Fabre Jr vs CA
FACTS: Petitioner Fabre and his wife were the owners of 1982
model Mazda minibus. They were using the said vehicle as a
school bus service for children in Manila. They hired Cabil as
their driver. On November 2, 1982, private respondent Word for
the World Christian Fellowship (WWCF) arranged with petitioners
for the transportation of members of young adult ministry from
Manila to La Union and back. While travelling, they met an
accident. The bus hit a fence and a coconut tree that caused
passengers to be injured including respondent Antonio. The
WWCF and Antonio then filed a criminal complaint against the
driver, the trial court decided in favor of respondents. All evidence
presented showed the negligence of the defendants ultimately
resulted to the accident. The Court of Appeals affirmed the
decision of the Trial Court. Hence this petition.
ISSUE: Whether or not the petitioners are liable for the injuries
suffered by the respondents based on culpa contractual and/or
culpa aquiliana.
RULING: The Court ruled that damages should be awarded based
on the theory that petitioners are liable for breach of contract of
carriage or culpa contractual or on the theory of quasi delict or culpa
aquiliana holding that the relation of passenger and carrier is
“contractual both in origin and nature,” nevertheless “the act that
breaks the contract may be also a tort. In both sources of obligation,
the existence of negligence of petitioners must be determined. In
this case, Cabil drove his bus negligently, while his employer, the
Fabres, who owned the bus, failed to exercise the diligence of a
good father of the family in the selection and supervision of their
employee is fully supported by the evidence on record. Pursuant to
Arts. 2176 and 2180 of the Civil Code his negligence gave rise to
the presumption that his employers, the Fabres, were themselves
negligent in the selection and supervision of their employee. Thus,
the finding of the Court that petitioners are liable under Arts. 2176
and 2180 for quasi delict fully justify that they are guilty of breach
of contract of carriage under Arts. 1733, 1755 and 1759 of the Civil
Code.
Northwest vs Heshan
Facts: In July 1998, Edward Heshan (Edward) purchased three
(3) roundtrip tickets from Northwest Airlines, Inc. (petitioner) for
him, his wife Nelia Heshan (Nelia) and daughter Dara Ganessa
Heshan (Dara) for their trip from Manila to St. Louis, Missouri,
USA and back to attend an ice skating competition where then
seven yearold Dara was to participate. When Daras participation
in the ice skating event ended on August 7, 1998, the Heshans
proceeded to the airport to take the connecting flight from St.
Louis to Memphis on their way to Los Angeles. At the airport, the
Heshans first checked-in their luggage at the airports curbside
check-in near the entrance. Since they arrived three hours
early for their 6:05 p.m.flight (Flight No. 972M), the Heshans
whiled away the time at a nearby coffee shop. At 5:15 p.m. when
the check-in counter opened, Edward took to the line where he
was second in the queue. When his turn came and presented the
tickets to petitioners customer service agent Ken Carns to get the
boarding passes, he was asked to step aside and wait to be
called again. Heshans were told to board the plane without any
boarding pass given to them and to just occupy open seats
therein. Inside the plane, the Heshans noticed that only one
vacant passenger seat was available, which was offered to Dara,
while Edward and Nelia were directed to occupy two folding seats
located at the rear portion of the plane. To respondents, the two
folding seats were crew seats intended for the stewardesses.
Heshans complained to the cabin crew about the matter but were
told that if they did not like to occupy the seats, they were free to
disembark from the plane. And disembark they did, complaining
thereafter to Carns about their situation. Petitioners plane then
departed for Memphis without respondents onboard. Heshans
were later endorsed to and carried by Trans World Airways to Los
Angeles. Respondents arrived in Los Angeles at 10:30 p.m. of the
same day but had to wait for three hours at the airport to retrieve
their luggage from petitioners Flight No. 972M. Respondents
stayed for five days more in the U.S. before going back home to
Manila. Respondents then sent a letter to petitioner to demand
indemnification for the breach of contract of carriage and filed a
complaint for breach of contract with damages at the Regional
Trial Court (RTC) of Quezon City.
