COMM REV TRANSPORTATION LAW CASES

1. Perena vs. Nicolas Aug 29, 2012; The Pereñas were engaged in the business of transporting students from their respective residences in
2. AF Sanchez Brokerage vs. CA, Dec. 21, 2004l Parañaque City to Don Bosco in Pasong Tamo, Makati City, and back. In their business, the Pereñas used
3. Cruz vs. Sun Holidays, June 29, 2010; a KIA Ceres Van (van) with Plate No. PYA 896, which had the capacity to transport 14 students at a time,
4. Villanueva vs Domingo, Sept 20, 2004; two of whom would be seated in the front beside the driver, and the others in the rear, with six students
5. UCPB Gen Insurance vs. Aboitiz Shipping, GR 168433; on either side. They employed Clemente Alfaro (Alfaro) as driver of the van.
6. PAL vs. Savillo, GR 149547; 6. Crisostomo vs. CA, GR 138334;
7. Villanueva vs. Domingo, GR 144274; In June 1996, the Zarates contracted the Pereñas to transport Aaron to and from Don Bosco. On August
8. PCI Leasing and Finance vs UCPB General Insurance, GR 162267; 22, 1996, as on previous school days, the van picked Aaron up around 6:00 a.m. from the Zarates’
9. Singapore Airlines vs. Andion Fernandez GR 142305; residence. Aaron took his place on the left side of the van near the rear door. The van, with its air-
10. Japan Airlines vs. Asuncion GR 161730; conditioning unit turned on and the stereo playing loudly, ultimately carried all the 14 student riders on
11. Alitalia vs. IAC, 192 SCRA 9; their way to Don Bosco. Considering that the students were due at Don Bosco by 7:15 a.m., and that they
12. Sabena Belgian World Airlines vs CA 255 SCRA 38; 13. Mapa vs. CA 275 SCRA 286 were already running late because of the heavy vehicular traffic on the South Superhighway, Alfaro took
14. Litonjua vs. National Seamen Board GR 51910; the van to an alternate route at about 6:45 a.m. by traversing the narrow path underneath the
15. Maranan vs. Perez GR 22272; Magallanes Interchange that was then commonly used by Makati-bound vehicles as a short cut into
16. Compania Maritima vs. CA GR 31379; Makati. At the time, the narrow path was marked by piles of construction materials and parked
17. Eastern Shipping Lines vs. IAC, 150 SCRA 469 passenger jeepneys, and the railroad crossing in the narrow path had no railroad warning signs, or
18. Sulpicio Lines vs. Curso 615 SCRA 575 watchmen, or other responsible persons manning the crossing. In fact, the bamboo barandilla was up,
19. Westwind Shipping vs. UCPB General Insurance 710 SCRA 544 leaving the railroad crossing open to traversing motorists.
20. Air France vs. Gallego 638 SCRA 472
At about the time the van was to traverse the railroad crossing, PNR Commuter No. 302 (train), operated
G.R. No. 157917 August 29, 2012 by Jhonny Alano (Alano), was in the vicinity of the Magallanes Interchange travelling northbound. As the
train neared the railroad crossing, Alfaro drove the van eastward across the railroad tracks, closely tailing
SPOUSES TEODORO1 and NANETTE PERENA, Petitioners, a large passenger bus. His view of the oncoming train was blocked because he overtook the passenger
vs. bus on its left side. The train blew its horn to warn motorists of its approach. When the train was about
SPOUSES TERESITA PHILIPPINE NICOLAS and L. ZARATE, NATIONAL RAILWAYS, and the COURT OF 50 meters away from the passenger bus and the van, Alano applied the ordinary brakes of the train. He
APPEALS Respondents. applied the emergency brakes only when he saw that a collision was imminent. The passenger bus
successfully crossed the railroad tracks, but the van driven by Alfaro did not. The train hit the rear end of
DECISION the van, and the impact threw nine of the 12 students in the rear, including Aaron, out of the van. Aaron
landed in the path of the train, which dragged his body and severed his head, instantaneously killing him.
BERSAMIN, J.: Alano fled the scene on board the train, and did not wait for the police investigator to arrive.

The operator of a. school bus service is a common carrier in the eyes of the law. He is bound to observe
extraordinary diligence in the conduct of his business. He is presumed to be negligent when death occurs
to a passenger. His liability may include indemnity for loss of earning capacity even if the deceased
passenger may only be an unemployed high school student at the time of the accident.
The Case
By petition for review on certiorari, Spouses Teodoro and Nanette Perefia (Perefias) appeal the adverse
decision promulgated on November 13, 2002, by which the Court of Appeals (CA) affirmed with
modification the decision rendered on December 3, 1999 by the Regional Trial Court (RTC), Branch 260,
in Parañaque City that had decreed them jointly and severally liable with Philippine National Railways
(PNR), their co-defendant, to Spouses Nicolas and Teresita Zarate (Zarates) for the death of their 15-year
old son, Aaron John L. Zarate (Aaron), then a high school student of Don Bosco Technical Institute (Don
Bosco).
Antecedents
Devastated by the early and unexpected death of Aaron, the Zarates commenced this action for
damages against Alfaro, the Pereñas, PNR and Alano. The Pereñas and PNR filed their respective
answers, with cross-claims against each other, but Alfaro could not be served with summons.
At the pre-trial, the parties stipulated on the facts and issues, viz:
A. FACTS:
That spouses Zarate were the legitimate parents of Aaron John L. Zarate;(1)
Spouses Zarate engaged the services of spouses(2) Pereña for the adequate and safe transportation
carriage of the former spouses' son from their residence in Parañaque to his school at the Don Bosco
Technical Institute in Makati City;
During the effectivity of the contract of(3) carriage and in the implementation thereof, Aaron, the
minor son of spouses Zarate died in connection with a vehicular/train collision which occurred while
Aaron was riding the contracted carrier Kia Ceres van of spouses Pereña, then driven and operated by

1
COMM REV TRANSPORTATION LAW CASES
the latter's employee/authorized driver Clemente Alfaro, which van collided with the train of PNR, at
around 6:45 A.M. of August 22, 1996, within the vicinity of the Magallanes Interchange in Makati City,
Metro Manila, Philippines;
At the time of the vehicular/train collision,(4) the subject site of the vehicular/train collision was a
railroad crossing used by motorists for crossing the railroad tracks;
During the said time of the vehicular/train(5) collision, there were no appropriate and safety warning
signs and railings at the site commonly used for railroad crossing;
At the material time, countless number of Makati(6) bound public utility and private vehicles used on a
daily basis the site of the collision as an alternative route and short-cut to Makati;
The train driver or operator left the scene of(7) the incident on board the commuter train involved
without waiting for the police investigator;
The site commonly used for railroad crossing by(8) motorists was not in fact intended by the railroad
operator for railroad crossing at the time of the vehicular collision;
PNR received the demand letter of the spouses Zarate;(9)
PNR refused to acknowledge any liability for the vehicular/train collision;(10)
The eventual closure of the railroad crossing(11) alleged by PNR was an internal arrangement between
the former and its project contractor; and
The site of the vehicular/train collision was(12) within the vicinity or less than 100 meters from the
Magallanes station of PNR.
B. ISSUES
(1) Whether or not defendant-driver of the van is, in the performance of his functions, liable for
negligence constituting the proximate cause of the vehicular collision, which resulted in the death of
plaintiff spouses' son;
(2) Whether or not the defendant spouses Pereña being the employer of defendant Alfaro are liable for
any negligence which may be attributed to defendant Alfaro;
(3) Whether or not defendant Philippine National Railways being the operator of the railroad system is
liable for negligence in failing to provide adequate safety warning signs and railings in the area
commonly used by motorists for railroad crossings, constituting the proximate cause of the vehicular
collision which resulted in the death of the plaintiff spouses' son;
(4) Whether or not defendant spouses Pereña are liable for breach of the contract of carriage with
plaintiff-spouses in failing to provide adequate and safe transportation for the latter's son;
(5) Whether or not defendants spouses are liable for actual, moral damages, exemplary damages, and
attorney's fees;
2
(6) Whether or not defendants spouses Teodorico and Nanette Pereña observed the diligence of
employers and school bus operators;
(7) Whether or not defendant-spouses are civilly liable for the accidental death of Aaron John Zarate;
(8) Whether or not defendant PNR was grossly negligent in operating the commuter train involved in the
accident, in allowing or tolerating the motoring public to cross, and its failure to install safety devices or
equipment at the site of the accident for the protection of the public;
(9) Whether or not defendant PNR should be made to reimburse defendant spouses for any and
whatever amount the latter may be held answerable or which they may be ordered to pay in favor of
plaintiffs by reason of the action;
(10) Whether or not defendant PNR should pay plaintiffs directly and fully on the amounts claimed by
the latter in their Complaint by reason of its gross negligence;
(11) Whether or not defendant PNR is liable to defendants spouses for actual, moral and exemplary
damages and attorney's fees.2
The Zarates’ claim against the Pereñas was upon breach of the contract of carriage for the safe transport
of Aaron; but that against PNR was based on quasi-delict under Article 2176, Civil Code.
In their defense, the Pereñas adduced evidence to show that they had exercised the diligence of a good
father of the family in the selection and supervision of Alfaro, by making sure that Alfaro had been issued
a driver’s license and had not been involved in any vehicular accident prior to the collision; that their
own son had taken the van daily; and that Teodoro Pereña had sometimes accompanied Alfaro in the
van’s trips transporting the students to school.
For its part, PNR tended to show that the proximate cause of the collision had been the reckless crossing
of the van whose driver had not first stopped, looked and listened; and that the narrow path traversed
by the van had not been intended to be a railroad crossing for motorists.
Ruling of the RTC
On December 3, 1999, the RTC rendered its decision,3 disposing:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff and against the
defendants ordering them to jointly and severally pay the plaintiffs as follows:
(1) (for) the death of Aaron- Php50,000.00;
(2) Actual damages in the amount of Php100,000.00;
(3) For the loss of earning capacity- Php2,109,071.00;
(4) Moral damages in the amount of Php4,000,000.00;
(5) Exemplary damages in the amount of Php1,000,000.00;
(6) Attorney’s fees in the amount of Php200,000.00; and
COMM REV TRANSPORTATION LAW CASES
(7) Cost of suit.
SO ORDERED.
On June 29, 2000, the RTC denied the Pereñas’ motion for reconsideration,4 reiterating that the
cooperative gross negligence of the Pereñas and PNR had caused the collision that led to the death of
Aaron; and that the damages awarded to the Zarates were not excessive, but based on the established
circumstances.
The CA’s Ruling
Both the Pereñas and PNR appealed (C.A.-G.R. CV No. 68916).
PNR assigned the following errors, to wit:5
The Court a quo erred in:
1. In finding the defendant-appellant Philippine National Railways jointly and severally liable together
with defendant-appellants spouses Teodorico and Nanette Pereña and defendant-appellant Clemente
Alfaro to pay plaintiffs-appellees for the death of Aaron Zarate and damages.
2. In giving full faith and merit to the oral testimonies of plaintiffs-appellees witnesses despite
overwhelming documentary evidence on record, supporting the case of defendants-appellants Philippine
National Railways.
The Pereñas ascribed the following errors to the RTC, namely:
The trial court erred in finding defendants-appellants jointly and severally liable for actual, moral and
exemplary damages and attorney’s fees with the other defendants.
The trial court erred in dismissing the cross-claim of the appellants Pereñas against the Philippine
National Railways and in not holding the latter and its train driver primarily responsible for the incident.
The trial court erred in awarding excessive damages and attorney’s fees.
The trial court erred in awarding damages in the form of deceased’s loss of earning capacity in the
absence of sufficient basis for such an award.
On November 13, 2002, the CA promulgated its decision, affirming the findings of the RTC, but limited
the moral damages to ₱ 2,500,000.00; and deleted the attorney’s fees because the RTC did not state the
factual and legal bases, to wit:6
WHEREFORE, premises considered, the assailed Decision of the Regional Trial Court, Branch 260 of
Parañaque City is AFFIRMED with the modification that the award of Actual Damages is reduced to ₱
59,502.76; Moral Damages is reduced to ₱ 2,500,000.00; and the award for Attorney’s Fees is Deleted.
SO ORDERED.
The CA upheld the award for the loss of Aaron’s earning capacity, taking cognizance of the ruling in
Cariaga v. Laguna Tayabas Bus Company and Manila Railroad Company,7 wherein the Court gave the
3
heirs of Cariaga a sum representing the loss of the deceased’s earning capacity despite Cariaga being
only a medical student at the time of the fatal incident. Applying the formula adopted in the American
Expectancy Table of Mortality:–
2/3 x (80 - age at the time of death) = life expectancy
the CA determined the life expectancy of Aaron to be 39.3 years upon reckoning his life expectancy from
age of 21 (the age when he would have graduated from college and started working for his own
livelihood) instead of 15 years (his age when he died). Considering that the nature of his work and his
salary at the time of Aaron’s death were unknown, it used the prevailing minimum wage of ₱ 280.00/day
to compute Aaron’s gross annual salary to be ₱ 110,716.65, inclusive of the thirteenth month pay.
Multiplying this annual salary by Aaron’s life expectancy of 39.3 years, his gross income would aggregate
to ₱ 4,351,164.30, from which his estimated expenses in the sum of ₱ 2,189,664.30 was deducted to
finally arrive at P 2,161,500.00 as net income. Due to Aaron’s computed net income turning out to be
higher than the amount claimed by the Zarates, only ₱ 2,109,071.00, the amount expressly prayed for by
them, was granted.
On April 4, 2003, the CA denied the Pereñas’ motion for reconsideration.8
Issues
In this appeal, the Pereñas list the following as the errors committed by the CA, to wit:
I. The lower court erred when it upheld the trial court’s decision holding the petitioners jointly and
severally liable to pay damages with Philippine National Railways and dismissing their cross-claim against
the latter.
II. The lower court erred in affirming the trial court’s decision awarding damages for loss of earning
capacity of a minor who was only a high school student at the time of his death in the absence of
sufficient basis for such an award.
III. The lower court erred in not reducing further the amount of damages awarded, assuming petitioners
are liable at all.
Ruling
The petition has no merit.
1.
Were the Pereñas and PNR jointly
and severally liable for damages?
The Zarates brought this action for recovery of damages against both the Pereñas and the PNR, basing
their claim against the Pereñas on breach of contract of carriage and against the PNR on quasi-delict.
The RTC found the Pereñas and the PNR negligent. The CA affirmed the findings.
We concur with the CA.
COMM REV TRANSPORTATION LAW CASES
To start with, the Pereñas’ defense was that they exercised the diligence of a good father of the family in
the selection and supervision of Alfaro, the van driver, by seeing to it that Alfaro had a driver’s license
and that he had not been involved in any vehicular accident prior to the fatal collision with the train; that
they even had their own son travel to and from school on a daily basis; and that Teodoro Pereña himself
sometimes accompanied Alfaro in transporting the passengers to and from school. The RTC gave scant
consideration to such defense by regarding such defense as inappropriate in an action for breach of
contract of carriage.
We find no adequate cause to differ from the conclusions of the lower courts that the Pereñas operated
as a common carrier; and that their standard of care was extraordinary diligence, not the ordinary
diligence of a good father of a family.
Although in this jurisdiction the operator of a school bus service has been usually regarded as a private
carrier,9 primarily because he only caters to some specific or privileged individuals, and his operation is
neither open to the indefinite public nor for public use, the exact nature of the operation of a school bus
service has not been finally settled. This is the occasion to lay the matter to rest.
A carrier is a person or corporation who undertakes to transport or convey goods or persons from one
place to another, gratuitously or for hire. The carrier is classified either as a private/special carrier or as a
common/public carrier.10 A private carrier is one who, without making the activity a vocation, or
without holding himself or itself out to the public as ready to act for all who may desire his or its services,
undertakes, by special agreement in a particular instance only, to transport goods or persons from one
place to another either gratuitously or for hire.11 The provisions on ordinary contracts of the Civil Code
govern the contract of private carriage.The diligence required of a private carrier is only ordinary, that is,
the diligence of a good father of the family. In contrast, a common carrier is a person, corporation, firm
or association engaged in the business of carrying or transporting passengers or goods or both, by land,
water, or air, for compensation, offering such services to the public.12 Contracts of common carriage are
governed by the provisions on common carriers of the Civil Code, the Public Service Act,13 and other
special laws relating to transportation. A common carrier is required to observe extraordinary diligence,
and is presumed to be at fault or to have acted negligently in case of the loss of the effects of
passengers, or the death or injuries to passengers.14
In relation to common carriers, the Court defined public use in the following terms in United States v.
Tan Piaco,15 viz:
"Public use" is the same as "use by the public". The essential feature of the public use is not confined to
privileged individuals, but is open to the indefinite public. It is this indefinite or unrestricted quality that
gives it its public character. In determining whether a use is public, we must look not only to the
character of the business to be done, but also to the proposed mode of doing it. If the use is merely
optional with the owners, or the public benefit is merely incidental, it is not a public use, authorizing the
exercise of the jurisdiction of the public utility commission. There must be, in general, a right which the
law compels the owner to give to the general public. It is not enough that the general prosperity of the
public is promoted. Public use is not synonymous with public interest. The true criterion by which to
judge the character of the use is whether the public may enjoy it by right or only by permission.
In De Guzman v. Court of Appeals,16 the Court noted that Article 1732 of the Civil Code avoided any
distinction between a person or an enterprise offering transportation on a regular or an isolated basis;
and has not distinguished a carrier offering his services to the general public, that is, the general
4
community or population, from one offering his services only to a narrow segment of the general
population.
Nonetheless, the concept of a common carrier embodied in Article 1732 of the Civil Code coincides
neatly with the notion of public service under the Public Service Act, which supplements the law on
common carriers found in the Civil Code. Public service, according to Section 13, paragraph (b) of the
Public Service Act, includes:
x x x every person that now or hereafter may own, operate, manage, or control in the Philippines, for
hire or compensation, with general or limited clientèle, whether permanent or occasional, and done for
the general business purposes, any common carrier, railroad, street railway, traction railway, subway
motor vehicle, either for freight or passenger, or both, with or without fixed route and whatever may be
its classification, freight or carrier service of any class, express service, steamboat, or steamship line,
pontines, ferries and water craft, engaged in the transportation of passengers or freight or both,
shipyard, marine repair shop, ice-refrigeration plant, canal, irrigation system, gas, electric light, heat and
power, water supply and power petroleum, sewerage system, wire or wireless communications systems,
wire or wireless broadcasting stations and other similar public services. x x x.17
Given the breadth of the aforequoted characterization of a common carrier, the Court has considered as
common carriers pipeline operators,18 custom brokers and warehousemen,19 and barge operators20
even if they had limited clientèle.
As all the foregoing indicate, the true test for a common carrier is not the quantity or extent of the
business actually transacted, or the number and character of the conveyances used in the activity, but
whether the undertaking is a part of the activity engaged in by the carrier that he has held out to the
general public as his business or occupation. If the undertaking is a single transaction, not a part of the
general business or occupation engaged in, as advertised and held out to the general public, the
individual or the entity rendering such service is a private, not a common, carrier. The question must be
determined by the character of the business actually carried on by the carrier, not by any secret
intention or mental reservation it may entertain or assert when charged with the duties and obligations
that the law imposes.21
Applying these considerations to the case before us, there is no question that the Pereñas as the
operators of a school bus service were: (a) engaged in transporting passengers generally as a business,
not just as a casual occupation; (b) undertaking to carry passengers over established roads by the
method by which the business was conducted; and (c) transporting students for a fee. Despite catering
to a limited clientèle, the Pereñas operated as a common carrier because they held themselves out as a
ready transportation indiscriminately to the students of a particular school living within or near where
they operated the service and for a fee.
The common carrier’s standard of care and vigilance as to the safety of the passengers is defined by law.
Given the nature of the business and for reasons of public policy, the common carrier is bound "to
observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers
transported by them, according to all the circumstances of each case."22 Article 1755 of the Civil Code
specifies that the common carrier should "carry the passengers safely as far as human care and foresight
can provide, using the utmost diligence of very cautious persons, with a due regard for all the
circumstances." To successfully fend off liability in an action upon the death or injury to a passenger, the
common carrier must prove his or its observance of that extraordinary diligence; otherwise, the legal
COMM REV TRANSPORTATION LAW CASES
presumption that he or it was at fault or acted negligently would stand.23 No device, whether by
stipulation, posting of notices, statements on tickets, or otherwise, may dispense with or lessen the
responsibility of the common carrier as defined under Article 1755 of the Civil Code. 24
And, secondly, the Pereñas have not presented any compelling defense or reason by which the Court
might now reverse the CA’s findings on their liability. On the contrary, an examination of the records
shows that the evidence fully supported the findings of the CA.
As earlier stated, the Pereñas, acting as a common carrier, were already presumed to be negligent at the
time of the accident because death had occurred to their passenger.25 The presumption of negligence,
being a presumption of law, laid the burden of evidence on their shoulders to establish that they had not
been negligent.26 It was the law no less that required them to prove their observance of extraordinary
diligence in seeing to the safe and secure carriage of the passengers to their destination. Until they did
so in a credible manner, they stood to be held legally responsible for the death of Aaron and thus to be
held liable for all the natural consequences of such death.
There is no question that the Pereñas did not overturn the presumption of their negligence by credible
evidence. Their defense of having observed the diligence of a good father of a family in the selection and
supervision of their driver was not legally sufficient. According to Article 1759 of the Civil Code, their
liability as a common carrier did not cease upon proof that they exercised all the diligence of a good
father of a family in the selection and supervision of their employee. This was the reason why the RTC
treated this defense of the Pereñas as inappropriate in this action for breach of contract of carriage.
The Pereñas were liable for the death of Aaron despite the fact that their driver might have acted
beyond the scope of his authority or even in violation of the orders of the common carrier.27 In this
connection, the records showed their driver’s actual negligence. There was a showing, to begin with, that
their driver traversed the railroad tracks at a point at which the PNR did not permit motorists going into
the Makati area to cross the railroad tracks. Although that point had been used by motorists as a
shortcut into the Makati area, that fact alone did not excuse their driver into taking that route. On the
other hand, with his familiarity with that shortcut, their driver was fully aware of the risks to his
passengers but he still disregarded the risks. Compounding his lack of care was that loud music was
playing inside the air-conditioned van at the time of the accident. The loudness most probably reduced
his ability to hear the warning horns of the oncoming train to allow him to correctly appreciate the
lurking dangers on the railroad tracks. Also, he sought to overtake a passenger bus on the left side as
both vehicles traversed the railroad tracks. In so doing, he lost his view of the train that was then coming
from the opposite side of the passenger bus, leading him to miscalculate his chances of beating the bus
in their race, and of getting clear of the train. As a result, the bus avoided a collision with the train but
the van got slammed at its rear, causing the fatality. Lastly, he did not slow down or go to a full stop
before traversing the railroad tracks despite knowing that his slackening of speed and going to a full stop
were in observance of the right of way at railroad tracks as defined by the traffic laws and regulations.28
He thereby violated a specific traffic regulation on right of way, by virtue of which he was immediately
presumed to be negligent.29
The omissions of care on the part of the van driver constituted negligence,30 which, according to
Layugan v. Intermediate Appellate Court,31 is "the omission to do something which a reasonable man,
guided by those considerations which ordinarily regulate the conduct of human affairs, would do, or the
doing of something which a prudent and reasonable man would not do,32 or as Judge Cooley defines it,
‘(t)he failure to observe for the protection of the interests of another person, that degree of care,
5
precaution, and vigilance which the circumstances justly demand, whereby such other person suffers
injury.’"33
The test by which to determine the existence of negligence in a particular case has been aptly stated in
the leading case of Picart v. Smith,34 thuswise:
The test by which to determine the existence of negligence in a particular case may be stated as follows:
Did the defendant in doing the alleged negligent act use that reasonable care and caution which an
ordinarily prudent person would have used in the same situation? If not, then he is guilty of negligence.
The law here in effect adopts the standard supposed to be supplied by the imaginary conduct of the
discreet paterfamilias of the Roman law. The existence of negligence in a given case is not determined by
reference to the personal judgment of the actor in the situation before him. The law considers what
would be reckless, blameworthy, or negligent in the man of ordinary intelligence and prudence and
determines liability by that.
The question as to what would constitute the conduct of a prudent man in a given situation must of
course be always determined in the light of human experience and in view of the facts involved in the
particular case. Abstract speculation cannot here be of much value but this much can be profitably said:
Reasonable men govern their conduct by the circumstances which are before them or known to them.
They are not, and are not supposed to be, omniscient of the future. Hence they can be expected to take
care only when there is something before them to suggest or warn of danger. Could a prudent man, in
the case under consideration, foresee harm as a result of the course actually pursued? If so, it was the
duty of the actor to take precautions to guard against that harm. Reasonable foresight of harm, followed
by the ignoring of the suggestion born of this prevision, is always necessary before negligence can be
held to exist. Stated in these terms, the proper criterion for determining the existence of negligence in a
given case is this: Conduct is said to be negligent when a prudent man in the position of the tortfeasor
would have foreseen that an effect harmful to another was sufficiently probable to warrant his foregoing
the conduct or guarding against its consequences. (Emphasis supplied)
Pursuant to the Picart v. Smith test of negligence, the Pereñas’ driver was entirely negligent when he
traversed the railroad tracks at a point not allowed for a motorist’s crossing despite being fully aware of
the grave harm to be thereby caused to his passengers; and when he disregarded the foresight of harm
to his passengers by overtaking the bus on the left side as to leave himself blind to the approach of the
oncoming train that he knew was on the opposite side of the bus.
Unrelenting, the Pereñas cite Phil. National Railways v. Intermediate Appellate Court,35 where the Court
held the PNR solely liable for the damages caused to a passenger bus and its passengers when its train
hit the rear end of the bus that was then traversing the railroad crossing. But the circumstances of that
case and this one share no similarities. In Philippine National Railways v. Intermediate Appellate Court,
no evidence of contributory negligence was adduced against the owner of the bus. Instead, it was the
owner of the bus who proved the exercise of extraordinary diligence by preponderant evidence. Also,
the records are replete with the showing of negligence on the part of both the Pereñas and the PNR.
Another distinction is that the passenger bus in Philippine National Railways v. Intermediate Appellate
Court was traversing the dedicated railroad crossing when it was hit by the train, but the Pereñas’ school
van traversed the railroad tracks at a point not intended for that purpose.
At any rate, the lower courts correctly held both the Pereñas and the PNR "jointly and severally" liable
for damages arising from the death of Aaron. They had been impleaded in the same complaint as
COMM REV TRANSPORTATION LAW CASES
defendants against whom the Zarates had the right to relief, whether jointly, severally, or in the
alternative, in respect to or arising out of the accident, and questions of fact and of law were common as
to the Zarates.36 Although the basis of the right to relief of the Zarates (i.e., breach of contract of
carriage) against the Pereñas was distinct from the basis of the Zarates’ right to relief against the PNR
(i.e., quasi-delict under Article 2176, Civil Code), they nonetheless could be held jointly and severally
liable by virtue of their respective negligence combining to cause the death of Aaron. As to the PNR, the
RTC rightly found the PNR also guilty of negligence despite the school van of the Pereñas traversing the
railroad tracks at a point not dedicated by the PNR as a railroad crossing for pedestrians and motorists,
because the PNR did not ensure the safety of others through the placing of crossbars, signal lights,
warning signs, and other permanent safety barriers to prevent vehicles or pedestrians from crossing
there. The RTC observed that the fact that a crossing guard had been assigned to man that point from 7
a.m. to 5 p.m. was a good indicium that the PNR was aware of the risks to others as well as the need to
control the vehicular and other traffic there. Verily, the Pereñas and the PNR were joint tortfeasors.
2.
Was the indemnity for loss of
Aaron’s earning capacity proper?
The RTC awarded indemnity for loss of Aaron’s earning capacity. Although agreeing with the RTC on the
liability, the CA modified the amount. Both lower courts took into consideration that Aaron, while only a
high school student, had been enrolled in one of the reputable schools in the Philippines and that he had
been a normal and able-bodied child prior to his death. The basis for the computation of Aaron’s earning
capacity was not what he would have become or what he would have wanted to be if not for his
untimely death, but the minimum wage in effect at the time of his death. Moreover, the RTC’s
computation of Aaron’s life expectancy rate was not reckoned from his age of 15 years at the time of his
death, but on 21 years, his age when he would have graduated from college.
We find the considerations taken into account by the lower courts to be reasonable and fully warranted.
Yet, the Pereñas submit that the indemnity for loss of earning capacity was speculative and
unfounded.1âwphi1 They cited People v. Teehankee, Jr.,37 where the Court deleted the indemnity for
victim Jussi Leino’s loss of earning capacity as a pilot for being speculative due to his having graduated
from high school at the International School in Manila only two years before the shooting, and was at the
time of the shooting only enrolled in the first semester at the Manila Aero Club to pursue his ambition to
become a professional pilot. That meant, according to the Court, that he was for all intents and purposes
only a high school graduate.
We reject the Pereñas’ submission.
First of all, a careful perusal of the Teehankee, Jr. case shows that the situation there of Jussi Leino was
not akin to that of Aaron here. The CA and the RTC were not speculating that Aaron would be some
highly-paid professional, like a pilot (or, for that matter, an engineer, a physician, or a lawyer). Instead,
the computation of Aaron’s earning capacity was premised on him being a lowly minimum wage earner
despite his being then enrolled at a prestigious high school like Don Bosco in Makati, a fact that would
have likely ensured his success in his later years in life and at work.
And, secondly, the fact that Aaron was then without a history of earnings should not be taken against his
parents and in favor of the defendants whose negligence not only cost Aaron his life and his right to
6
work and earn money, but also deprived his parents of their right to his presence and his services as well.
Our law itself states that the loss of the earning capacity of the deceased shall be the liability of the guilty
party in favor of the heirs of the deceased, and shall in every case be assessed and awarded by the court
"unless the deceased on account of permanent physical disability not caused by the defendant, had no
earning capacity at the time of his death."38 Accordingly, we emphatically hold in favor of the
indemnification for Aaron’s loss of earning capacity despite him having been unemployed, because
compensation of this nature is awarded not for loss of time or earnings but for loss of the deceased’s
power or ability to earn money.39
This favorable treatment of the Zarates’ claim is not unprecedented. In Cariaga v. Laguna Tayabas Bus
Company and Manila Railroad Company,40 fourth-year medical student Edgardo Carriaga’s earning
capacity, although he survived the accident but his injuries rendered him permanently incapacitated,
was computed to be that of the physician that he dreamed to become. The Court considered his
scholastic record sufficient to justify the assumption that he could have finished the medical course and
would have passed the medical board examinations in due time, and that he could have possibly earned
a modest income as a medical practitioner. Also, in People v. Sanchez,41 the Court opined that murder
and rape victim Eileen Sarmienta and murder victim Allan Gomez could have easily landed good-paying
jobs had they graduated in due time, and that their jobs would probably pay them high monthly salaries
from ₱ 10,000.00 to ₱ 15,000.00 upon their graduation. Their earning capacities were computed at rates
higher than the minimum wage at the time of their deaths due to their being already senior agriculture
students of the University of the Philippines in Los Baños, the country’s leading educational institution in
agriculture.
3.
Were the amounts of damages excessive?
The Pereñas plead for the reduction of the moral and exemplary damages awarded to the Zarates in the
respective amounts of ₱ 2,500,000.00 and ₱ 1,000,000.00 on the ground that such amounts were
excessive.
The plea is unwarranted.
The moral damages of ₱ 2,500,000.00 were really just and reasonable under the established
circumstances of this case because they were intended by the law to assuage the Zarates’ deep mental
anguish over their son’s unexpected and violent death, and their moral shock over the senseless
accident. That amount would not be too much, considering that it would help the Zarates obtain the
means, diversions or amusements that would alleviate their suffering for the loss of their child. At any
rate, reducing the amount as excessive might prove to be an injustice, given the passage of a long time
from when their mental anguish was inflicted on them on August 22, 1996.
Anent the ₱ 1,000,000.00 allowed as exemplary damages, we should not reduce the amount if only to
render effective the desired example for the public good. As a common carrier, the Pereñas needed to
be vigorously reminded to observe their duty to exercise extraordinary diligence to prevent a similarly
senseless accident from happening again. Only by an award of exemplary damages in that amount would
suffice to instill in them and others similarly situated like them the ever-present need for greater and
constant vigilance in the conduct of a business imbued with public interest.
COMM REV TRANSPORTATION LAW CASES
WHEREFORE, we DENY the petition for review on certiorari; AFFIRM the decision promulgated on
November 13, 2002; and ORDER the petitioners to pay the costs of suit.
SO ORDERED.
[G.R. No. 147079. December 21, 2004]
A.F. SANCHEZ BROKERAGE INC., petitioners, vs. THE HON. COURT OF APPEALS and FGU INSURANCE
CORPORATION, respondents.
DECISION
CARPIO MORALES, J.:
Before this Court on a petition for Certiorari is the appellate courts Decision[1] of August 10, 2000
reversing and setting aside the judgment of Branch 133, Regional Trial Court of Makati City, in Civil Case
No. 93-76B which dismissed the complaint of respondent FGU Insurance Corporation (FGU Insurance)
against petitioner A.F. Sanchez Brokerage, Inc. (Sanchez Brokerage).
On July 8, 1992, Wyeth-Pharma GMBH shipped on board an aircraft of KLM Royal Dutch Airlines at
Dusseldorf, Germany oral contraceptives consisting of 86,800 Blisters Femenal tablets, 14,000 Blisters
Nordiol tablets and 42,000 Blisters Trinordiol tablets for delivery to Manila in favor of the consignee,
Wyeth-Suaco Laboratories, Inc.[2] The Femenal tablets were placed in 124 cartons and the Nordiol
tablets were placed in 20 cartons which were packed together in one (1) LD3 aluminum container, while
the Trinordial tablets were packed in two pallets, each of which contained 30 cartons.[3]
Wyeth-Suaco insured the shipment against all risks with FGU Insurance which issued Marine Risk Note
No. 4995 pursuant to Marine Open Policy No. 138.[4]
Upon arrival of the shipment on July 11, 1992 at the Ninoy Aquino International Airport (NAIA),[5] it was
discharged without exception[6] and delivered to the warehouse of the Philippine Skylanders, Inc. (PSI)
located also at the NAIA for safekeeping.[7]
In order to secure the release of the cargoes from the PSI and the Bureau of Customs, Wyeth-Suaco
engaged the services of Sanchez Brokerage which had been its licensed broker since 1984.[8] As its
customs broker, Sanchez Brokerage calculates and pays the customs duties, taxes and storage fees for
the cargo and thereafter delivers it to Wyeth-Suaco.[9]
On July 29, 1992, Mitzi Morales and Ernesto Mendoza, representatives of Sanchez Brokerage, paid PSI
storage fee amounting to P8,572.35 a receipt for which, Official Receipt No. 016992,[10] was issued. On
the receipt, another representative of Sanchez Brokerage, M. Sison,[11] acknowledged that he received
the cargoes consisting of three pieces in good condition.[12]
Wyeth-Suaco being a regular importer, the customs examiner did not inspect the cargoes[13] which
were thereupon stripped from the aluminum containers[14] and loaded inside two transport vehicles
hired by Sanchez Brokerage.[15]
7
Among those who witnessed the release of the cargoes from the PSI warehouse were Ruben Alonso and
Tony Akas,[16] employees of Elite Adjusters and Surveyors Inc. (Elite Surveyors), a marine and cargo
surveyor and insurance claim adjusters firm engaged by Wyeth-Suaco on behalf of FGU Insurance.
Upon instructions of Wyeth-Suaco, the cargoes were delivered to Hizon Laboratories Inc. in Antipolo City
for quality control check.[17] The delivery receipt, bearing No. 07037 dated July 29, 1992, indicated that
the delivery consisted of one container with 144 cartons of Femenal and Nordiol and 1 pallet containing
Trinordiol.[18]
On July 31, 1992, Ronnie Likas, a representative of Wyeth-Suaco, acknowledged the delivery of the
cargoes by affixing his signature on the delivery receipt.[19] Upon inspection, however, he, together with
Ruben Alonzo of Elite Surveyors, discovered that 44 cartons containing Femenal and Nordiol tablets were
in bad order.[20] He thus placed a note above his signature on the delivery receipt stating that 44
cartons of oral contraceptives were in bad order. The remaining 160 cartons of oral contraceptives were
accepted as complete and in good order.
Ruben Alonzo thus prepared and signed, along with Ronnie Likas, a survey report[21] dated July 31, 1992
stating that 41 cartons of Femenal tablets and 3 cartons of Nordiol tablets were wetted (sic).[22]
The Elite Surveyors later issued Certificate No. CS-0731-1538/92[23] attached to which was an Annexed
Schedule whereon it was indicated that prior to the loading of the cargoes to the brokers trucks at the
NAIA, they were inspected and found to be in apparent good condition.[24] Also noted was that at the
time of delivery to the warehouse of Hizon Laboratories Inc., slight to heavy rains fell, which could
account for the wetting of the 44 cartons of Femenal and Nordiol tablets.[25]
On August 4, 1992, the Hizon Laboratories Inc. issued a Destruction Report[26] confirming that 38 x 700
blister packs of Femenal tablets, 3 x 700 blister packs of Femenal tablets and 3 x 700 blister packs of
Nordiol tablets were heavily damaged with water and emitted foul smell.
On August 5, 1992, Wyeth-Suaco issued a Notice of Materials Rejection[27] of 38 cartons of Femenal and
3 cartons of Nordiol on the ground that they were delivered to Hizon Laboratories with heavy water
damaged (sic) causing the cartons to sagged (sic) emitting a foul order and easily attracted flies.[28]
Wyeth-Suaco later demanded, by letter[29] of August 25, 1992, from Sanchez Brokerage the payment of
P191,384.25 representing the value of its loss arising from the damaged tablets.
As the Sanchez Brokerage refused to heed the demand, Wyeth-Suaco filed an insurance claim against
FGU Insurance which paid Wyeth-Suaco the amount of P181,431.49 in settlement of its claim under
Marine Risk Note Number 4995.
Wyeth-Suaco thus issued Subrogation Receipt[30] in favor of FGU Insurance.
On demand by FGU Insurance for payment of the amount of P181,431.49 it paid Wyeth-Suaco, Sanchez
Brokerage, by letter[31] of January 7, 1993, disclaimed liability for the damaged goods, positing that the
damage was due to improper and insufficient export packaging; that when the sealed containers were
opened outside the PSI warehouse, it was discovered that some of the loose cartons were wet,[32]
prompting its (Sanchez Brokerages) representative Morales to inform the Import-Export Assistant of
Wyeth-Suaco, Ramir Calicdan, about the condition of the cargoes but that the latter advised to still
deliver them to Hizon Laboratories where an adjuster would assess the damage.[33]
COMM REV TRANSPORTATION LAW CASES
Hence, the filing by FGU Insurance of a complaint for damages before the Regional Trial Court of Makati
City against the Sanchez Brokerage.
The trial court, by Decision[34] of July 29, 1996, dismissed the complaint, holding that the Survey Report
prepared by the Elite Surveyors is bereft of any evidentiary support and a mere product of pure
guesswork.[35]
On appeal, the appellate court reversed the decision of the trial court, it holding that the Sanchez
Brokerage engaged not only in the business of customs brokerage but also in the transportation and
delivery of the cargo of its clients, hence, a common carrier within the context of Article 1732 of the New
Civil Code.[36]
Noting that Wyeth-Suaco adduced evidence that the cargoes were delivered to petitioner in good order
and condition but were in a damaged state when delivered to Wyeth-Suaco, the appellate court held
that Sanchez Brokerage is presumed negligent and upon it rested the burden of proving that it exercised
extraordinary negligence not only in instances when negligence is directly proven but also in those cases
when the cause of the damage is not known or unknown.[37]
The appellate court thus disposed:
IN THE LIGHT OF ALL THE FOREGOING, the appeal of the Appellant is GRANTED. The Decision of the
Court a quo is REVERSED. Another Decision is hereby rendered in favor of the Appellant and against the
Appellee as follows:
1. The Appellee is hereby ordered to pay the Appellant the principal amount of P181, 431.49, with
interest thereupon at the rate of 6% per annum, from the date of the Decision of the Court, until the said
amount is paid in full;
2. The Appellee is hereby ordered to pay to the Appellant the amount of P20,000.00 as and by way of
attorneys fees; and
3. The counterclaims of the Appellee are DISMISSED.[38]
Sanchez Brokerages Motion for Reconsideration having been denied by the appellate courts Resolution
of December 8, 2000 which was received by petitioner on January 5, 2001, it comes to this Court on
petition for certiorari filed on March 6, 2001.
In the main, petitioner asserts that the appellate court committed grave and reversible error tantamount
to abuse of discretion when it found petitioner a common carrier within the context of Article 1732 of
the New Civil Code.
Respondent FGU Insurance avers in its Comment that the proper course of action which petitioner
should have taken was to file a petition for review on certiorari since the sole office of a writ of certiorari
is the correction of errors of jurisdiction including the commission of grave abuse of discretion
amounting to lack or excess of jurisdiction and does not include correction of the appellate courts
evaluation of the evidence and factual findings thereon.
8
On the merits, respondent FGU Insurance contends that petitioner, as a common carrier, failed to
overcome the presumption of negligence, it being documented that petitioner withdrew from the
warehouse of PSI the subject shipment entirely in good order and condition.[39]
The petition fails.
Rule 45 is clear that decisions, final orders or resolutions of the Court of Appeals in any case, i.e.,
regardless of the nature of the action or proceedings involved, may be appealed to this Court by filing a
petition for review, which would be but a continuation of the appellate process over the original case.[40]
The Resolution of the Court of Appeals dated December 8, 2000 denying the motion for reconsideration
of its Decision of August 10, 2000 was received by petitioner on January 5, 2001. Since petitioner failed
to appeal within 15 days or on or before January 20, 2001, the appellate courts decision had become
final and executory. The filing by petitioner of a petition for certiorari on March 6, 2001 cannot serve as a
substitute for the lost remedy of appeal.
In another vein, the rule is well settled that in a petition for certiorari, the petitioner must prove not
merely reversible error but also grave abuse of discretion amounting to lack or excess of jurisdiction.
Petitioner alleges that the appellate court erred in reversing and setting aside the decision of the trial
court based on its finding that petitioner is liable for the damage to the cargo as a common carrier. What
petitioner is ascribing is an error of judgment, not of jurisdiction, which is properly the subject of an
ordinary appeal.
Where the issue or question involves or affects the wisdom or legal soundness of the decision not the
jurisdiction of the court to render said decision the same is beyond the province of a petition for
certiorari.[41] The supervisory jurisdiction of this Court to issue a cert writ cannot be exercised in order
to review the judgment of lower courts as to its intrinsic correctness, either upon the law or the facts of
the case.[42]
Procedural technicalities aside, the petition still fails.
The appellate court did not err in finding petitioner, a customs broker, to be also a common carrier, as
defined under Article 1732 of the Civil Code, to wit:
Art. 1732. Common carriers are persons, corporations, firms or associations engaged in the business of
carrying or transporting passengers or goods or both, by land, water, or air, for compensation, offering
their services to the public.
Anacleto F. Sanchez, Jr., the Manager and Principal Broker of Sanchez Brokerage, himself testified that
the services the firm offers include the delivery of goods to the warehouse of the consignee or importer.
ATTY. FLORES:
Q: What are the functions of these license brokers, license customs broker?
WITNESS:
COMM REV TRANSPORTATION LAW CASES
As customs broker, we calculate the taxes that has to be paid in cargos, and those upon approval of the
importer, we prepare the entry together for processing and claims from customs and finally deliver the
goods to the warehouse of the importer.[43]
Article 1732 does not distinguish between one whose principal business activity is the carrying of goods
and one who does such carrying only as an ancillary activity.[44] The contention, therefore, of petitioner
that it is not a common carrier but a customs broker whose principal function is to prepare the correct
customs declaration and proper shipping documents as required by law is bereft of merit. It suffices that
petitioner undertakes to deliver the goods for pecuniary consideration.
In this light, petitioner as a common carrier is mandated to observe, under Article 1733[45] of the Civil
Code, extraordinary diligence in the vigilance over the goods it transports according to all the
circumstances of each case. In the event that the goods are lost, destroyed or deteriorated, it is
presumed to have been at fault or to have acted negligently, unless it proves that it observed
extraordinary diligence.[46]
The concept of extra-ordinary diligence was explained in Compania Maritima v. Court of Appeals:[47]
The extraordinary diligence in the vigilance over the goods tendered for shipment requires the common
carrier to know and to follow the required precaution for avoiding damage to, or destruction of the
goods entrusted to it for sale, carriage and delivery. It requires common carriers to render service with
the greatest skill and foresight and to use all reasonable means to ascertain the nature and
characteristics of goods tendered for shipment, and to exercise due care in the handling and stowage,
including such methods as their nature requires.[48]
In the case at bar, it was established that petitioner received the cargoes from the PSI warehouse in
NAIA in good order and condition;[49] and that upon delivery by petitioner to Hizon Laboratories Inc.,
some of the cargoes were found to be in bad order, as noted in the Delivery Receipt[50] issued by
petitioner, and as indicated in the Survey Report of Elite Surveyors[51] and the Destruction Report of
Hizon Laboratories, Inc.[52]
In an attempt to free itself from responsibility for the damage to the goods, petitioner posits that they
were damaged due to the fault or negligence of the shipper for failing to properly pack them and to the
inherent characteristics of the goods[53]; and that it should not be faulted for following the instructions
of Calicdan of Wyeth-Suaco to proceed with the delivery despite information conveyed to the latter that
some of the cartons, on examination outside the PSI warehouse, were found to be wet.[54]
While paragraph No. 4 of Article 1734[55] of the Civil Code exempts a common carrier from liability if the
loss or damage is due to the character of the goods or defects in the packing or in the containers, the
rule is that if the improper packing is known to the carrier or his employees or is apparent upon ordinary
observation, but he nevertheless accepts the same without protest or exception notwithstanding such
condition, he is not relieved of liability for the resulting damage.[56]
If the claim of petitioner that some of the cartons were already damaged upon delivery to it were true,
then it should naturally have received the cargo under protest or with reservations duly noted on the
receipt issued by PSI. But it made no such protest or reservation.[57]
Moreover, as observed by the appellate court, if indeed petitioners employees only examined the
cargoes outside the PSI warehouse and found some to be wet, they would certainly have gone back to
9
PSI, showed to the warehouseman the damage, and demanded then and there for Bad Order documents
or a certification confirming the damage.[58] Or, petitioner would have presented, as witness, the
employees of the PSI from whom Morales and Domingo took delivery of the cargo to prove that, indeed,
part of the cargoes was already damaged when the container was allegedly opened outside the
warehouse.[59]
Petitioner goes on to posit that contrary to the report of Elite Surveyors, no rain fell that day. Instead, it
asserts that some of the cargoes were already wet on delivery by PSI outside the PSI warehouse but such
notwithstanding Calicdan directed Morales to proceed with the delivery to Hizon Laboratories, Inc.
While Calicdan testified that he received the purported telephone call of Morales on July 29, 1992, he
failed to specifically declare what time he received the call. As to whether the call was made at the PSI
warehouse when the shipment was stripped from the airport containers, or when the cargoes were
already in transit to Antipolo, it is not determinable. Aside from that phone call, petitioner admitted that
it had no documentary evidence to prove that at the time it received the cargoes, a part of it was wet,
damaged or in bad condition.[60]
The 4-page weather data furnished by PAGASA[61] on request of Sanchez Brokerage hardly impresses,
no witness having identified it and interpreted the technical terms thereof.
The possibility on the other hand that, as found by Hizon Laboratories, Inc., the oral contraceptives were
damaged by rainwater while in transit to Antipolo City is more likely then. Sanchez himself testified that
in the past, there was a similar instance when the shipment of Wyeth-Suaco was also found to be wet by
rain.
ATTY. FLORES:
Q: Was there any instance that a shipment of this nature, oral contraceptives, that arrived at the NAIA
were damaged and claimed by the Wyeth-Suaco without any question?
WITNESS:
A: Yes sir, there was an instance that one cartoon (sic) were wetted (sic) but Wyeth-Suaco did not claim
anything against us.
ATTY. FLORES:
Q: HOW IS IT?
WITNESS:
A: We experienced, there was a time that we experienced that there was a cartoon (sic) wetted (sic) up
to the bottom are wet specially during rainy season.[62]
Since petitioner received all the cargoes in good order and condition at the time they were turned over
by the PSI warehouseman, and upon their delivery to Hizon Laboratories, Inc. a portion thereof was
found to be in bad order, it was incumbent on petitioner to prove that it exercised extraordinary
diligence in the carriage of the goods. It did not, however. Hence, its presumed negligence under Article
1735 of the Civil Code remains unrebutted.
 COMM REV TRANSPORTATION LAW CASES

