PROVIDENT INSURANCE vs. CA public policy.
public policy. Where the terms of the contract are clear and leave no doubt upon
FACTS
On or about June 5, 1989, the vessel MV "Eduardo II" took and received on board
at Sangi, Toledo City a shipment of 32,000 plastic woven bags of various fertilizer in
good order and condition for transportation to Cagayan de Oro City. The subject
shipment was consigned to Atlas Fertilizer Corporation, and covered by Bill of
Lading No. 01 and Marine Insurance Policy No. CMI-211/89-CB.
Upon its arrival at General Santos City on June 7, 1989, the vessel MV "Eduardo II"
was instructed by the consignee's representative to proceed to Davao City and
deliver the shipment to its Davao Branch in Tabigao.
On June 10, 1989, the MV "Eduardo II" arrived in Davao City where the subject
shipment was unloaded. In the process of unloading the shipment, three bags of
fertilizer fell overboard and 281 bags were considered to be unrecovered spillages.
Because of the mishandling of the cargo, it was determined that the consignee
incurred actual damages in the amount of P68,196.16.
As the claims were not paid, petitioner Provident Insurance Corporation
indemnified the consignee Atlas Fertilizer Corporation for its damages. Thereafter,
petitioner, as subrogee of the consignee, filed on June 3, 1991 a complaint against
respondent carrier seeking reimbursement for the value of the losses/damages to
the cargo.
ISSUE
Whether stipulation No. 7 in the bill of lading which limited the time to file a claim
in case of loss or spillage was valid and therefore absolves the carrier from liability?
RULING
It is a fact admitted by both parties that the losses and damages were caused by
the mishandling of the cargo by respondent carrier. There is also no dispute that
the consignee failed to strictly comply with Stipulation No. 7 of the Bill of Lading in
not making claims for damages to the goods within the twenty-four hour period
from the time of delivery, and that there was no exterior sign of damage of the
goods. Consequently, the only issue left to be resolved is whether the failure to
make the prompt notice of claim as required is fatal to the right of petitioner to
claim indemnification for damages.
The bill of lading defines the rights and liabilities of the parties in reference to the
contract of carriage. Stipulations therein are valid and binding in the absence of any
showing that the same are contrary to law, morals, customs, public order and
the intention of the contracting parties, the literal meaning of the stipulations shall
control.
A bill of lading is in the nature of a contract of adhesion, defined as one where one
of the parties imposes a ready-made form of contract which the other party may
accept or reject, but which the latter cannot modify. One party prepares the
stipulation in the contract, while the other party merely affixes his signature or his
"adhesion" thereto, giving no room for negotiation and depriving the latter of the
opportunity to bargain on equal footing. Nevertheless, these types of contracts
have been declared as binding as ordinary contracts, the reason being that the
party who adheres to the contract is free to reject it entirely.
In light of the foregoing, there can be no question about the validity and
enforceability of Stipulation No. 7 in the bill of lading. The twenty-four hour
requirement under the said stipulation is, by agreement of the contracting parties,
a sine qua non for the accrual of the right of action to recover damages against the
carrier.
LORENZO SHIPPING CORPORATION V. CHUBB AND SONS
FACTS:Petitioner Lorenzo Shipping Corporation is a domestic corporation engaged
in coast wise shipping of steel pipes. This case is on appeal in CA which favored the
respondent Chubb and Sons Corporation, a foreign corporation not licensed to do
business in the Philippines. they complaint about the rust information, thinning,
and several holes at different places of pipes on board after shipment made by
Lorenzo Shipping to Davao City. The court found the petitioner guilty to pay all the
damages and attorney’s fees.
ISSUE:
Whether or not Chubb and Sons can validly claim the damages?
HELD:
No, foreign corporations transacting business in the Philippines without license or
its successor or assigns shall be permitted to maintain or intervene any action, suit
1
or proceedings in any court or administrative agency of the Philippines; but such
corporation maybe sued or proceed against before the Philippine courts or
administrative tribunals or any valid cause recognized under Philippine laws. The
decision of the lower court was affirmed. Cost against petitioners.
Spouses Hernandez vs Spouses Dolor
This is a petition for review under Rule 45 of the Rules of Court seeking the reversal
of the decision[1] of the Court of Appeals, dated April 29, 2003, in CA-G.R. CV No.
60357, which affirmed with modification the amount of damages awarded in the
November 24, 1997 decision[2] of the Regional Trial Court of Batangas City, Branch
IV.
The undisputed facts are as follows:
At about 3:00 p.m. of December 19, 1986, Lorenzo Menard Boyet Dolor, Jr.
was driving an owner-type jeepney with plate no. DEB 804 owned by her mother,
Margarita, towards Anilao, Batangas. As he was traversing the road at Barangay
Anilao East, Mabini, Batangas, his vehicle collided with a passenger jeepney bearing
plate no. DEG 648, driven by petitioner Juan Gonzales and owned by his co-
petitioner Francisco Hernandez, which was travelling towards Batangas City.
Boyet Dolor and his passenger, Oscar Valmocina, died as a result of the
collision. Fred Panopio, Rene Castillo and Joseph Sandoval, who were also on board
the owner-type jeep, which was totally wrecked, suffered physical injuries. The
collision also damaged the passenger jeepney of Francisco Hernandez and caused
physical injuries to its passengers, namely, Virgie Cadavida, Fiscal Artemio Reyes
and Francisca Corona.[3]
Consequently, respondents commenced an action[4] for damages against
petitioners before the Regional Trial Court of Batangas City, alleging that driver
Juan Gonzales was guilty of negligence and lack of care and that the Hernandez
spouses were guilty of negligence in the selection and supervision of their
employees.[5]
Petitioners countered that the proximate cause of the death and injuries
sustained by the passengers of both vehicles was the recklessness of Boyet Dolor,
the driver of the owner-type jeepney, who was driving in a zigzagging manner
under the influence of alcohol. Petitioners also alleged that Gonzales was not the
driver-employee of the Hernandez spouses as the former only leased the passenger
jeepney on a daily basis. The Hernandez spouses further claimed that even if an
employer-employee relationship is found to exist between them, they cannot be
held liable because as employers they exercised due care in the selection and
supervision of their employee.
During the trial of the case, it was established that the drivers of the two
vehicles were duly licensed to drive and that the road where the collision occurred
was asphalted and in fairly good condition.[6] The owner-type jeep was travelling
uphill while the passenger jeepney was going downhill. It was further established
that the owner-type jeep was moderately moving and had just passed a road bend
when its passengers, private respondents Joseph Sandoval and Rene Castillo, saw
the passenger jeepney at a distance of three meters away. The passenger jeepney
was traveling fast when it bumped the owner type jeep. [7] Moreover, the evidence
presented by respondents before the trial court showed that petitioner Juan
Gonzales obtained his professional drivers license only on September 24, 1986, or
three months before the accident. Prior to this, he was holder of a student drivers
permit issued on April 10, 1986.[8]
On November 24, 1997, the trial court rendered a decision in favor of
respondents, the dispositive portion of which states:
Premises duly considered and the plaintiffs having satisfactorily convincingly and
credibly presented evidence clearly satisfying the requirements of preponderance
of evidence to sustain the complaint, this Court hereby declares judgment in favor
of the plaintiffs and against the defendants. Defendants-spouses Francisco
Hernandez and Aniceta Abel Hernandez and Juan Gonzales are therefore directed
to pay jointly and severally, the following:
1) To spouses Lorenzo Dolor and Margarita Dolor:
a) P50,000.00 for the death of their son, Lorenzo Menard Boyet Dolor, Jr.;
b) P142,000.00 as actual and necessary funeral expenses;
c) P50,000.00 reasonable value of the totally wrecked
owner-type jeep with plate no. DEB 804 Phil 85;
d) P20,000.00 as moral damages;
e) P20,000.00 as reasonable litigation expenses and attorneys fees.
2) To spouses Francisco Valmocina and Virginia Valmocina:
a) P50,000.00 for the death of their son, Oscar
Balmocina (sic);
b) P20,000.00 as moral damages;
c) P18,400.00 for funeral expenses;
d) P10,000.00 for litigation expenses and attorneys fees.
3) To spouses Victor Panopio and Martina Panopio:
2
a) P10,450.00 for the cost of the artificial leg and crutches being used by their son
Fred Panopio;
b) P25,000.00 for hospitalization and medical expenses they incurred for the
treatment of their son, Fred Panopio.
4) To Fred Panopio:
a) P25,000.00 for the loss of his right leg;
b) P10,000.00 as moral damages.
5) To Joseph Sandoval:
a) P4,000.00 for medical treatment.
The defendants are further directed to pay the costs of this proceedings.
SO ORDERED.[9]
Petitioners appealed[10] the decision to the Court of Appeals, which affirmed
the same with modifications as to the amount of damages, actual expenses and
attorneys fees awarded to the private respondents. The decretal portion of the
decision of the Court of Appeals reads:
WHEREFORE, the foregoing premises considered, the appealed decision
is AFFIRMED. However, the award for damages, actual expenses and attorneys fees
shall be MODIFIED as follows:
1) To spouses Lorenzo Dolor and Margarita Dolor:
a) P50,000.00 civil indemnity for their son Lorenzo Menard Dolor, Jr.;
b) P58,703.00 as actual and necessary funeral expenses;
c) P25,000,00 as temperate damages;
d) P100,000.00 as moral damages;
e) P20,000.00 as reasonable litigation expenses and attorneys fees.
2) To Spouses Francisco Valmocina and Virginia Valmocina:
a) P50,000.00 civil indemnity for the death of their son,
Oscar Valmocina;
b) P100,000.00 as moral damages;
c) P10,000.00 as temperate damages;
d) P10,000.00 as reasonable litigation expenses and
attorneys fees.
3) To Spouses Victor Panopio and Martina Panopio:
a) P10,352.59 as actual hospitalization and medical expenses;
b) P5,000.00 as temperate damages.
4) To Fred Panopio:
a) P50,000.00 as moral damages.
5) To Joseph Sandoval:
a) P3,000.00 as temperate damages.
SO ORDERED.[11]
Hence the present petition raising the following issues:
1. Whether the Court of Appeals was correct when it pronounced the Hernandez
spouses as solidarily liable with Juan Gonzales, although it is of record that they
were not in the passenger jeepney driven by latter when the accident occurred;
2. Whether the Court of Appeals was correct in awarding temperate damages to
private respondents namely the Spouses Dolor, Spouses Valmocina and Spouses
Panopio and to Joseph Sandoval, although the grant of temperate damages is not
provided for in decision of the court a quo;
3. Whether the Court of Appeals was correct in increasing the award of moral
damages to respondents, Spouses Dolor, Spouses Valmocina and Fred Panopio;
4. Whether the Court of Appeals was correct in affirming the grant of attorneys
fees to Spouses Dolor and to Spouses Valmocina although the lower court did not
specify the fact and the law on which it is based.
3
 Petitioners contend that the absence of the Hernandez spouses inside the
passenger jeepney at the time of the collision militates against holding them
solidarily liable with their co-petitioner, Juan Gonzales, invoking Article 2184 of the
Civil Code, which provides:
ARTICLE 2184. In motor vehicle mishaps, the owner is solidarily liable with his
driver, if the former, who was in the vehicle, could have, by the use of the due
diligence, prevented the misfortune. It is disputably presumed that a driver was
negligent, if he had been found guilty of reckless driving or violating traffic
regulations at least twice within the next preceding two months.
If the owner was not in the motor vehicle, the provisions of article 2180 are
applicable.
The Hernandez spouses argues that since they were not inside the jeepney at
the time of the collision, the provisions of Article 2180 of the Civil Code, which does
not provide for solidary liability between employers and employees, should be
applied.
We are not persuaded.
Article 2180 provides:
ARTICLE 2180. The obligation imposed by article 2176 is demandable not only for
one's own acts or omissions, but also for those of persons for whom one is
responsible.
The father and, in case of his death or incapacity, the mother, are responsible for
the damages caused by the minor children who live in their company.
Guardians are liable for damages caused by the minors or incapacitated persons
who are under their authority and live in their company.
The owners and managers of an establishment or enterprise are likewise
responsible for damages caused by their employees in the service of the branches
in which the latter are employed or on the occasion of their functions.
Employers shall be liable for the damages caused by their employees and
household helpers acting within the scope of their assigned tasks, even though
the former are not engaged in any business or industry.
The State is responsible in like manner when it acts through a special agent; but not
when the damage has been caused by the official to whom the task done properly
pertains, in which case what is provided in article 2176 shall be applicable.
Lastly, teachers or heads of establishments of arts and trades shall be liable for
damages caused by their pupils and students or apprentices, so long as they remain
in their custody.
The responsibility treated of in this article shall cease when the persons herein
mentioned prove that they observed all the diligence of a good father of a family to
prevent damage. (Underscoring supplied)
On the other hand, Article 2176 provides
Whoever by act or omission causes damage to another, there being fault or
negligence, is obliged to pay for the damage done. Such fault or negligence, if there
is no pre-existing contractual relation between the parties, is called a quasi-delict
and is governed by the provisions of this Chapter.
While the above provisions of law do not expressly provide for solidary
liability, the same can be inferred from the wordings of the first paragraph of
Article 2180 which states that the obligation imposed by article 2176 is demandable
not only for one's own acts or omissions, but also for those of persons for whom one
is responsible.
Moreover, Article 2180 should be read with Article 2194 of the same Code,
which categorically states that the responsibility of two or more persons who are
liable for quasi-delict is solidary. In other words, the liability of joint tortfeasors is
solidary.[12] Verily, under Article 2180 of the Civil Code, an employer may be held
solidarily liable for the negligent act of his employee.[13]
The solidary liability of employers with their employees for quasi-delicts
having been established, the next question is whether Julian Gonzales is an
employee of the Hernandez spouses. An affirmative answer will put to rest any
issue on the solidary liability of the Hernandez spouses for the acts of Julian
Gonzales. The Hernandez spouses maintained that Julian Gonzales is not their
employee since their relationship relative to the use of the jeepney is that of a
lessor and a lessee. They argue that Julian Gonzales pays them a daily rental of
P150.00 for the use of the jeepney.[14] In essence, petitioners are practicing the
boundary system of jeepney operation albeit disguised as a lease agreement
between them for the use of the jeepney.
4
 We hold that an employer-employee relationship exists between the
Hernandez spouses and Julian Gonzales.
Indeed to exempt from liability the owner of a public vehicle who operates it
under the boundary system on the ground that he is a mere lessor would be not
only to abet flagrant violations of the Public Service Law, but also to place the
riding public at the mercy of reckless and irresponsible drivers reckless because the
measure of their earnings depends largely upon the number of trips they make
and, hence, the speed at which they drive; and irresponsible because most if not all
of them are in no position to pay the damages they might cause. [15]
Anent the award of temperate damages to the private respondents, we hold
that the appellate court committed no reversible error in awarding the same to the
respondents.
Temperate or moderate damages are damages which are more than nominal
but less than compensatory which may be recovered when the court finds that
some pecuniary loss has been suffered but its amount cannot, from the nature of
the case, be proved with certainty.[16] Temperate damages are awarded for those
cases where, from the nature of the case, definite proof of pecuniary loss cannot
be offered, although the court is convinced that there has been such loss. A judge
should be empowered to calculate moderate damages in such cases, rather than
the plaintiff should suffer, without redress, from the defendants wrongful
act.[17] The assessment of temperate damages is left to the sound discretion of the
court provided that such an award is reasonable under the circumstances.[18]
We have gone through the records of this case and we find that, indeed,
respondents suffered losses which cannot be quantified in monetary terms. These
losses came in the form of the damage sustained by the owner type jeep of the
Dolor spouses; the internment and burial of Oscar Valmocina; the hospitalization of
Joseph Sandoval on account of the injuries he sustained from the collision and the
artificial leg and crutches that respondent Fred Panopio had to use because of the
amputation of his right leg. Further, we find that the amount of temperate
damages awarded to the respondents were reasonable under the circumstances.
As to the amount of moral damages which was awarded to respondents, a
review of the records of this case shows that there exists no cogent reason to
overturn the action of the appellate court on this aspect.
Under Article 2206, the spouse, legitimate and illegitimate descendants and
ascendants of the deceased may demand moral damages for mental anguish for
the death of the deceased. The reason for the grant of moral damages has been
explained, thus:
. . . the award of moral damages is aimed at a restoration, within the limits
possible, of the spiritual status quo ante; and therefore, it must be proportionate
to the suffering inflicted. The intensity of the pain experienced by the relatives of
the victim is proportionate to the intensity of affection for him and bears no
relation whatsoever with the wealth or means of the offender.[19]
Moral damages are emphatically not intended to enrich a plaintiff at the
expense of the defendant. They are awarded to allow the former to obtain means,
diversion or amusements that will serve to alleviate the moral suffering he has
undergone due to the defendants culpable action and must, perforce, be
proportional to the suffering inflicted.[20]
Truly, the pain of the sudden loss of ones offspring, especially of a son who
was in the prime of his youth, and who holds so much promise waiting to be
fulfilled is indeed a wellspring of intense pain which no parent should be made to
suffer. While it is true that there can be no exact or uniform rule for measuring the
value of a human life and the measure of damages cannot be arrived at by a
precise mathematical calculation,[21] we hold that the Court of Appeals award of
moral damages of P100,000.00 each to the Spouses Dolor and Spouses Valmocina
for the death of their respective sons, Boyet Dolor and Oscar Valmocina, is in full
accord with prevailing jurisprudence.[22]
With respect to the award of attorneys fees to respondents, no sufficient
basis was established for the grant thereof.
It is well settled that attorneys fees should not be awarded in the absence of
stipulation except under the instances enumerated in Article 2208 of the Civil
Code. As we have held in Rizal Surety and Insurance Company v. Court of
Appeals:[23]
Article 2208 of the Civil Code allows attorneys fees to be awarded by a court when
its claimant is compelled to litigate with third persons or to incur expenses to
protect his interest by reason of an unjustified act or omission of the party from
whom it is sought. While judicial discretion is here extant, an award thereof
demands, nevertheless, a factual, legal or equitable justification. The matter cannot
and should not be left to speculation and conjecture (Mirasol vs. De la Cruz, 84
SCRA 337; Stronghold Insurance Company, Inc. vs. Court of Appeals, 173 SCRA 619).
In the case at bench, the records do not show enough basis for sustaining the
award for attorneys fees and to adjudge its payment by petitioner. x x x.
5
Likewise, this Court held in Stronghold Insurance Company, Inc. vs. Court of
Appeals that:
In Abrogar v. Intermediate Appellate Court [G.R. No. 67970, January 15, 1988, 157
SCRA 57], the Court had occasion to state that [t]he reason for the award of
attorneys fees must be stated in the text of the courts decision, otherwise, if it is
stated only in the dispositive portion of the decision, the same must be disallowed
on appeal. x x x.[24]
WHEREFORE, the petition is DENIED. The assailed decision of the Court of
Appeals is AFFIRMED with the MODIFICATION that the grant of attorneys fees is
DELETED for lack of basis.
injured. Pedro Arriesgado lost consciousness and suffered a fracture in his right
colles. His wife, Felisa, was brought to the Danao City Hospital. She was later
transferred to the Southern Island Medical Center where she died shortly
thereafter.
Respondent Pedro A. Arriesgado then filed a complaint for breach of contract of
carriage, damages and attorneys fees before the Regional Trial Court of Cebu City,
Branch 20, against the petitioners, D Rough Riders bus operator William Tiu and his
driver, Virgilio Te Laspiñas on May 27, 1987. The respondent alleged that the
passenger bus in question was cruising at a fast and high speed along the national
road, and that petitioner Laspiñas did not take precautionary measures to avoid
the accident.