From the depositions of petitioners employees Carns, Mylan
Brown (Brown) and Melissa Seipel (Seipel), the following version
is gathered:
The Heshans did not have reservations for particular seats on the
flight. When they requested that they be seated together, Carns
denied the request and explained that other passengers had pre-
selected seats and that the computerized seating system did not
reflect that the request could be accommodated at the time. Carns
nonetheless assured the Heshans that they would be able to
board the plane and be seated accordingly, as he in fact
instructed them ten minutes before the planes departure, to board
the plane even without boarding passes and to occupy open seats
therein.
By Seipels claim, as the Heshans were upset upon learning that
they were not seated together on the plane, she told them that
she would request other passengers to switch places to
accommodate their demand; that she never had a chance to try to
carry out their demand, however, as she first had to find space for
their bags in the overhead compartment; and that the Heshans
cursed her which compelled her to seek assistance from Brown in
dealing with them.[12]
Brown averred that she went to the back portion of the plane to
help out but she was brushed aside by Nelia who was cursing
them as she stormed out of the plane followed by Edward and
Dara.
Petitioner denied that the Heshans were told to occupy folding
seats or crew seats since [Federal Aviation Authority] regulations
say no passengers are to sit there. As for respondents not having
been given boarding passes, petitioner asserted that that does not
in itself mean that the flight was overbooked, for [t]his is done on
last minute boarding when flights are full and in order to get
passengers on their way and to get the plane out on time. This is
acceptable procedure.
RTC in favor of respondents: P3,000,000.00, as moral
damages; P500,000.00, as exemplary damages; A sum
equivalent of 20% of the foregoing amounts, as attorney’s fees.
The trial court found that the Heshans had confirmed reservations
for the St Louis-Memphis leg of their return trip to the Philippines
is not disputed. As such, they were entitled as of right under their
contract to be accommodated in the flight, regardless of whether
they had selected their seats in advance or not. CA sustained the
trial courts findings but reduced the award of moral and exemplary
damages to P2 million and P300,000, respectively.
Petitioner’s arguments: It did not violate the contract of carriage
since respondents were eventually transported from Memphis to
Los Angeles, albeit via another airline, and that respondents
made no claim of having sustained injury during the carriage and
that if indeed crew seats were offered to respondents, its crew
would have had nowhere to sit and the plane would not have
been able to depart and that in reality, respondents voluntarily
disembarked from the aircraft because they were not willing to
wait to be seated together. Hence petitioner finds the amount of
damages imposed by the appellate court excessive and
unprecedented and needing substantial reduction.
Respondents arguments: Petitioner was guilty of breach of
contract. They cite Singapore Airlines v. Fernandez which ruled:
[W]hen an airline issues a ticket to a passenger, confirmed for a
particular flight on a certain date, a contract of carriage
arises. The passenger then has every right to expect that he be
transported on that flight and on that date. If he does not, then
the carrier opens itself to a suit for a breach of contract of
carriage.
Issue: Whether or not petitioner is liable?
Ruling: Yes. An examination of the evidence presented by
petitioner shows that it consisted only of depositions of its
witnesses. It had in its possession and disposition pertinent
documents such as the flight manifest and the planes actual
seating capacity and layout which could have clearly refuted
respondents claims that there were not enough passenger seats
available for them. It inexplicably failed to offer even a single
piece of documentary evidence. The Court thus believes that if at
least the cited documentary evidence had been produced, it
would have been adverse to petitioners case. Petitioner failed to
satisfactorily explain why it did not issue boarding passes to
respondents who were confirmed passengers, even after they had
checked-in their luggage three hours earlier. That respondents did
not reserve seats prior to checking-in did not excuse the non-
issuance of boarding passes. Respondents were made to wait for
last-minute cancellations before they were accommodated onto
the plane. This, coupled with petitioners failure to issue
respondents their boarding passes and the eleventh-hour
directive for them to embark, reinforces the impression that the
flight was overbooked.
