Transpo Clean

THE LAW ON TRANSPORTATION AND PUBLIC UTILITIES
SWU LAW- PHINMA

Atty. Jandel V. Ondangan
Instructor
COURSE SYLLABUS
PART I - COMMON CARRIERS ..................................................................................................................................... 7
Definition of Contract of Transportation.................................................................................................................... 7
Laws and Jurisprudence: ............................................................................................................................ 7
R.A 4136: land Transportation and Traffic Code ................................................................................................ 7
Unsworth Transportation International v. CA ............................................. Error! Bookmark not defined.
Agustin Dela Torre v. CA ........................................................................................................................... 27
Parties ............................................................................................................................................................... 32
1.1 Carriage of Passengers / Contract to Carry Passenger ....................................................................... 32
1.2 Carriage of Goods/ Contract to carry Goods ...................................................................................... 32
Laws and Jurisprudence: .................................................................................................................................. 32
Baliwag Transit Corporation v CA ............................................................................................................. 32
Everett Steamship Corp. v. CA ................................................................................................................ 35
British Airways v. CA ............................................................................................................................... 38
Perfection - ....................................................................................................................................................... 41
1. Contract to Carry - Consensual Contract (meeting of the minds) ................................................................ 41
2. Carriage Contract - Real Contract ................................................................................................................. 41
a) Carriage of Goods - Consensual....................................................................... Error! Bookmark not defined.
Buses, Jeepneys, and Street cars- Once the passenger steps foot If the BJS slows down, there is
already a continuous offer and reasonable time ........................................ Error! Bookmark not defined.
Trains- .......................................................................................................... Error! Bookmark not defined.
British Airways v. CA February 9, 1993, 218 SCRA 699 - XXX XXX .................................................................... 41
Mauro Ganzon v. CA No. L-48757, May 30, 1988 .................................................................................... 41
Korean Airlines Co. ltd v. CA August 3, 1994 234 SCRA 717 ..................................................................... 44
Dangwa Transportation Co., Inc. v CA October 7, 1991, 202 SCRA 574 ................................................... 48
Common carrier -........................................................................................................................................... 52
Public service - .......................................................................................................................................... 52
Laws and Jurisprudence: .......................................................................................................................... 52
Article 1732 of the New Civil Code ........................................................................................................... 52
Commonwealth Act No. 146 section 13 par. b as amended .................................................................... 52
De Guzman v. CA ...................................................................................................................................... 52
Test: .................................................................................................................................................................. 56
1.3 First Philippine Industrial Corporation v. CA .................................................................................... 56

1.4 Estrellita M. Bascos v. CA .................................................................................................................. 60
1.5 FGU Insurance Corporation v. G. P. Sarmiento Trucking Corporations ........................................... 65
1.6 Sps. Teodoro and Nanette Perena v. Sps Teresita Phil. Nicolas, et al. ............................................. 69
1.7 National Steel Corporation v. CA ...................................................................................................... 79
1.8 Sps Cruz v. Holiday ............................................................................................................................ 93
Characteristics .................................................................................................................................................. 99
Broader concept ....................................................................................................................................... 99
Ancillary business ..................................................................................................................................... 99
Limited clientele ....................................................................................................................................... 99
Means of transportation .......................................................................................................................... 99
Article 1732 of the New Civil Code ........................................................................................................... 99
National Steel Corporation v. CA .............................................................................................................. 99
a. Asia Lighterage and Shipping, Inc. v. CA ............................................................................................... 99
b. Fabre, Jr. v. CA .................................................................................................................................... 104
c. Phil. American general insurance Company v. PKS Shipping Co ......................................................... 111
d. Virgines Calvo v. UCPB General Insurance Co .................................................................................... 115
e. Caltex(phil) v. Sulpicio Lines ............................................................................................................... 120
f. Loadstar Shipping Co. v. Pioneer Asia Insurance .............................................................................. 126
g. Home Assurance Corp ........................................................................................................................ 133
h. Planters v. CA .................................................................................................................................... 135
i. A.F Sanchez Brokerage Inc. v. CA ......................................................................................................... 139
2. Effect of Charter Party ........................................................................................................................................ 145
3. Common carrier v. Private Carrier ...................................................................................................................... 145
Laws and Jurisprudence: ................................................................................................................................ 145
a. Cebu Salvage Corporation v. Philippine Home Assurance Corp ......................................................... 145
b. Valenzuela Hardwood and Industrial Supply, Inc. v. CA ................................................................... 147
c. Loadmasters Customs Services, Inc. Glodel Brokerage Corporation .................................................. 156
4. Common carrier v. Other contracts .................................................................................................................... 164
4.1 Distinguish from ....................................................................................................................................... 164
a. Towage................................................................................................................................................ 164
b. Arrastre ............................................................................................................................................... 164
c. Stevedoring ......................................................................................................................................... 164
d. Travel Agency ..................................................................................................................................... 164
Laws and Jurisprudence.................................................................................................................................. 164
a. Cargolift Shipping Inc. V. L. Actuario Marketing Co. and Skyland Brokerage ................................... 164
b. Mindanao Terminal and Brokerage services v. Phoenix Assurance Co .............................................. 170

c. Cebu Arrastre Services v. Collector of Internal Revenue .................................................................. 175
d. Crisostomo v. CA ............................................................................................................................... 178
5. Governing Laws .................................................................................................................................................. 183
5.1 Article 1766 of the New Civil Code(NCC) .......................................................................................... 183
5.2 Article 1753 NCC ............................................................................................................................... 183
5.3 Article 1732-1766 NCC...................................................................................................................... 183
5.4 National Dev. Company v. CA ......................................................................................................... 183
5.5 Mapa v. CA ...................................................................................................................................... 188
5.6 Alitalia v. Intermediate Appellate Court ......................................................................................... 196
5.7 Philippine Charter Insurance Corpo v. Neptune Orient Lines ........................................................ 199
5.8 Warsaw convetion ............................................................................................................................ 205
5.9 COGSA............................................................................................................................................... 205
5.10 RA 4136........................................................................................................................................... 205
5.11 RA 9497........................................................................................................................................... 205
6. Nature of business .............................................................................................................................................. 205
7. Registered owner rule and Kabit System ........................................................................................................... 205
7.1 Registration laws ...................................................................................................................................... 205
Compulsory registration of motor vehicles .................................................................................... 205
7.2 Registered owner rule .............................................................................................................................. 205
7.3 Kabit system ............................................................................................................................................. 205
7.4 Pari Delicto Rule ....................................................................................................................................... 205
7.5 Aircrafts and vessels ................................................................................................................................. 205
a. PCI leasing and finance, Inc. v. UCPB General Insurance Co .............................................................. 206
b. Equitable Leasing Corporation v. Lucita Suyon .................................................................................. 210
c. Aguilar v. Commercial Savings Bank ................................................................................................. 215
d. Perez v. Gutierrez ............................................................................................................................. 225
e. Aberlardo Lim ..................................................................................................................................... 227
f. Teja Marketing v. Intermediate Appellate Court ................................................................................ 231
g. Lita Enterprises, Inc. v. IAC ............................................................................................................... 233
h. Mariano C Mendoza and Lim v. SPS Gomez and Gomez .................................................................. 235
i. Estela Crisostomo v. CA and Caravan Travel and Tours .................................................................... 243
8. Boundary System ................................................................................................................................................ 248
a. Gregorio George Amante and Vicente Amante vs. Bibiano Serwelas ....................................... 249
b. Oscar Villarama Jr v. CA ...................................................................................................................... 251
c. Martin Lantaco et al. v. City Judge Francisco R. Llamas .................................................................... 264

d. Isabelo Doce v. WCC and Dadao Jadao ............................................................................................ 269
e. Rodolfo J. Serrano v. Severino Santos Transit and/or Severino Santos ............................................. 270
Obligation of the Carrier......................................................................................................................................... 273
Philam Insurance Co. v. Chartis Phil Insurance July 23, 2014 ........................................................... 273
Gregorio Anuran, Maria Maligaya v. Buno et al May 20 1966 ......................................................... 281
Duty to accept ........................................................................................................................................................ 283
FC Fisher v. Yangco Steamship Co. G.R. No. 8095 November 5 1914 31 Phil 1 ............................... 283
Valid grounds for non- acceptance......................................................................................................................... 291
Article 356-357-358 of the Code of Commerce(COC) ...................................................................... 291
Article 1742 of the NCC .................................................................................................................... 291
Duty to deliver goods ............................................................................................................................................. 291
Consequences of delay ........................................................................................................................................... 291
Article 1740 NCC ............................................................................................................................... 291
Article 1747 NCC ............................................................................................................................... 291
A. 370 COC ........................................................................................................................................ 291
A. 371 COC ........................................................................................................................................ 292
A. 372 COC ........................................................................................................................................ 292
A. 373 COC ........................................................................................................................................ 292
A. 374 COC ........................................................................................................................................ 292
Rights of passengers in case of delay ..................................................................................................................... 292
Article 698 COC ................................................................................................................................. 292
Trans-asia Shipping Lines, Inc. v. CA .................................................................................................... 292
Marina regulation Mem. Circular no. 112 ........................................................................................ 297
Place of delivery ..................................................................................................................................................... 297
A. 360 COC ........................................................................................................................................ 298
A. 368 COC ........................................................................................................................................ 298
A. 369 COC ........................................................................................................................................ 298
To whom delivered ................................................................................................................................................. 298
Delay to transport Passengers ................................................................................................................................ 298
Marina Memorandum Circular no. 112 December 15, 1995 ................................................................. 298
Duty to Exercise Extra-ordinary Diligence .............................................................................................................. 299
1.1 Code of commerce provisions .......................................................................................................... 299
1.2 Presumption of negligence ............................................................................................................... 299
1.3 Duration of Duty in Carriage of Goods ............................................................................................. 299
1.4 Commencement of Duty in Carriage of Passengers ......................................................................... 299
Laws and jurisprudence: ......................................................................................................................................... 299
a. Article 1733 of the NCC ...................................................................................................................... 299

b. Artilc 1755 of the NCC ........................................................................................................................ 299
c. Article 1736 of the NCC ....................................................................................................................... 299
d. Article of 1737 of the NCC .................................................................................................................. 299
e. Article of 1738 of the NCC .................................................................................................................. 299
Mariano v. Calleja July 31, 2009 ............................................................................................................. 299
Belgian Overseas Chartering and Shipping v. Phil. First Ins. Co., June 5, 2002 ...................................... 301
Ganzon v. CA G.R. No. L-48757 May 30, 1998 ........................................................................................ 306
Saludo v. CA ............................................................................................................................................ 307
Republic of the Philippines v. Lorenzo Shipping February 7, 2005 ........................................................ 324
Regional Container Lines v. Netherlands Insurance Co. September 4, 2009 ......................................... 327
Defenses of Common Carriers ................................................................................................................................ 329
Proximate Causation ........................................................................................................................ 329
New Civil Code Provisions ................................................................................................................ 329
Defense in Carriage of Passengers ................................................................................................... 329
Fortuitous event ............................................................................................................................... 330
Public enemy .................................................................................................................................... 330
Improper Packing.............................................................................................................................. 330
Order of Public Authority ................................................................................................................. 330
Defenses of Carriage of Passengers.................................................................................................. 330
Acts of Employees ............................................................................................................................ 330
Sabena Belgian World Airlines vs. CA ..................................................................................................... 330
Leopoldo Poblete vs. Donato Fabros ...................................................................................................... 334
Collin A. Morris vs. CA............................................................................................................................. 335
Antonia Maranan vs. Pascual Perez, et al,.............................................................................................. 339
Act of Other Passengers and 3rd persons .............................................................................................................. 341
Jose Pilapil vs. CA .................................................................................................................................... 341
Passengers baggages ............................................................................................................................................. 344
1.5 Define baggage ................................................................................................................................. 344
1.6 Checked-in-Baggage ......................................................................................................................... 344
1.7 Hand Carried baggage ...................................................................................................................... 344
Philippine Airlines Inc. vs. CA .................................................................................................................. 344
British Airways vs. CA ............................................................................................................................. 357
Philippine Airlines Inc. vs. Hon. Adriano Savillo, et. al.,.......................................................................... 362
Obligations of Shipper, Consignee and Passenger ................................................................................................. 365
1.8 Negligence of Shipper or Passenger ................................................................................................. 365
1.9 Payment of Freight ........................................................................................................................... 365
1.10 Who will pay the freight ................................................................................................................. 365

1.11 Time to pay the freight ................................................................................................................... 365
1.12 Carriers lien.................................................................................................................................... 365
1.13 Payment of Demurrage .................................................................................................................. 365

PART I - COMMON CARRIERS
Art 1732- Common Carriers are persons, corporations, firms or associations engaged in the business of carrying
or transporting passengers or goods or both, by land, water, or air, for compensation, offering their services to
the public.
Common Carrier one that holds itself out as ready to engage in the transportation of goods for hire as a public
employment and not as a casual occupation. (De Guzman v. CA, G.R. No. L-47822, 22 December 1988)
Definition of Contract of Transportation
The movement of persons or things from one place to another, by a carrier.

(Blacks Law Dictionary)
A contract of transportation is whereby a certain person or association of persons obligate

themselves to transport persons, things, news from one place to another for a fixed price. It is the
removal of goods or persons from one place to another.
Does not presume that the carrier is a common carrier.
Laws and Jurisprudence:
R.A 4136: land Transportation and Traffic Code
AN ACT TO COMPILE THE LAWS RELATIVE TO LAND TRANSPORTATION AND TRAFFIC RULES, TO CREATE A LAND
TRANSPORTATION COMMISSION AND FOR OTHER PURPOSES
Section 1. Title of Act. - This Act shall be known as the "Land Transportation and Traffic Code."
Section 2. Scope of Act. - The provisions of this Act shall control, as far as they apply, the registration and operation of
motor vehicles and the licensing of owners, dealers, conductors, drivers, and similar matters.
Section 3. Words and phrases defined. - As used in this Act:
(a) "Motor Vehicle" shall mean any vehicle propelled by any power other than muscular power using the public
highways, but excepting road rollers, trolley cars, street-sweepers, sprinklers, lawn mowers, bulldozers, graders,
fork-lifts, amphibian trucks, and cranes if not used on public highways, vehicles which run only on rails or tracks, and
tractors, trailers and traction engines of all kinds used exclusively for agricultural purposes.
Trailers having any number of wheels, when propelled or intended to be propelled by attachment to a motor vehicle,
shall be classified as separate motor vehicle with no power rating.
(b) "Passenger automobiles" shall mean all pneumatic-tire vehicles of types similar to those usually known under the
following terms: touring car, command car, speedster, sports car, roadster, jeep, cycle, car (except motor wheel and
similar small outfits which are classified with motorcycles), coupe, landaulet, closed car, limousine, cabriolet, and sedan.
Motor vehicles with changed or rebuilt bodies, such as jeepneys, jitneys, or station wagons, using a chassis of the usual
pneumatic-tire passenger automobile type, shall also be classified as passenger automobile, if their net allowable
carrying capacity, as determined by the Commissioner of Land Transportation, does not exceed nine passengers and if
they are not used primarily for carrying freight or merchandise.
The distinction between "passenger truck" and "passenger automobile" shall be that of common usage: Provided, That
a motor vehicle registered for more than nine passengers shall be classified as "truck": And Provided, further, That a
"truck with seating compartments at the back not used for hire shall be registered under special "S" classifications. In
case of dispute, the Commissioner of Land Transportation shall determine the classification to which any special type of
motor vehicle belongs.
(c) "Articulated vehicle" shall mean any motor vehicle with a trailer having no front axle and so attached that part of the
trailer rests upon motor vehicle and a substantial part of the weight of the trailer and of its load is borne by the motor
vehicle. Such a trailer shall be called as "semi-trailer."
(d) "Driver" shall mean every and any licensed operator of a motor vehicle.
(e) "Professional driver" shall mean every and any driver hired or paid for driving or operating a motor vehicle, whether
for private use or for hire to the public.
Any person driving his own motor vehicle for hire is a professional driver.
(f) "Owner" shall mean the actual legal owner of a motor vehicle, in whose name such vehicle is duly registered with
the Land Transportation Commission.
The "owner" of a government-owned motor vehicle is the head of the office or the chief of the Bureau to which the
said motor vehicle belongs.
(g) "Dealer" shall mean every person, association, partnership, or corporation making, manufacturing, constructing,
assembling, remodeling, rebuilding, or setting up motor vehicles; and every such entity acting as agent for the sale of
one or more makes, styles, or kinds of motor vehicles, dealing in motor vehicles, keeping the same in stock or selling
same or handling with a view to trading same.
(h) "Garage" shall mean any building in which two or more motor vehicles, either with or without drivers, are kept
ready for hire to the public, but shall not include street stands, public service stations, or other public places designated
by proper authority as parking spaces for motor vehicles for hire while awaiting or soliciting business.
(i) "Gross weight" shall mean the measured weight of a motor vehicle plus the maximum allowable carrying capacity in
merchandise, freight and/or passenger, as determined by the Commissioner of Land Transportation.
(j) "Highways" shall mean every public thoroughfare, public boulevard, driveway, avenue, park, alley and callejon, but
shall not include roadway upon grounds owned by private persons, colleges, universities, or other similar institutions.
(k) "The Commissioner of Land Transportation or his deputies" shall mean the actual or acting chief of the Land
Transportation Commission or such representatives, deputies, or assistants as he may, with the approval of the
Secretary of Public Works and Communications, appoint or designate in writing for the purpose contemplated by this
Act.
(l) "Parking or parked", for the purposes of this Act, shall mean that a motor vehicle is "parked" or "parking" if it has
been brought to a stop on the shoulder or proper edge of a highway, and remains inactive in that place or close thereto
for an appreciable period of time. A motor vehicle which properly stops merely to discharge a passenger or to take in a
waiting passenger, or to load or unload a small quantity of freight with reasonable dispatch shall not be considered as
"parked", if the motor vehicle again moves away without delay.
(m) "Tourist" shall mean a foreigner who travels from place to place for pleasure or culture.
ARTICLE III
Administration of Act
Section 4. Creation of the Commission. -
(a) There is created under the Department of Public Works and Communications an office which shall be designated
and known as the Land Transportation Commission, composed of one Commissioner and one Deputy Commissioner,
who shall be vested with the powers and duties hereafter specified. Whenever the word "Commission" is used in this
Act, it shall be deemed to mean the Land Transportation Commission, and whenever the word "Commissioner" is used
in this Act, it shall be taken to mean the Commissioner or Deputy Commissioner.
The Commissioner and the Deputy Commissioner shall be natural-born citizens and residents of the Philippines, and
they shall be appointed by the President of the Philippines, with the consent of the Commission on Appointments of
the Congress of the Philippines: Provided, however, That the present Administrator, Assistant Administrator and the
personnel of the Motor Vehicles Office shall continue in office without the necessity of reappointment.
(b) The Commissioner and Deputy Commissioner shall hold office until removed in accordance with the provisions of
the Revised Administrative Code.
(c) The Commissioner shall receive an annual compensation of twelve thousand pesos and the Deputy Commissioner,
an annual compensation of ten thousand four hundred pesos. The Commissioner shall be assisted by one head
executive assistant (MV regulation adviser or chief), one administrative officer, one registration regulation chief, one
inspection, examination and licensing regulation chief, one law and traffic enforcement regulation chief, one provincial
regulation chief, one utility and property regulation chief, one accounting officer, one internal chief auditor, and one
personnel officer, who shall receive an annual compensation of nine thousand pesos each; eight land transportation
regional directors who shall receive an annual compensation of eight thousand four hundred pesos each and eight land
transportation assistant regional directors, who shall receive an annual compensation of seven thousand pesos each
and ten assistant regulation chiefs, who shall receive an annual compensation of seven thousand pesos each.
(d) The Commission shall have its offices in Quezon City where the present Motor Vehicle Office is located, and shall
establish a regional branch office each in Tuguegarao (Cagayan), Baguio City, Pasig (Rizal), Lipa City, San Fernando (La
Union), Naga City, Cebu City, Iloilo City, Cagayan de Oro City, and Davao City, to be headed by a regional director who
will have immediate administration, supervision and control over activities and administration of the Commission in the
respective regions.
The Commissioner shall be responsible for the administration of this Act and shall have, in connection therewith, the
following powers and duties, in addition to those mentioned elsewhere in this Act:
(1) With the approval of the Secretary of Public Works and Communications, to issue rules and regulations not in
conflict with the provisions of this Act, prescribing the procedure for the examination, licensing and bonding of drivers;
the registration and re-registration of motor vehicles, transfer of ownership, change of status; the replacement of lost
certificates, licenses, badges, permits or number plates; and to prescribe the minimum standards and specifications
including allowable gross weight, allowable length, width and height or motor vehicles, distribution of loads, allowable
loads on tires, change of tire sizes, body design or carrying capacity subsequent to registration and all other special
cases which may arise for which no specific provision is otherwise made in this Act.
(2) To compile and arrange all applications, certificates, permits, licenses, and to enter, note and record thereon
transfers, notifications, suspensions, revocations, or judgments of conviction rendered by competent courts concerning
violations of this Act, with the end in view of preserving and making easily available such documents and records to
public officers and private persons properly and legitimately interested therein.
(3) To give public notice of the certificates, permits, licenses and badges issued, suspended or revoked and/or motor
vehicles transferred and/or drivers bonded under the provisions of this Act.
(4) The Commissioner of Land Transportation, with the approval of the Secretary of Public Works and Communications,
may designate as his deputy and agent any employee of the Land Transportation Commission, or such other
government employees as he may deem expedient to assist in the carrying out the provisions of this Act.
(5) The Commissioner of Land Transportation and his deputies are hereby authorized to make arrest for violations of
the provisions of this Act in so far as motor vehicles are concerned; to issue subpoena and subpoena duces tecum to
compel the appearance of motor vehicle operators and divers and/or other persons or conductors; and to use all
reasonable means within their powers to secure enforcement of the provisions of this Act.
(6) The Commissioner of Land Transportation or his deputies may at any time examine and inspect any motor vehicle to
determine whether such motor vehicle is registered, or is unsightly, unsafe, overloaded, improperly marked or
equipped, or otherwise unfit to be operated because of possible excessive damage to highways, bridges and/or
culverts.
(7) The Philippine Constabulary and the city and municipal police forces are hereby given the authority and the primary
responsibility and duty to prevent violations of this Act, and to carry out the police provisions hereof within their
respective jurisdiction: Provided, That all apprehensions made shall be submitted for final disposition to the
Commissioner and his deputies within twenty-four hours from the date of apprehension.
(8) All cases involving violations of this Act shall be endorsed immediately by the apprehending officer to the Land
Transportation Commission. Where such violations necessitate immediate action, the same shall be endorsed to the
traffic court, city or municipal court for summary investigation, hearing and disposition, but in all such cases,
appropriate notices of the apprehensions and the dispositions thereof shall be given to the Commissioner of Land
Transportation by the law-enforcement agency and the court concerned.
Notation of all such dispositions shall be entered in the records, and copy shall be mailed to the owner and to the driver
concerned.
CHAPTER II
REGISTRATION OF MOTOR VEHICLES
ARTICLE I
Duty to Register, Reports, Applications, Classifications
Section 5. All motor vehicles and other vehicles must be registered.
(a) No motor vehicle shall be used or operated on or upon any public highway of the Philippines unless the same is
properly registered for the current year in accordance with the provisions of this Act.
(b) Any registration of motor vehicles not renewed on or before the date fixed for different classifications, as provided
hereunder shall become delinquent and invalid:
1. For hire motor vehicles - on or before the last working day of February.
2. Privately-owned motor vehicles - from March one to the last working day of May.
3. All other motor vehicles - from June one to the last working day of June; except when the plates of such motor
vehicles are returned to the Commission in Quezon City or to the Office of the Motor Vehicles Registrar in the provincial
or city agency of the Commission on or before the last working day of December of the year of issue.
(c) Dealer's reports - The Commissioner of Land Transportation shall require dealers to furnish him with such
information and reports concerning the sale, importation, manufacture, number of stocks, transfer or other
transactions affecting motor vehicles as may be necessary for the effective enforcement of the provisions of this Act.
(d) Change of motor number prohibited. - No repair or change in the motor vehicle involving the exchange, elimination,
effacing, or replacing of the original or registered serial or motor number as stamped or imprinted, shall be allowed,
and any motor vehicle with a trace of having its motor number altered or tampered with shall be refused registration or
re-registration, unless such is satisfactorily explained and approved by the Commissioner.
(e) Encumbrances of motor vehicles. - Mortgages, attachments, and other encumbrances of motor vehicles, in order to
be valid, must be recorded in the Land Transportation Commission and must be properly recorded on the face of all
outstanding copies of the certificates of registration of the vehicle concerned.
Cancellation or foreclosure of such mortgages, attachments, and other encumbrances shall likewise be recorded, and in
the absence of such cancellation, no certificate of registration shall be issued without the corresponding notation of
mortgage, attachment and/or other encumbrances.
Records of encumbrances of motor vehicles shall be kept by the Land Transportation Commission in chronological
sequence and shall contain, among other things, the time, date and number of the entry in a "Book of Motor Vehicles"
referring to the creation, cancellation or foreclosure of the aforesaid mortgages, attachments or to other
encumbrances.
The Land Transportation Commission shall collect a fee of five pesos for every annotation of a mortgage, attachment
and/or other encumbrances, or cancellation thereof.
Section 6. Application and payments for registration. - Applications and payments for registration shall be made either
personally or by registered mail, and the date of the cancellation of the postage stamps of envelopes containing money
order or check shall be taken as the date of the application and/or payment for registration: Provided, That the
application is properly prepared and the payment for registration is sufficient as required by law.
Section 7. Registration Classification. - Every motor vehicle shall be registered under one of the following described
classifications:
(a) private passenger automobiles; (b) private trucks; and (c) private motorcycles, scooters, or motor wheel
attachments. Motor vehicles registered under these classifications shall not be used for hire under any circumstances
and shall not be used to solicit, accept, or be used to transport passengers or freight for pay.
Laborers necessary to handle freight on board private trucks may ride on such trucks: Provided, That seats shall not be
installed in the rear compartment thereof and that only such number of laborers, not exceeding ten, as may be needed
to handle the kind of freight carried, shall ride on the truck: Provided, further, That the combined weight of cargo and
passengers does not exceed the registered net capacity of the truck.
For the purpose of this section, a vehicle habitually used to carry freight not belonging to the registered owner thereof,
or passengers not related by consanguinity or affinity within the fourth civil degree to such owner, shall be conclusively
presumed to be "for hire."
No person shall be allowed to register as private truck any truck not actually and reasonably necessary to carry out his
duly licensed business or legitimate occupation or industry regularly paying taxes.
(d) Public utility automobiles; e) public utility trucks; (f) taxis and auto-calesas; (g) garage automobiles; (h) garage
trucks; (i) hire trucks: and (j) trucks owned by contractors and customs brokers and customs agents. Application for
registration under these classifications shall be accompanied by a certificate of public convenience or a special permit
issued by the Public Service Commission, and motor vehicles registered under these classifications shall be subject to
the Public Service Law, rules and regulations, as well as the provisions of this Act.
(k) Undertakes
(l) Dealers - Registrations under this classification are intended to cover generally and successively all the motor vehicles
imported or handled by dealers for sale. Motor vehicles registered under the dealer's classification shall, under no
circumstances, be employed to carry passengers or freight in the dealer's business, or for hire. Such vehicles shall be
operated under this classification only for the purpose of transporting the vehicle itself from the pier or factory to the
warehouse or sales room or for delivery to a prospective purchaser or for test or demonstration.
(m) Government automobiles; (n) government trucks; and (o) government motorcycles. Motor vehicles owned by the
Government of the Philippines or any of its political subdivisions shall be registered under these classifications. Motor
vehicles owned by government corporations, by government employees or by foreign governments shall not be
registered under this classification.
(p) Tourists bringing their own motor vehicles to the Philippines may, without registering such motor vehicles, use the
same during but not after ninety days of their sojourn: Provided, That the motor vehicle displays the number plates for
the current year of some other country or state, and said number plates as well as the name and address (permanent
and temporary) of the owner thereof are registered in the Land Transportation Commission prior to the operation of
the motor vehicle.
If such tourist remain in the Philippines longer than ninety days, the motor vehicle shall not be operated unless
registered in accordance with this Act and the corresponding registration fees paid.
(q) Special. The Commissioner of Land Transportation may, in his discretion, allow the registration under this
classification of motor vehicles which do not conform to the foregoing described regular classification.
ARTICLE II
Registration Fees
Section 8. Schedule of registration fees. - Except as otherwise specifically provided in this Act, each application for
renewal of registration of motor vehicles shall be accompanied by an annual registration fee in accordance with the
following schedule:
(a) Private automobiles with pneumatic rubber tires, an amount based on their respective shipping weight or factory
weight as indicated in the following schedule:
1,000 kilos or less P75.00
1,000 to 1,500 kilos 100.00

1,501 to 2,000 kilos 135.00
2,001 kilos and above 180.00
The factory or shipping weight of a private automobile shall be obtained from the Red Book edited by the National
Market Report, Inc., of the United States of America: Provided, further, That in the case of automobiles with altered,
changed or rebuilt bodies, the weight as obtained: by actual weighing shall be considered the vehicles weight:
Provided, furthermore, That the increase registration fees herein prescribed shall not apply to jeeps and jeepneys for
private use or for hire and the fees hereof shall be those prescribed for them before the approval of this Act.
The registered passenger capacity of passenger automobiles operated for hire or for private use shall be determined as
follows:
1. For each adult passenger, a horizontal rectangular area, including seat and feet space, not less than thirty-five
centimeters wide and sixty centimeters long, except in the front seat, which shall allow an area fifty centimeters wide
for the operator.
2. For each half passenger, a horizontal rectangular area, including seat and feet spaces, not less that seventeen and a
half centimeters wide by sixty centimeters long, provided, that each continuous row of seats shall not be allowed to
have more that one-half passenger.
(b) Private motor trucks, passenger buses and trailers with pneumatic rubber tires, the sum of five pesos for every
hundred kilograms of maximum allowable gross weight or fraction thereof.
(c) Private motor trucks, passenger buses and trailers with solid rubber tires or with part-solid and part-pneumatic
rubber tires, the sum of seven pesos for every hundred kilograms of maximum allowable gross weight or fraction
thereof.
(d) Private motorcycles and scooters of two or three wheels and bicycles with motor attachments, the sum of thirty
pesos.
(e) The fee for registration of motor vehicles for hire shall be sixty percent more than the fee prescribed for private
motor vehicles of the same category.
(f) The fee for registration of diesel-consuming vehicles shall be fifty percent more than that of vehicles using motor
fuel other than diesel oil. The fee for registration of motor vehicles for hire shall be sixty percent more than the fees
prescribed for private motor vehicles.
(g) No regular registration fees shall be charged for the general registration of motor vehicles contemplated under the
dealer's classification: Provided, That the Commissioner of Land Transportation shall provide appropriate dealer's
number plates corresponding to the classification of vehicles hereinbelow described, and registration fee for every set
of such dealer's number plates shall be in accordance with the following schedule of rates;
Two hundred pesos for each truck or trailer;
One hundred pesos for each passenger automobile; and
Twenty pesos for each motorcycle and the like.
(h) Registration under the "Government Motor Vehicle" classification shall be free of charge, upon request of the chief
of bureau or office concerned.
(i) Motor vehicles not intended to be operated or used upon any public highway, or which are operated on highways
not constructed or maintained by the Government, or are intended not to be used or operated at all, shall be exempt
from payment of the registration fees provided in this Act, but shall each pay an annual recording and service fee of
fifteen pesos: Provided, however, That no refund, credit for, or reimbursement of registration fees or part thereof shall
be made to any owner on account of the discontinuance of the use or operation of a motor vehicle subsequent to the
payment of such registration fees: Provided, further, That in the event motor vehicles exempted under this section shall
be found operated on any public highways, the regular registration fees and surcharges shall be collected in addition to
whatever penalties may be imposed for violation of this Act. The Commissioner of Land Transportation shall provide
distinctive number plates for vehicles exempted from payment of regular registration fees, and the owner of the
vehicles concerned shall pay four pesos for each set of such number plates.
(j) The maximum allowable gross weight of a motor truck, passenger bus, or trailer, upon which to compute the
registration fee thereof, shall be determined by the Commissioner of Land Transportation. He shall, from time to time
as the need of the service may require, prepare, subject to the approval of the Secretary of Public Works and
Communications, suitable tables of maximum allowable loads per wheel for different sizes kinds of tires.
(k) The registration fees provided in this Act for trucks may be payable in two equal installment, the first to be paid on
or before the last working day of February if for hire, and in March if private; and the second to be paid on or before the
last working day of August: Provided, That the fifty per cent penalty shall apply only to the unpaid balance of the
remaining period of delinquency.
Section 9. Permissible weights and dimensions of vehicles in highways traffic.
(a) The maximum gross weight and measurement of motor vehicles, unladen or with load, permissible on public
highways shall be as specified hereunder, subject to such regulations as the Commissioner with the approval of the
Secretary of Public Works and Communications, may promulgate, from time to time, as the conditions of the public
highways may warrant and the needs of the service may require.
Permissible maximum weights:
1. Per most heavily loaded wheel three thousand six hundred kilograms;
2. Per most heavily loaded axle eight thousand kilograms;
3. Per most heavily loaded axle group

(the two axles of the group being at
fourteen thousand five hundred kilograms.
least one meter and less than two
meters apart)
An axle weight shall be the total weight transmitted to the road by all the wheels the centers of which can be included
between the parallel transverse vertical planes one meter apart extending across the full width of the vehicles.
No provincial, city or municipal authority shall enact or enforce any ordinance or resolution regulating or prescribing the
maximum gross weight of any motor vehicle.
(b) No motor vehicle operating as a single unit shall exceed the following dimensions:
Overall width two and five-tenths meters
Overall height four meters
Overall length:
Freight vehicles with two axles ten meters
Passenger vehicles with two axles eleven meters
Vehicles with three or more axles fourteen meters
(c) No motor vehicle and/or trailer combination shall exceed eighteen meters in overall projected length, including any
load carried on such vehicle and trailer.
(d) No articulated vehicles shall be allowed to draw or pull a trailer and no vehicle already drawing a trailer shall draw
another.
Section 10. Special permits, fees for. - The Commissioner with the approval of the Secretary of Public Works and
Communications, shall issue regulations and schedules of additional fees under which special permits may be issued in
the discretion of the Commissioner or his deputies for each of the following special cases, without which special permit
no vehicles shall be operated on the public highways:
(a) To operate a motor vehicle or trailer outfit with wheel, axle, or axle group loads in excess of the limits fixed in
subsection (a) of Section nine hereof or in any regulation issued by the Commissioner.
(b) To operate a motor vehicle the size of which exceeds the limit of permissible dimensions specified in paragraph (b)
of Section nine hereof.
(c) To operate a motor vehicle with any part of the load extending beyond the projected width of the vehicle.
(d) To pull two trailers behind a motor vehicle.
(e) For any other special authority relating to the use of vehicles, not otherwise specifically provided herein.
Section 11. Additional fees. - In addition to the fees elsewhere provided in this Act, for each change of registration, from
private to for hire or vice-versa; revision of gross weight rating, change of tire size; transfer of ownership; replacement
of a lost registration certificate, number plate, driver's license or permit; badge; preparation of affidavit or certified
copy of records, or for any similar circumstances requiring the issue, revision, or reissue of a certificate of registration,
driver's license, badge, permit, or other document, a fee of two pesos shall be collected.
The replacement of a lost or utterly spoiled certificate, number plate, license, badge or permit shall render the original
invalid.
In case of request in writing for certification of data or facts involving two or more vehicles, a fee of five pesos a page or
part thereof shall be collected for each certification.
Section 12. Fee for original registration for part of year. - If any application for the original registration is made during
the first quarter of a calendar year, the total annual fee for the year shall be paid, if made during the second quarter,
three-fourths of the annual fee for that year shall be paid, if made during the third quarter, one half of the annual fee
shall be paid, and if made during the fourth quarter, one-fourth of the annual fee shall be paid.
Nothing in this section shall be construed as allowing quarterly renewals of registrations in order to avoid payment of
fees in advance for the entire year.
Section 13. Payment of taxes upon registration. - No original registration of motor vehicles subject to payment of taxes,
customs duties or other charges shall be accepted unless proof of payment of the taxes due thereon has been
presented to the Commission.
ARTICLE III
Registration Certificates, Records, Number Plates
Section 14. Issuance of certificates of registration. - A properly numbered certificate of registration shall be issued for
each separate motor vehicle after due inspection and payment of corresponding registration fees.
Section 15. Use and authority of certificate of registration.
(a) The said certificate shall be preserved and carried in the car by the owner as evidence of the registration of the
motor vehicle described therein, and shall be presented with subsequent applications for re-registration, transfer of
ownership, or recording of encumbrances: Provided, That in lieu of the certificate of registration a true copy or
photostat thereof may be carried in the motor vehicle.
(b) The certificate of registration issued under the provisions of this Act for any motor vehicle shall, while the same is
valid and effective and has not been suspended or revoked, be the authority for the operation of such motor vehicle.
(c) No motor vehicle shall be operated on the public highways in a manner which would place it under a classification
requiring the payment of a larger registration fee than that stated in the certificate of registration.
Section 16. Suspension of registration certificate. - If on inspection, as provided in paragraph (6) of Section four hereof,
any motor vehicle is found to be unsightly, unsafe, overloaded, improperly marked or equipped, or otherwise unfit to
be operated, or capable of causing excessive damage to the highways, or not conforming to minimum standards and
specifications, the Commissioner may refuse to register the said motor vehicle, or if already registered, may require the
number plates thereof to be surrendered to him, and upon seventy-two hours notice to the owner of the motor vehicle,
suspend such registration until the defects of the vehicle are corrected and/or the minimum standards and
specifications fully complied with.
Whenever it shall appear from the records of the Commission that during any twelve-month period more than three
warnings for violations of this Act have been given to the owner of a motor vehicle, or that the said owner has been
convicted by a competent court more than once for violation of such laws, the Commissioner may, in his discretion,
suspend the certificate of registration for a period not exceeding ninety days and, thereupon, shall require the
immediate surrender of the number plates.
Whenever a motor vehicle is found to be underweight the owner thereof shall pay the difference in the registration
fees corresponding to the shortage in weight plus a fifty per cent surcharge, and until such payment is made, the
certificate of registration of the motor vehicle concerned shall be suspended by the Commissioner.
After two such suspension, re-registration of the vehicle concerned for one year may be denied.
The Commissioner shall notify the owner of the motor vehicle of any action taken by him under this section.
Section 17. Number plates, preparation, preparation and issuance of . -
(a) The Commissioner shall cause number plates to be prepared and issued to owners of motor vehicles and trailers
registered under this Act, charging a fee of four pesos for each pair including the numerals indicating the year of
registry: Provided, however, That in case no number plates are available, the Commissioner or his deputies may issue,
without charge, a written permit temporarily authorizing the operation of any motor vehicles with other means of
identification: Provided, further, That all motor vehicles exempted from payment of registration fees, motor vehicles
for hire, and privately-owned motor vehicles shall bear plates so designed and painted with different colors to
distinguish one class from another: Provided, furthermore, That the plates of motor vehicles exempted from payment
of registration fees shall be permanently assigned to such motor vehicles during their entire lifetime while exempted
from payment of the fees: And, provided, finally, That the owner thereof shall return such plates to the Land
Transportation Commission within a period of seven working days after such owner has lost his exemption privilege or
has transferred the vehicle to a non-exempt owner.
(b) In case the design of the number plate is such that the numerals indicating the year of registry are on a detachable
tag, the Commissioner or his deputies may, in their discretion, issue the said tag only for subsequent re-registration
charging a fee of one peso for each tag issued.
Section 18. Use of number plates. - At all times, every motor vehicle shall display in conspicuous places, one in front and
one in the rear thereof, the said number plates.
The number plates shall be kept clean and cared for, and shall be firmly affixed to the motor vehicle in such a manner as
will make it entirely visible and always legible.
Except in the case of dealer's number plates which may be used successively on various motor vehicles in stock, no
person shall transfer number plates from motor vehicle to another.
No dealer's number plate shall be used on any motor vehicle after said vehicle has been sold and delivered to a
purchaser, and no dealer shall allow such dealer's number plates to be used on any motor vehicle after its sale and
delivery to a purchaser.
CHAPTER III
OPERATION OF MOTOR VEHICLE
ARTICLE I
License to Drive Motor Vehicles
Section 19. Duty to procure license. - Except as otherwise specifically provided in this Act, no person shall operate any
motor vehicle without first procuring a license to drive a motor vehicle for the current year, nor while such license is
delinquent, invalid, suspended or revoked.
The license shall be carried by the driver at all times when operating a motor vehicle, and shall be shown and/or
surrendered for cause and upon demand to any person with authority under this Act to confiscate the same.
Section 20. License for enlisted men operating Government motor vehicles. - Enlisted men operating a motor vehicle
owned by the Government of the Philippines shall be licensed in accordance with the provisions of this Act, but no
license or delinquency fees shall be collected therefrom. All licenses so issued shall bear the words "For Government
Vehicles Only" plainly marked or stamped in red ink across the face thereof.
A license so marked or stamped shall authorize the holder thereof to operate a private-owned motor vehicle.
Section 21. Operation of motor vehicles by tourists. - Bona fide tourist and similar transients who are duly licensed to
operate motor vehicles in their respective countries may be allowed to operate motor vehicles during but not after
ninety days of their sojourn in the Philippines.
If any accident involving such tourist or transient occurs, which upon investigation by the Commissioner or his deputies
indicates that the said tourist or transient is incompetent to operate motor vehicles, the Commissioner shall
immediately inform the said tourist or transient in writing that he shall no longer be permitted to operate a motor
vehicle.
After ninety days, any tourist or transient desiring to operate motor vehicles shall pay fees and obtain and carry a
license as hereinafter provided.
Section 22. Driver's license, fees, examination. - Every person who desires personally to operate any motor vehicle shall
file an application to the Commissioner or his deputies for a license to drive motor vehicles: Provided, however, That no
person shall be issued a professional driver's license who is suffering from highly contagious diseases, such as,
advanced tuberculosis, gonorrhea, syphilis, and the like.
Each such application except in the case of enlisted men operating government-owned vehicles, shall be accompanied
by a fee of five pesos, and shall contain such information respecting the applicant and his ability to operate motor
vehicles, as may be required by the Commission.
The Commissioner or his deputies shall also ascertain that the applicant's sight and hearing are normal, and may in their
discretion, require a certificate to that effect, signed by a reputable physician.
An examination or demonstration to show any applicant's ability to operate motor vehicles may also be required in the
discretion of the Commissioner or his deputies.
Section 23. Issuance of driver's license. - If, after such examination, the Commissioner or his deputy believes that the
applicant possesses the necessary qualifications and is proficient in the operation of motor vehicles, a license shall be
issued to such applicant upon payment of five pesos, but prior to the issuance of said license, the applicant shall furnish
three copies of his recent photograph to be securely attached to the license, and two copies to be filed and kept as
provided by this Act. All driver's licenses shall bear the signature and right-hand thumb print of the licensee.
Section 24. Use of driver's license and badge. - Every license issued under the provisions of this Act to any driver shall
entitle the holder thereof, while the same is valid and effective and not suspended or revoked, to operate the motor
vehicles described in such license: Provided, however, That every licensed professional driver, before operating a public
service motor vehicle registered under classifications (d) to (j) inclusive of Section seven hereof, shall secure from the
Commissioner, upon payment of the sum of one peso, a driver's badge which he shall, at all times while so operating a
motor vehicle, display in plain sight on the band of his cap or on his coat or shirt. Such driver's badge shall be of metal
with a plainly readable number assigned to the licensee stamped thereon.
It shall be unlawful for any duly licensed driver to transfer, lend or otherwise allow any person to use his license for the
purpose of enabling such person to operate a motor vehicle.
No owner of a motor vehicle shall engage, employ, or hire any person to operate such motor vehicle, unless the person
sought to be employed is a duly licensed professional driver.
Section 25. Driver's records. - Any driver who changes his address shall, within fifteen days, notify the Commissioner in
writing of his new address, name and address of his new employer, the number of the motor vehicle he is employed to
operate, and such other information as the Commissioner may require.
Section 26. Renewal of license. - Any license not renewed on or before the last working day of the month when the
applicant was born shall become delinquent and invalid, except when the license is surrendered to the Commissioner or
his deputies before the last working day of the month of his birth in order to avoid payment of the delinquency fees.
The fee for renewal of delinquent license shall be five pesos in addition to the basic fee as hereinabove prescribed.
Every applicant for renewal of license to operate any motor vehicle shall present to the Commissioner, in person or by
mail or messenger, the license issued to the applicant for the previous year, together with the proper fee of five pesos
and, in the case of professional chauffeurs, three copies of a readily-recognized photograph of the applicant, which
photograph shall have been taken not exceeding three years prior to the date of applicant for renewal.
Lost license. - In case the license for the previous year has been lost or cannot be produced, the applicant shall obtain a
duplicate in accord with Section eleven of this Act, on penalty of refusal, by the Commissioner or his deputies, to renew
the license: Provided, however, That the Commissioner or his deputies may, in their discretion accept in lieu of the
previous years license, the duly signed and sworn statement of an operator to the effect that he has not operated any
motor vehicle in the Philippines during the year or years to which no license was issued in his name.
The Commissioner and his deputies are hereby authorized to administer the oath in connection with such affidavit.
Section 27. Suspension, revocation of driver's license.
(a) The Commissioner may suspend for a period not exceeding three months or, after hearing, revoke any driver's
license issued under the provisions of this Act, and may order any such license to be delivered to him whenever he has
reason to believe that the holder thereof is an improper person to operate motor vehicles, or in operating or using a
motor vehicle in, or as an accessory to, the commission of any crime or act which endangers the public. Any deputy of
the Commissioner may, for the same cause, suspend for a period not exceeding three months any driver's license issued
under the provisions of this Act: Provided, That such suspension may be appealed to the Commissioner who may, after
reviewing the case, confirm, reverse or modify the action taken by such deputy.
(b) Whenever during any twelve-month period a driver shall have been convicted at least three times for the violations
of any provisions of this Act or of any regulation issued by the Commissioner or any municipal or city ordinance relating
to motor vehicle traffic not in conflict with any of the provisions of this Act, the Commissioner may, in his discretion,
revoke or suspend the license of such driver for a period not exceeding two years.
(c) The license suspended or revoked under the provisions of subsections (a) and (b) of this section shall not be
reinstated unless the driver has furnished a bond in accordance with Section twenty-nine of this Act and only after the
Commissioner has satisfied himself that such driver may again safely be permitted to operate a motor vehicle.
(d) A decision of the Commissioner revoking or refusing the reinstatement of a license under the provisions of this
Section may be appealed to the Secretary of Public Works and Communications.
Section 28. Driver's bond. - The Commissioner before reinstating any driver's license which has been suspended or
revoked under the provisions of the preceding section or of any provisions of this Act, may require such driver to post a
bond in the sum of one thousand pesos conditioned upon the satisfaction and payment of any claim which may be filed
or of any execution which may be issued against such driver in any case wherein said driver may be held answerable
while operating motor vehicles. The bond required in this section shall be in such form as to render sureties liable at
least for a period of not less than one year nor more than three years: Provided, however, That upon written application
to the Commissioner for release from such a bond, the Commissioner may after revoking or suspending the driver's
license, authorize the release of the bondsmen from further responsibility thereunder: Provided, further, That should
the Commissioner decide not to revoke the license of a driver who has been convicted of homicide through reckless
imprudence, or of the violation of the speed limit or of reckless driving at least three times within a twelve-month
period, the said driver shall post a bond in the sum of not less than two thousand pesos, conditioned upon the payment
of any claim which may be filed or any execution which may be issued against him in any case wherein said driver may
be held answerable while operating motor vehicles.
Section 29. Confiscation of driver's licenses. - Law enforcement and peace officers duly designated by the Commissioner
shall, in apprehending any driver for violations of this Act or of any regulations issued pursuant thereto, or of local
traffic rules and regulations, confiscate the license of the driver concerned and issue a receipt prescribed and issued by
the Commission therefor which shall authorize the driver to operate a motor vehicle for a period not exceeding
seventy-two hours from the time and date of issue of said receipt. The period so fixed in the receipt shall not be
extended, and shall become invalid thereafter. Failure of the driver to settle his case within fifteen days from the date
of apprehension will cause suspension and revocation of his license.
Section 30. Student-driver's permit. - Upon proper application and the payment of three pesos, the Commissioner or his
deputy may issue student-driver's permits, valid for six months to persons not under eighteen years of age, who desire
to learn to operate motor vehicles. No application for driver's license shall be received unless the applicant has
undergone instruction in the operation of motor vehicles for at least a month and has a valid student-driver's permit:
Provided, however, That any person who has a license to operate vehicles in other countries may, upon presentation of
appropriate evidence of such license, be allowed to pay for a driver's license without presenting a student driver's
permit.
A student driver who fails in the examination shall continue as a student driver for at least one additional month. No
student driver shall operate a motor vehicle unless accompanied by a duly licensed driver.
The licensed driver acting as instructor to the student driver shall likewise be responsible and liable for any violation of
the provisions of this Act and for any injury or damage done by the motor vehicle on account or as a result of its
operation by a student under his direction.
ARTICLE II
Illegal Use of Licenses, Number Plates, Etc.
Section 31. Imitation and false representations. - No person shall make or use attempt to make or use a driver's license,
badge, certificate of registration, number plate, tag, or permit in imitation or similitude of those issued under this Act,
or intended to be used as or for a legal license, badge, certificate, plate, tag or permit, or with intent to sell or otherwise
dispose of the same to another. No person shall falsely or fraudulently represent as valid and in force any driver's
license, badge, certificate, plate, tag or permit issued under this Act which is delinquent or which has been revoked or
suspended.
No person shall, knowingly and with intent to deceive, make one or more false or fraudulent statements in an
application for the registration of vehicles, or for a driver's license.
ARTICLE III
Passenger and Freight
Section 32. Exceeding registered capacity. - No person operating any vehicle shall allow more passenger or more freight
or cargo in his vehicle than its registered carrying capacity. In the case of public utility trucks or buses, the conductor
shall be exclusively liable for violations of this section or of Section thirty-two, letter (c) hereof: Provided, That the
conductor, before being employed by any public service operator, shall get a permit or license from the Commission
and pay five pesos annually for said license or permit issued in his favor, and the same is renewable on or before the last
working day of the month of his birth, attaching a readily recognizable photograph and after presentation of a medical
certificate of fitness of applicant.
Passenger trucks may be allowed to construct any cargo carrying device at the rear or at the side of the truck, subject
to the approval of the Commissioner: Provided, however, That the total weight of the device, including the cargo, shall
not exceed one hundred kilos.
(b) Carrying of passengers and freight on top of vehicles. - No person operating a motor vehicle shall allow any
passenger to ride on the cover or top of such vehicles: Provided, however, That subject to such conditions as may be
contained in permits that may be issued by the Commissioner, baggage or freight may be carried on the top of a truck
provided the weight thereof does not exceed twenty kilos per square meter and is distributed in such a manner as not
to endanger the passengers or stability of the truck.
(c) Riding on running boards. - No driver shall permit any person to ride on the running board, step board, or mudguard
of his motor vehicle for any purpose except to make repair or adjustment in the motor or to collect fares.
Section 33. Passenger or freight capacity marked on vehicle. - All passengers automobiles for hire shall have the
registered passenger capacity plainly and conspicuously marked on both sides thereof, in letters and numerals not less
than five centimeters in height.
All motor trucks, whether for passenger or freight, private, or for hire, shall have the registered passenger gross and
net weight capacities plainly and conspicuously marked on both sides thereof, in letters and numerals not less than five
centimeters in height.
ARTICLE IV
Accessories of Motor Vehicles
Section 34.
(a) Tires of motor vehicles. - No motor vehicle with metallic tires shall be operated upon any public highway, and solid
tires whenever used shall be of sufficient thickness to prevent the metal rims thereof from coming in direct contact
with the road.
(b) Brakes - Every motor vehicle with four or more wheels shall be provided with dual hydraulic brake system so that in
case of hydraulic line failure affecting the braking efficiency of any of the four wheels at least either the front or rear
wheels shall retain normal braking capabilities. In the absence of such dual braking system every motor vehicle with
four or more wheels shall be provided with safety valve devices of such design and make so that failure of the hydraulic
braking system of the vehicle because of leakage in the line of other parts of the system will not affect all wheels but
rather render at all times effective the braking power of either the two front wheels or the two rear wheels when
brakes are applied. This requirement, however, does not apply to motor vehicles equipped with pneumatic braking
system.
(b-1) Horns. - Every motor vehicle shall be provided with a horn or signalling devise in good working order: Provided,
however, That no horn or signalling device emitting an exceptionally loud, startling, or disagreeable sound shall be
installed or used on any motor vehicle.
All authorized emergency vehicles, such as ambulance and police cars and fire wagons used for emergency calls shall be
equipped with a bell, siren, or exhaust whistle of a type approved by the Commissioner, and no such device shall be
installed or used in any other vehicle.
No vehicle not classified as a motor vehicle under this Act shall be equipped with a horn or signaling device similar to
the horn customarily used on motor vehicles.
(c) Headlights. - Every motor vehicle of more than one meter of projected width, while in use on any public highway
shall bear two headlights, one on each side, with white or yellowish light visible from the front, which, not later than
one-half hour after sunset and until at least one-half four before sunrise and whenever weather conditions so require,
shall both be lighted.
Additional lamps and light may be carried, but no red lights shall be visible forward or ahead of the vehicle. Trucks,
buses, trailers, and other similar vehicles must carry, while in use on any public highway during night-time, colored
riding lights on each of the four corners not more than ten centimeters from the top.
All motor vehicles shall be equipped with devices for varying the intensity of light, and the driver must dim the
headlights or tilt the beams downward whenever the vehicle is being operated on well-lighted streets within the limits
of cities, municipalities, and thickly populated barrios or districts, or whenever such vehicle meets another vehicle on
any public highway.
(d) Taillights. - Every motor vehicle and trailer shall, during the above-mentioned hours, also bear on each side in the
rear a lamp showing a red light visible at least one hundred meters from the rear of the vehicle and a lamp throwing a
white light upon the number plate issued for such vehicle.
(e) Stop lights. - Every motor vehicle shall be equipped at the rear with at least one lamp which shall throw a sustained
bright red light visible under all conditions, even under bright sunlight, when the brakes are applied. Each bus, truck,
trailer or similar vehicle shall be equipped, as its stop light at or near its rear center, with a lamp at least twelve
centimeters in diameter with the word "stop" inscribed in the center.
(f) Motorcycle and other vehicle lights. - Every motor vehicle of less than one meter of projected width shall be subject
to the preceding provisions of this section, except that one headlight and one taillight shall be required. No signal light
shall be necessary.
Additional lamps may be carried provided they comply with the preceding provisions of this section.
Every motor vehicle, or whatever style, kind, make, character, or nature, when upon a highway during the hours
above-mentioned, whether in motion or not, shall have one or more lights so arranged that the same shall be visible at
least fifty meters from the front and the rear of such vehicle.
(g) Lights when parked or disabled. - Appropriate parking lights or flares visible one hundred meters away shall be
displayed at a corner of the vehicle whenever such vehicle is parked on highways or in places that are not well-lighted
or is placed in such manner as to endanger passing traffic.
(h) Windshield wiper. - Every motor vehicle shall be equipped with a mechanically or electrically operated device for
wiping off raindrops or other moisture from its front windshield.
(i) Use of red flag. - Whenever the load of any vehicle extends more than one meter beyond the bed or body thereof,
there shall be displayed at every projecting end of such load a red flag not less than thirty centimeters both in length
and width, except that during the hours fixed under subsection (c), there shall be displayed, in lieu of the required red
flags, red lights visible at least fifty meters away.
(j) Mufflers. - Every motor vehicle propelled by an internal combustion engine shall be equipped with a muffler, and
whenever said motor vehicle passes through a street of any city, municipality, or thickly populated district or barrio, the
muffler shall not be cut out or disconnected. No motor vehicle shall be operated in such a manner as to cause it to emit
or make any unnecessary or disagreeable odor, smoke or noise.
CHAPTER IV
TRAFFIC RULES
ARTICLE I
Speed Limit and Keeping to the Right
Section 35. Restriction as to speed. -
(a) Any person driving a motor vehicle on a highway shall drive the same at a careful and prudent speed, not greater
nor less than is reasonable and proper, having due regard for the traffic, the width of the highway, and of any other
condition then and there existing; and no person shall drive any motor vehicle upon a highway at such a speed as to
endanger the life, limb and property of any person, nor at a speed greater than will permit him to bring the vehicle to a
stop within the assured clear distance ahead.
(b) Subject to the provisions of the preceding paragraph, the rate of speed of any motor vehicle shall not exceed the
following:
Passengers
MAXIMUM ALLOWABLE SPEEDS Motor trucks and buses
Cars and Motorcycle
1. On open country roads, with no "blinds

corners" not closely bordered by 80 km. per hour 50 km. per hour
habitations.
2. On "through streets" or boulevards,

clear of traffic, with no " blind corners," 40 km. per hour 30 km. per hour
when so designated.
3. On city and municipal streets, with light

traffic, when not designated "through 30 km. per hour 30 km. per hour
streets".
4. Through crowded streets, approaching

intersections at "blind corners," passing
school zones, passing other vehicles which 20 km. per hour 20 km. per hour
are stationery, or for similar dangerous
circumstances.
(c) The rates of speed hereinabove prescribed shall not apply to the following:
(1) A physician or his driver when the former responds to emergency calls;
(2) The driver of a hospital ambulance on the way to and from the place of accident or other emergency;
(3) Any driver bringing a wounded or sick person for emergency treatment to a hospital, clinic, or any other similar
place;
(4) The driver of a motor vehicle belonging to the Armed Forces while in use for official purposes in times of riot,
insurrection or invasion;
(5) The driver of a vehicle, when he or his passengers are in pursuit of a criminal;
(6) A law-enforcement officer who is trying to overtake a violator of traffic laws; and
(7) The driver officially operating a motor vehicle of any fire department, provided that exemption shall not be
construed to allow unless or unnecessary fast driving of drivers aforementioned.
Section 36. Speed limits uniform throughout the Philippines. - No provincial, city or municipal authority shall enact or
enforce any ordinance or resolution specifying maximum allowable speeds other than those provided in this Act.
Section 37. Driving on right side of highway. - Unless a different course of action is required in the interest of the safety
and the security of life, person or property, or because of unreasonable difficulty of operation in compliance herewith,
every person operating a motor vehicle or an animal-drawn vehicle on a highway shall pass to the right when meeting
persons or vehicles coming toward him, and to the left when overtaking persons or vehicles going the same direction,
and when turning to the left in going from one highway to another, every vehicle shall be conducted to the right of the
center of the intersection of the highway.
Section 38. Classification of highways. - Public highways shall be properly classified for traffic purposes by the provincial
board, municipal board or city council having jurisdiction over them, and said provincial board, municipal board or city
council shall provide appropriate signs therefor, subject to the approval of the Commissioner. It shall be the duty of
every provincial, city and municipal secretary to certify to the Commissioner the names, locations, and limits of all
"through streets" designated as such by the provincial board, municipal board or council.
ARTICLE II
Overtaking and Passing a Vehicle, and Turning at Intersections
Section 39. Overtaking a vehicle. - The driver of any motor vehicle overtaking another vehicle proceeding in the same
direction shall pass at a safe distance to the left thereof, and shall not again drive to the right side of the highway until
safety clear of such overtaken vehicle except that on a highway, within a business or residential district, having two or
more lanes for the movement of traffic in one direction, the driver of a vehicle may overtake and pass another vehicle
on the right. Nothing in this section shall be construed to prohibit a driver overtaking and passing, upon the right,
another vehicle which is making or about to make a left turn.
Section 40. Driver to give way to overtaking vehicle. - The driver of a vehicle about to be overtaken and passed by
another vehicle approaching from the rear shall give way to the overtaking vehicle on suitable and audible signal being
given by the driver of the overtaking vehicle, and shall not increase the speed of his vehicle until completely passed by
the overtaking vehicle.
Section 41. Restrictions on overtaking and passing.
(a) The driver of a vehicle shall not drive to the left side of the center line of a highway in overtaking or passing another
vehicle proceeding in the same direction, unless such left side is clearly visible, and is free of oncoming traffic for a
sufficient distance ahead to permit such overtaking or passing to be made in safety.
(b) The driver of a vehicle shall not overtake or pass another vehicle proceeding in the same direction, when
approaching the crest of a grade, not upon a curve in the highway, where the driver's view along the highway is
obstructed within a distance of five hundred feet ahead, except on a highway having two or more lanes for movement
of traffic in one direction where the driver of a vehicle may overtake or pass another vehicle: Provided, That on a
highway within a business or residential district, having two or more lanes for movement of traffic in one direction, the
driver of a vehicle may overtake or pass another vehicle on the right.
(c) The driver of a vehicle shall not overtake or pass any other vehicle proceeding in the same direction, at any railway
grade crossing, not at any intersection of highways unless such intersection or crossing is controlled by traffic signal, or
unless permitted to do so by a watchman or a peace officer, except on a highway having two or more lanes for
movement of traffic in one direction where the driver of a vehicle may overtake or pass another vehicle on the right.
Nothing in this section shall be construed to prohibit a driver overtaking or passing upon the right another vehicle
which is making or about to make a left turn.
(d) The driver of a vehicle shall not overtake or pass, or attempt to pass, any other vehicle, proceeding in the same
direction, between any points indicated by the placing of official temporary warning or caution signs indicating that
men are working on the highway.
(e) The driver of a vehicle shall not overtake or pass, or attempt to overtake or pass, any other vehicle proceeding in the
same direction in any "no-passing or overtaking zone."
ARTICLE III
Right of Way and Signals
Section 42. Right of way.
(a) When two vehicles approach or enter an intersection at approximately the same time, the driver of the vehicle on
the left shall yield the right of way to the vehicle on the right, except as otherwise hereinafter provided. The driver of
any vehicle traveling at an unlawful speed shall forfeit any right of way which he might otherwise have hereunder.
(b) The driver of a vehicle approaching but not having entered an intersection, shall yield the right of way to a vehicle
within such intersection or turning therein to the left across the line of travel of such first-mentioned vehicle, provided
the driver of the vehicle turning left has given a plainly visible signal of intention to turn as required in this Act.
(c) The driver of any vehicle upon a highway within a business or residential district shall yield the right of way to a
pedestrian crossing such highway within a crosswalk, except at intersections where the movement of traffic is being
regulated by a peace officer or by traffic signal. Every pedestrian crossing a highway within a business or residential
district, at any point other than a crosswalk shall yield the right of way to vehicles upon the highway.
(d) The driver of a vehicle upon a highway shall bring to a full stop such vehicle before traversing any "through
highway" or railroad crossing: Provided, That when it is apparent that no hazard exists, the vehicle may be slowed
down to five miles per hour instead of bringing it to a full stop.
Section 43. Exception to the right of way rule.
(a) The driver of a vehicle entering a highway from a private road or drive shall yield the right of way to all vehicles
approaching on such highway.
(b) The driver of a vehicle upon a highway shall yield the right of way to police or fire department vehicles and
ambulances when such vehicles are operated on official business and the drivers thereof sound audible signal of their
approach.
(c) The driver of a vehicle entering a "through highway" or a "stop intersection" shall yield the right of way to all
vehicles approaching to either direction on such "through highway": Provided, That nothing in this subsection shall be
construed as relieving the driver of any vehicle being operated on a "through highway" from the duty of driving with
due regard for the safety of vehicles entering such "through highway" nor as protecting the said driver from the
consequence of an arbitrary exercise off such right of way.
Section 44. Signals on starting, stopping or turning. -
(a) The driver of any vehicle upon a highway, before starting, stopping or turning from a direct line, shall first see that
such movement can be made in safety, and if any pedestrian may be affected by such movement, shall give a clearly
audible signal by sounding the horn, and whenever the operation of any other vehicle approaching or following may be
affected by such movement, shall give a signal plainly visible to the driver of such other vehicles of the intention to
make such movement.
(b) The signal herein required shall be given by means of extending the hand and arm beyond the left side of the
vehicle, or by an approved mechanical or electrical signal device.
ARTICLE IV
Turning and Parking
Section 45. Turning at intersections. -

(a) The drive of a vehicle intending to run to the right at an intersection shall approach such intersection in the lane for
traffic nearest to the right-hand side of the highway and, in turning, shall keep as close as possible to the right-hand
curb or edge of the highway.
(b) The driver of a vehicle intending to turn to the left shall approach such intersection in the lane for traffic to the right
of and nearest to the center line of the highway, and, in turning, shall pass to the left of the center of the intersection,
except that, upon highways laned for traffic and upon one-way highways, a left turn shall be made from the left lane of
traffic in the direction in which the vehicle is proceeding.
(c) For the purpose of this section, the center of the intersection shall mean the meeting point of the medial lines of the
highways intersecting one another, except when it is occupied by a monument, grass plot or any permanent structure,
other than traffic control device.
Section 46. Parking prohibited in specified places. - No driver shall park a vehicle, or permit it to stand, whether
attended or unattended, upon a highway in any of the following places:
(a) Within an intersection
(b) On a crosswalk
(c) Within six meters of the intersection of curb lines.
(d) Within four meters of the driveway entrance to and fire station.
(e) Within four meters of fire hydrant
(f) In front of a private driveway
(g) On the roadway side of any vehicle stopped or parked at the curb or edge of the highway
(h) At any place where official signs have been erected prohibiting parking.
Section 47. Parked vehicle. - Whenever a motor vehicle is parked unattended on any highway, the driver thereof must
turn off the ignition switch and stop the motor and notch effectively the hand brake.
ARTICLE V
Miscellaneous Traffic Rules
Section 48. Reckless driving. - No person shall operate a motor vehicle on any highway recklessly or without reasonable
caution considering the width, traffic, grades, crossing, curvatures, visibility and other conditions of the highway and
the conditions of the atmosphere and weather, or so as to endanger the property or the safety or rights of any person
or so as to cause excessive or unreasonable damage to the highway.
Section 49. Right of way for police and other emergency vehicles. - Upon the approach of any police or fire department
vehicle, or of an ambulance giving audible signal, the driver of every other vehicle shall immediately drive the same to a
position as near as possible and parallel to the right-hand edge or curb of the highway, clear of any intersection of
highways, and shall stop and remain in such position, unless otherwise directed by a peace officer, until such vehicle
shall have passed.
Section 50. Tampering with vehicles. - No unauthorized person shall sound the horn, handle the levers or set in motion
or in any way tamper with a damage or deface any motor vehicle.
Section 51. Hitching to a vehicle. - No person shall hang on to, ride on, the outside or the rear end of any vehicle, and no
person on a bicycle, roller skate or other similar device, shall hold fast to or hitch on to any moving vehicle, and no
driver shall knowingly permit any person to hang on to or ride, the outside or rear end of his vehicle or allow any person
on a bicycle, roller skate or other similar device to hold fast or hitch to his vehicle.
Section 52. Driving or parking on sidewalk. - No person shall drive or park a motor vehicle upon or along any sidewalk,
path or alley not intended for vehicular traffic or parking.
Section 53. Driving while under the influence of liquor or narcotic drug. - No person shall drive a motor vehicle while
under the influence of liquor or narcotic drug.
Section 54. Obstruction of traffic. - No person shall drive his motor vehicle in such a manner as to obstruct or impede
the passage of any vehicle, nor, while discharging or taking on passengers or loading or unloading freight, obstruct the
free passage of other vehicles on the highway.
Section 55. Duty of driver in case of accident. - In the event that any accident should occur as a result of the operation of
a motor vehicle upon a highway, the driver present, shall show his driver's license, give his true name and address and
also the true name and address of the owner of the motor vehicle.
No driver of a motor vehicle concerned in a vehicular accident shall leave the scene of the accident without aiding the
victim, except under any of the following circumstances:
1. If he is in imminent danger of being seriously harmed by any person or persons by reason of the accident;
2. If he reports the accident to the nearest officer of the law; or
3. If he has to summon a physician or nurse to aid the victim.
CHAPTER V
PENAL AND OTHER PROVISIONS
ARTICLE I
Penalties
Section 56. Penalty for violation. - The following penalties shall be imposed for violations of this Act:
(a) For registering later than seven days after acquiring title to an unregistered motor vehicle or after conversion of a
registered motor vehicle requiring larger registration fee than that for which it was originally registered, or for renewal
of a delinquent registration, the penalty shall be a fine fifty per cent of the registration fees corresponding to the
portion of the year for which the vehicle is registered for use.
(b) For failure to sign driver's license or to carry same while driving, twenty pesos fine.
(c) Driving a vehicle with a delinquent or invalid driver's license, fifty pesos fine.
(d) Driving a motor vehicle with delinquent, suspended or invalid registration, or without registration or without the
proper license plate for the current year, three hundred pesos fine.
(e) Driving a motor vehicle without first securing a driver's license, three hundred pesos fine.
(f) Driving a motor vehicle while under the influence of liquor or narcotic drug, a fine of not less than two hundred
pesos nor more than five hundred pesos, or imprisonment of not more than three months, or both, at the discretion of
the Court.
(g) Violation of Section thirty-two, thirty-four (a), (b) and (b-1), thirty-five and forty-six a fine not exceeding one hundred
pesos: Provided, however, That in the case of violation of Section 34 (b) the vehicle or vehicles affected may not be
allowed to operate unless the requirements provided in this section are complied with.
(h) Violations of Sections forty-nine, fifty and fifty-two, a fine not exceeding fifty pesos.
(i) For making, using or attempting to make or use a driver's license, badge, certificate or registration, number plate,
tag or permit in imitation or similitude of those issued under this Act, or intended to be used as or for a legal license,
badge, certificate, plate, tag or permit or with intent to sell or otherwise dispose of the same to another, or false or
fraudulently represent as valid and in force any driver's license, badge, certificate, plate, tag or permit issued under this
Act which is delinquent or which has been suspended or revoked, a fine of not exceeding three hundred pesos.
(j) For using private passenger automobiles, private trucks, private motorcycles, and motor wheel attachments for hire,
in violation of Section seven, subsections (a), (b), and (c), of this Act, a fine of two hundred pesos and suspension of
driver's license for a period of three months for the first conviction; a fine of three hundred pesos and six months
imprisonment for the second conviction; and an imprisonment of one year and permanent revocation of the driver's
license for the third conviction.
(k) For permitting, allowing, consenting to, or tolerating the use of a privately-owned motor vehicle for hire in violation
of Section seven, subsections (a), (b), and (c), of this Act, there shall be imposed upon the owner of the vehicle a fine of
five hundred pesos and the certificate of registration shall be suspended for a period of three months for the first
conviction, and an increase of one hundred pesos in the fine and one month's suspension of the registration for each
subsequent conviction.
(l) For violation of any provisions of this Act or regulations promulgated pursuant hereto, not hereinbefore specifically
punished, a fine of not less than ten or more than fifty pesos shall be imposed.
(m) In the event an offender cannot pay any fine imposed pursuant to the provisions of this Act, he shall be made to
undergo subsidiary imprisonment as provided for in the Revised Penal Code.
(n) If, as the result of negligence or reckless or unreasonable fast driving, any accident occurs resulting in death or injury
of any person, the motor vehicle operator at fault shall, upon conviction, be punished under the provisions of the
Revised Penal Code.
Section 57. Punishment for other offenses. - The conviction of any person for any offense under this Act shall not bar his
prosecution for any other offense which may have been committed by such person concurrently with the commission
of the offense of which he was convicted or in doing the act or series of acts which constituted the offense of which he
was convicted.
Section 58. Duty of clerks of court. - It is hereby made the duty of clerks of the Court of First Instance, the City Court of
Municipal Court trying traffic violation cases to certify to the Commission the result of any case, whether criminal or
civil, involving violations of any provision of this Act or of other laws and ordinances relating to motor vehicles. Said
certificate shall specifically contain the name of the driver or owner of the vehicle involved, his address, the number of
his license and/or of the certificate or registration of his vehicle, and the date thereof, and the offense of which he was
convicted or acquitted.
ARTICLE II
Collection of Fees, Taxes and Fines, Liens, Allotment of Funds
Section 59. (a) Collection of fees; national and local taxes; toll fees. - The collection of all fees, taxes, and fines, under
the provisions of this Act shall be made in accordance with regulations to be prescribed by the Commissioner and
approved jointly by the Auditor General.
(b) No taxes or fees other than those prescribed in this Act shall be imposed for the registration or operation or on the
ownership of any motor vehicle, or for the exercise of the profession of chauffeur, by any municipal corporation, the
provisions of any city charter to the contrary notwithstanding: Provided, however, That any provincial board, city or
municipal council or board or other competent authority may enact and collect such reasonable and equitable toll fees
for the use of such bridges and ferries, within their respective jurisdiction, as may be authorized and approved by the
Secretary of Public Works and Communications, and also for the use of such public roads, as may be authorized by the
President of the Philippines upon recommendation of the Secretary of Public Works and Communications, but in none
of these cases shall any toll fees be charged or collected until and unless the approved schedule of tolls has been
posted legibly in a conspicuous place at such toll station.
Section 60. The lien upon motor vehicles. - Any balance of fees for registration, re-registration or delinquent registration
of a motor vehicle, remaining unpaid and all fines imposed upon any vehicle owner, shall constitute a first lien upon the
motor vehicle concerned.
The Commission is hereby vested with authority to issue a warrant of constructive or actual distraint or and levy to any
owner of motor vehicle who has any balance of fees for registration, re-registration or delinquent registration of a
motor vehicle remaining unpaid, which upon demand by the Commissioner of the Land Transportation Commission or
any of his deputies executing such warrant, the owner of the said vehicle shall surrender same at the time demanded,
except when the attachment or execution is under any judicial process. Any owner who fails or refuses to surrender any
of such property or vehicle not so surrendered shall be punished by a fine not exceeding the amount of the fees
(including penalties and interests, if any) for the collection of which such warrant has been issued, together with the
costs and interests, if any, from the time of such surrender. In addition, such owner shall punished by a fine of not more
than three hundred pesos or an imprisonment not more than six months, or both.
Section 61. Disposal of monies collected. - Monies collected under the provisions of this Act shall be deposited in a
special trust account in the National Treasury to constitute the Highway Special Fund, which shall be apportioned and
expended in accordance with the provisions of the "Philippine Highway Act of 1953": Provided, however, That the
amount necessary to maintain and equip the Land Transportation Commission but not to exceed fifteen per cent of the
total collections during any one year, shall be set aside for the purpose.
ARTICLE III
Final Provisions
Section 62. No provincial board, city or municipal board or council shall enact or enforce any ordinance or resolution in
conflict with the provisions of this Act, or prohibiting any deputy or agent of the Commission to enforce this Act within
their respective territorial jurisdiction and the provisions of any charter to the contrary notwithstanding.
Section 63. Repeal of laws and ordinances. - Act Numbered Thirty-nine hundred ninety-two, as amended, and all laws,
executive orders, ordinances, resolutions, regulations, or parts thereof in conflict with the provisions of this Act are
repealed: Provided, however, That nothing contained in this Act shall be construed as limiting or superseding any
provisions of the Public Service Act, as amended, with respect to the control by the Public Service Commission of motor
vehicles operating as public service, nor shall any provision of this Act be construed as limiting or abridging the powers
conferred upon and exercised by the Public Service Commission with regards to the control and supervision of the
operation of such motor vehicles as public service.
Section 64. Appropriation. - To carry out effectively the provisions of this Act, the amount of two hundred fifty
thousand pesos is hereby appropriated out of the fees collected under this Act, in addition to the appropriations
provided in the General Appropriations Act, for the expense of this Commission for the fiscal year beginning July first,
nineteen hundred and sixty-four, to June thirtieth, nineteen hundred and sixty-five: Provided, however, That any
savings in the appropriations of the Motor Vehicles Office for the fiscal year beginning July first, nineteen hundred and
sixty-three, to June thirtieth, nineteen hundred and sixty-four shall likewise be available for this purpose.
Freight Forwarders
A "freight forwarder" refers to a firm holding itself out to the general public (other than as a pipeline, rail,
motor, or water carrier) to provide transportation of property for compensation and, in the ordinary course
of its business,
(1) to assemble and consolidate, or to provide for assembling and consolidating, shipments, and to perform
or provide for break-bulk and distribution operations of the shipments;
(2) to assume responsibility for the transportation of goods from the place of receipt to the place of
destination; and
(3) to use for any part of the transportation a carrier subject to the federal law pertaining to common
carriers.
Is a Freight Forwarder a Common Carrier?
A freight forwarder's liability is limited to damages arising from its own negligence, including negligence in
choosing the carrier; however, where the forwarder contracts to deliver goods to their destination instead
of merely arranging for their transportation, it becomes liable as a common carrier for loss or damage to
goods. A freight forwarder assumes the responsibility of a carrier, which actually executes the transport,
even though the forwarder does not carry the merchandise itself.
Unsworth Transportation International v. CA
Petitioner as a freight forwarder, received the shipment of Shipper Sylvex Purchasing Corpration in its
warehouse after it stamped the Permit to Deliver Imported Goods. Oceanica Cargo Marine Surveyors
Corporation (OCMSC) conducted a stripping survey of the shipment located in petitioner's warehouse. The
survey results stated the goods were in good condition. The arrastre issued the Gate Pass for delivery to
Unilab's warehouse. The materials were noted to be complete and in good order in the gate pass. the
shipment arrived in Unilab's warehouse and was immediately surveyed by an independent surveyor, and
found damages on the goods.
Unilab filed a formal claim for the damages. Petitioner denied liability on the basis of the gate pass issued
by the arrastre that the goods were in complete and good condition. The RTC and CA decided in favor of
private respondent and against petitioner.
Petitioner admits that it is a forwarder but disagrees with the CA's conclusion that it is a common carrier.
Admittedly, petitioner is a freight forwarder. The term "freight forwarder" refers to a firm holding itself
out to the general public (other than as a pipeline, rail, motor, or water carrier) to provide transportation
of property for compensation and, in the ordinary course of its business, (1) to assemble and consolidate,
or to provide for assembling and consolidating, shipments, and to perform or provide for break-bulk and
distribution operations of the shipments; (2) to assume responsibility for the transportation of goods from
the place of receipt to the place of destination; and (3) to use for any part of the transportation a carrier
subject to the federal law pertaining to common carriers.
A freight forwarder's liability is limited to damages arising from its own negligence, including negligence in
choosing the carrier; however, where the forwarder contracts to deliver goods to their destination instead
of merely arranging for their transportation, it becomes liable as a common carrier for loss or damage to
goods. A freight forwarder assumes the responsibility of a carrier, which actually executes the transport,
even though the forwarder does not carry the merchandise itself.
Real and Hypothecary or Limited Liability Rule -
A doctrine in maritime law where the shipowner or ship agents liability is held as merely co-extensive with his
interest in the vessel such that a total loss thereof results in its extinction. In this jurisdiction, this rule is
provided in three articles of the Code of Commerce. These are:
Art. 587. The ship agent shall also be civilly liable for the indemnities in favor of third persons which
may arise from the conduct of the captain in the care of the goods which he loaded on the vessel; but he
may exempt himself therefrom by abandoning the vessel with all her equipment and the freight it may have
earned during the voyage.
---
Art. 590. The co-owners of the vessel shall be civilly liable in the proportion of their interests in the
common fund for the results of the acts of the captain referred to in Art. 587.
Each co-owner may exempt himself from this liability by the abandonment, before a notary, of the
part of the vessel belonging to him.
---
Art. 837. The civil liability incurred by shipowners in the case prescribed in this section, shall be
understood as limited to the value of the vessel with all its appurtenances and freightage served during the
voyage.
Agustin Dela Torre v. CA

Facts:
Respondent Concepcion owned LCT-Josephine, a vessel registered with the Philippine Coast Guard.
Concepcion entered into a Preliminary Agreement with Roland for the dry-docking and repairs of the said
vessel as well as for its charter afterwards. Under this agreement, Concepcion agreed that after the
dry-docking and repair of LCT-Josephine, it should be chartered for 10,000.00 per month with the following
conditions:
1. The CHARTERER will be the one to pay the insurance premium of the vessel
2. The vessel will be used once every three (3) months for a maximum period of two (2)
weeks
3. The SECOND PARTY (referring to Concepcion) agreed that LCT-Josephine should be
used by the FIRST PARTY (referring to Roland) for the maximum period of two (2) years
4. The FIRST PARTY (Roland) will take charge[x] of maintenance cost of the said
vessel. [Underscoring Supplied]
Concepcion and the Philippine Trigon Shipyard Corporation(PTSC), represented by Roland, entered
into a Contract of Agreement, wherein the latter would charter LCT-Josephine retroactive to May 1, 1984,
under the following conditions:
a. Chartered amount of the vessel 20,000.00 per month effective May 1, 1984;
j. The owner (Concepcion) shall pay 50% downpayment for the dry-docking and repair of the vessel and
the balance shall be paid every month in the amount of 10,000.00, to be deducted from the
rental amount of the vessel;
k. In the event that a THIRD PARTY is interested to purchase the said vessel, the SECOND PARTY
(PTSC/ Roland) has the option for first priority to purchase the vessel. If the SECOND PARTY
(PTSC/Roland) refuses the offer of the FIRST PARTY (Concepcion), shall give the SECOND PARTY
(PTSC/Roland) enough time to turn over the vessel so as not to disrupt previous commitments;
l. That the SECOND PARTY (PTSC/Roland) has the option to terminate the contract in the event of the
SECOND PARTY (PTSC/Roland) decide to stop operating;
m. The SECOND PARTY (PTSC/Roland) shall give 90 days notice of such termination of contract;
n. Next x x year of dry-docking and repair of vessel shall be shouldered by the SECOND PARTY
(PTSC/Roland); (Underscoring Supplied]
PTSC/Roland sub-chartered LCT-Josephine to Trigon Shipping Lines (TSL), a single proprietorship owned by
Rolands father, Agustin de la Torre (Agustin).
TSL, this time by Roland per Agustins Special Power of Attorney, sub-chartered LCT-Josephine to Ramon
Larrazabal (Larrazabal) for the transport of cargo consisting of sand and gravel to Leyte. On November 23,
1984, the LCT-Josephine with its cargo of sand and gravel arrived at Philpos, Isabel, Leyte. The vessel was
beached near the NDC Wharf. With the vessels ramp already lowered, the unloading of the vessels cargo
began with the use of Larrazabals payloader.
While the payloader was on the deck of the LCT-Josephine scooping a load of the cargo, the vessels ramp
started to move downward, the vessel tilted and sea water rushed in. Shortly thereafter,
LCT-Josephine sank.
Concepcion demanded that PTSC/ Roland refloat LCT-Josephine. The latter assured Concepcion that
negotiations were underway for the refloating of his vessel. Unfortunately, this did not materialize.
For this reason, Concepcion was constrained to institute a complaint for Sum of Money and Damages against
PTSC and Roland before the RTC. The RTC declared that the efficient cause of the sinking of
the LCT-JOSEPHINE was the improper lowering or positioning of the ramp, which was well within the charge
or responsibility of the captain and crew of the vessel.
Agustin, PTSC and Roland went to the CA on appeal. The appellate court, in agreement with the findings of
the RTC, affirmed its decision in toto.
Held:
From the foregoing, the issues raised in the two petitions can be categorized as: (1) those referring
to the factual milieu of the case; (2) those concerning the applicability of the Code of Commerce, more
specifically, the Limited Liability Rule; and (3) the question on the solidary liability of the petitioners.
As regards the issues requiring a review of the factual findings of the trial court, the Court finds no
compelling reason to deviate from the rule that findings of fact of a trial judge, especially when affirmed by
the appellate court, are binding before this Court.[22] The CA, in reviewing the findings of the RTC, made
these observations:
We are not persuaded that the trial Court finding should be set aside. The Court a quo sifted through
the records and arrived at the fact that clearly, there was improper lowering or positioning of the ramp,
which was not at peak, according to de la Torre and moving down according to Sungayan when the
payloader entered and scooped up a load of sand and gravel. Because of this, the payloader was in danger of
being lost (submerged) and caused Larrazabal to order the operator to go back into the vessel, according to
de la Torres version, or back off to the shore, per Sungayan. Whichever it was, the fact remains that the
ramp was unsteady (moving) and compelled action to save the payloader from submerging, especially
because of the conformation of the sea and the shore.
xxx
The contract executed on June 20, 1984, between plaintiff-appellee and defendants-appellants showed that
the services of the crew of the owner of the vessel were terminated. This allowed the charterer,
defendants-appellants, to employ their own. The sub-charter contract between defendants-appellants
Philippine Trigon Shipyard Corp. and third-party defendant-appellant Trigon Shipping Lines showed similar
provision where the crew of Philippine Trigon had to be terminated or rehired by Trigon Shipping Lines. As to
the agreement with fourth-party Larrazabal, it is silent on who would hire the crew of the vessel. Clearly,
the crew manning the vessel when it sunk belonged to third-party defendant-appellant. Hubart Sungayan,
the acting Chief Mate, testified that he was hired by Agustin de la Torre, who in turn admitted to hiring the
crew. The actions of fourth-party defendant, Larrazabal and his payloader operator did not include the
operation of docking where the problem arose. [Underscoring supplied]
Similarly, the Court has examined the records at hand and completely agree with the CA that the
factual findings of the RTC are in order.
With respect to petitioners position that the Limited Liability Rule under the Code of Commerce
should be applied to them, the argument is misplaced. The said rule has been explained to be that of the real
and hypothecary doctrine in maritime law where the shipowner or ship agents liability is held as merely
co-extensive with his interest in the vessel such that a total loss thereof results in its extinction. In this
jurisdiction, this rule is provided in three articles of the Code of Commerce. These are:
Art. 587. The ship agent shall also be civilly liable for the indemnities in favor of third persons which
may arise from the conduct of the captain in the care of the goods which he loaded on the vessel;
but he may exempt himself therefrom by abandoning the vessel with all her equipment and the
freight it may have earned during the voyage.
---
Art. 590. The co-owners of the vessel shall be civilly liable in the proportion of their interests in the
common fund for the results of the acts of the captain referred to in Art. 587.
Each co-owner may exempt himself from this liability by the abandonment, before a notary, of the
part of the vessel belonging to him.
---
Art. 837. The civil liability incurred by shipowners in the case prescribed in this section, shall be
understood as limited to the value of the vessel with all its appurtenances and freightage served
during the voyage.
Article 837 specifically applies to cases involving collision which is a necessary consequence of the
right to abandon the vessel given to the shipowner or ship agent under the first provision Article 587.
Similarly, Article 590 is a reiteration of Article 587, only this time the situation is that the vessel is co-owned
by several persons. Obviously, the forerunner of the Limited Liability Rule under the Code of Commerce is
Article 587. Now, the latter is quite clear on which indemnities may be confined or restricted to the value of
the vessel pursuant to the said Rule, and these are the indemnities in favor of third persons which may arise
from the conduct of the captain in the care of the goods which he loaded on the vessel. Thus, what is
contemplated is the liability to third persons who may have dealt with the shipowner, the agent or even the
charterer in case of demise or bareboat charter.
The only person who could avail of this is the shipowner, Concepcion. He is the very person whom
the Limited Liability Rule has been conceived to protect. The petitioners cannot invoke this as a
defense. In Yangco v. Laserna,[26] this Court, through Justice Moran, wrote:
The policy which the rule is designed to promote is the encouragement of

shipbuilding and investment in maritime commerce.
x x x.
Grotius, in his law of War and Peace, says that men would be deterred
from investing in ships if they thereby incurred the apprehension of being
rendered liable to an indefinite amount by the acts of the master, x x x.[27]
Later, in the case of Monarch Insurance Co., Inc. v. CA,[28] this Court, this time through Justice
Sabino R. De Leon, Jr., again explained:
No vessel, no liability, expresses in a nutshell the limited liability rule. The shipowners
or agents liability is merely coextensive with his interest in the vessel such that a total loss
thereof results in its extinction. The total destruction of the vessel extinguishes maritime
liens because there is no longer any res to which it can attach. This doctrine is based on the
real and hypothecary nature of maritime law which has its origin in the prevailing conditions
of the maritime trade and sea voyages during the medieval ages, attended by innumerable
hazards and perils. To offset against these adverse conditions and to encourage shipbuilding
and maritime commerce, it was deemed necessary to confine the liability of the owner or
agent arising from the operation of a ship to the vessel, equipment, and freight, or insurance,
if any.[29]
In view of the foregoing, Concepcion as the real shipowner is the one who is supposed to be
supported and encouraged to pursue maritime commerce. Thus, it would be absurd to apply the Limited
Liability Rule against him who, in the first place, should be the one benefitting from the said rule. In
distinguishing the rights between the charterer and the shipowner, the case of Yueng Sheng Exchange and
Trading Co. v. Urrutia & Co.[30] is most enlightening. In that case, no less than Chief Justice Arellano wrote:
The whole ground of this assignment of errors rests on the proposition advanced by
the appellant company that the charterer of a vessel, under the conditions stipulated in the
charter party in question, is the owner pro hac vice of the ship and takes upon himself the
responsibilities of the owner.
xxx
If G. Urrutia & Co., by virtue of the above-mentioned contract, became the agents of
the Cebu, then they must respond for the damages claimed, because the owner and the
agent are civilly responsible for the acts of the captain.
But G. Urrutia & Co. could not in any way exercise the powers or rights of an
agent. They could not represent the ownership of the vessel, nor could they, in their own
name and in such capacity, take judicial or extrajudicial steps in all that relates to commerce;
thus if the Cebu were attached, they would have no legal capacity to proceed to secure its
release; speaking generally, not even the fines could or ought to be paid by them, unless such
fines were occasioned by their orders. x x x.
The contract executed by Smith, Bell & Co., as agents for the Cebu, and G. Urrutia &
Co., as charterers of the vessel, did not put the latter in the place of the former, nor make
them agents of the owner or owners of the vessel. With relation to those agents, they
retained opposing rights derived from the charter party of the vessel, and at no time could
they be regarded by the third parties, or by the authorities, or by the courts, as being in the
place of the owners or the agents in matters relating to the responsibilities pertaining to the
ownership and possession of the vessel. x x x.[31]
In Yueng Sheng, it was further stressed that the charterer does not completely and absolutely step
into the shoes of the shipowner or even the ship agent because there remains conflicting rights between the
former and the real shipowner as derived from their charter agreement. The Court again quotes Chief Justice
Arellano:
Their (the charterers) possession was, therefore, the uncertain title of lease, not a
possession of the owner, such as is that of the agent, who is fully subrogated to the place of
the owner in regard to the dominion, possession, free administration, and navigation of the
vessel.[32]
Therefore, even if the contract is for a bareboat or demise charter where possession, free
administration and even navigation are temporarily surrendered to the charterer, dominion over the vessel
remains with the shipowner. Ergo, the charterer or the sub-charterer, whose rights cannot rise above that of
the former, can never set up the Limited Liability Rule against the very owner of the vessel. Borrowing the
words of Chief Justice Artemio V. Panganiban, Indeed, where the reason for the rule ceases, the rule itself
does not apply.[33]
The Court now comes to the issue of the liability of the charterer and the sub-charterer.
In the present case, the charterer and the sub-charterer through their respective contracts of
agreement/charter parties, obtained the use and service of the entire LCT-Josephine. The vessel was likewise
manned by the charterer and later by the sub-charterers people. With the complete and exclusive
relinquishment of possession, command and navigation of the vessel, the charterer and later the
sub-charterer became the vessels owner pro hac vice. Now, and in the absence of any showing that
the vessel or any part thereof was commercially offered for use to the public, the above agreements/charter
parties are that of a private carriage where the rights of the contracting parties are primarily defined and
governed by the stipulations in their contract.[34]
Although certain statutory rights and obligations of charter parties are found in the Code of
Commerce, these provisions as correctly pointed out by the RTC, are not applicable in the present case.
Indeed, none of the provisions found in the Code of Commerce deals with the specific rights and obligations
between the real shipowner and the charterer obtaining in this case. Necessarily, the Court looks to the New
Civil Code to supply the deficiency.[35] Thus, the RTC and the CA were both correct in applying the statutory
provisions of the New Civil Code in order to define the respective rights and obligations of the opposing
parties.
Thus, Roland, who, in his personal capacity, entered into the Preliminary Agreement with Concepcion
for the dry-docking and repair of LCT-Josephine, is liable under Article 1189[36] of the New Civil Code. There
is no denying that the vessel was not returned to Concepcion after the repairs because of the provision in
the Preliminary Agreement that the same should be used by Roland for the first two years. Before the vessel
could be returned, it was lost due to the negligence of Agustin to whom Roland chose to sub-charter or
sublet the vessel.
PTSC is liable to Concepcion under Articles 1665[37] and 1667[38] of the New Civil Code. As the
charterer or lessee under the Contract of Agreement dated June 20, 1984, PTSC was contract-bound to
return the thing leased and it was liable for the deterioration or loss of the same.
Agustin, on the other hand, who was the sub-charterer or sub-lessee of LCT-Josephine, is liable under
Article 1651 of the New Civil Code.[39] Although he was never privy to the contract between PTSC and
Concepcion, he remained bound to preserve the chartered vessel for the latter. Despite his non-inclusion in
the complaint of Concepcion, it was deemed amended so as to include him because, despite or in the
absence of that formality of amending the complaint to include him, he still had his day in court[40] as he
was in fact impleaded as a third-party defendant by his own son, Roland the very same person who
represented him in the Contract of Agreement with Larrazabal.
(S)ince the purpose of formally impleading a party is to assure him a day in court,
once the protective mantle of due process of law has in fact been accorded a litigant,
whatever the imperfection in form, the real litigant may be held liable as a party.[41]
In any case, all three petitioners are liable under Article 1170 of the New Civil Code.[42] The necessity
of insuring the LCT-Josephine, regardless of who will share in the payment of the premium, is very clear
under the Preliminary Agreement and the subsequent Contracts of Agreement dated June 20, 1984 and
August 1, 1984, respectively. The August 17, 1984 letter of Concepcions representative, Rogelio L. Martinez,
addressed to Roland in his capacity as the president of PTSC inquiring about the insurance of
the LCT-Josephine as well as reiterating the importance of insuring the said vessel is quite telling.
August 17, 1984

Mr. Roland de la Torre
President
Phil. Trigon Shipyard Corp.
Cebu City
Dear Sir:
In connection with your chartering of LCT JOSEPHINE effect[ive] May 1, 1984, I wish
to inquire regarding the insurance of said vessel to wit:
1. Name of Insurance Company

2. Policy No.
3. Amount of Premiums
4. Duration of coverage already paid
Please send a Xerox copy of policy to the undersigned as soon as possible.
In no case shall LCT JOSEPHINE sail without any insurance coverage.
Hoping for your (prompt) action on this regard.
Truly yours,
(sgd)ROGELIO L. MARTINEZ
Owners representative[43]
Clearly, the petitioners, to whom the possession of LCT Josephine had been entrusted as early as the
time when it was dry-docked for repairs, were obliged to insure the same. Unfortunately, they failed to do so
in clear contravention of their respective agreements. Certainly, they should now all answer for the loss of
the vessel.
Parties
1.1 Carriage of Passengers / Contract to Carry Passenger

Passenger - one who travels in a public conveyance by virtue of contract, express or implied, with
the carrier as to the payment of fare or that which is accepted as an equivalent thereof.
(Nueca v. Manila Railroad Co., G.R. No. 31731-R, 30 January 1968)
Common Carrier - one that holds itself out as ready to engage in the transportation of goods for hire as a
public employment and not as a casual occupation. (De Guzman v. CA, G.R. No. L-47822, 22 December 1988)
1.2 Carriage of Goods/ Contract to carry Goods

Shipper is the person who delivers the goods to the carrier for transportation. He is the person who pays
the consideration or on whose behalf payment is made.
Consignee is the person to whom the goods are to be delivered.
May be the shipper himself where the goods will be delivered to one of the branch offices of the
shipper, or
May be a third person who is not actually a party to the contract.
Carrier
Baliwag Transit Corporation v CA

Facts: Spouses Sotero Cailipan, Jr. and Zenaida Lopez, and their son George, of legal age, against
petitioner Baliwag Transit (Baliwag, for brevity) Complaint for damages arising from breach of
contract of carriage was filed by private respondents, the Spouses. The Complaint alleged that
George, who was a paying passenger on a Baliwag bus on 17 December 1984, suffered multiple
serious physical injuries when he was thrown off said bus driven in a careless and negligent manner
by the bus driver. As a result, he was confined in the hospital for treatment, incurring medical
expenses, which were borne by his parents, the respondent Spouses, in the sum of about
P200,000.00 plus other incidental expenses of about P10,000.00.
An Answer was filed by petitioner alleging that the cause of the injuries sustained by George was
solely attributable to his own voluntary act in that, without warning and provocation, he suddenly
stood up from his seat and headed for the door of the bus as if in a daze, opened it and jumped off
while said bus was in motion, in spite of the protestations by the driver and without the knowledge
of the conductor.
Baliwag then filed a Third-Party Complaint against Fortune Insurance & Surety Company, Inc., on its
third-party liability insurance in the amount of P50,000.00. In its Answer, Fortune Insurance claimed
limited liability, the coverage being subject to a Schedule of Indemnities forming part of the
insurance policy.
On 14 November 1985 and 18 November 1985, respectively, Fortune Insurance and Baliwag each
filed Motions to Dismiss on the ground that George, in consideration of the sum of P8,020.50 had
executed a "Release of Claims" dated 16 May 1985. These Motions were denied by the Trial Court in
an Order dated 13 January 1986 as they were filed beyond the time for pleading and after the
Answer were already filed.
On 5 February 1986 Baliwag filed a Motion to Admit Amended Answer, which was granted by the
Trial Court. The Amended Answer incorporated the affirmative defense in the Motion to Dismiss to
the effect that on 16 May 1985, George bad been paid all his claims for damages arising from the
incident subject matter of the complaint when he executed the following "Release of Claims":
For and in consideration of the payment to me/us of the sum of EIGHT THOUSAND TWENTY and
50/100 PESOS ONLY (P8,020.50), the receipt of which is hereby acknowledged, I/we, being of lawful
age, do hereby release, acquit and forever discharge Fortune Insurance and/or Baliwag transit, Inc.
his/her heirs, executors and assigns, from any and all liability now accrued or hereafter to accrue on
account of any and all claims or causes of action which I/we now or may here after have for
personal injuries, damage to property, loss of services, medical expenses, losses or damages of any
and every kind or nature whatsoever, now known or what may hereafter develop by me/us
sustained or received on or about 17th day of December, 1984 through Reckless Imprudence
Resulting to Physical Injuries, and I/we hereby declare that I/we fully understand the terms of this
settlement and voluntarily accept said sum for the purpose of making a full and final compromise
adjustment and settlement of the injuries and damages, expenses and inconvenience above
mentioned. (Rollo, p. 11)
During the preliminary hearing on the aforementioned affirmative defense, Baliwag waived the
presentation of testimonial evidence and instead offered as its Exhibit "1" the "Release of Claims"
signed by George and witnessed by his brother Benjamin L. Cailipan, a licensed engineer.
By way of opposition to petitioner's affirmative defense, respondent Sotero Cailipan, Jr. testified
that he is the father of George, who at the time of the incident was a student, living with his parents
and totally dependent on them for their support; that the expenses for his hospitalization were
shouldered by his parents; and that they had not signed the "Release of Claims."
In an Order dated 29 August 1986, the Regional Trial Court of Bulacan, Branch 20, 1 dismissed the
Complaint and Third-party Complaint, ruling that since the contract of carriage is between Baliwag
and George L. Cailipan, the latter, who is of legal age, had the exclusive right to execute the Release
of Claims despite the fact that he is still a student and dependent on his parents for support.
Consequently, the execution by George of the Release of Claims discharges Baliwag and Fortune
Insurance.
Aggrieved, the Spouses appealed to respondent Court of Appeals. The Appellate Court rendered a
Decision setting aside the appealed Order and holding that the "Release of Claims" cannot operate
as a valid ground for the dismissal of the case because it does not have the conformity of all the
parties, particularly George's parents, who have a substantial interest in the case as they stand to
be prejudiced by the judgment because they spent a sizeable amount for the medical bills of their
son; that the Release of Claims was secured by Fortune Insurance for the consideration of
P8,020.50 as the full and final settlement of its liability under the insurance policy and not for the
purpose of releasing Baliwag from its liability as a carrier in this suit for breach of contract. The
Appellate Court also ordered the remand of the case to the lower Court for trial on the merits and
for George to return the amount of P8,020.50 to Fortune Insurance.
Held: Release of Claims executed by him, as the injured party, discharging Fortune Insurance and
Baliwag from any and all liability is valid. He was then of legal age, a graduating student of
Agricultural Engineering, and had the capacity to do acts with legal effect (Article 37 in relation to
Article 402, Civil Code). Thus, he could sue and be sued even without the assistance of his parents.
Significantly, the contract of carriage was actually between George, as the paying passenger, and
Baliwag, as the common carrier. As such carrier, Baliwag was bound to carry its passengers safely
as far as human care and foresight could provide, and is liable for injuries to them through the
negligence or wilful acts of its employees (Articles 1755 and 1759, Civil Code). Thus, George had the
right to be safely brought to his destination and Baliwag had the correlative obligation to do so.
Since a contract may be violated only by the parties thereto, as against each other, in an action
upon that contract, the real parties in interest, either as plaintiff or as defendant, must be parties to
said contract (Marimperio Compania Naviera, S.A. vs. Court of Appeals, No. L-40234, December 14,
1987, 156 SCRA 368). A real party-in-interest -plaintiff is one who has a legal right while a real
party-in-interest-defendant is one who has a correlative legal obligation whose act or omission
violates the legal right of the former (Lee vs. Romillo, Jr., G.R. No. 60973, May 28, 1988). In the
absence of any contract of carriage between Baliwag and George's parents, the latter are not real
parties-in-interest in an action for breach of that contract.
The general rule of the common law is that every action must be brought in the name of the party
whose legal right has been invaded or infringed. 15 Enc. P1. & Pr. p. 484. "For the immediate wrong
and damage the person injured is the only one who can maintain the action." Id. p. 578. The person
who sustains an injury is the person to bring an action for the injury against the wrongdoer." Dicey
parties to Actions, 347. (Cited in Green v. Shoemaker, 73 A 688, 23 L.R.A., N.S. 667).
There is no question regarding the genuineness and due execution of the Release of Claims. It is a
duly notarized public document. It clearly stipulates that the consideration of P8,020.50 received by
George was "to release and forever discharge Fortune Insurance and/or Baliwag from any and all
liabilities now accrued or to accrue on account of any and all claims or causes of action ... for
personal injuries, damage to property, loss of services, medical expenses, losses or damages of any
and every kind or nature whatsoever, sustained by him on 17 December 1984 thru Reckless
Imprudence Resulting to Physical Injuries." Consequently, the ruling of respondent Appellate Court
that the "Release of Claims" was intended only as the full and final settlement of a third-party
liability for bodily injury claim and not for the purpose of releasing Baliwag from its liability, if any, in
a breach of a contract of carriage, has to be rejected for being contrary to the very terms thereof. If
the terms of a contract are clear and leave no doubt upon the intention of the contracting parties,
the literal meaning of its stipulations shall control (Article 1370, Civil Code). The phraseology "any
and all claims or causes of action" is broad enough to include all damages that may accrue to the
injured party arising from the unfortunate accident.
The Release of Claims had the effect of a compromise agreement since it was entered into for the
purpose of making a full and final compromise adjustment and settlement of the cause of action
involved. A compromise is a contract whereby the parties, by making reciprocal concessions, avoid
a litigation or put an end to one already commenced (Article 2028, Civil Code). The Release of
Claims executed by the injured party himself wrote finish to this litigation.
Everett Steamship Corp. v. CA October 8, 1998

MARTINEZ, J.:
Private respondent imported three crates of bus spare part from its supplier, Maruman Trading Company,
Ltd. (Maruman Trading), a foreign corporation based in Inazawa, Aichi, Japan. The crates were shipped from
Nagoya to Manila on board ADELFA EVERETTE, a vessel owned by petitioners principal, Everett Orient
Lines. The said crates were covered by Bill of Lading No. NGO53MN.
Upon arrival at the port of Manila, it was discovered that one of the crates was missing which was
confirmed and admitted by petitioner in its letter to private respondent, which thereafter made a formal
claim upon petitioner for the value of the lost cargo amounting to One Million Five Hundred Fifty Two
Thousand Five Hundred (Y1,552,500.00) Yen, the amount shown in an Invoice No. MTM-941, dated
November 14, 1991. However, petitioner offered to pay only One Hundred Thousand (Y100,000.00) Yen, the
maximum amount stipulated under Clause 18 of the covering bill of lading which limits the liability of
petitioner.
Private respondent rejected the offer and thereafter instituted a suit for collection docketed as Civil
Case No. C-15532, against petitioner before the Regional Trial Court of Caloocan City, Branch 126.
The trial court ruled:
1. Considering defendants categorical admission of loss and its failure to overcome the presumption
of negligence and fault, the Court conclusively finds defendant liable to the plaintiff.
2. As for the extent of the liability, the Court subscribes to the provisions of Article 1750 of the New
Civil Code -
Art. 1750. A contract fixing the sum that may be recovered by the owner or shipper for the
loss, destruction or deterioration of the goods is valid, if it is reasonable and just under the
circumstances, and has been fairly and freely agreed upon.
It is required, however, that the contract must be reasonable and just under the circumstances and
has been fairly and freely agreed upon. The requirements provided in Art. 1750 of the New Civil
Code must be complied with before a common carrier can claim a limitation of its pecuniary liability
in case of loss, destruction or deterioration of the goods it has undertaken to transport.
In the case at bar, the Court is of the view that the requirements of said article have not been met. The
fact that those conditions are printed at the back of the bill of lading in letters so small that they are hard to
read would not warrant the presumption that the plaintiff or its supplier was aware of these conditions such
that he had fairly and freely agreed to these conditions.
CA affirmed
Issues: (1) in ruling that the consent of the consignee to the terms and conditions of the bill of lading is
necessary to make such stipulations binding upon it;
(2) in holding that the carriers limited package liability as stipulated in the bill of lading does not apply in
the instant case; and
(3) (3) in allowing private respondent to fully recover the full alleged value of its lost cargo.
We shall first resolve the validity of the limited liability clause in the bill of lading.
A stipulation in the bill of lading limiting the common carriers liability for loss or destruction of a cargo
to a certain sum, unless the shipper or owner declares a greater value, is sanctioned by law, particularly
Articles 1749 and 1750 of the Civil Code which provide:
ART. 1749. A stipulation that the common carriers liability is limited to the value of the goods
appearing in the bill of lading, unless the shipper or owner declares a greater value, is binding.
ART. 1750. A contract fixing the sum that may be recovered by the owner or shipper for the loss,
destruction, or deterioration of the goods is valid, if it is reasonable and just under the
circumstances, and has been freely and fairly agreed upon.
Such limited-liability clause has also been consistently upheld by this Court in a number of cases.
Pursuant to the afore-quoted provisions of law, it is required that the stipulation limiting the common
carriers liability for loss must be reasonable and just under the circumstances, and has been freely and fairly
agreed upon.
The bill of lading subject of the present controversy specifically provides, among others:
18. All claims for which the carrier may be liable shall be adjusted and settled on the basis of the
shippers net invoice cost plus freight and insurance premiums, if paid, and in no event shall the carrier
be liable for any loss of possible profits or any consequential loss.
The carrier shall not be liable for any loss of or any damage to or in any connection with, goods in an
amount exceeding One Hundred Thousand Yen in Japanese Currency (Y100,000.00) or its equivalent in
any other currency per package or customary freight unit (whichever is least) unless the value of the
goods higher than this amount is declared in writing by the shipper before receipt of the goods by the
carrier and inserted in the Bill of Lading and extra freight is paid as required. (Emphasis supplied)
the shipper, Maruman Trading, had the option to declare a higher valuation if the value of its cargo was
higher than the limited liability of the carrier. Considering that the shipper did not declare a higher valuation,
it had itself to blame for not complying with the stipulations.
The trial courts ratiocination that private respondent could not have fairly and freely agreed to the
limited liability clause in the bill of lading because the said conditions were printed in small letters does not
make the bill of lading invalid.
We ruled in PAL, Inc. vs. Court of Appeals that the jurisprudence on the matter reveals the consistent
holding of the court that contracts of adhesion are not invalid per se and that it has on numerous occasions
upheld the binding effect thereof. Also, in Philippine American General Insurance Co., Inc. vs. Sweet Lines ,
Inc.[6] this Court , speaking through the learned Justice Florenz D. Regalado, held:
x x x Ong Yiu vs. Court of Appeals, et.al., instructs us that contracts of adhesion wherein one party
imposes a ready-made form of contract on the other x x x are contracts not entirely prohibited. The
one who adheres to the contract is in reality free to reject it entirely; if he adheres he gives his
consent. In the present case, not even an allegation of ignorance of a party excuses non-compliance
with the contractual stipulations since the responsibility for ensuring full comprehension of the
provisions of a contract of carriage devolves not on the carrier but on the owner, shipper, or
consignee as the case may be. (Emphasis supplied)
It was further explained in Ong Yiu vs Court of Appeals that stipulations in contracts of adhesion are
valid and binding.
While it may be true that petitioner had not signed the plane ticket x x, he is nevertheless bound by
the provisions thereof. Such provisions have been held to be a part of the contract of carriage, and
valid and binding upon the passenger regardless of the latters lack of knowledge or assent to the
regulation. It is what is known as a contract of adhesion, in regards which it has been said that
contracts of adhesion wherein one party imposes a ready-made form of contract on the other, as
the plane ticket in the case at bar, are contracts not entirely prohibited. The one who adheres to the
contract is in reality free to reject it entirely; if he adheres, he gives his consent. x x x , a contract
limiting liability upon an agreed valuation does not offend against the policy of the law forbidding
one from contracting against his own negligence. (Emphasis supplied)
The shipper, Maruman Trading, we assume, has been extensively engaged in the trading business. It can
not be said to be ignorant of the business transactions it entered into involving the shipment of its goods to
its customers.The shipper could not have known, or should know the stipulations in the bill of lading and
there it should have declared a higher valuation of the goods shipped. Moreover, Maruman Trading has not
been heard to complain that it has been deceived or rushed into agreeing to ship the cargo in petitioners
vessel. In fact, it was not even impleaded in this case.
The next issue to be resolved is whether or not private respondent, as consignee, who is not a
signatory to the bill of lading is bound by the stipulations thereof.
Again, in Sea-Land Service, Inc. vs. Intermediate Appellate Court (supra), we held that even if the
consignee was not a signatory to the contract of carriage between the shipper and the carrier, the
consignee can still be bound by the contract. Speaking through Mr. Chief Justice Narvasa, we ruled:
To begin with, there is no question of the right, in principle, of a consignee in a bill of lading to
recover from the carrier or shipper for loss of, or damage to goods being transported under said
bill, although that document may have been- as in practice it oftentimes is-drawn up only by
the consignor and the carrier without the intervention of the consignee. x x x.
x x x the right of a party in the same situation as respondent here, to recover for loss of a shipment
consigned to him under a bill of lading drawn up only by and between the shipper and the carrier,
springs from either a relation of agency that may exist between him and the shipper or consignor,
or his status as stranger in whose favor some stipulation is made in said contract, and who becomes
a party thereto when he demands fulfillment of that stipulation, in this case the delivery of the
goods or cargo shipped. In neither capacity can he assert personally, in bar to any provision of the
bill of lading, the alleged circumstance that fair and free agreement to such provision was vitiated
by its being in such fine print as to be hardly readable. Parenthetically, it may be observed that in
one comparatively recent case (Phoenix Assurance Company vs. Macondray & Co., Inc., 64 SCRA 15)
where this Court found that a similar package limitation clause was printed in the smallest type on
the back of the bill of lading, it nonetheless ruled that the consignee was bound thereby on the
strength of authority holding that such provisions on liability limitation are as much a part of a bill of
lading as though physically in it and as though placed therein by agreement of the parties.
There can, therefore, be no doubt or equivocation about the validity and enforceability of
freely-agreed-upon stipulations in a contract of carriage or bill of lading limiting the liability of the
carrier to an agreed valuation unless the shipper declares a higher value and inserts it into said
contract or bill. This proposition, moreover, rests upon an almost uniform weight of authority.
(Underscoring supplied)
When private respondent formally claimed reimbursement for the missing goods from petitioner and
subsequently filed a case against the latter based on the very same bill of lading, it (private respondent)
accepted the provisions of the contract and thereby made itself a party thereto, or at least has come to
court to enforce it. Thus, private respondent cannot now reject or disregard the carriers limited liability
stipulation in the bill of lading. In other words, private respondent is bound by the whole stipulations in the
bill of lading and must respect the same.
Private respondent, however, insists that the carrier should be liable for the full value of the lost cargo
in the amount of Y1,552,500.00, considering that the shipper, Maruman Trading, had "fully declared the
shipment x x x, the contents of each crate, the dimensions, weight and value of the contents,"[10] as shown
in the commercial Invoice No. MTM-941.
This claim was denied by petitioner, contending that it did not know of the contents, quantity and value
of "the shipment which consisted of three pre-packed crates described in Bill of Lading No. NGO-53MN
merely as 3 CASES SPARE PARTS.[11]
The bill of lading in question confirms petitioners contention. To defeat the carriers limited liability, the
aforecited Clause 18 of the bill of lading requires that the shipper should have declared in writing a higher
valuation of its goods before receipt thereof by the carrier and insert the said declaration in the bill of lading,
with the extra freight paid. These requirements in the bill of lading were never complied with by the shipper,
hence, the liability of the carrier under the limited liability clause stands. The commercial Invoice No.
MTM-941 does not in itself sufficiently and convincingly show that petitioner has knowledge of the value of
the cargo as contended by private respondent. No other evidence was proffered by private respondent to
support is contention. Thus, we are convinced that petitioner should be liable for the full value of the lost
cargo.
British Airways v. CA February 9, 1993, 218 SCRA 699
Facts: Mahtani who wants to go to India asked Mr. Gumar to prepare his travelplans. Mr. Gumar purchased a
ticket from British Airways (BA).Since BA had no direct flights from Manila to Bombay, Mahtani had to take a
flight to Hongkong via PAL, and upon arrival in Hongkong he had to take a connecting flight to Bombay on
board BA. Before departure, Mahtani checked in at PAL counter his two pieces of luggage containing his
clothings and personal effects, confident that upon reaching Hongkong, the same would be transferred to
the BA flight bound for Bombay.
when Mahtani arrived in Bombay he discovered that his luggage was missing and that upon inquiry from
the BA representatives, he was told that the same might have been diverted to London. After waiting for 1
week, BA finally advised him to file a claim by accomplishing the "Property Irregularity Report. In the
Philippines, on June 11, 1990 Mahtani filed his complaint for damages and attorney's fees against BA and
Mr.Gumar before the RTC.
alleging that the reason for the non-transfer of the luggage was due to the latter's late arrival in Hongkong,
thus leaving hardly any time for the proper transfer of Mahtani's luggage to the BA aircraft bound for
Bombay.
The RTC rendered its decision in favor of Mahtani. BA is ordered to pay Mahtani P7,000 for the value of the 2
suitcases$400 for the value of the contents of the luggageP50,000 for moral and exemplary damages and 20%
for attorneys fees and cost of the action.
This decision was affirmed by CA.
Before we resolve the issues raised by BA, it is needful to state that the nature of an airlines contract of
carriage partakes of two types, namely: a contract to deliver a cargo or merchandise to its destination and
a contract to transport passengers to their destination. A business intended to serve the travelling public
primarily, it is imbued with public interest, hence, the law governing common carriers imposes an exacting
standard. Neglect or malfeasance by the carriers employees could predictably furnish bases for an action for
damages.
In the instant case, it is apparent that the contract of carriage was between Mahtani and BA. Moreover,
it is indubitable that his luggage never arrived in Bombay on time. Therefore, as in a number of cases we
have assessed the airlines culpability in the form of damages for breach of contract involving misplaced
luggage.
In determining the amount of compensatory damages in this kind of cases, it is vital that the claimant
satisfactorily prove during the trial the existence of the factual basis of the damages and its causal
connection to defendants acts.
In this regard, the trial court granted the following award as compensatory damages:
Since plaintiff did not declare the value of the contents in his luggage and even failed to show
receipts of the alleged gifts for the members of his family in Bombay, the most that can be expected
for compensation of his lost luggage (2 suit cases) is Twenty U.S. Dollars ($20.00) per kilo, or a
combined value of Four Hundred ($400.00) U.S. Dollars for Twenty kilos representing the contents
plus Seven Thousand (P7,000.00) Pesos representing the purchase price of the two (2) suit cases.
However, as earlier stated, it is the position of BA that there should have been no separate award for the
luggage and the contents thereof since Mahtani failed to declare a separate higher valuation for the
luggage,[18] and therefore, its liability is limited, at most, only to the amount stated in the ticket.
Considering the facts of the case, we cannot assent to such specious argument.
Admittedly, in a contract of air carriage a declaration by the passenger of a higher value is needed to
recover a greater amount. Article 22(1) of the Warsaw Convention,[19] provides as follows:
xxxxxxxxx
(2) In the transportation of checked baggage and goods, the liability of the carrier shall be limited to a
sum of 250 francs per kilogram, unless the consignor has made, at the time the package was
handed over to the carrier, a special declaration of the value at delivery and has paid a supplementary
sum if the case so requires. In that case the carrier will be liable to pay a sum not exceeding the
declared sum, unless he proves that the sum is greater than the actual value to the consignor at
delivery.
American jurisprudence provides that an air carrier is not liable for the loss of baggage in an amount in
excess of the limits specified in the tariff which was filed with the proper authorities, such tariff being
binding on the passenger regardless of the passengers lack of knowledge thereof or assent thereto.[20] This
doctrine is recognized in this jurisdiction.[21]
Notwithstanding the foregoing, we have, nevertheless, ruled against blind reliance on adhesion
contracts where the facts and circumstances justify that they should be disregarded.[22]
In addition, we have held that benefits of limited liability are subject to waiver such as when the air
carrier failed to raise timely objections during the trial when questions and answers regarding the actual
claims and damages sustained by the passenger were asked.[23]
It is a well-settled doctrine that where the proponent offers evidence deemed by counsel of the adverse
party to be inadmissible for any reason, the latter has the right to object. However, such right is a mere
privilege which can be waived. Necessarily, the objection must be made at the earliest opportunity, lest
silence when there is opportunity to speak may operate as a waiver of objections.[25] BA has precisely failed
in this regard.
To compound matters for BA, its counsel failed, not only to interpose a timely objection, but even
conducted his own cross-examination as well.[26] In the early case of Abrenica v. Gonda,[27] we ruled that:
x x x (I)t has been repeatedly laid down as a rule of evidence that a protest or objection against the
admission of any evidence must be made at the proper time, and that if not so made it will be understood
to have been waived. The proper time to make a protest or objection is when, from the question
addressed to the witness, or from the answer thereto, or from the presentation of proof, the inadmissibility
of evidence is, or may be inferred.
Needless to say, factual findings of the trial court, as affirmed by the Court of Appeals, are entitled to
great respect.[28] Since the actual value of the luggage involved appreciation of evidence, a task within the
competence of the Court of Appeals, its ruling regarding the amount is assuredly a question of fact, thus, a
finding not reviewable by this Court.[29]
As to the issue of the dismissal of BAs third-party complaint against PAL, the Court of Appeals justified
its ruling in this wise, and we quote:[30]
Lastly, we sustain the trial courts ruling dismissing appellants third-party complaint against PAL.
The contract of air transportation in this case pursuant to the ticket issued by appellant to
plaintiff-appellee was exclusively between the plaintiff Mahtani and defendant-appellant BA. When
plaintiff boarded the PAL plane from Manila to Hongkong, PAL was merely acting as a subcontractor or
agent of BA. This is shown by the fact that in the ticket issued by appellant to plaintiff-appellee, it is
specifically provided on the Conditions of Contract, paragraph 4 thereof that:
4. x x x carriage to be performed hereunder by several successive carriers is regarded
as a single operation.
The rule that carriage by plane although performed by successive carriers is regarded as a single
operation and that the carrier issuing the passengers ticket is considered the principal party and the other
carrier merely subcontractors or agent, is a settled issue.
We cannot agree with the dismissal of the third-complaint.

