G.R. No. L-47822 December 22, 1988 undelivered goods (P 22,150.00) as well as for P 4,000.

00 as damages and P
PEDRO DE GUZMAN, petitioner, vs. COURT OF APPEALS and ERNESTO
CENDANA, respondents.
FELICIANO, J.:
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.
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:

Sometime in November 1970, petitioner Pedro de Guzman a merchant and 1. that private respondent was not a common carrier;
authorized dealer of General Milk Company (Philippines), Inc. in Urdaneta,
Pangasinan, contracted with respondent for the hauling of 750 cartons of Liberty 2. that the hijacking of respondent's truck was force majeure; and
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
3. that respondent was not liable for the value of the undelivered
December 1970, respondent loaded in Makati the merchandise on to his trucks: 150
cargo. (Rollo, p. 111)
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,
We consider first the issue of whether or not private respondent Ernesto Cendana
respondent's driver and employee.
may, under the facts earlier set forth, be properly characterized as a common
carrier.
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
The Civil Code defines "common carriers" in the following terms:
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.
Article 1732. Common carriers are persons, corporations, firms or
associations engaged in the business of carrying or transporting
On 6 January 1971, petitioner commenced action against private respondent in the
passengers or goods or both, by land, water, or air for
Court of First Instance of Pangasinan, demanding payment of P 22,150.00, the
compensation, offering their services to the public.
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 The above article makes no distinction between one whose principal business
liable for the value of the undelivered goods. 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
In his Answer, private respondent denied that he was a common carrier and argued
transportation service on a regular or scheduled basis and one offering such service
that he could not be held responsible for the value of the lost goods, such loss
on an occasional, episodic or unscheduled basis. Neither does Article 1732
having been due to force majeure.
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
On 10 December 1975, the trial court rendered a Decision 1 finding private
only from a narrow segment of the general population. We think that Article 1733
respondent to be a common carrier and holding him liable for the value of the
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'sprincipal 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;
(2) Act of the public enemy in war, whether
international or civil;
(3) Act or omission of the shipper or owner of
the goods;
(4) The character-of the goods or defects in the
packing or-in the containers; and
(5) Order or act of competent public authority.
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.
G.R. No. 131166 September 30, 1999
CALTEX (PHILIPPINES), INC., petitioner, vs. SULPICIO LINES, INC., GO SIOC SO,
ENRIQUE S. GO, EUSEBIO S. GO, CARLOS S. GO, VICTORIANO S. GO, DOMINADOR
S. GO, RICARDO S. GO, EDWARD S. GO, ARTURO S. GO, EDGAR S. GO, EDMUND S.
GO, FRANCISCO SORIANO, VECTOR SHIPPING CORPORATION, TERESITA G.
CAEZAL, AND SOTERA E. CAEZAL, respondents.
PARDO, J.:
Is the charterer of a sea vessel liable for damages resulting from a collision between
the chartered vessel and a passenger ship?
When MT Vector left the port of Limay, Bataan, on December 19, 1987 carrying
petroleum products of Caltex (Philippines), Inc. (hereinafter Caltex) no one could
have guessed that it would collide with MV Doa Paz, killing almost all the
passengers and crew members of both ships, and thus resulting in one of the
country's worst maritime disasters.
The petition before us seeks to reverse the Court of Appeals decision 1 holding
petitioner jointly liable with the operator of MT Vector for damages when the latter
collided with Sulpicio Lines, Inc.'s passenger ship MV Doa Paz.
The facts are as follows:
On December 19, 1987, motor tanker MT Vector left Limay, Bataan, at about 8:00
p.m., enroute to Masbate, loaded with 8,800 barrels of petroleum products shipped
by petitioner Caltex. 2 MT Vector is a tramping motor tanker owned and operated
by Vector Shipping Corporation, engaged in the business of transporting fuel
products such as gasoline, kerosene, diesel and crude oil. During that particular
voyage, the MT Vector carried on board gasoline and other oil products owned by
Caltex by virtue of a charter contract between
them. 3
On December 20, 1987, at about 6:30 a.m., the passenger ship MV Doa Paz left the
port of Tacloban headed for Manila with a complement of 59 crew members
including the master and his officers, and passengers totaling 1,493 as indicated in
the Coast Guard Clearance. 4 The MV Doa Paz is a passenger and cargo vessel
owned and operated by Sulpicio Lines, Inc. plying the route of Manila/ Tacloban/
Catbalogan/ Manila/ Catbalogan/ Tacloban/ Manila, making trips twice a week.
At about 10:30 p.m. of December 20, 1987, the two vessels collided in the open sea
within the vicinity of Dumali Point between Marinduque and Oriental Mindoro. All
the crewmembers of MV Doa Paz died, while the two survivors from MT Vector
claimed that they were sleeping at the time of the incident.1wphi1.nt
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. 659-87 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 Caezal's
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 Vector's 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, judgment 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, attorney's 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 court's 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 (P300,000.00);
4. Attorney's fees in the concept of actual damages in the amount
of FIFTY THOUSAND PESOS (P50,000.00);
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, attorney's 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 ship's 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 portion of a vessel of
one or more persons, provided the charter is limited to the ship
only, as in the case of a time-charter or the 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 . . .
A common carrier is a person or corporation whose regular business is to carry
passengers or property for all persons who may choose to employ and to
remunerate him. 16 MT Vector fits the definition of a common carrier under Article
1732 of the Civil Code. In Guzman vs. Court of Appeals, 17 we ruled:
The Civil Code defines "common carriers" in the following terms:
Art. 1732. Common carriers are persons, corporations, firms or
associations engaged in the business of carrying or transporting
passengers for passengers or goods or both, by land, water, or air
for compensation, offering their services to the public.
The above article makes no distinction between one
whose principal business activity is the carrying of persons or
goods or both, and one who does such carrying only as
an ancillary activity (in local idiom, as "a sideline"). Article 1732
also carefully avoids making any distinction between a person or
enterprise offering transportation service on a regular or
scheduled basis and one offering such services on 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
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 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 Vector's 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 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 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:
Art. 20. Every person who contrary to law, willfully or
negligently causes damage to another, shall indemnify the latter
for the same.
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.
And what is negligence?
The Civil Code provides:
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 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 Apolinario Ng: At the time when I extended the
commonly understood, is conduct which naturally or reasonably creates undue risk Contract, I did nothing because the tanker has a
or harm to others. It may be the failure to observe that degree of care, precaution, valid C.I. which will expire on December 7, 1987
and vigilance, which the circumstances justly demand, or the omission to do but on the last week of November, I called the
something which ordinarily regulate the conduct of human affairs, would do. attention of Mr. Abalos to ensure that the C.I.
be renewed and Mr. Abalos, in turn, assured me
The charterer of a vessel has no obligation before transporting its cargo to ensure they will renew the same.
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 Q: What happened after that?
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. A: On the first week of December, I again made
Hence, considering the nature of the obligation between Caltex and MT Vector, a follow-up from Mr. Abalos, and said they were
liability as found by the Court of Appeals is without basis.1wphi1.nt going to send me a copy as soon as possible,
sir. 24
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 xxx xxx xxx
transacting with common carriers, are not expected to inquire into the vessel's
seaworthiness, genuineness of its licenses and compliance with all maritime laws. Q: What did you do with the C.I.?
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
A: We did not insist on getting a copy of the C.I.
in general is concerned. By the same token, we cannot expect passengers to inquire
from Mr. Abalos on the first place, because of
every time they board a common carrier, whether the carrier possesses the
our long business relation, we trust Mr. Abalos
necessary papers or that all the carrier's employees are qualified. Such a practice
and the fact that the vessel was able to sail
would be an absurdity in a business where time is always of the essence.
indicates that the documents are in order. . .
Considering the nature of transportation business, passengers and shippers alike
. 25
customarily presume that common carriers possess all the legal requisites in its
operation.
On cross examination
Thus, the nature of the obligation of Caltex demands ordinary diligence like any
Atty. Sarenas: This being the case, and this being
other shipper in shipping his cargoes.
an admission by you, this Certificate of
Inspection has expired on December 7. Did it
A cursory reading of the records convinces us that Caltex had reasons to believe
occur to you not to let the vessel sail on that day
that MT Vector could legally transport cargo that time of the year.
because of the very approaching date of
expiration?
Atty. Poblador: Mr. Witness, I direct your attention to this portion
here containing the entries here under "VESSEL'S DOCUMENTS
Apolinar Ng: No sir, because as I said before, the
operation Manager assured us that they were
1. Certificate of Inspection No. 1290-85, issued able to secure a renewal of the Certificate of
December 21, 1986, and Expires December 7, Inspection and that they will in time submit us a
1987", Mr. Witness, what steps did you take copy. 26
regarding the impending expiry of the C.I. or the
Certificate of Inspection No. 1290-85 during the
Finally, on Mr. Ng's redirect examination:
hiring of MT Vector?
 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?
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.

Atty. Sarenas: . . .
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?
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.1wphi1.nt
No costs in this instance.

Atty. Sarenas: Objection. SO ORDERED.

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
G.R. No. 114167 July 12, 1995
COASTWISE LIGHTERAGE CORPORATION, petitioner, vs. COURT OF APPEALS and
the PHILIPPINE GENERAL INSURANCE COMPANY, respondents.
RESOLUTION
FRANCISCO, R., J.:
This is a petition for review of a Decision rendered by the Court of Appeals, dated
December 17, 1993, affirming Branch 35 of the Regional Trial Court, Manila in
holding that herein petitioner is liable to pay herein private respondent the amount
of P700,000.00, plus legal interest thereon, another sum of P100,000.00 as
attorney's fees and the cost of the suit.
The factual background of this case is as follows:
Pag-asa Sales, Inc. entered into a contract to transport molasses from the province
of Negros to Manila with Coastwise Lighterage Corporation (Coastwise for brevity),
using the latter's dumb barges. The barges were towed in tandem by the tugboat
MT Marica, which is likewise owned by Coastwise.
Upon reaching Manila Bay, while approaching Pier 18, one of the barges,
"Coastwise 9", struck an unknown sunken object. The forward buoyancy
compartment was damaged, and water gushed in through a hole "two inches wide
and twenty-two inches long" 1 As a consequence, the molasses at the cargo tanks
were contaminated and rendered unfit for the use it was intended. This prompted
the consignee, Pag-asa Sales, Inc. to reject the shipment of molasses as a total loss.
Thereafter, Pag-asa Sales, Inc. filed a formal claim with the insurer of its lost cargo,
herein private respondent, Philippine General Insurance Company (PhilGen, for
short) and against the carrier, herein petitioner, Coastwise Lighterage. Coastwise
Lighterage denied the claim and it was PhilGen which paid the consignee, Pag-asa
Sales, Inc., the amount of P700,000.00, representing the value of the damaged
cargo of molasses.
In turn, PhilGen then filed an action against Coastwise Lighterage before the
Regional Trial Court of Manila, seeking to recover the amount of P700,000.00 which
it paid to Pag-asa Sales, Inc. for the latter's lost cargo. PhilGen now claims to be
subrogated to all the contractual rights and claims which the consignee may have
against the carrier, which is presumed to have violated the contract of carriage.
The RTC awarded the amount prayed for by PhilGen. On Coastwise Lighterage's
appeal to the Court of Appeals, the award was affirmed.
Hence, this petition.
There are two main issues to be resolved herein. First, whether or not petitioner
Coastwise Lighterage was transformed into a private carrier, by virtue of the
contract of affreightment which it entered into with the consignee, Pag-asa Sales,
Inc. Corollarily, if it were in fact transformed into a private carrier, did it exercise the
ordinary diligence to which a private carrier is in turn bound? Second, whether or
not the insurer was subrogated into the rights of the consignee against the carrier,
upon payment by the insurer of the value of the consignee's goods lost while on
board one of the carrier's vessels.
On the first issue, petitioner contends that the RTC and the Court of Appeals erred
in finding that it was a common carrier. It stresses the fact that it contracted with
Pag-asa Sales, Inc. to transport the shipment of molasses from Negros Oriental to
Manila and refers to this contract as a "charter agreement". It then proceeds to cite
the case ofHome Insurance Company vs. American Steamship Agencies,
Inc. 2 wherein this Court held: ". . . a common carrier undertaking to carry a special
cargo or chartered to a special person only becomes a private carrier."
Petitioner's reliance on the aforementioned case is misplaced. In its entirety, the
conclusions of the court are as follows:
Accordingly, the charter party contract is one of affreightment
over the whole vessel, rather than a demise. As such, the liability
of the shipowner for acts or negligence of its captain and crew,
would remain in the absence of stipulation. 3
The distinction between the two kinds of charter parties (i.e. bareboat or demise
and contract of affreightment) is more clearly set out in the case of Puromines, Inc.
vs. Court of Appeals, 4 wherein we ruled:
Under the demise or bareboat charter of the vessel, the charterer
will generally be regarded as the owner for the voyage or service
stipulated. The charterer mans the vessel with his own people and
becomes the owner pro hac vice, subject to liability to others for
damages caused by negligence. To create a demise, the owner of
a vessel must completely and exclusively relinquish possession,
command and navigation thereof to the charterer, anything short
of such a complete transfer is a contract of affreightment (time or
voyage charter party) or not a charter party at all.
On the other hand a contract of affreightment is one in which the
owner of the vessel leases part or all of its space to haul goods for
others. It is a contract for special service to be rendered by the
owner of the vessel and under such contract the general owner
 retains the possession, command and navigation of the ship, the
charterer or freighter merely having use of the space in the vessel
in return for his payment of the charter hire. . . . .
. . . . An owner who retains possession of the ship though the hold
is the property of the charterer, remains liable as carrier and must
answer for any breach of duty as to the care, loading and
unloading of the cargo. . . .
Although a charter party may transform a common carrier into a private one, the
same however is not true in a contract of affreightment on account of the
aforementioned distinctions between the two.
Petitioner admits that the contract it entered into with the consignee was one of
affreightment. 5 We agree. Pag-asa Sales, Inc. only leased three of petitioner's
vessels, in order to carry cargo from one point to another, but the possession,
command and navigation of the vessels remained with petitioner Coastwise
Lighterage.
Pursuant therefore to the ruling in the aforecited Puromines case, Coastwise
Lighterage, by the contract of affreightment, was not converted into a private
carrier, but remained a common carrier and was still liable as such.
The law and jurisprudence on common carriers both hold that the mere proof of
delivery of goods in good order to a carrier and the subsequent arrival of the same
goods at the place of destination in bad order makes for a prima facie case against
the carrier.
It follows then that the presumption of negligence that attaches to common
carriers, once the goods it transports are lost, destroyed or deteriorated, applies to
the petitioner. This presumption, which is overcome only by proof of the exercise of
extraordinary diligence, remained unrebutted in this case.
The records show that the damage to the barge which carried the cargo of molasses
was caused by its hitting an unknown sunken object as it was heading for Pier 18.
The object turned out to be a submerged derelict vessel. Petitioner contends that
this navigational hazard was the efficient cause of the accident. Further it asserts
that the fact that the Philippine Coastguard "has not exerted any effort to prepare a
chart to indicate the location of sunken derelicts within Manila North Harbor to
avoid navigational accidents" 6 effectively contributed to the happening of this
mishap. Thus, being unaware of the hidden danger that lies in its path, it became
impossible for the petitioner to avoid the same. Nothing could have prevented the
event, making it beyond the pale of even the exercise of extraordinary diligence.
However, petitioner's assertion is belied by the evidence on record where it
appeared that far from having rendered service with the greatest skill and utmost
foresight, and being free from fault, the carrier was culpably remiss in the
observance of its duties.
Jesus R. Constantino, the patron of the vessel "Coastwise 9" admitted that he was
not licensed. The Code of Commerce, which subsidiarily governs common carriers
(which are primarily governed by the provisions of the Civil Code) provides:
Art. 609. Captains, masters, or patrons of vessels must be
Filipinos, have legal capacity to contract in accordance with this
code, and prove the skill capacity and qualifications necessary to
command and direct the vessel, as established by marine and
navigation laws, ordinances or regulations, and must not be
disqualified according to the same for the discharge of the duties
of the position. . . .
Clearly, petitioner Coastwise Lighterage's embarking on a voyage with an
unlicensed patron violates this rule. It cannot safely claim to have exercised
extraordinary diligence, by placing a person whose navigational skills are
questionable, at the helm of the vessel which eventually met the fateful accident. It
may also logically, follow that a person without license to navigate, lacks not just
the skill to do so, but also the utmost familiarity with the usual and safe routes
taken by seasoned and legally authorized ones. Had the patron been licensed, he
could be presumed to have both the skill and the knowledge that would have
prevented the vessel's hitting the sunken derelict ship that lay on their way to Pier
18.
As a common carrier, petitioner is liable for breach of the contract of carriage,
having failed to overcome the presumption of negligence with the loss and
destruction of goods it transported, by proof of its exercise of extraordinary
diligence.
On the issue of subrogation, which petitioner contends as inapplicable in this case,
we once more rule against the petitioner. We have already found petitioner liable
for breach of the contract of carriage it entered into with Pag-asa Sales, Inc.
However, for the damage sustained by the loss of the cargo which petitioner-carrier
was transporting, it was not the carrier which paid the value thereof to Pag-asa
Sales, Inc. but the latter's insurer, herein private respondent PhilGen.
Article 2207 of the Civil Code is explicit on this point:
 Art. 2207. If the plaintiffs property has been insured, and he has
received indemnity from the insurance company for the injury or
loss arising out of the wrong or breach of contract complained of,
the insurance company shall be subrogated to the rights of the
insured against the wrongdoer or the person who violated the
contract. . . .

This legal provision containing the equitable principle of subrogation has been
applied in a long line of cases including Compania Maritima v. Insurance Company
of North America; 7 Fireman's Fund Insurance Company v. Jamilla & Company,
Inc., 8 and Pan Malayan Insurance Corporation v. Court of Appeals, 9 wherein this
Court explained:

Article 2207 of the Civil Code is founded on the well-settled

principle of subrogation. If the insured property is destroyed or
damaged through the fault or negligence of a party other than the
assured, then the insurer, upon payment to the assured will be
subrogated to the rights of the assured to recover from the
wrongdoer to the extent that the insurer has been obligated to
pay. Payment by the insurer to the assured operated as an
equitable assignment to the former of all remedies which the
latter may have against the third party whose negligence or
wrongful act caused the loss. The right of subrogation is not
dependent upon, nor does it grow out of, any privity of contract
or upon written assignment of claim. It accrues simply upon
payment of the insurance claim by the insurer.

Undoubtedly, upon payment by respondent insurer PhilGen of the amount of

P700,000.00 to Pag-asa Sales, Inc., the consignee of the cargo of molasses totally
damaged while being transported by petitioner Coastwise Lighterage, the former
was subrogated into all the rights which Pag-asa Sales, Inc. may have had against
the carrier, herein petitioner Coastwise Lighterage.

WHEREFORE, premises considered, this petition is DENIED and the appealed

decision affirming the order of Branch 35 of the Regional Trial Court of Manila for
petitioner Coastwise Lighterage to pay respondent Philippine General Insurance
Company the "principal amount of P700,000.00 plus interest thereon at the legal
rate computed from March 29, 1989, the date the complaint was filed until fully
paid and another sum of P100,000.00 as attorney's fees and costs" 10 is likewise
hereby AFFIRMED

SO ORDERED.
G.R. No. 186312 June 29, 2010
SPOUSES DANTE CRUZ and LEONORA CRUZ, Petitioners,
vs.
SUN HOLIDAYS, INC., Respondent.
DECISION
CARPIO MORALES, J.:
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 P4,000,000.
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 P10,000 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 P300,000.
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 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 . . .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 P50,000.29
As for damages representing unearned income, the formula for its computation is:
Net Earning Capacity = life expectancy x (gross annual income - reasonable and
necessary living expenses).
Life expectancy is determined in accordance with the formula:
2 / 3 x [80 age of deceased at the time of death]30
The first factor, i.e., life expectancy, is computed by applying the formula (2/3 x [80
age at death]) adopted in the American Expectancy Table of Mortality or the
Actuarial of Combined Experience Table of Mortality.31
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
Respecting the award of moral damages, since respondent common carriers breach
of contract of carriage resulted in the death of petitioners son, following Article
1764 vis--vis Article 2206 of the Civil Code, petitioners are entitled to moral
damages.
Since respondent failed to prove that it exercised the extraordinary diligence
required of common carriers, it is presumed to have acted recklessly, thus
warranting the award too of exemplary damages, which are granted in contractual
obligations if the defendant acted in a wanton, fraudulent, reckless, oppressive or
malevolent manner.37
Under the circumstances, it is reasonable to award petitioners the amount
of P100,000 as moral damages andP100,000 as exemplary damages.381avvphi1

In computing the third factor necessary living expense, Smith Bell Dodwell Pursuant to Article 220839 of the Civil Code, attorney's fees may also be awarded
Shipping Agency Corp. v. Borja34teaches that when, as in this case, there is no where exemplary damages are awarded. The Court finds that 10% of the total
showing that the living expenses constituted the smaller percentage of the gross amount adjudged against respondent is reasonable for the purpose.
income, the living expenses are fixed at half of the gross income.
Finally, Eastern Shipping Lines, Inc. v. Court of Appeals40 teaches that when an
Applying the above guidelines, the Court determines Ruelito's life expectancy as obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or
follows: 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
Life expectancy = 2/3 x [80 - age of deceased at the time of death]
2/3 x [80 - 28]
1. When the obligation is breached, and it consists in the payment of a sum
2/3 x [52]
of money, i.e., a loan or forbearance of money, the interest due should be
Life expectancy = 35 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
Documentary evidence shows that Ruelito was earning a basic monthly salary of be computed from default, i.e., from judicial or extrajudicial demand under
$90035 which, when converted to Philippine peso applying the annual average and subject to the provisions of Article 1169 of the Civil Code.
exchange rate of $1 = P44 in 2000,36 amounts to P39,600. Ruelitos net earning
capacity is thus computed as follows: 2. When an obligation, not constituting a loan or forbearance of money, is
breached, an interest on the amount of damages awarded may be
Net Earning = life expectancy x (gross annual income - reasonable imposed at the discretion of the court at the rate of 6% per annum. No
Capacity and necessary living expenses). interest, however, shall be adjudged on unliquidated claims or damages
= 35 x (P475,200 - P237,600) except when or until the demand can be established with reasonable
= 35 x (P237,600) certainty. Accordingly, where the demand is established with reasonable
certainty, the interest shall begin to run from the time the claim is made
Net Earning judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty
= P8,316,000
Capacity 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) P50,000 as indemnity for the death of Ruelito Cruz;
(2) P8,316,000 as indemnity for Ruelitos loss of earning capacity; (3) P100,000 as
moral damages; (4) P100,000 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.
G.R. No. 125948 December 29, 1998
FIRST PHILIPPINE INDUSTRIAL CORPORATION, petitioner, vs. COURT OF APPEALS,
HONORABLE PATERNO V. TAC-AN, BATANGAS CITY and ADORACION C.
ARELLANO, in her official capacity as City Treasurer of Batangas, respondents.
MARTINEZ, J.:
This petition for review on certiorari assails the Decision of the Court of Appeals
dated November 29, 1995, in CA-G.R. SP No. 36801, affirming the decision of the
Regional Trial Court of Batangas City, Branch 84, in Civil Case No. 4293, which
dismissed petitioners' complaint for a business tax refund imposed by the City of
Batangas.
Petitioner is a grantee of a pipeline concession under Republic Act No. 387, as
amended, to contract, install and operate oil pipelines. The original pipeline
concession was granted in 1967 1 and renewed by the Energy Regulatory Board in
1992. 2
Sometime in January 1995, petitioner applied for a mayor's permit with the Office
of the Mayor of Batangas City. However, before the mayor's permit could be issued,
the respondent City Treasurer required petitioner to pay a local tax based on its
gross receipts for the fiscal year 1993 pursuant to the Local Government Code 3.
The respondent City Treasurer assessed a business tax on the petitioner amounting
to P956,076.04 payable in four installments based on the gross receipts for
products pumped at GPS-1 for the fiscal year 1993 which amounted to
P181,681,151.00. In order not to hamper its operations, petitioner paid the tax
under protest in the amount of P239,019.01 for the first quarter of 1993.
On January 20, 1994, petitioner filed a letter-protest addressed to the respondent
City Treasurer, the pertinent portion of which reads:
Please note that our Company (FPIC) is a pipeline operator with a
government concession granted under the Petroleum Act. It is
engaged in the business of transporting petroleum products from
the Batangas refineries, via pipeline, to Sucat and JTF Pandacan
Terminals. As such, our Company is exempt from paying tax on
gross receipts under Section 133 of the Local Government Code of
1991 . . . .
Moreover, Transportation contractors are not included in the
enumeration of contractors under Section 131, Paragraph (h) of
the Local Government Code. Therefore, the authority to impose
tax "on contractors and other independent contractors" under
Section 143, Paragraph (e) of the Local Government Code does
not include the power to levy on transportation contractors.
The imposition and assessment cannot be categorized as a mere
fee authorized under Section 147 of the Local Government Code.
The said section limits the imposition of fees and charges on
business to such 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 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:
 . . . Plaintiff is either a contractor or other independent
contractor.
. . . 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 onlycommon carriers so as not to
overburden the riding public or commuters with
taxes. Plaintiff is not a common carrier, but a
special carrier extending its services and
facilities to a single specific or "special
customer" under a "special contract."
2. The Local Tax Code of 1992 was basically
enacted to give more and effective local
autonomy to local governments than the
previous enactments, to make them
economically and financially viable to serve the
people and discharge their functions with a
concomitant obligation to accept certain
devolution of powers, . . . So, consistent with
this policy even franchise grantees are taxed
(Sec. 137) and contractors are also taxed under
Sec. 143 (e) and 151 of the Code. 9
Petitioner assailed the aforesaid decision before this Court via a petition for review.
On February 27, 1995, we referred the case to the respondent Court of Appeals for
consideration and adjudication. 10On 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 22, 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.
Art. 1732 of the Civil Code defines a "common carrier" as "any person, corporation,
firm or association engaged in the business of carrying or transporting passengers
or goods or both, by land, water, or air, for compensation, offering their services to
the public."
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 . . . 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 compensation, with
general or limited clientele, whether permanent, occasional or
accidental, and done for general business purposes, any common
carrier, railroad, street railway, traction railway, subway motor
vehicle, either for freight or passenger, or both, with or without
fixed route and whatever may be its classification, freight or
carrier service of any class, express service, steamboat, or
steamship line, pontines, ferries and water craft, engaged in the
transportation of passengers or freight or both, shipyard, marine
repair shop, wharf or dock, ice plant, ice-refrigeration plant, canal,
irrigation system gas, electric light heat and power, water supply
and power petroleum, sewerage system, wire or wireless
communications systems, wire or wireless broadcasting stations
and other similar public services. (Emphasis Supplied)
Also, respondent's argument that the term "common carrier" as used in Section 133
(j) of the Local Government Code refers only to common carriers transporting goods
and passengers through moving vehicles or vessels either by land, sea or water, is
erroneous.
As correctly pointed out by petitioner, the definition of "common carriers" in the
Civil Code makes no distinction as to the means of transporting, as long as it is by
land, water or air. It does not provide that the transportation of the passengers or
goods should be by motor vehicle. In fact, in the United States, oil pipe line
operators are considered common carriers. 17
Under the Petroleum Act of the Philippines (Republic Act 387), petitioner is
considered a "common carrier." Thus, Article 86 thereof provides that:
Art. 86. Pipe line concessionaire as common carrier. A pipe line shall
have the preferential right to utilize installations for the transportation of
petroleum owned by him, but is obligated to utilize the remaining
transportation capacity pro rata for the transportation of such other
petroleum as may be offered by others for transport, and to charge
without discrimination such rates as may have been approved by the
Secretary of Agriculture and Natural Resources.
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 . . . and everything relating to the manufacture, refining,
storage, or transportation by special methods of petroleum, is hereby
declared to be a public utility. (Emphasis Supplied)
The Bureau of Internal Revenue likewise considers the petitioner a "common
carrier." In BIR Ruling No. 069-83, it declared:
. . . 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 . . . . 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:
 Sec. 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:
xxx xxx xxx
(j) Taxes on the gross receipts of transportation
contractors and persons engaged in the transportation of
passengers or freight by hire and common carriers by air,
land or water, except as provided in this Code.
What we want to guard against here, Mr. Speaker, is the
imposition of taxes by local government units on the carrier
business. Local government units may impose taxes on top of
what is already being imposed by the National Internal Revenue
Code which is the so-called "common carriers tax." We do not
want a duplication of this tax, so we just provided for an
exception under Section 125 [now Sec. 137] that a province may
impose this tax at a specific rate.
MR. AQUINO (A.). Thank you for that clarification, Mr. Speaker. . .
. 18

The deliberations conducted in the House of Representatives on the Local It is clear that the legislative intent in excluding from the taxing power of the local
Government Code of 1991 are illuminating: government unit the imposition of business tax against common carriers is to
prevent a duplication of the so-called "common carrier's tax."
MR. AQUINO (A). Thank you, Mr. Speaker.
Petitioner is already paying three (3%) percent common carrier's tax on its gross
Mr. Speaker, we would like to proceed to page 95, line 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.
1. It states: "SEC. 121 [now Sec. 131]. Common Limitations on the
Taxing Powers of Local Government Units." . . .
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
MR. AQUINO (A.). Thank you Mr. Speaker.
and SET ASIDE.
Still on page 95, subparagraph 5, on taxes on the business of
SO ORDERED.
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.
G.R. No. L-69044 May 29, 1987
EASTERN SHIPPING LINES, INC., petitioner, vs. INTERMEDIATE APPELLATE COURT
and DEVELOPMENT INSURANCE & SURETY CORPORATION,respondents.
No. 71478 May 29, 1987
EASTERN SHIPPING LINES, INC., petitioner, vs. THE NISSHIN FIRE AND MARINE
INSURANCE CO., and DOWA FIRE & MARINE INSURANCE CO., LTD.,respondents.
MELENCIO-HERRERA, J.:
These two cases, both for the recovery of the value of cargo insurance, arose from
the same incident, the sinking of the M/S ASIATICA when it caught fire, resulting in
the total loss of ship and cargo.
The basic facts are not in controversy:
In G.R. No. 69044, sometime in or prior to June, 1977, the M/S ASIATICA, a vessel
operated by petitioner Eastern Shipping Lines, Inc., (referred to hereinafter as
Petitioner Carrier) loaded at Kobe, Japan for transportation to Manila, 5,000 pieces
of calorized lance pipes in 28 packages valued at P256,039.00 consigned to
Philippine Blooming Mills Co., Inc., and 7 cases of spare parts valued at P92,361.75,
consigned to Central Textile Mills, Inc. Both sets of goods were insured against
marine risk for their stated value with respondent Development Insurance and
Surety Corporation.
In G.R. No. 71478, during the same period, the same vessel took on board 128
cartons of garment fabrics and accessories, in two (2) containers, consigned to
Mariveles Apparel Corporation, and two cases of surveying instruments consigned
to Aman Enterprises and General Merchandise. The 128 cartons were insured for
their stated value by respondent Nisshin Fire & Marine Insurance Co., for US
$46,583.00, and the 2 cases by respondent Dowa Fire & Marine Insurance Co., Ltd.,
for US $11,385.00.
Enroute for Kobe, Japan, to Manila, the vessel caught fire and sank, resulting in the
total loss of ship and cargo. The respective respondent Insurers paid the
corresponding marine insurance values to the consignees concerned and were thus
subrogated unto the rights of the latter as the insured.
G.R. NO. 69044
On May 11, 1978, respondent Development Insurance & Surety Corporation
(Development Insurance, for short), having been subrogated unto the rights of the
two insured companies, filed suit against petitioner Carrier for the recovery of the
amounts it had paid to the insured before the then Court of First instance of Manila,
Branch XXX (Civil Case No. 6087).
Petitioner-Carrier denied liability mainly on the ground that the loss was due to an
extraordinary fortuitous event, hence, it is not liable under the law.
On August 31, 1979, the Trial Court rendered judgment in favor of Development
Insurance in the amounts of P256,039.00 and P92,361.75, respectively, with legal
interest, plus P35,000.00 as attorney's fees and costs. Petitioner Carrier took an
appeal to the then Court of Appeals which, on August 14, 1984, affirmed.
Petitioner Carrier is now before us on a Petition for Review on Certiorari.
G.R. NO. 71478
On June 16, 1978, respondents Nisshin Fire & Marine Insurance Co. NISSHIN for
short), and Dowa Fire & Marine Insurance Co., Ltd. (DOWA, for brevity), as
subrogees of the insured, filed suit against Petitioner Carrier for the recovery of the
insured value of the cargo lost with the then Court of First Instance of Manila,
Branch 11 (Civil Case No. 116151), imputing unseaworthiness of the ship and non-
observance of extraordinary diligence by petitioner Carrier.
Petitioner Carrier denied liability on the principal grounds that the fire which caused
the sinking of the ship is an exempting circumstance under Section 4(2) (b) of the
Carriage of Goods by Sea Act (COGSA); and that when the loss of fire is established,
the burden of proving negligence of the vessel is shifted to the cargo shipper.
On September 15, 1980, the Trial Court rendered judgment in favor of NISSHIN and
DOWA in the amounts of US $46,583.00 and US $11,385.00, respectively, with legal
interest, plus attorney's fees of P5,000.00 and costs. On appeal by petitioner, the
then Court of Appeals on September 10, 1984, affirmed with modification the Trial
Court's judgment by decreasing the amount recoverable by DOWA to US $1,000.00
because of $500 per package limitation of liability under the COGSA.
Hence, this Petition for Review on certiorari by Petitioner Carrier.
Both Petitions were initially denied for lack of merit. G.R. No. 69044 on January 16,
1985 by the First Division, and G. R. No. 71478 on September 25, 1985 by the
Second Division. Upon Petitioner Carrier's Motion for Reconsideration, however,
G.R. No. 69044 was given due course on March 25, 1985, and the parties were
required to submit their respective Memoranda, which they have done.
On the other hand, in G.R. No. 71478, Petitioner Carrier sought reconsideration of
the Resolution denying the Petition for Review and moved for its consolidation with
G.R. No. 69044, the lower-numbered case, which was then pending resolution with
the First Division. The same was granted; the Resolution of the Second Division of
September 25, 1985 was set aside and the Petition was given due course.
At the outset, we reject Petitioner Carrier's claim that it is not the operator of the
M/S Asiatica but merely a charterer thereof. We note that in G.R. No. 69044,
Petitioner Carrier stated in its Petition:
There are about 22 cases of the "ASIATICA" pending in various
courts where various plaintiffs are represented by various counsel
representing various consignees or insurance companies. The
common defendant in these cases is petitioner herein, being the
operator of said vessel. ... 1
Petitioner Carrier should be held bound to said admission. As a general rule, the
facts alleged in a party's pleading are deemed admissions of that party and binding
upon it. 2 And an admission in one pleading in one action may be received in
evidence against the pleader or his successor-in-interest on the trial of another
action to which he is a party, in favor of a party to the latter action. 3
The threshold issues in both cases are: (1) which law should govern the Civil Code
provisions on Common carriers or the Carriage of Goods by Sea Act? and (2) who
has the burden of proof to show negligence of the carrier?
On the Law Applicable
The law of the country to which the goods are to be transported governs the
liability of the common carrier in case of their loss, destruction or
deterioration. 4 As the cargoes in question were transported from Japan to the
Philippines, the liability of Petitioner Carrier is governed primarily by the Civil
Code. 5 However, in all matters not regulated by said Code, the rights and
obligations of common carrier shall be governed by the Code of Commerce and by
special laws. 6 Thus, the Carriage of Goods by Sea Act, a special law, is suppletory to
the provisions of the Civil Code. 7
On the Burden of Proof
Under the Civil Code, common carriers, from the nature of their business and for
reasons of public policy, are bound to observe extraordinary diligence in the
vigilance over goods, according to all the circumstances of each case. 8 Common
carriers are responsible for the loss, destruction, or deterioration of the goods
unless the same is due to any of the following causes only:
(1) Flood, storm, earthquake, lightning or other natural disaster or
calamity;
xxx xxx xxx 9
Petitioner Carrier claims that the loss of the vessel by fire exempts it from liability
under the phrase "natural disaster or calamity. " However, we are of the opinion
that fire may not be considered a natural disaster or calamity. This must be so as it
arises almost invariably from some act of man or by human means. 10 It does not
fall within the category of an act of God unless caused by lightning 11 or by other
natural disaster or calamity. 12 It may even be caused by the actual fault or privity
of the carrier. 13
Article 1680 of the Civil Code, which considers fire as an extraordinary fortuitous
event refers to leases of rural lands where a reduction of the rent is allowed when
more than one-half of the fruits have been lost due to such event, considering that
the law adopts a protection policy towards agriculture. 14
As the peril of the fire is not comprehended within the exception in Article
1734, supra, Article 1735 of the Civil Code provides that all cases than those
mention in Article 1734, the common carrier shall be presumed to have been at
fault or to have acted negligently, unless it proves that it has observed the
extraordinary deligence required by law.
In this case, the respective Insurers. as subrogees of the cargo shippers, have
proven that the transported goods have been lost. Petitioner Carrier has also
proved that the loss was caused by fire. The burden then is upon Petitioner Carrier
to proved that it has exercised the extraordinary diligence required by law. In this
regard, the Trial Court, concurred in by the Appellate Court, made the following
Finding of fact:
The cargoes in question were, according to the witnesses
defendant placed in hatches No, 2 and 3 cf the vessel, Boatswain
Ernesto Pastrana noticed that smoke was coming out from hatch
No. 2 and hatch No. 3; that where the smoke was noticed, the fire
was already big; that the fire must have started twenty-four 24)
our the same was noticed; that carbon dioxide was ordered
released and the crew was ordered to open the hatch covers of
No, 2 tor commencement of fire fighting by sea water: that all of
these effort were not enough to control the fire.
Pursuant to Article 1733, common carriers are bound to
extraordinary diligence in the vigilance over the goods. The
 evidence of the defendant did not show that extraordinary
vigilance was observed by the vessel to prevent the occurrence of
fire at hatches numbers 2 and 3. Defendant's evidence did not
likewise show he amount of diligence made by the crew, on
orders, in the care of the cargoes. What appears is that after the
cargoes were stored in the hatches, no regular inspection was
made as to their condition during the voyage. Consequently, the
crew could not have even explain what could have caused the
fire. The defendant, in the Court's mind, failed to satisfactorily
show that extraordinary vigilance and care had been made by the
crew to prevent the occurrence of the fire. The defendant, as a
common carrier, is liable to the consignees for said lack of
deligence required of it under Article 1733 of the Civil Code. 15
Having failed to discharge the burden of proving that it had exercised the
extraordinary diligence required by law, Petitioner Carrier cannot escape liability for
the loss of the cargo.
And even if fire were to be considered a "natural disaster" within the meaning of
Article 1734 of the Civil Code, it is required under Article 1739 of the same Code
that the "natural disaster" must have been the "proximate and only cause of the
loss," and that the carrier has "exercised due diligence to prevent or minimize the
loss before, during or after the occurrence of the disaster. " This Petitioner Carrier
has also failed to establish satisfactorily.
Nor may Petitioner Carrier seek refuge from liability under the Carriage of Goods by
Sea Act, It is provided therein that:
Sec. 4(2). Neither the carrier nor the ship shall be responsible for
loss or damage arising or resulting from
(b) Fire, unless caused by the actual fault or privity of the carrier.
xxx xxx xxx
In this case, both the Trial Court and the Appellate Court, in effect, found, as a fact,
that there was "actual fault" of the carrier shown by "lack of diligence" in that
"when the smoke was noticed, the fire was already big; that the fire must have
started twenty-four (24) hours before the same was noticed; " and that "after the
cargoes were stored in the hatches, no regular inspection was made as to their
condition during the voyage." The foregoing suffices to show that the circumstances
under which the fire originated and spread are such as to show that Petitioner
Carrier or its servants were negligent in connection therewith. Consequently, the
complete defense afforded by the COGSA when loss results from fire is unavailing
to Petitioner Carrier.
On the US $500 Per Package Limitation:
Petitioner Carrier avers that its liability if any, should not exceed US $500 per
package as provided in section 4(5) of the COGSA, which reads:
(5) Neither the carrier nor the ship shall in any event be or
become liable for any loss or damage to or in connection with the
transportation of goods in an amount exceeding $500 per package
lawful money of the United States, or in case of goods not shipped
in packages, per customary freight unit, or the equivalent of that
sum in other currency, unless the nature and value of such goods
have been declared by the shipper before shipment and inserted
in bill of lading. This declaration if embodied in the bill of lading
shall be prima facie evidence, but all be conclusive on the carrier.
By agreement between the carrier, master or agent of the carrier,
and the shipper another maximum amount than that mentioned
in this paragraph may be fixed: Provided, That such maximum
shall not be less than the figure above named. In no event shall
the carrier be Liable for more than the amount of damage actually
sustained.
xxx xxx xxx
Article 1749 of the New Civil Code also allows the limitations of liability in this wise:
Art. 1749. A stipulation that the common carrier's liability as
limited to the value of the goods appearing in the bill of lading,
unless the shipper or owner declares a greater value, is binding.
It is to be noted that the Civil Code does not of itself limit the liability of the
common carrier to a fixed amount per package although the Code expressly permits
a stipulation limiting such liability. Thus, the COGSA which is suppletory to the
provisions of the Civil Code, steps in and supplements the Code by establishing a
statutory provision limiting the carrier's liability in the absence of a declaration of a
higher value of the goods by the shipper in the bill of lading. The provisions of the
Carriage of Goods by.Sea Act on limited liability are as much a part of a bill of lading
as though physically in it and as much a part thereof as though placed therein by
agreement of the parties. 16
In G.R. No. 69044, there is no stipulation in the respective Bills of Lading (Exhibits
"C-2" and "I-3") 1 7 limiting the carrier's liability for the loss or destruction of the
goods. Nor is there a declaration of a higher value of the goods. Hence, Petitioner
Carrier's liability should not exceed US $500 per package, or its peso equivalent, at
the time of payment of the value of the goods lost, but in no case "more than the
amount of damage actually sustained."
The actual total loss for the 5,000 pieces of calorized lance pipes was P256,039
(Exhibit "C"), which was exactly the amount of the insurance coverage by
Development Insurance (Exhibit "A"), and the amount affirmed to be paid by
respondent Court. The goods were shipped in 28 packages (Exhibit "C-2")
Multiplying 28 packages by $500 would result in a product of $14,000 which, at the
current exchange rate of P20.44 to US $1, would be P286,160, or "more than the
amount of damage actually sustained." Consequently, the aforestated amount of
P256,039 should be upheld.
With respect to the seven (7) cases of spare parts (Exhibit "I-3"), their actual value
was P92,361.75 (Exhibit "I"), which is likewise the insured value of the cargo (Exhibit
"H") and amount was affirmed to be paid by respondent Court. however,
multiplying seven (7) cases by $500 per package at the present prevailing rate of
P20.44 to US $1 (US $3,500 x P20.44) would yield P71,540 only, which is the
amount that should be paid by Petitioner Carrier for those spare parts, and not
P92,361.75.
In G.R. No. 71478, in so far as the two (2) cases of surveying instruments are
concerned, the amount awarded to DOWA which was already reduced to $1,000 by
the Appellate Court following the statutory $500 liability per package, is in order.
In respect of the shipment of 128 cartons of garment fabrics in two (2) containers
and insured with NISSHIN, the Appellate Court also limited Petitioner Carrier's
liability to $500 per package and affirmed the award of $46,583 to NISSHIN. it
multiplied 128 cartons (considered as COGSA packages) by $500 to arrive at the
figure of $64,000, and explained that "since this amount is more than the insured
value of the goods, that is $46,583, the Trial Court was correct in awarding said
amount only for the 128 cartons, which amount is less than the maximum limitation
of the carrier's liability."
We find no reversible error. The 128 cartons and not the two (2) containers should
be considered as the shipping unit.
In Mitsui & Co., Ltd. vs. American Export Lines, Inc. 636 F 2d 807 (1981), the
consignees of tin ingots and the shipper of floor covering brought action against the
vessel owner and operator to recover for loss of ingots and floor covering, which
had been shipped in vessel supplied containers. The U.S. District Court for the
Southern District of New York rendered judgment for the plaintiffs, and the
defendant appealed. The United States Court of Appeals, Second Division, modified
and affirmed holding that:
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
liability limitation provision of Carriage of Goods by Sea Act.
Carriage of Goods by Sea Act, 4(5), 46 U.S.C.A.& 1304(5).
Even if language and purposes of Carriage of Goods by Sea Act left
doubt as to whether carrier-furnished containers whose contents
are disclosed should be treated as packages, the interest in
securing international uniformity would suggest that they should
not be so treated. Carriage of Goods by Sea Act, 4(5), 46 U.S.C.A.
1304(5).
... After quoting the statement in Leather's Best, supra, 451 F 2d
at 815, that treating a container as a package is inconsistent with
the congressional purpose of establishing a reasonable minimum
level of liability, Judge Beeks wrote, 414 F. Supp. at 907 (footnotes
omitted):
Although this approach has not completely escaped
criticism, there is, nonetheless, much to commend it. It
gives needed recognition to the responsibility of the
courts to construe and apply the statute as enacted,
however great might be the temptation to "modernize"
or reconstitute it by artful judicial gloss. If COGSA's
package limitation scheme suffers from internal illness,
Congress alone must undertake the surgery. There is, in
this regard, obvious wisdom in the Ninth Circuit's
conclusion in Hartford that technological advancements,
whether or not forseeable by the COGSA promulgators,
do not warrant a distortion or artificial construction of
the statutory term "package." A ruling that these large
reusable metal pieces of transport equipment qualify as
COGSA packages at least where, as here, they were
carrier owned and supplied would amount to just such
a distortion.
 Certainly, if the individual crates or cartons prepared by 2 Containers
the shipper and containing his goods can rightly be
considered "packages" standing by themselves, they do (128) Cartons)
not suddenly lose that character upon being stowed in a
carrier's container. I would liken these containers to Men's Garments Fabrics and Accessories Freight Prepaid
detachable stowage compartments of the ship. They
simply serve to divide the ship's overall cargo stowage
Say: Two (2) Containers Only.
space into smaller, more serviceable loci. Shippers'
packages are quite literally "stowed" in the containers
Considering, therefore, that the Bill of Lading clearly disclosed the contents of the
utilizing stevedoring practices and materials analogous to
containers, the number of cartons or units, as well as the nature of the goods, and
those employed in traditional on board stowage.
applying the ruling in the Mitsui and Eurygenes cases it is clear that the 128 cartons,
not the two (2) containers should be considered as the shipping unit subject to the
In Yeramex International v. S.S. Tando,, 1977 A.M.C. 1807 (E.D.
$500 limitation of liability.
Va.) rev'd on other grounds, 595 F 2nd 943 (4 Cir. 1979), another
district with many maritime cases followed Judge Beeks'
True, the evidence does not disclose whether the containers involved herein were
reasoning in Matsushita and similarly rejected the functional
carrier-furnished or not. Usually, however, containers are provided by the
economics test. Judge Kellam held that when rolls of polyester
carrier. 19 In this case, the probability is that they were so furnished for Petitioner
goods are packed into cardboard cartons which are then placed in
Carrier was at liberty to pack and carry the goods in containers if they were not so
containers, the cartons and not the containers are the packages.
packed. Thus, at the dorsal side of the Bill of Lading (Exhibit "A") appears the
following stipulation in fine print:
xxx xxx xxx
11. (Use of Container) Where the goods receipt of which is
The case of Smithgreyhound v. M/V Eurygenes, 18 followed the Mitsui test:
acknowledged on the face of this Bill of Lading are not already
packed into container(s) at the time of receipt, the Carrier shall be
Eurygenes concerned a shipment of stereo equipment packaged at liberty to pack and carry them in any type of container(s).
by the shipper into cartons which were then placed by the shipper
into a carrier- furnished container. The number of cartons was
The foregoing would explain the use of the estimate "Say: Two (2) Containers Only"
disclosed to the carrier in the bill of lading. Eurygenes followed the
in the Bill of Lading, meaning that the goods could probably fit in two (2) containers
Mitsui test and treated the cartons, not the container, as the
only. It cannot mean that the shipper had furnished the containers for if so, "Two
COGSA packages. However, Eurygenes indicated that a carrier
(2) Containers" appearing as the first entry would have sufficed. and if there is any
could limit its liability to $500 per container if the bill of lading
ambiguity in the Bill of Lading, it is a cardinal principle in the construction of
failed to disclose the number of cartons or units within the
contracts that the interpretation of obscure words or stipulations in a contract shall
container, or if the parties indicated, in clear and unambiguous
not favor the party who caused the obscurity. 20 This applies with even greater
language, an agreement to treat the container as the package.
force in a contract of adhesion where a contract is already prepared and the other
party merely adheres to it, like the Bill of Lading in this case, which is draw. up by
(Admiralty Litigation in Perpetuum: The the carrier. 21
Continuing Saga of Package Limitations and
Third World Delivery Problems by Chester D.
On Alleged Denial of Opportunity to Present Deposition of Its Witnesses: (in G.R. No.
Hooper & Keith L. Flicker, published in Fordham
69044 only)
International Law Journal, Vol. 6, 1982-83,
Number 1) (Emphasis supplied)
Petitioner Carrier claims that the Trial Court did not give it sufficient time to take
the depositions of its witnesses in Japan by written interrogatories.
In this case, the Bill of Lading (Exhibit "A") disclosed the following data:
We do not agree. petitioner Carrier was given- full opportunity to present its WHEREFORE, 1) in G.R. No. 69044, the judgment is modified in that petitioner
evidence but it failed to do so. On this point, the Trial Court found: Eastern Shipping Lines shall pay the Development Insurance and Surety Corporation
the amount of P256,039 for the twenty-eight (28) packages of calorized lance pipes,
xxx xxx xxx and P71,540 for the seven (7) cases of spare parts, with interest at the legal rate
from the date of the filing of the complaint on June 13, 1978, plus P5,000 as
Indeed, since after November 6, 1978, to August 27, 1979, not to attorney's fees, and the costs.
mention the time from June 27, 1978, when its answer was
prepared and filed in Court, until September 26, 1978, when the 2) In G.R.No.71478,the judgment is hereby affirmed.
pre-trial conference was conducted for the last time, the
defendant had more than nine months to prepare its evidence. Its SO ORDERED.
belated notice to take deposition on written interrogatories of its
witnesses in Japan, served upon the plaintiff on August 25th, just
two days before the hearing set for August 27th, knowing fully
well that it was its undertaking on July 11 the that the deposition
of the witnesses would be dispensed with if by next time it had
not yet been obtained, only proves the lack of merit of the
defendant's motion for postponement, for which reason it
deserves no sympathy from the Court in that regard. The
defendant has told the Court since February 16, 1979, that it was
going to take the deposition of its witnesses in Japan. Why did it
take until August 25, 1979, or more than six months, to prepare
its written interrogatories. Only the defendant itself is to blame
for its failure to adduce evidence in support of its defenses.

xxx xxx xxx 22

Petitioner Carrier was afforded ample time to present its side of the case. 23 It
cannot complain now that it was denied due process when the Trial Court rendered
its Decision on the basis of the evidence adduced. What due process abhors is
absolute lack of opportunity to be heard. 24

On the Award of Attorney's Fees:

Petitioner Carrier questions the award of attorney's fees. In both cases, respondent
Court affirmed the award by the Trial Court of attorney's fees of P35,000.00 in favor
of Development Insurance in G.R. No. 69044, and P5,000.00 in favor of NISSHIN and
DOWA in G.R. No. 71478.

Courts being vested with discretion in fixing the amount of attorney's fees, it is
believed that the amount of P5,000.00 would be more reasonable in G.R. No.
69044. The award of P5,000.00 in G.R. No. 71478 is affirmed.
G.R. No. L-49407 August 19, 1988
NATIONAL DEVELOPMENT COMPANY, petitioner-appellant, vs. THE COURT OF
APPEALS and DEVELOPMENT INSURANCE & SURETY CORPORATION, respondents-
appellees.
No. L-49469 August 19, 1988
MARITIME COMPANY OF THE PHILIPPINES, petitioner-appellant, vs. THE COURT OF
APPEALS and DEVELOPMENT INSURANCE & SURETY CORPORATION, respondents-
appellees.
PARAS, J.:
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," affirmingin 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.
I
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:
I
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
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. 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
On November 17,1978, the Court of Appeals promulgated its decision
COMPANY OF THE PHILIPPINES IS BARRED BY THE STATUTE OF LIMITATION AND
affirming in toto the decision of the trial court.
HAS ALREADY PRESCRIBED.
Hence these appeals by certiorari.
III
NDC's appeal was docketed as G.R. No. 49407, while that of MCP was docketed as
THE RESPONDENT COURT OF APPEALS ERRED IN ADMITTING IN EVIDENCE PRIVATE
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 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
course (Rollo, p. 108) and submitted for decision on February 29, 1980 (Rollo, p.
FAULT OF BOTH VESSELS INSTEAD OF FINDING THAT THE COLLISION WAS CAUSED
136).
BY THE FAULT, NEGLIGENCE AND LACK OF SKILL OF THE COMPLEMENTS OF THE
YASUSHIMA MARU WITHOUT THE FAULT OR NEGLIGENCE OF THE COMPLEMENT
In its brief, NDC cited the following assignments of error:
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 transported from Japan to the Philippines, the liability of the carrier is governed
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
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.
G.R. No. L-30212 September 30, 1987
BIENVENIDO GELISAN, petitioner, vs. BENITO ALDAY, respondent.
PADILLA, J.:
Review on certiorari of the judgment * rendered by the Court of Appeals, dated 11
October 1968, as amended by its resolution, dated 11 February 1969, in CA-G.R. No.
32670-R, entitled: "Benito Alday, plaintiff-appellant, vs. Roberto Espiritu and
Bienvenido Gelisan, defendants-appellees," which ordered the herein petitioner
Bienvenido Gelisan to pay, jointly and severally, with Roberto Espiritu, the
respondent Benito Alday the amount of P5,397.30, with. legal interest thereon from
the filing of the complaint, and the costs of suit; and for the said Roberto Espiritu to
pay or refund the petitioner Bienvenido Gelisan whatever amount the latter may
have paid to the respondent Benito Alday by virtue of the judgment.
The uncontroverted facts of the case are, as follows:
Defendant Bienvenido Gelisan is the owner of a freight truck
bearing plate No. TH-2377. On January 31, 1962, defendant
Bienvenido Gelisan and Roberto Espiritu entered into a contract
marked Exhibit 3-Gelisan under which Espiritu hired the same
freight truck of Gelisan for the purpose of hauling rice, sugar, flour
and fertilizer at an agreed price of P18.00 per trip within the limits
of the City of Manila provided the loads shall not exceed 200
sacks. It is also agreed that Espiritu shall bear and pay all losses
and damages attending the carriage of the goods to be hauled by
him. The truck was taken by a driver of Roberto Espiritu on
February 1, 1962. Plaintiff Benito Alday, a trucking operator, and
who owns about 15 freight trucks, had known the defendant
Roberto Espiritu since 1948 as a truck operator. Plaintiff had a
contract to haul the fertilizers of the Atlas Fertilizer Corporation
from Pier 4, North Harbor, to its Warehouse in Mandaluyong.
Alday met Espiritu at the gate of Pier 4 and the latter offered the
use of his truck with the driver and helper at 9 centavos per bag of
fertilizer. The offer was accepted by plaintiff Alday and he
instructed his checker Celso Henson to let Roberto Espiritu haul
the fertilizer. Espiritu made two hauls of 200 bags of fertilizer per
trip. The fertilizer was delivered to the driver and helper of
Espiritu with the necessary way bill receipts, Exhibits A and B.
Espiritu, however, did not deliver the fertilizer to the Atlas
Fertolizer bodega at Mandaluyong. The signatures appearing in
the way bill receipts Exhibits A and B of the Alday Transportation
admittedly not the signature of any representative or employee of
the Atlas Fertilizer Corporation. Roberto Espiritu could not be
found, and plaintiff reported the loss to the Manila Police
Department. Roberto Espiritu was later arrested and booked for
theft. ...
Subsequently, plaintiff Aiday saw the truck in question on Sto.
Cristo St. and he notified the Manila Police Department, and it
was impounded by the police. It was claimed by Bienvenido
Gelisan from the Police Department after he had been notified by
his employees that the truck had been impounded by the police;
but as he could not produce at the time the registration papers,
the police would not release the truck to Gelisan. As a result of
the impounding of the truck according to Gelisan, ... and that for
the release of the truck he paid the premium of P300 to the
surety company. 1
Benito Alday was compelled to pay the value of the 400 bags of fertilizer, in the
amount of P5,397.33, to Atlas Fertilizer Corporation so that, on 12 February 1962,
he (Alday) filed a complaint against Roberto Espiritu and Bienvenido Gelisan with
the Court of First Instance of Manila, docketed therein as Civil Case No. 49603, for
the recovery of damages suffered by him thru the criminal acts committed by the
defendants.
The defendant, Roberto Espiritu failed to file an answer and was, accordingly,
declared in default.
The defendant, Bienvenido Gelisan, upon the other hand, disowned responsibility.
He claimed that he had no contractual relations with the plaintiff Benito Alday as
regards the hauling and/or delivery of the 400 bags of fertilizer mentioned in the
complaint; that the alleged misappropriation or nondelivery by defendant Roberto
Espiritu of plaintiff's 400 bags of fertilizer, was entirely beyond his (Gelisan's)
control and knowledge, and which fact became known to him, for the first time, on
8 February 1962 when his freight truck, with plate No. TH-2377, was impounded by
the Manila Police Department, at the instance of the plaintiff; and that in his
written contract of hire with Roberto Espiritu, it was expressly provided that the
latter will bear and pay all loss and damages attending the carriage of goods to be
hauled by said Roberto Espiritu.
After trial, the Court of First Instance of Manila ruled that Roberto Espiritu alone
was liable to Benito Alday, since Bienvenido Gelisan was not privy to the contract
between Espiritu and Alday. The dispositive portion of the decision reads, as
follows:
 WHEREFORE, judgment is hereby rendered in favor of the plaintiff
and against the defendant Roberto Espiritu for the sum of P6,000
with interest at the legal rate from the time of the filing of the
complaint, and the costs of the suit. Plantiff's complaint is
dismissed with respect to defendant Bienvenido Gelisan, and
judgment is rendered in favor of defendant Bienvenido Gelisan
and against the plaintiff for the sum of P350. 2
On appeal, however, the Court of Appeals, citing the case of Montoya vs.
Ignacio, 3 found that Bienvenido Gelisan is likewise liable for being the registered
owner of the truck; and that the lease contract, executed by and between
Bienvenido Gelisan and Roberto Espiritu, is not binding upon Benito Alday for not
having been previously approved by the Public Service Commission. Accordingly, it
sentenced Bienvenido Gelisan to pay, jointly and severally with Roberto Espiritu,
Benito Alday the amount of P5,397.30, with legal interest thereon from the filing of
the complaint; and to pay the costs. Roberto Espiritu, in turn, was ordered to pay or
refund Bienvenido Gelisan whatever amount the latter may have paid to Benito
Alday by virtue of the judgment. 4
Hence, the present recourse by Bienvenido Gelisan.
The petition is without merit. The judgment rendered by the Court of Appeals,
which is sought to be reviewed, is in accord with the facts and the law on the case
and we find no cogent reason to disturb the same. The Court has invariably held in
several decisions that the registered owner of a public service vehicle is responsible
for damages that may arise from consequences incident to its operation or that
may be caused to any of the passengers therein. 5 The claim of the petitioner that
he is not hable in view of the lease contract executed by and between him and
Roberto Espiritu which exempts him from liability to third persons, cannot be
sustained because it appears that the lease contract, adverted to, had not been
approved by the Public Service Commission. It is settled in our jurisprudence that if
the property covered by a franchise is transferred or leased to another without
obtaining the requisite approval, the transfer is not binding upon the public and
third persons. 6
We also find no merit in the petitioner's argument that the rule requiring the
previous approval by the Public Service Commission, of the transfer or lease of the
motor vehicle, may be applied only in cases where there is no positive Identification
of the owner or driver, or where there are very scant means of Identification, but
not in those instances where the person responsible for damages has been fixed or
determined beforehand, as in the case at bar. The reason for the rule we reiterate
in the present case, was explained by the Court in Montoya vs. Ignacio, 7thus:
There is merit in this contention. The law really requires the
approval of the Public Service Commission in order that a
franchise, or any privilege 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 notified to the Public Service
Commission so that the latter mav take proper safeguards to
protect the interest of the public. In fact, the law requires that,
before the approval is granted, there should be a public hearing,
with notice to all interested parties, in order that the Commission
may determine if there are good and reasonable grounds
justifying the transfer or lease of the property covered by the
franchise, or if the sale or lease is detrimental to public interest.
Such being the reason and philosophy behind this requirement, 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 against 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. Since the lease of the jeepney in question was
made without such approval the only conclusion that can be
drawn is that Marcelino Ignacio still continues to be its operator in
contemplation of law, and as such is responsible for the
consequences incident to its operation, one of them being the
collision under consideration.
Bienvenido Gelisan, the registered owner, is not however without recourse. He has
a right to be indemnified by Roberto Espiritu for the amount titat he may be
required to pay as damages for the injury caused to Benito Alday, since the lease
contract in question, although not effective against the public for not having been
approved by the Public Service Commission, is valid and binding between the
contracting parties. 8
We also find no merit in the petitioner's contention that his liability is only
subsidiary. The Court has consistently considered the registered owner/operator of
a public service vehicle to be jointly and severally liable with the driver for damages
incurred by passengers or third persons as a consequence of injuries sustained in
the operation of said vehicles. Thus, in the case of Vargas vs. Langcay, 9 the Court
said:
We hold that the Court of Appeals erred in considering appellant-
petitioner Diwata Vargas only subsidiarily liable under Article 103
of the Revised Penal Code. This court, in previous decisions, has
 always considered the registered owner/operator of a passenger
vehicle, jointly and severally liable with the driver, for damages
incurred by passengers or third persons as a consequence of
injuries (or death) sustained in the operation of said vehicles.
(Montoya vs. Ignacio, 94 Phil., 182; Timbol vs. Osias, G.R. No. L-
7547, April 30, 1955; Vda. de Medina vs. Cresencia, 99 Phil., 506;
Necesito vs. Paras, 104 Phil., 75; Erezo vs. Jepte, 102 Phil., 103;
Tamayo vs. Aquino and Rayos vs Tamayo, 105 Phil., 949; 56 Off.
Gaz. [36] 5617.) In the case of Erezo vs. Jepte, Supra, We held:

* * * In synthesis, we hold that the registered owner, the

defendant-appellant herein, is primarily responsible for the
damage caused * * * (Emphasis supplied)

In the case of Tamayo vs. Aquino, supra, We said:

* * * As Tamayo is the registered owner of the truck, his

responsibffity to the public or to any passenger riding in the
vehicle or truck must be direct * * * (Emphasis supplied)

WHEREFORE, the petition is hereby DENIED. With costs against the petitioner.

