1
TRANSPORTATION LAW Interposing the defense that the complaint states no cause of action and even if it does, the action has prescribed, MCP filed on
National Development Company vs. CA, August 19, 1998;
PARAS, J.:
These are appeals by certiorari from the decision* of the Court of Appeals in CA G.R. No. L-46513-R entitled "Development
Insurance and Surety Corporation plaintiff-appellee vs. Maritime Company of the Philippines and National Development
Company defendant-appellants", affirming in toto the decision** in Civil Case No. 60641 of the then Court of First Instance of
Manila, Sixth Judicial District, the dispositive portion of which reads:
"WHEREFORE, judgment is hereby rendered ordering the defendants National Development Company and Maritime Company
of the Philippines, to pay jointly and severally, to the plaintiff Development Insurance and Surety Corp., the sum of THREE
HUNDRED SIXTY FOUR THOUSAND AND NINE HUNDRED FIFTEEN PESOS AND EIGHTY SIX CENTAVOS (P364,915.86) with the
legal interest thereon from the filing of plaintiff's complaint on April 22, 1965 until fully paid, plus TEN THOUSAND PESOS
(P10,000.00) by way of damages as and for attorney's fee.
"On defendant Maritime Company of the Philippines' cross-claim against the defendant National Development Company,
judgment is hereby rendered, ordering the National Development Company to pay the cross-claimant Maritime Company of
the Philippines the total amount that the Maritime Company of the Philippines may voluntarily or by compliance to a writ of
execution pay to the plaintiff pursuant to the judgment rendered in this case.
"With costs against the defendant Maritime Company of the Philippines."
The facts of these cases as found by the Court of Appeals, are as follows:
"The evidence before us shows that in accordance with a memorandum agreement entered into between defendants NDC and
MCP on September 13, 1962, defendant NDC as the first preferred mortgagee of three ocean going vessels including one with
the name 'Dona Nati' appointed defendant MCP as its agent to manage and operate said vessel for and in its behalf and
account (Exh. A). Thus, on February 28, 1964 the E. Philipp Corporation of New York loaded on board the vessel 'Dona Nati' at
San Francisco, California, a total of 1,200 bales of American raw cotton consigned to the order of Manila Banking Corporation,
Manila and the People's Bank and Trust Company acting for and in behalf of the Pan Asiatic Commercial Company, Inc., who
represents Riverside Mills Corporation (Exhs. K-2 to K-7-A & L-2 to L-7-A). Also loaded on the same vessel at Tokyo, Japan, were
the cargo of Kyokuto Boekui, Kaisa, Ltd., consigned to the order of Manila Banking Corporation consisting of 200 cartons of
sodium lauryl sulfate and 10 cases of aluminium foil (Exhs. M & M-1). En route to Manila the vessel Dona Nati figured in a
collision at 6:04 a.m. on April 15, 1964 at Ise Bay, Japan with a Japanese vessel 'SS Yasushima Maru' as a result of which 550
bales of aforesaid cargo of American raw cotton were lost and/or destroyed, of which 535 bales as damaged were landed and
sold on the authority of the General Average Surveyor for Yen 6,045,500 and 15 bales were not landed and deemed lost (Exh.
G). The damaged and lost cargoes was worth P344,977.86 which amount, the plaintiff as insurer, paid to the Riverside Mills
Corporation as holder of the negotiable bills of lading duly endorsed (Exhs. L-7-A, K-8-A, K-2-A, K-3-A, K-4-A, K-5-A, A-2, N-3 and
R-3). Also considered totally lost were the aforesaid shipment of Kyokuto, Boekui, Kaisa Ltd., consigned to the order of Manila
Banking Corporation, Manila, acting for Guilcon, Manila. The total loss was P19, 938.00 which the plaintiff as insurer paid to
Guilcon as holder of the duly endorsed bill of lading (Exhibits M-1 and S-3). Thus, the plaintiff had paid as insurer the total
amount of P364,915.86 to the consignees or their successors-in-interest, for the said lost or damaged cargoes. Hence, plaintiff
filed this complaint to recover said amount from the defendants-NDC and MCP as owner and ship agent respectively, of the
said 'Dona Nati' vessel." (Rollo, L-49469, p. 38)
On April 22, 1965, the Development Insurance and Surety Corporation filed before the then Court of First Instance of Manila an
action for the recovery of the sum of P364,915.86 plus attorney's fees of P10,000.00 against NDC and MCP (Record on Appeal,
pp. 1-6).
May 12, 1965 a motion to dismiss (Record on Appeal, pp. 7-14). DISC filed an Opposition on May 21, 1965 to which MCP filed a
reply on May 27, 1965 (Record on Appeal, pp. 14-24). On June 29, 1965, the trial court deferred the resolution of the motion to
dismiss till after the trial on the merits (Record on Appeal, p. 32). On June 8, 1965, MCP filed its answer with counterclaim and
cross-claim against NDC.
NDC, for its part, filed its answer to DISC's complaint on May 27, 1965 (Record on Appeal, pp. 22-24). It also filed an answer to
MCP's cross-claim on July 16, 1965 (Record on Appeal, pp. 39-40). However, on October 16, 1965, NDC's answer to DISC's
complaint was stricken off from the record for its failure to answer DISC's written interrogatories and to comply with the trial
court's order dated August 14, 1965 allowing the inspection or photographing of the memorandum of agreement it executed
with MCP. Said order of October 16, 1965 likewise declared NDC in default (Record on Appeal, p. 44). On August 31, 1966, NDC
filed a motion to set aside the order of October 16, 1965, but the trial court denied it in its order dated September 21, 1966.
On November 12, 1969, after DISC and MCP presented their respective evidence, the trial court rendered a decision ordering
the defendants MCP and NDC to pay jointly and solidarily to DISC the sum of P364,915.86 plus the legal rate of interest to be
computed from the filing of the complaint of April 22, 1965, until fully paid and attorney's fees of P10,000.00. Likewise, in said
decision, the trial court granted MCP's cross-claim against NDC.
MCP interposed its appeal on December 20, 1969, while NDC filed its appeal on February 17, 1970 after its motion to set aside
the decision was denied by the trial court in its order dated February 13, 1970.
On November 17, 1978, the Court of Appeals promulgated its decision affirming in toto the decision of the trial court.
Hence these appeals by certiorari.
NDC's appeal was docketed as G.R. No. 49407, while that of MCP was docketed as G.R. No. 49469. On July 25, 1979, this Court
ordered the consolidation of the above cases (Rollo, p. 103). On August 27, 1979, these consolidated cases were given due
course (Rollo, p. 108) and submitted for decision on February 29, 1980 (Rollo, p. 136).
In its brief, NDC cited the following assignments of error:
I
THE COURT OF APPEALS ERRED IN APPLYING ARTICLE 827 OF THE CODE OF COMMERCE AND NOT SECTION 4(2a) OF
COMMONWEALTH ACT NO. 65, OTHERWISE KNOWN AS THE CARRIAGE OF GOODS BY SEA ACT IN DETERMINING THE LIABILITY
FOR LOSS OF CARGOES RESULTING FROM THE COLLISION OF ITS VESSEL "DONA NATI" WITH THE "YASUSHIMA MARU"
OCCURRED AT ISE BAY, JAPAN OR OUTSIDE THE TERRITORIAL JURISDICTION OF THE PHILIPPINES.
II
THE COURT OF APPEALS ERRED IN NOT DISMISSING THE COMPLAINT FOR REIMBURSEMENT FILED BY THE INSURER, HEREIN
PRIVATE RESPONDENT-APPELLEE, AGAINST THE CARRIER, HEREIN PETITIONER-APPELLANT. (pp. 1-2, Brief for Petitioner-
Appellant National Development Company; p. 96, Rollo)
On its part, MCP assigned the following alleged errors:
I
THE RESPONDENT COURT OF APPEALS ERRED IN NOT HOLDING THAT RESPONDENT DEVELOPMENT INSURANCE AND SURETY
CORPORATION HAS NO CAUSE OF ACTION AS AGAINST PETITIONER MARITIME COMPANY OF THE PHILIPPINES AND IN NOT
DISMISSING THE COMPLAINT.

II
THE RESPONDENT COURT OF APPEALS ERRED IN NOT HOLDING THAT THE CAUSE OF ACTION OF RESPONDENT DEVELOPMENT
INSURANCE AND SURETY CORPORATION IF ANY EXISTS AS AGAINST HEREIN PETITIONER MARITIME COMPANY OF THE
PHILIPPINES IS BARRED BY THE STATUTE OF LIMITATION AND HAS ALREADY PRESCRIBED.
III
THE RESPONDENT COURT OF APPEALS ERRED IN ADMITTING IN EVIDENCE PRIVATE RESPONDENT'S EXHIBIT "H" AND IN
FINDING ON THE BASIS THEREOF THAT THE COLLISION OF THE SS DONA NATI AND THE YASUSHIMA MARU WAS DUE TO THE
FAULT OF BOTH VESSELS INSTEAD OF FINDING THAT THE COLLISION WAS CAUSED BY THE FAULT, NEGLIGENCE AND LACK OF
SKILL OF THE COMPLEMENTS OF THE YASUSHIMA MARU WITHOUT THE FAULT OR NEGLIGENCE OF THE COMPLEMENT OF THE
SS DONA NATI.
IV
THE RESPONDENT COURT OF APPEALS ERRED IN HOLDING THAT UNDER THE CODE OF COMMERCE PETITIONER APPELLANT
MARITIME COMPANY OF THE PHILIPPINES IS A SHIP AGENT OR NAVIERO OF SS DONA NATI OWNED BY CO-PETITIONER
APPELLANT NATIONAL DEVELOPMENT COMPANY AND THAT SAID PETITIONER-APPELLANT IS SOLIDARILY LIABLE WITH SAID CO-
PETITIONER FOR LOSS OF OR DAMAGES TO CARGO RESULTING IN COLLISION OF SAID VESSEL, WITH THE JAPANESE YASUSHIMA
MARU.
V More specifically, Article 826 of the Code of Commerce provides that where collision is imputable to the personnel of a vessel,
THE RESPONDENT COURT OF APPEALS ERRED IN FINDING THAT THE LOSS OF OR DAMAGES TO THE CARGO OF 550 BALES OF
AMERICAN RAW COTTON, DAMAGES WERE CAUSED IN THE AMOUNT OF P344,977.86 INSTEAD OF ONLY P110,000 AT P200.00
PER BALE AS ESTABLISHED IN THE BILLS OF LADING AND ALSO IN HOLDING THAT PARAGRAPH 10 OF THE BILLS OF LADING HAS
NO APPLICATION IN THE INSTANT CASE THERE BEING NO GENERAL AVERAGE TO SPEAK OF.
VI
THE RESPONDENT COURT OF APPEALS ERRED IN HOLDING THE PETITIONERS NATIONAL DEVELOPMENT COMPANY AND
MARITIME COMPANY OF THE PHILIPPINES TO PAY JOINTLY AND SEVERALLY TO HEREIN RESPONDENT DEVELOPMENT
INSURANCE AND SURETY CORPORATION THE SUM OF P364,915.86 WITH LEGAL INTEREST FROM THE FILING OF THE
COMPLAINT UNTIL FULLY PAID PLUS P10,000.00 AS AND FOR ATTORNEY'S FEES INSTEAD OF SENTENCING SAID PRIVATE
RESPONDENT TO PAY HEREIN PETITIONERS ITS COUNTERCLAIM IN THE AMOUNT OF P10,000.00 BY WAY OF ATTORNEY'S FEES
AND THE COSTS.
(pp. 1-4, Brief for the Maritime Company of the Philippines; p. 121, Rollo)
The pivotal issue in these consolidated cases is the determination of which laws govern loss or destruction of goods due to
collision of vessels outside Philippine waters, and the extent of liability as well as the rules of prescription provided thereunder.
The main thrust of NDC's argument is to the effect that the Carriage of Goods by Sea Act should apply to the case at bar and
not the Civil Code or the Code of Commerce. Under Section 4 (2) of said Act, the carrier is not responsible for the loss or
damage resulting from the "act, neglect or default of the master, mariner, pilot or the servants of the carrier in the navigation
or in the management of the ship." Thus, NDC insists that based on the findings of the trial court which were adopted by the
2
Court of Appeals, both pilots of the colliding vessels were at fault and negligent, NDC would have been relieved of liability
under the Carriage of Goods by Sea Act. Instead, Article 827 of the Code of Commerce was applied and both NDC and MCP
were ordered to reimburse the insurance company for the amount the latter paid to the consignee as earlier stated.
This issue has already been laid to rest by this Court in Eastern Shipping Lines Inc. v. IAC (150 SCRA 469-470 [1987]) where it was
held under similar circumstances that "the law of the country to which the goods are to be transported governs the liability of
the common carrier in case of their loss, destruction or deterioration" (Article 1753, Civil Code). Thus, the rule was specifically
laid down that for cargoes transported from Japan to the Philippines, the liability of the carrier is governed primarily by the Civil
Code and in all matters not regulated by said Code, the rights and obligations of common carrier shall be governed by the Code
of Commerce and by special laws (Article 1766, Civil Code). Hence, the Carriage of Goods by Sea Act, a special law, is merely
suppletory to the provisions of the Civil Code.
In the case at bar, it has been established that the goods in question are transported from San Francisco, California and Tokyo,
Japan to the Philippines and that they were lost or damaged due to a collision which was found to have been caused by the
negligence or fault of both captains of the colliding vessels. Under the above ruling, it is evident that the laws of the Philippines
will apply, and it is immaterial that the collision actually occurred in foreign waters, such as Ise Bay, Japan.
Under Article 1733 of the Civil Code, 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 circumstances of each case. Accordingly, under Article 1735 of the same Code, in all cases other than
those mentioned in Article 1734 thereof, the common carrier shall be presumed to have been at fault or to have acted
negligently, unless it proves that it has observed the extraordinary diligence required by law.
It appears, however, that collision falls among matters not specifically regulated by the Civil Code, so that no reversible error
can be found in respondent court's application to the case at bar of Articles 826 to 839, Book Three of the Code of Commerce,
which deal exclusively with collision of vessels.
the owner of the vessel at fault, shall indemnify the losses and damages incurred after an expert appraisal. But more in point to
the instant case is Article 827 of the same Code, which provides that if the collision is imputable to both vessels, each one shall
suffer its own damages and both shall be solidarily responsible for the losses and damages suffered by their cargoes.
Significantly, under the provisions of the Code of Commerce, particularly Articles 826 to 839, the shipowner or carrier, is not
exempt from liability for damages arising from collision due to the fault or negligence of the captain. Primary liability is imposed
on the shipowner or carrier in recognition of the universally accepted doctrine that the shipmaster or captain is merely the
representative of the owner who has the actual or constructive control over the conduct of the voyage (Yueng Sheng Exchange
and Trading Co. v. Urrutia & Co., 12 Phil. 751 [1909]).
There is, therefore, no room for NDC's interpretation that the Code of Commerce should apply only to domestic trade and not
to foreign trade. Aside from the fact that the Carriage of Goods by Sea Act (Com. Act No. 65) does not specifically provide for
the subject of collision, said Act in no uncertain terms, restricts its application "to all contracts for the carriage of goods by sea
to and from Philippine ports in foreign trade." Under Section 1 thereof, it is explicitly provided that "nothing in this Act shall be
construed as repealing any existing provision of the Code of Commerce which is now in force, or as limiting its application." By
such incorporation, it is obvious that said law not only recognizes the existence of the Code of Commerce, but more
importantly does not repeal nor limit its application.
On the other hand, Maritime Company of the Philippines claims that Development Insurance and Surety Corporation, has no
cause of action against it because the latter did not prove that its alleged subrogers have either the ownership or special
property right or beneficial interest in the cargo in question; neither was it proved that the bills of lading were transferred or
assigned to the alleged subrogers; thus, they could not possibly have transferred any right of action to said plaintiff-appellee in
this case. (Brief for the Maritime Company of the Philippines, p. 16).
The records show that the Riverside Mills Corporation and Guilcon, Manila are the holders of the duly endorsed bills of lading
covering the shipments in question and an examination of the invoices in particular, shows that the actual consignees of the
said goods are the aforementioned companies. Moreover, no less than MCP itself issued a certification attesting to this fact.
Accordingly, as it is undisputed that the insurer, plaintiff-appellee paid the total amount of P364,915.86 to said consignees for
the loss or damage of the insured cargo, it is evident that said plaintiff-appellee has a cause of action to recover (what it has
paid) from defendant-appellant MCP (Decision, CA-G.R. No. 46513-R, p. 10; Rollo, p. 43).
MCP next contends that it can not be liable solidarily with NDC because it is merely the manager and operator of the vessel
Dona Nati, not a ship agent. As the general managing agent, according to MCP, it can only be liable if it acted in excess of its
authority.
As found by the trial court and by the Court of Appeals, the Memorandum Agreement of September 13, 1962 (Exhibit 6,
Maritime) shows that NDC appointed MCP as Agent, a term broad enough to include the concept of Ship-agent in Maritime
Law. In fact, MCP was even conferred all the powers of the owner of the vessel, including the power to contract in the name of
the NDC (Decision, CA G.R. No. 46513, p. 12; Rollo, p. 40). Consequently, under the circumstances, MCP cannot escape liability.
It is well settled that both the owner and agent of the offending vessel are liable for the damage done where both are
impleaded (Philippine Shipping Co. v. Garcia Vergara, 96 Phil. 281 [1906]); that in case of collision, both the owner and the
agent are civilly responsible for the acts of the captain (Yueng Sheng Exchange and Trading Co. v. Urrutia & Co., supra citing
Article 586 of the Code of Commerce; Standard Oil Co. of New YOrk v. Lopez Castelo, 42 Phil. 256, 262 [1921]); that while it is
true that the liability of the naviero in the sense of charterer or agent, is not expressly provided in Article 826 of the Code of
Commerce, it is clearly deducible from the general doctrine of jurisprudence under the Civil Code but more specially as regards
contractual obligations in Article 586 of the Code of Commerce. Moreover, the Court held that both the owner and agent
(Naviero) should be declared jointly and severally liable, since the obligation which is the subject of the action had its origin in a
tortious act and did not arise from contract (Verzosa and Ruiz, Rementeria y Cia v. Lim, 45 Phil. 423 [1923]). Consequently, the
agent, even though he may not be the owner of the vessel, is liable to the shippers and owners of the cargo transported by it,
for losses and damages occasioned to such cargo, without prejudice, however, to his rights against the owner of the ship, to the
extent of the value of the vessel, its equipment, and the freight (Behn, Meyer Y Co. v. McMicking et al. 11 Phil. 276 [1908]).
As to the extent of their liability, MCP insists that their liability should be limited to P200.00 per package or per bale of raw
cotton as stated in paragraph 17 of the bills of lading. Also the MCP argues that the law on averages should be applied in
determining their liability.
MCP's contention is devoid of merit. The declared value of the goods was stated in the bills of lading and corroborated no less
by invoices offered as evidence during the trial. Besides, common carriers, in the language of the court in Juan Ysmael & Co.,
Inc. v. Barretto et al.,(51 Phil. 90 [1927]) "cannot limit its liability for injury to a loss of goods where such injury or loss was
caused by its own negligence." Negligence of the captains of the colliding vessel being the cause of the collision, and the
cargoes not being jettisoned to save some of the cargoes and the vessel, the trial court and the Court of Appeals acted correctly
in not applying the law on averages (Articles 806 to 818, Code of Commerce).
MCP's claim that the fault or negligence can only be attributed to the pilot of the vessel SS Yasushima Maru and not to the
Japanese Coast pilot navigating the vessel Dona Nati, need not be discussed lengthily as said claim is not only at variance with
NDC's posture, but also contrary to the factual findings of the trial court affirmed no less by the Court of Appeals, that both
pilots were at fault for not changing their excessive speed despite the thick fog obstructing their visibility.
Finally on the issue of prescription, the trial court correctly found that the bills of lading issued allow trans-shipment of the
cargo, which simply means that the date of arrival of the ship Dona Nati on April 18, 1964 was merely tentative to give
allowances for such contingencies that said vessel might not arrive on schedule at Manila and therefore, would necessitate the
trans-shipment of cargo, resulting in consequent delay of their arrival. In fact, because of the collision, the cargo which was
supposed to arrive in Manila on April 18, 1964 arrived only on June 12, 13, 18, 20 and July 10, 13 and 15, 1964. Hence, had the
cargoes in question been saved, they could have arrived in Manila on the above-mentioned dates. Accordingly, the complaint in
the instant case was filed on April 22, 1965, that is, long before the lapse of one (1) year from the date the lost or damaged
3
cargo "should have been delivered" in the light of Section 3, sub-paragraph (6) of the Carriage of Goods by Sea Act.
PREMISES CONSIDERED, the subject petitions are DENIED for lack of merit and the assailed decision of the respondent
Appellate Court is AFFIRMED.
FACTS:
In accordance with a memorandum agreement entered into between defendants NDC andMCP, NDC appointed MCP as its
agent to manage and operate Dona Nati vessel for and inits behalf and account
E. Philipp Corporation loaded on board the vessel 1200 bales of American raw cottonconsigned to the order of Manila Banking
Corporation, Manila and the People’s Bank and Trust Company acting for and in behalf of the Pan Asiatic Commercial Company,
Inc., whorepresents Riverside Mills Corporatio; also loaded on the same vessel were the cargo of Kyokuto Boekui, Kaisa, Ltd.,
consigned to the order of Manila Banking Corporationconsisting of 200 cartons of sodium lauryl sulfate and 10 cases of
aluminum foil
En route to Manila the vessel figured in a collision with a Japanese vessel as a result of which 550 bales of aforesaid cargo of
American raw cotton as well as the cargo of KyokutoBoekui, Kaisa, Ltd were lost and/or destroyed
Development Insurance & Surety Corp. paid the insurance and filed an action for recoveryof money against NDC and MCP
ISSUES: Which laws govern loss or destruction of goods due to collision of vessels outsidePhilippine waters; 2. what is the
extent of liability as well as the rules of prescriptionprovided thereunder
HELD:
[T]he law of the country to which the goods are to be transported governs theliability of the common carrier in case of their
loss, destruction or deterioration” (Art. 1753).Since the goods in question are transported from San Francisco, California and
Tokyo, Japanto the Philippines and that they were lost or due to a collision which was found to have beencaused by the
negligence or fault of both captains of the colliding vessels the laws of thePhilippines will apply.
Art 1735: in all other than those mentioned is Article 1734 thereof, the common carriershall be presumed to have been at fault
or to have acted negligently, unless it proves thatit has observed the extraordinary diligence required by law
Collision – not one of those enumerated under Art. 1734; hence, carrier is presumed to beat fault or to have acted negligently
2. Art. 826 of the Code of Commerce: where collision is imputable to the personnel of avessel, the owner of the vessel at fault,
shall indemnify the losses and damages incurredafter an expert appraisal. But more in point
Art. 827, ditto: if the collision is imputable to both vessels, each one shall suffer its owndamages and both shall be solidarily
responsible for the losses and damages suffered bytheir cargoes
Art 826 to 839, ditto: the shipowner or carrier is not exempt from liability for damagesarising from collision due to the fault or
negligence of the captain; primary liability isimposed on the shipowner or carrier in because of the accepted doctrine that
theshipmaster or captain is merely the representative of the owner who has the actual or constructive control over the conduct
of the voyage
both the owner (NDC) and agent (MPC) of the offending vessel are liable for the damagedone where both are impleaded; that
in case of collision, both the owner and the agent arecivilly—jointly and severally— responsible for the acts of the captain since
the obligation which is the subject of the action had its origin in a tortious act and did not arise from contract.
Facts:

National Development Company (NDC) appointed Maritime Company of the Philippines (MCP) as its agent to manage and
operate its vessel, ‘Dona Nati’, for and in behalf of its account. In 1964, while en route to Japan from San Francisco, Dona Nati
collided with a Japanese vessel, ‘SS Yasushima Maru’, causing its cargo to be damaged and lost. The private respondent, as
insurer to the consigners, paid almost Php400,000.00 for said lost and damaged cargo. Hence, the private respondent instituted
an action to recover from NDC.

Issue: Which laws govern the loss and destruction of goods due to collision of vessels outside Philippine waters?

Ruling:

In a previously decided case, it was held that the law of the country to which the goods are to be transported governs the
liability of the common carrier in case of their loss, destruction or deterioration pursuant to Article 1753 of the Civil Code. It is
immaterial that the collision actually occurred in foreign waters, such as Ise Bay, Japan.

It appears, however, that collision falls among matters not specifically regulated by the Civil Code, hence, we apply Articles 826
to 839, Book Three of the Code of Commerce, which deal exclusively with collision of vessels.

SO ORDERED.

4
 namely, Kaiser Engineers International, Inc., ACER Consultants (Far East) Ltd. and Freeman Fox, Tradeinvest/CKD Tatra of the
Czech and Slovak Federal Republics, TCGI Engineering All Asia Capital and Leasing Corporation, The Salim Group of Jakarta, E. L.
Tatad vs. Sec. Garcia, April 16, 1995; Enterprises, Inc., A.M. Oreta & Co. Capitol Industrial Construction Group, Inc, and F. F. Cruz & co., Inc.