In Firestone Tire and Rubber Company of the Philippines v. Tempengko,[31] we expounded on the
nature of a third-party complaint thus:
The third-party complaint is, therefore, a procedural device whereby a third party who is neither a
party nor privy to the act or deed complained of by the plaintiff, may be brought into the case with
leave of court, by the defendant, who acts as third-party plaintiff to enforce against such third-party
defendant a right for contribution, indemnity, subrogation or any other relief, in respect of the
plaintiffs claim.The third-party complaint is actually independent of and separate and distinct from
the plaintiffs complaint. Were it not for this provision of the Rules of Court, it would have to be filed
independently and separately from the original complaint by the defendant against the
third-party. But the Rules permit defendant to bring in a third-party defendant or so to speak, to
litigate his separate cause of action in respect of plaintiffs claim against a third-party in the original
and principal case with the object of avoiding circuitry of action and unnecessary proliferation of law
suits and of disposing expeditiously in one litigation the entire subject matter arising from one
particular set of facts.
Undeniably, for the loss of his luggage, Mahtani is entitled to damages from BA, in view of their contract
of carriage. Yet, BA adamantly disclaimed its liability and instead imputed it to PAL which the latter naturally
denies. In other words, BA and PAL are blaming each other for the incident.
In resolving this issue, it is worth observing that the contract of air transportation was exclusively
between Mahtani and BA, the latter merely endorsing the Manila to Hongkong leg of the formers journey to
PAL, as its subcontractor or agent. In fact, the fourth paragraph of the Conditions of Contracts of the
ticket[32] issued by BA to Mahtani confirms that the contract was one of continuous air transportation from
Manila to Bombay.
4. x x x carriage to be performed hereunder by several successive carriers is regarded

as a single operation.
Prescinding from the above discussion, it is undisputed that PAL, in transporting Mahtani from
Manila to Hongkong acted as the agent of BA.
Parenthetically, the Court of Appeals should have been cognizant of the well-settled rule that
an agent is also responsible for any negligence in the performance of its function[33] and is liable for
damages which the principal may suffer by reason of its negligent act. [34] Hence, the Court of Appeals
erred when it opined that BA, being the principal, had no cause of action against PAL, its agent or
sub-contractor.
Also, it is worth mentioning that both BA and PAL are members of the International Air Transport
Association (IATA), wherein member airlines are regarded as agents of each other in the issuance of the
tickets and other matters pertaining to their relationship.[35] Therefore, in the instant case, the contractual
relationship between BA and PAL is one of agency, the former being the principal, since it was the one
which issued the confirmed ticket, and the latter the agent.
Our pronouncement that BA is the principal is consistent with our ruling in Lufthansa
German Airlines v. Court of Appeals.[36] In that case, Lufthansa issued a confirmed ticket to Tirso
Antiporda covering five-leg trip aboard different airlines. Unfortunately, Air Kenya, one of the airlines
which was to carry Antiporda to a specific destination bumped him off.
An action for damages was filed against Lufthansa which, however, denied any liability, contending
that its responsibility towards its passenger is limited to the occurrence of a mishap on its own
line.Consequently, when Antiporda transferred to Air Kenya, its obligation as a principal in the contract of
carriage ceased; from there on, it merely acted as a ticketing agent for Air Kenya.
In rejecting Lufthansas argument, we ruled:
In the very nature of their contract, Lufthansa is clearly the principal in the contract of
carriage with Antiporda and remains to be so, regardless of those instances when
actual carriage was to be performed by various carriers. The issuance of confirmed
Lufthansa ticket in favor of Antiporda covering his entire five-leg trip aboard successive
carriers concretely attest to this.
Since the instant petition was based on breach of contract of carriage, Mahtani can only sue BA
alone, and not PAL, since the latter was not a party to the contract. However, this is not to say that PAL
is relieved from any liability due to any of its negligent acts. In China Air Lines, Ltd. v. Court of
Appeals,[37] while not exactly in point, the case, however, illustrates the principle which governs this
particular situation. In that case, we recognized that a carrier (PAL), acting as an agent of another carrier,
is also liable for its own negligent acts or omission in the performance of its duties.
Accordingly, to deny BA the procedural remedy of filing a third-party complaint against PAL for the
purpose of ultimately determining who was primarily at fault as between them, is without legal
basis. After all, such proceeding is in accord with the doctrine against multiplicity of cases which would
entail receiving the same or similar evidence for both cases and enforcing separate judgments
therefor. It must be borne in mind that the purpose of a third-party complaint is precisely to avoid delay
and circuity of action and to enable the controversy to be disposed of in one suit.[38] It is but logical, fair
and equitable to allow BA to sue PAL for indemnification, if it is proven that the latters negligence was
the proximate cause of Mahtanis unfortunate experience, instead of totally absolving PAL from any
liability.
Perfection -
Passengers
1st Type: CONTRACT TO CARRY an agreement to carry the passenger at some future date.
(CONSENSUAL IN NATURE hence, PERFECTED BY MERE CONSENT.
2nd Type: CONTRACT OF CARRIAGE OR OF COMMON CARRIAGE
(A REAL CONTRACT for not until the facilities of the carrier are actually used can the carrier be said to
have already assumed the obligation as a carrier)
1st Type: CONTRACT TO CARRY an agreement to carry and transport goods at some future date.
CONSENSUAL IN NATURE hence, PERFECTED BY MERE CONSENT.
2nd Type: CONTRACT OF CARRIAGE OR OF COMMON CARRIAGE
By the act of delivery of the goods, that is, when the goods are unconditionally placed in the possession
and control of the carrier, and upon their receipt by the carrier for transportation, the contract of
carriage is perfected.
1. AIRCRAFT
a) If contract to carry passengers, there is perfection even if no tickets have been issued to said
passengers so long as there was already a meeting of minds with respect to the subject matter and the
consideration. (British Airways, Inc. vs. CA, G. R. No. 92288, 9 February 1993)
b) If contract of carriage, there is perfection if it can be established that the passenger had checked
in at the departure counter, passed through customs and immigration, boarded the shuttle bus and
proceeded to the ramp of the aircraft and that his baggage had already been loaded in the aircraft to be
flown with the passenger to his destination.
(KAL Co. Ltd. Vs. CA, G.R. No. 114061, 3 August 1994, 234 SCRA 717, 723)
2. BUSES, JEEPNEYS, STREET CARS

a) Once a public utility bus or jeepney stops, it is in effect making a continuous offer to the
passengers. Hence, it is the duty of the drivers to stop their conveyances for a reasonable length of time in
order to afford passengers an opportunity to board and enter.
b) Passenger is deemed to be accepting the offer if he is already attempting to board the
conveyances and the contract of carriage is perfected from that point.
c) Any injury suffered by the passenger resulting from the sudden starting up of the carrier is already
based on contract.
3. TRAINS
a) There is perfection when a person with a bona fide intention to use the facilities of the carrier and
possessing sufficient fare with which to pay for his passage, has presented himself to the carrier for
transportation in the place and manner provided.
b) Where a person has already purchased a LRT token and while waiting on the platform designated
for boarding fell thereon and hit by the train, he was deemed a passenger.
(LRTA, et.al. Vs. Marjorie Navidad, et.al., G.R. No. 145804, 06 February 2003)
British Airways v. CA February 9, 1993, 218 SCRA 699 - XXX XXX
Mauro Ganzon v. CA No. L-48757, May 30, 1988
Facts: 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".
Pursuant to that agreement, Mauro B. Ganzon sent his lighter "Batman" to Mariveles
where it docked in three feet of water. 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, Mayor 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.
The gunshot was not fatal but Tumambing had to be taken to a hospital in Balanga, Bataan, for
treatment.
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 where the lighter was docketed. The rest was brought to
the compound of NASSCO. Later on Acting Mayor Rub issued a receipt stating that the
Municipality of Mariveles had taken custody of the scrap iron. 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
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 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.
Korean Airlines Co. ltd v. CA August 3, 1994 234 SCRA 717
Juanito C. Lapuz, an automotive electrician, was contracted for employment in Jeddah,

Saudi Arabia, for a period of one year through Pan Pacific Overseas Recruiting Services,
Inc. Lapuz was supposed to leave on November 8, 1980, via Korean Airlines. Initially, he was
"wait-listed," which meant that he could only be accommodated if any of the confirmed
passengers failed to show up at the airport before departure. When two of such passengers did
not appear, Lapuz and another person by the name of Perico were given the two unclaimed
seats.
According to Lapuz, he was allowed to check in with one suitcase and one shoulder
bag at the check-in counter of KAL. He passed through the customs and immigration
sections for routine check-up and was cleared for departure as Passenger No. 157 of KAL
Flight No. KE 903. Together with the other passengers, he rode in the shuttle bus and
proceeded to the ramp of the KAL aircraft for boarding. However, when he was at the third or
fourth rung of the stairs, a KAL officer pointed to him and shouted "Down! Down!" He
was thus barred from taking the flight. When he later asked for another booking, his
ticket was canceled by KAL. Consequently, he was unable to report for his work in Saudi
Arabia within the stipulated 2-week period and so lost his employment.
KAL, on the other hand, alleged that on November 8, 1980, Pan Pacific Recruiting Services
Inc. coordinated with KAL for the departure of 30 contract workers, of whom only 21 were
confirmed and 9 were wait-listed passengers. The agent of Pan Pacific, Jimmie Joseph,
after being informed that there was a possibility of having one or two seats becoming available,
gave priority to Perico, who was one of the supervisors of the hiring company in Saudi
Arabia. The other seat was won through lottery by Lapuz. However, only one seat became
available and so, pursuant to the earlier agreement that Perico was to be given priority, he
alone was allowed to board.
After trial, the Regional Trial Court of Manila, Branch 30, 1 adjudged KAL liable for
damages, disposing as follows:
WHEREFORE, in view of the foregoing consideration, judgment is hereby rendered
sentencing the defendant Korean Air Lines to pay plaintiff Juanito C. Lapuz the following:
1. The amount of TWO HUNDRED SEVENTY-TWO THOUSAND ONE HUNDRED SIXTY
(P272,160.00) PESOS as actual/compensatory damages, with legal interest thereon from the
date of the filing of the complaint until fully paid.
2. The sum of TWENTY-FIVE THOUSAND (P25,000.00) PESOS as and for attorney's fees;
and
3. The costs of suit.
The case is hereby dismissed with respect to defendant Pan Pacific Overseas Recruiting
Services, Inc.
The counterclaims and cross-claim of defendant Korean Air Lines Co., Ltd. are likewise
dismissed.
On appeal, this decision was modified by the Court of Appeals 2 as follows:
WHEREFORE, in view of all the foregoing, the appealed judgment is hereby AFFIRMED
with the following modifications: the amount of actual damages and compensatory damages is
reduced to P60,000.00 and defendant-appellant is hereby ordered to pay plaintiff-appellant the
sum of One Hundred Thousand Pesos (P100,000.00) by way of moral and exemplary damages,
at 6% interest per annum from the date of the filing of the Complaint until fully paid.
KAL and Lapuz filed their respective motions for reconsideration, which were both denied
for lack of merit. Hence, the present petitions for review which have been consolidated because
of the identity of the parties and the similarity of the issues.
In G. R. No. 114061, KAL assails the decision of the appellate court on the following
grounds:
1. That the Court of Appeals erred in concluding that petitioner committed a breach of
contract of carriage notwithstanding lack of proper, competent and sufficient evidence of the
existence of such contract.
2. That the Court of Appeals erred in not according the proper evidentiary weight to some
evidence presented and the fact that private respondent did not have any boarding pass to
prove that he was allowed to board and to prove that his airline ticket was confirmed.
3. That the Court of Appeals erred in concluding that the standby passenger status of
private respondent Lapuz was changed to a confirmed status when his name was entered into
the passenger manifest.
4. That the Court of Appeals abused its discretion in awarding moral and exemplary
damages in the amount of P100,000.00 in favor of private respondent notwithstanding its lack of
basis and private respondent did not state such amount in his complaint nor had private
respondent proven the said damages.
5. That the Court of Appeals erred in dismissing the counterclaims.
6. That the Court of Appeals erred in dismissing the counterclaim of petitioner against Pan
Pacific.
7. That the Court of Appeals erred in ruling that the 6% per annum legal interest on the
judgment shall be computed from the filing of the complaint.
In G. R. No. 113842, Lapuz seeks: (a) the setting aside of the decision of the Court of
Appeals insofar as it modifies the award of damages; b) actual and compensatory damages in
the sum equivalent to 5 years' loss of earnings based on the petitioner's monthly salary of 1,600
Saudi rials at the current conversion rate plus the cost of baggage and personal belongings
worth P2,000 and the service fee of P3,000 paid to the recruiting agency, all with legal interest
from the filing of the complaint until fully paid; c) moral damages of not less than P1 million and
exemplary damages of not less than P500,000.00, both with interest at 6% per annum from the
filing of the complaint; and d) attorney's fees in the sum equivalent to 30% of the award of
damages.
It is evident that the issues raised in these petitions relate mainly to the correctness of the
factual findings of the Court of Appeals and the award of damages. The Court has consistently
affirmed that the findings of fact of the Court of Appeals and the other lower courts are as a rule
binding upon it, subject to certain exceptions. As nothing in the record indicates any of such
exceptions, the factual conclusions of the appellate court must be affirmed.
The status of Lapuz as standby passenger was changed to that of a confirmed

passenger when his name was entered in the passenger manifest of KAL for its Flight No.
KE 903. His clearance through immigration and customs clearly shows that he had indeed been
confirmed as a passenger of KAL in that flight. KAL thus committed a breach of the contract
of carriage between them when it failed to bring Lapuz to his destination.
This Court has held that a contract to transport passengers is different in kind and degree
from any other contractual relation. The business of the carrier is mainly with the traveling public.
It invites people to avail themselves of the comforts and advantages it offers. The contract of air
carriage generates a relation attended with a public duty. Passengers have the right to be
treated by the carrier's employees with kindness, respect, courtesy and due consideration.
They are entitled to be protected against personal misconduct, injurious language, indignities
and abuses from such employees. So it is that any discourteous conduct on the part of these
employees toward a passenger gives the latter an action for damages against the carrier.
The breach of contract was aggravated in this case when, instead of courteously
informing Lapuz of his being a "wait-listed" passenger, a KAL officer rudely shouted
"Down! Down!" while pointing at him, thus causing him embarrassment and public humiliation.
KAL argues that "the evidence of confirmation of a chance passenger status is not through
the entry of the name of a chance passenger in the passenger manifest nor the clearance from
the Commission on Immigration and Deportation, because they are merely means of facilitating
the boarding of a chance passenger in case his status is confirmed." We are not persuaded.
The evidence presented by Lapuz shows that he had indeed checked in at the
departure counter, passed through customs and immigration, boarded the shuttle bus
and proceeded to the ramp of KAL's aircraft. In fact, his baggage had already been loaded
in KAL's aircraft, to be flown with him to Jeddah. The contract of carriage between him and
KAL had already been perfected when he was summarily and insolently prevented from
boarding the aircraft.
KAL's allegation that the respondent court abused its discretion in awarding moral and
exemplary damages is also not tenable.
The Court of Appeals granted moral and exemplary damages because:
The findings of the court a quo that the defendant-appellant has committed breach of
contract of carriage in bad faith and in wanton, disregard of plaintiff-appellant's rights as
passenger laid the basis and justification of an award for moral damages.
xxxx
In the instant case, we find that defendant-appellant Korean Air Lines acted in a wanton,
fraudulent, reckless, oppressive or malevolent manner when it "bumped off" plaintiff-appellant
on November 8, 1980, and in addition treated him rudely and arrogantly as a "patay gutom na
contract worker fighting Korean Air Lines," which clearly shows malice and bad faith, thus
entitling plaintiff-appellant to moral damages.
xxxx
Considering that the plaintiff-appellant's entitlement to moral damages has been fully
established by oral and documentary evidence, exemplary damages may be awarded. In fact,
exemplary damages may be awarded, even though not so expressly pleaded in the complaint
(Kapoe vs. Masa, 134 SCRA 231). By the same token, to provide an example for the public
good, an award of exemplary damages is also proper (Armovit vs. Court of Appeals, supra).
The well-entrenched principle is that moral damages depend upon the discretion of the court
based on the circumstances of each case. This discretion is limited by the principle that the
"amount awarded should not be palpably and scandalously excessive" as to indicate that it was
the result of prejudice or corruption on the part of the trial court. 6 Damages are not intended
to enrich the complainant at the expense of the defendant. They are awarded only to
alleviate the moral suffering that the injured party had undergone by reason of the defendant's
culpable action. 7 There is no hard-and-fast rule in the determination of what would be a
fair amount of moral damages since each case must be governed by its own peculiar
facts.
A review of the record of this case shows that the injury suffered by Lapuz is not so serious
or extensive as to warrant an award of P1.5 million. The assessment of P100,000 as moral and
exemplary damages in his favor is, in our view, reasonable and realistic.
Lapuz likewise claims that the respondent court could not rule upon the propriety of the
award of actual damages because it had not been assigned as an error by KAL. Not so. The
rule is that only errors specifically assigned and properly argued in the brief will be considered
except errors affecting jurisdiction over the subject matter and plain as well as clerical
errors. 8 But this is not without qualification for, as the Court held in Vda. de Javellana vs. Court
of Appeals: 9
. . . [T]he Court is clothed with ample authority to review matters, even if they are not
assigned as errors in their appeal, if it finds that their consideration is necessary in arriving at a
just decision of the case.
A similar pronouncement was made in Baquiran vs. Court of Appeals 10 in this wise:
Issues, though not specifically raised in the pleading in the appellate court, may, in
the interest of justice, be properly considered by said court in deciding a case, if they are
questions raised in the trial court and are matters of record having some bearing on the
issue submitted which the parties failed to raise or the lower court ignored.
The Court of Appeals was therefore justified in decreasing the award of actual damages
even if the issue was not assigned as an error by KAL. Consideration of this question was
necessary for the just and complete resolution of the present case. Furthermore, there was
enough evidence to warrant the reduction of the original award, as the challenged decision
correctly observed:
A perusal of the plaintiff-appellant's contract of employment shows that the effectivity of the
contract is for only one year, renewable every year for five years. Although plaintiff-appellant
intends to renew his contract, such renewal will still be subject to his foreign employer.
Plaintiff-appellant had not yet started working with his foreign employer, hence, there can be no
basis as to whether his contract will be renewed by his foreign employer or not. Thus, the
damages representing the loss of earnings of plaintiff-appellant in the renewal of the contract of
employment is at most speculative. Damages may not be awarded on the basis of speculation
or conjecture (Gachalian vs. Delim, 203 SCRA 126). Hence, defendant-appellant's liability is
limited to the one year contract only. Plaintiff-appellant is, therefore, entitled only to his lost
earnings for one year, i.e., P60,000.00, which is 1/5 of P300,000.00, the total amount of actual
damages, representing lost earnings for five years prayed for in the Complaint.
Plaintiff-appellant's contention that in computing his lost earnings, the current rate of the
Saudi Rial to the Philippine Peso at the time of payment should be used, is untenable,
considering that in his Complaint, plaintiff-appellant has quantified in Philippine Peso his lost
earnings for five years.
We disagree with the respondent court, however, on the date when the legal interest should
commence to run. The rule is that the legal interest of six percent (6%) on the amounts
adjudged in favor of Lapuz should resume from the time of the rendition of the trial court's
decision instead of November 28, 1980, the date of the filing of the complaint.
On this matter, the Court has held:
If suit were for payment of a definite sum of money, the contention might be tenable.
However, if it is for damages, unliquidated and not known until definitely ascertained, assessed
and determined by the courts after proof, interest should be from the date of the decision. 11
xxxx
The obligation to pay interest on a sum filed in a judgment exists from the date of the
sentence, when so declared; for until the net amount of the debtor's liability has been
determined, he cannot he considered delinquent in the fulfillment of his obligation to pay the
debt with interest thereon. 12
Finally, we find that the respondent court did not err in sustaining the trial court's dismissal
of KAL's counterclaim against Pan Pacific Overseas Recruiting Services Inc., whose
responsibility ended with the confirmation by KAL of Lapuz as its passenger in its Flight No.
903.
This is still another case of the maltreatment of our overseas contract workers, this time by
the airline supposed to bring the passenger to his foreign assignment. Our OCW's sacrifice
much in seeking employment abroad, where they are deprived of the company of their loved
ones, the direct protection of our laws, and the comfort of our own native culture and way of life.
This Court shall exert every effort to vindicate their rights when they are abused and shall
accord them the commensurate reparation of their injuries consistent with their dignity and
worth as members of the working class.
Dangwa Transportation Co., Inc. v CA October 7, 1991, 202 SCRA 574
Facts: An action for damages was filed by PR because Pedro Cudiamat died as a result of a vehicular
accident. Among others, it was alleged that on said date, while petitioner Theodore M. Lardizabal
was driving a passenger bus belonging to petitioner corporation in a reckless and imprudent
manner and without due regard to traffic rules and regulations and safety to persons and property,
it ran over its passenger, Pedrito Cudiamat. However, instead of bringing Pedrito immediately to
the nearest hospital, the said driver, in utter bad faith and without regard to the welfare of the
victim, first brought his other passengers and cargo to their respective destinations before banging
said victim to the Lepanto Hospital where he expired.
On the other hand, petitioners alleged that they had observed and continued to observe the
extraordinary diligence required in the operation of the transportation company and the
supervision of the employees, even as they add that they are not absolute insurers of the safety of
the public at large. Further, it was alleged that it was the victim's own carelessness and negligence
which gave rise to the subject incident, hence they prayed for the dismissal of the complaint plus
an award of damages in their favor by way of a counterclaim.
The trial court rendered a decision, effectively in favor of petitioners pronouncing that Pedrito
Cudiamat was negligent, which negligence was the proximate cause of his death. Nonetheless,
defendants in equity, are hereby ordered to pay the heirs of Pedrito Cudiamat the sum of
P10,000.00 which approximates the amount defendants initially offered said heirs for the amicable
settlement of the case.
Not satisfied therewith, private respondents appealed to the Court of Appeals which, in a decision
3 in CA-G.R. CV No. 19504 promulgated on August 14, 1990, set aside the decision of the lower court,
and ordered petitioners to pay private respondents:
1. The sum of Thirty Thousand (P30,000.00) Pesos by way of indemnity for death of the victim
Pedrito Cudiamat;
2. The sum of Twenty Thousand (P20,000.00) by way of moral damages;
3. The sum of Two Hundred Eighty Eight Thousand (P288,000.00) Pesos as actual and
compensatory damages;
4. The costs of this suit. 4
Petitioners' motion for reconsideration was denied by the Court of Appeals in its resolution dated
October 4, 1990, hence this petition with the central issue herein being whether respondent court
erred in reversing the decision of the trial court and in finding petitioners negligent and liable for
the damages claimed.
It is an established principle that the factual findings of the Court of Appeals as a rule are final and
may not be reviewed by this Court on appeal. However, this is subject to settled exceptions, one of
which is when the findings of the appellate court are contrary to those of the trial court, in which
case a reexamination of the facts and evidence may be undertaken. 6
In the case at bar, the trial court and the Court of Appeal have discordant positions as to who
between the petitioners an the victim is guilty of negligence. Perforce, we have had to conduct an
evaluation of the evidence in this case for the prope calibration of their conflicting factual findings
and legal conclusions.
The lower court, in declaring that the victim was negligent, made the following findings:
This Court is satisfied that Pedrito Cudiamat was negligent in trying to board a moving vehicle,
especially with one of his hands holding an umbrella. And, without having given the driver or the
conductor any indication that he wishes to board the bus. But defendants can also be found
wanting of the necessary diligence. In this connection, it is safe to assume that when the deceased
Cudiamat attempted to board defendants' bus, the vehicle's door was open instead of being
closed. This should be so, for it is hard to believe that one would even attempt to board a vehicle
(i)n motion if the door of said vehicle is closed. Here lies the defendant's lack of diligence. Under
such circumstances, equity demands that there must be something given to the heirs of the victim
to assuage their feelings. This, also considering that initially, defendant common carrier had made
overtures to amicably settle the case. It did offer a certain monetary consideration to the victim's
heirs.
However, respondent court, in arriving at a different opinion, declares that:
From the testimony of appellees'own witness in the person of Vitaliano Safarita, it is evident that
the subject bus was at full stop when the victim Pedrito Cudiamat boarded the same as it was
precisely on this instance where a certain Miss Abenoja alighted from the bus. Moreover, contrary
to the assertion of the appellees, the victim did indicate his intention to board the bus as can be
seen from the testimony of the said witness when he declared that Pedrito Cudiamat was no longer
walking and made a sign to board the bus when the latter was still at a distance from him. It was at
the instance when Pedrito Cudiamat was closing his umbrella at the platform of the bus when the
latter made a sudden jerk movement (as) the driver commenced to accelerate the bus.
Evidently, the incident took place due to the gross negligence of the appellee-driver in prematurely
stepping on the accelerator and in not waiting for the passenger to first secure his seat especially so
when we take into account that the platform of the bus was at the time slippery and wet because
of a drizzle. The defendants-appellees utterly failed to observe their duty and obligation as common
carrier to the end that they should observe extra-ordinary diligence in the vigilance over the goods
and for the safety of the passengers transported by them according to the circumstances of each
case (Article 1733, New Civil Code).
After a careful review of the evidence on record, we find no reason to disturb the above holding of
the Court of Appeals. Its aforesaid findings are supported by the testimony of petitioners' own
witnesses. One of them, Virginia Abalos, testified on cross-examination as follows:
Q It is not a fact Madam witness, that at bunkhouse 54, that is before the place of the incident,
there is a crossing?
A The way going to the mines but it is not being pass(ed) by the bus.
Q And the incident happened before bunkhouse 56, is that not correct?
A It happened between 54 and 53 bunkhouses. 9

The bus conductor, Martin Anglog, also declared:
Q When you arrived at Lepanto on March 25, 1985, will you please inform this Honorable Court if
there was anv unusual incident that occurred?
A When we delivered a baggage at Marivic because a person alighted there between Bunkhouse 53
and 54.
Q What happened when you delivered this passenger at this particular place in Lepanto?
A When we reached the place, a passenger alighted and I signalled my driver. When we stopped
we went out because I saw an umbrella about a split second and I signalled again the driver, so the
driver stopped and we went down and we saw Pedrito Cudiamat asking for help because he was
lying down.
Q How far away was this certain person, Pedrito Cudiamat, when you saw him lying down from
the bus how far was he?
A It is about two to three meters.
Q On what direction of the bus was he found about three meters from the bus, was it at the front
or at the back?
A At the back, sir. 10 (Emphasis supplied.)

The foregoing testimonies show that the place of the accident and the place where one of the
passengers alighted were both between Bunkhouses 53 and 54, hence the finding of the Court of
Appeals that the bus was at full stop when the victim boarded the same is correct. They further
confirm the conclusion that the victim fell from the platform of the bus when it suddenly
accelerated forward and was run over by the rear right tires of the vehicle, as shown by the
physical evidence on where he was thereafter found in relation to the bus when it stopped. Under
such circumstances, it cannot be said that the deceased was guilty of negligence.
The contention of petitioners that the driver and the conductor had no knowledge that the victim
would ride on the bus, since the latter had supposedly not manifested his intention to board the
same, does not merit consideration. When the bus is not in motion there is no necessity for a
person who wants to ride the same to signal his intention to board. A public utility bus, once it
stops, is in effect making a continuous offer to bus riders. Hence, it becomes the duty of the driver
and the conductor, every time the bus stops, to do no act that would have the effect of increasing
the peril to a passenger while he was attempting to board the same. The premature acceleration
of the bus in this case was a breach of such duty.
It is the duty of common carriers of passengers, including common carriers by railroad train,
streetcar, or motorbus, to stop their conveyances a reasonable length of time in order to afford
passengers an opportunity to board and enter, and they are liable for injuries suffered by boarding
passengers resulting from the sudden starting up or jerking of their conveyances while they are
doing so.
Further, even assuming that the bus was moving, the act of the victim in boarding the same cannot
be considered negligent under the circumstances. As clearly explained in the testimony of the
aforestated witness for petitioners, Virginia Abalos, th bus had "just started" and "was still in slow
motion" at the point where the victim had boarded and was on its platform. 13
It is not negligence per se, or as a matter of law, for one attempt to board a train or streetcar
which is moving slowly. 14 An ordinarily prudent person would have made the attempt board the
moving conveyance under the same or similar circumstances. The fact that passengers board and
alight from slowly moving vehicle is a matter of common experience both the driver and conductor
in this case could not have been unaware of such an ordinary practice.
The victim herein, by stepping and standing on the platform of the bus, is already considered a
passenger and is entitled all the rights and protection pertaining to such a contractual relation.
Hence, it has been held that the duty which the carrier passengers owes to its patrons extends to
persons boarding cars as well as to those alighting therefrom. 15
Common carriers, from the nature of their business and reasons of public policy, are bound to
observe extraordinary diligence for the safety of the passengers transported by the according to all
the circumstances of each case. 16 A common carrier is bound to carry the passengers safely as far
as human care and foresight can provide, using the utmost diligence very cautious persons, with a
due regard for all the circumstances.
It has also been repeatedly held that in an action based on a contract of carriage, the court need
not make an express finding of fault or negligence on the part of the carrier in order to hold it
responsible to pay the damages sought by the passenger. By contract of carriage, the carrier
assumes the express obligation to transport the passenger to his destination safely and observe
extraordinary diligence with a due regard for all the circumstances, and any injury that might be
suffered by the passenger is right away attributable to the fault or negligence of the carrier. This is
an exception to the general rule that negligence must be proved, and it is therefore incumbent
upon the carrier to prove that it has exercised extraordinary diligence as prescribed in Articles 1733
and 1755 of the Civil Code. 18
Moreover, the circumstances under which the driver and the conductor failed to bring the gravely
injured victim immediately to the hospital for medical treatment is a patent and incontrovertible
proof of their negligence. It defies understanding and can even be stigmatized as callous
indifference. The evidence shows that after the accident the bus could have forthwith turned at
Bunk 56 and thence to the hospital, but its driver instead opted to first proceed to Bunk 70 to allow
a passenger to alight and to deliver a refrigerator, despite the serious condition of the victim. The
vacuous reason given by petitioners that it was the wife of the deceased who caused the delay was
tersely and correctly confuted by respondent court:
... The pretension of the appellees that the delay was due to the fact that they had to wait for about
twenty minutes for Inocencia Cudiamat to get dressed deserves scant consideration. It is rather
scandalous and deplorable for a wife whose husband is at the verge of dying to have the luxury of
dressing herself up for about twenty minutes before attending to help her distressed and helpless
husband. 19
Further, it cannot be said that the main intention of petitioner Lardizabal in going to Bunk 70 was to
inform the victim's family of the mishap, since it was not said bus driver nor the conductor but the
companion of the victim who informed his family thereof. 20 In fact, it was only after the
refrigerator was unloaded that one of the passengers thought of sending somebody to the house
of the victim, as shown by the testimony of Virginia Abalos again, to wit:
Q Why, what happened to your refrigerator at that particular time?
A I asked them to bring it down because that is the nearest place to our house and when I went
down and asked somebody to bring down the refrigerator, I also asked somebody to call the family
of Mr. Cudiamat.
COURT:
Q Why did you ask somebody to call the family of Mr. Cudiamat?
A Because Mr. Cudiamat met an accident, so I ask somebody to call for the family of Mr. Cudiamat.
Q But nobody ask(ed) you to call for the family of Mr. Cudiamat?
A No sir. 21
With respect to the award of damages, an oversight was, however, committed by respondent Court
of Appeals in computing the actual damages based on the gross income of the victim. The rule is
that the amount recoverable by the heirs of a victim of a tort is not the loss of the entire earnings,
but rather the loss of that portion of the earnings which the beneficiary would have received. In
other words, only net earnings, not gross earnings, are to be considered, that is, the total of the
earnings less expenses necessary in the creation of such earnings or income and minus living and
other incidental expenses.
We are of the opinion that the deductible living and other expense of the deceased may fairly and
reasonably be fixed at P500.00 a month or P6,000.00 a year. In adjudicating the actual or
compensatory damages, respondent court found that the deceased was 48 years old, in good
health with a remaining productive life expectancy of 12 years, and then earning P24,000.00 a year.
Using the gross annual income as the basis, and multiplying the same by 12 years, it accordingly
awarded P288,000. Applying the aforestated rule on computation based on the net earnings, said
award must be, as it hereby is, rectified and reduced to P216,000.00. However, in accordance with
prevailing jurisprudence, the death indemnity is hereby increased to P50,000.00. 23
Common carrier -
A. Public service -
Article 1732 of the New Civil Code
Commonwealth Act No. 146 section 13 par. b as amended
Link:
http://www.upecon.org.ph/epdp/wp-content/uploads/2016/01/1936-11-7-960_CA-146-Public-Service-C
ommission-Act.pdf
De Guzman v. CA
Respondent Ernesto Cendana, a junk dealer, was engaged in buying up used bottles and scrap metal in
Pangasinan. Upon gathering sufficient quantities of such scrap material, respondent would bring such
material to Manila for resale. He utilized two (2) six-wheeler trucks which he owned for hauling the material
to Manila. On the return trip to Pangasinan, respondent would load his vehicles with cargo which various
merchants wanted delivered to differing establishments in Pangasinan. For that service, respondent charged
freight rates which were commonly lower than regular commercial rates.
Sometime in November 1970, petitioner Pedro de Guzman a merchant and authorized dealer of General Milk
Company (Philippines), Inc. in Urdaneta, Pangasinan, contracted with respondent for the hauling of 750
cartons of Liberty filled milk from a warehouse of General Milk in Makati, Rizal, to petitioner's
establishment in Urdaneta on or before 4 December 1970. Accordingly, on 1 December 1970, respondent
loaded in Makati the merchandise on to his trucks: 150 cartons were loaded on a truck driven by respondent
himself, while 600 cartons were placed on board the other truck which was driven by Manuel Estrada,
respondent's driver and employee.
Only 150 boxes of Liberty filled milk were delivered to petitioner. The other 600 boxes never reached
petitioner, since the truck which carried these boxes was hijacked somewhere along the MacArthur
Highway in Paniqui, Tarlac, by armed men who took with them the truck, its driver, his helper and the cargo.
On 6 January 1971, petitioner commenced action against private respondent in the Court of First Instance of
Pangasinan, demanding payment of P 22,150.00, the claimed value of the lost merchandise, plus damages
and attorney's fees. Petitioner argued that private respondent, being a common carrier, and having failed to
exercise the extraordinary diligence required of him by the law, should be held liable for the value of the
undelivered goods.
In his Answer, private respondent denied that he was a common carrier and argued that he could not be
held responsible for the value of the lost goods, such loss having been due to force majeure.
On 10 December 1975, the trial court rendered a Decision 1 finding private respondent to be a common
carrier and holding him liable for the value of the undelivered goods (P 22,150.00) as well as for P 4,000.00 as
damages and P 2,000.00 as attorney's fees.
On appeal before the Court of Appeals, respondent urged that the trial court had erred in considering him a
common carrier; in finding that he had habitually offered trucking services to the public; in not exempting
him from liability on the ground of force majeure; and in ordering him to pay damages and attorney's fees.
The Court of Appeals reversed the judgment of the trial court and held that respondent had been engaged in
transporting return loads of freight "as a casual
occupation a sideline to his scrap iron business" and not as a common carrier. Petitioner came to this
Court by way of a Petition for Review assigning as errors the following conclusions of the Court of Appeals:
1. that private respondent was not a common carrier;
2. that the hijacking of respondent's truck was force majeure; and
3. that respondent was not liable for the value of the undelivered cargo. (Rollo, p. 111)
We consider first the issue of whether or not private respondent Ernesto Cendana may, under the facts
earlier set forth, be properly characterized as a common carrier.
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 (in local Idiom as "a
sideline"). Article 1732 also carefully avoids making any distinction between a person or enterprise offering
transportation service on a regular or scheduled basis and one offering such service on an occasional,
episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its services to
the "general public," i.e., the general community or population, and one who offers services or solicits
business only from a narrow segment of the general population. We think that Article 1733 deliberaom
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:
... every person that now or hereafter may own, operate, manage, or control in the Philippines, for hire or
compensation, with general or limited clientele, whether permanent, occasional or accidental, and done for
general business purposes, any common carrier, railroad, street railway, traction railway, subway motor
vehicle, either for freight or passenger, or both, with or without fixed route and whatever may be its
classification, freight or carrier service of any class, express service, steamboat, or steamship line, pontines,
ferries and water craft, engaged in the transportation of passengers or freight or both, shipyard, marine
repair shop, wharf or dock, ice plant,
ice-refrigeration plant, canal, irrigation system, gas, electric light, heat and power, water supply and power
petroleum, sewerage system, wire or wireless communications systems, wire or wireless broadcasting
stations and other similar public services. ... (Emphasis supplied)
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 back-hauling
was done on a periodic or occasional rather than regular or scheduled manner, and even though private
respondent's principal occupation was not the carriage of goods for others. There is no dispute that private
respondent charged his customers a fee for hauling their goods; that fee frequently fell below commercial
freight rates is not relevant here.
The Court of Appeals referred to the fact that private respondent held no certificate of public convenience,
and concluded he was not a common carrier. This is palpable error. A certificate of public convenience is not
a requisite for the incurring of liability under the Civil Code provisions governing common carriers. That
liability arises the moment a person or firm acts as a common carrier, without regard to whether or not such
carrier has also complied with the requirements of the applicable regulatory statute and implementing
regulations and has been granted a certificate of public convenience or other franchise. To exempt private
respondent from the liabilities of a common carrier because he has not secured the necessary certificate of
public convenience, would be offensive to sound public policy; that would be to reward private respondent
precisely for failing to comply with applicable statutory requirements. The business of a common carrier
impinges directly and intimately upon the safety and well being and property of those members of the
general community who happen to deal with such carrier. The law imposes duties and liabilities upon
common carriers for the safety and protection of those who utilize their services and the law cannot allow a
common carrier to render such duties and liabilities merely facultative by simply failing to obtain the
necessary permits and authorizations.
We turn then to the liability of private respondent as a common carrier.
Common carriers, "by the nature of their business and for reasons of public policy" 2 are held to a very high
degree of care and diligence ("extraordinary diligence") in the carriage of goods as well as of passengers.
The specific import of extraordinary diligence in the care of goods transported by a common carrier is,
according to Article 1733, "further expressed in Articles 1734,1735 and 1745, numbers 5, 6 and 7" of the Civil
Code.
Article 1734 establishes the general rule that common carriers are responsible for the loss, destruction or
deterioration of the goods which they carry, "unless the same is due to any of the following causes only:
(1) Flood, storm, earthquake, lightning or other natural disaster or calamity;

(4) The character-of the goods or defects in the packing or-in the containers; and
It is important to point out that the above list of causes of loss, destruction or deterioration which exempt
the common carrier for responsibility therefor, is a closed list. Causes falling outside the foregoing list, even
if they appear to constitute a species of force majeure fall within the scope of Article 1735, which provides as
follows:
In all cases other than those mentioned in numbers 1, 2, 3, 4 and 5 of the preceding article, if the goods are
lost, destroyed or deteriorated, common carriers are presumed to have been at fault or to have acted
negligently, unless they prove that they observed extraordinary diligence as required in Article 1733.
(Emphasis supplied)
Applying the above-quoted Articles 1734 and 1735, we note firstly that the specific cause alleged in the
instant case the hijacking of the carrier's truck does not fall within any of the five (5) categories of
exempting causes listed in Article 1734. It would follow, therefore, that the hijacking of the carrier's vehicle
must be dealt with under the provisions of Article 1735, in other words, that the private respondent as
common carrier is presumed to have been at fault or to have acted negligently. This presumption, however,
may be overthrown by proof of extraordinary diligence on the part of private respondent.
Petitioner insists that private respondent had not observed extraordinary diligence in the care of petitioner's
goods. Petitioner argues that in the circumstances of this case, private respondent should have hired a
security guard presumably to ride with the truck carrying the 600 cartons of Liberty filled milk. We do not
believe, however, that in the instant case, the standard of extraordinary diligence required private
respondent to retain a security guard to ride with the truck and to engage brigands in a firelight at the risk of
his own life and the lives of the driver and his helper.
The precise issue that we address here relates to the specific requirements of the duty of extraordinary
diligence in the vigilance over the goods carried in the specific context of hijacking or armed robbery.
As noted earlier, the duty of extraordinary diligence in the vigilance over goods is, under Article 1733, given
additional specification not only by Articles 1734 and 1735 but also by Article 1745, numbers 4, 5 and 6, Article
1745 provides in relevant part:
Any of the following or similar stipulations shall be considered unreasonable, unjust and contrary to public
policy:
xxx xxx xxx
(5) that the common carrier shall not be responsible for the acts or omissions of his or its employees;
(6) that the common carrier's liability for acts committed by thieves, or of robbers who donot act with grave
or irresistible threat, violence or force, is dispensed with or diminished; and
(7) that the common carrier shall not responsible for the loss, destruction or deterioration of goods on
account of the defective condition of the car vehicle, ship, airplane or other equipment used in the contract
of carriage. (Emphasis supplied)
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."
In the instant case, armed men held up the second truck owned by private respondent which carried
petitioner's cargo. The record shows that an information for robbery in band was filed in the Court of First
Instance of Tarlac, Branch 2, in Criminal Case No. 198 entitled "People of the Philippines v. Felipe Boncorno,
Napoleon Presno, Armando Mesina, Oscar Oria and one John Doe." There, the accused were charged with
willfully and unlawfully taking and carrying away with them the second truck, driven by Manuel Estrada and
loaded with the 600 cartons of Liberty filled milk destined for delivery at petitioner's store in Urdaneta,
Pangasinan. The decision of the trial court shows that the accused acted with grave, if not irresistible, threat,
violence or force.3 Three (3) of the five (5) hold-uppers were armed with firearms. The robbers not only took
away the truck and its cargo but also kidnapped the driver and his helper, detaining them for several days
and later releasing them in another province (in Zambales). The hijacked truck was subsequently found by
the police in Quezon City. The Court of First Instance convicted all the accused of robbery, though not of
robbery in band. 4
In these circumstances, we hold that the occurrence of the loss must reasonably be regarded as quite
beyond the control of the common carrier and properly regarded as a fortuitous event. It is necessary to
recall that even common carriers are not made absolute insurers against all risks of travel and of transport of
goods, and are not held liable for acts or events which cannot be foreseen or are inevitable, provided that
they shall have complied with the rigorous standard of extraordinary diligence.
We, therefore, agree with the result reached by the Court of Appeals that private respondent Cendana is not
liable for the value of the undelivered merchandise which was lost because of an event entirely beyond
private respondent's control.
ACCORDINGLY, the Petition for Review on certiorari is hereby DENIED and the Decision of the Court of
Appeals dated 3 August 1977 is AFFIRMED. No pronouncement as to costs.
SO ORDERED.
Fernan, C.J., Gutierrez, Jr., Bidin and Cortes, JJ., concur.
Test:
1.3 First Philippine Industrial Corporation v. CA 300 SCRA 66

Facts:
Petitioner is a grantee of a pipeline concession under Republic Act No. 387, as amended, to contract,
install and operate oil pipelines. The original pipeline concession was granted in 1967[1] and renewed by
the Energy Regulatory Board in 1992.[2]
Sometime in January 1995, petitioner applied for a mayor's permit with the Office of the Mayor of
Batangas City. However, before the mayor's permit could be issued, the respondent City Treasurer
required petitioner to pay a local tax based on its gross receipts for the fiscal year 1993 pursuant to the
Local Government Code.[3] The respondent City Treasurer assessed a business tax on the petitioner
amounting to P956,076.04 payable in four installments based on the gross receipts for products pumped
at GPS-1 for the fiscal year 1993 which amounted to P181,681,151.00. In order not to hamper its
operations, petitioner paid the tax under protest in the amount of P239,019.01 for the first quarter of
1993.
On January 20, 1994, petitioner filed a letter-protest addressed to the respondent City Treasurer, the
pertinent portion of which reads:
"Please note that our Company (FPIC) is a pipeline operator with a government concession granted
under the Petroleum Act. It is engaged in the business of transporting petroleum products from the
Batangas refineries, via pipeline, to Sucat and JTF Pandacan Terminals. As such, our Company is
exempt from paying tax on gross receipts under Section 133 of the Local Government Code of 1991 x x
xx
"Moreover, Transportation contractors are not included in the enumeration of contractors under Section 131,
Paragraph (h) of the Local Government Code. Therefore, the authority to impose tax 'on contractors and
other independent contractors' under Section 143, Paragraph (e) of the Local Government Code does not
include the power to levy on transportation contractors.
"The imposition and assessment cannot be categorized as a mere fee authorized under Section 147 of the
Local Government Code. The said section limits the imposition of fees and charges on business to such
amounts as may be commensurate to the cost of regulation, inspection, and licensing. Hence, assuming
arguendo that FPIC is liable for the license fee, the imposition thereof based on gross receipts is violative of
the aforecited provision. The amount of P956,076.04 (P239,019.01 per quarter) is not commensurate to the
cost of regulation, inspection and licensing. The fee is already a revenue raising measure, and not a mere
regulatory imposition."[4]
On March 8, 1994, the respondent City Treasurer denied the protest contending that petitioner cannot
be considered engaged in transportation business, thus it cannot claim exemption under Section 133 (j) of
the Local Government Code.[5]
On June 15, 1994, petitioner filed with the Regional Trial Court of Batangas City a complaint[6] for tax
refund with prayer for a writ of preliminary injunction against respondents City of Batangas and Adoracion
Arellano in her capacity as City Treasurer. In its complaint, petitioner alleged, inter alia, that: (1) the
imposition and collection of the business tax on its gross receipts violates Section 133 of the Local
Government Code; (2) the authority of cities to impose and collect a tax on the gross receipts of "contractors
and independent contractors" under Sec. 141 (e) and 151 does not include the authority to collect such taxes
on transportation contractors for, as defined under Sec. 131 (h), the term "contractors" excludes
transportation contractors; and, (3) the City Treasurer illegally and erroneously imposed and collected the
said tax, thus meriting the immediate refund of the tax paid.[7]
Traversing the complaint, the respondents argued that petitioner cannot be exempt from taxes under
Section 133 (j) of the Local Government Code as said exemption applies only to "transportation contractors
and persons engaged in the transportation by hire and common carriers by air, land and
water." Respondents assert that pipelines are not included in the term "common carrier" which refers solely
to ordinary carriers such as trucks, trains, ships and the like. Respondents further posit that the term
"common carrier" under the said code pertains to the mode or manner by which a product is delivered to its
destination.[8]
On October 3, 1994, the trial court rendered a decision dismissing the complaint, ruling in this wise:
"xxx Plaintiff is either a contractor or other independent contractor.
xxx the exemption to tax claimed by the plaintiff has become unclear. It is a rule that tax exemptions are to
be strictly construed against the taxpayer, taxes being the lifeblood of the government. Exemption may
therefore be granted only by clear and unequivocal provisions of law.
"Plaintiff claims that it is a grantee of a pipeline concession under Republic Act 387, (Exhibit A) whose
concession was lately renewed by the Energy Regulatory Board (Exhibit B). Yet neither said law nor the deed
of concession grant any tax exemption upon the plaintiff.
"Even the Local Government Code imposes a tax on franchise holders under Sec. 137 of the Local Tax
Code. Such being the situation obtained in this case (exemption being unclear and equivocal) resort to
distinctions or other considerations may be of help:
1. That the exemption granted under Sec. 133 (j) encompasses only common carriers so as not
to overburden the riding public or commuters with taxes. Plaintiff is not a common
carrier, but a special carrier extending its services and facilities to a single specific or
"special customer" under a "special contract."
2. The Local Tax Code of 1992 was basically enacted to give more and effective local autonomy
to local governments than the previous enactments, to make them economically and
financially viable to serve the people and discharge their functions with a
concomitant obligation to accept certain devolution of powers, x x x So, consistent
with this policy even franchise grantees are taxed (Sec. 137) and contractors are also
taxed under Sec. 143 (e) and 151 of the Code."[9]
Petitioner assailed the aforesaid decision before this Court via a petition for review. On February 27,
1995, we referred the case to the respondent Court of Appeals for consideration and adjudication. [10] On
November 29, 1995, the respondent court rendered a decision[11] affirming the trial court's dismissal of
petitioner's complaint. Petitioner's motion for reconsideration was denied on July 18, 1996.[12]
Hence, this petition. At first, the petition was denied due course in a Resolution dated November 11,
1996.[13] Petitioner moved for a reconsideration which was granted by this Court in a Resolution[14] of January
20, 1997.Thus, the petition was reinstated.
Petitioner claims that the respondent Court of Appeals erred in holding that (1) the petitioner is not a
common carrier or a transportation contractor, and (2) the exemption sought for by petitioner is not clear
under the law.
There is merit in the petition.
A "common carrier" may be defined, broadly, as one who holds himself out to the public as engaged in
the business of transporting persons or property from place to place, for compensation, offering his services
to the public generally.
Article 1732 of the Civil Code defines a "common carrier" as "any person, corporation, firm or association
engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, for
compensation, offering their services to the public."
The test for determining whether a party is a common carrier of goods is:
1. He must be engaged in the business of carrying goods for others as a public employment, and
must hold himself out as ready to engage in the transportation of goods for person generally
as a business and not as a casual occupation;
2. He must undertake to carry goods of the kind to which his business is confined;
3. He must undertake to carry by the method by which his business is conducted and over his
established roads; and
4. The transportation must be for hire.[15]
Based on the above definitions and requirements, there is no doubt that petitioner is a common
carrier. It is engaged in the business of transporting or carrying goods, i.e. petroleum products, for hire as a
public employment. It undertakes to carry for all persons indifferently, that is, to all persons who choose to
employ its services, and transports the goods by land and for compensation. The fact that petitioner has a
limited clientele does not exclude it from the definition of a common carrier. In De Guzman vs. Court of
Appeals[16] we ruled that:
"The above article (Art. 1732, Civil Code) 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 x x x 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 1877
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:
'every person that now or hereafter may own, operate, manage, or control in the Philippines, for hire or
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.' "(Underscoring Supplied)
Also, respondent's argument that the term "common carrier" as used in Section 133 (j) of the Local
Government Code refers only to common carriers transporting goods and passengers through moving
vehicles or vessels either by land, sea or water, is erroneous.
As correctly pointed out by petitioner, the definition of "common carriers" in the Civil Code makes no
distinction as to the means of transporting, as long as it is by land, water or air. It does not provide that the
transportation of the passengers or goods should be by motor vehicle. In fact, in the United States, oil pipe
line operators are considered common carriers.[17]
Under the Petroleum Act of the Philippines (Republic Act 387), petitioner is considered a "common
carrier." Thus, Article 86 thereof provides that:
"Art. 86. Pipe line concessionaire as a common carrier. - A pipe line shall have the preferential right to utilize
installations for the transportation of petroleum owned by him, but is obligated to utilize the remaining
transportation capacity pro rata for the transportation of such other petroleum as may be offered by others
for transport, and to charge without discrimination such rates as may have been approved by the Secretary
of Agriculture and Natural Resources."
Republic Act 387 also regards petroleum operation as a public utility. Pertinent portion of Article 7
thereof provides:
"that everything relating to the exploration for and exploitation of petroleum x x and everything relating to
the manufacture, refining, storage, or transportation by special methods of petroleum, is hereby declared
to be a public utility." (Underscoring Supplied)
The Bureau of Internal Revenue likewise considers the petitioner a "common carrier." In BIR Ruling No.
069-83, it declared:
"x x x since [petitioner] is a pipeline concessionaire that is engaged only in transporting petroleum products,
it is considered a common carrier under Republic Act No. 387 x x x. Such being the case, it is not subject to
withholding tax prescribed by Revenue Regulations No. 13-78, as amended."
From the foregoing disquisition, there is no doubt that petitioner is a "common carrier" and, therefore,
exempt from the business tax as provided for in Section 133 (j), of the Local Government Code, to wit:
"Section 133. Common Limitations on the Taxing Powers of Local Government Units. - Unless otherwise
provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall
not extend to the levy of the following :
xxxxxxxxx
(j) Taxes on the gross receipts of transportation contractors and persons engaged in the
transportation of passengers or freight by hire and common carriers by air, land or water,
except as provided in this Code."
The deliberations conducted in the House of Representatives on the Local Government Code of 1991 are
illuminating:
"MR. AQUINO (A). Thank you, Mr. Speaker.
Mr. Speaker, we would like to proceed to page 95, line 1. It states : "SEC.121 [now Sec. 131]. Common
Limitations on the Taxing Powers of Local Government Units." x x x
MR. AQUINO (A.). Thank you Mr. Speaker.
Still on page 95, subparagraph 5, on taxes on the business of transportation. This appears to be one of those
being deemed to be exempted from the taxing powers of the local government units. May we know the
reason why the transportation business is being excluded from the taxing powers of the local government
units?
MR. JAVIER (E.). Mr. Speaker, there is an exception contained in Section 121 (now Sec. 131), line 16, paragraph
5. It states that local government units may not impose taxes on the business of transportation, except as
otherwise provided in this code.
Now, Mr. Speaker, if the Gentleman would care to go to page 98 of Book II, one can see there that provinces
have the power to impose a tax on business enjoying a franchise at the rate of not more than one-half of 1
percent of the gross annual receipts. So, transportation contractors who are enjoying a franchise would be
subject to tax by the province. That is the exception, Mr. Speaker.
What we want to guard against here, Mr. Speaker, is the imposition of taxes by local government units on
the carrier business. Local government units may impose taxes on top of what is already being imposed by
the National Internal Revenue Code which is the so-called "common carriers tax." We do not want a
duplication of this tax, so we just provided for an exception under Section 125 [now Sec. 137] that a province
may impose this tax at a specific rate.
MR. AQUINO (A.). Thank you for that clarification, Mr. Speaker. x x x[18]
It is clear that the legislative intent in excluding from the taxing power of the local government unit the
imposition of business tax against common carriers is to prevent a duplication of the so-called "common
carrier's tax."
Petitioner is already paying three (3%) percent common carrier's tax on its gross sales/earnings under
the National Internal Revenue Code.[19] To tax petitioner again on its gross receipts in its transportation of
petroleum business would defeat the purpose of the Local Government Code.
WHEREFORE, the petition is hereby GRANTED. The decision of the respondent Court of Appeals dated
November 29, 1995 in CA-G.R. SP No. 36801 is REVERSED and SET ASIDE.
1.4 Estrellita M. Bascos v. CA G.R No. 101089 April 7, 1993

SYLLABUS
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 an ancillary activity (in local idiom, as a
"sideline"). Article 1732 also carefully avoids making any distinction between a person or enterprise offering
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:
"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 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
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.
1.5 FGU Insurance Corporation v. G. P. Sarmiento Trucking

Corporations G.R No. 141910 August 6, 2002
FIRST DIVISION
[G.R. No. 141910. August 6, 2002]
FGU INSURANCE CORPORATION, petitioner, vs. G.P. SARMIENTO

TRUCKING CORPORATION and LAMBERT M. EROLES, respondents.
DECISION
VITUG, J.:
G.P. Sarmiento Trucking Corporation (GPS) undertook to deliver on 18 June 1994 thirty (30)
units of Condura S.D. white refrigerators aboard one of its Isuzu truck, driven by Lambert Eroles,
from the plant site of Concepcion Industries, Inc., along South Superhighway in Alabang, Metro
Manila, to the Central Luzon Appliances in Dagupan City. While the truck was traversing the
north diversion road along McArthur highway in Barangay Anupol, Bamban, Tarlac, it collided
with an unidentified truck, causing it to fall into a deep canal, resulting in damage to the
cargoes.
FGU Insurance Corporation (FGU), an insurer of the shipment, paid to Concepcion
Industries, Inc., the value of the covered cargoes in the sum of P204,450.00. FGU, in turn,
being the subrogee of the rights and interests of Concepcion Industries, Inc., sought
reimbursement of the amount it had paid to the latter from GPS. Since the trucking company
failed to heed the claim, FGU filed a complaint for damages and breach of contract of carriage
against GPS and its driver Lambert Eroles with the Regional Trial Court, Branch 66, of Makati
City. In its answer, respondents asserted that GPS was the exclusive hauler only of Concepcion
Industries, Inc., since 1988, and it was not so engaged in business as a common
carrier. Respondents further claimed that the cause of damage was purely accidental.
The issues having thus been joined, FGU presented its evidence, establishing the extent of
damage to the cargoes and the amount it had paid to the assured. GPS, instead of submitting
its evidence, filed with leave of court a motion to dismiss the complaint by way of demurrer to
evidence on the ground that petitioner had failed to prove that it was a common carrier.
The trial court, in its order of 30 April 1996,[1] granted the motion to dismiss, explaining
thusly:
Under Section 1 of Rule 131 of the Rules of Court, it is provided that Each party must prove
his own affirmative allegation, xxx.
In the instant case, plaintiff did not present any single evidence that would prove that
defendant is a common carrier.
xxxxxxxxx
Accordingly, the application of the law on common carriers is not warranted and the
presumption of fault or negligence on the part of a common carrier in case of loss, damage or
deterioration of goods during transport under 1735 of the Civil Code is not availing.
Thus, the laws governing the contract between the owner of the cargo to whom the plaintiff
was subrogated and the owner of the vehicle which transports the cargo are the laws on
obligation and contract of the Civil Code as well as the law on quasi delicts.
Under the law on obligation and contract, negligence or fault is not presumed. The law on
quasi delict provides for some presumption of negligence but only upon the attendance of
some circumstances. Thus, Article 2185 provides:
Art. 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.
Evidence for the plaintiff shows no proof that defendant was violating any traffic
regulation. Hence, the presumption of negligence is not obtaining.
Considering that plaintiff failed to adduce evidence that defendant is a common carrier and
defendants driver was the one negligent, defendant cannot be made liable for the damages of
the subject cargoes. [2]
The subsequent motion for reconsideration having been denied, [3] plaintiff interposed an
appeal to the Court of Appeals, contending that the trial court had erred (a) in holding that the
appellee corporation was not a common carrier defined under the law and existing
jurisprudence; and (b) in dismissing the complaint on a demurrer to evidence.
The Court of Appeals rejected the appeal of petitioner and ruled in favor of GPS. The
appellate court, in its decision of 10 June 1999, [4] discoursed, among other things, that -
"x x x in order for the presumption of negligence provided for under the law governing
common carrier (Article 1735, Civil Code) to arise, the appellant must first prove that the
appellee is a common carrier. Should the appellant fail to prove that the appellee is a
common carrier, the presumption would not arise; consequently, the appellant would have to
prove that the carrier was negligent.
"x x x x x x x x x
"Because it is the appellant who insists that the appellees can still be considered as a
common carrier, despite its `limited clientele, (assuming it was really a common carrier), it
follows that it (appellant) has the burden of proving the same. It (plaintiff-appellant) `must
establish his case by a preponderance of evidence, which means that the evidence as a whole
adduced by one side is superior to that of the other. (Summa Insurance Corporation vs. Court
of Appeals, 243 SCRA 175). This, unfortunately, the appellant failed to do -- hence, the
dismissal of the plaintiffs complaint by the trial court is justified.
"x x x x x x x x x
"Based on the foregoing disquisitions and considering the circumstances that the appellee
trucking corporation has been `its exclusive contractor, hauler since 1970, defendant has no
choice but to comply with the directive of its principal, the inevitable conclusion is that the
appellee is a private carrier.
"x x x x x x x x x
"x x x the lower court correctly ruled that 'the application of the law on common carriers is
not warranted and the presumption of fault or negligence on the part of a common carrier in
case of loss, damage or deterioration of good[s] during transport under [article] 1735 of the
Civil Code is not availing.' x x x.
"Finally, We advert to the long established rule that conclusions and findings of fact of a trial
court are entitled to great weight on appeal and should not be disturbed unless for strong and
valid reasons." [5]
Petitioner's motion for reconsideration was likewise denied;[6] hence, the instant
petition,[7] raising the following issues:
I
WHETHER RESPONDENT GPS MAY BE CONSIDERED AS A COMMON CARRIER

AS DEFINED UNDER THE LAW AND EXISTING JURISPRUDENCE.
II
WHETHER RESPONDENT GPS, EITHER AS A COMMON CARRIER OR A PRIVATE

CARRIER, MAY BE PRESUMED TO HAVE BEEN NEGLIGENT WHEN THE GOODS
IT UNDERTOOK TO TRANSPORT SAFELY WERE SUBSEQUENTLY DAMAGED
WHILE IN ITS PROTECTIVE CUSTODY AND POSSESSION.
III
WHETHER THE DOCTRINE OF RES IPSA LOQUITUR IS APPLICABLE IN THE

INSTANT CASE.
On the first issue, the Court finds the conclusion of the trial court and the Court of Appeals
to be amply justified. GPS, being an exclusive contractor and hauler of Concepcion Industries,
Inc., rendering or offering its services to no other individual or entity, cannot be considered a
common carrier. 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
hire or compensation, offering their services to the public,[8] whether to the public in general or
to a limited clientele in particular, but never on an exclusive basis.[9] The true test of a common
carrier is the carriage of passengers or goods, providing space for those who opt to avail
themselves of its transportation service for a fee. [10] Given accepted standards, GPS scarcely
falls within the term common carrier.
The above conclusion nothwithstanding, GPS cannot escape from liability.
In culpa contractual, upon which the action of petitioner rests as being the subrogee of
Concepcion Industries, Inc., the mere proof of the existence of the contract and the failure of its
compliance justify, prima facie, a corresponding right of relief.[11] The law, recognizing the
obligatory force of contracts,[12] will not permit a party to be set free from liability for any kind of
misperformance of the contractual undertaking or a contravention of the tenor thereof. [13] A
breach upon the contract confers upon the injured party a valid cause for recovering that which
may have been lost or suffered. The remedy serves to preserve the interests of the promisee
that may include his expectation interest, which is his interest in having the benefit of his
bargain by being put in as good a position as he would have been in had the contract been
performed, or his reliance interest, which is his interest in being reimbursed for loss caused by
reliance on the contract by being put in as good a position as he would have been in had the
contract not been made; or his restitution interest, which is his interest in having restored to him
any benefit that he has conferred on the other party.[14] Indeed, agreements can accomplish little,
either for their makers or for society, unless they are made the basis for action. [15] The effect of
every infraction is to create a new duty, that is, to make recompense to the one who has been
injured by the failure of another to observe his contractual obligation[16] unless he can show
extenuating circumstances, like proof of his exercise of due diligence (normally that of the
diligence of a good father of a family or, exceptionally by stipulation or by law such as in the
case of common carriers, that of extraordinary diligence) or of the attendance of fortuitous event,
to excuse him from his ensuing liability.
Respondent trucking corporation recognizes the existence of a contract of carriage
between it and petitioners assured, and admits that the cargoes it has assumed to deliver have
been lost or damaged while in its custody. In such a situation, a default on, or failure of
compliance with, the obligation in this case, the delivery of the goods in its custody to the place
of destination - gives rise to a presumption of lack of care and corresponding liability on the part
of the contractual obligor the burden being on him to establish otherwise. GPS has failed to do
so.
Respondent driver, on the other hand, without concrete proof of his negligence or fault, may
not himself be ordered to pay petitioner. The driver, not being a party to the contract of carriage
between petitioners principal and defendant, may not be held liable under the agreement. A
contract can only bind the parties who have entered into it or their successors who have
assumed their personality or their juridical position. [17] Consonantly with the axiom res inter alios
acta aliis neque nocet prodest, such contract can neither favor nor prejudice a third
person. Petitioners civil action against the driver can only be based on culpa aquiliana, which,
unlike culpa contractual, would require the claimant for damages to prove negligence or fault on
the part of the defendant.[18]
A word in passing. Res ipsa loquitur, a doctrine being invoked by petitioner, holds a
defendant liable where the thing which caused the injury complained of is shown to be under
the latters management and the accident is such that, in the ordinary course of things, cannot
be expected to happen if those who have its management or control use proper care. It affords
reasonable evidence, in the absence of explanation by the defendant, that the accident arose
from want of care.[19] It is not a rule of substantive law and, as such, it does not create an
independent ground of liability. Instead, it is regarded as a mode of proof, or a mere procedural
convenience since it furnishes a substitute for, and relieves the plaintiff of, the burden of
producing specific proof of negligence. The maxim simply places on the defendant the burden
of going forward with the proof.[20] Resort to the doctrine, however, may be allowed only when (a)
the event is of a kind which does not ordinarily occur in the absence of negligence; (b) other
responsible causes, including the conduct of the plaintiff and third persons, are sufficiently
eliminated by the evidence; and (c) the indicated negligence is within the scope of the
defendant's duty to the plaintiff.[21] Thus, it is not applicable when an unexplained accident may
be attributable to one of several causes, for some of which the defendant could not be
responsible.[22]
Res ipsa loquitur generally finds relevance whether or not a contractual relationship exists
between the plaintiff and the defendant, for the inference of negligence arises from the
circumstances and nature of the occurrence and not from the nature of the relation of the
parties.[23] Nevertheless, the requirement that responsible causes other than those due to
defendants conduct must first be eliminated, for the doctrine to apply, should be understood as
being confined only to cases of pure (non-contractual) tort since obviously the presumption of
negligence in culpa contractual, as previously so pointed out, immediately attaches by a failure
of the covenant or its tenor. In the case of the truck driver, whose liability in a civil action is
predicated on culpa acquiliana, while he admittedly can be said to have been in control and
management of the vehicle which figured in the accident, it is not equally shown, however, that
the accident could have been exclusively due to his negligence, a matter that can allow,
forthwith, res ipsa loquitur to work against him.
If a demurrer to evidence is granted but on appeal the order of dismissal is reversed, the
movant shall be deemed to have waived the right to present evidence. [24] Thus, respondent
corporation may no longer offer proof to establish that it has exercised due care in transporting
the cargoes of the assured so as to still warrant a remand of the case to the trial court.
WHEREFORE, the order, dated 30 April 1996, of the Regional Trial Court, Branch 66, of
Makati City, and the decision, dated 10 June 1999, of the Court of Appeals, are AFFIRMED only
insofar as respondent Lambert M. Eroles is concerned, but said assailed order of the trial court
and decision of the appellate court are REVERSED as regards G.P. Sarmiento Trucking
Corporation which, instead, is hereby ordered to pay FGU Insurance Corporation the value of
the damaged and lost cargoes in the amount of P204,450.00. No costs.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Kapunan, Ynares-Santiago, and Austria-Martinez,
JJ., concur.
1.6 Sps. Teodoro and Nanette Perena v. Sps Teresita Phil. Nicolas,
et al. G.R. No. 157917 August 29, 2012
The operator of a. school bus service is a common carrier in the eyes of the law. He is bound to observe
extraordinary diligence in the conduct of his business. He is presumed to be negligent when death occurs to
a passenger. His liability may include indemnity for loss of earning capacity even if the deceased passenger
may only be an unemployed high school student at the time of the accident.
The Case
By petition for review on certiorari, Spouses Teodoro and Nanette Perefia (Perefias) appeal the adverse
decision promulgated on November 13, 2002, by which the Court of Appeals (CA) affirmed with modification
the decision rendered on December 3, 1999 by the Regional Trial Court (RTC), Branch 260, in Paraaque City
that had decreed them jointly and severally liable with Philippine National Railways (PNR), their co-defendant,
to Spouses Nicolas and Teresita Zarate (Zarates) for the death of their 15-year old son, Aaron John L. Zarate
(Aaron), then a high school student of Don Bosco Technical Institute (Don Bosco).
Antecedents
The Pereas were engaged in the business of transporting students from their respective residences in
Paraaque City to Don Bosco in Pasong Tamo, Makati City, and back. In their business, the Pereas used a
KIA Ceres Van (van) with Plate No. PYA 896, which had the capacity to transport 14 students at a time, two
of whom would be seated in the front beside the driver, and the others in the rear, with six students on
either side. They employed Clemente Alfaro (Alfaro) as driver of the van.
In June 1996, the Zarates contracted the Pereas to transport Aaron to and from Don Bosco. On August 22,
1996, as on previous school days, the van picked Aaron up around 6:00 a.m. from the Zarates residence.
Aaron took his place on the left side of the van near the rear door. The van, with its 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;
(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 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 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 59,502.76; Moral Damages is reduced to 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 280.00/day to compute Aarons
gross annual salary to be 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 4,351,164.30, from which his
estimated expenses in the sum of 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 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 gratuitously or for hire.11 The provisions on ordinary contracts of the Civil Code govern the contract of
private carriage.The diligence required of a private carrier is only ordinary, that is, the diligence of a good
father of the family. In contrast, a common carrier is a person, corporation, firm or association engaged in
the business of carrying or transporting passengers or goods or both, by land, water, or air, for
compensation, offering such services to the public.12 Contracts of common carriage are governed by the
provisions on common carriers of the Civil Code, the Public Service Act, 13 and other special laws relating to
transportation. A common carrier is required to observe extraordinary diligence, and is presumed to be at
fault or to have acted negligently in case of the loss of the effects of passengers, or the death or injuries to
passengers.14
In relation to common carriers, the Court defined public use in the following terms in United States v. Tan
Piaco,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.
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.28He 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 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-paying jobs had they graduated in due time, and
that their jobs would probably pay them high monthly salaries from 10,000.00 to 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 2,500,000.00 and 1,000,000.00 on the ground that such amounts were excessive.
The plea is unwarranted.
The moral damages of 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 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.
1.7 National Steel Corporation v. CA December 12, 1997, 283 SCRA 45
The Court finds occasion to apply the rules on the seaworthiness of a private carrier, its owners
responsibility for damage to the cargo and its liability for demurrage and attorneys fees. The Court also
reiterates the well-known rule that findings of facts of trial courts, when affirmed by the Court of Appeals,
are binding on this Court.
The Case
Before us are two separate petitions for review filed by National Steel Corporation (NSC) and Vlasons
Shipping, Inc. (VSI), both of which assail the August 12, 1993 Decision of the Court of Appeals. [1] The Court of
Appeals modified the decision of the Regional Trial Court of Pasig, Metro Manila, Branch 163 in Civil Case No.
23317. The RTC disposed as follows:
WHEREFORE, judgment is hereby rendered in favor of defendant and against the plaintiff dismissing the
complaint with cost against plaintiff, and ordering plaintiff to pay the defendant on the counterclaim as
follows:
1. The sum of P75,000.00 as unpaid freight and P88,000.00 as demurrage with interest at the legal
rate on both amounts from April 7, 1976 until the same shall have been fully paid;
2. Attorneys fees and expenses of litigation in the sum of P100,000.00; and
3. Cost of suit.
SO ORDERED. [2]
On the other hand, the Court of Appeals ruled:
WHEREFORE, premises considered, the decision appealed from is modified by reducing the award for
demurrage to P44,000.00 and deleting the award for attorneys fees and expenses of litigation. Except as
thus modified, the decision is AFFIRMED. There is no pronouncement as to costs.
SO ORDERED. [3]
The Facts
The MV Vlasons I is a vessel which renders tramping service and, as such, does not transport cargo or
shipment for the general public. Its services are available only to specific persons who enter into a special
contract of charter party with its owner. It is undisputed that the ship is a private carrier. And it is in this
capacity that its owner, Vlasons Shipping, Inc., entered into a contract of affreightment or contract of
voyage charter hire with National Steel Corporation.
The facts as found by Respondent Court of Appeals are as follows:
(1) On July 17, 1974, plaintiff National Steel Corporation (NSC) as Charterer and defendant Vlasons Shipping,
Inc. (VSI) as Owner, entered into a Contract of Voyage Charter Hire (Exhibit B; also Exhibit 1) whereby NSC
hired VSIs vessel, the MV VLASONS I to make one (1) voyage to load steel products at Iligan City and
discharge them at North Harbor, Manila, under the following terms and conditions, viz:
1. x x x x x x.
2. Cargo: Full cargo of steel products of not less than 2,500 MT, 10% more or less at Masters option.
3. x x x x x x
4. Freight/Payment: P30.00 /metric ton, FIOST basis. Payment upon presentation of Bill of Lading within
fifteen (15) days.
5. Laydays/Cancelling: July 26, 1974/Aug. 5, 1974.
6. Loading/Discharging Rate: 750 tons per WWDSHINC. (Weather Working Day of 24 consecutive hours,
Sundays and Holidays Included).
7. Demurrage/Dispatch: P8,000.00/P4,000.00 per day.
8. x x x x x x
9. Cargo Insurance: Charterers and/or Shippers must insure the cargoes. Shipowners not responsible for
losses/damages except on proven willful negligence of the officers of the vessel.
10. Other terms:(a) All terms/conditions of NONYAZAI C/P [sic] or other internationally recognized Charter
Party Agreement shall form part of this Contract.
xxxxxxxxx
The terms F.I.O.S.T. which is used in the shipping business is a standard provision in the NANYOZAI Charter
Party which stands for Freight In and Out including Stevedoring and Trading, which means that the handling,
loading and unloading of the cargoes are the responsibility of the Charterer. Under Paragraph 5 of the
NANYOZAI Charter Party, it states, Charterers to load, stow and discharge the cargo free of risk and
expenses to owners. x x x(Underscoring supplied).
Under paragraph 10 thereof, it is provided that (o)wners shall, before and at the beginning of the voyage,
exercise due diligence to make the vessel seaworthy and properly manned, equipped and supplied and to
make the holds and all other parts of the vessel in which cargo is carried, fit and safe for its reception,
carriage and preservation. Owners shall not be liable for loss of or damage of the cargo arising or resulting
from: unseaworthiness unless caused by want of due diligence on the part of the owners to make the vessel
seaworthy, and to secure that the vessel is properly manned, equipped and supplied and to make the holds
and all other parts of the vessel in which cargo is carried, fit and safe for its reception, carriage and
preservation; xxx; perils, dangers and accidents of the sea or other navigable waters; xxx; wastage in bulk or
weight or any other loss or damage arising from inherent defect, quality or vice of the cargo; insufficiency of
packing; xxx; latent defects not discoverable by due diligence; any other cause arising without the actual
fault or privity of Owners or without the fault of the agents or servants of owners.
Paragraph 12 of said NANYOZAI Charter Party also provides that (o)wners shall not be responsible for split,
chafing and/or any damage unless caused by the negligence or default of the master and crew.
(2) On August 6, 7 and 8, 1974, in accordance with the Contract of Voyage Charter Hire, the MV VLASONS I
loaded at plaintiffs pier at Iligan City, the NSCs shipment of 1,677 skids of tinplates and 92 packages of hot
rolled sheets or a total of 1,769 packages with a total weight of about 2,481.19 metric tons for carriage to
Manila. The shipment was placed in the three (3) hatches of the ship. Chief Mate Gonzalo Sabando, acting as
agent of the vessel[,] acknowledged receipt of the cargo on board and signed the corresponding bill of
lading, B.L.P.P. No. 0233 (Exhibit D) on August 8, 1974.
(3) The vessel arrived with the cargo at Pier 12, North Harbor, Manila, on August 12, 1974. The following day,
August 13, 1974, when the vessels three (3) hatches containing the shipment were opened by plaintiffs
agents, nearly all the skids of tinplates and hot rolled sheets were allegedly found to be wet and rusty. The
cargo was discharged and unloaded by stevedores hired by the Charterer. Unloading was completed only on
August 24, 1974 after incurring a delay of eleven (11) days due to the heavy rain which interrupted the
unloading operations. (Exhibit E)
(4) To determine the nature and extent of the wetting and rusting, NSC called for a survey of the shipment
by the Manila Adjusters and Surveyors Company (MASCO). In a letter to the NSC dated March 17, 1975
(Exhibit G), MASCO made a report of its ocular inspection conducted on the cargo, both while it was still on
board the vessel and later at the NDC warehouse in Pureza St., Sta. Mesa, Manila where the cargo was taken
and stored. MASCO reported that it found wetting and rusting of the packages of hot rolled sheets and
metal covers of the tinplates; that tarpaulin hatch covers were noted torn at various extents; that
container/metal casings of the skids were rusting all over. MASCO ventured the opinion that rusting of the
tinplates was caused by contact with SEA WATER sustained while still on board the vessel as a consequence
of the heavy weather and rough seas encountered while en route to destination (Exhibit F). It was also
reported that MASCOs surveyors drew at random samples of bad order packing materials of the tinplates
and delivered the same to the M.I.T. Testing Laboratories for analysis. On August 31, 1974, the M.I.T. Testing
Laboratories issued Report No. 1770 (Exhibit I) which in part, states, The analysis of bad order samples of
packing materials xxx shows that wetting was caused by contact with SEA WATER.
(5) On September 6, 1974, on the basis of the aforesaid Report No. 1770, plaintiff filed with the defendant its
claim for damages suffered due to the downgrading of the damaged tinplates in the amount
of P941,145.18. Then on October 3, 1974, plaintiff formally demanded payment of said claim but defendant
VSI refused and failed to pay. Plaintiff filed its complaint against defendant on April 21, 1976 which was
docketed as Civil Case No. 23317, CFI, Rizal.
(6) In its complaint, plaintiff claimed that it sustained losses in the aforesaid amount of P941,145.18 as a result
of the act, neglect and default of the master and crew in the management of the vessel as well as the want
of due diligence on the part of the defendant to make the vessel seaworthy and to make the holds and all
other parts of the vessel in which the cargo was carried, fit and safe for its reception, carriage and
preservation -- all in violation of defendants undertaking under their Contract of Voyage Charter Hire.
(7) In its answer, defendant denied liability for the alleged damage claiming that the MV VLASONS I was
seaworthy in all respects for the carriage of plaintiffs cargo; that said vessel was not a common
carrier inasmuch as she was under voyage charter contract with the plaintiff as charterer under the charter
party; that in the course of the voyage from Iligan City to Manila, the MV VLASONS I encountered very rough
seas, strong winds and adverse weather condition, causing strong winds and big waves to continuously
pound against the vessel and seawater to overflow on its deck and hatch covers; that under the Contract of
Voyage Charter Hire, defendant shall not be responsible for losses/damages except on proven willful
negligence of the officers of the vessel, that the officers of said MV VLASONS I exercised due diligence and
proper seamanship and were not willfully negligent; that furthermore the Voyage Charter Party provides
that loading and discharging of the cargo was on FIOST terms which means that the vessel was free of risk
and expense in connection with the loading and discharging of the cargo; that the damage, if any, was due
to the inherent defect, quality or vice of the cargo or to the insufficient packing thereof or to latent defect of
the cargo not discoverable by due diligence or to any other cause arising without the actual fault or privity of
defendant and without the fault of the agents or servants of defendant; consequently, defendant is not
liable; that the stevedores of plaintiff who discharged the cargo in Manila were negligent and did not
exercise due care in the discharge of the cargo; and that the cargo was exposed to rain and seawater spray
while on the pier or in transit from the pier to plaintiffs warehouse after discharge from the vessel; and that
plaintiffs claim was highly speculative and grossly exaggerated and that the small stain marks or sweat
marks on the edges of the tinplates were magnified and considered total loss of the cargo. Finally, defendant
claimed that it had complied with all its duties and obligations under the Voyage Charter Hire Contract and
had no responsibility whatsoever to plaintiff. In turn, it alleged the following counterclaim:
(a) That despite the full and proper performance by defendant of its obligations under the Voyage Charter
Hire Contract, plaintiff failed and refused to pay the agreed charter hire of P75,000.00 despite demands
made by defendant;
(b) That under their Voyage Charter Hire Contract, plaintiff had agreed to pay defendant the sum
of P8,000.00 per day for demurrage. The vessel was on demurrage for eleven (11) days in Manila waiting for
plaintiff to discharge its cargo from the vessel. Thus, plaintiff was liable to pay defendant demurrage in the
total amount of P88,000.00.
(c) For filing a clearly unfounded civil action against defendant, plaintiff should be ordered to pay defendant
attorneys fees and all expenses of litigation in the amount of not less than P100,000.00.
(8) From the evidence presented by both parties, the trial court came out with the following findings which
were set forth in its decision:
(a) The MV VLASONS I is a vessel of Philippine registry engaged in the tramping service and is available for
hire only under special contracts of charter party as in this particular case.
(b) That for purposes of the voyage covered by the Contract of Voyage Charter Hire (Exh. 1), the MV
VLASONS I was covered by the required seaworthiness certificates including the Certification of
Classification issued by an international classification society, the NIPPON KAIJI KYOKAI (Exh. 4); Coastwise
License from the Board of Transportation (Exh. 5); International Loadline Certificate from the Philippine
Coast Guard (Exh. 6); Cargo Ship Safety Equipment Certificate also from the Philippine Coast Guard (Exh. 7);
Ship Radio Station License (Exh. 8); Certificate of Inspection by the Philippine Coast Guard (Exh. 12); and
Certificate of Approval for Conversion issued by the Bureau of Customs (Exh. 9). That being a vessel engaged
in both overseas and coastwise trade, the MV VLASONS I has a higher degree of seaworthiness and safety.
(c) Before it proceeded to Iligan City to perform the voyage called for by the Contract of Voyage Charter Hire,
the MV VLASONS I underwent drydocking in Cebu and was thoroughly inspected by the Philippine Coast
Guard. In fact, subject voyage was the vessels first voyage after the drydocking. The evidence shows that the
MV VLASONS I was seaworthy and properly manned, equipped and supplied when it undertook the
voyage. It had all the required certificates of seaworthiness.
(d) The cargo/shipment was securely stowed in three (3) hatches of the ship. The hatch openings were
covered by hatchboards which were in turn covered by two or double tarpaulins. The hatch covers were
water tight.Furthermore, under the hatchboards were steel beams to give support.
(e) The claim of the plaintiff that defendant violated the contract of carriage is not supported by
evidence. The provisions of the Civil Code on common carriers pursuant to which there exists a presumption
of negligence in case of loss or damage to the cargo are not applicable. As to the damage to the tinplates
which was allegedly due to the wetting and rusting thereof, there is unrebutted testimony of witness
Vicente Angliongto that tinplates sweat by themselves when packed even without being in contract (sic)
with water from outside especially when the weather is bad or raining. The rust caused by sweat or moisture
on the tinplates may be considered as a loss or damage but then, defendant cannot be held liable for it
pursuant to Article 1734 of the Civil Case which exempts the carrier from responsibility for loss or damage
arising from the character of the goods x x x. All the 1,769 skids of the tinplates could not have been
damaged by water as claimed by plaintiff. It was shown as claimed by plaintiff that the tinplates themselves
were wrapped in kraft paper lining and corrugated cardboards could not be affected by water from outside.
(f) The stevedores hired by the plaintiff to discharge the cargo of tinplates were negligent in not closing the
hatch openings of the MV VLASONS I when rains occurred during the discharging of the cargo thus allowing
rainwater to enter the hatches. It was proven that the stevedores merely set up temporary tents to cover
the hatch openings in case of rain so that it would be easy for them to resume work when the rains stopped
by just removing the tent or canvas. Because of this improper covering of the hatches by the stevedores
during the discharging and unloading operations which were interrupted by rains, rainwater drifted into the
cargo through the hatch openings. Pursuant to paragraph 5 of the NANYOSAI [sic] Charter Party which was
expressly made part of the Contract of Voyage Charter Hire, the loading, stowing and discharging of the
cargo is the sole responsibility of the plaintiff charterer and defendant carrier has no liability for whatever
damage may occur or maybe [sic] caused to the cargo in the process.
(g) It was also established that the vessel encountered rough seas and bad weather while en route from
Iligan City to Manila causing sea water to splash on the ships deck on account of which the master of the
vessel (Mr. Antonio C. Dumlao) filed a Marine Protest on August 13, 1974 (Exh. 15) which can be invoked by
defendant as a force majeure that would exempt the defendant from liability.
(h) Plaintiff did not comply with the requirement prescribed in paragraph 9 of the Voyage Charter Hire
contract that it was to insure the cargo because it did not. Had plaintiff complied with the requirement, then
it could have recovered its loss or damage from the insurer. Plaintiff also violated the charter party contract
when it loaded not only steel products, i.e. steel bars, angular bars and the like but also tinplates and hot
rolled sheets which are high grade cargo commanding a higher freight. Thus plaintiff was able to ship high
grade cargo at a lower freight rate.
(I) As regards defendants counterclaim, the contract of voyage charter hire under paragraph 4 thereof, fixed
the freight at P30.00 per metric ton payable to defendant carrier upon presentation of the bill of lading
within fifteen (15) days. Plaintiff has not paid the total freight due of P75,000.00 despite demands. The
evidence also showed that the plaintiff was required and bound under paragraph 7 of the same Voyage
Charter Hire contract to pay demurrage of P8,000.00 per day of delay in the unloading of the cargoes. The
delay amounted to eleven (11) days thereby making plaintiff liable to pay defendant for demurrage in the
amount of P88,000.00.
Appealing the RTC decision to the Court of Appeals, NSC alleged six errors:
I
The trial court erred in finding that the MV VLASONS I was seaworthy, properly manned, equipped and
supplied, and that there is no proof of willful negligence of the vessels officers.
II
The trial court erred in finding that the rusting of NSCs tinplates was due to the inherent nature or character
of the goods and not due to contact with seawater.
III
The trial court erred in finding that the stevedores hired by NSC were negligent in the unloading of NSCs
shipment.
IV
The trial court erred in exempting VSI from liability on the ground of force majeure.
V
The trial court erred in finding that NSC violated the contract of voyage charter hire.
VI
The trial court erred in ordering NSC to pay freight, demurrage and attorneys fees, to VSI.[4]
As earlier stated, the Court of Appeals modified the decision of the trial court by reducing the
demurrage from P88,000.00 to P44,000.00 and deleting the award of attorneys fees and expenses of
litigation.NSC and VSI filed separate motions for reconsideration. In a Resolution[5] dated October 20, 1993,
the appellate court denied both motions. Undaunted, NSC and VSI filed their respective petitions for review
before this Court. On motion of VSI, the Court ordered on February 14, 1994 the consolidation of these
petitions.[6]
The Issues
In its petition[7] and memorandum,[8] NSC raises the following questions of law and fact:
Questions of Law
1. Whether or not a charterer of a vessel is liable for demurrage due to cargo unloading delays
caused by weather interruption;
2. Whether or not the alleged seaworthiness certificates (Exhibits 3, 4, 5, 6, 7, 8, 9, 11 and 12) were
admissible in evidence and constituted evidence of the vessels seaworthiness at the beginning
of the voyages; and
3. Whether or not a charterers failure to insure its cargo exempts the shipowner from liability for
cargo damage.
Questions of Fact
1. Whether or not the vessel was seaworthy and cargo-worthy;

2. Whether or not vessels officers and crew were negligent in handling and caring for NSCs cargo;
3. Whether or not NSCs cargo of tinplates did sweat during the voyage and, hence, rusted on their
own; and
(4) Whether or not NSCs stevedores were negligent and caused the wetting[/]rusting of NSCs
tinplates.
In its separate petition, [9] VSI submits for the consideration of this Court the following alleged errors of
the CA:
A. The respondent Court of Appeals committed an error of law in reducing the award of demurrage
from P88,000.00 to P44,000.00.
B. The respondent Court of Appeals committed an error of law in deleting the award of P100,000 for
attorneys fees and expenses of litigation.
Amplifying the foregoing, VSI raises the following issues in its memorandum: [10]
I. Whether or not the provisions of the Civil Code of the Philippines on common carriers pursuant to which
there exist[s] a presumption of negligence against the common carrier in case of loss or damage to the
cargo are applicable to a private carrier.
II. Whether or not the terms and conditions of the Contract of Voyage Charter Hire, including the Nanyozai
Charter, are valid and binding on both contracting parties.
The foregoing issues raised by the parties will be discussed under the following headings:
1. Questions of Fact
2. Effect of NSCs Failure to Insure the Cargo
3. Admissibility of Certificates Proving Seaworthiness
4. Demurrage and Attorneys Fees.
The Courts Ruling
The Court affirms the assailed Decision of the Court of Appeals, except in respect of the demurrage.
Preliminary Matter: Common Carrier or Private Carrier?

At the outset, it is essential to establish whether VSI contracted with NSC as a common carrier or as a
private carrier. The resolution of this preliminary question determines the law, standard of diligence and
burden of proof applicable to the present case.
Article 1732 of the Civil Code defines a common carrier as 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. It has been held that the true test of a common carrier is
the carriage of passengers or goods, provided it has space, for all who opt to avail themselves of its
transportation service for a fee. [11] A carrier which does not qualify under the above test is deemed a private
carrier. Generally, private carriage is undertaken by special agreement and the carrier does not hold himself
out to carry goods for the general public. The most typical, although not the only form of private carriage, is
the charter party, a maritime contract by which the charterer, a party other than the shipowner, obtains the
use and service of all or some part of a ship for a period of time or a voyage or voyages. [12]
In the instant case, it is undisputed that VSI did not offer its services to the general public. As found by
the Regional Trial Court, it carried passengers or goods only for those it chose under a special contract of
charter party. [13] As correctly concluded by the Court of Appeals, the MV Vlasons I was not a common but a
private carrier. [14] Consequently, the rights and obligations of VSI and NSC, including their respective liability
for damage to the cargo, are determined primarily by stipulations in their contract of private carriage or
charter party. [15] Recently, in Valenzuela Hardwood and Industrial Supply, Inc., vs. Court of Appeals and
Seven Brothers Shipping Corporation, [16] the Court ruled:
x x x in a contract of private carriage, the parties may freely stipulate their duties and obligations which
perforce would be binding on them. Unlike in a contract involving a common carrier, private carriage does
not involve the general public. Hence, the stringent provisions of the Civil Code on common carriers
protecting the general public cannot justifiably be applied to a ship transporting commercial goods as a
private carrier. Consequently, the public policy embodied therein is not contravened by stipulations in a
charter party that lessen or remove the protection given by law in contracts involving common carriers.[17]
Extent of VSIs Responsibility and Liability Over NSCs Cargo
It is clear from the parties Contract of Voyage Charter Hire, dated July 17, 1974, that VSI shall not be
responsible for losses except on proven willful negligence of the officers of the vessel. The NANYOZAI
Charter Party, which was incorporated in the parties contract of transportation, further provided that the
shipowner shall not be liable for loss of or damage to the cargo arising or resulting from unseaworthiness,
unless the same was caused by its lack of due diligence to make the vessel seaworthy or to ensure that the
same was properly manned, equipped and supplied, and to make the holds and all other parts of the vessel
in which cargo [was] carried, fit and safe for its reception, carriage and preservation. [18] The NANYOZAI
Charter Party also provided that [o]wners shall not be responsible for split, chafing and/or any damage
unless caused by the negligence or default of the master or crew.[19]
Burden of Proof
In view of the aforementioned contractual stipulations, NSC must prove that the damage to its
shipment was caused by VSIs willful negligence or failure to exercise due diligence in making MV Vlasons
Iseaworthy and fit for holding, carrying and safekeeping the cargo. Ineluctably, the burden of proof was
placed on NSC by the parties agreement.
This view finds further support in the Code of Commerce which pertinently provides:
Art. 361. Merchandise shall be transported at the risk and venture of the shipper, if the contrary has not been
expressly stipulated.
Therefore, the damage and impairment suffered by the goods during the transportation, due to fortuitous
event, force majeure, or the nature and inherent defect of the things, shall be for the account and risk of the
shipper.
The burden of proof of these accidents is on the carrier.
Art. 362. The carrier, however, shall be liable for damages arising from the cause mentioned in the preceding
article if proofs against him show that they occurred on account of his negligence or his omission to take the
precautions usually adopted by careful persons, unless the shipper committed fraud in the bill of lading,
making him to believe that the goods were of a class or quality different from what they really were.
Because the MV Vlasons I was a private carrier, the shipowners obligations are governed by the
foregoing provisions of the Code of Commerce and not by the Civil Code which, as a general rule, places
the prima facie presumption of negligence on a common carrier. It is a hornbook doctrine that:
In an action against a private carrier for loss of, or injury to, cargo, the burden is on the plaintiff to prove that
the carrier was negligent or unseaworthy, and the fact that the goods were lost or damaged while in the
carriers custody does not put the burden of proof on the carrier.
Since x x x a private carrier is not an insurer but undertakes only to exercise due care in the protection of the
goods committed to its care, the burden of proving negligence or a breach of that duty rests on plaintiff and
proof of loss of, or damage to, cargo while in the carriers possession does not cast on it the burden of
proving proper care and diligence on its part or that the loss occurred from an excepted cause in the
contract or bill of lading. However, in discharging the burden of proof, plaintiff is entitled to the benefit of
the presumptions and inferences by which the law aids the bailor in an action against a bailee, and since the
carrier is in a better position to know the cause of the loss and that it was not one involving its liability, the
law requires that it come forward with the information available to it, and its failure to do so warrants an
inference or presumption of its liability. However, such inferences and presumptions, while they may affect
the burden of coming forward with evidence, do not alter the burden of proof which remains on plaintiff,
and, where the carrier comes forward with evidence explaining the loss or damage, the burden of going
forward with the evidence is again on plaintiff.
Where the action is based on the shipowners warranty of seaworthiness, the burden of proving a breach
thereof and that such breach was the proximate cause of the damage rests on plaintiff, and proof that the
goods were lost or damaged while in the carriers possession does not cast on it the burden of proving
seaworthiness. x x x Where the contract of carriage exempts the carrier from liability for unseaworthiness
not discoverable by due diligence, the carrier has the preliminary burden of proving the exercise of due
diligence to make the vessel seaworthy. [20]
In the instant case, the Court of Appeals correctly found that NSC has not taken the correct position in
relation to the question of who has the burden of proof. Thus, in its brief (pp. 10-11), after citing Clause 10 and
Clause 12 of the NANYOZAI Charter Party (incidentally plaintiff-appellants [NSCs] interpretation of Clause 12
is not even correct), it argues that a careful examination of the evidence will show that VSI miserably failed
to comply with any of these obligations as if defendant-appellee [VSI] had the burden of proof.[21]
First Issue: Questions of Fact
Based on the foregoing, the determination of the following factual questions is manifestly relevant: (1)
whether VSI exercised due diligence in making MV Vlasons I seaworthy for the intended purpose under the
charter party; (2) whether the damage to the cargo should be attributed to the willful negligence of the
officers and crew of the vessel or of the stevedores hired by NSC; and (3) whether the rusting of the
tinplates was caused by its own sweat or by contact with seawater.
These questions of fact were threshed out and decided by the trial court, which had the firsthand
opportunity to hear the parties conflicting claims and to carefully weigh their respective evidence. The
findings of the trial court were subsequently affirmed by the Court of Appeals. Where the factual findings of
both the trial court and the Court of Appeals coincide, the same are binding on this Court. [22] We stress that,
subject to some exceptional instances, [23] only questions of law -- not questions of fact -- may be raised
before this Court in a petition for review under Rule 45 of the Rules of Court. After a thorough review of the
case at bar, we find no reason to disturb the lower courts factual findings, as indeed NSC has not successfully
proven the application of any of the aforecited exceptions.
Was MV Vlasons I Seaworthy?
In any event, the records reveal that VSI exercised due diligence to make the ship seaworthy and fit for
the carriage of NSCs cargo of steel and tinplates. This is shown by the fact that it was drydocked and
inspected by the Philippine Coast Guard before it proceeded to Iligan City for its voyage to Manila under the
contract of voyage charter hire. [24] The vessels voyage from Iligan to Manila was the vessels first voyage after
drydocking. The Philippine Coast Guard Station in Cebu cleared it as seaworthy, fitted and equipped; it met all
requirements for trading as cargo vessel. [25] The Court of Appeals itself sustained the conclusion of the trial
court that MV Vlasons I was seaworthy. We find no reason to modify or reverse this finding of both the trial
and the appellate courts.
Who Were Negligent: Seamen or Stevedores?
As noted earlier, the NSC had the burden of proving that the damage to the cargo was caused by the
negligence of the officers and the crew of MV Vlasons I in making their vessel seaworthy and fit for the
carriage of tinplates. NSC failed to discharge this burden.
Before us, NSC relies heavily on its claim that MV Vlasons I had used an old and torn tarpaulin or canvas
to cover the hatches through which the cargo was loaded into the cargo hold of the ship. It faults the Court
of Appeals for failing to consider such claim as an uncontroverted fact [26] and denies that MV Vlasons I was
equipped with new canvas covers in tandem with the old ones as indicated in the Marine Protest xxx. [27] We
disagree.
The records sufficiently support VSIs contention that the ship used the old tarpaulin, only in addition to
the new one used primarily to make the ships hatches watertight. The foregoing are clear from the marine
protest of the master of the MV Vlasons I, Antonio C. Dumlao, and the deposition of the ships boatswain,
Jose Pascua. The salient portions of said marine protest read:
x x x That the M/V VLASONS I departed Iligan City or or about 0730 hours of August 8, 1974, loaded with
approximately 2,487.9 tons of steel plates and tin plates consigned to National Steel Corporation; that
before departure, the vessel was rigged, fully equipped and cleared by the authorities; that on or about
August 9, 1974, while in the vicinity of the western part of Negros and Panay, we encountered very rough
seas and strong winds and Manila office was advised by telegram of the adverse weather conditions
encountered; that in the morning of August 10, 1974, the weather condition changed to worse and strong
winds and big waves continued pounding the vessel at her port side causing sea water to overflow on deck
andhatch (sic) covers and which caused the first layer of the canvass covering to give way while the new
canvass covering still holding on;
That the weather condition improved when we reached Dumali Point protected by Mindoro; that we
re-secured the canvass covering back to position; that in the afternoon of August 10, 1974, while entering
Maricaban Passage, we were again exposed to moderate seas and heavy rains; that while approaching
Fortune Island, we encountered again rough seas, strong winds and big waves which caused the same
canvass to give way and leaving the new canvass holding on;
xxx xxx xxx [28]

And the relevant portions of Jose Pascuas deposition are as follows:
Q: What is the purpose of the canvas cover?
A: So that the cargo would not be soaked with water.
A: And will you describe how the canvas cover was secured on the hatch opening?
WITNESS
A: It was placed flat on top of the hatch cover, with a little canvas flowing over the sides and we
place[d] a flat bar over the canvas on the side of the hatches and then we place[d] a stopper
so that the canvas could not be removed.
ATTY DEL ROSARIO
Q: And will you tell us the size of the hatch opening? The length and the width of the hatch
opening.
A: Forty-five feet by thirty-five feet, sir.
xxxxxxxxx
Q: How was the canvas supported in the middle of the hatch opening?
A: There is a hatch board.
ATTY DEL ROSARIO
Q: What is the hatch board made of?
A: It is made of wood, with a handle.
Q: And aside from the hatch board, is there any other material there to cover the hatch?
A: There is a beam supporting the hatch board.
Q: What is this beam made of?
A: It is made of steel, sir.
Q: Is the beam that was placed in the hatch opening covering the whole hatch opening?
A: No, sir.
Q: How many hatch beams were there placed across the opening?
A: There are five beams in one hatch opening.
ATTY DEL ROSARIO
Q: And on top of the beams you said there is a hatch board. How many pieces of wood are put on
top?
A: Plenty, sir, because there are several pieces on top of the hatch beam.
Q: And is there a space between the hatch boards?
A: There is none, sir.
Q: They are tight together?
A: Yes, sir.
Q: How tight?
A: Very tight, sir.
Q: Now, on top of the hatch boards, according to you, is the canvas cover. How many canvas
covers?
A: Two, sir. [29]
That due diligence was exercised by the officers and the crew of the MV Vlasons I was further
demonstrated by the fact that, despite encountering rough weather twice, the new tarpaulin did not give
way and the ships hatches and cargo holds remained waterproof. As aptly stated by the Court of Appeals,
xxx we find no reason not to sustain the conclusion of the lower court based on overwhelming evidence,
that the MV VLASONS I was seaworthy when it undertook the voyage on August 8, 1974 carrying on board
thereof plaintiff-appellants shipment of 1,677 skids of tinplates and 92 packages of hot rolled sheets or a
total of 1,769 packages from NSCs pier in Iligan City arriving safely at North Harbor, Port Area, Manila, on
August 12, 1974; xxx. [30]
Indeed, NSC failed to discharge its burden to show negligence on the part of the officers and the crew
of MV Vlasons I. On the contrary, the records reveal that it was the stevedores of NSC who were negligent in
unloading the cargo from the ship.
The stevedores employed only a tent-like material to cover the hatches when strong rains occasioned by
a passing typhoon disrupted the unloading of the cargo. This tent-like covering, however, was clearly
inadequate for keeping rain and seawater away from the hatches of the ship. Vicente Angliongto, an officer
of VSI, testified thus:
ATTY ZAMORA:
Q: Now, during your testimony on November 5, 1979, you stated on August 14 you went on board
the vessel upon notice from the National Steel Corporation in order to conduct the inspection
of the cargo. During the course of the investigation, did you chance to see the discharging
operation?
WITNESS:
A: Yes, sir, upon my arrival at the vessel, I saw some of the tinplates already discharged on the pier
but majority of the tinplates were inside the hall, all the hatches were opened.
Q: In connection with these cargoes which were unloaded, where is the place.
A: At the Pier.
Q: What was used to protect the same from weather?
ATTY LOPEZ:
We object, your Honor, this question was already asked. This particular matter . . . the transcript of
stenographic notes shows the same was covered in the direct examination.
ATTY ZAMORA:
Precisely, your Honor, we would like to go on detail, this is the serious part of the testimony.
COURT:
All right, witness may answer.
ATTY LOPEZ:
Q: What was used in order to protect the cargo from the weather?
A: A base of canvas was used as cover on top of the tin plates, and tents were built at the opening
of the hatches.
Q: You also stated that the hatches were already opened and that there were tents constructed at
the opening of the hatches to protect the cargo from the rain. Now, will you describe [to] the
Court the tents constructed.
A: The tents are just a base of canvas which look like a tent of an Indian camp raise[d] high at the
middle with the whole side separated down to the hatch, the size of the hatch and it is soaks
[sic] at the middle because of those weather and this can be used only to temporarily protect
the cargo from getting wet by rains.
Q: Now, is this procedure adopted by the stevedores of covering tents proper?
A: No, sir, at the time they were discharging the cargo, there was a typhoon passing by and the
hatch tent was not good enough to hold all of it to prevent the water soaking through the
canvas and enter the cargo.
Q: In the course of your inspection, Mr. Anglingto [sic], did you see in fact the water enter and soak
into the canvas and tinplates.
A: Yes, sir, the second time I went there, I saw it.
Q: As owner of the vessel, did you not advise the National Steel Corporation [of] the procedure
adopted by its stevedores in discharging the cargo particularly in this tent covering of the
hatches?
A: Yes, sir, I did the first time I saw it, I called the attention of the stevedores but the stevedores did
not mind at all, so, I called the attention of the representative of the National Steel but nothing
was done, just the same.Finally, I wrote a letter to them. [31]
NSC attempts to discredit the testimony of Angliongto by questioning his failure to complain
immediately about the stevedores negligence on the first day of unloading, pointing out that he wrote his
letter to petitioner only seven days later. [32] The Court is not persuaded. Angliongtos candid answer in his
aforequoted testimony satisfactorily explained the delay. Seven days lapsed because he first called the
attention of the stevedores, then the NSCs representative, about the negligent and defective procedure
adopted in unloading the cargo. This series of actions constitutes a reasonable response in accord with
common sense and ordinary human experience. Vicente Angliongto could not be blamed for calling the
stevedores attention first and then the NSCs representative on location before formally informing NSC of the
negligence he had observed, because he was not responsible for the stevedores or the unloading
operations. In fact, he was merely expressing concern for NSC which was ultimately responsible for the
stevedores it had hired and the performance of their task to unload the cargo.
We see no reason to reverse the trial and the appellate courts findings and conclusions on this point, viz:
In the THIRD assigned error, [NSC] claims that the trial court erred in finding that the stevedores hired by
NSC were negligent in the unloading of NSCs shipment. We do not think so. Such negligence according to
the trial court is evident in the stevedores hired by [NSC], not closing the hatch of MV VLASONS I when rains
occurred during the discharging of the cargo thus allowing rain water and seawater spray to enter the
hatches and to drift to and fall on the cargo. It was proven that the stevedores merely set up temporary
tents or canvas to cover the hatch openings when it rained during the unloading operations so that it would
be easier for them to resume work after the rains stopped by just removing said tents or canvass. It has also
been shown that on August 20, 1974, VSI President Vicente Angliongto wrote [NSC] calling attention to the
manner the stevedores hired by [NSC] were discharging the cargo on rainy days and the improper closing of
the hatches which allowed continuous heavy rain water to leak through and drip to the tinplates covers and
[Vicente Angliongto] also suggesting that due to four (4) days continuos rains with strong winds that the
hatches be totally closed down and covered with canvas and the hatch tents lowered. (Exh 13). This letter
was received by [NSC] on 22 August 1974 while discharging operations were still going on (Exhibit 13-A). [33]
The fact that NSC actually accepted and proceeded to remove the cargo from the ship during
unfavorable weather will not make VSI liable for any damage caused thereby. In passing, it may be noted
that the NSC may seek indemnification, subject to the laws on prescription, from the stevedoring company
at fault in the discharge operations. A stevedore company engaged in discharging cargo xxx has the duty to
load the cargo xxx in a prudent manner, and it is liable for injury to, or loss of, cargo caused by its negligence
xxx and where the officers and members and crew of the vessel do nothing and have no responsibility in the
discharge of cargo by stevedores xxx the vessel is not liable for loss of, or damage to, the cargo caused by
the negligence of the stevedores xxx [34] as in the instant case.
Do Tinplates Sweat?
The trial court relied on the testimony of Vicente Angliongto in finding that xxx tinplates sweat by
themselves when packed even without being in contact with water from outside especially when the
weather is bad or raining xxx. [35] The Court of Appeals affirmed the trial courts finding.
A discussion of this issue appears inconsequential and unnecessary. As previously discussed, the
damage to the tinplates was occasioned not by airborne moisture but by contact with rain and seawater
which the stevedores negligently allowed to seep in during the unloading.
Second Issue: Effect of NSCs Failure to Insure the Cargo
The obligation of NSC to insure the cargo stipulated in the Contract of Voyage Charter Hire is totally
separate and distinct from the contractual or statutory responsibility that may be incurred by VSI for damage
to the cargo caused by the willful negligence of the officers and the crew of MV Vlasons I. Clearly, therefore,
NSCs failure to insure the cargo will not affect its right, as owner and real party in interest, to file an action
against VSI for damages caused by the latters willful negligence. We do not find anything in the charter party
that would make the liability of VSI for damage to the cargo contingent on or affected in any manner by
NSCs obtaining an insurance over the cargo.
Third Issue: Admissibility of Certificates Proving Seaworthiness
NSCs contention that MV Vlasons I was not seaworthy is anchored on the alleged inadmissibility of the
certificates of seaworthiness offered in evidence by VSI. The said certificates include the following:
1. Certificate of Inspection of the Philippine Coast Guard at Cebu
2. Certificate of Inspection from the Philippine Coast Guard
3. International Load Line Certificate from the Philippine Coast Guard
4. Coastwise License from the Board of Transportation
5. Certificate of Approval for Conversion issued by the Bureau of Customs. [36]
NSC argues that the certificates are hearsay for not having been presented in accordance with the Rules
of Court. It points out that Exhibits 3, 4 and 11 allegedly are not written records or acts of public officers;
while Exhibits 5, 6, 7, 8, 9, 11 and 12 are not evidenced by official publications or certified true copies as
required by Sections 25 and 26, Rule 132, of the Rules of Court. [37]
After a careful examination of these exhibits, the Court rules that Exhibits 3, 4, 5, 6, 7, 8, 9 and 12 are
inadmissible, for they have not been properly offered as evidence. Exhibits 3 and 4 are certificates issued by
private parties, but they have not been proven by one who saw the writing executed, or by evidence of the
genuineness of the handwriting of the maker, or by a subscribing witness. Exhibits 5, 6, 7, 8, 9, and 12 are
photocopies, but their admission under the best evidence rule have not been demonstrated.
We find, however, that Exhibit 11 is admissible under a well-settled exception to the hearsay rule per
Section 44 of Rule 130 of the Rules of Court, which provides that (e)ntries in official records made in the
performance of a duty by a public officer of the Philippines, or by a person in the performance of a duty
specially enjoined by law, are prima facie evidence of the facts therein stated. [38] Exhibit 11 is an original
certificate of the Philippine Coast Guard in Cebu issued by Lieutenant Junior Grade Noli C. Flores to the effect
that the vessel VLASONS I was drydocked x x x and PCG Inspectors were sent on board for inspection x x
x. After completion of drydocking and duly inspected by PCG Inspectors, the vessel VLASONS I, a cargo
vessel, is in seaworthy condition, meets all requirements, fitted and equipped for trading as a cargo vessel
was cleared by the Philippine Coast Guard and sailed for Cebu Port on July 10, 1974. (sic) NSCs claim,
therefore, is obviously misleading and erroneous.
At any rate, it should be stressed that that NSC has the burden of proving that MV Vlasons I was not
seaworthy. As observed earlier, the vessel was a private carrier and, as such, it did not have the obligation of
a common carrier to show that it was seaworthy. Indeed, NSC glaringly failed to discharge its duty of proving
the willful negligence of VSI in making the ship seaworthy resulting in damage to its cargo. Assailing the
genuineness of the certificate of seaworthiness is not sufficient proof that the vessel was not seaworthy.
Fourth Issue: Demurrage and Attorneys Fees
The contract of voyage charter hire provides inter alia:

xxx xxx xxx
2. Cargo: Full cargo of steel products of not less than 2,500 MT, 10% more or less at Masters option.
xxx xxx xxx
6. Loading/Discharging Rate : 750 tons per WWDSHINC.
7. Demurrage/Dispatch : P8,000.00/P4,000.00 per day. [39]
The Court defined demurrage in its strict sense as the compensation provided for in the contract of
affreightment for the detention of the vessel beyond the laytime or that period of time agreed on for
loading and unloading of cargo. [40] It is given to compensate the shipowner for the nonuse of the vessel. On
the other hand, the following is well-settled:
Laytime runs according to the particular clause of the charter party. x x x If laytime is expressed in running
days, this means days when the ship would be run continuously, and holidays are not excepted. A
qualification of weather permitting excepts only those days when bad weather reasonably prevents the
work contemplated. [41]
In this case, the contract of voyage charter hire provided for a four-day laytime; it also qualified laytime
as WWDSHINC or weather working days Sundays and holidays included. [42] The running of laytime was thus
made subject to the weather, and would cease to run in the event unfavorable weather interfered with the
unloading of cargo. [43] Consequently, NSC may not be held liable for demurrage as the four-day laytime
allowed it did not lapse, having been tolled by unfavorable weather condition in view of the WWDSHINC
qualification agreed upon by the parties. Clearly, it was error for the trial court and the Court of Appeals to
have found and affirmed respectively that NSC incurred eleven days of delay in unloading the cargo. The trial
court arrived at this erroneous finding by subtracting from the twelve days, specifically August 13, 1974 to
August 24, 1974, the only day of unloading unhampered by unfavorable weather or rain which was August 22,
1974. Based on our previous discussion, such finding is a reversible error. As mentioned, the respondent
appellate court also erred in ruling that NSC was liable to VSI for demurrage, even if it reduced the amount
by half.
Attorneys Fees
VSI assigns as error of law the Court of Appeals deletion of the award of attorneys fees. We
disagree. While VSI was compelled to litigate to protect its rights, such fact by itself will not justify an award
of attorneys fees under Article 2208 of the Civil Code when x x x no sufficient showing of bad faith would be
reflected in a partys persistence in a case other than an erroneous conviction of the righteousness of his
cause x x x. [44] Moreover, attorneys fees may not be awarded to a party for the reason alone that the
judgment rendered was favorable to the latter, as this is tantamount to imposing a premium on ones right to
litigate or seek judicial redress of legitimate grievances. [45]
Epilogue
At bottom, this appeal really hinges on a factual issue: when, how and who caused the damage to the
cargo? Ranged against NSC are two formidable truths. First, both lower courts found that such damage was
brought about during the unloading process when rain and seawater seeped through the cargo due to the
fault or negligence of the stevedores employed by it. Basic is the rule that factual findings of the trial court,
when affirmed by the Court of Appeals, are binding on the Supreme Court. Although there are settled
exceptions, NSC has not satisfactorily shown that this case is one of them. Second, the agreement between
the parties -- the Contract of Voyage Charter Hire -- placed the burden of proof for such loss or damage upon
the shipper, not upon the shipowner. Such stipulation, while disadvantageous to NSC, is valid because the
parties entered into a contract of private charter, not one of common carriage. Basic too is the doctrine that
courts cannot relieve a party from the effects of a private contract freely entered into, on the ground that it
is allegedly one-sided or unfair to the plaintiff. The charter party is a normal commercial contract and its
stipulations are agreed upon in consideration of many factors, not the least of which is the transport price
which is determined not only by the actual costs but also by the risks and burdens assumed by the shipper in
regard to possible loss or damage to the cargo. In recognition of such factors, the parties even stipulated
that the shipper should insure the cargo to protect itself from the risks it undertook under the charter
party. That NSC failed or neglected to protect itself with such insurance should not adversely affect VSI,
which had nothing to do with such failure or neglect.
WHEREFORE, premises considered, the instant consolidated petitions are hereby DENIED. The
questioned Decision of the Court of Appeals is AFFIRMED with the MODIFICATION that the demurrage
awarded to VSI is deleted. No pronouncement as to costs.
SO ORDERED.
1.8 Sps Cruz v. Holiday

Spouses Dante and Leonora Cruz (petitioners) lodged a Complaint on January 25, 20011 against Sun Holidays,
Inc. (respondent) with the Regional Trial Court (RTC) of Pasig City for damages arising from the death of their son
Ruelito C. Cruz (Ruelito) who perished with his wife on September 11, 2000 on board the boat M/B Coco Beach
III that capsized en route to Batangas from Puerto Galera, Oriental Mindoro where the couple had stayed at
Coco Beach Island Resort (Resort) owned and operated by respondent.
The stay of the newly wed Ruelito and his wife at the Resort from September 9 to 11, 2000 was by virtue of a
tour package-contract with respondent that included transportation to and from the Resort and the point of
departure in Batangas.
Miguel C. Matute (Matute),2 a scuba diving instructor and one of the survivors, gave his account of the incident
that led to the filing of the complaint as follows:
Matute stayed at the Resort from September 8 to 11, 2000. He was originally scheduled to leave the Resort in
the afternoon of September 10, 2000, but was advised to stay for another night because of strong winds and
heavy rains.
On September 11, 2000, as it was still windy, Matute and 25 other Resort guests including petitioners son and
his wife trekked to the other side of the Coco Beach mountain that was sheltered from the wind where they
boarded M/B Coco Beach III, which was to ferry them to Batangas.
Shortly after the boat sailed, it started to rain. As it moved farther away from Puerto Galera and into the open
seas, the rain and wind got stronger, causing the boat to tilt from side to side and the captain to step forward to
the front, leaving the wheel to one of the crew members.
The waves got more unwieldy. After getting hit by two big waves which came one after the other, M/B Coco
Beach III capsized putting all passengers underwater.
The passengers, who had put on their life jackets, struggled to get out of the boat. Upon seeing the captain,
Matute and the other passengers who reached the surface asked him what they could do to save the people
who were still trapped under the boat. The captain replied "Iligtas niyo na lang ang sarili niyo" (Just save
yourselves).
Help came after about 45 minutes when two boats owned by Asia Divers in Sabang, Puerto Galera passed by the
capsized M/B Coco Beach III. Boarded on those two boats were 22 persons, consisting of 18 passengers and four
crew members, who were brought to Pisa Island. Eight passengers, including petitioners son and his wife, died
during the incident.
At the time of Ruelitos death, he was 28 years old and employed as a contractual worker for Mitsui Engineering
& Shipbuilding Arabia, Ltd. in Saudi Arabia, with a basic monthly salary of $900.3
Petitioners, by letter of October 26, 2000,4 demanded indemnification from respondent for the death of their
son in the amount of at least 4,000,000.
Replying, respondent, by letter dated November 7, 2000,5 denied any responsibility for the incident which it
considered to be a fortuitous event. It nevertheless offered, as an act of commiseration, the amount of 10,000
to petitioners upon their signing of a waiver.
As petitioners declined respondents offer, they filed the Complaint, as earlier reflected, alleging that
respondent, as a common carrier, was guilty of negligence in allowing M/B Coco Beach III to sail notwithstanding
storm warning bulletins issued by the Philippine Atmospheric, Geophysical and Astronomical Services
Administration (PAGASA) as early as 5:00 a.m. of September 11, 2000.6
In its Answer,7 respondent denied being a common carrier, alleging that its boats are not available to the
general public as they only ferry Resort guests and crew members. Nonetheless, it claimed that it exercised the
utmost diligence in ensuring the safety of its passengers; contrary to petitioners allegation, there was no storm
on September 11, 2000 as the Coast Guard in fact cleared the voyage; and M/B Coco Beach III was not filled to
capacity and had sufficient life jackets for its passengers. By way of Counterclaim, respondent alleged that it is
entitled to an award for attorneys fees and litigation expenses amounting to not less than 300,000.
Carlos Bonquin, captain of M/B Coco Beach III, averred that the Resort customarily requires four conditions to
be met before a boat is allowed to sail, to wit: (1) the sea is calm, (2) there is clearance from the Coast Guard, (3)
there is clearance from the captain and (4) there is clearance from the Resorts assistant manager.8 He added
that M/B Coco Beach III met all four conditions on September 11, 2000,9 but a subasco or squall, characterized
by strong winds and big waves, suddenly occurred, causing the boat to capsize.10
By Decision of February 16, 2005,11 Branch 267 of the Pasig RTC dismissed petitioners Complaint and
respondents Counterclaim.
Petitioners Motion for Reconsideration having been denied by Order dated September 2, 2005,12 they
appealed to the Court of Appeals.
By Decision of August 19, 2008,13 the appellate court denied petitioners appeal, holding, among other things,
that the trial court correctly ruled that respondent is a private carrier which is only required to observe ordinary
diligence; that respondent in fact observed extraordinary diligence in transporting its guests on board M/B Coco
Beach III; and that the proximate cause of the incident was a squall, a fortuitous event.
Petitioners Motion for Reconsideration having been denied by Resolution dated January 16, 2009,14 they filed
the present Petition for Review.15
Petitioners maintain the position they took before the trial court, adding that respondent is a common carrier
since by its tour package, the transporting of its guests is an integral part of its resort business. They inform that
another division of the appellate court in fact held respondent liable for damages to the other survivors of the
incident.
Upon the other hand, respondent contends that petitioners failed to present evidence to prove that it is a
common carrier; that the Resorts ferry services for guests cannot be considered as ancillary to its business as no
income is derived therefrom; that it exercised extraordinary diligence as shown by the conditions it had imposed
before allowing M/B Coco Beach III to sail; that the incident was caused by a fortuitous event without any
contributory negligence on its part; and that the other case wherein the appellate court held it liable for
damages involved different plaintiffs, issues and evidence.16
The petition is impressed with merit.
Petitioners correctly rely on De Guzman v. Court of Appeals17 in characterizing respondent as a common carrier.
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 (in local idiom, as "a sideline").
Article 1732 also carefully avoids making any distinction between a person or enterprise offering transportation
service on a regular or scheduled basis and one offering such service on an occasional, episodic or unscheduled
basis. Neither does Article 1732 distinguish between a carrier offering its services to the "general public," i.e.,
the general community or population, and one who offers services or solicits business only from a narrow
segment of the general population. We think that Article 1733 deliberately refrained from making such
distinctions.
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:
. . . every person that now or hereafter may own, operate, manage, or control in the Philippines, for hire or
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 . . .18 (emphasis and underscoring supplied.)
Indeed, respondent is a common carrier. Its ferry services are so intertwined with its main business as to be
properly considered ancillary thereto. The constancy of respondents ferry services in its resort operations is
underscored by its having its own Coco Beach boats. And the tour packages it offers, which include the ferry
services, may be availed of by anyone who can afford to pay the same. These services are thus available to the
public.
That respondent does not charge a separate fee or fare for its ferry services is of no moment. It would be
imprudent to suppose that it provides said services at a loss. The Court is aware of the practice of beach resort
operators offering tour packages to factor the transportation fee in arriving at the tour package price. That
guests who opt not to avail of respondents ferry services pay the same amount is likewise inconsequential.
These guests may only be deemed to have overpaid.
As De Guzman instructs, Article 1732 of the Civil Code defining "common carriers" has deliberately refrained
from making distinctions on whether the carrying of persons or goods is the carriers principal business, whether
it is offered on a regular basis, or whether it is offered to the general public. The intent of the law is thus to not
consider such distinctions. Otherwise, there is no telling how many other distinctions may be concocted by
unscrupulous businessmen engaged in the carrying of persons or goods in order to avoid the legal obligations
and liabilities of common carriers.
Under the Civil Code, common carriers, from the nature of their business and for reasons of public policy, are
bound to observe extraordinary diligence for the safety of the passengers transported by them, according to all
the circumstances of each case.19 They are bound to carry the passengers safely as far as human care and
foresight can provide, using the utmost diligence of very cautious persons, with due regard for all the
circumstances.20
When a passenger dies or is injured in the discharge of a contract of carriage, it is presumed that the common
carrier is at fault or negligent. In fact, there is even no need for the court to make an express finding of fault or
negligence on the part of the common carrier. This statutory presumption may only be overcome by evidence
that the carrier exercised extraordinary diligence.21
Respondent nevertheless harps on its strict compliance with the earlier mentioned conditions of voyage before
it allowed M/B Coco Beach III to sail on September 11, 2000. Respondents position does not impress.
The evidence shows that PAGASA issued 24-hour public weather forecasts and tropical cyclone warnings for
shipping on September 10 and 11, 2000 advising of tropical depressions in Northern Luzon which would also
affect the province of Mindoro.22 By the testimony of Dr. Frisco Nilo, supervising weather specialist of PAGASA,
squalls are to be expected under such weather condition.23
A very cautious person exercising the utmost diligence would thus not brave such stormy weather and put other
peoples lives at risk. The extraordinary diligence required of common carriers demands that they take care of
the goods or lives entrusted to their hands as if they were their own. This respondent failed to do.
Respondents insistence that the incident was caused by a fortuitous event does not impress either.
The elements of a "fortuitous event" are: (a) the cause of the unforeseen and unexpected occurrence, or the
failure of the debtors to comply with their obligations, must have been independent of human will; (b) the event
that constituted the caso fortuito must have been impossible to foresee or, if foreseeable, impossible to avoid;
(c) the occurrence must have been such as to render it impossible for the debtors to fulfill their obligation in a
normal manner; and (d) the obligor must have been free from any participation in the aggravation of the
resulting injury to the creditor.24
To fully free a common carrier from any liability, the fortuitous event must have been the proximate and only
causeof the loss. And it should have exercised due diligence to prevent or minimize the loss before, during and
after the occurrence of the fortuitous event.25
Respondent cites the squall that occurred during the voyage as the fortuitous event that overturned M/B Coco
Beach III. As reflected above, however, the occurrence of squalls was expected under the weather condition of
September 11, 2000. Moreover, evidence shows that M/B Coco Beach III suffered engine trouble before it
capsized and sank.26 The incident was, therefore, not completely free from human intervention.
The Court need not belabor how respondents evidence likewise fails to demonstrate that it exercised due
diligence to prevent or minimize the loss before, during and after the occurrence of the squall.
Article 176427 vis--vis Article 220628 of the Civil Code holds the common carrier in breach of its contract of
carriage that results in the death of a passenger liable to pay the following: (1) indemnity for death, (2)
indemnity for loss of earning capacity and (3) moral damages.
Petitioners are entitled to indemnity for the death of Ruelito which is fixed at 50,000.29
As for damages representing unearned income, the formula for its computation is:
Net Earning Capacity = life expectancy x (gross annual income - reasonable and necessary living expenses).
Life expectancy is determined in accordance with the formula:
2 / 3 x [80 age of deceased at the time of death]30
The first factor, i.e., life expectancy, is computed by applying the formula (2/3 x [80 age at death]) adopted in
the American Expectancy Table of Mortality or the Actuarial of Combined Experience Table of Mortality.31
The second factor is computed by multiplying the life expectancy by the net earnings of the deceased, i.e., the
total earnings less expenses necessary in the creation of such earnings or income and less living and other
incidental expenses.32 The loss is not equivalent to the entire earnings of the deceased, but only such portion as
he would have used to support his dependents or heirs. Hence, to be deducted from his gross earnings are the
necessary expenses supposed to be used by the deceased for his own needs.33
In computing the third factor necessary living expense, Smith Bell Dodwell Shipping Agency Corp. v.
Borja34teaches that when, as in this case, there is no showing that the living expenses constituted the smaller
percentage of the gross income, the living expenses are fixed at half of the gross income.
Applying the above guidelines, the Court determines Ruelito's life expectancy as follows:
2/3 x [80 - age of deceased at the time of death]

Life expectancy = 2/3 x [80 - 28]
2/3 x [52]
Life expectancy = 35
Documentary evidence shows that Ruelito was earning a basic monthly salary of $90035 which, when converted
to Philippine peso applying the annual average exchange rate of $1 = 44 in 2000,36 amounts to 39,600.
Ruelitos net earning capacity is thus computed as follows:
Net = life expectancy x (gross annual income - reasonable and necessary living expenses).
Earning = 35 x (475,200 - 237,600)
Capacity = 35 x (237,600)
Net
Earning = 8,316,000
Capacity
Respecting the award of moral damages, since respondent common carriers breach of contract of carriage
resulted in the death of petitioners son, following Article 1764 vis--vis Article 2206 of the Civil Code,
petitioners are entitled to moral damages.
Since respondent failed to prove that it exercised the extraordinary diligence required of common carriers, it is
presumed to have acted recklessly, thus warranting the award too of exemplary damages, which are granted in
contractual obligations if the defendant acted in a wanton, fraudulent, reckless, oppressive or malevolent
manner.37
Under the circumstances, it is reasonable to award petitioners the amount of 100,000 as moral damages and
100,000 as exemplary damages.381avvphi1
Pursuant to Article 220839 of the Civil Code, attorney's fees may also be awarded where exemplary damages are
awarded. The Court finds that 10% of the total amount adjudged against respondent is reasonable for the
purpose.
Finally, Eastern Shipping Lines, Inc. v. Court of Appeals40 teaches that when an obligation, regardless of its
source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts is breached, the contravenor can be held
liable for payment of interest in the concept of actual and compensatory damages, subject to the following
rules, to wit
1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance
of money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest
due shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate
of interest shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial demand
under and subject to the provisions of Article 1169 of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount
of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest,
however, shall be adjudged on unliquidated claims or damages except when or until the demand can be
established with reasonable certainty. Accordingly, where the demand is established with reasonable certainty,
the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code)
but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall
begin to run only from the date the judgment of the court is made (at which time the quantification of damages
may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest
shall, in any case, be on the amount finally adjudged.
3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal
interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum from such
finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of
credit. (emphasis supplied).
Since the amounts payable by respondent have been determined with certainty only in the present petition, the
interest due shall be computed upon the finality of this decision at the rate of 12% per annum until satisfaction,
in accordance with paragraph number 3 of the immediately cited guideline in Easter Shipping Lines, Inc.
WHEREFORE, the Court of Appeals Decision of August 19, 2008 is REVERSED and SET ASIDE. Judgment is
rendered in favor of petitioners ordering respondent to pay petitioners the following: (1) 50,000 as indemnity
for the death of Ruelito Cruz; (2) 8,316,000 as indemnity for Ruelitos loss of earning capacity; (3) 100,000 as
moral damages; (4) 100,000 as exemplary damages; (5) 10% of the total amount adjudged against respondent
as attorneys fees; and (6) the costs of suit.
The total amount adjudged against respondent shall earn interest at the rate of 12% per annum computed from
the finality of this decision until full payment. SO ORDERED.
Characteristics
Broader concept
Ancillary business
Limited clientele
Means of transportation
Article 1732 of the New Civil Code
National Steel Corporation v. CA
a. Asia Lighterage and Shipping, Inc. v. CA, G.R. No. 147246, August 19. 2003
On appeal is the Court of Appeals May 11, 2000 Decision in CA-G.R. CV No.
[1]
49195 and February 21, 2001 Resolution affirming with modification the April 6,
[2]
1994 Decision of the Regional Trial Court of Manila which found petitioner liable to
[3]
pay private respondent the amount of indemnity and attorney's fees.