SO ORDERED.
G.R. No. 82318 May 18, 1989
GILBERTO M. DUAVIT, petitioner, vs. THE HON. COURT OF APPEALS, Acting
through the Third Division, as Public Respondent, and ANTONIO SARMIENTO, SR.
& VIRGILIO CATUAR respondents.
GUTIERREZ, JR., J.:
This petition raises the sole issue of whether or not the owner of a private vehicle
which figured in an accident can be held liable under Article 2180 of the Civil Code
when the said vehicle was neither driven by an employee of the owner nor taken
with the consent of the latter.
The facts are summarized in the contested decision, as follows:
From the evidence adduced by the plaintiffs, consisting of the
testimonies of witnesses Virgilio Catuar, Antonio Sarmiento, Jr.,
Ruperto Catuar, Jr. and Norberto Bernarte it appears that on July
28, 1971 plaintiffs Antonio Sarmiento, Sr. and Virgilio Catuar were
aboard a jeep with plate number 77-99-F-I Manila, 1971, owned
by plaintiff, Ruperto Catuar was driving the said jeep on Ortigas
Avenue, San Juan, Rizal; that plaintiff's jeep, at the time, was
running moderately at 20 to 35 kilometers per hour and while
approaching Roosevelt Avenue, Virgilio Catuar slowed down; that
suddenly, another jeep with plate number 99-97-F-J Manila 1971
driven by defendant Oscar Sabiniano hit and bumped plaintiff's
jeep on the portion near the left rear wheel, and as a result of the
impact plaintiff's jeep fell on its right and skidded by about 30
yards; that as a result plaintiffs jeep was damaged, particularly the
windshield, the differential, the part near the left rear wheel and
the top cover of the jeep; that plaintiff Virgilio Catuar was thrown
to the middle of the road; his wrist was broken and he sustained
contusions on the head; that likewise plaintiff Antonio Sarmiento,
Sr. was trapped inside the fallen jeep, and one of his legs was
fractured.
Evidence also shows that the plaintiff Virgilio Catuar spent a total
of P2,464.00 for repairs of the jeep, as shown by the receipts of
payment of labor and spare parts (Exhs. H to H-7 Plaintiffs likewise
tried to prove that plaintiff Virgilio Catuar, immediately after the
accident was taken to Immaculate Concepcion Hospital, and then
was transferred to the National Orthopedic Hospital; that while
plaintiff Catuar was not confined in the hospital, his wrist was in a
plaster cast for a period of one month, and the contusions on his
head were under treatment for about two (2) weeks; that for
hospitalization, medicine and allied expenses, plaintiff Catuar
spent P5,000.00.
Evidence also shows that as a result of the incident, plaintiff
Antonio Sarmiento, Sr. sustained injuries on his leg; that at first,
he was taken to the National Orthopedic Hospital (Exh. K but later
he was confined at the Makati Medical Center from July 29, to
August 29, 1971 and then from September 15 to 25, 1971; that his
leg was in a plaster cast for a period of eight (8) months; and that
for hospitalization and medical attendance, plaintiff Antonio
Sarmiento, Sr. spent no less than P13,785.25 as evidenced by
receipts in his possession. (Exhs. N to N-1).
Proofs were adduced also to show that plaintiff Antonio
sarmiento Sr. is employed as Assistant Accountant of the
Canlubang Sugar Estate with a salary of P1,200.00 a month; that
as sideline he also works as accountant of United Haulers Inc. with
a salary of P500.00 a month; and that as a result of this incident,
plaintiff Sarmiento was unable to perform his normal work for a
period of at least 8 months. On the other hand, evidence shows
that the other plaintiff Virgilio Catuar is a Chief Clerk in Canlubang
Sugar Estate with a salary of P500.00 a month, and as a result of
the incident, he was incapacitated to work for a period of one (1)
month.
The plaintiffs have filed this case both against Oscar Sabiniano as
driver, and against Gualberto Duavit as owner of the jeep.
Defendant Gualberto Duavit, while admitting ownership of the
other jeep (Plate No. 99-07-F-J Manila, 1971), denied that the
other defendant (Oscar Sabiniano) was his employee. Duavit
claimed that he has not been an employer of defendant Oscar
Sabiniano at any time up to the present.
On the other hand documentary and testimonial evidence show
that defendant Oscar Sabiniano was an employee of the Board of
Liquidators from November 14, 1966 up to January 4, 1973
(Annex A of Answer).
Defendant Sabiniano, in his testimony, categorically admitted that
he took the jeep from the garage of defendant Duavit without the
consent or authority of the latter (TSN, September 7, 1978, p. 8).
He testified further, that Duavit even filed charges against him for
 theft of the jeep, but which Duavit did not push through as his
(Sabiniano's) parents apologized to Duavit on his behalf.
Defendant Oscar Sabiniano, on the other hand in an attempt to
exculpate himself from liability, makes it appear that he was
taking all necessary precaution while driving and the accident
occurred due to the negligence of Virgilio Catuar. Sabiniano claims
that it was plaintiffs vehicle which hit and bumped their jeep.
(Reno, pp. 21-23)
The trial court found Oscar Sabiniano negligent in driving the vehicle but found no
employer-employee relationship between him and the petitioner because the latter
was then a government employee and he took the vehicle without the authority
and consent of the owner. The petitioner was, thus, absolved from liability under
Article 2180 of the Civil Code.
The private respondents appealed the case.
On January 7, 1988, the Court of Appeals rendered the questioned decision holding
the petitioner jointly and severally liable with Sabiniano. The appellate court in part
ruled:
We cannot go along with appellee's argument. It will be seen that
in Vargas v. Langcay, supra, it was held that it is immaterial
whether or not the driver was actually employed by the operator
of record or registered owner, and it is even not necessary to
prove who the actual owner of the vehicle and who the employer
of the driver is. When the Supreme Court ruled, thus: 'We must
hold and consider such owner-operator of record (registered
owner) as the employer in contemplation of law, of the driver,' it
cannot be construed other than that the registered owner is the
employer of the driver in contemplation of law. It is a conclusive
presumption of fact and law, and is not subject to rebuttal of
proof to the contrary. Otherwise, as stated in the decision, we
quote:
The purpose of the principles evolved by the decisions in these
matters will be defeated and thwarted if we entertain the
argument of petitioner that she is not liable because the actual
owner and employer was established by the evidence. . . .
Along the same vein, the defendant-appellee Gualberto Duavit cannot be allowed
to prove that the driver Sabiniano was not his employee at the time of the vehicular
accident.
The ruling laid down in Amar V. Soberano (1966), 63 O.G. 6850, by
this Court to the effect that the burden of proving the non-
existence of an employer-employee relationship is upon the
defendant and this he must do by a satisfactory preponderance of
evidence, has to defer to the doctrines evolved by the Supreme
Court in cases of damages arising from vehicular mishaps
involving registered motor vehicle. (See Tugade v. Court of
Appeals, 85 SCRA 226, 230). (Rollo, pp. 26-27)
The appellate court also denied the petitioner's motion for reconsideration. Hence,
this petition.
The petitioner contends that the respondent appellate court committed grave
abuse of discretion in holding him jointly and severally liable with Sabiniano in spite
of the absence of an employer-employee relationship between them and despite
the fact that the petitioner's jeep was taken out of his garage and was driven by
Sabiniano without his consent.
As early as in 1939, we have ruled that an owner of a vehicle cannot be held liable
for an accident involving the said vehicle if the same was driven without his consent
or knowledge and by a person not employed by him. Thus, in Duquillo v. Bayot (67
Phil. 131-133-134) [1939] we said:
Under the facts established, the defendant cannot be held liable
for anything. At the time of the accident, James McGurk was
driving the truck, and he was not an employee of the defendant,
nor did he have anything to do with the latter's business; neither
the defendant nor Father Ayson, who was in charge of her
business, consented to have any of her trucks driven on the day of
the accident, as it was a holy day, and much less by a chauffeur
who was not in charge of driving it; the use of the defendant's
truck in the circumstances indicated was done without her
consent or knowledge; it may, therefore, be said, that there was
not the remotest contractual relation between the deceased Pio
Duquillo and the defendant. It necessarily follows from all this
that articles 1101 and following of the Civil Code, cited by the
appellant, have no application in this case, and, therefore, the
errors attributed to the inferior court are without basis.
The Court upholds the above ruling as still relevant and better applicable to present We cannot blindly apply absolute rules based on precedents whose facts do not jibe
day circumstances. four square with pending cases. Every case must be determined on its own peculiar
factual circumstances. Where, as in this case, the records of the petition fail to
The respondent court's misplaced reliance on the cases of Erezo v. Jepte (102 Phil. indicate the slightest indicia of an employer-employee relationship between the
103 [1957] and Vargas v. Langcay (6 SCRA 174 [1962]) cannot be sustained. In the owner and the erring driver or any consent given by the owner for the vehicle's use,
Erezo case, Jepte, the registered owner of the truck which collided with a taxicab, we cannot hold the owner liable.
and which resulted in the killing of Erezo, claimed that at the time of the accident,
the truck belonged to the Port Brokerage in an arrangement with the corporation We, therefore, find that the respondent appellate court committed reversible error
but the same was not known to the Motor Vehicles Office. This Court sustained the in holding the petitioner jointly and severally liable with Sabiniano to the private
trial court's ruling that since Jepte represented himself to be the owner of the truck respondent.
and the Motor Vehicles Office, relying on his representation, registered the vehicle
in his name, the Government and all persons affected by the representation had WHEREFORE, the petition is GRANTED and the decision and resolution appealed
the right to rely on his declaration of ownership and registration. Thus, even if Jepte from are hereby ANNULLED and SET ASIDE. The decision of the then Court of First
were not the owner of the truck at the time of the accident, he was still held liable Instance (now Regional Trial Court) of Laguna, 8th Judicial District, Branch 6, dated
for the death of Erezo significantly, the driver of the truck was fully authorized to July 30, 1981 is REINSTATED.
drive it.
SO ORDERED.
Likewise, in the Vargas case, just before the accident occurred Vargas had sold her
jeepney to a third person, so that at the time of the accident she was no longer the
owner of the jeepney. This court, nevertheless, affirmed Vargas' liability since she
failed to surrender to the Motor Vehicles Office the corresponding AC plates in
violation of the Revised Motor Vehicle Law and Commonwealth Act No. 146. We
further ruled that the operator of record continues to be the operator of the vehicle
in contemplation of law, as regards the public and third persons, and as such is
responsible for the consequences incident to its operator. The vehicle involved was
a public utility jeepney for hire. In such cases, the law does not only require the
surrender of the AC plates but orders the vendor operator to stop the operation of
the jeepney as a form of public transportation until the matter is reported to the
authorities.

As can be seen, the circumstances of the above cases are entirely different from
those in the present case. Herein petitioner does not deny ownership of the vehicle
involved in tire mishap but completely denies having employed the driver Sabiniano
or even having authorized the latter to drive his jeep. The jeep was virtually stolen
from the petitioner's garage. To hold, therefore, the petitioner liable for the
accident caused by the negligence of Sabiniano who was neither his driver nor
employee would be absurd as it would be like holding liable the owner of a stolen
vehicle for an accident caused by the person who stole such vehicle. In this regard,
we cannot ignore the many cases of vehicles forcibly taken from their owners at
gunpoint or stolen from garages and parking areas and the instances of service
station attendants or mechanics of auto repair shops using, without the owner's
consent, vehicles entrusted to them for servicing or repair.
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 employee to be insolvent, since the liability of the former is solidary -- the latter
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
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.
G.R. No. L-64693 April 27, 1984
LITA ENTERPRISES, INC., petitioner, vs. SECOND CIVIL CASES DIVISION,
INTERMEDIATE APPELLATE COURT, NICASIO M. OCAMPO and FRANCISCA P.
GARCIA, respondents.
ESCOLIN, J.:
"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.hqw
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.
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.

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.hqw

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.
G.R. No. L-16790 April 30, 1963
URBANO MAGBOO and EMILIA C. MAGBOO, plaintiffs-appellees, vs. DELFIN
BERNARDO, defendant-appellant.
MAKALINTAL, J.:
Appeal from the Court of First Instance of Manila to the Court of Appeals, and
certified by the latter to this Court on the ground that only questions of law are
involved.
The action of the spouses Urbano Magboo and Emilia C. Magboo against Delfin
Bernardo is for enforcement of his subsidiary liability as employer in accordance
with Article 103, Revised Penal Code. The trial court ordered defendant to pay
plaintiffs P3,000.00 and costs upon the following stipulated facts:
1. That plaintiffs are the parents of Cesar Magboo, a child of 8 years old,
who lived with them and was under their custody until his death on
October 24,1956 when he was killed in a motor vehicle accident, the fatal
vehicle being a passenger jeepney with Plate No, AC-1963 (56) owned by
the defendant;
2. That at the time of the accident, said passenger jeepney was driven by
Conrado Roque;
3. That the contract between Conrado Roque and defendant Delfin
Bernardo was that Roque was to pay to defendant the sum of P8.00, which
he paid to said defendant, for privilege of driving the jeepney on October
24, 1956, it being their agreement that whatever earnings Roque could
make out of the use of the jeepney in transporting passengers from one
point to another in the City of Manila would belong entirely to Conrado
Roque;
4. That as a consequence of the accident and as a result of the death of
Cesar Magboo in said accident, Conrado Roque was prosecuted for
homicide thru reckless imprudence before the Court of First Instance of
Manila, the information having been docketed as Criminal Case No. 37736,
and that upon arraignment Conrado Roque pleaded guilty to the
information and was sentenced to six (6) months of arresto mayor, with
the accessory penalties of the law; to indemnify the heirs of the deceased
in the sum of P3,000.00, with subsidiary imprisonment in case of
insolvency, and to pay the costs;
5. That pursuant to said judgment Conrado Roque served his sentence but
he was not able to pay the indemnity because he was insolvent."
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.G., 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."
The same principle applies with greater reason in negligence cases concerning the
right of third parties to recover damages for injuries sustained. In Montoya v.
Ignacio, L-5868, December 29, 1953, the owner and operator of a passenger
jeepney leased it to another, but without the approval of the Public Service
Commission. In a subsequent collision a passenger died. We ruled that since the
lease was made without such approval, which was required by law, the owner
continued to be the operator of the vehicle in legal contemplation and as such was
responsible for the consequences incident to its operation. The same responsibility
was held to attach in a case where the injured party was not a passenger but a third
person, who sued on the theory of culpa aquiliana (Timbol vs. Osias, L-7547, April
30, 1955). There is no reason why a different rule should be applied in a subsidiary
liability case under Article 103 of the Revised Penal Code. As in the existence of an
employer-employee relationship between the owner of the vehicle and the driver.
Indeed to exempt from liability the owner of a public vehicle who operates it under
the "boundary system" on the ground that he is a mere lessor would be not only to
abet flagrant violations of the Public Service law but also to place the riding public
at the mercy of reckless and irresponsible drivers - reckless because the measure of
their earnings depends largely upon the number of trips they make and, hence, the
speed at which they drive; and irresponsible because most if not all of them are in
no position to pay the damages they might cause. (See Erezo vs. Jepte, L-9605,
September 30, 1957).
Wherefore, the parties respectfully pray that the foregoing stipulation of facts be
admitted and approved by this Honorable Court, without prejudice to the parties
adducing other evidence to prove their case not covered by this stipulation of
facts. 1wph1.t
Appellant further argues that he should not have been held subsidiarily liable
because Conrado Roque (the driver of the jeepney) pleaded guilty to the charge in
the criminal case without appellant's knowledge and contrary to the agreement
between them that such plea would not be entered but, instead evidence would be
presented to prove Roque's innocence. On this point we quote with approval the
pertinent portion of the decision appealed from:

"'With respect to the contention of the defendant that he was taken

unaware by the spontaneous plea of guilt entered by the driver Conrado
Roque, and that he did not have a chance to prove the innocence of said
Conrado Roque, the Court holds that at this stage, it is already too late to
try the criminal case all over again. Defendant's allegation that he relied on
his belief that Conrado Roque would defend himself and they had
sufficient proof to show that Roque was not guilty of the crime charged
cannot be entertained. Defendant should have taken it to himself to aid in
the defense of Conrado Roque. Having failed to take this step and the
accused having been declared guilty by final judgment of the crime of
homicide thru reckless imprudence, there appears no more way for the
defendant to escape his subsidiary liability as provided for in Article 103 of
the Revised Penal Code."'

WHEREFORE, the judgment appealed from, being in accordance with law, is hereby
affirmed, with costs against defendant-appellant.
G.R. No. L-48757 May 30, 1988
MAURO GANZON, petitioner, vs. COURT OF APPEALS and GELACIO E.
TUMAMBING, respondents.
SARMIENTO, J.:
The private respondent instituted in the Court of First Instance of Manila 1 an
action against the petitioner for damages based on culpa contractual. The
antecedent facts, as found by the respondent Court, 2 are undisputed:
On November 28, 1956, Gelacio Tumambing contracted the services of Mauro B.
Ganzon to haul 305 tons of scrap iron from Mariveles, Bataan, to the port of Manila
on board the lighter LCT "Batman" (Exhibit 1, Stipulation of Facts, Amended Record
on Appeal, p. 38). Pursuant to that agreement, Mauro B. Ganzon sent his lighter
"Batman" to Mariveles where it docked in three feet of water (t.s.n., September 28,
1972, p. 31). On December 1, 1956, Gelacio Tumambing delivered the scrap iron to
defendant Filomeno Niza, captain of the lighter, for loading which was actually
begun on the same date by the crew of the lighter under the captain's supervision.
When about half of the scrap iron was already loaded (t.s.n., December 14, 1972, p.
20), Mayor Jose Advincula of Mariveles, Bataan, arrived and demanded P5,000.00
from Gelacio Tumambing. The latter resisted the shakedown and after a heated
argument between them, Mayor Jose Advincula drew his gun and fired at Gelacio
Tumambing (t.s.n., March 19, 1971, p. 9; September 28, 1972, pp. 6-
7).<re||an1w> The gunshot was not fatal but Tumambing had to be taken to a THE APPELLATE COURT FAILED TO CONSIDER THAT THE LOSS OF THE SCRAP WAS
hospital in Balanga, Bataan, for treatment (t.s.n., March 19, 1971, p. 13; September
28, 1972, p. 15).
After sometime, the loading of the scrap iron was resumed. But on December 4,
1956, Acting Mayor Basilio Rub, accompanied by three policemen, ordered captain
Filomeno Niza and his crew to dump the scrap iron (t.s.n., June 16, 1972, pp. 8-9)
where the lighter was docked (t.s.n., September 28, 1972, p. 31). The rest was
brought to the compound of NASSCO (Record on Appeal, pp. 20-22). Later on Acting
Mayor Rub issued a receipt stating that the Municipality of Mariveles had taken
custody of the scrap iron (Stipulation of Facts, Record on Appeal, p. 40; t.s.n.,
September 28, 1972, p. 10.)
On the basis of the above findings, the respondent Court rendered a decision, the
dispositive portion of which states:
WHEREFORE, the decision appealed from is hereby reversed and
set aside and a new one entered ordering defendant-appellee
Mauro Ganzon to pay plaintiff-appellant Gelacio E. Tumambimg
the sum of P5,895.00 as actual damages, the sum of P5,000.00 as
exemplary damages, and the amount of P2,000.00 as attorney's
fees. Costs against defendant-appellee Ganzon. 3
In this petition for review on certiorari, the alleged errors in the decision of the
Court of Appeals are:
I
THE COURT OF APPEALS FINDING THE HEREIN PETITIONER GUILTY OF BREACH OF
THE CONTRACT OF TRANSPORTATION AND IN IMPOSING A LIABILITY AGAINST HIM
COMMENCING FROM THE TIME THE SCRAP WAS PLACED IN HIS CUSTODY AND
CONTROL HAVE NO BASIS IN FACT AND IN LAW.
II
THE APPELLATE COURT ERRED IN CONDEMNING THE PETITIONER FOR THE ACTS OF
HIS EMPLOYEES IN DUMPING THE SCRAP INTO THE SEA DESPITE THAT IT WAS
ORDERED BY THE LOCAL GOVERNMENT OFFICIAL WITHOUT HIS PARTICIPATION.
III
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.
Finding the award of actual and exemplary damages to be proper, the same will not
be disturbed by us. Besides, these were not sufficiently controverted by the
petitioner.

WHEREFORE, the petition is DENIED; the assailed decision of the Court of Appeals is
hereby AFFIRMED. Costs against the petitioner.

This decision is IMMEDIATELY EXECUTORY.

G.R. No. 122039 May 31, 2000
VICENTE CALALAS, petitioner, vs. COURT OF APPEALS, ELIZA JUJEURCHE SUNGA
and FRANCISCO SALVA, respondents.
MENDOZA, J.:
This is a petition for review on certiorari of the decision1 of the Court of Appeals,
dated March 31, 1991, reversing the contrary decision of the Regional Trial Court,
Branch 36, Dumaguete City, and awarding damages instead to private respondent
Eliza Jujeurche Sunga as plaintiff in an action for breach of contract of carriage.
The facts, as found by the Court of Appeals, are as follows:
At 10 o'clock in the morning of August 23, 1989, private respondent Eliza Jujeurche
G. Sunga, then a college freshman majoring in Physical Education at the Siliman
University, took a passenger jeepney owned and operated by petitioner Vicente
Calalas. As the jeepney was filled to capacity of about 24 passengers, Sunga was
given by the conductor an "extension seat," a wooden stool at the back of the door
at the rear end of the vehicle.
On the way to Poblacion Sibulan, Negros Occidental, the jeepney stopped to let a
passenger off. As she was seated at the rear of the vehicle, Sunga gave way to the
outgoing passenger. Just as she was doing so, an Isuzu truck driven by Iglecerio
Verena and owned by Francisco Salva bumped the left rear portion of the jeepney.
As a result, Sunga was injured. She sustained a fracture of the "distal third of the
left tibia-fibula with severe necrosis of the underlying skin." Closed reduction of the
fracture, long leg circular casting, and case wedging were done under sedation. Her
confinement in the hospital lasted from August 23 to September 7, 1989. Her
attending physician, Dr. Danilo V. Oligario, an orthopedic surgeon, certified she
would remain on a cast for a period of three months and would have to ambulate in
crutches during said period.
On October 9, 1989, Sunga filed a complaint for damages against Calalas, alleging
violation of the contract of carriage by the former in failing to exercise the diligence
required of him as a common carrier. Calalas, on the other hand, filed a third-party
complaint against Francisco Salva, the owner of the Isuzu truck.
The lower court rendered judgment against Salva as third-party defendant and
absolved Calalas of liability, holding that it was the driver of the Isuzu truck who was
responsible for the accident. It took cognizance of another case (Civil Case No.
3490), filed by Calalas against Salva and Verena, for quasi-delict, in which Branch 37
of the same court held Salva and his driver Verena jointly liable to Calalas for the
damage to his jeepney.
On appeal to the Court of Appeals, the ruling of the lower court was reversed on
the ground that Sunga's cause of action was based on a contract of carriage, not
quasi-delict, and that the common carrier failed to exercise the diligence required
under the Civil Code. The appellate court dismissed the third-party complaint
against Salva and adjudged Calalas liable for damages to Sunga. The dispositive
portion of its decision reads:
WHEREFORE, the decision appealed from is hereby REVERSED and
SET ASIDE, and another one is entered ordering defendant-
appellee Vicente Calalas to pay plaintiff-appellant:
(1) P50,000.00 as actual and compensatory damages;
(2) P50,000.00 as moral damages;
(3) P10,000.00 as attorney's fees; and
(4) P1,000.00 as expenses of litigation; and
(5) to pay the costs.
SO ORDERED.
Hence, this petition. Petitioner contends that the ruling in Civil Case No. 3490 that
the negligence of Verena was the proximate cause of the accident negates his
liability and that to rule otherwise would be to make the common carrier an insurer
of the safety of its passengers. He contends that the bumping of the jeepney by the
truck owned by Salva was a caso fortuito. Petitioner further assails the award of
moral damages to Sunga on the ground that it is not supported by evidence.
The petition has no merit.
The argument that Sunga is bound by the ruling in Civil Case No. 3490 finding the
driver and the owner of the truck liable for quasi-delict ignores the fact that she
was never a party to that case and, therefore, the principle ofres judicata does not
apply.
Nor are the issues in Civil Case No. 3490 and in the present case the same. The issue
in Civil Case No. 3490 was whether Salva and his driver Verena were liable for quasi-
delict for the damage caused to petitioner's jeepney. On the other hand, the issue
in this case is whether petitioner is liable on his contract of carriage. The first, quasi-
delict, also known as culpa aquiliana or culpa extra contractual, has as its source the
negligence of the tortfeasor. The second, breach of contract or culpa contractual, is
premised upon the negligence in the performance of a contractual obligation.
Consequently, in quasi-delict, the negligence or fault should be clearly established
because it is the basis of the action, whereas in breach of contract, the action can
be prosecuted merely by proving the existence of the contract and the fact that the
obligor, in this case the common carrier, failed to transport his passenger safely to
his destination.2 In case of death or injuries to passengers, Art. 1756 of the Civil
Code provides that common carriers are presumed to have been at fault or to have
acted negligently unless they prove that they observed extraordinary diligence as
defined in Arts. 1733 and 1755 of the Code. This provision necessarily shifts to the
common carrier the burden of proof.
There is, thus, no basis for the contention that the ruling in Civil Case No. 3490,
finding Salva and his driver Verena liable for the damage to petitioner's jeepney,
should be binding on Sunga. It is immaterial that the proximate cause of the
collision between the jeepney and the truck was the negligence of the truck driver.
The doctrine of proximate cause is applicable only in actions for quasi-delict, not in
actions involving breach of contract. The doctrine is a device for imputing liability to
a person where there is no relation between him and another party. In such a case,
the obligation is created by law itself. But, where there is a pre-existing contractual
relation between the parties, it is the parties themselves who create the obligation,
and the function of the law is merely to regulate the relation thus created. Insofar
as contracts of carriage are concerned, some aspects regulated by the Civil Code are
those respecting the diligence required of common carriers with regard to the
safety of passengers as well as the presumption of negligence in cases of death or
injury to passengers. It provides:
Art. 1733. Common carriers, from the nature of their business and
for reasons of public policy, are bound to observe extraordinary
diligence in the vigilance over the goods and for the safety of the
passengers transported by them, according to all the
circumstances of each case.
Such extraordinary diligence in the vigilance over the goods is
further expressed in articles 1734, 1735, and 1746, Nos. 5, 6, and
7, while the extraordinary diligence for the safety of the
passengers is further set forth in articles 1755 and 1756.
Art. 1755. A common carrier is bound to carry the 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.
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 by articles 1733 and 1755.
In the case at bar, upon the happening of the accident, the presumption of
negligence at once arose, and it became the duty of petitioner to prove that he had
to observe extraordinary diligence in the care of his passengers.
Now, did the driver of jeepney carry Sunga "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" as required by Art. 1755? We do not think so.
Several factors militate against petitioner's contention.
First, as found by the Court of Appeals, the jeepney was not properly parked, its
rear portion being exposed about two meters from the broad shoulders of the
highway, and facing the middle of the highway in a diagonal angle. This is a violation
of the R.A. No. 4136, as amended, or the Land Transportation and Traffic Code,
which provides:
Sec. 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.
Second, it is undisputed that petitioner's driver took in more passengers than the
allowed seating capacity of the jeepney, a violation of 32(a) of the same law. It
provides:
Exceeding registered capacity. No person operating any motor
vehicle shall allow more passengers or more freight or cargo in his
vehicle than its registered capacity.
The fact that Sunga was seated in an "extension seat" placed her in a peril greater
than that to which the other passengers were exposed. Therefore, not only was
petitioner unable to overcome the presumption of negligence imposed on him for
the injury sustained by Sunga, but also, the evidence shows he was actually
negligent in transporting passengers.
We find it hard to give serious thought to petitioner's contention that Sunga's
taking an "extension seat" amounted to an implied assumption of risk. It is akin to
arguing that the injuries to the many victims of the tragedies in our seas should not
be compensated merely because those passengers assumed a greater risk of 1764, in relation to Art. 2206(3) of the Civil Code; and (2) in the cases in which the
drowning by boarding an overloaded ferry. This is also true of petitioner's carrier is guilty of fraud or bad faith, as provided in Art. 2220.6
contention that the jeepney being bumped while it was improperly parked
constitutes caso fortuito. A caso fortuito is an event which could not be foreseen, or In this case, there is no legal basis for awarding moral damages since there was no
which, though foreseen, was inevitable.3 This requires that the following factual finding by the appellate court that petitioner acted in bad faith in the
requirements be present: (a) the cause of the breach is independent of the debtor's performance of the contract of carriage. Sunga's contention that petitioner's
will; (b) the event is unforeseeable or unavoidable; (c) the event is such as to render admission in open court that the driver of the jeepney failed to assist her in going to
it impossible for the debtor to fulfill his obligation in a normal manner, and (d) the a nearby hospital cannot be construed as an admission of bad faith. The fact that it
debtor did not take part in causing the injury to the was the driver of the Isuzu truck who took her to the hospital does not imply that
creditor.4 Petitioner should have foreseen the danger of parking his jeepney with petitioner was utterly indifferent to the plight of his injured passenger. If at all, it is
its body protruding two meters into the highway. merely implied recognition by Verena that he was the one at fault for the accident.

Finally, petitioner challenges the award of moral damages alleging that it is WHEREFORE, the decision of the Court of Appeals, dated March 31, 1995, and its
excessive and without basis in law. We find this contention well taken. resolution, dated September 11, 1995, are AFFIRMED, with the MODIFICATION that
the award of moral damages is DELETED.
In awarding moral damages, the Court of Appeals stated:
SO ORDERED.
Plaintiff-appellant at the time of the accident was a first-year
college student in that school year 1989-1990 at the Silliman
University, majoring in Physical Education. Because of the injury,
she was not able to enroll in the second semester of that school
year. She testified that she had no more intention of continuing
with her schooling, because she could not walk and decided not
to pursue her degree, major in Physical Education "because of my
leg which has a defect already."

Plaintiff-appellant likewise testified that even while she was under

confinement, she cried in pain because of her injured left foot. As
a result of her injury, the Orthopedic Surgeon also certified that
she has "residual bowing of the fracture side." She likewise
decided not to further pursue Physical Education as her major
subject, because "my left leg . . . has a defect already."

Those are her physical pains and moral sufferings, the inevitable
bedfellows of the injuries that she suffered. Under Article 2219 of
the Civil Code, she is entitled to recover moral damages in the
sum of P50,000.00, which is fair, just and reasonable.

As a general rule, moral damages are not recoverable in actions for damages
predicated on a breach of contract for it is not one of the items enumerated under
Art. 2219 of the Civil Code.5 As an exception, such damages are recoverable: (1) in
cases in which the mishap results in the death of a passenger, as provided in Art.
G.R. No. 118126 March 4, 1996
TRANS-ASIA SHIPPING LINES, INC., petitioner, vs. COURT OF APPEALS and ATTY.
RENATO T. ARROYO, respondents.
DAVIDE, JR., J.:p
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 vessel's voyage and the consequent
delay in that vessel's arrival at its port of destination, is the right
of a passenger affected thereby to be determined and governed
by the vague Civil Code provision on common carriers, or shall it
be, in the absence of a specific provision thereon governed by Art.
698 of the Code of Commerce? 1
The petitioner considers it a "novel question of law."
Upon a closer evaluation, however, of the challenged decision of the Court of
Appeals of 23 November 1994, 2 vis-a-vis, the decision of 29 June 1992 in Civil Case
No. 91-491 of the Regional Trial Court (RTC) of Cagayan de Oro City, Branch 24, 3 as
well as the allegations and arguments adduced by the parties, we find the
petitioner's formulation of the issue imprecise. As this Court sees it, what stands for
resolution is a common carrier's 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 . . . 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 acceeded [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 respondent's mental distress. He further alleged that
by reason of the petitioner's 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 damages arising from bad faith, breach of contract and from tort," with
the former arising from the petitioner's "failure to carry [him] to his place of
destination as contracted," while the latter from the "conduct of the [petitioner]
resulting [in] the infliction of emotional distress" to the private respondent. 6
After due trial, the trial court rendered its decision 7 and ruled that the action was
only for breach of contract, with Articles 1170, 1172, and 1173 of the Civil Code as
applicable law not Article 2180 of the same Code. It was of the opinion that
Article 1170 made a person liable for damages if, in the performance of his
obligation, he was guilty of fraud, negligence, or delay, or in any manner
contravened the tenor thereof; moreover, pursuant to Article 2201 of the same
Code, to be entitled to damages, the non-performance of the obligation must have
been tainted not only by fraud, negligence, or delay, but also bad faith, malice, and
wanton attitude. It then disposed of the case as follows:
WHEREFORE, it not appearing from the evidence that plaintiff was
left in the Port of Cebu because of the fault, negligence, malice or
wanton attitude of defendant's employees, the complaint is
DISMISSED. Defendant's 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
employees 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 vessel's 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, wantonly and with
malice.
If plaintiff, therefore, was not able to [m]ake the trip that night of
November 12, 1991, it was not because defendant maliciously did
it to exclude him [from] the trip. If he was left, it was because of
his fault or negligence. 9
Unsatisfied, the private respondent appealed to the Court of Appeals (CA-G.R. CV
No. 39901) and submitted for its determination the following assignment of errors:
(1) the trial court erred in not finding that the defendant-appellee was guilty of
fraud, delay, negligence, and bad faith; and (2) the trial court. erred in not awarding
moral and exemplary damages. 10
In its decision of 23 November 1994, 11 the Court of Appeals reversed the trial
court's decision by applying Article 1755 in relation to Articles 2201, 2208, 2217,
and 2232 of the Civil Code and, accordingly, awarded compensatory, moral, and
exemplary damages as follows:
WHEREFORE, premises considered, the appealed decision is
hereby REVERSED and SET ASIDE and another one is rendered
ordering defendant-appellee to pay plaintiff-appellant:
1. P20,000.00 as moral damages;
2. P10,000.00 as exemplary damages;
 3. P5,000.00 as attorney's 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 petitioner's 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 vessel's 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 respondent's 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:
. . . The dropping of the vessel's anchor after
running slowly on only one engine when it
departed earlier must have alarmed some
nervous passengers . . .
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 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
. . . 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, . . . 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 vessel's engine broke down and when he disembarked
from the vessel during the wee hours of the morning at Cebu City
when it returned. 14
Moral damages are recoverable in a damage suit predicated upon
a breach of contract of carriage where it is proved that the carrier
was guilty of fraud or bad faith even if death does not result. 15
Fraud and bad faith by defendant-appellee having been
established, the award of moral damages is in order. 16
To serve as a deterrent to the commission of similar acts in the
future, exemplary damages should be imposed upon defendant-
appellee. 17 Exemplary damages are designed by our civil law to
permit the courts to reshape behavior that is socially deleterious
in its consequence by creating . . . 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 vessel's 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 a drift at sea, thus in order to prevent the ship
from capsizing, it had to drop anchor. Plainly, the vessel was unseaworthy even
before the voyage began. For a vessel to be seaworthy, it must be adequately
equipped for the voyage and manned with a sufficient number of competent
officers and crew. 21 The failure of a common carrier to maintain in seaworthy
condition its vessel involved in a contract of carriage is a clear breach of its 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
petitioner's breach of the contract of carriage. 24 Anent a breach of a contract of
common carriage, moral damages may be awarded if the common carrier, like the
petitioner, acted fraudulently or in bad faith. 25
Exemplary damages are imposed by way of example or correction for the public
good, in addition to moral, temperate, liquidated or compensatory damages. 26 In
contracts and quasi-contracts, exemplary damages may be awarded if the
defendant acted in a wanton, fraudulent, reckless, oppressive or malevolent
manner. 27 It cannot, however, be considered as a matter of right; the court having
to decide whether or not they should be adjudicated. 28 Before the court may
consider an award for exemplary damages, the plaintiff must first show that he is
entitled to moral, temperate or compensatory damages; but it is not necessary that
he prove the monetary value thereof. 29
The Court of Appeals did not grant the private respondent actual or compensatory
damages, reasoning that no delay was incurred since there was no demand, as
required by Article 1169 of the Civil Code. This article, however, finds no application
in this case because, as found by the respondent Court, there was in fact no delay in
the commencement of the contracted voyage. If any delay was incurred, it was
after the commencement of such voyage, more specifically, when the voyage was
subsequently interrupted when the vessel had to stop near 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 petitioner's 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 petitioner's other vessel the following day, using the ticket he had
purchased for the previous day's voyage.
Any further delay then in the private respondent's arrival at the port of destination He is entitled to attorney's fees pursuant to Article 2208 of the
was caused by his decision to disembark. Had he remained on the first vessel, he Civil Code. It states:
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 Art. 2208. In the absence of stipulation, attorney's fees and
salary for half of a day. But actual or compensatory damages must be expenses of litigation, other than judicial costs cannot be
proved, 30 which the private respondent failed to do. There is no convincing recovered except:
evidence that he did not receive his salary for 13 November 1991 nor that his
absence was not excused. 1. When exemplary damages are awarded;

We likewise fully agree with the Court of Appeals that the petitioner is liable for 2. When the defendant's act or omission has
moral and exemplary damages. In allowing its unseaworthy M/V Asia Thailand to compelled the plaintiff to litigate with third
leave the port of origin and undertake the contracted voyage, with full awareness persons or to incur expenses to protect his
that it was exposed to perils of the sea, it deliberately disregarded its solemn duty interest.
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
This Court holds that the above does not satisfy the benchmark of "factual,
the safety or the vessel and passengers was never at stake because the sea was
legal and equitable justification" needed as basis for an award of attorney's
"calm" in the vicinity where it stopped as faithfully recorded in the vessel's log book
fees. 37 In sum, for lack of factual and legal basis, the award of attorney's
(Exhibit "4"). Hence, the petitioner concludes, the private respondent was merely
fees must be deleted.
"over-reacting" to the situation obtaining then. 31
WHEREFORE, the instant petition is DENIED and the challenged decision of the
We hold that the petitioner's defense cannot exculpate it nor mitigate its liability.
Court of Appeals in CA-G.R. CV No. 39901 is AFFIRMED subject to the modification
On the contrary, such a claim demonstrates beyond cavil the petitioner's lack of
as to the award for attorney's fees which is hereby SET ASIDE.
genuine concern for the safety of its passengers. It was, perhaps, only providential
then the sea happened to be calm. Even so, the petitioner should not expect its
Costs against the petitioner.
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 as nighttime is not the sole prerogative of the faint-hearted. More SO ORDERED.
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 attorney's fees. Under
Article 2208 of the Civil Code, these are recoverable only in the concept of actual
damages, 32 not as moral damages 33 nor judicial costs. 34Hence, to merit such an
award, it is settled that the amount thereof must be proven. 35 Moreover, such
must be specifically prayed for as was not done in this caseand may not be
deemed incorporated within a general prayer for "such other relief and remedy as
this court may deem just and equitable." 36 Finally, it must be noted that aside
from the following, the body of the respondent Court's decision was devoid of any
statement regarding attorney's fees:

Plaintiff-appellant was forced to litigate in order that he can claim

moral and exemplary damages for the suffering he encurred [sic].
G.R. No. 143133 June 5, 2002
BELGIAN OVERSEAS CHARTERING AND SHIPPING N.V. and JARDINE DAVIES
TRANSPORT SERVICES, INC.,petitioners, vs. PHILIPPINE FIRST INSURANCE CO.,
INC., respondents.
PANGANIBAN, J.:
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 Decision1 and the May 2, 2000 Resolution2 of the Court of
Appeals3 (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) Attorney's fees amounting to 20% of the claim; and
'3) Costs of suit.'"4
The assailed Resolution denied petitioner's 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 defendant's 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 M/V '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, M/V 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.1wphi1.nt
"Despite receipt of a formal demand, defendants-appellees refused to
submit to the consignee's claim. Consequently, plaintiff-appellant paid the
consignee five hundred six thousand eighty six & 50/100 pesos
(P506,086.50), and was subrogated to the latter's 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 respondent's suit was not
manifestly frivolous or primarily intended to harass them.8
Ruling of the Court of Appeals
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 attorney's fees.
Hence, this Petition.11
Issues
In their Memorandum, petitioners raise the following issues for the Court's
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 Court's 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
Fifth, petitioners -- in a letter31 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:

However, the presumption of fault or negligence will not arise21 if the loss is due to "Q. Mr. Esmerio, you mentioned that you are a Head Checker. Will you
any of the following causes: (1) flood, storm, earthquake, lightning, or other natural inform the Honorable Court with what company you are connected?
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 A. BM Santos Checkers Agency, sir.
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
Q. How is BM Santos checkers Agency related or connected with
or deterioration is other than the enumerated circumstances, then the carrier is
defendant Jardine Davies Transport Services?
liable therefor.23
A. It is the company who contracts the checkers, sir.
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
Q. You mentioned that you are a Head Checker, will you inform this
prima facie case of fault or negligence against the carrier. If no adequate
Honorable Court your duties and responsibilities?
explanation is given as to how the deterioration, the loss or the destruction of the
goods happened, the transporter shall be held responsible.24
A. I am the representative of BM Santos on board the vessel, sir, to
supervise the discharge of cargoes.
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 xxx xxx xxx

First, as stated in the Bill of Lading, petitioners received the subject shipment in Q. On or about August 1, 1990, were you still connected or employed
good order and condition in Hamburg, Germany.26 with BM Santos as a Head Checker?

Second, prior to the unloading of the cargo, an Inspection Report27 prepared and A. Yes, sir.
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 Q. And, on or about that date, do you recall having attended the
rusty. discharging and inspection of cold steel sheets in coil on board the MV/AN
ANGEL SKY?
Third, Bad Order Tally Sheet No. 15497928 issued by Jardine Davies Transport
Services, Inc., stated that the four coils were in bad order and condition. Normally, a A. Yes, sir, I was there.
request for a bad order survey is made in case there is an apparent or a presumed
loss or damage.29 xxx xxx xxx

Fourth, the Certificate of Analysis30 stated that, based on the sample submitted Q. Based on your inspection since you were also present at that time,
and tested, the steel sheets found in bad order were wet with fresh water. 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 Act44 (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 Report46 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
Complaint51 was filed by respondent on July 25, 1991, within the one-year
prescriptive period.
Third Issue:
Package Limitation
Assuming arguendo they are liable for respondent's 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.53 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
carrier's liability for loss or destruction of a cargo -- unless the shipper or owner
declares a greater value58 -- 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 carrier's liability in the absence of a shipper's
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 Lading66 limiting the
carrier's 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 petitioner's 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 packages:
"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.1wphi1.nt

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.
G.R. No. 147246 August 19, 2003
ASIA LIGHTERAGE AND SHIPPING, INC., petitioner, vs. COURT OF APPEALS and
PRUDENTIAL GUARANTEE AND ASSURANCE, INC., respondents.
PUNO, J.:
On appeal is the Court of Appeals' May 11, 2000 Decision1 in CA-G.R. CV No. 49195
and February 21, 2001 Resolution2 affirming with modification the April 6, 1994
Decision3 of the Regional Trial Court of Manila which found petitioner liable to 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$423,192.354 was shipped by Marubeni American Corporation of 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-4.5The shipment was insured by the private respondent Prudential
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. 03647 for delivery to consignee. The cargo 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, 1990.8 It
likewise secured the services of Gaspar Salvaging Corporation which refloated the
barge.9 The hole was then patched with clay and cement.
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.11 A second Marine
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.13 The total proceeds from the 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 P4,104,654.22.15Thereafter, as subrogee, it sought recovery of said
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.16 Petitioner
filed 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.
Petitioner's 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.
(2) 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 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."
(3) 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 EFFECTIVELY CONCLUDED THAT PETITIONER
FAILED TO EXERCISE DUE DILIGENCE AND/OR WAS NEGLIGENT IN ITS CARE
AND CUSTODY OF THE CONSIGNEE'S 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 consignee's 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,21 we held that the definition of common
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
drayage22 and it offers its barges to the public for carrying or transporting goods by
water for compensation. Petitioner is clearly a common carrier. In De
Guzman, supra,23 we considered private respondent Ernesto Cendaa to be a
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.24 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."25 In the case at bar, the petitioner admitted that it is
engaged in the business of shipping and lighterage,26 offering its barges to the
public, despite its 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 consignee's
goods.
Common carriers are bound to observe extraordinary diligence in the vigilance over
the goods transported by them.28 They are presumed to have been at fault or to
have acted negligently if the goods are lost, destroyed or deteriorated.29 To
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:
(1) Flood, storm, earthquake, lightning, or other natural disaster
or calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the
containers;
(5) Order or act of competent public authority.
In 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.30 The evidence show
that, even before the 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
xxx xxx xxx
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 consignee's 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.
xxx xxx xxx
This is not all. Petitioner still headed to the consignee's 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.32 A part of the testimony of Robert Boyd, Cargo
Operations Supervisor of the petitioner, reveals:
DIRECT-EXAMINATION BY ATTY. LEE:33
xxx xxx xxx
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.
 xxx xxx xxx meeting a typhoon head-on falls short of due diligence required from a common
carrier. More importantly, the officers/employees themselves of petitioner
CROSS-EXAMINATION BY ATTY. IGNACIO:34 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
xxx xxx xxx 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.
q - And then from ISLOFF Terminal you proceeded to the premises of
the GMC? Am I correct? 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.
a - The next day, in the morning, we hired for additional two (2)
tugboats as I have stated.
SO ORDERED.
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,
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.: For purposes of clarity, Exhibit I is designated as
Exhibit I-TWA.
On that date, do (sic) you have occasion to
handle or deal with the transfer of cargo from xxx xxx xxx
TWA Flight No. 603 to PAL San Francisco?
ATTY. JUAN COLLAS, JR.:
MICHAEL GIOSSO:
This Exhibit I-TWA, could you tell what it is, what
Yes, I did. it shows?

ATTY. JUAN COLLAS, JR.: MICHAEL GIOSSO:

What was your participation with the transfer of It shows transfer of manifest on 10-27-76 to PAL
the cargo? at 1400 and verified with two signatures as it
completed the transfer.
MICHAEL GIOSSO:
ATTY. JUAN COLLAS, JR.:
I manifested the freight on a transfer manifest
and physically moved it to PAL and concluded Very good,. Who was the PAL employee who
the transfer by signing it off. received the cargo?

ATTY. JUAN COLLAS, JR.: MICHAEL GIOSSO:

You brought it there yourself? The name is Garry Marcial." 37

MICHAEL GIOSSO: The deposition of Alberto A. Lim, PAL's cargo supervisor at San Francisco, as
deponent-witness for PAL, makes this further clarification:
Yes sir.
ATTY. CESAR P. MANALAYSAY:
ATTY. JUAN COLIAS, JR.:
You mentioned Airway Bill, Mr. Lim. I am
Do you have anything to show that PAL received showing to you a PAL Airway Bill Number
the cargo from TWA on October 27, 1976? 01180454 which for purposes of evidence, I
would like to request that the same be marked
MICHAEL GIOSSO: as evidence Exhibit I for PAL.

Yes, I do. xxx xxx xxx

(Witness presenting a document) In what circumstances did you encounter Exhibit

I-PAL?
ATTY. JUAN COLLAS, JR.:
ALBERTO A. LIM:
 If I recall correctly, I was queried by Manila, our Is that the same body mentioned in this Airway
Manila office with regard to a certain complaint Bill?
that a consignee filed that this shipment did not
arrive on the day that the consignee expects the ALBERTO A. LIM:
shipment to arrive.
Yes.
ATTY CESAR P. MANALAYSAY:
ATTY. CESAR P. MANALAYSAY:
Okay. Now, upon receipt of that query from
your Manila office, did you conduct any What time did you receive said body on October
investigation to pinpoint the possible causes of 28, 1976?
mishandling?
ALBERTO A. LIM:
ALBERTO A. LIM:
If I recall correctly, approximately 7:45 of
Yes. October 28, 1976.

xxx xxx xxx ATTY. CESAR P. MANALAYSAY:

ATTY. CESAR P. MANALAYSAY: Do you have any proof with you to back the
statement?
What is the result of your investigation?
ALBERTO A. LIM:
ALBERTO A. LIM:
Yes. We have on our records a Transfer Manifest
In the course of my investigation, I found that from American Airlines Number 204312 showing
we received the body on October 28, 1976, from that we received a human remains shipment
American Airlines. belong to Mrs. Cristina (sic) Saludo or the
human remains of Mrs. Cristina (sic) Saludo.
ATTY. CESAR P. MANALAYSAY:
ATTY. CESAR P. MAIALAYSAY:
What body are you referring to?
At this juncture, may I request that the Transfer
xxx xxx xxx Manifest referred to by the witness be marked
as an evidence as Exhibit II-PAL.
ALBERTO A. LIM:
xxx xxx xxx
The remains of Mrs. Cristina (sic) Saludo.
Mr. Lim, yesterday your co-defendant TWA
ATTY. CESAR P. MANALAYSAY: presented as their Exhibit I evidence tending to
show that on October 27, 1976 at about 2:00 in
the, afternoon they delivered to you a cargo
 bearing human remains. Could you go over this
Exhibit I and please give us your comments as to
that exhibit?
ATTY. ALBERTO C. MENDOZA:
That is a vague question. I would rather request
that counsel propound specific questions rather
than asking for comments on Exhibit I-TWA.
ATTY. CESAR P. MANALAYSAY:
In that case, I will reform my question. Could
you tell us whether TWA in fact delivered to you
the human remains as indicated in that Transfer
Manifest?
ALBERTO A. LIM:
Yes, they did.
ATTY. CESAR P. MANALAYSAY:
I noticed that the Transfer Manifest of TWA
marked as Exhibit I-TWA bears the same
numbers or the same entries as the Airway Bill
marked as Exhibit I-A PAL tending to show that
this is the human remains of Mrs Cristina (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
without dissent raises a presumption that all terms therein were brought to the
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
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.
G.R. No. L-20099 July 7, 1966
PARMANAND SHEWARAM, plaintiff and appellee, vs. PHILIPPINE AIR LINES,
INC., defendant and appellant.
ZALDIVAR, J.:
Before the municipal court of Zamboanga City, plaintiff-appellee Parmanand
Shewaram instituted an action to recover damages suffered by him due to the
alleged failure of defendant-appellant Philippines Air Lines, Inc. to observe
extraordinary diligence in the vigilance and carriage of his luggage. After trial the
municipal court of Zamboanga City rendered judgment ordering the appellant to
pay appellee P373.00 as actual damages, P100.00 as exemplary damages, P150.00
as attorney's fees, and the costs of the action.
Appellant Philippine Air Lines appealed to the Court of First Instance of Zamboanga
City. After hearing the Court of First Instance of Zamboanga City modified the
judgment of the inferior court by ordering the appellant to pay the appellee only
the sum of P373.00 as actual damages, with legal interest from May 6, 1960 and the
sum of P150.00 as attorney's fees, eliminating the award of exemplary damages.
From the decision of the Court of First Instance of Zamboanga City, appellant
appeals to this Court on a question of law, assigning two errors allegedly committed
by the lower court a quo, to wit:
1. The lower court erred in not holding that plaintiff-appellee was bound
by the provisions of the tariff regulations filed by defendant-appellant with
the civil aeronautics board and the conditions of carriage printed at the
back of the plane ticket stub.
2. The lower court erred in not dismissing this case or limiting the liability
of the defendant-appellant to P100.00.
The facts of this case, as found by the trial court, quoted from the decision
appealed from, are as follows:
That Parmanand Shewaram, the plaintiff herein, was on November 23,
1959, a paying passenger with ticket No. 4-30976, on defendant's aircraft
flight No. 976/910 from Zamboanga City bound for Manila; that defendant
is a common carrier engaged in air line transportation in the Philippines,
offering its services to the public to carry and transport passengers and
cargoes from and to different points in the Philippines; that on the above-
mentioned date of November 23, 1959, he checked in three (3) pieces of
baggages a suitcase and two (2) other pieces; that the suitcase was
mistagged by defendant's personnel in Zamboanga City, as I.G.N. (for
Iligan) with claim check No. B-3883, instead of MNL (for Manila). When
plaintiff Parmanand Shewaram arrived in Manila on the date of November
23, 1959, his suitcase did not arrive with his flight because it was sent to
Iligan. So, he made a claim with defendant's personnel in Manila airport
and another suitcase similar to his own which was the only baggage left for
that flight, the rest having been claimed and released to the other
passengers of said flight, was given to the plaintiff for him to take delivery
but he did not and refused to take delivery of the same on the ground that
it was not his, alleging that all his clothes were white and the National
transistor 7 and a Rollflex camera were not found inside the suitcase, and
moreover, it contained a pistol which he did not have nor placed inside his
suitcase; that after inquiries made by defendant's personnel in Manila
from different airports where the suitcase in question must have been
sent, it was found to have reached Iligan and the station agent of the PAL
in Iligan caused the same to be sent to Manila for delivery to Mr.
Shewaram and which suitcase belonging to the plaintiff herein arrived in
Manila airport on November 24, 1959; that it was also found out that the
suitcase shown to and given to the plaintiff for delivery which he refused
to take delivery belonged to a certain Del Rosario who was bound for Iligan
in the same flight with Mr. Shewaram; that when the plaintiff's suitcase
arrived in Manila as stated above on November 24, 1959, he was informed
by Mr. Tomas Blanco, Jr., the acting station agent of the Manila airport of
the arrival of his suitcase but of course minus his Transistor Radio 7 and
the Rollflex Camera; that Shewaram made demand for these two (2) items
or for the value thereof but the same was not complied with by defendant.
xxx xxx xxx
It is admitted by defendant that there was mistake in tagging the suitcase
of plaintiff as IGN. The tampering of the suitcase is more apparent when on
November 24, 1959, when the suitcase arrived in Manila, defendant's
personnel could open the same in spite of the fact that plaintiff had it
under key when he delivered the suitcase to defendant's personnel in
Zamboanga City. Moreover, it was established during the hearing that
there was space in the suitcase where the two items in question could
have been placed. It was also shown that as early as November 24, 1959,
when plaintiff was notified by phone of the arrival of the suitcase, plaintiff
asked that check of the things inside his suitcase be made and defendant
admitted that the two items could not be found inside the suitcase. There
was no evidence on record sufficient to show that plaintiff's suitcase was
never opened during the time it was placed in defendant's possession and
prior to its recovery by the plaintiff. However, defendant had presented
evidence that it had authority to open passengers' baggage to verify and
 find its ownership or identity. Exhibit "1" of the defendant would show
that the baggage that was offered to plaintiff as his own was opened and
the plaintiff denied ownership of the contents of the baggage. This proven
fact that baggage may and could be opened without the necessary
authorization and presence of its owner, applied too, to the suitcase of
plaintiff which was mis-sent to Iligan City because of mistagging. The
possibility of what happened in the baggage of Mr. Del Rosario at the
Manila Airport in his absence could have also happened to plaintiffs
suitcase at Iligan City in the absence of plaintiff. Hence, the Court believes
that these two items were really in plaintiff's suitcase and defendant
should be held liable for the same by virtue of its contract of carriage.
It is clear from the above-quoted portions of the decision of the trial court that said
court had found that the suitcase of the appellee was tampered, and the transistor
radio and the camera contained therein were lost, and that the loss of those articles
was due to the negligence of the employees of the appellant. The evidence shows
that the transistor radio cost P197.00 and the camera cost P176.00, so the total
value of the two articles was P373.00.
There is no question that the appellant is a common carrier.1 As such common
carrier the appellant, from the nature of its business and for reasons of public
policy, is bound to observe extraordinary diligence in the vigilance over the goods
and for the safety of the passengers transported by it according to the
circumstances of each case. 2 It having been shown that the loss of the transistor
radio and the camera of the appellee, costing P373.00, was due to the negligence of
the employees of the appellant, it is clear that the appellant should be held liable
for the payment of said loss.3
It is, however, contended by the appellant that its liability should be limited to the
amount stated in the conditions of carriage printed at the back of the plane ticket
stub which was issued to the appellee, which conditions are embodied in Domestic
Tariff Regulations No. 2 which was filed with the Civil Aeronautics Board. One of
those conditions, which is pertinent to the issue raised by the appellant in this case
provides as follows:
The liability, if any, for loss or damage to checked baggage or for delay in
the delivery thereof is limited to its value and, unless the passenger
declares in advance a higher valuation and pay an additional charge
therefor, the value shall be conclusively deemed not to exceed P100.00 for
each ticket.
The appellant maintains that in view of the failure of the appellee to declare a
higher value for his luggage, and pay the freight on the basis of said declared value
when he checked such luggage at the Zamboanga City airport, pursuant to the
abovequoted condition, appellee can not demand payment from the appellant of
an amount in excess of P100.00.
The law that may be invoked, in this connection is Article 1750 of the New Civil
Code which provides as follows:
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 accordance with the above-quoted provision of Article 1750 of the New Civil
Code, the pecuniary liability of a common carrier may, by contract, be limited to a
fixed amount. 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 Article 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 before us We believe that the requirements of said article have not been
met. It can not be said that the appellee had actually entered into a contract with
the appellant, embodying the conditions as printed at the back of the ticket stub
that was issued by the appellant to the appellee. The fact that those conditions are
printed at the back of the ticket stub in letters so small that they are hard to read
would not warrant the presumption that the appellee was aware of those
conditions such that he had "fairly and freely agreed" to those conditions. The trial
court has categorically stated in its decision that the "Defendant admits that
passengers do not sign the ticket, much less did plaintiff herein sign his ticket when
he made the flight on November 23, 1959." We hold, therefore, that the appellee is
not, and can not be, bound by the conditions of carriage found at the back of the
ticket stub issued to him when he made the flight on appellant's plane on
November 23, 1959.
The liability of the appellant in the present case should be governed by the
provisions of Articles 1734 and 1735 of the New Civil Code, which We quote as
follows:
ART. 1734. Common carries 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, 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.1wph1.t
ART. 1735. In all cases other than 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 in Article 1733.
doctrine and it makes no difference that there is no statutory prohibition
against contracts of this character.
"Par. 196. bb. Considerations on which Rule Based. The rule, it is said,
rests on considerations of public policy. The undertaking is to carry the
goods, and to relieve the shipper from all liability for loss or damage arising
from negligence in performing its contract is to ignore the contract itself.
The natural effect of a limitation of liability against negligence is to induce
want of care on the part of the carrier in the performance of its duty. The
shipper and the common carrier are not on equal terms; the shipper must
send his freight by the common carrier, or not at all; he is therefore
entirely at the mercy of the carrier unless protected by the higher power of
the law against being forced into contracts limiting the carrier's liability.
Such contracts are wanting in the element of voluntary assent.

"Par. 197. cc. Application and Extent of Rule (aa) Negligence of Servants.
It having been clearly found by the trial court that the transistor radio and the
The rule prohibiting limitation of liability for negligence is often stated
camera of the appellee were lost as a result of the negligence of the appellant as a
as a prohibition of any contract relieving the carrier from loss or damage
common carrier, the liability of the appellant is clear it must pay the appellee the
caused by its own negligence or misfeasance, or that of its servants; and it
value of those two articles.
has been specifically decided in many cases that no contract limitation will
relieve the carrier from responsibility for the negligence, unskillfulness, or
In the case of Ysmael and Co. vs. Barreto, 51 Phil. 90, cited by the trial court in
carelessness of its employer." (Cited in Ysmael and Co. vs. Barreto, 51 Phil.
support of its decision, this Court had laid down the rule that the carrier can not
90, 98, 99).
limit its liability for injury to or loss of goods shipped where such injury or loss was
caused by its own negligence.
In view of the foregoing, the decision appealed from is affirmed, with costs against
the appellant.
Corpus Juris, volume 10, p. 154, says:

"Par. 194, 6. Reasonableness of Limitations. The validity of stipulations

limiting the carrier's liability is to be determined by their reasonableness
and their conformity to the sound public policy, in accordance with which
the obligations of the carrier to the public are settled. It cannot lawfully
stipulate for exemption from liability, unless such exemption is just and
reasonable, and unless the contract is freely and fairly made. No
contractual limitation is reasonable which is subversive of public policy.