On the last day for submission of prequalification documents, the prequalification criteria proposed by the Technical Committee
FRANCISCO S. TATAD, JOHN H. OSMENA and RODOLFO G. BIAZON, petitioners,
were adopted by the PBAC. The criteria totalling 100 percent, are as follows: (a) Legal aspects — 10 percent; (b)
vs.
Management/Organizational capability — 30 percent; and (c) Financial capability — 30 percent; and (d) Technical capability —
HON. JESUS B. GARCIA, JR., in his capacity as the Secretary of the Department of Transportation and Communications, and
30 percent (Rollo, p. 122).
EDSA LRT CORPORATION, LTD., respondents.
On April 3, 1991, the Committee, charged under the BOT Law with the formulation of the Implementation Rules and
Regulations thereof, approved the same.
QUIASON, J.:
After evaluating the prequalification, bids, the PBAC issued a Resolution on May 9, 1991 declaring that of the five applicants,
This is a petition under Rule 65 of the Revised Rules of Court to prohibit respondents from further implementing and enforcing
only the EDSA LRT Consortium "met the requirements of garnering at least 21 points per criteria [sic], except for Legal Aspects,
the "Revised and Restated Agreement to Build, Lease and Transfer a Light Rail Transit System for EDSA" dated April 22, 1992,
and obtaining an over-all passing mark of at least 82 points" (Rollo, p. 146). The Legal Aspects referred to provided that the
and the "Supplemental Agreement to the 22 April 1992 Revised and Restated Agreement To Build, Lease and Transfer a Light
BOT/BT contractor-applicant meet the requirements specified in the Constitution and other pertinent laws (Rollo, p. 114).
Rail Transit System for EDSA" dated May 6, 1993.
Subsequently, Secretary Orbos was appointed Executive Secretary to the President of the Philippines and was replaced by
Petitioners Francisco S. Tatad, John H. Osmena and Rodolfo G. Biazon are members of the Philippine Senate and are suing in
Secretary Pete Nicomedes Prado. The latter sent to President Aquino two letters dated May 31, 1991 and June 14, 1991,
their capacities as Senators and as taxpayers. Respondent Jesus B. Garcia, Jr. is the incumbent Secretary of the Department of
respectively recommending the award of the EDSA LRT III project to the sole complying bidder, the EDSA LRT Consortium, and
Transportation and Communications (DOTC), while private respondent EDSA LRT Corporation, Ltd. is a private corporation
requesting for authority to negotiate with the said firm for the contract pursuant to paragraph 14(b) of the Implementing Rules
organized under the laws of Hongkong.
and Regulations of the BOT Law (Rollo, pp. 298-302).
I
In July 1991, Executive Secretary Orbos, acting on instructions of the President, issued a directive to the DOTC to proceed with
the negotiations. On July 16, 1991, the EDSA LRT Consortium submitted its bid proposal to DOTC.
In 1989, DOTC planned to construct a light railway transit line along EDSA, a major thoroughfare in Metropolitan Manila, which
shall traverse the cities of Pasay, Quezon, Mandaluyong and Makati. The plan, referred to as EDSA Light Rail Transit III (EDSA LRT
Finding this proposal to be in compliance with the bid requirements, DOTC and respondent EDSA LRT Corporation, Ltd., in
III), was intended to provide a mass transit system along EDSA and alleviate the congestion and growing transportation problem
substitution of the EDSA LRT Consortium, entered into an "Agreement to Build, Lease and Transfer a Light Rail Transit System
in the metropolis.
for EDSA" under the terms of the BOT Law (Rollo, pp. 147-177).
On March 3, 1990, a letter of intent was sent by the Eli Levin Enterprises, Inc., represented by Elijahu Levin to DOTC Secretary
Secretary Prado, thereafter, requested presidential approval of the contract.
Oscar Orbos, proposing to construct the EDSA LRT III on a Build-Operate-Transfer (BOT) basis.
In a letter dated March 13, 1992, Executive Secretary Franklin Drilon, who replaced Executive Secretary Orbos, informed
On March 15, 1990, Secretary Orbos invited Levin to send a technical team to discuss the project with DOTC.
Secretary Prado that the President could not grant the requested approval for the following reasons: (1) that DOTC failed to
conduct actual public bidding in compliance with Section 5 of the BOT Law; (2) that the law authorized public bidding as the
On July 9, 1990, Republic Act No. 6957 entitled "An Act Authorizing the Financing, Construction, Operation and Maintenance of
only mode to award BOT projects, and the prequalification proceedings was not the public bidding contemplated under the
Infrastructure Projects by the Private Sector, and For Other Purposes," was signed by President Corazon C. Aquino. Referred to
law; (3) that Item 14 of the Implementing Rules and Regulations of the BOT Law which authorized negotiated award of contract
as the Build-Operate-Transfer (BOT) Law, it took effect on October 9, 1990.
in addition to public bidding was of doubtful legality; and (4) that congressional approval of the list of priority projects under
the BOT or BT Scheme provided in the law had not yet been granted at the time the contract was awarded (Rollo, pp. 178-179).
Republic Act No. 6957 provides for two schemes for the financing, construction and operation of government projects through
private initiative and investment: Build-Operate-Transfer (BOT) or Build-Transfer (BT).
In view of the comments of Executive Secretary Drilon, the DOTC and private respondents re-negotiated the agreement. On
April 22, 1992, the parties entered into a "Revised and Restated Agreement to Build, Lease and Transfer a Light Rail Transit
In accordance with the provisions of R.A. No. 6957 and to set the EDSA LRT III project underway, DOTC, on January 22, 1991 and
System for EDSA" (Rollo, pp. 47-78) inasmuch as "the parties [are] cognizant of the fact the DOTC has full authority to sign the
March 14, 1991, issued Department Orders Nos. 91-494 and 91-496, respectively creating the Prequalification Bids and Awards
Agreement without need of approval by the President pursuant to the provisions of Executive Order No. 380 and that certain
Committee (PBAC) and the Technical Committee.
events [had] supervened since November 7, 1991 which necessitate[d] the revision of the Agreement" (Rollo, p. 51). On May 6,
1992, DOTC, represented by Secretary Jesus Garcia vice Secretary Prado, and private respondent entered into a "Supplemental
After its constitution, the PBAC issued guidelines for the prequalification of contractors for the financing and implementation of
Agreement to the 22 April 1992 Revised and Restated Agreement to Build, Lease and Transfer a Light Rail Transit System for
the project The notice, advertising the prequalification of bidders, was published in three newspapers of general circulation
EDSA" so as to "clarify their respective rights and responsibilities" and to submit [the] Supplemental Agreement to the
once a week for three consecutive weeks starting February 21, 1991.
President, of the Philippines for his approval" (Rollo, pp. 79-80).
The deadline set for submission of prequalification documents was March 21, 1991, later extended to April 1, 1991. Five groups
Secretary Garcia submitted the two Agreements to President Fidel V. Ramos for his consideration and approval. In a
responded to the invitation namely, ABB Trazione of Italy, Hopewell Holdings Ltd. of Hongkong, Mansteel International of
Memorandum to Secretary Garcia on May 6, 1993, approved the said Agreements, (Rollo, p. 194).
Mandaue, Cebu, Mitsui & Co., Ltd. of Japan, and EDSA LRT Consortium, composed of ten foreign and domestic corporations:
5
According to the agreements, the EDSA LRT III will use light rail vehicles from the Czech and Slovak Federal Republics and will
have a maximum carrying capacity of 450,000 passengers a day, or 150 million a year to be achieved-through 54 such vehicles
operating simultaneously. The EDSA LRT III will run at grade, or street level, on the mid-section of EDSA for a distance of 17.8
kilometers from F.B. Harrison, Pasay City to North Avenue, Quezon City. The system will have its own power facility (Revised and
Restated Agreement, Sec. 2.3 (ii); Rollo p. 55). It will also have thirteen (13) passenger stations and one depot in 16-hectare
government property at North Avenue (Supplemental Agreement, Sec. 11; Rollo, pp. 91-92).
Private respondents shall undertake and finance the entire project required for a complete operational light rail transit system
(Revised and Restated Agreement, Sec. 4.1; Rollo, p. 58). Target completion date is 1,080 days or approximately three years
from the implementation date of the contract inclusive of mobilization, site works, initial and final testing of the system
(Supplemental Agreement, Sec. 5; Rollo, p. 83). Upon full or partial completion and viability thereof, private respondent shall
deliver the use and possession of the completed portion to DOTC which shall operate the same (Supplemental Agreement, Sec.
5; Revised and Restated Agreement, Sec. 5.1; Rollo, pp. 61-62, 84). DOTC shall pay private respondent rentals on a monthly
basis through an Irrevocable Letter of Credit. The rentals shall be determined by an independent and internationally accredited
inspection firm to be appointed by the parties (Supplemental Agreement, Sec. 6; Rollo, pp. 85-86) As agreed upon, private
respondent's capital shall be recovered from the rentals to be paid by the DOTC which, in turn, shall come from the earnings of
the EDSA LRT III (Revised and Restated Agreement, Sec. 1, p. 5; Rollo, p. 54). After 25 years and DOTC shall have completed
payment of the rentals, ownership of the project shall be transferred to the latter for a consideration of only U.S. $1.00 (Revised
and Restated Agreement, Sec. 11.1; Rollo, p. 67).
On May 5, 1994, R.A. No. 7718, an "Act Amending Certain Sections of Republic Act No. 6957, Entitled "An Act Authorizing the
Financing, Construction, Operation and Maintenance of Infrastructure Projects by the Private Sector, and for Other Purposes"
was signed into law by the President. The law was published in two newspapers of general circulation on May 12, 1994, and
took effect 15 days thereafter or on May 28, 1994. The law expressly recognizes BLT scheme and allows direct negotiation of
BLT contracts.
II
In their petition, petitioners argued that:
(1) THE AGREEMENT OF APRIL 22, 1992, AS AMENDED BY THE SUPPLEMENTAL AGREEMENT OF MAY 6,
1993, INSOFAR AS IT GRANTS EDSA LRT CORPORATION, LTD., A FOREIGN CORPORATION, THE
OWNERSHIP OF EDSA LRT III, A PUBLIC UTILITY, VIOLATES THE CONSTITUTION AND, HENCE, IS
UNCONSTITUTIONAL;
(2) THE BUILD-LEASE-TRANSFER SCHEME PROVIDED IN THE AGREEMENTS IS NOT DEFINED NOR
RECOGNIZED IN R.A. NO. 6957 OR ITS IMPLEMENTING RULES AND REGULATIONS AND, HENCE, IS
ILLEGAL;
(3) THE AWARD OF THE CONTRACT ON A NEGOTIATED BASIS VIOLATES R; A. NO. 6957 AND, HENCE, IS
UNLAWFUL;
(4) THE AWARD OF THE CONTRACT IN FAVOR OF RESPONDENT EDSA LRT CORPORATION, LTD. VIOLATES
THE REQUIREMENTS PROVIDED IN THE IMPLEMENTING RULES AND REGULATIONS OF THE BOT LAW
AND, HENCE, IS ILLEGAL;
(5) THE AGREEMENTS VIOLATE EXECUTIVE ORDER NO 380 FOR THEIR FAILURE TO BEAR PRESIDENTIAL
APPROVAL AND, HENCE, ARE ILLEGAL AND INEFFECTIVE; AND
(6) THE AGREEMENTS ARE GROSSLY DISADVANTAGEOUS TO THE GOVERNMENT (Rollo, pp. 15-16).
Secretary Garcia and private respondent filed their comments separately and claimed that:
6
(1) Petitioners are not the real parties-in-interest and have no legal standing to institute the present petition;
(2) The writ of prohibition is not the proper remedy and the petition requires ascertainment of facts;
(3) The scheme adopted in the Agreements is actually a build-transfer scheme allowed by the BOT Law;
(4) The nationality requirement for public utilities mandated by the Constitution does not apply to private respondent;
(5) The Agreements executed by and between respondents have been approved by President Ramos and are not
disadvantageous to the government;
(6) The award of the contract to private respondent through negotiation and not public bidding is allowed by the BOT Law; and
(7) Granting that the BOT Law requires public bidding, this has been amended by R.A No. 7718 passed by the Legislature On
May 12, 1994, which provides for direct negotiation as a mode of award of infrastructure projects.
III
Respondents claimed that petitioners had no legal standing to initiate the instant action. Petitioners, however, countered that
the action was filed by them in their capacity as Senators and as taxpayers.
The prevailing doctrines in taxpayer's suits are to allow taxpayers to question contracts entered into by the national
government or government-owned or controlled corporations allegedly in contravention of the law (Kilosbayan, Inc. v.
Guingona, 232 SCRA 110 [1994]) and to disallow the same when only municipal contracts are involved (Bugnay Construction
and Development Corporation v. Laron, 176 SCRA. 240 [1989]).
For as long as the ruling in Kilosbayan on locus standi is not reversed, we have no choice but to follow it and uphold the legal
standing of petitioners as taxpayers to institute the present action.
IV
In the main, petitioners asserted that the Revised and Restated Agreement of April 22, 1992 and the Supplemental Agreement
of May 6, 1993 are unconstitutional and invalid for the following reasons:
(1) the EDSA LRT III is a public utility, and the ownership and operation thereof is limited by the
Constitution to Filipino citizens and domestic corporations, not foreign corporations like private
respondent;
(2) the Build-Lease-Transfer (BLT) scheme provided in the agreements is not the BOT or BT Scheme under
the law;
(3) the contract to construct the EDSA LRT III was awarded to private respondent not through public
bidding which is the only mode of awarding infrastructure projects under the BOT law; and
(4) the agreements are grossly disadvantageous to the government.
1. Private respondent EDSA LRT Corporation, Ltd. to whom the contract to construct the EDSA LRT III was awarded by public
respondent, is admittedly a foreign corporation "duly incorporated and existing under the laws of Hongkong" (Rollo, pp. 50, 79).
There is also no dispute that once the EDSA LRT III is constructed, private respondent, as lessor, will turn it over to DOTC, as
lessee, for the latter to operate the system and pay rentals for said use.
The question posed by petitioners is:
 Can respondent EDSA LRT Corporation, Ltd., a foreign corporation own EDSA LRT III; a public utility?
(Rollo, p. 17).
The phrasing of the question is erroneous; it is loaded. What private respondent owns are the rail tracks, rolling stocks like the
coaches, rail stations, terminals and the power plant, not a public utility. While a franchise is needed to operate these facilities
to serve the public, they do not by themselves constitute a public utility. What constitutes a public utility is not their ownership
but their use to serve the public (Iloilo Ice & Cold Storage Co. v. Public Service Board, 44 Phil. 551, 557 558 [1923]).
The Constitution, in no uncertain terms, requires a franchise for the operation of a public utility. However, it does not require a
franchise before one can own the facilities needed to operate a public utility so long as it does not operate them to serve the
public.
Section 11 of Article XII of the Constitution provides:
No franchise, certificate or any other form of authorization for the operation of a public utility shall be
granted except to citizens of the Philippines or to corporations or associations organized under the laws
of the Philippines at least sixty per centum of whose capital is owned by such citizens, nor shall such
franchise, certificate or authorization be exclusive character or for a longer period than fifty years . . .
(Emphasis supplied).
In law, there is a clear distinction between the "operation" of a public utility and the ownership of the facilities and equipment
used to serve the public.
Ownership is defined as a relation in law by virtue of which a thing pertaining to one person is completely subjected to his will
in everything not prohibited by law or the concurrence with the rights of another (Tolentino, II Commentaries and
Jurisprudence on the Civil Code of the Philippines 45 [1992]).
The exercise of the rights encompassed in ownership is limited by law so that a property cannot be operated and used to serve
the public as a public utility unless the operator has a franchise. The operation of a rail system as a public utility includes the
transportation of passengers from one point to another point, their loading and unloading at designated places and the
movement of the trains at pre-scheduled times (cf. Arizona Eastern R.R. Co. v. J.A.. Matthews, 20 Ariz 282, 180 P.159, 7 A.L.R.
1149 [1919] ;United States Fire Ins. Co. v. Northern P.R. Co., 30 Wash 2d. 722, 193 P. 2d 868, 2 A.L.R. 2d 1065 [1948]).
The right to operate a public utility may exist independently and separately from the ownership of the facilities thereof. One
can own said facilities without operating them as a public utility, or conversely, one may operate a public utility without owning
the facilities used to serve the public. The devotion of property to serve the public may be done by the owner or by the person
in control thereof who may not necessarily be the owner thereof.
This dichotomy between the operation of a public utility and the ownership of the facilities used to serve the public can be very
well appreciated when we consider the transportation industry. Enfranchised airline and shipping companies may lease their
aircraft and vessels instead of owning them themselves.
While private respondent is the owner of the facilities necessary to operate the EDSA. LRT III, it admits that it is not
enfranchised to operate a public utility (Revised and Restated Agreement, Sec. 3.2; Rollo, p. 57). In view of this incapacity,
private respondent and DOTC agreed that on completion date, private respondent will immediately deliver possession of the
LRT system by way of lease for 25 years, during which period DOTC shall operate the same as a common carrier and private
respondent shall provide technical maintenance and repair services to DOTC (Revised and Restated Agreement, Secs. 3.2, 5.1
and 5.2; Rollo, pp. 57-58, 61-62). Technical maintenance consists of providing (1) repair and maintenance facilities for the depot
and rail lines, services for routine clearing and security; and (2) producing and distributing maintenance manuals and drawings
for the entire system (Revised and Restated Agreement, Annex F).
7
Private respondent shall also train DOTC personnel for familiarization with the operation, use, maintenance and repair of the
rolling stock, power plant, substations, electrical, signaling, communications and all other equipment as supplied in the
agreement (Revised and Restated Agreement, Sec. 10; Rollo, pp. 66-67). Training consists of theoretical and live training of
DOTC operational personnel which includes actual driving of light rail vehicles under simulated operating conditions, control of
operations, dealing with emergencies, collection, counting and securing cash from the fare collection system (Revised and
Restated Agreement, Annex E, Secs. 2-3). Personnel of DOTC will work under the direction and control of private respondent
only during training (Revised and Restated Agreement, Annex E, Sec. 3.1). The training objectives, however, shall be such that
upon completion of the EDSA LRT III and upon opening of normal revenue operation, DOTC shall have in their employ personnel
capable of undertaking training of all new and replacement personnel (Revised and Restated Agreement, Annex E Sec. 5.1). In
other words, by the end of the three-year construction period and upon commencement of normal revenue operation, DOTC
shall be able to operate the EDSA LRT III on its own and train all new personnel by itself.
Fees for private respondent' s services shall be included in the rent, which likewise includes the project cost, cost of
replacement of plant equipment and spare parts, investment and financing cost, plus a reasonable rate of return thereon
(Revised and Restated Agreement, Sec. 1; Rollo, p. 54).
Since DOTC shall operate the EDSA LRT III, it shall assume all the obligations and liabilities of a common carrier. For this
purpose, DOTC shall indemnify and hold harmless private respondent from any losses, damages, injuries or death which may be
claimed in the operation or implementation of the system, except losses, damages, injury or death due to defects in the EDSA
LRT III on account of the defective condition of equipment or facilities or the defective maintenance of such equipment facilities
(Revised and Restated Agreement, Secs. 12.1 and 12.2; Rollo, p. 68).
In sum, private respondent will not run the light rail vehicles and collect fees from the riding public. It will have no dealings with
the public and the public will have no right to demand any services from it.
It is well to point out that the role of private respondent as lessor during the lease period must be distinguished from the role
of the Philippine Gaming Management Corporation (PGMC) in the case of Kilosbayan Inc. v. Guingona, 232 SCRA 110 (1994).
Therein, the Contract of Lease between PGMC and the Philippine Charity Sweepstakes Office (PCSO) was actually a
collaboration or joint venture agreement prescribed under the charter of the PCSO. In the Contract of Lease; PGMC, the lessor
obligated itself to build, at its own expense, all the facilities necessary to operate and maintain a nationwide on-line lottery
system from whom PCSO was to lease the facilities and operate the same. Upon due examination of the contract, the Court
found that PGMC's participation was not confined to the construction and setting up of the on-line lottery system. It spilled
over to the actual operation thereof, becoming indispensable to the pursuit, conduct, administration and control of the highly
technical and sophisticated lottery system. In effect, the PCSO leased out its franchise to PGMC which actually operated and
managed the same.
Indeed, a mere owner and lessor of the facilities used by a public utility is not a public utility (Providence and W.R. Co. v. United
States, 46 F. 2d 149, 152 [1930]; Chippewa Power Co. v. Railroad Commission of Wisconsin, 205 N.W. 900, 903, 188 Wis. 246
[1925]; Ellis v. Interstate Commerce Commission, Ill 35 S. Ct. 645, 646, 237 U.S. 434, 59 L. Ed. 1036 [1914]). Neither are owners
of tank, refrigerator, wine, poultry and beer cars who supply cars under contract to railroad companies considered as public
utilities (Crystal Car Line v. State Tax Commission, 174 p. 2d 984, 987 [1946]).
Even the mere formation of a public utility corporation does not ipso facto characterize the corporation as one operating a
public utility. The moment for determining the requisite Filipino nationality is when the entity applies for a franchise, certificate
or any other form of authorization for that purpose (People v. Quasha, 93 Phil. 333 [1953]).
2. Petitioners further assert that the BLT scheme under the Agreements in question is not recognized in the BOT Law and its
Implementing Rules and Regulations.
Section 2 of the BOT Law defines the BOT and BT schemes as follows:
 (a) Build-operate-and-transfer scheme — A contractual arrangement whereby the contractor undertakes
the construction including financing, of a given infrastructure facility, and the operation and maintenance
thereof. The contractor operates the facility over a fixed term during which it is allowed to charge facility
users appropriate tolls, fees, rentals and charges sufficient to enable the contractor to recover its
operating and maintenance expenses and its investment in the project plus a reasonable rate of return
thereon. The contractor transfers the facility to the government agency or local government unit
concerned at the end of the fixed term which shall not exceed fifty (50) years. For the construction stage,
the contractor may obtain financing from foreign and/or domestic sources and/or engage the services of
a foreign and/or Filipino constructor [sic]: Provided, That the ownership structure of the contractor of an
infrastructure facility whose operation requires a public utility franchise must be in accordance with the
Constitution: Provided, however, That in the case of corporate investors in the build-operate-and-transfer
corporation, the citizenship of each stockholder in the corporate investors shall be the basis for the
computation of Filipino equity in the said corporation: Provided, further, That, in the case of foreign
constructors [sic], Filipino labor shall be employed or hired in the different phases of the construction
where Filipino skills are available: Provided, furthermore, that the financing of a foreign or foreign-
controlled contractor from Philippine government financing institutions shall not exceed twenty percent
(20%) of the total cost of the infrastructure facility or project: Provided, finally, That financing from
foreign sources shall not require a guarantee by the Government or by government-owned or controlled
corporations. The build-operate-and-transfer scheme shall include a supply-and-operate situation which
is a contractual agreement whereby the supplier of equipment and machinery for a given infrastructure
facility, if the interest of the Government so requires, operates the facility providing in the process
technology transfer and training to Filipino nationals.
(b) Build-and-transfer scheme — "A contractual arrangement whereby the contractor undertakes the
construction including financing, of a given infrastructure facility, and its turnover after completion to the
government agency or local government unit concerned which shall pay the contractor its total
investment expended on the project, plus a reasonable rate of return thereon. This arrangement may be
employed in the construction of any infrastructure project including critical facilities which for security or
strategic reasons, must be operated directly by the government (Emphasis supplied).
The BOT scheme is expressly defined as one where the contractor undertakes the construction and financing in infrastructure
facility, and operates and maintains the same. The contractor operates the facility for a fixed period during which it may recover
its expenses and investment in the project plus a reasonable rate of return thereon. After the expiration of the agreed term, the
contractor transfers the ownership and operation of the project to the government.
In the BT scheme, the contractor undertakes the construction and financing of the facility, but after completion, the ownership
and operation thereof are turned over to the government. The government, in turn, shall pay the contractor its total
investment on the project in addition to a reasonable rate of return. If payment is to be effected through amortization
payments by the government infrastructure agency or local government unit concerned, this shall be made in accordance with
a scheme proposed in the bid and incorporated in the contract (R.A. No. 6957, Sec. 6).
Emphasis must be made that under the BOT scheme, the owner of the infrastructure facility must comply with the citizenship
requirement of the Constitution on the operation of a public utility. No such a requirement is imposed in the BT scheme.
There is no mention in the BOT Law that the BOT and BT schemes bar any other arrangement for the payment by the
government of the project cost. The law must not be read in such a way as to rule out or unduly restrict any variation within the
context of the two schemes. Indeed, no statute can be enacted to anticipate and provide all the fine points and details for the
multifarious and complex situations that may be encountered in enforcing the law (Director of Forestry v. Munoz, 23 SCRA 1183
[1968]; People v. Exconde, 101 Phil. 1125 [1957]; United States v. Tupasi Molina, 29 Phil. 119 [1914]).
The BLT scheme in the challenged agreements is but a variation of the BT scheme under the law.
8
As a matter of fact, the burden on the government in raising funds to pay for the project is made lighter by allowing it to
amortize payments out of the income from the operation of the LRT System.
In form and substance, the challenged agreements provide that rentals are to be paid on a monthly basis according to a
schedule of rates through and under the terms of a confirmed Irrevocable Revolving Letter of Credit (Supplemental Agreement,
Sec. 6; Rollo, p. 85). At the end of 25 years and when full payment shall have been made to and received by private respondent,
it shall transfer to DOTC, free from any lien or encumbrances, all its title to, rights and interest in, the project for only U.S. $1.00
(Revised and Restated Agreement, Sec. 11.1; Supplemental Agreement, Sec; 7; Rollo, pp. 67, .87).
A lease is a contract where one of the parties binds himself to give to another the enjoyment or use of a thing for a certain
price and for a period which may be definite or indefinite but not longer than 99 years (Civil Code of the Philippines, Art. 1643).
There is no transfer of ownership at the end of the lease period. But if the parties stipulate that title to the leased premises
shall be transferred to the lessee at the end of the lease period upon the payment of an agreed sum, the lease becomes a
lease-purchase agreement.
Furthermore, it is of no significance that the rents shall be paid in United States currency, not Philippine pesos. The EDSA LRT III
Project is a high priority project certified by Congress and the National Economic and Development Authority as falling under
the Investment Priorities Plan of Government (Rollo, pp. 310-311). It is, therefore, outside the application of the Uniform
Currency Act (R.A. No. 529), which reads as follows:
Sec. 1. — Every provision contained in, or made with respect to, any domestic obligation to wit, any
obligation contracted in the Philippines which provisions purports to give the obligee the right to require
payment in gold or in a particular kind of coin or currency other than Philippine currency or in an amount
of money of the Philippines measured thereby, be as it is hereby declared against public policy, and null,
void, and of no effect, and no such provision shall be contained in, or made with respect to, any
obligation hereafter incurred. The above prohibition shall not apply to (a) . . .; (b) transactions affecting
high-priority economic projects for agricultural, industrial and power development as may be determined
by
the National Economic Council which are financed by or through foreign funds; . . . .
3. The fact that the contract for the construction of the EDSA LRT III was awarded through negotiation and before congressional
approval on January 22 and 23, 1992 of the List of National Projects to be undertaken by the private sector pursuant to the BOT
Law (Rollo, pp. 309-312) does not suffice to invalidate the award.
Subsequent congressional approval of the list including "rail-based projects packaged with commercial development
opportunities" (Rollo, p. 310) under which the EDSA LRT III projects falls, amounts to a ratification of the prior award of the
EDSA LRT III contract under the BOT Law.
Petitioners insist that the prequalifications process which led to the negotiated award of the contract appears to have been
rigged from the very beginning to do away with the usual open international public bidding where qualified internationally
known applicants could fairly participate.
The records show that only one applicant passed the prequalification process. Since only one was left, to conduct a public
bidding in accordance with Section 5 of the BOT Law for that lone participant will be an absurb and pointless exercise
(cf. Deloso v. Sandiganbayan, 217 SCRA 49, 61 [1993]).
Contrary to the comments of the Executive Secretary Drilon, Section 5 of the BOT Law in relation to Presidential Decree No.
1594 allows the negotiated award of government infrastructure projects.
Presidential Decree No. 1594, "Prescribing Policies, Guidelines, Rules and Regulations for Government Infrastructure
Contracts," allows the negotiated award of government projects in exceptional cases. Sections 4 of the said law reads as
follows:
 Bidding. — Construction projects shall generally be undertaken by contract after competitive public
bidding. Projects may be undertaken by administration or force account or by negotiated contract only in
exceptional cases where time is of the essence, or where there is lack of qualified bidders or contractors,
or where there is conclusive evidence that greater economy and efficiency would be achieved through
this arrangement, and in accordance with provision of laws and acts on the matter, subject to the
approval of the Minister of Public Works and Transportation and Communications, the Minister of Public
Highways, or the Minister of Energy, as the case may be, if the project cost is less than P1 Million, and the
President of the Philippines, upon recommendation of the Minister, if the project cost is P1 Million or
more (Emphasis supplied).
Indeed, where there is a lack of qualified bidders or contractors, the award of government infrastructure contracts may he
made by negotiation. Presidential Decree No. 1594 is the general law on government infrastructure contracts while the BOT
Law governs particular arrangements or schemes aimed at encouraging private sector participation in government
infrastructure projects. The two laws are not inconsistent with each other but are in pari materia and should be read together
accordingly.
In the instant case, if the prequalification process was actually tainted by foul play, one wonders why none of the competing
firms ever brought the matter before the PBAC, or intervened in this case before us (cf. Malayan Integrated Industries Corp. v.
Court of Appeals, 213 SCRA 640 [1992]; Bureau Veritas v. Office of the President, 205 SCRA 705 [1992]).
The challenged agreements have been approved by President Ramos himself. Although then Executive Secretary Drilon may
have disapproved the "Agreement to Build, Lease and Transfer a Light Rail Transit System for EDSA," there is nothing in our laws
that prohibits parties to a contract from renegotiating and modifying in good faith the terms and conditions thereof so as to
meet legal, statutory and constitutional requirements. Under the circumstances, to require the parties to go back to step one of
the prequalification process would just be an idle ceremony. Useless bureaucratic "red tape" should be eschewed because it
discourages private sector participation, the "main engine" for national growth and development (R.A. No. 6957, Sec. 1), and
renders the BOT Law nugatory.
Republic Act No. 7718 recognizes and defines a BLT scheme in Section 2 thereof as:
(e) Build-lease-and-transfer — A contractual arrangement whereby a project proponent is authorized to
finance and construct an infrastructure or development facility and upon its completion turns it over to
the government agency or local government unit concerned on a lease arrangement for a fixed period
after which ownership of the facility is automatically transferred to the government unit concerned.
Section 5-A of the law, which expressly allows direct negotiation of contracts, provides:
Direct Negotiation of Contracts. — Direct negotiation shall be resorted to when there is only one
complying bidder left as defined hereunder.
(a) If, after advertisement, only one contractor applies for prequalification and it meets the
prequalification requirements, after which it is required to submit a bid proposal which is subsequently
found by the agency/local government unit (LGU) to be complying.
(b) If, after advertisement, more than one contractor applied for prequalification but only one meets the
prequalification requirements, after which it submits bid/proposal which is found by the agency/local
government unit (LGU) to be complying.
(c) If, after prequalification of more than one contractor only one submits a bid which is found by the
agency/LGU to be complying.
9
(d) If, after prequalification, more than one contractor submit bids but only one is found by the
agency/LGU to be complying. Provided, That, any of the disqualified prospective bidder [sic] may appeal
the decision of the implementing agency, agency/LGUs prequalification bids and awards committee
within fifteen (15) working days to the head of the agency, in case of national projects or to the
Department of the Interior and Local Government, in case of local projects from the date the
disqualification was made known to the disqualified bidder: Provided, furthermore, That the
implementing agency/LGUs concerned should act on the appeal within forty-five (45) working days from
receipt thereof.
Petitioners' claim that the BLT scheme and direct negotiation of contracts are not contemplated by the BOT Law has now been
rendered moot and academic by R.A. No. 7718. Section 3 of this law authorizes all government infrastructure agencies,
government-owned and controlled corporations and local government units to enter into contract with any duly prequalified
proponent for the financing, construction, operation and maintenance of any financially viable infrastructure or development
facility through a BOT, BT, BLT, BOO (Build-own-and-operate), CAO (Contract-add-operate), DOT (Develop-operate-and-transfer),
ROT (Rehabilitate-operate-and-transfer), and ROO (Rehabilitate-own-operate) (R.A. No. 7718, Sec. 2 [b-j]).
From the law itself, once and applicant has prequalified, it can enter into any of the schemes enumerated in Section 2 thereof,
including a BLT arrangement, enumerated and defined therein (Sec. 3).
Republic Act No. 7718 is a curative statute. It is intended to provide financial incentives and "a climate of minimum government
regulations and procedures and specific government undertakings in support of the private sector" (Sec. 1). A curative statute
makes valid that which before enactment of the statute was invalid. Thus, whatever doubts and alleged procedural lapses
private respondent and DOTC may have engendered and committed in entering into the questioned contracts, these have now
been cured by R.A. No. 7718 (cf. Development Bank of the Philippines v. Court of Appeals, 96 SCRA 342 [1980]; Santos V. Duata,
14 SCRA 1041 [1965]; Adong V. Cheong Seng Gee, 43 Phil. 43 [1922].
4. Lastly, petitioners claim that the agreements are grossly disadvantageous to the government because the rental rates are
excessive and private respondent's development rights over the 13 stations and the depot will rob DOTC of the best terms
during the most productive years of the project.
It must be noted that as part of the EDSA LRT III project, private respondent has been granted, for a period of 25 years,
exclusive rights over the depot and the air space above the stations for development into commercial premises for lease,
sublease, transfer, or advertising (Supplemental Agreement, Sec. 11; Rollo, pp. 91-92). For and in consideration of these
development rights, private respondent shall pay DOTC in Philippine currency guaranteed revenues generated therefrom in the
amounts set forth in the Supplemental Agreement (Sec. 11; Rollo, p. 93). In the event that DOTC shall be unable to collect the
guaranteed revenues, DOTC shall be allowed to deduct any shortfalls from the monthly rent due private respondent for the
construction of the EDSA LRT III (Supplemental Agreement, Sec. 11; Rollo, pp. 93-94). All rights, titles, interests and income over
all contracts on the commercial spaces shall revert to DOTC upon expiration of the 25-year period. (Supplemental Agreement,
Sec. 11; Rollo, pp. 91-92).
The terms of the agreements were arrived at after a painstaking study by DOTC. The determination by the proper
administrative agencies and officials who have acquired expertise, specialized skills and knowledge in the performance of their
functions should be accorded respect absent any showing of grave abuse of discretion (Felipe Ysmael, Jr. & Co. v. Deputy
Executive Secretary, 190 SCRA 673 [1990]; Board of Medical Education v. Alfonso, 176 SCRA 304 [1989]).
Government officials are presumed to perform their functions with regularity and strong evidence is necessary to rebut this
presumption. Petitioners have not presented evidence on the reasonable rentals to be paid by the parties to each other. The
matter of valuation is an esoteric field which is better left to the experts and which this Court is not eager to undertake.
That the grantee of a government contract will profit therefrom and to that extent the government is deprived of the profits if
it engages in the business itself, is not worthy of being raised as an issue. In all cases where a party enters into a contract with
the government, he does so, not out of charity and not to lose money, but to gain pecuniarily.
5. Definitely, the agreements in question have been entered into by DOTC in the exercise of its governmental function. DOTC is
the primary policy, planning, programming, regulating and administrative entity of the Executive branch of government in the
promotion, development and regulation of dependable and coordinated networks of transportation and communications
systems as well as in the fast, safe, efficient and reliable postal, transportation and communications services (Administrative
Code of 1987, Book IV, Title XV, Sec. 2). It is the Executive department, DOTC in particular that has the power, authority and
technical expertise determine whether or not a specific transportation or communication project is necessary, viable and
beneficial to the people. The discretion to award a contract is vested in the government agencies entrusted with that function
(Bureau Veritas v. Office of the President, 205 SCRA 705 [1992]).
WHEREFORE, the petition is DISMISSED.
Secretary Prado, thereafter, requested presidential approval of the contract.
Exec. Sec. Franklin Drilon, who replaced Sec. Orbos, informed Sec. Prado that the President could not grant the requested
approval for failure to comply with the requirements of the BOT Law.
In view whereof, Sec. Drilon, the DOTC and private respondent re-negotiated the agreement. On April 22, 1992, the parties
entered into a “Revised and Restated Agreement to Build, Lease and Transfer and Light Rail Transit System for EDSA. On May 6,
1992, DOTC, represented by Sec. Jesus Garcia, Sec. Prado and private respondent entered into a Supplemental Agreement to
the April Revised Agreement so as to clarify their respective rights and responsibilities.

SO ORDERED The two agreements were approved by President Fidel Ramos.

Facts:
According to the agreements, the EDSA LRT III will use light rail vehicles from the Czech and Slovak Federal Republics and will
have a maximum carrying capacity of 450,000 passengers a day. The system will have its own power facility. It will also have 13
This is a petition under Rule 65 of the Revised Rules of Court to prohibit respondents from further implementing the “Revised
passenger stations and one depot in 16-hectare government property at North Avenue.
and Restated Agreement to Build, Lease and Transfer a Light Rail Transit System for EDSA and the Supplemental Agreement to
the same project.
Private respondents shall undertake and finance the entire project required for a complete operational light rail transit system.
Target completion date is approximately 3 years from the implementation date of the contract. Upon full and partial completion
Petitioners Francisco Tatad, John Osmena and Rodolfo Biazon are members of the Philippine Senate and are suing in their
and viability thereof, private respondent shall deliver the use and possession of the completed portion to DOTC which shall
capacities as Senators and as taxpayers. Respondent Jesus Garcia was then Secretary of the DOTC, while private respondent
operate the same. DOTC shall pay private respondent rentals on aj monthly basis through an Irrevocable Letter of Credit. The
EDSA LRT CORPORATION, Ltd. is a private corporation organized under the laws of Hongkong.
rentals shall be determined by an independent and internationally accredited inspection firm to be appointed by the parties.
In 1989, DOTC planned to construct a light railway transit line along EDSA, which shall traverse the cities of Pasay, Quezon,
As agreed upon, private respondent’s capital shall be recovered from the rentals to be paid by the DOTC which, in turn, shall
Mandaluyong and Makati. The objective is to provide a mass transit system along EDSA and to alleviate the congestion in the
come from the earnings of the EDSA LRT III. After 25 years and DOTC shall have completed payment of the rentals, ownership of
metropolis.
the project shall be transferred to the latter for a consideration of only US $1.00.
On March 15, 1990, then DOTC Secretary Oscar Orbos, acting upon a proposal to construct the EDSA LRT III on a Build-Operate-
In their petition, petitioners argued that the agreement of April 22, 1992, as amended by the Supplemental Agreement of May
Transfer (BOT) basis, had invited Elijahu Levin from the Eli Levin Enterprises, Inc to send a technical team to discuss the project
6, 1993, in so far as it grants EDSA LRT COPORTATION, LTD., a foreign corporation, the ownership of EDSA LRT III, a public utility,
with the DOTC.
violates the constitution, and hence, is unconstitutional. They contend that the EDSA LRT III is a public utility, and the ownership
and operation thereof is limited by the Constitution to Filipino citizens and domestic corporations, not foreign corporations like
On July 9, 1990, RA No. 6957 referred to as the Build-Operate-Transfer (BOT) was signed by then President Corazon Aquino. The
private respondent.
said Act provides for two schemes for the financing, construction and operation of government projects through private
initiative and investment: BOT or Build-Transfer (BT).
Issue: Whether or not the EDSA LRT III assumes all the obligations and liabilities of a common carrier.
In accordance with the provisions of RA 6957 and to set the EDSA LRT III project underway, the Prequalification Bids and
Awards Committee and the Technical Committee were formed.
Held:
The prequalification criteria totalling 100% are as follows: a.) Legal aspects – 10%; b.) Management/Organizational capability –
What private respondent owns are the rail tracks, rolling stocks like the coaches, rail stations, terminals and the power plant,
30%; c.) Financial capability- 30%; and d.) Technical capability – 30%.
not a public utility. While a franchise is needed to operate these facilities to serve the public, they do not by themselves
constitute a public utility. What constitutes a public utility is not their ownership but their use to serve the public.
Of the 5 applicants, only the EDSA LRT Consortium “met the requirements of garnering at least 21 points per criteria, except for
Legal aspects, and obtaining an over-all passing mark of at least 82 points.” The Legal aspects referred to provided that the
Section 11 of Article XII of the Constitution provides:
BOT/BT contractor-applicant meet the requirements specified in the Constitution and other pertinent laws.
No franchise, certificate or any other form of authorization for the operation of a public utility shall be granted except to
Subsequently, Sec. Orbos was appointed Executive Secretary to the President of the Philippines and was replaced by Nicomedes
citizens of the Philippines or to corporations or associations organized under the laws of the Philippines at least sixty per
Prado. The latter recommended the award of the EDSA LRT III project to the sole complying bidder, the EDSA LRT Consortium,
centum of whose capital is owned by such citizens, nor shall such franchise, certificate or authorization be exclusive character
and requested for authority to negotiate with the said firm for the contract pursuant to the BOT Law. Authority was granted to
or for a longer period than 50 years.
proceed with the negotiations. The EDSA LRT Consortium submitted its proposal to DOTC.
The right to operate a public utility may exist independently and separately from the ownership of the facilities thereof. One
Finding the proposal to be in compliance with the bid requirements, DOTC and EDSA LRT Corporation, Ltd., in substitution of
can own said facilities without operating them as a public utility, or conversely, one may operate a public utility without owning
the EDSA LRT Consortium, entered into an “An Agreement to Build, Lease and Transfer a Light Rail Transit System for EDSA”
under the terms of the BOT Law.

10
the facilities used to serve the public. The devotion of property to serve the public may be done by the owner or by the person
in control thereof who may not necessarily be the owner thereof.

While private respondent is the owner of the facilities necessary to operate the EDSA LRT III, it admits that it is not enfranchised
to operate a public utility. In view of this incapacity, private respondent and DOTC agreed that on completion date, private
respondent will immediately deliver possession of the LRT system by of lease for 25 years, during which period DOTC shall
operate the same as a common carrier and private respondent shall provide technical maintenance and repair services to
DOTC.

Since DOTC shall operate the EDSA LRT III, it shall assume all the obligations and liabilities of a common carrier. For this
purpose, DOTC shall indemnify and hold harmless private respondent from any losses, damages, injuries or death which may be
claimed in the operation or implementation of the system, except losses, damages, injury or death due to defects in the EDSA
LRT III on account of the defective condition of equipment or facilities or the defective maintenance of such equipment
facilities.