First, the facts.
On June 13, 1990, 3,150 metric tons of Better Western White Wheat in bulk,
valued at US$423,192.35 was shipped by Marubeni American Corporation of
[4]
Portland, Oregon on board the vessel M/V NEO CYMBIDIUM V-26 for delivery to the
consignee, General Milling Corporation in Manila, evidenced by Bill of Lading No.
PTD/Man-4. The shipment was insured by the private respondent Prudential
[5]
Guarantee and Assurance, Inc. against loss or damage for P14,621,771.75 under
Marine Cargo Risk Note RN 11859/90. [6]
On July 25, 1990, the carrying vessel arrived in Manila and the cargo was
transferred to the custody of the petitioner Asia Lighterage and Shipping, Inc. The
petitioner was contracted by the consignee as carrier to deliver the cargo to
consignee's warehouse at Bo. Ugong, Pasig City.
On August 15, 1990, 900 metric tons of the shipment was loaded on barge PSTSI
III, evidenced by Lighterage Receipt No. 0364 for delivery to consignee. The cargo
[7]
did not reach its destination.

It appears that on August 17, 1990, the transport of said cargo was suspended
due to a warning of an incoming typhoon. On August 22, 1990, the petitioner
proceeded to pull the barge to Engineering Island off Baseco to seek shelter from the
approaching typhoon. PSTSI III was tied down to other barges which arrived ahead
of it while weathering out the storm that night. A few days after, the barge developed
a list because of a hole it sustained after hitting an unseen protuberance underneath
the water. The petitioner filed a Marine Protest on August 28, 1990. It likewise [8]
secured the services of Gaspar Salvaging Corporation which refloated the

barge. The hole was then patched with clay and cement.
[9]
The barge was then towed to ISLOFF terminal before it finally headed towards
the consignee's wharf on September 5, 1990. Upon reaching the Sta. Mesa spillways,
the barge again ran aground due to strong current. To avoid the complete sinking of
the barge, a portion of the goods was transferred to three other barges. [10]
The next day, September 6, 1990, the towing bits of the barge broke. It sank
completely, resulting in the total loss of the remaining cargo. A second Marine
[11]
Protest was filed on September 7, 1990. [12]
On September 14, 1990, a bidding was conducted to dispose of the damaged

wheat retrieved and loaded on the three other barges. The total proceeds from the
[13]
sale of the salvaged cargo was P201,379.75. [14]
On the same date, September 14, 1990, consignee sent a claim letter to the
petitioner, and another letter dated September 18, 1990 to the private respondent for
the value of the lost cargo.
On January 30, 1991, the private respondent indemnified the consignee in the
amount of P4,104,654.22. Thereafter, as subrogee, it sought recovery of said
[15]
amount from the petitioner, but to no avail.

On July 3, 1991, the private respondent filed a complaint against the petitioner for
recovery of the amount of indemnity, attorney's fees and cost of suit. Petitioner filed
[16]
its answer with counterclaim. [17]
The Regional Trial Court ruled in favor of the private respondent. The dispositive
portion of its Decision states:
WHEREFORE, premises considered, judgment is hereby rendered ordering defendant Asia

Lighterage & Shipping, Inc. liable to pay plaintiff Prudential Guarantee & Assurance Co.,
Inc. the sum of P4,104,654.22 with interest from the date complaint was filed on July 3,
1991 until fully satisfied plus 10% of the amount awarded as and for attorney's
fees. Defendant's counterclaim is hereby DISMISSED. With costs against defendant. [18]
Petitioner appealed to the Court of Appeals insisting that it is not a common

carrier. The appellate court affirmed the decision of the trial court with
modification. The dispositive portion of its decision reads:
WHEREFORE, the decision appealed from is hereby AFFIRMED with modification in the
sense that the salvage value of P201,379.75 shall be deducted from the amount
of P4,104,654.22. Costs against appellant.
SO ORDERED.
Petitioners Motion for Reconsideration dated June 3, 2000 was likewise denied
by the appellate court in a Resolution promulgated on February 21, 2001.
Hence, this petition. Petitioner submits the following errors allegedly committed
by the appellate court, viz: [19]
(1) THE COURT OF APPEALS DECIDED THE CASE A QUO IN A WAY NOT IN ACCORD
WITH LAW AND/OR WITH THE APPLICABLE DECISIONS OF THE SUPREME COURT
WHEN IT HELD THAT PETITIONER IS A COMMON CARRIER.
WHEN IT AFFIRMED THE FINDING OF THE LOWER COURT A QUO THAT ON THE
BASIS OF THE PROVISIONS OF THE CIVIL CODE APPLICABLE TO COMMON
CARRIERS, THE LOSS OF THE CARGO IS, THEREFORE, BORNE BY THE CARRIER
IN ALL CASES EXCEPT IN THE FIVE (5) CASES ENUMERATED.
WHEN IT EFFECTIVELY CONCLUDED THAT PETITIONER FAILED TO EXERCISE
DUE DILIGENCE AND/OR WAS NEGLIGENT IN ITS CARE AND CUSTODY OF THE
CONSIGNEES CARGO.
The issues to be resolved are:

(1) Whether the petitioner is a common carrier; and,
(2) Assuming the petitioner is a common carrier, whether it exercised
extraordinary diligence in its care and custody of the consignees cargo.
On the first issue, we rule that petitioner is a common carrier.
Article 1732 of the Civil Code defines common carriers as 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.
Petitioner contends that it is not a common carrier but a private carrier. Allegedly,
it has no fixed and publicly known route, maintains no terminals, and issues no
tickets. It points out that it is not obliged to carry indiscriminately for any person. It is
not bound to carry goods unless it consents. In short, it does not hold out its services
to the general public. [20]
We disagree.
In De Guzman vs. Court of Appeals, we held that the definition of common
[21]
carriers in Article 1732 of the Civil Code 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. We also did not distinguish 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. Further, we ruled that Article 1732 does not distinguish between a carrier
offering its services to the general public, and one who offers services or solicits
business only from a narrow segment of the general population.
In the case at bar, the principal business of the petitioner is that of lighterage and
drayage and it offers its barges to the public for carrying or transporting goods by
[22]
water for compensation. Petitioner is clearly a common carrier. In De

Guzman, supra, we considered private respondent Ernesto Cendaa to be a
[23]
common carrier even if his principal occupation was not the carriage of goods for
others, but that of buying used bottles and scrap metal in Pangasinan and selling
these items in Manila.
We therefore hold that petitioner is a common carrier whether its carrying of
goods is done on an irregular rather than scheduled manner, and with an only limited
clientele. A common carrier need not have fixed and publicly known routes. Neither
does it have to maintain terminals or issue tickets.
To be sure, petitioner fits the test of a common carrier as laid down in Bascos vs.
Court of Appeals. The test to determine a common carrier is whether the given
[24]
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. In the case at bar, the petitioner admitted that it is engaged in
[25]
the business of shipping and lighterage, offering its barges to the public, despite its
[26]
limited clientele for carrying or transporting goods by water for compensation. [27]
On the second issue, we uphold the findings of the lower courts that petitioner
failed to exercise extraordinary diligence in its care and custody of the consignees
goods.
Common carriers are bound to observe extraordinary diligence in the vigilance
over the goods transported by them. They are presumed to have been at fault or to
[28]
have acted negligently if the goods are lost, destroyed or deteriorated. To [29]
overcome the presumption of negligence in the case of loss, destruction or

deterioration of the goods, the common carrier must prove that it exercised
extraordinary diligence. There are, however, exceptions to this rule. Article 1734 of
the Civil Code enumerates the instances when the presumption of negligence does
not attach:
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:
In the case at bar, the barge completely sank after its towing bits broke, resulting
in the total loss of its cargo. Petitioner claims that this was caused by a typhoon,
hence, it should not be held liable for the loss of the cargo. However, petitioner failed
to prove that the typhoon is the proximate and only cause of the loss of the goods,
and that it has exercised due diligence before, during and after the occurrence of the
typhoon to prevent or minimize the loss. The evidence show that, even before the
[30]
towing bits of the barge broke, it had already previously sustained damage when it hit
a sunken object while docked at the Engineering Island. It even suffered a
hole. Clearly, this could not be solely attributed to the typhoon. The partly-submerged
vessel was refloated but its hole was patched with only clay and cement. The patch
work was merely a provisional remedy, not enough for the barge to sail safely. Thus,
when petitioner persisted to proceed with the voyage, it recklessly exposed the cargo
to further damage. A portion of the cross-examination of Alfredo Cunanan,
cargo-surveyor of Tan-Gatue Adjustment Co., Inc., states:
CROSS-EXAMINATION BY ATTY. DONN LEE: [31]
xxxxxxxxx
q - Can you tell us what else transpired after that incident?
a - After the first accident, through the initiative of the barge owners, they tried to pull out the
barge from the place of the accident, and bring it to the anchor terminal for safety, then
after deciding if the vessel is stabilized, they tried to pull it to the consignees warehouse,
now while on route another accident occurred, now this time the barge totally hitting
something in the course.
q - You said there was another accident, can you tell the court the nature of the second
accident?
a - The sinking, sir.
q - Can you tell the nature . . . can you tell the court, if you know what caused the sinking?
a - Mostly it was related to the first accident because there was already a whole (sic) on the
bottom part of the barge.
xxxxxxxxx
This is not all. Petitioner still headed to the consignees wharf despite knowledge
of an incoming typhoon. During the time that the barge was heading towards the
consignee's wharf on September 5, 1990, typhoon Loleng has already entered the
Philippine area of responsibility. A part of the testimony of Robert Boyd, Cargo
[32]
Operations Supervisor of the petitioner, reveals:
DIRECT-EXAMINATION BY ATTY. LEE: [33]
xxxxxxxxx
q - Now, Mr. Witness, did it not occur to you it might be safer to just allow the Barge to lie where
she was instead of towing it?
a - Since that time that the Barge was refloated, GMC (General Milling Corporation, the
consignee) as I have said was in a hurry for their goods to be delivered at their Wharf since
they needed badly the wheat that was loaded in PSTSI-3. It was needed badly by the
consignee.
q - And this is the reason why you towed the Barge as you did?
a - Yes, sir.
xxxxxxxxx
CROSS-EXAMINATION BY ATTY. IGNACIO: [34]
xxxxxxxxx
q - And then from ISLOFF Terminal you proceeded to the premises of the
GMC? Am I correct?
a - The next day, in the morning, we hired for additional two (2) tugboats as I have
stated.
q - Despite of the threats of an incoming typhoon as you testified a while ago?
a - It is already in an inner portion of Pasig River. The typhoon would be coming and
it would be dangerous if we are in the vicinity of Manila Bay.
q - But the fact is, the typhoon was incoming? Yes or no?
a - Yes.
q - And yet as a standard operating procedure of your Company, you have to secure
a sort of Certification to determine the weather condition, am I correct?
a - Yes, sir.
q - So, more or less, you had the knowledge of the incoming typhoon, right?
a - Yes, sir.
q - And yet you proceeded to the premises of the GMC?
a - ISLOFF Terminal is far from Manila Bay and anytime even with the typhoon if
you are already inside the vicinity or inside Pasig entrance, it is a safe place to
tow upstream.
Accordingly, the petitioner cannot invoke the occurrence of the typhoon as force
majeure to escape liability for the loss sustained by the private respondent. Surely,
meeting a typhoon head-on falls short of due diligence required from a common
carrier. More importantly, the officers/employees themselves of petitioner admitted
that when the towing bits of the vessel broke that caused its sinking and the total loss
of the cargo upon reaching the Pasig River, it was no longer affected by the
typhoon. The typhoon then is not the proximate cause of the loss of the cargo; a
human factor, i.e., negligence had intervened.
IN VIEW THEREOF, the petition is DENIED. The Decision of the Court of
Appeals in CA-G.R. CV No. 49195 dated May 11, 2000 and its Resolution dated
February 21, 2001 are hereby AFFIRMED. Costs against petitioner.
SO ORDERED
b. Fabre, Jr. v. CA, No. 111127, july 26, 1996, 259 SCRA 426
MENDOZA, J.:
This is a petition for review on certiorari of the decision of the Court of

Appeals[1] in CA-GR No. 28245, dated September 30, 1992, which affirmed with
modification the decision of the Regional Trial Court of Makati, Branch 58, ordering
petitioners jointly and severally to pay damages to private respondent Amyline
Antonio, and its resolution which denied petitioners motion for reconsideration for
lack of merit.
Petitioners Engracio Fabre, Jr. and his wife were owners of a 1982 model Mazda
minibus. They used the bus principally in connection with a bus service for school
children which they operated in Manila.The couple had a driver, Porfirio J. Cabil,
whom they hired in 1981, after trying him out for two weeks. His job was to take
school children to and from the St. Scholasticas College in Malate, Manila.
On November 2, 1984 private respondent Word for the World Christian
Fellowship Inc. (WWCF) arranged with petitioners for the transportation of 33
members of its Young Adults Ministry from Manila to La Union and back in
consideration of which private respondent paid petitioners the amount of P3,000.00.
The group was scheduled to leave on November 2, 1984, at 5:00 oclock in the
afternoon. However, as several members of the party were late, the bus did not leave
the Tropical Hut at the corner of Ortigas Avenue and EDSA until 8:00 oclock in the
evening. Petitioner Porfirio Cabil drove the minibus.
The usual route to Caba, La Union was through Carmen, Pangasinan. However,
the bridge at Carmen was under repair, so that petitioner Cabil, who was unfamiliar
with the area (it being his first trip to La Union), was forced to take a detour through
the town of Ba-ay in Lingayen, Pangasinan. At 11:30 that night, petitioner Cabil came
upon a sharp curve on the highway, running on a south to east direction, which he
described as siete. The road was slippery because it was raining, causing the bus,
which was running at the speed of 50 kilometers per hour, to skid to the left road
shoulder. The bus hit the left traffic steel brace and sign along the road and rammed
the fence of one Jesus Escano, then turned over and landed on its left side, coming
to a full stop only after a series of impacts. The bus came to rest off the road. A
coconut tree which it had hit fell on it and smashed its front portion.
Several passengers were injured. Private respondent Amyline Antonio was
thrown on the floor of the bus and pinned down by a wooden seat which came off
after being unscrewed. It took three persons to safely remove her from this
position. She was in great pain and could not move.
The driver, petitioner Cabil, claimed he did not see the curve until it was too
late. He said he was not familiar with the area and he could not have seen the curve
despite the care he took in driving the bus, because it was dark and there was no
sign on the road. He said that he saw the curve when he was already within 15 to 30
meters of it. He allegedly slowed down to 30 kilometers per hour, but it was too late.
The Lingayen police investigated the incident the next day, November 3,
1984. On the basis of their finding they filed a criminal complaint against the driver,
Porfirio Cabil. The case was later filed with the Lingayen Regional Trial
Court. Petitioners Fabre paid Jesus Escano P1,500.00 for the damage to the latters
fence. On the basis of Escanos affidavit of desistance the case against petitioners
Fabre was dismissed.
Amyline Antonio, who was seriously injured, brought this case in the RTC of
Makati, Metro Manila. As a result of the accident, she is now suffering from
paraplegia and is permanently paralyzed from the waist down. During the trial she
described the operations she underwent and adduced evidence regarding the cost of
her treatment and therapy. Immediately after the accident, she was taken to the
Nazareth Hospital in Ba-ay, Lingayen. As this hospital was not adequately equipped,
she was transferred to the Sto. Nio Hospital, also in the town of Ba-ay, where she
was given sedatives. An x-ray was taken and the damage to her spine was
determined to be too severe to be treated there. She was therefore brought to Manila,
first to the Philippine General Hospital and later to the Makati Medical Center where
she underwent an operation to correct the dislocation of her spine.
In its decision dated April 17, 1989, the trial court found that:
No convincing evidence was shown that the minibus was properly checked for travel to a
long distance trip and that the driver was properly screened and tested before being admitted
for employment. Indeed, all the evidence presented have shown the negligent act of the
defendants which ultimately resulted to the accident subject of this case.
Accordingly, it gave judgment for private respondents holding:
Considering that plaintiffs Word for the World Christian Fellowship, Inc. and Ms. Amyline
Antonio were the only ones who adduced evidence in support of their claim for damages, the
Court is therefore not in a position to award damages to the other plaintiffs.
WHEREFORE, premises considered, the Court hereby renders judgment against defendants
Mr. & Mrs. Engracio Fabre, Jr. and Porfirio Cabil y Jamil pursuant to articles 2176 and 2180
of the Civil Code of the Philippines and said defendants are ordered to pay jointly and
severally to the plaintiffs the following amount:
1) P93,657.11 as compensatory and actual damages;

2) P500,000.00 as the reasonable amount of loss of earning capacity of plaintiff Amyline
Antonio;
3) P20,000.00 as moral damages;
4) P20,000.00 as exemplary damages; and
5) 25% of the recoverable amount as attorneys fees;
6) Costs of suit.
SO ORDERED.
The Court of Appeals affirmed the decision of the trial court with respect to
Amyline Antonio but dismissed it with respect to the other plaintiffs on the ground that
they failed to prove their respective claims.The Court of Appeals modified the award
of damages as follows:
1) P93,657.11 as actual damages;
2) P600,000.00 as compensatory damages;
4) P20,000.00 as exemplary damages;
5) P10,000.00 as attorneys fees; and
6) Costs of suit.
The Court of Appeals sustained the trial courts finding that petitioner Cabil failed
to exercise due care and precaution in the operation of his vehicle considering the
time and the place of the accident. The Court of Appeals held that the Fabres were
themselves presumptively negligent. Hence, this petition. Petitioners raise the
following issues:
I. WHETHER OR NOT PETITIONERS WERE NEGLIGENT.
II. WHETHER OR NOT PETITIONERS WERE LIABLE FOR THE INJURIES SUFFERED BY
PRIVATE RESPONDENTS.
III. WHETHER OR NOT DAMAGES CAN BE AWARDED AND IN THE POSITIVE, UP TO
WHAT EXTENT.
Petitioners challenge the propriety of the award of compensatory damages in the

amount of P600,000.00. It is insisted that, on the assumption that petitioners are
liable, an award of P600,000.00 is unconscionable and highly speculative. Amyline
Antonio testified that she was a casual employee of a company called Suaco,
earning P1,650.00 a month, and a dealer of Avon products, earning an average of
P1,000.00 monthly. Petitioners contend that as casual employees do not have
security of tenure, the award of P600,000.00, considering Amyline Antonios earnings,
is without factual basis as there is no assurance that she would be regularly earning
these amounts.
With the exception of the award of damages, the petition is devoid of merit.
First, it is unnecessary for our purpose to determine whether to decide this case
on the theory that petitioners are liable for breach of contract of carriage or culpa
contractual or on the theory of quasi delict or culpa aquiliana as both the Regional
Trial Court and the Court of Appeals held, for although the relation of passenger and
carrier is contractual both in origin and nature, nevertheless the act that breaks the
contract may be also a tort.[2] In either case, the question is whether the bus driver,
petitioner Porfirio Cabil, was negligent.
The finding that Cabil drove his bus negligently, while his employer, the Fabres,
who owned the bus, failed to exercise the diligence of a good father of the family in
the selection and supervision of their employee is fully supported by the evidence on
record. These factual findings of the two courts we regard as final and conclusive,
supported as they are by the evidence. Indeed, it was admitted by Cabil that on the
night in question, it was raining, and, as a consequence, the road was slippery, and it
was dark. He averred these facts to justify his failure to see that there lay a sharp
curve ahead. However, it is undisputed that Cabil drove his bus at the speed of 50
kilometers per hour and only slowed down when he noticed the curve some 15 to 30
meters ahead.[3] By then it was too late for him to avoid falling off the road. Given the
conditions of the road and considering that the trip was Cabils first one outside of
Manila, Cabil should have driven his vehicle at a moderate speed. There is
testimony[4] that the vehicles passing on that portion of the road should only be
running 20 kilometers per hour, so that at 50 kilometers per hour, Cabil was running
at a very high speed.
Considering the foregoing the fact that it was raining and the road was slippery,
that it was dark, that he drove his bus at 50 kilometers an hour when even on a good
day the normal speed was only 20 kilometers an hour, and that he was unfamiliar
with the terrain, Cabil was grossly negligent and should be held liable for the injuries
suffered by private respondent Amyline Antonio.
Pursuant to Arts. 2176 and 2180 of the Civil Code his negligence gave rise to the
presumption that his employers, the Fabres, were themselves negligent in the
selection and supervision of their employee.
Due diligence in selection of employees is not satisfied by finding that the
applicant possessed a professional drivers license. The employer should also
examine the applicant for his qualifications, experience and record of service.[5] Due
diligence in supervision, on the other hand, requires the formulation of rules and
regulations for the guidance of employees and the issuance of proper instructions as
well as actual implementation and monitoring of consistent compliance with the
rules.[6]
In the case at bar, the Fabres, in allowing Cabil to drive the bus to La Union,
apparently did not consider the fact that Cabil had been driving for school children
only, from their homes to the St. Scholasticas College in Metro Manila.[7] They had
hired him only after a two-week apprenticeship. They had tested him for certain
matters, such as whether he could remember the names of the children he would be
taking to school, which were irrelevant to his qualification to drive on a long distance
travel, especially considering that the trip to La Union was his first. The existence of
hiring procedures and supervisory policies cannot be casually invoked to overturn
the presumption of negligence on the part of an employer.[8]
Petitioners argue that they are not liable because (1) an earlier departure (made
impossible by the congregations delayed meeting) could have averted the mishap
and (2) under the contract, the WWCF was directly responsible for the conduct of the
trip. Neither of these contentions hold water. The hour of departure had not been
fixed. Even if it had been, the delay did not bear directly on the cause of the
accident. With respect to the second contention, it was held in an early case that:
[A] person who hires a public automobile and gives the driver directions as to the place to
which he wishes to be conveyed, but exercises no other control over the conduct of the driver,
is not responsible for acts of negligence of the latter or prevented from recovering for
injuries suffered from a collision between the automobile and a train, caused by the
negligence either of the locomotive engineer or the automobile driver.[9]
As already stated, this case actually involves a contract of carriage. Petitioners,

the Fabres, did not have to be engaged in the business of public transportation for
the provisions of the Civil Code on common carriers to apply to them. As this Court
has held:[10]
Art. 1732. Common carriers are persons, corporations, firms or associations engaged in the
business of carrying or transporting passengers or goods or both, by land, water, or air for
compensation, offering their services to the public.
The above article makes no distinction between one whose principal business
activity is the carrying of persons or goods or both, and one who does such carrying
only as 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.
As common carriers, the Fabres were bound to exercise extraordinary diligence for
the safe transportation of the passengers to their destination. This duty of care is not
excused by proof that they exercised the diligence of a good father of the family in
the selection and supervision of their employee. As Art. 1759 of the Code provides:
Common carriers are liable for the death of or injuries to passengers through the
negligence or wilful acts of the formers employees, although such employees may
have acted beyond the scope of their authority or in violation of the orders of the
common carriers.
This liability of the common carriers does not cease upon proof that they
exercised all the diligence of a good father of a family in the selection and
supervision of their employees.
The same circumstances detailed above, supporting the finding of the trial court
and of the appellate court that petitioners are liable under Arts. 2176 and 2180
for quasi delict, fully justify finding them guilty of breach of contract of carriage under
Arts. 1733, 1755 and 1759 of the Civil Code.
Secondly, we sustain the award of damages in favor of Amyline
Antonio. However, we think the Court of Appeals erred in increasing the amount of
compensatory damages because private respondents did not question this award as
inadequate.[11] To the contrary, the award of P500,000.00 for compensatory
damages which the Regional Trial Court made is reasonable considering the
contingent nature of her income as a casual employee of a company and as
distributor of beauty products and the fact that the possibility that she might be able
to work again has not been foreclosed. In fact she testified that one of her previous
employers had expressed willingness to employ her again.
With respect to the other awards, while the decisions of the trial court and the
Court of Appeals do not sufficiently indicate the factual and legal basis for them, we
find that they are nevertheless supported by evidence in the records of this
case. Viewed as an action for quasi delict, this case falls squarely within the purview
of Art. 2219(2) providing for the payment of moral damages in cases of quasi
delict. On the theory that petitioners are liable for breach of contract of carriage, the
award of moral damages is authorized by Art. 1764, in relation to Art. 2220, since
Cabils gross negligence amounted to bad faith.[12]Amyline Antonios testimony, as
well as the testimonies of her father and co-passengers, fully establish the physical
suffering and mental anguish she endured as a result of the injuries caused by
petitioners negligence.
The award of exemplary damages and attorneys fees was also properly
made. However, for the same reason that it was error for the appellate court to
increase the award of compensatory damages, we hold that it was also error for it to
increase the award of moral damages and reduce the award of attorneys fees,
inasmuch as private respondents, in whose favor the awards were made, have not
appealed.[13]
As above stated, the decision of the Court of Appeals can be sustained either on
the theory of quasi delict or on that of breach of contract. The question is whether, as
the two courts below held, petitioners, who are the owners and driver of the bus, may
be made to respond jointly and severally to private respondent. We hold that they
may be. In Dangwa Trans. Co. Inc. v. Court of Appeals,[14] on facts similar to those in
this case, this Court held the bus company and the driver jointly and severally liable
for damages for injuries suffered by a passenger. Again, in Bachelor Express, Inc. v.
Court of Appeals[15] a driver found negligent in failing to stop the bus in order to let off
passengers when a fellow passenger ran amuck, as a result of which the passengers
jumped out of the speeding bus and suffered injuries, was held also jointly and
severally liable with the bus company to the injured passengers.
The same rule of liability was applied in situations where the negligence of the
driver of the bus on which plaintiff was riding concurred with the negligence of a third
party who was the driver of another vehicle, thus causing an accident. In Anuran v.
Buo,[16] Batangas Laguna Tayabas Bus Co. v. Intermediate Appellate
Court,[17] and Metro Manila Transit Corporation v. Court of Appeals,[18] the bus
company, its driver, the operator of the other vehicle and the driver of the vehicle
were jointly and severally held liable to the injured passenger or the latters heirs. The
basis of this allocation of liability was explained in Viluan v. Court of Appeals,[19] thus:
Nor should it make any difference that the liability of petitioner [bus owner] springs from
contract while that of respondents [owner and driver of other vehicle] arises
from quasi-delict. As early as 1913, we already ruled in Gutierrez vs. Gutierrez, 56 Phil. 177,
that in case of injury to a passenger due to the negligence of the driver of the bus on which
he was riding and of the driver of another vehicle, the drivers as well as the owners of the
two vehicles are jointly and severally liable for damages. Some members of the Court,
though, are of the view that under the circumstances they are liable on quasi-delict.[20]
It is true that in Philippine Rabbit Bus Lines, Inc. v. Court of Appeals[21] this Court
exonerated the jeepney driver from liability to the injured passengers and their
families while holding the owners of the jeepney jointly and severally liable, but that is
because that case was expressly tried and decided exclusively on the theory of culpa
contractual. As this Court there explained:
The trial court was therefore right in finding that Manalo [the driver] and spouses Mangune
and Carreon [the jeepney owners] were negligent. However, its ruling that spouses Mangune
and Carreon are jointly and severally liable with Manalo is erroneous. The driver cannot be
held jointly and severally liable with the carrier in case of breach of the contract of
carriage. The rationale behind this is readily discernible. Firstly, the contract of carriage is
between the carrier and the passenger, and in the event of contractual liability, the carrier is
exclusively responsible therefore to the passenger, even if such breach be due to the
negligence of his driver (see Viluan v. The Court of Appeals, et al., G.R. Nos. L-21477-81,
April 29, 1966, 16 SCRA 742) . . .[22]
As in the case of BLTB, private respondents in this case and her co-plaintiffs did
not stake out their claim against the carrier and the driver exclusively on one theory,
much less on that of breach of contract alone. After all, it was permitted for them to
allege alternative causes of action and join as many parties as may be liable on such
causes of action[23] so long as private respondent and her co-plaintiffs do not recover
twice for the same injury. What is clear from the cases is the intent of the plaintiff
there to recover from both the carrier and the driver, thus justifying the holding that
the carrier and the driver were jointly and severally liable because their separate and
distinct acts concurred to produce the same injury.
WHEREFORE, the decision of the Court of Appeals is AFFIRMED with
MODIFICATION as to the award of damages. Petitioners are ORDERED to PAY
jointly and severally the private respondent Amyline Antonio the following amounts:
1) P93,657.11 as actual damages;
2) P500,000.00 as the reasonable amount of loss of earning capacity of plaintiff Amyline
Antonio;
4) P20,000.00 as exemplary damages;
5) 25% of the recoverable amount as attorneys fees; and
6) costs of suit.
SO ORDERED.
c. Phil. American general insurance Company v. PKS Shipping Co.

April 9, 2003
The petition before the Court seeks a review of the decision of the Court of
Appeals in C.A. G.R. CV No. 56470, promulgated on 25 June 2001, which has
affirmed in toto the judgment of the Regional Trial Court (RTC), Branch 65, of Makati,
dismissing the complaint for damages filed by petitioner insurance corporation
against respondent shipping company.
Davao Union Marketing Corporation (DUMC) contracted the services of
respondent PKS Shipping Company (PKS Shipping) for the shipment to Tacloban
City of seventy-five thousand (75,000) bags of cement worth Three Million Three
Hundred Seventy-Five Thousand Pesos (P3,375,000.00). DUMC insured the goods
for its full value with petitioner Philippine American General Insurance Company
(Philamgen). The goods were loaded aboard the dumb barge Limar I belonging to
PKS Shipping. On the evening of 22 December 1988, about nine oclock, while Limar
I was being towed by respondents tugboat, MT Iron Eagle, the barge sank a couple
of miles off the coast of Dumagasa Point, in Zamboanga del Sur, bringing down with
it the entire cargo of 75,000 bags of cement.
DUMC filed a formal claim with Philamgen for the full amount of the
insurance. Philamgen promptly made payment; it then sought reimbursement from
PKS Shipping of the sum paid to DUMC but the shipping company refused to pay,
prompting Philamgen to file suit against PKS Shipping with the Makati RTC.
The RTC dismissed the complaint after finding that the total loss of the cargo
could have been caused either by a fortuitous event, in which case the ship owner
was not liable, or through the negligence of the captain and crew of the vessel and
that, under Article 587 of the Code of Commerce adopting the Limited Liability Rule,
the ship owner could free itself of liability by abandoning, as it apparently so did, the
vessel with all her equipment and earned freightage.
Philamgen interposed an appeal to the Court of Appeals which affirmed in
toto the decision of the trial court. The appellate court ruled that evidence to establish
that PKS Shipping was a common carrier at the time it undertook to transport the
bags of cement was wanting because the peculiar method of the shipping companys
carrying goods for others was not generally held out as a business but as a casual
occupation. It then concluded that PKS Shipping, not being a common carrier, was
not expected to observe the stringent extraordinary diligence required of common
carriers in the care of goods. The appellate court, moreover, found that the loss of
the goods was sufficiently established as having been due to fortuitous event,
negating any liability on the part of PKS Shipping to the shipper.
In the instant appeal, Philamgen contends that the appellate court has committed
a patent error in ruling that PKS Shipping is not a common carrier and that it is not
liable for the loss of the subject cargo. The fact that respondent has a limited clientele,
petitioner argues, does not militate against respondents being a common carrier and
that the only way by which such carrier can be held exempt for the loss of the cargo
would be if the loss were caused by natural disaster or calamity. Petitioner avers that
typhoon "APIANG" has not entered the Philippine area of responsibility and that,
even if it did, respondent would not be exempt from liability because its employees,
particularly the tugmaster, have failed to exercise due diligence to prevent or
minimize the loss.
PKS Shipping, in its comment, urges that the petition should be denied because
what Philamgen seeks is not a review on points or errors of law but a review of the
undisputed factual findings of the RTC and the appellate court. In any event, PKS
Shipping points out, the findings and conclusions of both courts find support from the
evidence and applicable jurisprudence.
The determination of possible liability on the part of PKS Shipping boils down to
the question of whether it is a private carrier or a common carrier and, in either case,
to the other question of whether or not it has observed the proper diligence (ordinary,
if a private carrier, or extraordinary, if a common carrier) required of it given the
circumstances.
The findings of fact made by the Court of Appeals, particularly when such
findings are consistent with those of the trial court, may not at liberty be reviewed by
this Court in a petition for review under Rule 45 of the Rules of
Court. The conclusions derived from those factual findings, however, are not
[1]
necessarily just matters of fact as when they are so linked to, or inextricably
intertwined with, a requisite appreciation of the applicable law. In such instances, the
conclusions made could well be raised as being appropriate issues in a petition for
review before this Court. Thus, an issue whether a carrier is private or common on
the basis of the facts found by a trial court or the appellate court can be a valid and
reviewable question of law.
The Civil Code defines common carriers in the following terms:
Article 1732. Common carriers are persons, corporations, firms or associations engaged in
the business of carrying or transporting passengers or goods or both, by land, water, or air for
Complementary to the codal definition is Section 13, paragraph (b), of the Public
Service Act; it defines public service to be
Philippines, for hire or compensation, with general or limited clientele, whether permanent,
occasional or accidental, and done for general business purposes, any common carrier,
railroad, street railway, subway motor vehicle, either for freight or passenger, or both, with
or without fixed route and whatever may be its classification, freight or carrier service of any
class, express service, steamboat, or steamship, or steamship line, pontines, ferries and water
craft, engaged in the transportation of passengers or freight or both, shipyard, marine repair
shop, wharf or dock, ice plant, ice refrigeration plant, canal, irrigation system, gas, electric
light, heat and power, water supply and power petroleum, sewerage system, wire or wireless
communication systems, wire or wireless broadcasting stations and other similar public
services. x x x. (Underscoring supplied).
The prevailing doctrine on the question is that enunciated in the leading case
of De Guzman vs. Court of Appeals. Applying Article 1732 of the Code, in
[2]
conjunction with Section 13(b) of the Public Service Act, this Court has held:
The above article makes no distinction between one whose principal business activity is the
carrying of persons or goods or both, and one who does such carrying only as
an ancillary activity (in local idiom, as `a sideline). Article 1732 also carefully avoids
making any distinction between a person or enterprise offering transportation service on
a regular or scheduled basis and one offering such service on an occasional, episodic or
unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its
services to the `general public, i.e., the general community or population, and one who offers
services or solicits business only from a narrow segment of the general population. We think
that Article 1732 deliberately refrained from making such distinctions.
So understood, the concept of `common carrier under Article 1732 may be seen to coincide
neatly with the notion of `public service, under the Public Service Act (Commonwealth Act
No. 1416, as amended) which at least partially supplements the law on common carriers set
forth in the Civil Code.
Much of the distinction between a common or public carrier and a private or

special carrier lies in the character of the business, such that if the undertaking is an
isolated transaction, not a part of the business or occupation, and the carrier does
not hold itself out to carry the goods for the general public or to a limited clientele,
although involving the carriage of goods for a fee, the person or corporation
[3]
providing such service could very well be just a private carrier. A typical case is that
of a charter party which includes both the vessel and its crew, such as in a bareboat
or demise, where the charterer obtains the use and service of all or some part of a
ship for a period of time or a voyage or voyages and gets the control of the vessel
[4]
and its crew. Contrary to the conclusion made by the appellate court, its factual
[5]
findings indicate that PKS Shipping has engaged itself in the business of carrying
goods for others, although for a limited clientele, undertaking to carry such goods for
a fee. The regularity of its activities in this area indicates more than just a casual
activity on its part. Neither can the concept of a common carrier change merely
[6]
because individual contracts are executed or entered into with patrons of the
carrier. Such restrictive interpretation would make it easy for a common carrier to
escape liability by the simple expedient of entering into those distinct agreements
with clients.
Addressing now the issue of whether or not PKS Shipping has exercised the
proper diligence demanded of common carriers, Article 1733 of the Civil Code
requires common carriers to observe extraordinary diligence in the vigilance over the
goods they carry. In case of loss, destruction or deterioration of goods, common
carriers are presumed to have been at fault or to have acted negligently, and the
burden of proving otherwise rests on them. The provisions of Article 1733,
[7]
notwithstanding, common carriers are exempt from liability for loss, destruction, or
deterioration of the goods due to any of the following causes:
(4) The character of the goods or defects in the packing or in the containers; and
(5) Order or act of competent public authority. [8]
The appellate court ruled, gathered from the testimonies and sworn marine
protests of the respective vessel masters of Limar I and MT Iron Eagle, that there
was no way by which the barges or the tugboats crew could have prevented the
sinking of Limar I. The vessel was suddenly tossed by waves of extraordinary height
of six (6) to eight (8) feet and buffeted by strong winds of 1.5 knots resulting in the
entry of water into the barges hatches. The official Certificate of Inspection of the
barge issued by the Philippine Coastguard and the Coastwise Load Line Certificate
would attest to the seaworthiness of Limar I and should strengthen the factual
findings of the appellate court.
Findings of fact of the Court of Appeals generally conclude this Court; none of the
recognized exceptions from the rule - (1) when the factual findings of the Court of
Appeals and the trial court are contradictory; (2) when the conclusion is a finding
grounded entirely on speculation, surmises, or conjectures; (3) when the inference
made by the Court of Appeals from its findings of fact is manifestly mistaken, absurd,
or impossible; (4) when there is a grave abuse of discretion in the appreciation of
facts; (5) when the appellate court, in making its findings, went beyond the issues of
the case and such findings are contrary to the admissions of both appellant and
appellee; (6) when the judgment of the Court of Appeals is premised on a
misapprehension of facts; (7) when the Court of Appeals failed to notice certain
relevant facts which, if properly considered, would justify a different conclusion;
(8) when the findings of fact are themselves conflicting; (9) when the findings of fact
are conclusions without citation of the specific evidence on which they are based;
and (10) when the findings of fact of the Court of Appeals are premised on the
absence of evidence but such findings are contradicted by the evidence on record
would appear to be clearly extant in this instance.
All given then, the appellate court did not err in its judgment absolving PKS
Shipping from liability for the loss of the DUMC cargo.
WHEREFORE, the petition is DENIED. No costs.
SO ORDERED.
d. Virgines Calvo v. UCPB General Insurance Co., G.R. No. 148496, March
19, 2002
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 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 business of carrying or transporting passengers or goods or both, by land, water, or air for
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:
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 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 therebeen 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.
e. Caltex(phil) v. Sulpicio Lines, 315 SCRA 709, 1999 case

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.
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.
On March 22, 1988, the board of marine inquiry in BMI Case No. 653-87 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.
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 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.
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 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 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.
f. Loadstar Shipping Co. v. Pioneer Asia Insurance G.R No. 157481

January 2006
For review on certiorari are (1) the Decision[1] dated October 15, 2002 and (2)
the Resolution[2] dated February 27, 2003, of the Court of Appeals in CA-G.R. CV No.
40999, which affirmed with modification the Decision [3] dated February 15, 1993 of the
Regional Trial Court of Manila, Branch 8 in Civil Case No. 86-37957.
The pertinent facts are as follows:
Petitioner Loadstar Shipping Co., Inc. (Loadstar for brevity) is the registered owner
and operator of the vessel M/V Weasel. It holds office at 1294 Romualdez St.,
Paco, Manila.
On June 6, 1984, Loadstar entered into a voyage-charter with Northern Mindanao

Transport Company, Inc. for the carriage of 65,000 bags of cement
from Iligan City to Manila. The shipper was Iligan Cement Corporation, while the
consignee in Manila was Market Developers, Inc.
On June 24, 1984, 67,500 bags of cement were loaded on board M/V Weasel and
stowed in the cargo holds for delivery to the consignee. The shipment was covered by
petitioners Bill of Lading[4] dated June 23, 1984.
Prior to the voyage, the consignee insured the shipment of cement with respondent
Pioneer Asia Insurance Corporation for P1,400,000, for which respondent issued Marine
Open Policy No. MOP-006 dated September 17, 1980, covering all shipments made on or
after September 30, 1980.[5]
At 12:50 in the afternoon of June 24, 1984, M/V

Weasel left Iligan City for Manila in good weather. However, at 4:31 in the morning
of June 25, 1984, Captain Vicente C. Montera, master of M/V Weasel, ordered the vessel to
be forced aground. Consequently, the entire shipment of cement was good as gone due to
exposure to sea water. Petitioner thus failed to deliver the goods to the consignee
in Manila.
The consignee demanded from petitioner full reimbursement of the cost of the lost
shipment. Petitioner, however, refused to reimburse the consignee despite repeated
demands.
Nonetheless, on March 11, 1985, respondent insurance company paid the
consignee P1,400,000 plus an additional amount of P500,000, the value of the lost
shipment of cement. In return, the consignee executed a Loss and Subrogation Receipt in
favor of respondent concerning the latters subrogation rights against petitioner.
Hence, on October 15, 1986, respondent filed a complaint docketed as Civil Case No.
86-37957, against petitioner with the Regional Trial Court of Manila, Branch 8. It alleged
that: (1) the M/V Weasel was not seaworthy at the commencement of the voyage; (2) the
weather and sea conditions then prevailing were usual and expected for that time of the
year and as such, was an ordinary peril of the voyage for which the M/V Weasel should
have been normally able to cope with; and (3) petitioner was negligent in the selection and
supervision of its agents and employees then manning the M/V Weasel.
In its Answer, petitioner alleged that no fault nor negligence could be attributed to it
because it exercised due diligence to make the ship seaworthy, as well as properly manned
and equipped. Petitioner insisted that the failure to deliver the subject cargo to the
consignee was due to force majeure. Petitioner claimed it could not be held liable for an act
or omission not directly attributable to it.
On February 15, 1993, the RTC rendered a Decision in favor of respondent, to wit:
WHEREFORE, in view of the foregoing, judgment is hereby rendered in
favor of plaintiff and against defendant Loadstar Shipping Co., Inc. ordering
the latter to pay as follows:
1. To pay plaintiff the sum of P1,900,000.00 with legal rate of interest

per annum from date of complaint until fully paid;
2. To pay the sum equal to 25% of the claim as and for attorneys fees
and litigation expenses; and,
3. To pay the costs of suit.
IT IS SO ORDERED.[6]
The RTC reasoned that petitioner, as a common carrier, bears the burden of proving
that it exercised extraordinary diligence in its vigilance over the goods it transported. The
trial court explained that in case of loss or destruction of the goods, a statutory presumption
arises that the common carrier was negligent unless it could prove that it had observed
extraordinary diligence.
Petitioners defense of force majeure was found bereft of factual basis. The RTC
called attention to the PAG-ASA report that at the time of the incident, tropical
storm Asiang had moved away from the Philippines. Further, records showed that the sea
and weather conditions in the area of Hinubaan, Negros Occidental from 8:00 p.m. of June
24, 1984 to 8:00 a.m. the next day were slight and smooth. Thus, the trial court concluded
that the cause of the loss was not tropical storm Asiang or any other force majeure, but
gross negligence of petitioner.
Petitioner appealed to the Court of Appeals.
In its Decision dated October 15, 2002, the Court of Appeals affirmed the RTC
Decision with modification that Loadstar shall only pay the sum of 10% of the total claim
for attorneys fees and litigation expenses. It ruled,
WHEREFORE, premises considered, the Decision dated February 15,
1993, of the Regional Trial Court of Manila, National Capital Judicial Region,
Branch 8, in Civil Case No. 86-37957 is hereby AFFIRMED with the
MODIFICATION that the appellant shall only pay the sum of 10% of the total
claim as and for attorneys fees and litigation expenses. Costs against the
appellant.
SO ORDERED.[7]
Petitioners Motion for Reconsideration was denied.[8]
The instant petition is anchored now on the following assignments of error:

I
THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT
PETITIONER IS A COMMON CARRIER UNDER ARTICLE 1732 OF THE
CIVIL CODE.
II
ASSUMING ARGUENDO THAT PETITIONER IS A COMMON CARRIER,
THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT
THE PROXIMATE CAUSE OF THE LOSS OF CARGO WAS NOT A
FORTUITOUS EVENT BUT WAS ALLEGEDLY DUE TO THE FAILURE
OF PETITIONER TO EXERCISE EXTRAORDINARY DILIGENCE.
III
THE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING THE
AWARD BY THE TRIAL COURT OF ATTORNEYS FEES AND
LITIGATION EXPENSES IN FAVOR OF HEREIN RESPONDENT.[9]
On the first and second issues, petitioner contends that at the time of the voyage the
carriers voyage-charter with the shipper converted it into a private carrier. Thus, the
presumption of negligence against common carriers could not apply. Petitioner further
avers that the stipulation in the voyage-charter holding it free from liability is valid and
binds the respondent. In any event, petitioner insists that it had exercised extraordinary
diligence and that the proximate cause of the loss of the cargo was a fortuitous event.
With regard to the third issue, petitioner points out that the award of attorneys fees
and litigation expenses appeared only in the dispositive portion of the RTC Decision with
nary a justification. Petitioner maintains that the Court of Appeals thus erred in affirming
the award.
For its part, respondent dismisses as factual issues the inquiry on (1) whether the loss
of the cargo was due to force majeure or due to petitioners failure to exercise extraordinary
diligence; and (2) whether respondent is entitled to recover attorneys fees and expenses of
litigation.
Respondent further counters that the Court of Appeals was correct when it held that
petitioner was a common carrier despite the charter of the whole vessel, since the charter
was limited to the ship only.
Prefatorily, we stress that the finding of fact by the trial court, when affirmed by the
Court of Appeals, is not reviewable by this Court in a petition for review on certiorari.
However, the conclusions derived from such factual finding are not necessarily pure issues
of fact when they are inextricably intertwined with the determination of a legal issue. In
such instances, the conclusions made may be raised in a petition for review before this
Court.[10]
The threshold issues in this case are: (1) Given the circumstances of this case, is
petitioner a common or a private carrier? and (2) In either case, did petitioner exercise the
required diligence i.e., the extraordinary diligence of a common carrier or the ordinary
diligence of a private carrier?
Article 1732 of the Civil Code defines a common carrier as follows:

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.
Petitioner is a corporation engaged in the business of transporting cargo by water and for
compensation, offering its services indiscriminately to the public. Thus, without doubt, it
is a common carrier. However, petitioner entered into a voyage-charter with the Northern
Mindanao Transport Company, Inc. Now, had the voyage-charter converted petitioner
into a private carrier?
We think not. The voyage-charter agreement between petitioner and Northern Mindanao
Transport Company, Inc. 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[11] where we ruled that:
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.[12]
Conformably, petitioner remains a common carrier notwithstanding the existence

of the charter agreement with the Northern Mindanao Transport Company, Inc. since the
said charter is limited to the ship only and does not involve both the vessel and its crew.
As elucidated in Planters Products, its charter is only a voyage-charter, not a bareboat
charter.
As a common carrier, petitioner is required to observe extraordinary diligence in

the vigilance over the goods it transports.[13] When the goods placed in its care are lost,
petitioner is presumed to have been at fault or to have acted negligently. Petitioner
therefore has the burden of proving that it observed extraordinary diligence in order to
avoid responsibility for the lost cargo.[14]
In Compania Maritima v. Court of Appeals,[15] we said:

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.
...
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.[16]
Article 1734 enumerates the instances when a carrier might be exempt from
liability for the loss of the goods. These are:
and
(5) Order or act of competent public authority.[17]
Petitioner claims that the loss of the goods was due to a fortuitous event under
paragraph 1. Yet, its claim is not substantiated. On the contrary, we find supported by
evidence on record the conclusion of the trial court and the Court of Appeals that the loss
of the entire shipment of cement was due to the gross negligence of petitioner.
Records show that in the evening of June 24, 1984, the sea and weather conditions
in the vicinity of Negros Occidental were calm. The records reveal that petitioner took a
shortcut route, instead of the usual route, which exposed the voyage to unexpected hazard.
Petitioner has only itself to blame for its misjudgment.
Petitioner heavily relies on Home Insurance Co. v. American Steamship Agencies,

Inc.[18] and Valenzuela Hardwood and Industrial Supply, Inc. v. Court of Appeals.[19] The
said cases involved a private carrier, not a common carrier. Moreover, the issue in both
cases is not the effect of a voyage-charter on a common carrier, but the validity of a
stipulation absolving the private carrier from liability in case of loss of the cargo
attributable to the negligence of the private carrier.
Lastly, on the third issue, we find consistent with law and prevailing jurisprudence
the Court of Appeals award of attorneys fees and expenses of litigation equivalent to ten
percent (10%) of the total claim. The contract between the parties in this case contained a
stipulation that in case of suit, attorneys fees and expenses of litigation shall be limited to
only ten percent (10%) of the total monetary award. Given the circumstances of this case,
we deem the said amount just and equitable.
WHEREFORE, the petition is DENIED. The assailed Decision dated October 15,
2002 and the Resolution dated February 27, 2003, of the Court of Appeals in CA-G.R.
CV No. 40999, are AFFIRMED.
Costs against petitioner.
SO ORDERED.
g. Home Assurance Corp., G.R. No. 150403, Jan. 25 2007.

May a carrier be held liable for the loss of cargo resulting from the sinking of a ship it does not own?
This is the issue presented for the Courts resolution in this petition for review on certiorari 1 assailing the
March 16, 2001 decision2 and September 17, 2001 resolution3 of the Court of Appeals (CA) in CA-G.R. CV
No. 40473 which in turn affirmed the December 27, 1989 decision4 of the Regional Trial Court (RTC), Branch
145, Makati, Metro Manila.5
The pertinent facts follow.
On November 12, 1984, petitioner Cebu Salvage Corporation (as carrier) and Maria Cristina Chemicals
Industries, Inc. [MCCII] (as charterer) entered into a voyage charter6 wherein petitioner was to load 800 to
1,100 metric tons of silica quartz on board the M/T Espiritu Santo7 at Ayungon, Negros Occidental for
transport to and discharge at Tagoloan, Misamis Oriental to consignee Ferrochrome Phils., Inc.8
Pursuant to the contract, on December 23, 1984, petitioner received and loaded 1,100 metric tons of silica
quartz on board the M/T Espiritu Santo which left Ayungon for Tagoloan the next day.9 The shipment never
reached its destination, however, because the M/T Espiritu Santo sank in the afternoon of December 24,
1984 off the beach of Opol, Misamis Oriental, resulting in the total loss of the cargo.10
MCCII filed a claim for the loss of the shipment with its insurer, respondent Philippine Home Assurance
Corporation.11 Respondent paid the claim in the amount of P211,500 and was subrogated to the rights of
MCCII.12Thereafter, it filed a case in the RTC13 against petitioner for reimbursement of the amount it paid
MCCII.
After trial, the RTC rendered judgment in favor of respondent. It ordered petitioner to pay
respondent P211,500 plus legal interest, attorneys fees equivalent to 25% of the award and costs of suit.
On appeal, the CA affirmed the decision of the RTC. Hence, this petition.
Petitioner and MCCII entered into a "voyage charter," also known as a contract of affreightment wherein the
ship was leased for a single voyage for the conveyance of goods, in consideration of the payment of
freight.14 Under a voyage charter, the shipowner 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 freight.15 An
owner who retains possession of the ship remains liable as carrier and must answer for loss or non-delivery
of the goods received for transportation.16
Petitioner argues that the CA erred when it affirmed the RTC finding that the voyage charter it entered into
with MCCII was a contract of carriage.17 It insists that the agreement was merely a contract of hire wherein
MCCII hired the vessel from its owner, ALS Timber Enterprises (ALS).18 Not being the owner of the M/T
Espiritu Santo, petitioner did not have control and supervision over the vessel, its master and crew.19 Thus, it
could not be held liable for the loss of the shipment caused by the sinking of a ship it did not own.
We disagree.
Based on the agreement signed by the parties and the testimony of petitioners operations manager, it is
clear that it was a contract of carriage petitioner signed with MCCII. It actively negotiated and solicited
MCCIIs account, offered its services to ship the silica quartz and proposed to utilize the M/T Espiritu Santo in
lieu of the M/T Seebees or the M/T Shirley (as previously agreed upon in the voyage charter) since these
vessels had broken down.20
There is no dispute that petitioner was a common carrier. At the time of the loss of the cargo, it was engaged
in the business of carrying and transporting goods by water, for compensation, and offered its services to the
public.21
From the nature of their business and for reasons of public policy, common carriers are bound to observe
extraordinary diligence over the goods they transport according to the circumstances of each case.22 In the
event of loss of the goods, common carriers are responsible, unless they can prove that this was brought
about by the causes specified in Article 1734 of the Civil Code.23 In all other cases, common carriers are
presumed to be at fault or to have acted negligently, unless they prove that they observed extraordinary
diligence.24
Petitioner was the one which contracted with MCCII for the transport of the cargo. It had control over what
vessel it would use. All throughout its dealings with MCCII, it represented itself as a common carrier. The fact
that it did not own the vessel it decided to use to consummate the contract of carriage did not negate its
character and duties as a common carrier. The MCCII (respondents subrogor) could not be reasonably
expected to inquire about the ownership of the vessels which petitioner carrier offered to utilize. As a practical
matter, it is very difficult and often impossible for the general public to enforce its rights of action under a
contract of carriage if it should be required to know who the actual owner of the vessel is.25 In fact, in this case,
the voyage charter itself denominated petitioner as the "owner/operator" of the vessel.26
Petitioner next contends that if there was a contract of carriage, then it was between MCCII and ALS as
evidenced by the bill of lading ALS issued.27
Again, we disagree.
The bill of lading was merely a receipt issued by ALS to evidence the fact that the goods had been received
for transportation. It was not signed by MCCII, as in fact it was simply signed by the supercargo of ALS.28 This
is consistent with the fact that MCCII did not contract directly with ALS. While it is true that a bill of lading may
serve as the contract of carriage between the parties,29 it cannot prevail over the express provision of the
voyage charter that MCCII and petitioner executed:
[I]n cases where a Bill of Lading has been issued by a carrier covering goods shipped aboard a vessel under
a charter party, and the charterer is also the holder of the bill of lading, "the bill of lading operates as the
receipt for the goods, and as document of title passing the property of the goods, but not as varying the
contract between the charterer and the shipowner." The Bill of Lading becomes, therefore, only a receipt and
not the contract of carriage in a charter of the entire vessel, for the contract is the Charter Party, and is the law
between the parties who are bound by its terms and condition provided that these are not contrary to law,
morals, good customs, public order and public policy. 30
Finally, petitioner asserts that MCCII should be held liable for its own loss since the voyage charter stipulated
that cargo insurance was for the charterers account.31 This deserves scant consideration. This simply meant
that the charterer would take care of having the goods insured. It could not exculpate the carrier from liability
for the breach of its contract of carriage. The law, in fact, prohibits it and condemns it as unjust and contrary
to public policy.32
To summarize, a contract of carriage of goods was shown to exist; the cargo was loaded on board the vessel;
loss or non-delivery of the cargo was proven; and petitioner failed to prove that it exercised extraordinary
diligence to prevent such loss or that it was due to some casualty or force majeure. The voyage charter here
being a contract of affreightment, the carrier was answerable for the loss of the goods received for
transportation.33
The idea proposed by petitioner is not only preposterous, it is also dangerous. It says that a carrier that enters
into a contract of carriage is not liable to the charterer or shipper if it does not own the vessel it chooses to
use. MCCII never dealt with ALS and yet petitioner insists that MCCII should sue ALS for reimbursement for
its loss. Certainly, to permit a common carrier to escape its responsibility for the goods it agreed to transport
(by the expedient of alleging non-ownership of the vessel it employed) would radically derogate from the
carrier's duty of extraordinary diligence. It would also open the door to collusion between the carrier and the
supposed owner and to the possible shifting of liability from the carrier to one without any financial capability
to answer for the resulting damages.34
WHEREFORE, the petition is hereby DENIED.
SO ORDERED.
h. Planters v. CA G.R. No. 101503, September 15, 1993 226 SCRA 476
Does a charter-party between a shipowner and a charterer transform a common carrier into a private one as
1
to negate the civil law presumption of negligence in case of loss or damage to its cargo?
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 was entered into between Mitsubishi as shipper/charterer and KKKK as shipowner,
2
in Tokyo, Japan. Riders to the aforesaid charter-party starting from par. 16 to 40 were attached to the
3
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 were all presumably inspected by the
4
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). The hatches remained open
6
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. The petitioner's warehouse was made of corrugated galvanized iron (GI) sheets, with an opening
8
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). A private marine and cargo surveyor, Cargo Superintendents Company Inc. (CSCI), was hired by PPI
10
to determine the "outturn" of the cargo shipped, by taking draft readings of the vessel prior to and after
discharge. The survey report submitted by CSCI to the consignee (PPI) dated 19 July 1974 revealed a
11
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." Hence, on 18 July 1975, PPI filed an action for damages with the Court of First Instance of
14
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 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. Relying on the 1968 case of Home Insurance
16
Co. v. American Steamship Agencies, Inc., the appellate court ruled that the cargo vessel M/V "Sun Plum"
17
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 . . . (emphasis supplied).
18
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. Petitioner further argues that since the
19
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; a contract of affreightment by which the owner of a ship
20
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; Charter parties are of two types: (a) contract of
21
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. In both cases, the charter-party provides for the hire
22
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. The 23
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. In the case of private
25
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. On the contrary, no such
26
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 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, does not find application in our
29
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. When M/V "Sun Plum"
33
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).
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. Moreover, a shipowner is liable for damage to the
35
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. The carrier, nonetheless, shall be liable for the loss and damage resulting from the preceding
37
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.
SO ORDERED.
i. A.F Sanchez Brokerage Inc. v. CA, G.R. No. 147079, December 21, 2004
Before this Court on a petition for Certiorari is the appellate courts Decision of [1]
August 10, 2000 reversing and setting aside the judgment of Branch 133, Regional
Trial Court of Makati City, in Civil Case No. 93-76B which dismissed the complaint of
respondent FGU Insurance Corporation (FGU Insurance) against petitioner A.F.
Sanchez Brokerage, Inc. (Sanchez Brokerage).
On July 8, 1992, Wyeth-Pharma GMBH shipped on board an aircraft of KLM
Royal Dutch Airlines at Dusseldorf, Germany oral contraceptives consisting of
86,800 Blisters Femenal tablets, 14,000 Blisters Nordiol tablets and 42,000 Blisters
Trinordiol tablets for delivery to Manila in favor of the consignee, Wyeth-Suaco
Laboratories, Inc. The Femenal tablets were placed in 124 cartons and the Nordiol
[2]
tablets were placed in 20 cartons which were packed together in one (1) LD3
aluminum container, while the Trinordial tablets were packed in two pallets, each of
which contained 30 cartons. [3]
Wyeth-Suaco insured the shipment against all risks with FGU Insurance which
issued Marine Risk Note No. 4995 pursuant to Marine Open Policy No. 138. [4]
Upon arrival of the shipment on July 11, 1992 at the Ninoy Aquino International
Airport (NAIA), it was discharged without exception and delivered to the warehouse
[5] [6]
of the Philippine Skylanders, Inc. (PSI) located also at the NAIA for safekeeping. [7]
In order to secure the release of the cargoes from the PSI and the Bureau of
Customs, Wyeth-Suaco engaged the services of Sanchez Brokerage which had
been its licensed broker since 1984. As its customs broker, Sanchez Brokerage
[8]
calculates and pays the customs duties, taxes and storage fees for the cargo and
thereafter delivers it to Wyeth-Suaco. [9]
On July 29, 1992, Mitzi Morales and Ernesto Mendoza, representatives of

Sanchez Brokerage, paid PSI storage fee amounting to P8,572.35 a receipt for
which, Official Receipt No. 016992, was issued. On the receipt, another
[10]
representative of Sanchez Brokerage, M. Sison, acknowledged that he received the

[11]
cargoes consisting of three pieces in good condition. [12]
Wyeth-Suaco being a regular importer, the customs examiner did not inspect the
cargoes which were thereupon stripped from the aluminum containers and loaded
[13] [14]
inside two transport vehicles hired by Sanchez Brokerage. [15]
Among those who witnessed the release of the cargoes from the PSI warehouse
were Ruben Alonso and Tony Akas, employees of Elite Adjusters and Surveyors
[16]
Inc. (Elite Surveyors), a marine and cargo surveyor and insurance claim adjusters
firm engaged by Wyeth-Suaco on behalf of FGU Insurance.
Upon instructions of Wyeth-Suaco, the cargoes were delivered to Hizon
Laboratories Inc. in Antipolo City for quality control check. The delivery receipt, [17]
bearing No. 07037 dated July 29, 1992, indicated that the delivery consisted of one
container with 144 cartons of Femenal and Nordiol and 1 pallet containing
Trinordiol. [18]
On July 31, 1992, Ronnie Likas, a representative of Wyeth-Suaco, acknowledged

the delivery of the cargoes by affixing his signature on the delivery receipt. Upon [19]
inspection, however, he, together with Ruben Alonzo of Elite Surveyors, discovered
that 44 cartons containing Femenal and Nordiol tablets were in bad order. He thus [20]
placed a note above his signature on the delivery receipt stating that 44 cartons of
oral contraceptives were in bad order. The remaining 160 cartons of oral
contraceptives were accepted as complete and in good order.
Ruben Alonzo thus prepared and signed, along with Ronnie Likas, a survey
report dated July 31, 1992 stating that 41 cartons of Femenal tablets and 3 cartons
[21]
of Nordiol tablets were wetted (sic). [22]

The Elite Surveyors later issued Certificate No. CS-0731-1538/92 attached to
[23]
which was an Annexed Schedule whereon it was indicated that prior to the loading of
the cargoes to the brokers trucks at the NAIA, they were inspected and found to be in
apparent good condition. Also noted was that at the time of delivery to the
[24]
warehouse of Hizon Laboratories Inc., slight to heavy rains fell, which could account
for the wetting of the 44 cartons of Femenal and Nordiol tablets. [25]
On August 4, 1992, the Hizon Laboratories Inc. issued a Destruction

Report confirming that 38 x 700 blister packs of Femenal tablets, 3 x 700 blister
[26]
packs of Femenal tablets and 3 x 700 blister packs of Nordiol tablets were heavily
damaged with water and emitted foul smell.
On August 5, 1992, Wyeth-Suaco issued a Notice of Materials Rejection of 38 [27]
cartons of Femenal and 3 cartons of Nordiol on the ground that they were delivered
to Hizon Laboratories with heavy water damaged (sic) causing the cartons to sagged
(sic) emitting a foul order and easily attracted flies. [28]
Wyeth-Suaco later demanded, by letter of August 25, 1992, from Sanchez

[29]
Brokerage the payment of P191,384.25 representing the value of its loss arising from
the damaged tablets.
As the Sanchez Brokerage refused to heed the demand, Wyeth-Suaco filed an
insurance claim against FGU Insurance which paid Wyeth-Suaco the amount
of P181,431.49 in settlement of its claim under Marine Risk Note Number 4995.
Wyeth-Suaco thus issued Subrogation Receipt in favor of FGU Insurance.
[30]
On demand by FGU Insurance for payment of the amount of P181,431.49 it paid

Wyeth-Suaco, Sanchez Brokerage, by letter of January 7, 1993, disclaimed liability
[31]
for the damaged goods, positing that the damage was due to improper and
insufficient export packaging; that when the sealed containers were opened outside
the PSI warehouse, it was discovered that some of the loose cartons were
wet, prompting its (Sanchez Brokerages) representative Morales to inform the
[32]
Import-Export Assistant of Wyeth-Suaco, Ramir Calicdan, about the condition of the

cargoes but that the latter advised to still deliver them to Hizon Laboratories where
an adjuster would assess the damage. [33]
Hence, the filing by FGU Insurance of a complaint for damages before the
Regional Trial Court of Makati City against the Sanchez Brokerage.
The trial court, by Decision of July 29, 1996, dismissed the complaint, holding
[34]
that the Survey Report prepared by the Elite Surveyors is bereft of any evidentiary
support and a mere product of pure guesswork. [35]
On appeal, the appellate court reversed the decision of the trial court, it holding
that the Sanchez Brokerage engaged not only in the business of customs brokerage
but also in the transportation and delivery of the cargo of its clients, hence, a
common carrier within the context of Article 1732 of the New Civil Code. [36]
Noting that Wyeth-Suaco adduced evidence that the cargoes were delivered to
petitioner in good order and condition but were in a damaged state when delivered to
Wyeth-Suaco, the appellate court held that Sanchez Brokerage is presumed
negligent and upon it rested the burden of proving that it exercised extraordinary
negligence not only in instances when negligence is directly proven but also in those
cases when the cause of the damage is not known or unknown. [37]
The appellate court thus disposed:
IN THE LIGHT OF ALL THE FOREGOING, the appeal of the Appellant is GRANTED.
The Decision of the Court a quo is REVERSED. Another Decision is hereby rendered
in favor of the Appellant and against the Appellee as follows:
1. The Appellee is hereby ordered to pay the Appellant the principal

amount of P181, 431.49, with interest thereupon at the rate of 6% per
annum, from the date of the Decision of the Court, until the said
amount is paid in full;
2. The Appellee is hereby ordered to pay to the Appellant the amount of

P20,000.00 as and by way of attorneys fees; and
3. The counterclaims of the Appellee are DISMISSED. [38]
Sanchez Brokerages Motion for Reconsideration having been denied by the

appellate courts Resolution of December 8, 2000 which was received by petitioner
on January 5, 2001, it comes to this Court on petition for certiorari filed on March 6,
2001.
In the main, petitioner asserts that the appellate court committed grave and
reversible error tantamount to abuse of discretion when it found petitioner a common
carrier within the context of Article 1732 of the New Civil Code.
Respondent FGU Insurance avers in its Comment that the proper course of
action which petitioner should have taken was to file a petition for review on certiorari
since the sole office of a writ of certiorari is the correction of errors of jurisdiction
including the commission of grave abuse of discretion amounting to lack or excess of
jurisdiction and does not include correction of the appellate courts evaluation of the
evidence and factual findings thereon.
On the merits, respondent FGU Insurance contends that petitioner, as a common
carrier, failed to overcome the presumption of negligence, it being documented that
petitioner withdrew from the warehouse of PSI the subject shipment entirely in good
order and condition. [39]
The petition fails.

Rule 45 is clear that decisions, final orders or resolutions of the Court of Appeals
in any case, i.e., regardless of the nature of the action or proceedings involved, may
be appealed to this Court by filing a petition for review, which would be but a
continuation of the appellate process over the original case. [40]
The Resolution of the Court of Appeals dated December 8, 2000 denying the
motion for reconsideration of its Decision of August 10, 2000 was received by
petitioner on January 5, 2001. Since petitioner failed to appeal within 15 days or on
or before January 20, 2001, the appellate courts decision had become final and
executory. The filing by petitioner of a petition for certiorari on March 6, 2001 cannot
serve as a substitute for the lost remedy of appeal.
In another vein, the rule is well settled that in a petition for certiorari, the petitioner
must prove not merely reversible error but also grave abuse of discretion amounting
to lack or excess of jurisdiction.
Petitioner alleges that the appellate court erred in reversing and setting aside the
decision of the trial court based on its finding that petitioner is liable for the damage to
the cargo as a common carrier. What petitioner is ascribing is an error of judgment,
not of jurisdiction, which is properly the subject of an ordinary appeal.
Where the issue or question involves or affects the wisdom or legal soundness of
the decision not the jurisdiction of the court to render said decision the same is
beyond the province of a petition for certiorari. The supervisory jurisdiction of this
[41]
Court to issue a cert writ cannot be exercised in order to review the judgment of
lower courts as to its intrinsic correctness, either upon the law or the facts of the
case. [42]
Procedural technicalities aside, the petition still fails.

The appellate court did not err in finding petitioner, a customs broker, to be also a
common carrier, as defined under Article 1732 of the Civil Code, to wit:
Art. 1732. Common carriers are persons, corporations, firms or associations

engaged in the business of carrying or transporting passengers or goods or both, by
land, water, or air, for compensation, offering their services to the public.
Anacleto F. Sanchez, Jr., the Manager and Principal Broker of Sanchez

Brokerage, himself testified that the services the firm offers include the delivery of
goods to the warehouse of the consignee or importer.
ATTY. FLORES:
Q: What are the functions of these license brokers, license customs broker?
WITNESS:
As customs broker, we calculate the taxes that has to be paid in cargos, and those upon
approval of the importer, we prepare the entry together for processing and claims from
customs and finally deliver the goods to the warehouse of the importer.[43]
Article 1732 does not distinguish between one whose principal business activity
is the carrying of goods and one who does such carrying only as an ancillary
activity. The contention, therefore, of petitioner that it is not a common carrier but a
[44]
customs broker whose principal function is to prepare the correct customs

declaration and proper shipping documents as required by law is bereft of merit. It
suffices that petitioner undertakes to deliver the goods for pecuniary consideration.
In this light, petitioner as a common carrier is mandated to observe, under Article
1733 of the Civil Code, extraordinary diligence in the vigilance over the goods it
[45]
transports according to all the circumstances of each case. In the event that the
goods are lost, destroyed or deteriorated, it is presumed to have been at fault or to
have acted negligently, unless it proves that it observed extraordinary
diligence. [46]
The concept of extra-ordinary diligence was explained in Compania Maritima v.

Court of Appeals: [47]
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 characteristics
of goods tendered for shipment, and to exercise due care in the handling and
stowage, including such methods as their nature requires. [48]
In the case at bar, it was established that petitioner received the cargoes from the
PSI warehouse in NAIA in good order and condition; and that upon delivery by
[49]
petitioner to Hizon Laboratories Inc., some of the cargoes were found to be in bad
order, as noted in the Delivery Receipt issued by petitioner, and as indicated in the
[50]
Survey Report of Elite Surveyors and the Destruction Report of Hizon Laboratories,
[51]
Inc.
[52]
In an attempt to free itself from responsibility for the damage to the goods,
petitioner posits that they were damaged due to the fault or negligence of the shipper
for failing to properly pack them and to the inherent characteristics of the goods ; [53]
and that it should not be faulted for following the instructions of Calicdan of
Wyeth-Suaco to proceed with the delivery despite information conveyed to the latter
that some of the cartons, on examination outside the PSI warehouse, were found to
be wet. [54]
While paragraph No. 4 of Article 1734 of the Civil Code exempts a common
[55]
carrier from liability if the loss or damage is due to the character of the goods or
defects in the packing or in the containers, the rule is that if the improper packing is
known to the carrier or his employees or is apparent upon ordinary observation, but
he nevertheless accepts the same without protest or exception notwithstanding such
condition, he is not relieved of liability for the resulting damage. [56]
If the claim of petitioner that some of the cartons were already damaged upon
delivery to it were true, then it should naturally have received the cargo under protest
or with reservations duly noted on the receipt issued by PSI. But it made no such
protest or reservation.[57]
Moreover, as observed by the appellate court, if indeed petitioners employees

only examined the cargoes outside the PSI warehouse and found some to be wet,
they would certainly have gone back to PSI, showed to the warehouseman the
damage, and demanded then and there for Bad Order documents or a certification
confirming the damage. Or, petitioner would have presented, as witness, the
[58]
employees of the PSI from whom Morales and Domingo took delivery of the cargo to
prove that, indeed, part of the cargoes was already damaged when the container
was allegedly opened outside the warehouse. [59]
Petitioner goes on to posit that contrary to the report of Elite Surveyors, no rain
fell that day. Instead, it asserts that some of the cargoes were already wet on delivery
by PSI outside the PSI warehouse but such notwithstanding Calicdan directed
Morales to proceed with the delivery to Hizon Laboratories, Inc.
While Calicdan testified that he received the purported telephone call of Morales
on July 29, 1992, he failed to specifically declare what time he received the call. As to
whether the call was made at the PSI warehouse when the shipment was stripped
from the airport containers, or when the cargoes were already in transit to Antipolo, it
is not determinable. Aside from that phone call, petitioner admitted that it had no
documentary evidence to prove that at the time it received the cargoes, a part of it
was wet, damaged or in bad condition. [60]
The 4-page weather data furnished by PAGASA on request of Sanchez [61]
Brokerage hardly impresses, no witness having identified it and interpreted the

technical terms thereof.
The possibility on the other hand that, as found by Hizon Laboratories, Inc., the
oral contraceptives were damaged by rainwater while in transit to Antipolo City is
more likely then. Sanchez himself testified that in the past, there was a similar
instance when the shipment of Wyeth-Suaco was also found to be wet by rain.
ATTY. FLORES:
Q: Was there any instance that a shipment of this nature, oral contraceptives, that arrived at the
NAIA were damaged and claimed by the Wyeth-Suaco without any question?
WITNESS:
A: Yes sir, there was an instance that one cartoon (sic) were wetted (sic) but Wyeth-Suaco did
not claim anything against us.
ATTY. FLORES:
Q: HOW IS IT?
WITNESS:
A: We experienced, there was a time that we experienced that there was a cartoon (sic) wetted
(sic) up to the bottom are wet specially during rainy season.[62]
Since petitioner received all the cargoes in good order and condition at the time
they were turned over by the PSI warehouseman, and upon their delivery to Hizon
Laboratories, Inc. a portion thereof was found to be in bad order, it was incumbent on
petitioner to prove that it exercised extraordinary diligence in the carriage of the
goods. It did not, however. Hence, its presumed negligence under Article 1735 of the
Civil Code remains unrebutted.
WHEREFORE, the August 10, 2000 Decision of the Court of Appeals is hereby
AFFIRMED.
SO ORDERED.
2. Effect of Charter Party.

3. Common carrier v. Private Carrier.
a. Cebu Salvage Corporation v. Philippine Home Assurance Corp.

G.R. No. 150403 January 25, 2007
May a carrier be held liable for the loss of cargo resulting from the sinking of a ship it does not own?
This is the issue presented for the Courts resolution in this petition for review on certiorari1 assailing the
March 16, 2001 decision2 and September 17, 2001 resolution3 of the Court of Appeals (CA) in CA-G.R. CV
No. 40473 which in turn affirmed the December 27, 1989 decision4 of the Regional Trial Court (RTC), Branch
145, Makati, Metro Manila.5
The pertinent facts follow.
On November 12, 1984, petitioner Cebu Salvage Corporation (as carrier) and Maria Cristina Chemicals
Industries, Inc. [MCCII] (as charterer) entered into a voyage charter6 wherein petitioner was to load 800 to
1,100 metric tons of silica quartz on board the M/T Espiritu Santo7 at Ayungon, Negros Occidental for
transport to and discharge at Tagoloan, Misamis Oriental to consignee Ferrochrome Phils., Inc.8
Pursuant to the contract, on December 23, 1984, petitioner received and loaded 1,100 metric tons of silica
quartz on board the M/T Espiritu Santo which left Ayungon for Tagoloan the next day.9 The shipment never
reached its destination, however, because the M/T Espiritu Santo sank in the afternoon of December 24,
1984 off the beach of Opol, Misamis Oriental, resulting in the total loss of the cargo.10
MCCII filed a claim for the loss of the shipment with its insurer, respondent Philippine Home Assurance
Corporation.11 Respondent paid the claim in the amount of P211,500 and was subrogated to the rights of
MCCII.12Thereafter, it filed a case in the RTC13 against petitioner for reimbursement of the amount it paid
MCCII.
After trial, the RTC rendered judgment in favor of respondent. It ordered petitioner to pay
respondent P211,500 plus legal interest, attorneys fees equivalent to 25% of the award and costs of suit.
On appeal, the CA affirmed the decision of the RTC. Hence, this petition.
Petitioner and MCCII entered into a "voyage charter," also known as a contract of affreightment wherein the
ship was leased for a single voyage for the conveyance of goods, in consideration of the payment of
freight.14 Under a voyage charter, the shipowner 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 freight.15 An
owner who retains possession of the ship remains liable as carrier and must answer for loss or non-delivery
of the goods received for transportation.16
Petitioner argues that the CA erred when it affirmed the RTC finding that the voyage charter it entered into
with MCCII was a contract of carriage.17 It insists that the agreement was merely a contract of hire wherein
MCCII hired the vessel from its owner, ALS Timber Enterprises (ALS).18 Not being the owner of the M/T
Espiritu Santo, petitioner did not have control and supervision over the vessel, its master and crew. 19 Thus, it
could not be held liable for the loss of the shipment caused by the sinking of a ship it did not own.
We disagree.
Based on the agreement signed by the parties and the testimony of petitioners operations manager, it is
clear that it was a contract of carriage petitioner signed with MCCII. It actively negotiated and solicited
MCCIIs account, offered its services to ship the silica quartz and proposed to utilize the M/T Espiritu Santo in
lieu of the M/T Seebees or the M/T Shirley (as previously agreed upon in the voyage charter) since these
vessels had broken down.20
There is no dispute that petitioner was a common carrier. At the time of the loss of the cargo, it was engaged
in the business of carrying and transporting goods by water, for compensation, and offered its services to the
public.21
From the nature of their business and for reasons of public policy, common carriers are bound to observe
extraordinary diligence over the goods they transport according to the circumstances of each case.22 In the
event of loss of the goods, common carriers are responsible, unless they can prove that this was brought
about by the causes specified in Article 1734 of the Civil Code.23 In all other cases, common carriers are
presumed to be at fault or to have acted negligently, unless they prove that they observed extraordinary
diligence.24
Petitioner was the one which contracted with MCCII for the transport of the cargo. It had control over what
vessel it would use. All throughout its dealings with MCCII, it represented itself as a common carrier. The fact
that it did not own the vessel it decided to use to consummate the contract of carriage did not negate its
character and duties as a common carrier. The MCCII (respondents subrogor) could not be reasonably
expected to inquire about the ownership of the vessels which petitioner carrier offered to utilize. As a practical
matter, it is very difficult and often impossible for the general public to enforce its rights of action under a
contract of carriage if it should be required to know who the actual owner of the vessel is.25 In fact, in this case,
the voyage charter itself denominated petitioner as the "owner/operator" of the vessel.26
Petitioner next contends that if there was a contract of carriage, then it was between MCCII and ALS as
evidenced by the bill of lading ALS issued.27
Again, we disagree.
The bill of lading was merely a receipt issued by ALS to evidence the fact that the goods had been received
for transportation. It was not signed by MCCII, as in fact it was simply signed by the supercargo of ALS.28 This
is consistent with the fact that MCCII did not contract directly with ALS. While it is true that a bill of lading may
serve as the contract of carriage between the parties,29 it cannot prevail over the express provision of the
voyage charter that MCCII and petitioner executed:
[I]n cases where a Bill of Lading has been issued by a carrier covering goods shipped aboard a vessel under
a charter party, and the charterer is also the holder of the bill of lading, "the bill of lading operates as the
receipt for the goods, and as document of title passing the property of the goods, but not as varying the
contract between the charterer and the shipowner." The Bill of Lading becomes, therefore, only a receipt and
not the contract of carriage in a charter of the entire vessel, for the contract is the Charter Party, and is the law
between the parties who are bound by its terms and condition provided that these are not contrary to law,
morals, good customs, public order and public policy. 30
Finally, petitioner asserts that MCCII should be held liable for its own loss since the voyage charter stipulated
that cargo insurance was for the charterers account.31 This deserves scant consideration. This simply meant
that the charterer would take care of having the goods insured. It could not exculpate the carrier from liability
for the breach of its contract of carriage. The law, in fact, prohibits it and condemns it as unjust and contrary
to public policy.32
To summarize, a contract of carriage of goods was shown to exist; the cargo was loaded on board the vessel;
loss or non-delivery of the cargo was proven; and petitioner failed to prove that it exercised extraordinary
diligence to prevent such loss or that it was due to some casualty or force majeure. The voyage charter here
being a contract of affreightment, the carrier was answerable for the loss of the goods received for
transportation.33
The idea proposed by petitioner is not only preposterous, it is also dangerous. It says that a carrier that enters
into a contract of carriage is not liable to the charterer or shipper if it does not own the vessel it chooses to
use. MCCII never dealt with ALS and yet petitioner insists that MCCII should sue ALS for reimbursement for
its loss. Certainly, to permit a common carrier to escape its responsibility for the goods it agreed to transport
(by the expedient of alleging non-ownership of the vessel it employed) would radically derogate from the
carrier's duty of extraordinary diligence. It would also open the door to collusion between the carrier and the
supposed owner and to the possible shifting of liability from the carrier to one without any financial capability
to answer for the resulting damages.34
WHEREFORE, the petition is hereby DENIED.
SO ORDERED.
b. Valenzuela Hardwood and Industrial Supply, Inc. v. CA G.R No.

102316 June 30, 1997
PANGANIBAN, J.:
Is a stipulation in a charter party that the (o)wners shall not be responsible for
loss, split, short-landing, breakages and any kind of damages to the
cargo valid? This is the main question raised in this petition for review assailing the
[1]
Decision of Respondent Court of Appeals in CA-G.R. No. CV-20156 promulgated

[2]
on October 15, 1991. The Court of Appeals modified the judgment of the Regional
Trial Court of Valenzuela, Metro Manila, Branch 171, the dispositive portion of which
reads:
WHEREFORE, Judgment is hereby rendered ordering South Sea Surety and Insurance Co.,
Inc. to pay plaintiff the sum of TWO MILLION PESOS (P2,000,000.00) representing the
value of the policy of the lost logs with legal interest thereon from the date of demand on
February 2, 1984 until the amount is fully paid or in the alternative, defendant Seven
Brothers Shipping Corporation to pay plaintiff the amount of TWO MILLION PESOS
(P2,000,000.00) representing the value of lost logs plus legal interest from the date of
demand on April 24, 1984 until full payment thereof; the reasonable attorneys fees in the
amount equivalent to five (5) percent of the amount of the claim and the costs of the suit.
Plaintiff is hereby ordered to pay defendant Seven Brothers Shipping Corporation the sum of
TWO HUNDRED THIRTY THOUSAND PESOS (P230,000.00) representing the balance of
the stipulated freight charges.
Defendant South Sea Surety and Insurance Companys counterclaim is hereby dismissed.
In its assailed Decision, Respondent Court of Appeals held:
WHEREFORE, the appealed judgment is hereby AFFIRMED except in so far (sic) as the
liability of the Seven Brothers Shipping Corporation to the plaintiff is concerned which is
hereby REVERSED and SET ASIDE. [3]
The Facts
The factual antecedents of this case as narrated in the Court of Appeals Decision
are as follows:
It appears that on 16 January 1984, plaintiff (Valenzuela Hardwood and Industrial Supply,
Inc.) entered into an agreement with the defendant Seven Brothers (Shipping Corporation)
whereby the latter undertook to load on board its vessel M/V Seven Ambassador the formers
lauan round logs numbering 940 at the port of Maconacon, Isabela for shipment to Manila.
On 20 January 1984, plaintiff insured the logs against loss and/or damage with defendant
South Sea Surety and Insurance Co., Inc. for P2,000,000.00 and the latter issued its Marine
Cargo Insurance Policy No. 84/24229 for P2,000,000.00 on said date.
On 24 January 1984, the plaintiff gave the check in payment of the premium on the
insurance policy to Mr. Victorio Chua.
In the meantime, the said vessel M/V Seven Ambassador sank on 25 January 1984 resulting
in the loss of the plaintiffs insured logs.
On 30 January 1984, a check for P5,625.00 (Exh. E) to cover payment of the premium and
documentary stamps due on the policy was tendered due to the insurer but was not
accepted. Instead, the South Sea Surety and Insurance Co., Inc. cancelled the insurance
policy it issued as of the date of the inception for non-payment of the premium due in
accordance with Section 77 of the Insurance Code.
On 2 February 1984, plaintiff demanded from defendant South Sea Surety and Insurance Co.,
Inc. the payment of the proceeds of the policy but the latter denied liability under the
policy. Plaintiff likewise filed a formal claim with defendant Seven Brothers Shipping
Corporation for the value of the lost logs but the latter denied the claim.
After due hearing and trial, the court a quo rendered judgment in favor of plaintiff and
against defendants. Both defendants shipping corporation and the surety company appealed.
Defendant-appellant Seven Brothers Shipping Corporation impute (sic) to the court a quo the
following assignment of errors, to wit:
A. The lower court erred in holding that the proximate cause of the sinking of the vessel
Seven Ambassadors, was not due to fortuitous event but to the negligence of the captain in
stowing and securing the logs on board, causing the iron chains to snap and the logs to roll to
the portside.
B. The lower court erred in declaring that the non-liability clause of the Seven Brothers
Shipping Corporation from logs (sic) of the cargo stipulated in the charter party is void for
being contrary to public policy invoking article 1745 of the New Civil Code.
C. The lower court erred in holding defendant-appellant Seven Brothers Shipping

Corporation liable in the alternative and ordering/directing it to pay plaintiff-appellee the
amount of two million (P2,000,000.00) pesos representing the value of the logs plus legal
interest from date of demand until fully paid.
D. The lower court erred in ordering defendant-appellant Seven Brothers Shipping

Corporation to pay appellee reasonable attorneys fees in the amount equivalent to 5% of the
amount of the claim and the costs of the suit.
E. The lower court erred in not awarding defendant-appellant Seven Brothers Corporation its
counter-claim for attorneys fees.
F. The lower court erred in not dismissing the complaint against Seven Brothers Shipping
Corporation.
Defendant-appellant South Sea Surety and Insurance Co., Inc. assigns the following errors:
A. The trial court erred in holding that Victorio Chua was an agent of defendant-appellant
South Sea Surety and Insurance Company, Inc. and likewise erred in not holding that he was
the representative of the insurance broker Columbia Insurance Brokers, Ltd.
B. The trial court erred in holding that Victorio Chua received compensation/commission on
the premiums paid on the policies issued by the defendant-appellant South Sea Surety and
Insurance Company, Inc.
C. The trial court erred in not applying Section 77 of the Insurance Code.
D. The trial court erred in disregarding the receipt of payment clause attached to and forming
part of the Marine Cargo Insurance Policy No. 84/24229.
E. The trial court in disregarding the statement of account or bill stating the amount of
premium and documentary stamps to be paid on the policy by the plaintiff-appellee.
F. The trial court erred in disregarding the indorsement of cancellation of the policy due to
non-payment of premium and documentary stamps.
G. The trial court erred in ordering defendant-appellant South Sea Surety and Insurance
Company, Inc. to pay plaintiff-appellee P2,000,000.00 representing value of the policy with
legal interest from 2 February 1984 until the amount is fully paid,
H. The trial court erred in not awarding to the defendant-appellant the attorneys fees alleged
and proven in its counterclaim.
The primary issue to be resolved before us is whether defendants shipping corporation and
the surety company are liable to the plaintiff for the latters lost logs.
[4]
The Court of Appeals affirmed in part the RTC judgment by sustaining the liability
of South Sea Surety and Insurance Company (South Sea), but modified it by holding
that Seven Brothers Shipping Corporation (Seven Brothers) was not liable for the lost
cargo. In modifying the RTC judgment, the respondent appellate court ratiocinated
[5]
thus:
It appears that there is a stipulation in the charter party that the ship owner would be
exempted from liability in case of loss.
The court a quo erred in applying the provisions of the Civil Code on common carriers to
establish the liability of the shipping corporation. The provisions on common carriers should
not be applied where the carrier is not acting as such but as a private carrier.
Under American jurisprudence, a common carrier undertaking to carry a special cargo or

chartered to a special person only, becomes a private carrier.
As a private carrier, a stipulation exempting the owner from liability even for the negligence
of its agent is valid (Home Insurance Company, Inc. vs. American Steamship Agencies, Inc.,
23 SCRA 24).
The shipping corporation should not therefore be held liable for the loss of the logs. [6]
South Sea and herein Petitioner Valenzuela Hardwood and Industrial Supply, Inc.
(Valenzuela) filed separate petitions for review before this Court. In a Resolution
dated June 2, 1995, this Court denied the petition of South Sea. There the Court
[7]
found no reason to reverse the factual findings of the trial court and the Court of
Appeals that Chua was indeed an authorized agent of South Sea when he received
Valenzuelas premium payment for the marine cargo insurance policy which was thus
binding on the insurer. [8]
The Court is now called upon to resolve the petition for review filed by Valenzuela
assailing the CA Decision which exempted Seven Brothers from any liability for the
lost cargo.
The Issue
Petitioner Valenzuelas arguments revolve around a single issue: whether or not
respondent Court (of Appeals) committed a reversible error in upholding the validity
of the stipulation in the charter party executed between the petitioner and the private
respondent exempting the latter from liability for the loss of petitioners logs arising
from the negligence of its (Seven Brothers) captain. [9]
The Courts Ruling
The petition is not meritorious.
Validity of Stipulation is Lis Mota
The charter party between the petitioner and private respondent stipulated that
the (o)wners shall not be responsible for loss, split, short-landing, breakages and any
kind of damages to the cargo. The validity of this stipulation is the lis mota of this
[10]
case.
It should be noted at the outset that there is no dispute between the parties that
the proximate cause of the sinking of M/V Seven Ambassadors resulting in the loss
of its cargo was the snapping of the iron chains and the subsequent rolling of the logs
to the portside due to the negligence of the captain in stowing and securing the logs
on board the vessel and not due to fortuitous event. Likewise undisputed is the
[11]
status of Private Respondent Seven Brothers as a private carrier when it contracted

to transport the cargo of Petitioner Valenzuela. Even the latter admits this in its
petition.[12]
The trial court deemed the charter party stipulation void for being contrary to
public policy, citing Article 1745 of the Civil Code which provides:
[13]
Art. 1745. Any of the following or similar stipulations shall be considered unreasonable,
unjust and contrary to public policy:
(1) That the goods are transported at the risk of the owner or shipper;
(2) That the common carrier will not be liable for any loss, destruction, or deterioration of
the goods;
(3) That the common carrier need not observe any diligence in the custody of the goods;
(4) That the common carrier shall exercise a degree of diligence less than that of a good
father of a family, or of a man of ordinary prudence in the vigilance over the movables
transported;
(5) That the common carrier shall not be responsible for the acts or omissions of his or its
employees;
(6) That the common carriers liability for acts committed by thieves, or of robbers who do
not act with grave or irresistible threat, violence or force, is dispensed with or diminished;
(7) That the common carrier is not responsible for the loss, destruction, or deterioration of
goods on account of the defective condition of the car, vehicle, ship, airplane or other
equipment used in the contract of carriage.
Petitioner Valenzuela adds that the stipulation is void for being contrary to
Articles 586 and 587 of the Code of Commerce and Articles 1170 and 1173 of the
[14]
Civil Code. Citing Article 1306 and paragraph 1, Article 1409 of the Civil
Code, petitioner further contends that said stipulation gives no duty or obligation to
[15]
the private respondent to observe the diligence of a good father of a family in the
custody and transportation of the cargo."
The Court is not persuaded. As adverted to earlier, it is undisputed that private
respondent had acted as a private carrier in transporting petitioners lauan logs. Thus,
Article 1745 and other Civil Code provisions on common carriers which were cited by
petitioner may not be applied unless expressly stipulated by the parties in their
charter party. [16]
In a contract of private carriage, the parties may validly stipulate that

responsibility for the cargo rests solely on the charterer, exempting the shipowner
from liability for loss of or damage to the cargo caused even by the negligence of the
ship captain. Pursuant to Article 1306 of the Civil Code, such stipulation is valid
[17]
because it is freely entered into by the parties and the same is not contrary to law,
morals, good customs, public order, or public policy. Indeed, their contract of private
carriage is not even a contract of adhesion. We stress that in a contract of private
carriage, the parties may freely stipulate their duties and obligations which perforce
would be binding on them. Unlike in a contract involving a common carrier, private
carriage does not involve the general public. Hence, the stringent provisions of the
Civil Code on common carriers protecting the general public cannot justifiably be
applied to a ship transporting commercial goods as a private carrier. Consequently,
the public policy embodied therein is not contravened by stipulations in a charter
party that lessen or remove the protection given by law in contracts involving
common carriers.
The issue posed in this case and the arguments raised by petitioner are not
novel; they were resolved long ago by this Court in Home Insurance Co. vs.
American Steamship Agencies, Inc. In that case, the trial court similarly nullified a
[18]
stipulation identical to that involved in the present case for being contrary to public
policy based on Article 1744 of the Civil Code and Article 587 of the Code of
Commerce.Consequently, the trial court held the shipowner liable for damages
resulting from the partial loss of the cargo. This Court reversed the trial court and laid
down, through Mr. Justice Jose P. Bengzon, the following well-settled observation
and doctrine:
The provisions of our Civil Code on common carriers were taken from Anglo-American
law. Under American jurisprudence, a common carrier undertaking to carry a special cargo
or chartered to a special person only, becomes a private carrier. As a private carrier, a
stipulation exempting the owner from liability for the negligence of its agent is not against
public policy, and is deemed valid.
Such doctrine We find reasonable. The Civil Code provisions on common carriers should not
be applied where the carrier is not acting as such but as a private carrier. The stipulation in
the charter party absolving the owner from liability for loss due to the negligence of its agent
would be void only if the strict public policy governing common carriers is applied. Such
policy has no force where the public at large is not involved, as in this case of a ship totally
chartered for the use of a single party. (Underscoring supplied.)
[19]
Indeed, where the reason for the rule ceases, the rule itself does not apply. The
general public enters into a contract of transportation with common carriers without a
hand or a voice in the preparation thereof. The riding public merely adheres to the
contract; even if the public wants to, it cannot submit its own stipulations for the
approval of the common carrier. Thus, the law on common carriers extends its
protective mantle against one-sided stipulations inserted in tickets, invoices or other
documents over which the riding public has no understanding or, worse, no
choice. Compared to the general public, a charterer in a contract of private carriage
is not similarly situated. It can -- and in fact it usually does -- enter into a free and
voluntary agreement. In practice, the parties in a contract of private carriage can
stipulate the carriers obligations and liabilities over the shipment which, in turn,
determine the price or consideration of the charter. Thus, a charterer, in exchange
for convenience and economy, may opt to set aside the protection of the law on
common carriers. When the charterer decides to exercise this option, he takes a
normal business risk.
Petitioner contends that the rule in Home Insurance is not applicable to the
present case because it covers only a stipulation exempting a private carrier from
liability for the negligence of his agent, but it does not apply to a stipulation
exempting a private carrier like private respondent from the negligence of his
employee or servant which is the situation in this case. This contention of petitioner
[20]
is bereft of merit, for it raises a distinction without any substantive difference. The
case of Home Insurance specifically dealt with the liability of the shipowner for acts
or negligence of its captain and crew and a charter party stipulation which exempts
[21]
the owner of the vessel from any loss or damage or delay arising from any other
source, even from the neglect or fault of the captain or crew or some other person
employed by the owner on board, for whose acts the owner would ordinarily be liable
except for said paragraph. Undoubtedly, Home Insurance is applicable to the case
[22]
at bar.
The naked assertion of petitioner that the American rule enunciated in Home
Insurance is not the rule in the Philippines deserves scant consideration. The Court
[23]
there categorically held that said rule was reasonable and proceeded to apply it in
the resolution of that case. Petitioner miserably failed to show such circumstances or
arguments which would necessitate a departure from a well-settled
rule.Consequently, our ruling in said case remains a binding judicial precedent based
on the doctrine of stare decisis and Article 8 of the Civil Code which provides that
(j)udicial decisions applying or interpreting the laws or the Constitution shall form part
of the legal system of the Philippines.
In fine, the respondent appellate court aptly stated that [in the case of] a private
carrier, a stipulation exempting the owner from liability even for the negligence of its
agent is valid.[24]
Other Arguments
On the basis of the foregoing alone, the present petition may already be
denied; the Court, however, will discuss the other arguments of petitioner for the
benefit and satisfaction of all concerned.
Articles 586 and 587, Code of Commerce
Petitioner Valenzuela insists that the charter party stipulation is contrary to

Articles 586 and 587 of the Code of Commerce which confer on petitioner the right to
recover damages from the shipowner and ship agent for the acts or conduct of the
captain. We are not persuaded. Whatever rights petitioner may have under the
[25]
aforementioned statutory provisions were waived when it entered into the charter
party.
Article 6 of the Civil Code provides that (r)ights may be waived, unless the waiver
is contrary to law, public order, public policy, morals, or good customs, or prejudicial
to a person with a right recognized by law. As a general rule patrimonial rights may
be waived as opposed to rights to personality and family rights which may not be
made the subject of waiver. Being patently and undoubtedly patrimonial, petitioners
[26]
right conferred under said articles may be waived. This, the petitioner did by
acceding to the contractual stipulation that it is solely responsible for any damage to
the cargo, thereby exempting the private carrier from any responsibility for loss or
damage thereto. Furthermore, as discussed above, the contract of private carriage
binds petitioner and private respondent alone; it is not imbued with public policy
considerations for the general public or third persons are not affected thereby.
Articles 1170 and 1173, Civil Code
Petitioner likewise argues that the stipulation subject of this controversy is void
for being contrary to Articles 1170 and 1173 of the Civil Code which read:
[27]
Art. 1170. Those who in the performance of their obligations are guilty of fraud, negligence,
or delay, and those who in any manner contravene the tenor thereof, are liable for damages
Art. 1173. The fault or negligence of the obligor consists in the omission of that diligence
which is required by the nature of the obligation and corresponds with the circumstances of
the persons, of the time and of the place. When negligence shows bad faith, the provisions of
articles 1171 and 2201, shall apply.
If the law does not state the diligence which is to be observed in the performance, that which
is expected of a good father of a family shall be required.
The Court notes that the foregoing articles are applicable only to the obligor or
the one with an obligation to perform. In the instant case, Private Respondent Seven
Brothers is not an obligor in respect of the cargo, for this obligation to bear the loss
was shifted to petitioner by virtue of the charter party. This shifting of responsibility,
as earlier observed, is not void. The provisions cited by petitioner are, therefore,
inapplicable to the present case.
Moreover, the factual milieu of this case does not justify the application of the
second paragraph of Article 1173 of the Civil Code which prescribes the standard of
diligence to be observed in the event the law or the contract is silent. In the instant
case, Article 362 of the Code of Commerce provides the standard of ordinary
[28]
diligence for the carriage of goods by a carrier. The standard of diligence under this
statutory provision may, however, be modified in a contract of private carriage as the
petitioner and private respondent had done in their charter party.
Cases Cited by Petitioner Inapplicable
Petitioner cites Shewaram vs. Philippine Airlines, Inc. which, in turn, [29]
quoted Juan Ysmael & Co. vs. Gabino Barreto & Co. and argues that the public
[30]
policy considerations stated there vis--viscontractual stipulations limiting the carriers

liability be applied with equal force to this case. It also cites Manila Railroad Co. vs.
[31]
Compaia Transatlantica and contends that stipulations exempting a party from

[32]
liability for damages due to negligence should not be countenanced and should be
strictly construed against the party claiming its benefit. We disagree.
[33]
The cases of Shewaram and Ysmael both involve a common carrier; thus, they
necessarily justify the application of such policy considerations and concomitantly
stricter rules. As already discussed above, the public policy considerations behind
the rigorous treatment of common carriers are absent in the case of private
carriers. Hence, the stringent laws applicable to common carriers are not applied to
private carriers. The case of Manila Railroad is also inapplicable because the action
for damages there does not involve a contract for transportation. Furthermore, the
defendant therein made a promise to use due care in the lifting operations
and, consequently, it was bound by its undertaking; besides, the exemption was
intended to cover accidents due to hidden defects in the apparatus or other
unforseeable occurrences not caused by its personal negligence. This promise was
thus construed to make sense together with the stipulation against liability for
damages. In the present case, we stress that the private respondent made no such
[34]
promise. The agreement of the parties to exempt the shipowner from responsibility
for any damage to the cargo and place responsibility over the same to petitioner is
the lone stipulation considered now by this Court.
Finally, petitioner points to Standard Oil Co. of New York vs. Lopez
Costelo, Walter A. Smith & Co. vs. Cadwallader Gibson Lumber Co., N. T. Hashim
[35] [36]
and Co. vs. Rocha and Co., Ohta

[37]
Development Co. vs.
SteamshipPompey and Limpangco Sons vs. Yangco Steamship Co. in support of
[38] [39]
its contention that the shipowner be held liable for damages. These however are
[40]
not on all fours with the present case because they do not involve a similar factual
milieu or an identical stipulation in the charter party expressly exempting the
shipowner from responsibility for any damage to the cargo.
Effect of the South Sea Resolution
In its memorandum, Seven Brothers argues that petitioner has no cause of action
against it because this Court has earlier affirmed the liability of South Sea for the loss
suffered by petitioner. Private respondent submits that petitioner is not legally entitled
to collect twice for a single loss. In view of the above disquisition upholding the
[41]
validity of the questioned charter party stipulation and holding that petitioner may not
recover from private respondent, the present issue is moot and academic. It suffices
to state that the Resolution of this Court dated June 2, 1995 affirming the liability of
[42]
South Sea does not, by itself, necessarily preclude the petitioner from proceeding
against private respondent. An aggrieved party may still recover the deficiency from
the person causing the loss in the event the amount paid by the insurance company
does not fully cover the loss. Article 2207 of the Civil Code provides:
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 has violated the contract. If the amount paid by the
insurance company does not fully cover the injury or loss, the aggrieved party shall be
entitled to recover the deficiency from the person causing the loss or injury.
WHEREFORE, premises considered, the petition is hereby DENIED for its utter
failure to show any reversible error on the part of Respondent Court. The assailed
Decision is AFFIRMED.
SO ORDERED
c. Loadmasters Customs Services, Inc. Glodel Brokerage

Corporation, G.R. No. 179446 January 10, 2011
This is a petition for review on certiorari under Rule 45 of the Revised Rules of Court
assailing the August 24, 2007 Decision[1] of the Court of Appeals (CA) in CA-G.R. CV
No. 82822, entitled R&B Insurance Corporation v. Glodel Brokerage Corporation and
Loadmasters Customs Services, Inc., which held petitioner Loadmasters Customs
Services, Inc. (Loadmasters) liable to respondent Glodel Brokerage
Corporation (Glodel) in the amount of P1,896,789.62 representing the insurance
indemnity which R&B Insurance Corporation (R&B Insurance) paid to the
insured-consignee, Columbia Wire and Cable Corporation (Columbia).
THE FACTS:
On August 28, 2001, R&B Insurance issued Marine Policy No. MN-00105/2001 in favor
of Columbia to insure the shipment of 132 bundles of electric copper cathodes against All
Risks. On August 28, 2001, the cargoes were shipped on board the vessel Richard Rey
from Isabela, Leyte, to Pier 10, North Harbor, Manila. They arrived on the same date.
Columbia engaged the services of Glodel for the release and withdrawal of the
cargoes from the pier and the subsequent delivery to its warehouses/plants. Glodel, in
turn, engaged the services of Loadmasters for the use of its delivery trucks to transport
the cargoes to Columbias warehouses/plants in Bulacan and Valenzuela City.
The goods were loaded on board twelve (12) trucks owned by Loadmasters, driven
by its employed drivers and accompanied by its employed truck helpers. Six (6) truckloads
of copper cathodes were to be delivered to Balagtas, Bulacan, while the other six (6)
truckloads were destined for Lawang Bato, Valenzuela City. The cargoes in six truckloads
for Lawang Bato were duly delivered in Columbias warehouses there. Of the six (6) trucks
en route to Balagtas, Bulacan, however, only five (5) reached the destination. One (1) truck,
loaded with 11 bundles or 232 pieces of copper cathodes, failed to deliver its cargo.
Later on, the said truck, an Isuzu with Plate No. NSD-117, was recovered but without the
copper cathodes. Because of this incident, Columbia filed with R&B Insurance a claim for
insurance indemnity in the amount of P1,903,335.39. After the requisite investigation and
adjustment, R&B Insurance paid Columbia the amount of P1,896,789.62 as insurance
indemnity.
R&B Insurance, thereafter, filed a complaint for damages against both

Loadmasters and Glodel before the Regional Trial Court, Branch 14, Manila (RTC),
docketed as Civil Case No. 02-103040. It sought reimbursement of the amount it had paid
to Columbia for the loss of the subject cargo. It claimed that it had been subrogated to the
right of the consignee to recover from the party/parties who may be held legally liable for
the loss.[2]
On November 19, 2003, the RTC rendered a decision[3] holding Glodel liable for
damages for the loss of the subject cargo and dismissing Loadmasters counterclaim for
damages and attorneys fees against R&B Insurance. The dispositive portion of the
decision reads:
WHEREFORE, all premises considered, the plaintiff having

established by preponderance of evidence its claims against defendant
Glodel Brokerage Corporation, judgment is hereby rendered ordering
the latter:
1. To pay plaintiff R&B Insurance Corporation the sum

of P1,896,789.62 as actual and compensatory damages,
with interest from the date of complaint until fully paid;
2. To pay plaintiff R&B Insurance Corporation the amount
equivalent to 10% of the principal amount recovered as and
for attorneys fees plus P1,500.00 per appearance in Court;
3. To pay plaintiff R&B Insurance Corporation the sum
of P22,427.18 as litigation expenses.
WHEREAS, the defendant Loadmasters Customs Services, Inc.s
counterclaim for damages and attorneys fees against plaintiff are hereby
dismissed.
With costs against defendant Glodel Brokerage Corporation.

