THIRD DIVISION
[9] The hole was then patched
[G.R. No. 147246. August 19, 2003]
ASIA LIGHTERAGE AND SHIPPING, INC., petitioner, vs. COURT OF APPEALS and PRUDENTIAL
GUARANTEE AND ASSURANCE, INC., respondents.
DECISION
PUNO, J.:
On appeal is the Court of Appeals May 11, 2000 Decision[1] in CA-G.R. CV No. 49195 and
February 21, 2001 Resolution[2] affirming with modification the April 6, 1994 Decision[3] of the
Regional Trial Court of Manila which found petitioner liable to pay private respondent the
amount of indemnity and attorney's fees.
First, the facts.
On June 13, 1990, 3,150 metric tons of Better Western White Wheat in bulk, valued at
US$423,192.35[4] was shipped by Marubeni American Corporation of Portland, Oregon on
board the vessel M/V NEO CYMBIDIUM V-26 for delivery to the consignee, General Milling
Corporation in Manila, evidenced by Bill of Lading No. PTD/Man-4.[5] The shipment was
insured by the private respondent Prudential Guarantee and Assurance, Inc. against loss or
damage for P14,621,771.75 under Marine Cargo Risk Note RN 11859/90.[6]
On July 25, 1990, the carrying vessel arrived in Manila and the cargo was transferred to the
custody of the petitioner Asia Lighterage and Shipping, Inc. The petitioner was contracted
by the consignee as carrier to deliver the cargo to consignee's warehouse at Bo. Ugong,
Pasig City.
On August 15, 1990, 900 metric tons of the shipment was loaded on barge PSTSI III,
evidenced by Lighterage Receipt No. 0364[7] for delivery to consignee. The cargo did not
reach its destination.
It appears that on August 17, 1990, the transport of said cargo was suspended due to a
warning of an incoming typhoon. On August 22, 1990, the petitioner proceeded to pull the
barge to Engineering Island off Baseco to seek shelter from the approaching
typhoon. PSTSI III was tied down to other barges which arrived ahead of it while
weathering out the storm that night. A few days after, the barge developed a list because
of a hole it sustained after hitting an unseen protuberance underneath the water. The
petitioner filed a Marine Protest on August 28, 1990.[8] It likewise secured the services of
Gaspar Salvaging Corporation which refloated the barge.
with clay and cement.
The barge was then towed to ISLOFF terminal before it finally headed towards the
consignee's wharf on September 5, 1990. Upon reaching the Sta. Mesa spillways, the barge
again ran aground due to strong current. To avoid the complete sinking of the barge, a
portion of the goods was transferred to three other barges.[10]
The next day, September 6, 1990, the towing bits of the barge broke. It sank completely,
resulting in the total loss of the remaining cargo.[11] A second Marine Protest was filed on
September 7, 1990.[12]
On September 14, 1990, a bidding was conducted to dispose of the damaged wheat
retrieved and loaded on the three other barges.[13] The total proceeds from the sale of the
salvaged cargo was P201,379.75.[14]
On the same date, September 14, 1990, consignee sent a claim letter to the petitioner,
and another letter dated September 18, 1990 to the private respondent for the value of
the lost cargo.
On January 30, 1991, the private respondent indemnified the consignee in the amount
of P4,104,654.22.[15] Thereafter, as subrogee, it sought recovery of said amount from the
petitioner, but to no avail.
On July 3, 1991, the private respondent filed a complaint against the petitioner for
recovery of the amount of indemnity, attorney's fees and cost of suit.[16] Petitioner filed its
answer with counterclaim.[17]
The Regional Trial Court ruled in favor of the private respondent. The dispositive portion of
its Decision states:
WHEREFORE, premises considered, judgment is hereby rendered ordering defendant Asia
Lighterage & Shipping, Inc. liable to pay plaintiff Prudential Guarantee & Assurance Co.,
Inc. the sum of P4,104,654.22 with interest from the date complaint was filed on July 3, 1991
until fully satisfied plus 10% of the amount awarded as and for attorney's fees. Defendant's
counterclaim is hereby DISMISSED. With costs against defendant.[18]
Petitioner appealed to the Court of Appeals insisting that it is not a common carrier. The
appellate court affirmed the decision of the trial court with modification. The dispositive
portion of its decision reads:
WHEREFORE, the decision appealed from is hereby AFFIRMED with modification in the
sense that the salvage value of P201,379.75 shall be deducted from the amount
of P4,104,654.22. Costs against appellant.
SO ORDERED.
Petitioners Motion for Reconsideration dated June 3, 2000 was likewise denied by the
appellate court in a Resolution promulgated on February 21, 2001.
Hence, this petition. Petitioner submits the following errors allegedly committed by the
appellate court, viz:[19]
(1) THE COURT OF APPEALS DECIDED THE CASE A QUO IN A WAY NOT IN ACCORD WITH
LAW AND/OR WITH THE APPLICABLE DECISIONS OF THE SUPREME COURT WHEN IT HELD THAT
PETITIONER IS A COMMON CARRIER.
(2) THE COURT OF APPEALS DECIDED THE CASE A QUO IN A WAY NOT IN ACCORD WITH
LAW AND/OR WITH THE APPLICABLE DECISIONS OF THE SUPREME COURT WHEN IT AFFIRMED
THE FINDING OF THE LOWER COURT A QUO THAT ON THE BASIS OF THE PROVISIONS OF THE
CIVIL CODE APPLICABLE TO COMMON CARRIERS, THE LOSS OF THE CARGO IS, THEREFORE,
BORNE BY THE CARRIER IN ALL CASES EXCEPT IN THE FIVE (5) CASES ENUMERATED.
(3) THE COURT OF APPEALS DECIDED THE CASE A QUO IN A WAY NOT IN ACCORD WITH
LAW AND/OR WITH THE APPLICABLE DECISIONS OF THE SUPREME COURT WHEN IT
EFFECTIVELY CONCLUDED THAT PETITIONER FAILED TO EXERCISE DUE DILIGENCE AND/OR
WAS NEGLIGENT IN ITS CARE AND CUSTODY OF THE CONSIGNEES CARGO.
The issues to be resolved are:
(1) Whether the petitioner is a common carrier; and,
(2) Assuming the petitioner is a common carrier, whether it exercised extraordinary
diligence in its care and custody of the consignees cargo.
On the first issue, we rule that petitioner is a common carrier.
Article 1732 of the Civil Code defines common carriers as persons, corporations, firms or
associations engaged in the business of carrying or transporting passengers or goods or
both, by land, water, or air, for compensation, offering their services to the public.
Petitioner contends that it is not a common carrier but a private carrier. Allegedly, it has no
fixed and publicly known route, maintains no terminals, and issues no tickets. It points out
that it is not obliged to carry indiscriminately for any person. It is not bound to carry goods
unless it consents. In short, it does not hold out its services to the general public.[20]
We disagree.
In De Guzman vs. Court of Appeals,[21] we held that the definition of common carriers in
Article 1732 of the Civil Code makes no distinction between one whose principal business
activity is the carrying of persons or goods or both, and one who does such carrying only
as an ancillary activity. We also did not distinguish between a person or enterprise offering
transportation service on a regular or scheduled basis and one offering such service on an
occasional, episodic or unscheduled basis. Further, we ruled that Article 1732 does not
distinguish between a carrier offering its services to the general public, and one who offers
services or solicits business only from a narrow segment of the general population.
In the case at bar, the principal business of the petitioner is that of lighterage and
drayage[22]and it offers its barges to the public for carrying or transporting goods by water
for compensation.Petitioner is clearly a common carrier. In De Guzman, supra,[23] we
considered private respondent Ernesto Cendaa to be a common carrier even if his
principal occupation was not the carriage of goods for others, but that of buying used
bottles and scrap metal in Pangasinan and selling these items in Manila.
We therefore hold that petitioner is a common carrier whether its carrying of goods is done
on an irregular rather than scheduled manner, and with an only limited clientele. A
common carrier need not have fixed and publicly known routes. Neither does it have to
maintain terminals or issue tickets.
To be sure, petitioner fits the test of a common carrier as laid down in Bascos vs. Court of
Appeals.[24] The test to determine a common carrier is whether the given undertaking is a
part of the business engaged in by the carrier which he has held out to the general public
as his occupation rather than the quantity or extent of the business transacted. [25] In the
case at bar, the petitioner admitted that it is engaged in the business of shipping and
lighterage,[26] offering its barges to the public, despite its limited clientele for carrying or
transporting goods by water for compensation.[27]
On the second issue, we uphold the findings of the lower courts that petitioner failed to
exercise extraordinary diligence in its care and custody of the consignees goods.
Common carriers are bound to observe extraordinary diligence in the vigilance over the
goods transported by them.[28] They are presumed to have been at fault or to have acted
negligently if the goods are lost, destroyed or deteriorated.[29] To overcome the
presumption of negligence in the case of loss, destruction or deterioration of the goods,
the common carrier must prove that it exercised extraordinary diligence. There are,
however, exceptions to this rule. Article 1734 of the Civil Code enumerates the instances
when the presumption of negligence does not attach:
Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of the
goods, unless the same is due to any of the following causes only:
(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
warehouse, now while on route another accident occurred, now this time the barge
totally hitting something in the course.
q - You said there was another accident, can you tell the court the nature of the second
accident?
a - The sinking, sir.
q - Can you tell the nature . . . can you tell the court, if you know what caused the sinking?
a - Mostly it was related to the first accident because there was already a whole (sic) on
the bottom part of the barge.

(4) The character of the goods or defects in the packing or in the containers; xxxxxxxxx

(5) Order or act of competent public authority.
In the case at bar, the barge completely sank after its towing bits broke, resulting in the
total loss of its cargo. Petitioner claims that this was caused by a typhoon, hence, it should
not be held liable for the loss of the cargo. However, petitioner failed to prove that the
typhoon is the proximate and only cause of the loss of the goods, and that it has exercised
due diligence before, during and after the occurrence of the typhoon to prevent or
minimize the loss.[30] The evidence show that, even before the towing bits of the barge
broke, it had already previously sustained damage when it hit a sunken object while
docked at the Engineering Island. It even suffered a hole. Clearly, this could not be solely
attributed to the typhoon. The partly-submerged vessel was refloated but its hole was
patched with only clay and cement. The patch work was merely a provisional remedy, not
enough for the barge to sail safely. Thus, when petitioner persisted to proceed with the
voyage, it recklessly exposed the cargo to further damage. A portion of the cross-
examination of Alfredo Cunanan, cargo-surveyor of Tan-Gatue Adjustment Co., Inc.,
states:
This is not all. Petitioner still headed to the consignees wharf despite knowledge of an
incoming typhoon. During the time that the barge was heading towards the consignee's
wharf on September 5, 1990, typhoon Loleng has already entered the Philippine area of
responsibility.[32] A part of the testimony of Robert Boyd, Cargo Operations Supervisor of the
petitioner, reveals:
DIRECT-EXAMINATION BY ATTY. LEE:[33]
xxxxxxxxx
q - Now, Mr. Witness, did it not occur to you it might be safer to just allow the Barge to lie
where she was instead of towing it?
a - Since that time that the Barge was refloated, GMC (General Milling Corporation, the
consignee) as I have said was in a hurry for their goods to be delivered at their Wharf since
they needed badly the wheat that was loaded in PSTSI-3. It was needed badly by the
consignee.

CROSS-EXAMINATION BY ATTY. DONN LEE:[31] q - And this is the reason why you towed the Barge as you did?

xxxxxxxxx a - Yes, sir.

q - Can you tell us what else transpired after that incident? xxxxxxxxx

a - After the first accident, through the initiative of the barge owners, they tried to pull out CROSS-EXAMINATION BY ATTY. IGNACIO:[34]
the barge from the place of the accident, and bring it to the anchor terminal for safety,
then after deciding if the vessel is stabilized, they tried to pull it to the consignees xxxxxxxxx
q - And then from ISLOFF Terminal you proceeded to the premises of the GMC? Am I Corona, and Carpio-Morales, JJ., on official leave.
correct?

a - The next day, in the morning, we hired for additional two (2) tugboats as I have stated.

q - Despite of the threats of an incoming typhoon as you testified a while ago?

a - It is already in an inner portion of Pasig River. The typhoon would be coming and it
would be dangerous if we are in the vicinity of Manila Bay.

q - But the fact is, the typhoon was incoming? Yes or no?

a - Yes.

q - And yet as a standard operating procedure of your Company, you have to secure a
sort of Certification to determine the weather condition, am I correct?

a - Yes, sir.

q - So, more or less, you had the knowledge of the incoming typhoon, right?

a - Yes, sir.

q - And yet you proceeded to the premises of the GMC?

a - ISLOFF Terminal is far from Manila Bay and anytime even with the typhoon if you are
already inside the vicinity or inside Pasig entrance, it is a safe place to tow upstream.

Accordingly, the petitioner cannot invoke the occurrence of the typhoon as force
majeure to escape liability for the loss sustained by the private respondent. Surely, meeting
a typhoon head-on falls short of due diligence required from a common carrier. More
importantly, the officers/employees themselves of petitioner admitted that when the
towing bits of the vessel broke that caused its sinking and the total loss of the cargo upon
reaching the Pasig River, it was no longer affected by the typhoon. The typhoon then is not
the proximate cause of the loss of the cargo; a human factor, i.e., negligence had
intervened.

IN VIEW THEREOF, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R.
CV No. 49195 dated May 11, 2000 and its Resolution dated February 21, 2001 are hereby
AFFIRMED. Costs against petitioner.

SO ORDERED.

Panganiban, and Sandoval-Gutierrez, JJ., concu

[G.R. No. 138334. August 25, 2003]
ESTELA L. CRISOSTOMO, petitioner, vs. THE COURT OF APPEALS andCARAVAN TRAVEL &
TOURS INTERNATIONAL, INC., respondents.
DECISION
YNARES-SANTIAGO, J.:
In May 1991, petitioner Estela L. Crisostomo contracted the services of respondent
Caravan Travel and Tours International, Inc. to arrange and facilitate her booking,
ticketing and accommodation in a tour dubbed Jewels of Europe. The package tour
included the countries of England, Holland, Germany, Austria, Liechstenstein, Switzerland
and France at a total cost of P74,322.70. Petitioner was given a 5% discount on the
amount, which included airfare, and the booking fee was also waived because petitioners
niece, Meriam Menor, was respondent companys ticketing manager.
Pursuant to said contract, Menor went to her aunts residence on June 12, 1991 a
Wednesday to deliver petitioners travel documents and plane tickets. Petitioner, in turn,
gave Menor the full payment for the package tour. Menor then told her to be at the Ninoy
Aquino International Airport (NAIA) on Saturday, two hours before her flight on board British
Airways.
Without checking her travel documents, petitioner went to NAIA on Saturday, June 15,
1991, to take the flight for the first leg of her journey from Manila to Hongkong. To
petitioners dismay, she discovered that the flight she was supposed to take had already
departed the previous day. She learned that her plane ticket was for the flight scheduled
on June 14, 1991. She thus called up Menor to complain.
Subsequently, Menor prevailed upon petitioner to take another tour the British Pageant
which included England, Scotland and Wales in its itinerary. For this tour package,
petitioner was asked anew to pay US$785.00 or P20,881.00 (at the then prevailing
exchange rate of P26.60). She gave respondent US$300 or P7,980.00 as partial payment
and commenced the trip in July 1991.
Upon petitioners return from Europe, she demanded from respondent the reimbursement
of P61,421.70, representing the difference between the sum she paid for Jewels of Europe
and the amount she owed respondent for the British Pageant tour. Despite several
demands, respondent company refused to reimburse the amount, contending that the
same was non-refundable.[1]Petitioner was thus constrained to file a complaint against
respondent for breach of contract of carriage and damages, which was docketed as Civil
Case No. 92-133 and raffled to Branch 59 of the Regional Trial Court of Makati City.
In her complaint,[2] petitioner alleged that her failure to join Jewels of Europe was due to
respondents fault since it did not clearly indicate the departure date on the plane
ticket. Respondent was also negligent in informing her of the wrong flight schedule through
its employee Menor. She insisted that the British Pageant was merely a substitute for the
Jewels of Europe tour, such that the cost of the former should be properly set-off against
the sum paid for the latter.
For its part, respondent company, through its Operations Manager, Concepcion Chipeco,
denied responsibility for petitioners failure to join the first tour. Chipeco insisted that
petitioner was informed of the correct departure date, which was clearly and legibly
printed on the plane ticket. The travel documents were given to petitioner two days
ahead of the scheduled trip. Petitioner had only herself to blame for missing the flight, as
she did not bother to read or confirm her flight schedule as printed on the ticket.
Respondent explained that it can no longer reimburse the amount paid for Jewels of
Europe, considering that the same had already been remitted to its principal in Singapore,
Lotus Travel Ltd., which had already billed the same even if petitioner did not join the
tour. Lotus European tour organizer, Insight International Tours Ltd., determines the cost of a
package tour based on a minimum number of projected participants. For this reason, it is
accepted industry practice to disallow refund for individuals who failed to take a booked
tour.[3]
Lastly, respondent maintained that the British Pageant was not a substitute for the
package tour that petitioner missed. This tour was independently procured by petitioner
after realizing that she made a mistake in missing her flight for Jewels of Europe. Petitioner
was allowed to make a partial payment of only US$300.00 for the second tour because her
niece was then an employee of the travel agency. Consequently, respondent prayed that
petitioner be ordered to pay the balance of P12,901.00 for the British Pageant package
tour.
After due proceedings, the trial court rendered a decision,[4] the dispositive part of which
reads:
WHEREFORE, premises considered, judgment is hereby rendered as follows:
1. Ordering the defendant to return and/or refund to the plaintiff the amount of Fifty Three
Thousand Nine Hundred Eighty Nine Pesos and Forty Three Centavos (P53,989.43) with legal
interest thereon at the rate of twelve percent (12%) per annum starting January 16, 1992,
the date when the complaint was filed;
2. Ordering the defendant to pay the plaintiff the amount of Five Thousand (P5,000.00)
Pesos as and for reasonable attorneys fees;
3. Dismissing the defendants counterclaim, for lack of merit; and
4. With costs against the defendant.
SO ORDERED.[5]
The trial court held that respondent was negligent in erroneously advising petitioner of her
departure date through its employee, Menor, who was not presented as witness to rebut
petitioners testimony. However, petitioner should have verified the exact date and time of
departure by looking at her ticket and should have simply not relied on Menors verbal
representation. The trial court thus declared that petitioner was guilty of contributory
negligence and accordingly, deducted 10% from the amount being claimed as refund.
Respondent appealed to the Court of Appeals, which likewise found both parties to be at
fault.However, the appellate court held that petitioner is more negligent than respondent
because as a lawyer and well-traveled person, she should have known better than to
simply rely on what was told to her. This being so, she is not entitled to any form of
damages. Petitioner also forfeited her right to the Jewels of Europe tour and must therefore
pay respondent the balance of the price for the British Pageant tour. The dispositive
portion of the judgment appealed from reads as follows:
WHEREFORE, premises considered, the decision of the Regional Trial Court dated October
26, 1995 is hereby REVERSED and SET ASIDE. A new judgment is hereby ENTERED requiring
the plaintiff-appellee to pay to the defendant-appellant the amount of P12,901.00,
representing the balance of the price of the British Pageant Package Tour, the same to
earn legal interest at the rate of SIX PERCENT (6%) per annum, to be computed from the
time the counterclaim was filed until the finality of this decision. After this decision becomes
final and executory, the rate of TWELVE PERCENT (12%) interest per annum shall be
additionally imposed on the total obligation until payment thereof is satisfied. The award of
attorneys fees is DELETED. Costs against the plaintiff-appellee.
SO ORDERED.[6]
Upon denial of her motion for reconsideration,[7] petitioner filed the instant petition under
Rule 45 on the following grounds:
I It is obvious from the above definition that respondent is not an entity engaged in the
It is respectfully submitted that the Honorable Court of Appeals committed a reversible
error in reversing and setting aside the decision of the trial court by ruling that the
petitioner is not entitled to a refund of the cost of unavailed Jewels of Europe tour she
being equally, if not more, negligent than the private respondent, for in the contract of
carriage the common carrier is obliged to observe utmost care and extra-ordinary
diligence which is higher in degree than the ordinary diligence required of the passenger.
Thus, even if the petitioner and private respondent were both negligent, the petitioner
cannot be considered to be equally, or worse, more guilty than the private respondent. At
best, petitioners negligence is only contributory while the private respondent [is guilty] of
gross negligence making the principle of pari delicto inapplicable in the case;
II
The Honorable Court of Appeals also erred in not ruling that the Jewels of Europe tour was
not indivisible and the amount paid therefor refundable;
III
The Honorable Court erred in not granting to the petitioner the consequential damages
due her as a result of breach of contract of carriage.[8]
Petitioner contends that respondent did not observe the standard of care required of a
common carrier when it informed her wrongly of the flight schedule. She could not be
deemed more negligent than respondent since the latter is required by law to exercise
extraordinary diligence in the fulfillment of its obligation. If she were negligent at all, the
same is merely contributory and not the proximate cause of the damage she suffered. Her
loss could only be attributed to respondent as it was the direct consequence of its
employees gross negligence.
Petitioners contention has no merit.
By definition, a contract of carriage or transportation is one whereby a certain person or
association of persons obligate themselves to transport persons, things, or news from one
place to another for a fixed price.[9] Such person or association of persons are regarded as
carriers and are classified as private or special carriers and common or public carriers.[10] A
common carrier is defined under Article 1732 of the Civil Code as persons, corporations,
firms or associations engaged in the business of carrying or transporting passengers or
goods or both, by land, water or air, for compensation, offering their services to the public.
business of transporting either passengers or goods and is therefore, neither a private nor a
common carrier. Respondent did not undertake to transport petitioner from one place to
another since its covenant with its customers is simply to make travel arrangements in their
behalf. Respondents services as a travel agency include procuring tickets and facilitating
travel permits or visas as well as booking customers for tours.
While petitioner concededly bought her plane ticket through the efforts of respondent
company, this does not mean that the latter ipso facto is a common carrier. At most,
respondent acted merely as an agent of the airline, with whom petitioner ultimately
contracted for her carriage to Europe. Respondents obligation to petitioner in this regard
was simply to see to it that petitioner was properly booked with the airline for the
appointed date and time. Her transport to the place of destination, meanwhile, pertained
directly to the airline.
The object of petitioners contractual relation with respondent is the latters service
of arranging and facilitating petitioners booking, ticketing and accommodation in the
package tour. In contrast, the object of a contract of carriage is the transportation of
passengers or goods. It is in this sense that the contract between the parties in this case
was an ordinary one for services and not one of carriage. Petitioners submission is premised
on a wrong assumption.
The nature of the contractual relation between petitioner and respondent is determinative
of the degree of care required in the performance of the latters obligation under the
contract. For reasons of public policy, a common carrier in a contract of carriage is bound
by law to carry passengers as far as human care and foresight can provide using the
utmost diligence of very cautious persons and with due regard for all the
circumstances.[11] As earlier stated, however, respondent is not a common carrier but a
travel agency. It is thus not bound under the law to observe extraordinary diligence in the
performance of its obligation, as petitioner claims.
Since the contract between the parties is an ordinary one for services, the standard of
care required of respondent is that of a good father of a family under Article 1173 of the
Civil Code.[12]This connotes reasonable care consistent with that which an ordinarily
prudent person would have observed when confronted with a similar situation. The test to
determine whether negligence attended the performance of an obligation is: did the
defendant in doing the alleged negligent act use that reasonable care and caution
which an ordinarily prudent person would have used in the same situation? If not, then he
is guilty of negligence.[13]
In the case at bar, the lower court found Menor negligent when she allegedly informed
petitioner of the wrong day of departure. Petitioners testimony was accepted as
indubitable evidence of Menors alleged negligent act since respondent did not call
Menor to the witness stand to refute the allegation. The lower court applied the
presumption under Rule 131, Section 3 (e)[14] of the Rules of Court that evidence willfully
suppressed would be adverse if produced and thus considered petitioners uncontradicted
testimony to be sufficient proof of her claim.
On the other hand, respondent has consistently denied that Menor was negligent and
maintains that petitioners assertion is belied by the evidence on record. The date and time
of departure was legibly written on the plane ticket and the travel papers were delivered
two days in advance precisely so that petitioner could prepare for the trip. It performed all
its obligations to enable petitioner to join the tour and exercised due diligence in its
dealings with the latter.
We agree with respondent.
Respondents failure to present Menor as witness to rebut petitioners testimony could not
give rise to an inference unfavorable to the former. Menor was already working in France
at the time of the filing of the complaint,[15] thereby making it physically impossible for
respondent to present her as a witness. Then too, even if it were possible for respondent to
secure Menors testimony, the presumption under Rule 131, Section 3(e) would still not
apply. The opportunity and possibility for obtaining Menors testimony belonged to both
parties, considering that Menor was not just respondents employee, but also petitioners
niece. It was thus error for the lower court to invoke the presumption that respondent
willfully suppressed evidence under Rule 131, Section 3(e). Said presumption would
logically be inoperative if the evidence is not intentionally omitted but is simply
unavailable, or when the same could have been obtained by both parties.[16]
In sum, we do not agree with the finding of the lower court that Menors negligence
concurred with the negligence of petitioner and resultantly caused damage to the
latter. Menors negligence was not sufficiently proved, considering that the only evidence
presented on this score was petitioners uncorroborated narration of the events. It is well-
settled that the party alleging a fact has the burden of proving it and a mere allegation
cannot take the place of evidence.[17] If the plaintiff, upon whom rests the burden of
proving his cause of action, fails to show in a satisfactory manner facts upon which he
bases his claim, the defendant is under no obligation to prove his exception or defense.[18]
Contrary to petitioners claim, the evidence on record shows that respondent exercised
due diligence in performing its obligations under the contract and followed standard
procedure in rendering its services to petitioner. As correctly observed by the lower court,
the plane ticket[19]issued to petitioner clearly reflected the departure date and time,
contrary to petitioners contention. The travel documents, consisting of the tour itinerary,
vouchers and instructions, were likewise delivered to petitioner two days prior to the trip.
Respondent also properly booked petitioner for the tour, prepared the necessary
documents and procured the plane tickets. It arranged petitioners hotel accommodation Davide, Jr., C.J., (Chairman), Vitug, Carpio, and Azcuna, JJ., concur.
as well as food, land transfers and sightseeing excursions, in accordance with its avowed
undertaking.

Therefore, it is clear that respondent performed its prestation under the contract as well as
everything else that was essential to book petitioner for the tour. Had petitioner exercised
due diligence in the conduct of her affairs, there would have been no reason for her to
miss the flight. Needless to say, after the travel papers were delivered to petitioner, it
became incumbent upon her to take ordinary care of her concerns. This undoubtedly
would require that she at least read the documents in order to assure herself of the
important details regarding the trip.

The negligence of the obligor in the performance of the obligation renders him liable for
damages for the resulting loss suffered by the obligee. Fault or negligence of the obligor
consists in his failure to exercise due care and prudence in the performance of the
obligation as the nature of the obligation so demands.[20] There is no fixed standard of
diligence applicable to each and every contractual obligation and each case must be
determined upon its particular facts. The degree of diligence required depends on the
circumstances of the specific obligation and whether one has been negligent is a question
of fact that is to be determined after taking into account the particulars of each case. [21]

The lower court declared that respondents employee was negligent. This factual finding,
however, is not supported by the evidence on record. While factual findings below are
generally conclusive upon this court, the rule is subject to certain exceptions, as when the
trial court overlooked, misunderstood, or misapplied some facts or circumstances of weight
and substance which will affect the result of the case.[22]

In the case at bar, the evidence on record shows that respondent company performed its
duty diligently and did not commit any contractual breach. Hence, petitioner cannot
recover and must bear her own damage.

WHEREFORE, the instant petition is DENIED for lack of merit. The decision of the Court of
Appeals in CA-G.R. CV No. 51932 is AFFIRMED. Accordingly, petitioner is ordered to pay
respondent the amount of P12,901.00 representing the balance of the price of the British
Pageant Package Tour, with legal interest thereon at the rate of 6% per annum, to be
computed from the time the counterclaim was filed until the finality of this Decision. After
this Decision becomes final and executory, the rate of 12% per annum shall be imposed
until the obligation is fully settled, this interim period being deemed to be by then an
equivalent to a forbearance of credit.[23]

SO ORDERED.
[G.R. No. 147079. December 21, 2004]
A.F. SANCHEZ BROKERAGE INC., petitioners, vs. THE HON. COURT OF APPEALS and FGU
INSURANCE CORPORATION, respondents.
DECISION
CARPIO MORALES, J.:
Before this Court on a petition for Certiorari is the appellate courts Decision[1] of August 10,
2000 reversing and setting aside the judgment of Branch 133, Regional Trial Court of Makati
City, in Civil Case No. 93-76B which dismissed the complaint of respondent FGU Insurance
Corporation (FGU Insurance) against petitioner A.F. Sanchez Brokerage, Inc. (Sanchez
Brokerage).
On July 8, 1992, Wyeth-Pharma GMBH shipped on board an aircraft of KLM Royal Dutch
Airlines at Dusseldorf, Germany oral contraceptives consisting of 86,800 Blisters Femenal
tablets, 14,000 Blisters Nordiol tablets and 42,000 Blisters Trinordiol tablets for delivery to
Manila in favor of the consignee, Wyeth-Suaco Laboratories, Inc.[2] The Femenal tablets
were placed in 124 cartons and the Nordiol tablets were placed in 20 cartons which were
packed together in one (1) LD3 aluminum container, while the Trinordial tablets were
packed in two pallets, each of which contained 30 cartons.[3]
Wyeth-Suaco insured the shipment against all risks with FGU Insurance which issued Marine
Risk Note No. 4995 pursuant to Marine Open Policy No. 138.[4]
Upon arrival of the shipment on July 11, 1992 at the Ninoy Aquino International Airport
(NAIA),[5] it was discharged without exception[6] and delivered to the warehouse of the
Philippine Skylanders, Inc. (PSI) located also at the NAIA for safekeeping.[7]
In order to secure the release of the cargoes from the PSI and the Bureau of Customs,
Wyeth-Suaco engaged the services of Sanchez Brokerage which had been its licensed
broker since 1984.[8] As its customs broker, Sanchez Brokerage calculates and pays the
customs duties, taxes and storage fees for the cargo and thereafter delivers it to Wyeth-
Suaco.[9]
On July 29, 1992, Mitzi Morales and Ernesto Mendoza, representatives of Sanchez
Brokerage, paid PSI storage fee amounting to P8,572.35 a receipt for which, Official
Receipt No. 016992,[10]was issued. On the receipt, another representative of Sanchez
Brokerage, M. Sison,[11]acknowledged that he received the cargoes consisting of three
pieces in good condition.[12]
Wyeth-Suaco being a regular importer, the customs examiner did not inspect the
cargoes[13]which were thereupon stripped from the aluminum containers[14] and loaded
inside two transport vehicles hired by Sanchez Brokerage.[15]
Among those who witnessed the release of the cargoes from the PSI warehouse were
Ruben Alonso and Tony Akas,[16] employees of Elite Adjusters and Surveyors Inc. (Elite
Surveyors), a marine and cargo surveyor and insurance claim adjusters firm engaged by
Wyeth-Suaco on behalf of FGU Insurance.
Upon instructions of Wyeth-Suaco, the cargoes were delivered to Hizon Laboratories Inc. in
Antipolo City for quality control check.[17] The delivery receipt, bearing No. 07037 dated
July 29, 1992, indicated that the delivery consisted of one container with 144 cartons of
Femenal and Nordiol and 1 pallet containing Trinordiol.[18]
On July 31, 1992, Ronnie Likas, a representative of Wyeth-Suaco, acknowledged the
delivery of the cargoes by affixing his signature on the delivery receipt.[19] Upon inspection,
however, he, together with Ruben Alonzo of Elite Surveyors, discovered that 44 cartons
containing Femenal and Nordiol tablets were in bad order.[20] He thus placed a note
above his signature on the delivery receipt stating that 44 cartons of oral contraceptives
were in bad order. The remaining 160 cartons of oral contraceptives were accepted as
complete and in good order.
Ruben Alonzo thus prepared and signed, along with Ronnie Likas, a survey report[21] dated
July 31, 1992 stating that 41 cartons of Femenal tablets and 3 cartons of Nordiol tablets
were wetted (sic).[22]
The Elite Surveyors later issued Certificate No. CS-0731-1538/92[23] attached to which was
an Annexed Schedule whereon it was indicated that prior to the loading of the cargoes to
the brokers trucks at the NAIA, they were inspected and found to be in apparent good
condition.[24] Also noted was that at the time of delivery to the warehouse of Hizon
Laboratories Inc., slight to heavy rains fell, which could account for the wetting of the 44
cartons of Femenal and Nordiol tablets.[25]
On August 4, 1992, the Hizon Laboratories Inc. issued a Destruction Report[26] confirming
that 38 x 700 blister packs of Femenal tablets, 3 x 700 blister packs of Femenal tablets and 3
x 700 blister packs of Nordiol tablets were heavily damaged with water and emitted foul
smell.
On August 5, 1992, Wyeth-Suaco issued a Notice of Materials Rejection[27] of 38 cartons of
Femenal and 3 cartons of Nordiol on the ground that they were delivered to Hizon
Laboratories with heavy water damaged (sic) causing the cartons to sagged (sic) emitting
a foul order and easily attracted flies.[28]
Wyeth-Suaco later demanded, by letter[29] of August 25, 1992, from Sanchez Brokerage the
payment of P191,384.25 representing the value of its loss arising from the damaged tablets.
As the Sanchez Brokerage refused to heed the demand, Wyeth-Suaco filed an insurance
claim against FGU Insurance which paid Wyeth-Suaco the amount of P181,431.49 in
settlement of its claim under Marine Risk Note Number 4995.
Wyeth-Suaco thus issued Subrogation Receipt[30] in favor of FGU Insurance.
On demand by FGU Insurance for payment of the amount of P181,431.49 it paid Wyeth-
Suaco, Sanchez Brokerage, by letter[31] of January 7, 1993, disclaimed liability for the
damaged goods, positing that the damage was due to improper and insufficient export
packaging; that when the sealed containers were opened outside the PSI warehouse, it
was discovered that some of the loose cartons were wet,[32] prompting its (Sanchez
Brokerages) representative Morales to inform the Import-Export Assistant of Wyeth-Suaco,
Ramir Calicdan, about the condition of the cargoes but that the latter advised to still
deliver them to Hizon Laboratories where an adjuster would assess the damage. [33]
Hence, the filing by FGU Insurance of a complaint for damages before the Regional Trial
Court of Makati City against the Sanchez Brokerage.
The trial court, by Decision[34] of July 29, 1996, dismissed the complaint, holding that the
Survey Report prepared by the Elite Surveyors is bereft of any evidentiary support and a
mere product of pure guesswork.[35]
On appeal, the appellate court reversed the decision of the trial court, it holding that the
Sanchez Brokerage engaged not only in the business of customs brokerage but also in the
transportation and delivery of the cargo of its clients, hence, a common carrier within the
context of Article 1732 of the New Civil Code.[36]
Noting that Wyeth-Suaco adduced evidence that the cargoes were delivered to
petitioner in good order and condition but were in a damaged state when delivered to
Wyeth-Suaco, the appellate court held that Sanchez Brokerage is presumed
negligent and upon it rested the burden of proving that it exercised extraordinary
negligence not only in instances when negligence is directly proven but also in those cases
when the cause of the damage is not known or unknown.[37]
The appellate court thus disposed:
IN THE LIGHT OF ALL THE FOREGOING, the appeal of the Appellant is GRANTED. The
Decision of the Court a quo is REVERSED. Another Decision is hereby rendered in favor of
the Appellant and against the Appellee as follows:
1. The Appellee is hereby ordered to pay the Appellant the principal amount of P181,
431.49, with interest thereupon at the rate of 6% per annum, from the date of the Decision
of the Court, until the said amount is paid in full;
2. The Appellee is hereby ordered to pay to the Appellant the amount of P20,000.00 as
and by way of attorneys fees; and
3. The counterclaims of the Appellee are DISMISSED.[38]
Sanchez Brokerages Motion for Reconsideration having been denied by the appellate
courts Resolution of December 8, 2000 which was received by petitioner on January 5,
2001, it comes to this Court on petition for certiorari filed on March 6, 2001.
In the main, petitioner asserts that the appellate court committed grave and reversible
error tantamount to abuse of discretion when it found petitioner a common carrier within
the context of Article 1732 of the New Civil Code.
Respondent FGU Insurance avers in its Comment that the proper course of action which
petitioner should have taken was to file a petition for review on certiorari since the sole
office of a writ of certiorari is the correction of errors of jurisdiction including the commission
of grave abuse of discretion amounting to lack or excess of jurisdiction and does not
include correction of the appellate courts evaluation of the evidence and factual findings
thereon.
On the merits, respondent FGU Insurance contends that petitioner, as a common carrier,
failed to overcome the presumption of negligence, it being documented that petitioner
withdrew from the warehouse of PSI the subject shipment entirely in good order and
condition.[39]
The petition fails.
Rule 45 is clear that decisions, final orders or resolutions of the Court of Appeals in any
case, i.e., regardless of the nature of the action or proceedings involved, may be
appealed to this Court by filing a petition for review, which would be but a continuation of
the appellate process over the original case.[40]
The Resolution of the Court of Appeals dated December 8, 2000 denying the motion for
reconsideration of its Decision of August 10, 2000 was received by petitioner on January 5,
2001. Since petitioner failed to appeal within 15 days or on or before January 20, 2001, the
appellate courts decision had become final and executory. The filing by petitioner of a
petition for certiorari on March 6, 2001 cannot serve as a substitute for the lost remedy of
appeal.
In another vein, the rule is well settled that in a petition for certiorari, the petitioner must
prove not merely reversible error but also grave abuse of discretion amounting to lack or
excess of jurisdiction.
Petitioner alleges that the appellate court erred in reversing and setting aside the decision
of the trial court based on its finding that petitioner is liable for the damage to the cargo as
a common carrier. What petitioner is ascribing is an error of judgment, not of jurisdiction,
which is properly the subject of an ordinary appeal.
Where the issue or question involves or affects the wisdom or legal soundness of the
decision not the jurisdiction of the court to render said decision the same is beyond the
province of a petition for certiorari.[41] The supervisory jurisdiction of this Court to issue
a cert writ cannot be exercised in order to review the judgment of lower courts as to its
intrinsic correctness, either upon the law or the facts of the case.[42]
Procedural technicalities aside, the petition still fails.
The appellate court did not err in finding petitioner, a customs broker, to be also a
common carrier, as defined under Article 1732 of the Civil Code, to wit:
Art. 1732. Common carriers are persons, corporations, firms or associations engaged in the
business of carrying or transporting passengers or goods or both, by land, water, or air, for
compensation, offering their services to the public.
Anacleto F. Sanchez, Jr., the Manager and Principal Broker of Sanchez Brokerage, himself
testified that the services the firm offers include the delivery of goods to the warehouse of
the consignee or importer.
ATTY. FLORES:
Q: What are the functions of these license brokers, license customs broker?
WITNESS:
As customs broker, we calculate the taxes that has to be paid in cargos, and those upon
approval of the importer, we prepare the entry together for processing and claims from
customs and finally deliver the goods to the warehouse of the importer.[43]
Article 1732 does not distinguish between one whose principal business activity is the
carrying of goods and one who does such carrying only as an ancillary activity.[44] The
contention, therefore, of petitioner that it is not a common carrier but a customs broker
whose principal function is to prepare the correct customs declaration and proper
shipping documents as required by law is bereft of merit. It suffices that petitioner
undertakes to deliver the goods for pecuniary consideration.
In this light, petitioner as a common carrier is mandated to observe, under Article
1733[45] of the Civil Code, extraordinary diligence in the vigilance over the goods it
transports according to all the circumstances of each case. In the event that the goods
are lost, destroyed or deteriorated, it is presumed to have been at fault or to have acted
negligently, unless it proves that it observed extraordinary diligence.[46]
The concept of extra-ordinary diligence was explained in Compania Maritima v. Court of
Appeals:[47]
The extraordinary diligence in the vigilance over the goods tendered for shipment requires
the common carrier to know and to follow the required precaution for avoiding damage
to, or destruction of the goods entrusted to it for sale, carriage and delivery. It requires
common carriers to render service with the greatest skill and foresight and to use all
reasonable means to ascertain the nature and characteristics of goods tendered for
shipment, and to exercise due care in the handling and stowage, including such methods
as their nature requires.[48]
In the case at bar, it was established that petitioner received the cargoes from the PSI
warehouse in NAIA in good order and condition;[49] and that upon delivery by petitioner to
Hizon Laboratories Inc., some of the cargoes were found to be in bad order, as noted in
the Delivery Receipt[50] issued by petitioner, and as indicated in the Survey Report of Elite
Surveyors[51] and the Destruction Report of Hizon Laboratories, Inc.[52]
In an attempt to free itself from responsibility for the damage to the goods, petitioner posits
that they were damaged due to the fault or negligence of the shipper for failing to
properly pack them and to the inherent characteristics of the goods[53]; and that it should
not be faulted for following the instructions of Calicdan of Wyeth-Suaco to proceed with
the delivery despite information conveyed to the latter that some of the cartons, on
examination outside the PSI warehouse, were found to be wet.[54]
While paragraph No. 4 of Article 1734[55] of the Civil Code exempts a common carrier from
liability if the loss or damage is due to the character of the goods or defects in the packing
or in the containers, the rule is that if the improper packing is known to the carrier or his
employees or is apparent upon ordinary observation, but he nevertheless accepts the
same without protest or exception notwithstanding such condition, he is not relieved of
liability for the resulting damage.[56]
If the claim of petitioner that some of the cartons were already damaged upon delivery to
it were true, then it should naturally have received the cargo under protest or with
reservations duly noted on the receipt issued by PSI. But it made no such protest or
reservation.[57]
Moreover, as observed by the appellate court, if indeed petitioners employees only
examined the cargoes outside the PSI warehouse and found some to be wet, they would
certainly have gone back to PSI, showed to the warehouseman the damage, and
demanded then and there for Bad Order documents or a certification confirming the
damage.[58] Or, petitioner would have presented, as witness, the employees of the PSI from
whom Morales and Domingo took delivery of the cargo to prove that, indeed, part of the
cargoes was already damaged when the container was allegedly opened outside the
warehouse.[59]
Petitioner goes on to posit that contrary to the report of Elite Surveyors, no rain fell that day.
Instead, it asserts that some of the cargoes were already wet on delivery by PSI outside the
PSI warehouse but such notwithstanding Calicdan directed Morales to proceed with the
delivery to Hizon Laboratories, Inc.
WITNESS:
A: Yes sir, there was an instance that one cartoon (sic) were wetted (sic) but Wyeth-Suaco
did not claim anything against us.
ATTY. FLORES:
Q: HOW IS IT?
WITNESS:
A: We experienced, there was a time that we experienced that there was a cartoon
(sic) wetted (sic) up to the bottom are wet specially during rainy season.[62]
Since petitioner received all the cargoes in good order and condition at the time they
were turned over by the PSI warehouseman, and upon their delivery to Hizon Laboratories,
Inc. a portion thereof was found to be in bad order, it was incumbent on petitioner to
prove that it exercised extraordinary diligence in the carriage of the goods. It did not,
however. Hence, its presumed negligence under Article 1735 of the Civil Code remains
unrebutted.
WHEREFORE, the August 10, 2000 Decision of the Court of Appeals is hereby AFFIRMED.

While Calicdan testified that he received the purported telephone call of Morales on July Costs against petitioner.
29, 1992, he failed to specifically declare what time he received the call. As to whether the SO ORDERED.
call was made at the PSI warehouse when the shipment was stripped from the airport
containers, or when the cargoes were already in transit to Antipolo, it is not determinable. Panganiban, (Chairman), Sandoval-Gutierrez, and Garcia, JJ., concur.
Aside from that phone call, petitioner admitted that it had no documentary evidence to
prove that at the time it received the cargoes, a part of it was wet, damaged or in bad Corona, J., on leave.
condition.[60]

The 4-page weather data furnished by PAGASA[61] on request of Sanchez Brokerage hardly
impresses, no witness having identified it and interpreted the technical terms thereof.

The possibility on the other hand that, as found by Hizon Laboratories, Inc., the oral
contraceptives were damaged by rainwater while in transit to Antipolo City is more likely
then. Sanchez himself testified that in the past, there was a similar instance when the
shipment of Wyeth-Suaco was also found to be wet by rain.

ATTY. FLORES:
[G.R. No. 150255. April 22, 2005]
Q: Was there any instance that a shipment of this nature, oral contraceptives, that arrived
at the NAIA were damaged and claimed by the Wyeth-Suaco without any question?
SCHMITZ TRANSPORT & BROKERAGE CORPORATION, petitioner, vs. TRANSPORT VENTURE,
INC., INDUSTRIAL INSURANCE COMPANY, LTD., and BLACK SEA SHIPPING AND DODWELL now
INCHCAPE SHIPPING SERVICES, respondents.
DECISION
CARPIO-MORALES, J.:
On petition for review is the June 27, 2001 Decision [1] of the Court of Appeals, as well as its
Resolution[2] dated September 28, 2001 denying the motion for reconsideration, which
affirmed that of Branch 21 of the Regional Trial Court (RTC) of Manila in Civil Case No. 92-
63132[3] holding petitioner Schmitz Transport Brokerage Corporation (Schmitz Transport),
together with Black Sea Shipping Corporation (Black Sea), represented by its ship agent
Inchcape Shipping Inc. (Inchcape), and Transport Venture (TVI), solidarily liable for the loss
of 37 hot rolled steel sheets in coil that were washed overboard a barge.
On September 25, 1991, SYTCO Pte Ltd. Singapore shipped from the port of Ilyichevsk,
Russia on board M/V Alexander Saveliev (a vessel of Russian registry and owned by Black
Sea) 545 hot rolled steel sheets in coil weighing 6,992,450 metric tons.
The cargoes, which were to be discharged at the port of Manila in favor of the consignee,
Little Giant Steel Pipe Corporation (Little Giant),[4] were insured against all risks with
Industrial Insurance Company Ltd. (Industrial Insurance) under Marine Policy No. M-91-
3747-TIS.[5]
The vessel arrived at the port of Manila on October 24, 1991 and the Philippine Ports
Authority (PPA) assigned it a place of berth at the outside breakwater at the Manila South
Harbor.[6]
Schmitz Transport, whose services the consignee engaged to secure the requisite
clearances, to receive the cargoes from the shipside, and to deliver them to its (the
consignees) warehouse at Cainta, Rizal,[7] in turn engaged the services of TVI to send a
barge and tugboat at shipside.
On October 26, 1991, around 4:30 p.m., TVIs tugboat Lailani towed the barge Erika V to
shipside.[8]
By 7:00 p.m. also of October 26, 1991, the tugboat, after positioning the barge alongside
the vessel, left and returned to the port terminal.[9] At 9:00 p.m., arrastre operator Ocean
Terminal Services Inc. commenced to unload 37 of the 545 coils from the vessel unto the
barge.
By 12:30 a.m. of October 27, 1991 during which the weather condition had become
inclement due to an approaching storm, the unloading unto the barge of the 37 coils was
accomplished.[10] No tugboat pulled the barge back to the pier, however.
At around 5:30 a.m. of October 27, 1991, due to strong waves,[11] the crew of the barge
abandoned it and transferred to the vessel. The barge pitched and rolled with the waves
and eventually capsized, washing the 37 coils into the sea.[12] At 7:00 a.m., a tugboat
finally arrived to pull the already empty and damaged barge back to the pier.[13]
Earnest efforts on the part of both the consignee Little Giant and Industrial Insurance to
recover the lost cargoes proved futile.[14]
Little Giant thus filed a formal claim against Industrial Insurance which paid it the amount
of P5,246,113.11. Little Giant thereupon executed a subrogation receipt[15] in favor of
Industrial Insurance.
Industrial Insurance later filed a complaint against Schmitz Transport, TVI, and Black Sea
through its representative Inchcape (the defendants) before the RTC of Manila, for the
recovery of the amount it paid to Little Giant plus adjustment fees, attorneys fees, and
litigation expenses.[16]
Industrial Insurance faulted the defendants for undertaking the unloading of the cargoes
while typhoon signal No. 1 was raised in Metro Manila.[17]
By Decision of November 24, 1997, Branch 21 of the RTC held all the defendants negligent
for unloading the cargoes outside of the breakwater notwithstanding the storm
signal.[18] The dispositive portion of the decision reads:
WHEREFORE, premises considered, the Court renders judgment in favor of the plaintiff,
ordering the defendants to pay plaintiff jointly and severally the sum of P5,246,113.11 with
interest from the date the complaint was filed until fully satisfied, as well as the sum
of P5,000.00 representing the adjustment fee plus the sum of 20% of the amount
recoverable from the defendants as attorneys fees plus the costs of suit. The counterclaims
and cross claims of defendants are hereby DISMISSED for lack of [m]erit.[19]
To the trial courts decision, the defendants Schmitz Transport and TVI filed a joint motion for
reconsideration assailing the finding that they are common carriers and the award of
excessive attorneys fees of more than P1,000,000. And they argued that they were not
motivated by gross or evident bad faith and that the incident was caused by a fortuitous
event. [20]
By resolution of February 4, 1998, the trial court denied the motion for reconsideration. [21]
All the defendants appealed to the Court of Appeals which, by decision of June 27, 2001,
affirmed in toto the decision of the trial court, [22] it finding that all the defendants were
common carriers Black Sea and TVI for engaging in the transport of goods and cargoes
over the seas as a regular business and not as an isolated transaction,[23] and Schmitz
Transport for entering into a contract with Little Giant to transport the cargoes from ship to
port for a fee.[24]
In holding all the defendants solidarily liable, the appellate court ruled that each one was
essential such that without each others contributory negligence the incident would not
have happened and so much so that the person principally liable cannot be distinguished
with sufficient accuracy.[25]
In discrediting the defense of fortuitous event, the appellate court held that although
defendants obviously had nothing to do with the force of nature, they however had
control of where to anchor the vessel, where discharge will take place and even when the
discharging will commence.[26]
The defendants respective motions for reconsideration having been denied by
Resolution[27] of September 28, 2001, Schmitz Transport (hereinafter referred to as
petitioner) filed the present petition against TVI, Industrial Insurance and Black Sea.
Petitioner asserts that in chartering the barge and tugboat of TVI, it was acting for its
principal, consignee Little Giant, hence, the transportation contract was by and between
Little Giant and TVI.[28]
By Resolution of January 23, 2002, herein respondents Industrial Insurance, Black Sea, and
TVI were required to file their respective Comments.[29]
By its Comment, Black Sea argued that the cargoes were received by the consignee
through petitioner in good order, hence, it cannot be faulted, it having had no control
and supervision thereover.[30]
For its part, TVI maintained that it acted as a passive party as it merely received the
cargoes and transferred them unto the barge upon the instruction of petitioner.[31]
In issue then are:
(1) Whether the loss of the cargoes was due to a fortuitous event, independent of any act
of negligence on the part of petitioner Black Sea and TVI, and
(2) If there was negligence, whether liability for the loss may attach to Black Sea, petitioner
and TVI.
When a fortuitous event occurs, Article 1174 of the Civil Code absolves any party from any
and all liability arising therefrom:
ART. 1174. Except in cases expressly specified by the law, or when it is otherwise declared
by stipulation, or when the nature of the obligation requires the assumption of risk, no
person shall be responsible for those events which could not be foreseen, or which though
foreseen, were inevitable.
In order, to be considered a fortuitous event, however, (1) the cause of the unforeseen
and unexpected occurrence, or the failure of the debtor to comply with his obligation,
must be independent of human will; (2) it must be impossible to foresee the event which
constitute the caso fortuito, or if it can be foreseen it must be impossible to avoid; (3) the
occurrence must be such as to render it impossible for the debtor to fulfill his obligation in
any manner; and (4) the obligor must be free from any participation in the aggravation of
the injury resulting to the creditor.[32]
[T]he principle embodied in the act of God doctrine strictly requires that the act must be
occasioned solely by the violence of nature. Human intervention is to be excluded from
creating or entering into the cause of the mischief. When the effect is found to be in part
the result of the participation of man, whether due to his active intervention or neglect or
failure to act, the whole occurrence is then humanized and removed from the rules
applicable to the acts of God.[33]
The appellate court, in affirming the finding of the trial court that human intervention in the
form of contributory negligence by all the defendants resulted to the loss of the
cargoes,[34] held that unloading outside the breakwater, instead of inside the breakwater,
while a storm signal was up constitutes negligence.[35] It thus concluded that the proximate
cause of the loss was Black Seas negligence in deciding to unload the cargoes at an
unsafe place and while a typhoon was approaching.[36]
From a review of the records of the case, there is no indication that there was greater risk
in loading the cargoes outside the breakwater. As the defendants proffered, the weather
on October 26, 1991 remained normal with moderate sea condition such that port
operations continued and proceeded normally.[37]
The weather data report,[38] furnished and verified by the Chief of the Climate Data
Section of PAG-ASA and marked as a common exhibit of the parties, states that while
typhoon signal No. 1 was hoisted over Metro Manila on October 23-31, 1991, the sea
condition at the port of Manila at 5:00 p.m. - 11:00 p.m. of October 26, 1991 was
moderate. It cannot, therefore, be said that the defendants were negligent in not
unloading the cargoes upon the barge on October 26, 1991 inside the breakwater.
That no tugboat towed back the barge to the pier after the cargoes were completely
loaded by 12:30 in the morning[39] is, however, a material fact which the appellate court
failed to properly consider and appreciate[40] the proximate cause of the loss of the
cargoes. Had the barge been towed back promptly to the pier, the deteriorating sea
conditions notwithstanding, the loss could have been avoided. But the barge was left
floating in open sea until big waves set in at 5:30 a.m., causing it to sink along with the
cargoes.[41] The loss thus falls outside the act of God doctrine.
The proximate cause of the loss having been determined, who among the parties is/are
responsible therefor?
Contrary to petitioners insistence, this Court, as did the appellate court, finds that petitioner
is a common carrier. For it undertook to transport the cargoes from the shipside of M/V
Alexander Saveliev to the consignees warehouse at Cainta, Rizal. As the appellate court
put it, as long as a person or corporation holds [itself] to the public for the purpose of
transporting goods as [a] business, [it] is already considered a common carrier regardless if
[it] owns the vehicle to be used or has to hire one.[42] That petitioner is a common carrier,
the testimony of its own Vice-President and General Manager Noel Aro that part of the
services it offers to its clients as a brokerage firm includes the transportation of cargoes
reflects so.
Atty. Jubay: Will you please tell us what [are you] functions x x x as Executive Vice-President
and General Manager of said Company?
Mr. Aro: Well, I oversee the entire operation of the brokerage and transport business of the
company. I also handle the various division heads of the company for operation matters,
and all other related functions that the President may assign to me from time to time, Sir.
Q: Now, in connection [with] your duties and functions as you mentioned, will you please
tell the Honorable Court if you came to know the company by the name Little Giant Steel
Pipe Corporation?
A: Yes, Sir. Actually, we are the brokerage firm of that Company.
Q: And since when have you been the brokerage firm of that company, if you can recall?
A: Since 1990, Sir.
Q: Now, you said that you are the brokerage firm of this Company. What work or duty did
you perform in behalf of this company?
A: We handled the releases (sic) of their cargo[es] from the Bureau of Customs. We [are]
also in-charged of the delivery of the goods to their warehouses. We also handled the
clearances of their shipment at the Bureau of Customs, Sir.
xxx
Q: Now, what precisely [was] your agreement with this Little Giant Steel Pipe Corporation
with regards to this shipment? What work did you do with this shipment?
A: We handled the unloading of the cargo[es] from vessel to lighter and then the delivery
of [the] cargo[es] from lighter to BASECO then to the truck and to the warehouse, Sir.
Q: Now, in connection with this work which you are doing, Mr. Witness, you are supposed
to perform, what equipment do (sic) you require or did you use in order to effect this
unloading, transfer and delivery to the warehouse?
A: Actually, we used the barges for the ship side operations, this unloading [from] vessel to
lighter, and on this we hired or we sub-contracted with [T]ransport Ventures, Inc. which
[was] in-charged (sic) of the barges. Also, in BASECO compound we are leasing cranes to
have the cargo unloaded from the barge to trucks, [and] then we used trucks to deliver
[the cargoes] to the consignees warehouse, Sir.
Q: And whose trucks do you use from BASECO compound to the consignees warehouse?
A: We utilized of (sic) our own trucks and we have some other contracted trucks, Sir.
xxx
ATTY. JUBAY: Will you please explain to us, to the Honorable Court why is it you have to
contract for the barges of Transport Ventures Incorporated in this particular operation?
A: Firstly, we dont own any barges. That is why we hired the services of another firm whom
we know [al]ready for quite sometime, which is Transport Ventures, Inc. (Emphasis
supplied)[43]
It is settled that under a given set of facts, a customs broker may be regarded as a
common carrier. Thus, this Court, in A.F. Sanchez Brokerage, Inc. v. The Honorable Court of
Appeals,[44] held:
The appellate court did not err in finding petitioner, a customs broker, to be also a
common carrier, as defined under Article 1732 of the Civil Code, to wit,
Art. 1732. Common carriers are persons, corporations, firms or associations engaged in the
business of carrying or transporting passengers or goods or both, by land, water, or air, for
compensation, offering their services to the public.
xxx
Article 1732 does not distinguish between one whose principal business activity is the
carrying of goods and one who does such carrying only as an ancillary activity. The
contention, therefore, of petitioner that it is not a common carrier but a customs broker
whose principal function is to prepare the correct customs declaration and proper
shipping documents as required by law is bereft of merit. It suffices that petitioner
undertakes to deliver the goods for pecuniary consideration.[45]
And in Calvo v. UCPB General Insurance Co. Inc.,[46] this Court held that as the
transportation of goods is an integral part of a customs broker, the customs broker is also a
common carrier. For to declare otherwise would be to deprive those with whom [it]
contracts the protection which the law affords them notwithstanding the fact that the
obligation to carry goods for [its] customers, is part and parcel of petitioners business.[47]
As for petitioners argument that being the agent of Little Giant, any negligence it
committed was deemed the negligence of its principal, it does not persuade.
True, petitioner was the broker-agent of Little Giant in securing the release of the cargoes.
In effecting the transportation of the cargoes from the shipside and into Little Giants
warehouse, however, petitioner was discharging its own personal obligation under a
contact of carriage.
Petitioner, which did not have any barge or tugboat, engaged the services of TVI as
handler[48] to provide the barge and the tugboat. In their Service Contract,[49] while Little
Giant was named as the consignee, petitioner did not disclose that it was acting on
commission and was chartering the vessel for Little Giant.[50] Little Giant did not thus
automatically become a party to the Service Contract and was not, therefore, bound by
the terms and conditions therein.
Not being a party to the service contract, Little Giant cannot directly sue TVI based
thereon but it can maintain a cause of action for negligence.[51]
In the case of TVI, while it acted as a private carrier for which it was under no duty to
observe extraordinary diligence, it was still required to observe ordinary diligence to ensure
the proper and careful handling, care and discharge of the carried goods.
Thus, Articles 1170 and 1173 of the Civil Code provide:
ART. 1170. Those who in the performance of their obligations are guilty of fraud,
negligence, or delay, and those who in any manner contravene the tenor thereof, are
liable for damages.
ART. 1173. The fault or negligence of the obligor consists in the omission of that diligence
which is required by the nature of the obligation and corresponds with the circumstances
of the persons, of the time and of the place. When negligence shows bad faith, the
provisions of articles 1171 and 2202, paragraph 2, shall apply.
If the law or contract does not state the diligence which is to be observed in the
performance, that which is expected of a good father of a family shall be required.
Was the reasonable care and caution which an ordinarily prudent person would have
used in the same situation exercised by TVI?[52]
This Court holds not.
TVIs failure to promptly provide a tugboat did not only increase the risk that might have
been reasonably anticipated during the shipside operation, but was the proximate
cause of the loss. A man of ordinary prudence would not leave a heavily loaded barge
floating for a considerable number of hours, at such a precarious time, and in the open
sea, knowing that the barge does not have any power of its own and is totally defenseless
from the ravages of the sea. That it was nighttime and, therefore, the members of the crew
of a tugboat would be charging overtime pay did not excuse TVI from calling for one such
tugboat.
As for petitioner, for it to be relieved of liability, it should, following Article 1739 [53] of the Civil
Code, prove that it exercised due diligence to prevent or minimize the loss, before, during
and after the occurrence of the storm in order that it may be exempted from liability for
the loss of the goods.
While petitioner sent checkers[54] and a supervisor[55] on board the vessel to counter-check
the operations of TVI, it failed to take all available and reasonable precautions to avoid
the loss. After noting that TVI failed to arrange for the prompt towage of the barge despite
the deteriorating sea conditions, it should have summoned the same or another tugboat
to extend help, but it did not.
This Court holds then that petitioner and TVI are solidarily liable[56] for the loss of the
cargoes. The following pronouncement of the Supreme Court is instructive:
The foundation of LRTAs liability is the contract of carriage and its obligation to indemnify
the victim arises from the breach of that contract by reason of its failure to exercise the
high diligence required of the common carrier. In the discharge of its commitment to
ensure the safety of passengers, a carrier may choose to hire its own employees or avail
itself of the services of an outsider or an independent firm to undertake the task. In either
case, the common carrier is not relieved of its responsibilities under the contract of
carriage.
Should Prudent be made likewise liable? If at all, that liability could only be for tort under
the provisions of Article 2176 and related provisions, in conjunction with Article 2180 of the
Civil Code. x x x [O]ne might ask further, how then must the liability of the common carrier,
on one hand, and an independent contractor, on the other hand, be described? It would
be solidary. A contractual obligation can be breached by tort and when the same act or
omission causes the injury, one resulting in culpa contractual and the other in culpa
aquiliana, Article 2194 of the Civil Code can well apply. In fine, a liability for tort may arise
even under a contract, where tort is that which breaches the contract. Stated differently,
when an act which constitutes a breach of contract would have itself constituted the
source of a quasi-delictual liability had no contract existed between the parties, the
contract can be said to have been breached by tort, thereby allowing the rules on tort to
apply.[57]
As for Black Sea, its duty as a common carrier extended only from the time the goods were
surrendered or unconditionally placed in its possession and received for transportation until
they were delivered actually or constructively to consignee Little Giant.[58]
judgment is rendered in its favor would be tantamount to imposing a premium on ones
right to litigate or seek judicial redress of legitimate grievances.[62]
On the award of adjustment fees: The adjustment fees and expense of divers were
incurred by Industrial Insurance in its voluntary but unsuccessful efforts to locate and
retrieve the lost cargo. They do not constitute actual damages.[63]
As for the court a quos award of interest on the amount claimed, the same calls for
modification following the ruling in Eastern Shipping Lines, Inc. v. Court of Appeals[64] that
when the demand cannot be reasonably established at the time the demand is made,
the interest shall begin to run not from the time the claim is made judicially or extrajudicially
but from the date the judgment of the court is made (at which the time the quantification
of damages may be deemed to have been reasonably ascertained). [65]
WHEREFORE, judgment is hereby rendered ordering petitioner Schmitz Transport &
Brokerage Corporation, and Transport Venture Incorporation jointly and severally liable for
the amount of P5,246,113.11 with the MODIFICATION that interest at SIX PERCENT per
annum of the amount due should be computed from the promulgation on November 24,
1997 of the decision of the trial court.
Costs against petitioner.
SO ORDERED.

Parties to a contract of carriage may, however, agree upon a definition of delivery that
extends the services rendered by the carrier. In the case at bar, Bill of Lading No. 2
covering the shipment provides that delivery be made to the port of discharge or so near
thereto as she may safely get, always afloat.[59] The delivery of the goods to the consignee
was not from pier to pier but from the shipside of M/V Alexander Saveliev and into barges,
for which reason the consignee contracted the services of petitioner. Since Black Sea had
constructively delivered the cargoes to Little Giant, through petitioner, it had discharged its
duty.[60]

In fine, no liability may thus attach to Black Sea.

Respecting the award of attorneys fees in an amount over P1,000,000.00 to Industrial THIRD DIVISION
Insurance, for lack of factual and legal basis, this Court sets it aside. While Industrial
Insurance was compelled to litigate its rights, such fact by itself does not justify the award
of attorneys fees under Article 2208 of the Civil Code. For no sufficient showing of bad faith
would be reflected in a partys persistence in a case other than an erroneous conviction of
the righteousness of his cause.[61] To award attorneys fees to a party just because the SPOUSES DANTE CRUZ and G.R. No. 186312
LEONORA CRUZ, City for damages arising from the death of their son Ruelito C. Cruz (Ruelito) who perished
with his wife on September 11, 2000 on board the boat M/B Coco Beach III that capsized
Petitioners, Present: en route to Batangas from Puerto Galera, Oriental Mindoro where the couple had stayed
at Coco Beach Island Resort (Resort) owned and operated by respondent.

CARPIO MORALES, J.,

Chairperson, The stay of the newly wed Ruelito and his wife at the Resort from September 9 to 11,
2000 was by virtue of a tour package-contract with respondent that included
BRION, transportation to and from the Resort and the point of departure in Batangas.

- versus - BERSAMIN,

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

Respondent.
Matute stayed at the Resort from September 8 to 11, 2000. He was originally scheduled to
Promulgated: leave the Resort in the afternoon of September 10, 2000, but was advised to stay for
June 29, 2010 another night because of strong winds and heavy rains.

x-------------------------------------------------x On September 11, 2000, as it was still windy, Matute and 25 other Resort guests including
petitioners son and his wife trekked to the other side of the Coco Beach mountain that was
sheltered from the wind where they boarded M/B Coco Beach III, which was to ferry them
to Batangas.

Shortly after the boat sailed, it started to rain. As it moved farther away from Puerto Galera
DECISION and into the open seas, the rain and wind got stronger, causing the boat to tilt from side to
side and the captain to step forward to the front, leaving the wheel to one of the crew
members.

CARPIO MORALES, J.:

The waves got more unwieldy. After getting hit by two big waves which came one after
the other, M/B Coco Beach III capsized putting all passengers underwater.

Spouses Dante and Leonora Cruz (petitioners) lodged a Complaint on January 25, The passengers, who had put on their life jackets, struggled to get out of the boat. Upon
2001[1] against Sun Holidays, Inc. (respondent) with the Regional Trial Court (RTC) of Pasig seeing the captain, Matute and the other passengers who reached the surface asked him
what they could do to save the people who were still trapped under the boat. The
captain replied Iligtas niyo na lang ang sarili niyo (Just save yourselves).
Help came after about 45 minutes when two boats owned by Asia Divers in Sabang,
Puerto Galera passed by the capsized M/B Coco Beach III. Boarded on those two boats
were 22 persons, consisting of 18 passengers and four crew members, who were brought
to Pisa Island. Eight passengers, including petitioners son and his wife, died during the
incident.
At the time of Ruelitos death, he was 28 years old and employed as a contractual worker
for Mitsui Engineering & Shipbuilding Arabia, Ltd. in Saudi Arabia, with a basic monthly
salary of $900.[3]
Petitioners, by letter of October 26, 2000,[4] demanded indemnification from respondent for
the death of their son in the amount of at least P4,000,000.
Replying, respondent, by letter dated November 7, 2000,[5] denied any responsibility for the
incident which it considered to be a fortuitous event. It nevertheless offered, as an act of
commiseration, the amount of P10,000 to petitioners upon their signing of a waiver.
As petitioners declined respondents offer, they filed the Complaint, as earlier reflected,
alleging that respondent, as a common carrier, was guilty of negligence in allowing M/B
Coco Beach III to sail notwithstanding storm warning bulletins issued by the Philippine
Atmospheric, Geophysical and Astronomical Services Administration (PAGASA) as early as
5:00 a.m. of September 11, 2000.[6]
In its Answer,[7] respondent denied being a common carrier, alleging that its boats are not
available to the general public as they only ferry Resort guests and crew
members. Nonetheless, it claimed that it exercised the utmost diligence in ensuring the
safety of its passengers; contrary to petitioners allegation, there was no storm
on September 11, 2000 as the Coast Guard in fact cleared the voyage; and M/B Coco
Beach III was not filled to capacity and had sufficient life jackets for its passengers. By way
of Counterclaim, respondent alleged that it is entitled to an award for attorneys fees and
litigation expenses amounting to not less than P300,000.
Carlos Bonquin, captain of M/B Coco Beach III, averred that the Resort customarily
requires four conditions to be met before a boat is allowed to sail, to wit: (1) the sea is
calm, (2) there is clearance from the Coast Guard, (3) there is clearance from the captain
and (4) there is clearance from the Resorts assistant manager.[8] He added that M/B Coco
Beach III met all four conditions on September 11, 2000,[9] but a subasco or squall,
characterized by strong winds and big waves, suddenly occurred, causing the boat to
capsize.[10]
By Decision of February 16, 2005,[11] Branch 267 of the Pasig RTC dismissed petitioners
Complaint and respondents Counterclaim.
Petitioners Motion for Reconsideration having been denied by Order dated September 2,
2005,[12] they appealed to the Court of Appeals.
By Decision of August 19, 2008,[13] the appellate court denied petitioners appeal, holding,
among other things, that the trial court correctly ruled that respondent is a private carrier
which is only required to observe ordinary diligence; that respondent in fact observed
extraordinary diligence in transporting its guests on board M/B Coco Beach III; and that the
proximate cause of the incident was a squall, a fortuitous event.
Petitioners Motion for Reconsideration having been denied by Resolution dated January
16, 2009,[14] they filed the present Petition for Review.[15]
Petitioners maintain the position they took before the trial court, adding that respondent is
a common carrier since by its tour package, the transporting of its guests is an integral part
of its resort business. They inform that another division of the appellate court in fact held
respondent liable for damages to the other survivors of the incident.
Upon the other hand, respondent contends that petitioners failed to present evidence to
prove that it is a common carrier; that the Resorts ferry services for guests cannot be
considered as ancillary to its business as no income is derived therefrom; that it exercised
extraordinary diligence as shown by the conditions it had imposed before allowing M/B
Coco Beach III to sail; that the incident was caused by a fortuitous event without any
contributory negligence on its part; and that the other case wherein the appellate court
held it liable for damages involved different plaintiffs, issues and evidence.[16]
The petition is impressed with merit.
Petitioners correctly rely on De Guzman v. Court of Appeals[17] in characterizing
respondent as a common carrier.
The Civil Code defines common carriers in the following terms:
Article 1732. Common carriers are persons, corporations, firms or associations engaged in
the business of carrying or transporting passengers or goods or both, by land, water, or air
for compensation, offering their services to the public.
The above article makes no distinction between one whose principal business activity is
the carrying of persons or goods or both, and one who does such carrying only as
an ancillary activity (in local idiom, as a sideline). Article 1732 also carefully avoids making
any distinction between a person or enterprise offering transportation service on a regular
or scheduled basis and one offering such service on an occasional, episodic or
unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its
services to the general public, i.e., the general community or population, and one who
offers services or solicits business only from a narrow segment of the general population. We
think that Article 1733 deliberately refrained from making such distinctions.
So understood, the concept of common carrier under Article 1732 may be seen to
coincide neatly with the notion of public service, under the Public Service Act
(Commonwealth Act No. 1416, as amended) which at least partially supplements the law
on common carriers set forth in the Civil Code. Under Section 13, paragraph (b) of the
Public Service Act, public service includes:
. . . every person that now or hereafter may own, operate, manage, or control in the
Philippines, for hire or compensation, with general or limited clientele, whether permanent,
occasional or accidental, and done for general business purposes, any common carrier,
railroad, street railway, traction railway, subway motor vehicle, either for freight or
passenger, or both, with or without fixed route and whatever may be its classification,
freight or carrier service of any class, express service, steamboat, or steamship line,
pontines, ferries and water craft, engaged in the transportation of passengers or freight or
both, shipyard, marine repair shop, wharf or dock, ice plant, ice-refrigeration plant, canal,
irrigation system, gas, electric light, heat and power, water supply and power petroleum,
sewerage system, wire or wireless communications systems, wire or wireless broadcasting
stations and other similar public services . . .[18] (emphasis and underscoring supplied.)
Indeed, respondent is a common carrier. Its ferry services are so intertwined with its main
business as to be properly considered ancillary thereto. The constancy of respondents ferry
services in its resort operations is underscored by its having its own Coco Beach boats. And
the tour packages it offers, which include the ferry services, may be availed of by anyone
who can afford to pay the same. These services are thus available to the public.
That respondent does not charge a separate fee or fare for its ferry services is of no
moment. It would be imprudent to suppose that it provides said services at a loss. The
Court is aware of the practice of beach resort operators offering tour packages to factor
the transportation fee in arriving at the tour package price. That guests who opt not to
avail of respondents ferry services pay the same amount is likewise inconsequential. These
guests may only be deemed to have overpaid.
As De Guzman instructs, Article 1732 of the Civil Code defining common carriers has
deliberately refrained from making distinctions on whether the carrying of persons or
goods is the carriers principal business, whether it is offered on a regular basis, or whether it
is offered to the general public. The intent of the law is thus to not consider such
distinctions. Otherwise, there is no telling how many other distinctions may be concocted
by unscrupulous businessmen engaged in the carrying of persons or goods in order to
avoid the legal obligations and liabilities of common carriers.
Under the Civil Code, common carriers, from the nature of their business and for reasons of
public policy, are bound to observe extraordinary diligence for the safety of the
passengers transported by them, according to all the circumstances of each case.[19] They
are bound to carry the passengers safely as far as human care and foresight can provide,
using the utmost diligence of very cautious persons, with due regard for all the
circumstances.[20]
When a passenger dies or is injured in the discharge of a contract of carriage, it is
presumed that the common carrier is at fault or negligent. In fact, there is even no need
for the court to make an express finding of fault or negligence on the part of the common
carrier. This statutory presumption may only be overcome by evidence that the carrier
exercised extraordinary diligence.[21]
Respondent nevertheless harps on its strict compliance with the earlier mentioned
conditions of voyage before it allowed M/B Coco Beach III to sail on September 11,
2000. Respondents position does not impress.
The evidence shows that PAGASA issued 24-hour public weather forecasts and tropical
cyclone warnings for shipping on September 10 and 11, 2000 advising of tropical
depressions in Northern Luzon which would also affect the province of Mindoro.[22] By the
testimony of Dr. Frisco Nilo, supervising weather specialist of PAGASA, squalls are to be
expected under such weather condition.[23]
A very cautious person exercising the utmost diligence would thus not brave such stormy
weather and put other peoples lives at risk. The extraordinary diligence required of
common carriers demands that they take care of the goods or lives entrusted to their
hands as if they were their own. This respondent failed to do.
Respondents insistence that the incident was caused by a fortuitous event does not
impress either.
The elements of a "fortuitous event" are: (a) the cause of the unforeseen and unexpected
occurrence, or the failure of the debtors to comply with their obligations, must have been
independent of human will; (b) the event that constituted the caso fortuito must have
been impossible to foresee or, if foreseeable, impossible to avoid; (c) the occurrence must
have been such as to render it impossible for the debtors to fulfill their obligation in a
normal manner; and (d) the obligor must have been free from any participation in the
aggravation of the resulting injury to the creditor.[24]
To fully free a common carrier from any liability, the fortuitous event must have been
the proximate and only cause of the loss. And it should have exercised due diligence to
prevent or minimize the loss before, during and after the occurrence of the fortuitous
event.[25]
Respondent cites the squall that occurred during the voyage as the fortuitous event that
overturned M/B Coco Beach III. As reflected above, however, the occurrence of squalls
was expected under the weather condition of September 11, 2000. Moreover, evidence
shows that M/B Coco Beach III suffered engine trouble before it capsized and sank.[26] The
incident was, therefore, not completely free from human intervention.
The Court need not belabor how respondents evidence likewise fails to demonstrate that it
exercised due diligence to prevent or minimize the loss before, during and after the
occurrence of the squall.