As to the damages: While courts are given discretion to determine
the amount of damages to be awarded, it is limited by the
principle that the amount awarded should not be palpably and
scandalously excessive. Moral damages are neither intended to
impose a penalty to the wrongdoer, nor to enrich the
claimant. Taking into consideration the facts and circumstances
attendant to the case, an award to respondents of P500,000,
instead of P2,000,000, as moral damages is to the Court
reasonable.
Sulpicio Lines vs CA
FACTS:
 October 23, 1988: Tito Duran Tabuquilde (Tito) and his
3-year old daughter Jennifer Anne (Anne) boarded the
M/V Dona Marilyn at North Harbor, Manila, bringing
with them several pieces of luggage.
 Storm Signal No. 2 had been raised by the
PAG-ASA authorities over Leyte as early as
5:30 P.M. of October 23, 1988 and which
signal was raised to Signal No. 3 by 10 P.M
 ship captain ordered the vessel to proceed
to Tacloban when prudence dictated that he
should have taken it to the nearest port for
shelter, thus violating his duty to exercise
extraordinary diligence in the carrying of
passengers safely to their destination
 October 24, 1988 morning: M/V Dona Marilyn, while in
transit, encountered inclement weather which caused
huge waves due to Typhoon Unsang.
 Angelina Tabuquilde contacted the Sulpicio
Office to verify radio reports that the vessel
M/V Dona Marilyn was missing
 Sulpicio Lines assured her that
the ship was merely "hiding"
thereby assuaging her anxiety
 October 24, 1988 2:00 P.M.: vessel capsized, throwing
Tito and Anne, along with hundreds of passengers,
into the sea.
 Tito tried to keep himself and his daughter
afloat but to no avail as the waves got
stronger and he was subsequently
separated from his daughter despite his
efforts.
 October 25, 1988 11:00 A.M.: He found himself on
Almagro Island in Samar
 He immediately searched for his daughter
among the survivors in the island, but failed
 Angelina tried to seek the assistance of the
Sulpicio Lines in Manila to no avail
 Angelina spent sleepless nights worrying
about her husband and daughter in view of
the refusal of Sulpicio Lines to release a
verification of the sinking of the ship
 October 26, 1988: Tito and other survivors in the
Almagro Island were fetched and were brought to
Tacloban Medical Center for treatment
 October 31, 1988: Tito reported the loss of his
daughter and was informed that the corpse of a child
with his daughter's description had been found
 Tito wrote a letter to his wife, reporting the
sad fact that Jennifer Anne was dead
 Angelina suffered from shock and severe
grief upon receipt of the news
 November 3, 1988: coffin bearing the corpse of Anne
was buried
 November 24, 1988: Tito filed a claim for damages
against Sulpicio Lines for the death of Anne and the
loss of his belongings worth P27,580
 Trial Court: in favor of Tito
 actual damages, P30,000.00 for the death
of Anne
  P100,000.00 as moral damages
 P50,000.00 as exemplary damages
 P50,000.00 as attorney's fees, and costs
ISSUE: W/N Tito has a right to recover damage for his lost
belongings
HELD: NO. Court of Appeals is AFFIRMED with the
MODIFICATION that the award of P27,580.00 as actual damages
for the loss of the contents of the pieces of baggage is deleted
and that the award of P30,000.00 under Article 2206 in relation
Article 1764 is increased to P50,000.00.
 There is no showing that the value of the contents of
the lost pieces of baggage was based on the bill of
lading or was previously declared by Tito before he
boarded the ship
 Article 2206 of the Civil Code of the Philippines: Only
deaths caused by a crime as quasi delict are entitled to
actual and compensatory damages without the need of
proof of the said damages. The amount of damages for
death caused by a crime or quasi delict shall be at
least Three Thousand Pesos, even though there may
have been mitigating circumstances. . . .
 Deducing alone from said provision, one
can conclude that damages arising
from culpa contractual are not compensable
without proof of special damages sustained
by the heirs of the victim.