SO ORDERED.[4]
Both R&B Insurance and Glodel appealed the RTC decision to the CA.
On August 24, 2007, the CA rendered the assailed decision which reads in part:
Considering that appellee is an agent of appellant Glodel, whatever

liability the latter owes to appellant R&B Insurance Corporation as
insurance indemnity must likewise be the amount it shall be paid by
appellee Loadmasters.
WHEREFORE, the foregoing considered, the appeal is PARTLY

GRANTED in that the appellee Loadmasters is likewise held liable to
appellant Glodel in the amount of P1,896,789.62 representing the
insurance indemnity appellant Glodel has been held liable to appellant
R&B Insurance Corporation.
Appellant Glodels appeal to absolve it from any liability is herein

DISMISSED.
SO ORDERED.[5]
Hence, Loadmasters filed the present petition for review on certiorari before this
Court presenting the following
ISSUES
1. Can Petitioner Loadmasters be held liable to Respondent Glodel in

spite of the fact that the latter respondent Glodel did not file a
cross-claim against it (Loadmasters)?
2. Under the set of facts established and undisputed in the case, can
petitioner Loadmasters be legally considered as an Agent of respondent
Glodel?[6]
To totally exculpate itself from responsibility for the lost goods, Loadmasters argues
that it cannot be considered an agent of Glodel because it never represented the latter in its
dealings with the consignee. At any rate, it further contends that Glodel has no recourse
against it for its (Glodels) failure to file a cross-claim pursuant to Section 2, Rule 9 of the
1997 Rules of Civil Procedure.
Glodel, in its Comment,[7] counters that Loadmasters is liable to it under its cross-claim
because the latter was grossly negligent in the transportation of the subject cargo. With
respect to Loadmasters claim that it is already estopped from filing a cross-claim, Glodel
insists that it can still do so even for the first time on appeal because there is no rule that
provides otherwise. Finally, Glodel argues that its relationship with Loadmasters is that
of Charter wherein the transporter (Loadmasters) is only hired for the specific job of
delivering the merchandise. Thus, the diligence required in this case is merely ordinary
diligence or that of a good father of the family, not the extraordinary diligence required of
common carriers.
R&B Insurance, for its part, claims that Glodel is deemed to have interposed a
cross-claim against Loadmasters because it was not prevented from presenting evidence
to prove its position even without amending its Answer. As to the relationship between
Loadmasters and Glodel, it contends that a contract of agency existed between the two
corporations.[8]
Subrogation is the substitution of one person in the place of another with reference
to a lawful claim or right, so that he who is substituted succeeds to the rights of the other
in relation to a debt or claim, including its remedies or securities. [9] Doubtless, R&B
Insurance is subrogated to the rights of the insured to the extent of the amount it paid the
consignee under the marine insurance, as provided under Article 2207 of the Civil Code,
which reads:
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 wrong-doer or the person who has violated the contract. If
the amount paid by the insurance company does not fully cover the
injury or loss, the aggrieved party shall be entitled to recover the
deficiency from the person causing the loss or injury.
As subrogee of the rights and interest of the consignee, R&B Insurance has the right
to seek reimbursement from either Loadmasters or Glodel or both for breach of contract
and/or tort.
The issue now is who, between Glodel and Loadmasters, is liable to pay R&B Insurance
for the amount of the indemnity it paid Columbia.
At the outset, it is well to resolve the issue of whether Loadmasters and Glodel are common
carriers to determine their liability for the loss of the subject cargo. Under Article 1732 of
the Civil Code, common carriers are persons, corporations, firms, or associations engaged
in the business of carrying or transporting passenger or goods, or both by land, water or air
for compensation, offering their services to the public.
Based on the aforecited definition, Loadmasters is a common carrier because it is
engaged in the business of transporting goods by land, through its trucking service. It is
a common carrier as distinguished from a private carrier wherein the carriage is
generally undertaken by special agreement and it does not hold itself out to carry goods
for the general public.[10] The distinction is significant in the sense that the rights and
obligations of the parties to a contract of private carriage are governed principally by
their stipulations, not by the law on common carriers.[11]
In the present case, there is no indication that the undertaking in the contract between
Loadmasters and Glodel was private in character. There is no showing that Loadmasters
solely and exclusively rendered services to Glodel.
In fact, Loadmasters admitted that it is a common carrier.[12]
In the same vein, Glodel is also considered a common carrier within the context of
Article 1732. In its Memorandum,[13] it states that it is a corporation duly organized and
existing under the laws of the Republic of the Philippines and is engaged in the business
of customs brokering. It cannot be considered otherwise because as held by this Court
in Schmitz Transport & Brokerage Corporation v. Transport Venture, Inc.,[14] a customs
broker is also regarded as a common carrier, the transportation of goods being an integral
part of its business.
Loadmasters and Glodel, being both common carriers, are mandated from the
nature of their business and for reasons of public policy, to observe the extraordinary
diligence in the vigilance over the goods transported by them according to all the
circumstances of such case, as required by Article 1733 of the Civil Code. When the
Court speaks of extraordinary diligence, it is that extreme measure of care and caution
which persons of unusual prudence and circumspection observe for securing and
preserving their own property or rights.[15] This exacting standard imposed on common
carriers in a contract of carriage of goods is intended to tilt the scales in favor of the
shipper who is at the mercy of the common carrier once the goods have been lodged for
shipment.[16] Thus, in case of loss of the goods, the common carrier is presumed to have
been at fault or to have acted negligently.[17] This presumption of fault or negligence,
however, may be rebutted by proof that the common carrier has observed extraordinary
diligence over the goods.
With respect to the time frame of this extraordinary responsibility, the Civil Code
provides that the exercise of extraordinary diligence lasts from the time the goods are
unconditionally placed in the possession of, and received by, the carrier for transportation
until the same are delivered, actually or constructively, by the carrier to the consignee, or
to the person who has a right to receive them.[18]
Premises considered, the Court is of the view that both Loadmasters and Glodel are
jointly and severally liable to R & B Insurance for the loss of the subject cargo. Under
Article 2194 of the New Civil Code, the responsibility of two or more persons who are
liable for a quasi-delict is solidary.
Loadmasters claim that it was never privy to the contract entered into by Glodel with
the consignee Columbia or R&B Insurance as subrogee, is not a valid defense. It may not
have a direct contractual relation with Columbia, but it is liable for tort under the
provisions of Article 2176 of the Civil Code on quasi-delicts which expressly provide:
ART. 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.
Pertinent is the ruling enunciated in the case of Mindanao Terminal and Brokerage
Service, Inc. v. Phoenix Assurance Company of New York,/McGee & Co., Inc.[19] where
this Court held that a tort may arise despite the absence of a contractual relationship, to
wit:
We agree with the Court of Appeals that the complaint filed

by Phoenix and McGee against Mindanao Terminal, from which the
present case has arisen, states a cause of action. The present action is
based on quasi-delict, arising from the negligent and careless loading and
stowing of the cargoes belonging to Del Monte Produce. Even assuming
that both Phoenix and McGee have only been subrogated in the rights of
Del Monte Produce, who is not a party to the contract of service between
Mindanao Terminal and Del Monte, still the insurance carriers may have
a cause of action in light of the Courts consistent ruling that the act that
breaks the contract may be also a tort. In fine, a liability for tort may arise
even under a contract, where tort is that which breaches the contract. In
the present case, Phoenix and McGee are not suing for damages for
injuries arising from the breach of the contract of service but from the
alleged negligent manner by which Mindanao Terminal handled the
cargoes belonging to Del Monte Produce. Despite the absence of
contractual relationship between Del Monte Produce and Mindanao
Terminal, the allegation of negligence on the part of the defendant
should be sufficient to establish a cause of action arising from
quasi-delict. [Emphases supplied]
In connection therewith, Article 2180 provides:

ART. 2180. The obligation imposed by Article 2176 is demandable
not only for ones own acts or omissions, but also for those of persons for
whom one is responsible.
xxxx
Employers shall be liable for the damages caused by their

employees and household helpers acting within the scope of their
assigned tasks, even though the former are not engaged in any business
or industry.
It is not disputed that the subject cargo was lost while in the custody of Loadmasters
whose employees (truck driver and helper) were instrumental in the hijacking or robbery of
the shipment.As employer, Loadmasters should be made answerable for the damages
caused by its employees who acted within the scope of their assigned task of delivering the
goods safely to the warehouse.
Whenever an employees negligence causes damage or injury to another, there

instantly arises a presumption juris tantum that the employer failed to
exercise diligentissimi patris families in the selection (culpa in eligiendo) or
supervision (culpa in vigilando) of its employees.[20] To avoid liability for a quasi-delict
committed by its employee, an employer must overcome the presumption by presenting
convincing proof that he exercised the care and diligence of a good father of a family in
the selection and supervision of his employee.[21] In this regard, Loadmasters failed.
Glodel is also liable because of its failure to exercise extraordinary diligence. It

failed to ensure that Loadmasters would fully comply with the undertaking to safely
transport the subject cargo to the designated destination. It should have been more prudent
in entrusting the goods to Loadmasters by taking precautionary measures, such as
providing escorts to accompany the trucks in delivering the cargoes. Glodel should,
therefore, be held liable with Loadmasters. Its defense of force majeure is unavailing.
At this juncture, the Court clarifies that there exists no principal-agent relationship
between Glodel and Loadmasters, as erroneously found by the CA. Article 1868 of the
Civil Code provides: By the contract of agency a person binds himself to render some
service or to do something in representation or on behalf of another, with the consent or
authority of the latter. The elements of a contract of agency are: (1) consent, express or
implied, of the parties to establish the relationship; (2) the object is the execution of a
juridical act in relation to a third person; (3) the agent acts as a representative and not for
himself; (4) the agent acts within the scope of his authority.[22]
Accordingly, there can be no contract of agency between the parties. Loadmasters

never represented Glodel. Neither was it ever authorized to make such representation. It
is a settled rule that the basis for agency is representation, that is, the agent acts for and
on behalf of the principal on matters within the scope of his authority and said acts have
the same legal effect as if they were personally executed by the principal. On the part of
the principal, there must be an actual intention to appoint or an intention naturally
inferable from his words or actions, while on the part of the agent, there must be an
intention to accept the appointment and act on it.[23] Such mutual intent is not obtaining in
this case.
What then is the extent of the respective liabilities of Loadmasters and

Glodel? Each wrongdoer is liable for the total damage suffered by R&B Insurance.
Where there are several causes for the resulting damages, a party is not relieved from
liability, even partially. It is sufficient that the negligence of a party is an efficient cause
without which the damage would not have resulted. It is no defense to one of the
concurrent tortfeasors that the damage would not have resulted from his negligence alone,
without the negligence or wrongful acts of the other concurrent tortfeasor. As stated in
the case of Far Eastern Shipping v. Court of Appeals,[24]
X x x. Where several causes producing an injury are concurrent
and each is an efficient cause without which the injury would not have
happened, the injury may be attributed to all or any of the causes and
recovery may be had against any or all of the responsible persons
although under the circumstances of the case, it may appear that one of
them was more culpable, and that the duty owed by them to the injured
person was not the same. No actor's negligence ceases to be a proximate
cause merely because it does not exceed the negligence of other actors.
Each wrongdoer is responsible for the entire result and is liable as
though his acts were the sole cause of the injury.
There is no contribution between joint tortfeasors whose liability is
solidary since both of them are liable for the total damage. Where the
concurrent or successive negligent acts or omissions of two or more
persons, although acting independently, are in combination the direct
and proximate cause of a single injury to a third person, it is impossible
to determine in what proportion each contributed to the injury
and either of them is responsible for the whole injury. Where their
concurring negligence resulted in injury or damage to a third party, they
become joint tortfeasors and are solidarily liable for the resulting
damage under Article 2194 of the Civil Code. [Emphasis supplied]
The Court now resolves the issue of whether Glodel can collect from Loadmasters, it
having failed to file a cross-claim against the latter.
Undoubtedly, Glodel has a definite cause of action against Loadmasters for breach
of contract of service as the latter is primarily liable for the loss of the subject cargo. In
this case, however, it cannot succeed in seeking judicial sanction against Loadmasters
because the records disclose that it did not properly interpose a cross-claim against the
latter. Glodel did not even pray that Loadmasters be liable for any and all claims that it
may be adjudged liable in favor of R&B Insurance. Under the Rules, a compulsory
counterclaim, or a cross-claim, not set up shall be barred.[25]Thus, a cross-claim cannot be
set up for the first time on appeal.
For the consequence, Glodel has no one to blame but itself. The Court cannot come
to its aid on equitable grounds. Equity, which has been aptly described as a justice outside
legality, is applied only in the absence of, and never against, statutory law or judicial
rules of procedure.[26] The Court cannot be a lawyer and take the cudgels for a party who
has been at fault or negligent.
WHEREFORE, the petition is PARTIALLY GRANTED. The August 24,

2007 Decision of the Court of Appeals is MODIFIED to read as follows:
WHEREFORE, judgment is rendered declaring petitioner

Loadmasters Customs Services, Inc. and respondent Glodel Brokerage
Corporation jointly and severally liable to respondent R&B Insurance
Corporation for the insurance indemnity it paid to consignee Columbia Wire
& Cable Corporation and ordering both parties to pay, jointly and severally,
R&B Insurance Corporation a] the amount of P1,896,789.62 representing the
insurance indemnity; b] the amount equivalent to ten (10%) percent thereof
for attorneys fees; and c] the amount of P22,427.18 for litigation expenses.
The cross-claim belatedly prayed for by respondent Glodel Brokerage

Corporation against petitioner Loadmasters Customs Services, Inc. is
DENIED.
SO ORDERED.
4. Common carrier v. Other contracts.

4.1Distinguish from:
a. Towage.
b. Arrastre.
c. Stevedoring,
d. Travel Agency.

a. Cargolift Shipping Inc. V. L. Actuario Marketing Co. and
Skyland Brokerage June 27, 2006
This is a petition for review on certiorari of the July 6, 2000 Decision[1] of the Court of
Appeals in CA-G.R. CV No. 55664, which affirmed the judgment[2] of the Regional Trial
Court of Caloocan City, Branch 121, in Civil Case No. C-16120 in so far as it found
petitioner Cargolift Shipping, Inc. (Cargolift) liable, as third-party defendant, for actual
damages in the sum of P97,021.20, as well as the November 28, 2000
Resolution[3] denying the motion for reconsideration.
The antecedent facts of the case are as follows:
Sometime in March 1993, respondent L. Acuario Marketing Corp., (Acuario) and

respondent Skyland Brokerage, Inc., (Skyland) entered into a time charter
agreement[4] whereby Acuario leased to Skyland its L. Acuario II barge for use by the
latter in transporting electrical posts from Manila to Limay, Bataan. At the same time,
Skyland also entered into a separate contract[5] with petitioner Cargolift, for the latters
tugboats to tow the aforesaid barge.
In accordance with the foregoing contracts, petitioners tugboat M/T Beejay left
the Manila South Harbor on April 1, 1993 with Acuarios barge in tow. It reached
the port of Limay, Bataan on April 3, 1993, whereupon M/T Beejay disengaged and once
again set sail for Manila. Petitioners other tugboat, the M/T Count, remained in Bataan to
secure the barge for unloading.
Off-loading operations went underway until April 7, 1993, when operations were
interrupted for the next two days to give way to the observance of the lenten season. The
unloading of the cargo was concluded on April 12, 1993, by which time M/T Beejay had
gone back to Bataan for the return trip. The M/T Beejay and the barge returned to
the port of Manila on April 13, 1993.
On the same day, the barge was brought to Acuarios shipyard where it was allegedly
discovered by Acuarios dry-docking officer, Guillermo Nacu, Jr., that the barge was listing
due to a leak in its hull. According to Nacu, he was informed by the skipper of the tugboat
that the damage was sustained in Bataan. To confirm the same, Nacu ordered an
underwater survey of the barge and prepared a damage report dated April 14, 1993. No
representative of Skyland was present during the inspection although it was furnished with
a copy of the said report.
The barge was consequently dry-docked for repairs at the Western Shipyard from
April 16 to April 26, 1993. Acuario spent the total sum of P97,021.20 for the repairs.[6]
Pursuant to its contract with Skyland which provided that (a)ny damage or loss on
the barge due to the fault or negligence of charterers shall be the responsibility of the
(c)harterer or his representative,[7] Acuario wrote Skyland seeking reimbursement of its
repair costs, failing which, it filed a complaint for damages against Skyland before the
Regional Trial Court of Caloocan City, where the case was docketed as Civil Case No.
C-16120 and raffled to Branch 121.
Skyland, in turn, filed a third-party complaint[8] against petitioner alleging that it was
responsible for the damage sustained by the barge.
According to Acuario and its witnesses, the weather in Bataan shifted drastically at
dawn of April 7, 1993 while the barge was docked at the Limay port eight meters away
from the stone wall. Due to strong winds and large waves, the barge repeatedly hit its hull
on the wall, thus prompting the barge patron to alert the tugboat captain of the M/T Count
to tow the barge farther out to sea. However, the tugboat failed to pull the barge to a safer
distance due to engine malfunction, thereby causing the barge to sustain a hole in its
hull. Fortunately, no part of the cargo was lost even if only half of it had been unloaded at
that time.[9]
On the other hand, petitioner and Skyland denied that the barge had been damaged. One
of its witnesses, Salvador D. Ocampo, claimed that he was involved in all aspects of the
operation and that no accident of any sort was brought to his knowledge. He alleged that
the barge patron and tug master made no mention of any maritime casualty during the
clearing of the vessels at the Philippine Ports Authority in Limay, Bataan. The barge was
in good condition and was not damaged when it was turned over to Acuario on April 13,
1993.[10]
In due course, the trial court promulgated its decision dated June 10, 1996, the dispositive
part of which reads:
WHEREFORE, premises considered, judgment is hereby rendered as follows:
1. Ordering the defendant Skyland Brokerage to pay to the

plaintiff L. Acuario Marketing Corporation the cost of
repairs of the barge L. Acuario II in the amount of
P97,021.20 and to seek reimbursement from the third-party
defendant Cargolift Shipping;
2. Ordering the defendant to pay attorneys fees in the amount of
P24,255.30 and to seek reimbursement thereof from the
third-party defendant; and
3. Ordering the defendant to pay the costs of suit subject to
reimbursement from the third-party defendant.
SO ORDERED.[11]
The trial court gave credence to the testimonies of Acuarios witnesses that the barge
sustained damage while it was being chartered by Skyland. It held that the positive
testimonies of Acuarios witnesses, coupled with documentary evidence detailing the nature
and extent of the damage as well as the repairs done on the barge, should prevail over the
bare denials of Skyland and petitioner. It also noted that two of the latters three witnesses
were not in Limay, Bataan when the incident happened.
The trial court further held that Skyland was liable under its time charter agreement
with Acuario pursuant to Article 1159 of the Civil Code which states that contracts have
the force of law between the contracting parties. Skyland must bear the consequences of
the tugboats incapacity to respond to the barges request for assistance because Acuario
had no control in the selection of the tugboats used by Skyland. But since the ultimate
fault lies with petitioner, justice demands that the latter reimburse Skyland for whatever it
may be adjudged to pay Acuario.[12]
Both Skyland and petitioner elevated the matter to the Court of Appeals which,
on July 6, 2000, rendered the assailed Decision affirming the trial court, but deleting the
award of attorneys fees. Upon denial of its motion for reconsideration,[13] petitioner
brought the instant petition raising the following issues:
WHETHER THE COURT OF APPEALS ERRED IN AFFIRMING THE

FINDING OF THE TRIAL COURT THAT L. ACUARIO II SUSTAINED
DAMAGE AND THAT IT WAS SUSTAINED DURING ITS CHARTER TO
RESPONDENT SKYLAND.
II
ASSUMING THAT L. ACUARIO II SUFFERED DAMAGE, WHETHER

THE COURT OF APPEALS ERRED IN UPHOLDING THE TRIAL COURT
DECISION HOLDING PETITIONER LIABLE THEREFOR.[14]
The petition lacks merit.
On the first assigned error, petitioner is asking this Court to resolve factual issues that
have already been settled by the courts below. The question of whether the barge had
been damaged during its charter to Skyland is a factual matter, the determination of
which may not be generally disturbed on appeal. Questions of fact are not reviewable by
this Court except under certain exceptional circumstances.[15] No such exceptional
circumstance exists in the case at bar.
On the contrary, the factual conclusions reached by the courts below are consistent with
the evidence on record. Acuarios witnesses testified that strong winds and waves caused
the barge to bump into the walls of the pier where it was berthed for
unloading. Petitioners tugboat failed to tow it farther away due to engine breakdown, thus
causing the barge to sustain a hole in its hull. These testimonies were duly supported and
corroborated by documentary evidence detailing the damage and repairs done on the
barge.[16]
On the other hand, petitioner and Skylands denial that there was inclement weather in the
early hours of April 7, 1993 and that the barge sustained no damage on this occasion were
not supported by evidence to overcome the positive allegations of Acuarios witnesses
who were present at the place and time of the incident. The categorical declaration of
Acuarios witnesses regarding the events which led to the damage on the barge shifted the
burden of evidence on petitioner and Skyland. They could have easily disproved Acuarios
claims by presenting competent proof that there was no weather disturbance on that day
or, by presenting the testimony of individuals who have personal knowledge of the events
which transpired.
Moreover, the inability of petitioners and Skylands witnesses to unequivocally declare

that it was still the M/T Count that secured the barge during the resumption of off-loading
operations casts suspicion on their credibility. As aptly observed by the trial court, such
hesitation on the part of its witnesses is indicative of uncertainty, if not a propensity to
withhold information that could be unfavorable to their cause.[17] To our mind, therefore,
the trial court rightly concluded that petitioners M/T Count indeed encountered
mechanical trouble, as asserted by Acuario. The fact that petitioner did not categorically
deny the allegation of mechanical trouble only serves to strengthen the trial courts
conclusion.
Petitioners assertion that it is contrary to human experience for the barge to have made
the return trip to Manila if it sustained the alleged damage deserves short shrift. The trial
court found that the damage on the barge was not too extensive as to render it incapable
of staying afloat and being used in operation. Neither was it impossible for the barges
cargo to remain intact and undamaged during the weather disturbance. Apart from the
fact that the cargo which consisted of wooden electric poles are, by nature, not easily
damaged by adverse weather,[18] part of it had already been unloaded when the
unfortunate incident occurred.
Consequently, we find no cogent reason to disturb the lower courts finding that the
barge sustained a hole in its hull when petitioners tugboat failed to tow it to a safer
distance as the weather changed in the port of Limay. This Court is bound by the factual
determinations of the appellate court especially when these are supported by substantial
evidence and merely affirm those of the trial court,[19] as in this case. There is no showing
here that the inferences made by the Court of Appeals were manifestly mistaken, or that
the appealed judgment was based on a misapprehension of facts, or that the appellate
court overlooked certain relevant, undisputed facts which, if properly considered, would
justify a different conclusion.[20] Thus, a reversal of the factual findings in this case is
unwarranted.
As for the second assigned error, petitioner asserts that it could not be held liable for the
damage sustained by Acuarios barge because the latter sought to recover upon its contract
with Skyland, to which petitioner was not a party. Since it had no contractual relation with
Acuario, only Skyland should be held liable under the contract. Besides, Skyland
contractually assumed the risk that the tugboat might encounter engine trouble when it
acknowledged in its contract with petitioner that the latters vessels were in good order and
in seaworthy condition. At any rate, it was neither negligent in the performance of its
obligation nor the proximate cause of the damage.
We do not agree.
It was not Acuario that seeks to hold petitioner liable for the damage to the barge, as the
former in fact sued only Skyland pursuant to their charter agreement. It was Skyland that
impleaded petitioner as third-party defendant considering that Skyland was being held
accountable for the damage attributable to petitioner. In other words, petitioner was not
sued under Skylands charter agreement with Acuario, but pursuant to its separate
undertaking with Skyland. Strictly speaking, therefore, petitioner is not being held liable
under any charter agreement with Acuario.
Consequently, it is not correct for petitioner to assert that Acuario could not recover
damages from it due to lack of privity of contract between them. It is not Acuario that is
seeking damages from petitioner but Skyland, with whom it undoubtedly had a juridical
tie. While Acuario could hold Skyland liable under its charter agreement, Skyland in turn
could enforce liability on petitioner based on the latters obligation to Skyland. In other
words, petitioner is being held liable by Skyland and not by Acuario.
Thus, in the performance of its contractual obligation to Skyland, petitioner was required
to observe the due diligence of a good father of the family. This much was held in the old
but still relevant case of Baer Senior & Co.s Successors v. La Compania
Maritima[21] where the Court explained that a tug and its owners must observe ordinary
diligence in the performance of its obligation under a contract of towage. The negligence
of the obligor in the performance of the obligation renders him liable for damages for the
resulting loss suffered by the obligee. Fault or negligence of the obligor consists in his
failure to exercise due care and prudence in the performance of the obligation as the
nature of the obligation so demands.[22]
In the case at bar, the exercise of ordinary prudence by petitioner means ensuring that its
tugboat is free of mechanical problems. While adverse weather has always been a real
threat to maritime commerce, the least that petitioner could have done was to ensure that
the M/T Count or any of its other tugboats would be able to secure the barge at all times
during the engagement. This is especially true when considered with the fact that
Acuarios barge was wholly dependent upon petitioners tugboat for propulsion. The barge
was not equipped with any engine and needed a tugboat for maneuvering.[23]
Needless to say, if petitioner only subjected the M/T Count to a more rigid check-up or
inspection, the engine malfunction could have been discovered or avoided. The M/T Count
was exclusively controlled by petitioner and the latter had the duty to see to it that the
tugboat was in good running condition. There is simply no basis for petitioners assertion
that Skyland contractually assumed the risk of any engine trouble that the tugboat may
encounter. Skyland merely procured petitioners towing service but in no way assumed any
such risk.
That petitioners negligence was the proximate cause of the damage to the barge cannot be
doubted. Had its tugboat been serviceable, the barge could have been moved away from
the stone wall with facility. It is too late in the day for petitioner to insist that the
proximate cause of the damage was the barge patrons negligence in not objecting to the
position of the barge by the stone wall. Aside from the fact that the position of the barge
is quite understandable since off-loading operations were then still underway,[24] the
alleged negligence of the barge patron is a matter that is also being raised for the first
time before this Court.
Thus, the damage to the barge could have been avoided had it not been for the tugboats
inability to tow it away from the stone wall. Considering that a barge has no power of its
own and is totally defenseless against the ravages of the sea, it was incumbent upon
petitioner to see to it that it could secure the barge by providing a seaworthy
tugboat. Petitioners failure to do so did not only increase the risk that might have been
reasonably anticipated during the shipside operation but was the proximate cause of the
damage.[25] Hence, as correctly found by the courts below, it should ultimately be held
liable therefor.
WHEREFORE, the petition is DENIED for lack of merit. The Decision of the Court of
Appeals in CA-G.R. CV No. 55664 dated July 6, 2000 and the Resolution dated November
28, 2000, finding petitioner Cargolift Shipping, Inc. liable, as third-party defendant, for
actual damages in the sum of P97,021.20, are AFFIRMED.
SO ORDERED.
b. Mindanao Terminal and Brokerage services v. Phoenix

Assurance Co. May 8, 2009
Before us is a petition for review on certiorari[1] under Rule 45 of the 1997 Rules of Civil
Procedure of the 29 October 2003[2] Decision of the Court of Appeals and the 26
February 2004Resolution[3] of the same court denying petitioners motion for
reconsideration.
The facts of the case are not disputed.
Del Monte Philippines, Inc. (Del Monte) contracted petitioner Mindanao Terminal
and Brokerage Service, Inc. (Mindanao Terminal), a stevedoring company, to load and
stow a shipment of 146,288 cartons of fresh green Philippine bananas and 15,202 cartons
of fresh pineapples belonging to Del Monte Fresh Produce International, Inc. (Del Monte
Produce) into the cargo hold of the vessel M/V Mistrau. The vessel was docked at the port
of Davao City and the goods were to be transported by it to the port of Inchon, Korea in
favor of consignee Taegu Industries, Inc. Del Monte Produce insured the shipment under
an open cargo policy with private respondent Phoenix Assurance Company of New York
(Phoenix), a non-life insurance company, and private respondent McGee & Co. Inc.
(McGee), the underwriting manager/agent of Phoenix.[4]
Mindanao Terminal loaded and stowed the cargoes aboard the M/V Mistrau. The vessel
set sail from the port of Davao City and arrived at the port of Inchon, Korea. It was then
discovered upon discharge that some of the cargo was in bad condition. The Marine
Cargo Damage Surveyor of Incok Loss and Average Adjuster of Korea, through its
representative Byeong Yong Ahn (Byeong), surveyed the extent of the damage of the
shipment. In a survey report, it was stated that 16,069 cartons of the banana shipment and
2,185 cartons of the pineapple shipment were so damaged that they no longer had
commercial value.[5]
Del Monte Produce filed a claim under the open cargo policy for the damages to its
shipment. McGees Marine Claims Insurance Adjuster evaluated the claim and
recommended that payment in the amount of $210,266.43 be made. A check for the
recommended amount was sent to Del Monte Produce; the latter then issued a
subrogation receipt[6] to Phoenix and McGee.
Phoenix and McGee instituted an action for damages[7] against Mindanao Terminal in the
Regional Trial Court (RTC) of Davao City, Branch 12. After trial, the RTC,[8] in a
decision dated 20 October 1999, held that the only participation of Mindanao Terminal
was to load the cargoes on board the M/V Mistrau under the direction and supervision of
the ships officers, who would not have accepted the cargoes on board the vessel and
signed the foremans report unless they were properly arranged and tightly secured to
withstand voyage across the open seas. Accordingly, Mindanao Terminal cannot be held
liable for whatever happened to the cargoes after it had loaded and stowed them.
Moreover, citing the survey report, it was found by the RTC that the cargoes were
damaged on account of a typhoon which M/V Mistrau had encountered during the voyage.
It was further held that Phoenix and McGee had no cause of action against Mindanao
Terminal because the latter, whose services were contracted by Del Monte, a distinct
corporation from Del Monte Produce, had no contract with the assured Del Monte
Produce. The RTC dismissed the complaint and awarded the counterclaim of Mindanao
Terminal in the amount of P83,945.80 as actual damages and P100,000.00 as attorneys
fees.[9] The actual damages were awarded as reimbursement for the expenses incurred by
Mindanao Terminals lawyer in attending the hearings in the case wherein he had to travel
all the way from Metro Manila to Davao City.
Phoenix and McGee appealed to the Court of Appeals. The appellate court
reversed and set aside[10] the decision of the RTC in its 29 October 2003 decision. The
same court ordered Mindanao Terminal to pay Phoenix and McGee the total amount of
$210,265.45 plus legal interest from the filing of the complaint until fully paid and
attorneys fees of 20% of the claim.[11] It sustained Phoenixs and McGees argument that
the damage in the cargoes was the result of improper stowage by Mindanao Terminal. It
imposed on Mindanao Terminal, as the stevedore of the cargo, the duty to exercise
extraordinary diligence in loading and stowing the cargoes. It further held that even with
the absence of a contractual relationship between Mindanao Terminal and Del Monte
Produce, the cause of action of Phoenix and McGee could be based on quasi-delict under
Article 2176 of the Civil Code.[12]
Mindanao Terminal filed a motion for reconsideration,[13] which the Court of

Appeals denied in its 26 February 2004[14] resolution. Hence, the present petition for
review.
Mindanao Terminal raises two issues in the case at bar, namely: whether it was
careless and negligent in the loading and stowage of the cargoes onboard M/V
Mistrau making it liable for damages; and, whether Phoenix and McGee has a cause of
action against Mindanao Terminal under Article 2176 of the Civil Code on quasi-delict.
To resolve the petition, three questions have to be answered: first, whether Phoenix and
McGee have a cause of action against Mindanao Terminal; second, whether Mindanao
Terminal, as a stevedoring company, is under obligation to observe the same
extraordinary degree of diligence in the conduct of its business as required by law for
common carriers[15] and warehousemen;[16] and third, whether Mindanao Terminal
observed the degree of diligence required by law of a stevedoring company.
We agree with the Court of Appeals that the complaint filed by Phoenix and
McGee against Mindanao Terminal, from which the present case has arisen, states a
cause of action. The present action is based on quasi-delict, arising from the negligent
and careless loading and stowing of the cargoes belonging to Del Monte Produce. Even
assuming that both Phoenix and McGee have only been subrogated in the rights of Del
Monte Produce, who is not a party to the contract of service between Mindanao Terminal
and Del Monte, still the insurance carriers may have a cause of action in light of the
Courts consistent ruling that the act that breaks the contract may be also a tort. [17] In fine,
a liability for tort may arise even under a contract, where tort is that which breaches the
contract[18]. In the present case, Phoenix and McGee are not suing for damages for
injuries arising from the breach of the contract of service but from the alleged negligent
manner by which Mindanao Terminal handled the cargoes belonging to Del Monte
Produce. Despite the absence of contractual relationship between Del Monte Produce and
Mindanao Terminal, the allegation of negligence on the part of the defendant should be
sufficient to establish a cause of action arising from quasi-delict.[19]
The resolution of the two remaining issues is determinative of the ultimate result of
this case.
Article 1173 of the Civil Code is very clear that if the law or contract does not state
the degree of diligence which is to be observed in the performance of an obligation then
that which is expected of a good father of a family or ordinary diligence shall be required.
Mindanao Terminal, a stevedoring company which was charged with the loading and
stowing the cargoes of Del Monte Produce aboard M/V Mistrau, had acted merely as a
labor provider in the case at bar. There is no specific provision of law that imposes a higher
degree of diligence than ordinary diligence for a stevedoring company or one who is
charged only with the loading and stowing of cargoes. It was neither alleged nor proven
by Phoenix and McGee that Mindanao Terminal was bound by contractual stipulation to
observe a higher degree of diligence than that required of a good father of a family. We
therefore conclude that following Article 1173, Mindanao Terminal was required to
observe ordinary diligence only in loading and stowing the cargoes of Del Monte Produce
aboard M/V Mistrau.
The Court of Appeals erred when it cited the case of Summa Insurance
Corporation v. CA and Port Service Inc.[20] in imposing a higher degree of diligence,[21] on
Mindanao Terminal in loading and stowing the cargoes. The case of Summa Insurance
Corporation v. CA, which involved the issue of whether an arrastre operator is legally
liable for the loss of a shipment in its custody and the extent of its liability, is inapplicable
to the factual circumstances of the case at bar. Therein, a vessel owned by the National
Galleon Shipping Corporation (NGSC) arrived at Pier 3, SouthHarbor, Manila, carrying a
shipment consigned to the order of Caterpillar Far East Ltd. with Semirara Coal
Corporation (Semirara) as "notify party." The shipment, including a bundle of PC 8 U
blades, was discharged from the vessel to the custody of the private respondent, the
exclusive arrastre operator at the South Harbor. Accordingly, three good-order cargo
receipts were issued by NGSC, duly signed by the ship's checker and a representative of
private respondent. When Semirara inspected the shipment at house, it discovered that the
bundle of PC8U blades was missing. From those facts, the Court observed:
x x x The relationship therefore between the consignee and the arrastre

operator must be examined. This relationship is much akin to that existing
between the consignee or owner of shipped goods and the common carrier,
or that between a depositor and a warehouseman[[22]]. In the performance of
its obligations, an arrastre operator should observe the same degree of
diligence as that required of a common carrier and a warehouseman as
enunciated under Article 1733 of the Civil Code and Section 3(b) of the
Warehouse Receipts Law, respectively. Being the custodian of the goods
discharged from a vessel, an arrastre operator's duty is to take good
care of the goods and to turn them over to the party entitled to their
possession. (Emphasis supplied)[23]
There is a distinction between an arrastre and a stevedore.[24] Arrastre, a Spanish word

which refers to hauling of cargo, comprehends the handling of cargo on the wharf or
between the establishment of the consignee or shipper and the ship's tackle. The
responsibility of the arrastre operator lasts until the delivery of the cargo to the consignee.
The service is usually performed by longshoremen. On the other hand, stevedoring refers
to the handling of the cargo in the holds of the vessel or between the ship's tackle and the
holds of the vessel. The responsibility of the stevedore ends upon the loading and stowing
of the cargo in the vessel.
It is not disputed that Mindanao Terminal was performing purely stevedoring

function while the private respondent in the Summa case was performing arrastre function.
In the present case, Mindanao Terminal, as a stevedore, was only charged with the
loading and stowing of the cargoes from the pier to the ships cargo hold; it was never the
custodian of the shipment of Del Monte Produce. A stevedore is not a common carrier for
it does not transport goods or passengers; it is not akin to a warehouseman for it does not
store goods for profit. The loading and stowing of cargoes would not have a far reaching
public ramification as that of a common carrier and a warehouseman; the public is
adequately protected by our laws on contract and on quasi-delict. The public policy
considerations in legally imposing upon a common carrier or a warehouseman a higher
degree of diligence is not present in a stevedoring outfit which mainly provides labor in
loading and stowing of cargoes for its clients.
In the third issue, Phoenix and McGee failed to prove by preponderance of

evidence[25] that Mindanao Terminal had acted negligently. Where the evidence on an
issue of fact is in equipoise or there is any doubt on which side the evidence
preponderates the party having the burden of proof fails upon that issue. That is to say, if
the evidence touching a disputed fact is equally balanced, or if it does not produce a just,
rational belief of its existence, or if it leaves the mind in a state of perplexity, the party
holding the affirmative as to such fact must fail.[26]
We adopt the findings[27] of the RTC,[28] which are not disputed by Phoenix and
McGee. The Court of Appeals did not make any new findings of fact when it reversed the
decision of the trial court. The only participation of Mindanao Terminal was to load the
cargoes on board M/V Mistrau.[29] It was not disputed by Phoenix and McGee that the
materials, such as ropes, pallets, and cardboards, used in lashing and rigging the cargoes
were all provided by M/V Mistrau and these materials meets industry standard.[30]
It was further established that Mindanao Terminal loaded and stowed the cargoes
of Del Monte Produce aboard the M/V Mistrau in accordance with the stowage plan, a
guide for the area assignments of the goods in the vessels hold, prepared by Del Monte
Produce and the officers of M/V Mistrau.[31] The loading and stowing was done under the
direction and supervision of the ship officers. The vessels officer would order the closing
of the hatches only if the loading was done correctly after a final inspection.[32] The said
ship officers would not have accepted the cargoes on board the vessel if they were not
properly arranged and tightly secured to withstand the voyage in open seas. They would
order the stevedore to rectify any error in its loading and stowing. A foremans report, as
proof of work done on board the vessel, was prepared by the checkers of Mindanao
Terminal and concurred in by the Chief Officer of M/V Mistrau after they were satisfied
that the cargoes were properly loaded.[33]
Phoenix and McGee relied heavily on the deposition of Byeong Yong Ahn [34] and on the
survey report[35] of the damage to the cargoes. Byeong, whose testimony was refreshed by
the survey report,[36] found that the cause of the damage was improper stowage[37] due to
the manner the cargoes were arranged such that there were no spaces between cartons, the
use of cardboards as support system, and the use of small rope to tie the cartons together
but not by the negligent conduct of Mindanao Terminal in loading and stowing the
cargoes. As admitted by Phoenix and McGee in their Comment[38] before us, the latter is
merely a stevedoring company which was tasked by Del Monte to load and stow the
shipments of fresh banana and pineapple of Del Monte Produce aboard the M/V Mistrau.
How and where it should load and stow a shipment in a vessel is wholly dependent on the
shipper and the officers of the vessel. In other words, the work of the stevedore was under
the supervision of the shipper and officers of the vessel. Even the materials used for
stowage, such as ropes, pallets, and cardboards, are provided for by the vessel. Even the
survey report found that it was because of the boisterous stormy weather due to the
typhoon Seth, as encountered by M/V Mistrau during its voyage, which caused the
shipments in the cargo hold to collapse, shift and bruise in extensive extent.[39] Even the
deposition of Byeong was not supported by the conclusion in the survey report that:
CAUSE OF DAMAGE
xxx
From the above facts and our survey results, we are of the opinion that
damage occurred aboard the carrying vessel during sea transit, being caused
by ships heavy rolling and pitching under boisterous weather while
proceeding from 1600 hrs on 7th October to 0700 hrs on 12th October,
1994 as described in the sea protest.[40]
As it is clear that Mindanao Terminal had duly exercised the required degree of
diligence in loading and stowing the cargoes, which is the ordinary diligence of a good
father of a family, the grant of the petition is in order.
However, the Court finds no basis for the award of attorneys fees in favor of
petitioner. None of the circumstances enumerated in Article 2208 of the Civil Code exists.
The present case is clearly not an unfounded civil action against the plaintiff as there is
no showing that it was instituted for the mere purpose of vexation or injury. It is not
sound public policy to set a premium to the right to litigate where such right is exercised
in good faith, even if erroneously.[41] Likewise, the RTC erred in awarding P83,945.80
actual damages to Mindanao Terminal. Although actual expenses were incurred by
Mindanao Terminal in relation to the trial of this case in Davao City, the lawyer of
Mindanao Terminal incurred expenses for plane fare, hotel accommodations and food, as
well as other miscellaneous expenses, as he attended the trials coming all the way
from Manila. But there is no showing that Phoenix and McGee made a false claim against
Mindanao Terminal resulting inthe protracted trial of the case necessitating the incurrence
of expenditures.[42]
WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals

in CA-G.R. CV No. 66121 is SET ASIDE and the decision of
the Regional Trial Court of Davao City, Branch 12 in Civil Case No. 25,311.97 is
hereby REINSTATED MINUS the awards of P100,000.00 as attorneys fees
and P83,945.80 as actual damages.
SO ORDERED.
c. Cebu Arrastre Services v. Collector of Internal Revenue May 30

1956
This is an appeal from the decision of the Board of Tax Appeals affirming the decision of the Collector of Internal
Revenue (later referred to as COLLECTOR), denying exemption to the Petitioner-Appellant Cebu Arrastre Service
(later referred to as CEBU ARRASTRE) from the percentage tax under section 191 of the National Internal
Revenue Code, and for refund of the amount of P2,867.02 already paid.
In 1952 the Cebu Arrastre, an association of persons engaged in the handling of cargoes carried by coastwise
vessels stopping at the port of Cebu, thru its counsel Atty. Jose Muaa petitioned the Collector of Internal
Revenue for the exemption and the refund based on the following grounds: chanroblesvirtuallawlibrary
(1) That they were a group of laborers who had recently organized themselves into an arrastre service
association merely for the purpose of centralizing the collection of handling charges and making direct payment
to the men in order to insure the compliance of the Minimum Wage Law requirement.
(2) That the work of the men of the said arrastre group is under the direct supervision and control of the
officers of the ships.
(3) That the Cebu Arrastre Service is engaged solely in the loading and unloading of cargoes to and from the
boats and is not engaged in the transportation business.
Acting upon the petition, the Collector referred the matter to his agent in Cebu for investigation. Mr. Ignacio
Quijano, the Assistant Agent, conducted the investigation and filed his report, the pertinent portions of which
are as follows:
chanroble svirtuallawlibrary
1. The loading and unloading of cargoes to and from the ships holds is done by the laborers under the Cebu
Arrastre Service Co., Inc.
2. The supervision of the ships officers in the work is confined only to the proper handling of the cargoes
according to their nature and to the proper placing of the cargoes inside the ships holds.
3. As to the laborers actuations outside of the handling and placing of cargoes inside the ships holds the
officers of the ship have no supervision.
xxx xxx xxx
6. The Cebu Arrastre Service Co., Inc. is not engaged in the transportation of the cargoes from the wharf to
the bodegas of the shippers. The shippers have their own trucks or provide for the transportation of their
cargoes from the wharf to their bodegas.
7. The laborers of the Cebu Arrastre Service Co., Inc. help only in the loading of the cargoes from the wharf to
the shippers trucks, for the shippers trucks are provided with their own journales.
On the basis of said report the Collector denied the petition, holding that inasmuch as the Cebu Arrastre was
engaged in the loading and unloading of vessels in port, it may be considered a stevedore within the meaning of
section 191 of the Tax Code. In this connection, it may be stated that section 191 of the Tax Code imposes a tax
equivalent to 3 per cent of the gross receipts on certain businesses and business entities, among them
stevedores.
In his brief counsel for Petitioner-Appellant bitterly assails the proceedings had in this case, saying that it has
been most inquisitorial, reminiscent of the ancient and antiquated method of administering justice by which
the Defendant was condemned without benefit of confrontation. The guarantee and protection jealousy
safeguarded by our Constitution has been completely disregarded. The report of the BIR Agent was a mere
unilateral affair and its findings were arrived at without the Petitioner-Appellants having had the slightest
opportunity to be confronted and his side heard. We have examined the record of the proceedings and find this
attack unfounded. Although the Board of Tax Appeals as an appellate board usually considers only the evidence
that comes with the appeal, nevertheless, in this case a hearing was had before it, and the very same counsel
Atty. Jose Muaa testified on behalf of the Cebu Arrastre, his client and of which he was the president, but he
failed to present any evidence or give any testimony in support of his present contention that the Cebu Arrastre
is not engaged in the work of loading cargoes into the holds of the boat or unloading the same from it. But in his
memorandum filed with the Tax Board, he made statements which the Tax Board liberally considered as
evidence but which the Board regarded as insufficient and not entirely credible. We reproduce a portion of the
decision of the Tax Board on this point: chanroble svirtuallawlibrary
In its memorandum filed with us in support of its petition for review of the case, Petitioners counsel makes
some additional statements of facts wherein he avers that, Their work (that of the companys laborers) was
simply the handling of cargoes at the wharf almost mechanically under the control and supervision of the
shipping companies. In cases where boats had booms their work was simply to load on the wharf at the ships
tackle by placing the cargoes in the sling and hooking unto the tackle, and unloading by unhooking the sling from
the tackle and discharging the cargoes on the wharf. In rare cases where the boats have no booms, these men
carry the cargoes up to the deck for the stevedores on board to store in the hold, in the case of loading, and
carry cargoes from the deck which have been unloaded from the hold by the stevedores to the wharf.
We have here three descriptions of the kind of work performed by the laborers of Petitionercorporation, of
which one is widely different from the other two: one is from the investigator of the Bureau of Internal
chanroblesvirtualla wlibrary
Revenue who says that the laborers in question carry cargoes to and from the pier to the hold of ships, which
agrees with the description appearing on the original request to the Collector by the President and Counselor of
the Corporation, the other being the contention of the same official of the Arrastre Service who, in his
memorandum on appeal, would have us believe that its workingmen merely place the cargoes in the slings and
then leave the ships tackle to lift and drop them into the holds or dump them on decks, there to be stowed by
another set of workingmen, presumably not connected at all with the Arrastre Service Corporation. When ships
are not provided with booms, cargoes are carried by the Arrastre Service laborers over planks or ladders to be
dumped into the deck or into the hold, there to be stowed by another set of stevedores not related to the
Corporation.
xxx xxx xxx
The question, then revolves around the facts and around the credibility of the description depicting the exact
nature of the work of the laborers working under the contracts entered into by the Cebu Arrastre Co. Inc. with
Cebu shipowners. We just determine therefore, which of the two conflicting versions comes nearer the reality of
the situation.
We may say at the outset that the preponderance of evidence is in favor of the version of the Assistant Agent
of the Bureau of Internal Revenue of Cebu. According to him the loading and unloading of cargoes to and from
the ships holds is done by the laborers under the Cebu Arrastre Service Co., Inc. and the ships officers
supervision is limited to the proper placing of the same inside the ships hold, the inference being that said
proper placing (stowing) is being done by the corporation laborers. This is not contradicted by the version of
the Petitioner as given in its original petition wherein it says: The men working under the Cebu Arrastre
chanroble svirtuallawlibrary
Service are same men of Katubusanan sa Mamumuo who have been handling the loading of the boats of the
Aboitiz & Co. and of the Philippine Navigation Co. since 1947 up to the present. It says also, further on: The chanroblesvirtuallawlibrary
Cebu Arrastre Service is dedicated itself solely to the loading and unloading of cargoes on the boats .. It is true
that the President and Counsel corrected this description in the memorandum on appeal to the effect that
laborers of the corporation do not, except on rare occasions, engage in loading or unloading the boat but limit
their work on loading or unloading pele-mele the slings of the boats under contract with the Arrastre Service,
but in the opinion of the Board this amendment is not nearer to the truth than the original version which was
corroborated by the official who investigated the case by order of the Collector of Internal Revenue.
It is noteworthy that in the agreement entered into by the shipowners and the corporation mention is twice
made of the arrastre service on the vessels (but never on the piers) to be done by the laborers of the Cebu
Arrastre Service Inc. Another circumstance which may help in obtaining a clear picture of the situation is that
nowhere in these papers is it contended that the stevedores actually performing the stowing work belong to an
organization not related to the Petitioner.
We quote the following definitions of stevedores, viz: chanroblesvirtuallawlibrary
Stevedores is one who works at, or one who is responsible for, the unloading and loading of a vessel in port.
(Websters New International Dictionary, Second Edition (unabridged), p. 2473).
A stevedore is a person employed in loading and unloading a vessel. (The Owego, D. C. Wash., 292 F. 505, 507).
Stevedores are class of laborers at the ports whose business it is to load and unload vessels. (The Senator, 21 F.
191).
Stevedore is defined as one whose occupation is to load and unload vessels in port; in other words, a chan roblesvirtualawlibrary
contractor or a jobber for special business ready to be employed by anybody at his line of work (Rankin vs.
Merchants and Miners Transp. Co., 73 Ga. 239, 54 Am. Rep. 874).
Stevedore and longshoreman, are synonymous terms when interpreted in the light of the work they
perform, namely loading and unloading of vessels (Zampiere vs. Willian Spencer and Son Corporation, 18b N.Y.S.
639, 640, 194 App. Div. 576).
Under the above definitions the Cebu Arrastre admittedly engaged in the work of loading and unloading
coastwise vessels calling at the port of Cebu, should be regarded as a stevedore and therefore subject to the
percentage tax under section 191 of the Tax Code. But even if we applied the narrower and more specific
concept of stevedore used by the Tax Board, namely, that a stevedore is one who places cargoes in the holds of
ships in such a way that the boat would maintain an even keel, and that even with the movement of the boat,
especially in rough weather, the cargoes would not be displaced from their original position, still, under the
finding of fact made by the Tax Board that the Cebu Arrastre is engaged in this work of towing cargo either in
the hold or even on the deck, Appellant would be subject to the tax. We also agree with the Tax Board that the
purpose for which the Petitioner-Appellant was organized, and the supervision exercised by the ships officers
over its work in loading and unloading vessels including the towing of cargo, has nothing to do with the tax
liability of the Petitioner-Appellant.
In view of the foregoing, the decision appealed from is hereby affirmed, with costs in both instances.
Paras, C.J., Bengzon, Padilla, Reyes, A., Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., and Endencia, JJ.,
concur.
d. Crisostomo v. CA August 25, 2003 G.R No. 138334
In May 1991, petitioner Estela L. Crisostomo contracted the services of
respondent Caravan Travel and Tours International, Inc. to arrange and facilitate her
booking, ticketing and accommodation in a tour dubbed Jewels of Europe. The
package tour included the countries of England, Holland, Germany, Austria,
Liechstenstein, Switzerland and France at a total cost of P74,322.70. Petitioner was
given a 5% discount on the amount, which included airfare, and the booking fee was
also waived because petitioners niece, Meriam Menor, was respondent companys
ticketing manager.
Pursuant to said contract, Menor went to her aunts residence on June 12, 1991 a
Wednesday to deliver petitioners travel documents and plane tickets. Petitioner, in
turn, gave Menor the full payment for the package tour. Menor then told her to be at
the Ninoy Aquino International Airport (NAIA) on Saturday, two hours before her
flight on board British Airways.
Without checking her travel documents, petitioner went to NAIA on Saturday,
June 15, 1991, to take the flight for the first leg of her journey from Manila to
Hongkong. To petitioners dismay, she discovered that the flight she was supposed to
take had already departed the previous day. She learned that her plane ticket was for
the flight scheduled on June 14, 1991. She thus called up Menor to complain.
Subsequently, Menor prevailed upon petitioner to take another tour the British
Pageant which included England, Scotland and Wales in its itinerary. For this tour
package, petitioner was asked anew to pay US$785.00 or P20,881.00 (at the then
prevailing exchange rate of P26.60). She gave respondent US$300 or P7,980.00 as
partial payment and commenced the trip in July 1991.
Upon petitioners return from Europe, she demanded from respondent the
reimbursement of P61,421.70, representing the difference between the sum she paid
for Jewels of Europe and the amount she owed respondent for the British Pageant
tour. Despite several demands, respondent company refused to reimburse the
amount, contending that the same was non-refundable. Petitioner was thus
[1]
constrained to file a complaint against respondent for breach of contract of carriage

and damages, which was docketed as Civil Case No. 92-133 and raffled to Branch
59 of the Regional Trial Court of Makati City.
In her complaint, petitioner alleged that her failure to join Jewels of Europe was
[2]
due to respondents fault since it did not clearly indicate the departure date on the
plane ticket. Respondent was also negligent in informing her of the wrong flight
schedule through its employee Menor. She insisted that the British Pageant was
merely a substitute for the Jewels of Europe tour, such that the cost of the former
should be properly set-off against the sum paid for the latter.
For its part, respondent company, through its Operations Manager, Concepcion
Chipeco, denied responsibility for petitioners failure to join the first tour. Chipeco
insisted that petitioner was informed of the correct departure date, which was clearly
and legibly printed on the plane ticket. The travel documents were given to petitioner
two days ahead of the scheduled trip. Petitioner had only herself to blame for missing
the flight, as she did not bother to read or confirm her flight schedule as printed on
the ticket.
Respondent explained that it can no longer reimburse the amount paid for Jewels
of Europe, considering that the same had already been remitted to its principal in
Singapore, Lotus Travel Ltd., which had already billed the same even if petitioner did
not join the tour. Lotus European tour organizer, Insight International Tours Ltd.,
determines the cost of a package tour based on a minimum number of projected
participants. For this reason, it is accepted industry practice to disallow refund for
individuals who failed to take a booked tour. [3]
Lastly, respondent maintained that the British Pageant was not a substitute for
the package tour that petitioner missed. This tour was independently procured by
petitioner after realizing that she made a mistake in missing her flight for Jewels of
Europe. Petitioner was allowed to make a partial payment of only US$300.00 for the
second tour because her niece was then an employee of the travel
agency.Consequently, respondent prayed that petitioner be ordered to pay the
balance of P12,901.00 for the British Pageant package tour.
After due proceedings, the trial court rendered a decision, the dispositive part of
[4]
which reads:
1. Ordering the defendant to return and/or refund to the plaintiff the amount of Fifty
Three Thousand Nine Hundred Eighty Nine Pesos and Forty Three Centavos
(P53,989.43) with legal interest thereon at the rate of twelve percent (12%) per
annum starting January 16, 1992, the date when the complaint was filed;
2. Ordering the defendant to pay the plaintiff the amount of Five Thousand
(P5,000.00) Pesos as and for reasonable attorneys fees;
3. Dismissing the defendants counterclaim, for lack of merit; and
4. With costs against the defendant.
SO ORDERED. [5]
The trial court held that respondent was negligent in erroneously advising
petitioner of her departure date through its employee, Menor, who was not presented
as witness to rebut petitioners testimony. However, petitioner should have verified
the exact date and time of departure by looking at her ticket and should have simply
not relied on Menors verbal representation. The trial court thus declared that
petitioner was guilty of contributory negligence and accordingly, deducted 10% from
the amount being claimed as refund.
Respondent appealed to the Court of Appeals, which likewise found both parties
to be at fault. However, the appellate court held that petitioner is more negligent than
respondent because as a lawyer and well-traveled person, she should have known
better than to simply rely on what was told to her. This being so, she is not entitled to
any form of damages. Petitioner also forfeited her right to the Jewels of Europe tour
and must therefore pay respondent the balance of the price for the British Pageant
tour. The dispositive portion of the judgment appealed from reads as follows:
WHEREFORE, premises considered, the decision of the Regional Trial Court dated October
26, 1995 is hereby REVERSED and SET ASIDE. A new judgment is hereby ENTERED
requiring the plaintiff-appellee to pay to the defendant-appellant the amount of P12,901.00,
representing the balance of the price of the British Pageant Package Tour, the same to earn
legal interest at the rate of SIX PERCENT (6%) per annum, to be computed from the time
the counterclaim was filed until the finality of this decision. After this decision becomes final
and executory, the rate of TWELVE PERCENT (12%) interest per annum shall be
additionally imposed on the total obligation until payment thereof is satisfied. The award of
attorneys fees is DELETED. Costs against the plaintiff-appellee.
SO ORDERED. [6]
Upon denial of her motion for reconsideration, petitioner filed the instant petition
[7]
under Rule 45 on the following grounds:

I
It is respectfully submitted that the Honorable Court of Appeals committed a reversible error
in reversing and setting aside the decision of the trial court by ruling that the petitioner is not
entitled to a refund of the cost of unavailed Jewels of Europe tour she being equally, if not
more, negligent than the private respondent, for in the contract of carriage the common
carrier is obliged to observe utmost care and extra-ordinary diligence which is higher in
degree than the ordinary diligence required of the passenger. Thus, even if the petitioner and
private respondent were both negligent, the petitioner cannot be considered to be equally, or
worse, more guilty than the private respondent. At best, petitioners negligence is only
contributory while the private respondent [is guilty] of gross negligence making the principle
of pari delicto inapplicable in the case;
II
The Honorable Court of Appeals also erred in not ruling that the Jewels of Europe tour was
not indivisible and the amount paid therefor refundable;
III
The Honorable Court erred in not granting to the petitioner the consequential damages due
her as a result of breach of contract of carriage. [8]
Petitioner contends that respondent did not observe the standard of care required
of a common carrier when it informed her wrongly of the flight schedule. She could
not be deemed more negligent than respondent since the latter is required by law to
exercise extraordinary diligence in the fulfillment of its obligation. If she were
negligent at all, the same is merely contributory and not the proximate cause of the
damage she suffered. Her loss could only be attributed to respondent as it was the
direct consequence of its employees gross negligence.
Petitioners contention has no merit.
By definition, a contract of carriage or transportation is one whereby a certain
person or association of persons obligate themselves to transport persons, things, or
news from one place to another for a fixed price. Such person or association of
[9]
persons are regarded as carriers and are classified as private or special carriers and
common or public carriers. A common carrier is defined under Article 1732 of the
[10]
Civil Code as persons, corporations, firms or associations engaged in the business of
carrying or transporting passengers or goods or both, by land, water or air, for
It is obvious from the above definition that respondent is not an entity engaged in
the business of transporting either passengers or goods and is therefore, neither a
private nor a common carrier. Respondent did not undertake to transport petitioner
from one place to another since its covenant with its customers is simply to make
travel arrangements in their behalf. Respondents services as a travel agency include
procuring tickets and facilitating travel permits or visas as well as booking customers
for tours.
While petitioner concededly bought her plane ticket through the efforts of
respondent company, this does not mean that the latter ipso facto is a common
carrier. At most, respondent acted merely as an agent of the airline, with whom
petitioner ultimately contracted for her carriage to Europe. Respondents obligation to
petitioner in this regard was simply to see to it that petitioner was properly booked
with the airline for the appointed date and time. Her transport to the place of
destination, meanwhile, pertained directly to the airline.
The object of petitioners contractual relation with respondent is the latters service
of arranging and facilitating petitioners booking, ticketing and accommodation in
the package tour. In contrast, the object of a contract of carriage is
the transportation of passengers or goods. It is in this sense that the contract
between the parties in this case was an ordinary one for services and not one of
carriage. Petitioners submission is premised on a wrong assumption.
The nature of the contractual relation between petitioner and respondent is
determinative of the degree of care required in the performance of the latters
obligation under the contract. For reasons of public policy, a common carrier in a
contract of carriage is bound by law to carry passengers as far as human care and
foresight can provide using the utmost diligence of very cautious persons and with
due regard for all the circumstances. As earlier stated, however, respondent is not a
[11]
common carrier but a travel agency. It is thus not bound under the law to observe
extraordinary diligence in the performance of its obligation, as petitioner claims.
Since the contract between the parties is an ordinary one for services, the
standard of care required of respondent is that of a good father of a family under
Article 1173 of the Civil Code. This connotes reasonable care consistent with that
[12]
which an ordinarily prudent person would have observed when confronted with a
similar situation. The test to determine whether negligence attended the performance
of an obligation is: 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. [13]
In the case at bar, the lower court found Menor negligent when she allegedly
informed petitioner of the wrong day of departure. Petitioners testimony was
accepted as indubitable evidence of Menors alleged negligent act since respondent
did not call Menor to the witness stand to refute the allegation. The lower court
applied the presumption under Rule 131, Section 3 (e) of the Rules of Court that
[14]
evidence willfully suppressed would be adverse if produced and thus considered

petitioners uncontradicted testimony to be sufficient proof of her claim.
On the other hand, respondent has consistently denied that Menor was negligent
and maintains that petitioners assertion is belied by the evidence on record. The date
and time of departure was legibly written on the plane ticket and the travel papers
were delivered two days in advance precisely so that petitioner could prepare for the
trip. It performed all its obligations to enable petitioner to join the tour and exercised
due diligence in its dealings with the latter.
We agree with respondent.
Respondents failure to present Menor as witness to rebut petitioners testimony
could not give rise to an inference unfavorable to the former. Menor was already
working in France at the time of the filing of the complaint, thereby making it
[15]
physically impossible for respondent to present her as a witness. Then too, even if it
were possible for respondent to secure Menors testimony, the presumption under
Rule 131, Section 3(e) would still not apply. The opportunity and possibility for
obtaining Menors testimony belonged to both parties, considering that Menor was
not just respondents employee, but also petitioners niece. It was thus error for the
lower court to invoke the presumption that respondent willfully suppressed evidence
under Rule 131, Section 3(e). Said presumption would logically be inoperative if the
evidence is not intentionally omitted but is simply unavailable, or when the same
could have been obtained by both parties. [16]
In sum, we do not agree with the finding of the lower court that Menors
negligence concurred with the negligence of petitioner and resultantly caused
damage to the latter. Menors negligence was not sufficiently proved, considering that
the only evidence presented on this score was petitioners uncorroborated narration
of the events. It is well-settled that the party alleging a fact has the burden of proving
it and a mere allegation cannot take the place of evidence. If the plaintiff, upon
[17]
whom rests the burden of proving his cause of action, fails to show in a satisfactory
manner facts upon which he bases his claim, the defendant is under no obligation to
prove his exception or defense. [18]
Contrary to petitioners claim, the evidence on record shows that respondent

exercised due diligence in performing its obligations under the contract and followed
standard procedure in rendering its services to petitioner. As correctly observed by
the lower court, the plane ticket issued to petitioner clearly reflected the departure
[19]
date and time, contrary to petitioners contention. The travel documents, consisting of
the tour itinerary, vouchers and instructions, were likewise delivered to petitioner two
days prior to the trip. Respondent also properly booked petitioner for the tour,
prepared the necessary documents and procured the plane tickets. It arranged
petitioners hotel accommodation as well as food, land transfers and sightseeing
excursions, in accordance with its avowed undertaking.
Therefore, it is clear that respondent performed its prestation under the contract
as well as everything else that was essential to book petitioner for the tour. Had
petitioner exercised due diligence in the conduct of her affairs, there would have
been no reason for her to miss the flight. Needless to say, after the travel papers
were delivered to petitioner, it became incumbent upon her to take ordinary care of
her concerns. This undoubtedly would require that she at least read the documents
in order to assure herself of the important details regarding the trip.
The negligence of the obligor in the performance of the obligation renders him
liable for damages for the resulting loss suffered by the obligee. Fault or negligence
of the obligor consists in his failure to exercise due care and prudence in the
performance of the obligation as the nature of the obligation so demands. There is [20]
no fixed standard of diligence applicable to each and every contractual obligation and
each case must be determined upon its particular facts. The degree of diligence
required depends on the circumstances of the specific obligation and whether one
has been negligent is a question of fact that is to be determined after taking into
account the particulars of each case. [21]
The lower court declared that respondents employee was negligent. This factual
finding, however, is not supported by the evidence on record. While factual findings
below are generally conclusive upon this court, the rule is subject to certain
exceptions, as when the trial court overlooked, misunderstood, or misapplied some
facts or circumstances of weight and substance which will affect the result of the
case. [22]
In the case at bar, the evidence on record shows that respondent company
performed its duty diligently and did not commit any contractual breach. Hence,
petitioner cannot recover and must bear her own damage.
WHEREFORE, the instant petition is DENIED for lack of merit. The decision of
the Court of Appeals in CA-G.R. CV No. 51932 is AFFIRMED. Accordingly, petitioner
is ordered to pay respondent the amount of P12,901.00 representing the balance of
the price of the British Pageant Package Tour, with legal interest thereon at the rate
of 6% per annum, to be computed from the time the counterclaim was filed until the
finality of this Decision. After this Decision becomes final and executory, the rate of
12% per annum shall be imposed until the obligation is fully settled, this interim
period being deemed to be by then an equivalent to a forbearance of credit. [23]
SO ORDERED.
5. Governing Laws:
5.1 Article 1766 of the New Civil Code(NCC).
5.2 Article 1753 NCC.
5.3 Article 1732-1766 NCC.
5.4 National Dev. Company v. CA 164 SCRA 593.
These are appeals by certiorari from the decision * of the Court of Appeals in CA G.R. No: L- 46513-R entitled "Development Insurance and Surety
Corporation plaintiff-appellee vs. Maritime Company of the Philippines and National Development Company defendant-appellants," affirming in toto the
decision ** in Civil Case No. 60641 of the then Court of First Instance of Manila, Sixth Judicial District, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered ordering the defendants National Development Company and
Maritime Company of the Philippines, to pay jointly and severally, to the plaintiff Development Insurance and
Surety Corp., the sum of THREE HUNDRED SIXTY FOUR THOUSAND AND NINE HUNDRED FIFTEEN
PESOS AND EIGHTY SIX CENTAVOS (364,915.86) with the legal interest thereon from the filing of plaintiffs
complaint on April 22, 1965 until fully paid, plus TEN THOUSAND PESOS (Pl0,000.00) by way of damages
as and for attorney's fee.
On defendant Maritime Company of the Philippines' cross-claim against the defendant National Development
Company, judgment is hereby rendered, ordering the National Development Company to pay the
cross-claimant Maritime Company of the Philippines the total amount that the Maritime Company of the
Philippines may voluntarily or by compliance to a writ of execution pay to the plaintiff pursuant to the judgment
rendered in this case.
With costs against the defendant Maritime Company of the Philippines.
(pp. 34-35, Rollo, GR No. L-49469)
The facts of these cases as found by the Court of Appeals, are as follows:
The evidence before us shows that in accordance with a memorandum agreement entered into between
defendants NDC and MCP on September 13, 1962, defendant NDC as the first preferred mortgagee of three
ocean going vessels including one with the name 'Dona Nati' appointed defendant MCP as its agent to
manage and operate said vessel for and in its behalf and account (Exh. A). Thus, on February 28, 1964 the E.
Philipp Corporation of New York loaded on board the vessel "Dona Nati" at San Francisco, California, a total
of 1,200 bales of American raw cotton consigned to the order of Manila Banking Corporation, Manila and the
People's Bank and Trust Company acting for and in behalf of the Pan Asiatic Commercial Company, Inc.,
who represents Riverside Mills Corporation (Exhs. K-2 to K7-A & L-2 to L-7-A). Also loaded on the same
vessel at Tokyo, Japan, were the cargo of Kyokuto Boekui, Kaisa, Ltd., consigned to the order of Manila
Banking Corporation consisting of 200 cartons of sodium lauryl sulfate and 10 cases of aluminum foil (Exhs.
M & M-1). En route to Manila the vessel Dofia Nati figured in a collision at 6:04 a.m. on April 15, 1964 at Ise
Bay, Japan with a Japanese vessel 'SS Yasushima Maru' as a result of which 550 bales of aforesaid cargo of
American raw cotton were lost and/or destroyed, of which 535 bales as damaged were landed and sold on
the authority of the General Average Surveyor for Yen 6,045,-500 and 15 bales were not landed and deemed
lost (Exh. G). The damaged and lost cargoes was worth P344,977.86 which amount, the plaintiff as insurer,
paid to the Riverside Mills Corporation as holder of the negotiable bills of lading duly endorsed (Exhs. L-7-A,
K-8-A, K-2-A, K-3-A, K-4-A, K-5-A, A- 2, N-3 and R-3}. Also considered totally lost were the aforesaid
shipment of Kyokuto, Boekui Kaisa Ltd., consigned to the order of Manila Banking Corporation, Manila, acting
for Guilcon, Manila, The total loss was P19,938.00 which the plaintiff as insurer paid to Guilcon as holder of
the duly endorsed bill of lading (Exhibits M-1 and S-3). Thus, the plaintiff had paid as insurer the total amount
of P364,915.86 to the consignees or their successors-in-interest, for the said lost or damaged cargoes.
Hence, plaintiff filed this complaint to recover said amount from the defendants-NDC and MCP as owner and
ship agent respectively, of the said 'Dofia Nati' vessel. (Rollo, L-49469, p.38)
On April 22, 1965, the Development Insurance and Surety Corporation filed before the then Court of First
Instance of Manila an action for the recovery of the sum of P364,915.86 plus attorney's fees of P10,000.00
against NDC and MCP (Record on Appeal), pp. 1-6).
Interposing the defense that the complaint states no cause of action and even if it does, the action has
prescribed, MCP filed on May 12, 1965 a motion to dismiss (Record on Appeal, pp. 7-14). DISC filed an
Opposition on May 21, 1965 to which MCP filed a reply on May 27, 1965 (Record on Appeal, pp. 14-24). On
June 29, 1965, the trial court deferred the resolution of the motion to dismiss till after the trial on the merits
(Record on Appeal, p. 32). On June 8, 1965, MCP filed its answer with counterclaim and cross-claim against
NDC.
NDC, for its part, filed its answer to DISC's complaint on May 27, 1965 (Record on Appeal, pp. 22-24). It also
filed an answer to MCP's cross-claim on July 16, 1965 (Record on Appeal, pp. 39-40). However, on October
16, 1965, NDC's answer to DISC's complaint was stricken off from the record for its failure to answer DISC's
written interrogatories and to comply with the trial court's order dated August 14, 1965 allowing the inspection
or photographing of the memorandum of agreement it executed with MCP. Said order of October 16, 1965
likewise declared NDC in default (Record on Appeal, p. 44). On August 31, 1966, NDC filed a motion to set
aside the order of October 16, 1965, but the trial court denied it in its order dated September 21, 1966.
On November 12, 1969, after DISC and MCP presented their respective evidence, the trial court rendered a
decision ordering the defendants MCP and NDC to pay jointly and solidarity to DISC the sum of P364,915.86
plus the legal rate of interest to be computed from the filing of the complaint on April 22, 1965, until fully paid
and attorney's fees of P10,000.00. Likewise, in said decision, the trial court granted MCP's crossclaim against
NDC.
MCP interposed its appeal on December 20, 1969, while NDC filed its appeal on February 17, 1970 after its
motion to set aside the decision was denied by the trial court in its order dated February 13,1970.
On November 17,1978, the Court of Appeals promulgated its decision affirming in toto the decision of the trial
court.
Hence these appeals by certiorari.
NDC's appeal was docketed as G.R. No. 49407, while that of MCP was docketed as G.R. No. 49469. On July
25,1979, this Court ordered the consolidation of the above cases (Rollo, p. 103). On August 27,1979, these
consolidated cases were given due course (Rollo, p. 108) and submitted for decision on February 29, 1980
(Rollo, p. 136).
In its brief, NDC cited the following assignments of error:
THE COURT OF APPEALS ERRED IN APPLYING ARTICLE 827 OF THE CODE OF COMMERCE AND
NOT SECTION 4(2a) OF COMMONWEALTH ACT NO. 65, OTHERWISE KNOWN AS THE CARRIAGE OF
GOODS BY SEA ACT IN DETERMINING THE LIABILITY FOR LOSS OF CARGOES RESULTING FROM
THE COLLISION OF ITS VESSEL "DONA NATI" WITH THE YASUSHIMA MARU"OCCURRED AT ISE BAY,
JAPAN OR OUTSIDE THE TERRITORIAL JURISDICTION OF THE PHILIPPINES.
II
THE COURT OF APPEALS ERRED IN NOT DISMISSING THE C0MPLAINT FOR REIMBURSEMENT
FILED BY THE INSURER, HEREIN PRIVATE RESPONDENT-APPELLEE, AGAINST THE CARRIER,
HEREIN PETITIONER-APPELLANT. (pp. 1-2, Brief for Petitioner-Appellant National Development Company;
p. 96, Rollo).
On its part, MCP assigned the following alleged errors:
THE RESPONDENT COURT OF APPEALS ERRED IN NOT HOLDING THAT RESPONDENT

DEVELOPMENT INSURANCE AND SURETY CORPORATION HAS NO CAUSE OF ACTION AS AGAINST
PETITIONER MARITIME COMPANY OF THE PHILIPPINES AND IN NOT DISMISSING THE COMPLAINT.
II
THE RESPONDENT COURT OF APPEALS ERRED IN NOT HOLDING THAT THE CAUSE OF ACTION OF
RESPONDENT DEVELOPMENT INSURANCE AND SURETY CORPORATION IF ANY EXISTS AS
AGAINST HEREIN PETITIONER MARITIME COMPANY OF THE PHILIPPINES IS BARRED BY THE
STATUTE OF LIMITATION AND HAS ALREADY PRESCRIBED.
III
THE RESPONDENT COURT OF APPEALS ERRED IN ADMITTING IN EVIDENCE PRIVATE

RESPONDENTS EXHIBIT "H" AND IN FINDING ON THE BASIS THEREOF THAT THE COLLISION OF
THE SS DONA NATI AND THE YASUSHIMA MARU WAS DUE TO THE FAULT OF BOTH VESSELS
INSTEAD OF FINDING THAT THE COLLISION WAS CAUSED BY THE FAULT, NEGLIGENCE AND LACK
OF SKILL OF THE COMPLEMENTS OF THE YASUSHIMA MARU WITHOUT THE FAULT OR
NEGLIGENCE OF THE COMPLEMENT OF THE SS DONA NATI
IV
THE RESPONDENT COURT OF APPEALS ERRED IN HOLDING THAT UNDER THE CODE OF
COMMERCE PETITIONER APPELLANT MARITIME COMPANY OF THE PHILIPPINES IS A SHIP AGENT
OR NAVIERO OF SS DONA NATI OWNED BY CO-PETITIONER APPELLANT NATIONAL DEVELOPMENT
COMPANY AND THAT SAID PETITIONER-APPELLANT IS SOLIDARILY LIABLE WITH SAID
CO-PETITIONER FOR LOSS OF OR DAMAGES TO CARGO RESULTING IN THE COLLISION OF SAID
VESSEL, WITH THE JAPANESE YASUSHIMA MARU.
V
THE RESPONDENT COURT OF APPEALS ERRED IN FINDING THAT THE LOSS OF OR DAMAGES TO
THE CARGO OF 550 BALES OF AMERICAN RAW COTTON, DAMAGES WERE CAUSED IN THE
AMOUNT OF P344,977.86 INSTEAD OF ONLY P110,000 AT P200.00 PER BALE AS ESTABLISHED IN
THE BILLS OF LADING AND ALSO IN HOLDING THAT PARAGRAPH 1O OF THE BILLS OF LADING HAS
NO APPLICATION IN THE INSTANT CASE THERE BEING NO GENERAL AVERAGE TO SPEAK OF.
VI
THE RESPONDENT COURT OF APPEALS ERRED IN HOLDING THE PETITIONERS NATIONAL

DEVELOPMENT COMPANY AND COMPANY OF THE PHILIPPINES TO PAY JOINTLY AND SEVERALLY
TO HEREIN RESPONDENT DEVELOPMENT INSURANCE AND SURETY CORPORATION THE SUM OF
P364,915.86 WITH LEGAL INTEREST FROM THE FILING OF THE COMPLAINT UNTIL FULLY PAID PLUS
P10,000.00 AS AND FOR ATTORNEYS FEES INSTEAD OF SENTENCING SAID PRIVATE RESPONDENT
TO PAY HEREIN PETITIONERS ITS COUNTERCLAIM IN THE AMOUNT OF P10,000.00 BY WAY OF
ATTORNEY'S FEES AND THE COSTS. (pp. 1-4, Brief for the Maritime Company of the Philippines; p. 121,
Rollo)
The pivotal issue in these consolidated cases is the determination of which laws govern loss or destruction of
goods due to collision of vessels outside Philippine waters, and the extent of liability as well as the rules of
prescription provided thereunder.
The main thrust of NDC's argument is to the effect that the Carriage of Goods by Sea Act should apply to the
case at bar and not the Civil Code or the Code of Commerce. Under Section 4 (2) of said Act, the carrier is
not responsible for the loss or damage resulting from the "act, neglect or default of the master, mariner, pilot
or the servants of the carrier in the navigation or in the management of the ship." Thus, NDC insists that
based on the findings of the trial court which were adopted by the Court of Appeals, both pilots of the colliding
vessels were at fault and negligent, NDC would have been relieved of liability under the Carriage of Goods by
Sea Act. Instead, Article 287 of the Code of Commerce was applied and both NDC and MCP were ordered to
reimburse the insurance company for the amount the latter paid to the consignee as earlier stated.
This issue has already been laid to rest by this Court of Eastern Shipping Lines Inc. v. IAC (1 50 SCRA
469-470 [1987]) where it was held under similar circumstance "that the law of the country to which the goods
are to be transported governs the liability of the common carrier in case of their loss, destruction or
deterioration" (Article 1753, Civil Code). Thus, the rule was specifically laid down that for cargoes transported
from Japan to the Philippines, the liability of the carrier is governed primarily by the Civil Code and in all
matters not regulated by said Code, the rights and obligations of common carrier shall be governed by the
Code of commerce and by laws (Article 1766, Civil Code). Hence, the Carriage of Goods by Sea Act, a
special law, is merely suppletory to the provision of the Civil Code.
In the case at bar, it has been established that the goods in question are transported from San Francisco,
California and Tokyo, Japan to the Philippines and that they were lost or due to a collision which was found to
have been caused by the negligence or fault of both captains of the colliding vessels. Under the above ruling,
it is evident that the laws of the Philippines will apply, and it is immaterial that the collision actually occurred in
foreign waters, such as Ise Bay, Japan.
Under Article 1733 of the Civil Code, common carriers from the nature of their business and for reasons of
public policy are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of
the passengers transported by them according to all circumstances of each case. Accordingly, under Article
1735 of the same Code, in all other than those mentioned is Article 1734 thereof, the common carrier shall be
presumed to have been at fault or to have acted negigently, unless it proves that it has observed the
extraordinary diligence required by law.
It appears, however, that collision falls among matters not specifically regulated by the Civil Code, so that no
reversible error can be found in respondent courses application to the case at bar of Articles 826 to 839, Book
Three of the Code of Commerce, which deal exclusively with collision of vessels.
More specifically, Article 826 of the Code of Commerce provides that where collision is imputable to the
personnel of a vessel, the owner of the vessel at fault, shall indemnify the losses and damages incurred after
an expert appraisal. But more in point to the instant case is Article 827 of the same Code, which provides that
if the collision is imputable to both vessels, each one shall suffer its own damages and both shall be solidarily
responsible for the losses and damages suffered by their cargoes.
Significantly, under the provisions of the Code of Commerce, particularly Articles 826 to 839, the shipowner
or carrier, is not exempt from liability for damages arising from collision due to the fault or negligence of the
captain. Primary liability is imposed on the shipowner or carrier in recognition of the universally accepted
doctrine that the shipmaster or captain is merely the representative of the owner who has the actual or
constructive control over the conduct of the voyage (Y'eung Sheng Exchange and Trading Co. v. Urrutia &
Co., 12 Phil. 751 [1909]).
There is, therefore, no room for NDC's interpretation that the Code of Commerce should apply only to
domestic trade and not to foreign trade. Aside from the fact that the Carriage of Goods by Sea Act (Com. Act
No. 65) does not specifically provide for the subject of collision, said Act in no uncertain terms, restricts its
application "to all contracts for the carriage of goods by sea to and from Philippine ports in foreign trade."
Under Section I thereof, it is explicitly provided that "nothing in this Act shall be construed as repealing any
existing provision of the Code of Commerce which is now in force, or as limiting its application." By such
incorporation, it is obvious that said law not only recognizes the existence of the Code of Commerce, but
more importantly does not repeal nor limit its application.
On the other hand, Maritime Company of the Philippines claims that Development Insurance and Surety
Corporation, has no cause of action against it because the latter did not prove that its alleged subrogers have
either the ownership or special property right or beneficial interest in the cargo in question; neither was it
proved that the bills of lading were transferred or assigned to the alleged subrogers; thus, they could not
possibly have transferred any right of action to said plaintiff- appellee in this case. (Brief for the Maritime
Company of the Philippines, p. 16).
The records show that the Riverside Mills Corporation and Guilcon, Manila are the holders of the duly
endorsed bills of lading covering the shipments in question and an examination of the invoices in particular,
shows that the actual consignees of the said goods are the aforementioned companies. Moreover, no less
than MCP itself issued a certification attesting to this fact. Accordingly, as it is undisputed that the insurer,
plaintiff appellee paid the total amount of P364,915.86 to said consignees for the loss or damage of the
insured cargo, it is evident that said plaintiff-appellee has a cause of action to recover (what it has paid) from
defendant-appellant MCP (Decision, CA-G.R. No. 46513-R, p. 10; Rollo, p. 43).
MCP next contends that it can not be liable solidarity with NDC because it is merely the manager and
operator of the vessel Dona Nati not a ship agent. As the general managing agent, according to MCP, it can
only be liable if it acted in excess of its authority.
As found by the trial court and by the Court of Appeals, the Memorandum Agreement of September 13, 1962
(Exhibit 6, Maritime) shows that NDC appointed MCP as Agent, a term broad enough to include the concept
of Ship-agent in Maritime Law. In fact, MCP was even conferred all the powers of the owner of the vessel,
including the power to contract in the name of the NDC (Decision, CA G.R. No. 46513, p. 12; Rollo, p. 40).
Consequently, under the circumstances, MCP cannot escape liability.
It is well settled that both the owner and agent of the offending vessel are liable for the damage done where
both are impleaded (Philippine Shipping Co. v. Garcia Vergara, 96 Phil. 281 [1906]); that in case of collision,
both the owner and the agent are civilly responsible for the acts of the captain (Yueng Sheng Exchange and
Trading Co. v. Urrutia & Co., supra citing Article 586 of the Code of Commerce; Standard Oil Co. of New York
v. Lopez Castelo, 42 Phil. 256, 262 [1921]); that while it is true that the liability of the naviero in the sense of
charterer or agent, is not expressly provided in Article 826 of the Code of Commerce, it is clearly deducible
from the general doctrine of jurisprudence under the Civil Code but more specially as regards contractual
obligations in Article 586 of the Code of Commerce. Moreover, the Court held that both the owner and agent
(Naviero) should be declared jointly and severally liable, since the obligation which is the subject of the action
had its origin in a tortious act and did not arise from contract (Verzosa and Ruiz, Rementeria y Cia v. Lim, 45
Phil. 423 [1923]). Consequently, the agent, even though he may not be the owner of the vessel, is liable to the
shippers and owners of the cargo transported by it, for losses and damages occasioned to such cargo,
without prejudice, however, to his rights against the owner of the ship, to the extent of the value of the vessel,
its equipment, and the freight (Behn Meyer Y Co. v. McMicking et al. 11 Phil. 276 [1908]).
As to the extent of their liability, MCP insists that their liability should be limited to P200.00 per package or per
bale of raw cotton as stated in paragraph 17 of the bills of lading. Also the MCP argues that the law on
averages should be applied in determining their liability.
MCP's contention is devoid of merit. The declared value of the goods was stated in the bills of lading and
corroborated no less by invoices offered as evidence ' during the trial. Besides, common carriers, in the
language of the court in Juan Ysmael & Co., Inc. v. Barrette et al., (51 Phil. 90 [1927]) "cannot limit its liability
for injury to a loss of goods where such injury or loss was caused by its own negligence." Negligence of the
captains of the colliding vessel being the cause of the collision, and the cargoes not being jettisoned to save
some of the cargoes and the vessel, the trial court and the Court of Appeals acted correctly in not applying
the law on averages (Articles 806 to 818, Code of Commerce).
MCP's claim that the fault or negligence can only be attributed to the pilot of the vessel SS Yasushima Maru
and not to the Japanese Coast pilot navigating the vessel Dona Nati need not be discussed lengthily as said
claim is not only at variance with NDC's posture, but also contrary to the factual findings of the trial court
affirmed no less by the Court of Appeals, that both pilots were at fault for not changing their excessive speed
despite the thick fog obstructing their visibility.
Finally on the issue of prescription, the trial court correctly found that the bills of lading issued allow
trans-shipment of the cargo, which simply means that the date of arrival of the ship Dona Nati on April
18,1964 was merely tentative to give allowances for such contingencies that said vessel might not arrive on
schedule at Manila and therefore, would necessitate the trans-shipment of cargo, resulting in consequent
delay of their arrival. In fact, because of the collision, the cargo which was supposed to arrive in Manila on
April 18, 1964 arrived only on June 12, 13, 18, 20 and July 10, 13 and 15, 1964. Hence, had the cargoes in
question been saved, they could have arrived in Manila on the above-mentioned dates. Accordingly, the
complaint in the instant case was filed on April 22, 1965, that is, long before the lapse of one (1) year from the
date the lost or damaged cargo "should have been delivered" in the light of Section 3, sub-paragraph (6) of
the Carriage of Goods by Sea Act.
PREMISES CONSIDERED, the subject petitions are DENIED for lack of merit and the assailed decision of
the respondent Appellate Court is AFFIRMED.
SO ORDERED.
5.5 Mapa v. CA 275 SCRA 1997 case

The main issue in this petition for review under Rule 45 of the Rules of Court is
the applicability of Article 28(1) of the Warsaw Convention, which provides as [1]
follows:
ARTICLE 28. (1) An action for damages must be brought, at the option of the plaintiff, in
the territory of one of the High Contracting Parties, either before the court of the domicile of
the carrier or of his principal place of business, or where he has a place of business through
which the contract has been made, or before the court at the place of destination.
We are urged by the petitioners to reverse the 31 May 1995 Decision of the Court
of Appeals in CA-G.R. CV No. 39896 affirming the 24 July 1992 Order of the
[2]
Regional Trial Court of Quezon City, Branch 102, which dismissed Civil Case No.
Q-91-9620 on the ground of lack of jurisdiction in view of the aforementioned Article
[3]
28(1) of the Warsaw Convention.

The antecedent facts, as summarized by the Court of Appeals, are as follows:
Plaintiffs Cornelio P. Mapa and Purita S. Mapa are respectable members of the society. Mr.
Mapa is an established businessman and currently the Regional General Manager of
Akerlund and Rausing, a multinational packaging material manufacturer based in Manila. He
was previously the Senior Vice President of Phimco Industries, an affiliate company of
Swedish Match Company. Mrs. Mapa is a successful businesswoman engaged in the
commercial transactions of high value antique and oriental arts decor items originating from
Asian countries. Carmina S. Mapa is the daughter of plaintiffs Purita and Cornelio and is a
graduate of the International School in Bangkok, Thailand, now presently enrolled at the
Boston University where she is majoring in communication.
Plaintiffs Mapa entered into contract of air transportation with defendant TWA as evidenced
by TWA ticket Nos. 015:9475:153:304 and 015:9475:153:305, purchased in Bangkok,
Thailand. Said TWA tickets are for Los Angeles-New York-Boston-St. Louis-Chicago ....
Domicile of carrier TWA is Kansas City, Missouri, USA. Its principal place of business is
Kansas City, Missouri, USA. TWAs place of business through which the contracts were
made is Bangkok, Thailand. The place of destination is Chicago, USA.
On August 10, 1990, plaintiffs Carmina and Purita left Manila on board PAL flight No. 104
for Los Angeles. Carmina was to commence schooling and thus was accompanied by Purita
to assist her in settling down at the University.
They arrived in Los Angeles on the same date and stayed there until August 14, 1990 when
they left for New York City.
On August 14, 1990, plaintiffs Purita and Carmina S. Mapa arrived at the John F. Kennedy
(JFK) Airport, New York, on TWA Flight No. 904.
On August 27, 1990, plaintiffs Purita and Carmina S. Mapa departed for Boston, taking a
connecting flight on TWAs carrier, TW 0901, from JFK Airport, New York, to Bostons
Logan Airport, checking in seven (7) pieces of luggage at the TWA counter in the JFK
Airport. The seven baggages were received by a porter who issued seven TWA baggage
receipts numbered 17-8270, 71, 72, 73, 74, 75, and 76 therefor.
From the entrance gate of the terminal building, plaintiffs Purita and Carmina proceeded to
TWAs ticket counter and presented their confirmed TWA tickets numbered
015:9475:153:304 and 015:9475:153:305 with a 3:00 p.m. departure time. They were issued
their boarding passes and were instructed to proceed to gate 35 for boarding. At about 2:40
p.m., plaintiffs noticed that there was still no instruction to board the aircraft so they made
inquiries. The TWA ground stewardess informed plaintiffs that they were at the wrong gate
because their flight was boarding at gate 1. Upon hearing this, plaintiffs rushed to gate 1
which was in another building terminal. At gate 1, they were told by a TWA ground
stewardess that flight 901 had just departed. However, they were consoled that another TWA
flight was leaving for Boston after 30 minutes and plaintiffs could use the same boarding
pass for the next flight. At around 3:15 p.m., plaintiffs Purita and Carmina were able to
board the next flight. However, the plane was not immediately cleared for take off on
account of a thunderstorm. The passengers were instructed to stay inside the aircraft until
6:00 p.m. when the plane finally left for Boston.
Upon arriving in Boston, plaintiffs Purita and Carmina proceeded to the carousel to claim
their baggages and found only three out of the seven they checked in, to wit: one Samsonite
on the carousel, another Samsonite lying on the floor near the carousel and a third baggage,
an American Tourister, inside the unclaimed baggage office. Plaintiffs immediately reported
the loss of their four baggages to the TWA Baggage Office at Logan Airport. TWAs
representative confidently assured them that their baggages would be located within 24 hours
and not more than 48 hours.
On September 2, 1990, plaintiffs received a letter from TWA, signed by Mr. J.A. Butler,
Customer Relations-Baggage Service, apologizing for TWAs failure to locate the missing
luggage and requesting plaintiffs to accomplish a passenger property questionnaire to
facilitate a further intensive and computerized search for the lost luggage. Plaintiffs duly
accomplished the passenger property questionnaire, taking pains to write down in detail the
contents of each missing baggage. The total value of the lost items amounted to $11, 283.79.
On September 20, 1990, plaintiffs counsel wrote TWA thru its General Sales Manager in the
Philippines, Daniel Tuason, with office address at Ground Floor, Saville Building, Sen. Gil J.
Puyat Avenue corner Paseo de Roxas, Makati, Metro Manila demanding indemnification for
the grave damage and injury suffered by the plaintiffs.
TWA again assured plaintiffs that intensive search was being conducted.
On October 8, 1990, TWA offered to amicably settle the case by giving plaintiffs-appellants
two options: (a) transportation credit for future TWA travel or (b) cash settlement. Five
months lapsed without any result on TWAs intensive search.
On January 3, 1991, plaintiffs-appellants opted for transportation credit for future TWA
travel.
On January 11, 1991, TWA disregarded plaintiffs option and unilaterally declared the
payment of $2,560.00 as constituting full satisfaction of the plaintiffs claim.
On July 19, 1991, plaintiffs accepted the check for $2,560.00, as partial payment for the
actual cost of their lost baggages and their contents.
Despite demands by plaintiffs, TWA failed and refused without just cause to indemnify and
redress plaintiffs for the grave injury and damages they have suffered.
[4]
Purita S. Mapa, Carmina S. Mapa, and Cornelio P. Mapa (herein petitioners) then
filed with the trial court on 1 August 1991 a complaint for damages, which was
[5] [6]
docketed as Civil Case No. Q-91-9620.Before a responsive pleading was filed, the
petitioners filed an Amended Complaint. They prayed that after due trial private
[7]
respondent Trans-World Airlines, Inc. (hereafter, TWA), be ordered to pay them the
following amounts: (1) US$8,723.79, or its equivalent in Philippine currency,
representing the cost of the lost luggage and its contents; (2) US$2,949.50, or its
equivalent in Philippine currency, representing the cost of hotel, board and lodging,
and communication expenses; (3) P1 million, by way of moral damages; (4) P1
million, by way of exemplary damages, with legal interest on said amounts from the
date of extrajudicial demand thereof; and (5) P500,000.00 as attorney's fees, costs of
the suit, and other expenses of litigation. [8]
On 26 February 1992, TWA filed its Answer to the Amended Complaint raising,
as special and affirmative defense, lack of jurisdiction of Philippine courts over the
action for damages in that pursuant to Article 28(1) of the Warsaw Convention, the
action could only be brought either in Bangkok where the contract was entered into,
or in Boston which was the place of destination, or in Kansas City which is the
carrier's domicile and principal place of business.
TWA further alleged that pursuant to the Warsaw Convention and the Notice of
Baggage Limitations at the back of the tickets, its liability to the petitioners is limited
to US$9.07 per pound, or US$20.00 per kilo, which is in lieu of actual and
compensatory damages. Even assuming that petitioners bag weighed the maximum
acceptable weight of 70 pounds, TWAs maximum liability is $640.00 per bag or
$2,560.00 for the four pieces of baggage, which the petitioners have been offered
and have accepted. TWA also submitted that it could not be liable for moral and
exemplary damages and attorneys fees because it did not act in a wanton, fraudulent,
reckless, oppressive, or malevolent manner. [9]
On 7 February 1992, the petitioners filed their second Amended Complaint to [10]
include a claim of US$2,500, or its equivalent in Philippine Currency, representing

the additional replacement cost of the items and personal effects contained in their
lost luggage; and US$4,500 representing the travel expenses, hotel, lodging, food
and other expenses of petitioner Cornelio Mapa, who was constrained to join his
family in Boston to extend the necessary assistance in connection with the lost
luggage.
After the filing of TWAs Answer to the second Amended Complaint, and [11]
petitioners Reply thereto, the trial court gave TWA ten days within which to submit a
memorandum in support of its affirmative defenses; after which the incident would be
deemed submitted for resolution. However, after TWA filed its Memorandum, the
[12] [13]
trial court gave the petitioners five days within which to file a reply memorandum; and
TWA, two days from receipt of the latter to file its comment thereon. The petitioners [14]
then filed their Opposition (by way of Reply Memorandum) to which TWA filed a [15]
Reply. Thereafter, the petitioners submitted a Rejoinder ; TWA, a Surrejoinder.

[16] [17] [18]
On 24 July 1992, the trial court issued an Order dismissing the case for lack of
[19]
jurisdiction in light of Article 28(1) of the Warsaw Convention. Thus:
It is plaintiffs' theory that the Warsaw Convention does not apply to the instant case because
plaintiffs' contract of transportation does not constitute "international transportation" as
defined in said convention. This however is belied by the Passenger Property Questionnaire
which is Annex C of plaintiffs' amended complaint. Page two of said questionnaire
accomplished by plaintiffs under the heading "Your Complete Itinerary" shows that the
TWA tickets issued to the plaintiffs form part of the contract of transportation to be
performed from Manila to the United States. Since the Philippines and the United States are
parties to the convention, plaintiffs' contracts of transportation come within the meaning of
International Transportation.
...
On the basis of the foregoing, the Court holds that the Warsaw Convention is applicable to
the case at bar, even if the basis of plaintiffs' present action is breach of contract of carriage
under the New Civil Code.
The next question to be resolved is whether or not the Court has jurisdiction to try the
present case in the light of the provision of Art. 28(1) above-quoted.
Under Art. 28(1) supra, a complaint for damages against an air carrier can be instituted only
in any of the following places/courts:
(1) The court of the domicile of the carrier;

(2) The court of its principal place of business;
(3) The court where it has a place of business through which the contract had been made;
(4) The court of the place of destination.
In interpreting the provision of Art. 28(1) of the Warsaw Convention, the Supreme Court in
the same case of Augusto Benedicto Santos vs. Northwest Airlines held:
"Whether Article 28(1) refers to jurisdiction or only to venue is a question over which
authorities are sharply divided. While the petitioner cites several cases holding that Article
28(1) refers to venue rather that jurisdiction, there are later cases cited by the private
respondent supporting the conclusion that the provision is jurisdictional.
Venue and jurisdiction are entirely distinct matters. Jurisdiction may not be conferred by
consent or waiver upon a court which otherwise would have no jurisdiction over the
subject-matter of an action; but the venue of an action as fixed by statute may be changed by
the consent of the parties and an objection that the plaintiff brought his suit in the wrong
country may be waived by the failure of the defendant to make a timely objection. In either
case, the court may render a valid judgment. Rules as to jurisdiction can never be left to the
consent or agreement of the parties, whether or not a prohibition exists against their
alteration.
A number of reasons tends to support the characterization of Article 28(1) as a jurisdiction

and not a venue provision. First, the wording of Article 32, which indicates the places where
the action for damages "must" be brought, underscores the mandatory nature of Article
28(1). Second, this characterization is consistent with one of the objectives of the
Convention, which is to "regulate in a uniform manner the conditions of international
transportation by air." Third, the Convention does not contain any provision prescribing rules
of jurisdiction other than Article 28(1), which means that the phrase "rules as to jurisdiction"
used in Article 32 must refer only to Article 28(1). In fact, the last sentence of Article 32
specifically deals with the exclusive enumeration in Article 28(1) as "jurisdictions," which,
as such, cannot be left to the will of the parties regardless of the time when the damage
occurred.
...
It has been shown by the defendant that the domicile of the defendant Trans World Airlines,
Inc. is Kansas City, Missouri, its principal place of business is also in Kansas City, Missouri,
the carrier's place of business through which the contracts were made is Bangkok (Annexes
A and A-1, Amended Complaint), and the place of destination was Boston.
The Philippines not being one of the places specified in Art. 28(1) above-quoted where the
complaint may be instituted, this Court therefore, does not have jurisdiction over the present
case.
Evidently discontented with the trial court's order, the petitioners appealed to the
Court of Appeals, contending that the lower court erred in not holding that (1) it has
jurisdiction over the instant case and (2) the Warsaw Convention is inapplicable in
the instant case because the subject matter of the case is not included within the
coverage of the said convention. They claimed that their cause of action could be
[20]
based on breach of contract of air carriage founded on Articles 1733, 1734, 1735,
1755, and 1756 of the New Civil Code governing common carriers or Article 2176 of
the same Code governing tort or quasi-delict.
The appellate court disagreed with the petitioners and affirmed the order of the
trial court. It held that the Warsaw Convention is the law which governs the dispute
between the petitioners and TWA because what is involved is international
transportation defined by said Convention in Article I(2). This holding is founded on
its determination that the two TWA tickets for Los Angeles-New York-Boston-St.
Louis-Chicago purchased in Bangkok, Thailand, were issued in conjunction with, and
therefore formed part of, the contract of transportation performed from Manila,
Philippines, to the United States.
The respondent court further held that the cause of action of the petitioners arose
from the loss of the four checked pieces of baggage, which then falls under Article
18(1), Chapter III (Liability of the Carrier) of the Warsaw Convention. Pursuant to
[21]
Article 24(1) of the Convention, all actions for damages, whether based on tort, code
law or common law, arising from loss of baggage under Article 18 of the Warsaw
Convention, can only be brought subject to the conditions and limits set forth in the
Warsaw Convention. Article 28(1) thereof sets forth conditions and limits in that the
action for damages may be instituted only in the territory of one of the High
Contracting Parties, before the court of (1) the domicile of the carrier, (2) the carriers
principal place of business, (3) the place of business through which the contract has
been made, or (4) the place of destination. Since the Philippines is not one of these
places, a Philippine Court, like the RTC, has no jurisdiction over the complaint for
damages.
Respondent Court of Appeals likewise held that the petitioners could not claim
application of Articles 1733, 1734, 1735, 1755, and 1756 of the New Civil Code on
common carriers without taking into consideration Article 1753 of the same Code,
which provides that the law of the country to which the goods are to be transported
shall govern the liability of the common carrier for their loss, destruction, or
deterioration. Since the country of ultimate destination is Chicago, the law of Chicago
shall govern the liability of TWA for the loss of the four pieces of baggage. Neither is
Article 2176 of the New Civil Code on torts or quasi-delicts applicable in view of the
private international law principle of lex loci delicti commissi. In addition,
[22]
comformably with Santos III v. Northwest Orient Airlines, mere allegation of willful
[23]
misconduct resulting in a tort is insufficient to exclude the case from the

comprehension of the Warsaw Convention.
Failing in their bid to reconsider the decision, the petitioners filed this
petition. They aver that respondent Court of Appeals gravely erred (1) in holding that
the Warsaw Convention is applicable to this case and (2) in applying Article 1753 of
the Civil Code and the principle of lex loci delicti commissi. [24]
We resolved to give due course to the petition after the filing by TWA of its
Comment on the petition and noted without action for the reasons stated in the
resolution of 25 September 1996 petitioners Reply and Rejoinder. We then required
the parties to submit their respective memoranda. They did in due time.
The petitioners insist that the Warsaw Convention is not applicable to their case
because the contracts they had with TWA did not involve an international
transportation. Whether the contracts were of international transportation is to be
solely determined from the TWA tickets issued to them in Bangkok, Thailand, which
showed that their itinerary was Los Angeles-New York-Boston-St.
Louis-Chicago.Accordingly, since the place of departure (Los Angeles) and the place
of destination (Chicago) are both within the territory of one High Contracting Party,
with no agreed stopping place in a territory subject to the sovereignty, mandate,
suzerainty or authority of another Power, the contracts did not constitute international
transportation as defined by the convention. They also claim to be without legal basis
the contention of TWA that their transportation contracts were of international
character because of the handwritten notations in the tickets re INTL TKT
#079-4402956821-2 and INTL TKT #079-4402956819. Notwithstanding such
notations, the TWA tickets, viz., (a) No. 015.9475:153:304 and (b) No.
015:9475:153:305 did not cease to be for the itinerary therein designated. Besides, it
is a fact that petitioners Purita and Carmina Mapa traveled from Manila to Los
Angeles via Philippine Airlines (PAL) by virtue of PAL tickets issued independently of
the TWA tickets.
The pith issue to be resolved under the petitioners first assigned error is whether
the contracts of transportation between Purita and Carmina Mapa, on the one hand,
and TWA, on the other, were contracts of international transportation under the
Warsaw Convention. If they were, then we should sustain the trial court and the
Court of Appeals in light of our ruling in Santos v. Northwest Orient Airlines. It [25]
appears clear to us that TWA itself, the trial court, and the Court of Appeals impliedly
admit that if the sole basis were the two TWA tickets for Los Angeles-New
York-Boston-St. Louis-Chicago, the contracts cannot be brought within the term
international transportation, as defined in Article I(2) of the Warsaw Convention. As
provided therein, a contract is one of international transportation only if
according to the contract made by the parties, the place of departure and the place of
destination, whether or not there be a break in the transportation or a transshipment, are
situated either within the territories of two High Contracting Parties, or within the territory of
a single High Contracting Party, if there is an agreed stopping place within a territory subject
to the sovereignty, mandate or authority of another power, even though that power is not a
party to this convention.
There are then two categories of international transportation, viz., (1) that where
the place of departure and the place of destination are situated within the territories
of two High Contracting Parties regardless of whether or not there be a break in the
transportation or a transshipment; and (2) that where the place of departure and the
place of destination are within the territory of a single High Contracting Party if there
is an agreed stopping place within a territory subject to the sovereignty, mandate, or
authority of another power, even though the power is not a party to the Convention.
The High Contracting Parties referred to in the Convention are the signatories
thereto and those which subsequently adhered to it. In the case of the Philippines,
the Convention was concurred in by the Senate, through Resolution No. 19, on 16
May 1950. The Philippine instrument of accession was signed by President Elpidio
Quirino on 13 October 1950 and was deposited with the Polish Government on 9
November 1950. The Convention became applicable to the Philippines on 9
February 1951. Then, on 23 September 1955, President Ramon Magsaysay issued
Proclamation No. 201, declaring the Philippines formal adherence thereto, to the end
that the same and every article and clause thereof may be observed and fulfilled in
good faith by the Republic of the Philippines and the citizens thereof. [26]
The contracts of transportation in this case are evidenced by the two TWA tickets,
No. 015:9475:153:304 and No. 015:9475:153:305, both purchased and issued in
Bangkok, Thailand. On the basis alone of the provisions therein, it is obvious that the
place of departure and the place of destination are all in the territory of the United
States, or of a single High Contracting Party. The contracts, therefore, cannot come
within the purview of the first category of international transportation. Neither can it
be under the second category since there was NO agreed stopping place within a
territory subject to the sovereignty, mandate, or authority of another power.
The only way to bring the contracts between Purita and Carmina Mapa, on the
one hand, and TWA, on the other, within the first category of international
transportation is to link them with, or to make them an integral part of, the Manila-Los
Angeles travel of Purita and Carmina through PAL aircraft. The linkages which have
been pointed out by the TWA, the trial court, and the Court of Appeals are (1) the
handwritten notations, viz., INTL TKT # 079-4402956821-2 and INTL TKT #
079-4402956819, on the two TWA tickets; and (2) the entries made by petitioners
Purita and Carmina Mapa in column YOUR COMPLETE ITINERARY in TWAs
Passenger Property Questionnaire, wherein they mentioned their travel from Manila
to Los Angeles in flight PR 102.
The alleged international tickets mentioned in the notations in conjunction with
which the two TWA tickets were issued were not presented. Clearly then, there is at
all no factual basis of the finding that the TWA tickets were issued in conjunction with
the international tickets, which are even, at least as of now, non-existent.
As regards the petitioners entry in YOUR COMPLETE ITINERARY column of the
Passenger Property Questionnaire wherein they included the Manila-Los
Angeles travel, it must be pointed out that this was made on 4 September 1990 by [27]
petitioners Purita and Carmina Mapa, and only in connection with their claim for their
lost pieces of baggage. The loss occurred much earlier, or on 27 August 1990. The
entry can by no means be considered as a part of, or supplement to, their contracts
of transportation evidenced by the TWA tickets which covered transportation within
the United States only.
It must be underscored that the first category of international transportation under
the Warsaw Convention is based on the contract made by the parties. TWA does not
claim that the Manila-Los Angeles contracts of transportation which brought Purita
and Carmina to Los Angeles were also its contracts. It does not deny the assertion of
the petitioners that those contracts were independent of the TWA tickets issued in
Bangkok, Thailand. No evidence was offered that TWA and PAL had an agreement
concerning transportation of passengers from points of departures not served with
aircrafts of one or the other.There could have been no difficulty for such agreement,
since TWA admitted without qualification in paragraph 1 of its Answer to the second [28]
Amended Complaint the allegation in paragraph 1.1 of the latter that TWA is a [29]
foreign corporation licensed to do business in the Philippines with office address at

Ground Floor, Saville Building, Sen. Gil. J. Puyat Avenue, corner Paseo de Roxas,
Makati, Metro Manila.
TWA relies on Article I(3) of the Convention, which provides as follows:
3. A carriage to be performed by several successive air carriers is deemed, for the purposes of
this Convention, to be one undivided carriage, if it has been regarded by the parties as a
single operation, whether it had been agreed upon under the form of a single contract or of a
series of contracts, and it shall not lose its international character merely because one
contract or a series of contracts is to be performed entirely within a territory subject to the
sovereignty, suzerainty, mandate, or authority of the same High Contracting Party.
It also points to Article 15 of the IATA Recommend Practice 1724, which

provides: Carriage to be performed by several successive carriers under one ticket,
or under a ticket and any conjunction ticket issued in connection therewith, is
regarded as a single operation. [30]
The flaw of respondents position is the presumption that the parties have
regarded as an undivided carriage or as a single operation the carriage from Manila
to Los Angeles through PAL then to New York-Boston- St. Louis-Chicago through
TWA. The dismissal then of the second Amended Complaint by the trial court and
the Court of Appeals affirmance of the dismissal were not based on indubitable facts
or grounds, but on inferences without established factual basis.
TWA should have offered evidence for its affirmative defenses at the preliminary
hearing therefor. Section 5 of Rule 16 of the Rules of Court expressly provides:
SEC. 5. Pleading grounds as affirmative defenses. -- Any of the grounds for dismissal
provided for in this rule, except improper venue, may be pleaded as an affirmative defense,
and a preliminary hearing may be had thereon as if a motion to dismiss had been filed.
Without any further evidence as earlier discussed, the trial court should have
denied the affirmative defense of lack of jurisdiction because it did not appear to
be indubitable. Section 3 of Rule 16 of the Rules of Court provides:
SEC. 3. Hearing and order. -- After hearing the court may deny or grant the motion or allow
amendment of pleading, or may defer the hearing and determination of the motion until the
trial if the ground alleged therein does not appear to be indubitable.
WHEREFORE, the instant petition is GRANTED and the challenged decision of

31 May 1995 of respondent Court of Appeals in CA-G.R. CV No. 39896, as well as
the Order of 24 July 1992 of the Regional Trial Court of Quezon City, Branch 102, in
Civil Case No. Q-91-9620, is REVERSED and SET ASIDE.
The Regional Trial Court of Quezon City, Branch 102, is hereby DIRECTED to
proceed with the pre-trial, if it has not been terminated, and with the trial on the merits
of the case and then to render judgment thereon, taking into account the foregoing
observations on the issue of jurisdiction.
SO ORDERED.
5.6 Alitalia v. Intermediate Appellate Court 192 SCRA 9, 1997 case
Dr. Felipa Pablo an associate professor in the University of the Philippines, 1 and a research grantee
of the Philippine Atomic Energy Agency was invited to take part at a meeting of the Department of
Research and Isotopes of the Joint FAO-IAEA Division of Atomic Energy in Food and Agriculture of the
United Nations in Ispra, Italy. 2 She was invited in view of her specialized knowledge in "foreign
substances in food and the agriculture environment." She accepted the invitation, and was then
scheduled by the organizers, to read a paper on "The Fate of Radioactive Fusion Products
Contaminating Vegetable Crops." 3 The program announced that she would be the second speaker on
the first day of the meeting. 4 To fulfill this engagement, Dr. Pablo booked passage on petitioner
airline, ALITALIA.
She arrived in Milan on the day before the meeting in accordance with the itinerary and time table set
for her by ALITALIA. She was however told by the ALITALIA personnel there at Milan that her luggage
was "delayed inasmuch as the same . . . (was) in one of the succeeding flights from Rome to Milan."
5 Her luggage consisted of two (2) suitcases: one contained her clothing and other personal items;
the other, her scientific papers, slides and other research material. But the other flights arriving from
Rome did not have her baggage on board.
By then feeling desperate, she went to Rome to try to locate her bags herself. There, she inquired
about her suitcases in the domestic and international airports, and filled out the forms prescribed by
ALITALIA for people in her predicament. However, her baggage could not be found. Completely
distraught and discouraged, she returned to Manila without attending the meeting in Ispra, Italy. : nad
Once back in Manila she demanded that ALITALIA make reparation for the damages thus suffered by
her. ALITALIA offered her "free airline tickets to compensate her for any alleged damages. . . ." She
rejected the offer, and forthwith commenced the action 6 which has given rise to the present appellate
proceedings.
As it turned out, Prof. Pablo's suitcases were in fact located and forwarded to Ispra, 7 Italy, but only
on the day after her scheduled appearance and participation at the U.N. meeting there. 8 Of course Dr.
Pablo was no longer there to accept delivery; she was already on her way home to Manila. And for
some reason or other, the suitcases were not actually restored to Prof. Pablo by ALITALIA until eleven
(11) months later, and four (4) months after institution of her action. 9
After appropriate proceedings and trial, the Court of First Instance rendered judgment in Dr. Pablo's
favor: 10
"(1) Ordering the defendant (ALITALIA) to pay . . . (her) the sum of TWENTY THOUSAND
PESOS (P20,000.00), Philippine Currency, by way of nominal damages;
(2) Ordering the defendant to pay . . . (her) the sum of FIVE THOUSAND PESOS (P5,000.00),
Philippine Currency, as and for attorney's fees; (and)
(3) Ordering the defendant to pay the costs of the suit."
ALITALIA appealed to the Intermediate Appellate Court but failed to obtain a reversal of the judgment.
11 Indeed, the Appellate Court not only affirmed the Trial Court's decision but also increased the
award of nominal damages payable by ALITALIA to P40,000.00. 12 That increase it justified as follows:
13
"Considering the circumstances, as found by the Trial Court and the negligence committed by
defendant, the amount of P20,000.00 under present inflationary conditions as awarded . . . to
the plaintiff as nominal damages, is too little to make up for the plaintiff's frustration and
disappointment in not being able to appear at said conference; and for the embarrassment and
humiliation she suffered from the academic community for failure to carry out an official
mission for which she was singled out by the faculty to represent her institution and the
country. After weighing carefully all the considerations, the amount awarded to the plaintiff for
nominal damages and attorney's fees should be increased to the cost of her round trip air fare
or at the present rate of peso to the dollar at P40,000,00."
ALITALIA has appealed to this Court on Certiorari. Here, it seeks to make basically the same points it
tried to make before the Trial Court and the Intermediate Appellate Court, i.e.:
1) that the Warsaw Convention should have been applied to limit ALITALIA'S liability; and
2) that there is no warrant in fact or in law for the award to Dr. Pablo of nominal damages and
attorney's fees. 14
In addition, ALITALIA postulates that it was error for the Intermediate Appellate Court to have refused
to pass on all the assigned errors and in not stating the facts and the law on which its decision is based.
15
Under the Warsaw Convention, 16 an air carrier is made liable for damages for:
1) the death, wounding or other bodily injury of a passenger if the accident causing it took
place on board the aircraft or in the course of its operations of embarking or disembarking; 17
2) the destruction or loss of, or damage to, any registered luggage or goods, if the occurrence
causing it took place during the carriage by air;" 18 and
3) delay in the transportation by air of passengers, luggage or goods. 19
In these cases, it is provided in the Convention that the "action for damages, however, founded, can
only be brought subject to conditions and limits set out" therein. 20
The Convention also purports to limit the liability of the carriers in the following manner: 21
1. In the carriage of passengers the liability of the carrier for each passenger is limited to the
sum of 250,000 francs . . . Nevertheless, by special contract, the carrier and the passenger
may agree to a higher limit of liability. : nad
2. a) In the carriage of registered baggage and of cargo, the liability of the carrier is limited to
a sum of 250 francs per kilogramme, unless the passenger or consignor has made, at the time
when the package was handed over to the carrier, a special declaration of interest in delivery
at destination and has paid a supplementary sum if the case so requires. In that case the
carrier will be liable to pay a sum not exceeding the declared sum, unless he proves that sum
is greater than the actual value to the consignor at delivery.
b) In the case of loss, damage or delay of part of registered baggage or cargo, or of any object
contained therein, the weight to be taken into consideration in determining the amount to
which the carrier's liability is limited shall be only the total weight of the package or packages
concerned. Nevertheless, when the loss, damage or delay of a part of the registered baggage
or cargo, or of an object contained therein, affects the value of other packages covered by the
same baggage check or the same air way bill, the total weight of such package or packages
shall also be taken into consideration in determining the limit of liability.
3. As regards objects of which the passenger takes charge himself the liability of the carrier is
limited to 5000 francs per passenger.
4. The limits prescribed . . shall not prevent the court from awarding, in accordance with its
own law, in addition, the whole or part of the court costs and of the other expenses of litigation
incurred by the plaintiff. The foregoing provision shall not apply if the amount of the damages
awarded, excluding court costs and other expenses of the litigation, does not exceed the sum
which the carrier has offered in writing to the plaintiff within a period of six months from the
date of the occurrence causing the damage, or before the commencement of the action, if that
is later.
The Warsaw Convention however denies to the carrier availment "of the provisions which exclude or
limit his liability, if the damage is caused by his wilful misconduct or by such default on his part as, in
accordance with the law of the court seized of the case, is considered to be equivalent to wilful
misconduct," or "if the damage is (similarly) caused . . by any agent of the carrier acting within the
scope of his employment." 22 The Hague Protocol amended the Warsaw Convention by removing the
provision that if the airline took all necessary steps to avoid the damage, it could exculpate itself
completely, 23 and declaring the stated limits of liability not applicable "if it is proved that the
damage resulted from an act or omission of the carrier, its servants or agents, done with intent to
cause damage or recklessly and with knowledge that damage would probably result." The same
deletion was effected by the Montreal Agreement of 1966, with the result that a passenger could
recover unlimited damages upon proof of wilful misconduct. 24
The Convention does not thus operate as an exclusive enumeration of the instances of an airline's
liability, or as an absolute limit of the extent of that liability. Such a proposition is not borne out by the
language of the Convention, as this Court has now, and at an earlier time, pointed out. 25 Moreover,
slight reflection readily leads to the conclusion that it should be deemed a limit of liability only in those
cases where the cause of the death or injury to person, or destruction, loss or damage to property or
delay in its transport is not attributable to or attended by any wilful misconduct, bad faith,
recklessness, or otherwise improper conduct on the part of any official or employee for which the
carrier is responsible, and there is otherwise no special or extraordinary form of resulting injury. The
Convention's provisions, in short, do not "regulate or exclude liability for other breaches of contract by
the carrier" 26 or misconduct of its officers and employees, or for some particular or exceptional type
of damage. Otherwise, "an air carrier would be exempt from any liability for damages in the event of
its absolute refusal, in bad faith, to comply with a contract of carriage, which is absurd." 27 Nor may
it for a moment be supposed that if a member of the aircraft complement should inflict some physical
injury on a passenger, or maliciously destroy or damage the latter's property, the Convention might
successfully be pleaded as the sole gauge to determine the carrier's liability to the passenger. Neither
may the Convention be invoked to justify the disregard of some extraordinary sort of damage
resulting to a passenger and preclude recovery therefor beyond the limits set by said Convention. It
is in this sense that the Convention has been applied, or ignored, depending on the peculiar facts
presented by each case. : -cralaw
In Pan American World Airways, Inc. v. I.A.C., 28 for example, the Warsaw Convention was applied
as regards the limitation on the carrier's liability, there being a simple loss of baggage without any
otherwise improper conduct on the part of the officials or employees of the airline or other special
injury sustained by the passenger.
On the other hand, the Warsaw Convention has invariably been held inapplicable, or as not restrictive
of the carrier's liability, where there was satisfactory evidence of malice or bad faith attributable to its
officers and employees. 29 Thus, an air carrier was sentenced to pay not only compensatory but also
moral and exemplary damages, and attorney's fees, for instance, where its employees rudely put a
passenger holding a first-class ticket in the tourist or economy section, 30 or ousted a brown Asiatic
from the plane to give his seat to a white man, 31 or gave the seat of a passenger with a confirmed
reservation to another, 32 or subjected a passenger to extremely rude, even barbaric treatment, as
by calling him a "monkey." 33
In the case at bar, no bad faith or otherwise improper conduct may be ascribed to the employees of
petitioner airline; and Dr. Pablo's luggage was eventually returned to her, belatedly, it is true, but
without appreciable damage. The fact is, nevertheless, that some special species of injury was caused
to Dr. Pablo because petitioner ALITALIA misplaced her baggage and failed to deliver it to her at the
time appointed a breach of its contract of carriage, to be sure with the result that she was unable
to read the paper and make the scientific presentation (consisting of slides, autoradiograms or films,
tables and tabulations) that she had painstakingly labored over, at the prestigious international
conference, to attend which she had traveled hundreds of miles, to her chagrin and embarrassment
and the disappointment and annoyance of the organizers. She felt, not unreasonably, that the
invitation for her to participate at the conference, extended by the Joint FAO/IAEA Division of Atomic
Energy in Food and Agriculture of the United Nations, was a singular honor not only to herself, but to
the University of the Philippines and the country as well, an opportunity to make some sort of
impression among her colleagues in that field of scientific activity. The opportunity to claim this honor
or distinction was irretrievably lost to her because of Alitalia's breach of its contract.
Apart from this, there can be no doubt that Dr. Pablo underwent profound distress and anxiety, which
gradually turned to panic and finally despair, from the time she learned that her suitcases were
missing up to the time when, having gone to Rome, she finally realized that she would no longer be
able to take part in the conference. As she herself put it, she "was really shocked and distraught and
confused."
Certainly, the compensation for the injury suffered by Dr. Pablo cannot under the circumstances be
restricted to that prescribed by the Warsaw Convention for delay in the transport of baggage.
She is not, of course, entitled to be compensated for loss or damage to her luggage. As already
mentioned, her baggage was ultimately delivered to her in Manila, tardily but safely. She is however
entitled to nominal damages which, as the law says, is adjudicated in order that a right of the
plaintiff, which has been violated or invaded by the defendant, may be vindicated and recognized, and
not for the purpose of indemnifying the plaintiff for any loss suffered and this Court agrees that the
respondent Court of Appeals correctly set the amount thereof at P40,000.00. As to the purely
technical argument that the award to her of such nominal damages is precluded by her omission to
include a specific claim therefor in her complaint, it suffices to draw attention to her general prayer,
following her plea for moral and exemplary damages and attorney's fees, "for such other and further
just and equitable relief in the premises," which certainly is broad enough to comprehend an
application as well for nominal damages. Besides, petitioner should have realized that the explicit
assertion, and proof, that Dr. Pablo's right had been violated or invaded by it absent any claim for
actual or compensatory damages, the prayer thereof having been voluntarily deleted by Dr. Pablo
upon the return to her of her baggage necessarily raised the issue of nominal damages. : rd
This Court also agrees that respondent Court of Appeals correctly awarded attorney's fees to Dr. Pablo,
and the amount of P5,000.00 set by it is reasonable in the premises. The law authorizes recovery of
attorney's fees inter alia where, as here, "the defendant's act or omission has compelled the plaintiff
to litigate with third persons or to incur expenses to protect his interest," 34 or "where the court
deems it just and equitable." 35
WHEREFORE, no error being perceived in the challenged decision of the Court of Appeals, it appearing
on the contrary to be entirely in accord with the facts and the law, said decision is hereby AFFIRMED,
with costs against the petitioner.
SO ORDERED.
5.7 Philippine Charter Insurance Corpo v. Neptune Orient Lines June

12, 2008
This is a petition for review on certiorari[1] of the Resolution of the Court of
Appeals (CA) in CA-G.R. CV No. 52855 promulgated on April 13, 2000 granting
respondents motion for reconsideration dated March 9, 2000. The Resolution held
respondents liable for damages to petitioner subject to the limited-liability provision in
the bill of lading.