Wherefore, the petition is DISMISSED

11
Radio Communication of the Phils, Inc. NTC, 150 SCRA 450 Section 13. (a) the Commission shall have jurisdiction, supervision, and control over all public services and their
franchises, equipment and other properties, and in the exercise of its authority, it shall have the necessary powers
and the aid of public force: ...
G.R. No. L-68729 May 29, 1987
Section 14. The following are exempted from the provisions of the preceding section:
RADIO COMMUNICATIONS OF THE PHILIPPINES, INC., petitioner,
vs.
(d) Radio companies except with respect to the fixing of rates;
NATIONAL TELECOMMUNICATIONS COMMISSION and KAYUMANGGI RADIO NETWORK INCORPORATED, respondents.
Section 15. With the exception of those enumerated in the preceding section, no public service shall operate in the
GUTIERREZ, JR, J.:
Philippines without possessing a valid and subsisting certificate from the Public Service Commission, known as
"certificate of public convenience," or "certificate of convenience and public necessity," as the case may be, to the
This petition seeks the reversal of the decision of the National Telecommunications Commission (NTC) which ordered petitioner
effect that the operation of said service and the authorization to do business will promote the public interests in a
Radio Communications of the Philippines, Incorporated (RCPI) to desist from operating its radio telephone services in
proper and suitable manner. ...
Catarman, Northern Samar; San Jose, Occidental Mindoro; and Sorsogon, Sorsogon.
We find no merit in the petitioner's contention.
Petitioner has been operating a radio communications system since 1957 under its legislative franchise granted by Republic Act
No. 2036 which was enacted on June 23, 1957.
Pursuant to Presidential Decree No. 1 dated September 23,1972, reorganizing the executive branch of the National
Government, the Public Service Commission was abolished and its functions were transferred to three specialized regulatory
In 1968, the petitioner established a radio telegraph service in Sorsogon, Sorsogon. In 1971, another radio telegraph service
boards, as follows: the Board of Transportation, the Board of Communications and the Board of Power and Waterworks. The
was put up in San Jose, Mindoro followed by another in Catarman, Samar in 1976. The installation of radio telephone services
functions so transferred were still subject to the limitations provided in sections 14 and 15 of the Public Service Law, as
started in 1971 in San Jose, Mindoro; then in Sorsogon, Sorsogon and Catarman, Samar in 1983.
amended. With the enactment of Executive Order No. 546 on July 23, 1979 implementing P.D. No.1, the Board of
Communications and the Telecommunications Control Bureau were abolished and their functions were transferred to the
In a decision dated June 24, 1980 in NTC Case No. 80-08, private respondent Kayumanggi Radio Network Incorporated was
National Telecommunications Commission (Sec. 19(d), Executive Order No. 546). Section 15 of said Executive Order spells out
authorized by the public respondent to operate radio communications systems in Catarman, Samar and in San Jose, Mindoro.
the functions of the National Telecommunications Commission as follows:
On December 14, 1983, the private respondent filed a complaint with the NTC alleging that the petitioner was operating in
Sec. 15. Functions of the Commission.-The Commission shall exercise the following functions:
Catarman, Samar and in San Jose, Mindoro without a certificate of public covenience and necessity. The petitioner, on the other
hand, counter-alleged that its telephone services in the places subject of the complaint are covered by the legislative franchise
a. Issue Certificate of Public Convenience for the operation of communications utilities and services, radio communications
recognized by both the public respondent and its predecessor, the Public Service Commission. In its supplemental reply, the
petitions systems, wire or wireless telephone or telegraph system, radio and television broadcasting system and other similar
petitioner further stated that it has been in operation in the questioned places long before private respondent Kayumanggi filed
public utilities;
its application to operate in the same places.
b. Establish, prescribe and regulate areas of operation of particular operators of public service communications; and determine
After conducting a hearing, NTC, in its decision dated August 22, 1984 ordered petitioner RCPI to immediately cease or desist
and prescribe charges or rates pertinent to the operation of such public utility facilities and services except in cases where
from the operation of its radio telephone services in Catarman Northern Samar; San Jose, Occidental Mindoro; and Sorsogon,
charges or rates are established by international bodies or associations of which the Philippines is a participating member or by
Sorsogon stating that under Executive Order No. 546, a certificate of public convenience and necessity is mandatory for the
bodies recognized by the Philippine Government as the proper arbiter of such charges or rates;
operation of communication utilities and services including radio communications.
c. Grant permits for the use of radio frequencies for wireless telephone and telegraph systems and radio communication
On September 4, 1984, the petitioner filed a motion for reconsideration which was denied in an order dated September 12,
systems including amateur radio stations and radio and television broadcasting systems;
1984.
d. Sub-allocate series of frequencies of bands allocated by the International Telecommunications Union to the specific services;
On October 1, 1984, the present petition was filed raising the issue of whether or not petitioner RCPI, a grantee of a legislative
franchise to operate a radio company, is required to secure a certificate of public convenience and necessity before it can validly
e. Establish and prescribe rules, regulations, standards, specifications in all cases related to the issued Certificate of Public
operate its radio stations including radio telephone services in Catarman, Northern Samar; San Jose, Occidental Mindoro; and
Convenience and administer and enforce the same;
Sorsogon, Sorsogon.
f. Coordinate and cooperate with government agencies and other entities concerned with any aspect involving communications
The petitioner's main argument states that the abolition of the Public Service Commission under Presidential Decree No. 1 and
with a view to continuously improve the communications service in the country;
the creation of the National Telecommunications Commission under Executive Order No. 546 to replace the defunct Public
Service Commission did not affect sections 14 and 15 of the Public Service Law (Commonwealth Act. No. 146, as amended).
g. Promulgate such rules and regulations, as public safety and interest may require, to encourage a larger and more effective
use of communications, radio and television broadcasting facilities, and to maintain effective competition among private
The provisions of the Public Service Law pertinent to the petitioner's allegation are as follows:
entities in these activities whenever the Commission finds it reasonably feasible;

h. Supervise and inspect the operation of radio stations and telecommunications facilities;

12
i. Undertake the examination and licensing of radio operators;
j. Undertake, whenever necessary, the registration of radio transmitters and transceivers; and
k. Perform such other functions as may be prescribed by law.
It is clear from the aforequoted provision that the exemption enjoyed by radio companies from the jurisdiction of the Public
Service Commission and the Board of Communications no longer exists because of the changes effected by the Reorganization
Law and implementing executive orders. The petitioner's claim that its franchise cannot be affected by Executive Order No. 546
on the ground that it has long been in operation since 1957 cannot be sustained.
A franchise started out as a "royal privilege or (a) branch of the King's prerogative, subsisting in the hands of a subject." This
definition was given by Finch, adopted by Blackstone, and accepted by every authority since (State v. Twin Village Water Co., 98
Me 214, 56 A 763 (1903)). Today, a franchise, being merely a privilege emanating from the sovereign power of the state and
owing its existence to a grant, is subject to regulation by the state itself by virtue of its police power through its administrative
agencies. We ruled in Pangasinan transportation Co., Inc. v. Public Service Commission (70 Phil. 221) that:
... statutes enacted for the regulation of public utilities, being a proper exercise by the State of its police power, are
applicable not only to those public utilities coming into existence after its passage, but likewise to those already
established and in operation ...
Executive Order No. 546, being an implementing measure of P.D. No. I insofar as it amends the Public Service Law (CA No. 146,
as amended) is applicable to the petitioner who must be bound by its provisions. The petitioner cannot install and operate
radio telephone services on the basis of its legislative franchise alone.
The position of the petitioner that by the mere grant of its franchise under RA No. 2036 it can operate a radio communications
system anywhere within the Philippines is erroneous. Section 1 of said statute reads:
Section 1. Subject to the provisions of the Constitution, and to the provisions, not inconsistent herewith, of Act
Numbered Three thousand eight hundred and forty-six, entitled.' An Act providing for the regulation of radio
stations and radio communications in the Philippine Islands, and for other purposes;' Commonwealth Act Numbered
One hundred forty-six, known as the Public Service Act, and their amendments, and other applicable laws, there is
hereby granted to the Radio Communications of the Philippines, its successors or assigns, the right and privilege of
constructing, installing, establishing and operating in the Philippines, at such places as the said corporation may
select and the Secretary of Public Works and Communications may approve, radio stations for the reception and
transmission of wireless messages on radiotelegraphy and/or radiotelephone, including both coastal and marine
telecommunications, each station to consist of two radio apparatus comprising of a receiving and sending radio
apparatus. (Emphasis supplied).
Section 4(a) of the same Act further provides that:
Sec. 4(a). This franchise shall not take effect nor shall any powers thereunder be exercised by the grantee until
the Secretary of Public works and Communications shall have allotted to the grantee the frequencies and wave
lengths to be used, and issued to the grantee a license for such case. (Emphasis supplied)
Thus, in the words of R.A. No. 2036 itself, approval of the then Secretary of Public Works and Communications was a
precondition before the petitioner could put up radio stations in areas where it desires to operate. It has been repeated time
and again that where the statutory norm speaks unequivocally, there is nothing for the courts to do except to apply it. The law,
leaving no doubt as to the scope of its operation, must be obeyed. (Gonzaga v. Court of Appeals, 51 SCRA 381).
The records of the case do not show any grant of authority from the then Secretary of Public Works and Communications
before the petitioner installed the questioned radio telephone services in San Jose, Mindoro in 1971. The same is true as
13
regards the radio telephone services opened in Sorsogon, Sorsogon and Catarman, Samar in 1983. No certificate of public
convenience and necessity appears to have been secured by the petitioner from the public respondent when such
certificate,was required by the applicable public utility regulations (See executive Order No. 546, sec. 15, supra.; Philippine Long
Distance Telephone Co. v. City of Davao, 15 SCRA 75; Olongapo Electric Light and Power Corp. v. National Power Corporation, et
al., G.R. No. L-24912, promulgated April 9, 1987.)
It was well within the powers of the public respondent to authorize the installation by the private respondent network of radio
communications systems in Catarman, Samar and San Jose, Mindoro. Under the circumstances of this case, the mere fact that
the petitioner possesses a franchise to put up and operate a radio communications system in certain areas is not an insuperable
obstacle to the public respondent's issuing the proper certificate to an applicant desiring to extend the same services to those
areas. The Constitution mandates that a franchise cannot be exclusive in nature nor can a franchise be granted except that it
must be subject to amendment, alteration, or even repeal by the legislature when the common good so requires. (Art. XII, sec.
11 of the 1986 Constitution). There is an express provision in the petitioner's franchise which provides compliance with the
above mandate R.A. 2036, sec. 15).
In view of the foregoing, we find no reason to disturb the public respondent's findings of fact, and conclusions of law insofar as
the private respondent was authorized to operate in Catarman, Samar and San Jose, Mindoro. As a rule, the Commission's
findings of fact, if supported by substantial evidence, are conclusive upon this Court. We may modify or ignore them only when
it clearly appears that there is no evidence to support reasonably such a conclusion. (Halili v. Daplas, 14 SCRA 14). The
petitioner has not shown why the private respondent should be denied the authority to operate its services in Samar and
Mindoro. It has not overcome the presumption that when the public respondent disturbed the petitioner's monopoly in certain
areas, it was doing so pursuant to public interest and the common good.
WHEREFORE, the challenged order of the public respondent dated August 22, 1984 is hereby AFFIRMED. The petition is
dismissed for lack of merit.
SO ORDERED.
Facts:
RCPI operated a radio communications system since 1957 under legislative franchise granted by Republic Act No. 2036 (1957).
The petitioner established a radio telegraph service in Sorsogon, Sorsogon (1968). in San Jose, Mindoro (1971), and Catarman,
Samar (1983).
Kayumanggi Radio, on the other hand, was given the rights by the NTC to operate radio networks in the same areas.
RCPI filed a complaint in the NTC and sought to prohibit Kayumanggi Radio to operate in the same areas. The NTC ruled against
the RTC’s favor and commanded RCPI to desist in the operation of radio telegraphs in the three areas.
RTC filed a MFR in 1984. This was denied.
In the SC, Petitioner alleged that the Public Service Law had sections that was still in effect even if the Public Service
Commission was abolished and the NTC was established.
These were S13- the Commission shall have jurisdiction, supervision, and control over all public services and their franchises
S 14- Radio companies are exempt from the commission’s authority except with respect to the fixing of rates
And S 15-no public service shall operate in the Philippines without possessing a valid and subsisting certificate from the Public
Service Commission, known as "certificate of public convenience,"
Issue: Whether or not petitioner RCPI, a grantee of a legislative franchise to operate a radio company, is required to secure
a certificate of public convenience and necessity before it can validly operate its radio stations including radio telephone
services in the aforementioned areas
Held:

Yes. Petition dismissed.

Ratio:

Presidential Decree No. 1- the Public Service Commission was abolished and its functions were transferred to three specialized
regulatory boards, as follows: the Board of Transportation, the Board of Communications and the Board of Power and
Waterworks. The functions so transferred were still subject to the limitations provided in sections 14 and 15 of the Public
Service Law, as amended.

The succeeding Executive Order No. 546- the Board of Communications and the Telecommunications Control Bureau were
abolished and their functions were transferred to the National Telecommunications Commission
Section 15- b. Establish, prescribe and regulate areas of operation of particular operators of public service communications; and
determine and prescribe charges or rates pertinent to the operation of such public utility facilities and services except in cases
where charges or rates are established by international bodies or associations of which the Philippines is a participating
member or by bodies recognized by the Philippine Government as the proper arbiter of such charges or rates;

c. Grant permits for the use of radio frequencies for wireless telephone and telegraph systems and radio communication
systems including amateur radio stations and radio and television broadcasting systems;
The exemption enjoyed by radio companies from the jurisdiction of the Public Service Commission and the Board of
Communications no longer exists because of the changes effected by the Reorganization Law and implementing
executive orders.

The petitioner's claim that its franchise cannot be affected by Executive Order No. 546 on the ground that it has long been in
operation since 1957 cannot be sustained.
Today, a franchise, being merely a privilege emanating from the sovereign power of the state and owing its existence to a grant,
is subject to regulation by the state itself by virtue of its police power through its administrative agencies. Pangasinan
transportation Co.- statutes enacted for the regulation of public utilities, being a proper exercise by the State of its police
power, are applicable not only to those public utilities coming into existence after its passage, but likewise to those already
established and in operation .

Executive Order No. 546, being an implementing measure of P.D. No. I insofar as it amends the Public Service Law (CA No. 146,
as amended) is applicable to the petitioner who must be bound by its provisions.
The position of the petitioner that by the mere grant of its franchise under RA No. 2036 it can operate a radio communications
system anywhere within the Philippines is erroneous.

Sec. 4(a). This franchise shall not take effect nor shall any powers thereunder be exercised by the grantee until the Secretary of
Public works and Communications shall have allotted to the grantee the frequencies and wave lengths to be used, and issued to
the grantee a license for such case.

Thus, in the words of R.A. No. 2036 itself, approval of the then Secretary of Public Works and Communications was a
precondition before the petitioner could put up radio stations in areas where it desires to operate.
The records of the case do not show any grant of authority from the then Secretary of Public Works and Communications
before the petitioner installed the questioned radio telephone services in San Jose, Mindoro in 1971. The same is true as
regards the radio telephone services opened in Sorsogon, Sorsogon and Catarman, Samar in 1983. No certificate of public
convenience and necessity appears to have been secured by the petitioner from the public respondent when
such certificate,was required by the applicable public utility regulations.

The Constitution mandates that a franchise cannot be exclusive in nature nor can a franchise be granted except that it must be
subject to amendment, alteration, or even repeal by the legislature when the common good so requires.

14
British Airways vs. CA, 218 SCRA 699; On August 8, 1981, private respondent received a telex message from its principal cancelling the hiring of the remaining
recruited workers due to the delay in transporting the workers to Jeddah.5
G.R. No. 92288 February 9, 1993
On January 27, 1982, private respondent filed a complaint for damages against petitioner with the Regional Trial Court of
BRITISH AIRWAYS, INC., petitioner,
Manila, Branch 1 in Civil Case No. 82-4653.
vs.
THE HON. COURT OF APPEALS, Twelfth Division, and FIRST INTERNATIONAL TRADING AND GENERAL SERVICES, respondents.
On the other hand, petitioner, alleged in its Answer with counterclaims that it received a telex message from Jeddah on March
20, 1981 advising that the principal of private respondent had prepaid the airfares of 100 persons to transport private
NOCON, J.:
respondent's contract workers from Manila to Jeddah on or before March 30, 1981. However, due to the unavailability of space
and limited time, petitioner had to return to its sponsor in Jeddah the prepaid ticket advice consequently not even one of the
This is a petition for review on certiorari to annul and set aside the decision dated November 15, 1989 of the Court of
alleged 93 contract workers were booked in any of its flights.
Appeals1 affirming the decision of the trial court2 in ordering petitioner British Airways, Inc. to pay private respondent First
International Trading and General Services actual damages, moral damages, corrective or exemplary damages, attorney's fees
On June 5, 1981, petitioner received another prepaid ticket advice to transport 16 contract workers of private respondent to
and the costs as well as the Resolution dated February 15, 19903 denying petitioner's Motion for Reconsideration in the
Jeddah but the travel agent of the private respondent booked only 10 contract workers for petitioner's June 9, 1981 flight.
appealed decision.
However, only 9 contract workers boarded the scheduled flight with 1 passenger not showing up as evidenced by the Philippine
Airlines' passenger manifest for Flight BA-020 (Exhibit "7", "7-A", "7-B" and "7-C").6
It appears on record that on February 15, 1981, private respondent First International Trading and General Services Co., a duly
licensed domestic recruitment and placement agency, received a telex message from its principal ROLACO Engineering and
Thereafter, private respondent's travel agent booked seats for 5 contract workers on petitioner's July 4, 1981 flight but said
Contracting Services in Jeddah, Saudi Arabia to recruit Filipino contract workers in behalf of said principal. 4
travel agent cancelled the booking of 2 passengers while the other 3 passengers did not show up on said flight.
During the early part of March 1981, said principal paid to the Jeddah branch of petitioner British Airways, Inc. airfare tickets
Sometime in July 1981, the travel agent of the private respondent booked 7 more contract workers in addition to the previous 5
for 93 contract workers with specific instruction to transport said workers to Jeddah on or before March 30, 1981.
contract workers who were not able to board the July 4, 1981 flight with the petitioner's July 7, 1981 flight which was accepted
by petitioner subject to reconfirmation.
As soon as petitioner received a prepaid ticket advice from its Jeddah branch to transport the 93 workers, private respondent
was immediately informed by petitioner that its principal had forwarded 93 prepaid tickets. Thereafter, private respondent
However on July 6, 1981, petitioner's computer system broke down which resulted to petitioner's failure to get a
instructed its travel agent, ADB Travel and Tours. Inc., to book the 93 workers with petitioner but the latter failed to fly said
reconfirmation from Saudi Arabia Airlines causing the automatic cancellation of the bookings of private respondent's 12
workers, thereby compelling private respondent to borrow money in the amount of P304,416.00 in order to purchase airline
contract workers. In the morning of July 7, 1981, the computer system of the petitioner was reinstalled and immediately
tickets from the other airlines as evidenced by the cash vouchers (Exhibits "B", "C" and "C-1 to C-7") for the 93 workers it had
petitioner tried to reinstate the bookings of the 12 workers with either Gulf Air or Saudi Arabia Airlines but both airlines replied
recruited who must leave immediately since the visas of said workers are valid only for 45 days and the Bureau of Employment
that no seat was available on that date and had to place the 12 workers on the wait list. Said information was duly relayed to
Services mandates that contract workers must be sent to the job site within a period of 30 days.
the private respondent and the 12 workers before the scheduled flight.
Sometime in the first week of June, 1981, private respondent was again informed by the petitioner that it had received a
After due trial on or on August 27, 1985, the trial court rendered its decision, the dispositive portion of which reads as follows:
prepaid ticket advice from its Jeddah branch for the transportation of 27 contract workers. Immediatety, private respondent
instructed its travel agent to book the 27 contract workers with the petitioner but the latter was only able to book and confirm
WHEREFORE, in view of all the foregoing, this Court renders judgment:
16 seats on its June 9, 1981 flight. However, on the date of the scheduled flight only 9 workers were able to board said flight
while the remaining 7 workers were rebooked to June 30, 1981 which bookings were again cancelled by the petitioner without
1. Ordering the defendant to pay the plaintiff actual damages in the sum of P308,016.00;
any prior notice to either private respondent or the workers. Thereafter, the 7 workers were rebooked to the July 4,1981 flight
of petitioner with 6 more workers booked for said flight. Unfortunately, the confirmed bookings of the 13 workers were again
2. Ordering defendant to pay moral damages to the plaintiff in the amount of P20,000.00;
cancelled and rebooked to July 7, 1981.
3. Ordering the defendant to pay the plaintiff P10,000.00 by way of corrective or exemplary damages;
On July 6, 1981, private respondent paid the travel tax of the said workers as required by the petitioner but when the receipt of
the tax payments was submitted, the latter informed private respondent that it can only confirm the seats of the 12 workers on
4. Ordering the defendant to pay the plaintiff 30% of its total claim for and as attorney's fees; and
its July 7, 1981 flight. However, the confirmed seats of said workers were again cancelled without any prior notice either to the
private respondent or said workers. The 12 workers were finally able to leave for Jeddah after private respondent had bought
tickets from the other airlines. 5. To pay the costs.7

As a result of these incidents, private respondent sent a letter to petitioner demanding compensation for the damages it had
incurred by the latter's repeated failure to transport its contract workers despite confirmed bookings and payment of the
corresponding travel taxes.
On July 23, 1981, the counsel of private respondent sent another letter to the petitioner demanding the latter to pay the
amount of P350,000.00 representing damages and unrealized profit or income which was denied by the petitioner.
On March 13, 1986, petitioner appealed said decision to respondent appellate court after the trial court denied its Motion for
Reconsideration on February 28, 1986.
On November 15, 1989, respondent appellate court affirmed the decision of the trial court, the dispositive portion of which
reads:
WHEREFORE, the decision appealed from is hereby AFFIRMED with costs against the appellant. 8

15
On December 9, 1989, petitioner filed a Motion for Reconsideration which was also denied.
Hence, this petition.
It is the contention of petitioner that private respondent has no cause of action against it there being no perfected contract of
carriage existing between them as no ticket was ever issued to private respondent's contract workers and, therefore, the
obligation of the petitioner to transport said contract workers did not arise. Furthermore, private respondent's failure to attach
any ticket in the complaint further proved that it was never a party to the alleged transaction.
Petitioner's contention is untenable.
Private respondent had a valid cause of action for damages against petitioner. A cause of action is an act or omission of one
party in violation of the legal right or rights of the other.9 Petitioner's repeated failures to transport private respondent's
workers in its flight despite confirmed booking of said workers clearly constitutes breach of contract and bad faith on its part. In
resolving petitioner's theory that private respondent has no cause of action in the instant case, the appellate court correctly
held that:
In dealing with the contract of common carriage of passengers for purpose of accuracy, there are two (2)
aspects of the same, namely: (a) the contract "to carry (at some future time)," which contract is
consensual and is necessarily perfected by mere consent (See Article 1356, Civil Code of the Philippines),
and (b) the contract "of carriage" or "of common carriage" itself which should be considered as a real
contract for not until the carrier is actually used can the carrier be said to have already assumed the
obligation of a carrier. (Paras, Civil Code Annotated, Vol. V, p. 429, Eleventh Ed.)
In the instant case, the contract "to carry" is the one involved which is consensual and is perfected by the
mere consent of the parties.
There is no dispute as to the appellee's consent to the said contract "to carry" its contract workers from
Manila to Jeddah. The appellant's consent thereto, on the other hand, was manifested by its acceptance
of the PTA or prepaid ticket advice that ROLACO Engineering has prepaid the airfares of the appellee's
contract workers advising the appellant that it must transport the contract workers on or before the end
of March, 1981 and the other batch in June, 1981.
Even if a PTA is merely an advice from the sponsors that an airline is authorized to issue a ticket and thus
no ticket was yet issued, the fact remains that the passage had already been paid for by the principal of
the appellee, and the appellant had accepted such payment. The existence of this payment was never
objected to nor questioned by the appellant in the lower court. Thus, the cause or consideration which is
the fare paid for the passengers exists in this case.
The third essential requisite of a contract is an object certain. In this contract "to carry", such an object is
the transport of the passengers from the place of departure to the place of destination as stated in the
telex.
Accordingly, there could be no more pretensions as to the existence of an oral contract of carriage
imposing reciprocal obligations on both parties.
In the case of appellee, it has fully complied with the obligation, namely, the payment of the fare and its
willingness for its contract workers to leave for their place of destination.
On the other hand, the facts clearly show that appellant was remiss in its obligation to transport the
contract workers on their flight despite confirmation and bookings made by appellee's travelling agent.
16
Besides, appellant knew very well that time was of the essence as the prepaid ticket advice had specified
the period of compliance therewith, and with emphasis that it could only be used if the passengers fly on
BA. Under the circumstances, the appellant should have refused acceptance of the PTA from appellee's
principal or to at least inform appellee that it could not accommodate the contract workers.
While there is no dispute that ROLACO Engineering advanced the payment for the airfares of the
appellee's contract workers who were recruited for ROLACO Engineering and the said contract workers
were the intended passengers in the aircraft of the appellant, the said contract "to carry" also involved
the appellee for as recruiter he had to see to it that the contract workers should be transported to
ROLACO Engineering in Jeddah thru the appellant's transportation. For that matter, the involvement of
the appellee in the said contract "to carry" was well demonstrated when
the appellant upon receiving the PTA immediately advised the appellee thereof. 10
Petitioner also contends that the appellate court erred in awarding actual damages in the amount of P308,016.00 to private
respondent since all expenses had already been subsequently reimbursed by the latter's principal.
In awarding actual damages to private respondent, the appellate court held that the amount of P308,016.00 representing
actual damages refers to private respondent's second cause of action involving the expenses incurred by the latter which were
not reimbursed by ROLACO Engineering. However, in the Complaint 11 filed by private respondent, it was alleged that private
respondent suffered actual damages in the amount of P308,016.00 representing the money it borrowed from friends and
financiers which is P304,416.00 for the 93 airline tickets and P3,600.00 for the travel tax of the 12 workers. It is clear therefore
that the actual damages private respondent seeks to recover are the airline tickets and travel taxes it spent for its workers
which were already reimbursed by its principal and not for any other expenses it had incurred in the process of recruiting said
contract workers. Inasmuch as all expenses including the processing fees incurred by private respondent had already been paid
for by the latter's principal on a staggered basis as admitted in open court by its managing director, Mrs. Bienvenida
Brusellas. 12 We do not find anymore justification in the appellate court's decision in granting actual damages to private
respondent.
Thus, while it may be true that private respondent was compelled to borrow money for the airfare tickets of its contract
workers when petitioner failed to transport said workers, the reimbursements made by its principal to private respondent failed
to support the latter's claim that it suffered actual damages as a result of petitioner's failure to transport said workers. It is
undisputed that private respondent had consistently admitted that its principal had reimbursed all its expenses.
Article 2199 of the Civil Code provides that:
Except as provided by law or by stipulations, one is entitled to an adequate compensation only for such
pecuniary loss suffered by him as he has duly proved. Such compensation is referred to as actual or
compensatory damages.
Furthermore, actual or compensatory damages cannot be presumed, but must be duly proved, and proved with reasonable
degree of certainty. A court cannot rely on speculation, conjecture or guesswork as to the fact and amount of damages, but
must depend upon competent proof that they have suffered and on evidence of the actual amount thereof. 13
However, private respondent is entitled to an award of moral and exemplary damages for the injury suffered as a result of
petitioner's failure to transport the former's workers because of the latter's patent bad faith in the performance of its
obligation. As correctly pointed out by the appellate court:
As evidence had proved, there was complete failure on the part of the appellant to transport the 93
contract workers of the appellee on or before March 30, 1981 despite receipt of the payment for their
airfares, and acceptance of the same by the appellant, with specific instructions from the appellee's
principal to transport the contract workers on or before March 30, 1981. No previous notice was ever
registered by the appellant that it could not comply with the same. And then followed the detestable act
 of appellant in unilaterally cancelling, booking and rebooking unreasonably the flight of appellee's
contract workers in June to July, 1981 without prior notice. And all of these actuations of the appellant
indeed constitute malice and evident bad faith which had caused damage and besmirched the reputation
and business image of the appellee. 14
As to the alleged damages suffered by the petitioner as stated in its counterclaims, the record shows that no claim for said
damages was ever made by the petitioner immediately after their alleged occurrence therefore said counterclaims were mere
afterthoughts when private respondent filed the present case.
WHEREFORE, the assailed decision is hereby AFFIRMED with the MODIFICATION that the award of actual damages be deleted
from said decision.
SO ORDERED.
Lessons Applicable: Actionable Document (Transportation)
FACTS:
February 15, 1981: First International Trading and General Services Co. (First Int'l), a duly licensed domestic recruitment and
placement agency, received a telex message from its principal ROLACO Engineering and Contracting Services (ROLACO) in
Jeddah, Saudi Arabia to recruit Filipino contract workers in its behalf
Early March 1981: ROLACO paid British Airways, Inc. (BA) Jeddah branch the airfare tickets for 93 contract workers with specific
instruction to transport the workers to Jeddah on or before March 30, 1981
As soon as BA received a prepaid ticket advice from its Jeddah branch informed First Int'l.
Thereafter, First Int'l instructed ADB Travel and Tours. Inc. (its travel agent) to book the 93 workers with BA but it failed
So First Int'l had to borrow P304,416.00 for the purchase of airline tickets from the other airlines for the 93 workers who must
leave immediately since the visas are valid only for 45 days and the Bureau of Employment Services mandates that contract
workers must be sent to the job site within a period of 30 days
First week of June, 1981: First Int'l was again informed by BA that it had received a prepaid ticket advice from its Jeddah branch
for the transportation of 27 contract workers.
Immediately, First Int'l instructed its ADB to book the 27 contract workers with the BA but only 16 seats were confirmed and
booked on its June 9, 1981 flight.
June 9, 1981: only 9 workers were able to board said flight while the remaining 7 workers were rebooked to:
June 30, 1981 - again cancelled by British without any prior notice to either First Int'l or the workers
July 4,1981 - (6 + 7 workers) 13 workers were again cancelled and rebooked to July 7, 1981.
July 6, 1981: First Int'l paid the travel tax of the workers as required by BA but when the receipt of the tax payments was
submitted, only 12 seats were confirmed for July 7, 1981 flight
July 7, 1981: Flight was again cancelled without any prior notice
12 workers were finally able to leave for Jeddah after First Int'l had bought tickets from the other airlines
As a result of these incidents, First Int'l sent a letter to BA demanding compensation for the damages it had incurred by the
repeated failure to transport its contract workers despite confirmed bookings and payment of the corresponding travel taxes.
July 23, 1981: the counsel of First Int'l sent another letter to BA demanding P350,000.00 damages and unrealized profit or
income - denied
August 8, 1981: First Int'l received a telex message from ROLACO cancelling the hiring of the remaining recruited workers due to
the delay in transporting the workers to Jeddah.
January 27, 1982: First Int'l filed a complaint for damages against First Int'l
CA Affirmed RTC: BA to pay First Int'l damages, attorneys fees and costs
ISSUE: W/N BA is not liable because there was no contract of carriage as no ticket was ever issued
17
HELD:
Affirmed. MODIFICATION that the award of actual damages be deleted (reimbursed by ROLACO)
In dealing with the contract of common carriage of passengers for purpose of accuracy, there are two (2) aspects of the same,
namely:
(a) the contract "to carry (at some future time)," which contract is consensual and is necessarily perfected by mere consent -
applicable in this case
(b) the contract "of carriage" or "of common carriage" itself which should be considered as a real contract for not until the
carrier is actually used can the carrier be said to have already assumed the obligation of a carrier
Even if a prepaid ticket advice (PTA) is merely an advice from the sponsors that an airline is authorized to issue a ticket and thus
no ticket was yet issued, the fact remains that the passage had already been paid for by the principal of the appellee, and the
appellant had accepted such payment
Besides, appellant knew very well that time was of the essence as the prepaid ticket advice had specified the period of
compliance therewith, and with emphasis that it could only be used if the passengers fly on BA
involvement of the BA in the contract "to carry" was well demonstrated when the it immediately advised First Int'l Acts of BA
indeed constitute malice and evident bad faith which had caused damage and besmirched the reputation and business image
fo First Int'l
FACTS:
First International Trading and General Services Co. – duly licensed domestic recruitmentand placement agency; it received a
telex message from its principal ROLACO Engineeringa n d C o nt ra c ti ng S e r v i c e s i n J e d d a h , S a u d i A ra b i a t o re c r u i t
F i l i p i n o c o nt ra c t wo r ke r s i n behalf of said principal
ROLACO paid to the Jeddah branch of petitioner British Airways, Inc. airfare tickets for 93contract workers with specific
instruction to transport said workers to Jeddah on or beforeMarch 30, 1981
M a r c h 1 9 8 1 : F i r s t I n t e r n a ti o n a l w a s i n f o r m e d b y B r i ti s h A i r w a y s t h a t R O L A C O h a d for
warded 93 prepaid tickets; First International instructed its travel agent, ADB Travel and Tours. Inc., to book the 93 workers with
petitioner but the latter failed to fly said workers,thereby compelling private respondent to borrow money in the amount of
P304,416.00 inorder to purchase airline tickets from the other airlines for the 93 workers it had recruitedwho must leave
immediately since the visas of said workers are valid only for 45 days andthe Bureau of Employment Services mandates that
contract workers must be sent to the job site within a period of 30 days
June 1981: First International was again informed by British Airways that it had received aprepaid ticket advice from its Jeddah
branch for the transportation of 27 contract workers;F i rst I nt e r n ati o n a l i n st r u c t e d i t s t rave l a g e nt t o b o o k t h e
2 7 c o nt ra c t wo r ke r s w i t h t h e p e ti ti o n e r b u t t he l att e r wa s o n l y a b l e t o b o o k a n d c o nfi r m 1 6 s e at s o n
i t s J u n e 9 , 1 9 8 1 fl i g ht ; o n t h e d at e o f t h e s c h e d u l e d fl i g ht o n l y 9 wo r ke rs we re a b l e t o b o a rd s a i d
fl i g ht while the remaining 7 workers were rebooked to June 30, 1981 which bookings were againc a n c e l l e d by t h e
p e ti ti o n e r w i t h o u t a ny p r i o r n o ti c e t o e i t he r p r i vat e re s p o n d e nt o r t h e wo r ke rs ; t he re a ft e r, t h e 7
wo r ke r s we re re b o o ke d t o t h e J u l y 4 ,1 9 8 1 fl i g ht o f p e ti ti o n e r with 6 more workers booked for said flight; but
the confirmed bookings of the 13 workerswere again cancelled and rebooked to July 7, 1981
First International paid the travel tax of the said workers as required by British Airways
butw h e n t h e r e c e i p t o f t h e t a x p a y m e n t s w a s s u b m i tt e d , t h e l a tt e r i n f o r
m e d F i r s t International that it can only confirm the seats of the 12 workers on its July 7, 1981 flight;b u t t h e
c o nfi r m e d s e at s o f s a i d wo r ke rs we re a ga i n c a n c e l l e d w i t h o u t a ny p r i o r n oti c e either to First International
or said workers; the 12 workers were finally able to leave for Jeddah after First International had bought tickets from the
other airlines
July 1981: First International sent a letter to petitioner demanding compensation for thedamages in the amount of P350,000.00
it had incurred by the latter’s repeated failure
tot r a n s p o r t i t s c o n t r a c t w o r k e r s d e s p i t e c o n fi r m e d b o o k i n g s a n d p a y m e
n t o f t h e corresponding travel taxes

BritishAirways’narration:

it received a telex message from Jeddah advising that ROLACO had prepaid the airfares of 100 persons to transport First
International’s contract workers from Manila to Jeddah on orbefore March 30, 1981; however, due to the unavailability of space
and limited time, it hadto return to its sponsor in Jeddah the prepaid ticket advice consequently not even one of the alleged 93
contract workers were booked in any of its flights

June 1981: British Airways received another prepaid ticket advice to transport 16 contractworkers of First International to
Jeddah but the travel agent of First International bookedonly 10 contract workers for British Airways’ June 9, 1981 flight;
however, only 9 contractworkers boarded the scheduled flight with 1 passenger not showing up as evidenced bythePhilippine
Airlines’passengermanifest

18
A.F Sanchez Brokerage, Inc. vs. CA G.R. No. 147079, December 21, 2004; to the carrier or his employees or is apparent upon ordinary observation, but he nevertheless accepts the same without protest
or exception notwithstanding such condition, he is not relieved of liability for the resulting damage. If the claim of Sanchez
A.F. SANCHEZ BROKERAGE INC., v. THE HON. COURT OF APPEALS and FGU INSURANCE CORPORATION
Brokerage that some of the cartons were already damaged upon delivery to it were true, then it should naturally have received
the cargo under protest or with reservation duly noted on the receipt issued by PSI but it made no such protest or reservation.
447 SCRA 427 (2004)

A common carrier is liable to the resulting damage to the goods if the improper packaging is known to the carrier or his
employees or is apparent upon ordinary observation, but he nevertheless accepts the same without protest or exception.

