66. Mecenas, et al. v. CA after the collision.
after the collision. There is also evidence that the “Don Juan” was carrying more
December 14, 1989 | G.R. NO. 88052
FACTS:
 On the morning of 22 April 1980, the M/T “Tacloban City,” a barge-type oil tanker
owned and operated by Philippine National Oil Company (PNOC), having unloaded its
cargo of petroleum products, left Negros Occidental and headed towards Bataan.
 On the same day, the M/V “Don Juan,” an interisland vessel owned and operated by
Negros Navigation, left Manila bound for Bacolod with 750 passengers listed in its
manifest, and a complete set of officers and crew members.
 On the evening of the same day, the two vessels became aware of each other’s
presence in the area by visual contact at a distance of 6 miles. They were fully aware
that if they continued on their course, they will meet head on.
o Don Juan steered to the right; Tacloban City continued its course to the left.
o The two vessels thus collided and as a result, the “Don Juan” sank and
hundreds of its passengers perished.
 Petitioners who were the children of the spouses Perfecto and Sofia Mecenas, their
parents among the passengers whose bodies were never found, filed a complaint
against Negros Navigation and its Captain Roger Santisteban.
 The trial court ruled that both vessels were at fault in the collision and awarded
petitioners actual or compensatory damages, which was reduced on appeal.
Petitioners likewise claim for exemplary damages.
ISSUE:
Whether or not petitioners herein are also entitled to exemplary damages.
HELD: YES, they are.
 In respect of the petitioners’ claim for exemplary damages, it is only necessary to refer
to Article 2232 of the Civil Code:
 Article 2332. In contracts and quasi-contracts, the court may exemplary damages if
the defendant acted in a wanton, fraudulent, reckless, oppressive or malevolent
manner.
 There is, therefore, no question that the “Don Juan” was at least as negligent as the
M/T “Tacloban City” in the events leading up to the collision and the sinking of the
“Don Juan.”
 The remaining question is whether the negligence on the part of the “Don Juan”
reached that level of recklessness or gross negligence that our Civil Code requires for
the imposition of exemplary damages. Our own review of the record in the case at bar
requires us to answer this in the affirmative.
o M/S Don Juan’s Master, Capt. Rogelio Santisteban, was playing mahjong
before and up to the time of collision.
 Moreover, after the collision, he failed to institute appropriate measures to delay the
sinking M/S Don Juan and to supervise properly the execution of his order of
abandonship. As regards the officer on watch, Senior 3rd Mate Rogelio Devera, he
admitted that he failed or did not call or inform Capt. Santisteban of the imminent
danger of collision and of the actual collision itself. Also, he failed to assist his master
to prevent the fast sinking of the ship. The record also indicates that Auxiliary Chief
Mate Antonio Labordo displayed laxity in maintaining order among the passengers
passengers than she had been certified as allowed to carry.
 Exemplary damages are designed by our civil law to permit the courts to reshape
behaviour that is socially deleterious in its consequence by creating negative
incentives or deterrents against such behaviour.
o In requiring compliance with the standard which is in fact that of the highest
possible degree of diligence, from common carriers and in creating a
presumption of negligence against them, the law seeks to compel them to
control their employees, to tame their reckless instincts and to force them to
take adequate care of human beings and their property.
o The Court will take judicial notice of the dreadful regularity with which
grievous maritime disasters occur in our waters with massive loss of life.
The bulk of our population is too poor to afford domestic air transportation.
So it is that notwithstanding the frequent sinking of passenger vessels in our
waters, crowds of people continue to travel by sea.
o This Court is prepared to use the instruments given to it by the law for
securing the ends of law and public policy.
o One of those instruments is the institution of exemplary damages; one of
those ends, of special importance in an archipelagic state like the
Philippines, is the safe and reliable carriage of people and goods by sea.
Considering the foregoing, we believe that an additional award in the
amount of P200,000.00 as exemplary damages is quite modest.
67. Negros Navigation Co., Inc. v. CA, Ramon Miranda, & Sps. Ricardo & Virginia Dela
Victoria
281 SCRA 534 | November 07, 1997
FACTS:
 Private respondent Ramon Miranda purchased from the Negros Navigation Co., Inc.
four special cabin tickets for his wife, daughter, son and niece who were going to
Bacolod City to attend a family reunion.
 The tickets were for Voyage No. 457-A of the M/V Don Juan, leaving Manila at 1:00
p.m. on April 22, 1980. The ship sailed from the port of Manila on schedule.
 At about 10:30 in the evening of April 22, 1980, the Don Juan collided off the Tablas
Strait in Mindoro, with the M/T Tacloban City, an oil tanker owned by the Philippine
National Oil Company (PNOC) and the PNOC Shipping and Transport Corporation
(PNOC/STC).
 M/V Don Juan sank. Several of her passengers perished in the sea tragedy. The bodies
of some of the victims were found and brought to shore, but the four members of
private respondents’ families were never found.
 Private respondents filed a complaint RTC of Manila against the Negros Navigation,
the Philippine National Oil Company (PNOC), and the PNOC Shipping and Transport
Corporation (PNOC/STC), seeking damages for the death of Ardita de la Victoria
Miranda, Rosario V. Miranda, Ramon V. Miranda, Jr., and Elfreda de la Victoria.
 Petitioner admitted that the Don Juan left Pier 2, North Harbor, Manila on April 22,
1980 and sank that night after being rammed by the oil tanker M/T Tacloban City, and
that, as a result of the collision, some of the passengers of the M/V Don Juan died.
Petitioner denied that the four relatives of private respondents actually boarded the
vessel as shown by the fact that their bodies were never recovered. Petitioner further
 averred that the Don Juan was seaworthy and manned by a full and competent crew, 3. YES - The rule is well-entrenched in our jurisprudence that a shipowner may be held liable
and that the collision was entirely due to the fault of the crew of the M/T Tacloban City. for injuries to passengers notwithstanding the exclusively real and hypothecary
 PNOC and petitioner Negros Navigation Co., Inc. entered into a compromise nature of maritime law if fault can be attributed to the shipowner. In Mecenas, this Court
agreement whereby petitioner assumed full responsibility for the payment and found petitioner guilty of negligence in (1) allowing or tolerating the ship captain and crew
satisfaction of all claims arising out of or in connection with the collision and releasing members in playing mahjong during the voyage, (2) in failing to maintain the vessel
the PNOC and the PNOC/STC from any liability to it. The agreement was subsequently seaworthy and (3) in allowing the ship to carry more passengers than it was allowed to
held by the trial court to be binding upon petitioner, PNOC and PNOC/STC. Private carry. Petitioner is, therefore, clearly liable for damages to the full extent.
respondents did not join in the agreement.
Issue: Dispositive Portion:
(1) Whether the members of private respondents’ families were actually passengers of WHEREFORE, the decision of the Court of Appeals is AFFIRMED with modification and
the Don Juan; petitioner is ORDERED to pay private respondents damages as follows:
(2) Whether the ruling in Mecenas v. Court of Appeals, finding the crew members of To private respondent Ramon Miranda:
petitioner to be grossly negligent in the performance of their duties, is binding in this P23,075.00 For actual damages
case; P109,038.96 As compensatory damages for loss of
(3) Whether the total loss of the M/V Don Juan extinguished petitioner’s liability; and earning capacity of his wife
P150,000.00 As compensatory damages for wrongful
Held: death of three victims
1. YES - The trial court held that the fact that the victims were passengers of the M/V Don P300,000.00 As moral damages
Juan was sufficiently proven by private respondent Ramon Miranda, who testified that he P300,000.00 As exemplary damages, all in the total
purchased tickets numbered 74411, 74412, 74413, and 74414 at P131.30 each from the amount of P882,113.96; and
Makati office of petitioner for Voyage No.47-A of the M/V Don Juan, which was leaving P40,000.00 As attorney’s fees.
Manila on April 22, 1980. This was corroborated by the passenger manifest on which the
numbers of the tickets and the names of Ardita Miranda and her children and Elfreda de la
To private respondents Spouses Ricardo and Virginia de la Victoria:
Victoria appear.
P12,000.00 For actual damages
P111,456.00 As compensatory damages for loss of
2. YES - In finding petitioner guilty of negligence and in failing to exercise the extraordinary
earning capacity
diligence required of it in the carriage of passengers, both the trial court and the appellate
court relied on the findings of this Court in Mecenas v. Intermediate Appellate Court, which P50,000.00 As compensatory damages for wrongful
case was brought for the death of other passengers. In that case it was found that although death
the proximate cause of the mishap was the negligence of the crew of the M/T Tacloban P100,000.00 As moral damages
City, the crew of the Don Juan was equally negligent as it found that the latter’s master, P100,000.00 As exemplary damages, all in the total
Capt. Rogelio Santisteban, was playing mahjong at the time of collision, and the officer on amount of 373,456.00; and
watch, Senior Third Mate Rogelio De Vera, admitted that he failed to call the attention of P415,000.00 As attorney’s fees.
Santisteban to the imminent danger facing them. This Court found that Capt. Santisteban
and the crew of the M/V Don Juan failed to take steps to prevent the collision or at least Petitioners are further ordered to pay costs of suit.
delay the sinking of the ship and supervise the abandoning of the ship. Petitioner Negros In the event the Philippine National Oil Company and/or the
Navigation was found equally negligent in tolerating the playing of mahjong by the ship PNOC Shipping and Transport Corporation pay or are required to pay all or a portion of the
captain and other crew members while on board the ship and failing to keep the M/V Don amounts adjudged, petitioner Negros Navigation Co., Inc. shall reimburse either of them such
Juan seaworthy so much so that the ship sank within 10 to 15 minutes of its impact with amount or amounts as either may have paid, and in the event of failure of Negros Navigation
the M/T Tacloban City. In addition, the Court found that the Don Juan was overloaded. The Co., Inc., to make the necessary reimbursement, PNOC and/or PNOC/STC shall be entitled to a
Certificate of Inspection, dated August 27, 1979, issued by the Philippine Coast Guard writ of execution without need of filing another action.
Commander at Iloilo City stated that the total number of persons allowed on the ship was SO ORDERED.
864, of whom 810 are passengers, but there were actually 1,004 on board the vessel when
it sank, 140 persons. Taking these circumstances together, and the fact that the M/V Don 68 ABETO v PAL
Juan, as the faster and better-equipped vessel, could have avoided a collision with the
PNOC tanker, this Court held that even if the Tacloban City had been at fault for failing to FACTS:
observe an internationally-recognized rule of navigation, the Don Juan was guilty of  The heirs of Judge Quirico Abeto who died while on board a plane of appellant which
contributory negligence. crashed at Mt. Baco, the Court of First Instance of Iloilo rendered a decision ordering
appellant to pay damages and attorney’s fees based on evidence showing that the
 accident occurred because the pilot did not follow the designated route for his flight,
and that the deviation from its prescribed route was not attributable to the bad
weather conditions because the weather was clear.
 Plaintiff’s evidence
o Judge Quirico Abeto, with the necessary tickets, boarded the Philippine Air
Lines’ PI-C133 plane at the Mandurriao Airport, Iloilo City for Manila.
o He was listed as the No. 18 passenger in its Load Manifest. The plane which
would then take two hours from Iloilo to Manila did not reach its destination
and the next day there was news that the plane was missing.
o After three weeks, it was ascertained that the plane crashed at Mt. Baco,
Province of Mindoro.
o All the passengers, including Judge Abeto, must have been killed instantly
and their remains were scattered all over the area. Among the articles
recovered on the site of the crash was a leather bag with the name "Judge
Quirico Abeto."
 Defendant’s defence
o Defendant tried to prove that the plane crash at Mt. Baco was beyond the
control of the pilot.
o The plane at the time of the crash was airworthy for the purpose of
conveying passengers across the country as shown by the certificate of
airworthiness issued by the Civil Aeronautics Administration (CAA).
o There was navigational error but no negligence or malfeasance on the part
of the pilot. The plane had undergone 1,822 pre-flight checks, 364 thorough
checks, 957 terminating checks and 501 after-maintenance checks.
o These checks were part of the quality control operation of defendant airline.
o Further, deviation from its prescribed route was due to the bad weather
conditions between Mt. Baco and Romblon and strong winds which caused
the plane to drift to Mt. Baco.
o Under the circumstances, Defendant argues that the crash was a fortuitous
event and, therefore, Defendant-Appellant cannot be held liable under the
provisions of Article 1174 of the New Civil Code. Besides, appellant tried to
prove that it had exercised all the cares, skill and diligence required by law
on that particular flight in question.
 Trial Court: Plaintiff led to the inevitable conclusion that the defendant did not
exercise extraordinary diligence or prudence as far as human foresight can provide
imposed upon by the Law, but on the contrary showed negligence and indifference for
the safety of the passengers that it was bound to transport.
1. That the Pilot of the plane disobeyed instruction given in not following the
route of Amber 1 prescribed by the CAA in Violation of Standard Regulation.
2. The defendant failed to perform the pre-flight test on plane PIC-133 before
the same took off from Mandurriao Airport to Manila in order to find out a
possible defect of the plane.
3. When the defendant allowed during the flight in question, student Officer
Rodriguez on training as proved when his body was found on the plane’s
cockpit with its microphone hanging still on his left leg.
4. When the Pilot during the flight in question failed or did not report his
position over or abeam Romblon which is a compulsory reporting point.
ISSUE: whether or not the defendant is liable for violation of its contract of carriage.
HELD: YES.
 The prescribed airway of plane PI-C133 that afternoon of November 23, 1960, with
Capt. de Mesa, as the pilot, was Iloilo-Romblon-Manila, denominated as airway
"Amber I," and the prescribed elevation of the flight was 6,000 ft. The fact is, the plane
did not take the designated route because it was some 30 miles to the west when it
crashed at Mt. Baco. According to defendant’s witness, Ramon A. Pedroza,
Administrative Assistant of the Philippine Air Lines, Inc., this tragic crash would have
not happened had the pilot continued on the route indicated.
 It is clear that the pilot did not follow the designated route for his flight between
Romblon and Manila. The weather was clear and he was supposed to cross airway
"Amber I" over Romblon; instead, he made a straight flight to Manila in violation of
any traffic rules.
 The provisions of the Civil Code on this question of liability are clear and explicit.
Article 1733 binds common carriers, "from the nature of their business and by
reasons of public policy, . . . to observe extraordinary diligence in the vigilance . . . for
the safety of the passengers transported by them according to all the circumstances of
each case." Article 1755 establishes the standard of care required of a common
carrier, which is, "to carry the passengers safely as far as human care and foresight
can provide, using the utmost diligence of very cautious persons, with due regard for
all the circumstances." Article 1756 fixes the burden of proof by providing that "in
case of death of or injuries to passengers, common carriers are presumed to have
been at fault or to have acted negligently, unless they prove that they observed extra-
ordinary diligence as prescribed in Articles 1733 and 1755." Lastly, Article 1757
states that "the responsibility of a common carrier for the safety of passengers . . .
cannot be dispensed with or lessened by stipulation, by the posting of notices, by
statements on tickets, or otherwise."
69. Cathay Pacific Airways Ltd. Vs. Court of Appeals and Tomas Alcantara
G.R. No. 60501 March 5, 1993
FACTS:
 On October 19, 1975, Tomas Alcantara was a first-class passenger of Cathay Pacific
Airways, Ltd. (Cathay) on its Flight No. CX-900 from Manila to Hongkong and onward
from Hongkong to Jakarta on Flight No. CX-711.
o The purpose of his trip was to attend a conference the following day with the
Director General of Trade of Indonesia, Alcantara being the EVP and GM of
Iligan Cement Corporation, Chairman of the Export Committee of the
Philippine Cement Corporation, and representative of the Cement Industry
Authority and the Philippine Cement Corporation.
o He checked in his luggage which contained not only his clothing and articles
for personal use but also papers and documents he needed for the
conference.
 Upon his arrival in Jakarta, he discovered that his luggage was missing. When he
inquired about his luggage from Cathay's representative in Jakarta, he was told that
his luggage was left behind in Hongkong.
 o For this, Alcantara was offered $20 as "inconvenience money" to buy his
immediate personal needs until the luggage could be delivered to him.
o His luggage finally reached Jakarta more than 24 hours after his arrival.
However, it was not delivered to him at his hotel but was required by Cathay
to be picked up by an official of the Philippine Embassy.
 On March 1, 1976, Alcantara filed his complaint against Cathay with the CFI of Lanao
del Norte praying for temperate, moral and exemplary damages, plus attorney's fees.
The CFI rendered its decision ordering Cathay to pay Alcantara P20,000 for moral
damages, P5,000 for temperate damages, P10,000 for exemplary damages, and
P25,000 for attorney's fees, and the costs.
 CA rendered its decision affirming the findings of fact of the trial court but modifying
its award by increasing the moral damages to P80,000, exemplary damages to
P20,000 and temperate or moderate damages to P10,000. The award of P25,000 for
attorney's fees was maintained.
 Cathay argues that although it failed to transport Alcantara's luggage on time, the one-
day delay was not made in bad faith so as to justify moral, exemplary and temperate
damages. It submits that the conclusion of the CA that Alcantara was treated rudely
and arrogantly when he sought assistance from Cathay's employees has no factual
basis, hence, the award of moral damages has no leg to stand on. As regards its second
assigned error, Cathay contends that the extent of its liability for breach of contract
should be limited absolutely to that set forth in the Warsaw Convention.
ISSUES:
1. Whether Cathay should be held liable for damages due to the delay in transporting
Alcantara’s luggage. – YES.
2. Whether Cathay can invoke the Warsaw Convention to limit its liability. – NO.
HELD:
1. Yes. Cathay breached its contract of carriage with Alcantara when it failed to deliver his
luggage at the designated place and time, it being the obligation of a common carrier to
carry its passengers and their luggage safely to their destination, which includes the duty
not to delay their transportation. The evidence shows that Cathay acted fraudulently or in
bad faith.
Moral damages predicated upon a breach of contract of carriage may only be recoverable in
instances where the mishap results in death of a passenger, or where the carrier is guilty of
fraud or bad faith.
In this case, Cathay was grossly negligent and reckless when it failed to deliver the
luggage of Alcantara at the appointed place and time. Cathay alleges that as a result of
mechanical trouble, all pieces of luggage on board the first aircraft bound for Jakarta were
unloaded and transferred to the second aircraft which departed an hour and a half later. Yet, as
the CA noted, Cathay was not even aware that it left behind Alcantara's luggage until its
attention was called by the Hongkong Customs authorities.
While the mere failure of Cathay to deliver Alcantara's luggage at the agreed place and time did
not ipso facto amount to willful misconduct since the luggage was eventually delivered, albeit
belatedly, the Court is persuaded that the employees of Cathay acted in bad faith. The Court
referred to the deposition of Romulo Palma, Commercial Attache of the Philippine Embassy at
Jakarta, who was with Alcantara when the latter sought assistance from the employees of
Cathay. This deposition was the basis of the findings of the lower courts when both awarded
moral damages to Alcantara:
"Q: What did Mr. Alcantara say, if any?
A. Mr. Alcantara was of course . . .. I could understand his position. He was furious for
the experience because probably he was thinking he was going to meet the Director-
General the following day and, well, he was with no change of proper clothes and so, I
would say, he was not happy about the situation.
Q: What did Mr. Alcantara say?
A: He was trying to press the fellow to make the report and if possible make the
delivery of his baggage as soon as possible.
Q: And what did the agent or duty officer say, if any?
A: The duty officer, of course, answered back saying 'What can we do, the baggage is
missing. I cannot do anything.' something like it. 'Anyhow you can buy anything you
need, charged to Cathay Pacific.'
Q: What was the demeanor or comportment of the duty officer of Cathay Pacific when
he said to Mr. Alcantara 'You can buy anything chargeable to Cathay Pacific'?
A: If I had to look at it objectively, the duty officer would like to dismiss the affair as
soon as possible by saying indifferently 'Don't worry. It can be found.'"
Indeed, the aforequoted testimony shows that the language and conduct of Cathay's
representative towards Alcantara was discourteous or arbitrary to justify the grant of
moral damages. The Cathay representative was not only indifferent and impatient; he
was also rude and insulting. He simply advised Alcantara to buy anything he wanted. But
even that was not sincere because the representative knew that the passenger was limited only
to $20 which, certainly, was not enough to purchase comfortable clothing appropriate for an
executive conference. Considering that Alcantara was not only a revenue passenger but
even paid for a first-class airline accommodation and accompanied at the time by the
Commercial Attache of the Philippine Embassy who was assisting him in his problem,
Cathay or its agents should have been more courteous and accommodating to Alcantara,
instead of giving him a rude reply, "What can we do, the baggage is missing. I cannot do anything
. . . Anyhow, you can buy anything you need, charged to Cathay Pacific." Cathay's employees
should have been more solicitous to a passenger in distress and assuaged his anxieties and
apprehensions. Cathay even refused to have the luggage of Alcantara delivered to him at
his hotel; instead, he was required to pick it up himself and an official of the Philippine
Embassy. Under the circumstances, it is evident that Cathay was remiss in its duty to provide
proper and adequate assistance to a paying passenger, more so one with first class
accommodation.
Where in breaching the contract of carriage the defendant airline is not shown to have acted
fraudulently or in bad faith, liability for damages is limited to the natural and probable
consequences of the breach of obligation which the parties had foreseen or could have
reasonably foreseen. In that case, such liability does not include moral and exemplary damages.
Conversely, if the defendant airline is shown to have acted fraudulently or in bad faith, the
award of moral and exemplary damages is proper.
However, respondent Alcantara is not entitled to temperate damages, contrary to the ruling of
the CFI, in the absence of any showing that he sustained some pecuniary loss. It cannot be
refuted that Alcantara's luggage was delivered to him without serious or appreciable damage.
2. No. As it has been repeatedly held, although the Warsaw Convention has the force and
effect of law in this country, being a treaty commitment assumed by the Philippine
ail himself of the provisions of this convention which exclude or limit his liability, if
the damage is caused by his willful misconduct or by such default on his part as, in
accordance with the law of the court to which the case is submitted, is considered to be
equivalent to willful misconduct."
(2) Similarly, the carrier shall not be entitled to avail himself of the said provisions, if
the damage is caused under the same circumstances by any agent of the carrier
acting within the scope of his employment."
When Cathay misplaced Alcantara's luggage and failed to deliver it at the appointed place and
time, some special species of injury must have been caused to him. For sure, the latter
underwent profound distress and anxiety, and the fear of losing the opportunity to fulfill the
purpose of his trip. In fact, for want of appropriate clothing for the occasion brought about by
the delay of the arrival of his luggage, to his embarrassment and consternation Alcantara had to
seek postponement of his pre-arranged conference with the Director General of Trade of the
host country.
In one case, the Court observed that a traveler would naturally suffer mental anguish,
anxiety and shock when he finds that his luggage did not travel with him and he finds
himself in a foreign land without any article of clothing other than what he has on.
Thus, Alcantara is entitled to moral and exemplary damages. However, the award by the CA of
P80,000 for moral damages is excessive, hence, it should be reduced to P30,000 The exemplary
damages of P20,000 being reasonable is maintained, as well as the attorney's fees of P25,000
considering that Cathay's act or omission has compelled Alcantara to litigate with third persons
or to incur expenses to protect his interest.
WHEREFORE, the assailed decision of respondent Court of Appeals is AFFIRMED with the
exception of the award of temperate damages of P10,000 which is deleted, while the award of
moral damages of P80,000 is reduced to P30,000. The award of P20,000 for exemplary
damages is maintained as reasonable together with the attorney's fees of P25,000. The moral
and exemplary damages shall earn interest at the legal rate from March 1, 1976 when the
complaint was filed until full payment.
NORTHWEST AIRLINES vs. DR. JAIME F. LAYA
G.R. No. 145956 | May 29, 2002 | J. Kapunan
FACTS:
government, said convention does not operate as an exclusive enumeration of the
instances for declaring a carrier liable for breach of contract of carriage or as an absolute
limit of the extent of that liability. The Warsaw Convention declares the carrier liable for
damages in the enumerated cases and under certain limitations. However, it must not be
construed to preclude the operation of the Civil Code and other pertinent laws. It does not
regulate, much less exempt, the carrier from liability for damages for violating the rights of
its passengers under the contract of carriage, especially if willful misconduct on the part of
the carrier's employees is found or established, which is clearly shown in the present case.
For, the Warsaw Convention itself provides in Art. 25 that —
"(1) The carrier shall not be entitled to av
 Dr. Jaime F. Laya was bound for San Francisco via a first class booking with Northwest
Airlines. After his luggage passed, and was cleared, through the x-ray machine of the
NAIA, Dr. Laya proceeded to NWAs check-in counter and was issued a boarding
pass. However, while on his way to the first class waiting lounge, a NWA employee
who requested him to proceed to a long table where passengers were lined up. There,
the passengers Samsonite hand-carried attach cases were being subjected to further
inspection. Since he noticed that he was carrying an attach case similar to those being
inspected, Dr. Laya acceded to the request. However, in the course of the inspection,
Dr. Laya noticed that his attach case was treated differently. While the other
passengers were eventually allowed to carry their cases on board the plane, Dr. Laya
was asked to place his attach case in a black garbage bag and he was given two (2)
paper envelopes where he could put its contents.
 Dr. Laya requested that he be allowed to talk with the manager to discuss his
situation, and a certain Mr. Barreto approached him. While Dr. Laya was explaining
his plight, Mr. Rommel Evangelista, NWA’s assistant manager, told him that even if
you are the President of the Philippines or the President of the United States we are
going to do the same. (awowza!)
 Dr. Laya wrote to NWA and reported the rude treatment accorded him by its
personnel. An exchange of communication ensued but NWA did not heed his
complaint. Dr. Laya’s counsel sent a demand letter to NWA. NWA responded by
apologizing for whatever inconvenience Dr. Laya suffered but it refused Dr. Layas
demand for indemnity. Instead, the NWA Customer Relations Office sent Dr. Laya a
letter with a transportation credit voucher worth US$100.00. Dr. Laya refused to
accept the voucher but kept it for evidentiary purposes, and he promptly filed a
complaint for damages against NWA before the RTC.
 RTC – ruled in favor of Dr. Laya, awarded ONE MILLION PESOS moral damages, 500k
exemplary and 50k atty’s fees.
 CA – affirmed RTC but reduced moral damages to 500k and exemplary damages to
250k
ISSUE:
1. Whether or not Dr. Laya is entitled to the award of damages?
HELD:
YES. The security procedures adopted by NWA was only the result of a directive issued by the
Federal Aviation Administration of which NWA, being a U.S. carrier, is subject to (because the
FAA has received information stating that two-man terrorist teams have been trained in the use
of briefcase bombs). While the protection of passengers must take precedence over
convenience, the implementation of security measures must be attended by basic
courtesies. The Court is inclined to believe the testimony of Dr. Laya that the personnel who
examined his attach case were rude, brusque, arrogant and domineering and that the manager
who attended to him answered his queries in a reprehensible manner, thus causing him
humiliation as the other passengers were already looking at him.
ATTY. ERMITAO:
Q. How was the examination conducted?
A. That's precisely, the problem, Sir, its the manner it was conducted.
COURT:
Q. How?
A. They were rude to me, brusque, arrogant and they were domineering, they don't even
like to listen to what I was saying and they were autocratic.
ATTY. ERMITAO:
Q. Why do you say that they were domineering and autocratic?
A. Because I wanted these things (my personal effects) to be placed in the briefcase after thorough
examination, but they said in a loud voice - No. That's an order they said and you cannot go
against them and everything I say or explain they say no.
ATTY. ERMITAO:
Q. In what tone of voice was this reply "no" made to you?
A. Well, in a loud voice attracting other passengers while others were looking at them with
dismay and I was so embarrassed because as I said, I was singled out. The others I saw did
not have the same experience before me.
xxx
xxx
Q. In what tone of voice made by Mr. Evangelista?
A. It's exactly a loud voice with unwarranted pride. It's a reprehensible way of talking.
ATTY. ERMITAO:
Q. At that particular instance of conversation was going on between you and Evangelista
defendant corporation, did you notice, if any, what the other passengers were doing in the
lounge?
A. Precisely, Sir, they were watching me and some of them are trying to hold his head this
way. (Witness turning his head from one to the other). And I don't know what that
mean. Anyway, they were just curious looking and no one was smiling. They were turning
their head this way with a facial expression of pity. Some of them were busy arranging their
personal effects on their respective briefcases.
Any security measure must coincide with the passengers right to be treated by the
carrier with kindness, respect and utmost consideration in all matters relative to their
trip. The Court is satisfied that Dr. Laya suffered mental anguish and serious anxiety because of
his experience with NWA personnel for which he should be awarded moral damages. Dr. Laya
is also entitled to exemplary damages by way of correction to the NWA for the public good and
in view of the malevolent manner by which the NWA personnel treated Dr. Laya.
DISPOSITION:
Petition PARTIALLY GRANTED. Reduced moral damages to 100k, exemplary damages to 50k
and atty’s fees to 25k.
71 Alfredo Mallari Sr. and Alfredo Mallari Jr. v CA and Bulletin Publishing Corp.
FACTS:
 On Oct. 14, 1987, at about 5:00 in the morning, the passenger jeepney driven by
Petitioner Alfredo Mallari Jr. and owned by his co-petitioner Alfredo Mallari Sr.
collided with the delivery van of respondent Bulletin Publishing Corp. (Bulletin) along
the National Highway in San Pablo, Dinalupihan, Bataan.
 Pet. Mallari Jr. testified that he went to the left lane of the highway and overtook a
Fiera which had stopped on the right lane. Before he passed by the Fiera, he saw the
van of respondent Bulletin coming from the opposite direction.
 The sketch of the accident showed that the collision occurred after Mallari, Jr.
overtook the Fiera while negotiating a curve in the highway. The points of collision
were the left rear portion of the passenger jeepney and the left front side of the
delivery van of Bulletin. The two (2) right wheels of the delivery van were on the right
shoulder of the road and pieces of debris from the accident were found scattered
along the shoulder of the road up to a certain portion of the lane travelled by the
passenger jeepney. The impact caused the jeepney to turn around and fall on its left
side resulting in injuries to its passengers one of whom was Israel Reyes who
eventually died.
 Claudia Reyes, the widow of Israel Reyes filed a complaint for damages with the RTC
of Olongapo City against Alfredo Mallari Sr., Alfredo Mallari Jr., Bulletin, its driver Felix
Angeles and N.V. Netherlands Insurance Company.
 Trial Court found that proximate cause of the collision was the negligence of Felix
Angeles, driver of the Bulletin delivery van, considering the fact that the left front
portion of the delivery truck driven by Felix Angeles hit and bumped the left rear
portion of the passenger jeepney driven by Alfredo Mallari Jr. Hence, it ordered
Bulletin and Felix Angeles to liable jointly and severally. Complaint against Alfredo
Mallari Sr. and Alfredo Mallari Jr. was dismissed.
 CA reversed the decision. It found that there was no negligence on the part of Angeles
and his employer, Bulletin. It held that the collision was caused by the sole negligence
of Alfredo Mallari Jr. who admitted that immediately before the collision and after he
rounded the curve on the highway, he overtook a Fiera which had stopped on his land
and that he had seen van driven by Angeles before overtaking Fiera. CA ordered
Mallari Jr and Mallari Sr. to compensate Claudia Reyes.
 Hence, this petition. Petitioners contend that there is no evidence to show that Mallari
overtook the vehicle at a curve on the road at the time of the accident. Petitioner also
submits that the trial court was in a better position than the CA to assess the evidence.
ISSUE: Whether petitioners should be held liable?
HELD: YES. Contrary to their allegation that there was no evidence that petitioner Mallari Jr.
overtook the vehicle at a curve on the road at the time of or before the accident, the same
petitioner himself testified that such fact indeed occur.
CA correctly found, based on the sketch and sport report of the police authorities which were
not disputed by petitioners, that the collision occurred immediately after petitioner Mallari Jr.
overtook a vehicle in front of it while traversing a curve on the highway. This act was in clear
violation of Sec. 41 pars (a) and (b), of RA 41361 as amended, otherwise known as The Land
Transportation and Traffic Code. The rule is settled that a driver abandoning his proper
lane for the purpose of overtaking another vehicle in an ordinary situation has the duty
to see to it that the road is clear and not to proceed if he cannot do so in safety. When a
motor vehicle is approaching or rounding a curve, there is special necessity for keeping to the
right side of the road and the driver does not have the right to drive on the left hand side
relying upon having time to turn to the right if a car approaching from the opposite direction
comes into view.
In the instant case, by his own admission, petitioner Mallari, Jr. already saw that the BULLETIN
delivery van was coming from the opposite direction and failing to consider the speed thereof
since it was still dark at 5:00 o’clock in the morning mindlessly occupied the left lane and
overtook two (2) vehicles in front of it at a curve in the highway. Clearly, the proximate cause of
the collision resulting in the death of Israel Reyes, a passenger of the jeepney, was the sole
negligence of the driver of the passenger jeepney, petitioner Alfredo Mallari, Jr., who recklessly
operated and drove his jeepney in a lane where overtaking was not allowed by traffic rules.
Under Art. 2185 of the Civil Code, unless there is proof to the contrary, it is presumed that a
person driving a motor vehicle has been negligent if at the time of the mishap he was violating a
traffic regulation. As found by the appellate court, petitioners failed to present satisfactory
evidence to overcome this legal presumption.
The negligence and recklessness of the driver of the passenger jeepney is binding against
petitioner Mallari, Sr., who admittedly was the owner of the passenger jeepney engaged as a
common carrier, considering the fact that in an action based on contract of carriage, the court
need not make an express finding of fault or negligence on the part of the carrier in order to
hold it responsible for the payment of damages sought by the passenger.
Under Art. 1755 of the Civil Code, a common carrier is bound to carry the passengers safely as
far as human care and foresight can provide using the utmost diligence of very cautious
persons with due regard for all the circumstances. Moreover, under Art. 1756 of the Civil Code,
in case of death or injuries to passengers, a common carrier is presumed to have been at fault
or to have acted negligently, unless it proves that it observed extraordinary diligence. Further,
pursuant to Art. 1759 of the same Code, it is liable for the death of or injuries to passengers
through the negligence or willful acts of the former’s employees. This liability of the common
1 Sec. 41. Restrictions on overtaking and passing.—(a) The driver of a vehicle shall not drive to the left side
of the center line of a highway in overtaking or passing another vehicle proceeding in the same direction,
unless such left side is clearly visible and is free of oncoming traffic for a sufficient distance ahead to permit
such overtaking or passing to be made in safety.
(b) The driver of a vehicle shall not overtake or pass another vehicle proceeding in the same direction
when approaching the crest of a grade, nor upon a curve in the highway, where the driver’s view along the
highway is obstructed within a distance of five hundredfeet ahead except on a highway having two or more
lanes for movement of traffic in one direction where the driver of a vehicle may overtake or pass another
vehicle: Provided That on a highway, within a business or residential district, having two or more lanes for
movement of traffic in one direction, the driver of a vehicle may overtake or pass another vehicle on the
right.
carrier does not cease upon proof that it exercised all the diligence of a good father of a family
in the selection of its employees. Clearly, by the contract of carriage, the carrier jeepney owned
by Mallari, Sr. assumed the express obligation to transport the passengers to their destination
safely and to observe extraordinary diligence with due regard for all the circumstances, and
any injury or death that might be suffered by its passengers is right away attributable to the
fault or negligence of the carrier.
WHEREFORE, the Petition is DENIED and the Decision of the Court of Appeals dated 20
September 1995 reversing the decision of the trial court being in accord with law and evidence
is AFFIRMED. Consequently, petitioners are ordered jointly and severally to pay Claudia G.
Reyes P1,006,777.50 for loss of earning capacity, P50,000.00 as civil indemnity for death, and
P10,000.00 for attorney’s fees. Costs against petitioners. SO ORDERED.
72 Phil. Rabbit Bus Lines vs. IAC.
Facts:
1. The passengers boarded the jeep owned by the Mangune Spouses and driven by
Manalo to bring them to Carmen Rosales Pangasinan.
2. Upon reaching barrio Sinayoan Tarlac, The right rear wheel of the truck was detach so
the driver steps on the brake as a result of which, the jeep who is running unbalance
made a uturn so that the front part face the south where it come from and its rear face
the north where it is going.
3. The bus of the petitioner driven by Delos Reyes bump the jeep resulting in the death
of the three passengers of the jeepney and injuries to others.
4. At the time and in the vicinity of the accident, there were no vehicles following the
jeepney, neither were there oncoming vehicles except the bus. The weather condition
of that day was fair.
5. The two drivers were charged of multiple homicide before the MTC of SanMiguel
Tarlac.
6. A probable cause was found with respect to the case of Manalo and the case of Delos
Reyes was dismissed and Manalo was convicted by the court of first instance of
Pangasinan.
7. Then the heirs of the deceased passengers filed a complaint for recovery of civil
damages before the court of first instance impleading both the defendant and the
respondent.
8. The CFI found Manalo guilty of negligence but this was reverse by the IAC.
9. CA had a contrary opinion. Applying primarily (1) the doctrine of last clear chance, (2)
the presumption that drivers who bump the rear of another vehicle guilty and the
cause of the accident unless contradicted by other evidence, and (3) the substantial
factor test. concluded that delos Reyes was negligent.
ISSUE: Who is liable for the death and physical injuries suffered by the passengers of the
jeepney?
HELD: MANALO, Jeepney driver.
 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 even
 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
of res ipsa loquitur supra. The negligence of spouses Mangune and Carreon was
likewise proven during the trial.
 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.
 According to the supreme court, The IAC erred in applying the doctrine of last clear
chance in this case because this doctrine applies only in a suit between the owners
and drivers of two colliding vehicles and not in a suit where passengers demand
responsibility from a carries to enforce its contractual obligation.
 So the decision of the IAC was set aside and the decision of the CFI was reinstated.
73. Sarkies Tours Philippines Inc. vs. Court of Appeals, Dr. Fortades et al
G.R. No. 108897. October 2, 1997
FACTS:
 On August 31, 1984, Fatima boarded petitioners De Luxe Bus No. 5 in Manila on her way to
Legazpi City. Her brother Raul helped her load three pieces of luggage containing all of her
optometry review books, materials and equipment, trial lenses, trial contact lenses,
passport and visa, as well as her mother Marisols U.S. immigration (green) card, among
other important documents and personal belongings.
 Her belongings was kept in the baggage compartment of the bus, but during a stopover at
Daet, it was discovered that all but one bag remained in the open compartment.
o The others, including Fatimas things, were missing and could have dropped along
the way. Some of the passengers suggested retracing the route to try to recover
the lost items, but the driver ignored them and proceeded to Legazpi City.
 Fatima immediately reported the loss to her mother who, in turn, went to petitioners office
in Legazpi City and later at its head office in Manila. The latter, however, merely offered
her P1,000.00 for each piece of luggage lost, which she turned down.
 After returning to Bicol disappointed but not defeated, they asked assistance from the
radio stations and even from Philtranco bus drivers who plied the same route on August
31st. The effort paid off when one of Fatimas bags was recovered.
 Marisol also reported the incident to the National Bureau of Investigations field office in
Legazpi City, and to the local police.
 On September 20, 1984, respondents, through counsel, formally demanded satisfaction of
their complaint from petitioner. In a letter dated October 1, 1984, the latter apologized for
the delay and said that (a) team has been sent out to Bicol for the purpose of recovering or
at least getting the full detail of the incident.
 After more than nine months of fruitless waiting, respondents decided to file the case
below to recover the value of the remaining lost items, as well as moral and exemplary
damages, attorneys fees and expenses of litigation.
o They claimed that the loss was due to petitioners failure to observe
extraordinary diligence in the care of Fatimas luggage and that petitioner dealt
with them in bad faith from the start. Petitioner, on the other hand, disowned any
liability for the loss on the ground that Fatima allegedly did not declare any
excess baggage upon boarding its bus.
RTC= Favored respondents and against defendant Sarkies Tours Philippines Inc. ordering them
to pay 30K for the value of personal belongings, 30K transportation expenses and so on.
CA= Affirmed RTC but DELETED the award for M & E damages. MR= Denied.
ISSUE: WON CA gravely erred when it affirmed the liability of Sarkies. (NO.)
HELD:
 Petitioner claims that Fatima did not bring any piece of luggage with her, and even if she
did, none was declared at the start of the trip. The documentary and testimonial
evidence presented at the trial, however, established that Fatima indeed boarded
petitioners De Luxe Bus No. 5 in the evening of August 31, 1984, and she brought
three pieces of luggage with her, as testified by her brother Raul, who helped her
pack her things and load them on said bus. One of the bags was even recovered with
the help of a Philtranco bus driver. In its letter dated October 1, 1984, petitioner tacitly
admitted its liability by apologizing to respondents and assuring them that efforts were
being made to recover the lost items.
 The records also reveal that respondents went to great lengths just to salvage their
loss. The incident was reported to the police, the NBI, and the regional and head
offices of petitioner. Marisol even sought the assistance of Philtranco bus drivers
and the radio stations. To expedite the replacement of her mothers lost U.S. immigration
documents, Fatima also had to execute an affidavit of loss. Clearly, they would not have
gone through all that trouble in pursuit of a fancied loss.
 Fatima was not the only one who lost her luggage. Other passengers suffered a similar
fate: Dr. Lita Samarista testified that petitioner offered her P1,000.00 for her lost
baggage and she accepted it; Carleen Carullo-Magno also lost her chemical engineering
review materials, while her brother lost abaca products he was transporting to Bicol.
 Petitioners receipt of Fatimas personal luggage having been thus established, it must now
be determined if, as a common carrier, it is responsible for their loss.
 The cause of the loss in the case at bar was petitioners negligence in not ensuring
that the doors of the baggage compartment of its bus were securely fastened. As a
 result of this lack of care, almost all of the luggage was lost, to the prejudice of the
paying passengers. As the Court of Appeals correctly observed:
x x x. Where the common carrier accepted its passengers baggage for transportation
and even had it placed in the vehicle by its own employee, its failure to collect the
freight charge is the common carriers own lookout. It is responsible for the
consequent loss of the baggage. In the instant case, defendant appellants employee
even helped Fatima Minerva Fortades and her brother load the luggages/baggages in
the bus baggage compartment, without asking that they be weighed, declared,
receipted or paid for. Neither was this required of the other passengers.
 Finally, petitioner questions the award of actual damages to respondents. There is no
dispute that of the three pieces of luggage of Fatima, only one was recovered. The other
two contained optometry books, materials, equipment, as well as vital documents and
personal belongings. Respondents had to shuttle between Bicol and Manila in their efforts
to be compensated for the loss. During the trial, Fatima and Marisol had to travel from the
United States just to be able to testify. Expenses were also incurred in reconstituting their
lost documents. Under these circumstances, the Court agrees with the Court of Appeals in
awarding P30K for the lost items and P30K for the transportation expenses, but disagrees
with the deletion of the award of moral and exemplary damages which, in view of the
foregoing proven facts, with negligence and bad faith on the fault of petitioner having been
duly established, should be granted to respondents in the amount of P20,000.00
and P5,000.00, respectively.
SC= CA decision and resolution are AFFIRMED with modification that petitioner is liable
for additional 20,000 for Moral Damages and 5,000 for Exemplary Damages.
74 MAGELLAN MANUFACTURING MARKETING CORPORATION vs. COURT OF APPEALS,
ORIENT OVERSEAS CONTAINER LINES and F.E. ZUELLIG, INC.
SHIPPER/SELLER: Magellan Manufacturers Marketing Corp. (MMMC)
CONSIGNEE/BUYER: Choju Co. of Yokohama, Japan (CHOJU)
CARRIER: Orient Overseas Container Lines, Inc., (OOCL); through its agent Zuellig.
FACTS:
 Choju for a consideration of $23,220.00 bought 136,000 pieces of anahaw fans from
MMMC.
o To effect payment a letter of credit (L/C) was issued by Choju to MMMC with
Allied Bank specifying that no transshipment should be done and an on-
board bill of lading must be issued.
 MMMC paid the freight charges to OCCL and a bill of lading was issued. Upon
presentment to the bank, the agreed amount was credited to MMMC but this was
subsequently refused by the bank as it found that there was transshipment and that
there was no on-board bill of lading.
 As a result of the refusal of Choju to accept, the anahaw fans were shipped back to
Manila. MMMC abandoned the whole cargo and asked OCCL for damages.
ALLEGATIONS:
MMMC: Did not agree to the transshipment and that the mistake of the documentation was on
the part of OCCL and not upon them.
OCCL: After MMMC informed them of the refusal of the bank for payment because of not
meeting the terms of the L/C, it issued a certificate stating that its bill of lading it issued is an
on-board bill of lading and that there was no actual transhipment of the fans; That, when the
goods are transferred from one vessel to another which both belong to the same owner which
was what happened to the Anahaw fans, then there is (no) transhipment.
ISSUE/S:
1. Whether there is a valid bill of lading. YES
2. Whether there is a transshipment. YES
RULING:
RTC: In favor of carrier, OCCL. It dismissed the complaint of MMMC on the ground that it
consented to the contents of the bill of lading where it is clearly indicated that there will be
transshipment. More so, MMMC is liable to pay OCCL the freight charges from Japan to Manila
and demurrages since it was the former which ordered the reshipment of the cargo from Japan
to Manila.
CA: In favor of OCCL but the freight charges and demurrages incurred by MMMC was reduced
because OCCL did not timely inform MMMC that the goods were already in Manila in addition to
the fact that OCCL had given MMMC the option of abandoning the goods in exchange for the
demurrages.
HELD:
1. There is a valid bill of lading BUT it was not an ON-BOARD BILL OF LADING
which was the requirement in the L/C but a Shipment Bill of Lading.
The difference between the two is that an on-board bill of lading is issued immediately
after the goods are already placed in the vessel which will transport such; On the other hand, a
shipment bill of lading is issued upon receipt of goods for a later date of shipping, that the
goods are not yet placed in the vessel yet. Thus, a violation of the terms of the L/C still and
refusal of the bank is proper.
MMMC had full knowledge that the bill issued to it contained terms and conditions clearly
violative of the requirements of the letter of credit. Nonetheless, perhaps in its eagerness to
conclude the transaction with its Japanese buyer and in a race to beat the expiry date of the
letter of credit, MMMC took the risk of accepting the bill of lading even if it did not conform
with the indicated specifications, possibly entertaining a glimmer of hope and imbued with a
touch of daring that such violations may be overlooked, if not disregarded, so long as the cargo
is delivered on time
2. There is transshipment of goods and this was consented by MMMC upon receipt of
the Bill of Lading issued by OCCL.
The fact of transhipment is not dependent upon the ownership of the transporting ships or
conveyances or in the change of carriers, as the petitioner seems to suggest, but rather on the
fact of actual physical transfer of cargo from one vessel to another.

