway Bill #079-
1180454 was not the remains of Crispina Saludo, the casket
containing her remains having been shipped to Mexico City.
However, it should be noted that, Pomierski F.H., the shipper
of Mrs. Saludo's remains, hired Continental Mortuary Services
(hereafter referred to as C.M.A.S.), which is engaged in the
business of transporting and forwarding human remains. Thus,
C.M.A.S. made all the necessary arrangements such as flights,
68
 transfers, etc. for shipment of the remains of Crispina what was in truth the erroneous cargo, said misshipped cargo was in fact
Saludo. withdrawn by CMAS from PAL as shown by the notation on another copy of
The remains were taken on October 26th, said manifest 35 stating "Received by CMAS Due to switch in Chicago 10/27-
1976, to C.M.A.S. at the airport. These people 1805H," the authenticity of which was never challenged. This shows that said
made all the necessary arrangements, such misshipped cargo was in fact withdrawn by CMAS from PAL and the correct
as flights, transfers, etc. This is a national shipment containing the body of Crispina Saludo was received by PAL only on
service used by undertakers throughout the October 28, 1976, at 1945H, or 7:45 P.M., per American Airlines Interline Freight
nation. They furnished the air pouch which Transfer Manifest No. AA204312. 36
the casket is enclosed in, and they see that Witness the deposition of TWA's ramp serviceman, Michael Giosso, on this
the remains are taken to the proper air matter:
frieght terminal. I was very surprised when ATTY. JUAN COLLAS, JR.:
Miss Saludo called me to say that the On that date, do (sic) you have occasion to
remains were not at the west coast terminal. I handle or deal with the transfer of cargo
immediately called C.M.A.S. They called me from TWA Flight No. 603 to PAL San
back in a matter of ten minutes to inform me Francisco?
that the remains were on a plane to Mexico MICHAEL GIOSSO:
City. The man said that there were two Yes, I did.
bodies at the terminal, and somehow they ATTY. JUAN COLLAS, JR.:
were switched. . . . (Exb. 6 "TWA", which is What was your participation with the transfer
the memo or incident report enclosed in the of the cargo?
stationery of Walter Pomierski & Sons Ltd.) MICHAEL GIOSSO:
Consequently, when the cargo was received from C.M.A.S. I manifested the freight on a transfer manifest
at the Chicago airport terminal for shipment, which was and physically moved it to PAL and
supposed to contain the remains of Crispina Saludo, Air Care concluded the transfer by signing it off.
International and/or TWA, had no way of determining its ATTY. JUAN COLLAS, JR.:
actual contents, since the casket was hermetically sealed by You brought it there yourself?
the Philippine Vice-Consul in Chicago and in an air pouch of MICHAEL GIOSSO:
C.M.A.S., to the effect that Air Care International and/or TWA Yes sir.
had to rely on the information furnished by the shipper ATTY. JUAN COLIAS, JR.:
regarding the cargo's content. Neither could Air Care Do you have anything to show that PAL
International and/or TWA open the casket for further received the cargo from TWA on October 27,
verification, since they were not only without authority to do 1976?
so, but even prohibited. MICHAEL GIOSSO:
Thus, under said circumstances, no fault and/or negligence Yes, I do.
can be attributed to PAL (even if Air Care International should (Witness presenting a document)
be considered as an agent of PAL) and/or TWA, the entire ATTY. JUAN COLLAS, JR.:
fault or negligence being exclusively with For purposes of clarity, Exhibit I is designated
C.M.A.S. 33 (Emphasis supplied.) as Exhibit I-TWA.
It can correctly and logically be concluded, therefore, that the switching xxx xxx xxx
occurred or, more accurately, was discovered on October 27, 1976; and ATTY. JUAN COLLAS, JR.:
based on the above findings of the Court of appeals, it happened while the This Exhibit I-TWA, could you tell what it is,
cargo was still with CMAS, well before the same was place in the custody of what it shows?
private respondents. MICHAEL GIOSSO:
Thus, while the Air Cargo Transfer Manifest of TWA of October 27, 1976 34 was It shows transfer of manifest on 10-27-76 to
signed by Garry Marcial of PAL at 1400H, or 2:00 P.M., on the same date, PAL at 1400 and verified with two signatures
thereby indicating acknowledgment by PAL of the transfer to them by TWA of as it completed the transfer.
69
 ATTY. JUAN COLLAS, JR.:
Very good,. Who was the PAL employee who
received the cargo?
MICHAEL GIOSSO:
The name is Garry Marcial." 37
The deposition of Alberto A. Lim, PAL's cargo supervisor at San Francisco, as
deponent-witness for PAL, makes this further clarification:
ATTY. CESAR P. MANALAYSAY:
You mentioned Airway Bill, Mr. Lim. I am
showing to you a PAL Airway Bill Number
01180454 which for purposes of evidence, I
would like to request that the same be
marked as evidence Exhibit I for PAL.
xxx xxx xxx
In what circumstances did you encounter
Exhibit I-PAL?
ALBERTO A. LIM:
If I recall correctly, I was queried by Manila,
our Manila office with regard to a certain
complaint that a consignee filed that this
shipment did not arrive on the day that the
consignee expects the shipment to arrive.
ATTY CESAR P. MANALAYSAY:
Okay. Now, upon receipt of that query from
your Manila office, did you conduct any
investigation to pinpoint the possible causes
of mishandling?
ALBERTO A. LIM:
Yes.
xxx xxx xxx
ATTY. CESAR P. MANALAYSAY:
What is the result of your investigation?
ALBERTO A. LIM:
In the course of my investigation, I found that
we received the body on October 28, 1976,
from American Airlines.
ATTY. CESAR P. MANALAYSAY:
What body are you referring to?
xxx xxx xxx
ALBERTO A. LIM:
The remains of Mrs. Cristina (sic) Saludo.
ATTY. CESAR P. MANALAYSAY:
Is that the same body mentioned in this
Airway Bill?
ALBERTO A. LIM:
Yes.
ATTY. CESAR P. MANALAYSAY:
What time did you receive said body on
October 28, 1976?
ALBERTO A. LIM:
If I recall correctly, approximately 7:45 of
October 28, 1976.
ATTY. CESAR P. MANALAYSAY:
Do you have any proof with you to back the
statement?
ALBERTO A. LIM:
Yes. We have on our records a Transfer
Manifest from American Airlines Number
204312 showing that we received a human
remains shipment belong to Mrs. Cristina (sic)
Saludo or the human remains of Mrs. Cristina
(sic) Saludo.
ATTY. CESAR P. MAIALAYSAY:
At this juncture, may I request that the
Transfer Manifest referred to by the witness
be marked as an evidence as Exhibit II-PAL.
xxx xxx xxx
Mr. Lim, yesterday your co-defendant TWA
presented as their Exhibit I evidence tending
to show that on October 27, 1976 at about
2:00 in the, afternoon they delivered to you a
cargo bearing human remains. Could you
go over this Exhibit I and please give us your
comments as to that exhibit?
ATTY. ALBERTO C. MENDOZA:
That is a vague question. I would rather
request that counsel propound specific
questions rather than asking for comments
on Exhibit I-TWA.
ATTY. CESAR P. MANALAYSAY:
In that case, I will reform my question. Could
you tell us whether TWA in fact delivered to
you the human remains as indicated in that
Transfer Manifest?
ALBERTO A. LIM:
Yes, they did.
ATTY. CESAR P. MANALAYSAY:
I noticed that the Transfer Manifest of TWA
marked as Exhibit I-TWA bears the same
numbers or the same entries as the Airway Bill
marked as Exhibit I-A PAL tending to show
that this is the human remains of Mrs Cristina
70
 (sic) Saludo. Could you tell us whether this is
true?
ALBERTO A. LIM:
It is true that we received human remains
shipment from TWA as indicated on this
Transfer Manifest. But in the course of
investigation, it was found out that the
human remains transferred to us is not the
remains of Mrs. Cristina (sic) Saludo this is the
reason why we did not board it on our
flight. 38
Petitioners consider TWA's statement that "it had to rely on the information
furnished by the shipper" a lame excuse and that its failure to prove that its
personnel verified and identified the contents of the casket before loading
the same constituted negligence on the part of TWA. 39
We upbold the favorable consideration by the Court of Appeals of the
following findings of the trial court:
It was not (to) TWA, but to C.M.A.S. that the Pomierski & Son
Funeral Home delivered the casket containing the remains of
Crispina Saludo. TWA would have no knowledge therefore
that the remains of Crispina Saludo were not the ones inside
the casket that was being presented to it for shipment. TWA
would have to rely on there presentations of C.M.A.S. The
casket was hermetically sealed and also sealed by the
Philippine Vice Consul in Chicago. TWA or any airline for that
matter would not have opened such a sealed casket just for
the purpose of ascertaining whose body was inside and to
make sure that the remains inside were those of the particular
person indicated to be by C.M.A.S. TWA had to accept
whatever information was being furnished by the shipper or
by the one presenting the casket for shipment. And so as a
matter of fact, TWA carried to San Francisco and transferred
to defendant PAL a shipment covered by or under PAL
Airway Bill No. 079-ORD-01180454, the airway bill for the
shipment of the casketed remains of Crispina Saludo. Only, it
turned out later, while the casket was already with PAL, that
what was inside the casket was not the body of Crispina
Saludo so much so that it had to be withdrawn by C.M.A.S.
from PAL. The body of Crispina Saludo had been shipped to
Mexico. The casket containing the remains of Crispina Saludo
was transshipped from Mexico and arrived in San Francisco
the following day on board American Airlines. It was
immediately loaded by PAL on its flight for Manila.