Article 1764[27] vis--vis Article 2206[28] of the Civil Code holds the common carrier in breach
of its contract of carriage that results in the death of a passenger liable to pay the
following: (1) indemnity for death, (2) indemnity for loss of earning capacity and (3) moral
damages.
Petitioners are entitled to indemnity for the death of Ruelito which is fixed at P50,000.[29]
As for damages representing unearned income, the formula for its computation is:
Net Earning Capacity = life expectancy x (gross annual income - reasonable and
necessary living expenses).
Life expectancy is determined in accordance with the formula:
2 / 3 x [80 age of deceased at the time of death][30]
The first factor, i.e., life expectancy, is computed by applying the formula (2/3 x [80 age at
death]) adopted in the American Expectancy Table of Mortality or the Actuarial of
Combined Experience Table of Mortality.[31]
The second factor is computed by multiplying the life expectancy by the net earnings of
the deceased, i.e., the total earnings less expenses necessary in the creation of such
earnings or income and less living and other incidental expenses.[32] The loss is not
equivalent to the entire earnings of the deceased, but only such portion as he would have
used to support his dependents or heirs. Hence, to be deducted from his gross earnings are
the necessary expenses supposed to be used by the deceased for his own needs.[33]
In computing the third factor necessary living expense, Smith Bell Dodwell Shipping
Agency Corp. v. Borja[34] teaches that when, as in this case, there is no showing that the
living expenses constituted the smaller percentage of the gross income, the living
expenses are fixed at half of the gross income.
Applying the above guidelines, the Court determines Ruelito's life expectancy as follows:
Life expectancy = 2/3 x [80 - age of deceased at the time of death]
2/3 x [80 - 28]
2/3 x [52]
Life expectancy = 35
Documentary evidence shows that Ruelito was earning a basic monthly salary of
$900[35] which, when converted to Philippine peso applying the annual average exchange
rate of $1 = P44 in 2000,[36] amounts to P39,600. Ruelitos net earning capacity is thus
computed as follows:
Net Earning Capacity = life expectancy x (gross annual income -
reasonable and necessary living expenses).
= 35 x (P475,200 - P237,600)
= 35 x (P237,600)
Net Earning Capacity = P8,316,000
Respecting the award of moral damages, since respondent common carriers breach of
contract of carriage resulted in the death of petitioners son, following Article 1764 vis--
vis Article 2206 of the Civil Code, petitioners are entitled to moral damages.
Since respondent failed to prove that it exercised the extraordinary diligence required of
common carriers, it is presumed to have acted recklessly, thus warranting the award too of
exemplary damages, which are granted in contractual obligations if the defendant acted
in a wanton, fraudulent, reckless, oppressive or malevolent manner.[37]
Under the circumstances, it is reasonable to award petitioners the amount of P100,000 as
moral damages and P100,000 as exemplary damages.[38]
Pursuant to Article 2208[39] of the Civil Code, attorney's fees may also be awarded where
exemplary damages are awarded. The Court finds that 10% of the total amount adjudged
against respondent is reasonable for the purpose.
Finally, Eastern Shipping Lines, Inc. v. Court of Appeals[40] teaches that when an obligation,
regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts is
breached, the contravenor can be held liable for payment of interest in the concept of
actual and compensatory damages, subject to the following rules, to wit
1. When the obligation is breached, and it consists in the payment of a sum of money, i.e.,
a loan or forbearance of money, the interest due should be that which may have been
stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the
time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 12%
per annum to be computed from default, i.e., from judicial or extrajudicial demand under
and subject to the provisions of Article 1169 of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of money, is breached, an
interest on the amount of damages awarded may be imposed at the discretion of the
court at the rate of 6% per annum. No interest, however, shall be adjudged on
unliquidated claims or damages except when or until the demand can be established
with reasonable certainty. Accordingly, where the demand is established with reasonable
certainty, the interest shall begin to run from the time the claim is made judicially or
extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably
established at the time the demand is made, the interest shall begin to run only from the
date the judgment of the court is made (at which time the quantification of damages
may be deemed to have been reasonably ascertained). The actual base for the
computation of legal interest shall, in any case, be on the amount finally adjudged.
3. When the judgment of the court awarding a sum of money becomes final and
executory, the rate of legal interest, whether the case falls under paragraph 1 or
paragraph 2, above, shall be 12% per annum from such finality until its satisfaction, this
interim period being deemed to be by then an equivalent to a forbearance of credit.
(emphasis supplied).
Since the amounts payable by respondent have been determined with certainty only in
the present petition, the interest due shall be computed upon the finality of this decision at
the rate of 12% per annum until satisfaction, in accordance with paragraph number 3 of
the immediately cited guideline in Easter Shipping Lines, Inc.
WHEREFORE, the Court of Appeals Decision of August 19, 2008 is REVERSED and SET
ASIDE. Judgment is rendered in favor of petitioners ordering respondent to pay petitioners
the following: (1) P50,000 as indemnity for the death of Ruelito Cruz; (2) P8,316,000 as
indemnity for Ruelitos loss of earning capacity; (3) P100,000 as moral
damages; (4) P100,000 as exemplary damages; (5) 10% of the total amount adjudged
against respondent as attorneys fees; and (6) the costs of suit.

The total amount adjudged against respondent shall earn interest at the rate of 12% per
annum computed from the finality of this decision until full payment.

SO ORDERED.

SECOND DIVISION

LOADMASTERS CUSTOMS SERVICES, INC., G.R. No. 179446

Petitioner,

Present:
 entitled R&B Insurance Corporation v. Glodel Brokerage Corporation and Loadmasters
Customs Services, Inc., which held petitioner Loadmasters Customs Services,
CARPIO, J., Chairperson, Inc. (Loadmasters) liable to respondent Glodel Brokerage Corporation (Glodel)in the
NACHURA, amount of P1,896,789.62 representing the insurance indemnity which R&B Insurance
Corporation (R&B Insurance) paid to the insured-consignee, Columbia Wire and Cable
- versus - PERALTA, Corporation (Columbia).

ABAD, and

MENDOZA, JJ.

THE FACTS:

GLODEL BROKERAGE CORPORATION and

R&B INSURANCE CORPORATION,

Respondents. On August 28, 2001, R&B Insurance issued Marine Policy No. MN-00105/2001 in favor
of Columbia to insure the shipment of 132 bundles of electric copper cathodes against All
Promulgated: Risks. On August 28, 2001, the cargoes were shipped on board the vessel Richard Rey from
Isabela, Leyte, to Pier 10, North Harbor, Manila. They arrived on the same date.

January 10, 2011

Columbia engaged the services of Glodel for the release and withdrawal of the cargoes
from the pier and the subsequent delivery to its warehouses/plants. Glodel, in turn,
X -------------------------------------------------------------------------------------- X engaged the services of Loadmasters for the use of its delivery trucks to transport the
cargoes to Columbias warehouses/plants in Bulacan and Valenzuela City.

DECISION
The goods were loaded on board twelve (12) trucks owned by Loadmasters, driven by its
employed drivers and accompanied by its employed truck helpers. Six (6) truckloads of
copper cathodes were to be delivered to Balagtas, Bulacan, while the other six (6)
truckloads were destined for Lawang Bato, Valenzuela City. The cargoes in six truckloads
MENDOZA, J.: for Lawang Bato were duly delivered in Columbias warehouses there. Of the six (6) trucks
en route to Balagtas, Bulacan, however, only five (5) reached the destination. One (1)
truck, loaded with 11 bundles or 232 pieces of copper cathodes, failed to deliver its cargo.

This is a petition for review on certiorari under Rule 45 of the Revised Rules of Court assailing Later on, the said truck, an Isuzu with Plate No. NSD-117, was recovered but without the
the August 24, 2007 Decision[1] of the Court of Appeals (CA) in CA-G.R. CV No. 82822, copper cathodes. Because of this incident, Columbia filed with R&B Insurance a claim for
insurance indemnity in the amount of P1,903,335.39. After the requisite investigation and WHEREAS, the defendant Loadmasters Customs Services, Inc.s counterclaim for damages
adjustment, R&B Insurance paid Columbia the amount of P1,896,789.62 as insurance and attorneys fees against plaintiff are hereby dismissed.
indemnity.

R&B Insurance, thereafter, filed a complaint for damages against both Loadmasters and
Glodel before the Regional Trial Court, Branch 14, Manila (RTC), docketed as Civil Case
No. 02-103040. It sought reimbursement of the amount it had paid to Columbia for the loss
of the subject cargo. It claimed that it had been subrogated to the right of the consignee
to recover from the party/parties who may be held legally liable for the loss.[2]

On November 19, 2003, the RTC rendered a decision[3] holding Glodel liable for damages With costs against defendant Glodel Brokerage Corporation.
for the loss of the subject cargo and dismissing Loadmasters counterclaim for damages
and attorneys fees against R&B Insurance.The dispositive portion of the decision reads: SO ORDERED.[4]

Both R&B Insurance and Glodel appealed the RTC decision to the CA.

WHEREFORE, all premises considered, the plaintiff having established by preponderance of

evidence its claims against defendant Glodel Brokerage Corporation, judgment is hereby On August 24, 2007, the CA rendered the assailed decision which reads in part:
rendered ordering the latter:

Considering that appellee is an agent of appellant Glodel, whatever liability the latter
owes to appellant R&B Insurance Corporation as insurance indemnity must likewise be the
1. To pay plaintiff R&B Insurance Corporation the sum of P1,896,789.62 as actual and amount it shall be paid by appellee Loadmasters.
compensatory damages, with interest from the date of complaint until fully paid;

WHEREFORE, the foregoing considered, the appeal is PARTLY GRANTED in that the
2. To pay plaintiff R&B Insurance Corporation the amount equivalent to 10% of the appellee Loadmasters is likewise held liable to appellant Glodel in the amount
principal amount recovered as and for attorneys fees plus P1,500.00 per appearance in of P1,896,789.62 representing the insurance indemnity appellant Glodel has been held
Court; liable to appellant R&B Insurance Corporation.

3. To pay plaintiff R&B Insurance Corporation the sum of P22,427.18 as litigation Appellant Glodels appeal to absolve it from any liability is herein DISMISSED.
expenses.

SO ORDERED.[5]

Hence, Loadmasters filed the present petition for review on certiorari before this Court
presenting the following
ISSUES
1. Can Petitioner Loadmasters be held liable to Respondent Glodel in spite of the fact that
the latter respondent Glodel did not file a cross-claim against it (Loadmasters)?
2. Under the set of facts established and undisputed in the case, can petitioner
Loadmasters be legally considered as an Agent of respondent Glodel?[6]
To totally exculpate itself from responsibility for the lost goods, Loadmasters argues that it
cannot be considered an agent of Glodel because it never represented the latter in its
dealings with the consignee. At any rate, it further contends that Glodel has no recourse
against it for its (Glodels) failure to file a cross-claim pursuant to Section 2, Rule 9 of the
1997 Rules of Civil Procedure.
Glodel, in its Comment,[7] counters that Loadmasters is liable to it under its cross-claim
because the latter was grossly negligent in the transportation of the subject cargo. With
respect to Loadmasters claim that it is already estopped from filing a cross-claim, Glodel
insists that it can still do so even for the first time on appeal because there is no rule that
provides otherwise. Finally, Glodel argues that its relationship with Loadmasters is that of
Charter wherein the transporter (Loadmasters) is only hired for the specific job of delivering
the merchandise. Thus, the diligence required in this case is merely ordinary diligence or
that of a good father of the family, not the extraordinary diligence required of common
carriers.
R&B Insurance, for its part, claims that Glodel is deemed to have interposed a cross-claim
against Loadmasters because it was not prevented from presenting evidence to prove its
position even without amending its Answer. As to the relationship between Loadmasters
and Glodel, it contends that a contract of agency existed between the two
corporations.[8]
Subrogation is the substitution of one person in the place of another with reference to a
lawful claim or right, so that he who is substituted succeeds to the rights of the other in
relation to a debt or claim, including its remedies or securities.[9] Doubtless, R&B Insurance is
subrogated to the rights of the insured to the extent of the amount it paid the consignee
under the marine insurance, as provided under Article 2207 of the Civil Code, which reads:
ART. 2207. If the plaintiffs property has been insured, and he has received indemnity from
the insurance company for the injury or loss arising out of the wrong or breach of contract
complained of, the insurance company shall be subrogated to the rights of the insured
against the wrong-doer or the person who has violated the contract. If the amount paid
by the insurance company does not fully cover the injury or loss, the aggrieved party shall
be entitled to recover the deficiency from the person causing the loss or injury.
As subrogee of the rights and interest of the consignee, R&B Insurance has the right to seek
reimbursement from either Loadmasters or Glodel or both for breach of contract and/or
tort.
The issue now is who, between Glodel and Loadmasters, is liable to pay R&B Insurance for
the amount of the indemnity it paid Columbia.
At the outset, it is well to resolve the issue of whether Loadmasters and Glodel are
common carriers to determine their liability for the loss of the subject cargo. Under Article
1732 of the Civil Code, common carriers are persons, corporations, firms, or associations
engaged in the business of carrying or transporting passenger or goods, or both by land,
water or air for compensation, offering their services to the public.
Based on the aforecited definition, Loadmasters is a common carrier because it is
engaged in the business of transporting goods by land, through its trucking service. It is
a common carrier as distinguished from a private carrier wherein the carriage is generally
undertaken by special agreement and it does not hold itself out to carry goods for the
general public.[10] The distinction is significant in the sense that the rights and obligations of
the parties to a contract of private carriage are governed principally by their stipulations,
not by the law on common carriers.[11]
In the present case, there is no indication that the undertaking in the contract between
Loadmasters and Glodel was private in character. There is no showing that Loadmasters
solely and exclusively rendered services to Glodel.
In fact, Loadmasters admitted that it is a common carrier.[12]
In the same vein, Glodel is also considered a common carrier within the context of Article
1732. In its Memorandum,[13] it states that it is a corporation duly organized and existing
under the laws of the Republic of the Philippines and is engaged in the business of customs
brokering. It cannot be considered otherwise because as held by this Court in Schmitz
Transport & Brokerage Corporation v. Transport Venture, Inc., [14] a customs broker is also
regarded as a common carrier, the transportation of goods being an integral part of its
business.
Loadmasters and Glodel, being both common carriers, are mandated from the nature of
their business and for reasons of public policy, to observe the extraordinary diligence in the
vigilance over the goods transported by them according to all the circumstances of such
case, as required by Article 1733 of the Civil Code. When the Court speaks of extraordinary
diligence, it is that extreme measure of care and caution which persons of unusual
prudence and circumspection observe for securing and preserving their own property or
rights.[15] This exacting standard imposed on common carriers in a contract of carriage of
goods is intended to tilt the scales in favor of the shipper who is at the mercy of the
common carrier once the goods have been lodged for shipment.[16] Thus, in case of loss of
the goods, the common carrier is presumed to have been at fault or to have acted
negligently.[17] This presumption of fault or negligence, however, may be rebutted by proof
that the common carrier has observed extraordinary diligence over the goods.
With respect to the time frame of this extraordinary responsibility, the Civil Code provides
that the exercise of extraordinary diligence 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.[18]
Premises considered, the Court is of the view that both Loadmasters and Glodel are jointly
and severally liable to R & B Insurance for the loss of the subject cargo. Under Article 2194
of the New Civil Code, the responsibility of two or more persons who are liable for a quasi-
delict is solidary.
Loadmasters claim that it was never privy to the contract entered into by Glodel with the
consignee Columbia or R&B Insurance as subrogee, is not a valid defense. It may not have
a direct contractual relation with Columbia, but it is liable for tort under the provisions of
Article 2176 of the Civil Code on quasi-delicts which expressly provide:
ART. 2176. Whoever by act or omission causes damage to another, there being fault or
negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no
pre-existing contractual relation between the parties, is called a quasi-delict and is
governed by the provisions of this Chapter.
Pertinent is the ruling enunciated in the case of Mindanao Terminal and Brokerage Service,
Inc. v. Phoenix Assurance Company of New York,/McGee & Co., Inc. [19] where this Court
held that a tort may arise despite the absence of a contractual relationship, to wit:
We agree with the Court of Appeals that the complaint filed by Phoenix and McGee
against Mindanao Terminal, from which the present case has arisen, states a cause of
action. The present action is based on quasi-delict, arising from the negligent and careless
loading and stowing of the cargoes belonging to Del Monte Produce. Even assuming that
both Phoenix and McGee have only been subrogated in the rights of Del Monte Produce,
who is not a party to the contract of service between Mindanao Terminal and Del Monte,
still the insurance carriers may have a cause of action in light of the Courts consistent ruling
that the act that breaks the contract may be also a tort. In fine, a liability for tort may arise
even under a contract, where tort is that which breaches the contract. In the present
case, Phoenix and McGee are not suing for damages for injuries arising from the breach of
the contract of service but from the alleged negligent manner by which Mindanao
Terminal handled the cargoes belonging to Del Monte Produce. Despite the absence of
contractual relationship between Del Monte Produce and Mindanao Terminal, the
allegation of negligence on the part of the defendant should be sufficient to establish a
cause of action arising from quasi-delict. [Emphases supplied]
In connection therewith, Article 2180 provides:
ART. 2180. The obligation imposed by Article 2176 is demandable not only for ones own
acts or omissions, but also for those of persons for whom one is responsible.
xxxx
Employers shall be liable for the damages caused by their employees and household
helpers acting within the scope of their assigned tasks, even though the former are not
engaged in any business or industry.
It is not disputed that the subject cargo was lost while in the custody of Loadmasters whose
employees (truck driver and helper) were instrumental in the hijacking or robbery of the
shipment. As employer, Loadmasters should be made answerable for the damages
caused by its employees who acted within the scope of their assigned task of delivering
the goods safely to the warehouse.
Whenever an employees negligence causes damage or injury to another, there instantly
arises a presumption juris tantum that the employer failed to exercise diligentissimi patris
families in the selection (culpa in eligiendo) or supervision (culpa in vigilando) of its
employees.[20] To avoid liability for a quasi-delict committed by its employee, an employer
must overcome the presumption by presenting convincing proof that he exercised the
care and diligence of a good father of a family in the selection and supervision of his
employee.[21] In this regard, Loadmasters failed.
Glodel is also liable because of its failure to exercise extraordinary diligence. It failed to
ensure that Loadmasters would fully comply with the undertaking to safely transport the
subject cargo to the designated destination. It should have been more prudent in
entrusting the goods to Loadmasters by taking precautionary measures, such as providing
escorts to accompany the trucks in delivering the cargoes. Glodel should, therefore, be
held liable with Loadmasters. Its defense of force majeure is unavailing.
At this juncture, the Court clarifies that there exists no principal-agent relationship between
Glodel and Loadmasters, as erroneously found by the CA. Article 1868 of the Civil Code
provides: By the contract of agency a person binds himself to render some service or to do
something in representation or on behalf of another, with the consent or authority of the
latter. The elements of a contract of agency are: (1) consent, express or implied, of the
parties to establish the relationship; (2) the object is the execution of a juridical act in
relation to a third person; (3) the agent acts as a representative and not for himself; (4) the
agent acts within the scope of his authority.[22]
Accordingly, there can be no contract of agency between the parties. Loadmasters
never represented Glodel. Neither was it ever authorized to make such representation. It is
a settled rule that the basis for agency is representation, that is, the agent acts for and on
behalf of the principal on matters within the scope of his authority and said acts have the
same legal effect as if they were personally executed by the principal. On the part of the
principal, there must be an actual intention to appoint or an intention naturally inferable
from his words or actions, while on the part of the agent, there must be an intention to
accept the appointment and act on it.[23]Such mutual intent is not obtaining in this case.
What then is the extent of the respective liabilities of Loadmasters and Glodel? Each
wrongdoer is liable for the total damage suffered by R&B Insurance. Where there are
several causes for the resulting damages, a party is not relieved from liability, even
partially. It is sufficient that the negligence of a party is an efficient cause without which
the damage would not have resulted. It is no defense to one of the concurrent tortfeasors
that the damage would not have resulted from his negligence alone, without the
negligence or wrongful acts of the other concurrent tortfeasor. As stated in the case of Far
Eastern Shipping v. Court of Appeals,[24]
X x x. Where several causes producing an injury are concurrent and each is an efficient
cause without which the injury would not have happened, the injury may be attributed to
all or any of the causes and recovery may be had against any or all of the responsible
persons although under the circumstances of the case, it may appear that one of them
was more culpable, and that the duty owed by them to the injured person was not the
same. No actor's negligence ceases to be a proximate cause merely because it does not
exceed the negligence of other actors. Each wrongdoer is responsible for the entire result
and is liable as though his acts were the sole cause of the injury.
There is no contribution between joint tortfeasors whose liability is solidary since both of
them are liable for the total damage. Where the concurrent or successive negligent acts
or omissions of two or more persons, although acting independently, are in combination
the direct and proximate cause of a single injury to a third person, it is impossible to
determine in what proportion each contributed to the injury and either of them is
responsible for the whole injury. Where their concurring negligence resulted in injury or
damage to a third party, they become joint tortfeasors and are solidarily liable for the
resulting damage under Article 2194 of the Civil Code. [Emphasis supplied]
The Court now resolves the issue of whether Glodel can collect from Loadmasters, it having
failed to file a cross-claim against the latter.
Undoubtedly, Glodel has a definite cause of action against Loadmasters for breach of
contract of service as the latter is primarily liable for the loss of the subject cargo. In this
case, however, it cannot succeed in seeking judicial sanction against Loadmasters
because the records disclose that it did not properly interpose a cross-claim against the
latter. Glodel did not even pray that Loadmasters be liable for any and all claims that it
may be adjudged liable in favor of R&B Insurance. Under the Rules, a compulsory
counterclaim, or a cross-claim, not set up shall be barred.[25] Thus, a cross-claim cannot be
set up for the first time on appeal.
For the consequence, Glodel has no one to blame but itself. The Court cannot come to its
aid on equitable grounds. Equity, which has been aptly described as a justice outside
legality, is applied only in the absence of, and never against, statutory law or judicial rules
of procedure.[26] The Court cannot be a lawyer and take the cudgels for a party who has
been at fault or negligent.
WHEREFORE, the petition is PARTIALLY GRANTED. The August 24, 2007 Decision of the Court
of Appeals is MODIFIED to read as follows:
WHEREFORE, judgment is rendered declaring petitioner Loadmasters Customs Services, Inc.
and respondent Glodel Brokerage Corporation jointly and severally liable to respondent
R&B Insurance Corporation for the insurance indemnity it paid to consignee Columbia Wire
& Cable Corporation and ordering both parties to pay, jointly and severally, R&B Insurance
Corporation a] the amount of P1,896,789.62 representing the insurance indemnity; b] the
amount equivalent to ten (10%) percent thereof for attorneys fees; and c] the amount
of P22,427.18 for litigation expenses.
The cross-claim belatedly prayed for by respondent Glodel Brokerage Corporation against
petitioner Loadmasters Customs Services, Inc. is DENIED.

SO ORDERED.

Spouses Teodoro and Nanette Perena, vs. Spouses Nicolas and Teresita Zarate
GR no. 157917 August 29, 2012

The facts of the case are as follows:

Spouses Perena were engaged in school bus service, transporting students from
Paranaque to Don Bosco Technical Institute in Makati. In June 1996, spouses Zarate
contracted spouses Perena to transport their son, Aaron Zarate, from their residence in
Paranaque to Don Bosco. As on the usual days of school in August 22, 1996, the van
picked-up Aaron in their house, he then took the left side seat near the rear door of the
said vehicle. Considering that the students were due by 7:15am at Don Bosco, and
because of heavy traffic at the South Superhighway, the driver, Clemente Alfaro, decided
to take the narrow path underneath the Magallanes interchange which then is being used
by Makati bound vehicles as short cut. The said narrow path has a railroad crossing, and transportation indiscriminately to the students of a particular school living within or near
while traversing the said narrow path, closely tailing a huge passenger bus, the driver of where they operated the service and for a fee.
the school service decided to overtake the said bus at about 50 meters away from the
railroad crossing. Considering that the stereo is playing loudly and blinded by the bus, he On the second issue, Article 1756 of the Civil code provides that, In case of death
did not hear the blowing of horn of the oncoming train as a warning to the vehicles. The of or injuries to passengers, common carriers are presumed to have been at fault or to
bus successfully crossed the railroad crossing but the van did not. The train hit the rear side have acted negligently, unless they prove that they observed extraordinary diligence as
of the van and the impact threw 9 of the 12 students including Aaron. His body landed in prescribed in articles 1733 and 1755. In this case, Aaron Zarate died, and thus as provided
the path of the train, which dragged him, severed his head, instantaneously killing him. under the above-mentioned law, they are negligent.
Devastated by the sudden death of their son, spouses Zarate commenced this action for
damages. The Regional Trial Court ruled in favor of the spouses Zarate. On appeal, The
Court of Appeals affirmed the decision of the lower court but lowered the moral damages
to php 2,500,000.00.

ISSUE:
Whether or not there is a breach of contract of a common carrier and whether
there is negligence.

HELD:

The Supreme Court ruled in favor spouses Zarate, affirming the decision of the
Court of Appeals.

In this case, the Supreme Court, once and for all lay the matter to rest that the
school service is a common carrier and not a private carrier, and as such, they are
required to observe the extraordinary diligence as provided under Article 1733 of the Civil
Code.

According to the Supreme Court, the true test for a common carrier is not the
quantity or extent of the business actually transacted, or the number and character of the
conveyances used in the activity, but whether the undertaking is a part of the activity SUPREME COURT
engaged in by the carrier that he has held out to the general public as his business or Manila
occupation. Otherwise stated, making the activity or holding himself or itself out to the
public as a ready to act for all who may desire his or its services to transport goods or THIRD DIVISION
persons for a fee.
G.R. No. 200289 November 25, 2013

Applying the considerations mentioned above, there is no question that Perenas

WESTWIND SHIPPING CORPORATION, Petitioner,
as the operators of a school service were: a) engaged in transporting passengers generally
vs.
as a business not just as a casual occupation; b) undertaking to carry passengers over
UCPB GENERAL INSURANCE CO., INC. and ASIAN TERMINALS INC., Respondents.
established roads; c) transporting students for a fee. Despite catering limited clientele, the
Perenas operated as a common carrier because they hold themselves out as a ready
x-----------------------x
G.R. No. 200314
ORIENT FREIGHT INTERNATIONAL INC., Petitioner,
vs.
UCPB GENERAL INSURANCE CO., INC. and ASIAN TERMINALS INC., Respondents.
DECISION
PERALTA, J.:
These two consolidated cases challenge, by way of petition for certiorari under Rule 45 of
the 1997 Rules of Civil Procedure, September 13, 2011 Decision1 and January 19, 2012
Resolution2 of the Court of Appeals (CA) in CA-G.R. CV No. 86752, which reversed and set
aside the January 27, 2006 Decision3 of the Manila City Regional Trial Court Branch (RTC)
30. The facts, as established by the records, are as follows:
On August 23, 1993, Kinsho-Mataichi Corporation shipped from the port of Kobe, Japan,
197 metal containers/skids of tin-free steel for delivery to the consignee, San Miguel
Corporation (SMC). The shipment, covered by Bill of Lading No. KBMA-1074,4 was loaded
and received clean on board M/V Golden Harvest Voyage No. 66, a vessel owned and
operated by Westwind Shipping Corporation (Westwind).
SMC insured the cargoes against all risks with UCPB General Insurance Co., Inc. (UCPB) for
US Dollars: One Hundred Eighty-Four Thousand Seven Hundred Ninety-Eight and Ninety-
Seven Centavos (US$184,798.97), which, at the time, was equivalent to Philippine Pesos: Six
Million Two Hundred Nine Thousand Two Hundred Forty-Five and Twenty-Eight Centavos
(₱6,209,245.28).
The shipment arrived in Manila, Philippines on August 31, 1993 and was discharged in the
custody of the arrastre operator, Asian Terminals, Inc. (ATI), formerly Marina Port Services,
Inc.5 During the unloading operation, however, six containers/skids worth Philippine Pesos:
One Hundred Seventeen Thousand Ninety-Three and Twelve Centavos (₱117,093.12)
sustained dents and punctures from the forklift used by the stevedores of Ocean Terminal
Services, Inc. (OTSI) in centering and shuttling the containers/skids. As a consequence, the
local ship agent of the vessel, Baliwag Shipping Agency, Inc., issued two Bad Order Cargo
Receipt dated September 1, 1993.
On September 7, 1993, Orient Freight International, Inc. (OFII), the customs broker of SMC,
withdrew from ATI the 197 containers/skids, including the six in damaged condition, and
delivered the same at SMC’s warehouse in Calamba, Laguna through J.B. Limcaoco
Trucking (JBL). It was discovered upon discharge that additional nine containers/skids
valued at Philippine Pesos: One Hundred Seventy-Five Thousand Six Hundred Thirty-Nine
and Sixty-Eight Centavos (₱175,639.68) were also damaged due to the forklift operations;
thus, making the total number of 15 containers/skids in bad order.
Almost a year after, on August 15, 1994, SMC filed a claim against UCPB, Westwind, ATI,
and OFII to recover the amount corresponding to the damaged 15 containers/skids. When
UCPB paid the total sum of Philippine Pesos: Two Hundred Ninety-Two Thousand Seven
Hundred Thirty-Two and Eighty Centavos (₱292,732.80), SMC signed the subrogation
receipt. Thereafter, in the exercise of its right of subrogation, UCPB instituted on August 30,
1994 a complaint for damages against Westwind, ATI, and OFII.6
After trial, the RTC dismissed UCPB’s complaint and the counterclaims of Westwind, ATI,
and OFII. It ruled that the right, if any, against ATI already prescribed based on the
stipulation in the 16 Cargo Gate Passes issued, as well as the doctrine laid down in
International Container Terminal Services, Inc. v. Prudential Guarantee & Assurance Co.
Inc.7 that a claim for reimbursement for damaged goods must be filed within 15 days from
the date of consignee’s knowledge. With respect to Westwind, even if the action against it
is not yet barred by prescription, conformably with Section 3 (6) of the Carriage of Goods
by Sea Act (COGSA) and Our rulings in E.E. Elser, Inc., et al. v. Court of Appeals, et al.8 and
Belgian Overseas Chartering and Shipping N.V. v. Phil. First Insurance Co., Inc.,9 the court a
quo still opined that Westwind is not liable, since the discharging of the cargoes were done
by ATI personnel using forklifts and that there was no allegation that it (Westwind) had a
hand in the conduct of the stevedoring operations. Finally, the trial court likewise absolved
OFII from any liability, reasoning that it never undertook the operation of the forklifts which
caused the dents and punctures, and that it merely facilitated the release and delivery of
the shipment as the customs broker and representative of SMC.
On appeal by UCPB, the CA reversed and set aside the trial court. The fallo of its
September 13, 2011 Decision directed:
WHEREFORE, premises considered, the instant appeal is hereby GRANTED. The Decision
dated January 27, 2006 rendered by the court a quo is REVERSED AND SET ASIDE. Appellee
Westwind Shipping Corporation is hereby ordered to pay to the appellant UCPB General
Insurance Co., Inc., the amount of One Hundred Seventeen Thousand and Ninety-Three
Pesos and Twelve Centavos (Php117,093.12), while Orient Freight International, Inc. is
hereby ordered to pay to UCPB the sum of One Hundred Seventy-Five Thousand Six
Hundred Thirty-Nine Pesos and Sixty-Eight Centavos (Php175,639.68). Both sums shall bear
interest at the rate of six (6%) percent per annum, from the filing of the complaint on
August 30, 1994 until the judgment becomes final and executory. Thereafter, an interest
rate of twelve (12%) percent per annum shall be imposed from the time this decision
becomes final and executory until full payment of said amounts.
SO ORDERED.10
While the CA sustained the RTC judgment that the claim against ATI already prescribed, it
rendered a contrary view as regards the liability of Westwind and OFII. For the appellate
court, Westwind, not ATI, is responsible for the six damaged containers/skids at the time of
its unloading. In its rationale, which substantially followed Philippines First Insurance Co., Inc.
v. Wallem Phils. Shipping, Inc.,11 it concluded that the common carrier, not the arrastre
operator, is responsible during the unloading of the cargoes from the vessel and that it is
not relieved from liability and is still bound to exercise extraordinary diligence at the time in
order to see to it that the cargoes under its possession remain in good order and condition.
The CA also considered that OFII is liable for the additional nine damaged
containers/skids, agreeing with UCPB’s contention that OFII is a common carrier bound to
observe extraordinary diligence and is presumed to be at fault or have acted negligently
for such damage. Noting the testimony of OFII’s own witness that the delivery of the
shipment to the consignee is part of OFII’s job as a cargo forwarder, the appellate court
ruled that Article 1732 of the New Civil Code (NCC) does not distinguish between one
whose principal business activity is the carrying of persons or goods or both and one who
does so as an ancillary activity. The appellate court further ruled that OFII cannot excuse
itself from liability by insisting that JBL undertook the delivery of the cargoes to SMC’s
warehouse. It opined that the delivery receipts signed by the inspector of SMC showed
that the containers/skids were received from OFII, not JBL. At the most, the CA said, JBL
was engaged by OFII to supply the trucks necessary to deliver the shipment, under its
supervision, to SMC.
Only Westwind and OFII filed their respective motions for reconsideration, which the CA
denied; hence, they elevated the case before Us via petitions docketed as G.R. Nos.
200289 and 200314, respectively.
Westwind argues that it no longer had actual or constructive custody of the
containers/skids at the time they were damaged by ATI’s forklift operator during the
unloading operations. In accordance with the stipulation of the bill of lading, which
allegedly conforms to Article 1736 of the NCC, it contends that its responsibility already
ceased from the moment the cargoes were delivered to ATI, which is reckoned from the
moment the goods were taken into the latter’s custody. Westwind adds that ATI, which is a
completely independent entity that had the right to receive the goods as exclusive
operator of stevedoring and arrastre functions in South Harbor, Manila, had full control
over its employees and stevedores as well as the manner and procedure of the
discharging operations.
As for OFII, it maintains that it is not a common carrier, but only a customs broker whose
participation is limited to facilitating withdrawal of the shipment in the custody of ATI by
overseeing and documenting the turnover and counterchecking if the quantity of the
shipments were in tally with the shipping documents at hand, but without participating in
the physical withdrawal and loading of the shipments into the delivery trucks of JBL.
Assuming that it is a common carrier, OFII insists that there is no need to rely on the
presumption of the law – that, as a common carrier, it is presumed to have been at fault or
have acted negligently in case of damaged goods – considering the undisputed fact that
the damages to the containers/skids were caused by the forklift blades, and that there is
no evidence presented to show that OFII and Westwind were the owners/operators of the
forklifts. It asserts that the loading to the trucks were made by way of forklifts owned and
operated by ATI and the unloading from the trucks at the SMC warehouse was done by
way of forklifts owned and operated by SMC employees. Lastly, OFII avers that neither the
undertaking to deliver nor the acknowledgment by the consignee of the fact of delivery
makes a person or entity a common carrier, since delivery alone is not the controlling
factor in order to be considered as such.
Both petitions lack merit.
The case of Philippines First Insurance Co., Inc. v. Wallem Phils. Shipping, Inc. 12 applies, as it
settled the query on which between a common carrier and an arrastre operator should be
responsible for damage or loss incurred by the shipment during its unloading. We
elucidated at length:
Common carriers, from the nature of their business and for reasons of public policy, are
bound to observe extraordinary diligence in the vigilance over the goods transported by
them. Subject to certain exceptions enumerated under Article 1734 of the Civil Code,
common carriers are responsible for the loss, destruction, or deterioration of the goods. The
extraordinary responsibility of the common carrier lasts from the time the goods are
unconditionally placed in the possession of, and received by the carrier for transportation
until the same are delivered, actually or constructively, by the carrier to the consignee, or
to the person who has a right to receive them.
For marine vessels, Article 619 of the Code of Commerce provides that the ship captain is
liable for the cargo from the time it is turned over to him at the dock or afloat alongside
the vessel at the port of loading, until he delivers it on the shore or on the discharging
wharf at the port of unloading, unless agreed otherwise. In Standard Oil Co. of New York v.
Lopez Castelo, the Court interpreted the ship captain’s liability as ultimately that of the
shipowner by regarding the captain as the representative of the shipowner.
Lastly, Section 2 of the COGSA provides that under every contract of carriage of goods by
sea, the carrier in relation to the loading, handling, stowage, carriage, custody, care, and
discharge of such goods, shall be subject to the responsibilities and liabilities and entitled
to the rights and immunities set forth in the Act. Section 3 (2) thereof then states that
among the carriers’ responsibilities are to properly and carefully load, handle, stow, carry,
keep, care for, and discharge the goods carried.
xxxx
On the other hand, the functions of an arrastre operator involve the handling of cargo
deposited on the wharf or between the establishment of the consignee or shipper and the
ship's tackle. Being the custodian of the goods discharged from a vessel, an arrastre
operator's duty is to take good care of the goods and to turn them over to the party
entitled to their possession.
Handling cargo is mainly the arrastre operator's principal work so its drivers/operators or
employees should observe the standards and measures necessary to prevent losses and
damage to shipments under its custody.
In Fireman’s Fund Insurance Co. v. Metro Port Service, Inc., the Court explained the
relationship and responsibility of an arrastre operator to a consignee of a cargo, to quote:
The legal relationship between the consignee and the arrastre operator is akin to that of a
depositor and warehouseman. The relationship between the consignee and the common
carrier is similar to that of the consignee and the arrastre operator. Since it is the duty of the
ARRASTRE to take good care of the goods that are in its custody and to deliver them in
good condition to the consignee, such responsibility also devolves upon the CARRIER. Both
the ARRASTRE and the CARRIER are therefore charged with and obligated to deliver the
goods in good condition to the consignee. (Emphasis supplied) (Citations omitted)
The liability of the arrastre operator was reiterated in Eastern Shipping Lines, Inc. v. Court of
Appeals with the clarification that the arrastre operator and the carrier are not always and
necessarily solidarily liable as the facts of a case may vary the rule.
Thus, in this case, the appellate court is correct insofar as it ruled that an arrastre operator
and a carrier may not be held solidarily liable at all times. But the precise question is which
entity had custody of the shipment during its unloading from the vessel?
The aforementioned Section 3 (2) of the COGSA states that among the carriers’
responsibilities are to properly and carefully load, care for and discharge the goods
carried. The bill of lading covering the subject shipment likewise stipulates that the carrier’s
liability for loss or damage to the goods ceases after its discharge from the vessel. Article
619 of the Code of Commerce holds a ship captain liable for the cargo from the time it is
turned over to him until its delivery at the port of unloading.
In a case decided by a U.S. Circuit Court, Nichimen Company v. M/V Farland, it was ruled
that like the duty of seaworthiness, the duty of care of the cargo is non-delegable, and the
carrier is accordingly responsible for the acts of the master, the crew, the stevedore, and
his other agents. It has also been held that it is ordinarily the duty of the master of a vessel
to unload the cargo and place it in readiness for delivery to the consignee, and there is an
implied obligation that this shall be accomplished with sound machinery, competent
hands, and in such manner that no unnecessary injury shall be done thereto. And the fact
that a consignee is required to furnish persons to assist in unloading a shipment may not
relieve the carrier of its duty as to such unloading.
xxxx
It is settled in maritime law jurisprudence that cargoes while being unloaded generally
remain under the custody of the carrier x x x.13
In Regional Container Lines (RCL) of Singapore v. The Netherlands Insurance Co.
(Philippines), Inc.14 and Asian Terminals, Inc. v. Philam Insurance Co., Inc.,15 the Court
echoed the doctrine that cargoes, while being unloaded, generally remain under the
custody of the carrier. We cannot agree with Westwind’s disputation that "the carrier in
Wallem clearly exercised supervision during the discharge of the shipment and that is why
it was faulted and held liable for the damage incurred by the shipment during such time."
What Westwind failed to realize is that the extraordinary responsibility of the common
carrier lasts until the time the goods are actually or constructively delivered by the carrier
to the consignee or to the person who has a right to receive them. There is actual delivery
in contracts for the transport of goods when possession has been turned over to the
consignee or to his duly authorized agent and a reasonable time is given him to remove
the goods.16 In this case, since the discharging of the containers/skids, which were
covered by only one bill of lading, had not yet been completed at the time the damage
occurred, there is no reason to imply that there was already delivery, actual or
constructive, of the cargoes to ATI. Indeed, the earlier case of Delsan Transport Lines, Inc.
v. American Home Assurance Corp.17 serves as a useful guide, thus:
Delsan’s argument that it should not be held liable for the loss of diesel oil due to backflow
because the same had already been actually and legally delivered to Caltex at the time
it entered the shore tank holds no water. It had been settled that the subject cargo was still
in the custody of Delsan because the discharging thereof has not yet been finished when
the backflow occurred. Since the discharging of the cargo into the depot has not yet
been completed at the time of the spillage when the backflow occurred, there is no
reason to imply that there was actual delivery of the cargo to the consignee. Delsan is
straining the issue by insisting that when the diesel oil entered into the tank of Caltex on
shore, there was legally, at that moment, a complete delivery thereof to Caltex. To be
sure, the extraordinary responsibility of common carrier lasts from the time the goods are
unconditionally placed in the possession of, and received by, the carrier for transportation
until the same are delivered, actually or constructively, by the carrier to the consignee, or
to a person who has the right to receive them. The discharging of oil products to Caltex
Bulk Depot has not yet been finished, Delsan still has the duty to guard and to preserve the
cargo. The carrier still has in it the responsibility to guard and preserve the goods, a duty
incident to its having the goods transported.
To recapitulate, common carriers, from the nature of their business and for reasons of
public policy, are bound to observe extraordinary diligence in vigilance over the goods
and for the safety of the passengers transported by them, according to all the
circumstances of each case. The mere proof of delivery of goods in good order to the
carrier, and their arrival in the place of destination in bad order, make out a prima facie
case against the carrier, so that if no explanation is given as to how the injury occurred,
the carrier must be held responsible. It is incumbent upon the carrier to prove that the loss
was due to accident or some other circumstances inconsistent with its liability.18
The contention of OFII is likewise untenable. A customs broker has been regarded as a
common carrier because transportation of goods is an integral part of its business.19 In
Schmitz Transport & Brokerage Corporation v. Transport Venture, Inc.,20 the Court already
reiterated: It is settled that under a given set of facts, a customs broker may be regarded
as a common carrier.1âwphi1 Thus, this Court, in A.F. Sanchez Brokerage, Inc. v. The
Honorable Court of Appeals held:
The appellate court did not err in finding petitioner, a customs broker, to be also a
common carrier, as defined under Article 1732 of the Civil Code, to wit, Art. 1732. Common
carriers are persons, corporations, firms or associations engaged in the business of carrying
or transporting passengers or goods or both, by land, water, or air, for compensation,
offering their services to the public.
xxxx
Article 1732 does not distinguish between one whose principal business activity is the
carrying of goods and one who does such carrying only as an ancillary activity. The
contention, therefore, of petitioner that it is not a common carrier but a customs broker
whose principal function is to prepare the correct customs declaration and proper
shipping documents as required by law is bereft of merit. It suffices that petitioner
undertakes to deliver the goods for pecuniary consideration.
And in Calvo v. UCPB General Insurance Co. Inc., this Court held that as the transportation
of goods is an integral part of a customs broker, the customs broker is also a common
carrier. For to declare otherwise "would be to deprive those with whom [it] contracts the
protection which the law affords them notwithstanding the fact that the obligation to
carry goods for [its] customers, is part and parcel of petitioner’s business."21
That OFII is a common carrier is buttressed by the testimony of its own witness, Mr. Loveric
Panganiban Cueto, that part of the services it offers to clients is cargo forwarding, which
includes the delivery of the shipment to the consignee.22 Thus, for undertaking the transport
of cargoes from ATI to SMC’s warehouse in Calamba, Laguna, OFII is considered a
common carrier. As long as a person or corporation holds itself to the public for the
purpose of transporting goods as a business, it is already considered a common carrier
regardless of whether it owns the vehicle to be used or has to actually hire one.
As a common carrier, OFII is mandated to observe, under Article 1733 of the Civil
Code,23 extraordinary diligence in the vigilance over the goods24 it transports according to
the peculiar circumstances of each case. In the event that the goods are lost, destroyed
or deteriorated, it is presumed to have been at fault or to have acted negligently unless it
proves that it observed extraordinary diligence.25 In the case at bar it was established that
except for the six containers/skids already damaged OFII received the cargoes from ATI in
good order and condition; and that upon its delivery to SMC additional nine
containers/skids were found to be in bad order as noted in the Delivery Receipts issued by
OFII and as indicated in the Report of Cares Marine Cargo Surveyors. Instead of merely
excusing itself from liability by putting the blame to ATI and SMC it is incumbent upon OFII
to prove that it actively took care of the goods by exercising extraordinary diligence in the
carriage thereof. It failed to do so. Hence its presumed negligence under Article 1735 of
the Civil Code remains unrebutted.
WHEREFORE, premises considered the petitions of Westwind and OFII in G.R. Nos. 200289
and 200314 respectively are DENIED. The September 13 2011 Decision and January 19 2012
Resolution of the Court of Appeals in CA-G.R. CV No. 86752 which reversed and set aside
the January 27 2006 Decision of the Manila City Regional Trial Court Branch 30 are
AFFIRMED.
SO ORDERED.
SECOND DIVISION

February 8, 2017

G.R. No. 212038

SPOUSES JESUS FERNANDO and ELIZABETH S. FERNANDO, Petitioners

vs.
NORTHWEST AIRLINES, INC., Respondent
x-----------------------x
G.R. No. 212043
NORTHWEST AIRLINES, INC., Petitioner,
vs.
SPOUSES JESUS FERNANDO and ELIZABETH S. FERNANDO, Respondents.
DECISION
PERALTA, J.:
Before us are consolidated petitions for review on certiorari under Rule 45 of the Rules of
Court assailing the Decision1 dated August 30, 2013, and Resolution2 dated March 31, 2014
of the Court of Appeals (CA) in CA-G.R. CV No. 93496 which affirmed the Decision3 dated
September 9, 2008 of the Regional Trial Court (RTC), Branch 97, Quezon City in Civil Case
No. Q-N-02-46727 finding Northwest Airlines, Inc. (Northwest) liable for breach of contract
of carriage.
The spouses Jesus and Elizabeth S. Fernando (Fernandos) are frequent flyers of Northwest
Airlines, Inc. and are holders of Elite Platinum World Perks Card, the highest category given
to frequent flyers of the carrier.4 They are known in the musical instruments and sports
equipments industry in the Philippines being the owners of JB Music and JB Sports with
outlets all over the country. They likewise own the five (5) star Hotel Elizabeth in Baguio City
and Cebu City, and the chain of Fersal Hotels and Apartelles in the country.5
The Fernandos initiated the filing of the instant case which arose from two (2) separate
incidents: first, when Jesus Fernando arrived at Los Angeles (LA) Airport on December 20,
2001; second, when the Fernandos were to depart from the LA Airport on January 29, 2002.
The factual antecedents are as follows:
Version of Spouses Jesus and Elizabeth S. Fernando:
a.) The arrival at Los Angeles Airport on December 20, 2001
Sometime on December 20, 2001, Jesus Fernando arrived at the LA Airport via Northwest
Airlines Flight No. NW02 to join his family who flew earlier to the said place for a reunion for
the Christmas holidays.6
When Jesus Fernando presented his documents at the immigration counter, he was asked
by the Immigration Officer to have his return ticket verified and validated since the date
reflected thereon is August 2001. So he approached a Northwest personnel who was later
identified as Linda Puntawongdaycha, but the latter merely glanced at his ticket without
checking its status with the computer and peremptorily said that the ticket has been used
and could not be considered as valid. He then explained to the personnel that he was
about to use the said ticket on August 20 or 21, 2001 on his way back to Manila from LA but
he could not book any seat because of some ticket restrictions so he, instead, purchased
new business class ticket on the said date.7 Hence, the ticket remains unused and
perfectly valid.
To avoid further arguments, Jesus Fernando gave the personnel the number of his Elite
Platinum World Perks Card for the latter to access the ticket control record with the airline's
computer and for her to see that the ticket is still valid. But Linda Puntawongdaycha
refused to check the validity of the ticket in the computer but, instead, looked at Jesus
Fernando with contempt, then informed the Immigration Officer that the ticket is not valid
because it had been used.8
The Immigration Officer brought Jesus Fernando to the interrogation room of the
Immigration and Naturalization Services (INS) where he was asked humiliating questions for
more than two (2) hours. When he was finally cleared by the Immigration Officer, he was
granted only a twelve (12)-day stay in the United States (US), instead of the usual six (6)
months.9
When Jesus Fernando was finally able to get out of the airport, to the relief of his family,
Elizabeth Fernando proceeded to a Northwest Ticket counter to verify the status of the
ticket. The personnel manning the counter courteously assisted her and confirmed that the
ticket remained unused and perfectly valid. To avoid any future problems that may be
encountered on the validity of the ticket, a new ticket was issued to Jesus Fernando.10
Since Jesus Fernando was granted only a twelve (12)-day stay in the US, his scheduled
plans with his family as well as his business commitments were disrupted. He was supposed
to stay with his family for the entire duration of the Christmas season because his son and
daughter were then studying at Pepperton University in California. But he was forced to fly
back to Manila before the twelve (12)-day stay expired and flew back to the US on
January 15, 2002. The Fernandos were, likewise, scheduled to attend the Musical
Instrument Trade Show in LA on January 1 7, 2002 and the Sports Equipment Trade Show in
Las Vegas on January 21 to 23, 2002 which were both previously scheduled. Hence, Jesus
Fernando had to spend additional expenses for plane fares and other related expenses,
and missed the chance to be with his family for the whole duration of the Christmas
holidays.11
b.) The departure from the Los Angeles Airport on January 29, 2002.
On January 29, 2002, the Fernandos were on their way back to the Philippines. They have
confirmed bookings on Northwest Airlines NW Flight No. 001 for Narita, Japan and NW 029
for Manila. They checked in with their luggage at the LA Airport and were given their
respective boarding passes for business class seats and claim stubs for six (6) pieces of
luggage. With boarding passes, tickets and other proper travel documents, they were
allowed entry to the departure area and joined their business associates from Japan and
the Philippines who attended the Musical Instrument Trade Show in LA on January 17, 2002
and the Sports Equipment Trade Show in Las Vegas on January 21 to 23, 2002. When it was
announced that the plane was ready for boarding, the Fernandos joined the long queue
of business class passengers along with their business associates.12
When the Fernandos reached the gate area where boarding passes need to be
presented, Northwest supervisor Linda Tang stopped them and demanded for the
presentation of their paper tickets (coupon type). They failed to present the same since,
according to them, Northwest issued electronic tickets (attached to the boarding passes)
which they showed to the supervisor.13 In the presence of the other passengers, Linda Tang
rudely pulled them out of the queue. Elizabeth Fernando explained to Linda Tang that the
matter could be sorted out by simply verifying their electronic tickets in her computer and
all she had to do was click and punch in their Elite Platinum World Perks Card number. But
Linda Tang arrogantly told them that if they wanted to board the plane, they should
produce their credit cards and pay for their new tickets, otherwise Northwest would order
their luggage off-loaded from the plane. Exasperated and pressed for time, the Fernandos
rushed to the Northwest Airline Ticket counter to clarify the matter. They were assisted by
Northwest personnel Jeanne Meyer who retrieved their control number from her computer
and was able to ascertain that the Fernandos' electronic tickets were valid and they were
confirmed passengers on both NW Flight No. 001 for Narita Japan and NW 029 for Manila
on that day. To ensure that the Fernandos would no longer encounter any problem with
Linda Tang, Jeanne Meyer printed coupon tickets for them who were then advised to rush
back to the boarding gates since the plane was about to depart. But when the Fernandos
reached the boarding gate, the plane had already departed. They were able to depart,
instead, the day after, or on January 30, 2002, and arrived in the Philippines on January
31,2002.14
Version of Northwest Airlines, Inc.:
a.) The arrival at the Los Angeles Airport on December 20, 2001.
Northwest claimed that Jesus Fernando travelled from Manila to LA on Northwest Airlines
on December 20, 2001. At the LA Airport, it was revealed that Jesus Fernando's return ticket
was dated August 20 or 21, 2001 so he encountered a problem in the Immigration Service.
About an hour after the aircraft had arrived, Linda Puntawongdaycha, Northwest
Customer Service Agent, was called by a US Immigration Officer named "Nicholas" to help
verify the ticket of Jesus Fernando. Linda Puntawongdaycha then asked Jesus Fernando to
"show" her "all the papers." Jesus Fernando only showed her the passenger receipt of his
ticket without any ticket coupon attached to it. The passenger receipt which was labelled
"Passenger Receipt" or "Customer Receipt" was dated August 2001. Linda
Puntawongdaycha asked Jesus Fernando several times whether he had any other ticket,
but Jesus Fernando insisted that the "receipt" was "all he has", and the passenger receipt
was his ticket. He failed to show her any other document, and was not able to give any
other relevant information about his return ticket. Linda Puntawongdaycha then
proceeded to the Interline Department and checked Jesus Fernando's Passenger Name
Record (PNR) and his itinerary. The itinerary only showed his coming from Manila to Tokyo
and Los Angeles; nothing would indicate about his flight back to Manila. She then looked
into his record and checked whether he might have had an electronic ticket but she
could not find any. For failure to find any other relevant information regarding Fernando's
return ticket, she then printed out Jesus Fernando's PNR and gave the document to the US
Immigration Officer. Linda Puntawongdaycha insisted that she did her best to help Jesus
Fernando get through the US Immigration.15
b.) The departure from the Los Angeles Airport on January 29, 2002.
On January 29, 2002, the Fernandos took Northwest for their flight back to Manila. In the
trip, the Fernandos used electronic tickets but the tickets were dated January 26, 2002 and
August 21, 2001. They reached the boarding gate few minutes before departure.
Northwest personnel Linda Tang was then the one assigned at the departure area. As a
standard procedure, Linda Tang scanned the boarding passes and collected tickets while
the passengers went through the gate. When the Fernandos presented their boarding
passes, Linda Tang asked for their tickets because there were no tickets stapled on their
boarding passes. She explained that even though the Fernandos had electronic tickets,
they had made "several changes on their ticket over and over". And when they made the
booking/reservation at Northwest, they never had any ticket number or information on the
reservation.16
When the Fernandos failed to show their tickets, Linda Tang called Yong who was a
supervisor at the ticket counter to verify whether the Fernandos had checked in, and
whether there were any tickets found at the ticket counter. Upon verification, no ticket
was found at the ticket counter, so apparently when the Fernandos checked in, there
were no tickets presented. Linda Tang also checked with the computer the reservation of
the Fernandos, but again, she failed to see any electronic ticket number of any kind,
and/or any ticket record. So as the Fernandos would be able to get on with the flight
considering the amount of time left, she told them that they could purchase tickets with
their credit cards and deal with the refund later when they are able to locate the tickets
and when they reach Manila. Linda Tang believed that she did the best she could under
the circumstances.17
However, the Fernandos did not agree with the solution offered by Linda Tang. Instead,
they went back to the Northwest ticket counter and were attended to by Jeanne Meyer
who was "courteous" and "was very kind enough" to assist them. Jeanne Meyer verified
their bookings and "printed paper tickets" for them. Unfortunately, when they went back to
the boarding gate, the plane had departed. Northwest offered alternative arrangements
for them to be transported to Manila on the same day on another airline, either through
Philippine Airlines or Cathay Pacific Airways, but they refused. Northwest also offered them
free hotel accommodations but they, again, rejected the offer 18 Northwest then made
arrangements for the transportation of the Fernandos from the airport to their house in LA,
and booked the Fernandos on a Northwest flight that would leave the next day, January
30, 2002. On January 30, 2002, the Fernandos flew to Manila on business class seats.19
On April 30, 2002, a complaint for damages20 was instituted by the Fernandos against
Northwest before the RTC, Branch 97, Quezon City. During the trial of the case, the
Fernandos testified to prove their claim. On the part of Northwest, Linda Tang-Mochizuki
and Linda Puntawongdaycha testified through oral depositions taken at the Office of the
Consulate General, Los Angeles City. The Northwest Manager for HR-Legal Atty. Cesar
Veneracion was also presented and testified on the investigation conducted by Northwest
as a result of the letters sent by Elizabeth Fernando and her counsel prior to the filing of the
complaint before the RTC.21
On September 9, 2008, the RTC issued a Decision, the dispositive portion of which states,
thus:
WHEREFORE, in view of the foregoing, this Court rendered judgment in favor of the plaintiffs
and against defendant ordering defendant to pay the plaintiffs, the following:
1. Moral damages in the amount of Two Hundred Thousand Pesos (₱200,000.00);
2. Actual or compensatory damages in the amount of Two Thousand US Dollars ($2,000.00)
or its corresponding Peso equivalent at the time the airline ticket was purchased;
3. Attorney's fees in the amount of Fifty Thousand pesos (₱50,000.00); and,
4. Cost of suit.
SO ORDERED.22
Both parties filed their respective appeals which were dismissed by the CA in a Decision
dated August 30, 2013, and affirmed the RTC Decision.
The Fernandos and Northwest separately filed motions for a reconsideration of the
Decision, both of which were denied by the CA on March 31, 2014.
The Fernandos filed a petition for review on certiorari23before this court docketed as G.R.
No. 212038. Northwest followed suit and its petition24 was docketed as G.R. No. 212043.
Considering that both petitions involved similar parties, emanated from the same Civil
Case No. Q-N-02-46727 and assailed the same CA judgment, they were ordered
consolidated in a Resolution25 dated June 18, 2014.
In G.R. No. 212038, the Fernandos raised the following issues:
WHETHER OR NOT THE ACTS OF THE PERSONNEL AND THAT OF DEFENDANT NORTHWEST ARE
WANTON, MALICIOUS, RECKLESS, DELIBERATE AND OPPRESSIVE IN CHARACTER,
AMOUNTING TO FRAUD AND BAD FAITH;
WHETHER OR NOT PETITIONER SPOUSES ARE ENTITLED TO MORAL DAMAGES IN AN AMOUNT
MORE THAN THAT AWARDED BY THE TRIAL COURT;
WHETHER OR NOT DEFENDANT NORTHWEST IS LIABLE TO PETITIONER SPOUSES FOR
EXEMPLARY DAMAGES; [AND]
WHETHER OR NOT THE PETITIONER SPOUSES ARE ENTITLED TO ATTORNEY'S FEES IN AN
AMOUNT MORE THAN THAT AWARDED BY THE TRIAL COURT.26
In G.R. No. 212043, Northwest anchored its petition on the following assigned errors:
I
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN RULING THAT NORTHWEST
COMMITTED A BREACH OF CONTRACT OF CARRIAGE;
II
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN RULING THAT NORTHWEST IS
LIABLE FOR DAMAGES AND THE AWARDS FOR MORAL DAMAGES AND ATTORNEY'S FEES ARE
APPROPRIATE;
III
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN RULING THAT NORTHWEST IS NOT
ENTITLED TO RECOVER ON ITS COUNTERCLAIMS.27
The Issues
The arguments proffered by the parties can be summed up into the following issues: (1)
whether or not there was breach of contract of carriage and whether it was done in a
wanton, malevolent or reckless manner amounting to bad faith; (2) whether or not
Northwest is liable for the payment of moral damages and attorney's fees and whether it is
liable to pay more than that awarded by the RTC; (3) whether or not Northwest is liable for
the payment of exemplary damages; and (4) whether or not Northwest Airlines is entitled
to recover on its counterclaim.
In their petition, the Fernandos contended that it was the personal misconduct, gross
negligence and the rude and abusive attitude of Northwest employees Linda
Puntawongdaycha and Linda Tang which subjected them to indignities, humiliation and
embarrassment. The attitude of the aforesaid employees was wanton and malevolent
allegedly amounting to fraud and bad faith. According to the Fernandos, if only Linda
Puntawongdaycha had taken the time to verify the validity of the ticket in the computer,
she would have not given the wrong information to the Immigration Officer because the
August 2001 return ticket remained unused and valid for a period of one (1) year, or until
August 2002. The wrong information given by Linda Puntawongdaycha aroused doubts
and suspicions on Jesus Fernando's travel plans. The latter was then subjected to two (2)
hours of questioning which allegedly humiliated him. He was even suspected of being an
"illegal alien". The negligence of Linda Puntawongdaycha was allegedly so gross and
reckless amounting to malice or bad faith.
As to the second incident, the Fernandos belied the accusation of Northwest that they did
not present any tickets. They presented their electronic tickets which were attached to
their boarding passes. If they had no tickets, the personnel at the check-in counter would
have not issued them their boarding passes and baggage claim stubs. That's why they
could not understand why the coupon-type ticket was still demanded by Northwest.
On the award of moral damages, the Fernandos referred to the testimony of Elizabeth
Fernando that she could not sleep and had a fever the night after the second incident.
Thus, the Fernandos demanded that they should be given more than the "token amount"
granted by the RTC which was affirmed by the CA. They stated that their status in the
society and in the business circle should also be considered as a factor in awarding moral
damages. They averred that they are well-known in the musical instruments and sports
equipment industry in the country being the owners of JB Music and JB Sports with outlets
all over the country. They own hotels, a chain of apartelles and a parking garage building
in Indiana, USA. And since the breach of contract allegedly amounted to fraud and bad
faith, they likewise demanded for the payment of exemplary damages and attorney's fees
more than the amount awarded by the RTC.
On the other hand, Northwest stated in its petition that Linda Puntawongdaycha tried her
best to help Jesus Fernando get through the US Immigration. Notwithstanding that Linda
Puntawongdaycha was not able to find any relevant information on Jesus Fernando's
return ticket, she still went an extra mile by printing the PNR of Jesus Fernando and
handling the same personally to the Immigration Officer. It pointed out that the
Immigration Officer "noticed in the ticket that it was dated sometime August 20 or 21, 2001,
although it was already December 2001."
As to the incident with Linda Tang, Northwest explained that she was only following
Northwest standard boarding procedures when she asked the Fernandos for their tickets
even if they had boarding passes. Thus, the conduct cannot be construed as bad faith.
The dates indicated on the tickets did not match the booking. Elizabeth Fernando was
using an electronic ticket dated August 21, 2001, while the electronic ticket of Jesus
Fernando was dated January 26, 2002. According to Northwest, even if the Fernandos had
electronic tickets, the same did not discount the fact that, on the face of the tickets, they
were for travel on past dates. Also, the electronic tickets did not contain the ticket number
or any information regarding the reservation. Hence, the alleged negligence of the
Fernandos resulted in the confusion in the procedure in boarding the plane and the
eventual failure to take their flight.
Northwest averred that the award of moral damages and attorney's fees were exorbitant
because such must be proportionate to the suffering inflicted. It argued that it is not
obliged to give any "special treatment" to the Fernandos just because they are good
clients of Northwest, because the supposed obligation does not appear in the contract of
carriage. It further averred that it is entitled to its counterclaim in the amount of
₱500,000.00 because the Fernandos allegedly acted in bad faith in prosecuting the case
which it believed are baseless and unfounded.
In the Comment28 of Northwest, it insisted that assuming a mistake was committed by
Linda Tang and Linda Puntawongdaycha, such mistake alone, without malice or ill will, is
not equivalent to fraud or bad faith that would entitle the Fernandos to the payment of
moral damages.
In the Reply29 of the Fernandos, they asserted that it was a lie on the part of Linda
Puntawongdaycha to claim that she checked the passenger name or PNR of Jesus
Fernando from the computer and, as a result, she was not allegedly able to find any return
ticket for him. According to Jesus Fernando, Linda Puntawongdaycha merely looked at his
ticket and declared the same to be invalid. The Fernandos reiterated that after Jesus
Fernando was released by the US Immigration Service, Elizabeth Fernando proceeded to a
Northwest Ticket counter to verify the status of the ticket. The personnel manning the
counter courteously assisted her and confirmed that the ticket remained unused and
perfectly valid. The personnel merely punched the Elite Platinum World Perks Card number
of Jesus Fernando and was able to verify the status of the ticket. The Fernandos further
argued that if there was a discrepancy with the tickets or reservations, they would not
have been allowed to check in, and since they were allowed to check in then they were
properly booked and were confirmed passengers of Northwest.
Our Ruling
We find merit in the petition of the Spouses Jesus and Elizabeth Fernando. The Fernandos'
cause of action against Northwest stemmed from a breach of contract of carriage. A
contract is a meeting of minds between two persons whereby one agrees to give
something or render some service to another for a consideration. There is no contract
unless the following requisites concur: (1) consent of the contracting parties; (2) an object
certain which is the subject of the contract; and (3) the cause of the obligation which is
established. 30
A contract of carriage is defined as one whereby a certain person or association of
persons obligate themselves to transport persons, things, or goods from one place to
another for a fixed price. Under Article 1732 of the Civil Code, this "persons, corporations,
firms, or associations engaged in the business of carrying or transporting passengers or
goods or both, by land, water, or air, for compensation, offering their services to the public"
is called a common carrier.31 Undoubtedly, a contract of carriage existed between
Northwest and the Fernandos. They voluntarily and freely gave their consent to an
agreement whose object was the transportation of the Fernandos from LA to Manila, and
whose cause or consideration was the fare paid by the Fernandos to Northwest.32
In Alitalia Airways v. CA, et al.,33 We held that when an airline issues a ticket to a passenger
confirmed for a particular flight on a certain date, a contract of carriage arises. The
passenger then has every right to expect that he would fly on that flight and on that date.
If he does not, then the carrier. opens itself to a suit for breach of contract of carriage. 34
When Northwest confirmed the reservations of the Fernandos, it bound itself to transport
the Fernandos on their flight on 29 January 2002.
We note that the witness35 of Northwest admitted on cross-examination that based on the
documents submitted by the Fernandos, they were confirmed
passengers on the January 29, 2002 flight.36
In an action based on a breach of contract of carriage, the aggrieved party does not
have to prove that the common carrier was at fault or was negligent. All that he has to
prove is the existence of the contract and the fact of its non-performance by the
carrier.37 As the aggrieved party, the Fernandos only had to prove the existence of the
contract and the fact of its non-performance by Northwest, as carrier, in order to be
awarded compensatory and actual damages.38
Therefore, having proven the existence of a contract of carriage between Northwest and
the Fernandos, and the fact of non-performance by Northwest of its obligation as a
common carrier, it is clear that Northwest breached its contract of carriage with the
Fernandos. Thus, Northwest opened itself to claims for compensatory, actual, moral and
exemplary damages, attorney's fees and costs of suit.39
Moreover, Article 1733 of the New Civil Code provides that common carriers, from the
nature of their business and for reasons of public policy, are bound to observe
extraordinary diligence in the vigilance over the goods and for the safety of the
passengers transported by them, according to all the circumstances of each case. Also,
Article 1755 of the same Code states that 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.
We, thus, sustain the findings of the CA and the RTC that Northwest committed a breach of
contract "in failing to provide the spouses with the proper assistance to avoid any
inconvenience" and that the actuations of Northwest in both subject incidents "fall short of
the utmost diligence of a very cautious person expected of it". Both ruled that considering
that the Fernandos are not just ordinary passengers but, in fact, frequent flyers of
Northwest, the latter should have been more courteous and accommodating to their
needs so that the delay and inconveniences they suffered could have been avoided.
Northwest was remiss in its duty to provide the proper and adequate assistance to them.
Nonetheless, We are not in accord with the common finding of the CA and the RTC when
both ruled out bad faith on the part of Northwest. While We agree that the discrepancy
between the date of actual travel and the date appearing on the tickets of the
Fernandos called for some verification, however, the Northwest personnel failed to
exercise the utmost diligence in assisting the Fernandos. The actuations of Northwest
personnel in both subject incidents are constitutive of bad faith.
On the first incident, Jesus Fernando even gave the Northwest personnel the number of his
Elite Platinum World Perks Card for the latter to access the ticket control record with the
airline's computer for her to see that the ticket is still valid. But Linda Puntawongdaycha
refused to check the validity of the ticket in the computer. As a result, the Immigration
Officer brought Jesus Fernando to the interrogation room of the INS where he was
interrogated for more than two (2) hours. When he was finally cleared by the Immigration
Officer, he was granted only a twelve (12)-day stay in the United States (US), instead of the
usual six (6) months.40
As in fact, the RTC awarded actual or compensatory damages because of the testimony
of Jesus Fernando that he had to go back to Manila and then return again to LA, USA, two
(2) days after requiring him to purchase another round trip ticket from Northwest in the
amount of $2,000.00 which was not disputed by Northwest.41 In ignoring Jesus Fernando's
pleas to check the validity of the tickets in the computer, the Northwest personnel
exhibited an indifferent attitude without due regard for the inconvenience and anxiety
Jesus Fernando might have experienced.
Passengers do not contract merely for transportation. They have a right to be treated by
the carrier's employees with kindness, respect, courtesy and due consideration. They are
entitled to be protected against personal misconduct, injurious language, indignities and
abuses from such employees. So it is, that any rule or discourteous conduct on the part of
employees towards a passenger gives the latter an action for damages against the
carrier.42
In requiring compliance with the standard of extraordinary diligence, a 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.43
Notably, after the incident, the Fernandos proceeded to a Northwest Ticket counter to
verify the status of the ticket and they were assured that the ticked remained unused and
perfectly valid. And, to avoid any future problems that may be encountered on the
validity of the ticket, a new ticket was issued to Jesus Fernando. The failure to promptly
verify the validity of the ticket connotes bad faith on the part of Northwest.
Bad faith does not simply connote bad judgment or negligence. It imports a dishonest
purpose or some moral obliquity and conscious doing of a wrong. It means breach of a
known duty through some motive, interest or ill will that partakes of the nature of fraud. A
finding of bad faith entitles the offended party to moral damages.44
As to the second incident, there was likewise fraud or bad faith on the part of Northwest
when it did not allow the Fernandos to board their flight for Manila on January 29, 2002, in
spite of confirmed tickets. We need to stress that they have confirmed bookings on
Northwest Airlines NW Flight No. 001 for Narita, Japan and NW 029 for Manila. They
checked in with their luggage at LA Airport and were given their respective boarding
passes for business class seats and claim stubs for six (6) pieces of luggage. With boarding
passes and electronic tickets, apparently, they were allowed entry to the departure area;
and, they eventually joined the long queue of business class passengers along with their
business associates.
However, in the presence of the other passengers, Northwest personnel Linda Tang pulled
the Fernandos out of the queue and asked for paper tickets (coupon type). Elizabeth
Fernando explained to Linda Tang that the matter could be sorted out by simply verifying
their electronic tickets in her computer and all she had to do was click and punch in their
Elite Platinum World Perks Card number. Again, the Northwest personnel refused to do so;
she, instead, told them to pay for new tickets so they could board the plane. Hence, the
Fernandos rushed to the Northwest Airline Ticket counter to clarify the matter. They were
assisted by Northwest personnel Jeanne Meyer who retrieved their control number from
her computer and was able to ascertain that the Fernandos' electronic tickets were valid,
and they were confirmed passengers on both NW Flight No. 001 for Narita Japan and NW
029 for Manila on that day.
In Ortigas, Jr. v. Lufthansa German Airlines, 45 this Court declared that "(i)n contracts of
common carriage, in attention and lack of care on the part of the carrier resulting in the
failure of the passenger to be accommodated in the class contracted for amounts to bad
faith or fraud which entitles the passengers to the award of moral damages in
accordance with Article 2220 of the Civil Code."
In Pan American World Airways, Inc. v. Intermediate Appellate Court, 46 where a would-be
passenger had the necessary ticket, baggage claim and clearance from immigration, all
clearly and unmistakably showing that she was, in fact, included in the passenger manifest
of said flight, and yet was denied accommodation in said flight, this Court did not hesitate
to affirm the lower court's finding awarding her damages on the ground that the breach of
contract of carriage amounted to bad faith.47 For the indignity and inconvenience of
being refused a confirmed seat on the last minute, said passenger is entitled to an award
of moral damages.48
In this case, We need to stress that the personnel who assisted the Fernandos even printed
coupon tickets for them and advised them to rush back to the boarding gates since the
plane was about to depart. But when the Fernandos reached the boarding gate, the
plane had already departed. They were able to depart, instead, the day after, or on
January 30, 2002.
In Japan Airlines v. Jesus Simangan, 49 this Court held that the acts committed by Japan
Airlines against Jesus Simangan amounted to bad faith, thus:
x x x JAL did not allow respondent to fly. It informed respondent that there was a need to
first check the authenticity of his travel documents with the U.S. Embassy. As admitted by
JAL, "the flight could not wait for Mr. Simangan because it was ready to depart."
Since JAL definitely declared that the flight could not wait for respondent, it gave
respondent no choice but to be left behind. The latter was unceremoniously bumped off
despite his protestations and valid travel documents and notwithstanding his contract of
carriage with JAL. Damage had already been done when respondent was offered to fly
the next day on July 30, 1992. Said offer did not cure JAL's default.50
Similarly, in Korean Airlines Co., Ltd. v. Court of Appeals, 51 where private respondent was
not allowed to board the plane because her seat had already been given to another
passenger even before the allowable period for passengers to check in had
lapsed despite the fact that she had a confirmed ticket and she had arrived on time, this
Court held that petitioner airline acted in bad faith in violating private respondent's rights
under their contract of carriage and is, therefore, liable for the injuries she has sustained as
a result.52
Under Article 222053 of the Civil Code of the Philippines, an award of moral damages, in
breaches of contract, is in order upon a showing that the defendant acted fraudulently or
in bad faith.54 Clearly, in this case, the Fernandos are entitled to an award of moral
damages. The purpose of awarding moral damages is to enable the injured party to
obtain means, diversion or amusement that will serve to alleviate the moral suffering he
has undergone by reason of defendant's culpable action.55
We note that even if both the CA and the RTC ruled out bad faith on the part of
Northwest, the award of "some moral damages" was recognized. Both courts believed that
considering that the Fernandos are good clients of Northwest for almost ten (10) years
being Elite Platinum World Perks Card holders, and are known in their business circle, they
should have been given by Northwest the corresponding special treatment.56 They own
hotels and a chain of apartelles in the country, and a parking garage building in Indiana,
USA. From this perspective, We adopt the said view. We, thus, increase the award of moral
damages to the Fernandos in the amount of ₱3,000,000.00.
As held in Kierulf v. Court of Appeals,57 the social and financial standing of a claimant may
be considered if he or she was subjected to contemptuous conduct despite the offender's
knowledge of his or her social and financial standing.
In Trans World Airlines v. Court of Appeals, 58 this Court considered the social standing of the
aggrieved passenger:
At the time of this unfortunate incident, the private respondent was a practicing lawyer, a
senior partner of a big law firm in Manila. He was a director of several companies and was
active in civic and social organizations in the Philippines. Considering the circumstances of
this case and the social standing of private respondent in the community, he is entitled to
the award of moral and exemplary damages. x x x This award should be reasonably
sufficient to indemnify private respondent for the humiliation and embarrassment that he
suffered and to serve as an example to discourage the repetition of similar oppressive and
discriminatory acts.59
Exemplary damages, which are awarded by way of example or correction for the public
good, may be recovered in contractual obligations, if defendant acted in wanton,
fraudulent, reckless, oppressive, or malevolent manner.60 They are designed by our civil law
to permit the courts to reshape behavior that is socially deleterious in its consequence by
creating negative incentives or deterrents against such behavior.61 Hence, given the facts
and circumstances of this case, We hold Northwest liable for the payment of exemplary
damages in the amount of ₱2,000,000.00.
In the case of Northwest Airlines, Inc. v. Chiong, 62 Chiong was given the run-around at the
Northwest check-in counter, instructed to deal with a man in barong to obtain a boarding
pass, and eventually barred from boarding a Northwest flight to accommodate an
American passenger whose name was merely inserted in the Flight Manifest, and did not
even personally check-in at the counter. Under the foregoing circumstances, the award of
moral and exemplary damages was given by this Court.
Time and again, We have declared that a contract of carriage, in this case, air transport, is
primarily intended to serve the traveling public and thus, imbued with public interest. The
law governing common carriers consequently imposes an exacting standard of
conduct.63 A contract to transport passengers is quite different in kind and degree from
any other contractual relation because of the relation which an air-carrier sustains with the
public. Its business is mainly with the travelling public. It invites people to avail of the
comforts and advantages it offers. The contract of air carriage, therefore, generates a
relation attended with a public duty. Neglect or malfeasance of the carrier's employees,
naturally, could give ground for an action or damages.64
As to the payment of attorney's fees, We sustain the award thereof on the ground that the
Fernandos were ultimately compelled to litigate and incurred expenses to protect their
rights and interests, and because the Fernandos are entitled to an award for exemplary
damages. Pursuant to Article 2208 of the Civil Code, attorney's fees may be awarded
when exemplary damages are awarded, or a party is compelled to litigate or incur
expenses to protect his interest, or where the defendant acted in gross and evident bad
faith in refusing to satisfy the plaintiff's plainly valid, just and demandable claim.
Records show that the Fernandos demanded payment for damages from Northwest even
before the filing of this case in court.1âwphi1 Clearly, the Fernandos were forced to obtain
the services of counsel to enforce a just claim, for which they should be awarded
attorney's fees.65 We deem it just and equitable to grant an award of attorney's fees
equivalent to 10% of the damages awarded.

