CALTEX (PHILIPPINES), INC. petitioner, vs. SULPICIO LINES, INC.

, GO SIOC SO,
ENRIQUE S. GO, EUSEBIO S. GO, CARLOS S. GO, VICTORIANO S. GO,
DOMINADOR S. GO, RICARDO S. GO, EDWARD S. GO, ARTURO S. GO,
EDGAR S. GO, EDMUND S. GO, FRANCISCO SORIANO, VECTOR SHIPPING
CORPORATION, TERESITA G. CAEZAL AND SOTERA E.
CAEZAL, respondents.

DECISION
PARDO, J.:

Is the charterer of a sea vessel liable for damages resulting from a collision between
the chartered vessel and a passenger ship?
When MT Vector left the port of Limay, Bataan, on December 19, 1987 carrying
petroleum products of Caltex (Philippines), Inc. (hereinafter Caltex) no one could have
guessed that it would collide with MV Doa Paz, killing almost all the passengers and crew
members of both ships, and thus resulting in one of the countrys worst maritime
disasters.
The petition before us seeks to reverse the Court of Appeals decision [1]holding
petitioner jointly liable with the operator of MT Vector for damages when the latter
collided with Sulpicio Lines, Inc.s passenger ship MV Doa Paz.
The facts are as follows:
On December 19, 1987, motor tanker MT Vector left Limay, Bataan, at about 8:00
p.m., enroute to Masbate, loaded with 8,800 barrels of petroleum products shipped by
petitioner Caltex.[2] MT Vector is a tramping motor tanker owned and operated by Vector
Shipping Corporation, engaged in the business of transporting fuel products such as
gasoline, kerosene, diesel and crude oil. During that particular voyage, the MT Vector
carried on board gasoline and other oil products owned by Caltex by virtue of a charter
contract between them.[3]
On December 20, 1987, at about 6:30 a.m., the passenger ship MV Doa Paz left the
port of Tacloban headed for Manila with a complement of 59 crew members including the
master and his officers, and passengers totaling 1,493 as indicated in the Coast Guard
Clearance.[4] The MV Doa Paz is a passenger and cargo vessel owned and operated by
Sulpicio Lines, Inc. plying the route of Manila/ Tacloban/ Catbalogan/ Manila/ Catbalogan/
Tacloban/ Manila, making trips twice a week.
At about 10:30 p.m. of December 20, 1987, the two vessels collided in the open sea
within the vicinity of Dumali Point between Marinduque and Oriental Mindoro. All the
crewmembers of MV Doa Paz died, while the two survivors from MT Vector claimed that
they were sleeping at the time of the incident.
The MV Doa Paz carried an estimated 4,000 passengers; many indeed, were not in
the passenger manifest. Only 24 survived the tragedy after having been rescued from
the burning waters by vessels that responded to distress calls. [5] Among those who
perished were public school teacher Sebastian Caezal (47 years old) and his daughter
Corazon Caezal (11 years old), both unmanifested passengers but proved to be on board
the vessel.
On March 22, 1988, the board of marine inquiry in BMI Case No. 653-87 after
investigation found that the MT Vector, its registered operator Francisco Soriano, and its
owner and actual operator Vector Shipping Corporation, were at fault and responsible for
its collision with MV Doa Paz.[6]
On February 13, 1989, Teresita Caezal and Sotera E. Caezal, Sebastian Caezals wife
and mother respectively, filed with the Regional Trial Court, Branch 8, Manila, a
complaint for Damages Arising from Breach of Contract of Carriage against Sulpicio
Lines, Inc. (hereafter Sulpicio). Sulpicio, in turn, filed a third party complaint against
Francisco Soriano, Vector Shipping Corporation and Caltex (Philippines), Inc. Sulpicio
alleged that Caltex chartered MT Vector with gross and evident bad faith knowing fully
well that MT Vector was improperly manned, ill-equipped, unseaworthy and a hazard to
safe navigation; as a result, it rammed against MV Doa Paz in the open sea setting MT
Vectors highly flammable cargo ablaze.
On September 15, 1992, the trial court rendered decision dismissing the third party
complaint against petitioner. The dispositive portion reads:

WHEREFORE, judgement is hereby rendered in favor of plaintiffs and against defendant-

3rd party plaintiff Sulpicio Lines, Inc., to wit:

1. For the death of Sebastian E. Caezal and his 11-year old daughter Corazon G. Caezal,
including loss of future earnings of said Sebastian, moral and exemplary damages,
attorneys fees, in the total amount of P 1,241,287.44 and finally;

2. The statutory costs of the proceedings.

Likewise, the 3rd party complaint is hereby DISMISSED for want of substantiation and
with costs against the 3rd party plaintiff.

IT IS SO ORDERED.

DONE IN MANILA, this 15th day of September 1992.

ARSENIO M. GONONG

Judge[7]

On appeal to the Court of Appeals interposed by Sulpicio Lines, Inc., on April 15,
1997, the Court of Appeal modified the trial courts ruling and included petitioner Caltex
as one of the those liable for damages. Thus:

WHEREFORE, in view of all the foregoing, the judgment rendered by the Regional Trial
Court is hereby MODIFIED as follows:

WHEREFORE, defendant Sulpicio Lines, Inc., is ordered to pay the heirs of Sebastian E.
Caezal and Corazon Caezal:

1. Compensatory damages for the death of Sebastian E.Caezal and Corazon Caezal the
total amount of ONE HUNDRED THOUSAND PESOS (P100,000);

2. Compensatory damages representing the unearned income of Sebastian E. Caezal, in

the total amount of THREE HUNDRED SIX THOUSAND FOUR HUNDRED EIGHTY
(P306,480.00) PESOS;

3. Moral damages in the amount of THREE HUNDRED THOUSAND PESOS (P 300,000.00);

4. Attorneys fees in the concept of actual damages in the amount of FIFTY THOUSAND
PESOS (P 50,000.00);

5. Costs of the suit.

Third party defendants Vector Shipping Co. and Caltex (Phils.), Inc. are held equally liable
under the third party complaint to reimburse/indemnify defendant Sulpicio Lines, Inc. of
the above-mentioned damages, attorneys fees and costs which the latter is adjudged to
pay plaintiffs, the same to be shared half by Vector Shipping Co. (being the vessel at
fault for the collision) and the other half by Caltex (Phils.), Inc. (being the charterer that
negligently caused the shipping of combustible cargo aboard an unseaworthy vessel).

SO ORDERED.

JORGE S. IMPERIAL

Associate Justice
WE CONCUR:

RAMON U. MABUTAS. JR. PORTIA ALIO HERMACHUELOS

Associate Justice Associate Justice[8]

Hence, this petition.

We find the petition meritorious.
First: The charterer has no liability for damages under Philippine Maritime laws.
The respective rights and duties of a shipper and the carrier depends not on whether
the carrier is public or private, but on whether the contract of carriage is a bill of lading
or equivalent shipping documents on the one hand, or a charter party or similar contract
on the other.[9]
Petitioner and Vector entered into a contract of affreightment, also known as a
voyage charter.[10]
A charter party is a contract by which an entire ship, or some principal part thereof, is
let by the owner to another person for a specified time or use; a contract of
affreightment is one by which the owner of a ship or other vessel lets the whole or part
of her to a merchant or other person for the conveyance of goods, on a particular
voyage, in consideration of the payment of freight.[11]
A contract of affreightment may be either time charter, wherein the leased vessel is
leased to the charterer for a fixed period of time, or voyage charter, wherein the ship is
leased for a single voyage. In both cases, the charter-party provides for the hire of the
vessel only, either for a determinate period of time or for a single or consecutive voyage,
the ship owner to supply the ships store, pay for the wages of the master of the crew,
and defray the expenses for the maintenance of the ship.[12]
Under a demise or bareboat charter on the other hand, the charterer mans the
vessel with his own people and becomes, in effect, the owner for the voyage or service
stipulated, subject to liability for damages caused by negligence.
If the charter is a contract of affreightment, which leaves the general owner in
possession of the ship as owner for the voyage, the rights and the responsibilities of
ownership rest on the owner. The charterer is free from liability to third persons in
respect of the ship.[13]
Second : MT Vector is a common carrier
Charter parties fall into three main categories: (1) Demise or bareboat, (2) time
charter, (3) voyage charter. Does a charter party agreement turn the common carrier
into a private one? We need to answer this question in order to shed light on the
responsibilities of the parties.
In this case, the charter party agreement did not convert the common carrier into a
private carrier. The parties entered into a voyage charter, which retains the character of
the vessel as a common carrier.
In Planters Products, Inc. vs. Court of Appeals,[14] we said:

It is therefore imperative that a public carrier shall remain as such, notwithstanding the
charter of the whole or portion of a vessel by one or more persons, provided the charter
is limited to the ship only, as in the case of a time-charter or voyage charter. It is only
when the charter includes both the vessel and its crew, as in a bareboat or demise that a
common carrier becomes private, at least insofar as the particular voyage covering the
charter-party is concerned. Indubitably, a ship-owner in a time or voyage charter retains
possession and control of the ship, although her holds may, for the moment, be the
property of the charterer.

Later, we ruled in Coastwise Lighterage Corporation vs. Court of Appeals:[15]

Although a charter party may transform a common carrier into a private one, the same
however is not true in a contract of affreightment xxx

A common carrier is a person or corporation whose regular business is to carry

passengers or property for all persons who may choose to employ and to remunerate
him.[16] MT Vector fits the definition of a common carrier under Article 1732 of the Civil
Code. In Guzman vs. Court of Appeals,[17] we ruled:
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 for 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 services on a 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.

It appears to the Court that private respondent is properly characterized as a common

carrier even though he merely back-hauled goods for other merchants from Manila to
Pangasinan, although such backhauling was done on a periodic, occasional rather than
regular or scheduled manner, and even though respondents principal occupation was not
the carriage of goods for others. There is no dispute that private respondent charged his
customers a fee for hauling their goods; that the fee frequently fell below commercial
freight rates is not relevant here.

Under the Carriage of Goods by Sea Act :

Sec. 3. (1) The carrier shall be bound before and at the beginning of the voyage to
exercise due diligence to -

(a) Make the ship seaworthy;

(b) Properly man, equip, and supply the ship;
xxx xxx xxx
Thus, the carriers are deemed to warrant impliedly the seaworthiness of the ship. For
a vessel to be seaworthy, it must be adequately equipped for the voyage and
manned with a sufficient number of competent officers and crew. The failure of a
common carrier to maintain in seaworthy condition the vessel involved in its contract of
carriage is a clear breach of its duty prescribed in Article 1755 of the Civil Code. [18]
The provisions owed their conception to the nature of the business of common
carriers. This business is impressed with a special public duty. The public must of
necessity rely on the care and skill of common carriers in the vigilance over the goods
and safety of the passengers, especially because with the modern development of
science and invention, transportation has become more rapid, more complicated and
somehow more hazardous.[19] For these reasons, a passenger or a shipper of goods is
under no obligation to conduct an inspection of the ship and its crew, the carrier being
obliged by law to impliedly warrant its seaworthiness.
This aside, we now rule on whether Caltex is liable for damages under the Civil Code.
Third: Is Caltex liable for damages under the Civil Code?
We rule that it is not.
 Sulpicio argues that Caltex negligently shipped its highly combustible fuel cargo
aboard an unseaworthy vessel such as the MT Vector when Caltex:
1. Did not take steps to have M/T Vectors certificate of inspection and coastwise
license renewed;
2. Proceeded to ship its cargo despite defects found by Mr. Carlos Tan of Bataan
Refinery Corporation;
3. Witnessed M/T Vector submitting fake documents and certificates to the
Philippine Coast Guard.
Sulpicio further argues that Caltex chose MT Vector to transport its cargo despite
these deficiencies:
1. The master of M/T Vector did not posses the required Chief Mate license to
command and navigate the vessel;
2. The second mate, Ronaldo Tarife, had the license of a Minor Patron, authorized
to navigate only in bays and rivers when the subject collision occurred in the
open sea;
3. The Chief Engineer, Filoteo Aguas, had no license to operate the engine of the
vessel;
4. The vessel did not have a Third Mate, a radio operator and a lookout; and
5. The vessel had a defective main engine.[20]
As basis for the liability of Caltex, the Court of Appeals relied on Articles 20 and 2176
of the Civil Code, which provide:

Article 20. - Every person who contrary to law, willfully or negligently causes damage to
another, shall indemnify the latter for the same.

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.

And what is negligence?

The Civil Code provides:

Article 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 Article 1171 and 2201 paragraph 2, shall apply.

If the law 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.

In Southeastern College, Inc. vs. Court of Appeals,[21] we said that negligence, as

commonly understood, is conduct which naturally or reasonably creates undue risk or
harm to others. It may be the failure to observe that degree of care, precaution, and
vigilance, which the circumstances justly demand, or the omission to do something
which ordinarily regulate the conduct of human affairs, would do.
The charterer of a vessel has no obligation before transporting its cargo to ensure
that the vessel it chartered complied with all legal requirements. The duty rests upon the
common carrier simply for being engaged in public service. [22] The Civil Code demands
diligence which is required by the nature of the obligation and that which corresponds
with the circumstances of the persons, the time and the place.Hence, considering the
nature of the obligation between Caltex and MT Vector, the liability as found by the Court
of Appeals is without basis.
The relationship between the parties in this case is governed by special
laws. Because of the implied warranty of seaworthiness, [23] shippers of goods, when
transacting with common carriers, are not expected to inquire into the vessels
seaworthiness, genuineness of its licenses and compliance with all maritime laws. To
demand more from shippers and hold them liable in case of failure exhibits nothing but
the futility of our maritime laws insofar as the protection of the public in general is
concerned. By the same token, we cannot expect passengers to inquire every time they
board a common carrier, whether the carrier possesses the necessary papers or that all
the carriers employees are qualified. Such a practice would be an absurdity in a business
where time is always of the essence. Considering the nature of transportation business,
passengers and shippers alike customarily presume that common carriers possess all the
legal requisites in its operation.
Thus, the nature of the obligation of Caltex demands ordinary diligence like any other
shipper in shipping his cargoes.
A cursory reading of the records convinces us that Caltex had reasons to believe that
MT Vector could legally transport cargo that time of the year.
Atty. Poblador: Mr. Witness, I direct your attention to this portion here containing the
entries here under VESSELS DOCUMENTS
1. Certificate of Inspection No. 1290-85, issued December 21, 1986, and Expires
December 7, 1987, Mr. Witness, what steps did you take regarding the
impending expiry of the C.I. or the Certificate of Inspection No. 1290-85 during
the hiring of MT Vector?
Apolinar Ng: At the time when I extended the Contract, I did nothing because the
tanker has a valid C.I. which will expire on December 7, 1987 but on the last week
of November, I called the attention of Mr. Abalos to ensure that the C.I. be renewed
and Mr. Abalos, in turn, assured me they will renew the same.
Q: What happened after that?
A: On the first week of December, I again made a follow-up from Mr. Abalos, and said
they were going to send me a copy as soon as possible, sir.[24]
xxx xxx xxx
Q: What did you do with the C.I.?
A: We did not insist on getting a copy of the C.I. from Mr. Abalos on the first place,
because of our long business relation, we trust Mr. Abalos and the fact that the
vessel was able to sail indicates that the documents are in order. xxx[25]
On cross examination -
Atty. Sarenas: This being the case, and this being an admission by you, this
Certificate of Inspection has expired on December 7. Did it occur to you not to let
the vessel sail on that day because of the very approaching date of expiration?
Apolinar Ng: No sir, because as I said before, the operation Manager assured us that
they were able to secure a renewal of the Certificate of Inspection and that they
will in time submit us a copy.[26]
Finally, on Mr. Ngs redirect examination:
Atty. Poblador: Mr. Witness, were you aware of the pending expiry of the Certificate
of Inspection in the coastwise license on December 7, 1987. What was your
assurance for the record that this document was renewed by the MT Vector?
Atty. Sarenas: xxx
Atty. Poblador: The certificate of Inspection?
A: As I said, firstly, we trusted Mr. Abalos as he is a long time business partner;
secondly, those three years, they were allowed to sail by the Coast Guard. That are
some that make me believe that they in fact were able to secure the necessary
renewal.
Q: If the Coast Guard clears a vessel to sail, what would that mean?
Atty. Sarenas: Objection.
 Court: He already answered that in the cross examination to the effect that if it was
allowed, referring to MV Vector, to sail, where it is loaded and that it was scheduled
for a destination by the Coast Guard, it means that it has Certificate of Inspection
extended as assured to this witness by Restituto Abalos. That in no case MV Vector
will be allowed to sail if the Certificate of Inspection is, indeed, not to be
extended. That was his repeated explanation to the cross-examination. So, there is
no need to clarify the same in the re-direct examination.[27]
Caltex and Vector Shipping Corporation had been doing business since 1985, or for
about two years before the tragic incident occurred in 1987. Past services rendered
showed no reason for Caltex to observe a higher degree of diligence.
Clearly, as a mere voyage charterer, Caltex had the right to presume that the ship
was seaworthy as even the Philippine Coast Guard itself was convinced of its
seaworthiness. All things considered, we find no legal basis to hold petitioner liable for
damages.
As Vector Shipping Corporation did not appeal from the Court of Appeals decision, we
limit our ruling to the liability of Caltex alone. However, we maintain the Court of Appeals
ruling insofar as Vector is concerned .
WHEREFORE, the Court hereby GRANTS the petition and SETS ASIDE the decision of
the Court of Appeals in CA-G. R. CV No. 39626, promulgated on April 15, 1997, insofar as
it held Caltex liable under the third party complaint to reimburse/indemnify defendant
Sulpicio Lines, Inc. the damages the latter is adjudged to pay plaintiffs-appellees. The
Court AFFIRMS the decision of the Court of Appeals insofar as it orders Sulpicio Lines, Inc.
to pay the heirs of Sebastian E. Caezal and Corazon Caezal damages as set forth
therein. Third-party defendant-appellee Vector Shipping Corporation and Francisco
Soriano are held liable to reimburse/indemnify defendant Sulpicio Lines, Inc. whatever
damages, attorneys fees and costs the latter is adjudged to pay plaintiffs-appellees in
the case.
No costs in this instance.
SO ORDERED.

[G.R. No. 137775. March 31, 2005]

FGU INSURANCE CORPORATION, petitioner, vs. THE COURT OF APPEALS, SAN

MIGUEL CORPORATION, and ESTATE OF ANG GUI, represented by LUCIO,
JULIAN, and JAIME, all surnamed ANG, and CO TO, respondents.

[G.R. No. 140704. March 31, 2005]

ESTATE OF ANG GUI, Represented by LUCIO, JULIAN and JAIME, all surnamed
ANG, and CO TO, petitioners, vs. THE HONORABLE COURT OF APPEALS,
SAN MIGUEL CORP., and FGU INSURANCE CORP., respondents.

DECISION
CHICO-NAZARIO, J.:

Before Us are two separate Petitions for review assailing the Decision [1] of the Court
of Appeals in CA-G.R. CV No. 49624 entitled, San Miguel Corporation, Plaintiff-Appellee
versus Estate of Ang Gui, represented by Lucio, Julian and Jaime, all surnamed Ang, and
Co To, Defendants-Appellants, ThirdParty Plaintiffs versus FGU Insurance Corporation,
Third-Party Defendant-Appellant, which affirmed in toto the decision[2] of the Regional
Trial Court of Cebu City, Branch 22. The dispositive portion of the Court of Appeals
decision reads:

WHEREFORE, for all the foregoing, judgment is hereby rendered as follows:

1) Ordering defendants to pay plaintiff the sum of

P1,346,197.00 and an interest of 6% per annum to be reckoned from the filing of
this case on October 2, 1990;
2) Ordering defendants to pay plaintiff the sum of
P25,000.00 for attorneys fees and an additional sum of P10,000.00 as litigation
expenses;
3) With cost against defendants.

For the Third-Party Complaint:

1) Ordering third-party defendant FGU Insurance Company to pay and reimburse

defendants the amount of P632,700.00.[3]

The Facts

Evidence shows that Anco Enterprises Company (ANCO), a partnership between Ang
Gui and Co To, was engaged in the shipping business. It owned the M/T ANCO tugboat
and the D/B Lucio barge which were operated as common carriers. Since the D/B Lucio
had no engine of its own, it could not maneuver by itself and had to be towed by a
tugboat for it to move from one place to another.
On 23 September 1979, San Miguel Corporation (SMC) shipped from Mandaue City,
Cebu, on board the D/B Lucio, for towage by M/T ANCO, the following cargoes:

Bill of Lading No. Shipment Destination

1 25,000 cases Pale Pilsen Estancia, Iloilo

350 cases Cerveza Negra Estancia, Iloilo
2 15,000 cases Pale Pilsen San Jose, Antique
200 cases Cerveza Negra San Jose, Antique
The consignee for the cargoes covered by Bill of Lading No. 1 was SMCs Beer
Marketing Division (BMD)-Estancia Beer Sales Office, Estancia, Iloilo, while the consignee
for the cargoes covered by Bill of Lading No. 2 was SMCs BMD-San Jose Beer Sales Office,
San Jose, Antique.
The D/B Lucio was towed by the M/T ANCO all the way from Mandaue City to San
Jose, Antique. The vessels arrived at San Jose, Antique, at about one oclock in the
afternoon of 30 September 1979. The tugboat M/T ANCO left the barge immediately after
reaching San Jose, Antique.
When the barge and tugboat arrived at San Jose, Antique, in the afternoon of 30
September 1979, the clouds over the area were dark and the waves were already big.
The arrastre workers unloading the cargoes of SMC on board the D/B Lucio began to
complain about their difficulty in unloading the cargoes. SMCs District Sales Supervisor,
Fernando Macabuag, requested ANCOs representative to transfer the barge to a safer
place because the vessel might not be able to withstand the big waves.
ANCOs representative did not heed the request because he was confident that the
barge could withstand the waves. This, notwithstanding the fact that at that time, only
the M/T ANCO was left at the wharf of San Jose, Antique, as all other vessels already left
the wharf to seek shelter. With the waves growing bigger and bigger, only Ten Thousand
Seven Hundred Ninety (10,790) cases of beer were discharged into the custody of the
arrastre operator.
At about ten to eleven oclock in the evening of 01 October 1979, the crew of D/B
Lucio abandoned the vessel because the barges rope attached to the wharf was cut off
by the big waves. At around midnight, the barge run aground and was broken and the
cargoes of beer in the barge were swept away.
As a result, ANCO failed to deliver to SMCs consignee Twenty-Nine Thousand Two
Hundred Ten (29,210) cases of Pale Pilsen and Five Hundred Fifty (550) cases of Cerveza
Negra. The value per case of Pale Pilsen was Forty-Five Pesos and Twenty Centavos
(P45.20). The value of a case of Cerveza Negra was Forty-Seven Pesos and Ten Centavos
(P47.10), hence, SMCs claim against ANCO amounted to One Million Three Hundred
Forty-Six Thousand One Hundred Ninety-Seven Pesos (P1,346,197.00).
As a consequence of the incident, SMC filed a complaint for Breach of Contract of
Carriage and Damages against ANCO for the amount of One Million Three Hundred Forty-
Six Thousand One Hundred Ninety-Seven Pesos (P1,346,197.00) plus interest, litigation
expenses and Twenty-Five Percent (25%) of the total claim as attorneys fees.
Upon Ang Guis death, ANCO, as a partnership, was dissolved hence, on 26 January
1993, SMC filed a second amended complaint which was admitted by the Court
impleading the surviving partner, Co To and the Estate of Ang Gui represented by Lucio,
Julian and Jaime, all surnamed Ang. The substituted defendants adopted the original
answer with counterclaim of ANCO since the substantial allegations of the original
complaint and the amended complaint are practically the same.
ANCO admitted that the cases of beer Pale Pilsen and Cerveza Negra mentioned in
the complaint were indeed loaded on the vessel belonging to ANCO. It claimed however
that it had an agreement with SMC that ANCO would not be liable for any losses or
damages resulting to the cargoes by reason of fortuitous event. Since the cases of beer
Pale Pilsen and Cerveza Negra were lost by reason of a storm, a fortuitous event which
battered and sunk the vessel in which they were loaded, they should not be held liable.
ANCO further asserted that there was an agreement between them and SMC to insure
the cargoes in order to recover indemnity in case of loss. Pursuant to that agreement,
the cargoes to the extent of Twenty Thousand (20,000) cases was insured with FGU
Insurance Corporation (FGU) for the total amount of Eight Hundred Fifty-Eight Thousand
Five Hundred Pesos (P858,500.00) per Marine Insurance Policy No. 29591.
Subsequently, ANCO, with leave of court, filed a Third-Party Complaint against FGU,
alleging that before the vessel of ANCO left for San Jose, Antique with the cargoes owned
by SMC, the cargoes, to the extent of Twenty Thousand (20,000) cases, were insured with
FGU for a total amount of Eight Hundred Fifty-Eight Thousand Five Hundred Pesos
(P858,500.00) under Marine Insurance Policy No. 29591. ANCO further alleged that on or
about 02 October 1979, by reason of very strong winds and heavy waves brought about
by a passing typhoon, the vessel run aground near the vicinity of San Jose, Antique, as a
result of which, the vessel was totally wrecked and its cargoes owned by SMC were lost
and/or destroyed. According to ANCO, the loss of said cargoes occurred as a result of
risks insured against in the insurance policy and during the existence and lifetime of said
insurance policy. ANCO went on to assert that in the remote possibility that the court will
order ANCO to pay SMCs claim, the third-party defendant corporation should be held
liable to indemnify or reimburse ANCO whatever amounts, or damages, it may be
required to pay to SMC.
In its answer to the Third-Party complaint, third-party defendant FGU admitted the
existence of the Insurance Policy under Marine Cover Note No. 29591 but maintained
that the alleged loss of the cargoes covered by the said insurance policy cannot be
attributed directly or indirectly to any of the risks insured against in the said insurance
policy. According to FGU, it is only liable under the policy to Third-party Plaintiff ANCO
and/or Plaintiff SMC in case of any of the following:
a) total loss of the entire shipment;
b) loss of any case as a result of the sinking of the vessel; or
c) loss as a result of the vessel being on fire.
Furthermore, FGU alleged that the Third-Party Plaintiff ANCO and Plaintiff SMC failed
to exercise ordinary diligence or the diligence of a good father of the family in the care
and supervision of the cargoes insured to prevent its loss and/or destruction.
 Third-Party defendant FGU prayed for the dismissal of the Third-Party Complaint and
asked for actual, moral, and exemplary damages and attorneys fees.[1]
The trial court found that while the cargoes were indeed lost due to fortuitous event,
there was failure on ANCOs part, through their representatives, to observe the degree of
diligence required that would exonerate them from liability. The trial court thus held the
Estate of Ang Gui and Co To liable to SMC for the amount of the lost shipment. With
respect to the Third-Party complaint, the court a quo found FGU liable to bear Fifty-Three
Percent (53%) of the amount of the lost cargoes. According to the trial court:

. . . Evidence is to the effect that the D/B Lucio, on which the cargo insured, run-aground
and was broken and the beer cargoes on the said barge were swept away. It is the sense
of this Court that the risk insured against was the cause of the loss.

...

Since the total cargo was 40,550 cases which had a total amount of P1,833,905.00 and
the amount of the policy was only for P858,500.00, defendants as assured, therefore,
were considered co-insurers of third-party defendant FGU Insurance Corporation to the
extent of 975,405.00 value of the cargo. Consequently, inasmuch as there was partial
loss of only P1,346,197.00, the assured shall bear 53% of the loss[4] [Emphasis ours]

The appellate court affirmed in toto the decision of the lower court and denied the
motion for reconsideration and the supplemental motion for reconsideration.
Hence, the petitions.

The Issues

In G.R. No. 137775, the grounds for review raised by petitioner FGU can be
summarized into two: 1) Whether or not respondent Court of Appeals committed grave
abuse of discretion in holding FGU liable under the insurance contract considering the
circumstances surrounding the loss of the cargoes; and 2) Whether or not the Court of
Appeals committed an error of law in holding that the doctrine of res judicata applies in
the instant case.
In G.R. No. 140704, petitioner Estate of Ang Gui and Co To assail the decision of the
appellate court based on the following assignments of error: 1) The Court of Appeals
committed grave abuse of discretion in affirming the findings of the lower court that the
negligence of the crewmembers of the D/B Lucio was the proximate cause of the loss of
the cargoes; and 2) The respondent court acted with grave abuse of discretion when it
ruled that the appeal was without merit despite the fact that said court had accepted the
decision in Civil Case No. R-19341, as affirmed by the Court of Appeals and the Supreme
Court, as res judicata.

Ruling of the Court

First, we shall endeavor to dispose of the common issue raised by both petitioners in
their respective petitions for review, that is, whether or not the doctrine of res
judicata applies in the instant case.
It is ANCOs contention that the decision in Civil Case No. R-19341, [5] which was
decided in its favor, constitutes res judicata with respect to the issues raised in the case
at bar.
The contention is without merit. There can be no res judicata as between Civil Case
No. R-19341 and the case at bar. In order for res judicata to be made applicable in a
case, the following essential requisites must be present: 1) the former judgment must be
final; 2) the former judgment must have been rendered by a court having jurisdiction
over the subject matter and the parties; 3) the former judgment must be a judgment or
order on the merits; and 4) there must be between the first and second action identity of
parties, identity of subject matter, and identity of causes of action.[6]
 There is no question that the first three elements of res judicata as enumerated
above are indeed satisfied by the decision in Civil Case No. R-19341. However, the
doctrine is still inapplicable due to the absence of the last essential requisite of identity
of parties, subject matter and causes of action.
The parties in Civil Case No. R-19341 were ANCO as plaintiff and FGU as defendant
while in the instant case, SMC is the plaintiff and the Estate of Ang Gui represented by
Lucio, Julian and Jaime, all surnamed Ang and Co To as defendants, with the latter merely
impleading FGU as third-party defendant.
The subject matter of Civil Case No. R-19341 was the insurance contract entered into
by ANCO, the owner of the vessel, with FGU covering the vessel D/B Lucio, while in the
instant case, the subject matter of litigation is the loss of the cargoes of SMC, as shipper,
loaded in the D/B Lucio and the resulting failure of ANCO to deliver to SMCs consignees
the lost cargo. Otherwise stated, the controversy in the first case involved the rights and
liabilities of the shipowner vis--vis that of the insurer, while the present case involves the
rights and liabilities of the shipper vis--vis that of the shipowner. Specifically, Civil Case
No. R-19341 was an action for Specific Performance and Damages based on FGU Marine
Hull Insurance Policy No. VMF-MH-13519 covering the vessel D/B Lucio, while the instant
case is an action for Breach of Contract of Carriage and Damages filed by SMC against
ANCO based on Bill of Lading No. 1 and No. 2, with defendant ANCO seeking
reimbursement from FGU under Insurance Policy No. MA-58486, should the former be
held liable to pay SMC.
Moreover, the subject matter of the third-party complaint against FGU in this case is
different from that in Civil Case No. R-19341. In the latter, ANCO was suing FGU for the
insurance contract over the vessel while in the former, the third-party complaint arose
from the insurance contract covering the cargoes on board the D/B Lucio.
The doctrine of res judicata precludes the re-litigation of a particular fact or issue
already passed upon by a court of competent jurisdiction in a former judgment, in
another action between the same parties based on a different claim or cause of action.
The judgment in the prior action operates as estoppel only as to those matters in issue
or points controverted, upon the determination of which the finding or judgment was
rendered.[7] If a particular point or question is in issue in the second action, and the
judgment will depend on the determination of that particular point or question, a former
judgment between the same parties or their privies will be final and conclusive in the
second if that same point or question was in issue and adjudicated in the first suit.[8]
Since the case at bar arose from the same incident as that involved in Civil Case No.
R-19341, only findings with respect to matters passed upon by the court in the former
judgment are conclusive in the disposition of the instant case. A careful perusal of the
decision in Civil Case No. R-19341 will reveal that the pivotal issues resolved by the
lower court, as affirmed by both the Court of Appeals and the Supreme Court, can be
summarized into three legal conclusions: 1) that the D/B Lucio before and during the
voyage was seaworthy; 2) that there was proper notice of loss made by ANCO within the
reglementary period; and 3) that the vessel D/B Lucio was a constructive total loss.
Said decision, however, did not pass upon the issues raised in the instant case.
Absent therein was any discussion regarding the liability of ANCO for the loss of the
cargoes. Neither did the lower court pass upon the issue of the alleged negligence of the
crewmembers of the D/B Lucio being the cause of the loss of the cargoes owned by SMC.
Therefore, based on the foregoing discussion, we are reversing the findings of the
Court of Appeals that there is res judicata.
Anent ANCOs first assignment of error, i.e., the appellate court committed error in
concluding that the negligence of ANCOs representatives was the proximate cause of the
loss, said issue is a question of fact assailing the lower courts appreciation of evidence
on the negligence or lack thereof of the crewmembers of the D/B Lucio. As a rule,
findings of fact of lower courts, particularly when affirmed by the appellate court, are
deemed final and conclusive. The Supreme Court cannot review such findings on appeal,
especially when they are borne out by the records or are based on substantial evidence.
[9]
As held in the case of Donato v. Court of Appeals,[10] in this jurisdiction, it is a
fundamental and settled rule that findings of fact by the trial court are entitled to great
weight on appeal and should not be disturbed unless for strong and cogent reasons
because the trial court is in a better position to examine real evidence, as well as to
observe the demeanor of the witnesses while testifying in the case.[11]
It is not the function of this Court to analyze or weigh evidence all over again, unless
there is a showing that the findings of the lower court are totally devoid of support or are
glaringly erroneous as to constitute palpable error or grave abuse of discretion. [12]
A careful study of the records shows no cogent reason to fault the findings of the
lower court, as sustained by the appellate court, that ANCOs representatives failed to
exercise the extraordinary degree of diligence required by the law to exculpate them
from liability for the loss of the cargoes.
First, ANCO admitted that they failed to deliver to the designated consignee the
Twenty Nine Thousand Two Hundred Ten (29,210) cases of Pale Pilsen and Five Hundred
Fifty (550) cases of Cerveza Negra.
Second, it is borne out in the testimony of the witnesses on record that the barge D/B
Lucio had no engine of its own and could not maneuver by itself. Yet, the patron of
ANCOs tugboat M/T ANCO left it to fend for itself notwithstanding the fact that as the two
vessels arrived at the port of San Jose, Antique, signs of the impending storm were
already manifest. As stated by the lower court, witness Mr. Anastacio Manilag testified
that the captain or patron of the tugboat M/T ANCO left the barge D/B Lucio immediately
after it reached San Jose, Antique, despite the fact that there were already big waves and
the area was already dark. This is corroborated by defendants own witness, Mr. Fernando
Macabueg.[13]
The trial court continued:

At that precise moment, since it is the duty of the defendant to exercise and observe
extraordinary diligence in the vigilance over the cargo of the plaintiff, the patron or
captain of M/T ANCO, representing the defendant could have placed D/B Lucio in a very
safe location before they left knowing or sensing at that time the coming of a typhoon.
The presence of big waves and dark clouds could have warned the patron or captain of
M/T ANCO to insure the safety of D/B Lucio including its cargo. D/B Lucio being a barge,
without its engine, as the patron or captain of M/T ANCO knew, could not possibly
maneuver by itself. Had the patron or captain of M/T ANCO, the representative of the
defendants observed extraordinary diligence in placing the D/B Lucio in a safe place, the
loss to the cargo of the plaintiff could not have occurred. In short, therefore, defendants
through their representatives, failed to observe the degree of diligence required of them
under the provision of Art. 1733 of the Civil Code of the Philippines.[14]

Petitioners Estate of Ang Gui and Co To, in their Memorandum, asserted that the
contention of respondents SMC and FGU that the crewmembers of D/B Lucio should have
left port at the onset of the typhoon is like advising the fish to jump from the frying pan
into the fire and an advice that borders on madness.[15]
The argument does not persuade. The records show that the D/B Lucio was the only
vessel left at San Jose, Antique, during the time in question. The other vessels were
transferred and temporarily moved to Malandong, 5 kilometers from wharf where the
barge remained.[16] Clearly, the transferred vessels were definitely safer in Malandong
than at the port of San Jose, Antique, at that particular time, a fact which petitioners
failed to dispute
ANCOs arguments boil down to the claim that the loss of the cargoes was caused by
the typhoon Sisang, a fortuitous event (caso fortuito), and there was no fault or
negligence on their part. In fact, ANCO claims that their crewmembers exercised due
diligence to prevent or minimize the loss of the cargoes but their efforts proved no match
to the forces unleashed by the typhoon which, in petitioners own words was, by any
yardstick, a natural calamity, a fortuitous event, an act of God, the consequences of
which petitioners could not be held liable for.[17]
The Civil Code provides:
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 vigilance over the goods is further expressed in Articles
1734, 1735, and 1745 Nos. 5, 6, and 7 . . .

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;

...

Art. 1739. 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 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 loss,
destruction, or deterioration of the goods . . . (Emphasis supplied)

Caso fortuito or force majeure (which in law are identical insofar as they exempt an
obligor from liability)[18] by definition, are extraordinary events not foreseeable or
avoidable, events that could not be foreseen, or which though foreseen, were inevitable.
It is therefore not enough that the event should not have been foreseen or anticipated,
as is commonly believed but it must be one impossible to foresee or to avoid. [19]
In this case, the calamity which caused the loss of the cargoes was not unforeseen
nor was it unavoidable. In fact, the other vessels in the port of San Jose, Antique,
managed to transfer to another place, a circumstance which prompted SMCs District
Sales Supervisor to request that the D/B Lucio be likewise transferred, but to no avail.
The D/B Lucio had no engine and could not maneuver by itself. Even if ANCOs
representatives wanted to transfer it, they no longer had any means to do so as the
tugboat M/T ANCO had already departed, leaving the barge to its own devices. The
captain of the tugboat should have had the foresight not to leave the barge alone
considering the pending storm.
While the loss of the cargoes was admittedly caused by the typhoon Sisang, a natural
disaster, ANCO could not escape liability to respondent SMC. The records clearly show
the failure of petitioners representatives to exercise the extraordinary degree of diligence
mandated by law. To be exempted from responsibility, the natural disaster should have
been the proximate and only cause of the loss. [20] There must have been no contributory
negligence on the part of the common carrier. As held in the case of Limpangco Sons v.
Yangco Steamship Co.:[21]

. . . To be exempt from liability because of an act of God, the tug must be free from any
previous negligence or misconduct by which that loss or damage may have been
occasioned. For, although the immediate or proximate cause of the loss in any given
instance may have been what is termed an act of God, yet, if the tug unnecessarily
exposed the two to such accident by any culpable act or omission of its own, it is not
excused.[22]

Therefore, as correctly pointed out by the appellate court, there was blatant
negligence on the part of M/T ANCOs crewmembers, first in leaving the engine-less barge
D/B Lucio at the mercy of the storm without the assistance of the tugboat, and again in
failing to heed the request of SMCs representatives to have the barge transferred to a
safer place, as was done by the other vessels in the port; thus, making said blatant
negligence the proximate cause of the loss of the cargoes.
We now come to the issue of whether or not FGU can be held liable under the
insurance policy to reimburse ANCO for the loss of the cargoes despite the findings of the
respondent court that such loss was occasioned by the blatant negligence of the latters
employees.
One of the purposes for taking out insurance is to protect the insured against the
consequences of his own negligence and that of his agents. Thus, it is a basic rule in
insurance that the carelessness and negligence of the insured or his agents constitute no
defense on the part of the insurer. [23] This rule however presupposes that the loss has
occurred due to causes which could not have been prevented by the insured, despite the
exercise of due diligence.
The question now is whether there is a certain degree of negligence on the part of
the insured or his agents that will deprive him the right to recover under the insurance
contract. We say there is. However, to what extent such negligence must go in order to
exonerate the insurer from liability must be evaluated in light of the circumstances
surrounding each case. When evidence show that the insureds negligence or
recklessness is so gross as to be sufficient to constitute a willful act, the insurer must be
exonerated.
In the case of Standard Marine Ins. Co. v. Nome Beach L. & T. Co.,[24] the United States
Supreme Court held that:

The ordinary negligence of the insured and his agents has long been held as a part of the
risk which the insurer takes upon himself, and the existence of which, where it is the
proximate cause of the loss, does not absolve the insurer from liability. But willful
exposure, gross negligence, negligence amounting to misconduct, etc., have often been
held to release the insurer from such liability.[25] [Emphasis ours]

...

In the case of Williams v. New England Insurance Co., 3 Cliff. 244, Fed. Cas. No. 17,731,
the owners of an insured vessel attempted to put her across the bar at Hatteras Inlet.
She struck on the bar and was wrecked. The master knew that the depth of water on the
bar was such as to make the attempted passage dangerous. Judge Clifford held that,
under the circumstances, the loss was not within the protection of the policy, saying:

Authorities to prove that persons insured cannot recover for a loss occasioned by their
own wrongful acts are hardly necessary, as the proposition involves an elementary
principle of universal application. Losses may be recovered by the insured, though
remotely occasioned by the negligence or misconduct of the master or crew, if
proximately caused by the perils insured against, because such mistakes and negligence
are incident to navigation and constitute a part of the perils which those who engage in
such adventures are obliged to incur; but it was never supposed that the insured could
recover indemnity for a loss occasioned by his own wrongful act or by that of any agent
for whose conduct he was responsible.[26] [Emphasis ours]

From the above-mentioned decision, the United States Supreme Court has made a
distinction between ordinary negligence and gross negligence or negligence amounting
to misconduct and its effect on the insureds right to recover under the insurance
contract. According to the Court, while mistake and negligence of the master or crew are
incident to navigation and constitute a part of the perils that the insurer is obliged to
incur, such negligence or recklessness must not be of such gross character as to amount
to misconduct or wrongful acts; otherwise, such negligence shall release the insurer from
liability under the insurance contract.
In the case at bar, both the trial court and the appellate court had concluded from
the evidence that the crewmembers of both the D/B Lucio and the M/T ANCO were
blatantly negligent. To wit:

There was blatant negligence on the part of the employees of defendants-appellants

when the patron (operator) of the tug boat immediately left the barge at the San Jose,
Antique wharf despite the looming bad weather. Negligence was likewise exhibited by
the defendants-appellants representative who did not heed Macabuags request that the
barge be moved to a more secure place. The prudent thing to do, as was done by the
other sea vessels at San Jose, Antique during the time in question, was to transfer the
vessel to a safer wharf. The negligence of the defendants-appellants is proved by the
fact that on 01 October 1979, the only simple vessel left at the wharf in San Jose was the
D/B Lucio.[27] [Emphasis ours]

As stated earlier, this Court does not find any reason to deviate from the conclusion
drawn by the lower court, as sustained by the Court of Appeals, that ANCOs
representatives had failed to exercise extraordinary diligence required of common
carriers in the shipment of SMCs cargoes. Such blatant negligence being the proximate
cause of the loss of the cargoes amounting to One Million Three Hundred Forty-Six
Thousand One Hundred Ninety-Seven Pesos (P1,346,197.00)
This Court, taking into account the circumstances present in the instant case,
concludes that the blatant negligence of ANCOs employees is of such gross character
that it amounts to a wrongful act which must exonerate FGU from liability under the
insurance contract.
WHEREFORE, premises considered, the Decision of the Court of Appeals dated 24
February 1999 is hereby AFFIRMED with MODIFICATION dismissing the third-party
complaint.
SO ORDERED.

G.R. No. 101503 September 15, 1993

PLANTERS PRODUCTS, INC., petitioner,

vs.
COURT OF APPEALS, SORIAMONT STEAMSHIP AGENCIES AND KYOSEI KISEN
KABUSHIKI KAISHA, respondents.

Gonzales, Sinense, Jimenez & Associates for petitioner.

Siguion Reyna, Montecillo & Ongsiako Law Office for private respondents.

BELLOSILLO, J.:

Does a charter-party 1 between a shipowner and a charterer transform a common carrier

into a private one as to negate the civil law presumption of negligence in case of loss or
damage to its cargo?

Planters Products, Inc. (PPI), purchased from Mitsubishi International Corporation

(MITSUBISHI) of New York, U.S.A., 9,329.7069 metric tons (M/T) of Urea 46% fertilizer
which the latter shipped in bulk on 16 June 1974 aboard the cargo vessel M/V "Sun Plum"
owned by private respondent Kyosei Kisen Kabushiki Kaisha (KKKK) from Kenai, Alaska,
U.S.A., to Poro Point, San Fernando, La Union, Philippines, as evidenced by Bill of Lading
No. KP-1 signed by the master of the vessel and issued on the date of departure.

On 17 May 1974, or prior to its voyage, a time charter-party on the vessel M/V "Sun
Plum" pursuant to the Uniform General Charter 2 was entered into between Mitsubishi as
shipper/charterer and KKKK as shipowner, in Tokyo, Japan. 3Riders to the aforesaid
charter-party starting from par. 16 to 40 were attached to the pre-printed agreement.
Addenda Nos. 1, 2, 3 and 4 to the charter-party were also subsequently entered into on
the 18th, 20th, 21st and 27th of May 1974, respectively.

Before loading the fertilizer aboard the vessel, four (4) of her holds 4 were all presumably
inspected by the charterer's representative and found fit to take a load of urea in bulk
pursuant to par. 16 of the charter-party which reads:
 16. . . . At loading port, notice of readiness to be accomplished by certificate
from National Cargo Bureau inspector or substitute appointed by charterers
for his account certifying the vessel's readiness to receive cargo spaces. The
vessel's hold to be properly swept, cleaned and dried at the vessel's expense
and the vessel to be presented clean for use in bulk to the satisfaction of the
inspector before daytime commences. (emphasis supplied)

After the Urea fertilizer was loaded in bulk by stevedores hired by and under the
supervision of the shipper, the steel hatches were closed with heavy iron lids, covered
with three (3) layers of tarpaulin, then tied with steel bonds. The hatches remained
closed and tightly sealed throughout the entire voyage. 5

Upon arrival of the vessel at her port of call on 3 July 1974, the steel pontoon hatches
were opened with the use of the vessel's boom. Petitioner unloaded the cargo from the
holds into its steelbodied dump trucks which were parked alongside the berth, using
metal scoops attached to the ship, pursuant to the terms and conditions of the charter-
partly (which provided for an F.I.O.S. clause). 6 The hatches remained open throughout
the duration of the discharge. 7

Each time a dump truck was filled up, its load of Urea was covered with tarpaulin before
it was transported to the consignee's warehouse located some fifty (50) meters from the
wharf. Midway to the warehouse, the trucks were made to pass through a weighing scale
where they were individually weighed for the purpose of ascertaining the net weight of
the cargo. The port area was windy, certain portions of the route to the warehouse were
sandy and the weather was variable, raining occasionally while the discharge was in
progress. 8 The petitioner's warehouse was made of corrugated galvanized iron (GI)
sheets, with an opening at the front where the dump trucks entered and unloaded the
fertilizer on the warehouse floor. Tarpaulins and GI sheets were placed in-between and
alongside the trucks to contain spillages of the ferilizer. 9

It took eleven (11) days for PPI to unload the cargo, from 5 July to 18 July 1974 (except
July 12th, 14th and 18th). 10A private marine and cargo surveyor, Cargo Superintendents
Company Inc. (CSCI), was hired by PPI to determine the "outturn" of the cargo shipped,
by taking draft readings of the vessel prior to and after discharge. 11 The survey report
submitted by CSCI to the consignee (PPI) dated 19 July 1974 revealed a shortage in the
cargo of 106.726 M/T and that a portion of the Urea fertilizer approximating 18 M/T was
contaminated with dirt. The same results were contained in a Certificate of
Shortage/Damaged Cargo dated 18 July 1974 prepared by PPI which showed that the
cargo delivered was indeed short of 94.839 M/T and about 23 M/T were rendered unfit for
commerce, having been polluted with sand, rust and
dirt. 12

Consequently, PPI sent a claim letter dated 18 December 1974 to Soriamont Steamship
Agencies (SSA), the resident agent of the carrier, KKKK, for P245,969.31 representing the
cost of the alleged shortage in the goods shipped and the diminution in value of that
portion said to have been contaminated with dirt. 13

Respondent SSA explained that they were not able to respond to the consignee's claim
for payment because, according to them, what they received was just a request for
shortlanded certificate and not a formal claim, and that this "request" was denied by
them because they "had nothing to do with the discharge of the shipment." 14 Hence, on
18 July 1975, PPI filed an action for damages with the Court of First Instance of Manila.
The defendant carrier argued that the strict public policy governing common carriers
does not apply to them because they have become private carriers by reason of the
provisions of the charter-party. The court a quo however sustained the claim of the
plaintiff against the defendant carrier for the value of the goods lost or damaged when it
ruled thus: 15

. . . Prescinding from the provision of the law that a common carrier is

presumed negligent in case of loss or damage of the goods it contracts to
transport, all that a shipper has to do in a suit to recover for loss or damage
is to show receipt by the carrier of the goods and to delivery by it of less
 than what it received. After that, the burden of proving that the loss or
damage was due to any of the causes which exempt him from liability is
shipted to the carrier, common or private he may be. Even if the provisions
of the charter-party aforequoted are deemed valid, and the defendants
considered private carriers, it was still incumbent upon them to prove that
the shortage or contamination sustained by the cargo is attributable to the
fault or negligence on the part of the shipper or consignee in the loading,
stowing, trimming and discharge of the cargo. This they failed to do. By this
omission, coupled with their failure to destroy the presumption of negligence
against them, the defendants are liable (emphasis supplied).