Contrary to MMMC's allegation that it did not agree to the transhipment, it could be gleaned
from the record that it actually consented to the transhipment when it received the bill of
lading personally at Zuellig's office (OCCL's agent).
75. SAMAR MINING COMPANY, INC., v. NORDEUTSCHER LLOYD and C.F. SHARP &
COMPANY, INC., defendants-appellants.
G.R. No. L-28673 October 23, 1984
FACTS:
 The case arose from an importation made by plaintiff, now appellee, SAMAR MINING
COMPANY, INC., of one (1) crate Optima welded wedge wire sieves through the M/S
SCHWABENSTEIN a vessel owned by defendant-appellant NORDEUTSCHER LLOYD,
which shipment is covered by Bill of Lading No. 18 duly issued to consignee SAMAR
MINING COMPANY, INC.
o Upon arrival of the aforesaid vessel at the port of Manila, the
aforementioned importation was unloaded and delivered in good order and
condition to the bonded warehouse of AMCYL. The goods were however
never delivered to, nor received by, the consignee at the port of destination
— Davao.
 When the letters of complaint sent to defendants failed to elicit the desired response,
consignee herein appellee, filed a formal claim for P1,691.93, the equivalent of
$424.00, against the former, but neither paid.
o Hence, the filing of the instant suit to enforce payment. Defendants-
appellants brought in AMCYL as third party defendant.
 The trial court rendered judgment in favor of plaintiff, ordering defendants to pay
the amount of P1,691.93 plus attorney's fees and costs. However, the Court stated that
defendants may recoup whatever they may pay plaintiff by enforcing the judgment
against third party defendant AMCYL which had earlier been declared in default. Only
the defendants appealed from said decision.
 The extent of appellant carrier's responsibility and/or liability in the transshipment of
the goods in question are spelled out and delineated under Section 1, paragraph 3 of
Bill of Lading No. 18, to wit:
“The carrier shall not be liable in any capacity whatsoever for any delay, loss or damage
occurring before the goods enter ship's tackle to be loaded or after the goods leave ship's
tackle to be discharged, transshipped or forwarded …”
and in Section 11 of the same Bill, which provides:
“Whenever the carrier or master may deem it advisable or in any case where the goods
are placed at carrier's disposal at or consigned to a point where the ship does not expect
to load or discharge, the carrier or master may, without notice, forward the whole or
any part of the goods before or after loading at the original port of shipment, ... This
carrier, in making arrangements for any transshipping or forwarding vessels or means
of transportation not operated by this carrier shall be considered solely the forwarding
agent of the shipper and without any other responsibility whatsoever even though the
freight for the whole transport has been collected by him.”
There clearly appears on the face of the bill of lading under column "PORT OF
TRANSHIPMENT" an entry "HONGKONG'. Despite said entries James Cu, MMMC's president still
delivered his voucher and the corresponding check in payment of the freight implying that he
consented to the transhipment.
 Defendants-appellants now shirk liability for the loss of the subject goods by claiming
that they have discharged the same in full and good condition unto the custody of
AMCYL at the port of discharge from ship — Manila, and therefore, pursuant to the
aforequoted stipulation (Sec. 11) in the bill of lading, their responsibility for the cargo
had ceased.
ISSUE: Whether Nordeutscher is liable under the bill of lading?
HELD: NO, it is not.
 Section 11 of Bill of Lading No. 18 and the third paragraph of Section 1 thereof are
valid stipulations between the parties insofar as they exempt the carrier from liability
for loss or damage to the goods while the same are not in the latter's actual custody.
 The liability of the common carrier for the loss, destruction or deterioration of goods
transported from a foreign country to the Philippines is governed primarily by the
New Civil Code. In all matters not regulated by said Code, the rights and obligations of
common carriers shall be governed by the Code of Commerce and by special laws.
Article 1736. The extraordinary responsibility of the common carrier lasts
from the time the goods are unconditionally placed in the possession of, and
received by the carrier for transportation until the same are delivered,
actually or constructively, by the carrier to the consignee, or to the person
who has a right to receive them, without prejudice to the provisions of article
1738.2
 There is no doubt that Art. 1738 finds no applicability to the instant case. The said
article contemplates a situation where the goods had already reached their place of
destination and are stored in the warehouse of the carrier. The subject goods were
still awaiting transshipment to their port of destination, and were stored in the
warehouse of a third party when last seen and/or heard of.
 However, Article 1736 is applicable to the instant suit. Under said article, the carrier
may be relieved of the responsibility for loss or damage to the goods upon actual or
constructive delivery of the same by the carrier to the consignee, or to the person who
has a right to receive them. In sales, actual delivery has been defined as the ceding of
corporeal possession by the seller, and the actual apprehension of corporeal
possession by the buyer or by some person authorized by him to receive the goods as
his representative for the purpose of custody or disposal. By the same token, there is
actual delivery in contracts for the transport of goods when possession has been
2 Article 1738. The extraordinary liability of the common carrier continues to be operative even during the
time the goods are stored in a warehouse of the carrier at the place of destination, until the consignee has
been advised of the arrival of the goods and has had reasonable opportunity thereafter to remove them or
otherwise dispose of them.