Lastly, the counterclaim of Northwest in its Answer 66 is a compulsory counterclaim for

damages and attorney's fees arising from the filing of the complaint. This compulsory
counterclaim of Northwest arising from the filing of the complaint may not be granted
inasmuch as the complaint against it is obviously not malicious or unfounded. It was filed
by the Fernandos precisely to claim their right to damages against Northwest. Well-settled
is the rule that the commencement of an action does not per se make the action wrongful
and subject the action to damages, for the law could not have meant to impose a
penalty on the right to litigate.67

WHEREFORE, the Decision dated August 30, 2013 and the Resolution dated March 31, 2014
of the Court of Appeals, in CA-G.R. CV No. 93496 are hereby AFFIRMED WITH
MODIFICATION. The award of moral damages and attorney's fees are hereby increased to
₱3,000,000.00 and ten percent (10%) of the damages awarded, respectively. Exemplary
damages in the amount of ₱2,000,000.00 is also awarded. Costs against Northwest Airlines.

The total amount adjudged shall earn legal interest at the rate of twelve percent (12%) per
annum computed from judicial demand or from April 30, 2002 to June 30 2013, and six
percent (6%) per annum from July 1, 2013 until their full satisfaction.

SO ORDERED.

THIRD DIVISION

G.R. No. 184513, March 09, 2016

DESIGNER BASKETS, INC., Petitioner, v. AIR SEA TRANSPORT, INC. AND ASIA CARGO
CONTAINER LINES, INC., Respondents.

DECISION

JARDELEZA, J.:

This is a Petition for Review on Certiorari1 of the August 16, 2007 Decision2 and September 2,
2008 Resolution3 of the Court of Appeals (CA) in CA-G.R. CV No. 79790, absolving
respondents Air Sea Transport, Inc. (ASTI) and Asia Cargo Container Lines, Inc. (ACCLI) from
liability in the complaint for sum of money and damages filed by petitioner Designer
Baskets, Inc. (DBI).
The Facts
DBI is a domestic corporation engaged in the production of housewares and handicraft
items for export.4Sometime in October 1995, Ambiente, a foreign-based company,
ordered from DBI 5 223 cartons of assorted wooden items (the shipment).6 The shipment was
worth Twelve Thousand Five Hundred Ninety and Eighty-Seven Dollars (US$12,590.87) and
payable through telegraphic transfer.7 Ambiente designated ACCLI as the forwarding
agent that will ship out its order from the Philippines to the United States (US). ACCLI is a
domestic corporation acting as agent of ASTI, a US based corporation engaged in carrier
transport business, in the Philippines.8
On January 7, 1996, DBI delivered the shipment to ACCLI for sea transport from Manila and
delivery to Ambiente at 8306 Wilshire Blvd., Suite 1239, Beverly Hills, California. To
acknowledge receipt and to serve as the contract of sea carriage, ACCLI issued to DBI
triplicate copies of ASTI Bill of Lading No. AC/MLLA601317.9 DBI retained possession of the
originals of the bills of lading pending the payment of the goods by Ambiente.10
On January 23, 1996, Ambiente and ASTI entered into an Indemnity Agreement
(Agreement).11 Under the Agreement, Ambiente obligated ASTI to deliver the shipment to
it or to its order "without the surrender of the relevant bill(s) of lading due to the non-arrival
or loss thereof."12 In exchange, Ambiente undertook to indemnify and hold ASTI and its
agent free from any liability as a result of the release of the shipment.13 Thereafter, ASTI
released the shipment to Ambiente without the knowledge of DBI, and without it receiving
payment for the total cost of the shipment.14
DBI then made several demands to Ambiente for the payment of the shipment, but to no
avail. Thus, on October 7, 1996, DBI filed the Original Complaint against ASTI, ACCLI and
ACCLFs incorporators-stockholders15 for the payment of the value of the shipment in the
amount of US$12,590.87 or Three Hundred Thirty-Three and Six Flundred Fifty-Eight Pesos
(P333,658.00), plus interest at the legal rate from January 22, 1996, exemplary damages,
attorney's fees and cost of suit.16
In its Original Complaint, DBI claimed that under Bill of Lading Number AC/MLLA601317,
ASTI and/or ACCLI is "to release and deliver the cargo/shipment to the consignee, x x x,
only after the original copy or copies of [the] Bill of Lading is or are surrendered to them;
otherwise, they become liable to the shipper for the value of the shipment." 17 DBI also
averred that ACCLI should be jointly and severally liable with its co-defendants because
ACCLI failed to register ASTI as a foreign corporation doing business in the Philippines. In
addition, ACCLI failed to secure a license to act as agent of ASTI.18
On February 20, 1997, ASTI, ACCLI, and ACCLI's incorporators-stockholders filed a Motion to
Dismiss.19They argued that: (a) they are not the real parties-in-interest in the action
because the cargo was delivered and accepted by Ambiente. The case, therefore, was a
simple case of nonpayment of the buyer; (b) relative to the incorporators-stockholders of
ACCLI, piercing the corporate veil is misplaced; (c) contrary to the allegation of DBI, the
bill of lading covering the shipment does not contain a proviso exposing ASTI to liability in
case the shipment is released without the surrender of the bill of lading; and (d) the
Original Complaint did not attach a certificate of non-forum shopping.20
DBI filed an Opposition to the Motion to Dismiss,21 asserting that ASTI and ACCLI failed to
exercise the required extraordinary diligence when they allowed the cargoes to be
withdrawn by the consignee without the surrender of the original bill of lading. ASTI, ACCLI,
and ACCLI's incorporators-stockholders countered that it is DBI who failed to exercise
extraordinary diligence in protecting its own interest. They averred that whether or not the
buyer-consignee pays the seller is already outside of their concern.22
Before the trial court could resolve the motion to dismiss, DBI filed an Amended
Complaint23 impleading Ambiente as a new defendant and praying that it be held
solidarity liable with ASTI, ACCLI, and ACCLFs incorporators-stockholders for the payment
of the value of the shipment. DBI alleged that it received reliable information that the
shipment was released merely on the basis of a company guaranty of Ambiente.24 Further,
DBI asserted that ACCLI's incorporators-stockholders have not yet fully paid their stock
subscriptions; thus, "under the circumstance of [the] case," they should be held liable to
the extent of the balance of their subscriptions.25cralawred
In their Answer,26 ASTI, ACCLI, and ACCLI's incorporators-stockholders countered that DBI
has no cause of action against ACCLI and its incorporators-stockholders because the
Amended Complaint, on its face, is for collection of sum of money by an unpaid seller
against a buyer. DBI did not allege any act of the incorporators-stockholders which would
constitute as a ground for piercing the veil of corporate fiction.27 ACCLI also reiterated that
there is no stipulation in the bill of lading restrictively subjecting the release of the cargo
only upon the presentation of the original bill of lading.28 It regarded the issue of ASTI's lack
of license to do business in the Philippines as "entirely foreign and irrelevant to the issue of
liability for breach of contract" between DBI and Ambiente. It stated that the purpose of
requiring a license (to do business in the Philippines) is to subject the foreign corporation to
the jurisdiction of Philippine courts.29
On July 22, 1997, the trial court directed the service of summons to Ambiente through the
Department of Trade and Industry.30 The summons was served on October 6, 199731 and
December 18, 1997.32 Ambiente failed to file an Answer. Hence, DBI moved to declare
Ambiente in default, which the trial court granted in its Order dated September 15, 1998. 33
The Ruling of the Trial Court
In a Decision34 dated July 25, 2003, the trial court found ASTI, ACCLI, and Ambiente
solidarity liable to DBI for the value of the shipment. It awarded DBI the following:
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1. US$12,590.87, or the equivalent of [P]333,658.00 at the time of the shipment, plus
12% interest per annum from 07 January 1996 until the same is fully paid;
2. [P]50,000.00 in exemplary damages;
3. [P]47,000.00 as and for attorney's fees; and,
4. [P]10,000.00 as cost of suit.35
The trial court declared that the liability of Ambiente is "very clear." As the buyer, it has an
obligation to pay for the value of the shipment. The trial court noted that "[the case] is a
simple sale transaction which had been perfected especially since delivery had already
been effected and with only the payment for the shipment remaining left to be done." 36
With respect to ASTI, the trial court held that as a common carrier, ASTI is bound to observe
extraordinary diligence in the vigilance over the goods. However, ASTI was remiss in its duty
when it allowed the unwarranted release of the shipment to Ambiente.37 The trial court
found that the damages suffered by DBI was due to ASTI's release of the merchandise
despite the non-presentation of the bill of lading. That ASTI entered into an Agreement with
Ambiente to release the shipment without the surrender of the bill of lading is of no
moment.38 The Agreement cannot save ASTI from liability because in entering into such, it
violated the law, the terms of the bill of lading and the right of DBI over the goods.39
The trial court also added that the Agreement only involved Ambiente and ASTI. Since DBI
is not privy to the Agreement, it is not bound by its terms.40cralawred
The trial court found that ACCLI "has not done enough to prevent the defendants
Ambiente and [ASTI] from agreeing among themselves the release of the goods in total
disregard of [DBFs] rights and in contravention of the country's civil and commercial
laws."41 As the forwarding agent, ACCLI was "well aware that the goods cannot be
delivered to the defendant Ambiente since [DBI] retained possession of the originals of the
bill of lading."42 Consequently, the trial court held ACCLI solidarily liable with ASTI.
As regards ACCLFs incorporators-stockholders, the trial court absolved them from liability.
The trial court ruled that the participation of ACCLFs incorporators-stockholders in the
release of the cargo is not as direct as that of ACCLI.43
DBI, ASTI and ACCLI appealed to the CA. On one hand, DBI took issue with the order of the
trial court awarding the value of the shipment in Philippine Pesos instead of US Dollars. It
also alleged that even assuming that the shipment may be paid in Philippine Pesos, the
trial court erred in pegging its value at the exchange rate prevailing at the time of the
shipment, rather than at the exchange rate prevailing at the time of payment.44
On the other hand, ASTI and ACCLI questioned the trial court's decision finding them
solidarily liable with DBI for the value of the shipment. They also assailed the trial court's
award of interest, exemplary damages, attorney's fees and cost of suit in DBFs favor. 45
The Ruling of the Court of Appeals
The CA affirmed the trial court's finding that Ambiente is liable to DBI, but absolved ASTI
and ACCLI from liability. The CA found that the pivotal issue is whether the law requires
that the bill of lading be surrendered by the buyer/consignee before the carrier can
release the goods to the former. It then answered the question in the negative, thus:
chanRoblesvirtualLawlibrary
There is nothing in the applicable laws that require the surrender of bills of lading before
the goods may be released to the buyer/consignee. In fact, Article 353 of the Code of
Commerce suggests a contrary conclusion, viz —
"Art. 353. After the contract has been complied with, the bill of lading which the carrier has
issued shall be returned to him, and by virtue of the exchange of this title with the thing
transported, the respective obligations shall be considered canceled xxx In case the
consignee, upon receiving the goods, cannot return the bill of lading subscribed by the
carrier because of its loss or of any other cause, he must give the latter a receipt for the
goods delivered, this receipt producing the same effects as the return of the bill of lading."
The clear import of the above article is that the surrender of the bill of lading is not an
absolute and mandatory requirement for the release of the goods to the consignee. The
fact that the carrier is given the alternative option to simply require a receipt for the goods
delivered suggests that the surrender of the bill of lading may be dispensed with when it
cannot be produced by the consignee for whatever cause.46 (Emphasis supplied.)
The CA stressed that DBI failed to present evidence to prove its assertion that the surrender
of the bill of lading upon delivery of the goods is a common mercantile practice.47 Further,
even assuming that such practice exists, it cannot prevail over law and jurisprudence.48
As for ASTI, the CA explained that its only obligation as a common carrier was to deliver
the shipment in good condition. It did not include looking beyond the details of the
transaction between the seller and the consignee, or more particularly, ascertaining the
payment of the goods by the buyer Ambiente.49
Since the agency between ASTI and ACCLI was established and not disputed by any of
the parties, neither can ACCLI, as a mere agent of ASTI, be held liable. This must be so in
the absence of evidence that the agent exceeded its authority.50
The CA, thus, ruled:
chanRoblesvirtualLawlibrary
WHEREFORE, in view of the foregoing, the Decision dated July 25, 2003 of Branch 255 of the
Regional Trial court of Las [Piñas] City in Civil Case No. LP-96-0235 is hereby AFFIRMED with
the following MODIFICATIONS:
1. Defendants-appellants Air Sea Transport, Inc. and Asia Cargo Container Lines, Inc.
are hereby ABSOLVED from all liabilities;
2. The actual damages to be paid by defendant Ambiente shall be in the amount of
US$12,590.87. Defendant Ambiente's liability may be paid in Philippine currency,
computed at the exchange rate prevailing at the time of payment;51 and
3. The rate of interest to be imposed on the total amount of US$12,590.87 shall be 6%
per annum computed from the filing of the complaint on October 7, 1996 until the
finality of this decision. After this decision becomes final and executory, the
applicable rate shall be 12% per annum until its full satisfaction.
SO ORDERED.52ChanRoblesVirtualawlibrary
Hence, this petition for review, which raises the sole issue of whether ASTI and ACCLI may
be held solidarily liable to DBI for the value of the shipment.
Our Ruling
We deny the petition.
A common carrier may release the goods to the consignee even without the surrender of
the hill of lading.
This case presents an instance where an unpaid seller sues not only the buyer, but the
carrier and the carrier's agent as well, for the payment of the value of the goods sold. The
basis for ASTI and ACCLI's liability, as pleaded by DBI, is the bill of lading covering the
shipment.
A bill of lading is defined as "a written acknowledgment of the receipt of goods and an
agreement to transport and to deliver them at a specified place to a person named or on
his order."53 It may also be defined as an instrument in writing, signed by a carrier or his
agent, describing the freight so as to identify it, stating the name of the consignor, the
terms of the contract of carriage, and agreeing or directing that the freight be delivered
to bearer, to order or to a specified person at a specified place.54
Under Article 350 of the Code of Commerce, "the shipper as well as the carrier of the
merchandise or goods may mutually demand that a bill of lading be made." A bill of
lading, when issued by the carrier to the shipper, is the legal evidence of the contract of
carriage between the former and the latter. It defines the rights and liabilities of the parties
in reference to the contract of carriage. The stipulations in the bill of lading are valid and
binding unless they are contrary to law, morals, customs, public order or public policy.55
Here, ACCLI, as agent of ASTI, issued Bill of Lading No. AC/MLLA601317 to DBI. This bill of
lading governs the rights, obligations and liabilities of DBI and ASTI. DBI claims that Bill of
Lading No. AC/MLLA601317 contains a provision stating that ASTI and ACCLI are "to
release and deliver the cargo/shipment to the consignee, x x x, only after the original copy
or copies of the said Bill of Lading is or are surrendered to them; otherwise they become
liable to [DBI] for the value of the shipment."56Quite tellingly, however, DBI does not point or
refer to any specific clause or provision on the bill of lading supporting this claim. The
language of the bill of lading shows no such requirement. What the bill of lading provides
on its face is:
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Received by the Carrier in apparent good order and condition unless otherwise indicated
hereon, the Container(s) and/or goods hereinafter mentioned to be transported and/or
otherwise forwarded from the Place of Receipt to the intended Place of Delivery upon
and [subject] to all the terms and conditions appearing on the face and back of this Bill of
Lading. If required by the Carrier this Bill of Lading duly endorsed must be surrendered in
exchange for the Goods of delivery order.57 (Emphasis supplied.)
There is no obligation, therefore, on the part of ASTI and ACCLI to release the goods only
upon the surrender of the original bill of lading.
Further, a carrier is allowed by law to release the goods to the consignee even without the
latter's surrender of the bill of lading. The third paragraph of Article 353 of the Code of
Commerce is enlightening:
chanRoblesvirtualLawlibrary
Article 353. The legal evidence of the contract between the shipper and the carrier shall
be the bills of lading, by the contents of which the disputes which may arise regarding their
execution and performance shall be decided, no exceptions being admissible other than
those of falsity and material error in the drafting.
After the contract has been complied with, the bill of lading which the carrier has issued
shall be returned to him, and by virtue of the exchange of this title with the thing
transported, the respective obligations and actions shall be considered cancelled, unless
in the same act the claim which the parties may wish to reserve be reduced to writing,
with the exception of that provided for in Article 366.
In case the consignee, upon receiving the goods, cannot return the bill of lading
subscribed by the carrier, because of its loss or any other cause, he must give the latter a
receipt for the goods delivered, this receipt producing the same effects as the return of the
bill of lading. (Emphasis supplied.)
The general rule is that upon receipt of the goods, the consignee surrenders the bill of
lading to the carrier and their respective obligations are considered canceled. The law,
however, provides two exceptions where the goods may be released without the
surrender of the bill of lading because the consignee can no longer return it. These
exceptions are when the bill of lading gets lost or for other cause. In either case, the
consignee must issue a receipt to the carrier upon the release of the goods. Such receipt
shall produce the same effect as the surrender of the bill of lading.
We have already ruled that the non-surrender of the original bill of lading does not violate
the carrier's duty of extraordinary diligence over the goods.58 In Republic v. Lorenzo
Shipping Corporation,59 we found that the carrier exercised extraordinary diligence when it
released the shipment to the consignee, not upon the surrender of the original bill of
lading, but upon signing the delivery receipts and surrender of the certified true copies of
the bills of lading. Thus, we held that the surrender of the original bill of lading is not a
condition precedent for a common carrier to be discharged of its contractual obligation.
Under special circumstances, we did not even require presentation of any form of receipt
by the consignee, in lieu of the original bill of lading, for the release of the goods.
In Macam v. Court of Appeals,60 we absolved the carrier from liability for releasing the
goods to the consignee without the bills of lading despite this provision on the bills of
lading:
chanRoblesvirtualLawlibrary
"One of the Bills of Lading must be surrendered duly endorsed in exchange for the goods
or delivery order."61 (Citations omitted.)
In clearing the carrier from liability, we took into consideration that the shipper sent a telex
to the carrier after the goods were shipped. The telex instructed the carrier to deliver the
goods without need of presenting the bill of lading and bank guarantee per the shipper's
request since "for prepaid shipt ofrt charges already fully paid our end x x x." 62 We also
noted the usual practice of the shipper to request the shipping lines to immediately release
perishable cargoes through telephone calls.
Also, in Eastern Shipping Lines v. Court of Appeals,63 we absolved the carrier from liability
for releasing the goods to the supposed consignee, Consolidated Mines, Inc. (CMI), on the
basis of an Undertaking for Delivery of Cargo but without the surrender of the original bill of
lading presented by CMI. Similar to the factual circumstance in this case, the Undertaking
in Eastern Shipping Lines guaranteed to hold the carrier "harmless from all demands,
claiming liabilities, actions and expenses."64 Though the central issue in that case was who
the consignee was in the bill of lading, it is noteworthy how we gave weight to the
Undertaking in ruling in favor of the carrier:
chanRoblesvirtualLawlibrary
But assuming that CMI may not be considered consignee, the petitioner cannot be
faulted for releasing the goods to CMI under the circumstances, due to its lack of
knowledge as to who was the real consignee in view of CMI's strong representations and
letter of undertaking wherein it stated that the bill of lading would be presented later. This is
precisely the situation covered by the last paragraph of Art. 353 of the [Code of
Commerce] to wit:
chanRoblesvirtualLawlibrary
"If in case of loss or for any other reason whatsoever, the consignee cannot return upon
receiving the merchandise the bill of lading subscribed by the carrier, he shall give said
carrier a receipt of the goods delivered this receipt producing the same effects as the
return of the bill of lading."65ChanRoblesVirtualawlibrary
Clearly, law and jurisprudence is settled that the surrender of the original bill of lading is not
absolute; that in case of loss or any other cause, a common carrier may release the goods
to the consignee even without it.
Here, Ambiente could not produce the bill of lading covering the shipment not because it
was lost, but for another cause: the bill of lading was retained by DBI pending Ambiente's
full payment of the shipment. Ambiente and ASTI then entered into an Indemnity
Agreement, wherein the former asked the latter to release the shipment even without the
surrender of the bill of lading. The execution of this Agreement, and the undisputed fact
that the shipment was released to Ambiente pursuant to it, to our mind, operates as a
receipt in substantial compliance with the last paragraph of Article 353 of the Code of
Commerce.
Articles 1733, 1734, and 1735 of the Civil Code are not applicable.
DBI, however, challenges the Agreement, arguing that the carrier released the goods
pursuant to it, notwithstanding the carrier's knowledge that the bill of lading should first be
surrendered. As such, DBI claims that ASTI and ACCLI are liable for damages because they
failed to exercise extraordinary diligence in the vigilance over the goods pursuant to
Articles 1733, 1734, and 1735 of the Civil Code.66
DBI is mistaken.
Articles 1733, 1734, and 1735 of the Civil Code are not applicable in this case. The Articles
state:
chanRoblesvirtualLawlibrary
Article 1733. Common carriers, from the nature of their business and for reasons of public
policy, are bound to observe extraordinary diligence in the vigilance over the goods and
for the safety of the passengers transported by them, according to all the circumstances
of each case.
Such extraordinary diligence in vigilance over the goods is further expressed in Articles
1734, 1735, and 1745, Nos. 5, 6, and 7, while the extraordinary diligence for the safety of
the passengers is further set forth in Articles 1755 and 1756.
Article 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:
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(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the containers;
(5) Order or act of competent public authority.
Article 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.
Articles 1733, 1734, and 1735 speak of the common carrier's responsibility over the goods.
They refer to the general liability of common carriers in case of loss,
destruction or deterioration of goods and the presumption of negligence against them.
This responsibility or duty 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.67 It is, in fact, undisputed that the goods
were timely delivered to the proper consignee or to the one who was authorized to
receive them. DBFs only cause of action against ASTI and ACCLI is the release of the goods
to Ambiente without the surrender of the bill of lading, purportedly in violation of the terms
of the bill of lading. We have already found that Bill of Lading No. AC/MLLA601317 does
not contain such express prohibition. Without any prohibition, therefore, the carrier had no
obligation to withhold release of the goods. Articles 1733, 1734, and 1735 do not give ASTI
any such obligation.
The applicable provision instead is Article 353 of the Code of Commerce, which we have
previously discussed. To reiterate, the Article allows the release of the goods to the
consignee even without his surrender of the original bill of lading. In such case, the duty of
the carrier to exercise extraordinary diligence is not violated. Nothing, therefore,
prevented the consignee and the carrier to enter into an indemnity agreement of the
same nature as the one they entered here. No law or public policy is contravened upon its
execution.
Article 1503 of the Civil Code does not apply to contracts for carriage of goods.
In its petition, DBI continues to assert the wrong application of Article 353 of the Code of
Commerce to its Amended Complaint. It alleges that the third paragraph of Article 1503 of
the Civil Code is the applicable provision because: (a) Article 1503 is a special provision
that deals particularly with the situation of the seller retaining the bill of lading; and (b)
Article 1503 is a law which is later in point of time to Article 353 of the Code of
Commerce.68 DBI posits that being a special provision, Article 1503 of the Civil Code should
prevail over Article 353 of the Code of Commerce, a general provision that makes no
reference to the seller retaining the bill of lading.69
DBFs assertion is untenable. Article 1503 is an exception to the general presumption
provided in the first paragraph of Article 1523, which reads:
chanRoblesvirtualLawlibrary
Article 1523. Where, in pursuance of a contract of sale, the seller is authorized or required
to send the goods to the buyer, delivery of the goods to a carrier, whether named by the
buyer or not, for the purpose of transmission to the buyer is deemed to be a delivery of the
goods to the buyer, except in the cases provided for in Articles 1503, first, second and third
paragraphs, or unless a contrary intent appears.
Unless otherwise authorized by the buyer, the seller must make such contract with the
carrier on behalf of the buyer as may be reasonable, having regard to the nature of the
goods and the other circumstances of the case. If the seller omit so to do, and the goods
are lost or damaged in the course of transit, the buyer may decline to treat the delivery to
the carrier as a delivery to himself, or may hold the seller responsible in damages.
Unless otherwise agreed, where goods are sent by the seller to the buyer under
circumstances in which the seller knows or ought to know that it is usual to insure, the seller
must give such notice to the buyer as may enable him to insure them during their transit,
and, if the seller fails to do so, the goods shall be deemed to be at his risk during such
transit. (Emphasis supplied.)
Article 1503, on the other hand, provides:
chanRoblesvirtualLawlibrary
Article 1503. When there is a contract of sale of specific goods, the seller may, by the terms
of the contract, reserve the right of possession or ownership in the goods until certain
conditions have been fulfilled. The right of possession or ownership may be thus reserved
notwithstanding the delivery of the goods to the buyer or to a carrier or other bailee for the
purpose of transmission to the buyer.
Where goods are shipped, and by the bill of lading the goods are deliverable to the seller
or his agent, or to the order of the seller or of his agent, the seller thereby reserves the
ownership in the goods. But, if except for the form of the bill of lading, the ownership would
have passed to the buyer on shipment of the goods, the seller's property in the goods shall
be deemed to be only for the purpose of securing performance by the buyer of his
obligations under the contract.
Where goods are shipped, and by the bill of lading the goods are deliverable to order of
the buyer or of his agent, but possession of the bill of lading is retained by the seller or his
agent, the seller thereby reserves a right to the possession of the goods as against the
buyer.
Where the seller of goods draws on the buyer for the price and transmits the bill of
exchange and bill of lading together to the buyer to secure acceptance or payment of
the bill of exchange, the buyer is bound to return the bill of lading if he does not honor the
bill of exchange, and if he wrongfully retains the bill of lading he acquires no added right
thereby. If, however, the bill of lading provides that the goods are deliverable to the buyer
or to the order of the buyer, or is indorsed in blank, or to the buyer by the consignee
named therein, one who purchases in good faith, for value, the bill of lading, or goods
from the buyer will obtain the ownership in the goods, although the bill of exchange has
not been honored, provided that such purchaser has received delivery of the bill of lading
indorsed by the consignee named therein, or of the goods, without notice of the facts
making the transfer wrongful. (Emphasis supplied.)
Articles 1523 and 1503, therefore, refer to a contract of sale between a seller and a buyer.
In particular, they refer to who between the seller and the buyer has the right of possession
or ownership over the goods subject of the sale. Articles 1523 and 1503 do not apply to a
contract of carriage between the shipper and the common carrier. The third paragraph of
Article 1503, upon which DBI relies, does not oblige the common carrier to withhold
delivery of the goods in the event that the bill of lading is retained by the seller. Rather, it
only gives the seller a better right to the possession of the goods as against the mere
inchoate right of the buyer. Thus, Articles 1523 and 1503 find no application here. The case
before us does not involve an action where the seller asserts ownership over the goods as
against the buyer. Instead, we are confronted with a complaint for sum of money and
damages filed by the seller against the buyer and the common carrier due to the non-
payment of the goods by the buyer, and the release of the goods by the carrier despite
non-surrender of the bill of lading. A contract of sale is separate and distinct from a
contract of carriage. They involve different parties, different rights, different obligations
and liabilities. Thus, we quote with approval the ruling of the CA, to wit:
chanRoblesvirtualLawlibrary
On the third assigned error, [w]e rule for the defendants-appellants [ASTI and ACCLI]. They
are correct in arguing that the nature of their obligation with plaintiff [DBI] is separate and
distinct from the transaction of the latter with defendant Ambiente. As carrier of the goods
transported by plaintiff, its obligation is simply to ensure that such goods are delivered on
time and in good condition. In the case [Macam v. Court of Appeals], the Supreme Court
emphasized that "the extraordinary responsibility of the common carriers lasts until actual
or constructive delivery of the cargoes to the consignee or to the person who has the right
to receive them." x x x
It is therefore clear that the moment the carrier has delivered the subject goods, its
responsibility ceases to exist and it is thereby freed from all the liabilities arising from the
transaction. Any question regarding the payment of the buyer to the seller is no longer the
concern of the carrier. This easily debunks plaintiffs theory of joint liability.70 x x x (Emphasis
supplied; citations omitted.)
The contract between DBI and ASTI is a contract of carriage of goods; hence, ASTI's liability
should be pursuant to that contract and the law on transportation of goods. Not being a
party to the contract of sale between DBI and Ambiente, ASTI cannot be held liable for
the payment of the value of the goods sold. In this regard, we cite Loadstar Shipping
Company, Incorporated v. Malayan Insurance Company, Incorporated,71 thus:
chanRoblesvirtualLawlibrary
Malayan opposed the petitioners' invocation of the Philex-PASAR purchase agreement,
stating that the contract involved in this case is a contract of affreightment between the
petitioners and PASAR, not the agreement between Philex and PASAR, which was a
contract for the sale of copper concentrates.

On this score, the Court agrees with Malayan that contrary to the trial court's disquisition,
the petitioners cannot validly invoke the penalty clause under the Philex-PASAR purchase
agreement, where penalties are to be imposed by the buyer PASAR against the seller
Philex if some elements exceeding the agreed limitations are found on the copper
concentrates upon delivery. The petitioners are not privy to the contract of sale of the
copper concentrates. The contract between PASAR and the petitioners is a contract of
carriage of goods and not a contract of sale. Therefore, the petitioners and PASAR are
bound by the laws on transportation of goods and their contract of affreightment. Since the
Contract of Affreightment between the petitioners and PASAR is silent as regards the
computation of damages, whereas the bill of lading presented before the trial court is
undecipherable, the New Civil Code and the Code of Commerce shall govern the
contract between the parties.72 (Emphasis supplied; citations omitted.)

In view of the foregoing, we hold that under Bill of Lading No. AC/MLLA601317 and the
pertinent law and jurisprudence, ASTI and ACCLI are not liable to DBI. We sustain the
finding of the CA that only Ambiente, as the buyer of the goods, has the obligation to pay
for the value of the shipment. However, in view of our ruling in Nacar v. Gallery
Frames,73 we modify the legal rate of interest imposed by the CA. Instead of 12% per
annum from the finality of this judgment until its full satisfaction, the rate of interest shall only
be 6% per annum.chanrobleslaw

WHEREFORE, the petition is DENIED for lack of merit. The August 16, 2007 Decision and the
September 2, 2008 Resolution of the Court of Appeals in CA-G.R. CV No. 79790 are
hereby AFFIRMEDwith the MODIFICATION that from the finality of this decision until its full
satisfaction, the applicable rate of interest shall be 6% per annum.

SO ORDERED.cralawlawlibrary FIRST DIVISION

G.R. No. 190271, September 14, 2016

TRANSIMEX CO., Petitioner, v. MAFRE ASIAN INSURANCE CORP., Respondent.

DECISION

SERENO, C.J.:
This case involves a money claim filed by an insurance company against the ship agent of
a common carrier. The dispute stemmed from an alleged shortage in a shipment of
fertilizer delivered by the carrier to a consignee. Before this Court, the ship agent insists that
the shortage was caused by bad weather, which must be considered either a storm under
Article 1734 of the Civil Code or a peril of the sea under the Carriage of Goods by Sea Act
(COGSA).1chanrobleslaw
In the Decision2 and the Resolution3 assailed in this Petition for Review on Certiorari,4 the
Court of Appeals (CA) affirmed the Decision5 of the Regional Trial Court (RTC). The RTC
ordered petitioner Transimex Co. (Transimex) to pay respondent Mafre Asian Insurance
Corp.6 the amount of P1,617,527.37 in addition to attorney's fees and costs. Petitioner is the
local ship agent of the vessel, while respondent is the subrogee of Fertiphil Corporation
(Fertiphil),7 the consignee of a shipment of Prilled Urea Fertilizer transported by M/V
Meryem Ana.
FACTUAL ANTECEDENTS
On 21 May 1996, M/V Meryem Ana received a shipment consisting of 21,857 metric tons of
Prilled Urea Fertilizer from Helm Duengemittel GMBH at Odessa, Ukraine.8 The shipment was
covered by two separate bills of lading and consigned to Fertiphil for delivery to two ports -
one in Poro Point, San Fernando, La Union; and the other in Tabaco, Albay.9 Fertiphil
insured the cargo against all risks under Marine Risk Note Nos. MN-MAR-HO-0001341 and
MN-MAR-HO-0001347 issued by respondent.10chanrobleslaw
On 20 June 1996, M/V Meryem Ana arrived at Poro Point, La Union, and discharged
14,339.507 metric tons of fertilizer under the first bill of lading.11 The ship sailed on to
Tabaco, Albay, to unload the remainder of the cargo. The fertilizer unloaded at Albay
appeared to have a gross weight of 7,700 metric tons.12 The present controversy involves
only this second delivery.
As soon as the vessel docked at the Tabaco port, the fertilizer was bagged and stored
inside a warehouse by employees of the consignee.13 When the cargo was subsequently
weighed, it was discovered that only 7,350.35 metric tons of fertilizer had been
delivered.14 Because of the alleged shortage of 349.65 metric tons, Fertiphil filed a claim
with respondent for P1,617,527.37,15 which was found compensable.16chanrobleslaw
After paying the claim of Fertiphil, respondent demanded reimbursement from petitioner
on the basis of the right of subrogation. The claim was denied, prompting respondent to
file a Complaint with the RTC for recovery of sum of money.17 In support of its claim,
respondent presented a Report of Survey18 and a Certification19 from David Cargo Survey
Services to prove the shortage. In addition, respondent submitted an Adjustment
Report20 prepared by Adjustment Standards Corporation (ASC) to establish the outturn
quantity and condition of the fertilizer discharged from the vessel at the Tabaco port.21 In
the report, the adjuster also stated that the shortage was attributable to the melting of the
fertilizer while inside the hatches, when the vessel took on water because of the bad
weather experienced at sea.22 Two witnesses were then presented by respondent to
buttress its documentary evidence.23chanrobleslaw
Petitioner, on the other hand, denied that there was loss or damage to the cargo.24 It
submitted survey certificates and presented the testimony of a marine surveyor to prove
that there was, in fact, an excess of 3.340 metric tons of fertilizer delivered to the
consignee.25cralawred Petitioner also alleged that defendants had exercised
extraordinary diligence in the transport and handling of the cargo.26chanrobleslaw
THE RTC RULING
The RTC ruled in favor of respondent and ordered petitioner to pay the claim of
P1,617,527.37. In its Decision,27 the trial court found that there was indeed a shortage in the
cargo delivered, for which the common carrier must be held responsible under Article 1734
of the Civil Code. The RTC also refused to give credence to petitioner's claim of overage
and noted that the presumption of fault and/or negligence on the part of the carrier
remained unrebutted. The trial court explained:ChanRoblesVirtualawlibrary
The defendants' defense is that there was no loss/damage to the cargo because instead
of a shortage there was an overage of 3.340, invoking the findings of Raul Pelagio, a
marine surveyor connected with Survey Specialists, Inc. whose services were engaged by
the defendants. However, the Court notes that what was loaded in the vessel M/V
Meryem Ana at Odessa, Ukraine on May 21, 1996 was 21,857 metric tons of prilled urea
fertilizer (Draft Survey Report, Exhibit F). How the quantity loaded had increased to
21,860.34 has not been explained by the defendants. Thus, the Court finds incredible the
testimony of Raul Pelagio that he found an overage of 3.340 metric tons. The Court is
inclined to give credence to the testimonies of witness Jaime David, the cargo surveyor
engaged by consignee Fertiphil Corporation, and witness Fabian Bon, a cargo surveyor of
Adjustment Standards Corporation, whose services were engaged by plaintiff Mafre Asian
Insurance Corporation, there being no reason for the Court to disregard their findings
which jibe with one another.
Thus, it appears crystal clear that on the vessel M/V Meryem Ana was loaded in bulk on
May 21, 1996 at Odessa, Ukraine a cargo consisting of 21,857 metric tons of prilled urea
fertilizer bound for delivery at Poro Point, San Fernando, La Union and at Tabaco, Albay;
that the cargo unloaded at said ports of destination had a shortage of 349.65 metric tons.
xxxx
As to the defense that defendants had supposedly exercised extraordinary care and
diligence in the transport and handling of the cargo, the Court finds that the evidence
presented by the defendants is absolutely and completely bereft of anything to support
their claim of having exercised extraordinary care and diligence.
Hence, the presumption of fault and/or negligence as provided in Art. 1735 of the Civil
Code on the part of the defendants stands unrebutted as against the
latter.28chanroblesvirtuallawlibrary
THE CA RULING
The CA affirmed the ruling of the RTC and denied petitioner's appeal.29 After evaluating
the evidence presented during trial, the appellate court found no reason to disturb the trial
court's conclusion that there was indeed a shortage in the shipment.30chanrobleslaw
The CA also rejected the assertion that petitioner was not a common carrier.31 Because
the latter offered services to the public for the transport of goods in exchange for
compensation, it was considered a common carrier in accordance with Article 1732 of the
Civil Code. The CA further noted that petitioner had already admitted this fact in the
Answer32 and even raised the defenses usually invoked by common carriers during trial
and on appeal, i.e., the exercise of extraordinary care and diligence, and fortuitous
event.33 These defenses were, however, found unmeritorious:ChanRoblesVirtualawlibrary
Defendants-appellants claim that the loss was due to a fortuitous event as the Survey
Report of Jaime David stated that during its voyage, the vessel encountered bad weather.
But to excuse a common carrier fully of any liability, Article 1739 of the Civil Code requires
that the fortuitous event must have been the proximate and only cause of the loss.
Moreover, it should have exercised due diligence to prevent or minimize the loss before,
during and after the occurrence of the fortuitous event.
xxxx
In the present case, defendants-appellants did not present proof that the "bad weather"
they encountered was a "storm" as contemplated by Article 1734(1). String winds are the
ordinary vicissitudes of a sea voyage. Even if the weather encountered by the ship was to
be deemed a natural disaster under Article 1739 of the Civil Code, defendants-appellants
failed to show that such natural disaster or calamity was the proximate and only cause of
the loss. The shortage must not have been caused or worsened by human participation.
The defense of fortuitous event or natural disaster cannot be successfully made when the
injury could have been avoided by human precaution.34chanroblesvirtuallawlibrary
Petitioner moved for reconsideration of the CA Decision, but the motion was denied.35 Not
only did the Motion for Reconsideration lack meit according to the appellate court; it was
also filed out of time.36chanrobleslaw
PROCEEDINGS BEFORE THIS COURT
On 3 December 2009, Transimex filed a Petition for Review on Certiorari37 before this Court
praying for the reversal of the CA Decision and Resolution.38 Petitioner asserts that the
lower courts erred in holding it liable for the alleged shortage in the shipment of fertilizer.
While it no longer questions the existence of the shortage, it claims that the loss or damage
was caused by bad weather.39 It then insists that the dispute is governed by Section 4 of
COGSA, which exempts the carrier from liability for any loss or damage arising from "perils,
dangers and accidents of the sea.40chanrobleslaw
In its Comment,41 respondent maintains that petitioner was correctly held liable for the
shortage of the cargo in accordance with the Civil Code provisions on common
carriers.42 It insists that the factual findings of the lower courts must be
respected43 particularly in this case, since petitioner failed to timely appeal the Decision of
the CA.44chanrobleslaw
Petitioner, in its Reply,45 takes a position different from its initial stance as to the law
applicable to the dispute. It concedes that the Civil Code primarily governs its liability as a
carrier, with COGSA as a suppletory source.46 Under both laws, petitioner contends that it is
exempt from liability, because damage to the cargo was caused by the bad weather
encountered by the vessel while at sea. This kind of weather supposedly qualifies as a
violent storm under the Civil Code; or as a peril, danger or accident of the sea under
COGSA.47chanrobleslaw
ISSUES
The following issues are presented for resolution by this Court:
1. Whether the CA Decision has become final and executory
2. Whether the transaction is governed by the provisions of the Civil Code on
common carriers or by the provisions of COGSA
3. Whether petitioner is liable for the loss or damage sustained by the cargo because
of bad weather
OUR RULING

We DENY the Petition.
This Court finds that the CA Decision has become final because of the failure of petitioner
to timely file a motion for reconsideration. Furthermore, contrary to the argument raised by
the latter, there is insufficient evidence to establish that the loss or damage to the cargo
was caused by a storm or a peril of the sea.
The CA Decision has become final and executory.
In the assailed Resolution, in which the CA ruled that petitioner's Motion for
Reconsideration was filed late, it explained:ChanRoblesVirtualawlibrary
Defendants-appellants' motion for reconsideration of the Court's Decision dated August 7,
2009 was filed out of time, as based on the reply letter dated October 13, 2009 of the
Chief, Administrative Unit, Office of the Postmaster, Makati City, copy of said Decision was
received by defendants-appellants' counsel on September 4, 2009, not September 14,
2009 as alleged in the motion for reconsideration. Consequently, the subject Decision
dated August 27, 2009 had become final and executory considering that the motion for
reconsideration was filed only on September 29, 2009, beyond the fifteen (15)-day
reglementary period which lasted until September 19, 2009.48chanroblesvirtuallawlibrary
The Court agrees. The Certification issued by the Office of the Postmaster of Makati, which
states that the Decision was received by respondent's counsel on 4 September 2009, is
entitled to full faith and credence. In the absence of contradictory evidence, the
presumption is that the postmaster has regularly performed his duty.49 In this case, there is
no reason to doubt his statement as to the date respondent received the CA Decision.
Significantly, Transimex failed to address this matter in its Petition. While it continued to
allege that it received the CA Decision on 14 September 2009, it did not refute the finding
of the appellate court that the former's Motion for Reconsideration had been filed late. It
was only after respondent again asserted the finality of the CA Decision in its Comment did
petitioner attempt to explain the discrepancy:ChanRoblesVirtualawlibrary
x x x Apparently, the said Decision dated 27 August 2009 was delivered by the postman to
the guard on duty at the ground floor of the building where undersigned counsel's office is
located. It was the guard on duty who received the said decision on 4 September 2009
but it was only on 14 September 2009 that undersigned counsel actually received the said
decision. Hence, the date of receipt of the decision should be reckoned from the date of
receipt by the counsel of the decision and not from the date of receipt of the guard who is
not an employee of the law office of the undersigned counsel.
This Court notes that the foregoing account remains unsupported by evidence. The guard
on duty or any employee of the law firm could have easily substantiated the explanation
offered by counsel for petitioner, but no statement from any of them was ever submitted.
Since petitioner was challenging the official statement of the Office of the Postmaster of
Makati on the matter, the former had the burden of proving its assertions and presenting
countervailing evidence. Unfounded allegations would not suffice.
In any event, this Court has decided to review the merits of this case in the interest of
justice. After a judicious evaluation of the arguments interposed by the parties, we find no
reason to reverse the CA Decision and Resolution.
The provisions of the Civil Code on common carriers are applicable.
As previously discussed, petitioner initially argued that the CA erred in applying the
provisions of the Civil Code to this case. It insisted that the contract of carriage between
the parties was governed by COGSA,50 the law applicable to "all contracts for the
carriage of goods by sea to and from Philippine ports in foreign trade."51 This assertion is
bereft of merit.
This Court upholds the ruling of the CA with respect to the applicable law. As expressly
provided in Article 1753 of the Civil Code, "[t]he law of the country to which the goods are
to be transported shall govern the liability of the common carrier for their loss, destruction
or deterioration." Since the cargo in this case was transported from Odessa, Ukraine, to
Tabaco, Albay, the liability of petitioner for the alleged shortage must be determined in
accordance with the provisions of the Civil Code on common carriers. In Eastern Shipping
Lines, Inc. v. BPI/MS Insurance Corp., the Court declared:ChanRoblesVirtualawlibrary
According to the New Civil Code, the law of the country to which the goods are to be
transported shall govern the liability of the common carrier for their loss, destruction or
deterioration. The Code takes precedence as the primary law over the rights and
obligations of common carriers with the Code of Commerce and COGSA applying
suppletorily.52chanroblesvirtuallawlibrary
Besides, petitioner itself later conceded in its Reply that the Civil Code provisions on
common carriers are primarily applicable to the present dispute, while COGSA only
applies in a suppletory manner.53chanrobleslaw
Petitioner is liable for the shortage incurred by the shipment.
Having settled the foregoing preliminary issues, the only argument left for this Court to
resolve is petitioner's assertion that it is exempt from liability for the loss or damage to the
cargo. As grounds for this exemption, petitioner cites both the Civil Code and COGSA,
particularly the provisions absolving a carrier from loss or damage sustained as the result of
a "storm" or a "peril of the sea."
In its Petition, Transimex summarizes the testimony of one witness for respondent supposedly
proving that the shortage in the shipment was caused by inclement weather encountered
by the vessel at sea. Petitioner claims that this testimony proves that damage to the cargo
was the result of the melting of the fertilizer after seawater entered Hatch No. 1 of the
vessel as a result of the bad weather conditions at sea:ChanRoblesVirtualawlibrary
The evidence for the respondent clearly proves that the loss/damage/shortage [suffered
by] the cargo was caused by the bad weather encountered by the vessel during the
voyage from Odessa, Ukraine to Poro Point, San Fernando, La Union, wherein due to bad
weather[,] sea water found its way inside Hatch No. 1 resulting in the wetting, melting and
discoloration of the prilled urea fertilizer. The fact that sea water found its way inside Hatch
No. 1 was clearly testified to by the witness for the respondent. Jaime R. Davis testified
that:ChanRoblesVirtualawlibrary
"He was present during the discharging operation, that he saw the hatches opened
whereupon he noticed the presence of water thereat; accordingly, he informed the master
of the vessel of the presence of water at the hatches to which the master of the vessel
replied that on the way they encountered bad weather."54 (Emphasis in the original)
Petitioner also cites a portion of the Adjustment Report submitted by respondent during
trial as proof that damage to the cargo was caused by a
storm:ChanRoblesVirtualawlibrary
How the sea water found its way inside Hatch No. 1 was clearly explained by another
witness for the respondent by the name of Fabian Bon who stated in his Adjustment as
follows:ChanRoblesVirtualawlibrary
Our inquiries disclosed that the master of the vessel interviewed by the consignee's
surveyor (David Cargo Survey Services) that during sailing from Odessa (Ukraine) bound to
Poro Point, San Fernando, La Union, Philippines, the vessel encountered bad weather on
June 3, 1996 and was rolling from starboard to portside top of the 1, 2, 3, 4, 5, 6 & 7 hatch
covers and sea water were washing over all main deck.
On the following day, June 4, 1996, wind reading up to 40 knots and very high swells were
coming from south west direction. The vessel was rolling and pitching heavily. Heavy sea
water were washing all main deck and were jumping from main deck to top of the seven
(7) hatch covers. As a result, the master filed a Marine Note of Protest on June 19, 1996 at
the Port of Poro Point, San Fernando, La Union, Philippines.55 (Emphases in the original)
The question before this Court therefore comes down to whether there is sufficient proof
that the loss or damage incurred by the cargo was caused by a "storm" or a "peril of the
sea."
We rule in the negative. As will be discussed, petitioner failed to prove the existence of a
storm or a peril of the sea within the context of Article 1734(1) of the Civil Code or Section
4(2)(c) of COGSA. Furthermore, there was no sufficient proof that the damage to the
shipment was solely and proximately caused by bad weather.
The presence of a "storm" or a "peril of the sea" was not established.
It must be emphasized that not all instances of bad weather may be categorized as
"storms" or "perils of the sea" within the meaning of the provisions of the Civil Code and
COGSA on common carriers. To be considered absolutory causes under either statute,
bad weather conditions must reach a certain threshold of severity.
With respect to storms, this Court has explained the difference between a storm and
ordinary weather conditions in Central Shipping Co. Inc. v. Insurance Company of North
America:56
Nonetheless, to our mind it would not be sufficient to categorize the weather condition at
the time as a "storm" within the absolutory causes enumerated in the law. Significantly, no
typhoon was observed within the Philippine area of responsibility during that period.
According to PAGASA, a storm has a wind force of 48 to 55 knots, equivalent to 55 to 63
miles per hour or 10 to 11 in the Beaufort Scale. The second mate of the vessel stated that
the wind was blowing around force 7 to 8 on the Beaufort Scale. Consequently, the strong
winds accompanying the southwestern monsoon could not be classified as a "storm." Such
winds are the ordinary vicissitudes of a sea voyage.57 (Emphases supplied; citations
omitted)
The phrase "perils of the sea" carries the same connotation. Although the term has not
been definitively defined in Philippine jurisprudence, courts in the United States of America
generally limit the application of the phrase to weather that is "so unusual, unexpected
and catastrophic as to be beyond reasonable expectation."58 Accordingly, strong winds
and waves are not automatically deemed perils of the sea, if these conditions are not
unusual for that particular sea area at that specific time, or if they could have been
reasonably anticipated or foreseen.59 While cases decided by U.S. courts are not binding
precedents in this jurisdiction, the Court considers these pronouncements persuasive 60 in
light of the fact that COGSA was originally an American statute 61 that was merely
adopted by the Philippine Legislature in 1936.62chanrobleslaw
In this case, the documentary and testimonial evidence cited by petitioner indicate
that M/V Meryem Anafaced winds of only up to 40 knots while at sea. This wind force
clearly fell short of the 48 to 55 knots required for "storms" under Article 1734(1) of the Civil
Code based on the threshold established by PAGASA.63 Petitioner also failed to prove that
the inclement weather encountered by the vessel was unusual, unexpected, or
catastrophic. In particular, the strong winds and waves, which allegedly assaulted the ship,
were not shown to be worse than what should have been expected in that particular
location during that time of the year. Consequently, this Court cannot consider these
weather conditions as "perils of the sea" that would absolve the carrier from liability.
As a side note, we observe that there are no definite statutory standards for determining
the existence of a "storm" or "peril of the sea" that would exempt a common carrier from
liability. Hence, in marine insurance cases, courts are constrained to rely upon their own
understanding of these terms of art, or upon imprecise accounts of the speed of the winds
encountered and the strength of the waves experienced by a vessel. To obviate
uncertainty, it may be time for Congress to lay down specific rules to distinguish "storms"
and other "perils of the sea" from the ordinary action of the wind and waves. While uniform
measures of severity may prove difficult to establish, the legislature may consider providing
more detailed standards to be used by the judiciary in resolving maritime cases. These may
include wind velocity, violence of the seas, the height of the waves, or even the expected
weather conditions in the area involved at the time of the incident.
Petitioner failed to prove the other requisites for exemption from liability under Article 1734
of the Civil Code.
Even assuming that the inclement weather encountered by the vessel amounted to a
"storm" under Article 1734(1) of the Civil Code, there are two other reasons why this Court
cannot absolve petitioner from liability for loss or damage to the cargo under the Civil
Code. First, there is no proof that the bad weather encountered by M/V Meryem Ana was
the proximate and only cause of damage to the shipment. Second, petitioner failed to
establish that it had exercised the diligence required from common carriers to prevent loss
or damage to the cargo.
We emphasize that common carriers are automatically presumed to have been at fault or
to have acted negligently if the goods they were transporting were lost, destroyed or
damaged while in transit.64 This presumption can only be rebutted by proof that the carrier
exercised extraordinary diligence and caution to ensure the protection of the shipment in
the event of foul weather.65 As this Court explained in Fortune Sea Carrier, Inc. v. BPI/MS
Insurance Corp.:ChanRoblesVirtualawlibrary
While the records of this case clearly establish that M/V Sea Merchant was damaged as
result of extreme weather conditions, petitioner cannot be absolved from liability. As
pointed out by this Court in Lea Mer Industries, Inc. v. Malayan Insurance, Inc., a common
carrier is not liable for loss only when (1) the fortuitous event was the only and proximate
cause of the loss and (2) it exercised due diligence to prevent or minimize the loss. The
second element is absent here. As a common carrier, petitioner should have been more
vigilant in monitoring weather disturbances within the country and their (possible) effect on
its routes and destination. More specifically, it should have been more alert on the possible
attenuating and dysfunctional effects of bad weather on the parts of the ship. It should
have foreseen the likely prejudicial effects of the strong waves and winds on the ship
brought about by inclement weather and should have taken the necessary precautionary
measures through extraordinary diligence to prevent the weakening or dysfunction of the
parts of the ship to avoid or prune down the loss to cargo.66 (citations omitted)
In the instant case, there is absolutely no evidence that petitioner satisfied the two
requisites. Before the trial court, petitioner limited itself to the defense of denial. The latter
refused to admit that the shipment sustained any loss or damage and even alleged
overage of the cargo delivered.67 As a result, the evidence it submitted was severely
limited, i.e., the testimony of a witness that supposedly confirmed the alleged excess in the
quantity of the fertilizer delivered to the consignee in Albay.68 No other evidence was
presented to demonstrate either the proximate and exclusive cause of the loss or the
extraordinary diligence of the carrier.
Under these circumstances, the Court cannot absolve petitioner from liability for the
shortage incurred by the shipment.
WHEREFORE, the Petition is DENIED. The Court of Appeals Decision and Resolution dated 27
August 2009 and 10 November 2009, respectively, are hereby AFFIRMED.
SO ORDERED.chanRoblesvirtualLawlibrary
Leonardo-De Castro, Perlas-Bernabe, and Caguioa, JJ., concur.
Bersamin, J., on official leave
REGIONAL CONTAINER LINES G.R. No. 168151
(RCL) OF SINGAPORE and
EDSA SHIPPING AGENCY, Present:
Petitioners,
QUISUMBING, J., Chairperson,
CARPIO-MORALES,
BRION,
- versus - DEL CASTILLO, and
 ABAD, JJ.
THE NETHERLANDS INSURANCE CO. (PHILIPPINES), Promulgated:
INC.,
Respondent. September 4, 2009
x -------------------------------------------------------------------------------------- x
DECISION
BRION, J.:
For our resolution is the petition for review on certiorari filed by petitioners Regional
Container Lines of Singapore (RCL) and EDSA Shipping Agency (EDSA Shipping) to annul
and set aside the decision[1] and resolution[2] of the Court of Appeals (CA) dated May 26,
2004 and May 10, 2005, respectively, in CA-G.R. CV No. 76690.
RCL is a foreign corporation based in Singapore. It does business in the Philippines through
its agent, EDSA Shipping, a domestic corporation organized and existing under Philippine
laws. Respondent Netherlands Insurance Company (Philippines), Inc. (Netherlands
Insurance) is likewise a domestic corporation engaged in the marine underwriting business.
FACTUAL ANTECEDENTS
The pertinent facts, based on the records are summarized below.
On October 20, 1995, 405 cartons of Epoxy Molding Compound were consigned to be
shipped from Singapore to Manila for Temic Telefunken
Microelectronics Philippines (Temic). U-Freight Singapore PTE Ltd.[3] (U-Freight Singapore), a
forwarding agent based in Singapore, contracted the services of Pacific Eagle Lines PTE.
Ltd. (Pacific Eagle) to transport the subject cargo. The cargo was packed, stored, and
sealed by Pacific Eagle in its Refrigerated Container No. 6105660 with Seal No. 13223. As
the cargo was highly perishable, the inside of the container had to be kept at a
temperature of 0 Celsius. Pacific Eagle then loaded the refrigerated container on board
the M/V Piya Bhum, a vessel owned by RCL, with which Pacific Eagle had a slot charter
agreement. RCL duly issued its own Bill of Lading in favor of Pacific Eagle.
To insure the cargo against loss and damage, Netherlands Insurance issued a Marine
Open Policy in favor of Temic, as shown by MPO-21-05081-94 and Marine Risk Note MRN-21
14022, to cover all losses/damages to the shipment.
On October 25, 1995, the M/V Piya Bhum docked in Manila. After unloading the
refrigerated container, it was plugged to the power terminal of the pier to keep its
temperature constant. Fidel Rocha (Rocha), Vice-President for Operations of Marines
Adjustment Corporation, accompanied by two surveyors, conducted a protective survey
of the cargo. They found that based on the temperature chart, the temperature reading
was constant from October 18, 1995 to October 25, 1995 at 0 Celsius. However,
at midnight of October 25, 1995 when the cargo had already been unloaded from the
ship the temperature fluctuated with a reading of 33 Celsius. Rocha believed the
fluctuation was caused by the burnt condenser fan motor of the refrigerated container.
On November 9, 1995, Temic received the shipment. It found the cargo completely
damaged. Temic filed a claim for cargo loss against Netherlands Insurance, with
supporting claims documents. The Netherlands Insurance paid Temic the sum
of P1,036,497.00 under the terms of the Marine Open Policy. Temic then executed a loss
and subrogation receipt in favor of Netherlands Insurance.
Seven months from delivery of the cargo or on June 4, 1996, Netherlands Insurance filed a
complaint for subrogation of insurance settlement with the Regional Trial Court, Branch 5,
Manila, against the unknown owner of M/V Piya Bhum and TMS Ship Agencies (TMS), the
latter thought to be the local agent of M/V Piya Bhums unknown owner.[4] The complaint
was docketed as Civil Case No. 96-78612.
Netherlands Insurance amended the complaint on January 17, 1997 to implead EDSA
Shipping, RCL, Eagle Liner Shipping Agencies, U-Freight Singapore, and U-Ocean (Phils.),
Inc. (U-Ocean), as additional defendants. A third amended complaint was later made,
impleading Pacific Eagle in substitution of Eagle Liner Shipping Agencies.
TMS filed its answer to the original complaint. RCL and EDSA Shipping filed their answers
with cross-claim and compulsory counterclaim to the second amended complaint. U-
Ocean likewise filed an answer with compulsory counterclaim and cross-claim. During the
pendency of the case, U-Ocean, jointly with U-Freight Singapore, filed another answer with
compulsory counterclaim. Only Pacific Eagle and TMS filed their answers to the third
amended complaint.
The defendants all disclaimed liability for the damage caused to the cargo, citing several
reasons why Netherland Insurances claims must be rejected. Specifically, RCL and EDSA
Shipping denied negligence in the transport of the cargo; they attributed any negligence
that may have caused the loss of the shipment to their co-defendants. They likewise
asserted that no valid subrogation exists, as the payment made by Netherlands Insurance
to the consignee was invalid. By way of affirmative defenses, RCL and EDSA Shipping
averred that the Netherlands Insurance has no cause of action, and is not the real party-
in-interest, and that the claim is barred by laches/prescription.
After Netherlands Insurance had made its formal offer of evidence, the defendants
including RCL and EDSA Shipping sought leave of court to file their respective motions to
dismiss based on demurrer to evidence.
RCL and EDSA Shipping, in their motion, insisted that Netherlands Insurance had (1) failed
to prove any valid subrogation, and (2) failed to establish that any negligence on their
part or that the loss was sustained while the cargo was in their custody.
On May 22, 2002, the trial court handed down an Order dismissing Civil Case No. 96-78612
on demurrer to evidence. The trial court ruled that while there was valid subrogation, the
defendants could not be held liable for the loss or damage, as their respective liabilities
ended at the time of the discharge of the cargo from the ship at the Port of Manila.
Netherlands Insurance seasonably appealed the order of dismissal to the CA.
On May 26, 2004, the CA disposed of the appeal as follows:
WHEREFORE, in view of the foregoing, the dismissal of the complaint against defendants
Regional Container Lines and Its local agent, EDSA Shipping Agency, is REVERSED and SET
ASIDE. The dismissal of the complaint against the other defendants is AFFIRMED. Pursuant to
Section 1, Rule 33 of the 1997 Rules of Civil Procedure, defendants Regional Container
Lines and EDSA Shipping Agency are deemed to have waived the right to present
evidence.
As such, defendants Regional Container Lines and EDSA Shipping Agency are ordered to
reimburse plaintiff in the sum of P1,036,497.00 with interest from date hereof until fully paid.
No costs.
SO ORDERED. [Emphasis supplied.]
The CA dismissed Netherland Insurances complaint against the other defendants after
finding that the claim had already been barred by prescription.[5]
Having been found liable for the damage to the cargo, RCL and EDSA Shipping filed a
motion for reconsideration, but the CA maintained its original conclusions.
The sole issue for our resolution is whether the CA correctly held RCL and EDSA Shipping
liable as common carriers under the theory of presumption of negligence.
THE COURTS RULING
The present case is governed by the following provisions of the Civil Code:
ART. 1733. Common carriers, from the nature of their business and for reasons of public
policy, are bound to observe extraordinary diligence in the vigilance over the goods and
for the safety of the passengers transported by them according to all the circumstances of
each case.
Such extraordinary diligence in the vigilance over the goods is further expressed in articles
1734, 1735, and 1745, Nos. 5, 6, and 7, while the extraordinary diligence for the safety of
the passengers is further set forth in articles1755 and 1756.
ART. 1734. Common carriers are responsible for the loss, destruction, or deterioration of the
goods, unless the same is due to any of the following causes only:
1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;
2) Act of the public enemy in war, whether international or civil;
3) Act 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;
5) Order or act of competent public authority.
ART. 1735. In all cases other that 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 by article 1733.
ART. 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 sane 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 articles 1738.
ART. 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.
ART. 1742. Even if the loss, destruction, or deterioration of the goods should be caused by
the character of the goods, or the faulty nature of the packing or of the containers, the
common carrier must exercise due diligence to forestall or lessen the loss.
In Central Shipping Company, Inc. v. Insurance Company of North America, [6] we
reiterated the rules for the liability of a common carrier for lost or damaged cargo as
follows:
(1) Common carriers are bound to observe extraordinary diligence over the goods
they transport, according to all the circumstances of each case;
(2) In the event of loss, destruction, or deterioration of the insured goods, common
carriers are responsible, unless they can prove that such loss, destruction, or deterioration
was brought about by, among others, flood, storm, earthquake, lightning, or other natural
disaster or calamity; and
(3) In all other cases not specified under Article 1734 of the Civil Code, common
carriers are presumed to have been at fault or to have acted negligently, unless they
observed extraordinary diligence.[7]
In the present case, RCL and EDSA Shipping disclaim any responsibility for the loss or
damage to the goods in question. They contend that the cause of the damage to the
cargo was the fluctuation of the temperature in the reefer van, which fluctuation
occurred after the cargo had already been discharged from the vessel; no fluctuation,
they point out, arose when the cargo was still on board M/V Piya Bhum. As the cause of
the damage to the cargo occurred after the same was already discharged from the
vessel and was under the custody of the arrastre operator (International Container
Terminal Services, Inc. or ICTSI), RCL and EDSA Shipping posit that the presumption of
negligence provided in Article 1735 of the Civil Code should not apply. What applies in this
case is Article 1734, particularly paragraphs 3 and 4 thereof, which exempts the carrier
from liability for loss or damage to the cargo when it is caused either by an act or omission
of the shipper or by the character of the goods or defects in the packing or in the
containers. Thus, RCL and EDSA Shipping seek to lay the blame at the feet of other parties.
We do not find the arguments of RCL and EDSA Shipping meritorious.
A common carrier is presumed to have been negligent if it fails to prove that it exercised
extraordinary vigilance over the goods it transported.[8] When the goods shipped are
either lost or arrived in damaged condition, a presumption arises against the carrier of its
failure to observe that diligence, and there need not be an express finding of negligence
to hold it liable.[9]
To overcome the presumption of negligence, the common carrier must establish by
adequate proof that it exercised extraordinary diligence over the goods. It must do more
than merely show that some other party could be responsible for the damage.[10]
In the present case, RCL and EDSA Shipping failed to prove that they did exercise that
degree of diligence required by law over the goods they transported. Indeed, there is
sufficient evidence showing that the fluctuation of the temperature in the refrigerated
container van, as recorded in the temperature chart, occurred after the cargo had been
discharged from the vessel and was already under the custody of the arrastre operator,
ICTSI. This evidence, however, does not disprove that the condenser fan which caused the
fluctuation of the temperature in the refrigerated container was not damaged while the
cargo was being unloaded from the ship. It is settled in maritime law jurisprudence
that cargoes while being unloaded generally remain under the custody of the
carrier;[11] RCL and EDSA Shipping failed to dispute this.
RCL and EDSA Shipping could have offered evidence before the trial court to show that
the damage to the condenser fan did not occur: (1) while the cargo was in transit; (2)
while they were in the act of discharging it from the vessel; or (3) while they were delivering
it actually or constructively to the consignee. They could have presented proof to show
that they exercised extraordinary care and diligence in the handling of the goods, but
they opted to file a demurrer to evidence. As the order granting their demurrer was
reversed on appeal, the CA correctly ruled that they are deemed to have waived their
right to present evidence,[12] and the presumption of negligence must stand.
It is for this reason as well that we find RCL and EDSA Shippings claim that the loss or
damage to the cargo was caused by a defect in the packing or in the containers. To
exculpate itself from liability for the loss/damage to the cargo under any of the causes, the
common carrier is burdened to prove any of the causes in Article 1734 of the Civil Code
claimed by it by a preponderance of evidence. If the carrier succeeds, the burden of
evidence is shifted to the shipper to prove that the carrier is negligent.[13] RCL and EDSA
Shipping, however, failed to satisfy this standard of evidence and in fact offered no
evidence at all on this point; a reversal of a dismissal based on a demurrer to evidence
bars the defendant from presenting evidence supporting its allegations.
WHEREFORE, we DENY the petition for review on certiorari filed by the Regional Container
Lines of Singapore and EDSA Shipping Agency. The decision of the Court of Appeals
dated May 26, 2004 in CA-G.R. CV No. 76690 is AFFIRMED IN TOTO. Costs against the
petitioners. SO ORDERED.
SECOND DIVISION
G.R. No. 194121, July 11, 2016
TORRES-MADRID BROKERAGE, INC., Petitioner, v. FEB MITSUI MARINE INSURANCE CO., INC.
AND BENJAMIN P. MANALASTAS, DOING BUSINESS UNDER THE NAME OF BMT TRUCKING
SERVICES, Respondents.
DECISION
BRION, J.:
We resolve the petition for review on certiorari challenging the Court of
Appeals' (CA) October 14, 2010 decision in CA-G.R. CV No. 91829. 1chanrobleslaw
The CA affirmed the Regional Trial Court's (RTC) decision in Civil Case No. 01-1596, and
found petitioner Torres-Madrid Brokerage, Inc. (TMBI) and respondent Benjamin P.
Manalastas jointly and solidarily liable to respondent FEB Mitsui Marine Insurance Co.,
Inc. (Mitsui) for damages from the loss of transported cargo.
Antecedents
On October 7, 2000, a shipment of various electronic goods from Thailand and Malaysia
arrived at the Port of Manila for Sony Philippines, Inc. (Sony). Previous to the arrival, Sony
had engaged the services of TMBI to facilitate, process, withdraw, and deliver the
shipment from the port to its warehouse in Binan, Laguna.2chanrobleslaw
TMBI - who did not own any delivery trucks - subcontracted the services of Benjamin
Manalastas' company, BMT Trucking Services (BMT), to transport the shipment from the port
to the Binan warehouse.3 Incidentally, TMBI notified Sony who had no objections to the
arrangement.4chanrobleslaw
Four BMT trucks picked up the shipment from the port at about 11:00 a.m. of October 7,
2000. However, BMT could not immediately undertake the delivery because of the truck
ban and because the following day was a Sunday. Thus, BMT scheduled the delivery on
October 9, 2000.
In the early morning of October 9, 2000, the four trucks left BMT's garage for
Laguna.5 However, only three trucks arrived at Sony's Binan warehouse.
At around 12:00 noon, the truck driven by Rufo Reynaldo Lapesura (NSF-391) was found
abandoned along the Diversion Road in Filinvest, Alabang, Muntinlupa City.6 Both the
driver and the shipment were missing.
Later that evening, BMT's Operations Manager Melchor Manalastas informed Victor Torres,
TMBI's General Manager, of the development.7 They went to Muntinlupa together to
inspect the truck and to report the matter to the police.8chanrobleslaw
Victor Torres also filed a complaint with the National Bureau of Investigation (NBI) against
Lapesura for "hijacking." 9 The complaint resulted in a recommendation by the NBI to the
Manila City Prosecutor's Office to prosecute Lapesura for qualified theft.10chanrobleslaw
TMBI notified Sony of the loss through a letter dated October 10, 2000,11 It also sent BMT a
letter dated March 29, 2001, demanding payment for the lost shipment. BMT refused to
pay, insisting that the goods were "hijacked."
In the meantime, Sony filed an insurance claim with the Mitsui, the insurer of the goods.
After evaluating the merits of the claim, Mitsui paid Sony PHP7,293,386.23 corresponding to
the value of the lost goods.12chanrobleslaw
After being subrogated to Sony's rights, Mitsui sent TMBI a demand letter dated August 30,
2001 for payment of the lost goods. TMBI refused to pay Mitsui's claim. As a result, Mitsui
filed a complaint against TMBI on November 6, 2001,
TMBI, in turn, impleaded Benjamin Manalastas, the proprietor of BMT, as a third-party
defendant. TMBI alleged that BMT's driver, Lapesura, was responsible for the theft/hijacking
of the lost cargo and claimed BMT's negligence as the proximate cause of the loss. TMBI
prayed that in the event it is held liable to Mitsui for the loss, it should be reimbursed by
BMT,
At the trial, it was revealed that BMT and TMBI have been doing business with each other
since the early 80's. It also came out that there had been a previous hijacking incident
involving Sony's cargo in 1997, but neither Sony nor its insurer filed a complaint against BMT
or TMBI.13chanrobleslaw
On August 5, 2008, the RTC found TMBI and Benjamin Manalastas jointly and solidarity
liable to pay Mitsui PHP 7,293,386.23 as actual damages, attorney's fees equivalent to 25%
of the amount claimed, and the costs of the suit.14 The RTC held that TMBI and Manalastas
were common carriers and had acted negligently.
Both TMBI and BMT appealed the RTC's verdict.
TMBI denied that it was a common carrier required to exercise extraordinary diligence. It
maintains that it exercised the diligence of a good father of a family and should be
absolved of liability because the truck was "hijacked" and this was a fortuitous event.
BMT claimed that it had exercised extraordinary diligence over the lost shipment, and
argued as well that the loss resulted from a fortuitous event.
On October 14, 2010, the CA affirmed the RTC's decision but reduced the award of
attorney's fees to PHP 200,000.
The CA held: (1) that "hijacking" is not necessarily a fortuitous event because the term
refers to the general stealing of cargo during transit;15 (2) that TMBI is a common carrier
engaged in the business of transporting goods for the general public for a fee; 16 (3) even if
the "hijacking" were a fortuitous event, TMBI's failure to observe extraordinary diligence in
overseeing the cargo and adopting security measures rendered it liable for the loss; 17 and
(4) even if TMBI had not been negligent in the handling, transport and the delivery of the
shipment, TMBI still breached its contractual obligation to Sony when it failed to deliver the
shipment.18chanrobleslaw