Respondent FGU Insurance Corporation (FGU) brought an action for reimbursement against petitioner A.F. Sanchez Brokerage
Inc. (Sanchez Brokerage) to collect the amount paid by the former to Wyeth-Suaco Laboratories Inc. (Wyeth-Suaco) as insurance
payment for the goods delivered in bad condition.

A.F. Brokerage refused to admit liability for the damaged goods which it delivered from Philippines Skylanders, Inc. (PSI) to
Wyeth-Suaco as it maintained that the damage was due to improper and insufficient export packaging, discovered when the
sealed containers were opened outside the PSI warehouse.

The Regional Trial Court of Makati dismissed the said complaint; however, the decision was subsequently reversed and set aside
by the Court of Appeals, finding that Sanchez Brokerage is liable for the carriage of cargo as a ―common carrier‖ by definition
of the New Civil Code.

ISSUE:

Whether or not the FGU Insurance is liable for the delivery of the damaged goods

HELD:

As defined under Article 1732 of the Civil Code, common carriers are persons, corporations, firms or associations engaged in
the business of carrying or transporting passengers or goods or both by land, water or air for compensation, offering their
services to the public. It does not distinguish between one whose principal business activity is the carrying of goods and one
who does such carrying only as an ancillary activity. The contention therefore of Sanchez Brokerage that it is not a common
carrier but a customs broker whose principal function is to prepare the correct customs declaration and proper shipping
documents as required by law is bereft of merit. It suffices that petitioner undertakes to deliver the goods for pecuniary
consideration.

In this light, Sanchez Brokerage as a common carrier is mandated to observe, under Article 1733 of the Civil Code, extraordinary
diligence in the vigilance over the goods it transports according to all the circumstances of each case. In the event that the
goods are lost, destroyed or deteriorated, it is presumed to have been at fault or to have acted negligently, unless it proves that
it observed extraordinary diligence.

The concept of ―extra-ordinary diligence‖ was explained in Compania Maritima v. Court of Appeals. The extraordinary
diligence in the vigilance over the goods tendered for shipment requires the common carrier to know and to follow the
required precaution for avoiding damage to or destruction of the goods entrusted to it for sale, carriage and delivery. It requires
common carriers to render service with the greatest skill and foresight and ―to use all reasonable means to ascertain the
nature and characteristics of goods tendered for shipment and to exercise due care in the handling and storage including such
methods as their nature requires.

It was established that Sanchez Brokerage received the cargoes from the PSI warehouse in good order and condition and that
upon delivery by petitioner some of the cargoes were found to be in bad order as noted in the Delivery Receipt and as indicated
in the Survey and Destruction Report.

While paragraph no. 4 of Article 1734 of the Civil Code exempts a common carrier from liability if the loss or damage is due to
the character of the goods or defects in the packaging or in the containers, the rule is that if the improper packaging is known
19
Crisostomo vs. CA, August 25, 2003, GR No. 138334;
Crisostomo v CAG.R. No. 138334 Aug 25, 2003 Ynares-Santiaga, RCA j.
Breach of Obligations>Negligence>Standard of Care
Summary:
In this case, the petitioner contracted with Caravan T&T (travel agency) for her trip toEurope. However, the petitioner missed
her flight because the flight she was supposed to
take had already departed from the previous day. Petitioner main contention’s is that,
Caravan T&T, as a common carrier should observed EXTRA ORDINARY DILIGENCE.SC ruled that the standard of care required of
common carrier is not applicable to CaravanT&T since from the nature of the latter is not to transport people but to make
bookingarrangements with their clients. The default standard of care is only diligence of a good fatherof a family.
Doctrines:
The negligence of the obligor in the performance of the obligation renders him liable fordamages for the resulting loss suffered
by the obligee. Fault or negligence of the obligorconsists in his failure to exercise due care and prudence in the performance of
the obligationas the nature of the obligation so demands.There is no fixed standard of diligence applicable to each and every
contractual obligationand each case must be determined upon its particular facts. The degree of diligence requireddepends on
the circumstances of the specific obligation and whether one has been negligentis a question of fact that is to be determined
after taking into account the particulars of eachcase.
Facts:
Petitioner
Estela Crisostomo (Lawyer, well-travelled woman)
Respondents:
Caravan Travel & Tours Int’l Inc (Travel agency), Company’s Manager, Meriam Menor (niecec also of Estela)
The petitioner contracted the respondent to arrange & facilitate her booking & ticketing & accommodation in “Jewels of
Europe” tour.
Menor, manager of the travel agency, went to the petitioner’s residence & deliver all necessary travel documents & advise the
petitioner to be at NAIA on Saturday (Jun15, 1991), two (2) hours before the flight.
Without checking the travel documents, the petitioner went to NAIA on Saturday.However, she discovered that the flight
she was supposed to take had alreadydeparted the previous day.
The petitioner then take another package (British Pageant) offered by the respondent;
She went to RTC to demand reimbursement on the differential cost of the two tourpackages. Petitioner holds that there was
BREACH OF CONTRACT OF CARRIAGE & DAMAGES. Lower courts’ decision below:
RTC: Respondent is negligent. Petitioner was merely guilty of contributory negligence.
CA: Petitioner is more negligent. Hence, not entitled for damages.
ISSUE/HOLDING: WON Caravan Travel & Tours is obliged to observe extra-ordinary diligence? (NO)
Respondent is not a common carrier but a travel agency. It is thus not bound under the law toobserve extraordinary diligence in
the performance of its obligation, as petitioner claims.By definition, a contract of carriage or transportation is one whereby a
certain person orassociation of persons obligate themselves to transport persons, things, or news from oneplace to another for
a fixed price. It is obvious from the above definition that respondent is notan entity engaged in the business of transporting
either passengers or goods. Respondentdid not undertake to transport petitioner from one place to another since its covenant
20
with itscustomers is simply to make travel arrangements in their behalf. Respondent’s services as a travel agency include
procuring tickets and facilitating travel permits or visas as well asbooking customers for tours
DISPOSITIVE:
Petition is DENIED for lack of merit.Decision of the Court of Appeals is AFFIRMED
FACTS:
1. Petitioner Estela L. Crisostomo (Crisostomo) contracted the services of respondent Caravan Travel and Tours International,
Inc. (Caravan) to arrange and facilitate her booking, ticketing and accommodation in a tour dubbed “Jewels of Europe”.
2. Pursuant to said contract, Meriam Menor (MENOR) who is also the niece of Crisostomo, went to the latter’s residence to
deliver the travel documents and plane tickets. Crisostomo, in turn, gave Menor the full payment for the package tour.
3. Without checking her travel documents, Crisostomo went to NAIA. However, she discovered that the flight she was supposed
to take had already departed the previous day. She thus called up Menor to complain.
4. Subsequently, Menor prevailed upon Crisostomo to take another tour – the “British Pageant” to which Crisostomo was asked
to pay once again.
5. Upon Crisostomo’s return from Europe, she demanded from Caravan the reimbursement of P61,421.70, representing the
difference between the sum she paid for “Jewels of Europe” and the amount she owed Caravan for the “British Pageant” tour.
Despite several demands, Caravan refused to reimburse the amount, contending that the same was non-refundable.
Crisostomothus filed a case.
6. Crisostomo alleged that her failure to join “Jewels of Europe” was due to Caravan’s fault since it did not clearly indicate the
departure date on the plane ticket. Caravan was also negligent in informing her of the wrong flight schedule through its
employee Menor.
7. Caravan insisted that Crisostomo was informed of the correct departure date, which was clearly and legibly printed on the
plane ticket. The travel documents were given two days ahead of the scheduled trip. Crisostomo had only herself to blame for
missing the flight, as she did not bother to read or confirm her flight schedule as printed on the ticket.
8. RTC: Caravan was negligent in erroneously advising Crisostomo of the wrong date.Crisostomo incurred contributory
negligence for not checking her travel documents. Caravan should reimburse Crisostomobut with deductions due to her
contributory negligence.
9. CA: Both parties were at fault. However, Crisostomo is more negligent because as a lawyer and well-traveled person, she
should have known better than to simply rely on what was told to her. This being so, she is not entitled to any form of
damages.
10. Crisostomo appealed to SC. She contended that Caravan did not observe the standard of care required of a common carrier
when it informed her wrongly of the flight schedule. She could not be deemed more negligent than Caravan since the latter is
required by law to exercise extraordinary diligence in the fulfillment of its obligation. If she were negligent at all, the same is
merely contributory and not the proximate cause of the damage she suffered.
ISSUE: Whether or not a travel agency is a common carrier and is therefore required to exercise extraordinary diligence.
HELD:
No, a travel agency is not an entity engaged in the business of transporting either passengers or goods and is therefore, neither
a private nor a common carrier.
RATIO:
By definition, a contract of carriage or transportation is one whereby a certain person or association of persons obligate
themselves to transport persons, things, or news from one place to another for a fixed price. Such person or association of
persons are regarded as carriers and are classified as private or special carriers and common or public carriers. A common
carrier is defined under Article 1732 of the Civil Code as persons, corporations, firms or associations engaged in the business of
carrying or transporting passengers or goods or both, by land, water or air, for compensation, offering their services to the
public.
It is obvious from the above definition that respondent is not an entity engaged in the business of transporting either
passengers or goods. Respondent did not undertake to transport petitioner from one place to another since its covenant with
its customers is simply to make travel arrangements in their behalf. Respondent’s services as a travel agency include procuring
tickets and facilitating travel permits or visas as well as booking customers for tours.

The object of petitioner’s contractual relation with respondent is the latter’s service of arranging and facilitating petitioner’s
booking, ticketing and accommodation in the package tour. In contrast, the object of a contract of carriage is the
transportationof passengers or goods. It is in this sense that the contract between the parties in this case was an ordinary one
for services and not one of carriage.

CASE LAW/ DOCTRINE: a travel agency is not an entity engaged in the business of transporting either passengers or goods and
is therefore, neither a private nor a common carrier. It goes without saying that a travel agency is not required by law to
exercise extra ordinary diligence.

21
De Guzman vs. CA, Dec. 12, 1988; loss must reasonably be regarded as quite beyond the control of the common carrier and properly regarded as a fortuitous
event. It is necessary to recall that even common carriers are not made absolute insurers against all risks of travel and of
Facts: transport of goods, and are not held liable for acts or events which cannot be foreseen or are inevitable, provided that they
shall have complied with the rigorous standard of extraordinary diligence.
Respondent Ernesto Cendana was a junk dealer. He buys scrap materials and brings those that he gathered to Manila for resale
using 2 six-wheeler trucks. On the return trip to Pangasinan, respondent would load his vehicle with cargo which various
merchants wanted delivered, charging fee lower than the commercial rates. Sometime in November 1970, petitioner Pedro de
Guzman contracted with respondent for the delivery of 750 cartons of Liberty Milk. On December 1, 1970, respondent loaded
the cargo. Only 150 boxes were delivered to petitioner because the truck carrying the boxes was hijacked along the way.
Petitioner commenced an action claiming the value of the lost merchandise. Petitioner argues that respondent, being a
common carrier, is bound to exercise extraordinary diligence, which it failed to do. Private respondent denied that he was a
common carrier, and so he could not be held liable for force majeure. The trial court ruled against the respondent, but such was
reversed by the Court of Appeals.

Issues:

(1) Whether or not private respondent is a common carrier

(2) Whether private respondent is liable for the loss of the goods

Held:

(1) Article 1732 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. 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 or occasional rather than regular or scheduled manner, and even though private respondent's 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 fee frequently fell below commercial freight rates is not relevant here. A certificate of public
convenience is not a requisite for the incurring of liability under the Civil Code provisions governing common carriers.

(2) Article 1734 establishes the general rule that common carriers are responsible for the loss, destruction or deterioration of
the goods which they carry, "unless the same is due to any of the following causes only:

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; and

e. Order or act of competent public authority."

The hijacking of the carrier's truck - does not fall within any of the five (5) categories of exempting causes listed in Article 1734.
Private respondent as common carrier is presumed to have been at fault or to have acted negligently. This presumption,
however, may be overthrown by proof of extraordinary diligence on the part of private respondent. 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." we hold that the occurrence of the

22
First Phil. Industrial Corp. vs. CA, Dec. 29, 1998;
FACTS:
FPIC – grantee of a pipeline concession under Republic Act No. 387, as amended,
t o contract, install and operate oil pipelines
It applied for a mayor ’s permit with the Offi ce of the Mayor of Batangas City. Before the permit could be
issued, it was required by the City Treasurer to pay a local tax based on itsgross receipts for the fiscal year 1993 pursuant to the
Local Government Code. It paid thetax under protest.
It fi led a complaint for tax refund alleging that 1) the impositi on and collecti on of thebusiness tax on its
gross receipts violates Secti on 133 of the Local Government Code which grants tax exemption to common carriers;
2) the authority of cities to impose andcollect a tax on the gross receipts of “contractors and independent contractors” under
Sec.141 (e) and 151 does not include the authority to collect such taxes on transportati on
c o n t r a c t o r s f o r , a s d e fi n e d u n d e r S e c . 1 3 1 ( h ) , t h e t e r m “ c o n t r a c t o r s ”
e x c l u d e s transportation contractors; and, 3) the City Treasurer illegally and erroneously imposedand collected the said tax,
thus meriting the immediate refund of the tax paid.
ISSUES: WON FPIC is a common carrier; 2. WON it is exempted from paying the taxes required by the
City Treasurer
both, shipyard, marine repair shop, wharf or dock, ice plant, ice-refrigeration plant, canal, irrigation system gas, electric
light heat and power, water supplyand power petroleum, sewerage system, wire or wireless communications systems, wire
orwireless broadcasting stations and other similar public services (CA No. 1416, as amended,otherwise known as the Public
Service Act)
FPIC - considered a common carrier under Art. 86 of the Petroleum Act of the Philippines(RA 387), which provides that: Art. 86.
Pipe line concessionaire as common carrier.
pipe line shall have the prefe renti al right to uti lize installati ons for the transportati on of petroleum owned
by him, but is obligated to utilize the remaining transportation capacitypro rata for the transportati on of such other
petroleum as may be off ered by others for transport, and to charge without discrimination such rates as may have
been approved bythe Secretary of Agriculture and Natural Resources.
FPIC is also a public uti lity pursuant to Art. 7 of RA 387 which states that “ever ything relating to the
exploration for and exploitation of petroleum . . . and everything relating tothe manufacture, refining, storage, or
transportation by special methods of petroleum, ishereby declared to be a public utility”
2. Yes. Legal basis is Section 133 (j), of the Local Government Code which provides that“Unless otherwise provided herein, the
exercise of the taxing powers of provinces, cities,municipalities, and barangays shall not extend to the levy of the following:
Taxes on thegross receipts of transportation contractors and persons engaged in the transportation of passengers or freight
by hire and common carriers b y a i r, l a n d o r w a t e r, e x c e p t a s provided in this Code”.

HELD: Reason for the exception: to avoid duplication of tax.

Ye s . F P I C i s e n g a g e d i n t h e b u s i n e s s o f t r a n s p o r ti n g o r c a r r y i n g g o o d s , i . e . petroleum products,
for hire as a public employment. It undertakes to carry for all personsindiff erently, that is, to all persons who choose
to employ its services, and transports the goods by land and for compensation.

common carrier -holds himself out to the public as engaged in the

b u s i n e s s o f t r a n s p o r ti n g p e r s o n s o r p r o p e r t y f r o m p l a c e t o p l a c e , f o r c o m p e n s a ti o n , o
ff e r i n g h i s services to the public generally (see also Art. 1732)

Test for determining whether a party is a common carrier of goods:

a. engaged in the business of carrying goods for others as a public employment, and musthold himself out as ready to engage in
the transportation of goods for person generally asa business and not as a casual occupation;

b. undertakes to carry goods of the kind to which his business is confined

c. undertakes to carry by the method by which his business is conducted and over his established roads

d. transportation is for hire

common service coincides with public service

public service
– includes every person that now or hereafter may own, operate. manage,or control in the Philippines, for hire or
compensati on, with general or limited clientele, whether permanent, occasional or accidental, and done for general
business purposes, anycommon carrier, railroad, street railway, traction railway, subway motor vehicle, either
forf r e i g h t o r p a s s e n g e r, o r b o t h , w i t h o r w i t h o u t fi x e d r o u t e a n d w h a t e v e r m a y b e i t s c l a s s i
fi c a ti o n , f r e i g h t o r c a r r i e r s e r v i c e o f a n y c l a s s , e x p r e s s s e r v i c e , s t e a m b o a t , o r s t e a m s h i p l
i n e , p o n ti n e s , f e r r i e s a n d w a t e r c r a ft , e n g a g e d i n t h e t r a n s p o r t a ti o n o f passengers or freight or

23
Erezo vs. Jepte, Sept. 30, 1957;

FACTS:
Aguedo Jepte is the registered owner of a six by six truck. While the same was being driven by Garcia, it collided
with a taxicab and then hit Ernesto Erezo, as a result of which he died. Garcia was prosecuted and found guilty for the crime of
homicide through reckless negligence. As the amount of the judgment could not be enforced against Garcia, heirs of Erezo
brought this action against the registered owner of the truck. Jepte claims that the vehicle does not belong to him and that the
trucks of the corporation were registered in his name as a convenient arrangement for Port Brokerage.

ISSUE: WoN Jepte should be liable to Erezo for the injuries occasioned to the latter because of the negligence of the driver even
if he was no longer the owner of the vehicle at the time of the accident.

HELD:
The registered owner of a certificate of public convenience is liable to the public for the injuries or damages suffered
by passengers or third persons caused by the operation of said vehicle, even though the same had been transferred to a third
person. The principle upon which this doctrine is based is that in dealing with vehicles registered under the Public Service Law,
the public has the right to assume or presume that the registered owner is the actual owner thereof, for it would be difficult for
the public to enforce the actions that they may have for injuries caused to them by the vehicles being negligently operated if
the public should be required to prove who the actual owner is. Under the same principle the registered owner of any vehicle,
even if not used for a public service, should primarily be responsible to the public or to third persons for injuries caused the
latter while the vehicle is being driven on the highways or streets.

24
Lim vs. CA, Jan. 16, 2002;

FACTS:
A passenger jeepney covered by a certificate of public convenience was sold by Vallarta to Donato Gonzales, who
continued to operate it under the same certificate of public convenience under the so-called kabit system, and in the course
thereof the vehicle met an accident through the fault of another vehicle.

ISSUE: May the new owner sue for damages against the erring vehicle?

HELD:
The thrust of the law in enjoining the kabit system is not so much as to penalize the parties but to identify the
person upon whom responsibility may be fixed in case of an accident with the end view of protecting the riding public. The
policy therefore loses its force if the public at large is not deceived, much less involved.
In the present case it is at once apparent that the evil sought to be prevented in enjoining the kabit system does not
exist. On the contrary, it was private respondent Gonzales himself who had been wronged and was seeking compensation for
the damage done to him. Thus, the private respondent has the right to proceed against petitioners for the damage caused on
his passenger jeepney as well as on his business.

25
Lita Enterprises vs. IAC, April 27, 1984;

FACTS:
Ocampo and Garcia purchased cars to be used as taxicabs but they had no franchise to operate taxicabs, so they
contracted with Lita Enterprises for the use of the latter’s certificate of public convenience. 7 years later, Ocampo decided to
register his taxicabs in his name. He requested the manager of petitioner Lita Enterprises, Inc. to turn over the registration
papers to him, but the latter allegedly refused. Hence, he filed a complaint against Lita Enterprises, Inc.

ISSUE: WON suit can be maintained arising from a violation of illegal contract.

HELD:
Kabit system, whereby a person who has been granted a certificate of convenience allows another person who owns
motors vehicles to operate under such franchise for a fee, is contrary to public policy and, therefore, void and inexistent under
Article 1409 of the Civil Code. Having entered into an illegal contract, neither can seek relief from the courts, and each must
bear the consequences of his acts.

26
Teja Marketing vs. IAC, 148 SCRA 347;

FACTS:
The records of the Land Transportation Commission show that the motorcycle sold to Nale was first mortgaged to
the Teja Marketing by Angel Jaucian though the Teja Marketing and Jaucian are one and the same, because it was made to
appear that way only as Nale had no franchise of his own and that he attached the unit to Jaucian's MCH Line. Teja Marketing
made demands for the payment of the motorcycle but Nale failed to comply, thus forcing Teja Marketing to filed an action
against Nale.

ISSUE: Whether Teja Marketing can recover damages against Nale?

HELD:
Unquestionably, the parties herein operated under an arrangement, commonly known as the "kabit system".
Although not out rightly penalized as a criminal offense, the kabit system is invariably recognized as being contrary to public
policy and, therefore, void and in existent under Article 1409 of the Civil Code. It is a fundamental principle that the court will
not aid either party to enforce an illegal contract, but will leave both where it finds then. Upon this premise it would be error to
accord the parties relief from their predicament.
The defect of inexistence of a contract is permanent and cannot be cured by ratification or by prescription. The mere
lapse of time cannot give efficacy to contracts that are null and void.

27
Santos vs. CA, May 26, 1981; absolute owner of the vehicle in questioned and 3) that damages be awarded to SANTOS as proven during the trial plus
attorney's fees in the amount of P450.00 and costs. 2
FIRST DIVISION
No public sale was conducted on May 8, 1964. On May 11, 1964, Branch X issued a Restraining Order enjoining the Sheriff from
G.R. No. L-26815 May 26, 1981
conducting the public auction sale of the motor vehicle levied upon. 3 The Restraining Order was issued wrongfully. Under the
provisions of Section 17, Rule 39, the action taken by the Sheriff cannot be restrained by another Court or by another Branch of
ADOLFO L. SANTOS, petitioner,
the same Court. The Sheriff has the right to continue with the public sale on his own responsibility, or he can desist from
vs.
conducting the public sale unless the attaching creditor files a bond securing him against the third-party-claim. But the decision
ABRAHAM SIBUG and COURT OF APPEALS, respondents.
to proceed or not with the public sale lies with him. As said in Uy Piaoco vs. Osmeña 9 Phil. 299, 307, "the powers of the Sheriff
involve both discretional power and personal liability." The mentioned discretional power and personal liability have been
further elucidated in Planes and Verdon vs. Madrigal & Co., et al., 94 Phil. 754, where it was held. 1äwphï1.ñët
MELENCIO-HERRERA, J.:1äwphï1.ñët
The duty of the sheriff in connection with the execution and satisfaction of judgment of the court is governed by
The controversy in this case will be resolved on the basis of the following facts and expositions. Prior to April 26, 1963 (the
Rule 39 of the Rules of Court. Section 15 thereof provides for the procedure to be. followed where the property
ACCIDENT DATE), Vicente U. Vidad (VIDAD, for short) was a duly authorized passenger jeepney operator. Also prior to the
levied on execution 'is claimed by a by person. lf the third-party claim is sufficient, the sheriff, upon receiving it, is
ACCIDENT DATE, petitioner Adolfo L. Santos (SANTOS, for short) was the owner of a passenger jeep, but he had no certificate of
not bound to proceed with the levy of the property, unless he is given by the judgment creditor an indemnity bond
public convenience for the operation of the vehicle as a public passenger jeep. SANTOS then transferred his jeep to the name of
against the claim (Mangaoang vs. Provincial Sheriff, 91 Phil., 368). Of course, the sheriff may proceed with the levy
VIDAD so that it could be operated under the latter's certificate of public convenience. ln other words, SANTOS became what is
even without the Indemnity bond, but in such case he will answer for any damages with his own personal funds
known in ordinary parlance as a kabit operator. For the protection of SANTOS, VIDAD executed a re-transfer document to the
(Waits vs. Peterson, et al., S Phil. 419 Alzua et al. vs. Johnson, 21 Phil., 308; Consults No. 341 de los abogados de
former, which was to be a private document presumably to be registered if and where it was decided that the passenger jeep of
Smith, Bell & Co., 48 Phil., 565). And the rule also provides that nothing therein contained shall prevent a third
SANTOS was to be withdrawn from the kabit arrangement.
person from vindicating his claim to the property by any proper action (Sec. 15 of Rule 39.).
On the ACCIDENT DATE, private respondent Abraham Sibug (SIBUG for short) was bumped by a passenger jeepney operated by
It appears from the above that if the attaching creditor should furnish an adequate bond. the Sheriff has to proceed with the
VIDAD and driven by Severe Gragas. As a result thereof, SIBUG filed a complaint for damages against VIDAD and Gragas with the
public auction. When such bond is not filed, then the Sheriff shall decide whether to proceed. or to desist from proceeding,
Court of First Instance of Manila, Branch XVII, then presided by Hon. Arsenic Solidum. That Civil Case will hereinafter be
with the public auction. lf he decides to proceed, he will incur personal liability in favor of the successful third-party claimant.
referred to as the BRANCH XVII CASE.
On October 14, 1965, Branch X affirmed SANTOS' ownership of the jeepney in question based on the evidence adduced, and
On December 5, 1963, a judgment was rendered by Branch XVII, sentencing VIDAD and Gragas, jointly and severally, to pay
decreed: .
SIBUG the sums of P506.20 as actual damages; P3,000.00 as moral damages; P500.00 as attorney's fees, and costs. 1
WHEREFORE, judgment is hereby rendered, enjoining the defendants from proceeding with the sale of
On April 10, 1964, the Sheriff of Manila levied on a motor vehicle, with Plate No. PUJ-343-64, registered in the name of VIDAD,
the vehicle in question ordering its return to the plaintiff and furthermore sentencing the defendant
and scheduled the public auction sale thereof on May 8,1964.
Abraham Sibug to pay the plaintiff the sum of P15.00 a day from April 10, 1964 until the vehicle is
returned to him, and P500.00 as attorney's fee's as well as the costs. 4
On April 11, 1964, SANTOS presented a third-party claim with the Sheriff alleging actual ownership of the motor vehicle levied
upon, and stating that registration thereof in the name of VIDAD was merely to enable SANTOS to make use of VIDAD'S
This was subsequently amended on December 5, 1965, upon motion for reconsideration filed by SANTOS, to include the
Certificate of Public Convenience. After the third-party complaint was filed, SIBUG submitted to the Sheriff a bond issued by the
BONDING COMPANY as jointly slid severally liable with SIBUG. .
Philippine Surety Insurance Company (THE BONDING COMPANY, for short), To save the Sheriff from liability if he were to
proceed with the sale and if SANTOS' third-party claim should be ultimately upheld.
... provided that the liability of the Philippine Surety & insurance Co., Inc. shall in no case exceed
P6,500.00. Abraham Sibug is furthermore condemned to pay the Philippine Surety & Insurance Co., Inc.
On April 22, 1964, that is, before the scheduled sale of May 8, 1964, SANTOS instituted an action for Damages and injunction
the same sums it is ordered to pay under this decision.
with a prayer for Preliminary Mandatory Injunction against SIBUG; VIDAD; and the Sheriff in Civil Case No. 56842 of Branch X, of
the same Court of First Instance of Manila (hereinafter referred to as the BRANCH X CASE). The complaint was later amended to
The jugdment in the BRANCH X CASE appears to be quite legally unpalatable For instance, since the undertaking furnished to
include the BONDING COMPANY as a party defendant although its bond had not become effective. ln the Complaint, SANTOS
the Sheriff by the BONDING COMPANY did not become effective for the reason that the jeep was not sold, the public sale
alleged essentially that he was the actual owner of the motor vehicle subject of levy: that a fictitious Deed of Sale of said motor
thereof having been restrained, there was no reason for promulgating judgment against the BONDING COMPANY. lt has also
vehicle was executed by him in VIDAD'S favor for purposes of operating said vehicle as a passenger jeepney under the latter's
been noted that the Complaint against VIDAD was dismissed.
franchise; that SANTOS did not receive any payment from VIDAD in consideration of said sale; that to protect SANTOS'
proprietary interest over the vehicle in question, VIDAD in turn had executed a Deed of Sale in favor of SANTOS on June 27,
Most important of all, the judgment against SIBUG was inequitable. ln asserting his rights of ownership to the vehicle in
1962; that SANTOS was not a party in the BRANCH XVII CASE and was not in any manner liable to the registered owner VIDAD
question, SANTOS candidly admitted his participation in the illegal and pernicious practice in the transportation business known
and the driver Gragas; that SANTOS derived a daily income of P30.00 from the operation of said motor vehicle as a passenger
as the kabit system. Sec.. 20 (g) of the Public Service Act, then the applicable law, specifically provided: .
jeepney and stood to suffer irreparable damage will possession of said motor vehicle were not restored to him. SANTOS then
prayed that 1,) pending trial, a Writ of Preliminary Mandatory injunction be issued ex-parte commanding the Sheriff of Manila
to restore the motor vehicle to him and that the Sheriff be enjoined from proceeding with its sale; 2) that, after trial, the Deed
of Sale in favor of VIDAD be declared absolutely fictitious and, therefore, null and void, and adjudging SANTOS to be the
28
 ... it shall be unlawful for any public service or for the owner, lessee or operator thereof, without the
approval and authorization of the Commission previously had – ... (g) to sell, alienate, mortgage,
encumber or lease its property, franchise, certificates, privileges, or rights, or any part thereof.
In this case, SANTOS had fictitiously sold the jeepney to VIDAD, who had become the registered owner and operator of record
at the time of the accident. lt is true that VIDAD had executed a re-sale to SANTOS, but the document was not registered.
Although SANTOS, as the kabit was the true owner as against VIDAD, the latter, as the registered owner/operator and grantee
of the franchise, is directly and primarily responsible and liable for the damages caused to SIBUG, the injured party, as a
consequence of the negligent or careless operation of the vehicle. 6 This ruling is based on the principle that the operator of
record is considered the operator of the vehicle in contemplation of law as regards the public and third persons 7 even if the
vehicle involved in the accident had been sold to another where such sale had not been approved by the then Public Service
Commission. 8 For the same basic reason, as the vehicle here in question was registered in VIDAD'S name, the levy on execution
against said vehicle should be enforced so that the judgment in the BRANCH XVII CASE may be satisfied, notwithstanding the
fact that the secret ownership of the vehicle belonged to another. SANTOS, as the kabit should not be allowed to defeat the
levy on his vehicle and to avoid his responsibilities as a kabit owner for he had led the public to believe that the vehicle
belonged to VIDAD. This is one way of curbing the pernicious kabit system that facilitates the commission of fraud against the
travelling public.
As indicated in the Erezo case, supra, SANTOS' remedy. as the real owner of the vehicle, is to go against VIDAD, the actual
operator who was responsible for the accident, for the recovery of whatever damages SANTOS may suffer by reason of the
execution. In fact, if SANTOS, as the kabit had been impleaded as a party defendant in the BRANCH XVII CASE, he should be
held jointly and severally liable with VIDAD and the driver for damages suffered by SIBUG, 9 as well as for exemplary damages. 10
From the judgment in the BRANCH X CASE SIBUG appealed. Meanwhile, SANTOS moved for immidiately execution. SIBUG
opposed it on the ground that Branch X had no jurisdiction over the BRANCH XVII CASE, and that Branch X had no power to
interfere by injunction with the judgment of Branch XVII a Court of concurrent or coordinate jurisdiction. 11
On November 13, 1965, Branch X released an order authorizing immediate execution on the theory that the BRANCH X CASE is
"principally an action for the issuance of a writ of prohibition to forbid the Sheriff from selling at public auction property not
belonging to the judgment creditor (sic) and there being no attempt in this case to interfere with the Judgment or decree of
another court of concurrent jurisdiction." 12
Without waiting for the resolution of his Motion for Reconsideration, SIBUG sought relief from respondent Appellate Court in a
Petition for certiorari with Preliminary injunction. On November 18, 1965, respondent Court of Appeals enjoined the
enforcement of the Branch X Decision and the Order of execution issued by said Branch. 13 On September 28, 1966, respondent
Count of Appeals rendered the herein challenged Decision nullifying the judgment renderred in the Branch X Case and
permanently restraining V from taking cognizance of the BRANCH X CASE SANTOS. It ruled that: .
... the respondent Court Branch X, indeed, encroached and interfered with the judgment of Branch XVII
when it issued a restraining order and finally a decision permanently enjoining the other court from
excuting the decision rendered in Civil Case No. 54335. This to our mind constitutes an interference with
the powers and authority of the other court having co-equal and coordinate jurisdiction. To rule
otherwise, would indubitably lead to confusion which might hamper or hinder the proper administration
of justice. ... 14
Respondent Court further held that SANTOS may not be permitted to prove his ownership over a particular vehicle being levied
upon but registered in another's name in a separated action, observing that: .
As the vehicle in question was registered in the name of Vicente U. Vidad, the government or any person
affected by the representation that said vehicle is registered under the name of a particular person had
the right to rely on his declaration of ownership and registration: and the registered owner or any other
person for that matter cannot be permitted to repudiate said declaration with the objective of proving
29
that said registered vehicle is owned by another person and not by the registered owner (sec. 68, (a),
Rule 123, and art. 1431, New Civil Code)
Were we to allow a third person to prove that he is the real owner of a particular vehicle and not the
registered owner it would in effect be tantamount to sanctioning the attempt of the registered owner of
the particular vehicle in evading responsibility for it cannot be dispelled that the door would be opened
to collusion between a person and a registered owner for the latter to escape said responsibility to the
public or to any person. ...
SANTOS now seeks a review of respondent Court's Decision contending that: .
1) The respondent Court of Appeals erred in holding that Branch X of the Court of First Instance of Manila
has no jurisdiction to restrain by Writ of Injunction the auction sale of petitioner's motor vehicle to satisfy
the judgment indebtedness of another person:
2) The respondent Court of Appeals erred in holding that petitioner as owner of a motor vehicle that was
levied upon pursuant to a Writ of Execution issued by Branch XVII of the Court of i stance of Manila in
Civil Case No. 54335 cannot be allowed to prove in a separate suit filed in Branch X of the same court
(Civil Case No. 56842) that he is the true owner of the said motor vehicle and not its registered owner;
3) The respondent Court of Appeals erred in declaring null and void the decision of the Court of First
Instance of Manila (Branch X ) in Civil Case No. 56482.
We gave due course to the Petition for Review on certiorari on December 14, 1966 and considered the case submitted for
decision on July 20, 1967.
One of the issues ventilated for resolution is the general question of jurisdiction of a Court of First Instance to issue, at the
instance of a third-party claimant, an Injunction restraining the execution sale of a passenger jeepney levied upon by a
judgment creditor in another Court of First Instance. The corollary issue is whether or not the third-party claimant has a right to
vindicate his claim to the vehicle levied upon through a separate action.
Since this case was submitted for decision in July, 1967, this Court, in Arabay, lnc. vs. Hon. Serafin Salvador, 15speaking through
Mr. Justice Ramon Aquino, succinctly held: .
It is noteworthy that, generally, the rule, that no court has authority to interfere by injunction with the
judgments or decrees of a concurrent or coordinate jurisdiction having equal power to grant the
injunctive relief, is applied in cases, where no third-party claimant is involved, in order to prevent one
court from nullifying the judgment or process of another court of the same rank or category, a power
which devolves upon the proper appellate court.
When the sheriff, acting beyond the bounds of his authority, seizes a stranger's property, the writ of
injunction, which is issued to stop the auction sale of that property, is not an interference with the writ of
execution issued by another court because the writ of execution was improperly implemented by the
sheriff. Under that writ, he could attach the property of the judgment debtor. He is not authorized to levy
upon the property of the third-party claimant (Polaris Marketing Corporation vs. Plan, L-40666, January
22, 1976, 69 SCRA 93, 97; Manila Herald Publishing Co., Inc. vs. Ramos, 88 Phil. 94, 102).
An earlier case, Abiera vs. Hon. Court of Appeals, et al., 16 explained the doctrine more extensively: 1äwphï1.ñët
Courts; Jurisdiction Courts without power to interfere by injunction with judgments or decrees of a court
of concurrent jurisdiction. – No court has power to interfere by injunction with the judgments or decrees
 of a court of concurrent or coordinate jurisdiction having equal power to grant the relief sought by
injunction.
Same, Same; Same; When applicable. – For this doctrine to apply, the injunction issued by one court
must interfere with the judgment or decree issued by another court of equal or coordinate jurisdiction
and the relief sought by such injunction must be one which could be granted by the court which
rendered the judgment or issued the decree.
Same, Same Same; Exception Judgment rendered by another court in favor of a third person who claims
property levied upon on execution. – Under section 17 of Rule 39 a third person who claims property
levied upon on execution may vindicate such claim by action. A judgment rendered in his favor - declaring
him to be the owner of the property - would not constitute interference with the powers or processes of
the court which rendered the judgment to enforce which the execution was levied. lf that be so - and it is
so because the property, being that of a stranger, is not subject to levy - then an interlocutory order, such
as injunction, upon a claim and prima facie showing of ownership by the claimant, cannot be considered
as such interference either.
Execution; Where property levied on claimed by third person; "Action" in section l7, Rule 39 of the Rules
of Court, interpreted – The right of a person who claims to be the owner of property levied upon on
execution to file a third-party claim with the sheriff is not exclusive, and he may file an action to vindicate
his claim even if the judgment creditor files an indemnity bond in favor of the sheriff to answer for any
damages that may be suffered by the third party claimant. By "action", as stated in the Rule, what is
meant is a separate and independent action.
Applied to the case at bar, it mill have to be held that, contrary to the rationale in the Decision of respondent Court, it was
appropriate, as a matter of procedure, for SANTOS, as an ordinary third-party claimant, to vindicate his claim of ownership in a
separate action under Section 17 of Rule 39. And the judgment rendered in his favor by Branch X, declaring him to be the
owner of the property, did not as a basic proposition, constitute interference with the powers or processes of Branch XVII which
rendered the judgment, to enforce which the was levied upon. And this is so because property belonging to a stranger is not
ordinarily subject to levy. While it is true that the vehicle in question was in custodia legis, and should not be interfered with
without the permission of the proper Court, the property must be one in which the defendant has proprietary interest. Where
the Sheriff seizes a stranger's property, the rule does not apply and interference with his custody is not interference with
another Court's Order of attachment. 17
transferred his jeep to the name of Vidad so that it could be operated underthe latter’s certificate of public convenience;
Santos, in effect, became a kabit operator on the accident date Sibug was bumped by a passenger jeepney operated by Vidad
anddriven by Severe Gragas; as a result thereof, Sibug filed a complaint for damages againstVidad and Gragas. The trial court
sentenced Vidad and Gragas, jointly and severally, to pay Sibug for the damages he suffered
Sheriff of Manila levied on a motor vehicle registered in the name of Vidad (but owned bySantos)
Santos presented a third- party claim with the Sheriff alleging actual ownership of the motor vehicle levied
upon, and stating that registration thereof in the name of Vidad wasmerely to enable Santos to make use of Vidad’s CPC
ISSUE: WON the subject motor vehicle owned by Santos should be attached to satisfy themoney judgment against Vidad who is
the registered owner of the same
HELD:
Yes. Sec. 20 (g) of the Public Service Act: “... it shall be unlawful for any public service or
for theo w n e r , l e s s e e o r o p e r a t o r t h e r e o f , w i t h o u t t h e a p p r o v a l a n d a u t h o r i z a ti o n
o f t h e Commission previously had – ... (g) to sell, alienate, mortgage, encumber or lease its property,
franchise, certificates, privileges, or rights, or any part thereof.”
Although Santos, as the kabit was the true owner, Vidad, as the registered
owner/operatora n d g r a n t e e o f t h e f r a n c h i s e , i s d i r e c t l y a n d p r i m a r i l y r e s p o n s i b l e a n d l i a b l e f o
r t h e damages caused to Sibug, the injured party, as a consequence of the negligent or carelessoperation of the vehicle.
(Ratio: the operator of record is considered the operator of thevehicle in contemplation of law as regards the public and third
persons even if the vehicleinvolved in the accident had been sold to another where such sale had not been approvedby
the then Public Service Commission)
S a n t o s ’ r e m e d y, a s t h e r e a l o w n e r o f t h e v e h i c l e , i s t o g o a g a i n s t V i d a d , t h e a c t u a l operator
who was responsible for the accident, for the recove ry of whatever damages Santos may suffer by reason of
the execution