turned over to the consignee or to his duly authorized agent and a reasonable time is
given him to remove the goods. The court a quo found that there was actual delivery
to the consignee through its duly authorized agent, the carrier.
 Two undertakings appeared embodied and/or provided for in the Bill of Lading in
question.
o The first is FOR THE TRANSPORT OF GOODS from Bremen, Germany to
Manila.
o The second, THE TRANSSHIPMENT OF THE SAME GOODS from Manila to
Davao, with appellant acting as agent of the consignee.
o At the hiatus between these two undertakings of appellant which is the
moment when the subject goods are discharged in Manila, its personality
changes from that of carrier to that of agent of the consignee.
 Thus, the character of appellant's possession also changes, from
possession in its own name as carrier, into possession in the name
of consignee as the latter's agent.
o Such being the case, there was, in effect, actual delivery of the goods from
appellant as carrier to the same appellant as agent of the consignee.
o Upon such delivery, the appellant, as erstwhile carrier, ceases to be
responsible for any loss or damage that may befall the goods from that point
onwards. This is the full import of Article 1736.
 HOWEVER, even as agent of the consignee, the appellant cannot be made answerable
for the value of the missing goods.
o Though the object of the agency (i.e. the transshipment of goods), was not
fully performed, appellant had commenced said performance, the
completion of which was aborted by circumstances beyond its control.
o An agent who carries out the orders and instructions of the principal
without being guilty of negligence, deceit or fraud, cannot be held
responsible for the failure of the principal to accomplish the object of the
agency.
76) SWEET LINES INC. v. TEVES
FACTS:
 Respondents Atty. Leovigildo Tandog and Rogelio Tiro bought tickets for Voyage 90 at
the branch office of petitioner Sweet Lines, Inc., a shipping company transporting
inter-island passengers and cargoes at Cagayan de Oro City.
 Respondents Tandog, and Tiro were to board petitioner Sweet Lines’ vessel, M/S
Sweet Hope bound for Tagbilaran City via port of Cebu.
ISSUE: WON Condition No. 14 is valid- NO
RULING:
There is no question that there was a valid contract of carriage entered into by petitioner
Sweet Lines and respondents Tandog and Tiro and that the passage tickets, upon which they
based their complaint are the best evidence  all the essential elements of a valid contract are
present (consent, cause or consideration, and object)
11
Upon learning that the vessel was not proceeding to Bohol, since many passengers were bound
for Surigao, respondents Tandog and Teves per advice, went to the branch office for proper
relocation to M/S Sweet Town.
Because M/S Sweet Town was already filled to capacity, they were forces to agree to hide at the
cargo section to avoid inspection of officers of the Philippine Coastguard.
Tandog and Tiro alleged that during the trip, they were exposed to the scorching heat of the sun
and dust coming from the ship’s cargo of corn grits and that the tickets they bought at CDO for
Tagbilaran were not honored and they were constrained to pay for other tickets.
Tandog and Tiro sued Sweet Lines for damages and breach of contract of carriage in the sum of
P10k before respondent CFI Misamis Oriental.
Petitioner Sweet Lines filed MTD on the ground of improper venue which was premised on the
condition printed at the back of the tickets (“Condition No. 14- any and all actions arising out of
the conditions and provisions of this ticket, irrespective of where it is issued, shall be filed in the
competent courts in the City of Cebu”)
 DENIED
Petitioner filed MR  DENIED
Hence, this present petition of prohibition with preliminary injunction alleging that respondent
judge Teves acted with GADALEJ.
Respondents Tandog and Tiro allege that Condition No. 14 is not valid because:
 that the same is not an essential element of the contract of carriage, being in itself a
different agreement which requires mutual consent of the parties to it
 they had no say in its preparation, the existence of which they could not refuse,
hence, they had no choice but to pay for the tickets and avail Sweet Lines’ shipping
facilities out of necessity
 Sweet Lines has been exacting too much from the public by inserting impositions in
the passage tickets too burdensome to bear
 the condition was not binding
 while the venue of actions may be transferred to one province to another, such
arrangement requires written agreement of the parties, not to be imposed
unilaterally
-However, with respect to the 14 conditions (Condition No. 14 being the issue in this case)
which was printed at the back of the passage tickets are commonly knowna as contracts of
adhesion, the validity and/or enforceability of which will have to be determined by the
peculiar circumstances obtaining in each case and nature of the conditions or terms sought to
be enforced
-While generally, stipulations in a contract come about after deliberate drafting by both parties
thereto, there are certain contracts almost all the provisions of which have been drafter only by
one party, usually a corporation  such contracts are contracts of adhesion because the only
participation of the party is the signing of his signature or his “adhesion” thereto

-The courts cannot ignore that nowadays, monopolies, cartels, and concentration of capital
endowed with overwhelming economic power, manage to impose upon parties prepared
“agreements” that the weaker party may not change, with this participation in the “agreement”
being reduced to the alternative to ‘take it or leave it’
-In the present case, the Court holds that Condition No. 14 printed at the back of the passage
ticket should be held as void and unenforceable for the ff. reasons:
1. under the circumstances, obligation in the inter-island shipping industry is not just
and fair to bind passengers to the terms and conditions printed at the back of the
ticket
2. Condition No. 14 subverts public policy on transfer of venue of proceedings of this
nature, since the same will prejudice rights and interests of innumerable passengers
in different parts of the country who, under Condition No. 14 will have to file suits
against petitioner Sweet Lines only in Cebu City
-It is hardly just and proper to expect the passenger to examine their tickets received from
crowded/congested counters, more often than not during rush hours, for conditions that may
be printed much charge them with having consented to the consisted
-Condition No. 14 was prepared solely by Sweet Lines and respondents had no say in its
preparation
WHEREFORE, petition is DISMISSED.
77 AMPARO C. SERVANDO, CLARA UY BICO, v. PHILIPPINE STEAM NAVIGATION CO
G.R. No. L-36481-2 October 23, 1982
FACTS:
 Appellees Clara Uy Bico (1,528 cavans of rice worth P40,907.50) and Amparo
Servando (44 cartons of colored paper toys and general merchandise worth
P1,070.50) loaded their respective cargoes on board appellant's vessel (Philippine
Steam Navigation Co.'s ) for carriage from Manila to Negros Occidental.
 The cargoes are represented by a Bill of Lading which states:
 Clause 14. Carrier shall not be responsible for loss or damage to
shipments billed 'owner's risk' unless such loss or damage is due to
negligence of carrier. Nor shall carrier be responsible for loss or
damage caused by force majeure, dangers or accidents of the sea or
other waters; war; public enemies; . . . fire . ...
 Upon arrival of the vessel at Pulupandan, in the morning of November 18, 1963, the
cargoes were discharged, complete and in good order, unto the warehouse of the
Bureau of Customs.
 After appellee Uy Bico had taken delivery of apportion of her cargoes, the warehouse
was rated by fire of unknown origin, destroying the rest of the two appellees' cargoes.
 Before the fire, 907 cavans of rice were delivered by Uy Bico
 Appellees filed their claims from appellant for the recovery of the value of the goods
destroyed by fire.
12
 Upon arrival of the vessel at the place of destination, the cargoes were discharged,
complete and in good order, into the warehouse of the Bureau of Customs. After
appellee Uy Bico had taken delivery of apportion of her cargoes, the warehouse was
rated by fire of unknown origin, destroying the rest of the two appellees' cargoes.
Appellees filed their claims from appellant for the recovery of the value of the goods
destroyed by fire.
 CFI- ruled in favor of appellees and ordered payment of their claims, stating that since
the burning of the warehouse occurred before actual or constructive delivery of the
goods to the appellees, the loss is chargeable against the appellant. Otherwise stated,
the delivery of the shipment in question to the warehouse of the Bureau of Customs is
not the delivery contemplated by Article 1736
o The lower court in its decision relied on the ruling laid down in Yu Biao
Sontua vs. Ossorio, 43 Phil. 511, where this Court held the defendant liable
for damages arising from a fire caused by the negligence of the defendant's
employees while loading cases of gasoline and petroleum products.
ISSUE(S):
1. W/N Philippine Steam should not be liable because of the stipulation in the bill of
lading exempting it from fortuitous event
2. W/N Bill of Lading limiting the liability is valid
HELD: Yes to both.
RATIO:
1. Agreement was in iteration of Article 1174. It states that “Except in cases expressly
specified by the law, or when it is otherwise declared by stipulation, or when the
nature of the obligation requires the assumption of risk, no person shall be
responsible for those events which could not be foreseen, or which, though foreseen,
were inevitable.” 'Caso fortuito' presents the following essential characteristics:
a. the cause of the unforeseen and unexpected occurrence, or of the failure of
the debtor to comply with his obligation, must be independent of the human
will;
b. it must be impossible to foresee the event which constitutes the 'caso
fortuito', or if it can be foreseen, it must be impossible to avoid;
c. the occurrence must be such as to render it impossible for the debtor to
fulfill his obligation in a normal manner; and
d. the obligor must be free from any participation in the aggravation of the
injury resulting to the creditor."
In the case at bar, the burning of the customs warehouse was an extraordinary event
which happened independently of the will of the appellant. The latter could not have
foreseen the event.
There is nothing in the record to show that appellant carrier incurred in delay in the
performance of its obligation. It appears that appellant had not only notified appellees
of the arrival of their shipment, out had demanded that the same be withdrawn. In
fact, pursuant to such demand, appellee Uy Bico had taken delivery of 907 cavans of
rice before the burning of the warehouse.