TMBI disagreed with the CA's ruling and filed the present petition on December 3, 2010.
The Arguments
TMBI's Petition
TMBI insists that the hijacking of the truck was a fortuitous event. It contests the CA's finding
that neither force nor intimidation was used in the taking of the cargo. Considering
Lapesura was never found, the Court should not discount the possibility that he was a
victim rather than a perpetrator.19chanrobleslaw
TMBI denies being a common carrier because it does not own a single truck to transport its
shipment and it does not offer transport services to the public for compensation.20 It
emphasizes that Sony knew TMBI did not have its own vehicles and would subcontract the
delivery to a third-party.
Further, TMBI now insists that the service it offered was limited to the processing of
paperwork attendant to the entry of Sony's goods. It denies that delivery of the shipment
was a part of its obligation.21chanrobleslaw
TMBI solely blames BMT as it had full control and custody of the cargo when it was
lost.22 BMT, as a common carrier, is presumed negligent and should be responsible for the
loss.
BhtT's Comment
BMT insists that it observed the required standard of care.23 Like the petitioner, BMT
maintains that the hijacking was a fortuitous event - a force majeure - that exonerates it
from liability.24 It points out that Lapesura has never been seen again and his fate remains
a mystery. BMT likewise argues that the loss of the cargo necessarily showed that the taking
was with the use of force or intimidation.25cralawredchanrobleslaw
If there was any attendant negligence, BMT points the finger on TMBI who failed to send a
representative to accompany the shipment.26 BMT further blamed TMBI for the latter's
failure to adopt security measures to protect Sony's cargo.27chanrobleslaw
Mitsui's Comment
Mitsui counters that neither TMBI nor BMT alleged or proved during the trial that the taking
of the cargo was accompanied with grave or irresistible threat, violence, or
force.28 Hence, the incident cannot be considered "force majeure" and TMBI remains
liable for breach of contract.
Mitsui emphasizes that TMBI's theory - that force or intimidation must have been used
because Lapesura was never found - was only raised for the first time before this Court.29 It
also discredits the theory as a mere conjecture for lack of supporting evidence.
Mitsui adopts the CA's reasons to conclude that TMBI is a common carrier. It also points out
Victor Torres' admission during the trial that TMBI's brokerage service includes the eventual
delivery of the cargo to the consignee.30chanrobleslaw
Mitsui invokes as well the legal presumption of negligence against TMBI, pointing out that
TMBI simply entrusted the cargo to BMT without adopting any security measures despite:
(1) a previous hijacking incident, when TMBI lost Sony's cargo; and (2) TMBI's knowledge
that the cargo was worth more than 10 million pesos.31chanrobleslaw
Mitsui affirms that TMBI breached the contract of carriage through its negligent handling of
the cargo, resulting in its loss.
The Court's Ruling
A brokerage may be considered a common
carrier if it also undertakes to deliver the
goods for its customers
Common carriers are persons, corporations, firms or associations engaged in the business
of transporting passengers or goods or both, by land, water, or air, for compensation,
offering their services to the public.32 By the nature of their business and for reasons of
public policy, they are bound to observe extraordinary diligence in the vigilance over the
goods and in the safety of their passengers.33chanrobleslaw
In A.F. Sanchez Brokerage Inc. v. Court of Appeals,34we held that a customs broker - whose
principal business is the preparation of the correct customs declaration and the proper
shipping documents - is still considered a common carrier if it also undertakes to deliver the
goods for its customers. The law does not distinguish between one whose principal business
activity is the carrying of goods and one who undertakes this task only as an ancillary
activity.35 This ruling has been reiterated in Schmitz Transport &Brokerage Corp. v. Transport
Venture, Inc.,36 Loadmasters Customs Services, Inc. v. Glodel Brokerage
Corporation,37 and Wesrwind Shipping Corporation v. UCPB General Insurance Co.,
Inc.38chanrobleslaw
Despite TMBI's present denials, we find that the delivery of the goods is an integral, albeit
ancillary, part of its brokerage services. TMBI admitted that it was contracted to facilitate,
process, and clear the shipments from the customs authorities, withdraw them from the
pier, then transport and deliver them to Sony's warehouse in Laguna.39chanrobleslaw
Further, TMBI's General Manager Victor Torres described the nature of its services as follows:
ATTY. VIRTUDAZO: Could you please tell the court what is the nature of the business of
[TMBI]?
Witness MR. Victor Torres of Torres Madrid: We are engaged in customs brokerage business.
We acquire the release documents from the Bureau of Customs and eventually deliver the
cargoes to the consignee's warehouse and we are engaged in that kind of business, sir. 40
That TMBI does not own trucks and has to subcontract the delivery of its clients' goods, is
immaterial. As long as an entity holds itself to the public for the transport of goods as a
business, it is considered a common carrier regardless of whether it owns the vehicle used
or has to actually hire one.41chanrobleslaw
Lastly, TMBI's customs brokerage services - including the transport/delivery of the cargo -
are available to anyone willing to pay its fees. Given these circumstances, we find it
undeniable that TMBI is a common carrier.
Consequently, TMBI should be held responsible for the loss, destruction, or deterioration of
the goods it transports unless it results from:
(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act 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;
(5) Order or act of competent public authority.42chanroblesvirtuallawlibrary
For all other cases - such as theft or robbery - a common carrier is presumed to have been
at fault or to have acted negligently, unless it can prove that it observed extraordinary
diligence.43chanrobleslaw
Simply put, the theft or the robbery of the goods is not considered a fortuitous event or a
force majeure. Nevertheless, a common carrier may absolve itself of liability for a resulting
loss: (1) if it proves that it exercised extraordinary diligence in transporting and safekeeping
the goods;44 or (2) if it stipulated with the shipper/owner of the goods to limit its liability for
the loss, destruction, or deterioration of the goods to a degree less than extraordinary
diligence.45chanrobleslaw
However, a stipulation diminishing or dispensing with the common carrier's liability for acts
committed by thieves or robbers who do not act with grave or irresistible threat, violence,
or force is void under Article 1745 of the Civil Code for being contrary to public
policy. 46Jurisprudence, too, has expanded Article 1734's five exemptions. De Guzman v.
Court of Appeals47 interpreted Article 1745 to mean that a robbery attended by "grave or
irresistible threat, violence or force" is a fortuitous event that absolves the common carrier
from liability.
In the present case, the shipper, Sony, engaged the services of TMBI, a common carrier, to
facilitate the release of its shipment and deliver the goods to its warehouse. In turn, TMBI
subcontracted a portion of its obligation - the delivery of the cargo - to another common
carrier, BMT.
Despite the subcontract, TMBI remained responsible for the cargo. Under Article 1736, a
common carrier's extraordinary responsibility over the shipper's goods lasts from the time
these goods are unconditionally placed in the possession of, and received by, the carrier
for transportation, until they are delivered, actually or constructively, by the carrier to the
consignee. 48chanrobleslaw
That the cargo disappeared during transit while under the custody of BMT - TMBI's
subcontractor - did not diminish nor terminate TMBFs responsibility over the cargo. Article
1735 of the Civil Code presumes that it was at fault.
Instead of showing that it had acted with extraordinary diligence, TMBI simply argued that
it was not a common carrier bound to observe extraordinary diligence. Its failure to
successfully establish this premise carries with it the presumption of fault or negligence, thus
rendering it liable to Sony/Mitsui for breach of contract.
Specifically, TMBI's current theory - that the hijacking was attended by force or intimidation
- is untenable.
First, TMBI alleged in its Third Party Complaint against BMT that Lapesura was responsible for
hijacking the shipment.49 Further, Victor Torres filed a criminal complaint against Lapesura
with the NBI.50 These actions constitute direct and binding admissions that Lapesura stole
the cargo. Justice and fair play dictate that TMBI should not be allowed to change its legal
theory on appeal.
Second, neither TMBI nor BMT succeeded in substantiating this theory through evidence.
Thus, the theory remained an unsupported allegation no better than speculations and
conjectures. The CA therefore correctly disregarded the defense of force majeure.
TMBI and BMT are not solidarity liable
to Mitsui
We disagree with the lower courts" ruling that TMBI and BMT are solidarity liable to Mitsui for
the loss as joint tortfeasors. The ruling was based on Article 2194 of the Civil Code:

chanRoblesvirtualLawlibrary
Art. 2194. The responsibility of two or more persons who are liable for quasi-delict is solidary.
Notably, TMBI's liability to Mitsui does not stem from a quasi-delict (culpa aquiliana) but
from its breach of contract (culpa contractual). The tie that binds TMBI with Mitsui is
contractual, albeit one that passed on to Mitsui as a result of TMBI's contract of carriage
with Sony to which Mitsui had been subrogated as an insurer who had paid Sony's
insurance claim. The legal reality that results from this contractual tie precludes the
application of quasi-delict based Article 2194.
A third party may recover from a
common carrier for quasi-delict
but must prove actual n egligence
We likewise disagree with the finding that BMT is directly liable to Sony/Mitsui for the loss of
the cargo. While it is undisputed that the cargo was lost under the actual custody of BMT
(whose employee is the primary suspect in the hijacking or robbery of the shipment), no
direct contractual relationship existed between Sony/Mitsui and BMT. If at all, Sony/Mitsui's
cause of action against BMT could only arise from quasi-delict, as a third party suffering
damage from the action of another due to the latter's fault or negligence, pursuant to
Article 2176 of the Civil Code.51chanrobleslaw
We have repeatedly distinguished between an action for breach of contract {culpa
contractual) and an action for quasi-delict (culpa aquiliana).
In culpa contractual, the plaintiff only needs to establish the existence of the contract and
the obligor's failure to perform his obligation. It is not necessary for the plaintiff to prove or
even allege that the obligor's non- compliance was due to fault or negligence because
Article 1735 already presumes that the common carrier is negligent. The common carrier
can only free itself from liability by proving that it observed extraordinary diligence. It
cannot discharge this liability by shifting the blame on its agents or
servants.52chanrobleslaw
On the other hand, the plaintiff in culpa aquiliana must clearly establish the defendant's
fault or negligence because this is the very basis of the action.53 Moreover, if the injury to
the plaintiff resulted from the act or omission of the defendant's employee or servant, the
defendant may absolve himself by proving that he observed the diligence of a good
father of a family to prevent the damage,54chanrobleslaw
In the present case, Mitsui's action is solely premised on TMBl's breach of contract. Mitsui
did not even sue BMT, much less prove any negligence on its part. If BMT has entered the
picture at all, it 'is because TMBI sued it for reimbursement for the liability that TMBI might
incur from its contract of carriage with Sony/Mitsui. Accordingly, there is no basis to directly
hold BMT liable to Mitsui for quasi-delict.
BMT is liable to TMBI for breach
of their contract of carriage
We do not hereby say that TMBI must absorb the loss. By subcontracting the cargo delivery
to BMT, TMBI entered into its own contract of carriage with a fellow common carrier.
The cargo was lost after its transfer to BMT's custody based on its contract of carriage with
TMBI. Following Article 1735, BMT is presumed to be at fault. Since BMT failed to prove that it
observed extraordinary diligence in the performance of its obligation to TMBI, it is liable to
TMBI for breach of their contract of carriage.
In these lights, TMBI is liable to Sony (subrogated by Mitsui) for breaching the contract of
carriage. In turn, TMBI is entitled to reimbursement from BMT due to the latter's own breach
of its contract of carriage with TMBI. The proverbial buck stops with BMT who may either:
(a) absorb the loss, or (b) proceed after its missing driver, the suspected culprit, pursuant to
Article 2181,55chanrobleslaw
WHEREFORE, the Court hereby ORDERS petitioner Torres- Madrid Brokerage, Inc. to pay the
respondent FEB Mitsui Marine Insurance Co., Inc. the following:
chanRoblesvirtualLawlibrary
a. Actual damages in the amount of PHP 7,293,386.23 plus legal interest from the
time the complaint was filed until it is fully paid;
b. Attorney's fees in the amount of PHP 200,000.00; and cralawlawlibrary
c. Costs of suit.
Respondent Benjamin P. Manalastas is in turn ORDERED to REIMBURSE Torres-Madrid
Brokerage, Inc. of the above-mentioned amounts.
SO ORDERED
THIRD DIVISION
[G.R. No. 146018. June 25, 2003]
EDGAR COKALIONG SHIPPING LINES, INC., petitioner, vs. UCPB GENERAL INSURANCE
COMPANY, INC., respondent.
DECISION
PANGANIBAN, J.:
The liability of a common carrier for the loss of goods may, by stipulation in the bill of
lading, be limited to the value declared by the shipper. On the other hand, the liability of
the insurer is determined by the actual value covered by the insurance policy and the
insurance premiums paid therefor, and not necessarily by the value declared in the bill of
lading.
The Case
Before the Court is a Petition for Review[1] under Rule 45 of the Rules of Court, seeking to set
aside the August 31, 2000 Decision[2] and the November 17, 2000 Resolution[3] of the Court
of Appeals[4] (CA) in CA-GR SP No. 62751.The dispositive part of the Decision reads:
IN THE LIGHT OF THE FOREGOING, the appeal is GRANTED. The Decision appealed from
is REVERSED. [Petitioner] is hereby condemned to pay to [respondent] the total amount
of P148,500.00, with interest thereon, at the rate of 6% per annum, from date of this
Decision of the Court. [Respondents] claim for attorneys fees [is] DISMISSED. [Petitioners]
counterclaims are DISMISSED.[5]
The assailed Resolution denied petitioners Motion for Reconsideration.
On the other hand, the disposition of the Regional Trial Courts[6] Decision,[7] which was later
reversed by the CA, states:
WHEREFORE, premises considered, the case is hereby DISMISSED for lack of merit.
No cost.[8]
The Facts
The facts of the case are summarized by the appellate court in this wise:
Sometime on December 11, 1991, Nestor Angelia delivered to the Edgar Cokaliong
Shipping Lines, Inc. (now Cokaliong Shipping Lines), [petitioner] for brevity, cargo consisting
of one (1) carton of Christmas dcor and two (2) sacks of plastic toys, to be transported on
board the M/V Tandag on its Voyage No. T-189 scheduled to depart from Cebu City, on
December 12, 1991, for Tandag, Surigao del Sur. [Petitioner] issued Bill of Lading No. 58,
freight prepaid, covering the cargo. Nestor Angelia was both the shipper and consignee
of the cargo valued, on the face thereof, in the amount of P6,500.00. Zosimo Mercado
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
for transportation thereof from Cebu City to Tandag, Surigao del Sur, on board the said
vessel, and said voyage. [Petitioner] issued Bill of Lading No. 59 covering the cargo which,
on the face thereof, was valued in the amount of P14,000.00. Under the Bill of Lading,
Zosimo Mercado was both the shipper and consignee of the cargo.
On December 12, 1991, Feliciana Legaspi insured the cargo, covered by Bill of Lading No.
59, with the UCPB General Insurance Co., Inc., [respondent] for brevity, for the amount
of P100,000.00 against all risks under Open Policy No. 002/91/254 for which she was issued,
by [respondent], Marine Risk Note No. 18409 on said date. She also insured the cargo
covered by Bill of Lading No. 58, with [respondent], for the amount of P50,000.00,
under Open Policy No. 002/91/254 on the basis of which [respondent] issued Marine Risk
Note No. 18410 on said date.
When the vessel left port, it had thirty-four (34) passengers and assorted cargo on board,
including the goods of Legaspi. 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. The Captain filed the required Marine Protest.
Shortly thereafter, Feliciana Legaspi filed a claim, with [respondent], for the value of the
cargo insured under Marine Risk Note No. 18409 and covered by Bill of Lading No. 59. She
submitted, in support of her claim, a Receipt, dated December 11, 1991, purportedly
signed by Zosimo Mercado, and Order Slips purportedly signed by him for the goods he
received from Feliciana Legaspi valued in the amount of P110,056.00. [Respondent]
approved the claim of Feliciana Legaspi and drew and issued UCPB Check No. 612939,
dated March 9, 1992, in the net amount of P99,000.00, in settlement of her claim after
which she executed a Subrogation Receipt/Deed, for said amount, in favor of
[respondent]. She also filed a claim for the value of the cargo covered by Bill of Lading No.
58. She submitted to [respondent] a Receipt, dated December 11, 1991 and Order Slips,
purportedly signed by Nestor Angelia for the goods he received from Feliciana Legaspi
valued at P60,338.00. [Respondent] approved her claim and remitted to Feliciana Legaspi
the net amount of P49,500.00, after which she signed a Subrogation Receipt/Deed, dated
March 9, 1992, in favor of [respondent].
On July 14, 1992, [respondent], as subrogee of Feliciana Legaspi, filed a complaint
anchored on torts against [petitioner], with the Regional Trial Court of Makati City, for the
collection of the total principal amount of P148,500.00, which it paid to Feliciana Legaspi
for the loss of the cargo, praying that judgment be rendered in its favor and against the
[petitioner] as follows:
WHEREFORE, it is respectfully prayed of this Honorable Court that after due hearing,
judgment be rendered ordering [petitioner] to pay [respondent] the following.
1. Actual damages in the amount of P148,500.00 plus interest thereon at the legal rate
from the time of filing of this complaint until fully paid;
2. Attorneys fees in the amount of P10,000.00; and
3. Cost of suit.
[Respondent] further prays for such other reliefs and remedies as this Honorable Court may
deem just and equitable under the premises.
[Respondent] alleged, inter alia, in its complaint, that the cargo subject of its complaint
was delivered to, and received by, [petitioner] for transportation to Tandag, Surigao del
Sur under Bill of Ladings, Annexes A and B of the complaint; that the loss of the cargo was
due to the negligence of the [petitioner]; and that Feliciana Legaspi had
executed Subrogation Receipts/Deeds in favor of [respondent] after paying to her the
value of the cargo on account of the Marine Risk Notes it issued in her favor covering the
cargo.
In its Answer to the complaint, [petitioner] alleged that: (a) [petitioner] was cleared by the
Board of Marine Inquiry of any negligence in the burning of the vessel; (b) the complaint
stated no cause of action against [petitioner]; and (c) the shippers/consignee had
already been paid the value of the goods as stated in the Bill of Lading and, hence,
[petitioner] cannot be held liable for the loss of the cargo beyond the value thereof
declared in the Bill of Lading.
After [respondent] rested its case, [petitioner] prayed for and was allowed, by the Court a
quo, to take the depositions of Chester Cokaliong, the Vice-President and Chief Operating
Officer of [petitioner], and a resident of Cebu City, and of Noel Tanyu, an officer of the
Equitable Banking Corporation, in Cebu City, and a resident of Cebu City, to be given
before the Presiding Judge of Branch 106 of the Regional Trial Court of Cebu City. Chester
Cokaliong and Noel Tanyu did testify, by way of deposition, before the Court and
declared inter alia, that: [petitioner] is a family corporation like the Chester Marketing, Inc.;
Nestor Angelia had been doing business with [petitioner] and Chester Marketing, Inc., for
years, and incurred an account with Chester Marketing, Inc. for his purchases from said
corporation; [petitioner] did issue Bills of Lading Nos. 58 and 59 for the cargo described
therein with Zosimo Mercado and Nestor Angelia as shippers/consignees, respectively; the
engine room of the M/V Tandag caught fire after it passed the Mandaue/Mactan Bridge
resulting in the total loss of the vessel and its cargo; an investigation was conducted by the
Board of Marine Inquiry of the Philippine Coast Guard which rendered a Report, dated
February 13, 1992 absolving [petitioner] of any responsibility on account of the fire, which
Report of the Board was approved by the District Commander of the Philippine Coast
Guard; a few days after the sinking of the vessel, a representative of the Legaspi Marketing
filed claims for the values of the goods under Bills of Lading Nos. 58 and 59 in behalf of the
shippers/consignees, Nestor Angelia and Zosimo Mercado; [petitioner] was able to
ascertain, from the shippers/consignees and the representative of the Legaspi Marketing
that the cargo covered by Bill of Lading No. 59 was owned by Legaspi Marketing and
consigned to Zosimo Mercado while that covered by Bill of Lading No. 58 was purchased
by Nestor Angelia from the Legaspi Marketing; that [petitioner] approved the claim of
Legaspi Marketing for the value of the cargo under Bill of Lading No. 59 and remitted to
Legaspi Marketing the said amount under Equitable Banking Corporation Check No.
20230486 dated August 12, 1992, in the amount of P14,000.00 for which the representative
of the Legaspi Marketing signed Voucher No. 4379, dated August 12, 1992, for the said
amount of P14,000.00 in full payment of claims under Bill of Lading No. 59; that [petitioner]
approved the claim of Nestor Angelia in the amount of P6,500.00 but that since the latter
owed Chester Marketing, Inc., for some purchases, [petitioner] merely set off the amount
due to Nestor Angelia under Bill of Lading No. 58 against his account with Chester
Marketing, Inc.; [petitioner] lost/[misplaced] the original of the check after it was received
by Legaspi Marketing, hence, the production of the microfilm copy by Noel Tanyu of the
Equitable Banking Corporation; [petitioner] never knew, before settling with Legaspi
Marketing and Nestor Angelia that the cargo under both Bills of Lading were insured with
[respondent], or that Feliciana Legaspi filed claims for the value of the cargo with
[respondent] and that the latter approved the claims of Feliciana Legaspi and paid the
total amount of P148,500.00 to her; [petitioner] came to know, for the first time, of the
payments by [respondent] of the claims of Feliciana Legaspi when it was served with the
summons and complaint, on October 8, 1992; after settling his claim, Nestor Angelia x x x
executed the Release and Quitclaim, dated July 2, 1993, and Affidavit, dated July 2, 1993
in favor of [respondent]; hence, [petitioner] was absolved of any liability for the loss of the
cargo covered by Bills of Lading Nos. 58 and 59; and even if it was, its liability should not
exceed the value of the cargo as stated in the Bills of Lading.
[Petitioner] did not anymore present any other witnesses on its evidence-in-chief. x x
x[9] (Citations omitted)
Ruling of the Court of Appeals
The CA held that petitioner had failed to prove that the fire which consumed the vessel
and its cargo was caused by something other than its negligence in the upkeep,
maintenance and operation of the vessel.[10]
Petitioner had paid P14,000 to Legaspi Marketing for the cargo covered by Bill of Lading
No. 59. The CA, however, held that the payment did not extinguish petitioners obligation to
respondent, because there was no evidence that Feliciana Legaspi (the insured) was the
owner/proprietor of Legaspi Marketing. The CA also pointed out the impropriety of treating
the claim under Bill of Lading No. 58 -- covering cargo valued therein at P6,500 -- as a
setoff against Nestor Angelias account with Chester Enterprises, Inc.
Finally, it ruled that respondent is not bound by the valuation of the cargo under the Bills of
Lading, x x x nor is the value of the cargo under said Bills of Lading conclusive on the
[respondent]. This is so because, in the first place, the goods were insured with the
[respondent] for the total amount of P150,000.00, which amount may be considered as the
face value of the goods.[11]
Hence this Petition.[12]
Issues
Petitioner raises for our consideration the following alleged errors of the CA:
I Having originated from an unchecked crack in the fuel oil service tank, the fire could not
The Honorable Court of Appeals erred, granting arguendo that petitioner is liable, in
holding that petitioners liability should be based on the actual insured value of the goods
and not from actual valuation declared by the shipper/consignee in the bill of lading.
II
The Court of Appeals erred in not affirming the findings of the Philippine Coast Guard, as
sustained by the trial court a quo, holding that the cause of loss of the aforesaid cargoes
under Bill of Lading Nos. 58 and 59 was due to force majeure and due diligence was
[exercised] by petitioner prior to, during and immediately after the fire on [petitioners]
vessel.
III
The Court of Appeals erred in not holding that respondent UCPB General Insurance has no
cause of action against the petitioner.[13]
In sum, the issues are: (1) Is petitioner liable for the loss of the goods? (2) If it is liable, what is
the extent of its liability?
This Courts Ruling
The Petition is partly meritorious.
First Issue:
Liability for Loss
Petitioner argues that 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.
We are 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. Fuel spurted out of the crack and dripped to the heating exhaust
manifold, causing the ship to burst into flames. 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.
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.[14] Hence, fire is not considered a natural disaster or calamity. In Eastern
Shipping Lines, Inc. v. Intermediate Appellate Court,[15] we explained:
x x x. This must be so as it arises almost invariably from some act of man or by human
means. 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.
Article 1680 of the Civil Code, which considers fire as an extraordinary fortuitous event
refers to leases or rural lands where a reduction of the rent is allowed when more than one-
half of the fruits have been lost due to such event, considering that the law adopts a
protective policy towards agriculture.
As the peril of fire is not comprehended within the exceptions in Article 1734, supra, Article
1735 of the Civil Code provides that in all cases other than those mentioned in Article 1734,
the common carrier shall be presumed to have been at fault or to have acted negligently,
unless it proves that it has observed the extraordinary diligence required by law.
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.[16]
The law provides that a common carrier is presumed to have been negligent if it fails to
prove that it exercised extraordinary vigilance over the goods it transported. 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. It failed to show when the last inspection and care
of the auxiliary engine fuel oil service tank was made, what the normal practice was for its
maintenance, or some other evidence to establish that it had exercised extraordinary
diligence. 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. Necessarily, in accordance
with Article 1735[17] of the Civil Code, we hold petitioner responsible for the loss of the
goods covered by Bills of Lading Nos. 58 and 59.
Second Issue:
Extent of Liability
Respondent contends that petitioners liability should be based on the actual insured value
of the goods, subject of this case. On the other hand, petitioner claims that its liability
should be limited to the value declared by the shipper/consignee in the Bill of Lading.
The records[18] 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.[19] The attempt by respondent to make light of this stipulation is
unconvincing. As it had the consignees copies of the Bills of Lading,[20] it could have easily
produced those copies, instead of relying on mere allegations and suppositions. However,
it presented mere photocopies thereof to disprove petitioners evidence showing the
existence of the above stipulation.
A stipulation that limits liability is valid[21] as long as it is not against public policy. In Everett
Steamship Corporation v. Court of Appeals, [22] the Court stated:
A stipulation in the bill of lading limiting the common carriers liability for loss or destruction
of a cargo to a certain sum, unless the shipper or owner declares a greater value, is
sanctioned by law, particularly Articles 1749 and 1750 of the Civil Code which provides:
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.
Such limited-liability clause has also been consistently upheld by this Court in a number of
cases. Thus, in Sea-Land Service, Inc. vs. Intermediate Appellate Court, we ruled:
It seems clear that even if said section 4 (5) of the Carriage of Goods by Sea Act did not
exist, the validity and binding effect of the liability limitation clause in the bill of lading here
are nevertheless fully sustainable on the basis alone of the cited Civil Code Provisions. That
said stipulation is just and reasonable is arguable from the fact that it echoes Art. 1750 itself
in providing a limit to liability only if a greater value is not declared for the shipment in the
bill of lading. To hold otherwise would amount to questioning the justness and fairness of
the law itself, and this the private respondent does not pretend to do. But over and above
that consideration, the just and reasonable character of such stipulation is implicit in it
giving the shipper or owner the option of avoiding accrual of liability limitation by the
simple and surely far from onerous expedient of declaring the nature and value of the
shipment in the bill of lading.
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.
The bill of lading subject of the present controversy specifically provides, among others:
18. All claims for which the carrier may be liable shall be adjusted and settled on the basis
of the shippers net invoice cost plus freight and insurance premiums, if paid, and in no
event shall the carrier be liable for any loss of possible profits or any consequential loss.
The carrier shall not be liable for any loss of or any damage to or in any connection with,
goods in an amount exceeding One Hundred Thousand Yen in Japanese Currency
(100,000.00) or its equivalent in any other currency per package or customary freight unit
(whichever is least) unless the value of the goods higher than this amount is declared in
writing by the shipper before receipt of the goods by the carrier and inserted in the Bill of
Lading and extra freight is paid as required.
The above stipulations are, to our mind, reasonable and just. In the bill of lading, the carrier
made it clear that its liability would only be up to One Hundred Thousand (Y100,000.00)
Yen. However, the shipper, Maruman Trading, had the option to declare a higher
valuation if the value of its cargo was higher than the limited liability of the
carrier. Considering that the shipper did not declare a higher valuation, it had itself to
blame for not complying with the stipulations. (Italics supplied)
In the present case, the stipulation limiting petitioners liability is not contrary to public
policy. In fact, its just and reasonable character is evident. 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 from placing the actual value of the goods therein. 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. Hence, a shipper/consignee that undervalues the real worth of the goods it seeks
to transport does not only violate a valid contractual stipulation, but commits a fraudulent
act when it seeks to make the common carrier liable for more than the amount it declared
in the bill of lading.
Indeed, Zosimo Mercado and Nestor Angelia misled petitioner by undervaluing the goods
in their respective Bills of Lading. Hence, petitioner was exposed to a risk that was
deliberately hidden from it, and from which it could not protect itself.
It is well to point out that, for assuming a higher risk (the alleged actual value of the goods)
the insurance company was paid the correct higher premium by Feliciana Legaspi; while
petitioner was paid a fee lower than what it was entitled to for transporting the goods that
had been deliberately undervalued by the shippers in the Bill of Lading. Between the two
of them, the insurer should bear the loss in excess of the value declared in the Bills of
Lading. This is the just and equitable solution.
In Aboitiz Shipping Corporation v. Court of Appeals,[23] the description of the nature and
the value of the goods shipped were declared and reflected in the bill of lading, like in the
present case. The Court therein considered this declaration as the basis of the carriers
liability and ordered payment based on such amount. Following this ruling, 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.
We find no cogent reason to disturb the CAs finding that Feliciana Legaspi was the owner
of the goods covered by Bills of Lading Nos. 58 and 59. Undoubtedly, the goods were
merely consigned to Nestor Angelia and Zosimo Mercado, respectively; thus, Feliciana
Legaspi or her subrogee (respondent) was entitled to the goods or, in case of loss, to
compensation therefor. There is no evidence showing that petitioner paid her for the loss of
those goods. It does not even claim to have paid her.
On the other hand, Legaspi Marketing filed with petitioner a claim for the lost goods under
Bill of Lading No. 59, for which the latter subsequently paid P14,000. But nothing in the
records convincingly shows that the former was the owner of the goods. Respondent was,
however, able to prove that it was Feliciana Legaspi who owned those goods, and who
was thus entitled to payment for their loss. Hence, the claim for the goods under Bill of
Lading No. 59 cannot be deemed to have been extinguished, because payment was
made to a person who was not entitled thereto.
With regard to the claim for the goods that were covered by Bill of Lading No. 58 and
valued at P6,500, the parties have not convinced us to disturb the findings of the CA that
compensation could not validly take place. Thus, we uphold the appellate courts ruling on
this point.
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.
SO ORDERED.
Puno, (Chairman), Sandoval-Gutierrez, Corona, and Carpio-Morales, JJ., concur.

SECOND DIVISION
[G.R. No. 127897. November 15, 2001]
DELSAN TRANSPORT LINES, INC., petitioner, vs. THE HON. COURT OF APPEALS and AMERICAN
HOME ASSURANCE CORPORATION, respondents.
DECISION
DE LEON, JR., J.:
Before us is a petition for review on certiorari of the Decision[1] of the Court of Appeals in
CA-G.R. CV No. 39836 promulgated on June 17, 1996, reversing the decision of the
Regional Trial Court of Makati City, Branch 137, ordering petitioner to pay private
respondent the sum of Five Million Ninety-Six Thousand Six Hundred Thirty-Five Pesos and
Fifty-Seven Centavos (P5,096,635.57) and costs and the Resolution [2] dated January 21,
1997 which denied the subsequent motion for reconsideration.
The facts show that Caltex Philippines (Caltex for brevity) entered into a contract of
affreightment with the petitioner, Delsan Transport Lines, Inc., for a period of one year
whereby the said common carrier agreed to transport Caltexs industrial fuel oil from the
Batangas-Bataan Refinery to different parts of the country. Under the contract, petitioner
took on board its vessel, MT Maysun, 2,277.314 kiloliters of industrial fuel oil of Caltex to be
delivered to the Caltex Oil Terminal in Zamboanga City. The shipment was insured with the
private respondent, American Home Assurance Corporation.
On August 14, 1986, MT Maysun set sail from Batangas for Zamboanga City. Unfortunately,
the vessel sank in the early morning of August 16, 1986 near Panay Gulf in the Visayas
taking with it the entire cargo of fuel oil.
Subsequently, private respondent paid Caltex the sum of Five Million Ninety-Six Thousand
Six Hundred Thirty-Five Pesos and Fifty-Seven Centavos (P5,096,635.57) representing the
insured value of the lost cargo. Exercising its right of subrogation under Article 2207 of the
New Civil Code, the private respondent demanded of the petitioner the same amount it
paid to Caltex.
Due to its failure to collect from the petitioner despite prior demand, private respondent
filed a complaint with the Regional Trial Court of Makati City, Branch 137, for collection of
a sum of money. After the trial and upon analyzing the evidence adduced, the trial court
rendered a decision on November 29, 1990 dismissing the complaint against herein
petitioner without pronouncement as to cost. The trial court found that the vessel, MT
Maysun, was seaworthy to undertake the voyage as determined by the Philippine Coast
Guard per Survey Certificate Report No. M5-016-MH upon inspection during its annual dry-
docking and that the incident was caused by unexpected inclement weather condition
or force majeure, thus exempting the common carrier (herein petitioner) from liability for
the loss of its cargo.[3]
The decision of the trial court, however, was reversed, on appeal, by the Court of
Appeals. The appellate court gave credence to the weather report issued by the
Philippine Atmospheric, Geophysical and Astronomical Services Administration (PAGASA
for brevity) which showed that from 2:00 oclock to 8:00 oclock in the morning on August
16, 1986, the wind speed remained at 10 to 20 knots per hour while the waves measured
from .7 to two (2) meters in height only in the vicinity of the Panay Gulf where the subject
vessel sank, in contrast to herein petitioners allegation that the waves were twenty (20)
feet high. In the absence of any explanation as to what may have caused the sinking of
the vessel coupled with the finding that the same was improperly manned, the appellate
court ruled that the petitioner is liable on its obligation as common carrier [4] to herein
private respondent insurance company as subrogee of Caltex. The subsequent motion for
reconsideration of herein petitioner was denied by the appellate court.
Petitioner raised the following assignments of error in support of the instant petition,[5] to wit:
I
THE COURT OF APPEALS ERRED IN REVERSING THE DECISION OF THE REGIONAL TRIAL COURT.
II
THE COURT OF APPEALS ERRED AND WAS NOT JUSTIFIED IN REBUTTING THE LEGAL
PRESUMPTION THAT THE VESSEL MT MAYSUN WAS SEAWORTHY.
III
THE COURT OF APPEALS ERRED IN NOT APPLYING THE DOCTRINE OF THE SUPREME COURT IN
THE CASE OF HOME INSURANCE CORPORATION V. COURT OF APPEALS.
Petitioner Delsan Transport Lines, Inc. invokes the provision of Section 113 of the Insurance
Code of the Philippines, which states that in every marine insurance upon a ship or freight,
or freightage, or upon any thing which is the subject of marine insurance there is an
implied warranty by the shipper that the ship is seaworthy. Consequently, the insurer will
not be liable to the assured for any loss under the policy in case the vessel would later on
be found as not seaworthy at the inception of the insurance.It theorized that when private
respondent paid Caltex the value of its lost cargo, the act of the private respondent is
equivalent to a tacit recognition that the ill-fated vessel was seaworthy; otherwise, private
respondent was not legally liable to Caltex due to the latters breach of implied warranty
under the marine insurance policy that the vessel was seaworthy.
The petitioner also alleges that the Court of Appeals erred in ruling that MT Maysun was not
seaworthy on the ground that the marine officer who served as the chief mate of the
vessel, Francisco Berina, was allegedly not qualified. Under Section 116 of the Insurance
Code of the Philippines, the implied warranty of seaworthiness of the vessel, which the
private respondent admitted as having been fulfilled by its payment of the insurance
proceeds to Caltex of its lost cargo, extends to the vessels complement.Besides, petitioner
avers that although Berina had merely a 2nd officers license, he was qualified to act as the
vessels chief officer under Chapter IV(403), Category III(a)(3)(ii)(aa) of the Philippine
Merchant Marine Rules and Regulations. In fact, all the crew and officers of MT Maysun
were exonerated in the administrative investigation conducted by the Board of Marine
Inquiry after the subject accident.[6]
In any event, petitioner further avers that private respondent failed, for unknown reason, to
present in evidence during the trial of the instant case the subject marine cargo insurance
policy it entered into with Caltex. By virtue of the doctrine laid down in the case of Home
Insurance Corporation vs. CA,[7] the failure of the private respondent to present the
insurance policy in evidence is allegedly fatal to its claim inasmuch as there is no way to
determine the rights of the parties thereto.
Hence, the legal issues posed before the Court are:
I safety of passengers transported by them, according to all the circumstances of each
Whether or not the payment made by the private respondent to Caltex for the insured
value of the lost cargo amounted to an admission that the vessel was seaworthy, thus
precluding any action for recovery against the petitioner.
II
Whether or not the non-presentation of the marine insurance policy bars the complaint for
recovery of sum of money for lack of cause of action.
We rule in the negative on both issues.
The payment made by the private respondent for the insured value of the lost cargo
operates as waiver of its (private respondent) right to enforce the term of the implied
warranty against Caltex under the marine insurance policy. However, the same cannot be
validly interpreted as an automatic admission of the vessels seaworthiness by the private
respondent as to foreclose recourse against the petitioner for any liability under its
contractual obligation as a common carrier. The fact of payment grants the private
respondent subrogatory right which enables it to exercise legal remedies that would
otherwise be available to Caltex as owner of the lost cargo against the petitioner common
carrier.[8] Article 2207 of the New Civil Code provides that:
Art. 2207. If the plaintiffs property has been insured, and he has received indemnity from
the insurance company for the injury or loss arising out of the wrong or breach of contract
complained of, the insurance company shall be subrogated to the rights of the insured
against the wrongdoer or the person who has violated the contract. If the amount paid by
the insurance company does not fully cover the injury or loss, the aggrieved party shall be
entitled to recover the deficiency from the person causing the loss or injury.
The right of subrogation has its roots in equity. It is designed to promote and to accomplish
justice and is the mode which equity adopts to compel the ultimate payment of a debt by
one who in justice and good conscience ought to pay.[9] It is not dependent upon, nor
does it grow out of, any privity of contract or upon written assignment of claim. It accrues
simply upon payment by the insurance company of the insurance claim. [10] Consequently,
the payment made by the private respondent (insurer) to Caltex (assured) operates as an
equitable assignment to the former of all the remedies which the latter may have against
the petitioner.
From the nature of their business and for reasons of public policy, common carriers are
bound to observe extraordinary diligence in the vigilance over the goods and for the
case.[11] In the event of loss, destruction or deterioration of the insured goods, common
carriers shall be responsible unless the same is brought about, among others, by flood,
storm, earthquake, lightning or other natural disaster or calamity.[12] In all other cases, 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.[13]
In order to escape liability for the loss of its cargo of industrial fuel oil belonging to Caltex,
petitioner attributes the sinking of MT Maysun to fortuitous event or force majeure. From the
testimonies of Jaime Jarabe and Francisco Berina, captain and chief mate, respectively of
the ill-fated vessel, it appears that a sudden and unexpected change of weather
condition occurred in the early morning of August 16, 1986; that at around 3:15 oclock in
the morning a squall (unos) carrying strong winds with an approximate velocity of 30 knots
per hour and big waves averaging eighteen (18) to twenty (20) feet high, repeatedly
buffeted MT Maysun causing it to tilt, take in water and eventually sink with its cargo. [14] This
tale of strong winds and big waves by the said officers of the petitioner however, was
effectively rebutted and belied by the weather report[15] from the Philippine Atmospheric,
Geophysical and Astronomical Services Administration (PAGASA), the independent
government agency charged with monitoring weather and sea conditions, showing that
from 2:00 oclock to 8:00 oclock in the morning on August 16, 1986, the wind speed
remained at ten (10) to twenty (20) knots per hour while the height of the waves ranged
from .7 to two (2) meters in the vicinity of Cuyo East Pass and Panay Gulf where the subject
vessel sank. Thus, as the appellate court correctly ruled, petitioners vessel, MT Maysun, sank
with its entire cargo for the reason that it was not seaworthy. There was no squall or bad
weather or extremely poor sea condition in the vicinity when the said vessel sank.
The appellate court also correctly opined that the petitioners witnesses, Jaime Jarabe and
Francisco Berina, ship captain and chief mate, respectively, of the said vessel, could not
be expected to testify against the interest of their employer, the herein petitioner common
carrier.
Neither may petitioner escape liability by presenting in evidence certificates [16] that tend
to show that at the time of dry-docking and inspection by the Philippine Coast Guard, the
vessel MT Maysun, was fit for voyage. These pieces of evidence do not necessarily take
into account the actual condition of the vessel at the time of the commencement of the
voyage. As correctly observed by the Court of appeals:
At the time of dry-docking and inspection, the ship may have appeared fit. The
certificates issued, however, do not negate the presumption of unseaworthiness triggered
by an unexplained sinking. Of certificates issued in this regard, authorities are likewise clear
as to their probative value, (thus):
Seaworthiness relates to a vessels actual condition. Neither the granting of classification or
the issuance of certificates establishes seaworthiness. (2-A Benedict on Admiralty, 7-3, Sec.
62)
And also:
Authorities are clear that diligence in securing certificates of seaworthiness does not satisfy
the vessel owners obligation. Also securing the approval of the shipper of the cargo, or his
surveyor, of the condition of the vessel or her stowage does not establish due diligence if
the vessel was in fact unseaworthy, for the cargo owner has no obligation in relation to
seaworthiness. (Ibid.)[17]
Additionally, the exoneration of MT Maysuns officers and crew by the Board of Marine
Inquiry merely concerns their respective administrative liabilities. It does not in any way
operate to absolve the petitioner common carrier from its civil liability arising from its failure
to observe extraordinary diligence in the vigilance over the goods it was transporting and
for the negligent acts or omissions of its employees, the determination of which properly
belongs to the courts.[18] In the case at bar, petitioner is liable for the insured value of the
lost cargo of industrial fuel oil belonging to Caltex for its failure to rebut the presumption of
fault or negligence as common carrier[19] occasioned by the unexplained sinking of its
vessel, MT Maysun, while in transit.
Anent the second issue, it is our view and so hold that the presentation in evidence of the
marine insurance policy is not indispensable in this case before the insurer may recover
from the common carrier the insured value of the lost cargo in the exercise of its
subrogatory right. The subrogation receipt, by itself, is sufficient to establish not only the
relationship of herein private respondent as insurer and Caltex, as the assured shipper of
the lost cargo of industrial fuel oil, but also the amount paid to settle the insurance
claim. The right of subrogation accrues simply upon payment by the insurance company
of the insurance claim.[20]
The presentation of the insurance policy was necessary in the case of Home Insurance
Corporation v. CA[21] (a case cited by petitioner) because the shipment therein (hydraulic
engines) passed through several stages with different parties involved in each stage. First,
from the shipper to the port of departure; second, from the port of departure to the M/S
Oriental Statesman; third, from the M/S Oriental Statesman to the M/S Pacific Conveyor;
fourth, from the M/S Pacific Conveyor to the port of arrival; fifth, from the port of arrival to
the arrastre operator; sixth, from the arrastre operator to the hauler, Mabuhay Brokerage
Co., Inc. (private respondent therein); and lastly, from the hauler to the consignee. We
emphasized in that case that in the absence of proof of stipulations to the contrary, the
hauler can be liable only for any damage that occurred from the time it received the
cargo until it finally delivered it to the consignee. Ordinarily, it cannot be held responsible
for the handling of the cargo before it actually received it. The insurance contract, which
was not presented in evidence in that case would have indicated the scope of the
insurers liability, if any, since no evidence was adduced indicating at what stage in the
handling process the damage to the cargo was sustained.
Hence, our ruling on the presentation of the insurance policy in the said case of Home
Insurance Corporation is not applicable to the case at bar. In contrast, there is no doubt
that the cargo of industrial fuel oil belonging to Caltex, in the case at bar, was lost while on
board petitioners vessel, MT Maysun, which sank while in transit in the vicinity of Panay Gulf
and Cuyo East Pass in the early morning of August 16, 1986.

WHEREFORE, the instant petition is DENIED. The Decision dated June 17, 1996 of the Court of
Appeals in CA-G.R. CV No. 39836 is AFFIRMED. Costs against the petitioner.

SO ORDERED.

THIRD DIVISION

LEA MER INDUSTRIES, INC., G.R. No. 161745

Petitioner,
Present
Panganiban, J.,
Chairman,
- versus - Sandoval-Gutierrez,
Corona,
Carpio Morales, and
Garcia, JJ
Promulgated:
MALAYAN INSURANCE CO., INC.,*
Respondent. September 30, 2005
x -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- x
DECISION
PANGANIBAN, J.:
C ommon carriers are bound to observe extraordinary diligence in their vigilance over
the goods entrusted to them, as required by the nature of their business and for reasons of
public policy. Consequently, the law presumes that common carriers are at fault or
negligent for any loss or damage to the goods that they transport. In the present case, the
evidence submitted by petitioner to overcome this presumption was sorely insufficient.
The Case
Before us is a Petition for Review[1] under Rule 45 of the Rules of Court, assailing the
October 9, 2002 Decision[2] and the December 29, 2003 Resolution[3] of the Court of
Appeals (CA) in CA-GR CV No. 66028. The challenged Decision disposed as follows:
WHEREFORE, the appeal is GRANTED. The December 7, 1999 decision of the Regional Trial
Court of Manila, Branch 42 in Civil Case No. 92-63159 is hereby REVERSED and SET ASIDE.
[Petitioner] is ordered to pay the [herein respondent] the value of the lost cargo in the
amount of P565,000.00. Costs against the [herein petitioner].[4]
Ilian Silica Mining entered into a contract of carriage with Lea Mer Industries, Inc., for the
shipment of 900 metric tons of silica sand valued at P565,000.[5] Consigned to Vulcan
Industrial and Mining Corporation, the cargo was to be transported from Palawan to
Manila. On October 25, 1991, the silica sand was placed on board Judy VII, a barge
leased by Lea Mer.[6] During the voyage, the vessel sank, resulting in the loss of the cargo.[7]
Malayan Insurance Co., Inc., as insurer, paid Vulcan the value of the lost cargo.[8] To
recover the amount paid and in the exercise of its right of subrogation, Malayan
demanded reimbursement from Lea Mer, which refused to comply. Consequently,
Malayan instituted a Complaint with the Regional Trial Court (RTC) of Manila on September
4, 1992, for the collection of P565,000 representing the amount that respondent had paid
Vulcan.[9]
On October 7, 1999, the trial court dismissed the Complaint, upon finding that the cause of
the loss was a fortuitous event.[10] The RTC noted that the vessel had sunk because of the
bad weather condition brought about by Typhoon Trining. The court ruled that petitioner
had no advance knowledge of the incoming typhoon, and that the vessel had been
cleared by the Philippine Coast Guard to travel from Palawan to Manila.[11]
Ruling of the Court of Appeals
Reversing the trial court, the CA held that the vessel was not seaworthy when it sailed for
Manila. Thus, the loss of the cargo was occasioned by petitioners fault, not by a fortuitous
event.[12]
Hence, this recourse.[13]
The Issues
Petitioner states the issues in this wise:
A. Whether or not the survey report of the cargo surveyor, Jesus Cortez, who had not been
presented as a witness of the said report during the trial of this case before the lower court
can be admitted in evidence to prove the alleged facts cited in the said report.

B. Whether or not the respondent, Court of Appeals, had validly or legally reversed the
The assailed Resolution denied reconsideration. finding of fact of the Regional Trial Court which clearly and unequivocally held that the
loss of the cargo subject of this case was caused by fortuitous event for which herein
The Facts petitioner could not be held liable.

C. Whether or not the respondent, Court of Appeals, had committed serious error and
grave abuse of discretion in disregarding the testimony of the witness from the MARINA,
Engr. Jacinto Lazo y Villegal, to the effect that the vessel Judy VII was seaworthy at the
time of incident and further in disregarding the testimony of the PAG-ASA weather
specialist, Ms. Rosa Barba y Saliente, to the effect that typhoon Trining did not hit Metro
Manila or Palawan.[14]
In the main, the issues are as follows: (1) whether petitioner is liable for the loss of the cargo,
and (2) whether the survey report of Jesus Cortez is admissible in evidence.
The Courts Ruling
The Petition has no merit.
First Issue:
Liability for Loss of Cargo
Question of Fact
The resolution of the present case hinges on whether the loss of the cargo was due to a
fortuitous event. This issue involves primarily a question of fact, notwithstanding petitioners
claim that it pertains only to a question of law. As a general rule, questions of fact may not
be raised in a petition for review.[15] The present case serves as an exception to this rule,
because the factual findings of the appellate and the trial courts vary.[16] This Court
meticulously reviewed the records, but found no reason to reverse the CA.
Rule on Common Carriers
Common carriers are persons, corporations, firms or associations engaged in the business
of carrying or transporting passengers or goods, or both -- by land, water, or air -- when this
service is offered to the public for compensation.[17] Petitioner is clearly a common carrier,
because it offers to the public its business of transporting goods through its vessels.[18]
Thus, the Court corrects the trial courts finding that petitioner became a private carrier
when Vulcan chartered it.[19] Charter parties are classified as contracts of demise (or
bareboat) and affreightment, which are distinguished as follows:
Under the demise or bareboat charter of the vessel, the charterer will generally be
considered as owner for the voyage or service stipulated. The charterer mans the vessel
with his own people and becomes, in effect, the owner pro hac vice, subject to liability to
others for damages caused by negligence. To create a demise, the owner of a vessel must
completely and exclusively relinquish possession, command and navigation thereof to the
charterer; anything short of such a complete transfer is a contract of affreightment (time or
voyage charter party) or not a charter party at all.[20]
The distinction is significant, because a demise or bareboat charter indicates a business
undertaking that is private in character. [21] Consequently, the rights and obligations of the
parties to a contract of private carriage are governed principally by their stipulations, not
by the law on common carriers.[22]
The Contract in the present case was one of affreightment, as shown by the fact that it
was petitioners crew that manned the tugboat M/V Ayalit and controlled the barge Judy
VII.[23] Necessarily, petitioner was a common carrier, and the pertinent law governs the
present factual circumstances.
Extraordinary Diligence Required
Common carriers are bound to observe extraordinary diligence in their vigilance over the
goods and the safety of the passengers they transport, as required by the nature of their
business and for reasons of public policy.[24] Extraordinary diligence requires rendering
service with the greatest skill and foresight to avoid damage and destruction to the goods
entrusted for carriage and delivery.[25]
Common carriers are presumed to have been at fault or to have acted negligently for loss
or damage to the goods that they have transported.[26] This presumption can be rebutted
only by proof that they observed extraordinary diligence, or that the loss or damage was
occasioned by any of the following causes:[27]
(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the containers;
(5) Order or act of competent public authority.[28]
Rule on Fortuitous Events
Article 1174 of the Civil Code provides that no person shall be responsible for a fortuitous
event which could not be foreseen, or which, though foreseen, was inevitable. Thus, if the
loss or damage was due to such an event, a common carrier is exempted from liability.
Jurisprudence defines the elements of a fortuitous event as follows: (a) the cause of the
unforeseen and unexpected occurrence, or the failure of the debtors to comply with their
obligations, must have been independent of human will; (b) the event that constituted
the caso fortuito must have been impossible to foresee or, if foreseeable, impossible to
avoid; (c) the occurrence must have been such as to render it impossible for the debtors
to fulfill their obligation in a normal manner; and (d) the obligor must have been free from
any participation in the aggravation of the resulting injury to the creditor.[29]
To excuse the common carrier fully of any liability, the fortuitous event must have been the
proximate and only cause of the loss.[30] Moreover, it should have exercised due diligence
to prevent or minimize the loss before, during and after the occurrence of the fortuitous
event.[31]
Loss in the Instant Case
There is no controversy regarding the loss of the cargo in the present case. As the common
carrier, petitioner bore the burden of proving that it had exercised extraordinary diligence
to avoid the loss, or that the loss had been occasioned by a fortuitous event -- an
exempting circumstance.
It was precisely this circumstance that petitioner cited to escape liability. Lea Mer claimed
that the loss of the cargo was due to the bad weather condition brought about by
Typhoon Trining.[32]Evidence was presented to show that petitioner had not been informed
of the incoming typhoon, and that the Philippine Coast Guard had given it clearance to
begin the voyage.[33] On October 25, 1991, the date on which the voyage commenced
and the barge sank, Typhoon Trining was allegedly far from Palawan, where the storm
warning was only Signal No. 1.[34]
The evidence presented by petitioner in support of its defense of fortuitous event was
sorely insufficient. As required by the pertinent law, it was not enough for the common
carrier to show that there was an unforeseen or unexpected occurrence. It had to show
that it was free from any fault -- a fact it miserably failed to prove.
First, petitioner presented no evidence that it had attempted to minimize or prevent the
loss before, during or after the alleged fortuitous event.[35] Its witness, Joey A. Draper,
testified that he could no longer remember whether anything had been done to minimize
loss when water started entering the barge.[36] This fact was confirmed during his cross-
examination, as shown by the following brief exchange:
Atty. Baldovino, Jr.:
Other than be[a]ching the barge Judy VII, were there other precautionary measure[s]
exercised by you and the crew of Judy VII so as to prevent the los[s] or sinking of barge
Judy VII?
xxxxxxxxx
Atty. Baldovino, Jr.:
Your Honor, what I am asking [relates to the] action taken by the officers and crew of
tugboat Ayalit and barge Judy VII x x x to prevent the sinking of barge Judy VII?
xxxxxxxxx
Court:
Mr. witness, did the captain of that tugboat give any instruction on how to save the barge
Judy VII?
Joey Draper:
I can no longer remember sir, because that happened [a] long time ago. [37]
Second, the alleged fortuitous event was not the sole and proximate cause of the loss.
There is a preponderance of evidence that the barge was not seaworthy when it sailed for
Manila.[38]Respondent was able to prove that, in the hull of the barge, there were holes
that might have caused or aggravated the sinking.[39] Because the presumption of
negligence or fault applied to petitioner, it was incumbent upon it to show that there were
no holes; or, if there were, that they did not aggravate the sinking.
Petitioner offered no evidence to rebut the existence of the holes. Its witness, Domingo A.
Luna, testified that the barge was in tip-top or excellent condition,[40] but that he had not
personally inspected it when it left Palawan.[41]
The submission of the Philippine Coast Guards Certificate of Inspection of Judy VII, dated
July 31, 1991, did not conclusively prove that the barge was seaworthy.[42] The regularity of
the issuance of the Certificate is disputably presumed. [43] It could be contradicted by
competent evidence, which respondent offered. Moreover, this evidence did not
necessarily take into account the actual condition of
the vessel at the time of the commencement of the voyage. [44]
Second Issue:
Admissibility of the Survey Report
Petitioner claims that the Survey Report[45] prepared by Jesus Cortez, the cargo surveyor,
should not have been admitted in evidence. The Court partly agrees. Because he did not
testify during the trial,[46] then the Report that he had prepared was hearsay and therefore
inadmissible for the purpose of proving the truth of its contents.
The Survey Report Not the Sole Evidence
The facts reveal that Cortezs Survey Report was used in the testimonies of respondents
witnesses -- Charlie M. Soriano; and Federico S. Manlapig, a cargo marine surveyor and
the vice-president of Toplis and Harding Company.[47] Soriano testified that the Survey
Report had been used in preparing the final Adjustment Report conducted by their
company.[48] The final Report showed that the barge was not seaworthy because of the
existence of the holes. Manlapig testified that he had prepared that Report after taking
into account the findings of the surveyor, as well as the pictures and the sketches of the
place where the sinking occurred.[49] Evidently, the existence of the holes was proved by
the testimonies of the witnesses, not merely by Cortez Survey Report.
Rule on Independently
Relevant Statement
That witnesses must be examined and presented during the trial,[50] and that their
testimonies must be confined to personal knowledge is required by the rules on evidence,
from which we quote:
Section 36. Testimony generally confined to personal knowledge; hearsay excluded. A
witness can testify only to those facts which he knows of his personal knowledge; that is,
which are derived from his own perception, except as otherwise provided in these rules. [51]
On this basis, the trial court correctly refused to admit Jesus Cortezs Affidavit, which
respondent had offered as evidence.[52] Well-settled is the rule that, unless the affiant is
presented as a witness, an affidavit is considered hearsay.[53]
An exception to the foregoing rule is that on independently relevant statements. A report
made by a person is admissible if it is intended to prove the tenor, not the truth, of the
statements.[54]Independent of the truth or the falsity of the statement given in the report,
the fact that it has been made is relevant. Here, the hearsay rule does not apply. [55]
In the instant case, the challenged Survey Report prepared by Cortez was admitted only
as part of the testimonies of respondents witnesses. The referral to Cortezs Report was in
relation to Manlapigs final Adjustment Report. Evidently, it was the existence of the Survey
Report that was testified to. The admissibility of that Report as part of the testimonies of the
witnesses was correctly ruled upon by the trial court.
At any rate, even without the Survey Report, petitioner has already failed to overcome the
presumption of fault that applies to common carriers.
WHEREFORE, the Petition is DENIED and the assailed Decision and Resolution are AFFIRMED.
Costs against petitioner.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 98243 July 1, 1992
ALEJANDRO ARADA, doing business under the name and style "SOUTH NEGROS
9,824 CS P176,824.80
ENTERPRISES", petitioner,
vs. On March 24, 1982, petitioner thru its crew master, Mr. Vivencio Babao, applied for a
HONORABLE COURT OF APPEALS, respondents. clearance with the Philippine Coast Guard for M/L Maya to leave the port of San Carlos
City, but due to a typhoon, it was denied clearance by SNI Antonio Prestado PN who was
PARAS, J.: then assigned at San Carlos City Coast Guard Detachment (Rollo, p. 122).
This is a petition for review on certiorari which seeks to annul and set aside the decision * of On March 25, 1982 M/L Maya was given clearance as there was no storm and the sea was
the Court of Appeals dated April 8, 1991 in CA-G.R. CV No. 20597 entitled "San Miguel calm. Hence, said vessel left for Mandaue City. While it was navigating towards Cebu, a
Corporation v. Alejandro Arada, doing business under the name and style "South Negros typhoon developed and said vessel was buffeted on all its sides by big waves. Its rudder
Enterprises", reversing the decision of the RTC, Seventh Judicial Region, Branch XII, Cebu was destroyed and it drifted for sixteen (16) hours although its engine was running.
City, ordering petitioner to pay the private respondent tho amount of P172,284.80 On March 27, 1982 at about 4:00 a.m., the vessel sank with whatever was left of its
representing the value of the cargo lost on board the ill-fated, M/L Maya with interest cargoes. The crew was rescued by a passing pump boat and was brought to
thereon at the legal rate from the date of the filing of the complaint on March 25, 1983 Calanggaman Island. Later in the afternoon, they were brought to Palompon, Leyte,
until fully paid, and the costs. where Vivencio Babao filed a marine protest (Rollo, p. 10).
The undisputed facts of the case are as follows: Alejandro Arada, herein petitioner, is the On the basis of such marine protest, the Board of Marine Inquiry conducted a hearing of
proprietor and operator of the firm South Negros Enterprises which has been organized the sinking of M/L Maya wherein private respondent was duly represented. Said Board
and established for more than ten (10) years. It is engaged in the business of small scale made its findings and recommendation dated November 7, 1983, the dispositive portion of
shipping as a common carrier, servicing the hauling of cargoes of different corporations which reads as:
and companies with the five (5) vessels it was operating (Rollo, p. 121). WHEREFORE, premises considered, this Board recommends as it is hereby recommended
On March 24, 1982. petitioner entered into a contract with private respondent to safely that the owner/operator, officers and crew of M/L Maya be exonerated or absolved from
transport as a common carrier, cargoes of the latter from San Carlos City, Negros any administrative liability on account of this incident (Exh. 1).
Occidental to Mandaue City using one of petitioner's vessels, M/L Maya. The cargoes of The Board's report containing its findings and recommendation was then forwarded to the
private respondent consisted of 9,824 cases of beer empties valued at P176,824.80, were headquarters of the Philippine Coast Guard for appropriate action. On the basis of such
itemized as follows: report, the Commandant of the Philippine Coast Guard rendered a decision dated
December 21, 1984 in SBMI Adm. Case No. 88-82 exonerating the owner/operator officers
NO. OF CASES CARGO VALUE
and crew of the ill-fated M/L Maya from any administrative liability on account of said
incident (Exh. 2).
7,515 CS PPW STENIE MTS P136.773.00
On March 25, 1983, Private respondent filed a complaint in the Regional Trial Court its first
1,542 CS PLW GRANDE MTS 23,438.40 cause of action being for the recovery of the value of the cargoes anchored on breach of
contract of carriage. After due hearing, said court rendered a decision dated July 18,
58 CS G.E. PLASTIC MTS 1,276.00 1988, the dispositive portion of which reads
WHEREFORE, judgment is hereby rendered as follows:
24 CS PLP MTS 456.00 (1) With respect to the first cause of action, claim of plaintiff is hereby dismissed;
(2) Under the second cause of action, defendant must pay plaintiff the sum of P2,000.00;
37 CS CS WOODEN MTS 673.40 (3) In the third cause of action, the defendant must pay plaintiff the sum of P2,849.20;
(4) Since the plaintiff has withheld the payment of P12,997.47 due the defendynt, the
8 CS LAGERLITE PLASTIC MTS 128.00 plaintiff should deduct the amount of P4,849.20 from the P12,997.47 and the balance of
P8,148.27 must be paid to the defendant; and
640 CS STENEI PLASTIC MTS 14,080.00
(5) Defendant's counterclaim not having been substantiated by evidence is likewise
dismissed. NO COSTS. (Orig. Record, pp. 193-195).
Thereafter, private respondent appealed said decision to the Court of Appeals claiming
that the trial court erred in —
(1) holding that nothing was shown that the defendant, or any of his employees who
manned the M/L Maya was negligent in any way nor did they fail to observe extraordinary
diligence over the cargoes of the plaintiff; and
(2) holding that the sinking of said vessel was caused by the storm, consequently,
dismissing the claim of plaintiff in its first cause of action for breach of contract of carriage
of goods (Rollo, pp. 33-34; Decision, pp. 3-4).
In its decision Promulgated on April 8, 1991, the Court of Appeals reversed the decision of
the court a quo, the dispositive portion and the dispositive part of its decision reads as:
WHEREFORE, that part of the Judgment appeal6d from is REVERSED and the appellee
Aleiandro Arada, doing business by the name and style, "South Negros Enterprises",
ordered (sic) to pay unto the appellant San Miguel Corporation the amount of P176,824.80
representing the value of the cargo lost on board the ill-fated vessel, M/L Maya, with
interest thereon at the legal rate from date of the filing of the complaint on March 25,
1983, until fully paid, and the costs. (Rollo, p. 37)
The Court of Appeals ruled that "in view of his failure to observe extraordinary diligence
over the cargo in question and his negligence previous to the sinking of the carrying vessel,
as above shown, the appellee is liable to the appellant for the value of the lost cargo.
Hence the present recourse.
On November 20, 1991, this Court gave due course to the petition. The pivotal issue to be
resolved is whether or not petitioner is liable for the value of the lost cargoes.
Petitioner contends that it was not in the exercise of its function as a common carrier when
it entered into a contract with private respondent,but was then acting as a private carrier
not bound by the requirement of extraordinary diligence (Rollo, p. 15) and that the factual
findings of the Board of Marine Inquiry and the Special Board of Marine Inquiry are binding
and conclusive on the Court (Rollo, pp. 16-17).
Private respondent counters that M/L Maya was in the exercise of its function as a
common carrier and its failure to observe the extraordinary diligence required of it in the
vigilance over their cargoes makes Petitioner liable for the value of said cargoes.
The petition is devoid of merit.
Common carriers are persons, corporations, firms or associations engaged in the business
of carrying or transporting passengers or goods or both, by land, water or air, for
compensation offering their services to the public (Art. 1732 of the New Civil Code).
In the case at bar, there is no doubt that petitioner was exercising its function as a
common carrier when it entered into a contract with private respondent to carry and
transport the latter's cargoes. This fact is best supported by the admission of petitioner's
son, Mr. Eric Arada, who testified as the officer-in-charge for operations of South Negros
Enterprises in Cebu City. In substance his testimony on January 14, 1985 is as follows:
Q. How many vessels are you operating?
A. There were all in all around five (5).
Q. And you were entering to service hauling of cargoes to different companies, is that
correct?
A. Yes, sir.
Q. In one word, the South Negros Enterprises is engaged in the business of common
carriers, is that correct?
A. Yes, sir,
Q. And in fact, at the time of the hauling of the San Miguel Beer, it was also in the same
category as a common carrier?
A. Yes, sir,
(TSN. pp. 3-4, Jan. 29, 1985)
A common carrier, both from the nature of its business and for insistent reasons of public
policy is burdened by law with the duty of exercising extraordinary diligence not only in
ensuring the safety of passengers, but in caring for the goods transported by it. The loss or
destruction or deterioration of goods turned over to the common carrier for the
conveyance to a designated destination raises instantly a presumption of fault or
negligence on the part of the carrier, save only where such loss, destruction or damage
arises from extreme circumstances such as a natural disaster or calamity ... (Benedicto v.
IAC, G.R. No. 70876, July 19, 1990, 187 SCRA 547) (Emphasis supplied).
In order that the common carrier may be exempted from responsibility, the natural disaster
must have been the proximate and only cause of the loss. However, the common carrier
must exercise due diligence to prevent or minimize the loss before, during and after the
occurrence of flood, storm or other natural disaster in order that the common carrier may
be exempted from liability for the destruction or deterioration of the goods (Article 1739,
New Civil Code).
In the instant case, the appellate court was correct in finding that petitioner failed to
observe the extraordinary diligence over the cargo in question and he or the master in his
employ was negligent previous to the sinking of the carrying vessel. In substance, the
decision reads:
... VIVENCIO BABAO, the master of the carrying vessel, knew that there was a typboon
coming before his departure but did not check where it was.
xxx xxx xxx
If only for the fact that he was first denied clearance to depart on March 24, 1982,
obviously because of a typhoon coming, Babao, as master of the vessel, should have
verified first where the typhoon was before departing on March 25, 1982. True, the sea was
calm at departure time. But that might be the calm before the storm. Prudence dictates
that he should have ascertained first where the storm was before departing as it might be
breaking waves
on his path. (Rollo, pp. 35-36)
Respondent court's conclusion as to the negligence of petitioner is supported by begin to be blown
evidence. It will be noted that Vivencio Babao knew of the impending typhoon on March
24, 1982 when the Philippine Coast Guard denied M/L Maya the issuance of a clearance in streaks along
to sail. Less than 24 hours elapsed since the time of the denial of said clearance and the
time a clearance to sail was finally issued on March 25, 1982. Records will show that Babao the direction of
did not ascertain where the typhoon was headed by the use of his vessel's barometer and
radio (Rorlo, p. 142). Neither did the captain of the vessel monitor and record the weather the wind;
conditions everyday as required by Art, 612 of the Code of Commerce (Rollo, pp. 142-143).
Had he done so while navigating for 31 hours, he could have anticipated the strong winds Spindrift begins
and big waves and taken shelter (Rollo, pp- 36; 145). His testimony on May 4, 1982 is as
follows: 2 AM 30 3.7 rough sea heaps up
Q. Did you not check on your own where the typhoon was?
white foam from
A. No. sir. (TSN, May 4, 1982, pp. 58-59)
Noteworthy is the fact that as Per official records of the Climatological Division of the
breaking waves
Philippine Atmospheric, Geophysical and Astronomical Services Administration (PAG-ASA
for brevity) issued by its Chief of Climatological Division, Primitivo G. Ballan, Jr. as to the begin to be blown
weather and sea conditions that prevailed in the vicinity of Catmon, Cebu during the
period March 25-27, 1982, the sea conditions on March 25, 1982 were slight to rough and in streaks along
the weather conditions then prevailing during those times were cloudy skies with
rainshowers and the small waves grew larger and larger, to wit: the direction of the wind;
SPEED WAVE HT. SEA WEATHER
Spindrift begins
KNOTS (METERS) CONDITIONS (Exh. 3)
A common carrier is obliged to observe extraordinary diligence and the failure of Babao
March 25 to ascertain the direction of the storm and the weather condition of the path they would
be traversing, constitute lack of foresight and minimum vigilance over its cargoes taking
8 AM 15 1-2 slight cloudy skies into account the surrounding circumstances of the case.
While the goods are in the possession of the carrier, it is but fair that it exercises
w/ rainshowers
extraordinary diligence in protecting them from loss or damage, and if loss occurs, the law
presumes that it was due to the carrier's fault or negligence; that is necessary to protect
2 PM 20-25 2.0-3.0 moderate overcast skies
the interest of the shipper which is at the mercy of the carrier (Art. 1756, Civil Code, Aboitiz
to rough w/ some rains Shipping Corporation v. Court of Appeals, G.R. No. 89757, Aug. 6, 1990, 188 SCRA 387).
Furthermore, the records show that the crew of M/L Maya did not have the required
8 PM 30 3.7 rough sea heaps up qualifications provided for in P.D. No. 97 or the Philippine Merchant Marine Officers Law, all
of whom were unlicensed. While it is true that they were given special permit to man the
white foam from vessel, such permit was issued at the risk and responsibility of the owner (Rollo, p. 36).
Finally, petitioner claims that the factual findings of the Special Board of Marine Inquiry
exonerating the owner/operator, crew officers of the ill-fated vessel M/L Maya from any
administrative liability is binding on the court.
In rejecting petitioner's claim, respondent court was correct in ruling that "such exoneration
was but with respect to the administrative liability of the owner/operator, officers and crew
of the ill-fated" vessel. It could not have meant exoneration of appellee from liability as a
common carrier for his failure to observe extraordinary diligence in the vigilance over the
goods it was transporting and for the negligent acts or omissions of his employees. Such is
the function of the Court, not the Special Board of Marine Inquiry." (Rollo, P. 37, Annex A, p.
7)
The Philippine Merchant Marine Rules and Regulations particularly Chapter XVI thereof
entitled "Marine Investigation and Suspension and Revocation Proceedings" prescribes the
Rules governing maritime casualties or accidents, the rules and Procedures in
administrative investigation of all maritime cases within the jurisdiction or cognizance of the
Philippine Coast Guard and the grounds for suspension and revocation of
licenses/certificates of marine officers and seamen (1601 — SCOPE); clearly, limiting the
jurisdiction of the Board of Marine Inquiry and Special Board of Marine Inquiry to the
administrative aspect of marine casualties in so far as it involves the shipowners and
officers.
PREMISES CONSIDERED, the appealed decision is AFFIRMED.
SO ORDERED.
Narvasa, C. J., (Chairman), Regalado and Nocon, JJ., concur.
Padilla, J. took no part.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION

G.R. No. L-31379 August 29, 1988

COMPAÑIA MARITIMA, petitioner,

vs.
COURT OF APPEALS and VICENTE CONCEPCION, respondents.
Rafael Dinglasan for petitioner.
Benjamin J. Molina for private respondent.
FERNAN, C.J.:
Petitioner Compañia Maritima seeks to set aside through this petition for review on
certiorari the decision 1 of the Court of Appeals dated December 5, 1965, adjudging
petitioner liable to private respondent Vicente E. Concepcion for damages in the amount
of P24,652.97 with legal interest from the date said decision shall have become final, for
petitioner's failure to deliver safely private respondent's payloader, and for costs of suit. The
payloader was declared abandoned in favor of petitioner.
The facts of the case are as follows:
Private respondent Vicente E. Concepcion, a civil engineer doing business under the
name and style of Consolidated Construction with office address at Room 412, Don
Santiago Bldg., Taft Avenue, Manila, had a contract with the Civil Aeronautics
Administration (CAA) sometime in 1964 for the construction of the airport in Cagayan de
Oro City Misamis Oriental.
Being a Manila — based contractor, Vicente E. Concepcion had to ship his construction
equipment to Cagayan de Oro City. Having shipped some of his equipment through
petitioner and having settled the balance of P2,628.77 with respect to said shipment,
Concepcion negotiated anew with petitioner, thru its collector, Pacifico Fernandez, on
August 28, 1964 for the shipment to Cagayan de Oro City of one (1) unit payloader, four
(4) units 6x6 Reo trucks and two (2) pieces of water tanks. He was issued Bill of Lading 113
on the same date upon delivery of the equipment at the Manila North Harbor. 2
These equipment were loaded aboard the MV Cebu in its Voyage No. 316, which left
Manila on August 30, 1964 and arrived at Cagayan de Oro City in the afternoon of
September 1, 1964. The Reo trucks and water tanks were safely unloaded within a few
hours after arrival, but while the payloader was about two (2) meters above the pier in the
course of unloading, the swivel pin of the heel block of the port block of Hatch No. 2 gave
way, causing the payloader to fall. 3 The payloader was damaged and was thereafter
taken to petitioner's compound in Cagayan de Oro City.
On September 7, 1964, Consolidated Construction, thru Vicente E. Concepcion, wrote
Compañia Maritima to demand a replacement of the payloader which it was considering
as a complete loss because of the extent of damage. 4 Consolidated Construction likewise
notified petitioner of its claim for damages. Unable to elicit response, the demand was
repeated in a letter dated October 2, 1964. 5
Meanwhile, petitioner shipped the payloader to Manila where it was weighed at the San
Miguel Corporation. Finding that the payloader weighed 7.5 tons and not 2.5 tons as
declared in the B-111 of Lading, petitioner denied the claim for damages of Consolidated
Construction in its letter dated October 7, 1964, contending that had Vicente E.
Concepcion declared the actual weight of the payloader, damage to their ship as well as
to his payloader could have been prevented. 6
To replace the damaged payloader, Consolidated Construction in the meantime bought
a new one at P45,000.00 from Bormaheco Inc. on December 3, 1964, and on July 6, 1965.,
Vicente E. Concepcion filed an action for damages against petitioner with the then Court
of First Instance of Manila, Branch VII, docketed as Civil Case No. 61551, seeking to recover
damages in the amount of P41,225.00 allegedly suffered for the period of 97 days that he
was not able to employ a payloader in the construction job at the rate of P450.00 a day;
P34,000.00 representing the cost of the damaged payloader; Pl 1, 000. 00 representing the
difference between the cost of the damaged payloader and that of the new payloader;
P20,000.00 representing the losses suffered by him due to the diversion of funds to enable
him to buy a new payloader; P10,000.00 as attorney's fees; P5,000.00 as exemplary
damages; and cost of the suit. 7
After trial, the then Court of First Instance of Manila, Branch VII, dismissed on April 24, 1968
the complaint with costs against therein plaintiff, herein private respondent Vicente E.
Concepcion, stating that the proximate cause of the fall of the payloader was Vicente E.
Concepcion's act or omission in having misrepresented the weight of the payloader as 2.5
tons instead of its true weight of 7.5 tons, which underdeclaration was intended to defraud
Compañia Maritima of the payment of the freight charges and which likewise led the
Chief Officer of the vessel to use the heel block of hatch No. 2 in unloading the
payloader. 8
From the adverse decision against him, Vicente E. Concepcion appealed to the Court of
Appeals which, on December 5, 1965 rendered a decision, the dispositive portion of which
reads:
IN VIEW WHEREOF, judgment must have to be as it is hereby reversed; defendant is
condemned to pay unto plaintiff the sum in damages of P24,652.07 with legal interest from
the date the present decision shall have become final; the payloader is declared
abandoned to defendant; costs against the latter. 9
Hence, the instant petition.
The principal issue in the instant case is whether or not the act of private respondent
Vicente E. Concepcion in furnishing petitioner Compañia Maritima with an inaccurate
weight of 2.5 tons instead of the payloader's actual weight of 7.5 tons was the proximate
and only cause of the damage on the Oliver Payloader OC-12 when it fell while being
unloaded by petitioner's crew, as would absolutely exempt petitioner from liability for
damages under paragraph 3 of Article 1734 of the Civil Code, which provides:
Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of the
goods, unless the same is due to any of the following causes only:
xxx xxx xxx
(3) Act or omission of the shipper or owner of the goods.
Petitioner claims absolute exemption under this provision upon the reasoning that private
respondent's act of furnishing it with an inaccurate weight of the payloader constitutes
misrepresentation within the meaning of "act or omission of the shipper or owner of the
goods" under the above- quoted article. It likewise faults the respondent Court of Appeals
for reversing the decision of the trial court notwithstanding that said appellate court also
found that by representing the weight of the payloader to be only 2.5 tons, private
respondent had led petitioner's officer to believe that the same was within the 5 tons
capacity of the heel block of Hatch No. 2. Petitioner would thus insist that the proximate
and only cause of the damage to the payloader was private respondent's alleged
misrepresentation of the weight of the machinery in question; hence, any resultant
damage to it must be borne by private respondent Vicente E. Concepcion.
The general rule under Articles 1735 and 1752 of the Civil Code is that common carriers are
presumed to have been at fault or to have acted negligently in case the goods
transported by them are lost, destroyed or had deteriorated. To overcome the
presumption of liability for the loss, destruction or deterioration of the goods under Article
1735, the common carriers must prove that they observed extraordinary diligence as
required in Article 1733 of the Civil Code. The responsibility of observing extraordinary
diligence in the vigilance over the goods is further expressed in Article 1734 of the same
Code, the article invoked by petitioner to avoid liability for damages.
Corollary is the rule that mere proof of delivery of the goods in good order to a common
carrier, and of their arrival at the place of destination in bad order, makes out prima
facie case against the common carrier, so that if no explanation is given as to how the
loss, deterioration or destruction of the goods occurred, the common carrier must be held
responsible. 10 Otherwise stated, it is incumbent upon the common carrier to prove that the
loss, deterioration or destruction was due to accident or some other circumstances
inconsistent with its liability.
In the instant case, We are not persuaded by the proferred explanation of petitioner
alleged to be the proximate cause of the fall of the payloader while it was being
unloaded at the Cagayan de Oro City pier. Petitioner seems to have overlooked the
extraordinary diligence required of common carriers in the vigilance over the goods
transported by them by virtue of the nature of their business, which is impressed with a
special public duty.
Thus, Article 1733 of the Civil Code provides:
Art. 1733. Common carriers, from the nature of their business and for reason of public
policy, are bound to observe extraordinary diligence in the vigilance over the goods and
for the safety of the passengers transported by them according to all the circumstances of
each case.
Such extraordinary diligence in the vigilance over the goods is further expressed in Articles
1734, 1735 and 1745, Nos. 5, 6 and 7, ...
The extraordinary diligence in the vigilance over the goods tendered for shipment requires
the common carrier to know and to follow the required precaution for avoiding damage
to, or destruction of the goods entrusted to it for safe carriage and delivery. It requires
common carriers to render service with the greatest skill and foresight and "to use all
reasonable means to ascertain the nature and characteristic of goods tendered for
shipment, and to exercise due care in the handling and stowage including such methods
as their nature requires."11 Under Article 1736 of the Civil Code, the responsibility to observe
extraordinary diligence commences and lasts from the time the goods are unconditionally
placed in the possession of, and received by the carrier for transportation until the same
are delivered, actually or constructively, by the carrier to the consignee, or to the person
who has the right to receive them without prejudice to the provisions of Article 1738.
Where, as in the instant case, petitioner, upon the testimonies of its own crew, failed to
take the necessary and adequate precautions for avoiding damage to, or destruction of,
the payloader entrusted to it for safe carriage and delivery to Cagayan de Oro City, it
cannot be reasonably concluded that the damage caused to the payloader was due to
the alleged misrepresentation of private respondent Concepcion as to the correct and
accurate weight of the payloader. As found by the respondent Court of Appeals, the fact
is that petitioner used a 5-ton capacity lifting apparatus to lift and unload a visibly heavy
cargo like a payloader. Private respondent has, likewise, sufficiently established the laxity
and carelessness of petitioner's crew in their methods of ascertaining the weight of heavy
cargoes offered for shipment before loading and unloading them, as is customary among
careful persons.
It must be noted that the weight submitted by private respondent Concepcion appearing
at the left-hand portion of Exhibit 8 12 as an addendum to the original enumeration of
equipment to be shipped was entered into the bill of lading by petitioner, thru Pacifico
Fernandez, a company collector, without seeing the equipment to be shipped.13 Mr.
Mariano Gupana, assistant traffic manager of petitioner, confirmed in his testimony that
the company never checked the information entered in the bill of lading. 14 Worse, the
weight of the payloader as entered in the bill of lading was assumed to be correct by Mr.
Felix Pisang, Chief Officer of MV Cebu. 15
The weights stated in a bill of lading are prima facie evidence of the amount received and
the fact that the weighing was done by another will not relieve the common carrier where
it accepted such weight and entered it on the bill of lading. 16 Besides, common carriers
can protect themselves against mistakes in the bill of lading as to weight by exercising
diligence before issuing the same. 17
While petitioner has proven that private respondent Concepcion did furnish it with an
inaccurate weight of the payloader, petitioner is nonetheless liable, for the damage
caused to the machinery could have been avoided by the exercise of reasonable skill
and attention on its part in overseeing the unloading of such a heavy equipment. And
circumstances clearly show that the fall of the payloader could have been avoided by
petitioner's crew. Evidence on record sufficiently show that the crew of petitioner had
been negligent in the performance of its obligation by reason of their having failed to take
the necessary precaution under the circumstances which usage has established among
careful persons, more particularly its Chief Officer, Mr. Felix Pisang, who is tasked with the
over-all supervision of loading and unloading heavy cargoes and upon whom rests the
burden of deciding as to what particular winch the unloading of the payloader should be
undertaken. 18 While it was his duty to determine the weight of heavy cargoes before
accepting them. Mr. Felix Pisang took the bill of lading on its face value and presumed the
same to be correct by merely "seeing" it. 19 Acknowledging that there was a "jumbo" in the
MV Cebu which has the capacity of lifting 20 to 25 ton cargoes, Mr. Felix Pisang chose not
to use it, because according to him, since the ordinary boom has a capacity of 5 tons
while the payloader was only 2.5 tons, he did not bother to use the "jumbo" anymore. 20
In that sense, therefore, private respondent's act of furnishing petitioner with an inaccurate
weight of the payloader upon being asked by petitioner's collector, cannot be used by
said petitioner as an excuse to avoid liability for the damage caused, as the same could
have been avoided had petitioner utilized the "jumbo" lifting apparatus which has a
capacity of lifting 20 to 25 tons of heavy cargoes. It is a fact known to the Chief Officer of
MV Cebu that the payloader was loaded aboard the MV Cebu at the Manila North
Harbor on August 28, 1964 by means of a terminal crane. 21 Even if petitioner chose not to
take the necessary precaution to avoid damage by checking the correct weight of the
payloader, extraordinary care and diligence compel the use of the "jumbo" lifting
apparatus as the most prudent course for petitioner.
While the act of private respondent in furnishing petitioner with an inaccurate weight of
the payloader cannot successfully be used as an excuse by petitioner to avoid liability to
the damage thus caused, said act constitutes a contributory circumstance to the damage
caused on the payloader, which mitigates the liability for damages of petitioner in
accordance with Article 1741 of the Civil Code, to wit:
Art. 1741. If the shipper or owner merely contributed to the loss, destruction or deterioration
of the goods, the proximate cause thereof being the negligence of the common carrier,
the latter shall be liable in damages, which however, shall be equitably reduced.
We find equitable the conclusion of the Court of Appeals reducing the recoverable
amount of damages by 20% or 1/5 of the value of the payloader, which at the time the
instant case arose, was valued at P34,000. 00, thereby reducing the recoverable amount
at 80% or 4/5 of P34,000.00 or the sum of P27,200.00. Considering that the freight charges
for the entire cargoes shipped by private respondent amounting to P2,318.40 remained
unpaid.. the same would be deducted from the P27,000.00 plus an additional deduction
of P228.63 representing the freight charges for the undeclared weight of 5 tons (difference
between 7.5 and 2.5 tons) leaving, therefore, a final recoverable amount of damages of
P24,652.97 due to private respondent Concepcion.
Notwithstanding the favorable judgment in his favor, private respondent assailed the Court
of Appeals' decision insofar as it limited the damages due him to only P24,652.97 and the
cost of the suit. Invoking the provisions on damages under the Civil Code, more particularly
Articles 2200 and 2208, private respondent further seeks additional damages allegedly
because the construction project was delayed and that in spite of his demands, petitioner
failed to take any steps to settle his valid, just and demandable claim for damages.
We find private respondent's submission erroneous. It is well- settled that an appellee, who
is not an appellant, may assign errors in his brief where his purpose is to maintain the
judgment on other grounds, but he may not do so if his purpose is to have the judgment
modified or reversed, for, in such case, he must appeal. 22 Since private respondent did
not appeal from the judgment insofar as it limited the award of damages due him, the
reduction of 20% or 1/5 of the value of the payloader stands.
WHEREFORE, in view of the foregoing, the petition is DENIED. The decision of the Court of
Appeals is hereby AFFIRMED in all respects with costs against petitioner. In view of the
length of time this case has been pending, this decision is immediately executory.

Gutierrez, Jr., Feliciano, Bidin and Cortes JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISON

G.R. No. 115024 February 7, 1996

MA. LOURDES VALENZUELA, petitioner,

vs.
COURT OF APPEALS, RICHARD LI and ALEXANDER COMMERCIAL, INC., respondents.
x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x
G.R. No. 117944 February 7, 1996
RICHARD LI, petitioner,
vs.
COURT OF APPEALS and LOURDES VALENZUELA, respondents.
DECISION
KAPUNAN, J.:
These two petitions for review on certiorari under Rule 45 of the Revised Rules of Court stem
from an action to recover damages by petitioner Lourdes Valenzuela in the Regional Trial
Court of Quezon City for injuries sustained by her in a vehicular accident in the early
morning of June 24, 1990. The facts found by the trial court are succinctly summarized by
the Court of Appeals below:
This is an action to recover damages based on quasi-delict, for serious physical injuries
sustained in a vehicular accident.
Plaintiff's version of the accident is as follows: At around 2:00 in the morning of June 24,
1990, plaintiff Ma. Lourdes Valenzuela was driving a blue Mitsubishi lancer with Plate No.
FFU 542 from her restaurant at Marcos highway to her home at Palanza Street, Araneta
Avenue. She was travelling along Aurora Blvd. with a companion, Cecilia Ramon, heading
towards the direction of Manila. Before reaching A. Lake Street, she noticed something
wrong with her tires; she stopped at a lighted place where there were people, to verify
whether she had a flat tire and to solicit help if needed. Having been told by the people
present that her rear right tire was flat and that she cannot reach her home in that car's
condition, she parked along the sidewalk, about 1-1/2 feet away, put on her emergency
lights, alighted from the car, and went to the rear to open the trunk. She was standing at
the left side of the rear of her car pointing to the tools to a man who will help her fix the tire
when she was suddenly bumped by a 1987 Mitsubishi Lancer driven by defendant Richard
Li and registered in the name of defendant Alexander Commercial, Inc. Because of the
impact plaintiff was thrown against the windshield of the car of the defendant, which was
destroyed, and then fell to the ground. She was pulled out from under defendant's car.
Plaintiff's left leg was severed up to the middle of her thigh, with only some skin and sucle
connected to the rest of the body. She was brought to the UERM Medical Memorial
Center where she was found to have a "traumatic amputation, leg, left up to distal thigh
(above knee)". She was confined in the hospital for twenty (20) days and was eventually
fitted with an artificial leg. The expenses for the hospital confinement (P120,000.00) and the
cost of the artificial leg (P27,000.00) were paid by defendants from the car insurance.
In her complaint, plaintiff prayed for moral damages in the amount of P1 million,
exemplary damages in the amount of P100,000.00 and other medical and related
expenses amounting to a total of P180,000.00, including loss of expected earnings.
Defendant Richard Li denied that he was negligent. He was on his way home, travelling at
55 kph; considering that it was raining, visibility was affected and the road was wet. Traffic
was light. He testified that he was driving along the inner portion of the right lane of Aurora
Blvd. towards the direction of Araneta Avenue, when he was suddenly confronted, in the
vicinity of A. Lake Street, San Juan, with a car coming from the opposite direction,
travelling at 80 kph, with "full bright lights". Temporarily blinded, he instinctively swerved to
the right to avoid colliding with the oncoming vehicle, and bumped plaintiff's car, which
he did not see because it was midnight blue in color, with no parking lights or early
warning device, and the area was poorly lighted. He alleged in his defense that the left
rear portion of plaintiff's car was protruding as it was then "at a standstill diagonally" on the
outer portion of the right lane towards Araneta Avenue (par. 18, Answer). He confirmed
the testimony of plaintiff's witness that after being bumped the car of the plaintiff swerved
to the right and hit another car parked on the sidewalk. Defendants counterclaimed for
damages, alleging that plaintiff was reckless or negligent, as she was not a licensed driver.
The police investigator, Pfc. Felic Ramos, who prepared the vehicular accident report and
the sketch of the three cars involved in the accident, testified that the plaintiff's car was
"near the sidewalk"; this witness did not remember whether the hazard lights of plaintiff's
car were on, and did not notice if there was an early warning device; there was a street
light at the corner of Aurora Blvd. and F. Roman, about 100 meters away. It was not mostly
dark, i.e. "things can be seen" (p. 16, tsn, Oct. 28, 1991).
A witness for the plaintiff, Rogelio Rodriguez, testified that after plaintiff alighted from her
car and opened the trunk compartment, defendant's car came approaching very fast
ten meters from the scene; the car was "zigzagging". The rear left side of plaintiff's car was
bumped by the front right portion of defendant's car; as a consequence, the plaintiff's car
swerved to the right and hit the parked car on the sidewalk. Plaintiff was thrown to the
windshield of defendant's car, which was destroyed, and landed under the car. He stated
that defendant was under the influence of liquor as he could "smell it very well" (pp. 43, 79,
tsn, June 17, 1991).
After trial, the lower court sustained the plaintiff's submissions and found defendant Richard
Li guilty of gross negligence and liable for damages under Article 2176 of the Civil Code.
The trial court likewise held Alexander Commercial, Inc., Li's employer, jointly and severally
liable for damages pursuant to Article 2180. It ordered the defendants to jointly and
severally pay the following amounts:
1. P41,840.00, as actual damages, representing the miscellaneous expenses of the plaintiff
as a result of her severed left leg;
2. The sums of (a) P37,500.00, for the unrealized profits because of the stoppage of
plaintiff's Bistro La Conga restaurant three (3) weeks after the accident on June 24, 1990;
(b) P20,000.00, a month, as unrealized profits of the plaintiff in her Bistro La Conga
restaurant, from August, 1990 until the date of this judgment and (c) P30,000.00, a month
for unrealized profits in plaintiff's two (2) beauty salons from July, 1990 until the date of this
decision;
3. P1,000,000.00, in moral damages;
4. P50,000.00, as exemplary damages;
5. P60,000.00, as reasonable attorney's fees; and
6. Costs.
As a result of the trial court's decision, defendants filed an Omnibus Motion for New Trial
and for Reconsideration, citing testimony in Criminal Case O.C. No. 804367 (People vs.
Richard Li), tending to show that the point of impact, as depicted by the pieces of
glass/debris from the parties' cars, appeared to be at the center of the right lane of Aurora
Blvd. The trial court denied the motion. Defendants forthwith filed an appeal with the
respondent Court of Appeals. In a Decision rendered March 30, 1994, the Court of Appeals
found that there was "ample basis from the evidence of record for the trial court's finding
that the plaintiff's car was properly parked at the right, beside the sidewalk when it was
bumped by defendant's car."1 Dismissing the defendants' argument that the plaintiff's car
was improperly parked, almost at the center of the road, the respondent court noted that
evidence which was supposed to prove that the car was at or near center of the right
lane was never presented during the trial of the case.2 The respondent court furthermore
observed that:
Defendant Li's testimony that he was driving at a safe speed of 55 km./hour is self serving; it
was not corroborated. It was in fact contradicted by eyewitness Rodriguez who stated
that he was outside his beerhouse located at Aurora Boulevard after A. Lake Street, at or
about 2:00 a.m. of June 24, 1990 when his attention was caught by a beautiful lady
(referring to the plaintiff) alighting from her car and opening the trunk compartment; he
noticed the car of Richard Li "approaching very fast ten (10) meters away from the scene";
defendant's car was zigzagging", although there were no holes and hazards on the street,
and "bumped the leg of the plaintiff" who was thrown against the windshield of
defendant's care, causing its destruction. He came to the rescue of the plaintiff, who was
pulled out from under defendant's car and was able to say "hurting words" to Richard Li
because he noticed that the latter was under the influence of liquor, because he "could
smell it very well" (p. 36, et. seq., tsn, June 17, 1991). He knew that plaintiff owned a
beerhouse in Sta. Mesa in the 1970's, but did not know either plaintiff or defendant Li
before the accident.
In agreeing with the trial court that the defendant Li was liable for the injuries sustained by
the plaintiff, the Court of Appeals, in its decision, however, absolved the Li's employer,
Alexander Commercial, Inc. from any liability towards petitioner Lourdes Valenzuela and
reduced the amount of moral damages to P500,000.00. Finding justification for exemplary
damages, the respondent court allowed an award of P50,000.00 for the same, in addition
to costs, attorney's fees and the other damages. The Court of Appeals, likewise, dismissed
the defendants' counterclaims.3
Consequently, both parties assail the respondent court's decision by filing two separate
petitions before this Court. Richard Li, in G.R. No. 117944, contends that he should not be
held liable for damages because the proximate cause of the accident was Ma. Lourdes
Valenzuela's own negligence. Alternatively, he argues that in the event that this Court finds
him negligent, such negligence ought to be mitigated by the contributory negligence of
Valenzuela.
On the other hand, in G.R. No. 115024, Ma. Lourdes Valenzuela assails the respondent
court's decision insofar as it absolves Alexander Commercial, Inc. from liability as the owner
of the car driven by Richard Li and insofar as it reduces the amount of the actual and
moral damages awarded by the trial court.4
As the issues are intimately related, both petitions are hereby consolidated.
It is plainly evident that the petition for review in G.R. No. 117944 raises no substantial
questions of law. What it, in effect, attempts to have this Court review are factual findings
of the trial court, as sustained by the Court of Appeals finding Richard Li grossly negligent in
driving the Mitsubishi Lancer provided by his company in the early morning hours of June
24, 1990. This we will not do. As a general rule, findings of fact of the Court of Appeals are
binding and conclusive upon us, and this Court will not normally disturb such factual
findings unless the findings of fact of the said court are palpably unsupported by the
evidence on record or unless the judgment itself is based on a misapprehension of facts.5
In the first place, Valenzuela's version of the incident was fully corroborated by an
uninterested witness, Rogelio Rodriguez, the owner-operator of an establishment located
just across the scene of the accident. On trial, he testified that he observed a car being
driven at a "very fast" speed, racing towards the general direction of Araneta
Avenue.6 Rodriguez further added that he was standing in front of his establishment, just
ten to twenty feet away from the scene of the accident, when he saw the car hit
Valenzuela, hurtling her against the windshield of the defendant's Mitsubishi Lancer, from
where she eventually fell under the defendant's car. Spontaneously reacting to the
incident, he crossed the street, noting that a man reeking with the smell of liquor had
alighted from the offending vehicle in order to survey the incident.7 Equally important,
Rodriguez declared that he observed Valenzuela's car parked parallel and very near the
sidewalk,8 contrary to Li's allegation that Valenzuela's car was close to the center of the
right lane. We agree that as between Li's "self-serving" asseverations and the observations
of a witness who did not even know the accident victim personally and who immediately
gave a statement of the incident similar to his testimony to the investigator immediately
after the incident, the latter's testimony deserves greater weight. As the court emphasized:
The issue is one of credibility and from Our own examination of the transcript, We are not
prepared to set aside the trial court's reliance on the testimony of Rodriguez negating
defendant's assertion that he was driving at a safe speed. While Rodriguez drives only a
motorcycle, his perception of speed is not necessarily impaired. He was subjected to cross-
examination and no attempt was made to question .his competence or the accuracy of
his statement that defendant was driving "very fast". This was the same statement he gave
to the police investigator after the incident, as told to a newspaper report (Exh. "P"). We
see no compelling basis for disregarding his testimony.
The alleged inconsistencies in Rodriguez' testimony are not borne out by an examination of
the testimony. Rodriguez testified that the scene of the accident was across the street
where his beerhouse is located about ten to twenty feet away (pp. 35-36, tsn, June 17,
1991). He did not state that the accident transpired immediately in front of his
establishment. The ownership of the Lambingan se Kambingan is not material; the business
is registered in the name of his mother, but he explained that he owns the establishment
(p. 5, tsn, June 20, 1991). Moreover, the testimony that the streetlights on his side of Aurora
Boulevard were on the night the accident transpired (p. 8) is not necessarily contradictory
to the testimony of Pfc. Ramos that there was a streetlight at the corner of Aurora
Boulevard and F. Roman Street (p. 45, tsn, Oct. 20, 1991).
With respect to the weather condition, Rodriguez testified that there was only a drizzle, not
a heavy rain and the rain has stopped and he was outside his establishment at the time
the accident transpired (pp. 64-65, tsn, June 17, 1991). This was consistent with plaintiff's
testimony that it was no longer raining when she left Bistro La Conga (pp. 10-11, tsn, April
29, 1991). It was defendant Li who stated that it was raining all the way in an attempt to
explain why he was travelling at only 50-55 kph. (p. 11, tsn, Oct. 14, 1991). As to the
testimony of Pfc. Ramos that it was raining, he arrived at the scene only in response to a
telephone call after the accident had transpired (pp. 9-10, tsn, Oct. 28, 1991). We find no
substantial inconsistencies in Rodriguez's testimony that would impair the essential integrity
of his testimony or reflect on his honesty. We are compelled to affirm the trial court's
acceptance of the testimony of said eyewitness.
Against the unassailable testimony of witness Rodriguez we note that Li's testimony was
peppered with so many inconsistencies leading us to conclude that his version of the
accident was merely adroitly crafted to provide a version, obviously self-serving, which
would exculpate him from any and all liability in the incident. Against Valenzuela's
corroborated claims, his allegations were neither backed up by other witnesses nor by the
circumstances proven in the course of trial. He claimed that he was driving merely at a
speed of 55 kph. when "out of nowhere he saw a dark maroon lancer right in front of him,
which was (the) plaintiff's car". He alleged that upon seeing this sudden "apparition" he put
on his brakes to no avail as the road was slippery.9
One will have to suspend disbelief in order to give credence to Li's disingenuous and
patently self-serving asseverations. The average motorist alert to road conditions will have
no difficulty applying the brakes to a car traveling at the speed claimed by Li. Given a
light rainfall, the visibility of the street, and the road conditions on a principal metropolitan
thoroughfare like Aurora Boulevard, Li would have had ample time to react to the
changing conditions of the road if he were alert - as every driver should be - to those
conditions. Driving exacts a more than usual toll on the senses. Physiological "fight or
flight" 10 mechanisms are at work, provided such mechanisms were not dulled by drugs,
alcohol, exhaustion, drowsiness, etc.11 Li's failure to react in a manner which would have
avoided the accident could therefore have been only due to either or both of the two
factors: 1) that he was driving at a "very fast" speed as testified by Rodriguez; and 2) that
he was under the influence of alcohol.12 Either factor working independently would have
diminished his responsiveness to road conditions, since normally he would have slowed
down prior to reaching Valenzuela's car, rather than be in a situation forcing him to
suddenly apply his brakes. As the trial court noted (quoted with approval by respondent
court):
Secondly, as narrated by defendant Richard Li to the San Juan Police immediately after
the incident, he said that while driving along Aurora Blvd., out of nowhere he saw a dark
maroon lancer right in front of him which was plaintiff's car, indicating, again, thereby that,
indeed, he was driving very fast, oblivious of his surroundings and the road ahead of him,
because if he was not, then he could not have missed noticing at a still far distance the
parked car of the plaintiff at the right side near the sidewalk which had its emergency
lights on, thereby avoiding forcefully bumping at the plaintiff who was then standing at the
left rear edge of her car.
Since, according to him, in his narration to the San Juan Police, he put on his brakes when
he saw the plaintiff's car in front of him, but that it failed as the road was wet and slippery,
this goes to show again, that, contrary to his claim, he was, indeed, running very fast. For,
were it otherwise, he could have easily completely stopped his car, thereby avoiding the
bumping of the plaintiff, notwithstanding that the road was wet and slippery. Verily, since,
if, indeed, he was running slow, as he claimed, at only about 55 kilometers per hour, then,
inspite of the wet and slippery road, he could have avoided hitting the plaintiff by the
mere expedient or applying his brakes at the proper time and distance.
It could not be true, therefore, as he now claims during his testimony, which is contrary to
what he told the police immediately after the accident and is, therefore, more believable,
that he did not actually step on his brakes but simply swerved a little to the right when he
saw the on-coming car with glaring headlights, from the opposite direction, in order to
avoid it.
For, had this been what he did, he would not have bumped the car of the plaintiff which
was properly parked at the right beside the sidewalk. And, it was not even necessary for
him to swerve a little to the right in order to safely avoid a collision with the on-coming car,
considering that Aurora Blvd. is a double lane avenue separated at the center by a
dotted white paint, and there is plenty of space for both cars, since her car was running at
the right lane going towards Manila on the on-coming car was also on its right lane going
to Cubao.13
Having come to the conclusion that Li was negligent in driving his company-issued
Mitsubishi Lancer, the next question for us to determine is whether or not Valenzuela was
likewise guilty of contributory negligence in parking her car alongside Aurora Boulevard,
which entire area Li points out, is a no parking zone.
We agree with the respondent court that Valenzuela was not guilty of contributory
negligence.
Contributory negligence is conduct on the part of the injured party, contributing as a legal
cause to the harm he has suffered, which falls below the standard to which he is required
to conform for his own protection.14 Based on the foregoing definition, the standard or act
to which, according to petitioner Li, Valenzuela ought to have conformed for her own
protection was not to park at all at any point of Aurora Boulevard, a no parking zone. We
cannot agree.
Courts have traditionally been compelled to recognize that an actor who is confronted
with an emergency is not to be held up to the standard of conduct normally applied to an
individual who is in no such situation. The law takes stock of impulses of humanity when
placed in threatening or dangerous situations and does not require the same standard of
thoughtful and reflective care from persons confronted by unusual and oftentimes
threatening conditions.15
Under the "emergency rule" adopted by this Court in Gan vs. Court of Appeals,16 an
individual who suddenly finds himself in a situation of danger and is required to act without
much time to consider the best means that may be adopted to avoid the impending
danger, is not guilty of negligence if he fails to undertake what subsequently and upon
reflection may appear to be a better solution, unless the emergency was brought by his
own negligence.17
Applying this principle to a case in which the victims in a vehicular accident swerved to
the wrong lane to avoid hitting two children suddenly darting into the street, we held,
in Mc Kee vs. Intermediate Appellate Court,18 that the driver therein, Jose Koh, "adopted
the best means possible in the given situation" to avoid hitting the children. Using the
"emergency rule" the Court concluded that Koh, in spite of the fact that he was in the
wrong lane when the collision with an oncoming truck occurred, was not guilty of
negligence.19
While the emergency rule applies to those cases in which reflective thought, or the
opportunity to adequately weigh a threatening situation is absent, the conduct which is
required of an individual in such cases is dictated not exclusively by the suddenness of the
event which absolutely negates thoroughful care, but by the over-all nature of the
circumstances. A woman driving a vehicle suddenly crippled by a flat tire on a rainy night
will not be faulted for stopping at a point which is both convenient for her to do so and
which is not a hazard to other motorists. She is not expected to run the entire boulevard in
search for a parking zone or turn on a dark street or alley where she would likely find no
one to help her. It would be hazardous for her not to stop and assess the emergency
(simply because the entire length of Aurora Boulevard is a no-parking zone) because the
hobbling vehicle would be both a threat to her safety and to other motorists. In the instant
case, Valenzuela, upon reaching that portion of Aurora Boulevard close to A. Lake St.,
noticed that she had a flat tire. To avoid putting herself and other motorists in danger, she
did what was best under the situation. As narrated by respondent court: "She stopped at a
lighted place where there were people, to verify whether she had a flat tire and to solicit
help if needed. Having been told by the people present that her rear right tire was flat and
that she cannot reach her home she parked along the sidewalk, about 1 1/2 feet away,
behind a Toyota Corona Car."20 In fact, respondent court noted, Pfc. Felix Ramos, the
investigator on the scene of the accident confirmed that Valenzuela's car was parked
very close to the sidewalk.21 The sketch which he prepared after the incident showed
Valenzuela's car partly straddling the sidewalk, clear and at a convenient distance from
motorists passing the right lane of Aurora Boulevard. This fact was itself corroborated by the
testimony of witness Rodriguez.22
Under the circumstances described, Valenzuela did exercise the standard reasonably
dictated by the emergency and could not be considered to have contributed to the
unfortunate circumstances which eventually led to the amputation of one of her lower
extremities. The emergency which led her to park her car on a sidewalk in Aurora
Boulevard was not of her own making, and it was evident that she had taken all
reasonable precautions.
Obviously in the case at bench, the only negligence ascribable was the negligence of Li
on the night of the accident. "Negligence, as it is commonly understood is conduct which
creates an undue risk of harm to others."23 It is the failure to observe that degree of care,
precaution, and vigilance which the circumstances justly demand, whereby such other
person suffers injury.24 We stressed, in Corliss vs. Manila Railroad Company,25 that
negligence is the want of care required by the circumstances.
The circumstances established by the evidence adduced in the court below plainly
demonstrate that Li was grossly negligent in driving his Mitsubishi Lancer. It bears emphasis
that he was driving at a fast speed at about 2:00 A.M. after a heavy downpour had settled
into a drizzle rendering the street slippery. There is ample testimonial evidence on record to
show that he was under the influence of liquor. Under these conditions, his chances of
effectively dealing with changing conditions on the road were significantly lessened. As
Presser and Keaton emphasize:
[U]nder present day traffic conditions, any driver of an automobile must be prepared for
the sudden appearance of obstacles and persons on the highway, and of other vehicles
at intersections, such as one who sees a child on the curb may be required to anticipate
its sudden dash into the street, and his failure to act properly when they appear may be
found to amount to negligence.26
Li's obvious unpreparedness to cope with the situation confronting him on the night of the
accident was clearly of his own making.
We now come to the question of the liability of Alexander Commercial, Inc. Li's employer.
In denying liability on the part of Alexander Commercial, the respondent court held that:
There is no evidence, not even defendant Li's testimony, that the visit was in connection
with official matters. His functions as assistant manager sometimes required him to perform
work outside the office as he has to visit buyers and company clients, but he admitted that
on the night of the accident he came from BF Homes Paranaque he did not have
"business from the company" (pp. 25-26, ten, Sept. 23, 1991). The use of the company car
was partly required by the nature of his work, but the privilege of using it for non-official
business is a "benefit", apparently referring to the fringe benefits attaching to his position.
Under the civil law, an employer is liable for the negligence of his employees in the
discharge of their respective duties, the basis of which liability is not respondeat superior,
but the relationship of pater familias, which theory bases the liability of the master
ultimately on his own negligence and not on that of his servant (Cuison v. Norton and
Harrison Co., 55 Phil. 18). Before an employer may be held liable for the negligence of his
employee, the act or omission which caused damage must have occurred while an
employee was in the actual performance of his assigned tasks or duties (Francis High
School vs. Court of Appeals, 194 SCRA 341). In defining an employer's liability for the acts
done within the scope of the employee's assigned tasks, the Supreme Court has held that
this includes any act done by an employee, in furtherance of the interests of the employer
or for the account of the employer at the time of the infliction of the injury or damage
(Filamer Christian Institute vs. Intermediate Appellate Court, 212 SCRA 637). An employer is
expected to impose upon its employees the necessary discipline called for in the
performance of any act "indispensable to the business and beneficial to their employer"
(at p. 645).
In light of the foregoing, We are unable to sustain the trial court's finding that since
defendant Li was authorized by the company to use the company car "either officially or
socially or even bring it home", he can be considered as using the company car in the
service of his employer or on the occasion of his functions. Driving the company car was
not among his functions as assistant manager; using it for non-official purposes would
appear to be a fringe benefit, one of the perks attached to his position. But to impose
liability upon the employer under Article 2180 of the Civil Code, earlier quoted, there must
be a showing that the damage was caused by their employees in the service of the
employer or on the occasion of their functions. There is no evidence that Richard Li was at
the time of the accident performing any act in furtherance of the company's business or its
interests, or at least for its benefit. The imposition of solidary liability against defendant
Alexander Commercial Corporation must therefore fail.27
We agree with the respondent court that the relationship in question is not based on the
principle of respondeat superior, which holds the master liable for acts of the servant, but
that of pater familias, in which the liability ultimately falls upon the employer, for his failure
to exercise the diligence of a good father of the family in the selection and supervision of
his employees. It is up to this point, however, that our agreement with the respondent court
ends. Utilizing the bonus pater familias standard expressed in Article 2180 of the Civil
Code, 28 we are of the opinion that Li's employer, Alexander Commercial, Inc. is jointly and
solidarily liable for the damage caused by the accident of June 24, 1990.
First, the case of St. Francis High School vs. Court of Appeals29 upon which respondent
court has placed undue reliance, dealt with the subject of a school and its teacher's
supervision of students during an extracurricular activity. These cases now fall under the
provision on special parental authority found in Art. 218 of the Family Code which
generally encompasses all authorized school activities, whether inside or outside school
premises.
Second, the employer's primary liability under the concept of pater familias embodied by
Art 2180 (in relation to Art. 2176) of the Civil Code is quasi-delictual or tortious in character.
His liability is relieved on a showing that he exercised the diligence of a good father of the
family in the selection and supervision of its employees. Once evidence is introduced
showing that the employer exercised the required amount of care in selecting its
employees, half of the employer's burden is overcome. The question of diligent supervision,
however, depends on the circumstances of employment.
Ordinarily, evidence demonstrating that the employer has exercised diligent supervision of
its employee during the performance of the latter's assigned tasks would be enough to
relieve him of the liability imposed by Article 2180 in relation to Article 2176 of the Civil
Code. The employer is not expected to exercise supervision over either the employee's
private activities or during the performance of tasks either unsanctioned by the former or
unrelated to the employee's tasks. The case at bench presents a situation of a different
character, involving a practice utilized by large companies with either their employees of
managerial rank or their representatives.
It is customary for large companies to provide certain classes of their employees with
courtesy vehicles. These company cars are either wholly owned and maintained by the
company itself or are subject to various plans through which employees eventually
acquire their vehicles after a given period of service, or after paying a token amount.
Many companies provide liberal "car plans" to enable their managerial or other
employees of rank to purchase cars, which, given the cost of vehicles these days, they
would not otherwise be able to purchase on their own.
Under the first example, the company actually owns and maintains the car up to the point
of turnover of ownership to the employee; in the second example, the car is really owned
and maintained by the employee himself. In furnishing vehicles to such employees, are
companies totally absolved of responsibility when an accident involving a company-
issued car occurs during private use after normal office hours?
Most pharmaceutical companies, for instance, which provide cars under the first plan,
require rigorous tests of road worthiness from their agents prior to turning over the car
(subject of company maintenance) to their representatives. In other words, like a good
father of a family, they entrust the company vehicle only after they are satisfied that the
employee to whom the car has been given full use of the said company car for company
or private purposes will not be a threat or menace to himself, the company or to others.
When a company gives full use and enjoyment of a company car to its employee, it in
effect guarantees that it is, like every good father, satisfied that its employee will use the
privilege reasonably and responsively.
In the ordinary course of business, not all company employees are given the privilege of
using a company-issued car. For large companies other than those cited in the example of
the preceding paragraph, the privilege serves important business purposes either related
to the image of success an entity intends to present to its clients and to the public in
general, or - for practical and utilitarian reasons - to enable its managerial and other
employees of rank or its sales agents to reach clients conveniently. In most cases,
providing a company car serves both purposes. Since important business transactions and
decisions may occur at all hours in all sorts of situations and under all kinds of guises, the
provision for the unlimited use of a company car therefore principally serves the business
and goodwill of a company and only incidentally the private purposes of the individual
who actually uses the car, the managerial employee or company sales agent. As such, in
providing for a company car for business use and/or for the purpose of furthering the
company's image, a company owes a responsibility to the public to see to it that the
managerial or other employees to whom it entrusts virtually unlimited use of a company
issued car are able to use the company issue capably and responsibly.
In the instant case, Li was an Assistant Manager of Alexander Commercial, Inc. In his
testimony before the trial court, he admitted that his functions as Assistant Manager did
not require him to scrupulously keep normal office hours as he was required quite often to
perform work outside the office, visiting prospective buyers and contacting and meeting
with company clients. 30 These meetings, clearly, were not strictly confined to routine hours
because, as a managerial employee tasked with the job of representing his company with
its clients, meetings with clients were both social as well as work-related functions. The
service car assigned to Li by Alexander Commercial, Inc. therefore enabled both Li - as
well as the corporation - to put up the front of a highly successful entity, increasing the
latter's goodwill before its clientele. It also facilitated meeting between Li and its clients by
providing the former with a convenient mode of travel.
Moreover, Li's claim that he happened to be on the road on the night of the accident
because he was coming from a social visit with an officemate in Paranaque was a bare
allegation which was never corroborated in the court below. It was obviously self-serving.
Assuming he really came from his officemate's place, the same could give rise to
speculation that he and his officemate had just been from a work-related function, or they
were together to discuss sales and other work related strategies.
In fine, Alexander Commercial, inc. has not demonstrated, to our satisfaction, that it
exercised the care and diligence of a good father of the family in entrusting its company
car to Li. No allegations were made as to whether or not the company took the steps
necessary to determine or ascertain the driving proficiency and history of Li, to whom it
gave full and unlimited use of a company car.31 Not having been able to overcome the
burden of demonstrating that it should be absolved of liability for entrusting its company
car to Li, said company, based on the principle of bonus pater familias, ought to be jointly
and severally liable with the former for the injuries sustained by Ma. Lourdes Valenzuela
during the accident.
Finally, we find no reason to overturn the amount of damages awarded by the respondent
court, except as to the amount of moral damages. In the case of moral damages, while
the said damages are not intended to enrich the plaintiff at the expense of a defendant,
the award should nonetheless be commensurate to the suffering inflicted. In the instant
case we are of the opinion that the reduction in moral damages from an amount of
P1,000,000.00 to P800,000,00 by the Court of Appeals was not justified considering the
nature of the resulting damage and the predictable sequelae of the injury.
As a result of the accident, Ma. Lourdes Valenzuela underwent a traumatic amputation of
her left lower extremity at the distal left thigh just above the knee. Because of this,
Valenzuela will forever be deprived of the full ambulatory functions of her left extremity,
even with the use of state of the art prosthetic technology. Well beyond the period of
hospitalization (which was paid for by Li), she will be required to undergo adjustments in
her prosthetic devise due to the shrinkage of the stump from the process of healing.
These adjustments entail costs, prosthetic replacements and months of physical and
occupational rehabilitation and therapy. During her lifetime, the prosthetic devise will have
to be replaced and re-adjusted to changes in the size of her lower limb effected by the
biological changes of middle-age, menopause and aging. Assuming she reaches
menopause, for example, the prosthetic will have to be adjusted to respond to the
changes in bone resulting from a precipitate decrease in calcium levels observed in the
bones of all post-menopausal women. In other words, the damage done to her would not
only be permanent and lasting, it would also be permanently changing and adjusting to
the physiologic changes which her body would normally undergo through the years. The
replacements, changes, and adjustments will require corresponding adjustive physical and
occupational therapy. All of these adjustments, it has been documented, are painful.
The foregoing discussion does not even scratch the surface of the nature of the resulting
damage because it would be highly speculative to estimate the amount of psychological
pain, damage and injury which goes with the sudden severing of a vital portion of the
human body. A prosthetic device, however technologically advanced, will only allow a
reasonable amount of functional restoration of the motor functions of the lower limb. The
sensory functions are forever lost. The resultant anxiety, sleeplessness, psychological injury,
mental and physical pain are inestimable.
As the amount of moral damages are subject to this Court's discretion, we are of the
opinion that the amount of P1,000,000.00 granted by the trial court is in greater accord
with the extent and nature of the injury - physical and psychological - suffered by
Valenzuela as a result of Li's grossly negligent driving of his Mitsubishi Lancer in the early
morning hours of the accident.
WHEREFORE, PREMISES CONSIDERED, the decision of the Court of Appeals is modified with
the effect of REINSTATING the judgment of the Regional Trial Court.
SO ORDERED.
FIRST DIVISION
PHILIPPINE CHARTER INSURANCE G.R. No. 145044
CORPORATION,
Petitioner,
Present:
- versus - PUNO, C.J., Chairperson,
CARPIO,
CORONA,
AZCUNA, and
LEONARDO-DE CASTRO, JJ.
NEPTUNE ORIENT LINES/OVERSEAS
AGENCY SERVICES, INC.,
Respondents. Promulgated:
June 12, 2008
X -------------------------------------------------------------------------------------- X
DECISION
AZCUNA, J.:
This is a petition for review on certiorari[1] of the Resolution of the Court of Appeals (CA) in
CA-G.R. CV No. 52855 promulgated on April 13, 2000 granting respondents motion for
reconsideration dated March 9, 2000. The Resolution held respondents liable for damages
to petitioner subject to the limited-liability provision in the bill of lading.
The facts are as follows:
On September 30, 1993, L.T. Garments Manufacturing Corp. Ltd. shipped from Hong Kong
three sets of warp yarn on returnable beams aboard respondent Neptune Orient Lines
vessel, M/V Baltimar Orion, for transport and delivery to Fukuyama Manufacturing
Corporation (Fukuyama) of No. 7 Jasmin Street, AUV Subdivision, Metro Manila.
The said cargoes were loaded in Container No. IEAU-4592750 in good condition under Bill
of Lading No. HKG-0396180. Fukuyama insured the shipment against all risks with petitioner
Philippine Charter Insurance Corporation (PCIC) under Marine Cargo Policy No. RN55581 in
the amount of P228,085.
During the course of the voyage, the container with the cargoes fell overboard and was
lost.
Thus, Fukuyama wrote a letter to respondent Overseas Agency Services, Inc. (Overseas
Agency), the agent of Neptune Orient Lines in Manila, and claimed for the value of the
lost cargoes. However, Overseas Agency ignored the claim. Hence, Fukuyama sought
payment from its insurer, PCIC, for the insured value of the cargoes in the amount
of P228,085, which claim was fully satisfied by PCIC.
On February 17, 1994, Fukuyama issued a Subrogation Receipt to petitioner PCIC for the
latter to be subrogated in its right to recover its losses from respondents.
PCIC demanded from respondents reimbursement of the entire amount it paid
to Fukuyama, but respondents refused payment.
On March 21, 1994, PCIC filed a complaint for damages against respondents with the
Regional Trial Court (RTC) of Manila, Branch 35.
Respondents filed an Answer with Compulsory Counterclaim denying liability. They alleged
that during the voyage, the vessel encountered strong winds and heavy seas making the
vessel pitch and roll, which caused the subject container with the cargoes to fall
overboard. Respondents contended that the occurrence was a fortuitous event which
exempted them from any liability, and that their liability, if any, should not exceed US$500
or the limit of liability in the bill of lading, whichever is lower.
In a Decision dated January 12, 1996, the RTC held that respondents, as common
carrier,[2] failed to prove that they observed the required extraordinary diligence to
prevent loss of the subject cargoes in accordance with the pertinent provisions of the Civil
Code.[3] The dispositive portion of the Decision reads:
WHEREFORE, judgment is rendered ordering the defendants, jointly and severally, to pay
the plaintiff the Peso equivalent as of February 17, 1994 of HK$55,000.00 or the sum
of P228,085.00, whichever is lower, with costs against the defendants.[4]
Respondents motion for reconsideration was denied by the RTC in an Order
dated February 19, 1996.
Respondents appealed the RTC Decision to the CA.
In a Decision promulgated on February 15, 2000, the CA affirmed the RTC Decision with
modification, thus:
WHEREFORE, the assailed decision is hereby MODIFIED. Appellants Neptune and Overseas
are hereby ordered to pay jointly and severally appellee PCIC P228,085.00, representing
the amount it paid Fukuyama. Costs against the appellants.[5]
Respondents moved for reconsideration of the Decision of the CA arguing, among others,
that their liability was only US$1,500 or US$500 per package under the limited liability
provision of the Carriage of Goods by Sea Act (COGSA).
In its Resolution dated April 13, 2000, the CA found the said argument of respondents to be
meritorious. The dispositive portion of the Resolution reads:
WHEREFORE, the motion is partly granted in the sense that appellants shall be liable to pay
appellee PCIC the value of the three packages lost computed at the rate of US$500 per
package or a total of US$1,500.00.[6]
Hence, this petition raising this lone issue:
THE COURT OF APPEALS ERRED IN AWARDING RESPONDENTS DAMAGES SUBJECT TO THE
US$500 PER PACKAGE LIMITATION.
Petitioner contends that the CA erred in awarding damages to respondents subject to the
US$500 per package limitation since the vessel committed a quasi deviation which is a
breach of the contract of carriage when it intentionally threw overboard the container
with the subject shipment during the voyage to Manila for its own benefit or preservation
based on a Survey Report[7] conducted by Mariners Adjustment Corporation, which firm
was tasked by petitioner to investigate the loss of the subject cargoes. According to
petitioner, the breach of contract resulted in the abrogation of respondents rights under
the contract and COGSA including the US$500 per package limitation. Hence,
respondents cannot invoke the benefit of the US$500 per package limitation and the CA
erred in considering the limitation and modifying its decision accordingly.
The contention lacks merit.
The facts as found by the RTC do not support the new allegation of facts by petitioner
regarding the intentional throwing overboard of the subject cargoes and quasi deviation.
The Court notes that in petitionersComplaint before the RTC, petitioner alleged as follows:
xxx xxx xxx
2.03 In the course of the maritime voyage from Hongkong to Manila subject shipment
fell overboard while in the custody of the defendants and were never recovered; it was
part of the LCL cargoes packed by defendants in container IEAU-4592750 that fell
overboard during the voyage.[8]
Moreover, the same Survey Report cited by petitioner stated:
From the investigation conducted, we noted that Capt. S.L. Halloway, Master of MV
BALTIMAR ORION filed a Note of Protest in the City of Manila, and was notarized on 06
October 1993.
Based on Note of Protest, copy attached hereto for your reference, carrier vessel sailed
from Hongkong on 1st October 1993 carrying containers bound for Manila.
Apparently, at the time the vessel [was] sailing at about 2400 hours of 2nd October 1993,
she encountered winds and seas such as to cause occasional moderate to heavy pitching
and rolling deeply at times. At 0154 hours, same day, while in position Lat. 20 degrees, 29
minutes North, Long. 115 degrees, 49 minutes East, four (4) x 40 ft. containers were lost/fell
overboard. The numbers of these containers are NUSU-3100789, TPHU -5262138, IEAU-
4592750, NUSU-4515404.
xxx xxx xxx
Furthermore, during the course of voyage, high winds and heavy seas were encountered
causing the ship to roll and pitch heavily. The course and speed was altered to ease
motion of the vessel, causing delay and loss of time on the voyage.
xxx xxx xxx
SURVEYORS REMARKS:
In view of the foregoing incident, we are of the opinion that the shipment of 3 cases of
Various Warp Yarn on Returnable Beams which were containerized onto 40 feet LCL (no.
IEAU-4592750) and fell overboard the subject vessel during heavy weather is an Actual
Total Loss.[9]
The records show that the subject cargoes fell overboard the ship and petitioner should
not vary the facts of the case on appeal. This Court is not a trier of facts, and, in this case,
the factual finding of the RTC and the CA, which is supported by the evidence on record,
is conclusive upon this Court.
As regards the issue on the limited liability of respondents, the Court upholds the decision
of the CA.

Since the subject cargoes were lost while being transported by respondent common
carrier from Hong Kong to the Philippines, Philippine law applies pursuant to the Civil Code
which provides:
Art. 1753. The law of the country to which the goods are to be transported shall govern the
liability of the common carrier for their loss, destruction or deterioration.
Art. 1766. In all matters not regulated by this Code, the rights and obligations of common
carriers shall be governed by the Code of Commerce and by special laws.
The rights and obligations of respondent common carrier are thus governed by the
provisions of the Civil Code, and the COGSA,[10] which is a special law, applies suppletorily.
The pertinent provisions of the Civil Code applicable to this case are as follows:
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 fairly and freely agreed upon.
In addition, Sec. 4, paragraph (5) of the COGSA, which is applicable to all contracts for
the carriage of goods by sea to and from Philippine ports in foreign trade, provides:
Neither the carrier nor the ship shall in any event be or become liable for any loss or
damage to or in connection with the transportation of goods in an amount exceeding
$500 per package lawful money of the United States, or in case of goods not shipped in
packages, per customary freight unit, or the equivalent of that sum in other currency,
unless the nature and value of such goods have been declared by the shipper before
shipment and inserted in the bill of lading. This declaration, if embodied in the bill of lading
shall be prima facie evidence, but shall be conclusive on the carrier.
In this case, Bill of Lading No. 0396180 stipulates:
Neither the Carrier nor the vessel shall in any event become liable for any loss of or
damage to or in connection with the transportation of Goods in an amount exceeding
US$500 (which is the package or shipping unit limitation under U.S. COGSA) per package
or in the case of Goods not shipped in packages per shipping unit or customary
freight, unless the nature and value of such Goods have been declared by the Shipper
before shipment and inserted in this Bill of Lading and the Shipper has paid additional
charges on such declared value. . . .
The bill of lading[11] submitted in evidence by petitioner did not show that the shipper
in Hong Kong declared the actual value of the goods as insured by Fukuyama before
shipment and that the said value was inserted in the Bill of Lading, and so no additional
charges were paid. Hence, the stipulation in the bill of lading that the carriers liability shall
not exceed US$500 per package applies.
Such stipulation in the bill of lading limiting respondents liability for the loss of the subject
cargoes is allowed under Art. 1749 of the Civil Code, and Sec. 4, paragraph (5) of the
COGSA. Everett Steamship Corporation v. Court of Appeals[12] held:
A stipulation in the bill of lading limiting the common carriers liability for loss or destruction
of a cargo to a certain sum, unless the shipper or owner declares a greater value, is
sanctioned by law, particularly Articles 1749 and 1750 of the Civil Code which provide:
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 fairly and freely agreed upon.
Such limited-liability clause has also been consistently upheld by this court in a number of
cases. Thus, in Sea-Land Service, Inc. vs. Intermediate Appellate Court, we ruled:
It seems clear that even if said section 4 (5) of the Carriage of Goods by Sea Act did not
exist, the validity and binding effect of the liability limitation clause in the bill of lading here
are nevertheless fully sustainable on the basis alone of the cited Civil Code Provisions. That
said stipulation is just and reasonable is arguable from the fact that it echoes Art. 1750 itself
in providing a limit to liability only if a greater value is not declared for the shipment in the
bill of lading. To hold otherwise would amount to questioning the justness and fairness of
the law itself.... But over and above that consideration, the just and reasonable character
of such stipulation is implicit in it giving the shipper or owner the option of avoiding accrual
of liability limitation by the simple and surely far from onerous expedient of declaring the
nature and value of the shipment in the bill of lading.

The CA, therefore, did not err in holding respondents liable for damages to petitioner
subject to the US$500 per package limited- liability provision in the bill of lading.

WHEREFORE, the petition is DENIED. The Resolution of the Court of Appeals in CA-G.R. CV
No. 52855 promulgated on April 13, 2000 is hereby AFFIRMED.

Costs against petitioner.

SO ORDERED.