However, as a matter of substance and on the merits, the ultimate conclusion of respondent Court nullifying the Decision
of Branch X permanently enjoining the auction sale, should be upheld. Legally speaking, it was not a "stranger's property" that
was levied upon by the Sheriff pursuant to the judgment rendered by Branch XVII. The vehicle was, in fact, registered in the
name of VIDAD, one of the judgment debtors. And what is more, the aspect of public service, with its effects on the riding
public, is involved. Whatever legal technicalities may be invoked, we find the judgment of respondent Court of Appeals to be in
consonance with justice.

WHEREFORE, as prayed for by private respondent Abraham Sibug, the petition for review on certiorari filed by Adolfo L. Santos
is dismissed with costs against the petitioner.

SO ORDERED.

FACTS:

Vicente Vidad – duly authorized passenger jeepney operator

prior to the accident date, Santos was the owner of a passenger jeep, but he had
n o certi fi cate of public convenience for the operati on of the vehicle as a public passenger jeep; he then
30
Baliwag Transit vs. CA, 147 SCRA 82; The defendant A & J and Julio Recontique for failure to provide its cargo truck with an early warning
device in violation of the Motor Vehicle Law.8
SECOND DIVISION
The trial court ordered Baliwag, A & J Trading and Recontique to pay jointly and severally the Garcia spouses the following: (1)
G.R. No. 116110 May 15, 1996
P25,000,00 hospitalization and medication fee, (2) P450,000.00 loss of earnings in eight (8) years, (3) P2,000.00 for the
hospitalization of their son Allan Garcia, (4) P50,000.00 moral damages, and (5) P30,000.00 attorney's fee.9
BALIWAG TRANSIT, INC., petitioner,
vs.
On appeal, the Court of Appeals modified the trial court's Decision by absolving A & J Trading from liability and by reducing the
COURT OF APPEALS, SPOUSES ANTONIO GARCIA & LETICIA GARCIA, A & J TRADING, AND JULIO RECONTIQUE, respondents.
award of attorney's fees to P10,000.00 and loss of earnings to P300,000.00, respectively. 10
PUNO, J.:p
Baliwag filed the present petition for review raising the following issues:
This is a petition for certiorari to review the Decision1 of the Court of Appeals in CA-G.R. CV-31246 awarding damages in favor of
1. Did the Court of Appeals err in absolving A & J Trading from liability and holding Baliwag solely liable
the spouses Antonio and Leticia Garcia for breach of contract of carriage. 2
for the injuries suffered by Leticia and Allan Garcia in the accident?
The records show that on July 31, 1980, Leticia Garcia, and her five-year old son, Allan Garcia, boarded Baliwag Transit Bus No.
2. Is the amount of damages awarded by the Court of Appeals to the Garcia spouses correct?
2036 bound for Cabanatuan City driven by Jaime Santiago. They took the seat behind the driver.
We affirm the factual findings of the Court of Appeals.
At about 7:30 in the evening, in Malimba, Gapan, Nueva Ecija, the bus passengers saw a cargo truck parked at the shoulder of
the national highway. Its left rear portion jutted to the outer lane, as the shoulder of the road was too narrow to accommodate
I
the whole truck. A kerosene lamp appeared at the edge of the road obviously to serve as a warning device. The truck driver,
Julio Recontique, and his helper, Arturo Escala, were then replacing a flat tire. The truck is owned by respondent A & J Trading.
As a common carrier, Baliwag breached its contract of carriage when it failed to deliver its passengers, Leticia and Allan Garcia
to their destination safe and sound. A common carrier is bound to carry its passengers safely as far as human care and foresight
Bus driver Santiago was driving at an in ordinately fast speed and failed to notice the truck and the kerosene lamp at the edge
can provide, using the utmost diligence of a very cautious person, with due regard for all the circumstances. 11 In a contract of
of the road. Santiago's passengers urged him to slow down but he paid them no heed. Santiago even carried animated
carriage, it is presumed that the common carrier was at fault or was negligent when a passenger dies or is injured. Unless the
conversations with his co-employees while driving. When the danger of collision became imminent, the bus passengers
presumption is rebutted, the court need not even make an express finding of fault or negligence on the part of the common
shouted "Babangga tayo!". Santiago stepped on the brake, but it was too late. His bus rammed into the stalled cargo truck. It
carrier. This statutory presumption may only be overcome by evidence that the carrier exercised extraordinary diligence as
caused the instant death of Santiago and Escala, and injury to several others. Leticia and Allan Garcia were among the injured
prescribed in Articles 1733 and 1755 of the Civil Code. 12
passengers.
The records are bereft of any proof to show that Baliwag exercised extra ordinary diligence. On the contrary, the evidence
Leticia suffered a fracture in her pelvis and right leg. They rushed her to the provincial hospital in Cabanatuan City where she
demonstrates its driver's recklessness. Leticia Garcia testified that the bus was running at a very high speed despite the drizzle
treatment. After three days, she was transferred to the National Orthopedic Hospital where she was confined for more than a
and the darkness of the highway. The passengers pleaded for its driver to slow down, but their plea was ignored. 13 Leticia also
month.3 She underwent an operation for partial hip prosthesis.4
revealed that the driver was smelling of liquor. 14 She could smell him as she was seated right behind the driver. Another
passenger, Felix Cruz testified that immediately before the collision, the bus driver was conversing with a co-employee. 15 All
Allan, on the other hand, broke a leg. He was also given emergency treatment at the provincial hospital.
these prove the bus driver's wanton disregard for the physical safety of his passengers, which makes Baliwag as a common
carrier liable for damages under Article 1759 of the Civil Code:
Spouses Antonio and Leticia Garcia sued Baliwag Transit, Inc., A & J Trading and Julio Recontique for damages in the Regional
Trial Court of Bulacan.5 Leticia sued as an injured passenger of Baliwag and as mother of Allan. At the time of the complaint,
Art. 1759. Common carriers are liable for the death of or injuries to passengers through the negligence or
Allan was a minor, hence, the suit initiated by his parents in his favor.
willfull acts of the former's employees, although such employees may have acted beyond the scope of
their authority or in violation of the orders of the common carriers.
Baliwag, A & J Trading and Recontique disclaimed responsibility for the mishap. Baliwag alleged that the accident was caused
solely by the fault and negligence of A & J Trading and its driver, Recontique. Baliwag charged that Recontique failed to place an
This liability of the common carriers do not cease upon proof that they exercised all the diligence of a
early warning device at the corner of the disabled cargo truck to warn on coming vehicles. 6 On the other hand, A & J Trading
good father of a family in the selection or supervision of their employees.
and Recontique alleged that the accident was the result of the negligence and reckless driving of Santiago, bus driver of
Baliwag.7
Baliwag cannot evade its liability by insisting that the accident was caused solely by the negligence of A & J Trading and Julio
Recontique. It harps on their alleged non use of an early warning device as testified to by Col. Demetrio dela Cruz, the station
After hearing, the trial court found all the defendants liable, thus:
commander of Gapan, Nueva Ecija who investigated the incident, and Francisco Romano, the bus conductor.
In view thereof, the Court holds that both defendants should be held liable; the defendant Baliwag
The records do not bear out Baliwag's contention. Col. dela Cruz and Romano testified that they did not see any early warning
Transit, Inc. for having failed to deliver the plaintiff and her son to their point of destination safely in
device at the scene of the accident. 16 They were referring to the triangular reflectorized plates in red and yellow issued by the
violation of plaintiff's and defendant Baliwag Transit's contractual relation.
Land Transportation Office. However, the evidence shows that Recontique and Ecala placed a kerosene lamp or torch at the

31
edge of the road, near the rear portion of the truck to serve as an early warning
device. 17 This substantially complies with Section 34 (g) of the Land Transportation and Traffic Code, to wit:
(g) Lights and reflector when parked or disabled. — Appropriate parking lights or flares visible one
hundred meters away shall be displayed at the corner of the vehicle whenever such vehicle is parked on
highways or in places that are not well-lighted or, is placed in such manner as to endanger passing traffic.
Furthermore, every motor vehicle shall be provided at all times with built-in reflectors or other similar
warning devices either pasted, painted or attached at its front and back which shall likewise be visible at
night at least one hundred meters away. No vehicle not provided with any of the requirements
mentioned in this subsection shall be registered. (emphasis supplied)
Baliwag's argument that the kerosene lamp or torch does not substantially comply with the law is untenable. The aforequoted
law clearly allows the use not only of an early warning device of the triangular reflectorized plates variety but also parking lights
or flares visible one hundred meters away. Indeed, Col. dela Cruz himself admitted that a kerosene lamp is an acceptable
substitute for the reflectorized plates. 18 No negligence, therefore, may be imputed to A & J Trading and its driver, Recontique.
Anent this factual issue, the analysis of evidence made by the Court of Appeals deserves our concurrence, viz:
In the case at bar, both the injured passengers of the Baliwag involved in the accident testified that they
saw some sort of kerosene or a torch on the rear portion of the truck before the accident. Baliwag
Transit's conductor attempted to defeat such testimony by declaring that he noticed no early warning
device in front of the truck.
Among the testimonies offered by the witnesses who were present at the scene of the accident, we rule
to uphold the affirmative testimonies given by the two injured passengers and give less credence to the
testimony of the bus conductor who solely testified that no such early warning device exists.
The testimonies of injured passengers who may well be considered as disinterested witness appear to be
natural and more probable than the testimony given by; Francisco Romano who is undoubtedly
interested in the outcome of the case, being the conductor of the defendant-appellant Baliwag Transit
Inc.
It must be borne in mind that the situation then prevailing at the time of the accident was admittedly
drizzly and all dark. This being so, it would be improbable and perhaps impossible on the part of the truck
helper without the torch nor the kerosene to remove the flat tires of the truck . Moreover, witness
including the bus conductor himself admitted that the passengers shouted, that they are going to bump
before the collision which consequently caused the bus driver to apply the brake 3 to 4 meters away from
the truck. Again, without the kerosene nor the torch in front of the truck, it would be improbable for the
driver, more so the passengers to notice the truck to be bumped by the bus considering the darkness of
the place at the time of the accident.
While it is true that the investigating officer testified that he found no early warning device at the time of
his investigation, We rule to give less credence to such testimony insofar as he himself admitted on cross
examination that he did not notice the presence of any kerosene lamp at the back of the truck because
when he arrived at the scene of the accident, there were already many people surrounding the place
(TSN, Aug. 22, 1989, p. 13). He further admitted that there exists a probability that the lights of the truck
may have been smashed by the bus at the time of the accident considering the location of the truck
where its rear portion was connected with the front portion of the bus (TSN, March 29, 1985, pp.
Investigator's testimony therefore did not confirm nor deny the existence of such warning device, making
his testimony of little probative value. 19
We now review the amount of damages awarded to the Garcia spouses.
32
First, the propriety of the amount awarded as hospitalization and medical fees. The award of P25,000.00 is not supported by
the evidence on record. The Garcias presented receipts marked as Exhibits "B-1" to "B-42" but their total amounted only to
P5,017.74. To be sure, Leticia testified as to the extra amount spent for her medical needs but without more reliable evidence,
her lone testimony cannot justify the award of P25,000.00. To prove actual damages, the best evidence available to the injured
party must be presented. The court cannot rely on uncorroborated testimony whose truth is suspect, but must depend upon
competent proof that damages have been actually suffered. 20 Thus, we reduce the actual damages for medical and
hospitalization expenses to P5,017.74.
Second, we find as reasonable the award of P300,000.00 representing Leticia's lost earnings. Before the accident, Leticia was
engaged in embroidery, earning P5,000.00 per month. 21 Her injuries forced her to stop working. Considering the nature and
extent of her injuries and the length of time it would take her to recover, 22 we find it proper that Baliwag should compensate
her lost income for five (5) years. 23
Third, the award of moral damages is in accord with law. In a breach of contract of carriage, moral damages are recoverable if
the carrier, through its agent, acted fraudulently or in bad faith. 24 The evidence show the gross negligence of the driver of
Baliwag bus which amounted to bad faith. Without doubt, Leticia and Allan experienced physical suffering, mental anguish and
serious anxiety by reason of the accident. Leticia underwent an operation to replace her broken hip bone with a metal plate.
She was confined at the National Orthopedic Hospital for 45 days. The young Allan was also confined in the hospital for his foot
injury. Contrary to the contention of Baliwag, the decision of the trial court as affirmed by, the Court of Appeals awarded moral
damages to Antonio and Leticia Garcia not in their capacity as parents of Allan. Leticia was given moral damages as an injured
party. Allan was also granted moral damages as an injured party but because of his minority, the award in his favor has to be
given to his father who represented him in the suit.
Finally, we find the award of attorney's fees justified. The complaint for damages was instituted by the Garcia spouses on
December 15, 1982, following the unjustified refusal of Baliwag to settle their claim. The Decision was promulgated by the trial
court only on January 29, 1991 or about nine years later. Numerous pleadings were filed before the trial court, the appellate
court and to this Court. Given the complexity of the case and the amount of damages involved, 25 the award of attorney's fee
for P10,000.00 is just and reasonable.
IN VIEW WHEREOF, the Decision of the respondent Court of Appeals in CA-G.R. CV-31246 is AFFIRMED with the MODIFICATION
reducing the actual damages for hospitalization and medical fees to P5,017.74. No costs.
SO ORDERED.
FACTS:
On 31 July 1980, Leticia Garcia, and her 5-year old son, Allan Garcia, boarded Baliwag Transit Bus 2036 bound for Cabanatuan
City driven by Jaime Santiago. They took the seat behind the driver.
At about 7:30 p.m., in Malimba, Gapan, Nueva Ecija, the bus passengers saw a cargo truck, owned by A & J Trading, parked at
the shoulder of the national highway. Its left rear portion jutted to the outer lane, as the shoulder of the road was too narrow
to accommodate the whole truck. A kerosene lamp appeared at the edge of the road obviously to serve as a warning device.
The truck driver, and his helper were then replacing a flat tire.
Bus driver Santiago was driving at an inordinately fast speed and failed to notice the truck and the kerosene lamp at the edge of
the road. Santiago’s passengers urged him to slow down but he paid them no heed. Santiago even carried animated
conversations with his co-employees while driving. When the danger of collision became imminent, the bus passengers
shouted “Babangga tayo!”. Santiago stepped on the brake, but it was too late. His bus rammed into the stalled cargo truck
killing him instantly and the truck’s helper, and injury to several others among them herein respondents.
Thus, a suit was filed against Baliwag Transit, Inc., A & J Trading and Julio Recontique for damages in the RTC of Bulacan. After
trial, it found Baliwag Transit, Inc. liable for having failed to deliver Garcia and her son to their point of destination safely in
violation of Garcia’s and Baliwag Transit’s contractual relation; and likewise found A & J and its truck driver liable for failure to
provide its cargo truck with an early warning device in violation of the Motor Vehicle Law. All were ordered to pay solidarily the
Garcia spouses.

On appeal, the CA modified the trial court’s Decision by absolving A & J Trading from liability.

ISSUE: Whether or not Baliwag should be held solely liable for the injuries.

HELD:

Yes.

As a common carrier, Baliwag breached its contract of carriage when it failed to deliver its passengers, Leticia and Allan Garcia
to their destination safe and sound. 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 for all the circumstances. In a contract of
carriage, it is presumed that the common carrier was at fault or was negligent when a passenger dies or is injured. Unless the
presumption is rebutted, the court need not even make an express finding of fault or negligence on the part of the common
carrier. This statutory presumption may only be overcome by evidence that the carrier exercised extraordinary diligence as
prescribed in Articles 1733 and 1755 of the Civil Code.

Article 1759 of the Civil Code provides that “Common carriers are liable for the death of or injuries to passengers through the
negligence or willfull acts of the former’s employees, although such employees may have acted beyond the scope of their
authority or in violation of the orders of the common carriers. This liability of the common carriers do not cease upon proof
that they exercised all the diligence of a good father of a family in the selection or supervision of their employees.”

Section 34 (g) of the Land Transportation and Traffic Code provides “Lights and reflector when parked or disabled. —
Appropriate parking lights or flares visible one hundred meters away shall be displayed at the corner of the vehicle whenever
such vehicle is parked on highways or in places that are not well-lighted or, is placed in such manner as to endanger passing
traffic. Furthermore, every motor vehicle shall be provided at all times with built-in reflectors or other similar warning devices
either pasted, painted or attached at its front and back which shall likewise be visible at night at least one hundred meters
away. No vehicle not provided with any of the requirements mentioned in this subsection shall be registered. ”

x x x However, the evidence shows that Recontique and Ecala placed a kerosene lamp or torch at the edge of the road, near the
rear portion of the truck to serve as an early warning device. This substantially complies with Section 34 (g) of the Land
Transportation and Traffic Code. The law clearly allows the use not only of an early warning device of the triangular
reflectorized plates variety but also parking lights or flares visible 100 meters away. Indeed, Col. dela Cruz himself admitted that
a kerosene lamp is an acceptable substitute for the reflectorized plates. No negligence, therefore, may be imputed to A & J
Trading and its driver, Recontique.

The Supreme Court affirmed the Decision of the Court of Appeals (CA-GR CV-31246) with the modification reducing the actual
damages for hospitalization and medical fees to P5,017.74; without costs.

33
Nostradamus Villanueva vs. Domingo, G.R. No. 144274, September 20, 2004; liable as employer of Ocfemia because the latter was off-duty as utility employee at the time of the incident. Neither
was Ocfemia performing a duty related to his employment. 3
THIRD DIVISION
After trial, the trial court found petitioner liable and ordered him to pay respondent actual, moral and exemplary damages plus
appearance and attorney’s fees:
G.R. No. 144274 September 20, 2004
WHEREFORE, judgment is hereby rendered for the plaintiffs, ordering Nostradamus Villanueva to pay the amount of
NOSTRADAMUS VILLANUEVA, petitioner,
₱99,580 as actual damages, ₱25,000.00 as moral damages, ₱25,000.00 as exemplary damages and attorney’s fees in
vs.
the amount of ₱10,000.00 plus appearance fees of ₱500.00 per hearing with legal interest counted from the date of
PRISCILLA R. DOMINGO and LEANDRO LUIS R. DOMINGO, respondents.
judgment. In conformity with the law on equity and in accordance with the ruling in First Malayan Lending and
Finance Corporation vs. Court of Appeals (supra), Albert Jaucian is hereby ordered to indemnify Nostradamus
DECISION
Villanueva for whatever amount the latter is hereby ordered to pay under the judgment.
CORONA, J.:
SO ORDERED.4
This is a petition to review the decision1 of the Court of Appeals in CA-G.R. CV No. 52203 affirming in turn the decision of the
The CA upheld the trial court’s decision but deleted the award for appearance and attorney’s fees because the justification for
trial court finding petitioner liable to respondent for damages. The dispositive portion read:
the grant was not stated in the body of the decision. Thus, this petition for review which raises a singular issue:
WHEREFORE, the appealed decision is hereby AFFIRMED except the award of attorney’s fees including appearance
MAY THE REGISTERED OWNER OF A MOTOR VEHICLE BE HELD LIABLE FOR DAMAGES ARISING FROM A VEHICULAR
fees which is DELETED.
ACCIDENT INVOLVING HIS MOTOR VEHICLE WHILE BEING OPERATED BY THE EMPLOYEE OF ITS BUYER WITHOUT THE
LATTER’S CONSENT AND KNOWLEDGE?5
SO ORDERED.2
Yes.
The facts of the case, as summarized by the Court of Appeals, are as follows:
We have consistently ruled that the registered owner of any vehicle is directly and primarily responsible to the public and third
[Respondent] Priscilla R. Domingo is the registered owner of a silver Mitsubishi Lancer Car model 1980 bearing plate
persons while it is being operated.6 The rationale behind such doctrine was explained way back in 1957 in Erezo vs. Jepte7:
No. NDW 781 ’91 with [co-respondent] Leandro Luis R. Domingo as authorized driver. [Petitioner] Nostradamus
Villanueva was then the registered "owner" of a green Mitsubishi Lancer bearing Plate No. PHK 201 ’91.
The principle upon which this doctrine is based is that in dealing with vehicles registered under the Public Service Law, the
public has the right to assume or presume that the registered owner is the actual owner thereof, for it would be difficult for the
On 22 October 1991 at about 9:45 in the evening, following a green traffic light, [respondent] Priscilla Domingo’s
public to enforce the actions that they may have for injuries caused to them by the vehicles being negligently operated if the
silver Lancer car with Plate No. NDW 781 ’91 then driven by [co-respondent] Leandro Luis R. Domingo was cruising
public should be required to prove who the actual owner is. How would the public or third persons know against whom to
along the middle lane of South Superhighway at moderate speed from north to south. Suddenly, a green Mitsubishi
enforce their rights in case of subsequent transfers of the vehicles? We do not imply by his doctrine, however, that the
Lancer with plate No. PHK 201 ’91 driven by Renato Dela Cruz Ocfemia darted from Vito Cruz Street towards the
registered owner may not recover whatever amount he had paid by virtue of his liability to third persons from the person to
South Superhighway directly into the path of NDW 781 ’91 thereby hitting and bumping its left front portion. As a
whom he had actually sold, assigned or conveyed the vehicle.
result of the impact, NDW 781 ’91 hit two (2) parked vehicles at the roadside, the second hitting another parked car
in front of it.
Under the same principle the registered owner of any vehicle, even if not used for a public service, should primarily
be responsible to the public or to third persons for injuries caused the latter while the vehicle is being driven on the
Per Traffic Accident Report prepared by Traffic Investigator Pfc. Patrocinio N. Acido, Renato dela Cruz Ocfemia was
highways or streets. The members of the Court are in agreement that the defendant-appellant should be held liable
driving with expired license and positive for alcoholic breath. Hence, Manila Assistant City Prosecutor Oscar A.
to plaintiff-appellee for the injuries occasioned to the latter because of the negligence of the driver, even if the
Pascua recommended the filing of information for reckless imprudence resulting to (sic) damage to property and
defendant-appellant was no longer the owner of the vehicle at the time of the damage because he had previously
physical injuries.
sold it to another. What is the legal basis for his (defendant-appellant’s) liability?
The original complaint was amended twice: first, impleading Auto Palace Car Exchange as commercial agent and/or
There is a presumption that the owner of the guilty vehicle is the defendant-appellant as he is the registered owner in the
buyer-seller and second, impleading Albert Jaucian as principal defendant doing business under the name and style
Motor Vehicles Office. Should he not be allowed to prove the truth, that he had sold it to another and thus shift the
of Auto Palace Car Exchange.
responsibility for the injury to the real and actual owner? The defendant holds the affirmative of this proposition; the trial court
held the negative.
Except for Ocfemia, all the defendants filed separate answers to the complaint. [Petitioner] Nostradamus Villanueva
claimed that he was no longer the owner of the car at the time of the mishap because it was swapped with a Pajero
The Revised Motor Vehicle Law (Act No. 3992, as amended) provides that no vehicle may be used or operated upon any public
owned by Albert Jaucian/Auto Palace Car Exchange. For her part, Linda Gonzales declared that her presence at the
highway unless the same is property registered. It has been stated that the system of licensing and the requirement that each
scene of the accident was upon the request of the actual owner of the Mitsubishi Lancer (PHK 201 ’91) [Albert
machine must carry a registration number, conspicuously displayed, is one of the precautions taken to reduce the danger of
Jaucian] for whom she had been working as agent/seller. On the other hand, Auto Palace Car Exchange represented
injury to pedestrians and other travelers from the careless management of automobiles. And to furnish a means of ascertaining
by Albert Jaucian claimed that he was not the registered owner of the car. Moreover, it could not be held subsidiary
the identity of persons violating the laws and ordinances, regulating the speed and operation of machines upon the highways (2