The appellant or its employees cannot also be charged with negligence. The storage of
the goods in the Customs warehouse pending withdrawal thereof by the appellees
was undoubtedly made with their knowledge and consent. Since the warehouse
belonged to and was maintained by the government, it would be unfair to impute
negligence to the appellant, the latter having no control whatsoever over the same.
Furthermore, the CFI erred in using the case of Yu Biao Sontua vs. Ossorio, as basis
because unlike in the said case, there is not a shared of proof in the present case that
the cause of the fire that broke out in the Custom's warehouse was in any way
attributable to the negligence of the appellant or its employees. Under the
circumstances, the appellant is plainly not responsible.
2. It should be pointed out, however, that in the bills of lading issued for the cargoes in
question, the parties agreed to limit the responsibility of the carrier for the loss or
damage that may be caused to the shipment by inserting therein the following
stipulation:
Clause 14. Carrier shall not be responsible for loss or damage to
shipments billed 'owner's risk' unless such loss or damage is due to
negligence of carrier. Nor shall carrier be responsible for loss or
damage caused by force majeure, dangers or accidents of the sea or
other waters; war; public enemies; . . . fire . ...
The Court sustains the validity of the above stipulation; there is nothing therein that is
contrary to law, morals or public policy.
Appellees would contend that the above stipulation does not bind them because it
was printed in fine letters on the back-of the bills of lading; and that they did not sign
the same. Settled is the rule that Such provisions have been held to be a part of the
contract of carriage, and valid and binding upon the passenger regardless of the
latter's lack of knowledge or assent to the regulation'. It is what is known as a contract
of 'adhesion', in regards which it has been said that contracts of adhesion wherein one
party imposes a ready made form of contract on the other, as the plane ticket in the
case at bar, are contracts not entirely prohibited. The one who adheres to the contract
is in reality free to reject it entirely; if he adheres, he gives his consent.
78 H.E. Heacock
79. EDGAR COKALIONG SHIPPING LINES, INC., petitioner, vs. UCPB GENERAL INSURANCE
COMPANY, INC., respondent.
G.R. No. 146018. June 25, 2003
FACTS:
 December 11, 1991: Nestor Angelia (shipper and consignee) delivered to the petitioner
Edgar Cokaliong Shipping Lines, Inc. (now Cokaliong Shipping Lines), a cargo consisting of
one (1) carton of Christmas decor and two (2) sacks of plastic toys, to be transported on
board the M/V Tandag from Cebu City for Tandag, Surigao del Sur. This cargo is under Bill
of Lading No. 58, in the amount of P6,500.00.
13
 Zosimo Mercado (another shipper and consignee) likewise delivered cargo to petitioner
consisting of two (2) cartons of plastic toys and Christmas decor, one (1) roll of floor mat
and one (1) bundle of various or assorted goods. This is under Bill of Lading No. 59, valued
in the amount of P14,000.00
 Feliciana Legaspi (owner of the goods) insured the cargo, covered by BOL Nos. 59 and No.
58, with the UCPB General Insurance Co., Inc., [respondent]. No. 59 was insured for
P100,000 while No. 58 for P50,000. [*Both amounts are far from the actual and declared
value in the BOLs issued by Cokaliong]
 After the vessel had passed by the Mandaue-Mactan Bridge, fire ensued in the engine
room, and, despite earnest efforts of the officers and crew of the vessel, the fire engulfed
and destroyed the entire vessel resulting in the loss of the vessel and the cargoes therein.
 Feliciana Legaspi filed a claim, with [respondent], for the value of the cargos insured. The
latter approved the claim. For Bill of Lading No. 59, Legaspi received from UCPB
P99,000.00 while for No. 58, P60,338.00.
 UCPB as subrogee of Legaspi, filed a complaint anchored on torts against petitioner, with
the RTC of Makati City, for the collection of the total principal amount of P148,500.00.
Respondent alleged that the loss of the cargo was due to the negligence of the petitioner
 Petitioner alleged that: (a) It was cleared by the Board of Marine Inquiry of any negligence
in the burning of the vessel; and (b) it cannot be held liable for the loss of the cargo beyond
the value thereof declared in the Bill of Lading.
Issue:
(1) Is petitioner liable for the loss of the goods? YES
(2) If it is liable, what is the extent of its liability? According to what was reflected in the
Bill of Lading
Held:
1. Petitioner’s argument: the cause of the loss of the goods, subject of this case, was force
majeure. It adds that its exercise of due diligence was adequately proven by the findings of
the Philippine Coast Guard.
 The Supreme Court was not convinced. The uncontroverted findings of the Philippine
Coast Guard show that the M/V Tandag sank due to a fire, which resulted from a crack
in the auxiliary engine fuel oil service tank. The crack was located on the side of the
fuel oil tank, which had a mere two-inch gap from the engine room walling, thus
precluding constant inspection and care by the crew
 Having originated from an unchecked crack in the fuel oil service tank, the fire could
not have been caused by force majeure. Broadly speaking, force majeure generally
applies to a natural accident, such as that caused by a lightning, an earthquake, a
tempest or a public enemy.
o Hence, fire is not considered a natural disaster or calamity. It does not fall
within the category of an act of God unless caused by lighting or by other
natural disaster or calamity. It may even be caused by the actual fault or
privity of the carrier.
o Peril of fire is not comprehended within the exceptions in Article 17343;
Article 17354 applies
3Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of the goods, unless
the same is due to any of the following causes only: (1) Flood, storm, earthquake, lightning, or other natural

 Where loss of cargo results from the failure of the officers of a vessel to inspect their
ship frequently so as to discover the existence of cracked parts, that loss cannot be
attributed to force majeure, but to the negligence of those officials.
 Ensuring the seaworthiness of the vessel is the first step in exercising the required
vigilance. Petitioner did not present sufficient evidence showing what measures or
acts it had undertaken to ensure the seaworthiness of the vessel.
o It failed to show when the last inspection and care of the auxiliary engine
fuel oil service tank was made, or some other evidence to establish that it
had exercised extraordinary diligence.
o It merely stated that constant inspection and care were not possible, and
that the last time the vessel was dry-docked was in November 1990.
2. Respondent’s contention: petitioner’s liability should be based on the actual insured value
of the goods, subject of this case.
 Petitioner’s: its liability should be limited to the value declared by the
shipper/consignee in the Bill of Lading.
 SC: Petitioner should not be held liable for more than what was declared by the
shippers/consignees as the value of the goods in the bills of lading.
 The records show that the Bills of Lading covering the lost goods contain the
stipulation that in case of claim for loss or for damage to the shipped merchandise or
property, [t]he liability of the common carrier x x x shall not exceed the value of the
goods as appearing in the bill of lading.
 A stipulation that limits liability is valid as long as it is not against public policy.
Following provisions apply in the present case:
Art. 1749. A stipulation that the common carriers liability is limited to
the value of the goods appearing in the bill of lading, unless the
shipper or owner declares a greater value, is binding.
Art. 1750. A contract fixing the sum that may be recovered by the
owner or shipper for the loss, destruction, or deterioration of the
goods is valid, if it is reasonable and just under the circumstances,
and has been freely and fairly agreed upon.
 Pursuant to the afore-quoted provisions of law, it is required that the stipulation
limiting the common carriers liability for loss must be reasonable and just under the
circumstances, and has been freely and fairly agreed upon.
 In the present case, the stipulation limiting petitioner’s liability is not contrary to
public policy.
disaster or calamity; (2) Act of the public enemy in war, whether international or civil; (3) Act of omission
of the shipper or owner of the goods; (4) The character of the goods or defects in the packing or in the
containers, and (5) Order or act of competent public authority.
4 Art. 1735. In all cases other than those mentioned in Nos. 1, 2, 3, 4, and 5 of the preceding article, if the
goods are lost, destroyed or deteriorated, common carriers are presumed to have been at fault or to have
acted negligently, unless they prove that they observed extraordinary diligence as required in Article 1733.
14
o The shippers/consignees may recover the full value of the goods by the
simple expedient of declaring the true value of the shipment in the Bill of
Lading. Other than the payment of a higher freight, there was nothing to stop
them (Legaspi, et.al) from placing the actual value of the goods therein.
o In fact, they committed fraud against the common carrier by deliberately
undervaluing the goods in their Bill of Lading, thus depriving the carrier of
its proper and just transport fare.
 Concededly, the purpose of the limiting stipulation in the Bill of Lading is to protect
the common carrier. Such stipulation obliges the shipper/consignee to notify the
common carrier of the amount that the latter may be liable for in case of loss of the
goods. The common carrier can then take appropriate measures -- getting insurance,
if needed, to cover or protect itself. This precaution on the part of the carrier is
reasonable and prudent.
Dispositive Portion:
WHEREFORE, the Petition is hereby PARTIALLY GRANTED. The assailed Decision is MODIFIED
in the sense that petitioner is ORDERED to pay respondent the sums of P14,000 and P6,500,
which represent the value of the goods stated in Bills of Lading Nos. 59 and 58, respectively. No
costs.
80 Belgian Overseas Chartering v. Phil. First Insurance
G.R. No. 143133|| June 5, 2002 || J. Panganiban
FACTS::
 CMC Trading A.G. shipped coils of prime cold rolled steel sheets on board MN/AN
Angel Sky to be transported from Hamburg to Manila, Philippine Steel Trading as
consignee.
 When the cargo was discharged in Manila, Philippine Steel found that it was unfit for
its purpose, thus declared a total loss.
 Philippine First Insurance paid Philippine Steel and instituted a suit for
reimbursement against Belgian Shipping. RTC ruled in favor of Belgian Shipping while
CA reversed the decision.
ISSUES:
1) W/N the common carrier is negligent;
2) W/N notice of loss was timely filed;
3) W/N the package limitation of liability is applicable.
HELD:
 1st Issue - NO. Mere proof of delivery of the goods in good order to a common carrier
and of their arrival in bad order at their destination constitutes a prima facie case of
fault or negligence against the carrier. Petitioners failed to rebut the prima facie
presumption of negligence in the case at bar. True, the words "metal envelopes rust
stained and slightly dented" were noted on the Bill of Lading; however, there is no
showing that petitioners exercised due diligence to forestall or lessen the loss. Having
failed to discharge the burden of proving that they have exercised the extraordinary
diligence required by law, petitioners cannot escape liability for the damage to the

four coils.
 2nd Issue - YES. Pursuant to Section 3, paragraph 6 of the Carriage of Goods by Sea Act
(COGSA), a failure to file a notice of claim within three days will not bar recovery if it
is nonetheless filed within one year. This one-year prescriptive period also applies to
the shipper, the consignee, the insurer of the goodsor any legal holder of the bill of
lading. In the present case, the cargo was discharged on July 31, 1990, while the
Complaint was filed by respondent on July 25, 1991, within the one-year prescriptive
period.
 3rd Issue - YES. In the case before us, there was no stipulation in the Bill of Lading
limiting the carrier's liability. Neither did the shipper declare a higher valuation of the
goods to be shipped. This fact notwithstanding, the insertion of the words "L/C No.
90/02447 cannot be the basis for petitioners' liability.
81. Shewaram vs. Philippine Air Lines (PAL)
G.R. No. L-20099 July 7, 1966
FACTS:
 On November 23, 1959, Parmanand Shewaram, was a paying passenger with ticket
No. 4-30976, on PAL’s flight No. 976/910 from Zamboanga City bound for Manila. He
checked in 3 pieces of baggage — a suitcase and 2 other pieces. The suitcase was
mistagged by PAL's personnel in Zamboanga City, as IGN (for Iligan) with claim check
No. B-3883, instead of MNL (for Manila). When Shewaram arrived in Manila, his
suitcase was missing because it was sent to Iligan.
 Shewaram made a claim with PAL's personnel in Manila airport and another suitcase
similar to his own which was the only baggage left for that flight was given to the him
for him to take delivery but he refused on the ground that it was not his, alleging that
all his clothes were white and the National transistor and a Rollflex camera were not
found. It also contained a pistol which he did not have nor placed inside his suitcase.
o After inquiries were made by PAL's personnel from different airports where
the suitcase in question must have been sent, it was found to have reached
Iligan. The station agent of the PAL in Iligan caused the same to be sent to
Manila for delivery to Shewaram which arrived on the next day. It was also
found out that the suitcase shown to and given to Shewaram for delivery
which he refused to take delivery belonged to a certain Del Rosario who was
bound for Iligan in the same flight with him.
o When the Shewaram's suitcase arrived in Manila, he was informed by Tomas
Blanco, Jr., the acting station agent of the Manila airport. However, his
Transistor Radio and the Rollflex Camera were missing. Shewaram made
demand for these 2 items or for the value thereof but the same was not
complied with by PAL. Shewaram instituted an action to recover damages
due to the failure of PAL to observe extraordinary diligence in the vigilance
and carriage of his luggage.
 It is apparent that Shewaram’s suitcase was tampered with because when the suitcase
arrived in Manila, PAL's personnel could open the same in spite of the fact that
Shewaram had it under a key when he delivered the suitcase to PAL's personnel in
Zamboanga City. Moreover, it was established during the hearing that there was space
in the suitcase where the two items in question could have been placed. There was no
15
evidence to show that Shewaram's suitcase was never opened during the time it was
placed in PAL's possession and prior to its recovery by the him.
 However, PAL had presented evidence that it had authority to open passengers'
baggage to verify and find its ownership or identity.
o Exhibit "1" of PAL would show that the baggage that was offered to
Shewaram as his own was opened and he denied ownership of the contents
of the baggage.
o This proven fact that baggage may and could be opened without the
necessary authorization and presence of its owner, applied too, to the
suitcase of Shewaram which was mis-sent to Iligan City because of
mistagging.
o The possibility of what happened in the baggage of Mr. Del Rosario at the
Manila Airport in his absence could have also happened to Shewaram’s
suitcase at Iligan City.
o The trial court believes that these two items were really in Shewaram's
suitcase and PAL should be held liable for the same by virtue of its contract
of carriage.
 After trial, the municipal court of Zamboanga City rendered judgment ordering the
appellant to pay appellee P373.00 as actual damages, P100.00 as exemplary damages,
P150.00 as attorney's fees, and the costs of the action.
 PAL appealed to the CFI of Zamboanga City. The CFI modified the judgment of the
inferior court by ordering the PAL to pay the Shewaram only the sum of P373.00 as
actual damages, with legal interest from May 6, 1960 and the sum of P150.00 as
attorney's fees, eliminating the award of exemplary damages.
ISSUE: Whether Shewaram was bound by the provisions of the tariff regulations filed by PAL
with the civil aeronautics board and the conditions of carriage printed at the back of the plane
ticket stub.
Held: NO.
 There is no question that PAL is a common carrier. As such, from the nature of its
business and for reasons of public policy, it is bound to observe extraordinary
diligence in the vigilance over the goods and for the safety of the passengers
transported by it according to the circumstances of each case. It having been
shown that the loss of the transistor radio and the camera of Shewaram, costing
P373.00, was due to the negligence of its employees it is clear that PAL should be held
liable for the payment of said loss.
 It is, however, contended by the PAL that its liability should be limited to the amount
stated in the conditions of carriage printed at the back of the plane ticket stub which
was issued to the Shewaram, which conditions are embodied in Domestic Tariff
Regulations No. 2 which was filed with the Civil Aeronautics Board. One of those
conditions, which is pertinent to the issue raised by the PAL in this case provides as
follows:
The liability, if any, for loss or damage to checked baggage or for
delay in the delivery thereof is limited to its value and, unless the
passenger declares in advance a higher valuation and pay an

additional charge therefor, the value shall be conclusively deemed not
to exceed P100.00 for each ticket.
 PAL maintains that in view of the failure of the Shewaram to declare a higher value for
his luggage, and pay the freight on the basis of said declared value when he checked
such luggage at the Zamboanga City airport, pursuant to the abovequoted condition,
Shewaram cannot demand payment from the appellant of an amount in excess of
P100.00.
 The law that may be invoked, in this connection is Art. 1750 of the New Civil Code
which provides as follows:
A contract fixing the sum that may be recovered by the owner or
shipper for the loss, destruction, or deterioration of the goods is valid,
if it is reasonable and just under the circumstances, and has been
fairly and freely agreed upon.
 In accordance with the above-quoted provision of Art. 1750 of the New Civil Code, the
pecuniary liability of a common carrier may, by contract, be limited to a fixed amount.
It is required, however, that the contract must be "reasonable and just under the
circumstances and has been fairly and freely agreed upon."
 The requirements provided in Article 1750 of the New Civil Code must be complied
with before a common carrier can claim a limitation of its pecuniary liability in case of
loss, destruction or deterioration of the goods it has undertaken to transport.
 In this case, the requirements of said article have not been met.
o It cannot be said that Shewaram had actually entered into a contract with
the PAL, embodying the conditions as printed at the back of the ticket stub
that was issued by PAL to him.
o The fact that those conditions are printed at the back of the ticket stub
in letters so small that they are hard to read would not warrant the
presumption that Shewaram was aware of those conditions such that
he had "fairly and freely agreed" to those conditions.
o The trial court has categorically stated in its decision that PAL admits that
passengers do not sign the ticket, much less did Shewaram sign his ticket
when he made the flight on November 23, 1959. Shewaram is not, and
cannot be bound by the conditions of carriage found at the back of the ticket
stub issued to him when he made the flight on PAL's plane.
The liability of the appellant in the present case should be governed by the provisions of Arts.
1734 and 1735 of the New Civil Code:
ART. 1734. Common carries are responsible for the loss, destruction, or deterioration of
the goods, unless the same is due to any of the following causes only:
(1) Flood, storm, earthquake, or other natural disaster or calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the
containers;
16
(5) Order or act of competent public authority.
ART. 1735. In all cases other than those mentioned in Nos. 1, 2, 3, 4 and 5 of the
preceding article, if the goods are lost, destroyed or deteriorated, common carriers are
presumed to have been at fault or to have acted negligently, unless they prove that they
observed extraordinary diligence as required in Article 1733.
It having been clearly found by the trial court that the transistor radio and the camera of
Shewaram were lost as a result of the negligence of the PAL as a common carrier, the
liability of the PAL is clear — it must pay the Shewaram the value of those two articles.
In the case of Ysmael and Co. vs. Barreto, cited by the trial court in support of its decision, this
Court had laid down the rule that the carrier cannot limit its liability for injury to or loss of
goods shipped where such injury or loss was caused by its own negligence. The rule rests
on considerations of public policy.
In view of the foregoing, the decision appealed from is affirmed, with costs against the
appellant.
82. Del Guerrero
83. Philippine American General Insurance Co. Inc. and Tagum Plastics Inc. vs. Sweet
Lines Inc., Davao Veterans Arrastre and Port Services Inc. and CA
FACTS:
 On May 12, 1978, Petitioners Philippine American General Insurance Co. Inc.
(Philamgen) and Tagum Plastics Inc. commenced an action against private
respondents Sweet Lines Inc. (SLI) and Davao Veterans Arrastre and Port Services Inc.
(DVAPSI), along with SCI Line and F.E. Zuellig Inc. as co-defendants.
 The vessel SS VISHVA YASH belonging to or operated by foreign common carrier took
on board at Baton Rouge, LA, two consignments of cargoes for shipment to Manila and
later for transshipment to Davao. It consisted 600 bags Low Density Polyethylene 631
and another 6,400 bags Low Density Polyethylene 647.
 The cargoes were insured by the Tagum Plastics Inc. with Philamgen.
 The vessel arrived at Manila and discharged its cargoes in the Port of Manila for
transshipment to Davao City. For the transshipment, the service of the vessel MV
Sweet Love owned by defendants interisland carrier was used.
 On May 15, 1977, shipments were discharged from the interisland carrier into the
custody of the consignee. A survey was conducted on July 8, 1977, it was found that, of
the cargo covered by Bill of Lading no. 25 and 26, supposed to contain 6,400 bags of
Low Density Polyethylene 647, but only 5, 413 bags were in good order and out of the
600 bags of Low Density Polyethylene 631, only 507 bags were in good condition.
Only a total of 5, 820 bags were delivered to the consignee in good order, leaving a
balance of 1,080 bags.
 Before trial, a compromise agreement was entered into between the petitioners and
defendants SCI Line and F/E/ Zuellig upon the latter’s payment of P532,65

 Trial Court: Granted the MTD grounded on said amicable settlement and the case as to
SCI Line and F.E. Zuellig was dismissed. Judgment was rendered in favor of Philamgen
and against SLI and DVAPSI.
 CA: Reversed TC decision on the ground of prescription.
 Hence, this petition for certiorari.
 Petitioners contend that it was error for the Court of Appeals to reverse the appealed
decision on the supposed ground of prescription when SLI failed to adduce any
evidence in support thereof and that the bills of lading said to contain the shortened
periods for filing a claim and for instituting a court action against the carrier were
never offered in evidence. Considering that the existence and tenor of this stipulation
on the aforesaid periods have allegedly not been established, petitioners maintain
that it is inconceivable how they can possibly comply therewith.
 SLI avers that it is standard practice in its operations to issue bills of lading for
shipments entrusted to it for carriage and that it in fact issued bills of lading
numbered MD-25 and MD-26 therefor with proof of their existence manifest in the
records of the case.
 DVAPSI insists on the propriety of the dismissal of the complaint as to it due to
petitioners’ failure to prove its direct responsibility for the loss and/or damage of the
cargo.
ISSUE: Whether petitioners may still recover from respondents?
HELD: NO.
 In the present case and under the assumption that the time limit involved is a
prescriptive period, respondent carrier duly raised prescription as an affirmative
defense in its answer setting forth paragraph 5 of the pertinent bills of lading which
comprised the stipulation thereon by parties, to wit:
“5. Claims for shortage, damage, must be made at the time of delivery
to consignee or agent, if container shows exterior signs of damage or
shortage. Claims for non-delivery, misdelivery, loss or damage must
be filed within 30 days from accrual. Suits arising from shortage,
damage or loss, non-delivery or misdelivery shall be instituted within
60 days from date of accrual of right of action. Failure to file claims
or institute judicial proceedings as herein provided constitutes waiver
of claim or right of action. In no case shall carrier be liable for any
delay, non-delivery, misdelivery, loss of damage to cargo while cargo
is not in actual custody of carrier.”
 Petitioners asserted that the agreements are considered as contracts of adhesion, the
provisions therein which are contrary to law and public policy cannot be availed of by
answering defendant as valid defenses.
 Petitioners’ failure to specifically deny the existence, much less the genuineness and
due execution, of the instruments in question amounts to an admission.
o Even granting that petitioners’ averment in their reply amounts to a denial,
it has the procedural earmarks of what in the law on pleadings is called a
negative pregnant, that is, a denial pregnant with the admission of the
substantial facts in the pleading responded to which are not squarely denied.
17
It is in effect an admission of the averment it is directed to. Thus, while
petitioners objected to the validity of such agreement for being contrary to
public policy, the existence of the bills of lading and said stipulations were
nevertheless impliedly admitted by them.
o Petitioners failed to touch on the matter of the non-presentation of the bills
of lading in their brief and earlier on in the appellate proceedings in this
case, hence it is too late in the day to now allow the litigation to be
overturned on that score, for to do so would mean overindulgence in
technicalities.
 It is to be noted that the carriage of the cargo involved was effected pursuant to an
“Application for Delivery of Cargoes without Original Bill of Lading” issued on May 20,
1977 in Davao City with the notation therein that said application corresponds to and
is subject to the terms of bills of lading MD-25 and MD-26.
o It would be a safe assessment to interpret this to mean that, sight unseen,
petitioners acknowledged the existence of said bills of lading. By having the
cargo shipped on respondent carrier’s vessel and later making a claim for
loss on the basis of the bills of lading, petitioners for all intents and purposes
accepted said bills.
o Having done so they are bound by all stipulations contained therein.
o As petitioners are suing for recovery on the contract, and in fact even went
as far as assailing its validity by categorizing it as a contract of adhesion,
then they necessarily admit that there is such a contract, their knowledge of
the existence of which with its attendant stipulations they cannot now be
allowed to deny.
 Stipulations in bills of lading or other contracts of shipment which require notice of
claim for loss of or damage to goods shipped in order to impose liability on the carrier
operate to prevent the enforcement of the contract when not complied with, that is,
notice is a condition precedent and the carrier is not liable if notice is not given in
accordance with the stipulation, as the failure to comply contract of carriage with
respect to notice of loss or claim for damage bars recovery for the loss or damage
suffered.
o The shipment in question was discharged into the custody of the consignee
on May 15, 1977, and it was from this date that petitioners’ cause of action
accrued, with thirty (30) days therefrom within which to file a claim with the
carrier for any loss or damage which may have been suffered by the cargo
and thereby perfect their right of action.
o The findings of respondent court as supported by petitioners’ formal offer of
evidence in the court below show that the claim was filed with SLI only on
April 28, 1978, way beyond the period provided in the bills of lading and
violative of the contractual provision, the inevitable consequence of which is
the loss of petitioners’ remedy or right to sue. Even the filing of the
complaint on May 12, 1978 is of no remedial or practical consequence, since
the time limits for the filing thereof, whether viewed as a condition
precedent or as a prescriptive period, would in this case be productive of the
same result, that is, that petitioners had no right of action to begin with or, at
any rate, their claim was time- barred.