On September 30, 1993, L.T. Garments Manufacturing Corp. Ltd. shipped from
Hong Kong three sets of warp yarn on returnable beams aboard respondent Neptune Orient
Lines vessel, M/V Baltimar Orion, for transport and delivery to Fukuyama Manufacturing
Corporation (Fukuyama) of No. 7 Jasmin Street, AUV Subdivision, Metro Manila.
The said cargoes were loaded in Container No. IEAU-4592750 in good condition
under Bill of Lading No. HKG-0396180. Fukuyama insured the shipment against all risks
with petitioner Philippine Charter Insurance Corporation (PCIC) under Marine Cargo
Policy No. RN55581 in the amount of P228,085.
During the course of the voyage, the container with the cargoes fell overboard and
was lost.
Thus, Fukuyama wrote a letter to respondent Overseas Agency Services, Inc.

(Overseas Agency), the agent of Neptune Orient Lines in Manila, and claimed for the value
of the lost cargoes.However, Overseas Agency ignored the
claim. Hence, Fukuyama sought payment from its insurer, PCIC, for the insured value of
the cargoes in the amount of P228,085, which claim was fully satisfied by PCIC.
On February 17, 1994, Fukuyama issued a Subrogation Receipt to petitioner PCIC

for the latter to be subrogated in its right to recover its losses from respondents.
PCIC demanded from respondents reimbursement of the entire amount it paid

to Fukuyama, but respondents refused payment.
On March 21, 1994, PCIC filed a complaint for damages against respondents with
the Regional Trial Court (RTC) of Manila, Branch 35.
Respondents filed an Answer with Compulsory Counterclaim denying
liability. They alleged that during the voyage, the vessel encountered strong winds and
heavy seas making the vessel pitch and roll, which caused the subject container with the
cargoes to fall overboard. Respondents contended that the occurrence was a fortuitous
event which exempted them from any liability, and that their liability, if any, should not
exceed US$500 or the limit of liability in the bill of lading, whichever is lower.
In a Decision dated January 12, 1996, the RTC held that respondents, as common
carrier,[2] failed to prove that they observed the required extraordinary diligence to
prevent loss of the subject cargoes in accordance with the pertinent provisions of the
Civil Code.[3] The dispositive portion of the Decision reads:
WHEREFORE, judgment is rendered ordering the defendants, jointly

and severally, to pay the plaintiff the Peso equivalent as of February 17,
1994 of HK$55,000.00 or the sum of P228,085.00, whichever is lower, with
costs against the defendants.[4]
Respondents motion for reconsideration was denied by the RTC in an Order

dated February 19, 1996.
Respondents appealed the RTC Decision to the CA.

In a Decision promulgated on February 15, 2000, the CA affirmed the RTC Decision
with modification, thus:
WHEREFORE, the assailed decision is hereby

MODIFIED. Appellants Neptune and Overseas are hereby ordered to pay
jointly and severally appellee PCIC P228,085.00, representing the amount it
paid Fukuyama. Costs against the appellants.[5]
Respondents moved for reconsideration of the Decision of the CA arguing, among

others, that their liability was only US$1,500 or US$500 per package under the limited
liability provision of the Carriage of Goods by Sea Act (COGSA).
In its Resolution dated April 13, 2000, the CA found the said argument of
respondents to be meritorious. The dispositive portion of the Resolution reads:
WHEREFORE, the motion is partly granted in the sense that appellants

shall be liable to pay appellee PCIC the value of the three packages lost
computed at the rate of US$500 per package or a total of US$1,500.00.[6]
Hence, this petition raising this lone issue:
THE COURT OF APPEALS ERRED IN AWARDING RESPONDENTS

DAMAGES SUBJECT TO THE US$500 PER PACKAGE LIMITATION.
Petitioner contends that the CA erred in awarding damages to respondents subject

to the US$500 per package limitation since the vessel committed a quasi deviation which
is a breach of the contract of carriage when it intentionally threw overboard the container
with the subject shipment during the voyage to Manila for its own benefit or preservation
based on a Survey Report[7]conducted by Mariners Adjustment Corporation, which firm
was tasked by petitioner to investigate the loss of the subject cargoes. According to
petitioner, the breach of contract resulted in the abrogation of respondents rights under
the contract and COGSA including the US$500 per package limitation. Hence,
respondents cannot invoke the benefit of the US$500 per package limitation and the CA
erred in considering the limitation and modifying its decision accordingly.
The contention lacks merit.

The facts as found by the RTC do not support the new allegation of facts by
petitioner regarding the intentional throwing overboard of the subject cargoes and quasi
deviation. The Court notes that in petitioners Complaint before the RTC, petitioner alleged
as follows:
xxx xxx xxx

2.03 In the course of the maritime voyage from Hongkong
to Manila subject shipment fell overboard while in the custody
of the defendants and were never recovered; it was part of the
LCL cargoes packed by defendants in container IEAU-4592750
that fell overboard during the voyage.[8]
Moreover, the same Survey Report cited by petitioner stated:
From the investigation conducted, we noted that Capt. S.L. Halloway,

Master of MV BALTIMAR ORION filed a Note of Protest in the City
of Manila, and was notarized on 06 October 1993.
Based on Note of Protest, copy attached hereto for your reference, carrier
vessel sailed from Hongkong on 1st October 1993 carrying containers bound
for Manila.
Apparently, at the time the vessel [was] sailing at about 2400 hours
nd
of 2 October 1993, she encountered winds and seas such as to cause
occasional moderate to heavy pitching and rolling deeply at times. At 0154
hours, same day, while in position Lat. 20 degrees, 29 minutes North, Long.
115 degrees, 49 minutes East, four (4) x 40 ft. containers were lost/fell
overboard. The numbers of these containers are NUSU-3100789, TPHU
-5262138, IEAU-4592750, NUSU-4515404.
xxx xxx xxx

Furthermore, during the course of voyage, high winds and heavy seas
were encountered causing the ship to roll and pitch heavily. The course and
speed was altered to ease motion of the vessel, causing delay and loss of time
on the voyage.
xxx xxx xxx
SURVEYORS REMARKS:
In view of the foregoing incident, we are of the opinion that the shipment of 3
cases of Various Warp Yarn on Returnable Beams which were containerized
onto 40 feet LCL (no. IEAU-4592750) and fell overboardthe subject vessel
during heavy weather is an Actual Total Loss.[9]
The records show that the subject cargoes fell overboard the ship and petitioner
should not vary the facts of the case on appeal. This Court is not a trier of facts, and, in this
case, the factual finding of the RTC and the CA, which is supported by the evidence on
record, is conclusive upon this Court.
As regards the issue on the limited liability of respondents, the Court upholds the
decision of the CA.
Since the subject cargoes were lost while being transported by respondent common
carrier from Hong Kong to the Philippines, Philippine law applies pursuant to the Civil
Code which provides:
Art. 1753. The law of the country to which the goods are to be
transported shall govern the liability of the common carrier for their loss,
destruction or deterioration.
Art. 1766. In all matters not regulated by this Code, the rights and
obligations of common carriers shall be governed by the Code of Commerce
and by special laws.
The rights and obligations of respondent common carrier are thus governed by the
provisions of the Civil Code, and the COGSA,[10] which is a special law, applies
suppletorily.
The pertinent provisions of the Civil Code applicable to this case are as follows:
Art. 1749. A stipulation that the common carriers liability is limited to

the value of the goods appearing in the bill of lading, unless the shipper or
owner declares a greater value, is binding.
Art. 1750. A contract fixing the sum that may be recovered by the owner
or shipper for the loss, destruction, or deterioration of the goods is valid, if it is
reasonable and just under the circumstances, and has been fairly and freely
agreed upon.
In addition, Sec. 4, paragraph (5) of the COGSA, which is applicable to all contracts
for the carriage of goods by sea to and from Philippine ports in foreign trade, provides:
Neither the carrier nor the ship shall in any event be or become liable for
any loss or damage to or in connection with the transportation of goods in an
amount exceeding $500 per package lawful money of the United States, or in
case of goods not shipped in packages, per customary freight unit, or the
equivalent of that sum in other currency, unless the nature and value of such
goods have been declared by the shipper before shipment and inserted in the
bill of lading. This declaration, if embodied in the bill of lading shall be prima
facie evidence, but shall be conclusive on the carrier.
In this case, Bill of Lading No. 0396180 stipulates:
Neither the Carrier nor the vessel shall in any event become liable for
any loss of or damage to or in connection with the transportation of Goods in an
amount exceeding US$500 (which is the package or shipping unit limitation
under U.S. COGSA) per package or in the case of Goods not shipped in
packages per shipping unit or customary freight, unless the nature and value
of such Goods have been declared by the Shipper before shipment and
inserted in this Bill of Lading and the Shipper has paid additional charges
on such declared value. . . .
The bill of lading[11] submitted in evidence by petitioner did not show that the
shipper in Hong Kong declared the actual value of the goods as insured
by Fukuyama before shipment and that the said value was inserted in the Bill of Lading,
and so no additional charges were paid. Hence, the stipulation in the bill of lading that the
carriers liability shall not exceed US$500 per package applies.
Such stipulation in the bill of lading limiting respondents liability for the loss of the
subject cargoes is allowed under Art. 1749 of the Civil Code, and Sec. 4, paragraph (5) of
the COGSA.Everett Steamship Corporation v. Court of Appeals[12] held:
A stipulation in the bill of lading limiting the common carriers liability

for loss or destruction of a cargo to a certain sum, unless the shipper or owner
declares a greater value, is sanctioned by law, particularly Articles 1749 and
1750 of the Civil Code which provide:
Art. 1749. A stipulation that the common carriers liability is limited to

the value of the goods appearing in the bill of lading, unless the shipper or
owner declares a greater value, is binding.
Art. 1750. A contract fixing the sum that may be recovered by the owner
or shipper for the loss, destruction, or deterioration of the goods is valid, if it is
reasonable and just under the circumstances, and has been fairly and freely
agreed upon.
Such limited-liability clause has also been consistently upheld by this

court in a number of cases. Thus, in Sea-Land Service, Inc. vs. Intermediate
Appellate Court, we ruled:
It seems clear that even if said section 4 (5) of the Carriage of Goods by
Sea Act did not exist, the validity and binding effect of the liability limitation
clause in the bill of lading here are nevertheless fully sustainable on the basis
alone of the cited Civil Code Provisions. That said stipulation is just and
reasonable is arguable from the fact that it echoes Art. 1750 itself in providing a
limit to liability only if a greater value is not declared for the shipment in the
bill of lading. To hold otherwise would amount to questioning the justness and
fairness of the law itself.... But over and above that consideration, the just and
reasonable character of such stipulation is implicit in it giving the shipper or
owner the option of avoiding accrual of liability limitation by the simple and
surely far from onerous expedient of declaring the nature and value of the
shipment in the bill of lading.
The CA, therefore, did not err in holding respondents liable for damages to
petitioner subject to the US$500 per package limited- liability provision in the bill of
lading.
WHEREFORE, the petition is DENIED. The Resolution of the Court of Appeals

in CA-G.R. CV No. 52855 promulgated on April 13, 2000 is hereby AFFIRMED.
SO ORDERED.
5.8 Warsaw convetion.
5.9 COGSA.
5.10 RA 4136.
5.11 RA 9497.
6. Nature of business.
7. Registered owner rule and Kabit System.

7.1 Registration laws.
Compulsory registration of motor vehicles RA 4136
7.2 Registered owner rule.
7.3 Kabit system.
7.4 Pari Delicto Rule.
7.5 Aircrafts and vessels.
a. PCI leasing and finance, Inc. v. UCPB General Insurance Co., Inc.
July 4, 2008
Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, seeking a reversal
of the Decision1 of the Court of Appeals (CA) dated December 12, 2003 affirming with modification the
Decision of the Regional Trial Court (RTC) of Makati City which ordered petitioner and Renato Gonzaga
(Gonzaga) to pay, jointly and severally, respondent the amount of P244,500.00 plus interest; and the CA
Resolution2 dated February 18, 2004 denying petitioner's Motion for Reconsideration.
The facts, as found by the CA, are undisputed:
On October 19, 1990 at about 10:30 p.m., a Mitsubishi Lancer car with Plate Number PHD-206 owned by
United Coconut Planters Bank was traversing the Laurel Highway, Barangay Balintawak, Lipa City. The car
was insured with plantiff-appellee [UCPB General Insurance Inc.], then driven by Flaviano Isaac with
Conrado Geronimo, the Asst. Manager of said bank, was hit and bumped by an 18-wheeler Fuso Tanker
Truck with Plate No. PJE-737 and Trailer Plate No. NVM-133, owned by defendants-appellants PCI Leasing
& Finance, Inc. allegedly leased to and operated by defendant-appellant Superior Gas & Equitable Co., Inc.
(SUGECO) and driven by its employee, defendant appellant Renato Gonzaga.
The impact caused heavy damage to the Mitsubishi Lancer car resulting in an explosion of the rear part of the
car. The driver and passenger suffered physical injuries. However, the driver defendant-appellant Gonzaga
continued on its [sic] way to its [sic] destination and did not bother to bring his victims to the hospital.
Plaintiff-appellee paid the assured UCPB the amount of P244,500.00 representing the insurance coverage of
the damaged car.
As the 18-wheeler truck is registered under the name of PCI Leasing, repeated demands were made by
plaintiff-appellee for the payment of the aforesaid amounts. However, no payment was made. Thus,
plaintiff-appellee filed the instant case on March 13, 1991.3
PCI Leasing and Finance, Inc., (petitioner) interposed the defense that it could not be held liable for the
collision, since the driver of the truck, Gonzaga, was not its employee, but that of its co-defendant Superior
Gas & Equitable Co., Inc. (SUGECO).4 In fact, it was SUGECO, and not petitioner, that was the actual
operator of the truck, pursuant to a Contract of Lease signed by petitioner and SUGECO.5 Petitioner, however,
admitted that it was the owner of the truck in question.6
After trial, the RTC rendered its Decision dated April 15, 1999,7 the dispositive portion of which reads:
WHEREFORE, premises considered, judgment is hereby rendered in favor of plaintiff UCPB General
Insurance [respondent], ordering the defendants PCI Leasing and Finance, Inc., [petitioner] and Renato
Gonzaga, to pay jointly and severally the former the following amounts: the principal amount of P244,500.00
with 12% interest as of the filing of this complaint until the same is paid; P50,000.00 as attorney's fees;
and P20,000.00 as costs of suit.
SO ORDERED.8
Aggrieved by the decision of the trial court, petitioner appealed to the CA.
In its Decision dated December 12, 2003, the CA affirmed the RTC's decision, with certain modifications, as
follows:
WHEREFORE, the appealed decision dated April 15, 1999 is hereby AFFIRMED with modification that the
award of attorney's fees is hereby deleted and the rate of interest shall be six percent (6%) per annum
computed from the time of the filing of the complaint in the trial court until the finality of the judgment. If the
adjudged principal and the interest remain unpaid thereafter, the interest rate shall be twelve percent (12%)
per annum computed from the time the judgment becomes final and executory until it is fully satisfied.
SO ORDERED.9
Petitioner filed a Motion for Reconsideration which the CA denied in its Resolution dated February 18, 2004.
Hence, herein Petition for Review.
The issues raised by petitioner are purely legal:
Whether petitioner, as registered owner of a motor vehicle that figured in a quasi-delict may be held liable,
jointly and severally, with the driver thereof, for the damages caused to third parties.
Whether petitioner, as a financing company, is absolved from liability by the enactment of Republic Act (R.A.)
No. 8556, or the Financing Company Act of 1998.
Anent the first issue, the CA found petitioner liable for the damage caused by the collision since under the
Public Service Act, if the property covered by a franchise is transferred or leased to another without obtaining
the requisite approval, the transfer is not binding on the Public Service Commission and, in contemplation of
law, the grantee continues to be responsible under the franchise in relation to the operation of the vehicle,
such as damage or injury to third parties due to collisions.10
Petitioner claims that the CA's reliance on the Public Service Act is misplaced, since the said law applies only
to cases involving common carriers, or those which have franchises to operate as public utilities. In contrast,
the case before this Court involves a private commercial vehicle for business use, which is not offered for
service to the general public.11
Petitioner's contention has partial merit, as indeed, the vehicles involved in the case at bar are not common
carriers, which makes the Public Service Act inapplicable.
However, the registered owner of the vehicle driven by a negligent driver may still be held liable under
applicable jurisprudence involving laws on compulsory motor vehicle registration and the liabilities of
employers for quasi-delicts under the Civil Code.
The principle of holding the registered owner of a vehicle liable for quasi-delicts resulting from its use is
well-established in jurisprudence. Erezo v. Jepte,12 with Justice Labrador as ponente, wisely explained the
reason behind this principle, thus:
Registration is required not to make said registration the operative act by which ownership in vehicles is
transferred, as in land registration cases, because the administrative proceeding of registration does not bear
any essential relation to the contract of sale between the parties (Chinchilla vs. Rafael and Verdaguer, 39 Phil.
888), but to permit the use and operation of the vehicle upon any public highway (section 5 [a], Act No. 3992,
as amended.) The main aim of motor vehicle registration is to identify the owner so that if any accident
happens, or that any damage or injury is caused by the vehicle on the public highways, responsibility therefor
can be fixed on a definite individual, the registered owner. Instances are numerous where vehicles running on
public highways caused accidents or injuries to pedestrians or other vehicles without positive identification of
the owner or drivers, or with very scant means of identification. It is to forestall these circumstances, so
inconvenient or prejudicial to the public, that the motor vehicle registration is primarily ordained, in the interest
of the determination of persons responsible for damages or injuries caused on public highways.
"'One of the principal purposes of motor vehicles legislation is identification of the vehicle and of the operator,
in case of accident; and another is that the knowledge that means of detection are always available may act
as a deterrent from lax observance of the law and of the rules of conservative and safe operation. Whatever
purpose there may be in these statutes, it is subordinate at the last to the primary purpose of rendering it
certain that the violator of the law or of the rules of safety shall not escape because of lack of means to
discover him.' The purpose of the statute is thwarted, and the displayed number becomes a 'snare and
delusion,' if courts would entertain such defenses as that put forward by appellee in this case. No responsible
person or corporation could be held liable for the most outrageous acts of negligence, if they should be
allowed to place a 'middleman' between them and the public, and escape liability by the manner in which they
recompense their servants." (King vs. Brenham Automobile Co., 145 S.W. 278, 279.)
With the above policy in mind, the question that defendant-appellant poses is: should not the registered
owner be allowed at the trial to prove who the actual and real owner is, and in accordance with such proof
escape or evade responsibility and lay the same on the person actually owning the vehicle? We hold with the
trial court that the law does not allow him to do so; the law, with its aim and policy in mind, does not relieve
him directly of the responsibility that the law fixes and places upon him as an incident or consequence of
registration. Were a registered owner allowed to evade responsibility by proving who the supposed transferee
or owner is, it would be easy for him, by collusion with others or otherwise, to escape said responsibility and
transfer the same to an indefinite person, or to one who possesses no property with which to respond
financially for the damage or injury done. A victim of recklessness on the public highways is usually without
means to discover or identify the person actually causing the injury or damage. He has no means other than
by a recourse to the registration in the Motor Vehicles Office to determine who is the owner. The protection
that the law aims to extend to him would become illusory were the registered owner given the opportunity to
escape liability by disproving his ownership. If the policy of the law is to be enforced and carried out, the
registered owner should not be allowed to prove the contrary to the prejudice of the person injured, that is, to
prove that a third person or another has become the owner, so that he may thereby be relieved of the
responsibility to the injured person.
The above policy and application of the law may appear quite harsh and would seem to conflict with truth and
justice. We do not think it is so. A registered owner who has already sold or transferred a vehicle has the
recourse to a third-party complaint, in the same action brought against him to recover for the damage or injury
done, against the vendee or transferee of the vehicle. The inconvenience of the suit is no justification for
relieving him of liability; said inconvenience is the price he pays for failure to comply with the registration that
the law demands and requires.
In synthesis, we hold that the registered owner, the defendant-appellant herein, is primarily responsible for
the damage caused to the vehicle of the plaintiff-appellee, but he (defendant-appellant) has a right to be
indemnified by the real or actual owner of the amount that he may be required to pay as damage for the injury
caused to the plaintiff-appellant.13
The case is still good law and has been consistently cited in subsequent cases.14 Thus, there is no good
reason to depart from its tenets.
For damage or injuries arising out of negligence in the operation of a motor vehicle, the registered owner may
be held civilly liable with the negligent driver either 1) subsidiarily, if the aggrieved party seeks relief based on
a delict or crime under Articles 100 and 103 of the Revised Penal Code; or 2) solidarily, if the complainant
seeks relief based on a quasi-delict under Articles 2176 and 2180 of the Civil Code. It is the option of the
plaintiff whether to waive completely the filing of the civil action, or institute it with the criminal action, or file it
separately or independently of a criminal action;15 his only limitation is that he cannot recover damages twice
for the same act or omission of the defendant.16
In case a separate civil action is filed, the long-standing principle is that the registered owner of a motor
vehicle is primarily and directly responsible for the consequences of its operation, including the negligence of
the driver, with respect to the public and all third persons.17 In contemplation of law, the registered owner of a
motor vehicle is the employer of its driver, with the actual operator and employer, such as a lessee, being
considered as merely the owner's agent.18 This being the case, even if a sale has been executed before a
tortious incident, the sale, if unregistered, has no effect as to the right of the public and third persons to
recover from the registered owner.19 The public has the right to conclusively presume that the registered
owner is the real owner, and may sue accordingly.20
In the case now before the Court, there is not even a sale of the vehicle involved, but a mere lease, which
remained unregistered up to the time of the occurrence of the quasi-delict that gave rise to the case. Since a
lease, unlike a sale, does not even involve a transfer of title or ownership, but the mere use or enjoyment of
property, there is more reason, therefore, in this instance to uphold the policy behind the law, which is to
protect the unwitting public and provide it with a definite person to make accountable for losses or injuries
suffered in vehicular accidents.21 This is and has always been the rationale behind compulsory motor vehicle
registration under the Land Transportation and Traffic Code and similar laws, which, as early as Erezo, has
been guiding the courts in their disposition of cases involving motor vehicular incidents. It is also important to
emphasize that such principles apply to all vehicles in general, not just those offered for public service or
utility.22
The Court recognizes that the business of financing companies has a legitimate and commendable
purpose.23 In earlier cases, it considered a financial lease or financing lease a legal contract,24 though subject
to the restrictions of the so-called Recto Law or Articles 1484 and 1485 of the Civil Code.25 In previous cases,
the Court adopted the statutory definition of a financial lease or financing lease, as:
[A] mode of extending credit through a non-cancelable lease contract under which the lessor purchases or
acquires, at the instance of the lessee, machinery, equipment, motor vehicles, appliances, business and
office machines, and other movable or immovable property in consideration of the periodic payment by the
lessee of a fixed amount of money sufficient to amortize at least seventy (70%) of the purchase price or
acquisition cost, including any incidental expenses and a margin of profit over an obligatory period of not less
than two (2) years during which the lessee has the right to hold and use the leased property, x x x but with no
obligation or option on his part to purchase the leased property from the owner-lessor at the end of the lease
contract. 26
Petitioner presented a lengthy discussion of the purported trend in other jurisdictions, which apparently tends
to favor absolving financing companies from liability for the consequences of quasi-delictual acts or
omissions involving financially leased property.27 The petition adds that these developments have been
legislated in our jurisdiction in Republic Act (R.A.) No. 8556,28 which provides:
Section 12. Liability of lessors. - Financing companies shall not be liable for loss, damage or injury caused by
a motor vehicle, aircraft, vessel, equipment, machinery or other property leased to a third person or entity
except when the motor vehicle, aircraft, vessel, equipment or other property is operated by the financing
company, its employees or agents at the time of the loss, damage or injury. 1avvp hi1
Petitioner's argument that the enactment of R.A. No. 8556, especially its addition of the new Sec. 12 to the
old law, is deemed to have absolved petitioner from liability, fails to convince the Court.
These developments, indeed, point to a seeming emancipation of financing companies from the obligation to
compensate claimants for losses suffered from the operation of vehicles covered by their lease. Such,
however, are not applicable to petitioner and do not exonerate it from liability in the present case.
The new law, R.A. No. 8556, notwithstanding developments in foreign jurisdictions, do not supersede or
repeal the law on compulsory motor vehicle registration. No part of the law expressly repeals Section 5(a)
and (e) of R.A. No. 4136, as amended, otherwise known as the Land Transportation and Traffic Code, to wit:
Sec. 5. Compulsory registration of motor vehicles. - (a) All motor vehicles and trailer of any type used or
operated on or upon any highway of the Philippines must be registered with the Bureau of Land
Transportation (now the Land Transportation Office, per Executive Order No. 125, January 30, 1987, and
Executive Order No. 125-A, April 13, 1987) for the current year in accordance with the provisions of this Act.
xxxx
(e) Encumbrances of motor vehicles. - Mortgages, attachments, and other encumbrances of motor
vehicles, in order to be valid against third parties must be recorded in the Bureau (now the Land
Transportation Office). Voluntary transactions or voluntary encumbrances shall likewise be properly recorded
on the face of all outstanding copies of the certificates of registration of the vehicle concerned.
Cancellation or foreclosure of such mortgages, attachments, and other encumbrances shall likewise be
recorded, and in the absence of such cancellation, no certificate of registration shall be issued without the
corresponding notation of mortgage, attachment and/or other encumbrances.
x x x x (Emphasis supplied)
Neither is there an implied repeal of R.A. No. 4136. As a rule, repeal by implication is frowned upon, unless
there is clear showing that the later statute is so irreconcilably inconsistent and repugnant to the existing law
that they cannot be reconciled and made to stand together.29 There is nothing in R.A. No. 4136 that is
inconsistent and incapable of reconciliation.
Thus, the rule remains the same: a sale, lease, or financial lease, for that matter, that is not registered with
the Land Transportation Office, still does not bind third persons who are aggrieved in tortious incidents, for
the latter need only to rely on the public registration of a motor vehicle as conclusive evidence of
ownership.30 A lease such as the one involved in the instant case is an encumbrance in contemplation of law,
which needs to be registered in order for it to bind third parties.31 Under this policy, the evil sought to be
avoided is the exacerbation of the suffering of victims of tragic vehicular accidents in not being able to identify
a guilty party. A contrary ruling will not serve the ends of justice. The failure to register a lease, sale, transfer
or encumbrance, should not benefit the parties responsible, to the prejudice of innocent victims.
The non-registration of the lease contract between petitioner and its lessee precludes the former from
enjoying the benefits under Section 12 of R.A. No. 8556.
This ruling may appear too severe and unpalatable to leasing and financing companies, but the Court
believes that petitioner and other companies so situated are not entirely left without recourse. They may
resort to third-party complaints against their lessees or whoever are the actual operators of their vehicles. In
the case at bar, there is, in fact, a provision in the lease contract between petitioner and SUGECO to the
effect that the latter shall indemnify and hold the former free and harmless from any "liabilities, damages,
suits, claims or judgments" arising from the latter's use of the motor vehicle.32 Whether petitioner would act
against SUGECO based on this provision is its own option.
The burden of registration of the lease contract is minuscule compared to the chaos that may result if
registered owners or operators of vehicles are freed from such responsibility. Petitioner pays the price for its
failure to obey the law on compulsory registration of motor vehicles for registration is a pre-requisite for any
person to even enjoy the privilege of putting a vehicle on public roads.
WHEREFORE, the petition is DENIED. The Decision dated December 12, 2003 and Resolution dated
February 18, 2004 of the Court of Appeals are AFFIRMED.
SO ORDERED.
b. Equitable Leasing Corporation v. Lucita Suyon, et al., G.R No. 143360

September 5, 2002
THIRD DIVISION
[G.R. No. 143360. September 5, 2002]
EQUITABLE LEASING CORPORATION, petitioner, vs. LUCITA SUYOM,

MARISSA ENANO, MYRNA TAMAYO and FELIX
OLEDAN, respondents.
DECISION
PANGANIBAN, J.:
In an action based on quasi delict, the registered owner of a motor vehicle is solidarily liable
for the injuries and damages caused by the negligence of the driver, in spite of the fact that the
vehicle may have already been the subject of an unregistered Deed of Sale in favor of another
person. Unless registered with the Land Transportation Office, the sale -- while valid and
binding between the parties -- does not affect third parties, especially the victims of accidents
involving the said transport equipment. Thus, in the present case, petitioner, which is the
registered owner, is liable for the acts of the driver employed by its former lessee who has
become the owner of that vehicle by virtue of an unregistered Deed of Sale.
Statement of the Case
Before us is a Petition for Review under Rule 45 of the Rules of Court, assailing the May 12,
2000 Decision[1] of the Court of Appeals[2] (CA) in CA-GR CV No. 55474. The decretal portion of
the Decision reads as follows:
WHEREFORE, premises considered, the instant appeal is hereby DISMISSED for lack of
merit. The assailed decision, dated May 5, 1997, of the Regional Trial Court of Manila,
Branch 14, in Civil Case No. 95-73522, is hereby AFFIRMED with MODIFICATION that
the award of attorneys fees is DELETED. [3]
On the other hand, in Civil Case No. 95-73522, the Regional Trial Court (RTC) of Manila
(Branch 14) had earlier disposed in this wise:
WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the
defendant Equitable Leasing Corporation ordering said defendant to pay to the plaintiffs the
following:
A. TO MYRNA TAMAYO
1. the sum of P50,000.00 for the death of Reniel Tamayo;
2. P50,000.00 as moral damages; and
3. P56,000.00 for the damage to the store and its contents, and funeral expenses.
B. TO FELIX OLEDAN
1. the sum of P50,000.00 for the death of Felmarie Oledan;
2. P50,000.00 as moral damages; and
3. P30,000.00 for medical expenses, and funeral expenses.
C. TO MARISSA ENANO
1. P7,000.00 as actual damages
D. TO LUCITA SUYOM
1. The sum of P5,000.00 for the medical treatment of her two sons.
The sum of P120,000.00 as and for attorneys fees. [4]
The Facts
On July 17, 1994, a Fuso Road Tractor driven by Raul Tutor rammed into the house
cum store of Myrna Tamayo located at Pier 18, Vitas, Tondo, Manila. A portion of the house
was destroyed. Pinned to death under the engine of the tractor were Respondent Myrna
Tamayos son, Reniel Tamayo, and Respondent Felix Oledans daughter, Felmarie
Oledan. Injured were Respondent Oledan himself, Respondent Marissa Enano, and two sons
of Respondent Lucita Suyom.
Tutor was charged with and later convicted of reckless imprudence resulting in multiple
homicide and multiple physical injuries in Criminal Case No. 296094-SA, Metropolitan Trial
Court of Manila, Branch 12.[5]
Upon verification with the Land Transportation Office, respondents were furnished a copy of
Official Receipt No. 62204139[6] and Certificate of Registration No. 08262797,[7] showing that the
registered owner of the tractor was Equitable Leasing Corporation/leased to Edwin Lim. On
April 15, 1995, respondents filed against Raul Tutor, Ecatine Corporation (Ecatine) and
Equitable Leasing Corporation (Equitable) a Complaint[8] for damages docketed as Civil Case
No. 95-73522 in the RTC of Manila, Branch 14.
The trial court, upon motion of plaintiffs counsel, issued an Order dropping Raul Tutor,
Ecatine and Edwin Lim from the Complaint, because they could not be located and served with
summonses.[9] On the other hand, in its Answer with Counterclaim,[10] petitioner alleged that the
vehicle had already been sold to Ecatine and that the former was no longer in possession and
control thereof at the time of the incident.It also claimed that Tutor was an employee, not of
Equitable, but of Ecatine.
After trial on the merits, the RTC rendered its Decision ordering petitioner to pay actual and
moral damages and attorneys fees to respondents. It held that since the Deed of Sale between
petitioner and Ecatine had not been registered with the Land Transportation Office (LTO), the
legal owner was still Equitable.[11] Thus, petitioner was liable to respondents.[12]
Ruling of the Court of Appeals
Sustaining the RTC, the CA held that petitioner was still to be legally deemed the
owner/operator of the tractor, even if that vehicle had been the subject of a Deed of Sale in
favor of Ecatine on December 9, 1992. The reason cited by the CA was that the Certificate of
Registration on file with the LTO still remained in petitioners name. [13] In order that a transfer of
ownership of a motor vehicle can bind third persons, it must be duly recorded in the LTO. [14]
The CA likewise upheld respondents claim for moral damages against petitioner because
the appellate court considered Tutor, the driver of the tractor, to be an agent of the registered
owner/operator.[15]
Hence, this Petition.[16]
Issues
In its Memorandum, petitioner raises the following issues for the Courts consideration:
I
Whether or not the Court of Appeals and the trial court gravely erred when they decided and
held that petitioner [was] liable for damages suffered by private respondents in an action
based on quasi delict for the negligent acts of a driver who [was] not the employee of the
petitioner.
II
Whether or not the Court of Appeals and the trial court gravely erred when they awarded
moral damages to private respondents despite their failure to prove that the injuries they
suffered were brought by petitioners wrongful act. [17]
This Courts Ruling
The Petition has no merit.
First Issue:
Liability for Wrongful Acts
Petitioner contends that it should not be held liable for the damages sustained by
respondents and that arose from the negligence of the driver of the Fuso Road Tractor, which it
had already sold to Ecatine at the time of the accident. Not having employed Raul Tutor, the
driver of the vehicle, it could not have controlled or supervised him. [18]
We are not persuaded. In negligence cases, the aggrieved party may sue the negligent
party under (1) Article 100[19] of the Revised Penal Code, for civil liability ex delicto; or (2) under
Article 2176[20] of the Civil Code, for civil liability ex quasi delicto.[21]
Furthermore, under Article 103 of the Revised Penal Code, employers may be
held subsidiarily liable for felonies committed by their employees in the discharge of the latters
duties.[22] This liability attaches when the employees who are convicted of crimes committed in
the performance of their work are found to be insolvent and are thus unable to satisfy the civil
liability adjudged.[23]
On the other hand, under Article 2176 in relation to Article 2180 [24] of the Civil Code, an
action predicated on quasi delict may be instituted against the employer for an employees act or
omission. The liability for the negligent conduct of the subordinate is direct and primary, but is
subject to the defense of due diligence in the selection and supervision of the employee. [25] The
enforcement of the judgment against the employer for an action based on Article 2176 does not
require the employee to be insolvent, since the liability of the former is solidary -- the latter
being statutorily considered a joint tortfeasor.[26] To sustain a claim based on quasi delict, the
following requisites must be proven: (a) damage suffered by the plaintiff, (b) fault or negligence
of the defendant, and (c) connection of cause and effect between the fault or negligence of the
defendant and the damage incurred by the plaintiff.[27]
These two causes of action (ex delicto or ex quasi delicto) may be availed of, subject to the
caveat[28] that the offended party cannot recover damages twice for the same act or omission or
under both causes.[29] Since these two civil liabilities are distinct and independent of each other,
the failure to recover in one will not necessarily preclude recovery in the other. [30]
In the instant case, respondents -- having failed to recover anything in the criminal case --
elected to file a separate civil action for damages, based on quasi delict under Article 2176 of
the Civil Code.[31] The evidence is clear that the deaths and the injuries suffered by respondents
and their kins were due to the fault of the driver of the Fuso tractor.
Dated June 4, 1991, the Lease Agreement[32] between petitioner and Edwin Lim
stipulated that it is the intention of the parties to enter into a FINANCE LEASE
AGREEMENT.[33] Under such scheme, ownership of the subject tractor was to be registered in
the name of petitioner, until the value of the vehicle has been fully paid by Edwin Lim.[34] Further,
in the Lease Schedule,[35] the monthly rental for the tractor was stipulated, and the term of the
Lease was scheduled to expire on December 4, 1992. After a few months, Lim completed the
payments to cover the full price of the tractor.[36] Thus, on December 9, 1992, a Deed of
Sale[37] over the tractor was executed by petitioner in favor of Ecatine represented by Edwin
Lim. However, the Deed was not registered with the LTO.
We hold petitioner liable for the deaths and the injuries complained of, because it was the
registered owner of the tractor at the time of the accident on July 17, 1994. [38] The Court has
consistently ruled that, regardless of sales made of a motor vehicle, the registered owner is the
lawful operator insofar as the public and third persons are concerned; consequently, it is directly
and primarily responsible for the consequences of its operation.[39] In contemplation of law, the
owner/operator of record is the employer of the driver, the actual operator and employer being
considered as merely its agent.[40] The same principle applies even if the registered owner of any
vehicle does not use it for public service.[41]
Since Equitable remained the registered owner of the tractor, it could not escape primary
liability for the deaths and the injuries arising from the negligence of the driver. [42]
The finance-lease agreement between Equitable on the one hand and Lim or Ecatine on
the other has already been superseded by the sale. In any event, it does not bind third
persons. The rationale for this rule has been aptly explained in Erezo v. Jepte,[43] which we quote
hereunder:
x x x. The main aim of motor vehicle registration is to identify the owner so that if any
accident happens, or that any damage or injury is caused by the vehicle on the public
highways, responsibility therefor can be fixed on a definite individual, the registered
owner. Instances are numerous where vehicles running on public highways caused accidents
or injuries to pedestrians or other vehicles without positive identification of the owner or
drivers, or with very scant means of identification. It is to forestall these circumstances, so
inconvenient or prejudicial to the public, that the motor vehicle registration is primarily
ordained, in the interest of the determination of persons responsible for damages or injuries
caused on public highways. [44]
Further, petitioners insistence on FGU Insurance Corp. v. Court of Appeals is

misplaced.[45] First, in FGU Insurance, the registered vehicle owner, which was engaged in a
rent-a-car business, rented out the car. In this case, the registered owner of the truck, which is
engaged in the business of financing motor vehicle acquisitions, has actually sold the truck to
Ecatine, which in turn employed Tutor. Second, in FGU Insurance, the registered owner of the
vehicle was not held responsible for the negligent acts of the person who rented one of its cars,
because Article 2180 of the Civil Code was not applicable. We held that no vinculum juris as
employer and employee existed between the owner and the driver.[46] In this case, the registered
owner of the tractor is considered under the law to be the employer of the driver, while the
actual operator is deemed to be its agent.[47] Thus, Equitable, the registered owner of the tractor,
is -- for purposes of the law on quasi delict -- the employer of Raul Tutor, the driver of the
tractor. Ecatine, Tutors actual employer, is deemed as merely an agent of Equitable.[48]
True, the LTO Certificate of Registration, dated 5/31/91, qualifies the name of the registered
owner as EQUITABLE LEASING CORPORATION/Leased to Edwin Lim. But the lease
agreement between Equitable and Lim has been overtaken by the Deed of Sale on December 9,
1992, between petitioner and Ecatine. While this Deed does not affect respondents in this quasi
delict suit, it definitely binds petitioner because, unlike them, it is a party to it.
We must stress that the failure of Equitable and/or Ecatine to register the sale with the LTO
should not prejudice respondents, who have the legal right to rely on the legal principle that the
registered vehicle owner is liable for the damages caused by the negligence of the
driver. Petitioner cannot hide behind its allegation that Tutor was the employee of Ecatine. This
will effectively prevent respondents from recovering their losses on the basis of the inaction or
fault of petitioner in failing to register the sale. The non-registration is the fault of petitioner,
which should thus face the legal consequences thereof.
Second Issue:
Moral Damages
Petitioner further claims that it is not liable for moral damages, because respondents failed
to establish or show the causal connection or relation between the factual basis of their claim
and their wrongful act or omission, if any. [49]
Moral damages are not punitive in nature, but are designed to compensate [50] and alleviate
in some way the physical suffering, mental anguish, fright, serious anxiety, besmirched
reputation, wounded feelings, moral shock, social humiliation, and similar injury unjustly caused
a person.[51] Although incapable of pecuniary computation, moral damages must nevertheless
be somehow proportional to and in approximation of the suffering inflicted. [52] This is so because
moral damages are in the category of an award designed to compensate the claimant for actual
injury suffered, not to impose a penalty on the wrongdoer.[53]
Viewed as an action for quasi delict, the present case falls squarely within the purview of
Article 2219 (2),[54] which provides for the payment of moral damages in cases of quasi
delict.[55] Having established the liability of petitioner as the registered owner of the
vehicle,[56] respondents have satisfactorily shown the existence of the factual basis for the
award[57] and its causal connection to the acts of Raul Tutor, who is deemed as petitioners
employee.[58] Indeed, the damages and injuries suffered by respondents were the proximate
result of petitioners tortious act or omission.[59]
Further, no proof of pecuniary loss is necessary in order that moral damages may be
awarded, the amount of indemnity being left to the discretion of the court. [60] The evidence gives
no ground for doubt that such discretion was properly and judiciously exercised by the trial
court.[61] The award is in fact consistent with the rule that moral damages are not intended to
enrich the injured party, but to alleviate the moral suffering undergone by that party by reason of
the defendants culpable action.[62]
WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED. Costs
against petitioner.
SO ORDERED.
Puno, (Chairman), Corona, and Carpio-Morales, JJ., concur.
Sandoval-Gutierrez, J., on leave.
c. Aguilar v. Commercial Savings Bank 412 Phil 834

DEL CASTILLO, J.:
In this Petition for Review on Certiorari,[1] the registered owner of a motor vehicle challenges
the Decision[2] dated July 11, 2006 of the Court of Appeals (CA) in CA-G.R. CV No. 67764
which held him liable for damages to the heirs of the victims who were run over by the said
vehicle.
Factual Antecedents
At dawn on New Years Day of 1993, Emilia Bacoy Monsalud (Emilia), along with her spouse
Leonardo Monsalud, Sr. and their daughter Glenda Monsalud, were on their way home from a
Christmas party they attended in Poblacion, Sominot, Zamboanga Del Sur. Upon
reaching Purok Paglaom in Sominot, they were run over by a Fuso passenger jeep bearing plate
number UV-PEK-600 that was being driven by Allan Maglasang (Allan). The jeep was
registered in the name of petitioner Oscar del Carmen, Jr. (Oscar Jr.) and used as a public utility
vehicle plying the Molave, Zamboanga del Sur to Sominot, Zamboanga del Sur and vice versa
route.
Because of the unfortunate incident, Criminal Case No. 93-10347[3] for Reckless
Imprudence Resulting in Multiple Homicide was filed against Allan before the Regional Trial
Court of Molave, Zamboanga del Sur, Branch 23. In a Decision dated March 13, 1997, said
court declared Allan guilty beyond reasonable doubt of the crime charged.[4]
During the pendency of said criminal case, Emilias father, Geronimo Bacoy (Geronimo),
in behalf of the six minor children[5] of the Monsaluds, filed Civil Case No. 96-20219,[6] an
independent civil action for damages based on culpa aquiliana. Aside from Allan, also
impleaded therein were his alleged employers, namely, the spouses Oscar del Carmen, Sr.
(Oscar Sr.) and Norma del Carmen (Spouses del Carmen) and the registered owner of the jeep,
their son Oscar Jr. Geronimo prayed for the reimbursement of funeral and burial expenses, as
well as the award of attorneys fees, moral and exemplary damages resulting from the death of
the three victims, and loss of net income earnings of Emilia who was employed as a public
school teacher at the time of her death.[7]
Defendants refused to assume civil liability for the victims deaths. Oscar Sr. averred that
the Monsaluds have no cause of action against them because he and his wife do not own the jeep
and that they were never the employers of Allan.[8] For his part, Oscar Jr. claimed to be a victim
himself. He alleged that Allan and his friends[9] stole his jeep while it was parked beside his
drivers rented house to take it for a joyride. Both he and a vehicle mechanic testified that the
subject jeep can easily be started by mere pushing sans the ignition key. The vehicles engine
shall then run but without any headlights on.[10] And implying that this was the manner by which
the vehicle was illegally taken, Oscar Jr. submitted as part of his documentary evidence the
statements[11] of Jemar Alarcon (Jemar) and Benjamin Andujar (Benjamin). The two, who were
with Allan in the jeep at the time of the accident, declared before the investigating officer that
during said time, the vehicles headlights were off. Because of this allegation, Oscar Jr. even filed
before the same trial court a carnapping case against Allan and his companions docketed as
Criminal Case No. 93-10380.[12] The case was, however, dismissed for insufficiency of
evidence.[13]
Oscar Jr. clarified that Allan was his jeep conductor and that it was the latters brother,
Rodrigo Maglasang (Rodrigo), who was employed as the driver.[14] In any event, Allans
employment as conductor was already severed before the mishap occurred on January 1, 1993
since he served as such conductor only from the first week of December until December 14,
1992.[15] In support of this, Oscar Jr. presented as witnesses Faustino Sismundo (Faustino) and
Cresencio Junior Baobao (Cresencio). Faustino, a resident of Molave, testified that when he
boarded the jeep heading to Sominot on December 31, 1992, it was Cresencio who was the
conductor. He also believed that Crecencio started to work as such at around December 15 or 16,
1992.[16] Cresencio, for his part, testified that he worked as Oscar Jr.s conductor from December
15, 1992 to January 1, 1993 and that Rodrigo was his driver.[17] He stated that upon learning that
the jeep figured in an accident, he never bothered to verify the news. Instead, he went to
Midsalip to work there as a conductor for his brothers vehicle, thereby terminating his
employment with Oscar Jr.[18]
Oscar Jr. likewise testified that it was routinary that after a days trip, the jeep would be
parked beside Rodrigos rented house[19] for the next early-morning operation.
Geronimo, on the other hand, averred that Allan was still Oscar Jr.s employee subsequent
to December 14, 1992. To prove this, he presented as witnesses Saturnino Jumawan (Saturnino)
and Jose Navarro (Jose). Saturnino testified that he would pay his fare to Allan every time he
would board the jeep in going to Molave and that the last time he rode the subject vehicle was
on December 23, 1992. He also claimed that immediately before January 1, 1993, Rodrigo and
Allan used to park the jeep at the yard of his house.[20] Jose likewise attested that Allan was still
the jeep conductor during the said period as he had ridden the jeep many times in mid-December
of 1992.[21]
Ruling of the Regional Trial Court
In its Decision[22] dated April 17, 2000, the RTC exculpated the spouses del Carmen from
civil liability for insufficiency of evidence. However, their son Oscar Jr. was held civilly liable in
a subsidiary capacity. The RTC anchored its ruling primarily on the principle of res ipsa
loquitur, i.e., that a presumption of negligence on the part of a defendant may be inferred if the
thing that caused an injury is shown to be under his management and that in the ordinary course
of things, the accident would not have happened had there been an exercise of care. Said court
ratiocinated that Oscar Jr., as the registered owner of the jeep, managed and controlled the same
through his driver Rodrigo, in whose house the jeep was usually parked. Since both Oscar Jr.
and Rodrigo were well aware that the jeep could easily be started by a mere push even without
the ignition key, they should have taken the necessary precaution to prevent the vehicle from
being used by unauthorized persons like Allan. The RTC thus concluded that such lack of
proper precaution, due care and foresight constitute negligence making the registered owner of
the vehicle civilly liable for the damage caused by the same.
The RTC disposed of the case as follows:
Wherefore, judgment is hereby entered in favor of the plaintiffs and against the
defendants Allan Maglasang and Oscar del Carmen, Jr. ordering
1. Defendant ALLAN MAGLASANG to pay the plaintiffs, and in case of

insolvency, for defendant OSCAR DEL CARMEN, JR., to pay the plaintiffs, the
following sums:
a. P73,112.00 for their funeral and burial expenses;

b. P1,000,000.00 moral damages for the death of the late Emilia Monsalud;
c. P250,000.00 moral damages for the death of the late Leonardo Monsalud,
Sr.;
d. P250,000.00 moral damages for the death of the late Glenda Monsalud;
e. P40, 000.00, for exemplary damages;
f. P20,000.00 attorneys fees; and
g. The cost of this proceedings.
2. The dismissal of the complaint as against the spouses OSCAR DEL CARMEN
SR. and NORMA DEL CARMEN.
SO ORDERED.[23]
Oscar Jr. moved for reconsideration[24] contending that the provision on vicarious liability
of the employer under Article 2180 of the Civil Code[25] requires the existence of
employer-employee relationship and that the employee was acting within the scope of his
employment when the tort occurred. He stressed that even assuming that Allan was his
employee, he was hired not as a driver but as a conductor. Hence, Allan acted beyond the scope
of his employment when he drove the jeep.
Oscar Jr. also stressed that the fact that the jeep was running without its headlights on at
the time of the accident indubitably shows that the same was stolen. He further alleged that the
jeep could not have been taken by only one person. As Rodrigo declared in Criminal Case No.
93-10380 (carnapping case), based on his experience, the jeep cannot be pushed by only one
person but by at least five people in order for it to start. This was due to the vehicles mass and
the deep canal which separates the parking area from the curved road that was obstructed by a
house.[26]
Setting aside its earlier decision, the lower court in its Order[27] dated June 21, 2000
granted the Motion for Reconsideration and absolved Oscar Jr. from civil liability. It cited
Article 103 of the Revised Penal Code which provides that for an employer to be subsidiarily
liable for the criminal acts of his employee, the latter should have committed the same in the
discharge of his duties. The court agreed with Oscar Jr. that this condition is wanting in Allans
case as he was not acting in the discharge of his duties as a conductor when he drove the jeep.
The court also declared the doctrine of res ipsa loquitur inapplicable since the property
owner cannot be made responsible for the damages caused by his property by reason of the
criminal acts of another. It then adjudged that only Allan should bear the consequences of his
criminal acts. Thus:
WHEREFORE, premises considered, the MOTION FOR

RECONSIDERATION is granted, and defendant OSCAR DEL CARMEN JR. is
hereby absolved from all civil liability arising from the felonious acts of convicted
accused ALLAN MAGLASANG.
IT IS SO ORDERED.[28]
Geronimo appealed.

In its July 11, 2006 Decision,[29] the CA granted the appeal.
In resolving the case, the CA first determined the preliminary issue of whether there was
an employer-employee relationship between Oscar Jr. and Allan at the time of the accident. It
ruled in the affirmative and gave more credence to the testimonies of Geronimos witnesses than
to those of Oscar Jr.s witnesses, Faustino and Cresencio. The CA ratiocinated that unlike the
witness presented by Geronimo, Faustino never resided in Poblacion and thus has limited
knowledge of the place. His testimony was also unreliable considering that he only rode the
subject jeep twice[30] during the last two weeks of December 1992. As regards Cresencios
testimony, the appellate court found it puzzling why he appeared to have acted uninterested
upon learning that the jeep was the subject of an accident when it was his bread and butter. Said
court likewise considered questionable Oscar Jr.s asseveration that Cresencio replaced Allan as
conductor when Cresencio testified that he replaced a certain Sumagang Jr.[31]
With regard to the main issue, the CA adjudged Oscar Jr. liable to the heirs of the victims
based on the principle that the registered owner of a vehicle is directly and primarily responsible
for the injuries or death of third parties caused by the operation of such vehicle. It disbelieved
Oscar Jr.s defense that the jeep was stolen not only because the carnapping case filed against
Allan and his companions was dismissed but also because, given the circumstances, Oscar Jr. is
deemed to have given Allan the implied permission to use the subject vehicle. To support its
conclusion, the CA cited the following circumstances: siblings Rodrigo and Allan were both
employees assigned to the said jeep; after a days work, said vehicle would be parked just beside
Rodrigos house where Allan also lived; the jeep could easily be started even without the use of
an ignition key; the said parking area was not fenced or secured to prevent the unauthorized use
of the vehicle which can be started even without the ignition key.
The dispositive portion of the CA Decision reads:
WHEREFORE, premises considered, the instant appeal is GRANTED. The

assailed Order dated 21 June 2000 of the Regional Trial Court (Branch 23), Molave,
Zamboanga del Sur, in Civil Case No. 96-20,219 is SET ASIDE and a new one is
hereby entered. OSCAR DEL CARMEN, Jr. and ALLAN MAGLASANG are held
primarily liable, jointly and severally, to pay plaintiffs-appellants:
1. Civil indemnity for the death of Emilia Bacoy Monsalud, Leonardo

Monsalud Sr., and Glenda Monsalud in the amount of Fifty thousand pesos
(P50,000.00) each or for the total amount of One hundred fifty thousand pesos
(P150,000.00);
2. Temperate damages in the amount of Twenty-five Thousand Pesos

(P25,000.00) each for the death of Emilia Monsalud, Leonardo Monsalud Sr., and
Glenda Monsalud (collectively the Monsaluds) or for the total amount of
Seventy-five thousand pesos (P75,000.00);
3. Moral damages in the amount of Fifty Thousand Pesos (P50,000.00)

each for the death of the Monsaluds or for a total amount of One Hundred Fifty
Thousand Pesos (P150,000.00);
4. Exemplary damages of Forty Thousand Pesos (P40,000.00).
No pronouncement as to costs.
SO ORDERED. [32]
Issues
As a result of the adverse judgment, Oscar Jr. filed this Petition for Review
on Certiorari alleging that the CA erred in:
1. x x x basing its conclusions and findings on speculations, surmises and
conjectures; misapprehension of facts which are in conflict with the findings of
the trial court;
2. x x x declaring a question of substance not in accord with law and with the
applicable decisions of the Supreme Court;
3. x x x departing from the regular course of the judicial proceedings in the

disposition of the appeal and [in going] beyond the issues of the case.[33]
Oscar Jr. points out that the CA failed to consider the RTCs ruling in its June 21, 2000
Order which was in accord with Article 2180 of the Civil Code, i.e., that the tort committed by
an employee should have been done within the scope of his assigned tasks for an employer to be
held liable under culpa aquiliana. However, the CA never touched upon this matter even if it
was glaring that Allans driving the subject vehicle was not within the scope of his previous
employment as conductor. Moreover, Oscar Jr. insists that his jeep was stolen and stresses that
the liability of a registered owner of a vehicle as to third persons, as well as the doctrine of res
ipsa loquitur, should not apply to him. He asserts that although Allan and his companions were
not found to have committed the crime of carnapping beyond reasonable doubt, it was
nevertheless established that the jeep was illicitly taken by them from a well secured area. This
is considering that the vehicle was running without its headlights on at the time of the accident, a
proof that it was started without the ignition key.
Our Ruling
Petitioners own evidence casts doubt on his claim that

his jeep was stolen by Allan and his alleged
cohorts. Negligence is presumed under the doctrine of
res ipsa loquitur.
Oscar Jr.s core defense to release him from responsibility for the death of the Monsaluds is that
his jeep was stolen. He highlights that the unauthorized taking of the jeep from the parking area
was indeed carried out by the clandestine and concerted efforts of Allan and his five companions,
notwithstanding the obstacles surrounding the parking area and the weight of the jeep.
Notably, the carnapping case filed against Allan and his group was already dismissed by
the RTC for insufficiency of evidence. But even in this civil case and as correctly concluded by
the CA, the evidentiary standard of preponderance of evidence required was likewise not met to
support Oscar Jr.s claim that his jeep was unlawfully taken.
Two of Allans co-accused in the carnapping case, Jemar and Benjamin, declared before
the police that when Allan invited them to ride with him, he was already driving the jeep:
04. Q- On that night, on or about 11:30 oclock on December 31, 1992, where were
you?
A- I went to the disco near [the] Public Market[,] Sominot, Zamboanga del Sur.
05. Q- While you were in disco place, do you know if there was an incident [that]
happened?
A- No sir but when I was in the disco place, at about 3:30 at dawn more or less[,]
January 1, 1993, Allan Maglasang arrived driving the jeep and he invited me
to ride together with Benjamin Andujar, Dioscoro Sol, Arniel Rezada and
Joven Orot.[34]
xxxx
04. Q- On that night, on or about 9:00 oclock in the evening more or less on
December 31, 1992, where were you?
A- I went to the disco at [the] Public Market[,] Sominot, Zamboanga del Sur.
05. Q- While you were in the disco place, do you know if there was an incident [that]
happened?
A- No, sir, but when I was in the disco place, at about 3:30 at dawn more or less[,]
January 1, 1993, Allan Maglasang arrive[d] driving the jeep and he invited me
to ride together with Jemar Alarcon, Dioscoro Sol, Arniel Rizada and Joven
Orot.[35]
There were six accused in the carnapping case. If Jemar and Benjamin were fetched by Allan
who was driving the jeep, this would mean that only three men pushed the jeep contrary to
Rodrigos testimony in Criminal Case No. 93-10380 that it has to be pushed by at least five
people so that it could start without the ignition key.
On direct examination,[36] Oscar Jr. was asked as to what Rodrigo, his driver who had informed
him about the accident on January 1, 1993 at around 7:00 a.m., turned over to him after the
incident, viz:
Q: When Rodrigo Maglasang, your driver informed you about the accident, what did
he carry with him if any and turned over to you?
A: The OR (Official Receipt) and the CR (Certificate of Registration) Sir.
Q: How about the key of the vehicle?

A: It was not turned over, Sir.[37]
Assuming arguendo that Allan stole the jeep by having the same pushed by a group, the ignition
key should then be with Rodrigo as he was entrusted with the jeeps possession. Thus, at the time
Rodrigo faced his employer hours after the incident, it is reasonable to expect that the driver
should have also returned the key to the operator together with the Official Receipt and
Certificate of Registration. Notably, Rodrigo did not do so and instead, the key was allegedly
handed over to the police for reasons unexplained and not available from the records.
Interestingly, Oscar Jr. never presented Rodrigo as his witness. Neither was he able to attest on
cross-examination that Allan really stole the jeep by pushing or that the key was handed over to
him by Rodrigo:
Q: On December 31, 1992, you did not know that it was Rodrigo Maglasang who
gave the key to Allan Maglasang. Is that correct?
A: I was not there. So, I do not know but he had an affidavit to show that he turned it
over to the police.
Q: What I was asking you is that, [o]n the night of December 31, 1992, when it was
driven by Allan Maglasang, you did not know that the key was voluntarily
given by Rodrigo Maglasang to Allan Maglasang?
A: I was not there.
Q: So, you could not testify on that, is that correct?

A: Yes Sir, I was not there.[38]
Furthermore, Oscar Jr. acknowledged the dismissal of the carnapping case, thus:
Q: Now, there was a case filed against Allan Maglasang and [his] x x x co-accused x
x x [n]amely: Benjamin Andojar, Dioscoro Sol, Joven Orot, [Jemar Azarcon]
and [Arniel] Rizada, for carnapping. Is that correct?
A: Yes Sir.
Q: That case was filed by you because you alleged that on December 31, 1992, your
jeep was carnapped by Allan Maglasang and his co-accused, the said
mentioned, is that correct?
A: Yes Sir.
Q: You testified on the case in Aurora, is that correct?

A: Yes, Sir.
Q: And you could well remember that this representation is the counsel of the
co-accused of Allan Maglasang, is that correct?
A: Yes Sir.
Q: And that case for carnapping was dismissed, is that correct?

A: Yes Sir.
Q: Even the case of Allan Maglasang, was also dismissed, is that correct
A: Yes Sir.
Q: Because there was no sufficient evidence to establish that the jeep was carnapped,
is that correct?
A: Yes Sir.[39]
While Oscar Jr. highlights that the headlights were not on to support his claim that his
jeep was stolen, this circumstance by itself will not prove that it really was stolen. The reason
why the headlights were not on at the time of the accident was not sufficiently established during
the trial. Besides, the fact that the headlights were not on cannot be exclusively attributed to the
lack of ignition key in starting the jeep as there may be other possibilities such as electrical
problems, broken headlights, or that they were simply turned off.
Hence, sans the testimony of witnesses and other relevant evidence to support the defense
of unauthorized taking, we cannot subscribe to Oscar Jr.s claim that his jeep was stolen. The
evidence on record brings forth more questions than clear-cut answers.
Oscar Jr. alleges that the presumption of negligence under the doctrine of res ipsa
loquitur (literally, the thing speaks for itself) should not have been applied because he was
vigilant in securing his vehicle. He claims that the jeep was parked in a well secured area not
remote to the watchful senses of its driver Rodrigo.
Under the doctrine of res ipsa loquitur, [w]here the thing that caused the injury
complained of is shown to be under the management of the defendant or his servants; and the
accident, in the ordinary course of things, would not happen if those who had management or
control used proper care, it affords reasonable evidence in the absence of a sufficient, reasonable
and logical explanation by defendant that the accident arose from or was caused by the
defendants want of care.[40] Res ipsa loquitur is merely evidentiary, a mode of proof, or a mere
procedural convenience, since it furnishes a substitute for, and relieves a plaintiff of, the burden
of producing a specific proof of negligence.[41] It recognizes that parties may establish prima
facie negligence without direct proof, thus, it allows the principle to substitute for specific proof
of negligence. It permits the plaintiff to present along with proof of the accident, enough of the
attending circumstances to invoke the doctrine, create an inference or presumption of negligence
and thereby place on the defendant the burden of proving that there was no negligence on his
part.[42] The doctrine is based partly on the theory that the defendant in charge of the
instrumentality which causes the injury either knows the cause of the accident or has the best
opportunity of ascertaining it while the plaintiff has no such knowledge, and is therefore
compelled to allege negligence in general terms.[43]
The requisites of the doctrine of res ipsa loquitur as established by jurisprudence are as
follows:
1) the accident is of a kind which does not ordinarily occur unless someone is
negligent;
2) the cause of the injury was under the exclusive control of the person in
charge and
3) the injury suffered must not have been due to any voluntary action or
contribution on the part of the person injured.[44]
The above requisites are all present in this case. First, no person just
walking along the road would suddenly be sideswiped and run over by an on-rushing vehicle
unless the one in charge of the said vehicle had been negligent. Second, the jeep which caused
the injury was under the exclusive control of Oscar Jr. as its owner. When Oscar Jr. entrusted the
ignition key to Rodrigo, he had the power to instruct him with regard to the specific restrictions
of the jeeps use, including who or who may not drive it. As he is aware that the jeep may run
without the ignition key, he also has the responsibility to park it safely and securely and to
instruct his driver Rodrigo to observe the same precaution. Lastly, there was no showing that the
death of the victims was due to any voluntary action or contribution on their part.
The aforementioned requisites having been met, there now arises a presumption of
negligence against Oscar Jr. which he could have overcome by evidence that he exercised due
care and diligence in preventing strangers from using his jeep. Unfortunately, he failed to do so.
What this Court instead finds worthy of credence is the CAs conclusion that Oscar Jr.
gave his implied permission for Allan to use the jeep. This is in view of Oscar Jr.s failure to
provide solid proof that he ensured that the parking area is well secured and that he had
expressly imposed restrictions as to the use of the jeep when he entrusted the same to his driver
Rodrigo. As fittingly inferred by the CA, the jeep could have been endorsed to Allan by his
brother Rodrigo since as already mentioned, Oscar Jr. did not give Rodrigo any specific and
strict instructions on matters regarding its use. Rodrigo therefore is deemed to have been given
the absolute discretion as to the vehicles operation, including the discretion to allow his brother
Allan to use it.
The operator on record of a vehicle is primarily

responsible to third persons for the deaths or injuries
consequent to its operation, regardless of whether the
employee drove the registered owners vehicle in
connection with his employment.
Without disputing the factual finding of the CA that Allan was still his
employee at the time of the accident, a finding which we see no reason to disturb, Oscar Jr.
contends that Allan drove the jeep in his private capacity and thus, an employers vicarious
liability for the employees fault under Article 2180 of the Civil Code cannot apply to him.
The contention is no longer novel. In Aguilar Sr. v. Commercial Savings Bank,[45] the car
of therein respondent bank caused the death of Conrado Aguilar, Jr. while being driven by its
assistant vice president. Despite Article 2180, we still held the bank liable for damages for the
accident as said provision should defer to the settled doctrine concerning accidents involving
registered motor vehicles, i.e., that the registered owner of any vehicle, even if not used for
public service, would primarily be responsible to the public or to third persons for injuries
caused the latter while the vehicle was being driven on the highways or streets.[46] We have
already ratiocinated that:
The main aim of motor vehicle registration is to identify the owner so that if any
accident happens, or that any damage or injury is caused by the vehicle on the public
highways, responsibility therefor can be fixed on a definite individual, the registered
owner. Instances are numerous where vehicles running on public highways caused
accidents or injuries to pedestrians or other vehicles without positive identification of
the owner or drivers, or with very scant means of identification. It is to forestall these
circumstances, so inconvenient or prejudicial to the public, that the motor vehicle
registration is primarily ordained, in the interest of the determination of persons
responsible for damages or injuries caused on public highways.[47]
Absent the circumstance of unauthorized use[48] or that the subject vehicle was
stolen[49] which are valid defenses available to a registered owner, Oscar Jr. cannot escape
liability for quasi-delict resulting from his jeeps use.
All told and considering that the amounts of damages awarded are in accordance with
prevailing jurisprudence, the Court concurs with the findings of the CA and sustains the awards
made. In addition, pursuant to Eastern Shipping Lines, Inc. v. Court of Appeals,[50] an interest of
six percent (6%) per annum on the amounts awarded shall be imposed, computed from the time
the judgment of the RTC is rendered on April 17, 2000 and twelve percent (12%) per annum on
such amount upon finality of this Decision until the payment thereof.
WHEREFORE, premises considered, the instant petition is DENIED. The Decision

dated July 11, 2006 of the Court of Appeals in CA-G.R. CV No. 67764 is
hereby AFFIRMED with further MODIFICATION that an interest of six percent (6%) per
annum on the amounts awarded shall be imposed, computed from the time the judgment of the
Regional Trial Court, Branch 23, Molave, Zamboanga del Sur is rendered on April 17, 2000 and
twelve percent (12%) per annum on such amount upon finality of this Decision until the
payment thereof.
SO ORDERED.
d. Perez v. Gutierrez 63 SCRA 149
This appeal from the decision dated June 9, 1967 of the Court of First Instance of Davao in its civil case 3163
poses objections to the manner the trial court adjudicated the claim for damages filed by the plaintiff-appellant
Fe Perez against the defendant-third-party plaintiff-appellee Josefina Gutierrez.
The complaint (later amended) filed on October 29, 1959 by Fe Perez with the Court of First Instance of
Davao against Josefina Gutierrez, for breach of contract of carriage, alleges that on September 6, 1959 while
she, together with nine co-teachers, was a passenger of an AC jeepney registered under the name of the
defendant Gutierrez, the said vehicle, due to the reckless negligence of its driver Leopoldo Cordero, met with
an accident, resulting in injuries to herself which required her hospitalization. In her answer, Josefina
Gutierrez averred that if the claim of Fe Perez is at all justified, responsibility therefor should devolve on one
Panfilo Alajar, the actual owner, by purchase, of the said passenger jeepney when the accident occurred and
against whom she has filed a third-party complaint.
The deed of sale attached to the third-party complaint recites, inter alia,
That it is mutually agreed by the herein vendor and vendee that the TITLE to the aforementioned vehicle shall
remain with the VENDOR, pending approval of the herein SALE by the Public Service Commission, said
motor vehicle being registered as a public utility auto-calesa under "AC" denomination; ...
That the vendee herein, by these presents, do [sic] hereby binds himself and do [sic] hereby assume, [sic]
responsibility for all actions, claims, demands, and rights of action, and whatever kind and nature, that may
hereafter develop as a consequence of or in the course of operation of the aforementioned vehicle; ...
In his answer to the third-party complaint, Panfilo Alajar disclaimed responsibility for the accident, alleging
that (a) the mentioned deed of sale is null and void because it has not been registered with the Public Service
Commission despite repeated demands on the 3rd-party complainant to do so; (b) the said passenger
jeepney remained in the control of the 3rd-party complainant who, together with her lawyer-husband, had
been collecting rentals from him for the use of the said vehicle; and (c) by express agreement, title to the said
vehicle remained with the 3rd-party complainant pending approval of the sale by the Public Service
Commission.
The defendant Leopoldo Cordero was declared in default and did not appeal.
On June 9, 1967, after trial on the merits, the court a quo rendered its decision, in the main finding Leopoldo
Cordero guilty of reckless imprudence, and finding that Panfilo Alajar owned and operated the auto calesa in
question and, in fact, after the accident, even assumed responsibility for the payment of the hospital bills due
to the Brokenshire Memorial Hospital for treatment of the injuries suffered by Fe Perez. Based on these
findings as well as the proof of the damages suffered by Fe Perez, the court adjudged as follows:
WHEREFORE, premises considered, judgment is hereby rendered ordering third-party defendant Panfilo
Alajar to pay plaintiff the amount of P1,552.20 hospital expenses; P2,000.00, actual damages; P5,000.00
moral damages; P500.00 incidental expenses; and P2,000.00 attorney's fees.
Ordering likewise Panfilo Alajar to pay defendant third-party plaintiff Josefina Gutierrez P500.00 moral
damages; and P1,000.00 attorney's fees, and to pay the costs of the proceedings on both cases.
The present appeal questions the correctness of the dispositive portion of the decision a quo which adjudged
Panfilo Alajar, instead of Josefina Gutierrez, as the party liable to her for the payment of the damages
adjudicated in her favor. Specifically, Fe Perez argues that the registered owner of a motor vehicle should be
the one held liable for damages resulting from breach of contract of carriage by a common carrier.
We find the appeal meritorious and in accord with settled law on the matter.
In Peralta vs. Mangusang 1 this Court, in approbation of a similar argument, said:
The law (Sec. 20 [g], Public Service Act) really requires the approval of the Public Service Commission in
order that a franchise, or any privileges pertaining thereto, may be sold or leased without infringing the
certificate issued to the grantee. The reason is obvious. Since a franchise is personal in nature any transfer or
lease thereof should be submitted for approval of the Public Service Commission, so that the latter may take
proper safeguards to protect the interest of the public. It follows that if the property covered by the franchise is
transferred or leased to another without obtaining the requisite approval, the transfer is not binding on the
Public Service Commission and, in contemplation of law, the grantee continues to be responsible under the
franchise in relation to the Commission and to the public for the consequences incident to the operation of the
vehicle, one of them being the collision under consideration. (Montoya v. Ignacio, 50 O.G. No. 1. 108; Vda. de
Medina, et al. v. Cresencia, et al., 52 O.G. No. 10, 4604; Erezo v. Jepte, et al., G.R. No. L-9605, Sept. 30,
1957; Tamayo v. Aquino, 56 O.G. No. 36,5617).
In the earlier case of Erezo vs. Jepte, 2 which is cited in the foregoing opinion, this Court held that the doctrine
making the registered owner of a common carrier answerable to the public for negligence injuries to its passengers
or third persons, even though the vehicle had already been transferred to another, is based upon the principle
... that in dealing with vehicles registered under the Public Service Law, the public has the right to assume or
presume that the registered owner is the actual owner thereof, for it would be difficult for the public to enforce
the actions that they may have for injuries caused to them by the vehicles being negligently operated if the
public should be required to prove who the actual owner is. How would the public or third persons know
against whom to enforce their rights in case of subsequent transfers of the vehicles? We do not imply by this
doctrine, however, that the registered owner may not recover whatever amount he had paid by virtue of his
liability to third persons from the person to whom he had actually sold, assigned or conveyed the vehicle.
In Tamayo vs. Aquino, 3 also cited in Mangusang, supra, this Court, reiterating what was stated en
passant in Jepte, supra, described the nature of the liability of the actual transferee of a vehicle the negligent
operation of which gives rise to injuries to its passengers:
The question that is posed, therefore, is how should the holder of the certificate of public convenience
Tamayo participate with his transferee operator Rayos, in the damages recoverable by the heirs of the
deceased passenger, if their liability is not that of joint tortfeasors in accordance with Article 2194 of the Civil
Code. The following considerations must be borne in mind in determining this question. As Tamayo is the
registered owner of the truck, his responsibility to the public or to any passenger riding in the vehicle or truck
must be direct, for the reasons given in our decision in the case of Erezo vs. Jepte, supra, as quoted above.
But as the transferee, who operated the vehicle when the passenger died, is the one directly responsible for
the accident and death, he should in turn be made responsible to the registered owner for what the latter may
have been adjudged to pay. In operating the truck without transfer thereof having been approved by the
Public Service Commission, the transferee acted merely as agent of the registered owner and should be
responsible to him (the registered owner), for any damages that he may cause the latter by his negligence."
Upon the foregoing, it is quite clear that the court below erred in holding Panfilo Alajar, rather than Josefina
Gutierrez, as the one directly liable to Fe Perez for the latter's injuries and the corresponding damages
incurred. This Court notes moreover, that the court below inexplicably failed to hold the driver (Leopoldo
Cordero), whom it found guilty of reckless imprudence, jointly and solidarily liable with Josefina Gutierrez to
Fe Perez in accordance with the provisions of article 2184 in relation to article 2180 of the new Civil Code. 4
ACCORDINGLY, the judgment below is hereby modified in the sense that Josefina Gutierrez and Leopoldo
Cordero are hereby adjudged directly and jointly and solidarily liable to Fe Perez for the sums adjudicated in
the judgment below in her (Fe Perez') favor, while Panfilo Alajar is, in turn, hereby held answerable to
Josefina Gutierrez for such amount as the latter may pay to Fe Perez in satisfaction of the judgment appealed
from. Costs against both the defendant-third party plaintiff-appellee Josefina Gutierrez and the third party
defendant-appellee Panfilo Alajar.
Makalintal, Actg.. C.J., Zaldivar, Fernando, Teehankee, Barredo, Makasiar, Antonio and Esguerra, JJ.,
concur.
e. Aberlardo Lim, et al. v. CA January 16, 2002
When a passenger jeepney covered by a certificate of public convenience is sold

to another who continues to operate it under the same certificate of public
convenience under the so-called kabit system, and in the course thereof the vehicle
meets an accident through the fault of another vehicle, may the new owner sue for
damages against the erring vehicle? Otherwise stated, does the new owner have
any legal personality to bring the action, or is he the real party in interest in the suit,
despite the fact that he is not the registered owner under the certificate of public
convenience?
Sometime in 1982 private respondent Donato Gonzales purchased an Isuzu
passenger jeepney from Gomercino Vallarta, holder of a certificate of public
convenience for the operation of public utility vehicles plying the
Monumento-Bulacan route. While private respondent Gonzales continued offering
the jeepney for public transport services he did not have the registration of the
vehicle transferred in his name nor did he secure for himself a certificate of public
convenience for its operation. Thus Vallarta remained on record as its registered
owner and operator.
On 22 July 1990, while the jeepney was running northbound along the North
Diversion Road somewhere in Meycauayan, Bulacan, it collided with a
ten-wheeler-truck owned by petitioner Abelardo Lim and driven by his co-petitioner
Esmadito Gunnaban. Gunnaban owned responsibility for the accident, explaining
that while he was traveling towards Manila the truck suddenly lost its brakes. To
avoid colliding with another vehicle, he swerved to the left until he reached the center
island. However, as the center island eventually came to an end, he veered farther to
the left until he smashed into a Ferroza automobile, and later, into private
respondent's passenger jeepney driven by one Virgilio Gonzales. The impact caused
severe damage to both the Ferroza and the passenger jeepney and left one (1)
passenger dead and many others wounded.
Petitioner Lim shouldered the costs for hospitalization of the wounded,
compensated the heirs of the deceased passenger, and had the Ferroza restored to
good condition. He also negotiated with private respondent and offered to have the
passenger jeepney repaired at his shop. Private respondent however did not accept
the offer so Lim offered him P20,000.00, the assessment of the damage as
estimated by his chief mechanic. Again, petitioner Lim's proposition was rejected;
instead, private respondent demanded a brand-new jeep or the amount
of P236,000.00. Lim increased his bid to P40,000.00 but private respondent was
unyielding. Under the circumstances, negotiations had to be abandoned; hence, the
filing of the complaint for damages by private respondent against petitioners.
In his answer Lim denied liability by contending that he exercised due diligence in
the selection and supervision of his employees. He further asserted that as the
jeepney was registered in Vallartas name, it was Vallarta and not private respondent
who was the real party in interest. For his part, petitioner Gunnaban averred that the
[1]
accident was a fortuitous event which was beyond his control. [2]
Meanwhile, the damaged passenger jeepney was left by the roadside to corrode
and decay. Private respondent explained that although he wanted to take his
jeepney home he had no capability, financial or otherwise, to tow the damaged
vehicle.
[3]
The main point of contention between the parties related to the amount of
damages due private respondent. Private respondent Gonzales averred that per
estimate made by an automobile repair shop he would have to spend P236,000.00 to
restore his jeepney to its original condition. On the other hand, petitioners insisted
[4]
that they could have the vehicle repaired for P20,000.00. [5]
On 1 October 1993 the trial court upheld private respondent's claim and awarded
him P236,000.00 with legal interest from 22 July 1990 as compensatory damages
and P30,000.00 as attorney's fees. In support of its decision, the trial court
ratiocinated that as vendee and current owner of the passenger jeepney private
respondent stood for all intents and purposes as the real party in interest. Even
Vallarta himself supported private respondent's assertion of interest over the jeepney
for, when he was called to testify, he dispossessed himself of any claim or pretension
on the property. Gunnaban was found by the trial court to have caused the accident
since he panicked in the face of an emergency which was rather palpable from his
act of directing his vehicle to a perilous streak down the fast lane of the
superhighway then across the island and ultimately to the opposite lane where it
collided with the jeepney.
On the other hand, petitioner Lim's liability for Gunnaban's negligence was
premised on his want of diligence in supervising his employees. It was admitted
during trial that Gunnaban doubled as mechanic of the ill-fated truck despite the fact
that he was neither tutored nor trained to handle such task. [6]
Forthwith, petitioners appealed to the Court of Appeals which, on 17 July 1996,

affirmed the decision of the trial court. In upholding the decision of the court a
quo the appeals court concluded that while an operator under the kabit system could
not sue without joining the registered owner of the vehicle as his principal, equity
demanded that the present case be made an exception. Hence this petition.
[7]
It is petitioners' contention that the Court of Appeals erred in sustaining the

decision of the trial court despite their opposition to the well-established doctrine that
an operator of a vehicle continues to be its operator as long as he remains the
operator of record. According to petitioners, to recognize an operator under
the kabit system as the real party in interest and to countenance his claim for
damages is utterly subversive of public policy. Petitioners further contend that
inasmuch as the passenger jeepney was purchased by private respondent for
only P30,000.00, an award of P236,000.00 is inconceivably large and would amount
to unjust enrichment. [8]
Petitioners' attempt to illustrate that an affirmance of the appealed decision could

be supportive of the pernicious kabit system does not persuade. Their labored efforts
to demonstrate how the questioned rulings of the courts a quo are diametrically
opposed to the policy of the law requiring operators of public utility vehicles to secure
a certificate of public convenience for their operation is quite unavailing.
The kabit system is an arrangement whereby a person who has been granted a
certificate of public convenience allows other persons who own motor vehicles to
operate them under his license, sometimes for a fee or percentage of the
earnings. Although the parties to such an agreement are not outrightly penalized by
[9]
law, the kabit system is invariably recognized as being contrary to public policy and
therefore void and inexistent under Art. 1409 of the Civil Code.
In the early case of Dizon v. Octavio the Court explained that one of the primary
[10]
factors considered in the granting of a certificate of public convenience for the

business of public transportation is the financial capacity of the holder of the license,
so that liabilities arising from accidents may be duly compensated. The kabit system
renders illusory such purpose and, worse, may still be availed of by the grantee to
escape civil liability caused by a negligent use of a vehicle owned by another and
operated under his license. If a registered owner is allowed to escape liability by
proving who the supposed owner of the vehicle is, it would be easy for him to transfer
the subject vehicle to another who possesses no
property with which to respond financially for the damage done. Thus, for the safety
of passengers and the public who may have been wronged and deceived through the
baneful kabit system, the registered owner of the vehicle is not allowed to prove that
another person has become the owner so that he may be thereby relieved of
responsibility. Subsequent cases affirm such basic doctrine. [11]
It would seem then that the thrust of the law in enjoining the kabit system is not
so much as to penalize the parties but to identify the person upon whom
responsibility may be fixed in case of an accident with the end view of protecting the
riding public. The policy therefore loses its force if the public at large is not deceived,
much less involved.
In the present case it is at once apparent that the evil sought to be prevented in
enjoining the kabit system does not exist. First, neither of the parties to the
pernicious kabit system is being held liable for damages. Second, the case arose
from the negligence of another vehicle in using the public road to whom no
representation, or misrepresentation, as regards the ownership and operation of the
passenger jeepney was made and to whom no such representation, or
misrepresentation, was necessary. Thus it cannot be said that private respondent
Gonzales and the registered owner of the jeepney were in estoppel for leading the
public to believe that the jeepney belonged to the registered owner. Third, the riding
public was not bothered nor inconvenienced at the very least by the illegal
arrangement. On the contrary, it was private respondent himself who had been
wronged and was seeking compensation for the damage done to him. Certainly, it
would be the height of inequity to deny him his right.
In light of the foregoing, it is evident that private respondent has the right to
proceed against petitioners for the damage caused on his passenger jeepney as well
as on his business. Any effort then to frustrate his claim of damages by the ingenuity
with which petitioners framed the issue should be discouraged, if not repelled.
In awarding damages for tortuous injury, it becomes the sole design of the courts
to provide for adequate compensation by putting the plaintiff in the same financial
position he was in prior to the tort. It is a fundamental principle in the law on damages
that a defendant cannot be held liable in damages for more than the actual loss
which he has inflicted and that a plaintiff is entitled to no more than the just and
adequate compensation for the injury suffered. His recovery is, in the absence of
circumstances giving rise to an allowance of punitive damages, limited to a fair
compensation for the harm done. The law will not put him in a position better than
where he should be in had not the wrong happened. [12]
In the present case, petitioners insist that as the passenger jeepney was
purchased in 1982 for only P30,000.00 to award damages considerably greater than
this amount would be improper and unjustified.Petitioners are at best reminded that
indemnification for damages comprehends not only the value of the loss suffered but
also that of the profits which the obligee failed to obtain. In other words,
indemnification for damages is not limited to damnum emergens or actual loss but
extends to lucrum cessans or the amount of profit lost. [13]
Had private respondent's jeepney not met an accident it could reasonably be

expected that it would have continued earning from the business in which it was
engaged. Private respondent avers that he derives an average income of P300.00
per day from his passenger jeepney and this earning was included in the award of
damages made by the trial court and upheld by the appeals court. The award
therefore of P236,000.00 as compensatory damages is not beyond reason nor
speculative as it is based on a reasonable estimate of the total damage suffered by
private respondent, i.e. damage wrought upon his jeepney and the income lost from
his transportation business. Petitioners for their part did not offer any substantive
evidence to refute the estimate made by the courts a quo.
However, we are constrained to depart from the conclusion of the lower courts
that upon the award of compensatory damages legal interest should be imposed
beginning 22 July 1990, i.e. the date of the accident. Upon the provisions of Art. 2213
of the Civil Code, interest "cannot be recovered upon unliquidated claims or
damages, except when the demand can be established with reasonable certainty." It
is axiomatic that if the suit were for damages, unliquidated and not known until
definitely ascertained, assessed and determined by the courts after proof, interest at
the rate of six percent (6%) per annum should be from the date the judgment of the
court is made (at which time the quantification of damages may be deemed to be
reasonably ascertained). [14]
In this case, the matter was not a liquidated obligation as the assessment of the
damage on the vehicle was heavily debated upon by the parties with private
respondent's demand for P236,000.00 being refuted by petitioners who argue that
they could have the vehicle repaired easily for P20,000.00. In fine, the amount due
private respondent was not a liquidated account that was already demandable and
payable.
One last word. We have observed that private respondent left his passenger
jeepney by the roadside at the mercy of the elements. Article 2203 of the Civil Code
exhorts parties suffering from loss or injury to exercise the diligence of a good father
of a family to minimize the damages resulting from the act or omission in
question. One who is injured then by the wrongful or negligent act of another should
exercise reasonable care and diligence to minimize the resulting damage. Anyway,
he can recover from the wrongdoer money lost in reasonable efforts to preserve the
property injured and for injuries incurred in attempting to prevent damage to it. [15]
However we sadly note that in the present case petitioners failed to offer in
evidence the estimated amount of the damage caused by private respondent's
unconcern towards the damaged vehicle. It is the burden of petitioners to show
satisfactorily not only that the injured party could have mitigated his damages but
also the amount thereof; failing in this regard, the amount of damages awarded
cannot be proportionately reduced.
WHEREFORE, the questioned Decision awarding private respondent Donato
Gonzales P236,000.00 with legal interest from 22 July 1990 as compensatory
damages and P30,000.00 as attorney's fees is MODIFIED. Interest at the rate of six
percent (6%) per annum shall be computed from the time the judgment of the lower
court is made until the finality of this Decision. If the adjudged principal and interest
remain unpaid thereafter, the interest shall be twelve percent (12%) per annum
computed from the time judgment becomes final and executory until it is fully
satisfied.
Costs against petitioners.
SO ORDERED.
f. Teja Marketing v. Intermediate Appellate Court, GR No. L-65510 March

9, 1987
"'Ex pacto illicito' non oritur actio" (No action arises out of illicit bargain) is the time-honored maxim that must
be applied to the parties in the case at bar. Having entered into an illegal contract, neither can seek relief from
the courts, and each must bear the consequences of his acts." (Lita Enterprises vs. IAC, 129 SCRA 81.)
The factual background of this case is undisputed. The same is narrated by the respondent court in its now
assailed decision, as follows:
On May 9, 1975, the defendant bought from the plaintiff a motorcycle with complete accessories and a
sidecar in the total consideration of P8,000.00 as shown by Invoice No. 144 (Exh. "A"). Out of the total
purchase price the defendant gave a downpayment of P1,700.00 with a promise that he would pay plaintiff
the balance within sixty days. The defendant, however, failed to comply with his promise and so upon his own
request, the period of paying the balance was extended to one year in monthly installments until January
1976 when he stopped paying anymore. The plaintiff made demands but just the same the defendant failed to
comply with the same thus forcing the plaintiff to consult a lawyer and file this action for his damage in the
amount of P546.21 for attorney's fees and P100.00 for expenses of litigation. The plaintiff also claims that as
of February 20, 1978, the total account of the defendant was already P2,731.06 as shown in a statement of
account (Exhibit. "B"). This amount includes not only the balance of P1,700.00 but an additional 12% interest
per annum on the said balance from January 26, 1976 to February 27, 1978; a 2% service charge; and P
546.21 representing attorney's fees.
In this particular transaction a chattel mortgage (Exhibit 1) was constituted as a security for the payment of
the balance of the purchase price. It has been the practice of financing firms that whenever there is a balance
of the purchase price the registration papers of the motor vehicle subject of the sale are not given to the buyer.
The records of the LTC show that the motorcycle sold to the defendant was first mortgaged to the Teja
Marketing by Angel Jaucian though the Teja Marketing and Angel Jaucian are one and the same, because it
was made to appear that way only as the defendant had no franchise of his own and he attached the unit to
the plaintiff's MCH Line. The agreement also of the parties here was for the plaintiff to undertake the yearly
registration of the motorcycle with the Land Transportation Commission. Pursuant to this agreement the
defendant on February 22, 1976 gave the plaintiff P90.00, the P8.00 would be for the mortgage fee and the
P82.00 for the registration fee of the motorcycle. The plaintiff, however failed to register the motorcycle on
that year on the ground that the defendant failed to comply with some requirements such as the payment of
the insurance premiums and the bringing of the motorcycle to the LTC for stenciling, the plaintiff saying that
the defendant was hiding the motorcycle from him. Lastly, the plaintiff explained also that though the
ownership of the motorcycle was already transferred to the defendant the vehicle was still mortgaged with the
consent of the defendant to the Rural Bank of Camaligan for the reason that all motorcycle purchased from
the plaintiff on credit was rediscounted with the bank.
On his part the defendant did not dispute the sale and the outstanding balance of P1,700. 00 still payable to
the plaintiff. The defendant was persuaded to buy from the plaintiff the motorcycle with the side car because
of the condition that the plaintiff would be the one to register every year the motorcycle with the Land
Transportation Commission. In 1976, however, the plaintfff failed to register both the chattel mortgage and
the motorcycle with the LTC notwithstanding the fact that the defendant gave him P90.00 for mortgage fee
and registration fee and had the motorcycle insured with La Perla Compana de Seguros (Exhibit "6") as
shown also by the Certificate of cover (Exhibit "3"). Because of this failure of the plaintiff to comply with his
obligation to register the motorcycle the defendant suffered damages when he failed to claim any insurance
indemnity which would amount to no less than P15,000.00 for the more than two times that the motorcycle
figured in accidents aside from the loss of the daily income of P15.00 as boundary fee beginning October
1976 when the motorcycle was impounded by the LTC for not being registered.
The defendant disputed the claim of the plaintiff that he was hiding from the plaintiff the motorcycle resulting
in its not being registered. The truth being that the motorcycle was being used for transporting passengers
and it kept on travelling from one place to another. The motor vehicle sold to him was mortgaged by the
plaintiff with the Rural Bank of Camaligan without his consent and knowledge and the defendant was not
even given a copy of the mortgage deed. The defendant claims that it is not true that the motorcycle was
mortgaged because of re-discounting for rediscounting is only true with Rural Banks and the Central Bank.
The defendant puts the blame on the plaintiff for not registering the motorcycle with the LTC and for not giving
him the registration papers inspite of demands made. Finally, the evidence of the defendant shows that
because of the filing of this case he was forced to retain the services of a lawyer for a fee on not less than
P1,000.00.
xxx xxx xxx
... it also appears and the Court so finds that defendant purchased the motorcycle in question, particularly for
the purpose of engaging and using the same in the transportation business and for this purpose said trimobile
unit was attached to the plaintiffs transportation line who had the franchise, so much so that in the registration
certificate, the plaintiff appears to be the owner of the unit. Furthermore, it appears to have been agreed,
further between the plaintiff and the defendant, that plaintiff would undertake the yearly registration of the unit
in question with the LTC. Thus, for the registration of the unit for the year 1976, per agreement, the defendant
gave to the plaintiff the amount of P82.00 for its registration, as well as the insurance coverage of the unit.
Eventually, petitioner Teja Marketing and/or Angel Jaucian filed an action for "Sum of Money with Damages"
against private respondent Pedro N. Nale in the City Court of Naga City. The City Court rendered judgment in
favor of petitioner, the dispositive portion of which reads:
WHEREFORE, decision is hereby rendered dismissing the counterclaim and ordering the defendant to pay
plaintiff the sum of P1,700.00 representing the unpaid balance of the purchase price with legal rate of interest
from the date of the filing of the complaint until the same is fully paid; to pay plaintiff the sum of P546.21 as
attorney's fees; to pay plaintiff the sum of P200.00 as expenses of litigation; and to pay the costs.
SO ORDERED.
On appeal to the Court of First Instance of Camarines Sur, the decision was affirmed in toto. Private
respondent filed a petition for review with the Intermediate Appellate Court and on July 18, 1983 the said
Court promulgated its decision, the pertinent portion of which reads
However, as the purchase of the motorcycle for operation as a trimobile under the franchise of the private
respondent Jaucian, pursuant to what is commonly known as the "kabit system", without the prior approval of
the Board of Transportation (formerly the Public Service Commission) was an illegal transaction involving the
fictitious registration of the motor vehicle in the name of the private respondent so that he may traffic with the
privileges of his franchise, or certificate of public convenience, to operate a tricycle service, the parties
being in pari delicto, neither of them may bring an action against the other to enforce their illegal contract [Art.
1412 (a), Civil Code].
xxx xxx xxx
WHEREFORE, the decision under review is hereby set aside. The complaint of respondent Teja Marketing
and/or Angel Jaucian, as well as the counterclaim of petitioner Pedro Nale in Civil Case No. 1153 of the Court
of First Instance of Camarines Sur (formerly Civil Case No. 5856 of the City Court of Naga City) are
dismissed. No pronouncement as to costs.
SO ORDERED.
The decision is now before Us on a petition for review, petitioner Teja Marketing and/or Angel Jaucian
presenting a lone assignment of error whether or not respondent court erred in applying the doctrine of
"pari delicto."
We find the petition devoid of merit.
Unquestionably, the parties herein operated under an arrangement, commonly known as the "kabit system"
whereby a person who has been granted a certificate of public convenience allows another person who owns
motor vehicles to operate under such franchise for a fee. A certificate of public convenience is a special
privilege conferred by the government. Abuse of this privilege by the grantees thereof cannot be
countenanced. The "kabit system" has been Identified as one of the root causes of the prevalence of graft
and corruption in the government transportation offices.
Although not outrightly penalized as a criminal offense, the kabit system is invariably recognized as being
contrary to public policy and, therefore, void and in existent under Article 1409 of the Civil Code. It is a
fundamental principle that the court will not aid either party to enforce an illegal contract, but will leave both
where it finds then. Upon this premise it would be error to accord the parties relief from their predicament.
Article 1412 of the Civil Code denies them such aid. It provides:
Art. 1412. If the act in which the unlawful or forbidden cause consists does not constitute a criminal offense,
the following rules shall be observed:
1. When the fault is on the part of both contracting parties, neither may recover that he has given by virtue of
the contract, or demand, the performance of the other's undertaking.
The defect of in existence of a contract is permanent and cannot be cured by ratification or by prescription.
The mere lapse of time cannot give efficacy to contracts that are null and void.
WHEREFORE, the petition is hereby dismissed for lack of merit. The assailed decision of the Intermediate
Appellate Court (now the Court of Appeals) is AFFIRMED. No costs.
SO ORDERED.
g. Lita Enterprises, Inc. v. IAC G.R. No. L-64693 April 27, 1984
"Ex pacto illicito non oritur actio" [No action arises out of an illicit bargain] is the tune-honored maxim that
must be applied to the parties in the case at bar. Having entered into an illegal contract, neither can seek
relief from the courts, and each must bear the consequences of his acts.
The factual background of this case is undisputed.
Sometime in 1966, the spouses Nicasio M. Ocampo and Francisca Garcia, herein private respondents,
purchased in installment from the Delta Motor Sales Corporation five (5) Toyota Corona Standard cars to be
used as taxicabs. Since they had no franchise to operate taxicabs, they contracted with petitioner Lita
Enterprises, Inc., through its representative, Manuel Concordia, for the use of the latter's certificate of public
convenience in consideration of an initial payment of P1,000.00 and a monthly rental of P200.00 per taxicab
unit. To effectuate Id agreement, the aforesaid cars were registered in the name of petitioner Lita Enterprises,
Inc, Possession, however, remained with tile spouses Ocampo who operated and maintained the same under
the name Acme Taxi, petitioner's trade name.
About a year later, on March 18, 1967, one of said taxicabs driven by their employee, Emeterio Martin,
collided with a motorcycle whose driver, one Florante Galvez, died from the head injuries sustained therefrom.
A criminal case was eventually filed against the driver Emeterio Martin, while a civil case for damages was
instituted by Rosita Sebastian Vda. de Galvez, heir of the victim, against Lita Enterprises, Inc., as registered
owner of the taxicab in the latter case, Civil Case No. 72067 of the Court of First Instance of Manila, petitioner
Lita Enterprises, Inc. was adjudged liable for damages in the amount of P25,000.00 and P7,000.00 for
attorney's fees.
This decision having become final, a writ of execution was issued. One of the vehicles of respondent spouses
with Engine No. 2R-914472 was levied upon and sold at public auction for 12,150.00 to one Sonnie Cortez,
the highest bidder. Another car with Engine No. 2R-915036 was likewise levied upon and sold at public
auction for P8,000.00 to a certain Mr. Lopez.
Thereafter, in March 1973, respondent Nicasio Ocampo decided to register his taxicabs in his name. He
requested the manager of petitioner Lita Enterprises, Inc. to turn over the registration papers to him, but the
latter allegedly refused. Hence, he and his wife filed a complaint against Lita Enterprises, Inc., Rosita
Sebastian Vda. de Galvez, Visayan Surety & Insurance Co. and the Sheriff of Manila for reconveyance of
motor vehicles with damages, docketed as Civil Case No. 90988 of the Court of First Instance of Manila. Trial
on the merits ensued and on July 22, 1975, the said court rendered a decision, the dispositive portion of
which reads: t.h qw
WHEREFORE, the complaint is hereby dismissed as far as defendants Rosita Sebastian Vda. de Galvez,
Visayan Surety & Insurance Company and the Sheriff of Manila are concerned.
Defendant Lita Enterprises, Inc., is ordered to transfer the registration certificate of the three Toyota cars not
levied upon with Engine Nos. 2R-230026, 2R-688740 and 2R-585884 [Exhs. A, B, C and D] by executing a
deed of conveyance in favor of the plaintiff.
Plaintiff is, however, ordered to pay Lita Enterprises, Inc., the rentals in arrears for the certificate of
convenience from March 1973 up to May 1973 at the rate of P200 a month per unit for the three cars. (Annex
A, Record on Appeal, p. 102-103, Rollo)
Petitioner Lita Enterprises, Inc. moved for reconsideration of the decision, but the same was denied by the
court a quo on October 27, 1975. (p. 121, Ibid.)
On appeal by petitioner, docketed as CA-G.R. No. 59157-R, the Intermediate Appellate Court modified the
decision by including as part of its dispositive portion another paragraph, to wit: t . hqw
In the event the condition of the three Toyota rears will no longer serve the purpose of the deed of
conveyance because of their deterioration, or because they are no longer serviceable, or because they are
no longer available, then Lita Enterprises, Inc. is ordered to pay the plaintiffs their fair market value as of July
22, 1975. (Annex "D", p. 167, Rollo.)
Its first and second motions for reconsideration having been denied, petitioner came to Us, praying that: t . hqw
1. ...
2. ... after legal proceedings, decision be rendered or resolution be issued, reversing, annulling or amending
the decision of public respondent so that:
(a) the additional paragraph added by the public respondent to the DECISION of the lower court (CFI) be
deleted;
(b) that private respondents be declared liable to petitioner for whatever amount the latter has paid or was
declared liable (in Civil Case No. 72067) of the Court of First Instance of Manila to Rosita Sebastian Vda. de
Galvez, as heir of the victim Florante Galvez, who died as a result ot the gross negligence of private
respondents' driver while driving one private respondents' taxicabs. (p. 39, Rollo.)
Unquestionably, the parties herein operated under an arrangement, comonly known as the "kabit system",
whereby a person who has been granted a certificate of convenience allows another person who owns
motors vehicles to operate under such franchise for a fee. A certificate of public convenience is a special
privilege conferred by the government . Abuse of this privilege by the grantees thereof cannot be
countenanced. The "kabit system" has been Identified as one of the root causes of the prevalence of graft
and corruption in the government transportation offices. In the words of Chief Justice Makalintal, 1 "this is a
pernicious system that cannot be too severely condemned. It constitutes an imposition upon the goo faith of the government.
Although not outrightly penalized as a criminal offense, the "kabit system" is invariably recognized as being
contrary to public policy and, therefore, void and inexistent under Article 1409 of the Civil Code, It is a
fundamental principle that the court will not aid either party to enforce an illegal contract, but will leave them
both where it finds them. Upon this premise, it was flagrant error on the part of both the trial and appellate
courts to have accorded the parties relief from their predicament. Article 1412 of the Civil Code denies them
such aid. It provides: t.h qw
ART. 1412. if the act in which the unlawful or forbidden cause consists does not constitute a criminal offense,
the following rules shall be observed;
(1) when the fault, is on the part of both contracting parties, neither may recover what he has given by virtue
of the contract, or demand the performance of the other's undertaking.
The defect of inexistence of a contract is permanent and incurable, and cannot be cured by ratification or by
prescription. As this Court said in Eugenio v. Perdido, 2 "the mere lapse of time cannot give efficacy to contracts
that are null void."
The principle of in pari delicto is well known not only in this jurisdiction but also in the United States where
common law prevails. Under American jurisdiction, the doctrine is stated thus: "The proposition is universal
that no action arises, in equity or at law, from an illegal contract; no suit can be maintained for its specific
performance, or to recover the property agreed to be sold or delivered, or damages for its property agreed to
be sold or delivered, or damages for its violation. The rule has sometimes been laid down as though it was
equally universal, that where the parties are in pari delicto, no affirmative relief of any kind will be given to one
against the other." 3 Although certain exceptions to the rule are provided by law, We see no cogent reason why
the full force of the rule should not be applied in the instant case.
WHEREFORE, all proceedings had in Civil Case No. 90988 entitled "Nicasio Ocampo and Francisca P.
Garcia, Plaintiffs, versus Lita Enterprises, Inc., et al., Defendants" of the Court of First Instance of Manila and
CA-G.R. No. 59157-R entitled "Nicasio Ocampo and Francisca P. Garica, Plaintiffs-Appellees, versus Lita
Enterprises, Inc., Defendant-Appellant," of the Intermediate Appellate Court, as well as the decisions
rendered therein are hereby annuleled and set aside. No costs.
SO ORDERED. 1wph1 .t
h. Mariano C Mendoza and Lim v. SPS Gomez and Gomez June 18, 2014
Assailed in the present appeal by certiorari is the Decision dated 29 September 2003 of the Special Fourth
1
Division of the Court of Appeals (CA) in CA-G.R. CV No. 71877, which affirmed with modification the
Decision dated 31 January 2001 of the Regional Trial Court (RTC), Branch 172, Valenzuela City in Civil
2
Case No. 5352-V-97, and which effectively allowed the award of actual, moral, and exemplary damages, as
well as attorney's fees and costs of the suit in favor of respondent Spouses Leonora and Gabriel Gomez
(respondents).
Antecedent Facts
On 7 March 1997, an Isuzu Elf truck (Isuzu truck) with plate number UAW 582, owned by respondent3
Leonora J. Gomez (Leonora) and driven by Antenojenes Perez (Perez), was hit by a Mayamy
4 5
Transportation bus (Mayamy bus) with temporary plate number 1376-1280, registered under the name of
6
petitioner Elvira Lim (Lim) and driven by petitioner Mariano C. Mendoza (Mendoza).
7 8
Owing to the incident, an Information for reckless imprudence resulting in damage to property and multiple
physical injuries was filed against Mendoza. Mendoza, however, eluded arrest, thus, respondents filed a
9
separate complaint for damages against Mendoza and Lim, seeking actual damages, compensation for lost
income, moral damages, exemplary damages, attorneys fees and costs of the suit. This was docketed as
10
Civil Case No. 5352-V-97.
According to PO1 Melchor F. Rosales (PO1 Rosales), investigating officer of the case, at around 5:30 a.m.,
the Isuzu truck, coming from Katipunan Road and heading towards E. Rodriguez, Sr. Avenue, was travelling
along the downward portion of Boni Serrano Avenue when, upon reaching the corner of Riviera Street,
fronting St. Ignatius Village, its left front portion was hit by the Mayamy bus. According to PO1 Rosales, the
11
Mayamy bus, while traversing the opposite lane, intruded on the lane occupied by the Isuzu truck. 12
PO1 Rosales also reported that Mendoza tried to escape by speeding away, but he was apprehended in
Katipunan Road corner C. P. Garcia Avenue by one Traffic Enforcer Galante and a security guard of St.
Ignatius Village.
13
As a result of the incident, Perez,as well as the helpers on board the Isuzu truck, namely Melchor V. Anla
(Anla), Romeo J. Banca (Banca), and Jimmy Repisada (Repisada), sustained injuries necessitating medical
treatment amounting to P11,267.35,which amount was shouldered by respondents. Moreover, the Isuzu
truck sustained extensive damages on its cowl, chassis, lights and steering wheel, amounting
to P142,757.40. 14
Additionally, respondents averred that the mishap deprived them of a daily income of P1,000.00. Engaged in
the business of buying plastic scraps and delivering them to recycling plants, respondents claimed that the
Isuzu truck was vital in the furtherance of their business.
For their part, petitioners capitalized on the issue of ownership of the bus in question. Respondents argued
that although the registered owner was Lim, the actual owner of the bus was SPO1 Cirilo Enriquez (Enriquez),
who had the bus attached with Mayamy Transportation Company (Mayamy Transport) under the so-called
"kabit system." Respondents then impleaded both Lim and Enriquez.
Petitioners, on the other hand, presented Teresita Gutierrez (Gutierrez), whose testimony was offered to
prove that Mayamy Bus or Mayamy Transport is a business name registered under her name, and that such
business is a sole proprietorship. Such was presented by petitioners to rebut the allegation of respondents
that Mayamy Transport is a corporation; and to show, moreover, that although Gutierrez is the sole
15
proprietor of Mayamy Transport, she was not impleaded by respondents in the case at bar. 16
After weighing the evidence, the RTC found Mendoza liable for direct personal negligence under Article 2176
of the Civil Code, and it also found Lim vicariously liable under Article 2180 of the same Code.
As regards Lim, the RTC relied on the Certificate of Registration issued by the Land Transportation Office on
9 December 1996 in concluding that she is the registered owner of the bus in question. Although actually
17
owned by Enriquez, following the established principle in transportation law, Lim, as the registered owner, is
the one who can be held liable.
Thus, the RTC disposed of the case as follows:
WHEREFORE, judgment is hereby rendered in favor of the [respondents] and against the [petitioners]:
1. Ordering the [petitioners] except Enriquez to pay [respondents], jointly and severally, the costs of repair of
the damaged vehicle in the amount of P142,757.40;
2. Ordering the defendants except Enriquez to pay [respondents], jointly and severally, the amount
of P1,000.00 per day from March 7, 1997 up to November 1997 representing the unrealized income of the
[respondents] when the incident transpired up to the time the damaged Isuzu truck was repaired;
3. Ordering the [petitioners] except Enriquez to pay [respondents], jointly and severally, the amount
of P100,000.00 as moral damages, plus a separate amount of P50,000.00 as exemplary damages;
4. Ordering the [petitioners] except Enriquez to pay [respondents], jointly and severally, the amount
of P50,000.00 as attorneys fees; 5. Ordering the [petitioners] except Enriquez to pay [respondents] the costs
of suit.
18
Displeased, petitioners appealed to the CA, which appeal was docketed as CA-G.R. CV No. 71877. After
evaluating the damages awarded by the RTC, such were affirmed by the CA with the exception of the award
of unrealized income which the CA ordered deleted, viz:
WHEREFORE, premises considered, the appeal is PARTLY GRANTED. The judgment of the Regional Trial
Court of Valenzuela City, Branch 172 dated January 31, 2001, is MODIFIED, in that the award of P1,000.00
per day from March 1997 up to November 1997 representing unrealized income is DELETED. The award
of P142,757.40 for the cost of repair of the damaged vehicle, the award of P100,000.00 as moral damages,
the award of P50,000.00 as exemplary damages, the award of P50,000.00 as attorneys fees and the costs of
the suit are hereby MAINTAINED. 19
The Present Petition
Unsatisfied with the CA ruling, petitioners filed an appeal by certiorari before the Court, raising the following
issues:20
1. The court a quo has decided questions of substance in a way not in accord with law or with the applicable
decisions of the Supreme Court when it awarded:
a. Moral damages in spite of the fact that the [respondents] cause of action is clearly based on quasi-delict
and [respondents] did not sustain physical injuries to be entitled thereto pursuant to Article 2219 (2) of the
New Civil Code and pertinent decisions of the Supreme Court to that effect. The court a quo erroneously
concluded that the driver acted in bad faith and erroneously applied the provision of Article 21 of the same
code to justify the award for bad faith is not consistent with quasi-delict which is founded on fault or
negligence.
b. Exemplary damages in spite of the fact that there is no finding that the vehicular accident was due to
petitioner-drivers gross negligence to be entitled thereto pursuant to Article 2231 of the New Civil Code and
pertinent decisions of the Supreme Court to that effect. The factual basis of the court a quo that "the act of the
driver of the bus in attempting to escape after causing the accident in wanton disregard of the consequences
of his negligent act is such gross negligence that justifies an award of exemplary damages" is an act after the
fact which is not within the contemplation of Article 2231 of the New Civil Code.
c. Attorneys fees in spite of the fact that the assailed decisions of the trial court and the court a quo are bereft
with jurisdictions for the award of attorneys fees pursuant to the pertinent decisions of the Supreme Court on
the matter and provision Article 2208 of the New Civil Code. The court a quo erroneously applied the decision
of the Supreme Court in Baas, Jr. vs. Court of Appeals, 325 SCRA 259.
The Courts Ruling
The petition is partially meritorious.
Respondents anchor their claim for damages on Mendozas negligence, banking on Article 2176 of the Civil
Code, to wit:
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.
In impleading Lim, on the other hand, respondents invoke the latters vicarious liability as espoused in Article
2180 of the same Code:
The obligation imposed by Article 2176 is demandable not only for ones own acts or omissions, but also for
those of persons for whom one is responsible.
xxxx
Employers shall be liable for the damages caused by their employees and household helpers acting within
the scope of their assigned tasks, even though the former are not engaged in any business of industry.
The first question to address, then, is whether or not Mendozas negligence was duly proven. Negligence is
defined as the 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. 21
As found by the RTC, and affirmed by the CA, Mendoza was negligent in driving the subject Mayamy bus, as
demonstrated by the fact that, at the time of the collision, the bus intruded on the lane intended for the Isuzu
truck. Having encroached on the opposite lane, Mendoza was clearly in violation of traffic laws. Article2185 of
the Civil Code provides that 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. In the case at
bar, Mendozas violation of traffic laws was the proximate cause of the harm.
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. 22
The evidence on record shows that before the collision, the Isuzu truck was in its rightful lane, and was even
at a stop, having been flagged down by a security guard of St. Ignatius Village. The mishap occurred when
23
the Mayamy bus, travelling at a fast speed as shown by the impact of the collision, and going in the opposite
direction as that of the Isuzu truck, encroached on the lane rightfully occupied by said Isuzu truck, and caused
the latter to spin, injuring Perez, Anla, Banca, and Repisada, and considerably damaging the Isuzu truck.
Having settled the fact of Mendozas negligence, then, the next question that confronts us is who may beheld
liable. According to Manresa, liability for personal acts and omissions is founded on that indisputable principle
of justice recognized by all legislations that when a person by his act or omission causes damage or prejudice
to another, a juridical relation is created by virtue of which the injured person acquires a right to be
indemnified and the person causing the damage is charged with the corresponding duty of repairing the
damage. The reason for this is found in the obvious truth that man should subordinate his acts to the precepts
of prudence and if he fails to observe them and causes damage to another, he must repair the damage. His 24
negligence having caused the damage, Mendoza is certainly liable to repair said damage.
Additionally, Mendozas employer may also be held liable under the doctrine of vicarious liability or imputed
negligence. Under such doctrine, a person who has not committed the act or omission which caused damage
or injury to another may nevertheless be held civilly liable to the latter either directly or subsidiarily under
certain circumstances. In our jurisdiction, vicarious liability or imputed negligence is embodied in Article 2180
25
of the Civil Code and the basis for damages in the action under said article is the direct and primary
negligence of the employer in the selection or supervision, or both, of his employee. 26
In the case at bar, who is deemed as Mendozas employer? Is it Enriquez, the actual owner of the bus or Lim,
the registered owner of the bus?
In Filcar Transport Services v. Espinas, we held that the registered owner is deemed the employer of the
27
negligent driver, and is thus vicariously liable under Article 2176, in relation to Article 2180, of the Civil Code.
Citing Equitable Leasing Corporation v. Suyom, the Court ruled that in so far as third persons are concerned,
28
the registered owner of the motor vehicle is the employer of the negligent driver, and the actual employer is
considered merely as an agent of such owner. Thus, whether there is an employer-employee relationship
between the registered owner and the driver is irrelevant in determining the liability of the registered owner
who the law holds primarily and directly responsible for any accident, injury or death caused by the operation
of the vehicle in the streets and highways. 29
As early as Erezo v. Jepte, the Court, speaking through Justice Alejo Labrador summarized the justification
30
for holding the registered owner directly liable, to wit:
x x x The main aim of motor vehicle registration is to identify the owner so that if any accident happens, or that
any damage or injury is caused by the vehicles on the public highways, responsibility therefore can be fixed
on a definite individual, the registered owner. Instances are numerous where vehicle running on public
highways caused accidents or injuries to pedestrians or other vehicles without positive identification of the
owner or drivers, or with very scant means of identification. It is to forestall these circumstances, so
inconvenient or prejudicial to the public, that the motor vehicle registration is primarily ordained, in the interest
of the determination of persons responsible for damages or injuries caused on public highways.
"One of the principal purposes of motor vehicles legislation is identification of the vehicle and of the operator,
in case of accident; and another is that the knowledge that means of detection are always available may act
as a deterrent from lax observance of the law and of the rules of conservative and safe operation. Whatever
purpose there may be in these statutes, it is subordinate at the last to the primary purpose of rendering it
certain that the violator of the law or of the rules of safety shall not escape because of lack of means to
discover him." The purpose of the statute is thwarted, and the displayed number becomes a "snare and
delusion," if courts will entertain such defenses as that put forward by appellee in this case. No responsible
person or corporation could be held liable for the most outrageous acts of negligence, if they should be
allowed to place a "middleman" between them and the public, and escape liability by the manner in which
they recompense their servants. 31
Generally, when an injury is caused by the negligence of a servant or employee, there instantly arises a
presumption of law that there was negligence on the part of the master or employer either in the selection of
the servant or employee (culpa in eligiendo) or in the supervision over him after the selection (culpa vigilando),
or both. The presumption is juris tantum and not juris et de jure; consequently, it may be rebutted. Accordingly,
the general rule is that if the employer shows to the satisfaction of the court that in the selection and
supervision of his employee he has exercised the care and diligence of a good father of a family, the
presumption is overcome and he is relieved of liability. However, with the enactment of the motor vehicle
32
registration law, the defenses available under Article 2180 of the Civil Code - that the employee acts beyond
the scope of his assigned task or that it exercised the due diligence of a good father of a family to prevent
damage are no longer available to the registered owner of the motor vehicle, because the motor vehicle
registration law, to a certain extent, modified Article 2180. 33
As such, there can be no other conclusion but to hold Lim vicariously liable with Mendoza.
This does not mean, however, that Lim is left without any recourse against Enriquez and Mendoza. Under the
civil law principle of unjust enrichment, the registered owner of the motor vehicle has a right to be indemnified
by the actual employer of the driver; and under Article 2181 of the Civil Code, whoever pays for the damage
caused by his dependents or employees may recover from the latter what he has paid or delivered in
satisfaction of the claim.
Having identified the persons liable, our next question is what may be awarded.
Actual or Compensatory Damages. Actual or compensatory damages are those awarded in satisfaction of, or
in recompense for, loss or injury sustained. They simply make good or replace the loss caused by the wrong. 34
Article 2202 of the Civil Code provides that in crimes and quasi delicts, the defendant shall be liable for all
damages which are the natural and probable consequences of the act or omission complained of. It is not
necessary that such damages have been foreseen or could have reasonably been foreseen by the defendant.
Article 2199 of the same Code, however, sets the limitation that, except as provided by law or by stipulation,
one is entitled to an adequate compensation only for such pecuniary loss suffered by him as he has duly
proved. As such, to warrant an award of actual or compensatory damages, the claimant must prove that the
damage sustained is the natural and probable consequences of the negligent act and, moreover, the claimant
must adequately prove the amount of such damage.
In the case at bar, the RTC, basing on the receipts submitted by respondents and which receipts petitioners
had the opportunity to examine, found that the total repairs on the Isuzu truck amounted to P142,757.40, and
that the full hospitalization and medical expenses of Perez, Anla, Banca, and Repisada amounted
to P11,267.35. As such, these are the amounts that respondents are entitled to as actual and compensatory
damages.
Although respondents alleged in their complaint that the damage to their Isuzu truck caused them the loss of
a daily income of P1,000.00, such claim was not duly substantiated by any evidence on record, and thus
cannot be awarded in their favor.
Moral Damages. Moral damages are awarded to enable the injured party to obtain means, diversions or
amusements that will serve to alleviate the moral suffering he has undergone, by reason of the defendant's
culpable action.35
In prayers for moral damages, however, recovery is more an exception rather than the rule. Moral damages
are not meant to be punitive but are designed to compensate and alleviate the physical suffering, mental
anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation,
and similar harm unjustly caused to a person. To be entitled to such an award, the claimant must satisfactorily
prove that he has suffered damages and that the injury causing it has sprung from any of the cases listed in
Articles 2219 and 2220 of the Civil Code. Moreover, the damages must be shown to be the proximate result
of a wrongful act or omission. The claimant must thus establish the factual basis of the damages and its
causal tie with the acts of the defendant.
36
In fine, an award of moral damages calls for the presentation of 1) evidence of besmirched reputation or
physical, mental or psychological suffering sustained by the claimant; 2)a culpable act or omission factually
established; 3) proof that the wrongful act or omission of the defendant is the proximate cause of the
damages sustained by the claimant; and 4) the proof that the act is predicated on any of the instances
expressed or envisioned by Article 2219 and Article 2220 of the Civil Code. 37
A review of the complaint and the transcript of stenographic notes yields the pronouncement that
respondents neither alleged nor offered any evidence of besmirched reputation or physical, mental or
psychological suffering incurred by them. All that Leonora and her counsel had to say on the matter of
damages other than actual or compensatory damages is this: 38
Q: Did you ever spend covering attorneys fees?
A: Yes, sir. P50,000.00.
Q: Aside from the actual damage that you have mentioned x x x, how much more would you like this Court to
award you by way of moral damages?
A: P100,000.00, sir.
Q: How about exemplary damages?
A: P50,000.00, sir.
Q: What happened to you, what did you feel when the defendants failed to immediately repair your vehicle
that was damaged Madam Witness?
A: I have incurred expenses and I was forced to apply for a loan, sir.
In Kierulf v. CA, we observed that this Court cannot remind the bench and the bar often enough that in order
39
that moral damages may be awarded, there must be pleading and proof of moral suffering, mental anguish,
fright and the like. Citing Francisco v. GSIS, the Court held that there must be clear testimony on the anguish
40
and other forms of mental suffering. Thus, if the plaintiff fails to take the witness stand and testify as to his
social humiliation, wounded feelings and anxiety, moral damages cannot be awarded.
Moreover, respondents were not able to show that their claim properly falls under Articles 2219 and 2220 of
the Civil Code. Respondents cannot rely on Article 2219 (2) of the Civil Code which allows moral damages in
quasi-delicts causing physical injuries because in physical injuries, moral damages are recoverable only by
the injured party, and in the case at bar, herein respondents were not the ones who were actually injured.
41
In B.F. Metal (Corp.) v. Sps. Lomotan, et al., the Court, in a claim for damages based on quasi-delict causing
42
physical injuries, similarly disallowed an award of moral damages to the owners of the damaged vehicle,
when neither of them figured in the accident and sustained injuries.
Neither can respondents rely on Article 21 of the Civil Code as the RTC erroneously did. Article 21 deals with
acts contra bonus mores, and has the following elements: (1) There is an act which is legal; (2) but which is
contrary to morals, good custom, public order, or public policy; (3) and it is done with intent to injure. In the
43
present case, it can hardly be said that Mendozas negligent driving and violation of traffic laws are legal acts.
Moreover, it was not proven that Mendoza intended to injure Perez, et al. Thus, Article 21 finds no application
to the case at bar. All in all, we find that the RTC and the CA erred in granting moral damages to respondents.
Exemplary Damages. Article 2229 of the Civil Code provides that exemplary or corrective damages are
imposed, by way of example or correction for the public good, in addition to moral, temperate, liquidated or
compensatory damages. Article 2231 of the same Code further states that in quasi-delicts, exemplary
damages may be granted if the defendant acted with gross negligence.
Our jurisprudence sets certain conditions when exemplary damages may be awarded: First, they may be
imposed by way of example or correction only in addition, among others, to compensatory damages, and
cannot be recovered as a matter of right, their determination depending upon the amount of compensatory
damages that may be awarded to the claimant. Second, the claimant must first establish his right to moral,
temperate, liquidated or compensatory damages. Third, the wrongful act must be accompanied by bad faith,
and the award would be allowed only if the guilty party acted in a wanton, fraudulent, reckless, oppressive or
malevolent manner. 44
In motor vehicle accident cases, exemplary damages may be awarded where the defendants misconduct is
so flagrant as to transcend simple negligence and be tantamount to positive or affirmative misconduct rather
than passive or negative misconduct. In characterizing the requisite positive misconduct which will support a
claim for punitive damages, the courts have used such descriptive terms as willful, wanton, grossly negligent,
reckless, or malicious, either alone or in combination. 45
Gross negligence is the absence of care or diligence as to amount to a reckless disregard of the safety of
persons or property. It evinces a thoughtless disregard of consequences without exerting any effort to avoid
them. 46
In the case at bar, having established respondents right to compensatory damages, exemplary damages are
also in order, given the fact that Mendoza was grossly negligent in driving the Mayamy bus. His act of
intruding or encroaching on the lane rightfully occupied by the Isuzu truck shows his reckless disregard for
safety.
In Bao v. Bachelor Express, Inc., et al., where an erring bus, in the process of overtaking a jeepney, also
47
encroached on the opposite lane, and consequently collided with a dump truck, the Court held the driver of
the bus grossly negligent and affirmed the award of exemplary damages. Attorneys Fees. Article 2208 of the
Civil Code enumerates the instances when attorneys fees may be recovered:
Art. 2208. In the absence of stipulation, attorneys 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;
(3) In criminal cases of malicious prosecution against the plaintiff;
(4) In case of a clearly unfounded civil action or proceeding against the plaintiff;
(5) Where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiffs valid and
demandable claim;
(6) In actions for legal support;
(7) In actions for the recovery of wages of household helpers, laborers and skilled workers;
(8) In actions for indemnity under workmens compensation and employers liability laws;
(9) In a separate civil action to recover civil liability arising from a crime;
(10) When at least double judicial costs are awarded;
(11) In any other case where the court deems it just and equitable that attorneys fees and expenses of
litigation should be recovered;
In all cases, the attorneys fees and expenses of litigation must be reasonable.
From the very opening sentence of Article 2208 of the Civil Code, it is clearly intended to retain the award of
attorneys fees as the exception in our law, as the general rule remains that attorneys fees are not
recoverable in the absence of a stipulation thereto, the reason being that it is not sound policy to set a
premium on the right to litigate. 48
As such, in Spouses Agustin v. CA, we held that, the award of attorneys fees being an exception rather than
49
the general rule, it is necessary for the court to make findings of facts and law that would bring the case within
the exception and justify the grant of such award. Thus, the reason for the award of attorneys fees must be
stated in the text of the courts decision; otherwise, if it is stated only in the dispositive portion of the decision,
the same must be disallowed on appeal.
In the case at bar, the RTC Decision had nil discussion on the propriety of attorneys fees, and it merely
awarded such in the dispositive. The CA Decision, on the other hand, merely stated that the award of
attorneys fees is merited as such is allowed when exemplary damages are awarded. Following established
50
jurisprudence, however, the CA should have disallowed on appeal said award of attorneys fees as the RTC
51
failed to substantiate said award. Costs of suit. The Rules of Court provide that, generally, costs shall be
allowed to the prevailing party as a matter of course, thus: 52
Section 1. Costs ordinarily follow results of suit.- Unless otherwise provided in these rules, costs shall be
allowed to the prevailing party as a matter of course, but the court shall have power, for special reasons, to
adjudge that either party shall pay the costs of an action, or that the same be divided, as may be equitable.
No costs shall be allowed against the Republic of the Philippines, unless otherwise provided by law.
In the present case, the award of costs of suit to respondents, as the prevailing party, is in order.
Interests. Interest by way of damages has been defined as interest allowed in actions for breach of contractor
1wphi1
tort for the unlawful detention of money already due. This type of interest is frequently called "moratory
interest." Interest as a part of damage, is allowed, not by application of arbitrary rules, but as a result of the
justice of the individual case and as compensation to the injured party. 53
The legal provision on interests in quasi-delicts is Article 2211 of the Civil Code which provides that in crimes
and quasi-delicts, interest as part of the damage, may, in a proper case, be adjudicated in the discretion of
the court.
Generally, interest is allowed as a matter of right for failure to pay liquidated claims when due. For 54
unliquidated claims, however, Article 2213 of the Civil Code provides that interest cannot be recovered upon
unliquidated claims or damages, except when the demand can be established with reasonable certainty.
In the case at bar, although the award of exemplary damages is unliquidated in the sense that petitioners
cannot know for sure, before judgment, the exact amount that they are required to pay to respondents, the
award of actual or compensatory damages, however, such as the truck repairs and medical expenses, is
arguably liquidated in that they can be measured against a reasonably certain standard. Moreover, justice
55
would seem to require that the delay in paying for past losses which can be made reasonably certain should
be compensated through an award of interest. 56
WHEREFORE, premises considered, the Court Resolves to PARTIALLY GRANT the appeal by certiorari, as
follows:
1) DECLARE Mariano Mendoza and Elvira Lim solidarily liable to respondent Spouses Leonora and Gabriel
Gomez;
2) MAINTAIN the award of actual or compensatory damages in the amount of P142,757.40 for the repair of
the Isuzu Elf truck, with legal interest beginning 31 January 2001 until fully paid;
3) GRANT additional actual or compensatory damages in the amount of P11,267.35 for the medical
expenses shouldered by respondent Spouses Leonora and Gabriel Gomez, with legal interest beginning 31
January 2001 until fully paid;
4) DELETE the award of moral damages;
5) MAINTAIN the award of exemplary damages at P50,000.00;
6) DELETE the award of attorney's fees; and
7) MAINTAIN the award of costs of suit.
SO ORDERED.
i. Estela Crisostomo v. CA and Caravan Travel and Tours August 25,