FIRST DIVISION
G.R. No. 172682, July 27, 2016
SULPICIO LINES, INC., Petitioner, v. NAPOLEON SESANTE, NOW SUBSTITUTED BY MARIBEL
ATILANO, KRISTEN MARIE, CHRISTIAN IONE, KENNETH KERRN AND KARISNA KATE, ALL
SURNAMED SESANTE, Respondent.
DECISION
BERSAMIN, J.:
Moral damages are meant to enable the injured party to obtain the means, diversions or
amusements in order to alleviate the moral suffering. Exemplary damages are designed to
permit the courts to reshape behavior that is socially deleterious in its consequence by
creating negative incentives or deterrents against such behavior.
The Case
This appeal seeks to undo and reverse the adverse decision promulgated on June 27,
2005,1 whereby the Court of Appeals (CA) affirmed with modification the judgment of the
Regional Trial Court (RTC), Branch 91, in Quezon City holding the petitioner liable to pay
temperate and moral damages due to breach of contract of carriage.2chanrobleslaw
Antecedents
On September 18, 1998, at around 12:55 p.m., the M/V Princess of the Orient, a passenger
vessel owned and operated by the petitioner, sank near Fortune Island in Batangas. Of the
388 recorded passengers, 150 were lost.3 Napoleon Sesante, then a member of the
Philippine National Police (PNP) and a lawyer, was one of the passengers who survived the
sinking. He sued the petitioner for breach of contract and damages.4chanrobleslaw
Sesante alleged in his complaint that the M/V Princess of the Orient left the Port of Manila
while Metro Manila was experiencing stormy weather; that at around 11:00 p.m., he had
noticed the vessel listing starboard, so he had gone to the uppermost deck where he
witnessed the strong winds and big waves pounding the vessel; that at the same time, he
had seen how the passengers had been panicking, crying for help and frantically
scrambling for life jackets in the absence of the vessel's officers and crew; that sensing
danger, he had called a certain Vency Ceballos through his cellphone to request him to
inform the proper authorities of the situation; that thereafter, big waves had rocked the
vessel, tossing him to the floor where he was pinned by a long steel bar; that he had freed
himself only after another wave had hit the vessel;5 that he had managed to stay afloat
after the vessel had sunk, and had been carried by the waves to the coastline of Cavite
and Batangas until he had been rescued; that he had suffered tremendous hunger, thirst,
pain, fear, shock, serious anxiety and mental anguish; that he had sustained injuries,6 and
had lost money, jewelry, important documents, police uniforms and the .45 caliber pistol
issued to him by the PNP; and that because it had committed bad faith in allowing the
vessel to sail despite the storm signal, the petitioner should pay him actual and moral
damages of P500,000.00 and P1,000,000.00, respectively.7chanrobleslaw
In its defense, the petitioner insisted on the seaworthiness of the M/V Princess of the Orient
due to its having been cleared to sail from the Port of Manila by the proper authorities;
that the sinking had been due to force majeure; that it had not been negligent; and that
its officers and crew had also not been negligent because they had made preparations to
abandon the vessel because they had launched life rafts and had provided the
passengers assistance in that regard.8chanrobleslaw
Decision of the RTC
On October 12, 2001, the RTC rendered its judgment in favor of the respondent,9 holding
as follows:ChanRoblesVirtualawlibrary
WHEREFORE, judgment is hereby rendered in favor of plaintiff Napoleon Sesante and
against defendant Sulpicio Lines, Inc., ordering said defendant to pay plaintiff:
1. Temperate damages in the amount of P400,000.00;
2. Moral damages in the amount of One Million Pesos (P1,000,000.00);
3. Costs of suit.
SO ORDERED.10chanroblesvirtuallawlibrary
The RTC observed that the petitioner, being negligent, was liable to Sesante pursuant to
Articles 1739 and 1759 of the Civil Code; that the petitioner had not established its due
diligence in the selection and supervision of the vessel crew; that the ship officers had
failed to inspect the stowage of cargoes despite being aware of the storm signal; that the
officers and crew of the vessel had not immediately sent a distress signal to the Philippine
Coast Guard; that the ship captain had not called for then "abandon ship" protocol; and
that based on the report of the Board of Marine Inquiry (BMI), the erroneous maneuvering
of the vessel by the captain during the extreme weather condition had been the
immediate and proximate cause of the sinking.
The petitioner sought reconsideration, but the RTC only partly granted its motion by
reducing the temperate damages from P500,000.00 to P300,000.00.11chanrobleslaw
Dissatisfied, the petitioner appealed.12 It was pending the appeal in the CA when Sesante
passed away. He was substituted by his heirs.13chanrobleslaw
Judgment of the CA
On June 27, 2005, the CA promulgated its assailed decision. It lowered the temperate
damages to P120,000.00, which approximated the cost of Sesante's lost personal
belongings; and held that despite the seaworthiness of the vessel, the petitioner remained
civilly liable because its officers and crew had been negligent in performing their
duties.14chanrobleslaw
Sttill aggrieved, Sulpicio Lines moved for reconsideration, but the CA denied the
motion.15chanrobleslaw
Hence, this appeal.
Issues
The petitioner attributes the following errors to the CA, to wit:ChanRoblesVirtualawlibrary
I
THE ASSAILED DECISION ERRED IN SUSTAINING THE AWARD OF MORAL DAMAGES, AS THE
INSTANT CASE IS FOR ALLEGED PERSONAL INJURIES PREDICATED ON BREACH OF CONTRACT
OF CARRIAGE, AND THERE BEING NO PROOF OF BAD FAITH ON THE PART OF SULPICIO
II
THE ASSAILED DECISION ERRED IN SUSTAINING THE AMOUNT OF MORAL DAMAGES
AWARDED, THE SAME BEING UNREASONABLE, EXCESSIVE AND UNCONSCIONABLE, AND
TRANSLATES TO UNJUST ENRICHMENT AGAINST SULPICIO
III
THE ASSAILED DECISION ERRED IN SUSTAINING THE AWARD OF TEMPERATE DAMAGES AS THE
SAME CANNOT SUBSTITUTE FOR A FAILED CLAIM FOR ACTUAL DAMAGES, THERE BEING NO
COMPETENT PROOF TO WARRANT SAID AWARD
IV
THE AWARD OF TEMPERATE DAMAGES IS UNTENABLE AS THE REQUISITE NOTICE UNDER THE
LAW WAS NOT GIVEN TO SULPICIO IN ORDER TO HOLD IT LIABLE FOR THE ALLEGED LOSS OF
SESANTE'S PERSONAL BELONGINGS
V Substitution by the heirs is not a matter of jurisdiction, but a requirement of due process. 17 It
THE ASSAILED DECISION ERRED IN SUBSTITUTING THE HEIRS OF RESPONDENT SESANTE IN THE
INSTANT CASE, THE SAME BEING A PERSONAL ACTION WHICH DOES NOT SURVIVE
VI
THE ASSAILED DECISION ERRED IN APPLYING ARTICLE 1759 OF THE NEW CIVIL CODE
AGAINST SULPICIO SANS A CLEAR-CUT FINDING OF SULPICIO'S BAD FAITH IN THE
INCIDENT16chanroblesvirtuallawlibrary
In other words, to be resolved are the following, namely: (1) Is the complaint for breach of
contract and damages a personal action that does not survive the death of the plaintiff?;
(2) Is the petitioner liable for damages under Article 1759 of the Civil Code?; and (3) Is
there sufficient basis for awarding moral and temperate damages?
Ruling of the Court
The appeal lacks merit.
I damages.19 Sesante's claim against the petitioner involved his personal injury caused by
An action for breach of contract of carriage survives the death of the plaintiff
The petitioner urges that Sesante's complaint for damages was purely personal and
cannot be transferred to his heirs upon his death. Hence, the complaint should be
dismissed because the death of the plaintiff abates a personal action.
The petitioner's urging is unwarranted.
Section 16, Rule 3 of the Rules of Court lays down the proper procedure in the event of the
death of a litigant, viz.:ChanRoblesVirtualawlibrary
Section 16. Death of party; duty of counsel. - Whenever a party to a pending action dies,
and the claim is not thereby extinguished, it shall be the duty of his counsel to inform the
court within thirty (30) days after such death of the fact thereof, and to give the name and
address of his legal representative or representatives. Failure of counsel to comply with his
duty shall be a ground for disciplinary action.
The heirs of the deceased may be allowed to be substituted for the deceased, without
requiring the appointment of an executor or administrator and the court may appoint a
guardian ad litem for the minor heirs.
xxxx
protects the right of due process belonging to any party, that in the event of death the
deceased litigant continues to be protected and properly represented in the suit through
the duly appointed legal representative of his estate.18chanrobleslaw
The application of the rule on substitution depends on whether or not the action survives
the death of the litigant. Section 1, Rule 87 of the Rules of Court enumerates the following
actions that survive the death of a party, namely: (1) recovery of real or personal property,
or an interest from the estate; (2) enforcement of liens on the estate; and (3) recovery of
damages for an injury to person or property. On the one hand, Section 5, Rule 86 of
the Rules of Court lists the actions abated by death as including: (1) claims for funeral
expenses and those for the last sickness of the decedent; (2) judgments for money; and (3)
all claims for money against the deceased, arising from contract, express or implied.
A contract of carriage generates a relation attended with public duty, neglect or
malfeasance of the carrier's employees and gives ground for an action for
the breach of the contract of carriage. Pursuant to the aforecited rules, the complaint
survived his death, and could be continued by his heirs following the rule on substitution.
II
The petitioner is liable for breach of contract of carriage
The petitioner submits that an action for damages based on breach of contract of
carriage under Article 1759 of the Civil Code should be read in conjunction with Article
2201 of the same code; that although Article 1759 only provides for a presumption of
negligence, it does not envision automatic liability; and that it was not guilty of bad faith
considering that the sinking of M/V Princess of the Orient had been due to a fortuitous
event, an exempting circumstance under Article 1174 of the Civil Code.
The submission has no substance.
Article 1759 of the Civil Code does not establish a presumption of negligence because it
explicitly makes the common carrier liable in the event of death or injury to passengers
due to the negligence or fault of the common carrier's employees. It
reads:ChanRoblesVirtualawlibrary
Article 1759. Common carriers are liable for the death or injuries to passengers through the
negligence or willful acts of the former's employees, although such employees may have
acted beyond the scope of their authority or in violation of the orders of the common
carriers.
This liability of the common carriers does not cease upon proof that they exercised all the
diligence of a good father of a family in the selection and supervision of their employees.
The liability of common carriers under Article 1759 is demanded by the duty of
extraordinary diligence required of common carriers in safely carrying their
passengers.20chanrobleslaw
On the other hand, Article 1756 of the Civil Code lays down the presumption of
negligence against the common carrier in the event of death or injury of its
passenger, viz.:ChanRoblesVirtualawlibrary
Article 1756. In case of death of or injuries to passengers, common carriers are presumed
to have been at fault or to have acted negligently, unless they prove that they observed
extraordinary diligence as prescribed in Articles 1733 and 1755.
Clearly, the trial court is not required to make an express finding of the common carrier's
fault or negligence.21 Even the mere proof of injury relieves the passengers from
establishing the fault or negligence of the carrier or its employees.22 The presumption of
negligence applies so long as there is evidence showing that: (a) a contract exists
between the passenger and the common carrier; and (b) the injury or death took place
during the existence of such contract.23 In such event, the burden shifts to the common
carrier to prove its observance of extraordinary diligence, and that an unforeseen event
or force majeure had caused the injury.24chanrobleslaw
Sesante sustained injuries due to the buffeting by the waves and consequent sinking of
M/V Princess of the Orient where he was a passenger. To exculpate itself from liability, the
common carrier vouched for the seaworthiness of M/V Princess of the Orient, and referred
to the BMI report to the effect that the severe weather condition - a force majeure - had
brought about the sinking of the vessel.
The petitioner was directly liable to Sesante and his heirs.
A common carrier may be relieved of any liability arising from a fortuitous event pursuant
to Article 117425cralawred of the Civil Code. But while it may free a common carrier from
liability, the provision still requires exclusion of human agency from the cause of injury or
loss.26 Else stated, for a common carrier to be absolved from liability in case of force
majeure, it is not enough that the accident was caused by a fortuitous event. The
common carrier must still prove that it did not contribute to the occurrence of the incident
due to its own or its employees' negligence.27 We explained in Schmitz Transport &
Brokerage Corporation v. Transport Venture, Inc.,28 as follows:ChanRoblesVirtualawlibrary
In order to be considered a fortuitous event, however, (1) the cause of the unforeseen and
unexpected occurrence, or the failure of the debtor to comply with his obligation, must be
independent of human will; (2) it must be impossible to foresee the event which constitute
the caso fortuito, or if it can be foreseen it must be impossible to avoid; (3) the occurrence
must be such as to render it impossible for the debtor to fulfill his obligation in any manner;
and (4) the obligor must be free from any participation in the aggravation of the injury
resulting to the creditor.
[T]he principle embodied in the act of God doctrine strictly requires that the act must be
occasioned solely by the violence of nature. Human intervention is to be excluded from
creating or entering into the cause of the mischief. When the effect is found to be in part
the result of the participation of man, whether due to his active intervention or neglect or
failure to act, the whole occurrence is then humanized and removed from the rules
applicable to the acts of God.29 (bold underscoring supplied for emphasis)
The petitioner has attributed the sinking of the vessel to the storm notwithstanding its
position on the seaworthiness of M/V Princess of the Orient. Yet, the findings of the BMI
directly contradicted the petitioner's attribution, as follows:ChanRoblesVirtualawlibrary
7. The Immediate and the Proximate Cause of the Sinking
The Captain's erroneous maneuvers of the M/V Princess of the Orient minutes before she
sunk [sic] had caused the accident. It should be noted that during the first two hours when
the ship left North Harbor, she was navigating smoothly towards Limbones Point. During the
same period, the ship was only subjected to the normal weather stress prevailing at the
time. She was then inside Manila Bar. The waves were observed to be relatively small to
endanger the safety of the ship. It was only when the MV Princess of the Orient had
cleared Limbones Pt. while navigating towards the direction of the Fortune Island when this
agonizing misfortune struck the ship.
Initially, a list of three degrees was observed. The listing of the ship to her portside had
continuously increased. It was at this point that the captain had misjudged the situation.
While the ship continuously listed to her portside and was battered by big waves, strong
southwesterly winds, prudent judgement [sic] would dictate that the Captain should have
considerably reduced the ship's speed. He could have immediately ordered the Chief
Engineer to slacken down the speed. Meanwhile, the winds and waves continuously hit
the ship on her starboard side. The waves were at least seven to eight meters in height and
the wind velocity was a[t] 25 knots. The MV Princess of the Orient being a close-type ship
(seven decks, wide and high superstructure) was vulnerable and exposed to the howling
winds and ravaging seas. Because of the excessive movement, the solid and liquid cargo
below the decks must have shifted its weight to port, which could have contributed to the
tilted position of the ship.
Minutes later, the Captain finally ordered to reduce the speed of the ship to 14 knots. At
the same time, he ordered to put ballast water to the starboard-heeling tank to arrest the
continuous listing of the ship. This was an exercise in futility because the ship was already
listing between 15 to 20 degrees to her portside. The ship had almost reached the
maximum angle of her loll. At this stage, she was about to lose her stability.
Despite this critical situation, the Captain executed several starboard maneuvers. Steering
the course of the Princess to starboard had greatly added to her tilting. In the open seas,
with a fast speed of 14 knots, advance maneuvers such as this would tend to bring the
body of the ship in the opposite side. In navigational terms, this movement is described as
the centripetal force. This force is produced by the water acting on the side of the ship
away from the center of the turn. The force is considered to act at the center of lateral
resistance which, in this case, is the centroid of the underwater area of the ship's side away
from the center of the turn. In the case of the Princess, when the Captain maneuvered her
to starboard, her body shifted its weight to port. Being already inclined to an angle of 15
degrees, coupled with the instantaneous movement of the ship, the cargoes below deck
could have completely shifted its position and weight towards portside. By this time, the
ship being ravaged simultaneously by ravaging waves and howling winds on her starboard
side, finally lost her grip.30chanroblesvirtuallawlibrary
Even assuming the seaworthiness of the MA/ Princess of the Orient, the petitioner could not
escape liability considering that, as borne out by the aforequoted findings of the BMI, the
immediate and proximate cause of the sinking of the vessel had been the gross
negligence of its captain in maneuvering the vessel.
The Court also notes that Metro Manila was experiencing Storm Signal No. 1 during the
time of the sinking.31 The BMI observed that a vessel like the M/V Princess of the Orient,
which had a volume of 13.734 gross tons, should have been capable of withstanding a
Storm Signal No. 1 considering that the responding fishing boats of less than 500 gross tons
had been able to weather through the same waves and winds to go to the succor of the
sinking vessel and had actually rescued several of the latter's distressed
passengers.32chanrobleslaw
III
The award of moral damages and temperate damages is proper
The petitioner argues that moral damages could be meted against a common carrier only
in the following instances, to wit: (1) in the situations enumerated by Article 2201 of the Civil
Code; (2) in cases of the death of a passenger; or (3)where there was bad faith on the
part of the common carrier. It contends that none of these instances obtained herein;
hence, the award should be deleted.
We agree with the petitioner that moral damages may be recovered in an action upon
breach of contract of carriage only when: (a) death of a passenger results, or (b) it is
proved that the carrier was guilty of fraud and bad faith, even if death does not
result.33 However, moral damages may be awarded if the contractual breach is found to
be wanton and deliberately injurious, or if the one responsible acted fraudulently or with
malice or bad faith.34chanrobleslaw
The CA enumerated the negligent acts committed by the officers and crew of M/V
Princess of the Orient, viz.:ChanRoblesVirtualawlibrary
x x x. [W]hile this Court yields to the findings of the said investigation report, yet it should be
observed that what was complied with by Sulpicio Lines were only the basic and minimal
safety standards which would qualify the vessel as seaworthy. In the same report however
it also revealed that the immediate and proximate cause of the sinking of the M/V Princess
of the Orient was brought by the following: erroneous maneuvering command of Captain
Esrum Mahilum and due to the weather condition prevailing at the time of the tragedy.
There is no doubt that under the circumstances the crew of the vessel were negligent in
manning it. In fact this was clearly established by the investigation of the Board of Marine
Inquiry where it was found that:ChanRoblesVirtualawlibrary
The Chief Mate, when interviewed under oath, had attested that he was not able to make
stability calculation of the ship vis-a-vis her cargo. He did not even know the metacentric
height (GM) of the ship whether it be positive or negative.
As cargo officer of the ship, he failed to prepare a detailed report of the ship's cargo
stowage plan.
He likewise failed to conduct the soundings (measurement) of the ballast tanks before the
ship departed from port. He readily presumed that the ship was full of ballast since the ship
was fully ballasted when she left Cebu for Manila on 16 September 1998 and had never
discharge[d] its contents since that time.
Being the officer-in-charge for emergency situation (sic) like this, he failed to execute and
supervise the actual abandonship (sic) procedure. There was no announcement at the
public address system of abandonship (sic), no orderly distribution of life jackets and no
orderly launching of life rafts. The witnesses have confirmed this finding on their sworn
statements.
There was miscalculation in judgment on the part of the Captain when he erroneously
navigated the ship at her last crucial moment. x x x
To aggravate his case, the Captain, having full command and responsibility of the MV
Princess of the Orient, had failed to ensure the proper execution of the actual abandoning
of the ship.
The deck and engine officers (Second Mate, Third Mate, Chief Engineers, Second
Engineer, Third Engineer and Fourth Engineer), being in charge of their respective
abandonship (sic) post, failed to supervise the crew and passengers in the proper
execution of abandonship (sic) procedure.
The Radio Officer (spark) failed to send the SOS message in the internationally accepted
communication network (VHF Channel 16). Instead, he used the Single Side Band (SSB)
radio in informing the company about the emergency situation. x x x
x35chanroblesvirtuallawlibrary
The aforestated negligent acts of the officers and crew of M/V Princess of the Orient could
not be ignored in view of the extraordinary duty of the common carrier to ensure the
safety of the passengers. The totality of the negligence by the officers and crew of M/V
Princess of the Orient, coupled with the seeming indifference of the petitioner to render
assistance to Sesante,36 warranted the award of moral damages.
While there is no hard-and-fast rule in determining what is a fair and reasonable amount of
moral damages, the discretion to make the determination is lodged in the trial court with
the limitation that the amount should not be palpably and scandalously excessive. The trial
court then bears in mind that moral damages are not intended to impose a penalty on the
wrongdoer, or to enrich the plaintiff at the expense of the defendant.37 The amount of the
moral damages must always reasonably approximate the extent of injury and be
proportional to the wrong committed.38chanrobleslaw
The Court recognizes the mental anguish, agony and pain suffered by Sesante who fought
to survive in the midst of the raging waves of the sea while facing the immediate prospect
of losing his life. His claim for moral and economic vindication is a bitter remnant of that
most infamous tragedy that left hundreds of families broken in its wake. The anguish and
moral sufferings he sustained after surviving the tragedy would always include the memory
of facing the prospect of his death from drowning, or dehydration, or being preyed upon
by sharks. Based on the established circumstances, his survival could only have been a
miracle wrought by God's grace, by which he was guided in his desperate swim for the
safety of the shore. But even with the glory of survival, he still had to grapple with not just
the memory of having come face to face with almost certain death, but also with having
to answer to the instinctive guilt for the rest of his days of being chosen to live among the
many who perished in the tragedy.39chanrobleslaw
While the anguish, anxiety, pain and stress experienced by Sesante during and after the
sinking cannot be quantified, the moral damages to be awarded should at least
approximate the reparation of all the consequences of the petitioner's negligence. With
moral damages being meant to enable the injured party to obtain the means, diversions
or amusements in order to alleviate his moral and physical sufferings,40 the Court is called
upon to ensure that proper recompense be allowed to him, through his heirs. For this
purpose, the amount of P1,000,000.00, as granted by the RTC and affirmed by the CA, is
maintained.
The petitioner contends that its liability for the loss of Sesante's personal belongings should
conform with Article 1754, in relation to Articles 1998, 2000 to 2003 of the Civil Code, which
provide:ChanRoblesVirtualawlibrary
Article 1754. The provisions of Articles 1733 to 1753 shall apply to the passenger's baggage
which is not in his personal custody or in that of his employees. As to other baggage, the
rules in Articles 1998 and 2000 to 2003 concerning the responsibility of hotel-keepers shall
be applicable.
xxxx
Article 1998. The deposit of effects made by travellers in hotels or inns shall also be
regarded as necessary. The keepers of hotels or inns shall be responsible for them as
depositaries, provided that notice was given to them, or to their employees, of the effects
brought by the guests and that, on the part of the latter, they take the precautions which
said hotel-keepers or their substitutes advised relative to the care and vigilance of their
effects.
xxxx
Article 2000. The responsibility referred to in the two preceding articles shall include the loss
of, or injury to the personal property of the guests caused by the servants or employees of
the keepers of hotels or inns as well as by strangers; but not that which may proceed from
any force majeure. The fact that travellers are constrained to rely on the vigilance of the
keeper of the hotel or inn shall be considered in determining the degree of care required
of him.
Article 2001. The act of a thief or robber, who has entered the hotel is not deemed force
majeure, unless it is done with the use of arms or through an irresistible force.
Article 2002. The hotel-keeper is not liable for compensation if the loss is due to the acts of
the guest, his family, servants or visitors, or if the loss arises from the character of the things
brought into the hotel.
Article 2003. The hotel-keeper cannot free himself from responsibility by posting notices to
the effect that he is not liable for the articles brought by the guest. Any stipulation to the
contrary between the hotel-keeper and the guest whereby the responsibility of the former
as set forth in Articles 1998 to 2001 is suppressed or diminished shall be void.
The petitioner denies liability because Sesante's belongings had remained in his custody all
throughout the voyage until the sinking, and he had not notified the petitioner or its
employees about such belongings. Hence, absent such notice, liability did not attach to
the petitioner.
Is notification required before the common carrier becomes liable for lost belongings that
remained in the custody of the passenger?
We answer in the negative.
The rule that the common carrier is always responsible for the passenger's baggage during
the voyage needs to be emphasized. Article 1754 of the Civil Code does not exempt the
common carrier from liability in case of loss, but only highlights the degree of care required
of it depending on who has the custody of the belongings. Hence, the law requires the
common carrier to observe the same diligence as the hotel keepers in case the baggage
remains with the passenger; otherwise, extraordinary diligence must be
exercised.41 Furthermore, the liability of the common carrier attaches even if the loss or
damage to the belongings resulted from the acts of the common carrier's employees, the
only exception being where such loss or damages is due to force majeure.42chanrobleslaw
In YHT Realty Corporation v. Court of Appeals,43 we declared the actual delivery of the
goods to the innkeepers or their employees as unnecessary before liability could attach to
the hotelkeepers in the event of loss of personal belongings of their guests considering that
the personal effects were inside the hotel or inn because the hotelkeeper shall remain
accountable.44 Accordingly, actual notification was not necessary to render the petitioner
as the common carrier liable for the lost personal belongings of Sesante. By allowing him to
board the vessel with his belongings without any protest, the petitioner became sufficiently
notified of such belongings. So long as the belongings were brought inside the premises of
the vessel, the petitioner was thereby effectively notified and consequently duty-bound to
observe the required diligence in ensuring the safety of the belongings during the voyage.
Applying Article 2000 of the Civil Code, the petitioner assumed the liability for loss of the
belongings caused by the negligence of its officers or crew. In view of our finding that the
negligence of the officers and crew of the petitioner was the immediate and proximate
cause of the sinking of the M/V Princess of the Orient, its liability for Sesante's lost personal
belongings was beyond question.
The petitioner claims that temperate damages were erroneously awarded because
Sesante had not proved pecuniary loss; and that the CA merely relied on his self-serving
testimony.
The award of temperate damages was proper.
Temperate damages may be recovered when some pecuniary loss has been suffered but
the amount cannot, from the nature of the case, be proven with certainty.45 Article
222446 of the Civil Codeexpressly authorizes the courts to award temperate damages
despite the lack of certain proof of actual damages.47chanrobleslaw
Indubitably, Sesante suffered some pecuniary loss from the sinking of the vessel, but the
value of the loss could not be established with certainty. The CA, which can try facts and
appreciate evidence, pegged the value of the lost belongings as itemized in the police
report at P120,000.00. The valuation approximated the costs of the lost belongings. In that
context, the valuation of P120,000.00 is correct, but to be regarded as temperate
damages.
In fine, the petitioner, as a common carrier, was required to observe extraordinary
diligence in ensuring the safety of its passengers and their personal belongings. It being
found herein short of the required diligence rendered it liable for the resulting injuries and
damages sustained by Sesante as one of its passengers.
Should the petitioner be further held liable for exemplary damages?
In contracts and quasi-contracts, the Court has the discretion to award exemplary
damages if the defendant acted in a wanton, fraudulent, reckless, oppressive, or
malevolent manner.48 Indeed, exemplary damages cannot be recovered as a matter of
right, and it is left to the court to decide whether or not to award them.49 In consideration
of these legal premises for the exercise of the judicial discretion to grant or deny exemplary
damages in contracts and quasi-contracts against a defendant who acted in a wanton,
fraudulent,' reckless, oppressive, or malevolent manner, the Court hereby awards
exemplary damages to Sesante.
First of all, exemplary damages did not have to be specifically pleaded or proved,
because the courts had the discretion to award them for as long as the evidence so
warranted. In Marchan v. Mendoza,50 the Court has relevantly
discoursed:ChanRoblesVirtualawlibrary
x x x. It is argued that this Court is without jurisdiction to adjudicate this exemplary
damages since there was no allegation nor prayer, nor proof, nor counterclaim of error for
the same by the appellees. It is to be observed however, that in the complaint, plaintiffs
"prayed for such other and further relief as this Court may deem just and equitable." Now,
since the body of the complaint sought to recover damages against the defendant-carrier
wherein plaintiffs prayed for indemnification for the damages they suffered as a result of
the negligence of said Silverio Marchan who is appellant's employee; and since
exemplary damages is intimately connected with general damages, plaintiffs may not be
expected to single out by express term the kind of damages they are trying to recover
against the defendant's carrier. Suffice it to state that when plaintiffs prayed in their
complaint for such other relief and remedies that may be availed of under the premises, in
effect, therefore, the court is called upon to exercise and use its discretion whether the
imposition of punitive or exemplary damages even though not expressly prayed or
pleaded in the plaintiffs' complaint.
x x x It further appears that the amount of exemplary damages need not be proved,
because its determination depends upon the amount of compensatory damages that may
be awarded to the claimant. If the amount of exemplary damages need not be proved, it
need not also be alleged, and the reason is obvious because it is merely incidental or
dependent upon what the court may award as compensatory damages. Unless and until
this premise is determined and established, what may be claimed as exemplary damages
would amount to a mere surmise or speculation. It follows as a necessary consequence
that the amount of exemplary damages need not be pleaded in the complaint because
the same cannot be predetermined. One can merely ask that it be determined by the
court if in the use of its discretion the same is warranted by the evidence, and this is just
what appellee has done. (Bold underscoring supplied for emphasis)
And, secondly, exemplary damages are designed by our civil law to "permit the courts to
reshape behavior that is socially deleterious in its consequence by creating negative
incentives or deterrents against such behavior."51 The nature and purpose for this kind of
damages have been well-stated in People v. Dalisay,52 to wit:ChanRoblesVirtualawlibrary
Also known as 'punitive' or 'vindictive' damages, exemplary or corrective damages are
intended to serve as a deterrent to serious wrong doings, and as a vindication of undue
sufferings and wanton invasion of the rights of an injured or a punishment for those guilty of
outrageous conduct. These terms are generally, but not always, used interchangeably. In
common law, there is preference in the use of exemplary damages when the award is to
account for injury to feelings and for the sense of indignity and humiliation suffered by a
person as a result of an injury that has been maliciously and wantonly inflicted, the theory
being that there should be compensation for the hurt caused by the highly reprehensible
conduct of the defendant - associated with such circumstances as willfulness, wantonness,
malice, gross negligence or recklessness, oppression, insult or fraud or gross fraud - that
intensifies the injury. The terms punitive or vindictive damages are often used to refer to
those species of damages that may be awarded against a person to punish him for his
outrageous conduct. In either case, these damages are intended in good measure to
deter the wrongdoer and others like him from similar conduct in the future. (Bold
underscoring supplied for emphasis)
The BMI found that the "erroneous maneuvers" during the ill-fated voyage by the captain
of the petitioner's vessel had caused the sinking. After the vessel had cleared Limbones
Point while navigating towards the direction of Fortune Island, the captain already noticed
the listing of the vessel by three degrees to the portside of the vessel, but, according to the
BMI, he did not exercise prudence as required by the situation in which his vessel was
suffering the battering on the starboard side by big waves of seven to eight meters high
and strong southwesterly winds of 25 knots. The BMI pointed out that he should have
considerably reduced the speed of the vessel based on his experience about the vessel -
a close-type ship of seven decks, and of a wide and high superstructure - being vulnerable
if exposed to strong winds and high waves. He ought to have also known that maintaining
a high speed under such circumstances would have shifted the solid and liquid cargo of
the vessel to port, worsening the tilted position of the vessel. It was only after a few minutes
thereafter that he finally ordered the speed to go down to 14 knots, and to put ballast
water to the starboard-heeling tank to arrest the continuous listing at portside. By then, his
moves became an exercise in futility because, according to the BMI, the vessel was
already listing to her portside between 15 to 20 degrees, which was almost the maximum
angle of the vessel's loll. It then became inevitable for the vessel to lose her stability.
The BMI concluded that the captain had executed several starboard maneuvers despite
the critical situation of the vessel, and that the maneuvers had greatly added to the tilting
of the vessel. It observed:ChanRoblesVirtualawlibrary
x x x In the open seas, with a fast speed of 14 knots, advance maneuvers such as this
would tend to bring the body of the ship in the opposite side. In navigational terms, this
movement is described as the centripetal force. This force is produced by the water acting
on the side of the ship away from the center of the turn. The force is considered to act at
the center of lateral resistance which, in this case, is the centroid of the underwater area of
the ship's side away from the center of the turn. In the case of the Princess, when the
Captain maneuvered her to starboard, her body shifted its weight to port. Being already
inclined to an angle of 15 degrees, coupled with the instantaneous movement of the ship,
the cargoes below deck could have completely shifted its position and weight towards
portside. By this time, the ship being ravaged simultaneously by ravaging waves and
howling winds on her starboard side, finally lost her grip.53chanroblesvirtuallawlibrary
Clearly, the petitioner and its agents on the scene acted wantonly and
recklessly. Wanton and recklessare virtually synonymous in meaning as respects liability for
conduct towards others.54Wanton means characterized by extreme recklessness and utter
disregard for the rights of others; or marked by or manifesting arrogant recklessness of
justice or of rights or feelings of others.55 Conduct is reckless when it is an extreme
departure from ordinary care, in a situation in which a high degree of danger is apparent.
It must be more than any mere mistake resulting from inexperience, excitement, or
confusion, and more than mere thoughtlessness or inadvertence, or simple
inattention.56chanrobleslaw
The actuations of the petitioner and its agents during the incident attending the
unfortunate sinking of the M/V Princess of the Orient were far below the standard of care
and circumspection that the law on common carriers demanded. Accordingly, we hereby
fix the sum of P1,000,000.00 in order to serve fully the objective of exemplarity among those
engaged in the business of transporting passengers and cargo by sea. The amount would
not be excessive, but proper. As the Court put it in Pereña v. Zarate:57
Anent the P1,000,000.00 allowed as exemplary damages, we should not reduce the
amount if only to render effective the desired example for the public good. As a common
carrier, the Perenas needed to be vigorously reminded to observe their duty to exercise
extraordinary diligence to prevent a similarly senseless accident from happening again.
Only by an award of exemplary damages in that amount would suffice to instill in them
and others similarly situated like them the ever-present need for greater and constant
vigilance in the conduct of a business imbued with public interest.58 (Bold underscoring
supplied for emphasis)
WHEREFORE, the Court AFFIRMS the decision promulgated on June 27, 2005 with
the MODIFICATIONS that: (a) the amount of moral damages is fixed at P1,000,000.00; (b)
the amount of P1,000,000.00 is granted as exemplary damages; and (c) the sum of
P120,000.00 is allowed as temperate damages, all to be paid to the heirs of the late
Napoleon Sesante. In addition, all the amounts hereby awarded shall earn interest of
6% per annum from the finality of this decision until fully paid. Costs of suit to be paid by the
petitioner.
SO ORDERED.chanRoblesvirtualLawlibrary
Sereno, C.J., Leonardo-De Castro, Perlas-Bernabe, and Caguioa, JJ., concur.
Endnotes:
Republic of the Philippines
Supreme Court
Manila
FIRST DIVISION
HERMINIO MARIANO, JR., G.R. No. 166640
Petitioner,
Present:
PUNO, C.J., Chairperson,
- versus - CARPIO,
 CORONA, Petitioner filed a complaint for breach of contract of carriage and damages
LEONARDO-DE CASTRO, and against respondents for their failure to transport his wife and mother of his three minor
BERSAMIN, JJ. children safely to her destination. Respondents denied liability for the death of Dr.
Mariano. They claimed that the proximate cause of the accident was the recklessness of
ILDEFONSO C. CALLEJAS and EDGAR DE BORJA, the driver of the trailer truck which bumped their bus while allegedly at a halt on the shoulder
Respondents. Promulgated: of the road in its rightful lane. Thus, respondent Callejas filed a third-party complaint against
Liong Chio Chang, doing business under the name and style of La Perla Sugar Supply, the
July 31, 2009 owner of the trailer truck, for indemnity in the event that he would be held liable for damages
to petitioner.
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
Other cases were filed. Callejas filed a complaint,[4] docketed as Civil Case No. NC-
397 before the RTC of Naic, Cavite, against La Perla Sugar Supply and Arcadio Arcilla, the
DECISION truck driver, for damages he incurred due to the vehicular accident. On September 24,
1992, the said court dismissed the complaint against La Perla Sugar Supply for lack of
evidence. It, however, found Arcilla liable to pay Callejas the cost of the repairs of his
PUNO, C.J.: passenger bus, his lost earnings, exemplary damages and attorneys fees.[5]

On appeal are the Decision[1] and Resolution[2] of the Court of Appeals in CA-G.R. A criminal case, Criminal Case No. 2223-92, was also filed against truck driver Arcilla
CV No. 66891, dated May 21, 2004 and January 7, 2005 respectively, which reversed the in the RTC of Imus, Cavite. On May 3, 1994, the said court convicted truck driver Arcadio
Decision[3] of the Regional Trial Court (RTC) of Quezon City, dated September 13, 1999, which Arcilla of the crime of reckless imprudence resulting to homicide, multiple slight physical
found respondents jointly and severally liable to pay petitioner damages for the death of his injuries and damage to property.[6]
wife.
In the case at bar, the trial court, in its Decision dated September 13, 1999, found
First, the facts: respondents Ildefonso Callejas and Edgar de Borja, together with Liong Chio Chang, jointly
and severally liable to pay petitioner damages and costs of suit. The dispositive portion of
the Decision reads:
Petitioner Herminio Mariano, Jr. is the surviving spouse of Dr. Frelinda Mariano who
was a passenger of a Celyrosa Express bus bound for Tagaytay when she met her ACCORDINGLY, the defendants are ordered to pay as follows:
death. Respondent Ildefonso C. Callejas is the registered owner of Celyrosa Express, while
respondent Edgar de Borja was the driver of the bus on which the deceased was a 1. The sum of P50,000.00 as civil indemnity for the loss of
passenger. life;
2. The sum of P40,000.00 as actual and compensatory
At around 6:30 p.m. on November 12, 1991, along Aguinaldo Highway, San Agustin, damages;
Dasmarias, Cavite, the Celyrosa Express bus, carrying Dr. Mariano as its passenger, collided
with an Isuzu truck with trailer bearing plate numbers PJH 906 and TRH 531. The passenger 3. The sum of P1,829,200.00 as foregone income;
bus was bound for Tagaytay while the trailer truck came from the opposite direction, bound 4. The sum of P30,000.00 as moral damages;
for Manila. The trailer truck bumped the passenger bus on its left middle portion. Due to the
impact, the passenger bus fell on its right side on the right shoulder of the highway and 5. The sum of P20,000.00 as exemplary damages;
caused the death of Dr. Mariano and physical injuries to four other passengers. Dr. Mariano 6. The costs of suit.
was 36 years old at the time of her death. She left behind three minor children, aged four,
three and two years. SO ORDERED.[7]
 Respondents Callejas and De Borja appealed to the Court of Appeals, contending that
the trial court erred in holding them guilty of breach of contract of carriage.
On May 21, 2004, the Court of Appeals reversed the decision of the trial court. It
reasoned:
. . . the presumption of fault or negligence against the carrier is only a
disputable presumption. It gives in where contrary facts are established
proving either that the carrier had exercised the degree of diligence
required by law or the injury suffered by the passenger was due to a
fortuitous event. Where, as in the instant case, the injury sustained by the
petitioner was in no way due to any defect in the means of transport or in
the method of transporting or to the negligent or wilful acts of private
respondent's employees, and therefore involving no issue of negligence in
its duty to provide safe and suitable cars as well as competent employees,
with the injury arising wholly from causes created by strangers over which
the carrier had no control or even knowledge or could not have prevented,
the presumption is rebutted and the carrier is not and ought not to be held
liable. To rule otherwise would make the common carrier the insurer of the
absolute safety of its passengers which is not the intention of the
lawmakers.[8]
The dispositive portion of the Decision reads:
WHEREFORE, the decision appealed from, insofar as it found
defendants-appellants Ildefonso Callejas and Edgar de Borja liable for
damages to plaintiff-appellee Herminio E. Mariano, Jr., is REVERSED and SET
ASIDE and another one entered absolving them from any liability for the
death of Dr. Frelinda Cargo Mariano.[9]
The appellate court also denied the motion for reconsideration filed by petitioner.
Hence, this appeal, relying on the following ground:
THE DECISION OF THE HONORABLE COURT OF APPEALS, SPECIAL
FOURTEENTH DIVISION IS NOT IN ACCORD WITH THE FACTUAL BASIS OF THE
CASE.[10]
The following are the provisions of the Civil Code pertinent to the case at bar:
ART. 1733. Common carriers, from the nature of their business and
for reasons of public policy, are bound to observe extraordinary diligence
in the vigilance over the goods and for the safety of the passengers
transported by them, according to all the circumstances of each case.
ART. 1755. A common carrier is bound to carry the passengers
safely as far as human care and foresight can provide, using the utmost
diligence of very cautious persons, with a due regard for all the
circumstances.
ART. 1756. In case of death of or injuries to passengers, common
carriers are presumed to have been at fault or to have acted negligently,
unless they prove that they observed extraordinary diligence as prescribed
in articles 1733 and 1755.
In accord with the above provisions, Celyrosa Express, a common carrier, through
its driver, respondent De Borja, and its registered owner, respondent Callejas, has the express
obligation to carry the passengers safely as far as human care and foresight can provide,
using the utmost diligence of very cautious persons, with a due regard for all the
circumstances,[11] and to observe extraordinary diligence in the discharge of its duty. The
death of the wife of the petitioner in the course of transporting her to her destination gave
rise to the presumption of negligence of the carrier. To overcome the presumption,
respondents have to show that they observed extraordinary diligence in the discharge of
their duty, or that the accident was caused by a fortuitous event.
This Court interpreted the above quoted provisions in Pilapil v. Court of
Appeals.[12] We elucidated:
While the law requires the highest degree of diligence from
common carriers in the safe transport of their passengers and creates a
presumption of negligence against them, it does not, however, make the
carrier an insurer of the absolute safety of its passengers.
Article 1755 of the Civil Code qualifies the duty of extraordinary
care, vigilance and precaution in the carriage of passengers by common
carriers to only such as human care and foresight can provide. What
constitutes compliance with said duty is adjudged with due regard to all
the circumstances.
Article 1756 of the Civil Code, in creating a presumption of fault or
negligence on the part of the common carrier when its passenger is injured,
merely relieves the latter, for the time being, from introducing evidence to
fasten the negligence on the former, because the presumption stands in
the place of evidence. Being a mere presumption, however, the same is
 rebuttable by proof that the common carrier had exercised extraordinary a More or less 500 meters.
diligence as required by law in the performance of its contractual
obligation, or that the injury suffered by the passenger was solely due to a q Why did you say that the truck has no brakes?
fortuitous event.
a I tested it.
In fine, we can only infer from the law the intention of the Code
Commission and Congress to curb the recklessness of drivers and operators q And you found no brakes?
of common carriers in the conduct of their business. a Yes, sir.
xxx
Thus, it is clear that neither the law nor the nature of the business of
a transportation company makes it an insurer of the passenger's safety, but q When you went to the scene of accident, what was the position of
that its liability for personal injuries sustained by its passenger rests upon its Celyrosa bus?
negligence, its failure to exercise the degree of diligence that the law
a It was lying on its side.
requires.
COURT:
In the case at bar, petitioner cannot succeed in his contention that respondents
q Right side or left side?
failed to overcome the presumption of negligence against them. The totality of evidence
shows that the death of petitioners spouse was caused by the reckless negligence of the a Right side.
driver of the Isuzu trailer truck which lost its brakes and bumped the Celyrosa Express bus,
owned and operated by respondents. ATTY. ESTELYDIZ:
q On what part of the road was it lying?
First, we advert to the sketch prepared by PO3 Magno S. de Villa, who investigated a On the shoulder of the road.
the accident. The sketch[13] shows the passenger bus facing the direction of Tagaytay City
and lying on its right side on the shoulder of the road, about five meters away from the point
COURT:
of impact. On the other hand, the trailer truck was on the opposite direction, about 500
meters away from the point of impact. PO3 De Villa stated that he interviewed De Borja, q How many meters from the point of impact?
respondent driver of the passenger bus, who said that he was about to unload some a Near, about 5 meters.[14]
passengers when his bus was bumped by the driver of the trailer truck that lost its brakes. PO3
De Villa checked out the trailer truck and found that its brakes really failed. He testified
before the trial court, as follows: His police report bolsters his testimony and states:
Said vehicle 1 [passenger bus] was running from Manila toward
ATTY. ESTELYDIZ:
south direction when, in the course of its travel, it was hit and bumped by
q You pointed to the Isuzu truck beyond the point of impact. Did you vehicle 2 [truck with trailer] then running fast from opposite direction,
investigate why did (sic) the Isuzu truck is beyond the point of impact? causing said vehicle 1 to fall on its side on the road shoulder, causing the
death of one and injuries of some passengers thereof, and its damage,
a Because the truck has no brakes. after collission (sic), vehicle 2 continiously (sic) ran and stopped at
approximately 500 meters away from the piont (sic) of impact.[15]
COURT:
q What is the distance between that circle which is marked as Exh. 1-c to
the place where you found the same?
In fine, the evidence shows that before the collision, the passenger bus was cruising on its
rightful lane along the Aguinaldo Highway when the trailer truck coming from the opposite
direction, on full speed, suddenly swerved and encroached on its lane, and bumped the
passenger bus on its left middle portion. Respondent driver De Borja had every right to
expect that the trailer truck coming from the opposite direction would stay on its proper
lane. He was not expected to know that the trailer truck had lost its brakes. The swerving of
the trailer truck was abrupt and it was running on a fast speed as it was found 500 meters
away from the point of collision.Secondly, any doubt as to the culpability of the driver of the
trailer truck ought to vanish when he pleaded guilty to the charge of reckless imprudence
resulting to multiple slight physical injuries and damage to property in Criminal Case No.
2223-92, involving the same incident.

IN VIEW WHEREOF, the petition is DENIED. The Decision dated May 21, 2004 and the
Resolution dated January 7, 2005 of the Court of Appeals in CA-G.R. CV No. 66891
are AFFIRMED.

SO ORDERED.

SECOND DIVISION

[G.R. No. 119756. March 18, 1999]

FORTUNE EXPRESS, INC., petitioner, vs. COURT OF APPEALS, PAULIE U. CAORONG, and
minor children YASSER KING CAORONG, ROSE HEINNI and PRINCE ALEXANDER, all surnamed
CAORONG, and represented by their mother PAULIE U. CAORONG, respondents.

DECISION

MENDOZA, J.:

This is an appeal by petition for review on certiorari of the decision, dated July 29,
1994, of the Court of Appeals, which reversed the decision of the Regional Trial Court, Branch
VI, Iligan City. The aforesaid decision of the trial court dismissed the complaint of private
respondents against petitioner for damages for breach of contract of carriage filed on the
ground that petitioner had not exercised the required degree of diligence in the operation
of one of its buses. Atty. Talib Caorong, whose heirs are private respondents herein, was a
passenger of the bus and was killed in the ambush involving said bus.
The facts of the instant case are as follows:
Petitioner is a bus company in northern Mindanao. Private respondent Paulie
Caorong is the widow of Atty. Caorong, while private respondents Yasser King, Rose Heinni,
and Prince Alexander are their minor children.
On November 18, 1989, a bus of petitioner figured in an accident with a jeepney in
Kauswagan, Lanao del Norte, resulting in the death of several passengers of the jeepney,
including two Maranaos. Crisanto Generalao, a volunteer field agent of the Constabulary
Regional Security Unit No. X, conducted an investigation of the accident. He found that the
owner of the jeepney was a Maranao residing in Delabayan, Lanao del Norte and that
certain Maranaos were planning to take revenge on the petitioner by burning some of its
buses. Generalao rendered a report on his findings to Sgt. Reynaldo Bastasa of the Philippine
Constabulary Regional Hearquarters at Cagayan de Oro. Upon the instruction of Sgt.
Bastasa, he went to see Diosdado Bravo, operations manager of petitioner, at its main office
in Cagayan de Oro City. Bravo assured him that the necessary precautions to insure the
safety of lives and property would be taken.[1]
At about 6:45 P.M. on November 22, 1989, three armed Maranaos who pretended
to be passengers, seized a bus of petitioner at Linamon, Lanao del Norte while on its way to
Iligan City. Among the passengers of the bus was Atty. Caorong. The leader of the
Maranaos, identified as one Bashier Mananggolo, ordered the driver, Godofredo
Cabatuan, to stop the bus on the side of the highway. Mananggolo then shot Cabatuan
on the arm, which caused him to slump on the steering wheel. Then one of the companions
of Mananggolo started pouring gasoline inside the bus, as the other held the passengers at
bay with a handgun. Mananggolo then ordered the passengers to get off the bus. The
passengers, including Atty. Caorong, stepped out of the bus and went behind the bushes in
a field some distance from the highway.[2]
However, Atty. Caorong returned to the bus to retrieve something from the
overhead rack. At that time, one of the armed men was pouring gasoline on the head of
the driver. Cabatuan, who had meantime regained consciousness, heard Atty. Caorong
pleading with the armed men to spare the driver as he was innocent of any wrong doing
and was only trying to make a living. The armed men were, however, adamant as they
repeated their warning that they were going to burn the bus along with its driver.During this
exchange between Atty. Caorong and the assailants, Cabatuan climbed out of the left
window of the bus and crawled to the canal on the opposite side of the highway. He heard
shots from inside the bus. Larry de la Cruz, one of the passengers, saw that Atty. Caorong
was hit. Then the bus was set on fire. Some of the passengers were able to pull Atty. Caorong
out of the burning bus and rush him to the Mercy Community Hospital in Iligan City, but he
died while undergoing operation.[3]
The private respondents brought this suit for breach of contract of carriage in the
Regional Trial Court, Branch VI, Iligan City. In his decision, dated December 28, 1990, the trial
court dismissed the complaint, holding as follows:
The fact that defendant, through Operations Manager Diosdado Bravo, was
informed of the rumors that the Moslems intended to take revenge by burning five buses of
defendant is established since the latter also utilized Crisanto Generalaos as a witness. Yet
despite this information, the plaintiffs charge, defendant did not take proper precautions. .
. . Consequently, plaintiffs now fault the defendant for ignoring the report. Their position is
that the defendant should have provided its buses with security guards. Does the law require
common carriers to install security guards in its buses for the protection and safety of its
passengers? Is the failure to post guards an omission of the duty to exercise the diligence of
a good father of the family which could have prevented the killing of Atty. Caorong? To our
mind, the diligence demanded by law does not include the posting of security guards in
buses. It is an obligation that properly belongs to the State. Besides, will the presence of one
or two security guards suffice to deter a determined assault of the lawless and thus prevent
the injury complained of? Maybe so, but again, perhaps not. In other words, the presence
of a security guard is not a guarantee that the killing of Atty. Caorong would have been
definitely avoided.
.
Accordingly, the failure of defendant to accord faith and credit to the report of Mr.
Generalao and the fact that it did not provide security to its buses cannot, in the light of the
circumstances, be characterized as negligence.
Finally, the evidence clearly shows that the assailants did not have the least
intention of harming any of the passengers. They ordered all the passengers to alight and
set fire on the bus only after all the passengers were out of danger. The death of Atty.
Caorong was an unexpected and unforseen occurrence over which defendant had no
control. Atty. Caorong performed an act of charity and heroism in coming to the succor of
the driver even in the face of danger. He deserves the undying gratitude of the driver whose
life he saved. No one should blame him for an act of extraordinary charity and altruism
which cost his life. But neither should any blame be laid on the doorstep of defendant. His
death was solely due to the willful acts of the lawless which defendant could neither prevent
nor stop.
. In view of the constitutional right to personal privacy, our pronouncement in this
WHEREFORE, in view of the foregoing, the complaint is hereby dismissed. For lack of
merit, the counter-claim is likewise dismissed. No cost.[4]
On appeal, however, the Court of Appeals reversed. It held:
In the case at bench, how did defendant-appellee react to the tip or information
that certain Maranao hotheads were planning to burn five of its buses out of revenge for
the deaths of two Maranaos in an earlier collision involving appellees bus? Except for the
remarks of appellees operations manager that we will have our action . . . . and Ill be the
one to settle it personally, nothing concrete whatsoever was taken by appellee or its
employees to prevent the execution of the threat. Defendant-appellee never adopted
even a single safety measure for the protection of its paying passengers. Were there
available safeguards? Of course, there were: one was frisking passengers particularly those
en route to the area where the threats were likely to be carried out such as where the earlier
accident occurred or the place of influence of the victims or their locality. If frisking was
resorted to, even temporarily, . . . . appellee might be legally excused from liability. Frisking
of passengers picked up along the route could have been implemented by the bus
conductor; for those boarding at the bus terminal, frisking could have been conducted by
him and perhaps by additional personnel of defendant-appellee. On hindsight, the
handguns and especially the gallon of gasoline used by the felons all of which were brought
inside the bus would have been discovered, thus preventing the burning of the bus and the
fatal shooting of the victim.
Appellees argument that there is no law requiring it to provide guards on its buses
and that the safety of citizens is the duty of the government, is not well taken. To be sure,
appellee is not expected to assign security guards on all of its buses; if at all, it has the duty
to post guards only on its buses plying predominantly Maranao areas. As discussed in the
next preceding paragraph, the least appellee could have done in response to the report
was to adopt a system of verification such as frisking of passengers boarding its
buses. Nothing, and to repeat, nothing at all, was done by defendant-appellee to protect
its innocent passengers from the danger arising from the Maranao threats. It must be
observed that frisking is not a novelty as a safety measure in our society. Sensitive places in
fact, nearly all important places have applied this method of security
enhancement. Gadgets and devices are available in the market for this purpose. It would
not have weighed much against the budget of the bus company if such items were made
available to its personnel to cope up with situations such as the Maranao threats.
decision should not be construed as an advocacy of mandatory frisking in all public
conveyances. What we are saying is that given the circumstances obtaining in the case at
bench that: (a) two Maranaos died because of a vehicular collision involving one of
appellees vehicles; (b) appellee received a written report from a member of the Regional
Security Unit, Constabulary Security Group, that the tribal/ethnic group of the two deceased
were planning to burn five buses of appellee out of revenge; and (c) appellee did nothing
absolutely nothing for the safety of its passengers travelling in the area of influence of the
victims, appellee has failed to exercise the degree of diligence required of common
carriers. Hence, appellee must be adjudged liable.
.
WHEREFORE, the decision appealed from is hereby REVERSED and another
rendered ordering defendant-appellee to pay plaintiffs-appellants the following:
1) P3,399,649.20 as death indemnity;
2) P50,000.00 and P500.00 per appearance as attorneys fees; and
Costs against defendant-appellee.[5]
Hence, this appeal. Petitioner contends:
(A) THAT PUBLIC RESPONDENT ERRED IN REVERSING THE DECISION OF THE REGIONAL
TRIAL COURT DATED DECEMBER 28, 1990 DISMISSING THE COMPLAINT AS WELL AS THE
COUNTERCLAIM, AND FINDING FOR PRIVATE RESPONDENTS BY ORDERING PETITIONER TO PAY
THE GARGANTUAN SUM OF P3,449,649.20 PLUS P500.00 PER APPEARANCE AS ATTORNEYS
FEES, AS WELL AS DENYING PETITIONERS MOTION FOR RECONSIDERATION AND THE
SUPPLEMENT TO SAID MOTION, WHILE HOLDING, AMONG OTHERS, THAT PETITIONER
BREACHED THE CONTRACT OF CARIAGE BY ITS FAILURE TO EXERCISE THE REQUIRED DEGREE
OF DILIGENCE;
 (B) THAT THE ACTS OF THE MARANAO OUTLAWS WERE SO GRAVE, IRRESISTIBLE,
VIOLENT, AND FORCEFUL, AS TO BE REGARDED AS CASO FORTUITO; AND
(C) THAT PUBLIC RESPONDENT COURT OF APPEALS SERIOUSLY ERRED IN HOLDING
THAT PETITIONER COULD HAVE PROVIDED ADEQUATE SECURITY IN PREDOMINANTLY MUSLIM
AREAS AS PART OF ITS DUTY TO OBSERVE EXTRA-ORDINARY DILIGENCE AS A COMMON
CARRIER.
The instant petition has no merit.
First. Petitioners Breach of the Contract of Carriage
Art. 1763 of the Civil Code provides that a common carrier is responsible for injuries
suffered by a passenger on account of the wilful acts of other passengers, if the employees
of the common carrier could have prevented the act the exercise of the diligence of a
good father of a family. In the present case, it is clear that because of the negligence of
petitioners employees, the seizure of the bus by Mananggolo and his men was made
possible.
Despite warning by the Philippine Constabulary at Cagayan de Oro that the
Maranaos were planning to take revenge on the petitioner by burning some of its buses and
the assurance of petitioners operation manager, Diosdado Bravo, that the necessary
precautions would be taken, petitioner did nothing to protect the safety of its passengers.
Had petitioner and its employees been vigilant they would not have failed to see
that the malefactors had a large quantity of gasoline with them. Under the circumstances,
simple precautionary measures to protect the safety of passengers, such as frisking
passengers and inspecting their baggages, preferably with non-intrusive gadgets such as
metal detectors, before allowing them on board could have been employed without
violating the passengers constitutional rights. As this Court intimated in Gacal v. Philippine
Air Lines, Inc.,[6] a common carrier can be held liable for failing to prevent a hijacking by
frisking passengers and inspecting their baggages.
From the foregoing, it is evident that petitioners employees failed to prevent the
attack on one of petitioners buses because they did not exercise the diligence of a good
father of a family. Hence, petitioner should be held liable for the death of Atty. Caorong.
Second. Seizure of Petitioners Bus not a Case of Force Majeure
The petitioner contends that the seizure of its bus by the armed assailants was a
fortuitous event for which it could not be held liable.
Art. 1174 of the Civil Code defines a fortuitous even as an occurrence which could
not be foreseen or which though foreseen, is inevitable. In Yobido v. Court of Appeals,[7] we
held that to be considered as force majeure, it is necessary that: (1) the cause of the breach
of the obligation must be independent of the human will; (2) the event must be either
unforeseeable or unavoidable; (3) the occurrence must be such as to render it impossible
for the debtor to fulfill the obligation in a normal manner; and (4) the obligor must be free of
participation in, or aggravation of, the injury to the creditor. The absence of any of the
requisites mentioned above would prevent the obligor from being excused from liability.
Thus, in Vasquez v. Court of Appeals, [8] it was held that the common carrier was
liable for its failure to take the necessary precautions against an approaching typhoon, of
which it was warned, resulting in the loss of the lives of several passengers. The event was
foreseeable, and, thus, the second requisite mentioned above was not fulfilled. This ruling
applies by analogy to the present case. Despite the report of PC agent Generalao that the
Maranaos were going to attack its buses, petitioner took no steps to safeguard the lives and
properties of its passengers. The seizure of the bus of the petitioner was foreseeable and,
therefore, was not a fortuitous event which would exempt petitioner from liability.
Petitioner invokes the ruling in Pilapil v. Court of Appeals[9] and De Guzman v. Court
of Appeals[10] in support of its contention that the seizure of its bus by the assailants
constitutes force majeure. In Pilapil v. Court of Appeals,[11] it was held that a common carrier
is not liable for failing to install window grills on its buses to protect passengers from injuries
caused by rocks hurled at the bus by lawless elements. On the other hand, in De Guzman v.
Court of Appeals,[12] it was ruled that a common carrier is not responsible for goods lost as a
result of a robbery which is attended by grave or irresistible threat, violence, or force.
It is clear that the cases of Pilapil and De Guzman do not apply to the present
case. Art. 1755 of the Civil Code provides that a common carrier is bound to carry the
passengers as far as human care and foresight can provide, using the utmost diligence of
very cautious person, with due regard for all the circumstances. Thus, we held
in Pilapil and De Guzman that the respondents therein were not negligent in failing to take
special precautions against threats to the safety of passengers which could not be foreseen,
such as tortious or criminal acts of third persons. In the present case, this factor of
unforeseeablility (the second requisite for an event to be considered force majeure) is
lacking. As already stated, despite the report of PC agent Generalao that the Maranaos
were planning to burn some of petitioners buses and the assurance of petitioners operations
manager (Diosdado Bravo) that the necessary precautions would be taken, nothing was
really done by petitioner to protect the safety of passengers.
Third. Deceased not Guilty of Contributory Negligence
The petitioner contends that Atty. Caorong was guilty of contributory negligence in
returning to the bus to retrieve something. But Atty. Caorong did not act recklessly. It should
be pointed out that the intended targets of the violence were petitioner and its employees,
not its passengers. The assailants motive was to retaliate for the loss of life of two Maranaos
as a result of the collision between petitioners bus and the jeepney in which the two
Maranaos were riding. Mananggolo, the leader of the group which had hijacked the bus,
ordered the passengers to get off the bus as they intended to burn it and its driver. The
armed men actually allowed Atty. Caorong to retrieve something from the bus. What
apparently angered them was his attempt to help the driver of the bus by pleading for his
life. He was playing the role of the good Samaritan. Certainly, this act cannot be considered
an act of negligence, let alone recklessness.
Fourth. Petitioner Liable to Private Respondents for Damages
We now consider the question of damages that the heirs of Atty. Caorong, private
respondents herein, are entitled to recover from the petitioner.
Indemnity for Death. Art. 1764 of the Civil Code, in relation to Art. 2206 thereof,
provides for the payment of indemnity for the death of passengers caused by the breached
of contract of carriage by a common carrier. Initially fixed in Art. 2206 at P3,000.00, the
amount of the said indemnity for death has through the years been gradually increased in
view of the declining value of the peso. It is presently fixed at P50,000.00.[13] Private
respondents are entitled to this amount.
Actual damages. Art. 2199 provides that Except as provided by law or by
stipulation, one is entitled to an adequate compensation only for such pecuniary loss
suffered by him as he has duly proved. The trial court found that the private respondents
spent P30,000.00 for the wake and burial of Atty. Caorong.[14] Since petitioner does not
question this finding of the trial court, it is liable to private respondents in the said amount as
actual damages.
Moral Damages. Under Art. 2206, the spouse, legitimate and illegitimate
descendants and ascendants of the deceased may demand moral damages for mental
anguish by reason of the death of the deceased. The trial court found that private
respondent Paulie Caorong suffered pain from the death of her husband and worry on how
to provide support for their minor children, private respondents Yasser King, Rose Heinni, and
Prince Alexander.[15] The petitioner likewise does not question this finding of the trial
court. Thus, in accordance with recent decisions of this Court,[16] we hold that the petitioner
is liable to the private respondents in the amount of P100,000.00 as moral damages for the
death of Atty. Caorong.
Exemplary Damages. Art. 2232 provides that in contracts and quasi-contracts, the
court may award exemplary damages if the defendant acted in a wanton, fraudulent,
reckless, oppressive, or malevolent manner. In the present case, the petitioner acted in a
wanton and reckless manner. Despite warning that the Maranaos were planning to take
revenge against the petitioner by burning some of its buses, and contrary to the assurance
made by its operations manager that the necessary precautions would be taken, the
petitioner and its employees did nothing to protect the safety of passengers. Under the
circumstances, we deem it reasonable to award private respondents exemplary damages
in the amount of P100,000.00.[17]
Attorneys Fees. Pursuant to Art. 2208, attorneys fees may be recovered when, as in
the instant case, exemplary damages are awarded. In the recent case of Sulpicio Lines, Inc.
v. Court of Appeals,[18] we held an award of P50,000.00 as attorneys fees to be
reasonable. Hence, the private respondents are entitled to attorneys fees in that amount.
Compensation for Loss of Earning Capacity. Art. 1764 of the Civil Code, in relation
to Art. 2206 thereof, provides that in addition to the indemnity for death arising from the
breach of contract of carriage by a common carrier, the defendant shall be liable for the
loss of the earning capacity of the deceased, and the indemnity shall be paid to the heirs
of the latter. The formula established in decided cases for computing net earning capacity
is as follows:[19]
Gross Necessary
Net earning = Life x Annual - Living
Capacity Expectancy Income Expenses
 Life expectancy is equivalent to two thirds (2/3) multiplied by the difference of Quisumbing, J., on official business abroad.
eighty (80) and the age of the deceased.[20] Since Atty. Caorong was 37 years old at the
time of his death,[21] he had a life expectancy of 28 2/3 more years.[22] His projected gross
annual income, computed based on his monthly salary of P11,385.00[23] as a lawyer in the
Department of Agrarian Reform at the time of his death, was P148,005.00.[24] allowing for
necessary living expenses of fifty percent (50%) [25]of his projected gross annual income, his
total earning capacity amounts to P2,121,404.90.[26] Hence, the petitioner is liable to the
private respondents in the said amount as compensation for loss of earning capacity.

WHEREFORE, the decision, dated July 29, 1994, of the Court of Appeals is hereby
AFFIRMED with the MODIFICATION that petitioner Fortune Express, Inc. is ordered to pay the
following amounts to private respondents Paulie, Yasser King, Rose Heinni, and Prince
Alexander Caorong:

1. death indemnity in the amount of fifty thousand pesos (P50,000.00);

2. actual damages in the amount of thirty thousand pesos (P30,000.00);

3. moral damages in the amount of one hundred thousand pesos(P100,000.00);

4. exemplary damages in the amount of one hundred thousand pesos

(P100,000.00);
Republic of the Philippines
SUPREME COURT
5. attorneys fees in the amount of fifty thousand pesos (P50,000.00); Manila

6. compensation for loss of earning capacity in the amount of two million one SECOND DIVISION
hundred twenty-one thousand four hundred four pesos and ninety centavos (P2,121,404.90);
and
G.R. No. 52159 December 22, 1989

7) costs of suits.
JOSE PILAPIL, petitioner,
vs.
SO ORDERED. HON. COURT OF APPEALS and ALATCO TRANSPORTATION COMPANY, INC., respondents.

Bellosillo, (Chairman), Puno, and Buena, JJ., concur. Martin Badong, Jr. for petitioner.
 Eufronio K. Maristela for private respondent.
PADILLA, J.:
This is a petition to review on certiorari the decision* rendered by the Court of
Appeals dated 19 October 1979 in CA-G.R. No. 57354-R entitled "Jose Pilapil, plaintiff-
appellee versus Alatco Transportation Co., Inc., defendant-appellant," which reversed and
set aside the judgment of the Court of First Instance of Camarines Sur in Civil Case No. 7230
ordering respondent transportation company to pay to petitioner damages in the total sum
of sixteen thousand three hundred pesos (P 16,300.00).
The record discloses the following facts:
Petitioner-plaintiff Jose Pilapil, a paying passenger, boarded respondent-
defendant's bus bearing No. 409 at San Nicolas, Iriga City on 16 September 1971 at about
6:00 P.M. While said bus No. 409 was in due course negotiating the distance between Iriga
City and Naga City, upon reaching the vicinity of the cemetery of the Municipality of Baao,
Camarines Sur, on the way to Naga City, an unidentified man, a bystander along said
national highway, hurled a stone at the left side of the bus, which hit petitioner above his
left eye. Private respondent's personnel lost no time in bringing the petitioner to the
provincial hospital in Naga City where he was confined and treated.
Considering that the sight of his left eye was impaired, petitioner was taken to Dr.
Malabanan of Iriga City where he was treated for another week. Since there was no
improvement in his left eye's vision, petitioner went to V. Luna Hospital, Quezon City where
he was treated by Dr. Capulong. Despite the treatment accorded to him by Dr. Capulong,
petitioner lost partially his left eye's vision and sustained a permanent scar above the left
eye.
Thereupon, petitioner instituted before the Court of First Instance of Camarines Sur,
Branch I an action for recovery of damages sustained as a result of the stone-throwing
incident. After trial, the court a quo rendered judgment with the following dispositive part:
Wherefore, judgment is hereby entered:
1. Ordering defendant transportation company to pay plaintiff Jose Pilapil the sum
of P 10,000.00, Philippine Currency, representing actual and material damages for causing
a permanent scar on the face and injuring the eye-sight of the plaintiff;
2. Ordering further defendant transportation company to pay the sum of P 5,000.00,
Philippine Currency, to the plaintiff as moral and exemplary damages;
3. Ordering furthermore, defendant transportation company to reimburse plaintiff
the sum of P 300.00 for his medical expenses and attorney's fees in the sum of P 1,000.00,
Philippine Currency; and
4. To pay the costs.
SO ORDERED 1
From the judgment, private respondent appealed to the Court of Appeals where
the appeal was docketed as CA-G.R. No. 57354R. On 19 October 1979, the Court of
Appeals, in a Special Division of Five, rendered judgment reversing and setting aside the
judgment of the court a quo.
Hence the present petition.
In seeking a reversal of the decision of the Court of Appeals, petitioner contends
that said court has decided the issue not in accord with law. Specifically, petitioner argues
that the nature of the business of a transportation company requires the assumption of
certain risks, and the stoning of the bus by a stranger resulting in injury to petitioner-passenger
is one such risk from which the common carrier may not exempt itself from liability.
We do not agree.
In consideration of the right granted to it by the public to engage in the business of
transporting passengers and goods, a common carrier does not give its consent to become
an insurer of any and all risks to passengers and goods. It merely undertakes to perform
certain duties to the public as the law imposes, and holds itself liable for any breach thereof.
 Under Article 1733 of the Civil Code, common carriers are required to observe
extraordinary diligence for the safety of the passenger transported by them, according to
all the circumstances of each case. The requirement of extraordinary diligence imposed
upon common carriers is restated in Article 1755: "A common carrier is bound to carry the
passengers safely as far as human care and foresight can provide, using the utmost
diligence of very cautious persons, with due regard for all the circumstances." Further, in
case of death of or injuries to passengers, the law presumes said common carriers to be at
fault or to have acted negligently. 2
While the law requires the highest degree of diligence from common carriers in the
safe transport of their passengers and creates a presumption of negligence against them, it
does not, however, make the carrier an insurer of the absolute safety of its passengers. 3
Article 1755 of the Civil Code qualifies the duty of extraordinary care, vigilance and
precaution in the carriage of passengers by common carriers to only such as human care
and foresight can provide. what constitutes compliance with said duty is adjudged with due
regard to all the circumstances.
Article 1756 of the Civil Code, in creating a presumption of fault or negligence on
the part of the common carrier when its passenger is injured, merely relieves the latter, for
the time being, from introducing evidence to fasten the negligence on the former, because
the presumption stands in the place of evidence. Being a mere presumption, however, the
same is rebuttable by proof that the common carrier had exercised extraordinary diligence
as required by law in the performance of its contractual obligation, or that the injury suffered
by the passenger was solely due to a fortuitous event. 4
In fine, we can only infer from the law the intention of the Code Commission and
Congress to curb the recklessness of drivers and operators of common carriers in the
conduct of their business.
Thus, it is clear that neither the law nor the nature of the business of a transportation
company makes it an insurer of the passenger's safety, but that its liability for personal injuries
sustained by its passenger rests upon its negligence, its failure to exercise the degree of
diligence that the law requires. 5
Petitioner contends that respondent common carrier failed to rebut the
presumption of negligence against it by proof on its part that it exercised extraordinary
diligence for the safety of its passengers.
We do not agree.
First, as stated earlier, the presumption of fault or negligence against the carrier is
only a disputable presumption. It gives in where contrary facts are established proving either
that the carrier had exercised the degree of diligence required by law or the injury suffered
by the passenger was due to a fortuitous event. Where, as in the instant case, the injury
sustained by the petitioner was in no way due to any defect in the means of transport or in
the method of transporting or to the negligent or willful acts of private respondent's
employees, and therefore involving no issue of negligence in its duty to provide safe and
suitable cars as well as competent employees, with the injury arising wholly from causes
created by strangers over which the carrier had no control or even knowledge or could not
have prevented, the presumption is rebutted and the carrier is not and ought not to be held
liable. To rule otherwise would make the common carrier the insurer of the absolute safety
of its passengers which is not the intention of the lawmakers.
Second, while as a general rule, common carriers are bound to exercise
extraordinary diligence in the safe transport of their passengers, it would seem that this is not
the standard by which its liability is to be determined when intervening acts of strangers is to
be determined directly cause the injury, while the contract of carriage Article 1763 governs:
Article 1763. A common carrier is responsible for injuries suffered by a passenger on
account of the wilful acts or negligence of other passengers or of strangers, if the common
carrier's employees through the exercise of the diligence of a good father of a family could
have prevented or stopped the act or omission.
Clearly under the above provision, a tort committed by a stranger which causes
injury to a passenger does not accord the latter a cause of action against the carrier. The
negligence for which a common carrier is held responsible is the negligent omission by the
carrier's employees to prevent the tort from being committed when the same could have
been foreseen and prevented by them. Further, under the same provision, it is to be noted
that when the violation of the contract is due to the willful acts of strangers, as in the instant
case, the degree of care essential to be exercised by the common carrier for the protection
of its passenger is only that of a good father of a family.
Petitioner has charged respondent carrier of negligence on the ground that the
injury complained of could have been prevented by the common carrier if something like
mesh-work grills had covered the windows of its bus.
 We do not agree.

Although the suggested precaution could have prevented the injury complained
of, the rule of ordinary care and prudence is not so exacting as to require one charged with
its exercise to take doubtful or unreasonable precautions to guard against unlawful acts of
strangers. The carrier is not charged with the duty of providing or maintaining vehicles as to
absolutely prevent any and all injuries to passengers. Where the carrier uses cars of the most
approved type, in general use by others engaged in the same occupation, and exercises a
high degree of care in maintaining them in suitable condition, the carrier cannot be
charged with negligence in this respect. 6

Finally, petitioner contends that it is to the greater interest of the State if a carrier
were made liable for such stone-throwing incidents rather than have the bus riding public
lose confidence in the transportation system.

Sad to say, we are not in a position to so hold; such a policy would be better left to
the consideration of Congress which is empowered to enact laws to protect the public from
the increasing risks and dangers of lawlessness in society.

[G.R. No. 145804. February 6, 2003]

WHEREFORE, the judgment appealed from is hereby AFFIRMED.

LIGHT RAIL TRANSIT AUTHORITY & RODOLFO ROMAN, petitioners, vs. MARJORIE
SO ORDERED.
NAVIDAD, Heirs of the Late NICANOR NAVIDAD & PRUDENT SECURITY AGENCY, respondents.

Melencio-Herrera (Chairperson), Sarmiento and Regalado, concur.

DECISION

Paras, J., took no part.

VITUG, J.:

The case before the Court is an appeal from the decision and resolution of the Court
of Appeals, promulgated on 27 April 2000 and 10 October 2000, respectively, in CA-G.R. CV
No. 60720, entitled Marjorie Navidad and Heirs of the Late Nicanor Navidad vs. Rodolfo
Roman, et. al., which has modified the decision of 11 August 1998 of the Regional Trial Court,
Branch 266, Pasig City, exonerating Prudent Security Agency (Prudent) from liability and
finding Light Rail Transit Authority (LRTA) and Rodolfo Roman liable for damages on account
of the death of Nicanor Navidad.
 On 14 October 1993, about half an hour past seven oclock in the evening, Nicanor
Navidad, then drunk, entered the EDSA LRT station after purchasing a token (representing
payment of the fare). While Navidad was standing on the platform near the LRT tracks,
Junelito Escartin, the security guard assigned to the area approached Navidad. A
misunderstanding or an altercation between the two apparently ensued that led to a fist
fight. No evidence, however, was adduced to indicate how the fight started or who,
between the two, delivered the first blow or how Navidad later fell on the LRT tracks. At the
exact moment that Navidad fell, an LRT train, operated by petitioner Rodolfo Roman, was
coming in. Navidad was struck by the moving train, and he was killed instantaneously.
On 08 December 1994, the widow of Nicanor, herein respondent Marjorie Navidad,
along with her children, filed a complaint for damages against Junelito Escartin, Rodolfo
Roman, the LRTA, the Metro Transit Organization, Inc. (Metro Transit), and Prudent for the
death of her husband. LRTA and Roman filed a counterclaim against Navidad and a cross-
claim against Escartin and Prudent. Prudent, in its answer, denied liability and averred that
it had exercised due diligence in the selection and supervision of its security guards.
The LRTA and Roman presented their evidence while Prudent and Escartin, instead
of presenting evidence, filed a demurrer contending that Navidad had failed to prove that
Escartin was negligent in his assigned task. On 11 August 1998, the trial court rendered its
decision; it adjudged:
WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the
defendants Prudent Security and Junelito Escartin ordering the latter to pay jointly and
severally the plaintiffs the following:
a) 1) Actual damages of P44,830.00;
2) Compensatory damages of P443,520.00;
3) Indemnity for the death of Nicanor Navidad in the sum of P50,000.00;
b) Moral damages of P50,000.00;
c) Attorneys fees of P20,000;
d) Costs of suit.
The complaint against defendants LRTA and Rodolfo Roman are dismissed for lack
of merit.
The compulsory counterclaim of LRTA and Roman are likewise dismissed.[1]
Prudent appealed to the Court of Appeals. On 27 August 2000, the appellate court
promulgated its now assailed decision exonerating Prudent from any liability for the death
of Nicanor Navidad and, instead, holding the LRTA and Roman jointly and severally liable
thusly:
WHEREFORE, the assailed judgment is hereby MODIFIED, by exonerating the
appellants from any liability for the death of Nicanor Navidad, Jr. Instead, appellees Rodolfo
Roman and the Light Rail Transit Authority (LRTA) are held liable for his death and are hereby
directed to pay jointly and severally to the plaintiffs-appellees, the following amounts:
a) P44,830.00 as actual damages;
b) P50,000.00 as nominal damages;
c) P50,000.00 as moral damages;
d) P50,000.00 as indemnity for the death of the deceased; and
e) P20,000.00 as and for attorneys fees.[2]
The appellate court ratiocinated that while the deceased might not have then as
yet boarded the train, a contract of carriage theretofore had already existed when the
victim entered the place where passengers were supposed to be after paying the fare and
getting the corresponding token therefor. In exempting Prudent from liability, the court
stressed that there was nothing to link the security agency to the death of Navidad. It said
that Navidad failed to show that Escartin inflicted fist blows upon the victim and the
evidence merely established the fact of death of Navidad by reason of his having been hit
by the train owned and managed by the LRTA and operated at the time by Roman. The
appellate court faulted petitioners for their failure to present expert evidence to establish
the fact that the application of emergency brakes could not have stopped the train.
The appellate court denied petitioners motion for reconsideration in its resolution of
10 October 2000.
 In their present recourse, petitioners recite alleged errors on the part of the
appellate court; viz:
I.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED BY DISREGARDING THE
FINDINGS OF FACTS BY THE TRIAL COURT
II.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT PETITIONERS
ARE LIABLE FOR THE DEATH OF NICANOR NAVIDAD, JR.
III.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT RODOLFO
ROMAN IS AN EMPLOYEE OF LRTA.[3]
Petitioners would contend that the appellate court ignored the evidence and the
factual findings of the trial court by holding them liable on the basis of a sweeping
conclusion that the presumption of negligence on the part of a common carrier was not
overcome. Petitioners would insist that Escartins assault upon Navidad, which caused the
latter to fall on the tracks, was an act of a stranger that could not have been foreseen or
prevented. The LRTA would add that the appellate courts conclusion on the existence of an
employer-employee relationship between Roman and LRTA lacked basis because Roman
himself had testified being an employee of Metro Transit and not of the LRTA.
Respondents, supporting the decision of the appellate court, contended that a
contract of carriage was deemed created from the moment Navidad paid the fare at the
LRT station and entered the premises of the latter, entitling Navidad to all the rights and
protection under a contractual relation, and that the appellate court had correctly held
LRTA and Roman liable for the death of Navidad in failing to exercise extraordinary diligence
imposed upon a common carrier.
Law and jurisprudence dictate that a common carrier, both from the nature of its
business and for reasons of public policy, is burdened with the duty of exercising utmost
diligence in ensuring the safety of passengers.[4] The Civil Code, governing the liability of a
common carrier for death of or injury to its passengers, provides:
Article 1755. A common carrier is bound to carry the passengers safely as far as
human care and foresight can provide, using the utmost diligence of very cautious persons,
with a due regard for all the circumstances.
Article 1756. In case of death of or injuries to passengers, common carriers are
presumed to have been at fault or to have acted negligently, unless they prove that they
observed extraordinary diligence as prescribed in articles 1733 and 1755.
Article 1759. Common carriers are liable for the death of or injuries to passengers
through the negligence or willful acts of the formers employees, although such employees
may have acted beyond the scope of their authority or in violation of the orders of the
common carriers.
This liability of the common carriers does not cease upon proof that they exercised
all the diligence of a good father of a family in the selection and supervision of their
employees.
Article 1763. A common carrier is responsible for injuries suffered by a passenger on
account of the willful acts or negligence of other passengers or of strangers, if the common
carriers employees through the exercise of the diligence of a good father of a family could
have prevented or stopped the act or omission.
The law requires common carriers to carry passengers safely using the utmost
diligence of very cautious persons with due regard for all circumstances.[5] Such duty of a
common carrier to provide safety to its passengers so obligates it not only during the course
of the trip but for so long as the passengers are within its premises and where they ought to
be in pursuance to the contract of carriage.[6] The statutory provisions render a common
carrier liable for death of or injury to passengers (a) through the negligence or wilful acts of
its employees or b) on account of wilful acts or negligence of other passengers or of
strangers if the common carriers employees through the exercise of due diligence could
have prevented or stopped the act or omission.[7] In case of such death or injury, a carrier is
presumed to have been at fault or been negligent, and[8] by simple proof of injury, the
passenger is relieved of the duty to still establish the fault or negligence of the carrier or of
its employees and the burden shifts upon the carrier to prove that the injury is due to an
unforeseen event or to force majeure.[9] In the absence of satisfactory explanation by the
carrier on how the accident occurred, which petitioners, according to the appellate court, contractual tie between the LRT and Navidad is not itself a juridical relation between the
have failed to show, the presumption would be that it has been at fault, [10] an exception latter and Roman; thus, Roman can be made liable only for his own fault or negligence.
from the general rule that negligence must be proved. [11]

The award of nominal damages in addition to actual damages is

The foundation of LRTAs liability is the contract of carriage and its obligation to untenable. Nominal damages are adjudicated in order that a right of the plaintiff, which
indemnify the victim arises from the breach of that contract by reason of its failure to exercise has been violated or invaded by the defendant, may be vindicated or recognized, and not
the high diligence required of the common carrier. In the discharge of its commitment to for the purpose of indemnifying the plaintiff for any loss suffered by him. [18] It is an established
ensure the safety of passengers, a carrier may choose to hire its own employees or avail itself rule that nominal damages cannot co-exist with compensatory damages.[19]
of the services of an outsider or an independent firm to undertake the task. In either case,
the common carrier is not relieved of its responsibilities under the contract of carriage.
WHEREFORE, the assailed decision of the appellate court is AFFIRMED with
MODIFICATION but only in that (a) the award of nominal damages is DELETED and (b)
Should Prudent be made likewise liable? If at all, that liability could only be for tort petitioner Rodolfo Roman is absolved from liability. No costs.
under the provisions of Article 2176 [12] and related provisions, in conjunction with Article
2180,[13] of the Civil Code. The premise, however, for the employers liability is negligence or
fault on the part of the employee. Once such fault is established, the employer can then be SO ORDERED.
made liable on the basis of the presumption juris tantum that the employer failed to
exercise diligentissimi patris families in the selection and supervision of its employees. The Davide, Jr., C.J., (Chairman), Ynares-Santiago, Carpio and Azcuna, JJ., concur.
liability is primary and can only be negated by showing due diligence in the selection and
supervision of the employee, a factual matter that has not been shown.Absent such a
showing, one might ask further, how then must the liability of the common carrier, on the
one hand, and an independent contractor, on the other hand, be described? It would be
solidary. A contractual obligation can be breached by tort and when the same act or
omission causes the injury, one resulting in culpa contractual and the other in culpa SECOND DIVISION
aquiliana, Article 2194[14] of the Civil Code can well apply.[15] In fine, a liability for tort may
arise even under a contract, where tort is that which breaches the contract.[16] Stated
G.R. No. 208802, October 14, 2015
differently, when an act which constitutes a breach of contract would have itself constituted
the source of a quasi-delictual liability had no contract existed between the parties, the
contract can be said to have been breached by tort, thereby allowing the rules on tort to G.V. FLORIDA TRANSPORT, INC., Petitioner, v. HEIRS OF ROMEO L. BATTUNG, JR., REPRESENTED
apply.[17] BY ROMEO BATTUNG, SR., Respondents.