WHEREFORE, the August 10, 2000 Decision of the Court of Appeals is hereby AFFIRMED.

Costs against petitioner.

SO ORDERED. CARPIO MORALES, J.:

SPOUSES DANTE CRUZ and G.R. No. 186312

LEONORA CRUZ, Spouses Dante and Leonora Cruz (petitioners) lodged a Complaint on January 25, 20011[1]
against Sun Holidays, Inc. (respondent) with the Regional Trial Court (RTC) of Pasig City for damages
Petitioners, Present: 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.
CARPIO MORALES, J.,

Chairperson,
The stay of the newly wed Ruelito and his wife at the Resort from September 9 to 11, 2000
BRION, 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.
- versus - BERSAMIN,

ABAD,* and
Miguel C. Matute (Matute),2[2] a scuba diving instructor and one of the survivors, gave his
SUN HOLIDAYS, INC., VILLARAMA, JR., JJ.
account of the incident that led to the filing of the complaint as follows:

Respondent.

Promulgated:
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
June 29, 2010
because of strong winds and heavy rains.

x-------------------------------------------------x
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.

DECISION

10
COMM REV TRANSPORTATION LAW CASES

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. 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[6]
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).
In its Answer,7[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.

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[3]
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[8] He added that M/B Coco Beach III met all four conditions on September 11,
2000,9[9] but a subasco or squall, characterized by strong winds and big waves, suddenly occurred,
causing the boat to capsize.10[10]

Petitioners, by letter of October 26, 2000,4[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[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.

11
COMM REV TRANSPORTATION LAW CASES
By Decision of February 16, 2005,11[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[12] they appealed to the Court of Appeals.
By Decision of August 19, 2008,13[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[14] they filed the present Petition for Review.15[15]
12
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[16]
The petition is impressed with merit.
Petitioners correctly rely on De Guzman v. Court of Appeals17[17] 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.
COMM REV TRANSPORTATION LAW CASES

The above article makes no distinction between one whose principal business activity is the resort operators offering tour packages to factor the transportation fee in arriving at the tour package
carrying of persons or goods or both, and one who does such carrying only as an ancillary activity (in price. That guests who opt not to avail of respondents ferry services pay the same amount is likewise
local idiom, as a sideline). Article 1732 also carefully avoids making any distinction between a person or inconsequential. These guests may only be deemed to have overpaid.
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 As De Guzman instructs, Article 1732 of the Civil Code defining common carriers has
Article 1733 deliberately refrained from making such distinctions. 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
So understood, the concept of common carrier under Article 1732 may be seen to coincide persons or goods in order to avoid the legal obligations and liabilities of common carriers.
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:
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[19] They are bound to carry the passengers
. . . every person that now or hereafter may own, operate, manage, or control in the safely as far as human care and foresight can provide, using the utmost diligence of very cautious
Philippines, for hire or compensation, with general or limited clientele, whether permanent, occasional persons, with due regard for all the circumstances.20[20]
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
When a passenger dies or is injured in the discharge of a contract of carriage, it is presumed that the
other similar public services . . .18[18] (emphasis and underscoring supplied.)
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[21]

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

13
COMM REV TRANSPORTATION LAW CASES

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[22] By the testimony of Dr. Frisco Nilo,
supervising weather specialist of PAGASA, squalls are to be expected under such weather
condition.23[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.

14
COMM REV TRANSPORTATION LAW CASES

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 Article 176427[27] vis--vis Article 220628[28] of the Civil Code holds the common carrier in breach of its
occurrence, or the failure of the debtors to comply with their obligations, must have been independent contract of carriage that results in the death of a passenger liable to pay the following: (1) indemnity for
of human will; (b) the event that constituted the caso fortuito must have been impossible to foresee or, death, (2) indemnity for loss of earning capacity and (3) moral damages.
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[24]
Petitioners are entitled to indemnity for the death of Ruelito which is fixed at P50,000.29[29]

To fully free a common carrier from any liability, the fortuitous event must have been the
proximate and only cause of the loss. And it should have exercised due diligence to prevent or minimize As for damages representing unearned income, the formula for its computation is:
the loss before, during and after the occurrence of the fortuitous event.25[25]

Net Earning Capacity = life expectancy x (gross annual income - reasonable and
Respondent cites the squall that occurred during the voyage as the fortuitous event that necessary living expenses).
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[26] The incident was, therefore, not completely
Life expectancy is determined in accordance with the formula:
free from human intervention.

2 / 3 x [80 age of deceased at the time of death]30[30]

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.

15
COMM REV TRANSPORTATION LAW CASES

2/3 x [80 - 28]

2/3 x [52]

The first factor, i.e., life expectancy, is computed by applying the formula (2/3 x [80 age at death]) Life expectancy = 35
adopted in the American Expectancy Table of Mortality or the Actuarial of Combined Experience Table of
Mortality.31[31]

The second factor is computed by multiplying the life expectancy by the net earnings of the deceased, Documentary evidence shows that Ruelito was earning a basic monthly salary of $90035[35] which,
i.e., the total earnings less expenses necessary in the creation of such earnings or income and less living when converted to Philippine peso applying the annual average exchange rate of $1 = P44 in 2000,36[36]
and other incidental expenses.32[32] The loss is not equivalent to the entire earnings of the deceased, amounts to P39,600. Ruelitos net earning capacity is thus computed as follows:
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[33]
Net Earning Capacity = life expectancy x (gross annual income -

reasonable and necessary living expenses).

In computing the third factor necessary living expense, Smith Bell Dodwell Shipping Agency Corp. v.
Borja34[34] teaches that when, as in this case, there is no showing that the living expenses constituted
the smaller percentage of the gross income, the living expenses are fixed at half of the gross income.
= 35 x (P475,200 - P237,600)

= 35 x (P237,600)
Applying the above guidelines, the Court determines Ruelito's life expectancy as follows:

Net Earning Capacity = P8,316,000

Life expectancy = 2/3 x [80 - age of deceased at the time of death]

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.