"Par. 195. 7. What Limitations of Liability Permissible. a. Negligence

(1) Rule in America (a) In Absence of Organic or Statutory Provisions
Regulating Subject aa. Majority Rule. In the absence of statute, it is
settled by the weight of authority in the United States, that whatever
limitations against its common-law liability are permissible to a carrier, it
cannot limit its liability for injury to or loss of goods shipped, where such
injury or loss is caused by its own negligence. This is the common law
G.R. No. L-40597 June 29, 1979
AGUSTINO B. ONG YIU, petitioner,
vs.
HONORABLE COURT OF APPEALS and PHILIPPINE AIR LINES, INC., respondents.
MELENCIO-HERRERA, J.:
In this Petition for Review by Certiorari, petitioner, a practicing lawyer and
businessman, seeks a reversal of the Decision of the Court of Appeals in CA-G.R. No.
45005-R, which reduced his claim for damages for breach of contract of
transportation.
The facts are as follows:
On August 26, 1967, petitioner was a fare paying passenger of respondent
Philippine Air Lines, Inc. (PAL), on board Flight No. 463-R, from Mactan Cebu, bound
for Butuan City. He was scheduled to attend the trial of Civil Case No. 1005 and
Spec. Procs. No. 1125 in the Court of First Instance, Branch II, thereat, set for
hearing on August 28-31, 1967. As a passenger, he checked in one piece of luggage,
a blue "maleta" for which he was issued Claim Check No. 2106-R (Exh. "A"). The
plane left Mactan Airport, Cebu, at about 1:00 o'clock P.M., and arrived at Bancasi
airport, Butuan City, at past 2:00 o'clock P.M., of the same day. Upon arrival,
petitioner claimed his luggage but it could not be found. According to petitioner, it
was only after reacting indignantly to the loss that the matter was attended to by
the porter clerk, Maximo Gomez, which, however, the latter denies, At about 3:00
o'clock P.M., PAL Butuan, sent a message to PAL, Cebu, inquiring about the missing
luggage, which message was, in turn relayed in full to the Mactan Airport teletype
operator at 3:45 P.M. (Exh. "2") that same afternoon. It must have been
transmitted to Manila immediately, for at 3:59 that same afternoon, PAL Manila
wired PAL Cebu advising that the luggage had been over carried to Manila aboard
Flight No. 156 and that it would be forwarded to Cebu on Flight No. 345 of the same
day. Instructions were also given that the luggage be immediately forwarded to
Butuan City on the first available flight (Exh. "3"). At 5:00 P.M. of the same
afternoon, PAL Cebu sent a message to PAL Butuan that the luggage would be
forwarded on Fright No. 963 the following day, August 27, 196'(. However, this
message was not received by PAL Butuan as all the personnel had already left since
there were no more incoming flights that afternoon.
In the meantime, petitioner was worried about the missing luggage because it
contained vital documents needed for trial the next day. At 10:00 o'clock that
evening, petitioner wired PAL Cebu demanding the delivery of his baggage before
noon the next day, otherwise, he would hold PAL liable for damages, and stating
that PAL's gross negligence had caused him undue inconvenience, worry, anxiety
and extreme embarrassment (Exh. "B"). This telegram was received by the Cebu
PAL supervisor but the latter felt no need to wire petitioner that his luggage had
already been forwarded on the assumption that by the time the message reached
Butuan City, the luggage would have arrived.
Early in the morning of the next day, August 27, 1967, petitioner went to the
Bancasi Airport to inquire about his luggage. He did not wait, however, for the
morning flight which arrived at 10:00 o'clock that morning. This flight carried the
missing luggage. The porter clerk, Maximo Gomez, paged petitioner, but the latter
had already left. A certain Emilio Dagorro a driver of a "colorum" car, who also used
to drive for petitioner, volunteered to take the luggage to petitioner. As Maximo
Gomez knew Dagorro to be the same driver used by petitioner whenever the latter
was in Butuan City, Gomez took the luggage and placed it on the counter. Dagorro
examined the lock, pressed it, and it opened. After calling the attention of Maximo
Gomez, the "maleta" was opened, Gomez took a look at its contents, but did not
touch them. Dagorro then delivered the "maleta" to petitioner, with the
information that the lock was open. Upon inspection, petitioner found that a folder
containing certain exhibits, transcripts and private documents in Civil Case No. 1005
and Sp. Procs. No. 1126 were missing, aside from two gift items for his parents-in-
law. Petitioner refused to accept the luggage. Dagorro returned it to the porter
clerk, Maximo Gomez, who sealed it and forwarded the same to PAL Cebu.
Meanwhile, petitioner asked for postponement of the hearing of Civil Case No.
1005 due to loss of his documents, which was granted by the Court (Exhs. "C" and
"C-1"). Petitioner returned to Cebu City on August 28, 1967. In a letter dated August
29, 1967 addressed to PAL, Cebu, petitioner called attention to his telegram (Exh.
"D"), demanded that his luggage be produced intact, and that he be compensated
in the sum of P250,000,00 for actual and moral damages within five days from
receipt of the letter, otherwise, he would be left with no alternative but to file suit
(Exh. "D").
On August 31, 1967, Messrs. de Leon, Navarsi, and Agustin, all of PAL Cebu, went to
petitioner's office to deliver the "maleta". In the presence of Mr. Jose Yap and Atty.
Manuel Maranga the contents were listed and receipted for by petitioner (Exh. "E").
On September 5, 1967, petitioner sent a tracer letter to PAL Cebu inquiring about
the results of the investigation which Messrs. de Leon, Navarsi, and Agustin had
promised to conduct to pinpoint responsibility for the unauthorized opening of the
"maleta" (Exh. "F").
The following day, September 6, 1967, PAL sent its reply hereinunder quoted
verbatim:
 Dear Atty. Ong Yiu:
This is with reference to your September 5, 1967, letter to Mr.
Ricardo G. Paloma, Acting Manager, Southern Philippines.
First of all, may we apologize for the delay in informing you of the
result of our investigation since we visited you in your office last
August 31, 1967. Since there are stations other than Cebu which
are involved in your case, we have to communicate and await
replies from them. We regret to inform you that to date we have
not found the supposedly lost folder of papers nor have we been
able to pinpoint the personnel who allegedly pilferred your
baggage.
You must realize that no inventory was taken of the cargo upon
loading them on any plane. Consequently, we have no way of
knowing the real contents of your baggage when same was
loaded.
We realized the inconvenience you encountered of this incident
but we trust that you will give us another opportunity to be of
better service to you.
Very truly yours,
PHILIPPINE AIR LINES, INC.
(Sgd) JEREMIAS S. AGUSTIN
Branch Supervisor
Cebu
(Exhibit G, Folder of Exhibits) 1
On September 13, 1967, petitioner filed a Complaint against PAL for damages for
breach of contract of transportation with the Court of First Instance of Cebu, Branch
V, docketed as Civil Case No. R-10188, which PAL traversed. After due trial, the
lower Court found PAL to have acted in bad faith and with malice and declared
petitioner entitled to moral damages in the sum of P80,000.00, exemplary damages
of P30,000.00, attorney's fees of P5,000.00, and costs.
Both parties appealed to the Court of Appeals petitioner in so far as he was
awarded only the sum of P80,000.00 as moral damages; and defendant because of
the unfavorable judgment rendered against it.
On August 22, 1974, the Court of Appeals,* finding that PAL was guilty only of
simple negligence, reversed the judgment of the trial Court granting petitioner
moral and exemplary damages, but ordered PAL to pay plaintiff the sum of P100.00,
the baggage liability assumed by it under the condition of carriage printed at the
back of the ticket.
Hence, this Petition for Review by Certiorari, filed on May 2, 1975, with petitioner
making the following Assignments of Error:
I. THE HONORABLE COURT OF APPEALS ERRED IN HOLDING
RESPONDENT PAL GUILTY ONLY OF SIMPLE NEGLIGENCE AND NOT
BAD FAITH IN THE BREACH OF ITS CONTRACT OF
TRANSPORTATION WITH PETITIONER.
II. THE HONORABLE COURT OF APPEALS MISCONSTRUED THE
EVIDENCE AND THE LAW WHEN IT REVERSED THE DECISION OF
THE LOWER COURT AWARDING TO PETITIONER MORAL
DAMAGES IN THE AMOUNT OF P80,000.00, EXEMPLARY
DAMAGES OF P30,000.00, AND P5,000.00 REPRESENTING
ATTORNEY'S FEES, AND ORDERED RESPONDENT PAL TO
COMPENSATE PLAINTIFF THE SUM OF P100.00 ONLY, CONTRARY
TO THE EXPLICIT PROVISIONS OF ARTICLES 2220, 2229, 2232 AND
2234 OF THE CIVIL CODE OF THE PHILIPPINES.
On July 16, 1975, this Court gave due course to the Petition.
There is no dispute that PAL incurred in delay in the delivery of petitioner's luggage.
The question is the correctness of respondent Court's conclusion that there was no
gross negligence on the part of PAL and that it had not acted fraudulently or in bad
faith as to entitle petitioner to an award of moral and exemplary damages.
From the facts of the case, we agree with respondent Court that PAL had not acted
in bad faith. Bad faith means a breach of a known duty through some motive of
interest or ill will. 2 It was the duty of PAL to look for petitioner's luggage which had
been miscarried. PAL exerted due diligence in complying with such duty.
As aptly stated by the appellate Court:
We do not find any evidence of bad faith in this. On the contrary,
We find that the defendant had exerted diligent effort to locate
plaintiff's baggage. The trial court saw evidence of bad faith
because PAL sent the telegraphic message to Mactan only at 3:00
o'clock that same afternoon, despite plaintiff's indignation for the
 non-arrival of his baggage. The message was sent within less than
one hour after plaintiff's luggage could not be located. Efforts had
to be exerted to locate plaintiff's maleta. Then the Bancasi airport
had to attend to other incoming passengers and to the outgoing
passengers. Certainly, no evidence of bad faith can be inferred
from these facts. Cebu office immediately wired Manila inquiring
about the missing baggage of the plaintiff. At 3:59 P.M., Manila
station agent at the domestic airport wired Cebu that the baggage
was over carried to Manila. And this message was received in
Cebu one minute thereafter, or at 4:00 P.M. The baggage was in
fact sent back to Cebu City that same afternoon. His Honor stated
that the fact that the message was sent at 3:59 P.M. from Manila
and completely relayed to Mactan at 4:00 P.M., or within one
minute, made the message appear spurious. This is a forced
reasoning. A radio message of about 50 words can be completely
transmitted in even less than one minute depending upon
atmospheric conditions. Even if the message was sent from
Manila or other distant places, the message can be received
within a minute. that is a scientific fact which cannot be
questioned. 3
Neither was the failure of PAL Cebu to reply to petitioner's rush telegram indicative
of bad faith, The telegram (Exh. B) was dispatched by petitioner at around 10:00
P.M. of August 26, 1967. The PAL supervisor at Mactan Airport was notified of it
only in the morning of the following day. At that time the luggage was already to be
forwarded to Butuan City. There was no bad faith, therefore, in the assumption
made by said supervisor that the plane carrying the bag would arrive at Butuan
earlier than a reply telegram. Had petitioner waited or caused someone to wait at
the Bancasi airport for the arrival of the morning flight, he would have been able to
retrieve his luggage sooner.
In the absence of a wrongful act or omission or of fraud or bad faith, petitioner is
not entitled to moral damages.
Art. 2217. Moral damages include physical suffering, mental
anguish, fright, serious anxiety, besmirched reputation, wounded
feelings, moral shock, social humiliation, and similar injury.
Though incapable of pecuniary computation, moral damages may
be recovered if they are the proximate result of the defendant's
wrongful act of omission.
Art. 2220. Willful injury to property may be a legal ground for
awarding moral damages if the court should find that, under the
circumstances, such damages are justly due. The same rule
applies to breaches of contract where the defendant acted
fraudulently or in bad faith.
Petitioner is neither entitled to exemplary damages. In contracts, as provided for in
Article 2232 of the Civil Code, exemplary damages can be granted if the defendant
acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner, which
has not been proven in this case.
Petitioner further contends that respondent Court committed grave error when it
limited PAL's carriage liability to the amount of P100.00 as stipulated at the back of
the ticket. In this connection, respondent Court opined:
As a general proposition, the plaintiff's maleta having been
pilfered while in the custody of the defendant, it is presumed that
the defendant had been negligent. The liability, however, of PAL
for the loss, in accordance with the stipulation written on the back
of the ticket, Exhibit 12, is limited to P100.00 per baggage,
plaintiff not having declared a greater value, and not having called
the attention of the defendant on its true value and paid the tariff
therefor. The validity of this stipulation is not questioned by the
plaintiff. They are printed in reasonably and fairly big letters, and
are easily readable. Moreover, plaintiff had been a frequent
passenger of PAL from Cebu to Butuan City and back, and he,
being a lawyer and businessman, must be fully aware of these
conditions. 4
We agree with the foregoing finding. The pertinent Condition of Carriage printed at
the back of the plane ticket reads:
8. BAGGAGE LIABILITY ... The total liability of the Carrier for lost or
damaged baggage of the passenger is LIMITED TO P100.00 for
each ticket unless a passenger declares a higher valuation in
excess of P100.00, but not in excess, however, of a total valuation
of P1,000.00 and additional charges are paid pursuant to Carrier's
tariffs.
There is no dispute that petitioner did not declare any higher value for his luggage,
much less did he pay any additional transportation charge.
But petitioner argues that there is nothing in the evidence to show that he had
actually entered into a contract with PAL limiting the latter's liability for loss or
delay of the baggage of its passengers, and that Article 1750* of the Civil Code has In fine, we hold that the conclusions drawn by respondent Court from the evidence
not been complied with. on record are not erroneous.

While it may be true that petitioner had not signed the plane ticket (Exh. "12"), he is WHEREFORE, for lack of merit, the instant Petition is hereby denied, and the
nevertheless bound by the provisions thereof. "Such provisions have been held to judgment sought to be reviewed hereby affirmed in toto.
be a part of the contract of carriage, and valid and binding upon the passenger
regardless of the latter's lack of knowledge or assent to the regulation". 5 It is what No costs.
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 SO ORDERED.
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. 6 And as held in Randolph v. American
Airlines, 103 Ohio App. 172, 144 N.E. 2d 878; Rosenchein vs. Trans World Airlines,
Inc., 349 S.W. 2d 483, "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.

Considering, therefore, that petitioner had failed to declare a higher value for his
baggage, he cannot be permitted a recovery in excess of P100.00.Besides,
passengers are advised not to place valuable items inside their baggage but "to avail
of our V-cargo service " (Exh. "1"). I t is likewise to be noted that there is nothing in
the evidence to show the actual value of the goods allegedly lost by petitioner.

There is another matter involved, raised as an error by PAL the fact that on
October 24, 1974 or two months after the promulgation of the Decision of the
appellate Court, petitioner's widow filed a Motion for Substitution claiming that
petitioner died on January 6, 1974 and that she only came to know of the adverse
Decision on October 23, 1974 when petitioner's law partner informed her that he
received copy of the Decision on August 28, 1974. Attached to her Motion was an
Affidavit of petitioner's law partner reciting facts constitutive of excusable
negligence. The appellate Court noting that all pleadings had been signed by
petitioner himself allowed the widow "to take such steps as she or counsel may
deem necessary." She then filed a Motion for Reconsideration over the opposition
of PAL which alleged that the Court of Appeals Decision, promulgated on August 22,
1974, had already become final and executory since no appeal had been interposed
therefrom within the reglementary period.

Under the circumstances, considering the demise of petitioner himself, who acted
as his own counsel, it is best that technicality yields to the interests of substantial
justice. Besides, in the 'last analysis, no serious prejudice has been caused
respondent PAL.
G.R. No. L-36481-2 October 23, 1982
AMPARO C. SERVANDO, CLARA UY BICO, plaintiffs-appellees, vs. PHILIPPINE
STEAM NAVIGATION CO., defendant-appellant.
ESCOLIN, J.:
This appeal, originally brought to the Court of Appeals, seeks to set aside the
decision of the Court of First Instance of Negros Occidental in Civil Cases Nos. 7354
and 7428, declaring appellant Philippine Steam Navigation liable for damages for
the loss of the appellees' cargoes as a result of a fire which gutted the Bureau of
Customs' warehouse in Pulupandan, Negros Occidental.
The Court of Appeals certified the case to Us because only pure questions of law are
raised therein.
The facts culled from the pleadings and the stipulations submitted by the parties
are as follows:
On November 6, 1963, appellees Clara Uy Bico and Amparo Servando loaded on
board the appellant's vessel, FS-176, for carriage from Manila to Pulupandan,
Negros Occidental, the following cargoes, to wit:
Clara Uy Bico
1,528 cavans of rice valued
at P40,907.50;
Amparo Servando
44 cartons of colored paper,
toys and general merchandise valued at
P1,070.50;
as evidenced by the corresponding bills of lading issued by the appellant. 1
Upon arrival of the vessel at Pulupandan, in the morning of November 18, 1963, the
cargoes were discharged, complete and in good order, unto the warehouse of the
Bureau of Customs. At about 2:00 in the afternoon of the same day, said warehouse
was razed by a fire of unknown origin, destroying appellees' cargoes. Before the
fire, however, appellee Uy Bico was able to take delivery of 907 cavans of
rice 2 Appellees' claims for the value of said goods were rejected by the appellant.
On the bases of the foregoing facts, the lower court rendered a decision, the
decretal portion of which reads as follows:
WHEREFORE, judgment is rendered as follows:
1. In case No. 7354, the defendant is hereby ordered to pay the
plaintiff Amparo C. Servando the aggregate sum of P1,070.50 with
legal interest thereon from the date of the filing of the complaint
until fully paid, and to pay the costs.
2. In case No. 7428, the defendant is hereby ordered to pay to
plaintiff Clara Uy Bico the aggregate sum of P16,625.00 with legal
interest thereon from the date of the filing of the complaint until
fully paid, and to pay the costs.
Article 1736 of the Civil Code imposes upon common carriers the duty to observe
extraordinary diligence from the moment the goods are unconditionally placed in
their possession "until the same are delivered, actually or constructively, by the
carrier to the consignee or to the person who has a right to receive them, without
prejudice to the provisions of Article 1738. "
The court a quo held that the delivery of the shipment in question to the
warehouse of the Bureau of Customs is not the delivery contemplated by Article
1736; and since the burning of the warehouse occurred before actual or
constructive delivery of the goods to the appellees, the loss is chargeable against
the appellant.
It should be pointed out, however, that in the bills of lading issued for the cargoes
in question, the parties agreed to limit the responsibility of the carrier for the loss
or damage that may be caused to the shipment by inserting therein the following
stipulation:
Clause 14. Carrier shall not be responsible for loss or damage to
shipments billed 'owner's risk' unless such loss or damage is due
to negligence of carrier. Nor shall carrier be responsible for loss or
damage caused by force majeure, dangers or accidents of the sea
or other waters; war; public enemies; . . . fire . ...
We sustain the validity of the above stipulation; there is nothing therein that is
contrary to law, morals or public policy.
Appellees would contend that the above stipulation does not bind them because it
was printed in fine letters on the back-of the bills of lading; and that they did not
sign the same. This argument overlooks the pronouncement of this Court in Ong Yiu
vs. Court of Appeals, promulgated June 29, 1979, 3 where the same issue was
resolved in this wise:
While it may be true that petitioner had not signed the plane
ticket (Exh. '12'), he is nevertheless bound by the provisions
thereof. 'Such provisions have been held to be a part of the
contract of carriage, and valid and binding upon the passenger
regardless of the latter's lack of knowledge or assent to the
regulation'. It is what is known as a contract of 'adhesion', in
regards which it has been said that contracts of adhesion wherein
one party imposes a ready made form of contract on the other, as
the plane ticket in the case at bar, are contracts not entirely
prohibited. The one who adheres to the contract is in reality free
to reject it entirely; if he adheres, he gives his consent."
(Tolentino, Civil Code, Vol. IV, 1962 Ed., p. 462, citing Mr. Justice
J.B.L. Reyes, Lawyer's Journal, Jan. 31, 1951, p. 49).
Besides, the agreement contained in the above quoted Clause 14 is a mere iteration
of the basic principle of law written in Article 1 1 7 4 of the Civil Code:
Article 1174. Except in cases expressly specified by the law, or
when it is otherwise declared by stipulation, or when the nature
of the obligation requires the assumption of risk, no person shall
be responsible for those events which could not be foreseen, or
which, though foreseen, were inevitable.
(4) the obligor must be free from any participation in the aggravation of the injury
resulting to the creditor." In the case at bar, the burning of the customs warehouse
was an extraordinary event which happened independently of the will of the
appellant. The latter could not have foreseen the event.
There is nothing in the record to show that appellant carrier ,incurred in delay in
the performance of its obligation. It appears that appellant had not only notified
appellees of the arrival of their shipment, but had demanded that the same be
withdrawn. In fact, pursuant to such demand, appellee Uy Bico had taken delivery
of 907 cavans of rice before the burning of the warehouse.
Nor can the appellant or its employees be charged with negligence. The storage of
the goods in the Customs warehouse pending withdrawal thereof by the appellees
was undoubtedly made with their knowledge and consent. Since the warehouse
belonged to and was maintained by the government, it would be unfair to impute
negligence to the appellant, the latter having no control whatsoever over the same.
The lower court in its decision relied on the ruling laid down in Yu Biao Sontua vs.
Ossorio 6, where this Court held the defendant liable for damages arising from a fire
caused by the negligence of the defendant's employees while loading cases of
gasoline and petroleon products. But unlike in the said case, there is not a shred of
proof in the present case that the cause of the fire that broke out in the Custom's
warehouse was in any way attributable to the negligence of the appellant or its
employees. Under the circumstances, the appellant is plainly not responsible.
WHEREFORE, the judgment appealed from is hereby set aside. No costs.
SO ORDERED.

Thus, where fortuitous event or force majeure is the immediate and proximate
cause of the loss, the obligor is exempt from liability for non-performance. The
Partidas, 4 the antecedent of Article 1174 of the Civil Code, defines 'caso fortuito' as
'an event that takes place by accident and could not have been foreseen. Examples
of this are destruction of houses, unexpected fire, shipwreck, violence of robbers.'

In its dissertation of the phrase 'caso fortuito' the Enciclopedia Juridicada

Espanola 5 says: "In a legal sense and, consequently, also in relation to contracts, a
'caso fortuito' presents the following essential characteristics: (1) the cause of the
unforeseen and unexpected occurrence, or of the failure of the debtor to comply
with his obligation, must be independent of the human will; (2) it must be
impossible to foresee the event which constitutes the 'caso fortuito', or if it can be
foreseen, it must be impossible to avoid; (3) the occurrence must be such as to
render it impossible for the debtor to fulfill his obligation in a normal manner; and
G.R. No. L-50076 September 14, 1990
NORBERTO QUISUMBING, SR., and GUNTHER LOEFFLER petitioners, vs. COURT OF
APPEALS and PHILIPPINE AIR LINES, INC., respondents.
NARVASA, J.:
Having met with no success in the Court of First Instance of Rizal and in the Court of
Appeals, the petitioners are now in this Court in a third and final attempt to recover
from the Philippine Airlines, Inc. (hereafter, simply PAL) the value of jewelry, other
valuables and money taken from them by four (4) armed robbers on board one of
the latter's airplanes while on a flight from Mactan City to Manila, as well as moral
and exemplary damages, attorney's fees and expenses of litigation.
The petitioners accept the correctness of the basic facts adopted by the Court of
Appeals from the judgment of the Court of First Instance, to wit: 1
1. . . . Norberto Quisumbing, Sr. and Gunther Leoffler were among
the of ... (PAL's) Fokker 'Friendship' PIC-536 plane in its flight of
November 6,1968 which left Mactan City at about 7:30 in the
evening with Manila for its destination.
2. After the plane had taken off, Florencio O. Villarin, a Senior NBI
Agent who was also a passenger of the said plane, noticed a
certain 'Zaldy,' a suspect in the killing of Judge Valdez, seated at
the front seat near the door leading to the cockpit of the plane. A
check by Villarin with the passenger's ticket in the possession of
flight Stewardess Annie Bontigao, who was seated at the last seat
right row, revealed that 'Zaldy' had used the name 'Cardente,' one
of his aliases known to Villarin. Villarin also came to know from
the stewardess that 'Zaldy' had three companions on board the
plane."
3. Villarin then scribbled a note addressed to the pilot of the plane
requesting the latter to contact NBI duty agents in Manila for the
said agents to ask the Director of the NBI to send about six NBI
agents to meet the plane because the suspect in the killing of
Judge Valdez was on board (Exh. 'G'). The said note was handed
by Villarin to the stewardess who in tum gave the same to the
pilot.
4. After receiving the note, which was about 15 minutes after take
off, the pilot of the plane, Capt. Luis Bonnevie, Jr., came out of the
cockpit and sat beside Villarin at the rear portion of the plane and
explained that he could not send the message because it would
be heard by all ground aircraft stations. Villarin, however, told the
pilot of the danger of commission of violent acts on board the
plane by the notorious 'Zaldy' and his three companions.
5. While the pilot and Villarin were talking, 'Zaldy' and one of his
companions walked to the rear and stood behind them. Capt.
Bonnevie then stood up and went back to the cockpit. 'Zaldy' and
his companions returned to their seats, but after a few minutes
they moved back to the rear throwing ugly looks at Villarin who,
sensing danger, stood up and went back to his original seat across
the aisle on the second to the last seat near the window. 'Zaldy
and his companion likewise went back to their respective seats in
front.
6. Soon thereafter an exchange of gunshots ensued between
Villarin and 'Zaldy' and the latter's companions. 'Zaldy' announced
to the passengers and the pilots in the cockpit that it was a hold-
up and ordered the pilot not to send any SOS. The hold-uppers
divested passengers of their belongings.
7. Specifically, ... Norberto Quisumbing, Sr. was divested of
jewelries and cash in the total amount of P18,650.00 out of which
recoveries were made amounting to P4,550.00. . . Gunther
Leoffler was divested of a wrist watch, cash and a wallet in the
total of P1,700.00. As a result of the incident ... Quisumbing,
Sr.suffered shock, because a gun had been pointed at him by one
of the holduppers.
8. Upon landing at the Manila International Airport. 'Zaldy' and his
three companions succeeded in escaping.
Demands were thereafter made on PAL by Quisumbing and Loeffler "to indemnify
... (them) on their aforesaid loss, but ... (PAL) refused ... (averring that) it is not
liable to (them) in law or in fact." 2
Contending that the "aforesaid loss is a result of breach of ... (PAL's) contractual
obligation to carry ... (them) and their belongings and effects to their Manila
destination without loss or damage, and constitutes a serious dereliction of ...
(PAL's) legal duty to exercise extraordinary diligence in the vigilance over the same."
, Quisumbing and Loeffler brought suit against PAL in the Court of First Instance of
Rizal, as stated in this opinion's opening paragraph, to recover the value of the
property lost by them to the robbers as well as moral and exemplary damages,
attorney's fees and expenses of litigation. 3 The plaintiffs declared that their suit
was instituted "... pursuant to Civil Code articles 1754, 998, 2000 and 2001 and on
the ground that in relation to said Civil Code article 2001 the complained-of act of
the armed robbers is not a force majeure, as the 'use of arms' or 'irresistible force'
was not taken advantage of by said armed robbers in gaining entrance to
defendant's ill-fated plane in questions. And, with respect to said Civil Code article
1998, it is not essential that the lost effects and belongings of plaintiffs were
actually delivered to defendant's plane personnel or that the latter were notified
thereof (De los Santos v. Tamn Khey, [CA] 58 O.G. 7693)." 4
PAL filed answer denying liability, alleging inter alia that the robbery during
the flight and after the aircraft was forcibly landed at the Manila Airport did indeed
constitute force majeure, and neither of the plaintiffs had notified PAL "or its crew
or employees that they were in possession of cash, German marks and valuable
jewelries and watches" or surrendered said items to "the crew or personnel on
board the aircraft." 5
After trial, the Court of First Instance rendered judgment 'dismissing plaintiffs'
complaint with costs against ... (them)." 6 The Court opined that since the plaintiffs
"did not notify defendant or its employees that they were in possession of the cash,
jewelries, and the wallet they are now claiming," the very provision of law invoked
by them, Article 1998 of the Civil Code, denies them any recourse against PAL. The
Court also pointed out that-
... while it is true that the use of gems was not taken advantage of
by the robbers in gaining entrance to defendant's ill-fated plane,
the armed robbery that took place constitutes force majeure for
which defendant is not liable because the robbers were able to
gain entrance to the plane with the guns they used already in
their possession, which fact could not have been prevented nor
avoided by the defendant since it was not authorized to search its
passengers for firearms and deadly weapons as shown in Exhibits
'6', '7', '8,' and '8-A.' As its robbery constitutes force majeure,
defendant is not liable.
The plaintiffs appealed to the Court of Appeals. 7 The Court affirmed the trial
court's judgment. 8 It rejected the argument that "the use of arms or ... irresistible
force" referred to in Article 2001 constitutes force majeure only if resorted to gain
entry into the airplane, and not if it attends "the robbery itself." The Court ruled
that under the facts, "the highjacking-robbery was force majeure," observing that
... hijackers do not board an airplane through a blatant display of
firepower and violent fury. Firearms, hand-grenades, dynamite,
and explosives are introduced into the airplane surreptitiously
and with the utmost cunning and stealth, although there is an
occasional use of innocent hostages who will be coldly murdered
unless a plane is given to the hijackers' complete disposal. The
objective of modern-day hijackers is to display the irresistible
force amounting to force majeure only when it is most effective
and that is when the jetliner is winging its way at Himalayan
altitudes and ill-advised heroics by either crew or passengers
would send the multi-million peso airplane and the priceless lives
of all its occupants into certain death and destruction. ...
The Appellate Court also ruled that in light of the evidence PAL could not be faulted
for want of diligence, particularly for failing "to take positive measures to
implement Civil Aeronautics Administration regulations prohibiting civilians from
carrying firearms on board aircrafts;" and that "the absence of coded transmissions,
the amateurish behaviour of the pilot in dealing with the NBI agent, the allegedly
open cockpit door, and the failure to return to Mactan, in the light of the
circumstances of the case ..., were not negligent acts sufficient to overcome the
force majeure nature of the armed robbery." In fact, the Court went on to says, 9
... it is illusive to assume that had these precautions been taken,
the hijacking or the robbery would not have succeeded. The
mandatory use of the most sophisticated electronic detection
devices and magnetometers, the imposition of severe penalties,
the development of screening procedures, the compilation of
hijacker behavioural profiles, the assignment of sky marshals, and
the weight of outraged world opinion may have minimized
hijackings but all these have proved ineffective against truly
determined hijackers. World experience shows that if a group of
armed hijackers want to take over a plane in flight, they can elude
the latest combined government and airline industry measures.
And as our own experience in Zamboanga City illustrates, the use
of force to overcome hijackers, results in the death and injury of
innocent passengers and crew members. We are not in the least
bit suggesting that the Philippine Airlines should not do
everything humanly possible to protect passengers from hijackers'
acts. We merely state that where the defendant has faithfully
complied with the requirements of government agencies and
adhered to the established procedures and precautions of the
airline industry at any particular time, its failure to take certain
steps that a passenger in hindsight believes should have been
taken is not the negligence or misconduct which mingles with
force majeure as an active and cooperative cause.
 Under the circumstance of the instant case, the acts of the airline
and its crew cannot be faulted as negligence. The hijackers had
already shown their willingness to kill. One passenger was in fact
killed and another survived gunshot wounds. The lives of the rest
of the passengers and crew were more important than their
properties. Cooperation with the hijackers until they released
their hostages at the runway end near the South Superhighway
was dictated by the circumstances.

Insisting that the evidence demonstrates negligence on the part of the PAL crew
"occurring before and exposing them to hijacking," Quisumbing and Loeffler have
come up to this Court praying that the judgments of the trial Court and the Court of
Appeals be reversed and another rendered in their favor. Once again, the issue will
be resolved against them.

A careful analysis of the record in relation to the memoranda and other pleadings of
the parties, convinces this Court of the correctness of the essential conclusion of
both the trial and appellate courts that the evidence does indeed fail to prove any
want of diligence on the part of PAL, or that, more specifically, it had failed to
comply with applicable regulations or universally accepted and observed
procedures to preclude hijacking; and that the particular acts singled out by the
petitioners as supposedly demonstrative of negligence were, in the light of the
circumstances of the case, not in truth negligent acts "sufficient to overcome the
force majeure nature of the armed robbery." The Court quite agrees, too, with the
Appellate Tribunal's wry observation that PAL's "failure to take certain steps that a
passenger in hindsight believes should have been taken is not the negligence or
misconduct which mingles with force majeure as an active and cooperative cause."

No success can therefore attend petitioners' appeal, not only because they wish to
have a review and modification of factual conclusions of the Court of Appeals,
which established and uniformly observed axiom proscribes, 10 but also because
those factual conclusions have in this Court's view been correctly drawn from the
proofs on record.

WHEREFORE, the petition is DENIED and the appealed Decision of the Court of
Appeals is AFFIRMED, with costs against petitioners.

SO ORDERED.
G.R. No. 60673 May 19, 1992
PAN AMERICAN WORLD AIRWAYS, INC., petitioner, vs. JOSE K. RAPADAS and THE
COURT OF APPEALS, respondents.
GUTIERREZ, JR., J.:
This is a petition for review assailing the decision of the respondent Court of
Appeals which affirmed in toto the trial court decision on the liability of petitioner
Pan American World Airways for damages due to private respondent. The trial court
ruled that the petitioner can not avail of a limitation of liabilities for lost baggages
of a passenger. The dispositive portion of the trial court decision reads:
WHEREFORE, in view of the foregoing considerations, judgment is
hereby rendered ordering defendant to pay plaintiff by way of
actual damages the equivalent peso value of the amount of
$5,228.90 and 100 paengs, nominal damages in the amount of
P20,000.00 and attorney's fees of P5,000.00, and the costs of the
suit. Defendant's counterclaim is dismissed. (Rollo, p. 13)
On January 16, 1975, private respondent Jose K. Rapadas held Passenger Ticket and
Baggage Claim Check No. 026-394830084-5 for petitioner's Flight No. 841 with the
route from Guam to Manila. While standing in line to board the flight at the Guam
airport, Rapadas was ordered by petitioner's handcarry control agent to check-in his
Samsonite attache case. Rapadas protested pointing to the fact that other co-
passengers were permitted to handcarry bulkier baggages. He stepped out of the
line only to go back again at the end of it to try if he can get through without having
to register his attache case. However, the same man in charge of handcarry control
did not fail to notice him and ordered him again to register his baggage. For fear
that he would miss the plane if he insisted and argued on personally taking the
valise with him, he acceded to checking it in. He then gave his attache case to his
brother who happened to be around and who checked it in for him, but without
declaring its contents or the value of its contents. He was given a Baggage Claim Tag
No. P-749-713. (Exhibit "B" for the plaintiff-respondent)
Upon arriving in Manila on the same date, January 16, 1975, Rapadas claimed and
was given all his checked-in baggages except the attache case. Since Rapadas felt ill
on his arrival, he sent his son, Jorge Rapadas to request for the search of the
missing luggage. The petitioner exerted efforts to locate the luggage through the
Pan American World Airways-Manila International Airport (PAN AM-MIA) Baggage
Service.
On January 30, 1975, the petitioner required the private respondent to put the
request in writing. The respondent filled in a Baggage Claim Blank Form. Thereafter,
Rapadas personally followed up his claim. For several times, he called up Mr.
Panuelos, the head of the Baggage Section of PAN AM. He also sent letters
demanding and reminding the petitioner of his claim.
Rapadas received a letter from the petitioner's counsel dated August 2, 1975
offering to settle the claim for the sum of one hundred sixty dollars ($160.00)
representing the petitioner's alleged limit of liability for loss or damage to a
passenger's personal property under the contract of carriage between Rapadas and
PAN AM. Refusing to accept this kind of settlement, Rapadas filed the instant action
for damages on October 1, 1975. Rapadas alleged that PAN AM discriminated or
singled him out in ordering that his luggage be checked in. He also alleged that PAN
AM neglected its duty in the handling and safekeeping of his attache case from the
point of embarkation in Guam to his destination in Manila. He placed the value of
the lost attache case and its contents at US$42,403.90. According to him, the loss
resulted in his failure to pay certain monetary obligations, failure to remit money
sent through him to relatives, inability to enjoy the fruits of his retirement and
vacation pay earned from working in Tonga Construction Company (he retired in
August 1974) and inability to return to Tonga to comply with then existing
contracts.
In its answer, petitioner-defendant PAN AM acknowledged responsibility for the
loss of the attache case but asserted that the claim was subject to the "Notice of
Baggage Liability Limitations" allegedly attached to and forming part of the
passenger ticket. The petitioner argued that the same notice was also conspicuously
posted in its offices for the guidance of the passengers.
At the trial, private respondent showed proof of his retirement award and vacation
pay amounting to $4,750.00. He claimed that the attache case also contained other
money consisting of $1,400 allegedly given to him by his son, Jaime, as a round trip
fare of his (plaintiff-respondent) wife, but which amount was later found to be
actually intended by Jaime as payment for arrears of a lot purchased from Tropical
Homes, Inc.; $3,000 allegedly given by his brothers for payment of taxes and for
constructing improvements on the Rapadas estates; and $300.00 birthday present
of the spouses Mr. and Mrs. Ruben Canonizado to plaintiff-respondent's wife. He
also claimed having kept several items in the attache case, namely (1) contracts
and records of employment, letters of commendation, testimonials and newspaper
clippings on his achievement for 13 years in Tonga, New Zealand and Australia,
drafts of manuscripts, photographs and drivers license alleged to be worth
$20,000.00; a Polaroid camera, films, calculator, and other personal items worth
$403.90; memorabilia, autographs personally acquired from Charles Lindberg,
Lawrence Rockefeller and Ryoichi Sasakawa, a commemorative palladium coin
worth Tongan 100 paengs and unused Tongan stamps, all totalling $7,500.00; and a
plan worth $5,000.00 drawn by his son Jaime, who is an architect, for the
construction of a residential house and a 6-story commercial building. Rapadas
claimed the amount of the attache case itself to be $25.50. (See Decision in Civil
Case No. 99564 in Amended Record on Appeal, pp. 61-85)
The lower court ruled in favor of complainant Rapadas after finding no stipulation
giving notice to the baggage liability limitation. The court rejected the claim of
defendant PANAM that its liability under the terms of the passenger ticket is only
up to $160.00. However, it scrutinized all the claims of the plaintiff. It discredited
insufficient evidence to show discriminatory acts or bad faith on the part of
petitioner PANAM.
On appeal, the Court of Appeals affirmed the trial court decision. Hence, this
petition.
The main issue raised in the case at bar is whether or not a passenger is bound by
the terms of a passenger ticket declaring that the limitations of liability set forth in
the Warsaw Convention (October 12, 1929; 137 League of Nations Treaty Series II;
See Proclamation No. 201 [1955], 51 O.G. 4933 [October, 1955]) as amended by the
Hague Protocol (September 28, 1955; 478 UNTS 373; III PTS 515), shall apply in case
of loss, damage or destruction to a registered luggage of a passenger.
The petitioner maintains that its liability for the lost baggage of respondent
Rapadas was limited to $160.00 since the latter did not declare a higher value for
his baggage and did not pay the corresponding additional charges.
The private respondent, on the other hand, insists that he is entitled to as much
damages as those awarded by the court and affirmed by the respondent appellate
court.
After a review of the various arguments of the opposing parties as well as the
records of the case, the Court finds sufficient basis under the particular facts of this
case for the availment of the liability limitations under the Warsaw Convention.
There is no dispute, and the courts below admit, that there was such a Notice
appearing on page two (2) of the airline ticket stating that the Warsaw Convention
governs in case of death or injury to a passenger or of loss, damage or destruction
to a passenger's luggage.
The Notice states:
If the passenger's journey involves an ultimate destination or stop
in a country other than the country of departure the Warsaw
Convention may be applicable and the Convention governs and in
most cases limits the liability of carriers for death or personal
injury and in respect of loss of or damage to baggage. See also
notice headed "Advice to International Passengers on Limitation
of Liability." (The latter notice refers to limited liability for death
or personal injury to passengers with proven damages not
exceeding US $75,000 per passenger; Exhibit "K" for plaintiff
respondent, Table of Exhibits, p. 19)
Furthermore, paragraph 2 of the "Conditions of Contract" also appearing on page 2
of the ticket states:
2. Carriage hereunder is subject to the rules and limitations
relating to liability established by the Warsaw Convention unless
such carriage is not "international carriage" as defined by that
Convention. (Exhibit "K", supra)
We note that plaintiff-respondent Rapadas presented as proof of the Passenger
Ticket and Baggage Check No. 026-394830084-5 a xerox copy of its page 2 which
contains the Notice and Conditions of Contract, and also page 3 which recites the
Advice to International Passengers on Limitation of Liability. He also presented two
xerox copies of Flight Coupon No. 3 of the same passenger ticket showing the fares
paid for the trips Honolulu to Guam, Guam to Manila, and Manila to Honolulu to
prove his obligations which remained unpaid because of the unexpected loss of
money allegedly placed inside the missing attache case. Rapadas explained during
the trial that the same passenger ticket was returned by him to one Mr. S.L. Faupula
of the Union Steam Ship Company of New Zealand, Ltd., Tonga who demanded the
payment of the fares or otherwise, the return of the unused plane tickets (including
the subject Passenger Ticket & Baggage Check No. 026-394830084-5). The issuance
of these tickets was facilitated by Mr. Faupula on credit.
Meanwhile, the petitioner offered as evidence Exhibit "1" also showing page 2 of
the passenger ticket to prove the notice and the conditions of the contract of
carriage. It likewise offered Exhibit "1-A", a xerox copy of a "Notice of Baggage
Liability Limitations" which the trial court disregarded and held to be non-existent.
The same Exhibit "1-A" contained the following stipulations:
NOTICE OF BAGGAGE LIABILITY LIMITATIONS Liability for loss,
delay, or damage to baggage is limited as follows unless a higher
value is declared in advance and additional charges are paid: (1)
for most international travel (including domestic portions of
international journeys) to approximately $8.16 per pound ($18.00
per kilo; now $20.00 per Exhibit "13") for checked baggage and
$360 (now $400 per Exhibit "13") per passenger for unchecked
 baggage; (2) for travel wholly between U.S. points, to $500 per
passenger on most carriers (a few have lower limits). Excess
valuation may not be declared on certain types of valuable
articles. Carriers assume no liability for fragile or perishable
articles. Further information may be obtained from the carrier.
(Table of Exhibits, p. 45)
The original of the Passenger Ticket and Baggage Check No. 026-394830084-5 itself
was not presented as evidence as it was among those returned to Mr. Faupula.
Thus, apart from the evidence offered by the defendant airline, the lower court had
no other basis for determining whether or not there was actually a stipulation on
the specific amounts the petitioner had expressed itself to be liable for loss of
baggage.
Although the trial court rejected the evidence of the defendant-petitioner of a
stipulation particularly specifying what amounts it had bound itself to pay for loss of
luggage, the Notice and paragraph 2 of the "Conditions of Contract" should be
sufficient notice showing the applicability of the Warsaw limitations.
The Warsaw Convention, as amended, specifically provides that it is applicable
to international carriage which it defines in Article 1, par. 2 as follows:
(2) For the purposes of this Convention, the expression
"international carriage" means any carriage in which, according to
the agreement between the parties, the place of departure and
the place of destination, whether or not there be a breach in the
carriage or a transhipment, 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 the territory of another State, even if that State is not
a High Contracting Party. Carriage between two points within the
territory of a single High Contracting Party without an agreed
stopping place within the territory of another State is not
international carriage for the purposes of this Convention. ("High
Contracting Party" refers to a state which has ratified or adhered
to the Convention, or which has not effectively denounced the
Convention [Article 40A(l)]).
Nowhere in the Warsaw Convention, as amended, is such a detailed notice of
baggage liability limitations required. Nevertheless, it should become a common,
safe and practical custom among air carriers to indicate beforehand the precise
sums equivalent to those fixed by Article 22 (2) of the Convention.
The Convention governs the availment of the liability limitations where the baggage
check is combined with or incorporated in the passenger ticket which complies with
the provisions of Article 3, par. l (c). (Article 4, par. 2) In the case at bar, the baggage
check is combined with the passenger ticket in one document of carriage. The
passenger ticket complies with Article 3, par. l (c) which provides:
(l) In respect of the carriage of passengers a ticket shall be
delivered containing:
(a) . . .
(b) . . .
(c) a notice to the effect that, if the passenger's
journey involves an ultimate destination or stop
in a country other than the country of
departure, the Warsaw Convention may be
applicable and that the Convention governs and
in most cases limits the liability of carriers for
death or personal injury and in respect of loss of
or damage to baggage.
We have held in the case of Ong Yiu v. Court of Appeals, supra, and reiterated in a
similar case where herein petitioner was also sued for damages, Pan American
World Airways v. Intermediate Appellate Court (164 SCRA 268 [1988]) that:
It (plane ticket) 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. (Tolentino,
Civil Code, Vol. IV, 1962 ed., p. 462, citing Mr. Justice J.B.L. Reyes,
Lawyer's Journal, January 31, 1951, p. 49) And as held in Randolph
v. American Airlines, 103 Ohio App. 172, 144 N.E. 2d 878;
Rosenchein v. Trans World Airlines, Inc., 349 S.W. 2d 483, "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.
Considering, therefore, that petitioner had failed to declare a
higher value for his baggage, he cannot be permitted a recovery in
excess of P100.00 . . . (91 SCRA 223 at page 231)
We hasten to add that while contracts of adhesion are not entirely prohibited,
neither is a blind reliance on them encouraged. In the face of facts and
circumstances showing they should be ignored because of their basically one sided
nature, the Court does not hesitate to rule out blind adherence to their terms. (See
Sweet Lines, Inc. v. Teves, 83 SCRA 361, 368-369[1978])
The arguments of the petitioner do not belie the fact that it was indeed
accountable for the loss of the attache case. What the petitioner is concerned
about is whether or not the notice, which it did not fail to state in the plane ticket
and which it deemed to have been read and accepted by the private respondent
will be considered by this Court as adequate under the circumstances of this case.
As earlier stated, the Court finds the provisions in the plane ticket sufficient to
govern the limitations of liabilities of the airline for loss of luggage. The passenger,
upon contracting with the airline and receiving the plane ticket, was expected to be
vigilant insofar as his luggage is concerned. If the passenger fails to adduce evidence
to overcome the stipulations, he cannot avoid the application of the liability
limitations.
The facts show that the private respondent actually refused to register the attache
case and chose to take it with him despite having been ordered by the PANAM
agent to check it in. In attempting to avoid registering the luggage by going back to
the line, private respondent manifested a disregard of airline rules on allowable
handcarried baggages. Prudence of a reasonably careful person also dictates that
cash and jewelry should be removed from checked-in-luggage and placed in one's
pockets or in a handcarried Manila-paper or plastic envelope.
The alleged lack of enough time for him to make a declaration of a higher value and
to pay the corresponding supplementary charges cannot justify his failure to comply
with the requirement that will exclude the application of limited liability. Had he
not wavered in his decision to register his luggage, he could have had enough time
to disclose the true worth of the articles in it and to pay the extra charges or
remove them from the checked-in-luggage. Moreover, an airplane will not depart
meantime that its own employee is asking a passenger to comply with a safety
regulation.
Passengers are also allowed one handcarried bag each provided it conforms to
certain prescribed dimensions. If Mr. Rapadas was not allowed to handcarry the lost
attache case, it can only mean that he was carrying more than the allowable weight
for all his luggages or more than the allowable number of handcarried items or
more than the prescribed dimensions for the bag or valise. The evidence on any
arbitrary behavior of a Pan Am employee or inexcusable negligence on the part of
the carrier is not clear from the petition. Absent such proof, we cannot hold the
carrier liable because of arbitrariness, discrimination, or mistreatment.
We are not by any means suggesting that passengers are always bound to the
stipulated amounts printed on a ticket, found in a contract of adhesion, or printed
elsewhere but referred to in handouts or forms. We simply recognize that the
reasons behind stipulations on liability limitations arise from the difficulty, if not
impossibility, of establishing with a clear preponderance of evidence the contents
of a lost valise or suitcase. Unless the contents are declared, it will always be the
word of a passenger against that of the airline. If the loss of life or property is
caused by the gross negligence or arbitrary acts of the airline or the contents of the
lost luggage are proved by satisfactory evidence other than the self-serving
declarations of one party, the Court will not hesitate to disregard the fine print in a
contract of adhesion. (See Sweet Lines Inc. v. Teves, supra) Otherwise, we are
constrained to rule that we have to enforce the contract as it is the only reasonable
basis to arrive at a just award.
We note that the finding on the amount lost is more of a probability than a proved
conclusion.
The trial court stated:
xxx xxx xxx
We come now to the actual loss of $4,750.00 which the plaintiff
claims was the amount of his retirement award and vacation pay.
According to the plaintiff, this was in cash of $100 denominations
and was placed in an envelope separate from the other money he
was carrying. Plaintiff presented the memorandum award, Exhibit
T-1 and the vouchers of payment, Exhibits T-2 and T-3. Under the
circumstances, recited by the plaintiff in which the loss occurred,
the Court believes that plaintiff could really have placed this
amount in the attache case considering that he was originally
handcarrying said attache case and the same was looked, and he
did not expect that he would be required to check it in. . . .
(Amended Record on Appeal, p. 75; Emphasis ours)
The above conclusion of the trial court does not arise from the facts. That the
attache case was originally handcarried does not beg the conclusion that the
amount of $4,750.00 in cash could have been placed inside. It may be noted that
out of a claim for US$42,403.90 as the amount lost, the trial court found for only
US$5,228.90 and 100 paengs. The court had doubts as to the total claim.
The lost luggage was declared as weighing around 18 pounds or approximately 8
kilograms. At $20.00 per kilogram, the petitioner offered to pay $160.00 as a higher
value was not declared in advance and additional charges were not paid. We note,
however, that an amount of $400.00 per passenger is allowed for unchecked
luggage. Since the checking-in was against the will of the respondent, we treat the
lost bag as partaking of involuntarily and hurriedly checked-in luggage and
continuing its earlier status as unchecked luggage. The fair liability under the
petitioner's own printed terms is $400.00. Since the trial court ruled out
discriminatory acts or bad faith on the part of Pan Am or other reasons warranting
damages, there is no factual basis for the grant of P20,000.00 damages.

As to the question of whether or not private respondent should be paid attorney's

fees, the Court sustains the finding of the trial court and the respondent appellate
court that it is just and equitable for the private respondent to recover expenses for
litigation in the amount of P5,000.00. Article 22(4) of the Warsaw Convention, as
amended does not preclude an award of attorney's fees. That provision states that
the limits of liability prescribed in the instrument "shall not prevent the court from
awarding, in accordance with its own law, in addition, the whole or part of the court
costs and other expenses of litigation incurred by the plaintiff." We, however, raise
the award to P10,000.00 considering the resort to the Court of Appeals and this
Court.

WHEREFORE, the petition is hereby GRANTED and the decision of the respondent
Court of Appeals is REVERSED and SET ASIDE. The petitioner is ordered to pay the
private respondent damages in the amount of US$400.00 or its equivalent in
Philippine Currency at the time of actual payment, P10,000.00 in attorney's fees,
and costs of the suit.

SO ORDERED.
G.R. No. 85331 August 25, 1989
KAPALARAN BUS LINE, petitioner, vs. ANGEL CORONADO, LOPE GRAJERA,
DIONISIO SHINYO, and THE COURT OF APPEALS, respondents,
FELICIANO, J.:
Petitioner Kapalaran Bus Line ("Kapalaran") seeks the reversal or modification of
the Court of Appeals' decision in CA G.R. CV No. 12476 and the absolution of
petitioner from all liability arising from the collision between one of petitioner's
buses and a jeepney owned by respondent Coronado, driven by respondent Grajera
and in which jeepney respondent Shinyo was a passenger.
The facts of this case as found by the trial court and adopted by the Court of
Appeals, are summarized in the trial court's decision and quoted in the Court of
Appeals' own judgment in the following terms:
The accident happened on the National Highway at 10:30 A.M. on
August 2, 1982. The jeepney driven by Lope Grajera was then
corning from Pila, Laguna on its way towards the direction of Sta.
Cruz, traversing the old highway. As it reached the intersection
where there is a traffic sign 'yield,' it stopped and cautiously
treated the intersection as a "Thru Stop' street, which it is not.
The KBL bus was on its way from Sta. Cruz, Laguna, driven by its
regular driver Virgilio Llamoso, on its way towards Manila. The
regular itinerary of the KBL bus is through the town proper of Pila,
Laguna, but at times it avoids this if a bus is already fully loaded
with passengers and can no longer accommodate additional
passengers. As the KBL bus neared the intersection, Virgilio
Llamoso inquired from his conductor if they could still
accommodate passengers and learning that they were already
full, he decided to bypass Pila and instead, to proceed along the
national highway. Virgilio Llamoso admitted that there was
another motor vehicle ahead of him.
The general rule is that the vehicle on the national highway has
the right-of-way as against a feeder road. Another general rule is
that the vehicle coming from the right has the right-of-way over
the vehicle coming from the left. The general rules on right-of-
way may be invoked only if both vehicles approach the
intersection at almost the same time. In the case at bar, both
roads are national roads. Also, the KBL bus was still far from the
intersection when the jeepney reached the same. As testified to
by Atty. Conrado L. Manicad who was driving a Mustang car
coming from the direction of Sta. Cruz and proceeding towards
the direction of Manila, he stopped at the intersection to give way
to the jeepney driven by Grajera. Behind Manicad were two
vehicles, a car of his client and another car. A Laguna Transit bus
had just entered the town of Pila ahead of Atty. Manicad.
The sketch marked Exhibit 'E' indicates very clearly that the
jeepney had already traversed the intersection when it met the
KBL bus head-on. It is also obvious that the point of impact was on
the right lane of the highway which is the lane properly belonging
to the jeepney. As testified to by Lope Grajera, the KBL bus
ignored the stopped vehicles of Atty. Manicad and the other
vehicles behind Atty. Manicad and overtook both vehicles at the
intersection, therefore, causing the accident.
Judging from the testimony of Atty. Conrado L. Manicad and the
sketch (Exhibit 'E'), the sequence of events shows that the first
vehicle to arrive at the intersection was the jeepney. Seeing that
the road was clear, the jeepney which had stopped at the
intersection began to move forward, and for his part, Atty.
Manicad stopped his car at the intersection to give way to the
jeepney. At about this time, the KBL bus was approaching the
intersection and its driver was engaged in determining from his
conductor if they would still pass through the town proper of Pila.
Upon learning that they were already full, he turned his attention
to the road and found the stopped vehicles at the intersection
with the jeepney trying to cross the intersection. The KBL bus had
no more room within which to stop without slamming into the
rear of the vehicle behind the car of Atty. Manicad. The KBL driver
chose to gamble on proceeding on its way, unfortunately, the
jeepney driven by Grajera, which had the right-of-way, was about
to cross the center of the highway and was directly on the path of
the KBL bus. The gamble made by Llamoso did not pay off. The
impact indicates that the KBL bus was travelling at a fast rate of
speed because, after the collision, it did not stop; it travelled for
another 50 meters and stopped only when it hit an electric post
(pp. 3-4, Decision; pp. 166167, Record). 1
On 14 September 1982, Kapalaran, apparently believing that the best defense was
offense, filed a complaint for damage to property and physical injuries through
reckless imprudence against respondents Angel Coronado and Lope Grajera in the
Regional Trial Court, Branch 27, Sta. Cruz, Laguna. Respondents answered with their
own claims (counter-claims) for damages. A third-party complaint and/or a
complaint for intervention was also filed in the same case against Kapalaran by
jeepney passenger Dionisio Shinyo.
On 15 October 1986, after trial, the trial court rendered a judgment in favor of
private respondents and ordering Kapalaran
(a) to pay Angel Coronado the sum of P40,000.00 as
compensation for the totally wrecked jeepney, plus the sum of
P5,000.00 as attorney's fees and litigation expenses, and
(b) to Dionisio Shinyo the sum of P35,000.00 representing the
expenses incurred by said intervenor for his treatment including
his car-hire, the further sum of P30,000.00 representing the
expenses said defendant will incur for his second operation to
remove the intramedulary nail from his femur, the additional sum
of P50,000.00 to serve as moral damages for the pain and
suffering inflicted on said defendant, plus the sum of P10,000.00
in the concept of exemplary damages to serve as a deterrent to
others who, like the plaintiff, may be minded to induce accident
victims to perjure themselves in a sworn statement, and the sum
of P15,000.00 as attorney's fees and litigation expenses.
From the above judgment, Kapalaran appealed to the Court of Appeals assailing the
trial court's findings on the issue of fault and the award of damages. The Court of
Appeals, on 28 June 1988, affirmed the decision of the trial court but modified the
award of damages by setting aside the grant of exemplary damages as well as the
award of attomey's fee and litigation expenses made to Dionisio Shinyo. 2
This decision of the Court of Appeals is now before us on a Petition for Review, a
motion for reconsideration by Kapalaran having been denied by that court on 13
October 1988.
Kapalaran assails the findings of fact of the Regional Trial Court and of the Court of
Appeals, and insists before this Court that respondent Grajera, driver of the
jeepney, was at fault and not the driver of Kapalaran's bus. It must be remembered
that it is not the function of this Court to analyze and weigh evidence presented by
the parties all over again and that our jurisdiction is in principle limited to reviewing
errors of law that might have been committed by the Court of Appeals. Kapalaran
has made no compelling showing of any misapprehension of facts on the part of the
Court of Appeals that would require us to review and overturn the factual findings
of that court. On the contrary, examination of the record shows that not only are
the conclusions of fact of the Court of Appeals and the trial court on who the bus
driver or the jeepney driver had acted negligently and was at fault in the collision
of their vehicles, amply supported by the evidence of record, but also that
Kapalaran's bus driver was grossly negligent and had acted wantonly and in obvious
disregard of the applicable rules on safety on the highway.
Kapalaran's driver had become aware that some vehicles ahead of the bus and
travelling in the same direction had already stopped at the intersection obviously to
give way either to pedestrians or to another vehicle about to enter the intersection.
The bus driver, who was driving at a speed too high to be safe and proper at or near
an intersection on the highway, and in any case too high to be able to slow down
and stop behind the cars which had preceded it and which had stopped at the
intersection, chose to swerve to the left lane and overtake such preceding vehicles,
entered the intersection and directly smashed into the jeepney within the
intersection. Immediately before the collision, the bus driver was actually violating
the following traffic rules and regulations, among others, in the Land Transportation
and Traffic Code, Republic Act No. 4136, as amended:
Sec. 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 or 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.
xxx xxx xxx
Sec. 41. Restrictions on overtaking and passing. _1 (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.
xxx xxx xxx
(c) The driver of a vehicle shall not overtake or pass any other
vehicle proceeding in the same direction, at any railway grade
crossing, or 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 driver,7 Where the employer is held liable for damages, it has of course a right of
another vehicle on the right. Nothing in this section shall be recourse against its own negligent employee. If petitioner Kapalaran was interested
construed to prohibit a driver overtaking or passing, upon the in maintaining its right of recourse against or reimbursement from its own
right, another vehicle which is making or about to make a left driver, 8 it should have appealled from that portion of the trial court's decision
turn. which had failed to hold the bus driver is not "merely subsidiary," and is not limited
to cases where the employee "cannot pay his liability" nor are private respondents
xxx xxx xxx compelled frist to proceed against the bus driver. The liability of the employer
under Article 2180 of the Civil Code is direct and immediate; it is not conditioned
(Emphasis supplied) upon prior recourse against the negligent employee and a prior showing of the
insolvency of such employee. 9 So far as the record shows, petitioner Kapalaran was
unable to rebut the presumption of negligence on its own part. The award of moral
Thus, a legal presumption arose that the bus driver was negligent 3 a presumption
damages against petitioner Kapalaran is not only entirely in order; it is also quite
Kapalaran was unable to overthrow.
modest consideirng Dionisio Shinyo's death during the pendency of this petition, a
death hastened by, if not directly due to, the grievous injuries sustained by him in
Petitioner's contention that the jeepney should have stopped before entering the
the violent collision.
"Y-intersection" because of the possibility that another vehicle behind the cars
which had stopped might not similarly stop and might swerve to the left to proceed
The Court of Appeals deleted the award of exemplary damages which the trial court
to the highway en route to Manila, is more ingenious than substantial. It also offers
had granted in order "to serve as a deterrent to others who, like the plaintiff
illustration of the familiar litigation tactic of shifting blame from one's own
[Kapalaran], may be minded to induce accident victims to perjure themselves in a
shoulders to those of the other party. But the jeepney driver, seeing the cars closest
sworn statement." The Court of Appeals held that htere was no basis for this award
to the intersection on the opposite side of the highway come to a stop to give way
of exemplary damages, stating that it was not "such a reprehensible act to try to
to him, had the right to assume that other vehicles further away and behind the
gather witnesses for one's cause" and that there was no evidence of use of "presure
stopped cars would similarly come to a stop and not seek illegally to overtake the
or influence" to induce the accident victims to perjure themselves While that might
stopped vehicles and come careening into the intersection at an unsafe
have been so, both the trial court and the Court of Appeals overlook another and
speed. 4 Petitioner's bus was still relatively far away from the intersection when the
far more compelling basis for the award of exemplary damages against petitioner
jeepney entered the same; the bus collided head on into the jeepney because the
Kapalaran in this case. There is no question that petitioner's bus driver was grossly
bus had been going at an excessively high velocity immediately before and at the
and very probably criminally negligent in his reckless disregard of the rights of other
time of overtaking the stopped cars, and so caught the jeepney within the
vehicles and their pasangers and of pedestrian as well The Court is entitled to take
intersection. It was also the responsibility of the bus driver to see to it, when it
judicial notice of the gross negligence and the appalling disregard of the physical
overtook the two (2) cars ahead which had stopped at the intersection, that the left
safety and property of others so commonly exhibited today by the drivers of
lane of the road within the intersection and beyond was clear. The point of impact
passanger bussses and similar vehicles on our highways. The law requires petitioner
was on the left side of the intersection (the light lane so far as concerns the jeepney
as common carrier to exercise extraordinary diligence incarrying and transporting
coming from the opposite side), which was precisely the lane or side on which the
their passanger safely "as far as human care and foresight can proved, using the
jeepney had a right to be.
utmost diligence of very cautious persons, with due regard for all
circumstances." 10 In requiring the highest possible degree of diligence from
Petitioner Kapalaran also assails the award of moral damages against itself, upon
common carriers and creating a presumption of negligence against them, the law
the ground that its own bus driver, third-party defendant, was apparently not held
compels them to curb the recklessness of their drivers. 11 While the immediate
liable by the trial court . 5 Hence, Kapalaran argues that there was no justification
beneficiaries of the standard of extraordinary diligence are, of course, the
for holding it, the employer, liable for damages, considering that such liability was
passengers and owners of cargo carried by a common carrier, they are not only
premised upon the bus driver's negligence and that petitioner "as mere employer"
persons that the law seeks to benefit. For if common carriers carefully observed the
was not guilty of such negligence or imprudence. 6 This contention in thoroughly
statutory standard of extraordinary diligence in respect of of their own passengers,
unpersuasive. The patent and gross negligence on the part of the petitioner
they cannot help but simultaneously benefit pedestrians and the owners and
Kapalaran's driver raised the legal presumption that Kapalaran as employer was
passengers of other vehicles who are equally entitled to the safe and convenient
guilty of negligence either in the selection or in the supervision of its bus
use of our roads and highways. 12 The law seeks to stop and prevent the slaughter
and maiming of people (whether passengers or not) and the destruction of property
(whether freight or not) on our highways by buses, the very size and power of
which seem often to inflame the minds of their drivers. Article 2231 of the Civil
Code explicitly authorizes the imposition of exemplary damages in cases of quasi-
delicts "if the defendant acted with gross negligence." Thus we believe that the
award of exemplary damages by the trial court was quite proper, although granted
for the wrong reason, and should not only be restored but augmented in the
present case. The Court is aware that respondent Shinyo did not file a separate
petition for review to set aside that portion of the Court of Appeals'decision which
deleted the grant by the trial court of exemplary damages. It is settled, however,
that issues which must be resolved if substantial justice is to be rendered to the
parties, may and should be considered and decided by this Court even if those
issues had not been explicitly raised by the party affected. 13 In the instant case, it
is not only the demands of substantial justice but also the compelling
considerations of public policy noted above, which impel us to the conclusion that
the trial court's award of exemplary damages was erroneously deleted and must be
restored and brought more nearly to the level which public policy and substantial
justice require.

In much the same vein, we believe that the award by the trial court of P15,000.00
as attorney's fees and litigation expenses, deleted by the Court of Appeals, should
similarly be restored, being both authorized by law 14 and demanded by substantial
justice in the instant case.

WHEREFORE, the Petition for Review on certiorari is DENIED for lack of merit and
the Decision of the Court of Appeals is hereby AFFIRMED, except (1) that the award
of exemplary damages to Dionisio Shinyo shall be restored and increased from
P10,000.00 to P25,000.00, and (2) that the grant of attorney's fees and litigation
expenses in the sum of P15,000.00 to Dionisio Shinyo shall similarly be restored.
Costs against petitioner.