The foregoing points at C.M.A.S., not defendant TWA much
less defendant PAL, as the ONE responsible for the switching
or mix-up of the two bodies at the Chicago Airport terminal,
and started a chain reaction of the misshipment of the body
of Crispina Saludo and a one-day delay in the delivery
thereof to its destination. 40
Verily, no amount of inspection by respondent airline companies could have
guarded against the switching that had already taken place. Or, granting
that they could have opened the casket to inspect its contents, private
respondents had no means of ascertaining whether the body therein
contained was indeed that of Crispina Saludo except, possibly, if the body
was that of a male person and such fact was visually apparent upon opening
the casket. However, to repeat, private respondents had no authority to
unseal and open the same nor did they have any reason or justification to
resort thereto.
It is the right of the carrier to require good faith on the part of those persons
who deliver goods to be carried, or enter into contracts with it, and inasmuch
as the freight may depend on the value of the article to be carried, the carrier
ordinarily has the right to inquire as to its value. Ordinarily, too, it is the duty of
the carrier to make inquiry as to the general nature of the articles shipped and
of their value before it consents to carry them; and its failure to do so cannot
defeat the shipper's right to recovery of the full value of the package if lost, in
the absence of showing of fraud or deceit on the part of the shipper. In the
absence of more definite information, the carrier has a the right to accept
shipper's marks as to the contents of the package offered for transportation
and is not bound to inquire particularly about them in order to take
advantage of a false classification and where a shipper expressly represents
the contents of a package to be of a designated character, it is not the duty
of the carrier to ask for a repetition of the statement nor disbelieve it and open
the box and see for itself. 41 However, where a common carrier has
reasonable ground to suspect that the offered goods are of a dangerous or
illegal character, the carrier has the right to know the character of such goods
and to insist on an inspection, if reasonable and practical under the
circumstances, as a condition of receiving and transporting such goods. 42
It can safely be said then that a common carrier is entitled to fair
representation of the nature and value of the goods to be carried, with the
concomitant right to rely thereon, and further noting at this juncture that a
carrier has no obligation to inquire into the correctness or sufficiency of such
information. 43 The consequent duty to conduct an inspection thereof arises in
the event that there should be reason to doubt the veracity of such
representations. Therefore, to be subjected to unusual search, other than the
routinary inspection procedure customarily undertaken, there must exist proof
that would justify cause for apprehension that the baggage is dangerous as
to warrant exhaustive inspection, or even refusal to accept carriage of the
same; and it is the failure of the carrier to act accordingly in the face of such
proof that constitutes the basis of the common carrier's liability. 44
In the case at bar, private respondents had no reason whatsoever to doubt
the truth of the shipper's representations. The airway bill expressly providing
that "carrier certifies goods received below were received for carriage," and
71
that the cargo contained "casketed human remains of Crispina Saludo," was
issued on the basis of such representations. The reliance thereon by private
respondents was reasonable and, for so doing, they cannot be said to have
acted negligently. Likewise, no evidence was adduced to suggest even an
iota of suspicion that the cargo presented for transportation was anything
other than what it was declared to be, as would require more than routine
inspection or call for the carrier to insist that the same be opened for scrutiny
of its contents per declaration.
Neither can private respondents be held accountable on the basis of
petitioners' preposterous proposition that whoever brought the cargo to the
airport or loaded it on the airplane did so as agent of private respondents, so
that even if CMAS whose services were engaged for the transit arrangements
for the remains was indeed at fault, the liability therefor would supposedly still
be attributable to private respondents.
While we agree that the actual participation of CMAS has been sufficiently
and correctly established, to hold that it acted as agent for private
respondents would be both an inaccurate appraisal and an unwarranted
categorization of the legal position it held in the entire transaction.
It bears repeating that CMAS was hired to handle all the necessary shipping
arrangements for the transportation of the human remains of Crispina Saludo
to Manila. Hence, it was to CMAS that the Pomierski & Son Funeral Home, as
shipper, brought the remains of petitioners' mother for shipment, with Maria
Saludo as consignee. Thereafter, CMAS booked the shipment with PAL
through the carrier's agent, Air Care International. 45 With its aforestated
functions, CMAS may accordingly be classified as a forwarder which, by
accepted commercial practice, is regarded as an agent of the shipper and
not of the carrier. As such, it merely contracts for the transportation of goods
by carriers, and has no interest in the freight but receives compensation from
the shipper as his agent. 46
At this point, it can be categorically stated that, as culled from the findings of
both the trial court and appellate courts, the entire chain of events which
culminated in the present controversy was not due to the fault or negligence
of private respondents. Rather, the facts of the case would point to CMAS as
the culprit. Equally telling of the more likely possibility of CMAS' liability is
petitioners' letter to and demanding an explanation from CMAS regarding the
statement of private respondents laying the blame on CMAS for the incident,
portions of which, reading as follows:
. . . we were informed that the unfortunate a mix-up occurred
due to your negligence. . . .
Likewise, the two airlines pinpoint the responsibility upon your
agents. Evidence were presented to prove that allegation.
On the face of this overwhelming evidence we could and
should have filed a case against you. . . . 47
clearly allude to CMAS as the party at fault. This is tantamount to an admission
by petitioners that they consider private respondents without fault, or is at the
very least indicative of the fact that petitioners entertained serious doubts as
to whether herein private respondents were responsible for the unfortunate
turn of events.
Undeniably, petitioners' grief over the death of their mother was aggravated
by the unnecessary inconvenience and anxiety that attended their efforts to
bring her body home for a decent burial. This is unfortunate and calls for
sincere commiseration with petitioners. But, much as we would like to give
them consolation for their undeserved distress, we are barred by the inequity
of allowing recovery of the damages prayed for by them at the expense of
private respondents whose fault or negligence in the very acts imputed to
them has not been convincingly and legally demonstrated.
Neither are we prepared to delve into, much less definitively rule on, the
possible liability of CMAS as the evaluation and adjudication of the same is
not what is presently at issue here and is best deferred to another time and
addressed to another forum.
II. Petitioners further fault the Court of Appeals for ruling that there was no
contractual breach on the part of private respondents as would entitle
petitioners to damages.
Petitioners hold that respondent TWA, by agreeing to transport the remains of
petitioners' mother on its Flight 131 from Chicago to San Francisco on October
27, 1976, made itself a party to the contract of carriage and, therefore, was
bound by the terms of the issued airway bill. When TWA undertook to ship the
remains on its Flight 603, ten hours earlier than scheduled, it supposedly
violated the express agreement embodied in the airway bill. It was allegedly
this breach of obligation which compounded, if not directly caused, the
switching of the caskets.
In addition, petitioners maintain that since there is no evidence as to who
placed the body on board Flight 603, or that CMAS actually put the cargo on
that flight, or that the two caskets at the Chicago airport were to be
transported by the same airline, or that they came from the same funeral
home, or that both caskets were received by CMAS, then the employees or
agents of TWA presumably caused the mix-up by loading the wrong casket on
the plane. For said error, they contend, TWA must necessarily be presumed
negligent and this presumption of negligence stands undisturbed unless
rebutting evidence is presented to show that the switching or misdelivery was
due to circumstances that would exempt the carrier from liability.
Private respondent TWA professes otherwise. Having duly delivered or
transferred the cargo to its co-respondent PAL on October 27, 1976 at 2:00
P.M., as supported by the TWA Transfer Manifest, TWA faithfully complied with
its obligation under the airway bill. Said faithful compliance was not affected
by the fact that the remains were shipped on an earlier flight as there was no
fixed time for completion of carriage stipulated on. Moreover, the carrier did
not undertake to carry the cargo aboard any specified aircraft, in view of the
condition on the back of the airway bill which provides:
CONDITIONS OF CONTRACT
xxx xxx xxx
72
 It is agreed that no time is fixed for the completion of carriage
hereunder and that Carrier may without notice substitute
alternate carriers or aircraft. Carrier assumes no obligation to
carry the goods by any specified aircraft or over any
particular route or routes or to make connection at any point
according to any particular schedule, and Carrier is hereby
authorized to select, or deviate from the route or routes of
shipment, notwithstanding that the same may be stated on
the face hereof. The shipper guarantees payment of all
charges and advances. 48
Hence, when respondent TWA shipped the body on earlier flight and on a
different aircraft, it was acting well within its rights. We find this argument
tenable.
The contention that there was contractual breach on the part of private
respondents is founded on the postulation that there was ambiguity in the
terms of the airway bill, hence petitioners' insistence on the application of the
rules on interpretation of contracts and documents. We find no such
ambiguity. The terms are clear enough as to preclude the necessity to probe
beyond the apparent intendment of the contractual provisions.
The hornbook rule on interpretation of contracts consecrates the primacy of
the intention of the parties, the same having the force of law between them.
When the terms of the agreement are clear and explicit, that they do not
justify an attempt to read into any alleged intention of the parties, the terms
are to be understood literally just as they appear on the face of the
contract. 49 The various stipulations of a contract shall be interpreted
together 50 and such a construction is to be adopted as will give effect to all
provisions thereof. 51 A contract cannot be construed by parts, but its clauses
should be interpreted in relation to one another. The whole contract must be
interpreted or read together in order to arrive at its true meaning. Certain
stipulations cannot be segregated and then made to control; neither do
particular words or phrases necessarily determine the character of a contract.