Costs against petitioners. The petitioners, for their part, filed a Third-Party Complaint against the following:
respondent Philippine Phoenix Surety and Insurance, Inc. (PPSII), petitioner Tiu’s
SO ORDERED. insurer; respondent Benjamin Condor, the registered owner of the cargo truck; and
respondent Sergio Pedrano, the driver of the truck. They alleged that petitioner
Tiu vs. Arriesgado
Laspiñas was negotiating the uphill climb along the national highway of Sitio
G.R. No. 138060, September 1, 2004
Aggies, Poblacion, Compostela, in a moderate and normal speed. It was further
alleged that the truck was parked in a slanted manner, its rear portion almost in
Facts: At about 10:00 p.m. of March 15, 1987, the cargo truck marked "Condor
the middle of the highway, and that no early warning device was displayed.
Hollow Blocks and General Merchandise" bearing plate number GBP-675 was
Petitioner Laspiñas promptly applied the brakes and swerved to the left to avoid
loaded with firewood in Bogo, Cebu and left for Cebu City. Upon reaching Sitio
hitting the truck head-on, but despite his efforts to avoid damage to property and
Aggies, Poblacion, Compostela, Cebu, just as the truck passed over a bridge, one of
physical injuries on the passengers, the right side portion of the bus hit the cargo
its rear tires exploded. The driver, Sergio Pedrano, then parked along the right side
truck’s left rear.
of the national highway and removed the damaged tire to have it vulcanized at a
nearby shop, about 700 meters away. Pedrano left his helper, Jose Mitante, Jr. to
HELD: The rules which common carriers should observe as to the safety of their
keep watch over the stalled vehicle, and instructed the latter to place a spare tire
passengers are set forth in the Civil Code, Articles 1733, 1755and 1756. It is
six fathoms away behind the stalled truck to serve as a warning for oncoming
undisputed that the respondent and his wife were not safely transported to the
vehicles. The trucks tail lights were also left on. It was about 12:00 a.m., March 16,
destination agreed upon. In actions for breach of contract, only the existence of
1987.
such contract, and the fact that the obligor, in this case the common carrier, failed
to transport his passenger safely to his destination are the matters that need to be
At about 4:45 a.m., D Rough Riders passenger bus with plate number PBP-724
proved. This is because under the said contract of carriage, the petitioners
driven by Virgilio Te Laspiñas was cruising along the national highway of Sitio
assumed the express obligation to transport the respondent and his wife to their
Aggies, Poblacion, Compostela, Cebu. The passenger bus was also bound for Cebu
destination safely and to observe extraordinary diligence with due regard for all
City, and had come from Maya, Daanbantayan, Cebu. Among its passengers were
circumstances. Any injury suffered by the passengers in the course thereof is
the Spouses Pedro A. Arriesgado and Felisa Pepito Arriesgado, who were seated at
immediately attributable to the negligence of the carrier. Upon the happening of
the right side of the bus, about three (3) or four (4) places from the front seat.
the accident, the presumption of negligence at once arises, and it becomes the
duty of a common carrier to prove that he observed extraordinary diligence in the
As the bus was approaching the bridge, Laspiñas saw the stalled truck, which was
care of his passengers. It must be stressed that in requiring the highest possible
then about 25 meters away. He applied the breaks and tried to swerve to the left
degree of diligence from common carriers and in creating a presumption of
to avoid hitting the truck. But it was too late; the bus rammed into the trucks left
negligence against them, the law compels them to curb the recklessness of their
rear. The impact damaged the right side of the bus and left several passengers

6
drivers. While evidence may be submitted to overcome such presumption of Yes.
negligence, it must be shown that the carrier observed the required extraordinary A common carrier is presumed to be at fault or negligent. It shall be liable for the
diligence, which means that the carrier must show the utmost diligence of very loss, destruction or deterioration of its cargo, unless it can prove that the sole and
cautious persons as far as human care and foresight can provide, or that the proximate cause of such event is one of the causes enumerated in Article 1734 of
accident was caused by fortuitous event. As correctly found by the trial court, the Civil Code, or that it exercised extraordinary diligence to prevent or minimize
petitioner Tiu failed to conclusively rebut such presumption. The negligence of the loss. In the present case, the weather condition encountered by petitioner’s
petitioner Laspiñas as driver of the passenger bus is, thus, binding against vessel was not a “storm” or a natural disaster comprehended in the law. Given the
petitioner Tiu, as the owner of the passenger bus engaged as a common carrier. known weather condition prevailing during the voyage, the manner of stowage
employed by the carrier was insufficient to secure the cargo from the rolling action
of the sea. The carrier took a calculated risk in improperly securing the cargo.
Central Shipping Company, Inc v Insurance Company of North America Having lost that risk, it cannot now disclaim any liability for the loss.
Established is the fact that between 10:00 p.m. on July 25, 1990 and 1:25 a.m. on
July 26, 1990, M/V Central Bohol encountered a southwestern monsoon in the
FACTS:
course of its voyage. Having made such factual representation in its Note of Marine
On July 25, 1990 at Puerto Princesa, Palawan, Central Shipping Company received
Protest, petitioner cannot now be allowed to retreat and claim that the
on board its vessel, the M/V ‘Central Bohol’, 376 pieces [of] Philippine Apitong
southwestern monsoon was a “storm.” Normally expected on sea voyages,
Round Logs and undertook to transport said shipment to Manila for delivery to
however, were such monsoons, during which strong winds were not unusual.
Alaska Lumber Co., Inc.
“The cargo was insured for P3,000,000.00 against total loss under Insurance
Company of North America’s Marine Cargo Policy No. MCPB- 00170. The vessel
According to PAGASA, a storm has a wind force of 48 to 55 knots, equivalent to 55
completely sank. Due to the sinking of the vessel, the cargo was totally lost. The
to 63 miles per hour or 10 to 11 in the Beaufort Scale. The second mate of the
consignee, Alaska Lumber Co. Inc., presented a claim for the value of the shipment
vessel stated that the wind was blowing around force 7 to 8 on the Beaufort Scale.
to Central Shipping but the latter failed and refused to settle the claim, hence
Consequently, the strong winds accompanying the southwestern monsoon could
Insurance company, being the insurer, paid said claim and now seeks to be
not be classified as a “storm.” Such winds are the ordinary vicissitudes of a sea
subrogated to all the rights and actions of the consignee as against Central
voyage.
Shipping. Central Shipping raised as its main defense that the proximate and only
Also, even if it were a storm, it was not the proximate and only cause of the loss.
cause of the sinking of its vessel and the loss of its cargo was a natural disaster, a
The loss of the vessel was caused not only by the southwestern monsoon, but also
tropical storm which neither Central Shipping nor the captain of its vessel could
by the shifting of the logs in the hold. Such shifting could been due only to
have foreseen.
improper stowage.
DECISION OF LOWER COURTS:
(2) Whether the doctrine of limited liability is applicable
(1) RTC: Central Shipping Liable. RTC was unconvinced that the sinking of M/V
No. The doctrine of limited liability under Article 587 of the Code of Commerce is
Central Bohol had been caused by the weather or any other caso fortuito. It noted
not applicable to the present case. This rule does not apply to situations in which
that monsoons, which were common occurrences during the months of July to
the loss or the injury is due to the concurrent negligence of the shipowner and the
December, could have been foreseen and provided for by an ocean-going vessel.
captain.
(2) CA: affirmed RTC. Given the season of rains and monsoons, the ship captain and
his crew should have anticipated the perils of the sea. The CA found no merit in
petitioner’s assertion of the vessel’s seaworthiness. It held that the Certificates of Victory Liner v Gammad
Inspection and Drydocking were not conclusive proofs thereof. In order to consider
a vessel to be seaworthy, it must be fit to meet the perils of the sea. Assailed in this petition for review on certiorari is the April 11, 2003 decision[1] of
the Court of Appeals in CA-G.R. CV No. 63290 which affirmed with modification the
ISSUES & RULING: November 6, 1998 decision[2] of the Regional Trial Court of Tuguegarao, Cagayan,
(1) Whether the carrier is liable for the loss of the cargo; and

7
Branch 5 finding petitioner Victory Liner, Inc. liable for breach of contract of
carriage in Civil Case No. 5023.
The facts as testified by respondent Rosalito Gammad show that on March 14,
1996, his wife Marie Grace Pagulayan-Gammad,[3] was on board an air-
conditioned Victory Liner bus bound for Tuguegarao, Cagayan from Manila. At
about 3:00 a.m., the bus while running at a high speed fell on a ravine somewhere
in Barangay Baliling, Sta. Fe, Nueva Vizcaya, which resulted in the death of Marie
Grace and physical injuries to other passengers.[4]
Petitioners motion to reset the presentation of its evidence to March 25, 1998[16]
was granted. However, on March 24, 1998, the counsel of petitioner sent the court
a telegram[17] requesting postponement but the telegram was received by the
trial court on March 25, 1998, after it had issued an order considering the case
submitted for decision for failure of petitioner and counsel to appear.[18]
On November 6, 1998, the trial court rendered its decision in favor of respondents,
the dispositive portion of which reads:

WHEREFORE, premises considered and in the interest of justice, judgment is

On May 14, 1996, respondent heirs of the deceased filed a complaint[5] for hereby rendered in favor of the plaintiffs and against the defendant Victory Liner,
damages arising from culpa contractual against petitioner. In its answer,[6] the Incorporated, ordering the latter to pay the following:
petitioner claimed that the incident was purely accidental and that it has always
exercised extraordinary diligence in its 50 years of operation.

1. Actual Damages -------------------- P 122,000.00

After several re-settings,[7] pre-trial was set on April 10, 1997.[8] For failure to
appear on the said date, petitioner was declared as in default.[9] However, on
petitioners motion[10] to lift the order of default, the same was granted by the trial 2. Death Indemnity --------------------- 50,000.00
court.[11]

3. Exemplary and Moral Damages----- 400,000.00

At the pre-trial on May 6, 1997, petitioner did not want to admit the proposed
stipulation that the deceased was a passenger of the Victory Liner Bus which fell on
the ravine and that she was issued Passenger Ticket No. 977785. Respondents, for
their part, did not accept petitioners proposal to pay P50,000.00.[12] 4. Compensatory Damages ---------- 1,500,000.00

After respondent Rosalito Gammad completed his direct testimony, cross- 5. Attorneys Fees ------------ 10% of the total amount granted
examination was scheduled for November 17, 1997[13] but moved to December 8,
1997,[14] because the parties and the counsel failed to appear. On December 8,
1997, counsel of petitioner was absent despite due notice and was deemed to have
6. Cost of the Suit.
waived right to cross-examine respondent Rosalito.[15]

SO ORDERED.[19]