 With respect to the award of moral
damages, the general rule is that said
damages are not recoverable in culpa
contractual except when the presence of
bad faith was proven
 in breach of contract of carriage, moral
damages may be recovered when it results
in the death of a passenger
 With respect to the award of exemplary
damages, Article 2232 of the Civil Code of
the Philippines gives the Court the
discretion to grant said damages in breach
of contract when the defendant acted in a
wanton, fraudulent and reckless manner
 The crew assumed a greater risk when, instead of
dropping anchor in or at the periphery of the Port of
Calapan, or returning to the port of Manila which is
nearer, proceeded on its voyage on the assumption
that it will be able to beat and race with the typhoon
and reach its destination before it (Unsang) passes
Phil. Rabbit Bus Lines v. IAC
Facts: Catalina Pascua et al were passengers of the jeepney
owned by Sps. Carreon and driven by Tranquilino Manalo. On
their way from Pampanga to Pangasinan, the right wheel of the
jeepney was detached causing it to run in an unbalanced position.
Manalo stepped on the brake causing it to make a U-turn and
invaded the western lane where it faced south instead of north.
Phil. Rabbit bumped the right rear portion of the jeep just when it
made it sudden u-turn resulting to death and injury of some
jeepney passengers. The heirs of Catalina Pascua sued the Sps.
Carreon and Manalo to which the CFI ruled in their favor holding
that latter is liable through breach of contract of carriage with their
passengers and granted the cross claim of Phil. Rabbit. The IAC
reversed holding Phil. Rabbit liable as it had the last clear chance
to avoid the accident, hence the case at bar.
ISSUE: W/N the doctrine of last clear chance is applicable
HELD: NO. The IAC misappreciated the facts and misapplied the
law warranting its reversal. The principle of “the last clear chance”
would call for application in a suit between the owner and the
driver of 2 colliding vehicles. It does not arise where a passenger
demands responsibility from the carrier to enforce its contractual
obligations. It would be inequitable to exempt the negligent driver
of the jeepney and its owners on the ground that the other driver
was likewise guilty of negligence. The IAC likewise applied the
presumption that drivers who bump the rear of another vehicle
guilty and the cause of the accident unless contradicted by other
evidence. The SC ruled that the application of the presumption in
the case at bar would have been correct had the u-turn made by
the jeepney not abrupt. The driver of the bus could not have
anticipated the u-turn made. Likewise, he cannot be expected to
avoid the collision.
(from original case): Police filed with the MTC of San Manuel,
Tarlac, a criminal complaint against the two drivers for Multiple
Homicide. At the preliminary investigation, a probable cause was
found with respect to the case of Manalo, thus, his case was
elevated to the Court of First Instance. However, finding no
sufficiency of evidence as regards the case of Delos Reyes, the
Court dismissed it. Manalo was convicted and sentenced to suffer
imprisonment. Not having appealed, he served his sentence. A
complaint for recovery of damages was then filed before the CFI
of Pangasinan. Civil Case No. 1136: spouses Casiano Pascua
and Juana Valdez sued as heirs of Catalina Pascua while Caridad
Pascua sued in her behalf. In Civil Case No. 1139, spouses
Manuel Millares and Fidencia Arcica sued as heirs of Erlinda
Meriales. In Civil Case No. 1140, spouses Mariano Estomo and
Dionisia Sarmiento also sued as heirs of Adelaida Estomo.
In all three cases, spouses Mangune and Carreon, Manalo,
Rabbit and Delos Reyes were all impleaded as defendants.
Plaintiffs anchored their suits against spouses Mangune and
Carreon and Manalo on their contractual liability. As against
Rabbit and delos Reyes, plaintiffs based their suits on their
culpability for a quasi-delict. Filriters Guaranty Assurance
Corporation, Inc. was also impleaded as additional defendant in
Civil Case No. 1136 only.
RTC: Defendants Isidro Mangune, Guillerma Carreon and
Tranquilino Manalo thru their negligence, breached contract of
carriage with their passengers. IAC reversed and found Delos
Reyes negligent. It ordered the Philippine Rabbit Bus Lines, Inc.
and its driver Tomas Delos Reyes to pay the former jointly and
severally damages.