On appeal, respondent Court of Appeals reversed the lower court and absolved the
carrier from liability for the value of the cargo that was lost or damaged. 16 Relying on the
1968 case of Home Insurance Co. v. American Steamship Agencies, Inc., 17 the appellate
court ruled that the cargo vessel M/V "Sun Plum" owned by private respondent KKKK was
a private carrier and not a common carrier by reason of the time charterer-party.
Accordingly, the Civil Code provisions on common carriers which set forth a presumption
of negligence do not find application in the case at bar. Thus

. . . In the absence of such presumption, it was incumbent upon the plaintiff-

appellee to adduce sufficient evidence to prove the negligence of the
defendant carrier as alleged in its complaint. It is an old and well settled rule
that if the plaintiff, upon whom rests the burden of proving his cause of
action, fails to show in a satisfactory manner the facts upon which he bases
his claim, the defendant is under no obligation to prove his exception or
defense (Moran, Commentaries on the Rules of Court, Volume 6, p. 2, citing
Belen v. Belen, 13 Phil. 202).

But, the record shows that the plaintiff-appellee dismally failed to prove the
basis of its cause of action, i.e. the alleged negligence of defendant carrier. It
appears that the plaintiff was under the impression that it did not have to
establish defendant's negligence. Be that as it may, contrary to the trial
court's finding, the record of the instant case discloses ample evidence
showing that defendant carrier was not negligent in performing its
obligation . . . 18 (emphasis supplied).

Petitioner PPI appeals to us by way of a petition for review assailing the decision of the
Court of Appeals. Petitioner theorizes that the Home Insurance case has no bearing on
the present controversy because the issue raised therein is the validity of a stipulation in
the charter-party delimiting the liability of the shipowner for loss or damage to goods
cause by want of due deligence on its part or that of its manager to make the vessel
seaworthy in all respects, and not whether the presumption of negligence provided
under the Civil Code applies only to common carriers and not to private
carriers. 19 Petitioner further argues that since the possession and control of the vessel
remain with the shipowner, absent any stipulation to the contrary, such shipowner
should made liable for the negligence of the captain and crew. In fine, PPI faults the
appellate court in not applying the presumption of negligence against respondent carrier,
and instead shifting the onus probandi on the shipper to show want of due deligence on
the part of the carrier, when he was not even at hand to witness what transpired during
the entire voyage.

As earlier stated, the primordial issue here is whether a common carrier becomes a
private carrier by reason of a charter-party; in the negative, whether the shipowner in
the instant case was able to prove that he had exercised that degree of diligence
required of him under the law.

It is said that etymology is the basis of reliable judicial decisions in commercial cases.
This being so, we find it fitting to first define important terms which are relevant to our
discussion.

A "charter-party" is defined as a contract by which an entire ship, or some principal part

thereof, is let by the owner to another person for a specified time or use; 20 a contract of
affreightment by which the owner of a ship or other vessel lets the whole or a part of her
to a merchant or other person for the conveyance of goods, on a particular voyage, in
consideration of the payment of freight; 21 Charter parties are of two types: (a) contract
of affreightment which involves the use of shipping space on vessels leased by the
owner in part or as a whole, to carry goods for others; and, (b) charter by demise or
bareboat charter, by the terms of which the whole vessel is let to the charterer with a
transfer to him of its entire command and possession and consequent control over its
navigation, including the master and the crew, who are his servants. Contract of
affreightment may either be time charter, wherein the vessel is leased to the charterer
for a fixed period of time, or voyage charter, wherein the ship is leased for a single
voyage. 22 In both cases, the charter-party provides for the hire of vessel only, either for
a determinate period of time or for a single or consecutive voyage, the shipowner to
supply the ship's stores, pay for the wages of the master and the crew, and defray the
expenses for the maintenance of the ship.

Upon the other hand, the term "common or public carrier" is defined in Art. 1732 of the
Civil Code. 23 The definition extends to carriers either by land, air or water which hold
themselves out as ready to engage in carrying goods or transporting passengers or both
for compensation as a public employment and not as a casual occupation. The
distinction between a "common or public carrier" and a "private or special carrier" lies in
the character of the business, such that if the undertaking is a single transaction, not a
part of the general business or occupation, although involving the carriage of goods for a
fee, the person or corporation offering such service is a private carrier. 24

Article 1733 of the New Civil Code mandates that common carriers, by reason of the
nature of their business, should observe extraordinary diligence in the vigilance over the
goods they carry. 25 In the case of private carriers, however, the exercise of ordinary
diligence in the carriage of goods will suffice. Moreover, in the case of loss, destruction or
deterioration of the goods, common carriers are presumed to have been at fault or to
have acted negligently, and the burden of proving otherwise rests on them. 26 On the
contrary, no such presumption applies to private carriers, for whosoever alleges damage
to or deterioration of the goods carried has the onus of proving that the cause was the
negligence of the carrier.

It is not disputed that respondent carrier, in the ordinary course of business, operates as
a common carrier, transporting goods indiscriminately for all persons. When petitioner
chartered the vessel M/V "Sun Plum", the ship captain, its officers and compliment were
under the employ of the shipowner and therefore continued to be under its direct
supervision and control. Hardly then can we charge the charterer, a stranger to the crew
and to the ship, with the duty of caring for his cargo when the charterer did not have any
control of the means in doing so. This is evident in the present case considering that the
steering of the ship, the manning of the decks, the determination of the course of the
voyage and other technical incidents of maritime navigation were all consigned to the
officers and crew who were screened, chosen and hired by the shipowner. 27

It is therefore imperative that a public carrier shall remain as such, notwithstanding the
charter of the whole or portion of a vessel by one or more persons, provided the charter
is limited to the ship only, as in the case of a time-charter or voyage-charter. It is only
when the charter includes both the vessel and its crew, as in a bareboat or demise that a
common carrier becomes private, at least insofar as the particular voyage covering the
charter-party is concerned. Indubitably, a shipowner in a time or voyage charter retains
possession and control of the ship, although her holds may, for the moment, be the
property of the charterer. 28

Respondent carrier's heavy reliance on the case of Home Insurance Co. v. American
Steamship Agencies, supra, is misplaced for the reason that the meat of the controversy
therein was the validity of a stipulation in the charter-party exempting the shipowners
from liability for loss due to the negligence of its agent, and not the effects of a special
charter on common carriers. At any rate, the rule in the United States that a ship
chartered by a single shipper to carry special cargo is not a common carrier, 29 does not
find application in our jurisdiction, for we have observed that the growing concern for
safety in the transportation of passengers and /or carriage of goods by sea requires a
more exacting interpretation of admiralty laws, more particularly, the rules governing
common carriers.

We quote with approval the observations of Raoul Colinvaux, the learned barrister-at-
law 30

As a matter of principle, it is difficult to find a valid distinction between cases

in which a ship is used to convey the goods of one and of several persons.
Where the ship herself is let to a charterer, so that he takes over the charge
and control of her, the case is different; the shipowner is not then a carrier.
But where her services only are let, the same grounds for imposing a strict
responsibility exist, whether he is employed by one or many. The master and
the crew are in each case his servants, the freighter in each case is usually
without any representative on board the ship; the same opportunities for
fraud or collusion occur; and the same difficulty in discovering the truth as to
what has taken place arises . . .

In an action for recovery of damages against a common carrier on the goods shipped,
the shipper or consignee should first prove the fact of shipment and its consequent loss
or damage while the same was in the possession, actual or constructive, of the carrier.
Thereafter, the burden of proof shifts to respondent to prove that he has exercised
extraordinary diligence required by law or that the loss, damage or deterioration of the
cargo was due to fortuitous event, or some other circumstances inconsistent with its
liability. 31

To our mind, respondent carrier has sufficiently overcome, by clear and convincing proof,
the prima faciepresumption of negligence.

The master of the carrying vessel, Captain Lee Tae Bo, in his deposition taken on 19 April
1977 before the Philippine Consul and Legal Attache in the Philippine Embassy in Tokyo,
Japan, testified that before the fertilizer was loaded, the four (4) hatches of the vessel
were cleaned, dried and fumigated. After completing the loading of the cargo in bulk in
the ship's holds, the steel pontoon hatches were closed and sealed with iron lids, then
covered with three (3) layers of serviceable tarpaulins which were tied with steel bonds.
The hatches remained close and tightly sealed while the ship was in transit as the weight
of the steel covers made it impossible for a person to open without the use of the ship's
boom. 32

It was also shown during the trial that the hull of the vessel was in good condition,
foreclosing the possibility of spillage of the cargo into the sea or seepage of water inside
the hull of the vessel. 33 When M/V "Sun Plum" docked at its berthing place,
representatives of the consignee boarded, and in the presence of a representative of the
shipowner, the foreman, the stevedores, and a cargo surveyor representing CSCI,
opened the hatches and inspected the condition of the hull of the vessel. The stevedores
unloaded the cargo under the watchful eyes of the shipmates who were overseeing the
whole operation on rotation basis. 34

Verily, the presumption of negligence on the part of the respondent carrier has been
efficaciously overcome by the showing of extraordinary zeal and assiduity exercised by
the carrier in the care of the cargo. This was confirmed by respondent appellate court
thus

. . . Be that as it may, contrary to the trial court's finding, the record of the
instant case discloses ample evidence showing that defendant carrier was
not negligent in performing its obligations. Particularly, the following
testimonies of plaintiff-appellee's own witnesses clearly show absence of
negligence by the defendant carrier; that the hull of the vessel at the time of
the discharge of the cargo was sealed and nobody could open the same
except in the presence of the owner of the cargo and the representatives of
the vessel (TSN, 20 July 1977, p. 14); that the cover of the hatches was made
of steel and it was overlaid with tarpaulins, three layers of tarpaulins and
therefore their contents were protected from the weather (TSN, 5 April 1978,
 p. 24); and, that to open these hatches, the seals would have to be broken,
all the seals were found to be intact (TSN, 20 July 1977, pp. 15-16) (emphasis
supplied).

The period during which private respondent was to observe the degree of diligence
required of it as a public carrier began from the time the cargo was unconditionally
placed in its charge after the vessel's holds were duly inspected and passed scrutiny by
the shipper, up to and until the vessel reached its destination and its hull was
reexamined by the consignee, but prior to unloading. This is clear from the limitation
clause agreed upon by the parties in the Addendum to the standard "GENCON" time
charter-party which provided for an F.I.O.S., meaning, that the loading, stowing, trimming
and discharge of the cargo was to be done by the charterer, free from all risk and
expense to the carrier. 35 Moreover, a shipowner is liable for damage to the cargo
resulting from improper stowage only when the stowing is done by stevedores employed
by him, and therefore under his control and supervision, not when the same is done by
the consignee or stevedores under the employ of the latter. 36

Article 1734 of the New Civil Code provides that common carriers are not responsible for
the loss, destruction or deterioration of the goods if caused by the charterer of the goods
or defects in the packaging or in the containers. The Code of Commerce also provides
that all losses and deterioration which the goods may suffer during the transportation by
reason of fortuitous event, force majeure, or the inherent defect of the goods, shall be
for the account and risk of the shipper, and that proof of these accidents is incumbent
upon the carrier. 37 The carrier, nonetheless, shall be liable for the loss and damage
resulting from the preceding causes if it is proved, as against him, that they arose
through his negligence or by reason of his having failed to take the precautions which
usage has established among careful persons. 38

Respondent carrier presented a witness who testified on the characteristics of the

fertilizer shipped and the expected risks of bulk shipping. Mr. Estanislao Chupungco, a
chemical engineer working with Atlas Fertilizer, described Urea as a chemical compound
consisting mostly of ammonia and carbon monoxide compounds which are used as
fertilizer. Urea also contains 46% nitrogen and is highly soluble in water. However, during
storage, nitrogen and ammonia do not normally evaporate even on a long voyage,
provided that the temperature inside the hull does not exceed eighty (80) degrees
centigrade. Mr. Chupungco further added that in unloading fertilizer in bulk with the use
of a clamped shell, losses due to spillage during such operation amounting to one
percent (1%) against the bill of lading is deemed "normal" or "tolerable." The primary
cause of these spillages is the clamped shell which does not seal very tightly. Also, the
wind tends to blow away some of the materials during the unloading process.

The dissipation of quantities of fertilizer, or its daterioration in value, is caused either by

an extremely high temperature in its place of storage, or when it comes in contact with
water. When Urea is drenched in water, either fresh or saline, some of its particles
dissolve. But the salvaged portion which is in liquid form still remains potent and usable
although no longer saleable in its original market value.

The probability of the cargo being damaged or getting mixed or contaminated with
foreign particles was made greater by the fact that the fertilizer was transported in
"bulk," thereby exposing it to the inimical effects of the elements and the grimy
condition of the various pieces of equipment used in transporting and hauling it.

The evidence of respondent carrier also showed that it was highly improbable for sea
water to seep into the vessel's holds during the voyage since the hull of the vessel was
in good condition and her hatches were tightly closed and firmly sealed, making the M/V
"Sun Plum" in all respects seaworthy to carry the cargo she was chartered for. If there
was loss or contamination of the cargo, it was more likely to have occurred while the
same was being transported from the ship to the dump trucks and finally to the
consignee's warehouse. This may be gleaned from the testimony of the marine and
cargo surveyor of CSCI who supervised the unloading. He explained that the 18 M/T of
alleged "bar order cargo" as contained in their report to PPI was just an approximation or
estimate made by them after the fertilizer was discharged from the vessel and
segregated from the rest of the cargo.

The Court notes that it was in the month of July when the vessel arrived port and
unloaded her cargo. It rained from time to time at the harbor area while the cargo was
being discharged according to the supply officer of PPI, who also testified that it was
windy at the waterfront and along the shoreline where the dump trucks passed enroute
to the consignee's warehouse.

Indeed, we agree with respondent carrier that bulk shipment of highly soluble goods like
fertilizer carries with it the risk of loss or damage. More so, with a variable weather
condition prevalent during its unloading, as was the case at bar. This is a risk the shipper
or the owner of the goods has to face. Clearly, respondent carrier has sufficiently proved
the inherent character of the goods which makes it highly vulnerable to deterioration; as
well as the inadequacy of its packaging which further contributed to the loss. On the
other hand, no proof was adduced by the petitioner showing that the carrier was remise
in the exercise of due diligence in order to minimize the loss or damage to the goods it
carried.

WHEREFORE, the petition is DISMISSED. The assailed decision of the Court of Appeals,
which reversed the trial court, is AFFIRMED. Consequently, Civil Case No. 98623 of the
then Court of the First Instance, now Regional Trial Court, of Manila should be, as it is
hereby DISMISSED.

Costs against petitioner.

SO ORDERED.

VIRGINES CALVO doing business under the name and style TRANSORIENT
CONTAINER TERMINAL SERVICES, INC., petitioner, vs. UCPB GENERAL
INSURANCE CO., INC. (formerly Allied Guarantee Ins. Co.,
Inc.) respondent.

DECISION
MENDOZA, J.:

This is a petition for review of the decision, [1] dated May 31, 2001, of the Court of
Appeals, affirming the decision[2] of the Regional Trial Court, Makati City, Branch 148,
which ordered petitioner to pay respondent, as subrogee, the amount of P93,112.00 with
legal interest, representing the value of damaged cargo handled by petitioner, 25%
thereof as attorneys fees, and the cost of the suit.
The facts are as follows:
Petitioner Virgines Calvo is the owner of Transorient Container Terminal Services, Inc.
(TCTSI), a sole proprietorship customs broker. At the time material to this case, petitioner
entered into a contract with San Miguel Corporation (SMC) for the transfer of 114 reels of
semi-chemical fluting paper and 124 reels of kraft liner board from the Port Area in
Manila to SMCs warehouse at the Tabacalera Compound, Romualdez St., Ermita, Manila.
The cargo was insured by respondent UCPB General Insurance Co., Inc.
On July 14, 1990, the shipment in question, contained in 30 metal vans, arrived in
Manila on board M/V Hayakawa Maru and, after 24 hours, were unloaded from the vessel
to the custody of the arrastre operator, Manila Port Services, Inc. From July 23 to July 25,
1990, petitioner, pursuant to her contract with SMC, withdrew the cargo from the
arrastre operator and delivered it to SMCs warehouse in Ermita, Manila. On July 25, 1990,
the goods were inspected by Marine Cargo Surveyors, who found that 15 reels of the
semi-chemical fluting paper were wet/stained/torn and 3 reels of kraft liner board were
likewise torn. The damage was placed at P93,112.00.
 SMC collected payment from respondent UCPB under its insurance contract for the
aforementioned amount. In turn, respondent, as subrogee of SMC, brought suit against
petitioner in the Regional Trial Court, Branch 148, Makati City, which, on December 20,
1995, rendered judgment finding petitioner liable to respondent for the damage to the
shipment.
The trial court held:

It cannot be denied . . . that the subject cargoes sustained damage while in the custody
of defendants. Evidence such as the Warehouse Entry Slip (Exh. E); the Damage Report
(Exh. F) with entries appearing therein, classified as TED and TSN, which the claims
processor, Ms. Agrifina De Luna, claimed to be tearrage at the end and tearrage at the
middle of the subject damaged cargoes respectively, coupled with the Marine Cargo
Survey Report (Exh. H - H-4-A) confirms the fact of the damaged condition of the subject
cargoes. The surveyor[s] report (Exh. H-4-A) in particular, which provides among others
that:

. . . we opine that damages sustained by shipment is attributable to improper handling in

transit presumably whilst in the custody of the broker . . . .

is a finding which cannot be traversed and overturned.

The evidence adduced by the defendants is not enough to sustain [her] defense that
[she is] are not liable. Defendant by reason of the nature of [her] business should have
devised ways and means in order to prevent the damage to the cargoes which it is under
obligation to take custody of and to forthwith deliver to the consignee. Defendant did not
present any evidence on what precaution [she] performed to prevent [the] said incident,
hence the presumption is that the moment the defendant accepts the cargo [she] shall
perform such extraordinary diligence because of the nature of the cargo.

....

Generally speaking under Article 1735 of the Civil Code, if the goods are proved to have
been lost, destroyed or deteriorated, common carriers are presumed to have been at
fault or to have acted negligently, unless they prove that they have observed the
extraordinary diligence required by law. The burden of the plaintiff, therefore, is to prove
merely that the goods he transported have been lost, destroyed or
deteriorated. Thereafter, the burden is shifted to the carrier to prove that he has
exercised the extraordinary diligence required by law. Thus, it has been held that the
mere proof of delivery of goods in good order to a carrier, and of their arrival at the place
of destination in bad order, makes 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. (cited in Commercial Laws of the
Philippines by Agbayani, p. 31, Vol. IV, 1989 Ed.)

Defendant, being a customs brother, warehouseman and at the same time a common
carrier is supposed [to] exercise [the] extraordinary diligence required by law, hence the
extraordinary responsibility 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 the same.[3]

Accordingly, the trial court ordered petitioner to pay the following amounts

1. The sum of P93,112.00 plus interest;

2. 25% thereof as lawyers fee;

3. Costs of suit.[4]
 The decision was affirmed by the Court of Appeals on appeal. Hence this petition for
review on certiorari.
Petitioner contends that:
I. THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR [IN]
DECIDING THE CASE NOT ON THE EVIDENCE PRESENTED BUT ON PURE
SURMISES, SPECULATIONS AND MANIFESTLY MISTAKEN INFERENCE.
II. THE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR IN
CLASSIFYING THE PETITIONER AS A COMMON CARRIER AND NOT AS PRIVATE
OR SPECIAL CARRIER WHO DID NOT HOLD ITS SERVICES TO THE PUBLIC.[5]
It will be convenient to deal with these contentions in the inverse order, for if
petitioner is not a common carrier, although both the trial court and the Court of Appeals
held otherwise, then she is indeed not liable beyond what ordinary diligence in the
vigilance over the goods transported by her, would require. [6] Consequently, any damage
to the cargo she agrees to transport cannot be presumed to have been due to her fault
or negligence.
Petitioner contends that contrary to the findings of the trial court and the Court of
Appeals, she is not a common carrier but a private carrier because, as a customs broker
and warehouseman, she does not indiscriminately hold her services out to the public but
only offers the same to select parties with whom she may contract in the conduct of her
business.
The contention has no merit. In De Guzman v. Court of Appeals,[7] the Court dismissed
a similar contention and held the party to be a common carrier, thus

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 . . . 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 1732
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:

x x x every person that now or hereafter may own, operate, manage, or control in the
Philippines, for hire or compensation, with general or limited 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. x x x [8]
 There is greater reason for holding petitioner to be a common carrier because the
transportation of goods is an integral part of her business. To uphold petitioners
contention would be to deprive those with whom she contracts the protection which the
law affords them notwithstanding the fact that the obligation to carry goods for her
customers, as already noted, is part and parcel of petitioners business.
Now, as to petitioners liability, Art. 1733 of the Civil Code provides:

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. . . .

In Compania Maritima v. Court of Appeals,[9] the meaning of extraordinary diligence in

the vigilance over goods was explained thus:

The extraordinary diligence in the vigilance over the goods tendered for shipment
requires the common carrier to know and to follow the required precaution for avoiding
damage to, or destruction of the goods entrusted to it for sale, carriage and delivery. It
requires common carriers to render service with the greatest skill and foresight and to
use all reasonable means to ascertain the nature and characteristic of goods tendered
for shipment, and to exercise due care in the handling and stowage, including such
methods as their nature requires.

In the case at bar, petitioner denies liability for the damage to the cargo. She claims
that the spoilage or wettage took place while the goods were in the custody of either the
carrying vessel M/V Hayakawa Maru, which transported the cargo to Manila, or the
arrastre operator, to whom the goods were unloaded and who allegedly kept them in
open air for nine days from July 14 to July 23, 1998 notwithstanding the fact that some of
the containers were deformed, cracked, or otherwise damaged, as noted in the Marine
Survey Report (Exh. H), to wit:

MAXU-2062880 - rain gutter deformed/cracked

ICSU-363461-3 - left side rubber gasket on door distorted/partly loose

PERU-204209-4 - with pinholes on roof panel right portion

TOLU-213674-3 - wood flooring we[t] and/or with signs of water soaked

MAXU-201406-0 - with dent/crack on roof panel

ICSU-412105-0 - rubber gasket on left side/door panel partly detached loosened.[10]

In addition, petitioner claims that Marine Cargo Surveyor Ernesto Tolentino testified
that he has no personal knowledge on whether the container vans were first stored in
petitioners warehouse prior to their delivery to the consignee. She likewise claims that
after withdrawing the container vans from the arrastre operator, her driver, Ricardo
Nazarro, immediately delivered the cargo to SMCs warehouse in Ermita, Manila, which is
a mere thirty-minute drive from the Port Area where the cargo came from. Thus, the
damage to the cargo could not have taken place while these were in her custody.[11]
Contrary to petitioners assertion, the Survey Report (Exh. H) of the Marine Cargo
Surveyors indicates that when the shipper transferred the cargo in question to the
arrastre operator, these were covered by clean Equipment Interchange Report (EIR) and,
when petitioners employees withdrew the cargo from the arrastre operator, they did so
without exception or protest either with regard to the condition of container vans
or their contents. The Survey Report pertinently reads

Details of Discharge:

Shipment, provided with our protective supervision was noted discharged ex vessel to
dock of Pier #13 South Harbor, Manila on 14 July 1990, containerized onto 30 x 20
secure metal vans, covered by clean EIRs. Except for slight dents and paint scratches on
side and roof panels, these containers were deemed to have [been] received in good
condition.

....

Transfer/Delivery:

On July 23, 1990, shipment housed onto 30 x 20 cargo containers was [withdrawn] by
Transorient Container Services, Inc. . . . without exception.

[The cargo] was finally delivered to the consignees storage warehouse located at
Tabacalera Compound, Romualdez Street, Ermita, Manila from July 23/25, 1990.[12]

As found by the Court of Appeals:

From the [Survey Report], it [is] clear that the shipment was discharged from the vessel
to the arrastre, Marina Port Services Inc., in good order and condition as evidenced by
clean Equipment Interchange Reports (EIRs). Had there been any damage to the
shipment, there would have been a report to that effect made by the arrastre
operator. The cargoes were withdrawn by the defendant-appellant from the arrastre still
in good order and condition as the same were received by the former without exception,
that is, without any report of damage or loss. Surely, if the container vans were
deformed, cracked, distorted or dented, the defendant-appellant would report it
immediately to the consignee or make an exception on the delivery receipt or note the
same in the Warehouse Entry Slip (WES). None of these took place. To put it simply, the
defendant-appellant received the shipment in good order and condition and delivered
the same to the consignee damaged. We can only conclude that the damages to the
cargo occurred while it was in the possession of the defendant-appellant. Whenever the
thing is lost (or damaged) in the possession of the debtor (or obligor), it shall be
presumed that the loss (or damage) was due to his fault, unless there is proof to the
contrary. No proof was proffered to rebut this legal presumption and the presumption of
negligence attached to a common carrier in case of loss or damage to the goods. [13]

Anent petitioners insistence that the cargo could not have been damaged while in
her custody as she immediately delivered the containers to SMCs compound, suffice it to
say that to prove the exercise of extraordinary diligence, petitioner must do more than
merely show the possibility that some other party could be responsible for the
damage. It must prove that it used all reasonable means to ascertain the nature and
characteristic of goods tendered for [transport] and that [it] exercise[d] due care in the
handling [thereof]. Petitioner failed to do this.
Nor is there basis to exempt petitioner from liability under Art. 1734(4), which
provides

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:

....

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

....

For this provision to apply, the rule is that if the improper packing or, in this case, the
defect/s in the container, is/are known to the carrier or his employees or apparent upon
ordinary observation, but he nevertheless accepts the same without protest or exception
notwithstanding such condition, he is not relieved of liability for damage
resulting therefrom.[14] In this case, petitioner accepted the cargo without exception
despite the apparent defects in some of the container vans. Hence, for failure of
petitioner to prove that she exercised extraordinary diligence in the carriage of goods in
this case or that she is exempt from liability, the presumption of negligence as provided
under Art. 1735[15] holds.
WHEREFORE, the decision of the Court of Appeals, dated May 31, 2001, is
AFFIRMED.
SO ORDERED.

PHILIPPINE AIRLINES, INC., petitioner, vs. CIVIL AERONAUTICS BOARD and

GRAND INTERNATIONAL AIRWAYS, INC., respondents.

DECISION
TORRES, JR., J.:

This Special Civil Action for Certiorari and Prohibition under Rule 65 of the Rules of
Court seeks to prohibit respondent Civil Aeronautics Board from exercising jurisdiction
over private respondent's Application for the issuance of a Certificate of Public
Convenience and Necessity, and to annul and set aside a temporary operating permit
issued by the Civil Aeronautics Board in favor of Grand International Airways (GrandAir,
for brevity) allowing the same to engage in scheduled domestic air transportation
services, particularly the Manila-Cebu, Manila-Davao, and converse routes.
The main reason submitted by petitioner Philippine Airlines, Inc. (PAL) to support its
petition is the fact that GrandAir does not possess a legislative franchise authorizing it to
engage in air transportation service within the Philippines or elsewhere. Such franchise
is, allegedly, a requisite for the issuance of a Certificate of Public Convenience or
Necessity by the respondent Board, as mandated under Section 11, Article XII of the
Constitution.
Respondent GrandAir, on the other hand, posits that a legislative franchise is no
longer a requirement for the issuance of a Certificate of Public Convenience and
Necessity or a Temporary Operating Permit, following the Court's pronouncements in the
case of Albano vs. Reyes,[1] as restated by the Court of Appeals in Avia Filipinas
International vs. Civil Aeronautics Board[2] and Silangan Airways, Inc. vs. Grand
International Airways, Inc., and the Hon. Civil Aeronautics Board.[3]
On November 24, 1994, private respondent GrandAir applied for a Certificate of
Public Convenience and Necessity with the Board, which application was docketed as
CAB Case No. EP-12711. [4] Accordingly, the Chief Hearing Officer of the CAB issued a
Notice of Hearing setting the application for initial hearing on December 16, 1994, and
directing GrandAir to serve a copy of the application and corresponding notice to all
scheduled Philippine Domestic operators. On December 14, 1994, GrandAir filed its
Compliance, and requested for the issuance of a Temporary Operating Permit. Petitioner,
itself the holder of a legislative franchise to operate air transport services, filed an
Opposition to the application for a Certificate of Public Convenience and Necessity on
December 16, 1995 on the following grounds:

"A. The CAB has no jurisdiction to hear the petitioner's application until the latter has
first obtained a franchise to operate from Congress.

B. The petitioner's application is deficient in form and substance in that:

1. The application does not indicate a route structure including a computation of

trunkline, secondary and rural available seat kilometers (ASK) which shall always be
maintained at a monthly level at least 5% and 20% of the ASK offered into and out of the
proposed base of operations for rural and secondary, respectively.
2. It does not contain a project/feasibility study, projected profit and loss statements,
projected balance sheet, insurance coverage, list of personnel, list of spare parts
inventory, tariff structure, documents supportive of financial capacity, route flight
schedule, contracts on facilities (hangars, maintenance, lot) etc.

C. Approval of petitioner's application would violate the equal protection clause of the
constitution.

D. There is no urgent need and demand for the services applied for.

E. To grant petitioner's application would only result in ruinous competition contrary to

Section 4(d) of R.A. 776."[5]

At the initial hearing for the application, petitioner raised the issue of lack of
jurisdiction of the Board to hear the application because GrandAir did not possess a
legislative franchise.
On December 20, 1994, the Chief Hearing Officer of CAB issued an Order denying
petitioner's Opposition. Pertinent portions of the Order read:

"PAL alleges that the CAB has no jurisdiction to hear the petitioner's application until the
latter has first obtained a franchise to operate from Congress.

The Civil Aeronautics Board has jurisdiction to hear and resolve the application. In Avia
Filipina vs. CAB, CA G.R. No. 23365, it has been ruled that under Section 10 (c) (I) of R.A.
776, the Board possesses this specific power and duty.

In view thereof, the opposition of PAL on this ground is hereby denied.

SO ORDERED."

Meantime, on December 22, 1994, petitioner this time, opposed private respondent's
application for a temporary permit maintaining that:

"1. The applicant does not possess the required fitness and capability of operating the
services applied for under RA 776; and,

2. Applicant has failed to prove that there is clear and urgent public need for the services
applied for."[6]

On December 23, 1994, the Board promulgated Resolution No. 119(92) approving the
issuance of a Temporary Operating Permit in favor of Grand Air [7] for a period of three
months, i.e., from December 22, 1994 to March 22, 1994. Petitioner moved for the
reconsideration of the issuance of the Temporary Operating Permit on January 11, 1995,
but the same was denied in CAB Resolution No. 02 (95) on February 2, 1995. [8] In the said
Resolution, the Board justified its assumption of jurisdiction over GrandAir's application.

"WHEREAS, the CAB is specifically authorized under Section 10-C (1) of Republic Act No.
776 as follows:

'(c) The Board shall have the following specific powers and duties:

(1) In accordance with the provision of Chapter IV of this Act, to issue, deny, amend
revise, alter, modify, cancel, suspend or revoke, in whole or in part, upon petitioner-
complaint, or upon its own initiative, any temporary operating permit or Certificate of
Public Convenience and Necessity; Provided, however; that in the case of foreign air
carriers, the permit shall be issued with the approval of the President of the Republic of
the Philippines."

WHEREAS, such authority was affirmed in PAL vs. CAB, (23 SCRA 992), wherein the
Supreme Court held that the CAB can even on its own initiative, grant a TOP even before
the presentation of evidence;
WHEREAS, more recently, Avia Filipinas vs. CAB, (CA-GR No. 23365), promulgated on
October 30, 1991, held that in accordance with its mandate, the CAB can issue not only a
TOP but also a Certificate of Public Convenience and Necessity (CPCN) to a qualified
applicant therefor in the absence of a legislative franchise, citing therein as basis the
decision of Albano vs. Reyes (175 SCRA 264) which provides (inter alia) that:

a) Franchises by Congress are not required before each and every public utility may
operate when the law has granted certain administrative agencies the power to grant
licenses for or to authorize the operation of certain public utilities;

b) The Constitutional provision in Article XII, Section 11 that the issuance of a franchise,
certificate or other form of authorization for the operation of a public utility does not
necessarily imply that only Congress has the power to grant such authorization since our
statute books are replete with laws granting specified agencies in the Executive Branch
the power to issue such authorization for certain classes of public utilities.

WHEREAS, Executive Order No. 219 which took effect on 22 January 1995, provides in
Section 2.1 that a minimum of two (2) operators in each route/link shall be encouraged
and that routes/links presently serviced by only one (1) operator shall be open for entry
to additional operators.

RESOLVED, (T)HEREFORE, that the Motion for Reconsideration filed by Philippine Airlines
on January 05, 1995 on the Grant by this Board of a Temporary Operating Permit (TOP) to
Grand International Airways, Inc. alleging among others that the CAB has no such
jurisdiction, is hereby DENIED, as it hereby denied, in view of the foregoing and
considering that the grounds relied upon by the movant are not indubitable."

On March 21, 1995, upon motion by private respondent, the temporary permit was
extended for a period of six (6) months or up to September 22, 1995.
Hence this petition, filed on April 3, 1995.
Petitioners argue that the respondent Board acted beyond its powers and jurisdiction
in taking cognizance of GrandAirs application for the issuance of a Certificate of Public
Convenience and Necessity, and in issuing a temporary operating permit in the
meantime, since GrandAir has not been granted and does not possess a legislative
franchise to engage in scheduled domestic air transportation. A legislative franchise is
necessary before anyone may engage in air transport services, and a franchise may only
be granted by Congress. This is the meaning given by the petitioner upon a reading of
Section 11, Article XII,[9] and Section 1, Article VI,[10] of the Constitution.
To support its theory, PAL submits Opinion No. 163, S. 1989 of the Department of
Justice, which reads:
Dr. Arturo C. Corona
Executive Director
Civil Aeronautics Board
PPL Building, 1000 U.N. Avenue
Ermita, Manila
Sir:

This has reference to your request for opinion on the necessity of a legislative franchise
before the Civil Aeronautics Board (CAB) may issue a Certificate of Public Convenience
and Necessity and/or permit to engage in air commerce or air transportation to an
individual or entity.

You state that during the hearing on the application of Cebu Air for a congressional
franchise, the House Committee on Corporations and Franchises contended that under
the present Constitution, the CAB may not issue the abovestated certificate or permit,
unless the individual or entity concerned possesses a legislative franchise. You believe
otherwise, however, for the reason that under R.A. No. 776, as amended, the CAB is
explicitly empowered to issue operating permits or certificates of public convenience and
necessity and that this statutory provision is not inconsistent with the current charter.
We concur with the view expressed by the House Committee on Corporations and
Franchises. In an opinion rendered in favor of your predecessor-in-office, this
Department observed that,-

xxx it is useful to note the distinction between the franchise to operate

and a permit to commence operation. The former is sovereign and
legislative in nature; it can be conferred only by the lawmaking
authority (17 W and P, pp. 691-697). The latter is administrative and
regulatory in character (In re Application of Fort Crook-Bellevue Boulevard
Line, 283 NW 223); it is granted by an administrative agency, such as the
Public Service Commission [now Board of Transportation], in the case of
land transportation, and the Civil Aeronautics Board, in case of air
services. While a legislative franchise is a pre-requisite to a grant of a
certificate of public convenience and necessity to an airline company,
such franchise alone cannot constitute the authority to commence
operations, inasmuch as there are still matters relevant to such
operations which are not determined in the franchise, like rates,
schedules and routes, and which matters are resolved in the process of
issuance of permit by the administrative. (Secretary of Justice opn No. 45,
s. 1981)

Indeed, authorities are agreed that a certificate of public convenience and necessity is
an authorization issued by the appropriate governmental agency for the operation of
public services for which a franchise is required by law (Almario, Transportation and
Public Service Law, 1977 Ed., p. 293; Agbayani, Commercial Law of the Phil., Vol. 4, 1979
Ed., pp. 380-381).

Based on the foregoing, it is clear that a franchise is the legislative authorization to

engage in a business activity or enterprise of a public nature, whereas a certificate of
public convenience and necessity is a regulatory measure which constitutes the
franchises authority to commence operations. It is thus logical that the grant of the
former should precede the latter.

Please be guided accordingly.

(SGD.) SEDFREY A. ORDOEZ

Secretary of Justice"

Respondent GrandAir, on the other hand, relies on its interpretation of the provisions
of Republic Act 776, which follows the pronouncements of the Court of Appeals in the
cases of Avia Filipinas vs. Civil Aeronautics Board, and Silangan Airways, Inc. vs. Grand
International Airways (supra).
In both cases, the issue resolved was whether or not the Civil Aeronautics Board can
issue the Certificate of Public Convenience and Necessity or Temporary Operating Permit
to a prospective domestic air transport operator who does not possess a legislative
franchise to operate as such. Relying on the Court's pronouncement in Albano vs.
Reyes (supra), the Court of Appeals upheld the authority of the Board to issue such
authority, even in the absence of a legislative franchise, which authority is derived from
Section 10 of Republic Act 776, as amended by P.D. 1462.[11]
The Civil Aeronautics Board has jurisdiction over GrandAir's Application for a
Temporary Operating Permit. This rule has been established in the case of Philippine Air
Lines Inc., vs. Civil Aeronautics Board, promulgated on June 13, 1968. [12] The Board is
expressly authorized by Republic Act 776 to issue a temporary operating permit or
Certificate of Public Convenience and Necessity, and nothing contained in the said law
negates the power to issue said permit before the completion of the applicant's evidence
and that of the oppositor thereto on the main petition. Indeed, the CAB's authority to
grant a temporary permit "upon its own initiative" strongly suggests the power to
exercise said authority, even before the presentation of said evidence has begun.
Assuming arguendo that a legislative franchise is prerequisite to the issuance of a
permit, the absence of the same does not affect the jurisdiction of the Board to hear the
application, but tolls only upon the ultimate issuance of the requested permit.
The power to authorize and control the operation of a public utility is admittedly a
prerogative of the legislature, since Congress is that branch of government vested with
plenary powers of legislation.

"The franchise is a legislative grant, whether made directly by the legislature itself, or by
any one of its properly constituted instrumentalities. The grant, when made, binds the
public, and is, directly or indirectly, the act of the state."[13]

The issue in this petition is whether or not Congress, in enacting Republic Act 776,
has delegated the authority to authorize the operation of domestic air transport services
to the respondent Board, such that Congressional mandate for the approval of such
authority is no longer necessary.
Congress has granted certain administrative agencies the power to grant licenses for,
or to authorize the operation of certain public utilities. With the growing complexity of
modern life, the multiplication of the subjects of governmental regulation, and the
increased difficulty of administering the laws, there is a constantly growing tendency
towards the delegation of greater powers by the legislature, and towards the approval of
the practice by the courts.[14] It is generally recognized that a franchise may be derived
indirectly from the state through a duly designated agency, and to this extent, the power
to grant franchises has frequently been delegated, even to agencies other than those of
a legislative nature.[15] In pursuance of this, it has been held that privileges conferred by
grant by local authorities as agents for the state constitute as much a legislative
franchise as though the grant had been made by an act of the Legislature. [16]
The trend of modern legislation is to vest the Public Service Commissioner with the
power to regulate and control the operation of public services under reasonable rules
and regulations, and as a general rule, courts will not interfere with the exercise of that
discretion when it is just and reasonable and founded upon a legal right.[17]
It is this policy which was pursued by the Court in Albano vs. Reyes. Thus, a reading
of the pertinent issuances governing the Philippine Ports Authority, [18] proves that the PPA
is empowered to undertake by itself the operation and management of the Manila
International Container Terminal, or to authorize its operation and management by
another by contract or other means, at its option. The latter power having been
delegated to the PPA, a franchise from Congress to authorize an entity other than the
PPA to operate and manage the MICP becomes unnecessary.
Given the foregoing postulates, we find that the Civil Aeronautics Board has the
authority to issue a Certificate of Public Convenience and Necessity, or Temporary
Operating Permit to a domestic air transport operator, who, though not possessing a
legislative franchise, meets all the other requirements prescribed by the law. Such
requirements were enumerated in Section 21 of R.A. 776.
There is nothing in the law nor in the Constitution, which indicates that a legislative
franchise is an indispensable requirement for an entity to operate as a domestic air
transport operator. Although Section 11 of Article XII recognizes Congress' control over
any franchise, certificate or authority to operate a public utility, it does not mean
Congress has exclusive authority to issue the same. Franchises issued by Congress are
not required before each and every public utility may operate. [19] In many instances,
Congress has seen it fit to delegate this function to government agencies, specialized
particularly in their respective areas of public service.
A reading of Section 10 of the same reveals the clear intent of Congress to delegate
the authority to regulate the issuance of a license to operate domestic air transport
services:

SECTION 10. Powers and Duties of the Board. (A) Except as otherwise provided herein,
the Board shall have the power to regulate the economic aspect of air transportation,
and shall have general supervision and regulation of, the jurisdiction and control over air
carriers, general sales agents, cargo sales agents, and air freight forwarders as well as
their property rights, equipment, facilities and franchise, insofar as may be necessary for
the purpose of carrying out the provision of this Act.

In support of the Board's authority as stated above, it is given the following specific
powers and duties:

(C) The Board shall have the following specific powers and duties:

(1) In accordance with the provisions of Chapter IV of this Act, to issue, deny, amend,
revise, alter, modify, cancel, suspend or revoke in whole or in part upon petition or
complaint or upon its own initiative any Temporary Operating Permit or Certificate of
Public Convenience and Necessity: Provided however, That in the case of foreign air
carriers, the permit shall be issued with the approval of the President of the Republic of
the Philippines.

Petitioner argues that since R.A. 776 gives the Board the authority to issue
"Certificates of Public Convenience and Necessity", this, according to petitioner, means
that a legislative franchise is an absolute requirement. It cites a number of authorities
supporting the view that a Certificate of Public Convenience and Necessity is issued to a
public service for which a franchise is required by law, as distinguished from a
"Certificate of Public Convenience" which is an authorization issued for the operation of
public services for which no franchise, either municipal or legislative, is required by law.
[20]

This submission relies on the premise that the authority to issue a certificate of public
convenience and necessity is a regulatory measure separate and distinct from the
authority to grant a franchise for the operation of the public utility subject of this
particular case, which is exclusively lodged by petitioner in Congress.
We do not agree with the petitioner.
Many and varied are the definitions of certificates of public convenience which courts
and legal writers have drafted. Some statutes use the terms "convenience and
necessity" while others use only the words "public convenience." The terms
"convenience and necessity", if used together in a statute, are usually held not to be
separable, but are construed together. Both words modify each other and must be
construed together. The word 'necessity' is so connected, not as an additional
requirement but to modify and qualify what might otherwise be taken as the strict
significance of the word necessity. Public convenience and necessity exists when the
proposed facility will meet a reasonable want of the public and supply a need which the
existing facilities do not adequately afford. It does not mean or require an actual physical
necessity or an indispensable thing.[21]

"The terms 'convenience' and 'necessity' are to be construed together, although they are
not synonymous, and effect must be given both. The convenience of the public must not
be circumscribed by according to the word 'necessity' its strict meaning or an essential
requisites."[22]

The use of the word "necessity", in conjunction with "public convenience" in a

certificate of authorization to a public service entity to operate, does not in any way
modify the nature of such certification, or the requirements for the issuance of the same.
It is the law which determines the requisites for the issuance of such certification, and
not the title indicating the certificate.
Congress, by giving the respondent Board the power to issue permits for the
operation of domestic transport services, has delegated to the said body the authority to
determine the capability and competence of a prospective domestic air transport
operator to engage in such venture. This is not an instance of transforming the
respondent Board into a mini-legislative body, with unbridled authority to choose who
should be given authority to operate domestic air transport services.

"To be valid, the delegation itself must be circumscribed by legislative restrictions, not a
"roving commission" that will give the delegate unlimited legislative authority. It must
not be a delegation "running riot" and "not canalized with banks that keep it from
overflowing." Otherwise, the delegation is in legal effect an abdication of legislative
authority, a total surrender by the legislature of its prerogatives in favor of the
delegate."[23]

Congress, in this instance, has set specific limitations on how such authority should
be exercised.
Firstly, Section 4 of R.A. No. 776, as amended, sets out the following guidelines or
policies:

"SECTION 4. Declaration of policies. In the exercise and performance of its powers and
duties under this Act, the Civil Aeronautics Board and the Civil Aeronautics Administrator
shall consider the following, among other things, as being in the public interest, and in
accordance with the public convenience and necessity:

(a) The development and utilization of the air potential of the Philippines;

(b) The encouragement and development of an air transportation system properly

adapted to the present and future of foreign and domestic commerce of the Philippines,
of the Postal Service and of the National Defense;

(c) The regulation of air transportation in such manner as to recognize and preserve the
inherent advantages of, assure the highest degree of safety in, and foster sound
economic condition in, such transportation, and to improve the relations between, and
coordinate transportation by, air carriers;

(d) The promotion of adequate, economical and efficient service by air carriers at
reasonable charges, without unjust discriminations, undue preferences or advantages, or
unfair or destructive competitive practices;

(e) Competition between air carriers to the extent necessary to assure the sound
development of an air transportation system properly adapted to the need of the foreign
and domestic commerce of the Philippines, of the Postal Service, and of the National
Defense;

(f) To promote safety of flight in air commerce in the Philippines; and,

(g) The encouragement and development of civil aeronautics.

More importantly, the said law has enumerated the requirements to determine the
competency of a prospective operator to engage in the public service of air
transportation.

SECTION 12. Citizenship requirement. Except as otherwise provided in the Constitution

and existing treaty or treaties, a permit authorizing a person to engage in domestic air
commerce and/or air transportation shall be issued only to citizens of the Philippines. [24]

SECTION 21. Issuance of permit. The Board shall issue a permit authorizing the whole or
any part of the service covered by the application, if it finds: (1) that the applicant is fit,
willing and able to perform such service properly in conformity with the provisions of this
Act and the rules, regulations, and requirements issued thereunder; and (2) that such
service is required by the public convenience and necessity; otherwise the application
shall be denied.

Furthermore, the procedure for the processing of the application of a Certificate of

Public Convenience and Necessity had been established to ensure the weeding out of
those entities that are not deserving of public service.[25]
In sum, respondent Board should now be allowed to continue hearing the application
of GrandAir for the issuance of a Certificate of Public Convenience and Necessity, there
being no legal obstacle to the exercise of its jurisdiction.
 ACCORDINGLY, in view of the foregoing considerations, the Court RESOLVED to
DISMISS the instant petition for lack of merit. The respondent Civil Aeronautics Board is
hereby DIRECTED to CONTINUE hearing the application of respondent Grand
International Airways, Inc. for the issuance of a Certificate of Public Convenience and
Necessity.
SO ORDERED.