2003
In May 1991, petitioner Estela L. Crisostomo contracted the services of

respondent Caravan Travel and Tours International, Inc. to arrange and facilitate her
booking, ticketing and accommodation in a tour dubbed Jewels of Europe. The
package tour included the countries of England, Holland, Germany, Austria,
Liechstenstein, Switzerland and France at a total cost of P74,322.70. Petitioner was
given a 5% discount on the amount, which included airfare, and the booking fee was
also waived because petitioners niece, Meriam Menor, was respondent companys
ticketing manager.
Pursuant to said contract, Menor went to her aunts residence on June 12, 1991 a
Wednesday to deliver petitioners travel documents and plane tickets. Petitioner, in
turn, gave Menor the full payment for the package tour. Menor then told her to be at
the Ninoy Aquino International Airport (NAIA) on Saturday, two hours before her
flight on board British Airways.
Without checking her travel documents, petitioner went to NAIA on Saturday,
June 15, 1991, to take the flight for the first leg of her journey from Manila to
Hongkong. To petitioners dismay, she discovered that the flight she was supposed to
take had already departed the previous day. She learned that her plane ticket was for
the flight scheduled on June 14, 1991. She thus called up Menor to complain.
Subsequently, Menor prevailed upon petitioner to take another tour the British
Pageant which included England, Scotland and Wales in its itinerary. For this tour
package, petitioner was asked anew to pay US$785.00 or P20,881.00 (at the then
prevailing exchange rate of P26.60). She gave respondent US$300 or P7,980.00 as
partial payment and commenced the trip in July 1991.
Upon petitioners return from Europe, she demanded from respondent the
reimbursement of P61,421.70, representing the difference between the sum she paid
for Jewels of Europe and the amount she owed respondent for the British Pageant
tour. Despite several demands, respondent company refused to reimburse the
amount, contending that the same was non-refundable. Petitioner was thus [1]
constrained to file a complaint against respondent for breach of contract of carriage

and damages, which was docketed as Civil Case No. 92-133 and raffled to Branch
59 of the Regional Trial Court of Makati City.
In her complaint, petitioner alleged that her failure to join Jewels of Europe was
[2]
due to respondents fault since it did not clearly indicate the departure date on the
plane ticket. Respondent was also negligent in informing her of the wrong flight
schedule through its employee Menor. She insisted that the British Pageant was
merely a substitute for the Jewels of Europe tour, such that the cost of the former
should be properly set-off against the sum paid for the latter.
For its part, respondent company, through its Operations Manager, Concepcion
Chipeco, denied responsibility for petitioners failure to join the first tour. Chipeco
insisted that petitioner was informed of the correct departure date, which was clearly
and legibly printed on the plane ticket. The travel documents were given to petitioner
two days ahead of the scheduled trip. Petitioner had only herself to blame for missing
the flight, as she did not bother to read or confirm her flight schedule as printed on
the ticket.
Respondent explained that it can no longer reimburse the amount paid for Jewels
of Europe, considering that the same had already been remitted to its principal in
Singapore, Lotus Travel Ltd., which had already billed the same even if petitioner did
not join the tour. Lotus European tour organizer, Insight International Tours Ltd.,
determines the cost of a package tour based on a minimum number of projected
participants. For this reason, it is accepted industry practice to disallow refund for
individuals who failed to take a booked tour. [3]
Lastly, respondent maintained that the British Pageant was not a substitute for
the package tour that petitioner missed. This tour was independently procured by
petitioner after realizing that she made a mistake in missing her flight for Jewels of
Europe. Petitioner was allowed to make a partial payment of only US$300.00 for the
second tour because her niece was then an employee of the travel
agency.Consequently, respondent prayed that petitioner be ordered to pay the
balance of P12,901.00 for the British Pageant package tour.
After due proceedings, the trial court rendered a decision, the dispositive part of
[4]
which reads:
1. Ordering the defendant to return and/or refund to the plaintiff the amount of Fifty
Three Thousand Nine Hundred Eighty Nine Pesos and Forty Three Centavos
(P53,989.43) with legal interest thereon at the rate of twelve percent (12%) per
annum starting January 16, 1992, the date when the complaint was filed;
2. Ordering the defendant to pay the plaintiff the amount of Five Thousand
(P5,000.00) Pesos as and for reasonable attorneys fees;
3. Dismissing the defendants counterclaim, for lack of merit; and
4. With costs against the defendant.
SO ORDERED. [5]
The trial court held that respondent was negligent in erroneously advising
petitioner of her departure date through its employee, Menor, who was not presented
as witness to rebut petitioners testimony. However, petitioner should have verified
the exact date and time of departure by looking at her ticket and should have simply
not relied on Menors verbal representation. The trial court thus declared that
petitioner was guilty of contributory negligence and accordingly, deducted 10% from
the amount being claimed as refund.
Respondent appealed to the Court of Appeals, which likewise found both parties
to be at fault. However, the appellate court held that petitioner is more negligent than
respondent because as a lawyer and well-traveled person, she should have known
better than to simply rely on what was told to her. This being so, she is not entitled to
any form of damages. Petitioner also forfeited her right to the Jewels of Europe tour
and must therefore pay respondent the balance of the price for the British Pageant
tour. The dispositive portion of the judgment appealed from reads as follows:
WHEREFORE, premises considered, the decision of the Regional Trial Court dated October
26, 1995 is hereby REVERSED and SET ASIDE. A new judgment is hereby ENTERED
requiring the plaintiff-appellee to pay to the defendant-appellant the amount of P12,901.00,
representing the balance of the price of the British Pageant Package Tour, the same to earn
legal interest at the rate of SIX PERCENT (6%) per annum, to be computed from the time
the counterclaim was filed until the finality of this decision. After this decision becomes final
and executory, the rate of TWELVE PERCENT (12%) interest per annum shall be
additionally imposed on the total obligation until payment thereof is satisfied. The award of
attorneys fees is DELETED. Costs against the plaintiff-appellee.
SO ORDERED. [6]
Upon denial of her motion for reconsideration, petitioner filed the instant petition
[7]
under Rule 45 on the following grounds:

I
It is respectfully submitted that the Honorable Court of Appeals committed a reversible error
in reversing and setting aside the decision of the trial court by ruling that the petitioner is not
entitled to a refund of the cost of unavailed Jewels of Europe tour she being equally, if not
more, negligent than the private respondent, for in the contract of carriage the common
carrier is obliged to observe utmost care and extra-ordinary diligence which is higher in
degree than the ordinary diligence required of the passenger. Thus, even if the petitioner and
private respondent were both negligent, the petitioner cannot be considered to be equally, or
worse, more guilty than the private respondent. At best, petitioners negligence is only
contributory while the private respondent [is guilty] of gross negligence making the principle
of pari delicto inapplicable in the case;
II
The Honorable Court of Appeals also erred in not ruling that the Jewels of Europe tour was
not indivisible and the amount paid therefor refundable;
III
The Honorable Court erred in not granting to the petitioner the consequential damages due
her as a result of breach of contract of carriage. [8]
Petitioner contends that respondent did not observe the standard of care required
of a common carrier when it informed her wrongly of the flight schedule. She could
not be deemed more negligent than respondent since the latter is required by law to
exercise extraordinary diligence in the fulfillment of its obligation. If she were
negligent at all, the same is merely contributory and not the proximate cause of the
damage she suffered. Her loss could only be attributed to respondent as it was the
direct consequence of its employees gross negligence.
Petitioners contention has no merit.
By definition, a contract of carriage or transportation is one whereby a certain
person or association of persons obligate themselves to transport persons, things, or
news from one place to another for a fixed price. Such person or association of
[9]
persons are regarded as carriers and are classified as private or special carriers and
common or public carriers. A common carrier is defined under Article 1732 of the
[10]
Civil Code as persons, corporations, firms or associations engaged in the business of

carrying or transporting passengers or goods or both, by land, water or air, for
It is obvious from the above definition that respondent is not an entity engaged in
the business of transporting either passengers or goods and is therefore, neither a
private nor a common carrier. Respondent did not undertake to transport petitioner
from one place to another since its covenant with its customers is simply to make
travel arrangements in their behalf. Respondents services as a travel agency include
procuring tickets and facilitating travel permits or visas as well as booking customers
for tours.
While petitioner concededly bought her plane ticket through the efforts of
respondent company, this does not mean that the latter ipso facto is a common
carrier. At most, respondent acted merely as an agent of the airline, with whom
petitioner ultimately contracted for her carriage to Europe. Respondents obligation to
petitioner in this regard was simply to see to it that petitioner was properly booked
with the airline for the appointed date and time. Her transport to the place of
destination, meanwhile, pertained directly to the airline.
The object of petitioners contractual relation with respondent is the latters service
of arranging and facilitating petitioners booking, ticketing and accommodation in
the package tour. In contrast, the object of a contract of carriage is
the transportation of passengers or goods. It is in this sense that the contract
between the parties in this case was an ordinary one for services and not one of
carriage. Petitioners submission is premised on a wrong assumption.
The nature of the contractual relation between petitioner and respondent is
determinative of the degree of care required in the performance of the latters
obligation under the contract. For reasons of public policy, a common carrier in a
contract of carriage is bound by law to carry passengers as far as human care and
foresight can provide using the utmost diligence of very cautious persons and with
due regard for all the circumstances. As earlier stated, however, respondent is not a
[11]
common carrier but a travel agency. It is thus not bound under the law to observe
extraordinary diligence in the performance of its obligation, as petitioner claims.
Since the contract between the parties is an ordinary one for services, the
standard of care required of respondent is that of a good father of a family under
Article 1173 of the Civil Code. This connotes reasonable care consistent with that
[12]
which an ordinarily prudent person would have observed when confronted with a
similar situation. The test to determine whether negligence attended the performance
of an obligation is: 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. [13]
In the case at bar, the lower court found Menor negligent when she allegedly
informed petitioner of the wrong day of departure. Petitioners testimony was
accepted as indubitable evidence of Menors alleged negligent act since respondent
did not call Menor to the witness stand to refute the allegation. The lower court
applied the presumption under Rule 131, Section 3 (e) of the Rules of Court that
[14]
evidence willfully suppressed would be adverse if produced and thus considered

petitioners uncontradicted testimony to be sufficient proof of her claim.
On the other hand, respondent has consistently denied that Menor was negligent
and maintains that petitioners assertion is belied by the evidence on record. The date
and time of departure was legibly written on the plane ticket and the travel papers
were delivered two days in advance precisely so that petitioner could prepare for the
trip. It performed all its obligations to enable petitioner to join the tour and exercised
due diligence in its dealings with the latter.
We agree with respondent.
Respondents failure to present Menor as witness to rebut petitioners testimony
could not give rise to an inference unfavorable to the former. Menor was already
working in France at the time of the filing of the complaint, thereby making it
[15]
physically impossible for respondent to present her as a witness. Then too, even if it
were possible for respondent to secure Menors testimony, the presumption under
Rule 131, Section 3(e) would still not apply. The opportunity and possibility for
obtaining Menors testimony belonged to both parties, considering that Menor was
not just respondents employee, but also petitioners niece. It was thus error for the
lower court to invoke the presumption that respondent willfully suppressed evidence
under Rule 131, Section 3(e). Said presumption would logically be inoperative if the
evidence is not intentionally omitted but is simply unavailable, or when the same
could have been obtained by both parties. [16]
In sum, we do not agree with the finding of the lower court that Menors
negligence concurred with the negligence of petitioner and resultantly caused
damage to the latter. Menors negligence was not sufficiently proved, considering that
the only evidence presented on this score was petitioners uncorroborated narration
of the events. It is well-settled that the party alleging a fact has the burden of proving
it and a mere allegation cannot take the place of evidence. If the plaintiff, upon
[17]
whom rests the burden of proving his cause of action, fails to show in a satisfactory
manner facts upon which he bases his claim, the defendant is under no obligation to
prove his exception or defense. [18]
Contrary to petitioners claim, the evidence on record shows that respondent

exercised due diligence in performing its obligations under the contract and followed
standard procedure in rendering its services to petitioner. As correctly observed by
the lower court, the plane ticket issued to petitioner clearly reflected the departure
[19]
date and time, contrary to petitioners contention. The travel documents, consisting of
the tour itinerary, vouchers and instructions, were likewise delivered to petitioner two
days prior to the trip. Respondent also properly booked petitioner for the tour,
prepared the necessary documents and procured the plane tickets. It arranged
petitioners hotel accommodation as well as food, land transfers and sightseeing
excursions, in accordance with its avowed undertaking.
Therefore, it is clear that respondent performed its prestation under the contract
as well as everything else that was essential to book petitioner for the tour. Had
petitioner exercised due diligence in the conduct of her affairs, there would have
been no reason for her to miss the flight. Needless to say, after the travel papers
were delivered to petitioner, it became incumbent upon her to take ordinary care of
her concerns. This undoubtedly would require that she at least read the documents
in order to assure herself of the important details regarding the trip.
The negligence of the obligor in the performance of the obligation renders him
liable for damages for the resulting loss suffered by the obligee. Fault or negligence
of the obligor consists in his failure to exercise due care and prudence in the
performance of the obligation as the nature of the obligation so demands. There is
[20]
no fixed standard of diligence applicable to each and every contractual obligation and
each case must be determined upon its particular facts. The degree of diligence
required depends on the circumstances of the specific obligation and whether one
has been negligent is a question of fact that is to be determined after taking into
account the particulars of each case. [21]
The lower court declared that respondents employee was negligent. This factual
finding, however, is not supported by the evidence on record. While factual findings
below are generally conclusive upon this court, the rule is subject to certain
exceptions, as when the trial court overlooked, misunderstood, or misapplied some
facts or circumstances of weight and substance which will affect the result of the
case.[22]
In the case at bar, the evidence on record shows that respondent company
performed its duty diligently and did not commit any contractual breach. Hence,
petitioner cannot recover and must bear her own damage.
WHEREFORE, the instant petition is DENIED for lack of merit. The decision of
the Court of Appeals in CA-G.R. CV No. 51932 is AFFIRMED. Accordingly, petitioner
is ordered to pay respondent the amount of P12,901.00 representing the balance of
the price of the British Pageant Package Tour, with legal interest thereon at the rate
of 6% per annum, to be computed from the time the counterclaim was filed until the
finality of this Decision. After this Decision becomes final and executory, the rate of
12% per annum shall be imposed until the obligation is fully settled, this interim
period being deemed to be by then an equivalent to a forbearance of credit. [23]
SO ORDERED.
8. Boundary System.
a. Gregorio George Amante and Vicente Amante vs. Bibiano
Serwelas September 30, 2005
The subject of this petition for review on certiorari under Rule 45 of the Rules of Court is the decision[1] of the Court
of Appeals dated December 28, 1999 declaring respondent Bibiano Serwelas as the lawful owner of a contested
vehicle.
The facts, as found by the appellate court, follow.

Danilo Bicomong was the registered owner of a 1990 Isuzu Jitney with motor no. 139328, chassis no. SPMM
35092-90-C and plate no. DHH 230, evidenced by certificate of registration no. 00567641.[2] He was employed as
plant supervisor of Amante Motors.
On July 17, 1992, Bicomong sold the vehicle for P200,000 to respondent in a deed of absolute sale.[3] On October 7,
1992, respondent had the vehicle registered in his name, as shown in certificate of registration no. 14058314. [4] He
then operated it as a common carrier on a boundary system.[5]
On December 9, 1993, the vehicle was seized by the police highway patrol group in General Mariano Alvarez, Cavite
without a warrant, upon the request of petitioner Gregorio Amante, the manager of Amante Motors.
The vehicle was brought to Camp Vicente Lim in Laguna and, after being subjected to macro-etching examination by
SPO1 Elfin B. Rico of the Philippine National Police Crime Laboratory Service, was later released to petitioner
Gregorio Amante. Despite respondents demand,[6] Gregorio Amante refused to return the vehicle. Hence, respondent
instituted a replevin suit with the trial court.[7] Asserting ownership of the vehicle, petitioner Vicente Amante, the
proprietor of Amante Motors, intervened in the suit.
On April 29, 1996, the trial court rendered a decision[8] declaring respondent as the lawful owner of the vehicle:
The illegal seizure of the vehicle was triggered by the suspicion of the defendant [9] that [the] said
vehicle was spirited out of Amante Motors by Danilo [Bicomong] who was formerly the plant supervisor therein.
Aside from the suspicion and the inconclusive conclusion of the technician that the chassis number of
the vehicle in question was re-stamped no other evidence like registration certificate was adduced by
defendant/intervenor, to support the claim of ownership.
xxx xxx xxx
Besides, it was not shown that the certificate of registration of Danilo was spurious or fake. It was not
also shown that the subject vehicle was registered in the name of either the defendant or intervenor[10] or
Amante Motors. Now, between the plaintiff[11] who purchased the vehicle in good faith and for value and with
supporting genuine documents and the defendant/intervenor who merely presumed that they owned the
chassis, the choice is clear.[12]
The trial court also awarded damages to respondent for lost earnings[13] amounting to P103,200 plus P37,963 as
premium for the replevin bond of respondent.
On appeal, the Court of Appeals affirmed the trial courts decision holding respondent as the rightful owner of the
vehicle. It ruled that respondent had established ownership of the vehicle to the exclusion of the whole world. [14] It
also affirmed the award of damages as unrealized earnings[15] but deleted the award for replevin bond premium since
no claim for it was made in the complaint.
Petitioners motion for reconsideration was denied. Hence, this recourse.

Petitioners impute errors involving questions of fact which we are not at liberty to review. Our jurisdiction is
generally limited to reviewing errors of law that may have been committed by the Court of Appeals. We reiterate the
oft-repeated but not so well-heeded rule that findings of fact of the Court of Appeals, especially when they are in
agreement with those of the trial court, are accorded not only respect but even finality, and are binding on this Court.
Barring a showing that the findings complained of were devoid of support, they must stand for this Court is not
expected or required to examine or refute the oral and documentary evidence submitted by the parties. [16] The trial
court, having heard the witnesses and observed their demeanor and manner of testifying, is in a better position to
assess their credibility.
In any event, we carefully reviewed the records of this case and found no compelling reason to disturb the findings
and conclusions of the trial court and the appellate court.
Respondents ownership of the vehicle was proven by the certificate of registration in his name. Petitioner
Vicente Amante, on the otherhand, could not present any certificate of registration to support his claim. Between
one who is armed with a certificate of registration clearly establishing his ownership and another whose claim is
supported only by unconvincing allegations, we do not hesitate to rule for the former.
A certificate of registration of a motor vehicle creates a strong presumption of ownership in favor of one in
whose name it is issued, unless proven otherwise. In this case, we have not found sufficient proof to destroy the
presumption. Petitioners seek to dispel the presumption by alleging that the vehicle was stolen by Bicomong from
them and therefore the respondent was a buyer in bad faith. In this connection, petitioners raise the following
points:
1. Bicomong was merely a supervisor at Amante Motors owned by petitioner Vicente Amante.
2. Bicomong had no motor shop of his own.

3. Bicomong had no other [source] of income or livelihood aside from being a supervisor at Amante
Motors and did not own any passenger-type jeepney.
4. [R]espondent was brought to the shop of Amante Motors where he chose and picked the subject motor
vehicle from among the jeepneys on display thereat for sale.
5. [T]he jeepney chosen by respondent at the shop of Amante Motors was the very same vehicle in
question delivered to him by Danilo Bicomong at his residence [in] Cavite.
6. [T]he subject motor vehicle was among the passenger-type jeepneys manufactured and/or assembled
by Amante Motors spirited out of the shop of Amante Motors by Danilo Bicomong.
7. [T]he macro-etching examination conducted by SPO1 Elfin B. Rico of the Philippine National Police
Crime Laboratory Service on the subject motor vehicle clearly revealed presence of signs of grinding
on the metal surface where the chassis number is normally located per his Physical Investigation
Report No. PI-369-93 dated December 9, 1993.
8. Chassis no. SPMM-35092-90C (the chassis number in Bicomongs certificate of registration)

was merely re-stamped on the chassis of subject motor vehicle as per the aforesaid Physical
Investigation Report No. PI-369-93 of SPO1 Rico.
9. [T]he chassis bearing no. SPMM-35092-90-C, as found re-stamped on the chassis of the vehicle in
question by SPO1 Rico is with the police authorities of San Pablo City, Laguna.
10. [T]he dorsal side of the hood of subject motor vehicle, when its paint was scratched, showed
the original chassis number secretly stamped thereon by petitioners.
11. Danilo Bicomong was not even presented in court to prove his alleged ownership of [the] subject motor
vehicle; and
12. Danilo Bicomong, among others, was charged by the Office of the City Prosecutor of San Pablo City for
theft of subject motor vehicle and other jeepneys as per Resolution of the San Pablo City Prosecutors
Office. [17]
We are not convinced. There is no clear indication that the vehicle was stolen by Bicomong, much less that
respondent had knowledge thereof. Hence, the presumption of ownership created by respondents certificate of
registration stands.
More telling are the following observations.
The fact that Bicomong was only a supervisor at Amante Motors did not conclusively prove that he never at
any time owned a jeepney for sale. That was pure speculation. Ones wealth is not measured solely by his occupation.
There are so many possibilities which might have explained how Bicomong managed to own one although that is no
longer within the extent of our review.
Next, as supervisor of Amante Motors, Bicomong was clothed with authority to deal and transact with
customers. When respondent was shown the vehicles on display, it was not necessary for him to verify in whose
names the vehicles were registered. What a customer normally does under such circumstances is to take a look at
the items and take his pick.
Petitioners wish to establish bad faith on the part of respondent for purchasing a jeepney which was
registered not to Amante Motors but to Danilo Bicomong. Was this sufficient proof of bad faith on the part of a
purchaser? Whatever internal arrangement the motor shop may have had with Bicomong regarding why the latters
vehicle was among those on display in its premises was not the responsibility of respondent buyer to inquire into.
What was crucial was the valid certificate of registration in Bicomongs name, true and clean on its face. Respondent
buyer was not required to go beyond that.
Petitioners also assert that the delivery of the vehicle to respondents residence should have made him suspicious.
We do not agree. In order to attract buyers, sellers are known to extend all kinds of gimmicks and accommodations,
one of which could have been the delivery of the vehicle right at a buyers doorstep.
Next, in an attempt to prove that the vehicle was stolen from them, petitioners presented evidence such as
the police report on the macro-etching examination conducted on the vehicle. There is something legally anomalous
about this, however. The seizure of the vehicle on December 9, 1993 by the highway patrol group (which led to such
examination) was done without a court warrant. Obviously, Gregorio Amante could not have effected the seizure
without the cooperation of his friendly contacts in the police force. This, on the mere suspicion that it was spirited
out of the Amante Motor Shop sometime in 1992. How are we supposed to rule on this in the light of the Bill of Rights
guaranteed by the Constitution? One of the most protected rights of every person is the
right against unreasonable searches and seizures[18]. The fundamental law mandates that these must be carried out
only on the strength of a judicial warrant, otherwise evidence secured therefrom is deemed tainted. In the language
of the fundamental law, it is inadmissible in evidence for any purpose in any proceeding. [19]
Although the exclusionary rule admits of some exceptions such as customs searches, searches of moving
vehicles, seizure of evidence in plain view, consented searches, searches incidental to a lawful arrest and stop and
frisk measures,[20] the case at bar does not fall under any of the foregoing.
Moreover, the element of immediacy between the time of the commission of the offense and the time of the
seizure was missing. The alleged commission of the theft was in 1992 while the seizure was effected only in 1993.
There was thus no compelling reason for the haste in seizing the vehicle because petitioner Gregorio Amante could
have easily obtained a warrant if he really believed that the vehicle had been stolen from them.
We rule therefore that the reports, based as they were on chattel illegally seized, were inadmissible in
evidence and thus carried no weight.
Finally, the resolution of San Pablo City Assistant Prosecutor Esperidion Gajitos[21] could not but strengthen
respondents claim of good faith. Petitioner Gregorio Amantes criminal complaint for violation of RA 6539[22] and the
Anti-Fencing Law was filed in court only against Bicomong. Respondent was exonerated of any liability whatsoever.
All told, we find no reason to disturb the findings of both the court a quo and the appellate court on the
good faith of respondent.
As to the issue of damages, we concur with the Court of Appeals that only petitioner Gregorio Amante
should be held liable for the unrealized rentals of respondent during the period he was deprived of the vehicles
possession. Petitioner Vicente Amante was not privy to the unlawful seizure and detention of the vehicle.
WHEREFORE, in view of the foregoing, the decision of the Court of Appeals dated December 28, 1999 is
hereby AFFIRMED with MODIFICATION. Respondent Bibiano Serwelas is hereby declared the owner of the
disputed vehicle. Petitioner Gregorio Amante is hereby ordered to pay respondent the amount of P103,200 as
unrealized rentals plus P37,963 as premium for the replevin bond.[23]
Costs against petitioners.
SO ORDERED.
b. Oscar Villarama Jr v. CA G.R. No. 165881 April 19, 2006

Before us is a Petition for Review on Certiorari under Rule 65 of the Revised Rules of
Court assailing the Decision[1] and Resolution[2] of the Court of Appeals (CA) in CA-G.R.
SP No. 78720 which set aside the Resolution[3] of the National Labor Relations
Commission (NLRC) in NCR-30-08-03247-00, which in turn affirmed the Decision[4] of
the Labor Arbiter dismissing the complaint filed by respondent Jerry V. Bustamante.
Petitioner Oscar Villamaria, Jr. was the owner of Villamaria Motors, a sole
proprietorship engaged in assembling passenger jeepneys with a public utility franchise to
operate along the Baclaran-Sucat route. By 1995, Villamaria stopped assembling jeepneys
and retained only nine, four of which he operated by employing drivers on a boundary
basis. One of those drivers was respondent Bustamante who drove the jeepney with Plate
No. PVU-660. Bustamante remitted P450.00 a day to Villamaria as boundary and kept the
residue of his daily earnings as compensation for driving the vehicle. In August 1997,
Villamaria verbally agreed to sell the jeepney to Bustamante under the
boundary-hulog scheme, where Bustamante would remit to Villarama P550.00 a day for a
period of four years; Bustamante would then become the owner of the vehicle and continue
to drive the same under Villamarias franchise. It was also agreed that Bustamante would
make a downpayment of P10,000.00.
On August 7, 1997, Villamaria executed a contract entitled Kasunduan ng Bilihan

ng Sasakyan sa Pamamagitan ng Boundary-Hulog[5] over the passenger jeepney with
Plate No. PVU-660, Chassis No. EVER95-38168-C and Motor No. SL-26647. The
parties agreed that if Bustamante failed to pay the boundary-hulog for three days,
Villamaria Motors would hold on to the vehicle until Bustamante paid his arrears,
including a penalty of P50.00 a day; in case Bustamante failed to remit the daily
boundary-hulog for a period of one week, the Kasunduan would cease to have legal effect
and Bustamante would have to return the vehicle to Villamaria Motors.
Under the Kasunduan, Bustamante was prohibited from driving the vehicle without
prior authority from Villamaria Motors. Thus, Bustamante was authorized to operate the
vehicle to transport passengers only and not for other purposes. He was also required to
display an identification card in front of the windshield of the vehicle; in case of failure to
do so, any fine that may be imposed by government authorities would be charged against
his account. Bustamante further obliged himself to pay for the cost of replacing any parts of
the vehicle that would be lost or damaged due to his negligence. In case the vehicle
sustained serious damage, Bustamante was obliged to notify Villamaria Motors before
commencing repairs. Bustamante was not allowed to wear slippers, short pants or
undershirts while driving. He was required to be polite and respectful towards the
passengers. He was also obliged to notify Villamaria Motors in case the vehicle was leased
for two or more days and was required to attend any meetings which may be called from
time to time. Aside from the boundary-hulog, Bustamante was also obliged to pay for the
annual registration fees of the vehicle and the premium for the vehicles comprehensive
insurance. Bustamante promised to strictly comply with the rules and regulations imposed
by Villamaria for the upkeep and maintenance of the jeepney.
Bustamante continued driving the jeepney under the supervision and control of
Villamaria. As agreed upon, he made daily remittances of P550.00 in payment of the
purchase price of the vehicle.Bustamante failed to pay for the annual registration fees of
the vehicle, but Villamaria allowed him to continue driving the jeepney.
In 1999, Bustamante and other drivers who also had the same arrangement with
Villamaria Motors failed to pay their respective boundary-hulog. This prompted
Villamaria to serve a Paalala,[6] reminding them that under the Kasunduan, failure to pay
the daily boundary-hulog for one week, would mean their respective jeepneys would be
returned to him without any complaints. He warned the drivers that the Kasunduan would
henceforth be strictly enforced and urged them to comply with their obligation to avoid
litigation.
On July 24, 2000, Villamaria took back the jeepney driven by Bustamante and
barred the latter from driving the vehicle.
On August 15, 2000, Bustamante filed a Complaint[7] for Illegal Dismissal against
Villamaria and his wife Teresita. In his Position Paper,[8] Bustamante alleged that he was
employed by Villamaria in July 1996 under the boundary system, where he was required
to remit P450.00 a day. After one year of continuously working for them, the spouses
Villamaria presented the Kasunduanfor his signature, with the assurance that he
(Bustamante) would own the jeepney by March 2001 after paying P550.00 in daily
installments and that he would thereafter continue driving the vehicle along the same
route under the same franchise. He further narrated that in July 2000, he informed the
Villamaria spouses that the surplus engine of the jeepney needed to be replaced, and was
assured that it would be done. However, he was later arrested and his drivers license was
confiscated because apparently, the replacement engine that was installed was taken from
a stolen vehicle. Due to negotiations with the apprehending authorities, the jeepney was
not impounded. The Villamaria spouses took the jeepney from him on July 24, 2000, and
he was no longer allowed to drive the vehicle since then unless he paid them P70,000.00.
Bustamante prayed that judgment be rendered in his favor, thus:

WHEREFORE, in the light of the foregoing, it is most respectfully prayed that
judgment be rendered ordering the respondents, jointly and severally, the following:
1. Reinstate complainant to his former position without loss of seniority rights and
execute a Deed of Sale in favor of the complainant relative to the PUJ with Plate No.
PVU-660;
2. Ordering the respondents to pay backwages in the amount of P400.00 a day and
other benefits computed from July 24, 2000 up to the time of his actual reinstatement;
3. Ordering respondents to return the amount of P10,000.00 and P180,000.00 for

the expenses incurred by the complainant in the repair and maintenance of the subject jeep;
4. Ordering the respondents to refund the amount of One Hundred (P100.00) Pesos
per day counted from August 7, 1997 up to June 2000 or a total of P91,200.00;
5. To pay moral and exemplary damages of not less than P200,000.00;
6. Attorneys fee[s] of not less than 10% of the monetary award.
Other just and equitable reliefs under the premises are also being prayed for.[9]
In their Position Paper,[10] the spouses Villamaria admitted the existence of

the Kasunduan, but alleged that Bustamante failed to pay the P10,000.00 downpayment
and the vehicles annual registration fees. They further alleged that Bustamante eventually
failed to remit the requisite boundary-hulog of P550.00 a day, which prompted them to
issue the Paalaala. Instead of complying with his obligations, Bustamante stopped
making his remittances despite his daily trips and even brought the jeepney to the
province without permission. Worse, the jeepney figured in an accident and its license
plate was confiscated; Bustamante even abandoned the vehicle in a gasoline station in
Sucat, Paraaque City for two weeks. When the security guard at the gasoline station
requested that the vehicle be retrieved and Teresita Villamaria asked Bustamante for the
keys, Bustamante told her: Di kunin ninyo. When the vehicle was finally retrieved, the
tires were worn, the alternator was gone, and the battery was no longer working.
Citing the cases of Cathedral School of Technology v. NLRC[11] and Canlubang

Security Agency Corporation v. NLRC,[12] the spouses Villamaria argued that Bustamante
was not illegally dismissed since the Kasunduan executed on August 7, 1997 transformed
the employer-employee relationship into that of vendor-vendee. Hence, the spouses
concluded, there was no legal basis to hold them liable for illegal dismissal. They prayed
that the case be dismissed for lack of jurisdiction and patent lack of merit.
In his Reply,[13] Bustamante claimed that Villamaria exercised control and

supervision over the conduct of his employment. He maintained that the rulings of the
Court in National Labor Union v. Dinglasan,[14] Magboo v. Bernardo,[15] and Citizen's
League of Free Workers v. Abbas[16] are germane to the issue as they define the nature of
the owner/operator-driver relationship under the boundary system. He further reiterated
that it was the Villamaria spouses who presented the Kasunduan to him and that he
conformed thereto only upon their representation that he would own the vehicle after four
years. Moreover, it appeared that the Paalala was duly received by him, as he, together
with other drivers, was made to affix his signature on a blank piece of paper purporting to
be an attendance sheet.
On March 15, 2002, the Labor Arbiter rendered judgment[17] in favor of the spouses
Villamaria and ordered the complaint dismissed on the following ratiocination:
Respondents presented the contract of Boundary-Hulog, as well as the PAALALA,

to prove their claim that complainant violated the terms of their contract and afterwards
abandoned the vehicle assigned to him. As against the foregoing, [the] complaints (sic)
mere allegations to the contrary cannot prevail.
Not having been illegally dismissed, complainant is not entitled to damages and
attorney's fees.[18]
Bustamante appealed the decision to the NLRC,[19] insisting that

the Kasunduan did not extinguish the employer-employee relationship between him and
Villamaria. While he did not receive fixed wages, he kept only the excess of the
boundary-hulog which he was required to remit daily to Villamaria under the
agreement. Bustamante maintained that he remained an employee because he was
engaged to perform activities which were necessary or desirable to Villamarias trade or
business.
The NLRC rendered judgment[20] dismissing the appeal for lack of merit, thus:
WHEREFORE, premises considered, complainant's appeal is hereby

DISMISSED for reasons not stated in the Labor Arbiter's decision but mainly on a
jurisdictional issue, there being none over the subject matter of the controversy.[21]
The NLRC ruled that under the Kasunduan, the juridical relationship between
Bustamante and Villamaria was that of vendor and vendee, hence, the Labor Arbiter had
no jurisdiction over the complaint. Bustamante filed a Motion for Reconsideration, which
the NLRC resolved to deny on May 30, 2003.[22]
Bustamante elevated the matter to the CA via Petition for Certiorari, alleging that
the NLRC erred
I
IN DISMISSING PETITIONERS APPEAL FOR REASON NOT STATED IN THE
LABOR ARBITERS DECISION, BUT MAINLY ON JURISDICTIONAL ISSUE;
II
IN DISREGARDING THE LAW AND PREVAILING JURISPRUDENCE WHEN IT
DECLARED THAT THE RELATIONSHIP WHICH WAS ESTABLISHED BETWEEN
PETITIONER AND THE PRIVATE RESPONDENT WAS DEFINITELY A MATTER
WHICH IS BEYOND THE PROTECTIVE MANTLE OF OUR LABOR LAWS.[23]
Bustamante insisted that despite the Kasunduan, the relationship between him and
Villamaria continued to be that of employer-employee and as such, the Labor Arbiter had
jurisdiction over his complaint. He further alleged that it is common knowledge that
operators of passenger jeepneys (including taxis) pay their drivers not on a regular monthly
basis but on commission or boundary basis, or even the
boundary-hulog system. Bustamante asserted that he was dismissed from employment
without any lawful or just cause and without due notice.
For his part, Villamaria averred that Bustamante failed to adduce proof of their
employer-employee relationship. He further pointed out that the Dinglasan case pertains
to the boundary system and not the boundary-hulog system, hence inapplicable in the
instant case. He argued that upon the execution of the Kasunduan, the juridical tie
between him and Bustamante was transformed into a vendor-vendee relationship. Noting
that he was engaged in the manufacture and sale of jeepneys and not in the business of
transporting passengers for consideration, Villamaria contended that the daily fees which
Bustmante paid were actually periodic installments for the the vehicle and were not the
same fees as understood in the boundary system. He added that the boundary-hulog plan
was basically a scheme to help the driver-buyer earn money and eventually pay for the
unit in full, and for the owner to profit not from the daily earnings of the driver-buyer but
from the purchase price of the unit sold. Villamaria further asserted that the apparently
restrictive conditions in the Kasunduan did not mean that the means and method of
driver-buyers conduct was controlled, but were mere ways to preserve the vehicle for the
benefit of both parties: Villamaria would be able to collect the agreed purchase price,
while Bustamante would be assured that the vehicle would still be in good running
condition even after four years. Moreover, the right of vendor to impose certain
conditions on the buyer should be respected until full ownership of the property is vested
on the latter.Villamaria insisted that the parallel circumstances obtaining in Singer
Sewing Machine Company v. Drilon[24] has analogous application to the instant issue.
In its Decision[25] dated August 30, 2004, the CA reversed and set aside the NLRC
decision. The fallo of the decision reads:
UPON THE VIEW WE TAKE IN THIS CASE, THUS, the impugned

resolutions of the NLRC must be, as they are hereby are, REVERSED AND SET ASIDE,
and judgment entered in favor of petitioner:
1. Sentencing private respondent Oscar Villamaria, Jr. to pay

petitioner Jerry Bustamante separation pay computed from the time of his
employment up to the time of termination based on the prevailing minimum
wage at the time of termination; and,
2. Condemning private respondent Oscar Villamaria, Jr. to pay

petitioner Jerry Bustamante back wages computed from the time of his
dismissal up to March 2001 based on the prevailing minimum wage at the
time of his dismissal.
Without Costs.
SO ORDERED.[26]
The appellate court ruled that the Labor Arbiter had jurisdiction over Bustamantes
complaint. Under the Kasunduan, the relationship between him and Villamaria was dual:
that of vendor-vendee and employer-employee. The CA ratiocinated that Villamarias
exercise of control over Bustamantes conduct in operating the jeepney is inconsistent with
the formers claim that he was not engaged in the transportation business. There was no
evidence that petitioner was allowed to let some other person drive the jeepney.
The CA further held that, while the power to dismiss was not mentioned in
the Kasunduan, it did not mean that Villamaria could not exercise it. It explained that the
existence of an employment relationship did not depend on how the worker was paid but
on the presence or absence of control over the means and method of the employees
work. In this case, Villamarias directives (to drive carefully, wear an identification card,
don decent attire, park the vehicle in his garage, and to inform him about provincial trips,
etc.) was a means to control the way in which Bustamante was to go about his work. In
view of Villamarias supervision and control as employer, the fact that the boundary
represented installment payments of the purchase price on the jeepney did not remove the
parties employer-employee relationship.
While the appellate court recognized that a weeks default in paying the
boundary-hulog constituted an additional cause for terminating Bustamantes employment,
it held that the latter was illegally dismissed. According to the CA, assuming that
Bustamante failed to make the required payments as claimed by Villamaria, the latter
nevertheless failed to take steps to recover the unit and waited for Bustamante to abandon
it. It also pointed out that Villamaria neither submitted any police report to support his
claim that the vehicle figured in a mishap nor presented the affidavit of the gas station
guard to substantiate the claim that Bustamante abandoned the unit.
Villamaria received a copy of the decision on September 8, 2004, and filed,

on September 17, 2004, a motion for reconsideration thereof. The CA denied the motion
in a Resolution[27] dated November 2, 2004, and Villamaria received a copy thereof
on November 8, 2004.
Villamaria, now petitioner, seeks relief from this Court via petition for review
on certiorari under Rule 65 of the Rules of Court, alleging that the CA committed grave
abuse of its discretion amounting to excess or lack of jurisdiction in reversing the decision
of the Labor Arbiter and the NLRC. He claims that the CA erred in ruling that the juridical
relationship between him and respondent under the Kasunduan was a combination of
employer-employee and vendor-vendee relationships. The terms and conditions of
the Kasunduan clearly state that he and respondent Bustamante had entered into a
conditional deed of sale over the jeepney; as such, their employer-employee relationship
had been transformed into that of vendor-vendee. Petitioner insists that he had the right to
reserve his title on the jeepney until after the purchase price thereof had been paid in full.
In his Comment on the petition, respondent avers that the appropriate remedy of petitioner
was an appeal via a petition for review on certiorari under Rule 45 of the Rules of Court
and not a special civil action of certiorari under Rule 65. He argues that petitioner failed to
establish that the CA committed grave abuse of its discretion amounting to excess or lack
of jurisdiction in its decision, as the said ruling is in accord with law and the evidence on
record.
Respondent further asserts that the Kasunduan presented to him by petitioner which
provides for a boundary-hulog scheme was a devious circumvention of the Labor Code of
the Philippines.Respondent insists that his juridical relationship with petitioner is that of
employer-employee because he was engaged to perform activities which were necessary or
desirable in the usual business of petitioner, his employer.
In his Reply, petitioner avers that the Rules of Procedure should be liberally construed in
his favor; hence, it behooves the Court to resolve the merits of his petition.
We agree with respondents contention that the remedy of petitioner from the CA decision
was to file a petition for review on certiorari under Rule 45 of the Rules of Court and not
the independent action of certiorari under Rule 65. Petitioner had 15 days from receipt of
the CA resolution denying his motion for the reconsideration within which to file the
petition under Rule 45.[28] But instead of doing so, he filed a petition
for certiorari under Rule 65 on November 22, 2004, which did not, however, suspend
the running of the 15-day reglementary period; consequently, the CA decision became
final and executory upon the lapse of the reglementary period for appeal. Thus, on this
procedural lapse, the instant petition stands to be dismissed.[29]
It must be stressed that the recourse to a special civil action under Rule 65 of the Rules of
Court is proscribed by the remedy of appeal under Rule 45. As the Court elaborated
in Tomas Claudio Memorial College, Inc. v. Court of Appeals:[30]
We agree that the remedy of the aggrieved party from a decision or final resolution of the
CA is to file a petition for review on certiorari under Rule 45 of the Rules of Court, as
amended, on questions of facts or issues of law within fifteen days from notice of the said
resolution. Otherwise, the decision of the CA shall become final and executory. The
remedy under Rule 45 of the Rules of Court is a mode of appeal to this Court from the
decision of the CA. It is a continuation of the appellate process over the original case. A
review is not a matter of right but is a matter of judicial discretion. The aggrieved party
may, however, assail the decision of the CA via a petition for certiorari under Rule 65 of
the Rules of Court within sixty days from notice of the decision of the CA or its resolution
denying the motion for reconsideration of the same. This is based on the premise that in
issuing the assailed decision and resolution, the CA acted with grave abuse of discretion,
amounting to excess or lack of jurisdiction and there is no plain, speedy and adequate
remedy in the ordinary course of law. A remedy is considered plain, speedy and adequate if
it will promptly relieve the petitioner from the injurious effect of the judgment and the acts
of the lower court.
The aggrieved party is proscribed from filing a petition for certiorari if appeal is
available, for the remedies of appeal and certiorari are mutually exclusive and not
alternative or successive. The aggrieved party is, likewise, barred from filing a petition
for certiorari if the remedy of appeal is lost through his negligence. A petition
for certiorari is an original action and does not interrupt the course of the principal case
unless a temporary restraining order or a writ of preliminary injunction has been issued
against the public respondent from further proceeding. A petition for certiorari must be
based on jurisdictional grounds because, as long as the respondent court acted within its
jurisdiction, any error committed by it will amount to nothing more than an error of
judgment which may be corrected or reviewed only by appeal.[31]
However, we have also ruled that a petition for certiorari under Rule 65 may be
considered as filed under Rule 45, conformably with the principle that rules of procedure
are to be construed liberally, provided that the petition is filed within the reglementary
period under Section 2, Rule 45 of the Rules of Court, and where valid and compelling
circumstances warrant that the petition be resolved on its merits.[32] In this case, the
petition was filed within the reglementary period and petitioner has raised an issue of
substance: whether the existence of a boundary-hulog agreement negates the
employer-employee relationship between the vendor and vendee, and, as a corollary,
whether the Labor Arbiter has jurisdiction over a complaint for illegal dismissal in such
case.
We resolve these issues in the affirmative.
The rule is that, the nature of an action and the subject matter thereof, as well as,
which court or agency of the government has jurisdiction over the same, are determined
by the material allegations of the complaint in relation to the law involved and the
character of the reliefs prayed for, whether or not the complainant/plaintiff is entitled to
any or all of such reliefs.[33] A prayer or demand for relief is not part of the petition of the
cause of action; nor does it enlarge the cause of action stated or change the legal effect of
what is alleged.[34] In determining which body has jurisdiction over a case, the better
policy is to consider not only the status or relationship of the parties but also the nature of
the action that is the subject of their controversy.[35]
Article 217 of the Labor Code, as amended, vests on the Labor Arbiter exclusive
original jurisdiction only over the following:
x x x (a) Except as otherwise provided under this Code, the Labor Arbiters shall
have original and exclusive jurisdiction to hear and decide, within thirty (30) calendar days
after the submission of the case by the parties for decision without extension, even in the
absence of stenographic notes, the following cases involving all workers, whether
agricultural or non-agricultural:
1. Unfair labor practice cases;

2. Termination disputes;
3. If accompanied with a claim for reinstatement, those cases that
workers may file involving wage, rates of pay, hours of work, and other
terms and conditions of employment;
4. Claims for actual, moral, exemplary and other forms of
damages arising from the employer-employee relations;
5. Cases arising from violation of Article 264 of this Code,
including questions involving the legality of strikes and lockouts; and
6. Except claims for Employees Compensation, Social Security,

Medicare and maternity benefits, all other claims, arising from
employer-employee relationship, including those of persons in domestic
or household service, involving an amount exceeding five thousand pesos
(P5,000.00) regardless of whether accompanied with a claim for
reinstatement.
(b) The Commission shall have exclusive appellate jurisdiction over all cases
decided by Labor Arbiters.
(c) Cases arising from the interpretation or implementation of collective bargaining

agreements, and those arising from the interpretation or enforcement of company
personnel policies shall be disposed of by the Labor Arbiter by referring the same to the
grievance machinery and voluntary arbitration as may be provided in said agreements.
In the foregoing cases, an employer-employee relationship is an indispensable

jurisdictional requisite.[36] The jurisdiction of Labor Arbiters and the NLRC under Article
217 of the Labor Code is limited to disputes arising from an employer-employee
relationship which can only be resolved by reference to the Labor Code, other labor
statutes or their collective bargaining agreement.[37] Not every dispute between an
employer and employee involves matters that only the Labor Arbiter and the NLRC can
resolve in the exercise of their adjudicatory or quasi-judicial powers.Actions between
employers and employees where the employer-employee relationship is merely incidental
is within the exclusive original jurisdiction of the regular courts.[38] When the principal
relief is to be granted under labor legislation or a collective bargaining agreement, the
case falls within the exclusive jurisdiction of the Labor Arbiter and the NLRC even
though a claim for damages might be asserted as an incident to such claim. [39]
We agree with the ruling of the CA that, under the boundary-hulog scheme
incorporated in the Kasunduan, a dual juridical relationship was created between petitioner
and respondent: that of employer-employee and vendor-vendee. The Kasunduan did not
extinguish the employer-employee relationship of the parties extant before the execution of
said deed.
As early as 1956, the Court ruled in National Labor Union v. Dinglasan[40] that the
jeepney owner/operator-driver relationship under the boundary system is that of
employer-employee and not lessor-lessee. This doctrine was affirmed, under similar
factual settings, in Magboo v. Bernardo[41] and Lantaco, Sr. v. Llamas,[42] and was
analogously applied to govern the relationships between auto-calesa owner/operator and
driver,[43] bus owner/operator and conductor,[44] and taxi owner/operator and driver.[45]
The boundary system is a scheme by an owner/operator engaged in transporting

passengers as a common carrier to primarily govern the compensation of the driver, that
is, the latters daily earnings are remitted to the owner/operator less the excess of the
boundary which represents the drivers compensation. Under this system, the
owner/operator exercises control and supervision over the driver. It is unlike in lease of
chattels where the lessor loses complete control over the chattel leased but the lessee is
still ultimately responsible for the consequences of its use. The management of the
business is still in the hands of the owner/operator, who, being the holder of the
certificate of public convenience, must see to it that the driver follows the route
prescribed by the franchising and regulatory authority, and the rules promulgated with
regard to the business operations. The fact that the driver does not receive fixed wages
but only the excess of the boundary given to the owner/operator is not sufficient to
change the relationship between them. Indubitably, the driver performs activities which
are usually necessary or desirable in the usual business or trade of the owner/operator.[46]
Under the Kasunduan, respondent was required to remit P550.00 daily to petitioner,
an amount which represented the boundary of petitioner as well as respondents partial
payment (hulog) of the purchase price of the jeepney.
Respondent was entitled to keep the excess of his daily earnings as his daily wage. Thus,
the daily remittances also had a dual purpose: that of petitioners boundary and
respondents partial payment (hulog) for the vehicle. This dual purpose was expressly
stated in the Kasunduan. The well-settled rule is that an obligation is not novated by an
instrument that expressly recognizes the old one, changes only the terms of payment, and
adds other obligations not incompatible with the old provisions or where the new contract
merely supplements the previous one. [47] The two obligations of the respondent to remit
to petitioner the boundary-hulog can stand together.
In resolving an issue based on contract, this Court must first examine the contract
itself, keeping in mind that when the terms of the agreement are clear and leave no doubt
as to the intention of the contracting parties, the literal meaning of its stipulations shall
prevail.[48] The intention of the contracting parties should be ascertained by looking at the
words used to project their intention, that is, all the words, not just a particular word or
two or more words standing alone. The various stipulations of a contract shall be
interpreted together, attributing to the doubtful ones that sense which may result from all
of them taken jointly.[49] The parts and clauses must be interpreted in relation to one
another to give effect to the whole. The legal effect of a contract is to be determined from
the whole read together.[50]
Under the Kasunduan, petitioner retained supervision and control over the conduct
of the respondent as driver of the jeepney, thus:
Ang mga patakaran, kaugnay ng bilihang ito sa pamamagitan ng boundary hulog

ay ang mga sumusunod:
1. Pangangalagaan at pag-iingatan ng TAUHAN NG IKALAWANG PANIG ang

sasakyan ipinagkatiwala sa kanya ng TAUHAN NG UNANG PANIG.
2. Na ang sasakyan nabanggit ay gagamitin lamang ng TAUHAN NG

IKALAWANG PANIG sa paghahanapbuhay bilang pampasada o pangangalakal sa
malinis at maayos na pamamaraan.
3. Na ang sasakyan nabanggit ay hindi gagamitin ng TAUHAN NG IKALAWANG

PANIG sa mga bagay na makapagdudulot ng kahihiyan, kasiraan o pananagutan sa
TAUHAN NG UNANG PANIG.
4. Na hindi ito mamanehohin ng hindi awtorisado ng opisina ng UNANG PANIG.
5. Na ang TAUHAN NG IKALAWANG PANIG ay kinakailangang maglagay ng

ID Card sa harap ng windshield upang sa pamamagitan nito ay madaliang malaman
kung ang nagmamaneho ay awtorisado ng VILLAMARIA MOTORS o hindi.
6. Na sasagutin ng TAUHAN NG IKALAWANG PANIG ang [halaga ng] multa

kung sakaling mahuli ang sasakyang ito na hindi nakakabit ang ID card sa wastong lugar
o anuman kasalanan o kapabayaan.
7. Na sasagutin din ng TAUHAN NG IKALAWANG PANIG ang materyales o

piyesa na papalitan ng nasira o nawala ito dahil sa kanyang kapabayaan.
8. Kailangan sa VILLAMARIA MOTORS pa rin ang garahe habang hinuhulugan

pa rin ng TAUHAN NG IKALAWANG PANIG ang nasabing sasakyan.
9. Na kung magkaroon ng mabigat na kasiraan ang sasakyang ipinagkaloob ng

TAUHAN NG UNANG PANIG, ang TAUHAN NG IKALAWANG PANIG ay obligadong
itawag ito muna sa VILLAMARIA MOTORS bago ipagawa sa alin mang Motor Shop na
awtorisado ng VILLAMARIA MOTORS.
10. Na hindi pahihintulutan ng TAUHAN NG IKALAWANG PANIG sa panahon

ng pamamasada na ang nagmamaneho ay naka-tsinelas, naka short pants at nakasando
lamang. Dapat ang nagmamaneho ay laging nasa maayos ang kasuotan upang igalang
ng mga pasahero.
11. Na ang TAUHAN NG IKALAWANG PANIG o ang awtorisado niyang driver

ay magpapakita ng magandang asal sa mga pasaheros at hindi dapat magsasalita ng
masama kung sakali man may pasaherong pilosopo upang maiwasan ang anumang
kaguluhan na maaaring kasangkutan.
12. Na kung sakaling hindi makapagbigay ng BOUNDARY HULOG ang
TAUHAN NG IKALAWANG PANIG sa loob ng tatlong (3) araw ay ang opisina ng
VILLAMARIA MOTORS ang may karapatang mangasiwa ng nasabing sasakyan
hanggang matugunan ang lahat ng
responsibilidad. Ang halagang dapat bayaran sa opisina ay may karagdagang multa
ng P50.00 sa araw-araw na ito ay nasa pangangasiwa ng VILLAMARIA MOTORS.
13. Na kung ang TAUHAN NG IKALAWANG PANIG ay hindi makapagbigay ng

BOUNDARY HULOG sa loob ng isang linggo ay nangangahulugan na ang kasunduang
ito ay wala ng bisa at kusang ibabalik ng TAUHAN NG IKALAWANG PANIG ang
nasabing sasakyan sa TAUHAN NG UNANG PANIG.
14. Sasagutin ng TAUHAN NG IKALAWANG PANIG ang bayad sa rehistro,

comprehensive insurance taon-taon at kahit anong uri ng aksidente habang ito ay
hinuhulugan pa sa TAUHAN NG UNANG PANIG.
15. Na ang TAUHAN NG IKALAWANG PANIG ay obligadong dumalo sa

pangkalahatang pagpupulong ng VILLAMARIA MOTORS sa tuwing tatawag ang mga
tagapangasiwa nito upang maipaabot ang anumang mungkahi sa ikasusulong ng
samahan.
16. Na ang TAUHAN NG IKALAWANG PANIG ay makikiisa sa lahat ng mga

patakaran na magkakaroon ng pagbabago o karagdagan sa mga darating na panahon at
hindi magiging hadlang sa lahat ng mga balakin ng VILLAMARIA MOTORS sa lalo pang
ipagtatagumpay at ikakatibay ng Samahan.
17. Na ang TAUHAN NG IKALAWANG PANIG ay hindi magiging buwaya sa

pasahero upang hindi kainisan ng kapwa driver at maiwasan ang pagkakasangkot sa
anumang gulo.
18. Ang nasabing sasakyan ay hindi kalilimutang siyasatin ang kalagayan lalo na
sa umaga bago pumasada, at sa hapon o gabi naman ay sisikapin mapanatili ang
kalinisan nito.
19. Na kung sakaling ang nasabing sasakyan ay maaarkila at aabutin ng dalawa

o higit pang araw sa lalawigan ay dapat lamang na ipagbigay alam muna ito sa
VILLAMARIA MOTORS upang maiwasan ang mga anumang suliranin.
20. Na ang TAUHAN NG IKALAWANG PANIG ay iiwasan ang

pakikipag-unahan sa kaninumang sasakyan upang maiwasan ang aksidente.
21. Na kung ang TAUHAN NG IKALAWANG PANIG ay mayroon sasabihin sa

VILLAMARIA MOTORS mabuti man or masama ay iparating agad ito sa kinauukulan at
iwasan na iparating ito kung [kani-kanino] lamang upang maiwasan ang anumang
usapin. Magsadya agad sa opisina ng VILLAMARIA MOTORS.
22. Ang mga nasasaad sa KASUNDUAN ito ay buong galang at puso kong
sinasang-ayunan at buong sikap na pangangalagaan ng TAUHAN NG IKALAWANG
PANIG ang nasabing sasakyan at gagamitin lamang ito sa paghahanapbuhay at wala
nang iba pa.[51]
The parties expressly agreed that petitioner, as vendor, and respondent, as vendee,
entered into a contract to sell the jeepney on a daily installment basis of P550.00 payable
in four years and that petitioner would thereafter become its owner. A contract is one of
conditional sale, oftentimes referred to as contract to sell, if the ownership or title over
the
property sold is retained by the vendor, and is not passed to the vendee unless and until
there is full payment of the purchase price and/or upon faithful compliance with the other
terms and conditions that may lawfully be stipulated.[52] Such payment or satisfaction of
other preconditions, as the case may be, is a positive suspensive condition, the failure of
which is not a breach of contract, casual or serious, but simply an event that would
prevent the obligation of the vendor to convey title from acquiring binding
force.[53] Stated differently, the efficacy or obligatory force of the vendor's obligation to
transfer title is subordinated to the happening of a future and uncertain event so that if the
suspensive condition does not take place, the parties would stand as if the conditional
obligation had never existed.[54] The vendor may extrajudicially terminate the operation
of the contract, refuse conveyance, and retain the sums or installments already received,
where such rights are expressly provided for.[55]
Under the boundary-hulog scheme, petitioner retained ownership of the jeepney

although its material possession was vested in respondent as its driver. In case respondent
failed to make his P550.00 daily installment payment for a week, the agreement would be
of no force and effect and respondent would have to return the jeepney to petitioner; the
employer-employee relationship would likewise be terminated unless petitioner would
allow respondent to continue driving the jeepney on a boundary basis of P550.00 daily
despite the termination of their vendor-vendee relationship.
The juridical relationship of employer-employee between petitioner and respondent

was not negated by the foregoing stipulation in the Kasunduan, considering that
petitioner retained control of respondents conduct as driver of the vehicle. As correctly
ruled by the CA:
The exercise of control by private respondent over petitioners conduct in operating

the jeepney he was driving is inconsistent with private respondents claim that he is, or was,
not engaged in the transportation business; that, even if petitioner was allowed to let some
other person drive the unit, it was not shown that he did so; that the existence of an
employment relation is not dependent on how the worker is paid but on the presence or
absence of control over the means and method of the work; that the amount earned in
excess of the boundary hulog is equivalent to wages; and that the fact that the power of
dismissal was not mentioned in the Kasunduan did not mean that private respondent never
exercised such power, or could not exercise such power.
Moreover, requiring petitioner to drive the unit for commercial use, or to wear an
identification card, or to don a decent attire, or to park the vehicle in Villamaria Motors
garage, or to inform Villamaria Motors about the fact that the unit would be going out to
the province for two days of more, or to drive the unit carefully, etc. necessarily related to
control over the means by which the petitioner was to go about his work; that the ruling
applicable here is not Singer Sewing Machine but National Labor Union since the latter
case involved jeepney owners/operators and jeepney drivers, and that the fact that the
boundary here represented installment payment of the purchase price on the jeepney did
not withdraw the relationship from that of employer-employee, in view of the overt
presence of supervision and control by the employer.[56]
Neither is such juridical relationship negated by petitioners claim that the terms
and conditions in the Kasunduan relative to respondents behavior and deportment as
driver was for his and respondents benefit: to insure that respondent would be able to pay
the requisite daily installment of P550.00, and that the vehicle would still be in good
condition despite the lapse of four years.What is primordial is that petitioner retained
control over the conduct of the respondent as driver of the jeepney.
Indeed, petitioner, as the owner of the vehicle and the holder of the franchise, is
entitled to exercise supervision and control over the respondent, by seeing to it that the
route provided in his franchise, and the rules and regulations of the Land Transportation
Regulatory Board are duly complied with. Moreover, in a business establishment, an
identification card is usually provided not just as a security measure but to mainly
identify the holder thereof as a bona fide employee of the firm who issues it.[57]
As respondents employer, it was the burden of petitioner to prove that respondents

termination from employment was for a lawful or just cause, or, at the very least, that
respondent failed to make his daily remittances of P550.00 as boundary. However,
petitioner failed to do so. As correctly ruled by the appellate court:
It is basic of course that termination of employment must be effected in accordance

with law. The just and authorized causes for termination of employment are enumerated
under Articles 282, 283 and 284 of the Labor Code.
Parenthetically, given the peculiarity of the situation of the parties here, the default
in the remittance of the boundary hulog for one week or longer may be considered an
additional cause for termination of employment. The reason is because
the Kasunduan would be of no force and effect in the event that the purchaser failed to
remit the boundary hulog for one week. The Kasunduan in this case pertinently stipulates:
13. Na kung ang TAUHAN NG IKALAWANG PANIG ay hindi

makapagbigay ng BOUNDARY HULOG sa loob ng isang linggo ay
NANGANGAHULUGAN na ang kasunduang ito ay wala ng bisa at kusang
ibabalik ng TAUHAN NG IKALAWANG PANIG ang nasabing sasakyan sa
TAUHAN NG UNANG PANIG na wala ng paghahabol pa.
Moreover, well-settled is the rule that, the employer has the burden of proving that the
dismissal of an employee is for a just cause. The failure of the employer to discharge this
burden means that the dismissal is not justified and that the employee is entitled to
reinstatement and back wages.
In the case at bench, private respondent in his position paper before the Labor
Arbiter, alleged that petitioner failed to pay the miscellaneous fee of P10,000.00 and the
yearly registration of the unit; that petitioner also stopped remitting the boundary hulog,
prompting him (private respondent) to issue a Paalala, which petitioner however ignored;
that petitioner even brought the unit to his (petitioners) province without informing him
(private respondent) about it; and that petitioner eventually abandoned the vehicle at a
gasoline station after figuring in an accident. But private respondent failed to substantiate
these allegations with solid, sufficient proof. Notably, private respondents allegation viz,
that he retrieved the vehicle from the gas station, where petitioner abandoned it,
contradicted his statement in the Paalala that he would enforce the provision (in
the Kasunduan) to the effect that default in the remittance of the boundary hulog for one
week would result in the forfeiture of the unit. The Paalala reads as follows:
Sa lahat ng mga kumukuha ng sasakyan

Sa pamamagitan ng BOUNDARY HULOG
Nais ko pong ipaalala sa inyo ang Kasunduan na inyong pinirmahan particular na ang
paragrapo 13 na nagsasaad na kung hindi kayo makapagbigay ng Boundary Hulog sa
loob ng isang linggo ay kusa ninyong ibabalik and nasabing sasakyan na inyong
hinuhulugan ng wala ng paghahabol pa.
Mula po sa araw ng inyong pagkatanggap ng Paalala na ito ay akin na pong ipatutupad

ang nasabing Kasunduan kayat aking pinaaalala sa inyong lahat na tuparin natin ang
nakalagay sa kasunduan upang maiwasan natin ito.
Hinihiling ko na sumunod kayo sa hinihingi ng paalalang ito upang hindi na tayo

makaabot pa sa korte kung sakaling hindi ninyo isasauli ang inyong sasakyan na
hinuhulugan na ang mga magagastos ay kayo pa ang magbabayad sapagkat ang hindi
ninyo pagtupad sa kasunduan ang naging dahilan ng pagsampa ng kaso.
Sumasainyo
Attendance: 8/27/99
(The Signatures appearing herein
include (sic) that of petitioners) (Sgd.)
OSCAR VILLAMARIA, JR.
If it were true that petitioner did not remit the boundary hulog for one week or more, why
did private respondent not forthwith take steps to recover the unit, and why did he have to
wait for petitioner to abandon it?
On another point, private respondent did not submit any police report to support his claim
that petitioner really figured in a vehicular mishap. Neither did he present the affidavit of
the guard from the gas station to substantiate his claim that petitioner abandoned the unit
there.[58]
Petitioners claim that he opted not to terminate the employment of respondent

because of magnanimity is negated by his (petitioners) own evidence that he took the
jeepney from the respondent only on July 24, 2000.
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. The decision

of the Court of Appeals in CA-G.R. SP No. 78720 is AFFIRMED. Costs against
petitioner.
SO ORDERED
c. Martin Lantaco et al. v. City Judge Francisco R. Llamas October 28,

1981
This is a verified letter-complaint dated August 7, 1975 addressed to the President of the Philippines (by lst
Indorsement, dated August 25, 1975, this case was referred by the Office of the President to this Court,
pursuant to Section 7, Article X of the Constitution), by jeepney drivers Martin Lantaco, Sr., Esteban del
Barrio, Rosalito Alamag and Borromeo Vitaliano, all residents of Pasay City, against City Judge Francisco R.
Llamas of the Pasay City Court for "Backsliding and Grave Abuse of Discretion."
On January 8, 1975, an investigating special counsel of the City Fiscal's Office of Pasay City, filed Criminal
Cases Nos. 95647, 95648, 95649 and 95650, all for estafa against Ricardo Paredes, an officer of the
PASCAMASCON, an association of jeepney operators, for "non-remittance of SSS contribution premiums."
These cases were assigned to respondent. After the prosecution had rested its case, the defense moved to
dismiss all the criminal cases on the ground that the evidence presented by the prosecution is insufficient to
convict the accused beyond reasonable doubt. The prosecution opposed the motion. According to the
complainants, the respondent set the promulgation of his decision on July 22, 1975, postponed to July 30,
1975 and again to July 31, 1975, when at about 9:45 in the morning, upon respondent's instruction, his clerk
of court read the dispositive portion thereof acquitting the accused of all four estafa cases on the ground of
reasonable doubt.
According to the herein complainants:
After the reading of (the) Decision a recess was made by Judge Llamas and we requested Judge Llamas to
furnish us a copy of said Decision. Judge Llamas told us that there are no more copy and we told Judge
Llamas if there is no more copy we would like to xerox the original and Judge Llamas told us that xerox copy
are not permitted and Judge Llamas instructed one of the employees in his office a- steno-typist to type
another copy for us and that the typist told us to come back on Monday, August 4, which we did, but, the
steno-typist failed to furnish us the copy as agreed by us and told us again to come back next day, August 5.
The next morning we went back of the office of Judge Llamas, same we failed to get copy of the Decision.
On August 6, 1975 at 11:00 A.M. one of the complainants, Esteban del Barrio and Ceferino F. Ginete, the
President or our labor union went to Judge Llamas to secure copy of said decision to (sic) the same person
the steno-typist. The steno-typist went inside the room of Judge Llamas and a few minutes the typist went
back to us and informed us that he could not type the Decision because the folder is at the house of Judge
Llamas and when Mr. Ginete inquire why the said folder of the complainants are at the house of Judge
Llamas, the typist reply the Judge making "CORRECTION." Mr. Ginete wonder why a correction is being
made when the decision has already been rendered anti why the delay in furnishing us copy, WHY?
This Court required the respondent to comment on the complaint by 2nd Indorsement dated September 16,
1975. This Court also sent by registered mails a follow-up letter dated October 23, 1975 and a tracer letter
dated November 25, 1975. The Bureau of Posts in a certification dated November 26, 1975 certified that
these follow-up letters were delivered to and received by the office of the respondent.
Finally, on March 8, 1976 this Court received respondent's comment dated December 3, 1975. His brief
comment:
The four related criminal accusations against Mr. Ricardo Paredes, were validly and properly decided by this
Court. The motion to dismiss after the prosecution's case was rested, was resolved and said resolution of
acquittal is the very decision in this case which was validly promulgated in the presence of the accused, the
prosecuting fiscal and Mr. Severino Ginete and all the complaining parties. The records of the decision show
that the accused assisted by counsel signed the same on said date and copies thereafter furnished counsel
for the accused and the prosecuting fiscal.
Respondent also averred:
It is respectfully submitted that on the details of the proceedings and the evidence presented, no better
answer could be made by the undersigned except by submitting a copy of said decision promulgated July 31,
1975 and marked as Annex "A" of this comment. In the same breath, the matter of the advisability as
suggested that this finding by this Court be reviewed by the Military may best be answered by a thorough
reading of the decision.
After a careful examination of the records before this Court, We found that respondent committed grave
abuse of authority in refusing to give the complainants a copy of his decision in Criminal Cases Nos.
95647-95650. The complainants were understandably interested in securing a copy of the decision as they
were the complaining witnesses in these four criminal cases. The request was made during office hours. It
was relayed personally to the respondent. The decision in question was already promulgated. Copies were
already furnished the counsel for the prosecution and the defense. It was already part of the public record
which the citizen has a right to scrutinize. And if there was "no more copy," the complainants were amenable
to have a xerox copy of the original on file, copies of which, as part of court records, are allowed to be given to
interested parties upon request, duly certified as a true copy of the original on file. What aggravates the
situation, as seen from the sequence of events narrated by the complainants which were never denied or
rebutted by the respondent, is that respondent, without just cause, denied complainants access to public
records and gave the complainants the run-around, which is oppressive as it is arbitrary. In Baldoza vs.
Honorable Judge Rodolfo B. Dimaano (A.M. No. 112-MJ, May 5, 1976), WE emphasized the importance of
access to public records. predicated as it is on the right of the people to acquire information on matters of
public concern in which the public has a legitimate interest. While the public officers in custody or control of
public records have the discretion to regulate the manner in which such records may be inspected, examined
or copied by interested persons, such discretion does not carry with it the authority to prohibit such access,
inspection, examination or copying.
Continuing, said this Court:
The New Constitution now expressly recognizes that the people are entitled to information on matters of
public concern and thus are expressly granted access to official records, as well as documents of official acts,
or transactions, or decisions, subject to such limitations imposed by law (Article IV, Section 6, New
Constitution). The incorporation of this right in the Constitution is a recognition of the fundamental role of free
exchange of information in a democracy. There can be no realistic perception by the public of the nation's
problems, nor a meaningful democratic decision- making if they are denied access to information of general
interest. Information is needed to enable the members of society to cope with the exigencies of the times. As
has been aptly observed: Maintaining the flow of such information depends on protection for both its
acquisition and its dissemination since, if either process is interrupted, the flow inevitably ceases. (87 Harvard
Law Review 1505) [Baldoza vs. Hon. Judge Rodolfo B. Dimaano, A.M. No. 112-MJ, May 5, 1976].
The herein complainants prayed that respondent's decision be reviewed "to obviate any miscarriage of justice
considering the adverse effects to the thousands of jeepney drivers and to prevent the other jeepney
operators in using (sic) the Decision ... for their own benefits." The respondent commented that "no better
answer could be made ... except by submitting a copy of the decision" and the complaint "may best be
answered by a thorough reading of the decision."
OUR "review" in administrative cases of this nature as defined in Vda. de Zabala vs. Pamaran (A.C. No.
200-J, June 10, 1971, 39 SCRA 430, 433), is limited to the text of the decision and respondent's articulations
on the law and the evidence submitted. WE do not review the decision to reverse it or to set it aside as if it
were brought to this Court on regular appeal; for this is beyond the objective of an administrative proceedings
to protect the public service, to secure the faithful and efficient performance of official functions, and to rid the
public service of incompetent, corrupt and unworthy public servants.
WE have carefully read, examined and analyzed the decision submitted by the respondent. WE found that in
sustaining the motion to dismiss on the ground of insufficiency of evidence after the prosecution rested its
case, respondent committed several errors bordering on gross ignorance of the law.
1. Respondent erred in concluding that the prosecution failed to prove that the accused, despite repeated
demands, refused and still refuses to remit the alleged collected premium contributions and that "if no
demand was ever made ... then a criminal prosecution for estafa ... could not prosper."
The uniform allegation in all the four informations for estafa that "the accused, despite repeated demands,
refused and still refuses to remit ...," need not anymore be proved by the prosecution; because the Social
Security Act of 1954 (R.A. No. 1161, as amended by R.A. No. 1792, No. 2658 and No. 3839, and further
amended by Presidential Decrees Nos. 24, 65 and 177), makes it the duty of the employer to remit the
contributions without need of any demand therefor by the employee. Section 22(a), (b), (c) and (d) of said Act,
governing "Remittance of Contributions" requires as a legal obligation of every employer to remit within the
first seven (7) days of the month the contributions of the employee and the employer to the Social Security
System, failing which invites the imposition of a penalty of three percent (3%). With this mandate of the law,
demand on the part of the employee before the employer remits these contributions to the SSS is not a
condition precedent for such remittance. The Social Security System can collect such contributions in the
same manner as taxes are made collectible under the National Internal Revenue Code (Sec. 22[b], Social
Security Act). Thus:
SEC. 22. Remittance of contributions The contributions imposed in the proceeding sections shall be
remitted to the SSS within the first seven days of each calendar month following the month for which they are
applicable or within such time as the Commission may prescribe. Every employer required to deduct and to
remit such contributions shall be liable for their payment, and if any contribution is not paid to the SSS, as
herein prescribed, he shall pay besides the contribution a penalty thereon of three per cent per month from
the date the contribution fans due until paid. If deemed expedient and advisable by the Commission, the
collection and remittance of contributions shall be made quarterly or semi-annually in advance, the
contributions payable by the employees to be advanced by their respective employers: Provided, That upon
separation of an employee, any contributions so paid in advance but not due shall be credited or refunded to
his employer.
(b) The contributions payable under this Act in cases where an employer refuses or neglects to pay the same
shall be collected by the System in the same manner as taxes are made collectible under the National
Internal Revenue Code, as amended Failure or refusal of the employer to pay or remit the contributions
herein prescribed shall not prejudice the right of the covered employee to the benefits of the coverage.
xxx xxx xxx
(e) For purposes of this section, any employer who is delinquent or has not remitted all the monthly
contributions due and payable may within six (6) months from approval of this amendatory act remit said
contributions to the SSS and submit the corresponding collection lists therefor without incurring the
prescribed three per cent penalty. In case the employer fails to remit to the SSS the said contributions within
the six months grace period, the penalty of three per cent shall be imposed from the time the contributions
first became due as provided in paragraph (a) of this section. Provided, however, That the Administrator, may
in meritorious cases, allow employers who have submitted a payment plan, on or before April 19 1973, to pay
their contributions due and payable up to December 31, 1973 without incurring the prescribed three per cent
penalty. As amended by Rep. Act No. 2658, and by Pres. Decrees Nos. 24 and 177).
To prove remittance, the employer can submit his records thereon or a certification from the SSS as to the
fact of remittance of the contributions.
II. Respondent likewise erred in concluding that, in connection with the daily deductions of P 0.50 as SSS
premium contributions, "this Court is not convinced and could not reasonably believe that there was a forced
daily deductions or exaction of P0. 50."
Section 18 of the Social Security Act governing employees' contribution, provides that ... the employer shall
deduct and withhold from such employee's monthly salary, wage, compensation or earnings the employee's
contribution in an amount corresponding to his salary, wage, compensation or earnings during the month in
accordance with the following schedule effective on January 1, 1973 ... ." With this legal obligation placed on
the employer's shoulder, respondent's reasonable belief that "there was or could be no forced daily
deductions or exaction of P 0.50" would have no legal basis and support.
III. Respondent again cried in finding "that from the existing relationship between the accused as owner of the
utility jeepneys and all the complainants, there is categorically demonstrated no employer-employee
relationship in contemplation of the Social Security Act of 1954, as amended by Presidential Decrees Nos. 24,
65 and 177. In other words, if by law there exists no such relationship, then the herein accused truly is not
even obligated to collect such amounts; neither is he under obligation to make remittance payments."
For, as early as March 23, 1956, in National Labor Union vs. Benedicto Dinglasan (L-7945), this Court
already ruled that there is employer-employee relation between jeepney owners/operators and jeepney
drivers under the boundary system arrangement, and enunciated:
The main question to determine is whether there exists a relationship of employer-employee between the
drivers of the jeeps and the owner thereof. The findings contained in the first order are not disputed by both
parties except the last to which the respondent took exception. But in the resolution setting aside the order of
16 February 1954 the Court of Industrial Relations in banc did not state that such finding is not supported by
evidence. It merely declares that there is no employer-employee relation between respondent, Benedicto
Dinglasan, and the driver complainants in this case. If the findings to which the respondent took exception is
unsupported by the evidence, a pronouncement to that effect would have been made by the Court in banc. In
the absence of such pronouncement we are not at liberty to ignore or disregard said finding. The findings of
the Court of Industrial Relations with respect to question of fact, if supported by substantial evidence on the
record shall be conclusive. Taking into consideration the findings of fact made by the Court of Industrial
Relations we find it difficult to uphold the conclusion of the Court set forth in its resolution of 23 June 1954.
The drivers did not invest a single centavo in the business and the respondent is the exclusive owner of the
jeeps. The management of the business is in the respondent's hands. For even if the drivers of the jeeps take
material possession of the jeeps, still the respondent as owner thereof and holder of a certificate of public
convenience is entitled to exercise, as he does and under the law he must, supervision over the drivers by
seeing to it that they follow the route prescribed by the Public Service Commission and the rules and
regulations promulgated by it as regards their operation. And when they pass by the gasoline station of the
respondent checking by his employees on the water tank, oil and tire pressure is done. The only features that
would make the relationship of lessor and lessee between the respondent and the drivers, members of the
union, as contended by the respondent, are the fact that he does not pay them any fixed wage but their
compensation is the excess of the total amount of P7.50 which they agreed to pay to the respondent, the
owner of the jeeps, and the fact that the gasoline burned by the jeeps is for the account of the drivers. These
two features are not, however, sufficient to withdraw the relationship between them from that of
employer-employee, because the estimated earnings for fares must be over and above the amount they
agreed to pay to the respondent for a ten-hour shift or ten-hour a day operation of the jeeps. Not having any
interest in the business because they did not invest anything in the acquisition of the jeeps and did not
participate in the management thereof, their service as drivers of the jeeps being their only contribution to the
business, the relationship of lessor and lessee cannot be sustained [In the matter of the Park Floral Company,
etc., 19 NLRB 403; Radley et al. vs. Commonwealth, 161 SW (2d) 417; Jones vs. Goodson et al., 121 Fed.
Rep. (2d) 176; Mitchel vs. Gibbson et al., 172 Fed. Rep. (2d) 970]. In the lease of chattels the lessor loses
complete control over the chattel leased although the lessee cannot make bad use thereof, for he would be
responsible for damages to the lessor should he do so. In this case there is a supervision and a sort of control
that the owner of the jeeps exercises over the drivers. It is an attempt by ingenious scheme to withdraw the
relationship between the owner of the jeeps and the drivers thereof from the operation of the labor laws
enacted to promote industrial peace. (98 Phil. 650, 651-53).
On April 30, 1963, this Court reiterated this doctrine in Magboo, et al. vs. Bernardo (L-16790, 7 SCRA 952)
and stated:
Appellant assails said decision, assigning three errors which boil down to the question of whether or not an
employer- employee relationship exists between a jeepney-owner and a driver under a "boundary system"
arrangement. Appellant contends that the relationship is essentially that of lessor and lessee.
A similar contention has been rejected by this Court in several cases. In National Labor Union v. Dinglasan,
52 O.B., No. 4, 1933, it was held that the features which characterize the boundary system namely, the fact
that the driver does not receive a fixed wage but gets only the excess of the receipt of fares collected by him
over the amount he pays to the jeep-owner and that the gasoline consumed by the jeep is for the account of
the driver are not sufficient to withdraw the relationship between them from that of employer and employee.
The ruling was subsequently cited and applied in Doce v. Workmen's Compensation Commission, L-9417,
December 22, 1958, which involved the liability of a bus owner for injury compensation to a conductor
working under the boundary system. (7 SCRA 953-54).
Indeed, considering that about nineteen (19) years before July 31, 1975, when respondent rendered his
decision in the four estafa cases, it was a settled doctrine that an employer-employee relationship exists
between jeepney owners/operators and jeepney drivers under the boundary system arrangement, of which
rule respondent was obviously ignorant (Section 1, Rule 129, Rules of Court, and in line with Municipal Board
of Manila vs. Agustin, 65 Phil. 144).
Respondent mistakenly relied on the cases of Social Security System vs. Court of Appeals and Shriro (37
SCRA 579) and Social Security System vs. Court of Appeals and Manila Jockey Club (30 SCRA 210), which
have no bearing on or relevance to the issue posed in the estafa cases filed by the complainants and heard
by him. The Shriro and the Manila Jockey Club cases did not involve or resolve the relationship between
jeepney owners/operators and jeepney drivers in any manner whatsoever. The Shriro case concerned the
relationship of "commission sales agents" and Shriro (Philippines) Inc., the exclusive distributor of "Regal"
sewing machine. The Manila Jockey Club, Inc. case concerned jockeys who are connected with the Manila
Jockey Club, Inc. and the Philippine Racing Club, Inc.
Since an employer-employee relationship subsists between the jeepney owners/operators and jeepney
drivers under the boundary system arrangement, SSS coverage "shall be compulsory" (Sec. 9, Social
Security Act), the SSS's deduction would follow as a matter of law (Sec. 18, supra), and the accused in the
four estafa cases, without previous demand by the jeepney drivers, is under legal obligation to remit the
driver's contribution to the SSS.
Decisions of the Supreme Court need not be proved as they are matters of judicial notice (Sec. 1, Rule 129,
Rev. Rules of Court; V Moran, Rules of Court, 1970 ed., pp. 38-39). Ignorance of the law excuses no one (Art.
3, New Civil Code) and judicial decisions applying or interpreting the law or the Constitution are part of the
legal system (Art. 8, New Civil Code).
In the light of the above discussion, respondent gravely erred in sustaining the motion to dismiss the estafa
cases by conveniently relying on the accepted axiom that the prosecution cannot rely on the weakness of the
defense to gain conviction, for conviction can only rest upon the strength of the prosecution evidence (Duran
vs. Court of Appeals, L-39758, May 7, 1976, citing People vs. Barrera, 82 Phil. 391), and, as a consequence,
material and moral damages had been inflicted on the numerous complaining drivers whose rights to refile
the criminal cases for estafa against the accused are now foreclosed by the rule on double jeopardy.
In recapitulation, We find that respondent exhibited gross ignorance of the Social Security Act of 1954, as
amended, particularly the sections governing SSS compulsory coverage, employer-employee contributions,
deduction of SSS's contributions, and remittance of SSS contributions; and of the settled jurisprudence that
the relationship between jeepney owners/operators and jeepney drivers under the boundary system
arrangement is that of employer and employee. Or, if respondent was aware of them, he deliberately
refrained from applying them, which can never be excused (Quizon, et al. vs. Judge Jose G. Baltazar, Jr., A.C.
No. 532-MJ, July 25, 1975) and "is hardly to be condoned" (Fernando, J., concurring opinion, Quizon, et al. vs.
Judge Baltazar, Jr., supra).
WE, moreover, find that respondent repeatedly ignored this Court's directive to file his comment on the
instant complaint within ten (10) days from receipt of our 2nd Indorsement of September 16, 1975,
necessitating the sending of two tracer letters dated October 23, 1975 and November 25, 1975. His comment
came only on March 8, 1976. His failure to submit the required comment within the period fixed is disrespect
to the Court as well as aggravated the delay in the speedy and orderly disposition of this administrative
complaint. (cf. Medina, etc., et al. vs. Hon. Valdellon; etc., et al., L- 38810, March 25, 1975; Atienza vs. Perez,
etc., A.M. No. P- 216, July 9, 1974)
WHEREFORE, RESPONDENT FRANCISCO R. LLAMAS IS HEREBY DISMISSED AS CITY JUDGE OF

PASAY CITY WITH FORFEITURE OF ALL RETIREMENT PRIVILEGES AND WITH PREJUDICE TO
REINSTATEMENT TO ANY POSITION IN THE NATIONAL OR LOCAL GOVERNMENT, INCLUDING
GOVERNMENT-OWNED OR CONTROLLED CORPORATIONS, AGENCIES OR INSTRUMENTALITIES.
SO ORDERED.
d. Isabelo Doce v. WCC and Dadao Jadao G.R. No. L-9417 December 22, 1958
1. EMPLOYER AND EMPLOYEE; OWNER OF BUS AND CONDUCTOR UNDER BOUNDARY SYSTEM. The relationship of employer
and employee exists between the owner of a bus and its conductor operating under the boundary system within the meaning
of the law and as such the case comes under the jurisdiction of the Court of Industrial Relations.
DECISION
BAUTISTA ANGELO, J.:
Dado Jadao filed with the Workmens Compensation Commission a claim for compensation against Isabelo Doce for injuries he
suffered in an accident that occurred on June 11, 1953 in the City of Manila while working as a conductor of a bus belonging to
the latter under a boundary system. Doce interposed the defense that there was no employer-employee relationship between
him and Jadao and hence the Commission has no jurisdiction to act on the claim.
The claim was assigned to a referee for hearing who, after receiving the evidence, rendered decision holding that a conductor
who works under the boundary system in the operation of the bus of another is considered an employee of the latter within the
meaning of the law and as such Doce is responsible to pay to Jadao the compensation prescribed in the Workmens
Compensation Act. Consequently, the referee ordered Doce to pay Jadao a compensation of P757.43, plus the cost of the
medical and surgical expenses incurred by the latter, and to pay the Commission the amount of P8.00 as fees in accordance
with the law. This decision was affirmed by the Commission on July 2, 1955. Doce interposed the present petition for review.
The facts as found by the Commission are: Dado Jadao was a conductor of Bus No. 9 of the B-Twelve Liner owned and operated
by Isabelo Doce who was paid under the boundary system. His average daily earnings as conductor was P4.00, working five
days a week. On June 11, 1953, while acting as such conductor, Jadao was pinned by two buses on Quezon Boulevard, Manila,
suffering injuries on the right leg, head and left ear. He was treated in the North General Hospital and in the National Orthopedic
Hospital, and as a result he suffered temporary total disability from June 11, 1953 to May 10, 1954 and a partial loss of the use
of his right leg.
It was also proven that under the boundary system adopted by petitioner and respondent, the driver and conductor of the bus
gave to the owner a fixed amount out of the daily earnings derived from its operation. In this case, the conductor and the driver
used to give to respondent P15.00 daily. The owner supplied the gasoline at the beginning but its cost is later reimbursed out
of the earnings of the day. After deducting the cost of the gasoline and the rental of P15.00, the remainder is divided between
the conductor and the driver.
The issue to be determined is whether the employer-employee relationship existed between the owner of the bus and the
conductor considering that the latter worked under a boundary system as explained above and is not paid directly by the
former.
This case falls squarely within our ruling in National Labor Union v. Dinglasan, 52 Off. Gaz., No. 4, 1933, wherein this Court held
that a driver of a jeep who operates the same under the boundary system is considered an employee within the meaning of the
law and as such the case comes under the jurisdiction of the Court of Industrial Relations. In that case, Benedicto Dinglasan was
the owner and operator of TPU jeepneys which were driven by petitioners under verbal contracts that they will pay P7.50 for 10
hours use under the so- called "boundary system." The drivers did not receive salaries or wages from the owner. Their days
earnings were the excess over the P7.50 they paid for the use of the jeepneys. In the event that they did not earn more, the
owner did not have to pay them anything. In holding that the employer-employee relationship existed between the owner of the
jeepneys and the drivers even if the latter worked under the boundary system, this Court said: jgc:chan robles. com.ph
"The only features that would make the relationship of lessor and lessee between the respondent, owner of the jeeps, and the
drivers, members of the petitioner union, are the fact that he does not pay them any fixed wage but their compensation is the
excess of the total amount of fares earned or collected by them over and above the amount of P7.50 which they agreed to pay
to the respondent, and the fact that the gasoline burned by the jeeps is for the account of the drivers. These two features are
not, however, sufficient to withdraw the relationship between them from that of employer-employee, because the estimated
earnings for fares must be over and above the amount they agreed to pay to the respondent for a ten-hour shift or ten-hour a
day operation of the jeeps. Not having any interest in the business because they did not invest anything in the acquisition of the
jeeps and did not participate in the management thereof, their service as drivers of the jeeps being their only contribution to
the business, the relationship of lessor and lessee cannot be sustained." cralaw virtua 1aw lib rary
The contention of petitioner that the relation that existed between him and the respondent is only one of lessor and lessee
cannot therefore be sustained.
Wherefore, the decision appealed from is affirmed, with costs against petitioner
e. Rodolfo J. Serrano v. Severino Santos Transit and/or Severino

Santos, August 9, 2010
Petitioner Rodolfo J. Serrano was hired on September 28, 1992 as bus conductor by respondent Severino Santos
Transit, a bus company owned and operated by its co-respondent Severino Santos.
After 14 years of service or on July 14, 2006, petitioner applied for optional retirement from the company whose
representative advised him that he must first sign the already prepared Quitclaim before his retirement pay could be
released. As petitioners request to first go over the computation of his retirement pay was denied, he signed the Quitclaim on
which he wrote U.P. (under protest) after his signature, indicating his protest to the amount of P75,277.45 which he received,
computed by the company at 15 days per year of service.
Petitioner soon after filed a complaint[1] before the Labor Arbiter, alleging that the company erred in its computation
since under Republic Act No. 7641, otherwise known as the Retirement Pay Law, his retirement pay should have been
computed at 22.5 days per year of service to include the cash equivalent of the 5-day service incentive leave (SIL) and 1/12 of
the 13th month pay which the company did not.
The company maintained, however, that the Quitclaim signed by petitioner barred his claim and, in any event, its
computation was correct since petitioner was not entitled to the 5-day SIL and pro-rated 13th month pay for, as a bus
conductor, he was paid on commission basis. Respondents, noting that the retirement differential pay amounted to
only P1,431.15, explained that in the computation of petitioners retirement pay, five months were inadvertently not included
because some index cards containing his records had been lost.
By Decision[2] of February 15, 2007, Labor Arbiter Cresencio Ramos, Jr. ruled in favor of petitioner, awarding
him P116,135.45 as retirement pay differential, and 10% of the total monetary award as attorneys fees. In arriving at such
computation, the Labor Arbiter ratiocinated:
In the same Labor Advisory on Retirement Pay Law, it was likewise decisively made clear that the law
expanded the concept of one-half month salary from the usual one-month salary divided by two, to wit:
B. COMPUTATION OF RETIREMENT PAY
A covered employee who retires pursuant to RA 7641 shall be entitled to

retirement pay equivalent to at least one-half (1/12) month salary for every year of service,
a fraction of at least six (6) months being considered as one whole year.
The law is explicit that one-half month salary shall mean fifteen (15) days plus
one-twelfth (1/12) of the 13th month pay and the cash equivalent of not more than five (5)
days service incentive leaves unless the parties provide for broader inclusions. Evidently,
the law expanded the concept of one-half month salary from the usual one-month salary
divided by two.
The retirement pay is equal to half-months pay per year of service. But half-months pay is
expanded because it means not just the salary for 15 days but also one-twelfth of the 13th-month pay and
the cash value of five-day service incentive leave. THIS IS THE MINIMUM. The retirement pay package
can be improved upon by voluntary company policy, or particular agreement with the employee, or through
a collective bargaining agreement. (The Labor Code with Comments and Cases, C.A. Azcunea, Vol. II,
page 765, Fifth Edition 2004).
Thus, having established that 22.5 days pay per year of service is the correct formula in arriving at
the complete retirement pay of complainant and inasmuch as complainants daily earning is based on
commission earned in a day, which varies each day, the next critical issue that needs discernment is the
determination of what is a fair and rational amount of daily earning of complainant to be used in the
computation of his retirement pay.
While complainant endeavored to substantiate his claim that he earned average daily commission
of P700.00, however, the documents he presented are not complete, simply representative copies, therefore
unreliable. On the other haNd, while respondents question complainants use of P700.00 (daily income) as
basis in determining the latters correct retirement pay, however it does not help their defense that they did
not present a single Conductors Trip Report to contradict the claim of complainant. Instead, respondents
adduced a handwritten summary of complainants monthly income from 1993 until June 2006. It must be
noted also that complainant did not contest the amounts stated on the summary of his monthly income as
reported by respondents. Given the above considerations, and most importantly that complainant did not
dispute the figures stated in that document, we find it logical, just and equitable for both parties to rely on
the summary of monthly income provided by respondent, thus, we added complainants monthly income
from June 2005 until June 2006 or the last twelve months and we arrived at P189,591.30) and we divided it
by twelve (12) to arrive at complainants average monthly earning of P15,799.28. Thereafter, the average
monthly of P15,799.28 is divided by twenty-six (26) days, the factor commonly used in determining the
regular working days in a month, to arrive at his average daily income of P607.66. Finally, P607.66
(average daily income) x 22.5 days = P13,672.35 x 14 (length of service) = P191,412.90 (COMPLETE
RETIREMENT PAY). However, inasmuch as complainant already received P75,277.45, the retirement
differential pay due him is P116,135.45 (P191,412.90 P75,277.45). (underscoring partly in the original and
partly supplied)
The National Labor Relations Commission (NLRC) to which respondents appealed reversed the Labor Arbiters
ruling and dismissed petitioners complaint by Decision[3] dated April 23, 2008.It, however, ordered respondents to pay
retirement differential in the amount of P2,365.35.
Citing R & E Transport, Inc. v. Latag,[4] the NLRC held that since petitioner was paid on purely commission basis,
he was excluded from the coverage of the laws on 13 th month pay and SIL pay, hence, the 1/12 of the 13th month pay and the
5-day SIL should not be factored in the computation of his retirement pay.
Petitioners motion for reconsideration having been denied by Resolution[5] of June 27, 2008, he appealed to the
Court of Appeals.
By the assailed Decision[6] of February 11, 2009, the appellate court affirmed the NLRCs ruling, it merely holding
that it was based on substantial evidence, hence, should be respected.
Petitioners motion for reconsideration was denied, hence, the present petition for review on certiorari.
The petition is meritorious.
Republic Act No. 7641 which was enacted on December 9, 1992 amended Article 287 of the Labor Code by
providing for retirement pay to qualified private sector employees in the absence of any retirement plan in the
establishment. The pertinent provision of said law reads:
Section 1. Article 287 of Presidential Decree No. 442, as amended, otherwise known as the
Labor Code of the Philippines, is hereby amended to read as follows:
xxxx
In the absence of a retirement plan or agreement providing for retirement benefits of
employees in the establishment, an employee upon reaching the age of sixty (60) years
or more, but not beyond sixty-five (65) years which is hereby declared the
compulsory retirement age, who has served at least five (5) years in the said
establishment, may retire and shall be entitled to retirement pay equivalent to at least
one-half (1/2) month salary for every year of service, a fraction of at least six (6)
months being considered as one whole year.
Unless the parties provide for broader inclusions, the term one-half (1/2) month
salary shall mean fifteen (15) days plus one-twelfth (1/12) of the 13th month pay and
the cash equivalent of not more than five (5) days of service incentive leaves.
Retail, service and agricultural establishments or operations employing not more

than (10) employees or workers are exempted from the coverage of this provision.
x x x x (emphasis and underscoring supplied)

Further, the Implementing Rules of said law provide:
RULE II
Retirement Benefits
SECTION 1.
General Statement on Coverage. This Rule shall apply to all employees in the private sector, regardless
of their position, designation or status and irrespective of the method by which their wages are paid,
except to those specifically exempted under Section 2 hereof. As used herein, the term Act shall refer to
Republic Act No. 7641 which took effect on January 7, 1993.
SECTION 2
Exemptions. This Rule shall not apply to the following employees:

2.1 Employees of the National Government and its political subdivisions, including Government-owned
and/or controlled corporations, if they are covered by the Civil Service Law and its regulations.
2.2 Domestic helpers and persons in the personal service of another.
2.3 Employees of retail, service and agricultural establishment or operations regularly employing not
more than ten (10) employees. As used in this sub-section;
xxxx
SECTION 5
Retirement Benefits.
5.1 In the absence of an applicable agreement or retirement plan, an employee who retires pursuant to the
Act shall be entitled to retirement pay equivalent to at least one-half () month salary for every year of
service, a fraction of at least six (6) months being considered as one whole year.
5.2 Components of One-half () Month Salary. For the purpose of determining the minimum retirement
pay due an employee under this Rule, the term one-half month salary shall include all of the following:
(a) Fifteen (15) days salary of the employee based on his latest salary rate. As used herein, the
term salary includes all remunerations paid by an employer to his employees for services rendered
during normal working days and hours, whether such payments are fixed or ascertained on a time,
task, piece of commission basis, or other method of calculating the same, and includes the fair and
reasonable value, as determined by the Secretary of Labor and Employment, of food, lodging or other
facilities customarily furnished by the employer to his employees. The term does not include cost of living
allowances, profit-sharing payments and other monetary benefits which are not considered as part of or
integrated into the regular salary of the employees.
(b) The cash equivalent of not more than five (5) days of service incentive leave;
(c) One-twelfth of the 13th month pay due the employee.
(d) All other benefits that the employer and employee may agree upon that should be included in
the computation of the employees retirement pay.
x x x x (emphasis supplied)
Admittedly, petitioner worked for 14 years for the bus company which did not adopt any retirement scheme. Even if
petitioner as bus conductor was paid on commission basis then, he falls within the coverage of R.A. 7641 and its
implementing rules. As thus correctly ruled by the Labor Arbiter, petitioners retirement pay should include the cash
equivalent of the 5-day SIL and 1/12 of the 13th month pay.
The affirmance by the appellate court of the reliance by the NLRC on R & E Transport, Inc. is erroneous. In said
case, the Court held that a taxi driver paid according to the boundary system is not entitled to the 13th month and the SIL pay,
hence, his retirement pay should be computed on the sole basis of his salary.
For purposes, however, of applying the law on SIL, as well as on retirement, the Court notes that there is
a difference between drivers paid under the boundary system and conductors who are paid on commission basis.
In practice, taxi drivers do not receive fixed wages. They retain only those sums in excess of the boundary or fee
they pay to the owners or operators of the vehicles. [7] Conductors, on the other hand, are paid a certain percentage of the bus
earnings for the day.
It bears emphasis that under P.D. 851 or the SIL Law, the exclusion from its coverage of workers who are paid on a
purely commission basis is only with respect to field personnel. The more recent case of Auto Bus Transport Systems, Inc., v.
Bautista[8] clarifies that an employee who is paid on purely commission basis is entitled to SIL:
A careful perusal of said provisions of law will result in the conclusion that the grant of service
incentive leave has been delimited by the Implementing Rules and Regulations of the Labor Code to apply
only to those employees not explicitly excluded by Section 1 of Rule V. According to the Implementing
Rules, Service Incentive Leave shall not apply to employees classified as field personnel. The phrase
other employees whose performance is unsupervised by the employer must not be understood as a
separate classification of employees to which service incentive leave shall not be granted. Rather, it
serves as an amplification of the interpretation of the definition of field personnel under the Labor Code as
those whose actual hours of work in the field cannot be determined with reasonable certainty.
The same is true with respect to the phrase those who are engaged on task or contract basis,
purely commission basis. Said phrase should be related with field personnel, applying the rule
on ejusdem generis that general and unlimited terms are restrained and limited by the particular terms that
they follow. Hence, employees engaged on task or contract basis or paid on purely commission basis
are not automatically exempted from the grant of service incentive leave, unless, they fall under the
classification of field personnel.
xxxx
According to Article 82 of the Labor Code, field personnel shall refer to non-agricultural
employees who regularly perform their duties away from the principal place of business or branch
office of the employer and whose actual hours of work in the field cannot be determined with
reasonable certainty. This definition is further elaborated in the Bureau of Working Conditions (BWC),
Advisory Opinion to Philippine Technical-Clerical Commercial Employees Association which states that:
As a general rule, [field personnel] are those whose performance of their job/service is
not supervised by the employer or his representative, the workplace being away from the
principal office and whose hours and days of work cannot be determined with reasonable
certainty; hence, they are paid specific amount for rendering specific service or performing
specific work. If required to be at specific places at specific times, employees including
drivers cannot be said to be field personnel despite the fact that they are performing work
away from the principal office of the employee.
x x x x (emphasis, italics and underscoring supplied)
WHEREFORE, the petition is GRANTED. The Court of Appeals Decision of February 11, 2009 and Resolution of April
28, 2009 are REVERSED and SET ASIDE and the Labor Arbiters Decision dated February 15, 2007 is REINSTATED.
SO ORDERED
Part 2 Obligation of Parties
Obligation of the Carrier

Philam Insurance Co. v. Chartis Phil Insurance July 23, 2014
At bar are consolidated petitions for review on certiorari under Rule 45 of the Rules of Court assailing the
1
Decision dated January 30, 2009 of the Court of Appeals (CA) in CA-G.R. CV No. 89482 affirming with
2
modifications the Decision dated February 26, 2007 of the Regional Trial Court (RTC) of Makati City, Branch
3
148, in Civil Case No. 01-889.
The Factual Antecedents
On December 19, 2000, Novartis Consumer Health Philippines, Inc. (NOVARTIS) imported from Jinsuk
Trading Co. Ltd., (JINSUK) in South Korea, 19 pallets of 200 rolls of Ovaltine Power 18 Glaminated plastic
packaging material.
In order to ship the goods to the Philippines, JINSUK engaged the services of Protop Shipping Corporation
(PROTOP), a freight forwarder likewise based in South Korea, to forward the goods to their consignee,
NOVARTIS.
Based on Bill of Lading No. PROTAS 200387 issued by PROTOP, the cargo was on freight prepaid basis and
on "shippers load and count" which means that the "container [was] packed with cargo by one shipper where
the quantity, description and condition of the cargo is the sole responsibility of the shipper." Likewise stated
4
in the bill of lading is the name Sagawa Express Phils., Inc., (SAGAWA) designated as the entity in the
Philippines which will obtain the delivery contract.
PROTOP shipped the cargo through Dongnama Shipping Co. Ltd. (DONGNAMA) which in turn loaded the
same on M/V Heung-A Bangkok V-019 owned and operated by Heung-A Shipping Corporation, (HEUNG-A),
a Korean corporation, pursuant to a slot charter agreement whereby a space in the latters vessel was
reserved for the exclusive use of the former. Wallem Philippines Shipping, Inc. (WALLEM) is the ship agent of
HEUNG-A in the Philippines. NOVARTIS insured the shipment with Philam Insurance Company, Inc.
(PHILAM, now Chartis Philippines Insurance, Inc.) under All Risk Marine Open Insurance Policy No.
MOP-0801011828 against all loss, damage, liability, or expense before, during transit and even after the
discharge of the shipment from the carrying vessel until its complete delivery to the consignees premises.
The vessel arrived at the port ofManila, South Harbor, on December 27, 2000 and the subject shipment
contained in Sea Van Container No. DNAU 420280-9 was discharged without exception into the possession,
custody and care of Asian Terminals, Inc. (ATI) as the customs arrastre operator.
The shipment was thereafter withdrawn on January 4, 2001, by NOVARTIS appointed broker, Stephanie
Customs Brokerage Corporation (STEPHANIE) from ATIs container yard.
The shipment reached NOVARTIS premises on January 5, 2001 and was thereupon inspected by the
companys Senior Laboratory Technician, Annie Rose Caparoso (Caparoso). 5
Upon initial inspection, Caparoso found the container van locked with its load intact. After opening the same,
she inspected its contents and discovered that the boxes of the shipment were wet and damp. The boxes on
one side of the van were in disarray while others were opened or damaged due to the dampness. Caparoso
further observed that parts of the container van were damaged and rusty. There were also water droplets on
the walls and the floor was wet. Since the damaged packaging materials might contaminate the product they
were meant to hold, Caparoso rejected the entire shipment.
Renato Layug and Mario Chin, duly certified adjusters of the Manila Adjusters and Surveyors Company
wereforthwith hailed to inspect and conduct a survey of the shipment. Their Certificate of Survey dated
6 7
January 17, 2001 yielded results similar to the observations of Caparoso, thus:
[T]he sea van panels/sidings and roofing were noted with varying degrees of indentations and partly
corroded/rusty. Internally, water bead clung along the roofs from rear to front section. The mid section
dented/sagged with affected area was noted withminutes hole evidently due to thinning/corroded rusty metal
plates. The shipment was noted with several palletized cartons already in collapsed condition due to wetting.
The vans entire floor length was also observed wet. 8
All 17 pallets of the 184 cartons/rolls contained in the sea van were found wet/water damaged. Sixteen
(16)cartons/rolls supposedly contained in 2 pallets were unaccounted for although the surveyors remarked
that this may be due to short shipment by the supplier considering that the sea van was fully loaded and can
no longer accommodate the said unaccounted items. The survey report further stated that the "wetting
sustained by the shipment may have reasonably be attributed to the water seepage that gain entry into the
sea van container damageroofs (minutes hole) during transit period[sic]." 9
Samples from the wet packing materials/boxes were submitted to the chemist of Precision Analytical Services,
Inc. (PRECISION), Virgin Hernandez (Hernandez), and per Laboratory Report No. 042-07 dated January 16,
2001, the cause of wetting in the carton boxes and kraft paper/lining materials as well as the aluminum foil
laminated plastic packaging material, was salt water. 10
Aggrieved, NOVARTIS demanded indemnification for the lost/damaged shipment from PROTOP, SAGAWA,
ATI and STEPHANIE but was denied. Insurance claims were, thus, filed with PHILAM which paid the insured
value of the shipment inthe adjusted amount of One Million Nine Hundred Four Thousand Six Hundred
Thirteen Pesos and Twenty Centavos (P1,904,613.20). Claiming that after such payment, it was subrogated
to all the rights and claims of NOVARTIS against the parties liable for the lost/damaged shipment, PHILAM
filed on June 4, 2001, a complaint for damages against PROTOP, as the issuer of Bill of Lading No. PROTAS
200387, its ship agent in the Philippines, SAGAWA, consignee, ATI and the broker, STEPHANIE.
On October 12, 2001, PHILAM sent a demand letter to WALLEM for reimbursement of the insurance claims
paid to NOVARTIS. When WALLEM ignored the demand, PHILAM impleaded it as additional defendant in
11
an Amended Complaint duly admitted by the trial court on October 19, 2001. 12
On December 11, 2001, PHILAM filed a Motion to Admit Second Amended Complaint this time designating
PROTOP as the owner/operator of M/V Heung-A Bangkok V-019 and adding HEUNG-A as party defendant
for being the registered owner of the vessel. The motion was granted and the second amended complaint
13
was admitted by the trial court on December 14, 2001. 14
PROTOP, SAGAWA, ATI, STEPHANIE, WALLEM and HEUNG-A denied liability for the lost/damaged
shipment.
SAGAWA refuted the allegation that it is the ship agent of PROTOP and argued that a ship agent represents
the owner of the vessel and not a mere freight forwarder like PROTOP. SAGAWA averred that its only role
with respect to the shipment was to inform NOVARTIS of its arrival in the Philippines and to facilitate the
surrender of the original bill of lading issued by PROTOP.
SAGAWA further remarked that it was deprived an opportunity to examine and investigate the nature and
extent of the damage while the matter was still fresh so as tosafeguard itself from false/fraudulent claims
because NOVARTIS failed totimely give notice about the loss/damage. 15
SAGAWA admitted that it has a non-exclusive agency agreement with PROTOP to serve as the latters
delivery contact person in the Philippines with respect to the subject shipment. SAGAWA is also a freight
forwarding company and that PROTOPwas not charged any fee for the services rendered by SAGAWA with
respect to the subject shipment and instead the latter was given US$10 as commission. For having been
16
dragged into court on a baseless cause, SAGAWA counterclaimed for damages in the form of attorneys fees.
ATI likewise interposed a counterclaim for damages against PHILAM for its allegedly baseless complaint. ATI
averred that it exercised due care and diligence in handling the subject container. Also, NOVARTIS, through
PHILAM, is now barred from filing any claim for indemnification because the latter failed to file the same
within 15 days from receipt of the shipment. Meanwhile, STEPHANIE asserted that its only role with respect
17
to the shipment was its physical retrieval from ATI and thereafter its delivery to NOVARTIS. That entire time,
the sealwas intact and not broken. Also, based on the Certificate of Survey, the damage to the shipment was
due to salt water which means that it could not have occurred while STEPHANIE was in possession thereof
during its delivery from ATIs container yard to NOVARTIS premises. STEPHANIE counterclaimed for moral
damages and attorneys fees. 18
WALLEM alleged that the damageand shortages in the shipment were the responsibility of the shipper,
JINSUK, because it was taken on board on a "shippers load and count" basis which means that it was the
shipper that packed, contained and stuffed the shipment in the container van without the carriers
participation. The container van was already sealed when it was loadedon the vessel and hence, the carrier
was in no position to verify the condition and other particulars of the shipment.
WALLEM also asserted that the shipment was opened long after it was discharged from the vessel and that
WALLEM or HEUNG-A were not present during the inspection, examination and survey.
WALLEM pointed the blame to PROTOP because its obligation to the shipper as freight forwarder carried the
concomitant responsibility of ensuring the shipments safety from the port of loading until the final place of
delivery. WALLEM claimed to haveexercised due care and diligence in handling the shipment.
In the alternative, WALLEM averred that any liability which may be imputed to it is limited only to
US$8,500.00 pursuant to the Carriage of Goods by Sea Act (COGSA). 19
HEUNG-A argued that it is not the carrier insofar as NOVARTIS is concerned. The carrier was either
PROTOP, a freight forwarder considered as a non-vessel operating common carrier or DONGNAMA which
provided the container van to PROTOP. HEUNG-A denied being the carrier of the subjectshipment and
20
asserted that its only obligation was to provide DONGNAMA a space on board M/V Heung-A Bangkok V-019.
PROTOP failed to file an answer to the complaint despite having been effectively served with alias summons.
It was declared in default in the RTC Order dated June 6, 2002. 21
Ruling of the RTC
In a Decision dated February 26, 2007, the RTC ruled that the damage to the shipment occurred onboard
22
the vessel while in transit from Korea to the Philippines.