Issue: Who is liable for the death and physical injuries suffered by
the passengers of the jeepney?
Held: We find that the proximate cause of the accident was the
negligence of Manalo and spouses Mangune and Carreon. They
all failed to exercise the precautions that are needed precisely pro
hac vice. In culpa contractual, the moment a passenger dies or is
injured, the carrier is presumed to have been at fault or to have
acted negligently, and this disputable presumption may only be
overcome by evidence that he had observed extra-ordinary
diligence as prescribed in Articles 1733, 1755 and 1756 of the
New Civil Code or that the death or injury of the passenger was
due to a fortuitous event. The negligence of Manalo was proven
during the trial by the unrebutted testimonies of Caridad Pascua,
Police Investigator Tacpal, Police Corporal Cacalda, his
(Manalo's) conviction for the crime of Multiple Homicide and
Multiple Serious Injuries with Damage to Property thru Reckless
Imprudence, and the application of the doctrine ofres ipsa loquitur
supra. The negligence of spouses Mangune and Carreon was
likewise proven during the trial. To escape liability, defendants
Mangune and Carreon offered to show thru their witness Natalio
Navarro, an alleged mechanic, that he periodically checks and
maintains the jeepney of said defendants, the last on Dec. 23, the
day before the collision, which included the tightening of the bolts.
This notwithstanding the right rear wheel of the vehicle was
detached while in transit. As to the cause thereof no evidence was
offered. Said defendant did not even attempt to explain, much
less establish, it to be one caused by a caso fortuito.
In any event, "in an action for damages against the carrier for his
failure to safely carry his passenger to his destination, an accident
caused either by defects in the automobile or through the
negligence of its driver, is not a caso fortuito which would avoid
the carriers liability for damages. The trial court was therefore
right in finding that Manalo and spouses Mangune and Carreon
were negligent. However, its ruling that spouses Mangune and
Carreon are jointly and severally liable with Manalo is erroneous
The driver cannot be held jointly and severally liable with the
carrier in case of breach of the contract of carriage. The rationale
behind this is readily discernible. Firstly, the contract of carriage is
between the carrier and the passenger, and in the event of
contractual liability, the carrier is exclusively responsible therefore
to the passenger, even if such breach be due to the negligence of
his driver. In other words, the carrier can neither shift his liability
on the contract to his driver nor share it with him, for his driver's
negligence is his. Secondly, if We make the driver jointly and
severally liable with the carrier, that would make the carrier's
liability personal instead of merely vicarious and consequently,
entitled to recover only the share which corresponds to the driver,
contradictory to the explicit provision of Article 2181 of the New
Civil Code. We affirm the amount of damages adjudged by the
trial court, except with respect to the indemnity for loss of life.
Under Article 1764 in relation to Article 2206 of the New Civil
Code, the amount of damages for the death of a passenger is at
least three thousand pesos (P3,000.00). The prevailing
jurisprudence has increased the amount of P3,000.00 to
P30,000.00.
Victory Liner vs Malecdan
Facts: Petitioner is a common carrier. Private respondent Elena
Malecdan is the widow of the deceased, while private
respondents Veronica, Virginia, Mary Pauline, Arthur, Viola,
Manuel and Valentin Malecdan are their children. Andres
Malecdan was a 75 year-old farmer while he was crossing the
National Highway on his way home from the farm, a Dalin Liner
bus on the southbound lane stopped to allow him and his carabao
to pass. However, as Andres was crossing the highway, a bus of
petitioner Victory Liner, driven by Ricardo C. Joson, Jr., bypassed
the Dalin bus. In so doing, respondent hit the old man and the
carabao on which he was riding. As a result, Andres Malecdan
was thrown off the carabao, while the beast toppled over. The
Victory Liner bus sped past the old man, while the Dalin bus
proceeded to its destination without helping him. The incident was
witnessed by Andres Malecdan’s neighbor, Virgilio Lorena, who
was resting in a nearby waiting shed after working on his
farm. Malecdan sustained a wound on his left shoulder, from
which bone fragments protruded. He was taken by Lorena and
another person to the Cagayan District Hospital where he died a
few hours after arrival. The carabao also died soon afterwards.