6, G.R. No. L-19857 March 2, 1923

THE ILOILO ICE AND COLD STORAGE COMPANY, petitioner,

vs.
PUBLIC UTILITY BOARD, respondent.

This action in certiorari is for the purpose of reviewing a decision of the Public Utility
Commissioner, affirmed by the Public Utility Board, holding that the petitioner, the Iloilo
Ice and Cold Storage Company, is a public utility and, as such, subject to the control and
jurisdiction of the Public Utility Commissioner.

The case can be best understood by a consideration of its various phases, under the
following topic: Statement of the issue, statement of the case, statement of the facts,
statement of the law, statement of the authorities, statement of the petitioner's case,
and of the government's case, and judgment.

STATEMENT OF THE ISSUE

The issue is whether the Iloilo Ice and Cold Storage Company is a public utility, as that
term is defined by section 9 of Act No. 2694.

STATEMENT OF THE CASE

Francisco Villanueva, Jr., secretary of the Public Utility Commission, investigated the
operation of ice plants in Iloilo early in November, 1921. He reported to the Public Utility
Commissioner that the Iloilo Ice and Cold Storage Company should be considered a
public utility, and that, accordingly, the proper order should issue.

Agreeable to the recommendation of Secretary Villanueva, the Public Utility

Commissioner promulgated an order on December 19, 1921, reciting the facts
abovementioned, and directing the Iloilo Ice and Cold Storage Company to show cause
why it should not be considered a public utility and as such required to comply with each
and every duty of public utilities provided in Act No. 2307, as amended by Act No. 2694.
To this order, John Bordman, treasurer of the Iloilo Ice and Cold Storage Company,
interposed a special answer, in which it was alleged that the company is, and always has
been operated as a private enterprise.

Hearing was then had, at which the testimonies of Francisco Villanueva, Jr., and of John
Bordman were received. Various exhibits were presented and received in evidence. Mr.
Bordman, as the managing director and treasurer of the company, later submitted an
affidavit.

The Public Utility Commissioner rendered a decision holding in effect that the Iloilo Ice
and Cold Storage Company was a public utility, and that, accordingly, it should file in the
office of the Public Utility Commissioner, a statement of its charges for ice. This decision
was affirmed on appeal to the Public Utility Board. From this last decision, petitioner has
come before this court, asking that the proceeding below be reviewed, and the decisions
set aside.

STATEMENT OF THE FACTS

The petitioner, the Iloilo Ice and Cold Storage Company, is a corporation organized under
the laws of the Philippine Islands in 1908, with a capital stock of P60,000. Continuously
since that date, the company has maintained and operated a plant for the manufacture
and sale of ice in the City of Iloilo. It also does business to a certain extent in the
Provinces of Negros, Capiz, and Antique, and with boats which stop at the port of Iloilo.
At the time its operation were started, two additional ice plants were operating in Iloilo.
Subsequently, however, the other plants ceased to operate, so that the petitioner now
has no competitor in the field.

The normal production of ice of the Iloilo Ice and Cold Storage Company is about 3 tons
per day. In the month of January, 1922, a total of 83,837 kilos of ice were sold, of which
56,400 kilos were on written contracts in the City of Iloilo and adjoining territory, 14,214
kilos, also on written contracts, to steamers calling at the port of Iloilo, and 13,233 kilos
on verbal contracts. Although new machinery has been installed in the plant, this was
merely for replacement purposes, and did not add to its capacity. The demand for ice has
usually been much more than the plant could produce and no effort has been made to
provide sufficient ice to supply all who might apply.

Since 1908, the business of the Iloilo Ice and Cold Storage Company, accordingly to its
managing director and treasurer, has been carried on with selected customers only.
Preference, however, is always given to hospitals, the request of practicing physicians,
and the needs of sick persons. The larger part of the company's business is perfected by
written contracts signed by the parties served, which, in the present form, includes an
agreement that no right to future service is involved.

The coupon books of the company contain on the outside the following:

This agreement witnesseth, that The Iloilo Ice and Cold Storage Co. will furnish the
undersigned with ice as indicated herein at the rate of one coupon per day. These
coupons are not transferable. It is further agreed that the company is not obligated
to similar service in future except by special agreement.

Iloilo, ......................................................................................., 192 ......

(Signed) ....................................................................... No. ..................

Cash sales of ice are accomplished on forms reading: "In receiving the ice represented by
this ticket I hereby agree that the Iloilo Ice and Cold Storage Co. is not bound in future to
extend to me further service." A notice posted in the Iloilo store reads: "No ice is sold to
the public by this plant. Purchases can only be made by private contract." In August,
1918, all storage facilities were abolished, and resumed in 1920 only with contracts, a
copy of the form at present in use waiving any right to continued service.

On only one point of fact is there any divergence, and this is relatively unimportant.
Secretary Villanueva reported, and the Public Utility Commissioner found, that the Iloilo
Ice and Cold Storage Company sold ice to the public, and advertised its sale through the
papers; while managing director Bordman claims that only once have the instructions of
the board of directors prohibiting public advertising been violated.

STATEMENT OF THE LAW

The original public utility law, Act No. 2307, in its section 14, 1n speaking of the
jurisdiction of the Board of Public Utility Commissioner, and in defining the term "public
utility," failed to include ice, refrigeration, and cold storage plants. This deficiency was,
however, remedied by Act No. 2694, enacted in 1917, which amended section 14 of Act
No. 2307, to read as follows:

* * * The term "public utility" is hereby defined to include every individual,

copartnership, association, corporation or joint stock company, whether domestic
or foreign, their lessee, trustees or receivers appointed by any court whatsoever,
or any municipality, province or other department of the Government of the
Philippine Islands, that now or hereafter may own, operate, manage or control
 within the Philippine Islands any common carrier, railroad, street railway, traction
railway, steamboat or steamship line, small water craft, such
as bancas, virais, lorchas, and others, engaged in the transportation of passengers
and cargo, line of freight and passenger automobiles, shipyard, marine railway,
marine repair shop, ferry, freight or any other car services, public warehouse,
public wharf or dock not under the jurisdiction of the Insular Collector of Customs,
ice, refrigeration, cold storage, canal, irrigation, express, subway, pipe line, gas,
electric light, heat, power, water, oil sewer, telephone, wire or wireless telegraph
system, plant or equipment, for public use: Provided, That the Commission or
Commissioner shall have no jurisdiction over ice plants, cold storage plants, or any
other kind of public utilities operated by the Federal Government exclusively for its
own and not for public use. . . .

It will thus be noted that the term "public utility," in this jurisdiction, includes every
individual, copartnership, association, corporation, or joint stock company that now or
hereafter may own, operate, manage, or control, within the Philippine Islands, any ice,
refrigeration, cold storage system, plant, or equipment, for public use. Particular
attention is invited to the last phrase, "for public use."

STATEMENT OF THE AUTHORITIES

The authorities are abundant, although some of them are not overly instructive.
Selection is made of the pertinent decisions coming from our own Supreme Court, the
Supreme Court of the United States, and the Supreme Court of California.

In the case of United States vs. Tan Piaco ([1920], 40 Phil., 853), the facts were that the
trucks of the defendant furnished service under special agreements to carry particular
persons and property. Following the case of Terminal Taxicab Co. vs. Kutz ([1916], 241 U.
S., 252), it was held that since the defendant did not hold himself out to carry all
passengers and freight for all persons who might offer, he was not a public utility and,
therefore, was not criminally liable for his failure to obtain a license from the Public Utility
Commissioner. It was said:

Under the provisions of said section, two things are necessary: (a) The individual,
copartnership, etc., etc., must be a public utility; and (b) the business in which
such individual, copartnership, etc., etc., is engaged must be for public use. So
long as the individual or copartnership, etc., etc., is engaged in a purely private
enterprise, without attempting to render service to all who may apply, he can in no
sense be considered a public utility, for public use.

"Public use" means the same as "use by the public." The essential feature of the
public use is that it is not confined to privileged individuals, but is open to the
indefinite public. It is this indefinite or unrestricted quality that gives it its public
character. In determining whether a use is public, we must look not only to the
character of the business to be done, but also to the proposed mode of doing it. If
the use is merely optional with the owners, or the public benefit is merely
incidental, it is not a public use, authorizing the exercise of the jurisdiction of the
public utility commission. There must be, in general, a right which the law compels
the owner to give to the general public. It is not enough that the general prosperity
of the public is promoted. Public use is not synonymous with public interest. The
true criterion by which to judge of the character of the use is whether the public
may enjoy it by right or only by permission.

In the decision of the Supreme Court of the United States in Terminal Taxicab
Company vs. Kutz, supra, it was held: "A taxicab company is a common carrier within the
meaning of the Act of March 4, 1913 (37 Stat. at L., 938, chap. 150), sec. 8, and hence
subject to the jurisdiction of the Public Utilities Commission of the District of Columbia as
a "public utility" in respect of its exercise of its exclusive right under lease from the
Washington Terminal Company, the owner of the Washington Union Railway Station, to
solicit livery and taxicab business from persons passing to or from trains, and of its
exclusive right under contracts with certain Washington hotels to solicit taxicab business
from guest, but that part of its business which consists in furnishing automobiles from its
central garage on individual orders, generally by telephone, cannot be regarded as a
public utility, and the rates charged for such service are therefore not open to inquiry by
the Commission." Mr. Justice Holmes, delivering the opinion of the court, in part said:

The rest of the plaintiff's business, amounting to four tenths, consists mainly in
furnishing automobiles from its central garage on orders, generally by telephone. It
asserts the right to refuse the service, and no doubt would do so it the pay was
uncertain, but it advertises extensively, and, we must assume, generally accepts
any seemingly solvent customer. Still, the bargains are individual, and however
much they may tend towards uniformity in price, probably have not quite the
mechanical fixity of charges that attends the use of taxicabs from the station and
hotels. There is no contract with a third person to serve the public generally. The
question whether, as to this part of its business, it is an agency for public use
within the meaning of the statute, is more difficult. . . . Although I have not been
able to free my mind from doubt, the court is of opinion that this part of the
business is not to be regarded as a public utility. It is true that all business, and, for
the matter of that, every life in all its details, has a public aspect, some bearing
upon the welfare of the community in which it is passed. But, however it may have
been in earlier days as to the common callings, it is assumed in our time that an
invitation to the public to buy does not necessarily entail an obligation to sell. It is
assumed an ordinary shopkeeper may refuse his wares arbitrary to a customer
whom he dislikes, and although that consideration is not conclusive (233 U. S.,
407), it is assumed that such a calling is not public as the word is used. In the
absence of clear language to the contrary it would be assumed that an ordinary
livery stable stood on the same footing as a common shop, and there seems to be
no difference between the plaintiff's service from its garage and that of a livery
stable. It follows that the plaintiff is not bound to give information as to its garage
rates.

The Supreme Court of California in the case of Thayer and Thayer vs. California
Development Company ([1912], 164 Cal., 117), announced, among other things, that the
essential feature of a public use is that "it is not confined to privileged individuals, but is
open to the indefinite public. It is this indefiniteness or unrestricted quality that gives it
its public character." Continuing, reference was made to the decision of the United States
Supreme Court in Fallbrook Irrigation District vs. Bradley ([1896], 164 U. S., 161), where
the United States Supreme Court considered the question of whether or not the water
belonging to an irrigation district organized under the California statute of 1887, and
acquired for and applied to its authorized uses and purposes, was water dedicated to a
public use. Upon this question, the Supreme Court on appeal said:

The fact that the use of the water is limited to the landowner is not therefore a
fatal objection to this legislation. It is not essential that the entire community, or
even any considerable portion thereof, should directly enjoy or participate in an
improvement in order to constitute a public use. All landowners in the district have
the right to a proportionate share of the water, and no one landowner is favored
above his fellow in his right to the use of the water. It is not necessary, in order
that the use should be public, that every resident in the district should have the
right to the use of the water. The water is not used for general, domestic, or for
drinking purposes, and it is plain from the scene of the act that the water is
intended for the use of those who will have occasion to use it on their lands. . . .
We think it clearly appears that all who by reason of their ownership of or
connection with any portion of the lands would have occasion to use the water,
would in truth have the opportunity to use it upon the same terms as all others
similarly situated. In this away the use, so far as this point is concerned, is
public because all persons have the right to use the water under the same
circumstances. This is sufficient.

The latest pronouncement of the United States Supreme Court here available is found in
the case of Producers Transportation Company vs. Railroad Commission of the State of
California ([1920], 251 U. S., 228). Mr. Justice Van Devander, delivering the opinion of the
court, in part said:
 It is, of course, true that if the pipe line was constructed solely to carry oil for
particular procedures under strictly private contracts and never was devoted by its
owner to public use, that is, to carrying for the public, the State could not by mere
legislative fiat or by any regulating order of a commission convert it into a public
utility or make its owner a common carrier; for that would be taking private
property for public use without just compensation, which no State can do
consistently with the due process of law clause of the Fourteenth Amendment. . . .
On the other hand, if in the beginning or during its subsequent operation the pipe
line was devoted by its owner to public use, and if the right thus extended to the
public has not been withdrawn, there can be no doubt that the pipe line is a public
utility and its owner a common carrier whose rates and practices are subject to
public regulation. Munn vs. Illinois, supra.

The state court, upon examining the evidence, concluded that the company
voluntarily had devoted the pipe line to the use of the public in transporting oil,
and it rested this conclusion upon the grounds . . . that, looking through the maze
of contracts, agency agreements and the like, under which the transportation was
effected, subordinating form to substance, and having due regard to the agency's
ready admission of new members and its exclusion of none, it was apparent that
the company did in truth carry oil for all producers seeking its service, in other
words, for the public. (See Pipe Line Cases, 234 U. S., 548.)

Lastly, we take note of the case of Allen vs. Railroad Commission of the State of
California ([1918], 179 Cal., 68; 8 A. L. R., 249). It was here held that a water company
does not, by undertaking to furnish a water supply to a municipality which will require
only a small percentage of its product, become a public utility as to the remainder, which
it sells under private contracts. The court observed that its decision fully recognized that
a private water company may be organized to sell water for purposes of private gain,
and that in doing, it does not become a public utility. "To hold that property has been
dedicated to a public use," reads the opinion, "is not a trivial thing, and such dedication
is never presumed without evidence of unequivocal intention." Continuing, the court
discusses what is a public utility in the following language:

What is a public utility, over which the state may exercise its regulatory control
without regard to the private interest which may be affected thereby? It its
broadest sense everything upon which man bestows labor for purpose other than
those for the benefits of his immediate family is impressed with a public use. No
occupation escapes it, no merchant can avoid it, no professional man can deny it.
As an illustrative type one may instance the butcher. He deals with the public; he
invites and is urgent that the public should deal with him. The character of his
business is such that, under the police power of the state, it may well be subject to
regulation, and in many places and instances is so regulated. The preservation of
cleanliness, the inspection of meats to see that they are wholesome, all such
matters are within the due and reasonable regulatory powers of the state or
nation. But these regulatory powers are not called into exercise because the
butcher has devoted his property to public service so as to make it a public utility.
He still has the unquestionable right to fix his prices; he still has the questioned
right to say that he will or will not contract with any member of the public. What
differentiates all such activities from a true public utility is this and this only: That
the devotion to public use must be of such character that the public generally, or
that part of it which has been served and which has accepted the services, has the
right to demand that that service shall be conducted, so long as it is continued,
with reasonable efficiency under reasonable charges. Public use, then, means the
use by the public and be every individual member of it, as a legal right.

STATEMENT OF THE PETITIONER'S CASE AND OF THE GOVERNMENT'S CASE

Petitioner contends on the facts, that the evidence shows that the petitioner is operating
a small ice plant in Iloilo; that no attempt has been made to supply the needs of all who
may apply for accommodation or to expand the plant to meet all demands; that sales
have been made to selected customers only, and that the right has been freely exercised
to refuse sales not only to whole districts, but constantly to individuals as wells; that the
greater portion of the business is conducted through signed contracts with selected
individuals, and on occasions, when there is a surplus, the same is sold for cash to
selected applicants; that no sales are made except to persons who have waived all claim
of right to similar accommodation in the future; and that no offer, agreement, or tender
of service to the public has ever been made. Petitioner contends, as to the law, that the
decisions heretofore referred to are controlling.

The Government has no quarrel with the petitioner as to the facts. But the Attorney-
General attempts to differentiate the authorities from the instant situation. The Attorney-
General also argues that to sanction special contracts would "open a means of escape
from the application of the law."

The result is, therefore, that we have substantial agreement between the petitioner and
the government as to the issue, as to the facts, as to the law, and as to the applicable
authorities. The question, however, remains as puzzling as before.

Planting ourselves of the authorities, which discuss the subject of public use, the
criterion by which to judge of the character of the use is whether the public may enjoy it
by right or only by permission. (U. S. vs. Tan Piaco, supra.) The essential feature of a
public use is that it is not confined to privileged individuals, but is open to the indefinite
public. (Thayler and Thayler vs. California Development Company, supra.) The use is
public if all persons have the right to the use under the same circumstances. (Fall brook
Irrigation District vs. Bradley, supra.) If the company did in truth sell ice to all persons
seeking its service, it would be a public utility. But if on the other hand, it was organized
solely for particular persons under strictly private contracts, and never was devoted by
its owners to public use, it could not be held to be a public utility without violating the
due process of law clause of the Constitution. (Producers Transportation Co. vs. Railroad
Commission, supra.) And the apparent and continued purpose of the Iloilo Ice and
Storage Company has been, and is, to remain a private enterprise and to avoid
submitting to the Public Utility law.

The argument for the Government, nevertheless, merits serious consideration. The
attempt of the Public Utility Commissioner to intervene in corporate affairs, to protect
the public, is commendable. Sympathetic thought should always be given to the facts
laid before the Commissioner, with reference to the law under which he is acting.

Aware of the foregoing situation, the members of the Court are of the opinion that the
present case is governed by the authorities mentioned in this decision, which means, of
course, that, upon the facts shown in the record, the Iloilo Ice and Storage Company is
not a public utility within the meaning of the law. Like Mr. Justice Holmes, in his opinion in
Terminal Taxicab Company vs. Kutz, supra, when, in speaking for himself personally, he
admitted that he had not been able to free his mind from doubt, so has the writer not
been able to free his mind from doubt, but is finally led to accept the authorities as
controlling.

JUDGMENT

It is declared that the business of the Iloilo Ice and Cold Storage Company is not a public
utility, subject to the control and jurisdiction of the Public Utility Commissioner, and that,
accordingly, the decisions of the Public Utility Commissioner and of the Public Utility
Board must be revoked, without special finding as to costs. So ordered.

SPOUSES TEODORO1 and NANETTE PERENA, Petitioners,

vs.
SPOUSES TERESITA PHILIPPINE NICOLAS and L. ZARATE, NATIONAL RAILWAYS,
and the COURT OF APPEALS Respondents.

DECISION

BERSAMIN, J.:
The operator of a. school bus service is a common carrier in the eyes of the law. He is
bound to observe extraordinary diligence in the conduct of his business. He is presumed
to be negligent when death occurs to a passenger. His liability may include indemnity for
loss of earning capacity even if the deceased passenger may only be an unemployed
high school student at the time of the accident.

The Case

By petition for review on certiorari, Spouses Teodoro and Nanette Perefia (Perefias)
appeal the adverse decision promulgated on November 13, 2002, by which the Court of
Appeals (CA) affirmed with modification the decision rendered on December 3, 1999 by
the Regional Trial Court (RTC), Branch 260, in Paraaque City that had decreed them
jointly and severally liable with Philippine National Railways (PNR), their co-defendant, to
Spouses Nicolas and Teresita Zarate (Zarates) for the death of their 15-year old son,
Aaron John L. Zarate (Aaron), then a high school student of Don Bosco Technical Institute
(Don Bosco).

Antecedents

The Pereas were engaged in the business of transporting students from their respective
residences in Paraaque City to Don Bosco in Pasong Tamo, Makati City, and back. In
their business, the Pereas used a KIA Ceres Van (van) with Plate No. PYA 896, which had
the capacity to transport 14 students at a time, two of whom would be seated in the
front beside the driver, and the others in the rear, with six students on either side. They
employed Clemente Alfaro (Alfaro) as driver of the van.

In June 1996, the Zarates contracted the Pereas to transport Aaron to and from Don
Bosco. On August 22, 1996, as on previous school days, the van picked Aaron up around
6:00 a.m. from the Zarates residence. Aaron took his place on the left side of the van
near the rear door. The van, with its air-conditioning unit turned on and the stereo
playing loudly, ultimately carried all the 14 student riders on their way to Don Bosco.
Considering that the students were due at Don Bosco by 7:15 a.m., and that they were
already running late because of the heavy vehicular traffic on the South Superhighway,
Alfaro took the van to an alternate route at about 6:45 a.m. by traversing the narrow
path underneath the Magallanes Interchange that was then commonly used by Makati-
bound vehicles as a short cut into Makati. At the time, the narrow path was marked by
piles of construction materials and parked passenger jeepneys, and the railroad crossing
in the narrow path had no railroad warning signs, or watchmen, or other responsible
persons manning the crossing. In fact, the bamboo barandilla was up, leaving the
railroad crossing open to traversing motorists.

At about the time the van was to traverse the railroad crossing, PNR Commuter No. 302
(train), operated by Jhonny Alano (Alano), was in the vicinity of the Magallanes
Interchange travelling northbound. As the train neared the railroad crossing, Alfaro drove
the van eastward across the railroad tracks, closely tailing a large passenger bus. His
view of the oncoming train was blocked because he overtook the passenger bus on its
left side. The train blew its horn to warn motorists of its approach. When the train was
about 50 meters away from the passenger bus and the van, Alano applied the ordinary
brakes of the train. He applied the emergency brakes only when he saw that a collision
was imminent. The passenger bus successfully crossed the railroad tracks, but the van
driven by Alfaro did not. The train hit the rear end of the van, and the impact threw nine
of the 12 students in the rear, including Aaron, out of the van. Aaron landed in the path
of the train, which dragged his body and severed his head, instantaneously killing him.
Alano fled the scene on board the train, and did not wait for the police investigator to
arrive.

Devastated by the early and unexpected death of Aaron, the Zarates commenced this
action for damages against Alfaro, the Pereas, PNR and Alano. The Pereas and PNR
filed their respective answers, with cross-claims against each other, but Alfaro could not
be served with summons.

At the pre-trial, the parties stipulated on the facts and issues, viz:
A. FACTS:

(1) That spouses Zarate were the legitimate parents of Aaron John L. Zarate;

(2) Spouses Zarate engaged the services of spouses Perea for the
adequate and safe transportation carriage of the former spouses' son from
their residence in Paraaque to his school at the Don Bosco Technical
Institute in Makati City;

(3) During the effectivity of the contract of carriage and in the

implementation thereof, Aaron, the minor son of spouses Zarate died in
connection with a vehicular/train collision which occurred while Aaron was
riding the contracted carrier Kia Ceres van of spouses Perea, then driven
and operated by the latter's employee/authorized driver Clemente Alfaro,
which van collided with the train of PNR, at around 6:45 A.M. of August 22,
1996, within the vicinity of the Magallanes Interchange in Makati City, Metro
Manila, Philippines;

(4) At the time of the vehicular/train collision, the subject site of the
vehicular/train collision was a railroad crossing used by motorists for crossing
the railroad tracks;

(5) During the said time of the vehicular/train collision, there were no
appropriate and safety warning signs and railings at the site commonly used
for railroad crossing;

(6) At the material time, countless number of Makati bound public utility and
private vehicles used on a daily basis the site of the collision as an
alternative route and short-cut to Makati;

(7) The train driver or operator left the scene of the incident on board the
commuter train involved without waiting for the police investigator;

(8) The site commonly used for railroad crossing by motorists was not in fact
intended by the railroad operator for railroad crossing at the time of the
vehicular collision;

(9) PNR received the demand letter of the spouses Zarate;

(10) PNR refused to acknowledge any liability for the vehicular/train

collision;

(11) The eventual closure of the railroad crossing alleged by PNR was an
internal arrangement between the former and its project contractor; and

(12) The site of the vehicular/train collision was within the vicinity or less
than 100 meters from the Magallanes station of PNR.

B. ISSUES

(1) Whether or not defendant-driver of the van is, in the performance of his
functions, liable for negligence constituting the proximate cause of the
vehicular collision, which resulted in the death of plaintiff spouses' son;

(2) Whether or not the defendant spouses Perea being the employer of
defendant Alfaro are liable for any negligence which may be attributed to
defendant Alfaro;

(3) Whether or not defendant Philippine National Railways being the operator
of the railroad system is liable for negligence in failing to provide adequate
safety warning signs and railings in the area commonly used by motorists for
 railroad crossings, constituting the proximate cause of the vehicular collision
which resulted in the death of the plaintiff spouses' son;

(4) Whether or not defendant spouses Perea are liable for breach of the
contract of carriage with plaintiff-spouses in failing to provide adequate and
safe transportation for the latter's son;

(5) Whether or not defendants spouses are liable for actual, moral damages,
exemplary damages, and attorney's fees;

(6) Whether or not defendants spouses Teodorico and Nanette Perea

observed the diligence of employers and school bus operators;

(7) Whether or not defendant-spouses are civilly liable for the accidental
death of Aaron John Zarate;

(8) Whether or not defendant PNR was grossly negligent in operating the
commuter train involved in the accident, in allowing or tolerating the
motoring public to cross, and its failure to install safety devices or equipment
at the site of the accident for the protection of the public;

(9) Whether or not defendant PNR should be made to reimburse defendant

spouses for any and whatever amount the latter may be held answerable or
which they may be ordered to pay in favor of plaintiffs by reason of the
action;

(10) Whether or not defendant PNR should pay plaintiffs directly and fully on
the amounts claimed by the latter in their Complaint by reason of its gross
negligence;

(11) Whether or not defendant PNR is liable to defendants spouses for actual,
moral and exemplary damages and attorney's fees.2

The Zarates claim against the Pereas was upon breach of the contract of carriage for
the safe transport of Aaron; but that against PNR was based on quasi-delict under Article
2176, Civil Code.

In their defense, the Pereas adduced evidence to show that they had exercised the
diligence of a good father of the family in the selection and supervision of Alfaro, by
making sure that Alfaro had been issued a drivers license and had not been involved in
any vehicular accident prior to the collision; that their own son had taken the van daily;
and that Teodoro Perea had sometimes accompanied Alfaro in the vans trips
transporting the students to school.

For its part, PNR tended to show that the proximate cause of the collision had been the
reckless crossing of the van whose driver had not first stopped, looked and listened; and
that the narrow path traversed by the van had not been intended to be a railroad
crossing for motorists.

Ruling of the RTC

On December 3, 1999, the RTC rendered its decision,3 disposing:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff

and against the defendants ordering them to jointly and severally pay the plaintiffs as
follows:

(1) (for) the death of Aaron- Php50,000.00;

(2) Actual damages in the amount of Php100,000.00;

(3) For the loss of earning capacity- Php2,109,071.00;

 (4) Moral damages in the amount of Php4,000,000.00;

(5) Exemplary damages in the amount of Php1,000,000.00;

(6) Attorneys fees in the amount of Php200,000.00; and

(7) Cost of suit.

SO ORDERED.

On June 29, 2000, the RTC denied the Pereas motion for reconsideration, 4 reiterating
that the cooperative gross negligence of the Pereas and PNR had caused the collision
that led to the death of Aaron; and that the damages awarded to the Zarates were not
excessive, but based on the established circumstances.

The CAs Ruling

Both the Pereas and PNR appealed (C.A.-G.R. CV No. 68916).

PNR assigned the following errors, to wit:5

The Court a quo erred in:

1. In finding the defendant-appellant Philippine National Railways jointly and

severally liable together with defendant-appellants spouses Teodorico and
Nanette Perea and defendant-appellant Clemente Alfaro to pay plaintiffs-
appellees for the death of Aaron Zarate and damages.

2. In giving full faith and merit to the oral testimonies of plaintiffs-appellees

witnesses despite overwhelming documentary evidence on record,
supporting the case of defendants-appellants Philippine National Railways.

The Pereas ascribed the following errors to the RTC, namely:

The trial court erred in finding defendants-appellants jointly and severally liable for
actual, moral and exemplary damages and attorneys fees with the other defendants.

The trial court erred in dismissing the cross-claim of the appellants Pereas against the
Philippine National Railways and in not holding the latter and its train driver primarily
responsible for the incident.

The trial court erred in awarding excessive damages and attorneys fees.

The trial court erred in awarding damages in the form of deceaseds loss of earning
capacity in the absence of sufficient basis for such an award.

On November 13, 2002, the CA promulgated its decision, affirming the findings of the
RTC, but limited the moral damages to P 2,500,000.00; and deleted the attorneys fees
because the RTC did not state the factual and legal bases, to wit:6

WHEREFORE, premises considered, the assailed Decision of the Regional Trial Court,
Branch 260 of Paraaque City is AFFIRMED with the modification that the award of Actual
Damages is reduced to P 59,502.76; Moral Damages is reduced to P 2,500,000.00; and
the award for Attorneys Fees is Deleted.

SO ORDERED.

The CA upheld the award for the loss of Aarons earning capacity, taking cognizance of
the ruling in Cariaga v. Laguna Tayabas Bus Company and Manila Railroad
Company,7 wherein the Court gave the heirs of Cariaga a sum representing the loss of
the deceaseds earning capacity despite Cariaga being only a medical student at the
time of the fatal incident. Applying the formula adopted in the American Expectancy
Table of Mortality:

2/3 x (80 - age at the time of death) = life expectancy

the CA determined the life expectancy of Aaron to be 39.3 years upon reckoning his life
expectancy from age of 21 (the age when he would have graduated from college and
started working for his own livelihood) instead of 15 years (his age when he died).
Considering that the nature of his work and his salary at the time of Aarons death were
unknown, it used the prevailing minimum wage of P 280.00/day to compute Aarons
gross annual salary to be P 110,716.65, inclusive of the thirteenth month pay. Multiplying
this annual salary by Aarons life expectancy of 39.3 years, his gross income would
aggregate to P 4,351,164.30, from which his estimated expenses in the sum
of P 2,189,664.30 was deducted to finally arrive at P 2,161,500.00 as net income. Due to
Aarons computed net income turning out to be higher than the amount claimed by the
Zarates, only P 2,109,071.00, the amount expressly prayed for by them, was granted.

On April 4, 2003, the CA denied the Pereas motion for reconsideration. 8

Issues

In this appeal, the Pereas list the following as the errors committed by the CA, to wit:

I. The lower court erred when it upheld the trial courts decision holding the petitioners
jointly and severally liable to pay damages with Philippine National Railways and
dismissing their cross-claim against the latter.

II. The lower court erred in affirming the trial courts decision awarding damages for loss
of earning capacity of a minor who was only a high school student at the time of his
death in the absence of sufficient basis for such an award.

III. The lower court erred in not reducing further the amount of damages awarded,
assuming petitioners are liable at all.

Ruling

The petition has no merit.

1.
Were the Pereas and PNR jointly
and severally liable for damages?

The Zarates brought this action for recovery of damages against both the Pereas and
the PNR, basing their claim against the Pereas on breach of contract of carriage and
against the PNR on quasi-delict.

The RTC found the Pereas and the PNR negligent. The CA affirmed the findings.

We concur with the CA.

To start with, the Pereas defense was that they exercised the diligence of a good father
of the family in the selection and supervision of Alfaro, the van driver, by seeing to it that
Alfaro had a drivers license and that he had not been involved in any vehicular accident
prior to the fatal collision with the train; that they even had their own son travel to and
from school on a daily basis; and that Teodoro Perea himself sometimes accompanied
Alfaro in transporting the passengers to and from school. The RTC gave scant
consideration to such defense by regarding such defense as inappropriate in an action
for breach of contract of carriage.

We find no adequate cause to differ from the conclusions of the lower courts that the
Pereas operated as a common carrier; and that their standard of care was extraordinary
diligence, not the ordinary diligence of a good father of a family.
Although in this jurisdiction the operator of a school bus service has been usually
regarded as a private carrier,9primarily because he only caters to some specific or
privileged individuals, and his operation is neither open to the indefinite public nor for
public use, the exact nature of the operation of a school bus service has not been finally
settled. This is the occasion to lay the matter to rest.

A carrier is a person or corporation who undertakes to transport or convey goods or

persons from one place to another, gratuitously or for hire. The carrier is classified either
as a private/special carrier or as a common/public carrier. 10 A private carrier is one who,
without making the activity a vocation, or without holding himself or itself out to the
public as ready to act for all who may desire his or its services, undertakes, by special
agreement in a particular instance only, to transport goods or persons from one place to
another either gratuitously or for hire. 11The provisions on ordinary contracts of the Civil
Code govern the contract of private carriage.The diligence required of a private carrier is
only ordinary, that is, the diligence of a good father of the family. In contrast, a common
carrier is a person, corporation, firm or association engaged in the business of carrying or
transporting passengers or goods or both, by land, water, or air, for compensation,
offering such services to the public. 12Contracts of common carriage are governed by the
provisions on common carriers of the Civil Code, the Public Service Act, 13 and other
special laws relating to transportation. A common carrier is required to observe
extraordinary diligence, and is presumed to be at fault or to have acted negligently in
case of the loss of the effects of passengers, or the death or injuries to passengers.14

In relation to common carriers, the Court defined public use in the following terms in
United States v. Tan Piaco,15viz:

"Public use" is the same as "use by the public". The essential feature of the public use is
not confined to privileged individuals, but is open to the indefinite public. It is this
indefinite or unrestricted quality that gives it its public character. In determining whether
a use is public, we must look not only to the character of the business to be done, but
also to the proposed mode of doing it. If the use is merely optional with the owners, or
the public benefit is merely incidental, it is not a public use, authorizing the exercise of
the jurisdiction of the public utility commission. There must be, in general, a right which
the law compels the owner to give to the general public. It is not enough that the general
prosperity of the public is promoted. Public use is not synonymous with public interest.
The true criterion by which to judge the character of the use is whether the public may
enjoy it by right or only by permission.

In De Guzman v. Court of Appeals,16 the Court noted that Article 1732 of the Civil Code
avoided any distinction between a person or an enterprise offering transportation on a
regular or an isolated basis; and has not distinguished a carrier offering his services to
the general public, that is, the general community or population, from one offering his
services only to a narrow segment of the general population.

Nonetheless, the concept of a common carrier embodied in Article 1732 of the Civil Code
coincides neatly with the notion of public service under the Public Service Act, which
supplements the law on common carriers found in the Civil Code. Public service,
according to Section 13, paragraph (b) of the Public Service Act, includes:

x x x every person that now or hereafter may own, operate, manage, or control in the
Philippines, for hire or compensation, with general or limited clientle, whether
permanent or occasional, and done for the general business purposes, any common
carrier, railroad, street railway, traction railway, subway motor vehicle, either for freight
or passenger, or both, with or without fixed route and whatever may be its classification,
freight or carrier service of any class, express service, steamboat, or steamship line,
pontines, ferries and water craft, engaged in the transportation of passengers or freight
or both, shipyard, marine repair shop, ice-refrigeration plant, canal, irrigation system,
gas, electric light, heat and power, water supply and power petroleum, sewerage
system, wire or wireless communications systems, wire or wireless broadcasting stations
and other similar public services. x x x.17
Given the breadth of the aforequoted characterization of a common carrier, the Court
has considered as common carriers pipeline operators, 18 custom brokers and
warehousemen,19 and barge operators20 even if they had limited clientle.

As all the foregoing indicate, the true test for a common carrier is not the quantity or
extent of the business actually transacted, or the number and character of the
conveyances used in the activity, but whether the undertaking is a part of the activity
engaged in by the carrier that he has held out to the general public as his business or
occupation. If the undertaking is a single transaction, not a part of the general business
or occupation engaged in, as advertised and held out to the general public, the individual
or the entity rendering such service is a private, not a common, carrier. The question
must be determined by the character of the business actually carried on by the carrier,
not by any secret intention or mental reservation it may entertain or assert when
charged with the duties and obligations that the law imposes.21

Applying these considerations to the case before us, there is no question that the
Pereas as the operators of a school bus service were: (a) engaged in transporting
passengers generally as a business, not just as a casual occupation; (b) undertaking to
carry passengers over established roads by the method by which the business was
conducted; and (c) transporting students for a fee. Despite catering to a limited clientle,
the Pereas operated as a common carrier because they held themselves out as a ready
transportation indiscriminately to the students of a particular school living within or near
where they operated the service and for a fee.

The common carriers standard of care and vigilance as to the safety of the passengers
is defined by law. Given the nature of the business and for reasons of public policy, the
common carrier is bound "to observe extraordinary diligence in the vigilance over the
goods and for the safety of the passengers transported by them, according to all the
circumstances of each case."22 Article 1755 of the Civil Code specifies that the common
carrier should "carry the passengers safely as far as human care and foresight can
provide, using the utmost diligence of very cautious persons, with a due regard for all the
circumstances." To successfully fend off liability in an action upon the death or injury to a
passenger, the common carrier must prove his or its observance of that extraordinary
diligence; otherwise, the legal presumption that he or it was at fault or acted negligently
would stand.23 No device, whether by stipulation, posting of notices, statements on
tickets, or otherwise, may dispense with or lessen the responsibility of the common
carrier as defined under Article 1755 of the Civil Code. 24

And, secondly, the Pereas have not presented any compelling defense or reason by
which the Court might now reverse the CAs findings on their liability. On the contrary, an
examination of the records shows that the evidence fully supported the findings of the
CA.

As earlier stated, the Pereas, acting as a common carrier, were already presumed to be
negligent at the time of the accident because death had occurred to their
passenger.25 The presumption of negligence, being a presumption of law, laid the burden
of evidence on their shoulders to establish that they had not been negligent. 26 It was the
law no less that required them to prove their observance of extraordinary diligence in
seeing to the safe and secure carriage of the passengers to their destination. Until they
did so in a credible manner, they stood to be held legally responsible for the death of
Aaron and thus to be held liable for all the natural consequences of such death.

There is no question that the Pereas did not overturn the presumption of their
negligence by credible evidence. Their defense of having observed the diligence of a
good father of a family in the selection and supervision of their driver was not legally
sufficient. According to Article 1759 of the Civil Code, their liability as a common carrier
did not cease upon proof that they exercised all the diligence of a good father of a family
in the selection and supervision of their employee. This was the reason why the RTC
treated this defense of the Pereas as inappropriate in this action for breach of contract
of carriage.
The Pereas were liable for the death of Aaron despite the fact that their driver might
have acted beyond the scope of his authority or even in violation of the orders of the
common carrier.27 In this connection, the records showed their drivers actual negligence.
There was a showing, to begin with, that their driver traversed the railroad tracks at a
point at which the PNR did not permit motorists going into the Makati area to cross the
railroad tracks. Although that point had been used by motorists as a shortcut into the
Makati area, that fact alone did not excuse their driver into taking that route. On the
other hand, with his familiarity with that shortcut, their driver was fully aware of the risks
to his passengers but he still disregarded the risks. Compounding his lack of care was
that loud music was playing inside the air-conditioned van at the time of the accident.
The loudness most probably reduced his ability to hear the warning horns of the
oncoming train to allow him to correctly appreciate the lurking dangers on the railroad
tracks. Also, he sought to overtake a passenger bus on the left side as both vehicles
traversed the railroad tracks. In so doing, he lost his view of the train that was then
coming from the opposite side of the passenger bus, leading him to miscalculate his
chances of beating the bus in their race, and of getting clear of the train. As a result, the
bus avoided a collision with the train but the van got slammed at its rear, causing the
fatality. Lastly, he did not slow down or go to a full stop before traversing the railroad
tracks despite knowing that his slackening of speed and going to a full stop were in
observance of the right of way at railroad tracks as defined by the traffic laws and
regulations.28 He thereby violated a specific traffic regulation on right of way, by virtue of
which he was immediately presumed to be negligent.29

The omissions of care on the part of the van driver constituted negligence, 30 which,
according to Layugan v. Intermediate Appellate Court, 31 is "the omission to do something
which a reasonable man, guided by those considerations which ordinarily regulate the
conduct of human affairs, would do, or the doing of something which a prudent and
reasonable man would not do, 32 or as Judge Cooley defines it, (t)he failure to observe for
the protection of the interests of another person, that degree of care, precaution, and
vigilance which the circumstances justly demand, whereby such other person suffers
injury."33

The test by which to determine the existence of negligence in a particular case has been
aptly stated in the leading case of Picart v. Smith,34 thuswise:

The test by which to determine the existence of negligence in a particular case may be
stated as follows: Did the defendant in doing the alleged negligent act use that
reasonable care and caution which an ordinarily prudent person would have used in the
same situation? If not, then he is guilty of negligence. The law here in effect adopts the
standard supposed to be supplied by the imaginary conduct of the discreet paterfamilias
of the Roman law. The existence of negligence in a given case is not determined by
reference to the personal judgment of the actor in the situation before him. The law
considers what would be reckless, blameworthy, or negligent in the man of ordinary
intelligence and prudence and determines liability by that.

The question as to what would constitute the conduct of a prudent man in a given
situation must of course be always determined in the light of human experience and in
view of the facts involved in the particular case. Abstract speculation cannot here be of
much value but this much can be profitably said: Reasonable men govern their conduct
by the circumstances which are before them or known to them. They are not, and are not
supposed to be, omniscient of the future. Hence they can be expected to take care only
when there is something before them to suggest or warn of danger. Could a prudent
man, in the case under consideration, foresee harm as a result of the course actually
pursued? If so, it was the duty of the actor to take precautions to guard against that
harm. Reasonable foresight of harm, followed by the ignoring of the suggestion born of
this prevision, is always necessary before negligence can be held to exist. Stated in
these terms, the proper criterion for determining the existence of negligence in a given
case is this: Conduct is said to be negligent when a prudent man in the position of the
tortfeasor would have foreseen that an effect harmful to another was sufficiently
probable to warrant his foregoing the conduct or guarding against its consequences.
(Emphasis supplied)
Pursuant to the Picart v. Smith test of negligence, the Pereas driver was entirely
negligent when he traversed the railroad tracks at a point not allowed for a motorists
crossing despite being fully aware of the grave harm to be thereby caused to his
passengers; and when he disregarded the foresight of harm to his passengers by
overtaking the bus on the left side as to leave himself blind to the approach of the
oncoming train that he knew was on the opposite side of the bus.

Unrelenting, the Pereas cite Phil. National Railways v. Intermediate Appellate

Court,35 where the Court held the PNR solely liable for the damages caused to a
passenger bus and its passengers when its train hit the rear end of the bus that was then
traversing the railroad crossing. But the circumstances of that case and this one share no
similarities. In Philippine National Railways v. Intermediate Appellate Court, no evidence
of contributory negligence was adduced against the owner of the bus. Instead, it was the
owner of the bus who proved the exercise of extraordinary diligence by preponderant
evidence. Also, the records are replete with the showing of negligence on the part of
both the Pereas and the PNR. Another distinction is that the passenger bus in Philippine
National Railways v. Intermediate Appellate Court was traversing the dedicated railroad
crossing when it was hit by the train, but the Pereas school van traversed the railroad
tracks at a point not intended for that purpose.

At any rate, the lower courts correctly held both the Pereas and the PNR "jointly and
severally" liable for damages arising from the death of Aaron. They had been impleaded
in the same complaint as defendants against whom the Zarates had the right to relief,
whether jointly, severally, or in the alternative, in respect to or arising out of the
accident, and questions of fact and of law were common as to the Zarates. 36 Although
the basis of the right to relief of the Zarates (i.e., breach of contract of carriage) against
the Pereas was distinct from the basis of the Zarates right to relief against the PNR
(i.e., quasi-delict under Article 2176, Civil Code), they nonetheless could be held jointly
and severally liable by virtue of their respective negligence combining to cause the
death of Aaron. As to the PNR, the RTC rightly found the PNR also guilty of negligence
despite the school van of the Pereas traversing the railroad tracks at a point not
dedicated by the PNR as a railroad crossing for pedestrians and motorists, because the
PNR did not ensure the safety of others through the placing of crossbars, signal lights,
warning signs, and other permanent safety barriers to prevent vehicles or pedestrians
from crossing there. The RTC observed that the fact that a crossing guard had been
assigned to man that point from 7 a.m. to 5 p.m. was a good indicium that the PNR was
aware of the risks to others as well as the need to control the vehicular and other traffic
there. Verily, the Pereas and the PNR were joint tortfeasors.

2.
Was the indemnity for loss of
Aarons earning capacity proper?

The RTC awarded indemnity for loss of Aarons earning capacity. Although agreeing with
the RTC on the liability, the CA modified the amount. Both lower courts took into
consideration that Aaron, while only a high school student, had been enrolled in one of
the reputable schools in the Philippines and that he had been a normal and able-bodied
child prior to his death. The basis for the computation of Aarons earning capacity was
not what he would have become or what he would have wanted to be if not for his
untimely death, but the minimum wage in effect at the time of his death. Moreover, the
RTCs computation of Aarons life expectancy rate was not reckoned from his age of 15
years at the time of his death, but on 21 years, his age when he would have graduated
from college.

We find the considerations taken into account by the lower courts to be reasonable and
fully warranted.

Yet, the Pereas submit that the indemnity for loss of earning capacity was speculative
and unfounded.1wphi1 They cited People v. Teehankee, Jr., 37 where the Court deleted
the indemnity for victim Jussi Leinos loss of earning capacity as a pilot for being
speculative due to his having graduated from high school at the International School in
Manila only two years before the shooting, and was at the time of the shooting only
enrolled in the first semester at the Manila Aero Club to pursue his ambition to become a
professional pilot. That meant, according to the Court, that he was for all intents and
purposes only a high school graduate.

We reject the Pereas submission.

First of all, a careful perusal of the Teehankee, Jr. case shows that the situation there of
Jussi Leino was not akin to that of Aaron here. The CA and the RTC were not speculating
that Aaron would be some highly-paid professional, like a pilot (or, for that matter, an
engineer, a physician, or a lawyer). Instead, the computation of Aarons earning capacity
was premised on him being a lowly minimum wage earner despite his being then
enrolled at a prestigious high school like Don Bosco in Makati, a fact that would have
likely ensured his success in his later years in life and at work.

And, secondly, the fact that Aaron was then without a history of earnings should not be
taken against his parents and in favor of the defendants whose negligence not only cost
Aaron his life and his right to work and earn money, but also deprived his parents of their
right to his presence and his services as well. Our law itself states that the loss of the
earning capacity of the deceased shall be the liability of the guilty party in favor of the
heirs of the deceased, and shall in every case be assessed and awarded by the court
"unless the deceased on account of permanent physical disability not caused by the
defendant, had no earning capacity at the time of his death." 38Accordingly, we
emphatically hold in favor of the indemnification for Aarons loss of earning capacity
despite him having been unemployed, because compensation of this nature is awarded
not for loss of time or earnings but for loss of the deceaseds power or ability to earn
money.39

This favorable treatment of the Zarates claim is not unprecedented. In Cariaga v.

Laguna Tayabas Bus Company and Manila Railroad Company, 40 fourth-year medical
student Edgardo Carriagas earning capacity, although he survived the accident but his
injuries rendered him permanently incapacitated, was computed to be that of the
physician that he dreamed to become. The Court considered his scholastic record
sufficient to justify the assumption that he could have finished the medical course and
would have passed the medical board examinations in due time, and that he could have
possibly earned a modest income as a medical practitioner. Also, in People v.
Sanchez,41 the Court opined that murder and rape victim Eileen Sarmienta and murder
victim Allan Gomez could have easily landed good-paying jobs had they graduated in
due time, and that their jobs would probably pay them high monthly salaries
from P 10,000.00 to P 15,000.00 upon their graduation. Their earning capacities were
computed at rates higher than the minimum wage at the time of their deaths due to
their being already senior agriculture students of the University of the Philippines in Los
Baos, the countrys leading educational institution in agriculture.

3.
Were the amounts of damages excessive?

The Pereas plead for the reduction of the moral and exemplary damages awarded to
the Zarates in the respective amounts of P 2,500,000.00 and P 1,000,000.00 on the
ground that such amounts were excessive.

The plea is unwarranted.