16
COMM REV TRANSPORTATION LAW CASES
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[37]
Under the circumstances, it is reasonable to award petitioners the amount of P100,000 as moral
damages and P100,000 as exemplary damages.38[38]
Pursuant to Article 220839[39] of the Civil Code, attorney's fees may also be awarded where exemplary
damages are awarded. The Court finds that 10% of the total amount adjudged against respondent is
reasonable for the purpose.
Finally, Eastern Shipping Lines, Inc. v. Court of Appeals40[40] teaches that when an obligation, regardless
of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts is breached, the contravenor can
be held liable for payment of interest in the concept of actual and compensatory damages, subject to the
following rules, to wit
1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a
loan or forbearance of money, the interest due should be that which may have been stipulated in
17
writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially
demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be computed
from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article
1169 of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest
on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per
annum. No interest, however, shall be adjudged on unliquidated claims or damages except when or until
the demand can be established with reasonable certainty. Accordingly, where the demand is established
with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or
extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the
time the demand is made, the interest shall begin to run only from the date the judgment of the court is
made (at which time the quantification of damages may be deemed to have been reasonably
ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount
finally adjudged.
3. When the judgment of the court awarding a sum of money becomes final and executory, the
rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per
annum from such finality until its satisfaction, this interim period being deemed to be by then an
equivalent to a forbearance of credit. (emphasis supplied).
Since the amounts payable by respondent have been determined with certainty only in the
present petition, the interest due shall be computed upon the finality of this decision at the rate of 12%
per annum until satisfaction, in accordance with paragraph number 3 of the immediately cited guideline
in Easter Shipping Lines, Inc.
WHEREFORE, the Court of Appeals Decision of August 19, 2008 is REVERSED and SET ASIDE.
Judgment is rendered in favor of petitioners ordering respondent to pay petitioners the following: (1)
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.
COMM REV TRANSPORTATION LAW CASES
SO ORDERED.
CONCHITA CARPIO MORALES
Associate Justice
Chairperson
[G.R. No. 144274. September 20, 2004]
NOSTRADAMUS VILLANUEVA petitioner, vs. PRISCILLA R. DOMINGO and LEANDRO LUIS R. DOMINGO,
respondents.
DECISION
CORONA, J.:
This is a petition to review the decision[1] of the Court of Appeals in CA-G.R. CV No. 52203 affirming in
turn the decision of the trial court finding petitioner liable to respondent for damages. The dispositive
portion read:
WHEREFORE, the appealed decision is hereby AFFIRMED except the award of attorneys fees including
appearance fees which is DELETED.
SO ORDERED.[2]
The facts of the case, as summarized by the Court of Appeals, are as follows:
[Respondent] Priscilla R. Domingo is the registered owner of a silver Mitsubishi Lancer Car model 1980
bearing plate No. NDW 781 91 with [co-respondent] Leandro Luis R. Domingo as authorized driver.
[Petitioner] Nostradamus Villanueva was then the registered owner of a green Mitsubishi Lancer bearing
Plate No. PHK 201 91.
On 22 October 1991 at about 9:45 in the evening, following a green traffic light, [respondent] Priscilla
Domingos silver Lancer car with Plate No. NDW 781 91 then driven by [co-respondent] Leandro Luis R.
Domingo was cruising along the middle lane of South Superhighway at moderate speed from north to
south. Suddenly, a green Mitsubishi Lancer with plate No. PHK 201 91 driven by Renato Dela Cruz
Ocfemia darted from Vito Cruz Street towards the South Superhighway directly into the path of NDW
781 91 thereby hitting and bumping its left front portion. As a result of the impact, NDW 781 91 hit two
(2) parked vehicles at the roadside, the second hitting another parked car in front of it.
18
Per Traffic Accident Report prepared by Traffic Investigator Pfc. Patrocinio N. Acido, Renato dela Cruz
Ocfemia was driving with expired license and positive for alcoholic breath. Hence, Manila Assistant City
Prosecutor Oscar A. Pascua recommended the filing of information for reckless imprudence resulting to
(sic) damage to property and physical injuries.
The original complaint was amended twice: first, impleading Auto Palace Car Exchange as commercial
agent and/or buyer-seller and second, impleading Albert Jaucian as principal defendant doing business
under the name and style of Auto Palace Car Exchange.
Except for Ocfemia, all the defendants filed separate answers to the complaint. [Petitioner] Nostradamus
Villanueva claimed that he was no longer the owner of the car at the time of the mishap because it was
swapped with a Pajero owned by Albert Jaucian/Auto Palace Car Exchange. For her part, Linda Gonzales
declared that her presence at the scene of the accident was upon the request of the actual owner of the
Mitsubishi Lancer (PHK 201 91) [Albert Jaucian] for whom she had been working as agent/seller. On the
other hand, Auto Palace Car Exchange represented by Albert Jaucian claimed that he was not the
registered owner of the car. Moreover, it could not be held subsidiary liable as employer of Ocfemia
because the latter was off-duty as utility employee at the time of the incident. Neither was Ocfemia
performing a duty related to his employment.[3]
After trial, the trial court found petitioner liable and ordered him to pay respondent actual, moral and
exemplary damages plus appearance and attorneys fees:
WHEREFORE, judgment is hereby rendered for the plaintiffs, ordering Nostradamus Villanueva to pay the
amount of P99,580 as actual damages, P25,000.00 as moral damages, P25,000.00 as exemplary damages
and attorneys fees in the amount of P10,000.00 plus appearance fees of P500.00 per hearing with legal
interest counted from the date of judgment. In conformity with the law on equity and in accordance with
the ruling in First Malayan Lending and Finance Corporation vs. Court of Appeals (supra), Albert Jaucian
is hereby ordered to indemnify Nostradamus Villanueva for whatever amount the latter is hereby
ordered to pay under the judgment.
SO ORDERED.[4]
The CA upheld the trial courts decision but deleted the award for appearance and attorneys fees
because the justification for the grant was not stated in the body of the decision. Thus, this petition for
review which raises a singular issue:
MAY THE REGISTERED OWNER OF A MOTOR VEHICLE BE HELD LIABLE FOR DAMAGES ARISING FROM A
VEHICULAR ACCIDENT INVOLVING HIS MOTOR VEHICLE WHILE BEING OPERATED BY THE EMPLOYEE OF
ITS BUYER WITHOUT THE LATTERS CONSENT AND KNOWLEDGE?[5]
Yes.
We have consistently ruled that the registered owner of any vehicle is directly and primarily responsible
to the public and third persons while it is being operated.[6] The rationale behind such doctrine was
explained way back in 1957 in Erezo vs. Jepte[7]:
The principle upon which this doctrine is based is that in dealing with vehicles registered under the
Public Service Law, the public has the right to assume or presume that the registered owner is the actual
owner thereof, for it would be difficult for the public to enforce the actions that they may have for
COMM REV TRANSPORTATION LAW CASES
injuries caused to them by the vehicles being negligently operated if the public should be required to
prove who the actual owner is. How would the public or third persons know against whom to enforce
their rights in case of subsequent transfers of the vehicles? We do not imply by his doctrine, however,
that the registered owner may not recover whatever amount he had paid by virtue of his liability to third
persons from the person to whom he had actually sold, assigned or conveyed the vehicle.
Under the same principle the registered owner of any vehicle, even if not used for a public service, should
primarily be responsible to the public or to third persons for injuries caused the latter while the vehicle is
being driven on the highways or streets. The members of the Court are in agreement that the defendant-
appellant should be held liable to plaintiff-appellee for the injuries occasioned to the latter because of the
negligence of the driver, even if the defendant-appellant was no longer the owner of the vehicle at the
time of the damage because he had previously sold it to another. What is the legal basis for his
(defendant-appellants) liability?
There is a presumption that the owner of the guilty vehicle is the defendant-appellant as he is the
registered owner in the Motor Vehicles Office. Should he not be allowed to prove the truth, that he had
sold it to another and thus shift the responsibility for the injury to the real and actual owner? The
defendant holds the affirmative of this proposition; the trial court held the negative.
The Revised Motor Vehicle Law (Act No. 3992, as amended) provides that no vehicle may be used or
operated upon any public highway unless the same is property registered. It has been stated that the
system of licensing and the requirement that each machine must carry a registration number,
conspicuously displayed, is one of the precautions taken to reduce the danger of injury to pedestrians
and other travelers from the careless management of automobiles. And to furnish a means of
ascertaining the identity of persons violating the laws and ordinances, regulating the speed and
operation of machines upon the highways (2 R.C.L. 1176). Not only are vehicles to be registered and that
no motor vehicles are to be used or operated without being properly registered for the current year, but
that dealers in motor vehicles shall furnish thee Motor Vehicles Office a report showing the name and
address of each purchaser of motor vehicle during the previous month and the manufacturers serial
number and motor number. (Section 5(c), Act No. 3992, as amended.)
Registration is required not to make said registration the operative act by which ownership in vehicles is
transferred, as in land registration cases, because the administrative proceeding of registration does not
bear any essential relation to the contract of sale between the parties (Chinchilla vs. Rafael and
Verdaguer, 39 Phil. 888), but to permit the use and operation of the vehicle upon any public highway
(section 5 [a], Act No. 3992, as amended). The main aim of motor vehicle registration is to identify the
owner so that if any accident happens, or that any damage or injury is caused by the vehicle on the
public highways, responsibility therefore can be fixed on a definite individual, the registered owner.
Instances are numerous where vehicles running on public highways caused accidents or injuries to
pedestrians or other vehicles without positive identification of the owner or drivers, or with very scant
means of identification. It is to forestall these circumstances, so inconvenient or prejudicial to the public,
that the motor vehicle registration is primarily ordained, in the interest of the determination of persons
responsible for damages or injuries caused on public highways:
One of the principal purposes of motor vehicles legislation is identification of the vehicle and of the
operator, in case of accident; and another is that the knowledge that means of detection are always
available may act as a deterrent from lax observance of the law and of the rules of conservative and safe
operation. Whatever purpose there may be in these statutes, it is subordinate at the last to the primary
19
purpose of rendering it certain that the violator of the law or of the rules of safety shall not escape
because of lack of means to discover him. The purpose of the statute is thwarted, and the displayed
number becomes a share and delusion, if courts would entertain such defenses as that put forward by
appellee in this case. No responsible person or corporation could be held liable for the most outrageous
acts of negligence, if they should be allowed to pace a middleman between them and the public, and
escape liability by the manner in which they recompense servants. (King vs. Brenham Automobile Co.,
Inc. 145 S.W. 278, 279.)
With the above policy in mind, the question that defendant-appellant poses is: should not the registered
owner be allowed at the trial to prove who the actual and real owner is, and in accordance with such
proof escape or evade responsibility by and lay the same on the person actually owning the vehicle? We
hold with the trial court that the law does not allow him to do so; the law, with its aim and policy in
mind, does not relieve him directly of the responsibility that the law fixes and places upon him as an
incident or consequence of registration. Were a registered owner allowed to evade responsibility by
proving who the supposed transferee or owner is, it would be easy for him, by collusion with others or
otherwise, to escape said responsibility and transfer the same to an indefinite person, or to one who
possesses no property with which to respond financially for the damage or injury done. A victim of
recklessness on the public highways is usually without means to discover or identify the person actually
causing the injury or damage. He has no means other than by a recourse to the registration in the Motor
Vehicles Office to determine who is the owner. The protection that the law aims to extend to him would
become illusory were the registered owner given the opportunity to escape liability by disproving his
ownership. If the policy of the law is to be enforced and carried out, the registered owner should not be
allowed to prove the contrary to the prejudice of the person injured, that is, to prove that a third person
or another has become the owner, so that he may thereby be relieved of the responsibility to the injured
person.
The above policy and application of the law may appear quite harsh and would seem to conflict with
truth and justice. We do not think it is so. A registered owner who has already sold or transferred a
vehicle has the recourse to a third-party complaint, in the same action brought against him to recover for
the damage or injury done, against the vendee or transferee of the vehicle. The inconvenience of the suit
is no justification for relieving him of liability; said inconvenience is the price he pays for failure to
comply with the registration that the law demands and requires.
In synthesis, we hold that the registered owner, the defendant-appellant herein, is primarily responsible
for the damage caused to the vehicle of the plaintiff-appellee, but he (defendant-appellant) has a right to
be indemnified by the real or actual owner of the amount that he may be required to pay as damage for
the injury caused to the plaintiff-appellant.[8]
Petitioner insists that he is not liable for damages since the driver of the vehicle at the time of the
accident was not an authorized driver of the new (actual) owner of the vehicle. He claims that the ruling
in First Malayan Leasing and Finance Corporation vs. CA[9] implies that to hold the registered owner
liable for damages, the driver of the vehicle must have been authorized, allowed and permitted by its
actual owner to operate and drive it. Thus, if the vehicle is driven without the knowledge and consent of
the actual owner, then the registered owner cannot be held liable for damages.
He further argues that this was the underlying theory behind Duavit vs. CA[10] wherein the court
absolved the registered owner from liability after finding that the vehicle was virtually stolen from the
COMM REV TRANSPORTATION LAW CASES
owners garage by a person who was neither authorized nor employed by the owner. Petitioner
concludes that the ruling in Duavit and not the one in First Malayan should be applicable to him.
Petitioners argument lacks merit. Whether the driver is authorized or not by the actual owner is
irrelevant to determining the liability of the registered owner who the law holds primarily and directly
responsible for any accident, injury or death caused by the operation of the vehicle in the streets and
highways. To require the driver of the vehicle to be authorized by the actual owner before the registered
owner can be held accountable is to defeat the very purpose why motor vehicle legislations are enacted
in the first place.
Furthermore, there is nothing in First Malayan which even remotely suggests that the driver must be
authorized before the registered owner can be held accountable. In First Malayan, the registered owner,
First Malayan Corporation, was held liable for damages arising from the accident even if the vehicle
involved was already owned by another party:
This Court has consistently ruled that regardless of who the actual owner is of a motor vehicle might be,
the registered owner is the operator of the same with respect to the public and third persons, and as
such, directly and primarily responsible for the consequences of its operation. In contemplation of law,
the owner/operator of record is the employer of the driver, the actual operator and employer being
considered merely as his agent (MYC-Agro-Industrial Corporation vs. Vda. de Caldo, 132 SCRA 10, citing
Vargas vs. Langcay, 6 SCRA 174; Tamayo vs. Aquino, 105 Phil. 949).
We believe that it is immaterial whether or not the driver was actually employed by the operator of
record. It is even not necessary to prove who the actual owner of the vehicle and the employer of the
driver is. Granting that, in this case, the father of the driver is the actual owner and that he is the actual
employer, following the well-settled principle that the operator of record continues to be the operator of
the vehicle in contemplation of law, as regards the public and third person, and as such is responsible for
the consequences incident to its operation, we must hold and consider such owner-operator of record as
the employer, in contemplation of law, of the driver. And, to give effect to this policy of law as
enunciated in the above cited decisions of this Court, we must now extend the same and consider the
actual operator and employer as the agent of the operator of record.[11]
Contrary to petitioners position, the First Malayan ruling is applicable to him since the case involves the
same set of facts ― the registered owner had previously sold the vehicle to someone else and was being
driven by an employee of the new (actual) owner. Duavit is inapplicable since the vehicle there was not
transferred to another; the registered and the actual owner was one and the same person. Besides, in
Duavit, the defense of the registered owner, Gilberto Duavit, was that the vehicle was practically stolen
from his garage by Oscar Sabiano, as affirmed by the latter:
Defendant Sabiano, in his testimony, categorically admitted that he took the jeep from the garage of
defendant Duavit without the consent and authority of the latter. He testified further that Duavit even
filed charges against him for the theft of the jeep but which Duavit did not push through as his (Sabianos)
parents apologized to Duavit on his behalf.[12]
As correctly pointed out by the CA, the Duavit ruling is not applicable to petitioners case since the
circumstance of unauthorized use was not present. He in fact voluntarily delivered his car to Albert
Jaucian as part of the downpayment for a vehicle he purchased from Jaucian. Thus, he could not claim
that the vehicle was stolen from him since he voluntarily ceded possession thereof to Jaucian. It was the
20
latter, as the new (actual) owner, who could have raised the defense of theft to prove that he was not
liable for the acts of his employee Ocfemia. Thus, there is no reason to apply the Duavit ruling to this
case.
The ruling in First Malayan has been reiterated in BA Finance Corporation vs. CA[13] and more recently
in Aguilar, Sr. vs. Commercial Savings Bank.[14] In BA Finance, we held the registered owner liable even
if, at the time of the accident, the vehicle was leased by another party and was driven by the lessees
employee. In Aguilar, the registered owner-bank answered for damages for the accident even if the
vehicle was being driven by the Vice-President of the Bank in his private capacity and not as an officer of
the Bank, as claimed by the Bank. We find no reason to deviate from these decisions.
The main purpose of vehicle registration is the easy identification of the owner who can be held
responsible for any accident, damage or injury caused by the vehicle. Easy identification prevents
inconvenience and prejudice to a third party injured by one who is unknown or unidentified. To allow a
registered owner to escape liability by claiming that the driver was not authorized by the new (actual)
owner results in the public detriment the law seeks to avoid.
Finally, the issue of whether or not the driver of the vehicle during the accident was authorized is not at
all relevant to determining the liability of the registered owner. This must be so if we are to comply with
the rationale and principle behind the registration requirement under the motor vehicle law.
WHEREFORE, the petition is hereby DENIED. The January 26, 2000 decision of the Court of Appeals is
AFFIRMED.
SO ORDERED.
G.R. No. 168433 February 10, 2009
UCPB GENERAL INSURANCE CO., INC., Petitioner,
vs.
ABOITIZ SHIPPING CORP. EAGLE EXPRESS LINES, DAMCO INTERMODAL SERVICES, INC., and PIMENTEL
CUSTOMS BROKERAGE CO., Respondents.
DECISION
TINGA, J.:
UCPB General Insurance Co., Inc. (UCPB) assails the Decision1 of the Court of Appeals dated October 29,
2004, which reversed the Decision2 dated November 29, 1999 of the Regional Trial Court of Makati City,
Branch 146, and its Resolution3 dated June 14, 2005, which denied UCPB’s motion for reconsideration.
The undisputed facts, culled from the assailed Decision, are as follows:
On June 18, 1991, three (3) units of waste water treatment plant with accessories were purchased by
San Miguel Corporation (SMC for brevity) from Super Max Engineering Enterprises, Co., Ltd. of Taipei,
Taiwan. The goods came from Charleston, U.S.A. and arrived at the port of Manila on board MV
"SCANDUTCH STAR". The same were then transported to Cebu on board MV "ABOITIZ SUPERCON II".
After its arrival at the port of Cebu and clearance from the Bureau of Customs, the goods were delivered
COMM REV TRANSPORTATION LAW CASES
to and received by SMC at its plant site on August 2, 1991. It was then discovered that one electrical
motor of DBS Drive Unit Model DE-30-7 was damaged.
Pursuant to an insurance agreement, plaintiff-appellee paid SMC the amount of ₱1,703,381.40
representing the value of the damaged unit. In turn, SMC executed a Subrogation Form dated March 31,
1992 in favor of plaintiff-appellee.
Consequently, plaintiff-appellee filed a Complaint on July 21, 1992 as subrogee of SMC seeking to
recover from defendants the amount it had paid SMC.
On September 20, 1994, plaintiff-appellee moved to admit its Amended Complaint whereby it impleaded
East Asiatic Co. Ltd. (EAST for brevity) as among the defendants for being the "general agent" of DAMCO.
In its Order dated September 23, 1994, the lower court admitted the said amended complaint.
Upon plaintiff-appellee’s motion, defendant DAMCO was declared in default by the lower court in its
Order dated January 6, 1995.
In the meantime, on January 25, 1995, defendant EAST filed a Motion for Preliminary Hearing on its
affirmative defenses seeking the dismissal of the complaint against it on the ground of prescription,
which motion was however denied by the court a quo in its Order dated September 1, 1995. Such denial
was elevated by defendant EAST to this Court through a Petition for Certiorari on October 30, 1995 in CA
G.R. SP No. 38840. Eventually, this Court issued its Decision dated February 14, 1996 setting aside the
lower court’s assailed order of denial and further ordering the dismissal of the complaint against
defendant EAST. Plaintiff-appellee moved for reconsideration thereof but the same was denied by this
Court in its Resolution dated November 8, 1996. As per Entry of Judgment, this Court’s decision ordering
the dismissal of the complaint against defendant EAST became final and executory on December 5, 1996.
Accordingly, the court a quo noted the dismissal of the complaint against defendant EAST in its Order
dated December 5, 1997. Thus, trial ensued with respect to the remaining defendants.
On November 29, 1999, the lower court rendered its assailed Decision, the dispositive portion of which
reads:
WHEREFORE, all the foregoing premises considered, judgment is hereby rendered declaring DAMCO
Intermodal Systems, Inc., Eagle Express Lines, Inc. and defendant Aboitiz Shipping solidarily liable to
plaintiff-subrogee for the damaged shipment and orders them to pay plaintiff jointly and severally the
sum of ₱1,703,381.40.
No costs.
SO ORDERED.
Not convinced, defendants-appellants EAGLE and ABOITIZ now come to this Court through their
respective appeals x x x4
The appellate court, as previously mentioned, reversed the decision of the trial court and ruled that
UCPB’s right of action against respondents did not accrue because UCPB failed to file a formal notice of
claim within 24 hours from (SMC’s) receipt of the damaged merchandise as required under Art. 366 of
the Code of Commerce. According to the Court of Appeals, the filing of a claim within the time limitation
21
in Art. 366 is a condition precedent to the accrual of a right of action against the carrier for the damages
caused to the merchandise.
In its Memorandum5 dated February 8, 2007, UCPB asserts that the claim requirement under Art. 366 of
the Code of Commerce does not apply to this case because the damage to the merchandise had already
been known to the carrier. Interestingly, UCPB makes this revelation: "x x x damage to the cargo was
found upon discharge from the foreign carrier onto the International Container Terminal Services, Inc.
(ICTSI) in the presence of the carrier’s representative who signed the Request for Bad Order Survey6 and
the Turn Over of Bad Order Cargoes.7 On transshipment, the cargo was already damaged when loaded
on board the inter-island carrier."8 This knowledge, UCPB argues, dispenses with the need to give the
carrier a formal notice of claim. Incidentally, the carrier’s representative mentioned by UCPB as present
at the time the merchandise was unloaded was in fact a representative of respondent Eagle Express
Lines (Eagle Express).
UCPB claims that under the Carriage of Goods by Sea Act (COGSA), notice of loss need not be given if the
condition of the cargo has been the subject of joint inspection such as, in this case, the inspection in the
presence of the Eagle Express representative at the time the cargo was opened at the ICTSI.
UCPB further claims that the issue of the applicability of Art. 366 of the Code of Commerce was never
raised before the trial court and should, therefore, not have been considered by the Court of Appeals.
Eagle Express, in its Memorandum9 dated February 7, 2007, asserts that it cannot be held liable for the
damage to the merchandise as it acted merely as a freight forwarder’s agent in the transaction. It
allegedly facilitated the transshipment of the cargo from Manila to Cebu but represented the interest of
the cargo owner, and not the carrier’s. The only reason why the name of the Eagle Express
representative appeared on the Permit to Deliver Imported Goods was that the form did not have a
space for the freight forwarder’s agent, but only for the agent of the shipping line. Moreover, UCPB had
previously judicially admitted that upon verification from the Bureau of Customs, it was East Asiatic Co.,
Ltd. (East Asiatic), regarding whom the original complaint was dismissed on the ground of prescription,
which was the real agent of DAMCO Intermodal Services, Inc. (DAMCO), the ship owner.
Eagle Express argues that the applicability of Art. 366 of the Code of Commerce was properly raised as an
issue before the trial court as it mentioned this issue as a defense in its Answer to UCPB’s Amended
Complaint. Hence, UCPB’s contention that the question was raised for the first time on appeal is
incorrect.
Aboitiz Shipping Corporation (Aboitiz), on the other hand, points out, in its Memorandum 10 dated March
29, 2007, that it obviously cannot be held liable for the damage to the cargo which, by UCPB’s admission,
was incurred not during transshipment to Cebu on
board one of Aboitiz’s vessels, but was already existent at the time of unloading in Manila. Aboitiz also
argues that Art. 366 of the Code of Commerce is applicable and serves as a condition precedent to the
accrual of UCPB’s cause of action against it.lawphil.net
The Memorandum11 dated June 3, 2008, filed by Pimentel Customs Brokerage Co. (Pimentel Customs), is
also a reiteration of the applicability of Art. 366 of the Code of Commerce.
COMM REV TRANSPORTATION LAW CASES
It should be stated at the outset that the issue of whether a claim should have been made by SMC, or
UCPB as SMC’s subrogee, within the 24-hour period prescribed by Art. 366 of the Code of Commerce was
squarely raised before the trial court.
In its Answer to Amended Complaint12 dated May 10, 1993, Eagle Express averred, thus:
The amended complaint states no cause of action under the provisions of the Code of Commerce and
the terms of the bill of lading; consignee made no claim against herein defendant within twenty four (24)
hours following the receipt of the alleged cargo regarding the condition in which said cargo was
delivered; however, assuming arguendo that the damage or loss, if any, could not be ascertained from
the outside part of the shipment, consignee never made any claim against herein defendant at the time
of receipt of said cargo; herein defendant learned of the alleged claim only upon receipt of the
complaint.13
Likewise, in its Answer14 dated September 21, 1992, Aboitiz raised the defense that UCPB did not file a
claim with it and that the complaint states no cause of action.
UCPB obviously made a gross misrepresentation to the Court when it claimed that the issue regarding
the applicability of the Code of Commerce, particularly the 24-hour formal claim rule, was not raised as
an issue before the trial court. The appellate court, therefore, correctly looked into the validity of the
arguments raised by Eagle Express, Aboitiz and Pimentel Customs on this point after the trial court had
so ill-advisedly centered its decision merely on the matter of extraordinary diligence.
Interestingly enough, UCPB itself has revealed that when the shipment was discharged and opened at
the ICTSI in Manila in the presence of an Eagle Express representative, the cargo had already been found
damaged. In fact, a request for bad order survey was then made and a turnover survey of bad order
cargoes was issued, pursuant to the procedure in the discharge of bad order cargo. The shipment was
then repacked and transshipped from Manila to Cebu on board MV Aboitiz Supercon II. When the cargo
was finally received by SMC at its Mandaue City warehouse, it was found in bad order, thereby
confirming the damage already uncovered in Manila.15
In charging Aboitiz with liability for the damaged cargo, the trial court condoned UCPB’s wrongful suit
against Aboitiz to whom the damage could not have been attributable since there was no evidence
presented that the cargo was further damaged during its transshipment to Cebu. Even by the exercise of
extraordinary diligence, Aboitiz could not have undone the damage to the cargo that had already been
there when the same was shipped on board its vessel.
That said, it is nonetheless necessary to ascertain whether any of the remaining parties may still be held
liable by UCPB. The provisions of the Code of Commerce, which apply to overland, river and maritime
transportation, come into play.
Art. 366 of the Code of Commerce states:
Art. 366. Within twenty-four hours following the receipt of the merchandise, the claim against the carrier
for damage or average which may be found therein upon opening the packages, may be made, provided
that the indications of the damage or average which gives rise to the claim cannot be ascertained from
the outside part of such packages, in which case the claim shall be admitted only at the time of receipt.
22
After the periods mentioned have elapsed, or the transportation charges have been paid, no claim shall
be admitted against the carrier with regard to the condition in which the goods transported were
delivered.1avvphi1
The law clearly requires that the claim for damage or average must be made within 24 hours from
receipt of the merchandise if, as in this case, damage cannot be ascertained merely from the outside
packaging of the cargo.
In Philippine Charter Insurance Corporation v. Chemoil Lighterage Corporation,16 petitioner, as subrogee
of Plastic Group Phil., Inc. (PGP), filed suit against respondent therein for the damage found on a
shipment of chemicals loaded on board respondent’s barge. Respondent claimed that no timely notice in
accordance with Art. 366 of the Code of Commerce was made by petitioner because an employee of PGP
merely made a phone call to respondent’s Vice President, informing the latter of the contamination of
the cargo. The Court ruled that the notice of claim was not timely made or relayed to respondent in
accordance with Art. 366 of the Code of Commerce.
The requirement to give notice of loss or damage to the goods is not an empty formalism. The
fundamental reason or purpose of such a stipulation is not to relieve the carrier from just liability, but
reasonably to inform it that the shipment has been damaged and that it is charged with liability therefor,
and to give it an opportunity to examine the nature and extent of the injury. This protects the carrier by
affording it an opportunity to make an investigation of a claim while the matter is still fresh and easily
investigated so as to safeguard itself from false and fraudulent claims.17
We have construed the 24-hour claim requirement as a condition precedent to the accrual of a right of
action against a carrier for loss of, or damage to, the goods. The shipper or consignee must allege and
prove the fulfillment of the condition. Otherwise, no right of action against the carrier can accrue in favor
of the former.18
The shipment in this case was received by SMC on August 2, 1991. However, as found by the Court of
Appeals, the claims were dated October 30, 1991, more than three (3) months from receipt of the
shipment and, at that, even after the extent of the loss had already been determined by SMC’s surveyor.
The claim was, therefore, clearly filed beyond the 24-hour time frame prescribed by Art. 366 of the Code
of Commerce.
But what of the damage already discovered in the presence of Eagle Express’s representative at the time
the shipment was discharged in Manila? The Request for Bad Order Survey and Turn Over Survey of Bad
Order Cargoes, respectively dated June 17, 1999 and June 28, 1991, evince the fact that the damage to
the cargo was already made known to Eagle Express and, possibly, SMC, as of those dates.
Sec. 3(6) of the COGSA provides a similar claim mechanism as the Code of Commerce but prescribes a
period of three (3) days within which notice of claim must be given if the loss or damage is not apparent.
It states:
Sec. 3(6). Unless notice of loss or damage and the general nature of such loss or damage be given in
writing to the carrier or his agent at the port of discharge or at the time of the removal of the goods into
the custody of the person entitled to delivery thereof under the contract of carriage, such removal shall
be prima facie evidence of the delivery by the carrier of the goods as descibed in the bill of lading. If the
loss or damage is not apparent, the notice must be given within three days of the delivery.
COMM REV TRANSPORTATION LAW CASES
Said notice of loss or damage may be endorsed upon the receipt of the goods given by the person taking
delivery thereof.
The notice in writing need not be given if the state of the goods has at the time of their receipt been the
subject of joint survey or inspection.
UCPB seizes upon the last paragraph which dispenses with the written notice if the state of the goods
has been the subject of a joint survey which, in this case, was the opening of the shipment in the
presence of an Eagle Express representative. It should be noted at this point that the applicability of the
above-quoted provision of the COGSA was not raised as an issue by UCPB before the trial court and was
only cited by UCPB in its Memorandum in this case.
UCPB, however, is ambivalent as to which party Eagle Express represented in the transaction. By its own
manifestation, East Asiatic, and not Eagle Express, acted as the agent through which summons
and court notices may be served on DAMCO. It would be unjust to hold that Eagle Express’s knowledge
of the damage to the cargo is such that it served to preclude or dispense with the 24-hour notice to the
carrier required by Art. 366 of the Code of Commerce. Neither did the inspection of the cargo in which
Eagle Express’s representative had participated lead to the waiver of the written notice under the Sec.
3(6) of the COGSA. Eagle Express, after all, had acted as the agent of the freight consolidator, not that of
the carrier to whom the notice should have been made.
At any rate, the notion that the request for bad order survey and turn over survey of bad cargoes signed
by Eagle Express’s representative is construable as compliant with the notice requirement under Art. 366
of the Code of Commerce was foreclosed by the dismissal of the complaint against DAMCO’s
representative, East Asiatic.
As regards respondent Pimentel Customs, it is sufficient to acknowledge that it had no participation in
the physical handling, loading and delivery of the damaged cargo and should, therefore, be absolved of
liability.
Finally, UCPB’s misrepresentation that the applicability of the Code of Commerce was not raised as an
issue before the trial court warrants the assessment of double costs of suit against it.
WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. CV No. 68168,
dated October 29, 2004 and its Resolution dated June 14, 2005 are AFFIRMED. Double costs against
petitioner.
SO ORDERED.
DANTE O. TINGAM
Associate Justice
WE CONCUR:
G.R. No. 149547 July 4, 2008
PHILIPPINE AIRLINES, INC., petitioner,
vs.
23
HON. ADRIANO SAVILLO, Presiding Judge of RTC Branch 30 , Iloilo City, and SIMPLICIO GRIÑO,
respondents.
DECISION
CHICO-NAZARIO, J.:
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, assailing the Decision 1
dated 17 August 2001, rendered by the Court of Appeals in CA-G.R. SP No. 48664, affirming in toto the
Order2 dated 9 June 1998, of Branch 30 of the Regional Trial Court (RTC) of Iloilo City, dismissing the
Motion to Dismiss filed by petitioner Philippine Airlines Inc. (PAL) in the case entitled, Simplicio Griño v.
Philippine Airlines, Inc. and Singapore Airlines, docketed as Civil Case No. 23773.
PAL is a corporation duly organized under Philippine law, engaged in the business of providing air
carriage for passengers, baggage and cargo.3
Public respondent Hon. Adriano Savillo is the presiding judge of Branch 30 of the Iloilo RTC, where Civil
Case No. 23773 was filed; while private respondent Simplicio Griño is the plaintiff in the aforementioned
case.
The facts are undisputed.
Private respondent was invited to participate in the 1993 ASEAN Seniors Annual Golf Tournament held in
Jakarta, Indonesia. He and several companions decided to purchase their respective passenger tickets
from PAL with the following points of passage: MANILA-SINGAPORE-JAKARTA-SINGAPORE-MANILA.
Private respondent and his companions were made to understand by PAL that its plane would take them
from Manila to Singapore, while Singapore Airlines would take them from Singapore to Jakarta.4
On 3 October 1993, private respondent and his companions took the PAL flight to Singapore and arrived
at about 6:00 o’clock in the evening. Upon their arrival, they proceeded to the Singapore Airlines office
to check-in for their flight to Jakarta scheduled at 8:00 o’clock in the same evening. Singapore Airlines
rejected the tickets of private respondent and his group because they were not endorsed by PAL. It was
explained to private respondent and his group that if Singapore Airlines honored the tickets without
PAL’s endorsement, PAL would not pay Singapore Airlines for their passage. Private respondent tried to
contact PAL’s office at the airport, only to find out that it was closed.5
Stranded at the airport in Singapore and left with no recourse, private respondent was in panic and at a
loss where to go; and was subjected to humiliation, embarrassment, mental anguish, serious anxiety,
fear and distress. Eventually, private respondent and his companions were forced to purchase tickets
from Garuda Airlines and board its last flight bound for Jakarta. When they arrived in Jakarta at about
12:00 o’clock midnight, the party who was supposed to fetch them from the airport had already left and
they had to arrange for their transportation to the hotel at a very late hour. After the series of nerve-
wracking experiences, private respondent became ill and was unable to participate in the tournament. 6
Upon his return to the Philippines, private respondent brought the matter to the attention of PAL. He
sent a demand letter to PAL on 20 December 1993 and another to Singapore Airlines on 21 March 1994.
However, both airlines disowned liability and blamed each other for the fiasco. On 15 August 1997,
private respondent filed a Complaint for Damages before the RTC docketed as Civil Case No. 23773,
seeking compensation for moral damages in the amount of P1,000,000.00 and attorney’s fees.7
COMM REV TRANSPORTATION LAW CASES
Instead of filing an answer to private respondent’s Complaint, PAL filed a Motion to Dismiss8 dated 18
September 1998 on the ground that the said complaint was barred on the ground of prescription under
Section 1(f) of Rule 16 of the Rules of Court.9 PAL argued that the Warsaw Convention,10 particularly
Article 29 thereof,11 governed this case, as it provides that any claim for damages in connection with the
international transportation of persons is subject to the prescription period of two years. Since the
Complaint was filed on 15 August 1997, more than three years after PAL received the demand letter on
25 January 1994, it was already barred by prescription.
On 9 June 1998, the RTC issued an Order12 denying the Motion to Dismiss. It maintained that the
provisions of the Civil Code and other pertinent laws of the Philippines, not the Warsaw Convention,
were applicable to the present case.
The Court of Appeals, in its assailed Decision dated 17 August 2001, likewise dismissed the Petition for
Certiorari filed by PAL and affirmed the 9 June 1998 Order of the RTC. It pronounced that the application
of the Warsaw Convention must not be construed to preclude the application of the Civil Code and other
pertinent laws. By applying Article 1144 of the Civil Code, 13 which allowed for a ten-year prescription
period, the appellate court declared that the Complaint filed by private respondent should not be
dismissed.14
Hence, the present Petition, in which petitioner raises the following issues:
I In United Airlines v. Uy,18 this Court distinguished between the (1) damage to the passenger’s baggage
THE COURT OF APPEALS ERRED IN NOT GIVING DUE COURSE TO THE PETITION AS RESPONDENT JUDGE
COMMITED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF JURSIDICTION IN DENYING PAL’S
MOTION TO DISMISS.
II
THE COURT OF APPEALS ERRED IN NOT APPLYING THE PROVISIONS OF THE WARSAW CONVENTION
DESPITE THE FACT THAT GRIÑO’S CAUSE OF ACTION AROSE FROM A BREACH OF CONTRACT FOR
INTERNATIONAL AIR TRANSPORT.
III
THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE COMPLAINT FILED BY GRIÑO BEYOND THE
TWO (2)-YEAR PERIOD PROVIDED UNDER THE WARSAW CONVENTION IS ALREADY BARRED BY
PRESCRIPTION.15
The petition is without merit.
In determining whether PAL’s Motion to Dismiss should have been granted by the trial court, it must be
ascertained if all the claims made by the private respondent in his Complaint are covered by the Warsaw
Convention, which effectively bars all claims made outside the two-year prescription period provided
under Article 29 thereof. If the Warsaw Convention covers all of private respondent’s claims, then Civil
Case No. 23773 has already prescribed and should therefore be dismissed. On the other hand, if some, if
not all, of respondent’s claims are outside the coverage of the Warsaw Convention, the RTC may still
proceed to hear the case.
24
The Warsaw Convention applies to "all international transportation of persons, baggage or goods
performed by any aircraft for hire." It seeks to accommodate or balance the interests of passengers
seeking recovery for personal injuries and the interests of air carriers seeking to limit potential liability. It
employs a scheme of strict liability favoring passengers and imposing damage caps to benefit air
carriers.16 The cardinal purpose of the Warsaw Convention is to provide uniformity of rules governing
claims arising from international air travel; thus, it precludes a passenger from maintaining an action for
personal injury damages under local law when his or her claim does not satisfy the conditions of liability
under the Convention.17
Article 19 of the Warsaw Convention provides for liability on the part of a carrier for "damages
occasioned by delay in the transportation by air of passengers, baggage or goods." Article 24 excludes
other remedies by further providing that "(1) in the cases covered by articles 18 and 19, any action for
damages, however founded, can only be brought subject to the conditions and limits set out in this
convention." Therefore, a claim covered by the Warsaw Convention can no longer be recovered under
local law, if the statute of limitations of two years has already lapsed.
Nevertheless, this Court notes that jurisprudence in the Philippines and the United States also recognizes
that the Warsaw Convention does not "exclusively regulate" the relationship between passenger and
carrier on an international flight. This Court finds that the present case is substantially similar to cases in
which the damages sought were considered to be outside the coverage of the Warsaw Convention.
and (2) humiliation he suffered at the hands of the airline’s employees. The first cause of action was
covered by the Warsaw Convention which prescribes in two years, while the second was covered by the
provisions of the Civil Code on torts, which prescribes in four years.
Similar distinctions were made in American jurisprudence. In Mahaney v. Air France,19 a passenger was
denied access to an airline flight between New York and Mexico, despite the fact that she held a
confirmed reservation. The court therein ruled that if the plaintiff were to claim damages based solely on
the delay she experienced – for instance, the costs of renting a van, which she had to arrange on her
own as a consequence of the delay – the complaint would be barred by the two-year statute of
limitations. However, where the plaintiff alleged that the airlines subjected her to unjust discrimination
or undue or unreasonable preference or disadvantage, an act punishable under the United States laws,
then the plaintiff may claim purely nominal compensatory damages for humiliation and hurt feelings,
which are not provided for by the Warsaw Convention. In another case, Wolgel v. Mexicana Airlines,20
the court pronounced that actions for damages for the "bumping off" itself, rather than the incidental
damages due to the delay, fall outside the Warsaw Convention and do not prescribe in two years.
In the Petition at bar, private respondent’s Complaint alleged that both PAL and Singapore Airlines were
guilty of gross negligence, which resulted in his being subjected to "humiliation, embarrassment, mental
anguish, serious anxiety, fear and distress."21 The emotional harm suffered by the private respondent as
a result of having been unreasonably and unjustly prevented from boarding the plane should be
distinguished from the actual damages which resulted from the same incident. Under the Civil Code
provisions on tort,22 such emotional harm gives rise to compensation where gross negligence or malice is
proven.
The instant case is comparable to the case of Lathigra v. British Airways.23
COMM REV TRANSPORTATION LAW CASES

In Lathigra, it was held that the airlines’ negligent act of reconfirming the passenger’s reservation days SO ORDERED.
before departure and failing to inform the latter that the flight had already been discontinued is not
among the acts covered by the Warsaw Convention, since the alleged negligence did not occur during Ynares-Santiago, Chairperson, Austria-Martinez, Nachura, Reyes, JJ., concur.
the performance of the contract of carriage but, rather, days before the scheduled flight.
[G.R. No. 138334. August 25, 2003]
In the case at hand, Singapore Airlines barred private respondent from boarding the Singapore Airlines
flight because PAL allegedly failed to endorse the tickets of private respondent and his companions, ESTELA L. CRISOSTOMO, petitioner, vs. the Court of Appeals and CARAVAN TRAVEL & TOURS
despite PAL’s assurances to respondent that Singapore Airlines had already confirmed their passage. INTERNATIONAL, INC., respondents.
While this fact still needs to be heard and established by adequate proof before the RTC, an action based
on these allegations will not fall under the Warsaw Convention, since the purported negligence on the DECISION
part of PAL did not occur during the performance of the contract of carriage but days before the
YNARES-SANTIAGO, J.:
scheduled flight. Thus, the present action cannot be dismissed based on the statute of limitations
provided under Article 29 of the Warsaw Convention.
In May 1991, petitioner Estela L. Crisostomo contracted the services of respondent Caravan Travel and
Tours International, Inc. to arrange and facilitate her booking, ticketing and accommodation in a tour
Had the present case merely consisted of claims incidental to the airlines’ delay in transporting their
dubbed Jewels of Europe. The package tour included the countries of England, Holland, Germany,
passengers, the private respondent’s Complaint would have been time-barred under Article 29 of the
Austria, Liechstenstein, Switzerland and France at a total cost of P74,322.70. Petitioner was given a 5%
Warsaw Convention. However, the present case involves a special species of injury resulting from the
discount on the amount, which included airfare, and the booking fee was also waived because
failure of PAL and/or Singapore Airlines to transport private respondent from Singapore to Jakarta – the
petitioners niece, Meriam Menor, was respondent companys ticketing manager.
profound distress, fear, anxiety and humiliation that private respondent experienced when, despite
PAL’s earlier assurance that Singapore Airlines confirmed his passage, he was prevented from boarding
Pursuant to said contract, Menor went to her aunts residence on June 12, 1991 a Wednesday to deliver
the plane and he faced the daunting possibility that he would be stranded in Singapore Airport because
petitioners travel documents and plane tickets. Petitioner, in turn, gave Menor the full payment for the
the PAL office was already closed.
package tour. Menor then told her to be at the Ninoy Aquino International Airport (NAIA) on Saturday,
two hours before her flight on board British Airways.
These claims are covered by the Civil Code provisions on tort, and not within the purview of the Warsaw
Convention. Hence, the applicable prescription period is that provided under Article 1146 of the Civil
Without checking her travel documents, petitioner went to NAIA on Saturday, June 15, 1991, to take the
Code:
flight for the first leg of her journey from Manila to Hongkong. To petitioners dismay, she discovered that
the flight she was supposed to take had already departed the previous day. She learned that her plane
Art. 1146. The following actions must be instituted within four years:
ticket was for the flight scheduled on June 14, 1991. She thus called up Menor to complain.
(1) Upon an injury to the rights of the plaintiff;
Subsequently, Menor prevailed upon petitioner to take another tour the British Pageant which included
(2) Upon a quasi-delict. England, Scotland and Wales in its itinerary. For this tour package, petitioner was asked anew to pay
US$785.00 or P20,881.00 (at the then prevailing exchange rate of P26.60). She gave respondent US$300
Private respondent’s Complaint was filed with the RTC on 15 August 1997, which was less than four years or P7,980.00 as partial payment and commenced the trip in July 1991.
since PAL received his extrajudicial demand on 25 January 1994. Thus, private respondent’s claims have
not yet prescribed and PAL’s Motion to Dismiss must be denied. Upon petitioners return from Europe, she demanded from respondent the reimbursement of
P61,421.70, representing the difference between the sum she paid for Jewels of Europe and the amount
Moreover, should there be any doubt as to the prescription of private respondent’s Complaint, the more she owed respondent for the British Pageant tour. Despite several demands, respondent company
prudent action is for the RTC to continue hearing the same and deny the Motion to Dismiss. Where it refused to reimburse the amount, contending that the same was non-refundable.41[1] Petitioner was
cannot be determined with certainty whether the action has already prescribed or not, the defense of thus constrained to file a complaint against respondent for breach of contract of carriage and damages,
prescription cannot be sustained on a mere motion to dismiss based on what appears to be on the face which was docketed as Civil Case No. 92-133 and raffled to Branch 59 of the Regional Trial Court of
of the complaint.24 And where the ground on which prescription is based does not appear to be Makati City.
indubitable, the court may do well to defer action on the motion to dismiss until after trial on the
merits.25

IN VIEW OF THE FOREGOING, the instant Petition is DENIED. The assailed Decision of the Court of
Appeals in CA-G.R. SP No. 48664, promulgated on 17 August 2001 is AFFIRMED. Costs against the
petitioner.