ACCORDINGLY, on the foregoing premises, the instant petition is DENIED and the dismissal of
the complaint in the court a quo as decreed by respondent Court of Appeals in its challenged
judgment is hereby AFFIRMED. SO ORDERED.
84. Saludo v. CA
FACTS:
 After the death of Crispina Galdo Saludo, mother of Aniceto G. Saludo, Jr.,Maria
Salvacion Saludo,Leopoldo G. Saludo and Saturnino G. Saludo ,in Chicago Illinois,
Pomierski and Son Funeral Home of Chicago, made the necessary preparations and
arrangements for the shipment, of the remains from Chicago to the Philippines.
o The funeral home had the remains embalmed and secured a permit for the
disposition of dead human body, Philippine Vice Consul in Chicago, Illinois,
Bienvenido M. Llaneta, at the Pomierski & Son Funeral Home, sealed the
shipping case containing a hermetically sealed casket that is airtight and
waterproof wherein was contained the remains of Crispina Saludo Galdo.
Pomierski brought the remains to C.M.A.S. (Continental Mortuary Air
Services) at the Chicago airport which made the necessary arrangements
such as flights, transfers, etc.;
o C.M.A.S. is a national service used by undertakers to throughout the US, they
furnish the air pouch which the casket is enclosed in, and they see that the
remains are taken to the proper air freight terminal.
o C.M.A.S. booked the shipment with PAL thru the carrier's agent Air Care
International , with Pomierski F.H. as the shipper and Maria Saludo as the
consignee. PAL Airway Bill No. 079-01180454 Ordinary was issued where in
the requested routing was (1)from Chicago to San Francisco on board TWA
(Trans World Airlines)Flight131 of October 27, 1976 and(2)from San
Francisco to Manila on board PAL Flight No. 107 of the same date, and
(3)from Manila to Cebu on board PAL Flight 149 of October 29, 1976.
 In the meantime, Maria Salvacion Saludo and Saturnino Saludo, thru a travel agent,
were booked with United Airlines from Chicago to California, and with PAL from
California to Manila. But they changed reservations to TWA after learning from the
director of Pomierski FH and confirming by phone that their mother’s remains should
be on that TWA flight.
o In the airport they saw no body from the lookout area and was informed
when they went to the TWA counter that none was on that flight.
o Reluctantly, they took the TWA flight upon assurance of her cousin, Ani
Bantug, that he would look into the matter and inform her about it on the
plane or have it radioed to her.
o But no confirmation from her cousin reached her that her mother was on the
West Coast.
 Upon arrival at San Francisco, Maria inquired to the TWA counter, who was still
unaware of her mother’s remains.
o She informed Pomierski, who immediately called C.M.A.S.
o It turned out that the casketed human remains that was issued the PAL
Airway Bill was not the remains of Crispina Saludo, the casket containing her
remains was on a plane to Mexico City, there being two bodies at the
terminal, which were somehow switched.
18
o Later, C.M.A.S. called saying that they were sending the remains back to
California via Texas. The following day October 28, the shipment or remains
of Crispina Saludo arrived in San Francisco from Mexico on board
 American Airlines and was transferred to and/or received by PAL. The shipment was
immediately loaded on PAL flight for Manila that same evening and arrived in Manila
on Oct 30 a day after its expected arrival on October 29.
 Petitioners’ counsel informed TWA of the misshipment and eventual delay in the
delivery of the cargo containing the remains of the late Crispin Saludo, and of the
discourtesy of its employees to petitioners Maria Salvacion Saludo and Saturnino
Saludo. In a separate letter, addressed to PAL, petitioners stated that they were
holding PAL liable for said delay in delivery and would commence judicial action
should no favorable explanation be given. Both denied liability.
ISSUE
Whether the bill of lading constituted as receipt by the private respondents of the remains
of Crispina. – NO.
HELD:
 No. Petitioners allege that private 'respondents received the casketed remains of
Crispina on October 26, 1976, as evidenced by the issuance of PAL Air Way-bill No.
079- 01180454 by Air Care International as carrier's agent. From said date, private
respondents were charged with the responsibility to exercise extraordinary diligence
so much so that for the alleged switching of the caskets on October 27, 1976, or one
day after private respondents received the cargo, the latter must necessarily be liable.
 Petitioners rely on the jurisprudential dictum, both under American and Philippine
law, that the issuance of a bill of lading carries the presumption that the goods were
delivered to the carrier facie evidence of the receipt of the goods by the carrier. In the
absence of convincing testimony establishing mistake, recitals in the bill of lading
showing that the carrier received the goods for shipment on a specified date control.
 A bill of lading is a written acknowledgment of the receipt of the goods and an
agreement to transport and deliver them at a specified place to a person named or on
his order. Such instrument may be called a shipping receipt, forwarder's receipt and
receipt for transportation. The designation, however, is immaterial. It has been held
that freight tickets for bus companies as well as receipts for cargo transported by all
forms of transportation, whether by sea or land, fall within the definition. Under the
Tariff and Customs Code, a bill of lading includes airway bills of lading. The two-fold
character of a bill of lading is all too familiar: it is a receipt as to the quantity and
description of the goods shipped and a contract to transport the goods to the
consignee or other person therein designated, on the terms specified in such
instrument.
 Logically, since a bill of lading acknowledges receipt of goods to be transported,
delivery of the goods to the carrier normally precedes the issuance of the bill; or, to
some extent, delivery of the goods and issuance of the bill are regarded in commercial
practice as simultaneous acts. However, except as may be prohibited by law, there is
nothing to prevent an inverse order of events, that is, the execution of the bill, of
lading even prior to actual possession and control by the carrier of the cargo to be
transported. There is no law which requires that the delivery of the goods for carriage

and the issuance of the covering bill of lading must coincide in point of time or, for
that matter, that the former should precede the latter.
 Ordinarily, a receipt is not essential to a complete delivery of goods to the carrier for
transportation but, when issued, is competent and prima facie, but not conclusive,
evidence of delivery to the carrier. Except as modified by statute, it is a general rule as
to the parties to a contract of carriage of goods in connection with which a bill of
lading is issued reciting that goods have been received for transportation, that the
recital being in essence a receipt alone, is not conclusive, but may be explained, varied
or contradicted by parol or other evidence.
 While we agree with petitioners' statement that "an airway bill estops the carrier
from denying receipt of goods of the quantity and quality described in the bill,"
however, as between the shipper and the carrier, when no goods have been delivered
for shipment no recitals in the bill can estop the carrier from showing the true facts.
Between the consignor of goods and a receiving carrier, recitals in a bill of lading as to
the goods shipped raise only a rebuttable presumption that such goods were
delivered for shipment.
 In this case it was established that on October 26, 1976 the cargo containing the
casketed remains of Crispina Saludo was booked for PAL Flight Number PR-107
leaving San Francisco for Manila on October 27, 1976. PAL Airway Bill No. 079-
01180454 was issued, not as evidence of receipt of delivery of the Cargo on October
26, 1976, but merely as a confirmation of the booking thus made for the San
Francisco-Manila flight scheduled on October 27, 1976. It was not until October 28,
1976 that PAL received physical delivery of the body at San Francisco, as duly
evidenced by the Interline Freight Transfer Manifest of the American Airline Freight
System.
85. Wallem Philippines Shipping vs. Prudential Guarantee
G.R. No. 152158, February 7, 2003
FACTS:
 Private respondent Prudential Guarantee & Assurance Inc. (Prudential) brought an action
for damages and AFs against Wallem Philippines Shipping, Inc. (Wallem) and Seacoast
Maritime Corporation (Seacoast) before RTC Makati City.
o It sought the recovery of the sum of P995,677.00, representing the amount it had
paid to its insured, General Milling Corporation (GMC), for alleged shortage
incurred in the shipment of Indian Toasted Soyabean Extraction Meal, Yellow.
 In its answer, Wallem denied liability for damage or loss to the shipment.
o That Prudentials claim was excessive and exaggerated; that Wallems liability, if
any, should not exceed the invoice value of the alleged loss or the applicable
package limitation, whichever was lower, or the limit of liability set in the bill of
lading.
 Wallem filed a compulsory counterclaim against Prudential as the complaint was allegedly
a clearly unfounded civil action. Wallem filed a crossclaim against its co-defendant
Seacoast, in the event that it was made liable to Prudential. Upon motion of Prudentials
counsel, defendant Seacoast was declared in default. After termination of the pre-trial
conference, this case was tried on the merits.
 To prove its claim for indemnity, Prudential presented two witnesses: Josephine Suarez
and Alfredo Cunanan.
19
o For Josephine Suarez, she averred that she received a claim from GMC in
connection with its shipment which arrived on board M/V Gao Yang. However,
upon cross examination, she admitted that she had no participation in the
preparation of the documents submitted to her, based her recommendation to
pay GMCs claim on said documents and did not do anything to verify the
genuineness of Bill of Lading BEDI/1 and Commercial Invoice No. 1401. She said
that GMC had been paid 20% more than its alleged loss.
o For Alfredo Cunanan, senior cargo surveyor of Tan-Gatue declared that he
conducted in March 1990 a survey of the shipment on board M/V Gao Yang. Upon
cross examination, Cunanan testified that no cargo was left on the M/V Gao
Yang after the discharging process. He admitted that his basis for determining
the weight of the shipment prior to unloading was the Certificate of Weight
furnished by GMC, as to which preparation he did not participate. Also the cargo
had been packed in bags at the port of origin. The bags were then conveyed to
midstream in barges alongside the vessel and hauled up onto the steamer.
 In the course of the discharging and weighing operations, one of Tan-Gatues assigned
surveyors registered a protest as there were blurred notations on GMCs weighing
scale. They found that the scale had not been properly calibrated and that it showed a
discrepancy of approximately 130 metric tons. Hence, a reweighing was done with the use
of another scale.
 Wallem’s representative was not notified of this reweighing, which was made by loading
the cargo on the truck for delivery to consignees receivers. Reloading on the trucks was
also made through the use of a suction tube. An alleged shortage of 164.4 metric tons was
found, which was significantly lower than the shortage stated in the recapitulation above.
 Part of Cunanans report contained an opinion stating that the shortage may be attributed
to the spillage incurred during the transit and loading of the shipment to the vessel at the
port of origin for the following reasons: (1) the said shipment was originally packed in
bags prior to loading to carrier vessel; (2) the weighing of the said shipment made prior to
its loading to the carrier vessel became the basis of the quantity stated in the bill of lading;
and (3) the bagged shipment, after weighing over the weighbridge scale, was conveyed to
midstream in barges alongside the vessel and hauled up onto the steamer, after which the
mouths of the bags were cut open and the contents emptied into ship hatches.
 After weighing in Batangas, the bagged shipment was delivered to GMCs warehouse.
Because of the shortage, GMC filed a claim against Prudential, being its insurer.
 For its part, petitioner Wallem, as defendant below, presented three
witnesses: Romualdo De Belen, manager of its documentations department, Rio Puriran,
marine cargo surveyor of Oceanica Cargo Marine Surveyor (Oceanica), and Edilberto
Mendoza, Wallems operations manager.
 Romualdo De Belen testified that he was the claims supervisor for Wallem. He was tasked
to gather all documents of a claim and to submit them to the Protective and Indemnity
Club (P&I), which in turn handles all claims pertaining to a vessel which is a member
thereof.
o He found that the weight stated in the bill of lading was less than what was
actually discharged. The bill of lading stated that the weight of the cargo was
4,415 metric tons, but the actual weight discharged was 4,418 metric tons.
 Rio Puriran, an employee of Oceanica, described the procedure in preparing the draft
survey which would become the basis for the survey certificate. He testified that the draft
mark is taken and the known cargo weight is sounded so that the displacement of the ship

may be computed and the weight of the cargo unloaded known. On cross-examination, he
admitted that he had no participation in conducting the survey covered by the survey
certificate marked as Exhibits 3 to 3-A.
 Edilberto Mendoza, Wallems operations manager, declared that a representative was sent
to oversee the discharging of its cargo when the M/V Gao Yang arrived in Batangas. He
tendered a Notice of Readiness to GMC and assigned Oceanica to conduct a draft survey
and issue a survey certificate. The unloading of the cargo was undertaken by GMC per the
free out notation on the bill of lading. Mendoza stated that free out means that the vessel is
free from any expenses and discharging operations for the cargo. It is the cargo receiver
who has the responsibility to get their cargo. After discharge of the cargo, Wallems
representative prepared a general statement of facts. On cross-examination, Mendoza
admitted that he was not present when the cargo was discharged from the vessel and that
he had no participation in the preparation of the general statement of facts and the notice
of readiness.
RTC= Prudential failed to prove by clear, convincing, and competent evidence that there was a
shortage in the shipment. It failed to establish by competent evidence the genuineness and due
execution of the bill of lading and, therefore, the true and exact weight of the shipment when it
was loaded unto the vessel. Hence, there was no way by which a shortage could be determined.
CA= Reversed RTC. Wallem and Seacoast to pay, jointly and severally, plaintiff-
appellant Prudential the amount of P796,541.672, plus 6% interest. It ruled that the bill of
lading was prima facie evidence of the goods therein described, both notations said to contain
and weight unknown on the bill of lading being inapplicable to shipments in bulk. Contrary to
the opinion of the trial court, it was ruled by the appeals court that losses were incurred during
the loading operations, and that these losses were the liability of the carrier. MR= Denied.
ISSUE: WON CA erred in ruling that the quantity of the cargo reflected in the BOL is conclusive
as to the actual cargo of the consignee notwithstanding the fact that said cargo was shipped on
a said to weight basis. Hence, said decision is contrary to COGSA. (YES.)
HELD:
(1) The trial court held that private respondent Prudential failed to prove by clear, convincing,
and competent evidence that there was a shortage in the shipment. Hence, petitioner
Wallem could not be held liable for the indemnity paid by Prudential to GMC. Prudentials
own witnesses admitted that they had no participation in the preparation of the
documents upon which they base their claim. They even testified that the loss, if indeed
there was any, might have been due to the loading process or by the unloading operations
conducted by GMC. However, the Court of Appeals ruled that on the basis of the weight
stated on the bill of lading, there was indeed a shortage, and held that the loss was caused
in the loading process alone.
We find that the Court of Appeals erred in finding that a shortage had taken
place. Josephine Suarez, Prudentials claims processor, merely identified the papers
submitted to her in connection with GMCs claim (Bill of Lading BEDI/1), Commercial
Invoice No. 1401 issued by Toepfer International Asia Pte, Ltd. SGS Certificate of Quality
and SGS Certificate of). Ms. Suarez had no personal knowledge of the contents of the said
documents and could only surmise as to the actual weight of the cargo loaded on M/V Gao
20
Yang. She admitted that she had no participation in the preparation of the papers upon
which Prudential based its cause of action against Wallem. Ms. Suarez’s testimony
regarding the contents of the documents is thus hearsay, based as it is on the knowledge of
another person not presented on the witness stand.
Nor has the genuineness and due execution of these documents been established. In the
absence of clear, convincing, and competent evidence to prove that the shipment indeed
weighed 4,415.35 metric tons at the port of origin when it was loaded on the M/V Gao
Yang, it cannot be determined whether there was a shortage of the shipment upon its
arrival in Batangas.
(2) The Court of Appeals erred in ruling that the contents of the bill of lading cannot be
controverted by evidence to the contrary because it was prima facie evidence of the goods
therein described. Wallems evidence casts doubt on the veracity of the documents upon
which Prudential bases its claim. There could have been no spillage while the shipment
was on board the vessel because, according to Prudentials witness Cunanan, the hatches
were closed. Moreover, it was shown that, after the shipment was unloaded from the
vessel, it was weighed with the use of GMCs weighing scale, which was later found to be
defective. Cunanan stated in his report that during the course of discharging/weighing
operation, he noted some minor discrepancy on the weighing scale, hence, he registered
the protest. We suggest to the assured to conduct another reweighing to determine the
correct quantity of the soyabean meal unloaded from the vessel.
Indeed, it is likely that there was again spillage of the shipment when it was reweighed
after its unloading in the same manner that there was spillage when the shipment was
unloaded from the vessel. It should also be noted that the reweighing was conducted only
on April 26, 1990, five days after the shipment was put in the storage of the consignee.
Indeed, as the bill of lading indicated that the contract of carriage was under a said to
weigh clause, the shipper is solely responsible for the loading while the carrier is oblivious
of the contents of the shipment.
(3) Even if the shortage can be definitively determined, Wallem still cannot be held liable
because of the failure of Prudential to present the contract of insurance or a copy
thereof. Prudential claims that it is subrogated to the rights of GMC pursuant to their
insurance contract. For this purpose, it submitted a subrogation receipt and a marine
cargo risk note. However, as the trial court pointed out, this is not sufficient. As GMCs
subrogee, Prudential can exercise only those rights granted to GMC under the insurance
contract. The contract of insurance must be presented in evidence to indicate the extent of
its coverage. As there was no determination of rights under the insurance contract, this
Courts ruling in Home Insurance Corporation v. Court of Appeals is applicable:
The insurance contract has not been presented. It may be assumed for the sake of
argument that the subrogation receipt may nevertheless be used to establish the
relationship between the petitioner [Home Insurance Corporation] and the consignee
[Nestl Phil.] and the amount paid to settle the claim. But that is all the document can
do. By itself alone, the subrogation receipt is not sufficient to prove the petitioners
claim holding the respondent [Mabuhay Brokerage Co., Inc.] liable for the damage to
the engine.