Lorena executed a sworn statement before the police
authorities. Subsequently, a criminal complaint for reckless
imprudence resulting in homicide and damage to property was
filed against the Victory Liner bus driver Ricardo Joson, Jr.
Private respondents brought this suit for damages in the RTC
which found the driver guilty of gross negligence in the operation
of his vehicle and Victory Liner, Inc. also guilty of gross
negligence in the selection and supervision of Joson, Jr. Petitioner
and its driver were held liable for damages which are as follows:
P50,000.00 as death indemnity; P88,339.00 for actual damages;
P200,000.00 for moral damages; P50,000.00 as exemplary
damages; Thirty percent (30%) as attorney’s fees of whatever
amount that can be collected by the plaintiff. CA affirmed decision
of the RTC with the award of the attorney’s fees modified to
50,000.
Issue: Whether petitioner exercised due diligence in the selection
and supervision of its employees and whether the award of
damages is proper?
Held: No. Article 2180 provides for the solidary liability of an
employer for the quasi-delict committed by an employee. The
responsibility of employers for the negligence of their employees
in the performance of their duties is primary and, therefore, the
injured party may recover from the employers directly, regardless
of the solvency of their employees. Employers may be relieved of
responsibility for the negligent acts of their employees acting
within the scope of their assigned task only if they can show that
they observed all the diligence of a good father of a family to
prevent damage. For this purpose, they have the burden of
proving that they have indeed exercised such diligence, both in
the selection of the employee and in the supervision of the
performance of his duties. In the selection of prospective
employees, employers are required to examine them as to their
qualifications, experience and service records. With respect to the
supervision of employees, employers must formulate standard
operating procedures, monitor their implementation and impose
disciplinary measures for breaches thereof. These facts must be
shown by concrete proof, including documentary evidence.
In the instant case, petitioner presented the results of Joson Jr.s
written examination ,actual driving tests, x-ray examination,
psychological examination, NBI clearance, physical examination,
hematology examination, urinalysis, student driver training, shop
training, birth certificate, high school diploma and reports from the
General Maintenance Manager and the Personnel Manager
showing that he had passed all the tests and training sessions
and was ready to work as a professional driver. However, as the
trial court noted, petitioner did not present proof that Joson, Jr.
had nine years of driving experience. Petitioner also presented
testimonial evidence that drivers of the company were given
seminars on driving safety at least twice a year. Again, however,
as the trial court noted there is no record of Joson, Jr. ever
attending such a seminar. Petitioner likewise failed to establish
the speed of its buses during its daily trips or to submit in
evidence the trip tickets, speed meters and reports of field
inspectors. The finding of the trial court that petitioners bus was
running at a very fast speed when it overtook the Dalin bus and hit
the deceased was not disputed by petitioner. For these reasons,
we hold that the trial court did not err in finding petitioner to be
negligent in the supervision of its driver Joson, Jr.
To justify an award of actual damages, there should be proof of
the actual amount of loss incurred in connection with the death,
wake or burial of the victim. We cannot take into account receipts
showing expenses incurred sometime after the burial of the victim,
such as expenses relating to the 9th day, 40th day and 1st year
death anniversaries. In this case, the trial court
awarded P88,339.00 as actual damages. While these were duly
supported by receipts, these included the amount of P5,900.00,
the cost of one pig which had been butchered for the 9th day
death anniversary of the deceased. This item cannot be
allowed. We, therefore, reduce the amount of actual
damages. The award of P200,000.00 for moral damages should
likewise be reduced. The trial court found that the wife and
children of the deceased underwent intense moral suffering as a
result of the latters death. Under Art. 2206 of the Civil Code, the
spouse, legitimate children and illegitimate descendants and
ascendants of the deceased may demand moral damages for
mental anguish by reason of the death of the deceased. On the
other hand, the award of P50,000.00 for indemnity is in
accordance with current rulings of the Court.