The legal effect of the contract is not to be determined alone by any
particular provision disconnected from all others, but in the ruling intention of
the parties as gathered from all the language they have used and from their
contemporaneous and subsequent acts. 52
Turning to the terms of the contract at hand, as presented by PAL Air Waybill
No. 079-01180454, respondent court approvingly quoted the trial court's
disquisition on the aforequoted condition appearing on the reverse side of the
airway bill and its disposition of this particular assigned error:
The foregoing stipulation fully answers plaintiffs' objections to
the one-day delay and the shipping of the remains in TWA
Flight 603 instead of TWA Flight 131. Under the stipulation,
parties agreed that no time was fixed to complete the
contract of carriage and that the carrier may, without notice,
substitute alternate carriers or aircraft. The carrier did not
assume the obligation to carry the shipment on any specified
aircraft.
xxx xxx xxx
Furthermore, contrary to the claim of plaintiffs-appellants, the
conditions of the Air Waybill are big enough to be read and
noticed. Also, the mere fact that the cargo in question was
shipped in TWA Flight 603, a flight earlier on the same day
than TWA Flight 131, did not in any way cause or add to the
one-day delay complained of and/or the switching or mix-up
of the bodies. 53
Indubitably, that private respondent can use substitute aircraft even without
notice and without the assumption of any obligation whatsoever to carry the
goods on any specified aircraft is clearly sanctioned by the contract of
carriage as specifically provided for under the conditions thereof.
Petitioners' invocation of the interpretative rule in the Rules of Court that
written words control printed words in documents, 54 to bolster their assertion
that the typewritten provisions regarding the routing and flight schedule
prevail over the printed conditions, is tenuous. Said rule may be considered
only when there is inconsistency between the written and printed words of the
contract.
As previously stated, we find no ambiguity in the contract subject of this case
that would call for the application of said rule. In any event, the contract
has provided for such a situation by explicitly stating that the above condition
remains effective "notwithstanding that the same (fixed time for completion of
carriage, specified aircraft, or any particular route or schedule) may be stated
on the face hereof." While petitioners hinge private respondents' culpability on
the fact that the carrier "certifies goods described below were received for
carriage," they may have overlooked that the statement on the face of the
airway bill properly and completely reads
Carrier certifies goods described below were received for
carriage subject to the Conditions on the reverse hereof the
goods then being in apparent good order and condition
except as noted hereon. 55 (Emphasis ours.)
Private respondents further aptly observe that the carrier's certification
regarding receipt of the goods for carriage "was of a smaller print than the
condition of the Air Waybill, including Condition No. 5 and thus if plaintiffs-
appellants had recognized the former, then with more reason they were
aware of the latter. 56
In the same vein, it would also be incorrect to accede to the suggestion of
petitioners that the typewritten specifications of the flight, routes and dates of
departures and arrivals on the face of the airway bill constitute a special
contract which modifies the printed conditions at the back thereof. We
reiterate that typewritten provisions of the contract are to be read and
understood subject to and in view of the printed conditions, fully reconciling
and giving effect to the manifest intention of the parties to the agreement.
73
The oft-repeated rule regarding a carrier's liability for delay is that in the
absence of a special contract, a carrier is not an insurer against delay in
transportation of goods. When a common carrier undertakes to convey
goods, the law implies a contract that they shall be delivered at destination
within a reasonable time, in the absence, of any agreement as to the time of
delivery. 57 But where a carrier has made an express contract to transport and
deliver property within a specified time, it is bound to fulfill its contract and is
liable for any delay, no matter from what cause it may have arisen. 58 This
result logically follows from the well-settled rule that where the law creates a
duty or charge, and the party is disabled from performing it without any
default in himself, and has no remedy over, then the law will excuse him, but
where the party by his own contract creates a duty or charge upon himself,
he is bound to make it good notwithstanding any accident or delay by
inevitable necessity because he might have provided against it by contract.
Whether or not there has been such an undertaking on the part of the carrier
to be determined from the circumstances surrounding the case and by
application of the ordinary rules for the interpretation of contracts. 59
Echoing the findings of the trial court, the respondent court correctly declared
that
In a similar case of delayed delivery of air cargo under a very
similar stipulation contained in the airway bill which reads:
"The carrier does not obligate itself to carry the goods by any
specified aircraft or on a specified time. Said carrier being
hereby authorized to deviate from the route of the shipment
without any liability therefor", our Supreme Court ruled that
common carriers are not obligated by law to carry and to
deliver merchandise, and persons are not vested with the
right to prompt delivery, unless such common carriers
previously assume the obligation. Said rights and obligations
are created by a specific contract entered into by the parties
(Mendoza vs. PAL, 90 Phil. 836).
There is no showing by plaintiffs that such a special or specific
contract had been entered into between them and the
defendant airline companies.
And this special contract for prompt delivery should call the
attention of the carrier to the circumstances surrounding the
case and the approximate amount of damages to be
suffered in case of delay (See Mendoza vs. PAL, supra). There
was no such contract entered into in the instant case.60
Also, the theory of petitioners that the specification of the flights and dates of
departure and arrivals constitute a special contract that could prevail over
the printed stipulations at the back of the airway bill is vacuous. To
countenance such a postulate would unduly burden the common carrier for
that would have the effect of unilaterally transforming every single bill of
lading or trip ticket into a special contract by the simple expedient of filling it
up with the particulars of the flight, trip or voyage, and thereby imposing upon
the carrier duties and/or obligations which it may not have been ready or
willing to assume had it been timely, advised thereof.
Neither does the fact that the challenged condition No. 5 was printed at the
back of the airway bill militate against its binding effect on petitioners as
parties to the contract, for there were sufficient indications on the face of said
bill that would alert them to the presence of such additional condition to put
them on their guard. Ordinary prudence on the part of any person entering or
contemplating to enter into a contract would prompt even a cursory
examination of any such conditions, terms and/or stipulations.
There is a holding in most jurisdictions that the acceptance of a bill of lading
without dissent raises a presumption that all terms therein were brought to the
knowledge of the shipper and agreed to by him, and in the absence of fraud
or mistake, he is estopped from thereafter denying that he assented to such
terms. This rule applies with particular force where a shipper accepts a bill of
lading with full knowledge of its contents, and acceptance under such
circumstances makes it a binding contract. In order that any presumption of
assent to a stipulation in a bill of lading limiting the liability of a carrier may
arise, it must appear that the clause containing this exemption from liability
plainly formed a part of the contract contained in the bill of lading. A
stipulation printed on the back of a receipt or bill of lading or on papers
attached to such receipt will be quite as effective as if printed on its face, if it
is shown that the consignor knew of its terms. Thus, where a shipper accepts a
receipt which states that its conditions are to be found on the back, such
receipt comes within the general rule, and the shipper is held to have
accepted and to be bound by the conditions there to be found. 61
Granting arguendo that Condition No. 5 partakes of the nature of a contract
of adhesion and as such must be construed strictly against the party who
drafted the same or gave rise to any ambiguity therein, it should be borne in
mind that a contract of adhesion may be struck down as void and
unenforceable, for being subversive of public policy, only when the weaker
party is imposed upon in dealing with the dominant bargaining party and is
reduced to the alternative of taking it or leaving it, completely deprived of the
opportunity to bargain on equal footing. 62However, Ong Yiu vs. Court of
Appeals, et al 63 instructs us that contracts of adhesion are not entirely
prohibited. The one who adheres to the contract is in reality free to reject it
entirely; if he adheres, be gives his consent. Accordingly, petitioners, far from
being the weaker party in this situation, duly signified their presumed assent to
all terms of the contract through their acceptance of the airway bill and are
consequently bound thereby. It cannot be gainsaid that petitioners' were not
without several choices as to carriers in Chicago with its numerous airways
and airliner servicing the same.
We wish to allay petitioners' apprehension that Condition No. 5 of the airway
bill is productive of mischief as it would validate delay in delivery, sanction
violations of contractual obligations with impunity or put a premium on
breaches of contract.
74
Just because we have said that condition No. 5 of the airway bill is binding mother's remains were transported ten hours earlier than originally scheduled,
upon the parties to and fully operative in this transaction, it does not mean, there was no reason for private respondents' personnel to disclaim knowledge
and let this serve as fair warning to respondent carriers, that they can at all of the arrival or whereabouts of the same other than their sheer arrogance,
times whimsically seek refuge from liability in the exculpatory sanctuary of said indifference and extreme insensitivity to the feelings of petitioners. Moreover,
Condition No. 5 or arbitrarily vary routes, flights and schedules to the prejudice being passengers and not merely consignors of goods, petitioners had the
of their customers. This condition only serves to insulate the carrier from liability right to be treated with courtesy, respect, kindness and due consideration.
in those instances when changes in routes, flights and schedules are clearly In riposte, TWA claims that its employees have always dealt politely with all
justified by the peculiar circumstances of a particular case, or by general clients, customers and the public in general. PAL, on the other hand, declares
transportation practices, customs and usages, or by contingencies or that in the performance of its obligation to the riding public, other customers
emergencies in aviation such as weather turbulence, mechanical failure, and clients, it has always acted with justice, honesty, courtesy and good faith.
requirements of national security and the like. And even as it is conceded that Respondent appellate court found merit in and reproduced the trial court's
specific routing and other navigational arrangements for a trip, flight or refutation of this assigned error:
voyage, or variations therein, generally lie within the discretion of the carrier in About the only evidence of plaintiffs that may have
the absence of specific routing instructions or directions by the shipper, it is reference to the manner with which the personnel of
plainly incumbent upon the carrier to exercise its rights with due deference to defendants treated the two plaintiffs at the San Francisco
the rights, interests and convenience of its customers. Airport are the following pertinent portions of Maria Saludo's
A common carrier undertaking to transport property has the implicit duty to testimony:
carry and deliver it within reasonable time, absent any particular stipulation Q When you arrived there, what did you do,
regarding time of delivery, and to guard against delay. In case of any if any?
unreasonable delay, the carrier shall be liable for damages immediately and A I immediately went to the TWA counter
proximately resulting from such neglect of duty. 64 As found by the trial court, and I inquired about whether my mother was
the delay in the delivery of the remains of Crispina Saludo, undeniable and there or if' they knew anything about it.
regrettable as it was, cannot be attributed to the fault, negligence or malice Q What was the answer?
of private respondents, 65 a conclusion concurred in by respondent court and A They said they do not know. So, we waited.
which we are not inclined to disturb. Q About what time was that when you
We are further convinced that when TWA opted to ship the remains of reached San Francisco from Chicago?