It is curious that the petitioner disregarded this rule, knowing that the best evidence of
the insurance contract was its original copy, which was presumably in the possession of
Home itself. Failure to present this original (or even a copy of it), for reasons the Court
cannot comprehend, must prove fatal to this petition.
WHEREFORE, the decision and resolution of the Court of Appeals is REVERSED and the
decision of the Regional Trial Court, Branch 134, Makati City, dismissing the complaint and the
counterclaim, is REINSTATED. No pronouncement as to costs.
86 Cordoba v Warner Barnes
87. MONICO G. ROLDAN v LIM PONZO & CO.
G.R. No. L-11325 | December 7, 1917
FACTS:
 Plaintiff in this action seeks to recover damages in the sum of P3,780.12 for the
alleged failure of the defendant company to live up to its contract for the
transportation of 2,244 packages of sugar from the plaintiff's hacienda to Iloilo.
o Defendants admit the execution of the contract, the receipt from the plaintiff
of 2,244 packages of sugar for transportation, and the loss of a part of this
sugar.
o Counsel for defendant insists, however, that it should not be held
responsible for its failure to carry out the contract, because, as it alleges, the
sugar was lost in a wreck in the river of Jalaud, without fault on the part of
the owner, the patron, or the crew of the vessel.
o Defendant company's lorcha was wrecked in the river Jalaud, and that of the
2,244 packages of plaintiff's sugar aboard the vessel, only 1,022 packages
were saved in a more or less damaged condition.
 At the trial in the court below, the plaintiff undertook to establish the facts upon
which he based his claim for damages and introduced evidence tending to disclose
that the lorcha had been wrecked and the sugar lost through the negligence and lack
of skill of the master of the lorcha in the management of his vessel. The trial judge
peremptorily dismissed the complaint on the ground that it was neither alleged or
proved that the plaintiff had complied with the provisions of section 366 of the
Commercial Code.
Sec. 366 of the Commercial Code: "Within the twenty-four hours
following the receipt of the merchandise a claim may be brought
against the carrier on account of damage or average found therein
on opening the packages, provided that the indication of the
damage of average giving rise to the claim cannot be ascertained
from the exterior of said packages, in which case said claim would
only be admitted on the receipt of the packages.
"After the periods mentioned have elapsed, or after the
transportation charges have been paid, no claim whatsoever shall
be admitted against the carrier with regard to the condition in
which the goods transported were delivered.”
21
ISSUE: Whether Sec. 366 is applicable in this case?
HELD: NO.
 Article 366 of the Commercial Code is limited to cases of claims for damage to
goods actually turned over by the carrier and received by the consignee,
whether those damages be apparent from an examination of the packages in
which the goods are delivered, or of such a character that the nature and extent
of the damage is not apparent until the packages are opened and the contents
examined. Clearly it has no application in cases wherein the goods entrusted to
the carrier are not delivered by the carrier to the consignee. In such cases there
can be no question of a claim for damages suffered by the goods while in
transport, since the claim for damages arises exclusively out of the failure to
make delivery. (DOCTRINE)
o The object sought to be attained by the requirement of the submission of
claims in pursuance of this article is to compel the consignee of goods
entrusted to a carrier to make prompt demand for settlement of alleged
damages suffered by the goods while in transport, so that the carrier will be
enabled to verify all such claims at the time of delivery or within twenty-four
hours thereafter, and if necessary fix responsibility and secure evidence as
to the nature and extent of the alleged damages to the goods while the
matter is still fresh in the minds of the parties.
o It is very clear, then, that in so far as this action seeks to recover damages for
defendant's failure to deliver 1,222 packages or bayones of sugar, the failure
to make claim for such damages under the provisions of article 366 of the
Commercial Code in no wise affects the respective rights of the parties.
 The necessity for making the claim in accordance with that article did not arise
if, as it is alleged, these 1,022 packages of sugar were recovered from the wreck
by the plaintiff, himself, in an effort, by his own activities, to save his property
from total loss. The measures to be taken under the terms of article 367 of the Code
when the parties are unable to arrive at an amicable settlement of claims for damages
set up in accordance with article 366, quite clearly indicate that the necessity for the
presentation of claims under this article arises only in those cases wherein the carrier
makes delivery and the consignee receives the goods in pursuance of the terms of the
contract.
 Until the defendant has had an opportunity to submit his evidence it is impossible to
determine under what conditions these 1,022 packages of sugar came into the
possession of the plaintiff, or to determine whether his claim for damages by the
wetting of this sugar, if well founded in every other respect, is or should be defeated
by his failure to make claim for such damages in the manner and form indicated in
article 366 of the Commercial Code.
DISPOSITIVE: Case is remanded for new trial
88 VILLA REY TRANSIT v. CA
FACTS:

 At about 1:30 in the morning, an Izuzu First Class passenger bus owned and operated
by the defendant Villa Rey Transit, and driven by Laureano Casim, left Lingayen,
Pangasinan, for Manila
o Among its paying passengers was the deceased, Policronio Quintos, Jr. who
sat on the first seat, second row, right side of the bus.
 At about 4:55am when the vehicle was nearing the northern approach of the Sadsaran
Bridge on the national highway Pampanga, it frontally hit the rear side of a bullcart
filled with hay
o As a result, the end of a bamboo pole placed on top of the hayload and tied to
the cart to hold it in place, hit the right side of the windshield of the bus
o The protruding end of the bamboo pole, about 8 feet long from the rear of
the bullcart, penetrated through the glass windshield and landed on the face
of Policronio Quintos, Jr. who, because of the impact, fell from his seat and
was sprawled on the floor.
 The pole landed on his left eye and the bone of the left side of his face was fractured
and suffered other multiple wounds and was rendered unconscious due, among other
causes to severe cerebral concussion. Despite the medical assistance, Policronio
Quintos, Jr. died on the same day, due to traumatic shock due to cerebral injuries.
o Respondents Trinidad, Prima, and Julita Quintos, sisters and only surviving
heirs of Policronio brought an action against Villa Rey Transit as owner and
operator of said bus for breach of contract of carriage and to recover
P63,750 as damages.
 Villa Rey Transit contended that the mishap was due to a fortuitous event but this was
rejected by the RTC and CA – both courts holding that the death of Policronio was due
to the negligence of the bus driver, whom Villa Rey Transit was liable under its
contract of carriage with the deceased
 RTC ordered Villa Rey to pay respondents Quintos P63,750 for damages for breach of
contract of carriage. CA affirmed the decision.
ISSUE: WON the computation of damages should be based upon the life expectancy of deceased
Policronio- YES
RULING:
 The determination of such amount depends, mainly upon two (2) factors:
1. The number of years on the basis of which the damages shall be computed;
and
2. The rate at which the losses sustained by said respondents should be fixed
 The first factor was based by the trial court upon the life expectancy of Policronio
Quintos, Jr., which was placed at 33-1/3 years — he being over 29 years of age (or
around 30 years for purposes of computation) at the time of his demise — by
applying the formula (2/3 x [80-301 = life expectancy) adopted in the American
Expectancy Table of Mortality or the actuarial of Combined Experience Table of
Mortality
 The determination of the indemnity to be awarded to the heirs of a deceased person
has therefore no fixed basis much is left to the discretion of the court considering
the moral and material damages involved, and so it has been said that there can be no
exact or uniform rule for measuring the value of a human life and the measure of
22
damages cannot be arrived at by precise mathematical calculation, but the amount
recoverable depends on the particular facts and circumstances of each case
 The life expectancy of the deceased or of the beneficiary, whichever is shorter, is an
important factor; other factors that are usually considered are:
1. pecuniary loss to plaintiff or beneficiary
2. loss of support
3. loss of service
4. loss of society
5. mental suffering of beneficiaries
6. medical and funeral expenses
 Thus, life expectancy is, not only relevant, but, also, an important element in fixing the
amount recoverable by private respondents herein  the Court of Appeals has not
erred in basing the computation of petitioner's liability upon the life expectancy of
Policronio Quintos, Jr
 It should also be noted that with the determination of the losses of damages sustained
by respondents Quintos , as dependents and heirs, the damages consist, not of the full
amount of Policronio’s earnings, but of the support they received or would have
received from him had he not died  aka only net earnings, not gross earning, are to
be considered, that is, the total of the earnings less expenses necessary in the creation
of such earnings or income6 and less living and other incidental expenses
 It is fair and reasonable to fix the deductible living and other expenses of the deceased
at the sum of P1,184.00 a year, or about P100.00 a month, and that, consequently, the
loss sustained by his sisters may be roughly estimated at P1,000.00 a year or
P33,333.33 for the 33-1/3 years of his life expectancy
 To this sum of P33,333.33, the following should be added:
o P12,000.00, pursuant to Arts.104 and 107 of the Revised Penal Code, in
relation to Article 2206 of our Civil Code, as construed and applied by this
Court;
o P1,727.95, actually spent by private respondents for medical and burial
expenses; and
o attorney's fee, which was fixed by the trial court, at P500.00, but which, in
view of the appeal taken by petitioner herein, first to the Court of Appeals
and later to this Supreme Court, should be increased to P2,500.00
 Hence, the amount adjudged in the decision appealed from should be reduced to the
aggregate sum of P49,561.28, with interest thereo.
89 Baliwag Transit v CA
90 PAL v CA
91 Singson v CA

92. Carlos Singson, petitioner, vs. Court of Appeals, and Cathay Pacific Airway, Inc.
respondent.
G.R. No. 119995 November 18, 1997
FACTS:
 On May 42, 1988, Petitioner Carlos Singson and his cousin Crescentino Tiongson
bought from Respondent CATHAY two openly dated, identically routed, round trip
plane tickets for the purpose of spending their vacation in the United States.
 Each consisted of six flight coupons corresponding to this itinerary:
o 1 – Manila to Hongkong
o 2 – Hongkong to San Francisco
o 3 – San Francisco to Loas Angeles
o 4 – Los Angeles back to San Francisco
o 5 – San Francisco to Hongkong ***
o 6 – Hongkong to Manila
 The procedure was that at the start of each leg of the trip a flight coupon
corresponding to the particular sector of the travel would be removed from the ticket
booklet so that at the end of the trip no more coupon would be left in the ticket
booklet.
 On 6 June 1988 CARLOS SINGSON and Crescentino Tiongson left Manila on board
CATHAY's Flight No. 902. They arrived safely in Los Angeles and after staying there
for about three (3) weeks they decided to return to the Philippines. On 30 June 1988
they arranged for their return flight at CATHAY's Los Angeles Office and chose 1 July
1988, a Friday, for their departure. While Tiongson easily got a booking for the flight,
SINGSON was not as lucky. *** It was discovered that his ticket booklet did not have
flight coupon no. 5 corresponding to the San Francisco- Hongkong leg of the trip.
Instead, what was in his ticket was flight coupon no. 3 — San Francisco to Los Angeles
— which was supposed to have been used and removed from the ticket booklet. It
was not until 6 July 1988 that CATHAY was finally able to arrange for his return flight
to Manila. (Singson failed to obtain a booking in LA for their to Manila; apparently, the
coupon corresponding to the 5th leg of the trip was missing and instead the 3rd was still
attached. It was not until few days later that the defendant finally was able to arrange
for his return to Manila.)
 Singson commenced an action for damages based on breach of contract of carriage
against CATHAY before the Regional Trial Court.
 CATHAY denied these allegations and averred that since petitioner was holding an
"open-dated" ticket, which meant that he was not booked on a specific flight on a
particular date, there was no contract of carriage yet existing such that CATHAY's
refusal to immediately book him could not be construed as breach of contract of
carriage.
 The trial court rendered a decision in favor of petitioner herein holding that CATHAY
was guilty of gross negligence amounting to malice and bad faith for which it was
adjudged to pay petitioner P20,000.00 for actual damages with interest at the legal
rate of twelve percent (12%) per annum from 26 August 1988 when the complaint
was filed until fully paid, P500,000.00 for moral damages, P400,000.00 for exemplary
damages, P100,000.00 for attorney’s fees, and, to pay the costs.
 On appeal by CATHAY, the Court of Appeals reversed the trial court’s finding that
there was gross negligence amounting to bad faith or fraud and, accordingly, modified
23
its judgment by deleting the awards for moral and exemplary damages, and the
attorney’s fees as well.
ISSUE:
1. Whether a breach of contract was committed by Cathay when it failed to confirm the
booking of petitioner for its July 1, 1988 flight; - YES
2. Whether the carrier was liable not only for actual damages but also for moral and
exemplary damages, and attorney’s fees for failing to book petitioner on his return flight to
the Philippines. – YES
HELD:
1. CATHAY undoubtedly committed a breach of contract when it refused to confirm
petitioner's flight reservation back to the Philippines on account of his missing flight
coupon. Its contention that there was no contract of carriage that was breached because
petitioner's ticket was open-dated is untenable.
 To begin with, the round trip ticket issued by the carrier to the passenger was
in itself a complete written contract by and between the carrier and the
passenger. It has all the elements of a complete written contract, to wit:
o the consent of the contracting parties manifested by the fact that the
passenger agreed to be transported by the carrier to and from Los
Angeles via San Francisco and Hongkong back to the Philippines, and
the carrier's acceptance to bring him to his destination and then back
home;
o cause or consideration, which was the fare paid by the passenger as
stated in his ticket; and,
o object, which was the transportation of the passenger from the place of
departure to the place of destination and back, which are also stated in
his ticket.
 In fact, the contract of carriage in the instant case was already partially executed
as the carrier complied with its obligation to transport the passenger to his
destination, i.e., Los Angeles. Only the performance of the other half of the
contract — which was to transport the passenger back to the Philippines — was
left to be done.
 Petitioner was not a mere "chance passenger with no superior right to be
boarded on a specific flight," as erroneously claimed by CATHAY and sustained
by the appellate court.
 Interestingly, it appears that CATHAY was responsible for the loss of the ticket.
One of two (2) things may be surmised from the circumstances of this case: first,
US Air (CATHAY's agent) had mistakenly detached the San Francisco-Hongkong
flight coupon thinking that it was the San Francisco-Los Angeles portion; or,
second, petitioner's booklet of tickets did not from issuance include a San
Francisco-Hongkong flight coupon. In either case, the loss of the coupon was
attributed to the negligence of CATHAY's agents and was the proximate cause of
the non-confirmation of petitioner's return flight on 1 July 1988. It virtually
prevented petitioner from demanding the fulfillment of the carrier's obligations
under the contract.

2. Although the rule is that moral damages predicated upon a breach of contract of carriage
may only be recoverable in instances where the mishap results in the death of the
passenger5, or where the carrier is guilty of fraud or bad faith, there are situations where
the negligence of the carrier is so gross and reckless as to virtually amount to bad faith6, in
which case the passenger likewise becomes entitled to recover moral damages.
 In the instant case, the following circumstances attended the breach of contract
by CATHAY, to wit:
o First, as heretofore discussed, the ticket coupon corresponding to the
San Francisco-Hongkong flight was missing either due to the negligence
of CATHAY's agents in improperly detaching petitioner's flight coupons
or failing to issue the flight coupon for San Francisco-Hongkong in the
ticket booklet;
o Second, petitioner and his cousin presented their respective ticket
booklets bearing identical itineraries to prove that there had been a
mistake in removing the coupons of petitioner. Furthermore, CATHAY's
Timothy Remedios testified that he was able to ascertain from his flight
reservations computer that petitioner indeed had reservations booked
for travel on their return flight, but CATHAY apparently ignored the
clear evidential import of these facts and peremptorily refused to
confirm petitioner's flight — while ready to confirm his traveling
companion's identically routed plane ticket — on the lame and flimsy
excuse that the existence and validity of the missing ticket must first be
verified;
o Third, petitioner was directed by CATHAY to go to its San Francisco
office and make the necessary verification concerning the lost coupon
himself. This, notwithstanding the fact that CATHAY was responsible for
the loss of the ticket and had all the necessary equipment, e.g.,
computers, fax and telex machines and telephones which could facilitate
the verification right there at its Los Angeles Office.
Dispositive Portion:
WHEREFORE, the petition is GRANTED and the 14 July 1994 Decision of the Court of Appeals is
REVERSED. Private respondent is ordered to pay petitioner P20,000.00 for actual damages as
fixed by the trial court, plus P200,000.00 for moral damages, P50,000.00 for exemplary
damages and P25,000.00 for attorney's fees. No costs.
SO ORDERED.
92 International Harvester Company of the Philippines v Crisanto Aragon, Yaras and
Company, Far East
August 26, 1949| Paraz, J. | Admiralty and Maritime Commerce
FACTS:
 Manila Terminal Co Inc (MTCI) is in charge of the custody and delivery to the
respective owners of cargoes discharged at the Government piers in the City of
5Art 1764, 2206
6Art. 2220
24
Manila. International Harvester is the agent in the Philippines of the vessel “Belle
of the Sea”
 S/S Belle of the Sea took on board at LA, California goods for shipment to Manila,
which were eventually discharged at the Government piers under the
supervision and custody of MTCI.
 Yaras and Company, Far East filed a company against MTCI and International
Harvester for the goods lost
o 1 carton of assorted samples with a stipulated value of P200 was not
delivered to Yaras and Company
 Before trial could proceed, International Harvester filed a Motion to Dismiss on
the ground that the Municipal Court of Manila had no jurisdiction to try case
because the action involves admiralty or maritime jurisdiction. This was
overruled.
 International Harvester then filed in the CFI Manila a petition for prohibition
against Judge Crisanto Aragon and Yaras and Company Far East to restrain Judge
Araon form proceeding with the case on the ground that admiralty or maritime
jurisdiction is involved. CFI ruled in favor of International Harvester and ordered
Judge Aragon to desist from taking cognizance of the civil case.
RULING: Appealed judgment is therefore affirmed
Whether the action involves admiralty or maritime jurisdiction? – YES
Whether the Municipal Court has jurisdiction over the case? – NO
Argument of Yaras and Company: Admiralty jurisdiction is not involved in this case because
the contract in question was made upon land and to be terminated upon land.
 Admiralty has jurisdiction over all maritime contracts, in whatever form, wherever
they were executed or are to be performed, but not over non-maritime contracts.
 Whether or not a contract is maritime depends not on the place where the
contract is made and is to be executed, making the locality the test, but on the
subject-matter of the contract, making the true criterion a maritime service or a
maritime transaction. (American rule)
o Specifically, admiralty has jurisdiction of a proceeding in rem or in
personam for the breach of a contract of affreightment, whether evidenced
by a bill of lading or a charter party. And typical of a controversy over
contracts of affreightment is a suit of one party against the other for loss of
or damage to the cargo.
 This is the very case now before us, because the respondent Yaras and Company seeks
to recover from the petitioner International Harvester Company of the Philippines the
value of a certain lost cargo.
 The liability of International Harvester is predicated on the contract of carriage by sea
between the International Harvester and Yaras and Company as evidenced by Bill of
Lading No. 105, independently of the liability of MTCI, as operator of an arrastre
service.
 The Court noted that the argument of Yaras and Company does not hold water
because its view merely reflects the English rule which had long been rejected in the
US. Is it now settled in US that the “jurisdiction of admiralty in matters of contract

depends upon the subject-matter (i.e. nature and character of the contract) and that
the English rule which conceded jurisdiction only to contracts made upon and to be
performed upon navigable waters, is inadmissible. If admiralty has jurisdiction over
the subject-matter, to say that it is necessary for the parties to go upon the sea to
execute the instrument borders upon absurdity.
 The Court adopted the sound American rule.
 Prohibition is the proper remedy since the Judge was taking cognizance of the case
over which he had no jurisdiction and his order overruling the motion to dismiss filed
by the petitioner-appellee is interlocutory and therefore not appealable.
93 Philippine Shipping Company vs. Francisco Vergara
G.R. No. L-1600 June 1, 1906
FACTS:
 Nuestra Sra. De Lourdes collided with steamship Navarra. The Philippine Shipping Co.,
the owner of the steamship Nuestra Sra. de Lourdes, claims an indemnification of
P44,000 for the loss of the said ship as a result of a collision.
o Ynchausti & Co. also claimed P24,705.64 as an indemnification for the loss of
the cargo of hemp and coprax carried by the said ship. The defendant,
Francisco Garcia Vergara, was the owner of the steamship Navarra.
 The trial court found that the steamship Lourdes was sailing in accordance with law,
but the Navarra was not.
o It found that Navarra was responsible for the collision. It also found that
both ships with their respective cargoes were entirely lost.
 Construing Art. 837 of the Code Commerce, the trial court held that
Vergara was not responsible to Philippine Shipping Co. for the
value of the steamship Lourdes, with the costs of the suit against
the latter.
 Philippine Shipping Co. and Vergara appealed, but the latter has
failed to prosecute his appeal by a bill of exceptions or otherwise.
 Philippine Shipping Co., contends that the Vergara should pay P18,000, the value of
the Navarra at the time of its loss; that this is the sense in which the provisions of Art.
837 of the Code of Commerce should be understood; that said code has followed the
principles of the English law and not those of the American law, and that it was
immaterial whether the Navarra had been entirely lost, provided her value at the time
she was lost could be ascertained, since the extent of the liability of the owner of the
colliding vessel for the damages resulting from the collision is to be determined in
accordance with such value.
ISSUE: Whether Philippine Shipping Co. should be indemnified P18,000, the estimated value of
Navarra at the time of the collision. – No.
HELD: No.
 Art. 837 of the Code Commerce provides: "The civil liability contracted by the
shipowners in the cases prescribed in this section shall be understood as limited to
the value of the vessel with all her equipment and all the freight money earned
during the voyage."
25
 This section is a necessary consequence of the right to abandon the vessel given to the
shipowner in Art. 587 of the code, and it is one of the many superfluities contained in
the code.
Art. 587. The agent shall also the civilly liable for the indemnities in
favor of third persons which arise from the conduct of the captain
in the care of the goods which the vessel carried, but he may
exempt himself therefrom by abandoning the vessel with all her
equipment and the freight he may have earned during the trip.
 The "Exposicion de motivos" of the Code of Commerce contains the following:
"The present code (1829) does not determine the juridical status of
the agent where such agent is not himself the owner of the vessel.
This omission is supplied by the proposed code, which provides in
accordance with the principles of maritime law that by agent it is
to be understood the person entrusted with the provisioning of the
vessel, or the one who represents her in the port in which she
happens to be. This person is the only one who represents the vessel
— that is to say, the only one who represents the interest of the
owner of the vessel. This provision has therefore cleared the doubt
which existed as to the extent of the liability, both of the agent and
for the owner of the vessel. Such liability is limited by the proposed
code to the value of the vessel and other things appertaining
thereto.”
 There is no doubt that if the Navarra had not been entirely lost, the agent, having held
liable for the negligence of the captain of the vessel, could have abandoned her with
all her equipment and the freight money earned during the voyage, thus bringing
himself within the provisions of the Art. 837 in so far as the subsidiary civil liability is
concerned.
o This abandonment which would have amounted to an offer of the value of
the vessel, of her equipment, and freight money earned could not have been
refused, and the agent could not have been personally compelled, under
such circumstances, to pay the 18,000 pesos, the estimated value of the
vessel at the time of the collision.
 This is the difference which exists between the lawful acts and lawful obligation of the
captain and the liability which he incurs on account of any unlawful act committed by
him.
o In the first case, the lawful acts and obligations of the captain beneficial to
the vessel may be enforced as against the agent for the reason that such
obligations arise from the contract of agency (provided, however, that the
captain does not exceed his authority), while as to any liability incurred by
the captain through his unlawful acts, the ship agent is simply subsidiarily
civilly liable.
o This liability of the agent is limited to the vessel and it does not extend
further. For this reason, the Code of Commerce makes agent liable to
the extent of the value of the vessel, as to the codes of the principal