Art. 2231 provides that exemplary damages may be recovered in
cases involving quasi-delicts if the defendant acted with gross
negligence. Exemplary damages are imposed not to enrich one
party or impoverish another but to serve as a deterrent against or
as a negative incentive to curb socially deleterious actions. In this
case, petitioners driver Joson, Jr. was grossly negligent in driving
at such a high speed along the national highway and overtaking
another vehicle which had stopped to allow a pedestrian to
cross. Worse, after the accident, Joson, Jr. did not stop the bus to
help the victim. Finally, private respondents are entitled to
attorney’s fees. Under Art. 2008 of the Civil Code, attorney’s fees
may be recovered when, as in the instant case, exemplary
damages are awarded.
PhilaAm vs Heung-a Shipping
Facts: Novartis Consumer Health Philippines, Inc. imported from
Jinsuk Trading Co. Ltd., (JINSUK) in South Korea, 19 pallets of
200 rolls of Ovaltine Power 18 Glaminated plastic packaging
material. In order to ship the goods to the Philippines, JINSUK
engaged the services of PROTOP, a freight forwarder likewise
based in South Korea, to forward the goods to their consignee,
NOVARTIS. Based on Bill of Lading No. PROTAS 200387 issued
by PROTOP, the cargo was on freight prepaid basis and on
"shipper’s load and count" which means that the "container [was]
packed with cargo by one shipper where the quantity, description
and condition of the cargo is the sole responsibility of the
shipper." Likewise stated in the bill of lading is the name Sagawa
Express which is designated as the entity in the Philippines which
will obtain the delivery contract. PROTOP shipped the cargo
through DONGNAMA which in turn loaded the same on M/V
Heung-A Bangkok V-019 owned and operated by Heung-A
Shipping Corporation, a Korean corporation, pursuant to a ‘slot
charter agreement’ whereby a space in the latter’s vessel was
reserved for the exclusive use of the former. Wallem Philippines
Shipping, Inc. is the ship agent of HEUNG-A in the Philippines.
NOVARTIS insured the shipment with Philam Insurance
Company, Inc. The vessel arrived at the port of Manila, South
Harbor, on December 27, 2000 and the subject shipment was
discharged without exception into the possession, custody and
care of Asian Terminals, Inc. as the customs arrastre operator.
The shipment was thereafter withdrawn by NOVARTIS’ appointed
broker, Stephanie Customs Brokerage Corporation from ATI’s
container yard.
The shipment reached NOVARTIS’ premises and was inspected.
Upon initial inspection, Caparoso found the container van locked
with its load intact. After opening the same, she inspected its
contents and discovered that the boxes of the shipment were wet
and damp. The boxes on one side of the van were in disarray
while others were opened or damaged due to the dampness.
Caparoso further observed that parts of the container van were
damaged and rusty. There were also water droplets on the walls
and the floor was wet. Since the damaged packaging materials
might contaminate the product they were meant to hold, Caparoso
rejected the entire shipment.
NOVARTIS demanded indemnification for the lost/damaged
shipment from PROTOP, SAGAWA, ATI and STEPHANIE but
was denied. Insurance claims were, thus, filed with PHILAM.
Claiming that after such payment, it was subrogated to all the
rights and claims of NOVARTIS against the parties liable for the
lost/damaged shipment, PHILAM filed a complaint for damages
against PROTOP, SAGAWA, ATI and STEPHANIE. It later
impleaded WALLEM. PHILAM filed a Motion to Admit Second
Amended Complaint this time designating PROTOP as the
owner/operator of M/V Heung-A Bangkok V-019 and adding
HEUNG-A as party defendant for being the registered owner of
the vessel. PROTOP, SAGAWA, ATI, STEPHANIE, WALLEM and
HEUNG-A denied liability for the lost/damaged shipment.