The moral damages of P 2,500,000.00 were really just and reasonable under the
established circumstances of this case because they were intended by the law to
assuage the Zarates deep mental anguish over their sons unexpected and violent
death, and their moral shock over the senseless accident. That amount would not be too
much, considering that it would help the Zarates obtain the means, diversions or
amusements that would alleviate their suffering for the loss of their child. At any rate,
reducing the amount as excessive might prove to be an injustice, given the passage of a
long time from when their mental anguish was inflicted on them on August 22, 1996.
Anent the P 1,000,000.00 allowed as exemplary damages, we should not reduce the
amount if only to render effective the desired example for the public good. As a common
carrier, the Pereas 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.

WHEREFORE, we DENY the petition for review on certiorari; AFFIRM the decision
promulgated on November 13, 2002; and ORDER the petitioners to pay the costs of suit.

SO ORDERED.

9, G.R. No. L-56487 October 21, 1991

REYNALDA GATCHALIAN, petitioner,

vs.
ARSENIO DELIM and the HON. COURT OF APPEALS, respondents.

At noon time on 11 July 1973, petitioner Reynalda Gatchalian boarded, as a paying

passenger, respondent's "Thames" mini bus at a point in San Eugenio, Aringay, La Union,
bound for Bauang, of the same province. On the way, while the bus was running along
the highway in Barrio Payocpoc, Bauang, Union, "a snapping sound" was suddenly heard
at one part of the bus and, shortly thereafter, the vehicle bumped a cement flower pot
on the side of the road, went off the road, turned turtle and fell into a ditch. Several
passengers, including petitioner Gatchalian, were injured. They were promptly taken to
Bethany Hospital at San Fernando, La Union, for medical treatment. Upon medical
examination, petitioner was found to have sustained physical injuries on the leg, arm and
forehead, specifically described as follows: lacerated wound, forehead; abrasion, elbow,
left; abrasion, knee, left; abrasion, lateral surface, leg, left. 1

On 14 July 1973, while injured. passengers were confined in the hospital, Mrs. Adela
Delim, wife of respondent, visited them and later paid for their hospitalization and
medical expenses. She also gave petitioner P12.00 with which to pay her transportation
expense in going home from the hospital. However, before Mrs. Delim left, she had the
injured passengers, including petitioner, sign an already prepared Joint Affidavit which
stated, among other things:

That we were passengers of Thames with Plate No. 52-222 PUJ Phil. 73 and
victims after the said Thames met an accident at Barrio Payocpoc Norte,
Bauang, La Union while passing through the National Highway No. 3;

That after a thorough investigation the said Thames met the accident due to
mechanical defect and went off the road and turned turtle to the east canal
of the road into a creek causing physical injuries to us;

xxx xxx xxx

That we are no longer interested to file a complaint, criminal or civil

against the said driver and owner of the said Thames, because it was an
accident and the said driver and owner of the said Thames have gone to the
extent of helping us to be treated upon our injuries.

xxx xxx xxx 2

(Emphasis supplied)

Notwithstanding this document, petitioner Gathalian filed with the then Court of First
Instance of La Union an action extra contractu to recover compensatory and moral
damages. She alleged in the complaint that her injuries sustained from the vehicular
mishap had left her with a conspicuous white scar measuring 1 by 1/2 inches on the
forehead, generating mental suffering and an inferiority complex on her part; and that as
a result, she had to retire in seclusion and stay away from her friends. She also alleged
that the scar diminished her facial beauty and deprived her of opportunities for
employment. She prayed for an award of: P10,000.00 for loss of employment and other
opportunities; P10,000.00 for the cost of plastic surgery for removal of the scar on her
forehead; P30,000.00 for moral damages; and P1,000.00 as attorney's fees.

In defense, respondent averred that the vehicular mishap was due to force majeure, and
that petitioner had already been paid and moreover had waived any right to institute any
action against him (private respondent) and his driver, when petitioner Gatchalian signed
the Joint Affidavit on 14 July 1973.

After trial, the trial court dismissed the complaint upon the ground that when petitioner
Gatchalian signed the Joint Affidavit, she relinquished any right of action (whether
criminal or civil) that she may have had against respondent and the driver of the mini-
bus.

On appeal by petitioner, the Court of Appeals reversed the trial court's conclusion that
there had been a valid waiver, but affirmed the dismissal of the case by denying
petitioner's claim for damages:

We are not in accord, therefore, of (sic) the ground of the trial court's
dismissal of the complaint, although we conform to the trial court's
disposition of the case its dismissal.

IN VIEW OF THE FOREGOING considerations, there being no error committed

by the lower court in dismissing the plaintiff-appellant's complaint, the
judgment of dismissal is hereby affirmed.

Without special pronouncement as to costs.

SO ORDERED. 3

In the present Petition for Review filed in forma pauperis, petitioner assails the decision
of the Court of Appeals and ask this Court to award her actual or compensatory damages
as well as moral damages.

We agree with the majority of the Court of Appeals who held that no valid waiver of her
cause of action had been made by petitioner. The relevant language of the Joint Affidavit
may be quoted again:

That we are no longer interested to file a complaint, criminal or civil against

the said driver and owner of the said Thames, because it was an accident
and the said driver and owner of the said Thames have gone to the extent of
helping us to be treated upon our injuries. (Emphasis supplied)

A waiver, to be valid and effective, must in the first place be couched in clear and
unequivocal terms which leave no doubt as to the intention of a person to give up
a right or benefit which legally pertains to him. 4 A waiver may not casually be
attributed to a person when the terms thereof do not explicitly and clearly
evidence an intent to abandon a right vested in such person.

The degree of explicitness which this Court has required in purported waivers is
illustrated in Yepes and Susaya v. Samar Express Transit (supra), where the Court in
reading and rejecting a purported waiver said:

. . . It appears that before their transfer to the Leyte Provincial Hospital,

appellees were asked to sign as, in fact, they signed the document Exhibit I
wherein they stated that "in consideration of the expenses which said
operator has incurred in properly giving us the proper medical treatment, we
hereby manifest our desire to waive any and all claims against the operator
of the Samar Express Transit."
 xxx xxx xxx

Even a cursory examination of the document mentioned above will readily

show that appellees did not actually waive their right to claim damages from
appellant for the latter's failure to comply with their contract of carriage. All
that said document proves is that they expressed a "desire" to make the
waiver which obviously is not the same as making an actual waiver of
their right. A waiver of the kind invoked by appellant must be clear and
unequivocal (Decision of the Supreme Court of Spain of July 8, 1887)
which is not the case of the one relied upon in this appeal. (Emphasis
supplied)

If we apply the standard used in Yepes and Susaya, we would have to conclude
that the terms of the Joint Affidavit in the instant case cannot be regarded as a
waiver cast in "clear and unequivocal" terms. Moreover, the circumstances under
which the Joint Affidavit was signed by petitioner Gatchalian need to be
considered. Petitioner testified that she was still reeling from the effects of the
vehicular accident, having been in the hospital for only three days, when the
purported waiver in the form of the Joint Affidavit was presented to her for signing;
that while reading the same, she experienced dizziness but that, seeing the other
passengers who had also suffered injuries sign the document, she too signed
without bothering to read the Joint Affidavit in its entirety. Considering these
circumstances there appears substantial doubt whether petitioner understood fully
the import of the Joint Affidavit (prepared by or at the instance of private
respondent) she signed and whether she actually intended thereby to waive any
right of action against private respondent.

Finally, because what is involved here is the liability of a common carrier for injuries
sustained by passengers in respect of whose safety a common carrier must
exercise extraordinary diligence, we must construe any such purported waiver most
strictly against the common carrier. For a waiver to be valid and effective, it must not be
contrary to law, morals, public policy or good
customs. 5 To uphold a supposed waiver of any right to claim damages by an injured
passenger, under circumstances like those exhibited in this case, would be to dilute and
weaken the standard of extraordinary diligence exacted by the law from common
carriers and hence to render that standard unenforceable. 6 We believe such a purported
waiver is offensive to public policy.

Petitioner Gatchalian also argues that the Court of Appeals, having by majority vote held
that there was no enforceable waiver of her right of action, should have awarded her
actual or compensatory and moral damages as a matter of course.

We have already noted that a duty to exercise extraordinary diligence in protecting the
safety of its passengers is imposed upon a common carrier. 7 In case of death or injuries
to passengers, a statutory presumption arises that the common carrier was at fault or
had acted negligently "unless it proves that it [had] observed extraordinary diligence as
prescribed in Articles 1733 and 1755." 8 In fact, because of this statutory presumption, it
has been held that a court need not even make an express finding of fault or negligence
on the part of the common carrier in order to hold it liable. 9 To overcome this
presumption, the common carrier must slow to the court that it had exercised
extraordinary diligence to prevent the injuries. 10 The standard of extraordinary
diligence imposed upon common carriers is considerably more demanding than the
standard of ordinary diligence, i.e., the diligence of a good paterfamilias established in
respect of the ordinary relations between members of society. A common carrier is bound
to carry its passengers safely" as far as human care and foresight can provide, using
the utmost diligence of a very cautious person, with due regard to all the
circumstances". 11

Thus, the question which must be addressed is whether or not private respondent has
successfully proved that he had exercised extraordinary diligence to prevent the mishap
involving his mini-bus. The records before the Court are bereft of any evidence showing
that respondent had exercised the extraordinary diligence required by law. Curiously,
respondent did not even attempt, during the trial before the court a quo, to prove that he
had indeed exercised the requisite extraordinary diligence. Respondent did try to
exculpate himself from liability by alleging that the mishap was the result of force
majeure. But allegation is not proof and here again, respondent utterly failed to
substantiate his defense of force majeure. To exempt a common carrier from liability for
death or physical injuries to passengers upon the ground of force majeure, the carrier
must clearly show not only that the efficient cause of the casualty was entirely
independent of the human will, but also that it was impossible to avoid. Any participation
by the common carrier in the occurrence of the injury will defeat the defense of force
majeure. In Servando v. Philippine Steam Navigation Company, 12 the Court summed up
the essential characteristics of force majeure by quoting with approval from
the Enciclopedia Juridica Espaola:

Thus, where fortuitous event or force majeure is the immediate and

proximate cause of the loss, the obligor is exempt from liability non-
performance. The Partidas, the antecedent of Article 1174 of the Civil Code,
defines "caso fortuito" as 'an event that takes place by accident and could
not have been foreseen. Examples of this are destruction of houses,
unexpected fire, shipwreck, violence of robber.

In its dissertation on the phrase "caso fortuito" the Enciclopedia Juridica

Espaola says: 'In legal sense and, consequently, also in relation to
contracts, a "caso fortuito" presents the following essential characteristics:
(1) the cause of the unforeseen and unexpected occurence, or of the failure
of the debtor to comply with his obligation, must be independent of the
human will; (2) it must be impossible to foresee the event which constitutes
the "caso fortuito", or if it can be foreseen, it must be impossible to avoid; (3)
the occurrence must be such as to render it impossible for the debtor to fulfill
his obligation in a normal manner; and (4) the obligor must be free from any
participation in the aggravation of the injury resulting to the creditor.

Upon the other hand, the record yields affirmative evidence of fault or negligence on the
part of respondent common carrier. In her direct examination, petitioner Gatchalian
narrated that shortly before the vehicle went off the road and into a ditch, a "snapping
sound" was suddenly heard at one part of the bus. One of the passengers, an old
woman, cried out, "What happened?" ("Apay addan samet nadadaelen?"). The driver
replied, nonchalantly, "That is only normal" ("Ugali ti makina dayta"). The driver did not
stop to check if anything had gone wrong with the bus. Moreover, the driver's reply
necessarily indicated that the same "snapping sound" had been heard in the bus on
previous occasions. This could only mean that the bus had not been checked physically
or mechanically to determine what was causing the "snapping sound" which had
occurred so frequently that the driver had gotten accustomed to it. Such a sound is
obviously alien to a motor vehicle in good operating condition, and even a modicum of
concern for life and limb of passengers dictated that the bus be checked and repaired.
The obvious continued failure of respondent to look after the roadworthiness and safety
of the bus, coupled with the driver's refusal or neglect to stop the mini-bus after he had
heard once again the "snapping sound" and the cry of alarm from one of the passengers,
constituted wanton disregard of the physical safety of the passengers, and hence gross
negligence on the part of respondent and his driver.

We turn to petitioner's claim for damages. The first item in that claim relates to revenue
which petitioner said she failed to realize because of the effects of the vehicular mishap.
Petitioner maintains that on the day that the mini-bus went off the road, she was
supposed to confer with the district supervisor of public schools for a substitute teacher's
job, a job which she had held off and on as a "casual employee." The Court of Appeals,
however, found that at the time of the accident, she was no longer employed in a public
school since, being a casual employee and not a Civil Service eligible, she had been laid
off. Her employment as a substitute teacher was occasional and episodic, contingent
upon the availability of vacancies for substitute teachers. In view of her employment
status as such, the Court of Appeals held that she could not be said to have in fact lost
any employment after and by reason of the accident. 13 Such was the factual finding of
the Court of Appeals, a finding entitled to due respect from this Court. Petitioner
Gatchalian has not submitted any basis for overturning this finding of fact, and she may
not be awarded damages on the basis of speculation or conjecture. 14

Petitioner's claim for the cost of plastic surgery for removal of the scar on her forehead,
is another matter. A person is entitled to the physical integrity of his or her body; if that
integrity is violated or diminished, actual injury is suffered for which actual or
compensatory damages are due and assessable. Petitioner Gatchalian is entitled to be
placed as nearly as possible in the condition that she was before the mishap. A scar,
especially one on the face of the woman, resulting from the infliction of injury upon her,
is a violation of bodily integrity, giving raise to a legitimate claim for restoration to
her conditio ante. If the scar is relatively small and does not grievously disfigure the
victim, the cost of surgery may be expected to be correspondingly modest. In Araneta,
et al. vs. Areglado, et al., 15 this Court awarded actual or compensatory damages for,
among other things, the surgical removal of the scar on the face of a young boy who had
been injured in a vehicular collision. The Court there held:

We agree with the appellants that the damages awarded by the lower court
for the injuries suffered by Benjamin Araneta are inadequate. In allowing not
more than P1,000.00 as compensation for the "permanent deformity and
something like an inferiority complex" as well as for the "pathological
condition on the left side of the jaw" caused to said plaintiff, the court below
overlooked the clear evidence on record that to arrest the degenerative
process taking place in the mandible and restore the injured boy to a nearly
normal condition, surgical intervention was needed, for which the doctor's
charges would amount to P3,000.00, exclusive of hospitalization fees,
expenses and medicines. Furthermore, the operation, according to Dr. Dio,
would probably have to be repeated in order to effectuate a complete cure,
while removal of the scar on the face obviously demanded plastic surgery.

xxx xxx xxx

The father's failure to submit his son to a plastic operation as soon as

possible does not prove that such treatment is not called for. The damage to
the jaw and the existence of the scar in Benjamin Araneta's face are physical
facts that can not be reasoned out of existence. That the injury should be
treated in order to restore him as far as possible to his original condition is
undeniable. The father's delay, or even his negligence, should not be allowed
to prejudice the son who has no control over the parent's action nor impair
his right to a full indemnity.

. . . Still, taking into account the necessity and cost of corrective measures to
fully repair the damage; the pain suffered by the injured party; his feelings of
inferiority due to consciousness of his present deformity, as well as the
voluntary character of the injury inflicted; and further considering that a
repair, however, skillfully conducted, is never equivalent to the original
state, we are of the opinion that the indemnity granted by the trial court
should be increased to a total of P18,000.00. (Emphasis supplied)

Petitioner estimated that the cost of having her scar surgically removed was somewhere
between P10,000.00 to P15,000.00. 16 Upon the other hand, Dr. Fe Tayao Lasam, a
witness presented as an expert by petitioner, testified that the cost would probably be
between P5,000.00 to P10,000.00. 17 In view of this testimony, and the fact that a
considerable amount of time has lapsed since the mishap in 1973 which may be
expected to increase not only the cost but also very probably the difficulty of removing
the scar, we consider that the amount of P15,000.00 to cover the cost of such plastic
surgery is not unreasonable.

Turning to petitioner's claim for moral damages, the long-established rule is that moral
damages may be awarded where gross negligence on the part of the common carrier is
shown. 18 Since we have earlier concluded that respondent common carrier and his
driver had been grossly negligent in connection with the bus mishap which had injured
petitioner and other passengers, and recalling the aggressive manuevers of respondent,
through his wife, to get the victims to waive their right to recover damages even as they
were still hospitalized for their injuries, petitioner must be held entitled to such moral
damages. Considering the extent of pain and anxiety which petitioner must have
suffered as a result of her physical injuries including the permanent scar on her forehead,
we believe that the amount of P30,000.00 would be a reasonable award. Petitioner's
claim for P1,000.00 as atttorney's fees is in fact even more modest. 19

WHEREFORE, the Decision of the Court of Appeals dated 24 October 1980, as well as the
decision of the then Court of First Instance of La Union dated 4 December 1975 are
hereby REVERSED and SET ASIDE.Respondent is hereby ORDERED to pay petitioner
Reynalda Gatchalian the following sums: 1) P15,000.00 as actual or compensatory
damages to cover the cost of plastic surgery for the removal of the scar on petitioner's
forehead; 2) P30,000.00 as moral damages; and 3) P1,000.00 as attorney's fees, the
aggregate amount to bear interest at the legal rate of 6% per annum counting from the
promulgation of this decision until full payment thereof. Costs against private
respondent.

SO ORDERED.

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

COMPAIA MARITIMA, petitioner,

vs.
COURT OF APPEALS and VICENTE CONCEPCION, respondents.

Petitioner Compaia 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

Compaia 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 Compaia 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 Compaia 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.

11. G.R. No. 84458 November 6, 1989

ABOITIZ SHIPPING CORPORATION, petitioner,

vs.
HON. COURT OF APPEALS, ELEVENTH DIVISION, LUCILA C. VIANA, SPS.
ANTONIO VIANA and GORGONIA VIANA, and PIONEER STEVEDORING
CORPORATION, respondents.

In this appeal by certiorari, petitioner Aboitiz Shipping Corporation seeks a review of the
decision 1 of respondent Court of Appeals, dated July 29, 1988, the decretal portion of
which reads:

WHEREFORE, the judgment appealed from as modified by the order of

October 27, 1982, is hereby affirmed with the modification that appellant
Aboitiz Shipping is hereby ordered to pay plaintiff-appellees the amount of
P30,000.00 for the death of Anacleto Viana; actual damages of P9,800.00;
P150,000.00 for unearned income; P7,200.00 as support for deceased's
parents; P20,000.00 as moral damages; P10,000.00 as attorney's fees; and
to pay the costs.

The undisputed facts of the case, as found by the court a quo and adopted by
respondent court, are as follows: .

The evidence disclosed that on May 11, 1975, Anacleto Viana boarded the
vessel M/V Antonia, owned by defendant, at the port at San Jose, Occidental
Mindoro, bound for Manila, having purchased a ticket (No. 117392) in the
sum of P23.10 (Exh. 'B'). On May 12, 1975, said vessel arrived at Pier 4,
North Harbor, Manila, and the passengers therein disembarked, a gangplank
having been provided connecting the side of the vessel to the pier. Instead of
using said gangplank Anacleto Viana disembarked on the third deck which
was on the level with the pier. After said vessel had landed, the Pioneer
Stevedoring Corporation took over the exclusive control of the cargoes
loaded on said vessel pursuant to the Memorandum of Agreement dated July
 26, 1975 (Exh. '2') between the third party defendant Pioneer Stevedoring
Corporation and defendant Aboitiz Shipping Corporation.

The crane owned by the third party defendant and operated by its crane
operator Alejo Figueroa was placed alongside the vessel and one (1) hour
after the passengers of said vessel had disembarked, it started operation by
unloading the cargoes from said vessel. While the crane was being operated,
Anacleto Viana who had already disembarked from said vessel obviously
remembering that some of his cargoes were still loaded in the vessel, went
back to the vessel, and it was while he was pointing to the crew of the said
vessel to the place where his cargoes were loaded that the crane hit him,
pinning him between the side of the vessel and the crane. He was thereafter
brought to the hospital where he later expired three (3) days thereafter, on
May 15, 1975, the cause of his death according to the Death Certificate (Exh.
"C") being "hypostatic pneumonia secondary to traumatic fracture of the
pubic bone lacerating the urinary bladder" (See also Exh. "B"). For his
hospitalization, medical, burial and other miscellaneous expenses, Anacleto's
wife, herein plaintiff, spent a total of P9,800.00 (Exhibits "E", "E-1", to "E-5").
Anacleto Viana who was only forty (40) years old when he met said fateful
accident (Exh. 'E') was in good health. His average annual income as a
farmer or a farm supervisor was 400 cavans of palay annually. His parents,
herein plaintiffs Antonio and Gorgonia Viana, prior to his death had been
recipient of twenty (20) cavans of palay as support or P120.00 monthly.
Because of Anacleto's death, plaintiffs suffered mental anguish and extreme
worry or moral damages. For the filing of the instant case, they had to hire a
lawyer for an agreed fee of ten thousand (P10,000.00) pesos. 2

Private respondents Vianas filed a complaint 3 for damages against petitioner corporation
(Aboitiz, for brevity) for breach of contract of carriage.

In its answer. 4 Aboitiz denied responsibility contending that at the time of the accident,
the vessel was completely under the control of respondent Pioneer Stevedoring
Corporation (Pioneer, for short) as the exclusive stevedoring contractor of Aboitiz, which
handled the unloading of cargoes from the vessel of Aboitiz. It is also averred that since
the crane operator was not an employee of Aboitiz, the latter cannot be held liable under
the fellow-servant rule.

Thereafter, Aboitiz, as third-party plaintiff, filed a third-party complaint 5 against Pioneer

imputing liability thereto for Anacleto Viana's death as having been allegedly caused by
the negligence of the crane operator who was an employee of Pioneer under its exclusive
control and supervision.

Pioneer, in its answer to the third-party complaint, 6 raised the defenses that Aboitiz had
no cause of action against Pioneer considering that Aboitiz is being sued by the Vianas
for breach of contract of carriage to which Pioneer is not a party; that Pioneer had
observed the diligence of a good father of a family both in the selection and supervision
of its employees as well as in the prevention of damage or injury to anyone including the
victim Anacleto Viana; that Anacleto Viana's gross negligence was the direct and
proximate cause of his death; and that the filing of the third-party complaint was
premature by reason of the pendency of the criminal case for homicide through reckless
imprudence filed against the crane operator, Alejo Figueroa.

In a decision rendered on April 17, 1980 by the trial court, 7 Aboitiz was ordered to pay
the Vianas for damages incurred, and Pioneer was ordered to reimburse Aboitiz for
whatever amount the latter paid the Vianas. The dispositive portion of said decision
provides:

WHEREFORE, judgment is hereby rendered in favor of the plantiffs:

(1) ordering defendant Aboitiz Shipping Corporation to pay to plaintiffs the

sum of P12,000.00 for the death of Anacleto Viana P9,800.00 as actual
damages; P533,200.00 value of the 10,664 cavans of palay computed at
 P50.00 per cavan; P10,000.00 as attorney's fees; F 5,000.00, value of the
100 cavans of palay as support for five (5) years for deceased (sic) parents,
herein plaintiffs Antonio and Gorgonia Viana computed at P50.00 per cavan;
P7,200.00 as support for deceased's parents computed at P120.00 a month
for five years pursuant to Art. 2206, Par. 2, of the Civil Code; P20,000.00 as
moral damages, and costs; and

(2) ordering the third party defendant Pioneer Stevedoring Corporation to

reimburse defendant and third party plaintiff Aboitiz Shipping Corporation
the said amounts that it is ordered to pay to herein plaintiffs.

Both Aboitiz and Pioneer filed separate motions for reconsideration wherein they
similarly raised the trial court's failure to declare that Anacleto Viana acted with gross
negligence despite the overwhelming evidence presented in support thereof. In addition,
Aboitiz alleged, in opposition to Pioneer's motion, that under the memorandum of
agreement the liability of Pioneer as contractor is automatic for any damages or losses
whatsoever occasioned by and arising from the operation of its arrastre and stevedoring
service.

In an order dated October 27, 1982, 8 the trial court absolved Pioneer from liability for
failure of the Vianas and Aboitiz to preponderantly establish a case of negligence against
the crane operator which the court a quo ruled is never presumed, aside from the fact
that the memorandum of agreement supposedly refers only to Pioneer's liability in case
of loss or damage to goods handled by it but not in the case of personal injuries, and,
finally that Aboitiz cannot properly invoke the fellow-servant rule simply because its
liability stems from a breach of contract of carriage. The dispositive portion of said order
reads:

WHEREFORE, judgment is hereby modified insofar as third party defendant

Pioneer Stevedoring Corporation is concerned rendered in favor of the
plaintiffs-,:

(1) Ordering defendant Aboitiz Shipping Corporation to pay the plaintiffs the
sum of P12,000.00 for the death of Anacleto Viana; P9,000.00 (sic) as actual
damages; P533,200.00 value of the 10,664 cavans of palay computed at
P50.00 per cavan; P10,000.00 as attorney's fees; P5,000.00 value of the 100
cavans of palay as support for five (5) years for deceased's parents, herein
plaintiffs Antonio and Gorgonia Viana,computed at P50.00 per cavan;
P7,200.00 as support for deceased's parents computed at P120.00 a month
for five years pursuant to Art. 2206, Par. 2, of the Civil Code; P20,000.00 as
moral damages, and costs; and

(2) Absolving third-party defendant Pioneer Stevedoring Corporation for (sic)

any liability for the death of Anacleto Viana the passenger of M/V Antonia
owned by defendant third party plaintiff Aboitiz Shipping Corporation it
appearing that the negligence of its crane operator has not been established
therein.

Not satisfied with the modified judgment of the trial court, Aboitiz appealed the same to
respondent Court of Appeals which affirmed the findings of of the trial court except as to
the amount of damages awarded to the Vianas.

Hence, this petition wherein petitioner Aboitiz postulates that respondent court erred:

(A) In holding that the doctrine laid down by this honorable Court in La
Mallorca vs. Court of Appeals, et al. (17 SCRA 739, July 27, 1966) is
applicable to the case in the face of the undisputable fact that the factual
situation under the La Mallorca case is radically different from the facts
obtaining in this case;

(B) In holding petitioner liable for damages in the face of the finding of the
court a quo and confirmed by the Honorable respondent court of Appeals
 that the deceased, Anacleto Viana was guilty of contributory negligence,
which, We respectfully submit contributory negligence was the proximate
cause of his death; specifically the honorable respondent Court of Appeals
failed to apply Art. 1762 of the New Civil Code;

(C) In the alternative assuming the holding of the Honorable respondent

Court of Appears that petitioner may be legally condemned to pay damages
to the private respondents we respectfully submit that it committed a
reversible error when it dismissed petitioner's third party complaint against
private respondent Pioneer Stevedoring Corporation instead of compelling
the latter to reimburse the petitioner for whatever damages it may be
compelled to pay to the private respondents Vianas. 9

At threshold, it is to be observed that both the trial court and respondent Court of
Appeals found the victim Anacleto Viana guilty of contributory negligence, but holding
that it was the negligence of Aboitiz in prematurely turning over the vessel to the
arrastre operator for the unloading of cargoes which was the direct, immediate and
proximate cause of the victim's death.

I. Petitioner contends that since one (1) hour had already elapsed from the time Anacleto
Viana disembarked from the vessel and that he was given more than ample opportunity
to unload his cargoes prior to the operation of the crane, his presence on the vessel was
no longer reasonable e and he consequently ceased to be a passenger. Corollarily, it
insists that the doctrine in La Mallorca vs. Court of Appeals, et al. 10 is not applicable to
the case at bar.

The rule is that the relation of carrier and passenger continues until the passenger has
been landed at the port of destination and has left the vessel owner's dock or
premises. 11 Once created, the relationship will not ordinarily terminate until the
passenger has, after reaching his destination, safely alighted from the carrier's
conveyance or had a reasonable opportunity to leave the carrier's premises. All persons
who remain on the premises a reasonable time after leaving the conveyance are to be
deemed passengers, and what is a reasonable time or a reasonable delay within this rule
is to be determined from all the circumstances, and includes a reasonable time to see
after his baggage and prepare for his departure. 12 The carrier-passenger relationship is
not terminated merely by the fact that the person transported has been carried to his
destination if, for example, such person remains in the carrier's premises to claim his
baggage. 13

It was in accordance with this rationale that the doctrine in the aforesaid case of La
Mallorca was enunciated, to wit:

It has been recognized as a rule that the relation of carrier and passenger
does not cease at the moment the passenger alights from the carrier's
vehicle at a place selected by the carrier at the point of destination, but
continues until the passenger has had a reasonable time or a reasonable
opportunity to leave the carrier's premises. And, what is a reasonable time or
a reasonable delay within this rule is to be determined from all the
circumstances. Thus, a person who, after alighting from a train, walks along
the station platform is considered still a passenger. So also, where a
passenger has alighted at his destination and is proceeding by the usual way
to leave the company's premises, but before actually doing so is halted by
the report that his brother, a fellow passenger, has been shot, and he in good
faith and without intent of engaging in the difficulty, returns to relieve his
brother, he is deemed reasonably and necessarily delayed and thus
continues to be a passenger entitled as such to the protection of the railroad
company and its agents.

In the present case, the father returned to the bus to get one of his baggages
which was not unloaded when they alighted from the bus. Racquel, the child
that she was, must have followed the father. However, although the father
was still on the running board of the bus waiting for the conductor to hand
 him the bag or bayong, the bus started to run, so that even he (the father)
had to jump down from the moving vehicle. It was at this instance that the
child, who must be near the bus, was run over and killed. In the
circumstances, it cannot be claimed that the carrier's agent had exercised
the 'utmost diligence' of a 'very cautious person' required by Article 1755 of
the Civil Code to be observed by a common carrier in the discharge of its
obligation to transport safely its passengers. ... The presence of said
passengers near the bus was not unreasonable and they are, therefore, to be
considered still as passengers of the carrier, entitled to the protection under
their contract of carriage. 14

It is apparent from the foregoing that what prompted the Court to rule as it did in said
case is the fact of the passenger's reasonable presence within the carrier's premises.
That reasonableness of time should be made to depend on the attending circumstances
of the case, such as the kind of common carrier, the nature of its business, the customs
of the place, and so forth, and therefore precludes a consideration of the time
element per se without taking into account such other factors. It is thus of no moment
whether in the cited case of La Mallorca there was no appreciable interregnum for the
passenger therein to leave the carrier's premises whereas in the case at bar, an interval
of one (1) hour had elapsed before the victim met the accident. The primary factor to be
considered is the existence of a reasonable cause as will justify the presence of the
victim on or near the petitioner's vessel. We believe there exists such a justifiable cause.

It is of common knowledge that, by the very nature of petitioner's business as a shipper,

the passengers of vessels are allotted a longer period of time to disembark from the ship
than other common carriers such as a passenger bus. With respect to the bulk of cargoes
and the number of passengers it can load, such vessels are capable of accommodating a
bigger volume of both as compared to the capacity of a regular commuter bus.
Consequently, a ship passenger will need at least an hour as is the usual practice, to
disembark from the vessel and claim his baggage whereas a bus passenger can easily
get off the bus and retrieve his luggage in a very short period of time. Verily, petitioner
cannot categorically claim, through the bare expedient of comparing the period of time
entailed in getting the passenger's cargoes, that the ruling in La Mallorca is inapplicable
to the case at bar. On the contrary, if we are to apply the doctrine enunciated therein to
the instant petition, we cannot in reason doubt that the victim Anacleto Viana was still a
passenger at the time of the incident. When the accident occurred, the victim was in the
act of unloading his cargoes, which he had every right to do, from petitioner's vessel. As
earlier stated, a carrier is duty bound not only to bring its passengers safely to their
destination but also to afford them a reasonable time to claim their baggage.

It is not definitely shown that one (1) hour prior to the incident, the victim had already
disembarked from the vessel. Petitioner failed to prove this. What is clear to us is that at
the time the victim was taking his cargoes, the vessel had already docked an hour
earlier. In consonance with common shipping procedure as to the minimum time of one
(1) hour allowed for the passengers to disembark, it may be presumed that the victim
had just gotten off the vessel when he went to retrieve his baggage. Yet, even if he had
already disembarked an hour earlier, his presence in petitioner's premises was not
without cause. The victim had to claim his baggage which was possible only one (1) hour
after the vessel arrived since it was admittedly standard procedure in the case of
petitioner's vessels that the unloading operations shall start only after that time.
Consequently, under the foregoing circumstances, the victim Anacleto Viana is still
deemed a passenger of said carrier at the time of his tragic death.

II. Under the law, common carriers are, from the nature of their business and for reasons
of public policy, 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. 15 More particularly, 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. 16 Thus,
where a passenger dies or is injured, the common carrier is presumed to have been at
fault or to have acted negligently. 17 This gives rise to an action for breach of contract of
carriage where all that is required of plaintiff is to prove the existence of the contract of
carriage and its non-performance by the carrier, that is, the failure of the carrier to carry
the passenger safely to his destination, 18 which, in the instant case, necessarily includes
its failure to safeguard its passenger with extraordinary diligence while such relation
subsists.

The presumption is, therefore, established by law that in case of a passenger's death or
injury the operator of the vessel was at fault or negligent, having failed to exercise
extraordinary diligence, and it is incumbent upon it to rebut the same. This is in
consonance with the avowed policy of the State to afford full protection to the
passengers of common carriers which can be carried out only by imposing a stringent
statutory obligation upon the latter. Concomitantly, this Court has likewise adopted a
rigid posture in the application of the law by exacting the highest degree of care and
diligence from common carriers, bearing utmost in mind the welfare of the passengers
who often become hapless victims of indifferent and profit-oriented carriers. We cannot
in reason deny that petitioner failed to rebut the presumption against it. Under the facts
obtaining in the present case, it cannot be gainsaid that petitioner had inadequately
complied with the required degree of diligence to prevent the accident from happening.

As found by the Court of Appeals, the evidence does not show that there was a cordon of
drums around the perimeter of the crane, as claimed by petitioner. It also adverted to
the fact that the alleged presence of visible warning signs in the vicinity was disputable
and not indubitably established. Thus, we are not inclined to accept petitioner's
explanation that the victim and other passengers were sufficiently warned that merely
venturing into the area in question was fraught with serious peril. Definitely, even
assuming the existence of the supposed cordon of drums loosely placed around the
unloading area and the guard's admonitions against entry therein, these were at most
insufficient precautions which pale into insignificance if considered vis-a-vis the gravity
of the danger to which the deceased was exposed. There is no showing that petitioner
was extraordinarily diligent in requiring or seeing to it that said precautionary measures
were strictly and actually enforced to subserve their purpose of preventing entry into the
forbidden area. By no stretch of liberal evaluation can such perfunctory acts approximate
the "utmost diligence of very cautious persons" to be exercised "as far as human care
and foresight can provide" which is required by law of common carriers with respect to
their passengers.

While the victim was admittedly contributorily negligent, still petitioner's aforesaid failure
to exercise extraordinary diligence was the proximate and direct cause of, because it
could definitely have prevented, the former's death. Moreover, in paragraph 5.6 of its
petition, at bar, 19 petitioner has expressly conceded the factual finding of respondent
Court of Appeals that petitioner did not present sufficient evidence in support of its
submission that the deceased Anacleto Viana was guilty of gross negligence. Petitioner
cannot now be heard to claim otherwise.

No excepting circumstance being present, we are likewise bound by respondent court's

declaration that there was no negligence on the part of Pioneer Stevedoring Corporation,
a confirmation of the trial court's finding to that effect, hence our conformity to Pioneer's
being absolved of any liability.

As correctly observed by both courts, Aboitiz joined Pioneer in proving the alleged gross
negligence of the victim, hence its present contention that the death of the passenger
was due to the negligence of the crane operator cannot be sustained both on grounds, of
estoppel and for lack of evidence on its present theory. Even in its answer filed in the
court below it readily alleged that Pioneer had taken the necessary safeguards insofar as
its unloading operations were concerned, a fact which appears to have been accepted by
the plaintiff therein by not impleading Pioneer as a defendant, and likewise inceptively
by Aboitiz by filing its third-party complaint only after ten (10) months from the
institution of the suit against it. Parenthetically, Pioneer is not within the ambit of the rule
on extraordinary diligence required of, and the corresponding presumption of negligence
foisted on, common carriers like Aboitiz. This, of course, does not detract from what we
have said that no negligence can be imputed to Pioneer but, that on the contrary, the
failure of Aboitiz to exercise extraordinary diligence for the safety of its passenger is the
rationale for our finding on its liability.
WHEREFORE, the petition is DENIED and the judgment appealed from is hereby
AFFIRMED in toto.

SO ORDERED.

12. [G.R. No. 118126. March 4, 1996]

TRANS-ASIA SHIPPING LINES, INC., petitioner, vs. COURT OF APPEALS and

ATTY. RENATO T. ARROYO, respondents.

DECISION
DAVIDE, JR., J.:

As formulated by the petitioner, the issue in this petition for review

on certiorari under Rule 45 of the Rules of Court is as follows:

In case of interruption of a vessels voyage and the consequent delay in that vessels
arrival at its port of destination, is the right of a passenger affected thereby to be
determined and governed by the vague Civil Code provision on common carriers, or shall
it be, in the absence of a specific provision thereon, governed by Art. 698 of the Code of
Commerce?[1]

The petitioner considers it a novel question of law.

Upon a closer evaluation, however, of the challenged decision of the Court of Appeals
of 23 November 1994,[2] vis-a-vis, the decision of 29 June 1992 in Civil Case No. 91-491
of the Regional Trial Court (RTC) of Cagayan de Oro City, Branch 24, [3] as well as the
allegations and arguments adduced by the parties, we find the petitioners formulation of
the issue imprecise. As this Court sees it, what stands for resolution is a common carriers
liability for damages to a passenger who disembarked from the vessel upon its return to
the port of origin, after it suffered engine trouble and had to stop at sea, having
commenced the contracted voyage on one engine.
The antecedents are summarized by the Court of Appeals as follows:

Plaintiff [herein private respondent Atty. Renato Arroyo], a public attorney, bought a
ticket [from] defendant [herein petitioner], a corporation engaged in x x x inter-island
shipping, for the voyage of M/V Asia Thailand vessel to Cagayan de Oro City from Cebu
City on November 12, 1991.

At around 5:30 in the evening of November 12, 1991, plaintiff boarded the M/V Asia
Thailand vessel. At that instance, plaintiff noticed that some repair works [sic] were
being undertaken on the engine of the vessel. The vessel departed at around 11:00 in
the evening with only one (1) engine running.

After an hour of slow voyage, the vessel stopped near Kawit Island and dropped its
anchor thereat. After half an hour of stillness, some passengers demanded that they
should be allowed to return to Cebu Cityfor they were no longer willing to continue their
voyage to Cagayan de Oro City. The captain acceded [sic] to their request and thus the
vessel headed back to Cebu City.

At Cebu City, plaintiff together with the other passengers who requested to be brought
back to Cebu City, were allowed to disembark. Thereafter, the vessel proceeded to
Cagayan de Oro City. Plaintiff, the next day, boarded the M/V Asia Japan for its voyage to
Cagayan de Oro City, likewise a vessel of defendant.

On account of this failure of defendant to transport him to the place of destination

on November 12, 1991, plaintiff filed before the trial court a complaint for damages
against defendant.[4]
 In his complaint, docketed as Civil Case No. 91-491, plaintiff (hereinafter private
respondent) alleged that the engines of the M/V Asia Thailand conked out in the open
sea, and for more than an hour it was stalled and at the mercy of the waves, thus
causing fear in the passengers. It sailed back to Cebu City after it regained power, but for
unexplained reasons, the passengers, including the private respondent, were arrogantly
told to disembark without the necessary precautions against possible injury to them.
They were thus unceremoniously dumped, which only exacerbated the private
respondents mental distress. He further alleged that by reason of the petitioners wanton,
reckless, and willful acts, he was unnecessarily exposed to danger and, having been
stranded in Cebu City for a day, incurred additional expenses and loss of income. He
then prayed that he be awarded P1,100.00, P50,000.00, and P25,000.00 as
compensatory, moral, and exemplary damages, respectively.[5]
In his pre-trial brief, the private respondent asserted that his complaint was an action
for damage&arising from bad faith, breach of contract and from tort, with the former
arising from the petitioners failure to carry [him] to his place of destination as
contracted, while the latter from the conduct of the [petitioner] resulting [in] the
infliction of emotional distress to the private respondent.[6]
After due trial, the trial court rendered its decision [7] and ruled that the action was
only for breach of contract, with Articles 1170, 1172, and 1173 of the Civil Code as
applicable law - not Article 2180 of the same Code. It was of the opinion that Article 1170
made a person liable for damages if, in the performance of his obligation, he was guilty
of fraud, negligence, or delay, or in any manner contravened the tenor thereof;
moreover, pursuant to Article 2201 of the same Code, to be entitled to damages, the
non-performance of the obligation must have been tainted not only by fraud, negligence,
or delay, but also bad faith, malice, and wanton attitude. It then disposed of the case as
follows:

WHEREFORE, it not appearing from the evidence that plaintiff was left in
the Port of Cebu because of the fault, negligence, malice or wanton attitude of
defendants employees, the complaint is DISMISSED. Defendants counterclaim is likewise
dismissed it not appearing also that filing of the case by plaintiff was motivated by
malice or bad faith.[8]

The trial court made the following findings to support its disposition:

In the light of the evidence adduced by the parties and of the above provisions of the
New Civil Code, the issue to be resolved, in the resolution of this case is whether or not,
defendant thru its employee in [sic] the night of November 12, 1991, committed fraud,
negligence, bad faith or malice when it left plaintiff in the Port of Cebu when it sailed
back to Cagayan de Oro City after it has [sic] returned from Kawit Island.

Evaluation of the evidence of the parties tended to show nothing that defendant
committed fraud. As early as 3:00 p.m. of November 12, 1991, defendant did not hide
the fact that the cylinder head cracked. Plaintiff even saw during its repair. If he had
doubts as to the vessels capacity to sail, he had time yet to take another boat. The ticket
could be returned to defendant and corresponding cash [would] be returned to him.

Neither could negligence, bad faith or malice on the part of defendant be inferred from
the evidence of the parties. When the boat arrived at [the] Port of Cebu after it returned
from Kawit Island, there was an announcement that passengers who would like to
disembark were given ten (10) minutes only to do so. By this announcement, it could be
inferred that the boat will [sic] proceed to Cagayan de Oro City. If plaintiff entertained
doubts, he should have asked a member of the crew of the boat or better still, the
captain of the boat. But as admitted by him, he was of the impression only that the boat
will not proceed to Cagayan de Oro that evening so he disembarked. He was instead, the
ones [sic] negligent. Had he been prudent, with the announcement that those who will
disembark were given ten minutes only, he should have lingered a little by staying in his
cot and inquired whether the boat will proceed to Cagayan de Oro City or not. Defendant
cannot be expected to be telling [sic] the reasons to each passenger. Announcement by
microphone was enough.
The court is inclined to believe that the story of defendant that the boat returned to
the Port of Cebu because of the request of the passengers in view of the waves. That it
did not return because of the defective engines as shown by the fact that
fifteen (15) minutes after the boat docked [at] the Port of Cebu and those who wanted to
proceed to Cagayan de Oro disembarked, it left for Cagayan de Oro City.

The defendant got nothing when the boat returned to Cebu to let those who did not want
to proceed to Cagayan de Oro City including plaintiff disembarked. On the contrary, this
would mean its loss instead because it will have to refund their tickets or they will use it
the next trip without paying anymore. It is hard therefore, to imagine how defendant by
leaving plaintiff in Cebu could have acted in bad faith, negligently, want only and with
malice.

If plaintiff, therefore, was not able to [m]ake the trip that night of November 12, 1991, it
was not because defendant maliciously did it to exclude him [from] the trip. If he was
left, it was because of his fault or negligence.[9]

Unsatisfied, the private respondent appealed to the Court of Appeals (CA-G.R. CV No.
39901) and submitted for its determination the following assignment of errors: (1) the
trial court erred in not finding that the defendant-appellee was guilty of fraud, delay,
negligence, and bad faith; and (2) the trial court erred in not awarding moral and
exemplary damages.[10]
In its decision of 23 November 1994,[11] the Court of Appeals reversed the trial courts
decision by applying Article 1755 in relation to Articles 2201, 2208, 2217, and 2232 of
the Civil Code and, accordingly, awarded compensatory, moral, and exemplary damages
as follows:

WHEREFORE, premises considered, the appealed decision is hereby REVERSED and SET
ASIDE and another one is rendered ordering defendant-appellee to pay plaintiff-
appellant:

1. P20,000.00 as moral damages;

2. P10,000.00 as exemplary damages;
3. P5,000.00 as attorneys fees;
4. Cost of suit.

SO ORDERED.[12]

It did not, however, allow the grant of damages for the delay in the performance of
the petitioners obligation as the requirement of demand set forth in Article 1169 of the
Civil Code had not been met by the private respondent. Besides, it found that the private
respondent offered no evidence to prove that his contract of carriage with the petitioner
provided for liability in case of delay in departure, nor that a designation of the time of
departure was the controlling motive for the establishment of the contract. On the latter,
the court a quo observed that the private respondent even admitted he was unaware of
the vessels departure time, and it was only when he boarded the vessel that he became
aware of such. Finally, the respondent Court found no reasonable basis for the private
respondents belief that demand was useless because the petitioner had rendered it
beyond its power to perform its obligation; on the contrary, he even admitted that the
petitioner had been assuring the passengers that the vessel would leave on time, and
that it could still perform its obligation to transport them as scheduled.
To justify its award of damages, the Court of Appeals ratiocinated as follows:

It is an established and admitted fact that the vessel before the voyage had undergone
some repair work on the cylinder head of the engine. It is likewise admitted by
defendant-appellee that it left the port of Cebu City with only one engine running.
Defendant-appellee averred:

x x x The dropping of the vessels anchor after running slowly on only one engine when it
departed earlier must have alarmed some nervous passengers x x x
 The entries in the logbook which defendant-appellee itself offered as evidence
categorically stated therein that the vessel stopped at Kawit Island because of engine
trouble. It reads:

2330 HRS STBD ENGINE EMERGENCY STOP

2350 HRS DROP ANCHOR DUE TO. ENGINE TROUBLE, 2 ENGINE STOP.

The stoppage was not to start and synchronized [sic] the engines of the vessel as
claimed by defendant-appellee. It was because one of the engines of the vessel broke
down; it was because of the disability of the vessel which from the very beginning of the
voyage was known to defendant-appellee.
Defendant-appellee from the very start of the voyage knew for a fact that the vessel
was not yet in its sailing condition because the second engine was still being repaired.
Inspite of this knowledge, defendant-appellee still proceeded to sail with only one engine
running.
Defendant-appellee at that instant failed to exercise the diligence which all common
carriers should exercise in transporting or carrying passengers. The law does not merely
require extraordinary diligence in the performance of the obligation. The law mandates
that common carrier[s] should exercise utmost diligence in the transport of passengers.
Article 1755 of the New Civil Code provides:

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.

Utmost diligence of a VERY CAUTIOUS person dictates that defendant-appellee should

have pursued the voyage only when its vessel was already fit to sail. Defendant-appellee
should have made certain that the vessel [could] complete the voyage before starting
[to] sail. Anything less than this, the vessel [could not] sail x x x with so many
passengers on board it.
However, defendant-appellant [sic] in complete disregard of the safety of the
passengers, chose to proceed with its voyage even if only one engine was running as the
second engine was still being repaired during the voyage. Defendant-appellee
disregarded the not very remote possibility that because of the disability of the vessel,
other problems might occur which would endanger the lives of the passengers sailing
with a disabled vessel.
As expected, x x x engine trouble occurred. Fortunate[ly] for defendant-appellee,
such trouble only necessitated the stoppage of the vessel and did not cause the vessel to
capsize. No wonder why some passengers requested to be brought back to Cebu City.
Common carriers which are mandated to exercise utmost diligence should not be taking
these risks.
On this premise, plaintiff-appellant should not be faulted why he chose to disembark
from the vessel with the other passengers when it returned back to Cebu City.
Defendant-appellee may call him a very panicky passenger or a nervous person, but this
will not relieve defendant-appellee from the liability it incurred for its failure to exercise
utmost diligence.[13]
xxx xxx xxx
As to the second assigned error, we find that plaintiff-appellant is entitled to the
award of moral and exemplary damages for the breach committed by defendant-
appellee.
As discussed, defendant-appellee in sailing to Cagayan de Oro City with only one
engine and with full knowledge of the true condition of the vessel, acted in bad faith with
malice, in complete disregard for the safety of the passengers and only for its own
personal advancement/interest.
The Civil Code provides:
Art 2201.

xxx xxx xxx

In case of fraud, bad faith, malice or wanton attitude, the obligor shall be responsible for
all damages which may be reasonably attributed to the non-performance of the
obligation.