25
COMM REV TRANSPORTATION LAW CASES
In her complaint,42[2] petitioner alleged that her failure to join Jewels of Europe was due to respondents
fault since it did not clearly indicate the departure date on the plane ticket. Respondent was also
negligent in informing her of the wrong flight schedule through its employee Menor. She insisted that
the British Pageant was merely a substitute for the Jewels of Europe tour, such that the cost of the
former should be properly set-off against the sum paid for the latter.
For its part, respondent company, through its Operations Manager, Concepcion Chipeco, denied
responsibility for petitioners failure to join the first tour. Chipeco insisted that petitioner was informed of
the correct departure date, which was clearly and legibly printed on the plane ticket. The travel
documents were given to petitioner two days ahead of the scheduled trip. Petitioner had only herself to
blame for missing the flight, as she did not bother to read or confirm her flight schedule as printed on
the ticket.
Respondent explained that it can no longer reimburse the amount paid for Jewels of Europe, considering
that the same had already been remitted to its principal in Singapore, Lotus Travel Ltd., which had
already billed the same even if petitioner did not join the tour. Lotus European tour organizer, Insight
International Tours Ltd., determines the cost of a package tour based on a minimum number of
projected participants. For this reason, it is accepted industry practice to disallow refund for individuals
who failed to take a booked tour.43[3]
Lastly, respondent maintained that the British Pageant was not a substitute for the package tour that
petitioner missed. This tour was independently procured by petitioner after realizing that she made a
mistake in missing her flight for Jewels of Europe. Petitioner was allowed to make a partial payment of
only US$300.00 for the second tour because her niece was then an employee of the travel agency.
Consequently, respondent prayed that petitioner be ordered to pay the balance of P12,901.00 for the
British Pageant package tour.
After due proceedings, the trial court rendered a decision,44[4] the dispositive part of which reads:
WHEREFORE, premises considered, judgment is hereby rendered as follows:
1. Ordering the defendant to return and/or refund to the plaintiff the amount of Fifty Three
Thousand Nine Hundred Eighty Nine Pesos and Forty Three Centavos (P53,989.43) with legal interest
26
thereon at the rate of twelve percent (12%) per annum starting January 16, 1992, the date when the
complaint was filed;
2. Ordering the defendant to pay the plaintiff the amount of Five Thousand (P5,000.00) Pesos as
and for reasonable attorneys fees;
3. Dismissing the defendants counterclaim, for lack of merit; and
4. With costs against the defendant.
SO ORDERED.45[5]
The trial court held that respondent was negligent in erroneously advising petitioner of her departure
date through its employee, Menor, who was not presented as witness to rebut petitioners testimony.
However, petitioner should have verified the exact date and time of departure by looking at her ticket
and should have simply not relied on Menors verbal representation. The trial court thus declared that
petitioner was guilty of contributory negligence and accordingly, deducted 10% from the amount being
claimed as refund.
Respondent appealed to the Court of Appeals, which likewise found both parties to be at fault. However,
the appellate court held that petitioner is more negligent than respondent because as a lawyer and well-
traveled person, she should have known better than to simply rely on what was told to her. This being
so, she is not entitled to any form of damages. Petitioner also forfeited her right to the Jewels of Europe
tour and must therefore pay respondent the balance of the price for the British Pageant tour. The
dispositive portion of the judgment appealed from reads as follows:
WHEREFORE, premises considered, the decision of the Regional Trial Court dated October 26, 1995 is
hereby REVERSED and SET ASIDE. A new judgment is hereby ENTERED requiring the plaintiff-appellee to
pay to the defendant-appellant the amount of P12,901.00, representing the balance of the price of the
British Pageant Package Tour, the same to earn legal interest at the rate of SIX PERCENT (6%) per annum,
to be computed from the time the counterclaim was filed until the finality of this decision. After this
decision becomes final and executory, the rate of TWELVE PERCENT (12%) interest per annum shall be
additionally imposed on the total obligation until payment thereof is satisfied. The award of attorneys
fees is DELETED. Costs against the plaintiff-appellee.
SO ORDERED.46[6]
COMM REV TRANSPORTATION LAW CASES
Upon denial of her motion for reconsideration,47[7] petitioner filed the instant petition under Rule 45 on
the following grounds:
I to the public.
It is respectfully submitted that the Honorable Court of Appeals committed a reversible error in reversing
and setting aside the decision of the trial court by ruling that the petitioner is not entitled to a refund of
the cost of unavailed Jewels of Europe tour she being equally, if not more, negligent than the private
respondent, for in the contract of carriage the common carrier is obliged to observe utmost care and
extra-ordinary diligence which is higher in degree than the ordinary diligence required of the passenger.
Thus, even if the petitioner and private respondent were both negligent, the petitioner cannot be
considered to be equally, or worse, more guilty than the private respondent. At best, petitioners
negligence is only contributory while the private respondent [is guilty] of gross negligence making the
principle of pari delicto inapplicable in the case;
II
The Honorable Court of Appeals also erred in not ruling that the Jewels of Europe tour was not indivisible
and the amount paid therefor refundable;
III
The Honorable Court erred in not granting to the petitioner the consequential damages due her as a
result of breach of contract of carriage.48[8]
Petitioner contends that respondent did not observe the standard of care required of a common carrier
when it informed her wrongly of the flight schedule. She could not be deemed more negligent than
respondent since the latter is required by law to exercise extraordinary diligence in the fulfillment of its
obligation. If she were negligent at all, the same is merely contributory and not the proximate cause of
the damage she suffered. Her loss could only be attributed to respondent as it was the direct
consequence of its employees gross negligence.
Petitioners contention has no merit.
By definition, a contract of carriage or transportation is one whereby a certain person or association of
persons obligate themselves to transport persons, things, or news from one place to another for a fixed
price.49[9] Such person or association of persons are regarded as carriers and are classified as private or
27
special carriers and common or public carriers.50[10] A common carrier is defined under Article 1732 of
the Civil Code as persons, corporations, firms or associations engaged in the business of carrying or
transporting passengers or goods or both, by land, water or air, for compensation, offering their services
It is obvious from the above definition that respondent is not an entity engaged in the business of
transporting either passengers or goods and is therefore, neither a private nor a common carrier.
Respondent did not undertake to transport petitioner from one place to another since its covenant with
its customers is simply to make travel arrangements in their behalf. Respondents services as a travel
agency include procuring tickets and facilitating travel permits or visas as well as booking customers for
tours.
While petitioner concededly bought her plane ticket through the efforts of respondent company, this
does not mean that the latter ipso facto is a common carrier. At most, respondent acted merely as an
agent of the airline, with whom petitioner ultimately contracted for her carriage to Europe. Respondents
obligation to petitioner in this regard was simply to see to it that petitioner was properly booked with
the airline for the appointed date and time. Her transport to the place of destination, meanwhile,
pertained directly to the airline.
The object of petitioners contractual relation with respondent is the latters service of arranging and
facilitating petitioners booking, ticketing and accommodation in the package tour. In contrast, the object
of a contract of carriage is the transportation of passengers or goods. It is in this sense that the contract
between the parties in this case was an ordinary one for services and not one of carriage. Petitioners
submission is premised on a wrong assumption.
The nature of the contractual relation between petitioner and respondent is determinative of the degree
of care required in the performance of the latters obligation under the contract. For reasons of public
policy, a common carrier in a contract of carriage is bound by law to carry passengers as far as human
care and foresight can provide using the utmost diligence of very cautious persons and with due regard
for all the circumstances.51[11] As earlier stated, however, respondent is not a common carrier but a
travel agency. It is thus not bound under the law to observe extraordinary diligence in the performance
of its obligation, as petitioner claims.
COMM REV TRANSPORTATION LAW CASES
Since the contract between the parties is an ordinary one for services, the standard of care required of
respondent is that of a good father of a family under Article 1173 of the Civil Code.52[12] This connotes
reasonable care consistent with that which an ordinarily prudent person would have observed when
confronted with a similar situation. The test to determine whether negligence attended the performance
of an obligation is: did the defendant in doing the alleged negligent act use that reasonable care and
caution which an ordinarily prudent person would have used in the same situation? If not, then he is
guilty of negligence.53[13]
In the case at bar, the lower court found Menor negligent when she allegedly informed petitioner of the
wrong day of departure. Petitioners testimony was accepted as indubitable evidence of Menors alleged
negligent act since respondent did not call Menor to the witness stand to refute the allegation. The
lower court applied the presumption under Rule 131, Section 3 (e)54[14] of the Rules of Court that
evidence willfully suppressed would be adverse if produced and thus considered petitioners
uncontradicted testimony to be sufficient proof of her claim.
On the other hand, respondent has consistently denied that Menor was negligent and maintains that
petitioners assertion is belied by the evidence on record. The date and time of departure was legibly
written on the plane ticket and the travel papers were delivered two days in advance precisely so that
petitioner could prepare for the trip. It performed all its obligations to enable petitioner to join the tour
and exercised due diligence in its dealings with the latter.
We agree with respondent.
Respondents failure to present Menor as witness to rebut petitioners testimony could not give rise to an
inference unfavorable to the former. Menor was already working in France at the time of the filing of the
complaint,55[15] thereby making it physically impossible for respondent to present her as a witness.
Then too, even if it were possible for respondent to secure Menors testimony, the presumption under
Rule 131, Section 3(e) would still not apply. The opportunity and possibility for obtaining Menors
testimony belonged to both parties, considering that Menor was not just respondents employee, but
28
also petitioners niece. It was thus error for the lower court to invoke the presumption that respondent
willfully suppressed evidence under Rule 131, Section 3(e). Said presumption would logically be
inoperative if the evidence is not intentionally omitted but is simply unavailable, or when the same could
have been obtained by both parties.56[16]
In sum, we do not agree with the finding of the lower court that Menors negligence concurred with the
negligence of petitioner and resultantly caused damage to the latter. Menors negligence was not
sufficiently proved, considering that the only evidence presented on this score was petitioners
uncorroborated narration of the events. It is well-settled that the party alleging a fact has the burden of
proving it and a mere allegation cannot take the place of evidence.57[17] If the plaintiff, upon whom
rests the burden of proving his cause of action, fails to show in a satisfactory manner facts upon which
he bases his claim, the defendant is under no obligation to prove his exception or defense.58[18]
Contrary to petitioners claim, the evidence on record shows that respondent exercised due diligence in
performing its obligations under the contract and followed standard procedure in rendering its services
to petitioner. As correctly observed by the lower court, the plane ticket59[19] issued to petitioner clearly
reflected the departure date and time, contrary to petitioners contention. The travel documents,
consisting of the tour itinerary, vouchers and instructions, were likewise delivered to petitioner two days
prior to the trip. Respondent also properly booked petitioner for the tour, prepared the necessary
documents and procured the plane tickets. It arranged petitioners hotel accommodation as well as food,
land transfers and sightseeing excursions, in accordance with its avowed undertaking.
Therefore, it is clear that respondent performed its prestation under the contract as well as everything
else that was essential to book petitioner for the tour. Had petitioner exercised due diligence in the
conduct of her affairs, there would have been no reason for her to miss the flight. Needless to say, after
the travel papers were delivered to petitioner, it became incumbent upon her to take ordinary care of
her concerns. This undoubtedly would require that she at least read the documents in order to assure
herself of the important details regarding the trip.
COMM REV TRANSPORTATION LAW CASES
The negligence of the obligor in the performance of the obligation renders him liable for damages for the
resulting loss suffered by the obligee. Fault or negligence of the obligor consists in his failure to exercise
due care and prudence in the performance of the obligation as the nature of the obligation so
demands.60[20] There is no fixed standard of diligence applicable to each and every contractual
obligation and each case must be determined upon its particular facts. The degree of diligence required
depends on the circumstances of the specific obligation and whether one has been negligent is a
question of fact that is to be determined after taking into account the particulars of each case.61[21]
The lower court declared that respondents employee was negligent. This factual finding, however, is not
supported by the evidence on record. While factual findings below are generally conclusive upon this
court, the rule is subject to certain exceptions, as when the trial court overlooked, misunderstood, or
misapplied some facts or circumstances of weight and substance which will affect the result of the
case.62[22]
In the case at bar, the evidence on record shows that respondent company performed its duty diligently
and did not commit any contractual breach. Hence, petitioner cannot recover and must bear her own
damage.
WHEREFORE, the instant petition is DENIED for lack of merit. The decision of the Court of Appeals in CA-
G.R. CV No. 51932 is AFFIRMED. Accordingly, petitioner is ordered to pay respondent the amount of
P12,901.00 representing the balance of the price of the British Pageant Package Tour, with legal interest
thereon at the rate of 6% per annum, to be computed from the time the counterclaim was filed until the
finality of this Decision. After this Decision becomes final and executory, the rate of 12% per annum shall
be imposed until the obligation is fully settled, this interim period being deemed to be by then an
equivalent to a forbearance of credit.63[23]
SO ORDERED.
G.R. No. 162267 July 4, 2008
29
PCI LEASING AND FINANCE, INC., petitioner,
vs.
UCPB GENERAL INSURANCE CO., INC., respondent.
DECISION
AUSTRIA-MARTINEZ, J.:
Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, seeking a
reversal of the Decision1 of the Court of Appeals (CA) dated December 12, 2003 affirming with
modification the Decision of the Regional Trial Court (RTC) of Makati City which ordered petitioner and
Renato Gonzaga (Gonzaga) to pay, jointly and severally, respondent the amount of P244,500.00 plus
interest; and the CA Resolution2 dated February 18, 2004 denying petitioner's Motion for
Reconsideration.
The facts, as found by the CA, are undisputed:
On October 19, 1990 at about 10:30 p.m., a Mitsubishi Lancer car with Plate Number PHD-206 owned by
United Coconut Planters Bank was traversing the Laurel Highway, Barangay Balintawak, Lipa City. The car
was insured with plantiff-appellee [UCPB General Insurance Inc.], then driven by Flaviano Isaac with
Conrado Geronimo, the Asst. Manager of said bank, was hit and bumped by an 18-wheeler Fuso Tanker
Truck with Plate No. PJE-737 and Trailer Plate No. NVM-133, owned by defendants-appellants PCI
Leasing & Finance, Inc. allegedly leased to and operated by defendant-appellant Superior Gas &
Equitable Co., Inc. (SUGECO) and driven by its employee, defendant appellant Renato Gonzaga.
The impact caused heavy damage to the Mitsubishi Lancer car resulting in an explosion of the rear part
of the car. The driver and passenger suffered physical injuries. However, the driver defendant-appellant
Gonzaga continued on its [sic] way to its [sic] destination and did not bother to bring his victims to the
hospital.
Plaintiff-appellee paid the assured UCPB the amount of P244,500.00 representing the insurance
coverage of the damaged car.
As the 18-wheeler truck is registered under the name of PCI Leasing, repeated demands were made by
plaintiff-appellee for the payment of the aforesaid amounts. However, no payment was made. Thus,
plaintiff-appellee filed the instant case on March 13, 1991.3
PCI Leasing and Finance, Inc., (petitioner) interposed the defense that it could not be held liable for the
collision, since the driver of the truck, Gonzaga, was not its employee, but that of its co-defendant
Superior Gas & Equitable Co., Inc. (SUGECO).4 In fact, it was SUGECO, and not petitioner, that was the
actual operator of the truck, pursuant to a Contract of Lease signed by petitioner and SUGECO.5
Petitioner, however, admitted that it was the owner of the truck in question.6
After trial, the RTC rendered its Decision dated April 15, 1999,7 the dispositive portion of which reads:
WHEREFORE, premises considered, judgment is hereby rendered in favor of plaintiff UCPB General
Insurance [respondent], ordering the defendants PCI Leasing and Finance, Inc., [petitioner] and Renato
Gonzaga, to pay jointly and severally the former the following amounts: the principal amount of
COMM REV TRANSPORTATION LAW CASES
P244,500.00 with 12% interest as of the filing of this complaint until the same is paid; P50,000.00 as
attorney's fees; and P20,000.00 as costs of suit.
SO ORDERED.8
Aggrieved by the decision of the trial court, petitioner appealed to the CA.
In its Decision dated December 12, 2003, the CA affirmed the RTC's decision, with certain modifications,
as follows:
WHEREFORE, the appealed decision dated April 15, 1999 is hereby AFFIRMED with modification that the
award of attorney's fees is hereby deleted and the rate of interest shall be six percent (6%) per annum
computed from the time of the filing of the complaint in the trial court until the finality of the judgment.
If the adjudged principal and the interest remain unpaid thereafter, the interest rate shall be twelve
percent (12%) per annum computed from the time the judgment becomes final and executory until it is
fully satisfied.
SO ORDERED.9
Petitioner filed a Motion for Reconsideration which the CA denied in its Resolution dated February 18,
2004.
Hence, herein Petition for Review.
The issues raised by petitioner are purely legal:
Whether petitioner, as registered owner of a motor vehicle that figured in a quasi-delict may be held
liable, jointly and severally, with the driver thereof, for the damages caused to third parties.
Whether petitioner, as a financing company, is absolved from liability by the enactment of Republic Act
(R.A.) No. 8556, or the Financing Company Act of 1998.
Anent the first issue, the CA found petitioner liable for the damage caused by the collision since under
the Public Service Act, if the property covered by a franchise is transferred or leased to another without
obtaining the requisite approval, the transfer is not binding on the Public Service Commission and, in
contemplation of law, the grantee continues to be responsible under the franchise in relation to the
operation of the vehicle, such as damage or injury to third parties due to collisions.10
Petitioner claims that the CA's reliance on the Public Service Act is misplaced, since the said law applies
only to cases involving common carriers, or those which have franchises to operate as public utilities. In
contrast, the case before this Court involves a private commercial vehicle for business use, which is not
offered for service to the general public.11
Petitioner's contention has partial merit, as indeed, the vehicles involved in the case at bar are not
common carriers, which makes the Public Service Act inapplicable.
However, the registered owner of the vehicle driven by a negligent driver may still be held liable under
applicable jurisprudence involving laws on compulsory motor vehicle registration and the liabilities of
employers for quasi-delicts under the Civil Code.
30
The principle of holding the registered owner of a vehicle liable for quasi-delicts resulting from its use is
well-established in jurisprudence. Erezo v. Jepte,12 with Justice Labrador as ponente, wisely explained the
reason behind this principle, thus:
Registration is required not to make said registration the operative act by which ownership in vehicles is
transferred, as in land registration cases, because the administrative proceeding of registration does not
bear any essential relation to the contract of sale between the parties (Chinchilla vs. Rafael and
Verdaguer, 39 Phil. 888), but to permit the use and operation of the vehicle upon any public highway
(section 5 [a], Act No. 3992, as amended.) The main aim of motor vehicle registration is to identify the
owner so that if any accident happens, or that any damage or injury is caused by the vehicle on the
public highways, responsibility therefor can be fixed on a definite individual, the registered owner.
Instances are numerous where vehicles running on public highways caused accidents or injuries to
pedestrians or other vehicles without positive identification of the owner or drivers, or with very scant
means of identification. It is to forestall these circumstances, so inconvenient or prejudicial to the public,
that the motor vehicle registration is primarily ordained, in the interest of the determination of persons
responsible for damages or injuries caused on public highways.
"'One of the principal purposes of motor vehicles legislation is identification of the vehicle and of the
operator, in case of accident; and another is that the knowledge that means of detection are always
available may act as a deterrent from lax observance of the law and of the rules of conservative and safe
operation. Whatever purpose there may be in these statutes, it is subordinate at the last to the primary
purpose of rendering it certain that the violator of the law or of the rules of safety shall not escape
because of lack of means to discover him.' The purpose of the statute is thwarted, and the displayed
number becomes a 'snare and delusion,' if courts would entertain such defenses as that put forward by
appellee in this case. No responsible person or corporation could be held liable for the most outrageous
acts of negligence, if they should be allowed to place a 'middleman' between them and the public, and
escape liability by the manner in which they recompense their servants." (King vs. Brenham Automobile
Co., 145 S.W. 278, 279.)
With the above policy in mind, the question that defendant-appellant poses is: should not the registered
owner be allowed at the trial to prove who the actual and real owner is, and in accordance with such
proof escape or evade responsibility and lay the same on the person actually owning the vehicle? We
hold with the trial court that the law does not allow him to do so; the law, with its aim and policy in
mind, does not relieve him directly of the responsibility that the law fixes and places upon him as an
incident or consequence of registration. Were a registered owner allowed to evade responsibility by
proving who the supposed transferee or owner is, it would be easy for him, by collusion with others or
otherwise, to escape said responsibility and transfer the same to an indefinite person, or to one who
possesses no property with which to respond financially for the damage or injury done. A victim of
recklessness on the public highways is usually without means to discover or identify the person actually
causing the injury or damage. He has no means other than by a recourse to the registration in the Motor
Vehicles Office to determine who is the owner. The protection that the law aims to extend to him would
become illusory were the registered owner given the opportunity to escape liability by disproving his
ownership. If the policy of the law is to be enforced and carried out, the registered owner should not be
allowed to prove the contrary to the prejudice of the person injured, that is, to prove that a third person
or another has become the owner, so that he may thereby be relieved of the responsibility to the injured
person.
COMM REV TRANSPORTATION LAW CASES
The above policy and application of the law may appear quite harsh and would seem to conflict with
truth and justice. We do not think it is so. A registered owner who has already sold or transferred a
vehicle has the recourse to a third-party complaint, in the same action brought against him to recover for
the damage or injury done, against the vendee or transferee of the vehicle. The inconvenience of the suit
is no justification for relieving him of liability; said inconvenience is the price he pays for failure to
comply with the registration that the law demands and requires.
In synthesis, we hold that the registered owner, the defendant-appellant herein, is primarily responsible
for the damage caused to the vehicle of the plaintiff-appellee, but he (defendant-appellant) has a right to
be indemnified by the real or actual owner of the amount that he may be required to pay as damage for
the injury caused to the plaintiff-appellant.13
The case is still good law and has been consistently cited in subsequent cases.14 Thus, there is no good
reason to depart from its tenets.
For damage or injuries arising out of negligence in the operation of a motor vehicle, the registered owner
may be held civilly liable with the negligent driver either 1) subsidiarily, if the aggrieved party seeks relief
based on a delict or crime under Articles 100 and 103 of the Revised Penal Code; or 2) solidarily, if the
complainant seeks relief based on a quasi-delict under Articles 2176 and 2180 of the Civil Code. It is the
option of the plaintiff whether to waive completely the filing of the civil action, or institute it with the
criminal action, or file it separately or independently of a criminal action;15 his only limitation is that he
cannot recover damages twice for the same act or omission of the defendant.16
In case a separate civil action is filed, the long-standing principle is that the registered owner of a motor
vehicle is primarily and directly responsible for the consequences of its operation, including the
negligence of the driver, with respect to the public and all third persons.17 In contemplation of law, the
registered owner of a motor vehicle is the employer of its driver, with the actual operator and employer,
such as a lessee, being considered as merely the owner's agent.18 This being the case, even if a sale has
been executed before a tortious incident, the sale, if unregistered, has no effect as to the right of the
public and third persons to recover from the registered owner.19 The public has the right to conclusively
presume that the registered owner is the real owner, and may sue accordingly.20
In the case now before the Court, there is not even a sale of the vehicle involved, but a mere lease,
which remained unregistered up to the time of the occurrence of the quasi-delict that gave rise to the
case. Since a lease, unlike a sale, does not even involve a transfer of title or ownership, but the mere use
or enjoyment of property, there is more reason, therefore, in this instance to uphold the policy behind
the law, which is to protect the unwitting public and provide it with a definite person to make
accountable for losses or injuries suffered in vehicular accidents.21 This is and has always been the
rationale behind compulsory motor vehicle registration under the Land Transportation and Traffic Code
and similar laws, which, as early as Erezo, has been guiding the courts in their disposition of cases
involving motor vehicular incidents. It is also important to emphasize that such principles apply to all
vehicles in general, not just those offered for public service or utility.22
The Court recognizes that the business of financing companies has a legitimate and commendable
purpose.23 In earlier cases, it considered a financial lease or financing lease a legal contract,24 though
subject to the restrictions of the so-called Recto Law or Articles 1484 and 1485 of the Civil Code.25 In
previous cases, the Court adopted the statutory definition of a financial lease or financing lease, as:
31
[A] mode of extending credit through a non-cancelable lease contract under which the lessor purchases
or acquires, at the instance of the lessee, machinery, equipment, motor vehicles, appliances, business
and office machines, and other movable or immovable property in consideration of the periodic
payment by the lessee of a fixed amount of money sufficient to amortize at least seventy (70%) of the
purchase price or acquisition cost, including any incidental expenses and a margin of profit over an
obligatory period of not less than two (2) years during which the lessee has the right to hold and use the
leased property, x x x but with no obligation or option on his part to purchase the leased property from
the owner-lessor at the end of the lease contract. 26
Petitioner presented a lengthy discussion of the purported trend in other jurisdictions, which apparently
tends to favor absolving financing companies from liability for the consequences of quasi-delictual acts
or omissions involving financially leased property.27 The petition adds that these developments have
been legislated in our jurisdiction in Republic Act (R.A.) No. 8556,28 which provides:
Section 12. Liability of lessors. - Financing companies shall not be liable for loss, damage or injury caused
by a motor vehicle, aircraft, vessel, equipment, machinery or other property leased to a third person or
entity except when the motor vehicle, aircraft, vessel, equipment or other property is operated by the
financing company, its employees or agents at the time of the loss, damage or injury.1avvphi1
Petitioner's argument that the enactment of R.A. No. 8556, especially its addition of the new Sec. 12 to
the old law, is deemed to have absolved petitioner from liability, fails to convince the Court.
These developments, indeed, point to a seeming emancipation of financing companies from the
obligation to compensate claimants for losses suffered from the operation of vehicles covered by their
lease. Such, however, are not applicable to petitioner and do not exonerate it from liability in the
present case.
The new law, R.A. No. 8556, notwithstanding developments in foreign jurisdictions, do not supersede or
repeal the law on compulsory motor vehicle registration. No part of the law expressly repeals Section
5(a) and (e) of R.A. No. 4136, as amended, otherwise known as the Land Transportation and Traffic Code,
to wit:
Sec. 5. Compulsory registration of motor vehicles. - (a) All motor vehicles and trailer of any type used or
operated on or upon any highway of the Philippines must be registered with the Bureau of Land
Transportation (now the Land Transportation Office, per Executive Order No. 125, January 30, 1987, and
Executive Order No. 125-A, April 13, 1987) for the current year in accordance with the provisions of this
Act.
xxxx
(e) Encumbrances of motor vehicles. - Mortgages, attachments, and other encumbrances of motor
vehicles, in order to be valid against third parties must be recorded in the Bureau (now the Land
Transportation Office). Voluntary transactions or voluntary encumbrances shall likewise be properly
recorded on the face of all outstanding copies of the certificates of registration of the vehicle concerned.
Cancellation or foreclosure of such mortgages, attachments, and other encumbrances shall likewise be
recorded, and in the absence of such cancellation, no certificate of registration shall be issued without
the corresponding notation of mortgage, attachment and/or other encumbrances.
COMM REV TRANSPORTATION LAW CASES

x x x x (Emphasis supplied)
Neither is there an implied repeal of R.A. No. 4136. As a rule, repeal by implication is frowned upon,
unless there is clear showing that the later statute is so irreconcilably inconsistent and repugnant to the
existing law that they cannot be reconciled and made to stand together. 29 There is nothing in R.A. No.
4136 that is inconsistent and incapable of reconciliation.
Thus, the rule remains the same: a sale, lease, or financial lease, for that matter, that is not registered
with the Land Transportation Office, still does not bind third persons who are aggrieved in tortious
incidents, for the latter need only to rely on the public registration of a motor vehicle as conclusive
evidence of ownership.30 A lease such as the one involved in the instant case is an encumbrance in
contemplation of law, which needs to be registered in order for it to bind third parties.31 Under this
policy, the evil sought to be avoided is the exacerbation of the suffering of victims of tragic vehicular
accidents in not being able to identify a guilty party. A contrary ruling will not serve the ends of justice.
The failure to register a lease, sale, transfer or encumbrance, should not benefit the parties responsible,
to the prejudice of innocent victims.
This is a petition for review on certiorari assailing the Decision64[1] of the Court of Appeals which
affirmed in toto the decision65[2] of the Regional Trial Court of Pasig City, Branch 164 in Civil Case No.
60985 filed by the respondent for damages.
The Case for the Respondent
Respondent Andion Fernandez is an acclaimed soprano here in the Philippines and abroad. At the time of
the incident, she was availing an educational grant from the Federal Republic of Germany, pursuing a
Masters Degree in Music majoring in Voice.66[3]
She was invited to sing before the King and Queen of Malaysia on February 3 and 4, 1991. For this
singing engagement, an airline passage ticket was purchased from petitioner Singapore Airlines which
would transport her to Manila from Frankfurt, Germany on January 28, 1991. From Manila, she would
proceed to Malaysia on the next day.67[4] It was necessary for the respondent to pass by Manila in
order to gather her wardrobe; and to rehearse and coordinate with her pianist her repertoire for the
aforesaid performance.

The non-registration of the lease contract between petitioner and its lessee precludes the former from
enjoying the benefits under Section 12 of R.A. No. 8556.
This ruling may appear too severe and unpalatable to leasing and financing companies, but the Court
believes that petitioner and other companies so situated are not entirely left without recourse. They may
resort to third-party complaints against their lessees or whoever are the actual operators of their
vehicles. In the case at bar, there is, in fact, a provision in the lease contract between petitioner and
SUGECO to the effect that the latter shall indemnify and hold the former free and harmless from any
"liabilities, damages, suits, claims or judgments" arising from the latter's use of the motor vehicle. 32
Whether petitioner would act against SUGECO based on this provision is its own option.
The petitioner issued the respondent a Singapore Airlines ticket for Flight No. SQ 27, leaving Frankfurt,
Germany on January 27, 1991 bound for Singapore with onward connections from Singapore to Manila.
Flight No. SQ 27 was scheduled to leave Frankfurt at 1:45 in the afternoon of January 27, 1991, arriving
at Singapore at 8:50 in the morning of January 28, 1991. The connecting flight from Singapore to Manila,
Flight No. SQ 72, was leaving Singapore at 11:00 in the morning of January 28, 1991, arriving in Manila at
2:20 in the afternoon of the same day.68[5]

The burden of registration of the lease contract is minuscule compared to the chaos that may result if
registered owners or operators of vehicles are freed from such responsibility. Petitioner pays the price
for its failure to obey the law on compulsory registration of motor vehicles for registration is a pre-
requisite for any person to even enjoy the privilege of putting a vehicle on public roads.

WHEREFORE, the petition is DENIED. The Decision dated December 12, 2003 and Resolution dated
February 18, 2004 of the Court of Appeals are AFFIRMED.

Costs against petitioner.

SO ORDERED.

[G.R. No. 142305. December 10, 2003]

SINGAPORE AIRLINES LIMITED, petitioner, vs. ANDION FERNANDEZ, respondent.

DECISION

CALLEJO, SR., J.:

32
COMM REV TRANSPORTATION LAW CASES
On January 27, 1991, Flight No. SQ 27 left Frankfurt but arrived in Singapore two hours late or at about
11:00 in the morning of January 28, 1991. By then, the aircraft bound for Manila had left as scheduled,
leaving the respondent and about 25 other passengers stranded in the Changi Airport in Singapore.69[6]
Upon disembarkation at Singapore, the respondent approached the transit counter who referred her to
the nightstop counter and told the lady employee thereat that it was important for her to reach Manila
on that day, January 28, 1991. The lady employee told her that there were no more flights to Manila for
that day and that respondent had no choice but to stay in Singapore. Upon respondents persistence, she
was told that she can actually fly to Hong Kong going to Manila but since her ticket was non-transferable,
she would have to pay for the ticket. The respondent could not accept the offer because she had no
money to pay for it.70[7] Her pleas for the respondent to make arrangements to transport her to Manila
were unheeded.71[8]
The respondent then requested the lady employee to use their phone to make a call to Manila. Over the
employees reluctance, the respondent telephoned her mother to inform the latter that she missed the
connecting flight. The respondent was able to contact a family friend who picked her up from the airport
for her overnight stay in Singapore.72[9]
The next day, after being brought back to the airport, the respondent proceeded to petitioners counter
which says: Immediate Attention To Passengers with Immediate Booking. There were four or five
passengers in line. The respondent approached petitioners male employee at the counter to make
arrangements for immediate booking only to be told: Cant you see I am doing something. She explained
her predicament but the male employee uncaringly retorted: Its your problem, not ours.73[10]
33
The respondent never made it to Manila and was forced to take a direct flight from Singapore to
Malaysia on January 29, 1991, through the efforts of her mother and travel agency in Manila. Her mother
also had to travel to Malaysia bringing with her respondents wardrobe and personal things needed for
the performance that caused them to incur an expense of about P50,000.74[11]
As a result of this incident, the respondents performance before the Royal Family of Malaysia was below
par. Because of the rude and unkind treatment she received from the petitioners personnel in Singapore,
the respondent was engulfed with fear, anxiety, humiliation and embarrassment causing her to suffer
mental fatigue and skin rashes. She was thereby compelled to seek immediate medical attention upon
her return to Manila for acute urticaria.75[12]
On June 15, 1993, the RTC rendered a decision with the following dispositive portion:
ACCORDINGLY and as prayed for, defendant Singapore Airlines is ordered to pay herein plaintiff Andion
H. Fernandez the sum of:
1. FIFTY THOUSAND (P50,000.00) PESOS as compensatory or actual damages;
2. TWO HUNDRED and FIFTY THOUSAND (P250,000.00) PESOS as moral damages considering
plaintiffs professional standing in the field of culture at home and abroad;
3. ONE HUNDRED THOUSAND (P100,000.00) PESOS as exemplary damages;
4. SEVENTY-FIVE THOUSAND (P75,000.00) PESOS as attorneys fees; and
5. To pay the costs of suit.
SO ORDERED.76[13]
The petitioner appealed the decision to the Court of Appeals.
On June 10, 1998, the CA promulgated the assailed decision finding no reversible error in the appealed
decision of the trial court.77[14]
COMM REV TRANSPORTATION LAW CASES
Forthwith, the petitioner filed the instant petition for review, raising the following errors:
I respondent and the other 25 passengers missed their connecting flight to Manila, the petitioner
THE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING IN TOTO THE DECISION OF THE TRIAL COURT
THAT AWARDED DAMAGES TO RESPONDENT FOR THE ALLEGED FAILURE OF THE PETITIONER TO
EXERCISE EXTRAORDINARY DILIGENCE.
II
THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE PETITIONER ACTED IN BAD FAITH.
III
THE HONORABLE COURT OF APPEALS ERRED IN DISMISSING THE PETITIONERS COUNTERCLAIMS.78[15]
The petitioner assails the award of damages contending that it exercised the extraordinary diligence
required by law under the given circumstances. The delay of Flight No. SQ 27 from Frankfurt to
Singapore on January 28, 1991 for more than two hours was due to a fortuitous event and beyond
petitioners control. Inclement weather prevented the petitioners plane coming from Copenhagen,
Denmark to arrive in Frankfurt on time on January 27, 1991. The plane could not take off from the
airport as the place was shrouded with fog. This delay caused a snowball effect whereby the other flights
were consequently delayed. The plane carrying the respondent arrived in Singapore two (2) hours
behind schedule.79[16] The delay was even compounded when the plane could not travel the normal
route which was through the Middle East due to the raging Gulf War at that time. It had to pass through
the restricted Russian airspace which was more congested.80[17]
Under these circumstances, petitioner therefore alleged that it cannot be faulted for the delay in arriving
in Singapore on January 28, 1991 and causing the respondent to miss her connecting flight to Manila.
34
The petitioner further contends that it could not also be held in bad faith because its personnel did their
best to look after the needs and interests of the passengers including the respondent. Because the
automatically booked them to the flight the next day and gave them free hotel accommodations for the
night. It was respondent who did not take petitioners offer and opted to stay with a family friend in
Singapore.
The petitioner also alleges that the action of the respondent was baseless and it tarnished its good name
and image earned through the years for which, it was entitled to damages in the amount of P1,000,000;
exemplary damages of P500,000; and attorneys fees also in the amount of P500,000.81[18]
The petition is barren of merit.
When an airline issues a ticket to a passenger, confirmed for a particular flight on a certain date, a
contract of carriage arises. The passenger then has every right to expect that he be transported on that
flight and on that date. If he does not, then the carrier opens itself to a suit for a breach of contract of
carriage.82[19]
The contract of air carriage is a peculiar one. 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.83[20] In an action for
breach of contract of carriage, the aggrieved party does not have to prove that the common carrier was
at fault or was negligent. All that is necessary to prove is the existence of the contract and the fact of its
non-performance by the carrier.84[21]
In the case at bar, it is undisputed that the respondent carried a confirmed ticket for the two-legged trip
from Frankfurt to Manila: 1) Frankfurt-Singapore; and 2) Singapore-Manila. In her contract of carriage
with the petitioner, the respondent certainly expected that she would fly to Manila on Flight No. SQ 72
on January 28, 1991. Since the petitioner did not transport the respondent as covenanted by it on said
COMM REV TRANSPORTATION LAW CASES
terms, the petitioner clearly breached its contract of carriage with the respondent. The respondent had
every right to sue the petitioner for this breach. The defense that the delay was due to fortuitous events
and beyond petitioners control is unavailing. In PAL vs. CA,85[22] we held that:
.... Undisputably, PALs diversion of its flight due to inclement weather was a fortuitous event.
Nonetheless, such occurrence did not terminate PALs contract with its passengers. Being in the business
of air carriage and the sole one to operate in the country, PAL is deemed to be 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 carriers premises. 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...
...
...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 C.C., 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 defendants failure to provide
comfort and convenience to its stranded passengers using extraordinary 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.
Indeed, in the instant case, petitioner was not without recourse to enable it to fulfill its obligation to
transport the respondent safely as scheduled as far as human care and foresight can provide to her
destination. Tagged as a premiere airline as it claims to be and with the complexities of air travel, it was
certainly well-equipped to be able to foresee and deal with such situation. The petitioners indifference
and negligence by its absence and insensitivity was exposed by the trial court, thus:
(a) Under Section 9.1 of its Traffic Manual (Exhibit 4) flights can be delayed to await the uplift of
connecting cargo and passengers arriving on a late in-bound flight As adverted to by the trial court,Flight
SQ-27/28 maybe delayed for about half an hour to transfer plaintiff to her connecting flight. As pointed
out above, delay is normal in commercial air transportation (RTC Decision, p. 22); or
(b) Petitioner airlines could have carried her on one of its flights bound for Hongkong and
arranged for a connecting flight from Hongkong to Manila all on the same date. But then the airline
personnel who informed her of such possibility told her that she has to pay for that flight. Regrettably,
respondent did not have sufficient funds to pay for it. (TSN, 30 March 1992, pp.8-9; RTC Decision, pp. 22-
23) Knowing the predicament of the respondent, petitioner did not offer to shoulder the cost of the
ticket for that flight; or
(c) As noted by the trial court from the account of petitioners witness, Bob Khkimyong, that a
passenger such as the plaintiff could have been accommodated in another international airline such as
Lufthansa to bring the plaintiff to Singapore early enough from Frankfurt provided that there was prior
35
communication from that station to enable her to catch the connecting flight to Manila because of the
urgency of her business in Manila(RTC Decision, p. 23)
The petitioners diligence in communicating to its passengers the consequences of the delay in their
flights was wanting. As elucidated by the trial court:
It maybe that delay in the take off and arrival of commercial aircraft could not be avoided and may be
caused by diverse factors such as those testified to by defendants pilot. However, knowing fully well that
even before the plaintiff boarded defendants Jumbo aircraft in Frankfurt bound for Singapore, it has
already incurred a delay of two hours. Nevertheless, defendant did not take the trouble of informing
plaintiff, among its other passengers of such a delay and that in such a case, the usual practice of
defendant airline will be that they have to stay overnight at their connecting airport; and much less did it
inquire from the plaintiff and the other 25 passengers bound for Manila whether they are amenable to
stay overnight in Singapore and to take the connecting flight to Manila the next day. Such information
should have been given and inquiries made in Frankfurt because even the defendant airlines manual
provides that in case of urgency to reach his or her destination on the same date, the head office of
defendant in Singapore must be informed by telephone or telefax so as the latter may make certain
arrangements with other airlines in Frankfurt to bring such a passenger with urgent business to
Singapore in such a manner that the latter can catch up with her connecting flight such as S-27/28
without spending the night in Singapore86[23]
The respondent was not remiss in conveying her apprehension about the delay of the flight when she
was still in Frankfurt. Upon the assurance of petitioners personnel in Frankfurt that she will be
transported to Manila on the same date, she had every right to expect that obligation fulfilled. She
testified, to wit:
Q: Now, since you were late, when the plane that arrived from Frankfurt was late, did you not
make arrangements so that your flight from Singapore to Manila would be adjusted?
A: I asked the lady at the ticket counter, the one who gave the boarding pass in Frankfurt and I
asked her, Since my flight going to Singapore would be late, what would happen to my Singapore-Manila
flight? and then she said, Dont worry, Singapore Airlines would be responsible to bring you to Manila on
the same date. And then they have informed the name of the officer, or whatever, that our flight is going
to be late.87[24]
When a passenger contracts for a specific flight, he has a purpose in making that choice which must be
respected. This choice, once exercised, must not be impaired by a breach on the part of the airline
COMM REV TRANSPORTATION LAW CASES
without the latter incurring any liability.88[25] For petitioners failure to bring the respondent to her
destination, as scheduled, we find the petitioner clearly liable for the breach of its contract of carriage
with the respondent.
We are convinced that the petitioner acted in bad faith. Bad faith means a breach of known duty through
some motive of interest or ill will. Self-enrichment or fraternal interest, and not personal ill will, may well
have been the motive; but it is malice nevertheless.89[26] Bad faith was imputed by the trial court when
it found that the petitioners employees at the Singapore airport did not accord the respondent the
attention and treatment allegedly warranted under the circumstances. The lady employee at the counter
was unkind and of no help to her. The respondent further alleged that without her threats of suing the
company, she was not allowed to use the companys phone to make long distance calls to her mother in
Manila. The male employee at the counter where it says: Immediate Attention to Passengers with
Immediate Booking was rude to her when he curtly retorted that he was busy attending to other
passengers in line. The trial court concluded that this inattentiveness and rudeness of petitioners
personnel to respondents plight was gross enough amounting to bad faith. This is a finding that is
generally binding upon the Court which we find no reason to disturb.
Article 2232 of the Civil Code provides that in a contractual or quasi-contractual relationship, exemplary
damages may be awarded only if the defendant had acted in a wanton, fraudulent, reckless, oppressive
or malevolent manner. In this case, petitioners employees acted in a wanton, oppressive or malevolent
manner. The award of exemplary damages is, therefore, warranted in this case.
WHEREFORE, the Petition is DENIED. The Decision of the Court of Appeals is AFFIRMED.
SO ORDERED.
G.R. No. 161730 January 28, 2005
JAPAN AIRLINES, petitioner,
vs.
MICHAEL ASUNCION and JEANETTE ASUNCION, respondents.
DECISION
YNARES-SANTIAGO, J.:
36
This petition for review seeks to reverse and set aside the October 9, 2002 decision1 of the Court of
Appeals and its January 12, 2004 resolution,2 which affirmed in toto the June 10, 1997 decision of the
Regional Trial Court of Makati City, Branch 61 in Civil Case No. 92-3635.3
On March 27, 1992, respondents Michael and Jeanette Asuncion left Manila on board Japan Airlines’
(JAL) Flight 742 bound for Los Angeles. Their itinerary included a stop-over in Narita and an overnight
stay at Hotel Nikko Narita. Upon arrival at Narita, Mrs. Noriko Etou-Higuchi of JAL endorsed their
applications for shore pass and directed them to the Japanese immigration official.4 A shore pass is
required of a foreigner aboard a vessel or aircraft who desires to stay in the neighborhood of the port of
call for not more than 72 hours.
During their interview, the Japanese immigration official noted that Michael appeared shorter than his
height as indicated in his passport. Because of this inconsistency, respondents were denied shore pass
entries and were brought instead to the Narita Airport Rest House where they were billeted overnight.
The immigration official also handed Mrs. Higuchi a Notice5 where it was stated that respondents were
to be "watched so as not to escape".
Mr. Atsushi Takemoto of the International Service Center (ISC), the agency tasked by Japan’s
Immigration Department to handle passengers who were denied shore pass entries, brought
respondents to the Narita Airport Rest House where they stayed overnight until their departure the
following day for Los Angeles. Respondents were charged US$400.00 each for their accommodation,
security service and meals.
On December 12, 1992, respondents filed a complaint for damages6 claiming that JAL did not fully
apprise them of their travel requirements and that they were rudely and forcibly detained at Narita
Airport.
JAL denied the allegations of respondents. It maintained that the refusal of the Japanese immigration
authorities to issue shore passes to respondents is an act of state which JAL cannot interfere with or
prevail upon. Consequently, it cannot impose upon the immigration authorities that respondents be
billeted at Hotel Nikko instead of the airport resthouse.7
On June 10, 1997, the trial court rendered its decision, the dispositive portion of which reads:
WHEREFORE PREMISES CONSIDERED, judgment is hereby rendered in favor of plaintiffs ordering
defendant JAL to pay plaintiffs as follows:
1. the sum of US$800.00 representing the expenses incurred at the Narita Airport with interest at 12%
per annum from March 27, 1992 until the sum is fully paid;
2. the sum of P200,000.00 for each plaintiff as moral damages;
3. the amount of P100,000.00 for each plaintiff as exemplary damages;
4. the amount of P100,000.00 as attorney’s fees; and
5. costs of suit.
COMM REV TRANSPORTATION LAW CASES
SO ORDERED.8
The trial court dismissed JAL’s counterclaim for litigation expenses, exemplary damages and attorney’s
fees.
On October 9, 2002, the Court of Appeals affirmed in toto the decision of the trial court. Its motion for
reconsideration having been denied,9 JAL now files the instant petition.
The basic issue for resolution is whether JAL is guilty of breach of contract.
Under Article 1755 of the Civil Code, a common carrier such as JAL is bound to carry its 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. When an airline issues a ticket to a passenger, confirmed for a
particular flight on a certain date, a contract of carriage arises. The passenger has every right to expect
that he be transported on that flight and on that date and it becomes the carrier’s obligation to carry him
and his luggage safely to the agreed destination.10 If the passenger is not so transported or if in the
process of transporting he dies or is injured, the carrier may be held liable for a breach of contract of
carriage.11
We find that JAL did not breach its contract of carriage with respondents. It may be true that JAL has the
duty to inspect whether its passengers have the necessary travel documents, however, such duty does
not extend to checking the veracity of every entry in these documents. JAL could not vouch for the
authenticity of a passport and the correctness of the entries therein. The power to admit or not an alien
into the country is a sovereign act which cannot be interfered with even by JAL. This is not within the
ambit of the contract of carriage entered into by JAL and herein respondents. As such, JAL should not be
faulted for the denial of respondents’ shore pass applications.
Prior to their departure, respondents were aware that upon arrival in Narita, they must secure shore
pass entries for their overnight stay. Respondents’ mother, Mrs. Imelda Asuncion, insisted though that
Ms. Linda Villavicencio of JAL assured her that her children would be granted the passes.12 This assertion
was satisfactorily refuted by Ms. Villavicencio’s testimony during the cross examination, to wit:
ATTY. GONZAGA:
Q I will show to you Exh. 9 which is the TIM and on page 184 hereof, particularly number 10, and I quote,
"Those holding tickets with confirmed seats and other documents for their onward journey and
continuing their journey to a third country provided that they obtain an indorsement with an application
of shore pass or transit pass from the airline ground personnel before clearing the immigration
formality?"
WITNESS:
A Yes, Sir.
Q Did you tell this provision to Mrs. Asuncion?
A Yes, Sir. I did.
Q Are you sure?
37
A Yes, Sir.
Q Did you give a copy?
A No, Sir, I did not give a copy but verbally I explained to her the procedure they have to undergo when
they get to narita airport.
….
Q And you read the contents of this [TIM]?
A No, Sir, I did not read it to her but I explained to her the procedure that each passenger has to go
through before when they get to narita airport before they line up in the immigration counter.
Q In other words, you told Mrs. Asuncion the responsibility of securing shore passes bears solely on the
passengers only?
A Yes, Sir.
Q That the airline has no responsibility whatsoever with regards (sic) to the application for shore passes?
A Yes, Sir.13
Next, respondents claimed that petitioner breached its contract of carriage when it failed to explain to
the immigration authorities that they had overnight vouchers at the Hotel Nikko Narita. They imputed
that JAL did not exhaust all means to prevent the denial of their shore pass entry applications.
To reiterate, JAL or any of its representatives have no authority to interfere with or influence the
immigration authorities. The most that could be expected of JAL is to endorse respondents’ applications,
which Mrs. Higuchi did immediately upon their arrival in Narita.
As Mrs. Higuchi stated during her deposition:
ATTY. QUIMBO
Q: Madam Witness, what assistance did you give, if any, to the plaintiffs during this interview?
A: No, I was not present during their interview. I cannot assist.
Q: Why not?
A: It is forbidden for a civilian personnel to interfere with the Immigration agent’s duties.14
….
Q: During the time that you were in that room and you were given this notice for you to sign, did you tell
the immigration agent that Michael and Jeanette Asuncion should be allowed to stay at the Hotel Nikko
Narita because, as passengers of JAL, and according to the plaintiff, they had vouchers to stay in that
hotel that night?
COMM REV TRANSPORTATION LAW CASES

A: No, I couldn’t do so. Davide, Jr., C.J., (Chairman), Carpio, and Azcuna, JJ., concur.

Q: Why not? Quisumbing, J., no part.

A: This notice is evidence which shows the decision of immigration authorities. It shows there that the [G.R. No. 71929 : December 4, 1990.]
immigration inspector also designated Room 304 of the Narita Airport Resthouse as the place where the
passengers were going to wait for their outbound flight.1awphi1.nét I cannot interfere with that 192 SCRA 9
decision.15
ALITALIA, Petitioner, vs. INTERMEDIATE APPELLATE COURT and FELIPA E. PABLO, Respondents.
Mrs. Higuchi did all she could to assist the respondents. Upon being notified of the denial of
respondents’ applications, Mrs. Higuchi immediately made reservations for respondents at the Narita
Airport Rest House which is really more a hotel than a detention house as claimed by respondents.16
DECISION
More importantly, nowhere in respondent Michael’s testimony did he state categorically that Mrs.
Higuchi or any other employee of JAL treated them rudely or exhibited improper behavior throughout
their stay. We therefore find JAL not remiss in its obligations as a common carrier.1awphi1.nét
NARVASA, J.:
Moral damages may be recovered in cases where one willfully causes injury to property, or in cases of
breach of contract where the other party acts fraudulently or in bad faith. Exemplary damages are
imposed by way of example or correction for the public good, when the party to a contract acts in
Dr. Felipa Pablo — an associate professor in the University of the Philippines, 1 and a research grantee of
wanton, fraudulent, oppressive or malevolent manner. Attorney’s fees are allowed when exemplary
the Philippine Atomic Energy Agency — was invited to take part at a meeting of the Department of
damages are awarded and when the party to a suit is compelled to incur expenses to protect his
Research and Isotopes of the Joint FAO-IAEA Division of Atomic Energy in Food and Agriculture of the
interest.17 There being no breach of contract nor proof that JAL acted in wanton, fraudulent or
United Nations in Ispra, Italy. 2 She was invited in view of her specialized knowledge in "foreign
malevolent manner, there is no basis for the award of any form of damages.
substances in food and the agriculture environment." She accepted the invitation, and was then
scheduled by the organizers, to read a paper on "The Fate of Radioactive Fusion Products Contaminating
Neither should JAL be held liable to reimburse respondents the amount of US$800.00. It has been
Vegetable Crops." 3 The program announced that she would be the second speaker on the first day of
sufficiently proven that the amount pertained to ISC, an agency separate and distinct from JAL, in
the meeting. 4 To fulfill this engagement, Dr. Pablo booked passage on petitioner airline, ALITALIA.
payment for the accommodations provided to respondents. The payments did not in any manner accrue
to the benefit of JAL.
She arrived in Milan on the day before the meeting in accordance with the itinerary and time table set
for her by ALITALIA. She was however told by the ALITALIA personnel there at Milan that her luggage
However, we find that the Court of Appeals correctly dismissed JAL’s counterclaim for litigation
was "delayed inasmuch as the same . . . (was) in one of the succeeding flights from Rome to Milan." 5
expenses, exemplary damages and attorney’s fees. The action was filed by respondents in utmost good
Her luggage consisted of two (2) suitcases: one contained her clothing and other personal items; the
faith and not manifestly frivolous. Respondents honestly believed that JAL breached its contract. A
other, her scientific papers, slides and other research material. But the other flights arriving from Rome
person’s right to litigate should not be penalized by holding him liable for damages. This is especially true
did not have her baggage on board.
when the filing of the case is to enforce what he believes to be his rightful claim against another
although found to be erroneous.18
By then feeling desperate, she went to Rome to try to locate her bags herself. There, she inquired about
her suitcases in the domestic and international airports, and filled out the forms prescribed by ALITALIA
WHEREFORE, in view of the foregoing, the instant petition is PARTLY GRANTED. The October 9, 2002
for people in her predicament. However, her baggage could not be found. Completely distraught and
decision of the Court of Appeals and its January 12, 2004 resolution in CA-G.R. CV No. 57440, are
discouraged, she returned to Manila without attending the meeting in Ispra, Italy. : nad
REVERSED and SET ASIDE insofar as the finding of breach on the part of petitioner and the award of
damages, attorney’s fees and costs of the suit in favor of respondents is concerned. Accordingly, there
Once back in Manila she demanded that ALITALIA make reparation for the damages thus suffered by her.
being no breach of contract on the part of petitioner, the award of actual, moral and exemplary
ALITALIA offered her "free airline tickets to compensate her for any alleged damages. . . ." She rejected
damages, as well as attorney’s fees and costs of the suit in favor of respondents Michael and Jeanette
the offer, and forthwith commenced the action 6 which has given rise to the present appellate
Asuncion, is DELETED for lack of basis. However, the dismissal for lack of merit of petitioner’s
proceedings.
counterclaim for litigation expenses, exemplary damages and attorney’s fees, is SUSTAINED. No
pronouncement as to costs. As it turned out, Prof. Pablo's suitcases were in fact located and forwarded to Ispra, 7 Italy, but only on
the day after her scheduled appearance and participation at the U.N. meeting there. 8 Of course Dr.
SO ORDERED.
Pablo was no longer there to accept delivery; she was already on her way home to Manila. And for some