maritime nations provided, with the vessel, and not individually. Such is
also the spirit of our code.
 That which distinguishes the maritime from the civil law and even from the
mercantile law in general is the real and hypothecary7 nature of the former, and the
many securities of a real nature that maritime customs from time immemorial, the
laws, the codes, and the later jurisprudence, have provided for the protection of the
various and conflicting interests which are ventured and risked in maritime
expeditions, such as the interests of the vessel and of the agent, those of the owners of
the cargo and consignees, those who salvage the ship, those who make loans upon the
cargo, those of the sailors and members of the crew as to their wages, and those of a
constructor as to repairs made to the vessel.
 The owners and agents of a vessel causing the loss of another vessel by collision
are not liable beyond the vessel itself causing the collision and other things
appertaining thereto.
 In view of the above stated principles, Vergara is liable for the indemnification to
which the Philippine Shipping Co. is entitled by reason of the collision, but he is not
required to pay such indemnification for the reason that the obligation thus
incurred has been extinguished on account of the loss of the thing bound for the
payment thereof.
94 95 TEODORO YANGCO vs. MANUEL LASERNA
G.R. No. L-47447-47449 | October 29, 1941 | J. Moran
FACTS:
 At about one o'clock in the afternoon of May 26, 1927, the steamer S.S. Negros,
belonging to Teodoro R. Yangco, left the port of Romblon on its return trip to Manila.
 Typhoon signal No. 2 was then up, of which fact the captain was duly advised and his
attention thereto called by the passengers themselves before the vessel set sail.
 The boat was overloaded as indicated by the load line which was 6 to 7 inches below
the surface of the water. The passengers, numbering about 180, were overcrowded,
the vessel's capacity being limited to only 123 passengers.
 As the sea became increasingly violent, the captain ordered the vessel to turn left,
evidently to return to port, but in the maneuver, the vessel was caught sidewise by a
big wave which caused it to capsize and sink. Many of the passengers died in the
mishap who filed, 3 of them, separate civil actions against Yangco to recover damages
for the death of the passengers.
 After the rendition of the judgment to this effect, Yangco sought to abandon the vessel
to the plainitffs in the three cases, together with all its equipments, without prejudice
to his right to appeal. The abandonment having been denied, an appeal was taken to
the Court of Appeals, wherein all the judgmnets were affirmed except for the increase
of the sums.
ISSUE:
7relating to an obligation, right, or security in property of a debtor given to a creditor by contract or by
operation of law without transfer of possession or title to the creditor
26
Whether or not the shipowner or agent, notwithstanding the total loss of the vessel as a
result of the negligence of its captain, be properly held liable in damages for the
consequent death of its passengers?
HELD:
 NO. According to Article 587 of the Code of Commerce, the agent shall also be civilly
liable for the indemnities in favor of third persons which arise from the conduct of the
captain in the care of the goods which the vessel carried; but he may exempt himself
therefrom by abandoning the vessel with all her equipments and the freight he may
have earned during the voyage.
 The provisions accords a shipowner or agent the right of abandonment; and by
necessary implication, his liability is confined to that which he is entitled as of right to
abandon — "the vessel with all her equipment and the freight it may have earned
during the voyage."
 Lawful acts and obligations of the captain beneficial to the vessel may be enforced as
against the agent for the reason that such obligations arise from the contract of
agency while as to any liability incurred by the captain through his unlawful acts, the
ship agent is simply subsidiarily civilly liable. This liability of the agent is limited to
the vessel and it does not extend further. For this reason the Code of Commerce
makes the agent liable to the extent of the value of the vessel, as the codes of the
principal maritime nations provide with the vessel, and not individually.
 If the shipowner or agent may in any way be held civilly liable at all for injury to or
death of passengers arising from the negligence of the captain in cases of collisions or
shipwrecks, his liability is merely co-extensive with his interest in the vessel such that
a total loss thereof results in its extinction.
 Assuming that petitioner is liable for a breach of contract of carriage, the
exclusively "real and hypothecary nature" of maritime law operates to limit
such liability to the value of the vessel, or to the insurance thereon, if any. In the
instant case it does not appear that the vessel was insured. Whether the abandonment
of the vessel sought by the petitioner in the instant case was in accordance with law of
not, is immaterial. The vessel having totally perished, any act of abandonment would
be an idle ceremony.
DISPOSITION:
Judgement is reversed and petitioner is hereby absolved of all the complaints, without costs.
95 Chua Yek Hong vs. IAC, Mariano Guno and Dominador Olit
FACTS:
 Petitioner Chua Yek Hong is a duly licensed copra dealer based at Puerto Galera
Mindoro.
 Private respondents Guno and Olit are the owners of the vessel M/V Luzviminda I, a
common carrier engaged in coastwise trade from the different ports of Oriental
Mindoro to the Port of Manila.
 Petitioner Chua Yek Hong loaded 1,000 sacks of copra, valued at P101, 227.40, on
board the vessel M/V Luzviminda I for shipmrnt from Puerto Galera, Oriental Mindoro
to Manila.

 The cargo however did not reach Manila because the vessel capsized and sank with all
its cargo somewhere between Cape Santiago and Calatagan, Batangas.
 Petitioner Chua Yek Hong instituted before the CFI a complaint for damages based on
breach of contract of carriage.
 Private respondents averred that even assuming that the alleged cargo was truly
loaded aboard their vessel, their liability had been extinguished by reason of the total
loss of the said vessel.
 TC: Private respondents are liable to pay the sum of P101,227.40 representing the
value of the cargo belonging to the plaintiff which was lost while in the custody of the
defendants; P65,550.00 representing miscellaneous expenses of plaintiff on said lost
cargo; attorney’s fees in the amount of P5,000.00, and to pay the costs of suit.
 IAC: Reversed TC decision. It applied Article 587 of the Code of Commerce, and held
that private respondents’ liability, as shipowners, for the loss of the cargo is merely
co-extensive with their interest in the vessel such that a total loss thereof results in its
extinction. Respondents were absolved from any liability.
ISSUE: Whether respondent IAC erred in applying the doctrine of limited liability under Art.
587 of the Code of Commerce?
HELD: NO.
 Article 587 of the Code of Commerce provides: “Art. 587. The shipagent shall also be
civilly liable for the indemnities in favor of third persons which may arise from the
conduct of the captain in the care of the goods which he loaded on the vessel; but he
may exempt himself therefrom by abandoning the vessel with all the equipments and
the freight it may have earned during the voyage.”
o The term “shipagent” is broad enough to include the shipowner.
o Pursuant to said provision, therefore, both the shipowner and shipagent are
civilly and directly liable for the indemnities in favor of third persons, which
may arise from the conduct of the captain in the care of goods transported,
as well as for the safety of passengers transported.
 However, under the same Article, this direct liability is moderated and limited by the
shipagent’s or shipowner’s right of abandonment of the vessel and earned freight.
 This expresses the universal principle of limited liability under maritime law.
The most fundamental effect of abandoment is the cessation of the responsibility of
the shipagent/owner.
o It has thus been held that by necessary implication, the shipagent’s or
shipowner’s liability is confined to that which he is entitled as of right to
abandon—“the vessel with all her equipment and the freight it may have
earned during the voyage,” and “to the insurance thereof if any”.
o In other words, the shipowner’s or agent’s liability is merely co-extensive
with his interest in the vessel such that a total loss thereof results in its
extinction.
o “No vessel, no liability” expresses in a nutshell the limited liability rule. The
total destruction of the vessel extinguishes maritime liens as there is no
longer any res to which it can attach.
 The limited liability rule, however, is not without exceptions, namely:
(1) where the injury or death to a passenger is due either to the fault of the
shipowner, or to the concurring negligence of the shipowner and the captain;
27
(2) where the vessel is insured; and
(3) in workmen’s compensation claims.
 In this case, there is nothing in the records to show that the loss of the cargo was due
to the fault of the private respondents as shipowners, or to their concurrent
negligence with the captain of the vessel.
 Moreover, Article 1766 of the Civil Code provides:
Art. 1766. In all matters not regulated by this Code, the rights and
obligations of common earners shall be governed by the Code of
Commerce and by special laws.
 In other words, the primary law is the Civil Code (Arts. 1732-1766) and in default
thereof, the Code of Commerce and other special laws are applied. Since the Civil Code
contains no provisions regulating liability of shipowners or agents in the event of total
loss or destruction of the vessel, it is the provisions of the Code of Commerce, more
particularly Article 587, that govern in this case.
 In sum, it will have to be held that since the shipagent’s or shipowner’s liability is
merely co-extensive with his interest in the vessel such that a total loss thereof results
in its extinction, and none of the exceptions to the rule on limited liability being
present, the liability of private respondents for the loss of the cargo of copra must he
deemed to have been extinguished. There is no showing that the vessel was insured in
this case.
WHEREFORE, the judgment sought to be reviewed is hereby AFFIRMED. No costs.
SO ORDERED.
96 OHTA DEVT COMPANY vs Steamship “Pompey”
FACTS:
 Plaintiff, Ohta Development Company, is the owner of a pier in Talomo Bay, Davao. On
the western side of the pier were groups of posts (3 to a group) about 20 feet apart, 2
feet away from the pier which served as a protection to the pier against the impact of
the vessel. 

 One morning of June 23, at around 7:00 AM, the Steamship Pompey in command of
Captain Alfredo Galvez, possessing a certificate of public convenience issued by the
Commissioner of Public Utility in the name of “the National Coal Company”, carrying
cargo of flour and rice for the plaintiff, docked along the side of the pier. 

 The Pompey docked with her bow (anchor) facing towards the land and fastened her
ropes to the posts on the pier. She did not stretch a rope to the tree to on the shore,
neither did she drop her bow anchors.
o Other ships docking at the pier has always observed that the bow facing
towards the land and fastened a rope to a tree situated faster west on the
beach as a precaution taken to avoid the ship from getting too close to the
pier.
 After being docked, they proceeded to unload the flour and rice which as first
deposited on the pier and later transported to the plaintiff’s warehouse on land where

it was officially received.
o The unloading of the cargo was done without any infererence of the part of
the plaintiff and exclusively by laborers and the crew of the ship.
 The unloading was done in a hurry and their being 15 or 20 laborers engaged in the
hauling of the same to the plaintiff’s warehouse, a large amount of cargo accumulated
on the dock. Within 10 minutes past 11 on the same morning, the pier sank with all of
its merchandise. 
 Philippines on October 31, 1980.
 COURT FINDINGS: The current forced the ship towards the pier. The impact caused
the pier to sink.
o When the pier sank, there was a current from west to east. The flour which
floated after the sinking of the dock 
 drifted from west to east. 
  The incident of said vessel's sinking gave rise to the filing of suits for recovery of lost cargo
o The pier when it sank, leaned towards the west, going beyond the western
line formerly occupied by the pier. The hull of the ship came to a stop at a
point where the piles of defense formerly stood. Based on the photograph
taken after the incident admitted by the court as Exhibit B. 
 Board of Marine Inquiry (BMI) = Sinking was due to force majeure and that subject vessel, at
 DEFENSE CONTENDS: the pier sank because of the weight of the cargo and the poor
condition of the dock. Captain Razon, the first mate of Pompey on that trip – the sole
witness presented by the defense, claims that the defense piles fell without coming
into contact with the ship. 
 CA= Affirmed RTC.
o COURT RULED: The pier underwent repairs in 1921 and 1922 wherein
materials not in good condition were replaced. The testimony of the Captain
Razon is inconceivable because the piles were not attached to the pier but
were 2 feet away from it. The sinking of the dock should not affect the
defense piles.
 CONCLUSION OF THE COURT: dock on the account of the impact of the ship as a result
of a strong current at the time; that the ship was not fastened with the rope to a tree
on shore and that bow anchors had not been dropped.
ISSUE(S): Whether the defendant National Coal Company’s liability ceased when the
merchandise was unload and placed on the dock based on the bills of lading of the lost
merchandise.
 losses brought about by the sinking of the vessel M/V P. ABOITIZ, as based on the real and
HELD: NO
RATIO: Under article 619 of the Code of Commerce, it is the delivery of the cargo at the port of
discharge that determines the cessation of the liability of the captain for the cargo. In the
instant case, when the merchandise was lost by the sinking of the pier, it had not yet been
delivered, and therefore still under the responsibility of the captain. The defendant company, as
agent, is liable for the indemnities arising from the lack of skill or negligence of the captain.
On the liability of ship agents – provision of the Article 587 of the Code of Commerce, limiting
the liability of the agent to the value of the ship, its appurtenances and freight, is not applicable
when no abandonment of the vessel is made
97 ABOITIZ SHIPPING CORPORATION vs. GENERAL ACCIDENT FIRE AND LIFE
ASSURANCE CORPORATION (GAFLAC), LTD.
28
G.R. No. 100446 January 21, 1993
FACTS:
 Petitioner is a corporation organized and operating under Philippine laws and engaged in
the business of maritime trade as a carrier. As such, it owned and operated the ill-fated
"M/V P. ABOITIZ," a common carrier which sank on a voyage from Hongkong to the
 Private respondent General Accident Fire and Life Assurance Corporation, Ltd. (GAFLAC),
on the other hand, is a foreign insurance company pursuing its remedies as a subrogee of
several cargo consignees whose respective cargo sank with the said vessel and for which it
has priorly paid.
either by the shippers, their successor-in-interest, or the cargo insurers like GAFLAC as
subrogees.
the time of the sinking was seaworthy.
(1st CASE) RTC = Found against the carrier (Aboitiz) on the basis that the loss subject matter
therein did not occur as a result of force majeure.
SC (Aboitiz vs. Court of Appeals) = Affirmed CA. Sinking was not to force majeure hence
liable. In this case, an attempted execution of judgment award amounting P1,072,611.20 which
actually gave rise to this petition.
(2nd CASE) RTC= Affirmed BMI. Sinking due to force majeure.
SC (Country Bankers Insurance Corp. vs CA) = Sustained RTC findings which affirmed BMI.
Sinking was due to force majeure.
 Because of the conflicting rulings, the Court is now therefore tasked to reconcile the
resulting apparent contrary findings in cases originating out of a single set of facts.
 It is in this factual milieu that the instant petition seeks a pronouncement as to the
applicability of the doctrine of limited liability on the totality of the claims vis a vis the
hypothecary nature of maritime law.
 In support of the instant petition, the following arguments are submitted by the
petitioner:
o 1. The Limited Liability Rule warrants immediate stay of execution of judgment
to prevent impairment of other creditors' shares;
o 2. The finding of unseaworthiness of a vessel is not necessarily attributable to the
shipowner; and
o 3 The principle of "Law of the Case" is not applicable to the present petition.
 On the other hand, private respondent opposes the foregoing contentions, arguing that:
o 1. There is no limited liability to speak of or applicable real and hypothecary rule
under Article 587, 590, and 837 of the Code of Commerce in the face of the facts
found by the lower court (Civil Case No. 144425), upheld by the Appellate Court
(CA G.R. No. 10609), and affirmed in toto by the Supreme Court in G.R. No. 89757
which cited G.R. No. 88159 as the Law of the Case; and

o 2. Under the doctrine of the Law of the Case, cases involving the same incident,
parties similarly situated and the same issues litigated should be decided in
conformity therewith following the maxim stare decisis et non quieta movere.
ISSUES & RULING:
(1) WON the Resolution of this Court in G.R. No. 88159, Aboitiz Shipping vs. Court of Appeals
effectively bars and precludes the instant petition as argued by respondent GAFLAC. (NO.)
 Resolution of this Court in Aboitiz vs. CA does not effectively bar and preclude the
instant petition by GAFLAC because they are essentially different.
o The limited liability settled in G.R. No. 88159 is that which attaches to cargo
by virtue of stipulations in the Bill of Lading, popularly known as package
limitation clauses, which in that case was contained in Section 8 of the
Bill of Lading and which limited the carrier's liability to US$500.00 for
the cargo whose value was therein sought to be recovered. Said
resolution did not tackle the matter of the Limited Liability Rule
arising out of the real and hypothecary nature of maritime law, which
was not raised therein, and which is the principal bone of contention in
this case. While the matters threshed out in G.R. No. 88159, particularly
those dealing with the issues on primary administrative jurisdiction and the
package liability limitation provided in the Bill of Lading are now settled and
should no longer be touched, the instant case raises a completely different
issue. It appears, therefore, that the resolution in G.R. 88159 adverted to has
no bearing other than factual to the instant case.
(2) WON execution of judgments which have become final and executory may be stayed is also
an issue. (YES but as an XPN so that substantial justice may not be subverted.)
 This Court has always been consistent in its stand that the very purpose for its
existence is to see to the accomplishment of the ends of justice. Consistent with this
view, a number of decisions have originated herefrom, the tenor of which is that no
procedural consideration is sacrosanct if such shall result in the subverting of
substantial justice. The right to an execution after finality of a decision is certainly no
exception to this. Thus, in the case of Lipana v. Development Bank of Rizal, the Court
ruled that the rule that once a decision becomes final and executory, it is the
ministerial duty of the court to order its execution, admits of certain exceptions
as in cases of special and exceptional nature where it becomes the imperative in
the higher interest of justice to direct the suspension of its execution; whenever
it is necessary to accomplish the aims of justice or when certain facts and
circumstances transpired after the judgment became final which would render
the execution of the judgment unjust.
(3) WON the Limited Liability Rule arising out of the real and hypothecary nature of maritime
law should apply in this and related cases. (YES.)
 The real and hypothecary nature of maritime law simply means that the liability of the
carrier in connection with losses related to maritime contracts is confined to the
vessel, which is hypothecated for such obligations or which stands as the guaranty for
their settlement. Thus, the liability of the vessel owner and agent arising from the
operation of such vessel were confined to the vessel itself, its equipment, freight, and
insurance, if any, which limitation served to induce capitalists into effectively
29
wagering their resources against the consideration of the large profits attainable in
the trade.
 We now come to its applicability in the instant case. In the few instances when the
matter was considered by this Court, we have been consistent in this
jurisdiction in holding that the only time the Limited Liability Rule does not
apply is when there is an actual finding of negligence on the part of the vessel
owner or agent.
(3.1)WON there is a finding of such negligence on the part of the owner in the instant case. (NO.)
 A careful reading of the decision rendered by the trial court in Civil Case No. 144425
as well as the entirety of the records in the instant case will show that there has been
no actual finding of negligence on the part of petitioner. In its Decision, the trial court
merely held that:
. . . Considering the foregoing reasons, the Court holds that the vessel M/V
"Aboitiz" and its cargo were not lost due to fortuitous event or force majeure."
(p. 32, Rollo)
 The same is true of the decision of this Court in G.R. No. 89757 affirming the decision
of the Court of Appeals in CA-G.R. CV No. 10609 since both decisions did not make any
new and additional finding of fact. Both merely affirmed the factual findings of the
trial court, adding that the cause of the sinking of the vessel was because of
unseaworthiness due to the failure of the crew and the master to exercise
extraordinary diligence. Indeed, there appears to have been no evidence presented
sufficient to form a conclusion that petitioner shipowner itself was negligent, and no
tribunal, including this Court will add or subtract to such evidence to justify a
conclusion to the contrary.
 The qualified nature of the meaning of "unseaworthiness," under the peculiar
circumstances of this case is underscored by the fact that in the Country
Banker's case, supra, arising from the same sinking, the Court sustained the decision
of the Court of Appeals that the sinking of the M/V P. Aboitiz was due to force majeure.
 On this point, it should be stressed that unseaworthiness is not a fault that can be laid
squarely on petitioner's lap, absent a factual basis for such a conclusion. The
unseaworthiness found in some cases where the same has been ruled to exist is
directly attributable to the vessel's crew and captain, more so on the part of the latter
since Article 612 of the Code of Commerce provides that among the inherent duties of
a captain is to examine a vessel before sailing and to comply with the laws of
navigation. Such a construction would also put matters to rest relative to the decision
of the Board of Marine Inquiry. While the conclusion therein exonerating the captain
and crew of the vessel was not sustained for lack of basis, the finding therein
contained to the effect that the vessel was seaworthy deserves merit. Despite
appearances, it is not totally incompatible with the findings of the trial court and the
Court of Appeals, whose finding of "unseaworthiness" clearly did not pertain to the
structural condition of the vessel which is the basis of the BMI's findings, but to the
condition it was in at the time of the sinking, which condition was a result of the acts of
the captain and the crew.
 The rights of a vessel owner or agent under the Limited Liability Rule are akin to
those of the rights of shareholders to limited liability under our corporation law. Both