8

On appeal by petitioner, the Court of Appeals affirmed the decision of the trial
court with modification as follows:
[T]he Decision dated 06 November 1998 is hereby MODIFIED to reflect that the
following are hereby adjudged in favor of plaintiffs-appellees:
1. Actual Damages in the amount of P88,270.00;
2. Compensatory Damages in the amount of P1,135,536,10;
3. Moral and Exemplary Damages in the amount of P400,000.00; and
4. Attorneys fees equivalent to 10% of the sum of the actual, compensatory, moral,
and exemplary damages herein adjudged.
The court a quos judgment of the cost of the suit against defendant-appellant is
hereby AFFIRMED.
SO ORDERED.[20]
Represented by a new counsel, petitioner on May 21, 2003 filed a motion for
reconsideration praying that the case be remanded to the trial court for cross-
examination of respondents witness and for the presentation of its evidence; or in
the alternative, dismiss the respondents complaint.[21] Invoking APEX Mining, Inc.
v. Court of Appeals,[22] petitioner argues, inter alia, that the decision of the trial
court should be set aside because the negligence of its former counsel, Atty.
Antonio B. Paguirigan, in failing to appear at the scheduled hearings and move for
reconsideration of the orders declaring petitioner to have waived the right to cross-
examine respondents witness and right to present evidence, deprived petitioner of
its day in court.
On August 21, 2003, the Court of Appeals denied petitioners motion for
reconsideration.[23]
Hence, this petition for review principally based on the fact that the mistake or
gross negligence of its counsel deprived petitioner of due process of law. Petitioner
also argues that the trial courts award of damages were without basis and should
be deleted.
The issues for resolution are: (1) whether petitioners counsel was guilty of gross
negligence; (2) whether petitioner should be held liable for breach of contract of
carriage; and (3) whether the award of damages was proper.
It is settled that the negligence of counsel binds the client. This is based on the rule
that any act performed by a counsel within the scope of his general or implied
authority is regarded as an act of his client. Consequently, the mistake or
negligence of counsel may result in the rendition of an unfavorable judgment
against the client. However, the application of the general rule to a given case
should be looked into and adopted according to the surrounding circumstances
obtaining. Thus, exceptions to the foregoing have been recognized by the court in
cases where reckless or gross negligence of counsel deprives the client of due
process of law, or when its application will result in outright deprivation of the
clients liberty or property or where the interests of justice so require, and accord
relief to the client who suffered by reason of the lawyers gross or palpable mistake
or negligence.[24]
The exceptions, however, are not present in this case. The record shows that Atty.
Paguirigan filed an Answer and Pre-trial Brief for petitioner. Although initially
declared as in default, Atty. Paguirigan successfully moved for the setting aside of
9
the order of default. In fact, petitioner was represented by Atty. Paguirigan at the
pre-trial who proposed settlement for P50,000.00. Although Atty. Paguirigan failed
to file motions for reconsideration of the orders declaring petitioner to have
waived the right to cross-examine respondents witness and to present evidence, he
nevertheless, filed a timely appeal with the Court of Appeals assailing the decision
of the trial court. Hence, petitioners claim that it was denied due process lacks
basis.
Petitioner too is not entirely blameless. Prior to the issuance of the order declaring
it as in default for not appearing at the pre-trial, three notices (dated October 23,
1996,[25] January 30, 1997,[26] and March 26, 1997,[27]) requiring attendance at
the pre-trial were sent and duly received by petitioner. However, it was only on
April 27, 1997, after the issuance of the April 10, 1997 order of default for failure to
appear at the pre-trial when petitioner, through its finance and administrative
manager, executed a special power of attorney[28] authorizing Atty. Paguirigan or
any member of his law firm to represent petitioner at the pre-trial. Petitioner is
guilty, at the least, of contributory negligence and fault cannot be imputed solely
on previous counsel.
The case of APEX Mining, Inc., invoked by petitioner is not on all fours with the case
at bar. In APEX, the negligent counsel not only allowed the adverse decision against
his client to become final and executory, but deliberately misrepresented in the
progress report that the case was still pending with the Court of Appeals when the
same was dismissed 16 months ago.[29] These circumstances are absent in this
case because Atty. Paguirigan timely filed an appeal from the decision of the trial
court with the Court of Appeals.
In Gold Line Transit, Inc. v. Ramos,[30] the Court was similarly confronted with the
issue of whether or not the client should bear the adverse consequences of its
counsels negligence. In that case, Gold Line Transit, Inc. (Gold Line) and its lawyer
failed to appear at the pre-trial despite notice and was declared as in default. After
the plaintiffs presentation of evidence ex parte, the trial court rendered decision
ordering Gold Line to pay damages to the heirs of its deceased passenger. The
decision became final and executory because counsel of Gold Line did not file any
appeal. Finding that Goldline was not denied due process of law and is thus bound
by the negligence of its lawyer, the Court held as follows
This leads us to the question of whether the negligence of counsel was so gross and
reckless that petitioner was deprived of its right to due process of law. We do not
believe so. It cannot be denied that the requirements of due process were
observed in the instant case. Petitioner was never deprived of its day in court, as in
fact it was afforded every opportunity to be heard. Thus, it is of record that notices
were sent to petitioner and that its counsel was able to file a motion to dismiss the
complaint, an answer to the complaint, and even a pre-trial brief. What was
irretrievably lost by petitioner was its opportunity to participate in the trial of the
case and to adduce evidence in its behalf because of negligence.
In the application of the principle of due process, what is sought to be safeguarded
against is not the lack of previous notice but the denial of the opportunity to be
heard. The question is not whether petitioner succeeded in defending its rights and
interests, but simply, whether it had the opportunity to present its side of the
controversy. Verily, as petitioner retained the services of counsel of its choice, it
should, as far as this suit is concerned, bear the consequences of its choice of a
faulty option. Its plea that it was deprived of due process echoes on hollow ground
and certainly cannot elicit approval nor sympathy.
To cater to petitioners arguments and reinstate its petition for relief from
judgment would put a premium on the negligence of its former counsel and
encourage the non-termination of this case by reason thereof. This is one case
where petitioner has to bear the adverse consequences of its counsels act, for a
client is bound by the action of his counsel in the conduct of a case and he cannot
thereafter be heard to complain that the result might have been different had his
counsel proceeded differently. The rationale for the rule is easily discernible. If the
negligence of counsel be admitted as a reason for opening cases, there would
never be an end to a suit so long as a new counsel could be hired every time it is
shown that the prior counsel had not been sufficiently diligent, experienced or
learned.[31]
Similarly, in Macalalag v. Ombudsman,[32] a Philippine Postal Corporation
employee charged with dishonesty was not able to file an answer and position
paper. He was found guilty solely on the basis of complainants evidence and was
dismissed with forfeiture of all benefits and disqualification from government
10
service. Challenging the decision of the Ombudsman, the employee contended that
the gross negligence of his counsel deprived him of due process of law. In
debunking his contention, the Court said
Neither can he claim that he is not bound by his lawyers actions; it is only in case of
gross or palpable negligence of counsel when the courts can step in and accord
relief to a client who would have suffered thereby. If every perceived mistake,
failure of diligence, lack of experience or insufficient legal knowledge of the lawyer
would be admitted as a reason for the reopening of a case, there would be no end
to controversy. Fundamental to our judicial system is the principle that every
litigation must come to an end. It would be a clear mockery if it were otherwise.
Access to the courts is guaranteed, but there must be a limit to it.
Viewed vis--vis the foregoing jurisprudence, to sustain petitioners argument that it
was denied due process of law due to negligence of its counsel would set a
dangerous precedent. It would enable every party to render inutile any adverse
order or decision through the simple expedient of alleging gross negligence on the
part of its counsel. The Court will not countenance such a farce which contradicts
long-settled doctrines of trial and procedure.[33]
Anent the second issue, petitioner was correctly found liable for breach of contract
of carriage. A common carrier 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 to all the circumstances. In a contract of carriage, it is
presumed that the common carrier was at fault or was negligent when a passenger
dies or is injured. Unless the presumption is rebutted, the court need not even
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.[34]
In the instant case, there is no evidence to rebut the statutory presumption that
the proximate cause of Marie Graces death was the negligence of petitioner.
Hence, the courts below correctly ruled that petitioner was guilty of breach of
contract of carriage.
Nevertheless, the award of damages should be modified.
Article 1764[35] in relation to Article 2206[36] of the Civil Code, holds the common
carrier in breach of its contract of carriage that results in the death of a passenger
liable to pay the following: (1) indemnity for death, (2) indemnity for loss of earning
capacity, and (3) moral damages.
In the present case, respondent heirs of the deceased are entitled to indemnity for
the death of Marie Grace which under current jurisprudence is fixed at
P50,000.00.[37]
The award of compensatory damages for the loss of the deceaseds earning capacity
should be deleted for lack of basis. As a rule, documentary evidence should be
presented to substantiate the claim for damages for loss of earning capacity. By
way of exception, damages for loss of earning capacity may be awarded despite the
absence of documentary evidence when (1) the deceased is self-employed earning
less than the minimum wage under current labor laws, and judicial notice may be
taken of the fact that in the deceaseds line of work no documentary evidence is
available; or (2) the deceased is employed as a daily wage worker earning less than
the minimum wage under current labor laws.[38]
In People v. Oco,[39] the evidence presented by the prosecution to recover
damages for loss of earning capacity was the bare testimony of the deceaseds wife
that her husband was earning P8,000.00 monthly as a legal researcher of a private
corporation. Finding that the deceased was neither self-employed nor employed as
a daily-wage worker earning less than the minimum wage under the labor laws
existing at the time of his death, the Court held that testimonial evidence alone is
insufficient to justify an award for loss of earning capacity.
Likewise, in People v. Caraig,[40] damages for loss of earning capacity was not
awarded because the circumstances of the 3 deceased did not fall within the
11
recognized exceptions, and except for the testimony of their wives, no
documentary proof about their income was presented by the prosecution. Thus
The testimonial evidence shows that Placido Agustin, Roberto Raagas, and
Melencio Castro Jr. were not self-employed or employed as daily-wage workers
earning less than the minimum wage under the labor laws existing at the time of
their death. Placido Agustin was a Social Security System employee who received a
monthly salary of P5,000. Roberto Raagas was the President of Sinclair Security and
Allied Services, a family owned corporation, with a monthly compensation of
P30,000. Melencio Castro Jr. was a taxi driver of New Rocalex with an average daily
earning of P500 or a monthly earning of P7,500. Clearly, these cases do not fall
under the exceptions where indemnity for loss of earning capacity can be given
despite lack of documentary evidence. Therefore, for lack of documentary proof,
no indemnity for loss of earning capacity can be given in these cases. (Emphasis
supplied)
Here, the trial court and the Court of Appeals computed the award of
compensatory damages for loss of earning capacity only on the basis of the
testimony of respondent Rosalito that the deceased was 39 years of age and a
Section Chief of the Bureau of Internal Revenue, Tuguergarao District Office with a
salary of P83,088.00 per annum when she died.[41] No other evidence was
presented. The award is clearly erroneous because the deceaseds earnings does
not fall within the exceptions.
However, the fact of loss having been established, temperate damages in the
amount of P500,000.00 should be awarded to respondents. Under Article 2224 of
the Civil Code, temperate or moderate damages, which are more than nominal but
less than compensatory damages, may be recovered when the court finds that
some pecuniary loss has been suffered but its amount can not, from the nature of
the case, be proved with certainty.
In Pleno v. Court of Appeals,[42] the Court sustained the trial courts award of
P200,000.00 as temperate damages in lieu of actual damages for loss of earning
capacity because the income of the victim was not sufficiently proven, thus
The trial court based the amounts of damages awarded to the petitioner on the
following circumstances:
As to the loss or impairment of earning capacity, there is no doubt that Pleno is an
ent[re]preneur and the founder of his own corporation, the Mayon Ceramics
Corporation. It appears also that he is an industrious and resourceful person with
several projects in line, and were it not for the incident, might have pushed them
through. On the day of the incident, Pleno was driving homeward with geologist
Longley after an ocular inspection of the site of the Mayon Ceramics Corporation.
His actual income however has not been sufficiently established so that this Court
cannot award actual damages, but, an award of temperate or moderate damages
may still be made on loss or impairment of earning capacity. That Pleno sustained a
permanent deformity due to a shortened left leg and that he also suffers from
double vision in his left eye is also established. Because of this, he suffers from
some inferiority complex and is no longer active in business as well as in social life.
In similar cases as in Borromeo v. Manila Electric Railroad Co., 44 Phil 165; Coriage,
et al. v. LTB Co., et al., L-11037, Dec. 29, 1960, and in Araneta, et al. v. Arreglado, et
al., L-11394, Sept. 9, 1958, the proper award of damages were given.
We rule that the lower courts awards of damages are more consonant with the
factual circumstances of the instant case. The trial courts findings of facts are clear
and well-developed. Each item of damages is adequately supported by evidence on
record.
Article 2224 of the Civil Code was likewise applied in the recent cases of People v.
Singh[43] and People v. Almedilla,[44] to justify the award of temperate damages
in lieu of damages for loss of earning capacity which was not substantiated by the
required documentary proof.
Anent the award of moral damages, the same cannot be lumped with exemplary
damages because they are based on different jural foundations.[45] These
damages are different in nature and require separate determination.[46] In culpa
contractual or breach of contract, moral damages may be recovered when the
12
defendant acted in bad faith or was guilty of gross negligence (amounting to bad
faith) or in wanton disregard of contractual obligations and, as in this case, when
the act of breach of contract itself constitutes the tort that results in physical
injuries. By special rule in Article 1764 in relation to Article 2206 of the Civil Code,
moral damages may also be awarded in case the death of a passenger results from
a breach of carriage.[47] On the other hand, exemplary damages, which are
awarded by way of example or correction for the public good may be recovered in
contractual obligations if the defendant acted in wanton, fraudulent, reckless,
oppressive, or malevolent manner.[48]
Respondents in the instant case should be awarded moral damages to compensate
for the grief caused by the death of the deceased resulting from the petitioners
breach of contract of carriage. Furthermore, the petitioner failed to prove that it
exercised the extraordinary diligence required for common carriers, it is presumed
to have acted recklessly.[49] Thus, the award of exemplary damages is proper.
Under the circumstances, we find it reasonable to award respondents the amount
of P100,000.00 as moral damages and P100,000.00 as exemplary damages. These
amounts are not excessive.[50]
The actual damages awarded by the trial court reduced by the Court of Appeals
should be further reduced. In People v. Duban,[51] it was held that only
substantiated and proven expenses or those that appear to have been genuinely
incurred in connection with the death, wake or burial of the victim will be
recognized. A list of expenses (Exhibit J),[52] and the contract/receipt for the
construction of the tomb (Exhibit F)[53] in this case, cannot be considered
competent proof and cannot replace the official receipts necessary to justify the
award. Hence, actual damages should be further reduced to P78,160.00,[54] which
was the amount supported by official receipts.
Pursuant to Article 2208[55] of the Civil Code, attorneys fees may also be
recovered in the case at bar where exemplary damages are awarded. The Court
finds the award of attorneys fees equivalent to 10% of the total amount adjudged
against petitioner reasonable.
Finally, in Eastern Shipping Lines, Inc. v. Court of Appeals,[56] it was held that when
an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or
quasi-delicts is breached, the contravenor can be held liable for payment of
interest in the concept of actual and compensatory damages, subject to the
following rules, to wit
1. When the obligation is breached, and it consists in the payment of a sum of
money, i.e., a loan or forbearance of money, the interest due should be that which
may have been stipulated in writing. Furthermore, the interest due shall itself earn
legal interest from the time it is judicially demanded. In the absence of stipulation,
the rate of interest shall be 12% per annum to be computed from default, i.e., from
judicial or extrajudicial demand under and subject to the provisions of Article 1169
of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of money, is
breached, an interest on the amount of damages awarded may be imposed at the
discretion of the court at the rate of 6% per annum. No interest, however, shall be