HEUNG-A was adjudged as the common carrier of the subject shipment by virtue of the admissions of
WALLEMs witness, Ronald Gonzales (Gonzales) that despite the slot charter agreement with DONGNAMA,
it was still the obligation of HEUNG-A to transport the cargo from Busan, Korea to Manila and thus any
damage to the shipment is the responsibility of the carrier to the consignee.
The RTC further observed that HEUNG-A failed to present evidence showing that it exercised the diligence
required of a common carrier in ensuring the safety of the shipment.
The RTC discounted the slot charter agreement between HEUNG-A and DONGNAMA, and held that it did
not bind the consignee who was not a party thereto. Further, it was HEUNG-As duty to ensure that the
container van was in good condition by taking an initiative to state in its contract and demand from the owner
of the container van that it should be in a good condition all the time. Such initiative cannot be shifted to the
shipper because it is in no position to demand the same from the owner of the container van.
WALLEM was held liable as HEUNG-As ship agent in the Philippines while PROTOP was adjudged liable
because the damage sustained by the shipment was due to the bad condition of the container van. Also,
based on the statement at the backof the bill of lading, it assumed responsibility for loss and damage as
freight forwarder, viz:
6.1 The responsibility of the Freight Forwarder for the goods under these conditions covers the period from
the time the Freight Forwarder has taken the goods in his charge to the time of the delivery.
6.2 The Freight Forwarde[r] shall beliable for loss or damage to the goods as well as for delay in delivery if the
occurrence which caused the loss, damage, delay in delivery took place while the goods were in his charge
as defined in clause 2.1.a unless the Freight Forwarder proves that no fault or neglect of his own servants or
agents or any other person referred to in Clause 2.2 has caused or contributed to such loss, damage or delay.
However, the Freight Forwarder shall only be liable for loss following from delay in delivery if the Consignor
has made a declaration of interest in timely delivery which has been accepted by the Freight Forwarder and
stated in this FBL. 23
PHILAM was declared to havebeen validly subrogated in NOVARTIS stead and thus entitled to recover the
insurance claims it paid to the latter.
ATI and STEPHANIE were exonerated from any liability. SAGAWA was likewise adjudged not liable for the
loss/damage to the shipment by virtue of the phrase "Shippers Load and Count" reflected in the bill of lading
issued by PROTOP. Since the container van was packed under the sole responsibility of the shipper in Korea,
SAGAWA, which is based in the Philippines, had no chance to check if the contents were in good condition or
not. The RTC concluded that SAGAWA cannot be expected to observe the diligence or care required of a
carrier or ship agent. SAGAWA, ATI and STEPHANIEs counterclaims for attorneys fees were granted and
PHILAM was ordered to pay the same for having been filed a shotgun case against them. Accordingly, the
dispositive portion of the RTC decision read:
WHEREFORE, premises considered, judgment is hereby rendered declaring defendants PROTOP

SHIPPING CORPORATION, HEUNG-A SHIPPING CORPORATION and WALLEM PHILIPPINES
SHIPPING, INC. solidarily liable to pay x x x PHILAM INSURANCE COMPANY, INC. the following amounts:
1. [P]1,904,613.20 plus interest of 12% per annum from December 26, 2001 (date of service of summons to
defendant Heung-A) until full payment;
2. [P]350,000.00 as attorneys fees; and 3. Cost of suit.
With regards to the counter claims, x x x PHILAM INSURANCE COMPANY, INC. is hereby ordered to pay
defendants SAGAWA EXPRESS PHILIPPINES, INC., ASIAN TERMINALS, INC., and STEPHANIE
CUSTOMS BROKERAGE CORPORATION the amount of [P]100,000.00 each as attorneys fees.
SO ORDERED. 24
Ruling of the CA
An appeal to the CA was interposed by PHILAM, WALLEM and HEUNG-A. In a Decision dated January 30,
25
2009, the CA agreed with the RTC that PROTOP, HEUNG-A and WALLEM are liable for the damaged
shipment. The fact that HEUNG-A was not a party to the bill of lading did not negate the existence of a
contract of carriage between HEUNG-A and/or WALLEM and NOVARTIS. A bill of lading is not indispensable
for the creation of a contract of carriage. By agreeing to transport the goods contained in the sea van
providedby DONGNAMA, HEUNG-A impliedly entered into a contract of carriage with NOVARTIS with whom
the goods were consigned. Hence, it assumed the obligations of a common carrier to observe extraordinary
diligence in the vigilance over the goods transported by it. Further the Slot Charter Agreement did not change
HEUNG-As character as a common carrier.
Moreover, the proximate cause ofthe damage was the failure of HEUNG-A to inspect and examine the actual
condition of the sea van before loading it on the vessel. Also, propermeasures in handling and stowage
should have been adopted to prevent seepage of sea water into the sea van.
The CA rejected WALLEM and HEUNG-As argument that NOVARTIS failed to comply with Article 366 of the
Code of Commerce requiring that a claim must be made against the carrier within 24 hours from receipt of the
merchandise because such provision applies only to inter-island shipments within the Philippines.
The CA limited the liability of PROTOP, WALLEM and HEUNG-A to US$8,500.00 pursuant to the liability
limitation under the COGSA since the shipper failed to declare the value of the subject cargo in the bill of
lading and since they could not be made answerable for the two (2) unaccounted pallets because the
shipment was on a "shippers load, count and seal" basis.
The attorneys fees awarded to SAGAWA, ATI and STEPHANIE were deleted because it was not shown that
PHILAM was motivated by malice and bad faith in impleading them as defendants. Thus, the CA decision
was disposed as follows:
WHEREFORE, premises considered, the appealed Decision is hereby AFFIRMED with

MODIFICATION.Defendants PROTOP SHIPPING CORPORATION, HEUNG-A SHIPPING CORPORATION
[and] WALLEM PHILIPPINES SHIPPING,INC.s solidary liability to PHILAM INSURANCE COMPANY, INC.
is reduced to $8,500.00 plus interest per annum from26 December 2001 (date ofservice of summons to
defendant Heung-A) until full payment. The award of attorneys fees in the amount of One Hundred Thousand
Pesos ([P]100,000.[00]) each to SAGAWA EXPRESS PHILIPPINES, INC., ASIAN TERMINALS, INC. and
STEPHANIE CUSTOMS BROKERAGE is hereby DELETED.
SO ORDERED. 26
The foregoing judgment was reiterated in the CA Resolution dated May 8, 2009 which denied the motions
27
for reconsideration filed by PHILAM, WALLEM and HEUNG-A.
PHILAM thereafter filed a petition for review before the Court docketed as G.R. No. 187701. WALLEM and
HEUNG-A followed suit and their petition was docketed as G.R. No. 187812. Considering that both petitions
involved similar parties and issue, emanated from the same Civil Case No. 01-889 and assailed the same CA
judgment, they were ordered consolidated in a Resolution dated January 13, 2010.
28
In G.R. No. 187701, PHILAM raised the following grounds:
THE HONORABLE [CA] COMMITTED SERIOUS ERROR WHEN IT RULED IN ITS

DECISION OF 30 JANUARY 2009 THAT [HEUNG-A and WALLEM] HAVE THE RIGHT TO
LIMIT THEIR LIABILITY UNDER THE PACKAGE LIMITATION OF LIABILITY OF SECTION
4(5) OF THE CARRIAGE OF GOODS BY SEA ACT, 1924, IN VIEW OF ITS OBSERVATION
THAT [NOWHERE] IN THE BILL OF LADING DID THE SHIPPER DECLARE THE VALUE
OF THE SUBJECT CARGO;
THE HONORABLE [CA] COMMITTED SERIOUS ERROR WHEN IT COMPLETELY

DISREGARDED THE FUNDAMENTAL BREACHES OF [HEUNG-A and WALLEM] OF
[THEIR] OBLIGATIONS AND RESPONSIBILITIES UNDER THE CONTRACT OF
CARRIAGE AND LAW OF THE CASE AS LEGAL GROUNDS TO PRECLUDE ITS
AVAILMENT OF THE PACKAGE LIMITATION OF LIABILITY UNDER SECTION 4(5) OF
THE CARRIAGE OF GOODS BY SEA ACT, 1924. 29
In G.R. No. 187812, HEUNG-A and WALLEM argued that:

THE [CA] COMMITTED A SERIOUS ERROR OF LAW IN RULING THAT THE CODE
OFCOMMERCE, SPECIFICALLY ARTICLE 366 THEREOF, DOES NOT APPLY IN THIS
CASE[;]
THE [CA] COMMITTED A SERIOUS ERROR OF LAW IN RULING THAT THE SO-CALLED
"PARAMOUNT CLAUSE" IN THE BILL OF LADING, WHICH PROVIDED THAT "COGSA"
SHALL GOVERN THE TRANSACTION, RESULTED IN THE EXCLUSION OR
INAPPLICABILITY OF THE CODE OF COMMERCE[;]
THE [CA] COMMITTED A SERIOUS ERROR OF LAW IN NOT RULING THAT [PHILAM]
HAS NO RIGHT OF ACTION AGAINST [HEUNG-A and WALLEM] INSOFAR AS DAMAGE
TO CARGO IS CONCERNED IN VIEW OF THE FACT THAT NO TIMELY CLAIM WAS
FILED PURSUANT TO ARTICLE 366 OF THE CODE OF COMMERCE OR THE
PROVISIONS OF THE BILL OF LADING NO.DNALGOBUM 005019[;]
THE [CA] GRAVELY ABUSED ITS DISCRETION AMOUNTING TO EXCESS OR LACK OF

JURISDICTION IN FINDING THAT THE CONTAINERIZED CARGO WAS DAMAGED
WHILE IN THE POSSESSION OR CUSTODY OF THE VESSEL "HEUNG-A BANGKOK". 30
Issues
The arguments proffered by the parties can be summed up into the following issues: (1) Whether the
shipment sustained damage while in the possession and custody of HEUNG-A, and if so, whether
HEUNG-As liability can be limited to US$500 per package pursuant tothe COGSA; (2) Whether or not
NOVARTIS/PHILAM failed to file a timely claim against HEUNG-A and/or WALLEM.
Ruling of the Court
It must be stressed that the question on whether the subject shipment sustained damaged while in the
possession and custody of HEUNG-A is a factual matter which has already beendetermined by the RTC and
the CA. The courts a quowere uniform in finding that the goods inside the container van were damaged by
sea water whilein transit on board HEUNG-As vessel.
Being a factual question, it is notreviewable in the herein petition filed under Rule 45 of the Rules of Court. It
isnot the Courts duty to evaluate and weigh the evidence all over again as such function is conceded to be
within the expertise of the trial court whose findings, when supported by substantial evidence on record and
affirmed by the CA, are regarded with respect, if not binding effect, by this Court.31
There are certain instances, however, when the Court is compelled to deviate from this rule, dismantle the
factual findings of the courts a quoand conduct a probe into the factual questions at issue. These
circumstances are: (1) the inference made ismanifestly mistaken, absurd or impossible; (2) there is grave
abuse of discretion; (3) the findings are grounded entirely on speculations, surmises or conjectures; (4) the
judgment of the CA is based on misapprehension of facts; (5) the CA, in making its findings, went beyond the
issues of the case and the same is contrary to the admissions of both appellant and appellee; (6) the findings
of fact are conclusions without citation of specific evidence on which theyare based; (7) the CA manifestly
overlooked certain relevant facts not disputed by the parties and which, if properly considered, would justify a
different conclusion; and (8) the findings of fact of the CA are premised on the absence ofevidence and are
contradicted by the evidence on record. 32
None of the foregoing instances is extant from records of the present case. Instead, the Court finds that the
factual findings of the courts a quo are supported by evidence on record.
The uncontested results of the inspection survey conducted by Manila Adjusters Surveyors Company
showed that sea water seeped into the panels/sidings and roofing of the container van. This was confirmed
by the examination conducted by Hernandez, the chemist of PRECISION, on samples from the cartons,
boxes, aluminum foil and laminated plastic packaging materials. Based on the laboratory examination results,
the contents of the van were drenched by sea water, an element which is highly conspicuous in the high seas.
It can thus be reasonably concluded that negligence occurred while the container van was in transit, in
HEUNG-As possession, control and custody as the carrier.
Although the container van had defects, they were not, however, so severe as to accommodate heavy
saturation of sea water. The holes were tiny and the rusty portions did not cause gaps or tearing. Hence, the
van was still in a suitable condition to hold the goods and protect them from natural weather elements or even
the normal flutter of waves in the seas.
The scale of the damage sustained by the cargo inside the van could have been only caused by large volume
of sea water since not a single package inside was spared. Aside from the defective condition of the van,
some other circumstance or occurrence contributed to the damages sustained by the shipment. Since the
presence of sea water is highly concentrated in the high seas and considering HEUNG-As failure to
demonstrate how it exercised due diligence in handling and preserving the container van while in transit, it is
liable for the damages sustained thereby.
As the carrier of the subject shipment, HEUNG-A was bound to exercise extraordinary diligence in conveying
the same and its slot charter agreement with DONGNAMA did not divest it of such characterization nor
relieve it of any accountability for the shipment.
Based on the testimony of Gonzales, WALLEMs employee and witness, the charter party between
33
HEUNG-A and DONGNAMA was a contract of affreightment and not a bare boat or demise charter, viz:
Q: Now, the space charter that you are mentioning is not either a bareboat or a demise?
A: Yes, sir.
Q: Okay. So in other words, that space charter party is only to allow the shipper, Dongnama, to load its cargo
for a certain specified space?
A: Yes, sir.
34
A charter party has been defined in Planters Products, Inc. v. Court of Appeals as:35
[A] contract by which an entire ship, orsome 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 conveyance of goods, on a particular voyage, in
consideration of the payment of freight. x x x. (Citations omitted)
36
A charter party has two types. First, it could be a contract of affreightment whereby the use of shipping space
on vessels is leased in part or as a whole, to carry goods for others. The charter-party provides for the hire of
vessel only, either for a determinate period of time (time charter) or for a single or consecutive voyage
(voyage charter). The shipowner supplies the ships stores, pay for the wages ofthe master and the crew, and
defray the expenses for the maintenance of the ship. The voyage remains under the responsibility of the
37
carrier and it is answerable for the loss of goods received for transportation. The charterer is free from liability
to third persons in respect of the ship. 38
Second, charter by demise or bareboat charter under 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. The charterer mans the vessel with his own people and
39
becomes, in effect, the owner for the voyage or service stipulated and hence liable for damages or loss
sustained by the goods transported. 40
Clearly then, despite its contract of affreightment with DONGNAMA, HEUNG-A remained responsible as the
carrier, hence, answerable for the damages incurred by the goods received for transportation. "[C]ommon
carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary
diligenceand vigilance with respect to the safety of the goods and the passengers they transport. Thus,
common carriers are required to render service with the greatest skill and foresight and to use all reasonable
means to ascertain the nature and characteristics of the goods tendered for shipment, and toexercise due
care in the handling and stowage, including such methods as their nature requires." 41
"[C]ommon carriers, as a general rule, are presumed to have been at fault or negligent if the goods they
transported deteriorated or got lost or destroyed. That is, unless they provethat they exercised extraordinary
diligence in transporting the goods. Inorder to avoid responsibility for any loss or damage, therefore, they
have the burden of proving that they observed such diligence." Further, under Article 1742 of the Civil Code,
42
even if the loss, destruction, or deterioration of the goods should be caused by the faulty nature of the
containers, the common carrier must exercise due diligence to forestall or lessen the loss.
Here, HEUNG-A failed to rebut this prima faciepresumption when it failed to give adequate explanation as to
how the shipment inside the container van was handled, stored and preserved to forestall or prevent any
damage or loss while the same was inits possession, custody and control.
PROTOP is solidarily liable with HEUNG-A for the lost/damaged shipment in view of the bill of lading the
former issued to NOVARTIS. "A bill of lading is a written acknowledgement of the receipt of goods and an
agreement to transport and to deliver them at a specified place to a person named or on his or her order. It
operates both as a receipt and as a contract. It is a receipt for the goods shipped and a contract to transport
and deliver the same as therein stipulated." PROTOP breached its contract with NOVARTIS when it failed to
43
deliver the goods in the same quantity, quality and description as stated in Bill of Lading No. PROTAS
200387.
The CA did not err in applying the provisions of the COGSA specifically, the rule on Package Liability
Limitation.
Under Article 1753 of the Civil Code, the law of the country to which the goods are to be transported shall
govern the liability of the common carrier for their loss, destruction or deterioration. Since the subject
shipment was being transported from South Korea to the Philippines, the Civil Code provisions shall apply. In
all mattersnot regulated by the Civil Code, the rights and obligations of common carriers shall be governed by
the Code of Commerce and by special laws, such as the COGSA.
44
While the Civil Code contains provisions making the common carrier liable for loss/damage to the goods
transported, it failed to outline the manner of determining the amount of suchliability. Article372 of the Code of
Commerce fills in this gap, thus:
Article 372. The value of the goods which the carrier must pay in cases if loss or misplacement shall be
determined in accordance with that declared in the bill of lading, the shipper not being allowed to present
proof that among the goods declared therein there were articles of greater value and money.
Horses, vehicles, vessels, equipment and all other principal and accessory means of transportation shall be
especially bound infavor of the shipper, although with respect to railroads said liability shall be subordinated
to the provisions of the laws of concession with respect to the property, and to what this Code established as
to the manner and form of effecting seizures and attachments against said companies. (Emphasis ours)
In case, however, of the shippers failure to declare the value of the goods in the bill of lading, Section 4,
paragraph 5 of the COGSA provides:
Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in
connection with the transportation of goods in an amount exceeding $500 per package lawful money of the
United States, or in case of goods not shipped in packages, per customary freight unit, or the equivalent of
that sum in other currency, unless the nature and value of such goods have been declared by the shipper
before shipment and inserted in the bill of lading. This declaration, if embodied in the bill of lading shall be
prima facieevidence, but shall be conclusive on the carrier.
Hence, when there is a loss/damage to goods covered by contracts of carriage from a foreign port to a
Philippine port and in the absence a shippers declaration of the value of the goods in the bill of lading, as in
the present case, the foregoing provisions of the COGSA shall apply. The CA, therefore, did not err in ruling
that HEUNG-A, WALLEM and PROTOPs liability is limited to $500 per package or pallet. 45
The Court likewise affirms the CA in pronouncing HEUNG-A, WALLEM and PROTOP liable only for the
lost/damaged 17 pallets instead of 19 pallets stated in the bill of lading. This is because, per the "Shippers
Load and Count" arrangement, the contents are not required to be checked and inventoried by the carrier at
the port of loading or before said carrier enters the port of unloading in the Philippines since it is the shipper
who has the sole responsibility for the quantity, description and condition of the cargoes shipped in container
vans. As such, the carrier cannot be held responsible for any discrepancy if the description in the bill of
46
lading is different from the actual contents of the container.

47
Consonant with the ruling in the recent Asian Terminals, Inc. v. Philam Insurance Co., Inc., the prescriptive
48
period for filing an action for lost/damaged goods governed by contracts of carriage by sea to and from
Philippine ports in foreign trade is governed by paragraph 6,Section 3 of the COGSA which states:
(6) Unless notice of loss or damageand the general nature of such loss or damage be given in writing to the
carrier or his agent at the port of discharge before or at the time of the removal of the goods into the custody
of the person entitled to delivery thereof under the contract of carriage, such removal shall be prima
facieevidence of the delivery by the carrier of the goods as described in the bill of lading. If the loss or
damage is not apparent, the notice must be given within three days of the delivery.
Said notice of loss or damage maybe endorsed upon the receipt for the goods given by the person taking
delivery thereof.
The notice in writing need not be given if the state of the goods has at the time of their receipt been the
subject of joint survey or inspection. In any event the carrier and the ship shall be discharged from all liability
in respect of loss or damage unless suit is brought withinone year after delivery of the goods or the date when
the goods should have been delivered: Provided, That if a notice of loss or damage, either apparent or
concealed, is not given as provided for in this section, that fact shall not affect or prejudice the right of the
shipper to bring suit within one year after the delivery of the goods or the date when the goods should have
been delivered.
It was further ruled in Asian Terminals that pursuant to the foregoing COGSA prov:sion, failure to comply with
the notice requirement shall not affect or prejudice the right of the shipper to bring suit within one year after
delivery of the goods.
The consignee, NOV ARTIS, received the subject shipment on January 5, 2001. PHILAM, as the subrogee of
NOVARTIS, filed a claim against PROTOP on June 4, 2001, against WALLEM on October 12, 2001 and
against HEUNG-A on December 11, 2001, or all within the one-year prescriptive period. Verily then, despite
NOV AR TIS' failure to comply with the three-day notice requirement, its subrogee PHILAM is not barred from
seeking reimbursement from PROTOP, HEUNG-A and WALLEM because the demands for payment were
timely filed.
The amount which PHILAM is entitled to receive shall earn a legal interest at the rate of six percent (6%) per
annum from the date of finality of this judgment until its full satisfaction pursuant to Nacar v. Gallery Frames. 49
WHEREFORE, all the foregoing considered, the Decision dated January 30, 2009 of the Court of Appeals in
CA-G.R. CV No. 89482 is hereby AFFlHMED with MODIFICATION in that the interest rate on the award of
US$8,500.00 shall be six percent (6%) per annum from the date of finality of this judgment until fully paid.
SO ORDERED.
Gregorio Anuran, Maria Maligaya v. Buno et al May 20 1966

At noon of January 12, 1958, a passenger jeepney was parked on the road to Taal, Batangas. A motor truck
speeding along, negligently bumped it from behind, with such violence that three of its passengers died, even
as two others (passengers too) suffered injuries that required their confinement at the Provincial Hospital for
many days.
So, in February 1958 these suits were instituted by the representatives of the dead and of the injured, to
recover consequently damages against the driver and the owners of the truck and also against the driver and
the owners of the jeepney.
The Batangas Court of First Instance, after trial, rendered judgment absolving the driver of the jeepney and its
owners, but it required the truck driver and the owners thereof to make compensation.
The plaintiffs appealed to the Court of Appeals insisting that the driver and the owners of the jeepney
should also be made liable for damages.
The last mentioned court, upon reviewing the record, declared that:
It is admitted that at about noontime on January 13, 1958, the passenger jeepney owned by defendants
spouses Pedro Gahol and Luisa Alcantara, bearing plate No. TPU-13548, then being driven by their regular
driver, defendant Pepito Buo was on its regular route travelling from Mahabang Ludlud, Taal, Batangas,
towards the poblacion of the said municipality. When said passenger jeepney crossed the bridge separating
Barrios Mahabang Ludlud and Balisong, Taal, Batangas, it had fourteen passengers, excluding the driver,
according to the testimony of defendant Buo (pp. 12 and 18, t.s.n. July 17, 1958), or sixteen passengers
according to the testimony of plaintiff Edita de Sagun, (pp. 9, 12 and 13, t.s.n. June 26, 1958). However, the
fact remains that the vehicle was overloaded with passengers at the time, because according to the partial
stipulation of facts "the maximum capacity of the jeepney bearing plate No. TPU-13548 of said defendants
was eleven (11) passengers including the driver. (Printed Record on Appeal, pp. 35, 37.)
After crossing the bridge, defendant Buo stopped his vehicle in order to allow one of his passengers to alight.
But he so parked his jeepney in such a way that one-half of its width (the left wheels) was on the asphalted
pavement of the road and the other half, on the right shoulder of said road (pp. 21-22, t.s.n. May 26, 1958; p.
12 t.s.n. July 17, 1958). Approximately five minutes later and before Buo could start his vehicle, a speeding
water truck, which bore plate No. T-17526 and owned by defendants-spouses Anselmo Maligaya and
Ceferina Aro, then being driven by Guillermo Razon from the direction of Mahabang Ludlud, Taal, Batangas,
towards the poblacion of that municipality, violently smashed against the parked jeepney from behind,
causing it to turn turtle into a nearby ditch.
Then said Appellate Court went on to affirm the exoneration of the jeepney driver and of its owners. It
explained that although "the driver of the ill-starred vehicle was not free from fault, for he was guilty of an
antecedent negligence in parking his vehicle with a portion thereof occupying the asphalted road", it
considered the truck driver guilty of greater negligence which was the efficient cause of the collision; and
applying the doctrine of the "last clear chance"1 said Court ordered the owners of the truck to pay, solidarily
with its driver, damages as follows:
x x x the sum of P6,000.00 for the death of their daughter Emelita, another sum of P5,000.00 as moral
damages and the sum of P500.00 as actual damages, and to plaintiffs Simplicio, Alberto, Avelina and Alfredo,
all surnamed Arriola, and represented by their guardian ad litem Agustin Arriola, the sum of P6,000.00 for the
death of their natural mother, Leonor Masongsong, another sum of P5,000.00 as moral damages the sum of
P3,600.00 for loss of earning capacity of said deceased and the sum of P850.00 as actual damages.
The plaintiffs brought the matter to this Supreme Court insisting that the driver and the owners of the
jeepney should also be made liable.
We gave due course to the petition for review, because we thought the decision meant exoneration of the
carrier from liability to its passengers, notwithstanding the negligence of its driver.
Upon further and more extended consideration of the matter, we have become convinced that error of law
was committed in releasing the jeepney from liability. It must be remembered that the obligation of the carrier
to transport its passengers safely is such that the New Civil Code requires "utmost diligence" from the carriers
(Art. 1755) who are "presumed to have been at fault or to have acted negligently, unless they prove that they
have observed extraordinary diligence" (Art. 1756). In this instance, this legal presumption of negligence is
confirmed by the Court of Appeals' finding that the driver of the jeepney in question was at fault in parking the
vehicle improperly. It must follow that the driver and the owners of the jeepney must answer for injuries
to its passengers.
The principle about the "last clear chance" would call for application in a suit between the owners and drivers
of the two colliding vehicles. It does not arise where a passenger demands responsibility from the carrier to
enforce its contractual obligations. For it would be inequitable to exempt the negligent driver of the jeepney
and its owners on the ground that the other driver was likewise guilty of negligence.
Now as to damages. The driver and the owners of the truck have not appealed from the Court of Appeals'
assessment. The plaintiffs (petitioners) have not asked here for a greater amount of indemnity. They merely
pray for a declaration that Pepito Buo, Pedro Gahol and Luisa Alcantara (the driver and the owners of the
jeepney, respectively) be declared jointly and severally liable with the other defendants.1wph1 .t
Wherefore, affirming the decision under review, we hereby modify it in the sense prayed for by
plaintiffs-petitioners. The three defendants last mentioned are required to pay solidarily with the other
defendants-respondents the amounts fixed by the appealed decision. Costs of both appeals against said
three defendants. So ordered.
Bautista Angelo, Concepcion, J.B.L. Reyes, Dizon, Regala, Makalintal and Bengzon, J.P., JJ., concur.
Barrera, Zaldivar and Sanchez, JJ., took no part.
Duty to accept
FC Fisher v. Yangco Steamship Co. G.R. No. 8095 November 5
1914 31 Phil 1
The real question involved in these proceedings is whether the refusal of the owners and officers of a steam
vessel, duly licensed to engage in the coastwise trade of the Philippine Islands and engaged in that trade as a
common carrier, to accept for carriage "dynamite, powder or other explosives" from any and all shippers who
may offer such explosives for carriage can be held to be a lawful act without regard to any question as to the
conditions under which such explosives are offered to carriage, or as to the suitableness of the vessel for the
transportation of such explosives, or as to the possibility that the refusal to accept such articles of commerce
in a particular case may have the effect of subjecting any person or locality or the traffic in such explosives to
an undue, unreasonable or unnecessary prejudice or discrimination.
Summarized briefly, the complaint alleges that plaintiff is a stockholder in the Yangco Steamship Company,
the owner of a large number of steam vessels, duly licensed to engage in the coastwise trade of the
Philippine Islands; that on or about June 10, 1912, the directors of the company adopted a resolution which
was thereafter ratified and affirmed by the shareholders of the company, "expressly declaring and providing
that the classes of merchandise to be carried by the company in its business as a common carrier do not
include dynamite, powder or other explosives, and expressly prohibiting the officers, agents and servants of
the company from offering to carry, accepting for carriage said dynamite, powder or other explosives;" that
thereafter the respondent Acting Collector of Customs demanded and required of the company the
acceptance and carriage of such explosives; that he has refused and suspended the issuance of the
necessary clearance documents of the vessels of the company unless and until the company consents to
accept such explosives for carriage; that plaintiff is advised and believes that should the company decline to
accept such explosives for carriage, the respondent Attorney-General of the Philippine Islands and the
respondent prosecuting attorney of the city of Manila intend to institute proceedings under the penal
provisions of sections 4, 5, and 6 of Act No. 98 of the Philippine Commission against the company, its
managers, agents and servants, to enforce the requirements of the Acting Collector of Customs as to the
acceptance of such explosives for carriage; that notwithstanding the demands of the plaintiff stockholder, the
manager, agents and servants of the company decline and refuse to cease the carriage of such explosives,
on the ground that by reason of the severity of the penalties with which they are threatened upon failure to
carry such explosives, they cannot subject themselves to "the ruinous consequences which would inevitably
result" from failure on their part to obey the demands and requirements of the Acting Collector of Customs as
to the acceptance for carriage of explosives; that plaintiff believes that the Acting Collector of Customs
erroneously construes the provisions of Act No. 98 in holding that they require the company to accept such
explosives for carriage notwithstanding the above mentioned resolution of the directors and stockholders of
the company, and that if the Act does in fact require the company to carry such explosives it is to that extent
unconstitutional and void; that notwithstanding this belief of complainant as to the true meaning of the Act, the
questions involved cannot be raised by the refusal of the company or its agents to comply with the demands
of the Acting Collector of Customs, without the risk of irreparable loss and damage resulting from his refusal
to facilitate the documentation of the company's vessels, and without assuming the company to test the
questions involved by refusing to accept such explosives for carriage.
The prayer of the complaint is as follows:
Wherefore your petitioner prays to this honorable court as follows:
First. That to the due hearing of the above entitled action be issued a writ of prohibition perpetually restraining
the respondent Yangco Steamship Company, its appraisers, agents, servants or other representatives from
accepting to carry and from carrying, in steamers of said company dynamite, powder or other explosive
substance, in accordance with the resolution of the board of directors and of the shareholders of said
company.
Second. That a writ of prohibition be issued perpetually enjoining the respondent J.S. Stanley as Acting
Collector of Customs of the Philippine Islands, his successors, deputies, servants or other representatives,
from obligating the said Yangco Steamship Company, by any means whatever, to carry dynamite, powder or
other explosive substance.
Third. That a writ of prohibition be issued perpetually enjoining the respondent Ignacio Villamor as
Attorney-General of the Philippine Islands, and W.H. Bishop as prosecuting attorney of the city of Manila,
their deputies representatives or employees, from accusing the said Yangco Steamship Company, its officers,
agents or servants, of the violation of Act No. 98 by reason of the failure or omission of the said company to
accept for carriage out to carry dynamite powder or other explosive.
Fourth. That the petitioner be granted such other remedy as may be meet and proper.
To this complaint the respondents demurred, and we are of opinion that the demurrer must be sustained, on
the ground that the complaint does not set forth facts sufficient to constitute a cause of action.
It will readily be seen that plaintiff seeks in these proceedings to enjoin the steamship company from
accepting for carriage on any of its vessels, dynamite, powder or other explosives, under any conditions
whatsoever; to prohibit the Collector of Customs and the prosecuting officers of the government from all
attempts to compel the company to accept such explosives for carriage on any of its vessels under any
conditions whatsoever; and to prohibit these officials from any attempt to invoke the penal provisions of Act
No. 98, in any case of a refusal by the company or its officers so to do; and this without regard to the
conditions as to safety and so forth under which such explosives are offered for carriage, and without regard
also to any question as to the suitableness for the transportation of such explosives of the particular vessel
upon which the shipper offers them for carriage; and further without regard to any question as to whether
such conduct on the part of the steamship company and its officers involves in any instance an undue,
unnecessary or unreasonable discrimination to the prejudice of any person, locality or particular kind of traffic.
There are no allegations in the complaint that for some special and sufficient reasons all or indeed any of the
company's vessels are unsuitable for the business of transporting explosives; or that shippers have declined
or will in future decline to comply with such reasonable regulations and to take such reasonable precautions
as may be necessary and proper to secure the safety of the vessels of the company in transporting such
explosives. Indeed the contention of petitioner is that a common carrier in the Philippine Islands may decline
to accept for carriage any shipment of merchandise of a class which it expressly or impliedly declines to
accept from all shippers alike, because as he contends "the duty of a common carrier to carry for all who offer
arises from the public profession he has made, and limited by it."
In support of this contention counsel cites for a number of English and American authorities, discussing and
applying the doctrine of the common law with reference to common carriers. But it is unnecessary now to
decide whether, in the absence of statute, the principles on which the American and English cases were
decided would be applicable in this jurisdiction. The duties and liabilities of common carriers in this jurisdiction
are defined and fully set forth in Act No. 98 of the Philippine Commission, and until and unless that statute be
declared invalid or unconstitutional, we are bound by its provisions.
Sections 2, 3 and 4 of the Act are as follows:
SEC. 2. It shall be unlawful for any common carrier engaged in the transportation of passengers or property
as above set forth to make or give any unnecessary or unreasonable preference or advantage to any
particular person, company, firm, corporation or locality, or any particular kind of traffic in any respect
whatsoever, or to subject any particular person, company, firm, corporation or locality, or any particular kind
of traffic, to undue or unreasonable prejudice or discrimination whatsoever, and such unjust preference or
discrimination is also hereby prohibited and declared to be unlawful.
SEC. 3. No common carrier engaged in the carriage of passengers or property as aforesaid shall, under any
pretense whatsoever, fail or refuse to receive for carriage, and as promptly as it is able to do so without
discrimination, to carry any person or property offering for carriage, and in the order in which such persons or
property are offered for carriage, nor shall any such common carrier enter into any arrangement, contract or
agreement with any other person or corporation whereby the latter is given an exclusive or preferential or
monopolize the carriage any class or kind of property to the exclusion or partial exclusion of any other person
or persons, and the entering into any such arrangement, contract or agreement, under any form or pretense
whatsoever, is hereby prohibited and declared to be unlawful.
SEC. 4. Any willful violation of the provisions of this Act by any common carrier engaged in the transportation
of passengers or property as hereinbefore set forth is hereby declared to be punishable by a fine not
exceeding five thousand dollars money of the United States, or by imprisonment not exceeding two years, or
both, within the discretion of the court.
The validity of this Act has been questioned on various grounds, and it is vigorously contended that in so far
as it imposes any obligation on a common carrier to accept for carriage merchandise of a class which he
makes no public profession to carry, or which he has expressly or impliedly announced his intention to
decline to accept for carriage from all shippers alike, it is ultra vires, unconstitutional and void.
We may dismiss without extended discussion any argument or contention as to the invalidity of the statute
based on alleged absurdities inherent in its provisions or on alleged unreasonable or impossible requirements
which may be read into it by a strained construction of its terms.
We agree with counsel for petitioner that the provision of the Act which prescribes that, "No common carrier ...
shall, under any pretense whatsoever, fail or refuse to receive for carriage ... to carry any person or property
offering for carriage," is not to be construed in its literal sense and without regard to the context, so as to
impose an imperative duty on all common carriers to accept for carriage, and to carry all and any kind of
freight which may be offered for carriage without regard to the facilities which they may have at their disposal.
The legislator could not have intended and did not intend to prescribe that a common carrier running
passenger automobiles for hire must transport coal in his machines; nor that the owner of a tank steamer,
expressly constructed in small watertight compartments for the carriage of crude oil must accept common
carrier must accept and carry contraband articles, such as opium, morphine, cocaine, or the like, the mere
possession of which is declared to be a criminal offense; nor that common carriers must accept eggs offered
for transportation in paper parcels or any merchandise whatever do defectively packed as to entail upon the
company unreasonable and unnecessary care or risks.
Read in connection with its context this, as well as all the other mandatory and prohibitory provisions of the
statute, was clearly intended merely to forbid failures or refusals to receive persons or property for carriage
involving any "unnecessary or unreasonable preference or advantage to any particular person, company, firm,
corporation, or locality, or any particular kind of traffic in any respect whatsoever," or which would "subject
any particular person, company, firm, corporation or locality, or any particular kind of traffic to any undue or
unreasonable prejudice or discrimination whatsoever."
The question, then, of construing and applying the statute, in cases of alleged violations of its provisions,
always involves a consideration as to whether the acts complained of had the effect of making or giving an
"unreasonable or unnecessary preference or advantage" to any person, locality or particular kind of traffic, or
of subjecting any person, locality, or particular kind of traffic to any undue or unreasonable prejudice or
discrimination. It is very clear therefore that the language of the statute itself refutes any contention as to its
invalidity based on the alleged unreasonableness of its mandatory or prohibitory provisions.
So also we may dismiss without much discussion the contentions as to the invalidity of the statute, which are
based on the alleged excessive severity of the penalties prescribed for violation of its provisions. Upon
general principles it is peculiarly and exclusively within the province of the legislator to prescribe the pains
and penalties which may be imposed upon persons convicted of violations of the laws in force within his
territorial jurisdiction. With the exercise of his discretion in this regard where it is alleged that excessive fines
or cruel and unusual punishments have been prescribed, and even in such cases the courts will not presume
to interfere in the absence of the clearest and most convincing argument and proof in support of such
contentions. (Weems vs. United States, 217 U.S., 349; U.S. vs.Pico, 18 Phil. Rep., 386.) We need hardly add
that there is no ground upon which to rest a contention that the penalties prescribed in the statute under
consideration are either excessive or cruel and unusual, in the sense in which these terms are used in the
organic legislation in force in the Philippine Islands.
But it is contended that on account of the penalties prescribed the statute should be held invalid upon the
principles announced in Ex parte Young (209 U.S., 123, 147, 148); Cotting vs. Goddard (183 U.S., 79, 102);
Mercantile Trust Co. vs. Texas Co. (51 Fed., 529); Louisville Ry. vs. McCord (103 Fed., 216); Cons. Gas
Co. vs. Mayer (416 Fed., 150). We are satisfied however that the reasoning of those cases is not applicable
to the statute under consideration. The principles announced in those decisions are fairly indicated in the
following citations found in petitioner's brief:
But when the legislature, in an effort to prevent any inquiry of the validity of a particular statute, so burdens
any challenge thereof in the courts that the party affected is necessarily constrained to submit rather than
take the chances of the penalties imposed, then it becomes a serious question whether the party is not
deprived of the equal protection of the laws. (Cotting vs. Goddard, 183 U. S., 79, 102.)
It may therefore be said that when the penalties for disobedience are by fines so enormous and imprisonment
so severe as to intimidate the company and its officers from resorting to the courts to test the validity of the
legislation, the result is the same as if the law in terms prohibited the company from seeking judicial
construction of laws which deeply affect its rights.
It is urged that there is no principle upon which to base the claim that a person is entitled to disobey a statute
at least once, for the purpose of testing its validity, without subjecting himself to the penalties for
disobedience provided by the statute in case it is valid. This is not an accurate statement of the case.
Ordinarily a law creating offenses in the nature of misdemeanors or felonies relates to a subject over which
the jurisdiction of the legislature is complete in any event. In the case, however, of the establishment of
certain rates without any hearing, the validity of such rates necessarily depends upon whether they are high
enough to permit at least some return upon the investment (how much it is not now necessary to state), and
an inquiry as to that fact is a proper subject of judicial investigation. If it turns out that the rates are too low for
that purpose, then they are illegal. Now, to impose upon a party interested the burden of obtaining a judicial
decision of such a question (no prior hearing having been given) only upon the condition that, if unsuccessful,
he must suffer imprisonment and pay fines, as provided in these acts, is, in effect, to close up all approaches
to the courts, and thus prevent any hearing upon the question whether the rates as provided by the acts are
not too low, and therefore invalid. The distinction is obvious between a case where the validity of the act
depends upon the existence of a fact which can be determined only after investigation of a very complicated
and technical character, and the ordinary case of a statute upon a subject requiring no such investigation,
and over which the jurisdiction of the legislature is complete in any event.
We hold, therefore, that the provisions of the acts relating to the enforcement of the rates, either for freight or
passengers, by imposing such enormous fines and possible imprisonment as a result of an unsuccessful
effort to test the validity of the laws themselves, are unconstitutional on their face, without regard to the
question of the insufficiency of those rates. (Ex parte Young, 209 U.S., 123 147, 148.)
An examination of the general provisions of our statute, of the circumstances under which it was enacted, the
mischief which it sought to remedy and of the nature of the penalties prescribed for violations of its terms
convinces us that, unlike the statutes under consideration in the above cited cases, its enactment involved no
attempt to prevent common carriers "from resorting to the courts to test the validity of the legislation;" no
"effort to prevent any inquiry" as to its validity. It imposes no arbitrary obligation upon the company to do or to
refrain from doing anything. It makes no attempt to compel such carriers to do business at a fixed or arbitrarily
designated rate, at the risk of separate criminal prosecutions for every demand of a higher or a different rate.
Its penalties can be imposed only upon proof of "unreasonable," "unnecessary" and "unjust" discriminations,
and range from a maximum which is certainly not excessive for willful, deliberate and contumacious violations
of its provisions by a great and powerful corporation, to a minimum which may be a merely nominal fine. With
so wide a range of discretion for a contention on the part of any common carrier that it or its officers are
"intimidated from resorting to the courts to test the validity" of the provisions of the statute prohibiting such
"unreasonable," "unnecessary" and "unjust" discriminations, or to test in any particular case whether a given
course of conduct does in fact involve such discrimination. We will presume, for the purpose of declaring the
statute invalid, that there is so real a danger that the Courts of First Instance and this court on appeal will
abuse the discretion thus conferred upon us, as to intimidate any common carrier, acting in good faith, from
resorting to the courts to test the validity of the statute. Legislative enactments, penalizing unreasonable
discriminations, unreasonable restraints of trade, and unreasonable conduct in various forms of human
activity are so familiar and have been so frequently sustained in the courts, as to render extended discussion
unnecessary to refute any contention as to the invalidity of the statute under consideration, merely it imposes
upon the carrier the obligation of adopting one of various courses of conduct open to it, at the risk of incurring
a prescribed penalty in the event that the course of conduct actually adopted by it should be held to have
involved an unreasonable, unnecessary or unjust discrimination. Applying the test announced in Ex
parte Young, supra, it will be seen that the validity of the Act does not depend upon "the existence of a fact
which can be determined only after investigation of a very complicated and technical character," and that "the
jurisdiction of the legislature" over the subject with which the statute deals "is complete in any event." There
can be no real question as to the plenary power of the legislature to prohibit and to penalize the making of
undue, unreasonable and unjust discriminations by common carriers to the prejudice of any person, locality
or particular kind of traffic. (See Munn vs.Illinois, 94 U.S., 113, and other cases hereinafter cited in support of
this proposition.)
Counsel for petitioner contends also that the statute, if construed so as to deny the right of the steamship
company to elect at will whether or not it will engage in a particular business, such as that of carrying
explosives, is unconstitutional "because it is a confiscation of property, a taking of the carrier's property
without due process of law," and because it deprives him of his liberty by compelling him to engage in
business against his will. The argument continues as follows:
To require of a carrier, as a condition to his continuing in said business, that he must carry anything and every
thing is to render useless the facilities he may have for the carriage of certain lines of freight. It would be
almost as complete a confiscation of such facilities as if the same were destroyed. Their value as a means of
livelihood would be utterly taken away. The law is a prohibition to him to continue in business; the alternative
is to get out or to go into some other business the same alternative as was offered in the case of the
Chicago & N.W. Ry. vs. Dey (35 Fed. Rep., 866, 880), and which was there commented on as follows:
"Whatever of force there may be in such arguments, as applied to mere personal property capable of removal
and use elsewhere, or in other business, it is wholly without force as against railroad corporations, so large a
proportion of whose investment is in the soil and fixtures appertaining thereto, which cannot be removed. For
a government, whether that government be a single sovereign or one of the majority, to say to an individual
who has invested his means in so laudable an enterprise as the construction of a railroad, one which tends so
much to the wealth and prosperity of the community, that, if he finds that the rates imposed will cause him to
do business at a loss, he may quit business, and abandon that road, is the very irony of despotism. Apples of
Sodom were fruit of joy in comparison. Reading, as I do, in the preamble of the Federal Constitution, that it
was ordained to "establish justice," I can never believe that it is within the property of an individual invested in
and used for a purpose in which even the Argus eyes of the police power can see nothing injurious to public
morals, public health, or the general welfare. I read also in the first section of the bill of rights of this state that
"all men are by nature free and equal, and have certain inalienable rights, among which are those of enjoying
and defending life and liberty, acquiring, possessing, and protecting property, and pursuing and obtaining
safety and happiness;" and I know that, while that remains as the supreme law of the state, no legislature can
directly or indirectly lay its withering or destroying hand on a single dollar invested in the legitimate business
of transportation." (Chicago & N.W. Ry. vs. Dey, 35 Fed. Rep., 866, 880.)
It is manifest, however, that this contention is directed against a construction of the statute, which, as we have
said, is not warranted by its terms. As we have already indicated, the statute does not "require of a carrier, as
a condition to his continuing in said business, that he must carry anything and everything," and thereby
"render useless the facilities he may have for the carriage of certain lines of freight." It merely forbids failures
or refusals to receive persons or property for carriage which have the effect of giving an "unreasonable or
unnecessary preference or advantage" to any person, locality or particular kind of traffic, or of subjecting any
person, locality or particular kind of traffic to any undue or unreasonable prejudice or discrimination.
Counsel expressly admits that the statute, "as a prohibition against discrimination is a fair, reasonable and
valid exercise of government," and that "it is necessary and proper that such discrimination be prohibited and
prevented," but he contends that "on the other hand there is no reasonable warrant nor valid excuse for
depriving a person of his liberty by requiring him to engage in business against his will. If he has a rolling boat,
unsuitable and unprofitable for passenger trade, he may devote it to lumber carrying. To prohibit him from
using it unless it is fitted out with doctors and stewards and staterooms to carry passengers would be an
invalid confiscation of this property. A carrier may limit his business to the branches thereof that suit his
convenience. If his wagon be old, or the route dangerous, he may avoid liability for loss of passengers' lives
and limbs by carrying freight only. If his vehicles require expensive pneumatic tires, unsuitable for freight
transportation, ha may nevertheless carry passengers. The only limitation upon his action that it is competent
for the governing authority to impose is to require him to treat all alike. His limitations must apply to all, and
they must be established limitations. He cannot refuse to carry a case of red jusi on the ground that he has
carried for others only jusi that he was green, or blue, or black. But he can refuse to carry redjusi, if he has
publicly professed such a limitation upon his business and held himself out as unwilling to carry the same for
anyone."
To this it is sufficient answer to say that there is nothing in the statute which would deprive any person of his
liberty "by requiring him to engage in business against his will." The prohibitions of the statute against undue,
unnecessary or unreasonable regulations which the legislator has seen fit to prescribe for the conduct of the
business in which the carrier is engaged of his own free will and accord. In so far as the self-imposed
limitations by the carrier upon the business conducted by him, in the various examples given by counsel, do
not involve an unreasonable or unnecessary discrimination the statute would not control his action in any
wise whatever. It operates only in cases involving such unreasonable or unnecessary preferences or
discriminations. Thus in the hypothetical case suggested by the petitioner, a carrier engaged in the carriage
of green, blue or black jusi, and duly equipped therefor would manifestly be guilty of "giving an unnecessary
and unreasonable preference to a particular kind of traffic" and of subjecting to "an undue and reasonable
prejudice a particular kind of traffic," should he decline to carry red jusi, to the prejudice of a particular shipper
or of those engaged in the manufacture of that kind of jusi, basing his refusal on the ground of "mere whim or
caprice" or of mere personal convenience. So a public carrier of passengers would not be permitted under
this statute to absolve himself from liability for a refusal to carry a Chinaman, a Spaniard, an American, a
Filipino, or a mestizo by proof that from "mere whim or caprice or personal scruple," or to suit his own
convenience, or in the hope of increasing his business and thus making larger profits, he had publicly
announced his intention not to carry one or other of these classes of passengers.
The nature of the business of a common carrier as a public employment is such that it is clearly within the
power of the state to impose such just and reasonable regulations thereon in the interest of the public as the
legislator may deem proper. Of course such regulations must not have the effect of depriving an owner of his
property without due process of law, nor of confiscating or appropriating private property without just
compensation, nor of limiting or prescribing irrevocably vested rights or privileges lawfully acquired under a
charter or franchise. But aside from such constitutional limitations, the determination of the nature and extent
of the regulations which should be prescribed rests in the hands of the legislator.
Common carriers exercise a sort of public office, and have duties to perform in which the public is interested.
Their business is, therefore, affected with a public interest, and is subject of public regulation. (New Jersey
Steam Nav. Co. vs. Merchants Bank, 6 How., 344, 382; Munn vs. Illinois, 94 U.S., 113, 130.) Indeed, this
right of regulation is so far beyond question that it is well settled that the power of the state to exercise
legislative control over railroad companies and other carriers "in all respects necessary to protect the public
against danger, injustice and oppression" may be exercised through boards of commissioners. (New York etc.
R. Co. vs. Bristol, 151 U.S., 556, 571; Connecticut etc. R. Co. vs. Woodruff, 153 U.S., 689.)
Regulations limiting of passengers the number of passengers that may be carried in a particular vehicle or
steam vessel, or forbidding the loading of a vessel beyond a certain point, or prescribing the number and
qualifications of the personnel in the employ of a common carrier, or forbidding unjust discrimination as to
rates, all tend to limit and restrict his liberty and to control to some degree the free exercise of his discretion in
the conduct of his business. But since the Granger cases were decided by the Supreme Court of the United
States no one questions the power of the legislator to prescribe such reasonable regulations upon property
clothed with a public interest as he may deem expedient or necessary to protect the public against danger,
injustice or oppression. (Munn vs. Illinois, 94 U.S., 113, 130; Chicago etc. R. Co. vs. Cutts, 94 U.S., 155;
Budd vs. New York, 143 U.S., 517; Cotting vs. Goddard, 183 U.S., 79.) The right to enter the public
employment as a common carrier and to offer one's services to the public for hire does not carry with it the
right to conduct that business as one pleases, without regard to the interest of the public and free from such
reasonable and just regulations as may be prescribed for the protection of the public from the reckless or
careless indifference of the carrier as to the public welfare and for the prevention of unjust and unreasonable
discrimination of any kind whatsoever in the performance of the carrier's duties as a servant of the public.
Business of certain kinds, including the business of a common carrier, holds such a peculiar relation to the
public interest that there is superinduced upon it the right of public regulation. (Budd vs. New York, 143 U.S.,
517, 533.) When private property is "affected with a public interest it ceases to be juris privati only." Property
becomes clothed with a public interest when used in a manner to make it of public consequence and affect
the community at large. "When, therefore, one devotes his property to a use in which the public has an
interest, he, in effect, grants to the public an interest in that use, and must submit to be controlled by the
public for the common good, to the extent of the interest he has thus created. He may withdraw his grant by
discontinuing the use, but so long as he maintains the use he must submit to control." (Munn vs. Illinois, 94
U.S., 113; Georgia R. & Bkg. Co. vs. Smith, 128 U.S., 174; Budd vs. New York, 143 U.S., 517; Louisville etc.
Ry. Co. vs. Kentucky, 161 U.S., 677, 695.)
Of course this power to regulate is not a power to destroy, and limitation is not the equivalent of confiscation.
Under pretense of regulating fares and freight the state can not require a railroad corporation to carry persons
or property without reward. Nor can it do that which in law amounts to a taking of private property for public
use without just compensation, or without due process of law. (Chicago etc. R. Co. vs. Minnesota, 134 U.S.,
418; Minneapolis Eastern R. Co. vs. Minnesota, 134 U.S., 467.) But the judiciary ought not to interfere with
regulations established and palpably unreasonable as to make their enforcement equivalent to the taking of
property for public use without such compensation as under all the circumstances is just both to the owner
and to the public, that is, judicial interference should never occur unless the case presents, clearly and
beyond all doubt, such a flagrant attack upon the rights of property under the guise of regulations as to
compel the court to say that the regulation in question will have the effect to deny just compensation for
private property taken for the public use. (Chicago etc. R. Co. vs. Wellman, 143 U.S., 339; Smyth vs. Ames,
169 U.S., 466, 524; Henderson Bridge Co. vs. Henderson City, 173 U.S., 592, 614.)
Under the common law of England it was early recognized that common carriers owe to the public the duty of
carrying indifferently for all who may employ them, and in the order in which application is made, and without
discrimination as to terms. True, they were allowed to restrict their business so as to exclude particular
classes of goods, but as to the kinds of property which the carrier was in the habit of carrying in the
prosecution of his business he was bound to serve all customers alike (State vs. Cincinnati etc. R. Co., 47
Ohio St., 130, 134, 138; Louisville etc. Ry. Co. vs. Quezon City Coal Co., 13 Ky. L. Rep., 832); and it is to be
observed in passing that these common law rules are themselves regulations controlling, limiting and
prescribing the conditions under which common carriers were permitted to conduct their business.
(Munn vs. Illinois, 94 U. S., 113, 133.)
It was found, in the course of time, that the correction of abuses which had grown up with the enormously
increasing business of common carriers necessitated the adoption of statutory regulations controlling the
business of common carriers, and imposing severe and drastic penalties for violations of their terms. In
England, the Railway Clauses Consolidation Act was enacted in 1845, the Railway and Canal Traffic Act in
1854, and since the passage of those Acts much additional legislation has been adopted tending to limit and
control the conduct of their business by common carriers. In the United States, the business of common
carriers has been subjected to a great variety of statutory regulations. Among others Congress enacted "The
Interstate Commerce Act" (1887) and its amendments, and the Elkins Act as amended (1906); and most if not
all of the States of the Union have adopted similar legislation regulating the business of common carriers
within their respective jurisdictions. Unending litigation has arisen under these statutes and their amendments,
but nowhere has the right of the state to prescribe just and reasonable regulations controlling and limiting the
conduct of the business of common carriers in the public interest and for the general welfare been
successfully challenged, though of course there has been wide divergence of opinion as to the
reasonableness, the validity and legality of many of the regulations actually adopted.
The power of the Philippine legislator to prohibit and to penalize all and any unnecessary or unreasonable
discriminations by common carriers may be maintained upon the same reasoning which justified the
enactment by the Parliament of England and the Congress of the United States of the above mentioned
statutes prohibiting and penalizing the granting of certain preferences and discriminations in those countries.
As we have said before, we find nothing confiscatory or unreasonable in the conditions imposed in the
Philippine statute upon the business of common carriers. Correctly construed they do not force him to engage
in any business his will or to make use of his facilities in a manner or for a purpose for which they are not
reasonably adapted. It is only when he offers his facilities as a common carrier to the public for hire, that the
statute steps in and prescribes that he must treat all alike, that he may not pick and choose which customer
he will serve, and, specifically, that he shall not make any undue or unreasonable preferences or
discriminations whatsoever to the prejudice not only of any person or locality but also of any particular kind of
traffic.
The legislator having enacted a regulation prohibiting common carriers from giving unnecessary or
unreasonable preferences or advantages to any particular kind of traffic or subjecting any particular kind of
traffic to any undue or unreasonable prejudice or discrimination whatsoever, it is clear that whatever may
have been the rule at the common law, common carriers in this jurisdiction cannot lawfully decline to accept a
particular class of goods for carriage, to the prejudice of the traffic in those goods, unless it appears that for
some sufficient reason the discrimination against the traffic in such goods is reasonable and necessary. Mere
whim or prejudice will not suffice. The grounds for the discrimination must be substantial ones, such as will
justify the courts in holding the discrimination to have been reasonable and necessary under all
circumstances of the case.
The prayer of the petition in the case at bar cannot be granted unless we hold that the refusal of the
defendant steamship company to accept for carriage on any of its vessels "dynamite, gunpowder or other
explosives" would in no instance involve a violation of the provisions of this statute. There can be little doubt,
however, that cases may and will arise wherein the refusal of a vessel "engaged in the coastwise trade of the
Philippine Islands as a common carrier" to accept such explosives for carriage would subject some person,
company, firm or corporation, or locality, or particular kind of traffic to a certain prejudice or discrimination.
Indeed it cannot be doubted that the refusal of a "steamship company, the owner of a large number of
vessels" engaged in that trade to receive for carriage any such explosives on any of its vessels would subject
the traffic in such explosives to a manifest prejudice and discrimination. The only question to be determined
therefore is whether such prejudice or discrimination might in any case prove to be undue, unnecessary or
unreasonable.
This of course is, in each case, a question of fact, and we are of the opinion that the facts alleged in the
complaint are not sufficient to sustain a finding in favor of the contentions of the petitioner. It is not alleged in
the complaint that "dynamite, gunpowder and other explosives" can in no event be transported with
reasonable safety on board steam vessels engaged in the business of common carriers. It is not alleged that
all, or indeed any of the defendant steamship company's vessels are unsuited for the carriage of such
explosives. It is not alleged that the nature of the business in which the steamship company is engaged is
such as to preclude a finding that a refusal to accept such explosives on any of its vessels would subject the
traffic in such explosives to an undue and unreasonable prejudice and discrimination.
Plaintiff's contention in this regard is as follows:
In the present case, the respondent company has expressly and publicly renounced the carriage of
explosives, and expressly excluded the same terms from the business it conducts. This in itself were
sufficient, even though such exclusion of explosives were based on no other ground than the mere whim,
caprice or personal scruple of the carrier. It is unnecessary, however, to indulge in academic discussion of a
moot question, for the decision not a carry explosives rests on substantial grounds which are self-evident.
We think however that the answer to the question whether such a refusal to carry explosives involves an
unnecessary or unreasonable preference or advantage to any person, locality or particular kind of traffic or
subjects any person, locality or particular to traffic to an undue or unreasonable prejudice and discrimination
is by no means "self-evident," and that it is a question of fact to be determined by the particular circumstances
of each case.
The words "dynamite, powder or other explosives" are broad enough to include matches, and other articles of
like nature, and may fairly be held to include also kerosene oil, gasoline and similar products of a highly
inflammable and explosive character. Many of these articles of merchandise are in the nature of necessities
in any country open to modern progress and advancement. We are not fully advised as to the methods of
transportation by which they are made commercially available throughout the world, but certain it is that
dynamite, gunpowder, matches, kerosene oil and gasoline are transported on many vessels sailing the high
seas. Indeed it is a matter of common knowledge that common carriers throughout the world transport
enormous quantities of these explosives, on both land and sea, and there can be little doubt that a general
refusal of the common carriers in any country to accept such explosives for carriage would involve many
persons, firms and enterprises in utter ruin, and would disastrously affect the interests of the public and the
general welfare of the community.
It would be going to far to say that a refusal by a steam vessel engaged in the business of transporting
general merchandise as a common carrier to accept for carriage a shipment of matches, solely on the ground
of the dangers incident to the explosive quality of this class of merchandise, would not subject the traffic in
matches to an unnecessary, undue or unreasonable prejudice and discrimination without proof that for some
special reason the particular vessel is not fitted to carry articles of that nature. There may be and doubtless
are some vessels engaged in business as common carriers of merchandise, which for lack of suitable deck
space or storage rooms might be justified in declining to carry kerosene oil, gasoline, and similar products,
even when offered for carriage securely packed in cases; and few vessels are equipped to transport those
products in bulk. But in any case of a refusal to carry such products which would subject any person, locality
or the traffic in such products would be necessary to hear evidence before making an affirmative finding that
such prejudice or discrimination was or was not unnecessary, undue or unreasonable. The making of such a
finding would involve a consideration of the suitability of the vessel for the transportation of such products ;
the reasonable possibility of danger or disaster resulting from their transportation in the form and under the
conditions in which they are offered for carriage; the general nature of the business done by the carrier and,
in a word, all the attendant circumstances which might affect the question of the reasonable necessity for the
refusal by the carrier to undertake the transportation of this class of merchandise.
But it is contended that whatever the rule may be as to other explosives, the exceptional power and violence
of dynamite and gunpowder in explosion will always furnish the owner of a vessel with a reasonable excuse
for his failure or refusal to accept them for carriage or to carry them on board his boat. We think however that
even as to dynamite and gunpowder we would not be justified in making such a holding unaided by evidence
sustaining the proposition that these articles can never be carried with reasonable safety on any vessel
engaged in the business of a common carrier. It is said that dynamite is so erratic an uncontrollable in its
action that it is impossible to assert that it can be handled with safety in any given case. On the other hand it
is contended that while this may be true of some kinds of dynamite, it is a fact that dynamite can be and is
manufactured so as to eliminate any real danger from explosion during transportation. These are of course
questions of fact upon which we are not qualified to pass judgment without the assistance of expert witnesses
who have made special studies as to the chemical composition and reactions of the different kinds of
dynamite, or attained a thorough knowledge of its properties as a result of wide experience in its manufacture
and transportation.
As we construe the Philippine statute, the mere fact that violent and destructive explosions can be obtained
by the use of dynamite under certain conditions would not be sufficient in itself to justify the refusal of a vessel,
duly licensed as a common carrier of merchandise, to accept it for carriage, if it can be proven that in the
condition in which it is offered for carriage there is no real danger to the carrier, nor reasonable ground to fear
that his vessel or those on board his vessel will be exposed to unnecessary and unreasonable risk in
transporting it, having in mind the nature of his business as a common carrier engaged in the coastwise trade
in the Philippine Islands, and his duty as a servant of the public engaged in a public employment. So also, if
by the exercise of due diligence and the taking of unreasonable precautions the danger of explosions can be
practically eliminated, the carrier would not be justified in subjecting the traffic in this commodity to prejudice
or discrimination by proof that there would be a possibility of danger from explosion when no such
precautions are taken.
The traffic in dynamite, gunpowder and other explosives is vitally essential to the material and general welfare
of the people of these Islands. If dynamite, gunpowder and other explosives are to continue in general use
throughout the Philippines, they must be transported by water from port to port in the various islands which
make up the Archipelago. We are satisfied therefore that the refusal by a particular vessel, engaged as a
common carrier of merchandise in the coastwise trade of the Philippine Islands, to accept any or all of these
explosives for carriage would constitute a violation of the prohibitions against discriminations penalized under
the statute, unless it can be shown by affirmative evidence that there is so real and substantial a danger of
disaster necessarily involved in the carriage of any or all of these articles of merchandise as to render such
refusal a due or a necessary or a reasonable exercise of prudence and discretion on the part of the
shipowner.
The complaint in the case at bar lacking the necessary allegations under this ruling, the demurrer must be
sustained on the ground that the facts alleged do not constitute a cause of action.
A number of interesting questions of procedure are raised and discussed in the briefs of counsel. As to all of
these questions we expressly reserve our opinion, believing as we do that in sustaining the demurrer on the
grounds indicated in this opinion we are able to dispose of the real issue involved in the proceedings without
entering upon the discussion of the nice questions which it might have been necessary to pass upon had it
appeared that the facts alleged in the complaint constitute a cause of action.
We think, however, that we should not finally dispose of the case without indicating that since the institution of
these proceedings the enactment of Acts No. 2307 and No. 2362 (creating a Board of Public Utility
Commissioners and for other purposes) may have materially modified the right to institute and maintain such
proceedings in this jurisdiction. But the demurrer having been formallly submitted for judgment before the
enactment of these statutes, counsel have not been heard in this connection. We therefore refrain from any
comment upon any questions which might be raised as to whether or not there may be another adequate and
appropriate remedy for the alleged wrong set forth in the complaint. Our disposition of the question raised by
the demurrer renders that unnecessary at this time, though it may not be improper to observe that a careful
examination of those acts confirms us in the holding upon which we base our ruling on this demurrer, that is
to say "That whatever may have been the rule at the common law, common carriers in this jurisdiction cannot
lawfully decline to accept a particular class of goods for carriage, to the prejudice of the traffic in those goods,
unless it appears that for some sufficient reason the discrimination against the traffic in such goods is
reasonable and necessary. Mere prejudice or whim will not suffice. The grounds of the discrimination must be
substantial ones, such as will justify the courts in holding the discrimination to have been reasonable and
necessary under all the circumstances of the case."
Unless an amended complaint be filed in the meantime, let judgment be entered ten days hereafter
sustaining the demurrer and dismissing the complaint with costs against the complainant, and twenty days
thereafter let the record be filed in the archives of original actions in this court. So ordered.
Valid grounds for non- acceptance

Article 356-357-358 of the Code of Commerce(COC)
Article 1742 of the NCC
Duty to deliver goods
Consequences of delay
Article 1740 NCC
Article 1747 NCC
A. 370 COC
A. 371 COC
A. 372 COC
A. 373 COC
A. 374 COC
Rights of passengers in case of delay
Article 698 COC
Trans-asia Shipping Lines, Inc. v. CA

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, vis-a-vis, the decision of 29 June 1992 in Civil Case No. 91-491 of the Regional Trial Court (RTC) of
[2]
Cagayan de Oro City, Branch 24, as well as the allegations and arguments adduced by the parties, we find
[3]
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 City for they were no longer willing
to continue their voyage to Cagayan de Oro City. The captain acceded [sic] to their request and thus the vessel headed
back to Cebu City.
At Cebu City, 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 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 and ruled that the action was only for breach of
[7]
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, the Court of Appeals reversed the trial courts decision by applying
[11]
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 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 x x x
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. Exemplary damages are designed by our civil law to permit the courts to
[17]
reshape behavior that is socially deleterious in its consequence by creating x x x negative incentives or
deterrents against such behavior. [18]
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. The failure of [21]
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. Anent a breach of a contract of common carriage, moral
[24]
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. In contracts and quasi-contracts, exemplary
[26]
damages may be awarded if the defendant acted in a wanton fraudulent, reckless, oppressive or malevolent
manner. It cannot, however, be considered as a matter of right; the court having to decide whether or not
[27]
they should be adjudicated. Before the court may consider an award for exemplary damages, the plaintiff
[28]
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 Kawit Island 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 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, which the [30]
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, not as moral damages nor judicial
[32] [33]
costs. Hence, to merit such an award, it is settled that the amount thereof must be proven. Moreover, such
[34] [35]
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. Finally, it must be
[36]
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. In sum, for lack of factual and legal basis, the award of
[37]
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.
Marina regulation Mem. Circular no. 112
Place of delivery
A. 360 COC
A. 368 COC
A. 369 COC
To whom delivered
Delay to transport Passengers

Marina Memorandum Circular no. 112 December 15, 1995
Duty to Exercise Extra-ordinary Diligence
1.1 Code of commerce provisions
1.2 Presumption of negligence
1.3 Duration of Duty in Carriage of Goods
1.4 Commencement of Duty in Carriage of Passengers
Laws and jurisprudence:

a. Article 1733 of the NCC
b. Artilc 1755 of the NCC
c. Article 1736 of the NCC
d. Article of 1737 of the NCC
e. Article of 1738 of the NCC
Mariano v. Calleja July 31, 2009

On appeal are the Decision[1] and Resolution[2] of the Court of Appeals in CA-G.R. CV No. 66891, dated May 21, 2004
and January 7, 2005 respectively, which reversed the Decision[3] of the Regional Trial Court (RTC) of Quezon City,
dated September 13, 1999, which found respondents jointly and severally liable to pay petitioner damages for the death
of his wife.
First, the facts:
Petitioner Herminio Mariano, Jr. is the surviving spouse of Dr. Frelinda Mariano who was a passenger of a
Celyrosa Express bus bound for Tagaytay when she met her death. Respondent Ildefonso C. Callejas is the registered
owner of Celyrosa Express, while respondent Edgar de Borja was the driver of the bus on which the deceased was a
passenger.
At around 6:30 p.m. on November 12, 1991, along Aguinaldo Highway, San Agustin, Dasmarias, Cavite, the
Celyrosa Express bus, carrying Dr. Mariano as its passenger, collided with an Isuzu truck with trailer bearing plate
numbers PJH 906 and TRH 531. The passenger bus was bound for Tagaytay while the trailer truck came from the
opposite direction, bound for Manila. The trailer truck bumped the passenger bus on its left middle portion. Due to the
impact, the passenger bus fell on its right side on the right shoulder of the highway and caused the death of Dr. Mariano
and physical injuries to four other passengers. Dr. Mariano was 36 years old at the time of her death. She left behind
three minor children, aged four, three and two years.
Petitioner filed a complaint for breach of contract of carriage and damages against respondents for their failure
to transport his wife and mother of his three minor children safely to her destination. Respondents denied liability for
the death of Dr. Mariano. They claimed that the proximate cause of the accident was the recklessness of the driver of
the trailer truck which bumped their bus while allegedly at a halt on the shoulder of the road in its rightful lane. Thus,
respondent Callejas filed a third-party complaint against Liong Chio Chang, doing business under the name and style of
La Perla Sugar Supply, the owner of the trailer truck, for indemnity in the event that he would be held liable for
damages to petitioner.
Other cases were filed. Callejas filed a complaint,[4] docketed as Civil Case No. NC-397 before the RTC of
Naic, Cavite, against La Perla Sugar Supply and Arcadio Arcilla, the truck driver, for damages he incurred due to the
vehicular accident. On September 24, 1992, the said court dismissed the complaint against La Perla Sugar Supply for
lack of evidence. It, however, found Arcilla liable to pay Callejas the cost of the repairs of his passenger bus, his lost
earnings, exemplary damages and attorneys fees.[5]
A criminal case, Criminal Case No. 2223-92, was also filed against truck driver Arcilla in the RTC of Imus,
Cavite. On May 3, 1994, the said court convicted truck driver Arcadio Arcilla of the crime of reckless imprudence
resulting to homicide, multiple slight physical injuries and damage to property.[6]
In the case at bar, the trial court, in its Decision dated September 13, 1999, found respondents Ildefonso
Callejas and Edgar de Borja, together with Liong Chio Chang, jointly and severally liable to pay petitioner damages
and costs of suit. The dispositive portion of the Decision reads:
ACCORDINGLY, the defendants are ordered to pay as follows:
1. The sum of P50,000.00 as civil indemnity for the loss of life;
2. The sum of P40,000.00 as actual and compensatory damages;
3. The sum of P1,829,200.00 as foregone income;
4. The sum of P30,000.00 as moral damages;
5. The sum of P20,000.00 as exemplary damages;
6. The costs of suit.
SO ORDERED.[7]
Respondents Callejas and De Borja appealed to the Court of Appeals, contending that the trial court erred in holding
them guilty of breach of contract of carriage.
On May 21, 2004, the Court of Appeals reversed the decision of the trial court. It reasoned:
. . . 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 wilful 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. [8]
The dispositive portion of the Decision reads:
WHEREFORE, the decision appealed from, insofar as it found defendants-appellants Ildefonso
Callejas and Edgar de Borja liable for damages to plaintiff-appellee Herminio E. Mariano, Jr., is
REVERSED and SET ASIDE and another one entered absolving them from any liability for the death of Dr.
Frelinda Cargo Mariano.[9]
The appellate court also denied the motion for reconsideration filed by petitioner.
Hence, this appeal, relying on the following ground:
THE DECISION OF THE HONORABLE COURT OF APPEALS, SPECIAL FOURTEENTH DIVISION
IS NOT IN ACCORD WITH THE FACTUAL BASIS OF THE CASE.[10]
The following are the provisions of the Civil Code pertinent to the case at bar:
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.
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.
In accord with the above provisions, Celyrosa Express, a common carrier, through its driver, respondent De
Borja, and its registered owner, respondent Callejas, has the express obligation 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,[11] and to observe extraordinary diligence in the discharge of its duty. The death of the wife of the
petitioner in the course of transporting her to her destination gave rise to the presumption of negligence of the
carrier.To overcome the presumption, respondents have to show that they observed extraordinary diligence in the
discharge of their duty, or that the accident was caused by a fortuitous event.
This Court interpreted the above quoted provisions in Pilapil v. Court of Appeals.[12] We elucidated:
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.
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 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.
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.
In the case at bar, petitioner cannot succeed in his contention that respondents failed to overcome the
presumption of negligence against them. The totality of evidence shows that the death of petitioners spouse was caused
by the reckless negligence of the driver of the Isuzu trailer truck which lost its brakes and bumped the Celyrosa Express
bus, owned and operated by respondents.
First, we advert to the sketch prepared by PO3 Magno S. de Villa, who investigated the accident. The
sketch[13] shows the passenger bus facing the direction of Tagaytay City and lying on its right side on the shoulder of
the road, about five meters away from the point of impact. On the other hand, the trailer truck was on the opposite
direction, about 500 meters away from the point of impact. PO3 De Villa stated that he interviewed De Borja,
respondent driver of the passenger bus, who said that he was about to unload some passengers when his bus was
bumped by the driver of the trailer truck that lost its brakes. PO3 De Villa checked out the trailer truck and found that
its brakes really failed. He testified before the trial court, as follows:
ATTY. ESTELYDIZ:
q You pointed to the Isuzu truck beyond the point of impact. Did you investigate why did (sic) the Isuzu
truck is beyond the point of impact?
a Because the truck has no brakes.
COURT:
q What is the distance between that circle which is marked as Exh. 1-c to the place where you found the
same?
a More or less 500 meters.
q Why did you say that the truck has no brakes?
a I tested it.
q And you found no brakes?
a Yes, sir.
xxx
q When you went to the scene of accident, what was the position of Celyrosa bus?
a It was lying on its side.
COURT:
q Right side or left side?
a Right side.
ATTY. ESTELYDIZ:
q On what part of the road was it lying?
a On the shoulder of the road.
COURT:
q How many meters from the point of impact?
a Near, about 5 meters.[14]
His police report bolsters his testimony and states:
Said vehicle 1 [passenger bus] was running from Manila toward south direction when, in the
course of its travel, it was hit and bumped by vehicle 2 [truck with trailer] then running fast from opposite
direction, causing said vehicle 1 to fall on its side on the road shoulder, causing the death of one and
injuries of some passengers thereof, and its damage, after collission (sic), vehicle 2 continiously (sic) ran
and stopped at approximately 500 meters away from the piont (sic) of impact.[15]
In fine, the evidence shows that before the collision, the passenger bus was cruising on its rightful lane along the
Aguinaldo Highway when the trailer truck coming from the opposite direction, on full speed, suddenly swerved and
encroached on its lane, and bumped the passenger bus on its left middle portion. Respondent driver De Borja had every
right to expect that the trailer truck coming from the opposite direction would stay on its proper lane. He was not
expected to know that the trailer truck had lost its brakes. The swerving of the trailer truck was abrupt and it was
running on a fast speed as it was found 500 meters away from the point of collision. Secondly, any doubt as to the
culpability of the driver of the trailer truck ought to vanish when he pleaded guilty to the charge of reckless imprudence
resulting to multiple slight physical injuries and damage to property in Criminal Case No. 2223-92, involving the same
incident.
IN VIEW WHEREOF, the petition is DENIED. The Decision dated May 21, 2004 and the Resolution dated
January 7, 2005 of the Court of Appeals in CA-G.R. CV No. 66891 are AFFIRMED.
SO ORDERED
Belgian Overseas Chartering and Shipping v. Phil. First Ins. Co., June 5, 2002
Proof of the delivery of goods in good order to a common carrier and of their arrival in bad order at their
destination constitutes prima facie fault or negligence on the part of the carrier. If no adequate explanation is given as to
how the loss, the destruction or the deterioration of the goods happened, the carrier shall be held liable therefor.
Statement of the Case
Before us is a Petition for Review under Rule 45 of the Rules of Court, assailing the July 15, 1998 Decision [1] and
the May 2, 2000 Resolution[2] of the Court of Appeals[3] (CA) in CA-GR CV No. 53571. The decretal portion of the
Decision reads as follows:
WHEREFORE, in the light of the foregoing disquisition, the decision appealed from is hereby REVERSED and SET
ASIDE. Defendants-appellees are ORDERED to jointly and severally pay plaintiffs-appellants the following:
1) FOUR Hundred Fifty One Thousand Twenty-Seven Pesos and 32/100 (P451,027.32) as actual
damages, representing the value of the damaged cargo, plus interest at the legal rate from the time of
filing of the complaint on July 25, 1991, until fully paid;
2) Attorneys fees amounting to 20% of the claim; and
3) Costs of suit.[4]
The assailed Resolution denied petitioners Motion for Reconsideration.

The CA reversed the Decision of the Regional Trial Court (RTC) of Makati City (Branch 134), which had
disposed as follows:
WHEREFORE, in view of the foregoing, judgment is hereby rendered, dismissing the complaint, as well as defendants
counterclaim.[5]
The Facts
The factual antecedents of the case are summarized by the Court of Appeals in this wise:
On June 13, 1990, CMC Trading A.G. shipped on board the MN Anangel Sky at Hamburg, Germany 242 coils of
various Prime Cold Rolled Steel sheets for transportation to Manila consigned to the Philippine Steel Trading
Corporation. On July 28, 1990, MN Anangel Sky arrived at the port of Manila and, within the subsequent days,
discharged the subject cargo. Four (4) coils were found to be in bad order B.O. Tally sheet No. 154974. Finding the
four (4) coils in their damaged state to be unfit for the intended purpose, the consignee Philippine Steel Trading
Corporation declared the same as total loss.
Despite receipt of a formal demand, defendants-appellees refused to submit to the consignees claim. Consequently,
plaintiff-appellant paid the consignee five hundred six thousand eighty six & 50/100 pesos (P506,086.50), and was
subrogated to the latters rights and causes of action against defendants-appellees. Subsequently, plaintiff-appellant
instituted this complaint for recovery of the amount paid by them, to the consignee as insured.
Impugning the propriety of the suit against them, defendants-appellees imputed that the damage and/or loss was due to
pre-shipment damage, to the inherent nature, vice or defect of the goods, or to perils, danger and accidents of the sea, or
to insufficiency of packing thereof, or to the act or omission of the shipper of the goods or their representatives. In
addition thereto, defendants-appellees argued that their liability, if there be any, should not exceed the limitations of
liability provided for in the bill of lading and other pertinent laws. Finally, defendants-appellees averred that, in any
event, they exercised due diligence and foresight required by law to prevent any damage/loss to said shipment.[6]
Ruling of the Trial Court
The RTC dismissed the Complaint because respondent had failed to prove its claims with the quantum of proof
required by law.[7]
It likewise debunked petitioners counterclaim, because respondents suit was not manifestly frivolous or primarily
intended to harass them.[8]
In reversing the trial court, the CA ruled that petitioners were liable for the loss or the damage of the goods
shipped, because they had failed to overcome the presumption of negligence imposed on common carriers.
The CA further held as inadequately proven petitioners claim that the loss or the deterioration of the goods was
due to pre-shipment damage.[9] It likewise opined that the notation metal envelopes rust stained and slightly dented
placed on the Bill of Lading had not been the proximate cause of the damage to the four (4) coils.[10]
As to the extent of petitioners liability, the CA held that the package limitation under COGSA was not applicable,
because the words L/C No. 90/02447 indicated that a higher valuation of the cargo had been declared by the
shipper. The CA, however, affirmed the award of attorneys fees.
Hence, this Petition.[11]
Issues
In their Memorandum, petitioners raise the following issues for the Courts consideration:
I
Whether or not plaintiff by presenting only one witness who has never seen the subject shipment and whose testimony
is purely hearsay is sufficient to pave the way for the applicability of Article 1735 of the Civil Code;
II
Whether or not the consignee/plaintiff filed the required notice of loss within the time required by law;
III
Whether or not a notation in the bill of lading at the time of loading is sufficient to show pre-shipment damage and to
exempt herein defendants from liability;
IV
Whether or not the PACKAGE LIMITATION of liability under Section 4 (5) of COGSA is applicable to the case at
bar.[12]
In sum, the issues boil down to three:

1. Whether petitioners have overcome the presumption of negligence of a common carrier
2. Whether the notice of loss was timely filed
3. Whether the package limitation of liability is applicable
This Courts Ruling
The Petition is partly meritorious.
First Issue:
Proof of Negligence
Petitioners contend that the presumption of fault imposed on common carriers should not be applied on the basis
of the lone testimony offered by private respondent. The contention is untenable.
Well-settled is the rule that common carriers, from the nature of their business and for reasons of public policy, are
bound to observe extraordinary diligence and vigilance with respect to the safety of the goods and the passengers they
transport.[13] Thus, common carriers are required to render service with the greatest skill and foresight and to use all
reason[a]ble means to ascertain the nature and characteristics of the goods tendered for shipment, and to exercise due
care in the handling and stowage, including such methods as their nature requires.[14] The extraordinary responsibility
lasts from the time the goods are unconditionally placed in the possession of and received for transportation by the
carrier until they are delivered, actually or constructively, to the consignee or to the person who has a right to receive
them.[15]
This strict requirement is justified by the fact that, without a hand or a voice in the preparation of such contract,
the riding public enters into a contract of transportation with common carriers.[16] Even if it wants to, it cannot submit its
own stipulations for their approval.[17] Hence, it merely adheres to the agreement prepared by them.
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 they transported deteriorated or got lost or destroyed.[18] That is, unless they prove
that they exercised extraordinary diligence in transporting the goods.[19] In order to avoid responsibility for any loss or
damage, therefore, they have the burden of proving that they observed such diligence.[20]
However, the presumption of fault or negligence will not arise[21] if the loss is due to any of the following causes:
(1) flood, storm, earthquake, lightning, or other natural disaster or calamity; (2) an act of the public enemy in war,
whether international or civil; (3) an act or omission of the shipper or owner of the goods; (4) the character of the goods
or defects in the packing or the container; or (5) an order or act of competent public authority.[22] This is a closed list. If
the cause of destruction, loss or deterioration is other than the enumerated circumstances, then the carrier is liable
therefor.[23]
Corollary to the foregoing, mere proof of delivery of the goods in good order to a common carrier and of their
arrival in bad order at their destination constitutes a prima facie case of fault or negligence against the carrier. If no
adequate explanation is given as to how the deterioration, the loss or the destruction of the goods happened, the
transporter shall be held responsible.[24]
That petitioners failed to rebut the prima facie presumption of negligence is revealed in the case at bar by a review
of the records and more so by the evidence adduced by respondent.[25]
First, as stated in the Bill of Lading, petitioners received the subject shipment in good order and condition in
Hamburg, Germany.[26]
Second, prior to the unloading of the cargo, an Inspection Report[27] prepared and signed by representatives of both
parties showed the steel bands broken, the metal envelopes rust-stained and heavily buckled, and the contents thereof
exposed and rusty.
Third, Bad Order Tally Sheet No. 154979[28] issued by Jardine Davies Transport Services, Inc., stated that the four
coils were in bad order and condition. Normally, a request for a bad order survey is made in case there is an apparent or
a presumed loss or damage.[29]
Fourth, the Certificate of Analysis[30] stated that, based on the sample submitted and tested, the steel sheets found
in bad order were wet with fresh water.
Fifth, petitioners -- in a letter[31] addressed to the Philippine Steel Coating Corporation and dated October 12, 1990
-- admitted that they were aware of the condition of the four coils found in bad order and condition.
These facts were confirmed by Ruperto Esmerio, head checker of BM Santos Checkers Agency. Pertinent portions
of his testimony are reproduce hereunder:
Q. Mr. Esmerio, you mentioned that you are a Head Checker. Will you inform the Honorable Court with what company you are
connected?
A. BM Santos Checkers Agency, sir.
Q. How is BM Santos Checkers Agency related or connected with defendant Jardine Davies Transport Services?
A. It is the company who contracts the checkers, sir.
Q. You mentioned that you are a Head Checker, will you inform this Honorable Court your duties and responsibilities?
A. I am the representative of BM Santos on board the vessel, sir, to supervise the discharge of cargoes.
xxxxxxxxx
Q. On or about August 1, 1990, were you still connected or employed with BM Santos as a Head Checker?
A. Yes, sir.
Q. And, on or about that date, do you recall having attended the discharging and inspection of cold steel sheets in coil on board the
MV/AN ANGEL SKY?
A. Yes, sir, I was there.
xxxxxxxxx
Q. Based on your inspection since you were also present at that time, will you inform this Honorable Court the condition or the
appearance of the bad order cargoes that were unloaded from the MV/ANANGEL SKY?
ATTY. MACAMAY:
Objection, Your Honor, I think the document itself reflects the condition of the cold steel sheets and the best evidence is the
document itself, Your Honor that shows the condition of the steel sheets.
COURT:
Let the witness answer.
A. The scrap of the cargoes is broken already and the rope is loosen and the cargoes are dent on the sides.[32]
All these conclusively prove the fact of shipment in good order and condition and the consequent damage to the
four coils while in the possession of petitioner,[33] who notably failed to explain why.[34]
Further, petitioners failed to prove that they observed the extraordinary diligence and precaution which the law
requires a common carrier to know and to follow, to avoid damage to or destruction of the goods entrusted to it for safe
carriage and delivery.[35]
True, the words metal envelopes rust stained and slightly dented were noted on the Bill of Lading; however, there
is no showing that petitioners exercised due diligence to forestall or lessen the loss.[36] Having been in the service for
several years, the master of the vessel should have known at the outset that metal envelopes in the said state would
eventually deteriorate when not properly stored while in transit.[37] Equipped with the proper knowledge of the nature of
steel sheets in coils and of the proper way of transporting them, the master of the vessel and his crew should have
undertaken precautionary measures to avoid possible deterioration of the cargo. But none of these measures was
taken.[38] Having failed to discharge the burden of proving that they have exercised the extraordinary diligence required
by law, petitioners cannot escape liability for the damage to the four coils.[39]
In their attempt to escape liability, petitioners further contend that they are exempted from liability under Article
1734(4) of the Civil Code. They cite the notation metal envelopes rust stained and slightly dented printed on the Bill of
Lading as evidence that the character of the goods or defect in the packing or the containers was the proximate cause of
the damage. We are not convinced.
From the evidence on record, it cannot be reasonably concluded that the damage to the four coils was due to the
condition noted on the Bill of Lading.[40] The aforecited exception refers to cases when goods are lost or damaged while
in transit as a result of the natural decay of perishable goods or the fermentation or evaporation of substances liable
therefor, the necessary and natural wear of goods in transport, defects in packages in which they are shipped, or the
natural propensities of animals.[41] None of these is present in the instant case.
Further, even if the fact of improper packing was known to the carrier or its crew or was apparent upon ordinary
observation, it is not relieved of liability for loss or injury resulting therefrom, once it accepts the goods
notwithstanding such condition.[42] Thus, petitioners have not successfully proven the application of any of the
aforecited exceptions in the present case.[43]
Second Issue:
Notice of Loss
Petitioners claim that pursuant to Section 3, paragraph 6 of the Carriage of Goods by Sea Act[44] (COGSA),
respondent should have filed its Notice of Loss within three days from delivery. They assert that the cargo was
discharged on July 31, 1990, but that respondent filed its Notice of Claim only on September 18, 1990.[45]
We are not persuaded. First, the above-cited provision of COGSA provides that the notice of claim need not be
given if the state of the goods, at the time of their receipt, has been the subject of a joint inspection or survey. As stated
earlier, prior to unloading the cargo, an Inspection Report[46] as to the condition of the goods was prepared and signed by
representatives of both parties.[47]
Second, as stated in the same provision, a failure to file a notice of claim within three days will not bar recovery if
it is nonetheless filed within one year.[48] This one-year prescriptive period also applies to the shipper, the consignee, the
insurer of the goods or any legal holder of the bill of lading.[49]
In Loadstar Shipping Co., Inc. v. Court of Appeals,[50] we ruled that a claim is not barred by prescription as long as
the one-year period has not lapsed. Thus, in the words of the ponente, Chief Justice Hilario G. Davide Jr.:
Inasmuch as the neither the Civil Code nor the Code of Commerce states a specific prescriptive period on the matter,
the Carriage of Goods by Sea Act (COGSA)--which provides for a one-year period of limitation on claims for loss of,
or damage to, cargoes sustained during transit--may be applied suppletorily to the case at bar.
In the present case, the cargo was discharged on July 31, 1990, while the Complaint[51] was filed by respondent on
July 25, 1991, within the one-year prescriptive period.
Third Issue:
Package Limitation
Assuming arguendo they are liable for respondents claims, petitioners contend that their liability should be limited
to US$500 per package as provided in the Bill of Lading and by Section 4(5)[52] of COGSA.[53]
On the other hand, respondent argues that Section 4(5) of COGSA is inapplicable, because the value of the subject
shipment was declared by petitioners beforehand, as evidenced by the reference to and the insertion of the Letter of
Credit or L/C No. 90/02447 in the said Bill of Lading.[54]
A bill of lading serves two functions. First, it is a receipt for the goods shipped.[55] Second, it is a contract by which
three parties -- namely, the shipper, the carrier, and the consignee -- undertake specific responsibilities and assume
stipulated obligations.[56] In a nutshell, the acceptance of the bill of lading by the shipper and the consignee, with full
knowledge of its contents, gives rise to the presumption that it constituted a perfected and binding contract.[57]
Further, a stipulation in the bill of lading limiting to a certain sum the common carriers liability for loss or
destruction of a cargo -- unless the shipper or owner declares a greater value[58] -- is sanctioned by law.[59] There are,
however, two conditions to be satisfied: (1) the contract is reasonable and just under the circumstances, and (2) it has
been fairly and freely agreed upon by the parties.[60] The rationale for, this rule is to bind the shippers by their agreement
to the value (maximum valuation) of their goods.[61]
It is to be noted, however, that the Civil Code does not limit the liability of the common carrier to a fixed amount
per package.[62] In all matters not regulated by the Civil Code, the right and the obligations of common carriers shall be
governed by the Code of Commerce and special laws.[63] Thus, the COGSA, which is suppletory to the provisions of the
Civil Code, supplements the latter by establishing a statutory provision limiting the carriers liability in the absence of a
shippers declaration of a higher value in the bill of lading.[64] The provisions on limited liability are as much a part of the
bill of lading as though physically in it and as though placed there by agreement of the parties.[65]
In the case before us, there was no stipulation in the Bill of Lading[66] limiting the carriers liability. Neither did the
shipper declare a higher valuation of the goods to be shipped. This fact notwithstanding, the insertion of the words L/C
No. 90/02447 cannot be the basis for petitioners liability.
First, a notation in the Bill of Lading which indicated the amount of the Letter of Credit obtained by the shipper
for the importation of steel sheets did not effect a declaration of the value of the goods as required by the bill.[67]That
notation was made only for the convenience of the shipper and the bank processing the Letter of Credit.[68]
Second, in Keng Hua Paper Products v. Court of Appeals,[69] we held that a bill of lading was separate from the
Other Letter of Credit arrangements. We ruled thus:
(T)he contract of carriage, as stipulated in the bill of lading in the present case, must be treated independently of the
contract of sale between the seller and the buyer, and the contract of issuance of a letter of credit between the amount of
goods described in the commercial invoice in the contract of sale and the amount allowed in the letter of credit will not
affect the validity and enforceability of the contract of carriage as embodied in the bill of lading. As the bank cannot be
expected to look beyond the documents presented to it by the seller pursuant to the letter of credit, neither can the
carrier be expected to go beyond the representations of the shipper in the bill of lading and to verify their
accuracy vis--vis the commercial invoice and the letter of credit. Thus, the discrepancy between the amount of goods
indicated in the invoice and the amount in the bill of lading cannot negate petitioners obligation to private respondent
arising from the contract of transportation.[70]
In the light of the foregoing, petitioners liability should be computed based on US$500 per package and not on the
per metric ton price declared in the Letter of Credit.[71] In Eastern Shipping Lines, Inc. v. Intermediate Appellate
Court[72] we explained the meaning of package:
When what would ordinarily be considered packages are shipped in a container supplied by the carrier and the number
of such units is disclosed in the shipping documents, each of those units and not the container constitutes the package
referred to in the liability limitation provision of Carriage of Goods by Sea Act.
Considering, therefore, the ruling in Eastern Shipping Lines and the fact that the Bill of Lading clearly disclosed
the contents of the containers, the number of units, as well as the nature of the steel sheets, the four damaged coils
should be considered as the shipping unit subject to the US$500 limitation.
WHEREFORE, the Petition is partly granted and the assailed Decision MODIFIED. Petitioners liability is
reduced to US$2,000 plus interest at the legal rate of six percent from the time of the filing of the Complaint on July 25,
1991 until the finality of this Decision, and 12 percent thereafter until fully paid. No pronouncement as to costs.
SO ORDERED.
Ganzon v. CA G.R. No. L-48757 May 30, 1998
FACTS: Gelacio > Ganzon (via Capt. Niza) > Lighter Batman (common carrier) (loaded half)
November 28, 1956: Gelacio Tumambing (Gelacio) contracted the services of of Mauro B. Ganzon to haul 305
tons of scrap iron from Mariveles, Bataan, to the port of Manila on board the light LCT Batman
December 1, 1956: Gelacio delivered the scrap iron to Filomeno Niza, captain of the lighter, for loading which
was actually begun on the same date by the crew of the lighter under the captains supervisor.
When about half of the scrap iron was already loaded, Mayor Jose Advincula of Mariveles, Bataan arrived and
demanded P5000 from Gelacio
Upon resisting, the Mayor fired at Gelacio so he had to be taken to the hospital
Loading of the scrap iron was resumed
December 4, 1956: Acting Mayor Basilio Rub (Rub), accompanied by 3 policemen, ordered captain Filomeno
Niza and his crew to dump the scrap iron where the lighter was docked
Later on Rub had taken custody of the scrap iron
RTC: in favor of Gelacio and against Ganzon
ISSUE: W/N Ganzon should be held liable under the contract of carriage
HELD: YES. Petition is DENIED.

Ganzon thru his employees, actually received the scraps is freely admitted.
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.
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.
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:

Hence, the petitioner is presumed to have been at fault or to have acted negligently.
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.
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.
We cannot sustain the theory of caso fortuito - "order or act of competent public authority"(Art. 1174 of the Civil
Code)
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.
Ganzon 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.
Saludo v. CA
Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
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.
REGALADO, J.:
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).
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.
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 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, transfers,
etc. for shipment of the remains of Crispina Saludo.
The remains were taken on October 26th, 1976, to C.M.A.S. at the airport. These people made all the
necessary arrangements, such as flights, transfers, etc. This is a national service used by undertakers
throughout the nation. They furnished the air pouch which the casket is enclosed in, and they see that the
remains are taken to the proper air frieght terminal. I was very surprised when Miss Saludo called me to say
that the remains were not at the west coast terminal. I immediately called C.M.A.S. They called me back in a
matter of ten minutes to inform me that the remains were on a plane to Mexico City. The man said that there
were two bodies at the terminal, and somehow they were switched. . . . (Exb. 6 "TWA", which is the memo
or incident report enclosed in the stationery of Walter Pomierski & Sons Ltd.)
Consequently, when the cargo was received from C.M.A.S. at the Chicago airport terminal for shipment,
which was supposed to contain the remains of Crispina Saludo, Air Care International and/or TWA, had no
way of determining its actual contents, since the casket was hermetically sealed by the Philippine
Vice-Consul in Chicago and in an air pouch of C.M.A.S., to the effect that Air Care International and/or TWA
had to rely on the information furnished by the shipper regarding the cargo's content. Neither could Air Care
International and/or TWA open the casket for further verification, since they were not only without authority to
do so, but even prohibited.
Thus, under said circumstances, no fault and/or negligence can be attributed to PAL (even if Air Care
International should be considered as an agent of PAL) and/or TWA, the entire fault or negligence being
exclusively with C.M.A.S. 33 (Emphasis supplied.)
It can correctly and logically be concluded, therefore, that the switching occurred or, more accurately, was
discovered on October 27, 1976; and based on the above findings of the Court of appeals, it happened while
the cargo was still with CMAS, well before the same was place in the custody of private respondents.
Thus, while the Air Cargo Transfer Manifest of TWA of October 27, 1976 34 was signed by Garry Marcial of PAL
at 1400H, or 2:00 P.M., on the same date, thereby indicating acknowledgment by PAL of the transfer to them by
TWA of what was in truth the erroneous cargo, said misshipped cargo was in fact withdrawn by CMAS from PAL as
shown by the notation on another copy of said manifest 35 stating "Received by CMAS Due to switch in Chicago
10/27-1805H," the authenticity of which was never challenged. This shows that said misshipped cargo was in fact
withdrawn by CMAS from PAL and the correct shipment containing the body of Crispina Saludo was received by
PAL only on October 28, 1976, at 1945H, or 7:45 P.M., per American Airlines Interline Freight Transfer Manifest No.
AA204312. 36
Witness the deposition of TWA's ramp serviceman, Michael Giosso, on this matter:
ATTY. JUAN COLLAS, JR.:
On that date, do (sic) you have occasion to handle or deal with the transfer of cargo from TWA Flight No. 603
to PAL San Francisco?
MICHAEL GIOSSO:
Yes, I did.
What was your participation with the transfer of the cargo?
MICHAEL GIOSSO:
I manifested the freight on a transfer manifest and physically moved it to PAL and concluded the transfer by
signing it off.
You brought it there yourself?
MICHAEL GIOSSO:
Yes sir.
ATTY. JUAN COLIAS, JR.:
Do you have anything to show that PAL received the cargo from TWA on October 27, 1976?
MICHAEL GIOSSO:
Yes, I do.
(Witness presenting a document)
For purposes of clarity, Exhibit I is designated as Exhibit I-TWA.
xxx xxx xxx
This Exhibit I-TWA, could you tell what it is, what it shows?
MICHAEL GIOSSO:
It shows transfer of manifest on 10-27-76 to PAL at 1400 and verified with two signatures as it completed the
transfer.
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
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.
What body are you referring to?
xxx xxx xxx
ALBERTO A. LIM:
The remains of Mrs. Cristina (sic) Saludo.
Is that the same body mentioned in this Airway Bill?
ALBERTO A. LIM:
Yes.
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.
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.
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.
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 (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 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
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.
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.
Just because we have said that condition No. 5 of the airway bill is binding upon the parties to and fully
operative in this transaction, it does not mean, and let this serve as fair warning to respondent carriers, that
they can at all times whimsically seek refuge from liability in the exculpatory sanctuary of said Condition No. 5
or arbitrarily vary routes, flights and schedules to the prejudice of their customers. This condition only serves
to insulate the carrier from liability in those instances when changes in routes, flights and schedules are
clearly justified by the peculiar circumstances of a particular case, or by general transportation practices,
customs and usages, or by contingencies or emergencies in aviation such as weather turbulence, mechanical
failure, requirements of national security and the like. And even as it is conceded that specific routing and
other navigational arrangements for a trip, flight or voyage, or variations therein, generally lie within the
discretion of the carrier in the absence of specific routing instructions or directions by the shipper, it is plainly
incumbent upon the carrier to exercise its rights with due deference to the rights, interests and convenience
of its customers.
A common carrier undertaking to transport property has the implicit duty to carry and deliver it within
reasonable time, absent any particular stipulation regarding time of delivery, and to guard against delay. In
case of any unreasonable delay, the carrier shall be liable for damages immediately and proximately resulting
from such neglect of duty. 64 As found by the trial court, the delay in the delivery of the remains of Crispina Saludo,
undeniable and regrettable as it was, cannot be attributed to the fault, negligence or malice of private
respondents, 65 a conclusion concurred in by respondent court and which we are not inclined to disturb.
We are further convinced that when TWA opted to ship the remains of Crispina Saludo on an earlier flight, it
did so in the exercise of sound discretion and with reasonable prudence, as shown by the explanation of its
counsel in his letter of February 19, 1977 in response to petitioners' demand letter:
Investigation of TWA's handling of this matter reveals that although the shipment was scheduled on TWA
Flight 131 of October 27, 1976, it was actually boarded on TWA Flight 603 of the same day, approximately 10
hours earlier, in order to assure that the shipment would be received in San Francisco in sufficient time for
transfer to PAL. This transfer was effected in San Francisco at 2:00 P.M. on October 27, 1976. 66
Precisely, private respondent TWA knew of the urgency of the shipment by reason of this notation on the
lower portion of the airway bill: "All documents have been certified. Human remains of Cristina (sic) Saludo.
Please return bag first available flight to SFO." Accordingly, TWA took it upon itself to carry the remains of
Crispina Saludo on an earlier flight, which we emphasize it could do under the terms of the airway bill, to
make sure that there would be enough time for loading said remains on the transfer flight on board PAL.
III. Petitioners challenge the validity of respondent court's finding that private respondents are not liable for
tort on account of the humiliating, arrogant and indifferent acts of their officers and personnel. They posit that
since their mother's remains were transported ten hours earlier than originally scheduled, there was no
reason for private respondents' personnel to disclaim knowledge of the arrival or whereabouts of the same
other than their sheer arrogance, indifference and extreme insensitivity to the feelings of petitioners.
Moreover, being passengers and not merely consignors of goods, petitioners had the right to be treated with
courtesy, respect, kindness and due consideration.
In riposte, TWA claims that its employees have always dealt politely with all clients, customers and the public
in general. PAL, on the other hand, declares that in the performance of its obligation to the riding public, other
customers and clients, it has always acted with justice, honesty, courtesy and good faith.
Respondent appellate court found merit in and reproduced the trial court's refutation of this assigned error:
About the only evidence of plaintiffs that may have reference to the manner with which the personnel of
defendants treated the two plaintiffs at the San Francisco Airport are the following pertinent portions of Maria
Saludo's testimony:
Q When you arrived there, what did you do, if any?
A I immediately went to the TWA counter and I inquired about whether my mother was there or if' they knew
anything about it.
Q What was the answer?
A They said they do not know. So, we waited.
Q About what time was that when you reached San Francisco from Chicago?
A I think 5 o'clock. Somewhere around that in the afternoon.
Q You made inquiry it was immediately thereafter?
A Right after we got off the plane.
Q Up to what time did you stay in the airport to wait until the TWA people could tell you the whereabouts?
A Sorry, Sir, but the TWA did not tell us anything. We stayed there until about 9 o'clock. They have not heard
anything about it. They did not say anything.
Q Do you want to convey to the Court that from 5 up to 9 o'clock in the evening you yourself went back to the
TWA and they could not tell you where the remains of your mother were?
A Yes sir.
Q And after nine o'clock, what did you do?
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 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 respondent Trans World Airlines, the appealed decision is
AFFIRMED in all other respects.
SO ORDERED.
Melencio-Herrera, Paras, Padilla and Nocon, JJ., concur.
Republic of the Philippines v. Lorenzo Shipping February 7, 2005
For review on certiorari are the Decision1 dated January 16, 2002, of the Court of Appeals, in CA-G.R. CV
No. 48349, and its Resolution,2 of May 13, 2002, denying the motion for reconsideration of herein petitioner
National Trucking and Forwarding Corporation (NTFC). The impugned decision affirmed in toto the
judgment3 dated November 14, 1994 of the Regional Trial Court (RTC) of Manila, Branch 53, in Civil Case No.
90-52102.
The undisputed facts, as summarized by the appellate court, are as follows:
On June 5, 1987, the Republic of the Philippines, through the Department of Health (DOH), and the
Cooperative for American Relief Everywhere, Inc. (CARE) signed an agreement wherein CARE would
acquire from the United States government donations of non-fat dried milk and other food products from
January 1, 1987 to December 31, 1989. In turn, the Philippines would transport and distribute the donated
commodities to the intended beneficiaries in the country.
The government entered into a contract of carriage of goods with herein petitioner National Trucking and
Forwarding Corporation (NTFC). Thus, the latter shipped 4,868 bags of non-fat dried milk through herein
respondent Lorenzo Shipping Corporation (LSC) from September to December 1988. The consignee named
in the bills of lading issued by the respondent was Abdurahman Jama, petitioners branch supervisor in
Zamboanga City.
On reaching the port of Zamboanga City, respondents agent, Efren Ruste4 Shipping Agency, unloaded the
4,868 bags of non-fat dried milk and delivered the goods to petitioners warehouse. Before each delivery,
Rogelio Rizada and Ismael Zamora, both delivery checkers of Efren Ruste Shipping Agency, requested
Abdurahman to surrender the original bills of lading, but the latter merely presented certified true copies
thereof. Upon completion of each delivery, Rogelio and Ismael asked Abdurahman to sign the delivery
receipts. However, at times when Abdurahman had to attend to other business before a delivery was
completed, he instructed his subordinates to sign the delivery receipts for him.
Notwithstanding the precautions taken, the petitioner allegedly did not receive the subject goods. Thus, in a
letter dated March 11, 1989, petitioner NTFC filed a formal claim for non-delivery of the goods shipped
through respondent.
In its letter of April 26, 1989, the respondent explained that the cargo had already been delivered to
Abdurahman Jama. The petitioner then decided to investigate the loss of the goods. But before the
investigation was over, Abdurahman Jama resigned as branch supervisor of petitioner.
Noting but disbelieving respondents insistence that the goods were delivered, the government through the
DOH, CARE, and NTFC as plaintiffs filed an action for breach of contract of carriage, against respondent as
defendant, with the RTC of Manila.
After trial, the RTC resolved the case as follows:

WHEREFORE, judgment is hereby rendered in favor of the defendant and against the plaintiffs, dismissing
the latters complaint, and ordering the plaintiffs, pursuant to the defendants counterclaim, to pay, jointly and
solidarily, to the defendant, actual damages in the amount of P50,000.00, and attorneys fees in the amount
of P70,000.00, plus the costs of suit.
SO ORDERED.5
Dissatisfied with the foregoing ruling, herein petitioner appealed to the Court of Appeals. It faulted the lower
court for not holding that respondent failed to deliver the cargo, and that respondent failed to exercise the
extraordinary diligence required of common carriers. Petitioner also assailed the lower court for denying its
claims for actual, moral, and exemplary damages, and for awarding actual damages and attorneys fees to
the respondent.6
The Court of Appeals found that the trial court did not commit any reversible error. It dismissed the appeal,
and affirmed the assailed decision in toto.
Undaunted, petitioner now comes to us, assigning the following errors:
THE COURT OF APPEALS GRAVELY ERRED WHEN IT FAILED TO APPRECIATE AND APPLY THE
LEGAL STANDARD OF EXTRAORDINARY DILIGENCE IN THE SHIPMENT AND DELIVERY OF GOODS
TO THE RESPONDENT AS A COMMON CARRIER, AS WELL AS THE ACCOMPANYING LEGAL
PRESUMPTION OF FAULT OR NEGLIGENCE ON THE PART OF THE COMMON CARRIER, IF THE
GOODS ARE LOST, DESTROYED OR DETERIORATED, AS REQUIRED UNDER THE CIVIL CODE.
II
THE COURT OF APPEALS GRAVELY ERRED WHEN IT SUSTAINED THE BASELESS AND ARBITRARY
AWARD OF ACTUAL DAMAGES AND ATTORNEYS FEES INASMUCH AS THE ORIGINAL COMPLAINT
WAS FILED IN GOOD FAITH, WITHOUT MALICE AND WITH THE BEST INTENTION OF PROTECTING
THE INTEREST AND INTEGRITY OF THE GOVERNMENT AND ITS CREDIBILITY AND RELATIONSHIP
WITH INTERNATIONAL RELIEF AGENCIES AND DONOR STATES AND ORGANIZATION.7
The issues for our resolution are: (1) Is respondent presumed at fault or negligent as common carrier for the
loss or deterioration of the goods? and (2) Are damages and attorneys fees due respondent?
Anent the first issue, petitioner contends that the respondent is presumed negligent and liable for failure to
abide by the terms and conditions of the bills of lading; that Abdurahman Jamas failure to testify should not
be held against petitioner; and that the testimonies of Rogelio Rizada and Ismael Zamora, as employees of
respondents agent, Efren Ruste Shipping Agency, were biased and could not overturn the legal presumption
of respondents fault or negligence.
For its part, the respondent avers that it observed extraordinary diligence in the delivery of the goods. Prior to
releasing the goods to Abdurahman, Rogelio and Ismael required the surrender of the original bills of lading,
and in their absence, the certified true copies showing that Abdurahman was indeed the consignee of the
goods. In addition, they required Abdurahman or his designated subordinates to sign the delivery receipts
upon completion of each delivery.
We rule for respondent.
Article 17338 of the Civil Code demands that a common carrier observe extraordinary diligence over the
goods transported by it. Extraordinary diligence is that extreme measure of care and caution which persons of
unusual prudence and circumspection use for securing and preserving their own property or rights.9 This
exacting standard imposed on common carriers in a contract of carriage of goods is intended to tilt the scales
in favor of the shipper who is at the mercy of the common carrier once the goods have been lodged for
shipment. Hence, in case of loss of goods in transit, the common carrier is presumed under the law to have
been at fault or negligent.10 However, the presumption of fault or negligence, may be overturned by
competent evidence showing that the common carrier has observed extraordinary diligence over the goods.
In the instant case, we agree with the court a quo that the respondent adequately proved that it exercised
extraordinary diligence. Although the original bills of lading remained with petitioner, respondents agents
demanded from Abdurahman the certified true copies of the bills of lading. They also asked the latter and in
his absence, his designated subordinates, to sign the cargo delivery receipts.
This practice, which respondents agents testified to be their standard operating procedure, finds support in
Article 353 of the Code of Commerce:
ART. 353. . . .
After the contract has been complied with, the bill of lading which the carrier has issued shall be returned to
him, and by virtue of the exchange of this title with the thing transported, the respective obligations and
actions shall be considered cancelled, .
In case the consignee, upon receiving the goods, cannot return the bill of lading subscribed by the
carrier, because of its loss or of any other cause, he must give the latter a receipt for the goods
delivered, this receipt producing the same effects as the return of the bill of lading. (Emphasis
supplied)
Conformably with the aforecited provision, the surrender of the original bill of lading is not a condition
precedent for a common carrier to be discharged of its contractual obligation. If surrender of the original bill of
lading is not possible, acknowledgment of the delivery by signing the delivery receipt suffices. This is what
respondent did.
We also note that some delivery receipts were signed by Abdurahmans subordinates and not by
Abdurahman himself as consignee. Further, delivery checkers Rogelio and Ismael testified that Abdurahman
was always present at the initial phase of each delivery, although on the few occasions when Abdurahman
could not stay to witness the complete delivery of the shipment, he authorized his subordinates to sign the
delivery receipts for him. This, to our mind, is sufficient and substantial compliance with the requirements.
We further note that, strangely, petitioner made no effort to disapprove Abdurahmans resignation until after
the investigation and after he was cleared of any responsibility for the loss of the goods. With Abdurahman
outside of its reach, petitioner cannot now pass to respondent what could be Abdurahmans negligence, if
indeed he were responsible.
On the second issue, petitioner submits there is no basis for the award of actual damages and attorneys fees.
It maintains that its original complaint for sum of money with damages for breach of contract of carriage was
not fraudulent, in bad faith, nor malicious. Neither was the institution of the action rash nor precipitate.
Petitioner avers the filing of the action was intended to protect the integrity and interest of the government and
its relationship and credibility with international relief agencies and donor states.
On the other hand, respondent maintains that petitioners suit was baseless and malicious because instead of
going after its absconding employee, petitioner wanted to recoup its losses from respondent. The trial court
and the Court of Appeals were justified in granting actual damages and reasonable attorneys fees to
respondent.
On this point, we agree with petitioner.
The right to litigate should bear no premium. An adverse decision does not ipso facto justify an award of
attorneys fees to the winning party.11 When, as in the instant case, petitioner was compelled to sue to protect
the credibility of the government with international organizations, we are not inclined to grant attorneys fees.
We find no ill motive on petitioners part, only an erroneous belief in the righteousness of its claim.
Moreover, an award of attorneys fees, in the concept of damages under Article 2208 of the Civil
Code,12 requires factual and legal justifications. While the law allows some degree of discretion on the part of
the courts in awarding attorneys fees and expenses of litigation, the discretion must be exercised with great
care approximating as closely as possible, the instances exemplified by the law.13 We have searched but
found nothing in petitioners suit that justifies the award of attorneys fees.
Respondent failed to show proof of actual pecuniary loss, hence, no actual damages are due in favor of
respondent.14
WHEREFORE, the petition is PARTIALLY GRANTED. The assailed decision and resolution of the Court of
Appeals in CA-G.R. CV No. 48349 dated January 16, 2002 and May 13, 2002 respectively, denying
petitioners claim for actual, moral and exemplary damages are AFFIRMED. The award of actual damages
and attorneys fees to respondent pursuant to the latters counterclaim in the trial court is DELETED.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Ynares-Santiago, Carpio and Azcuna, JJ., concur.
Regional Container Lines v. Netherlands Insurance Co. September 4, 2009

For our resolution is the petition for review on certiorari filed by petitioners Regional Container Lines of Singapore
(RCL) and EDSA Shipping Agency (EDSA Shipping) to annul and set aside the decision[1] and resolution[2] of the Court of
Appeals (CA) dated May 26, 2004 and May 10, 2005, respectively, in CA-G.R. CV No. 76690.
RCL is a foreign corporation based in Singapore. It does business in the Philippines through its agent, EDSA Shipping, a
domestic corporation organized and existing under Philippine laws. Respondent Netherlands Insurance Company
(Philippines), Inc. (Netherlands Insurance) is likewise a domestic corporation engaged in the marine underwriting business.
FACTUAL ANTECEDENTS
The pertinent facts, based on the records are summarized below.
On October 20, 1995, 405 cartons of Epoxy Molding Compound were consigned to be shipped from Singapore to Manila for
Temic Telefunken Microelectronics Philippines (Temic). U-Freight Singapore PTE Ltd.[3] (U-Freight Singapore), a
forwarding agent based in Singapore, contracted the services of Pacific Eagle Lines PTE. Ltd. (Pacific Eagle) to transport the
subject cargo. The cargo was packed, stored, and sealed by Pacific Eagle in its Refrigerated Container No. 6105660 with Seal
No. 13223. As the cargo was highly perishable, the inside of the container had to be kept at a temperature of 0 Celsius.
Pacific Eagle then loaded the refrigerated container on board the M/V Piya Bhum, a vessel owned by RCL, with which Pacific
Eagle had a slot charter agreement. RCL duly issued its own Bill of Lading in favor of Pacific Eagle.
To insure the cargo against loss and damage, Netherlands Insurance issued a Marine Open Policy in favor of Temic,
as shown by MPO-21-05081-94 and Marine Risk Note MRN-21 14022, to cover all losses/damages to the shipment.
On October 25, 1995, the M/V Piya Bhum docked in Manila. After unloading the refrigerated container, it was plugged to the
power terminal of the pier to keep its temperature constant. Fidel Rocha (Rocha), Vice-President for Operations of Marines
Adjustment Corporation, accompanied by two surveyors, conducted a protective survey of the cargo. They found that based
on the temperature chart, the temperature reading was constant from October 18, 1995 to October 25, 1995 at 0
Celsius. However, at midnight of October 25, 1995 when the cargo had already been unloaded from the ship the temperature
fluctuated with a reading of 33 Celsius. Rocha believed the fluctuation was caused by the burnt condenser fan motor of the
refrigerated container.
On November 9, 1995, Temic received the shipment. It found the cargo completely damaged. Temic filed a claim
for cargo loss against Netherlands Insurance, with supporting claims documents. The Netherlands Insurance paid Temic the
sum of P1,036,497.00 under the terms of the Marine Open Policy. Temic then executed a loss and subrogation receipt in
favor of Netherlands Insurance.
Seven months from delivery of the cargo or on June 4, 1996, Netherlands Insurance filed a complaint for subrogation of
insurance settlement with the Regional Trial Court, Branch 5, Manila, against the unknown owner of M/V Piya
Bhum and TMS Ship Agencies (TMS), the latter thought to be the local agent of M/V Piya Bhums unknown owner.[4] The
complaint was docketed as Civil Case No. 96-78612.
Netherlands Insurance amended the complaint on January 17, 1997 to implead EDSA Shipping, RCL, Eagle Liner
Shipping Agencies, U-Freight Singapore, and U-Ocean (Phils.), Inc. (U-Ocean), as additional defendants. A third amended
complaint was later made, impleading Pacific Eagle in substitution of Eagle Liner Shipping Agencies.
TMS filed its answer to the original complaint. RCL and EDSA Shipping filed their answers with cross-claim and
compulsory counterclaim to the second amended complaint. U-Ocean likewise filed an answer with compulsory counterclaim
and cross-claim. During the pendency of the case, U-Ocean, jointly with U-Freight Singapore, filed another answer with
compulsory counterclaim. Only Pacific Eagle and TMS filed their answers to the third amended complaint.
The defendants all disclaimed liability for the damage caused to the cargo, citing several reasons why Netherland Insurances
claims must be rejected. Specifically, RCL and EDSA Shipping denied negligence in the transport of the cargo; they
attributed any negligence that may have caused the loss of the shipment to their co-defendants. They likewise asserted that no
valid subrogation exists, as the payment made by Netherlands Insurance to the consignee was invalid. By way of affirmative
defenses, RCL and EDSA Shipping averred that the Netherlands Insurance has no cause of action, and is not the real
party-in-interest, and that the claim is barred by laches/prescription.
After Netherlands Insurance had made its formal offer of evidence, the defendants including RCL and EDSA
Shipping sought leave of court to file their respective motions to dismiss based on demurrer to evidence.
RCL and EDSA Shipping, in their motion, insisted that Netherlands Insurance had (1) failed to prove any valid subrogation,
and (2) failed to establish that any negligence on their part or that the loss was sustained while the cargo was in their custody.
On May 22, 2002, the trial court handed down an Order dismissing Civil Case No. 96-78612 on demurrer to evidence. The
trial court ruled that while there was valid subrogation, the defendants could not be held liable for the loss or damage, as their
respective liabilities ended at the time of the discharge of the cargo from the ship at the Port of Manila.
Netherlands Insurance seasonably appealed the order of dismissal to the CA.
On May 26, 2004, the CA disposed of the appeal as follows:
WHEREFORE, in view of the foregoing, the dismissal of the complaint against defendants Regional Container Lines and
Its local agent, EDSA Shipping Agency, is REVERSED and SET ASIDE. The dismissal of the complaint against
the other defendants is AFFIRMED. Pursuant to Section 1, Rule 33 of the 1997 Rules of Civil Procedure, defendants
Regional Container Lines and EDSA Shipping Agency are deemed to have waived the right to present evidence.
As such, defendants Regional Container Lines and EDSA Shipping Agency are ordered to reimburse plaintiff in the sum
of P1,036,497.00 with interest from date hereof until fully paid.
No costs.
SO ORDERED. [Emphasis supplied.]
The CA dismissed Netherland Insurances complaint against the other defendants after finding that the claim had already been
barred by prescription.[5]
Having been found liable for the damage to the cargo, RCL and EDSA Shipping filed a motion for reconsideration, but the
CA maintained its original conclusions.
The sole issue for our resolution is whether the CA correctly held RCL and EDSA Shipping liable as common carriers
under the theory of presumption of negligence.
THE COURTS RULING
The present case is governed by the following provisions of the Civil Code:
ART. 1733. Common carriers, from the nature of their business and for reasons of public policy, are bound to observe
extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them
according to all the circumstances of each case.
Such extraordinary diligence in the vigilance over the goods is further expressed in articles 1734, 1735, and 1745, Nos. 5, 6, and
7, while the extraordinary diligence for the safety of the passengers is further set forth in articles1755 and 1756.
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;