are privileges granted by statute, and while not absolute, must be swept aside only in
the established existence of the most compelling of reasons. In the absence of such
reasons, this Court chooses to exercise prudence and shall not sweep such rights aside
on mere whim or surmise, for even in the existence of cause to do so, such incursion is
definitely punitive in nature and must never be taken lightly.
 In both insolvency of a corporation and the sinking of a vessel, the claimants or
creditors are limited in their recovery to the remaining value of accessible assets. In
the case of an insolvent corporation, these are the residual assets of the corporation
left over from its operations. In the case of a lost vessel, these are the insurance
proceeds and pending freightage for the particular voyage.
 In the instant case, there is, therefore, a need to collate all claims preparatory to
their satisfaction from the insurance proceeds on the vessel M/V P. Aboitiz and
its pending freightage at the time of its loss. No claimant can be given
precedence over the others by the simple expedience of having filed or
completed its action earlier than the rest. Thus, execution of judgment in earlier
completed cases, even those already final and executory, must be stayed
pending completion of all cases occasioned by the subject sinking. Then and
only then can all such claims be simultaneously settled, either completely or
pro-rata should the insurance proceeds and freightage be not enough to satisfy
all claims.
 Finally, the Court notes that petitioner has provided this Court with a list of all
pending cases together with the corresponding claims and the pro-rated share of
each. We likewise note that some of these cases are still with the Court of Appeals, and
some still with the trial courts and which probably are still undergoing trial. It would
not, therefore, be entirely correct to preclude the trial courts from making their own
findings of fact in those cases and deciding the same by allotting shares for these
claims, some of which, after all, might not prevail, depending on the evidence
presented in each. We, therefore, rule that the pro-rated share of each claim can
only be found after all the cases shall have been decided.
 In fairness to the claimants, and as a matter of equity, the total proceeds of the
insurance and pending freightage should now be deposited in trust. Moreover,
petitioner should institute the necessary limitation and distribution action before the
proper admiralty court within 15 days from the finality of this decision, and thereafter
deposit with it the proceeds from the insurance company and pending freightage in
order to safeguard the same pending final resolution of all incidents, for final pro-
rating and settlement thereof.
SC= Petition is hereby GRANTED. Orders of RTC and CA are hereby set aside. TC directed to desist
from proceeding with the execution of the judgment rendered in Civil Case No. 144425 pending
determination of the totality of claims recoverable from the petitioner as the owner of the M/V P.
Aboitiz. Petitioner is directed to institute the necessary action and to deposit the proceeds of the
insurance of subject vessel as above-described within fifteen (15) days from finality of this
decision. The temporary restraining order issued in this case dated August 7, 1991 is hereby made
permanent.
98 MONARCH INSURANCE CO v. CA
FACTS:
30
NOTE: These are 3 consolidated petitions which all arose from the loss of cargoes of various
shippers when the M/V P. Aboitiz (ABOITIZ), a common carrier owned and operated by
Aboitiz, sank on her voyage from Hong Kong to Manila on October 31, 1980.
 [G.R. No. 92735] is a petition for review which assails the decision of the CA setting
aside the writ of execution issued by the lower court for the full indemnification of the
claims of, Monarch Insurance Company (MONARCH) and Tabacalera Insurance
Company, Incorporated (TABACALERA) against ABOITIZ, on the ground that
ABOITIZ is entitled to the benefit of the limited liability rule in maritime law.
o Monarch and Tabacalera are insurance carriers of lost cargoes. They
indemnified the shippers and were consequently subrogated to their rights,
interests and actions against Aboitiz, the cargo carrier.
 Because Aboitiz refused to compensate Monarch and Tabacalera,
they filed a case against Aboitiz. Aboitiz posited a defense of force
majeure for the loss of the glass tubing, motor vehicle parts,
Renault spare parts, door closers, plastic spangles, in light of the
sinking of the M/V P. Aboitiz;
o Monarch and Tabacalera, through the survey of Perfect Lambert, a surveyor
commissioned to investigate the possible cause of the sinking of the cargo
vessel, established that on her voyage to Manila from Hong Kong, the vessel
did not encounter weather so inclement that Aboitiz would be exculpated
from liability for losses.
 The master of M/V P. Aboitiz described the wind force
encountered by the vessel as from ten (10) to fifteen (15)
knots, a weather condition classified as typical and moderate
in the South China Sea at that particular time of the year. The
survey added that the seaworthiness of the vessel was in
question especially because the breaches of the hull and the
serious flooding of two (2) cargo holds occurred
simultaneously in "seasonal weather.
o Trial court ruled against Aboitiz and made it liable. Consequently, Monarch
and Tabacalera moved for execution of judgment which the court granted
and issued separate writs of execution.
 However, Aboitiz invoked the real and hypothecary nature of
liability in maritime law and filed an urgent motion to quash the
writs of execution.
 According to Aboitiz, since its liability is limited to the value of the
vessel which was insufficient to satisfy the aggregate claims of all
110 claimants, to indemnify Monarch and Tabacalera ahead of the
other claimants would be prejudicial to the latter.
o Subsequently, Aboitiz filed with the Court of Appeals a petition for certiorari
and prohibition with prayer for preliminary injunction and/or temporary
restraining order which the court granted thereby the subject writs of
execution, auction sale, certificates of sale were annulled;
 *[G.R. No. 94867] is a petition for certiorari to annul and set aside the decision of the
CA which ordered the lower court to stay the execution of the judgment in favor of the
Allied Guarantee Insurance Company (ALLIED) against ABOITIZ insofar as it
impairs the rights of the other claimants to their pro-rata share in the insurance

proceeds from the sinking of the M/V P. Aboitiz, in accordance with the rule on
limited liability.
 *[G.R. No. 95578] is a petition for review seeking a reversal of the decision of the CA
which modified the judgment of the lower court by applying the
hypothecary rule on limited liability to limit the lower courts award of actual
damages to Equitable Insurance Corporation (EQUITABLE) to its pro-rata
share in the insurance proceeds from the sinking of the M/V P. Aboitiz.
 Both these 2** cases were tried jointly whereas, Allied as insurer-subrogee of
consignee Peak Plastic and Metal Products Limited and Equitable, as insurer-
subrogee of consignee-assured Axel Manufacturing Corporation, filed
complaints to recover for the loss of bags of PVC compounds, bags ABS plastic,
drums of synthetic organic tanning substances and optical bleaching agents due
to the sinking of the same, M/V P. Aboitiz.
o Aboitiz disclaimed responsibility for the amounts being recovered, alleging
that the loss was due to a fortuitous event or an act of God. It prayed for the
dismissal of the cases and the payment of attorneys fees, litigation expenses
plus costs of suit.
o Both Allied and Equitable posited the testimonies of Capt. Gerry N. Racines,
master mariner of the M/V P. Aboitiz, and Justo C. Iglesias, a meteorologist of
the Philippine Atmospheric Geophysical and Astronomical Services
Administration (PAGASA).
o The gist of the testimony of the captain and meteorologist will show
that the vessel suddenly encountered rough seas with waves about
fifteen to twenty-five feet high and sea water entered the vessel and
despite of successfully pumping out the water on their first try, the
water level continued rising in the cargo area and even though the
crew tried earnestly to pumped the water out, it cannot be done
anymore.
o That, a stormy weather condition prevailed within the Philippine area
of responsibility, particularly along the sea route from Hong Kong to
Manila, because of tropical depression "Yoning. However, the captain
affirmed that the wind force on October 29-30, 1980 was only ten (10)
to fifteen (15) knots. Under the Beaufort Scale of Wind, said wind
velocity falls under scale No. 4 that describes the sea condition as
"moderate breeze," and "small waves becoming longer, fairly frequent
white horses.
 Similar with the first case, the trial court rendered a decision against Aboitiz but
before the issuance of the writ of execution, Aboitiz filed an injunction/TRO and was
favored by.
ISSUE/S:
1. Whether the limited liability rule in maritime law is applicable in favor of Aboitiz in
order to stay the execution of the judgments for full indemnification of the losses
suffered by the petitioners as a result of the sinking of the M/V P. Aboitiz. (YES)
2. Whether Aboitiz can be held liable for the mishap for negligence. (YES)
31
HELD:
 The petitioners assert in common that the vessel M/V P. Aboitiz did not sink by
reason of force majeure but because of its unseaworthiness and the concurrent fault
and/or negligence of Aboitiz, the captain and its crew, thereby barring Aboitiz from
availing of the benefit of the limited liability rule.
o Article 587 speaks only of situations where the fault or negligence is
committed solely by the captain. In cases where the ship owner is
likewise to be blamed, Article 587 does not apply. Such a situation will
be covered by the provisions of the Civil Code on common carriers.
 A finding that a fortuitous event was the sole cause of the loss of the M/V P. Aboitiz
would absolve Aboitiz from any and all liability pursuant to Article 1734(1) of the
Civil Code which provides in part that common carriers are responsible for the loss,
destruction, or deterioration of the goods they carry, unless the same is due to flood,
storm, earthquake, lightning, or other natural disaster or calamity.
o On the other hand, a finding that the M/V P. Aboitiz sank by reason of fault
and/or negligence of Aboitiz, the ship captain and crew of the M/V P. Aboitiz
would render inapplicable the rule on limited liability.
1. LIMITED LIABILITY ISSUE. SC found the doctrine of limited liability rule applicable.
 In G.R. No. 92735, after receiving Monarchs and Tabacaleras evidence, the trial court
found that the complete loss of the shipment on board the M/V P. Aboitiz when it sank
was neither due to a fortuitous event nor a storm or natural cause.
 For Aboitiz failure to present controverting evidence, the trial court also upheld
petitioners allegation that the M/V P. Aboitiz was unseaworthy.
o However, on appeal, CA exculpated Aboitiz from fault or negligence and
ruled that even if M/V P. Aboitiz was found to be unseaworthy, this fault
cannot be laid on the shipowners door.
G.R. No. 95578
 This case was similarly resolved by the trial court, which found that the sinking of the
M/V P. Aboitiz was not due to an act of God or force majeure. It added that the
evidence presented by the petitioner Equitable demonstrated the negligence of
Aboitiz Shipping Corporation in the management and operation of its vessel M/V P.
Aboitiz.
 However, Aboitiz appeal was favorably acted upon by the CA which reiterated its
ruling in G.R. No. 92735 that the unseaworthiness of the M/V P.
 Aboitiz was not a fault directly attributable to Aboitiz but to the captain, and that
Aboitiz is entitled to the benefit of the limited liability rule for having abandoned its
ship.
G.R. No. 94867
 In this case, the trial court held that the M/V P. Aboitiz was not lost due to a fortuitous
event or force majeure, and that Aboitiz had failed to satisfactorily establish that it
had observed extraordinary diligence in the vigilance over the goods transported by
it.

 The unseaworthiness of the M/V P. Aboitiz had caused it to founder. However, SC take
exception to the pronouncement therein that said unseaworthiness could not be
attributed to the ship owner but only to the negligent acts of the captain and crew of
the M/V P. Aboitiz.
2. On the matter of Aboitiz negligence, SC found Aboitiz, and the captain and crew of the M/V P.
Aboitiz to have been concurrently negligent. Aboitiz failed to present sufficient evidence to
exculpate itself from fault and/or negligence in the sinking of its vessel in the face of the
foregoing expert testimony.
 This is in accordance with the rule that in cases involving the limited liability of
shipowners, the initial burden of proof of negligence or unseaworthiness rests
on the claimants. However, once the vessel owner or any party asserts the right
to limit its liability, the burden of proof as to lack of privity or knowledge on its
part with respect to the matter of negligence or unseaworthiness is shifted to it.
 This burden, Aboitiz had unfortunately failed to discharge. That Aboitiz failed to
discharge the burden of proving that the unseaworthiness of its vessel was not due to
its fault and/or negligence should not however mean that the limited liability rule will
not be applied to the present cases.
 The peculiar circumstances here demand that there should be no strict adherence to
procedural rules on evidence lest the just claims of shippers/insurers be frustrated.
Instead of filing the suit as directed by SC, Aboitiz tolerated the situation of several claimants
waiting to get hold of its insurance proceeds, which, if correctly handled must have multiplied
in amount by now, thus causing more damage to the claimants over and above that which they
have endured as a direct consequence of the sinking of the M/V P. Aboitiz.
Disposition: WHEREFORE, the petitions in G.R. Nos. 92735, 94867, and 95578 are DENIED
(the limited liability issue). The decisions of the CA in CA-G.R. No. SP-17427 dated March 29,
1990, CA-G.R. SP No. 20844 dated August 15, 1990, and CA-G.R. CV No. 15071 dated August 24,
1990 are AFFIRMED with the MODIFICATION that respondent Aboitiz Shipping
Corporation is ordered to pay each of the respective petitioners the amounts of
P100,000.00 as moral damages and P50,000.00 as attorneys fees, and treble the cost of
suit.
Aboitiz is further directed to comply with the Order promulgated by this Court on January 21,
1993 in Aboitiz Shipping Corporation v. General Accident Fire and Life Assurance Corporation,
Ltd., G.R. No. 100446, January 21, 1993, to (a) institute the necessary limitation and
distribution action before the proper Regional Trial Court, acting as admiralty court, within
fifteen (15) days from the finality of this decision, and (b) thereafter to deposit with the said
court the insurance proceeds from the loss of the vessel, M/V P. Aboitiz, and the freightage
earned in order to safeguard the same pending final resolution of all incidents relative to the
final pro-rating thereof and to the settlement of all claims.
99 MANILA STEAMSHIP CO., INC., Petitioner, vs. INSA ABDULHAMAN (MORO) and LIM
HONG TO, Respondents.
FACTS:
32
 From 7:00 to 8:00 o’clock in the evening of May 4, 1948, the M/L “Consuelo V”, laden
with cargoes and passengers left the port of Zamboanga City bound for Siokon under
the command of Faustino Macrohon. She was then towing a kumpit, named “Sta.
Maria Bay”. The weather was good and fair.
o Among her passengers were the Plaintiff Insa Abdulhaman, his wife Carimla
Mora and their five children. The Plaintiff and his wife paid their fare before
the voyage started.
o On that same night the M/S “Bowline Knot” was navigating from Maribojoc
towards Zamboanga.
 Between 9:30 to 10:00 in the evening the dark clouds bloated with rain began to fall
and the gushing strong wind began to blow steadily harder, lashing the waves into a
choppy and roaring sea. Such weather lasted for about an hour and then it became fair
although it was showering and the visibility was good enough.
 When some of the passengers of the M/L “Consuelo V” were then sleeping and some
were lying down awake, all of a sudden they felt the shocking collision of the M/L
“Consuelo V” and a big motorship, which later on was identified as the M/V “Bowline
Knot”.
o Because the M/L “Consuelo V” capsized, her crew and passengers, before
realizing what had happened, found themselves swimming and floating on
the crest of the waves and as a result of which nine passengers were dead
and missing and all the cargoes carried on said boat, including those of the
Plaintiff.
 Among the dead passengers were plaintiff’s five children. As the cause of the collision,
the Court of Appeals affirmed the findings of the Board of Marine Inquiry, that the
commanding officer of the colliding vessels had both been negligent in operating their
respective vessels.
 Wherefore, the Court held the owners of both vessels solidarily liable to Plaintiff for
the damages caused to him by the collision, under Article 827 of the Code of
Commerce; but exempted Defendant Lim Hong To from liability by reason of the
sinking and total loss of his vessel
o Petitioner Manila Steamship Co. pleads that it is exempt from any liability to
Plaintiff under Article 1903 of the Civil Code because it had exercised the
diligence of a good father of a family in the selection of its employees.
ISSUE: Whether Manila Steamship is exempt from liability?
Held: NO.
 While it is true that Plaintiff’s action against Petitioner is based on a tort or quasi-
delict, the tort in question is not a civil tort under the Civil Code but a maritime tort
resulting in a collision at sea, governed by Articles 826-939 of the Code of Commerce.
o Under Article 827 of the Code of Commerce, in case of collision between
two vessels imputable to both of them, each vessel shall suffer her own
damage and both shall be solidarily liable for the damages occasioned
to their cargoes.
o The characteristic language of the law in making the “vessels” solidarily
liable for the damages due to the maritime collision emphasizes the direct
nature of the responsibilities on account of the collision incurred by the

shipowner under maritime law, as distinguished from the civil law and
mercantile law in general.
o This direct responsibility is recognized in Article 618 of the Code of
Commerce under which the captain shall be civilly liable to the ship agent,
and the latter is the one liable to third persons.
 In fact, it is a general principle, well established maritime law and custom, that
shipowners and ship agents are civilly liable for the acts of the captain (Code of
Commerce, Article 586) and for the indemnities due the third persons (Article 587);
that injured parties may immediately look for reimbursement to the owner of the
ship, it being universally recognized that the ship master or captain is primarily the
representative of the owner.
o This direct liability, moderated and limited by the owner’s right of
abandonment of the vessel and earned freight (Article 587), has been
declared to exist, not only in case of breached contracts, but also in cases of
tortious negligence.
 It is easy to see that to admit the defense of due diligence of a bonus pater familias (in
the selection and vigilance of the officers and crew) as exempting the shipowner from
any liability for their faults, would render nugatory the solidary liability established
by Article 827 of the Code of Commerce for the greater protection of injured parties.
o To compel the parties prejudiced to look to the crew for indemnity and
redress would be an illusory remedy for almost always its members are,
from captains down, mere wage earners.
 Lim Hong To (owner of M/L Consul V) is also liable. It is to be noted that both the
master and the engineer of the motor launch “Consuelo V” were not duly licensed.
o Lim Hong To deliberately increased the risk to which the passengers and
shippers of cargo aboard the “Consuelo V” would be subjected.
o In his desire to reap greater benefits in the maritime trade, Lim Hong To
willfully augmented the dangers and hazards to his vessel’s unwarry
passengers, who would normally assume that the launch officers possessed
the necessary skill and experience to evade the perils of the sea.
o Hence, the liability of said Respondent cannot be the identical to that of a
shipowner who bears in mind the safety of the passengers and cargo by
employing duly licensed officers.
 The international rule is to the effect that the right of abandonment of vessels, as a
legal limitation of a shipowner’s liability, does not apply to cases where the injury or
the average is due to shipowner’s own fault.
100 ABUEG v. SAN DIEGO
FACTS:
 Dionisia, Marciana and Rosario are widows of machinists working in the motor
ships/fishing boats (San Diego II and Bartolome S), who perished when the boats sank
(they were caught in a typhoon on Oct. 1, 1941 whilearound Mindoro Island, filed a
case against the owner, Bartolome San Diego for compensation.
 CFI Manila granted the petition, and awarded compensation provided for in the
Workmen’s Compensation Act.
 San Diego filed an appealed with CA; CA forwarded the case to SC, since there were no
questions of fact.
33
San Diego claimed that:
a) Article587 Code of Commerce: if the vessel together with all her tackle and freight
money earned during the voyage are abandoned, the agent's liability to third persons
for tortious acts of the captain in the care of the goods which the ship carried is
extinguished (Yangco vs. Laserna, 73 Phil., 330)
b) Article 837 Code of Commerce: in cases of collision, the ship owners' liability is
limited to the value of the vessel with all her equipment and freight earned during the
voyage (Philippine Shipping Company vs. Garcia, 6 Phil., 281)
c) Article 643 Code of Commerce: if the vessel and freight are totally lost, the agent's
liability for wages of the crew is extinguished
ISSUE: WON San Diego as owner of the ships which sank as a result of a typhoon is liable for
the compensation of the deceased workers -YES
RULING:
 Provisions of the Code of Commerce invoked have no room in the application of the
Workmen's Compensation Act (WCA) which seeks to improve, and aims at the
amelioration of, the condition of laborers and employees
 It is not the liability for the damage or loss of the cargo or injury to, or death of, a
passenger by or through the misconduct of the captain or master of the ship; nor the
liability for the loss of the ship as result of collision; nor the responsibility for wages of
the crew, but a liability created by a statute to compensate employees and laborers in
cases of injury received by or inflicted upon them, while engaged in the performance
of their work or employment, or the heirs and dependents and laborers and
employees in the event of death caused by their employment
o Such compensation has nothing to do with the provisions of the Code of
Commerce regarding maritime commerce. It is an item in the cost of
production, which must be included in the budget of any well-managed
industry
 The Workmen’s Compensation Act was enacted to abrogate the common law and our
Civil Code upon culpable acts and omissions, and that the employer need not be guilty
of neglect or fault, in order that responsibility may attach to him
o The rights and responsibilities defined in WCA must be governed by its own
peculiar provisions in complete disregard of other similar mercantile law 
If an accident is compensable under the WCA, it must be compensated even
when the workman's right is not recognized by or is in conflict with other
provisions of the Civil Code or the Code of Commerce
NOTE: The new point raised by the owner(the motorboats engaged in fishing could not be
deemed to be in the coastwise and interisland trade, as contemplated in section 38 of the
Workmen's Compensation Act (No. 3428), as amended by Act no. 3812) was inconsistent with
the provisions they invoked, since CoC would then not apply to them
 But even if this were true, owner is still liable since the deceased officers of the motor
ships in question were still industrial employees within the purview of section 39,
paragraph (d), as amended, for industrial employment "includes all employment or
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work at a trade, occupation or profession exercised by an employer for the purpose of

gain."

 -BUT the term "coastwise and interisland trade" cannot have a narrow meaning as to
confine it to the carriage for hire of passengers and/or merchandise on vessels
between ports and places in the Philippines, because while fishing is an industry, if
the catch is brought to a port for sale, it is at the same time a trade

WHEREFORE, judgment of the lower court is AFFIRMED.