38
COMM REV TRANSPORTATION LAW CASES
reason or other, the suitcases were not actually restored to Prof. Pablo by ALITALIA until eleven (11)
months later, and four (4) months after institution of her action. 9
After appropriate proceedings and trial, the Court of First Instance rendered judgment in Dr. Pablo's
favor: 10
"(1) Ordering the defendant (ALITALIA) to pay . . . (her) the sum of TWENTY THOUSAND PESOS
(P20,000.00), Philippine Currency, by way of nominal damages;
(2) Ordering the defendant to pay . . . (her) the sum of FIVE THOUSAND PESOS (P5,000.00), Philippine
Currency, as and for attorney's fees; (and)
(3) Ordering the defendant to pay the costs of the suit."
ALITALIA appealed to the Intermediate Appellate Court but failed to obtain a reversal of the judgment.
11 Indeed, the Appellate Court not only affirmed the Trial Court's decision but also increased the award
of nominal damages payable by ALITALIA to P40,000.00. 12 That increase it justified as follows: 13
"Considering the circumstances, as found by the Trial Court and the negligence committed by defendant,
the amount of P20,000.00 under present inflationary conditions as awarded . . . to the plaintiff as
nominal damages, is too little to make up for the plaintiff's frustration and disappointment in not being
able to appear at said conference; and for the embarrassment and humiliation she suffered from the
academic community for failure to carry out an official mission for which she was singled out by the
faculty to represent her institution and the country. After weighing carefully all the considerations, the
amount awarded to the plaintiff for nominal damages and attorney's fees should be increased to the
cost of her round trip air fare or at the present rate of peso to the dollar at P40,000,00."
ALITALIA has appealed to this Court on Certiorari. Here, it seeks to make basically the same points it tried
to make before the Trial Court and the Intermediate Appellate Court, i.e.:
1) that the Warsaw Convention should have been applied to limit ALITALIA'S liability; and
2) that there is no warrant in fact or in law for the award to Dr. Pablo of nominal damages and attorney's
fees. 14
In addition, ALITALIA postulates that it was error for the Intermediate Appellate Court to have refused to
pass on all the assigned errors and in not stating the facts and the law on which its decision is based. 15
Under the Warsaw Convention, 16 an air carrier is made liable for damages for:
1) the death, wounding or other bodily injury of a passenger if the accident causing it took place on
board the aircraft or in the course of its operations of embarking or disembarking; 17
2) the destruction or loss of, or damage to, any registered luggage or goods, if the occurrence causing it
took place during the carriage by air;" 18 and
3) delay in the transportation by air of passengers, luggage or goods. 19
39
In these cases, it is provided in the Convention that the "action for damages, however, founded, can only
be brought subject to conditions and limits set out" therein. 20
The Convention also purports to limit the liability of the carriers in the following manner: 21
1. In the carriage of passengers the liability of the carrier for each passenger is limited to the sum of
250,000 francs . . . Nevertheless, by special contract, the carrier and the passenger may agree to a higher
limit of liability.: nad
2. a) In the carriage of registered baggage and of cargo, the liability of the carrier is limited to a sum of
250 francs per kilogramme, unless the passenger or consignor has made, at the time when the package
was handed over to the carrier, a special declaration of interest in delivery at destination and has paid a
supplementary sum if the case so requires. In that case the carrier will be liable to pay a sum not
exceeding the declared sum, unless he proves that sum is greater than the actual value to the consignor
at delivery.
b) In the case of loss, damage or delay of part of registered baggage or cargo, or of any object contained
therein, the weight to be taken into consideration in determining the amount to which the carrier's
liability is limited shall be only the total weight of the package or packages concerned. Nevertheless,
when the loss, damage or delay of a part of the registered baggage or cargo, or of an object contained
therein, affects the value of other packages covered by the same baggage check or the same air way bill,
the total weight of such package or packages shall also be taken into consideration in determining the
limit of liability.
3. As regards objects of which the passenger takes charge himself the liability of the carrier is limited to
5000 francs per passenger.
4. The limits prescribed . . shall not prevent the court from awarding, in accordance with its own law, in
addition, the whole or part of the court costs and of the other expenses of litigation incurred by the
plaintiff. The foregoing provision shall not apply if the amount of the damages awarded, excluding court
costs and other expenses of the litigation, does not exceed the sum which the carrier has offered in
writing to the plaintiff within a period of six months from the date of the occurrence causing the
damage, or before the commencement of the action, if that is later.
The Warsaw Convention however denies to the carrier availment "of the provisions which exclude or
limit his liability, if the damage is caused by his wilful misconduct or by such default on his part as, in
accordance with the law of the court seized of the case, is considered to be equivalent to wilful
misconduct," or "if the damage is (similarly) caused . . by any agent of the carrier acting within the scope
of his employment." 22 The Hague Protocol amended the Warsaw Convention by removing the
provision that if the airline took all necessary steps to avoid the damage, it could exculpate itself
completely, 23 and declaring the stated limits of liability not applicable "if it is proved that the damage
resulted from an act or omission of the carrier, its servants or agents, done with intent to cause damage
or recklessly and with knowledge that damage would probably result." The same deletion was effected
by the Montreal Agreement of 1966, with the result that a passenger could recover unlimited damages
upon proof of wilful misconduct. 24
The Convention does not thus operate as an exclusive enumeration of the instances of an airline's
liability, or as an absolute limit of the extent of that liability. Such a proposition is not borne out by the
language of the Convention, as this Court has now, and at an earlier time, pointed out. 25 Moreover,
COMM REV TRANSPORTATION LAW CASES
slight reflection readily leads to the conclusion that it should be deemed a limit of liability only in those
cases where the cause of the death or injury to person, or destruction, loss or damage to property or
delay in its transport is not attributable to or attended by any wilful misconduct, bad faith, recklessness,
or otherwise improper conduct on the part of any official or employee for which the carrier is
responsible, and there is otherwise no special or extraordinary form of resulting injury. The Convention's
provisions, in short, do not "regulate or exclude liability for other breaches of contract by the carrier" 26
or misconduct of its officers and employees, or for some particular or exceptional type of damage.
Otherwise, "an air carrier would be exempt from any liability for damages in the event of its absolute
refusal, in bad faith, to comply with a contract of carriage, which is absurd." 27 Nor may it for a moment
be supposed that if a member of the aircraft complement should inflict some physical injury on a
passenger, or maliciously destroy or damage the latter's property, the Convention might successfully be
pleaded as the sole gauge to determine the carrier's liability to the passenger. Neither may the
Convention be invoked to justify the disregard of some extraordinary sort of damage resulting to a
passenger and preclude recovery therefor beyond the limits set by said Convention. It is in this sense
that the Convention has been applied, or ignored, depending on the peculiar facts presented by each
case.:-cralaw
In Pan American World Airways, Inc. v. I.A.C., 28 for example, the Warsaw Convention was applied as
regards the limitation on the carrier's liability, there being a simple loss of baggage without any
otherwise improper conduct on the part of the officials or employees of the airline or other special injury
sustained by the passenger.
On the other hand, the Warsaw Convention has invariably been held inapplicable, or as not restrictive of
the carrier's liability, where there was satisfactory evidence of malice or bad faith attributable to its
officers and employees. 29 Thus, an air carrier was sentenced to pay not only compensatory but also
moral and exemplary damages, and attorney's fees, for instance, where its employees rudely put a
passenger holding a first-class ticket in the tourist or economy section, 30 or ousted a brown Asiatic
from the plane to give his seat to a white man, 31 or gave the seat of a passenger with a confirmed
reservation to another, 32 or subjected a passenger to extremely rude, even barbaric treatment, as by
calling him a "monkey." 33
In the case at bar, no bad faith or otherwise improper conduct may be ascribed to the employees of
petitioner airline; and Dr. Pablo's luggage was eventually returned to her, belatedly, it is true, but
without appreciable damage. The fact is, nevertheless, that some special species of injury was caused to
Dr. Pablo because petitioner ALITALIA misplaced her baggage and failed to deliver it to her at the time
appointed — a breach of its contract of carriage, to be sure — with the result that she was unable to
read the paper and make the scientific presentation (consisting of slides, autoradiograms or films, tables
and tabulations) that she had painstakingly labored over, at the prestigious international conference, to
attend which she had traveled hundreds of miles, to her chagrin and embarrassment and the
disappointment and annoyance of the organizers. She felt, not unreasonably, that the invitation for her
to participate at the conference, extended by the Joint FAO/IAEA Division of Atomic Energy in Food and
Agriculture of the United Nations, was a singular honor not only to herself, but to the University of the
Philippines and the country as well, an opportunity to make some sort of impression among her
colleagues in that field of scientific activity. The opportunity to claim this honor or distinction was
irretrievably lost to her because of Alitalia's breach of its contract.
Apart from this, there can be no doubt that Dr. Pablo underwent profound distress and anxiety, which
gradually turned to panic and finally despair, from the time she learned that her suitcases were missing
40
up to the time when, having gone to Rome, she finally realized that she would no longer be able to take
part in the conference. As she herself put it, she "was really shocked and distraught and confused."
Certainly, the compensation for the injury suffered by Dr. Pablo cannot under the circumstances be
restricted to that prescribed by the Warsaw Convention for delay in the transport of baggage.
She is not, of course, entitled to be compensated for loss or damage to her luggage. As already
mentioned, her baggage was ultimately delivered to her in Manila, tardily but safely. She is however
entitled to nominal damages — which, as the law says, is adjudicated in order that a right of the plaintiff,
which has been violated or invaded by the defendant, may be vindicated and recognized, and not for the
purpose of indemnifying the plaintiff for any loss suffered — and this Court agrees that the respondent
Court of Appeals correctly set the amount thereof at P40,000.00. As to the purely technical argument
that the award to her of such nominal damages is precluded by her omission to include a specific claim
therefor in her complaint, it suffices to draw attention to her general prayer, following her plea for moral
and exemplary damages and attorney's fees, "for such other and further just and equitable relief in the
premises," which certainly is broad enough to comprehend an application as well for nominal damages.
Besides, petitioner should have realized that the explicit assertion, and proof, that Dr. Pablo's right had
been violated or invaded by it — absent any claim for actual or compensatory damages, the prayer
thereof having been voluntarily deleted by Dr. Pablo upon the return to her of her baggage —
necessarily raised the issue of nominal damages.: rd
This Court also agrees that respondent Court of Appeals correctly awarded attorney's fees to Dr. Pablo,
and the amount of P5,000.00 set by it is reasonable in the premises. The law authorizes recovery of
attorney's fees inter alia where, as here, "the defendant's act or omission has compelled the plaintiff to
litigate with third persons or to incur expenses to protect his interest," 34 or "where the court deems it
just and equitable." 35
WHEREFORE, no error being perceived in the challenged decision of the Court of Appeals, it appearing
on the contrary to be entirely in accord with the facts and the law, said decision is hereby AFFIRMED,
with costs against the petitioner.
SO ORDERED.
[G.R. No. 104685. March 14, 1996]
SABENA BELGIAN WORLD AIRLINES, petitioner, vs. HON. COURT OF APPEALS and MA. PAULA SAN
AGUSTIN, respondents.
DECISION
VITUG, J.:
The appeal before the Court involves the issue of an airlines liability for lost luggage. The petition for
review assails the decision of the Court Appeals,i[1] dated 27 February 1992, affirming an award of
damages made by the trial court in a complaint filed by private respondent against petitioner.
The factual background of the case, narrated by the trial court and reproduced at length by the appellate
court, is hereunder quoted:
COMM REV TRANSPORTATION LAW CASES
On August 21, 1987, plaintiff was a passenger on board Flight SN 284 of defendant airline originating
from Casablanca to Brussels, Belgium on her way back to Manila. Plaintiff checked in her luggage which
contained her valuables, namely: jewelries valued at $2,350.00; clothes $1,500.00; shoes/bag $150;
accessories $75; luggage itself $10.00; or a total of $4,265.00, for which she was issued Tag No. 71423.
She stayed overnight in Brussels and her luggage was left on board Flight SN 284.
Plaintiff arrived at Manila International Airport on September 2, 1987 and immediately submitted her
Tag No. 71423 to facilitate the release of her luggage hut the luggage was missing. She was advised to
accomplish and submit a property Irregularity Report which she submitted and filed on the same day.
She followed up her claim on September 14, 1987 but the luggage remained to be missing.
On September 15, 1987, she filed her formal complaint with the office of Ferge Massed, defendants
Local Manager, demanding immediate attention (Exh. A).
On September 30, 1987, on the occasion of plaintiffs following up of her luggage claim, she was
furnished copies of defendants telexes with an information that the Brussels Office of defendant found
the luggage and that they have broken the locks for identification (Exhibit B). Plaintiff was assured by the
defendant that it has notified its Manila Office that the luggage will be shipped to Manila on October 27,
1987. But unfortunately plaintiff was informed that the luggage was lost for the second time (Exhibits C
and C-1).
At the time of the filling of the complaint, the luggage with its content has not been found.
Plaintiff demanded from the defendant the money value of the luggage and its contents amounting to
$4,265.00 or its exchange value, but defendant refused to settle the claim.
Defendant asserts in its Answer and its evidence tend to show that while it admits that the plaintiff was a
passenger on board Flight No. SN 284 with a piece of checked in luggage bearing Tag No. 71423, the loss
of the luggage was due to plaintiffs sole if not contributory negligence; that she did not declare the
valuable items in her checked-in luggage at the flight counter when she checked in for her flight from
Casablanca to Brussels so that either the representative of the defendant at the counter would have
advised her to secure an insurance on the alleged valuable items and required her to pay additional
charges, or would have refused acceptance of her baggage as required by the generally accepted
practices of international carriers; that Section 9(a), Article IX of General Conditions of carriage requiring
passengers to collect their checked baggage at the place of stopover, plaintiff neglected to claim her
baggage at the Brussels Airport; that plaintiff should have retrieved her undeclared valuables from her
baggage at the Brussels Airport since her flight from Brussels to Manila will still have to visit for
confirmation inasmuch as only her flight from Casablanca to Brussels was confirmed; that defendant
incorporated in all Sabena Plane Tickets, including Sabena Ticket No. 082422-72502241 issued to plaintiff
in Manila on August 21, 1987, a warning that Items of value should be carried on your person and that
some carriers assume no liability for fragile, valuable or perishable articles and that further information
may he obtained from the carrier for guidance; that granting without conceding that defendant is liable,
its liability is limited only to US $20.00 per kilo due to plaintiffs failure to declare a higher value on the
contents of her checked in luggage and pay additional charges thereon.ii[2]
The trial court rendered judgment ordering petitioner Sabena Belgian World Airlines to pay private
respondent Ma. Paula San Agustin
41
(a) x x x US$4,265.00 or its legal exchange in Philippine pesos;
(b) x x x P30,000.00 as moral damages;
(c) x x x P10,000.00 as exemplary damages;
(d) x x x P10,000.00 attorneys fees; and
(e) (t)he costs of the suit.iii[3]
Sabena appealed the decision of the Regional Trial Court to the Court of Appeals. The appellate court, in
its decision of 27 February 1992, affirmed in toto the trial courts judgment.
Petitioner airline company, in contending that the alleged negligence of private respondent should be
considered the primary cause for the loss of her luggage, avers that, despite her awareness that the
flight ticket had been confirmed only for Casablanca and Brussels, and that her flight from Brussels to
Manila had yet to be confirmed, she did not retrieve the luggage upon arrival in Brussels. Petitioner
insists that private respondent, being a seasoned international traveler, must have likewise been familiar
with the standard provisions contained in her flight ticket that items of value are required to be hand-
carried by the passenger and that the liability of the airline or loss, delay or damage to baggage would be
limited, in any event, to only US$20.00 per kilo unless a higher value is declared in advance and
corresponding additional charges are paid thereon. At the Casablanca International Airport, private
respondent, in checking in her luggage, evidently did not declare its contents or value. Petitioner cites
Section 5(c), Article IX, of the General Conditions of Carriage, signed at Warsaw, Poland, on 02 October
1929, as amended by the Hague Protocol of 1955, generally observed by International carriers, stating,
among other things, that:
Passengers shall not include in his checked baggage, and the carrier may refuse to carry as checked
baggage, fragile or perishable articles, money, jewelry, precious metals, negotiable papers, securities or
other valuables.iv[4]
Fault or negligence consists in the omission of that diligence which is demanded by the nature of an
obligation and corresponds with the circumstances of the person, of the time, and of the place. When
the source of an obligation is derived from a contract, the mere breach or non-fulfillment of the
prestation gives rise to the presumption of fault on the part of the obligor. This rule is not different in the
case of common carriers in the carriage of goods which, indeed, are bound to observe not just the due
diligence of a good father of a family but that of extraordinary care in the vigilance over the goods. The
appellate court has aptly observed:
x x x Art. 1733 of the [Civil] Code provides that from the very nature of their business and by reasons of
public policy, common carriers are bound to observe extraordinary diligence in the vigilance over the
goods transported by them. This extraordinary responsibility, according to Art. 1736, lasts from the time
the goods are unconditionally placed in the possession of and received by the carrier until they are
delivered actually or constructively to the consignee or person who has the right to receive them. Art.
1737 states that the common carriers duty to observe extraordinary diligence in the vigilance over the
goods transported by them remains in full force and effect even when they are temporarily unloaded or
stored in transit. And Art. 1735 establishes the presumption that 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 had observed extraordinary diligence as required in Article 1733.
COMM REV TRANSPORTATION LAW CASES
The only exceptions to the foregoing extraordinary responsibility of the common carrier is when the loss,
destruction, or deterioration of the goods is due to any of the following causes:
(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the containers;
(5) Order or act of competent public authority.
Not one of the above excepted causes obtains in this case.v[5]
The above rules remain basically unchanged even when the contract is breached by tortvi[6] although
noncontradictory principles on quasi-delict may then be assimilated as also forming part of the governing
law. Petitioner is not thus entirely off track when it has likewise raised in its defense the tort doctrine of
proximate cause. Unfortunately for petitioner, however, the doctrine cannot, in this particular instance,
support its case. Proximate cause is that which, in natural and continuous sequence, unbroken by any
efficient intervening cause, produces injury and without which the result would not have occurred. The
exemplification by the Court in one casevii[7] is simple and explicit; viz:
(T)he proximate legal cause is that acting first and producing the injury, either immediately or by setting
other events in motion, all constituting a natural and Continuous chain of events, each having a close
causal Connection with its immediate predecessor, the final event in the chain immediately affecting the
injury as a natural and probable result of the cause which first acted, under such circumstances that the
person responsible for the first event should, as an ordinarily prudent, and intelligent person, have
reasonable ground to expect at the moment of his act or default that an injury to some person might
probably result therefrom.
It remained undisputed that private respondents luggage was lost while it was in the custody of
petitioner. It was supposed to arrive on the same flight that private respondent took in returning to
Manila on 02 September 1987. When she discovered that the luggage was missing, she promptly
accomplished and filed a Property Irregularity Report. She followed up her claim on 14 September 1987,
and filed, on the following day, a formal letter-complaint with petitioner. She felt relieved when, on 23
October 1987, she was advised that her luggage had finally been found, with its contents intact when
examined, and that she could expect it to arrive on 27 October 1987. She then waited anxiously only to
be told later that her luggage had been lost for the second time. Thus, the appellate court, given all the
facts before it, sustained the trial court in finding petitioner ultimately guilty of gross negligence in the
handling of private respondents luggage. The loss of said baggage not only once by twice, said the
appellate court, underscores the wanton negligence and lack of care on the part of the carrier.
The above findings, which certainly cannot be said to be without basis, foreclose whatever rights
petitioner might have had to the possible limitation of liabilities enjoyed by international air carriers
under the Warsaw Convention (Convention for the Unification of Certain Rules Relating to International
Carriage by Air, as amended by the Hague Protocol of 1955, the Montreal Agreement of 1966, the
Guatemala Protocol of 1971 and the Montreal Protocols of 1975). In Alitalia vs. Intermediate Appellate
Court,viii[8] now Chief Justice Andres R. Narvasa, speaking for the Court, has explained it well; he said:
42
The Warsaw Convention however denies to the carrier availment of the provisions which exclude or limit
his liability, if the damage is caused by his wilful misconduct or by such default on his part as, in
accordance with the law of the court seized of the case, is considered to be equivalent to wilful
misconduct, or if the damage is (similarly) caused x x x by any agent of the carrier acting within the scope
of his employment. The Hague Protocol amended the Warsaw Convention by removing the provision
that if the airline took all necessary steps to avoid the damage, it could exculpate itself completely, and
declaring the stated limits of liability not applicable if it is proved that the damage resulted from an act
or omission of the carrier, its servants or agents, done with intent to cause damage or recklessly and
with knowledge that damage would probably result. The same deletion was effected by the Montreal
Agreement of 1966, with the result that a passenger could recover unlimited damages upon proof of
wilful misconduct.
The Convention does not thus operate as an exclusive enumeration of the instances of an airlines
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 wilful misconduct, bad faith, recklessness or
otherwise improper conduct on the part of any official or employee for which the carrier is responsible,
and there is otherwise no special or extraordinary form of resulting injury. The Contentions 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 latters property, the Convention might successfully be pleaded as the sole gauge
to determine the carriers liability to the passenger. Neither may the Convention be invoked to justify the
disregard of some extraordinary sort of damage resulting to a passenger and preclude recovery therefor
beyond the limits set by said Convention. It is in this sense that the Convention has been applied, or
ignored, depending on the peculiar facts presented by each case.
The Court thus sees no error in the preponderant application to the instant case by the appellate court,
as well as by the trial court, of the usual rules on the extent of recoverable damages beyond the Warsaw
limitations. Under domestic law and jurisprudence (the Philippines being the country of destination), the
attendance of gross negligence (given the equivalent of fraud or bad faith) holds the common carrier
liable for all damages which can be reasonably attributed, although unforeseen, to the non-performance
of the obligation,ix[9] including moral and exemplary damages.x[10]
WHEREFORE, the decision appealed from is AFFIRMED. Costs against petitioner.
SO ORDERED.
[G.R. No. 122308. July 8, 1997]
PURITA S. MAPA, CARMINA S. MAPA and CORNELIO P. MAPA, petitioners, vs. COURT OF APPEALS and
TRANS-WORLD AIRLINES INC., respondents.
DECISION
COMM REV TRANSPORTATION LAW CASES
DAVIDE, JR., J.:
The main issue in this petition for review under Rule 45 of the Rules of Court is the applicability of Article
28(1) of the Warsaw Convention,xi[1] which provides as follows:
ARTICLE 28. (1) An action for damages must be brought, at the option of the plaintiff, in the territory of
one of the High Contracting Parties, either before the court of the domicile of the carrier or of his
principal place of business, or where he has a place of business through which the contract has been
made, or before the court at the place of destination.
We are urged by the petitioners to reverse the 31 May 1995 Decision of the Court of Appeals in CA-G.R.
CV No. 39896xii[2] affirming the 24 July 1992 Order of the Regional Trial Court of Quezon City, Branch
102, which dismissed Civil Case No. Q-91-9620xiii[3] on the ground of lack of jurisdiction in view of the
aforementioned Article 28(1) of the Warsaw Convention.
The antecedent facts, as summarized by the Court of Appeals, are as follows:
Plaintiffs Cornelio P. Mapa and Purita S. Mapa are respectable members of the society. Mr. Mapa is an
established businessman and currently the Regional General Manager of Akerlund and Rausing, a
multinational packaging material manufacturer based in Manila. He was previously the Senior Vice
President of Phimco Industries, an affiliate company of Swedish Match Company. Mrs. Mapa is a
successful businesswoman engaged in the commercial transactions of high value antique and oriental
arts decor items originating from Asian countries. Carmina S. Mapa is the daughter of plaintiffs Purita
and Cornelio and is a graduate of the International School in Bangkok, Thailand, now presently enrolled
at the Boston University where she is majoring in communication.
Plaintiffs Mapa entered into contract of air transportation with defendant TWA as evidenced by TWA
ticket Nos. 015:9475:153:304 and 015:9475:153:305, purchased in Bangkok, Thailand. Said TWA tickets
are for Los Angeles-New York-Boston-St. Louis-Chicago ....
Domicile of carrier TWA is Kansas City, Missouri, USA. Its principal place of business is Kansas City,
Missouri, USA. TWAs place of business through which the contracts were made is Bangkok, Thailand. The
place of destination is Chicago, USA.
On August 10, 1990, plaintiffs Carmina and Purita left Manila on board PAL flight No. 104 for Los Angeles.
Carmina was to commence schooling and thus was accompanied by Purita to assist her in settling down
at the University.
They arrived in Los Angeles on the same date and stayed there until August 14, 1990 when they left for
New York City.
On August 14, 1990, plaintiffs Purita and Carmina S. Mapa arrived at the John F. Kennedy (JFK) Airport,
New York, on TWA Flight No. 904.
On August 27, 1990, plaintiffs Purita and Carmina S. Mapa departed for Boston, taking a connecting flight
on TWAs carrier, TW 0901, from JFK Airport, New York, to Bostons Logan Airport, checking in seven (7)
pieces of luggage at the TWA counter in the JFK Airport. The seven baggages were received by a porter
who issued seven TWA baggage receipts numbered 17-8270, 71, 72, 73, 74, 75, and 76 therefor.
43
From the entrance gate of the terminal building, plaintiffs Purita and Carmina proceeded to TWAs ticket
counter and presented their confirmed TWA tickets numbered 015:9475:153:304 and 015:9475:153:305
with a 3:00 p.m. departure time. They were issued their boarding passes and were instructed to proceed
to gate 35 for boarding. At about 2:40 p.m., plaintiffs noticed that there was still no instruction to board
the aircraft so they made inquiries. The TWA ground stewardess informed plaintiffs that they were at the
wrong gate because their flight was boarding at gate 1. Upon hearing this, plaintiffs rushed to gate 1
which was in another building terminal. At gate 1, they were told by a TWA ground stewardess that flight
901 had just departed. However, they were consoled that another TWA flight was leaving for Boston
after 30 minutes and plaintiffs could use the same boarding pass for the next flight. At around 3:15 p.m.,
plaintiffs Purita and Carmina were able to board the next flight. However, the plane was not immediately
cleared for take off on account of a thunderstorm. The passengers were instructed to stay inside the
aircraft until 6:00 p.m. when the plane finally left for Boston.
Upon arriving in Boston, plaintiffs Purita and Carmina proceeded to the carousel to claim their baggages
and found only three out of the seven they checked in, to wit: one Samsonite on the carousel, another
Samsonite lying on the floor near the carousel and a third baggage, an American Tourister, inside the
unclaimed baggage office. Plaintiffs immediately reported the loss of their four baggages to the TWA
Baggage Office at Logan Airport. TWAs representative confidently assured them that their baggages
would be located within 24 hours and not more than 48 hours.
On September 2, 1990, plaintiffs received a letter from TWA, signed by Mr. J.A. Butler, Customer
Relations-Baggage Service, apologizing for TWAs failure to locate the missing luggage and requesting
plaintiffs to accomplish a passenger property questionnaire to facilitate a further intensive and
computerized search for the lost luggage. Plaintiffs duly accomplished the passenger property
questionnaire, taking pains to write down in detail the contents of each missing baggage. The total value
of the lost items amounted to $11, 283.79.
On September 20, 1990, plaintiffs counsel wrote TWA thru its General Sales Manager in the Philippines,
Daniel Tuason, with office address at Ground Floor, Saville Building, Sen. Gil J. Puyat Avenue corner
Paseo de Roxas, Makati, Metro Manila demanding indemnification for the grave damage and injury
suffered by the plaintiffs.
TWA again assured plaintiffs that intensive search was being conducted.
On October 8, 1990, TWA offered to amicably settle the case by giving plaintiffs-appellants two options:
(a) transportation credit for future TWA travel or (b) cash settlement. Five months lapsed without any
result on TWAs intensive search.
On January 3, 1991, plaintiffs-appellants opted for transportation credit for future TWA travel.
On January 11, 1991, TWA disregarded plaintiffs option and unilaterally declared the payment of
$2,560.00 as constituting full satisfaction of the plaintiffs claim.
On July 19, 1991, plaintiffs accepted the check for $2,560.00, as partial payment for the actual cost of
their lost baggages and their contents.
Despite demands by plaintiffs, TWA failed and refused without just cause to indemnify and redress
plaintiffs for the grave injury and damages they have suffered.xiv[4]
COMM REV TRANSPORTATION LAW CASES
Purita S. Mapa, Carmina S. Mapa, and Cornelio P. Mapa (herein petitioners) then filed with the trial court
on 1 August 1991 a complaintxv[5] for damages,xvi[6] which was docketed as Civil Case No. Q-91-9620.
Before a responsive pleading was filed, the petitioners filed an Amended Complaint.xvii[7] They prayed
that after due trial private respondent Trans-World Airlines, Inc. (hereafter, TWA), be ordered to pay
them the following amounts: (1) US$8,723.79, or its equivalent in Philippine currency, representing the
cost of the lost luggage and its contents; (2) US$2,949.50, or its equivalent in Philippine currency,
representing the cost of hotel, board and lodging, and communication expenses; (3) P1 million, by way of
moral damages; (4) P1 million, by way of exemplary damages, with legal interest on said amounts from
the date of extrajudicial demand thereof; and (5) P500,000.00 as attorney's fees, costs of the suit, and
other expenses of litigation.xviii[8]
On 26 February 1992, TWA filed its Answer to the Amended Complaint raising, as special and affirmative
defense, lack of jurisdiction of Philippine courts over the action for damages in that pursuant to Article
28(1) of the Warsaw Convention, the action could only be brought either in Bangkok where the contract
was entered into, or in Boston which was the place of destination, or in Kansas City which is the carrier's
domicile and principal place of business.
TWA further alleged that pursuant to the Warsaw Convention and the Notice of Baggage Limitations at
the back of the tickets, its liability to the petitioners is limited to US$9.07 per pound, or US$20.00 per
kilo, which is in lieu of actual and compensatory damages. Even assuming that petitioners bag weighed
the maximum acceptable weight of 70 pounds, TWAs maximum liability is $640.00 per bag or $2,560.00
for the four pieces of baggage, which the petitioners have been offered and have accepted. TWA also
submitted that it could not be liable for moral and exemplary damages and attorneys fees because it did
not act in a wanton, fraudulent, reckless, oppressive, or malevolent manner.xix[9]
On 7 February 1992, the petitioners filed their second Amended Complaintxx[10] to include a claim of
US$2,500, or its equivalent in Philippine Currency, representing the additional replacement cost of the
items and personal effects contained in their lost luggage; and US$4,500 representing the travel
expenses, hotel, lodging, food and other expenses of petitioner Cornelio Mapa, who was constrained to
join his family in Boston to extend the necessary assistance in connection with the lost luggage.
After the filing of TWAs Answer to the second Amended Complaint,xxi[11] and petitioners Reply thereto,
the trial court gave TWA ten days within which to submit a memorandum in support of its affirmative
defenses; after which the incident would be deemed submitted for resolution.xxii[12] However, after
TWA filed its Memorandum,xxiii[13] the trial court gave the petitioners five days within which to file a
reply memorandum; and TWA, two days from receipt of the latter to file its comment thereon.xxiv[14]
The petitioners then filed their Opposition (by way of Reply Memorandum)xxv[15] to which TWA filed a
Reply.xxvi[16] Thereafter, the petitioners submitted a Rejoinderxxvii[17]; TWA, a Surrejoinder.xxviii[18]
On 24 July 1992, the trial court issued an Orderxxix[19] dismissing the case for lack of jurisdiction in light
of Article 28(1) of the Warsaw Convention. Thus:
It is plaintiffs' theory that the Warsaw Convention does not apply to the instant case because plaintiffs'
contract of transportation does not constitute "international transportation" as defined in said
convention. This however is belied by the Passenger Property Questionnaire which is Annex C of
plaintiffs' amended complaint. Page two of said questionnaire accomplished by plaintiffs under the
heading "Your Complete Itinerary" shows that the TWA tickets issued to the plaintiffs form part of the
contract of transportation to be performed from Manila to the United States. Since the Philippines and
44
the United States are parties to the convention, plaintiffs' contracts of transportation come within the
meaning of International Transportation.
...
On the basis of the foregoing, the Court holds that the Warsaw Convention is applicable to the case at
bar, even if the basis of plaintiffs' present action is breach of contract of carriage under the New Civil
Code.
The next question to be resolved is whether or not the Court has jurisdiction to try the present case in
the light of the provision of Art. 28(1) above-quoted.
Under Art. 28(1) supra, a complaint for damages against an air carrier can be instituted only in any of the
following places/courts:
(1) The court of the domicile of the carrier;
(2) The court of its principal place of business;
(3) The court where it has a place of business through which the contract had been made;
(4) The court of the place of destination.
In interpreting the provision of Art. 28(1) of the Warsaw Convention, the Supreme Court in the same
case of Augusto Benedicto Santos vs. Northwest Airlines held:
"Whether Article 28(1) refers to jurisdiction or only to venue is a question over which authorities are
sharply divided. While the petitioner cites several cases holding that Article 28(1) refers to venue rather
that jurisdiction, there are later cases cited by the private respondent supporting the conclusion that the
provision is jurisdictional.
Venue and jurisdiction are entirely distinct matters. Jurisdiction may not be conferred by consent or
waiver upon a court which otherwise would have no jurisdiction over the subject-matter of an action;
but the venue of an action as fixed by statute may be changed by the consent of the parties and an
objection that the plaintiff brought his suit in the wrong country may be waived by the failure of the
defendant to make a timely objection. In either case, the court may render a valid judgment. Rules as to
jurisdiction can never be left to the consent or agreement of the parties, whether or not a prohibition
exists against their alteration.
A number of reasons tends to support the characterization of Article 28(1) as a jurisdiction and not a
venue provision. First, the wording of Article 32, which indicates the places where the action for
damages "must" be brought, underscores the mandatory nature of Article 28(1). Second, this
characterization is consistent with one of the objectives of the Convention, which is to "regulate in a
uniform manner the conditions of international transportation by air." Third, the Convention does not
contain any provision prescribing rules of jurisdiction other than Article 28(1), which means that the
phrase "rules as to jurisdiction" used in Article 32 must refer only to Article 28(1). In fact, the last
sentence of Article 32 specifically deals with the exclusive enumeration in Article 28(1) as "jurisdictions,"
which, as such, cannot be left to the will of the parties regardless of the time when the damage occurred.
COMM REV TRANSPORTATION LAW CASES
...
It has been shown by the defendant that the domicile of the defendant Trans World Airlines, Inc. is
Kansas City, Missouri, its principal place of business is also in Kansas City, Missouri, the carrier's place of
business through which the contracts were made is Bangkok (Annexes A and A-1, Amended Complaint),
and the place of destination was Boston.
The Philippines not being one of the places specified in Art. 28(1) above-quoted where the complaint
may be instituted, this Court therefore, does not have jurisdiction over the present case.
Evidently discontented with the trial court's order, the petitioners appealed to the Court of Appeals,
contending that the lower court erred in not holding that (1) it has jurisdiction over the instant case and
(2) the Warsaw Convention is inapplicable in the instant case because the subject matter of the case is
not included within the coverage of the said convention.xxx[20] They claimed that their cause of action
could be based on breach of contract of air carriage founded on Articles 1733, 1734, 1735, 1755, and
1756 of the New Civil Code governing common carriers or Article 2176 of the same Code governing tort
or quasi-delict.
The appellate court disagreed with the petitioners and affirmed the order of the trial court. It held that
the Warsaw Convention is the law which governs the dispute between the petitioners and TWA because
what is involved is international transportation defined by said Convention in Article I(2). This holding is
founded on its determination that the two TWA tickets for Los Angeles-New York-Boston-St. Louis-
Chicago purchased in Bangkok, Thailand, were issued in conjunction with, and therefore formed part of,
the contract of transportation performed from Manila, Philippines, to the United States.
The respondent court further held that the cause of action of the petitioners arose from the loss of the
four checked pieces of baggage, which then falls under Article 18(1), Chapter III (Liability of the Carrier)
of the Warsaw Convention.xxxi[21] Pursuant to Article 24(1) of the Convention, all actions for damages,
whether based on tort, code law or common law, arising from loss of baggage under Article 18 of the
Warsaw Convention, can only be brought subject to the conditions and limits set forth in the Warsaw
Convention. Article 28(1) thereof sets forth conditions and limits in that the action for damages may be
instituted only in the territory of one of the High Contracting Parties, before the court of (1) the domicile
of the carrier, (2) the carriers principal place of business, (3) the place of business through which the
contract has been made, or (4) the place of destination. Since the Philippines is not one of these places, a
Philippine Court, like the RTC, has no jurisdiction over the complaint for damages.
Respondent Court of Appeals likewise held that the petitioners could not claim application of Articles
1733, 1734, 1735, 1755, and 1756 of the New Civil Code on common carriers without taking into
consideration Article 1753 of the same Code, which provides that the law of the country to which the
goods are to be transported shall govern the liability of the common carrier for their loss, destruction, or
deterioration. Since the country of ultimate destination is Chicago, the law of Chicago shall govern the
liability of TWA for the loss of the four pieces of baggage. Neither is Article 2176 of the New Civil Code on
torts or quasi-delicts applicable in view of the private international law principle of lex loci delicti
commissi.xxxii[22] In addition, comformably with Santos III v. Northwest Orient Airlines,xxxiii[23] mere
allegation of willful misconduct resulting in a tort is insufficient to exclude the case from the
comprehension of the Warsaw Convention.
45
Failing in their bid to reconsider the decision, the petitioners filed this petition. They aver that
respondent Court of Appeals gravely erred (1) in holding that the Warsaw Convention is applicable to
this case and (2) in applying Article 1753 of the Civil Code and the principle of lex loci delicti
commissi.xxxiv[24]
We resolved to give due course to the petition after the filing by TWA of its Comment on the petition
and noted without action for the reasons stated in the resolution of 25 September 1996 petitioners
Reply and Rejoinder. We then required the parties to submit their respective memoranda. They did in
due time.
The petitioners insist that the Warsaw Convention is not applicable to their case because the contracts
they had with TWA did not involve an international transportation. Whether the contracts were of
international transportation is to be solely determined from the TWA tickets issued to them in Bangkok,
Thailand, which showed that their itinerary was Los Angeles-New York-Boston-St. Louis-Chicago.
Accordingly, since the place of departure (Los Angeles) and the place of destination (Chicago) are both
within the territory of one High Contracting Party, with no agreed stopping place in a territory subject to
the sovereignty, mandate, suzerainty or authority of another Power, the contracts did not constitute
international transportation as defined by the convention. They also claim to be without legal basis the
contention of TWA that their transportation contracts were of international character because of the
handwritten notations in the tickets re INTL TKT #079-4402956821-2 and INTL TKT #079-4402956819.
Notwithstanding such notations, the TWA tickets, viz., (a) No. 015.9475:153:304 and (b) No.
015:9475:153:305 did not cease to be for the itinerary therein designated. Besides, it is a fact that
petitioners Purita and Carmina Mapa traveled from Manila to Los Angeles via Philippine Airlines (PAL) by
virtue of PAL tickets issued independently of the TWA tickets.
The pith issue to be resolved under the petitioners first assigned error is whether the contracts of
transportation between Purita and Carmina Mapa, on the one hand, and TWA, on the other, were
contracts of international transportation under the Warsaw Convention. If they were, then we should
sustain the trial court and the Court of Appeals in light of our ruling in Santos v. Northwest Orient
Airlines.xxxv[25] It appears clear to us that TWA itself, the trial court, and the Court of Appeals impliedly
admit that if the sole basis were the two TWA tickets for Los Angeles-New York-Boston-St. Louis-Chicago,
the contracts cannot be brought within the term international transportation, as defined in Article I(2) of
the Warsaw Convention. As provided therein, a contract is one of international transportation only if
according to the contract made by the parties, the place of departure and the place of destination,
whether or not there be a break in the transportation or a transshipment, are situated either within the
territories of two High Contracting Parties, or within the territory of a single High Contracting Party, if
there is an agreed stopping place within a territory subject to the sovereignty, mandate or authority of
another power, even though that power is not a party to this convention.
There are then two categories of international transportation, viz., (1) that where the place of departure
and the place of destination are situated within the territories of two High Contracting Parties regardless
of whether or not there be a break in the transportation or a transshipment; and (2) that where the
place of departure and the place of destination are within the territory of a single High Contracting Party
if there is an agreed stopping place within a territory subject to the sovereignty, mandate, or authority of
another power, even though the power is not a party to the Convention.
COMM REV TRANSPORTATION LAW CASES
The High Contracting Parties referred to in the Convention are the signatories thereto and those which
subsequently adhered to it. In the case of the Philippines, the Convention was concurred in by the
Senate, through Resolution No. 19, on 16 May 1950. The Philippine instrument of accession was signed
by President Elpidio Quirino on 13 October 1950 and was deposited with the Polish Government on 9
November 1950. The Convention became applicable to the Philippines on 9 February 1951. Then, on 23
September 1955, President Ramon Magsaysay issued Proclamation No. 201, declaring the Philippines
formal adherence thereto, to the end that the same and every article and clause thereof may be
observed and fulfilled in good faith by the Republic of the Philippines and the citizens thereof.xxxvi[26]
The contracts of transportation in this case are evidenced by the two TWA tickets, No. 015:9475:153:304
and No. 015:9475:153:305, both purchased and issued in Bangkok, Thailand. On the basis alone of the
provisions therein, it is obvious that the place of departure and the place of destination are all in the
territory of the United States, or of a single High Contracting Party. The contracts, therefore, cannot
come within the purview of the first category of international transportation. Neither can it be under the
second category since there was NO agreed stopping place within a territory subject to the sovereignty,
mandate, or authority of another power.
The only way to bring the contracts between Purita and Carmina Mapa, on the one hand, and TWA, on
the other, within the first category of international transportation is to link them with, or to make them
an integral part of, the Manila-Los Angeles travel of Purita and Carmina through PAL aircraft. The
linkages which have been pointed out by the TWA, the trial court, and the Court of Appeals are (1) the
handwritten notations, viz., INTL TKT # 079-4402956821-2 and INTL TKT # 079-4402956819, on the two
TWA tickets; and (2) the entries made by petitioners Purita and Carmina Mapa in column YOUR
COMPLETE ITINERARY in TWAs Passenger Property Questionnaire, wherein they mentioned their travel
from Manila to Los Angeles in flight PR 102.
The alleged international tickets mentioned in the notations in conjunction with which the two TWA
tickets were issued were not presented. Clearly then, there is at all no factual basis of the finding that
the TWA tickets were issued in conjunction with the international tickets, which are even, at least as of
now, non-existent.
As regards the petitioners entry in YOUR COMPLETE ITINERARY column of the Passenger Property
Questionnaire wherein they included the Manila-Los Angeles travel, it must be pointed out that this was
made on 4 September 1990xxxvii[27] by petitioners Purita and Carmina Mapa, and only in connection
with their claim for their lost pieces of baggage. The loss occurred much earlier, or on 27 August 1990.
The entry can by no means be considered as a part of, or supplement to, their contracts of
transportation evidenced by the TWA tickets which covered transportation within the United States only.
It must be underscored that the first category of international transportation under the Warsaw
Convention is based on the contract made by the parties. TWA does not claim that the Manila-Los
Angeles contracts of transportation which brought Purita and Carmina to Los Angeles were also its
contracts. It does not deny the assertion of the petitioners that those contracts were independent of the
TWA tickets issued in Bangkok, Thailand. No evidence was offered that TWA and PAL had an agreement
concerning transportation of passengers from points of departures not served with aircrafts of one or
the other. There could have been no difficulty for such agreement, since TWA admitted without
qualification in paragraph 1 of its Answerxxxviii[28] to the second Amended Complaint the allegation in
paragraph 1.1 of the latterxxxix[29] that TWA is a foreign corporation licensed to do business in the
46
Philippines with office address at Ground Floor, Saville Building, Sen. Gil. J. Puyat Avenue, corner Paseo
de Roxas, Makati, Metro Manila.
TWA relies on Article I(3) of the Convention, which provides as follows:
3. A carriage to be performed by several successive air carriers is deemed, for the purposes of this
Convention, to be one undivided carriage, if it has been regarded by the parties as a single operation,
whether it had been agreed upon under the form of a single contract or of a series of contracts, and it
shall not lose its international character merely because one contract or a series of contracts is to be
performed entirely within a territory subject to the sovereignty, suzerainty, mandate, or authority of the
same High Contracting Party.
It also points to Article 15 of the IATA Recommend Practice 1724, which provides: Carriage to be
performed by several successive carriers under one ticket, or under a ticket and any conjunction ticket
issued in connection therewith, is regarded as a single operation.xl[30]
The flaw of respondents position is the presumption that the parties have regarded as an undivided
carriage or as a single operation the carriage from Manila to Los Angeles through PAL then to New York-
Boston- St. Louis-Chicago through TWA. The dismissal then of the second Amended Complaint by the
trial court and the Court of Appeals affirmance of the dismissal were not based on indubitable facts or
grounds, but on inferences without established factual basis.
TWA should have offered evidence for its affirmative defenses at the preliminary hearing therefor.
Section 5 of Rule 16 of the Rules of Court expressly provides:
SEC. 5. Pleading grounds as affirmative defenses. -- Any of the grounds for dismissal provided for in this
rule, except improper venue, may be pleaded as an affirmative defense, and a preliminary hearing may
be had thereon as if a motion to dismiss had been filed.
Without any further evidence as earlier discussed, the trial court should have denied the affirmative
defense of lack of jurisdiction because it did not appear to be indubitable. Section 3 of Rule 16 of the
Rules of Court provides:
SEC. 3. Hearing and order. -- After hearing the court may deny or grant the motion or allow amendment
of pleading, or may defer the hearing and determination of the motion until the trial if the ground
alleged therein does not appear to be indubitable.
WHEREFORE, the instant petition is GRANTED and the challenged decision of 31 May 1995 of respondent
Court of Appeals in CA-G.R. CV No. 39896, as well as the Order of 24 July 1992 of the Regional Trial Court
of Quezon City, Branch 102, in Civil Case No. Q-91-9620, is REVERSED and SET ASIDE.
The Regional Trial Court of Quezon City, Branch 102, is hereby DIRECTED to proceed with the pre-trial, if
it has not been terminated, and with the trial on the merits of the case and then to render judgment
thereon, taking into account the foregoing observations on the issue of jurisdiction.
SO ORDERED.
Narvasa, C.J., (Chairman), Melo, Francisco, and Panganiban, JJ., concur.
COMM REV TRANSPORTATION LAW CASES
G.R. No. L-51910 August 10, 1989
LITONJUA SHIPPING COMPANY INC., petitioner
vs.
NATIONAL SEAMEN BOARD and GREGORIO P. CANDONGO respondents.
Ferrer, Valte, Mariano, Sangalang & Villanueva for petitioner.
Estratonico S. Anano for private respondent.
FELICIANO, J.:
In this Petition for Certiorari, petitioner Litonjua Shipping Company, Inc. ("Lintonjua") seeks to annul and
set aside a decision dated, 31 May 1979 of the National Seamen Board ("NSB") in NSB Case No. 1331-77
affirming the decision dated 17 February 1977 of the NSB hearing officer which adjudged petitioner
Litonjua liable to private respondent for violation of the latter's contract of employment and which
ordered petitioner to pay damages.
Petitioner Litonjua is the duly appointed local crewing Managing Office of the Fairwind Shipping
Corporation ('Fairwind). The M/V Dufton Bay is an ocean-going vessel of foreign registry owned by the
R.D. Mullion Ship Broking Agency Ltd. ("Mullion"). On 11 September 1976, while the Dufton Bay was in
the port of Cebu and while under charter by Fairwind, the vessel's master contracted the services of,
among others, private respondent Gregorio Candongo to serve as Third Engineer for a period of twelve
(12) months with a monthly wage of US$500.00. This agreement was executed before the Cebu Area
Manning Unit of the NSB. Thereafter, private respondent boarded the vessel. On 28 December 1976,
before expiration of his contract, private respondent was required to disembark at Port Kelang, Malaysia,
and was returned to the Philippines on 5 January 1977. The cause of the discharge was described in his
Seaman's Book as 'by owner's arrange".1
Shortly after returning to the Philippines, private respondent filed a complaint before public respondent
NSB, which complaint was docketed as NSB-1331-77, for violation of contract, against Mullion as the
shipping company and petitioner Litonjua as agent of the shipowner and of the charterer of the vessel.
At the initial hearing, the NSB hearing officer held a conference with the parties, at which conference
petitioner Litonjua was represented by one of its supercargos, Edmond Cruz. Edmond Cruz asked, in
writing, that the hearing be postponed for a month upon the ground that the employee of Litonjua in
charge of the case was out of town. The hearing officer denied this request and then declared petitioner
Litonjua in default. At the hearing, private respondent testified that when he was recruited by the
Captain of the Dufton Bay, the latter was accompanied to the NSB Cebu Area Manning Unit by two (2)
supercargos sent by petitioner Litonjua to Cebu, and that the two (2) supercargos Edmond Cruz and
Renato Litonjua assisted private respondent in the procurement of his National Investigation and
Security Agency (NISA) clearance. Messrs. Cruz and Litonjua were also present during private
respondent's interview by Captain Ho King Yiu of the Dufton Bay.
On 17 February 1977, the hearing officer of the NSB rendered a judgment by default, 2 the dispositive
portion of which read:
47
Wherefore, premises considered, judgment is hereby rendered ordering the respondents R.D. Mullion
Shipbrokers Co., Ltd., and Litonjua Shipping Co., Inc., jointly and solidarily to pay the complainant the
sum of four thousand six hundred fifty seven dollars and sixty three cents ($4,657.63) or its equivalent in
the Phil. currency within 10 days from receipt of the copy of this Decision the payment of which to be
coursed through the then NSB.
The above conclusion was rationalized in the following terms:
From the evidence on record it clearly appears that there was no sufficient or valid cause for the
respondents to terminate the services of complainant prior to 17 September 1977, which is the expiry
date of the contract. For this reason the respondents have violated the conditions of the contract of
employment which is a sufficient justification for this Board to render award in favor of the complainant
of the unpaid salaries due the latter as damages corresponding to the unexpired portion of the contract
including the accrued leave pay computed on the basis of five [51 days pay for every month of service
based at $500.00 monthly salary. Complainant's wages account further show that he has an undrawn
wage amounting to US$13.19 to be paid by the respondents Philippine agency together with his accrued
leave pay. 3
Petitioner Litonjua filed a motion for reconsideration of the hearing officer's decision; the motion was
denied. Petitioner next filed an "Appeal and/or Motion for Reconsideration of the Default Judgment
dated 9 August 1977" with the central office of the NSB. NSB then suspended its hearing officer's
decision and lifted the order of default against petitioner Litonjua, thereby allowing the latter to adduce
evidence in its own behalf The NSB hearing officer, on 26 April 1978, made the following findings:
While it appears that in the preparation of the employment papers of the complainant, what was
indicated therein was R.D. Mullion Co. (HK) Ltd. referring to Exhibit "B" (Standard Format of a Service
Agreement) and Exhibit "C" (Affidavit of Undertaking), as thecompany whom Captain Ho King Yiu, the
Master of the vessel Dufton Bay, was representing to be the shipowner, the fact remains that at the time
of the recruitment of the complainant, as duly verified by the National Seamen Board, Cebu Area
Manning Unit, the Litonjua Shipping Company was the authorized agent of the vessel's charterer, the
Fairwind Shipping Corporation, and that in the recruitment process, the Litonjua Shipping Company
through its supercargos in the persons of Edmund Cruz and Renato Litonjua, had knowledge thereof and
in fact assisted in the interviews conducted by the Master of the crew applicants as admitted by Renato
Litonjua including the acts of facilitating the crew's NISA clearances as testified to by complainant.
Moreover, the participation of the Litonjua Shipping Corporation in the recruitment of complainant,
together with the other crewmembers, in Cebu in September 1976 can be traced to the contents of the
letter of April 5, 1976 by the Fairwind Shipping Limited, thru its Director David H.L. Wu addressed to the
National Seamen Board, copy of which is on file with Contracts and Licensing Division, quote:
This is to certify that Messrs. Litonjua Shipping, Inc. is duly appointed local crewing Managing Office to
attend on our Crew requirements as well as attend to our ship's requirements when in Philippine ports.
We further authorized Litonjua Shipping Co., Inc. to act as local representative who can sue and be sued,
and to bind and sign contracts for our behalf. 4
The NSB then lifted the suspension of the hearing officer's 17 February 1977 decision.
COMM REV TRANSPORTATION LAW CASES
Petitioner Litonjua once more moved for reconsideration. On 31 May 1979, public respondent NSB
rendered a decision 5 which affirmed its hearing offices decision of 17 February 1977 and which read in
part as follows:
It is clear that respondent Litonjua Shipping Co., Inc. is the authorized Philippine agent of Fairwind
Shipping Corporation, charterer of the vessel 'Dufton Bay, wherein complainant, served as 3rd Engineer
from 17 September until disembarkation on December 28, 1976. It is also clear from the complainant's
wages account bearing the heading 'Fairwind Shipping Corporation', signed by the Master of the vessel
that the Philippine agency referred to herein directed to pay the said withdrawn wages of $13.19 is no
other than Litonjua Shipping Company, Inc.
From this observation, it can be reasonably inferred that the master of the vessel acted for and in behalf
of Fairwind Shipping Corporation who had the obligation to pay the salary of the complainant. It
necessarily follows that Fairwind Shipping Corporation is the employer of said complainant. Moreover, it
had been established by complainant that Litonjua Shipping Company, Inc., had knowledge of and
participated, through its employee, in the recruitment of herein complainant.
xxx xxx xxx
In view of the foregoing, and pursuant to Art. 3 of the New Labor Code of the Philippines, which provides
that, 'The state shall afford protection to labor . . .' as well as the provisions of Art. 4 thereof, that 'all
doubts in the implementation and interpretation of the provisions of the Code, including its
implementing rules and regulations, shall be resolved in favor of labor', it is our conclusion, that the
decision dated February 17, 1977, is based on evidence formally offered and presented during the
hearing and that there was no grave abuse of discretion committed by the hearing officer in finding
respondent Litonjua Shipping Company, Inc., liable to complainant. (Emphasis supplied)
In the instant Petition for Certiorari, petitioner Litonjua assails the decision of public respondent NSB
declaring the charterer Fairwind as employer of private respondent, and for whose liability petitioner
was made responsible, as constituting a grave abuse of discretion amounting to lack of jurisdiction. The
principal if not the sole issue to be resolved here is whether or not the charterer Fairwind was properly
regarded as the employer of private respondent Candongo.
Petitioner Litonjua makes two (2) principal submissions in support of its contention, to wit:
1) As a general rule, admiralty law as embodied in the Philippine Code of Commerce fastens liability for
payment of the crew's wages upon the ship owner, and not the charterer; and
2) The evidence of record is grossly inadequate to shift such liability from the shipowner to the
petitioner.6
Petitioner Litonjua contends that the shipowner, not the charterer, was the employer of private
respondent; and that liability for damages cannot be imposed upon petitioner which was a mere agent
of the charterer. It is insisted that private respondent's contract of employment and affidavit of
undertaking clearly showed that the party with whom he had contracted was none other than Mullion,
the shipowner, represented by the ship's master. 7 Petitioner also argues that its supercargos merely
assisted Captain Ho King Yiu of the Dufton Bay in being private respondent as Third Engineer. Petitioner
also points to the circumstance that the discharge and the repatriation of private respondent was
specified in his Seaman's Book as having been "by owner's arrange." Petitioner Litonjua thus argues that
48
being the agent of the charterer and not of the shipowner, it accordingly should not have been held
liable on the contract of employment of private respondent.
We are not persuaded by petitioner's argument. We believe that there are two (2) grounds upon which
petitioner Litonjua may be held liable to the private respondent on the contract of employment.
The first basis is the charter party which existed between Mullion, the shipowner, and Fairwind, the
charterer. In modern maritime law and usage, there are three (3) distinguishable types of charter
parties: (a) the "bareboat" or "demise" charter; (b) the "time" charter; and (c) the "voyage" or "trip"
charter. A bareboat or demise charter is a demise of a vessel, much as a lease of an unfurnished house is
a demise of real property. The shipowner turns over possession of his vessel to the charterer, who then
undertakes to provide a crew and victuals and supplies and fuel for her during the term of the charter.
The shipowner is not normally required by the terms of a demise charter to provide a crew, and so the
charterer gets the "bare boat", i.e., without a crew. 8 Sometimes, of course, the demise charter might
provide that the shipowner is to furnish a master and crew to man the vessel under the charterer's
direction, such that the master and crew provided by the shipowner become the agents and servants or
employees of the charterer, and the charterer (and not the owner) through the agency of the master,
has possession and control of the vessel during the charter period. A time charter, upon the other hand,
like a demise charter, is a contract for the use of a vessel for a specified period of time or for the
duration of one or more specified voyages. In this case, however, the owner of a time-chartered vessel
(unlike the owner of a vessel under a demise or bare-boat charter), retains possession and control
through the master and crew who remain his employees. What the time charterer acquires is the right to
utilize the carrying capacity and facilities of the vessel and to designate her destinations during the term
of the charter. A voyage charter, or trip charter, is simply a contract of affreightment, that is, a contract
for the carriage of goods, from one or more ports of loading to one or more ports of unloading, on one
or on a series of voyages. In a voyage charter, master and crew remain in the employ of the owner of the
vessel. 9
It is well settled that in a demise or bare boat charter, the charterer is treated as owner pro hac vice of
the vessel, the charterer assuming in large measure the customary rights and liabilities of the shipowner
in relation to third persons who have dealt with him or with the vessel. 10 In such case, the Master of
the vessel is the agent of the charterer and not of the shipowner.11 The charterer or owner pro hac vice,
and not the general owner of the vessel, is held liable for the expenses of the voyage including the wages
of the seamen.12
It is important to note that petitioner Litonjua did not place into the record of this case a copy of the
charter party covering the M/V Dufton Bay. We must assume that petitioner Litonjua was aware of the
nature of a bareboat or demise charter and that if petitioner did not see fit to include in the record a
copy of the charter party, which had been entered into by its principal, it was because the charter party
and the provisions thereof were not supportive of the position adopted by petitioner Litonjua in the
present case, a position diametrically opposed to the legal consequence of a bareboat charter.13
Treating Fairwind as owner pro hac vice, petitioner Litonjua having failed to show that it was not such,
we believe and so hold that petitioner Litonjua, as Philippine agent of the charterer, may be held liable
on the contract of employment between the ship captain and the private respondent.
There is a second and ethically more compelling basis for holding petitioner Litonjua liable on the
contract of employment of private respondent. The charterer of the vessel, Fairwind, clearly benefitted
from the employment of private respondent as Third Engineer of the Dufton Bay, along with the ten (10)
COMM REV TRANSPORTATION LAW CASES
other Filipino crewmembers recruited by Captain Ho in Cebu at the same occasion. 14 If private
respondent had not agreed to serve as such Third Engineer, the ship would not have been able to
proceed with its voyage. The equitable consequence of this benefit to the charterer is, moreover,
reinforced by convergence of other circumstances of which the Court must take account. There is the
circumstance that only the charterer, through the petitioner, was present in the Philippines. Secondly,
the scope of authority or the responsibility of petitioner Litonjua was not clearly delimited. Petitioner as
noted, took the position that its commission was limited to taking care of vessels owned by Fairwind. But
the documentary authorization read into the record of this case does not make that clear at all. The
words "our ships" may well be read to refer both to vessels registered in the name of Fairwind and
vessels owned by others but chartered by Fairwind. Indeed the commercial, operating requirements of a
vessel for crew members and for supplies and provisions have no relationship to the technical
characterization of the vessel as owned by or as merely chartered by Fairwind. In any case, it is not clear
from the authorization given by Fairwind to petitioner Litonjua that vessels chartered by Fairwind (and
owned by some other companies) were not to be taken care of by petitioner Litonjua should such vessels
put into a Philippine port. The statement of account which the Dufton Bay's Master had signed and
which pertained to the salary of private respondent had referred to a Philippine agency which would
take care of disbursing or paying such account. 'there is no question that Philippine agency was the
Philippine agent of the charterer Fairwind. Moreover, there is also no question that petitioner Litonjua
did assist the Master of the vessel in locating and recruiting private respondent as Third Engineer of the
vessel as well as ten (10) other Filipino seamen as crew members. In so doing, petitioner Litonjua
certainly in effect represented that it was taking care of the crewing and other requirements of a vessel
chartered by its principal, Fairwind.15
Last, but certainly not least, there is the circumstance that extreme hardship would result for the private
respondent if petitioner Litonjua, as Philippine agent of the charterer, is not held liable to private
respondent upon the contract of employment. Clearly, the private respondent, and the other Filipino
crew members of the vessel, would be defenseless against a breach of their respective contracts. While
wages of crew members constitute a maritime lien upon the vessel, private respondent is in no position
to enforce that lien. If only because the vessel, being one of foreign registry and not ordinarily doing
business in the Philippines or making regular calls on Philippine ports cannot be effectively held to
answer for such claims in a Philippine forum. Upon the other hand, it seems quite clear that petitioner
Litonjua, should it be held liable to private respondent for the latter's claims, would be better placed to
secure reimbursement from its principal Fairwind. In turn, Fairwind would be in an indefinitely better
position (than private respondent) to seek and obtain recourse from Mullion, the foreign shipowner,
should Fairwind feel entitled to reimbursement of the amounts paid to private respondent through
petitioner Litonjua.
We conclude that private respondent was properly regarded as an employee of the charterer Fairwind
and that petitioner Litonjua may be held to answer to private respondent for the latter's claims as the
agent in the Philippines of Fairwind. We think this result, which public respondent reached, far from
constituting a grave abuse of discretion, is compelled by equitable principles and by the demands of
substantial justice. To hold otherwise would be to leave private respondent (and others who may find
themselves in his position) without any effective recourse for the unjust dismissal and for the breach of
his contract of employment.
WHEREFORE, the Petition for certiorari is DISMISSED and the Decision of the then National Seamen
Board dated 31 May 1979 is hereby AFFIRMED. No pronouncement as to costs.
49
SO ORDERED.
G.R. No. L-22272 June 26, 1967
ANTONIA MARANAN, plaintiff-appellant,
vs.
PASCUAL PEREZ, ET AL., defendants.
PASCUAL PEREZ, defendant appellant.
Pedro Panganiban for plaintiff-appellant.
Magno T. Bueser for 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.1äwphï1.ñët
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
COMM REV TRANSPORTATION LAW CASES
contract with the deceased. As a result, Devesa's assault can not be deemed in law a breach of Gillaco's
contract of transportation by a servant or employee of the carrier. . . . (Emphasis supplied)
Now here, the killing was perpetrated by the driver of the very cab transporting the passenger, in whose
hands the carrier had entrusted the duty of executing the contract of carriage. In other words, unlike the
Gillaco case, the killing of the passenger here took place in the course of duty of the guilty employee and
when the employee was acting within the scope of his duties.
Moreover, the Gillaco case was decided under the provisions of the Civil Code of 1889 which, unlike the
present Civil Code, did not impose upon common carriers absolute liability for the safety of passengers
against wilful assaults or negligent acts committed by their employees. The death of the passenger in the
Gillaco case was truly a fortuitous event which exempted the carrier from liability. It is true that Art.
1105 of the old Civil Code on fortuitous events has been substantially reproduced in Art. 1174 of the Civil
Code of the Philippines but both articles clearly remove from their exempting effect the case where the
law expressly provides for liability in spite of the occurrence of force majeure. And herein significantly
lies the statutory difference between the old and present Civil Codes, in the backdrop of the factual
situation before Us, which further accounts for a different result in the Gillaco case. Unlike the old Civil
Code, the new Civil Code of the Philippines expressly makes the common carrier liable for intentional
assaults committed by its employees upon its passengers, by the wording of Art. 1759 which
categorically states that
Common carriers are liable for the death of or injuries to passengers through the negligence or willful
acts of the former's employees, although such employees may have acted beyond the scope of their
authority or in violation of the orders of the common carriers.
The Civil Code provisions on the subject of Common Carriers1 are new and were taken from Anglo-
American Law.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
As can be gleaned from Art. 1759, the Civil Code of the Philippines evidently follows the rule based on
the second view. At least three very cogent reasons underlie this rule. As explained in Texas Midland R.R.
v. Monroe, 110 Tex. 97, 216 S.W. 388, 389-390, and Haver v. Central Railroad Co., 43 LRA 84, 85: (1) the
special undertaking of the carrier requires that it furnish its passenger that full measure of protection
afforded by the exercise of the high degree of care prescribed by the law, inter alia from violence and
insults at the hands of strangers and other passengers, but above all, from the acts of the carrier's own
servants charged with the passenger's safety; (2) said liability of the carrier for the servant's violation of
duty to passengers, is the result of the formers confiding in the servant's hands the performance of his
contract to safely transport the passenger, delegating therewith the duty of protecting the passenger
50
with the utmost care prescribed by law; and (3) as between the carrier and the passenger, the former
must bear the risk of wrongful acts or negligence of the carrier's employees against passengers, since it,
and not the passengers, has power to select and remove them.
Accordingly, it is the carrier's strict obligation to select its drivers and similar employees with due regard
not only to their technical competence and physical ability, but also, no less important, to their total
personality, including their patterns of behavior, moral fibers, and social attitude.
Applying this stringent norm to the facts in this case, therefore, the lower court rightly adjudged the
defendant carrier liable pursuant to Art. 1759 of the Civil Code. The dismissal of the claim against the
defendant driver was also correct. Plaintiff's action was predicated on breach of contract of carriage7 and
the cab driver was not a party thereto. His civil liability is covered in the criminal case wherein he was
convicted by final judgment.
In connection with the award of damages, the court a quo granted only P3,000 to plaintiff-appellant. This
is the minimum compensatory damages amount recoverable under Art. 1764 in connection with Art.
2206 of the Civil Code when a breach of contract results in the passenger's death. As has been the policy
followed by this Court, this minimal award should be increased to P6,000. As to other alleged actual
damages, the lower court's finding that plaintiff's evidence thereon was not convincing,8 should not be
disturbed. Still, Arts. 2206 and 1764 award moral damages in addition to compensatory damages, to the
parents of the passenger killed to compensate for the mental anguish they suffered. A claim therefor,
having been properly made, it becomes the court's duty to award moral damages. 9 Plaintiff demands
P5,000 as moral damages; however, in the circumstances, We consider P3,000 moral damages, in
addition to the P6,000 damages afore-stated, as sufficient. Interest upon such damages are also due to
plaintiff-appellant. 10
Wherefore, with the modification increasing the award of actual damages in plaintiff's favor to P6,000,
plus P3,000.00 moral damages, with legal interest on both from the filing of the complaint on December
6, 1961 until the whole amount is paid, the judgment appealed from is affirmed in all other respects. No
costs. So ordered.
Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez and Castro, JJ., concur.
G.R. No. L-31379 August 29, 1988
COMPAÑIA MARITIMA, petitioner,
vs.
COURT OF APPEALS and VICENTE CONCEPCION, respondents.
Rafael Dinglasan for petitioner.
Benjamin J. Molina for private respondent.
FERNAN, C.J.:
COMM REV TRANSPORTATION LAW CASES
Petitioner Compañia Maritima seeks to set aside through this petition for review on certiorari the
decision 1 of the Court of Appeals dated December 5, 1965, adjudging petitioner liable to private
respondent Vicente E. Concepcion for damages in the amount of P24,652.97 with legal interest from the
date said decision shall have become final, for petitioner's failure to deliver safely private respondent's
payloader, and for costs of suit. The payloader was declared abandoned in favor of petitioner.
The facts of the case are as follows:
Private respondent Vicente E. Concepcion, a civil engineer doing business under the name and style of
Consolidated Construction with office address at Room 412, Don Santiago Bldg., Taft Avenue, Manila,
had a contract with the Civil Aeronautics Administration (CAA) sometime in 1964 for the construction of
the airport in Cagayan de Oro City Misamis Oriental.
Being a Manila — based contractor, Vicente E. Concepcion had to ship his construction equipment to
Cagayan de Oro City. Having shipped some of his equipment through petitioner and having settled the
balance of P2,628.77 with respect to said shipment, Concepcion negotiated anew with petitioner, thru
its collector, Pacifico Fernandez, on August 28, 1964 for the shipment to Cagayan de Oro City of one (1)
unit payloader, four (4) units 6x6 Reo trucks and two (2) pieces of water tanks. He was issued Bill of
Lading 113 on the same date upon delivery of the equipment at the Manila North Harbor. 2
These equipment were loaded aboard the MV Cebu in its Voyage No. 316, which left Manila on August
30, 1964 and arrived at Cagayan de Oro City in the afternoon of September 1, 1964. The Reo trucks and
water tanks were safely unloaded within a few hours after arrival, but while the payloader was about
two (2) meters above the pier in the course of unloading, the swivel pin of the heel block of the port
block of Hatch No. 2 gave way, causing the payloader to fall. 3 The payloader was damaged and was
thereafter taken to petitioner's compound in Cagayan de Oro City.
On September 7, 1964, Consolidated Construction, thru Vicente E. Concepcion, wrote Compañia
Maritima to demand a replacement of the payloader which it was considering as a complete loss
because of the extent of damage. 4 Consolidated Construction likewise notified petitioner of its claim for
damages. Unable to elicit response, the demand was repeated in a letter dated October 2, 1964. 5
Meanwhile, petitioner shipped the payloader to Manila where it was weighed at the San Miguel
Corporation. Finding that the payloader weighed 7.5 tons and not 2.5 tons as declared in the B-111 of
Lading, petitioner denied the claim for damages of Consolidated Construction in its letter dated October
7, 1964, contending that had Vicente E. Concepcion declared the actual weight of the payloader, damage
to their ship as well as to his payloader could have been prevented. 6
To replace the damaged payloader, Consolidated Construction in the meantime bought a new one at
P45,000.00 from Bormaheco Inc. on December 3, 1964, and on July 6, 1965., Vicente E. Concepcion filed
an action for damages against petitioner with the then Court of First Instance of Manila, Branch VII,
docketed as Civil Case No. 61551, seeking to recover damages in the amount of P41,225.00 allegedly
suffered for the period of 97 days that he was not able to employ a payloader in the construction job at
the rate of P450.00 a day; P34,000.00 representing the cost of the damaged payloader; Pl 1, 000. 00
representing the difference between the cost of the damaged payloader and that of the new payloader;
P20,000.00 representing the losses suffered by him due to the diversion of funds to enable him to buy a
new payloader; P10,000.00 as attorney's fees; P5,000.00 as exemplary damages; and cost of the suit. 7
51
After trial, the then Court of First Instance of Manila, Branch VII, dismissed on April 24, 1968 the
complaint with costs against therein plaintiff, herein private respondent Vicente E. Concepcion, stating
that the proximate cause of the fall of the payloader was Vicente E. Concepcion's act or omission in
having misrepresented the weight of the payloader as 2.5 tons instead of its true weight of 7.5 tons,
which underdeclaration was intended to defraud Compañia Maritima of the payment of the freight
charges and which likewise led the Chief Officer of the vessel to use the heel block of hatch No. 2 in
unloading the payloader. 8
From the adverse decision against him, Vicente E. Concepcion appealed to the Court of Appeals which,
on December 5, 1965 rendered a decision, the dispositive portion of which reads:
IN VIEW WHEREOF, judgment must have to be as it is hereby reversed; defendant is condemned to pay
unto plaintiff the sum in damages of P24,652.07 with legal interest from the date the present decision
shall have become final; the payloader is declared abandoned to defendant; costs against the latter. 9
Hence, the instant petition.
The principal issue in the instant case is whether or not the act of private respondent Vicente E.
Concepcion in furnishing petitioner Compañia Maritima with an inaccurate weight of 2.5 tons instead of
the payloader's actual weight of 7.5 tons was the proximate and only cause of the damage on the Oliver
Payloader OC-12 when it fell while being unloaded by petitioner's crew, as would absolutely exempt
petitioner from liability for damages under paragraph 3 of Article 1734 of the Civil Code, which provides:
Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of the goods,
unless the same is due to any of the following causes only:
xxx xxx xxx
(3) Act or omission of the shipper or owner of the goods.
Petitioner claims absolute exemption under this provision upon the reasoning that private respondent's
act of furnishing it with an inaccurate weight of the payloader constitutes misrepresentation within the
meaning of "act or omission of the shipper or owner of the goods" under the above- quoted article. It
likewise faults the respondent Court of Appeals for reversing the decision of the trial court
notwithstanding that said appellate court also found that by representing the weight of the payloader to
be only 2.5 tons, private respondent had led petitioner's officer to believe that the same was within the
5 tons capacity of the heel block of Hatch No. 2. Petitioner would thus insist that the proximate and only
cause of the damage to the payloader was private respondent's alleged misrepresentation of the weight
of the machinery in question; hence, any resultant damage to it must be borne by private respondent
Vicente E. Concepcion.
The general rule under Articles 1735 and 1752 of the Civil Code is that common carriers are presumed to
have been at fault or to have acted negligently in case the goods transported by them are lost, destroyed
or had deteriorated. To overcome the presumption of liability for the loss, destruction or deterioration of
the goods under Article 1735, the common carriers must prove that they observed extraordinary
diligence as required in Article 1733 of the Civil Code. The responsibility of observing extraordinary
diligence in the vigilance over the goods is further expressed in Article 1734 of the same Code, the article
invoked by petitioner to avoid liability for damages.
COMM REV TRANSPORTATION LAW CASES
Corollary is the rule that mere proof of delivery of the goods in good order to a common carrier, and of
their arrival at the place of destination in bad order, makes out prima facie case against the common
carrier, so that if no explanation is given as to how the loss, deterioration or destruction of the goods
occurred, the common carrier must be held responsible. 10 Otherwise stated, it is incumbent upon the
common carrier to prove that the loss, deterioration or destruction was due to accident or some other
circumstances inconsistent with its liability.
In the instant case, We are not persuaded by the proferred explanation of petitioner alleged to be the
proximate cause of the fall of the payloader while it was being unloaded at the Cagayan de Oro City pier.
Petitioner seems to have overlooked the extraordinary diligence required of common carriers in the
vigilance over the goods transported by them by virtue of the nature of their business, which is
impressed with a special public duty.
Thus, Article 1733 of the Civil Code provides:
Art. 1733. Common carriers, from the nature of their business and for reason of public policy, are bound
to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers
transported by them according to all the circumstances of each case.
Such extraordinary diligence in the vigilance over the goods is further expressed in Articles 1734, 1735
and 1745, Nos. 5, 6 and 7, ...
The extraordinary diligence in the vigilance over the goods tendered for shipment requires the common
carrier to know and to follow the required precaution for avoiding damage to, or destruction of the
goods entrusted to it for safe carriage and delivery. It requires common carriers to render service with
the greatest skill and foresight and "to use all reasonable means to ascertain the nature and
characteristic of goods tendered for shipment, and to exercise due care in the handling and stowage
including such methods as their nature requires."11 Under Article 1736 of the Civil Code, the
responsibility to observe extraordinary diligence commences and lasts from the time the goods are
unconditionally placed in the possession of, and received by the carrier for transportation until the same
are delivered, actually or constructively, by the carrier to the consignee, or to the person who has the
right to receive them without prejudice to the provisions of Article 1738.
Where, as in the instant case, petitioner, upon the testimonies of its own crew, failed to take the
necessary and adequate precautions for avoiding damage to, or destruction of, the payloader entrusted
to it for safe carriage and delivery to Cagayan de Oro City, it cannot be reasonably concluded that the
damage caused to the payloader was due to the alleged misrepresentation of private respondent
Concepcion as to the correct and accurate weight of the payloader. As found by the respondent Court of
Appeals, the fact is that petitioner used a 5-ton capacity lifting apparatus to lift and unload a visibly
heavy cargo like a payloader. Private respondent has, likewise, sufficiently established the laxity and
carelessness of petitioner's crew in their methods of ascertaining the weight of heavy cargoes offered for
shipment before loading and unloading them, as is customary among careful persons.
It must be noted that the weight submitted by private respondent Concepcion appearing at the left-hand
portion of Exhibit 8 12 as an addendum to the original enumeration of equipment to be shipped was
entered into the bill of lading by petitioner, thru Pacifico Fernandez, a company collector, without seeing
the equipment to be shipped.13 Mr. Mariano Gupana, assistant traffic manager of petitioner, confirmed
in his testimony that the company never checked the information entered in the bill of lading. 14 Worse,
52
the weight of the payloader as entered in the bill of lading was assumed to be correct by Mr. Felix Pisang,
Chief Officer of MV Cebu. 15
The weights stated in a bill of lading are prima facie evidence of the amount received and the fact that
the weighing was done by another will not relieve the common carrier where it accepted such weight
and entered it on the bill of lading. 16 Besides, common carriers can protect themselves against mistakes
in the bill of lading as to weight by exercising diligence before issuing the same. 17
While petitioner has proven that private respondent Concepcion did furnish it with an inaccurate weight
of the payloader, petitioner is nonetheless liable, for the damage caused to the machinery could have
been avoided by the exercise of reasonable skill and attention on its part in overseeing the unloading of
such a heavy equipment. And circumstances clearly show that the fall of the payloader could have been
avoided by petitioner's crew. Evidence on record sufficiently show that the crew of petitioner had been
negligent in the performance of its obligation by reason of their having failed to take the necessary
precaution under the circumstances which usage has established among careful persons, more
particularly its Chief Officer, Mr. Felix Pisang, who is tasked with the over-all supervision of loading and
unloading heavy cargoes and upon whom rests the burden of deciding as to what particular winch the
unloading of the payloader should be undertaken. 18 While it was his duty to determine the weight of
heavy cargoes before accepting them. Mr. Felix Pisang took the bill of lading on its face value and
presumed the same to be correct by merely "seeing" it. 19 Acknowledging that there was a "jumbo" in
the MV Cebu which has the capacity of lifting 20 to 25 ton cargoes, Mr. Felix Pisang chose not to use it,
because according to him, since the ordinary boom has a capacity of 5 tons while the payloader was only
2.5 tons, he did not bother to use the "jumbo" anymore. 20
In that sense, therefore, private respondent's act of furnishing petitioner with an inaccurate weight of
the payloader upon being asked by petitioner's collector, cannot be used by said petitioner as an excuse
to avoid liability for the damage caused, as the same could have been avoided had petitioner utilized the
"jumbo" lifting apparatus which has a capacity of lifting 20 to 25 tons of heavy cargoes. It is a fact known
to the Chief Officer of MV Cebu that the payloader was loaded aboard the MV Cebu at the Manila North
Harbor on August 28, 1964 by means of a terminal crane. 21 Even if petitioner chose not to take the
necessary precaution to avoid damage by checking the correct weight of the payloader, extraordinary
care and diligence compel the use of the "jumbo" lifting apparatus as the most prudent course for
petitioner.
While the act of private respondent in furnishing petitioner with an inaccurate weight of the payloader
cannot successfully be used as an excuse by petitioner to avoid liability to the damage thus caused, said
act constitutes a contributory circumstance to the damage caused on the payloader, which mitigates the
liability for damages of petitioner in accordance with Article 1741 of the Civil Code, to wit:
Art. 1741. If the shipper or owner merely contributed to the loss, destruction or deterioration of the
goods, the proximate cause thereof being the negligence of the common carrier, the latter shall be liable
in damages, which however, shall be equitably reduced.
We find equitable the conclusion of the Court of Appeals reducing the recoverable amount of damages
by 20% or 1/5 of the value of the payloader, which at the time the instant case arose, was valued at
P34,000. 00, thereby reducing the recoverable amount at 80% or 4/5 of P34,000.00 or the sum of
P27,200.00. Considering that the freight charges for the entire cargoes shipped by private respondent
amounting to P2,318.40 remained unpaid.. the same would be deducted from the P27,000.00 plus an
COMM REV TRANSPORTATION LAW CASES