Plaintiff-appellant is entitled to moral damages for the mental anguish, fright and
serious anxiety he suffered during the voyage when the vessels engine broke down and
when he disembarked from the vessel during the wee hours of the morning
at Cebu City when it returned.[14]
Moral damages are recoverable in a damage suit predicated upon a breach of
contract of carriage where it is proved that the carrier was guilty of fraud or bad faith
even if death does not result.[15]
Fraud and bad faith by defendant-appellee having been established, the award of
moral damages is in order.[16]
To serve as a deterrent to the commission of similar acts in the future, exemplary
damages should be imposed upon defendant-appellee.[17] Exemplary damages are
designed by our civil law to permit the courts to reshape behavior that is socially
deleterious in its consequence by creating x x x negative incentives or deterrents against
such behavior.[18]
Moral damages having been awarded, exemplary damages maybe properly awarded.
When entitlement to moral damages has been established, the award of exemplary
damages is proper.[19]
The petitioner then instituted this petition and submitted the question of law earlier
adverted to.
Undoubtedly, there was, between the petitioner and the private respondent, a
contract of common carriage. The laws of primary application then are the provisions on
common carriers under Section 4, Chapter 3, Title VIII, Book IV of the Civil Code, while for
all other matters not regulated thereby, the Code of Commerce and special laws.[20]
Under Article 1733 of the Civil Code, the petitioner was bound to observe
extraordinary diligence in ensuring the safety of the private respondent. That meant that
the petitioner was, pursuant to Article 1755 of the said Code, bound to carry the private
respondent safely as far as human care and foresight could provide, using the utmost
diligence of very cautious persons, with due regard for all the circumstances. In this
case, we are in full accord with the Court of Appeals that the petitioner failed to
discharge this obligation.
Before commencing the contracted voyage, the petitioner undertook some repairs on
the cylinder head of one of the vessels engines. But even before it could finish these
repairs, it allowed the vessel to leave the port of origin on only one functioning engine,
instead of two. Moreover, even the lone functioning engine was not in perfect condition
as sometime after it had run its course, it conked out. This caused the vessel to stop and
remain adrift at sea, thus in order to prevent the ship from capsizing, it had to drop
anchor. Plainly, the vessel was unseaworthy even before the voyage began. For a vessel
to be seaworthy, it must be adequately equipped for the voyage and manned with a
sufficient number of competent officers and crew. [21] The failure of a common carrier to
maintain in seaworthy condition its vessel involved in a contract of carriage is a clear
breach of is duty prescribed in Article 1755 of the Civil Code.
As to its liability for damages to the private respondent, Article 1764 of the Civil Code
expressly provides:

ART. 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 common carrier.
The damages comprised in Title XVIII of the Civil Code are actual or compensatory,
moral, nominal, temperate or moderate, liquidated, and exemplary.
In his complaint, the private respondent claims actual or compensatory, moral, and
exemplary damages.
Actual or compensatory damages represent the adequate compensation for
pecuniary loss suffered and for profits the obligee failed to obtain. [22]
In contracts or quasi-contracts, the obligor is liable for all the damages which may be
reasonably attributed to the non-performance of the obligation if he is guilty of fraud,
bad faith, malice, or wanton attitude.[23]
Moral damages include moral suffering, mental anguish, fright, serious anxiety,
besmirched reputation, wounded feelings, moral shock, social humiliation, or similar
injury. They may be recovered in the cases enumerated in Article 2219 of the Civil Code,
likewise, if they are the proximate result of, as in this case, the petitioners breach of the
contract of carriage.[24] Anent a breach of a contract of common carriage, moral damages
may be awarded if the common carrier, like the petitioner, acted fraudulently or in bad
faith.[25]
Exemplary damages are imposed by way of example or correction for the public
good, in addition to moral, temperate, liquidated or compensatory damages. [26] In
contracts and quasi-contracts, exemplary damages may be awarded if the defendant
acted in a wanton fraudulent, reckless, oppressive or malevolent manner. [27] It cannot,
however, be considered as a matter of right; the court having to decide whether or not
they should be adjudicated.[28] Before the court may consider an award for exemplary
damages, the plaintiff must first show that he is entitled to moral, temperate or
compensatory damages; but it is not necessary that he prove the monetary value
thereof.[29]
The Court of Appeals did not grant the private respondent actual or compensatory
damages, reasoning that no delay was incurred since there was no demand, as required
by Article 1169 of the Civil Code. This article, however, finds no application in this case
because, as found by the respondent Court, there was in fact no delay in the
commencement of the contracted voyage. If any delay was incurred, it was after the
commencement of such voyage, more specifically, when the voyage was subsequently
interrupted when the vessel had to stop near KawitIsland after the only functioning
engine conked out.
As to the rights and duties of the parties strictly arising out of such delay, the Civil
Code is silent. However, as correctly pointed out by the petitioner, Article 698 of the
Code of Commerce specifically provides for such a situation. It reads:

In case a voyage already begun should be interrupted, the passengers shall be obliged to
pay the fare in proportion to the distance covered, without right to recover for losses and
damages if the interruption is due to fortuitous event or force majeure, but with a right to
indemnity if the interruption should have been caused by the captain exclusively. If the
interruption should be caused by the disability of the vessel and a passenger should
agree to await the repairs, he may not be required to pay any increased price of
passage, but his living expenses during the stay shall be for his own account.

This article applies suppletorily pursuant to Article 1766 of the Civil Code.
Of course, this does not suffice for a resolution of the case at bench for, as earlier
stated, the cause of the delay or interruption was the petitioners failure to observe
extraordinary diligence. Article 698 must then be read together with Articles 2199, 2200,
2201, and 2208 in relation to Article 21 of the Civil Code. So read, it means that the
petitioner is liable for any pecuniary loss or loss of profits which the private respondent
may have suffered by reason thereof. For the private respondent, such would be the loss
of income if unable to report to his office on the day he was supposed to arrive were it
not for the delay. This, however, assumes that he stayed on the vessel and was with it
when it thereafter resumed its voyage; but he did not. As he and some passengers
resolved not to complete the voyage, the vessel had to return to its port of origin and
allow them to disembark. The private respondent then took the petitioners other vessel
the following day, using the ticket he had purchased for the previous days voyage.
Any further delay then in the private respondents arrival at the port of destination
was caused by his decision to disembark. Had he remained on the first vessel, he would
have reached his destination at noon of 13 November 1991, thus been able to report to
his office in the afternoon. He, therefore, would have lost only the salary for half of a day.
But actual or compensatory damages must be proved, [30] which the private respondent
failed to do. There is no convincing evidence that he did not receive his salary for 13
November 1991 nor that his absence was not excused.
We likewise fully agree with the Court of Appeals that the petitioner is liable for moral
and exemplary damages. In allowing its unseaworthy M/V Asia Thailand to leave the port
of origin and undertake the contracted voyage, with full awareness that it was exposed
to perils of the sea, it deliberately disregarded its solemn duty to exercise extraordinary
diligence and obviously acted with bad faith and in a wanton and reckless manner. On
this score, however, the petitioner asserts that the safety of the vessel and passengers
was never at stake because the sea was calm in the vicinity where it stopped as
faithfully recorded in the vessels log book (Exhibit 4). Hence, the petitioner concludes,
the private respondent was merely over-reacting to the situation obtaining then.[31]
We hold that the petitioners defense cannot exculpate it nor mitigate its liability. On
the contrary, such a claim demonstrates beyond cavil the petitioners lack of genuine
concern for the safety of its passengers. It was, perhaps, only providential that the sea
happened to be calm. Even so, the petitioner should not expect its passengers to act in
the manner it desired. The passengers were not stoics; becoming alarmed, anxious, or
frightened at the stoppage of a vessel at sea in an unfamiliar zone at nighttime is not the
sole prerogative of the faint-hearted. More so in the light of the many tragedies at sea
resulting in the loss of lives of hopeless passengers and damage to property simply
because common carriers failed in their duty to exercise extraordinary diligence in the
performance of their obligations.
We cannot, however, give our affirmance to the award of attorneys fees. Under
Article 2208 of the Civil Code, these are recoverable only in the concept of actual
damages,[32] not as moral damages[33] nor judicial costs.[34] Hence, to merit such an
award, it is settled that the amount thereof must be proven. [35] Moreover, such must be
specifically prayed for - as was not done in this case - and may not be deemed
incorporated within a general prayer for such other relief and remedy as this court may
deem just and equitable.[36] Finally, it must be noted that aside from the following, the
body of the respondent Courts decision was devoid of any statement regarding attorneys
fees:

Plaintiff-appellant was forced to litigate in order that he can claim moral and exemplary
damages for the suffering he encurred [sic]. He is entitled to attorneys fees pursuant to
Article 2208 of the Civil Code. It states:

Article 2208. In the absence of stipulation, attorney s fees and expenses of litigation,
other than judicial costs cannot be recovered except:

1. When exemplary damages are awarded;

2. When the defendants act or omission has compelled the plaintiff to litigate
with third persons or to incur expenses to protect his interest.
This Court holds that the above does not satisfy the benchmark of factual, legal and
equitable justification needed as basis for an award of attorneys fees. [37] In sum, for lack
of factual and legal basis, the award of attorneys fees must be deleted.
WHEREFORE, the instant petition is DENIED and the challenged decision of the Court
of Appeals in CA-G.R. CV No. 39901 is AFFIRMED subject to the modification as to the
award for attorneys fees which is hereby SET ASIDE.
Costs against the petitioner.
SO ORDERED.
13. [G.R. No. 110398. November 7, 1997]

NEGROS NAVIGATION CO., INC., petitioner, vs. THE COURT OF APPEALS, RAMON
MIRANDA, SPS. RICARDO and VIRGINIA DE LA VICTORIA, respondents.

DECISION
MENDOZA, J.:

This is a petition for review on certiorari of the decision of the Court of Appeals
affirming with modification the Regional Trial Courts award of damages to private
respondents for the death of relatives as a result of the sinking of petitioners vessel.
In April of 1980, private respondent Ramon Miranda purchased from the Negros
Navigation Co., Inc. four special cabin tickets (#74411, 74412, 74413 and 74414) for his
wife, daughter, son and niece who were going to Bacolod City to attend a family reunion.
The tickets were for Voyage No. 457-A of the M/V Don Juan, leaving Manila at 1:00 p.m.
on April 22, 1980.
The ship sailed from the port of Manila on schedule.
At about 10:30 in the evening of April 22, 1980, the Don Juan collided off the Tablas
Strait in Mindoro, with the M/T Tacloban City, an oil tanker owned by the Philippine
National Oil Company (PNOC) and the PNOC Shipping and Transport Corporation
(PNOC/STC). As a result, the M/V Don Juan sank. Several of her passengers perished in
the sea tragedy. The bodies of some of the victims were found and brought to shore, but
the four members of private respondents families were never found.
Private respondents filed a complaint on July 16, 1980 in the Regional Trial Court of
Manila, Branch 34, against the Negros Navigation, the Philippine National Oil Company
(PNOC), and the PNOC Shipping and Transport Corporation (PNOC/STC), seeking damages
for the death of Ardita de la Victoria Miranda, 48, Rosario V. Miranda, 19, Ramon V.
Miranda, Jr., 16, and Elfreda de la Victoria, 26.
In its answer, petitioner admitted that private respondents purchased ticket numbers
74411, 74412, 74413 and 74414; that the ticket numbers were listed in the passenger
manifest; and that the Don Juan left Pier 2, North Harbor, Manila on April 22, 1980 and
sank that night after being rammed by the oil tanker M/T Tacloban City, and that, as a
result of the collision, some of the passengers of the M/V Don Juan died. Petitioner,
however, denied that the four relatives of private respondents actually boarded the
vessel as shown by the fact that their bodies were never recovered. Petitioner further
averred that the Don Juan was seaworthy and manned by a full and competent crew, and
that the collision was entirely due to the fault of the crew of the M/T Tacloban City.
On January 20, 1986, the PNOC and petitioner Negros Navigation Co., Inc. entered
into a compromise agreement whereby petitioner assumed full responsibility for the
payment and satisfaction of all claims arising out of or in connection with the collision
and releasing the PNOC and the PNOC/STC from any liability to it. The agreement was
subsequently held by the trial court to be binding upon petitioner, PNOC and
PNOC/STC. Private respondents did not join in the agreement.
After trial, the court rendered judgment on February 21, 1991, the dispositive portion
of which reads as follows:

WHEREFORE, in view of the foregoing, judgment is hereby rendered in favor of the

plaintiffs, ordering all the defendants to pay jointly and severally to the plaintiffs
damages as follows:

To Ramon Miranda:

P42,025.00 for actual damages;

P152,654.55 as compensatory damages for loss of earning capacity of his wife;

 P90,000.00 as compensatory damages for wrongful death of three (3) victims;

P300,000.00 as moral damages;

P50,000.00 as exemplary damages, all in the total amount of P634,679.55; and

P40,000.00 as attorneys fees.

To Spouses Ricardo and Virginia de la Victoria:

P12,000.00 for actual damages;

P158,899.00 as compensatory damages for loss of earning capacity;

P30,000.00 as compensatory damages for wrongful death;

P100,000.00 as moral damages;

P20,000.00 as exemplary damages, all in the total amount of P320,899.00; and

P15,000.00 as attorneys fees.

On appeal, the Court of Appeals [1] affirmed the decision of the Regional Trial Court
with modification
1. Ordering and sentencing defendants-appellants, jointly and severally, to pay
plaintiff-appellee Ramon Miranda the amount of P23,075.00 as actual damages
instead of P42,025.00;
2. Ordering and sentencing defendants-appellants, jointly and severally, to pay
plaintiff-appellee Ramon Miranda the amount of P150,000.00, instead
of P90,000.00, as compensatory damages for the death of his wife and two
children;
3. Ordering and sentencing defendants-appellants, jointly and severally, to pay
plaintiffs-appellees Dela Victoria spouses the amount of P50,000.00, instead
of P30,000.00, as compensatory damages for the death of their daughter
Elfreda Dela Victoria;
Hence this petition, raising the following issues:
(1) whether the members of private respondents families were actually
passengers of the Don Juan;
(2) whether the ruling in Mecenas v. Court of Appeals,[2] finding the crew members
of petitioner to be grossly negligent in the performance of their duties, is
binding in this case;
(3) whether the total loss of the M/V Don Juan extinguished petitioners liability;
and
(4) whether the damages awarded by the appellate court are excessive,
unreasonable and unwarranted.
First. The trial court held that the fact that the victims were passengers of the
M/V Don Juan was sufficiently proven by private respondent Ramon Miranda, who
testified that he purchased tickets numbered 74411, 74412, 74413, and 74414
at P131.30 each from the Makati office of petitioner for Voyage No. 47-A of the M/V Don
Juan, which was leaving Manila on April 22, 1980. This was corroborated by the
passenger manifest (Exh. E) on which the numbers of the tickets and the names of Ardita
Miranda and her children and Elfreda de la Victoria appear.
Petitioner contends that the purchase of the tickets does not necessarily mean that
the alleged victims actually took the trip. Petitioner asserts that it is common knowledge
that passengers purchase tickets in advance but do not actually use them. Hence,
private respondent should also prove the presence of the victims on the ship. The
witnesses who affirmed that the victims were on the ship were biased and unreliable.
This contention is without merit. Private respondent Ramon Miranda testified that he
personally took his family and his niece to the vessel on the day of the voyage and
stayed with them on the ship until it was time for it to leave. There is no reason he
should claim members of his family to have perished in the accident just to maintain an
action. People do not normally lie about so grave a matter as the loss of dear ones. It
would be more difficult for private respondents to keep the existence of their relatives if
indeed they are alive than it is for petitioner to show the contrary. Petitioners only proof
is that the bodies of the supposed victims were not among those recovered from the site
of the mishap. But so were the bodies of the other passengers reported missing not
recovered, as this Court noted in the Mecenas[3] case.
Private respondent Mirandas testimony was corroborated by Edgardo
Ramirez. Ramirez was a seminarian and one of the survivors of the collision. He testified
that he saw Mrs. Miranda and Elfreda de la Victoria on the ship and that he talked with
them. He knew Mrs. Miranda who was his teacher in the grade school. He also knew
Elfreda who was his childhood friend and townmate. Ramirez said he was with Mrs.
Miranda and her children and niece from 7:00 p.m. until 10:00 p.m. when the collision
happened and that he in fact had dinner with them. Ramirez said he and Elfreda stayed
on the deck after dinner and it was there where they were jolted by the collision of the
two vessels. Recounting the moments after the collision, Ramirez testified that Elfreda
ran to fetch Mrs. Miranda. He escorted her to the room and then tried to go back to the
deck when the lights went out. He tried to return to the cabin but was not able to do so
because it was dark and there was a stampede of passengers from the deck.
Petitioner casts doubt on Ramirez testimony, claiming that Ramirez could not have
talked with the victims for about three hours and not run out of stories to tell, unless
Ramirez had a storehouse of stories. But what is incredible about acquaintances thrown
together on a long journey staying together for hours on end, in idle conversation
precisely to while the hours away?
Petitioner also points out that it took Ramirez three (3) days before he finally
contacted private respondent Ramon Miranda to tell him about the fate of his family. But
it is not improbable that it took Ramirez three days before calling on private respondent
Miranda to tell him about the last hours of Mrs. Miranda and her children and niece, in
view of the confusion in the days following the collision as rescue teams and relatives
searched for survivors.
Indeed, given the facts of this case, it is improper for petitioner to even suggest that
private respondents relatives did not board the ill-fated vessel and perish in the accident
simply because their bodies were not recovered.
Second. In finding petitioner guilty of negligence and in failing to exercise the
extraordinary diligence required of it in the carriage of passengers, both the trial court
and the appellate court relied on the findings of this Court in Mecenas v. Intermediate
Appellate Court,[4] which case was brought for the death of other passengers. In that
case it was found that although the proximate cause of the mishap was the negligence of
the crew of the M/T Tacloban City, the crew of the Don Juan was equally negligent as it
found that the latters master, Capt. Rogelio Santisteban, was playing mahjong at the
time of collision, and the officer on watch, Senior Third Mate Rogelio De Vera, admitted
that he failed to call the attention of Santisteban to the imminent danger facing
them. This Court found that Capt. Santisteban and the crew of the M/V Don Juan failed to
take steps to prevent the collision or at least delay the sinking of the ship and supervise
the abandoning of the ship.
Petitioner Negros Navigation was found equally negligent in tolerating the playing of
mahjong by the ship captain and other crew members while on board the ship and failing
to keep the M/V Don Juan seaworthy so much so that the ship sank within 10 to 15
minutes of its impact with the M/T Tacloban City.
In addition, the Court found that the Don Juan was overloaded. The Certificate of
Inspection, dated August 27, 1979, issued by the Philippine Coast Guard Commander at
Iloilo City stated that the total number of persons allowed on the ship was 864, of whom
810 are passengers, but there were actually 1,004 on board the vessel when it sank, 140
persons more than the maximum number that could be safely carried by it.
Taking these circumstances together, and the fact that the M/V Don Juan, as the
faster and better-equipped vessel, could have avoided a collision with the PNOC tanker,
this Court held that even if the Tacloban City had been at fault for failing to observe an
internationally-recognized rule of navigation, the Don Juan was guilty of contributory
negligence. Through Justice Feliciano, this Court held:

The grossness of the negligence of the Don Juan is underscored when one considers the
foregoing circumstances in the context of the following facts: Firstly, the Don Juan was
more than twice as fast as the Tacloban City. The Don Juans top speed was 17 knots;
while that of the Tacloban City was 6.3. knots. Secondly, the Don Juan carried the full
complement of officers and crew members specified for a passenger vessel of her
class. Thirdly, the Don Juan was equipped with radar which was functioning that
night. Fourthly, the Don Juans officer on-watch had sighted the Tacloban City on his radar
screen while the latter was still four (4) nautical miles away. Visual confirmation of radar
contact was established by the Don Juan while the Tacloban City was still 2.7 miles
away. In the total set of circumstances which existed in the instant case, the Don Juan,
had it taken seriously its duty of extraordinary diligence, could have easily avoided the
collision with the Tacloban City. Indeed, the Don Juan might well have avoided the
collision even if it had exercised ordinary diligence merely.

It is true that the Tacloban City failed to follow Rule 18 of the International Rules of the
Road which requires two (2) power-driven vessels meeting end on or nearly end on each
to alter her course to starboard (right) so that each vessel may pass on the port side
(left) of the other. The Tacloban City, when the two (2) vessels were only three-tenths
(0.3) of a mile apart, turned (for the second time) 15o to port side while the Don Juan
veered hard to starboard. . . . [But] route observance of the International Rules of the
Road will not relieve a vessel from responsibility if the collision could have been avoided
by proper care and skill on her part or even by a departure from the rules.

In the petition at bar, the Don Juan having sighted the Tacloban City when it was still a
long way off was negligent in failing to take early preventive action and in allowing the
two (2) vessels to come to such close quarters as to render the collision inevitable when
there was no necessity for passing so near to the Tacloban City as to create that hazard
or inevitability, for the Don Juan could choose its own distance.It is noteworthy that the
Tacloban City, upon turning hard to port shortly before the moment of collision, signalled
its intention to do so by giving two (2) short blasts with its horn. The Don Juan gave no
answering horn blast to signal its own intention and proceeded to turn hard to starboard.

We conclude that Capt. Santisteban and Negros Navigation are properly held liable for
gross negligence in connection with the collision of the Don Juan and Tacloban City and
the sinking of the Don Juan leading to the death of hundreds of passengers. . . .[5]

Petitioner criticizes the lower courts reliance on the Mecenas case, arguing that,
although this case arose out of the same incident as that involved in Mecenas, the
parties are different and trial was conducted separately. Petitioner contends that the
decision in this case should be based on the allegations and defenses pleaded and
evidence adduced in it or, in short, on the record of this case.
The contention is without merit. What petitioner contends may be true with respect
to the merits of the individual claims against petitioner but not as to the cause of the
sinking of its ship on April 22, 1980 and its liability for such accident, of which there can
only be one truth. Otherwise, one would be subscribing to the sophistry: truth on one
side of the Pyrenees, falsehood on the other!
Adherence to the Mecenas case is dictated by this Courts policy of maintaining
stability in jurisprudence in accordance with the legal maxim stare decisis et non quieta
movere (Follow past precedents and do not disturb what has been settled.) Where, as in
this case, the same questions relating to the same event have been put forward by
parties similarly situated as in a previous case litigated and decided by a competent
court, the rule of stare decisis is a bar to any attempt to relitigate the same issue.
[6]
In Woulfe v. Associated Realties Corporation,[7] the Supreme Court of New Jersey held
that where substantially similar cases to the pending case were presented and applicable
principles declared in prior decisions, the court was bound by the principle of stare
decisis. Similarly, in State ex rel. Tollinger v. Gill,[8] it was held that under the doctrine of
stare decisis a ruling is final even as to parties who are strangers to the original
proceeding and not bound by the judgment under the res judicata doctrine. The
Philadelphia court expressed itself in this wise: Stare decisis simply declares that, for the
sake of certainty, a conclusion reached in one case should be applied to those which
follow, if the facts are substantially the same, even though the parties may be different.
[9]
Thus, in J. M. Tuason v. Mariano, supra, this Court relied on its rulings in other cases
involving different parties in sustaining the validity of a land title on the principle of stare
decisis et non quieta movere.
Indeed, the evidence presented in this case was the same as those presented in
the Mecenas case, to wit:

Document Mecenas case This case

Decision of Commandant Exh. 10[10] Exh. 11-B-NN/X

Phil. Coast Guard in BMI Case
No. 415-80 dated 3/26/81

Decision of the Minister Exh. 11[11] Exh. ZZ

of National Defense dated 3/12/82

Resolution on the motion Exh. 13[12] Exh. AAA

for reconsideration of the (private respondents)
decision of the Minister of
National Defense dated 7/24/84

Certificate of inspection Exh. 1-A[13] Exh. 19-NN

dated 8/27/79

Certificate of Stability Exh. 6-A[14] Exh. 19-D-NN

dated 12/16/76

Nor is it true that the trial court merely based its decision on the Mecenas case. The
trial court made its own independent findings on the basis of the testimonies of
witnesses, such as Senior Third Mate Rogelio de Vera, who incidentally gave substantially
the same testimony on petitioners behalf before the Board of Marine Inquiry. The trial
court agreed with the conclusions of the then Minister of National Defense finding both
vessels to be negligent.
Third. The next issue is whether petitioner is liable to pay damages notwithstanding
the total loss of its ship. The issue is not one of first impression. The rule is well-
entrenched in our jurisprudence that a shipowner may be held liable for injuries to
passengers notwithstanding the exclusively real and hypothecary nature of maritime law
if fault can be attributed to the shipowner.[15]
In Mecenas, this Court found petitioner guilty of negligence in (1) allowing or
tolerating the ship captain and crew members in playing mahjong during the voyage, (2)
in failing to maintain the vessel seaworthy and (3) in allowing the ship to carry more
passengers than it was allowed to carry. Petitioner is, therefore, clearly liable for
damages to the full extent.
Fourth. Petitioner contends that, assuming that the Mecenas case applies, private
respondents should be allowed to claim only P43,857.14 each as moral damages
because in the Mecenas case, the amount of P307,500.00 was awarded to the seven
children of the Mecenas couple. Under petitioners formula, Ramon Miranda should
receive P43,857.14, while the De la Victoria spouses should receive P97,714.28.
Here is where the principle of stare decisis does not apply in view of differences in
the personal circumstances of the victims. For that matter, differentiation would be
justified even if private respondents had joined the private respondents in
the Mecenas case. The doctrine of stare decisis works as a bar only against issues
litigated in a previous case. Where the issue involved was not raised nor presented to
the court and not passed upon by the court in the previous case, the decision in the
previous case is not stare decisis of the question presently presented.[16] The decision in
the Mecenas case relates to damages for which petitioner was liable to the claimants in
that case.
In the case at bar, the award of P300,000.00 for moral damages is reasonable
considering the grief petitioner Ramon Miranda suffered as a result of the loss of his
entire family. As a matter of fact, three months after the collision, he developed a heart
condition undoubtedly caused by the strain of the loss of his family. The P100,000.00
given to Mr. and Mrs. de la Victoria is likewise reasonable and should be affirmed.
As for the amount of civil indemnity awarded to private respondents, the appellate
courts award of P50,000.00 per victim should be sustained. The amount of P30,000.00
formerly set in De Lima v. Laguna Tayabas Co.,[17] Heirs of Amparo delos Santos v. Court
of Appeals,[18] and Philippine Rabbit Bus Lines, Inc. v. Intermediate Appellate Court [19] as
benchmark was subsequently increased to P50,000.00 in the case of Sulpicio Lines, Inc.
v. Court of Appeals,[20] which involved the sinking of another interisland ship on October
24, 1988.
We now turn to the determination of the earning capacity of the victims. With respect
to Ardita Miranda, the trial court awarded damages computed as follows:[21]

In the case of victim Ardita V. Miranda whose age at the time of the accident was 48
years, her life expectancy was computed to be 21.33 years, and therefore, she could
have lived up to almost 70 years old.Her gross earnings for 21.33 years based
on P10,224.00 per annum, would be P218,077.92. Deducting therefrom 30% as her living
expenses, her net earnings would be P152,654.55, to which plaintiff Ramon Miranda is
entitled to compensatory damages for the loss of earning capacity of his wife. In
considering 30% as the living expenses of Ardita Miranda, the Court takes into account
the fact that plaintiff and his wife were supporting their daughter and son who were both
college students taking Medicine and Law respectively.

In accordance with the ruling in Villa-Rey Transit, Inc. v. Court of Appeals,[22] we think the
life expectancy of Ardita Miranda was correctly determined to be 21.33 years, or up to
age 69.Petitioner contends, however, that Mrs. Miranda would have retired from her job
as a public school teacher at 65, hence her loss of earning capacity should be reckoned
up to 17.33 years only.
The accepted formula for determining life expectancy is 2/3 multiplied by (80 minus
the age of the deceased). It may be that in the Philippines the age of retirement
generally is 65 but, in calculating the life expectancy of individuals for the purpose of
determining loss of earning capacity under Art. 2206(1) of the Civil Code, it is assumed
that the deceased would have earned income even after retirement from a particular
job. In this case, the trial court took into account the fact that Mrs. Miranda had a
masters degree and a good prospect of becoming principal of the school in which she
was teaching. There was reason to believe that her income would have increased
through the years and she could still earn more after her retirement, e.g., by becoming a
consultant, had she not died. The gross earnings which Mrs. Miranda could reasonably be
expected to earn were it not for her untimely death was, therefore, correctly computed
by the trial court to be P218,077.92 (given a gross annual income of P10,224.00 and life
expectancy of 21.33 years).
Petitioner contends that from the amount of gross earnings, 60% should be deducted
as necessary living expenses, not merely 30% as the trial court allowed. Petitioner
contends that 30% is unrealistic, considering that Mrs. Mirandas earnings would have
been subject to taxes, social security deductions and inflation.
We agree with this contention. In Villa-Rey Transit, Inc. v. Court of Appeals,[23] the
Court allowed a deduction of P1,184.00 for living expenses from the P2,184.00 annual
salary of the victim, which is roughly 54.2% thereof. The deceased was 29 years old and
a training assistant in the Bacnotan Cement Industries. In People v. Quilaton,[24] the
deceased was a 26-year old laborer earning a daily wage. The court allowed a deduction
of P120,000.00 which was 51.3% of his annual gross earnings of P234,000.00. In People
v. Teehankee,[25] the court allowed a deduction of P19,800.00, roughly 42.4% thereof
from the deceaseds annual salary of P46,659.21. The deceased, Maureen Hultman, was
17 years old and had just received her first paycheck as a secretary. In the case at bar,
we hold that a deduction of 50% from Mrs. Mirandas gross earnings (P218,077.92) would
be reasonable, so that her net earning capacity should be P109,038.96. There is no basis
for supposing that her living expenses constituted a smaller percentage of her gross
income than the living expenses in the decided cases. To hold that she would have used
only a small part of her income for herself, a larger part going to the support of her
children would be conjectural and unreasonable.
As for Elfreda de la Victoria, the trial court found that, at the time of her death, she
was 26 years old, a teacher in a private school in Malolos, Bulacan, earning P6,192.00
per annum.Although a probationary employee, she had already been working in the
school for two years at the time of her death and she had a general efficiency rating of
92.85% and it can be presumed that, if not for her untimely death, she would have
become a regular teacher. Hence, her loss of earning capacity is P111,456.00, computed
as follows:

net earning capacity (x) = life expectancy x [ gross annual income less reasonable &
necessary living expenses (50%) ]

x = [ 2 (80-26) ] x [P6,192.00 - P3,096.00]

= 36 x 3,096.00

= P111,456.00

On the other hand, the award of actual damages in the amount of P23,075.00 was
determined by the Court of Appeals on the basis of receipts submitted by private
respondents. This amount is reasonable considering the expenses incurred by private
respondent Miranda in organizing three search teams to look for his family, spending for
transportation in going to places such as Batangas City and Iloilo, where survivors and
the bodies of other victims were found, making long distance calls, erecting a monument
in honor of the four victims, spending for obituaries in the Bulletin Today and for food,
masses and novenas.
Petitioners contention that the expenses for the erection of a monument and other
expenses for memorial services for the victims should be considered included in the
indemnity for death awarded to private respondents is without merit. Indemnity for
death is given to compensate for violation of the rights of the deceased, i.e., his right to
life and physical integrity. [26] On the other hand, damages incidental to or arising out of
such death are for pecuniary losses of the beneficiaries of the deceased.
As for the award of attorneys fees, we agree with the Court of Appeals that the
amount of P40,000.00 for private respondent Ramon Miranda and P15,000.00 for the de
la Victoria spouses is justified. The appellate court correctly held:

The Mecenas case cannot be made the basis for determining the award for attorneys
fees. The award would naturally vary or differ in each case. While it is admitted that
plaintiff-appellee Ramon Miranda who is himself a lawyer, represented also plaintiffs-
appellees Dela Victoria spouses, we note that separate testimonial evidence were
adduced by plaintiff-appellee Ramon Miranda (TSN, February 26, 1982, p. 6) and
plaintiffs-appellees spouses Dela Victoria (TSN, August 13, 1981, p. 43). Considering the
amount of work and effort put into the case as indicated by the voluminous transcripts of
stenographic notes, we find no reason to disturb the award of P40,000.00 for plaintiff-
appellee Ramon Miranda and P15,000.00 for plaintiffs-appellees Dela Victoria spouses.[27]

The award of exemplary damages should be increased to P300,000.00 for Ramon

Miranda and P100,000.00 for the de la Victoria spouses in accordance with our ruling in
the Mecenascase:
Exemplary damages are designed by our civil law to permit the courts to reshape
behaviour that is socially deleterious in its consequence by creating negative incentives
or deterrents against such behaviour.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. The Court will take judicial notice of the dreadful regularity with which grievous
maritime disasters occur in our waters with massive loss of life. The bulk of our
population is too poor to afford domestic air transportation.So it is that notwithstanding
the frequent sinking of passenger vessels in our waters, crowds of people continue to
travel by sea. This Court is prepared to use the instruments given to it by the law for
securing the ends of law and public policy. One of those instruments is the institution of
exemplary damages; one of those ends, of special importance in an archipelagic state
like the Philippines, is the safe and reliable carriage of people and goods by sea.[28]

WHEREFORE, the decision of the Court of Appeals is AFFIRMED with modification and
petitioner is ORDERED to pay private respondents damages as follows:

To private respondent Ramon Miranda:

P23,075.00 for actual damages;

P109,038.96 as compensatory damages for loss of earning capacity of his wife;

P150,000.00 as compensatory damages for wrongful death of three (3) victims;

P300,000.00 as moral damages;

P300,000.00 as exemplary damages, all in the total amount of P882,113.96; and

P40,000.00 as attorneys fees.

To private respondents Spouses Ricardo and Virginia de la Victoria:

P12,000.00 for actual damages;

P111,456.00 as compensatory damages for loss of earning capacity;

P50,000.00 as compensatory damages for wrongful death;

P100,000.00 as moral damages;

P100,000.00 as exemplary damages, all in the total amount of P373,456.00; and

P15,000.00 as attorneys fees.

Petitioners are further ordered to pay costs of suit.

In the event the Philippine National Oil Company and/or the PNOC Shipping and
Transport Corporation pay or are required to pay all or a portion of the amounts
adjudged, petitioner Negros Navigation Co., Inc. shall reimburse either of them such
amount or amounts as either may have paid, and in the event of failure of Negros
Navigation Co., Inc., to make the necessary reimbursement, PNOC and/or PNOC/STC shall
be entitled to a writ of execution without need of filing another action.
SO ORDERED.

14. G.R. No. 73835 January 17, 1989

CHINA AIRLINES, LTD., petitioner,

vs.
INTERMEDIATE APPELLATE COURT and CLAUDIA B. OSORIO, respondent
respondents.

This is a petition to review the decision 1 dated January 21, 1986 of the then Intermediate
Appellate Court in AC-G.R. No. 00915 entitled, "Claudia B. Osorio v. China Airlines, Ltd.",
as well as the resolution of February 28, 1986 denying petitioner's motion for
reconsideration of said decision.

It is worthwhile noting at the outset that there exists in this case a conflict in the findings
of facts of the trial and appellate courts which made a thorough review of the records of
the case imperative. Such exercise disclosed that:

On April 14, 1980, after a four-day delay caused by an engine malfunction, private
respondent Claudia B. Osorio boarded in Manila Flight No. CI-812 of petitioner China
Airlines, Ltd., for Taipei. Said flight, as originally scheduled, was to bring private
respondent and nine (9) other passengers to Taipei in time for petitioner airline's Flight
No. CI-002 for Los Angeles (LAX). As this schedule had been rendered impossible by the
delay, it was agreed, prior to their departure from Manila that private respondent and the
nine (9) other passengers similarly situated would spend the night in Taipei at
petitioner's expense and would be brought the following day to San Francisco (SF),
U.S.A., where they would be furnished an immediate flight connection to LAX.

This arrangement went well until private respondent and her co-passengers arrived in
San Francisco, U.S.A. on April 15, 1980 at around 1:31 p.m., SF local time. No instructions
having been received regarding them by petitioner's SF Office due to the delay in the
transmission of the telex messages from Manila, private respondent and her co-
passengers were asked to deplane and wait while contact with Manila was being made.
This, however, could not be done immediately because of the time difference between
the two (2) places.

Later, when it appeared that private respondent and her co-passengers might have to
spend the night in San Francisco, they asked that they be provided food and overnight
accommodations as transit passengers, but were refused by petitioner's passenger
service agent, Dennis Cheng. Apparently irked by this refusal, in addition to the
information that their luggage were not unloaded, private respondent and some of her
fellow passengers angrily left petitioner's SF Office without leaving a contact address.
Thus, when word from Manila came at 6:45 p.m. authorizing the issuance of tickets for
LAX to private respondent and her companions, the latter could not be informed thereof.

It was only on the following day, April 16, 1980, after spending the night at the YMCA,
paying a fee of $5.00 therefor, that private respondent learned thru her companions Atty.
Laud and Mrs. Sim that her ticket for LAX and luggage were ready for pick-up any time.
Notwithstanding, private respondent preferred to pick up her luggage on April 17, 1980
and fly to LAX on said date with a Western Airlines ticket which she purchased for
$56.00. Private respondent spent the night of April 16, 1980 in the house of Mrs. Sims
friend who did not charge anything. Private respondent, however, bought some groceries
for her hostess.

On June 30, 1980, private respondent filed before the then Court of First Instance of
Manila a complaint for damages arising from breach of contract against petitioner airline.
After trial, the court a quo rendered judgment 2on October 7, 1981, absolving petitioner
airline from any liability for damages to private respondent, except for the sum of
Pl,248.00 representing reimbursement of the $100.00 spent by private respondent as an
involuntarily rerouted passenger in San Francisco, California, U.S.A and the $56.00 paid
by her for her SFC-LAX Western Airlines ticket. 3

On appeal, respondent Intermediate Appellate Court reversed the lower court's decision.
Finding a palpable breach of contract of carriage to have been committed by petitioner
airlines, the respondent court ordered the latter to pay to private respondent, in addition
to the actual damages imposed by the trial court, moral and exemplary damages in the
amounts of P100,000 and P20,000, respectively, with attorney's fees of P5,000. 4
Its motion for reconsideration having been denied, petitioner airline brought the instant
petition for review, alleging that:

THE RESPONDENT COURT WRONGLY INCLUDED FROM THE PROVEN FACTS

AND, INDEED WENT AGAINST THE EVIDENCE, WHEN IT FOUND THE
PETITIONER AS HAVING COMMITTED A PALPABLE BREACH OF THE CONTRACT
OF CARRIAGE.

'THE RESPONDENT COURT COMMITTED AN ERROR OR LAW CORRECTIBLE BY

REVIEW ON CERTIORARI WHEN IT AWARDED MORAL AND EXEMPLARY
DAMAGES IN FAVOR OF THE PRIVATE RESPONDENT. 5

The issues posed for determination are; did the failur1e of petitioner airline to arrange
for private respondent's immediate flight to Los Angeles constitute a palpable breach of
contract of carriage? Was the treatment of private respondent by petitioner's agent in
San Francisco characterized by malice or bad faith?

The records manifest that it was upon petitioner's traffic agent Mrs. Diana Lim's
assurance of an immediate flight connection from San Francisco that private respondent
agreed to be re-routed to San Francisco, thus:

Q. What was the condition before leaving Manila, how would these
passengers be flown to Taipei? Since their destination petition is Los
Angeles?

A. From Manila to Taipei, they would still take the China Airlines, the night
where they were really booked on. They still stay overnight in Taipei. From
Taipei they will connect the next day to San Francisco. Then from San
Francisco we promised that we would give them tickets from San Francisco to
Los Angeles.

Q. That same day?

A. To San Francisco, that would be the next day.

Q. Then what happened next?

A. We told them that before they left.

Q. How about the flights for them from San Francisco to Angeles?

A. It would be immediate connection. As soon as they arrive, they would be

given tickets so that they could catch up on the next available flights. '

Q. What airlines?

A. These was no airlines because they will make the booking.

Q. Who would make the booking?

A. Our reservation sir.

Q. So do you wish to inform this Honorable Court that these ten (10)
passengers were informed that they would be flown to Taipei and from Taipei
they will be flown to San Francisco and will be furnished transportation from
San Francisco to Los Angeles?

A. Yes, sir.

Q. All at the expense of China Airlines?

A. Yes, sir. .
 xxx xxx xxx

Q. Did they agree to this condition before departing for Taipei?

A. For the Sims they had no objection at all. In fact, they wanted to stay
longer in San Francisco.

Q. How about the plaintiff?

A. For Osorio and Laud, at first they did not agree, until I told them that San
Francisco would issue them the new tickets from San Francisco to Los
Angeles.

Q. So that when Laud and Osorio were informed by you that they would be
furnished tickets from San Francisco to Los Angeles, did they still continue to
object?

A. No more sir.

Q. But were you sure that there would be booking for them for immediate
connection?

A. The reservation would do that because from San Francisco to Los Angeles
there would be flight every hour. As soon as they arrive and they. . . if they
would not catch up with the very first flight, they would catch the next one.

Q. So, accommodation of flight from San Francisco to Los Angeles is no

problem?

A. No problem because there is flight every hour. 6

Due, however, to the delay in the receipt of the telex messages regarding private
respondent's status and the arrangements to be made for her, the promised immediate
flight connection was not reaped. The testimony of Mrs. Lim on the circumstances
surrounding the transmission of the telex messages in question is as follows:

Q. Would you know Mrs. Lim whether the Manila office had been sending
Telexes on April 14, 1980 regarding these passengers?

A. Yes, sir.

xxx xxx xxx

Q Now, are there any other Telexes sent by the Manila office in connection
with this case by you personally and by Mr. Austria the Sales Director?

A Here sir, (Witness handing to Atty. de Santos two Telexes)

xxx xxx xxx

Q. These Telexes Mrs. Lim intended for San Francisco, they were duly
received?

Court:

A. In other words, they were sent out?

Q. Yes, sir but we have had a lot of experiences wherein the messages would
be received late. We sent out the messages immediately but sometimes the
Hongkong link will be down so the messages would arrive late. It stuck there
sir.
 A. Did you have any understanding with these passengers including the
plaintiff on how they would subsist in San Francisco should there be a delay
in the transmission of messages?

Q. No sir because I did not expect any delay. It was very sudden. I did not
expect any delay at all from San Francisco. I knew all the time they would
connect immediately.

A. What I mean is that should the communication sent out from Manila be
not received on time in San Francisco, did you cover that . . . or did you take
some steps to answer for that contingency?

Q. No sir, we did not. We never thought of it that way. We always took it for
granted that everything would be alright. It has never happened before. In
other cases where we had cases like this, they were always on time. We
never had this problem where the passengers would be stranded. This is the
first time.

A. There would be a time lag of around two days. Because one night in Taipei.
They left Manila April 14?

Q. They arrived Taipei April 14. They arrived San Francisco April 15.

A. So the 24-hour or more time gap would be normally sufficient for all your
messages to reach San Francisco?

Q. Yes, sir.

A. And never before did you experience such a delay?

Q. Yes, sir. 7

The respondent court considered petitioner airline as wanting in human care and
foresight in providing for the care and safety of its passengers in not having taken other
steps to ensure receipt by its San Francisco Office of the instructions about the re-routed
passengers, notwithstanding its previous experience with delayed transmission of
messages. For respondent court, this omission on the part of petitioner, coupled with
what respondent court received as rude and arrogant behavior of petitioner's passenger
service agent Dennis Cheng, constituted a palpable breach of contract of carriage
entitling private respondent to an award of actual, moral and exemplary damages as well
as attorney's fees. We are not in complete agreement.

Verily, petitioner airlines committed a breach of contract in failing to secure an

immediate flight connection for private respondent. Under Article 1755 of the Civil Code
of the Philippines, petitioner, as a common carrier, is duty bound to "carry 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." The reliance of petitioner
on the subject telex communications falls short of the utmost diligence of a very cautious
person expected of it, thereby rendering it liable for its failure to abide by the promised
immediate connection. 8

Be that as it may, we, however, find that the breach of contract committed by petitioner
was not attended by gross negligence, recklessness or wanton disregard of the rights of
private respondent as a passenger. Telex was the established mode of communication
between petitioner's Manila and San Francisco offices. Contact by telephone was not a
practice due to the time difference between the two places. Thus, while petitioner's
Manila office was aware of the possibility of transmission delay, it bad to avail itself of
this mode of communication. For this course of action, we do not find petitioner to have
acted wantonly or recklessly. Considering the gap of more than 24 hours between the
time the telex messages were sent out and private respondent's expected arrival at San
Francisco, it was not unreasonable for petitioner to expect that this time gap would cover
whatever delay might be encountered at the Hongkong Link. 9 Thus, while petitioner may
have been remiss in its total reliance upon the telex communications and therefore
considered negligent in view of the degree of diligence required of it as a common
carrier, such negligence cannot under the obtaining circumstances be said to be so gross
as to amount to bad faith.

As regards petitioners passenger service agent Dennis Cheng's treatment of private

respondent, we share the trial court's observation, thus:

Neither is the court impressed with plaintiffs (private respondent) allegation

that she was ill-treated by defendant's (petitioner) personnel at the San
Francisco airport area. Her self-serving declaration on this score does not
suffice to contradict the straightforward and detailed deposition of Dennis
Cheng (see Exhs. 10 to 10-1), let along the well-known custom and policy of
Chinese businessmen and employees of being courteous and attentive to
customers... 10

The respondent appellate court chose to believe private respondent's allegation of

rudeness and arrogance over Dennis Cheng's categorical denial contained in his
deposition 11 on the ground that said deposition is hearsay. This is an error on respondent
court's part. The deposition was taken in accordance with the Rules of Court and is
admissible under the Rules of Evidence. It is a material and vital evidence that the
appellate court had overlooked, nay, ignored; a factor which calls for the Court's review
powers and which excludes the case from the general rule that findings of facts of the
Court of Appeals are binding on this court.

We are convinced that petitioner's personnel were not motivated by ill will or malice in
their dealings with private respondent. Their refusal to accede to her demands for a
flight connection to Los Angeles and/or food and hotel accommodations was due
primarily to lack of information or knowledge upon which to act upon and not from a
deliberate intent to ignore or disregard private respondent's rights as a passenger. They
cannot be faulted for wanting to verify with Manila private respondent's status before
acting upon her request as tickets for Los Angeles cannot be used in going to San
Francisco, and possession of a ticket with Los Angeles as destination was not an
indication that one was a transit or an involuntarily re-routed passenger.

Contact thru telephone with Manila could not immediately be made because of the time
difference and private respondent was accordingly advised that information from Manila
could be expected at around 6:30 p.m., the time that the Manila Office would have
begun its office hours. 12 This repeated advise, notwithstanding, private respondent left
the airport without leaving a contact address. In this sense, it was private respondent
herself who rendered it impossible for petitioner airlines to perform its obligation of
bringing her to Los Angeles as contracted for.

The breach of contract under consideration having been incurred in good faith, petitioner
airlines is liable for damages which are the natural and probable consequences of said
breach and which the parties have foreseen at the time the obligation was
constituted. 13 These damages consist of the actual damages awarded by the trial court
to private respondent.