SO ORDERED.
G.R. No. 88052 December 14, 1989
JOSE P. MECENAS, ROMEO P. MECENAS, LILIA P. MECENAS, ORLANDO P.
MECENAS, VIOLETA M. ACERVO, LUZVIMINDA P. MECENAS; and OFELIA M.
JAVIER, petitioners, vs. HON. COURT OF APPEALS, CAPT. ROGER SANTISTEBAN and
NEGROS NAVIGATION CO., INC., respondents.
FELICIANO, J.:
At 6:20 o'clock in the morning of 22 April 1980, the M/T "Tacloban City," a barge-
type oil tanker of Philippine registry, with a gross tonnage of 1,241,68 tons, owned
by the Philippine National Oil Company (PNOC) and operated by the PNOC Shipping
and Transport Corporation (PNOC Shipping), having unloaded its cargo of
petroleum products, left Amlan, Negros Occidental, and headed towards Bataan. At
about 1:00 o'clock in the afternoon of that same day, the M/V "Don Juan," an
interisland vessel, also of Philippine registry, of 2,391.31 tons gross weight, owned
and operated by the Negros Navigation Co., Inc. (Negros Navigation) left Manila
bound for Bacolod with seven hundred fifty (750) passengers listed in its manifest,
and a complete set of officers and crew members.
On the evening of that same day, 22 April 1980, at about 10:30 o'clock, the
"Tacloban City" and the "Don Juan" collided at the Talbas Strait near Maestra de
Ocampo Island in the vicinity of the island of Mindoro. When the collision occurred,
the sea was calm, the weather fair and visibility good. As a result of this collision,
the M/V "Don Juan" sank and hundreds of its passengers perished. Among the ill-
fated passengers were the parents of petitioners, the spouses Perfecto Mecenas
and Sofia Mecenas, whose bodies were never found despite intensive search by
petitioners.
On 29 December 1980, petitioners filed a complaint in the then Court- of First
Instance of Quezon City, docketed as Civil Case No. Q-31525, against private
respondents Negros Navigation and Capt. Roger Santisteban, the captain of the
"Don Juan" without, however, impleading either PNOC or PNOC Shipping. In their
complaint, petitioners alleged that they were the seven (7) surviving legitimate
children of Perfecto Mecenas and Sofia Mecenas and that the latter spouses
perished in the collision which had resulted from the negligence of Negros
Navigation and Capt. Santisteban. Petitioners prayed for actual damages of not less
than P100,000.00 as well as moral and exemplary damages in such amount as the
Court may deem reasonable to award to them.
Another complaint, docketed as Civil Case No. Q-33932, was filed in the same court
by Lilia Ciocon claiming damages against Negros Navigation, PNOC and PNOC
Shipping for the death of her husband Manuel Ciocon, another of the luckless
passengers of the "Don Juan." Manuel Ciocon's body, too, was never found.
The two (2) cases were consolidated and heard jointly by the Regional Trial Court of
Quezon City, Branch 82. On 17 July 1986, after trial, the trial court rendered a
decision, the dispositive of which read as follows:
WHEREFORE, the Court hereby renders judgment ordering:
a) The defendant Negros Navigation Co., Inc. and Capt. Roger
Santisteban jointly and severally liable to pay plaintiffs in Civil
Case No Q-31525, the sum of P400,000.00 for the death of
plaintiffs' parents, Perfecto A. Mecenas and Sofia P. Mecenas; to
pay said plaintiff's the sum of P15.000,00 as and for attorney's
fees; plus costs of the suit.
b) Each of the defendants Negros Navigation Co Inc. and
Philippine National Oil Company/PNOC Shipping and
Transportation Company, to pay the plaintiff in Civil Case No. Q-
33932, the sum of P100,000.00 for the death of Manuel Ciocon, to
pay said plaintiff jointly and severally, the sum of P1 5,000.00 as
and for attorney's fees, plus costs of the suit. 1
Negros Navigation, Capt. Santisteban, PNOC and PNOC Shipping appealed the trial
court's decision to the Court of Appeals. Later, PNOC and PNOC Shipping withdrew
their appeal citing a compromise agreement reached by them with Negros
Navigation; the Court of Appeals granted the motion by a resolution dated 5
September 1988, subject to the reservation made by Lilia Ciocon that she could not
be bound by the compromise agreement and would enforce the award granted her
by the trial court.
In time, the Court of Appeals rendered a decision dated 26 January 1989 which
decreed the following:
WHEREFORE, in view of the foregoing, the decision of the court a quo is hereby
affirmed as modified with respect to Civil Case No. 31525, wherein defendant
appellant Negros Navigation Co. Inc. and Capt. Roger Santisteban are held jointly
and severally liable to pay the plaintiffs the amount of P100,000. 00 as actual and
compensatory damages and P15,000.00 as attorney's fees and the cost of the suit. 2
The issue to be resolved in this Petition for Review is whether or not the Court of
Appeals had erred in reducing the amount of the damages awarded by the trial
court to the petitioners from P400,000.00 to P100,000.00.
We note that the trial court had granted petitioners the sum of P400,000,00 "for
the death of [their parents]" plus P15,000.00 as attorney's fees, while the Court of
Appeals awarded them P100,000.00 "as actual and compensatory damages" and
P15,000.00 as attorney's fees. To determine whether such reduction of the
damages awarded was proper, we must first determine whether petitioners were
entitled to an award of damagesother than actual or compensatory damages, that
is, whether they were entitled to award of moral and exemplary damages.
We begin by noting that both the trial court and the Court of Appeals considered
the action (Civil Case No. Q-31525) brought by the sons and daughters of the
deceased Mecenas spouses against Negros Navigation as based on quasi-delict. We
believed that action is more appropriately regarded as grounded on contract, the
contract of carriage between the Mecenas spouses as regular passengers who paid
for their boat tickets and Negros Navigation; the surviving children while not
themselves passengers are in effect suing the carrier in representation of their
deceased parents. 3 Thus, the suit (Civil Case No. Q-33932) filed by the widow Lilia
Ciocon was correctly treated by the trial and appellate courts as based on contract
(vis-a-vis Negros Navigation) and as well on quasi-delict (vis-a-vis PNOC and PNOC
Shipping). In an action based upon a breach of the contract of carriage, the carrier
under our civil law is liable for the death of passengers arising from the negligence
or willful act of the carrier's employees although such employees may have acted
beyond the scope of their authority or even in violation of the instructions of the
carrier, 4which liability may include liability for moral damages. 5 It follows that
petitioners would be entitled to moral damages so long as the collision with the
"Tacloban City" and the sinking of the "Don Juan" were caused or attended by
negligence on the part of private respondents.
In respect of the petitioners' claim for exemplary damages, it is only necessary to
refer to Article 2232 of the Civil Code:
Article 2332. In contracts and quasi-contracts, the court may
exemplary damages if the defendant acted in a wanton,
fraudulent, reckless, oppressive or malevolent manner. 6
Thus, whether petitioners are entitled to exemplary damages as claimed must
depend upon whether or not private respondents acted recklessly, that is, with
gross negligence.
We turn, therefore, to a consideration of whether or not Negros Navigation and
Capt. Santisteban were grossly negligent during the events which culminated in the
collision with "Tacloban City" and the sinking of the "Don Juan" and the resulting
heavy loss of lives.
The then Commandant of the Philippine Coast Guard, Commodore B.C. Ochoco, in a
decision dated 2 March 1981, held that the "Tacloban City" was "primarily and
solely [sic] at fault and responsible for the collision." 7Initially, the Minister of
National Defense upheld the decision of Commodore Ochoco. 8 On Motion for
Reconsideration, however, the Minister of National Defense reversed himself and
held that both vessels had been at fault:
It is therefore evident from a close and thorough review of the
evidence that fault is imputable to both vessels for the collision.
Accordingly, the decision dated March 12, 1982, subject of the
Motion for Reconsideration filed by counsel of M/T Tacloban City,
is hereby reversed. However, the administrative penalties
imposed oil both vessels and their respective crew concerned are
hereby affirmed. 9
The trial court, after a review of the evidence submitted during the trial, arrived at
the same conclusion that the Minister of National Defense had reached that both
the "Tacloban City" and the "Don Juan" were at fault in the collision. The trial court
summarized the testimony and evidence of PNOC and PNOC Shipping as well as of
Negros Navigation in the following terms:
Defendant PNOC's version of the incident:
M/V Don Juan was first sighted at about 5 or 6 miles from
Tacloban City (TSN, January 21, 1985, p. 13); it was on the
starboard (right) side of Tacloban City. This was a visual contact;
not picked up by radar (p. 15, Ibid). Tacloban City was travelling
310 degrees with a speed of 6 knots, estimated speed of Don Juan
of 16 knots (TSN, May 9, pp. 5-6). As Don Juan approached,
Tacloban City gave a leeway of 1 0 degrees to the left. 'The
purpose was to enable Tacloban to see the direction of Don Juan
(p. 19, Ibid). Don Juan switched to green light, signifying that it
will pass Tacloban City's right side; it will be a starboard to
starboard passing (p. 21, Ibid) Tacloban City's purpose in giving a
leeway of 10 degrees at this point, is to give Don Juan more space
for her passage (p. 22, Ibid). This was increased by Tacloban City
to an additional 15 degrees towards the left (p. 22, Ibid). The way
was clear and Don Juan has not changed its course (TSN, May
9,1985, p. 39).
When Tacloban City altered its course the second time, from 300
degrees to 285 degrees, Don Juan was about 4.5 miles away (TSN,
May 9,1985, p. 7).
Despite executing a hardport maneuver, the collision nonetheless
occurred. Don Juan rammed the Tacloban City near the starboard
bow (p. 7, Ibid)."
NENACO's [Negros Navigation] version.
Don Juan first sighted Tacloban City 4 miles away, as shown by
radar (p. 13, May 24, 1983). Tacloban City showed its red and
green lights twice; it proceeded to, and will cross, the path of Don
Juan. Tacloban was on the left side of Don Juan (TSN, April
20,1983, p. 4).
Upon seeing Tacloban's red and green lights, Don Juan executed
hard starboard (TSN, p. 4, Ibid.) This maneuver is in conformity
with the rule that 'when both vessels are head on or nearly head
on, each vessel must turn to the right in order to avoid each
other. (p. 5, Ibid). Nonetheless, Tacloban appeared to be heading
towards Don Juan (p. 6, Ibid),
When Don Juan executed hard starboard, Tacloban was about
1,500 feet away (TSN, May 24,1983, p. 6). Don Juan, after
execution of hard starboard, will move forward 200 meters before
the vessel will respond to such maneuver (p. 7, Ibid). The speed of
Don Juan at that time was 17 knits; Tacloban City 6.3 knots. t
"Between 9 to 15 seconds from execution of hard starboard,
collision occurred (p. 8, Ibid). (pp. 3-4 Decision). 10
The trial court concluded:
M/ V Don Juan and Tacloban City became aware of each other's
presence in the area by visual contact at a distance of something
like 6 miles from each other. They were fully aware that if they
continued on their course, they will meet head on. Don Juan -
steered to the right; Tacloban City continued its course to the left.
There can be no excuse for them not to realize that, with such
maneuvers, they will collide. They executed maneuvers
inadequate, and too late, to avoid collision.
The Court is of the considered view that the defendants are
equally negligent and are liable for damages. (p. 4, decision). 11
The Court of Appeals, for its part, reached the same
conclusion. 12
There is, therefore, no question that the "Don Juan" was at least as negligent as the
M/T "Tacloban City" in the events leading up to the collision and the sinking of the
"Don Juan." The remaining question is whether the negligence on the part of the
"Don Juan" reached that level of recklessness or gross negligence that our Civil
Code requires for the imposition of exemplary damages. Our own review of the
record in the case at bar requires us to answer this in the affirmative.
In the first place, the report of the Philippine Coast Guard Commandant (Exhibit "l
0"), while holding the "Tacloban City" as "primarily and solely [sic] at fault and
responsible for the collision," did itself set out that there had been fault or
negligence on the part of Capt. Santisteban and his officers and crew before the
collision and immediately after contact of the two (2) vessels. The decision of
Commodore Ochoco said:
xxxxxxxxx
M/S Don Juan's Master, Capt. Rogelio Santisteban, was playing
mahjong before and up to the time of collision. Moreover, after
the collision, he failed to institute appropriate measures to delay
the sinking MS Don Juan and to supervise properly the execution
of his order of abandonship. As regards the officer on watch,
Senior 3rd Mate Rogelio Devera, he admitted that he failed or did
not call or inform Capt. Santisteban of the imminent danger of
collision and of the actual collision itself Also, he failed to assist
his master to prevent the fast sinking of the ship. The record also
indicates that Auxiliary Chief Mate Antonio Labordo displayed
laxity in maintaining order among the passengers after the
collision.
x x x x x x x x x. 13
We believe that the behaviour of the captain of the "Don Juan" in tills instance-
playing mahjong "before and up to the time of collision constitutes behaviour that
is simply unacceptable on the part of the master of a vessel to whose hands the
lives and welfare of at least seven hundred fifty (750) passengers had been
entrusted. Whether or not Capt. Santisteban was "off-duty" or "on-duty" at or
around the time of actual collision is quite immaterial; there is, both realistically
speaking and in contemplation of law, no such thing as "off-duty" hours for the
master of a vessel at sea that is a common carrier upon whom the law imposes the
duty of extraordinary diligence-
 [t]he duty 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. 14
The record does not show that was the first or only time that Capt. Santisteban had
entertained himself during a voyage by playing mahjong with his officers and
passengers; Negros Navigation in permitting, or in failing to discover and correct
such behaviour, must be deemed grossly negligent.
Capt. Santisteban was also faulted in the Philippine Coast Guard decision for failing
after the collision, "to institute appropriate measures to delay the sinking of M/V
Don Juan." This appears to us to be a euphemism for failure to maintain the sea-
worthiness or the water-tight integrity of the "Don Juan." The record shows that the
"Don Juan" sank within ten (10) to fifteen (15) minutes after initial contact with the
"Tacloban City. 15 While the failure of Capt. Santisteban to supervise his officers
and crew in the process of abandoning the ship and his failure to avail of measures
to prevent the too rapid sinking of his vessel after collision, did not cause the
collision by themselves, such failures doubtless contributed materially to the
consequent loss of life and, moreover, were indicative of the kind and level of
diligence exercised by Capt. Santisteban in respect of his vessel and his officers and
men prior to actual contact between the two (2) vessels. The officer-on-watch in
the "Don Juan" admitted that he had failed to inform Capt. Santisteban not only of
the "imminent danger of collision" but even of "the actual collision itself "
There is also evidence that the "Don Juan" was carrying more passengers than she
had been certified as allowed to carry. The Certificate of Inspection 16 dated 27
August 1979, issued by the Philippine Coast Guard Commander at Iloilo City, the
Don Juan's home port, states:
Passengers allowed : 810
Total Persons Allowed : 864
The report of the Philippine Coast Guard (Exhibit "10") stated that the "Don Juan"
had been "officially cleared with 878 passengers on board when she sailed from the
port of Manila on April 22, 1980 at about 1:00 p.m." This head-count of the
passengers "did not include the 126 crew members, children below three (3) years
old and two (2) half-paying passengers" which had been counted as one adult
passenger. 17 Thus, the total number of persons on board the "Don Juan" on that
ill-starred night of 22 April 1 980 was 1,004, or 140 persons more than the
maximum lumber that could be safely carried by the "Don Juan," per its own
Certificate of Inspection. 18 We note in addition, that only 750 passengers had been
listed in its manifest for its final voyage; in other words, at least 128 passengers on
board had not even been entered into the "Don Juan's" manifest. The "Don Juan's"
Certificate of Inspection showed that she carried life boat and life raft
accommodations for only 864 persons, the maximum number of persons she was
permitted to carry; in other words, she did not carry enough boats and life rafts for
all the persons actually on board that tragic night of 22 April 1980.
We hold that under these circumstances, a presumption of gross negligence on the
part of the vessel (her officers and crew) and of its ship-owner arises; this
presumption was never rebutted by Negros Navigation.
The grossness of the negligence of the "Don Juan" is underscored when one
considers the foregoing circumstances in the context of the following facts: Firstly,
the "Don Juan" was more than twice as fast as the "Tacloban City." The "Don
Juan's" top speed was 17 knots; while that of the "Tacloban City" was 6.3.
knots. 19Secondly, the "Don Juan" carried the full complement of officers and crew
members specified for a passenger vessel of her class. Thirdly, the "Don Juan" was
equipped with radar which was functioning that night. Fourthly, the "Don Juan's"
officer on-watch had sighted the "Tacloban City" on his radar screen while the latter
was still four (4) nautical miles away. Visual confirmation of radar contact was
established by the "Don Juan" while the "Tacloban City" was still 2.7 miles
away. 20 In the total set of circumstances which existed in the instant case, the
"Don Juan," had it taken seriously its duty of extraordinary diligence, could have
easily avoided the collision with the "Tacloban City," Indeed, the "Don Juan" might
well have avoided the collision even if it had exercised ordinary diligence merely.
It is true that the "Tacloban City" failed to follow Rule 18 of the International Rules
of the Road which requires two (2) power- driven vessels meeting end on or nearly
end on each to alter her course to starboard (right) so that each vessel may pass on
the port side (left) of the other. 21 The "Tacloban City," when the two (2) vessels
were only three-tenths (0.3) of a mile apart, turned (for the second time) 150 to
port side while the "Don Juan" veered hard to starboard. This circumstance, while it
may have made the collision immediately inevitable, cannot, however, be viewed in
isolation from the rest of the factual circumstances obtaining before and up to the
collision. In any case, Rule 18 like all other International Rules of the Road, are not
to be obeyed and construed without regard to all the circumstances surrounding a
particular encounter between two (2) vessels. 22 In ordinary circumstances, a
vessel discharges her duty to another by a faithful and literal observance of the
Rules of Navigation, 23 and she cannot be held at fault for so doing even though a
different course would have prevented the collision. This rule, however, is not to be
applied where it is apparent, as in the instant case, that her captain was guilty of
negligence or of a want of seamanship in not perceiving the necessity for, or in so
acting as to create such necessity for, a departure from the rule and acting
accordingly. 24 In other words, "route observance" of the International Rules of the
Road will not relieve a vessel from responsibility if the collision could have been
avoided by proper care and skill on her part or even by a departure from the
rules. 25
In the petition at bar, the "Don Juan" having sighted the "Tacloban City" when it
was still a long way off was negligent in failing to take early preventive action and in
allowing the two (2) vessels to come to such close quarters as to render the collision
inevitable when there was no necessity for passing so near to the "Tacloban City" as
to create that hazard or inevitability, for the "Don Juan" could choose its own
distance. 26, It is noteworthy that the "Tacloban City," upon turning hard to port
shortly before the moment of collision, signalled its intention to do so by giving two
(2) short blasts with horn. 26A The "Don Juan " gave no answering horn blast to
signal its own intention and proceeded to turn hatd to starboard. 26B
We conclude that Capt. Santisteban and Negros Navigation are properly held liable
for gross negligence in connection with the collision of the "Don Juan" and
"Tacloban City" and the sinking of the "Don Juan" leading to the death of hundreds
of passengers. We find no necessity for passing upon the degree of negligence or
culpability properly attributable to PNOC and PNOC Shipping or the master of the
"Tacloban City," since they were never impleaded here.
It will be recalled that the trial court had rendered a lump sum of P400,000.00 to
petitioners for the death of their parents in the "Don Juan" tragedy. Clearly, the trial
court should have included a breakdown of the lump sum award into its component
parts: compensatory damages, moral damages and exemplary damages. On appeal,
the Court of Appeals could have and should have itself broken down the lump sum
award of the trial court into its constituent parts; perhaps, it did, in its own mind. In
any case, the Court of Appeals apparently relying uponManchester Development
Corporation V. Court of Appeals 27 reduced the P400,000.00 lump sum award into a
P100,000.00 for actual and compensatory damages only.
We believe that the Court of Appeals erred in doing so, It is true that the
petitioners' complaint before the trial court had in the body indicated that the
petitioner-plaintiffs believed that moral damages in the amount of at least
P1,400,000.00 were properly due to them (not P12,000,000.00 as the Court of
Appeals erroneously stated) as well as exemplary damages in the sum of
P100,000.00 and that in the prayer of their complaint, they did not specify the
amount of moral and exemplary damages sought from the trial court. We do not
believe, however, that the Manchester doctrine, which has been modified and
clarified in subsequent decision by the Court in Sun Insurance Office, Ltd. (SIOL), et
al. v. Asuncion, et al. 28 can be applied in the instant case so as to work a striking
out of that portion of the trial court's award which could be deemed nationally to
constitute an award of moral and exemplary damages. Manchester was
promulgated by the Court on 7 May 1987. Circular No. 7 of this Court, which
embodied the doctrine in Manchester, is dated 24 March 1988. Upon the other
hand, the complaint in the case at bar was filed on 29December 1980, that is, long
before either Manchester or Circular No. 7 of 24 March 1988 emerged. The decision
of the trial court was itself promulgated on 17 July 1986, again,
before Manchester and Circular No. 7 were promulgated. We do not believe that
Manchester should have been applied retroactively to this case where a decision on
the merits had already been rendered by the trial court, even though such decision
was then under appeal and had not yet reached finality. There is noindication at
all that petitioners here sought simply to evade payment of the court's filing fees or
to mislead the court in the assessment of the filing fees. In any event, we
apply Manchester as clarified and amplified by Sun Insurance Office Ltd. (SIOL), by
holding that the petitioners shall pay the additional filing fee that is properly
payable given the award specified below, and that such additional filing fee shall
constitute a lien upon the judgment.
We consider, finally, the amount of damages-compensatory, moral and exemplary-
properly imposable upon private respondents in this case. The original award of the
trial court of P400,000.00 could well have been disaggregated by the trial court and
the Court of Appeals in the following manner:
1. actual or compensatory damages proved in the course of trial
consisting of actual expenses
incurred by petitioners
in their search for their
parents' bodies- -P126,000.00
2. actual or compensatory
damages in case of
wrongful death
(P30,000.00 x 2) -P60,000.00 29
(3) moral damages -P107,000.00
(4) exemplary damages -P107,000.00
 Total -P400,000.00 awarded to petitioners to P100,000.00 is hereby REVERSED and SET ASIDE. The
award granted by the trial court is hereby RESTORED and AUGMENTED as follows:
Considering that petitioners, legitimate children of the deceased spouses Mecenas,
are seven (7) in number and that they lost both father and mothe in one fell blow of (a) P 126,000.00 for actual damages;
fate, and considering the pain and anxiety they doubtless experienced while
searching for their parents among the survivors and the corpses recovered from the (b) P 60,000.00 as compensatory damages for wrongful death;
sea or washed ashore, we believe that an additional amount of P200,000.00 for
moral damages, making a total of P307,000.00 for moral damages, making a total of (c) P 307,000.00 as moral damages;
P307,000.00 as moral damages, would be quite reasonable.
(d) P 307,000.00 as exemplary damages making a total of P
Exemplary damages are designed by our civil law to permit the courts to reshape 800,000.00; and
behaviour that is socially deleterious in its consequence by creating negative
incentives or deterrents against such behaviour. In requiring compliance with the
(e) P 15,000.00 as attorney's fees.
standard which is in fact that of the highest possible degree of diligence, from
common carriers and in creating a presumption of negligence against them, the law
Petitioners shall pay the additional filing fees properly due and payable in view of
seels to compel them to control their employees, to tame their reckless instincts
and to force them to take adequate care of human beings and their property. The the award here made, which fees shall be computed by the Clerks of Court of the
trial court, and shall constitute a lien upon the judgment here awarded. Cost
Court will take judicial notive of the dreadful regularity with which grievous
against private respondents.
maritime disasters occur in our waters with massive loss of life. The bulk of our
population is too poor to afford domestic air transportation. So it is that
notwithstanding the frequent sinking of passenger vessels in our waters, crowds of SO ORDERED.
people continue to travel by sea. This Court is prepared to use the instruments
given to it by the law for securing the ends of law and public policy. One of those
instruments is the institution of exemplary damages; one of those ends, of special
importance in an archipelagic state like the Philippines, is the safe and reliable
carriage of people and goods by sea. Considering the foregoing, we believe that an
additional award in the amount of P200,000.00 as exmplary damages, is quite
modest.

The Court is aware that petitioners here merely asked for the restoration of the P
400.000.00 award of the trial court. We underscore once more, however, the firmly
settled doctrine that this Court may consider and resolved all issues which must be
decided in order to render substantial justice to the parties, including issues not
explicity raised by the party affected. In the case at bar, as in Kapalaran Bus Line v.
Coronado, et al., 30 both the demands of sustantial justice and the imperious
requirements of public policy compel us to the conclusion that the trial court's
implicit award of moral and exemplary damages was erronoeusly deledted and
must be restored and augmented and brought more nearely to the level required
by public policy and substantial justice.

WHEREFORE, the Petition for Review on certiorari is hereby GRANTED and the
Decision of the Court of Appeals insofar as it redurce the amount of damages
G.R. No. L-55300 March 15, 1990
FRANKLIN G. GACAL and CORAZON M. GACAL, the latter assisted by her husband,
FRANKLIN G. GACAL,petitioners, vs. PHILIPPINE AIR LINES, INC., and THE
HONORABLE PEDRO SAMSON C. ANIMAS, in his capacity as PRESIDING JUDGE of
the COURT OF FIRST INSTANCE OF SOUTH COTABATO, BRANCH I, respondents.
PARAS, J.:
This is a, petition for review on certiorari of the decision of the Court of First
Instance of South Cotabato, Branch 1,* promulgated on August 26, 1980 dismissing
three (3) consolidated cases for damages: Civil Case No. 1701, Civil Case No. 1773
and Civil Case No. 1797 (Rollo, p. 35).
The facts, as found by respondent court, are as follows:
Plaintiffs Franklin G. Gacal and his wife, Corazon M. Gacal,
Bonifacio S. Anislag and his wife, Mansueta L. Anislag, and the late
Elma de Guzman, were then passengers boarding defendant's
BAC 1-11 at Davao Airport for a flight to Manila, not knowing that
on the same flight, Macalinog, Taurac Pendatum known as
Commander Zapata, Nasser Omar, Liling Pusuan Radia,
Dimantong Dimarosing and Mike Randa, all of Marawi City and
members of the Moro National Liberation Front (MNLF), were
their co-passengers, three (3) armed with grenades, two (2) with
.45 caliber pistols, and one with a .22 caliber pistol. Ten (10)
minutes after take off at about 2:30 in the afternoon, the
hijackers brandishing their respective firearms announced the
hijacking of the aircraft and directed its pilot to fly to Libya. With
the pilot explaining to them especially to its leader, Commander
Zapata, of the inherent fuel limitations of the plane and that they
are not rated for international flights, the hijackers directed the
pilot to fly to Sabah. With the same explanation, they relented
and directed the aircraft to land at Zamboanga Airport,
Zamboanga City for refueling. The aircraft landed at 3:00 o'clock
in the afternoon of May 21, 1976 at Zamboanga Airport. When
the plane began to taxi at the runway, it was met by two armored
cars of the military with machine guns pointed at the plane, and it
stopped there. The rebels thru its commander demanded that a
DC-aircraft take them to Libya with the President of the defendant
company as hostage and that they be given $375,000 and six (6)
armalites, otherwise they will blow up the plane if their demands
will not be met by the government and Philippine Air Lines.
Meanwhile, the passengers were not served any food nor water
and it was only on May 23, a Sunday, at about 1:00 o'clock in the
afternoon that they were served 1/4 slice of a sandwich and 1/10
cup of PAL water. After that, relatives of the hijackers were
allowed to board the plane but immediately after they alighted
therefrom, an armored car bumped the stairs. That commenced
the battle between the military and the hijackers which led
ultimately to the liberation of the surviving crew and the
passengers, with the final score of ten (10) passengers and three
(3) hijackers dead on the spot and three (3) hijackers captured.
City Fiscal Franklin G. Gacal was unhurt. Mrs. Corazon M. Gacal
suffered injuries in the course of her jumping out of the plane
when it was peppered with bullets by the army and after two (2)
hand grenades exploded inside the plane. She was hospitalized at
General Santos Doctors Hospital, General Santos City, for two (2)
days, spending P245.60 for hospital and medical expenses,
Assistant City Fiscal Bonifacio S. Anislag also escaped unhurt but
Mrs. Anislag suffered a fracture at the radial bone of her left
elbow for which she was hospitalized and operated on at the San
Pedro Hospital, Davao City, and therefore, at Davao Regional
Hospital, Davao City, spending P4,500.00. Elma de Guzman died
because of that battle. Hence, the action of damages instituted by
the plaintiffs demanding the following damages, to wit:
Civil Case No. 1701
City Fiscal Franklin G. Gacal and Mrs. Corazon M.
Gacal actual damages: P245.60 for hospital
and medical expenses of Mrs Gacal; P8,995.00
for their personal belongings which were lost
and not recovered; P50,000.00 each for moral
damages; and P5,000.00 for attorney's fees,
apart from the prayer for an award of exemplary
damages (Record, pp. 4-6, Civil Case No. 1701).
Civil Case No. 1773
xxx xxx xxx
Civil Case No. 1797
xxx xxx xxx
The trial court, on August 26, 1980, dismissed the complaints finding that all the
damages sustained in the premises were attributed to force majeure.
On September 12, 1980 the spouses Franklin G. Gacal and Corazon M. Gacal,
plaintiffs in Civil Case No. 1701, filed a notice of appeal with the lower court on pure
questions of law (Rollo, p. 55) and the petition for review oncertiorari was filed with
this Court on October 20, 1980 (Rollo, p. 30).
The Court gave due course to the petition (Rollo, p. 147) and both parties filed their
respective briefs but petitioner failed to file reply brief which was noted by the
Court in the resolution dated May 3, 1982 (Rollo, p. 183).
Petitioners alleged that the main cause of the unfortunate incident is the gross,
wanton and inexcusable negligence of respondent Airline personnel in their failure
to frisk the passengers adequately in order to discover hidden weapons in the
bodies of the six (6) hijackers. They claimed that despite the prevalence of
skyjacking, PAL did not use a metal detector which is the most effective means of
discovering potential skyjackers among the passengers (Rollo, pp. 6-7).
Respondent Airline averred that in the performance of its obligation to safely
transport passengers as far as human care and foresight can provide, it has
exercised the utmost diligence of a very cautious person with due regard to all
circumstances, but the security checks and measures and surveillance precautions
in all flights, including the inspection of baggages and cargo and frisking of
passengers at the Davao Airport were performed and rendered solely by military
personnel who under appropriate authority had assumed exclusive jurisdiction over
the same in all airports in the Philippines.
Similarly, the negotiations with the hijackers were a purely government matter and
a military operation, handled by and subject to the absolute and exclusive
jurisdiction of the military authorities. Hence, it concluded that the accident that
befell RP-C1161 was caused by fortuitous event, force majeure and other causes
beyond the control of the respondent Airline.
The determinative issue in this case is whether or not hijacking or air piracy during
martial law and under the circumstances obtaining herein, is
a caso fortuito or force majeure which would exempt an aircraft from payment of
damages to its passengers whose lives were put in jeopardy and whose personal
belongings were lost during the incident.
Under the Civil Code, common carriers are required to exercise extraordinary
diligence in their vigilance over the goods and for the safety of passengers
transported by them, according to all the circumstances of each case (Article 1733).
They are presumed at fault or to have acted negligently whenever a passenger dies
or is injured (Philippine Airlines, Inc. v. National Labor Relations Commission, 124
SCRA 583 [1983]) or for the loss, destruction or deterioration of goods in cases
other than those enumerated in Article 1734 of the Civil Code (Eastern Shipping
Lines, Inc. v. Intermediate Appellate Court, 150 SCRA 463 [1987]).
The source of a common carrier's legal liability is the contract of carriage, and by
entering into said contract, it binds itself to carry the passengers safely as far as
human care and foresight can provide. There is breach of this obligation if it fails to
exert extraordinary diligence according to all the circumstances of the case in
exercise of the utmost diligence of a very cautious person (Isaac v. Ammen
Transportation Co., 101 Phil. 1046 [1957]; Juntilla v. Fontanar, 136 SCRA 624
[1985]).
It is the duty of a common carrier to overcome the presumption of negligence
(Philippine National Railways v. Court of Appeals, 139 SCRA 87 [1985]) and it must
be shown that the carrier had observed the required extraordinary diligence of a
very cautious person as far as human care and foresight can provide or that the
accident was caused by a fortuitous event (Estrada v. Consolacion, 71 SCRA 523
[1976]). Thus, as ruled by this Court, no person shall be responsible for those
"events which could not be foreseen or which though foreseen were inevitable.
(Article 1174, Civil Code). The term is synonymous with caso fortuito (Lasam v.
Smith, 45 Phil. 657 [1924]) which is of the same sense as "force majeure" (Words
and Phrases Permanent Edition, Vol. 17, p. 362).
In order to constitute a caso fortuito or force majeure that would exempt a person
from liability under Article 1174 of the Civil Code, it is necessary that the following
elements must concur: (a) the cause of the breach of the obligation must be
independent of the human will (the will of the debtor or the obligor); (b) the event
must be either unforeseeable or unavoidable; (c) the event must be such as to
render it impossible for the debtor to fulfill his obligation in a normal manner; and
(d) the debtor must be free from any participation in, or aggravation of the injury to
the creditor (Lasam v. Smith, 45 Phil. 657 [1924]; Austria v. Court of Appeals, 39
SCRA 527 [1971]; Estrada v. Consolacion, supra; Vasquez v. Court of Appeals, 138
SCRA 553 [1985]; Juan F. Nakpil & Sons v. Court of Appeals, 144 SCRA 596
[1986]). Caso fortuito or force majeure, by definition, are extraordinary events not
foreseeable or avoidable, events that could not be foreseen, or which, though
foreseen, are inevitable. It is, therefore, not enough that the event should not have
been foreseen or anticipated, as is commonly believed, but it must be one
impossible to foresee or to avoid. The mere difficulty to foresee the happening is
not impossibility to foresee the same (Republic v. Luzon Stevedoring Corporation,
21 SCRA 279 [1967]).
Applying the above guidelines to the case at bar, the failure to transport petitioners
safely from Davao to Manila was due to the skyjacking incident staged by six (6)
passengers of the same plane, all members of the Moro National Liberation Front
(MNLF), without any connection with private respondent, hence, independent of
the will of either the PAL or of its passengers.

Under normal circumstances, PAL might have foreseen the skyjacking incident
which could have been avoided had there been a more thorough frisking of
passengers and inspection of baggages as authorized by R.A. No. 6235. But the
incident in question occurred during Martial Law where there was a military take-
over of airport security including the frisking of passengers and the inspection of
their luggage preparatory to boarding domestic and international flights. In fact
military take-over was specifically announced on October 20, 1973 by General Jose
L. Rancudo, Commanding General of the Philippine Air Force in a letter to Brig. Gen.
Jesus Singson, then Director of the Civil Aeronautics Administration (Rollo, pp. 71-
72) later confirmed shortly before the hijacking incident of May 21, 1976 by Letter
of Instruction No. 399 issued on April 28, 1976 (Rollo, p. 72).

Otherwise stated, these events rendered it impossible for PAL to perform its
obligations in a nominal manner and obviously it cannot be faulted with negligence
in the performance of duty taken over by the Armed Forces of the Philippines to the
exclusion of the former.

Finally, there is no dispute that the fourth element has also been satisfied.
Consequently the existence of force majeure has been established exempting
respondent PAL from the payment of damages to its passengers who suffered
death or injuries in their persons and for loss of their baggages.

PREMISES CONSIDERED, the petition is hereby DISMISSED for lack of merit and the
decision of the Court of First Instance of South Cotabato, Branch I is hereby
AFFIRMED.

SO ORDERED.
G.R. No. L-82619 September 15, 1993
PHILIPPINE AIRLINES, INC., petitioner,
vs.
COURT OF APPEALS and PEDRO ZAPATOS, respondents.
BELLOSILLO, J.:
This petition for review in certiorari seeks to annul and set aside the decision of the
then Intermediate Appellant Court, 1 now Court of Appeals, dated 28 February
1985, in AC-G.R. CV No. 69327 ("Pedro Zapatos v. Philippine Airlines, Inc.") affirming
the decision of the then Court of first Instance, now Regional Trial Court, declaring
Philippine Airlines, Inc., liable in damages for breach of contract.
On 25 November 1976, private respondent filed a complaint for damages for breach
of contract of carriage 2against Philippine Airlines, Inc. (PAL), before the then Court
of First Instance, now Regional Trial Court, of Misamis Occidental, at Ozamiz City.
According to him, on 2 August 1976, he was among the twenty-one (21) passengers
of PAL Flight 477 that took off from Cebu bound for Ozamiz City. The routing of this
flight was Cebu-Ozamiz-Cotabato. While on flight and just about fifteen (15)
minutes before landing at Ozamiz City, the pilot received a radio message that the
airport was closed due to heavy rains and inclement weather and that he should
proceed to Cotabato City instead.
Upon arrival at Cotabato City, the PAL Station Agent informed the passengers of
their options to return to Cebu on flight 560 of the same day and thence to Ozamiz
City on 4 August 1975, or take the next flight to Cebu the following day, or remain
at Cotabato and take the next available flight to Ozamiz City on 5 August 1975. 3 The
Station Agent likewise informed them that Flight 560 bound for Manila would make
a stop-over at Cebu to bring some of the diverted passengers; that there were only
six (6) seats available as there were already confirmed passengers for Manila; and,
that the basis for priority would be the check-in sequence at Cebu.
Private respondent chose to return to Cebu but was not accommodated because he
checked-in as passenger No. 9 on Flight 477. He insisted on being given priority over
the confirmed passengers in the accommodation, but the Station Agent refused
private respondent's demand explaining that the latter's predicament was not due
to PAL's own doing but to be a force majeure. 4
Private respondent tried to stop the departure of Flight 560 as his personal
belongings, including a package containing a camera which a certain Miwa from
Japan asked him to deliver to Mrs. Fe Obid of Gingoog City, were still on board. His
plea fell on deaf ears. PAL then issued to private respondent a free ticket to Iligan
city, which the latter received under protest. 5 Private respondent was left at the
airport and could not even hitch a ride in the Ford Fiera loaded with PAL
personnel. 6 PAL neither provided private respondent with transportation from the
airport to the city proper nor food and accommodation for his stay in Cotabato City.
The following day, private respondent purchased a PAL ticket to Iligan City. He
informed PAL personnel that he would not use the free ticket because he was filing
a case against PAL. 7 In Iligan City, private respondent hired a car from the airport to
Kolambugan, Lanao del Norte, reaching Ozamiz City by crossing the bay in a
launch. 8 His personal effects including the camera, which were valued at P2,000.00
were no longer recovered.
On 13 January 1977, PAL filed its answer denying that it unjustifiably refused to
accommodate private respondent.9 It alleged that there was simply no more seat
for private respondent on Flight 560 since there were only six (6) seats available and
the priority of accommodation on Flight 560 was based on the check-in sequence in
Cebu; that the first six (6) priority passengers on Flight 477 chose to take Flight 560;
that its Station Agent explained in a courteous and polite manner to all passengers
the reason for PAL's inability to transport all of them back to Cebu; that the
stranded passengers agreed to avail of the options and had their respective tickets
exchanged for their onward trips; that it was only the private respondent who
insisted on being given priority in the accommodation; that pieces of checked-in
baggage and had carried items of the Ozamiz City passengers were removed from
the aircraft; that the reason for their pilot's inability to land at Ozamis City airport
was because the runway was wet due to rains thus posing a threat to the safety of
both passengers and aircraft; and, that such reason of force majeure was a valid
justification for the pilot to bypass Ozamiz City and proceed directly to Cotabato
City.
On 4 June 1981, the trial court rendered its decision 10 the dispositive portion of
which states:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff
and against the defendant Philippine AirLines, Inc. ordering the
latter to pay:
(1) As actual damages, the sum of Two Hundred Pesos (P200.00)
representing plaintiff's expenses for transportation, food and
accommodation during his stranded stay at Cotabato City; the
sum of Forty-Eight Pesos (P48.00) representing his flight fare from
Cotabato City to Iligan city; the sum of Five Hundred Pesos
(P500.00) representing plaintiff's transportation expenses from
Iligan City to Ozamiz City; and the sum of Five Thousand Pesos
 (P5,000.00) as loss of business opportunities during his stranded
stay in Cotabato City;
(2) As moral damages, the sum of Fifty Thousand Pesos
(P50,000.00) for plaintiff's hurt feelings, serious anxiety, mental
anguish and unkind and discourteous treatment perpetrated by
defendant's employees during his stay as stranded passenger in
Cotabato City;
(3) As exemplary damages, the sum of Ten Thousand Pesos
(P10,000.00) to set a precedent to the defendant airline that it
shall provide means to give comfort and convenience to stranded
passengers;
(4) The sum of Three Thousand Pesos (P3,000.00) as attorney's
fees;
(5) To pay the costs of this suit.
PAL appealed to the Court of Appeals which on 28 February 1985, finding no
reversible error, affirmed the judgment of the court a quo. 11
PAL then sought recourse to this Court by way of a petition for review
on certiorari 12 upon the following issues: (1) Can the Court of Appeals render a
decision finding petitioner (then defendant-appellant in the court below) negligent
and, consequently, liable for damages on a question of substance which was neither
raised on a question nor proved at the trial? (2) Can the Court of Appeals award
actual and moral damages contrary to the evidence and established
jurisprudence? 13
An assiduous examination of the records yields no valid reason for reversal of the
judgment on appeal; only a modification of its disposition.
In its petition, PAL vigorously maintains that private respondent's principal cause of
action was its alleged denial of private respondent's demand for priority over the
confirmed passengers on Flight 560. Likewise, PAL points out that the complaint did
not impute to PAL neglect in failing to attend to the needs of the diverted
passengers; and, that the question of negligence was not and never put in issue by
the pleadings or proved at the trial.
Contrary to the above arguments, private respondent's amended complaint
touched on PAL's indifference and inattention to his predicament. The pertinent
portion of the amended complaint 14 reads:
10. That by virtue of the refusal of the defendant through its
agent in Cotabato to accommodate (sic) and allow the plaintiff to
take and board the plane back to Cebu, and by accomodating
(sic) and allowing passengers from Cotabato for Cebu in his stead
and place, thus forcing the plaintiff against his will, to be left and
stranded in Cotabato, exposed to the peril and danger of muslim
rebels plundering at the time, the plaintiff, as a consequence,
(have) suffered mental anguish, mental torture, social humiliation,
bismirched reputation and wounded feeling, all amounting to a
conservative amount of thirty thousand (P30,000.00) Pesos.
To substantiate this aspect of apathy, private respondent testified 15
A I did not even notice that I was I think the last
passenger or the last person out of the PAL employees
and army personnel that were left there. I did not notice
that when I was already outside of the building after our
conversation.
Q What did you do next?
A I banished (sic) because it seems that there was a war
not far from the airport. The sound of guns and the
soldiers were plenty.
Q After that what did you do?
A I tried to look for a transportation that could bring me
down to the City of Cotabato.
Q Were you able to go there?
A I was at about 7:00 o'clock in the evening more or less
and it was a private jeep that I boarded. I was even
questioned why I and who am (sic) I then. Then I
explained my side that I am (sic) stranded passenger.
Then they brought me downtown at Cotabato.
 Q During your conversation with the Manager were you
not offered any vehicle or transportation to Cotabato
airport downtown?
A In fact I told him (Manager) now I am by-passed
passenger here which is not my destination what can you
offer me. Then they answered, "it is not my fault. Let us
forget that."
Q In other words when the Manager told you that offer
was there a vehicle ready?
A Not yet. Not long after that the Ford Fiera loaded with
PAL personnel was passing by going to the City of
Cotabato and I stopped it to take me a ride because
there was no more available transportation but I was not
accommodated.
Significantly, PAL did not seem to mind the introduction of evidence which focused
on its alleged negligence in caring for its stranded passengers. Well-settled is the
rule in evidence that the protest or objection against the admission of evidence
should be presented at the time the evidence is offered, and that the proper time
to make protest or objection to the admissibility of evidence is when the question is
presented to the witness or at the time the answer thereto is given. 16 There being
no objection, such evidence becomes property of the case and all the parties are
amenable to any favorable or unfavorable effects resulting from the evidence. 17
PAL instead attempted to rebut the aforequoted testimony. In the process, it failed
to substantiate its counter allegation for want of concrete proof 18
Atty. Rubin O. Rivera PAL's counsel:
Q You said PAL refused to help you when you were in
Cotabato, is that right?
Private respondent:
A Yes.
Q Did you ask them to help you regarding any offer of
transportation or of any other matter asked of them?
A Yes, he (PAL PERSONNEL) said what is? It is not our
fault.
Q Are you not aware that one fellow passenger even
claimed that he was given Hotel accommodation because
they have no money?
xxx xxx xxx
A No, sir, that was never offered to me. I said, I tried to
stop them but they were already riding that PAL pick-up
jeep, and I was not accommodated.
Having joined in the issue over the alleged lack of care it exhibited towards its
passengers, PAL cannot now turn around and feign surprise at the outcome of the
case. When issues not raised by the pleadings are tried by express or implied
consent of the parties, they shall be treated in all respects as if they had been raised
in the pleadings. 19
With regard to the award of damages affirmed by the appellate court, PAL argues
that the same is unfounded. It asserts that it should not be charged with the task of
looking after the passengers' comfort and convenience because the diversion of the
flight was due to a fortuitous event, and that if made liable, an added burden is
given to PAL which is over and beyond its duties under the contract of carriage. It
submits that granting arguendo that negligence exists, PAL cannot be liable in
damages in the absence of fraud or bad faith; that private respondent failed to
apprise PAL of the nature of his trip and possible business losses; and, that private
respondent himself is to be blamed for unreasonably refusing to use the free ticket
which PAL issued.
The contract of air carriage is a peculiar one. Being imbued with public interest, the
law requires common carriers 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 In Air France v. Carrascoso, 21 we held that
A contract to transport passengers is quite different in kind and
degree from any other contractual relation. And this, 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 of the comforts and advantages it offers. The contract of air
carriage, therefore, generates a relation attended with a public
duty . . . . ( emphasis supplied).
The position taken by PAL in this case clearly illustrates its failure to grasp the
exacting standard required by law. Undisputably, PAL's diversion of its flight due to
inclement weather was a fortuitous event. Nonetheless, such occurrence did not
terminate PAL's contract with its passengers. Being in the business of air carriage
and the sole one to operate in the country, PAL is deemed equipped to deal with
situations as in the case at bar. What we said in one case once again must be
stressed, i.e., the relation of carrier and passenger continues until the latter has
been landed at the port of destination and has left the carrier's premises. 22 Hence,
PAL necessarily would still have to exercise extraordinary diligence in safeguarding
the comfort, convenience and safety of its stranded passengers until they have
reached their final destination. On this score, PAL grossly failed considering the then
ongoing battle between government forces and Muslim rebels in Cotabato City and
the fact that the private respondent was a stranger to the place. As the appellate
court correctly ruled
While the failure of plaintiff in the first instance to reach his
destination at Ozamis City in accordance with the contract of
carriage was due to the closure of the airport on account of rain
and inclement weather which was radioed to defendant 15
minutes before landing, it has not been disputed by defendant
airline that Ozamis City has no all-weather airport and has to
cancel its flight to Ozamis City or by-pass it in the event of
inclement weather. Knowing this fact, it becomes the duty of
defendant to provide all means of comfort and convenience to its
passengers when they would have to be left in a strange place in
case of such by-passing. The steps taken by defendant airline
company towards this end has not been put in evidence,
especially for those 7 others who were not accommodated in the
return trip to Cebu, only 6 of the 21 having been so
accommodated. It appears that plaintiff had to leave on the next
flight 2 days later. If the cause of non-fulfillment of the contract is
due to a fortuitous event, it has to be the sole and only cause (Art.
1755 CC., Art. 1733 C.C.) Since part of the failure to comply with
the obligation of common carrier to deliver its passengers safely
to their destination lay in the defendant's failure to provide
comfort and convenience to its stranded passengers using extra-
ordinary diligence, the cause of non-fulfillment is not solely and
exclusively due to fortuitous event, but due to something which
defendant airline could have prevented, defendant becomes
liable to plaintiff. 23
While we find PAL remiss in its duty of extending utmost care to private respondent
while being stranded in Cotabato City, there is no sufficient basis to conclude that
PAL failed to inform him about his non-accommodation on Flight 560, or that it was
inattentive to his queries relative thereto.
On 3 August 1975, the Station Agent reported to his Branch Manager in Cotabato
City that
3. Of the fifteen stranded passengers two pax elected to take
F478 on August 05, three pax opted to take F442 August 03. The
remaining ten (10) including subject requested that they be
instead accommodated (sic) on F446 CBO-IGN the following day
where they intended to take the surface transportation to OZC.
Mr. Pedro Zapatos had by then been very vocal and boiceterous
(sic) at the counter and we tactfully managed to steer him inside
the Station Agent's office. Mr. Pedro Zapatos then adamantly
insisted that all the diverted passengers should have been given
priority over the originating passengers of F560 whether
confirmed or otherwise. We explained our policies and after
awhile he seemed pacified and thereafter took his ticket (in-lieued
(sic) to CBO-IGN, COCON basis), at the counter in the presence of
five other passengers who were waiting for their tickets too. The
rest of the diverted pax had left earlier after being assured their
tickets will be ready the following day. 24
Aforesaid Report being an entry in the course of business is prima facie evidence of
the facts therein stated. Private respondent, apart from his testimony, did not offer
any controverting evidence. If indeed PAL omitted to give information about the
options available to its diverted passengers, it would have been deluged with
complaints. But, only private respondent complained
Atty. Rivera (for PAL)
Q I understand from you Mr. Zapatos that at the time
you were waiting at Cotabato Airport for the decision of
PAL, you were not informed of the decision until after
the airplane left is that correct?
A Yes.
COURT:
Q What do you mean by "yes"? You meant you were not
informed?
 A Yes, I was not informed of their decision, that they will
only accommodate few passengers.
Q Aside from you there were many other stranded
passengers?
A I believed, yes.
Q And you want us to believe that PAL did not explain
(to) any of these passengers about the decision regarding
those who will board the aircraft back to Cebu?
A No, Sir.
Q Despite these facts Mr. Zapatos did any of the other
passengers complained (sic) regarding that incident?
xxx xxx xxx
A There were plenty of argument and I was one of those
talking about my case.
Q Did you hear anybody complained (sic) that he has not
been informed of the decision before the plane left for
Cebu?
A No. 25
Admittedly, private respondent's insistence on being given priority in
accommodation was unreasonable considering the fortuitous event and that there
was a sequence to be observed in the booking, i.e., in the order the passengers
checked-in at their port of origin. His intransigence in fact was the main cause for
his having to stay at the airport longer than was necessary.
Atty. Rivera:
Q And, you were saying that despite the fact that
according to your testimony there were at least 16
passengers who were stranded there in Cotabato airport
according to your testimony, and later you said that
there were no other people left there at that time, is that
correct?
A Yes, I did not see anyone there around. I think I was the
only civilian who was left there.
Q Why is it that it took you long time to leave that place?
A Because I was arguing with the PAL personnel. 26
Anent the plaint that PAL employees were disrespectful and inattentive toward
private respondent, the records are bereft of evidence to support the same. Thus,
the ruling of respondent Court of Appeals in this regard is without basis. 27 On the
contrary, private respondent was attended to not only by the personnel of PAL but
also by its Manager." 28
In the light of these findings, we find the award of moral damages of Fifty Thousand
Pesos (P50,000.00) unreasonably excessive; hence, we reduce the same to Ten
Thousand Pesos (P10,000.00). Conformably herewith, the award of exemplary
damages is also reduced to five Thousand Pesos (5,000.00). Moral damages are not
intended to enrich the private respondent. They are awarded only to enable the
injured party to obtain means, diversion or amusements that will serve to alleviate
the moral suffering he has undergone by reason of the defendant's culpable
action. 29
With regard to the award of actual damages in the amount of P5,000.00
representing private respondent's alleged business losses occasioned by his stay at
Cotabato City, we find the same unwarranted. Private respondent's testimony that
he had a scheduled business "transaction of shark liver oil supposedly to have been
consummated on August 3, 1975 in the morning" and that "since (private
respondent) was out for nearly two weeks I missed to buy about 10 barrels of shark
liver oil," 30 are purely speculative. Actual or compensatory damages cannot be
presumed but must be duly proved with reasonable degree of certainty. A court
cannot rely on speculation, conjecture or guesswork as to the fact and amount of
damages, but must depend upon competent proof that they have suffered and on
evidence of the actual amount thereof. 31
WHEREFORE the decision appealed from is AFFIRMED with modification however
that the award of moral damages of Fifty Thousand Pesos (P50,000.00) is reduced
to Ten Thousand Pesos (P10,000.00) while the exemplary damages of Ten Thousand
Pesos (P10,000.00) is also reduced to Five Thousand Pesos (P5,000.00). The award
of actual damages in the amount Five Thousand Pesos (P5,000.00) representing
business losses occasioned by private respondent's being stranded in Cotabato City
is deleted.
SO ORDERED.
G.R. No. 95582 October 7, 1991 Not satisfied therewith, private respondents appealed to the Court of Appeals
DANGWA TRANSPORTATION CO., INC. and THEODORE LARDIZABAL y which, in a decision 3 in CA-G.R. CV No. 19504 promulgated on August 14, 1990, set
MALECDAN, petitioners, vs. COURT OF APPEALS, INOCENCIA CUDIAMAT, EMILIA aside the decision of the lower court, and ordered petitioners to pay private
CUDIAMAT BANDOY, FERNANDO CUDLAMAT, MARRIETA CUDIAMAT, NORMA respondents:
CUDIAMAT, DANTE CUDIAMAT, SAMUEL CUDIAMAT and LIGAYA CUDIAMAT, all
Heirs of the late Pedrito Cudiamat represented by Inocencia 1. The sum of Thirty Thousand (P30,000.00) Pesos by way of
Cudiamat, respondents. indemnity for death of the victim Pedrito Cudiamat;
REGALADO, J.:p
2. The sum of Twenty Thousand (P20,000.00) by way of moral
On May 13, 1985, private respondents filed a complaint 1 for damages against damages;
petitioners for the death of Pedrito Cudiamat as a result of a vehicular accident
which occurred on March 25, 1985 at Marivic, Sapid, Mankayan, Benguet. Among 3. The sum of Two Hundred Eighty Eight Thousand (P288,000.00)
others, it was alleged that on said date, while petitioner Theodore M. Lardizabal Pesos as actual and compensatory damages;
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
4. The costs of this suit. 4
safety to persons and property, it ran over its passenger, Pedrito Cudiamat.
However, instead of bringing Pedrito immediately to the nearest hospital, the said
Petitioners' motion for reconsideration was denied by the Court of Appeals in its
driver, in utter bad faith and without regard to the welfare of the victim, first
resolution dated October 4, 1990,5 hence this petition with the central issue herein
brought his other passengers and cargo to their respective destinations before
being whether respondent court erred in reversing the decision of the trial court
banging said victim to the Lepanto Hospital where he expired.
and in finding petitioners negligent and liable for the damages claimed.
On the other hand, petitioners alleged that they had observed and continued to
It is an established principle that the factual findings of the Court of Appeals as a
observe the extraordinary diligence required in the operation of the transportation
rule are final and may not be reviewed by this Court on appeal. However, this is
company and the supervision of the employees, even as they add that they are not
subject to settled exceptions, one of which is when the findings of the appellate
absolute insurers of the safety of the public at large. Further, it was alleged that it
court are contrary to those of the trial court, in which case a reexamination of the
was the victim's own carelessness and negligence which gave rise to the subject
facts and evidence may be undertaken. 6
incident, hence they prayed for the dismissal of the complaint plus an award of
damages in their favor by way of a counterclaim.
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
On July 29, 1988, the trial court rendered a decision, effectively in favor of
have had to conduct an evaluation of the evidence in this case for the prope
petitioners, with this decretal portion:
calibration of their conflicting factual findings and legal conclusions.
IN VIEW OF ALL THE FOREGOING, judgment is hereby pronounced
The lower court, in declaring that the victim was negligent, made the following
that Pedrito Cudiamat was negligent, which negligence was the
findings:
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 This Court is satisfied that Pedrito Cudiamat was negligent in
initially offered said heirs for the amicable settlement of the case. trying to board a moving vehicle, especially with one of his hands
No costs. 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.
SO ORDERED. 2
In this connection, it is safe to assume that when the deceased
Cudiamat attempted to board defendants' bus, the vehicle's door
 was open instead of being closed. This should be so, for it is hard
to believe that one would even attempt to board a vehicle (i)n
motion if the door of said vehicle is closed. Here lies the
defendant's lack of diligence. Under such circumstances, equity
demands that there must be something given to the heirs of the
victim to assuage their feelings. This, also considering that initially,
defendant common carrier had made overtures to amicably settle
the case. It did offer a certain monetary consideration to the
victim's heirs. 7
However, respondent court, in arriving at a different opinion, declares that:
From the testimony of appellees'own witness in the person of
Vitaliano Safarita, it is evident that the subject bus was at full stop
when the victim Pedrito Cudiamat boarded the same as it was
precisely on this instance where a certain Miss Abenoja alighted
from the bus. Moreover, contrary to the assertion of the
appellees, the victim did indicate his intention to board the bus as
can be seen from the testimony of the said witness when he
declared that Pedrito Cudiamat was no longer walking and made a
sign to board the bus when the latter was still at a distance from
him. It was at the instance when Pedrito Cudiamat was closing his
umbrella at the platform of the bus when the latter made a
sudden jerk movement (as) the driver commenced to accelerate
the bus.
Evidently, the incident took place due to the gross negligence of
the appellee-driver in prematurely stepping on the accelerator
and in not waiting for the passenger to first secure his seat
especially so when we take into account that the platform of the
bus was at the time slippery and wet because of a drizzle. The
defendants-appellees utterly failed to observe their duty and
obligation as common carrier to the end that they should observe
extra-ordinary diligence in the vigilance over the goods and for
the safety of the passengers transported by them according to the
circumstances of each case (Article 1733, New Civil Code). 8
After a careful review of the evidence on record, we find no reason to disturb the
above holding of the Court of Appeals. Its aforesaid findings are supported by the
testimony of petitioners' own witnesses. One of them, Virginia Abalos, testified on
cross-examination as follows:
Q It is not a fact Madam witness, that at bunkhouse 54, that is
before the place of the incident, there is a crossing?
A The way going to the mines but it is not being pass(ed) by the
bus.
Q And the incident happened before bunkhouse 56, is that not
correct?
A It happened between 54 and 53 bunkhouses. 9
The bus conductor, Martin Anglog, also declared:
Q When you arrived at Lepanto on March 25, 1985, will you
please inform this Honorable Court if there was anv unusual
incident that occurred?
A When we delivered a baggage at Marivic because a person
alighted there between Bunkhouse 53 and 54.
Q What happened when you delivered this passenger at this
particular place in Lepanto?
A When we reached the place, a passenger alighted and I
signalled my driver. When we stopped we went out because I saw
an umbrella about a split second and I signalled again the driver,
so the driver stopped and we went down and we saw Pedrito
Cudiamat asking for help because he was lying down.
Q How far away was this certain person, Pedrito Cudiamat, when
you saw him lying down from the bus how far was he?
A It is about two to three meters.
Q On what direction of the bus was he found about three meters
from the bus, was it at the front or at the back?
A At the back, sir. 10 (Emphasis supplied.)
The foregoing testimonies show that the place of the accident and the place where
one of the passengers alighted were both between Bunkhouses 53 and 54, hence
the finding of the Court of Appeals that the bus was at full stop when the victim
boarded the same is correct. They further confirm the conclusion that the victim fell
from the platform of the bus when it suddenly accelerated forward and was run
over by the rear right tires of the vehicle, as shown by the physical evidence on
where he was thereafter found in relation to the bus when it stopped. Under such
circumstances, it cannot be said that the deceased was guilty of negligence.
The contention of petitioners that the driver and the conductor had no knowledge
that the victim would ride on the bus, since the latter had supposedly not
manifested his intention to board the same, does not merit consideration. When
the bus is not in motion there is no necessity for a person who wants to ride the
same to signal his intention to board. A public utility bus, once it stops, is in effect
making a continuous offer to bus riders. Hence, it becomes the duty of the driver
and the conductor, every time the bus stops, to do no act that would have the
effect of increasing the peril to a passenger while he was attempting to board the
same. The premature acceleration of the bus in this case was a breach of such
duty. 11
It is the duty of common carriers of passengers, including common carriers by
railroad train, streetcar, or motorbus, to stop their conveyances a reasonable length
of time in order to afford passengers an opportunity to board and enter, and they
are liable for injuries suffered by boarding passengers resulting from the sudden
starting up or jerking of their conveyances while they are doing so. 12
Further, even assuming that the bus was moving, the act of the victim in boarding
the same cannot be considered negligent under the circumstances. As clearly
explained in the testimony of the aforestated witness for petitioners, Virginia
Abalos, th bus had "just started" and "was still in slow motion" at the point where
the victim had boarded and was on its platform. 13
It is not negligence per se, or as a matter of law, for one attempt to board a train or
streetcar which is moving slowly. 14 An ordinarily prudent person would have made
the attempt board the moving conveyance under the same or similar
circumstances. The fact that passengers board and alight from slowly moving
vehicle is a matter of common experience both the driver and conductor in this
case could not have been unaware of such an ordinary practice.
The victim herein, by stepping and standing on the platform of the bus, is already
considered a passenger and is entitled all the rights and protection pertaining to
such a contractual relation. Hence, it has been held that the duty which the carrier
passengers owes to its patrons extends to persons boarding cars as well as to those
alighting therefrom. 15
Common carriers, from the nature of their business and reasons of public policy,
are bound to observe extraordina diligence for the safety of the passengers
transported by the according to all the circumstances of each case. 16 A common
carrier is bound to carry the passengers safely as far as human care and foresight
can provide, using the utmost diligence very cautious persons, with a due regard for
all the circumstances. 17
It has also been repeatedly held that in an action based on a contract of carriage,
the court need not make an express finding of fault or negligence on the part of the
carrier in order to hold it responsible to pay the damages sought by the passenger.
By contract of carriage, the carrier assumes the express obligation to transport the
passenger to his destination safely and observe extraordinary diligence with a due
regard for all the circumstances, and any injury that might be suffered by the
passenger is right away attributable to the fault or negligence of the carrier. This is
an exception to the general rule that negligence must be proved, and it is therefore
incumbent upon the carrier to prove that it has exercised extraordinary diligence as
prescribed in Articles 1733 and 1755 of the Civil Code. 18
Moreover, the circumstances under which the driver and the conductor failed to
bring the gravely injured victim immediately to the hospital for medical treatment is
a patent and incontrovertible proof of their negligence. It defies understanding and
can even be stigmatized as callous indifference. The evidence shows that after the
accident the bus could have forthwith turned at Bunk 56 and thence to the hospital,
but its driver instead opted to first proceed to Bunk 70 to allow a passenger to
alight and to deliver a refrigerator, despite the serious condition of the victim. The
vacuous reason given by petitioners that it was the wife of the deceased who
caused the delay was tersely and correctly confuted by respondent court:
... The pretension of the appellees that the delay was due to the
fact that they had to wait for about twenty minutes for Inocencia
Cudiamat to get dressed deserves scant consideration. It is rather
scandalous and deplorable for a wife whose husband is at the
verge of dying to have the luxury of dressing herself up for about
twenty minutes before attending to help her distressed and
helpless husband. 19
Further, it cannot be said that the main intention of petitioner Lardizabal in going to
Bunk 70 was to inform the victim's family of the mishap, since it was not said bus
driver nor the conductor but the companion of the victim who informed his family
thereof. 20 In fact, it was only after the refrigerator was unloaded that one of the
passengers thought of sending somebody to the house of the victim, as shown by
the testimony of Virginia Abalos again, to wit:
 Q Why, what happened to your refrigerator at that particular SO ORDERED.
time?

A I asked them to bring it down because that is the nearest place

to our house and when I went down and asked somebody to bring
down the refrigerator, I also asked somebody to call the family of
Mr. Cudiamat.

COURT:

Q Why did you ask somebody to call the family of Mr. Cudiamat?

A Because Mr. Cudiamat met an accident, so I ask somebody to

call for the family of Mr. Cudiamat.

Q But nobody ask(ed) you to call for the family of Mr. Cudiamat?