RTC ruled that the damage to the shipment occurred onboard the
vessel while in transit from Korea to the Philippines. HEUNG-A
was adjudged as the common carrier of the subject shipment as
despite the slot charter agreement with DONGNAMA, it was still
the obligation of HEUNG-A to transport the cargo from Busan,
Korea to Manila and thus any damage to the shipment is the
responsibility of the carrier to the consignee. HEUNG-A failed to
present evidence showing that it exercised the diligence required
of a common carrier in ensuring the safety of the shipment. The
RTC discounted the slot charter agreement between HEUNG-A
and DONGNAMA, and held that it did not bind the consignee who
was not a party thereto. Further, it was HEUNG-A’s duty to ensure
that the container van was in good condition by taking an initiative
to state in its contract and demand from the owner of the
container van that it should be in a good condition all the time.
Such initiative cannot be shifted to the shipper because it is in no
position to demand the same from the owner of the container van.
WALLEM was held liable as HEUNG-A’s ship agent in the
Philippines while PROTOP was adjudged liable because the
damage sustained by the shipment was due to the bad condition
of the container van.
CA agreed with the RTC that PROTOP, HEUNG-A and WALLEM
are liable for the damaged shipment. The fact that HEUNG-A was
not a party to the bill of lading did not negate the existence of a
contract of carriage between HEUNG-A and/or WALLEM and
NOVARTIS. A bill of lading is not indispensable for the creation of
a contract of carriage. By agreeing to transport the goods
contained in the sea van provided by DONGNAMA, HEUNG-A
impliedly entered into a contract of carriage with NOVARTIS with
whom the goods were consigned. Hence, it assumed the
obligations of a common carrier to observe extraordinary diligence
in the vigilance over the goods transported by it. Further the Slot
Charter Agreement did not change HEUNG-A’s character as a
common carrier. Moreover, the proximate cause of the damage
was the failure of HEUNG-A to inspect and examine the actual
condition of the sea van before loading it on the vessel. Also,
proper measures in handling and stowage should have been
adopted to prevent seepage of sea water into the sea van.
Issue: Whether or not Heung-A is liable?
Ruling: Despite its contract of affreightment with DONGNAMA,
HEUNG-A remained responsible as the carrier, hence,
answerable for the damages incurred by the goods received for
transportation. "Common carriers, from the nature of their
business and for reasons of public policy, are bound to observe
extraordinary diligence and vigilance with respect to the safety of
the goods and the passengers they transport. Thus, common
carriers are required to render service with the greatest skill and
foresight and ‘to use all reasonable means to ascertain the nature
and characteristics of the goods tendered for shipment, and to
exercise due care in the handling and stowage, including such
methods as their nature requires.’ Common carriers, as a general
rule, are presumed to have been at fault or negligent if the goods
they transported deteriorated or got lost or destroyed. That is,
unless they prove that they exercised extraordinary diligence in
transporting the goods. In order to avoid responsibility for any loss
or damage, therefore, they have the burden of proving that they
observed such diligence." Further, under Article 1742 of the Civil
Code, even if the loss, destruction, or deterioration of the goods
should be caused by the faulty nature of the containers, the
common carrier must exercise due diligence to forestall or lessen
the loss.
Here, HEUNG-A failed to rebut this prima facie presumption when
it failed to give adequate explanation as to how the shipment
inside the container van was handled, stored and preserved to
forestall or prevent any damage or loss while the same was in its
possession, custody and control.
PROTOP is solidarily liable with HEUNG-A for the lost/damaged
shipment in view of the bill of lading the former issued to
NOVARTIS. PROTOP breached its contract with NOVARTIS
when it failed to deliver the goods in the same quantity, quality
and description as stated in Bill of Lading No. PROTAS 200387.
Under Article 1753 of the Civil Code, the law of the country to
which the goods are to be transported shall govern the liability of
the common carrier for their loss, destruction or deterioration.
Since the subject shipment was being transported from South
Korea to the Philippines, the Civil Code provisions shall apply. In
all matters not regulated by the Civil Code, the rights and
obligations of common carriers shall be governed by the Code of
Commerce and by special laws, such as the COGSA. When there
is a loss/damage to goods covered by contracts of carriage from a
foreign port to a Philippine port and in the absence a shipper’s
declaration of the value of the goods in the bill of lading, as in the
present case, the foregoing provisions of the COGSA shall apply.