With respect to moral damages, the rule is that the same are recoverable in a damage
suit predicated upon a breach of contract of carriage only where [1] the mishap results in
the death of a passenger 14 and [2] it is proved that the carrier was guilty of fraud or bad
faith, even if death does not result. 15 As the present case does not fall under either of
the cited instances, the award of moral damages should be, as it is hereby disallowed.

The award of exemplary damages must likewise be deleted, as it has not been shown
that petitioner, in committing the breach of contract of carriage, acted in a wanton,
fraudulent, reckless, oppressive or malevolent manner. 16

The award of attorney's fees is justified under Article 2208(2) of the Civil Code which
states that the same may be recovered when the defendant's act or omission has
compelled the plaintiff to litigate with third persons or to incur expenses to protect his
interest. The amount of P6,000.00 awarded by respondent court should be increased to
P10,000.00 considering that the case has reached this Tribunal.

WHEREFORE, the decision under review is hereby MODIFIED in that the award of moral
and exemplary damages to private respondent Claudia B. Osorio is eliminated and the
attorney's fees is increased to P10,000.00. No pronouncement as to costs.

SO ORDERED.

15. G.R. No. 101089. April 7, 1993.

ESTRELLITA M. BASCOS, petitioners,

vs.
COURT OF APPEALS and RODOLFO A. CIPRIANO, respondents.

1. CIVIL LAW; COMMON CARRIERS; DEFINED; TEST TO DETERMINE COMMON CARRIER.

Article 1732 of the Civil Code defines a common carrier as "(a) person, corporation or
firm, or association 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 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." . . . The holding of the Court in De Guzman vs. Court of Appeals is
instructive. In referring to Article 1732 of the Civil Code, it held thus: "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 distinguished 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 1732 deliberately refrained from making such distinctions."

2. ID.; ID.; DILIGENCE REQUIRED IN VIGILANCE OVER GOODS TRANSPORTED; WHEN

PRESUMPTION OF NEGLIGENCE ARISES; HOW PRESUMPTION OVERCAME; WHEN
PRESUMPTION MADE ABSOLUTE. Common carriers are obliged to observe
extraordinary diligence in the vigilance over the goods transported by them. Accordingly,
they are presumed to have been at fault or to have acted negligently if the goods are
lost, destroyed or deteriorated. There are very few instances when the presumption of
negligence does not attach and these instances are enumerated in Article 1734. In those
cases where the presumption is applied, the common carrier must prove that it exercised
extraordinary diligence in order to overcome the presumption . . . The presumption of
negligence was raised against petitioner. It was petitioner's burden to overcome it. Thus,
contrary to her assertion, private respondent need not introduce any evidence to prove
her negligence. Her own failure to adduce sufficient proof of extraordinary diligence
made the presumption conclusive against her.

3. ID.; ID.; HIJACKING OF GOODS; CARRIER PRESUMED NEGLIGENT; HOW CARRIER

ABSOLVED FROM LIABILITY. In De Guzman vs. Court of Appeals, the Court held that
hijacking, not being included in the provisions of Article 1734, must be dealt with under
the provisions of Article 1735 and thus, the common carrier is presumed to have been at
fault or negligent. To exculpate the carrier from liability arising from hijacking, he must
prove that the robbers or the hijackers acted with grave or irresistible threat, violence, or
force. This is in accordance with Article 1745 of the Civil Code which provides: "Art. 1745.
Any of the following or similar stipulations shall be considered unreasonable, unjust and
contrary to public policy . . . (6) That the common carrier's liability for acts committed by
thieves, or of robbers who do not act with grave or irresistible threat, violences or force,
is dispensed with or diminished"; In the same case, the Supreme Court also held that:
"Under Article 1745 (6) above, a common carrier is held responsible and will not be
allowed to divest or to diminish such responsibility even for acts of strangers like
thieves or robbers, except where such thieves or robbers in fact acted "with grave of
irresistible threat, violence of force," We believe and so hold that the limits of the duty of
extraordinary diligence in the vigilance over the goods carried are reached where the
goods are lost as a result of a robbery which is attended by "grave or irresistible threat,
violence or force."

4. REMEDIAL LAW; EVIDENCE; JUDICIAL ADMISSIONS CONCLUSIVE. In this case,

petitioner herself has made the admission that she was in the trucking business, offering
her trucks to those with cargo to move. Judicial admissions are conclusive and no
evidence is required to prove the same.

5. ID.; ID.; BURDEN OF PROOF RESTS WITH PARTY WHO ALLEGES A FACT. Petitioner
presented no other proof of the existence of the contract of lease. He who alleges a fact
has the burden of proving it.

6. ID.; ID.; AFFIDAVITS NOT CONSIDERED BEST EVIDENCE IF AFFIANTS AVAILABLE AS

WITNESSES. While the affidavit of Juanito Morden, the truck helper in the hijacked
truck, was presented as evidence in court, he himself was a witness as could be gleaned
from the contents of the petition. Affidavits are not considered the best evidence if the
affiants are available as witnesses.

7. CIVIL LAW; OBLIGATIONS AND CONTRACTS; CONTRACT IS WHAT LAW DEFINES IT TO

BE. Granting that the said evidence were not self-serving, the same were not sufficient
to prove that the contract was one of lease. It must be understood that a contract is
what the law defines it to be and not what it is called by the contracting parties.

DECISION

CAMPOS, JR., J p:

This is a petition for review on certiorari of the decision ** of the Court of Appeals in
"RODOLFO A. CIPRIANO, doing business under the name CIPRIANO TRADING
ENTERPRISES plaintiff-appellee, vs. ESTRELLITA M. BASCOS, doing business under the
name of BASCOS TRUCKING, defendant-appellant," C.A.-G.R. CV No. 25216, the
dispositive portion of which is quoted hereunder:

"PREMISES considered, We find no reversible error in the decision appealed from, which
is hereby affirmed in toto. Costs against appellant." 1

The facts, as gathered by this Court, are as follows:

Rodolfo A. Cipriano representing Cipriano Trading Enterprise (CIPTRADE for short) entered
into a hauling contract 2 with Jibfair Shipping Agency Corporation whereby the former
bound itself to haul the latter's 2,000 m/tons of soya bean meal from Magallanes Drive,
Del Pan, Manila to the warehouse of Purefoods Corporation in Calamba, Laguna. To carry
out its obligation, CIPTRADE, through Rodolfo Cipriano, subcontracted with Estrellita
Bascos (petitioner) to transport and to deliver 400 sacks of soya bean meal worth
P156,404.00 from the Manila Port Area to Calamba, Laguna at the rate of P50.00 per
metric ton. Petitioner failed to deliver the said cargo. As a consequence of that failure,
Cipriano paid Jibfair Shipping Agency the amount of the lost goods in accordance with
the contract which stated that:

"1. CIPTRADE shall be held liable and answerable for any loss in bags due to theft,
hijacking and non-delivery or damages to the cargo during transport at market
value, . . ." 3

Cipriano demanded reimbursement from petitioner but the latter refused to pay.
Eventually, Cipriano filed a complaint for a sum of money and damages with writ of
preliminary attachment 4 for breach of a contract of carriage. The prayer for a Writ of
Preliminary Attachment was supported by an affidavit 5 which contained the following
allegations:
"4. That this action is one of those specifically mentioned in Sec. 1, Rule 57 the Rules of
Court, whereby a writ of preliminary attachment may lawfully issue, namely:

"(e) in an action against a party who has removed or disposed of his property, or is about
to do so, with intent to defraud his creditors;"

5. That there is no sufficient security for the claim sought to be enforced by the present
action;

6. That the amount due to the plaintiff in the above-entitled case is above all legal
counterclaims;"

The trial court granted the writ of preliminary attachment on February 17, 1987.

In her answer, petitioner interposed the following defenses: that there was no contract of
carriage since CIPTRADE leased her cargo truck to load the cargo from Manila Port Area
to Laguna; that CIPTRADE was liable to petitioner in the amount of P11,000.00 for
loading the cargo; that the truck carrying the cargo was hijacked along Canonigo St.,
Paco, Manila on the night of October 21, 1988; that the hijacking was immediately
reported to CIPTRADE and that petitioner and the police exerted all efforts to locate the
hijacked properties; that after preliminary investigation, an information for robbery and
carnapping were filed against Jose Opriano, et al.; and that hijacking, being a force
majeure, exculpated petitioner from any liability to CIPTRADE.

After trial, the trial court rendered a decision *** the dispositive portion of which reads as
follows:

"WHEREFORE, judgment is hereby rendered in favor of plaintiff and against defendant

ordering the latter to pay the former:

1. The amount of ONE HUNDRED FIFTY-SIX THOUSAND FOUR HUNDRED FOUR PESOS
(P156,404.00) as an (sic) for actual damages with legal interest of 12% per cent per
annum to be counted from December 4, 1986 until fully paid;

2. The amount of FIVE THOUSAND PESOS (P5,000.00) as and for attorney's fees; and

3. The costs of the suit.

The "Urgent Motion To Dissolve/Lift preliminary Attachment" dated March 10, 1987 filed
by defendant is DENIED for being moot and academic.

SO ORDERED." 6

Petitioner appealed to the Court of Appeals but respondent Court affirmed the trial
court's judgment.

Consequently, petitioner filed this petition where she makes the following assignment of
errors; to wit:

"I. THE RESPONDENT COURT ERRED IN HOLDING THAT THE CONTRACTUAL RELATIONSHIP
BETWEEN PETITIONER AND PRIVATE RESPONDENT WAS CARRIAGE OF GOODS AND NOT
LEASE OF CARGO TRUCK.

II. GRANTING, EX GRATIA ARGUMENTI, THAT THE FINDING OF THE RESPONDENT COURT
THAT THE CONTRACTUAL RELATIONSHIP BETWEEN PETITIONER AND PRIVATE
RESPONDENT WAS CARRIAGE OF GOODS IS CORRECT, NEVERTHELESS, IT ERRED IN
FINDING PETITIONER LIABLE THEREUNDER BECAUSE THE LOSS OF THE CARGO WAS DUE
TO FORCE MAJEURE, NAMELY, HIJACKING.

III. THE RESPONDENT COURT ERRED IN AFFIRMING THE FINDING OF THE TRIAL COURT
THAT PETITIONER'S MOTION TO DISSOLVE/LIFT THE WRIT OF PRELIMINARY ATTACHMENT
HAS BEEN RENDERED MOOT AND ACADEMIC BY THE DECISION OF THE MERITS OF THE
CASE." 7

The petition presents the following issues for resolution: (1) was petitioner a common
carrier?; and (2) was the hijacking referred to a force majeure?

The Court of Appeals, in holding that petitioner was a common carrier, found that she
admitted in her answer that she did business under the name A.M. Bascos Trucking and
that said admission dispensed with the presentation by private respondent, Rodolfo
Cipriano, of proofs that petitioner was a common carrier. The respondent Court also
adopted in toto the trial court's decision that petitioner was a common carrier, Moreover,
both courts appreciated the following pieces of evidence as indicators that petitioner was
a common carrier: the fact that the truck driver of petitioner, Maximo Sanglay, received
the cargo consisting of 400 bags of soya bean meal as evidenced by a cargo receipt
signed by Maximo Sanglay; the fact that the truck helper, Juanito Morden, was also an
employee of petitioner; and the fact that control of the cargo was placed in petitioner's
care.

In disputing the conclusion of the trial and appellate courts that petitioner was a
common carrier, she alleged in this petition that the contract between her and Rodolfo A.
Cipriano, representing CIPTRADE, was lease of the truck. She cited as evidence certain
affidavits which referred to the contract as "lease". These affidavits were made by Jesus
Bascos 8 and by petitioner herself. 9 She further averred that Jesus Bascos confirmed in
his testimony his statement that the contract was a lease contract. 10 She also stated
that: she was not catering to the general public. Thus, in her answer to the amended
complaint, she said that she does business under the same style of A.M. Bascos Trucking,
offering her trucks for lease to those who have cargo to move, not to the general public
but to a few customers only in view of the fact that it is only a small business. 11

We agree with the respondent Court in its finding that petitioner is a common carrier.

Article 1732 of the Civil Code defines a common carrier as "(a) person, corporation or
firm, or association 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 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."
12 In this case, petitioner herself has made the admission that she was in the trucking
business, offering her trucks to those with cargo to move. Judicial admissions are
conclusive and no evidence is required to prove the same. 13

But petitioner argues that there was only a contract of lease because they offer their
services only to a select group of people and because the private respondents, plaintiffs
in the lower court, did not object to the presentation of affidavits by petitioner where the
transaction was referred to as a lease contract.

Regarding the first contention, the holding of the Court in De Guzman vs. Court of
Appeals 14 is instructive. In referring to Article 1732 of the Civil Code, it held thus:

"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 1732 deliberately refrained from making such distinctions."

Regarding the affidavits presented by petitioner to the court, both the trial and appellate
courts have dismissed them as self-serving and petitioner contests the conclusion. We
are bound by the appellate court's factual conclusions. Yet, granting that the said
evidence were not self-serving, the same were not sufficient to prove that the contract
was one of lease. It must be understood that a contract is what the law defines it to be
and not what it is called by the contracting parties. 15 Furthermore, petitioner presented
no other proof of the existence of the contract of lease. He who alleges a fact has the
burden of proving it. 16

Likewise, We affirm the holding of the respondent court that the loss of the goods was
not due to force majeure.

Common carriers are obliged to observe extraordinary diligence in the vigilance over the
goods transported by them. 17 Accordingly, they are presumed to have been at fault or
to have acted negligently if the goods are lost, destroyed or deteriorated. 18 There are
very few instances when the presumption of negligence does not attach and these
instances are enumerated in Article 1734. 19 In those cases where the presumption is
applied, the common carrier must prove that it exercised extraordinary diligence in order
to overcome the presumption.

In this case, petitioner alleged that hijacking constituted force majeure which exculpated
her from liability for the loss of the cargo. In De Guzman vs. Court of Appeals, 20 the
Court held that hijacking, not being included in the provisions of Article 1734, must be
dealt with under the provisions of Article 1735 and thus, the common carrier is presumed
to have been at fault or negligent. To exculpate the carrier from liability arising from
hijacking, he must prove that the robbers or the hijackers acted with grave or irresistible
threat, violence, or force. This is in accordance with Article 1745 of the Civil Code which
provides:

"Art. 1745. Any of the following or similar stipulations shall be considered unreasonable,
unjust and contrary to public policy;

xxx xxx xxx

(6) That the common carrier's liability for acts committed by thieves, or of robbers who
do not act with grave or irresistible threat, violences or force, is dispensed with or
diminished;"

In the same case, 21 the Supreme Court also held that:

"Under Article 1745 (6) above, a common carrier is held responsible and will not be
allowed to divest or to diminish such responsibility even for acts of strangers like
thieves or robbers except where such thieves or robbers in fact acted with grave or
irresistible threat, violence or force. We believe and so hold that the limits of the duty of
extraordinary diligence in the vigilance over the goods carried are reached where the
goods are lost as a result of a robbery which is attended by "grave or irresistible threat,
violence or force."

To establish grave and irresistible force, petitioner presented her accusatory affidavit, 22
Jesus Bascos' affidavit, 23 and Juanito Morden's 24 "Salaysay". However, both the trial
court and the Court of Appeals have concluded that these affidavits were not enough to
overcome the presumption. Petitioner's affidavit about the hijacking was based on what
had been told her by Juanito Morden. It was not a first-hand account. While it had been
admitted in court for lack of objection on the part of private respondent, the respondent
Court had discretion in assigning weight to such evidence. We are bound by the
conclusion of the appellate court. In a petition for review on certiorari, We are not to
determine the probative value of evidence but to resolve questions of law. Secondly, the
affidavit of Jesus Bascos did not dwell on how the hijacking took place. Thirdly, while the
affidavit of Juanito Morden, the truck helper in the hijacked truck, was presented as
evidence in court, he himself was a witness as could be gleaned from the contents of the
petition. Affidavits are not considered the best evidence if the affiants are available as
witnesses. 25 The subsequent filing of the information for carnapping and robbery
against the accused named in said affidavits did not necessarily mean that the contents
of the affidavits were true because they were yet to be determined in the trial of the
criminal cases.
The presumption of negligence was raised against petitioner. It was petitioner's burden
to overcome it. Thus, contrary to her assertion, private respondent need not introduce
any evidence to prove her negligence. Her own failure to adduce sufficient proof of
extraordinary diligence made the presumption conclusive against her.

Having affirmed the findings of the respondent Court on the substantial issues involved,
We find no reason to disturb the conclusion that the motion to lift/dissolve the writ of
preliminary attachment has been rendered moot and academic by the decision on the
merits.

In the light of the foregoing analysis, it is Our opinion that the petitioner's claim cannot
be sustained. The petition is DISMISSED and the decision of the Court of Appeals is
hereby AFFIRMED.

SO ORDERED.

16. G.R. No. 52159 December 22, 1989

JOSE PILAPIL, petitioner,

vs.
HON. COURT OF APPEALS and ALATCO TRANSPORTATION COMPANY,
INC., respondents.

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.

WHEREFORE, the judgment appealed from is hereby AFFIRMED.

SO ORDERED.

17. THE PHILIPPINE AMERICAN GENERAL INSURANCE CO., INC., petitioner, vs.
MGG MARINE SERVICES, INC. and DOROTEO GAERLAN, respondents.

This petition for review seeks the reversal of the Decision, dated September 23,
1998, of the Court of Appeals in CA-G.R. CV No. 43915, [1] which absolved private
respondents MCG Marine Services, Inc. and Doroteo Gaerlan of any liability regarding the
loss of the cargo belonging to San Miguel Corporation due to the sinking of the M/V
Peatheray Patrick-G owned by Gaerlan with MCG Marine Services, Inc. as agent.
On March 1, 1987, San Miguel Corporation insured several beer bottle cases with an
aggregate value of P5,836,222.80 with petitioner Philippine American General Insurance
Company.[2] The cargo were loaded on board the M/V Peatheray Patrick-G to be
transported from Mandaue City to Bislig, Surigao del Sur.
After having been cleared by the Coast Guard Station in Cebu the previous day, the
vessel left the port of Mandaue City for Bislig, Surigao del Sur on March 2, 1987. The
weather was calm when the vessel started its voyage.
The following day, March 3, 1987, M/V Peatheray Patrick-G listed and subsequently
sunk off Cawit Point, Cortes, Surigao del Sur. As a consequence thereof, the cargo
belonging to San Miguel Corporation was lost.
Subsequently, San Miguel Corporation claimed the amount of its loss from petitioner.
Upon petitioners request, on March 18, 1987, Mr. Eduardo Sayo, a surveyor from the
Manila Adjusters and Surveyors Co., went to Taganauan Island, Cortes, Surigao del Sur
where the vessel was cast ashore, to investigate the circumstances surrounding the loss
of the cargo. In his report, Mr. Sayo stated that the vessel was structurally sound and
that he did not see any damage or crack thereon. He concluded that the
proximate cause of the listing and subsequent sinking of the vessel was the shifting of
ballast water from starboard to portside. The said shifting of ballast water allegedly
affected the stability of the M/V Peatheray Patrick-G.
Thereafter, petitioner paid San Miguel Corporation the full amount of P5,836,222.80
pursuant to the terms of their insurance contract.
On November 3, 1987, petitioner as subrogee of San Miguel Corporation filed with
the Regional Trial Court (RTC) of Makati City a case for collection against private
respondents to recover the amount it paid to San Miguel Corporation for the loss of the
latters cargo.
Meanwhile, the Board of Marine Inquiry conducted its own investigation of the sinking
of the M/V Peatheray Patrick-G to determine whether or not the captain and crew of the
vessel should be held responsible for the incident. [3] On May 11, 1989, the Board
rendered its decision exonerating the captain and crew of the ill-fated vessel for any
administrative liability. It found that the cause of the sinking of the vessel was the
existence of strong winds and enormous waves in Surigao del Sur, a fortuitous event that
could not have been forseen at the time the M/V Peatheray Patrick-G left the port of
Mandaue City.It was further held by the Board that said fortuitous event was the
proximate and only cause of the vessels sinking.
On April 15, 1993, the RTC of Makati City, Branch 134, promulgated its Decision
finding private respondents solidarily liable for the loss of San Miguel Corporations cargo
and ordering them to pay petitioner the full amount of the lost cargo plus legal interest,
attorneys fees and costs of suit.[4]
Private respondents appealed the trial courts decision to the Court of Appeals. On
September 23, 1998, the appellate court issued the assailed Decision, which reversed
the ruling of the RTC. It held that private respondents could not be held liable for the loss
of San Miguel Corporations cargo because said loss occurred as a consequence of a
fortuitous event, and that such fortuitous event was the proximate and only cause of the
loss.[5]
Petitioner thus filed the present petition, contending that:
(A)

IN REVERSING AND SETTING ASIDE THE DECISION OF RTC BR. 134 OF MAKATI
CITY ON THE BASIS OF THE FINDINGS OF THE BOARD OF MARINE INQUIRY,
APPELLATE COURT DECIDED THE CASE AT BAR NOT IN ACCORD WITH LAW OR
WITH THE APPLICABLE DECISIONS OF THE HONORABLE COURT;

(B)

IN REVERSING THE TRIAL COURTS DECISION, THE APPELLATE COURT GRAVELY

ERRED IN CONTRADICTING AND IN DISTURBING THE FINDINGS OF THE FORMER;

(C)

THE APPELLATE COURT GRAVELY ERRED IN REVERSING THE DECISION OF THE

TRIAL COURT AND IN DISMISSING THE COMPLAINT.[6]

Common carriers, from the nature of their business and for reasons of public policy,
are mandated to observe extraordinary diligence in the vigilance over the goods and for
the safety of the passengers transported by them. [7] Owing to this high degree of
diligence required of them, common carriers, as a general rule, are presumed to have
been at fault or negligent if the goods transported by them are lost, destroyed or if the
same deteriorated.[8]
However, this presumption of fault or negligence does not arise in the cases
enumerated under Article 1734 of the Civil Code:

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;

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

(5) Order or act of competent public authority.

In order that a common carrier may be absolved from liability where the loss,
destruction or deterioration of the goods is due to a natural disaster or calamity, it must
further be shown that the such natural disaster or calamity was the proximate
and only cause of the loss;[9] there must be an entire exclusion of human agency from
the cause of the injury of the loss.[10]
 Moreover, even in cases where a natural disaster is the proximate and only cause of
the loss, a common carrier is still required to exercise due diligence to prevent or
minimize loss before, during and after the occurrence of the natural disaster, for it to be
exempt from liability under the law for the loss of the goods. [11] If a common carrier fails
to exercise due diligence--or that ordinary care which the circumstances of the particular
case demand[12] --to preserve and protect the goods carried by it on the occasion of a
natural disaster, it will be deemed to have been negligent, and the loss will not be
considered as having been due to a natural disaster under Article 1734 (1).
In the case at bar, the issues may be narrowed down to whether the loss of the cargo
was due to the occurrence of a natural disaster, and if so, whether such natural disaster
was the sole and proximate cause of the loss or whether private respondents were partly
to blame for failing to exercise due diligence to prevent the loss of the cargo.
The parties do not dispute that on the day the M/V Peatheray Patrick-G sunk, said
vessel encountered strong winds and huge waves ranging from six to ten feet in
height. The vessel listed at the port side and eventually sunk at Cawit Point, Cortes,
Surigao del Sur.
The Court of Appeals, citing the decision of the Board of Marine Inquiry in the
administrative case against the vessels crew (BMI--646-87), found that the loss of the
cargo was due solely to the existence of a fortuitous event, particularly the presence of
strong winds and huge waves at Cortes, Surigao del Sur on March 3, 1987:
xxx

III. WHAT WAS THE PROXIMATE CAUSE OF SINKING?

Evidence shows that when "LCT Peatheray Patrick-G" left the port of Mandawe, Cebu for
Bislig, Surigao del Sur on March 2, 1987 the Captain had observed the fair atmospheric
condition of the area of the pier and confirmed this good weather condition with the
Coast Guard Detachment of Mandawe City. However, on March 3, 1987 at about 10:00
o'clock in the evening, when the vessel had already passed Surigao Strait. the vessel
started to experience waves as high as 6 to 7 feet and that the Northeasterly wind was
blowing at about five (5) knot velocity. At about 11:00 o'clock P.M. when the vessel was
already about 4.5 miles off Cawit Point, Cortes, Surigao del Sur, the vessel was
discovered to be listing 15 degrees to port side and that the strength of the wind had
increased to 15 knots and the waves were about ten (10) feet high [Ramilo TSN 10-27-87
p. 32). Immediately thereafter, emergency measures were taken by the crew. The
officers had suspected that a leak or crack might had developed at the bottom hull
particularly below one or two of the empty wing tanks at port side serving as buoyancy
tanks resulting in ingress of sea water in the tanks was confirmed when the Captain
ordered to use the cargo pump. The suction valves to the said tanks of port side were
opened in order to suck or draw out any amount of water that entered into the
tanks. The suction pressure of the pump had drawn out sea water in large quantity
indicating therefore, that a leak or crack had developed in the hull as the vessel was
continuously batted and pounded by the huge waves. Bailing out of the water through
the pump was done continuously in an effort of the crew to prevent the vessel from
sinking. but then efforts were in vain. The vessel still continued to list even more despite
the continuous pumping and discharging of sea water from the wing tanks indicating that
the amount of the ingress of sea water was greater in volume that that was being
discharged by the pump. Considering therefore, the location of the suspected source of
the ingress of sea water which was a crack or hole at the bottom hull below the
buoyancy tank's port side which was not acessible (sic) for the crew to check or control
the flow of sea water into the said tank. The accumulation of sea water aggravated by
the continuous pounding, rolling and pitching of the vessel against huge waves and
strong northeasterly wind, the Captain then had no other recourse except to order
abandonship to save their lives.[13]

The presence of a crack in the ill-fated vessel through which water seeped in was
confirmed by the Greutzman Divers who were commissioned by the private respondents
to conduct an underwater survey and inspection of the vessel to determine the cause
and circumstances of its sinking. In its report, Greutzman Divers stated that along the
port side platings, a small hole and two separate cracks were found at about midship. [14]
The findings of the Board of Marine Inquiry indicate that the attendance of strong
winds and huge waves while the M/V Peatheray Patrick-G was sailing through Cortes,
Surigao del Norte on March 3, 1987 was indeed fortuitous. A fortuitous event has been
defined as one which could not be foreseen, or which though foreseen, is inevitable.
[15]
An event is considered fortuitous if the following elements concur:

xxx (a) the cause of the unforeseen and unexpected occurrence, or the failure of the
debtor to comply with his obligations, must be independent of human will; (b) it must be
impossible to foresee the event which constitutes the caso fortuito, or if it can be
foreseen, it must be impossible to avoid; (c) the occurrence must be such as to render it
impossible for the debtor to fulfill his obligation in a normal manner; and (d) the obligor
must be free from any participation in the aggravation of the injury resulting to the
creditor. xxx[16]

In the case at bar, it was adequately shown that before the M/V Peatheray Patrick-G
left the port of Mandaue City, the Captain confirmed with the Coast Guard that the
weather condition would permit the safe travel of the vessel to Bislig, Surigao del
Sur. Thus, he could not be expected to have foreseen the unfavorable weather condition
that awaited the vessel in Cortes, Surigao del Sur. It was the presence of the strong
winds and enormous waves which caused the vessel to list, keel over, and consequently
lose the cargo contained therein. The appellate court likewise found that there was no
negligence on the part of the crew of the M/V Peatheray Patrick-G, citing the following
portion of the decision of the Board of Marine Inquiry:

I. WAS LCT PEATHERAY PATRICK-G SEAWORTHY WHEN SHE LEFT THE PORT OF MANDAWE,
CEBU AND AT THE TIME OF SINKING?

Evidence clearly shows that the vessel was propelled with three (3) diesel engines of 250
BHP each or a total of 750 BHP. It had three (3) propellers which were operating
satisfactorily from the time the vessel left the port of Mandawe up to the time when the
hull on the double bottom tank was heavily floaded (sic) by uncontrollable entry of sea
water resulting in the stoppage of engines. The vessel was also equipped with operating
generator pumps for emergency cases. This equipment was also operating satisfactorily
up to the time when the engine room was heavily floaded (sic) with sea water. Further,
the vessel had undergone emergency drydocking and repair before the accident
occurred (sic) on November 9, 1986 at Trigon Shipyard, San Fernando, Cebu as shown by
the billing for the Drydocking and Repair and certificate of Inspection No. 2588-86 issued
by the Philippine coast Guard on December 5, 1986 which expired on November 8, 1987.

LCT Peatheray Patrick-G was skippered by Mr. Manuel P. Ramilo, competent and
experienced licensed Major Patron who had been in command of the vessel for more
than three (3) years from July 1984 up to the time of sinking March 3, 1987. His Chief
Mate Mr. Mariano Alalin also a licensed Major Patron had been the Chief Mate of " LCT
Peatheray Patrick-G" for one year and three months at the time of the accident. Further
Chief Mate Alalin had commanded a tanker vessel named M/T Mercedes of MGM
Corporation for almost two (2) years from 1983-1985 (Alalin TSN-4-13-88 pp. 32-33).

That the vessel was granted SOLAS clearance by the Philippine Coast Guard on March 1,
1987 to depart from Mandawe City for Bislig, Surigao del Sur as evidenced by a
certification issued to D.C. Gaerlan Oil Products by Coast Guard Station Cebu dated
December 23, 1987.

Based on the foregoing circumstances, "LCT Peatheray Patrick-G" should be considered

seaworthy vessel at the time she undertook that fateful voyage on March 2, 1987.

To be seaworthy, a vessel must not only be staunch and fit in the hull for the voyage to
be undertaken but also must be properly equipped and for that purpose there is a duty
upon the owner to provide a competent master and a crew adequate in number and
competent for their duty and equals in disposition and seamanship to the ordinary in that
calling. (Ralph 299 F-52, 1924 AMC 942). American President 2td v. Ren Fen Fed 629.
AMC 1723 LCA 9 CAL 1924).[17]

Overloading was also eliminated as a possible cause of the sinking of the vessel, as the
evidence showed that its freeboard clearance was substantially greater than the
authorized freeboard clearance.[18]
Although the Board of Marine Inquiry ruled only on the administrative liability of the
captain and crew of the M/V Peatheray Patrick-G, it had to conduct a thorough
investigation of the circumstances surrounding the sinking of the vessel and the loss of
its cargo in order to determine their responsibility, if any. The results of its investigation
as embodied in its decision on the administrative case clearly indicate that the loss of
the cargo was due solely to the attendance of strong winds and huge waves which
caused the vessel accumulate water, tilt to the port side and to eventually keel
over. There was thus no error on the part of the Court of Appeals in relying on the factual
findings of the Board of Marine Inquiry, for such factual findings, being supported by
substantial evidence are persuasive, considering that said administrative body is an
expert in matters concerning marine casualties.[19]
Since the presence of strong winds and enormous waves at Cortes, Surigao del Sur
on March 3, 1987 was shown to be the proximate and only cause of the sinking of the
M/V Peatheray Patrick-G and the loss of the cargo belonging to San Miguel Corporation,
private respondents cannot be held liable for the said loss.
WHEREFORE, the assailed Decision of the Court of Appeals is hereby AFFIRMED and
the petition is hereby DENIED.
SO ORDERED.

18. G.R. No. L-48757 May 30, 1988

MAURO GANZON, petitioner,

vs.
COURT OF APPEALS and GELACIO E. TUMAMBING, respondents.

The private respondent instituted in the Court of First Instance of Manila 1 an action
against the petitioner for damages based on culpa contractual. The antecedent facts, as
found by the respondent Court, 2 are undisputed:

On November 28, 1956, Gelacio Tumambing contracted the services of Mauro B. Ganzon
to haul 305 tons of scrap iron from Mariveles, Bataan, to the port of Manila on board the
lighter LCT "Batman" (Exhibit 1, Stipulation of Facts, Amended Record on Appeal, p. 38).
Pursuant to that agreement, Mauro B. Ganzon sent his lighter "Batman" to Mariveles
where it docked in three feet of water (t.s.n., September 28, 1972, p. 31). On December
1, 1956, Gelacio Tumambing delivered the scrap iron to defendant Filomeno Niza, captain
of the lighter, for loading which was actually begun on the same date by the crew of the
lighter under the captain's supervision. When about half of the scrap iron was already
loaded (t.s.n., December 14, 1972, p. 20), Mayor Jose Advincula of Mariveles, Bataan,
arrived and demanded P5,000.00 from Gelacio Tumambing. The latter resisted the
shakedown and after a heated argument between them, Mayor Jose Advincula drew his
gun and fired at Gelacio Tumambing (t.s.n., March 19, 1971, p. 9; September 28, 1972,
pp. 6-7).<re||an1w> The gunshot was not fatal but Tumambing had to be taken to a
hospital in Balanga, Bataan, for treatment (t.s.n., March 19, 1971, p. 13; September 28,
1972, p. 15).

After sometime, the loading of the scrap iron was resumed. But on December 4, 1956,
Acting Mayor Basilio Rub, accompanied by three policemen, ordered captain Filomeno
Niza and his crew to dump the scrap iron (t.s.n., June 16, 1972, pp. 8-9) where the lighter
was docked (t.s.n., September 28, 1972, p. 31). The rest was brought to the compound of
NASSCO (Record on Appeal, pp. 20-22). Later on Acting Mayor Rub issued a receipt
stating that the Municipality of Mariveles had taken custody of the scrap iron (Stipulation
of Facts, Record on Appeal, p. 40; t.s.n., September 28, 1972, p. 10.)
On the basis of the above findings, the respondent Court rendered a decision, the
dispositive portion of which states:

WHEREFORE, the decision appealed from is hereby reversed and set aside
and a new one entered ordering defendant-appellee Mauro Ganzon to pay
plaintiff-appellant Gelacio E. Tumambimg the sum of P5,895.00 as actual
damages, the sum of P5,000.00 as exemplary damages, and the amount of
P2,000.00 as attorney's fees. Costs against defendant-appellee Ganzon. 3

In this petition for review on certiorari, the alleged errors in the decision of the Court of
Appeals are:

THE COURT OF APPEALS FINDING THE HEREIN PETITIONER GUILTY OF BREACH OF THE
CONTRACT OF TRANSPORTATION AND IN IMPOSING A LIABILITY AGAINST HIM
COMMENCING FROM THE TIME THE SCRAP WAS PLACED IN HIS CUSTODY AND CONTROL
HAVE NO BASIS IN FACT AND IN LAW.

II

THE APPELLATE COURT ERRED IN CONDEMNING THE PETITIONER FOR THE ACTS OF HIS
EMPLOYEES IN DUMPING THE SCRAP INTO THE SEA DESPITE THAT IT WAS ORDERED BY
THE LOCAL GOVERNMENT OFFICIAL WITHOUT HIS PARTICIPATION.

III

THE APPELLATE COURT FAILED TO CONSIDER THAT THE LOSS OF THE SCRAP WAS DUE
TO A FORTUITOUS EVENT AND THE PETITIONER IS THEREFORE NOT LIABLE FOR LOSSES
AS A CONSEQUENCE THEREOF. 4

The petitioner, in his first assignment of error, insists that the scrap iron had not been
unconditionally placed under his custody and control to make him liable. However, he
completely agrees with the respondent Court's finding that on December 1, 1956, the
private respondent delivered the scraps to Captain Filomeno Niza for loading in the
lighter "Batman," That the petitioner, thru his employees, actually received the scraps is
freely admitted. Significantly, there is not the slightest allegation or showing of any
condition, qualification, or restriction accompanying the delivery by the private
respondent-shipper of the scraps, or the receipt of the same by the petitioner. On the
contrary, soon after the scraps were delivered to, and received by the petitioner-common
carrier, loading was commenced.

By the said act of delivery, the scraps were unconditionally placed in the possession and
control of the common carrier, and upon their receipt by the carrier for transportation,
the contract of carriage was deemed perfected. Consequently, the petitioner-carrier's
extraordinary responsibility for the loss, destruction or deterioration of the goods
commenced. Pursuant to Art. 1736, such extraordinary responsibility would cease only
upon the delivery, actual or constructive, by the carrier to the consignee, or to the
person who has a right to receive them. 5 The fact that part of the shipment had not
been loaded on board the lighter did not impair the said contract of transportation as the
goods remained in the custody and control of the carrier, albeit still unloaded.

The petitioner has failed to show that the loss of the scraps was due to any of the
following causes enumerated in Article 1734 of the Civil Code, namely:

(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.

Hence, the petitioner is presumed to have been at fault or to have acted negligently. 6 By
reason of this presumption, the court is not even required to make an express finding of
fault or negligence before it could hold the petitioner answerable for the breach of the
contract of carriage. Still, the petitioner could have been exempted from any liability had
he been able to prove that he observed extraordinary diligence in the vigilance over the
goods in his custody, according to all the circumstances of the case, or that the loss was
due to an unforeseen event or to force majeure. As it was, there was hardly any attempt
on the part of the petitioner to prove that he exercised such extraordinary diligence.

It is in the second and third assignments of error where the petitioner maintains that he
is exempt from any liability because the loss of the scraps was due mainly to the
intervention of the municipal officials of Mariveles which constitutes a caso fortuito as
defined in Article 1174 of the Civil Code. 7

We cannot sustain the theory of caso fortuito. In the courts below, the petitioner's
defense was that the loss of the scraps was due to an "order or act of competent public
authority," and this contention was correctly passed upon by the Court of Appeals which
ruled that:

... In the second place, before the appellee Ganzon could be absolved from
responsibility on the ground that he was ordered by competent public
authority to unload the scrap iron, it must be shown that Acting Mayor Basilio
Rub had the power to issue the disputed order, or that it was lawful, or that it
was issued under legal process of authority. The appellee failed to establish
this. Indeed, no authority or power of the acting mayor to issue such an order
was given in evidence. Neither has it been shown that the cargo of scrap iron
belonged to the Municipality of Mariveles. What we have in the record is the
stipulation of the parties that the cargo of scrap iron was accilmillated by the
appellant through separate purchases here and there from private
individuals (Record on Appeal, pp. 38-39). The fact remains that the order
given by the acting mayor to dump the scrap iron into the sea was part of
the pressure applied by Mayor Jose Advincula to shakedown the appellant for
P5,000.00. The order of the acting mayor did not constitute valid authority
for appellee Mauro Ganzon and his representatives to carry out.

Now the petitioner is changing his theory to caso fortuito. Such a change of theory on
appeal we cannot, however, allow. In any case, the intervention of the municipal officials
was not In any case, of a character that would render impossible the fulfillment by the
carrier of its obligation. The petitioner was not duty bound to obey the illegal order to
dump into the sea the scrap iron. Moreover, there is absence of sufficient proof that the
issuance of the same order was attended with such force or intimidation as to completely
overpower the will of the petitioner's employees. The mere difficulty in the fullfilment of
the obligation is not considered force majeure. We agree with the private respondent
that the scraps could have been properly unloaded at the shore or at the NASSCO
compound, so that after the dispute with the local officials concerned was settled, the
scraps could then be delivered in accordance with the contract of carriage.

There is no incompatibility between the Civil Code provisions on common carriers and
Articles 361 8 and 362 9 of the Code of Commerce which were the basis for this Court's
ruling in Government of the Philippine Islands vs. Ynchausti & Co.10 and which the
petitioner invokes in tills petition. For Art. 1735 of the Civil Code, conversely stated,
means that the shipper will suffer the losses and deterioration arising from the causes
enumerated in Art. 1734; and in these instances, the burden of proving that damages
were caused by the fault or negligence of the carrier rests upon him. However, the
carrier must first establish that the loss or deterioration was occasioned by one of the
excepted causes or was due to an unforeseen event or to force majeure. Be that as it
may, insofar as Art. 362 appears to require of the carrier only ordinary diligence, the
same is .deemed to have been modified by Art. 1733 of the Civil Code.
Finding the award of actual and exemplary damages to be proper, the same will not be
disturbed by us. Besides, these were not sufficiently controverted by the petitioner.

WHEREFORE, the petition is DENIED; the assailed decision of the Court of Appeals is
hereby AFFIRMED. Costs against the petitioner.

This decision is IMMEDIATELY EXECUTORY.

19. [G.R. No. 119197. May 16, 1997]

TABACALERA INSURANCE CO., PRUDENTIAL GUARANTEE & ASSURANCE, INC.,

and NEW ZEALAND INSURANCE CO., LTD., petitioners, vs. NORTH FRONT
SHIPPING SERVICES, INC., and COURT OF APPEALS, respondents.

TABACALERA INSURANCE CO., Prudential Guarantee & Assurance, Inc., and New
Zealand Insurance Co., Ltd., in this petition for review on certiorari, assail the 22
December 1994 decision of the Court of Appeals and its Resolution of 16 February 1995
which affirmed the 1 June 1993 decision of the Regional Trial Court dismissing their
complaint for damages against North Front Shipping Services, Inc.
On 2 August 1990, 20,234 sacks of corn grains valued at P3,500,640.00 were shipped
on board North Front 777, a vessel owned by North Front Shipping Services, Inc. The
cargo wasconsigned to Republic Flour Mills Corporation in Manila under Bill of Lading No.
001[1] and insured with the herein mentioned insurance companies. The vessel was
inspected prior to actual loading by representatives of the shipper and was found fit to
carry the merchandise. The cargo was covered with tarpaulins and wooden boards. The
hatches were sealed and could only be opened by representatives of Republic Flour Mills
Corporation.
The vessel left Cagayan de Oro City on 2 August 1990 and arrived Manila on 16
August 1990. Republic Flour Mills Corporation was advised of its arrival but it did not
immediately commence the unloading operations. There were days when unloading had
to be stopped due to variable weather conditions and sometimes for no apparent reason
at all. When the cargo was eventually unloaded there was a shortage of 26.333 metric
tons. The remaining merchandise was already moldy, rancid and deteriorating. The
unloading operations were completed on 5 September 1990 or twenty (20) days after the
arrival of the barge at the wharf of Republic Flour Mills Corporation in Pasig City.
Precision Analytical Services, Inc., was hired to examine the corn grains and
determine the cause of deterioration. A Certificate of Analysis was issued indicating that
the corn grains had 18.56% moisture content and the wetting was due to contact with
salt water. The mold growth was only incipient and not sufficient to make the corn grains
toxic and unfit for consumption. In fact the mold growth could still be arrested by drying.
Republic Flour Mills Corporation rejected the entire cargo and formally demanded
from North Front Shipping Services, Inc., payment for the damages suffered by it. The
demands however were unheeded. The insurance companies were perforce obliged to
pay Republic Flour Mills Corporation P2,189,433.40.
By virtue of the payment made by the insurance companies they were subrogated to
the rights of Republic Flour Mills Corporation. Thusly, they lodged a complaint for
damages against North Front Shipping Services, Inc., claiming that the loss was
exclusively attributable to the fault and negligence of the carrier. The Marine Cargo
Adjusters hired by the insurance companies conducted a survey and found cracks in the
bodega of the barge and heavy concentration of molds on the tarpaulins and wooden
boards. They did not notice any seals in the hatches. The tarpaulins were not brand new
as there were patches on them, contrary to the claim of North Front Shipping Services,
Inc., thus making it possible for water to seep in. They also discovered that the bulkhead
of the barge was rusty.
 North Front Shipping Services, Inc., averred in refutation that it could not be made
culpable for the loss and deterioration of the cargo as it was never negligent. Captain
Solomon Villanueva, master of the vessel, reiterated that the barge was inspected prior
to the actual loading and was found adequate and seaworthy. In addition, they were
issued a permit to sail by the Coast Guard. The tarpaulins were doubled and brand new
and the hatches were properly sealed. They did not encounter big waves hence it was
not possible for water to seep in. He further averred that the corn grains were farm wet
and not properly dried when loaded.
The court below dismissed the complaint and ruled that the contract entered into
between North Front Shipping Services, Inc., and Republic Flour Mills Corporation was a
charter-party agreement. As such, only ordinary diligence in the care of goods was
required of North Front Shipping Services, Inc. The inspection of the barge by the shipper
and the representatives of the shipping company before actual loading, coupled with
the Permit to Sail issued by the Coast Guard, sufficed to meet the degree of diligence
required of the carrier.
On the other hand, the Court of Appeals ruled that as a common carrier required to
observe a higher degree of diligence North Front 777 satisfactorily complied with all the
requirements hence was issued a Permit to Sail after proper inspection. Consequently,
the complaint was dismissed and the motion for reconsideration rejected.
The charter-party agreement between North Front Shipping Services, Inc., and
Republic Flour Mills Corporation did not in any way convert the common carrier into a
private carrier. We have already resolved this issue with finality in Planters Products, Inc.
v. Court of Appeals[2] thus -

A 'charter-party' is defined as a contract by which an entire ship, or some principal part

thereof, is let by the owner to another person for a specified time or use; a contract of
affreightment by which the owner of a ship or other vessel lets the whole or a part of her
to a merchant or other person for the conveyance of goods, on a particular voyage, in
consideration of the payment of freight x x x x Contract of affreightment may either be
time charter, wherein the vessel is leased to the charterer for a fixed period of time, or
voyage charter, wherein the ship is leased for a single voyage. In both cases, the charter-
party provides for the hire of the vessel only, either for a determinate period of time or
for a single or consecutive voyage, the ship owner to supply the ship's store, pay for the
wages of the master of the crew, and defray the expenses for the maintenance of the
ship.

Upon the other hand, the term 'common or public carrier' is defined in Art. 1732 of the
Civil Code. The definition extends to carriers either by land, air or water which
hold themselves out as ready to engage in carrying goods or transporting passengers or
both for compensation as a public employment and not as a casual occupation x x x x

It is therefore imperative that a public carrier shall remain as such, notwithstanding the
charter of the whole or portion of a vessel by one or more persons, provided the charter
is limited to the ship only, as in the case of a time-charter or voyage-
charter (underscoring supplied).

North Front Shipping Services, Inc., is a corporation engaged in the business of

transporting cargo and offers its services indiscriminately to the public. It is without
doubt a common carrier. As such it is required to observe extraordinary diligence in its
vigilance over the goods it transports. [3]. When goods placed in its care are lost or
damaged, the carrier is presumed to have been at fault or to have acted negligently.
[4]
North Front Shipping Services, Inc., therefore has the burden of proving that it
observed extraordinary diligence in order to avoid responsibility for the lost cargo.
North Front Shipping Services, Inc., proved that the vessel was inspected prior to
actual loading by representatives of the shipper and was found fit to take a load of corn
grains. They were also issued Permit to Sail by the Coast
Guard. The master of the vessel testified that the corn grains were farm wet when
loaded. However, this testimony was disproved by the clean bill of lading issued by North
Front Shipping Services, Inc., which did not contain a notation that the corn grains were
wet and improperly dried. Having been in the service since 1968, the master of the
vessel would have known at the outset that corn grains that were farm wet and not
properly dried would eventually deteriorate when stored in sealed and hot compartments
as in hatches of a ship. Equipped with this knowledge, the master of the vessel and his
crew should have undertaken precautionary measures to avoid or lessen the cargo's
possible deterioration as they were presumed knowledgeable about the nature of such
cargo. But none of such measures was taken.
In Compania Maritima v. Court of Appeals[5] we ruled -

x x x x 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. 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 x x x x

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 characteristics of goods tendered
for shipment, and to exercise due care in the handling and stowage, including such
methods as their nature requires' (underscoring supplied).