adjudged on unliquidated claims or damages except when or until the demand can
be established with reasonable certainty. Accordingly, where the demand is
established with reasonable certainty, the interest shall begin to run from the time
the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such
certainty cannot be so reasonably established at the time the demand is made, the
interest shall begin to run only from the date the judgment of the court is made (at
which time the quantification of damages may be deemed to have been reasonably
ascertained). The actual base for the computation of legal interest shall, in any
case, be on the amount finally adjudged.
3. When the judgment of the court awarding a sum of money becomes final and
executory, the rate of legal interest, whether the case falls under paragraph 1 or
paragraph 2, above, shall be 12% per annum from such finality until its satisfaction,
this interim period being deemed to be by then an equivalent to a forbearance of
credit. (Emphasis supplied).
In the instant case, petitioner should be held liable for payment of interest as
damages for breach of contract of carriage. Considering that the amounts payable
13
by petitioner has been determined with certainty only in the instant petition, the
interest due shall be computed upon the finality of this decision at the rate of 12%
per annum until satisfaction, per paragraph 3 of the aforecited rule.[57]
WHEREFORE, in view of all the foregoing, the petition is PARTIALLY GRANTED. The
April 11, 2003 decision of the Court of Appeals in CA-G.R. CV No. 63290, which
modified the decision of the Regional Trial Court of Tuguegarao, Cagayan in Civil
Case No. 5023, is AFFIRMED with MODIFICATION. As modified, petitioner Victory
Liner, Inc., is ordered to pay respondents the following: (1) P50,000.00 as
indemnity for the death of Marie Grace Pagulayan-Gammad; (2) P100,000.00 as
moral damages; (3) P100,000.00 as exemplary damages; (4) P78,160.00 as actual
damages; (5) P500,000.00 as temperate damages; (6) 10% of the total amount as
attorneys fees; and the costs of suit.
Furthermore, the total amount adjudged against petitioner shall earn interest at
the rate of 12% per annum computed from the finality of this decision until fully
paid.
SO ORDERED.
OF APPEALS and FGU INSURANCE CORPORATION
447 SCRA 427 (2004)
A common carrier is liable to the resulting damage to the goods if the improper
packaging is known to the carrier or his employees or is apparent upon ordinary
observation, but he nevertheless accepts the same without protest or exception.
Respondent FGU Insurance Corporation (FGU) brought an action for
reimbursement against petitioner A.F. Sanchez Brokerage Inc. (Sanchez Brokerage)
to collect the amount paid by the former to Wyeth-Suaco Laboratories Inc. (Wyeth-
Suaco) as insurance payment for the goods delivered in bad condition.
A.F. Brokerage refused to admit liability for the damaged goods which it delivered
from Philippines Skylanders, Inc. (PSI) to Wyeth-Suaco as it maintained that the
damage was due to improper and insufficient export packaging, discovered when
the sealed containers were opened outside the PSI warehouse.
The Regional Trial Court of Makati dismissed the said complaint; however, the
decision was subsequently reversed and set aside by the Court of Appeals, finding
that Sanchez Brokerage is liable for the carriage of cargo as a ―common carrier‖ by
definition of the New Civil Code.
ISSUE:
Whether or not the FGU Insurance is liable for the delivery of the damaged goods
HELD:
As defined under Article 1732 of the Civil Code, 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. It 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 Sanchez Brokerage 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, Sanchez Brokerage as a common carrier is mandated to observe, under
Article 1733 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.
The concept of ―extra-ordinary diligence‖ was explained in Compania Maritima v.
Court of Appeals. The extraordinary diligence in the vigilance over the goods
tendered for shipment requires the common carrier to know and to follow the
14
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 storage including such methods as their nature requires.
It was established that Sanchez Brokerage received the cargoes from the PSI
warehouse in good order and condition and that upon delivery by petitioner some
of the cargoes were found to be in bad order as noted in the Delivery Receipt and
as indicated in the Survey and Destruction Report.
While paragraph no. 4 of Article 1734 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 packaging or in the containers, the rule is that if the improper packaging 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. If the claim of Sanchez Brokerage 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 reservation duly noted on the receipt issued by PSI but
it made no such protest or reservation.
MACONDRAY & CO., INC. VS. PROVIDENT INSURANCE CORPORATION February,
2005
Facts: CANPOTEX SHIPPING SERVICES LIMITED INC., shipped on board the vessel
M/V Trade carrier certain goods in favor of ATLAS FERTILIZER CORPORATION.
Subject shipments were insured with Provident Insurance Corp. against all risks.
When the shipment arrived, consignee discovered that the shipment sustained
losses. Provident paid for said losses. Formal claims were then filed with Trade &
Transport but MACONDRAY refused and failed to settle the same. MACONDRAY
denies liability over the losses, it, having no absolute relation with Trade &
Transport, the alleged operator of the vessel who transported the shipment; that
accordingly, MACONDRAY is the local representative of the shipper; the charterer
of M/V Trade Carrier and not party to this case; that it has no control over the acts
of the captain and crew of the carrier and cannot be held responsible for any
damage arising from the fault or negligence of said captain and crew; that upon
arrival at the port, M/V Trade Carrier discharged the full amount of shipment as
shown by the draft survey.
Issue: Whether or not MACONDRAY & CO. INC., as an agent, is responsible for any
loss sustained by any party from the vessel owned by Trade & Transport.
Held: Although petitioner is not an agent of Trade & Transport, it can still be the
ship agent of the vessel M/V Trade Carrier. A ship agent is the person entrusted
with provisioning or representing the vessel in the port in which it may be found.
Hence, whether acting as agent of the owner of the vessel or as agent of the
charterer, petitioner will be considered as the ship agent and may be held liable as
such, as long as the latter is the one that provisions or represents the vessel.
The trial court found that petitioner was appointed as local agent of the vessel,
which duty includes arrangement for the entrance and clearance of the vessel.
Further, the CA found that the evidence shows that petitioner represented the
vessel. The latter prepared the Notice of Readiness, the Statement of Facts, the
Completion Notice, the Sailing Notice and Custom’s Clearance. Petitioner’s
employees were present at the port of destination one day before the arrival of the
vessel, where they stayed until it departed. They were also present during the
actual discharging of the cargo. Moreover, Mr. de la Cruz, the representative of
petitioner, also prepared for the needs of the vessel. These acts all point to the
conclusion that it was the entity that represented the vessel at the port of
destination and was the ship agent within the meaning and context of Article 586
of the Code of Commerce.
2005
POLIAND INDUSTRIAL LIMITED vs. NATIONAL DEVELOPMENT COMPANY,
DEVELOPMENT BANK OF THE PHILIPPINES [G.R. No. 143866. August 22, 2005]
FACTS:
Poliand is an assignee of the of the rights of Asian Hardwood over the outstanding
obligation of National Development Corporation (NDC), the latter being the owner
of Galleon which previously secured credit accommodations from Asian Hardwood
for its expenses on provisions, oil, repair, among others.
Galleon also obtained loans from Japanese lenders to finance acquisition of vessels
which was guaranteed by DBP in consideration of a promise by Galleon to secure a
first mortgage on the vessels. DBP later transferred ownership of the vessel to NDC.
A collection suit was filed after repeated demands of Poliand for the satisfaction of
the obligation from Galleon, NDC and DBP went unheeded.
ISSUE: Whether POLIAND has a maritime lien enforceable against NDC or DBP or
both.
15
HELD:
Yes, Poliand has a maritime lien which is more superior than DBP’s mortgage lien.
“Before POLIAND’s claim may be classified as superior to the mortgage constituted
on the vessel, it must be shown to be one of the enumerated claims which Section
17, P.D. No. 1521 declares as having preferential status in the event of the sale of
the vessel. One of such claims enumerated under Section 17, P.D. No. 1521 which
is considered to be superior to the preferred mortgage lien is a maritime lien
arising prior in time to the recording of the preferred mortgage. Such maritime lien
is described under Section 21, P.D. No. 1521, which reads:
SECTION 21. Maritime Lien for Necessaries; persons entitled to such lien. — Any
person furnishing repairs, supplies, towage, use of dry dock or marine railway, or
other necessaries to any vessel, whether foreign or domestic, upon the order of the
owner of such vessel, or of a person authorized by the owner, shall have a
maritime lien on the vessel, which may be enforced by suit in rem, and it shall be
necessary to allege or prove that credit was given to the vessel.
Under the aforequoted provision, the expense must be incurred upon the order of
the owner of the vessel or its authorized person and prior to the recording of the
ship mortgage. Under the law, it must be established that the credit was extended
to the vessel itself.
The trial court found that GALLEON’s advances obtained from Asian Hardwood
were used to cover for the payment of bunker oil/fuel, unused stores and oil,
bonded stores, provisions, and repair and docking of the GALLEON vessels. These
expenses clearly fall under Section 21, P.D. No. 1521.
The trial court also found that the advances from Asian Hardwood were spent for
ship modification cost and the crew’s salary and wages. DBP contends that a ship
modification cost is omitted under Section 17, P.D. No. 1521, hence, it does not
have a status superior to DBP’s preferred mortgage lien.
As stated in Section 21, P.D. No. 1521, a maritime lien may consist in “other
necessaries spent for the vessel.” The ship modification cost may properly be
classified under this broad category because it was a necessary expenses for the
vessel’s navigation. As long as an expense on the vessel is indispensable to the
maintenance and navigation of the vessel, it may properly be treated as a maritime
lien for necessaries under Section 21, P.D. No. 1521."
However, Only NDC is liable on the maritime lien
x x x [O]nly NDC is liable for the payment of the maritime lien. A maritime lien is
akin to a mortgage lien in that in spite of the transfer of ownership, the lien is not
extinguished. The maritime lien is inseparable from the vessel and until discharged,
it follows the vessel. Hence, the enforcement of a maritime lien is in the nature and
character of a proceeding quasi in rem.[65] The expression “action in rem” is, in its
narrow application, used only with reference to certain proceedings in courts of
admiralty wherein the property alone is treated as responsible for the claim or
obligation upon which the proceedings are based.[66] Considering that DBP
subsequently transferred ownership of the vessels to NDC, the Court holds the
latter liable on the maritime lien. Notwithstanding the subsequent transfer of the
vessels to NDC, the maritime lien subsists.
CRESCENT PETROLEUM, LTD., Petitioner, vs. M/V "LOK MAHESHWARI," THE
SHIPPING CORPORATION OF INDIA, and PORTSERV LIMITED
G.R. No. 155014 November 11, 2005
FACTS:
Respondent M/V "Lok Maheshwari" (Vessel) is an oceangoing vessel of Indian
registry that is owned by respondent Shipping Corporation of India (SCI), a
corporation organized and existing under the laws of India and principally owned
by the Government of India. It was time-chartered by respondent SCI to Halla
Merchant Marine Co. Ltd. (Halla), a South Korean company. Halla, in turn, sub-
chartered the Vessel through a time charter to Transmar Shipping, Inc. (Transmar).
Transmar further sub-chartered the Vessel to Portserv Limited (Portserv). Both
Transmar and Portserv are corporations organized and existing under the laws of
Canada.
On or about November 1, 1995, Portserv requested petitioner Crescent Petroleum,
Ltd. (Crescent), a corporation organized and existing under the laws of Canada that
is engaged in the business of selling petroleum and oil products for the use and
operation of oceangoing vessels, to deliver marine fuel oils (bunker fuels) to the
Vessel. Petitioner Crescent granted and confirmed the request through an advice
via facsimile dated November 2, 1995. As security for the payment of the bunker
fuels and related services, petitioner Crescent received two (2) checks in the
amounts of US$100,000.00 and US$200,000.00. Thus, petitioner Crescent
contracted with its supplier, Marine Petrobulk Limited (Marine Petrobulk), another
Canadian corporation, for the physical delivery of the bunker fuels to the Vessel.
16
On or about November 4, 1995, Marine Petrobulk delivered the bunker fuels
amounting to US$103,544 inclusive of barging and demurrage charges to the Vessel
at the port of Pioneer Grain, Vancouver, Canada. The Chief Engineer Officer of the
Vessel duly acknowledged and received the delivery receipt. Marine Petrobulk
issued an invoice to petitioner Crescent for the US$101,400.00 worth of the bunker
fuels. Petitioner Crescent issued a check for the same amount in favor of Marine
Petrobulk, which check was duly encashed.
Having paid Marine Petrobulk, petitioner Crescent issued a revised invoice dated
November 21, 1995 to "Portserv Limited, and/or the Master, and/or Owners,
and/or Operators, and/or Charterers of M/V ‘Lok Maheshwari’" in the amount of
US$103,544.00 with instruction to remit the amount on or before December 1,
1995. The period lapsed and several demands were made but no payment was
received. Also, the checks issued to petitioner Crescent as security for the payment
of the bunker fuels were dishonored for insufficiency of funds. As a consequence,
petitioner Crescent incurred additional expenses of US$8,572.61 for interest,
tracking fees, and legal fees.
On May 2, 1996, while the Vessel was docked at the port of Cebu City, petitioner
Crescent instituted before the RTC of Cebu City an action "for a sum of money with
prayer for temporary restraining order and writ of preliminary attachment" against
respondents Vessel and SCI, Portserv and/or Transmar.
On May 3, 1996, the trial court issued a writ of attachment against the Vessel with
bond at P2,710,000.00. Petitioner Crescent withdrew its prayer for a temporary
restraining order and posted the required bond.
On May 18, 1996, summonses were served to respondents Vessel and SCI, and
Portserv and/or Transmar through the Master of the Vessel. On May 28, 1996,
respondents Vessel and SCI, through Pioneer Insurance and Surety Corporation
(Pioneer), filed an urgent ex-parte motion to approve Pioneer’s letter of
undertaking, to consider it as counter-bond and to discharge the attachment. On
May 29, 1996, the trial court granted the motion; thus, the letter of undertaking
was approved as counter-bond to discharge the attachment.
ISSUE:
Whether the Philippine court has or will exercise jurisdiction and entitled to
maritime lien under our laws on foreign vessel docked on Philippine port and
supplies furnished to a vessel in a foreign port?
RULING:
In a suit to establish and enforce a maritime lien for supplies furnished to a vessel
in a foreign port, whether such lien exists, or whether the court has or will exercise
jurisdiction, depends on the law of the country where the supplies were furnished,
which must be pleaded and proved.
The Lauritzen-Romero-Rhoditis trilogy of cases, which replaced such single-factor
methodologies as the law of the place of supply. The multiple-contact test to
determine, in the absence of a specific Congressional directive as to the statute’s
reach, which jurisdiction’s law should be applied. The following factors were
considered: (1) place of the wrongful act; (2) law of the flag; (3) allegiance or
domicile of the injured; (4) allegiance of the defendant shipowner; (5) place of
contract; (6) inaccessibility of foreign forum; and (7) law of the forum. This is
applicable not only to personal injury claims arising under the Jones Act but to all
matters arising under maritime law in general
The Court cannot sustain petitioner Crescent’s insistence on the application of P.D.
No. 1521 or the Ship Mortgage Decree of 1978 and hold that a maritime lien exists.
Out of the seven basic factors listed in the case of Lauritzen, Philippine law only
falls under one – the law of the forum. All other elements are foreign – Canada is
the place of the wrongful act, of the allegiance or domicile of the injured and the
place of contract; India is the law of the flag and the allegiance of the defendant
shipowner. Applying P.D. No. 1521,a maritime lien exists would not promote the
public policy behind the enactment of the law to develop the domestic shipping
industry. Opening up our courts to foreign suppliers by granting them a maritime
lien under our laws even if they are not entitled to a maritime lien under their laws
will encourage forum shopping. In light of the interests of the various foreign
elements involved, it is clear that Canada has the most significant interest in this
dispute. The injured party is a Canadian corporation, the sub-charterer which
placed the orders for the supplies is also Canadian, the entity which physically
delivered the bunker fuels is in Canada, the place of contracting and negotiation is
in Canada, and the supplies were delivered in Canada.
Japan Airlines V. Asuncion (G.R No. 161730, January 28,2005) 449 SCRA 544
FACTS:
This petition for review seeks to reverse and set aside the October 9, 2002 decision
of the Court of Appeals and its January 12, 2004 resolution, 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.
On March 27, 1992, respondents Michael and Jeanette Asuncion left Manila on
board Japan Airlines’ (JAL) Flight 742 bound for Los Angeles. Their itinerary
17
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. 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.
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 damages claiming that
JAL did not fully apprise them of their travel requirements and that they were
rudely and forcibly detained at Narita Airport.
Issue: Whether or not JAL is liable of breach of contract of carriage.
Side Issues:
· Whether or not JAL is liable for moral, exemplary damages,
· Whether or not the plaintiff is liable for attorney’s fee and cost of suit incurred
(JAL counterclaim)
Ruling:
The court finds 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.
In the Respondents claim 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. 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.
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 wanton, fraudulent,
oppressive or malevolent manner. Attorney’s fees are allowed when exemplary
damages are awarded and when the party to a suit is compelled to incur expenses
to protect his interest.[17] There being no breach of contract nor proof that JAL