A No sir. 21

With respect to the award of damages, an oversight was, however, committed by

respondent Court of Appeals in computing the actual damages based on the gross
income of the victim. The rule is that the amount recoverable by the heirs of a
victim of a tort is not the loss of the entire earnings, but rather the loss of that
portion of the earnings which the beneficiary would have received. In other words,
only net earnings, not gross earnings, are to be considered, that is, the total of the
earnings less expenses necessary in the creation of such earnings or income and
minus living and other incidental expenses. 22

We are of the opinion that the deductible living and other expense of the deceased
may fairly and reasonably be fixed at P500.00 a month or P6,000.00 a year. In
adjudicating the actual or compensatory damages, respondent court found that the
deceased was 48 years old, in good health with a remaining productive life
expectancy of 12 years, and then earning P24,000.00 a year. Using the gross annual
income as the basis, and multiplying the same by 12 years, it accordingly awarded
P288,000. Applying the aforestated rule on computation based on the net earnings,
said award must be, as it hereby is, rectified and reduced to P216,000.00. However,
in accordance with prevailing jurisprudence, the death indemnity is hereby
increased to P50,000.00. 23

WHEREFORE, subject to the above modifications, the challenged judgment and

resolution of respondent Court of Appeals are hereby AFFIRMED in all other
respects.
G.R. No. 145804 February 6, 2003
LIGHT RAIL TRANSIT AUTHORITY & RODOLFO ROMAN, petitioners, vs. MARJORIE
NAVIDAD, Heirs of the Late NICANOR NAVIDAD & PRUDENT SECURITY
AGENCY, respondents.
DECISION
VITUG, J.:
The case before the Court is an appeal from the decision and resolution of the Court
of Appeals, promulgated on 27 April 2000 and 10 October 2000, respectively, in CA-
G.R. CV No. 60720, entitled "Marjorie Navidad and Heirs of the Late Nicanor
Navidad vs. Rodolfo Roman, et. al.," which has modified the decision of 11 August
1998 of the Regional Trial Court, Branch 266, Pasig City, exonerating Prudent
Security Agency (Prudent) from liability and finding Light Rail Transit Authority
(LRTA) and Rodolfo Roman liable for damages on account of the death of Nicanor
Navidad.
On 14 October 1993, about half an hour past seven oclock in the evening, Nicanor
Navidad, then drunk, entered the EDSA LRT station after purchasing a "token"
(representing payment of the fare). While Navidad was standing on the platform
near the LRT tracks, Junelito Escartin, the security guard assigned to the area
approached Navidad. A misunderstanding or an altercation between the two
apparently ensued that led to a fist fight. No evidence, however, was adduced to
indicate how the fight started or who, between the two, delivered the first blow or
how Navidad later fell on the LRT tracks. At the exact moment that Navidad fell, an
LRT train, operated by petitioner Rodolfo Roman, was coming in. Navidad was
struck by the moving train, and he was killed instantaneously.
On 08 December 1994, the widow of Nicanor, herein respondent Marjorie Navidad,
along with her children, filed a complaint for damages against Junelito Escartin,
Rodolfo Roman, the LRTA, the Metro Transit Organization, Inc. (Metro Transit), and
Prudent for the death of her husband. LRTA and Roman filed a counterclaim against
Navidad and a cross-claim against Escartin and Prudent. Prudent, in its answer,
denied liability and averred that it had exercised due diligence in the selection and
supervision of its security guards.
The LRTA and Roman presented their evidence while Prudent and Escartin, instead
of presenting evidence, filed a demurrer contending that Navidad had failed to
prove that Escartin was negligent in his assigned task. On 11 August 1998, the trial
court rendered its decision; it adjudged:
"WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the
defendants Prudent Security and Junelito Escartin ordering the latter to pay jointly
and severally the plaintiffs the following:
"a) 1) Actual damages of P44,830.00;
2) Compensatory damages of P443,520.00;
3) Indemnity for the death of Nicanor Navidad in the sum of P50,000.00;
"b) Moral damages of P50,000.00;
"c) Attorneys fees of P20,000;
"d) Costs of suit.
"The complaint against defendants LRTA and Rodolfo Roman are dismissed for lack
of merit.
"The compulsory counterclaim of LRTA and Roman are likewise dismissed."1
Prudent appealed to the Court of Appeals. On 27 August 2000, the appellate court
promulgated its now assailed decision exonerating Prudent from any liability for the
death of Nicanor Navidad and, instead, holding the LRTA and Roman jointly and
severally liable thusly:
"WHEREFORE, the assailed judgment is hereby MODIFIED, by exonerating the
appellants from any liability for the death of Nicanor Navidad, Jr. Instead, appellees
Rodolfo Roman and the Light Rail Transit Authority (LRTA) are held liable for his
death and are hereby directed to pay jointly and severally to the plaintiffs-
appellees, the following amounts:
a) P44,830.00 as actual damages;
b) P50,000.00 as nominal damages;
c) P50,000.00 as moral damages;
d) P50,000.00 as indemnity for the death of the deceased; and
e) P20,000.00 as and for attorneys fees."2
The appellate court ratiocinated that while the deceased might not have then as yet
boarded the train, a contract of carriage theretofore had already existed when the
victim entered the place where passengers were supposed to be after paying the
fare and getting the corresponding token therefor. In exempting Prudent from
liability, the court stressed that there was nothing to link the security agency to the
death of Navidad. It said that Navidad failed to show that Escartin inflicted fist
blows upon the victim and the evidence merely established the fact of death of
Navidad by reason of his having been hit by the train owned and managed by the
LRTA and operated at the time by Roman. The appellate court faulted petitioners
for their failure to present expert evidence to establish the fact that the application
of emergency brakes could not have stopped the train.
The appellate court denied petitioners motion for reconsideration in its resolution
of 10 October 2000.
In their present recourse, petitioners recite alleged errors on the part of the
appellate court; viz:
"I.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED BY DISREGARDING THE
FINDINGS OF FACTS BY THE TRIAL COURT
"II.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT
PETITIONERS ARE LIABLE FOR THE DEATH OF NICANOR NAVIDAD, JR.
"III.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT RODOLFO
ROMAN IS AN EMPLOYEE OF LRTA."3
Petitioners would contend that the appellate court ignored the evidence and the
factual findings of the trial court by holding them liable on the basis of a sweeping
conclusion that the presumption of negligence on the part of a common carrier was
not overcome. Petitioners would insist that Escartins assault upon Navidad, which
caused the latter to fall on the tracks, was an act of a stranger that could not have
been foreseen or prevented. The LRTA would add that the appellate courts
conclusion on the existence of an employer-employee relationship between Roman
and LRTA lacked basis because Roman himself had testified being an employee of
Metro Transit and not of the LRTA.
Respondents, supporting the decision of the appellate court, contended that a
contract of carriage was deemed created from the moment Navidad paid the fare at
the LRT station and entered the premises of the latter, entitling Navidad to all the
rights and protection under a contractual relation, and that the appellate court had
correctly held LRTA and Roman liable for the death of Navidad in failing to exercise
extraordinary diligence imposed upon a common carrier.
Law and jurisprudence dictate that a common carrier, both from the nature of its
business and for reasons of public policy, is burdened with the duty of exercising
utmost diligence in ensuring the safety of passengers.4 The Civil Code, governing
the liability of a common carrier for death of or injury to its passengers, provides:
"Article 1755. A common carrier is bound to carry the passengers safely as far as
human care and foresight can provide, using the utmost diligence of very cautious
persons, with a due regard for all the circumstances.
"Article 1756. In case of death of or injuries to passengers, common carriers are
presumed to have been at fault or to have acted negligently, unless they prove that
they observed extraordinary diligence as prescribed in articles 1733 and 1755."
"Article 1759. Common carriers are liable for the death of or injuries to passengers
through the negligence or willful acts of the formers employees, although such
employees may have acted beyond the scope of their authority or in violation of the
orders of the common carriers.
"This liability of the common carriers does not cease upon proof that they exercised
all the diligence of a good father of a family in the selection and supervision of their
employees."
"Article 1763. A common carrier is responsible for injuries suffered by a passenger
on account of the willful acts or negligence of other passengers or of strangers, if
the common carriers employees through the exercise of the diligence of a good
father of a family could have prevented or stopped the act or omission."
The law requires common carriers to carry passengers safely using the utmost
diligence of very cautious persons with due regard for all circumstances.5 Such duty
of a common carrier to provide safety to its passengers so obligates it not only
during the course of the trip but for so long as the passengers are within its
premises and where they ought to be in pursuance to the contract of carriage.6 The
statutory provisions render a common carrier liable for death of or injury to
passengers (a) through the negligence or wilful acts of its employees or b) on
account of wilful acts or negligence of other passengers or of strangers if the
common carriers employees through the exercise of due diligence could have
prevented or stopped the act or omission.7 In case of such death or injury, a carrier proven x x x." This finding of the appellate court is not without substantial
is presumed to have been at fault or been negligent, and8 by simple proof of injury, justification in our own review of the records of the case.
the passenger is relieved of the duty to still establish the fault or negligence of the
carrier or of its employees and the burden shifts upon the carrier to prove that the There being, similarly, no showing that petitioner Rodolfo Roman himself is guilty of
injury is due to an unforeseen event or to force majeure.9 In the absence of any culpable act or omission, he must also be absolved from liability. Needless to
satisfactory explanation by the carrier on how the accident occurred, which say, the contractual tie between the LRT and Navidad is not itself a juridical relation
petitioners, according to the appellate court, have failed to show, the presumption between the latter and Roman; thus, Roman can be made liable only for his own
would be that it has been at fault,10 an exception from the general rule that fault or negligence.
negligence must be proved.11
The award of nominal damages in addition to actual damages is untenable. Nominal
The foundation of LRTAs liability is the contract of carriage and its obligation to damages are adjudicated in order that a right of the plaintiff, which has been
indemnify the victim arises from the breach of that contract by reason of its failure violated or invaded by the defendant, may be vindicated or recognized, and not for
to exercise the high diligence required of the common carrier. In the discharge of its the purpose of indemnifying the plaintiff for any loss suffered by him.18 It is an
commitment to ensure the safety of passengers, a carrier may choose to hire its established rule that nominal damages cannot co-exist with compensatory
own employees or avail itself of the services of an outsider or an independent firm damages.19
to undertake the task. In either case, the common carrier is not relieved of its
responsibilities under the contract of carriage. WHEREFORE, the assailed decision of the appellate court is AFFIRMED with
MODIFICATION but only in that (a) the award of nominal damages is DELETED and
Should Prudent be made likewise liable? If at all, that liability could only be for tort (b) petitioner Rodolfo Roman is absolved from liability. No costs.
under the provisions of Article 217612 and related provisions, in conjunction with
Article 2180,13 of the Civil Code. The premise, however, for the employers liability SO ORDERED.
is negligence or fault on the part of the employee. Once such fault is established,
the employer can then be made liable on the basis of the presumption juris tantum
that the employer failed to exercise diligentissimi patris families in the selection and
supervision of its employees. The liability is primary and can only be negated by
showing due diligence in the selection and supervision of the employee, a factual
matter that has not been shown. Absent such a showing, one might ask further,
how then must the liability of the common carrier, on the one hand, and an
independent contractor, on the other hand, be described? It would be solidary. A
contractual obligation can be breached by tort and when the same act or omission
causes the injury, one resulting in culpa contractual and the other in culpa
aquiliana, Article 219414 of the Civil Code can well apply.15 In fine, a liability for
tort may arise even under a contract, where tort is that which breaches the
contract.16 Stated differently, when an act which constitutes a breach of contract
would have itself constituted the source of a quasi-delictual liability had no contract
existed between the parties, the contract can be said to have been breached by
tort, thereby allowing the rules on tort to apply.17

Regrettably for LRT, as well as perhaps the surviving spouse and heirs of the late
Nicanor Navidad, this Court is concluded by the factual finding of the Court of
Appeals that "there is nothing to link (Prudent) to the death of Nicanor (Navidad),
for the reason that the negligence of its employee, Escartin, has not been duly
G.R. Nos. 66102-04 August 30, 1990
PHILIPPINE RABBIT BUS LINES, INC., petitioner, vs. THE HONORABLE
INTERMEDIATE APPELLATE COURT AND CASIANO PASCUA, ET AL., respondents.
MEDIALDEA, J.:
This is a petition for review on certiorari of the decision of the Intermediate
Appellate Court (now Court of Appeals) dated July 29, 1983 in AC-G.R. Nos. CV-
65885, CV-65886 and CV-65887 which reversed the decision of the Court of First
Instance (now Regional Trial Court) of Pangasinan dated December 27, 1978; and its
resolution dated November 28, 1983 denying the motion for reconsideration.
It is an established principle that the factual findings of the Court of Appeals are
final and may not be reviewed by this Court on appeal. However, this principle is
subject to certain exceptions. One of these is when the findings of the appellate
court are contrary to those of the trial court (see Sabinosa v. The Honorable Court
of Appeals, et al., G.R. No. L-47981, July 24, 1989) in which case, a re-examination
of the facts and evidence may be undertaken. This is Our task now.
The antecedent facts are as follows:
About 11:00 o'clock in the morning on December 24, 1966, Catalina Pascua, Caridad
Pascua, Adelaida Estomo, Erlinda Meriales, Mercedes Lorenzo, Alejandro Morales
and Zenaida Parejas boarded the jeepney owned by spouses Isidro Mangune and
Guillerma Carreon and driven by Tranquilino Manalo at Dau, Mabalacat, Pampanga
bound for Carmen, Rosales, Pangasinan to spend Christmas at their respective
homes. Although they usually ride in buses, they had to ride in a jeepney that day
because the buses were full. Their contract with Manalo was for them to pay
P24.00 for the trip. The private respondents' testimonial evidence on this
contractual relationship was not controverted by Mangune, Carreon and Manalo,
nor by Filriters Guaranty Assurance Corporation, Inc., the insurer of the jeepney,
with contrary evidence. Purportedly riding on the front seat with Manalo was
Mercedes Lorenzo. On the left rear passenger seat were Caridad Pascua, Alejandro
Morales and Zenaida Parejas. On the right rear passenger seat were Catalina
Pascua, Adelaida Estomo, and Erlinda Meriales. After a brief stopover at Moncada,
Tarlac for refreshment, the jeepney proceeded towards Carmen, Rosales,
Pangasinan.
Upon reaching barrio Sinayoan, San Manuel, Tarlac, the right rear wheel of the
jeepney was detached, so it was running in an unbalanced position. Manalo
stepped on the brake, as a result of which, the jeepney which was then running on
the eastern lane (its right of way) made a U-turn, invading and eventually stopping
on the western lane of the road in such a manner that the jeepney's front faced the
south (from where it came) and its rear faced the north (towards where it was
going). The jeepney practically occupied and blocked the greater portion of the
western lane, which is the right of way of vehicles coming from the north, among
which was Bus No. 753 of petitioner Philippine Rabbit Bus Lines, Inc. (Rabbit) driven
by Tomas delos Reyes. Almost at the time when the jeepney made a sudden U-turn
and encroached on the western lane of the highway as claimed by Rabbit and delos
Reyes, or after stopping for a couple of minutes as claimed by Mangune, Carreon
and Manalo, the bus bumped from behind the right rear portion of the jeepney. As
a result of the collision, three passengers of the jeepney (Catalina Pascua, Erlinda
Meriales and Adelaida Estomo) died while the other jeepney passengers sustained
physical injuries. What could have been a festive Christmas turned out to be tragic.
The causes of the death of the three jeepney passengers were as follows (p. 101,
Record on Appeal):
The deceased Catalina Pascua suffered the following injuries, to
wit: fracture of the left parietal and temporal regions of the skull;
fracture of the left mandible; fracture of the right humenous;
compound fracture of the left radious and ullma middle third and
lower third; fracture of the upper third of the right tibia and
fillnea; avulsion of the head, left internal; and multiple abrasions.
The cause of her death was shock, secondary to fracture and
multiple hemorrhage. The fractures were produced as a result of
the hitting of the victim by a strong force. The abrasions could be
produced when a person falls from a moving vehicles (sic) and
rubs parts of her body against a cement road pavement. . . .
Erlinda Mariles (sic) sustained external lesions such as contusion
on the left parietal region of the skull; hematoma on the right
upper lid; and abrasions (sic) on the left knee. Her internal lesions
were: hematoma on the left thorax; multiple lacerations of the
left lower lobe of the lungs; contusions on the left lower lobe of
the lungs; and simple fractures of the 2nd, 3rd, 4th, 5th, 6th, 7th,
and 8th ribs, left. The forcible impact of the jeep caused the above
injuries which resulted in her death. . . .
The cause of death of Erlinda or Florida Estomo (also called as per
autopsy of Dr. Panlasiqui was due to shock due to internal
hemorrhage, ruptured spleen and trauma. . . .
Caridad Pascua suffered physical injuries as follows (p. 101, Record on Appeal):
 . . . lacerated wound on the forehead and occipital region,
hematoma on the forehead, multiple abrasions on the forearm,
right upper arm, back and right leg. . . .
The police investigators of Tacpal and policemen of San Manuel, Tarlac, Tarlac,
upon arrival at the scene of the mishap, prepared a sketch (common exhibit "K" for
private respondents "19" for Rabbit) showing the relative positions of the two
vehicles as well as the alleged point of impact (p. 100, Record on Appeal):
. . . The point of collision was a cement pave-portion of the
Highway, about six (6) meters wide, with narrow shoulders with
grasses beyond which are canals on both sides. The road was
straight and points 200 meters north and south of the point of
collision are visible and unobstructed. Purportedly, the point of
impact or collision (Exh. "K-4", Pascua on the sketch Exh. "K"-
Pascua) was on the western lane of the highway about 3 feet (or
one yard) from the center line as shown by the bedris (sic), dirt
and soil (obviously from the undercarriage of both vehicles) as
well as paint, marron (sic) from the Rabbit bus and greenish from
the jeepney. The point of impact encircled and marked with the
letter "X" in Exh. "K"-4 Pascua, had a diameter of two meters, the
center of which was about two meters from the western edge of
cement pavement of the roadway. Pictures taken by witness
Bisquera in the course of the investigation showed the relative
positions of the point of impact and center line (Exh. "P"-Pascua)
the back of the Rabbit bus (Exh. "P"-1-Pascua"), the lifeless body
of Catalina Pascua (Exh. "P-2 Pascua"), and the damaged front
part of the Rabbit bus (Exh. "P-3 Pascua"). No skid marks of the
Rabbit bus was found in the vicinity of the collision, before or
after the point of impact. On the other hand, there was a skid
mark about 45 meters long purportedly of the jeepney from the
eastern shoulder of the road south of, and extending up to the
point of impact.
At the time and in the vicinity of the accident, there were no vehicles following the
jeepney, neither were there oncoming vehicles except the bus. The weather
condition of that day was fair.
After conducting the investigation, the police filed with the Municipal Court of San
Manuel, Tarlac, a criminal complaint against the two drivers for Multiple Homicide.
At the preliminary investigation, a probable cause was found with respect to the
case of Manalo, thus, his case was elevated to the Court of First Instance. However,
finding no sufficiency of evidence as regards the case of delos Reyes, the Court
dismissed it. Manalo was convicted and sentenced to suffer imprisonment. Not
having appealed, he served his sentence.
Complaints for recovery of damages were then filed before the Court of First
Instance of Pangasinan. In Civil Case No. 1136, spouses Casiano Pascua and Juana
Valdez sued as heirs of Catalina Pascua while Caridad Pascua sued in her behalf. In
Civil Case No. 1139, spouses Manuel Millares and Fidencia Arcica sued as heirs of
Erlinda Meriales. In Civil Case No. 1140, spouses Mariano Estomo and Dionisia
Sarmiento also sued as heirs of Adelaida Estomo.
In all three cases, spouses Mangune and Carreon, Manalo, Rabbit and delos Reyes
were all impleaded as defendants. Plaintiffs anchored their suits against spouses
Mangune and Carreon and Manalo on their contractual liability. As against Rabbit
and delos Reyes, plaintiffs based their suits on their culpability for a quasi-delict.
Filriters Guaranty Assurance Corporation, Inc. was also impleaded as additional
defendant in Civil Case No. 1136 only.
For the death of Catalina Pascua, plaintiffs in Civil Case No. 1136 sought to collect
the aggregate amount of P70,060.00 in damages, itemized as follows: P500.00 for
burial expenses; P12,000.00 for loss of wages for 24 years; P10,000.00 for
exemplary damages; P10,000.00 for moral damages; and P3,000.00 for attorney's
fees. In the same case, plaintiff Caridad Pascua claimed P550.00 for medical
expenses; P240.00 for loss of wages for two months; P2,000.00 for disfigurement of
her face; P3,000.00 for physical pain and suffering; P2,500.00 as exemplary
damages and P2,000.00 for attorney's fees and expenses of litigation.
In Civil Case No. 1139, plaintiffs demanded P500.00 for burial expenses; P6,000.00
for the death of Erlinda, P63,000.00 for loss of income; P10,000.00 for moral
damages and P3,000.00 for attorney's fees or total of P80,000.00.
In Civil Case No. 1140, plaintiffs claimed P500.00 for burial expenses; P6,000.00 for
the death of Adelaide, P56,160.00 for loss of her income or earning capacity;
P10,000.00 for moral damages; and P3,000.00 for attorney's fees.
Rabbit filed a cross-claim in the amount of P15,000.00 for attorney's fees and
expenses of litigation. On the other hand, spouses Mangune and Carreon filed a
cross-claim in the amount of P6,168.00 for the repair of the jeepney and P3,000.00
for its non-use during the period of repairs.
On December 27, 1978, the trial court rendered its decision finding Manalo
negligent, the dispositive portion of which reads (pp. 113-114, Record on Appeal):
PREMISES CONSIDERED, this Court is of the opinion and so holds:
1) That defendants Isidro Mangune, Guillerma Carreon and
Tranquilino Manalo thru their negligence, breached contract of
carriage with their passengers the plaintiffs' and/or their heirs,
and this Court renders judgment ordering said defendants, jointly
and severally, to pay the plaintiffs
a) In Civil Case No. 1136, for the death of Catalina Pascua, to pay
her heirs the amounts of P12,000.00 for indemnity for loss of her
life; P41,760.00 for loss of earnings; P324.40 for actual expenses
and P2,000.00 for moral damages;
b) In the same Civil Case No.1136 for the injuries of Caridad
Pascua, to pay her the amounts of P240.00 for loss of wages,
P328.20 for actual expenses and P500.00 for moral damages;
c) In Civil Case No.1139 for the death of Erlinda Meriales, to pay
her heirs (the plaintiffs) the amount of P12,000.00 for
indemnity for loss of her life; P622.00 for actual expenses,
P60,480.00 for loss of wages or income and P2,000.00 for moral
damages;
d) In Civil Case No. 1140, for the death of Erlinda (also called
Florida or Adelaida Estomo), to pay her heirs (the plaintiff the
amount of P12,000.00 for indemnity for the loss of her life;
P580.00 for actual expenses; P53,160.00 for loss of wages or
income and P2,000.00 for moral damages.
2) The defendant Filriters Guaranty Insurance Co., having
contracted to ensure and answer for the obligations of
defendants Mangune and Carreon for damages due their
passengers, this Court renders judgment against the said
defendants Filriters Guaranty Insurance Co., jointly and severally
with said defendants (Mangune and Carreon) to pay the plaintiffs
the amount herein above adjudicated in their favor in Civil Case
No. 1136 only. All the amounts awarded said plaintiff, as set forth
in paragraph one (1) hereinabove;
3) On the cross claim of Phil. Rabbit Bus Lines, Inc. ordering the
defendant, Isidro Mangune, Guillerma Carreon and Tranquilino
Manalo, to pay jointly and severally, cross-claimant Phil. Rabbit
Bus Lines, Inc., the amounts of P216.27 as actual damages to its
Bus No. 753 and P2,173.60 for loss of its earning.
All of the above amount, shall bear legal interest from the filing of
the complaints.
Costs are adjudged against defendants Mangune, Carreon and
Manalo and Filriters Guaranty.
SO ORDERED
On appeal, the Intermediate Appellate Court reversed the above-quoted decision
by finding delos Reyes negligent, the dispositive portion of which reads (pp. 55-
57, Rollo):
WHEREFORE, PREMISES CONSIDERED, the lower court's decision
is hereby REVERSED as to item No. 3 of the decision which reads:
3) On the cross claim of Philippine Rabbit Bus Lines, Inc. ordering
the defendants Isidro Mangune, Guillerma Carreon and
Tranquilino Manalo, to pay jointly and severally, the amounts of
P216.27 as actual damages to its Bus No. 753 and P2,173.60 for
loss of its earnings.
and another judgment is hereby rendered in favor of plaintiffs-
appellants Casiana Pascua, Juan Valdez and Caridad Pascua,
ordering the Philippine Rabbit Bus Lines, Inc. and its driver Tomas
delos Reyes to pay the former jointly and severally damages in
amounts awarded as follows:
For the death of Catalina Pascua, the parents and/or heirs are
awarded
Civil Case No. 1136
a) Indemnity for the loss of life P12,000.00
b) Loss of Salaries or earning capacity 14,000.00
c) Actual damages (burial expenses) 800.00
d) For moral damages 10,000.00
e) Exemplary damages 3,000.00
 f) For attorney's fees 3,000.00
Total P38,200.00 (sic)
For the physical injuries suffered by Caridad Pascua:
Civil Case No. 1136
a) Actual damages (hospitalization expenses) P550.00
b) Moral damages (disfigurement of the
face and physical suffering 8,000.00
c) Exemplary damages 2,000.00
Total P10,550.00
For the death of Erlinda Arcega Meriales. the parents and/or
heirs:
Civil Case No. 1139
a) Indemnity for loss of life P12,000.00
b) Loss of Salary or Earning Capacity 20,000.00
c) Actual damages (burial expenses) 500.00
d) Moral damages 15,000.00
e) Exemplary damages 15,000.00
f) Attorney's fees 3,000.00
Total P65,500.00
For the death of Florida Sarmiento Estomo:
Civil Case No. 1140
a) Indemnity for loss of life P12,000.00
b) Loss of Salary or Earning capacity 20,000.00
c) Actual damages (burial expenses) 500.00
d) Moral damages 3,000.00
e) Exemplary damages 3,000.00
f) Attorney's fees 3,000.00
Total P41,500.00
With costs against the Philippine Rabbit Bus Lines, Inc.
SO ORDERED.
The motion for reconsideration was denied. Hence, the present petition.
The issue is who is liable for the death and physical injuries suffered by the
passengers of the jeepney?
The trial court, in declaring that Manalo was negligent, considered the following (p.
106, Record on Appeal):
(1) That the unrebutted testimony of his passenger plaintiff
Caridad Pascua that a long ways (sic) before reaching the point of
collision, the Mangune jeepney was "running fast" that his
passengers cautioned driver Manalo to slow down but did not
heed the warning: that the right rear wheel was detached causing
the jeepney to run to the eastern shoulder of the road then back
to the concrete pavement; that driver Manalo applied the brakes
 after which the jeepney made a U-turn (half-turn) in such a
manner that it inverted its direction making it face South instead
of north; that the jeepney stopped on the western lane of the
road on the right of way of the oncoming Phil. Rabbit Bus where it
was bumped by the latter;
(2) The likewise unrebutted testimony of Police Investigator
Tacpal of the San Manuel (Tarlac) Police who, upon responding to
the reported collission, found the real evidence thereat indicate in
his sketch (Exh. K, Pascua ), the tracks of the jeepney of defendant
Mangune and Carreon running on the Eastern shoulder (outside
the concrete paved road) until it returned to the concrete road at
a sharp angle, crossing the Eastern lane and the (imaginary)
center line and encroaching fully into the western lane where the
collision took place as evidenced by the point of impact;
(3) The observation of witness Police Corporal Cacalda also of the
San Manuel Police that the path of the jeepney they found on the
road and indicated in the sketch (Exh. K-Pascua) was shown by
skid marks which he described as "scratches on the road caused
by the iron of the jeep, after its wheel was removed;"
(4) His conviction for the crime of Multiple Homicide and Multiple
Serious Physical Injuries with Damage to Property thru Reckless
Imprudence by the Court of First Instance of Tarlac (Exh. 24-
Rabbit) upon the criminal Information by the Provincial Fiscal of
Tarlac (Exh. 23-Rabbit), as a result of the collision, and his
commitment to prison and service of his sentence (Exh. 25-
Rabbit) upon the finality of the decision and his failure to appeal
therefrom; and
(5) The application of the doctrine of res-ipsa loquitar (sic)
attesting to the circumstance that the collision occured (sic) on
the right of way of the Phil. Rabbit Bus.
The respondent court had a contrary opinion. Applying primarily (1) the doctrine of
last clear chance, (2) the presumption that drivers who bump the rear of another
vehicle guilty and the cause of the accident unless contradicted by other evidence,
and (3) the substantial factor test. concluded that delos Reyes was negligent.
The misappreciation of the facts and evidence and the misapplication of the laws by
the respondent court warrant a reversal of its questioned decision and resolution.
We reiterate that "[t]he 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." This was Our ruling in Anuran, et al. v. Buo et
al., G.R. Nos. L-21353 and L-21354, May 20, 1966, 17 SCRA 224. 1 Thus, the
respondent court erred in applying said doctrine.
On the presumption that drivers who bump the rear of another vehicle guilty and
the cause of the accident, unless contradicted by other evidence, the respondent
court said (p. 49, Rollo):
. . . the jeepney had already executed a complete turnabout and
at the time of impact was already facing the western side of the
road. Thus the jeepney assumed a new frontal position vis a vis,
the bus, and the bus assumed a new role of defensive driving. The
spirit behind the presumption of guilt on one who bumps the rear
end of another vehicle is for the driver following a vehicle to be at
all times prepared of a pending accident should the driver in front
suddenly come to a full stop, or change its course either through
change of mind of the front driver, mechanical trouble, or to
avoid an accident. The rear vehicle is given the responsibility of
avoiding a collision with the front vehicle for it is the rear vehicle
who has full control of the situation as it is in a position to observe
the vehicle in front of it.
The above discussion would have been correct were it not for the undisputed fact
that the U-turn made by the jeepney was abrupt (Exhibit "K," Pascua). The jeepney,
which was then traveling on the eastern shoulder, making a straight, skid mark of
approximately 35 meters, crossed the eastern lane at a sharp angle, making a skid
mark of approximately 15 meters from the eastern shoulder to the point of impact
(Exhibit "K" Pascua). Hence, delos Reyes could not have anticipated the sudden U-
turn executed by Manalo. The respondent court did not realize that the
presumption was rebutted by this piece of evidence.
With regard to the substantial factor test, it was the opinion of the respondent
court that (p. 52, Rollo):
. . . It is the rule under the substantial factor test that if the actor's
conduct is a substantial factor in bringing about harm to another,
the fact that the actor neither foresaw nor should have foreseen
the extent of the harm or the manner in which it occurred does
 not prevent him from being liable (Restatement, Torts, 2d). Here,
We find defendant bus running at a fast speed when the accident
occurred and did not even make the slightest effort to avoid the
accident, . . . . The bus driver's conduct is thus a substantial factor
in bringing about harm to the passengers of the jeepney, not only
because he was driving fast and did not even attempt to avoid the
mishap but also because it was the bus which was the physical
force which brought about the injury and death to the passengers
of the jeepney.
The speed of the bus was calculated by respondent court as follows (pp. 54-
55, Rollo):
According to the record of the case, the bus departed from Laoag,
Ilocos Norte, at 4:00 o'clock A.M. and the accident took place at
approximately around 12:30 P.M., after travelling roughly for 8
hours and 30 minutes. Deduct from this the actual stopover time
of two Hours (computed from the testimony of the driver that he
made three 40-minute stop-overs), We will have an actual
travelling time of 6 hours and 30 minutes.
Under the circumstances, We calculate that the Laoag-Tarlac
route (365 kms.) driving at an average of 56 km. per hour would
take 6 hours and 30 minutes. Therefore, the average speed of the
bus, give and take 10 minutes, from the point of impact on the
highway with excellent visibility factor would be 80 to 90 kms. per
hour, as this is the place where buses would make up for lost time
in traversing busy city streets.
Still, We are not convinced. It cannot be said that the bus was travelling at a fast
speed when the accident occurred because the speed of 80 to 90 kilometers per
hour, assuming such calculation to be correct, is yet within the speed limit allowed
in highways. We cannot even fault delos Reyes for not having avoided the collision.
As aforestated, the jeepney left a skid mark of about 45 meters, measured from the
time its right rear wheel was detached up to the point of collision. Delos Reyes must
have noticed the perilous condition of the jeepney from the time its right rear
wheel was detached or some 90 meters away, considering that the road was
straight and points 200 meters north and south of the point of collision, visible and
unobstructed. Delos Reyes admitted that he was running more or less 50 kilometers
per hour at the time of the accident. Using this speed, delos Reyes covered the
distance of 45 meters in 3.24 seconds. If We adopt the speed of 80 kilometers per
hour, delos Reyes would have covered that distance in only 2.025 seconds. Verily,
he had little time to react to the situation. To require delos Reyes to avoid the
collision is to ask too much from him. Aside from the time element involved, there
were no options available to him. As the trial court remarked (pp. 107-108, Record
on Appeal):
. . . They (plaintiffs) tried to impress this Court that defendant de
los Reyes, could have taken either of two options: (1) to swerve to
its right (western shoulder) or (2) to swerve to its left (eastern
lane), and thus steer clear of the Mangune jeepney. This Court
does not so believe, considering the existing exigencies of space
and time.
As to the first option, Phil. Rabbit's evidence is convincing and
unrebutted that the Western shoulder of the road was narrow
and had tall grasses which would indicate that it was not passable.
Even plaintiffs own evidence, the pictures (Exhs. P and P-2,
Pascua) are mute confirmation of such fact. Indeed, it can be
noticed in the picture (Exh. P-2, Pascua) after the Rabbit bus came
to a full stop, it was tilted to right front side, its front wheels
resting most probably on a canal on a much lower elevation that
of the shoulder or paved road. It too shows that all of the wheels
of the Rabbit bus were clear of the roadway except the outer left
rear wheel. These observation appearing in said picture (Exh P-2,
Pascua) clearly shows coupled with the finding the Rabbit bus
came to a full stop only five meters from the point of impact (see
sketch, Exh. K-Pascua) clearly show that driver de los Reyes
veered his Rabbit bus to the right attempt to avoid hitting the
Mangune's jeepney. That it was not successful in fully clearing the
Mangune jeepney as its (Rabbit's) left front hit said jeepney (see
picture Exh. 10-A-Rabbit) must have been due to limitations of
space and time.
Plaintiffs alternatively claim that defendant delos Reyes of the
Rabbit bus could also have swerved to its left (eastern lane) to
avoid bumping the Mangune jeepney which was then on the
western lane. Such a claim is premised on the hypothesis (sic) that
the eastern lane was then empty. This claim would appear to be
good copy of it were based alone on the sketch made after the
collision. Nonetheless, it loses force it one were to consider the
time element involved, for moments before that, the Mangune
jeepney was crossing that very eastern lane at a sharp angle.
Under such a situation then, for driver delos Reyes to swerve to
the eastern lane, he would run the greater risk of running smack
in the Mangune jeepney either head on or broadside.
After a minute scrutiny of the factual matters and duly proven evidence, We find
that the proximate cause of the accident was the negligence of Manalo and spouses
Mangune and Carreon. They all failed to exercise the precautions that are needed
precisely pro hac vice.
In culpa contractual, the moment a passenger dies or is injured, the carrier is
presumed to have been at fault or to have acted negligently, and this disputable
presumption may only be overcome by evidence that he had observed extra-
ordinary diligence as prescribed in Articles 1733, 1755 and 1756 of the New Civil
Code 2 or that the death or injury of the passenger was due to a fortuitous
event 3 (Lasam v. Smith, Jr., 45 Phil. 657).
The negligence of Manalo was proven during the trial by the unrebutted
testimonies of Caridad Pascua, Police Investigator Tacpal, Police Corporal Cacalda,
his (Manalo's) conviction for the crime of Multiple Homicide and Multiple Serious
Injuries with Damage to Property thru Reckless Imprudence, and the application of
the doctrine ofres ipsa loquitur supra. The negligence of spouses Mangune and
Carreon was likewise proven during the trial (p. 110, Record on Appeal):
To escape liability, defendants Mangune and Carreon offered to
show thru their witness Natalio Navarro, an alleged mechanic,
that he periodically checks and maintains the jeepney of said
defendants, the last on Dec. 23, the day before the collision,
which included the tightening of the bolts. This notwithstanding
the right rear wheel of the vehicle was detached while in transit.
As to the cause thereof no evidence was offered. Said defendant
did not even attempt to explain, much less establish, it to be one
caused by a caso fortuito. . . .
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). In other words,
the carrier can neither shift his liability on the contract to his driver nor share it with
him, for his driver's negligence is his. 4 Secondly, if We make the driver jointly and
severally liable with the carrier, that would make the carrier's liability personal
instead of merely vicarious and consequently, entitled to recover only the share
which corresponds to the driver, 5 contradictory to the explicit provision of Article
2181 of the New Civil Code. 6
We affirm the amount of damages adjudged by the trial court, except with respect
to the indemnity for loss of life. Under Article 1764 in relation to Article 2206 of the
New Civil Code, the amount of damages for the death of a passenger is at least
three thousand pesos (P3,000.00). The prevailing jurisprudence has increased the
amount of P3,000.00 to P30,000.00 (see Heirs of Amparo delos Santos, et al. v.
Honorable Court of Appeals, et al., G.R. No. 51165, June 21, 1990 citing De Lima v.
Laguna Tayabas Co., G.R. Nos. L-35697-99, April 15, 1988, 160 SCRA 70).
ACCORDINGLY, the petition is hereby GRANTED. The decision of the Intermediate
Appellate Court dated July 29, 1983 and its resolution dated November 28, 1983 are
SET ASIDE. The decision of the Court of First Instance dated December 27, 1978 is
REINSTATED MODIFICATION that only Isidro Mangune, Guillerma Carreon and
Filriters Guaranty Assurance Corporation, Inc. are liable to the victims or their heirs
and that the amount of indemnity for loss of life is increased to thirty thousand
pesos (P30,000.00).
SO ORDERED.

In any event, "[i]n an action for damages against the carrier for his failure
to safely carry his passenger to his destination, an accident caused either
by defects in the automobile or through the negligence of its driver, is not
a caso fortuito which would avoid the carriers liability for damages (Son v.
Cebu Autobus Company, 94 Phil. 892 citing Lasam, et al. v. Smith, Jr., 45
Phil. 657; Necesito, etc. v. Paras, et al., 104 Phil. 75).

The trial court was therefore right in finding that Manalo and spouses Mangune and
Carreon 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
G.R. No. L-9907 June 30, 1958
LOURDES J. LARA, ET AL., plaintiffs-appellants, vs. BRIGIDO R.
VALENCIA, defendant-appellant.
BAUTISTA ANGELO, J.:
This is an action for damages brought by plaintiffs against defendant in the Court of
First Instance of Davao for the death of one Demetrio Lara, Sr. allegedly caused by
the negligent act of defendant. Defendant denied the charge of negligence and set
up certain affirmative defenses and a counterclaim.
The court after hearing rendered judgment ordering defendant to pay the plaintiffs
the following amount: (a) P10,000 as moral damages; (b) P3,000 as exemplary
damages; and (c) P1,000 as attorney's fees, in addition to the costs of action. Both
parties appealed to this Court because the damages claimed in the complaint
exceed the sum of P50,000.
In their appeal, plaintiffs claim that the court a quo erred in disregarding their claim
of P41,400 as actual or compensatory damages and in awarding as attorneys' fees
only the sum of P1,000 instead of P3,000 as agreed upon between plaintiffs and
their counsel. Defendant, on the other hand, disputes the finding of the court a quo
that the oath of Demetrio Lara, Sr. was due to the negligence of defendant and the
portion of the judgment which orders dependant to pay to plaintiffs moral and
exemplary damages as well as attorneys' fees, said defendant contending that the
court should have declared that the death of Lara was due to unavoidable accident.
The deceased was an inspector of the Bureau of Forestry stationed in Davao with an
annual salary of P1,800. The defendant is engaged in the business of exporting logs
from his lumber concession in Cotabato. Lara went to said concession upon
instructions of his chief to classify the logs of defendant which were about to be
loaded on a ship anchored in the port of Parang. The work Lara of lasted for six days
during which he contracted malaria fever. In the morning of January 9, 1954, Lara
who then in a hurry to return to Davao asked defendant if he could take him in his
pick-up as there was then no other means of transportation, to which defendant
agreed, and in that same morning the pick-up left Parang bound for Davao taking
along six passengers, including Lara.
The pick-up has a front seat where the driver and two passengers can be
accommodated and the back has a steel flooring enclosed with a steel walling of 16
to 17 inches tall on the sides and with a 19 inches tall walling at the back. Before
leaving Parang, the sitting arrangement was as follows: defendant was at the wheel
and seated with him in the front seat were Mrs. Valencia and Nicanor Quinain; on
the back of the pick-up were two improvised benches placed on each side, and
seated on the right bench were Ricardo Alojipan and Antonio Lagahit, and on the
left one Bernardo and Pastor Geronimo. A person by the name of Leoning was
seated on a box located on the left side while in the middle Lara sat on a bag.
Before leaving Parang, defendant invited Lara to sit with him on the front seat but
Lara declined. It was their understanding that upon reaching barrio Samoay,
Cotabato, the passengers were to alight and take a bus bound for Davao, but when
they arrived at that place, only Bernardo alighted and the other passengers
requested defendant to allow them to ride with him up to Davao because there was
then no available bus that they could take in going to that place. Defendant again
accommodated the passengers.
When they continued their trip, the sitting arrangement of the passengers
remained the same, Lara being seated on a bag in the middle with his arms on a
suitcase and his head cove red by a jacket. Upon reaching Km. 96, barrio Catidtuan,
Lara accidentally fell from the pick-up and as a result he suffered serious injuries.
Valencia stopped the pick-up to see what happened to Lara. He sought the help of
the residents of that place and applied water to Lara but to no avail. They brought
Lara to the nearest place where they could find a doctor and not having found any
they took him to St. Joseph's Clinic of Kidapawan. But when Lara arrived he was
already dead. From there they proceeded to Davao City and immediately notified
the local authorities. An investigation was made regarding the circumstances
surrounding the death of Lara but no criminal action was taken against defendant.
It should be noted that the deceased went to the lumber concession of defendant
in Parang, Cotabato upon instructions of his chief in order to classify the logs of
defendant which were then ready to be exported and to be loaded on a ship
anchored in the port of Parang. It took Lara six days to do his work during which he
contracted malaria fever and for that reason he evinced a desire to return
immediately to Davao. At that time, there was no available bus that could take him
back to Davao and so he requested the defendant if he could take him in his own
pick-up. Defendant agreed and, together with Lara, other passengers tagged along,
most of them were employees of the Government. Defendant merely
accommodated them and did not charge them any fee for the service. It was also
their understanding that upon reaching barrio Samoay, the passengers would alight
and transfer to a bus that regularly makes the trip to Davao but unfortunately there
was none available at the time and so the same passengers, including Lara, again
requested the defendant to drive them to Davao. Defendant again accommodated
them and upon reaching Km. 96, Lara accidentally fell suffering fatal injuries.
It therefore appears that the deceased, as well his companions who rode in the
pick-up of defendant, were merely accommodation passengers who paid nothing
for the service and so they can be considered as invited guests within the meaning
of the law. As accommodation passengers or invited guests, defendant as owner
and driver of the pick-up owes to them merely the duty to exercise reasonable care
so that they may be transported safely to their destination. Thus, "The rule is
established by the weight of authority that the owner or operator of an automobile
owes the duty to an invited guest to exercise reasonable care in its operation, and
not unreasonably to expose him to danger and injury by increasing the hazard of
travel. This rule, as frequently stated by the courts, is that an owner of an
automobile owes a guest the duty to exercise ordinary or reasonable care to avoid
injuring him. Since one riding in an automobile is no less a guest because he asked
for the privilege of doing so, the same obligation of care is imposed upon the driver
as in the case of one expressly invited to ride" (5 Am. Jur., 626-627). Defendant,
therefore, is only required to observe ordinary care, and is not in duty bound to
exercise extraordinary diligence as required of a common carrier by our law
(Articles 1755 and 1756, new Civil Code).
The question that now arises is: Is there enough evidence to show that defendant
failed to observe ordinary care or diligence in transporting the deceased from
Parang to Davao on the date in question?
The trial court answered the question in the affirmative but in so doing it took into
account only the following facts:
No debe perderse de vista el hecho, que los negocios de exportacion de
trozos del demandado tiene un volumen de P1,200. Lara era empleado de
la Oficina de Montes, asalariado por el gobierno, no pagado por el
demandado para classificar los trozos exportados; debido a los trabajos de
classificacion que duro 6 dias, en su ultimo dia Lara no durmio toda la
noche, al dia siguiente, Lara fue atacado de malaria, tenia inflamada la cara
y cuerpo, sufria dolores de cabeza con erupciones en la cara y cuerpo; que
en la manana, del dia 2 de enero de 1954, fecha en que Lara salio de Davao
para Parang, en aeroplano para clasificar los trozos del demandado, el
automobil de este condujo a aquel al aerodromo de Davao.
xxx xxx xxx
El viaje de Cotabato a Davao no es menos de 8 horas, su carretera esta en
malas condiciones, desnivelada, con piedras salientes y baches, que hacen
del vehiculo no estable en su marcha. Lara estaba enfermo de cierta
gravedad, tenia el cuerpo y cara inflamados, atacado de malaria, con
dolores de cabeza y con erupciones en la cara y cuerpo.
A la vista de estos hechos, el demandado debia de saber que era
sumamente peligroso llevar 5 pasajeros en la parte trasera del pick-up;
particularmente, para la salud de Lara; el permitirlo, el demandado no ha
tomado las precausiones, para evitar un posible accidente fatal. La
negative de Lara de ocupar el asiento delantero del pick-up no constituye a
juicio del Juzgado una defensa, pues el demendado conociendo el estado
delicado de salud de Lara, no debio de haber permitido que aquel regrese
a Davao en su pick-up; si querria prestar a aquel un favor, debio de haver
provisto a Lara de un automobil para su regrese a Davao, ya que el
demendado es un millionario; si no podia prestar a aquel este favor, debio
de haver dejado a Lara en Samuay para coger aquel un camion de pasajero
de Cotabato a Davao.
Even if we admit as true the facts found by the trial court, still we find that the
same are not sufficient to show that defendant has failed to take the precaution
necessary to conduct his passengers safely to their place of destination for there is
nothing there to indicate that defendant has acted with negligence or without
taking the precaution that an ordinary prudent man would have taken under similar
circumstances. It should be noted that Lara went to the lumber concession of
defendant in answer to a call of duty which he was bound to perform because of
the requirement of his office and he contracted the malaria fever in the course of
the performance of that duty. It should also be noted that defendant was not in
duty bound to take the deceased in his own pick-up to Davao because from Parang
to Cotabato there was a line of transportation that regularly makes trips for the
public, and if defendant agreed to take the deceased in his own car, it was only to
accommodate him considering his feverish condition and his request that he be so
accommodated. It should also be noted that the passengers who rode in the pick-
up of defendant took their respective seats therein at their own choice and not
upon indication of defendant with the particularity that defendant invited the
deceased to sit with him in the front seat but which invitation the deceased
declined. The reason for this can only be attributed to his desire to be at the back so
that he could sit on a bag and travel in a reclining position because such was more
convenient for him due to his feverish condition. All the circumstances therefore
clearly indicate that defendant had done what a reasonable prudent man would
have done under the circumstances.
There is every reason to believe that the unfortunate happening was only due to an
unforeseen accident accused by the fact that at the time the deceased was half
asleep and must have fallen from the pick-up when it ran into some stones causing
it to jerk considering that the road was then bumpy, rough and full of stones.
The finding of the trial court that the pick-up was running at more than 40
kilometers per hour is not supported by the evidence. This is a mere surmise made
by the trial court considering the time the pick-up left barrio Samoay and the time
the accident occured in relation to the distance covered by the pick-up. And even if
this is correct, still we say that such speed is not unreasonable considering that they
were traveling on a national road and the traffic then was not heavy. We may
rather attribute the incident to lack of care on the part of the deceased considering
that the pick-up was open and he was then in a crouching position. Indeed, the law
provides that "A passenger must observe the diligence of a good father of a family
to avoid injury to himself" (Article 1761, new Civil Code), which means that if the
injury to the passenger has been proximately caused by his own negligence, the
carrier cannot be held liable.

All things considered, we are persuaded to conclude that the accident occurred not
due to the negligence of defendant but to circumstances beyond his control and so
he should be exempt from liability.

Wherefore, the decision appealed from is reversed, without pronouncement as to

costs.
G.R. No. 52159 December 22, 1989 causing a permanent scar on the face and injuring the
JOSE PILAPIL, petitioner, vs. HON. COURT OF APPEALS and ALATCO eye-sight of the plaintiff;
TRANSPORTATION COMPANY, INC., respondents.
PADILLA, J.: 2. Ordering further defendant transportation company to
pay the sum of P 5,000.00, Philippine Currency, to the
This is a petition to review on certiorari the decision* rendered by the Court of plaintiff as moral and exemplary damages;
Appeals dated 19 October 1979 in CA-G.R. No. 57354-R entitled "Jose Pilapil,
plaintiff-appellee versus Alatco Transportation Co., Inc., defendant-appellant," 3. Ordering furthermore, defendant transportation
which reversed and set aside the judgment of the Court of First Instance of company to reimburse plaintiff the sum of P 300.00 for
Camarines Sur in Civil Case No. 7230 ordering respondent transportation company his medical expenses and attorney's fees in the sum of P
to pay to petitioner damages in the total sum of sixteen thousand three hundred 1,000.00, Philippine Currency; and
pesos (P 16,300.00).
4. To pay the costs.
The record discloses the following facts:
SO ORDERED 1
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 From the judgment, private respondent appealed to the Court of Appeals where the
about 6:00 P.M. While said bus No. 409 was in due course negotiating the distance appeal was docketed as CA-G.R. No. 57354R. On 19 October 1979, the Court of
between Iriga City and Naga City, upon reaching the vicinity of the cemetery of the Appeals, in a Special Division of Five, rendered judgment reversing and setting aside
Municipality of Baao, Camarines Sur, on the way to Naga City, an unidentified man, the judgment of the court a quo.
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
Hence the present petition.
in bringing the petitioner to the provincial hospital in Naga City where he was
confined and treated.
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
Considering that the sight of his left eye was impaired, petitioner was taken to Dr.
argues that the nature of the business of a transportation company requires the
Malabanan of Iriga City where he was treated for another week. Since there was no
assumption of certain risks, and the stoning of the bus by a stranger resulting in
improvement in his left eye's vision, petitioner went to V. Luna Hospital, Quezon
injury to petitioner-passenger is one such risk from which the common carrier may
City where he was treated by Dr. Capulong. Despite the treatment accorded to him
not exempt itself from liability.
by Dr. Capulong, petitioner lost partially his left eye's vision and sustained a
permanent scar above the left eye.
We do not agree.
Thereupon, petitioner instituted before the Court of First Instance of Camarines
In consideration of the right granted to it by the public to engage in the business of
Sur, Branch I an action for recovery of damages sustained as a result of the stone-
transporting passengers and goods, a common carrier does not give its consent to
throwing incident. After trial, the court a quo rendered judgment with the following
become an insurer of any and all risks to passengers and goods. It merely
dispositive part:
undertakes to perform certain duties to the public as the law imposes, and holds
itself liable for any breach thereof.
Wherefore, judgment is hereby entered:
Under Article 1733 of the Civil Code, common carriers are required to observe
1. Ordering defendant transportation company to pay
extraordinary diligence for the safety of the passenger transported by them,
plaintiff Jose Pilapil the sum of P 10,000.00, Philippine
according to all the circumstances of each case. The requirement of extraordinary
Currency, representing actual and material damages for
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.
G.R. No. L-20761 July 27, 1966
LA MALLORCA, petitioner, vs. HONORABLE COURT OF APPEALS, MARIANO
BELTRAN, ET AL., respondents.
BARRERA, J.:
La Mallorca seeks the review of the decision of the Court of Appeals in CA-G.R. No.
23267-R, holding it liable for quasi-delict and ordering it to pay to respondents
Mariano Beltran, et al., P6,000.00 for the death of his minor daughter Raquel
Beltran, plus P400.00 as actual damages.
The facts of the case as found by the Court of Appeals, briefly are:
On December 20, 1953, at about noontime, plaintiffs, husband and wife,
together with their minor daughters, namely, Milagros, 13 years old,
Raquel, about 4 years old, and Fe, over 2 years old, boarded the
Pambusco Bus No. 352, bearing plate TPU No. 757 (1953 Pampanga),
owned and operated by the defendant, at San Fernando, Pampanga,
bound for Anao, Mexico, Pampanga. At the time, they were carrying with
them four pieces of baggages containing their personal belonging. The
conductor of the bus, who happened to be a half-brother of plaintiff
Mariano Beltran, issued three tickets (Exhs. A, B, & C) covering the full
fares of the plaintiff and their eldest child, Milagros. No fare was charged
on Raquel and Fe, since both were below the height at which fare is
charged in accordance with the appellant's rules and regulations.
After about an hour's trip, the bus reached Anao whereat it stopped to
allow the passengers bound therefor, among whom were the plaintiffs and
their children to get off. With respect to the group of the plaintiffs,
Mariano Beltran, then carrying some of their baggages, was the first to get
down the bus, followed by his wife and his children. Mariano led his
companions to a shaded spot on the left pedestrians side of the road about
four or five meters away from the vehicle. Afterwards, he returned to the
bus in controversy to get his other bayong, which he had left behind, but in
so doing, his daughter Raquel followed him, unnoticed by her father. While
said Mariano Beltran was on the running board of the bus waiting for the
conductor to hand him his bayong which he left under one of its seats near
the door, the bus, whose motor was not shut off while unloading, suddenly
started moving forward, evidently to resume its trip, notwithstanding the
fact that the conductor has not given the driver the customary signal to
start, since said conductor was still attending to the baggage left behind by
Mariano Beltran. Incidentally, when the bus was again placed into a
complete stop, it had travelled about ten meters from the point where the
plaintiffs had gotten off.
Sensing that the bus was again in motion, Mariano Beltran immediately
jumped from the running board without getting his bayong from the
conductor. He landed on the side of the road almost in front of the shaded
place where he left his wife and children. At that precise time, he saw
people beginning to gather around the body of a child lying prostrate on
the ground, her skull crushed, and without life. The child was none other
than his daughter Raquel, who was run over by the bus in which she rode
earlier together with her parents.
For the death of their said child, the plaintiffs commenced the present suit
against the defendant seeking to recover from the latter an aggregate
amount of P16,000 to cover moral damages and actual damages sustained
as a result thereof and attorney's fees. After trial on the merits, the court
below rendered the judgment in question.
On the basis of these facts, the trial court found defendant liable for breach of
contract of carriage and sentenced it to pay P3,000.00 for the death of the child and
P400.00 as compensatory damages representing burial expenses and costs.
On appeal to the Court of Appeals, La Mallorca claimed that there could not be a
breach of contract in the case, for the reason that when the child met her death,
she was no longer a passenger of the bus involved in the incident and, therefore,
the contract of carriage had already terminated. Although the Court of Appeals
sustained this theory, it nevertheless found the defendant-appellant guilty of quasi-
delict and held the latter liable for damages, for the negligence of its driver, in
accordance with Article 2180 of the Civil Code. And, the Court of Appeals did not
only find the petitioner liable, but increased the damages awarded the plaintiffs-
appellees to P6,000.00, instead of P3,000.00 granted by the trial court.
In its brief before us, La Mallorca contends that the Court of Appeals erred (1) in
holding it liable for quasi-delict, considering that respondents complaint was one
for breach of contract, and (2) in raising the award of damages from P3,000.00 to
P6,000.00 although respondents did not appeal from the decision of the lower
court.
Under the facts as found by the Court of Appeals, we have to sustain the judgement
holding petitioner liable for damages for the death of the child, Raquel Beltran. It
may be pointed out that although it is true that respondent Mariano Beltran, his
wife, and their children (including the deceased child) had alighted from the bus at
a place designated for disembarking or unloading of passengers, it was also
established that the father had to return to the vehicle (which was still at a stop) to
get one of his bags or bayong that was left under one of the seats of the bus. There
can be no controversy that as far as the father is concerned, when he returned to
the bus for hisbayong which was not unloaded, the relation of passenger and
carrier between him and the petitioner remained subsisting. For, the relation of
carrier and passenger does not necessarily cease where the latter, after alighting
from the car, aids the carrier's servant or employee in removing his baggage from
the car.1 The issue to be determined here is whether as to the child, who was
already led by the father to a place about 5 meters away from the bus, the liability
of the carrier for her safety under the contract of carriage also persisted.
It has been recognized as a rule that the relation of carrier and passenger does not
cease at the moment the passenger alights from the carrier's vehicle at a place
selected by the carrier at the point of destination, but continues until the passenger
has had a reasonable time or a reasonable opportunity to leave the carrier's
premises. And, what is a reasonable time or a reasonable delay within this rule is to
be determined from all the circumstances. Thus, a person who, after alighting from
a train, walks along the station platform is considered still a passenger.2 So also,
where a passenger has alighted at his destination and is proceeding by the usual
way to leave the company's premises, but before actually doing so is halted by the
report that his brother, a fellow passenger, has been shot, and he in good faith and
without intent of engaging in the difficulty, returns to relieve his brother, he is
deemed reasonably and necessarily delayed and thus continues to be a passenger
entitled as such to the protection of the railroad and company and its agents.3
In the present case, the father returned to the bus to get one of his baggages which
was not unloaded when they alighted from the bus. Raquel, the child that she was,
must have followed the father. However, although the father was still on the
running board of the bus awaiting for the conductor to hand him the bag or bayong,
the bus started to run, so that even he (the father) had to jump down from the
moving vehicle. It was at this instance that the child, who must be near the bus, was
run over and killed. In the circumstances, it cannot be claimed that the carrier's
agent had exercised the "utmost diligence" of a "very cautions person" required by
Article 1755 of the Civil Code to be observed by a common carrier in the discharge
of its obligation to transport safely its passengers. In the first place, the driver,
although stopping the bus, nevertheless did not put off the engine. Secondly, he
started to run the bus even before the bus conductor gave him the signal to go and
while the latter was still unloading part of the baggages of the passengers Mariano
Beltran and family. The presence of said passengers near the bus was not
unreasonable and they are, therefore, to be considered still as passengers of the
carrier, entitled to the protection under their contract of carriage.
But even assuming arguendo that the contract of carriage has already terminated,
herein petitioner can be held liable for the negligence of its driver, as ruled by the
Court of Appeals, pursuant to Article 2180 of the Civil Code. Paragraph 7 of the
complaint, which reads
That aside from the aforesaid breach of contract, the death of Raquel
Beltran, plaintiffs' daughter, was caused by the negligence and want of
exercise of the utmost diligence of a very cautious person on the part of
the defendants and their agent, necessary to transport plaintiffs and their
daughter safely as far as human care and foresight can provide in the
operation of their vehicle.
is clearly an allegation for quasi-delict. The inclusion of this averment for quasi-
delict, while incompatible with the other claim under the contract of carriage, is
permissible under Section 2 of Rule 8 of the New Rules of Court, which allows a
plaintiff to allege causes of action in the alternative, be they compatible with each
other or not, to the end that the real matter in controversy may be resolved and
determined.4
The plaintiffs sufficiently pleaded the culpa or negligence upon which the claim was
predicated when it was alleged in the complaint that "the death of Raquel Beltran,
plaintiffs' daughter, was caused by the negligence and want of exercise of the
utmost diligence of a very cautious person on the part of the defendants and their
agent." This allegation was also proved when it was established during the trial that
the driver, even before receiving the proper signal from the conductor, and while
there were still persons on the running board of the bus and near it, started to run
off the vehicle. The presentation of proof of the negligence of its employee gave
rise to the presumption that the defendant employer did not exercise the diligence
of a good father of the family in the selection and supervision of its employees. And
this presumption, as the Court of Appeals found, petitioner had failed to overcome.
Consequently, petitioner must be adjudged peculiarily liable for the death of the
child Raquel Beltran.
The increase of the award of damages from P3,000.00 to P6,000.00 by the Court of
Appeals, however, cannot be sustained. Generally, the appellate court can only pass
upon and consider questions or issues raised and argued in appellant's brief.
Plaintiffs did not appeal from that portion of the judgment of the trial court
awarding them on P3,000.00 damages for the death of their daughter. Neither does
it appear that, as appellees in the Court of Appeals, plaintiffs have pointed out in
their brief the inadequacy of the award, or that the inclusion of the figure P3,000.00
was merely a clerical error, in order that the matter may be treated as an exception
to the general rule.5Herein petitioner's contention, therefore, that the Court of
Appeals committed error in raising the amount of the award for damages is,
evidently, meritorious.1wph1.t
Wherefore, the decision of the Court of Appeals is hereby modified by sentencing,
the petitioner to pay to the respondents Mariano Beltran, et al., the sum of
P3,000.00 for the death of the child, Raquel Beltran, and the amount of P400.00 as
actual damages. No costs in this instance. So ordered.
G.R. No. 84458 November 6, 1989
ABOITIZ SHIPPING CORPORATION, petitioner, vs. HON. COURT OF APPEALS,
ELEVENTH DIVISION, LUCILA C. VIANA, SPS. ANTONIO VIANA and GORGONIA
VIANA, and PIONEER STEVEDORING CORPORATION, respondents.
REGALADO, J.:
In this appeal by certiorari, petitioner Aboitiz Shipping Corporation seeks a review
of the decision 1 of respondent Court of Appeals, dated July 29, 1988, the decretal
portion of which reads:
WHEREFORE, the judgment appealed from as modified by the
order of October 27, 1982, is hereby affirmed with the
modification that appellant Aboitiz Shipping is hereby ordered to
pay plaintiff-appellees the amount of P30,000.00 for the death of
Anacleto Viana; actual damages of P9,800.00; P150,000.00 for
unearned income; P7,200.00 as support for deceased's parents;
P20,000.00 as moral damages; P10,000.00 as attorney's fees; and
to pay the costs.
The undisputed facts of the case, as found by the court a quo and adopted by
respondent court, are as follows: .
The evidence disclosed that on May 11, 1975, Anacleto Viana
boarded the vessel M/V Antonia, owned by defendant, at the port
at San Jose, Occidental Mindoro, bound for Manila, having
purchased a ticket (No. 117392) in the sum of P23.10 (Exh. 'B'). On
May 12, 1975, said vessel arrived at Pier 4, North Harbor, Manila,
and the passengers therein disembarked, a gangplank having
been provided connecting the side of the vessel to the pier.
Instead of using said gangplank Anacleto Viana disembarked on
the third deck which was on the level with the pier. After said
vessel had landed, the Pioneer Stevedoring Corporation took over
the exclusive control of the cargoes loaded on said vessel
pursuant to the Memorandum of Agreement dated July 26, 1975
(Exh. '2') between the third party defendant Pioneer Stevedoring
Corporation and defendant Aboitiz Shipping Corporation.
The crane owned by the third party defendant and operated by its
crane operator Alejo Figueroa was placed alongside the vessel and
one (1) hour after the passengers of said vessel had disembarked,
it started operation by unloading the cargoes from said vessel.
While the crane was being operated, Anacleto Viana who had
already disembarked from said vessel obviously remembering
that some of his cargoes were still loaded in the vessel, went back
to the vessel, and it was while he was pointing to the crew of the
said vessel to the place where his cargoes were loaded that the
crane hit him, pinning him between the side of the vessel and the
crane. He was thereafter brought to the hospital where he later
expired three (3) days thereafter, on May 15, 1975, the cause of
his death according to the Death Certificate (Exh. "C") being
"hypostatic pneumonia secondary to traumatic fracture of the
pubic bone lacerating the urinary bladder" (See also Exh. "B"). For
his hospitalization, medical, burial and other miscellaneous
expenses, Anacleto's wife, herein plaintiff, spent a total of
P9,800.00 (Exhibits "E", "E-1", to "E-5"). Anacleto Viana who was
only forty (40) years old when he met said fateful accident (Exh.
'E') was in good health. His average annual income as a farmer or
a farm supervisor was 400 cavans of palay annually. His parents,
herein plaintiffs Antonio and Gorgonia Viana, prior to his death
had been recipient of twenty (20) cavans of palay as support or
P120.00 monthly. Because of Anacleto's death, plaintiffs suffered
mental anguish and extreme worry or moral damages. For the
filing of the instant case, they had to hire a lawyer for an agreed
fee of ten thousand (P10,000.00) pesos. 2
Private respondents Vianas filed a complaint 3 for damages against petitioner
corporation (Aboitiz, for brevity) for breach of contract of carriage.
In its answer. 4 Aboitiz denied responsibility contending that at the time of the
accident, the vessel was completely under the control of respondent Pioneer
Stevedoring Corporation (Pioneer, for short) as the exclusive stevedoring contractor
of Aboitiz, which handled the unloading of cargoes from the vessel of Aboitiz. It is
also averred that since the crane operator was not an employee of Aboitiz, the
latter cannot be held liable under the fellow-servant rule.
Thereafter, Aboitiz, as third-party plaintiff, filed a third-party complaint 5 against
Pioneer imputing liability thereto for Anacleto Viana's death as having been
allegedly caused by the negligence of the crane operator who was an employee of
Pioneer under its exclusive control and supervision.
Pioneer, in its answer to the third-party complaint, 6 raised the defenses that
Aboitiz had no cause of action against Pioneer considering that Aboitiz is being sued
by the Vianas for breach of contract of carriage to which Pioneer is not a party; that
Pioneer had observed the diligence of a good father of a family both in the selection
and supervision of its employees as well as in the prevention of damage or injury to
anyone including the victim Anacleto Viana; that Anacleto Viana's gross negligence
was the direct and proximate cause of his death; and that the filing of the third-
party complaint was premature by reason of the pendency of the criminal case for
homicide through reckless imprudence filed against the crane operator, Alejo
Figueroa.
In a decision rendered on April 17, 1980 by the trial court, 7 Aboitiz was ordered to
pay the Vianas for damages incurred, and Pioneer was ordered to reimburse Aboitiz
for whatever amount the latter paid the Vianas. The dispositive portion of said
decision provides:
WHEREFORE, judgment is hereby rendered in favor of the
plantiffs:
(1) ordering defendant Aboitiz Shipping Corporation to pay to
plaintiffs the sum of P12,000.00 for the death of Anacleto Viana
P9,800.00 as actual damages; P533,200.00 value of the 10,664
cavans of palay computed at P50.00 per cavan; P10,000.00 as
attorney's fees; F 5,000.00, value of the 100 cavans of palay as
support for five (5) years for deceased (sic) parents, herein
plaintiffs Antonio and Gorgonia Viana computed at P50.00 per
cavan; P7,200.00 as support for deceased's parents computed at
P120.00 a month for five years pursuant to Art. 2206, Par. 2, of
the Civil Code; P20,000.00 as moral damages, and costs; and
(2) ordering the third party defendant Pioneer Stevedoring
Corporation to reimburse defendant and third party plaintiff
Aboitiz Shipping Corporation the said amounts that it is ordered
to pay to herein plaintiffs.
Both Aboitiz and Pioneer filed separate motions for reconsideration wherein they
similarly raised the trial court's failure to declare that Anacleto Viana acted with
gross negligence despite the overwhelming evidence presented in support thereof.
In addition, Aboitiz alleged, in opposition to Pioneer's motion, that under the
memorandum of agreement the liability of Pioneer as contractor is automatic for
any damages or losses whatsoever occasioned by and arising from the operation of
its arrastre and stevedoring service.
In an order dated October 27, 1982, 8 the trial court absolved Pioneer from liability
for failure of the Vianas and Aboitiz to preponderantly establish a case of
negligence against the crane operator which the court a quo ruled is never
presumed, aside from the fact that the memorandum of agreement supposedly
refers only to Pioneer's liability in case of loss or damage to goods handled by it but
not in the case of personal injuries, and, finally that Aboitiz cannot properly invoke
the fellow-servant rule simply because its liability stems from a breach of contract
of carriage. The dispositive portion of said order reads:
WHEREFORE, judgment is hereby modified insofar as third party
defendant Pioneer Stevedoring Corporation is concerned
rendered in favor of the plaintiffs-,:
(1) Ordering defendant Aboitiz Shipping Corporation to pay the
plaintiffs the sum of P12,000.00 for the death of Anacleto Viana;
P9,000.00 (sic) as actual damages; P533,200.00 value of the
10,664 cavans of palay computed at P50.00 per cavan; P10,000.00
as attorney's fees; P5,000.00 value of the 100 cavans of palay as
support for five (5) years for deceased's parents, herein plaintiffs
Antonio and Gorgonia Viana,computed at P50.00 per cavan;
P7,200.00 as support for deceased's parents computed at P120.00
a month for five years pursuant to Art. 2206, Par. 2, of the Civil
Code; P20,000.00 as moral damages, and costs; and
(2) Absolving third-party defendant Pioneer Stevedoring
Corporation for (sic) any liability for the death of Anacleto Viana
the passenger of M/V Antonia owned by defendant third party
plaintiff Aboitiz Shipping Corporation it appearing that the
negligence of its crane operator has not been established therein.
Not satisfied with the modified judgment of the trial court, Aboitiz appealed the
same to respondent Court of Appeals which affirmed the findings of of the trial
court except as to the amount of damages awarded to the Vianas.
Hence, this petition wherein petitioner Aboitiz postulates that respondent court
erred:
(A) In holding that the doctrine laid down by this honorable Court
in La Mallorca vs. Court of Appeals, et al. (17 SCRA 739, July 27,
1966) is applicable to the case in the face of the undisputable fact
that the factual situation under the La Mallorca case is radically
different from the facts obtaining in this case;
(B) In holding petitioner liable for damages in the face of the
finding of the court a quo and confirmed by the Honorable
respondent court of Appeals that the deceased, Anacleto Viana
was guilty of contributory negligence, which, We respectfully
submit contributory negligence was the proximate cause of his
 death; specifically the honorable respondent Court of Appeals
failed to apply Art. 1762 of the New Civil Code;
(C) In the alternative assuming the holding of the Honorable
respondent Court of Appears that petitioner may be legally
condemned to pay damages to the private respondents we
respectfully submit that it committed a reversible error when it
dismissed petitioner's third party complaint against private
respondent Pioneer Stevedoring Corporation instead of
compelling the latter to reimburse the petitioner for whatever
damages it may be compelled to pay to the private respondents
Vianas. 9
At threshold, it is to be observed that both the trial court and respondent Court of
Appeals found the victim Anacleto Viana guilty of contributory negligence, but
holding that it was the negligence of Aboitiz in prematurely turning over the vessel
to the arrastre operator for the unloading of cargoes which was the direct,
immediate and proximate cause of the victim's death.
I. Petitioner contends that since one (1) hour had already elapsed from the time
Anacleto Viana disembarked from the vessel and that he was given more than
ample opportunity to unload his cargoes prior to the operation of the crane, his
presence on the vessel was no longer reasonable e and he consequently ceased to
be a passenger. Corollarily, it insists that the doctrine in La Mallorca vs. Court of
Appeals, et al. 10 is not applicable to the case at bar.
The rule is that the relation of carrier and passenger continues until the passenger
has been landed at the port of destination and has left the vessel owner's dock or
premises. 11 Once created, the relationship will not ordinarily terminate until the
passenger has, after reaching his destination, safely alighted from the carrier's
conveyance or had a reasonable opportunity to leave the carrier's premises. All
persons who remain on the premises a reasonable time after leaving the
conveyance are to be deemed passengers, and what is a reasonable time or a
reasonable delay within this rule is to be determined from all the circumstances,
and includes a reasonable time to see after his baggage and prepare for his
departure. 12 The carrier-passenger relationship is not terminated merely by the
fact that the person transported has been carried to his destination if, for example,
such person remains in the carrier's premises to claim his baggage. 13
It was in accordance with this rationale that the doctrine in the aforesaid case of La
Mallorca was enunciated, to wit:
It has been recognized as a rule that the relation of carrier and
passenger does not cease at the moment the passenger alights
from the carrier's vehicle at a place selected by the carrier at the
point of destination, but continues until the passenger has had a
reasonable time or a reasonable opportunity to leave the carrier's
premises. And, what is a reasonable time or a reasonable delay
within this rule is to be determined from all the circumstances.
Thus, a person who, after alighting from a train, walks along the
station platform is considered still a passenger. So also, where a
passenger has alighted at his destination and is proceeding by the
usual way to leave the company's premises, but before actually
doing so is halted by the report that his brother, a fellow
passenger, has been shot, and he in good faith and without intent
of engaging in the difficulty, returns to relieve his brother, he is
deemed reasonably and necessarily delayed and thus continues to
be a passenger entitled as such to the protection of the railroad
company and its agents.
In the present case, the father returned to the bus to get one of
his baggages which was not unloaded when they alighted from
the bus. Racquel, the child that she was, must have followed the
father. However, although the father was still on the running
board of the bus waiting for the conductor to hand him the bag
or bayong, the bus started to run, so that even he (the father) had
to jump down from the moving vehicle. It was at this instance that
the child, who must be near the bus, was run over and killed. In
the circumstances, it cannot be claimed that the carrier's agent
had exercised the 'utmost diligence' of a 'very cautious person'
required by Article 1755 of the Civil Code to be observed by a
common carrier in the discharge of its obligation to transport
safely its passengers. ... The presence of said passengers near the
bus was not unreasonable and they are, therefore, to be
considered still as passengers of the carrier, entitled to the
protection under their contract of carriage. 14
It is apparent from the foregoing that what prompted the Court to rule as it did in
said case is the fact of the passenger's reasonable presence within the carrier's
premises. That reasonableness of time should be made to depend on the attending
circumstances of the case, such as the kind of common carrier, the nature of its
business, the customs of the place, and so forth, and therefore precludes a
consideration of the time element per se without taking into account such other
factors. It is thus of no moment whether in the cited case of La Mallorcathere was
no appreciable interregnum for the passenger therein to leave the carrier's
premises whereas in the case at bar, an interval of one (1) hour had elapsed before
the victim met the accident. The primary factor to be considered is the existence of
a reasonable cause as will justify the presence of the victim on or near the
petitioner's vessel. We believe there exists such a justifiable cause.
It is of common knowledge that, by the very nature of petitioner's business as a
shipper, the passengers of vessels are allotted a longer period of time to disembark
from the ship than other common carriers such as a passenger bus. With respect to
the bulk of cargoes and the number of passengers it can load, such vessels are
capable of accommodating a bigger volume of both as compared to the capacity of
a regular commuter bus. Consequently, a ship passenger will need at least an hour
as is the usual practice, to disembark from the vessel and claim his baggage
whereas a bus passenger can easily get off the bus and retrieve his luggage in a very
short period of time. Verily, petitioner cannot categorically claim, through the bare
expedient of comparing the period of time entailed in getting the passenger's
cargoes, that the ruling in La Mallorca is inapplicable to the case at bar. On the
contrary, if we are to apply the doctrine enunciated therein to the instant petition,
we cannot in reason doubt that the victim Anacleto Viana was still a passenger at
the time of the incident. When the accident occurred, the victim was in the act of
unloading his cargoes, which he had every right to do, from petitioner's vessel. As
earlier stated, a carrier is duty bound not only to bring its passengers safely to their
destination but also to afford them a reasonable time to claim their baggage.
It is not definitely shown that one (1) hour prior to the incident, the victim had
already disembarked from the vessel. Petitioner failed to prove this. What is clear
to us is that at the time the victim was taking his cargoes, the vessel had already
docked an hour earlier. In consonance with common shipping procedure as to the
minimum time of one (1) hour allowed for the passengers to disembark, it may be
presumed that the victim had just gotten off the vessel when he went to retrieve
his baggage. Yet, even if he had already disembarked an hour earlier, his presence
in petitioner's premises was not without cause. The victim had to claim his baggage
which was possible only one (1) hour after the vessel arrived since it was admittedly
standard procedure in the case of petitioner's vessels that the unloading operations
shall start only after that time. Consequently, under the foregoing circumstances,
the victim Anacleto Viana is still deemed a passenger of said carrier at the time of
his tragic death.
II. Under the law, common carriers are, from the nature of their business and for
reasons of public policy, bound to observe extraordinary diligence in the vigilance
over the goods and for the safety of the passengers transported by them, according
to all the circumstances of each case. 15 More particularly, a common carrier is
bound to carry the passengers safely as far as human care and foresight can
provide, using the utmost diligence of very cautious persons, with a due regard for
all the circumstances. 16 Thus, where a passenger dies or is injured, the common
carrier is presumed to have been at fault or to have acted negligently. 17 This gives
rise to an action for breach of contract of carriage where all that is required of
plaintiff is to prove the existence of the contract of carriage and its non-
performance by the carrier, that is, the failure of the carrier to carry the passenger
safely to his destination, 18 which, in the instant case, necessarily includes its failure
to safeguard its passenger with extraordinary diligence while such relation subsists.
The presumption is, therefore, established by law that in case of a passenger's
death or injury the operator of the vessel was at fault or negligent, having failed to
exercise extraordinary diligence, and it is incumbent upon it to rebut the same. This
is in consonance with the avowed policy of the State to afford full protection to the
passengers of common carriers which can be carried out only by imposing a
stringent statutory obligation upon the latter. Concomitantly, this Court has
likewise adopted a rigid posture in the application of the law by exacting the highest
degree of care and diligence from common carriers, bearing utmost in mind the
welfare of the passengers who often become hapless victims of indifferent and
profit-oriented carriers. We cannot in reason deny that petitioner failed to rebut
the presumption against it. Under the facts obtaining in the present case, it cannot
be gainsaid that petitioner had inadequately complied with the required degree of
diligence to prevent the accident from happening.
As found by the Court of Appeals, the evidence does not show that there was a
cordon of drums around the perimeter of the crane, as claimed by petitioner. It also
adverted to the fact that the alleged presence of visible warning signs in the vicinity
was disputable and not indubitably established. Thus, we are not inclined to accept
petitioner's explanation that the victim and other passengers were sufficiently
warned that merely venturing into the area in question was fraught with serious
peril. Definitely, even assuming the existence of the supposed cordon of drums
loosely placed around the unloading area and the guard's admonitions against entry
therein, these were at most insufficient precautions which pale into insignificance if
considered vis-a-vis the gravity of the danger to which the deceased was exposed.
There is no showing that petitioner was extraordinarily diligent in requiring or
seeing to it that said precautionary measures were strictly and actually enforced to
subserve their purpose of preventing entry into the forbidden area. By no stretch of
liberal evaluation can such perfunctory acts approximate the "utmost diligence of
very cautious persons" to be exercised "as far as human care and foresight can
provide" which is required by law of common carriers with respect to their
passengers.
While the victim was admittedly contributorily negligent, still petitioner's aforesaid
failure to exercise extraordinary diligence was the proximate and direct cause of,
because it could definitely have prevented, the former's death. Moreover, in
paragraph 5.6 of its petition, at bar, 19 petitioner has expressly conceded the
factual finding of respondent Court of Appeals that petitioner did not present
sufficient evidence in support of its submission that the deceased Anacleto Viana
was guilty of gross negligence. Petitioner cannot now be heard to claim otherwise.