34
R.C.L. 1176). Not only are vehicles to be registered and that no motor vehicles are to be used or operated without being
properly registered for the current year, but that dealers in motor vehicles shall furnish thee Motor Vehicles Office a report
showing the name and address of each purchaser of motor vehicle during the previous month and the manufacturer’s serial
number and motor number. (Section 5(c), Act No. 3992, as amended.)
Registration is required not to make said registration the operative act by which ownership in vehicles is transferred, as in land
registration cases, because the administrative proceeding of registration does not bear any essential relation to the contract of
sale between the parties (Chinchilla vs. Rafael and Verdaguer, 39 Phil. 888), but to permit the use and operation of the vehicle
upon any public highway (section 5 [a], Act No. 3992, as amended). The main aim of motor vehicle registration is to identify the
owner so that if any accident happens, or that any damage or injury is caused by the vehicle on the public highways,
responsibility therefore can be fixed on a definite individual, the registered owner. Instances are numerous where vehicles
running on public highways caused accidents or injuries to pedestrians or other vehicles without positive identification of the
owner or drivers, or with very scant means of identification. It is to forestall these circumstances, so inconvenient or prejudicial
to the public, that the motor vehicle registration is primarily ordained, in the interest of the determination of persons
responsible for damages or injuries caused on public highways:
One of the principal purposes of motor vehicles legislation is identification of the vehicle and of the operator, in case of
accident; and another is that the knowledge that means of detection are always available may act as a deterrent from lax
observance of the law and of the rules of conservative and safe operation. Whatever purpose there may be in these statutes, it
is subordinate at the last to the primary purpose of rendering it certain that the violator of the law or of the rules of safety shall
not escape because of lack of means to discover him. The purpose of the statute is thwarted, and the displayed number
becomes a "share and delusion," if courts would entertain such defenses as that put forward by appellee in this case. No
responsible person or corporation could be held liable for the most outrageous acts of negligence, if they should be allowed to
pace a "middleman" between them and the public, and escape liability by the manner in which they recompense servants.
(King vs. Brenham Automobile Co., Inc. 145 S.W. 278, 279.)
With the above policy in mind, the question that defendant-appellant poses is: should not the registered owner be allowed at
the trial to prove who the actual and real owner is, and in accordance with such proof escape or evade responsibility by and lay
the same on the person actually owning the vehicle? We hold with the trial court that the law does not allow him to do so; the
law, with its aim and policy in mind, does not relieve him directly of the responsibility that the law fixes and places upon him as
an incident or consequence of registration. Were a registered owner allowed to evade responsibility by proving who the
supposed transferee or owner is, it would be easy for him, by collusion with others or otherwise, to escape said responsibility
and transfer the same to an indefinite person, or to one who possesses no property with which to respond financially for the
damage or injury done. A victim of recklessness on the public highways is usually without means to discover or identify the
person actually causing the injury or damage. He has no means other than by a recourse to the registration in the Motor
Vehicles Office to determine who is the owner. The protection that the law aims to extend to him would
become illusory were the registered owner given the opportunity to escape liability by disproving his ownership. If the policy of
the law is to be enforced and carried out, the registered owner should not be allowed to prove the contrary to the prejudice of
the person injured, that is, to prove that a third person or another has become the owner, so that he may thereby be relieved
of the responsibility to the injured person.
The above policy and application of the law may appear quite harsh and would seem to conflict with truth and justice. We do
not think it is so. A registered owner who has already sold or transferred a vehicle has the recourse to a third-party complaint,
in the same action brought against him to recover for the damage or injury done, against the vendee or transferee of the
vehicle. The inconvenience of the suit is no justification for relieving him of liability; said inconvenience is the price he pays for
failure to comply with the registration that the law demands and requires.
In synthesis, we hold that the registered owner, the defendant-appellant herein, is primarily responsible for the damage caused
to the vehicle of the plaintiff-appellee, but he (defendant-appellant) has a right to be indemnified by the real or actual owner of
the amount that he may be required to pay as damage for the injury caused to the plaintiff-appellant. 8
35
Petitioner insists that he is not liable for damages since the driver of the vehicle at the time of the accident was not an
authorized driver of the new (actual) owner of the vehicle. He claims that the ruling in First Malayan Leasing and Finance
Corporation vs. CA9 implies that to hold the registered owner liable for damages, the driver of the vehicle must have been
authorized, allowed and permitted by its actual owner to operate and drive it. Thus, if the vehicle is driven without the
knowledge and consent of the actual owner, then the registered owner cannot be held liable for damages.
He further argues that this was the underlying theory behind Duavit vs. CA10 wherein the court absolved the registered owner
from liability after finding that the vehicle was virtually stolen from the owner’s garage by a person who was neither authorized
nor employed by the owner. Petitioner concludes that the ruling in Duavit and not the one in First Malayan should be
applicable to him.
Petitioner’s argument lacks merit. Whether the driver is authorized or not by the actual owner is irrelevant to determining the
liability of the registered owner who the law holds primarily and directly responsible for any accident, injury or death caused by
the operation of the vehicle in the streets and highways. To require the driver of the vehicle to be authorized by
the actual owner before the registered owner can be held accountable is to defeat the very purpose why motor vehicle
legislations are enacted in the first place.
Furthermore, there is nothing in First Malayan which even remotely suggests that the driver must be authorized before the
registered owner can be held accountable. In First Malayan, the registered owner, First Malayan Corporation, was held liable
for damages arising from the accident even if the vehicle involved was already owned by another party:
This Court has consistently ruled that regardless of who the actual owner is of a motor vehicle might be, the
registered owner is the operator of the same with respect to the public and third persons, and as such, directly and
primarily responsible for the consequences of its operation. In contemplation of law, the owner/operator of record is
the employer of the driver, the actual operator and employer being considered merely as his agent (MYC-Agro-
Industrial Corporation vs. Vda. de Caldo, 132 SCRA 10, citing Vargas vs. Langcay, 6 SCRA 174; Tamayo vs. Aquino,
105 Phil. 949).
‘We believe that it is immaterial whether or not the driver was actually employed by the operator of
record. It is even not necessary to prove who the actual owner of the vehicle and the employer of the
driver is. Granting that, in this case, the father of the driver is the actual owner and that he is the actual
employer, following the well-settled principle that the operator of record continues to be the operator of
the vehicle in contemplation of law, as regards the public and third person, and as such is responsible for
the consequences incident to its operation, we must hold and consider such owner-operator of record as
the employer, in contemplation of law, of the driver. And, to give effect to this policy of law as enunciated
in the above cited decisions of this Court, we must now extend the same and consider the actual
operator and employer as the agent of the operator of record.’ 11
Contrary to petitioner’s position, the First Malayan ruling is applicable to him since the case involves the same set of facts ―
the registered owner had previously sold the vehicle to someone else and was being driven by an employee of the new (actual)
owner. Duavit is inapplicable since the vehicle there was not transferred to another; the registered and the actual owner was
one and the same person. Besides, in Duavit, the defense of the registered owner, Gilberto Duavit, was that the vehicle was
practically stolen from his garage by Oscar Sabiano, as affirmed by the latter:
Defendant Sabiano, in his testimony, categorically admitted that he took the jeep from the garage of defendant
Duavit without the consent and authority of the latter. He testified further that Duavit even filed charges against him
for the theft of the jeep but which Duavit did not push through as his (Sabiano’s) parents apologized to Duavit on his
behalf.12
As correctly pointed out by the CA, the Duavit ruling is not applicable to petitioner’s case since the circumstance of
unauthorized use was not present. He in fact voluntarily delivered his car to Albert Jaucian as part of the downpayment for a
vehicle he purchased from Jaucian. Thus, he could not claim that the vehicle was stolen from him since he voluntarily ceded
possession thereof to Jaucian. It was the latter, as the new (actual) owner, who could have raised the defense of theft to prove
that he was not liable for the acts of his employee Ocfemia. Thus, there is no reason to apply the Duavit ruling to this case.
The ruling in First Malayan has been reiterated in BA Finance Corporation vs. CA13 and more recently in Aguilar, Sr. vs.
Commercial Savings Bank.14 In BA Finance, we held the registered owner liable even if, at the time of the accident, the vehicle
was leased by another party and was driven by the lessee’s employee. In Aguilar, the registered owner-bank answered for
damages for the accident even if the vehicle was being driven by the Vice-President of the Bank in his private capacity and not
as an officer of the Bank, as claimed by the Bank. We find no reason to deviate from these decisions.
The main purpose of vehicle registration is the easy identification of the owner who can be held responsible for any accident,
damage or injury caused by the vehicle. Easy identification prevents inconvenience and prejudice to a third party injured by one
who is unknown or unidentified. To allow a registered owner to escape liability by claiming that the driver was not authorized
by the new (actual) owner results in the public detriment the law seeks to avoid.
Finally, the issue of whether or not the driver of the vehicle during the accident was authorized is not at all relevant to
determining the liability of the registered owner. This must be so if we are to comply with the rationale and principle behind
the registration requirement under the motor vehicle law.
WHEREFORE, the petition is hereby DENIED. The January 26, 2000 decision of the Court of Appeals is AFFIRMED.
SO ORDERED.
FACTS:
A car driven by Renato Ocfemia hit a car driven by Leandro Domingo. The registered owner of Ocfemia’s vehicle was
Nostradamus Villanueva, although Villanueva has traded the vehicle for a Pajero owned by Albert Jaucian/Auto Palace Car
Exchange.
Issue: Whether a registered owner of a vehicle may be held liable for damages arising from an accident involving the said
vehicle.
HELD:
The registered owner of any vehicle, even if not used for a public service, should be primarily responsible to the
public or third persons while the vehicle is being driven on the streets.
Registered owner is primarily and solidarily liable with driver under the KABIT SYSTEM. Kabit system is contrary to
public policy; therefore, void and inexistent.
FACTS:
Priscilla Domingo is the registered owner of a silver Mitsubishi Lancer Car model1980 with Plate No. NDW 781 with co-
respondent Leandro Luis Domingo asauthorized driver. Petitioner Nostradamus Villanueva was then the registered “owner” of a
green Mitsubishi Lancer bearing Plate No. PHK 201.On Oct. 22, 1991, 9:45 PM, following a green traffic light, Priscilla Domingo
silverLancer then driven by Leandro Domingo was cruising the middle lane of SouthSuperhighway at moderate speed when
suddenly, a green Mitsubishi Lancerwith Plate No. PHK 201 driven by Renato Dela Cruz Ocfemia darted from Vito Cruz St.
towards the South Superhighway directly into the path of Domingo’s car thereby hitting and bumping its left front portion. As a
result of the impact, NDW781 hit two parked vehicles at the roadside, the second hitting another carparked in front of it.Traffic
accident report found Ocfemia driving with expired license and positivefor alcoholic breath.
Manila Asst. Prosecutor Pascua recommended filing ofinformation for reckless imprudence resulting to damage to property
andphysical injuries. The original complaint was amended twice: first impleadingAuto Palace Car Exchange as commercial agent
and/or buyer-seller andsecond, impleading Albert Jaucian as principal defendant doing business underthe name and style of
Auto Palace Car Exchange. Except Ocfemia, alldefendants filed separate answers to the complaint.Petitioner Nostradamus
Villanueva claimed that he was no longer the owner ofthe car at the time of the mishap because it was swapped with a Pajero
ownedby Albert Jaucian/Auto Palace Car Exchange. Linda Gonzales declared thather presence at the scene of the accident was
36
upon the request of the actualowner of the Mitsubishi Lancer PHK 201, Albert Jaucian for whom she had beenworking as
agent/seller. Auto Palace Car Exchange represented by AlbertJaucian claimed that he was not the registered owner of the car.
Moreover, itcould not be held subsidiarily liable as employer of Ocfemia because the latterwas off-duty as utility employee at
the time of the incident. Neither was Ocfemiaperforming a duty related to his employment.RTC found petitioner Villanueva
liable and ordered him to pay respondentactual, moral and exemplary damages plus appearance and attorney’s fees. In
conformity with equity and the ruling in First Malayan Lending and Finance Corp.vs CA, Albert Jaucian is hereby ordered to
indemnify Villanueva for whateveramount the latter is hereby ordered to pay under the judgment.
Transportation Law Case
CA upheld trial court’s decision but deleted the award for appearance andattorney’s fees as the same was not justified in the
body of the decision.
ISSUE:May the registered owner of a motor vehicle be held liable for damages arisingfrom a vehicular accident involving his
motor vehicle while being operated by the employee of its buyer without the latter’s consent and knowledge?
RULING:
YES, the registered owner of any vehicle is directly and primarily responsible forthe public and third persons while it is being
operated. The rationale behindsuch doctrine was explained way back in 1957 in
Erezo vs. Jepte.
The principle upon which this doctrine is based is that in dealing with vehiclesregistered under the Public Service Law, the
public has the right to assume or presumethat the registered owner is the actual owner thereof, for it would be difficult for
the public to enforce the actions that they may have for injuries caused to them by thevehicles being negligently operated if the
public should be required to prove who theactual owner is. How would the public or third persons know against whom
toenforce their rights in case of subsequent transfers of the vehicles? We do not imply by his doctrine, however, that the
registered owner may not recover whatever amounthe had paid by virtue of his liability to third persons from the person to
whom he hadactually sold, assigned or conveyed the vehicle.
Under the same principle the registered owner of any vehicle, even if not used for a public service, should primarily be
responsible to the public or to third persons forinjuries caused the latter while the vehicle is being driven on the highways
or streets. The members of the Court are in agreement that the defendant-appellant should be held liable to plaintiff-appellee
for the injuries occasioned to the latterbecause of the negligence of the driver, even if the defendant-appellant was no longerthe
owner of the vehicle at the time of the damage because he had previously sold it toanother
A registered owner who has already sold or transferred a vehicle has the recourse to athird-party complaint, in the same action
brought against him to recover for thedamage or injury done, against the vendee or transferee of the
vehicle. Theinconvenience of the suit is no justification for relieving him of liability; saidinconvenience is the price he pays for
failure to comply with the registration that thelaw demands and requires.
Transportation Law Case
In synthesis, we hold that the registered owner, the defendant-appellant herein, is primarily responsible for the damage caused
to the vehicle of the plaintiff-appellee, but he (defendant-appellant) has a right to be indemnified by the real or actual ownerof
the amount that he may be required to pay as damage for the injury caused to the plaintiff-appellant.
Spouses Hernandez et al vs. Spouses Dolor et al, GR No. 160286, July 30, 2004; jeep.7 Moreover, the evidence presented by respondents before the trial court showed that petitioner Juan Gonzales obtained
his professional driver's license only on September 24, 1986, or three months before the accident. Prior to this, he was holder
of a student driver's permit issued on April 10, 1986.8
FIRST DIVISION
On November 24, 1997, the trial court rendered a decision in favor of respondents, the dispositive portion of which states:
G.R. No. 160286 July 30, 2004
Premises duly considered and the plaintiffs having satisfactorily convincingly and credibly presented evidence clearly
satisfying the requirements of preponderance of evidence to sustain the complaint, this Court hereby declares
SPOUSES FRANCISCO M. HERNANDEZ and ANICETA ABEL-HERNANDEZ and JUAN GONZALES,petitioners,
judgment in favor of the plaintiffs and against the defendants. Defendants-spouses Francisco Hernandez and Aniceta
vs.
Abel Hernandez and Juan Gonzales are therefore directed to pay jointly and severally, the following:
SPOUSES LORENZO DOLOR and MARGARITA DOLOR, FRED PANOPIO, JOSEPH SANDOVAL, RENE CASTILLO, SPOUSES
FRANCISCO VALMOCINA and VIRGINIA VALMOCINA, SPOUSES VICTOR PANOPIO and MARTINA PANOPIO, and HON. COURT
1) To spouses Lorenzo Dolor and Margarita Dolor:
OF APPEALS, respondents.
a) P50,000.00 – for the death of their son, Lorenzo Menard "Boyet" Dolor, Jr.;

DECISION b) P142,000.00 – as actual and necessary funeral expenses;

c) P50,000.00 – reasonable value of the totally wrecked owner-type jeep with plate no. DEB 804 Phil '85;
YNARES-SANTIAGO, J.:
d) P20,000.00 – as moral damages;
This is a petition for review under Rule 45 of the Rules of Court seeking the reversal of the decision 1 of the Court of Appeals,
dated April 29, 2003, in CA-G.R. CV No. 60357, which affirmed with modification the amount of damages awarded in the e) P20,000.00 as reasonable litigation expenses and attorney's fees.
November 24, 1997 decision2 of the Regional Trial Court of Batangas City, Branch IV.
2) To spouses Francisco Valmocina and Virginia Valmocina:
The undisputed facts are as follows:
a) P50,000.00 – for the death of their son, Oscar Balmocina (sic);
At about 3:00 p.m. of December 19, 1986, Lorenzo Menard "Boyet" Dolor, Jr. was driving an owner-type jeepney with plate no.
DEB 804 owned by her mother, Margarita, towards Anilao, Batangas. As he was traversing the road at Barangay Anilao East, b) P20,000.00 – as moral damages;
Mabini, Batangas, his vehicle collided with a passenger jeepney bearing plate no. DEG 648, driven by petitioner Juan Gonzales
and owned by his co-petitioner Francisco Hernandez, which was travelling towards Batangas City. c) P18,400.00 – for funeral expenses;

Boyet Dolor and his passenger, Oscar Valmocina, died as a result of the collision. Fred Panopio, Rene Castillo and Joseph d) P10,000.00 – for litigation expenses and attorney's fees.
Sandoval, who were also on board the owner-type jeep, which was totally wrecked, suffered physical injuries. The collision also
damaged the passenger jeepney of Francisco Hernandez and caused physical injuries to its passengers, namely, Virgie Cadavida, 3) To spouses Victor Panopio and Martina Panopio:
Fiscal Artemio Reyes and Francisca Corona.3
a) P10,450.00 – for the cost of the artificial leg and crutches being used by their son Fred Panopio;
Consequently, respondents commenced an action4 for damages against petitioners before the Regional Trial Court of Batangas
City, alleging that driver Juan Gonzales was guilty of negligence and lack of care and that the Hernandez spouses were guilty of b) P25,000.00 – for hospitalization and medical expenses they incurred for the treatment of their son,
negligence in the selection and supervision of their employees. 5 Fred Panopio.

Petitioners countered that the proximate cause of the death and injuries sustained by the passengers of both vehicles was the 4) To Fred Panopio:
recklessness of Boyet Dolor, the driver of the owner-type jeepney, who was driving in a zigzagging manner under the influence
of alcohol. Petitioners also alleged that Gonzales was not the driver-employee of the Hernandez spouses as the former only a) P25,000.00 – for the loss of his right leg;
leased the passenger jeepney on a daily basis. The Hernandez spouses further claimed that even if an employer-employee
relationship is found to exist between them, they cannot be held liable because as employers they exercised due care in the b) P10,000.00 – as moral damages.
selection and supervision of their employee.
5) To Joseph Sandoval:
During the trial of the case, it was established that the drivers of the two vehicles were duly licensed to drive and that the road
where the collision occurred was asphalted and in fairly good condition.6 The owner-type jeep was travelling uphill while the a) P4,000.00 for medical treatment.
passenger jeepney was going downhill. It was further established that the owner-type jeep was moderately moving and had
just passed a road bend when its passengers, private respondents Joseph Sandoval and Rene Castillo, saw the passenger The defendants are further directed to pay the costs of this proceedings.
jeepney at a distance of three meters away. The passenger jeepney was traveling fast when it bumped the owner type

37
 SO ORDERED.9 2. Whether the Court of Appeals was correct in awarding temperate damages to private respondents namely the
Spouses Dolor, Spouses Valmocina and Spouses Panopio and to Joseph Sandoval, although the grant of temperate
Petitioners appealed10 the decision to the Court of Appeals, which affirmed the same with modifications as to the amount of damages is not provided for in decision of the court a quo;
damages, actual expenses and attorney's fees awarded to the private respondents. The decretal portion of the decision of the
Court of Appeals reads: 3. Whether the Court of Appeals was correct in increasing the award of moral damages to respondents, Spouses
Dolor, Spouses Valmocina and Fred Panopio;
WHEREFORE, the foregoing premises considered, the appealed decision is AFFIRMED. However, the award for
damages, actual expenses and attorney's fees shall be MODIFIED as follows: 4. Whether the Court of Appeals was correct in affirming the grant of attorney's fees to Spouses Dolor and to
Spouses Valmocina although the lower court did not specify the fact and the law on which it is based.
1) To spouses Lorenzo Dolor and Margarita Dolor:
Petitioners contend that the absence of the Hernandez spouses inside the passenger jeepney at the time of the collision
a) P50,000.00 – civil indemnity for their son Lorenzo Menard Dolor, Jr.; militates against holding them solidarily liable with their co-petitioner, Juan Gonzales, invoking Article 2184 of the Civil Code,
which provides:
b) P58,703.00 – as actual and necessary funeral expenses;
ARTICLE 2184. In motor vehicle mishaps, the owner is solidarily liable with his driver, if the former, who was in the
c) P25,000,00 – as temperate damages; vehicle, could have, by the use of the due diligence, prevented the misfortune. It is disputably presumed that a
driver was negligent, if he had been found guilty of reckless driving or violating traffic regulations at least twice
d) P100,000.00 – as moral damages; within the next preceding two months.

e) P20,000.00 – as reasonable litigation expenses and attorney's fees. If the owner was not in the motor vehicle, the provisions of article 2180 are applicable.

2) To Spouses Francisco Valmocina and Virginia Valmocina:
a) P50,000.00 – civil indemnity for the death of their son, Oscar Valmocina;
b) P100,000.00 – as moral damages;
c) P10,000.00 – as temperate damages;
d) P10,000.00 – as reasonable litigation expenses and attorney's fees.
The Hernandez spouses argues that since they were not inside the jeepney at the time of the collision, the provisions of Article
2180 of the Civil Code, which does not provide for solidary liability between employers and employees, should be applied.
We are not persuaded.
Article 2180 provides:
ARTICLE 2180. The obligation imposed by article 2176 is demandable not only for one's own acts or omissions, but
also for those of persons for whom one is responsible.

3) To Spouses Victor Panopio and Martina Panopio: The father and, in case of his death or incapacity, the mother, are responsible for the damages caused by the minor
children who live in their company.
a) P10,352.59 – as actual hospitalization and medical expenses;
Guardians are liable for damages caused by the minors or incapacitated persons who are under their authority and
b) P5,000.00 – as temperate damages. live in their company.

4) To Fred Panopio: The owners and managers of an establishment or enterprise are likewise responsible for damages caused by their
employees in the service of the branches in which the latter are employed or on the occasion of their functions.
a) P50,000.00 – as moral damages.
Employers shall be liable for the damages caused by their employees and household helpers acting within the
5) To Joseph Sandoval: scope of their assigned tasks, even though the former are not engaged in any business or industry.

a) P3,000.00 as temperate damages. The State is responsible in like manner when it acts through a special agent; but not when the damage has been
caused by the official to whom the task done properly pertains, in which case what is provided in article 2176 shall
SO ORDERED.11 be applicable.

Hence the present petition raising the following issues:
1. Whether the Court of Appeals was correct when it pronounced the Hernandez spouses as solidarily liable with
Juan Gonzales, although it is of record that they were not in the passenger jeepney driven by latter when the
accident occurred;
Lastly, teachers or heads of establishments of arts and trades shall be liable for damages caused by their pupils and
students or apprentices, so long as they remain in their custody.
The responsibility treated of in this article shall cease when the persons herein mentioned prove that they observed
all the diligence of a good father of a family to prevent damage. (Underscoring supplied)

38
On the other hand, Article 2176 provides –
Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the
damage done. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is called a
quasi-delict and is governed by the provisions of this Chapter.
While the above provisions of law do not expressly provide for solidary liability, the same can be inferred from the wordings of
the first paragraph of Article 2180 which states that the obligation imposed by article 2176 is demandable not only for one's
own acts or omissions, but also for those of persons for whom one is responsible.
Moreover, Article 2180 should be read with Article 2194 of the same Code, which categorically states that the responsibility of
two or more persons who are liable for quasi-delict is solidary. In other words, the liability of joint tortfeasors is solidary. 12 Verily,
under Article 2180 of the Civil Code, an employer may be held solidarily liable for the negligent act of his employee. 13
The solidary liability of employers with their employees for quasi-delicts having been established, the next question is whether
Julian Gonzales is an employee of the Hernandez spouses. An affirmative answer will put to rest any issue on the solidary
liability of the Hernandez spouses for the acts of Julian Gonzales. The Hernandez spouses maintained that Julian Gonzales is not
their employee since their relationship relative to the use of the jeepney is that of a lessor and a lessee. They argue that Julian
Gonzales pays them a daily rental of P150.00 for the use of the jeepney. 14 In essence, petitioners are practicing the "boundary
system" of jeepney operation albeit disguised as a lease agreement between them for the use of the jeepney.
We hold that an employer-employee relationship exists between the Hernandez spouses and Julian Gonzales.
Indeed to exempt from liability the owner of a public vehicle who operates it under the "boundary system" on the ground that
he is a mere lessor would be not only to abet flagrant violations of the Public Service Law, but also to place the riding public at
the mercy of reckless and irresponsible drivers — reckless because the measure of their earnings depends largely upon the
number of trips they make and, hence, the speed at which they drive; and irresponsible because most if not all of them are in
no position to pay the damages they might cause.15
Anent the award of temperate damages to the private respondents, we hold that the appellate court committed no reversible
error in awarding the same to the respondents.
Temperate or moderate damages are damages which are more than nominal but less than compensatory which may be
recovered when the court finds that some pecuniary loss has been suffered but its amount cannot, from the nature of the case,
be proved with certainty.16 Temperate damages are awarded for those cases where, from the nature of the case, definite proof
of pecuniary loss cannot be offered, although the court is convinced that there has been such loss. A judge should be
empowered to calculate moderate damages in such cases, rather than the plaintiff should suffer, without redress, from the
defendant's wrongful act.17 The assessment of temperate damages is left to the sound discretion of the court provided that
such an award is reasonable under the circumstances.18
We have gone through the records of this case and we find that, indeed, respondents suffered losses which cannot be
quantified in monetary terms. These losses came in the form of the damage sustained by the owner type jeep of the Dolor
spouses; the internment and burial of Oscar Valmocina; the hospitalization of Joseph Sandoval on account of the injuries he
sustained from the collision and the artificial leg and crutches that respondent Fred Panopio had to use because of the
amputation of his right leg. Further, we find that the amount of temperate damages awarded to the respondents were
reasonable under the circumstances.
As to the amount of moral damages which was awarded to respondents, a review of the records of this case shows that there
exists no cogent reason to overturn the action of the appellate court on this aspect.
39
Under Article 2206, the "spouse, legitimate and illegitimate descendants and ascendants of the deceased may demand moral
damages for mental anguish for the death of the deceased." The reason for the grant of moral damages has been explained,
thus:
. . . the award of moral damages is aimed at a restoration, within the limits possible, of the spiritual status quo ante;
and therefore, it must be proportionate to the suffering inflicted. The intensity of the pain experienced by the
relatives of the victim is proportionate to the intensity of affection for him and bears no relation whatsoever with
the wealth or means of the offender.19
Moral damages are emphatically not intended to enrich a plaintiff at the expense of the defendant. They are awarded to allow
the former to obtain means, diversion or amusements that will serve to alleviate the moral suffering he has undergone due to
the defendant's culpable action and must, perforce, be proportional to the suffering inflicted. 20
Truly, the pain of the sudden loss of one's offspring, especially of a son who was in the prime of his youth, and who holds so
much promise waiting to be fulfilled is indeed a wellspring of intense pain which no parent should be made to suffer. While it is
true that there can be no exact or uniform rule for measuring the value of a human life and the measure of damages cannot be
arrived at by a precise mathematical calculation, 21 we hold that the Court of Appeals' award of moral damages of P100,000.00
each to the Spouses Dolor and Spouses Valmocina for the death of their respective sons, Boyet Dolor and Oscar Valmocina, is in
full accord with prevailing jurisprudence.22
With respect to the award of attorney's fees to respondents, no sufficient basis was established for the grant thereof.
It is well settled that attorney's fees should not be awarded in the absence of stipulation except under the instances
enumerated in Article 2208 of the Civil Code. As we have held in Rizal Surety and Insurance Company v. Court of Appeals:23
Article 2208 of the Civil Code allows attorney's fees to be awarded by a court when its claimant is compelled to
litigate with third persons or to incur expenses to protect his interest by reason of an unjustified act or omission of
the party from whom it is sought. While judicial discretion is here extant, an award thereof demands, nevertheless,
a factual, legal or equitable justification. The matter cannot and should not be left to speculation and conjecture
(Mirasol vs. De la Cruz, 84 SCRA 337; Stronghold Insurance Company, Inc. vs. Court of Appeals, 173 SCRA 619).
In the case at bench, the records do not show enough basis for sustaining the award for attorney's fees and to
adjudge its payment by petitioner. x x x.
Likewise, this Court held in Stronghold Insurance Company, Inc. vs. Court of Appeals that:
"In Abrogar v. Intermediate Appellate Court G.R. No. 67970, January 15, 1988, 157 SCRA 57], the Court
had occasion to state that '[t]he reason for the award of attorney's fees must be stated in the text of the
court's decision, otherwise, if it is stated only in the dispositive portion of the decision, the same must be
disallowed on appeal.' x x x."24
WHEREFORE, the petition is DENIED. The assailed decision of the Court of Appeals is AFFIRMED with the MODIFICATION that
the grant of attorney's fees is DELETED for lack of basis.
Costs against petitioners.
SO ORDERED.
FACTS:
A vehicle owned by the petitioners figured in an accident as a result of which the petitioners were sued for
damages. Petitioners main defense at the time the incident happened is that the vehicle is being leased to the driver. The latter
paying the rental by way of boundary at P150 per day. Since they are merely lessors, they should not be held liable for the
injury sustained by the respondents.
ISSUE: W/N the owner of the vehicle is solidarily liable with the driver.

HELD:
For the purpose of imputing liability, employer-employee relationship exist between the owner and the driver
although the latter may pay rental by way of boundary. To sustain the petitioners’ contention that they should be excused from
liability because they are merely lessors will be a flagrant disregard of our public service law which imputes liability upon
registered owner of the subject vehicle. To sustain the contention of the petitioner will put the public at the mercy of
irresponsible and reckless drivers.

40
Delsan Transport Lines, Inc. vs. American Home Insurance, G.R. No. 149019, 15 August 2006; On February 19, 1985, AHAC, as Caltex’s subrogee, instituted Civil Case No. 85-29357 against Delsan before the Manila RTC,
Branch 9, for loss caused by the spillage. It likewise prayed that it be indemnified for damages suffered in the amount
of P652,432.57 plus legal interest thereon.
SECOND DIVISION
Also, on May 5, 1985, in the Manila RTC, Branch 31, AHAC instituted Civil Case No. 85-30559 against Delsan for the loss caused
G.R. No. 149019 August 15, 2006
by the backflow. It likewise prayed that it be awarded the amount of P1,939,575.37 for damages and reasonable attorney’s
fees. As counterclaim in both cases, AHAC prayed for attorney’s fees in the amount of P200,000.00 and P500.00 for every court
DELSAN TRANSPORT LINES, INC., Petitioner,
appearance.
vs.
AMERICAN HOME ASSURANCE CORPORATION, Respondent.
Since the cause of action in both cases arose out of the same incident and involved the same issues, the two were consolidated
and assigned to Branch 9 of the court.
DECISION
On August 31, 1989, the trial court rendered its decision 2 in favor of AHAC holding Delsan liable for the loss of the cargo for its
GARCIA, J.:
negligence in its duty as a common carrier. Dispositively, the decision reads:
By this petition for review on certiorari under Rule 45 of the Rules of Court, petitioner Delsan Transport Lines, Inc. (Delsan
WHEREFORE, judgment is hereby rendered:
hereafter) assails and seeks to set aside the Decision, 1 dated July 16, 2001, of the Court of Appeals (CA) in CA-G.R. CV No.
40951 affirming an earlier decision of the Regional Trial Court (RTC) of Manila, Branch IX, in two separate complaints for
A). In Civil Case No. 85-30559:
damages docketed as Civil Case No. 85-29357 and Civil Case No. 85-30559.
(1) Ordering the defendant (petitioner Delsan) to pay plaintiff (respondent AHAC) the sum of P1,939,575.37 with interest
The facts:
thereon at the legal rate from November 21, 1984 until fully paid and satisfied; and
Delsan is a domestic corporation which owns and operates the vessel MT Larusan. On the other hand, respondent American
(2) Ordering defendant to pay plaintiff the sum of P10,000.00 as and for attorney’s fees.
Home Assurance Corporation (AHAC for brevity) is a foreign insurance company duly licensed to do business in the Philippines
through its agent, the American-International Underwriters, Inc. (Phils.). It is engaged, among others, in insuring cargoes for
For lack of merit, the counterclaim is hereby dismissed.
transportation within the Philippines.
B). In Civil Case No. 85-29357:
On August 5, 1984, Delsan received on board MT Larusan a shipment consisting of 1,986.627 k/l Automotive Diesel Oil (diesel
oil) at the Bataan Refinery Corporation for transportation and delivery to the bulk depot in Bacolod City of Caltex Phils., Inc.
(1) Ordering defendant to pay plaintiff the sum of P479,262.57 with interest thereon at the legal rate from February 6, 1985
(Caltex), pursuant to a Contract of Afreightment. The shipment was insured by respondent AHAC against all risks under Inland
until fully paid and satisfied;
Floater Policy No. AH-IF64-1011549P and Marine Risk Note No. 34-5093-6.
(2) Ordering defendant to pay plaintiff the sum of P5,000.00 as and for attorney’s fees.
On August 7, 1984, the shipment arrived in Bacolod City. Immediately thereafter, unloading operations commenced. The
discharging of the diesel oil started at about 1:30 PM of the same day. However, at about 10:30 PM, the discharging had to be
For lack of merit, the counterclaim is hereby dismissed.
stopped on account of the discovery that the port bow mooring of the vessel was intentionally cut or stolen by unknown
persons. Because there was nothing holding it, the vessel drifted westward, dragged and stretched the flexible rubber hose
Costs against the defendant.
attached to the riser, broke the elbow into pieces, severed completely the rubber hose connected to the tanker from the main
delivery line at sea bed level and ultimately caused the diesel oil to spill into the sea. To avoid further spillage, the vessel’s crew
tried water flushing to clear the line of the diesel oil but to no avail. In the meantime, the shore tender, who was waiting for the SO ORDERED.
completion of the water flushing, was surprised when the tanker signaled a "red light" which meant stop pumping. Unaware of
what happened, the shore tender, thinking that the vessel would, at any time, resume pumping, did not shut the storage tank In time, Delsan appealed to the CA whereat its recourse was docketed as CA-G.R. CV No. 40951.
gate valve. As all the gate valves remained open, the diesel oil that was earlier discharged from the vessel into the shore tank
backflowed. Due to non-availability of a pump boat, the vessel could not send somebody ashore to inform the people at the In the herein challenged decision, 3 the CA affirmed the findings of the trial court. In so ruling, the CA declared that Delsan
depot about what happened. After almost an hour, a gauger and an assistant surveyor from the Caltex’s Bulk Depot Office failed to exercise the extraordinary diligence of a good father of a family in the handling of its cargo. Applying Article 1736 4 of
boarded the vessel. It was only then that they found out what had happened. Thereafter, the duo immediately went ashore to the Civil Code, the CA ruled that since the discharging of the diesel oil into Caltex bulk depot had not been completed at the
see to it that the shore tank gate valve was closed. The loss of diesel oil due to spillage was placed at 113.788 k/l while some time the losses occurred, there was no reason to imply that there was actual delivery of the cargo to Caltex, the consignee. We
435,081 k/l thereof backflowed from the shore tank. quote the fallo of the CA decision:

As a result of spillage and backflow of diesel oil, Caltex sought recovery of the loss from Delsan, but the latter refused to pay. As WHEREFORE, premises considered, the appealed Decision of the Regional Trial Court of Manila, Branch 09 in Civil Case Nos. 85-
insurer, AHAC paid Caltex the sum of P479,262.57 for spillage, pursuant to Marine Risk Note No. 34-5093-6, and P1,939,575.37 29357 and 85-30559 is hereby AFFIRMED with a modification that attorney’s fees awarded in Civil Case Nos. 85-29357 and 85-
for backflow of the diesel oil pursuant to Inland Floater Policy No. AH-1F64-1011549P. 30559 are hereby DELETED.

SO ORDERED.

41
Delsan is now before the Court raising substantially the same issues proffered before the CA.
Principally, Delsan insists that the CA committed reversible error in ruling that Article 1734 of the Civil Code cannot exculpate it
from liability for the loss of the subject cargo and in not applying the rule on contributory negligence against Caltex, the
shipper-owner of the cargo, and in not taking into consideration the fact that the loss due to backflow occurred when the diesel
oil was already completely delivered to Caltex.
We are not persuaded.
In resolving this appeal, the Court reiterates the oft-stated doctrine that factual findings of the CA, affirmatory of those of the
trial court, are binding on the Court unless there is a clear showing that such findings are tainted with arbitrariness,
capriciousness or palpable error. 5
Delsan would have the Court absolve it from liability for the loss of its cargo on two grounds. First, the loss through spillage was
partly due to the contributory negligence of Caltex; and Second, the loss through backflow should not be borne by Delsan
because it was already delivered to Caltex’s shore tank.
Common carriers are bound to observe extraordinary diligence in the vigilance over the goods transported by them. They are
presumed to have been at fault or to have acted negligently if the goods are lost, destroyed or deteriorated. 6 To overcome the
presumption of negligence in case of loss, destruction or deterioration of the goods, the common carrier must prove that it
exercised extraordinary diligence. There are, however, exceptions to this rule. Article 1734 of the Civil Code enumerates the
instances when the presumption of negligence does not attach:
Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of the goods, unless the same is due to
any of the following causes only:
1) Flood storm, earthquake, lightning, or other natural disaster or calamity;
2) Act of the public enemy in war, whether international or civil;
3) Act or omission of the shipper or owner of the goods;
4) The character of the goods or defects in the packing or in the containers;
5) Order or act of competent public authority.
Both the trial court and the CA uniformly ruled that Delsan failed to prove its claim that there was a contributory negligence on
the part of the owner of the goods – Caltex. We see no reason to depart therefrom. As aptly pointed out by the CA, it had been
established that the proximate cause of the spillage and backflow of the diesel oil was due to the severance of the port bow
mooring line of the vessel and the failure of the shore tender to close the storage tank gate valve even as a check on the drain
cock showed that there was still a product on the pipeline. To the two courts below, the actuation of the gauger and the escort
surveyor, both personnel from the Caltex Bulk Depot, negates the allegation that Caltex was remiss in its duties. As we see it,
the crew of the vessel should have promptly informed the shore tender that the port mooring line was cut off. However, Delsan
did not do so on the lame excuse that there was no available banca. As it is, Delsan’s personnel signaled a "red light" which was
not a sufficient warning because such signal only meant that the pumping of diesel oil had been finished. Neither did the
blowing of whistle suffice considering the distance of more than 2 kilometers between the vessel and the Caltex Bulk Depot,
aside from the fact that it was not the agreed signal. Had the gauger and the escort surveyor from Caltex Bulk Depot not gone
aboard the vessel to make inquiries, the shore tender would have not known what really happened. The crew of the vessel
should have exerted utmost effort to immediately inform the shore tender that the port bow mooring line was severed.
42
To be sure, Delsan, as the owner of the vessel, was obliged to prove that the loss was caused by one of the excepted causes if it
were to seek exemption from responsibility. 7 Unfortunately, it miserably failed to discharge this burden by the required
quantum of proof.
Delsan’s argument that it should not be held liable for the loss of diesel oil due to backflow because the same had already been
actually and legally delivered to Caltex at the time it entered the shore tank holds no water. It had been settled that the subject
cargo was still in the custody of Delsan because the discharging thereof has not yet been finished when the backflow occurred.
Since the discharging of the cargo into the depot has not yet been completed at the time of the spillage when the backflow
occurred, there is no reason to imply that there was actual delivery of the cargo to the consignee. Delsan is straining the issue
by insisting that when the diesel oil entered into the tank of Caltex on shore, there was legally, at that moment, a complete
delivery thereof to Caltex. To be sure, the extraordinary responsibility of common carrier lasts from the time the goods are
unconditionally placed in the possession of, and received by, the carrier for transportation until the same are delivered, actually
or constructively, by the carrier to the consignee, or to a person who has the right to receive them. 8 The discharging of oil
products to Caltex Bulk Depot has not yet been finished, Delsan still has the duty to guard and to preserve the cargo. The
carrier still has in it the responsibility to guard and preserve the goods, a duty incident to its having the goods transported.
To recapitulate, common carriers, from the nature of their business and for reasons of public policy, are bound to observe
extraordinary diligence in vigilance over the goods and for the safety of the passengers transported by them, according to all
the circumstances of each case. 9 The mere proof of delivery of goods in good order to the carrier, and their arrival in the place
of destination in bad order, make out a prima facie case against the carrier, so that if no explanation is given as to how the
injury occurred, the carrier must be held responsible. It is incumbent upon the carrier to prove that the loss was due to
accident or some other circumstances inconsistent with its liability. 10
All told, Delsan, being a common carrier, should have exercised extraordinary diligence in the performance of its duties.
Consequently, it is obliged to prove that the damage to its cargo was caused by one of the excepted causes if it were to seek
exemption from responsibility. 11 Having failed to do so, Delsan must bear the consequences.
WHEREFORE, petition is DENIED and the assailed decision of the CA is AFFIRMED in toto.
Cost against petitioner.
SO ORDERED.
FACTS:
The facts show that Caltex Philippines (Caltex for brevity) entered into a contract of affreightment with the petitioner, Delsan
Transport Lines, Inc., for a period of one year whereby the said common carrier agreed to transport Caltex’s industrial fuel oil
from the Batangas-Bataan Refinery to different parts of the country. Under the contract, petitioner took on board its vessel, MT
Maysun 2,277.314 kiloliters of industrial fuel oil of Caltex to be delivered to the Caltex Oil Terminal in Zamboanga City. The
shipment was insured with the private respondent, American Home Assurance Corporation. During the voyage, the vessel sank.
The insurer paid Caltex and now seeks recovery under the right of subrogation. The trial court found the vessel seaworthy and
the incident was caused by force majeure hence, exempt from liability. CA reversed the trial court’s decision, explaining that
petitioner was liable as a common carrier due to lack of manpower and absent any explanation why the vessel sank.
ISSUE:
Whether or not there was an implied admission of seaworthiness thus precluding the right of recovery by private respondent
as insurer.
Whether or not the non-presentation of the marine insurance policy bars the complaint for recovery of sum of money for lack
of cause of action.
RULING:
No. The payment made by the private respondent for the insured’s value of the lost cargo operates as waiver of its (private
respondent) right to enforce the term of the implied warranty against Caltex under the marine insurance policy. However, the
same cannot be validly interpreted as an automatic admission of the vessel’s seaworthiness by the private respondent as to
foreclose recourse against the petitioner for any liability under its contractual obligation as a common carrier. The fact of
payment grants the private respondent subrogatory right which enables it to exercise legal remedies that would otherwise be
available to Caltex as owner of the lost cargo against the petitioner common carrier.