Crispina Saludo on an earlier flight, it did so in the exercise of sound discretion A I think 5 o'clock. Somewhere around that in
and with reasonable prudence, as shown by the explanation of its counsel in the afternoon.
his letter of February 19, 1977 in response to petitioners' demand letter: Q You made inquiry it was immediately
Investigation of TWA's handling of this matter reveals that thereafter?
although the shipment was scheduled on TWA Flight 131 of A Right after we got off the plane.
October 27, 1976, it was actually boarded on TWA Flight 603 Q Up to what time did you stay in the airport
of the same day, approximately 10 hours earlier, in order to to wait until the TWA people could tell you
assure that the shipment would be received in San Francisco the whereabouts?
in sufficient time for transfer to PAL. This transfer was effected A Sorry, Sir, but the TWA did not tell us
in San Francisco at 2:00 P.M. on October 27, 1976. 66 anything. We stayed there until about 9
Precisely, private respondent TWA knew of the urgency of the shipment by o'clock. They have not heard anything about
reason of this notation on the lower portion of the airway bill: "All documents it. They did not say anything.
have been certified. Human remains of Cristina (sic) Saludo. Please return bag Q Do you want to convey to the Court that
first available flight to SFO." Accordingly, TWA took it upon itself to carry the from 5 up to 9 o'clock in the evening you
remains of Crispina Saludo on an earlier flight, which we emphasize it could do yourself went back to the TWA and they
under the terms of the airway bill, to make sure that there would be enough could not tell you where the remains of your
time for loading said remains on the transfer flight on board PAL. mother were?
III. Petitioners challenge the validity of respondent court's finding that private A Yes sir.
respondents are not liable for tort on account of the humiliating, arrogant and Q And after nine o'clock, what did you do?
indifferent acts of their officers and personnel. They posit that since their
75
A I told my brother my Mom was supposed to
be on the Philippine Airlines flight. "Why don't"
we check with PAL instead to see if she was
there?" We tried to comfort each other. I told
him anyway that was a shortest flight from
Chicago to California. We will be with our
mother on this longer flight. So, we checked
with the PAL.
Q What did you find?
A We learned, Yes, my Mom would be on the
flight.
Q Who was that brother?
A Saturnino Saludo.
Q And did you find what was your flight from
San Francisco to the Philippines?
A I do not know the number. It was the
evening flight of the Philippine Airline(s) from
San Francisco to Manila.
Q You took that flight with your mother?
A We were scheduled to, Sir.
Q Now, you could not locate the remains of
your mother in San Francisco could you tell
us what did you feel?
A After we were told that my mother was not
there?
Q After you learned that your mother could
not fly with you from Chicago to California?
A Well, I was very upset. Of course, I wanted
the confirmation that my mother was in the
West Coast. The fliqht was about 5 hours from
Chicago to California. We waited anxiously
all that time on the plane. I wanted to be
assured about my mother's remains. But
there was nothing and we could not get any
assurance from anyone about it.
Q Your feeling when you reached San
Francisco and you could not find out from
the TWA the whereabouts of the remains,
what did you feel?
A Something nobody would be able to
describe unless he experiences it himself. It is
a kind of panic. I think it's a feeling you are
about to go crazy. It is something I do not
want to live through again. (Inting, t.s.n., Aug.
9, 1983, pp. 14-18).
The foregoing does not show any humiliating or arrogant
manner with which the personnel of both defendants treated
the two plaintiffs. Even their alleged indifference is not clearly
established. The initial answer of the TWA personnel at the
counter that they did not know anything about the remains,
and later, their answer that they have not heard anything
about the remains, and the inability of the TWA counter
personnel to inform the two plaintiffs of the whereabouts of
the remains, cannot be said to be total or complete
indifference to the said plaintiffs. At any rate, it is any rude or
discourteous conduct, malfeasance or neglect, the use of
abusive or insulting language calculated to humiliate and
shame passenger or had faith by or on the part of the
employees of the carrier that gives the passenger an action
for damages against the carrier (Zulueta vs. Pan American
World Airways, 43 SCRA 397; Air France vs. Carrascoso, et al.,
18 SCRA 155; Lopez, et al. vs. Pan American World Airways, 16
SCRA 431; Northwest Airlines, Inc. vs. Cuenca, 14 SCRA 1063),
and none of the above is obtaining in the instant case. 67
We stand by respondent court's findings on this point, but only to the extent
where it holds that the manner in which private respondent TWA's employees
dealt with petitioners was not grossly humiliating, arrogant or indifferent as
would assume the proportions of malice or bad faith and lay the basis for an
award of the damages claimed. It must however, be pointed out that the
lamentable actuations of respondent TWA's employees leave much to be
desired, particularly so in the face of petitioners' grief over the death of their
mother, exacerbated by the tension and anxiety wrought by the impasse and
confusion over the failure to ascertain over an appreciable period of time
what happened to her remains.
Airline companies are hereby sternly admonished that it is their duty not only
to cursorily instruct but to strictly require their personnel to be more
accommodating towards customers, passengers and the general public.
After all, common carriers such as airline companies are in the business of
rendering public service, which is the primary reason for their enfranchisement
and recognition in our law. Because the passengers in a contract of carriage
do not contract merely for transportation, they have a right to be treated with
kindness, respect, courtesy and consideration. 68 A contract to transport
passengers is quite different in kind and degree from any other contractual
relation, and generates a relation attended with public duty. The operation of
a common carrier is a business affected with public interest and must be
directed to serve the comfort and convenience of passengers. 69 Passengers
are human beings with human feelings and emotions; they should not be
treated as mere numbers or statistics for revenue.
The records reveal that petitioners, particularly Maria and Saturnino Saludo,
agonized for nearly five hours, over the possibility of losing their mother's mortal
remains, unattended to and without any assurance from the employees of
76
TWA that they were doing anything about the situation. This is not to say that
petitioners were to be regaled with extra special attention. They were,
however, entitled to the understanding and humane consideration called for
by and commensurate with the extraordinary diligence required of common
carriers, and not the cold insensitivity to their predicament. It is hard to believe
that the airline's counter personnel were totally helpless about the situation.
Common sense would and should have dictated that they exert a little extra
effort in making a more extensive inquiry, by themselves or through their
superiors, rather than just shrug off the problem with a callous and uncaring
remark that they had no knowledge about it. With all the modern
communications equipment readily available to them, which could have
easily facilitated said inquiry and which are used as a matter of course by
airline companies in their daily operations, their apathetic stance while not
legally reprehensible is morally deplorable.
Losing a loved one, especially one's, parent, is a painful experience. Our
culture accords the tenderest human feelings toward and in reverence to the
dead. That the remains of the deceased were subsequently delivered, albeit
belatedly, and eventually laid in her final resting place is of little consolation.
The imperviousness displayed by the airline's personnel, even for just that
fraction of time, was especially condemnable particularly in the hour of
bereavement of the family of Crispina Saludo, intensified by anguish due to
the uncertainty of the whereabouts of their mother's remains. Hence, it is quite
apparent that private respondents' personnel were remiss in the observance
of that genuine human concern and professional attentiveness required and
expected of them.
The foregoing observations, however, do not appear to be applicable or
imputable to respondent PAL or its employees. No attribution of discourtesy or
indifference has been made against PAL by petitioners and, in fact, petitioner
Maria Saludo testified that it was to PAL that they repaired after failing to
receive proper attention from TWA. It was from PAL that they received
confirmation that their mother's remains would be on the same flight to Manila
with them.
We find the following substantiation on this particular episode from the
deposition of Alberto A. Lim, PAL's cargo supervisor earlier adverted to,
regarding their investigation of and the action taken on learning of petitioner's
problem:
ATTY. ALBERTO C. MENDOZA:
Yes.
Mr. Lim, what exactly was your procedure
adopted in your so called investigation?
ALBERTO A. LIM:
I called the lead agent on duty at that time
and requested for a copy of airway bill,
transfer manifest and other documents
concerning the shipment.
ATTY ALBERTO C. MENDOZA:
Then, what?
ALBERTO A. LIM:
They proceeded to analyze exactly where
PAL failed, if any, in forwarding the human
remains of Mrs. Cristina (sic) Saludo. And I
found out that there was not (sic) delay in
shipping the remains of Mrs. Saludo to
Manila. Since we received the body from
American Airlines on 28 October at 7:45 and
we expedited the shipment so that it could
have been loaded on our flight leaving at
9:00 in the evening or just barely one hour
and 15 minutes prior to the departure of the
aircraft. That is so (sic) being the case, I
reported to Manila these circumstances. 70
IV. Finally, petitioners insist, as a consequence of the delay in the shipment of
their mother's remains allegedly caused by wilful contractual breach, on their
entitlement to actual, moral and exemplary damages as well as attorney's
fees, litigation expenses, and legal interest.
The uniform decisional tenet in our jurisdiction bolds that moral damages may
be awarded for wilful or fraudulent breach of contract 71 or when such
breach is attended by malice or bad faith. 72 However, in the absence of
strong and positive evidence of fraud, malice or bad faith, said damages
cannot be awarded. 73 Neither can there be an award of exemplary
damages 74 nor of attorney's fees 75 as an item of damages in the absence of
proof that defendant acted with malice, fraud or bad faith.