Regrettably for LRT, as well as perhaps the surviving spouse and heirs of the late
Nicanor Navidad, this Court is concluded by the factual finding of the Court of Appeals that
there is nothing to link (Prudent) to the death of Nicanor (Navidad), for the reason that the
negligence of its employee, Escartin, has not been duly proven x x x. This finding of the
appellate court is not without substantial justification in our own review of the records of the
case.
There being, similarly, no showing that petitioner Rodolfo Roman himself is guilty of
any culpable act or omission, he must also be absolved from liability. Needless to say, the
DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari1 are the Decision2 dated May 31, 2013 and
the Resolution3 dated August 23, 2013 of the Court of Appeals (CA) in CA-G.R. CV No.
97757, which affirmed in toto the Decision4 dated August 29, 2011 of the Regional Trial
Court of Cabagan, Isabela, Branch 22 (RTC) in Civil Case No. 22-1103 finding petitioner
G.V. Florida Transport, Inc. (petitioner), Federico M. Duplio, Jr. (Duplio), and Christopher
Daraoay (Daraoay) jointly and severally liable to respondents heirs of Romeo L. Battung, Jr.
(respondents) for damages arising from culpa contractual.
The Facts
Respondents alleged that in the evening of March 22, 2003, Romeo L. Battung, Jr.
(Battung) boarded petitioner's bus with body number 037 and plate number BVJ-525 in
Delfin Albano, Isabela, bound for Manila.5 Battung was seated at the first row behind the
driver and slept during the ride. When the bus reached the Philippine Carabao Center in
Muñoz, Nueva Ecija, the bus driver, Duplio, stopped the bus and alighted to check the
tires. At this point, a man who was seated at the fourth row of the bus stood up, shot
Battung at his head, and then left with a companion. The bus conductor, Daraoay,
notified Duplio of the incident and thereafter, brought Romeo to the hospital, but the latter
was pronounced dead on arrival.6 Hence, respondents filed a complaint7 on July 15, 2008
for damages in the aggregate amount of P1,826,000.00 8 based on a breach of contract of
carriage against petitioner, Duplio, and Baraoay (petitioner, et al.) before the RTC,
docketed as Civil Case No. 22-1103. Respondents contended that as a common carrier,
petitioner and its employees are bound to observe extraordinary diligence in ensuring the
safety of passengers; and in case of injuries and/or death on the part of a passenger, they
are presumed to be at fault and, thus, responsible therefor. As such, petitioner, et al. should
be held civilly liable for Battung's death.9
In their defense, petitioner, et al. maintained that they had exercised the extraordinary
diligence required by law from common carriers. In this relation, they claimed that a
common carrier is not an absolute insurer of its passengers and that Battung's death should
be properly deemed a fortuitous event. Thus, they prayed for the dismissal of the
complaint, as well as the payment of their counterclaims for damages and attorney's
fees.10
The RTC Ruling
In a Decision11 dated August 29, 2011, the RTC ruled in respondents' favor and,
accordingly, ordered petitioner, et al. to pay respondent the amounts of: (a) P1,586,000.00
as compensatory damages for unearned income; (b) P50,000.00 as actual damages; and
(c) P50,000.00 as moral damages.12
The RTC found that petitioner, et al. were unable to rebut the presumed liability of
common carriers in case of injuries/death to its passengers due to their failure to show that
they implemented the proper security measures to prevent passengers from carrying
deadly weapons inside the bus which, in this case, resulted in the killing of Battung. As
such, petitioner, et al. were held civilly liable for the latter's death based on culpa
contractual.13
Dissatisfied, petitioner, et al. appealed to the CA.14
The CA Ruling
In a Decision15 dated May 31, 2013, the CA affirmed the ruling of the RTC in toto.16 It held
that the killing of Battung cannot be deemed as a fortuitous event, considering that such
killing happened right inside petitioner's bus and that petitioner, et al. did not take any
safety measures in ensuring that no deadly weapon would be smuggled inside the bus.17
Aggrieved, only petitioner moved for reconsideration18 which was, however, denied in a
Resolution19dated August 23, 2013; hence, the instant petition.chanrobleslaw
The Issue Before the Court
The core issue for the Court's resolution is whether or not the CA correctly affirmed the
ruling of the RTC finding petitioner liable for damages to respondent arising from culpa
contractual.
The Court's Ruling
The petition is meritorious.chanrobleslaw
I.
The law exacts from common carriers (i.e., those persons, corporations, firms, or
associations engaged in the business of carrying or transporting passengers or goods or
both, by land, water, or air, for compensation, offering their services to the public 20) the
highest degree of diligence (i.e., extraordinary diligence) in ensuring the safety of its
passengers. Articles 1733 and 1755 of the Civil Code state:
Art. 1733. Common carriers, from the nature of their business and for reasons of public
policy, are bound to observe extraordinary diligence in the vigilance over the goods and
for the safety of the passengers transported by them, according to all the circumstances
of each case.
Art. 1755. A common carrier is bound to carry the passengers safely as far as human care
and foresight can provide, using the utmost diligence of very cautious persons, with a due
regard for all the circumstances.
In this relation, Article 1756 of the Civil Code provides that "[i]n case of death of or injuries
to passengers, common carriers are presumed to have been at fault or to have acted
negligently, unless they prove that they observed extraordinary diligence as prescribed in
Articles 1733 and 1755." This disputable presumption may also be overcome by a showing
that the accident was caused by a fortuitous event.21
The foregoing provisions notwithstanding, it should be pointed out that the law does not
make the common carrier an insurer of the absolute safety of its passengers. In Mariano, Jr.
v. Callejas,22 the Court explained that:
While the law requires the highest degree of diligence from common carriers in the safe
transport of their passengers and creates a presumption of negligence against them, it
does not, however, make the carrier an insurer of the absolute safety of its passengers.
Article 1755 of the Civil Code qualifies the duty of extraordinary care, vigilance[,] and
precaution in the carriage of passengers by common carriers to only such as human care
and foresight can provide. What constitutes compliance with said duty is adjudged with
due regard to all the circumstances.
Article 1756 of the Civil Code, in creating a presumption of fault or negligence on the part
of the common carrier when its passenger is injured, merely relieves the latter, for the time
being, from introducing evidence to fasten the negligence on the former, because the
presumption stands in the place of evidence. Being a mere presumption, however, the
same is rebuttable by proof that the common carrier had exercised extraordinary
diligence as required by law in the performance of its contractual obligation, or that the
injury suffered by the passenger was solely due to a fortuitous event.
In fine, we can only infer from the law the intention of the Code Commission and
Congress to curb the recklessness of drivers and operators of common carriers in the
conduct of their business.
Thus, it is clear that neither the law nor the nature of the business of a transportation
company makes it an insurer of the passenger's safety, but that its liability for personal
injuries sustained by its passenger rests upon its negligence, its failure to exercise the
degree of diligence that the law requires.23 (Emphases and underscoring
supplied)ChanRoblesVirtualawlibrary
Therefore, it is imperative for a party claiming against a common carrier under the above-
said provisions to show that the injury or death to the passenger/s arose from the
negligence of the common carrier and/or its employees in providing safe transport to its
passengers.
In Pilapil v. CA,24 the Court clarified that where the injury sustained by the passenger was in
no way due (1) to any defect in the means of transport or in the method of transporting, or
(2) to the negligent or willful acts of the common carrier's employees with respect to the
foregoing - such as when the injury arises wholly from causes created by strangers which
the carrier had no control of or prior knowledge to prevent — there would be no issue
regarding the common carrier's negligence in its duty to provide safe and suitable care, as
well as competent employees in relation to its transport business; as such, the presumption
of fault/negligence foisted under Article 1756 of the Civil Code should not apply:
First, as stated earlier, the presumption of fault or negligence against the carrier is only a
disputable presumption.[The presumption] gives in where contrary facts are established
proving either that the carrier had exercised the degree of diligence required by law or
the injury suffered by the passenger was due to a fortuitous event. Where, as in the instant
case, the injury sustained by the petitioner was in no way due to any defect in the means
of transport or in the method of transporting or to the negligent or wilful acts of [the
common carrier'sl employees, and therefore involving no issue of negligence in its duty to
provide safe and suitable [care] as well as competent employees, with the injury arising
wholly from causes created by strangers over which the carrier had no control or even
knowledge or could not have prevented, the presumption is rebutted and the carrier is not
and ought not to be held liable.To rule otherwise would make the common carrier the
insurer of the absolute safety of its passengers which is not the intention of the lawmakers.
(Emphasis and underscoring supplied)
In this case, Battung's death was neither caused by any defect in the means of transport or
in the method of transporting, or to the negligent or willful acts of petitioner's employees,
namely, that of Duplio and Daraoay, in their capacities as driver and conductor,
respectively. Instead, the case involves the death of Battung wholly caused by the
surreptitious act of a co-passenger who, after consummating such crime, hurriedly
alighted from the vehicle.25 Thus, there is no proper issue on petitioner's duty to observe
extraordinary diligence in ensuring the safety of the passengers transported by it, and the
presumption of fault/negligence against petitioner under Article 1756 in relation to Articles
1733 and 1755 of the Civil Code should not apply.
II.
On the other hand, since Battung's death was caused by a co-passenger, the applicable
provision is Article 1763 of the Civil Code, which states that "a common carrier is
responsible for injuries suffered by a passenger on account of the willful acts or negligence
of other passengers or of strangers, if the common carrier's employees through the exercise
of the diligence of a good father of a familycould have prevented or stopped the act or
omission." Notably, for this obligation, the law provides a lesser degree of diligence, i.e.,
diligence of a good father of a family, in assessing the existence of any culpability on the
common carrier's part.
Case law states that the concept of diligence of a good father of a family "connotes
reasonable care consistent with that which an ordinarily prudent person would have
observed when confronted with a similar situation. The test to determine whether
negligence attended the performance of an obligation is: did the defendant in doing the
alleged negligent act use that reasonable care and caution which an ordinarily prudent
person would have used in the same situation? If not, then he is guilty of negligence."26
In ruling on this case, the CA cited Fortune Express, Inc. v. Court of Appeals27 (Fortune) in
ascribing negligence on the part of petitioner, ratiocinating that it failed to implement
measures to detect if its passengers were carrying firearms or deadly weapons which
would pose a danger to the other passengers.28 However, the CA's reliance was plainly
misplaced in view of Fortune's factual variance with the case at bar.
In Fortune, the common carrier had already received intelligence reports from law
enforcement agents that certain lawless elements were planning to hijack and burn some
of its buses; and yet, it failed to implement the necessary precautions to ensure the safety
of its buses and its passengers. A few days later, one of the company's buses was indeed
hijacked and burned by the lawless elements pretending as mere passengers, resulting in
the death of one of the bus passengers. Accordingly, the Court held that the common
carrier's failure to take precautionary measures to protect the safety of its passengers
despite warnings from law enforcement agents showed that it failed to exercise the
diligence of a good father of a family in preventing the attack against one of its buses;
thus, the common carrier was rightfully held liable for the death of the aforementioned
passenger.
In contrast, no similar danger was shown to exist in this case so as to impel petitioner or its
employees to implement heightened security measures to ensure the safety of its
passengers. There was also no showing that during the course of the trip, Battung's killer
made suspicious actions which would have forewarned petitioner's employees of the
need to conduct thorough checks on him or any of the passengers. Relevantly, the Court,
in Nocum v. Laguna Tayabas Bus Company,29 has held that common carriers should be
given sufficient leeway in assuming that the passengers they take in will not bring anything
that would prove dangerous to himself, as well as his co-passengers, unless there is
something that will indicate that a more stringent inspection should be made, viz.:
In this particular case before Us, it must be considered that while it is true the passengers of
appellant's bus should not be made to suffer for something over which they had no
control, as enunciated in the decision of this Court cited by His Honor, fairness demands
that in measuring a common carrier's duty towards its passengers, allowance must be
given to the reliance that should be reposed on the sense of responsibility of all the
passengers in regard to their common safety. It is to be presumed that a passenger will not
take with him anything dangerous to the lives and limbs of his co-passengers, not to speak
of his own. Not to be lightly considered must be the right to privacy to which each
passenger is entitled. He cannot be subjected to any unusual search, when he protests the
innocuousness of his baggage and nothing appears to indicate the contrary, as in the
case at bar. In other words, inquiry may be verbally made as to the nature of a
passenger's baggage when such is not outwardly perceptible, but beyond this,
constitutional boundaries are already in danger of being transgressed. Calling a
policeman to his aid, as suggested by the service manual invoked by the trial judge, in
compelling the passenger to submit to more rigid inspection, after the passenger had
already declared that the box contained mere clothes and other miscellaneous, could
not have justified invasion of a constitutionally protected domain. Police officers acting
without judicial authority secured in the manner provided by law are not beyond the pale
of constitutional inhibitions designed to protect individual human rights and liberties.
Withal, what must be importantly considered here is not so much the infringement of the
fundamental sacred rights of the particular passenger herein involved, but the constant
threat any contrary ruling would pose on the right of privacy of all passengers of all
common carriers, considering how easily the duty to inspect can be made an excuse for
mischief and abuse. Of course, when there are sufficient indications that the
representations of the passenger regarding the nature of his baggage may not be true, in
the interest of the common safety of all, the assistance of the police authorities may be
solicited, not necessarily to force the passenger to open his baggage, but to conduct the
needed investigation consistent with the rules of propriety and, above all, the constitutional
rights of the passenger. It is in this sense that the mentioned service manual issued by
appellant to its conductors must be understood.30(Emphases and underscoring supplied)
In this case, records reveal that when the bus stopped at San Jose City to let four (4) men
ride petitioner's bus (two [2] of which turned out to be Battung's murderers), the bus driver,
Duplio, saw them get on the bus and even took note of what they were wearing.
Moreover, Duplio made the bus conductor, Daraoay, approach these men and have
them pay the corresponding fare, which Daraoay did.31 During the foregoing, both Duplio
and Daraoay observed nothing which would rouse their suspicion that the men were
armed or were to carry out an unlawful activity. With no such indication, there was no
need for them to conduct a more stringent search (i.e., bodily search) on the aforesaid
men. By all accounts, therefore, it cannot be concluded that petitioner or any of its
employees failed to employ the diligence of a good father of a family in relation to its
responsibility under Article 1763 of the Civil Code. As such, petitioner cannot altogether be
held civilly liable.
WHEREFORE, the petition is GRANTED. Accordingly, the Decision dated May 31, 2013 and
the Resolution dated August 23, 2013 of the Court of Appeals in CA-G.R. CV No. 97757 are
hereby REVERSED and SET ASIDE. Accordingly, the complaint for damages filed by
respondents heirs of Romeo L. Battung, Jr. is DISMISSED for lack of merit.

SO ORDERED.chanroblesvirtuallawlibrary

FIRST DIVISION

G.R. No. 206468, August 02, 2017

JUDITH D. DARINES AND JOYCE D. DARINES, Petitioners, v. EDUARDO QUIÑONES

AND ROLANDO QUITAN, Respondents.

DECISION

DEL CASTILLO, J.:

This Petition for Review on Certiorari assails the October 29, 2012 Decision1 of the Court of
Appeals (CA) in CA-G.R. CV No. 95638, which reversed and set aside the July 14, 2010
Decision2 of the Regional Trial Court (RTC) of Baguio City, Branch 3 in Civil Case No. 6363-
R for "Breach of Contract of Carriage & Damages." Also challenged is the March 6, 2013 CA
Resolution3 denying the motion for reconsideration on the assailed Decision.

Factual Antecedents
Judith D. Darines (Judith) and her daughter, Joyce D. Darines (Joyce) (petitioners) alleged
in their Complaint4 that on December 31, 2005, they boarded the Amianan Bus Line with
Plate No. ACM 497 and Body No. 808 as paying passengers enroute from Carmen, Rosales,
Pangasinan to Baguio City. Respondent Rolando M. Quitan (Quitan) was driving the bus at
that time. While travelling on Camp 3, Tuba, Benguet along Kennon Road, the bus crashed
into a truck (with Plate No. XSE 578) which was parked on the shoulder of Kennon Road. As
a result, both vehicles were damaged; two passengers of the bus died; and the other
passengers, including petitioners, were injured. In particular, Joyce suffered cerebral
concussion while Judith had an eye wound which required an operation.
Petitioners argued that Quitan and respondent Eduardo Quinones (Quinones), the operator
of Amianan Bus Line, breached their contract of carriage as they failed to bring them safely
to their destination. They also contended that Quitan's reckless and negligent driving
caused the collision. Consequently, they prayed for actual, moral, exemplary and temperate
damages, and costs of suit.
For their part, Quinones and Quitan (respondents) countered in their Answer that, during
5
the December 31, 2005 incident, Quitan was driving in a careful, prudent, and dutiful
manner at the normal speed of 40 kilometers per hour. According to them, the proximate
cause of the incident was the negligence of the truck driver, Ronald C. Fernandez, who
parked the truck at the roadside right after the curve without having installed any early
warning device. They also claimed that Quinones observed due diligence in the selection
and supervision of his employees as he conducted seminars on road safety measures; and
Quitan attended such seminars including those required by the government on traffic
safety. They likewise averred that Quitan was a licensed professional driver who, in his 12
years as a public utility driver, had not figured in any incident like the one at hand.
During the trial, Judith testified that Quitan was driving at a very fast pace resulting in a
collision with the truck parked at the shoulder of the road.6 Consequently, the bone holding
her right eye was fractured and had to be operated.7 She claimed that, as a result of
incident, she failed to report for work for two months.8
To prove the actual damages that she suffered, Judith presented receipts for medicine, and
a summary of expenses, which included those incurred for the ritual dao-is. She explained
that she and Joyce are Igorots, being members of Ibaloi, Kankanay-ey, an indigenous
tribe;9 and as their customary practice, when a member who meets an accident is released
from the hospital, they butcher pigs to remove or prevent bad luck from returning to the
family.10
Moreover, to support her claim for moral damages, Judith testified that she suffered
sleepless nights since she worried about the result and possible effect of her operation.11
On the other hand, respondents presented Ernesto Benitez (Benitez), who, on behalf of
respondents, testified that he bought the medicines and paid petitioners' hospitalization
expenses, as evidenced by receipts he submitted in court.12
Ruling of the Regional Trial Court
On July 14, 2010, the RTC rendered its Decision ordering respondents to pay petitioners the
following:
1. Moral Damages of One Hundred Thousand Pesos (P100,000.00);
2. Exemplary Damages of Thirty Thousand Pesos (P30,000.00);
3. Attorney's Fees of Fifteen Percent (15%) of the Damages, plus Total
Appearance Fees of Sixteen Thousand Five Hundred Pesos (P16,500.00);
and
4. Costs of Suit.13
The RTC held that since the respondents already paid the actual damages relating to
petitioners' medical and hospitalization expenses, then the only remaining matters for
resolution were: whether respondents were liable to pay petitioners a) actual damages
representing the expenses incurred during the dao-isritual; and, Judith's alleged lost
income; b) moral and exemplary damages; and, c) attorney's fees.
The RTC noted that petitioners did not present any receipt as regards the expenses they
incurred during the dao-is ritual. As regards their claim for Judith's lost income, the RTC
held that petitioners similarly failed to substantiate the same as there was no showing that
Judith's failure to report for work for two months was because of the incident. Thus, the
RTC did not award actual damages for lack of evidence.
However, the RTC awarded moral damages grounded on Judith's testimony regarding her
pain and suffering. It likewise awarded exemplary damages by way of correction, and to
serve as example to common carriers to be extraordinarily diligent in transporting
passengers. It also granted petitioners attorney's fees plus costs of suit on the ground that
petitioners were compelled to litigate the case.
Aggrieved, respondents appealed to the CA.
Ruling of the Court of Appeals
In its October 29, 2012 Decision, the CA reversed and set aside the RTC Decision.
The CA stressed that respondents did not dispute that they were liable for breach of
contract of carriage; in fact, they paid for the medical and hospital expenses of petitioners.
Nonetheless, the CA deleted the award of moral damages because petitioners failed to
prove that respondents acted fraudulently or in bad faith, as shown by the fact that
respondents paid petitioners' medical and hospitalization expenses. The CA held that, since
no moral damages was awarded, then there was no basis to grant exemplary damages.
Finally, it ruled that because moral and exemplary damages were not granted, then the
award of attorney's fees must also be deleted.
On March 6, 2013, the CA denied petitioners' Motion for Reconsideration.
Issues
Hence, petitioners filed this Petition raising the issues as follows: cha nRoblesvi rt ual Lawlib rary
1. WHETHER OR NOT THE CASE OF PETITIONERS FALL[S] UNDER ARTICLES
20,1157,1759, 2176,2180 AND 2219 OF THE CIVIL CODE THEREBY
ENTITL[ING THEM] TO MORAL AND EXEMPLARY DAMAGES AND
ATTORNEY'S FEES;
2. WHETHER OR NOT THE XXX AWARD OF DAMAGES AND ATTORNEY'S FEES
BY THE TRIAL COURT BECAME FINAL AND EXECUTORY SINCE HEREIN
RESPONDENTS DID NOT QUESTION THE SAME IN THEIR APPEAL BUT
MERELY QUESTIONED THE AMOUNTS OF AWARD [FOR BEING]
EXORBITANT.14
Petitioners' Arguments
Petitioners maintain that respondents are liable to pay them moral and exemplary damages
because the proximate cause of their injuries was the reckless driving of Quitan. As regards
Quinones, his fault is presumed considering that he did not offer proof that he exercised
extraordinary diligence in the selection and supervision of his employees. They added that
the negligence of respondents resulted in the latter's failure to transport them to their
destination thereby constituting a breach of their contract of carriage. They also argued
that the RTC's grant of damages and attorney's fees in their favor already attained finality
because when respondents appealed to the CA, they only questioned the amounts given by
the RTC for being exorbitant, but not the award itself.
Respondents' Arguments
Respondents, on their end, posit that they are not liable to pay moral damages because
their acts were not attended by fraud or bad faith. They add that since petitioners are not
entitled to moral damages, then it follows that they are also not entitled to exemplary
damages; and same is true with regard to the grant of attorney's fees as the same
necessitates the grant of moral and exemplary damages.
Our Ruling
The Court denies the Petition.
First of all, petitioners contend that the awards of moral and exemplary damages and
attorney's fees by the RTC already attained finality because respondents did not dispute
such grants when they appealed to the CA but only the fact that the amounts were
exorbitant.
Such contention is without merit.
A plain reading of the assigned errors15 and issues16 in the Appellants' Brief of respondents
with the CA reveals that they questioned the awards of moral and exemplary damages as
well as attorney's fees made by the RTC to petitioners. Since respondents timely challenged
the awards when they interposed an appeal to the CA, the same had not yet attained
finality.
Going now to the main issue, the Court fully agrees with the CA ruling that in an action for
breach of contract, moral damages may be recovered only when a) death of a passenger
results; or b) the carrier was guilty of fraud and bad faith even if death does not result; and
that neither of these circumstances were present in the case at bar. The CA correctly held
that, since no moral damages was awarded then, there is no basis to grant exemplary
damages and attorney's fees to petitioners.
To stress, this case is one for breach of contract of carriage (culpa contractual) where it is
necessary to show the existence of the contract between the parties, and the failure of the
common carrier to transport its passenger safely to his or her destination. An action for
breach of contract differs from quasi-delicts (also referred as culpa aquiliana or culpa extra
contractual) as the latter emanate from the negligence of the tort feasor17 including such
instance where a person is injured in a vehicular accident by a party other than the carrier
where he is a passenger.
The principle that, in an action for breach of contract of carriage, moral damages may be
awarded only in case (1) an accident results in the death of a passenger; or (2) the carrier
is guilty of fraud or bad faith, is pursuant to Article 1764, in relation to Article 2206(3) of
the Civil Code, and Article 2220 thereof,18 as follows:chanRob lesvi rtua lLawl ibra ry
Article 1764. Damages in cases comprised in this Section shall be awarded in accordance
with Title XVIII of this Book, concerning Damages. Article 2206 shall also apply to
the death of a passenger caused by the breach of contract by a common carrier.
(Emphasis supplied)
Article 2206. The amount of damages for death caused by a crime or quasi-delict shall be at
least three thousand pesos, even though there may have been mitigating circumstances. In
addition:
xxxx
 action for breach of contract is so gross as to amount to malice, then the claim of moral
(3) The spouse, legitimate and illegitimate descendants and ascendants of the deceased damages is without merit.31
may demand moral damages for mental anguish by reason of the death of the deceased.
Here, petitioners impute negligence on the part of respondents when, as paying
Article 2220. Willful injury to property may be a legal ground for awarding moral damages if passengers, they sustained injuries when the bus owned and operated by respondent
the court should find that, under the circumstances, such damages are justly due. The Quinones, and driven by respondent Quitan, collided with another vehicle. Petitioners
same rule applies to breaches of contract where the defendant acted fraudulently or propounded on the negligence of respondents, but did not discuss or impute fraud or bad
in bad faith. (Emphasis supplied) faith, or such gross negligence which would amount to bad faith, against respondents.
There being neither allegation nor proof that respondents acted in fraud or in bad faith in
The aforesaid concepts of fraud or bad faith and negligence are basic as they are distinctly
performing their duties arising from their contract of carriage, they are then not liable for
differentiated by law. Specifically, fraud or bad faith connotes "deliberate or wanton wrong
moral damages.
doing"19 or such deliberate disregard of contractual obligations20 while negligence amounts
to sheer carelessness.21
The Court also sustains the CA's finding that petitioners are not entitled to exemplary
damages. Pursuant to Articles 2229 and 223432 of the Civil Code, exemplary damages may
More particularly, fraud includes "inducement through insidious machination." In turn,
22
be awarded only in addition to moral, temperate, liquidated, or compensatory damages.
insidious machination refers to such deceitful strategy or such plan with an evil purpose. On
Since petitioners are not entitled to either moral, temperate, liquidated, or compensatory
the other hand, bad faith does not merely pertain to bad judgment or negligence but
damages, then their claim for exemplary damages is bereft of merit.
relates to a dishonest purpose, and a deliberate doing of a wrongful act. Bad faith involves
"breach of a known duty through some motive or interest or ill will that partakes of the
Finally, considering the absence of any of the circumstances under Article 220833 of the Civil
nature of fraud."23
Code where attorney's fees may be awarded, the same cannot be granted to petitioners.
In Viluan v. Court of Appeals,24 and Bulante v. Chu Liante,25 the Court disallowed the
All told, the CA correctly ruled that petitioners are not entitled to moral and exemplary
recovery of moral damages in actions for breach of contract for lack of showing that the
damages as well as attorney's fees.
common carrier committed fraud or bad faith in performing its obligation. Similarly,
in Verzosa v. Baytan,26 the Court did not also grant moral damages in an action for breach
WHEREFORE, the Petition is DENIED. The October 29, 2012 Decision and March 6, 2013
of contract as there was neither allegation nor proof that the common carrier committed
Resolution of the Court of Appeals in CA-G.R. CV No. 95638 are AFFIRMED.
fraud or bad faith.27 The Court declared that "[t]o award moral damages for breach of
contract, therefore, without proof of bad faith or malice on the part of the defendant, as
SO ORDERED.
required by [Article 2220 of the Civil Code], would be to violate the clear provisions of the
law, and constitute unwarranted judicial legislation.28
Sereno, C.J., (Chairperson), Leonardo-De Castro, Perlas-Bernabe, and Caguioa, JJ., concur.
Meanwhile, in Gatchalian v. Delim,29 and Mr. & Mrs. Fabre, Jr. v. Court of Appeals,30 the
Court found the common carriers liable for breach of contract of carriage and awarded
moral damages to the injured passengers on the ground that the common carrier
committed gross negligence, which amounted to bad faith. Particularly, in Mr. & Mrs. Fabre,
Jr., the gross negligence of the common carrier was determined from the fact that its driver
was not engaged to drive long distance travels; he was also unfamiliar with the area where
he detoured the bus as it was his first time to ply such route; the road was slippery because
it was raining, yet the bus was running at 50 kilometers per hour resulting in its skidding to
the left shoulder of the road; and the bus hit the steel brace on the road at past 11:30 p.m.
The Court also noted that other than the imputation of gross negligence, the injured
passengers therein pursued their claim not on the theory of breach of contract of carriage
alone but also on quasi-delicts.

Clearly, unless it is fully established (and not just lightly inferred) that negligence in an
FIRST DIVISION

July 19, 2017

G.R. No. 203902

SPOUSES DIONISIO ESTRADA and JOVITA R. ESTRADA, Petitioner

vs.
PHILIPPINE RABBIT BUS LINES, INC. and EDUARDO R. SA YLAN, Respondents

DECISION

DEL CASTILLO, J.:

The Court restates in this petition two principles on the grant of damages. First, moral
damages, as a general rule, are not recoverable in an action for damages predicated on
breach of contract.1 Second, temperate damages in lieu of actual damages for loss of
earning capacity may be awarded where earning capacity is plainly established but no
evidence was presented to support the allegation of the injured party's actual income.2
This Petition for Review on Certiorari assails the May 16, 2012 Decision3 and October 1, 2012
Resolution4 of the Court of Appeals (CA) in CA-G.R. CV No. 95520, which partially granted
the appeal filed therewith by respondent Philippine Rabbit Bus Lines, Inc. (Philippine
Rabbit) and denied petitioners spouses Dionisio C. Estrada (Dionisio) and Jovita R. Estrada's
motion for reconsideration thereto.
Factual Antecedents
On April 13, 2004, petitioners filed with the Regional Trial Court (RTC) of Urdaneta City,
Pangasinan, a Complaint5for Damages against Philippine Rabbit and respondent Eduardo
R. Saylan (Eduardo).
The facts as succinctly summarized by the RTC are as follows:
[A] mishap occurred on April 9, 2002 along the national highway in Barangay
Alipangpang, Pozorrubio, Pangasinan, between the passenger bus with plate number
CVK-964 and body number 3101, driven by [respondent] Eduardo Saylan and owned by
[respondent] Philippine Rabbit Bus, Lines, Inc., and the Isuzu truck with plate number UPB-
974 driven by Willy U. Urez and registered in the nan1e of Rogelio Cuyton, Jr.. At the time of
the incident, the Philippine Rabbit Bus was going towards the north direction, while the
Isuzu truck was travelling towards the south direction. The collision happened at the left
lane or the lane properly belonging to the Isuzu truck. The right front portion of the Isuzu
Truck appears to have collided with the right side portion of the body of the Philippine
Rabbit bus. x x x Before the collision, the bus was following closely a jeepney. When the
jeepney stopped, the bus suddenly swerved to the left encroaching upon the rightful lane
of the Isuzu truck, which resulted in the collision of the two (2) vehicles. x x x The [petitioner]
Dionisio Estrada, who was an1ong the passengers of the Philippine Rabbit bus, as
evidenced by the ticket issued to him, was injured on the [right] arm as a consequence of
the accident. His injured right arm was amputated at the Villaflor Medical Doctor's Hospital
in Dagupan City x x x. For the treatment of his injury, he incurred expenses as evidenced by
x x x various receipts.6
Dionisio argued that pursuant to the contract of carriage between him and Philippine
Rabbit, respondents were duty-bound to carry him safely as far as human care and
foresight can provide, with utmost diligence of a very cautious person, and with due
regard for all the circumstances from the point of his origin in Urdaneta City to his
destination in Pugo, La Union. However, through the fault and negligence of Philippine
Rabbit's driver, Eduardo, and without human care, foresight, and due regard for all
circumstances, respondents failed to transport him safely by reason of the aforementioned
collision which resulted in the amputation of Dionisio's right arm. And since demands for
Philippine Rabbit7 to pay him damages for the injury he sustained remained unheeded,
Dionisio filed the said complaint wherein he prayed for the following awards: moral
damages of ₱500,000.00 actual damages of ₱60,000.00, and attorney's fees of ₱25,000.00.
Petitioners' claim for moral damages, in particular, was based on the following allegations:
9. [The] amount of ₱500,000.00 as moral damages for the amputation of [Dionisio's] right
arm for life including his moral sufferings for such [loss] of right arm is reasonable. Said
amount is computed and derived using the formula (2/3 x [80- age of the complainant
when the injury is sustained] = life expectancy) adopted in the American Expectancy
Table of Mortality or the actuarial of Combined Experience Table of Mortality. From such
formula, [Dionisio] is expected to live for 18 years, which is equivalent [to] about 6570 days.
For each day, [Dionisio] is claiming ₱80.00 as he is expected to work for 8 hours a day with
his amputated arm or to enjoy the same for at least 8 hours a day (or is claiming ₱l0.00 for
each hour) for 18 years (6570 days). The amount that can be computed thereof would be
₱525,600.00 (6570 days x ₱80.00). [Dionisio] then [rounded] it off to ₱500,000.00, the moral
damages consisted [of] his moral sufferings due to the [loss] of his right arm for life; 8
Denying any liability, Philippine Rabbit in its Answer9 averred that it carried Dionisio safely
as far as human care and foresight could provide with the utmost diligence of a very
cautious person and with due regard for all the circumstances prevailing. While it did not
contest that its bus figured in an accident, Philippine Rabbit nevertheless argued that the
cause thereof was an extraordinary circumstance independent of its driver's action or a
fortuitous event. Hence, it claimed to be exempt from any liability arising therefrom. In any
case, Philippine Rabbit averred that it was the Isuzu truck coming from the opposite
direction which had the last clear chance to avoid the mishap. Instead of slowing down
upon seeing the bus, the said truck continued its speed such that it bumped into the right
side of the bus. The proximate cause of the accident, therefore, was the wrongful and
negligent manner in which the Isuzu truck was operated by its driver. In view of this,
Philippine Rabbit believed that Dionisio has no cause of action against it.
With respect to Eduardo, he was declared in default after he failed to file an Answer
despite due notice.10
Ruling of the Regional Trial Court
Treating petitioners' Complaint for damages as one predicated on breach of contract of
carriage, the RTC rendered its Decision11 on December 1, 2009.
In concluding that Eduardo was negligent in driving the Philippine Rabbit bus, the said
court ratiocinated, viz.:
Evidently, prior to the accident, [Eduardo] was tailgating the jeepney ahead of him. When
the jeepney stopped, [Eduardo] suddenly swerved the bus to the left, encroaching in the
process the rightful lane of the oncoming Isuzu truck, thereby resulting in the collision. The
fact that [Eduardo] did not apply the brakes, but instead swerved to the other lane, fairly
suggests that he was not only unnecessarily close to the jeepney, but that he was
operating the bus at a speed greater than what was reasonably necessary for him to be
able to bring his vehicle to a full stop to avoid hitting the vehicle he was then following.
Clearly, immediately before the collision, [Eduardo] was actually violating Section 35 of the
Land Transportation and Traffic Code, Republic Act No. 4136, as amended:
Sec. 35. Restriction as to speed. - (a) Any person driving a motor vehicle on a highway shall
drive the same at a careful and prudent speed, not greater nor less than [what] is
reasonable and proper, having due regard for the traffic, the width of the highway, and or
any other condition then and there existing; and no person shall drive any motor vehicle
upon a highway at such a speed as to endanger the life, limb and property of any person,
nor at a speed greater than will permit him to bring the vehicle to a stop within the clear
distance ahead.
Too, when [Eduardo] swerved to the left and encroached on the rightful lane of the Isuzu
truck, he was violating Section 41 of the same Traffic Code:
Sec. 41. Restriction 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.
The fact that the collision occurred immediately after the bus swerved on the left lane
clearly [indicates] that the other lane was not clear and free of oncoming vehicle at the
time x x x [Eduardo] tried to overtake the jeepney to avoid hitting it.
It is presumed that a person driving a motor vehicle has been negligent if at the time of the
mishap, he was violating any traffic regulation, unless there is proof to the contrary (Article
2185 of the CivilCode). [Eduardo] failed to rebut this legal presumption as he chose not to
answer the complaint and to testify in court. [Philippine Rabbit was also] unsuccessful in
overthrowing the said legal presumption. x x x
[Eduardo's] failure to observe the proper and safe distance from the vehicle ahead of him
and in running the bus at a speed greater than what was reasonably necessary to control
and stop the vehicle when warranted by the circumstances, clearly were reflective of his
lack of precaution, vigilance, and foresight in operating his vehicle. As an experienced
driver, he should have known about the danger posed by tailgating another vehicle and
driving his vehicle at an unreasonable speed called for by the circumstances. For, the
sudden stopping of a motor vehicle, for whatever [reason], is not an uncommon and
[unforeseeable] occurrence in the highway. If only he had exercised diligence, vigilance
and foresight, he would have refrained from tailgating another vehicle at a dangerously
close range. What he should have done instead was to maintain a reasonable distance
from the jeepney and drove his vehicle at a speed not greater than will permit him to bring
the vehicle to a stop within the assured clear distance ahead. This he failed to do. As a
consequence, when the jeepney stopped, he was unable to control and stop the bus.
Instead, he was forced to swerve the bus to the left lane blocking the path of the
oncoming Isuzu truck. While he averted smashing the jeepney, he however collided with
the Isuzu truck. No doubt, it was [Eduardo's] lack of precaution, vigilance and foresight
that led to the accident. Otherwise stated, it was his recklessness or negligence that was
the proximate cause of the mishap.
[Philippine Rabbit's] imputation of fault to the driver of the Isuzu truck, claiming that it was
the latter [which] had the last clear chance to avoid the accident, deserves scant
consideration. As the evidence would show, the impact occurred immediately after the
bus swerved and while in the process of encroaching on the left lane. This is evidenced by
the fact that the front portion of the Isuzu truck collided with the right side portion of the
bus. The driver of the Isuzu truck, before the accident, was cruising on the lane properly
belonging to him. He had every right to expect that all the vehicles, including the bus
coming from the opposite direction would stay on their proper lane. He certainly was not
expected to know what prompted the bus driver to suddenly swerve his vehicle to the left.
The abruptness by which the bus swerved without a warning could not have given him the
luxury of time to reflect and anticipate the bus' encroachment of his lane for him to be
able to avoid it. Needless to point out, there was no last clear chance to speak of on the
part of the driver of the Isuzu truck to avoid the accident. Besides, the 'last clear chance'
principle is not applicable in this case since the instant suit is between the passenger and
the common carrier. x x x12
The RTC then proceeded to determine whether Philippine Rabbit, as it claimed, exercised
the diligence of a good father of a family in the selection and supervision of its drivers as to
negate any liability for damages. The said court, however, was unconvinced after it found
that (1) Philippine Rabbit failed to show that it had taken all the necessary and actual
steps to thoroughly examine the qualifications of Eduardo as a driver worthy of
employment; and (2) no proof relative to the existence of company rules and regulations,
instructions, and policies affecting its drivers, as well as to their actual implementation and
observance, were presented. Hence, Philippine Rabbit was held jointly and severally liable
with Eduardo for the awards made in favor of Dionisio as follows:
The emotional anguish and suffering of x x x Dionisio Estrada as a consequence of the
injury and amputation of his right arm due to the reckless driving of x x x Eduardo, which
resulted in the accident, cannot be overemphasized. The loss of the use of his right arm
and the humiliation of being tagged in the public [eye] as a person with only one arn1
would certainly be borne by him for the rest of his life. The amount of moral damages he is
praying appears to be reasonable under the circumstances.
Too, the award of attorney's fees is proper considering that x xx [Dionisio] was forced to
litigate after x x x [Philippine Rabbit] refused to heed his demand for the payment of
damages as a consequence of the accident.
WHEREFORE, judgment is hereby rendered ordering x x x Philippine Rabbit Bus Lines, Inc.
and Eduardo Saylan to pay jointly and severally x xx Dionisio Estrada the following
amounts:
1. Five Hundred Thousand Pesos (₱500,000.00) as moral damages;
2. Fifty Seven Thousand Seven Hundred Sixty Six Pesos and Twenty Five Centavos
(₱57,766.25), as actual damages; and
3. Twenty Five Thousand Pesos (₱25,000.00), as attorney's fees; and the costs of suit.
SO ORDERED.13
Philippine Rabbit filed a Motion for Reconsideration14 but the same was denied for lack of
merit in an Order15 dated May 31, 2010.
Ruling of the Court of Appeals
On appeal, Philippine Rabbit imputed error upon the RTC in not finding that it exercised
the diligence of a good father of a family in the selection and supervision of its drivers. In
any case, it argued that moral damages are not recoverable in an action for damages
predicated on breach of contract except when death results or when the carrier is guilty
of fraud or bad faith. Since none of the two aforementioned circumstances are present in
this case, Philippine Rabbit contended that it is Eduardo alone who should be held civilly
liable.
In a Decision16 dated May 16, 2012, the CA partially granted the appeal on the following
ratiocination:
Based from [sic] the aforecited allegations in the complaint, it was rightly regarded by the
trial court as an action to recover damages arising from breach of contract of carriage.
There was in fact, an admission that [Dionisio] was a passenger of a bus owned by
[Philippine Rabbit]. In an action for breach of contract of carriage, all that is required is to
prove the existence of such contract and its non-performance by the carrier through the
latter's failure to carry the passenger safely to his destination. In the present case, it was
duly established that there was a collision and as a result of which, [Dionisio] sustained an
injury.
[Philippine Rabbit] was therefore properly found liable for breach of contract of carriage.
A common carrier is bound to carry its passengers safely as far as human care and
foresight can provide, using the utmost diligence of very cautious persons, with due regard
to all the circumstances. In a contract of carriage, it is presumed that the common carrier
was at fault or was negligent when a passenger dies or is injured. Unless the presumption is
rebutted, the court need not even make an express finding of fault or negligence on the
part of the common carrier. This presumption may only be overcome by evidence that the
carrier exercised extraordinary diligence, and this presumption remained unrebutted in this
case. The trial court found that the accident which led to the amputation of [Dionisio's]
arm was due to the reckless driving and negligence of [Philippine Rabbit's] driver and
stated that:
No doubt, it was x x x [Eduardo's] lack of precaution, vigilance and foresight that led to the
accident. Otherwise stated, it was his recklessness or negligence that was the proximate
cause of the mishap.
Such negligence and recklessness is binding against [Philippine Rabbit] pursuant to Article
1759 of the Civil Code which provides:
Common carriers are liable for the death of or injuries to passengers through the
negligence or willful acts of the former' s employees, although such employees may have
acted beyond the scope of their authority or in violation of the orders of the common
carriers.
This liability of the common carriers does not cease upon proof that they exercised all the
diligence of a good father of a family in the selection and supervision of their employees.
Thus, [Philippine Rabbit's] defense that it acted with the diligence of a good father of a
family in its selection of its driver, Eduardo R. Saylan, is unavailing. [Philippine Rabbit]
however is correct in its contention that moral damages are not recoverable in actions for
damages predicated on a breach of contract, unless death of a passenger results, or it is
proved that the carrier was guilty of fraud or bad faith, even if death does not result.
There was no evidence on record indicative of fraud or bad faith on [Philippine Rabbit's]
part. Bad faith should be established by clear and convincing evidence. The settled rule is
that the law always presumes good faith such that any person who seeks to be awarded
damages due to the acts of another has the burden of proving that the latter acted in
bad faith or with ill motive. The award for attorney's fees must likewise be deleted
considering that moral damages cannot be granted and none of the instances
enumerated in Article 2208 of the Civil Code is present in the instant case. However, the
actual damages awarded by the trial court are adequately substantiated by official
receipts. Therefore, the same shall be sustained.
The driver on the other hand, may not be held liable under the contract of carriage, not
being a party to the same. The basis of a cause of action of a passenger against the driver
is either culpa criminal or culpa aquiliana. A passenger may file a criminal case based on
culpa criminal punishable under the Revised Penal Code or a civil case based on culpa
aquiliana under Articles 2176 and 2177 of the Civil Code.
A cause of action based on culpa contractual is also separate and distinct from a cause
of action based on culpa aquiliana. x x x
xxxx
The trial court therefore erred in ruling that [Philippine Rabbit] bus company and
[respondent] driver are jointly and severally liable. The driver cannot be held jointly and
severally liable with the carrier in case of breach of the contract of carriage. The contract
of carriage is between the carrier and the passenger, and in the event of contractual
liability, the carrier is exclusively responsible [therefor] to the passenger, even if such
breach be due to the negligence of his driver. 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.17
Accordingly, the CA modified the RTC Decision in that it declared Philippine Rabbit as
solely and exclusively liable to Dionisio for actual damages in the amount of ₱57,766.25
and deleted the award of moral damages and attorney's fees.
Petitioners filed a Motion for Reconsideration18 but the same was denied by the CA for lack
of merit in a Resolution19dated October 1, 2012.
Hence, this Petition for Review on Certiorari raising the following issues:
WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN DECLARING THAT THERE
WAS NO EVIDENCE ON RECORD INDICATIVE OF FRAUD OR BAD FAITH ON [PHILIPPINE
RABBIT'S] PART.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN NOT [CONSIDERING] X X X
THE [COST OF THE] REPLACEMENT OF PETITIONER [DIONISIO'S AMPUTATED RIGHT ARM] WITH
[AN] ARTIFICIAL ONE AS ACTUAL DAMAGES.20
The Parties' Arguments
Petitioners dispute the findings of lack of fraud or bad faith on the part of Philippine Rabbit
as to make it liable for moral damages. According to them, the assertions of Philippine
Rabbit in its Answer, i.e., that it carried Dionisio safely; that it was not an insurer of all risks;
that the accident was caused by a fortuitous event; that in any event, it was the negligent
manner by which the Isuzu truck was operated which was the proximate cause of the
accident; and that Dionisio has no cause of action against Philippine Rabbit, were made
with the intention to evade liability. Petitioners claim that the said assertions are clear
indication of fraud or bad faith.
In justifying their claim for moral damages, petitioners aver that in their Complaint, they did
not seek for moral damages in terms of physical suffering, mental anguish, fright, serious
anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and
similar injury per se, but for moral damages based purely on the fact that Dionisio lost his
right arm. They argue that while in a strict sense, Dionisio incurred actual damages through
the amputation of his right arm, such loss may rightly be considered as falling under moral
damages. This is because a right arm is beyond the commerce of man and loss thereof
necessarily brings physical suffering, mental anguish, besmirched reputation, social
humiliation and similar injury to a person. At any rate, should this Court award the amount
of ₱500,000.00 as actual damages due to the loss of Dionisio's right arm, petitioners also
find the same proper and appropriate under the circumstances.
Now jointly represented by one counsel, respondents, on the other hand, reiterate the rule
that moral damages are not recoverable in an action for damages predicated on a
breach of contract, as in this case, since breach of contract is not one of the items
enumerated in Article 2219 of the Civil Code. Only as an exception, moral damages may
be recovered in an action for breach of contract of carriage when the mishap results in
death or if the carrier acted fraudulently or in bad faith. Since Dionisio did not die in the
mishap nor was Philippine Rabbit found guilty of fraud or bad faith, respondents argue that
an award for moral damages is improper for having no basis in fact and in law.
Our Ruling
The Court modifies the CA ruling.
Moral damages; Instances when
moral damages can be awarded in an
action for breach of contract.
Moral damages include physical suffering, mental anguish, fright, serious anxiety,
besmirched reputation, wounded feelings, moral shock, social humiliation, and similar
injury. Though incapable of pecuniary computation, moral damages may be recovered if
they are the proximate result of the defendant's wrongful act or omission.21
Under Article 2219 of the Civil Code, moral damages are recoverable in the following and
analogous cases: (1) a criminal offense resulting in physical injuries; (2) quasi-delicts
causing physical injuries; (3) seduction, abduction, rape or other lascivious acts; (4)
adultery or concubinage; (5) illegal or arbitrary detention or arrest; (6) illegal search; (7)
libel, slander, or any other form of defamation; (8) malicious prosecution; (9) acts
mentioned in Article 309;22 and (1) acts and actions referred to in Articles 21,23 26,24 27
,25 28,26 29,27 30,28 32,29 34,30 and 35.31
x x x [C]ase law establishes the following requisites for the award of moral damages: (1)
there must be an injury clearly sustained by the claimant, whether physical, mental or
psychological; (2) there must be a culpable act or omission factually established; (3) the
wrongful act or omission of the defendant is the proximate cause of the injury sustained by
the claimant; and (4) the award for damages is predicated on any of the cases stated in
Article 2219 of the Civil Code.32
Since breach of contract is not one of the items enumerated under Article 2219, moral
damages, as a general rule, are not recoverable in actions for damages predicated on
breach of contract.33
x x x As an exception, such damages are recoverable [in an action for breach of
contract:] (1) in cases in which the mishap results in the death of a passenger, as provided
in Article 1764,34 in relation to Article 2206(3)35 of the Civil Code; and (2) in x x x cases in
which the carrier is guilty of fraud or bad faith, as provided in Article 2220 36.37
Moral damages are not recoverable
in this case.
It is obvious that this case does not come under the first of the abovementioned
exceptions since Dionisio did not die in the mishap but merely suffered an injury.
Nevertheless, petitioners contend that it falls under the second category since they aver
that Philippine Rabbit is guilty of fraud or bad faith.
It has been held, however, that "allegations of bad faith and fraud must be proved by
clear and convincing evidence."38 They are never presumed considering that they are
serious accusations that can be so conveniently and casually invoked.39 And unless
convincingly substantiated by whoever is alleging them, they amount to mere slogans or
mudslinging.40
In this case, the fraud or bad faith that must be convincingly proved by petitioners should
be one which was committed by Philippine Rabbit in breaching its contract of carriage
with Dionisio. Unfortunately for petitioners, the Court finds no persuasive proof of such fraud
or bad faith.
Fraud has been defined to include an inducement through insidious machination. Insidious
machination refers to a deceitful scheme or plot with an evil or devious purpose. Deceit
exists where the party, with intent to deceive, conceals or omits to state material facts
and, by reason of such omission or concealment, the other party was induced to give
consent that would not otherwise have been given.41
Bad faith, on the other hand, "does not simply connote bad judgment or negligence; it
imports a dishonest purpose or some moral obliquity and conscious doing of a wrong, a
breach of a known duty through some motive or interest or ill will that partakes of the
nature of fraud."42
There is no showing here that Philippine Rabbit induced Dionisio to enter into a contract of
carriage with the former through insidious machination. Neither is there any indication or
even an allegation of deceit or concealment or omission of material facts by reason of
which Dionisio boarded the bus owned by Philippine Rabbit. Likewise, it was not shown
that Philippine Rabbit's breach of its known duty, which was to transport Dionisio from
Urdaneta to La Union,43 was attended by some motive, interest, or ill will. From these, no
fraud or bad faith can be attributed to Philippine Rabbit.
Still, petitioners insist that since the defenses it pleaded in its Answer were designed to
evade liability, Philippine Rabbit is guilty of fraud or bad faith. Suffice it to state, however,
that the allegations which made up Philippine Rabbit's defenses are hardly the kind of
fraud or bad faith contemplated by law. Again, it bears to mention that the fraud or bad
faith must be one which attended the contractual breach or one which induced Dionisio
to enter into contract in the first place.
Clearly, moral damages are not recoverable in this case. The CA, therefore, did not err in
deleting the award for moral damages.
Actual damages for loss/impairment
of earning capacity are also not
recoverable. In lieu thereof, the
Court awards temperate damages.
In an attempt to recover the ₱500,000.00 awarded by the RTC as moral damages but
deleted by the CA, petitioners would instead want this Court to grant them the same
amount as just and proper compensation for the loss of Dionisio's right arm.
It can be recalled that in the Complaint, petitioners justified their claim for moral damages
as follows:
9. [The] amount of ₱500,000.00 as moral damages for the amputation of [Dionisio's] right
arm for life including his moral sufferings for such [loss] of right arm is reasonable.
Said amount is computed and derived using the formula (2/3 x [80- age of the
complainant when the injury is sustained] = life expectancy) adopted in the American
Expectancy Table of Mortality or the actuarial of Combined Experience Table of Mortality.
From such formula, [Dionisio] is expected to live for 18 years, which is equivalent [to] about
6570 days. For each day, [Dionisio] is claiming ₱80.00 as he is expected to work for 8 hours
a day with his amputated arm or to enjoy the same for at least 8 hours a day (or is claiming
₱l0.00 for each hour) for 18 years (6570 days). The amount that can be computed thereof
would be ₱525,600.00 (6570 days x ₱80.00). [Dionisio] then [rounded] it off to ₱500,000.00,
the moral damages consisted [of] his moral sufferings due to the [loss] of his right arm for
life;44
It thus appears that while petitioners denominated their claim for ₱500,000.00 as moral
damages, their computation was actually based on the supposed loss/impairment of
Dionisio's earning capacity.
Loss or impairment of ean1ing capacity finds support under Article 2205 (1) of the Civil
Code, to wit:
Art. 2205. Damages may be recovered:
(1) For loss or impairment of earning capacity in cases of temporary or permanent
personal injury;
xxxx
It is, however, settled that "damages for loss [or impairment] of earning capacity is in the
nature of actual damages x x x."45
Actual or compensatory damages are those awarded in order to compensate a party for
an injury or loss he suffered. They arise out of a sense of natural justice, aimed at repairing
the wrong done. To be recoverable, they must be duly proved with a reasonable degree
of certainty. A court cannot rely on speculation, conjecture, or guesswork as to the fact
and amount of damages, but must depend upon competent proof that they have
suffered, and on evidence of the actual amount thereof.46
Thus, as a rule, documentary evidence should be presented to substantiate the claim for
damages for loss of earning capacity. By way of exception, damages for loss [or
impairment] of earning capacity may be awarded despite the absence of documentary
evidence when (1) the deceased [or the injured] was self-employed and earning less than
the minimum wage under current labor laws, in which case, judicial notice may be taken
of the fact that in the deceased's line of work no documentary evidence is available; or
(2) the deceased was employed as a daily worker earning less than the minimum wage
under current labor laws.47
Here, it is unlikely that petitioners presented evidence to prove a claim for actual damages
based on loss/impairment of earning capacity since what they were claiming at the outset
was an award for moral damages. The Court has nonetheless gone over the records to
find out if they have sufficiently shown during trial that they are entitled to such
compensatory damages that they are now claiming. Unfortunately, no documentary
evidence supporting Dionisio's actual income is extant on the records. What it bears is the
mere testimony of Dionisio on the matter, viz.:
COURT:
Q: By the way, why did you submit the original copy of your exhibits to the GSIS?
A: I am claiming my GSIS compensation because I am a government Employee.
ATTY. SEVILLEJA:
Q: What particular government [agency do] you belong?
A: DECS.
Q: You are a teacher?
A: Yes sir.
Q: You are still continuing your profession as a teacher until now?
A: Yes sir.
Q: By the way Mr. witness, you are claiming x x x moral damages of ₱500,000.00? How did
you compute that ₱500,000.00?
A: I based that from [sic] my income which is about ₱80.00 a day or ₱l0.00 per hour.
Q: Is that x x x gross or not?
A: Net sir.
Q: What are your other sideline?
A: I know [how] to drive a tricycle.
Q: Because of [the] amputation of your right arm, you mean to say you [cannot] drive
anymore a tricycle?
A: Yes sir.
Q: By the way Mr. witness, how old are you when you met [the] accident?
A: More than 53 years old sir, less than 54.
Q: If you are claiming for x x x moral damages of P80.00 a day, how come you are asking
for ₱500,000.00?
A: If you compute that it is ₱2,400.00 monthly. If I still [live by] about 20-30 years [more], I
can still [earn] that amount.48
It must be emphasized, though, that documentary proof of Dionisio's actual income
cannot be dispensed with since based on the above testimony, Dionisio does not fall
under any of the two exceptions aforementioned. Thus, as it stands, there is no competent
proof substantiating his actual income and because of this, an award for actual damages
for loss/ impairment of earning capacity cannot be made.
Nonetheless, since it was established that Dionisio lost his right arm, temperate damages in
lieu of actual damages for loss/impairment of earning capacity may be awarded in his
favor. Under Article 2224, "[t]emperate or moderate damages, which are more than
nominal but less than compensatory damages, may be recovered when the court finds
that some pecuniary loss has been suffered but its amount cannot, from the nature of the
case, be proved with certainty."
The case of Tan v. OMC Carriers, Inc.49 enumerates several instances wherein the Court
awarded temperate damages in lieu of actual damages for loss of earning capacity, viz.:
In the past, we awarded temperate damages in lieu of actual damages for loss of earning
capacity where earning capacity is plainly established but no evidence was presented to
support the allegation of the injured party's actual income.
In Pleno v. Court of Appeals, we sustained the award of temperate damages in the
amount of ₱200,000.00 instead of actual damages for loss of earning capacity because
the plaintiffs income was not sufficiently proven.
We did the same in People v. Singh, and People v. Almedilla, granting temperate
damages in place of actual damages for the failure of the prosecution to present
sufficient evidence of the deceased's income.
Similarly, in Victory Liner, Inc. v. Gammad, we deleted the award of damages for loss of
earning capacity for lack of evidentiary basis of the actual extent of the loss. Nevertheless,
because the income-earning capacity lost was clearly established, we awarded the heirs
₱500,000.00 as temperate damages.50
Accordingly, the Court in Tan awarded to the heirs of the therein deceased victim, who
was working as a tailor at the time of his death, temperate damages in the amount of
₱300,000.00 in lieu of compensatory damages.51
In the subsequent case of Orix Metro Leasing and Finance Corporation v.
Mangalinao,52 the Court likewise awarded temperate damages as follows:
While the net income had not been sufficiently established, the Court recognizes the fact
that the Mangalinao heirs had suffered loss deserving of compensation.1âwphi1 What the
CA awarded is in actuality a form of temperate damages. Such form of damages under
Article 2224 of the Civil Code is given in the absence of competent proof on the actual
damages suffered. In the past, we awarded temperate damages in lieu of actual
damages for loss of earning capacity where earning capacity is plainly established but no
evidence was presented to support the allegation of the injured party's actual income. In
this case, Roberto Mangalinao, the breadwinner of the family, was a businessman
engaged in buying and selling palay and agricultural supplies that required high capital in
its operations and was only 37 at the time of his death. Moreover, the Pathfinder which the
Mangalinaos own, became a total wreck. Under the circumstances, we find the award of
₱500,000.00 as temperate damages as reasonable.53
And in the more recent case of People v. Salahuddin,54 the lower courts' award of
₱4,398,000.00 as compensation for loss of earning capacity of a murdered lawyer was
disallowed due to insufficiency of evidence. Again in lieu thereof, temperate damages of
₱l,000,000.00 was awarded.55
In view of the above rulings and under the circumstances of this case, the Court finds
reasonable to award Dionisio temperate damages of ₱500,000.00 in lieu of actual
damages for the loss/impairment of his earning capacity.

Actual damages by way of medical

expenses must be supported by
official receipts.

Anent petitioners' assertion that actual damages should be awarded to them for the cost
of replacement of Dionisio's amputated right arm, suffice it to state that petitioners failed
to show during trial that the said amputated right arm was actually replaced by an
artificial one. All that petitioners submitted was a quotation of ₱l60,000.00 for a unit of
elbow prosthesis56 and nothing more. It has been held that actual proof of expenses
incurred for medicines and other medical supplies necessary for treatment and
rehabilitation must be presented by the claimant, in the form of official receipts, to show
the exact cost of his medication and to prove that he indeed went through medication
and rehabilitation. In the absence of the same, such claim must be negated. 57

At any rate, the RTC already granted petitioners actual damages by way of medical
expenses based on the official hospital receipts submitted.58 There is, however, a need to
correct the amount, that is, the should be ₱57,658.25 as borne by the receipts and not
₱57,766.25 . Republic of the Philippines

Legal interest is imposed on the Supreme Court

amounts awarded.
Manila
In addition, the amounts of damages awarded are declared subject to legal interest of
6% per annum from the finality of this Decision until full satisfaction.59

WHEREFORE, the Petition for Review on Certiorari is DENIED. The assailed May 16, 2012
Decision and October 1, 2012 Resolution of the Court of Appeals in CA-G.R. CV No. 95520
are AFFIRMED with MODIFICATIONS as follows: (1) petitioners are declared entitled to
SECOND DIVISION
temperate damages of ₱500,000.00; (2) the award of actual damages is set at the
amount of ₱57,658.25; and (3) all damages awarded are subject to legal interest of 6% per
annum from the finality of this Decision until full satisfaction.
PHILIPPINE NATIONAL RAILWAYS CORPORATION, JAPHET G.R. No. 190022
SO ORDERED. ESTRANAS and BEN SAGA,

Petitioners,
Present:
 CARPIO, J., The Antecedent Facts

-versus- Chairperson,

VILLARAMA, JR.,* On May 14, 2004, at about three oclock in the morning, Reynaldo Vizcara (Reynaldo) was
driving a passenger jeepney headed towards Bicol to deliver onion crops, with his
PEREZ, companions, namely, Cresencio Vizcara (Cresencio), Crispin Natividad (Crispin), Samuel
Natividad (Samuel), Dominador Antonio (Dominador) and Joel Vizcara (Joel). While
PURIFICACION VIZCARA, SERENO, and
crossing the railroad track in Tiaong, Quezon, a Philippine National Railways (PNR) train,
MARIVIC VIZCARA, REYES, JJ. then being operated by respondent Japhet Estranas (Estranas), suddenly turned up and
rammed the passenger jeepney. The collision resulted to the instantaneous death of
CRESENCIA A. NATIVIDAD, Reynaldo, Cresencio, Crispin, and Samuel. On the other hand, Dominador and Joel,
sustained serious physical injuries.[4]
HECTOR VIZCARA, JOEL VIZCARA and DOMINADOR
ANTONIO,
Promulgated:
Respondents. At the time of the accident, there was no level crossing installed at the railroad crossing.
Additionally, the Stop, Look and Listen signage was poorly maintained. The Stop signage
February 15, 2012 was already faded while the Listen signage was partly blocked by another signboard. [5]

x------------------------------------------------------------------------------------x On September 15, 2004, the survivors of the mishap, Joel and Dominador, together with
the heirs of the deceased victims, namely, Purificacion Vizcara, Marivic Vizcara, Cresencia
Natividad and Hector Vizcara, filed an action for damages against PNR, Estranas and Ben
Saga, the alternate driver of the train, before the RTC of Palayan City. The case was raffled
DECISION to Branch 40 and was docketed as Civil Case No. 0365-P. In their complaint, the
respondents alleged that the proximate cause of the
fatalities and serious physical injuries sustained by the victims of the accident was the
REYES, J.: petitioners gross negligence in not providing adequate safety measures to prevent injury to
persons and properties. They pointed out that in the railroad track of Tiaong, Quezon
where the accident happened, there was no level crossing bar, lighting equipment or bell
installed to warn motorists of the existence of the track and of the approaching train. They
Nature of the Petition concluded their complaint with a prayer for actual, moral and compensatory damages,
as well as attorneys fees.[6]

Before this Court is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil
Procedure, seeking to annul and set aside the Decision[1] dated July 21, 2009 of the Court
of Appeals (CA) in CA-G.R. CV No. 90021, which affirmed with modification the
Decision[2] dated March 20, 2007 of the Regional Trial Court (RTC), Branch 40, Palayan City,
and Resolution[3] dated October 26, 2009, which denied the petitioners motion for
reconsideration.
For their part, the petitioners claimed that they exercised due diligence in operating the
train and monitoring its roadworthiness. They asseverate that right before the collision,
Estranas was driving the train at a moderate speed. Four hundred (400) meters away from
the railroad crossing, he started blowing his horn to warn motorists of the approaching
train. When the train was only fifty (50) meters away from the intersection, respondent
Estranas noticed that all vehicles on both sides of the track were already at a full
stop. Thus, he carefully proceeded at a speed of twenty-five (25) kilometers per hour, still 1) P50,000.00, as indemnity for the death of Cresencio Vizcara;
blowing the trains horn. However, when the train was already ten (10) meters away from
the intersection, the passenger jeepney being driven by Reynaldo suddenly crossed the 2) P200,000.00 as moral damages;
tracks. Estranas immediately stepped on the brakes to avoid hitting the jeepney but due to
3) P100,000.00 as exemplary damages; and
the sheer weight of the train, it did not instantly come to a complete stop until the jeepney
was dragged 20 to 30 meters away from the point of collision.[7] 4) P20,000.00 for Attorneys fees.

The Ruling of the Trial Court c) HECTOR VIZCARA:

1) P50,000.00 as indemnity for the death of Samuel Vizcara;

After trial on the merits, the RTC rendered its Decision [8] dated March 20, 2007, ruling in 2) P200,000.00 as moral damages;
favor of the respondents, the dispositive portion of which reads:
3) P100,000.00 as exemplary damages; and

4) P20,000.00 for Attorneys fees.

WHEREFORE, premises considered, judgment is hereby rendered ordering defendants
Philippine National Railways Corporation (PNR), Japhet Estranas and Ben Saga to, jointly
and severally pay the following amounts to:
d) CRESENCIA NATIVIDAD:

1. a) PURIFICACION VIZCARA:
1) P50,000.00 as indemnity for the death of Crispin Natividad;
1) P50,000.00, as indemnity for the death of Reynaldo Vizcara;
2) P200,000.00 as moral damages;
2) P35,000.00, for funeral expenses;
3) P100,000.00 as exemplary damages; and
3) P5,000.00 for re-embalming expenses;
4) P20,000.00 for Attorneys fees.
4) P40,000.00 for wake/interment expenses;

5) P300,000.00 as reimbursement for the value of the jeepney with license plate no.
DTW-387; e) JOEL VIZCARA

6) P200,000.00 as moral damages;

7) P100,000.00 as exemplary damages; and 1) P9,870.00 as reimbursement for his actual expenses;

8) P20,000.00 for Attorneys fees. 2) P50,000.00 as moral damages;

3) P25,000.00 as exemplary damages; and

b) MARIVIC VIZCARA: 4) P10,000.00 for Attorneys fees.

f) DOMINADOR ANTONIO

(2) The award of moral damages to PURIFICACION VIZCARA, MARIVIC VIZCARA, HECTOR
VIZCARA and CRESENCIA NATIVIDAD is hereby reduced from P200,000.00
1) P63,427.00 as reimbursement for his actual expenses; to P100,000.00 each while moral damages awarded to JOEL VIZCARA and DOMINADOR
ANTONIO are likewise reduced from P50,000.00 to P25,000.00;
2) P50,000.00 as moral damages;

3) P25,000.00 as exemplary damages; and

(3) The award of exemplary damages to PURIFICACION VIZCARA, MARIVIC VIZCARA,
4) P10,000.00 for Attorneys fees.
HECTOR VIZCARA and CRESENCIA NATIVIDAD is hereby reduced from P100,000.00
to P50,000.00 each while exemplary damages awarded to JOEL VIZCARA and
DOMINADOR ANTONIO are likewise reduced from P25,000.00 to P12,500.00; and
and

(4) The award for attorneys fees in favor of the Appellees as well as the award of
2. Costs of suit. P300,000.00 to Appellee PURIFICACION as reimbursement for the value of the jeepney
is DELETED.

SO ORDERED.[9]
SO ORDERED.[10]

The Ruling of the CA

Unyielding, the petitioners appealed the RTC decision to the CA. Subsequently, on July 21,
2009, the CA rendered the assailed decision, affirming the RTC decision with modification
with respect to the amount of damages awarded to the respondents. The CA disposed,
thus:
In the assailed decision, the CA affirmed the RTCs finding of negligence on the part of the
petitioners. It concurred with the trial court's conclusion that petitioner PNR's failure to install
sufficient safety devices in the area, such as flagbars or safety railroad bars and signage,
was the proximate cause of the accident. Nonetheless, in order to conform with
established jurisprudence, it modified the monetary awards to the victims and the heirs of
those who perished due to the collision.

WHEREFORE, instant appeal is PARTIALLY GRANTED. The assailed Decision is AFFIRMED WITH The petitioners filed a Motion for Reconsideration[11] of the decision of the CA. However, in
MODIFICATION, as follows: a Resolution[12] dated October 26, 2009, the CA denied the same.

(1) The award of P5,000.00 for re-embalming expenses and P40,000.00 for wake/interment Aggrieved, the petitioners filed the present petition for review on certiorari, raising the
expenses to PURIFICACION VIZCARA is deleted. In lieu thereof, P25,000.00 as temperate following grounds:
damages is awarded;
I petitioners for their failure to ensure that adequate warning devices are installed along the
THE CA ERRED IN FINDING THAT THE PROXIMATE CAUSE OF THE ACCIDENT WAS THE
NEGLIGENCE OF THE PETITIONERS;
II
THE CA ERRED IN HOLDING THAT THE DOCTRINE OF LAST CLEAR CHANCE FINDS NO
APPLICATION IN THE INSTANT CASE;
III
THE CA ERRED IN FINDING NEGLIGENCE ON THE PART OF THE PETITIONERS OR ERRED IN NOT
FINDING AT THE LEAST, CONTRIBUTORY NEGLIGENCE ON THE PART OF THE RESPONDENTS.[13]
The petitioners maintain that the proximate cause of the collision was the negligence and
recklessness of the driver of the jeepney. They argue that as a professional driver, Reynaldo
is presumed to be familiar with traffic rules and regulations, including the right of way
accorded to trains at railroad crossing and the precautionary measures to observe in
traversing the same. However, in utter disregard of the right of way enjoyed by PNR trains,
he failed to bring his jeepney to a full stop before crossing the railroad track and
thoughtlessly followed the ten-wheeler truck ahead of them. His failure to maintain a safe
distance between the jeepney he was driving and the truck ahead of the same
prevented him from seeing the PNR signage displayed along the crossing.[14]
In their Comment,[15] the respondents reiterate the findings of the RTC and the CA that the
petitioners' negligence in maintaining adequate and necessary public safety devices in
the area of the accident was the proximate cause of the mishap. They asseverate that if
there was only a level crossing bar, warning light or sound, or flagman in the intersection,
the accident would not have happened. Thus, there is no other party to blame but the
railroad crossing.[16]
This Courts Ruling
The petition lacks merit.
The petitioners negligence was the proximate cause of the accident.
Article 2176 of the New Civil Code prescribes a civil liability for damages caused by a
person's act or omission constituting fault or negligence. It states:
Article 2176. Whoever by act or omission causes damage to another, there being fault or
negligence, is obliged to pay for the damage done. Such fault or negligence, if there was
no pre-existing contractual relation between the parties, is called quasi-delict and is
governed by the provisions of this chapter.
In Layugan v. Intermediate Appellate Court,[17] negligence was defined as the omission to
do something which a reasonable man, guided by considerations which ordinarily
regulate the conduct of human affairs, would do, or the doing of something which a
prudent and reasonable man would not do. It is the failure to observe for the protection of
the interests of another person, that degree of care, precaution, and vigilance which the
circumstances justly demand, whereby such other person suffers injury.[18] To determine the
existence of negligence, the time-honored test was: Did the defendant in doing the
alleged negligent act use that reasonable care and caution which an ordinarily prudent
person would have used in the same situation? If not, then he is guilty of negligence. The
law here in effect adopts the standard supposed to be supplied by the imaginary conduct
of the discreet paterfamilias of the Roman law. The existence of negligence in a given
case is not determined by reference to the personal judgment of the actor in the situation
before him. The law considers what would be reckless, blameworthy, or negligent in the
man of ordinary intelligence and prudence and determines liability by that. [19]
In the instant petition, this Court is called upon to determine whose negligence
occasioned the ill-fated incident. The records however reveal that this issue had been
rigorously discussed by both the RTC and the CA. To emphasize, the RTC ruled that it was
the petitioners failure to install adequate safety devices at the railroad crossing which
proximately caused the collision. This finding was affirmed by the CA in its July 21, 2009
Decision. It is a well-established rule that factual findings by the CA are conclusive on the
parties and are not reviewable by this Court. They are entitled to great weight and
respect, even finality, especially when, as in this case, the CA affirmed the factual findings
arrived at by the trial court.[20]
Furthermore, in petitions for review on certiorari, only questions of law may be put into
issue. Questions of fact cannot be entertained.[21] To distinguish one from the other,
a question of law exists when the doubt or difference centers on what the law is on a
certain state of facts. A question of fact, on the other hand, exists if the doubt centers on
the truth or falsity of the alleged facts.[22] Certainly, the finding of negligence by the RTC,
which was affirmed by the CA, is a question of fact which this Court cannot pass upon as
this would entail going into the factual matters on which the negligence was
based.[23] Moreover, it was not shown that the present case falls under any of the
recognized exceptions[24] to the oft repeated principle according great weight and
respect to the factual findings of the trial court and the CA.
At any rate, the records bear out that the factual circumstances of the case were
meticulously scrutinized by both the RTC and the CA before arriving at the same finding of
negligence on the part of the petitioners, and we found no compelling reason to disturb
the same. Both courts ruled that the petitioners fell short of the diligence expected of it,
taking into consideration the nature of its business, to forestall any untoward incident. In
particular, the petitioners failed to install safety railroad bars to prevent motorists from
crossing the tracks in order to give way to an approaching train. Aside from the absence
of a crossing bar, the Stop, Look and Listen signage installed in the area was poorly
maintained, hence, inadequate to alert the public of the impending danger. A reliable
signaling device in good condition, not just a dilapidated Stop, Look and Listen signage, is
needed to give notice to the public. It is the responsibility of the railroad company to use
reasonable care to keep the signal devices in working order. Failure to do so would be an
indication of negligence.[25] Having established the fact of negligence on the part of the
petitioners, they were rightfully held liable for damages.
There was no contributory negligence on the part of the respondents.
As to whether there was contributory negligence on the part of the respondents, this court
rule in the negative. Contributory negligence is conduct on the part of the injured party,
contributing as a legal cause to the harm he has suffered, which falls below the standard
which he is required to conform for his own protection. It is an act or omission amounting to
want of ordinary care on the part of the person injured which, concurring with the
defendants negligence, is the proximate cause of the injury.[26] Here, we cannot see how
the respondents could have contributed to their injury when they were not even aware of
the forthcoming danger. It was established during the trial that the jeepney carrying the
respondents was following a ten-wheeler truck which was only about three to five meters
ahead. When the truck proceeded to traverse the railroad track, Reynaldo, the driver of
the jeepney, simply followed through. He did so under the impression that it was safe to
proceed. It bears noting that the prevailing circumstances immediately before the collision
did not manifest even the slightest indication of an imminent harm. To begin with, the truck
they were trailing was able to safely cross the track. Likewise, there was no crossing bar to
prevent them from proceeding or, at least, a stoplight or signage to forewarn them of the
approaching peril. Thus, relying on his faculties of sight and hearing, Reynaldo had no
reason to anticipate the impending danger.[27] He proceeded to cross the track and, all of
a sudden, his jeepney was rammed by the train being operated by the petitioners. Even
then, the circumstances before the collision negate the imputation of contributory
negligence on the part of the respondents. What clearly appears is that the accident
would not have happened had the petitioners installed reliable and adequate safety
devices along the crossing to ensure the safety of all those who may utilize the same.
At this age of modern transportation, it behooves the PNR to exert serious efforts to catch
up with the trend, including the contemporary standards in railroad safety. As an institution
established to alleviate public transportation, it is the duty of the PNR to promote the safety
and security of the general riding public and provide for their convenience, which to a
considerable degree may be accomplished by the installation of precautionary warning
devices. Every railroad crossing must be installed with barriers on each side of the track to
block the full width of the road until after the train runs past the crossing. To even draw
closer attention, the railroad crossing may be equipped with a device which rings a bell or
turns on a signal light to signify the danger or risk of crossing. It is similarly beneficial to
mount advance warning signs at the railroad crossing, such as a reflectorized crossbuck
sign to inform motorists of the existence of the track, and a stop, look and listen signage to
prompt the public to take caution. These warning signs must be erected in a place where
they will have ample lighting and unobstructed visibility both day and night. If only these
safety devices were installed at the Tiaong railroad crossing and the accident nevertheless
occurred, we could have reached a different disposition in the extent of the petitioners
liability.
The exacting nature of the responsibility of railroad companies to secure public safety by
the installation of warning devices was emphasized in Philippine National Railways v. Court
of Appeals,[28] thus:
[I]t may broadly be stated that railroad companies owe to the public a duty of exercising
a reasonable degree of care to avoid injury to persons and property at railroad crossings,
which duties pertain both to the operation of trains and to the maintenance of the
crossings. Moreover, every corporation constructing or operating a railway shall make and
construct at all points where such railway crosses any public road, good, sufficient, and
safe crossings, and erect at such points, at sufficient elevation from such road as to admit
a free passage of vehicles of every kind, a sign with large and distinct letters placed
thereon, to give notice of the proximity of the railway, and warn persons of the necessity of
looking out for trains. The failure of the PNR to put a cross bar, or signal light, flagman or
switchman, or semaphore is evidence of negligence and disregard of the safety of the
public, even if there is no law or ordinance requiring it, because public safety demands
that said device or equipment be installed.[29]
The responsibility of the PNR to secure public safety does not end with the installation of
safety equipment and signages but, with equal measure of accountability, with the
upkeep and repair of the same. Thus, in Cusi v. Philippine National Railways,[30] we held:
Jurisprudence recognizes that if warning devices are installed in railroad crossings, the
travelling public has the right to rely on such warning devices to put them on their guard
and take the necessary precautions before crossing the tracks. A need, therefore, exists for
the railroad company to use reasonable care to keep such devices in good condition and
in working order, or to give notice that they are not operating, since if such a signal is
misunderstood it is a menace. Thus, it has been held that if a railroad company maintains
a signalling device at a crossing to give warning of the approach of a train, the failure of
the device to operate is generally held to be evidence of negligence, which maybe
considered with all the circumstances of the case in determining whether the railroad
company was negligent as a matter of fact. [31]
The maintenance of safety equipment and warning signals at railroad crossings is equally
important as their installation since poorly maintained safety warning devices court as
much danger as when none was installed at all. The presence of safety warning signals at
railroad crossing carries with it the presumption that they are in good working condition
and that the public may depend on them for assistance. If they happen to be neglected
and inoperative, the public may be misled into relying on the impression of safety they
normally convey and eventually bring injury to themselves in doing so.
The doctrine of last clear chance is not applicable.
Finally, the CA correctly ruled that the doctrine of last clear chance is not applicable in the
instant case. The doctrine of last clear chance provides that where both parties are
negligent but the negligent act of one is appreciably later in point of time than that of the
other, or where it is impossible to determine whose fault or negligence brought about the
occurrence of the incident, the one who had the last clear opportunity to avoid the
impending harm but failed to do so, is chargeable with the consequences arising
therefrom. Stated differently, the rule is that the antecedent negligence of a person does
not preclude recovery of damages caused by the supervening negligence of the latter,
who had the last fair chance to prevent the impending harm by the exercise of due
diligence.[32] To reiterate, the proximate cause of the collision was the petitioners
negligence in ensuring that motorists and pedestrians alike may safely cross the railroad
track. The unsuspecting driver and passengers of the jeepney did not have any
participation in the occurrence of the unfortunate incident which befell them. Likewise,
they did not exhibit any overt act manifesting disregard for their own safety. Thus, absent
preceding negligence on the part of the respondents, the doctrine of last clear chance
cannot be applied.
WHEREFORE, premises considered, the petition is DENIED. The Decision of the Court of
Appeals dated July 21, 2009 in CA-G.R. CV No. 90021 is hereby AFFIRMED.