acted in wanton, fraudulent or malevolent manner, there is no basis for the award
of any form of damages.
Neither should JAL be held liable to reimburse respondents the amount of
US$800.00. It has been sufficiently proven that the amount pertained to ISC, an
agency separate and distinct from JAL, in payment for the accommodations
provided to respondents. The payments did not in any manner accrue to the
benefit of JAL.
However, we find that the Court of Appeals correctly dismissed JAL’s counterclaim
for litigation expenses, exemplary damages and attorney’s fees. The action was
filed by respondents in utmost good faith and not manifestly frivolous.
Respondents honestly believed that JAL breached its contract. A person’s right to
litigate should not be penalized by holding him liable for damages. This is especially
true when the filing of the case is to enforce what he believes to be his rightful
claim against another although found to be erroneous.[
WHEREFORE, in view of the foregoing, the instant petition is PARTLY GRANTED. The
October 9, 2002 decision of the Court of Appeals and its January 12, 2004
resolution in CA-G.R. CV No. 57440, are 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
being no breach of contract on the part of petitioner, the award of actual, moral
and exemplary damages, as well as attorney’s fees and costs of the suit in favor of
respondents Michael and Jeanette Asuncion, is DELETED for lack of basis. However,
the dismissal for lack of merit of petitioner’s counterclaim for litigation expenses,
18
exemplary damages and attorney’s fees, is SUSTAINED. No pronouncement as to
costs.
Republic vs. Lorenzo Shipping Lines
G.R. No. 153563. February 07, 2005
Facts: The Republic of the Philippines signed an agreement through the
Department of Health and the Cooperative for American Relief Everywhere, Inc.
(CARE) wherein it would acquire from the US government donations of Non-Fat
Dried Milk and other food products. In turn, the Philippines will transport and
distribute the donated to the intended beneficiaries of the country. As a result, it
entered into a contract of carriage of goods with the herein respondent. The latter
shipped 4,868 bags of non-fat dried milk from Sept-Dec 1988. The consignee
named in the bills was Abdurahman Jama, petitioner’s branch supervisor in
Zamboanga City. Upon reaching the port of Zamboanga, respondent’s agent, Efren
Ruste Shipping Agency unloaded the said milks. Before each delivery, Rogelio
Rizada and Ismael Zamora both delivery checkers of Efren Ruste requested
Abdurahman to surrender the originals of the Bill of Lading. However, the
petitioner alleged that they did not receive anything and they filed a claim against
the herein respondent. The petitioner contended that the respondents failed to
exercise extraordinary diligence.
Issue: Whether the respondents failed to exercise extraordinary diligence required
by law?
Held: The surrender of the Bill of Lading is not a condition precedent for a common
carrier to be discharged of its contractual obligation. If the surrender is not
possible, acknowledgment of the delivery by signing the receipt suffices. The herein
respondent did not even bother to prevent the resignation of abdurhaman Jama to
be utilized as a witness.
Schmitz Transport & Brokerage Corporation vs. Transport Venture, Inc. (458 SCRA
557)
FACTS:
Petitioner, who was in charge of securing requisite clearances, receive the cargoes
from the shipside and deliver it to the consignee Little Giant Steel Pipe Corporation
warehouse at Cainta, Rizal, hired the services of respondent Transport Venture
Incorporation (TVI)’s tugboat for the hot rolled steel sheets in coil. Coils were
unloaded to the barge but there was no tugboat to pull the barge to the pier. Due
to strong waves caused by approaching storm, the barge was abandoned. Later,
the barge capsized washing 37 coils into the sea. Consignee was executed a
subrogation receipt by Industrial Insurance after the former’s filing of formal claim.
Industrial Insurance filed a complaint against both petitioner and respondent
herein. The trial court held that petitioner and respondent TVI were jointly and
severally liable for the subrogation.
ISSUE:
Whether or not the loss of cargoes was due to fortuitous event.
RULING:
NO. In order, to be considered a fortuitous event: (1) the cause of the unforeseen
and unexpected occurrence, or the failure of the debtor to comply with his
obligation, must be independent of human will; (2) it must be impossible to foresee
the event which constitute the caso fortuito, or if it can be foreseen it must be
impossible to avoid; (3) the occurrence must be such as to render it impossible for
the debtor to fulfill his obligation in any manner; and (4) the obligor must be free
from any participation in the aggravation of the injury resulting to the creditor.
Petitioner and respondent TVI were jointly and severally liable for the amount of
paid by the consignee plus interest computed from the date of decision of the trial
court.
Topic: Extraordinary diligence
Case: SULPICIO LINES, INC., petitioner, vs. FIRST LEPANTO-TAISHO INSURANCE
CORPORATION, respondent.
G.R. No. 140349. June 29, 2005
FACTS: Taiyo Yuden Philippines, Inc. (owner of the goods) and Delbros, Inc.
(shipper) entered into a contract, evidenced by Bill of Lading issued by the latter in
favor of the owner of the goods, for Delbros, Inc. to transport a shipment of goods
consisting of 3 wooden crates containing 136 cartons of inductors and LC
compound on board the V Singapore V20 from Cebu City to Singapore in favor of
the consignee, Taiyo Yuden Singapore Pte, Ltd.
19
For the carriage of said shipment from Cebu City to Manila, Delbros, Inc. engaged
the services of the vessel M/V Philippine Princess, owned and operated by
petitioner Sulpicio Lines, Inc. (carrier). During the unloading of the shipment, one
crate containing 42 cartons dropped from the cargo hatch to the pier apron. The
owner of the goods examined the dropped cargo, and upon an alleged finding that
the contents of the crate were no longer usable for their intended purpose, they
were rejected as a total loss and returned to Cebu City.
The owner of the goods filed a claim with herein petitioner-carrier for the recovery
of the value of the rejected cargo which was refused by the latter. Thereafter, the
owner of the goods sought payment from respondent First Lepanto-Taisho
Insurance Corporation (insurer) under a marine insurance policy issued to the
former. Respondent-insurer paid the claim less thirty-five percent (35%) salvage
value or P194, 220.31.
The payment of the insurance claim of the owner of the goods by the respondent-
insurer subrogated the latter to whatever right or legal action the owner of the
goods may have against Delbros, Inc. and petitioner-carrier, Sulpicio Lines, Inc.
Thus, respondent-insurer then filed claims for reimbursement from Delbros, Inc.
and petitioner-carrier Sulpicio Lines, Inc. which were subsequently denied.
In 1992, respondent-insurer filed a suit for damages with the trial court against
Delbros, Inc. and herein petitioner-carrier.
Delbros, Inc. filed on 15 April 1993 its Answer with Counterclaim and Cross-claim,
alleging that assuming the contents of the crate in question were truly in bad
order, fault is with herein petitioner-carrier which was responsible for the
unloading of the crates.
Petitioner-carrier filed its Answer to Delbros, Inc.’s cross-claim asserting that it
observed extraordinary diligence in the handling, storage and general care of the
shipment and that subsequent inspection of the shipment by the Manila Adjusters
and Surveyors Company showed that the contents of the third crate that had fallen
were found to be in apparent sound condition, except that “2 cello bags each of 50
pieces ferri inductors No. LC FL 112270K-60 (c) were unaccounted for and missing
as per packaging list.”
After hearing, the trial court dismissed the complaint for damages as well as the
counterclaim filed by therein defendant Sulpicio Lines, Inc. and the cross-claim filed
by Delbros, Inc on the grounds that plaintiff has failed to prove its case.
The CA reversed the RTC decision and ordered Delbros and Sulpicio Lines to pay,
jointly and severally, plaintiff-appellant the sum of P194,220.31 representing actual
damages, plus legal interest counted from the filing of the complaint until fully
paid.
ISSUE: whether or not, based on the evidence presented during the trial, the owner
of the goods, respondent-insurer’s predecessor-in-interest, did incur damages, and
if so, whether or not petitioner-carrier is liable for the same
RULING:
It cannot be denied that the shipment sustained damage while in the custody of
petitioner-carrier. It is not disputed that one of the 3 crates did fall from the cargo
hatch to the pier apron while petitioner-carrier was unloading the cargo from its
vessel. Neither is it impugned that upon inspection, it was found that 2 cartons
were torn on the side and the top flaps were open and that 2 cello bags, each of 50
pieces ferri inductors, were missing from the cargo.
Petitioner-carrier contends that its liability, if any, is only to the extent of the cargo
damage or loss and should not include the lack of fitness of the shipment for
transport to Singapore due to the damaged packing. This is erroneous. Petitioner-
carrier seems to belabor under the misapprehension that a distinction must be
made between the cargo packaging and the contents of the cargo. According to it,
damage to the packaging is not tantamount to damage to the cargo. It must be
stressed that in the case at bar, the damage sustained by the packaging of the
cargo while in petitioner-carrier’s custody resulted in its unfitness to be
transported to its consignee in Singapore. Such failure to ship the cargo to its final
destination because of the ruined packaging, indeed, resulted in damages on the
part of the owner of the goods.
The falling of the crate during the unloading is evidence of petitioner-carrier’s
negligence in handling the cargo. As a common carrier, it is expected to observe
extraordinary diligence in the handling of goods placed in its possession for
transport.[12] The standard of extraordinary diligence imposed upon common
carriers is considerably more demanding than the standard of ordinary diligence,
i.e., the diligence of a good paterfamilias established in respect of the ordinary
relations between members of society.[13] A common carrier is bound to transport
its cargo and its passengers safely "as far as human care and foresight can provide,
using the utmost diligence of a very cautious person, with due regard to all
circumstances.”[14] The extraordinary diligence in the vigilance over the goods
tendered for shipment requires the common carrier to know and to follow the
20
required precaution for avoiding the damage to, or destruction of, the goods
entrusted to it for safe carriage and delivery.[15] 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.”[16]
Thus, when the shipment suffered damages as it was being unloaded, petitioner-
carrier is presumed to have been negligent in the handling of the damaged cargo.
Under Articles 1735[17] and 1752[18] of the Civil Code, 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 loss, destruction or deterioration of goods under Article
1735, the common carrier must prove that they observed extraordinary diligence
as required in Article 1733[19] of the Civil Code.[20]
Petitioner-carrier miserably failed to adduce any shred of evidence of the required
extraordinary diligence to overcome the presumption that it was negligent in
transporting the cargo.
Coming now to the issue of the extent of petitioner-carrier’s liability, it is
undisputed that respondent-insurer paid the owner of the goods under the
insurance policy the amount of P194,220.31 for the alleged damages the latter has
incurred. Neither is there dispute as to the fact that Delbros, Inc. paid P194,220.31
to respondent-insurer in satisfaction of the whole amount of the judgment
rendered by the Court of Appeals. The question then is: To what extent is Sulpicio
Lines, Inc., as common carrier, liable for the damages suffered by the owner of the
goods?
Upon respondent-insurer’s payment of the alleged amount of loss suffered by the
insured (the owner of the goods), the insurer is entitled to be subrogated pro tanto
to any right of action which the insured may have against the common carrier
whose negligence or wrongful act caused the loss.[21] Subrogation is the
substitution of one person in the place of another with reference to a lawful claim
or right, so that he who is substituted succeeds to the rights of the other in relation
to a debt or claim, including its remedies or securities.[22]The rights to which the
subrogee succeeds are the same as, but not greater than, those of the person for
whom he is substituted, that is, he cannot acquire any claim, security or remedy
the subrogor did not have.[23] In other words, a subrogee cannot succeed to a
right not possessed by the subrogor.[24] A subrogee in effect steps into the shoes
of the insured and can recover only if the insured likewise could have
recovered.[25]
As found by the Court of Appeals, there was damage suffered by the goods which
consisted in the destruction of one wooden crate and the tearing of two (2)
cardboard boxes therein which rendered them unfit to be sent to Singapore.[26]
The falling of the crate was negligence on the part of Sulpicio Lines, Inc. for which it
cannot exculpate itself from liability because it failed to prove that it exercised
extraordinary diligence.[27]
Hence, we uphold the ruling of the appellate court that herein petitioner-carrier is
liable to pay the amount paid by respondent-insurer for the damages sustained by
the owner of the goods.
As stated in the manifestation filed by Delbros, Inc., however, respondent-insurer
had already been paid the full amount granted by the Court of Appeals, hence, it
will be tantamount to unjust enrichment for respondent-insurer to again recover
damages from herein petitioner-carrier.
With respect to Delbros, Inc.’s prayer contained in its manifestation that, in case
the decision in the instant case be adverse to petitioner-carrier, a pronouncement
as to the matter of reimbursement, indemnification or contribution in favor of
Delbros, Inc. be included in the decision, this Court will not pass upon said issue
since Delbros, Inc. has no personality before this Court, it not being a party to the
instant case. Notwithstanding, this shall not bar any action Delbros, Inc. may
institute against petitioner-carrier Sulpicio Lines, Inc. with respect to the damages
the latter is liable to pay.
WHEREFORE, premises considered, the assailed Decision of the Court of Appeals
dated 26 May 1999 and its Resolution dated 13 October 1999 are hereby
AFFIRMED. No costs.
SO ORDERED.
PHILIPPINE CHARTER INSURANCE CORPORATION vs. UNKNOWN OWNER OF THE
VESSEL M/V “NATIONAL HONOR,” NATIONAL SHIPPING CORPORATION OF THE
PHILIPPINES and INTERNATIONAL CONTAINER SERVICES, INC.
FACTS:
Petitioner Philippine Charter Insurance Corporation (PCIC) is the insurer of a
shipment on board the vessel M/V “National Honor,” represented in the
Philippines by its agent, National Shipping Corporation of the Philippines (NSCP).
21
The M/V “National Honor” arrived at the Manila International Container Terminal
(MICT). The International Container Terminal Services, Incorporated (ICTSI) was
furnished with a copy of the crate cargo list and bill of lading, and it knew the
contents of the crate. The following day, the vessel started discharging its cargoes
using its winch crane. The crane was operated by Olegario Balsa, a winchman from
the ICTSI, exclusive arrastre operator of MICT.
Denasto Dauz, Jr., the checker-inspector of the NSCP, along with the crew and the
surveyor of the ICTSI, conducted an inspection of the cargo. They inspected the
hatches, checked the cargo and found it in apparent good condition. Claudio
Cansino, the stevedore of the ICTSI, placed two sling cables on each end of Crate
No. 1. No sling cable was fastened on the mid-portion of the crate. In Dauz’s
experience, this was a normal procedure. As the crate was being hoisted from the
vessel’s hatch, the mid-portion of the wooden flooring suddenly snapped in the air,
about five feet high from the vessel’s twin deck, sending all its contents crashing
down hard, resulting in extensive damage to the shipment.
PCIC paid the damage, and as subrogee, filed a case against M/V National Honor,
NSCP and ICTSI. Both RTC and CA dismissed the complaint.
ISSUE:
Whether or not the presumption of negligence is applicable in the instant case.
HELD:
No.
We agree with the contention of the petitioner that common carriers, from the
nature of their business and for reasons of public policy, are mandated to observe
extraordinary diligence in the vigilance over the goods and for the safety of the
passengers transported by them, according to all the circumstances of each case.
he Court has defined extraordinary diligence in the vigilance overthe goods as
follows:
The extraordinary diligence in the vigilance over the goods tendered for shipment
requires the common carrier to know and to follow the required precaution for
avoiding damage to, or destruction of the goods entrusted to it for sale, carriage
and delivery. It requires common carriers to render service with the greatest skill
and foresight and “to use all reasonable means to ascertain the nature and
characteristic of goods tendered for shipment, and to exercise due care in the
handling and stowage, including such methods as their nature requires.”
The common carrier’s duty to observe the requisite diligence in the shipment of
goods lasts from the time the articles are surrendered to or unconditionally placed
in the possession of, and received by, the carrier for transportation until delivered
to, or until the lapse of a reasonable time for their acceptance, by the person
entitled to receive them.] >When the goods shipped are either lost or arrive in
damaged condition, a presumption arises against the carrier of its failure to
observe that diligence, and there need not be an express finding of negligence to
hold it liable. To overcome the presumption of negligence in the case of loss,
destruction or deterioration of the goods, the common carrier must prove that it
exercised extraordinary diligence.
However, under Article 1734 of the New Civil Code, the presumption of negligence
does not apply 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.
It bears stressing that the enumeration in Article 1734 of the New Civil Code which
exempts the common carrier for the loss or damage to the cargo is a closed list. To
exculpate itself from liability for the loss/damage to the cargo under any of the
causes, the common carrier is burdened to prove any of the aforecited causes
claimed by it by a preponderance of evidence. If the carrier succeeds, the burden of
evidence is shifted to the shipper to prove that the carrier is negligent.
“Defect” is the want or absence of something necessary for completeness or
perfection; a lack or absence of something essential to completeness; a deficiency
in something essential to the proper use for the purpose for which a thing is to be
used. On the other hand, inferior means of poor quality, mediocre, or second rate.
A thing may be of inferior quality but not necessarily defective. In other words,
“defectiveness” is not synonymous with “inferiority.”
xxx
22
In the present case, the trial court declared that based on the record, the loss of
the shipment was caused by the negligence of the petitioner as the shipper:

The same may be said with respect to defendant ICTSI. The breakage and collapse
of Crate No. 1 and the total destruction of its contents were not imputable to any
fault or negligence on the part of said defendant in handling the unloading of the
cargoes from the carrying vessel, but was due solely to the inherent defect and
weakness of the materials used in the fabrication of said crate.

The crate should have three solid and strong wooden batten placed side by side
underneath or on the flooring of the crate to support the weight of its contents. x x
x

23
2006
Loadstar v Pioneer G.R. No. 157481 January 24, 2006
Facts: Petitioner Loadstar Shipping is the registered owner and operator of the
vessel M/V Weasel. On June 6, 1984, it entered into a voyage-charter with
Northern Mindanao Transport Company, Inc. for the carriage of 65,000 bags of
cement from Iligan City toManila. The shipper was Iligan Cement Corporation,
while the consignee in Manila was Market Developers, Inc. 67,500 bags of cement
were loaded on board M/V Weasel and stowed in the cargo holds for delivery to
the consignee. Prior to the voyage, the consignee insured the shipment of
cement with respondent Pioneer Asia Insurance Corporation for P1,400,000, for
which there was a marine policy issued. The vessel ran aground. Consequently,
the entire shipment of cement was good as gone due to exposure to sea water.Â
Petitioner thus failed to deliver the goods to the consignee in Manila. The
consignee demanded from petitioner full reimbursement of the cost of the lost
shipment. Petitioner refused to reimburse despite repeated demands. The
insurance company paid the consignee P1,400,000 plus an additional amount
ofP500,000, the value of the lost shipment of cement. In return, the consignee
executed a Loss and Subrogation Receipt in favor of respondent concerning the
latterâs subrogation rights against petitioner. Respondent filed a complaint against
petitioner in the trial court for the recovery of the sum it paid. The trial court ruled
in favor of the insurance company. Petitionerâs defense of force majeure was
found bereft of factual basis. The RTC called attention to the PAG-ASA report that
at the time of the incident, tropical storm âAsiangâ had moved away from theÂ
Philippines. Further, records showed that the sea and weather conditions in the
area of Hinubaan, Negros Occidental from 8:00 p.m. of June 24, 1984 toÂ
8:00 a.m. the next day were slight and smooth. Thus, the trial court concluded
that the cause of the loss was not tropical storm âAsiangâ or any other force
majeure, but gross negligence of petitioner. Petitioner appealed to the Court of
Appeals. It affirmed the RTC Decision with modification that Loadstar shall only pay
the sum of 10% of the total claim for attorneyâs fees and litigation expenses. Hence
this petition.
Issue: 1. WON petitioner is a common or a private carrier? 2. In either case, did
petitioner exercise the required diligence:Â the extraordinary diligence of a
common carrier or the ordinary diligence of a private carrie
Held: common carrier, No. Petition denied. Ratio: Petitioner is a corporation
engaged in the business of transporting cargo by water and for compensation,
offering its services indiscriminately to the public. Thus, without doubt, it is a
common carrier. The voyage-charter agreement between petitioner and
Northern Mindanao Transport Company, Inc. did not in any way convert the
common carrier into a private carrier. Conformably, petitioner remains a
common carrier notwithstanding the existence of the charter agreement with the
Northern Mindanao Transport Company, Inc. since the said charter is limited to the
ship only and does not involve both the vessel and its crew. As elucidated inÂ
Planters Products, this charter is only a voyage-charter, not a bareboat charter. It is
only when the charter includes both the vessel and its crew, as in a bareboat or
demise that a common carrier becomes private, at least insofar as the particular
voyage covering the charter-party is concerned. Indubitably, a shipowner in a time
or voyage charter retains possession and control of the ship, although her holds
may, for the moment, be the property of the charterer. As a common carrier,
petitioner is required to observe extraordinary diligence in the vigilance over the
goods it transports. When the goods placed in its care are lost, petitioner is
presumed to have been at fault or to have acted negligently. Petitioner therefore
has the burden of proving that it observed extraordinary diligence in order to avoid
responsibility for the lost cargo. Article 1734 enumerates the instances when a
carrier might be exempt from liability for the loss of the goods. These are: (1)Â
Flood, storm, earthquake, lightning, or other natural disaster or calamity Petitioner
claims that the loss of the goods was due to a fortuitous event under paragraph 1.Â
Yet, its claim is not substantiated. On the contrary, there was evidence that the
loss of the entire shipment of cement was due to the gross negligence of
petitioner. Records show that in the evening of June 24, 1984, the sea and
weather conditions in the vicinity of Negros Occidental were calm. The records
reveal that petitioner took a shortcut route, instead of the usual route, which
exposed the voyage to unexpected hazard. Petitioner has only itself to blame for
its misjudgment.
ABOITIZ SHIPPING CORPORATION vs. NEW INDIA ASSURANCE COMPANY, LTD
G..R. No. 156978 May 2, 2006
FACTS:
Societe Francaise Des Colloides loaded a cargo of textiles and auxiliary chemicals
from France on board a vessel owned by Franco-Belgian Services, Inc. The cargo
was consigned to General Textile, Inc., in Manila and insured by respondent New
India Assurance Company, Ltd. While in Hong Kong, the cargo was transferred to
M/V P. Aboitiz for transshipment to Manila.
Before departing, the vessel was advised by the Japanese Meteorological Center
that it was safe to travel to its destination. But while at sea, the vessel received a
report of a typhoon moving within its general path. To avoid the typhoon, the
24
vessel changed its course. However, it was still at the fringe of the typhoon when
its hull leaked. On October 31, 1980, the vessel sank, but the captain and his crew
were saved.
Both the trial and the appellate courts found that the sinking was not due to the
typhoon but to its unseaworthiness.
ISSUE:
Whether the limited liability doctrine, which limits respondent’s award of damages
to its pro-rata share in the insurance proceeds, applies in this case.
HELD:
No. x x x An exception to the limited liability doctrine is when the damage is due to
the fault of the shipowner or to the concurrent negligence of the shipowner and
the captain. In which case, the shipowner shall be liable to the full-extent of the
damage.
xxx
In the present case, petitioner has the burden of showing that it exercised
extraordinary diligence in the transport of the goods it had on board in order to
invoke the limited liability doctrine. Differently put, to limit its liability to the
amount of the insurance proceeds, petitioner has the burden of proving that the
unseaworthiness of its vessel was not due to its fault or negligence. Considering the
evidence presented and the circumstances obtaining in this case, we find that
petitioner failed to discharge this burden. It initially attributed the sinking to the
typhoon and relied on the BMI findings that it was not at fault. However, both the
trial and the appellate courts, in this case, found that the sinking was not due to
the typhoon but to its unseaworthiness. Evidence on record showed that the
weather was moderate when the vessel sank. These factual findings of the Court of
Appeals, affirming those of the trial court are not to be disturbed on appeal, but
must be accorded great weight. These findings are conclusive not only on the
parties but on this Court as well.
Estacion vs. Bernardo| Austria-Martinez G.R. No. 144723, February 27, 2006 | 483
SCRA 222
FACTS • October 16, 1982, afternoon, Respondent Noe was going home to
Dumaguete from Cebu. He boarded a Ford Fiera jeepney driven by Geminiano
Quinquillera (Quinquillera) and owned by Cecilia Bandoquillo (Bandoquillo). • He
was seated on the extension seat at the center of the fiera. • From San Jose, an old
woman wanted to ride so Noe offered his seat and hung/stood on the left rear
carrier of the vehicle (sumabit) • The fiera slowed down and stopped to pick up
more passengers. • Suddenly, an Isuzu cargo truck owned by petitioner Estacion
and driven by Gerosano, which was travelling in the same direction, hit the rear
portion of the jeepney. • The fiera crushed Noe’s legs and feet, he was brought to
Siliman Univ Med Center where his lower left leg was amputated. • Police report
showed that there were 10 more who were injured by the accident. • Feb 18, 1993,
Now and his guardian ad litem Arlie Bernardo filed w the RTC of Dumaguete a
complaint for damages arising from quasi-delict against petitioner as owner of the
truck and his driver. • RTC ruled that Gerosano was negligent and it was the direct
and proximate cause of the incident. It also held petitioner liable as employer. • CA
affirmed in toto the RTC. •
ISSUES & ARGUMENTS • W/N Petitioner is liable? • W/N Noe was guilty of
contributory negligence?
HOLDING & RATIO DECIDENDI YES. • From the way the truck reacted to the
application of the brakes, it can be shown that Gerosano was driving at a fast speed
because the brakes skidded a lengthy 48 feet as shown in he sketch of the police. •
There was also only one tire mark which meant that the brakes of the truck were
not aligned properly, otherwise, there would have been 2 tire marks. • It is the
negligent act of petitioner’s driver of driving the cargo truck at a fast speed coupled
with faulty brakes which was the proximate cause of respondent Noe’s injury. • As
employer of Gerosano, petitioner is primarily and solidarily liable for the quasidelict
committed by the former. He is presumed to be negligent in the selection of his
employee which petitioner failed to overcome. • He failed to show that he
examined driver Gerosano as to his qualifications, experience and records.
YES. NOE IS GUILTY OF CONTRIBUTORY NEGLIGENCE BY STANDING AT THE REAR
PORTION OF THE JEEP. • Contributory Negligence is conduct on the part of the
injured party, contributing as a legal cause to the harm he has suffered, which falls
below the standard to which he is required to conform for his own protection. •
Noe’s act of standing on the left rear portion showed his lack of ordinary care and
foresight that such act could cause him harm or put his life in danger. • To hold a
person as having contributed to his injuries, it must be shown that he performed an
act that brought about his injuries in disregard of warning or signs of an impending
danger to health and body. • Quinquillera (jeepney driver) was also negligent
because there was overloading which is in violation of traffic rules and regulations.
25
He also allowed Noe to stand on the left rear of his jeep. • There is also a
presumption of negligence on the part of the owner of the jeep, Bandoquillo,
which she did not rebut. • 20-80 ratio distribution of damages.
ORLANDO VILLANUEVA, petitioner, vs.
HON. COURT OF APPEALS and LILIA CANALITA-VILLANUEVA, respondents.
This petition for review under Rule 45 of the Rules of Court assails the January 26,
1998 Decision1 of the Court of Appeals in CA-G.R. CV No. 51832, affirming with
modification the Decision2 dated January 12, 1996 of the Regional Trial Court of
Valenzuela, Metro Manila, Branch 172 in Civil Case No. 3997-V-92 (a) dismissing
petitioner's petition for the annulment of his marriage to private respondent and
(b) ordering him to pay moral and exemplary damages, attorney’s fees and costs.
Also assailed is the March 5, 1998 Resolution3 denying petitioner’s motion for
reconsideration.
The antecedent facts are as follows:
Petitioner Orlando Villanueva and private respondent Lilia Canalita-Villanueva got
married on April 13, 1988 in Puerto Princesa, Palawan. On November 17, 1992,
Orlando filed with the trial court a petition for annulment of his marriage alleging
that threats of violence and duress forced him into marrying Lilia, who was already
pregnant; that he did not get her pregnant prior to the marriage; that he never
cohabited with her after the marriage; and that he later learned that private
respondent's child died during delivery on August 29, 1988.4
In her answer with compulsory counterclaim,5 Lilia prayed for the dismissal of the
petition, arguing that petitioner freely and voluntarily married her; that petitioner
stayed with her in Palawan for almost a month after their marriage; that petitioner
wrote letters to her after he returned to Manila, during which private respondent
visited him personally; and that petitioner knew about the progress of her
pregnancy, which ended in their son being born prematurely. Private respondent
also prayed for the payment of moral and exemplary damages, attorney’s fees and
costs.
On January 12, 1996, the trial court rendered judgment the dispositive portion of
which states:
WHEREFORE, judgment is hereby rendered as follows:
1) Dismissing the above-entitled case; and
2) Ordering the plaintiff to pay the defendant moral damages in the amount of
P100,000.00, exemplary damages in the amount of P50,000.00, and attorney's fees
in the amount of P20,000.00, plus the costs of suit.
SO ORDERED.6
The Court of Appeals affirmed the trial court’s dismissal of the petition and the
award of attorney’s fees and costs, but reduced the award of moral and exemplary
damages to P50,000.00 and P25,000.00, respectively. The Court of Appeals denied
petitioner’s motion for reconsideration, hence, the instant petition for review
based on the following assigned errors:
I. THE RESPONDENT COURT OF APPEALS COMMITTED A GRAVE ABUSE OF
DISCRETION IN NOT GRANTING THE ANNULMENT OF MARRIAGE THE CONSENT OF
THE PETITIONER HAVING BEEN OBTAINED BY FRAUD, INTIMIDATION AND UNDUE
AND IMPROPER PRESSURE AND INFLUENCE PLUS THE FACT THAT THERE WAS NO
COHABITATION WHATSOEVER BETWEEN PETITIONER AND PRIVATE RESPONDENT.
II. THE RESPONDENT COURT OF APPEALS COMMITTED GROSS ERROR IN
AWARDING MORAL AND EXEMPLARY DAMAGES AS WELL AS ATTORNEY'S FEES,
SAID AWARDS NOT BEING THOSE ALLOWED BY LAW.7
The issues for resolution are (a) whether the subject marriage may be annulled on
the ground of vitiated consent; and (b) whether petitioner should be liable for
moral and exemplary damages as well as attorney’s fees and costs.
Th petition is partly granted.
Factual findings of the Court of Appeals, especially if they coincide with those of
the trial court, as in the instant case, are generally binding on this Court.8 We
affirm the findings of the Court of Appeals that petitioner freely and voluntarily
married private respondent and that no threats or intimidation, duress or violence
compelled him to do so, thus –
To begin with, We are at once disturbed by the circumstance that despite the
alleged coerced consent which supposedly characterized his marriage with Lilia on
April 13, 1988, it was only on November 17, 1992 or after a span of not less than
26
four (4) years and eight (8) months when Orlando took serious step to have the
same marriage annulled. Unexplained, the prolonged inaction evidently finds basis
in Lilia’s allegation that this annulment suit was filed by Orlando solely in the hope
that a favorable judgment thereon would bolster his defense, if not altogether
bring about his acquittal in the criminal case for bigamy which was then already
pending against him. Unfortunately, however, let alone the fact that the criminal
case was admittedly decided ahead with a judgment of conviction against Orlando
x x x even the very outcome of the present case disappointed his expectation. At
this late, with his appeal in the bigamy case still pending with this Court x x x
Orlando must be hoping against hope that with a decree of annulment ensuing
from this Court, he may yet secure an acquittal in the same bigamy charge. Viewed
in this perspective, the instant appeal is, therefore, understandable.
But even in terms of merit, the recourse must have to fall.
Appellant anchored his prayer for the annulment of his marriage on the ground
that he did not freely consent to be married to the appellee. He cited several
incidents that created on his mind a reasonable and well-grounded fear of an
imminent and grave danger to his life and safety, to wit: the harassing phone calls
from the appellee and strangers as well as the unwanted visits by three men at the
premises of the University of the East after his classes thereat, and the threatening
presence of a certain Ka Celso, a supposed member of the New People’s Army
whom appellant claimed to have been hired by appellee and who accompanied
him in going to her home province of Palawan to marry her.
The Court is not convinced that appellant’s apprehension of danger to his person is
so overwhelming as to deprive him of the will to enter voluntarily to a contract of
marriage. It is not disputed that at the time he was allegedly being harassed,
appellant worked as a security guard in a bank. Given his employment at that time,
it is reasonable to assume that appellant knew the rudiments of self-defense, or, at
the very least, the proper way to keep himself out of harm’s way. For sure, it is
even doubtful if threats were indeed made to bear upon appellant, what with the
fact that he never sought the assistance of the security personnel of his school nor
the police regarding the activities of those who were threatening him. And neither
did he inform the judge about his predicament prior to solemnizing their marriage.
Appellant also invoked fraud to annul his marriage, as he was made to believe by
appellee that the latter was pregnant with his child when they were married.
Appellant’s excuse that he could not have impregnated the appellee because he
did not have an erection during their tryst is flimsy at best, and an outright lie at
worst. The complaint is bereft of any reference to his inability to copulate with the
appellee. His counsel also conceded before the lower court that his client had a
sexual relationship with the appellee x x x. He also narrated x x x that sometime in
January 1988, he and the appellee went to a hotel where "the sexual act was
consummated, with the defendant on top" x x x.
Instead of providing proofs that he was tricked into marrying his wife, appellant
resorted to undermining the credibility of the latter by citing her testimony that her
child was born, and died, on August 29, 1989, a year off from August 29, 1988, the
date of fetal death as appearing in the registry of deaths of the Office of the Civil
Registrar of Puerto Princesa City x x x.
To Our mind, appellant cannot make capital of the lapse because it is
inconsequential, as there is no controversy regarding the date of death of
appellee’s fetus. Nevertheless, during the continuation of the cross-examination of
the appellee, she declared that her child was prematurely born on August 29, 1988,
matching the date in the certification of the Civil Registrar x x x. The Court is not
prepared to disbelieve the appellee and throw overboard her entire testimony
simply on account of her confusion as to the exact date of the death of the fetus,
especially when she herself had presented documentary evidence that put August
29, 1988 as the date her fetus died.
Appellant’s propensity to rely on his perceived weakness of the appellee’s evidence
continues in his argument that if indeed there is truth to her claim that she was
impregnated sometime in December 1987, then she could not have a premature
delivery on August 29, 1988, as she had testified during the trial, because the 35-
week period of pregnancy is complete by that time. Whether the appellee’s
impression that she had delivered prematurely is correct or not will not affect the
fact that she had delivered a fetus on August 29, 1988. In the light of appellant’s
admission that he had a sexual intercourse with his wife in January 1988, and his
failure to attribute the latter’s pregnancy to any other man, appellant cannot
complain that he was deceived by the appellee into marrying her.
Appellant also puts in issue the lower court’s appreciation of the letters allegedly
written by him to the appellee. During his cross-examination, when confronted
with thirteen (13) letters, appellant identified the seven (7) letters that he sent to
the appellee, but denied the remaining six (6) x x x. The letters admitted by the
appellant contained expressions of love and concern for his wife, and hardly the
rantings of a man under duress. During the re-direct examination, however,
appellant suddenly changed mind and denied authorship of those seven (7) letters,
claiming that he was forced to admit them because he was threatened with harm
by the appellee. If he was laboring under duress when he made the admission,
where did he find the temerity to deny his involvement with the remaining six (6)
27
letters? The recantation can only be motivated by a hindsight realization by the
appellant of the evidentiary weight of those letters against his case.
As to the second assignment of error, appellant cannot claim that his marriage
should be annulled due to the absence of cohabitation between him and his wife.
Lack of cohabitation is, per se, not a ground to annul a marriage. Otherwise, the
validity of a marriage will depend upon the will of the spouses who can terminate
the marital union by refusing to cohabitate. The failure to cohabit becomes
relevant only if it arises as a result of the perpetration of any of the grounds for
annulling the marriage, such as lack of parental consent, insanity, fraud,
intimidation, or undue influence x x x. Since the appellant failed to justify his failure
to cohabit with the appellee on any of those grounds, the validity of his marriage
must be upheld.9
We also agree that private respondent is entitled to attorney’s fees. Article 2208
(11) of the Civil Code provides that attorney’s may be awarded where the court
deems it just and equitable under the circumstances, as in the instant case.
We, however, delete the award of moral and exemplary damages for lack of factual
and legal basis. There is nothing in the records or in the appealed decision that
would support an award of moral damages. In justifying the award, the Court of
Appeals merely said thus:
It is not difficult to imagine the suffering of the appellee from the baseless
portrayal of her by the appellant as the perpetrator of fraudulent schemes to trap
an unwilling mate. x x x10
However, the aforesaid finding is only a supposition as it has no reference to any
testimony of private respondent detailing her alleged physical suffering, mental
anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral
shock, social humiliation, and similar injury as would entitle her to moral damages.
In Mahinay v. Velasquez, Jr.,11 we held that:
In order that moral damages may be awarded, there must be pleading and proof of
moral suffering, mental anguish, fright and the like. While respondent alleged in his
complaint that he suffered mental anguish, serious anxiety, wounded feelings and
moral shock, he failed to prove them during the trial. Indeed, respondent should
have taken the witness stand and should have testified on the mental anguish,
serious anxiety, wounded feelings and other emotional and mental suffering he
purportedly suffered to sustain his claim for moral damages. Mere allegations do
not suffice; they must be substantiated by clear and convincing proof. No other
person could have proven such damages except the respondent himself as they
were extremely personal to him.
As private respondent is not entitled to moral damages, a fortiori, she is not
entitled to exemplary damages. This is clear in Article 2234 of the Civil Code, which
provides:
ART. 2234. While the amount of the exemplary damages need not be proved, the
plaintiff must show that he is entitled to moral, temperate or compensatory
damages before the court may consider the question of whether or not exemplary
damages should be awarded. In case liquidated damages have been agreed upon,
although no proof of loss is necessary in order that such liquidated damages may
be recovered, nevertheless, before the court may consider the question of granting
exemplary in addition to the liquidated damages, the plaintiff must show that he
would be entitled to moral, temperate or compensatory damages were it not for
the stipulation for liquidated damages.
Hence, exemplary damages is allowed only in addition to moral damages such that
no exemplary damages can be awarded unless the claimant first establishes his
clear right to moral damages.12 In the instant case, private respondent failed to
satisfactorily establish her claim for moral damages, thus she is not likewise
entitled to exemplary damages.
WHEREFORE, the petition is PARTLY GRANTED. The January 26, 1998 Decision of
the Court of Appeals in CA-G.R. CV No. 51832 affirming with modification the
January 12, 1996 Decision of the Regional Trial Court of Valenzuela, Metro Manila,
Branch 172 in Civil Case No. 3997-V-92 dismissing petitioner’s petition for the
annulment of his marriage with private respondent, is AFFIRMED. However, the
award of moral and exemplary damages is DELETED for lack of basis.
SO ORDERED.
Diaz Vs. CA
In this petition for certiorari under Rule 65 of the Rules of Court, petitioner imputes
grave abuse of discretion to the Court of Appeals vis-a-vis its May 30, 2001
decision[2] in CA-G.R. CV No. 67017, the dispositive portion of which read:
28
WHEREFORE, premises considered, the present appeal is hereby DISMISSED for
lack of merit. The Decision (Judgment) dated October 29, 1999 of the Regional Trial
Court of Malaybalay City, Bukidnon, Branch 10 in Civil Case No. 2586-95 is hereby
AFFIRMED and REITERATED.[3]
The issues raised by petitioner are:
The facts follow.