The censurable conduct of TWA's employees cannot, however, be said to
have approximated the dimensions of fraud, malice or bad faith. It can be
said to be more of a lethargic reaction produced and engrained in some
people by the mechanically routine nature of their work and a racial or
societal culture which stultifies what would have been their accustomed
human response to a human need under a former and different ambience.
Nonetheless, the facts show that petitioners' right to be treated with due
courtesy in accordance with the degree of diligence required by law to be
exercised by every common carrier was violated by TWA and this entitles
them, at least, to nominal damages from TWA alone. Articles 2221 and 2222 of
the Civil Code make it clear that nominal damages are not intended for
indemnification of loss suffered but for the vindication or recognition of a right
violated of invaded. They are recoverable where some injury has been done
but the amount of which the evidence fails to show, the assessment of
damages being left to the discretion of the court according to the
circumstances of the case. 76 In the exercise of our discretion, we find an
award of P40,000.00 as nominal damages in favor of, petitioners to be a
reasonable amount under the circumstances of this case.
WHEREFORE, with the modification that an award of P40,000.00 as and by way
of nominal damages is hereby granted in favor of petitioners to be paid by
77
respondent Trans World Airlines, the appealed decision is AFFIRMED in all other
respects.
SO ORDERED.
LAMBERT S. RAMOS, G.R. No. 184905
- versus - Chico-Nazario,
C.O.L. REALTY CORPORATION,
Respondent. Promulgated:
DECISION
YNARES-SANTIAGO, J.:
The issue for resolution is whether petitioner can be held solidarily
liable with his driver, Rodel Ilustrisimo, to pay respondent C.O.L. Realty the
amount of P51,994.80 as actual damages suffered in a vehicular collision.
The facts, as found by the appellate court, are as follows:
On or about 10:40 oclock in the morning of 8 March
2004, along Katipunan (Avenue), corner Rajah Matanda
(Street), Quezon City, a vehicular accident took place
between a Toyota Altis Sedan bearing Plate Number XDN
210, owned by petitioner C.O.L. Realty Corporation, and
driven by Aquilino Larin (Aquilino), and a Ford Expedition,
owned by x x x Lambert Ramos (Ramos) and driven by Rodel
Ilustrisimo (Rodel), with Plate Number LSR 917. A passenger of
the sedan, one Estela Maliwat (Estela) sustained injuries. She
was immediately rushed to the hospital for treatment.
(C.O.L. Realty) averred that its driver, Aquilino, was
slowly driving the Toyota Altis car at a speed of five to ten
kilometers per hour along Rajah Matanda Street and has just
crossed the center lane of Katipunan Avenue when (Ramos)
Ford Espedition violently rammed against the cars right rear
door and fender. With the force of the impact, the sedan
turned 180 degrees towards the direction where it came
from.
Upon investigation, the Office of the City Prosecutor
of Quezon City found probable cause to indict Rodel, the
driver of the Ford Expedition, for Reckless Imprudence
Resulting in Damage to Property. In the meantime, petitioner
demanded from respondent reimbursement for the expenses
incurred in the repair of its car and the hospitalization of
Estela in the aggregate amount of P103,989.60. The demand
fell on deaf ears prompting (C.O.L. Realty) to file a Complaint
for Damages based on quasi-delict before the Metropolitan
Trial Court of Metro Manila (MeTC), Quezon City, docketed as
Civil Case No. 33277, and subsequently raffled to Branch 42.
As could well be expected, (Ramos) denied liability
for damages insisting that it was the negligence of Aquilino,
(C.O.L. Realtys) driver, which was the proximate cause of the
accident. (Ramos) maintained that the sedan car
crossed Katipunan Avenue from Rajah Matanda
Street despite the concrete barriers placed thereon
prohibiting vehicles to pass through the intersection.
(Ramos) further claimed that he was not in the
vehicle when the mishap occurred. He asserted that he
exercised the diligence of a good father of a family in the
selection and supervision of his driver, Rodel.
Weighing the respective evidence of the parties, the
MeTC rendered the Decision dated 1 March 2006 exculpating
(Ramos) from liability, thus:
WHEREFORE, the instant case is
DISMISSED for lack of merit. The
Counterclaims of the defendant are likewise
DISMISSED for lack of sufficient factual and
legal basis.
SO ORDERED.
The aforesaid judgment did not sit well with (C.O.L.
Realty) so that he (sic) appealed the same before the RTC of
Quezon City, raffled to Branch 215, which rendered the
assailed Decision dated 5 September 2006, affirming the
MeTCs Decision. (C.O.L. Realtys) Motion for Reconsideration
met the same fate as it was denied by the RTC in its Order
dated 5 June 2007.[1]
C.O.L. Realty appealed to the Court of Appeals which affirmed the
view that Aquilino was negligent in crossing Katipunan Avenue from Rajah
Matanda Street since, as per Certification of the Metropolitan Manila
Development Authority (MMDA) dated November 30, 2004, such act is
specifically prohibited. Thus:
This is to certify that as per records found and
available in this office the crossing of vehicles at Katipunan
78
 Avenue from Rajah Matanda Street to Blue Ridge
Subdivision, Quezon City has (sic) not allowed since January
2004 up to the present in view of the ongoing road
construction at the area.[2] (Emphasis supplied)
Barricades were precisely placed along the intersection of Katipunan
Avenue and Rajah Matanda Street in order to prevent motorists from
crossing Katipunan Avenue. Nonetheless, Aquilino crossed Katipunan
Avenue through certain portions of the barricade which were broken, thus
violating the MMDA rule.[3]
However, the Court of Appeals likewise noted that at the time of the
collision, Ramos vehicle was moving at high speed in a busy area that was
then the subject of an ongoing construction (the Katipunan Avenue-Boni
Serrano Avenue underpass), then smashed into the rear door and fender of
the passengers side of Aquilinos car, sending it spinning in a 180-degree
turn.[4] It therefore found the driver Rodel guilty of contributory negligence for
driving the Ford Expedition at high speed along a busy intersection.
Thus, on May 28, 2008, the appellate court rendered the assailed
Decision,[5] the dispositive portion of which reads, as follows:
WHEREFORE, the Decision dated 5 September 2006 of
the Regional Trial Court of Quezon City, Branch 215 is hereby
MODIFIED in that respondent Lambert Ramos is held solidarily
liable with Rodel Ilustrisimo to pay petitioner C.O.L. Realty
Corporation the amount of P51,994.80 as actual damages.
Petitioner C.O.L. Realty Corporations claim for exemplary
damages, attorneys fees and cost of suit are DISMISSED for
lack of merit.
SO ORDERED.
Petitioner filed a Motion for Reconsideration but it was denied. Hence,
the instant petition, which raises the following sole issue:
THE COURT OF APPEALS DECISION IS CONTRARY TO
LAW AND JURISPRUDENCE, AND THE EVIDENCE TO SUPPORT
AND JUSTIFY THE SAME IS INSUFFICIENT.
We resolve to GRANT the petition.
There is no doubt in the appellate courts mind that Aquilinos violation
of the MMDA prohibition against crossing Katipunan Avenue from Rajah
Matanda Street was theproximate cause of the accident. Respondent does
not dispute this; in its Comment to the instant petition, it even conceded that
petitioner was guilty of mere contributory negligence.[6]
Thus, the Court of Appeals acknowledged that:
The Certification dated 30 November 2004 of the
Metropolitan Manila Development Authority (MMDA)
evidently disproved (C.O.L. Realtys) barefaced assertion that
its driver, Aquilino, was not to be blamed for the accident
TO WHOM IT MAY CONCERN:
This is to certify that as per records
found and available in this office the crossing
of vehicles at Katipunan Avenue from Rajah
Matanda Street to Blue Ridge
Subdivision, Quezon City has (sic) not
allowed since January 2004 up to the present
in view of the ongoing road construction at
the area.
This certification is issued upon
request of the interested parties for whatever
legal purpose it may serve.
(C.O.L. Realty) admitted that there were barricades
along the intersection of Katipunan Avenue and Rajah
Matanda Street. The barricades were placed thereon to
caution drivers not to pass through the intersecting roads. This
prohibition stands even if, as (C.O.L. Realty) claimed, the
barriers were broken at that point creating a small gap
through which any vehicle could pass. What is clear to Us is
that Aquilino recklessly ignored these barricades and drove
through it. Without doubt, his negligence is established by the
fact that he violated a traffic regulation. This finds support in
Article 2185 of the Civil Code
Unless there is proof to the contrary,
it is presumed that a person driving a motor
vehicle has been negligent if at the time of
the mishap, he was violating any traffic
regulation.
Accordingly, there ought to be no question on
(C.O.L. Realtys) negligence which resulted in the vehicular
mishap.[7]
79
 However, it also declared Ramos liable vicariously for
Rodels contributory negligence in driving the Ford Expedition at high speed
along a busy intersection. On this score, the appellate court made the
following pronouncement:
As a professional driver, Rodel should have known
that driving his vehicle at a high speed in a major
thoroughfare which was then subject of an on-going
construction was a perilous act. He had no regard to (sic) the
safety of other vehicles on the road. Because of the impact
of the collision, (Aquilinos) sedan made a 180-degree turn as
(Ramos) Ford Expedition careened and smashed into its rear
door and fender. We cannot exculpate Rodel from liability.
Having thus settled the contributory negligence of
Rodel, this created a presumption of negligence on the part
of his employer, (Ramos). For the employer to avoid the
solidary liability for a tort committed by his employee, an
employer must rebut the presumption by presenting
adequate and convincing proof that in the selection and
supervision of his employee, he or she exercises the care and
diligence of a good father of a family. Employers must submit
concrete proof, including documentary evidence, that they
complied with everything that was incumbent on them.