additional deduction of P228.63 representing the freight charges for the undeclared weight of 5 tons
(difference between 7.5 and 2.5 tons) leaving, therefore, a final recoverable amount of damages of
P24,652.97 due to private respondent Concepcion.
Notwithstanding the favorable judgment in his favor, private respondent assailed the Court of Appeals'
decision insofar as it limited the damages due him to only P24,652.97 and the cost of the suit. Invoking
the provisions on damages under the Civil Code, more particularly Articles 2200 and 2208, private
respondent further seeks additional damages allegedly because the construction project was delayed
and that in spite of his demands, petitioner failed to take any steps to settle his valid, just and
demandable claim for damages.
We find private respondent's submission erroneous. It is well- settled that an appellee, who is not an
appellant, may assign errors in his brief where his purpose is to maintain the judgment on other grounds,
but he may not do so if his purpose is to have the judgment modified or reversed, for, in such case, he
must appeal. 22 Since private respondent did not appeal from the judgment insofar as it limited the
award of damages due him, the reduction of 20% or 1/5 of the value of the payloader stands.
WHEREFORE, in view of the foregoing, the petition is DENIED. The decision of the Court of Appeals is
hereby AFFIRMED in all respects with costs against petitioner. In view of the length of time this case has
been pending, this decision is immediately executory.
G.R. No. L-69044 May 29, 1987
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.

EASTERN SHIPPING LINES, INC., petitioner, On August 31, 1979, the Trial Court rendered judgment in favor of Development Insurance in the
vs. amounts of P256,039.00 and P92,361.75, respectively, with legal interest, plus P35,000.00 as attorney's
INTERMEDIATE APPELLATE COURT and DEVELOPMENT INSURANCE & SURETY CORPORATION, fees and costs. Petitioner Carrier took an appeal to the then Court of Appeals which, on August 14, 1984,
respondents. affirmed.

No. 71478 May 29, 1987 Petitioner Carrier is now before us on a Petition for Review on Certiorari.

EASTERN SHIPPING LINES, INC., petitioner, G.R. NO. 71478

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,
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.

53
COMM REV TRANSPORTATION LAW CASES
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
54
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.
COMM REV TRANSPORTATION LAW CASES
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
55
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).
COMM REV TRANSPORTATION LAW CASES
... 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 the shipper and containing his goods can rightly
be considered "packages" standing by themselves, they do not suddenly lose that character upon being
stowed in a carrier's container. I would liken these containers to detachable stowage compartments of
the ship. They simply serve to divide the ship's overall cargo stowage space into smaller, more
serviceable loci. Shippers' packages are quite literally "stowed" in the containers utilizing stevedoring
practices and materials analogous to those employed in traditional on board stowage.
In Yeramex International v. S.S. Tando,, 1977 A.M.C. 1807 (E.D. Va.) rev'd on other grounds, 595 F 2nd
943 (4 Cir. 1979), another district with many maritime cases followed Judge Beeks' reasoning in
Matsushita and similarly rejected the functional economics test. Judge Kellam held that when rolls of
polyester goods are packed into cardboard cartons which are then placed in containers, the cartons and
not the containers are the packages.
xxx xxx xxx
The case of Smithgreyhound v. M/V Eurygenes, 18 followed the Mitsui test:
Eurygenes concerned a shipment of stereo equipment packaged by the shipper into cartons which were
then placed by the shipper into a carrier- furnished container. The number of cartons was disclosed to
the carrier in the bill of lading. Eurygenes followed the Mitsui test and treated the cartons, not the
container, as the COGSA packages. However, Eurygenes indicated that a carrier could limit its liability to
$500 per container if the bill of lading failed to disclose the number of cartons or units within the
container, or if the parties indicated, in clear and unambiguous language, an agreement to treat the
container as the package.
(Admiralty Litigation in Perpetuum: The Continuing Saga of Package Limitations and Third World Delivery
Problems by Chester D. Hooper & Keith L. Flicker, published in Fordham International Law Journal, Vol. 6,
1982-83, Number 1) (Emphasis supplied)
In this case, the Bill of Lading (Exhibit "A") disclosed the following data:
2 Containers
(128) Cartons)
56
Men's Garments Fabrics and Accessories Freight Prepaid
Say: Two (2) Containers Only.
Considering, therefore, that the Bill of Lading clearly disclosed the contents of the containers, the
number of cartons or units, as well as the nature of the goods, and 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 $500 limitation of liability.
True, the evidence does not disclose whether the containers involved herein were carrier-furnished or
not. Usually, however, containers are provided by the carrier. 19 In this case, the probability is that they
were so furnished for Petitioner Carrier was at liberty to pack and carry the goods in containers if they
were not so packed. Thus, at the dorsal side of the Bill of Lading (Exhibit "A") appears the following
stipulation in fine print:
11. (Use of Container) Where the goods receipt of which is 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 at liberty to
pack and carry them in any type of container(s).
The foregoing would explain the use of the estimate "Say: Two (2) Containers Only" in the Bill of Lading,
meaning that the goods could probably fit in two (2) containers only. It cannot mean that the shipper
had furnished the containers for if so, "Two (2) Containers" appearing as the first entry would have
sufficed. and if there is any ambiguity in the Bill of Lading, it is a cardinal principle in the construction of
contracts that the interpretation of obscure words or stipulations in a contract shall not favor the party
who caused the obscurity. 20 This applies with even greater force in a contract of adhesion where a
contract is already prepared and the other party merely adheres to it, like the Bill of Lading in this case,
which is draw. up by the carrier. 21
On Alleged Denial of Opportunity to Present Deposition of Its Witnesses: (in G.R. No. 69044 only)
Petitioner Carrier claims that the Trial Court did not give it sufficient time to take the depositions of its
witnesses in Japan by written interrogatories.
We do not agree. petitioner Carrier was given- full opportunity to present its evidence but it failed to do
so. On this point, the Trial Court found:
xxx xxx xxx
Indeed, since after November 6, 1978, to August 27, 1979, not to mention the time from June 27, 1978,
when its answer was prepared and filed in Court, until September 26, 1978, when the pre-trial
conference was conducted for the last time, the defendant had more than nine months to prepare its
evidence. Its belated notice to take deposition on written interrogatories of its witnesses in Japan,
served upon the plaintiff on August 25th, just two days before the hearing set for August 27th, knowing
fully well that it was its undertaking on July 11 the that the deposition of the witnesses would be
dispensed with if by next time it had not yet been obtained, only proves the lack of merit of the
defendant's motion for postponement, for which reason it deserves no sympathy from the Court in that
regard. The defendant has told the Court since February 16, 1979, that it was going to take the
deposition of its witnesses in Japan. Why did it take until August 25, 1979, or more than six months, to
COMM REV TRANSPORTATION LAW CASES

prepare its written interrogatories. Only the defendant itself is to blame for its failure to adduce BERSAMIN, and
evidence in support of its defenses.
DOMINGO E. CURSO, VILLARAMA, JR., JJ.
xxx xxx xxx 22
LUCIA E. CURSO,
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 MELECIO E. CURSO, SEGUNDO E. CURSO,
adduced. What due process abhors is absolute lack of opportunity to be heard. 24
VIRGILIO E. CURSO, DIOSDADA E. CURSO, and Promulgated:
On the Award of Attorney's Fees: CECILIA E. CURSO,

Petitioner Carrier questions the award of attorney's fees. In both cases, respondent Court affirmed the Respondents.
award by the Trial Court of attorney's fees of P35,000.00 in favor of Development Insurance in G.R. No. March 17, 2010
69044, and P5,000.00 in favor of NISSHIN and DOWA in G.R. No. 71478.
x-----------------------------------------------------------------------------------------x
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.
DECISION
WHEREFORE, 1) in G.R. No. 69044, the judgment is modified in that petitioner Eastern Shipping Lines
shall pay the Development Insurance and Surety Corporation the amount of P256,039 for the twenty-
eight (28) packages of calorized lance pipes, and P71,540 for the seven (7) cases of spare parts, with
interest at the legal rate from the date of the filing of the complaint on June 13, 1978, plus P5,000 as BERSAMIN, J.:
attorney's fees, and the costs.