In fine, we find that the carrier failed to observe the required extraordinary
diligence in the vigilance over the goods placed in its
care. The proofs presented by North Front ShippingServices, Inc., were insufficient to
rebut the prima facie presumption of private respondent's negligence, more so if we
consider the evidence adduced by petitioners.
It is not denied by the insurance companies that the vessel was indeed inspected
before actual loading and that North Front 777 was issued a Permit to Sail. They proved
the fact of shipment and its consequent loss or damage while in the actual possession of
the carrier. Notably, the carrier failed to volunteer any explanation why there was
spoilage and how it occurred. On the other hand, it was shown during the trial that the
vessel had rusty bulkheads and the wooden boards and tarpaulins bore heavy
concentration of molds. The tarpaulins used were not new, contrary to the claim of North
Front Shipping Services, Inc., as there were already several patches on them, hence,
making it highly probable for water to enter.
Laboratory analysis revealed that the corn grains were contaminated with salt
water. North Front Shipping Services, Inc., failed to rebut all these arguments. It did not
even endeavor to establish that the loss, destruction or deterioration of the goods
was due to the following: (a) flood, storm, earthquake, lightning, or other natural disaster
or calamity; (b) act of the public enemy in war, whether international or civil; (c) act or
omission of the shipper or owner of the goods; (d) the character of the goods or defects
in the packing or in the containers; (e) order or act of competent public authority. [6] This
is a closed list. If the cause of destruction, loss or deterioration is other than the
enumerated circumstances, then the carrier is rightly liable therefor.
However, we cannot attribute the destruction, loss or deterioration of the cargo solely
to the carrier. We find the consignee Republic Flour Mills Corporation guilty of
contributorynegligence. It was seasonably notified of the arrival of the barge but did not
immediately start the unloading operations. No explanation was proffered by the
consignee as to why there was a delay of six (6) days. Had the unloading been
commenced immediately the loss could have been completely avoided or at least
minimized. As testified to by the chemist who analyzed the corn samples, the mold
growth was only at its incipient stage and could still be arrested by drying. The corn
grains were not yet toxic or unfit for consumption. For its contributory negligence,
Republic Flour Mills Corporation should share at least 40% of the loss.[7]
 WHEREFORE, the Decision of the Court of Appeals of 22 December 1994 and its
Resolution of 16 February 1995 are REVERSED and SET ASIDE. Respondent North Front
Shipping Services, Inc., is ordered to pay petitioners Tabacalera Insurance Co., Prudential
Guarantee & Assurance, Inc., and New Zealand Insurance Co. Ltd., P1,313,660.00 which
is 60% of the amount paid by the insurance companies to Republic Flour Mills
Corporation, plus interest at the rate of 12% per annum from the time this judgment
becomes final until full payment.
SO ORDERED.

22. G.R. No. 95536 March 23, 1992

ANICETO G. SALUDO, JR., MARIA SALVACION SALUDO, LEOPOLDO G. SALUDO

and SATURNINO G. SALUDO, petitioners,
vs.
HON. COURT OF APPEALS, TRANS WORLD AIRLINES, INC., and PHILIPPINE
AIRLINES, INC., respondents.

Assailed in this petition for review on certiorari is the decision in CA-G.R. CV No. 20951
of respondent Court of Appeals 1 which affirmed the decision of the trial court 2 dismissing
for lack of evidence herein petitioners' complaint in Civil Case No R-2101 of the then
Court of First Instance of Southern Leyte, Branch I.

The facts, as recounted by the court a quo and adopted by respondent court after
"considering the evidence on record," are as follows:

After the death of plaintiffs' mother, Crispina Galdo Saludo, in Chicago

Illinois, (on) October 23, 1976 (Exh. A), Pomierski and Son Funeral Home of
Chicago, made the necessary preparations and arrangements for the
shipment, of the remains from Chicago to the Philippines. The funeral home
had the remains embalmed (Exb. D) and secured a permit for the disposition
of dead human body on October 25, 1976 (Exh. C), Philippine Vice Consul in
Chicago, Illinois, Bienvenido M. Llaneta, at 3:00 p.m. on October 26, 1976 at
the Pomierski & Son Funeral Home, sealed the shipping case containing a
hermetically sealed casket that is airtight and waterproof wherein was
contained the remains of Crispina Saludo Galdo (sic) (Exb. B). On the same
date, October 26, 1976, Pomierski brought the remains to C.M.A.S.
(Continental Mortuary Air Services) at the airport (Chicago) which made the
necessary arrangements such as flights, transfers, etc.; C.M.A.S. is a national
service used by undertakers to throughout the nation (U.S.A.), they furnish
the air pouch which the casket is enclosed in, and they see that the remains
are taken to the proper air freight terminal (Exh. 6-TWA). C.M.A.S. booked the
shipment with PAL thru the carrier's agent Air Care International, with
Pomierski F.H. as the shipper and Mario (Maria) Saludo as the consignee. PAL
Airway Bill No. 079-01180454 Ordinary was issued wherein the requested
routing was from Chicago to San Francisco on board TWA Flight 131 of
October 27, 1976 and from San Francisco to Manila on board PAL Flight No.
107 of the same date, and from Manila to Cebu on board PAL Flight 149 of
October 29, 1976 (See Exh. E., Also Exh. 1-PAL).

In the meantime, plaintiffs Maria Salvacion Saludo and Saturnino Saludo, thru
a travel agent, were booked with United Airlines from Chicago to California,
and with PAL from California to Manila. She then went to the funeral director
of Pomierski Funeral Home who had her mother's remains and she told the
director that they were booked with United Airlines. But the director told her
that the remains were booked with TWA flight to California. This upset her,
and she and her brother had to change reservations from UA to the TWA
flight after she confirmed by phone that her mother's remains should be on
that TWA flight. They went to the airport and watched from the look-out area.
She saw no body being brought. So, she went to the TWA counter again, and
she was told there was no body on that flight. Reluctantly, they took the TWA
flight upon assurance of her cousin, Ani Bantug, that he would look into the
 matter and inform her about it on the plane or have it radioed to her. But no
confirmation from her cousin reached her that her mother was on the West
Coast.

Upon arrival at San Francisco at about 5:00 p.m., she went to the TWA
counter there to inquire about her mother's remains. She was told they did
not know anything about it.

She then called Pomierski that her mother's remains were not at the West
Coast terminal, and Pomierski immediately called C.M.A.S., which in a matter
of 10 minutes informed him that the remains were on a plane to Mexico City,
that there were two bodies at the terminal, and somehow they were
switched; he relayed this information to Miss Saludo in California; later
C.M.A.S. called and told him they were sending the remains back to
California via Texas (see Exh. 6-TWA).

It-turned out that TWA had carried a shipment under PAL Airway Bill No. 079-
ORD-01180454 on TWA Flight 603 of October 27, 1976, a flight earlier than
TWA Flight 131 of the same date. TWA delivered or transferred the said
shipment said to contain human remains to PAL at 1400H or 2:00 p.m. of the
same date, October 27, 1976 (Bee Exh. 1- TWA). "Due to a switch(ing) in
Chicago", this shipment was withdrawn from PAL by CMAS at 1805H (or 6:05
p.m.) of the same date, October 27 (Exh. 3-PAL, see Exh. 3-a-PAL).

What transpired at the Chicago (A)irport is explained in a memo or incident

report by Pomierski (Exh. 6-TWA) to Pomierski's lawyers who in turn referred
to said' memo and enclosed it in their (Pomierski's lawyers) answer dated
July 18, 1981 to herein plaintiff's counsel (See Exh. 5-TWA). In that memo or
incident report (Exh. 6-TWA), it is stated that the remains (of Crispina Saludo)
were taken to CMAS at the airport; that there were two bodies at the
(Chicago Airport) terminal, and somehow they were switched, that the
remains (of Crispina Saludo) were on a plane to Mexico City; that CMAS is a
national service used by undertakers throughout the nation (U.S.A.), makes
all the necessary arrangements, such as flights, transfers, etc., and see(s) to
it that the remains are taken to the proper air freight terminal.

The following day October 28, 1976, the shipment or remains of Crispina
Saludo arrived (in) San Francisco from Mexico on board American Airlines.
This shipment was transferred to or received by PAL at 1945H or 7:45 p.m.
(Exh. 2-PAL, Exh. 2-a-PAL). This casket bearing the remains of Crispina
Saludo, which was mistakenly sent to Mexico and was opened (there), was
resealed by Crispin F. Patagas for shipment to the Philippines (See Exh. B-1).
The shipment was immediately loaded on PAL flight for Manila that same
evening and arrived (in) Manila on October 30, 1976, a day after its expected
arrival on October 29, 1976. 3

In a letter dated December 15, 1976, 4 petitioners' counsel informed private respondent
Trans World Airlines (TWA) of the misshipment and eventual delay in the delivery of the
cargo containing the remains of the late Crispin Saludo, and of the discourtesy of its
employees to petitioners Maria Salvacion Saludo and Saturnino Saludo. In a separate
letter on June 10, 1977 addressed to co-respondent Philippine Airlines (PAL), 5 petitioners
stated that they were holding PAL liable for said delay in delivery and would commence
judicial action should no favorable explanation be given.

Both private respondents denied liability. Thus, a damage suit 6 was filed by petitioners
before the then Court of First Instance, Branch III, Leyte, praying for the award of actual
damages of P50,000.00, moral damages of P1,000,000.00, exemplary damages,
attorney's fees and costs of suit.

As earlier stated, the court below absolved the two respondent airlines companies of
liability. The Court of Appeals affirmed the decision of the lower court in toto, and in a
subsequent resolution, 7 denied herein petitioners' motion for reconsideration for lack of
merit.

In predictable disagreement and dissatisfaction with the conclusions reached by

respondent appellate court, petitioners now urge this Court to review the appealed
decision and to resolve whether or not (1) the delay in the delivery of the casketed
remains of petitioners' mother was due to the fault of respondent airline companies, (2)
the one-day delay in the delivery of the same constitutes contractual breach as would
entitle petitioners to damages, (3) damages are recoverable by petitioners for the
humiliating, arrogant and indifferent acts of the employees of TWA and PAL, and (4)
private respondents should be held liable for actual, moral and exemplary damages,
aside from attorney's fees and litigation expenses. 8

At the outset and in view of the spirited exchanges of the parties on this aspect, it is to
be stressed that only questions of law may be raised in a petition filed in this Court to
review on certiorari the decision of the Court of Appeals. 9 This being so, the factual
findings of the Court of Appeals are final and conclusive and cannot be reviewed by the
Supreme Court. The rule, however, admits of established exceptions, to wit: (a) where
there is grave abuse of discretion; (b) when the finding is grounded entirely on
speculations, surmises or conjectures;(c) when the inference made is manifestly-
mistaken, absurd or impossible; (d) when the judgment of the Court of Appeals was
based on a misapprehension of facts; (e) when the factual findings are conflicting; (f)
when the Court of Appeals, in making its findings, went beyond the issues of the case
and the same are contrary to the admissions of both appellant and appellee; 10 (g) when
the Court of Appeals manifestly overlooked certain relevant facts not disputed by the
parties and which, if properly considered, would justify a different conclusion; 11 and (h)
where the findings of fact of the Court of Appeals are contrary to those of the trial court,
or are mere conclusions without citation of specific evidence, or where the facts of set
forth by the petitioner are not disputed by the respondent, or where the findings of fact
of the Court of Appeals are premised on the absence of evidence and are contradicted by
the evidence on record. 12

To distinguish, a question of law is one which involves a doubt or controversy on what

the law is on a certain state of facts; and, a question of fact, contrarily, is one in which
there is a doubt or difference as to the truth or falsehood of the alleged facts. 13 One test,
it has been held, is whether the appellate court can determine the issue raised without
reviewing or evaluating the evidence, in which case it is a question of law, otherwise it
will be a question of fact. 14

Respondent airline companies object to the present recourse of petitioners on the ground
that this petition raises only factual questions. 15 Petitioners maintain otherwise or,
alternatively, they are of the position that, assuming that the petition raises factual
questions, the same are within the recognized exceptions to the general rule as would
render the petition cognizable and worthy of review by the Court. 16

Since it is precisely the soundness of the inferences or conclusions that may be drawn
from the factual issues which are here being assayed, we find that the issues raised in
the instant petition indeed warrant a second look if this litigation is to come to a
reasonable denouement. A discussion seriatim of said issues will further reveal that the
sequence of the events involved is in effect disputed. Likewise to be settled is whether or
not the conclusions of the Court of Appeals subject of this review indeed find evidentiary
and legal support.

I. Petitioners fault respondent court for "not finding that private respondents failed to
exercise extraordinary diligence required by law which resulted in the switching and/or
misdelivery of the remains of Crispina Saludo to Mexico causing gross delay in its
shipment to the Philippines, and consequently, damages to petitioners." 17

Petitioner allege that private respondents received the casketed remains of petitioners'
mother on October 26, 1976, as evidenced by the issuance of PAL Air Waybill No. 079-
01180454 18 by Air Care International as carrier's agent; and from said date, private
respondents were charged with the responsibility to exercise extraordinary diligence so
much so that for the alleged switching of the caskets on October 27, 1976, or one day
after private respondents received the cargo, the latter must necessarily be liable.

To support their assertion, petitioners rely on the jurisprudential dictum, both under
American and Philippine law, that "(t)he issuance of a bill of lading carries the
presumption that the goods were delivered to the carrier issuing the bill, for immediate
shipment, and it is nowhere questioned that a bill of lading is prima facie evidence of the
receipt of the goods by the carrier. . . . In the absence of convincing testimony
establishing mistake, recitals in the bill of lading showing that the carrier received the
goods for shipment on a specified date control (13 C.J.S. 235)." 19

A bill of lading is a written acknowledgment of the receipt of the goods and an

agreement to transport and deliver them at a specified place to a person named or on
his order. Such instrument may be called a shipping receipt, forwarder's receipt and
receipt for transportation. 20 The designation, however, is immaterial. It has been hold
that freight tickets for bus companies as well as receipts for cargo transported by all
forms of transportation, whether by sea or land, fall within the definition. Under the Tariff
and Customs Code, a bill of lading includes airway bills of lading. 21 The two-fold
character of a bill of lading is all too familiar; it is a receipt as to the quantity and
description of the goods shipped and a contract to transport the goods to the consignee
or other person therein designated, on the terms specified in such instrument. 22

Logically, since a bill of lading acknowledges receipt of goods to be transported, delivery

of the goods to the carrier normally precedes the issuance of the bill; or, to some extent,
delivery of the goods and issuance of the bill are regarded in commercial practice as
simultaneous acts. 23 However, except as may be prohibited by law, there is nothing to
prevent an inverse order of events, that is, the execution of the bill of lading even prior
to actual possession and control by the carrier of the cargo to be transported. There is no
law which requires that the delivery of the goods for carriage and the issuance of the
covering bill of lading must coincide in point of time or, for that matter, that the former
should precede the latter.

Ordinarily, a receipt is not essential to a complete delivery of goods to the carrier for
transportation but, when issued, is competent and prima facie, but not conclusive,
evidence of delivery to the carrier. A bill of lading, when properly executed and delivered
to a shipper, is evidence that the carrier has received the goods described therein for
shipment. Except as modified by statute, it is a general rule as to the parties to a
contract of carriage of goods in connection with which a bill of lading is issued reciting
that goods have been received for transportation, that the recital being in essence a
receipt alone, is not conclusive, but may be explained, varied or contradicted by parol or
other evidence. 24

While we agree with petitioners' statement that "an airway bill estops the carrier from
denying receipt of goods of the quantity and quality described in the bill," a further
reading and a more faithful quotation of the authority cited would reveal that "(a) bill of
lading may contain constituent elements of estoppel and thus become something more
than a contract between the shipper and the carrier. . . . (However), as between the
shipper and the carrier, when no goods have been delivered for shipment no recitals in
the bill can estop the carrier from showing the true facts . . . Between the consignor of
goods and receiving carrier, recitals in a bill of lading as to the goods shipped raise only
a rebuttable presumption that such goods were delivered for shipment. As between the
consignor and a receiving carrier, the fact must outweigh the recital." 25 (Emphasis
supplied)

For this reason, we must perforce allow explanation by private respondents why, despite
the issuance of the airway bill and the date thereof, they deny having received the
remains of Crispina Saludo on October 26, 1976 as alleged by petitioners.

The findings of the trial court, as favorably adopted by the Court of Appeals and which
we have earner quoted, provide us with the explanation that sufficiently over comes the
presumption relied on by petitioners in insisting that the remains of their mother were
delivered to and received by private respondents on October 26, 1976. Thus
 . . . Philippine Vice Consul in Chicago, Illinois, Bienvenido M. Llaneta, at 3:00
p.m. on October 26, 1976 at the Pomierski & Son Funeral Home, sealed the
shipping case containing a hermetically sealed casket that is airtight and
waterproof wherein was contained the remains of Crispina Saludo Galdo (sic)
(Exh. B). On the same date October 26, 1976, Pomierski brought the remains
to C.M.A.S. (Continental Mortuary Air Services) at the airport (Chicago) which
made the necessary arrangements such as flights, transfers, etc; C.M.A.S. is
a national service used by undertakers throughout the nation (U.S.A.), they
furnish the air pouch which the casket is enclosed in, and they see that the
remains are taken to the proper air freight terminal (Exh. G-TWA). C.M.A.S.
booked the shipment with PAL thru the carrier's agent Air Care International,
with Pomierski F.H. as the shipper and Mario (Maria) Saludo as the
consignee. PAL Airway Bill No. 079- 01180454 Ordinary was issued wherein
the requested routing was from Chicago to San Francisco on board TWA
Flight-131 of October 27;1976, and from San Francisco to Manila on board
PAL Flight No. 107 of the same date, and from Manila to Cebu on board PAL
Flight 149 of October 29, 1976 (See Exh. E, also Exh. 1-PAL). 26(Emphasis
ours.)

Moreover, we are persuaded to believe private respondent PAL's account as to what

transpired October 26, 1976:

. . . Pursuant thereto, on 26 October 1976, CMAS acting upon the instruction

of Pomierski, F.H., the shipper requested booking of the casketed remains of
Mrs. Cristina (sic) Saludo on board PAL's San Francisco-Manila Flight No. PR
107 on October 27, 1976.

2. To signify acceptance and confirmation of said booking, PAL issued to said

Pomierski F.H., PAL Airway Bill No. 079-01180454 dated October 27,
1976 (sic, "10/26/76"). PAL confirmed the booking and transporting of the
shipment on board of its Flight PR 107 on October 27, 1976 on the basis of
the representation of the shipper and/or CMAS that the said cargo would
arrive in San Francisco from Chicago on board United Airlines Flight US 121
on 27 October 1976. 27

In other words, on October 26, 1976 the cargo containing the casketed remains of
Crispina Saludo was booked for PAL Flight Number PR-107 leaving San Francisco for
Manila on October 27, 1976, PAL Airway Bill No. 079-01180454 was issued, not as
evidence of receipt of delivery of the cargo on October 26, 1976, but merely as a
confirmation of the booking thus made for the San Francisco-Manila flight scheduled on
October 27, 1976. Actually, it was not until October 28, 1976 that PAL received physical
delivery of the body at San Francisco, as duly evidenced by the Interline Freight Transfer
Manifest of the American Airline Freight System and signed for by Virgilio Rosales at
1945H, or 7:45 P.M. on said date. 28

Explicit is the rule under Article 1736 of the Civil Code that the extraordinary
responsibility of the common carrier begins from the time the goods are delivered to the
carrier. This responsibility remains in full force and effect even when they are temporarily
unloaded or stored in transit, unless the shipper or owner exercises the right of
stoppage in transitu, 29 and terminates only after the lapse of a reasonable time for the
acceptance, of the goods by the consignee or such other person entitled to receive
them. 30 And, there is delivery to the carrier when the goods are ready for and have been
placed in the exclusive possession, custody and control of the carrier for the purpose of
their immediate transportation and the carrier has accepted them. 31 Where such a
delivery has thus been accepted by the carrier, the liability of the common carrier
commences eo instanti. 32

Hence, while we agree with petitioners that the extraordinary diligence statutorily
required to be observed by the carrier instantaneously commences upon delivery of the
goods thereto, for such duty to commence there must in fact have been delivery of the
cargo subject of the contract of carriage. Only when such fact of delivery has been
unequivocally established can the liability for loss, destruction or deterioration of goods
in the custody of the carrier, absent the excepting causes under Article 1734, attach and
the presumption of fault of the carrier under Article 1735 be invoked.

As already demonstrated, the facts in the case at bar belie the averment that there was
delivery of the cargo to the carrier on October 26, 1976. Rather, as earlier explained, the
body intended to be shipped as agreed upon was really placed in the possession and
control of PAL on October 28, 1976 and it was from that date that private respondents
became responsible for the agreed cargo under their undertakings in PAL Airway Bill No.
079-01180454. Consequently, for the switching of caskets prior thereto which was not
caused by them, and subsequent events caused thereby, private respondents cannot be
held liable.

Petitioners, proceeding on the premise that there was delivery of the cargo to private
respondents on October 26,1976 and that the latter's extraordinary responsibility had by
then become operative, insist on foisting the blame on private respondents for the
switching of the two caskets which occurred on October 27, 1976. It is argued that since
there is no clear evidence establishing the fault Continental Mortuary Air Services
(CMAS) for the mix-up, private respondents are presumably negligent pursuant to Article
1735 of the Civil Code and, for failure to rebut such presumption, they must necessarily
be held liable; or, assuming that CMAS was at fault, the same does not absolve private
respondents of liability because whoever brought the cargo to the airport or loaded it on
the plane did so as agent of private respondents.

This contention is without merit. As pithily explained by the Court of Appeals:

The airway bill expressly provides that "Carrier certifies goods described
below were received for carriage", and said cargo was "casketed human
remains of Crispina Saludo," with "Maria Saludo as Consignee; Pomierski F.H.
as Shipper; Air Care International as carrier's agent." On the face of the said
airway bill, the specific flight numbers, specific routes of shipment and dates
of departure and arrival were typewritten, to wit: Chicago TWA Flight 131/27
to San Francisco and from San Francisco by PAL 107 on, October 27, 1976 to
Philippines and to Cebu via PAL Flight 149 on October 29, 1976. The airway
bill also contains the following typewritten words, as follows: all documents
have been examined (sic). Human remains of Crispina Saludo. Please return
back (sic) first available flight to SFO.

But, as it turned out and was discovered later the casketed human remains
which was issued PAL Airway Bill #079-1180454 was not the remains of
Crispina Saludo, the casket containing her remains having been shipped to
Mexico City.

However, it should be noted that, Pomierski F.H., the shipper of Mrs. Saludo's
remains, hired Continental Mortuary Services (hereafter referred to as
C.M.A.S.), which is engaged in the business of transporting and forwarding
human remains. Thus, C.M.A.S. made all the necessary arrangements such
as flights, transfers, etc. for shipment of the remains of Crispina Saludo.

The remains were taken on October 26th, 1976, to C.M.A.S. at

the airport. These people made all the necessary arrangements,
such as flights, transfers, etc. This is a national service used by
undertakers throughout the nation. They furnished the air pouch
which the casket is enclosed in, and they see that the remains
are taken to the proper air frieght terminal. I was very surprised
when Miss Saludo called me to say that the remains were not at
the west coast terminal. I immediately called C.M.A.S. They
called me back in a matter of ten minutes to inform me that the
remains were on a plane to Mexico City. The man said that there
were two bodies at the terminal, and somehow they were
switched. . . . (Exb. 6 "TWA", which is the memo or incident
report enclosed in the stationery of Walter Pomierski & Sons Ltd.)
 Consequently, when the cargo was received from C.M.A.S. at the Chicago
airport terminal for shipment, which was supposed to contain the remains of
Crispina Saludo, Air Care International and/or TWA, had no way of
determining its actual contents, since the casket was hermetically sealed by
the Philippine Vice-Consul in Chicago and in an air pouch of C.M.A.S., to the
effect that Air Care International and/or TWA had to rely on the information
furnished by the shipper regarding the cargo's content. Neither could Air
Care International and/or TWA open the casket for further verification, since
they were not only without authority to do so, but even prohibited.

Thus, under said circumstances, no fault and/or negligence can be attributed

to PAL (even if Air Care International should be considered as an agent of
PAL) and/or TWA, the entire fault or negligence being exclusively with
C.M.A.S. 33 (Emphasis supplied.)

It can correctly and logically be concluded, therefore, that the switching occurred or,
more accurately, was discovered on October 27, 1976; and based on the above findings
of the Court of appeals, it happened while the cargo was still with CMAS, well before the
same was place in the custody of private respondents.

Thus, while the Air Cargo Transfer Manifest of TWA of October 27, 1976 34 was signed by
Garry Marcial of PAL at 1400H, or 2:00 P.M., on the same date, thereby indicating
acknowledgment by PAL of the transfer to them by TWA of what was in truth the
erroneous cargo, said misshipped cargo was in fact withdrawn by CMAS from PAL as
shown by the notation on another copy of said manifest 35 stating "Received by CMAS
Due to switch in Chicago 10/27-1805H," the authenticity of which was never challenged.
This shows that said misshipped cargo was in fact withdrawn by CMAS from PAL and the
correct shipment containing the body of Crispina Saludo was received by PAL only on
October 28, 1976, at 1945H, or 7:45 P.M., per American Airlines Interline Freight Transfer
Manifest No. AA204312. 36

Witness the deposition of TWA's ramp serviceman, Michael Giosso, on this matter:

ATTY. JUAN COLLAS, JR.:

On that date, do (sic) you have occasion to handle or deal with

the transfer of cargo from TWA Flight No. 603 to PAL San
Francisco?

MICHAEL GIOSSO:

Yes, I did.

ATTY. JUAN COLLAS, JR.:

What was your participation with the transfer of the cargo?

MICHAEL GIOSSO:

I manifested the freight on a transfer manifest and physically

moved it to PAL and concluded the transfer by signing it off.

ATTY. JUAN COLLAS, JR.:

You brought it there yourself?

MICHAEL GIOSSO:

Yes sir.

ATTY. JUAN COLIAS, JR.:

 Do you have anything to show that PAL received the cargo from
TWA on October 27, 1976?

MICHAEL GIOSSO:

Yes, I do.

(Witness presenting a document)

ATTY. JUAN COLLAS, JR.:

For purposes of clarity, Exhibit I is designated as Exhibit I-TWA.

xxx xxx xxx

ATTY. JUAN COLLAS, JR.:

This Exhibit I-TWA, could you tell what it is, what it shows?

MICHAEL GIOSSO:

It shows transfer of manifest on 10-27-76 to PAL at 1400 and

verified with two signatures as it completed the transfer.

ATTY. JUAN COLLAS, JR.:

Very good,. Who was the PAL employee who received the cargo?

MICHAEL GIOSSO:

The name is Garry Marcial." 37

The deposition of Alberto A. Lim, PAL's cargo supervisor at San Francisco, as deponent-
witness for PAL, makes this further clarification:

ATTY. CESAR P. MANALAYSAY:

You mentioned Airway Bill, Mr. Lim. I am showing to you a PAL

Airway Bill Number 01180454 which for purposes of evidence, I
would like to request that the same be marked as evidence
Exhibit I for PAL.

xxx xxx xxx

In what circumstances did you encounter Exhibit I-PAL?

ALBERTO A. LIM:

If I recall correctly, I was queried by Manila, our Manila office with

regard to a certain complaint that a consignee filed that this
shipment did not arrive on the day that the consignee expects
the shipment to arrive.

ATTY CESAR P. MANALAYSAY:

Okay. Now, upon receipt of that query from your Manila office,
did you conduct any investigation to pinpoint the possible causes
of mishandling?

ALBERTO A. LIM:

Yes.
xxx xxx xxx

ATTY. CESAR P. MANALAYSAY:

What is the result of your investigation?

ALBERTO A. LIM:

In the course of my investigation, I found that we received the

body on October 28, 1976, from American Airlines.

ATTY. CESAR P. MANALAYSAY:

What body are you referring to?

xxx xxx xxx

ALBERTO A. LIM:

The remains of Mrs. Cristina (sic) Saludo.

ATTY. CESAR P. MANALAYSAY:

Is that the same body mentioned in this Airway Bill?

ALBERTO A. LIM:

Yes.

ATTY. CESAR P. MANALAYSAY:

What time did you receive said body on October 28, 1976?

ALBERTO A. LIM:

If I recall correctly, approximately 7:45 of October 28, 1976.

ATTY. CESAR P. MANALAYSAY:

Do you have any proof with you to back the statement?

ALBERTO A. LIM:

Yes. We have on our records a Transfer Manifest from American

Airlines Number 204312 showing that we received a human
remains shipment belong to Mrs. Cristina (sic) Saludo or the
human remains of Mrs. Cristina (sic) Saludo.

ATTY. CESAR P. MAIALAYSAY:

At this juncture, may I request that the Transfer Manifest referred

to by the witness be marked as an evidence as Exhibit II-PAL.

xxx xxx xxx

Mr. Lim, yesterday your co-defendant TWA presented as their

Exhibit I evidence tending to show that on October 27, 1976 at
about 2:00 in the, afternoon they delivered to you a cargo
bearing human remains. Could you go over this Exhibit I and
please give us your comments as to that exhibit?

ATTY. ALBERTO C. MENDOZA:

 That is a vague question. I would rather request that counsel
propound specific questions rather than asking for comments on
Exhibit I-TWA.

ATTY. CESAR P. MANALAYSAY:

In that case, I will reform my question. Could you tell us whether

TWA in fact delivered to you the human remains as indicated in
that Transfer Manifest?

ALBERTO A. LIM:

Yes, they did.

ATTY. CESAR P. MANALAYSAY:

I noticed that the Transfer Manifest of TWA marked as Exhibit I-

TWA bears the same numbers or the same entries as the Airway
Bill marked as Exhibit I-A PAL tending to show that this is the
human remains of Mrs Cristina (sic) Saludo. Could you tell us
whether this is true?

ALBERTO A. LIM:

It is true that we received human remains shipment from TWA as

indicated on this Transfer Manifest. But in the course of
investigation, it was found out that the human remains
transferred to us is not the remains of Mrs. Cristina (sic) Saludo
this is the reason why we did not board it on our flight. 38

Petitioners consider TWA's statement that "it had to rely on the information furnished by
the shipper" a lame excuse and that its failure to prove that its personnel verified and
identified the contents of the casket before loading the same constituted negligence on
the part of TWA. 39

We upbold the favorable consideration by the Court of Appeals of the following findings
of the trial court:

It was not (to) TWA, but to C.M.A.S. that the Pomierski & Son Funeral Home
delivered the casket containing the remains of Crispina Saludo. TWA would
have no knowledge therefore that the remains of Crispina Saludo were not
the ones inside the casket that was being presented to it for shipment. TWA
would have to rely on there presentations of C.M.A.S. The casket was
hermetically sealed and also sealed by the Philippine Vice Consul in Chicago.
TWA or any airline for that matter would not have opened such a sealed
casket just for the purpose of ascertaining whose body was inside and to
make sure that the remains inside were those of the particular person
indicated to be by C.M.A.S. TWA had to accept whatever information was
being furnished by the shipper or by the one presenting the casket for
shipment. And so as a matter of fact, TWA carried to San Francisco and
transferred to defendant PAL a shipment covered by or under PAL Airway Bill
No. 079-ORD-01180454, the airway bill for the shipment of the casketed
remains of Crispina Saludo. Only, it turned out later, while the casket was
already with PAL, that what was inside the casket was not the body of
Crispina Saludo so much so that it had to be withdrawn by C.M.A.S. from PAL.
The body of Crispina Saludo had been shipped to Mexico. The casket
containing the remains of Crispina Saludo was transshipped from Mexico and
arrived in San Francisco the following day on board American Airlines. It was
immediately loaded by PAL on its flight for Manila.

The foregoing points at C.M.A.S., not defendant TWA much less defendant
PAL, as the ONE responsible for the switching or mix-up of the two bodies at
 the Chicago Airport terminal, and started a chain reaction of the
misshipment of the body of Crispina Saludo and a one-day delay in the
delivery thereof to its destination. 40

Verily, no amount of inspection by respondent airline companies could have guarded

against the switching that had already taken place. Or, granting that they could have
opened the casket to inspect its contents, private respondents had no means of
ascertaining whether the body therein contained was indeed that of Crispina Saludo
except, possibly, if the body was that of a male person and such fact was visually
apparent upon opening the casket. However, to repeat, private respondents had no
authority to unseal and open the same nor did they have any reason or justification to
resort thereto.

It is the right of the carrier to require good faith on the part of those persons who deliver
goods to be carried, or enter into contracts with it, and inasmuch as the freight may
depend on the value of the article to be carried, the carrier ordinarily has the right to
inquire as to its value. Ordinarily, too, it is the duty of the carrier to make inquiry as to
the general nature of the articles shipped and of their value before it consents to carry
them; and its failure to do so cannot defeat the shipper's right to recovery of the full
value of the package if lost, in the absence of showing of fraud or deceit on the part of
the shipper. In the absence of more definite information, the carrier has a the right to
accept shipper's marks as to the contents of the package offered for transportation and
is not bound to inquire particularly about them in order to take advantage of a false
classification and where a shipper expressly represents the contents of a package to be
of a designated character, it is not the duty of the carrier to ask for a repetition of the
statement nor disbelieve it and open the box and see for itself. 41 However, where a
common carrier has reasonable ground to suspect that the offered goods are of a
dangerous or illegal character, the carrier has the right to know the character of such
goods and to insist on an inspection, if reasonable and practical under the
circumstances, as a condition of receiving and transporting such goods. 42

It can safely be said then that a common carrier is entitled to fair representation of the
nature and value of the goods to be carried, with the concomitant right to rely thereon,
and further noting at this juncture that a carrier has no obligation to inquire into the
correctness or sufficiency of such information. 43 The consequent duty to conduct an
inspection thereof arises in the event that there should be reason to doubt the veracity
of such representations. Therefore, to be subjected to unusual search, other than the
routinary inspection procedure customarily undertaken, there must exist proof that
would justify cause for apprehension that the baggage is dangerous as to warrant
exhaustive inspection, or even refusal to accept carriage of the same; and it is the failure
of the carrier to act accordingly in the face of such proof that constitutes the basis of the
common carrier's liability. 44

In the case at bar, private respondents had no reason whatsoever to doubt the truth of
the shipper's representations. The airway bill expressly providing that "carrier certifies
goods received below were received for carriage," and that the cargo contained
"casketed human remains of Crispina Saludo," was issued on the basis of such
representations. The reliance thereon by private respondents was reasonable and, for so
doing, they cannot be said to have acted negligently. Likewise, no evidence was adduced
to suggest even an iota of suspicion that the cargo presented for transportation was
anything other than what it was declared to be, as would require more than routine
inspection or call for the carrier to insist that the same be opened for scrutiny of its
contents per declaration.

Neither can private respondents be held accountable on the basis of petitioners'

preposterous proposition that whoever brought the cargo to the airport or loaded it on
the airplane did so as agent of private respondents, so that even if CMAS whose services
were engaged for the transit arrangements for the remains was indeed at fault, the
liability therefor would supposedly still be attributable to private respondents.

While we agree that the actual participation of CMAS has been sufficiently and correctly
established, to hold that it acted as agent for private respondents would be both an
inaccurate appraisal and an unwarranted categorization of the legal position it held in
the entire transaction.

It bears repeating that CMAS was hired to handle all the necessary shipping
arrangements for the transportation of the human remains of Crispina Saludo to Manila.
Hence, it was to CMAS that the Pomierski & Son Funeral Home, as shipper, brought the
remains of petitioners' mother for shipment, with Maria Saludo as consignee. Thereafter,
CMAS booked the shipment with PAL through the carrier's agent, Air Care
International. 45 With its aforestated functions, CMAS may accordingly be classified as a
forwarder which, by accepted commercial practice, is regarded as an agent of the
shipper and not of the carrier. As such, it merely contracts for the transportation of goods
by carriers, and has no interest in the freight but receives compensation from the shipper
as his agent. 46

At this point, it can be categorically stated that, as culled from the findings of both the
trial court and appellate courts, the entire chain of events which culminated in the
present controversy was not due to the fault or negligence of private respondents.
Rather, the facts of the case would point to CMAS as the culprit. Equally telling of the
more likely possibility of CMAS' liability is petitioners' letter to and demanding an
explanation from CMAS regarding the statement of private respondents laying the blame
on CMAS for the incident, portions of which, reading as follows:

. . . we were informed that the unfortunate a mix-up occurred due to your

negligence. . . .

Likewise, the two airlines pinpoint the responsibility upon your agents.
Evidence were presented to prove that allegation.

On the face of this overwhelming evidence we could and should have filed a
case against you. . . . 47

clearly allude to CMAS as the party at fault. This is tantamount to an admission by

petitioners that they consider private respondents without fault, or is at the very least
indicative of the fact that petitioners entertained serious doubts as to whether herein
private respondents were responsible for the unfortunate turn of events.

Undeniably, petitioners' grief over the death of their mother was aggravated by the
unnecessary inconvenience and anxiety that attended their efforts to bring her body
home for a decent burial. This is unfortunate and calls for sincere commiseration with
petitioners. But, much as we would like to give them consolation for their undeserved
distress, we are barred by the inequity of allowing recovery of the damages prayed for
by them at the expense of private respondents whose fault or negligence in the very acts
imputed to them has not been convincingly and legally demonstrated.

Neither are we prepared to delve into, much less definitively rule on, the possible liability
of CMAS as the evaluation and adjudication of the same is not what is presently at issue
here and is best deferred to another time and addressed to another forum.

II. Petitioners further fault the Court of Appeals for ruling that there was no contractual
breach on the part of private respondents as would entitle petitioners to damages.

Petitioners hold that respondent TWA, by agreeing to transport the remains of

petitioners' mother on its Flight 131 from Chicago to San Francisco on October 27, 1976,
made itself a party to the contract of carriage and, therefore, was bound by the terms of
the issued airway bill. When TWA undertook to ship the remains on its Flight 603, ten
hours earlier than scheduled, it supposedly violated the express agreement embodied in
the airway bill. It was allegedly this breach of obligation which compounded, if not
directly caused, the switching of the caskets.

In addition, petitioners maintain that since there is no evidence as to who placed the
body on board Flight 603, or that CMAS actually put the cargo on that flight, or that the
two caskets at the Chicago airport were to be transported by the same airline, or that
they came from the same funeral home, or that both caskets were received by CMAS,
then the employees or agents of TWA presumably caused the mix-up by loading the
wrong casket on the plane. For said error, they contend, TWA must necessarily be
presumed negligent and this presumption of negligence stands undisturbed unless
rebutting evidence is presented to show that the switching or misdelivery was due to
circumstances that would exempt the carrier from liability.

Private respondent TWA professes otherwise. Having duly delivered or transferred the
cargo to its co-respondent PAL on October 27, 1976 at 2:00 P.M., as supported by the
TWA Transfer Manifest, TWA faithfully complied with its obligation under the airway bill.
Said faithful compliance was not affected by the fact that the remains were shipped on
an earlier flight as there was no fixed time for completion of carriage stipulated on.
Moreover, the carrier did not undertake to carry the cargo aboard any specified aircraft,
in view of the condition on the back of the airway bill which provides:

CONDITIONS OF CONTRACT

xxx xxx xxx

It is agreed that no time is fixed for the completion of carriage hereunder and
that Carrier may without notice substitute alternate carriers or aircraft.
Carrier assumes no obligation to carry the goods by any specified aircraft or
over any particular route or routes or to make connection at any point
according to any particular schedule, and Carrier is hereby authorized to
select, or deviate from the route or routes of shipment, notwithstanding that
the same may be stated on the face hereof. The shipper guarantees payment
of all charges and advances. 48

Hence, when respondent TWA shipped the body on earlier flight and on a different
aircraft, it was acting well within its rights. We find this argument tenable.

The contention that there was contractual breach on the part of private respondents is
founded on the postulation that there was ambiguity in the terms of the airway bill,
hence petitioners' insistence on the application of the rules on interpretation of contracts
and documents. We find no such ambiguity. The terms are clear enough as to preclude
the necessity to probe beyond the apparent intendment of the contractual provisions.

The hornbook rule on interpretation of contracts consecrates the primacy of the intention
of the parties, the same having the force of law between them. When the terms of the
agreement are clear and explicit, that they do not justify an attempt to read into any
alleged intention of the parties, the terms are to be understood literally just as they
appear on the face of the contract. 49 The various stipulations of a contract shall be
interpreted together 50 and such a construction is to be adopted as will give effect to all
provisions thereof. 51 A contract cannot be construed by parts, but its clauses should be
interpreted in relation to one another. The whole contract must be interpreted or read
together in order to arrive at its true meaning. Certain stipulations cannot be segregated
and then made to control; neither do particular words or phrases necessarily determine
the character of a contract. The legal effect of the contract is not to be determined alone
by any particular provision disconnected from all others, but in the ruling intention of the
parties as gathered from all the language they have used and from their
contemporaneous and subsequent acts. 52

Turning to the terms of the contract at hand, as presented by PAL Air Waybill No. 079-
01180454, respondent court approvingly quoted the trial court's disquisition on the
aforequoted condition appearing on the reverse side of the airway bill and its disposition
of this particular assigned error:

The foregoing stipulation fully answers plaintiffs' objections to the one-day

delay and the shipping of the remains in TWA Flight 603 instead of TWA
Flight 131. Under the stipulation, parties agreed that no time was fixed to
complete the contract of carriage and that the carrier may, without notice,
 substitute alternate carriers or aircraft. The carrier did not assume the
obligation to carry the shipment on any specified aircraft.

xxx xxx xxx

Furthermore, contrary to the claim of plaintiffs-appellants, the conditions of

the Air Waybill are big enough to be read and noticed. Also, the mere fact
that the cargo in question was shipped in TWA Flight 603, a flight earlier on
the same day than TWA Flight 131, did not in any way cause or add to the
one-day delay complained of and/or the switching or mix-up of the bodies. 53

Indubitably, that private respondent can use substitute aircraft even without notice and
without the assumption of any obligation whatsoever to carry the goods on any specified
aircraft is clearly sanctioned by the contract of carriage as specifically provided for under
the conditions thereof.

Petitioners' invocation of the interpretative rule in the Rules of Court that written words
control printed words in documents, 54 to bolster their assertion that the typewritten
provisions regarding the routing and flight schedule prevail over the printed conditions, is
tenuous. Said rule may be considered only when there is inconsistency between the
written and printed words of the contract.

As previously stated, we find no ambiguity in the contract subject of this case that would
call for the application of said rule. In any event, the contract has provided for such a
situation by explicitly stating that the above condition remains effective "notwithstanding
that the same (fixed time for completion of carriage, specified aircraft, or any particular
route or schedule) may be stated on the face hereof." While petitioners hinge private
respondents' culpability on the fact that the carrier "certifies goods described below were
received for carriage," they may have overlooked that the statement on the face of the
airway bill properly and completely reads

Carrier certifies goods described below were received for carriage subject to
the Conditions on the reverse hereof the goods then being in apparent good
order and condition except as noted hereon. 55 (Emphasis ours.)

Private respondents further aptly observe that the carrier's certification regarding receipt
of the goods for carriage "was of a smaller print than the condition of the Air Waybill,
including Condition No. 5 and thus if plaintiffs-appellants had recognized the former,
then with more reason they were aware of the latter. 56

In the same vein, it would also be incorrect to accede to the suggestion of petitioners
that the typewritten specifications of the flight, routes and dates of departures and
arrivals on the face of the airway bill constitute a special contract which modifies the
printed conditions at the back thereof. We reiterate that typewritten provisions of the
contract are to be read and understood subject to and in view of the printed conditions,
fully reconciling and giving effect to the manifest intention of the parties to the
agreement.

The oft-repeated rule regarding a carrier's liability for delay is that in the absence of a
special contract, a carrier is not an insurer against delay in transportation of goods.
When a common carrier undertakes to convey goods, the law implies a contract that
they shall be delivered at destination within a reasonable time, in the absence, of any
agreement as to the time of delivery. 57 But where a carrier has made an express
contract to transport and deliver property within a specified time, it is bound to fulfill its
contract and is liable for any delay, no matter from what cause it may have
arisen. 58 This result logically follows from the well-settled rule that where the law creates
a duty or charge, and the party is disabled from performing it without any default in
himself, and has no remedy over, then the law will excuse him, but where the party by
his own contract creates a duty or charge upon himself, he is bound to make it good
notwithstanding any accident or delay by inevitable necessity because he might
have provided against it by contract. Whether or not there has been such an undertaking
on the part of the carrier to be determined from the circumstances surrounding the case
and by application of the ordinary rules for the interpretation of contracts. 59

Echoing the findings of the trial court, the respondent court correctly declared that

In a similar case of delayed delivery of air cargo under a very similar

stipulation contained in the airway bill which reads: "The carrier does not
obligate itself to carry the goods by any specified aircraft or on a specified
time. Said carrier being hereby authorized to deviate from the route of the
shipment without any liability therefor", our Supreme Court ruled that
common carriers are not obligated by law to carry and to deliver
merchandise, and persons are not vested with the right to prompt delivery,
unless such common carriers previously assume the obligation. Said rights
and obligations are created by a specific contract entered into by the parties
(Mendoza vs. PAL, 90 Phil. 836).

There is no showing by plaintiffs that such a special or specific contract had

been entered into between them and the defendant airline companies.

And this special contract for prompt delivery should call the attention of the
carrier to the circumstances surrounding the case and the approximate
amount of damages to be suffered in case of delay (See Mendoza vs.
PAL, supra). There was no such contract entered into in the instant case.60

Also, the theory of petitioners that the specification of the flights and dates of departure
and arrivals constitute a special contract that could prevail over the printed stipulations
at the back of the airway bill is vacuous. To countenance such a postulate would unduly
burden the common carrier for that would have the effect of unilaterally transforming
every single bill of lading or trip ticket into a special contract by the simple expedient of
filling it up with the particulars of the flight, trip or voyage, and thereby imposing upon
the carrier duties and/or obligations which it may not have been ready or willing to
assume had it been timely, advised thereof.

Neither does the fact that the challenged condition No. 5 was printed at the back of the
airway bill militate against its binding effect on petitioners as parties to the contract, for
there were sufficient indications on the face of said bill that would alert them to the
presence of such additional condition to put them on their guard. Ordinary prudence on
the part of any person entering or contemplating to enter into a contract would prompt
even a cursory examination of any such conditions, terms and/or stipulations.

There is a holding in most jurisdictions that the acceptance of a bill of lading without
dissent raises a presumption that all terms therein were brought to the knowledge of the
shipper and agreed to by him, and in the absence of fraud or mistake, he is estopped
from thereafter denying that he assented to such terms. This rule applies with particular
force where a shipper accepts a bill of lading with full knowledge of its contents, and
acceptance under such circumstances makes it a binding contract. In order that any
presumption of assent to a stipulation in a bill of lading limiting the liability of a carrier
may arise, it must appear that the clause containing this exemption from liability plainly
formed a part of the contract contained in the bill of lading. A stipulation printed on the
back of a receipt or bill of lading or on papers attached to such receipt will be quite as
effective as if printed on its face, if it is shown that the consignor knew of its terms. Thus,
where a shipper accepts a receipt which states that its conditions are to be found on the
back, such receipt comes within the general rule, and the shipper is held to have
accepted and to be bound by the conditions there to be found. 61

Granting arguendo that Condition No. 5 partakes of the nature of a contract of adhesion
and as such must be construed strictly against the party who drafted the same or gave
rise to any ambiguity therein, it should be borne in mind that a contract of adhesion may
be struck down as void and unenforceable, for being subversive of public policy, only
when the weaker party is imposed upon in dealing with the dominant bargaining party
and is reduced to the alternative of taking it or leaving it, completely deprived of the
opportunity to bargain on equal footing. 62However, Ong Yiu vs. Court of Appeals, et
al 63 instructs us that contracts of adhesion are not entirely prohibited. The one who
adheres to the contract is in reality free to reject it entirely; if he adheres, be gives his
consent. Accordingly, petitioners, far from being the weaker party in this situation, duly
signified their presumed assent to all terms of the contract through their acceptance of
the airway bill and are consequently bound thereby. It cannot be gainsaid that
petitioners' were not without several choices as to carriers in Chicago with its numerous
airways and airliner servicing the same.

We wish to allay petitioners' apprehension that Condition No. 5 of the airway bill is
productive of mischief as it would validate delay in delivery, sanction violations of
contractual obligations with impunity or put a premium on breaches of contract.