No excepting circumstance being present, we are likewise bound by respondent

court's declaration that there was no negligence on the part of Pioneer Stevedoring
Corporation, a confirmation of the trial court's finding to that effect, hence our
conformity to Pioneer's being absolved of any liability.

As correctly observed by both courts, Aboitiz joined Pioneer in proving the alleged
gross negligence of the victim, hence its present contention that the death of the
passenger was due to the negligence of the crane operator cannot be sustained
both on grounds, of estoppel and for lack of evidence on its present theory. Even in
its answer filed in the court below it readily alleged that Pioneer had taken the
necessary safeguards insofar as its unloading operations were concerned, a fact
which appears to have been accepted by the plaintiff therein by not impleading
Pioneer as a defendant, and likewise inceptively by Aboitiz by filing its third-party
complaint only after ten (10) months from the institution of the suit against it.
Parenthetically, Pioneer is not within the ambit of the rule on extraordinary
diligence required of, and the corresponding presumption of negligence foisted on,
common carriers like Aboitiz. This, of course, does not detract from what we have
said that no negligence can be imputed to Pioneer but, that on the contrary, the
failure of Aboitiz to exercise extraordinary diligence for the safety of its passenger is
the rationale for our finding on its liability.

WHEREFORE, the petition is DENIED and the judgment appealed from is hereby
AFFIRMED in toto.

SO ORDERED.
G.R. No. L-22272 June 26, 1967
ANTONIA MARANAN, plaintiff-appellant, vs. PASCUAL PEREZ, ET AL., defendants.
PASCUAL PEREZ, defendant appellant.
BENGZON, J.P., J.:
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 theGillaco 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.2 There, 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
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
awardmoral 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

As can be gleaned from Art. 1759, the Civil Code of the Philippines evidently follows Wherefore, with the modification increasing the award of actual damages in
the rule based on the second view. At least three very cogent reasons underlie this plaintiff's favor to P6,000, plus P3,000.00 moral damages, with legal interest on
rule. As explained in Texas Midland R.R. v. Monroe, 110 Tex. 97, 216 S.W. 388, 389- both from the filing of the complaint on December 6, 1961 until the whole amount
390, and Haver v. Central Railroad Co., 43 LRA 84, 85: (1) the special undertaking of is paid, the judgment appealed from is affirmed in all other respects. No costs. So
the carrier requires that it furnish its passenger that full measure of protection ordered.
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
G.R. No. L-55347 October 4, 1985 On appeal, the Appellate Court sustained the holding of the trial court that the PNR
PHILIPPINE NATIONAL RAILWAYS, petitioner, vs. THE HONORABLE COURT OF did not exercise the utmost diligence required by law of a common carrier. It
APPEALS and ROSARIO TUPANG, respondents. further increased the amount adjudicated by the trial court by ordering PNR to pay
ESCOLIN, J.: the plaintiff an additional sum of P5,000.00 as exemplary damages.

Invoking the principle of state immunity from suit, the Philippine National Railways, Moving for reconsideration of the above decision, the PNR raised for the first time,
PNR for short, instituted this petition for review on certiorari to set aside the as a defense, the doctrine of state immunity from suit. It alleged that it is a mere
decision of the respondent Appellate Court which held petitioner PNR liable for agency of the Philippine government without distinct or separate personality of its
damages for the death of Winifredo Tupang, a paying passenger who fell off a train own, and that its funds are governmental in character and, therefore, not subject to
operated by the petitioner. garnishment or execution. The motion was denied; the respondent court ruled that
the ground advanced could not be raised for the first time on appeal.
The pertinent facts are summarized by the respondent court as follows:
Hence, this petition for review.
The facts show that on September 10, 1972, at about 9:00 o'clock
in the evening, Winifredo Tupang, husband of plaintiff Rosario The petition is devoid of merit. The PNR was created under Rep. Act 4156, as
Tupang, boarded 'Train No. 516 of appellant at Libmanan, amended. Section 4 of the said Act provides:
Camarines Sur, as a paying passenger bound for Manila. Due to
some mechanical defect, the train stopped at Sipocot, Camarines The Philippine national Railways shall have the following powers:
Sur, for repairs, taking some two hours before the train could
resume its trip to Manila. Unfortunately, upon passing Iyam a. To do all such other things and to transact all such business
Bridge at Lucena, Quezon, Winifredo Tupang fell off the train directly or indirectly necessary, incidental or conducive to the
resulting in his death.The train did not stop despite the alarm attainment of the purpose of the corporation; and
raised by the other passengers that somebody fell from the train.
Instead, the train conductor Perfecto Abrazado, called the station
b. Generally, to exercise all powers of a corporation under the
agent at Candelaria, Quezon, and requested for verification of the
Corporation Law.
information. Police authorities of Lucena City were dispatched to
the Iyam Bridge where they found the lifeless body of Winifredo
Under the foregoing section, the PNR has all the powers, the characteristics and
Tupang.
attributes of a corporation under the Corporation Law. There can be no question
then that the PNR may sue and be sued and may be subjected to court processes
As shown by the autopsy report, Winifredo Tupang died of cardio-
just like any other corporation. 2
respiratory failure due to massive cerebral hemorrhage due to
traumatic injury [Exhibits B and C, Folder of Exhibits],Tupang was
The petitioner's contention that the funds of the PNR are not subject to
later buried in the public cemetery of Lucena City by the local
garnishment or execution hardly raises a question of first impression. In Philippine
police authorities. [Rollo, pp. 91-92]
National Railways v. Union de Maquinistas, et al., 3 then Justice Fernando, later
Chief Justice, said. "The main issue posed in this certiorari proceeding, whether or
Upon complaint filed by the deceased's widow, Rosario Tupang, the then Court of
not the funds of the Philippine National Railways, could be garnished or levied upon
First Instance of Rizal, after trial, held the petitioner PNR liable for damages for
on execution was resolved in two recent decisions, the Philippine National Bank v.
breach of contract of carriage and ordered "to pay the plaintiff the sum of
Court of Industrial Relations [81 SCRA 314] and Philippine National Bank v. Hon.
P12,000,00 for the death of Winifredo Tupang, plus P20,000.00 for loss of his
Judge Pabalan [83 SCRA 595]. This Court in both cases answered the question in the
earning capacity and the further sum of P10,000.00 as moral damages, and
affirmative. There was no legal bar to garnishment or execution. The argument
P2,000.00 as attorney's fees, and costs. 1
based on non-suability of a state allegedly because the funds are governmental in
character was unavailing.So it must be again."
In support of the above conclusion, Justice Fernando cited the Court's holding
in Philippine National Bank v. Court of Industrial Relations, to wit: "The premise that
the funds could be spoken of as public in character may be accepted in the sense
that the People's Homesite and Housing Corporation was a government-owned
entity. It does not follow though that they were exempt from garnishment. National
Shipyard and Steel Corporation v. Court of Industrial Relations is squarely in point.
As was explicitly stated in the opinion of then Justice, later Chief Justice,
Concepcion: "The allegation to the effect that the funds of the NASSCO are public
funds of the government, and that, as such, the same may not be garnished,
attached or levied upon, is untenable for, as a government- owned and controlled
corporation, the NASSCO has a personality of its own, distinct and separate from
that of the Government. It has-pursuant to Section 2 of Executive Order No. 356,
dated October 23, 1950 * * *, pursuant to which the NASSCO has been established-
'all the powers of a corporation under the Corporation Law * * *. 4
As far back as 1941, this Court in the case of Manila Hotel Employees Association v.
Manila Hotel Co., 5 laid down the rule that "when the government enters into
commercial business, it abandons its sovereign capacity and is to be treated like any
other corporation. [Bank of the U.S. v. Planters' Bank, 9 Waitch 904, 6 L. ed. 244]. By
engaging in a particular business through the instrumentality of a corporation the
government divests itself pro hac vice of its sovereign character, so as to render the
corporation subject to the rules of law governing private corporations. 6 Of Similar
import is the pronouncement in Prisco v. CIR,' that "when the government engages
in business, it abdicates part of its sovereign prerogatives and descends to the level
of a citizen, ... . " In fine, the petitioner PNR cannot legally set up the doctrine of
non-suability as a bar to the plaintiff's suit for damages.
But while petitioner failed to exercise extraordinary diligence as required by
law, 8 it appears that the deceased was chargeable with contributory negligence.
Since he opted to sit on the open platform between the coaches of the train, he
should have held tightly and tenaciously on the upright metal bar found at the side
of said platform to avoid falling off from the speeding train. Such contributory
negligence, while not exempting the PNR from liability, nevertheless justified the
deletion of the amount adjudicated as moral damages. By the same token, the
award of exemplary damages must be set aside. Exemplary damages may be
allowed only in cases where the defendant acted in a wanton, fraudulent, reckless,
oppressive or malevolent manner. 9 There being no evidence of fraud, malice or
bad faith on the part of petitioner, the grant of exemplary damages should be
discarded.
WHEREFORE, the decision of the respondent appellate court is hereby modified by
eliminating therefrom the amounts of P10,000.00 and P5,000.00 adjudicated as
moral and exemplary damages, respectively. No costs.
SO ORDERED.

The appellate court found, the petitioner does not deny, that the train boarded by
the deceased Winifredo Tupang was so over-crowded that he and many other
passengers had no choice but to sit on the open platforms between the coaches of
the train. It is likewise undisputed that the train did not even slow down when it
approached the Iyam Bridge which was under repair at the time, Neither did the
train stop, despite the alarm raised by other passengers that a person had fallen off
the train at lyam Bridge. 7

The petitioner has the obligation to transport its passengers to their destinations
and to observe extraordinary diligence in doing so. Death or any injury suffered by
any of its passengers gives rise to the presumption that it was negligent in the
performance of its obligation under the contract of carriage. Thus, as correctly ruled
by the respondent court, the petitioner failed to overthrow such presumption of
negligence with clear and convincing evidence.
G.R. No. 71238 March 19, 1992
LUFTHANSA GERMAN AIRLINES, petitioner, vs. INTERMEDIATE APPELLATE COURT
and SPOUSES HENRY H. ALCANTARA and TERESITA ALCANTARA,respondents.
BIDIN, J.:
This is a petition for review on certiorari decision of the then Intermediate
Appellate Court * dated May 31, 1984, affirming with modification the decision of
the then Court of First Instance of Manila, Sixth Judicial District, Branch XXIV, and
the resolution dated June 18, 1985 denying the motion for reconsideration of the
said decision.
The antecedent facts of this case are as follows:
On January 21, 1979, respondent Henry H. Alcantara shipped thirteen (13) pieces of
luggage through petitioner Lufthansa from Teheran to Manila as evidenced by
Lufthansa Air Waybill No. 220-9776-2733 (Exhibit "A", also Exhibit "1"). The Air
Waybill discloses that the actual gross weight of the thirteen (13) pieces of luggage
is 180 kilograms. Respondent Henry H. Alcantara did not declare an inventory of the
contents or the value of the luggages when he delivered them to Lufthansa.
On March 3, 1979, the thirteen (13) pieces of luggage were boarded in one of
Lufthansa's flights which arrived in Manila on the same date. After the luggages
arrived in Manila, the consignee, respondent Teresita Alcantara, was able to claim
from the cargo broker Philippine Skylanders, Inc. on March 6, 1979 only twelve (12)
out of the thirteen (13) pieces of luggage with a total weight of 174 kilograms
(Exhibits "20" and "20-A").
The private respondents advised Lufthansa of the loss of one of the luggages and of
the contents thereof (Exhibits "B", "C" and "D"). Petitioner Lufthansa sent telex
tracing messages to different stations and to the Philippine Airlines which actually
carried the cargo (Exhibits "3", "5", "7", "9", "11", "12", "13" and "14"). But all
efforts in tracing the missing luggage were fruitless (Exhibits "4", "6", "8", "10", "12"
and "17").
Since efforts to trace the missing luggage yielded negative results, Lufthansa
informed Henry Alcantara accordingly and advised him to file a claim invoice
(Exhibits "18" and "19").
On September 24, 1979, the private respondents wrote the petitioner demanding
the production of the missing luggage within then (10) days from receipt (Exhibit
"E"). Since the petitioner did not comply with said demand, the private respondents
filed a complaint dated May 7, 1980, for breach of contract with damages against
the petitioner before the Court of First Instance of Manila, Sixth Judicial District,
Branch XXIV.
The petitioner filed its answer to the complaint alleging that the Warsaw
Convention limits the liability of the carrier, if any, with respect to cargo to a sum of
250 francs per kilo ($20.00 per kilo or $9.07 per pound), unless a higher value is
declared in advance and additional charges are paid by the passenger and the
conditions of the contract as set forth in the air waybill expressly subject the
contract of carriage of cargo to the Warsaw Convention. The petitioner also alleged
that it never acted fraudulently or in bad faith so as to entitle respondent spouses
to moral damages and attorney's fees, nor did it act in a wanton, fraudulent,
reckless, oppressive or malevolent manner as to entitle spouses to exemplary
damages.
After trial, on November 18, 1981, the trial court ** rendered its decision, the
dispositive portion of which reads as follows:
WHEREFORE, judgment is hereby rendered in favor of plaintiffs,
spouses Henry H. Alcantara and Teresita Alcantara, and against
Lufthansa German Airlines.
(1) Ordering defendant to pay plaintiffs the sum of P200,000.00
for actual damages, with interest thereon at the legal rate from
the date of the filing of the complaint until the principal sum is
fully paid;
(2) Ordering defendant to pay plaintiffs the sum of P20,000.00 as
attorney's fees; and
(3) Ordering defendant to pay the costs of suit.
SO ORDERED. (Rollo, pp. 62-63)
The petitioner appealed to the then Intermediate Appellate Court. On May 31,
1984, the appellate promulgated its decision, the dispositive portion of which
reads:
WHEREFORE, PREMISES CONSIDERED, the decision appealed from
is hereby AFFIRMED with the modification that the amount of
P20,000.00 awarded as attorney's fees shall be deleted, the costs
to be borne by the respective parties.
 SO ORDERED. (Rollo, p. 39).
Its motion for reconsideration having been denied, the petition filed the instant
petition.
The main issue in this case is whether or not the private respondents are entitled to
an award of damages beyond the liability set forth in the Warsaw Convention and in
the Airwaybill of Lading.
The petitioner contends that the Republic of the Philippines is a party to the
"Convention for the Unification of Certain Rules Relating to International
Transportation by Air," otherwise known as the Warsaw Convention. After the
Senate of the Republic of the Philippines, by its Resolution No. 19 of May 16, 1950,
concurred in the adherence by the government of the Philippines to the said
Convention, and after the government of the Republic of the Philippines formally
notified the government of the Republic of Poland of such adherence on November
9, 1950, Presidential Proclamation No. 201 signed by the late President Ramon
Magsaysay on September 23, 1965 made public the adherence of the Republic of
the Philippines to the said Warsaw Convention which applies to all international
transportation of persons, baggage or goods performed by aircraft for hire. Since
the contract between the petitioner and respondent Henry H. Alcantara embodied
in Airwaybill No. 220-9776-2733 is one of international carriage by air, it is subject
to the Warsaw Convention, which in Article 22 limits the liability of the carrier with
respect to checked baggage to a sum of 250 French francs per kilo (equivalent to US
$20.00/kilo) unless a higher value has been declared in advance and additional
charges are paid by the passenger. Respondent Henry H. Alcantara having admitted
that he did not declare the value or contents of the missing luggage, the liability of
the petitioner is therefore limited by the Warsaw Convention and the Airwaybill to
US$20.00 per kilo.
The petitioner further argues that the award of P200,000.00 as actual damages is
not borne by evidence. It insists that the testimonial and documentary evidence of
respondent spouses failed to indicate the actual value of the alleged contents of the
missing luggage and have not presented actual proof as to the contents, total
weight and value of the missing luggage as well as the actual damage they suffered
(Rollo, pp. 88-89, 95).
On the other hand, the private respondents maintain that the petitioner, as found
by the trial and appellate courts, waived the benefits of the Warsaw Convention
when it offered a settlement in the amount of $200.00 which is much higher than
what the Convention prescribes and never raised timely objections during the trial
to the introduction of evidence regarding the actual claims and damages sustained
by respondent Alcantara.
The private respondents also claim that in the trial of the case, they proved a loss of
P200,000.00 and an expense of $15,000.00 in vainly trying to locate the missing
luggage all over Europe and the trial court awarded less than what was proven
(Rollo, p. 118).
The petition is without merit.
The loss of one luggage belonging to the private respondents while the same was in
the custody of the petitioner is not disputed. The contract of air carriage generates
a relation attended with a public duty. Neglect or malfeasance of the carrier's
employees could given ground for an action for damages (Zulueta v. Pan American
World Airways, Inc., 43 SCRA 37 [1972]). Common carriers are liable for the missing
goods for failure to comply with its duty (American Insurance Co., Inc. v. Macondray
& Co., Inc., 39 SCRA 494 [171]).
In Alitalia vs. Intermediate Appellate Court (192 SCRA 9 [1990]) where petitioner
Alitalia as carrier failed to deliver a passenger's (Dr. Felipa Pablo's) baggage
containing the papers she was scheduled to read and the materials which would
have enabled her to make scientific presentation (consisting of slides,
autoradiograms or films, tables and tabulations ) in a prestigious international
conference in Rome where she was invited to participate in the conference,
extended by the Joint FAO/IAEA Division of Atomic Energy in Food and Agriculture
of the Untied Nations, as a consequence of which she failed to participate in the
conference, this Court held that the Warsaw Convention does not exclude liability
for other breaches of contract by the carrier. Thus:
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. 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
wilfull 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" 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." 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 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.
xxx xxx xxx
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 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, no 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
that for any loss suffered and this Court agrees that the
respondent Court of Appeals correctly set the amount thereof at
P40,000.00.
In the case at bar, the trial court found that: (a) petitioners airline has not
successfully refuted the presumption established by Article 1735 of the Civil Code
that the loss of the luggage in question was due to the negligence or fault of its
employees; (b) the contents of the missing luggage of private respondents could
not be replaced and were assessed at P200,000.00 by the latter;
(c) respondent Henry Alcantara spent about $15,000.00 in trying to locate said
luggage in Frankfurt, Germany, London, United Kingdom and Hongkong;
(d) there being no evidence to the contrary, the foregoing assessments made by
private respondents were fair and reasonable; and (e) private respondents were
unable to present ample evidence to prove fraud and bad faith and are therefore
not entitled to moral damages under Article 2220 of the Civil Code (Rollo, p. 61).
On the other hand, the Court of Appeals found that the lower court's award of
P200,000.00 as actual compensatory damages is well based factually and legally
(Rollo, p. 37) except as to the deletion of attorney's fees due to the absence of
findings of gross and evident bad faith (Rollo, p. 39).
Under the circumstances, there appears to be no cogent reason to disturb the
factual findings of both the trial court and the Court of Appeals.
Furthermore, the respondent court found that petitioner waived the applicability of
the Warsaw Convention to the case at bar when it offered private respondent a
higher amount than that which is provided in the said law and failed to raise timely
objections during the trial when questions and answers were brought out regarding
the actual claims and damages sustained by Alcantara which were even subjected
to lengthy cross examination by Lufthansa's counsel. In Abrenica v. Gonda (34 Phil.
739), this Court held:

. . . (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.

It is also settled that the court cannot disregard evidence which would ordinarily be
incompetent under the rules but has been rendered admissible by the failure of a
party to object thereto. Thus:

. . . The acceptance of an incompetent witness to testify in a civil

suit, as well as the allowance of improper questions that may be
put to him while on the stand is a matter resting in the discretion
of the litigant. He may asset his right by timely objection or he
may waive it, expressly or by silence. In any case, the option rests
with him. Once admitted, the testimony is in the case for what it is
worth and the judge has no power to disregard it for the sole
reason that it could have been excluded, if it had been objected to,
nor to strike it out on its own motion. (Cruz v. CA, et al., 192 SCRA
209 [1990] citing Marella vs. Reyes, 12 Phil. 1). (Emphasis
supplied).

WHEREFORE, the petition is Dismissed and the questioned decision and resolution
of the appellate court are Affirmed. No costs.

SO ORDERED.
G.R. Nos. 100374-75 November 27, 1992
RUFINO Y. LUNA, RODOLFO J. ALONSO and PORFIRIO RODRIGUEZ, petitioners, vs.
HON. COURT OF APPEALS, HON. CRISTINA M. ESTRADA in her capacity as
Presiding Judge, RTC-Pasig, Br. 69, Metro Manila, HON. TERESITA D. CAPULONG in
her capacity as Presiding Judge, RTC-Valenzuela, Br. 172, Metro Manila, and
NORTHWEST AIRLINES, INC., respondents.
BELLOSILLO, J.:
This joint petition for review on certiorari originated from two (2) separate
complaints arising from an airline's delay in the delivery of the luggage of its
passengers at their destination which respondent courts dismissed for lack of cause
of action. The resulting issue is whether the application of the Warsaw Convention
operates to exclude the application of the provisions of the New Civil Code and the
other statutes.
Briefly, the facts: On 19 May 1989, at around 8:00 in the morning, petitioners
Rufino Luna, Rodolfo Alonso and Porfirio Rodriguez boarded Flight 020 of private
respondent Northwest Airlines bound for Seoul, South Korea, to attend the four-
day Rotary International Convention from the 21st to the 24th of May 1992. They
checked in one (1) piece of luggage each. After boarding, however, due to engine
trouble, they were asked to disembark and transfer to a Korean Airlines plane
scheduled to depart four (4) hours later. They were assured that their baggage
would be with them in the same flight.
When petitioners arrived in Seoul, they discovered that their personal belongings
were nowhere to be found instead, they were allegedly flown to Seattle, U.S.A. It
was not until four (4) days later, and only after repeated representations with
Northwest Airlines personnel at the airport in Korea were petitioners able to
retrieve their luggage. By then the Convention, which they were hardly able to
attend, was almost over.
Petitioners Rufino Y. Luna and Rodolfo J. Alfonso assert that on 6 June 1989, or
thirteen (13) days after they recovered their luggage, they sent a written claim to
private respondent's office along Roxas Blvd., Ermita, Manila. Petitioner Porfirio
Rodriquez, on his part, asserverates that he filed his claim on 13 June 1989.
However, private respondent, is a letter of 21 June 1989, disowned any liability for
the delay and averred that it exerted "its best efforts to carry the passenger and
baggage with reasonable dispatch." 1
Thus, on 14 July 1989, petitioners Luna and Alonso jointly filed a complaint for
breach of contract with damages before the Regional Trial Court of Pasig, Metro
Manila, docketed as Civil Case No. 58390, subsequently raffled to Br. 69, 2 while
petitioner Rodriquez filed his own complaint with the Regional Trial Court of
Valenzuela, Metro Manila, docketed as Civil Case No. 3194-V-89, assigned to Br.
172. 3 However, upon motion of private respondent, both complaints were
dismissed 4 for lack of cause of action due to petitioners' failure to state in their
respective complaints that they filed a prior claim with private respondent within
the prescribed period.
Petitioners Luna and Alonso then filed a petition for certiorari before the Court of
Appeals to set aside the order of respondent Judge Cristina M. Estrada granting
private respondent's motion to dismiss, while petitioner Rodriquez proceeded
directly to this Court on certiorari for the same purpose. However, in Our resolution
of 26 February 1990, We referred his petition to the Court of Appeals.
On 26 March 1991, the Third Division of respondent Court of Appeals, applying the
provisions of the Warsaw Convention and ruling that certiorari was not a substitute
for a lost appeal, dismissed the petition of Luna and Alonso, 5 and on 7 June 1991
denied their motion for reconsideration. 6 Meanwhile, on 28 February 1991 the
Seventh Division of respondent Court of Appeals, ruling that the questioned order
of the trial court had already become final, similarly rejected the petition of
Rodriquez, and on 6 June 1991 denied his motion for reconsideration. 7 Hence, this
present recourse by petitioners Luna, Alonso and Rodriguez.
Four (4) grounds are relied upon by petitioners which, nevertheless, may be
reduced to three, namely: (a) that respondent appellate court disregarded Our
ruling in Alitalia v. CA 8 where We said that "[t]he 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;" 9 (b) that "petitions to revoke orders
and decisions may be entertained even after the time to appeal had elapsed, in
cases wherein the jurisdiction of the court had been exceeded;" 10 and, (c) that Art.
26 of the Warsaw Convention which prescribes the reglementary period within
which to file a claim cannot be invoked if damage is caused by the carrier's willful
misconduct, as provided by Art. 25 of the same Warsaw Convention.
Private respondent, on the other hand, argues that the dismissal order of
respondent courts had already become final after petitioners failed to either move
for reconsideration or appeal from the orders within the reglementary period,
hence, certiorari is no substitute for a lost appeal.
Private respondent also maintains that it did not receive any demand letter from
petitioners within the 21-day reglementary period, as provided in par. 7 of the
Conditions of Contract appearing in the plane ticket. Since Art. 26. par. (4), of the
Warsaw Convention provides that "[f]ailing complaint within the times aforesaid,
no action shall lie against the carrier, save in the case of fraud on his part," the
carrier consequently cannot be held liable for the delay in the delivery of the
baggage. In other words, non-observance of the prescribed period to file a claim
bars claimant's action in court for recovery.
Private respondent, citing foreign jurisprudence, 11 likewise submits that Art. 25,
par. (1), of the Warsaw Convention which excludes or limits liability of common
carriers if the damage is caused by it willful misconduct, refers only to the monetary
ceiling on damages found in Art. 22.
We find the appeal impressed with merit.
From the facts, it appears that private respondent Northwest Airlines indeed failed
to deliver petitioners' baggage at the designated time and place. For this, all that
respondent carrier could say was that "[w]e exerted all efforts to comply with this
condition of the contract." 12 Hence, it is evident that petitioners suffered some
special specie of injury for which they should rightly be compensated. Private
respondent cannot be allowed to escape liability by seeking refuge in the argument
that the trial courts' orders have attained finality due to petitioners failure to move
for reconsideration or to file a timely appeal therefrom. Technicalities should be
disregarded if only to render to the respective parties that which is their due. Thus,
although We have said that certiorari cannot be a substitute for a lapsed appeal,
We have, time and again, likewise held that where a rigid application of that rule
will result in a manifest failure or miscarriage of justice, the rule may be
relaxed. 13 Hence, considering the broader and primordial interests of justice,
particularly when there is grave abuse of discretion, thus impelling occasional
departure from the general rule that the extraordinary writ of certiorari cannot
substitute for a lost appeal, respondent appellate court may legally entertain the
special civil action for certiorari. 14
Previously, We ruled that the Warsaw Convention was a treaty commitment
voluntarily assumed by the Philippine government; consequently, it has the force
and effect of law in this country. 15 But, in the same token, We are also aware of
jurisprudence that the Warsaw Convention does not operate as an exclusive
enumeration of the instances for declaring an airline liable for breach of contract of
carriage or as an absolute limit of the extent of that liability. 16 The Convention
merely declares the carrier liable for damages in the enumerated cases, if the
conditions therein specified are present. 17 For sure, it does not regulate the
liability, much less exempt, the carrier for violating the rights of others which must
simply be respected in accordance with their contracts of carriage. The application
of the Convention must not therefore be construed to preclude the operation of
the Civil Code and other pertinent laws. In fact, in Alitalia v. IAC, 18 We awarded Dr.
Felipa Pablo nominal damages, the provisions of the Convention notwithstanding.
Hence, petitioners' alleged failure to file a claim with the common carrier as
mandated by the provisions of the Warsaw Convention should not be a ground for
the summary dismissal of their complaints since private respondent may still be
held liable for breach of other relevant laws which may provide a different period or
procedure for filing a claim. Considering that petitioners indeed filed a claim which
private respondent admitted having received on 21 June, 1989, their demand may
have very well been filed within the period prescribed by those applicable laws.
Consequently, respondent trial courts, as well as respondent appellate court, were
in error when they limited themselves to the provisions of the Warsaw Convention
and disregarding completely the provisions of the Civil Code.
We are unable to agree however with petitioners that Art. 25 of the Convention
operations to exclude the other provisions of the Convention if damage is caused by
the common carrier's willful misconduct. As correctly pointed out by private
respondent, Art. 25 refers only to the monetary ceiling on damages found in Art. 22
should damage be caused by the carrier's willful misconduct. Hence, only the
provisions of Art. 22 limiting the carrier's liability and imposing a monetary ceiling in
case of willful misconduct on its part that the carrier cannot invoke. 19 This issue
however has become academic in the light of our ruling that the trial courts erred in
dismissing petitioners' respective complaints.
We are not prepared to subscribed to petitioners' argument that the failure of
private respondent to deliver their luggage at the designated time and place
amounted ipso facto to willful misconduct. For willful misconduct to exist, there
must be a showing that the acts complained of were impelled by an intention to
violate the law, or were in persistent disregard of one's rights. It must be evidenced
by a flagrantly or shamefully wrong or improper conduct.
WHEREFORE, the assailed decisions and resolutions of respondent Court of Appeals
are REVERSED and SET ASIDE. The complaints for breach of contract of carriage with
damages in Civil Case No. 3194-V-89 and Civil Case No. 58390 dismissed by
respondent Judges Teresita D. Capulong and Cristina M. Estrada, respectively, are
ordered REINSTATED and given due course until terminated. No costs. SO
ORDERED.
G.R. No. L-74811 December 14, 1988
CHUA YEK HONG, petitioner, vs. INTERMEDIATE APPELLATE COURT, MARIANO
GUNO and DOMINADOR OLIT, respondents.
MELENCIO-HERRERA, J.:

Before us is a Motion for Reconsideration of our Decision dated 30 September 1988

affirming the judgment of the Court of Appeals dismissing the complaint against
private respondents and absolving them from any and all liability arising from the
loss of 1000 sacks of copra shipped by petitioner aboard private respondents'
vessel. Private respondents filed an opposition thereto.

Petitioner argues that this Court failed to consider the Trial Court's finding that the
loss of the vessel with its cargo was due to the fault of the shipowner or to the
concurring negligence of the shipowner and the captain.

The Appellate Court Decision, however, mentions only the ship captain as having
been negligent in the performance of his duties (p. 3, Court of Appeals Decision, p.
15, Rollo). This is a factual finding binding on this Court. For the exception to the
limited liability rule (Article 587, Code of Commerce) to apply, the loss must be due
to the fault of the shipowner, or to the concurring negligence of the shipowner and
the captain. As we held, there is nothing in the records showing such negligence (p.
6, Decision.)

The invocation by petitioners of Articles 1733 and 1735 of the Civil Code is
misplaced. As was stated in the Decision sought to be reconsidered, while the
primary law governing the instant case is the Civil Code, in all matters not regulated
by said Code, the Code of Commerce and other special laws shall govern. Since the
Civil Code contains no provisions regulating liability of shipowners or agents in the
event of total loss or destruction of the vessel, it is the provisions of the Code of
Commerce, particularly Article 587, that governs.

Petitioner further contends that the ruling laid down in Eastern Shipping Lines vs.
IAC, et al. (150 SCRA 464 [1987]) should be made to apply in the instant case. That
case, however, involved foreign maritime trade while the present case involves
local inter-island shipping. The environmental set-up in the two cases, therefore, is
not on all fours.

ACCORDINGLY, petitioner's Motion for Reconsideration is hereby DENIED and this

denial is FINAL.