2) In G.R.No.71478,the judgment is hereby affirmed.

SO ORDERED.
Are the surviving brothers and sisters of a passenger of a vessel that sinks during a voyage
Narvasa, Cruz, Feliciano and Gancayco, JJ., concur. entitled to recover moral damages from the vessel owner as common carrier?

SULPICIO LINES, INC., G.R. No. 157009 This is the question presented in the appeal taken by the common carrier from the reversal by
the Court of Appeals (CA) of the decision of the Regional Trial Court (RTC) dismissing the complaint for
Petitioner, various damages filed by the surviving brothers and sisters of the late Dr. Cenon E. Curso upon a finding
that force majeure had caused the sinking. The CA awarded moral and other damages to the surviving
brothers and sisters.

Present:

-versus - PUNO, C.J., Chairperson, Antecedents

CARPIO MORALES,

LEONARDO-DE CASTRO,

57
COMM REV TRANSPORTATION LAW CASES

On October 23, 1988, Dr. Curso boarded at the port of Manila the MV Doa Marilyn, an inter-
island vessel owned and operated by petitioner Sulpicio Lines, Inc., bound for Tacloban City.
Unfortunately, the MV Doa Marilyn sank in the afternoon of October 24, 1988 while at sea due to the Ruling of the CA
inclement sea and weather conditions brought about by Typhoon Unsang. The body of Dr. Curso was not
recovered, along with hundreds of other passengers of the ill-fated vessel. At the time of his death, Dr.
Curso was 48 years old, and employed as a resident physician at the Naval District Hospital in Naval,
Biliran. He had a basic monthly salary of P3,940.00, and would have retired from government service by The respondents appealed to the CA, contending that the RTC erred: (a) in considering itself
December 20, 2004 at the age of 65. barred from entertaining the case by the findings of fact of the SBMI in SBMI-ADM Case No. 08-88; (b) in
not holding that the petitioner was negligent and did not exercise the required diligence and care in
conducting Dr. Curso to his destination; (c) in not finding that the MV Doa Marilyn was unseaworthy at
the time of its sinking; and (d) in not awarding damages to them.91[2]
On January 21, 1993, the respondents, allegedly the surviving brothers and sisters of Dr.
Curso, sued the petitioner in the RTC in Naval, Biliran to claim damages based on breach of contract of
carriage by sea, averring that the petitioner had acted negligently in transporting Dr. Curso and the other
passengers. They stated, among others, that their parents had predeceased Dr. Curso, who died single In its decision dated September 16, 2002,92[3] the CA held and disposed:
and without issue; and that, as such, they were Dr. Cursos surviving heirs and successors in interest
entitled to recover moral and other damages.90[1] They prayed for judgment, as follows: (a)
compensatory damages of P1,924,809.00; (b) moral damages of P100,000.00; (c) exemplary or corrective
damages in the amount deemed proper and just; (d) expenses of litigation of at least P50,000.00; (e)
attorneys fees of P50,000.00; and (f) costs of suit. Based on the events described by the appellees witness, the Court found inadequate proof to
show that Sulpicio Lines, Inc., or its officers and crew, had exercised the required degree of diligence to
acquit the appellee of liability.

The petitioner denied liability, insisting that the sinking of the vessel was due to force majeure
(i.e., Typhoon Unsang), which exempted a common carrier from liability. It averred that the MV Doa
Marilyn was seaworthy in all respects, and was in fact cleared by the Philippine Coast Guard for the
voyage; and that after the accident it conducted intensive search and rescue operations and extended
assistance and aid to the victims and their families.
Ruling of the RTC
In the first place, the court finds inadequate explanation why the officers of the M.V. Doa
Marilyn had not apprised themselves of the weather reports on the approach of typhoon Unsang which
had the power of a signal no. 3 cyclone, bearing upon the general direction of the path of the M.V. Doa
Marilyn. If the officers and crew of the Doa Marilyn had indeed been adequately monitoring the strength
and direction of the typhoon, and had acted promptly and competently to avoid the same, then such a
mishap would not have occurred.

Furthermore, there was no account of the acts and decision of the crew of the ill-fated ship
On July 28, 1995, the RTC dismissed the complaint upon its finding that the sinking of the
from 8:00 PM on October 23, 1988 when the Chief Mate left his post until 4:00 AM the next day when he
vessel was due to force majeure. The RTC concluded that the officers of the MV Doa Marilyn had acted
resumed duty. It does not appear what occurred during that time, or what weather reports were
with the diligence required of a common carrier; that the sinking of the vessel and the death of its
received and acted upon by the ship captain. What happened during such time is important in
passengers, including Dr. Curso, could not have been avoided; that there was no basis to consider the
MV Doa Marilyn not seaworthy at the time of the voyage; that the findings of the Special Board of
Marine Inquiry (SBMI) constituted to investigate the disaster absolved the petitioner, its officers, and
crew of any negligence and administrative liability; and that the respondents failed to prove their claim
for damages.

58
COMM REV TRANSPORTATION LAW CASES

determining what information about the typhoon was gathered and how the ship officers reached their (4) Costs of the suit.94[5]
decision to just change course, and not take shelter while a strong typhoon was approaching.

Furthermore, the Court doubts the fitness of the ship for the voyage, since at the first sign of
bad weather, the ships hydraulic system failed and had to be repaired mid-voyage, making the vessel a
virtual derelict amidst a raging storm at sea. It is part of the appellees extraordinary diligence as a
common carrier to make sure that its ships can withstand the forces that bear upon them during a
voyage, whether they be the ordinary stress of the sea during a calm voyage or the rage of a storm. The
fact that the stud bolts in the ships hydraulic system gave way while the ship was at sea discredits the
theory that the appellee exercised due diligence in maintaining the seaworthy condition of the M.V. Doa
Marilyn. xxx.93[4]
Hence, this appeal, in which the petitioner insists that the CA committed grievous errors in
holding that the respondents were entitled to moral damages as the brothers and sisters of the late Dr.
Curso; that the CA thereby disregarded Article 1764 and Article 2206 of the Civil Code, and the ruling in
Receiver for North Negros Sugar Co., Inc. v. Ybaez,95[6] whereby the Supreme Court disallowed the
award of moral damages in favor of the brothers and sisters of a deceased passenger in an action upon
breach of a contract of carriage.96[7]

xxx
Issues
Aside from these, the defendant must compensate the plaintiffs for moral damages that they
suffered as a result of the negligence attending the loss of the M.V. Doa Marilyn. Plaintiffs, have
established that they took great pains to recover, in vain, the body of their brother, at their own cost,
while suffering great grief due to the loss of a loved one. Furthermore, Plaintiffs were unable to recover The petitioner raises the following issues:
the body of their brother. Moral damages worth P100,000.00 is proper.

ARE THE BROTHERS AND SISTERS OF A DECEASED PASSENGER IN A CASE OF BREACH OF CONTRACT OF
WHEREFORE, premises considered, the appealed decision of the RTC of Naval, Biliran, Branch CARRIAGE ENTITLED TO AN AWARD OF MORAL DAMAGES AGAINST THE CARRIER?
16, rendered in Civil Case No. B-0851, is hereby SET ASIDE. In lieu thereof, judgment is hereby rendered,
finding the defendant-appellee Sulpicio Lines, Inc, to have been negligent in transporting the deceased
Cenon E. Curso who was on board the ill-fated M.V. Doa Marilyn, resulting in his untimely death.
ASSUMING (THAT) THEY ARE ENTITLED TO CLAIM MORAL DAMAGES, SHOULD THE AWARD BE GRANTED
Defendant-appellee is hereby ordered to pay the plaintiffs heirs of Cenon E. Curso the following:
OR GIVEN TO THE BROTHER OR SISTER NOTWITHSTANDING (THE) LACK OF EVIDENCE AS REGARDS HIS
OR HER PERSONAL SUFFERING?

(1) Death indemnity in the amount of P50,000.00;

(2) Loss of Earning Capacity in the amount of P504,241.20;

(3) Moral Damages in the amount of P100,000.00.

59
COMM REV TRANSPORTATION LAW CASES

Ruling (3) The spouse, legitimate and illegitimate descendants and ascendants of the deceased may
demand moral damages for mental anguish by reason of the death of the deceased.

The petition is meritorious.

As a general rule, moral damages are not recoverable in actions for damages predicated on a
breach of contract, unless there is fraud or bad faith.97[8] As an exception, moral damages may be
awarded in case of breach of contract of carriage that results in the death of a passenger,98[9] in
accordance with Article 1764, in relation to Article 2206 (3), of the Civil Code, which provide:
The foregoing legal provisions set forth the persons entitled to moral damages. The omission
from Article 2206 (3) of the brothers and sisters of the deceased passenger reveals the legislative intent
to exclude them from the recovery of moral damages for mental anguish by reason of the death of the
deceased. Inclusio unius est exclusio alterius.99[10] The solemn power and duty of the courts to interpret
and apply the law do not include the power to correct the law by reading into it what is not written
therein.100[11] Thus, the CA erred in awarding moral damages to the respondents.

Article 1764. Damages in cases comprised in this Section shall be awarded in accordance with
Title XVIII of this Book, concerning Damages. Article 2206 shall also apply to the death of a passenger The petitioner has correctly relied on the holding in Receiver for North Negros Sugar
caused by the breach of contract by a common carrier. Company, Inc. v. Ybaez,101[12] to the effect that in case of death caused by quasi-delict, the brother of
the deceased was not entitled to the award of moral damages based on Article 2206 of the Civil Code.

Article 2206. The amount of damages for death caused by a crime or quasi-delict shall be at least three
thousand pesos, even though there may have been mitigating circumstances. In addition:
Essentially, the purpose of moral damages is indemnity or reparation, that is, to enable the
injured party to obtain the means, diversions, or amusements that will serve to alleviate the moral
suffering he has undergone by reason of the tragic event. According to Villanueva v. Salvador,102[13]
(1) The defendant shall be liable for the loss of the earning capacity of the deceased, and the the conditions for awarding moral damages are: (a) there must be an injury, whether physical, mental, or
indemnity shall be paid to the heirs of the latter; such indemnity shall in every case be assessed and
awarded by the court, unless the deceased on account of permanent physical disability not caused by
the defendant, had no earning capacity at the time of his death;

(2) If the deceased was obliged to give support according to the provisions of article 291, the
recipient who is not an heir called to the decedent's inheritance by the law of testate or intestate
succession, may demand support from the person causing the death, for a period not exceeding five
years, the exact duration to be fixed by the court;

60
COMM REV TRANSPORTATION LAW CASES

psychological, clearly substantiated by the claimant; (b) there must be a culpable act or omission
factually established; (c) the wrongful act or omission of the defendant must be the proximate cause of
the injury sustained by the claimant; and (d) the award of damages is predicated on any of the cases
stated in Article 2219 of the Civil Code.
Article 2219 circumscribes the instances in which moral damages may be awarded. The provision does
not include succession in the collateral line as a source of the right to recover moral damages. The usage
of the phrase analogous cases in the provision means simply that the situation must be held similar to
To be entitled to moral damages, the respondents must have a right based upon law. It is true that under those expressly enumerated in the law in question104[15] following the ejusdem generis rule. Hence,
Article 1003103[14] of the Civil Code they succeeded to the entire estate of the late Dr. Curso in the Article 1003 of the Civil Code is not concerned with recovery of moral damages.
absence of the latters descendants, ascendants, illegitimate children, and surviving spouse. However,
they were not included among the persons entitled to recover moral damages, as enumerated in Article
2219 of the Civil Code, viz:
In fine, moral damages may be recovered in an action upon breach of contract of carriage
only when: (a) where death of a passenger results, or (b) it is proved that the carrier was guilty of fraud
and bad faith, even if death does not result.105[16] Article 2206 of the Civil Code entitles the
Article 2219. Moral damages may be recovered in the following and analogous cases: descendants, ascendants, illegitimate children, and surviving spouse of the deceased passenger to
demand moral damages for mental anguish by reason of the death of the deceased.106[17]
(1) A criminal offense resulting in physical injuries;

(2) Quasi-delicts causing physical injuries;

WHEREFORE, the petition for review on certiorari is granted, and the award made to the
(3) Seduction, abduction, rape or other lascivious acts; respondents in the decision dated September 16, 2002 of the Court of Appeals of moral damages
amounting to P100,000.00 is deleted and set aside.
(4) Adultery or concubinage;

(5) Illegal or arbitrary detention or arrest;

SO ORDERED.
(6) Illegal search;
G.R. No. 200289 November 25, 2013
(7) Libel, slander or any other form of defamation;
WESTWIND SHIPPING CORPORATION, Petitioner,
(8) Malicious prosecution; vs.
UCPB GENERAL INSURANCE CO., INC. and ASIAN TERMINALS INC., Respondents.
(9) Acts mentioned in article 309;

(10) Acts and actions referred to in articles 21, 26, 27, 28, 29, 30, 32, 34 and 35.

The parents of the female seduced, abducted, raped or abused referred to in No. 3 of this article, may
also recover moral damages.

The spouse, descendants, ascendants and brothers and sisters may bring the action mentioned in No. 9
of this article, in the order named.

61
COMM REV TRANSPORTATION LAW CASES

x-----------------------x
G.R. No. 200314
ORIENT FREIGHT INTERNATIONAL INC., Petitioner,
vs.
UCPB GENERAL INSURANCE CO., INC. and ASIAN TERMINALS INC., Respondents.
DECISION
PERALTA, J.:
These two consolidated cases challenge, by way of petition for certiorari under Rule 45 of the 1997 Rules
of Civil Procedure, September 13, 2011 Decision1 and January 19, 2012 Resolution2 of the Court of
Appeals (CA) in CA-G.R. CV No. 86752, which reversed and set aside the January 27, 2006 Decision3 of
the Manila City Regional Trial Court Branch (RTC) 30. The facts, as established by the records, are as
follows:
On August 23, 1993, Kinsho-Mataichi Corporation shipped from the port of Kobe, Japan, 197 metal
containers/skids of tin-free steel for delivery to the consignee, San Miguel Corporation (SMC). The
shipment, covered by Bill of Lading No. KBMA-1074,4 was loaded and received clean on board M/V
Golden Harvest Voyage No. 66, a vessel owned and operated by Westwind Shipping Corporation
(Westwind).
SMC insured the cargoes against all risks with UCPB General Insurance Co., Inc. (UCPB) for US Dollars:
One Hundred Eighty-Four Thousand Seven Hundred Ninety-Eight and Ninety-Seven Centavos
(US$184,798.97), which, at the time, was equivalent to Philippine Pesos: Six Million Two Hundred Nine
Thousand Two Hundred Forty-Five and Twenty-Eight Centavos (₱6,209,245.28).
After trial, the RTC dismissed UCPB’s complaint and the counterclaims of Westwind, ATI, and OFII. It
ruled that the right, if any, against ATI already prescribed based on the stipulation in the 16 Cargo Gate
Passes issued, as well as the doctrine laid down in International Container Terminal Services, Inc. v.
Prudential Guarantee & Assurance Co. Inc.7 that a claim for reimbursement for damaged goods must be
filed within 15 days from the date of consignee’s knowledge. With respect to Westwind, even if the
action against it is not yet barred by prescription, conformably with Section 3 (6) of the Carriage of
Goods by Sea Act (COGSA) and Our rulings in E.E. Elser, Inc., et al. v. Court of Appeals, et al.8 and Belgian
Overseas Chartering and Shipping N.V. v. Phil. First Insurance Co., Inc.,9 the court a quo still opined that
Westwind is not liable, since the discharging of the cargoes were done by ATI personnel using forklifts
and that there was no allegation that it (Westwind) had a hand in the conduct of the stevedoring
operations. Finally, the trial court likewise absolved OFII from any liability, reasoning that it never
undertook the operation of the forklifts which caused the dents and punctures, and that it merely
facilitated the release and delivery of the shipment as the customs broker and representative of SMC.
On appeal by UCPB, the CA reversed and set aside the trial court. The fallo of its September 13, 2011
Decision directed:
WHEREFORE, premises considered, the instant appeal is hereby GRANTED. The Decision dated January
27, 2006 rendered by the court a quo is REVERSED AND SET ASIDE. Appellee Westwind Shipping
Corporation is hereby ordered to pay to the appellant UCPB General Insurance Co., Inc., the amount of
One Hundred Seventeen Thousand and Ninety-Three Pesos and Twelve Centavos (Php117,093.12), while
Orient Freight International, Inc. is hereby ordered to pay to UCPB the sum of One Hundred Seventy-Five
Thousand Six Hundred Thirty-Nine Pesos and Sixty-Eight Centavos (Php175,639.68). Both sums shall bear
interest at the rate of six (6%) percent per annum, from the filing of the complaint on August 30, 1994
until the judgment becomes final and executory. Thereafter, an interest rate of twelve (12%) percent per
annum shall be imposed from the time this decision becomes final and executory until full payment of
said amounts.

SO ORDERED.10
The shipment arrived in Manila, Philippines on August 31, 1993 and was discharged in the custody of the
arrastre operator, Asian Terminals, Inc. (ATI), formerly Marina Port Services, Inc.5 During the unloading
While the CA sustained the RTC judgment that the claim against ATI already prescribed, it rendered a
operation, however, six containers/skids worth Philippine Pesos: One Hundred Seventeen Thousand
contrary view as regards the liability of Westwind and OFII. For the appellate court, Westwind, not ATI, is
Ninety-Three and Twelve Centavos (₱117,093.12) sustained dents and punctures from the forklift used
responsible for the six damaged containers/skids at the time of its unloading. In its rationale, which
by the stevedores of Ocean Terminal Services, Inc. (OTSI) in centering and shuttling the containers/skids.
substantially followed Philippines First Insurance Co., Inc. v. Wallem Phils. Shipping, Inc.,11 it concluded
As a consequence, the local ship agent of the vessel, Baliwag Shipping Agency, Inc., issued two Bad Order
that the common carrier, not the arrastre operator, is responsible during the unloading of the cargoes
Cargo Receipt dated September 1, 1993.
from the vessel and that it is not relieved from liability and is still bound to exercise extraordinary
diligence at the time in order to see to it that the cargoes under its possession remain in good order and
On September 7, 1993, Orient Freight International, Inc. (OFII), the customs broker of SMC, withdrew
condition. The CA also considered that OFII is liable for the additional nine damaged containers/skids,
from ATI the 197 containers/skids, including the six in damaged condition, and delivered the same at
agreeing with UCPB’s contention that OFII is a common carrier bound to observe extraordinary diligence
SMC’s warehouse in Calamba, Laguna through J.B. Limcaoco Trucking (JBL). It was discovered upon
and is presumed to be at fault or have acted negligently for such damage. Noting the testimony of OFII’s
discharge that additional nine containers/skids valued at Philippine Pesos: One Hundred Seventy-Five
own witness that the delivery of the shipment to the consignee is part of OFII’s job as a cargo forwarder,
Thousand Six Hundred Thirty-Nine and Sixty-Eight Centavos (₱175,639.68) were also damaged due to
the appellate court ruled that Article 1732 of the New Civil Code (NCC) does not distinguish between one
the forklift operations; thus, making the total number of 15 containers/skids in bad order.
whose principal business activity is the carrying of persons or goods or both and one who does so as an
Almost a year after, on August 15, 1994, SMC filed a claim against UCPB, Westwind, ATI, and OFII to ancillary activity. The appellate court further ruled that OFII cannot excuse itself from liability by insisting
recover the amount corresponding to the damaged 15 containers/skids. When UCPB paid the total sum that JBL undertook the delivery of the cargoes to SMC’s warehouse. It opined that the delivery receipts
of Philippine Pesos: Two Hundred Ninety-Two Thousand Seven Hundred Thirty-Two and Eighty Centavos signed by the inspector of SMC showed that the containers/skids were received from OFII, not JBL. At
(₱292,732.80), SMC signed the subrogation receipt. Thereafter, in the exercise of its right of subrogation, the most, the CA said, JBL was engaged by OFII to supply the trucks necessary to deliver the shipment,
UCPB instituted on August 30, 1994 a complaint for damages against Westwind, ATI, and OFII.6 under its supervision, to SMC.

62
COMM REV TRANSPORTATION LAW CASES
Only Westwind and OFII filed their respective motions for reconsideration, which the CA denied; hence,
they elevated the case before Us via petitions docketed as G.R. Nos. 200289 and 200314, respectively.
Westwind argues that it no longer had actual or constructive custody of the containers/skids at the time
they were damaged by ATI’s forklift operator during the unloading operations. In accordance with the
stipulation of the bill of lading, which allegedly conforms to Article 1736 of the NCC, it contends that its
responsibility already ceased from the moment the cargoes were delivered to ATI, which is reckoned
from the moment the goods were taken into the latter’s custody. Westwind adds that ATI, which is a
completely independent entity that had the right to receive the goods as exclusive operator of
stevedoring and arrastre functions in South Harbor, Manila, had full control over its employees and
stevedores as well as the manner and procedure of the discharging operations.
As for OFII, it maintains that it is not a common carrier, but only a customs broker whose participation is
limited to facilitating withdrawal of the shipment in the custody of ATI by overseeing and documenting
the turnover and counterchecking if the quantity of the shipments were in tally with the shipping
documents at hand, but without participating in the physical withdrawal and loading of the shipments
into the delivery trucks of JBL. Assuming that it is a common carrier, OFII insists that there is no need to
rely on the presumption of the law – that, as a common carrier, it is presumed to have been at fault or
have acted negligently in case of damaged goods – considering the undisputed fact that the damages to
the containers/skids were caused by the forklift blades, and that there is no evidence presented to show
that OFII and Westwind were the owners/operators of the forklifts. It asserts that the loading to the
trucks were made by way of forklifts owned and operated by ATI and the unloading from the trucks at
the SMC warehouse was done by way of forklifts owned and operated by SMC employees. Lastly, OFII
avers that neither the undertaking to deliver nor the acknowledgment by the consignee of the fact of
delivery makes a person or entity a common carrier, since delivery alone is not the controlling factor in
order to be considered as such.
Both petitions lack merit.
The case of Philippines First Insurance Co., Inc. v. Wallem Phils. Shipping, Inc.12 applies, as it settled the
query on which between a common carrier and an arrastre operator should be responsible for damage
or loss incurred by the shipment during its unloading. We elucidated at length:
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 transported by them. Subject to certain
exceptions enumerated under Article 1734 of the Civil Code, common carriers are responsible for the
loss, destruction, or deterioration of the goods. The extraordinary responsibility of the common carrier
lasts from the time the goods are unconditionally placed in the possession of, and received by the carrier
for transportation until the same are delivered, actually or constructively, by the carrier to the
consignee, or to the person who has a right to receive them.
For marine vessels, Article 619 of the Code of Commerce provides that the ship captain is liable for the
cargo from the time it is turned over to him at the dock or afloat alongside the vessel at the port of
loading, until he delivers it on the shore or on the discharging wharf at the port of unloading, unless
agreed otherwise. In Standard Oil Co. of New York v. Lopez Castelo, the Court interpreted the ship
captain’s liability as ultimately that of the shipowner by regarding the captain as the representative of
the shipowner.
63
Lastly, Section 2 of the COGSA provides that under every contract of carriage of goods by sea, the carrier
in relation to the loading, handling, stowage, carriage, custody, care, and discharge of such goods, shall
be subject to the responsibilities and liabilities and entitled to the rights and immunities set forth in the
Act. Section 3 (2) thereof then states that among the carriers’ responsibilities are to properly and
carefully load, handle, stow, carry, keep, care for, and discharge the goods carried.
xxxx
On the other hand, the functions of an arrastre operator involve the handling of cargo deposited on the
wharf or between the establishment of the consignee or shipper and the ship's tackle. Being the
custodian of the goods discharged from a vessel, an arrastre operator's duty is to take good care of the
goods and to turn them over to the party entitled to their possession.
Handling cargo is mainly the arrastre operator's principal work so its drivers/operators or employees
should observe the standards and measures necessary to prevent losses and damage to shipments under
its custody.
In Fireman’s Fund Insurance Co. v. Metro Port Service, Inc., the Court explained the relationship and
responsibility of an arrastre operator to a consignee of a cargo, to quote:
The legal relationship between the consignee and the arrastre operator is akin to that of a depositor and
warehouseman. The relationship between the consignee and the common carrier is similar to that of the
consignee and the arrastre operator. Since it is the duty of the ARRASTRE to take good care of the goods
that are in its custody and to deliver them in good condition to the consignee, such responsibility also
devolves upon the CARRIER. Both the ARRASTRE and the CARRIER are therefore charged with and
obligated to deliver the goods in good condition to the consignee. (Emphasis supplied) (Citations
omitted)
The liability of the arrastre operator was reiterated in Eastern Shipping Lines, Inc. v. Court of Appeals
with the clarification that the arrastre operator and the carrier are not always and necessarily solidarily
liable as the facts of a case may vary the rule.
Thus, in this case, the appellate court is correct insofar as it ruled that an arrastre operator and a carrier
may not be held solidarily liable at all times. But the precise question is which entity had custody of the
shipment during its unloading from the vessel?
The aforementioned Section 3 (2) of the COGSA states that among the carriers’ responsibilities are to
properly and carefully load, care for and discharge the goods carried. The bill of lading covering the
subject shipment likewise stipulates that the carrier’s liability for loss or damage to the goods ceases
after its discharge from the vessel. Article 619 of the Code of Commerce holds a ship captain liable for
the cargo from the time it is turned over to him until its delivery at the port of unloading.
In a case decided by a U.S. Circuit Court, Nichimen Company v. M/V Farland, it was ruled that like the
duty of seaworthiness, the duty of care of the cargo is non-delegable, and the carrier is accordingly
responsible for the acts of the master, the crew, the stevedore, and his other agents. It has also been
held that it is ordinarily the duty of the master of a vessel to unload the cargo and place it in readiness
for delivery to the consignee, and there is an implied obligation that this shall be accomplished with
sound machinery, competent hands, and in such manner that no unnecessary injury shall be done
COMM REV TRANSPORTATION LAW CASES
thereto. And the fact that a consignee is required to furnish persons to assist in unloading a shipment
may not relieve the carrier of its duty as to such unloading.
xxxx
It is settled in maritime law jurisprudence that cargoes while being unloaded generally remain under the
custody of the carrier x x x.13
In Regional Container Lines (RCL) of Singapore v. The Netherlands Insurance Co. (Philippines), Inc.14 and
Asian Terminals, Inc. v. Philam Insurance Co., Inc.,15 the Court echoed the doctrine that cargoes, while
being unloaded, generally remain under the custody of the carrier. We cannot agree with Westwind’s
disputation that "the carrier in Wallem clearly exercised supervision during the discharge of the
shipment and that is why it was faulted and held liable for the damage incurred by the shipment during
such time." What Westwind failed to realize is that the extraordinary responsibility of the common
carrier lasts until the time the goods are actually or constructively delivered by the carrier to the
consignee or to the person who has a right to receive them. There is actual delivery in contracts for the
transport of goods when possession has been turned over to the consignee or to his duly authorized
agent and a reasonable time is given him to remove the goods.16 In this case, since the discharging of
the containers/skids, which were covered by only one bill of lading, had not yet been completed at the
time the damage occurred, there is no reason to imply that there was already delivery, actual or
constructive, of the cargoes to ATI. Indeed, the earlier case of Delsan Transport Lines, Inc. v. American
Home Assurance Corp.17 serves as a useful guide, thus:
Delsan’s argument that it should not be held liable for the loss of diesel oil due to backflow because the
same had already been actually and legally delivered to Caltex at the time it entered the shore tank holds
no water. It had been settled that the subject cargo was still in the custody of Delsan because the
discharging thereof has not yet been finished when the backflow occurred. Since the discharging of the
cargo into the depot has not yet been completed at the time of the spillage when the backflow occurred,
there is no reason to imply that there was actual delivery of the cargo to the consignee. Delsan is
straining the issue by insisting that when the diesel oil entered into the tank of Caltex on shore, there
was legally, at that moment, a complete delivery thereof to Caltex. To be sure, the extraordinary
responsibility of common carrier lasts from the time the goods are unconditionally placed in the
possession of, and received by, the carrier for transportation until the same are delivered, actually or
constructively, by the carrier to the consignee, or to a person who has the right to receive them. The
discharging of oil products to Caltex Bulk Depot has not yet been finished, Delsan still has the duty to
guard and to preserve the cargo. The carrier still has in it the responsibility to guard and preserve the
goods, a duty incident to its having the goods transported.
To recapitulate, common carriers, from the nature of their business and for reasons of public policy, are
bound to observe extraordinary diligence in vigilance over the goods and for the safety of the passengers
transported by them, according to all the circumstances of each case. The mere proof of delivery of
goods in good order to the carrier, and their arrival in the place of destination in bad order, make out a
prima facie case against the carrier, so that if no explanation is given as to how the injury occurred, the
carrier must be held responsible. It is incumbent upon the carrier to prove that the loss was due to
accident or some other circumstances inconsistent with its liability.18
The contention of OFII is likewise untenable. A customs broker has been regarded as a common carrier
because transportation of goods is an integral part of its business.19 In Schmitz Transport & Brokerage
64
Corporation v. Transport Venture, Inc.,20 the Court already reiterated: It is settled that under a given set
of facts, a customs broker may be regarded as a common carrier.1âwphi1 Thus, this Court, in A.F.
Sanchez Brokerage, Inc. v. The Honorable Court of Appeals held:
The appellate court did not err in finding petitioner, a customs broker, to be also a common carrier, as
defined under Article 1732 of the Civil Code, to wit, Art. 1732. Common carriers are persons,
corporations, firms or associations engaged in the business of carrying or transporting passengers or
goods or both, by land, water, or air, for compensation, offering their services to the public.
xxxx
Article 1732 does not distinguish between one whose principal business activity is the carrying of goods
and one who does such carrying only as an ancillary activity. The contention, therefore, of petitioner that
it is not a common carrier but a customs broker whose principal function is to prepare the correct
customs declaration and proper shipping documents as required by law is bereft of merit. It suffices that
petitioner undertakes to deliver the goods for pecuniary consideration.
And in Calvo v. UCPB General Insurance Co. Inc., this Court held that as the transportation of goods is an
integral part of a customs broker, the customs broker is also a common carrier. For to declare otherwise
"would be to deprive those with whom [it] contracts the protection which the law affords them
notwithstanding the fact that the obligation to carry goods for [its] customers, is part and parcel of
petitioner’s business."21
That OFII is a common carrier is buttressed by the testimony of its own witness, Mr. Loveric Panganiban
Cueto, that part of the services it offers to clients is cargo forwarding, which includes the delivery of the
shipment to the consignee.22 Thus, for undertaking the transport of cargoes from ATI to SMC’s
warehouse in Calamba, Laguna, OFII is considered a common carrier. As long as a person or corporation
holds itself to the public for the purpose of transporting goods as a business, it is already considered a
common carrier regardless of whether it owns the vehicle to be used or has to actually hire one.
As a common carrier, OFII is mandated to observe, under Article 1733 of the Civil Code,23 extraordinary
diligence in the vigilance over the goods24 it transports according to the peculiar circumstances of each
case. In the event that the goods are lost, destroyed or deteriorated, it is presumed to have been at fault
or to have acted negligently unless it proves that it observed extraordinary diligence.25 In the case at bar
it was established that except for the six containers/skids already damaged OFII received the cargoes
from ATI in good order and condition; and that upon its delivery to SMC additional nine containers/skids
were found to be in bad order as noted in the Delivery Receipts issued by OFII and as indicated in the
Report of Cares Marine Cargo Surveyors. Instead of merely excusing itself from liability by putting the
blame to ATI and SMC it is incumbent upon OFII to prove that it actively took care of the goods by
exercising extraordinary diligence in the carriage thereof. It failed to do so. Hence its presumed
negligence under Article 1735 of the Civil Code remains unrebutted.
WHEREFORE, premises considered the petitions of Westwind and OFII in G.R. Nos. 200289 and 200314
respectively are DENIED. The September 13 2011 Decision and January 19 2012 Resolution of the Court
of Appeals in CA-G.R. CV No. 86752 which reversed and set aside the January 27 2006 Decision of the
Manila City Regional Trial Court Branch 30 are AFFIRMED.
SO ORDERED.
COMM REV TRANSPORTATION LAW CASES

65
COMM REV TRANSPORTATION LAW CASES

66