(Ramos) feebly attempts to escape vicarious liability
by averring that Rodel was highly recommended when he
applied for the position of family driver by the Social Service
Committee of his parish. A certain Ramon Gomez, a member
of the churchs livelihood program, testified that a
background investigation would have to be made before an
applicant is recommended to the parishioners for
employment. (Ramos) supposedly tested Rodels driving skills
before accepting him for the job. Rodel has been his driver
since 2001, and except for the mishap in 2004, he has not
been involved in any road accident.
Regrettably, (Ramos) evidence which consisted
mainly of testimonial evidence remained unsubstantiated
and are thus, barren of significant weight. There is nothing on
the records which would support (Ramos) bare allegation of
Rodels 10-year unblemished driving record. He failed to
present convincing proof that he went to the extent of
verifying Rodels qualifications, safety record, and driving
history.
So too, (Ramos) did not bother to refute (C.O.L.
Realtys) stance that his driver was texting with his cellphone
while running at a high speed and that the latter did not slow
down albeit he knew that Katipunan Avenue was then
undergoing repairs and that the road was barricaded with
barriers. The presumption juris tantum that there was
negligence in the selection of driver remains unrebutted. As
the employer of Rodel, (Ramos) is solidarily liable for the
quasi-delict committed by the former.
Certainly, in the selection of prospective employees,
employers are required to examine them as to their
qualifications, experience and service records. In the
supervision of employees, the employer must formulate
standard operating procedures, monitor their implementation
and impose disciplinary measures for the breach thereof.
These, (Ramos) failed to do.[8]
Petitioner disagrees, arguing that since Aquilinos willful disregard of
the MMDA prohibition was the sole proximate cause of the accident, then
respondent alone should suffer the consequences of the accident and the
damages it incurred. He argues:
20. It becomes apparent therefore that the only time
a plaintiff, the respondent herein, can recover damages is if
its negligence was only contributory, and such contributory
negligence was the proximate cause of the accident. It has
been clearly established in this case, however, that
respondents negligence was not merely contributory, but
the sole proximate cause of the accident.
xxxx
22. As culled from the foregoing, respondent was the
sole proximate cause of the accident. Respondents vehicle
should not have been in that position since crossing the said
intersection was prohibited. Were it not for the obvious
negligence of respondents driver in crossing the intersection
that was prohibited, the accident would not have
happened. The crossing of respondents vehicle in a
prohibited intersection unquestionably produced the injury,
and without which the accident would not have occurred.
On the other hand, petitioners driver had the right to be
where he was at the time of the mishap. As correctly
concluded by the RTC, the petitioners driver could not be
80
 expected to slacken his speed while travelling along said
intersection since nobody, in his right mind, would do the
same. Assuming, however, that petitioners driver was indeed
guilty of any contributory negligence, such was not the
proximate cause of the accident considering that again, if
respondents driver did not cross the prohibited intersection,
no accident would have happened. No imputation of any
lack of care on Ilustrisimos could thus be concluded. It is
obvious then that petitioners driver was not guilty of any
negligence that would make petitioner vicariously liable for
damages.
23. As the sole proximate cause of the accident was
respondents own driver, respondent cannot claim damages
from petitioner.[9]
On the other hand, respondent in its Comment merely reiterated the
appellate courts findings and pronouncements, conceding that petitioner is
guilty of mere contributory negligence, and insisted on his vicarious liability as
Rodels employer under Article 2184 of the Civil Code.
Articles 2179 and 2185 of the Civil Code on quasi-delicts apply in this
case, viz:
Article 2179. When the plaintiffs own negligence was
the immediate and proximate cause of his injury, he cannot
recover damages. But if his negligence was only contributory,
the immediate and proximate cause of the injury being the
defendants lack of due care, the plaintiff may recover
damages, but the courts shall mitigate the damages to be
awarded.
Article 2185. Unless there is proof to the contrary, it is
presumed that a person driving a motor vehicle has been
negligent if at the time of the mishap, he was violating any
traffic regulation.
If the master is injured by the negligence of a third person and by the
concurring contributory negligence of his own servant or agent, the latters
negligence is imputed to his superior and will defeat the superiors action
against the third person, assuming of course that the contributory negligence
was the proximate cause of the injury of which complaint is made.[10]
Applying the foregoing principles of law to the instant case, Aquilinos
act of crossing Katipunan Avenue via Rajah Matanda constitutes negligence
because it was prohibited by law. Moreover, it was the proximate cause of
the accident, and thus precludes any recovery for any damages suffered by
respondent from the accident.
Proximate cause is defined as that cause, which, in natural and
continuous sequence, unbroken by any efficient intervening cause, produces
the injury, and without which the result would not have occurred. And more
comprehensively, the 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 effecting 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 ordinary 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.[11]
If Aquilino heeded the MMDA prohibition against crossing Katipunan
Avenue from Rajah Matanda, the accident would not have happened. This
specific untoward event is exactly what the MMDA prohibition was intended
for. Thus, a prudent and intelligent person who resides within the vicinity where
the accident occurred, Aquilino had reasonable ground to expect that the
accident would be a natural and probable result if he crossed Katipunan
Avenue since such crossing is considered dangerous on account of the busy
nature of the thoroughfare and the ongoing construction of the Katipunan-
Boni Avenue underpass. It was manifest error for the Court of Appeals to have
overlooked the principle embodied in Article 2179 of the Civil Code, that
when the plaintiffs own negligence was the immediate and proximate cause
of his injury, he cannot recover damages.
Hence, we find it unnecessary to delve into the issue of Rodels
contributory negligence, since it cannot overcome or defeat Aquilinos
recklessness which is the immediate and proximate cause of the accident.
Rodels contributory negligence has relevance only in the event that Ramos
seeks to recover from respondent whatever damages or injuries he may have
suffered as a result; it will have the effect of mitigating the award of damages
in his favor. In other words, an assertion of contributory negligence in this case
would benefit only the petitioner; it could not eliminate respondents liability for
Aquilinos negligence which is the proximate result of the accident.
WHEREFORE, the petition is GRANTED. The Decision of the Court of
Appeals dated May 28, 2008 in CA-G.R. SP No. 99614 and its Resolution of
October 13, 2008 are hereby REVERSED and SET ASIDE. The Decision of the
Regional Trial Court of Quezon City, Branch 215 dated September 5, 2006
dismissing for lack of merit respondents complaint for damages is
hereby REINSTATED.
81

SO ORDERED.
G.R. No. L-9671 August 23, 1957
CESAR L. ISAAC, plaintiff-appellant,
vs.
A. L. AMMEN TRANSPORTATION CO., INC., defendant-appellee.
Angel S. Gamboa for appellant.
Manuel O. Chan for appellee.
BAUTISTA ANGELO, J.:
A. L. Ammen Transportation Co., Inc., hereinafter referred to as defendant, is a
corporation engaged in the business of transporting passengers by land for
compensation in the Bicol provinces and one of the lines it operates is the one
connecting Legaspi City, Albay with Naga City, Camarines Sur. One of the
buses which defendant was operating is Bus No. 31. On May 31, 1951, plaintiff
boarded said bus as a passenger paying the required fare from Ligao, Albay
bound for Pili, Camarines Sur, but before reaching his destination, the bus
collided with a motor vehicle of the pick-up type coming from the opposite
direction, as a result of which plaintiff's left arm was completely severed and
the severed portion fell inside the bus. Plaintiff was rushed to a hospital in Iriga,
Camarines Sur where he was given blood transfusion to save his life. After four
days, he was transferred to another hospital in Tabaco, Albay, where he
under went treatment for three months. He was moved later to the
Orthopedic Hospital where he was operated on and stayed there for another
two months. For these services, he incurred expenses amounting to P623.40,
excluding medical fees which were paid by defendant.
As an aftermath, plaintiff brought this action against defendants for damages
alleging that the collision which resulted in the loss of his left arm was mainly
due to the gross incompetence and recklessness of the driver of the bus
operated by defendant and that defendant incurred in culpa
contractual arising from its non-compliance with its obligation to transport
plaintiff safely to his, destination. Plaintiff prays for judgment against
defendant as follows: (1) P5,000 as expenses for his medical treatment, and
P3,000 as the cost of an artificial arm, or a total of P8,000; (2) P6,000
representing loss of earning; (3) P75,000 for diminution of his earning capacity;
(4) P50,000 as moral damages; and (5) P10,000 as attorneys' fees and costs of
suit.
Defendant set up as special defense that the injury suffered by plaintiff was
due entirely to the fault or negligence of the driver of the pick-up car which
collided with the bus driven by its driver and to the contributory negligence of
plaintiff himself. Defendant further claims that the accident which resulted in
the injury of plaintiff is one which defendant could not foresee or, though
foreseen, was inevitable.
The after trial found that the collision occurred due to the negligence of the
driver of the pick-up car and not to that of the driver of the bus it appearing
that the latter did everything he could to avoid the same but that
notwithstanding his efforts, he was not able to avoid it. As a consequence, the
court dismissed complaint, with costs against plaintiff. This is an appeal from
said decision.
It appears that plaintiff boarded a bus of defendant as paying passenger
from Ligao, Albay, bound for Pili, Camarines Sur, but before reaching his
destination, the bus collided with a pick-up car which was coming from the
opposite direction and, as a, result, his left arm was completely severed and
fell inside the back part of the bus. Having this background in view, and
considering that plaintiff chose to hold defendant liable on its contractual
obligation to carry him safely to his place of destination, it becomes important
to determine the nature and extent of the liability of a common carrier to a
passenger in the light of the law applicable in this jurisdiction.