SO ORDERED.
G.R. No. 92735 June 8, 2000
MONARCH INSURANCE CO., INC., TABACALERA INSURANCE CO., INC and Hon.
Judge AMANTE PURISIMA,petitioners, vs. COURT OF APPEALS and ABOITIZ
SHIPPING CORPORATION, respondents.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 94867
ALLIED GUARANTEE INSURANCE COMPANY, petitioner, vs. COURT OF APPEALS,
Presiding Judge, RTC Manila, Br. 24 and ABOITIZ SHIPPING
CORPORATION,respondents.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 95578
EQUITABLE INSURANCE CORPORATION, petitioner, vs. COURT OF APPEALS,
Former First Division Composed of Hon. Justices RODOLFO NOCON, PEDRO
RAMIREZ, and JESUS ELBINIAS and ABOITIZ SHIPPING
CORPORATION, respondents.
DE LEON, JR., J.:
Before us are three consolidated petitions. G.R. No. 92735 is a petition for review
filed under Rule 45 of the Rules of Court assailing the decision of the Court of
Appeals dated March 29, 1990 in CA-G.R. SP. Case No. 17427 which set aside the
writ of execution issued by the lower court for the full indemnification of the claims
of the petitioners, Monarch Insurance Company (hereafter "Monarch") and
Tabacalera Insurance Company, Incorporated (hereafter "Tabacalera") against
private respondent, Aboitiz Shipping Corporation (hereafter "Aboitiz") on the
ground that the latter is entitled to the benefit of the limited liability rule in
maritime law; G.R. No. 94867 is a petition for certiorari under Rule 65 of the Rules
of Court to annul and set aside the decision of the Court of Appeals dated August
15, 1990 in CA-G.R. SP No. 20844 which ordered the lower court to stay the
execution of the judgment in favor of the petitioner, Allied Guarantee Insurance
Company (hereafter "Allied") against Aboitiz insofar as it impairs the rights of the
other claimants to their pro-rata share in the insurance proceeds from the sinking
of the M/V P. Aboitiz, in accordance with the rule on limited liability; and G.R. No.
95578 is a petition for review under Rule 45 of the Rules of Court seeking a reversal
of the decision of the Court of Appeals dated August 24, 1990 and its resolution
dated October 4, 1990 in C.A. G.R. Civil Case No. 15071 which modified the
judgment of the lower court's award of actual damages to petitioner Equitable
Insurance Corporation (hereafter "Equitable") to its pro-rata share in the insurance
proceeds from the sinking of the M/V P. Aboitiz.
All cases arose from the loss of cargoes of various shippers when the M/V P. Aboitiz,
a common carrier owned and operated by Aboitiz, sank on her voyage from Hong
Kong to Manila on October 31, 1980. Seeking indemnification for the loss of their
cargoes, the shippers, their successors-in-interest, and the cargo insurers such as
the instant petitioners filed separate suits against Aboitiz before the Regional Trial
Courts. The claims numbered one hundred and ten (110) for the total amount of
P41,230,115.00 which is almost thrice the amount of the insurance proceeds of
P14,500,000.00 plus earned freight of 500,000.00 according to Aboitiz. To this day,
some of these claims, including those of herein petitioners, have not yet been
settled.
G.R. No. 92735.
Monarch and Tabacalera are insurance carriers of lost cargoes. They indemnified
the shippers and were consequently subrogated to their rights, interests and
actions against Aboitiz, the cargo carrier. 1 Because Aboitiz refused to compensate
Monarch, it filed two complaints against Aboitiz, docketed as Civil Cases Nos. 82-
2767 and 82-2770. For its part, Tabacalera also filed two complaints against the
same defendant, docketed as Civil Cases Nos. 82-2768 and 82-2769. As these four
(4) cases had common causes of action, they were consolidated and jointly tried. 2
In Civil Case No. 82-2767 where Monarch also named Malaysian International
Shipping Corporation and Litonja Merchant Shipping Agency as Aboitiz's co-
defendants, Monarch sough recovery of P29,719.88 representing the value of three
(3) pallets of glass tubing that sank with the M/V P. Aboitiz, plus attorney's fees of
not less than P5,000.00, litigation expenses, interest at the legal rate on all these
amounts, and the cost of suit. 3 Civil Case. No. 82-2770 was a complaint filed by
Monarch against Aboitiz and co-defendants Compagnie Maritime des Chargeurs
Reunis and F.E. Zuellig (M), Inc. for the recovery of P39,597.00 representing the
value of the one case motor vehicle parts which was lost when the M/V P. Aboitiz
sank on her way to Manila, plus Attorney's fees of not less than P10,000.00 and cost
of suit. 4
Tabacalera sought against Franco Belgian Services, F.E. Zuellig and Aboitiz in Civil
Case No. 82-2768 the recovery of P284,218.00 corresponding to the value of nine
(9) cases of Renault spare parts, P213,207.00 for the value of twenty-five (25) cases
of door closers and P42,254.00 representing the value of eighteen (18) cases of
plastic spangle, plus attorney's fees of not less than P50,000.00 and cost of suit. 5 In
Civil Case No. 82-2769, Tabacalera claimed from Hong Kong Island Shipping Co.,
Ltd., Citadel Lines and Aboitiz indemnification in the amount of P75,058.00 for the
value of four (4) cartons of motor vehicle parts foundered with the M/V P. Aboitiz,
plus attorney's fees of not less than P20,000.00 and cost of suit. 6
In its answer with counterclaim, Aboitiz rejected responsibility for the claims on the
ground that the sinking of its cargo vessel was due to force majeure or an act of
God. 7 Aboitiz was subsequently declared as in default for its failure to appear
during the pre-trial. Its counsel fried a motion to set aside the order of default with
notice of his withdrawal as such counsel. Before the motion could be acted upon,
Judge Bienvenido Ejercjto, the presiding judge of the trial court, was promoted to
the then intermediate Appellate Court. The cases were thus re-raffled to Branch VII
of the RTC of Manila presided by Judge Amante P. Purisima, the co-petitioner in
G.R. No. 92735. Without resolving the pending motion to set aside the order of
default, the trial court set the cases for hearing. However, since Aboitiz had
repeatedly failed to appear in court, the trial court denied the said motion and
allowed Monarch and Tabacalera to present evidence ex-parte. 8
Monarch and Tabacalera proffered in evidence the survey of Perfect Lambert, a
surveyor commissioned to investigate the possible cause of the sinking of the cargo
vessel. The survey established that on her voyage to Manila from Hong Kong, the
vessel did not encounter weather so inclement that Aboitiz would be exculpated
from liability for losses. In his note of protest, the master of M/V P. Aboitiz
described the wind force encountered by the vessel as from ten (10) to fifteen (15)
knots, a weather condition classified as typical and moderate in the South China Sea
at that particular time of the year. The survey added that the seaworthiness of the
vessel was in question especially because the breaches of the hull and the serious
flooding of two (2) cargo holds occurred simultaneously in "seasonal weather." 9
In due course, the trial court rendered judgment against Aboitiz but the complaint
against all the other defendants was dismissed. Aboitiz was held liable for the
following: (a) in Civil Case No. 82-2767, P29,719.88 with legal interest from the filing
of the complaint until fully paid plus attorney's fees of P30,000.00 and cost of suit;
(b) in Civil Case No. 82-2768, P539,679.00 with legal interest of 12% per
annum from date of filing of the complaint until fully paid, plus attorney's fees of
P30,000.00, litigation expenses and cost of suit; (c) in Civil Case No. 82-2769,
P75,058.00 with legal interest of 12% per annum from date of filing of the
complaint until-fully paid, plus P5,000.00 attorney's fees, litigation expenses and
cost of suit, and (d) in Civil Case No. 82-2770, P39,579.66 with legal interest of
12% per annum from date of filing of the complaint until fully paid, plus attorney's
fees of P5,000.00, litigation expenses and cost of suit.
Aboitiz filed a motion for reconsideration of the decision and/or for new trial to lift
the order of default. The court denied the motion on August 27, 1986. 10 Aboitiz
appealed to the Court of Appeals but the appeal was dismissed for its failure to file
appellant's brief. It subsequently filed an urgent motion for reconsideration of the
dismissal with prayer for the admission of its attached appellant's brief. The
appellate court denied that motion for lack of merit in a Resolution dated July 8,
1988. 11
Aboitiz thus filed a petition for review before this Court. Docketed as G.R. No.
84158, the petition was denied in the Resolution of October 10, 1988 for being filed
out of time. Aboitiz's motion for the reconsideration of said Resolution was similarly
denied. 12 Entry of judgment was made in the case. 13
Consequently, Monarch and Tabacalera moved for execution of judgment. The trial
court granted the motion on April 4, 1989 14 and issued separate writs of
execution. However, on April 12, 1989, Aboitiz, invoking the real and hypothecary
nature of liability in maritime law, filed an urgent motion to quash the writs of
execution. 15 According to Aboitiz, since its liability is limited to the value of the
vessel which was insufficient to satisfy the aggregate claims of all 110 claimants, to
indemnify Monarch and Tabacalera ahead of the other claimants would be
prejudicial to the latter. Monarch and Tabacalera opposed the motion to quash. 16
On April 17, 1989, before the motion to quash could be heard, the sheriff levied
upon five (5) heavy equipment owned by Aboitiz for the public auction sale. At said
sale, Monarch was the highest bidder for one (1) unit FL-151 Fork Lift (big) and one
(1) unit FL-25 Fork Lift (small). Tabacalera was also the highest bidder for one (1)
unit TCH TL-251 Hyster Container Lifter, one (1) unit Hyster Top Lifter (out of order),
and one (1) unit ER-353 Crane. The corresponding certificates of sale 17 were issued
to Monarch and Tabacalera.
On April 18, 1989, the day before the hearing of the motion to quash, Aboitiz filed a
supplement to its motion, to add the fact that an auction sale had taken place. On
April 19, 1989, Judge Purisima issued an order denying the motion to quash but
freezing execution proceedings for ten (10) days to give Aboitiz time to secure a
restraining order from a higher court. 18 Execution was scheduled to resume to
fully satisfy the judgment when the grace period shall have lapsed without such
restraining order having been obtained by Aboitiz.
Aboitiz filed with the Court of Appeals a petition for certiorari and prohibition with
prayer for preliminary injunction and/or temporary restraining order under CA-G.R.
No. SP-17427. 19 On March 29, 1990, the appellate court rendered a Decision the
dispositive portion of which reads:
WHEREFORE, the writ of certiorari is hereby granted, annulling the subject
writs of execution, auction sale, certificates of sale, and the assailed orders
of respondent Judge dated April 4 and April 19, 1989 insofar as the money
value of those properties of Aboitiz, levied on execution and sold at public
auction, has exceeded the pro-rata shares of Monarch and Tabacalera in
the insurance proceeds of Aboitiz in relation to the pro-rata shares of the
106 other claimants.
The writ of prohibition is also granted to enjoin respondent Judge,
Monarch and Tabacalera from proceeding further with execution of the
 judgments in question insofar as the execution would satisfy the claims of
Monarch and Tabacalera in excess of their pro-rata shares and in effect
reduce the balance of the proceeds for distribution to the other claimants
to their prejudice.
The question of whether or how much of the claims of Monarch and
Tabacalera against the insurance proceeds has already been settled
through the writ of execution and auction sale in question, being factual
issues, shall be threshed out before respondent judge.
The writ of preliminary injunction issued in favor of Aboitiz, having served
its purpose, is hereby lifted. No pronouncement as to costs.
SO ORDERED. 20
Hence, the instant petition for review on certiorari where petitioners Monarch,
Tabacalera and Judge Purisima raise the following assignment of errors:
1. The appellate court grievously erred in re-opening the Purisima
decisions, already final and executory, on the alleged ground that the issue
of real and hypothecary liability had not been previously resolved by
Purisima, the appellate court, and this Hon. Supreme Court;
2. The appellate court erred when it resolved that Aboitiz is entitled to the
limited real and hypothecary liability of a ship owner, considering the facts
on record and the law on the matter.
3. The appellate court erred when it concluded that Aboitiz does not have
to present evidence to prove its entitlement to the limited real and
hypothecary liability.
4. The appellate court erred in ignoring the case of "Aboitiz Shipping
Corporation v. CA and Allied Guaranty Insurance Co., Inc. (G.R. No. 88159),
decided by this Honorable Supreme Court as early as November 13, 1989,
considering that said case, now factual and executory, is in pari
materia with the instant case.
5. The appellate court erred in not concluding that irrespective of whether
Aboitiz is entitled to limited hypothecary liability or not, there are enough
funds to satisfy all the claimants.
6. The appellate court erred when it concluded that Aboitiz had made an
"abandonment" as envisioned by Art. 587 of the Code of Commerce.
7. The appellate court erred when it concluded that other claimants would
suffer if Tabacalera and Monarch would be fully paid.
8. The appellate court erred in concluding that certiorari was the proper
remedy for Aboitiz. 21
G.R. NOS. 94867 & 95578
Allied as insurer-subrogee of consignee Peak Plastic and Metal Products Limited,
filed a complaint against Aboitiz for the recovery of P278,536.50 representing the
value of 676 bags of PVC compound and 10 bags of ABS plastic lost on board the
M/V P. Aboitiz, with legal interest from the date of filing of the complaint, plus
attorney's fees, exemplary damages and costs. 22 Docketed as Civil Case No.
138643, the case was heard before the Regional Trial Court of Manila, Branch XXIV,
presided by Judge Sergio D. Mabunay.
On the other hand, Equitable, as insurer-subrogee of consignee-assured Axel
Manufacturing Corporation, filed an amended complaint against Franco Belgian
Services, F.E. Zuellig, Inc. and Aboitiz for the recovery of P194,794.85 representing
the value of 76 drums of synthetic organic tanning substances and 1,000 kilograms
of optical bleaching agents which were also lost on board the M/V P. Aboitiz, with
legal interest from the date of filing of the complaint, plus 25% attorney's fees,
exemplary damages, litigation expenses and costs of suit.23 Docketed as Civil Case
No. 138396, the complaint was assigned to the Regional Trial Court of Manila,
Branch VIII.
In its answer with counterclaim in the two cases, Aboitiz disclaimed responsibility
for the amounts being recovered, alleging that the loss was due to a fortuitous
event or an act of God. It prayed for the dismissal of the cases and the payment of
attorney's fees, litigation expenses plus costs of suit. It similarly relied on the
defenses of force mejeure, seaworthiness of the vessel and exercise of due diligence
in the carriage of goods as regards the cross-claim of its co-defendants. 24
In support of its position, Aboitiz presented the testimonies of Capt. Gerry N.
Racines, master mariner of the M/V P. Aboitiz, and Justo C. Iglesias, a meteorologist
of the Philippine Atmospheric Geophysical and Astronomical Services
Administration (PAGASA). The gist of the testimony of Capt. Racines in the two
cases follows:
The M/V P. Aboitiz left Hong Kong for Manila at about 7:30 in the evening of
October 29, 1980 after securing a departure clearance from the Hong Kong Port
Authority. The departure was delayed for two hours because he (Capt. Racines) was
observing the direction of the storm that crossed the Bicol Region. He proceeded
with the voyage only after being informed that the storm had abated. At about 8:00
o'clock in the morning of October 30, 1980, after more than twelve (12) hours of
navigation, the vessel suddenly encountered rough seas with waves about fifteen to
twenty-five feet high. He ordered his chief engineer to check the cargo holds. The
latter found that sea water had entered cargo hold Nos. 1 and 2. He immediately
directed that water be pumped out by means of the vessel's bilge pump, a device
capable of ejecting 180 gallons of water per minute. They were initially successful in
pumping out the water.
At 6:00 a.m. of October 31, 1980, however, Capt. Racines received a report from his
chief engineer that the water level in the cargo holds was rapidly rising. He altered
the vessel's course and veered towards the northern tip of Luzon to prevent the
vessel from being continuously pummeled by the waves. Despite diligent efforts of
the officers and crew, however, the vessel, which was approximately 250 miles
away from the eye of the storm, began to list on starboard side at 27 degrees. Capt.
Racines and his crew were not able to make as much headway as they wanted
because by 12:00 noon of the same day, the cargo holds were already flooded with
sea water that rose from three to twelve feet, disabling the bilge pump from
containing the water.
The M/V P. Aboitiz sank at about 7:00 p.m. of October 31, 1980 at latitude 18
degrees North, longitude 170 degrees East in the South China Sea in between Hong
Kong, the Philippines and Taiwan with the nearest land being the northern tip of
Luzon, around 270 miles from Cape Bojeador, Bangui, Ilocos Norte. Responding to
the captain's distress call, the M/V Kapuas (Capuas) manned by Capt. Virgilio
Gonzales rescued the officers and crew of the ill-fated M/V P. Aboitiz and brought
them to Waileen, Taiwan where Capt. Racines lodged his marine protest dated
November 3, 1980.
Justo Iglesias, meteorologist of PAGASA and another witness of Aboitiz, testified in
both cases that during the inclusive dates of October 28-31, 1980, a stormy weather
condition prevailed within the Philippine area of responsibility, particularly along
the sea route from Hong Kong to Manila, because of tropical depression
"Yoning."25 PAGASA issued weather bulletins from October 28-30, 1980 while the
storm was still within Philippine territory. No domestic bulletins were issued the
following day when the storm which hit Eastern Samar, Southern Quezon and
Southern Tagalog provinces, had made its exit to the South China Sea through
Bataan.
Allied and Equitable refuted the allegation that the M/V P. Aboitiz and its cargo
were lost due to force majeure, relying mainly on the marine protest filed by Capt.
Racines as well as on the Beaufort Scale of Wind. In his marine protest under oath,
Capt. Racines affirmed that the wind force an October 29-30, 1980 was only ten
(10) to fifteen (15) knots. Under the Beaufort Scale of Wind, said wind velocity falls
under scale No. 4 that describes the sea condition as "moderate breeze," and "small
waves becoming longer, fairly frequent white horses." 26
To fortify its position, Equitable presented Rogelio T. Barboza who testified that as
claims supervisor and processor of Equitable, he recommended payment to Axel
Manufacturing Corporation as evidenced by the cash voucher, return check and
subrogation receipt. Barboza also presented a letter of demand to Aboitiz which,
however, the latter ignored. 27
On April 24, 1984, the trial court rendered a decision that disposed of Civil Case No.
138643 as follows:
WHEREFORE, judgment is hereby rendered ordering defendant Aboitiz
Shipping Company to pay plaintiff Allied Guarantee Insurance Company,
Inc. the sum of P278,536.50, with legal interest thereon from March 10,
1981, then date of the filing of the complaint, until fully paid, plus
P30,000.00 as attorney's fees, with costs of suit.
SO ORDERED. 28
A similar decision was arrived at in Civil Case No. 138396, the dispositive portion of
which reads:
WHEREFORE, in view of the foregoing, this Court hereby renders judgment
in favor of plaintiff and against defendant Aboitiz Shipping Corporation, to
pay the sum of P194,794.85 with legal rate of interest thereon from
February 27, 1981 until fully paid; attorney's fees of twenty-five (25%)
percent of the total claim, plus litigation expenses and costs of litigation.
SO ORDERED. 29
In Civil Case No. 138643, Aboitiz appealed to the Court of Appeals under CA-G.R. CV
No. 04121. On March 23, 1987, the Court of Appeals affirmed the decision of the
lower court. A motion for reconsideration of the said decision was likewise denied
by the Court of Appeals on May 3, 1989. Aggrieved, Aboitiz then filed a petition for
review with this Court docketed as G.R. No. 88159 which was denied for lack merit.
Entry of judgment was made and the lower court's decision in Civil Case No. 138643
became final and executory. Allied prayed for the issuance of a writ of execution in
the lower court which was granted by the latter on April 4, 1990. To stay the
execution of the judgment of the lower court, Aboitiz filed a petition
for certiorari and prohibition with preliminary injunction with the Court of Appeals
docketed as CA-G.R. SP No. 20844. 30 On August 15, 1990, the Court of Appeals
rendered the assailed decision, the dispositive portion of which reads as follows.
WHEREFORE, the challenged order of the respondent Judge dated April 4,
1990 granting the execution is hereby set aside. The respondent Judge is
further ordered to stay the execution of the judgment insofar as it impairs
the rights of the 100 other claimants to the insurance proceeds including
the rights of the petitioner to pay more than the value of the vessel or the
insurance proceeds and to desist from executing the judgment insofar as it
prejudices the pro-rata share of all claimants to the insurance proceeds.
No pronouncement as to costs.
SO ORDERED. 31
Hence, Allied filed the instant petition for certiorari, mandamus and injunction with
preliminary injunction and/or restraining order before this Court alleging the
following assignment of errors:
1. Respondent Court of Appeals gravely erred in staying the immediate
execution of the judgment of the lower court as it has no authority nor
jurisdiction to directly or indirectly alter, modify, amend, reverse or
invalidate a final judgment as affirmed by the Honorable Supreme Court in
G.R. No. 88159.
2. Respondent Court of Appeals with grave abuse of discretion amounting
to lack or excess of jurisdiction, brushed aside the doctrine in G.R. No.
88159 which is now the law of the case and observance of time honored
principles of stare decisis, res adjudicata and estoppel by judgment.
3. Real and hypothecary rule under Articles 587, 590 and 837 of the Code
of Commerce which is the basis of the questioned decision (Annex "C"
hereof) is without application in the face of the facts found by the lower
court, sustained by the Court of Appeals in CA-G.R. No. 04121 and
affirmed in toto by the Supreme Court in G.R. No. 88159.
4. Certiorari as a special remedy is unavailing for private respondent as
there was no grave abuse of discretion nor lack or excess of jurisdiction for
Judge Mabunay to issue the order of April 4, 1990 which was in accord
with law and jurisprudence, nor were there intervening facts and/or
supervening events that will justify respondent court to issue a writ
of certiorari or a restraining order on a final and executory judgment of the
Honorable Supreme Court. 32
From the decision of the trial court in Civil Case No. 138396 that favored Equitable,
Aboitiz likewise appealed to the Court of Appeals through CA-G.R. CV No. 15071. On
August 24, 1990, the Court of Appeals rendered the Decision quoting extensively its
Decision in CA-G.R. No. SP-17427 (now G.R. No. 92735) and disposing of the appeal
as follows:
WHEREFORE, we hereby affirm the trial court's awards of actual damages,
attorney's fees and litigation expenses, with the exception of legal interest,
in favor of plaintiff-appellee Equitable Insurance Corporation as subrogee
of the consignee for the loss of its shipment aboard the M/V "P. Aboitiz"
and against defendant-appellant Aboitiz Shipping Corporation. However,
the amount and payment of those awards shall be subject to a
determination of the pro-rata share of said appellee in relation to the pro-
rata shares of the 109 other claimants, which determination shall be made
by the trial court. This case is therefore hereby ordered remanded to the
trial court which shall reopen the case and receive evidence to determine
appellee's pro-rata share as aforesaid. No pronouncement as to costs.
SO ORDERED. 33
On September 12, 1990, Equitable moved to reconsider the Court of Appeals'
Decision. The Court of Appeals denied the motion for reconsideration on October 4,
1990. 34 Consequently, Equitable filed with this Court a petition for review alleging
the following assignment of errors:
1. Respondent Court of Appeals, with grave abuse of discretion amounting
to lack or excess of jurisdiction, erroneously brushed aside the doctrine in
G.R. No. 88159 which is now the law of the case as held in G.R. No. 89757
involving the same and identical set of facts and cause of action relative to
the sinking of the M/V "P. Aboitiz" and observance of the time honored
principles of stare decisis, and estoppel by judgment.
2. Real and hypothecary rule under Articles 587, 590 and 837 of the Code
of Commerce which is the basis of the assailed decision and resolution is
without application in the face of the facts found by the trial court which
conforms to the conclusion and finding of facts arrived at in a similar and
identical case involving the same incident and parties similarly situated in
G.R. No. 88159 already declared as the "law of the case" in a subsequent
decision of this Honorable Court in G.R. No. 89757 promulgated on August
6, 1990.
 3. Respondent Court of Appeals gravely erred in concluding that limited
liability rule applies in case of loss of cargoes when the law itself does not
distinguish; fault of the shipowner or privity thereto constitutes one of the
exceptions to the application of limited liability under Article 587, 590 and
837 of the Code of Commerce, Civil Code provisions on common carriers
for breach of contract of carriage prevails. 35
These three petitions in G.R. Nos. 92735, 94867 and 95578 were consolidated in the
Resolution of August 5, 1991 on the ground that the petitioners "have identical
causes of action against the same respondent and similar reliefs are prayed for." 36
The threshold issue in these consolidated petitions is the applicability of the limited
liability rule in maritime law in favor of Aboitiz in order to stay the execution of the
judgments for full indemnification of the losses suffered by the petitioners as a
result of the sinking of the M/V P. Aboitiz. Before we can address this issue,
however, there are procedural matters that need to be threshed out.
First. At the outset, the Court takes note of the fact that in G.R. No. 92735, Judge
Amante Purisima, whose decision in the Regional Trial Court is sought to be upheld,
is named as a co-petitioner. In Calderon v. Solicitor General, 37 where the petitioner
in the special civil action of certiorari and mandamus was also the judge whose
order was being assailed, the Court held that said judge had no standing to file the
petition because he was merely a nominal or formal party-respondent under
Section 5 of Rule 65 of the Rules of Court. He should not appear as a party seeking
the reversal of a decision that is unfavorable to the action taken by him. The Court
there said:
Judge Calderon should be-reminded of the well-known doctrine that a
judge should detach himself from cases where his decision is appealed to a
higher court for review. The raison d'etre for such doctrine is the fact that
a judge is not an active combatant in such proceeding and must leave the
opposing parties to contend their individual positions and for the appellate
court to decide the issues without his active participation. By filing this
case, petitioner in a way ceased to be judicial and has become adversarial
instead. 38
While the petition in G.R. No. 92735 does not expressly show whether or not Judge
Purisima himself is personally interested in the disposition of this petition or he was
just inadvertently named as petitioner by the real parties in interest, the fact that
Judge Purisima is named as petitioner has not escaped this Court's notice. Judges
and litigants should be reminded of the basic rule that courts or individual judges
are not supposed to be interested "combatants" in any litigation they resolve.
Second. The petitioners contend that the inapplicability of the limited liability rule
to Aboitiz has already been decided on by no less than this Court in G.R. No. 88159
as early as November 13, 1989 which was subsequently declared as "law of the
case" in G.R. No. 89757 on August 6, 1990. Herein petitioners cite the
aforementioned cases in support of their theory that the limited liability rule based
on the real and hypothecary nature of maritime law has no application in the cases
at bar.
The existence of what petitioners insist is already the "law of the case" on the
matter of limited liability is at best illusory. Petitioners are either deliberately
misleading this Court or profoundly confused. As elucidated in the case of Aboitiz
Shipping Corporation vs. General Accident Fire and Life Assurance Corporation, 39
An examination of the November 13, 1989 Resolution in G.R. No. 88159
(pp. 280-282, Rollo) shows that the same settles two principal matters, first
of which is that the doctrine of primary administrative jurisdiction is not
applicable therein; and second is that a limitation of liability in said case
would render inefficacious the extraordinary diligence required by law of
common carriers.
It should be pointed out, however, that the limited liability discussed in
said case is not the same one now in issue at bar, but an altogether
different aspect. The limited liability settled in G.R. No. 88159 is that which
attaches to cargo by virtue of stipulations in the Bill of Lading, popularly
known as package limitation clauses, which in that case was contained in
Section 8 of the Bill of Lading and which limited the carrier's liability to
US$500.00 for the cargo whose value was therein sought to be recovered.
Said resolution did not tackle the matter of the Limited Liability Rule
arising out of the real and hypothecary nature of maritime law, which was
not raised therein, and which is the principal bone of contention in this
case. While the matters threshed out in G.R. No. 88159, particularly those
dealing with the issues on primary administrative jurisdiction and the
package liability limitation provided in the Bill of Lading are now settled
and should no longer be touched, the instant case raises a completely
different issue. 40
Third. Petitioners asseverate that the judgments of the lower courts, already final
and executory, cannot be directly or indirectly altered, modified, amended,
reversed or invalidated.
The rule that once a decision becomes final and executory, it is the ministerial duty
of the court to order its execution, is not an absolute one: We have allowed the
suspension of execution in cases of special and exceptional nature when it becomes
imperative in the higher interest of justice. 41 The unjust and inequitable effects
upon various other claimants against Aboitiz should we allow the execution of
judgments for the full indemnification of petitioners' claims impel us to uphold the
stay of execution as ordered by the respondent Court of Appeals. We reiterate our
pronouncement in Aboitiz Shipping Corporation vs. General Accident Fire and Life
Assurance Corporation on this very same issue.
This brings us to the primary question herein which is whether or not
respondent court erred in granting execution of the full judgment award in
Civil Case No. 14425 (G.R. No. 89757), thus effectively denying the
application of the limited liability enunciated under the appropriate
articles of the Code of Commerce. . . . . Collaterally, determination of the
question of whether execution of judgments which have become final and
executory may be stayed is also an issue.
We shall tackle the latter issue first. This Court has always been consistent
in its stand that the very purpose for its existence is to see the
accomplishment of the ends of justice. Consistent with this view, a number
of decisions have originated herefrom, the tenor of which is that no
procedural consideration is sancrosanct if such shall result in the
subverting of justice. The right to execution after finality of a decision is
certainly no exception to this. Thus, in Cabrias v. Adil (135 SCRA 355
[1885]), this Court ruled that:
xxx xxx xxx
. . . every court having jurisdiction to render a particular judgment
has inherent power to enforce it, and to exercise equitable
control over such enforcement. The court has authority to inquire
whether its judgment has been executed, and will remove
obstructions to the enforcement thereof. Such authority extends
not only to such orders and such writs as may be necessary to
prevent an improper enforcement of the judgment. If a judgment
is sought to be perverted and made a medium of consummating a
wrong the court on proper application can prevent it. 42
Fourth. Petitioners in G.R. No. 92735 ever that it was error for the respondent Court
of Appeals to allow Aboitiz the benefit of the limited liability rule despite its failure
to present evidence to prove its entitlement thereto in the court below. Petitioners
Monarch and Tabacalera remind this Court that from the inception of G.R. No.
92735 in the lower court and all the way to the Supreme Court, Aboitiz had not
presented an iota of evidence to exculpate itself from the charge of negligence for
the simple reason that it was declared as in default. 43
It is true that for having been declared in default, Aboitiz was precluded from
presenting evidence to prove its defenses in the court a quo. We cannot, however,
agree with petitioners that this circumstance prevents the respondent Court of
Appeals from taking cognizance of Aboitiz' defenses on appeal.
It should be noted that Aboitiz was declared as in default not for its failure to file an
answer but for its absence during pre-trial and the trial proper. In Aboitiz' answer
with counterclaim, it claimed that the sinking of the M/V P. Aboitiz was due to an
act of God or unforeseen event and that the said ship had been seaworthy and fit
for the voyage. Aboitiz also alleged that it exercised the due diligence required by
law, and that considering the real and hypothecary nature of maritime trade, the
sinking justified the extinguishment of its liability for the lost shipment. 44
A judgment of default does not imply a waiver of rights except that of being heard
and presenting evidence in defendant's favor. It does not imply admission by the
defendant of the facts and causes of action of the plaintiff, because the codal
section 45 requires the latter to adduce evidence in support of his allegations as an
indispensable condition before final judgment could be given in his favor. Nor could
it be interpreted as an admission by the defendant that the plaintiff's causes of
action find support in the law or that the latter is entitled to the relief prayed
for. 46 This is especially true with respect to a defendant who had filed his answer
but had been subsequently declared in default for failing to appear at the trial since
he has had an opportunity to traverse, viahis answer, the material averments
contained in the complaint. Such defendant has a better standing than a defendant
who has neither answered nor appeared at trial. 47 The former should be allowed
to reiterate all affirmative defenses pleaded in his answer before the Court of
Appeals. Likewise, the Court of Appeals may review the correctness of the
evaluation of the plaintiffs evidence by the lower court.
It should also be pointed out that Aboitiz is not raising the issue of its entitlement to
the limited liability rule for the first time on appeal thus, the respondent Court of
Appeals may properly rule on the same.
However, whether or not the respondent Court of Appeals erred in finding, upon
review, that Aboitiz is entitled to the benefit of the limited liability rule is an
altogether different matter which shall be discussed below.1awphi1
Rule on Limited Liability. The petitioners assert in common that the vessel M/V P.
Aboitiz did not sink by reason offorce majeure but because of its unseaworthiness
and the concurrent fault and/or negligence of Aboitiz, the captain and its crew,
thereby barring Aboitiz from availing of the benefit of the limited liability rule.
The principle of limited liability is enunciated in the following provisions of the Code
of Commerce:
Art. 587. The shipagent 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 goods which he loaded on the vessel; but he may exempt
himself therefrom by abandoning the vessel with all the equipments and
the freight it may have earned during the voyage.
Art. 590. The co-owners of a 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 his 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 the freightage served during the voyage.
Art. 837 appeals the principle of limited liability in cases of collision hence, Arts. 587
and 590 embody the universal principle of limited liability in all cases. In Yangco v.
Laserna, 48 this Court elucidated on the import of Art. 587 as follows:
The provision accords a shipowner or agent the right of abandonment; and
by necessary implication, his liability is confined to that which he is entitled
as of right to abandon-"the vessel with all her equipments and the freight
it may have earned during the voyage." It is true that the article appears to
deal only with the limited liability of the shipowners or agents for damages
arising from the misconduct of the captain in the care of the goods which
the vessel carries, but this is a mere deficiency of language and in no way
indicates the true extent of such liability. The consensus of authorities is to
the effect that notwithstanding the language of the aforequoted provision,
the benefit of limited liability therein provided for, applies in all cases
wherein the shipowner or agent may properly be held liable for the
negligent or illicit acts of the captain. 49
"No vessel, no liability," expresses in a nutshell the limited liability rule. The
shipowner's or agent's liability is merely co-extensive 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. 50This 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. 51
Contrary to the petitioners' theory that the limited liability rule has been rendered
obsolete by the advances in modern technology which considerably lessen the risks
involved in maritime trade, this Court continues to apply the said rule in
appropriate cases. This is not to say, however, that the limited liability rule is
without exceptions, namely: (1) where the injury or death to a passenger is due
either to the fault of the shipowner, or to the concurring negligence of the
shipowner and the captain; 52 (2) where the vessel is insured; and (3) in workmen's
compensation claims. 53
We have categorically stated that Article 587 speaks only of situations where the
fault or negligence is committed solely by the captain. In cases where the ship
owner is likewise to be blamed, Article 587 does not apply. Such a situation will be
covered by the provisions of the Civil Code on common carriers. 54
A finding that a fortuitous event was the sole cause of the loss of the M/V P. Aboitiz
would absolve Aboitiz from any and all liability pursuant to Article 1734(1) of the
Civil Code which provides in part that common carriers are responsible for the loss,
destruction, or deterioration of the goods they carry, unless the same is due to
flood, storm, earthquake, lightning, or other natural disaster or calamity. On the
other hand, a finding that the M/V P. Aboitiz sank by reason of fault and/or
negligence of Aboitiz, the ship captain and crew of the M/V P. Aboitiz would render
inapplicable the rule on limited liability. These issues are therefore ultimately
questions of fact which have been subject of conflicting determinations by the trial
courts, the Court of Appeals and even this Court.
In Civil Cases Nos. 82-2767-82-2770 (now G.R. No. 92735), after receiving
Monarch's and Tabacalera's evidence, the trial court found that the complete loss
of the shipment on board the M/V P. Aboitiz when it sank was neither due to a
fortuitous event nor a storm or natural cause. For Aboitiz' failure to present
controverting evidence, the trial court also upheld petitioners' allegation that the
M/V P. Aboitiz was unseaworthy. 55 However, on appeal, respondent Court of
Appeals exculpated Aboitiz from fault or negligence and ruled that:
. . ., even if she (M/V P. Aboitiz) was found to be unseaworthy,
this fault (distinguished from civil liability) cannot be laid on the
shipowner's door. Such fault was directly attributable to the captain. This is
so, because under Art. 612 of the Code of Commerce, among the inherent
 duties of a captain, are to examine the vessel before sailing and to comply
with the laws on navigation. 56
and that:
. . . although the shipowner may be held civilly liable for the captain's fault
. . . having abandoned the vessel in question, even if the vessel was
unseaworthy due to the captain's fault, Aboitiz is still entitled to the
benefit under the rule of limited liability accorded to shipowners by the
Code of Commerce. 57
Civil Case No. 138396 (now G.R. No. 95578) was similarly resolved by the trial court,
which found that the sinking of the M/V P. Aboitiz was not due to an act of God
or force majeure. It added that the evidence presented by the petitioner Equitable
demonstrated the negligence of Aboitiz Shipping Corporation in the management
and operation of its, vessel M/V P. Aboitiz. 58
However, Aboitiz' appeal was favorably acted upon by the respondent Court of
Appeals which reiterated its ruling in G.R. No. 92735 that the unseaworthiness of
the M/V P. Aboitiz was not a fault directly attributable to Aboitiz but to the captain,
and that Aboitiz is entitled to the benefit of the limited liability rule for having
abandoned its ship. 59
Finally, in Civil Case No. 138643 (now G.R. No. 94867), the trial court held that the
M/V P. Aboitiz was not lost due to a fortuitous event or force majeure, and that
Aboitiz had failed to satisfactorily establish that it had observed extraordinary
diligence in the vigilance over the goods transported by it. 60
In CA-G.R. CV No. 04121, the Court of Appeals initially ruled against Aboitiz and
found that the sinking of the vessel was due to its unseaworthiness and the failure
of its crew and master to exercise extraordinary diligence. 61Subsequently,
however, Aboitiz' petition before the Court of Appeals, docketed as CA-G.R. SP No.
20844 (now G.R. No. 94867) to annul and set aside the order of execution issued by
the lower court was resolved in favor of Aboitiz. The Court of Appeals brushed aside
the issue of Aboitiz' negligence and/or fault and proceeded to allow the application
of the limited liability rule "to accomplish the aims of justice." 62 It elaborated thus:
"To execute the judgment in this case would prejudice the substantial right of other
claimants who have filed suits to claim their cargoes that was lost in the vessel that
sank and also against the petitioner to be ordered to pay more than what the law
requires." 63
It should be pointed out that the issue of whether or not the M/V P. Aboitiz sank by
reason of force majeure is not a novel one for that question has already been the
subject of conflicting pronouncements by the Supreme Court. InAboitiz Shipping
Corporation v. Court of Appeals, 64 this Court approved the findings of the trial
court and the appellate court that the sinking of the M/V P. Aboitiz was not due to
the waves caused by tropical storm "Yoning" but due to the fault and negligence of
Aboitiz, its master and crew. 65 On the other hand, in the later case ofCountry
Bankers Insurance Corporation v. Court of Appeals, 66 this Court issued a Resolution
on August 28, 1991 denying the petition for review on the ground that the Court of
Appeals committed no reversible error, thereby affirming and adopting as its own,
the findings of the Court of Appeals that force majeure had caused the M/V P.
Aboitiz to founder.
In view of these conflicting pronouncements, we find that now is the opportune
time to settle once and for all the issue or whether or not force mejeure had indeed
caused the M/V P. Aboitiz to sink. After reviewing the records of the instant cases,
we categorically state that by the facts on record, the M/V P. Aboitiz did not go
under water because of the storm "Yoning."
It is true that as testified by Justo Iglesias, meteorologist of Pag-Asa, during the
inclusive dates of October 28-31, 1980, a stormy weather condition prevailed within
the Philippine area of responsibility, particularly along the sea route from Hong
Kong to Manila, because of tropical depression "Yoning". 67 But even Aboitiz' own
evidence in the form of the marine protest filed by Captain Racines affirmed that
the wind force when the M/V P. Aboitiz foundered on October 31, 1980 was only
ten (10) to fifteen (15) knots which, under the Beaufort Scale or Wind, falls within
scale No. 4 that describes the wind velocity as "moderate breeze," and
characterizes the waves as "small . . . becoming longer, fairly frequent white
horses." 68 Captain Racines also testified in open court that the ill-fated M/V P.
Aboitiz was two hundred (200) miles away from storm "Yoning" when it sank. 69
The issue of negligence on the part of Aboitiz, and the captain and crew of the M/V
P. Aboitiz has also been subject of conflicting rulings by this Court. In G.R. No.
100373, Country Bankers Insurance Corporation v. Court of Appeals, this Court
found no error in the findings of the Court of Appeals that the M/V P. Aboitiz sank
by reason offorce majeure, and that there was no negligence on the part of its
officers and crew. In direct contradiction is this Court's categorical declaration
in Aboitiz Shipping Corporation v. Court of Appeals," 70 to wit:
The trial court and the appellate court found that the sinking of the M/V P.
Aboitiz was not due to the waves caused by tropical storm "Yoning" but
due to the fault and negligence of petitioner, its master and crew. The
court reproduces with approval said findings . . . . 71
However, in the subsequent case of Aboitiz Shipping Corporation v. General
Accident Fire and Life Assurance Corporation, Ltd., 72 this Court exculpated Aboitiz
from fault and/or negligence while holding that the unseaworthiness of the M/V P.
Aboitiz was only attributable to the negligence of its captain and crew. Thus,
On this point, it should be stressed that unseaworthiness is not a fault that
can be laid squarely on petitioner's lap, absent a factual basis for such
conclusion. The unseaworthiness found in some cases where the same has
been ruled to exist is directly attributable to the vessel's crew and captain,
more so on the part of the latter since Article 612 of the Code of
Commerce provides that among the inherent duties of a captain is to
examine a vessel before sailing and to comply with the laws of navigation.
Such a construction would also put matters to rest relative to the decision
of the Board of Marine Inquiry. While the conclusion therein exonerating
the captain and crew of the vessel was not sustained for lack of basis, the
finding therein contained to the effect that the vessel was seaworthy
deserves merit. Despite appearances, it is not totally incompatible with the
findings of the trial court and the Court of Appeals, whose finding of
"unseaworthiness" clearly did not pertain to the structural condition of the
vessel which is the basis of the BMI's findings, but to the condition it was in
at the time of the sinking, which condition was a result of the acts of the
captain and the crew. 73
It therefore becomes incumbent upon this Court to answer with finality the nagging
question of whether or not it was the concurrent fault and/or negligence of Aboitiz
and the captain and crew of the ill-fated vessel that had caused it to go under
water.
Guided by our previous pronouncements and illuminated by the evidence now on
record, we reiterate our findings in Aboitiz Shipping Corporation v. General Accident
Fire and Life Assurance Corporation, Ltd. 74, that the unseaworthiness of the M/V P.
Aboitiz had caused it to founder. We, however, take exception to the
pronouncement therein that said unseaworthiness could not be attributed to the
ship owner but only to the negligent acts of the captain and crew of the M/V P.
Aboitiz. On the matter of Aboitiz' negligence, we adhere to our ruling in Aboitiz
Shipping Corporation v. Court of Appeals, 75 that found Aboitiz, and the captain and
crew of the M/V P. Aboitiz to have been concurrently negligent.
During the trial of Civil Case Nos. 82-2767-82-2770 (now G.R. No. 92735),
petitioners Monarch and Tabacalera presented a survey from Perfect Lambert, a
surveyor based in Hong Kong that conducted an investigation on the possible cause
of the sinking of the vessel. The said survey established that the cause of the sinking
of the vessel was the leakage of water into the M/V P. Aboitiz which probably
started in the forward part of the No. 1 hull, although no explanation was proffered
as to why the No. 2 hull was likewise flooded. Perfect Lambert surmised that the
flooding was due to a leakage in the shell plating or a defect in the water tight bulk
head between the Nos. 1 and 2 holds which allowed the water entering hull No. 1
to pass through hull No. 2. The surveyor concluded that whatever the cause of the
leakage of water into these hulls, the seaworthiness of the vessel was definitely in
question because the breaches of the hulls and serious flooding of the two cargo
holds occurred simultaneously in seasonal weather. 76
We agree with the uniform finding of the lower courts that Aboitiz had failed to
prove that it observed the extraordinary diligence required of it as a common
carrier. We therefore reiterate our pronouncement in Aboitiz Corporation v. Court
of Appeals 77 on the issue of Aboitiz' liability in the sinking of its vessel, to wit:
In accordance with Article 1732 of the Civil Code, the defendant common
carrier from the nature of its business and for reasons of public policy, is
bound to observe extraordinary diligence in the vigilance over the goods
and for the safety of the passengers transported by it according to all
circumstances of the case. While the goods are in the possession of the
carrier, it is but fair that it exercise extraordinary diligence in protecting
them from loss or damage, and if loss occurs, the law presumes that it was
due to the carrier's fault or negligence; that is necessary to protect the
interest of the shipper which is at the mercy of the carrier . . . In the case at
bar, the defendant failed to prove hat the loss of the subject cargo was not
due to its fault or negligence. 78
The failure of Aboitiz to present sufficient evidence to exculpate itself from fault
and/or negligence in the sinking of its vessel in the face of the foregoing expert
testimony constrains us to hold that Aboitiz was concurrently at fault and/or
negligent with the ship captain and crew of the M/V P. Aboitiz. This is in accordance
with the rule that in cases involving the limited liability of shipowners, the initial
burden of proof of negligence or unseaworthiness rests on the claimants. However,
once the vessel owner or any party asserts the right to limit its liability, the burden
of proof as to lack of privity or knowledge on its part with respect to the matter of
negligence or unseaworthiness is shifted to it. 79 This burden, Aboitiz had
unfortunately failed to discharge. That Aboitiz failed to discharge the burden of
proving that the unseaworthiness of its vessel was not due to its fault and/or
negligence should not however mean that the limited liability rule will not be
applied to the present cases. The peculiar circumstances here demand that there
should be no strict adherence to procedural rules on evidence lest the just claims of
shippers/insurers be frustrated. The rule on limited liability should be applied in
accordance with the latest ruling inAboitiz Shipping Corporation v. General Accident
Fire and Life Assurance Corporation, Ltd., 80 promulgated on January 21, 1993, that
claimants be treated as "creditors in an insolvent corporation whose assets are not
enough to satisfy the totality of claims against it." 81 To do so, the Court set out in
that case the procedural guidelines:
In the instant case, there is, therefore, a need to collate all claims
preparatory to their satisfaction from the insurance proceeds on the vessel
M/V P. Aboitiz and its pending freightage at the time of its loss. No
claimant can be given precedence over the others by the simple
expedience of having completed its action earlier than the rest. Thus,
execution of judgment in earlier completed cases, even these already final
and executory must be stayed pending completion of all cases occasioned
by the subject sinking. Then and only then can all such claims be
simultaneously settled, either completely or pro-rata should the insurance
proceeds and freightage be not enough to satisfy all claims.
xxx xxx xxx
In fairness to the claimants and as a matter of equity, the total proceeds of
the insurance and pending freightage should now be deposited in trust.
Moreover, petitioner should institute the necessary limitation and
distribution action before the proper admiralty court within 15 days from
finality of this decision, and thereafter deposit with it the proceeds from
the insurance company and pending freightage in order to safeguard the
same pending final resolution of all incidents, for final pro-rating and
settlement thereof. 82(Emphasis supplied.)
There is no record that Aboitiz. has instituted such action or that it has deposited in
trust the insurance proceeds and freightage earned. The pendency of the instant
cases before the Court is not a reason for Aboitiz to disregard the aforementioned
order of the Court. In fact, had Aboitiz complied therewith, even these cases could
have been terminated earlier. We are inclined to believe that instead of filing the
suit as directed by this Court, Aboitiz tolerated the situation of several claimants
waiting to gel hold of its insurance proceeds, which, if correctly handled must have
multiplied in amount by now. By its failure to abide by the order of this Court, it had
caused more damage to the claimants over and above that which they have
endured as a direct consequence of the sinking of the M/V P. Aboitiz. It was obvious
that from among the many cases filed against it over the years, Aboitiz was waiting
for a judgment that might prove favorable to it, in blatant violation of the basic
provisions of the Civil Code on abuse of rights.
Well aware of the 110 claimants against it, Aboitiz preferred to litigate the claims
singly rather than exert effort towards the consolidation of all claims. Consequently,
courts have arrived at conflicting decisions while claimants waited over the years
for a resolution of any of the cases that would lead to the eventual resolution of the
rest. Aboitiz failed to give the claimants their due and to observe honesty and good
faith in the exercise of its rights. 83
Aboitiz' blatant disregard of the order of this Court in Aboitiz Shipping Corporation
v. General Accident Fire and Life Assurance Corporation, Ltd. 84 cannot be anything
but, willful on its part. An act is considered willful if it is done with knowledge of its
injurious effect; it is not required that the act be done purposely to produce the
injury.85 Aboitiz is well aware that by not instituting the said suit, it caused the
delay in the resolution of all claims against it. Having willfully caused loss or injury
to the petitioners in a manner that is contrary to morals, good customs or public
policy, Aboitiz is liable for damages to the latter. 86
Thus, for its contumacious act of defying the order of this Court to file the
appropriate action to consolidate all claims for settlement, Aboitiz must be held
liable for moral damages which may be awarded in appropriate cases under the
Chapter on human relations of the Civil Code (Articles 19 to 36). 87
On account of Aboitiz' refusal to satisfy petitioners' claims in accordance with the
directive of the Court in Aboitiz Shipping Corporation v. General Accident Fire and
Life Assurance Corporation, Ltd., it acted in gross and evident bad faith. Accordingly,
pursuant to Article 2208 of the Civil Code, 88 petitioners should be granted
attorney's fees.
WHEREFORE, the petitions in G.R. Nos. 92735, 94867, and 95578 are DENIED. The
decisions of the Court of Appeals in CA-G.R. No. SP-17427 dated March 29, 1990,
CA-G.R. SP No. 20844 dated August 15, 1990, and CA-G.R. CV No. 15071 dated
August 24, 1990 are AFFIRMED with the MODIFICATION that respondent Aboitiz
Shipping Corporation is ordered to pay each of the respective petitioners the
amounts of P100,000.00 as moral damages and P50,000.00 as attorney's fees, and
treble the cost of suit.
Respondent Aboitiz Shipping Corporation is further directed to comply with the
Order promulgated by this Court on January 21, 1993 in Aboitiz Shipping
Corporation v. General Accident Fire and Life Assurance Corporation, Ltd., G.R. No.
100446, January 21, 1993, to (a) institute the necessary limitation and distribution
action before the proper Regional Trial Court, acting as admiralty court, within
fifteen (15) days from the finality of this decision, and (b) thereafter to deposit with
the said court the insurance proceeds from the loss of the vessel, M/V P. Aboitiz,
and the freightage earned in order to safeguard the same pending final resolution
of all incidents relative to the final pro-rating thereof and to the settlement of all
claims. SO ORDERED.
G.R. No. 100446 January 21, 1993
ABOITIZ SHIPPING CORPORATION, petitioner, vs. GENERAL ACCIDENT FIRE AND
LIFE ASSURANCE CORPORATION, LTD., respondent.
MELO, J.:
This refers to a petition for review which seeks to annul and set aside the decision
of the Court of Appeals dated June 21, 1991, in CA G.R. SP No. 24918. The appellate
court dismissed the petition for certiorari filed by herein petitioner, Aboitiz Shipping
Corporation, questioning the Order of April 30, 1991 issued by the Regional Trial
Court of the National Capital Judicial Region (Manila, Branch IV) in its Civil Case No.
144425 granting private respondent's prayer for execution for the full amount of
the judgment award. The trial court in so doing swept aside petitioner's opposition
which was grounded on the real and hypothecary nature of petitioner's liability as
ship owner. The application of this established principle of maritime law would
necessarily result in a probable reduction of the amount to be recovered by private
respondent, since it would have to share with a number of other parties similarly
situated in the insurance proceeds on the vessel that sank.
The basic facts are not disputed.
Petitioner is a corporation organized and operating under Philippine laws and
engaged in the business of maritime trade as a carrier. As such, it owned and
operated the ill-fated "M/V P. ABOITIZ," a common carrier which sank on a voyage
from Hongkong to the Philippines on October 31, 1980. Private respondent General
Accident Fire and Life Assurance Corporation, Ltd. (GAFLAC), on the other hand, is a
foreign insurance company pursuing its remedies as a subrogee of several cargo
consignees whose respective cargo sank with the said vessel and for which it has
priorly paid.
The incident of said vessel's sinking gave rise to the filing of suits for recovery of lost
cargo either by the shippers, their successor-in-interest, or the cargo insurers like
GAFLAC as subrogees. The sinking was initially investigated by the Board of Marine
Inquiry (BMI Case No. 466, December 26, 1984), which found that such sinking was
due toforce majeure and that subject vessel, at the time of the sinking was
seaworthy. This administrative finding notwithstanding, the trial court in said Civil
Case No. 144425 found against the carrier on the basis that the loss subject matter
therein did not occur as a result of force majeure. Thus, in said case, plaintiff
GAFLAC was allowed to prove, and. was later awarded, its claim. This decision in
favor of GAFLAC was elevated all the way up to this Court in G.R. No. 89757 (Aboitiz
v. Court of Appeals, 188 SCRA 387 [1990]), with Aboitiz, like its ill-fated vessel,
encountering rough sailing. The attempted execution of the judgment award in said
case in the amount of P1,072,611.20 plus legal interest has given rise to the instant
petition.
On the other hand, other cases have resulted in findings upholding the conclusion
of the BMI that the vessel was seaworthy at the time of the sinking, and that such
sinking was due to force majeure. One such ruling was likewise elevated to this
Court in G.R. No. 100373, Country Bankers Insurance Corporation v. Court of
Appeals, et al., August 28, 1991 and was sustained. Part of the task resting upon
this Court, therefore, is to reconcile the resulting apparent contrary findings in
cases originating out of a single set of facts.
It is in this factual milieu that the instant petition seeks a pronouncement as to the
applicability of the doctrine of limited liability on the totality of the claims vis a
vis the losses brought about by the sinking of the vessel M/V P. ABOITIZ, as based
on the real and hypothecary nature of maritime law. This is an issue which begs to
be resolved considering that a number of suits alleged in the petition number about
110 (p. 10 and pp. 175 to 183, Rollo) still pend and whose resolution shall well-nigh
result in more confusion than presently attends the instant case.
In support of the instant petition, the following arguments are submitted by the
petitioner:
1. The Limited Liability Rule warrants immediate stay of execution
of judgment to prevent impairment of other creditors' shares;
2. The finding of unseaworthiness of a vessel is not necessarily
attributable to the shipowner; and
3 The principle of "Law of the Case" is not applicable to the
present petition. (pp. 2-26, Rollo.)
On the other hand, private respondent opposes the foregoing contentions, arguing
that:
1. There is no limited liability to speak of or applicable real and
hypothecary rule under Article 587, 590, and 837 of the Code of
Commerce in the face of the facts found by the lower court (Civil
Case No. 144425), upheld by the Appellate Court (CA G.R. No.
10609), and affirmed in toto by the Supreme Court in G.R. No.
89757 which cited G.R. No. 88159 as the Law of the Case; and
2. Under the doctrine of the Law of the Case, cases involving the
same incident, parties similarly situated and the same issues
litigated should be decided in conformity therewith following the
maximstare decisis et non quieta movere. (pp. 225 to 279, Rollo.)
Before proceeding to the main bone of contention, it is important to determine first
whether or not the Resolution of this Court in G.R. No. 88159, Aboitiz Shipping,
Corporation vs. The Honorable Court of Appeals and Allied Guaranty Insurance
Company, Inc., dated November 13, 1989 effectively bars and precludes the instant
petition as argued by respondent GAFLAC.
An examination of the November 13, 1989 Resolution in G.R. No. 88159 (pp. 280 to
282, Rollo) shows that the same settles two principal matters, first of which is
that the doctrine of primary administrative jurisdiction is not applicable therein; and
second is that a limitation of liability in said case would render inefficacious the
extraordinary diligence required by law of common carriers.
It should be pointed out, however, that the limited liability discussed in said case is
not the same one now in issue at bar, but an altogether different aspect. The
limited liability settled in G.R. No. 88159 is that which attaches to cargo by virtue of
stipulations in the Bill of Lading, popularly known as package limitation clauses,
which in that case was contained in Section 8 of the Bill of Lading and which limited
the carrier's liability to US$500.00 for the cargo whose value was therein sought to
be recovered. Said resolution did not tackle the matter of the Limited Liability Rule
arising out of the real and hypothecary nature of maritime law, which was not
raised therein, and which is the principal bone of contention in this case. While the
matters threshed out in G.R. No. 88159, particularly those dealing with the issues
on primary administrative jurisdiction and the package liability limitation provided
in the Bill of Lading are now settled and should no longer be touched, the instant
case raises a completely different issue. It appears, therefore, that the resolution in
G.R. 88159 adverted to has no bearing other than factual to the instant case.
This brings us to the primary question herein which is whether or not respondent
court erred in granting execution of the full judgment award in Civil Case No. 14425
(G.R. No. 89757), thus effectively denying the application of the limited liability
enunciated under the appropriate articles of the Code of Commerce. The articles
may be ancient, but they are timeless and have remained to be good law.
Collaterally, determination of the question of whether execution of judgments
which have become final and executory may be stayed is also an issue.
We shall tackle the latter issue first. This Court has always been consistent in its
stand that the very purpose for its existence is to see to the accomplishment of the
ends of justice. Consistent with this view, a number of decisions have originated
herefrom, the tenor of which is that no procedural consideration is sacrosanct if
such shall result in the subverting of substantial justice. The right to an execution
after finality of a decision is certainly no exception to this. Thus, in Cabrias v.
Adil (135 SCRA 355 [1985]), this Court ruled that:
. . . It is a truism that every court has the power "to control, in the
furtherance of justice, the conduct of its ministerial officers, and
of all other persons in any manner connected with a case before
it, in every manner appertaining thereto. It has also been said
that:
. . . every court having jurisdiction to render a particular
judgment has inherent power to enforce it, and to
exercise equitable control over such enforcement. The
court has authority to inquire whether its judgment has
been executed, and will remove obstructions to the
enforcement thereof. Such authority extends not only to
such orders and such writs as may be necessary to carry
out the judgment into effect and render it binding and
operative, but also to such orders and such writs as may
be necessary to prevent an improper enforcement of the
judgment. If a judgment is sought to be perverted and
made a medium of consummating a wrong the court on
proper application can prevent it. (at p. 359)
and again in the case of Lipana v. Development Bank of Rizal (154 SCRA 257 [1987]),
this Court found that:
The rule that once a decision becomes final and executory, it is
the ministerial duty of the court to order its execution, admits of
certain exceptions as in cases of special and exceptional nature
where it becomes the imperative in the higher interest of justice
to direct the suspension of its execution (Vecine v. Geronimo, 59
OG 579); whenever it is necessary to accomplish the aims of
justice (Pascual v Tan, 85 Phil. 164); or when certain facts and
circumstances transpired after the judgment became final which
would render the execution of the judgment unjust (Cabrias v.
Adil, 135 SCRA 354). (at p. 201)
We now come to the determination of the principal issue as to whether the Limited
Liability Rule arising out of the real and hypothecary nature of maritime law should
apply in this and related cases. We rule in the affirmative.
In deciding the instant case below, the Court of Appeals took refuge in this Court's
decision in G.R. No. 89757 upholding private respondent's claims in that particular
case, which the Court of Appeals took to mean that this Court has "considered,
passed upon and resolved Aboitiz's contention that all claims for the losses should
first be determined before GAFLAC's judgment may be satisfied," and that such
ruling "in effect necessarily negated the application of the limited liability principle" damage, or forfeiture, done, occasioned, or incurred, without the
(p. 175, Rollo). Such conclusion is not accurate. The decision in G.R. No. 89757 privity or knowledge of such owner or owners shall not exceed
considered only the circumstances peculiar to that particular case, and was not the amount or value of the interest of such owner in such vessel,
meant to traverse the larger picture herein brought to fore, the circumstances of and her freight then pending. (Section 183 of the US Federal
which heretofore were not relevant. We must stress that the matter of the Limited Limitation of Liability Act).
Liability Rule as discussed was never in issue in all prior cases, including those
before the RTCs and the Court of Appeals. As discussed earlier, the "limited liability" and
in issue before the trial courts referred to the package limitation clauses in the bills
of lading and not the limited liability doctrine arising from the real and hypothecary 1. The owner of a sea-going ship may limit his liability in
nature of maritime trade. The latter rule was never made a matter of defense in any accordance with Article 3 of this Convention in respect of claims
of the cases a quo, as properly it could not have been made so since it was not arising, from any of the following occurrences, unless the
relevant in said cases. The only time it could come into play is when any of the cases occurrence giving rise to the claim resulted from the actual fault
involving the mishap were to be executed, as in this case. Then, and only then, or privity of the owner;
could the matter have been raised, as it has now been brought before the Court.
(a) loss of life of, or personal injury to, any person being carried in
The real and hypothecary nature of maritime law simply means that the liability of the ship, and loss of, or damage to, any property on board the
the carrier in connection with losses related to maritime contracts is confined to the ship.
vessel, which is hypothecated for such obligations or which stands as the guaranty
for their settlement. It has its origin by reason of the conditions and risks attending
(b) loss of life of, or personal injury to, any other person, whether
maritime trade in its earliest years when such trade was replete with innumerable
on land or on water, loss of or damage to any other property or
and unknown hazards since vessels had to go through largely uncharted waters to
infringement of any rights caused by the act, neglect or default
ply their trade. It was designed to offset such adverse conditions and to encourage
the owner is responsible for, or any person not on board the ship
people and entities to venture into maritime commerce despite the risks and the
for whose act, neglect or default the owner is responsible:
prohibitive cost of shipbuilding. Thus, the liability of the vessel owner and agent
Provided, however, that in regard to the act, neglect or default of
arising from the operation of such vessel were confined to the vessel itself, its
this last class of person, the owner shall only be entitled to limit
equipment, freight, and insurance, if any, which limitation served to induce
his liability when the act, neglect or default is one which occurs in
capitalists into effectively wagering their resources against the consideration of the
the navigation or the management of the ship or in the loading,
large profits attainable in the trade.
carriage or discharge of its cargo or in the embarkation, carriage
or disembarkation of its passengers.
It might be noteworthy to add in passing that despite the modernization of the
shipping industry and the development of high-technology safety devices designed
(c) any obligation or liability imposed by any law relating to the
to reduce the risks therein, the limitation has not only persisted, but is even
removal of wreck and arising from or in connection with the
practically absolute in well-developed maritime countries such as the United States
raising, removal or destruction of any ship which is sunk, stranded
and England where it covers almost all maritime casualties. Philippine maritime law
or abandoned (including anything which may be on board such
is of Anglo-American extraction, and is governed by adherence to both international
ship) and any obligation or liability arising out of damage caused
maritime conventions and generally accepted practices relative to maritime trade
to harbor works, basins and navigable waterways. (Section 1,
and travel. This is highlighted by the following excerpts on the limited liability of
Article I of the Brussels International Convention of 1957)
vessel owners and/or agents;
In this jurisdiction, on the other hand, its application has been well-nigh constricted
Sec. 183. The liability of the owner of any vessel, whether
by the very statute from which it originates. The Limited Liability Rule in the
American or foreign, for any embezzlement, loss, or destruction
Philippines is taken up in Book III of the Code of Commerce, particularly in Articles
by any person of any person or any property, goods, or
587, 590, and 837, hereunder quoted in toto:
merchandise shipped or put on board such vessel, or for any loss,
 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 a 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 (on collisions), shall be understood
as limited to the value of the vessel with all its appurtenances and
freightage served during the voyage. (Emphasis supplied)
Taken together with related articles, the foregoing cover only liability for injuries to
third parties (Art. 587), acts of the captain (Art. 590) and collisions (Art. 837).
In view of the foregoing, this Court shall not take the application of such limited
liability rule, which is a matter of near absolute application in other jurisdictions, so
lightly as to merely "imply" its inapplicability, because as could be seen, the reasons
for its being are still apparently much in existence and highly regarded.
We now come to its applicability in the instant case. In the few instances when the
matter was considered by this Court, we have been consistent in this jurisdiction in
holding that the only time the Limited Liability Rule does not apply is when there is
an actual finding of negligence on the part of the vessel owner or agent (Yango v.
Laserna, 73 Phil. 330 [1941]; Manila Steamship Co., Inc. v. Abdulhanan, 101 Phil. 32
[1957]; Heirs of Amparo delos Santos v. Court of Appeals, 186 SCRA 649 [1967]).
The pivotal question, thus, is whether there is a finding of such negligence on the
part of the owner in the instant case.
A careful reading of the decision rendered by the trial court in Civil Case No. 144425
(pp. 27-33, Rollo) as well as the entirety of the records in the instant case will show
that there has been no actual finding of negligence on the part of petitioner. In its
Decision, the trial court merely held that:
. . . Considering the foregoing reasons, the Court holds that the
vessel M/V "Aboitiz" and its cargo were not lost due to fortuitous
event or force majeure." (p. 32, Rollo)
The same is true of the decision of this Court in G.R. No. 89757 (pp. 71-86, Rollo)
affirming the decision of the Court of Appeals in CA-G.R. CV No. 10609 (pp. 34-
50, Rollo) since both decisions did not make any new and additional finding of fact.
Both merely affirmed the factual findings of the trial court, adding that the cause of
the sinking of the vessel was because of unseaworthiness due to the failure of the
crew and the master to exercise extraordinary diligence. Indeed, there appears to
have been no evidence presented sufficient to form a conclusion that petitioner
shipowner itself was negligent, and no tribunal, including this Court will add or
subtract to such evidence to justify a conclusion to the contrary.
The qualified nature of the meaning of "unseaworthiness," under the peculiar
circumstances of this case is underscored by the fact that in the Country
Banker's case, supra, arising from the same sinking, the Court sustained the
decision of the Court of Appeals that the sinking of the M/V P. Aboitiz was due
to force majeure.
On this point, it should be stressed that unseaworthiness is not a fault that can be
laid squarely on petitioner's lap, absent a factual basis for such a conclusion. The
unseaworthiness found in some cases where the same has been ruled to exist is
directly attributable to the vessel's crew and captain, more so on the part of the
latter since Article 612 of the Code of Commerce provides that among the inherent
duties of a captain is to examine a vessel before sailing and to comply with the laws
of navigation. Such a construction would also put matters to rest relative to the
decision of the Board of Marine Inquiry. While the conclusion therein exonerating
the captain and crew of the vessel was not sustained for lack of basis, the finding
therein contained to the effect that the vessel was seaworthy deserves merit.
Despite appearances, it is not totally incompatible with the findings of the trial
court and the Court of Appeals, whose finding of "unseaworthiness" clearly did not
pertain to the structural condition of the vessel which is the basis of the BMI's
findings, but to the condition it was in at the time of the sinking, which condition
was a result of the acts of the captain and the crew.
The rights of a vessel owner or agent under the Limited Liability Rule are akin to
those of the rights of shareholders to limited liability under our corporation law.
Both are privileges granted by statute, and while not absolute, must be swept aside
only in the established existence of the most compelling of reasons. In the absence
of such reasons, this Court chooses to exercise prudence and shall not sweep such
rights aside on mere whim or surmise, for even in the existence of cause to do so,
such incursion is definitely punitive in nature and must never be taken lightly.
More to the point, the rights of parties to claim against an agent or owner of a
vessel may be compared to those of creditors against an insolvent corporation
whose assets are not enough to satisfy the totality of claims as against it. While
each individual creditor may, and in fact shall, be allowed to prove the actual
amounts of their respective claims, this does not mean that they shall all be allowed
to recover fully thus favoring those who filed and proved their claims sooner to the
prejudice of those who come later. In such an instance, such creditors too would
not also be able to gain access to the assets of the individual shareholders, but must
limit their recovery to what is left in the name of the corporation. Thus, in the case
of Lipana v. Development Bank of Rizal earlier cited, We held that:
In the instant case, the stay of execution of judgment is warranted
by the fact that the respondent bank was placed under
receivership. To execute the judgment would unduly deplete the
assets of respondent bank to the obvious prejudice of other
depositors and creditors, since, as aptly stated in Central Bank v.
Morfe (63 SCRA 114), after the Monetary Board has declared that
a bank is insolvent and has ordered it to cease operations, the
Board becomes the trustee of its assets for the equal benefit of all
creditors, and after its insolvency, one cannot obtain an
advantage or preference over another by an attachment,
execution or otherwise. (at p. 261).
In both insolvency of a corporation and the sinking of a vessel, the claimants or
creditors are limited in their recovery to the remaining value of accessible assets. In
the case of an insolvent corporation, these are the residual assets of the
corporation left over from its operations. In the case of a lost vessel, these are the
insurance proceeds and pending freightage for the particular voyage.
undergoing trial. It would not, therefore, be entirely correct to preclude the trial
courts from making their own findings of fact in those cases and deciding the same
by allotting shares for these claims, some of which, after all, might not prevail,
depending on the evidence presented in each. We, therefore, rule that the pro-
rated share of each claim can only be found after all the cases shall have been
decided.
In fairness to the claimants, and as a matter of equity, the total proceeds of the
insurance and pending freightage should now be deposited in trust. Moreover,
petitioner should institute the necessary limitation and distribution action before
the proper admiralty court within 15 days from the finality of this decision, and
thereafter deposit with it the proceeds from the insurance company and pending
freightage in order to safeguard the same pending final resolution of all incidents,
for final pro-rating and settlement thereof.
ACCORDINGLY, the petition is hereby GRANTED, and the Orders of the Regional
Trial Court of Manila, Branch IV dated April 30, 1991 and the Court of Appeals dated
June 21, 1991 are hereby set aside. The trial court is hereby directed to desist from
proceeding with the execution of the judgment rendered in Civil Case No. 144425
pending determination of the totality of claims recoverable from the petitioner as
the owner of the M/V P. Aboitiz. Petitioner is directed to institute the necessary
action and to deposit the proceeds of the insurance of subject vessel as above-
described within fifteen (15) days from finality of this decision. The temporary
restraining order issued in this case dated August 7, 1991 is hereby made
permanent. SO ORDERED.

In the instant case, there is, therefore, a need to collate all claims preparatory to
their satisfaction from the insurance proceeds on the vessel M/V P. Aboitiz and its
pending freightage at the time of its loss. No claimant can be given precedence over
the others by the simple expedience of having filed or completed its action earlier
than the rest. Thus, execution of judgment in earlier completed cases, even those
already final and executory, must be stayed pending completion of all cases
occasioned by the subject sinking. Then and only then can all such claims be
simultaneously settled, either completely or pro-rata should the insurance proceeds
and freightage be not enough to satisfy all claims.

Finally, the Court notes that petitioner has provided this Court with a list of all
pending cases (pp. 175 to 183,Rollo), together with the corresponding claims and
the pro-rated share of each. We likewise note that some of these cases are still with
the Court of Appeals, and some still with the trial courts and which probably are still
G.R. No. 101503 September 15, 1993
PLANTERS PRODUCTS, INC., petitioner, vs. COURT OF APPEALS, SORIAMONT
STEAMSHIP AGENCIES AND KYOSEI KISEN KABUSHIKI KAISHA,respondents.
BELLOSILLO, J.:
Does a charter-party 1 between a shipowner and a charterer transform a common
carrier into a private one as to negate the civil law presumption of negligence in
case of loss or damage to its cargo?
Planters Products, Inc. (PPI), purchased from Mitsubishi International Corporation
(MITSUBISHI) of New York, U.S.A., 9,329.7069 metric tons (M/T) of Urea 46%
fertilizer which the latter shipped in bulk on 16 June 1974 aboard the cargo vessel
M/V "Sun Plum" owned by private respondent Kyosei Kisen Kabushiki Kaisha (KKKK)
from Kenai, Alaska, U.S.A., to Poro Point, San Fernando, La Union, Philippines, as
evidenced by Bill of Lading No. KP-1 signed by the master of the vessel and issued
on the date of departure.
On 17 May 1974, or prior to its voyage, a time charter-party on the vessel M/V "Sun
Plum" pursuant to the Uniform General Charter 2 was entered into between
Mitsubishi as shipper/charterer and KKKK as shipowner, in Tokyo, Japan. 3Riders to
the aforesaid charter-party starting from par. 16 to 40 were attached to the pre-
printed agreement. Addenda Nos. 1, 2, 3 and 4 to the charter-party were also
subsequently entered into on the 18th, 20th, 21st and 27th of May 1974,
respectively.
Before loading the fertilizer aboard the vessel, four (4) of her holds 4 were all
presumably inspected by the charterer's representative and found fit to take a load
of urea in bulk pursuant to par. 16 of the charter-party which reads:
16. . . . At loading port, notice of readiness to be accomplished by
certificate from National Cargo Bureau inspector or substitute
appointed by charterers for his account certifying the vessel's
readiness to receive cargo spaces. The vessel's hold to be properly
swept, cleaned and dried at the vessel's expense and the vessel to
be presented clean for use in bulk to the satisfaction of the
inspector before daytime commences. (emphasis supplied)
After the Urea fertilizer was loaded in bulk by stevedores hired by and under the
supervision of the shipper, the steel hatches were closed with heavy iron lids,
covered with three (3) layers of tarpaulin, then tied with steel bonds. The hatches
remained closed and tightly sealed throughout the entire voyage. 5
Upon arrival of the vessel at her port of call on 3 July 1974, the steel pontoon
hatches were opened with the use of the vessel's boom. Petitioner unloaded the
cargo from the holds into its steelbodied dump trucks which were parked alongside
the berth, using metal scoops attached to the ship, pursuant to the terms and
conditions of the charter-partly (which provided for an F.I.O.S. clause). 6 The
hatches remained open throughout the duration of the discharge. 7
Each time a dump truck was filled up, its load of Urea was covered with tarpaulin
before it was transported to the consignee's warehouse located some fifty (50)
meters from the wharf. Midway to the warehouse, the trucks were made to pass
through a weighing scale where they were individually weighed for the purpose of
ascertaining the net weight of the cargo. The port area was windy, certain portions
of the route to the warehouse were sandy and the weather was variable, raining
occasionally while the discharge was in progress. 8 The petitioner's warehouse was
made of corrugated galvanized iron (GI) sheets, with an opening at the front where
the dump trucks entered and unloaded the fertilizer on the warehouse floor.
Tarpaulins and GI sheets were placed in-between and alongside the trucks to
contain spillages of the ferilizer. 9
It took eleven (11) days for PPI to unload the cargo, from 5 July to 18 July 1974
(except July 12th, 14th and 18th).10 A private marine and cargo surveyor, Cargo
Superintendents Company Inc. (CSCI), was hired by PPI to determine the "outturn"
of the cargo shipped, by taking draft readings of the vessel prior to and after
discharge. 11 The survey report submitted by CSCI to the consignee (PPI) dated 19
July 1974 revealed a shortage in the cargo of 106.726 M/T and that a portion of the
Urea fertilizer approximating 18 M/T was contaminated with dirt. The same results
were contained in a Certificate of Shortage/Damaged Cargo dated 18 July 1974
prepared by PPI which showed that the cargo delivered was indeed short of 94.839
M/T and about 23 M/T were rendered unfit for commerce, having been polluted
with sand, rust and dirt. 12
Consequently, PPI sent a claim letter dated 18 December 1974 to Soriamont
Steamship Agencies (SSA), the resident agent of the carrier, KKKK, for P245,969.31
representing the cost of the alleged shortage in the goods shipped and the
diminution in value of that portion said to have been contaminated with dirt. 13
Respondent SSA explained that they were not able to respond to the consignee's
claim for payment because, according to them, what they received was just a
request for shortlanded certificate and not a formal claim, and that this "request"
was denied by them because they "had nothing to do with the discharge of the
shipment." 14Hence, on 18 July 1975, PPI filed an action for damages with the Court
of First Instance of Manila. The defendant carrier argued that the strict public policy
governing common carriers does not apply to them because they have become
private carriers by reason of the provisions of the charter-party. The court a
quo however sustained the claim of the plaintiff against the defendant carrier for
the value of the goods lost or damaged when it ruled thus: 15
. . . Prescinding from the provision of the law that a common
carrier is presumed negligent in case of loss or damage of the
goods it contracts to transport, all that a shipper has to do in a
suit to recover for loss or damage is to show receipt by the carrier
of the goods and to delivery by it of less than what it
received. After that, the burden of proving that the loss or damage
was due to any of the causes which exempt him from liability is
shipted to the carrier, common or private he may be. Even if the
provisions of the charter-party aforequoted are deemed valid,
and the defendants considered private carriers, it was still
incumbent upon them to prove that the shortage or
contamination sustained by the cargo is attributable to the fault
or negligence on the part of the shipper or consignee in the
loading, stowing, trimming and discharge of the cargo. This they
failed to do. By this omission, coupled with their failure to destroy
the presumption of negligence against them, the defendants are
liable (emphasis supplied).
On appeal, respondent Court of Appeals reversed the lower court and absolved the
carrier from liability for the value of the cargo that was lost or damaged. 16 Relying
on the 1968 case of Home Insurance Co. v. American Steamship Agencies,
Inc., 17 the appellate court ruled that the cargo vessel M/V "Sun Plum" owned by
private respondent KKKK was a private carrier and not a common carrier by reason
of the time charterer-party. Accordingly, the Civil Code provisions on common
carriers which set forth a presumption of negligence do not find application in the
case at bar. Thus
. . . In the absence of such presumption, it was incumbent upon
the plaintiff-appellee to adduce sufficient evidence to prove the
negligence of the defendant carrier as alleged in its complaint. It is
an old and well settled rule that if the plaintiff, upon whom rests
the burden of proving his cause of action, fails to show in a
satisfactory manner the facts upon which he bases his claim, the
defendant is under no obligation to prove his exception or
defense (Moran, Commentaries on the Rules of Court, Volume 6,
p. 2, citing Belen v. Belen, 13 Phil. 202).
But, the record shows that the plaintiff-appellee dismally failed to
prove the basis of its cause of action, i.e. the alleged negligence of
defendant carrier. It appears that the plaintiff was under the
impression that it did not have to establish defendant's
negligence. Be that as it may, contrary to the trial court's finding,
the record of the instant case discloses ample evidence showing
that defendant carrier was not negligent in performing its
obligation . . . 18 (emphasis supplied).
Petitioner PPI appeals to us by way of a petition for review assailing the decision of
the Court of Appeals. Petitioner theorizes that the Home Insurance case has no
bearing on the present controversy because the issue raised therein is the validity
of a stipulation in the charter-party delimiting the liability of the shipowner for loss
or damage to goods cause by want of due deligence on its part or that of its
manager to make the vessel seaworthy in all respects, and not whether the
presumption of negligence provided under the Civil Code applies only to common
carriers and not to private carriers. 19 Petitioner further argues that since the
possession and control of the vessel remain with the shipowner, absent any
stipulation to the contrary, such shipowner should made liable for the negligence of
the captain and crew. In fine, PPI faults the appellate court in not applying the
presumption of negligence against respondent carrier, and instead shifting the onus
probandi on the shipper to show want of due deligence on the part of the carrier,
when he was not even at hand to witness what transpired during the entire voyage.
As earlier stated, the primordial issue here is whether a common carrier becomes a
private carrier by reason of a charter-party; in the negative, whether the shipowner
in the instant case was able to prove that he had exercised that degree of diligence
required of him under the law.
It is said that etymology is the basis of reliable judicial decisions in commercial
cases. This being so, we find it fitting to first define important terms which are
relevant to our discussion.
A "charter-party" is defined as a contract by which an entire ship, or some principal
part thereof, is let by the owner to another person for a specified time or use; 20 a
contract of affreightment by which the owner of a ship or other vessel lets the
whole or a part of her to a merchant or other person for the conveyance of goods,
on a particular voyage, in consideration of the payment of freight; 21 Charter
parties are of two types: (a) contract of affreightment which involves the use of
shipping space on vessels leased by the owner in part or as a whole, to carry goods
for others; and, (b) charter by demise or bareboat charter, by the terms of which
the whole vessel is let to the charterer with a transfer to him of its entire command
and possession and consequent control over its navigation, including the master
and the crew, who are his servants. Contract of affreightment may either be time
charter, wherein the vessel is leased to the charterer for a fixed period of time, or
voyage charter, wherein the ship is leased for a single voyage. 22 In both cases, the
charter-party provides for the hire of vessel only, either for a determinate period of
time or for a single or consecutive voyage, the shipowner to supply the ship's
stores, pay for the wages of the master and the crew, and defray the expenses for
the maintenance of the ship.
Upon the other hand, the term "common or public carrier" is defined in Art. 1732 of
the Civil Code. 23 The definition extends to carriers either by land, air or water
which hold themselves out as ready to engage in carrying goods or transporting
passengers or both for compensation as a public employment and not as a casual
occupation. The distinction between a "common or public carrier" and a "private or
special carrier" lies in the character of the business, such that if the undertaking is a
single transaction, not a part of the general business or occupation, although
involving the carriage of goods for a fee, the person or corporation offering such
service is a private carrier. 24
Article 1733 of the New Civil Code mandates that common carriers, by reason of the
nature of their business, should observe extraordinary diligence in the vigilance
over the goods they carry. 25 In the case of private carriers, however, the exercise
of ordinary diligence in the carriage of goods will suffice. Moreover, in the case of
loss, destruction or deterioration of the goods, common carriers are presumed to
have been at fault or to have acted negligently, and the burden of proving
otherwise rests on them. 26 On the contrary, no such presumption applies to
private carriers, for whosoever alleges damage to or deterioration of the goods
carried has the onus of proving that the cause was the negligence of the carrier.
It is not disputed that respondent carrier, in the ordinary course of business,
operates as a common carrier, transporting goods indiscriminately for all persons.
When petitioner chartered the vessel M/V "Sun Plum", the ship captain, its officers
and compliment were under the employ of the shipowner and therefore continued
to be under its direct supervision and control. Hardly then can we charge the
charterer, a stranger to the crew and to the ship, with the duty of caring for his
cargo when the charterer did not have any control of the means in doing so. This is
evident in the present case considering that the steering of the ship, the manning of
the decks, the determination of the course of the voyage and other technical
incidents of maritime navigation were all consigned to the officers and crew who
were screened, chosen and hired by the shipowner. 27
It is therefore imperative that a public carrier shall remain as such, notwithstanding
the charter of the whole or portion of a vessel by one or more persons, provided
the charter is limited to the ship only, as in the case of a time-charter or voyage-
charter. It is only when the charter includes both the vessel and its crew, as in a
bareboat or demise that a common carrier becomes private, at least insofar as the
particular voyage covering the charter-party is concerned. Indubitably, a shipowner
in a time or voyage charter retains possession and control of the ship, although her
holds may, for the moment, be the property of the charterer. 28
Respondent carrier's heavy reliance on the case of Home Insurance Co. v. American
Steamship Agencies, supra, is misplaced for the reason that the meat of the
controversy therein was the validity of a stipulation in the charter-party exempting
the shipowners from liability for loss due to the negligence of its agent, and not the
effects of a special charter on common carriers. At any rate, the rule in the United
States that a ship chartered by a single shipper to carry special cargo is not a
common carrier, 29 does not find application in our jurisdiction, for we have
observed that the growing concern for safety in the transportation of passengers
and /or carriage of goods by sea requires a more exacting interpretation of
admiralty laws, more particularly, the rules governing common carriers.
We quote with approval the observations of Raoul Colinvaux, the learned barrister-
at-law 30
As a matter of principle, it is difficult to find a valid distinction
between cases in which a ship is used to convey the goods of one
and of several persons. Where the ship herself is let to a
charterer, so that he takes over the charge and control of her, the
case is different; the shipowner is not then a carrier. But where
her services only are let, the same grounds for imposing a strict
responsibility exist, whether he is employed by one or many. The
master and the crew are in each case his servants, the freighter in
each case is usually without any representative on board the ship;
the same opportunities for fraud or collusion occur; and the same
difficulty in discovering the truth as to what has taken place arises
...
In an action for recovery of damages against a common carrier on the goods
shipped, the shipper or consignee should first prove the fact of shipment and its
consequent loss or damage while the same was in the possession, actual or
constructive, of the carrier. Thereafter, the burden of proof shifts to respondent to
prove that he has exercised extraordinary diligence required by law or that the loss,
damage or deterioration of the cargo was due to fortuitous event, or some other
circumstances inconsistent with its liability. 31
To our mind, respondent carrier has sufficiently overcome, by clear and convincing
proof, the prima faciepresumption of negligence.
The master of the carrying vessel, Captain Lee Tae Bo, in his deposition taken on 19
April 1977 before the Philippine Consul and Legal Attache in the Philippine Embassy
in Tokyo, Japan, testified that before the fertilizer was loaded, the four (4) hatches
of the vessel were cleaned, dried and fumigated. After completing the loading of
the cargo in bulk in the ship's holds, the steel pontoon hatches were closed and
sealed with iron lids, then covered with three (3) layers of serviceable tarpaulins
which were tied with steel bonds. The hatches remained close and tightly sealed
while the ship was in transit as the weight of the steel covers made it impossible for
a person to open without the use of the ship's boom. 32
It was also shown during the trial that the hull of the vessel was in good condition,
foreclosing the possibility of spillage of the cargo into the sea or seepage of water
inside the hull of the vessel. 33 When M/V "Sun Plum" docked at its berthing place,
representatives of the consignee boarded, and in the presence of a representative
of the shipowner, the foreman, the stevedores, and a cargo surveyor representing
CSCI, opened the hatches and inspected the condition of the hull of the vessel. The
stevedores unloaded the cargo under the watchful eyes of the shipmates who were
overseeing the whole operation on rotation basis. 34
Verily, the presumption of negligence on the part of the respondent carrier has
been efficaciously overcome by the showing of extraordinary zeal and assiduity
exercised by the carrier in the care of the cargo. This was confirmed by respondent
appellate court thus
. . . Be that as it may, contrary to the trial court's finding, the
record of the instant case discloses ample evidence showing that
defendant carrier was not negligent in performing its obligations.
Particularly, the following testimonies of plaintiff-appellee's own
witnesses clearly show absence of negligence by the defendant
carrier; that the hull of the vessel at the time of the discharge of
the cargo was sealed and nobody could open the same except in
the presence of the owner of the cargo and the representatives of
the vessel (TSN, 20 July 1977, p. 14); that the cover of the hatches
was made of steel and it was overlaid with tarpaulins, three layers
of tarpaulins and therefore their contents were protected from
the weather (TSN, 5 April 1978, p. 24); and, that to open these
hatches, the seals would have to be broken, all the seals were
found to be intact (TSN, 20 July 1977, pp. 15-16) (emphasis
supplied).
The period during which private respondent was to observe the degree of diligence
required of it as a public carrier began from the time the cargo was unconditionally
placed in its charge after the vessel's holds were duly inspected and passed scrutiny
by the shipper, up to and until the vessel reached its destination and its hull was
reexamined by the consignee, but prior to unloading. This is clear from the
limitation clause agreed upon by the parties in the Addendum to the standard
"GENCON" time charter-party which provided for an F.I.O.S., meaning, that the
loading, stowing, trimming and discharge of the cargo was to be done by the
charterer, free from all risk and expense to the carrier. 35 Moreover, a shipowner is
liable for damage to the cargo resulting from improper stowage only when the
stowing is done by stevedores employed by him, and therefore under his control
and supervision, not when the same is done by the consignee or stevedores under
the employ of the latter. 36
Article 1734 of the New Civil Code provides that common carriers are not
responsible for the loss, destruction or deterioration of the goods if caused by the
charterer of the goods or defects in the packaging or in the containers. The Code of
Commerce also provides that all losses and deterioration which the goods may
suffer during the transportation by reason of fortuitous event, force majeure, or the
inherent defect of the goods, shall be for the account and risk of the shipper, and
that proof of these accidents is incumbent upon the carrier. 37 The carrier,
nonetheless, shall be liable for the loss and damage resulting from the preceding
causes if it is proved, as against him, that they arose through his negligence or by
reason of his having failed to take the precautions which usage has established
among careful persons. 38
Respondent carrier presented a witness who testified on the characteristics of the
fertilizer shipped and the expected risks of bulk shipping. Mr. Estanislao Chupungco,
a chemical engineer working with Atlas Fertilizer, described Urea as a chemical
compound consisting mostly of ammonia and carbon monoxide compounds which
are used as fertilizer. Urea also contains 46% nitrogen and is highly soluble in water.
However, during storage, nitrogen and ammonia do not normally evaporate even
on a long voyage, provided that the temperature inside the hull does not exceed
eighty (80) degrees centigrade. Mr. Chupungco further added that in unloading
fertilizer in bulk with the use of a clamped shell, losses due to spillage during such
operation amounting to one percent (1%) against the bill of lading is deemed
"normal" or "tolerable." The primary cause of these spillages is the clamped shell
which does not seal very tightly. Also, the wind tends to blow away some of the
materials during the unloading process.
The dissipation of quantities of fertilizer, or its daterioration in value, is caused
either by an extremely high temperature in its place of storage, or when it comes in
contact with water. When Urea is drenched in water, either fresh or saline, some of
its particles dissolve. But the salvaged portion which is in liquid form still remains
potent and usable although no longer saleable in its original market value.
The probability of the cargo being damaged or getting mixed or contaminated with
foreign particles was made greater by the fact that the fertilizer was transported in
"bulk," thereby exposing it to the inimical effects of the elements and the grimy
condition of the various pieces of equipment used in transporting and hauling it.