2) Act of the public enemy in war, whether international or civil;
3) Act of 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.
ART. 1735. In all cases other that those mentioned in Nos. 1, 2, 3, 4 and 5 of the preceding article, if the goods are lost,
destroyed, or deteriorated, common carriers are presumed to have been at fault or to have acted negligently,
unless they prove that they observed extraordinary diligence as required by article 1733.
ART. 1736. The extraordinary responsibility of the common carrier lasts from the time the goods are unconditionally
placed in the possession of, and received by the carrier for transportation until the sane are delivered, actually
or constructively, by the carrier to the consignee, or to the person who has a right to receive them, without
prejudice to the provisions of articles 1738.
ART. 1738. The extraordinary liability of the common carrier continues to be operative even during the time the goods are stored
in a warehouse of the carrier at the place of destination, until the consignee has been advised of the arrival of the goods
and has had reasonable opportunity thereafter to remove them or otherwise dispose of them.
ART. 1742. Even if the loss, destruction, or deterioration of the goods should be caused by the character of the goods, or the
faulty nature of the packing or of the containers, the common carrier must exercise due diligence to forestall or
lessen the loss.
In Central Shipping Company, Inc. v. Insurance Company of North America, [6] we reiterated the rules for the liability of a
common carrier for lost or damaged cargo as follows:
(1) Common carriers are bound to observe extraordinary diligence over the goods they transport, according to all
the circumstances of each case;
(2) In the event of loss, destruction, or deterioration of the insured goods, common carriers are responsible, unless
they can prove that such loss, destruction, or deterioration was brought about by, among others, flood,
storm, earthquake, lightning, or other natural disaster or calamity; and
(3) In all other cases not specified under Article 1734 of the Civil Code, common carriers are presumed to have
been at fault or to have acted negligently, unless they observed extraordinary diligence. [7]
In the present case, RCL and EDSA Shipping disclaim any responsibility for the loss or damage to the goods in
question. They contend that the cause of the damage to the cargo was the fluctuation of the temperature in the reefer van,
which fluctuation occurred after the cargo had already been discharged from the vessel; no fluctuation, they point out, arose
when the cargo was still on board M/V Piya Bhum. As the cause of the damage to the cargo occurred after the same was
already discharged from the vessel and was under the custody of the arrastre operator (International Container Terminal
Services, Inc. or ICTSI), RCL and EDSA Shipping posit that the presumption of negligence provided in Article 1735 of the
Civil Code should not apply. What applies in this case is Article 1734, particularly paragraphs 3 and 4 thereof, which
exempts the carrier from liability for loss or damage to the cargo when it is caused either by an act or omission of the shipper
or by the character of the goods or defects in the packing or in the containers. Thus, RCL and EDSA Shipping seek to lay the
blame at the feet of other parties.
We do not find the arguments of RCL and EDSA Shipping meritorious.
A common carrier is presumed to have been negligent if it fails to prove that it exercised extraordinary vigilance
over the goods it transported.[8] When the goods shipped are either lost or arrived in damaged condition, a presumption arises
against the carrier of its failure to observe that diligence, and there need not be an express finding of negligence to hold it
liable.[9]
To overcome the presumption of negligence, the common carrier must establish by adequate proof that it
exercised extraordinary diligence over the goods. It must do more than merely show that some other party could be
responsible for the damage.[10]
In the present case, RCL and EDSA Shipping failed to prove that they did exercise that degree of diligence required by law
over the goods they transported. Indeed, there is sufficient evidence showing that the fluctuation of the temperature in the
refrigerated container van, as recorded in the temperature chart, occurred after the cargo had been discharged from the vessel
and was already under the custody of the arrastre operator, ICTSI. This evidence, however, does not disprove that the
condenser fan which caused the fluctuation of the temperature in the refrigerated container was not damaged while the cargo
was being unloaded from the ship. It is settled in maritime law jurisprudence that cargoes while being unloaded generally
remain under the custody of the carrier;[11]RCL and EDSA Shipping failed to dispute this.
RCL and EDSA Shipping could have offered evidence before the trial court to show that the damage to the condenser fan did
not occur: (1) while the cargo was in transit; (2) while they were in the act of discharging it from the vessel; or (3) while they
were delivering it actually or constructively to the consignee. They could have presented proof to show that they exercised
extraordinary care and diligence in the handling of the goods, but they opted to file a demurrer to evidence. As the order
granting their demurrer was reversed on appeal, the CA correctly ruled that they are deemed to have waived their
right to present evidence,[12] and the presumption of negligence must stand.
It is for this reason as well that we find RCL and EDSA Shippings claim that the loss or damage to the cargo was caused by a
defect in the packing or in the containers. To exculpate itself from liability for the loss/damage to the cargo under any of the
causes, the common carrier is burdened to prove any of the causes in Article 1734 of the Civil Code claimed by it by a
preponderance of evidence. If the carrier succeeds, the burden of evidence is shifted to the shipper to prove that the carrier is
negligent.[13] RCL and EDSA Shipping, however, failed to satisfy this standard of evidence and in fact offered no evidence at
all on this point; a reversal of a dismissal based on a demurrer to evidence bars the defendant from presenting evidence
supporting its allegations.
WHEREFORE, we DENY the petition for review on certiorari filed by the Regional Container Lines of Singapore and
EDSA Shipping Agency. The decision of the Court of Appeals dated May 26, 2004 in CA-G.R. CV No. 76690
is AFFIRMED IN TOTO. Costs against the petitioners.
SO ORDERED.
Defenses of Common Carriers

Proximate Causation
New Civil Code Provisions
Defense in Carriage of Passengers
Fortuitous event
Public enemy
Improper Packing
Order of Public Authority
Defenses of Carriage of Passengers
Acts of Employees
Sabena Belgian World Airlines vs. CA

The only issue in this case is whether or not the petitioner, Sabena Belgian World Airlines, is liable to the
respondents for damages arising from breach of contract of carriage.
The antecendent facts were summarized by the respondent Court of Appeals as follows:
On March 27, 1979, the plaintiff-appellee Concepcion F. Fule purchased three round trip tickets for herself
and two children, Estrella and Gemma, from the defendant-appellant Sabena World Airlines for the routes
covering Manila-Brussels-Barcelona-Madrid. (Exhs. A, B and C) On March 29, 1979, she and her children
took the Sabena flight No. 274, arriving in Brussels, Belgium at 6:00 o'clock in the morning of March 30, 1979.
Just before the flight arrived in Brussels, it was announced that the city would be cloudy and rainy and in fact
when the plane arrived there was a slight drizzle. (TSN, pp. 5-6, April 17, 1980) Before disembarking, the
plaintiff- appellees put on their sweaters and winter coats but did not cover their heads. Mrs. Fule thought
there would be a shuttle bus or a ground steward with umbrella to bring them to the terminal building.
However, there was none and the plaintiff-appellees had to walk towards the terminal building which was
about 20 to 30 meters from the plane. As a result, their winter coats got wet, as did the front portion of Mrs.
Fule's dress as she could not hold her coat to keep it from opening. (Id., pp. 7-8; 10-12)
The plaintiff-appellees waited for about 5 hours in the transit area of the airport terminal for their connecting
flight to Barcelona, Spain. When their flight was announced, they had to walk again in the rain without head
covers. (Id., pp. 17-18) In Barcelona, while the luggages of her children were recovered, Mrs. Fule's luggage
was missing. She went to Sabena office but found it closed. After 40 minutes of waiting a Sabena personnel
arrived and advised her to wait for the next flight from Brussels because her luggage might be in it. But when
the flight arrived it was not among those which were carried. (TSN, pp. 19-22, Jan. 16, 1980) So, she
returned to Sabena office but it was already closed. She then went to Iberia Airlines Office where she was
asked to prepare a reclaimation letter and advised to go to her hotel and wait for a call. (Id., pp. 22-24, 30)
Plaintiff-appellees checked in at Hotel Dante, (Id., p. 31) As Mrs. Fule wanted to change her clothes, she
bought a dress and a nightgown at a department store, El Cortes Ingles, for which she paid 5,000 pesetas
(Exhs. D to D-2; TSN, pp. 32-33, Jan. 16, 1980). Afterwards, she made an overseas call to her daughter in
Manila, who was working at Air France, to find out whether her luggage had not been left in Manila. For the
Telephone call she paid 2,775 pesetas. (Exh. E)
Then at 10:30 in the evening, Iberia Airlines called and informed her that her luggage had arrived. (TSN, p. 5,
March 5, 1980) She, therefore, took a cab to the airport and the round trip taxi fare amounted to 920 pesetas.
(Id., p. 9; Exh. F)
At the hotel, Mrs. Fule asked for a doctor because she felt sick, lost her voice and had an attack of asthma.
Her children developed fever due to colds, attributed to the rainy weather condition upon their arrived and
departure from Brussels. The doctor gave them injections and prescribed medicines for them. (Id., pp. 12-14)
Plaintiff-appellees incurred medical expenses amounting to 3,000 pesetas (Exhs. G, H and I). Plaintiff-
appellees also incurred hotel expenses amounting to 14,320 pesetas. (Exh. J)
After reaching Madrid, Mrs. Fule made a letter-complaint to the Sabena office which she gave to Angel
Yancha who told her that the letter would be forwarded to Brussels, as the Madrid office could not do anything
about it. (Exh. K) The total claim for actual damages was 26,015 pesetas.
A few weeks later, Yancha informed her that the Madrid office would pay about half of what she was asking,
and the balance would be paid in Manila. She received a check amounting to 8,620 pesetas and signed a
document (Exh- L) written in French, a language she did not understand. (Id., pp. 21-26) Yancha did not
explain the contents of the document to her and it was only upon her return to Manila that she learned that the
document was a quitclaim. Her daughter, who spoke French, explained its content to her. The
plaintiff-appellee made a demand on the Manila office of Sabena for the balance of their claim for 26,015
pesetas and P 200,000.00 as moral damages. (Exh. M)
During the trial, the defendant-appellant airline company presented Angel Yancha as its witness. Yancha
confirmed that Mrs. Fule had talked to him about the problem she and her children had encountered in
Brussels and Barcelona and that she wanted to make a claim against Sabena for the expenses she had
incurred. Upon Yancha's advice, Fule wrote a demand letter to the airline. This letter was given to Alejandro
Abeledo, the Madrid office sales manager, who sent it to the airline's general manager. Sabena's Madrid
office got a reply from Brussels, directing it to pay Mrs. Fule about 8,000 pesetas. Yancha gave the check and
a letter to Mrs. Fule, telling her that she was being paid only such amount and not the total amount of her
claim. He asked Mrs. Fule to sign the letter, written in French (which turned out to be a quitclaim), to serve as
a receipt for the amount paid to her. (TSN, pp. 3-10, Nov. 27, 1980) Yancha said he did not ask Mrs. Fule
whether she understood French. The letter was not translated to her. He also told Mrs. Fule to contact the
Manila Office for information about the difference in her claim. (Id., pp. 21 and 23)
On the basis of these facts, the lower court found the defendant-appellant liable. The dispositive portion of its
decision states:
WHEREFORE, all the foregoing considered, this Court sentences defendant Sabena World Airlines to pay
plaintiffs the following amounts:
a. P l,981.21-as actual damage representing the l7,395 pesetas balance of plaintiffs claim that was not settled
in Madrid.
b. P 50,000.00-as moral damages for the serious anxiety and fright caused plaintiffs' incident in Mrs. Fule's
missing maleta and the trouble she was placed in retrieving the same late at night in Barcelona. .
c. P 50,000.00-as exemplary damages for defendant's callous indifference in protecting plaintiffs from the
inclement weather when disembarking from and embarking on its airplane in Brussels when the nose-loader
could not be used and for its bad faith in deceiving Mrs. Fule signing a document in French that purportedly
was merely a receipt that was in reality a quitclaim.
d. P 10,000.00-by way of attorney's fees under the provisions of sub-paragraphs (1), (2), and (11), Art. 2208
of the Civil Code.
e. Pay the costs of suit. (pp. 31-34, Rollo)
On appeal to the respondent Court of Appeals, the decision was modified. The appellate court reduced the
amount of moral and exemplary damages from P 50,000.00 to P 25,000.00 each. In all other respects, the
appealed decision was affirmed.
On March 30, 1988, the petitioner went to this Court on petition for review on certiorari presenting its alleged
pivotal issues, namely:
1. WHETHER THE DOCUMENT (EXHIBIT "L" AND EXHIBIT "1") ACCOMPANYING THE CHECK IS JUST
A RECEIPT, OR A VALID QUITCLAIM WHICH FORECLOSES PRIVATE RESPONDENTS' CAUSES OF
ACTION AGAINST THE PETITIONER.
2. WHETHER THE PETITIONER COMMITTED AN ACT OF DUPLICITY AND BAD FAITH IN LETTING
PRIVATE RESPONDENT CONCEPCION FULE SIGN THE DOCUMENT (EXHIBIT "L" AND EXHIBIT "1")
WHEN SHE RECEIVED THE CHECK.
3. HAVING RULED THAT THE AWARD FOR MORAL DAMAGES IS NOT PROPER AND UNJUSTIFIED,
WHETHER OR NOT THE RESPONDENT HON. COURT OF APPEALS (SEVENTH DIVISION) SERIOUSLY
ERRED FOR STILL AWARDING MORAL DAMAGES BY SIMPLY MODIFYING THE AWARD FOR MORAL
DAMAGES PREVIOUSLY MADE BY THE TRIAL COURT.
4. HAVING RULED THAT THE AWARD FOR EXEMPLARY DAMAGES IS NOT PROPER AND
UNJUSTIFIED, WHETHER OR NOT THE RESPONDENT HON. COURT OF APPEALS (SEVENTH
DIVISION) GRAVELY ERRED FOR STILL AWARDING EXEMPLARY DAMAGES BY SIMPLY MODIFYING
THE AWARD FOR EXEMPLARY DAMAGES PREVIOUSLY MADE BY THE TRIAL COURT. (pp. 15-16,
Rollo)
We affirm the appealed decision.
A perusal of the first two issues mentioned above shows that the same are factual. After going over the
various arguments of the petitioner on these issues, we reiterate the established rule that this Court is not a
trier of facts (Korean Airlines, Ltd. v. Court of Appeals, 154 SCRA 211 [1987]). The conclusions and 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. The fact that the appellate court adopted the findings of the trial court make the same
binding upon this Court for the factual findings of the appellate court are generally binding on the Supreme
Court. The findings of the Court of Appeals when supported by substantial evidence are almost always
beyond the power of review by the Supreme Court. (Rebuleda v. Intermediate Appellate Court, 155 SCRA
520 [1987]) The petitioner has failed to show that its case should be an exception to these established
principles.
To be sure, however, the examination of the provisions of the document in question revealed that the
appellate court did not err in considering that while it may have been also a quitclaim, Mrs. Fule did not know
that she was made to sign a quitclaim. The document, in its English translation which the petitioner insists is
the binding translation for lack of opposition from the respondents, states the following:
I, the undersigned, Mrs. Concepcion Foronda de Fule, (address) declare to have received from Sabena
(Societe Anonymo Belgo d'Exploitation de la Navigation Adrienne) the sum of Pesetas 8,620.00 (Eight
thousand six hundred twenty)
as settlement on account of all claims whether legally founded or not, which may have been introduced, will
be introduced, or will have been introduced in the future, in relation to:
various expenses incurred in Brussels,
and guarantees to Sabena, its co-transporters, its agents and its managers against any recourse which may
be introduced against them directly or indirectly, and I will undertake to absorb any expenses which may arise
from this.
This payment is effected without any burden or responsibility on the part of Sabena, its co-transporters, its
agents and in-charge.
In case this payment is effected to compensate for loss of goods, Sabena has the right to retain said goods if
found, until an agreement is reached as to the amount involved.
I declare to subrogate Sabena, up to the above-agreed amount, from all rights whatsoever, vis-a-vis and
authorize the use of my name for the appropriate means of valuing said rights and I will undertake to furnish
all necessary documents and information to this purpose.
The present release subrogation is effective only when the abovementioned sum is released to Mrs.
Concepcion Foronda de Fule
in the following manner: Cheque Bank of Santander No. C-536.690.
Place & date: Madrid, 31, May 1979
Signature: Signed by Mrs. C.F. de Fule (p. 78, Rollo)
The foregoing provisions clearly show that the document is both a receipt and a quitclaim as it settles upon
receipt of the mentioned sum of money "all claims whether legally founded or not, which may have been
introduced, will be introduced or will have been introduced in the future, in relation to various expenses
incurred in Brussels . . .
The issue, however, is not what was written in French in the document but what Yancha represented to Mrs.
Fule when he induced her to sign it. As stated by the Court of Appeals, citing Air France v. Carrascoso (18
SCRA 155 [1966]), the misconduct on the part of the carrier's employees toward a passenger gives the latter
an action for damages against the carrier.
We also note that in its appeal to the Court of Appeals, the petitioner alleged in its brief the following
assignment of error: "The trial court erred in not holding that by the quitclaim (Exh. L; Exhs. 1 and 1-a) the
plaintiff- appellees have no cause of action against the defendant-appellant for moral and exemplary
damages and in not sustaining the validity of the said quitclaim." (p. 52, Rollo) In its discussion, the petitioner
insisted that the trial court erred in concluding that Exhibit L is only a receipt and that the respondent
understood it as such. It argued that the rest of the document recites a quitclaim and the respondent
understood French because she received her schooling in Spain where French is taught. In the present
petition, however, the petitioner alleges that it is both a receipt and a quitclaim but it does not foreclose the
respondent's right to collect the balance of her claim. It is obvious that the petitioner is taking inconsistent
positions which this Court may not allow.
In the last two issues, the petitioner argues that the appellate court erred in still awarding moral and
exemplary damages inspire of its express declaration that the petitioner did not act in bad faith. This
allegation is misleading because the Court of Appeals did not declare the petitioner entirely faultless. The
appellate court held:
But we do not think the award of moral damages for the trouble which Mrs. Fule had gone through as a result
of the delay in the delivery of her luggage in Barcelona is justified. In cases of breach of contracts, moral
damages can be awarded only where the defendant has acted fraudulently or in bad faith. (Civil Code, art.
2220, Fores v. Miranda, 105 Phil. 266 [1959]; Necesito v. Paras, 104 Phil. 75 [1957]) Mere negligence, even if
thereby the plaintiff suffers mental anguish or serious fright is not a ground for awarding moral damages. In
Laguna Tayabas Bus Co. v. Cornista, 11 SCRA 181 [1964]), cited by the plaintiff-appellees to justify the
award to them of moral damages, the failure of the carrier to cover the side of its bus as a result of which, and
the bus driver's reckless operation of the bus, a passenger fell, was held to be not mere negligence but a
'misconduct', warranting the award of moral damages. So was the neglect of the airline in Air France v.
Carrascoso, 18 SCRA 155 [1966]), the other case cited by the plaintiffs-appelles, simple negligence but a
'malfeasance' whereby a first class passenger was down graded into a third class passenger on the onward
flight of an airline, just so as a 'white man' could be accommodated. The case at bar cannot be analogized to
these cases.
Indeed, the flaw in the trial court's decision is its assumption that every case of mental anguish or fright or
serious anxiety calls for the award of moral damages. While the enumeration of cases in Art. 2219 is not
exclusive, the defendant's act must be wrongful or wanton or done in bad faith to justify the imposition of
moral damages. Here, there is no finding that the carrier's delay in delivering Mrs. Fule's luggage was
wrongful or due to bad faith.
Nonetheless, an award of P 25,000.00 for the airline's bad faith in making Mrs. Fule sign a quitclaim without
informing her of its contents, which were written in French, is in our opinion justified.
With respect to the award for exemplary damages, the amount of P 50,000.00 must be reduced by half. The
trial court gave this award for (1) the defendant-appellant's 'callous indifference in protecting plaintiffs from
the inclement weather when disembarking from and embarking on its plane in Brussels' and (2) for deceiving
Mrs. Fule into signing a quitclaim by representing it to be merely a receipt for partial payment of her claims.
While we hold that the failure of the defendant-appellant to protect the plaintiff-appellees from the rain in
disembarking from the plane for the stopover in Brussels and again in reboarding it for the onward flight to
Barcelona constitutes a neglect of its duty to its passengers, we do not think that its neglect was so gross as
to amount to bad faith or wantonness. (Civil Code, Art. 2232) The award of exemplary damages cannot be
justified. In the Airlines Cases in which the Supreme Court awarded moral and exemplary damages, the
airlines concerned were found guilty of either gross neglect or malfeasance or even malice. In contrast, what
is involved in this case was simple negligence, considering that the rain through which the plaintiff-appellees
had to walk was a 'slight drizzle.' If it was driving rain or heavy snow, perhaps there would be basis for finding
the defendant- appellant guilty of gross negligence, in light of the duty of air carriers to observe 'utmost or
extraordinary diligence,' (Zulueta v. Pan American World Airway, Inc., 49 SCRA 1, 14, [1973]).
With respect to the award of exemplary damages for alleged duplicity of the airlines employee, we hold that
the trial court's decision is correct. Accordingly, the award of P 50,000.00 must be reduced to P 25,00.00. (pp.
40-41, Rollo)
We find no reversible error in the foregoing conclusions. The appellate court's finding that the negligence in
this case does not amount to bad faith finds support in a recent decision of this Court. In the case of China
Airlines, Ltd. v. Intermediate Appellate Court, et al. (G.R. No. 73835, January 17, 1989), this Court passed
upon the issue of damages brought about by the airlines' failure to carry out a promised immediate flight
connection from San Francisco, U.S.A to Los Angeles, U.S.A due to inefficient means of communication. The
Court ruled that "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 circumstances be said to be so gross as to amount to bad faith." (Ibid, at p. 10)
In the same case, however, the Court ruled that "[W]ith 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 a of passenger and (2) it is proved that the carrier was guilty of fraud and bad faith, even if
death does not result." (Ibid, at p. 13) As the appellate court found the petitioner guilty of bad faith in letting
the respondent sign a quitclaim without her knowledge or understanding and contrary to what she was
planning to do, the reduced award of moral and exemplary damages is proper and legal.
WHEREFORE, IN VIEW OF ALL FOREGOING, the petition is hereby DISMISSED for lack of merit. The
appealed decision is AFFIRMED,
SO ORDERED.
Leopoldo Poblete vs. Donato Fabros
his is an action for damages, arising from a vehicular accident, filed by the plaintiff Godofredo Poblete as
owner of the damaged taxicab against the driver and owner of the allegedly offending vehicle, Donato Fabros
and Godofredo de la Cruz, respectively.
After trial on the merits, and the case submitted for decision, the trial court, the Court of First Instance of
Davao, Judge Vicente Cusi, Jr., presiding, dismissed the case on the ground that from the allegation of the
complaint, the action is one to hold Donato Fabros, as the employer of the allegedly negligent driver,
Godofredo de la Cruz, subsidiarily liable for the damage caused the plaintiff, and is, therefore, premature,
there having been no criminal action filed against the driver who had died during the pendency of the case at
bar, and, in effect, states no cause of action. A motion for reconsideration was filed to the order of dismissal,
but to no avail. Hence, this appeal.
The question raised is whether on the basis of the allegation of the complaint, the action is one to enforce the
subsidiary liability of the employer of the negligent driver as provided in Article 103 of the Revised Penal Code,
as held by the court a quo, or it is an action based on quasi-delict. In the first case, the action would be
premature and would, accordingly, be wanting in a cause of action before a judgment of conviction has been
rendered against the negligent driver, for, while a separate civil action may be filed for damages arising from
the criminal offense of the accused for negligence, upon proper reservation of said action (Section 2, Rule III,
Rules of Court), the same may not be heard separately in advance or ahead of the criminal action. While in
the second case, the action, being for liability based on quasi-delict, not for liability arising from crime, may
proceed independently from the criminal action. It is also for a different purpose, the liability sought to be
imposed on the employer being a primary and direct liability, not merely subsidiary. Civil liability for
quasi-delict and that arising out of a crime are clearly different and distinct from each other, as lucidly
demonstrated and discussed in Barredo vs. Garcia, et al., 78 Phil. 607.
Examining the allegations of the complaints, to determine what is made the basis thereof for the relief sought,
which is to impose a "joint and several" liability on the defendants (p. 5 Record on Appeal; Page 26, Rollo),
there is absolutely no reason to exclude and rule out, as the court a quo did, the fact that the action is one
based on quasi delict and hold, as again the court did, that the action is based on the criminal offense of
negligence, as defined in the Revised Penal Code, committed by the driver alone, and concluding that the
purpose of the action is to impose the subsidiary liability on the employer as provided in the same Code.
The court a quo said:
As it is, the complaint really states no cause of action against Donato Fabros in his capacity as employer of
Godofredo de la Cruz. Stated differently, the complaint against Donato Fabros is premature, because he is
only subsidiarily liable under the Penal Code. His subsidiary liability should not be litigated in the civil action
against de la Cruz. It follows that the third-party complaint that he filed is also premature.
From the above observation of the Court, it is crystal clear that the court itself has found that the
employer-employee relation of the two defendants has been sufficiently alleged; otherwise, it would have no
basis for saying that the complaint is "against Donato Fabros in his capacity as employer of Godofredo de la
Cruz." The defendant Donato Fabros has himself correctly perceived the basis of the complaint against him,
as one based on quasi-delict, for instead of filing a motion for a bill of particulars if he deemed the allegations
vague or ambiguous, he interposed in his answer the defense of a "due diligence of a good father of a family
in the selection, employment and supervision of his driver." (Page 8, Record on Appeal; Page 26, Rollo).
In the second place, in alluding to the subsidiary liability of the employer, Donato Fabros, the court a quo has,
likewise, found sufficiently alleged negligence as the basis for the action. The complaint expressly and clearly
alleges that the accident was "due solely to the gross negligence, carelessness and unskillful driving of
defendant Godofredo de la Cruz" (Page 3, Record on Appeal, Page 20, Rollo).
With the allegation of negligence against the driver, Godofredo de la Cruz, and that of an employer-employee
relation between him and his co-defendant, Donato Fabros, the complaint clearly and unmistakably makes
out a case based on quasi-delict, as explicitly provided in Article 2180 of the Civil Code which, inter alia,
provides:
... The owners and managers of an establishment or enterprise are likewise responsible for damages caused
by their employees in the service of the branches in which the latter are employed or on the occasion of their
functions.
What needs only to be alleged under the aforequoted provision is that the employee (driver) has, by his
negligence (quasi-delict) caused damage to make the employer, likewise, responsible for the tortious act of
the employee, and his liability is, as earlier observed, primary and solidary. (Bachrach Motor Co. vs. Gamboa,
L-10296, May 21, 1957; Malipol vs. Tan, 55 SCRA 202: Barredo vs. Garcia and Almario, 73 Phil. 607; Vinluan
vs. Court of Appeals, et al., 16 SCRA 742; Anuran, et al. vs. Buno et al. 17 SCRA 224).
It is such a firmly established principle, as to have virtually formed part of the 'law itself, that the negligence of
the employee gives rise to the presumption of negligence on the part of the employer. This is the presumed
negligence in the selection and supervision of the employee. The theory of presumed negligence, in contrast
with the American doctrine of respondent superior, where the negligence of the employee
is conclusively presumed to be the negligence of the employer, is clearly deducible from the last paragraph of
Article 2180 of the Civil Code which provides that the responsibility therein mentioned shall cease if the
employers prove that they observed all the diligence of a good father of a family to prevent damages (12
Manresa, 657; Balica vs. Litonjua and Leynes, 30 Phil. 624; Cangco vs. Manila Railroad Co., 38 Phil. 768), as
observed in the same cases just cited.
From what has been said, the error of the court a quo in dismissing the case on his mistaken notion that the
action is based on crime, not quasi-delict, becomes very patent. How the court concluded that the action is to
enforce the subsidiary liability of Donato Fabros as the employer of the negligent driver Godofredo de la Cruz
is inconceivable, with the plain and explicit prayer of the complaint to declare the defendants "jointly and
severally" liable for damages, a concept antagonistic to that of subsidiary liability. The death of defendant,
Godofredo de la Cruz, the driver, is therefore, no hindrance to the present action, at least as against the
employer, Donato Fabros, taking its course to final judgment, which the court a quo should have rendered,
the trial of the case having been terminated, instead of dismissing the case, without even a motion to dismiss,
with the evidence, in an probability, supportive of an action on quasi-delict, which the pleadings, both the
complaint and the answer, raised as the specific issue involved and as joined by said pleadings.
A word of advice at least as a reminder, may be meet at this juncture, for judges to give a deeper study and
reflection in the disposition of cases, so that undue delay which could very well be avoided, as in this case,
had the judge been more circumspect and analytical, would not cause injustice to litigants, under the familiar
maxim that justice delayed is justice denied, which should constantly sound its stern warning to all dispensers
of justice.
WHEREFORE, the order of dismissal dated April 17, 1968 is hereby set aside, and let this case be remanded
to the court of origin for the rendition of the judgment on the merits based on the evidence adduced during the
trial. This judgment shall be immediately executory upon its promulgation.
Collin A. Morris vs. CA

Petitioners appeal via certiorari from the decision[1] of the Court of Appeals, which reversed the decision
of the trial court and ordered the dismissal of petitioners complaint for damages against respondent for
breach of contract of air carriage.
On February 14, 1978, petitioners filed with the Regional Trial Court, Makati, Branch 143 an action
for damages for breach of contract of air carriage against respondent airline because they were bumped
off from SAS Flight SK 893, Manila-Tokyo, on February 14, 1978, despite a confirmed booking in the
first class section of the flight.
Petitioners Collin A. Morris and Thomas P. Whittier were American citizens; the vice-president for
technical services and the director for quality assurance, respectively, of Sterling Asia, a foreign
corporation with regional headquarters at No. 8741 Paseo de Roxas, Makati City.
Respondent Scandinavian Airline System (SAS for brevity) is and at times material hereto has been
engaged in the commercial air transport of passengers globally.
Petitioner Morris and co-petitioner Whittier had a series of business meetings with Japanese
businessmen in Japan from February 14 to February 22, 1978. They requested their travel agent, Staats
Travel Service, Inc. to book them as first class passengers in SAS Manila-Tokyo flight on February 14,
1978. Respondent booked them as first-class passengers on Flight SK 893, Manila-Tokyo flight on
February 14, 1978, at 3:50 in the afternoon.
At 1:30 in the afternoon of February 14, 1978, a limousine service of the travel agency fetched
petitioner Morris at his house in Urdaneta Village, Makati City. Thereafter, they went to Merville Park,
Paraaque and fetched petitioner Whittier, arriving there at around 2:00 in the afternoon. From Paraaque,
they went to the Manila International Airport and arrived at 2:35 in the afternoon.
Upon arrival at the airport, representatives of the travel agency met petitioners. It took petitioners
two to three minutes to clear their bags at the customs section. After that, they proceeded to the SAS
check-in counter and presented their tickets, passports, immigration cards and travel documents to Ms.
Erlinda Ponce at the reception desk.
After about fifteen (15) minutes, petitioners noticed that their travel documents were not being
processed at the check-in counter. They were informed that there were no more seats on the plane for
which reason they could not be accommodated on the flight.
Petitioner Morris contacted Staats Travel Service and asked the latter to contact the management of
SAS to find out what was the problem. After ten (10) minutes, Staats Travel Service called and
confirmed their booking.Thereafter, petitioners Morris and Whittier returned to respondents check-in
counter anticipating that they would be allowed to check-in. However, the check-in counter was
closed. When they informed Ms. Ponce, in-charge at the check-in counter that arrangements had been
made with respondents office, she ignored them. Even respondents supervisor, Raul Basa, ignored them
and refused to answer their question why they could not be accommodated in the flight despite their
confirmed booking.
When petitioners went to the supervisors desk to check the flight manifest, they saw that their
names on top of the list of the first class section had been crossed out. They pressed the supervisor to
allow them in the flight as they had confirmed tickets. Mr. Basa informed them that it could not be done
because the flight was closed and it was too late to do anything. They checked in at exactly 3:10 in the
afternoon and the flight was scheduled to leave Manila International Airport at 3:50 in the afternoon.[2]
Petitioner Morris said that they were advised to be at the airport at least an hour before departure
time. This has been respondents policy in petitioners previous travels abroad.[3]
Ms. Erlinda Ponce, SAS employee on duty at the check-in counter on February 14, 1978 testified
that the economy class of SAS Flight SK 893 was overbooked; however, the first class section was
open. She met petitioners, who were booked in the first class section, when they approached the counter
to check-in. They were not accommodated on the flight because they checked-in after the flight manifest
had been closed, forty (40) minutes prior to the planes departure. Petitioners seats were given to
economy class passengers who were upgraded to first class.[4]
Upon cross-examination, Ms. Ponce said that petitioners might have arrived at the airport earlier
than 3:10 in the afternoon when the flight manifest was closed; she was sure that they arrived at the
check-in counter at past 3:10 in the afternoon. The first class seats of petitioners were given to upgraded
economy class passengers three (3) minutes before the flight manifest was closed.[5]
Raul Cruz Basa, a supervisor of respondent airline company, testified that SAS Flight SK 893 on
February 14, 1978 was overbooked in the economy class. Petitioner Morris and Whittier were among the
names listed in the first class section of the flight manifest. However, their names were crossed out and
the symbols NOSH, meaning NO SHOW, written after their names. The NO SHOW notation could
mean either that the booked passengers or his travel documents were not at the counter at the time of the
closing of the flight manifest.
Mr. Basa said that he talked to petitioners at about 3:20 in the afternoon after receiving a radio call
from the ground staff at the check-in counter about complaints from passengers.
He learned from Ms. Ponce that petitioners checked in late after the flight manifest had been closed,
after which time waitlisted passengers from the economy class had been upgraded. He explained to
petitioners that they could not be accommodated on the plane because the seats were all filled up. He
admitted that there were about six (6) passengers in the counter who were refused boarding because
waitlisted passengers had been accepted. Most of those who were refused boarding came in late.[6]
Alice Magtulac, another witness of the respondent, testified that she was supervisor of ticketing and
reservation section. She said that petitioners Morris and Whittier had confirmed reservation tickets to the
first class section of SAS Flight SK 893, Manila-Tokyo flight, on February 14, 1978. She confirmed that
Ms. Thelma Lorraine Sayer was one of the economy class passengers who was not able to leave because
the flight was overbooked on the economy class.
Ms. Magtulac said that it was not SAS policy to upgrade economy passengers to first class if
passengers booked for first class did not show up.[7]
On August 24, 1988, the trial court rendered a judgment against respondent and
in favor of petitioners Morris and Whittier. The dispositive portion reads:
WHEREFORE, in view of the foregoing, the Court hereby renders judgment in favor of the
plaintiffs and against defendant, ordering the latter to pay the former the following:
1) Moral damages to plaintiff Collin A. Morris in the amount of P1,000,000.00 and to

plaintiff Thomas P. Whittier the sum of P750,000.00;
2) Exemplary damages in the sum of P200,00.00;
3) Attorneys fees in the amount of P300,000.00, plus the costs of suit.
SO ORDERED.
Makati, Metro Manila, August 24, 1988.
[ORIGINAL SIGNED]
TEOFILO GUADIZ, JR.
J u d g e[8]
On October 5, 1988, respondent filed a notice of appeal.[9]
Meanwhile, on October 6, 1988, petitioners Morris and Whittier moved for reconsideration of the
decision as regards the award of damages.
On November 2, 1988, respondent opposed the motion for reconsideration.[10]
On February 26, 1992, the trial court issued an order granting petitioners motion for reconsideration,
the decretal portion of which is quoted herein, to wit:
WHEREFORE, in view of the foregoing, the Court hereby grants the Motion for
Reconsideration. The dispositive portion of the Decision is hereby amended with respect to
the amount of moral damages, ordering the defendant to pay moral damages to Collin Morris
in the amount of P1,500,000.00 and to Thomas Whittier the amount of P1,000,000.00.
SO ORDERED.
Makati, Metro Manila, February 26, 1992.
[ORIGINAL SIGNED]
TEOFILO GUADIZ, JR.
J u d g e[11]
Respondents appeal rested mainly on the ground that the trial court misappreciated the facts and
evidence adduced during the trial. The thrust of its defense was petitioners lack of cause of action,
considering that they checked-in at the SAS counter at the Manila International Airport after the flight
manifest was closed and after their first class seats were given to waitlisted economy class passengers.[12]
On January 21, 1997, the Court of Appeals promulgated a decision reversing the decision of the
court a quo, and ordering the dismissal of the complaint for damages. The dispositive portion of the
decision provides:
WHEREFORE, the appealed decision is hereby REVERSED and SET ASIDE and another
one rendered dismissing plaintiffs-appellees complaint.
SO ORDERED.[13]
In reversing the trial courts decision, the Court of Appeals found petitioners statements
self-serving. Petitioners failed to prove that they checked-in on time. The appellate court lent credence to
respondents claim that petitioners were denied boarding on SAS Flight SK 893 because of their late
arrival for check-in at the international airport. Respondents employee, Ms. Erlinda Ponce, testified that
petitioners checked in after the flight manifest was closed.
Hence, this petition.[14]
Petitioners allege that the Court of Appeals gravely erred in dismissing their complaint for damages
and in finding their testimonies self-serving. They contend that the trial court did not act arbitrarily in
lending credence to their testimonies and finding their evidence sufficient to
warrant the award of damages against respondent. In sum, they claim to be entitled to the award for
damages because, as found by the trial court, they were wrongfully and in bad faith, bumped-off from
SAS Flight SK 893 on February 14, 1978, despite their timely arrival at the airport for check-in and
confirmed bookings as first class passengers.[15]
The petition has no merit.
To begin with, it must be emphasized that a contract to transport passengers is quite different in
kind and degree from any other contractual relations, and this is because of the relation, which an air
carrier sustains with the public. Its business is mainly with the travelling public. It invites people to avail
[themselves] of the comforts and advantages it offers. The contract of air carriage, therefore, generates a
relation attended with a public duty. Neglect or malfeasance of the carriers employees naturally could
give ground for an action for damages.[16]
In awarding moral damages for breach of contract of carriage, the breach must be wanton and
deliberately injurious or the one responsible acted fraudulently or with malice or bad faith.[17] Where in
breaching the contract of carriage the defendant airline is not shown to have acted fraudulently or in bad
faith, liability for damages is limited to the natural and probable consequences of the breach of
obligation which the parties had foreseen or could have reasonably foreseen. In that case, such liability
does not include moral and exemplary damages.[18] Moral damages are generally not recoverable in culpa
contractual except when bad faith had been proven. However, the same damages may be recovered
when breach of contract of carriage results in the death of a passenger.[19]
The award of exemplary damages has likewise no factual basis. It is a requisite that the act must be
accompanied by bad faith or done in wanton, fraudulent or malevolent manner--circumstances which are
absent in this case. In addition, exemplary damages cannot be awarded as the requisite element of
compensatory damages was not present."[20]
In the instant case, assuming arguendo that breach of contract of carriage may be attributed to
respondent, petitioners travails were directly traceable to their failure to check-in on time, which led to
respondents refusal to accommodate them on the flight.
The rule is that moral damages are recoverable in a damage suit predicated upon a breach of
contract of carriage only where (a) the mishap results in the death of a passenger and (b) it is proved that
the carrier was guilty of fraud and bad faith even if death does not result.[21]
For having arrived at the airport after the closure of the flight manifest, respondents employee could
not be faulted for not entertaining petitioners tickets and travel documents for processing, as the
checking in of passengers for SAS Flight SK 893 was finished. There was no fraud or bad faith as would
justify the courts award of moral damages.
Bad faith does not simply connote bad judgment or negligence, it imports a dishonest purpose or
some moral obliquity and conscious doing of a wrong, a breach of known duty through some motive or
interest or ill will that partakes of the nature of fraud.[22]
In the instant case, respondents denial of petitioners boarding on SAS Flight SK 893 was not
attended by bad faith or malice.
To the contrary, facts revealed that they were not allowed to board the plane due to their failure to
check-in on time. Petitioner Morris admitted that they were at the check-in counter at around 3:10,
exactly the same time that the flight manifest was closed, but still too late to be accommodated on the
plane. Respondents supervisor, Raul C. Basa, testified that he met petitioners at about 3:20 in the
afternoon after receiving a radio call from the ground staff regarding petitioners complaints. Clearly,
petitioners did not arrive on time for check-in.
As we find petitioners not entitled to moral damages, an award of exemplary damages is likewise
baseless.[23] Where the award of moral and exemplary damages is eliminated, so must the award for
attorneys fees be deleted.[24]
WHEREFORE, the Court DENIES the petition for lack of merit. The Court AFFIRMS in toto the
decision of the Court of Appeals in CA-G. R. CV. No. 38684.
No costs.
SO ORDERED.
Antonia Maranan vs. Pascual Perez, et al,
Rogelio Corachea, on October 18, 1960, was a passenger in a taxicab owned and operated by Pascual
Perez when he was stabbed and killed by the driver, Simeon Valenzuela.
Valenzuela was prosecuted for homicide in the Court of First Instance of Batangas. Found guilty, he was
sentenced to suffer imprisonment and to indemnify the heirs of the deceased in the sum of P6,000. Appeal
from said conviction was taken to the Court of Appeals. 1wph1. t
On December 6 1961, while appeal was pending in the Court of Appeals, Antonia Maranan, Rogelio's mother,
filed an action in the Court of First Instance of Batangas to recover damages from Perez and Valenzuela for
the death of her son. Defendants asserted that the deceased was killed in self-defense, since he first
assaulted the driver by stabbing him from behind. Defendant Perez further claimed that the death was a caso
fortuito for which the carrier was not liable.
The court a quo, after trial, found for the plaintiff and awarded her P3,000 as damages against defendant
Perez. The claim against defendant Valenzuela was dismissed. From this ruling, both plaintiff and defendant
Perez appealed to this Court, the former asking for more damages and the latter insisting on non-liability.
Subsequently, the Court of Appeals affirmed the judgment of conviction earlier mentioned, during the
pendency of the herein appeal, and on May 19, 1964, final judgment was entered therein. (Rollo, p. 33).
Defendant-appellant relies solely on the ruling enunciated in Gillaco v. Manila Railroad Co., 97 Phil. 884, that
the carrier is under no absolute liability for assaults of its employees upon the passengers. The attendant
facts and controlling law of that case and the one at bar are very different however. In the Gillaco case, the
passenger was killed outside the scope and the course of duty of the guilty employee. As this Court there
found:
x x x when the crime took place, the guard Devesa had no duties to discharge in connection with the
transportation of the deceased from Calamba to Manila. The stipulation of facts is clear that when Devesa
shot and killed Gillaco, Devesa was assigned to guard the Manila-San Fernando (La Union) trains, and he
was at Paco Station awaiting transportation to Tutuban, the starting point of the train that he was engaged to
guard. In fact, his tour of duty was to start at 9:00 two hours after the commission of the crime. Devesa was
therefore under no obligation to safeguard the passengers of the Calamba-Manila train, where the deceased
was riding; and the killing of Gillaco was not done in line of duty. The position of Devesa at the time was that
of another would be passenger, a stranger also awaiting transportation, and not that of an employee assigned
to discharge any of the duties that the Railroad had assumed by its contract with the deceased. As a result,
Devesa's assault can not be deemed in law a breach of Gillaco's contract of transportation by a servant or
employee of the carrier. . . . (Emphasis supplied)
Now here, the killing was perpetrated by the driver of the very cab transporting the passenger, in whose
hands the carrier had entrusted the duty of executing the contract of carriage. In other words, unlike
the Gillaco case, the killing of the passenger here took place in the course of duty of the guilty employee and
when the employee was acting within the scope of his duties.
Moreover, the Gillaco case was decided under the provisions of the Civil Code of 1889 which, unlike the
present Civil Code, did not impose upon common carriers absolute liability for the safety of passengers
against wilful assaults or negligent acts committed by their employees. The death of the passenger in
the Gillaco case was truly a fortuitous event which exempted the carrier from liability. It is true that Art. 1105
of the old Civil Code on fortuitous events has been substantially reproduced in Art. 1174 of the Civil Code of
the Philippines but both articles clearly remove from their exempting effect the case where the law expressly
provides for liability in spite of the occurrence of force majeure. And herein significantly lies the statutory
difference between the old and present Civil Codes, in the backdrop of the factual situation before Us, which
further accounts for a different result in the Gillaco case. Unlike the old Civil Code, the new Civil Code of the
Philippines expressly makes the common carrier liable for intentional assaults committed by its employees
upon its passengers, by the wording of Art. 1759 which categorically states that
Common carriers are liable for the death of or injuries to passengers through the negligence or willful acts of
the former's employees, although such employees may have acted beyond the scope of their authority or in
violation of the orders of the common carriers.
The Civil Code provisions on the subject of Common Carriers1 are new and were taken from Anglo-American
Law.2There, the basis of the carrier's liability for assaults on passengers committed by its drivers rests either
on (1) the doctrine of respondeat superior or (2) the principle that it is the carrier's implied duty to transport
the passenger safely.3
Under the first, which is the minority view, the carrier is liable only when the act of the employee is within the
scope of his authority and duty. It is not sufficient that the act be within the course of employment only.4
Under the second view, upheld by the majority and also by the later cases, it is enough that the assault
happens within the course of the employee's duty. It is no defense for the carrier that the act was done in
excess of authority or in disobedience of the carrier's orders.5 The carrier's liability here is absolute in the
sense that it practically secures the passengers from assaults committed by its own employees.6
As can be gleaned from Art. 1759, the Civil Code of the Philippines evidently follows the rule based on the
second view. At least three very cogent reasons underlie this rule. As explained in Texas Midland R.R. v.
Monroe, 110 Tex. 97, 216 S.W. 388, 389-390, and Haver v. Central Railroad Co., 43 LRA 84, 85: (1) the
special undertaking of the carrier requires that it furnish its passenger that full measure of protection afforded
by the exercise of the high degree of care prescribed by the law, inter alia from violence and insults at the
hands of strangers and other passengers, but above all, from the acts of the carrier's own servants charged
with the passenger's safety; (2) said liability of the carrier for the servant's violation of duty to passengers, is
the result of the formers confiding in the servant's hands the performance of his contract to safely transport
the passenger, delegating therewith the duty of protecting the passenger with the utmost care prescribed by
law; and (3) as between the carrier and the passenger, the former must bear the risk of wrongful acts or
negligence of the carrier's employees against passengers, since it, and not the passengers, has power to
select and remove them.
Accordingly, it is the carrier's strict obligation to select its drivers and similar employees with due regard not
only to their technical competence and physical ability, but also, no less important, to their total personality,
including their patterns of behavior, moral fibers, and social attitude.
Applying this stringent norm to the facts in this case, therefore, the lower court rightly adjudged the defendant
carrier liable pursuant to Art. 1759 of the Civil Code. The dismissal of the claim against the defendant driver
was also correct. Plaintiff's action was predicated on breach of contract of carriage7 and the cab driver was
not a party thereto. His civil liability is covered in the criminal case wherein he was convicted by final
judgment.
In connection with the award of damages, the court a quo granted only P3,000 to plaintiff-appellant. This is
the minimum compensatory damages amount recoverable under Art. 1764 in connection with Art. 2206 of the
Civil Code when a breach of contract results in the passenger's death. As has been the policy followed by this
Court, this minimal award should be increased to P6,000. As to other alleged actual damages, the lower
court's finding that plaintiff's evidence thereon was not convincing,8 should not be disturbed. Still, Arts. 2206
and 1764 award moral damages in addition to compensatory damages, to the parents of the passenger killed
to compensate for the mental anguish they suffered. A claim therefor, having been properly made, it becomes
the court's duty to award moral damages.9 Plaintiff demands P5,000 as moral damages; however, in the
circumstances, We consider P3,000 moral damages, in addition to the P6,000 damages afore-stated, as
sufficient. Interest upon such damages are also due to plaintiff-appellant. 10
Wherefore, with the modification increasing the award of actual damages in plaintiff's favor to P6,000, plus
P3,000.00 moral damages, with legal interest on both from the filing of the complaint on December 6, 1961
until the whole amount is paid, the judgment appealed from is affirmed in all other respects. No costs. So
ordered.
Act of Other Passengers and 3rd persons

Jose Pilapil vs. CA
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 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.
Passengers baggages
1.5 Define baggage
1.6 Checked-in-Baggage
1.7 Hand Carried baggage
Philippine Airlines Inc. vs. CA
This is definitely not a case of first impression. The incident which eventuated in the
present controversy is a drama of common contentious occurrence between
passengers and carriers whenever loss is sustained by the former. Withal, the
exposition of the factual ambience and the legal precepts in this adjudication may
hopefully channel the assertiveness of passengers and the intransigence of carriers
into the realization that at times a bad extrajudicial compromise could be better than
a good judicial victory.
Assailed in this petition for review is the decision of respondent Court of Appeals
in CA-G.R. CV No. 42744 which affirmed the decision of the lower court finding
[1] [2]
petitioner Philippine Air Lines, Inc. (PAL) liable as follows:
ACCORDINGLY, judgment is hereby rendered ordering defendant Philippine Air Lines,

Inc., to pay plaintiff Gilda C. Mejia:
(1) P30,000.00 by way of actual damages of the microwave oven;
(2) P10,000.00 by way of moral damages;
(3) P20,000.00 by way of exemplary damages;
(4) P10,000.00 as attorneys fee;
all in addition to the costs of the suit.
Defendants counterclaim is hereby dismissed for lack of merit. [3]
The facts as found by respondent Court of Appeals are as follows:
On January 27, 1990, plaintiff Gilda C. Mejia shipped thru defendant, Philippine Airlines,
one (1) unit microwave oven, with a gross weight of 33 kilograms from San
Francisco, U.S.A. to Manila, Philippines. Upon arrival, however, of said article
in Manila, Philippines, plaintiff discovered that its front glass door was broken and the
damage rendered it unserviceable. Demands both oral and written were made by plaintiff
against the defendant for the reimbursement of the value of the damaged microwave oven,
and transportation charges paid by plaintiff to defendant company. But these demands fell on
deaf ears.
On September 25, 1990, plaintiff Gilda C. Mejia filed the instant action for damages against
defendant in the lower court.
In its answer, defendant Airlines alleged inter alia, by way of special and affirmative
defenses, that the court has no jurisdiction over the case; that plaintiff has no valid cause of
action against defendant since it acted only in good faith and in compliance with the
requirements of the law, regulations, conventions and contractual commitments; and that
defendant had always exercised the required diligence in the selection, hiring and
supervision of its employees. [4]
What had theretofore transpired at the trial in the court a quo is narrated as
follows:
Plaintiff Gilda Mejia testified that sometime on January 27, 1990, she took defendants plane
from San Francisco, U.S.A. for Manila, Philippines (Exh. F). Amongst her baggages (sic)
was a slightly used microwave oven with the brand name Sharp under PAL Air Waybill No.
0-79-1013008-3 (Exh. A). When shipped, defendants office at San Francisco inspected it. It
was in good condition with its front glass intact. She did not declare its value upon the
advice of defendants personnel at San Francisco.
When she arrived in Manila, she gave her sister Concepcion C. Dio authority to claim
her baggag(e) (Exh. G) and took a connecting flight for Bacolod City.
When Concepcion C. Dino claimed the baggag(e) (Exh. B) with defendant, then with the
Bureau of Customs, the front glass of the microwave oven was already broken and cannot be
repaired because of the danger of radiation.They demanded from defendant thru
Atty. Paco P30,000.00 for the damages although a brand new one costs P40,000.00, but
defendant refused to pay.
Hence, plaintiff engaged the services of counsel. Despite demand (Exh. E) by counsel,
defendant still refused to pay.
The damaged oven is still with defendant. Plaintiff is engaged in (the) catering and restaurant
business. Hence, the necessity of the oven. Plaintiff suffered sleepless nights when defendant
refused to pay her (for) the broken oven and claims P 10,000.00 moral damages,
P20,000.00 exemplary damages, P10,000.00 attorneys fees plus P300.00 per court
appearance and P15,000.00 monthly loss of income in her business beginning February,
1990.
Defendant Philippine Airlines thru its employees Rodolfo Pandes and

Vicente Villaruz posited that plaintiffs claim was not investigated until after the filing of the
formal claim on August 13, 1990 (Exh. 6 also Exh. E). During the investigations, plaintiff
failed to submit positive proof of the value of the cargo. Hence her claim was denied.
Also plaintiffs claim was filed out of time under paragraph 12, a(1) of the Air Waybill
(Exh. A, also Exh. 1) which provides: (a) the person entitled to delivery must make a
complaint to the carrier in writing in case: (1) of visible damage to the goods, immediately
after discovery of the damage and at the latest within 14 days from the receipt of the goods. [5]
As stated at the outset, respondent Court of Appeals similarly ruled in favor of

private respondent by affirming in full the trial courts judgment in Civil Case No. 6210,
with costs against petitioner. Consequently, petitioner now impugns respondent
[6]
appellate courts ruling insofar as it agrees with (1) the conclusions of the trial court
that since the air waybill is a contract of adhesion, its provisions should be strictly
construed against herein petitioner; (2) the finding of the trial court that herein
petitioners liability is not limited by the provisions of the air waybill; and (3) the award
by the trial court to private respondent of moral and exemplary damages, attorneys
fees and litigation expenses.
The trial court relied on the ruling in the case of Fieldmens Insurance Co., Inc.
vs. Vda. De Songco, et al. in finding that the provisions of the air waybill should be
[7]
strictly construed against petitioner. More particularly, the court below stated its
findings thus:
In this case, it is seriously doubted whether plaintiff had read the printed conditions at the
back of the Air Waybill (Exh. 1), or even if she had, if she was given a chance to negotiate
on the conditions for loading her microwave oven. Instead she was advised by defendants
employee at San Francisco, U.S.A., that there is no need to declare the value of her oven
since it is not brand new. Further, plaintiff testified that she immediately submitted a formal
claim for P30,000.00 with defendant. But their claim was referred from one employee to
another th(e)n told to come back the next day, and the next day, until she was referred to a
certain Atty. Paco. When they got tired and frustrated of coming without a settlement of their
claim in sight, they consulted a lawyer who demanded from defendant on August 13,
1990 (Exh. E, an[d] Exh. 6).
The conclusion that inescapably emerges from the above findings of fact is to concede it
with credence. x x x.[8]
Respondent appellate court approved said findings of the trial court in this
manner:
We cannot agree with defendant-appellants above contention. Under our jurisprudence, the
Air Waybill is a contract of adhesion considering that all the provisions thereof are prepared
and drafted only by the carrier (Sweet Lines v. Teves, 83 SCRA 361). The only participation
left of the other party is to affix his signature thereto (BPI Credit Corporation vs. Court of
Appeals, 204 SCRA 601; Saludo, Jr. vs. C.A., 207 SCRA 498; Maersk vs. Court of Appeals,
222 SCRA 108, among the recent cases). In the earlier case of Angeles v. Calasanz, 135
SCRA 323, the Supreme Court ruled that the terms of a contract (of adhesion) must be
interpreted against the party who drafted the same. x xx.[9]
Petitioner airlines argues that the legal principle enunciated

in Fieldmens Insurance does not apply to the present case because the provisions of
the contract involved here are neither ambiguous nor obscure. The front portion of
the air waybill contains a simple warning that the shipment is subject to the
conditions of the contract on the dorsal portion thereof regarding the limited liability of
the carrier unless a higher valuation is declared, as well as the reglementary period
within which to submit a written claim to the carrier in case of damage or loss to the
cargo. Granting that the air waybill is a contract of adhesion, it has been ruled by the
Court that such contracts are not entirely prohibited and are in fact binding
regardless of whether or not respondent herein read the provisions thereof. Having
contracted the services of petitioner carrier instead of other airlines, private
respondent in effect negotiated the terms of the contract and thus became bound
thereby. [10]
Counsel for private respondent refutes these arguments by saying that due to her
eagerness to ship the microwave oven to Manila, private respondent assented to the
terms and conditions of the contract without any opportunity to question or change its
terms which are practically on a take-it-or-leave-it basis, her only participation therein
being the affixation of her signature. Further, reliance on
the Fieldmensinsurance case is misplaced since it is not the ambiguity or obscurity of
the stipulation that renders necessary the strict interpretation of a contract of
adhesion against the drafter, but the peculiarity of the transaction wherein one party,
normally a corporation, drafts all the provisions of the contract without any
participation whatsoever on the part of the other party other than affixment of
signature. [11]
A review of jurisprudence on the matter reveals the consistent holding of the

Court that contracts of adhesion are not invalid per se and that it has on numerous
occasions upheld the binding effect thereof. As explained in Ong Yiu vs. Court of
[12]
Appeals, et al., supra:
x x x. Such provisions have been held to be a part of the contract of carriage, and valid and
binding upon the passenger regardless of the latters lack of knowledge or assent to the
regulation. It is what is known as a contract of adhesion, in regards which it has been said
that contracts of adhesion wherein one party imposes a ready-made form of contract on the
other, as the plane ticket in the case at bar, are contracts not entirely prohibited. The one who
adheres to the contract is in reality free to reject it entirely; if he adheres, he gives his consent.
x x x, a contract limiting liability upon an agreed valuation does not offend against the policy
of the law forbidding one from contracting against his own negligence.
As rationalized in Saludo, Jr. vs. Court of Appeals, et al., supra:
x x x, 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. x x x.
but subject to the caveat that
x x x. Just because we have said that Condition No. 5 of the airway bill is binding upon the
parties to and fully operative in this transaction, it does not mean, and let this serve as fair
warning to respondent carriers, that they can at all times whimsically seek refuge from
liability in the exculpatory sanctuary of said Condition No. 5 x x x.
The peculiar nature of such contracts behooves the Court to closely scrutinize the
factual milieu to which the provisions are intended to apply. Thus, just as consistently
and unhesitatingly, but without categorically invalidating such contracts, the Court
has construed obscurities and ambiguities in the restrictive provisions of contracts of
adhesion strictly albeit not unreasonably against the drafter thereof when justified in
light of the operative facts and surrounding circumstances. [13]
We find nothing objectionable about the lower courts reliance upon

the Fieldmens Insurance case, the principles wherein squarely apply to the present
petition. The parallelism between the aforementioned case and this one is readily
apparent for, just as in the instant case, it is the binding effect of the provisions in a
contract of adhesion (an insurance policy in Fieldmens Insurance) that is put to test.
A judicious reading of the case reveals that what was pivotal in the judgment of
liability against petitioner insurance company therein, and necessarily interpreting
the provisions of the insurance policy as ineffective, was the finding that the
representations made by the agent of the insurance company rendered it impossible
to comply with the conditions of the contract in question, rather than the mere
ambiguity of its terms. The extended pronouncements regarding strict construction of
ambiguous provisions in an adhesion contract against its drafter, which although
made by the Court as an aside but has perforce evolved into a judicial tenet over time,
was actually an incidental statement intended to emphasize the duty of the court to
protect the weaker, as against the more dominant, party to a contract, as well as to
prevent the iniquitous situation wherein the will of one party is imposed upon the
other in the course of negotiation.
Thus, there can be no further question as to the validity of the terms of the air
waybill, even if the same constitutes a contract of adhesion. Whether or not the
provisions thereof particularly on the limited liability of the carrier are binding on
private respondent in this instance must be determined from the facts and
circumstances involved vis-a-vis the nature of the provisions sought to be enforced,
taking care that equity and fair play should characterize the transaction under review.
On petitioners insistence that its liability for the damage to private respondents
microwave oven, if any, should be limited by the provisions of the air waybill, the
lower court had this to say:
By and large, defendants evidence is anchored principally on plaintiffs alleged failure to

comply with paragraph 12, a(1) (Exh. 1-C-2) of the Air waybill (Exh. A, also Exh. 1), by
filing a formal claim immediately after discovery of the damage. Plaintiff filed her formal
claim only on August 13, 1990 (Exh. 6, also Exh. E). And, failed to present positive proof on
the value of the damaged microwave oven. Hence, the denial of her claim.
This Court has misgivings about these pretensions of defendant.
xxx xxx xxx
Finally, the Court finds no merit to defendants contention that under the Warsaw Convention,
its liability if any, cannot exceed U.S. $20.00 based on weight as plaintiff did not declare the
contents of her baggage nor pay additional charges before the flight. [14]
The appellate court declared correct the non-application by the trial court of the
limited liability of therein defendant-appellant under the Conditions of the Contract
contained in the air waybill , based on the ruling in Cathay Pacific Airways, Ltd. vs.
Court of Appeals, et al., which substantially enunciates the rule that while the
[15]
Warsaw Convention has the force and effect of law in the Philippines, being a treaty
commitment by the government and as a signatory thereto, the same does not
operate as an exclusive enumeration of the instances when a carrier shall be liable
for breach of contract or as an absolute limit of the extent of liability, nor does it
preclude the operation of the Civil Code or other pertinent laws.
Petitioner insists that both respondent court and the trial court erred in finding that
petitioners liability, if any, is not limited by the provisions of the air waybill, for, as
evidence of the contract of carriage between petitioner and private respondent, it
substantially states that the shipper certifies to the correctness of the entries
contained therein and accepts that the carriers liability is limited to US$20 per
kilogram of goods lost, damaged or destroyed unless a value is declared and a
supplementary charge paid. Inasmuch as no such declaration was made by private
respondent, as she admitted during cross-examination, the liability of petitioner, if
any, should be limited to 28 kilograms multiplied by US$20, or $560. Moreover, the
validity of these conditions has been upheld in the leading case of Ong Yiu vs. Court
of Appeals, et al., supra, and subsequent cases, for being a mere reiteration of the
limitation of liability under the. Warsaw Convention, which treaty has the force and
effect of law. [16]
It is additionally averred that since private respondent was merely advised, not
ordered, that she need not declare a higher value for her cargo, the final decision of
refraining from making such a declaration fell on private respondent and should not
put the petitioner in estoppel from invoking its limited liability. [17]
In refutation, private respondent explains that the reason for the absence of a
declaration of a higher value was precisely because petitioners personnel in San
Francisco, U.S.A. advised her not to declare the value of her cargo, which testimony
has not at all been rebutted by petitioner. This being so, petitioner is estopped from
faulting private respondent for her failure to declare the value of the microwave
oven. [18]
The validity of provisions limiting the liability of carriers contained in bills of

lading have been consistently upheld for the following reason:
x x x. The stipulation in the bill of lading limiting the common carriers liability to the value
of goods appearing in the bill, unless the shipper or owner declares a greater value, is valid
and binding. The limitation of the carriers liability is sanctioned by the freedom of the
contracting parties to establish such stipulations, clauses, terms, or conditions as they may
deem convenient, provided they are not contrary to law, morals, good customs and public
policy. x x x.
[19]
However, the Court has likewise cautioned against blind reliance on adhesion
contracts where the facts and circumstances warrant that they should be
disregarded. [20]
In the case at bar, it will be noted that private respondent signified an intention to
declare the value of the microwave oven prior to shipment, but was explicitly advised
against doing so by PALs personnel in San Francisco, U.S.A., as borne out by her
testimony in court:
xxx xxx xxx
Q Did you declare the value of the shipment?
A No. I was advised not to.
Q Who advised you?
A At the PAL Air Cargo.[21]
It cannot be denied that the attention of PAL through its personnel in San
Francisco was sufficiently called to the fact that private respondents cargo was highly
susceptible to breakage as would necessitate the declaration of its actual
value. Petitioner had all the opportunity to check the condition and manner of packing
prior to acceptance for shipment, as well as during the preparation of the air waybill
[22]
by PALsAcceptance Personnel based on information supplied by the shipper, and [23]
to reject the cargo if the contents or the packing did not meet the companys required
specifications. Certainly, PAL could not have been otherwise prevailed upon to
merely accept the cargo.
While Vicente Villaruz, officer-in-charge of the PAL Import Section at the time of
incident, posited that there may have been inadequate and improper packing of the
cargo, which by itself could be a ground for refusing carriage of the goods
[24]
presented for shipment, he nonetheless admitted on cross-examination that private

respondents cargo was accepted by PAL in its San Francisco office:
ATTY. VINCO
So that, be that as it may, my particular concern is that, it is the PAL personnel
that accepts the baggage?
WITNESS
Yes, sir.
ATTY. VINCO
Also, if he comes from abroad like in this particular case, it is the PAL personnel
who accepts the baggage?
WITNESS
Yes, sir.
ATTY. VINCO
And the PAL personnel may or may not accept the baggage?
WITNESS
Yes, sir.
ATTY. VINCO
According to what is stated as in the acceptance of the cargo, it is to the best interest of the
airlines, that is, he want(s) also that the airlines would be free from any liability. Could that
be one of the grounds for not admitting a baggage?
WITNESS
Safety is number one (I)
xxx xxx xxx
ATTY. VINCO
So, this baggage was accepted and admitted in San Francisco?
WITNESS
Yes, sir.
ATTY. VINCO
And you could not show any document to the Court that would suggest that this baggage
was denied admittance by your office at San Francisco?
WITNESS
No, I cannot show.
ATTY. VINCO
Now, can you show any document that would suggest that there was
insufficient pac(k)aging on this particular baggage from abroad?
WITNESS
No, sir.[25]
In response to the trial courts questions during the trial, he also stated that while
the passengers declaration regarding the general or fragile character of the cargo is
to a certain extent determinative of its classification, PAL nevertheless has and
exercises discretion as to the manner of handling required by the nature of the cargo
it accepts for carriage. He further opined that the microwave oven was only a general,
not a fragile, cargo which did not require any special handling. [26]
There is no absolute obligation on the part of a carrier to accept a cargo. Where a

common carrier accepts a cargo for shipment for valuable consideration, it takes the
risk of delivering it in good condition as when it was loaded. And if the fact of
improper packing is known to the carrier or its personnel, or apparent upon
observation but it accepts the goods notwithstanding such condition, it is not relieved
of liability for loss or injury resulting therefrom.
[27]
The acceptance in due course by PAL of private respondents cargo as packed

and its advice against the need for declaration of its actual value operated as an
assurance to private respondent that in fact there was no need for such a
declaration. Petitioner can hardly be faulted for relying on the representations
of PALs own personnel.
In other words, private respondent Mejia could and would have complied with the
conditions stated in the air waybill, i.e., declaration of a higher value and payment of
supplemental transportation charges, entitling her to recovery of damages beyond
the stipulated limit of US$20 per kilogram of cargo in the event of loss or damage,
had she not been effectively prevented from doing so upon the advice
of PALspersonnel for reasons best known to themselves.
As pointed out by private respondent, the aforestated facts were not denied by
PAL in any of its pleadings nor rebutted by way of evidence presented in the course
of the trial, and thus in effect it judicially admitted that such an advice was given by its
personnel in San Francisco, U.S.A. Petitioner, therefore, is estopped from blaming
private respondent for not declaring the value of the cargo shipped and which would
have otherwise entitled her to recover a higher amount of damages. The Courts
bidding in the Fieldmens Insurance case once again rings true:
x x x. As estoppel is primarily based on the doctrine of good faith and the avoidance of harm
that will befall an innocent party due to its injurious reliance, the failure to apply it in this
case would result in gross travesty of justice.
We likewise uphold the lower courts finding that private respondent complied with
the requirement for the immediate filing of a formal claim for damages as required in
the air waybill or, at least, we find that there was substantial compliance therewith.
Private respondent testified that she authorized her sister, Concepcion Dio, to
claim her cargo consisting of a microwave oven since the former had to take a
connecting flight to Bacolod City on the very same afternoon of the day of her
arrival. As instructed, Concepcion Dio promptly proceeded to PALs Import Section
[28]
the next day to claim the oven. Upon discovering that the glass door was broken, she
immediately filed a claim by way of the baggage freight claim on which was duly
[29]
annotated the damage sustained by the oven. [30]
Her testimony relates what took place thereafter:

ATTY. VINCO
So, after that inspection, what did you do?
WITNESS
After that annotation placed by Mr. Villaruz, I went home and I followed it up the next day
with the Clerk of PAL cargo office.
ATTY. VINCO
What did the clerk tell you?
WITNESS
She told me that the claim was being processed and I made several phone calls after that. I
started my follow-ups February up to June 1990.
ATTY. VINCO
And what results did those follow-ups produce?
WITNESS
All they said (was) that the document was being processed, that they were waiting for
Atty. Paco to report to the office and they could refer the matter to Atty. Paco.
ATTY. VINCO
Who is this Atty. Paco?
WITNESS
He was the one in-charge of approving our claim.
ATTY. VINCO
Were you able to see Atty. Paco?
WITNESS
Yes, sir. I personally visited Atty. Paco together with my auntie who was a former PAL
employee.
xxx xxx xxx
ATTY. VINCO
So, what did you do, did you make a report or did you tell Atty. Paco of your scouting
around for a possible replacement?
WITNESS
I did call him back at his office. I made a telephone call.
ATTY. VINCO
And what answer did Atty. Paco make after you have reported back to him?
WITNESS
They told me that they were going to process the claim based on the price that I gave them
but there was no definite result.
ATTY. VINCO
How many times did you go and see Atty. Paco regarding the claim of your sister?
WITNESS
I made one personal visit and several follow-up calls. With Atty. Paco, I made one phone
call but I made several phone calls with his secretary or the clerk at PAL cargo office and I
was trying to locate him but unfortunately, he was always out of his office.[31]
PAL claims processor, Rodolfo Pandes, confirmed having received the baggage
*
freight claim on January 30, 1990 and the referral to and extended pendency of the
[32]
private respondents claim with the office of Atty. Paco, to wit:

ATTY. VINCO:
Q And you did instruct the claimant to see the Claim Officer of the company, right?
WITNESS:
A Yes, sir.
ATTY. VINCO:
Q And the Claim Officer happened to be Atty. Paco?
WITNESS:
A Yes, sir.
ATTY. VINCO:
Q And you know that the plaintiff thru her authorized representative Concepcion Dio, who is her
sister had many times gone to Atty. Paco, in connection with this claim of her sister?
WITNESS:
A Yes, sir.
ATTY. VINCO:
Q As a matter of fact even when the complaint was already filed here in Court the claimant had
continued to call about the settlement of her claim with Atty. Paco, is that correct?
xxx xxx xxx
WITNESS:
A Yes, sir.
ATTY. VINCO.
Q You know this fact because a personnel saw you in one of the pre-trial here when this case
was heard before the sala of Judge Moscardon, is that correct?
WITNESS:
A Yes.
ATTY. VINCO:
Q In other words, the plaintiff rather had never stop(ped) in her desire for your company to
settle this claim, right?
WITNESS
A Yes, sir.[33]
Considering the abovementioned incidents and private respondent Mejias own

zealous efforts in following up the claim, it was clearly not her fault that the letter of
[34]
demand for damages could only be filed, after months of exasperating follow-up of
the claim, on August 13, 1990. If there was any failure at all to file the formal claim
[35]
within the prescriptive period contemplated in the air waybill, this was largely
because of PALs own doing, the consequences of which cannot, in all fairness, be
attributed to private respondent.
Even if the claim for damages was conditioned on the timely filing of a formal
claim, under Article 1186 of the Civil Code that condition was deemed fulfilled,
considering that the collective action of PALspersonnel in tossing around the claim
and leaving it unresolved for an indefinite period of time was tantamount to
voluntarily preventing its fulfillment. On grounds of equity, the filing of the baggage
freight claim, which sufficiently informed PAL of the damage sustained by private
respondents cargo, constituted substantial compliance with the requirement in the
contract for the filing of a formal claim.
All told, therefore, respondent appellate court did not err in ruling that the
provision on limited liability is not applicable in this case. We, however, note in
passing that while the facts and circumstances of this case do not call for the direct
application of the provisions of the Warsaw Convention, it should be stressed that,
indeed, recognition of the Warsaw Convention does not preclude the operation of the
Civil Code and other pertinent laws in the determination of the extent of liability of the
common carrier. [36]
The Warsaw Convention, being a treaty to which the Philippines is a signatory, is

as much a part of Philippine law as the Civil Code, Code of Commerce and other
municipal special laws. The provisions therein contained, specifically on the
[37]
limitation of carriers liability, are operative in the Philippines but only in appropriate
situations.
Petitioner ascribes ultimate error in the award of moral exemplary damages and
attorneys fees in favor of private respondent in that other than the statement of the
trial court that petitioner acted in bad faith in denying private respondents claim,
which was affirmed by the Court of Appeals, there is no evidence on record that the
same is true. The denial of private respondents claim was supposedly in the honest
belief that the same had prescribed, there being no timely formal claim filed; and
despite having been given an opportunity to submit positive proof of the value of the
damaged microwave oven, no such proof was submitted. Petitioner insists that its
failure to deliver the oven in the condition in which it was shipped could hardly be
considered as amounting to bad faith. [38]
Private respondent counters that petitioners failure to deliver the microwave oven
in the condition in which it was received can be describe as gross negligence
amounting to bad faith, on the further consideration that it failed to prove that it
exercised the extraordinary diligence required by law, and that no explanation
whatsoever was given as to why the front glass of the oven was broken. [39]
The trial court justified its award of actual, moral and exemplary damages, and
attorneys fees in favor of private respondent in this wise:
Since the plaintiffs baggage destination was the Philippines, Philippine law governs the
liability of the defendant for damages for the microwave oven.
The provisions of the New Civil Code on common carriers are Article(s) 1733, 1735 and
1753 x x x.
xxx xxx xxx
In this case, defendant failed to overcome, not only the presumption but more importantly,
plaintiffs evidence that defendants negligence was the proximate cause of the damages of the
microwave oven. Further, plaintiff has established that defendant acted in bad faith when it
denied the formers claim on the ground that the formal claim was filed beyond the period as
provided in paragraph 12 (a-1) (Exh. 1-C-2) of the Air Waybill (Exh. 1, also Exh A), when
actually, Concepcion Dio, sister of plaintiff has immediately filed the formal claim upon
discovery of the damage. [40]
Respondent appellate court was in full agreement with the trial courts finding of
bad faith on the part of petitioner as a basis for the award of the aforestated damages,
declaring that:
As to the last assigned error, a perusal of the facts and law of the case reveals that the lower
courts award of moral and exemplary damages, attorneys fees and costs of suit to
plaintiff-appellee is in accordance with current laws and jurisprudence on the matter. Indeed,
aside from the fact that defendant-appellant acted in bad faith in breaching the contract and
in denying plaintiffs valid claim for damages, plaintiff-appellee underwent profound distress,
sleepless nights, and anxiety upon knowledge of her damaged microwave oven in possession
of defendant-appellant, entitling her to the award of moral and exemplary damages (Cathay
Pacific Airways, Ltd. vs. C.A., supra; Arts. 2219 & 2221, New Civil Code), and certainly
plaintiff-appellants unjust refusal to comply with her valid demand for payment, thereby also
entitling her to reasonable attorneys fees [Art. 2208 (2) and (11), id.]. [41]
It will be noted that petitioner never denied that the damage to the microwave
oven was sustained while the same was in its custody. The possibility that said
damage was due to causes beyond the control of PAL has effectively been ruled out
since the entire process in handling of the cargo - from the unloading thereof from the
plane, the towing and transfer to the PAL warehouse, the transfer to the Customs
examination area, and its release thereafter to the shipper - was done almost
exclusively by, and with the intervention or, at the very least, under the direct
supervision of a responsible PAL personnel. [42]
The very admissions of PAL, through Vicente Villaruz of its Import Section, as
follows:
ATTY. VINCO
So that, you now claim, Mr. Witness, that from the time the cargo was unloaded from the
plane until the time it reaches the Customs counter where it was inspected, all the way, it
was the PAL personnel who did all these things?
WITNESS
Yes, however, there is also what we call the Customs storekeeper and the Customs guard
along with the cargo.
ATTY. VINCO
You made mention about a locator?
WITNESS
Yes, sir.
ATTY. VINCO
This locator, is he an employee of the PAL or the Customs?
WITNESS
He is a PAL employee.[43]
lead to the inevitable conclusion that whatever damage may have been sustained by
the cargo is due to causes attributable to PALs personnel or, at all events, under
their responsibility.
Moreover, the trial court underscored the fact that petitioner was not able to
overcome the statutory presumption of negligence in Article 1735 which, as a
common carrier, it was laboring under in case of loss, destruction or deterioration of
goods, through proper showing of the exercise of extraordinary diligence. Neither did
it prove that the damage to the microwave oven was because of any of
the exceptingcauses under Article 1734, all of the same Code. Inasmuch as the
subject item was received in apparent good condition, no contrary notation or
exception having been made on the air waybill upon its acceptance for shipment, the
fact that it was delivered with a broken glass door raises the presumption
that PALs personnel were negligent in the carriage and handling of the cargo. [44]
Furthermore, there was glaringly no attempt what so ever on the part of petitioner
to explain the cause of the damage to the oven. The unexplained cause of damage
to private respondents cargo constitutes gross carelessness or negligence which by
itself justifies the present award of damages. The equally unexplained and
[45]
inordinate delay in acting on the claim upon referral thereof to the claims officer,
Atty. Paco, and the noncommittal responses to private respondents entreaties for
settlement of her claim for damages belies petitioners pretension that there was no
bad faith on its part. This unprofessional indifference of PALs personnel despite full
and actual knowledge of the damage to private respondents cargo, just to be
exculpated from liability on pure technicality and bureaucratic subterfuge, smacks of
willful misconduct and insensitivity to a passengers plight tantamount to bad
faith and renders unquestionable petitioners liability for damages. In sum, there is
[46]
no reason to disturb the findings of the trial court in this case, especially with its
full affirmance by respondent Court of Appeals.
On this note, the case at bar goes into the annals of our jurisprudence after six
years and recedes into the memories of our legal experience as just another
inexplicable inevitability. We will never know exactly how many man-hours went into
the preparation, litigation and adjudication of this simple dispute over an oven, which
the parties will no doubt insist they contested as a matter of principle. One thing,
however, is certain. As long as the first letter in principle is somehow outplaced by
the peso sign, the courts will always have to resolve similar controversies although
mutual goodwill could have dispensed with judicial recourse.
IN VIEW OF ALL OF THE FOREGOING, the assailed judgment of respondent
Court of Appeals is AFFIRMED in toto.
SO ORDERED.
British Airways vs. CA
In this appeal by certiorari, petitioner British Airways (BA) seeks to set aside the decision of
respondent Court of Appeals[1] promulgated on September 7, 1995, which affirmed the award of
damages and attorneys fees made by the Regional Trial Court of Cebu, 7th Judicial Region,
Branch 17, in favor of private respondent GOP Mahtani as well as the dismissal of its third-party
complaint against Philippine Airlines (PAL).[2]
The material and relevant facts are as follows:
On April 16, 1989, Mahtani decided to visit his relatives in Bombay, India. In
anticipation of his visit, he obtained the services of a certain Mr. Gumar to prepare
his travel plans. The latter, in turn, purchased a ticket from BA where the following
itinerary was indicated: [3]
CARRIER FLIGHT DATE TIME STATUS
MANILA MNL PR 310Y 16 APR 1730 OK

HONGKONG HKG BA 20 M 16 APR 2100 OK
BOMBAY BOM BA 19 M 23 APR 0840 OK
MANILA MNL"
Since BA had no direct flights from Manila to Bombay, Mahtani had to take a flight to
Hongkong via PAL, and upon arrival in Hongkong he had to take a connecting flight to Bombay
on board BA.
Prior to his departure, Mahtani checked in at the PAL counter in Manila his two pieces of
luggage containing his clothings and personal effects, confident that upon reaching Hongkong,
the same would be transferred to the BA flight bound for Bombay.
Unfortunately, when Mahtani arrived in Bombay he discovered that his luggage was
missing and that upon inquiry from the BA representatives, he was told that the same might
have been diverted to London. After patiently waiting for his luggage for one week, BA finally
advised him to file a claim by accomplishing the Property Irregularity Report.[4]
Back in the Philippines, specifically on June 11, 1990, Mahtani filed his complaint for
damages and attorneys fees[5] against BA and Mr. Gumar before the trial court, docketed as
Civil Case No. CEB-9076.
On September 4, 1990, BA filed its answer with counter claim [6] to the complaint raising, as
special and affirmative defenses, that Mahtani did not have a cause of action against
it. Likewise, on November 9, 1990, BA filed a third-party complaint[7] against PAL alleging that
the reason for the non-transfer of the luggage was due to the latters late arrival in Hongkong,
thus leaving hardly any time for the proper transfer of Mahtanis luggage to the BA aircraft bound
for Bombay.
On February 25, 1991, PAL filed its answer to the third-party complaint, wherein it
disclaimed any liability, arguing that there was, in fact, adequate time to transfer the luggage to
BA facilities in Hongkong.Furthermore, the transfer of the luggage to Hongkong authorities
should be considered as transfer to BA.[8]
After appropriate proceedings and trial, on March 4, 1993, the trial court rendered its
decision in favor of Mahtani,[9] the dispositive portion of which reads as follows:
WHEREFORE, premises considered, judgment is rendered for the plaintiff
and against the defendant for which defendant is ordered to pay plaintiff the
sum of Seven Thousand (P7,000.00) Pesos for the value of the two (2) suit
cases; Four Hundred U.S. ($400.00) Dollars representing the value of the
contents of plaintiffs luggage; Fifty Thousand (P50,000.00) Pesos for moral
and actual damages and twenty percent (20%) of the total amount imposed
against the defendant for attorneys fees and costs of this action.
The Third-Party Complaint against third-party defendant Philippine Airlines is
DISMISSED for lack of cause of action.
SO ORDERED.
Dissatisfied, BA appealed to the Court of Appeals, which however, affirmed the trial courts
findings. Thus:
WHEREFORE, in view of all the foregoing considerations, finding the
Decision appealed from to be in accordance with law and evidence, the same
is hereby AFFIRMED in toto, with costs against defendant-appellant.
SO ORDERED. [10]
BA is now before us seeking the reversal of the Court of Appeals decision.

In essence, BA assails the award of compensatory damages and attorneys fees, as well as
the dismissal of its third-party complaint against PAL.[11]
Regarding the first assigned issue, BA asserts that the award of compensatory damages in
the separate sum of P7,000.00 for the loss of Mahtanis two pieces of luggage was without basis
since Mahtani in his complaint[12] stated the following as the value of his personal belongings:
8. On said travel, plaintiff took with him the following items and its
corresponding value, to wit:
1. personal belonging - - - - - - - - - - - - - - P10,000.00
2. gifts for his parents and relatives - - - - - $5,000.00
Moreover, he failed to declare a higher valuation with respect to his luggage, a condition
provided for in the ticket, which reads:[13]
Liability for loss, delay, or damage to baggage is limited unless a higher value
is declared in advance and additional charges are paid:
1. For most international travel (including domestic corporations of
international journeys) the liability limit is approximately U.S. $9.07 per pound
(U.S. $20.00) per kilo for checked baggage and U.S. $400 per passenger for
unchecked baggage.
Before we resolve the issues raised by BA, it is needful to state that the nature of an airlines
contract of carriage partakes of two types, namely: a contract to deliver a cargo or merchandise
to its destination and a contract to transport passengers to their destination. A business
intended to serve the travelling public primarily, it is imbued with public interest, hence, the law
governing common carriers imposes an exacting standard.[14] Neglect or malfeasance by the
carriers employees could predictably furnish bases for an action for damages. [15]
In the instant case, it is apparent that the contract of carriage was between Mahtani and
BA. Moreover, it is indubitable that his luggage never arrived in Bombay on time. Therefore, as
in a number of cases[16] we have assessed the airlines culpability in the form of damages for
breach of contract involving misplaced luggage.
In determining the amount of compensatory damages in this kind of cases, it is vital that the
claimant satisfactorily prove during the trial the existence of the factual basis of the damages
and its causal connection to defendants acts.[17]
In this regard, the trial court granted the following award as compensatory damages:
Since plaintiff did not declare the value of the contents in his luggage and
even failed to show receipts of the alleged gifts for the members of his family
in Bombay, the most that can be expected for compensation of his lost
luggage (2 suit cases) is Twenty U.S. Dollars ($20.00) per kilo, or a combined
value of Four Hundred ($400.00) U.S. Dollars for Twenty kilos representing
the contents plus Seven Thousand (P7,000.00) Pesos representing the
purchase price of the two (2) suit cases.
However, as earlier stated, it is the position of BA that there should have been no separate
award for the luggage and the contents thereof since Mahtani failed to declare a separate
higher valuation for the luggage,[18] and therefore, its liability is limited, at most, only to the
amount stated in the ticket.
Considering the facts of the case, we cannot assent to such specious argument.
Admittedly, in a contract of air carriage a declaration by the passenger of a higher value is
needed to recover a greater amount. Article 22(1) of the Warsaw Convention, [19] provides as
follows:
xxxxxxxxx
(2) In the transportation of checked baggage and goods, the liability of the
carrier shall be limited to a sum of 250 francs per kilogram, unless the
consignor has made, at the time the package was handed over to the carrier,
a special declaration of the value at delivery and has paid a supplementary
sum if the case so requires. In that case the carrier will be liable to pay a sum
not exceeding the declared sum, unless he proves that the sum is greater
than the actual value to the consignor at delivery.
American jurisprudence provides that an air carrier is not liable for the loss of baggage in an
amount in excess of the limits specified in the tariff which was filed with the proper authorities,
such tariff being binding on the passenger regardless of the passengers lack of knowledge
thereof or assent thereto.[20] This doctrine is recognized in this jurisdiction.[21]
Notwithstanding the foregoing, we have, nevertheless, ruled against blind reliance on
adhesion contracts where the facts and circumstances justify that they should be disregarded.[22]
In addition, we have held that benefits of limited liability are subject to waiver such as when
the air carrier failed to raise timely objections during the trial when questions and answers
regarding the actual claims and damages sustained by the passenger were asked. [23]
Given the foregoing postulates, the inescapable conclusion is that BA had waived the
defense of limited liability when it allowed Mahtani to testify as to the actual damages he
incurred due to the misplacement of his luggage, without any objection. In this regard, we quote
the pertinent transcript of stenographic notes of Mahtanis direct testimony: [24]
Q - How much are you going to ask from this court?
A - P100,000.00.
Q - What else?
A - Exemplary damages.
Q - How much?
A - P100,000.00.
Q - What else?
A - The things I lost, $5,000.00 for the gifts I lost and my
personal belongings, P10,000.00.
Q - What about the filing of this case?
A - The court expenses and attorneys fees is 30%.
Indeed, it is a well-settled doctrine that where the proponent offers evidence deemed by
counsel of the adverse party to be inadmissible for any reason, the latter has the right to
object. However, such right is a mere privilege which can be waived. Necessarily, the objection
must be made at the earliest opportunity, lest silence when there is opportunity to speak may
operate as a waiver of objections.[25] BA has precisely failed in this regard.
To compound matters for BA, its counsel failed, not only to interpose a timely objection, but
even conducted his own cross-examination as well.[26] In the early case of Abrenica v.
Gonda,[27] we ruled that:
x x x (I)t has been repeatedly laid down as a rule of evidence that a protest or
objection against the admission of any evidence must be made at the proper
time, and that if not so made it will be understood to have been waived. The
proper time to make a protest or objection is when, from the question
addressed to the witness, or from the answer thereto, or from the presentation
of proof, the inadmissibility of evidence is, or may be inferred.
Needless to say, factual findings of the trial court, as affirmed by the Court of Appeals, are
entitled to great respect.[28] Since the actual value of the luggage involved appreciation of
evidence, a task within the competence of the Court of Appeals, its ruling regarding the amount
is assuredly a question of fact, thus, a finding not reviewable by this Court. [29]
As to the issue of the dismissal of BAs third-party complaint against PAL, the Court of
Appeals justified its ruling in this wise, and we quote:[30]
Lastly, we sustain the trial courts ruling dismissing appellants third-party
complaint against PAL.
The contract of air transportation in this case pursuant to the ticket issued by
appellant to plaintiff-appellee was exclusively between the plaintiff Mahtani
and defendant-appellant BA. When plaintiff boarded the PAL plane from
Manila to Hongkong, PAL was merely acting as a subcontractor or agent of
BA. This is shown by the fact that in the ticket issued by appellant to
plaintiff-appellee, it is specifically provided on the Conditions of Contract,
paragraph 4 thereof that:
4. x x x carriage to be performed hereunder by several successive
carriers is regarded as a single operation.
The rule that carriage by plane although performed by successive carriers is
regarded as a single operation and that the carrier issuing the passengers
ticket is considered the principal party and the other carrier merely
subcontractors or agent, is a settled issue.
We cannot agree with the dismissal of the third-complaint.
In Firestone Tire and Rubber Company of the Philippines v. Tempengko,[31] we expounded
on the nature of a third-party complaint thus:
The third-party complaint is, therefore, a procedural device whereby a third
party who is neither a party nor privy to the act or deed complained of by the
plaintiff, may be brought into the case with leave of court, by the defendant,
who acts as third-party plaintiff to enforce against such third-party defendant a
right for contribution, indemnity, subrogation or any other relief, in respect of
the plaintiffs claim.The third-party complaint is actually independent of and
separate and distinct from the plaintiffs complaint. Were it not for this
provision of the Rules of Court, it would have to be filed independently and
separately from the original complaint by the defendant against the
third-party. But the Rules permit defendant to bring in a third-party defendant
or so to speak, to litigate his separate cause of action in respect of plaintiffs
claim against a third-party in the original and principal case with the object of
avoiding circuitry of action and unnecessary proliferation of law suits and of
disposing expeditiously in one litigation the entire subject matter arising from
one particular set of facts.
Undeniably, for the loss of his luggage, Mahtani is entitled to damages from BA, in view of
their contract of carriage. Yet, BA adamantly disclaimed its liability and instead imputed it to
PAL which the latter naturally denies. In other words, BA and PAL are blaming each other for
the incident.
In resolving this issue, it is worth observing that the contract of air transportation was
exclusively between Mahtani and BA, the latter merely endorsing the Manila to Hongkong leg of
the formers journey to PAL, as its subcontractor or agent. In fact, the fourth paragraph of the
Conditions of Contracts of the ticket[32] issued by BA to Mahtani confirms that the contract was
one of continuous air transportation from Manila to Bombay.
4. x x x carriage to be performed hereunder by several successive carriers is
regarded as a single operation.
Prescinding from the above discussion, it is undisputed that PAL, in transporting Mahtani
from Manila to Hongkong acted as the agent of BA.
Parenthetically, the Court of Appeals should have been cognizant of the well-settled rule
that an agent is also responsible for any negligence in the performance of its function[33] and is
liable for damages which the principal may suffer by reason of its negligent act. [34] Hence, the
Court of Appeals erred when it opined that BA, being the principal, had no cause of action
against PAL, its agent or sub-contractor.
Also, it is worth mentioning that both BA and PAL are members of the International Air
Transport Association (IATA), wherein member airlines are regarded as agents of each other in
the issuance of the tickets and other matters pertaining to their relationship. [35] Therefore, in the
instant case, the contractual relationship between BA and PAL is one of agency, the former
being the principal, since it was the one which issued the confirmed ticket, and the latter the
agent.
Our pronouncement that BA is the principal is consistent with our ruling in Lufthansa
German Airlines v. Court of Appeals.[36] In that case, Lufthansa issued a confirmed ticket to Tirso
Antiporda covering five-leg trip aboard different airlines. Unfortunately, Air Kenya, one of the
airlines which was to carry Antiporda to a specific destination bumped him off.
An action for damages was filed against Lufthansa which, however, denied any liability,
contending that its responsibility towards its passenger is limited to the occurrence of a mishap
on its own line.Consequently, when Antiporda transferred to Air Kenya, its obligation as a
principal in the contract of carriage ceased; from there on, it merely acted as a ticketing agent
for Air Kenya.
In rejecting Lufthansas argument, we ruled:
In the very nature of their contract, Lufthansa is clearly the principal in the
contract of carriage with Antiporda and remains to be so, regardless of those
instances when actual carriage was to be performed by various carriers. The
issuance of confirmed Lufthansa ticket in favor of Antiporda covering his
entire five-leg trip aboard successive carriers concretely attest to this.
Since the instant petition was based on breach of contract of carriage, Mahtani can only sue
BA alone, and not PAL, since the latter was not a party to the contract. However, this is not to
say that PAL is relieved from any liability due to any of its negligent acts. In China Air Lines,
Ltd. v. Court of Appeals,[37] while not exactly in point, the case, however, illustrates the principle
which governs this particular situation. In that case, we recognized that a carrier (PAL), acting
as an agent of another carrier, is also liable for its own negligent acts or omission in the
performance of its duties.
Accordingly, to deny BA the procedural remedy of filing a third-party complaint against PAL
for the purpose of ultimately determining who was primarily at fault as between them, is without
legal basis. After all, such proceeding is in accord with the doctrine against multiplicity of cases
which would entail receiving the same or similar evidence for both cases and enforcing
separate judgments therefor. It must be borne in mind that the purpose of a third-party
complaint is precisely to avoid delay and circuity of action and to enable the controversy to
be disposed of in one suit.[38] It is but logical, fair and equitable to allow BA to sue PAL for
indemnification, if it is proven that the latters negligence was the proximate cause of Mahtanis
unfortunate experience, instead of totally absolving PAL from any liability.
WHEREFORE, in view of the foregoing, the decision of the Court of Appeals in CA-G.R. CV
No. 43309 dated September 7, 1995 is hereby MODIFIED, reinstating the third-party complaint
filed by British Airways dated November 9, 1990 against Philippine Airlines. No costs.
SO ORDERED
Philippine Airlines Inc. vs. Hon. Adriano Savillo, et. al.,

This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, assailing the Decision1 dated
17 August 2001, rendered by the Court of Appeals in CA-G.R. SP No. 48664, affirming in toto the
Order2 dated 9 June 1998, of Branch 30 of the Regional Trial Court (RTC) of Iloilo City, dismissing the Motion
to Dismiss filed by petitioner Philippine Airlines Inc. (PAL) in the case entitled, Simplicio Grio v. Philippine
Airlines, Inc. and Singapore Airlines, docketed as Civil Case No. 23773.
PAL is a corporation duly organized under Philippine law, engaged in the business of providing air carriage
for passengers, baggage and cargo.3
Public respondent Hon. Adriano Savillo is the presiding judge of Branch 30 of the Iloilo RTC, where Civil Case
No. 23773 was filed; while private respondent Simplicio Grio is the plaintiff in the aforementioned case.
The facts are undisputed.
Private respondent was invited to participate in the 1993 ASEAN Seniors Annual Golf Tournament held in
Jakarta, Indonesia. He and several companions decided to purchase their respective passenger tickets from
PAL with the following points of passage: MANILA-SINGAPORE-JAKARTA-SINGAPORE-MANILA. Private
respondent and his companions were made to understand by PAL that its plane would take them from Manila
to Singapore, while Singapore Airlines would take them from Singapore to Jakarta.4
On 3 October 1993, private respondent and his companions took the PAL flight to Singapore and arrived at
about 6:00 oclock in the evening. Upon their arrival, they proceeded to the Singapore Airlines office to
check-in for their flight to Jakarta scheduled at 8:00 oclock in the same evening. Singapore Airlines rejected
the tickets of private respondent and his group because they were not endorsed by PAL. It was explained to
private respondent and his group that if Singapore Airlines honored the tickets without PALs endorsement,
PAL would not pay Singapore Airlines for their passage. Private respondent tried to contact PALs office at
the airport, only to find out that it was closed.5
Stranded at the airport in Singapore and left with no recourse, private respondent was in panic and at a loss
where to go; and was subjected to humiliation, embarrassment, mental anguish, serious anxiety, fear and
distress. Eventually, private respondent and his companions were forced to purchase tickets from Garuda
Airlines and board its last flight bound for Jakarta. When they arrived in Jakarta at about 12:00 oclock
midnight, the party who was supposed to fetch them from the airport had already left and they had to arrange
for their transportation to the hotel at a very late hour. After the series of nerve-wracking experiences, private
respondent became ill and was unable to participate in the tournament. 6
Upon his return to the Philippines, private respondent brought the matter to the attention of PAL. He sent a
demand letter to PAL on 20 December 1993 and another to Singapore Airlines on 21 March 1994. However,
both airlines disowned liability and blamed each other for the fiasco. On 15 August 1997, private respondent
filed a Complaint for Damages before the RTC docketed as Civil Case No. 23773, seeking compensation for
moral damages in the amount of P1,000,000.00 and attorneys fees.7
Instead of filing an answer to private respondents Complaint, PAL filed a Motion to Dismiss 8 dated 18
September 1998 on the ground that the said complaint was barred on the ground of prescription under
Section 1(f) of Rule 16 of the Rules of Court.9 PAL argued that the Warsaw Convention,10 particularly Article
29 thereof,11 governed this case, as it provides that any claim for damages in connection with the international
transportation of persons is subject to the prescription period of two years. Since the Complaint was filed on
15 August 1997, more than three years after PAL received the demand letter on 25 January 1994, it was
already barred by prescription.
On 9 June 1998, the RTC issued an Order12 denying the Motion to Dismiss. It maintained that the provisions
of the Civil Code and other pertinent laws of the Philippines, not the Warsaw Convention, were applicable to
the present case.
The Court of Appeals, in its assailed Decision dated 17 August 2001, likewise dismissed the Petition for
Certiorari filed by PAL and affirmed the 9 June 1998 Order of the RTC. It pronounced that the application of
the Warsaw Convention must not be construed to preclude the application of the Civil Code and other
pertinent laws. By applying Article 1144 of the Civil Code,13 which allowed for a ten-year prescription period,
the appellate court declared that the Complaint filed by private respondent should not be dismissed.14
Hence, the present Petition, in which petitioner raises the following issues:
THE COURT OF APPEALS ERRED IN NOT GIVING DUE COURSE TO THE PETITION AS RESPONDENT
JUDGE COMMITED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURSIDICTION IN
DENYING PALS MOTION TO DISMISS.
II
THE COURT OF APPEALS ERRED IN NOT APPLYING THE PROVISIONS OF THE WARSAW
CONVENTION DESPITE THE FACT THAT GRIOS CAUSE OF ACTION AROSE FROM A BREACH OF
CONTRACT FOR INTERNATIONAL AIR TRANSPORT.
III
THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE COMPLAINT FILED BY GRIO
BEYOND THE TWO (2)-YEAR PERIOD PROVIDED UNDER THE WARSAW CONVENTION IS ALREADY
BARRED BY PRESCRIPTION.15
The petition is without merit.
In determining whether PALs Motion to Dismiss should have been granted by the trial court, it must be
ascertained if all the claims made by the private respondent in his Complaint are covered by the Warsaw
Convention, which effectively bars all claims made outside the two-year prescription period provided under
Article 29 thereof. If the Warsaw Convention covers all of private respondents claims, then Civil Case No.
23773 has already prescribed and should therefore be dismissed. On the other hand, if some, if not all, of
respondents claims are outside the coverage of the Warsaw Convention, the RTC may still proceed to hear
the case.
The Warsaw Convention applies to "all international transportation of persons, baggage or goods performed
by any aircraft for hire." It seeks to accommodate or balance the interests of passengers seeking recovery for
personal injuries and the interests of air carriers seeking to limit potential liability. It employs a scheme of strict
liability favoring passengers and imposing damage caps to benefit air carriers.16 The cardinal purpose of the
Warsaw Convention is to provide uniformity of rules governing claims arising from international air travel; thus,
it precludes a passenger from maintaining an action for personal injury damages under local law when his or
her claim does not satisfy the conditions of liability under the Convention.17
Article 19 of the Warsaw Convention provides for liability on the part of a carrier for "damages occasioned by
delay in the transportation by air of passengers, baggage or goods." Article 24 excludes other remedies by
further providing that "(1) in the cases covered by articles 18 and 19, any action for damages, however
founded, can only be brought subject to the conditions and limits set out in this convention." Therefore, a
claim covered by the Warsaw Convention can no longer be recovered under local law, if the statute of
limitations of two years has already lapsed.
Nevertheless, this Court notes that jurisprudence in the Philippines and the United States also recognizes
that the Warsaw Convention does not "exclusively regulate" the relationship between passenger and carrier
on an international flight. This Court finds that the present case is substantially similar to cases in which the
damages sought were considered to be outside the coverage of the Warsaw Convention.
In United Airlines v. Uy,18 this Court distinguished between the (1) damage to the passengers baggage and
(2) humiliation he suffered at the hands of the airlines employees. The first cause of action was covered by
the Warsaw Convention which prescribes in two years, while the second was covered by the provisions of the
Civil Code on torts, which prescribes in four years.
Similar distinctions were made in American jurisprudence. In Mahaney v. Air France,19 a passenger was
denied access to an airline flight between New York and Mexico, despite the fact that she held a confirmed
reservation. The court therein ruled that if the plaintiff were to claim damages based solely on the delay she
experienced for instance, the costs of renting a van, which she had to arrange on her own as a
consequence of the delay the complaint would be barred by the two-year statute of limitations. However,
where the plaintiff alleged that the airlines subjected her to unjust discrimination or undue or unreasonable
preference or disadvantage, an act punishable under the United States laws, then the plaintiff may claim
purely nominal compensatory damages for humiliation and hurt feelings, which are not provided for by the
Warsaw Convention. In another case, Wolgel v. Mexicana Airlines,20the court pronounced that actions for
damages for the "bumping off" itself, rather than the incidental damages due to the delay, fall outside the
Warsaw Convention and do not prescribe in two years.
In the Petition at bar, private respondents Complaint alleged that both PAL and Singapore Airlines were
guilty of gross negligence, which resulted in his being subjected to "humiliation, embarrassment, mental
anguish, serious anxiety, fear and distress."21 The emotional harm suffered by the private respondent as a
result of having been unreasonably and unjustly prevented from boarding the plane should be distinguished
from the actual damages which resulted from the same incident. Under the Civil Code provisions on
tort,22 such emotional harm gives rise to compensation where gross negligence or malice is proven.
The instant case is comparable to the case of Lathigra v. British Airways.23
In Lathigra, it was held that the airlines negligent act of reconfirming the passengers reservation days before
departure and failing to inform the latter that the flight had already been discontinued is not among the acts
covered by the Warsaw Convention, since the alleged negligence did not occur during the performance of the
contract of carriage but, rather, days before the scheduled flight.
In the case at hand, Singapore Airlines barred private respondent from boarding the Singapore Airlines flight
because PAL allegedly failed to endorse the tickets of private respondent and his companions, despite PALs
assurances to respondent that Singapore Airlines had already confirmed their passage. While this fact still
needs to be heard and established by adequate proof before the RTC, an action based on these allegations
will not fall under the Warsaw Convention, since the purported negligence on the part of PAL did not occur
during the performance of the contract of carriage but days before the scheduled flight. Thus, the present
action cannot be dismissed based on the statute of limitations provided under Article 29 of the Warsaw
Convention.
Had the present case merely consisted of claims incidental to the airlines delay in transporting their
passengers, the private respondents Complaint would have been time-barred under Article 29 of the Warsaw
Convention. However, the present case involves a special species of injury resulting from the failure of PAL
and/or Singapore Airlines to transport private respondent from Singapore to Jakarta the profound distress,
fear, anxiety and humiliation that private respondent experienced when, despite PALs earlier assurance that
Singapore Airlines confirmed his passage, he was prevented from boarding the plane and he faced the
daunting possibility that he would be stranded in Singapore Airport because the PAL office was already
closed.
These claims are covered by the Civil Code provisions on tort, and not within the purview of the Warsaw
Convention. Hence, the applicable prescription period is that provided under Article 1146 of the Civil Code:
Art. 1146. The following actions must be instituted within four years:
(1) Upon an injury to the rights of the plaintiff;
(2) Upon a quasi-delict.
Private respondents Complaint was filed with the RTC on 15 August 1997, which was less than four years
since PAL received his extrajudicial demand on 25 January 1994. Thus, private respondents claims have not
yet prescribed and PALs Motion to Dismiss must be denied.
Moreover, should there be any doubt as to the prescription of private respondents Complaint, the more
prudent action is for the RTC to continue hearing the same and deny the Motion to Dismiss. Where it cannot
be determined with certainty whether the action has already prescribed or not, the defense of prescription
cannot be sustained on a mere motion to dismiss based on what appears to be on the face of the
complaint.24 And where the ground on which prescription is based does not appear to be indubitable, the
court may do well to defer action on the motion to dismiss until after trial on the merits.25
IN VIEW OF THE FOREGOING, the instant Petition is DENIED. The assailed Decision of the Court of
Appeals in CA-G.R. SP No. 48664, promulgated on 17 August 2001 is AFFIRMED. Costs against the
petitioner.
SO ORDERED.
Obligations of Shipper, Consignee and Passenger

1.8 Negligence of Shipper or Passenger
1.9 Payment of Freight
1.10 Who will pay the freight
1.11 Time to pay the freight
1.12 Carriers lien
1.13 Payment of Demurrage
Part 3 Extraordinary Diligence of Common carriers
a. Loadmasters Customs Services v. Glodel Brokerage Corporation and R&B Insurance January
10, 2011, G.R No. 179446
b. Cesar Isaac v. A.L. Ammen Transportation Co., Inc. August 23, 1957 G.R No. L-9671
c. Jose Pilapil v. Hon. CA and Alatco Transportation Co. December 22, 1989
d. Herminio Nocum v. Laguna Tayabas Bus Company G.R. No. L-23733 October 31, 1969
e. Batangas Transportation Co. v. Gregorio Caguimbal et al. G.R. No. L-22985 January 24, 1968
f. Loadmasters Customs Services v. Glodel Brokerage Corporation and R&B Insurance G.R. No.
179446 January 10, 2011
g. Pedro Guzman v CA December 22, 1988
h. Estela Crisostomo v. CA and Caravan Travel & Tours, G.R. No. 138334, August 25, 2003
i. American Home Assurance Co. v. The Court of Appeals, G.R. No. 94149, May 5, 1992
j. Amparo C. Servando, Claro Uy Bico v. Philippine Steam Navigation October 23, 1982
k. Vda. De Abeto v. Philippine Airlines, Inc. 115 SCRA 489
l. R. Transport Corporation v. Pante September 15, 2009
m. Asian Terminals, Inc. v. Simon Enterprise, Inc. G.R. No. 177116 February 27, 2013
3.1 LIABILITIES OF COMMON CARRIERS
> Victorino Cusi and Pilar Pobre v. Philippine National Railways, G.R. No. L-29889 May 31, 1979
> Loadstar Shipping Co., Inc. vs. Court of Appeals, G.R. No. 131621, September 28, 1999)
Light Rail Transit Authority & Rodolfo Roman vs. Marjorie Navidad, G.R. No. 145804, 6
February 2003
Lita Enterprises, Inc. vs. Intermediate Appellate Court, G.R. No. L-64693, 27 April 1984)
(Victor Juaniza vs. Eugenio Jose, G.R. No.L-50127-28, 30 March 1979)
(Ma. Luisa Benedicto vs. Hon. Intermediate Appellate Court, G.R. No. 70876, 19 July 1990)
(Angel Jereos vs. Hon. Court of Appeals, G.R. No. L-48747, 30 September 1982)
(Equitable Leasing Corporation vs. Lucita Suyom et al., G.R. No. 143360, 5 September 2002)
(William Tiu, doing business under the name and style of D Rough Riders, vs. Pedro A.
Arriesgado, G.R. No. 138060, 1 September 2004)
(Spouses Cesar & Suthira Zalamea vs. Court of Appeals, G.R. No. 104235 November 18, 1993)
(Singapore Airlines Limited vs. Fernandez, G.R. No. 142305, December 10, 2003)
(Philippine Airlines, Inc., vs. Court of Appeals, G.R. No. 119641, May 17, 1996)
(Philippine Airlines, Inc. vs. Court of Appeals, G.R. No. 120262, July 17, 1997)
(Carlos Singson vs. Court of Appeals, G.R. No. 119995, November 18, 1997)
(Cathay Pacific Airways, Ltd., vs. Spouses Daniel Vazquez And Maria Luisa Madrigal Vazquez,
G.R. No. 150843, March 14, 2003)
(Philippine Airlines Inc. vs. Court of Appeals, G.R. No. 123238, September 22, 2008)
The Heirs of the late Ruben Reinoso, Sr. vs. Court of Appeals, GR No. 116121, July 18, 2011
Heirs of Josemaria Ochoa vs. G&S Transport Corporation, March 19, as affirmed in the July
16, 2012 decision
3.2 VIGILANCE OVER GOODS
1. Exempting Causes
1.1 Requirement of Absence of Negligence
Cases:
(Saturnino Bayasen vs. Court of Appeals, G.R. No.L-25785, 26 February 1981)
(Alberta Yobido vs. Court of Appeals, G.R. No. 113003, 17 October 1997)
(Bachelor Express, Incorporated vs. The Honorable Court of Appeals (Sixth Division), G.R.
No. 85691, 31 July 1990)
(Sweet Lines, Inc. vs. The Honorable Court of Appeals, Micaela b. Quintos, et al., G.R. No.
L-43640, 28 April 1983
(Vicente Vergara vs. The Court of Appeals, G.R. No. 77679, 30 September 1987)
(Mauro Ganzon vs. Court of Appeals, G.R. no. L-48757, 30 May 1988)
(Fortune Express, Inc. vs. Court of Appeals, G.R. No. 119756, 18 March 1999)
(Pedro Vasquez, et al., vs. The Court of Appeals, G.R. No. L-42926, 13 September 1985)
(Loadstar Shipping Co., Inc. vs. Court of Appeals, G.R. No. 131621, 28 September 1999)
(Smith Bell Dodwell Shipping Agency Corporation vs. Catalino Borja, G.R. No. 143008. June
10, 2002)
3.3 LIABILITY OF SHIP OWNERS AND SHIPPING AGENTS

Cases:
(Aboitiz Shipping Corporation vs. General Accident Fire and Life Assurance Corporation Ltd.,
217 SCRA 359, 1993)
(Luzon Stevedoring Corporation vs. Court of Appeals, G.R. No. L-58897, 3 December 1987)
(Chua Yek Hong vs. Intermediate Appellate Court, G.R. No. 74811, 30 September 1988)
Dela Torre vs. Court of Appeals, GR No. 160088, July 13, 2011
Also read
ALSO READ:
3.4 Extra ordinary diligence in Carriage by Sea
Seaworthiness
Meaning of seaworthiness
Deviation
Negligence of Captain and Crew
Rules on passengers safety
Transshipment
Part 4 Bill of Lading and Other Formalities

4.1 Concepts
4.2 Definition
4.3 Kind of Bill of lading
4.4 Nature of Bill of lading
4.5 When effective
4.6 Bill of lading as Contract
Parties
Contract of adhesion
Parol evidence rule
Bill of lading as evidence
Bill of lading as actionable document
Shipment terms
PART 5 ACTIONS AND DAMAGES IN CASE OF BREACH

5.1 Distinctions CULPA CONTRACTUAL V. CULPA AQUILIANA
5.2 Concurrent causes of actions
Concurrence with 3rd persons
Solidary liability
Alternative compensation scheme
5.3 Notice of claim and prescriptive period
Claim in overland Transportation and coastwise shipping
Prescription in Overland Transportation and coastwise shipping
Claim in International carriage of goods by sea
Prescription in International Carriage of goods
5.4 Recoverable Damages
Extent of recovery
Kinds of damages
1. Actual or Compensatory Damages
2. Attorneys fees
3. Interest
4. Moral damages
5. Nominal damages
6. Temperate or moderate damages
7. Liquidated damages
8. Exemplary or corrective damages
PART 6 MARITIME LAW

Maritime law defined
Real and Hypothecary Nature
Protest
Admiralty jurisdiction
Maritime pollution
Marine insurance
PART 7 VESSELS
PART 8 CHARTER PARTIES
8.1 Definition
8.2 Different kinds of charter parties
Bareboat charter
Contract of affreightment
8.3 Effect of charter on character of carrier
8.4 Persons who may make charter
Charterer
Part owners
Ship agents
Captain or master
8.5 Requisites of a valid charter party
8.6 Freight
8.7 Port of unloading
8.8 Demurrage
PART 9 LOANS ON BOTTOMRY AND RESPODENTIA

PART 10 AVERAGES
PART 11 COLLISSIONS
PART 12 ARRIVAL UNDER STRESS AND SHIPWRECKS
PART 13 SALVAGE
PART 14 - COGSA

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THE LAW ON TRANSPORTATION AND PUBLIC UTILITIES

SWU LAW- PHINMA

Definition of Contract of Transportation.................................................................................................................... 7

Laws and Jurisprudence: ............................................................................................................................ 7

R.A 4136: land Transportation and Traffic Code ................................................................................................ 7

Unsworth Transportation International v. CA ............................................. Error! Bookmark not defined.

Agustin Dela Torre v. CA ........................................................................................................................... 27

1.1 Carriage of Passengers / Contract to Carry Passenger ....................................................................... 32

1.2 Carriage of Goods/ Contract to carry Goods ...................................................................................... 32

Laws and Jurisprudence: .................................................................................................................................. 32

Baliwag Transit Corporation v CA ............................................................................................................. 32

Everett Steamship Corp. v. CA ................................................................................................................ 35

British Airways v. CA ............................................................................................................................... 38

1. Contract to Carry - Consensual Contract (meeting of the minds) ................................................................ 41

2. Carriage Contract - Real Contract ................................................................................................................. 41

a) Carriage of Goods - Consensual....................................................................... Error! Bookmark not defined.

Trains- .......................................................................................................... Error! Bookmark not defined.

Laws and Jurisprudence: .................................................................................................................................. 41

Mauro Ganzon v. CA No. L-48757, May 30, 1988 .................................................................................... 41

Common carrier -........................................................................................................................................... 52

Public service - .......................................................................................................................................... 52

Laws and Jurisprudence: .......................................................................................................................... 52

Article 1732 of the New Civil Code ........................................................................................................... 52

Commonwealth Act No. 146 section 13 par. b as amended .................................................................... 52

1.3 First Philippine Industrial Corporation v. CA .................................................................................... 56

1.5 FGU Insurance Corporation v. G. P. Sarmiento Trucking Corporations ........................................... 65

1.7 National Steel Corporation v. CA ...................................................................................................... 79

1.8 Sps Cruz v. Holiday ............................................................................................................................ 93

Broader concept ....................................................................................................................................... 99

Ancillary business ..................................................................................................................................... 99

Limited clientele ....................................................................................................................................... 99

Means of transportation .......................................................................................................................... 99

Laws and Jurisprudence: .................................................................................................................................. 99

Article 1732 of the New Civil Code ........................................................................................................... 99

National Steel Corporation v. CA .............................................................................................................. 99

a. Asia Lighterage and Shipping, Inc. v. CA ............................................................................................... 99

b. Fabre, Jr. v. CA .................................................................................................................................... 104

c. Phil. American general insurance Company v. PKS Shipping Co ......................................................... 111

d. Virgines Calvo v. UCPB General Insurance Co .................................................................................... 115

e. Caltex(phil) v. Sulpicio Lines ............................................................................................................... 120

f. Loadstar Shipping Co. v. Pioneer Asia Insurance .............................................................................. 126

g. Home Assurance Corp ........................................................................................................................ 133

h. Planters v. CA .................................................................................................................................... 135

i. A.F Sanchez Brokerage Inc. v. CA ......................................................................................................... 139

2. Effect of Charter Party ........................................................................................................................................ 145

3. Common carrier v. Private Carrier ...................................................................................................................... 145

Laws and Jurisprudence: ................................................................................................................................ 145

a. Cebu Salvage Corporation v. Philippine Home Assurance Corp ......................................................... 145

b. Valenzuela Hardwood and Industrial Supply, Inc. v. CA ................................................................... 147

c. Loadmasters Customs Services, Inc. Glodel Brokerage Corporation .................................................. 156

4. Common carrier v. Other contracts .................................................................................................................... 164

4.1 Distinguish from ....................................................................................................................................... 164

b. Arrastre ............................................................................................................................................... 164

c. Stevedoring ......................................................................................................................................... 164

d. Travel Agency ..................................................................................................................................... 164

Laws and Jurisprudence.................................................................................................................................. 164

b. Mindanao Terminal and Brokerage services v. Phoenix Assurance Co .............................................. 170

d. Crisostomo v. CA ............................................................................................................................... 178

5. Governing Laws .................................................................................................................................................. 183

5.1 Article 1766 of the New Civil Code(NCC) .......................................................................................... 183

5.2 Article 1753 NCC ............................................................................................................................... 183

5.3 Article 1732-1766 NCC...................................................................................................................... 183