Just because we have said that condition No. 5 of the airway bill is binding upon the
parties to and fully operative in this transaction, it does not mean, and let this serve as
fair warning to respondent carriers, that they can at all times whimsically seek refuge
from liability in the exculpatory sanctuary of said Condition No. 5 or arbitrarily vary
routes, flights and schedules to the prejudice of their customers. This condition only
serves to insulate the carrier from liability in those instances when changes in routes,
flights and schedules are clearly justified by the peculiar circumstances of a particular
case, or by general transportation practices, customs and usages, or by contingencies or
emergencies in aviation such as weather turbulence, mechanical failure, requirements of
national security and the like. And even as it is conceded that specific routing and other
navigational arrangements for a trip, flight or voyage, or variations therein, generally lie
within the discretion of the carrier in the absence of specific routing instructions or
directions by the shipper, it is plainly incumbent upon the carrier to exercise its rights
with due deference to the rights, interests and convenience of its customers.

A common carrier undertaking to transport property has the implicit duty to carry and
deliver it within reasonable time, absent any particular stipulation regarding time of
delivery, and to guard against delay. In case of any unreasonable delay, the carrier shall
be liable for damages immediately and proximately resulting from such neglect of
duty. 64 As found by the trial court, the delay in the delivery of the remains of Crispina
Saludo, undeniable and regrettable as it was, cannot be attributed to the fault,
negligence or malice of private respondents, 65 a conclusion concurred in by respondent
court and which we are not inclined to disturb.

We are further convinced that when TWA opted to ship the remains of Crispina Saludo on
an earlier flight, it did so in the exercise of sound discretion and with reasonable
prudence, as shown by the explanation of its counsel in his letter of February 19, 1977 in
response to petitioners' demand letter:

Investigation of TWA's handling of this matter reveals that although the

shipment was scheduled on TWA Flight 131 of October 27, 1976, it was
actually boarded on TWA Flight 603 of the same day, approximately 10 hours
earlier, in order to assure that the shipment would be received in San
Francisco in sufficient time for transfer to PAL. This transfer was effected in
San Francisco at 2:00 P.M. on October 27, 1976. 66

Precisely, private respondent TWA knew of the urgency of the shipment by reason of this
notation on the lower portion of the airway bill: "All documents have been certified.
Human remains of Cristina (sic) Saludo. Please return bag first available flight to SFO."
Accordingly, TWA took it upon itself to carry the remains of Crispina Saludo on an earlier
flight, which we emphasize it could do under the terms of the airway bill, to make sure
that there would be enough time for loading said remains on the transfer flight on board
PAL.

III. Petitioners challenge the validity of respondent court's finding that private
respondents are not liable for tort on account of the humiliating, arrogant and indifferent
acts of their officers and personnel. They posit that since their mother's remains were
transported ten hours earlier than originally scheduled, there was no reason for private
respondents' personnel to disclaim knowledge of the arrival or whereabouts of the same
other than their sheer arrogance, indifference and extreme insensitivity to the feelings of
petitioners. Moreover, being passengers and not merely consignors of goods, petitioners
had the right to be treated with courtesy, respect, kindness and due consideration.

In riposte, TWA claims that its employees have always dealt politely with all clients,
customers and the public in general. PAL, on the other hand, declares that in the
performance of its obligation to the riding public, other customers and clients, it has
always acted with justice, honesty, courtesy and good faith.

Respondent appellate court found merit in and reproduced the trial court's refutation of
this assigned error:

About the only evidence of plaintiffs that may have reference to the manner
with which the personnel of defendants treated the two plaintiffs at the San
Francisco Airport are the following pertinent portions of Maria Saludo's
testimony:

Q When you arrived there, what did you do, if any?

A I immediately went to the TWA counter and I inquired about

whether my mother was there or if' they knew anything about it.

Q What was the answer?

A They said they do not know. So, we waited.

Q About what time was that when you reached San Francisco
from Chicago?

A I think 5 o'clock. Somewhere around that in the afternoon.

Q You made inquiry it was immediately thereafter?

A Right after we got off the plane.

Q Up to what time did you stay in the airport to wait until the
TWA people could tell you the whereabouts?

A Sorry, Sir, but the TWA did not tell us anything. We stayed
there until about 9 o'clock. They have not heard anything about
it. They did not say anything.

Q Do you want to convey to the Court that from 5 up to 9 o'clock

in the evening you yourself went back to the TWA and they could
not tell you where the remains of your mother were?

A Yes sir.

Q And after nine o'clock, what did you do?

A I told my brother my Mom was supposed to be on the

Philippine Airlines flight. "Why don't" we check with PAL instead
to see if she was there?" We tried to comfort each other. I told
him anyway that was a shortest flight from Chicago to California.
We will be with our mother on this longer flight. So, we checked
with the PAL.

Q What did you find?

A We learned, Yes, my Mom would be on the flight.

Q Who was that brother?

 A Saturnino Saludo.

Q And did you find what was your flight from San Francisco to the
Philippines?

A I do not know the number. It was the evening flight of the

Philippine Airline(s) from San Francisco to Manila.

Q You took that flight with your mother?

A We were scheduled to, Sir.

Q Now, you could not locate the remains of your mother in San
Francisco could you tell us what did you feel?

A After we were told that my mother was not there?

Q After you learned that your mother could not fly with you from
Chicago to California?

A Well, I was very upset. Of course, I wanted the confirmation

that my mother was in the West Coast. The fliqht was about 5
hours from Chicago to California. We waited anxiously all that
time on the plane. I wanted to be assured about my mother's
remains. But there was nothing and we could not get any
assurance from anyone about it.

Q Your feeling when you reached San Francisco and you could
not find out from the TWA the whereabouts of the remains, what
did you feel?

A Something nobody would be able to describe unless he

experiences it himself. It is a kind of panic. I think it's a feeling
you are about to go crazy. It is something I do not want to live
through again. (Inting, t.s.n., Aug. 9, 1983, pp. 14-18).

The foregoing does not show any humiliating or arrogant manner with which
the personnel of both defendants treated the two plaintiffs. Even their
alleged indifference is not clearly established. The initial answer of the TWA
personnel at the counter that they did not know anything about the remains,
and later, their answer that they have not heard anything about the remains,
and the inability of the TWA counter personnel to inform the two plaintiffs of
the whereabouts of the remains, cannot be said to be total or complete
indifference to the said plaintiffs. At any rate, it is any rude or discourteous
conduct, malfeasance or neglect, the use of abusive or insulting language
calculated to humiliate and shame passenger or had faith by or on the part
of the employees of the carrier that gives the passenger an action for
damages against the carrier (Zulueta vs. Pan American World Airways, 43
SCRA 397; Air France vs. Carrascoso, et al., 18 SCRA 155; Lopez, et al. vs.
Pan American World Airways, 16 SCRA 431; Northwest Airlines, Inc. vs.
Cuenca, 14 SCRA 1063), and none of the above is obtaining in the instant
case. 67

We stand by respondent court's findings on this point, but only to the extent where it
holds that the manner in which private respondent TWA's employees dealt with
petitioners was not grossly humiliating, arrogant or indifferent as would assume the
proportions of malice or bad faith and lay the basis for an award of the damages claimed.
It must however, be pointed out that the lamentable actuations of respondent TWA's
employees leave much to be desired, particularly so in the face of petitioners' grief over
the death of their mother, exacerbated by the tension and anxiety wrought by the
impasse and confusion over the failure to ascertain over an appreciable period of time
what happened to her remains.
Airline companies are hereby sternly admonished that it is their duty not only to cursorily
instruct but to strictly require their personnel to be more accommodating towards
customers, passengers and the general public. After all, common carriers such as airline
companies are in the business of rendering public service, which is the primary reason
for their enfranchisement and recognition in our law. Because the passengers in a
contract of carriage do not contract merely for transportation, they have a right to be
treated with kindness, respect, courtesy and consideration. 68 A contract to transport
passengers is quite different in kind and degree from any other contractual relation, and
generates a relation attended with public duty. The operation of a common carrier is a
business affected with public interest and must be directed to serve the comfort and
convenience of passengers. 69 Passengers are human beings with human feelings and
emotions; they should not be treated as mere numbers or statistics for revenue.

The records reveal that petitioners, particularly Maria and Saturnino Saludo, agonized for
nearly five hours, over the possibility of losing their mother's mortal remains, unattended
to and without any assurance from the employees of TWA that they were doing anything
about the situation. This is not to say that petitioners were to be regaled with extra
special attention. They were, however, entitled to the understanding and humane
consideration called for by and commensurate with the extraordinary diligence required
of common carriers, and not the cold insensitivity to their predicament. It is hard to
believe that the airline's counter personnel were totally helpless about the situation.
Common sense would and should have dictated that they exert a little extra effort in
making a more extensive inquiry, by themselves or through their superiors, rather than
just shrug off the problem with a callous and uncaring remark that they had no
knowledge about it. With all the modern communications equipment readily available to
them, which could have easily facilitated said inquiry and which are used as a matter of
course by airline companies in their daily operations, their apathetic stance while not
legally reprehensible is morally deplorable.

Losing a loved one, especially one's, parent, is a painful experience. Our culture accords
the tenderest human feelings toward and in reverence to the dead. That the remains of
the deceased were subsequently delivered, albeit belatedly, and eventually laid in her
final resting place is of little consolation. The imperviousness displayed by the airline's
personnel, even for just that fraction of time, was especially condemnable particularly in
the hour of bereavement of the family of Crispina Saludo, intensified by anguish due to
the uncertainty of the whereabouts of their mother's remains. Hence, it is quite apparent
that private respondents' personnel were remiss in the observance of that genuine
human concern and professional attentiveness required and expected of them.

The foregoing observations, however, do not appear to be applicable or imputable to

respondent PAL or its employees. No attribution of discourtesy or indifference has been
made against PAL by petitioners and, in fact, petitioner Maria Saludo testified that it was
to PAL that they repaired after failing to receive proper attention from TWA. It was from
PAL that they received confirmation that their mother's remains would be on the same
flight to Manila with them.

We find the following substantiation on this particular episode from the deposition of
Alberto A. Lim, PAL's cargo supervisor earlier adverted to, regarding their investigation of
and the action taken on learning of petitioner's problem:

ATTY. ALBERTO C. MENDOZA:

Yes.

Mr. Lim, what exactly was your procedure adopted in your so

called investigation?

ALBERTO A. LIM:

I called the lead agent on duty at that time and requested for a
copy of airway bill, transfer manifest and other documents
concerning the shipment.
 ATTY ALBERTO C. MENDOZA:

Then, what?

ALBERTO A. LIM:

They proceeded to analyze exactly where PAL failed, if any, in

forwarding the human remains of Mrs. Cristina (sic) Saludo. And I
found out that there was not (sic) delay in shipping the remains
of Mrs. Saludo to Manila. Since we received the body from
American Airlines on 28 October at 7:45 and we expedited the
shipment so that it could have been loaded on our flight leaving
at 9:00 in the evening or just barely one hour and 15 minutes
prior to the departure of the aircraft. That is so (sic) being the
case, I reported to Manila these circumstances. 70

IV. Finally, petitioners insist, as a consequence of the delay in the shipment of their
mother's remains allegedly caused by wilful contractual breach, on their entitlement to
actual, moral and exemplary damages as well as attorney's fees, litigation expenses, and
legal interest.

The uniform decisional tenet in our jurisdiction bolds that moral damages may be
awarded for wilful or fraudulent breach of contract 71 or when such breach is attended by
malice or bad faith. 72 However, in the absence of strong and positive evidence of fraud,
malice or bad faith, said damages cannot be awarded. 73 Neither can there be an award
of exemplary damages 74 nor of attorney's fees 75 as an item of damages in the absence
of proof that defendant acted with malice, fraud or bad faith.

The censurable conduct of TWA's employees cannot, however, be said to have

approximated the dimensions of fraud, malice or bad faith. It can be said to be more of a
lethargic reaction produced and engrained in some people by the mechanically routine
nature of their work and a racial or societal culture which stultifies what would have been
their accustomed human response to a human need under a former and different
ambience.

Nonetheless, the facts show that petitioners' right to be treated with due courtesy in
accordance with the degree of diligence required by law to be exercised by every
common carrier was violated by TWA and this entitles them, at least, to nominal
damages from TWA alone. Articles 2221 and 2222 of the Civil Code make it clear that
nominal damages are not intended for indemnification of loss suffered but for the
vindication or recognition of a right violated of invaded. They are recoverable where
some injury has been done but the amount of which the evidence fails to show, the
assessment of damages being left to the discretion of the court according to the
circumstances of the case. 76 In the exercise of our discretion, we find an award of
P40,000.00 as nominal damages in favor of, petitioners to be a reasonable amount under
the circumstances of this case.

WHEREFORE, with the modification that an award of P40,000.00 as and by way of

nominal damages is hereby granted in favor of petitioners to be paid by respondent
Trans World Airlines, the appealed decision is AFFIRMED in all other respects.

SO ORDERED.

LAMBERT S. RAMOS, G.R. No. 184905

Petitioner,
Present:
Ynares-Santiago, J. (Chairperson),
- versus - Chico-Nazario,
Velasco, Jr.,
Nachura, and
Peralta, JJ.
C.O.L. REALTY CORPORATION,
Respondent. Promulgated:

August 28, 2009

x ---------------------------------------------------------------------------------------- x

DECISION

YNARES-SANTIAGO, J.:

The issue for resolution is whether petitioner can be held solidarily liable with his
driver, Rodel Ilustrisimo, to pay respondent C.O.L. Realty the amount of P51,994.80 as
actual damages suffered in a vehicular collision.

The facts, as found by the appellate court, are as follows:

On or about 10:40 oclock in the morning of 8 March 2004, along

Katipunan (Avenue), corner Rajah Matanda (Street), Quezon City, a vehicular
accident took place between a Toyota Altis Sedan bearing Plate Number XDN
210, owned by petitioner C.O.L. Realty Corporation, and driven by Aquilino
Larin (Aquilino), and a Ford Expedition, owned by x x x Lambert Ramos
(Ramos) and driven by Rodel Ilustrisimo (Rodel), with Plate Number LSR
917. A passenger of the sedan, one Estela Maliwat (Estela) sustained injuries.
She was immediately rushed to the hospital for treatment.

(C.O.L. Realty) averred that its driver, Aquilino, was slowly driving the
Toyota Altis car at a speed of five to ten kilometers per hour along Rajah
Matanda Street and has just crossed the center lane of Katipunan Avenue
when (Ramos) Ford Espedition violently rammed against the cars right rear
door and fender. With the force of the impact, the sedan turned 180 degrees
towards the direction where it came from.

Upon investigation, the Office of the City Prosecutor of Quezon City

found probable cause to indict Rodel, the driver of the Ford Expedition, for
Reckless Imprudence Resulting in Damage to Property. In the meantime,
petitioner demanded from respondent reimbursement for the expenses
incurred in the repair of its car and the hospitalization of Estela in the
aggregate amount of P103,989.60. The demand fell on deaf ears prompting
(C.O.L. Realty) to file a Complaint for Damages based on quasi-delict before
the Metropolitan Trial Court of Metro Manila (MeTC), Quezon City, docketed as
Civil Case No. 33277, and subsequently raffled to Branch 42.

As could well be expected, (Ramos) denied liability for damages

insisting that it was the negligence of Aquilino, (C.O.L. Realtys) driver, which
was the proximate cause of the accident. (Ramos) maintained that the sedan
car crossed Katipunan Avenue from Rajah Matanda Street despite the
concrete barriers placed thereon prohibiting vehicles to pass through the
intersection.

(Ramos) further claimed that he was not in the vehicle when the
mishap occurred. He asserted that he exercised the diligence of a good
father of a family in the selection and supervision of his driver, Rodel.

Weighing the respective evidence of the parties, the MeTC rendered

the Decision dated 1 March 2006 exculpating (Ramos) from liability, thus:

WHEREFORE, the instant case is DISMISSED for lack of

merit. The Counterclaims of the defendant are likewise
DISMISSED for lack of sufficient factual and legal basis.
 SO ORDERED.

The aforesaid judgment did not sit well with (C.O.L. Realty) so that he
(sic) appealed the same before the RTC of Quezon City, raffled to Branch
215, which rendered the assailed Decision dated 5 September 2006,
affirming the MeTCs Decision. (C.O.L. Realtys) Motion for Reconsideration
met the same fate as it was denied by the RTC in its Order dated 5 June
2007.[1]

C.O.L. Realty appealed to the Court of Appeals which affirmed the view that
Aquilino was negligent in crossing Katipunan Avenue from Rajah Matanda Street since, as
per Certification of the Metropolitan Manila Development Authority (MMDA) dated
November 30, 2004, such act is specifically prohibited. Thus:

This is to certify that as per records found and available in this

office the crossing of vehicles at Katipunan Avenue from Rajah
Matanda Street to Blue Ridge Subdivision, Quezon City has (sic) not
allowed since January 2004 up to the present in view of the ongoing
road construction at the area.[2] (Emphasis supplied)

Barricades were precisely placed along the intersection of Katipunan

Avenue and Rajah Matanda Street in order to prevent motorists from crossing Katipunan
Avenue. Nonetheless, Aquilino crossed Katipunan Avenue through certain portions of the
barricade which were broken, thus violating the MMDA rule.[3]

However, the Court of Appeals likewise noted that at the time of the collision,
Ramos vehicle was moving at high speed in a busy area that was then the subject of an
ongoing construction (the Katipunan Avenue-Boni Serrano Avenue underpass), then
smashed into the rear door and fender of the passengers side of Aquilinos car, sending it
spinning in a 180-degree turn.[4] It therefore found the driver Rodel guilty of contributory
negligence for driving the Ford Expedition at high speed along a busy intersection.

Thus, on May 28, 2008, the appellate court rendered the assailed Decision, [5] the
dispositive portion of which reads, as follows:

WHEREFORE, the Decision dated 5 September 2006 of the Regional

Trial Court of Quezon City, Branch 215 is hereby MODIFIED in that respondent
Lambert Ramos is held solidarily liable with Rodel Ilustrisimo to pay
petitioner C.O.L. Realty Corporation the amount of P51,994.80 as actual
damages. Petitioner C.O.L. Realty Corporations claim for exemplary
damages, attorneys fees and cost of suit are DISMISSED for lack of merit.

SO ORDERED.

Petitioner filed a Motion for Reconsideration but it was denied. Hence, the instant
petition, which raises the following sole issue:

THE COURT OF APPEALS DECISION IS CONTRARY TO LAW AND

JURISPRUDENCE, AND THE EVIDENCE TO SUPPORT AND JUSTIFY THE SAME IS
INSUFFICIENT.

We resolve to GRANT the petition.

 There is no doubt in the appellate courts mind that Aquilinos violation of the MMDA
prohibition against crossing Katipunan Avenue from Rajah Matanda Street was
theproximate cause of the accident. Respondent does not dispute this; in its Comment
to the instant petition, it even conceded that petitioner was guilty of mere contributory
negligence.[6]

Thus, the Court of Appeals acknowledged that:

The Certification dated 30 November 2004 of the Metropolitan Manila

Development Authority (MMDA) evidently disproved (C.O.L. Realtys)
barefaced assertion that its driver, Aquilino, was not to be blamed for the
accident

TO WHOM IT MAY CONCERN:

This is to certify that as per records found and available in

this office the crossing of vehicles at Katipunan
Avenue from Rajah Matanda Street to Blue Ridge
Subdivision, Quezon City has (sic) not allowed since January 2004
up to the present in view of the ongoing road construction at the
area.

This certification is issued upon request of the interested

parties for whatever legal purpose it may serve.

(C.O.L. Realty) admitted that there were barricades along the

intersection of Katipunan Avenue and Rajah Matanda Street. The barricades
were placed thereon to caution drivers not to pass through the intersecting
roads. This prohibition stands even if, as (C.O.L. Realty) claimed, the barriers
were broken at that point creating a small gap through which any vehicle
could pass. What is clear to Us is that Aquilino recklessly ignored these
barricades and drove through it. Without doubt, his negligence is established
by the fact that he violated a traffic regulation. This finds support in Article
2185 of the Civil Code

Unless there is proof to the contrary, it is presumed that a

person driving a motor vehicle has been negligent if at the time
of the mishap, he was violating any traffic regulation.

Accordingly, there ought to be no question on (C.O.L. Realtys)

negligence which resulted in the vehicular mishap.[7]

However, it also declared Ramos liable vicariously for Rodels contributory

negligence in driving the Ford Expedition at high speed along a busy intersection. On
this score, the appellate court made the following pronouncement:

As a professional driver, Rodel should have known that driving his

vehicle at a high speed in a major thoroughfare which was then subject of an
on-going construction was a perilous act. He had no regard to (sic) the safety
of other vehicles on the road. Because of the impact of the collision,
(Aquilinos) sedan made a 180-degree turn as (Ramos) Ford Expedition
careened and smashed into its rear door and fender. We cannot exculpate
Rodel from liability.

Having thus settled the contributory negligence of Rodel, this created a

presumption of negligence on the part of his employer, (Ramos). For the
employer to avoid the solidary liability for a tort committed by his employee,
 an employer must rebut the presumption by presenting adequate and
convincing proof that in the selection and supervision of his employee, he or
she exercises the care and diligence of a good father of a family. Employers
must submit concrete proof, including documentary evidence, that they
complied with everything that was incumbent on them.

(Ramos) feebly attempts to escape vicarious liability by averring that

Rodel was highly recommended when he applied for the position of family
driver by the Social Service Committee of his parish. A certain Ramon
Gomez, a member of the churchs livelihood program, testified that a
background investigation would have to be made before an applicant is
recommended to the parishioners for employment. (Ramos) supposedly
tested Rodels driving skills before accepting him for the job. Rodel has been
his driver since 2001, and except for the mishap in 2004, he has not been
involved in any road accident.

Regrettably, (Ramos) evidence which consisted mainly of testimonial

evidence remained unsubstantiated and are thus, barren of significant
weight. There is nothing on the records which would support (Ramos) bare
allegation of Rodels 10-year unblemished driving record. He failed to present
convincing proof that he went to the extent of verifying Rodels qualifications,
safety record, and driving history.

So too, (Ramos) did not bother to refute (C.O.L. Realtys) stance that his
driver was texting with his cellphone while running at a high speed and that
the latter did not slow down albeit he knew that Katipunan Avenue was then
undergoing repairs and that the road was barricaded with barriers. The
presumption juris tantum that there was negligence in the selection of driver
remains unrebutted. As the employer of Rodel, (Ramos) is solidarily liable for
the quasi-delict committed by the former.

Certainly, in the selection of prospective employees, employers are

required to examine them as to their qualifications, experience and service
records. In the supervision of employees, the employer must formulate
standard operating procedures, monitor their implementation and impose
disciplinary measures for the breach thereof. These, (Ramos) failed to do. [8]

Petitioner disagrees, arguing that since Aquilinos willful disregard of the MMDA
prohibition was the sole proximate cause of the accident, then respondent alone should
suffer the consequences of the accident and the damages it incurred. He argues:

20. It becomes apparent therefore that the only time a plaintiff, the
respondent herein, can recover damages is if its negligence was only
contributory, and such contributory negligence was the proximate cause of
the accident. It has been clearly established in this case, however, that
respondents negligence was not merely contributory, but the sole
proximate cause of the accident.

xxxx

22. As culled from the foregoing, respondent was the sole proximate
cause of the accident. Respondents vehicle should not have been in that
position since crossing the said intersection was prohibited. Were it not for
the obvious negligence of respondents driver in crossing the intersection that
was prohibited, the accident would not have happened. The crossing of
respondents vehicle in a prohibited intersection unquestionably produced the
injury, and without which the accident would not have occurred. On the other
hand, petitioners driver had the right to be where he was at the time of the
mishap. As correctly concluded by the RTC, the petitioners driver could not
be expected to slacken his speed while travelling along said intersection
 since nobody, in his right mind, would do the same. Assuming, however, that
petitioners driver was indeed guilty of any contributory negligence, such was
not the proximate cause of the accident considering that again, if
respondents driver did not cross the prohibited intersection, no accident
would have happened. No imputation of any lack of care on Ilustrisimos
could thus be concluded. It is obvious then that petitioners driver was not
guilty of any negligence that would make petitioner vicariously liable for
damages.

23. As the sole proximate cause of the accident was respondents own
driver, respondent cannot claim damages from petitioner.[9]

On the other hand, respondent in its Comment merely reiterated the appellate
courts findings and pronouncements, conceding that petitioner is guilty of mere
contributory negligence, and insisted on his vicarious liability as Rodels employer under
Article 2184 of the Civil Code.

Articles 2179 and 2185 of the Civil Code on quasi-delicts apply in this case, viz:

Article 2179. When the plaintiffs own negligence was the immediate
and proximate cause of his injury, he cannot recover damages. But if his
negligence was only contributory, the immediate and proximate cause of the
injury being the defendants lack of due care, the plaintiff may recover
damages, but the courts shall mitigate the damages to be awarded.

Article 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.

If the master is injured by the negligence of a third person and by the concurring
contributory negligence of his own servant or agent, the latters negligence is imputed to
his superior and will defeat the superiors action against the third person, assuming of
course that the contributory negligence was the proximate cause of the injury of which
complaint is made.[10]

Applying the foregoing principles of law to the instant case, Aquilinos act of
crossing Katipunan Avenue via Rajah Matanda constitutes negligence because it was
prohibited by law. Moreover, it was the proximate cause of the accident, and thus
precludes any recovery for any damages suffered by respondent from the accident.

Proximate cause is defined as that cause, which, in natural and continuous

sequence, unbroken by any efficient intervening cause, produces the injury, and without
which the result would not have occurred. And more comprehensively, the proximate
legal cause is that acting first and producing the injury, either immediately or by setting
other events in motion, all constituting a natural and continuous chain of events, each
having a close causal connection with its immediate predecessor, the final event in the
chain immediately effecting the injury as a natural and probable result of the cause
which first acted, under such circumstances that the person responsible for the first
event should, as an ordinary prudent and intelligent person, have reasonable ground to
expect at the moment of his act or default that an injury to some person might probably
result therefrom.[11]
 If Aquilino heeded the MMDA prohibition against crossing Katipunan Avenue from
Rajah Matanda, the accident would not have happened. This specific untoward event is
exactly what the MMDA prohibition was intended for. Thus, a prudent and intelligent
person who resides within the vicinity where the accident occurred, Aquilino had
reasonable ground to expect that the accident would be a natural and probable result if
he crossed Katipunan Avenue since such crossing is considered dangerous on account of
the busy nature of the thoroughfare and the ongoing construction of the Katipunan-Boni
Avenue underpass. It was manifest error for the Court of Appeals to have overlooked the
principle embodied in Article 2179 of the Civil Code, that when the plaintiffs own
negligence was the immediate and proximate cause of his injury, he cannot recover
damages.

Hence, we find it unnecessary to delve into the issue of Rodels contributory

negligence, since it cannot overcome or defeat Aquilinos recklessness which is the
immediate and proximate cause of the accident. Rodels contributory negligence has
relevance only in the event that Ramos seeks to recover from respondent whatever
damages or injuries he may have suffered as a result; it will have the effect of mitigating
the award of damages in his favor. In other words, an assertion of contributory
negligence in this case would benefit only the petitioner; it could not eliminate
respondents liability for Aquilinos negligence which is the proximate result of the
accident.

WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals

dated May 28, 2008 in CA-G.R. SP No. 99614 and its Resolution of October 13, 2008 are
hereby REVERSED and SET ASIDE. The Decision of the Regional Trial Court of Quezon
City, Branch 215 dated September 5, 2006 dismissing for lack of merit respondents
complaint for damages is hereby REINSTATED.

SO ORDERED.

G.R. No. L-9671 August 23, 1957

CESAR L. ISAAC, plaintiff-appellant,

vs.
A. L. AMMEN TRANSPORTATION CO., INC., defendant-appellee.

Angel S. Gamboa for appellant.

Manuel O. Chan for appellee.

BAUTISTA ANGELO, J.:

A. L. Ammen Transportation Co., Inc., hereinafter referred to as defendant, is a

corporation engaged in the business of transporting passengers by land for
compensation in the Bicol provinces and one of the lines it operates is the one
connecting Legaspi City, Albay with Naga City, Camarines Sur. One of the buses which
defendant was operating is Bus No. 31. On May 31, 1951, plaintiff boarded said bus as a
passenger paying the required fare from Ligao, Albay bound for Pili, Camarines Sur, but
before reaching his destination, the bus collided with a motor vehicle of the pick-up type
coming from the opposite direction, as a result of which plaintiff's left arm was
completely severed and the severed portion fell inside the bus. Plaintiff was rushed to a
hospital in Iriga, Camarines Sur where he was given blood transfusion to save his life.
After four days, he was transferred to another hospital in Tabaco, Albay, where he under
went treatment for three months. He was moved later to the Orthopedic Hospital where
he was operated on and stayed there for another two months. For these services, he
incurred expenses amounting to P623.40, excluding medical fees which were paid by
defendant.

As an aftermath, plaintiff brought this action against defendants for damages alleging
that the collision which resulted in the loss of his left arm was mainly due to the gross
incompetence and recklessness of the driver of the bus operated by defendant and that
defendant incurred in culpa contractual arising from its non-compliance with its
obligation to transport plaintiff safely to his, destination. Plaintiff prays for judgment
against defendant as follows: (1) P5,000 as expenses for his medical treatment, and
P3,000 as the cost of an artificial arm, or a total of P8,000; (2) P6,000 representing loss
of earning; (3) P75,000 for diminution of his earning capacity; (4) P50,000 as moral
damages; and (5) P10,000 as attorneys' fees and costs of suit.

Defendant set up as special defense that the injury suffered by plaintiff was due entirely
to the fault or negligence of the driver of the pick-up car which collided with the bus
driven by its driver and to the contributory negligence of plaintiff himself. Defendant
further claims that the accident which resulted in the injury of plaintiff is one which
defendant could not foresee or, though foreseen, was inevitable.

The after trial found that the collision occurred due to the negligence of the driver of the
pick-up car and not to that of the driver of the bus it appearing that the latter did
everything he could to avoid the same but that notwithstanding his efforts, he was not
able to avoid it. As a consequence, the court dismissed complaint, with costs against
plaintiff. This is an appeal from said decision.

It appears that plaintiff boarded a bus of defendant as paying passenger from Ligao,
Albay, bound for Pili, Camarines Sur, but before reaching his destination, the bus collided
with a pick-up car which was coming from the opposite direction and, as a, result, his left
arm was completely severed and fell inside the back part of the bus. Having this
background in view, and considering that plaintiff chose to hold defendant liable on its
contractual obligation to carry him safely to his place of destination, it becomes
important to determine the nature and extent of the liability of a common carrier to a
passenger in the light of the law applicable in this jurisdiction.

In this connection, appellant invokes the rule that, "when an action is based on a
contract of carriage, as in this case, all that is necessary to sustain recovery is proof of
the existence of the contract of the breach thereof by act or omission", and in support
thereof, he cites several Philippine cases.1 With the ruling in mind, appellant seems to
imply that once the contract of carriage is established and there is proof that the same
was broken by failure of the carrier to transport the passenger safely to his destination,
the liability of the former attaches. On the other hand, appellee claims that is a wrong
presentation of the rule. It claims that the decisions of this Court in the cases cited do
not warrant the construction sought to be placed upon, them by appellant for a mere
perusal thereof would show that the liability of the carrier was predicated not upon mere
breach of its contract of carriage but upon the finding that its negligence was found to be
the direct or proximate cause of the injury complained of. Thus, appellee contends that
"if there is no negligence on the part of the common carrier but that the accident
resulting in injuries is due to causes which are inevitable and which could not have been
avoided or anticipated notwithstanding the exercise of that high degree of care and skill
which the carrier is bound to exercise for the safety of his passengers", neither the
common carrier nor the driver is liable therefor.

We believe that the law concerning the liability of a common carrier has now suffered a
substantial modification in view of the innovations introduced by the new Civil Code.
These innovations are the ones embodied in Articles 1733, 1755 and 1756 in so far as
the relation between a common carrier and its passengers is concerned, which, for ready
reference, we quote hereunder:

ART. 1733. Common carriers, from the nature of their business and for reasons of
public policy, are bound to observe extra ordinary 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 articles 1755 and 1756.

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.

The Code Commission, in justifying this extraordinary diligence required of a common

carrier, says the following:

A common carrier is bound to carry the passengers safely as far as human care
and foresight can provide, using the utmost deligence of very cautions persons,
with due regard for all circumstances. This extraordinary diligence required of
common carriers is calculated to protect the passengers from the tragic mishaps
that frequently occur in connection with rapid modern transportation. This high
standard of care is imperatively demanded by the precariousness of human life
and by the consideration that every person must in every way be safeguarded
against all injury. (Report of the Code Commission, pp. 35-36)" (Padilla, Civil Code
of the Philippines, Vol. IV, 1956 ed., p. 197).

From the above legal provisions, we can make the following restatement of the principles
governing the liability of a common carrier: (1) the liability of a carrier is contractual and
arises upon breach of its obligation. There is breach if it fails to exert extraordinary
diligence according to all circumstances of each case; (2) a carrier is obliged to carry its
passenger with the utmost diligence of a very cautious person, having due regard for all
the circumstances; (3) a carrier is presumed to be at fault or to have acted negligently in
case of death of, or injury to, passengers, it being its duty to prove that it exercised
extraordinary diligence; and (4) the carrier is not an insurer against all risks of travel.

The question that now arises is: Has defendant observed extraordinary diligence or the
utmost diligence of every cautious person, having due regard for all circumstances, in
avoiding the collision which resulted in the injury caused to the plaintiff?

After examining the evidence in connection with how the collision occurred, the lower
court made the following finding:

Hemos examinado muy detenidamente las pruebas presentadas en la vista,

principalmente, las declaraciones que hemos acotado arriba, y hernos Ilegado a la
conclusion de que el demandado ha hecho, todo cuanto estuviere de su parte para
evitar el accidente, pero sin embargo, no ha podido evitarlo.

EI hecho de que el demandado, antes del choque, tuvo que hacer pasar su truck
encima de los montones de grava que estaban depositados en la orilla del camino,
sin que haya ido mas alla, por el grave riesgo que corrian las vidas de sus
pasajeros, es prueba concluyente de lo que tenemos dicho, a saber: que el
cuanto esuba de su parte, para evitar el accidente, sin que haya podidoevitardo,
por estar fuera de su control.

The evidence would appear to support the above finding. Thus, it appears that Bus No.
31, immediately prior to the collision, was running at a moderate speed because it had
just stopped at the school zone of Matacong, Polangui, Albay. The pick-up car was at full
speed and was running outside of its proper lane. The driver of the bus, upon seeing the
manner in which the pick-up was then running, swerved the bus to the very extreme
right of the road until its front and rear wheels have gone over the pile of stones or
gravel situated on the rampart of the road. Said driver could not move the bus farther
right and run over a greater portion of the pile, the peak of which was about 3 feet high,
without endangering the safety of his passengers. And notwithstanding all these efforts,
the rear left side of the bus was hit by the pick-up car.

Of course, this finding is disputed by appellant who cannot see eye to eye with the
evidence for the appellee and insists that the collision took place because the driver of
the bus was going at a fast speed. He contends that, having seen that a car was coming
from the opposite direction at a distance which allows the use of moderate care and
prudence to avoid an accident, and knowing that on the side of the road along which he
was going there was a pile of gravel, the driver of the bus should have stopped and
waited for the vehicle from the opposite direction to pass, and should have proceeded
only after the other vehicle had passed. In other words, according to appellant, the act of
the driver of the bus in squeezing his way through of the bus in squeezing his way
through between the oncoming pick-up and the pile of gravel under the circumstances
was considered negligent.

But this matter is one of credibility and evaluation of the evidence. This is evidence. This
is the function of the trial court. The trial court has already spoken on this matter as we
have pointed out above. This is also a matter of appreciation of the situation on the part
of the driver. While the position taken by appellant appeals more to the sense of caution
that one should observe in a given situation to avoid an accident or mishap, such
however can not always be expected from one who is placed suddenly in a predicament
where he is not given enough time to take the course of action as he should under
ordinary circumstances. One who is placed in such a predicament cannot exercise such
coolness or accuracy of judgment as is required of him under ordinary circumstances and
he cannot therefore be expected to observe the same judgment, care and precaution as
in the latter. For this reason, authorities abound where failure to observe the same
degree of care that as ordinary prudent man would exercise under ordinary
circumstances when confronted with a sadden emergency was held to be warranted and
a justification to exempt the carrier from liability. Thus, it was held that "where a carrier's
employee is confronted with a sudden emergency, the fact that he is obliged to act
quickly and without a chance for deliberation must be taken into account, and he is held
to the some degree of care that he would otherwise be required to exercise in the
absence of such emergency but must exercise only such care as any ordinary prudent
person would exercise under like circumstances and conditions, and the failure on his
part to exercise the best judgement the case renders possible does not establish lack of
care and skill on his part which renders the company, liable. . . . (13 C. J. S., 1412; 10 C.
J.,970). Considering all the circumstances, we are persuaded to conclude that the driver
of the bus has done what a prudent man could have done to avoid the collision and in
our opinion this relieves appellee from legibility under our law.

A circumstances which miliates against the stand of appellant is the fact borne out by
the evidence that when he boarded the bus in question, he seated himself on the left
side thereof resting his left arm on the window sill but with his left elbow outside the
window, this being his position in the bus when the collision took place. It is for this
reason that the collision resulted in the severance of said left arm from the body of
appellant thus doing him a great damage. It is therefore apparent that appellant is guilty
of contributory negligence. Had he not placed his left arm on the window sill with a
portion thereof protruding outside, perhaps the injury would have been avoided as is the
case with the other passenger. It is to be noted that appellant was the only victim of the
collision.

It is true that such contributory negligence cannot relieve appellee of its liability but will
only entitle it to a reduction of the amount of damage caused (Article 1762, new Civil
Code), but this is a circumstance which further militates against the position taken by
appellant in this case.

It is the prevailing rule that it is negligence per se for a passenger on a railroad

voluntarily or inadvertently to protrude his arm, hand, elbow, or any other part of
his body through the window of a moving car beyond the outer edge of the window
or outer surface of the car, so as to come in contact with objects or obstacles near
 the track, and that no recovery can be had for an injury which but for such
negligence would not have been sustained. (10 C. J. 1139)

Plaintiff, (passenger) while riding on an interurban car, to flick the ashes, from his
cigar, thrust his hand over the guard rail a sufficient distance beyond the side line
of the car to bring it in contact with the trunk of a tree standing beside the track;
the force of the blow breaking his wrist. Held, that he was guilty of contributory
negligence as a matter of law. (Malakia vs. Rhode Island Co., 89 A., 337.)

Wherefore, the decision appealed from is affirmed, with cost against appellant.

G.R. No. 114167 July 12, 1995

COASTWISE LIGHTERAGE CORPORATION, petitioner,

vs.
COURT OF APPEALS and the PHILIPPINE GENERAL INSURANCE
COMPANY, respondents.

RESOLUTION

FRANCISCO, R., J.:

This is a petition for review of a Decision rendered by the Court of Appeals, dated
December 17, 1993, affirming Branch 35 of the Regional Trial Court, Manila in holding
that herein petitioner is liable to pay herein private respondent the amount of
P700,000.00, plus legal interest thereon, another sum of P100,000.00 as attorney's fees
and the cost of the suit.

The factual background of this case is as follows:

Pag-asa Sales, Inc. entered into a contract to transport molasses from the province of
Negros to Manila with Coastwise Lighterage Corporation (Coastwise for brevity), using
the latter's dumb barges. The barges were towed in tandem by the tugboat MT Marica,
which is likewise owned by Coastwise.

Upon reaching Manila Bay, while approaching Pier 18, one of the barges, "Coastwise 9",
struck an unknown sunken object. The forward buoyancy compartment was damaged,
and water gushed in through a hole "two inches wide and twenty-two inches long" 1 As a
consequence, the molasses at the cargo tanks were contaminated and rendered unfit for
the use it was intended. This prompted the consignee, Pag-asa Sales, Inc. to reject the
shipment of molasses as a total loss. Thereafter, Pag-asa Sales, Inc. filed a formal claim
with the insurer of its lost cargo, herein private respondent, Philippine General Insurance
Company (PhilGen, for short) and against the carrier, herein petitioner, Coastwise
Lighterage. Coastwise Lighterage denied the claim and it was PhilGen which paid the
consignee, Pag-asa Sales, Inc., the amount of P700,000.00, representing the value of the
damaged cargo of molasses.

In turn, PhilGen then filed an action against Coastwise Lighterage before the Regional
Trial Court of Manila, seeking to recover the amount of P700,000.00 which it paid to Pag-
asa Sales, Inc. for the latter's lost cargo. PhilGen now claims to be subrogated to all the
contractual rights and claims which the consignee may have against the carrier, which is
presumed to have violated the contract of carriage.

The RTC awarded the amount prayed for by PhilGen. On Coastwise Lighterage's appeal to
the Court of Appeals, the award was affirmed.

Hence, this petition.

There are two main issues to be resolved herein. First, whether or not petitioner
Coastwise Lighterage was transformed into a private carrier, by virtue of the contract of
affreightment which it entered into with the consignee, Pag-asa Sales, Inc. Corollarily, if it
were in fact transformed into a private carrier, did it exercise the ordinary diligence to
which a private carrier is in turn bound? Second, whether or not the insurer was
subrogated into the rights of the consignee against the carrier, upon payment by the
insurer of the value of the consignee's goods lost while on board one of the carrier's
vessels.

On the first issue, petitioner contends that the RTC and the Court of Appeals erred in
finding that it was a common carrier. It stresses the fact that it contracted with Pag-asa
Sales, Inc. to transport the shipment of molasses from Negros Oriental to Manila and
refers to this contract as a "charter agreement". It then proceeds to cite the case
of Home Insurance Company vs. American Steamship Agencies, Inc. 2 wherein this Court
held: ". . . a common carrier undertaking to carry a special cargo or chartered to a
special person only becomes a private carrier."

Petitioner's reliance on the aforementioned case is misplaced. In its entirety, the

conclusions of the court are as follows:

Accordingly, the charter party contract is one of affreightment over the

whole vessel, rather than a demise. As such, the liability of the shipowner for
acts or negligence of its captain and crew, would remain in the absence of
stipulation. 3

The distinction between the two kinds of charter parties (i.e. bareboat or demise and
contract of affreightment) is more clearly set out in the case of Puromines, Inc. vs. Court
of Appeals, 4 wherein we ruled:

Under the demise or bareboat charter of the vessel, the charterer will
generally be regarded as the owner for the voyage or service stipulated. The
charterer mans the vessel with his own people and becomes 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.

On the other hand a contract of affreightment is one in which the owner of

the vessel leases part or all of its space to haul goods for others. It is a
contract for special service to be rendered by the owner of the vessel and
under such contract the general owner retains the possession, command and
navigation of the ship, the charterer or freighter merely having use of the
space in the vessel in return for his payment of the charter hire. . . . .

. . . . An owner who retains possession of the ship though the hold is the
property of the charterer, remains liable as carrier and must answer for any
breach of duty as to the care, loading and unloading of the cargo. . . .

Although a charter party may transform a common carrier into a private one, the same
however is not true in a contract of affreightment on account of the aforementioned
distinctions between the two.

Petitioner admits that the contract it entered into with the consignee was one of
affreightment. 5 We agree. Pag-asa Sales, Inc. only leased three of petitioner's vessels, in
order to carry cargo from one point to another, but the possession, command and
navigation of the vessels remained with petitioner Coastwise Lighterage.

Pursuant therefore to the ruling in the aforecited Puromines case, Coastwise Lighterage,
by the contract of affreightment, was not converted into a private carrier, but remained a
common carrier and was still liable as such.
The law and jurisprudence on common carriers both hold that the mere proof of delivery
of goods in good order to a carrier and the subsequent arrival of the same goods at the
place of destination in bad order makes for a prima facie case against the carrier.

It follows then that the presumption of negligence that attaches to common carriers,
once the goods it transports are lost, destroyed or deteriorated, applies to the petitioner.
This presumption, which is overcome only by proof of the exercise of extraordinary
diligence, remained unrebutted in this case.

The records show that the damage to the barge which carried the cargo of molasses was
caused by its hitting an unknown sunken object as it was heading for Pier 18. The object
turned out to be a submerged derelict vessel. Petitioner contends that this navigational
hazard was the efficient cause of the accident. Further it asserts that the fact that the
Philippine Coastguard "has not exerted any effort to prepare a chart to indicate the
location of sunken derelicts within Manila North Harbor to avoid navigational
accidents" 6 effectively contributed to the happening of this mishap. Thus, being unaware
of the hidden danger that lies in its path, it became impossible for the petitioner to avoid
the same. Nothing could have prevented the event, making it beyond the pale of even
the exercise of extraordinary diligence.

However, petitioner's assertion is belied by the evidence on record where it appeared

that far from having rendered service with the greatest skill and utmost foresight, and
being free from fault, the carrier was culpably remiss in the observance of its duties.

Jesus R. Constantino, the patron of the vessel "Coastwise 9" admitted that he was not
licensed. The Code of Commerce, which subsidiarily governs common carriers (which are
primarily governed by the provisions of the Civil Code) provides:

Art. 609. Captains, masters, or patrons of vessels must be Filipinos, have

legal capacity to contract in accordance with this code, and prove the skill
capacity and qualifications necessary to command and direct the vessel, as
established by marine and navigation laws, ordinances or regulations, and
must not be disqualified according to the same for the discharge of the
duties of the position. . . .

Clearly, petitioner Coastwise Lighterage's embarking on a voyage with an unlicensed

patron violates this rule. It cannot safely claim to have exercised extraordinary diligence,
by placing a person whose navigational skills are questionable, at the helm of the vessel
which eventually met the fateful accident. It may also logically, follow that a person
without license to navigate, lacks not just the skill to do so, but also the utmost
familiarity with the usual and safe routes taken by seasoned and legally authorized ones.
Had the patron been licensed, he could be presumed to have both the skill and the
knowledge that would have prevented the vessel's hitting the sunken derelict ship that
lay on their way to Pier 18.

As a common carrier, petitioner is liable for breach of the contract of carriage, having
failed to overcome the presumption of negligence with the loss and destruction of goods
it transported, by proof of its exercise of extraordinary diligence.

On the issue of subrogation, which petitioner contends as inapplicable in this case, we

once more rule against the petitioner. We have already found petitioner liable for breach
of the contract of carriage it entered into with Pag-asa Sales, Inc. However, for the
damage sustained by the loss of the cargo which petitioner-carrier was transporting, it
was not the carrier which paid the value thereof to Pag-asa Sales, Inc. but the latter's
insurer, herein private respondent PhilGen.

Article 2207 of the Civil Code is explicit on this point:

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 violated the contract. . . .

This legal provision containing the equitable principle of subrogation has been applied in
a long line of cases including Compania Maritima v. Insurance Company of North
America; 7 Fireman's Fund Insurance Company v. Jamilla & Company, Inc., 8 and Pan
Malayan Insurance Corporation v. Court of Appeals, 9 wherein this Court explained:

Article 2207 of the Civil Code is founded on the well-settled principle of

subrogation. If the insured property is destroyed or damaged through the
fault or negligence of a party other than the assured, then the insurer, upon
payment to the assured will be subrogated to the rights of the assured to
recover from the wrongdoer to the extent that the insurer has been obligated
to pay. Payment by the insurer to the assured operated as an equitable
assignment to the former of all remedies which the latter may have against
the third party whose negligence or wrongful act caused the loss. The right
of subrogation 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 of the insurance claim by the insurer.

Undoubtedly, upon payment by respondent insurer PhilGen of the amount of

P700,000.00 to Pag-asa Sales, Inc., the consignee of the cargo of molasses totally
damaged while being transported by petitioner Coastwise Lighterage, the former was
subrogated into all the rights which Pag-asa Sales, Inc. may have had against the carrier,
herein petitioner Coastwise Lighterage.

WHEREFORE, premises considered, this petition is DENIED and the appealed decision
affirming the order of Branch 35 of the Regional Trial Court of Manila for petitioner
Coastwise Lighterage to pay respondent Philippine General Insurance Company the
"principal amount of P700,000.00 plus interest thereon at the legal rate computed from
March 29, 1989, the date the complaint was filed until fully paid and another sum of
P100,000.00 as attorney's fees and costs" 10 is likewise hereby AFFIRMED

SO ORDERED.