In this connection, appellant invokes the rule that, "when an action is based
on a contract of carriage, as in this case, all that is necessary to sustain
recovery is proof of the existence of the contract of the breach thereof by act
or omission", and in support thereof, he cites several Philippine cases. 1 With the
ruling in mind, appellant seems to imply that once the contract of carriage is
established and there is proof that the same was broken by failure of the
carrier to transport the passenger safely to his destination, the liability of the
former attaches. On the other hand, appellee claims that is a wrong
presentation of the rule. It claims that the decisions of this Court in the cases
cited do not warrant the construction sought to be placed upon, them by
appellant for a mere perusal thereof would show that the liability of the carrier
was predicated not upon mere breach of its contract of carriage but upon
the finding that its negligence was found to be the direct or proximate cause
of the injury complained of. Thus, appellee contends that "if there is no
negligence on the part of the common carrier but that the accident resulting
in injuries is due to causes which are inevitable and which could not have
been avoided or anticipated notwithstanding the exercise of that high
degree of care and skill which the carrier is bound to exercise for the safety of
his passengers", neither the common carrier nor the driver is liable therefor.
We believe that the law concerning the liability of a common carrier has now
suffered a substantial modification in view of the innovations introduced by
the new Civil Code. These innovations are the ones embodied in Articles 1733,
1755 and 1756 in so far as the relation between a common carrier and its
passengers is concerned, which, for ready reference, we quote hereunder:
ART. 1733. Common carriers, from the nature of their business and for
reasons of public policy, are bound to observe extra ordinary
diligence in the vigilance over the goods and for the safety of the
passengers transported by them according to all the circumstances
of each case.
Such extraordinary diligence in the vigilance over the goods is further
expressed in articles 1734, 1735, and 1745, Nos. 5, 6, and 7, while the
extraordinary diligence for the safety of the passengers is further set
forth in articles 1755 and 1756.
82
 ART. 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.
ART. 1756. In case of death of or injuries to passengers, common
carriers are presumed to have been at fault or to have acted
negligently, unless they prove that they observed extraordinary
diligence as prescribed in articles 1733 and 1755.
The Code Commission, in justifying this extraordinary diligence required of a
common carrier, says the following:
A common carrier is bound to carry the passengers safely as far as
human care and foresight can provide, using the utmost deligence of
very cautions persons, with due regard for all circumstances. This
extraordinary diligence required of common carriers is calculated to
protect the passengers from the tragic mishaps that frequently occur
in connection with rapid modern transportation. This high standard of
care is imperatively demanded by the precariousness of human life
and by the consideration that every person must in every way be
safeguarded against all injury. (Report of the Code Commission, pp.
35-36)" (Padilla, Civil Code of the Philippines, Vol. IV, 1956 ed., p. 197).
From the above legal provisions, we can make the following restatement of
the principles governing the liability of a common carrier: (1) the liability of a
carrier is contractual and arises upon breach of its obligation. There is breach
if it fails to exert extraordinary diligence according to all circumstances of
each case; (2) a carrier is obliged to carry its passenger with the utmost
diligence of a very cautious person, having due regard for all the
circumstances; (3) a carrier is presumed to be at fault or to have acted
negligently in case of death of, or injury to, passengers, it being its duty to
prove that it exercised extraordinary diligence; and (4) the carrier is not an
insurer against all risks of travel.
The question that now arises is: Has defendant observed extraordinary
diligence or the utmost diligence of every cautious person, having due regard
for all circumstances, in avoiding the collision which resulted in the injury
caused to the plaintiff?
After examining the evidence in connection with how the collision occurred,
the lower court made the following finding:
Hemos examinado muy detenidamente las pruebas presentadas en
la vista, principalmente, las declaraciones que hemos acotado
arriba, y hernos Ilegado a la conclusion de que el demandado ha
hecho, todo cuanto estuviere de su parte para evitar el accidente,
pero sin embargo, no ha podido evitarlo.
EI hecho de que el demandado, antes del choque, tuvo que hacer
pasar su truck encima de los montones de grava que estaban
depositados en la orilla del camino, sin que haya ido mas alla, por el
grave riesgo que corrian las vidas de sus pasajeros, es prueba
concluyente de lo que tenemos dicho, a saber: que el cuanto
esuba de su parte, para evitar el accidente, sin que haya
podidoevitardo, por estar fuera de su control.
The evidence would appear to support the above finding. Thus, it appears
that Bus No. 31, immediately prior to the collision, was running at a moderate
speed because it had just stopped at the school zone of Matacong, Polangui,
Albay. The pick-up car was at full speed and was running outside of its proper
lane. The driver of the bus, upon seeing the manner in which the pick-up was
then running, swerved the bus to the very extreme right of the road until its
front and rear wheels have gone over the pile of stones or gravel situated on
the rampart of the road. Said driver could not move the bus farther right and
run over a greater portion of the pile, the peak of which was about 3 feet
high, without endangering the safety of his passengers. And notwithstanding
all these efforts, the rear left side of the bus was hit by the pick-up car.
Of course, this finding is disputed by appellant who cannot see eye to eye
with the evidence for the appellee and insists that the collision took place
because the driver of the bus was going at a fast speed. He contends that,
having seen that a car was coming from the opposite direction at a distance
which allows the use of moderate care and prudence to avoid an accident,
and knowing that on the side of the road along which he was going there
was a pile of gravel, the driver of the bus should have stopped and waited for
the vehicle from the opposite direction to pass, and should have proceeded
only after the other vehicle had passed. In other words, according to
appellant, the act of the driver of the bus in squeezing his way through of the
bus in squeezing his way through between the oncoming pick-up and the pile
of gravel under the circumstances was considered negligent.
But this matter is one of credibility and evaluation of the evidence. This is
evidence. This is the function of the trial court. The trial court has already
spoken on this matter as we have pointed out above. This is also a matter of
appreciation of the situation on the part of the driver. While the position taken
by appellant appeals more to the sense of caution that one should observe in
a given situation to avoid an accident or mishap, such however can not
always be expected from one who is placed suddenly in a predicament
where he is not given enough time to take the course of action as he should
under ordinary circumstances. One who is placed in such a predicament
cannot exercise such coolness or accuracy of judgment as is required of him
under ordinary circumstances and he cannot therefore be expected to
observe the same judgment, care and precaution as in the latter. For this
reason, authorities abound where failure to observe the same degree of care
that as ordinary prudent man would exercise under ordinary circumstances
when confronted with a sadden emergency was held to be warranted and a
justification to exempt the carrier from liability. Thus, it was held that "where a
carrier's employee is confronted with a sudden emergency, the fact that he is
obliged to act quickly and without a chance for deliberation must be taken
into account, and he is held to the some degree of care that he would
otherwise be required to exercise in the absence of such emergency but must
exercise only such care as any ordinary prudent person would exercise under
83
like circumstances and conditions, and the failure on his part to exercise the
best judgement the case renders possible does not establish lack of care and
skill on his part which renders the company, liable. . . . (13 C. J. S., 1412; 10 C.
J.,970). Considering all the circumstances, we are persuaded to conclude
that the driver of the bus has done what a prudent man could have done to
avoid the collision and in our opinion this relieves appellee from legibility under
our law.
A circumstances which miliates against the stand of appellant is the fact
borne out by the evidence that when he boarded the bus in question, he
seated himself on the left side thereof resting his left arm on the window sill but
with his left elbow outside the window, this being his position in the bus when
the collision took place. It is for this reason that the collision resulted in the
severance of said left arm from the body of appellant thus doing him a great
damage. It is therefore apparent that appellant is guilty of contributory
negligence. Had he not placed his left arm on the window sill with a portion
thereof protruding outside, perhaps the injury would have been avoided as is
the case with the other passenger. It is to be noted that appellant was the
only victim of the collision.
It is true that such contributory negligence cannot relieve appellee of its
liability but will only entitle it to a reduction of the amount of damage caused
(Article 1762, new Civil Code), but this is a circumstance which further militates
against the position taken by appellant in this case.
It is the prevailing rule that it is negligence per se for a passenger on a
railroad voluntarily or inadvertently to protrude his arm, hand, elbow,
or any other part of his body through the window of a moving car
beyond the outer edge of the window or outer surface of the car, so
as to come in contact with objects or obstacles near the track, and
that no recovery can be had for an injury which but for such
negligence would not have been sustained. (10 C. J. 1139)
Plaintiff, (passenger) while riding on an interurban car, to flick the
ashes, from his cigar, thrust his hand over the guard rail a sufficient
distance beyond the side line of the car to bring it in contact with the
trunk of a tree standing beside the track; the force of the blow
breaking his wrist. Held, that he was guilty of contributory negligence
as a matter of law. (Malakia vs. Rhode Island Co., 89 A., 337.)
Wherefore, the decision appealed from is affirmed, with cost against
appellant.
G.R. No. 114167 July 12, 1995
COASTWISE LIGHTERAGE CORPORATION, petitioner,
vs.
COURT OF APPEALS and the PHILIPPINE GENERAL INSURANCE
COMPANY, respondents.
RESOLUTION
FRANCISCO, R., J.:
This is a petition for review of a Decision rendered by the Court of Appeals,
dated December 17, 1993, affirming Branch 35 of the Regional Trial Court,
Manila in holding that herein petitioner is liable to pay herein private
respondent the amount of P700,000.00, plus legal interest thereon, another
sum of P100,000.00 as attorney's fees and the cost of the suit.
The factual background of this case is as follows:
Pag-asa Sales, Inc. entered into a contract to transport molasses from the
province of Negros to Manila with Coastwise Lighterage Corporation
(Coastwise for brevity), using the latter's dumb barges. The barges were towed
in tandem by the tugboat MT Marica, which is likewise owned by Coastwise.