SO ORDERED.

FIRST DIVISION

G.R. No. 169891 November 2, 2006

PHILIPPINE NATIONAL RAILWAYS, Petitioner,

vs.
ETHEL BRUNTY and JUAN MANUEL M. GARCIA, Respondents.

DECISION

CALLEJO, SR., J.:

This is a Petition for Review on Certiorari of the Decision1 of the Court of Appeals (CA) in
CA-G.R. CV No. 47567 and its Resolution2 denying the motion for reconsideration thereof.
The assailed decision affirmed with partial modification the ruling3 of the Regional Trial
Court (RTC) of Manila, Branch 20, directing petitioner Philippine National Railways (PNR) to
indemnify respondents Ethel Brunty and Juan Manuel M. Garcia for the death of Rhonda
Brunty, and to pay actual and moral damages, attorney’s fees and cost of suit.

Rhonda Brunty, daughter of respondent Ethel Brunty and an American citizen, came to the
Philippines for a visit sometime in January 1980. Prior to her departure, she, together with
her Filipino host Juan Manuel M. Garcia, traveled to Baguio City on board a Mercedes
Benz sedan with plate number FU 799, driven by Rodolfo L. Mercelita. It was about 12:00
midnight, January 25, 1980. By then, PNR Train No. T-71, driven by Alfonso Reyes, was on its
way to Tutuban, Metro Manila4 as it had left the La Union station at 11:00 p.m., January 24,
1980.
By 2:00 a.m., Rhonda Brunty, Garcia and Mercelita were already approaching the railroad
crossing at Barangay Rizal, Moncada, Tarlac. Mercelita, driving at approximately 70 km/hr,
drove past a vehicle, unaware of the railroad track up ahead and that they were about
to collide with PNR Train No. T-71. Mercelita was instantly killed when the Mercedes Benz
smashed into the train; the two other passengers suffered serious physical injuries.5 A
certain James Harrow6 brought Rhonda Brunty to the Central Luzon Doctor’s Hospital in
Tarlac, where she was pronounced dead after ten minutes from arrival. Garcia, who had
suffered severe head injuries, was brought via ambulance to the same hospital. He was
transferred to the Manila Doctor’s Hospital, and later to the Makati Medical Center for
further treatment.7
On July 28, 1981, Ethel Brunty sent a demand letter 8 to the PNR demanding payment of
actual, compensatory, and moral damages, as a result of her daughter’s death. When
PNR did not respond, Ethel Brunty and Garcia, filed a complaint9 for damages against the
PNR before the RTC of Manila. The case was raffled to Branch 20 and was docketed as
Civil Case No. 83-18645. They alleged that the death of Mercelita and Rhonda Brunty, as
well as the physical injuries suffered by Garcia, were the direct and proximate result of the
gross and reckless negligence of PNR in not providing the necessary equipment at the
railroad crossing in Barangay Rizal, Municipality of Moncada, Tarlac. They pointed out that
there was no flagbar or red light signal to warn motorists who were about to cross the
railroad track, and that the flagman or switchman was only equipped with a hand
flashlight.10 Plaintiffs likewise averred that PNR failed to supervise its employees in the
performance of their respective tasks and duties, more particularly the pilot and operator
of the train.11 They prayed for the payment of the following damages:
1.) ₱200,000.00 as actual and compensatory damages to plaintiff Ethel Brunty;
2.) ₱2,800,000.00 for compensatory damages to plaintiff Ethel Brunty representing lost or
unearned income of Rhonda Brunty;
3.) Such amounts of moral and exemplary damages as may be warranted by the
evidence adduced, to plaintiff Ethel Brunty;
4.) At least ₱64,057.61 as actual damages representing medical expenses to plaintiff Juan
Manuel M. Garcia and at least ₱1,000,000.00 as unearned or lost income of said plaintiff;
5.) At least ₱72,760.00 as actual damages representing cost of the Mercedes Benz car to
plaintiff Juan Manuel M. Garcia;
6.) Such amounts of moral and exemplary damages as may be warranted by the
evidence adduced, to plaintiff Juan Manuel M. Garcia; and
7.) Attorney’s fees equivalent to at least 15% of the total award to plaintiffs herein.12
In its Answer,13 PNR claimed that it exercised the diligence of a good father of a family not
only in the selection but also in the supervision of its employees.14 By way of special and
affirmative defense, it stressed that it had the right of way on the railroad crossing in
question, and that it has no legal duty to put up a bar or red light signal in any such
crossing. It insisted that there were adequate, visible, and clear warning signs strategically
posted on the sides of the road before the railroad crossing. It countered that the
immediate and proximate cause of the accident was Mercelita’s negligence, and that he
had the last clear chance to avoid the accident. The driver disregarded the warning signs,
the whistle blasts of the oncoming train and the flashlight signals to stop given by the
guard.15 As counterclaim, it prayed that it be awarded actual and compensatory
damages, and litigation expenses.16
Plaintiffs filed an Amended Complaint17 dated July 28, 1986 to include, as party plaintiff,
Chemical Industries of the Philippines, Inc. (Chemphil), Garcia’s employer, who claimed to
have paid for the latter’s medical and hospitalization expenses, the services rendered by
the funeral parlor of the deceased, and the expenses in transferring the remains of Rhonda
Brunty to the United States.18
After trial on the merits, the RTC rendered its Decision 19 on May 21, 1990 in favor of plaintiffs.
The fallo reads:
WHEREFORE, judgment is hereby rendered in favor of the plaintiffs Ethel Brunty and Juan
Manuel M. Garcia and against the defendant Philippine National Railways directing the
latter to pay the former the sum of:
1. Thirty Thousand Pesos (₱30,000.00) Philippine Currency, for the death of Rhonda Brunty
formerly a resident of 1595 Ashland Avenue, Des Plaines, Illinois, U.S.A.;
2. One Million Pesos (₱1,000,000.00) Philippine Currency for moral and actual damages
due the heirs of Rhonda Brunty;
3. Seventy-Two Thousand Seven Hundred Sixty Pesos (₱72,760.00) Philippine Currency for
damages sustained by the Mercedes Benz;
4. Fifty Thousand Pesos (₱50,000.00) Philippine Currency as and for attorney's fees, and;
5. Costs of suit.
SO ORDERED.20
Aggrieved, the PNR appealed the case to the CA, raising the following errors:
I.
THE TRIAL COURT ERRED IN ADJUDGING DEFENDANT-APPELLANT PNR LIABLE FOR THE DEATH
OF RHONDA BRUNTY AND THE CONSEQUENT AWARD OF DAMAGES DUE THE HEIRS OF
RHONDA BRUNTY.
II.
THE TRIAL COURT ERRED IN ADJUDGING DEFENDANT-APPELLANT PNR LIABLE FOR THE
DAMAGES SUFFERED BY PLAINTIFF-APPELLEE’S MERCEDES BENZ IN THE AMOUNT OF SEVENTY-
TWO THOUSAND SEVEN HUNDRED AND SIXTY PESOS (₱72,760.00).
III.
THE LOWER COURT ERRED IN AWARDING ATTORNEY’S FEES TO THE PLAINTIFFS-APPELLEES.21
In its Brief, PNR insisted that the sole and proximate cause of the accident was the
negligence and recklessness of Garcia and Mercelita.22 It insisted that it had provided
adequate warning signals at the railroad crossing23 and had exercised due care in the
selection and supervision of its employees.24 The RTC erred in awarding damages to
Rhonda Brunty as she cannot be allowed to receive what she is not in a position to give,
having been a non-resident alien who did not own a property in the Philippines.25 It likewise
questioned the award of damages on the Mercedes Benz as well as the grant of
attorney’s fees.26 At the very least, Mercelita was guilty of contributory negligence.27
For their part, appellees countered that appellant was grossly and recklessly negligent in
not properly providing the necessary equipment at the railroad crossing in Rizal, Moncada,
Tarlac;28 appellant was negligent in not exercising due diligence of a good father of a
family in the supervision of its employees, particularly the train operator Alfonso Reyes;29 the
car was driven in a careful and diligent manner, and at a moderate speed, with due
regard to all traffic rules and regulations at that particular time;30 the doctrine of "last clear
chance" is not applicable;31 Ethel Brunty is a non-resident alien who can rightfully file the
instant case;32 and they are entitled to recover damages from appellant.33
The CA rendered the assailed Decision34 on August 15, 2005. The dispositive portion reads:
WHEREFORE, premises considered, the assailed decision is hereby AFFIRMED with PARTIAL
MODIFICATIONS, increasing the death indemnity award from ₱30,000.00 to ₱50,000.00, and
deleting the award for damages sustained by the Mercedes Benz.
SO ORDERED.35
The appellate court affirmed the findings of the RTC as to the negligence of the PNR.
Considering the circumstances prevailing at the time of the fatal accident, it ruled that the
alleged safety measures installed by the PNR at the railroad crossing were not merely
inadequate – they did not satisfy the well-settled safety standards in
transportation.36 However, the CA did not agree with the RTC’s findings on the contributory
negligence of Mercelita, the driver of the Mercedes Benz. It held that Mercelita could not
have foreseen the harm that would befall him and the two other passengers under the
prevailing circumstances, thus, could not be considered guilty of contributory
negligence.37
The PNR, now petitioner, comes before this Court in this Petition for Review on Certiorari on
the following grounds:
I.
THE COURT OF APPEALS ERRED IN MANIFESTLY OVERLOOKING CERTAIN RELEVANT FACTS
NOT DISPUTED BY THE PARTIES AND WHICH, IF PROPERLY CONSIDERED, WOULD JUSTIFY A
DIFFERENT CONCLUSION SUCH AS:
THE RESPONDENTS’ DRIVER OVERTOOK ANOTHER VEHICLE BY ACCELERATING AT 70
KILOMETERS PER HOUR WITHIN JUST 50 YARDS AWAY FROM THE RAILROAD TRACKS.
II.
THE FINDINGS OF FACT OF THE COURT OF APPEALS ARE CONTRARY TO THOSE OF THE TRIAL
COURT REGARDING CONTRIBUTORY NEGLIGENCE OF THE RESPONDENTS’ DRIVER.
III.
THE COURT OF APPEALS ERRED IN NOT APPLYING THE DOCTRINE OF LAST CLEAR CHANCE IN
THE INSTANT CASE.38
Petitioner insists that the proximate cause of the mishap was Mercelita’s disregard of traffic
rules and regulations. Had the court considered the fact that Mercelita had overtaken
another vehicle a few yards before the railroad track, it would have reached a different
conclusion.39 Moreover, petitioner asserts, considering that the decisions of the RTC and
the CA vary as to whether or not Mercelita was guilty of contributory negligence, the
findings of the RTC should prevail. Thus, Mercelita’s contributory negligence should not
have been ignored.40 Lastly, petitioner avers that since there is freedom of control and
greater maneuverability on the part of motor vehicles, it is obvious that in railroad
crossings, they have the last clear chance to prevent or avoid an unwanted accident
from taking place.41
In their Comment42 on the petition, respondents reiterate the findings of the RTC and the
CA that the breach by petitioner of its legal duty to provide adequate and necessary
public safety device and equipment within the area or scene of the accident was the
proximate cause of the mishap.43 While it is true that as a general rule, the trial court is in
the best position to evaluate and observe the conduct and demeanor of the witnesses
presented during the trial, the CA, in the exercise of its appellate jurisdiction, has the
vested right to modify, reject, or set aside the trial court’s evaluation and findings.44 As to
the application of the doctrine of last clear chance, respondents claim that said issue is
being raised for the first time in this petition.45 Lastly, respondents cite foreign jurisprudence
stating that if the violation is one which gives rise to liability per se for any resulting injury,
the defenses ordinarily available in actions for diligence are barred and the contributory
negligence of the person injured is no defense.46
The Court is thus tasked to answer the following factual questions: (1) As between
petitioner and Mercelita, whose negligence resulted in the unfortunate collision? (2) Is
Mercelita (the driver of the Mercedes Benz) guilty of contributory negligence? Finally, the
application in this case of the doctrine of last clear chance is likewise in question.
Negligence is the omission to do something which a reasonable man, guided by those
considerations which ordinarily regulate the conduct of human affairs, would do, or the
doing of something which a prudent and reasonable man would not do.47 In Corliss v.
Manila Railroad Company,48 this Court held that negligence is want of the care required
by the circumstances. It is a relative or comparative, not an absolute, term and its
application depends upon the situation of the parties and the degree of care and
vigilance which the circumstances reasonably require.49 In determining whether or not
there is negligence on the part of the parties in a given situation, jurisprudence 50 has laid
down the following test: Did defendant, in doing the alleged negligent act, use that
reasonable care and caution which an ordinarily prudent person would have used in the
same situation? If not, the person is guilty of negligence. The law, in effect, adopts the
standard supposed to be supplied by the imaginary conduct of the discreet pater familias
of the Roman law.
The issue of who, between the parties, was negligent was thoroughly discussed by both the
RTC and the CA. In petitions for review under Rule 45 of the Revised Rules of Court, only
questions of law may be put into issue, and questions of fact as a general rule, cannot be
entertained. The finding of negligence by the RTC, as affirmed by the CA, is a question of
fact which this Court cannot pass upon as it would entail going into factual matters on
which the finding of negligence was based.51 The established rule is that factual findings of
the CA affirming those of the trial court are conclusive and binding on this Court.52
The records of the instant case show that both the RTC and the CA carefully examined the
factual circumstances surrounding the case, and we find no cogent reason to disturb the
same. It is, however, worthy to emphasize that petitioner was found negligent because of
its failure to provide the necessary safety device to ensure the safety of motorists in
crossing the railroad track. As such, it is liable for damages for violating the provisions of
Article 2176 of the New Civil Code, viz:
Article 2176. Whoever, by act or omission, causes damage to another, there being fault or
negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no
pre-existing contractual relation between the parties, is called a quasi-delict and is
governed by the provisions of this Chapter.
In a long line of cases, the Court held that in order to sustain a claim based on quasi-delict,
the following requisites must concur: (1) damage to plaintiff; (2) negligence, by act or
omission, of which defendant, or some person for whose acts he must respond was guilty;
and (3) connection of cause and effect between such negligence and
damage.53 Applying the foregoing requisites, the CA correctly made the following
conclusions:
It was clearly established that plaintiffs-appellees (respondents herein) sustained damage
or injury as a result of the collision. That there was negligence on the part of PNR is, likewise,
beyond cavil. Considering the circumstances prevailing at the time of the fatal accident,
the alleged safety measures installed by the PNR at the railroad crossing is not only
inadequate but does not satisfy well-settled safety standards in transportation. x x x
xxxx
x x x An examination of the photographs of the railroad crossing at Moncada, Tarlac
presented as evidence by PNR itself would yield the following: (1.) absence of flagbars or
safety railroad bars; (2.) inadequacy of the installed warning signals; and (3.) lack of
proper lighting within the area. Thus, even if there was a flagman stationed at the site as
claimed by PNR (petitioner), it would still be impossible to know or see that there is a
railroad crossing/tracks ahead, or that there is an approaching train from the Moncada
side of the road since one’s view would be blocked by a cockpit arena. x x x54
Moreover, the CA held that a vehicle coming from the Moncada side would have
difficulty in knowing that there is an approaching train because of the slight curve, more
so, at an unholy hour as 2:00 a.m. Thus, it is imperative on the part of the PNR to provide
adequate safety equipment in the area.55
It may broadly be stated that railroad companies owe to the public a duty of exercising a
reasonable degree of care to avoid injury to persons and property at railroad crossings,
which duties pertain both in the operation of trains and in the maintenance of the
crossings.56 Moreover, every corporation constructing or operating a railway shall make
and construct at all points where such railway crosses any public road, good, sufficient,
and safe crossings and erect at such points, at a sufficient elevation from such road as to
admit a free passage of vehicles of every kind, a sign with large and distinct letters placed
thereon, to give notice of the proximity of the railway, and warn persons of the necessity of
looking out for trains.57
This Court has previously determined the liability of the PNR for damages for its failure to
put a cross bar, or signal light, flagman or switchman, or semaphores. Such failure is
evidence of negligence and disregard of the safety of the public, even if there is no law or
ordinance requiring it because public safety demands that said device or equipment be
installed.58
In view of the foregoing, we affirm the factual findings of the CA as well as its conclusion
on petitioner’s negligence.
As to whether or not Mercelita was guilty of contributory negligence, we agree with
petitioner. Contributory negligence is conduct on the part of the injured party, contributing
as a legal cause to the harm he has suffered, which falls below the standard to which he is
required to conform for his own protection.59 To hold a person as having contributed to his
injuries, it must be shown that he performed an act that brought about his injuries in
disregard of warning or signs of an impending danger to health and body.60 To prove
contributory negligence, it is still necessary to establish a causal link, although not
proximate, between the negligence of the party and the succeeding injury. In a legal
sense, negligence is contributory only when it contributes proximately to the injury, and not
simply a condition for its occurrence.61
The court below found that there was a slight curve before approaching the tracks; the
place was not properly illuminated; one’s view was blocked by a cockpit arena; and
Mercelita was not familiar with the road. Yet, it was also established that Mercelita was
then driving the Mercedes Benz at a speed of 70 km/hr and, in fact, had overtaken a
vehicle a few yards before reaching the railroad track. Mercelita should not have driven
the car the way he did. However, while his acts contributed to the collision, they
nevertheless do not negate petitioner’s liability. Pursuant to Article 2179 62 of the New Civil
Code, the only effect such contributory negligence could have is to mitigate liability,
which, however, is not applicable in this case, as will be discussed later.1âwphi1
As to whether or not the doctrine of last clear chance is applicable, we rule in the
negative. The doctrine of last clear chance states that where both parties are negligent
but the negligent act of one is appreciably later than that of the other, or where it is
impossible to determine whose fault or negligence caused the loss, the one who had the
last clear opportunity to avoid the loss but failed to do so, is chargeable with the loss.
Stated differently, the antecedent negligence of plaintiff does not preclude him from
recovering damages caused by the supervening negligence of defendant, who had the
last fair chance to prevent the impending harm by the exercise of due diligence. 63 The
proximate cause of the injury having been established to be the negligence of petitioner,
we hold that the above doctrine finds no application in the instant case.
We note that the damages awarded by the appellate court consist of (1) ₱50,000.00 as
indemnity for the death of Rhonda Brunty; (2) ₱1,000,000.00 as actual and moral damages
due the heirs of Rhonda Brunty; and (3) ₱50,000.00 as and by way of attorney’s fees. No
damages, however, were awarded for the injuries suffered by Garcia, yet, the latter never
interposed an appeal before the CA nor even before this Court. The record is, likewise,
bereft of any allegation and proof as to the relationship between Mercelita (the driver)
and Rhonda Brunty. Hence, the earlier finding of contributory negligence on the part of
Mercelita, which generally has the effect of mitigation of liability, does not apply.
As to the amount of damages awarded, a modification of the same is in order, specifically
on the award of actual and moral damages in the aggregate amount of ₱1,000,000.00.
Actual or compensatory damages are those awarded in order to compensate a party for
an injury or loss he suffered. They arise out of a sense of natural justice, aimed at repairing
the wrong done. To be recoverable, they must be duly proved with a reasonable degree
of certainty. A court cannot rely on speculation, conjecture, or guesswork as to the fact
and amount of damages, but must depend upon competent proof that they have
suffered, and on evidence of the actual amount thereof.64 Respondents, however, failed
to present evidence for such damages; hence, the award of actual damages cannot be
sustained. However, as the heirs of Rhonda Brunty undeniably incurred expenses for the
wake and burial of the latter, we deem it proper to award temperate damages in the
amount of ₱25,000.00 pursuant to prevailing jurisprudence.65 This is in lieu of actual
damages as it would be unfair for the victim’s heirs to get nothing, despite the death of
their kin, for the reason alone that they cannot produce receipts.66
The relatives of the victim who incurred physical injuries in a quasi-delict are not proscribed
from recovering moral damages in meritorious cases.67 We, therefore, sustain the award of
moral damages in favor of the heirs of Rhonda Brunty.
Moral damages are not punitive in nature, but are designed to compensate and alleviate
in some way the physical suffering, mental anguish, fright, serious anxiety, besmirched
reputation, wounded feelings, moral shock, social humiliation, and similar injury unjustly
caused a person. Although incapable of pecuniary computation, moral damages must
nevertheless be somehow proportional to and in approximation of the suffering
inflicted.68 In the instant case, the moral suffering of the heirs of Rhonda Brunty was
sufficiently established by Ethel Brunty in her deposition,69 viz:
Q: What have you felt as a result of the death of Rhonda?
A: I felt earnest anguish and mixed feelings of anger and extreme sorrow because she
died so far away and alone, and because her death could so easily be prevented if there
had been adequate and appropriate warning signals at the railroad crossing and it is just
an unbearable and irreparable loss. In so many ways, she was my life. It seemed to me
that losing her was just like losing my own life, or worst, and even now, there is no end to
our bereavement. I am still on constant medication to be able to sleep and to be able to
perform my duties effectively in my job but it does not take away the pain of loss.70

In People v. Teehankee, Jr.,71 and in Metro Manila Transit Corporation v. Court of

Appeals,72 we awarded moral damages in the amount of ₱1,000,000.00 to the heirs of the
deceased. In Victory Liner, Inc. v. Heirs of Malecdan,73the award of ₱100,000.00 as moral
damages was held in keeping with the purpose of the law, while in Macalinao v.
Ong,74 the amount of ₱50,000.00 was held sufficient.1âwphi1

Considering the circumstances attendant in this case, we find that an award of

₱500,000.00 as moral damages to the heirs of Rhonda Brunty is proper. In view of recent
jurisprudence, indemnity of ₱50,000.00 for the death of Rhonda Brunty and attorney’s fees
amounting to ₱50,000.00 is likewise proper.

WHEREFORE, premises considered, the Decision of the Court of Appeals dated August 15,
2005 is AFFIRMED WITH MODIFICATIONS. The award of actual damages is deleted, and in
lieu thereof, temperate damages of ₱25,000.00 is awarded to the heirs of Rhonda Brunty.
The award of moral damages is reduced to ₱500,000.00.

SO ORDERED.

[G.R. No. 138060. September 1, 2004]

WILLIAM TIU, doing business under the name and style of D Rough Riders, and VIRGILIO TE
LAS PIAS petitioners, vs. PEDRO A. ARRIESGADO, BENJAMIN CONDOR, SERGIO PEDRANO
and PHILIPPINE PHOENIX SURETY AND INSURANCE, INC., respondents.

DECISION

CALLEJO, SR., J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court from the
Decision[1] of the Court of Appeals in CA-G.R. CV No. 54354 affirming with modification the
Decision[2] of the Regional Trial Court, 7th Judicial Region, Cebu City, Branch 20, in Civil
Case No. CEB-5963 for breach of contract of carriage, damages and attorneys fees, and
the Resolution dated February 26, 1999 denying the motion for reconsideration thereof.

The following facts are undisputed:

At about 10:00 p.m. of March 15, 1987, the cargo truck marked Condor Hollow Blocks and
General Merchandise bearing plate number GBP-675 was loaded with firewood in Bogo,
Cebu and left for Cebu City. Upon reaching Sitio Aggies, Poblacion, Compostela, Cebu,
just as the truck passed over a bridge, one of its rear tires exploded. The driver, Sergio
Pedrano, then parked along the right side of the national highway and removed the
damaged tire to have it vulcanized at a nearby shop, about 700 meters away. [3] Pedrano
left his helper, Jose Mitante, Jr. to keep watch over the stalled vehicle, and instructed the
latter to place a spare tire six fathoms away[4] behind the stalled truck to serve as a
warning for oncoming vehicles. The trucks tail lights were also left on. It was about 12:00
a.m., March 16, 1987.
At about 4:45 a.m., D Rough Riders passenger bus with plate number PBP-724 driven by
Virgilio Te Laspias was cruising along the national highway of Sitio Aggies, Poblacion,
Compostela, Cebu. The passenger bus was also bound for Cebu City, and had come from
Maya, Daanbantayan, Cebu. Among its passengers were the Spouses Pedro A.
Arriesgado and Felisa Pepito Arriesgado, who were seated at the right side of the bus,
about three (3) or four (4) places from the front seat.
As the bus was approaching the bridge, Laspias saw the stalled truck, which was then
about 25 meters away.[5] He applied the breaks and tried to swerve to the left to avoid
hitting the truck. But it was too late; the bus rammed into the trucks left rear. The impact
damaged the right side of the bus and left several passengers injured. Pedro Arriesgado
lost consciousness and suffered a fracture in his right colles.[6] His wife, Felisa, was brought
to the Danao CityHospital. She was later transferred to the Southern Island Medical Center
where she died shortly thereafter.[7]
Respondent Pedro A. Arriesgado then filed a complaint for breach of contract of carriage,
damages and attorneys fees before the Regional Trial Court of Cebu City, Branch 20,
against the petitioners, D Rough Riders bus operator William Tiu and his driver, Virgilio Te
Laspias on May 27, 1987. The respondent alleged that the passenger bus in question was
cruising at a fast and high speed along the national road, and that petitioner Laspias did
not take precautionary measures to avoid the accident.[8] Thus:
6. That the accident resulted to the death of the plaintiffs wife, Felisa Pepito Arriesgado, as
evidenced by a Certificate of Death, a xerox copy of which is hereto attached as integral
part hereof and marked as ANNEX A, and physical injuries to several of its passengers,
including plaintiff himself who suffered a COLLES FRACTURE RIGHT, per Medical Certificate,
a xerox copy of which is hereto attached as integral part hereof and marked as ANNEX B
hereof.
7. That due to the reckless and imprudent driving by defendant Virgilio Te Laspias of the
said Rough Riders passenger bus, plaintiff and his wife, Felisa Pepito Arriesgado, failed to
safely reach their destination which was Cebu City, the proximate cause of which was
defendant-drivers failure to observe utmost diligence required of a very cautious person
under all circumstances.
8. That defendant William Tiu, being the owner and operator of the said Rough Riders
passenger bus which figured in the said accident, wherein plaintiff and his wife were riding
at the time of the accident, is therefore directly liable for the breach of contract of
carriage for his failure to transport plaintiff and his wife safely to their place of destination
which was Cebu City, and which failure in his obligation to transport safely his passengers
was due to and in consequence of his failure to exercise the diligence of a good father of
the family in the selection and supervision of his employees, particularly defendant-driver
Virgilio Te Laspias.[9]
The respondent prayed that judgment be rendered in his favor and that the petitioners be
condemned to pay the following damages:
1). To pay to plaintiff, jointly and severally, the amount of P30,000.00 for the death and
untimely demise of plaintiffs wife, Felisa Pepito Arriesgado;
2). To pay to plaintiff, jointly and severally, the amount of P38,441.50, representing actual
expenses incurred by the plaintiff in connection with the death/burial of plaintiffs wife;
3). To pay to plaintiff, jointly and severally, the amount of P1,113.80, representing
medical/hospitalization expenses incurred by plaintiff for the injuries sustained by him;
4). To pay to plaintiff, jointly and severally, the amount of P50,000.00 for moral damages;
5). To pay to plaintiff, jointly and severally, the amount of P50,000.00 by way of exemplary
damages;
6). To pay to plaintiff, jointly and severally, the amount of P20,000.00 for attorneys fees;
7). To pay to plaintiff, jointly and severally, the amount of P5,000.00 for litigation expenses.
PLAINTIFF FURTHER PRAYS FOR SUCH OTHER RELIEFS AND REMEDIES IN LAW AND EQUITY. [10]
The petitioners, for their part, filed a Third-Party Complaint[11] on August 21, 1987 against the
following: respondent Philippine Phoenix Surety and Insurance, Inc. (PPSII), petitioner Tius
insurer; respondent Benjamin Condor, the registered owner of the cargo truck; and
respondent Sergio Pedrano, the driver of the truck. They alleged that petitioner Laspias
was negotiating the uphill climb along the national highway of Sitio Aggies, Poblacion,
Compostela, in a moderate and normal speed. It was further alleged that the truck was
parked in a slanted manner, its rear portion almost in the middle of the highway, and that
no early warning device was displayed. Petitioner Laspias promptly applied the brakes
and swerved to the left to avoid hitting the truck head-on, but despite his efforts to avoid
damage to property and physical injuries on the passengers, the right side portion of the
bus hit the cargo trucks left rear. The petitioners further alleged, thus:
5. That the cargo truck mentioned in the aforequoted paragraph is owned and registered
in the name of the third-party defendant Benjamin Condor and was left unattended by its
driver Sergio Pedrano, one of the third-party defendants, at the time of the incident;
6. That third-party defendant Sergio Pedrano, as driver of the cargo truck with marked (sic)
Condor Hollow Blocks & General Merchandise, with Plate No. GBP-675 which was recklessly
and imprudently parked along the national highway of Compostela, Cebu during the
vehicular accident in question, and third-party defendant Benjamin Condor, as the
registered owner of the cargo truck who failed to exercise due diligence in the selection
and supervision of third-party defendant Sergio Pedrano, are jointly and severally liable to
the third-party plaintiffs for whatever liability that may be adjudged against said third-party
plaintiffs or are directly liable of (sic) the alleged death of plaintiffs wife;
7. That in addition to all that are stated above and in the answer which are intended to
show reckless imprudence on the part of the third-party defendants, the third-party
plaintiffs hereby declare that during the vehicular accident in question, third-party
defendant was clearly violating Section 34, par. (g) of the Land Transportation and Traffic
Code
10. That the aforesaid passenger bus, owned and operated by third-party plaintiff William
Tiu, is covered by a common carrier liability insurance with Certificate of Cover No. 054940
issued by Philippine Phoenix Surety and Insurance, Inc., Cebu City Branch, in favor of third-
party plaintiff William Tiu which covers the period from July 22, 1986 to July 22, 1987 and
that the said insurance coverage was valid, binding and subsisting during the time of the
aforementioned incident (Annex A as part hereof);
11. That after the aforesaid alleged incident, third-party plaintiff notified third-party
defendant Philippine Phoenix Surety and Insurance, Inc., of the alleged incident hereto
mentioned, but to no avail;
12. That granting, et arguendo et arguendi, if herein third-party plaintiffs will be adversely
adjudged, they stand to pay damages sought by the plaintiff and therefore could also
look up to the Philippine Phoenix Surety and Insurance, Inc., for contribution,
indemnification and/or reimbursement of any liability or obligation that they might [be]
adjudged per insurance coverage duly entered into by and between third-party plaintiff
William Tiu and third-party defendant Philippine Phoenix Surety and Insurance, Inc.;[12]
The respondent PPSII, for its part, admitted that it had an existing contract with petitioner
Tiu, but averred that it had already attended to and settled the claims of those who were
injured during the incident.[13] It could not accede to the claim of respondent Arriesgado,
as such claim was way beyond the scheduled indemnity as contained in the contract of
insurance. [14]
After the parties presented their respective evidence, the trial court ruled in favor of
respondent Arriesgado. The dispositive portion of the decision reads:
WHEREFORE, in view of the foregoing, judgment is hereby rendered in favor of plaintiff as
against defendant William Tiu ordering the latter to pay the plaintiff the following amounts:
1 - The sum of FIFTY THOUSAND PESOS (P50,000.00) as moral damages;
2 - The sum of FIFTY THOUSAND PESOS (P50,000.00) as exemplary damages;
3 - The sum of THIRTY-EIGHT THOUSAND FOUR HUNDRED FORTY-ONE PESOS (P38,441.00) as
actual damages;
4 - The sum of TWENTY THOUSAND PESOS (P20,000.00) as attorneys fees;
5 - The sum of FIVE THOUSAND PESOS (P5,000.00) as costs of suit;
SO ORDERED.[15]
According to the trial court, there was no dispute that petitioner William Tiu was engaged
in business as a common carrier, in view of his admission that D Rough Rider passenger bus
which figured in the accident was owned by him; that he had been engaged in the
transportation business for 25 years with a sole proprietorship; and that he owned 34 buses.
The trial court ruled that if petitioner Laspias had not been driving at a fast pace, he could
have easily swerved to the left to avoid hitting the truck, thus, averting the unfortunate
incident. It then concluded that petitioner Laspias was negligent.
The trial court also ruled that the absence of an early warning device near the place
where the truck was parked was not sufficient to impute negligence on the part of
respondent Pedrano, since the tail lights of the truck were fully on, and the vicinity was well
lighted by street lamps.[16] It also found that the testimony of petitioner Tiu, that he based
the selection of his driver Laspias on efficiency and in-service training, and that the latter
had been so far an efficient and good driver for the past six years of his employment, was
insufficient to prove that he observed the diligence of a good father of a family in the
selection and supervision of his employees.
After the petitioners motion for reconsideration of the said decision was denied, the
petitioners elevated the case to the Court of Appeals on the following issues:
I WHETHER THIRD PARTY DEFENDANT SERGIO PEDRANO WAS RECKLESS AND IMPRUDENT
WHEN HE PARKED THE CARGO TRUCK IN AN OBLIQUE MANNER;
II WHETHER THE THIRD PARTY DEFENDANTS ARE JOINTLY AND SEVERALLY LIABLE DIRECTLY TO
PLAINTIFF-APPELLEE OR TO DEFENDANTS-APPELLANTS FOR WHATEVER LIABILITY THAT MAY BE
ADJUDGED TO THE SAID DEFENDANTS-APPELLANTS;
III WHETHER DEFENDANT-APPELLANT VIRGILIO TE LASPIAS WAS GUILTY OF GROSS
NEGLIGENCE;
IV WHETHER DEFENDANT-APPELLANT WILLIAM TIU HAD EXERCISED THE DUE DILIGENCE OF A
GOOD FATHER OF A FAMILY IN THE SELECTION AND SUPERVISION OF HIS DRIVERS;
V GRANTING FOR THE SAKE OF ARGUMENT THAT DEFENDANT-APPELLANT WILLIAM TIU IS
LIABLE TO PLAINTIFF-APPELLEE, WHETHER THERE IS LEGAL AND FACTUAL BASIS IN AWARDING
EXCESSIVE MORAL DAMAGES, EX[E]MPLARY DAMAGES, ATTORNEYS FEES AND LITIGATION
EXPENSES TO PLAINTIFF-APPELLEE;
VI WHETHER THIRD PARTY DEFENDANT PHILIPPINE PHOENIX SURETY AND INSURANCE, INC. IS
LIABLE TO DEFENDANT- APPELLANT WILLIAM TIU.[17]
The appellate court rendered judgment affirming the trial courts decision with the
modification that the awards for moral and exemplary damages were reduced to P25,000.
The dispositive portion reads:
WHEREFORE, the appealed Decision dated November 6, 1995 is hereby MODIFIED such
that the awards for moral and exemplary damages are each reduced to P25,000.00 or a
total of P50,000.00 for both. The judgment is AFFIRMED in all other respects.
SO ORDERED.[18]
According to the appellate court, the action of respondent Arriesgado was based not on
quasi-delict but on breach of contract of carriage. As a common carrier, it was incumbent
upon petitioner Tiu to prove that extraordinary diligence was observed in ensuring the
safety of passengers during transportation. Since the latter failed to do so, he should be
held liable for respondent Arriesgados claim. The CA also ruled that no evidence was
presented against the respondent PPSII, and as such, it could not be held liable for
respondent Arriesgados claim, nor for contribution, indemnification and/or reimbursement
in case the petitioners were adjudged liable.
The petitioners now come to this Court and ascribe the following errors committed by the
appellate court:
I. THE HONORABLE COURT OF APPEALS ERRED IN NOT DECLARING RESPONDENTS BENJAMIN
CONDOR AND SERGIO PEDRANO GUILTY OF NEGLIGENCE AND HENCE, LIABLE TO
RESPONDENT PEDRO A. ARRIESGADO OR TO PETITIONERS FOR WHATEVER LIABILITY THAT
MAY BE ADJUDGED AGAINST THEM.
II. THE HONORABLE COURT OF APPEALS ERRED IN FINDING PETITIONERS GUILTY OF
NEGLIGENCE AND HENCE, LIABLE TO RESPONDENT PEDRO A. ARRIESGADO.
III. THE HONORABLE COURT OF APPEALS ERRED IN FINDING PETITIONER WILLIAM TIU LIABLE
FOR EXEMPLARY DAMAGES, ATTORNEYS FEES AND LITIGATION EXPENSES.
IV.THE HONORABLE COURT OF APPEALS ERRED IN NOT FINDING RESPONDENT
PHILIPPINE PHOENIX SURETY AND INSURANCE, INC. LIABLE TO RESPONDENT PEDRO A.
ARRIESGADO OR TO PETITIONER WILLIAM TIU.[19]
According to the petitioners, the appellate court erred in failing to appreciate the
absence of an early warning device and/or built-in reflectors at the front and back of the
cargo truck, in clear violation of Section 34, par. (g) of the Land Transportation and Traffic
Code. They aver that such violation is only a proof of respondent Pedranos negligence, as
provided under Article 2185 of the New Civil Code. They also question the appellate courts
failure to take into account that the truck was parked in an oblique manner, its rear
portion almost at the center of the road. As such, the proximate cause of the incident was
the gross recklessness and imprudence of respondent Pedrano, creating the presumption
of negligence on the part of respondent Condor in supervising his employees, which
presumption was not rebutted. The petitioners then contend that respondents Condor and
Pedrano should be held jointly and severally liable to respondent Arriesgado for the
payment of the latters claim.
The petitioners, likewise, aver that expert evidence should have been presented to prove
that petitioner Laspias was driving at a very fast speed, and that the CA could not reach
such conclusion by merely considering the damages on the cargo truck. It was also
pointed out that petitioner Tiu presented evidence that he had exercised the diligence of
a good father of a family in the selection and supervision of his drivers.
The petitioners further allege that there is no legal and factual basis to require petitioner Tiu
to pay exemplary damages as no evidence was presented to show that the latter acted
in a fraudulent, reckless and oppressive manner, or that he had an active participation in
the negligent act of petitioner Laspias.
Finally, the petitioners contend that respondent PPSII admitted in its answer that while it
had attended to and settled the claims of the other injured passengers, respondent
Arriesgados claim remained unsettled as it was beyond the scheduled indemnity under
the insurance contract. The petitioners argue that said respondent PPSII should have
settled the said claim in accordance with the scheduled indemnity instead of just denying
the same.
On the other hand, respondent Arriesgado argues that two of the issues raised by the
petitioners involved questions of fact, not reviewable by the Supreme Court: the finding of
negligence on the part of the petitioners and their liability to him; and the award of
exemplary damages, attorneys fees and litigation expenses in his favor. Invoking the
principle of equity and justice, respondent Arriesgado pointed out that if there was an
error to be reviewed in the CA decision, it should be geared towards the restoration of the
moral and exemplary damages to P50,000 each, or a total of P100,000 which was reduced
by the Court of Appeals to P25,000 each, or a total of only P50,000.
Respondent Arriesgado also alleged that respondents Condor and Pedrano, and
respondent Phoenix Surety, are parties with whom he had no contract of carriage, and
had no cause of action against. It was pointed out that only the petitioners needed to be
sued, as driver and operator of the ill-fated bus, on account of their failure to bring the
Arriesgado Spouses to their place of destination as agreed upon in the contract of
carriage, using the utmost diligence of very cautious persons with due regard for all
circumstances.
Respondents Condor and Pedrano point out that, as correctly ruled by the Court of
Appeals, the proximate cause of the unfortunate incident was the fast speed at which
petitioner Laspias was driving the bus owned by petitioner Tiu. According to the
respondents, the allegation that the truck was not equipped with an early warning device
could not in any way have prevented the incident from happening. It was also pointed
out that respondent Condor had always exercised the due diligence required in the
selection and supervision of his employees, and that he was not a party to the contract of
carriage between the petitioners and respondent Arriesgado.
Respondent PPSII, for its part, alleges that contrary to the allegation of petitioner Tiu, it
settled all the claims of those injured in accordance with the insurance contract. It further
avers that it did not deny respondent Arriesgados claim, and emphasizes that its liability
should be within the scheduled limits of indemnity under the said contract. The respondent
concludes that while it is true that insurance contracts are contracts of indemnity, the
measure of the insurers liability is determined by the insureds compliance with the terms
thereof.
The Courts Ruling
At the outset, it must be stressed that this Court is not a trier of facts.[20] Factual findings of
the Court of Appeals are final and may not be reviewed on appeal by this Court, except
when the lower court and the CA arrived at diverse factual findings.[21] The petitioners in
this case assail the finding of both the trial and the appellate courts that petitioner Laspias
was driving at a very fast speed before the bus owned by petitioner Tiu collided with
respondent Condors stalled truck. This is clearly one of fact, not reviewable by the Court in
a petition for review under Rule 45.[22]
On this ground alone, the petition is destined to fail.
However, considering that novel questions of law are likewise involved, the Court resolves
to examine and rule on the merits of the case.
Petitioner Laspias
Was negligent in driving
The Ill-fated bus
In his testimony before the trial court, petitioner Laspias claimed that he was traversing the
two-lane road at Compostela, Cebu at a speed of only forty (40) to fifty (50) kilometers per
hour before the incident occurred.[23] He also admitted that he saw the truck which was
parked in an oblique position at about 25 meters before impact, [24] and tried to avoid
hitting it by swerving to the left. However, even in the absence of expert evidence, the
damage sustained by the truck[25] itself supports the finding of both the trial court and the
appellate court, that the D Rough Rider bus driven by petitioner Laspias was traveling at a
fast pace. Since he saw the stalled truck at a distance of 25 meters, petitioner Laspias had
more than enough time to swerve to his left to avoid hitting it; that is, if the speed of the
bus was only 40 to 50 kilometers per hour as he claimed. As found by the Court of Appeals,
it is easier to believe that petitioner Laspias was driving at a very fast speed, since at 4:45
a.m., the hour of the accident, there were no oncoming vehicles at the opposite direction.
Petitioner Laspias could have swerved to the left lane with proper clearance, and, thus,
could have avoided the truck.[26] Instinct, at the very least, would have prompted him to
apply the breaks to avert the impending disaster which he must have foreseen when he
caught sight of the stalled truck. As we had occasion to reiterate:
A man must use common sense, and exercise due reflection in all his acts; it is his duty to
be cautious, careful and prudent, if not from instinct, then through fear of recurring
punishment. He is responsible for such results as anyone might foresee and for acts which
no one would have performed except through culpable abandon. Otherwise, his own
person, rights and property, and those of his fellow beings, would ever be exposed to all
manner of danger and injury.[27]
We agree with the following findings of the trial court, which were affirmed by the CA on
appeal:
A close study and evaluation of the testimonies and the documentary proofs submitted by
the parties which have direct bearing on the issue of negligence, this Court as shown by
preponderance of evidence that defendant Virgilio Te Laspias failed to observe
extraordinary diligence as a driver of the common carrier in this case. It is quite hard to
accept his version of the incident that he did not see at a reasonable distance ahead the
cargo truck that was parked when the Rough Rider [Bus] just came out of the bridge
which is on an (sic) [more] elevated position than the place where the cargo truck was
parked. With its headlights fully on, defendant driver of the Rough Rider was in a vantage
position to see the cargo truck ahead which was parked and he could just easily have
avoided hitting and bumping the same by maneuvering to the left without hitting the said
cargo truck. Besides, it is (sic) shown that there was still much room or space for the Rough
Rider to pass at the left lane of the said national highway even if the cargo truck had
occupied the entire right lane thereof. It is not true that if the Rough Rider would proceed
to pass through the left lane it would fall into a canal considering that there was much
space for it to pass without hitting and bumping the cargo truck at the left lane of said
national highway. The records, further, showed that there was no incoming vehicle at the
opposite lane of the national highway which would have prevented the Rough Rider from
not swerving to its left in order to avoid hitting and bumping the parked cargo truck. But
the evidence showed that the Rough Rider instead of swerving to the still spacious left lane
of the national highway plowed directly into the parked cargo truck hitting the latter at its
rear portion; and thus, the (sic) causing damages not only to herein plaintiff but to the
cargo truck as well.[28]
Indeed, petitioner Laspias negligence in driving the bus is apparent in the records. By his
own admission, he had just passed a bridge and was traversing the highway of
Compostela, Cebu at a speed of 40 to 50 kilometers per hour before the collision
occurred. The maximum speed allowed by law on a bridge is only 30 kilometers per
hour.[29] And, as correctly pointed out by the trial court, petitioner Laspias also violated
Section 35 of the Land Transportation and Traffic Code, Republic Act No. 4136, as
amended:
Sec. 35. Restriction as to speed. (a) Any person driving a motor vehicle on a highway shall
drive the same at a careful and prudent speed, not greater nor less than is reasonable
and proper, having due regard for the traffic, the width of the highway, and or any other
condition then and there existing; and no person shall drive any motor vehicle upon a
highway at such speed as to endanger the life, limb and property of any person, nor at a
speed greater than will permit him to bring the vehicle to a stop within the assured clear
distance ahead.[30]
Under Article 2185 of the Civil Code, a person driving a vehicle is presumed negligent if at
the time of the mishap, he was violating any traffic regulation.[31]
Petitioner Tiu failed to
Overcome the presumption
Of negligence against him as
One engaged in the business
Of common carriage
The rules which common carriers should observe as to the safety of their passengers are set
forth in the Civil Code, Articles 1733,[32] 1755[33] and 1756.[34] In this case, respondent
Arriesgado and his deceased wife contracted with petitioner Tiu, as owner and operator
of D Rough Riders bus service, for transportation from Maya, Daanbantayan, Cebu, to
Cebu City for the price of P18.00.[35] It is undisputed that the respondent and his wife were
not safely transported to the destination agreed upon. In actions for breach of contract,
only the existence of such contract, and the fact that the obligor, in this case the common
carrier, failed to transport his passenger safely to his destination are the matters that need
to be proved.[36] This is because under the said contract of carriage, the petitioners
assumed the express obligation to transport the respondent and his wife to their
destination safely and to observe extraordinary diligence with due regard for all
circumstances.[37] Any injury suffered by the passengers in the course thereof is
immediately attributable to the negligence of the carrier.[38] Upon the happening of the
accident, the presumption of negligence at once arises, and it becomes the duty of a
common carrier to prove that he observed extraordinary diligence in the care of his
passengers.[39] It must be stressed that in requiring the highest possible degree of diligence
from common carriers and in creating a presumption of negligence against them, the law
compels them to curb the recklessness of their drivers.[40]
While evidence may be submitted to overcome such presumption of negligence, it must
be shown that the carrier observed the required extraordinary diligence, which means that
the carrier must show the utmost diligence of very cautious persons as far as human care
and foresight can provide, or that the accident was caused by fortuitous event.[41] As
correctly found by the trial court, petitioner Tiu failed to conclusively rebut such
presumption. The negligence of petitioner Laspias as driver of the passenger bus is, thus,
binding against petitioner Tiu, as the owner of the passenger bus engaged as a common
carrier.[42]
The Doctrine of
Last Clear Chance
Is Inapplicable in the
Case at Bar
Contrary to the petitioners contention, the principle of last clear chance is inapplicable in
the instant case, as it only applies in a suit between the owners and drivers of two colliding
vehicles. It does not arise where a passenger demands responsibility from the carrier to
enforce its contractual obligations, for it would be inequitable to exempt the negligent
driver and its owner on the ground that the other driver was likewise guilty of
negligence.[43] The common law notion of last clear chance permitted courts to grant
recovery to a plaintiff who has also been negligent provided that the defendant had the
last clear chance to avoid the casualty and failed to do so. Accordingly, it is difficult to see
what role, if any, the common law of last clear chance doctrine has to play in a jurisdiction
where the common law concept of contributory negligence as an absolute bar to
recovery by the plaintiff, has itself been rejected, as it has been in Article 2179 of the Civil
Code.[44]
Thus, petitioner Tiu cannot escape liability for the death of respondent Arriesgados wife
due to the negligence of petitioner Laspias, his employee, on this score.
Respondents Pedrano and
Condor were likewise
Negligent
In Phoenix Construction, Inc. v. Intermediate Appellate Court,[45] where therein respondent
Dionisio sustained injuries when his vehicle rammed against a dump truck parked askew,
the Court ruled that the improper parking of a dump truck without any warning lights or
reflector devices created an unreasonable risk for anyone driving within the vicinity, and
for having created such risk, the truck driver must be held responsible. In ruling against the
petitioner therein, the Court elucidated, thus:
In our view, Dionisios negligence, although later in point of time than the truck drivers
negligence, and therefore closer to the accident, was not an efficient intervening or
independent cause. What the petitioners describe as an intervening cause was no more
than a foreseeable consequence of the risk created by the negligent manner in which the
truck driver had parked the dump truck. In other words, the petitioner truck driver owed a
duty to private respondent Dionisio and others similarly situated not to impose upon them
the very risk the truck driver had created. Dionisios negligence was not that of an
independent and overpowering nature as to cut, as it were, the chain of causation in fact
between the improper parking of the dump truck and the accident, nor to sever the juris
vinculum of liability.
We hold that private respondent Dionisios negligence was only contributory, that the
immediate and proximate cause of the injury remained the truck drivers lack of due
care.[46]
In this case, both the trial and the appellate courts failed to consider that respondent
Pedrano was also negligent in leaving the truck parked askew without any warning lights
or reflector devices to alert oncoming vehicles, and that such failure created the
presumption of negligence on the part of his employer, respondent Condor, in supervising
his employees properly and adequately. As we ruled in Poblete v. Fabros:[47]
It is such a firmly established principle, as to have virtually formed part of the law itself, that
the negligence of the employee gives rise to the presumption of negligence on the part of
the employer. This is the presumed negligence in the selection and supervision of
employee. The theory of presumed negligence, in contrast with the American doctrine
of respondeat superior, where the negligence of the employee is conclusively presumed
to be the negligence of the employer, is clearly deducible from the last paragraph of
Article 2180 of the Civil Code which provides that the responsibility therein mentioned shall
cease if the employers prove that they observed all the diligence of a good father of a
family to prevent damages. [48]
The petitioners were correct in invoking respondent Pedranos failure to observe Article IV,
Section 34(g) of the Rep. Act No. 4136, which provides:
(g) Lights when parked or disabled. Appropriate parking lights or flares visible one hundred
meters away shall be displayed at a corner of the vehicle whenever such vehicle is parked
on highways or in places that are not well-lighted or is placed in such manner as to
endanger passing traffic.
The manner in which the truck was parked clearly endangered oncoming traffic on both
sides, considering that the tire blowout which stalled the truck in the first place occurred in
the wee hours of the morning. The Court can only now surmise that the unfortunate
incident could have been averted had respondent Condor, the owner of the truck,
equipped the said vehicle with lights, flares, or, at the very least, an early warning
device.[49] Hence, we cannot subscribe to respondents Condor and Pedranos claim that
they should be absolved from liability because, as found by the trial and appellate courts,
the proximate cause of the collision was the fast speed at which petitioner Laspias drove
the bus. To accept this proposition would be to come too close to wiping out the
fundamental principle of law that a man must respond for the foreseeable consequences
of his own negligent act or omission. Indeed, our law on quasi-delicts seeks to reduce the
risks and burdens of living in society and to allocate them among its members. To accept
this proposition would be to weaken the very bonds of society.[50]
The Liability of
Respondent PPSII
as Insurer
The trial court in this case did not rule on the liability of respondent PPSII, while the
appellate court ruled that, as no evidence was presented against it, the insurance
company is not liable.
A perusal of the records will show that when the petitioners filed the Third-Party Complaint
against respondent PPSII, they failed to attach a copy of the terms of the insurance
contract itself. Only Certificate of Cover No. 054940[51]issued in favor of Mr. William Tiu,
Lahug, Cebu City signed by Cosme H. Boniel was appended to the third-party complaint.
The date of issuance, July 22, 1986, the period of insurance, from July 22, 1986 to July 22, Desistance to that effect, xerox copies of which are hereto attached as Annexes 1, 2, 3, 4,
1987, as well as the following items, were also indicated therein: 5, and 6 respectively;

SCHEDULED VEHICLE 9. With respect to the claim of plaintiff, herein answering third party defendant through its
authorized insurance adjuster attended to said claim. In fact, there were negotiations to
MODEL MAKE TYPE OF BODY COLOR BLT FILE NO. that effect. Only that it cannot accede to the demand of said claimant considering that
the claim was way beyond the scheduled indemnity as per contract entered into with
Isuzu Forward Bus blue mixed third party plaintiff William Tiu and third party defendant (Philippine Phoenix Surety and
Insurance, Inc.). Third party Plaintiff William Tiu knew all along the limitation as earlier stated,
PLATE NO. SERIAL/CHASSIS MOTOR NO. AUTHORIZED UNLADEN
he being an old hand in the transportation business; 55
PBP-724 NO. SER450- 677836 CAPACITY 50 WEIGHT 6Cyls.
1584124 Kgs. Considering the admissions made by respondent PPSII, the existence of the insurance
contract and the salient terms thereof cannot be dispatched. It must be noted that after
SECTION 1/11 *LIMITS OF LIABILITY P50,000.00 PREMIUMS filing its answer, respondent PPSII no longer objected to the presentation of evidence by
PAID respondent Arriesgado and the insured petitioner Tiu. Even in its Memorandum56 before the
A. THIRD PARTY LIABILITY
Court, respondent PPSII admitted the existence of the contract, but averred as follows:
B. PASSENGER LIABILITY Per Person Per Accident P540.0052
Petitioner Tiu is insisting that PPSII is liable to him for contribution, indemnification and/or
P12,000.00 P50,000
reimbursement. This has no basis under the contract. Under the contract, PPSII will pay all
sums necessary to discharge liability of the insured subject to the limits of liability but not to
exceed the limits of liability as so stated in the contract. Also, it is stated in the contract that
In its Answer53 to the Third-Party Complaint, the respondent PPSII admitted the existence of in the event of accident involving indemnity to more than one person, the limits of liability
the contract of insurance, in view of its failure to specifically deny the same as required shall not exceed the aggregate amount so specified by law to all persons to be
under then Section 8(a), Rule 8 of the Rules of Court,54 which reads: indemnified.57

Sec. 8. How to contest genuineness of such documents. When an action or defense is
founded upon a written instrument copied in or attached to the corresponding pleading
as provided in the preceding section, the genuineness and due execution of the
instrument shall be deemed admitted unless the adverse party, under oath, specifically
denies them, and sets forth what he claims to be the facts; but the requirement of an oath
does not apply when the adverse party does not appear to be a party to the instrument or
when compliance with an order for inspection of the original instrument is refused.
In fact, respondent PPSII did not dispute the existence of such contract, and admitted that
it was liable thereon. It claimed, however, that it had attended to and settled the claims of
those injured during the incident, and set up the following as special affirmative defenses:
Third party defendant Philippine Phoenix Surety and Insurance, Inc. hereby reiterates and
incorporates by way of reference the preceding paragraphs and further states THAT:-
8. It has attended to the claims of Vincent Canales, Asuncion Batiancila and Neptali
Palces who sustained injuries during the incident in question. In fact, it settled financially
their claims per vouchers duly signed by them and they duly executed Affidavit[s] of
As can be gleaned from the Certificate of Cover, such insurance contract was issued
pursuant to the Compulsory Motor Vehicle Liability Insurance Law. It was expressly
provided therein that the limit of the insurers liability for each person was P12,000, while the
limit per accident was pegged at P50,000. An insurer in an indemnity contract for third
party liability is directly liable to the injured party up to the extent specified in the
agreement but it cannot be held solidarily liable beyond that amount.58 The respondent
PPSII could not then just deny petitioner Tius claim; it should have paid P12,000 for the
death of Felisa Arriesgado,59 and respondent Arriesgados hospitalization expenses
of P1,113.80, which the trial court found to have been duly supported by receipts. The total
amount of the claims, even when added to that of the other injured passengers which the
respondent PPSII claimed to have settled,60 would not exceed the P50,000 limit under the
insurance agreement.
Indeed, the nature of Compulsory Motor Vehicle Liability Insurance is such that it is primarily
intended to provide compensation for the death or bodily injuries suffered by innocent
third parties or passengers as a result of the negligent operation and use of motor vehicles.
The victims and/or their dependents are assured of immediate financial assistance,
regardless of the financial capacity of motor vehicle owners.61 As the Court, speaking
through Associate Justice Leonardo A. Quisumbing, explained in Government Service
Insurance System v. Court of Appeals:62
However, although the victim may proceed directly against the insurer for indemnity, the
third party liability is only up to the extent of the insurance policy and those required by
law. While it is true that where the insurance contract provides for indemnity against liability
to third persons, and such persons can directly sue the insurer, the direct liability of the
insurer under indemnity contracts against third party liability does not mean that the insurer
can be held liable in solidum with the insured and/or the other parties found at fault. For
the liability of the insurer is based on contract; that of the insured carrier or vehicle owner is
based on tort.
Obviously, the insurer could be held liable only up to the extent of what was provided for
by the contract of insurance, in accordance with the CMVLI law. At the time of the
incident, the schedule of indemnities for death and bodily injuries, professional fees and
other charges payable under a CMVLI coverage was provided for under the Insurance
Memorandum Circular (IMC) No. 5-78 which was approved on November 10, 1978. As
therein provided, the maximum indemnity for death was twelve thousand (P12,000.00)
pesos per victim. The schedules for medical expenses were also provided by said IMC,
specifically in paragraphs (C) to (G).63
Damages to be
Awarded
The trial court correctly awarded moral damages in the amount of P50,000 in favor of
respondent Arriesgado. The award of exemplary damages by way of example or
correction of the public good,64 is likewise in order. As the Court ratiocinated in Kapalaran
Bus Line v. Coronado:65
While the immediate beneficiaries of the standard of extraordinary diligence are, of
course, the passengers and owners of cargo carried by a common carrier, they are not
the only persons that the law seeks to benefit. For if common carriers carefully observed
the statutory standard of extraordinary diligence in respect of their own passengers, they
cannot help but simultaneously benefit pedestrians and the passengers of other vehicles
who are equally entitled to the safe and convenient use of our roads and highways. The
law seeks to stop and prevent the slaughter and maiming of people (whether passengers
or not) on our highways and buses, the very size and power of which seem to inflame the
minds of their drivers. Article 2231 of the Civil Code explicitly authorizes the imposition of
exemplary damages in cases of quasi-delicts if the defendant acted with gross
negligence.66
The respondent Pedro A. Arriesgado, as the surviving spouse and heir of Felisa Arriesgado,
is entitled to indemnity in the amount of P50,000.00.67
The petitioners, as well as the respondents Benjamin Condor and Sergio Pedrano are jointly
and severally liable for said amount, conformably with the following pronouncement of
the Court in Fabre, Jr. vs. Court of Appeals:68
The same rule of liability was applied in situations where the negligence of the driver of the
bus on which plaintiff was riding concurred with the negligence of a third party who was
the driver of another vehicle, thus causing an accident. In Anuran v. Buo, Batangas
Laguna Tayabas Bus Co. v. Intermediate Appellate Court, and Metro Manila Transit
Corporation v. Court of Appeals, the bus company, its driver, the operator of the other
vehicle and the driver of the vehicle were jointly and severally held liable to the
injured passenger or the latters heirs. The basis of this allocation of liability was explained
in Viluan v. Court of Appeals, thus:
Nor should it make difference that the liability of petitioner [bus owner] springs from
contract while that of respondents [owner and driver of other vehicle] arises from quasi-
delict. As early as 1913, we already ruled in Gutierrez vs. Gutierrez, 56 Phil. 177, that in case
of injury to a passenger due to the negligence of the driver of the bus on which he was
riding and of the driver of another vehicle, the drivers as well as the owners of the two
vehicles are jointly and severally liable for damages. Some members of the Court, though,
are of the view that under the circumstances they are liable on quasi-delict.69
IN LIGHT OF ALL THE FOREGOING, the petition is PARTIALLY GRANTED. The Decision of the
Court of Appeals is AFFIRMED with MODIFICATIONS:
(1) Respondent Philippine Phoenix Surety and Insurance, Inc. and petitioner William Tiu
are ORDERED to pay, jointly and severally, respondent Pedro A. Arriesgado the total
amount of P13,113.80;
(2) The petitioners and the respondents Benjamin Condor and Sergio Pedrano
are ORDERED to pay, jointly and severally, respondent Pedro A. Arriesgado P50,000.00 as
indemnity; P26,441.50 as actual damages; P50,000.00 as moral damages; P50,000.00 as
exemplary damages; and P20,000.00 as attorneys fees.
SO ORDERED.
Austria-Martinez, (Acting Chairman), Tinga, and Chico-Nazario, JJ., concur.
Puno J., (Chairman), on official leave.
Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 153076 June 21, 2007

LAPANDAY AGRICULTURAL and DEVELOPMENT CORPORATION (LADECO), HENRY

BERENGUEL, and APOLONIO R. DEOCAMPO, petitioners,
vs.
MICHAEL RAYMOND ANGALA, respondent.

DECISION

CARPIO, J.:

The Case
Before the Court is a petition for review1 assailing the 25 July 2001 Decision2 and 11 March
2002 Resolution3 of the Court of Appeals in CA-G.R. CV No. 51134.
The Antecedent Facts
On 4 May 1993, at about 2:45 p.m., a Datsun crewcab with plate no. PEC-903 driven by
Apolonio Deocampo (Deocampo) bumped into a 1958 Chevy pick-up with plate no.
MAM-475 owned by Michael Raymond Angala (respondent) and driven by Bernulfo Borres
(Borres). Lapanday Agricultural and Development Corporation (LADECO) owned the
crewcab which was assigned to its manager Manuel Mendez (Mendez). Deocampo was
the driver and bodyguard of Mendez. Both vehicles were running along Rafael Castillo St.,
Agdao, Davao City heading north towards Lanang, Davao City. The left door, front left
fender, and part of the front bumper of the pick-up were damaged.
Respondent filed an action for Quasi-Delict, Damages, and Attorney’s Fees against
LADECO, its administrative officer Henry Berenguel4 (Berenguel) and Deocampo.
Respondent alleged that his pick-up was slowing down to about five to ten kilometers per
hour (kph) and was making a left turn preparatory to turning south when it was bumped
from behind by the crewcab which was running at around 60 to 70 kph. The crewcab
stopped 21 meters from the point of impact. Respondent alleged that he heard a
screeching sound before the impact. Respondent was seated beside the driver and was
looking at the speedometer when the accident took place. Respondent testified that
Borres made a signal because he noticed a blinking light while looking at the
speedometer.5
Respondent sent a demand letter to LADECO for the payment of the damages he
incurred because of the accident but he did not receive any reply. Thus, respondent filed
the case against LADECO, Berenguel, and Deocampo.
Deocampo alleged that the pick-up and the crewcab he was driving were both running
at about 40 kph. The pick-up was running along the outer lane. The pick-up was about 10
meters away when it made a U-turn towards the left. Deocampo testified that he did not
see any signal from the pick-up.6 Deocampo alleged that he tried to avoid the pick-up but
he was unable to avoid the collision. Deocampo stated that he did not apply the brakes
because he knew the collision was unavoidable. Deocampo admitted that he stepped on
the brakes only after the collision.
The Ruling of the Trial Court
In its 3 March 1995 Decision,7 the Regional Trial Court of Davao City, Branch 15 (trial court)
ruled:
WHEREFORE, judgment is hereby rendered ordering the defendants LADECO and Apolonio
Deocampo to solidarily pay the plaintiffs the following sums:
1. Twenty three thousand two hundred (P23,200.00) pesos as actual damages.
2. Ten thousand (P10,000.00) pesos as moral damages.
3. Ten thousand (P10,000.00) pesos as attorney’s fees.
4. Costs of suit.
SO ORDERED.8
The trial court found that the crewcab was running very fast while following the pick-up
and that the crewcab’s speed was the proximate cause of the accident. The trial court
observed that the crewcab stopped 21 meters away from the point of impact despite
Deocampo’s claim that he stepped on the brakes moments after the collision. The trial
court ruled that Deocampo had the last opportunity to avoid the accident.
The trial court found that Berenguel was not liable because he was not the owner of the
crewcab.
LADECO and Deocampo (petitioners)9 filed a motion for reconsideration. The trial court
denied petitioners’ motion in its 13 June 1995 Order.10
Petitioners filed an appeal before the Court of Appeals.
The Ruling of the Court of Appeals
The Court of Appeals affirmed in toto the trial court’s decision.
The Court of Appeals sustained the finding of the trial court that Deocampo was negligent.
The Court of Appeals applied the doctrine of last clear chance and ruled that Deocampo
had the responsibility of avoiding the pick-up.
The Court of Appeals also sustained the solidary liability of LADECO and Deocampo. The
Court of Appeals ruled that under Article 2180 of the Civil Code, the negligence of the
driver is presumed to be the negligence of the owner of the vehicle.
The dispositive portion of the Court of Appeals’ Decision reads:
WHEREFORE, premises considered, the appeal is DISMISSED for lack of merit, and the
assailed Decision of the Court a quo in Civil Case No. 22067-93 is AFFIRMED in toto. Costs
against defendants-appellants.
SO ORDERED.11
Petitioners filed a motion for reconsideration. In its 11 March 2002 Resolution, the Court of
Appeals denied the motion for lack of merit.
Hence, the petition before this Court.
The Issues
The issues before the Court are the following:
1. Whether the provisions of Section 45(b) of Republic Act No. 4136 12 (RA 4136) and Article
2185 of the Civil Code apply to this case; and
2. Whether respondent is entitled to the damages awarded.
The Ruling of this Court
The petition is partly meritorious.
Both Drivers are Negligent
Both the trial court and the Court of Appeals found that Deocampo was at fault because
he was driving very fast prior to the collision. The Court of Appeals sustained the trial court’s
finding that Deocampo was running more than the normal cruising speed. Both the trial
court and the Court of Appeals noted that the crewcab stopped 21 meters away from the
point of impact. Deocampo admitted that he stepped on the brakes only after the
collision.
Petitioners allege that Borres did not take the proper lane before executing the U-turn.
Petitioners allege that Borres violated Section 45(b) of RA 4136 and it was his recklessness
that was the proximate cause of the accident.
Section 45(b) of RA 4136 states:
Sec. 45. Turning at intersections. x x x
(b) The driver of a vehicle intending to turn to the left shall approach such intersection in
the lane for traffic to the right of and nearest to the center line of the highway, and, in
turning, shall pass to the left of the center of the intersection, except that, upon highways
laned for traffic and upon one-way highways, a left turn shall be made from the left lane
of traffic in the direction in which the vehicle is proceeding.
Petitioners further allege that since Borres was violating a traffic rule at the time of the
accident, respondent and Borres were the parties at fault. Petitioners cite Article 2185 of
the Civil Code, thus:
Art. 2185. 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 any traffic
regulation.
We rule that both parties were negligent in this case. Borres was at the outer lane when he
executed a U-turn. Following Section 45(b) of RA 4136, Borres should have stayed at the
inner lane which is the lane nearest to the center of the highway. However, Deocampo
was equally negligent. Borres slowed down the pick-up preparatory to executing the U-
turn. Deocampo should have also slowed down when the pick-up slowed down.
Deocampo admitted that he noticed the pick-up when it was still about 20 meters away
from him.13 Vehicular traffic was light at the time of the incident. The pick-up and the
crewcab were the only vehicles on the road.14 Deocampo could have avoided the
crewcab if he was not driving very fast before the collision, as found by both the trial court
and the Court of Appeals. We sustain this finding since factual findings of the Court of
Appeals affirming those of the trial court are conclusive and binding on this
Court.15 Further, the crewcab stopped 21 meters from the point of impact. It would not
have happened if Deocampo was not driving very fast.
Doctrine of Last Clear Chance Applies
Since both parties are at fault in this case, the doctrine of last clear chance applies.
The doctrine of last clear chance states that where both parties are negligent but the
negligent act of one is appreciably later than that of the other, or where it is impossible to
determine whose fault or negligence caused the loss, the one who had the last clear
opportunity to avoid the loss but failed to do so is chargeable with the loss.16 In this case,
Deocampo had the last clear chance to avoid the collision. Since Deocampo was driving
the rear vehicle, he had full control of the situation since he was in a position to observe
the vehicle in front of him.17 Deocampo had the responsibility of avoiding bumping the
vehicle in front of him.18 A U-turn is done at a much slower speed to avoid skidding and
overturning, compared to running straight ahead.19 Deocampo could have avoided the
vehicle if he was not driving very fast while following the pick-up. Deocampo was not only
driving fast, he also admitted that he did not step on the brakes even upon seeing the
pick-up. He only stepped on the brakes after the collision.
Petitioners are Solidarily Liable
LADECO alleges that it should not be held jointly and severally liable with Deocampo
because it exercised due diligence in the supervision and selection of its employees. Aside
from this statement, LADECO did not proffer any proof to show how it exercised due
diligence in the supervision and selection of its employees. LADECO did not show its policy
in hiring its drivers, or the manner in which it supervised its drivers. LADECO failed to
substantiate its allegation that it exercised due diligence in the supervision and selection of
its employees.
Hence, we hold LADECO solidarily liable with Deocampo.
Respondent is Entitled to Moral Damages
We sustain the award of moral damages. Moral damages are awarded to allow a plaintiff
to obtain means, diversion, or amusement that will serve to alleviate the moral suffering he
has undergone due to the defendant’s culpable action.20 The trial court found that
respondent, who was on board the pick-up when the collision took place, suffered shock,
serious anxiety, and fright when the crewcab bumped his pick-up. We sustain the trial
court and the Court of Appeals in ruling that respondent sufficiently showed that he
suffered shock, serious anxiety, and fright which entitle him to moral damages.

Both the trial court and the Court of Appeals failed to give any justification for the award
of attorney’s fees. Awards of attorney’s fees must be based on findings of fact and of law
and stated in the decision of the trial court.21 Further, no premium should be placed on the
right to litigate.22 Hence, we delete the award of attorney’s fees.

WHEREFORE, we AFFIRM the 25 July 2001 Decision and 11 March 2002 Resolution of the
Court of Appeals in CA-G.R. CV No. 51134 with MODIFICATION by deleting the award of
attorney’s fees.

SO ORDERED.