The evidence of respondent carrier also showed that it was highly improbable for
sea water to seep into the vessel's holds during the voyage since the hull of the
vessel was in good condition and her hatches were tightly closed and firmly sealed,
making the M/V "Sun Plum" in all respects seaworthy to carry the cargo she was
chartered for. If there was loss or contamination of the cargo, it was more likely to
have occurred while the same was being transported from the ship to the dump
trucks and finally to the consignee's warehouse. This may be gleaned from the
testimony of the marine and cargo surveyor of CSCI who supervised the unloading.
He explained that the 18 M/T of alleged "bar order cargo" as contained in their
report to PPI was just an approximation or estimate made by them after the
fertilizer was discharged from the vessel and segregated from the rest of the cargo.

The Court notes that it was in the month of July when the vessel arrived port and
unloaded her cargo. It rained from time to time at the harbor area while the cargo
was being discharged according to the supply officer of PPI, who also testified that
it was windy at the waterfront and along the shoreline where the dump trucks
passed enroute to the consignee's warehouse.

Indeed, we agree with respondent carrier that bulk shipment of highly soluble
goods like fertilizer carries with it the risk of loss or damage. More so, with a
variable weather condition prevalent during its unloading, as was the case at bar.
This is a risk the shipper or the owner of the goods has to face. Clearly, respondent
carrier has sufficiently proved the inherent character of the goods which makes it
highly vulnerable to deterioration; as well as the inadequacy of its packaging which
further contributed to the loss. On the other hand, no proof was adduced by the
petitioner showing that the carrier was remise in the exercise of due diligence in
order to minimize the loss or damage to the goods it carried.

WHEREFORE, the petition is DISMISSED. The assailed decision of the Court of

Appeals, which reversed the trial court, is AFFIRMED. Consequently, Civil Case No.
98623 of the then Court of the First Instance, now Regional Trial Court, of Manila
should be, as it is hereby DISMISSED.

Costs against petitioner.

SO ORDERED.
G.R. No. L-47447-47449 October 29, 1941
TEODORO R. YANGCO, ETC., petitioner, vs. MANUEL LASERNA, ET
AL., respondents.
MORAN, J.:
At about one o'clock in the afternoon of May 26, 1927, the steamer S.S. Negros,
belonging to petitioner here, Teodoro R. Yangco, left the port of Romblon on its
retun trip to Manila. Typhoon signal No. 2 was then up, of which fact the captain
was duly advised and his attention thereto called by the passengers themselves
before the vessel set sail. The boat was overloaded as indicated by the loadline
which was 6 to 7 inches below the surface of the water. Baggage, trunks and other
equipments were heaped on the upper deck, the hold being packed to capacity. In
addition, the vessel carried thirty sacks of crushed marble and about one hundred
sacks of copra and some lumber. The passengers, numbering about 180, were
overcrowded, the vessel's capacity being limited to only 123 passengers. After two
hours of sailing, the boat encountered strong winds and rough seas between the
islands of Banton and Simara, and as the waves splashed the ladies' dresses, the
awnings were lowered. As the sea became increasingly violent, the captain ordered
the vessel to turn left, evidently to return to port, but in the manuever, the vessel
was caught sidewise by a big wave which caused it to capsize and sink. Many of the
passengers died in the mishap, among them being Antolin Aldaa and his son
Victorioso, husband and son, respectively, of Emilia Bienvenida who, together with
her other children and a brother-in-law, are respondents in G.R. No. 47447; Casiana
Laserna, the daughter of respondents Manuel Laserna and P.A. de Laserna in G.R.
47448; and Genaro Basaa, son of Filomeno Basaa, respondent in G.R. No. 47449.
These respondents instituted in the Court of First Instance of Capiz separate civil
actions against petitioner here to recover damages for the death of the passengers
aforementioned. The court awarded the heirs of Antolin and Victorioso Aldana the
sum of P2,000; the heirs of Casiana Laserna, P590; and those of Genaro Basana, also
P590. After the rendition of the judgment to this effcet, petitioner, by a verified
pleading, sought to abandon th evessel to the plainitffs in the three cases, together
with all its equipments, without prejudice to his right to appeal. The abandonment
having been denied, an appeal was taken to the Court of Appeals, wherein all the
judgmnets were affirmed except that which sums was increased to P4,000.
Petitioner, now deceased, appealed and is here represented by his legal
representative.
Brushing aside the incidental issues, the fundamental question here raised is: May
the shipowner or agent, notwithstanding the total loss of the vessel as a result of
the negligence of its captain, be properly held liable in damages for the consequent
death of its passengers? We are of the opinion and so hold that this question is
controlled by the provisions of article 587 of the Code of Commerce. Said article
reads:
The agent shall also be civilly liable for the indemnities in favor of third
persons which arise from the conduct of the captain in the care of the
goods which the vessel carried; but he may exempt himself therefrom by
abandoning the vessel with all her equipments and the freight he may
have earned during the voyage.
The provisions accords a shipowner or agent the right of abandonment; and by
necessary implication, his liability is confined to that which he is entitled as of right
to abandon "the vessel with all her equipments and the freight it may have
earned during the voyage." It is true that the article appears to deal only with the
limited liability of shipowners or agents for damages arising from the misconduct of
the captain in the care of the goods which the vessel carries, but this is a mere
deficiency of language and in no way indicates the true extent of such liability. The
consensus of authorities is to the effect that notwithstanding the language of the
aforequoted provision, the benefit of limited liability therein provided for, applies in
all cases wherein the shipowner or agent may properly be held liable for the
negligent or illicit acts of the captain. Dr. Jose Ma. Gonzalez de Echavarri y Vivanco,
commenting on said article, said:
La letra del Codigo, en el articulo 587, presenta una gravisima cuestion. El
derecho de abandono, si se atiende a lo escrito, solo se refiere a las
indemnizaciones a que dierQe lugar la conducta del Capitan en la custodia
de los efectos que cargo en el buque.
Es ese el espiritu del legislador? No; habra derecho de abandono en las
responsabilidades nacidas de obligaciones contraidas por el Capitan y de
otros actos de este? Lo reputamos evidente y, para fortalecer nuestra
opinion, basta copiar el siguiente parrafo de la Exposicion de motivos:
"El proyecto, al aplicar estos principios, se inspira tambien en los
intereses del comercio maritimo, que quedaran mas asegurados
ofreciendo a todo el que contrata con el naviero o Capitan del
buque, la garantia real del mismo, cualesquiera que sean las
facultades o atribuciones de que se hallen investidos." (Echavarri,
Codigo de Comercio, Tomo 4, 2. a ed., pags. 483-484.)
A cursory examination will disclose that the principle of liomited liability of a
shipowner or agent is provided for in but three articles of the Code of Commerce
article 587 aforequoted and article 590 and 837. Article 590 merely reiterates the
principle embodied in article 587, applies the same principle in cases of collision,
and it has been observed that said article is but "a necessary consequences of the
right to abandon the vessel given to the shipowner in article 587 of the Code, and it
is one of the many superfluities contained in the Code." (Lorenzo
Benito, Lecciones 352, quoted in Philippine Shipping Co. vs. Garcia, 6 Phil. 281, 282.)
In effect, therefore, only articles 587 and 590 are the provisions conatined in our
Code of Commerce on the matter, and the framers of said code had intended those
provisions to embody the universal principle of limited liability in all cases. Thus, in
the "Exposicon de Motivos" of the Code of Commerce, we read:
The present code (1829) does not determine the juridical status of the
agent where such agent is not himself the owner of the vessel. This
omission is supplied by the proposed code, which provides in accordance
with the principles of maritime law that by agent it is to be understood the
person intrusted with the provisioning of the vessel, or the one who
represents her in the port in which she happens to be. This person is the
only one who represents the vessel that is to say, the only one who
represents the interests of the owner of the vessel. This provision has
therefore cleared the doubt which existed as to the extent of the liability,
both of the agent and of the owner of the vessel. Such liability is limited by
the proposed code to the value of the vessel and other things appertaining
thereto.
In Philippine Shipping Co. vs. Garcia (6 Phil., 281, 284-286), we have expressed
ourselves in such a comprehensive manner as to leave no room for doubt on the
applicability of our ratio decidendi not only to cases of collision but also to those of
shipwrecks, etc. We said:
This is the difference which exists between the lawful acts and lawful
obligations of the captain and the liability which he incurs on account of
any unlawful act committed by him. In the first case, the lawful acts and
obligations of the captain beneficial to the vessel may be enforced as
against the agent for the reason that such obligations arise from te the
contract of agency (provided, however, that the captain does not exceed
his authority), while as to any liability incurred by the captain through his
unlawful acts, the ship agent is simply subsidiarily civilly liable. This liability
of the agent is limited to the vessel and it does not extend further. For this
reason the Code of Commerce makes the agent liable to the extent of the
value of the vessel, as the codes of the principal maritime nations
provide with the vessel, and not individually. Such is also the spirit of our
Code.
The spirit of our code s accurately set forth in a treatise on maritime law,
from which we deem proper to quote the following as the basis of this
decision:lawphil.net
"That which distinguishes the maritime from the civil law and
even from the mercantile law in general is the real and
hypothecary nature of the former, and the many securities of
a real nature that maritime customs from time immemorial, the
laws, the codes, and the later jurisprudence, have provided for
the protection of the various and conflicting interests which are
ventured and risked in maritime expeditions, such as the interests
of the vessel and of the agent, those of the owners of the cargo
and consignees, those who salvage the ship, those who make
loans upon the cargo, those of the sailors and members of the
crew as to their wages, and those of a constructor as to repairs
made to the vessel.
"As evidence of this real nature of the maritime law we have (1)
the limitation of the liability of the agents to the actual value of
the vessel and the freight money, and (2) the right to retain the
cargo and the embargo and detention of the vessel even in cases
where the ordinary civil law would not allow more than a personal
action against the debtor or person liable. It will be observed that
these rights are correlative, and naturally so, because if the agent
can exempt himself from liability by abandoning the vessel and
freight money, thus avoiding the possibility of risking his whole
fortune in the business, it is also just that his maritime creditor
may for any reason attach the vessel itself to secure his claim
without waiting for a settlement of his rights by a final judgment,
even to the prejudice of a third person.
"This repeals the civil law to such an extent that, in certain cases,
where the mortgaged property islost no personal action lies
against the owner or agent of the vessel. For instance, where the
vessel is lost the sailors and members of the crew cannot recover
their wages; in case of collision, the liability of the agent is limited
as aforesaid, and in case of shipwreck, those who loan their
money on the vessel and cargo lose all their rights and cannot
claim reimbursement under the law.
"There are two reasons why it is impossible to do away with these
privileges, to wit: (1) The risk to which the thing is exposed, and
(2) the real nature of the maritime law, exclusively real, according
to which the liability of the parties is limited to a thing which is at
the mercy of the waves. If the agent is only liable with the vessel
and freight money and both may be lost through the accidents of
navigation it is only just that the maritime creditor have some
 means to obviating this precarious nature of his rights by
detaining the ship, his only security, before it is lost.
"The liens, tacit or legal, which may exist upon the vessel and
which a purchaser of the same would be obliged to respect and
recognize are in addition to those existing in favor of the State
by virtue of the privileges which are granted to it by all the laws
pilot, tonnate, and port dues and other similar charges, the wages
of the crew earned during the last voyage as provided in article
646 of the Code of Commerce, salvage dues under article 842, the
indemnification due to the captain of the vessel in case his
contract is terminated on account of the voluntary sale of the ship
and the insolvency of the owner as provided in article 608, and all
other liabilities arising from collisions under articles 837 and 838."
We are shared in this conclusion by the eminent commentators on the subject.
Agustin Vicente y Gella, asserting, in his "Introduccion al Derecho Mercantil
Comparado" 1929 (pages 374-375), the like principle of limited liability of
shipowners or agent in cases of accidents, collisions, shipwrecks, etc., said:
De las responsabilities que pueden resultar como consequencia del
comercio maritimo, y no solo por hechos propios sino tambien por las que
se ocasionen por los del capitan y la tripulacion, responde frente a tercero
el naviero que representa el buque; pero el derecho maritimo es sobre
todo tradicional y siguiendo un viejo principio de la Edad Media la
responsabilidad del naviero se organiza de un modo especifico y
particularisimo que no encuentra similar en el derecho general de las
obligaciones.
Una forma corrientisima de verificarse el comercio maritimo durante la
epoca medieval, era prestar un propietario su navio para que cargase en el
mercancias determinada persona, y se hiciese a la mar, yendo al frente de
la expedicion un patron del buque, que llegado al puerto de destino se
encargaba de venderlas y retornaba al de salida despues de adquirir en
aquel otros efectos que igualmente revendia a su regreso, verificado lo
cual los beneficios de la expedicion se repartian entre el dueo del buque,
el cargador y el capitan y tripulantes en la proporcion estipulada. El
derecho maritimo empezo a considerar la asociacion asi formada como
una verdadera sociedad mercantil, de responsabilidad limitada, y de
acuerdo con los principios que gobiernan aquella en los casos de
accidentes, abordajes, naufragios, etc., se resolvia que el dueo del buque
perdia la nave, el cargador las mercancias embarcadas y el capitan y la
tripulacion su trabajo, sin que en ningun caso el tercer acreedor pudiese
reclamar mayor cantidad de ninguno de ellos, porque su responsabilidad
quedaba limitada a lo que cada uno aporto a la sociedad. Recogidas estas
ideas en el derecho comercial de tiempos posteriores, la responsabilidad
del naviero se edifico sobre aquellos principios, y derogando la norma
general civil de que del cumplimiento de sus obligaciones responde el
deudor con todos sus bienes presentes y futuros, la responsabilidad
maritima se considero siempre limitada ipso jure al patrimonio de mar. Y
este es el origen de la regla trascendental de derecho maritimo segun la
cual el naviero se libera de toda responsabilidad abandonando el buque y
el flete a favor de los acreedores.
From the Enciclopedia Juridica Espaola, Vol. 23, p. 347, we read:
Ahora bien: hasta donde se extiende esta responsabilidad del naviero?
sobre que bienes pueden los acreedores resarcirse? Esta es otra
especialidad del Derecho maritimo; en el Derecho comun la
responsabilidad es limitada; tambien lo era en el antiguo Derecho
maritimo romano; es daba la actio exercitoria contra el exercitor navis sin
ninguna restriccion, pero en la Edad Media una idea nueva se introdujo en
los usos maritimos. Las cargas resultantes de las expediciones maritimas se
consideraron limitadas por los propietarios de las naves a los valores
comprometidos por ellos en cada expedicion; se separo ficticiamente el
patrimonio de los navieros en dos partes que todavia se designan de una
manera bastante exacta; fortuna de tierra y fortuna de mar o flotante; y se
admitio la teoria de que esta era la que respondia solo de las deudas
provinientes de los actos del capitan o de la tripulacion, es decir, que el
conjunto del patrimonio del naviero escaparia a estas cargas desde el
momento en que abandonara la nave y los fletes a los acreedores. . . .
Escriche in his Diccionario de la Legislacion y Jurisprudencia, Vol. 1, p. 38, observes:
La responsabilidad del naviero, en el caso expuesto, se funda en el
principio de derecho comun de ser responsable todo el que pone al frente
de un establecimiento a una persona, de los daos o perjuicios que
ocasionare esta desempeando su cometido, y en que estando facultado el
naviero para la eleccion de capitan de la nave, viene a tener
indirectamente culpa en la negligencia o actos de este que o casionaron
daos o perjuicios, puesto que no se aseguro de su pericia o buena fe.
Limitase, sin embargo, la responsabilidad del naviero a la perdida de la
nave, sus aparejos, y fletes devengados durante el viaje; porque no
pudiendo vigilar de un modo directo e inmediato la conducta del capitan,
hubiera sido duro hacerla extensiva a todos sus bienes que podria
comprometer el capitan con sus faltas o delitos.
The views of these learned commentators, including those of Estasen (Derecho
Mercantil, Vol. 4, 259) and Supino (Derecho Mercantil, pp. 463-464), leave nothing
to be desired and nothing to be doubted on the principle. It only remains to be
noted that the rule of limited liability provided for in our Code of Commerce reflects
merely, or is but a restatement, imperfect though it is, of the almost universal
principle on the subject. While previously under the civil or common law, the owner
of a vessel was liable to the full amount for damages caused by the misconduct of
the master, by the general maritime law of modern Europe, the liability of the
shipowner was subsequently limited to his interest in the vessel. (Norwich & N. Y.
Trans. Co. v. Wright, 80 U. S. 104, 20 Law. ed. 585.) A similar limitation was placed
by the British Parliament upon the liability of Englosh shipowners through a series
of statutes beginning in 1734 with the Act of 7 George II, chapter 15. The
legislatures of Massachusetts and Maine followed suit in 1818 and 1821, and finally,
Congress enacted the Limited Liability Act of March 3, 1851, embodying most of the
provisions contained in the British Statutes (see 24 R. C. L. pp. 1387-1389). Section
4283 of the Revised Statutes (sec. 183, Tit. 46, Code of Laws of U. S. A.) reads:
LIABILITY OF OWNER NOT TO EXCEED INTEREST. The liability of the
owner of any vessel, for any embezzlement, loss, or destruction, by any
person, of any property, goods, or merchandise, shipped or put on board
of such vessel, or for any loss, damage, or injury by collision, or for any act,
matter or thing, loss, damage, or forfeiture, done, occasioned, or incurred
without the privity, or knowledge of such owner or owners, shall in no case
exceed the amount or value of the interest of such owner in such vessel,
and her freight then pending.
The policy which the rule is designed to promote is the encouragement of
shipbuilding and investment in maritime commerce. (Vide: Norwich & N. Y. Trans.
Co. v. Wright, supra; The Main v. Williams, 152 U. S. 122; 58 C. J. 634.) And it is in
that spirit that the American courts construed the Limited Liability Act of Congress
whereby the immunities of the Act were applied to claims not only for lost goods
but also for injuries and "loss of life of passengers, whether arising under the
general law of admiralty, or under Federal or State statutes." (The City of Columbus,
22 Fed. 460; The Longfellow, 104 Fed. 360; Butler v. Boston & Savannah Steamship
Co., 32 Law. ed. 1017; Craig v. Continental Insurance Co., 35 Law. ed. 836.) The
Supreme Court of the United States in Norwich & N. Y. Trans. Co. v. Wright, 80 U. S.
104, 20 Law. ed. 585, 589-590, accounting for the history of the principle, clinches
our exposition of the supporting authorities:
The history of the limitation of liability of shipowners is matter of common
knowledge. The learned opinion ofJudge Ware in the case of The Rebecca,
1 Ware, 187-194, leaves little to be desired on the subject. He shows that it
originated in the maritime law of modern Europe; that whilst the civil, as
well as the common law, made the owner responsible to the whole extent
of damage caused by the wrongful act or negligence of the matter or crew,
the maritime law only made then liable (if personally free from blame) to
the amount of their interest in the ship. So that, if they surrendered the
ship, they were discharged.
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 and,
therefore, in Holland, they had never observed the Roman Law on that
subject, but had a regulation that the ship owners should be bound no
farther than the value of their ship and freight. His words are: Navis et
eorum quae in navi sunt," "the ship and goods therein." But he is speaking
of the owner's interest; and this, as to the cargo, is the freight thereon, and
in that sense he is understood by the commentators. Boulay Paty, Droit
Maritime, tit. 3, sec. 1, p. 276; Book II, c. XI, sec. XIII. The maritime law, as
codified in the celebrated French Ordonance de la Marine, in 1681,
expressed the rule thus: 'The proprietors of vessels shall be responsible for
the acts of the master, but they shall be discharged by abandoning the ship
and freight.' Valin, in his commentary on this passage, lib. 2, tit. 8, art. 2,
after specifying certain engagements of the master which are binding on
the owners, without any limit of responsibility, such as contracts for the
benefit of the vessel, made during the voyage (except contracts of
bottomry) says: "With these exceptions it is just that the owner should not
be bound for the acts of the master, except to the amount of the ship and
freight. Otherwise he would run the risk of being ruined by the bad faith or
negligence of his captain, and the apprehension of this would be fatal to
the interests of navigation. It is quite sufficient that he be exposed to the
loss of his ship and of the freight, to make it his interest, independently of
any goods he may have on board to select a reliable captain." Pardessus
says: 'The owner is bound civilly for all delinquencies committed by the
captain within the scope of his authority, but he may discharge himself
therefrom by abandoning the ship and freight; and, if they are lost, it
suffices for his discharge, to surrender all claims in respect of the ship and
its freight," such as insurance, etc. Droit Commercial, part 3, tit. 2, c. 3, sec.
2.
The same general doctrine is laid down by many other writers on maritime
law. So that it is evident that, by this law, the owner's liability was
coextensive with his interest in the vessel and its freight, and ceased by his
abandonment and surrender of these to the parties sustaining loss.
In the light of all the foregoing, we therefore hold that if the shipowner or agent
may in any way be held civilly liable at all for injury to or death of passengers arising
from the negligence of the captain in cases of collisions or shipwrecks, his liability is
merely co-extensive with his interest in the vessel such that a total loss thereof
results in its extinction. In arriving at this conclusion, we have not been unmindful
of the fact that the ill-fated steamshipNegros, as a vessel engaged in interisland
trade, is a common carrier (De Villata v. Stanely, 32 Phil., 541), and that the as a
vessel engaged in interisland trade, is a common carrier (De Villata v. Stanely, 32
Phil., 541), and that the relationship between the petitioner and the passengers
who died in the mishap rests on a contract of carriage. But assuming that petitioner
is liable for a breach of contract of carriage, the exclusively "real and hypothecary
nature" of maritime law operates to limit such liability to the value of the vessel, or
to the insurance thereon, if any. In the instant case it does not appear that the
vessel was insured.

Whether the abandonment of the vessel sought by the petitioner in the instant case
was in accordance with law of not, is immaterial. The vessel having totally perished,
any act of abandonment would be an idle ceremony.

Judgement is reversed and petitioner is hereby absolved of all the complaints,

without costs.
G.R. No. L-30805 December 26, 1984
DOMINGO ANG, plaintiff-appellant, vs. COMPANIA MARITIMA, MARITIME
COMPANY OF THE PHILIPPINES and C.L. DIOKNO, defendants-appellees.
AQUINO, J.:
This case involves the recovery of damages by the consignee from the carrier in
case of misdelivery of the cargo which action was dismissed by the trial court on the
grounds of lack of cause of action and prescription.
It should be noted that that legal point is already res judicata. In 1967 it was
decided in favor of plaintiff-appellant Domingo Ang in Ang vs. American Steamship
Agencies, Inc., 125 Phil. 543 and 125 Phil. 1040, three cases. As observed by Ang's
counsel, the facts of those cases and the instant case are the same mutatis
mutandis. It was held that Ang has a cause of action against the carrier which has
not prescribed
In the instant case, Ang on September 26, 1963, as the assignee of a bill of lading
held by Yau Yue Commercial Bank, Ltd. of Hongkong, sued Compania Maritima,
Maritime Company of the Philippines and C.L. Diokno. He prayed that the
defendants be ordered to pay him solidarily the sum of US$130,539.68 with interest
from February 9, 1963 plus attorney's fees and damages.
In the American Steamship Agencies cases, it was held that the action of Ang is
based on misdelivery of the cargo which should be distinguished from loss thereof.
The one-year period provided for in section 3 (6) of the Carriage of Goods by Sea
Act refers to loss of the cargo. What is applicable is the four-year period of
prescription for quasi-delicts prescribed in article 1146 (2) of the Civil Code or ten
years for violation of a written contract as provided for in article 1144 (1) of the
same Code.
As Ang filed the action less than three years from the date of the alleged
misdelivery of the cargo, it has not yet prescribed. Ang, as indorsee of the bill of
lading, is a real party in interest with a cause of action for damages.
WHEREFORE, the order of dismissal is reversed and set aside. The case is remanded
to the trial court for further proceedings. Costs against the defendants.
SO ORDERED.

Ang alleged that Yau Yue Commercial Bank agreed to sell to Herminio G. Teves
under certain conditions 559 packages of galvanized steel, Durzinc sheets. The
merchandise was loaded on May 25, 1961 at Yawata, Japan in the M/S Luzon a
vessel owned and operated by the defendants, to be transported to Manila and
consigned "to order" of the shipper, Tokyo Boeki, Ltd., which indorsed the bill of
lading issued by Compania Maritima to the order of Yau Yue Commercial Bank.

Ang further alleged that the defendants, by means of a permit to deliver imported
articles, authorized the delivery of the cargo to Teves who obtained delivery from
the Bureau of Customs without the surrender of the bill of lading and in violation of
the terms thereof. Teves dishonored the draft drawn by Yau Yue against him.

The Hongkong and Shanghai Banking Corporation made the corresponding protest
for the draft's dishonor and returned the bill of lading to Yau Yue. The bill of lading
was indorsed to Ang.

The defendants filed a motion to dismiss Ang's complaint on the ground of lack of
cause of action. Ang opposed the motion. As already stated, the trial court on May
22, 1964 dismissed the complaint on the grounds of lack of cause of action and
prescription since the action was filed beyond the one-year period provided in the
Carriage of Goods by Sea Act.
G.R. No. 77638 July 12, 1990
MARITIME AGENCIES & SERVICES, INC., petitioner, vs. COURT OF APPEALS, and
UNION INSURANCE SOCIETY OF CANTON, LTD., respondents.
G.R. No. 77674 July 12, 1990
UNION INSURANCE SOCIETY OF CANTON, LTD., petitioner, vs. COURT OF APPEALS,
HONGKONG ISLAND CO., LTD., MARITIME AGENCIES & SERVICES, INC., and/or
VIVA CUSTOMS BROKERAGE, respondents.
CRUZ, J.:
Transcontinental Fertilizer Company of London chartered from Hongkong Island
Shipping Company of Hongkong the motor vessel named "Hongkong Island" for the
shipment of 8073.35 MT (gross) bagged urea from Novorossisk, Odessa, USSR to the
Philippines, the parties signing for this purpose a Uniform General Charter dated
August 9, 1979. 1
Of the total shipment, 5,400.04 MT was for the account of Atlas Fertilizer Company
as consignee, 3,400.04 to be discharged in Manila and the remaining 2,000 MT in
Cebu. 2 The goods were insured by the consignee with the Union Insurance Society
of Canton, Ltd. for P6,779,214.00 against all risks. 3
Maritime Agencies & Services, Inc. was appointed as the charterer's agent and
Macondray Company, Inc. as the owner's agent. 4
The vessel arrived in Manila on October 3, 1979, and unloaded part of the
consignee's goods, then proceeded to Cebu on October 19, 1979, to discharge the
rest of the cargo. On October 31, 1979, the consignee filed a formal claim against
Maritime, copy furnished Macondray, for the amount of P87,163.54, representing C
& F value of the 1,383 shortlanded bags. 5 On January 12, 1980, the consignee filed
another formal claim, this time against Viva Customs Brokerage, for the amount of
P36,030.23, representing the value of 574 bags of net unrecovered spillage. 6
These claims having been rejected, the consignee then went to Union, which on
demand paid the total indemnity of P113,123.86 pursuant to the insurance
contract. As subrogee of the consignee, Union then filed on September 19, 1980, a
complaint for reimbursement of this amount, with legal interest and attorney's
fees, against Hongkong Island Company, Ltd., Maritime Agencies & Services, Inc.
and/or Viva Customs Brokerage. 7 On April 20, 1981, the complaint was amended
to drop Viva and implead Macondray Company, Inc. as a new defendant. 8
On January 4, 1984, after trial, the trial court rendered judgment holding the
defendants liable as follows:
(a) defendants Hongkong Island Co., Ltd., and its local agent
Macondray & Co., Inc. to pay the plaintiff the sum of P87,163.54
plus 12% interest from April 20, 1981 until the whole amount is
fully paid, P1,000.00 as attorney's fees and to pay one-half (1/2)
of the costs; and
(b) defendant Maritime Agencies & Services, Inc., to pay the
plaintiff the sum of P36,030.23, plus 12% interest from April 20,
1981 until the whole amount is fully paid, P600.00 as attorney's
fees and to pay one-half (1/2) of the costs. 9
Petitioner appealed the decision to the Court of Appeals, which rendered a decision
on November 28, 1986, the dispositive portion of which reads:
WHEREFORE, the decision appealed from is modified, finding the
charterer Transcontinental Fertilizer Co., Ltd. represented by its
agent Maritime Agencies & Services, Inc. liable for the amount of
P87,163.54 plus interest at 12% plus attorney's fees of P1,000.00.
Defendant Hongkong Island Co., Ltd. represented by Macondray
Co., Inc. are accordingly exempted from any liability. 10
Maritime and Union filed separate motions for reconsideration which were both
denied. The movants are now before us to question the decision of the respondent
court.
In G.R. No. 77638, Maritime pleads non-liability on the ground that it was only the
charterer's agent and should not answer for whatever responsibility might have
attached to the principal. It also argues that the respondent court erred in applying
Articles 1734 and 1735 of the Civil Code in determining the charterer's liability.
In G.R. No. 77674, Union asks for the modification of the decision of the respondent
court so as to make Maritime solidarily and solely liable, its principal not having
been impleaded and so not subject to the jurisdiction of our courts.
These two cases were consolidated and given due course, the parties being
required to submit simultaneous memoranda. All complied, including Hongkong
Island Company, Ltd., and Macondray Company, Inc., although they pointed out
that they were not involved in the petitions.
There are three general categories of charters, to wit, the demise or "bareboat
charter," the time charter and the voyage charter.
A demise involves the transfer of full possession and control of the vessel for the
period covered by the contract, the charterer obtaining the right to use the vessel
and carry whatever cargo it chooses, while manning and supplying the ship as
well. 11
A time charter is a contract to use a vessel for a particular period of time, the
charterer obtaining the right to direct the movements of the vessel during the
chartering period, although the owner retains possession and control. 12
A voyage charter is a contract for the hire of a vessel for one or a series of voyages
usually for the purpose of transporting goods for the charterer. The voyage charter
is a contract of affreightment and is considered a private carriage. 13
Tested by those definitions, the agreement entered into in the cases at bar should
be considered. This brings us to the basic question of who, in this kind of charter,
shall be liable for the cargo.
A voyage charter being a private carriage, the parties may freely contract respecting
liability for damage to the goods and other matters. The basic principle is that "the
responsibility for cargo loss falls on the one who agreed to perform the duty
involved" in accordance with the terms of most voyage charters. 14
This is true in the present cases where the charterer was responsible for loading,
stowage and discharging at the ports visited, while the owner was responsible for
the care of the cargo during the voyage. Thus, Par. 2 of the Uniform General Charter
read:
2. Owners are to be responsible for loss of or damage to the
goods or for delay in delivery of the goods only in case the loss,
damage or delay has been caused by the improper or negligent
stowage of the goods or by personal want of due diligence on the
part of the Owners or their Manager to make the vessel in all
respects seaworthy and to secure that she is properly manned,
equipped and supplied or by the personal act or default of the
Owners or their Manager.
And the Owners are responsible for no loss or damage or delay
arising from any other cause whatsoever, even from the neglect
or default of the Captain or crew or some other person employed
by the Owners onboard or ashore for whose acts they would, but
for this clause, be responsible, or from unseaworthiness of the
vessel on loading or commencement of the voyage or at any time
whatsoever.
Damage caused by contact with or leakage, smell or evaporation
from other goods or by the inflammable or explosive nature or
insufficient package of other goods not to be considered as
caused by improper or negligent stowage, even if in fact so
caused.
while Clause 17 of Additional Clauses to Charter party provided:
The cargo shall be loaded, stowed and discharged free of expense
to the vessel under the Master's supervision. However, if required
at loading and discharging ports the vessel is to give free use of
winches and power to drive them gear, runners and ropes. Also
slings, as on board. Shore winchmen are to be employed and they
are to be for Charterers' or Shippers' or Receivers' account as the
case may be. Vessel is also to give free use of sufficient light, as on
board, if required for night work. Time lost through breakdown of
winches or derricks is not to count as laytime.
In Home Insurance Co. v. American Steamship Agencies, Inc., 15 the trial court
rejected similar stipulations as contrary to public policy and, applying the provisions
of the Civil Code on common carriers and of the Code of Commerce on the duties of
the ship captain, held the vessel liable in damages for loss of part of the cargo it was
carrying. This Court reversed, declaring as follows:
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 the case of a ship
totally chartered for the use of a single party.
Nevertheless, this ruling cannot benefit Hongkong, because there was no showing
in that case that the vessel was at fault. In the cases at bar, the trial court found
that 1,383 bags were shortlanded, which could only mean that they were damaged
or lost on board the vessel before unloading of the shipment. It is not denied that
the entire cargo shipped by the charterer in Odessa was covered by a clean bill of
lading. 16 As the bags were in good order when received in the vessel, the
presumption is that they were damaged or lost during the voyage as a result of
their negligent improper stowage. For this the ship owner should be held liable.
But we do agree that the period for filing the claim is one year, in accordance with
the Carriage of Goods by Sea Act. This was adopted and embodied by our
legislature in Com. Act No. 65 which, as a special law, prevails over the general
provisions of the Civil Code on prescription of actions. Section 3(6) of that Act
provides as follows:
In any event, the carrier and the ship shall be discharged from all
liability in respect of loss or damage unless suit is brought within
one year after delivery of the goods or the date when the goods
should have been delivered; Provided, that if a notice of loss for
damage; either apparent or concealed, is not given as provided
for in this section, that fact shall not effect 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.
This period was applied by the Court in the case of Union Carbide, Philippines,
Inc. v. Manila Railroad Co., 17where it was held:
Under the facts of this case, we held that the one-year period was
correctly reckoned by the trial court from December 19, 1961,
when, as agreed upon by the parties and as shown in the tally
sheets, the cargo was discharged from the carrying vessel and
delivered to the Manila Port Service. That one-year period expired
on December 19, 1962. Inasmuch as the action was filed on
December 21, 1962, it was barred by the statute of limitations.
The one-year period in the cases at bar should commence on October 20, 1979,
when the last item was delivered to the consignee. 18 Union's complaint was filed
against Hongkong on September 19, 1980, but tardily against Macondray on April
20, 1981. The consequence is that the action is considered prescribed as far as
Macondray is concerned but not against its principal, which is what matters
anyway.
As regards the goods damaged or lost during unloading, the charterer is liable
therefor, having assumed this activity under the charter party "free of expense to
the vessel." The difficulty is that Transcontinental has not been impleaded in these
cases and so is beyond our jurisdiction. The liability imposable upon it cannot be
borne by Maritime which, as a mere agent, is not answerable for injury caused by
its principal. It is a well-settled principle that the agent shall be liable for the act or
omission of the principal only if the latter is undisclosed. 19
Union seeks to hold Maritime liable as ship agent on the basis of the ruling of this
Court in the case of Switzerland General Insurance Co., Ltd. v. Ramirez. 20 However,
we do not find that case is applicable.
In that case, the charterer represented itself on the face of the bill of lading as the
carrier. The vessel owner and the charterer did not stipulate in the Charter party on
their separate respective liabilities for the cargo. The loss/damage to the cargo was
sustained while it was still on board or under the custody of the vessel. As the
charterer was itself the carrier, it was made liable for the acts of the ship captain
who was responsible for the cargo while under the custody of the vessel.
As for the charterer's agent, the evidence showed that it represented the vessel
when it took charge of the unloading of the cargo and issued cargo receipts (or tally
sheets) in its own name. Claims against the vessel for the losses/damages sustained
by that cargo were also received and processed by it. As a result, the charterer's
agent was also considered a ship agent and so was held to be solidarily liable with
its principal.
The facts in the cases at bar are different. The charterer did not represent itself as a
carrier and indeed assumed responsibility ability only for the unloading of the
cargo, i.e, after the goods were already outside the custody of the vessel. In
supervising the unloading of the cargo and issuing Daily Operations Report and
Statement of Facts indicating and describing the day-to-day discharge of the cargo,
Maritime acted in representation of the charterer and not of the vessel. It thus
cannot be considered a ship agent. As a mere charterer's agent, it cannot be held
solidarily liable with Transcontinental for the losses/damages to the cargo outside
the custody of the vessel. Notably, Transcontinental was disclosed as the
charterer's principal and there is no question that Maritime acted within the scope
of its authority.
Hongkong and Macondray point out in their memorandum that the appealed
decision is not assailed insofar as it favors them and so has become final as to them.
We do not think so. First of all, we note that they were formally impleaded as
respondents in G.R No. 77674 and submitted their comment and later their
memorandum, where they discussed at length their position vis-a-vis the claims of
the other parties. Secondly, we reiterate the rule that even if issues are not formally
and specifically raised on appeal, they may nevertheless be considered in the
interest of justice for a proper decision of the case.itc-asl Thus, we have held
that:
Besides, an unassigned error closely related to the error properly
assigned, or upon which the determination of the question raised
by the error properly assigned is dependent, will be considered by
the appellate court notwithstanding the failure to assign it as
error.
At any rate, the 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. 21
authorized agent, until its final discharge at the port of Manila.
Defendant Hongkong Island Co., Ltd., as "shipowner" and
represented by the defendant Macondray & Co., Inc., as its local
agent in the Philippines, should be responsible for the value of the
bags of urea fertilizer which were shortlanded.
The remainder of the claim in the amount of P36,030.23,
representing the value of the 574 bags of unrecovered spillages
having occurred after the shipment was discharged from the
vessel unto the ex-lighters as well as during the discharge from
the lighters to the truck which transported the shipment to the
consignee's warehouses should be for the account of the
defendant Maritime Agencies & Services, Inc.

xxx xxx xxx
Issues, though not specifically raised in the pleadings 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 ignore(d). 22
xxx xxx xxx
While an assignment of error which is required by law or rule of
court has been held essential to appellate review, and only those
assigned will be considered, there are a number of cases which
appear to accord to the appellate court a broad discretionary
power to waive this lack of proper assignment of errors and
consider errors not assigned. 23
We affirm the factual findings but must modify the legal conclusions. As previously
discussed, the liability of Macondray can no longer be enforced because the claim
against it has prescribed; and as for Maritime, it cannot be held liable for the acts of
its known principal resulting in injury to Union. The interest must also be reduced to
the legal rate of 6%, conformably to our ruling in Reformina v. Tomol 24 and Article
2209 of the Civil Code, and should commence, not on April 20, 1981, but on
September 19, 1980, date of the filing of the original complaint.
WHEREFORE, the decision of the respondent court is SET ASIDE and that of the trial
court is REINSTATED as above modified. The parties shall bear their respective
costs.
SO ORDERED.

In his decision dated January 4, 1984, Judge Artemon de Luna of the Regional Trial
Court of Manila held:

The Court, on the basis of the evidence, finds nothing to disprove

the finding of the marine and cargo surveyors that of the 66,390
bags of urea fertilizer, 65,547 bags were "discharged ex-vessel"
and there were "shortlanded" "1,383 bags", valued at P87,163.54.
This sum should be the principal and primary liability and
responsibility of the carrying vessel. Under the contract for the
transportation of goods, the vessel's responsibility commence
upon the actual delivery to, and receipt by the carrier or its
G.R. No. L-34978 February 26, 1988
ANGELES C. VDA. DE LAT, CAROLINA LAT PEREZ DE TAGLE, and PEDRO C. LAT,
JR., petitioners, vs. THE PUBLIC SERVICE COMMISSION and ROBERTO C.
DIAZ, respondents.
GANCAYCO, J.:
This is a petition for the review of a Decision of the Public Service Commission,
dated February 24, 1972, granting the application of the herein private respondent,
Roberto C. Diaz, for a Certificate of Public Convenience.
The facts of the case are as follows:
On May 11, 1970, the herein private respondent Roberto C. Diaz filed an application
with the respondent Public Service Commission for a Certificate of Public
Convenience and Necessity to operate and maintain an ice plant service in Davao
City alleging among others that he is financially capable to operate and maintain the
proposed service, and that public necessity and convenience will be promoted in a
proper and suitable manner with the approval of his application. 1 Said application
was published in two newspapers of general circulation namely: El Debate and The
Philippine Herald, and copies thereof were sent to affected operators including the
herein petitioners Angeles C. Vda. de Lat Carolina Lat, Perez de Tagle and Pedro C.
Lat, Jr. Only the petitioners filed an Opposition to the Application and the same was
submitted on July 3,1970.
By agreement of the parties, the hearing of the Application and the Opposition was
set by the respondent Commission for August 17,1970 at 9 o'clock in the morning.
However, when the case was called for hearing as late as 10 o'clock in the morning
on the said date, neither the oppositors nor their counsel was present. Hence, the
respondent Commission declared the case uncontested and received the evidence
of the private respondent.
In this petition, the petitioners contend that they filed an Urgent Motion for
Postponement and of Hearing on August 17, 1970, with the respondent
Commission on the ground that their counsel made the mistake of noting down in
his calendar the hearing on August 6, 1970, a Sunday and that it was already too
late when he discovered the said mistake. 2 On August 18,1970,the petitioners filed
a motion for reopening of the case and allowance to present evidence but
unfortunately, on the same date respondent Commission issued an Order granting
the private respondent provisional authority to operate the ice plant for six (6)
months. This was based on the findings of the Commission that there was indeed an
urgent need for an ice plant in Davao City as its population has increased
tremendously. Petitioners then filed a motion for reconsideration but this was
denied in a Resolution signed by all the members of the respondent Commission,
said motion having been heard by the Commission en banc. 3
The above-mentioned provisional authority granted to the private respondent was
extended twice. The first extension was given on February 12, 1971 and the second,
on December 10, 1971. Finally on February 24, 1972, the respondent Commission
handed down a Decision approving the Application of the private respondent and
granting him a Certificate of Public Convenience to operate a 2-ton ice plant in
Davao City.
In this petition for review, the petitioners are asking that the Decision rendered by
the respondent Commission on February 24, 1972 be set aside and declared null
and void, as it has been rendered without due process. Their claim is that they were
deprived of their day in court when they were not allowed to cross-examine the
witnesses of the private respondent and to present their evidence in support of
their Opposition. 4 Furthermore, they submit that the decision awarding the
Certificate of Public Convenience to the private respondent was based merely on
the latter's uncorroborated testimony and would amount to competition that
would damage their business. 5
Two issues are raised in this petition. The first is whether or not the petitioners
were deprived of their day in Court to make the proceeding in the respondent
Public Service Commission nun and void. And the other is whether or not the
private respondent was validly awarded the questioned Certificate of Public
Convenience to operate an ice plant in Davao City.
As regards the first issue, We reject the petitioners' assertion that their right to due
process was violated. It is very clear from the records that the petitioners were
given notice and opportunity to be heard negating the petitioners' declaration that
they were deprived of their day in court.
Going back to the facts of this Case, We find, as the respondent Commission
did, 6 that the private respondent duly complied with the required notice of
hearing. There was publication. 7 The petitioners could not have been denied the
right to be heard because as their counsel even admits, he agreed to the setting of
the hearing of the case for August 19, 1970 at 9 o'clock in the morning. 8
The Petitioners should have known about the date of the hearing. Yet, when the
case was called, neither they nor their counsel showed up. There was not even any
word from them. Their lame excuse that their lawyer made the mistake of noting
down the healing on a Sunday instead of a Monday is unacceptable. There were
three of them who presented themselves as oppositors. It is unbelievable that no
one of them found out about the mistake of their counsel had they shown any
slight interest in the case. Their negligence cannot now be passed on to the
respondent Commission which only did the right thing of proceeding with the case,
which had become uncontested.
Nor can it be said that the Decision of the respondent Commission is arbitrary. The
application was not outrightly approved upon reception of the evidence of the
private respondent. On the contrary, the respondent Commission took time to
consider and weigh such evidence as can be seen from the fact that the private
respondent was granted only a provisional authority on August 18, 1970, which was
twice extended, before the case was finally determined on February 24, 1972.
We are convinced that the private respondent deserves to be awarded the
Certificate of Public Convenience. He was able to fully satisfy the requisites before
such a certificate may be granted, namely: (1) the applicant must be a citizen of the
Philippines, or a corporation or co-partnership, association or joint stock company
constituted and organized under the laws of the Philippines, 60 per centum at least
of the stock or paid-up capital of which belong entirely to citizens of the Philippines;
(2) the applicant must be financially capable of undertaking the proposed service
and meeting the responsibilities incident to its operations; and (3) the applicant
must prove that the operation of the public service proposed and the authorization
to do business wig promote the public interest in a proper and suitable manner. 9
There is no question that the private respondent is a Filipino Citizen. Regarding his
financial capacity and public necessity for the ice plant, the finding of the Public
Service Commission on these are relevant, to wit:
for an ice plant in Davao City, to serve the requirements for ice in
the said city. 10
Before We end, it is apt to stress the principle that nobody has the exclusive right to
secure a franchise or a Certificate of Public Convenience. The paramount
consideration should always be the public interest and public convenience. 11
Furthermore, the allegation of the petitioners that the grant of Certificate of Public
Convenience to the private respondent would result in ruinous competition
amounting to damage of their business 12 is unconvincing. The grant is for the
operation of a mere 2-ton ice plant and only in Davao City whereas the petitioners
are big operators producing no less than 63 tons of ice daily and who are authorized
to operate ice plants not only in the City of Davao but also in the three Davao
provinces. And We have held before, in order that the opposition based on ruinous
competition may prosper, it must be shown that the opponent would be deprived
of their profits on the capital invested in its business. The mere possibility of
reduction in the earnings of a business is not sufficient to prove ruinous
competition. It must be shown that the business would not have sufficient gains to
pay a fair rate of interest on its capital investments. 13
WHEREFORE, the decision of the Public Service Commission appealed from is
hereby AFFIRMED, with costs against the petitioners.
SO ORDERED.

It appears from the evidence adduced by the applicant, that he is

a co-owner of a parcel of land situated at Barrio Magugpo, Tagum,
Davao (Exhibit "F" & "F-l") with an area of 15,738 square meters
and having a present market value of P25,000.00 (Exhibits "G" &
"G-1") with the Bank of the Philippine Islands; and that, he is
engaged in the fishing business with an investment of P10,000.00
to P15,000.00 and from which he earns a monthly income of
P2,000.00 to P3,000.00. As regards the necessity for the service
applied for, applicant testified that the only oppositors here are
serving almost 1/3 of the population of Davao; that Davao City is a
tourist belt and the population has increased from 225.7 in 1960
to 389.3 in 1970, as evidenced by Exhibit "1"; that there are two
(2) or (3) three barrios in said city; that being a fishing ground,
there are plenty of fish wherein ice is very much needed in order
to preserve them; that he received a request from the Barrio
Captain of Bo. Buhangin, Davao City (Exhibit "J") clamoring for ice
in behalf of its 9,431 inhabitants; and that there is an urgent need
G.R. No. 100727 March 18, 1992
COGEO-CUBAO OPERATORS AND DRIVERS ASSOCIATION, petitioner, vs. THE
COURT OF APPEALS, LUNGSOD SILANGAN TRANSPORT SERVICES, CORP.,
INC., respondents.
MEDIALDEA, J.:
This is a petition for review on certiorari of the decision of the Court of Appeals
which affirmed with modification the decision of the Regional Trial Court awarding
damages in favor of respondent Lungsod Silangan Transport Services Corp., Inc.
(Lungsod Corp. for brevity).
The antecedents facts of this case are as follows:
It appears that a certificate of public convenience to operate a
jeepney service was ordered to be issued in favor of Lungsod
Silangan to ply the Cogeo-Cubao route sometime in 1983 on the
justification that public necessity and convenience will best be
served, and in the absence of existing authorized operators on the
lined apply for . . . On the other hand, defendant-Association was
registered as a non-stock, non-profit organization with the
Securities and Exchange Commission on October 30, 1985 . . . with
the main purpose of representing plaintiff-appellee for whatever
contract and/or agreement it will have regarding the ownership of
units, and the like, of the members of the Association . . .
Perturbed by plaintiffs' Board Resolution No. 9 . . . adopting a
Bandera' System under which a member of the cooperative is
permitted to queue for passenger at the disputed pathway in
exchange for the ticket worth twenty pesos, the proceeds of
which shall be utilized for Christmas programs of the drivers and
other benefits, and on the strength of defendants' registration as
a collective body with the Securities and Exchange Commission,
defendants-appellants, led by Romeo Oliva decided to form a
human barricade on November 11, 1985 and assumed the
dispatching of passenger jeepneys . . . This development as
initiated by defendants-appellants gave rise to the suit for
damages.
Defendant-Association's Answer contained vehement denials to
the insinuation of take over and at the same time raised as a
defense the circumstance that the organization was formed not to
compete with plaintiff-cooperative. It, however, admitted that it
is not authorized to transport passengers . . . (pp. 15-16, Rollo)
On July 31, 1989, the trial court rendered a decision in favor of respondent Lungsod
Corp., the dispositive portion of which states:
WHEREFORE FROM THE FOREGOING CONSIDERATION, the Court
hereby renders judgment in favor of the plaintiff and against the
defendants as follows:
1. Ordering defendants to pay plaintiff the amount of P50,000.00
as actual damages;
2. Ordering the defendants to pay the plaintiffs the amount of
P10,000.00 as attorney's fees.
SO ORDERED. (P. 39, Rollo)
Not satisfied with the decision, petitioner Association appealed with the Court of
Appeals. On May 27, 1991, respondent appellate court rendered its decision
affirming the findings of the trial court except with regard to the award of actual
damages in the amount of P50,000.00 and attorney's fees in the amount of
P10,000.00. The Court of Appeals however, awarded nominal damages to petitioner
in the amount of P10,000.00.
Hence, this petition was filed with the petitioner assigning the following errors of
the appellate court:
I. THE RESPONDENT COURT ERRED IN MERELY MODIFYING THE
JUDGMENT OF THE TRIAL COURT.
II. THE RESPONDENT COURT ERRED IN HOLDING THAT THE
PETITIONER USURPED THE PROPERTY RIGHT OF THE PRIVATE
RESPONDENT.
III. AND THE RESPONDENT COURT ERRED IN DENYING THE
MOTION FOR RECONSIDERATION.
Since the assigned errors are interrelated, this Court shall discuss them jointly. The
main issue raised by the petitioner is whether or not the petitioner usurped the
property right of the respondent which shall entitle the latter to the award of
nominal damages.
Petitioner contends that the association was formed not to complete with the
respondent corporation in the latter's operation as a common carrier; that the
same was organized for the common protection of drivers from abusive traffic
officers who extort money from them, and for the elimination of the practice of
respondent corporation of requiring jeepney owners to execute deed of sale in
favor of the corporation to show that the latter is the owner of the jeeps under its
certificate of public convenience. Petitioner also argues that in organizing the
association, the members thereof are merely exercising their freedom or right to
redress their grievances.
We find the petition devoid of merit.
Under the Public Service Law, a certificate of public convenience is an authorization
issued by the Public Service Commission for the operation of public services for
which no franchise is required by law. In the instant case, a certificate of public
convenience was issued to respondent corporation on January 24, 1983 to operate
a public utility jeepney service on the Cogeo-Cubao route. As found by the trial
court, the certificate was issued pursuant to a decision passed by the Board of
Transportation in BOT Case No. 82-565.
A certification of public convenience is included in the term "property" in the broad
sense of the term. Under the Public Service Law, a certificate of public convenience
can be sold by the holder thereof because it has considerable material value and is
considered as valuable asset (Raymundo v. Luneta Motor Co., et al., 58 Phil. 889).
Although there is no doubt that it is private property, it is affected with a public
interest and must be submitted to the control of the government for the common
good (Pangasinan Transportation Co. v. PSC, 70 Phil 221). Hence, insofar as the
interest of the State is involved, a certificate of public convenience does not confer
upon the holder any proprietary right or interest or franchise in the route covered
thereby and in the public highways (Lugue v. Villegas, L-22545, Nov . 28, 1969, 30
SCRA 409). However, with respect to other persons and other public utilities, a
certificate of public convenience as property, which represents the right and
authority to operate its facilities for public service, cannot be taken or interfered
with without due process of law. Appropriate actions may be maintained in courts
by the holder of the certificate against those who have not been authorized to
operate in competition with the former and those who invade the rights which the
former has pursuant to the authority granted by the Public Service Commission
(A.L. Ammen Transportation Co. v. Golingco. 43 Phil. 280).
In the case at bar, the trial court found that petitioner association forcibly took over
the operation of the jeepney service in the Cogeo-Cubao route without any
authorization from the Public Service Commission and in violation of the right of
respondent corporation to operate its services in the said route under its certificate
of public convenience. These were its findings which were affirmed by the appellate
court:
The Court from the testimony of plaintiff's witnesses as well as
the documentary evidences presented is convinced that the
actions taken by defendant herein though it admit that it did not
have the authority to transport passenger did in fact assume the
role as a common carrier engaged in the transport of passengers
within that span of ten days beginning November 11, 1985 when
it unilaterally took upon itself the operation and dispatching of
jeepneys at St. Mary's St. The president of the defendant
corporation. Romeo Oliva himself in his testimony confirmed that
there was indeed a takeover of the operations at St. Mary's St. . . .
(p. 36, Rollo)
The findings of the trial court especially if affirmed by the appellate court bear great
weight and will not be disturbed on appeal before this Court. Although there is no
question that petitioner can exercise their constitutional right to redress their
grievances with respondent Lungsod Corp., the manner by which this constitutional
right is to be, exercised should not undermine public peace and order nor should it
violate the legal rights of other persons. Article 21 of the Civil Code provides that
any person who wilfully causes loss or injury to another in a manner that is contrary
to morals, good customs or public policy shall compensate the latter for the
damage. The provision covers a situation where a person has a legal right which
was violated by another in a manner contrary to morals, good customs or public
policy. It presupposes loss or injury, material or otherwise, which one may suffer as
a result of such violation. It is clear form the facts of this case that petitioner formed
a barricade and forcibly took over the motor units and personnel of the respondent
corporation. This paralyzed the usual activities and earnings of the latter during the
period of ten days and violated the right of respondent Lungsod Corp. To conduct
its operations thru its authorized officers.
As to the propriety of damages in favor of respondent Lungsod Corp., the
respondent appellate court stated:
. . . it does not necessarily follow that plaintiff-appellee is entitled
to actual damages and attorney's fees. While there may have
been allegations from plaintiff-cooperative showing that it did in
fact suffer some from of injury . . . it is legally unprecise to order
the payment of P50,000.00 as actual damages for lack of concrete
proof therefor. There is, however, no denying of the act of
usurpation by defendants-appellants which constituted an
invasion of plaintiffs'-appellees' property right. For this, nominal
damages in the amount of P10,000.00 may be granted. (Article
2221, Civil Code). (p. 18,Rollo)
No compelling reason exists to justify the reversal of the ruling of the respondent
appellate court in the case at bar. Article 2222 of the Civil Code states that the court
may award nominal damages in every obligation arising from any source
enumerated in Article 1157, or in every case where any property right has been
invaded. Considering the circumstances of the case, the respondent corporation is
entitled to the award of nominal damages.

ACCORDINGLY, the petition is DENIED and the assailed decision of the respondent
appellate court dated May 27, 1991 is AFFIRMED.

SO ORDERED.