Upon reaching Manila Bay, while approaching Pier 18, one of the barges,
"Coastwise 9", struck an unknown sunken object. The forward buoyancy
compartment was damaged, and water gushed in through a hole "two
inches wide and twenty-two inches long" 1 As a consequence, the molasses at
the cargo tanks were contaminated and rendered unfit for the use it was
intended. This prompted the consignee, Pag-asa Sales, Inc. to reject the
shipment of molasses as a total loss. Thereafter, Pag-asa Sales, Inc. filed a
formal claim with the insurer of its lost cargo, herein private respondent,
Philippine General Insurance Company (PhilGen, for short) and against the
carrier, herein petitioner, Coastwise Lighterage. Coastwise Lighterage denied
the claim and it was PhilGen which paid the consignee, Pag-asa Sales, Inc.,
the amount of P700,000.00, representing the value of the damaged cargo of
molasses.
In turn, PhilGen then filed an action against Coastwise Lighterage before the
Regional Trial Court of Manila, seeking to recover the amount of P700,000.00
which it paid to Pag-asa Sales, Inc. for the latter's lost cargo. PhilGen now
claims to be subrogated to all the contractual rights and claims which the
consignee may have against the carrier, which is presumed to have violated
the contract of carriage.
The RTC awarded the amount prayed for by PhilGen. On Coastwise
Lighterage's appeal to the Court of Appeals, the award was affirmed.
Hence, this petition.
There are two main issues to be resolved herein. First, whether or not petitioner
Coastwise Lighterage was transformed into a private carrier, by virtue of the
contract of affreightment which it entered into with the consignee, Pag-asa
Sales, Inc. Corollarily, if it were in fact transformed into a private carrier, did it
exercise the ordinary diligence to which a private carrier is in turn bound?
Second, whether or not the insurer was subrogated into the rights of the
consignee against the carrier, upon payment by the insurer of the value of the
consignee's goods lost while on board one of the carrier's vessels.
On the first issue, petitioner contends that the RTC and the Court of Appeals
erred in finding that it was a common carrier. It stresses the fact that it
contracted with Pag-asa Sales, Inc. to transport the shipment of molasses from
Negros Oriental to Manila and refers to this contract as a "charter agreement".
It then proceeds to cite the case of Home Insurance Company vs. American
Steamship Agencies, Inc. 2 wherein this Court held: ". . . a common carrier
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undertaking to carry a special cargo or chartered to a special person only
becomes a private carrier."
Petitioner's reliance on the aforementioned case is misplaced. In its entirety,
the conclusions of the court are as follows:
Accordingly, the charter party contract is one of
affreightment over the whole vessel, rather than a demise. As
such, the liability of the shipowner for acts or negligence of its
captain and crew, would remain in the absence of
stipulation. 3
The distinction between the two kinds of charter parties (i.e. bareboat or
demise and contract of affreightment) is more clearly set out in the case
of Puromines, Inc. vs. Court of Appeals, 4 wherein we ruled:
Under the demise or bareboat charter of the vessel, the
charterer will generally be regarded as the owner for the
voyage or service stipulated. The charterer mans the vessel
with his own people and becomes the owner pro hac vice,
subject to liability to others for damages caused by
negligence. To create a demise, the owner of a vessel must
completely and exclusively relinquish possession, command
and navigation thereof to the charterer, anything short of
such a complete transfer is a contract of affreightment (time
or voyage charter party) or not a charter party at all.
On the other hand a contract of affreightment is one in which
the owner of the vessel leases part or all of its space to haul
goods for others. It is a contract for special service to be
rendered by the owner of the vessel and under such contract
the general owner retains the possession, command and
navigation of the ship, the charterer or freighter merely
having use of the space in the vessel in return for his payment
of the charter hire. . . . .
. . . . An owner who retains possession of the ship though the
hold is the property of the charterer, remains liable as carrier
and must answer for any breach of duty as to the care,
loading and unloading of the cargo. . . .
Although a charter party may transform a common carrier into a private one,
the same however is not true in a contract of affreightment on account of the
aforementioned distinctions between the two.
Petitioner admits that the contract it entered into with the consignee was one
of affreightment. 5 We agree. Pag-asa Sales, Inc. only leased three of
petitioner's vessels, in order to carry cargo from one point to another, but the
possession, command and navigation of the vessels remained with petitioner
Coastwise Lighterage.
Pursuant therefore to the ruling in the aforecited Puromines case, Coastwise
Lighterage, by the contract of affreightment, was not converted into a private
carrier, but remained a common carrier and was still liable as such.
The law and jurisprudence on common carriers both hold that the mere proof
of delivery of goods in good order to a carrier and the subsequent arrival of
the same goods at the place of destination in bad order makes for a prima
facie case against the carrier.
It follows then that the presumption of negligence that attaches to common
carriers, once the goods it transports are lost, destroyed or deteriorated,
applies to the petitioner. This presumption, which is overcome only by proof of
the exercise of extraordinary diligence, remained unrebutted in this case.
The records show that the damage to the barge which carried the cargo of
molasses was caused by its hitting an unknown sunken object as it was
heading for Pier 18. The object turned out to be a submerged derelict vessel.
Petitioner contends that this navigational hazard was the efficient cause of
the accident. Further it asserts that the fact that the Philippine Coastguard
"has not exerted any effort to prepare a chart to indicate the location of
sunken derelicts within Manila North Harbor to avoid navigational
accidents" 6 effectively contributed to the happening of this mishap. Thus,
being unaware of the hidden danger that lies in its path, it became impossible
for the petitioner to avoid the same. Nothing could have prevented the
event, making it beyond the pale of even the exercise of extraordinary
diligence.
However, petitioner's assertion is belied by the evidence on record where it
appeared that far from having rendered service with the greatest skill and
utmost foresight, and being free from fault, the carrier was culpably remiss in
the observance of its duties.
Jesus R. Constantino, the patron of the vessel "Coastwise 9" admitted that he
was not licensed. The Code of Commerce, which subsidiarily governs
common carriers (which are primarily governed by the provisions of the Civil
Code) provides:
Art. 609. Captains, masters, or patrons of vessels must be
Filipinos, have legal capacity to contract in accordance with
this code, and prove the skill capacity and qualifications
necessary to command and direct the vessel, as established
by marine and navigation laws, ordinances or regulations,
and must not be disqualified according to the same for the
discharge of the duties of the position. . . .
Clearly, petitioner Coastwise Lighterage's embarking on a voyage with an
unlicensed patron violates this rule. It cannot safely claim to have exercised
extraordinary diligence, by placing a person whose navigational skills are
questionable, at the helm of the vessel which eventually met the fateful
accident. It may also logically, follow that a person without license to
navigate, lacks not just the skill to do so, but also the utmost familiarity with the
usual and safe routes taken by seasoned and legally authorized ones. Had the
patron been licensed, he could be presumed to have both the skill and the
knowledge that would have prevented the vessel's hitting the sunken derelict
ship that lay on their way to Pier 18.
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As a common carrier, petitioner is liable for breach of the contract of at the legal rate computed from March 29, 1989, the date the complaint was
carriage, having failed to overcome the presumption of negligence with the filed until fully paid and another sum of P100,000.00 as attorney's fees and
loss and destruction of goods it transported, by proof of its exercise of costs" 10 is likewise hereby AFFIRMED
extraordinary diligence. SO ORDERED.
On the issue of subrogation, which petitioner contends as inapplicable in this
case, we once more rule against the petitioner. We have already found
petitioner liable for breach of the contract of carriage it entered into with
Pag-asa Sales, Inc. However, for the damage sustained by the loss of the
cargo which petitioner-carrier was transporting, it was not the carrier which
paid the value thereof to Pag-asa Sales, Inc. but the latter's insurer, herein
private respondent PhilGen.
Article 2207 of the Civil Code is explicit on this point:
Art. 2207. If the plaintiffs property has been insured, and he
has received indemnity from the insurance company for the
injury or loss arising out of the wrong or breach of contract
complained of, the insurance company shall be subrogated
to the rights of the insured against the wrongdoer or the
person who violated the contract. . . .
This legal provision containing the equitable principle of subrogation has been
applied in a long line of cases including Compania Maritima v. Insurance
Company of North America; 7 Fireman's Fund Insurance Company v. Jamilla &
Company, Inc., 8 and Pan Malayan Insurance Corporation v. Court of
Appeals, 9 wherein this Court explained:
Article 2207 of the Civil Code is founded on the well-settled
principle of subrogation. If the insured property is destroyed or
damaged through the fault or negligence of a party other
than the assured, then the insurer, upon payment to the
assured will be subrogated to the rights of the assured to
recover from the wrongdoer to the extent that the insurer has
been obligated to pay. Payment by the insurer to the assured
operated as an equitable assignment to the former of all
remedies which the latter may have against the third party
whose negligence or wrongful act caused the loss. The right
of subrogation is not dependent upon, nor does it grow out
of, any privity of contract or upon written assignment of
claim. It accrues simply upon payment of the insurance claim
by the insurer.
Undoubtedly, upon payment by respondent insurer PhilGen of the amount of
P700,000.00 to Pag-asa Sales, Inc., the consignee of the cargo of molasses
totally damaged while being transported by petitioner Coastwise Lighterage,
the former was subrogated into all the rights which Pag-asa Sales, Inc. may
have had against the carrier, herein petitioner Coastwise Lighterage.
WHEREFORE, premises considered, this petition is DENIED and the appealed
decision affirming the order of Branch 35 of the Regional Trial Court of Manila
for petitioner Coastwise Lighterage to pay respondent Philippine General
Insurance Company the "principal amount of P700,000.00 plus interest thereon
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