Petitioner Agapita Diaz operated a common carrier, a Tamaraw FX taxi plying the
route of Cagayan de Oro City to any point in Region 10. On July 20, 1996, 1) whether or not the Court of Appeals committed grave abuse of discretion
petitioners taxi, driven by one Arman Retes, was moving at an excessive speed in affirming the trial courts decision denying petitioners motion for leave to present
when it rammed into the rear portion of a Hino cargo truck owned by private evidence on her defense and third-party complaint, and
respondent Teodoro Lantoria and driven by private respondent Rogelio Francisco.
As a result, nine passengers of the taxi died including Sherly Moneo. 2) whether or not the Court of Appeals committed grave abuse of discretion
in affirming the trial courts decision holding petitioner liable for breach of contract.
On August 13, 1996, the heirs of Sherly Moneo[4] filed with the Regional Trial Court
of Malaybalay City, Branch 10,[5] an action for breach of contract of carriage and The petition lacks merit.
damages[6] against petitioner and her driver, Arman Retes.
First, Section 3, Rule 18 of the Rules of Court states that:
On motion,[7] petitioner filed a third-party complaint against private respondents
Teodorio Lantoria and Rogelio Francisco.[8]

The pre-trial conference was initially set on July 11, 1998 but was reset to July 30, The notice of pre-trial shall be served on counsel, or on the party who has no
1998 for petitioner and her counsels failure to appear[9] despite due notice. counsel. The counsel served with such notice is charged with the duty of notifying
Registry receipt number 04364[10] showed that notice had been sent to the party represented by him.
petitioners counsel, Atty. Cipriano Lupeba.[11] On scheduled date, petitioner and
Petitioner was represented by Atty. Cipriano Lupeba to whom the notice was
her counsel again failed to appear, prompting the court to allow private
sent.[18] It was incumbent on the latter to advise petitioner accordingly. His failure
respondents to present evidence ex parte
to do so constituted negligence which bound petitioner.
More than seven nths after the conclusion[12] of private respondents ex parte
Further, Sections 4 and 5 of Rule 18 read:
presentation of evidence, petitioner filed a motion for leave to present evidence on
her defense and third-party complaint.[13] The trial court denied this.[14]
Sec. 4. Appearance of Parties. It shall be the duty of the parties and their counsel to
appear at the pre-trial. The non-appearance of the party may be excused only if a
On October 29, 1999, the trial court rendered a decision holding petitioner and
valid cause is shown therefore or if a representative shall appear in his behalf fully
Arman Retes jointly and severally liable to pay private respondent heirs of Sherly
authorized in writing to enter into an amicable settlement, to submit to alternative
Moneo P50,000 for her death, P50,000 as moral damages, P20,000 as exemplary
modes of dispute resolution, and to enter into stipulations or admissions of facts
damages and P20,000 as attorneys fees.[1
and of documents.
On appeal, the trial courts decision was affirmed by the Court of Appeals in the
assailed May 30, 2001 decision.[16] The motion for reconsideration was
denied.[17] Hence, this recourse.

29
Sec. 5. Effect of failure to appear. The failure of the plaintiff to appear when so
required pursuant to the next preceding section shall be cause for the dismissal of
the action. The dismissal shall be with prejudice, unless otherwise ordered by the
court. A similar failure on the defendant shall be cause to allow the plaintiff to
present his evidence ex parte and the court to render judgment on the basis
thereof.
Consequently, it was no error for the trial court to allow private respondents to
present their evidence ex parte when petitioner and her counsel failed to appear
for the scheduled pre-trial conference.
Second, a common carrier is bound to carry the passengers safely as far as human
care and foresight can provide, using the utmost diligence of very cautious persons,
with a due regard for all the circumstances.[19]
In a contract of carriage, it is presumed that the common carrier is at fault or is
negligent when a passenger dies or is injured. 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.[20]
In the case at bar, petitioner, as common carrier, failed to establish sufficient
evidence to rebut the presumption of negligence. The findings of the trial court, as
affirmed by the Court of Appeals, showed that the accident which led to the death
of Sherly Moneo was caused by the reckless speed and gross negligence of
petitioners driver who demonstrated no regard for the safety of his passengers.[21]
It was thus correct to hold petitioner guilty of breach of the contract of carriage.
WHEREFORE, this petition is hereby DISMISSED.
Costs against petitioner.
SO ORDERED.
Delsan Transport v. American Home
FACTS:
• Carrier – Delsan Transport Lines Inc.
• Shipper – Caltex Philippines
• Insurer – American Home Assurance Corporation
• Delsan Transport was hired by Caltex to transport its cargo of diesel oil
from Bataan Refinery Corporation to the bulk depot in Bacolod City through a
Contract of Affreightment. Upon the arrival of MT Larusan which carried the cargo
in its destination, unloading operations commenced. Thereafter the discharging
had to be stopped on account of the discovery that the port bow mooring of the
vessel was intentionally cut or stolen by unknown persons. Because there was
nothing holding it, the vessel drifted westward, dragged and stretched the flexible
rubber hose attached to the riser, broke the elbow into pieces, severed completely
the rubber hose connected to the tanker from the main delivery line at sea bed
level and ultimately caused the diesel oil to spill into the sea. Unaware of what
happened, the shore tender, thinking that the vessel would, at any time, resume
pumping, did not shut the storage tank gate valve. As all the gate valves remained
open, the diesel oil that was earlier discharged from the vessel into the shore tank
backflowed. In short, there was spillage and backflow of the diesel cargo. As a
result of spillage and backflow of diesel oil, Caltex sought recovery of the loss from
Delsan, but the latter refused to pay. As insurer, AHAC paid Caltex the sum of
P479,262.57 for spillage, pursuant to Marine Risk Note No. 34-5093-6, and
P1,939,575.37 for backflow of the diesel oil pursuant to Inland Floater Policy No.
AH-1F64-1011549P. AHiAC as subrogee asked Delsan to compensate it for the
amount paid, but to no avail, AHAc instituted an action against Delsan.
• RTC – ruled in favor of AHAC nad held Delsan liable for the loss of the
cargo due to its negligence as a common carrier
• CA – affirmed RTC - Delsan failed to exercise the extraordinary diligence
of a good father of a family in the handling of its cargo. Applying Article 1736[4] of
the Civil Code, the CA ruled that since the discharging of the diesel oil into Caltex
bulk depot had not been completed at the time the losses occurred, there was no
reason to imply that there was actual delivery of the cargo to Caltex, the consignee
ISSUE:
W/N petitioner should be held liable for both spillage and backflow that caused the
loss of the cargo.
30
HELD:
YES. Common carriers are bound to observe extraordinary diligence in
the vigilance over the goods transported by them. They are presumed to have been
at fault or to have acted negligently if the goods are lost, destroyed or
deteriorated.[6] To overcome the presumption of negligence in case of loss,
destruction or deterioration of the goods, the common carrier must prove that it
exercised extraordinary diligence. There are, however, exceptions to this rule found
in Article 1734 of the NCC.
In the case at bar, it had been established that the proximate cause of
the spillage and backflow of the diesel oil was due to the severance of the port bow
mooring line of the vessel and the failure of the shore tender to close the storage
tank gate valve even as a check on the drain cock showed that there was still a
product on the pipeline. The crew of the vessel should have promptly informed the
shore tender that the port mooring line was cut off. However, Delsan did not do so
on the lame excuse that there was no available banca. The crew of the vessel
should have exerted utmost effort to immediately inform the shore tender that the
port bow mooring line was severed.
To be sure, Delsan, as the owner of the vessel, was obliged to prove that the
loss was caused by one of the excepted causes if it were to seek exemption from
responsibility.[7] Unfortunately, it miserably failed to discharge this burden by the
required quantum of proof.
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.[8]
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.
Hence, having not overturned the presumption of negligence, it is but
right and proper to held petitioner liable for the loss of the cargo.
Prudential Guarantee Assurance Inc. vs. Trans Asia Shipping Lines
Facts:
Trans Asia is the owner of the vessel M/V Asia Korea. Prudential Guarantee and
Assurance Inc. insured said vessel for loss/damage of the hull and machinery arising
from perils of fire and explosion beginning from the period of July 1, 1993 until July
1, 1994. While the policy was in force, a fire broke out. Trans Asia file its notice of
claim for damages sustained by the vessel. It also reserved its right to subsequently
notify Prudential as to the full amount of the claim upon final survey and
determination by the average adjuster Richard Hogg International of the damage
sustained by the reason of fire. Trans Asia executed a document denominated
"Loan and Trust Receipt" amounting to Php 3,000,000. Prudential Guarantee and
Assurance Inc. denied the former's claim and requested for the return of the said
amount. The insurance company contends that there was a breach in the policy
conditions, specifically, "Warranted Vessel Classed and Class Maintained".
The trial court held that Trans Asia failed to prove its compliance with the terms of
the warranty. It further explained that the concealment made by Trans Asia is
sufficient to avoid the policy. Prudential, as the injured party, is entitled to rescind
to rescind the contract. The trial court dismissed the complaint and directed Trans
Asia to return the "loan" extended by Prudential.
The Court of Appeals reversed the decision of the trial court. It contends that
Prudential had the burden to show that there was a breach in the warranty and
which it failed to do so. The Court considered Prudential's admission that, at the
time the insurance contract was entered into, the vessel was properly classed by
the Bureau Veritas, a classification recignized by the industry. It further contends
that then subject warranty was in a form of a rider, hence, such contract should be
counstrued against Prudential. Finally, it interpreted the transaction between the
parties as one of subrogation, instead of a loan. Thus, the amount given to Trans
Asia was considered to be a partial payment to its claim under the policy.
Issue/s:
1.) WON there was a breach in the warranty of the contract.
31
2.) WON such contract partakes the nature of a loan.
Held:
The Supreme Court held that:
1.) Prudential failed to establish that Trans Asia had violated and breached the
policy condition provided in the insurance contract. The latter was able to establish
proof of loss and coverage of the loss. Prudential also made a categorical admission
at the time of the procurement of the insurance contract that the vessel was
properly classified by the Bureau Veritas.
Assuming that there was a breach in the policy, the renewal of the insurance policy
for two consecutive years after the loss is deemed as a waiver on the part of
Prudential. Breach of a warranty or of a condition renders the contract defeasible
at the option of the insurer; but if he so elects, he may waive his privilege and
power to rescind by the mere expression of an intention so to do.
2.) the amount granted by Prudential to Trans Asia, evidenced by a document
denominated as a "Loan and Trust Receipt", constitued partial payment on the
policy. Under said agreement, Prudential is obligated to hand over to Trans Asia
"whatever recovery the latter may make" and the latter to deliver to the former
"all document necessary to prove its interest in the said property." Prudential was
given the right of subrogation to whatever net recovery Trans Asia may obtain from
third parties resulting from the fire.
PETITION DENIED.
CARGOLIFT SHIPPING, INC. vs. L. ACUARIO MARKETING CORP. and SKYLAND
BROKERAGE, INC
G.R. No. 146426. June 27, 2006
FACTS:
Respondent L. Acuario Marketing Corp., ("Acuario") and respondent Skyland
Brokerage, Inc., ("Skyland") entered into a time charter agreement whereby
Acuario leased to Skyland its L. Acuario II barge for use by the latter in transporting
electrical posts from Manila to Limay, Bataan. At the same time, Skyland also
entered into a separate contract with petitioner Cargolift, for the latter’s tugboats
to tow the aforesaid barge.
After the whole operation was concluded, the barge was brought to Acuario’s
shipyard where it was allegedly discovered by that the barge was listing due to a
leak in its hull. It was informed by the skipper of the tugboat that the damage was
sustained in Bataan. It was learned later the due to strong winds and large waves,
the barge repeatedly hit its hull on the wall, thus prompting the barge patron to
alert the tugboat captain of the M/T Count to tow the barge farther out to sea.
However, the tugboat failed to pull the barge to a safer distance due to engine
malfunction, thereby causing the barge to sustain a hole in its hull.
Acuario spent the total sum of P97,021.20 for the repairs, and, pursuant to the
contract, sought reimbursement from Skyland, failing which, it filed a suit before
the RTC which was granted. On appeal, it was affirmed by the CA. Skyland, in turn,
filed a third-party complaint against petitioner alleging that it was responsible for
the damage sustained by the barge.
ISSUE:
Whether or not petitioner should be held liable.
HELD:
Yes.
Thus, in the performance of its contractual obligation to Skyland, petitioner was
required to observe the due diligence of a good father of the family. This much was
held in the old but still relevant case of Baer Senior & Co.’s Successors v. La
Compania Maritima where the Court explained that a tug and its owners must
observe ordinary diligence in the performance of its obligation under a contract of
towage. The negligence of the obligor in the performance of the obligation renders
him liable for damages for the resulting loss suffered by the obligee. Fault or
negligence of the obligor consists in his failure to exercise due care and prudence in
the performance of the obligation as the nature of the obligation so demands.
In the case at bar, the exercise of ordinary prudence by petitioner means ensuring
that its tugboat is free of mechanical problems. While adverse weather has always
been a real threat to maritime commerce, the least that petitioner could have done
was to ensure that the M/T Count or any of its other tugboats would be able to
secure the barge at all times during the engagement. This is especially true when
considered with the fact that Acuario’s barge was wholly dependent upon
32
petitioner’s tugboat for propulsion. The barge was not equipped with any engine
and needed a tugboat for maneuvering.
Needless to say, if petitioner only subjected the M/T Count to a more rigid check-
up or inspection, the engine malfunction could have been discovered or avoided.
The M/T Count was exclusively controlled by petitioner and the latter had the duty
to see to it that the tugboat was in good running condition. There is simply no basis
for petitioner’s assertion that Skyland contractually assumed the risk of any engine
trouble that the tugboat may encounter. Skyland merely procured petitioner’s
towing service but in no way assumed any such risk.
EASTERN SHIPPING LINES, INC., Petitioner, v. N.V. THE NETHERLANDS INSURANCE
COMPANY, Respondent.
Assailed via Petition for Review are the Decision dated September 7, 20001 and
Resolution dated December 8, 20002 of the Court of Appeals in CA-G.R. CV No.
44784, N.V. The Netherlands Insurance Company v. Eastern Shipping Lines, Inc.
On July 4, 1985, Sunglobe International Corporation shipped five cases containing a
total of 5,000 pieces of pre-sensitized printing plates from Yokohama, Japan on
board the vessel M/S Eastern Venus, owned and operated by herein petitioner
Eastern Shipping Lines, Inc. The shipment, covered by Bill of Lading No. YMA-14,3
was bound for Manila for delivery to the consignee, Liwayway Publishing, Inc.
The shipment was insured for P398,118 by respondent N.V. Netherlands Insurance
Company under Marine Risk Insurance Note No. 21.01940.01−P.4
The shipment arrived in Manila on July 20, 19855 and was unloaded from the
vessel to the custody of arrastre operator Metro Port Services, Inc. (Metro Port)
from July 21 to July 22, 1985. Three of the five cases, Cases Nos. 1, 2, and 4 were
accepted by Metro Port in good order condition on account of which two Good
Order Cargo Receipts were accomplished and signed by the representative of the
vessel and that of Metroport.
As Cases Nos. 3 and 5 were found to be in bad order, Bad Order Cargo Receipt No.
10226 dated July 21, 19856 covering Case No. 3 and Bad Order Cargo Receipt No.
10227 dated July 22, 19857 covering Case No. 5 were accomplished and duly
signed also by the representative of the vessel and that of Metro Port.
On July 23, 1985, Metro Port issued two "Turn Over Survey of Bad Order Cargoes"8
which were signed by a representative of the vessel and a representative of Metro
Port covering Cases Nos. 3 and 5.
Before Cases Nos. 3 and 5 were formally turned over from the vessel to Metro Port
or on July 23, 1985, a surveyor engaged by petitioner, R & R Industrial Surveyors,
Co., Inc. (R & R Surveyors), inspected the cargoes covering said cases, following
which it issued on even date two documents denominated as "BAD ORDER CARGO
INSPECTED ON BOARD PRIOR TO DISCHARGE/AFTER LEAVING SHIP'S TACKLE"
which were signed by its representative and that of Metro Port. In the first
document covering Case No. 3, R & R Surveyors found its wooden case to be
"broken on sides," albeit the packages inside were "ok," while in the second
document covering Case No. 5, it found its wooden case to be "badly broken," but
the packages inside were "ok."
After the entire shipment was withdrawn from the pier and delivered to the
consignee's warehouse9 on July 26, 1985, the consignee engaged the services of
another surveyor, Audemus Adjustment Corporation, to inspect the shipment. The
consignee was later to claim, by letter of August 30, 1985 addressed to petitioner,
damages "for total loss" in the amount of P41,065.88 sustained by Case No. 4.10
The letter read:
xxx
Please be informed that as per survey report of Audemus Adjustment Corporation,
two (2) wooden cases out of the subject shipment arrived in bad order condition.
[H]owever, from damaged case No. 4, Fourteen (14) packages were torn on sides,
contents partly exposed. The entire 15 packages each containing 30 pieces printing
plates are not usable for the purpose intended, hence we are declaring our claim
for total loss.
Per commercial invoice, packing list, certificate of weight and measurement,
marine risk note, B.O. turnover Nos. 58744 and 58755 [sic]11 and Bad Order Survey
No. 31166 and B/L No. YMA-14:
_____________________________________________________
14 cartons each of 30 pieces = 420 pcs. "ALMAX"
33
Nega, AAN 621x915x.30mm @ US$3.62 = Insurance Premium

US$ 1,520.40 4,522.98

@ exchange rate P18.68= Brokerage

P28,401.07 3,078.73

Add: Proportionate share on: Doc. Stamp

Customs duty 487.50

P89,007.00 P142,025.21

$1,520.40 x P142,025 =

Compensating tax $17,050.00 12,664.81

44,679.00 Our Claim - - - - - - - - - - -

Import fee P41,065.88

250.00 x x x x (Emphasis and underscoring supplied)cralawlibrary

34

Petitioner denied the consignee's claim by letter of September 30, 198512 as the
cargo claimed to have been damaged was, per its records of discharge, intact and
in good condition.
Meanwhile, respondent issued a check in favor of the consignee in the amount of
P35,501.38 representing "full and final settlement of the marine cargo claim"
covered by the Marine Risk Insurance Note.13 The consignee thus issued to
respondent a Letter of Subrogation ceding its right to the refund of P35,501.38.14
Respondent failed to get petitioner to settle the said amount, however, hence, it
filed on July 11, 1986 a Complaint for sum of money15 before the RTC of Makati,
docketed as Civil Case No. 14309.
Resolving in the negative the issues of 1) whether Case No. 4 sustained damage
while under the custody and control of petitioner, and 2) whether petitioner is
liable for the payment of the amount of P31,501.38 claimed by respondent,16 the
trial court, by Judgment dated October 15, 1993,17 dismissed respondent's
complaint.
On appeal by respondent, the appellate court, by the assailed Decision of
September 7, 2000,18 reversed the trial court's decision in light of the following
observations:
In this case, there is no proof adduced to show that the carrier had indeed
exercised the foresight required by law. Instead, defendant Eastern sought to
escape liability on the defense that the damages attending the shipment occurred,
or were discovered, when the same were already discharged from the vessel and
were already in the custody of the consignee.
A review of the evidence presented shows, however, that contrary to the
defendant's[-herein petitioner's] claim, the two (2) cases of pre-sensitized plates
were damaged while they were under the responsibility of the carrier, and were
reported in bad order at the time they were discharged.
Upon leaving the vessel's tackle, prior to discharging the consignee's property, two
cases containing the imported plates were reported to be in bad order by R and R
Industrial Surveyors Inc., the cargo surveyors employed by defendant Eastern.
(Exhibits "9" and "10") One of the cases were reported as "broken at one side"
while the other was "badly broken." It must be remarked that the cargo inside the
broken cases consisted of pre-sensitized plates used for printing purposes. They are
light sensitive, such that any unwanted exposure to light will render them
unsuitable for further use. The slightest damage to their cases would necessarily
result in their damage.
Apart from this, the arrastre operator Metroport Services, Inc. reported that two
cases of the subject shipment "were discharged in bad order from the vessel and
loss or damage arising therefrom is the vessel's responsibility." (Exhibit "F")19
(Underscoring supplied)cralawlibrary
Accordingly, the appellate court disposed as follows:
WHEREFORE, premises considered, the instant appeal from the Judgment of the
Regional Trial Court is hereby GRANTED. The defendant-appellee Eastern Shipping
Lines is hereby ORDERED to pay the plaintiff N.V. The Netherlands Insurance
Company; (a) the sum of P35,501.38 with legal interest at the rate of 6% per year
counted from the date of entry of the Court's judgment; and (b) the sum equivalent
of 25% of the principal award abovesaid as attorney's fees.20 (Underscoring
supplied)cralawlibrary
By Resolution of December 8, 2000,21 the appellate court denied petitioner's
Motion for Reconsideration, hence, the present petition which posits that:
35
I

THE TRIAL COURT'S D E C I S I O N HAS SOUND FACTUAL AND LEGAL BASES.
II
THE COURT OF APPEALS INCORRECTLY APPLIED THE STATUTORY PRESUMPTION OF
NEGLIGENCE TO THE PRESENT CASE.22
Further, petitioner points out that the survey conducted by the consignee's
designated surveyor Audemus Adjustment Corporation, which found the contents
of Case No. 4 to be damaged, was done only on July 26, 1985 and at the
consignee's warehouse.25
In its Comment,26 respondent alleges that the reports of petitioner's surveyor, R &
R Surveyors, show that the damage was found while the shipment was "on board
prior to discharge/after leaving ship's tackle,"27

While in a Petition for Review before this Court, only questions of law may be To enlighten this Court whether the fault lies on petitioner, a consideration of the
raised, there are instances when factual findings of the Court of Appeals may be cargo receipts issued by petitioner, the turnover of survey of bad cargoes issued by
reviewed. Thus in Insular Life Assurance Company, Ltd v. Court of Appeals, this arrastre operator Metro Port, and bad order cargo inspection report of petitioner-
Court stressed: engaged R & R Surveyors, as reflected in the following tabulation, is in order:

It is a settled rule that in the exercise of the Supreme Court's power of review, the Case Number
Court is not a trier of facts and does not normally undertake the re-examination of
the evidence presented by the contending parties during the trial of the case
Issued by Eastern Shipping Lines
considering that the findings of facts of the C[ourt of] A[ppeals] are conclusive and
binding on the Court. However, the Court had recognized several exceptions to this
rule, to wit: (1) when the findings are grounded entirely on speculation, surmises or
conjectures; (2) when the inference made is manifestly mistaken, absurd or
impossible; (3) when there is grave abuse of discretion; (4) when the judgment is Issued by Metro Port
based on a misapprehension of facts; (5) when the findings of facts are conflicting;
(6) when in making its findings the Court of Appeals went beyond the issues of the
case, or its findings are contrary to the admissions of both the appellant and the
appellee; (7) when the findings are contrary to the trial court; (8) when the findings Issued by R & R Surveyors
are conclusions without citation of specific evidence on which they are based; (9)
when the facts set forth in the petition as well as in the petitioner's main and reply
briefs are not disputed by the respondent; (10) when the findings of fact are
premised on the supposed absence of evidence and contradicted by the evidence Case No. 1
on record; and (11)when the Court of Appeals manifestly overlooked certain
relevant facts not disputed by the parties, which, if properly considered, would Good Order Cargo Receipt No. 152795 dated July 21, 1985 (Exh. "5")
justify a different conclusion. x x x23 (Emphasis supplied; italics in the original.)
Case No. 2

Petitioner draws attention to the consignee's demand letter to it which was earlier
quoted, it pointing out that the documents therein mentioned referred to Cases
Good Order Cargo Receipt No. 152795 dated July 21, 1985 (Exh. "5")28
Nos. 3 and 5, not to Case No. 424 the damage to which is the subject of the present
claim.

36

Case No. 3
Bad Order Cargo Receipt No. 10226 dated July 21, 1985 (Exh. "7")
Turnover of Survey of Bad Cargoes Receipt No. 58744 dated July 23, 1985 (Exh. "4")
Bad Order Cargo Inspected on Board Prior to Discharge/ After Leaving Ship's Tackle
dated July 23, 1985 (Exh. "9")
Case No. 4
Good Order Cargo Receipt No. 152999 dated July 22, 1985 (Exh. "6")
Case No. 5
Bad Order Cargo Receipt No. 10227 dated July 22, 1985 (Exh. "8")
Turnover of Survey of Bad Cargoes Receipt No. 58745 dated July 23, 1985 (Exh. "3")
Bad Order Cargo Inspected on Board Prior to Discharge/ After Leaving Ship's Tackle
dated July 23, 1985 (Exh. "10")
From the above tabulation, Case No. 4 was found by petitioner to be in good order.
Respondent would want this Court to believe, however, that all the Cases, including
Case No. 4, were inspected on board prior to discharge/ after leaving the ship's
tackle. In support of respondent's position, it cites Exhibits "9" and "10"29 issued
by R & R Surveyors whose services, it bears repeating, were engaged by petitioner.
From the above tabulation, however, it appears that Exhs. "9" and "10" refer to the
inspection made by the said surveyor firm on Case Nos. 3 and 5. Obviously, there
was no need to re-examine or resurvey Cases Nos. 1, 2 and 4, they appearing to
have been unqualifiedly accepted by arrastre operator Metro Port, hence, the
absence of any comment/information thereon, as the above tabulation reflects.
If Case No. 4 was also inspected and found to be in bad order, would not R & R
Surveyors have made a written memorandum thereof? And if R & R Surveyors
failed to put in writing any such findings, would not the representative of Metro
Port have demanded from it the issuance of a Bad Order Cargo Inspected on Board
Prior to Discharge/After Leaving Ship's Tackle similar to Exhibits "9" and
"10"?cralawlibrary
Respondent demurs to the applicability to the case at bar of this Court's ruling in
Summa Insurance Corporation v. CA30 and in Hartford Fire Insurance Co. v. E.
Razon, Inc.31 cited by petitioner.
In Summa Insurance, the shipment was discharged from the ship to the custody of
the arrastre operator Metro Port. Three good order cargo receipts were issued by
the ship owner which were signed by its checker and the representative of the
arrastre operator. When the shipment arrived and was inspected at the warehouse
of the consignee, a bundle-part of the shipment was missing. The arrastre operator
37
thereupon issued a shortlanded certificate stating that the bundle was already
missing when it received the shipment from the ship.
Relying more on the good order cargo receipts issued by the ship owner than on
the short-landed certificate issued by the arrastre operator, the trial court, still in
Summa Insurance, held:
As between the aforementioned two documentary exhibits, the Court is more
inclined to give credence to the cargo receipts. Said cargo receipts were signed by a
checker of defendant NGSC and a representative of Metro Port. It is safe to
presume that the cargo receipts accurately describe the quantity and condition of
the shipment when it was discharged from the vessel. Metro Port's representative
would not have signed the cargo receipts if only four (4) packages were discharged
from the vessel and given to the possession and custody of the arrastre operator.
Having been signed by its representative, the Metro Port is bound by the contents
of the cargo receipts.
On the other hand, the Metro Port's shortlanded certificate could not be given
weight considering that, as correctly argued by counsel for defendant NGSC, it was
issued by Metro Port alone and was not countersigned by the representatives of
the shipping company and the consignee. Besides, the certificate was prepared by
Atty. Servillano V. Dolina, Second Deputy General Manager of Metro Port, and
there is no proof on record that he was present at the time the subject shipment
was unloaded from the vessel and received by the arrastre operator. Moreover, the
shortlanded certificate bears the date of March 15, 1982, more than three months
after the discharge of the cargo from the carrying vessel.32 (Underscoring
supplied)cralawlibrary
The trial court's above-quoted findings were cited with approval by this Court.
As in the case of Summa Insurance, petitioner-vessel owner issued Good Order
Cargo Receipt No. 15299933 dated July 22, 1985 covering Case No. 4 which was
signed by its representative and countersigned by arrastre operator Metro Port.
The signature of the representative of Metro Port appears under the statement:
"Above described goods checked and received as to quantity, quality and
description upon discharge."34
As posited by petitioner, Metro Port's representative would certainly have refused
to sign Good Order Cargo Receipt No. 152999 if Case No. 4 and/or its contents
were indeed damaged.35
In Hartford Fire Insurance,36 this Court, in determining the issue of where the
damage to the contents of three drums of brake fluid occurred, took into account
the information appearing in the Request for Bad Order Survey which did not
reflect any such damage.
xxx
Of crucial significance is the condition of the cargo as described in defendant[-
arrastre operator]'s Request for Bad Order Survey prepared before the release of
the goods to the consignee's broker as follows:
"3 drums brake fluid, in apparent good order, contents complete except each
dented at rims."
38
The said Certificate was signed not only by defendant's inspector but also by the
consignee's representative. It shows that while the rims of the drums were dented
the contents thereof were complete. If, as the marine survey showed, "it was
evident that the contents had leaked as shown by stain marks on various parts of
the containers," then, those stain marks should have been evident as well when
defendant's Bad Order Certificate was prepared. The consignee's representative
would surely have noticed it and would have caused a notation to that effect to
have been made in the Bad Order Certificate. The fact that the Certificate was
silent on that point but that instead it specifically indicated that the contents, as
detected upon survey at the consignee's warehouse, must have occurred after the
cargo had left defendant's custody. x x x37 (Italics in the original; underscoring
supplied)
In fine, Case No. 4 was not in a damaged state when petitioner discharged it to
arrastre operator Metro Port. Petitioner cannot thus be held liable for any damages
on Case No. 4 that may have been discovered after its delivery to the consignee.
WHEREFORE, the petition is GRANTED. The assailed Decision dated September 7,
2000 and Resolution dated December 8, 2000 of the Court of Appeals are
REVERSED and SET ASIDE. The Decision dated October 15, 1993 of the Regional
Trial Court (RTC) Branch 64, Makati is, in light of the foregoing discussions,
REINSTATED.

As in Hartford Fire Insurance, in the present case, the July 26, 1985 Request for Bad
Order Survey38 issued by Metro Port which was signed by its representative and SO ORDERED.
that of the consignee did not cover or refer to Case No. 4.

The form Report dated October 31, 1985 of Metro Port39 wherein the blanks
therein were, in so far as they are pertinent, filled up as follows:

xxx 2. The two (2) cases covered by our B.O. Examination Report(s) No. (s) 31166
was/were discharged in bad order from the vessel and loss or damage arising
therefrom is the vessel's responsibility,

cannot be given weight since above-cited B.O. Examination Report No. 31166
refers to Turnover of Survey of Bad Cargoes Receipt Nos. 58744 and 58745
covering Cases Nos. 3 and 5, respectively, as the above tabulation clearly shows.

Nor can the Report of Audemus Adjustment Corporation40 be given weight, since it
conducted the inspection only on July 26, 1985, at the consignee's warehouse, and
in the absence of any representative of the shipping company.41

39