From the nature of their business and for reasons of public policy, common carriers are bound to observe extraordinary
diligence in the vigilance over the goods and for the safety of passengers transported by them, according to all the
circumstance of each case.In the event of loss, destruction or deterioration of the insured goods, common carriers shall be
responsible unless the same is brought about, among others, by flood, storm, earthquake, lightning or other natural disaster or
calamity. In all other cases, if the goods are lost, destroyed or deteriorated, common carriers are presumed to have been at
fault or to have acted negligently, unless they prove that they observed extraordinary diligence. The said presumption was not
overturned by petitioner in this case. Hence, private respondent as insurer can exercise its right of subrogation against
petitioner.
Thus, as the appellate court correctly ruled, petitioner’s vessel, MT Maysun, sank with its entire cargo for the reason that it was
not seaworthy. There was no squall or bad weather or extremely poor sea condition in the vicinity when the said vessel sank.

Anent the second issue, it is our view and so hold that the presentation in evidence of the marine insurance policy is not
indispensable in this case before the insurer may recover from the common carrier the insured value of the lost cargo in the
exercise of its subrogatory right. The subrogation receipt, by itself, is sufficient to establish not only the relationship of herein
private respondent as insurer and Caltex, as the assured shipper of the lost cargo of industrial fuel oil, but also the amount paid
to settle the insurance claim. The right of subrogation accrues simply upon payment by the insurance company of the insurance
claim.

43
Sarkies Tours Phils vs. CA, Oct. 2, 1997; 2. The sum of P90,000.00 for the transportation expenses, as well as moral damages;
THIRD DIVISION
3. The sum of P10,000.00 by way of exemplary damages;
G.R. No. 108897 October 2, 1997
4. The sum of P5,000.00 as attorney's fees; and
SARKIES TOURS PHILIPPINES, INC., petitioner,
5. The sum of P5,000.00 as litigation expenses or a total of One Hundred Forty Thousand (P140,000.00) Pesos.
vs.
HONORABLE COURT OF APPEALS (TENTH DIVISION), DR. ELINO G. FORTADES, MARISOL A. FORTADES and FATIMA MINERVA
to be paid by herein defendant Sarkies Tours Philippines, Inc. to the herein plaintiffs within 30 days from receipt of
A. FORTADES, respondents.
this Decision.

SO ORDERED.
ROMERO, J.:
On appeal, the appellate court affirmed the trial court's judgment, but deleted the award of moral and exemplary damages.
This petition for review is seeking the reversal of the decision of the Court of Appeals in CA-G.R. CV No. 18979 promulgated on
Thus,
January 13, 1993, as well as its resolution of February 19, 1993, denying petitioner's motion for reconsideration for being a
mere rehash of the arguments raised in the appellant's brief.
WHEREFORE, premises considered, except as above modified, fixing the award for transportation expenses at
P30,000.00 and the deletion of the award for moral and exemplary damages, the decision appealed from is
The case arose from a damage suit filed by private respondents Elino, Marisol, and Fatima Minerva, all surnamed Fortades,
AFFIRMED, with costs against defendant-appellant.
against petitioner for breach of contract of carriage allegedly attended by bad faith.
SO ORDERED.
On August 31, 1984, Fatima boarded petitioner's De Luxe Bus No. 5 in Manila on her way to Legazpi City. Her brother Raul
helped her load three pieces of luggage containing all of her optometry review books, materials and equipment, trial lenses,
Its motion for reconsideration was likewise rejected by the Court of Appeals, so petitioner elevated its case to this Court for a
trial contact lenses, passport and visa, as well as her mother Marisol's U.S. immigration (green) card, among other important
review.
documents and personal belongings. Her belongings were kept in the baggage compartment of the bus, but during a stopover
at Daet, it was discovered that only one bag remained in the open compartment. The others, including Fatima's things, were
After a careful scrutiny of the records of this case, we are convinced that the trial and appellate courts resolved the issues
missing and might have dropped along the way. Some of the passengers suggested retracing the route of the bus to try to
judiciously based on the evidence at hand.
recover the lost items, but the driver ignored them and proceeded to Legazpi City.
Petitioner claims that Fatima did not bring any piece of luggage with her, and even if she did, none was declared at the start of
Fatima immediately reported the loss to her mother who, in turn, went to petitioner's office in Legazpi City and later at its head
the trip. The documentary and testimonial evidence presented at the trial, however, established that Fatima indeed boarded
office in Manila. Petitioner, however, merely offered her P1,000.00 for each piece of luggage lost, which she turned down. After
petitioner's De Luxe Bus No. 5 in the evening of August 31, 1984, and she brought three pieces of luggage with her, as testified
returning to Bicol, disappointed but not defeated, mother and daughter asked assistance from the radio stations and even from
by her brother Raul, 2 who helped her pack her things and load them on said bus. One of the bags was even recovered by a
Philtranco bus drivers who plied the same route on August 31st. The effort paid off when one of Fatima's bags was recovered.
Philtranco bus driver. In its letter dated October 1, 1984, petitioner tacitly admitted its liability by apologizing to respondents
Marisol further reported the incident to the National Bureau of Investigation's field office in Legazpi City and to the local police.
and assuring them that efforts were being made to recover the lost items.
On September 20, 1984, respondents, through counsel, formally demanded satisfaction of their complaint from petitioner. In a
The records also reveal that respondents went to great lengths just to salvage their loss. The incident was reported to the
letter dated October 1, 1984, the latter apologized for the delay and said that "(a) team has been sent out to Bicol for the
police, the NBI, and the regional and head offices of petitioner. Marisol even sought the assistance of Philtranco bus drivers and
purpose of recovering or at least getting the full detail"1 of the incident.
the radio stations. To expedite the replacement of her mother's lost U.S. immigration documents, Fatima also had to execute an
affidavit of loss.3 Clearly, they would not have gone through all that trouble in pursuit of a fancied loss.
After more than nine months of fruitless waiting, respondents decided to file the case below to recover the value of the
remaining lost items, as well as moral and exemplary damages, attorney's fees and expenses of litigation. They claimed that the
Fatima was not the only one who lost her luggage. Apparently, other passengers had suffered a similar fate: Dr. Lita Samarista
loss was due to petitioner's failure to observe extraordinary diligence in the care of Fatima's luggage and that petitioner dealt
testified that petitioner offered her P1,000.00 for her lost baggage and she accepted it;4 Carleen Carullo-Magno lost her
with them in bad faith from the start. Petitioner, on the other hand, disowned any liability for the loss on the ground that
chemical engineering review materials, while her brother lost abaca products he was transporting to Bicol. 5
Fatima allegedly did not declare any excess baggage upon boarding its bus.
Petitioner's receipt of Fatima's personal luggage having been thus established, it must now be determined if, as a common
On June 15, 1988, after trial on the merits, the court a quo adjudged the case in favor of respondents, viz.:
carrier, it is responsible for their loss. Under the Civil Code, "(c)ommon carriers, from the nature of their business and for
reasons of public policy, are bound to observe extraordinary diligence in the vigilance over the goods . . . transported by
PREMISES CONSIDERED, judgment is hereby rendered in favor of the plaintiffs (herein respondents) and against the
them,"6 and this liability "lasts from the time the goods are unconditionally placed in the possession of, and received by the
herein defendant Sarkies Tours Philippines, Inc., ordering the latter to pay to the former the following sums of
carrier for transportation until the same are delivered, actually or constructively, by the carrier to . . . the person who has a right
money, to wit:
to receive them,"7 unless the loss is due to any of the excepted causes under Article 1734 thereof. 8
1. The sum of P30,000.00 equivalent to the value of the personal belongings of plaintiff Fatima Minerva Fortades,
etc. less the value of one luggage recovered;
44
The cause of the loss in the case at bar was petitioner's negligence in not ensuring that the doors of the baggage compartment
of its bus were securely fastened. As a result of this lack of care, almost all of the luggage was lost, to the prejudice of the
paying passengers. As the Court of Appeals correctly observed:
. . . . Where the common carrier accepted its passenger's baggage for transportation and even had it placed in the
vehicle by its own employee, its failure to collect the freight charge is the common carrier's own lookout. It is
responsible for the consequent loss of the baggage. In the instant case, defendant appellant's employee even helped
Fatima Minerva Fortades and her brother load the luggages/baggages in the bus' baggage compartment, without
asking that they be weighed, declared, receipted or paid for (TSN, August 4, 1986, pp. 29, 34, 54, 57, 70; December
23, 1987, p. 35). Neither was this required of the other passengers (TSN, August 4, 1986, p. 104; February 5, 1988; p.
13).
Finally, petitioner questions the award of actual damages to respondents. On this point, we likewise agree with the trial and
appellate courts' conclusions. There is no dispute that of the three pieces of luggage of Fatima, only one was recovered. The
other two contained optometry books, materials, equipment, as well as vital documents and personal belongings. Respondents
had to shuttle between Bicol and Manila in their efforts to be compensated for the loss. During the trial, Fatima and Marisol
had to travel from the United States just to be able to testify. Expenses were also incurred in reconstituting their lost
documents. Under these circumstances, the Court agrees with the Court of Appeals in awarding P30,000.00 for the lost items
and P30,000.00 for the transportation expenses, but disagrees with the deletion of the award of moral and exemplary damages
which, in view of the foregoing proven facts, with negligence and bad faith on the fault of petitioner having been duly
established, should be granted to respondents in the amount of P20,000.00 and P5,000.00, respectively.
WHEREFORE, the assailed decision of the Court of Appeals dated January 13, 1993, and its resolution dated February 19, 1993,
are hereby AFFIRMED with the MODIFICATION that petitioner is ordered to pay respondents an additional P20,000.00 as moral
damages and P5,000.00 as exemplary damages. Costs against petitioner.
SO ORDERED.
FACTS:
Fati ma boarded Sarkies Tours’ bus in Manila on her way to Legazpi City. She had her 3 pieces of luggage
containing all of her optometry review books, materials and equipment,trial lenses, trial contact lenses, passport and
visa, as well as her mother Marisol’s U.S.immigrati on (green) card, among other
important documents and personal belongingsloaded in the bus’ luggage compartment. During a stopover at Daet,
it was discovered thatonly one bag remained in the open compartment. The others, including Fatima’s things,were missing and
might have dropped along the way.
Fatima filed an action against Sarkies Tours, claiming that the loss was due to its failure toobserve extraordinary diligence
in the care of her luggage and that Sarkies Tours dealt with them in bad faith from the start
ISSUE: WON Sarkies Tours is liable
HELD:
Yes. Common carriers, from the nature of their business and for reasons of
public p o l i c y, a r e b o u n d t o o b s e r v e e x t r a o r d i n a r y d i l i g e n c e i n t h e v i g i l a n c e o v e r t h e g o o d s tr
ansported by them, and this liability lasts from the ti me the goods are unconditi onally placed in the
possession of, and received by the carrier for transportation until the same aredelivered, actually or constructively, by the
carrier to the person who has a right to receivethem, unless the loss is due to any of the excepted causes under Art. 1734. The
cause of the loss was Sarkies Tours’ negligence in not ensuring that the doors of thebaggage
45
compartment of its bus were securely fastened. As a result of this lack of care, almost all of the luggage was
lost, to the prejudice of the paying passengers.
CASE:
Fatima boarded petitioner's bus bringing 3 pieces of luggage with her. Her brother helped her load them on the bus
compartment. During a stopover at Daet, it was discovered that only one bag remained in the open compartment. Private
respondents asked assistance from the radio stations and from Philtranco bus drivers who plied the same route. They were able
to recover one of Fatima's bags.After a few weeks, private respondents formally demanded from petitioner.In its letter,
petitioner tacitly admitted its liability by apologizing and assuring respondents that efforts were being made to recover the lost
items.Months later, respondents filed a case to recover the value of the remaining lost items claiming that the loss was due to
petitioner's failure to observe extraordinary diligence in the care of Fatima's luggage and that petitioner dealt with them in bad
faith from the start. Petitioner denied liability on the ground that Fatima allegedly did not declare any excess baggage upon
boarding its bus.
W/N petitioner, as a common carrier, is responsible for the loss.
YES. Under the Civil Code, "(c)ommon carriers, from the nature of their business and for reasons of public policy, are bound to
observe extraordinary diligence in the vigilance over the goods… transported by them," and this liability "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 person who has a right to receive them," unless the loss is due to
any of the excepted causes under Article 1734 thereof.The cause of the loss in the case at bar was petitioner's negligence in not
ensuring that the doors of the baggage compartment of its bus were securely fastened. Further, where the common carrier
accepted its passenger's baggage for transportation and even had it placed in the vehicle by its own employee, its failure to
collect the freight charge is the common carrier's own lookout; it is responsible for the consequent loss of the baggage. In this
case, petitioner’s employee even helped Fatima and her brother load the luggages in the bus' baggage compartment, without
asking that they be weighed, declared, receipted or paid for.
FACTS:
 Fatima boarded petitioner's De Luxe Bus in Manila on her way to Legazpi City. Her brother Raul helped her load 3
pieces of luggage containing all of her optometry review books, materials and equipment, trial lenses, trial contact
lenses, passport and visa, her mother’s U.S. green card, among other important documents and personal
belongings. Her belongings were kept in the baggage compartment of the bus, but during a stopover at Daet, it was
discovered that only one bag remained in the open compartment. The others, including Fatima's things, were
missing and might have dropped along the way. Some of the passengers suggested retracing the route of the bus to
try to recover the lost items, but the driver ignored them and proceeded to Legazpi City.
 Fatima immediately reported the loss to petitioner through her mother. Petitioner, however, merely offered her P1k
for each piece of luggage lost, which she turned down.
 After returning to Bicol, private respondents asked assistance from the radio stations and from Philtranco bus drivers
who plied the same route. They were able to recover one of Fatima's bags.
 After a few weeks, private respondents formally demanded satisfaction of their complaint from petitioner.
 In a letter, petitioner apologized for the delay and said that "(a) team has been sent out to Bicol for the purpose of
recovering or at least getting the full detail" of the incident.
 After more than 9 months of fruitless waiting, respondents decided to file a case to recover the value of the
remaining lost items, as well as moral and exemplary damages, attorney's fees and expenses of litigation. They
claimed that the loss was due to petitioner's failure to observe extraordinary diligence in the care of Fatima's
luggage and that petitioner dealt with them in bad faith from the start. Petitioner, on the other hand, disowned any
liability for the loss on the ground that Fatima allegedly did not declare any excess baggage upon boarding its bus.
ISSUE:
Whether or not petitioner, as a common carrier, is responsible for the loss.
HELD & RATIO:
YES.
 Under the Civil Code, "(c)ommon carriers, from the nature of their business and for reasons of public policy, are
bound to observe extraordinary diligence in the vigilance over the goods . . . transported by them," and this liability
"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 person who has a
right to receive them," unless the loss is due to any of the excepted causes under Article 1734 thereof.
 The cause of the loss in the case at bar was petitioner's negligence in not ensuring that the doors of the baggage
compartment of its bus were securely fastened. As a result of this lack of care, almost all of the luggages were lost,
to the prejudice of the paying passengers.
 Where the common carrier accepted its passenger's baggage for transportation and even had it placed in the vehicle
by its own employee, its failure to collect the freight charge is the common carrier's own lookout. It is responsible
for the consequent loss of the baggage.
In the instant case, petitioner’s employee even helped Fatima and her brother load the luggages in the bus' baggage
compartment, without asking that they be weighed, declared, receipted or paid for.
As it was at fault, it cannot seek the protective mantle of Sec. 4(2) of Carriage of Goods bySea Act which provides:
“Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from x x x (b) Fire,
unless caused by the actual fault or privity of the carrier.”
there was actual fault of the carrier shown by lack of diligence in that when the smoke wasnoticed, the fire was already big;
that the fire must have started 24 hours before the samewas noticed; and that after the cargoes were stored in the hatches, no
regular inspectionwas made as to their condition during the voyage.
3. See Art. 1749.G.R. No. 69044: no stipulation in the Bills of Lading limiting the carrier’s liability for the lossor destruction of
the goods; no declaration of a higher value of the goods; Hence, Eastern
Shipping Lines’ liability should not exceed US $500 per package (as provided in 4(5) of theCOGSA), or its peso equivalent, at the
time of payment of the value of the goods lost, but inno case more than the amount of damage actually sustained

FACTS:

(G.R. No. L-69044): a vessel operated by petitioner Eastern Shipping Lines, Inc., loaded a
tK o b e , J a p a n f o r t r a n s p o r t a ti o n t o M a n i l a , 5 0 0 0 p i e c e s o f c a l o r i z e d l a n c e p i p e s i n 2 8 packag
es consigned to Philippine Blooming Mills Co., Inc., and 7 cases of spare parts consigned to Central Textile Mills,
Inc.; both sets of goods were insured with DevelopmentInsurance and Surety Corp.

(G. R. N o. 71478 ): th e same ve ssel too k o n b oard 128 car to ns o f gar me nt fabr ic s
a n d accessories, in 2 containers, consigned to Mariveles Apparel Corporation, and two cases of surveying instruments
consigned to Aman Enterprises and General Merchandise the vessel caught fire and sank, resulting in the total loss of ship and
cargo

ISSUES:
1. which law should govern — the Civil Code provisions on Common carriers or theCarriage of Goods by Sea Act?;
2. who has the burden of proof to show negligence of the carrier?
3. what is the extent of the carrier’s liability?

HELD:

1 . T h e l a w o f t h e c o u n t r y t o w h i c h t h e g o o d s a r e t o b e t r a n s p o r t e d g o v e r n s t h e liability of
the common carrier in case of their loss, destructi on or deteriorati on. As the cargoes were transported from
Japan to the Philippines, the liability of Petitioner Carrier isgoverned primarily by the Civil Code. However, in all matters not
regulated by said Code,the rights and obligations of common carrier shall be governed by the Code of Commerceand by special
laws. Thus, the Carriage of Goods by Sea Act, a special law, is suppletory tothe provisions of the Civil Code.

2. Article 1735 of the Civil Code provides that all cases than those mention in Article 1734,the common carrier shall be
presumed to have been at fault or to have acted negligently,unless it proves that it has observed the extraordinar y
diligence required by law. Theburden is upon Eastern Shipping Lines to prove that it has exercised the
extraordinar y diligence required by law.

Note: fi re –not considered a natural disaster or calamity within the contemplati on of Art. 1734 for it arises
almost invariably from some act of man or by human means; it does notfall within the category of an act of God
unless caused by lightning or by other natural disaster or calamity

having failed to discharge the burden of proving that it had exercised the extraordinar y diligence required by
law, Eastern Shipping Lines cannot escape liability for the loss of thecargo

46
Tabacalera Insurance vs. North Front Shipping, May 16, 1997; was not possible for water to seep in. He further averred that the corn grains were farm wet and not properly dried when
loaded.
FIRST DIVISION
The court below dismissed the complaint and ruled that the contract entered into between North Front Shipping Services, Inc.,
G.R. No. 119197 May 16, 1997
and Republic Flour Mills Corporation was a charter-party agreement. As such, only ordinary diligencein 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
TABACALERA INSURANCE CO., PRUDENTIAL GUARANTEE & ASSURANCE, INC., and NEW ZEALAND INSURANCE CO.,
shipping company before actual loading, coupled with the Permit to Sail issued by the Coast Guard, sufficed to meet the degree
LTD., petitioners,
of diligence required of the carrier.
vs.
NORTH FRONT SHIPPING SERVICES, INC., and COURT OF APPEALS, respondents.
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.
BELLOSILLO, J.:
The charter-party agreement between North Front Shipping Services, Inc., and Republic Flour Mills Corporation did not in any
TABACALERA INSURANCE CO., Prudential Guarantee & Assurance, Inc., and New Zealand Insurance Co., Ltd., in this petition for
way convert the common carrier into a private carrier. We have already resolved this issue with finality in Planters Products,
review on certiorari, assail the 22 December 1994 decision of the Court of Appeals and its Resolution of 16 February 1995
Inc. v. Court of Appeals 2 thus —
which affirmed the 1 June 1993 decision of the Regional Trial Court dismissing their complaint for damages against North Front
Shipping Services, Inc.
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
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
of a ship or other vessel lets the whole or a part of her to a merchant or other person for the conveyance
by North Front Shipping Services, Inc. The cargo was consigned to Republic Flour Mills Corporation in Manila under Bill of
of goods, on a particular voyage, in consideration of the payment of freight . . . Contract of affreightment
Lading No. 001 1 and insured with the herein mentioned insurance companies. The vessel was inspected prior to actual loading
may either be time charter, wherein the vessel is leased to the charterer for a fixed period of time, or
by representatives of the shipper and was found fit to carry the merchandise. The cargo was covered with tarpaulins and
voyage charter, wherein the ship is leased for a single voyage. In both cases, the charter-party provides
wooden boards. The hatches were sealed and could only be opened by representatives of Republic Flour Mills Corporation.
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 vessel left Cagayan de Oro City on 2 August 1990 and arrived Manila on 16 August 1990. Republic Flour Mills Corporation
the expenses for the maintenance of the ship.
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
Upon the other hand, the term "common or public carrier" is defined in Art. 1732 of the Civil Code. The
unloaded there was a shortage of 26.333 metric tons. The remaining merchandise was already moldy, rancid and deteriorating.
definition extends to carriers either by land, air or water which hold themselves out as ready to engage in
The unloading operations were completed on 5 September 1990 or twenty (20) days after the arrival of the barge at the wharf
carrying goods or transporting passengers or both for compensation as a public employment and not as a
of Republic Flour Mills Corporation in Pasig City.
casual occupation . . .
Precision Analytical Services, Inc., was hired to examine the corn grains and determine the cause of deterioration. A Certificate
It is therefore imperative that a public carrier shall remain as such, notwithstanding the charter of the
of Analysis was issued indicating that the corn grains had 18.56% moisture content and the wetting was due to contact with salt
whole or portion of a vessel by one or more persons, provided the charter is limited to the shin only, as in
water. The mold growth was only incipient and not sufficient to make the corn grains toxic and unfit for consumption. In fact
the case of a time-charter or voyage-charter (emphasis supplied).
the mold growth could still be arrested by drying.
North Front Shipping Services, Inc., is a corporation engaged in the business of transporting cargo and offers its services
Republic Flour Mills Corporation rejected the entire cargo and formally demanded from North Front Shipping Services, Inc.,
indiscriminately to the public. It is without doubt a common carrier. As such it is required to observe extraordinary diligence in
payment for the damages suffered by it. The demands however were unheeded. The insurance companies were perforce
its vigilance over the goods it transports. 3 When goods placed in its care are lost or damaged, the carrier is presumed to have
obliged to pay Republic Flour Mills Corporation P2,189,433.40.
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.
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
North Front Shipping Services, Inc., proved that the vessel was inspected prior to actual loading by representatives of the
exclusively attributable to the fault and negligence of the carrier. The Marine Cargo Adjusters hired by the insurance companies
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
conducted a survey and found cracks in the bodega of the barge and heavy concentration of molds on the tarpaulins and
the vessel testified that the corn grains were farm wet when loaded. However, this testimony was disproved by the clean bill of
wooden boards. They did not notice any seals in the hatches. The tarpaulins were not brand new as there were patches on
lading issued by North Front Shipping Services, Inc., which did not contain a notation that the corn grains were wet and
them, contrary to the claim of North Front Shipping Services, Inc., thus making it possible for water to seep in. They also
improperly dried. Having been in the service since 1968, the master of the vessel would have known at the outset that corn
discovered that the bulkhead of the barge was rusty.
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
North Front Shipping Services, Inc., averred in refutation that it could not be made culpable for the loss and deterioration of the
precautionary measures to avoid or lessen the cargo's possible deterioration as they were presumed knowledgeable about the
cargo as it was never negligent. Captain Solomon Villanueva, master of the vessel, reiterated that the barge was inspected prior
nature of such cargo. But none of such measures was taken.
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
47
In Compania Maritima v. Court of Appeals 5 we ruled —
. . . 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 . . .
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" (emphasis supplied).
Sacks of grains were loaded on board a vessel owned by North Front Shipping (common carrier); the consignee: Republic Floor
Mills. The vessel was inspected by representatives of the shipper prior to the transport and was found fitting to carry the cargo;
it was also issued a Permit to Sail. The goods were successfully delivered but it was not immediately unloaded by the consignee.
There were a shortage of 23.666 metric tons and some of the merchandise was already moldy and deteriorating. Hence, the
consignee rejected all the cargo and demanded payment of damages from the common carrier. Upon refusal, the insurance
companies (petitioners) were obliged to pay. Petitioners now allege that there was negligence on the part of the carrier. The
trial court ruled that only ordinary diligence was required since the charter-party agreement converted North Front Shipping
into a private carrier.
Issues: WON North Front Shipping is a common carrier. If indeed, did it fail to exercise the required diligence and thus should
be held liable?

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 Shipping Services, 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.
Held:
North Front Shipping is a common carrier. Thus, it has the burden of proving that it observed extraordinary diligence in order to
avoid responsibility for the lost cargo.
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. 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 usex x x
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.

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 contributory negligence. 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
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; © 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. 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.

WHEREFORE, the Decision of the Court of Appeals of 22 December 1994 and its Resolution of 16 February 1995 are REVERSED However, the destruction, loss or deterioration of the cargo cannot be attributed solely to the carrier. The consignee Republic
and SET ASIDE. Respondent North Front Shipping Services, Inc., is ordered to pay petitioners Tabacalera Insurance Co.,
Flour Mills Corporation is guilty of contributory negligence. It was seasonably notified of the arrival of the barge but did not
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 immediately start the unloading operations.
judgment becomes final until full payment.

SO ORDERED.

Facts:

48
Macam vs. CA, Aug. 25, 1999;
SECOND DIVISION
G.R. No. 125524 August 25, 1999
BENITO MACAM doing business under the name and style BEN-MAC ENTERPRISES, petitioner,
vs.
COURT OF APPEALS, CHINA OCEAN SHIPPING CO., and/or WALLEM PHILIPPINES SHIPPING, INC.,respondents.
BELLOSILLO, J.:
On 4 April 1989 petitioner Benito Macam, doing business under the name and style Ben-Mac Enterprises, shipped on board the
vessel Nen Jiang, owned and operated by respondent China Ocean Shipping Co., through local agent respondent Wallem
Philippines Shipping, Inc. (hereinafter WALLEM), 3,500 boxes of watermelons valued at US$5,950.00 covered by Bill of Lading
No. HKG 99012 and exported through Letter of Credit No. HK 1031/30 issued by National Bank of Pakistan, Hongkong
(hereinafter PAKISTAN BANK) and 1,611 boxes of fresh mangoes with a value of US$14,273.46 covered by Bill of Lading No. HKG
99013 and exported through Letter of Credit No. HK 1032/30 also issued by PAKISTAN BANK. The Bills of Lading contained the
following pertinent provision: "One of the Bills of Lading must be surrendered duly endorsed in exchange for the goods or
delivery order.1 The shipment was bound for Hongkong with PAKISTAN BANK as consignee and Great Prospect Company of
Kowloon, Hongkong (hereinafter GPC) as notify party.
On 6 April 1989, per letter of credit requirement, copies of the bills of lading and commercial invoices were submitted to
petitioner's depository bank, Consolidated Banking Corporation (hereinafter SOLIDBANK), which paid petitioner in advance the
total value of the shipment of US$20,223.46.1âwphi1.nêt
Upon arrival in Hongkong, the shipment was delivered by respondent WALLEM directly to GPC, not to PAKISTAN BANK, and
without the required bill of lading having been surrendered. Subsequently, GPC failed to pay PAKISTAN BANK such that the
latter, still in possession of the original bills of lading, refused to pay petitioner through SOLIDBANK. Since SOLIDBANK already
pre-paid petitioner the value of the shipment, it demanded payment from respondent WALLEM through five (5) letters but was
refused. Petitioner was thus allegedly constrained to return the amount involved to SOLIDBANK, then demanded payment from
respondent WALLEM in writing but to no avail.
On 25 September 1991 petitioner sought collection of the value of the shipment of US$20,223.46 or its equivalent of
P546,033.42 from respondents before the Regional Trial Court of Manila, based on delivery of the shipment to GPC without
presentation of the bills of lading and bank guarantee.
Respondents contended that the shipment was delivered to GPC without presentation of the bills of lading and bank guarantee
per request of petitioner himself because the shipment consisted of perishable goods. The telex dated 5 April 1989 conveying
such request read —
AS PER SHPR'S REQUEST KINDLY ARRANGE DELIVERY OF A/M SHIPT TO RESPECTIVE CNEES WITHOUT PRESENTATION
OF OB/L2 and bank guarantee since for prepaid shipt ofrt charges already fully paid our end . . . .3
Respondents explained that it is a standard maritime practice, when immediate delivery is of the essence, for the shipper to
request or instruct the carrier to deliver the goods to the buyer upon arrival at the port of destination without requiring
presentation of the bill of lading as that usually takes time. As proof thereof, respondents apprised the trial court that for the
duration of their two-year business relationship with petitioner concerning similar shipments to GPC deliveries were effected
without presentation of the bills of lading.4 Respondents advanced next that the refusal of PAKISTAN BANK to pay the letters of
credit to SOLIDBANK was due to the latter's failure to submit a Certificate of Quantity and Quality. Respondents counterclaimed
for attorney's fees and costs of suit.
49
On 14 May 1993 the trial court ordered respondents to pay, jointly and severally, the following amounts: (1) P546,033.42 plus
legal interest from 6 April 1989 until full payment; (2) P10,000.00 as attorney's fees; and, (3) the costs. The counterclaims were
dismissed for lack of merit.5 The trial court opined that respondents breached the provision in the bill of lading requiring that
"one of the Bills of Lading must be surrendered duly endorsed in exchange for the goods or delivery order," when they released
the shipment to GPC without presentation of the bills of lading and the bank guarantee that should have been issued by
PAKISTAN BANK in lieu of the bills of lading. The trial court added that the shipment should not have been released to GPC at all
since the instruction contained in the telex was to arrange delivery to the respective consignees and not to any party. The trial
court observed that the only role of GPC in the transaction as notify party was precisely to be notified of the arrival of the
cargoes in Hongkong so it could in turn duly advise the consignee.
Respondent Court of Appeals appreciated the evidence in a different manner. According to it, as established by previous similar
transactions between the parties, shipped cargoes were sometimes actually delivered not to the consignee but to notify party
GPC without need of the bills of lading or bank guarantee.6 Moreover, the bills of lading were viewed by respondent court to
have been properly superseded by the telex instruction and to implement the instruction, the delivery of the shipment must be
to GPC, the real importer/buyer of the goods as shown by the export invoices, 7 and not to PAKISTAN BANK since the latter could
very well present the bills of lading in its possession; likewise, if it were the PAKISTAN BANK to which the cargoes were to be
strictly delivered it would no longer be proper to require a bank guarantee. Respondent court noted that besides, GPC was
listed as a consignee in the telex. It observed further that the demand letter of petitioner to respondents never complained of
misdelivery of goods. Lastly, respondent court found that petitioner's claim of having reimbursed the amount involved to
SOLIDBANK was unsubstantiated. Thus, on 13 March 1996 respondent court set aside the decision of the trial court and
dismissed the complaint together with the counterclaims.8 On 5 July 1996 reconsideration was denied.9
Petitioner submits that the fact that the shipment was not delivered to the consignee as stated in the bill of lading or to a party
designated or named by the consignee constitutes a misdelivery thereof. Moreover, petitioner argues that from the text of the
telex, assuming there was such an instruction, the delivery of the shipment without the required bill of lading or bank
guarantee should be made only to the designated consignee, referring to PAKISTAN BANK.
We are not persuaded. The submission of petitioner that "the fact that the shipment was not delivered to the consignee as
stated in the Bill of Lading or to a party designated or named by the consignee constitutes a misdelivery thereof" is a deviation
from his cause of action before the trial court. It is clear from the allegation in his complaint that it does not deal with
misdelivery of the cargoes but of delivery to GPC without the required bills of lading and bank guarantee —
6. The goods arrived in Hongkong and were released by the defendant Wallem directly to the buyer/notify party,
Great Prospect Company and not to the consignee, the National Bank of Pakistan, Hongkong, without the required
bills of lading and bank guarantee for the release of the shipment issued by the consignee of the goods . . . .10
Even going back to an event that transpired prior to the filing of the present case or when petitioner wrote respondent
WALLEM demanding payment of the value of the cargoes, misdelivery of the cargoes did not come into the picture —
We are writing you on behalf of our client, Ben-Mac Enterprises who informed us that Bills of Lading No. 99012 and
99013 with a total value of US$20,223.46 were released to Great Prospect, Hongkong without the necessary bank
guarantee. We were further informed that the consignee of the goods, National Bank of Pakistan, Hongkong, did not
release or endorse the original bills of lading. As a result thereof, neither the consignee, National Bank of Pakistan,
Hongkong, nor the importer, Great Prospect Company, Hongkong, paid our client for the goods . . . . 11
At any rate, we shall dwell on petitioner's submission only as a prelude to our discussion on the imputed liability of respondents
concerning the shipped goods. Article 1736 of the Civil Code provides —
Art. 1736. The extraordinary responsibility of the common carriers lasts from the time the goods are unconditionally
placed in the possession of, and received by the carrier for transportation until the same are delivered, actually or
constructively, by the carrier to the consignee, or to the person who has a right to receive them, without prejudice
to the provisions of article 1738.12
We emphasize that the extraordinary responsibility of the common carriers lasts until actual or constructive delivery of the
cargoes to the consignee or to the person who has a right to receive them. PAKISTAN BANK was indicated in the bills of lading as
consignee whereas GPC was the notify party. However, in the export invoices GPC was clearly named as buyer/importer.
Petitioner also referred to GPC as such in his demand letter to respondent WALLEM and in his complaint before the trial court.
This premise draws us to conclude that the delivery of the cargoes to GPC as buyer/importer which, conformably with Art. 1736
had, other than the consignee, the right to receive them14 was proper.
The real issue is whether respondents are liable to petitioner for releasing the goods to GPC without the bills of lading or bank
guarantee.
Respondents submitted in evidence a telex dated 5 April 1989 as basis for delivering the cargoes to GPC without the bills of
lading and bank guarantee. The telex instructed delivery of various shipments to the respective consignees without need of
presenting the bill of lading and bank guarantee per the respective shipper's request since "for prepaid shipt ofrt charges
already fully paid." Petitioner was named therein as shipper and GPC as consignee with respect to Bill of Lading Nos. HKG
99012 and HKG 99013. Petitioner disputes the existence of such instruction and claims that this evidence is self-serving.
From the testimony of petitioner, we gather that he has been transacting with GPC as buyer/importer for around two (2) or
three (3) years already. When mangoes and watermelons are in season, his shipment to GPC using the facilities of respondents
is twice or thrice a week. The goods are released to GPC. It has been the practice of petitioner to request the shipping lines to
immediately release perishable cargoes such as watermelons and fresh mangoes through telephone calls by himself or his
"people." In transactions covered by a letter of credit, bank guarantee is normally required by the shipping lines prior to
releasing the goods. But for buyers using telegraphic transfers, petitioner dispenses with the bank guarantee because the goods
are already fully paid. In his several years of business relationship with GPC and respondents, there was not a single instance
when the bill of lading was first presented before the release of the cargoes. He admitted the existence of the telex of 3 July
1989 containing his request to deliver the shipment to the consignee without presentation of the bill of lading 15 but not the
telex of 5 April 1989 because he could not remember having made such request.
Consider pertinent portions of petitioner's testimony —
Q: Are you aware of any document which would indicate or show that your request to the defendant Wallem for the
immediate release of your fresh fruits, perishable goods, to Great Prospect without the presentation of the original
Bill of Lading?
A: Yes, by telegraphic transfer, which means that it is fully paid. And I requested immediate release of the cargo
because there was immediate payment.
Q: And you are referring, therefore, to this copy Telex release that you mentioned where your Company's name
appears Ben-Mac?
Atty. Hernandez: Just for the record, Your Honor, the witness is showing a Bill of Lading referring to SKG (sic) 93023
and 93026 with Great Prospect Company.
Atty. Ventura:
Q: Is that the telegraphic transfer?
A: Yes, actually, all the shippers partially request for the immediate release of the goods when they are perishable. I
thought Wallem Shipping Lines is not neophyte in the business. As far as LC is concerned, Bank guarantee is needed
for the immediate release of the goods . . . .15
Q: Mr. Witness, you testified that if is the practice of the shipper of the perishable goods to ask the shipping lines to
release immediately the shipment. Is that correct?
50
A: Yes, sir.
Q: Now, it is also the practice of the shipper to allow the shipping lines to release the perishable goods to the
importer of goods without a Bill of Lading or Bank guarantee?
A: No, it cannot be without the Bank Guarantee.
Atty. Hernandez:
Q: Can you tell us an instance when you will allow the release of the perishable goods by the shipping lines to the
importer without the Bank guarantee and without the Bill of Lading?
A: As far as telegraphic transfer is concerned.
Q: Can you explain (to) this Honorable Court what telegraphic transfer is?
A: Telegraphic transfer, it means advance payment that I am already fully paid . . . .
Q: Mr. Macam, with regard to Wallem and to Great Prospect, would you know and can you recall that any of your
shipment was released to Great Prospect by Wallem through telegraphic transfer?
A: I could not recall but there were so many instances sir.
Q: Mr. Witness, do you confirm before this Court that in previous shipments of your goods through Wallem, you
requested Wallem to release immediately your perishable goods to the buyer?
A: Yes, that is the request of the shippers of the perishable goods . . . . 16
Q: Now, Mr. Macam, if you request the Shipping Lines for the release of your goods immediately even without the
presentation of OBL, how do you course it?
A: Usually, I call up the Shipping Lines, sir . . . .17
Q: You also testified you made this request through phone calls. Who of you talked whenever you made such phone
call?
A: Mostly I let my people to call, sir. (sic)
Q: So everytime you made a shipment on perishable goods you let your people to call? (sic)
A: Not everytime, sir.
Q: You did not make this request in writing?
A: No, sir. I think I have no written request with Wallem . . . .18
Against petitioner's claim of "not remembering" having made a request for delivery of subject cargoes to GPC without
presentation of the bills of lading and bank guarantee as reflected in the telex of 5 April 1989 are damaging disclosures in his
testimony. He declared that it was his practice to ask the shipping lines to immediately release shipment of perishable goods
through telephone calls by himself or his "people." He no longer required presentation of a bill of lading nor of a bank
guarantee as a condition to releasing the goods in case he was already fully paid. Thus, taking into account that subject
shipment consisted of perishable goods and SOLIDBANK pre-paid the full amount of the value thereof, it is not hard to believe
the claim of respondent WALLEM that petitioner indeed requested the release of the goods to GPC without presentation of the
bills of lading and bank guarantee.
The instruction in the telex of 5 April 1989 was "to deliver the shipment to respective consignees." And so petitioner argues
that, assuming there was such an instruction, the consignee referred to was PAKISTAN BANK. We find the argument too
simplistic. Respondent court analyzed the telex in its entirety and correctly arrived at the conclusion that the consignee referred
to was not PAKISTAN BANK but GPC —
There is no mistake that the originals of the two (2) subject Bills of Lading are still in the possession of the Pakistani
Bank. The appealed decision affirms this fact. Conformably, to implement the said telex instruction, the delivery of
the shipment must be to GPC, the notify party or real importer/buyer of the goods and not the Pakistani Bank since
the latter can very well present the original Bills of Lading in its possession. Likewise, if it were the Pakistani Bank to
whom the cargoes were to be strictly delivered, it will no longer be proper to require a bank guarantee as a
substitute for the Bill of Lading. To construe otherwise will render meaningless the telex instruction. After all, the
cargoes consist of perishable fresh fruits and immediate delivery thereof to the buyer/importer is essentially a factor
to reckon with. Besides, GPC is listed as one among the several consignees in the telex (Exhibit 5-B) and the
instruction in the telex was to arrange delivery of A/M shipment (not any party) to respective consignees without
presentation of OB/L and bank guarantee . . . .20
Apart from the foregoing obstacles to the success of petitioner's cause, petitioner failed to substantiate his claim that he
returned to SOLIDBANK the full amount of the value of the cargoes. It is not far-fetched to entertain the notion, as did
respondent court, that he merely accommodated SOLIDBANK in order to recover the cost of the shipped cargoes from
respondents. We note that it was SOLIDBANK which initially demanded payment from respondents through five (5) letters.
SOLIDBANK must have realized the absence of privity of contract between itself and respondents. That is why petitioner
conveniently took the cudgels for the bank.
In view of petitioner's utter failure to establish the liability of respondents over the cargoes, no reversible error was committed
by respondent court in ruling against him.
WHEREFORE, the petition is DENIED. The decision of respondent Court of Appeals of 13 March 1996 dismissing the complaint
of petitioner Benito Macam and the counterclaims of respondents China Ocean Shipping Co. and/or Wallem Philippines
Shipping, Inc., as well as its resolution of 5 July 1996 denying reconsideration, is AFFIRMED.1âwphi1.nêt
SO ORDERED.
Facts:
Benito Macam, doing business under name Ben-Mac Enterprises, shipped on board vessel Nen-Jiang, owned and operated by
respondent China Ocean Shipping Co. through local agent Wallem Philippines Shipping Inc., 3,500 boxes of watermelon covered
by Bill of Lading No. HKG 99012, and 1,611 boxes of fresh mangoes covered by Bill of Lading No. HKG 99013. The shipment was
bound for Hongkong with PAKISTAN BANK as consignee and Great Prospect Company of Rowloon (GPC) as notify party.
Upon arrival in Hongkong, shipment was delivered by respondent WALLEM directly to GPC, not to PAKISTAN BANK and without
the required bill of lading having been surrendered. Subsequently, GPC failed to pay PAKISTAN BANK, such that the latter, still in
possession of original bill of lading, refused to pay petitioner thru SOLIDBANK. Since SOLIDBANK already pre-paid the value of
shipment, it demanded payment from respondent WALLEM but was refused. MACAM constrained to return the amount paid
by SOLIDBANK and demanded payment from WALLEM but to no avail.
WALLEM submitted in evidence a telex dated 5 April 1989 as basis for delivering the cargoes to GPC without the bills of lading
and bank guarantee. The telex instructed delivery of various shipments to the respective consignees without need of presenting
the bill of lading and bank guarantee per the respective shipper’s request since “for prepaid shipt ofrt charges already fully
paid.” MACAM, however, argued that, assuming there was such an instruction, the consignee referred to was PAKISTAN BANK
and not GPC.
51
The RTC ruled for MACAM and ordered value of shipment. CA reversed RTC’s decision.
Issue: Are the respondents liable to the petitioner for releasing the goods to GPC without the bills of lading or bank guarantee?
Held:
It is a standard maritime practice when immediate delivery is of the essence, for shipper to request or instruct the carrier to
deliver the goods to the buyer upon arrival at the port of destination without requiring presentation of bill of lading as that
usually takes time. Thus, taking intoaccount that subject shipment consisted of perishable goods and SOLIDBANK pre-paid the
full amount of value thereof, it is not hard to believe the claim of respondent WALLEM that petitioner indeed requested the
release of the goods to GPC without presentation of the bills of lading and bank guarantee.
To implement the said telex instruction, the delivery of the shipment must be to GPC, the notify party or real importer/buyer of
the goods and not the PAKISTANI BANK since the latter can very well present the original Bills of Lading in its possession.
Likewise, if it were the PAKISTANI BANK to whom the cargoes were to be strictly delivered, it will no longer be proper to require
a bank guarantee as a substitute for the Bill of Lading. To construe otherwise will render meaningless the telex instruction. After
all, the cargoes consist of perishable fresh fruits and immediate delivery thereof the buyer/importer is essentially a factor to
reckon with.
We emphasize that the extraordinary responsibility of the common carriers lasts until actual or constructive delivery of the
cargoes to the consignee or to the person who has a right to receive them. PAKISTAN BANK wasindicated in the bills of lading as
consignee whereas GPC was the notify party. However, in the export invoices GPC was clearly named as buyer/importer.
Petitioner also referred to GPC as such in his demand letter to respondent WALLEM and in his complaint before the trial court.
This premise draws us to conclude that the delivery of the cargoes to GPC as buyer/importer which, conformably with Art. 1736
had, other than the consignee, the right to receive them was proper.
Facts:
Macam exported watermelons and mangoes to Hong Kong. The bill of lading stated that one of the bills must be presented by
the Pakistan Bank as consignee and Great Prospect Company as the notify party. Upon arrival in Hong Kong, the shipment was
delivered by the carrier directly to GPC and not to Pakistan Bank and without the bill of lading being surrendered.
Issue: Whether or not there was a valid delivery.
Held:
The extraordinary responsibility of common carriers last until actual or constructive delivery of the cargo to the consignee or his
agent. Pakistan was indicated as consignee and GPC was the notify party. However, in the export invoice, GPC was clearly
named as buyer or importer. Petitioner referred to GPC as such in his demand letter to respondent and his complaint before
the court. This premise brings into conclusion that the deliveries of the cargo to GPC as buyer or importer is in conformity with
Art. 1736 of the Civil Code. Therefore, there was a valid delivery.
Samar Mining Company vs Nordeutscher Lloyd, et al., Oct. 23, 1984; PORT OF DISCHARGE OF GOODS: DAVAO
FREIGHT PREPAID 8
SECOND DIVISION
It is clear, then, that in discharging the goods from the ship at the port of Manila, and delivering the same into the custody of
AMCYL, the bonded warehouse, appellants were acting in full accord with the contractual stipulations contained in Bill of
G.R. No. L-28673 October 23, 1984
Lading No. 18. The delivery of the goods to AMCYL was part of appellants' duty to transship the goods from Manila to their port
of destination-Davao. The word "transship" means:
SAMAR MINING COMPANY, INC., plaintiff-appellee,
vs.
to transfer for further transportation from one ship or conveyance to another 9
NORDEUTSCHER LLOYD and C.F. SHARP & COMPANY, INC., defendants-appellants.
The extent of appellant carrier's responsibility and/or liability in the transshipment of the goods in question are spelled out and
CUEVAS, J.:
delineated under Section 1, paragraph 3 of Bill of Lading No. 18, to wit:
This is an appeal taken directly to Us on certiorari from the decision of the defunct Court of First Instance of Manila, finding
The carrier shall not be liable in any capacity whatsoever for any delay, loss or damage occurring before
defendants carrier and agent, liable for the value of goods never delivered to plaintiff consignee. The issue raised is a pure
the goods enter ship's tackle to be loaded or after the goods leave ship's tackle to be discharged,
question of law, which is, the liability of the defendants, now appellants, under the bill of lading covering the subject shipment.
transshipped or forwarded ... (Emphasis supplied)
The case arose from an importation made by plaintiff, now appellee, SAMAR MINING COMPANY, INC., of one (1) crate Optima
and in Section 11 of the same Bill, which provides:
welded wedge wire sieves through the M/S SCHWABENSTEIN a vessel owned by defendant-appellant NORDEUTSCHER LLOYD,
(represented in the Philippines by its agent, C.F. SHARP & CO., INC.), which shipment is covered by Bill of Lading No. 18 duly
Whenever the carrier or m aster may deem it advisable or in any case where the goods are placed at
issued to consignee SAMAR MINING COMPANY, INC. Upon arrival of the aforesaid vessel at the port of Manila, the
carrier's disposal at or consigned to a point where the ship does not expect to load or discharge, the
aforementioned importation was unloaded and delivered in good order and condition to the bonded warehouse of
carrier or master may, without notice, forward the whole or any part of the goods before or after loading
AMCYL. 1 The goods were however never delivered to, nor received by, the consignee at the port of destination — Davao.
at the original port of shipment, ... This carrier, in making arrangements for any transshipping or
forwarding vessels or means of transportation not operated by this carrier shall be considered solely the
When the letters of complaint sent to defendants failed to elicit the desired response, consignee herein appellee, filed a formal
forwarding agent of the shipper and without any other responsibility whatsoever even though the freight
claim for P1,691.93, the equivalent of $424.00 at the prevailing rate of exchange at that time, against the former, but neither
for the whole transport has been collected by him. ... Pending or during forwarding or transshipping the
paid. Hence, the filing of the instant suit to enforce payment. Defendants-appellants brought in AMCYL as third party
carrier may store the goods ashore or afloat solely as agent of the shipper and at risk and expense of the
defendant.
goods and the carrier shall not be liable for detention nor responsible for the acts, neglect, delay or
failure to act of anyone to whom the goods are entrusted or delivered for storage, handling or any
The trial court rendered judgment in favor of plaintiff, ordering defendants to pay the amount of P1,691.93 plus attorney's fees
service incidental thereto (Emphasis supplied) 10
and costs. However, the Court stated that defendants may recoup whatever they may pay plaintiff by enforcing the judgment
against third party defendant AMCYL which had earlier been declared in default. Only the defendants appealed from said
Defendants-appellants now shirk liability for the loss of the subject goods by claiming that they have discharged the same in full
decision.
and good condition unto the custody of AMCYL at the port of discharge from ship — Manila, and therefore, pursuant to the
aforequoted stipulation (Sec. 11) in the bill of lading, their responsibility for the cargo had ceased. 11
The issue at hand demands a close scrutiny of Bill of Lading No. 18 and its various clauses and stipulations which should be
examined in the light of pertinent legal provisions and settled jurisprudence. This undertaking is not only proper but necessary
We find merit in appellants' stand. The validity of stipulations in bills of lading exempting the carrier from liability for loss or
as well because of the nature of the bill of lading which operates both as a receipt for the goods; and more importantly, as a
damage to the goods when the same are not in its actual custody has been upheld by Us in PHOENIX ASSURANCE CO., LTD. vs.
contract to transport and deliver the same as stipulated therein. 2 Being a contract, it is the law between the parties
UNITED STATES LINES, 22 SCRA 674 (1968). Said case matches the present controversy not only as to the material facts but
thereto 3 who are bound by its terms and conditions 4 provided that these are not contrary to law, morals, good customs, public
more importantly, as to the stipulations contained in the bill of lading concerned. As if to underline their awesome likeness, the
order and public policy. 5
goods in question in both cases were destined for Davao, but were discharged from ship in Manila, in accordance with their
respective bills of lading.
Bill of Lading No. 18 sets forth in page 2 thereof 6 that one (1) crate of Optima welded wedge wire sieves was received by the
carrier NORDEUTSCHER LLOYD at the "port of loading" which is Bremen, Germany, while the freight had been prepaid up to the
The stipulations in the bill of lading in the PHOENIX case which are substantially the same as the subject stipulations before Us,
port of destination or the "port of discharge of goods in this case, Davao, the carrier undertook to transport the goods in its
provides:
vessel, M/S SCHWABENSTEIN only up to the "port of discharge from ship-Manila. Thereafter, the goods were to be transshipped
by the carrier to the port of destination or "port of discharge of goods The stipulation is plainly indicated on the face of the bill
The carrier shall not be liable in any capacity whatsoever for any loss or damage to the goods while the
which contains the following phrase printed below the space provided for the port of discharge from ship", thus: £
goods are not in its actual custody. (Par. 2, last subpar.)
if goods are to be transshipped at port of discharge, show destination under the column for "description
The carrier or master, in making arrangements with any person for or in connection with all transshipping
of contents" 7
or forwarding of the goods or the use of any means of transportation or forwarding of goods not used or
operated by the carrier, shall be considered solely the agent of the shipper and consignee and without
As instructed above, the following words appeared typewritten under the column for "description of contents": .
any other responsibility whatsoever or for the cost thereof ... (Par. 16). 12

52
Finding the above stipulations not contrary to law, morals, good customs, public order or public policy, We sustained their
validity 13 Applying said stipulations as the law between the parties in the aforecited case, the Court concluded that:
... The short form Bill of Lading ( ) states in no uncertain terms that the port of discharge of the cargo is
Manila, but that the same was to be transshipped beyond the port of discharge to Davao City. Pursuant
to the terms of the long form Bill of Lading ( ), appellee's responsibility as a common carrier ceased the
moment the goods were unloaded in Manila and in the matter of transshipment, appellee acted merely
as an agent of the shipper and consignee. ... (Emphasis supplied) 14
Coming now to the case before Us, We hold, that by the authority of the above pronouncements, and in conformity with the
pertinent provisions of the New Civil Code, Section 11 of Bill of Lading No. 18 and the third paragraph of Section 1 thereof are
valid stipulations between the parties insofar as they exempt the carrier from liability for loss or damage to the goods while the
same are not in the latter's actual custody.
The liability of the common carrier for the loss, destruction or deterioration of goods transported from a foreign country to the
Philippines is governed primarily by the New Civil Code. 15 In all matters not regulated by said Code, the rights and obligations
of common carriers shall be governed by the Code of Commerce and by special laws. 16 A careful perusal of the provisions of
the New Civil Code on common carriers (Section 4, Title VIII, Book IV) directs our attention to Article 1736 thereof, which reads:
Article 1736. The extraordinary responsibility of the common carrier lasts from the time the goods are
unconditionally placed in the possession of, and received by the carrier for transportation until the same
are delivered, actually or constructively, by the carrier to the consignee, or to the person who has a right
to receive them, without prejudice to the provisions of article 1738.
Article 1738 referred to in the foregoing provision runs thus:
Article 1738. The extraordinary liability of the common carrier continues to be operative even during the
time the goods are stored in a warehouse of the carrier at the place of destination, until the consignee
has been advised of the arrival of the goods and has had reasonable opportunity thereafter to remove
them or otherwise dispose of them.
There is no doubt that Art. 1738 finds no applicability to the instant case. The said article contemplates a situation where the
goods had already reached their place of destination and are stored in the warehouse of the carrier. The subject goods were
still awaiting transshipment to their port of destination, and were stored in the warehouse of a third party when last seen
and/or heard of. However, Article 1736 is applicable to the instant suit. Under said article, the carrier may be relieved of the
responsibility for loss or damage to the goods upon actual or constructive delivery of the same by the carrier to the consignee,
or to the person who has a right to receive them. In sales, actual delivery has been defined as the ceding of corporeal
possession by the seller, and the actual apprehension of corporeal possession by the buyer or by some person authorized by
him to receive the goods as his representative for the purpose of custody or disposal. 17 By the same token, there is actual
delivery in contracts for the transport of goods when possession has been turned over to the consignee or to his duly
authorized agent and a reasonable time is given him to remove the goods. 18 The court a quo found that there was actual
delivery to the consignee through its duly authorized agent, the carrier.
It becomes necessary at this point to dissect the complex relationship that had developed between appellant and appellee in
the course of the transactions that gave birth to the present suit. Two undertakings appeared embodied and/or provided for in
the Bill of Lading 19 in question. The first is FOR THE TRANSPORT OF GOODS from Bremen, Germany to Manila. The second,
THE TRANSSHIPMENT OF THE SAME GOODS from Manila to Davao, with appellant acting as agent of the consignee. 20 At the
hiatus between these two undertakings of appellant which is the moment when the subject goods are discharged in Manila, its
personality changes from that of carrier to that of agent of the consignee. Thus, the character of appellant's possession also
changes, from possession in its own name as carrier, into possession in the name of consignee as the latter's agent. Such being
the case, there was, in effect, actual delivery of the goods from appellant as carrier to the same appellant as agent of the
53
consignee. Upon such delivery, the appellant, as erstwhile carrier, ceases to be responsible for any loss or damage that may
befall the goods from that point onwards. This is the full import of Article 1736, as applied to the case before Us.
But even as agent of the consignee, the appellant cannot be made answerable for the value of the missing goods, It is true that
the transshipment of the goods, which was the object of the agency, was not fully performed. However, appellant had
commenced said performance, the completion of which was aborted by circumstances beyond its control. An agent who carries
out the orders and instructions of the principal without being guilty of negligence, deceit or fraud, cannot be held responsible
for the failure of the principal to accomplish the object of the agency, 21This can be gleaned from the following provisions of the
New Civil Code on the obligations of the agent:
Article 1884. The agent is bound by his acceptance to carry out the agency, and is liable for the damages
which, through his non-performance, the principal may suffer.
Article 1889. The agent shall be liable for damages if, there being a conflict between his interests and
those of the principal, he should prefer his own.
Article 1892. The agent may appoint a substitute if the principal has not prohibited him from doing so;
but he shall be responsible for the acts of the substitute:
(1) When he was not given the power to appoint one;
(2) When he was given such power but without designating the person and the person appointed was
notoriously incompetent or insolvent.
Article 1909. The agent is responsible not only for fraud, but also for negligence which shall be judged
with more or less rigor by the courts, according to whether the agency was or was not for a
compensation.
The records fail to reveal proof of negligence, deceit or fraud committed by appellant or by its representative in the Philippines.
Neither is there any showing of notorious incompetence or insolvency on the part of AMCYT, which acted as appellant's
substitute in storing the goods awaiting transshipment.
The actions of appellant carrier and of its representative in the Philippines being in full faith with the lawful stipulations of Bill
of Lading No. 18 and in conformity with the provisions of the New Civil Code on common carriers, agency and contracts, they
incur no liability for the loss of the goods in question.
WHEREFORE, the appealed decision is hereby REVERSED. Plaintiff-appellee's complaint is hereby DISMISSED.
No costs.
SO ORDERED.
FACTS:
Samar Mining Company, Inc. imported1 crate of welded wedge wire sieves shipped through Nordeutscher Lloyd
Bill of Lading No. 18:
transshipped at port of discharge: davao
Section 1, paragraph 3 of Bill of Lading No. 18
The carrier shall not be liable in any capacity whatsoever for any delay, loss or damage occurring before the goods enter ship's
tackle to be loaded or after the goods leave ship's tackle to be discharged, transshipped or forwarded ...
Section 11:
Whenever the carrier or m aster may deem it advisable or in any case where the goods are placed at carrier's disposal at or
consigned to a point where the ship does not expect to load or discharge, the carrier or master may, without notice, forward
the whole or any part of the goods before or after loading at the original port of shipment, ... This carrier, in making
arrangements for any transshipping or forwarding vessels or means of transportation not operated by this carrier shall be
considered solely the forwarding agent of the shipper and without any other responsibility whatsoever even though the freight
for the whole transport has been collected by him. ... Pending or during forwarding or transshipping the carrier may store the
goods ashore or afloat solely as agent of the shipper and at risk and expense of the goods and the carrier shall not be liable for
detention nor responsible for the acts, neglect, delay or failure to act of anyone to whom the goods are entrusted or delivered
for storage, handling or any service incidental thereto

When the goods arrived in the port of Davao, it was delivered in good order and condition to the bonded warehouse of AMCYL
but it was not delivered and received by Samar Mining Company, Inc.
Samar filed a claim against Nordeutscher and C.F. Sharp who brought in AMCYL as third party defendant
RTC: favored Samar

Nordeutscher and C.F. Sharp laible but may enforce judgment against AMCYL

ISSUE: W/N the stipulations in bills of lading exempting the carrier from liability for loss or damage to the goods when the same
are not in its actual custody is valid

HELD:

YES. Reversed

Article 1736. The extraordinary responsibility of the common carrier lasts from the time the goods are unconditionally
placed in the possession of, and received by the carrier for transportation until the same are delivered, actually or
constructively, by the carrier to the consignee, or to the person who has a right to receive them, without prejudice to the
provisions of article 1738. - applicable
Article 1738. The extraordinary liability of the common carrier continues to be operative even during the time the goods are
stored in a warehouse of the carrier at the place of destination, until the consignee has been advised of the arrival of the goods
and has had reasonable opportunity thereafter to remove them or otherwise dispose of them. - no applicable since article
contemplates a situation where the goods had already reached their place of destination and are stored in the warehouse of
the carrier
Article 1884. The agent is bound by his acceptance to carry out the agency, and is liable for the damages which, through his
non-performance, the principal may suffer.
Article 1889. The agent shall be liable for damages if, there being a conflict between his interests and those of the principal,
he should prefer his own.
Article 1892. The agent may appoint a substitute if the principal has not prohibited him from doing so; but he shall be
responsible for the acts of the substitute:

(1) When he was not given the power to appoint one;

(2) When he was given such power but without designating the person and the person appointed was notoriously
incompetent or insolvent
Article 1909. The agent is responsible not only for fraud, but also for negligence which shall be judged with more or less
rigor by the courts, according to whether the agency was or was not for a compensation.
The records fail to reveal proof of negligence, deceit or fraud committed by appellant or by its representative in the Philippines.
Neither is there any showing of notorious incompetence or insolvency on the part of AMCYT, which acted as appellant's
substitute in storing the goods awaiting transshipment

54
Servando vs. Phil. Steam Navigation, Oct. 23, 1982; 2. In case No. 7428, the defendant is hereby ordered to pay to plaintiff Clara Uy Bico the aggregate sum
of P16,625.00 with legal interest thereon from the date of the filing of the complaint until fully paid, and
SECOND DIVISION
to pay the costs.
G.R. No. L-36481-2 October 23, 1982
Article 1736 of the Civil Code imposes upon common carriers the duty to observe extraordinary diligence from the moment the
goods are unconditionally placed in their possession "until the same are delivered, actually or constructively, by the carrier to
AMPARO C. SERVANDO, CLARA UY BICO, plaintiffs-appellees,
the consignee or to the person who has a right to receive them, without prejudice to the provisions of Article 1738. "
vs.
PHILIPPINE STEAM NAVIGATION CO., defendant-appellant.
The court a quo held that the delivery of the shipment in question to the warehouse of the Bureau of Customs is not the
delivery contemplated by Article 1736; and since the burning of the warehouse occurred before actual or constructive delivery
ESCOLIN, J.:
of the goods to the appellees, the loss is chargeable against the appellant.
This appeal, originally brought to the Court of Appeals, seeks to set aside the decision of the Court of First Instance of Negros
It should be pointed out, however, that in the bills of lading issued for the cargoes in question, the parties agreed to limit the
Occidental in Civil Cases Nos. 7354 and 7428, declaring appellant Philippine Steam Navigation liable for damages for the loss of
responsibility of the carrier for the loss or damage that may be caused to the shipment by inserting therein the following
the appellees' cargoes as a result of a fire which gutted the Bureau of Customs' warehouse in Pulupandan, Negros Occidental.
stipulation:
The Court of Appeals certified the case to Us because only pure questions of law are raised therein.
Clause 14. Carrier shall not be responsible for loss or damage to shipments billed 'owner's risk' unless
such loss or damage is due to negligence of carrier. Nor shall carrier be responsible for loss or damage
The facts culled from the pleadings and the stipulations submitted by the parties are as follows:
caused by force majeure, dangers or accidents of the sea or other waters; war; public enemies; . . .
fire . ...
On November 6, 1963, appellees Clara Uy Bico and Amparo Servando loaded on board the appellant's vessel, FS-176, for
carriage from Manila to Pulupandan, Negros Occidental, the following cargoes, to wit:
We sustain the validity of the above stipulation; there is nothing therein that is contrary to law, morals or public policy.
Clara Uy Bico —
Appellees would contend that the above stipulation does not bind them because it was printed in fine letters on the back-of the
bills of lading; and that they did not sign the same. This argument overlooks the pronouncement of this Court in Ong Yiu vs.
1,528 cavans of rice valued Court of Appeals, promulgated June 29, 1979, 3 where the same issue was resolved in this wise:
at P40,907.50; While it may be true that petitioner had not signed the plane ticket (Exh. '12'), he is nevertheless bound
by the provisions thereof. 'Such provisions have been held to be a part of the contract of carriage, and
Amparo Servando — valid and binding upon the passenger regardless of the latter's lack of knowledge or assent to the
regulation'. It is what is known as a contract of 'adhesion', in regards which it has been said that contracts
44 cartons of colored paper, of adhesion wherein one party imposes a ready made form of contract on the other, as the plane ticket in
the case at bar, are contracts not entirely prohibited. The one who adheres to the contract is in reality
toys and general merchandise valued at P1,070.50; free to reject it entirely; if he adheres, he gives his consent." (Tolentino, Civil Code, Vol. IV, 1962 Ed., p.
462, citing Mr. Justice J.B.L. Reyes, Lawyer's Journal, Jan. 31, 1951, p. 49).
as evidenced by the corresponding bills of lading issued by the appellant. 1
Besides, the agreement contained in the above quoted Clause 14 is a mere iteration of the basic principle of law written in
Upon arrival of the vessel at Pulupandan, in the morning of November 18, 1963, the cargoes were discharged, complete and in Article 1 1 7 4 of the Civil Code:
good order, unto the warehouse of the Bureau of Customs. At about 2:00 in the afternoon of the same day, said warehouse was
razed by a fire of unknown origin, destroying appellees' cargoes. Before the fire, however, appellee Uy Bico was able to take Article 1174. Except in cases expressly specified by the law, or when it is otherwise declared by
delivery of 907 cavans of rice 2 Appellees' claims for the value of said goods were rejected by the appellant. stipulation, or when the nature of the obligation requires the assumption of risk, no person shall be
responsible for those events which could not be foreseen, or which, though foreseen, were inevitable.
On the bases of the foregoing facts, the lower court rendered a decision, the decretal portion of which reads as follows:
Thus, where fortuitous event or force majeure is the immediate and proximate cause of the loss, the obligor is exempt from
WHEREFORE, judgment is rendered as follows: liability for non-performance. The Partidas, 4 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,
1. In case No. 7354, the defendant is hereby ordered to pay the plaintiff Amparo C. Servando the shipwreck, violence of robbers.'
aggregate sum of P1,070.50 with legal interest thereon from the date of the filing of the complaint until
fully paid, and to pay the costs. In its dissertation of the phrase 'caso fortuito' the Enciclopedia Juridicada Espanola 5 says: "In a 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 occurrence, 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

55
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." In the
case at bar, the burning of the customs warehouse was an extraordinary event which happened independently of the will of the
appellant. The latter could not have foreseen the event.
There is nothing in the record to show that appellant carrier ,incurred in delay in the performance of its obligation. It appears
that appellant had not only notified appellees of the arrival of their shipment, but had demanded that the same be withdrawn.
In fact, pursuant to such demand, appellee Uy Bico had taken delivery of 907 cavans of rice before the burning of the
warehouse.
Nor can the appellant or its employees be charged with negligence. The storage of the goods in the Customs warehouse
pending withdrawal thereof by the appellees was undoubtedly made with their knowledge and consent. Since the warehouse
belonged to and was maintained by the government, it would be unfair to impute negligence to the appellant, the latter having
no control whatsoever over the same.
The lower court in its decision relied on the ruling laid down in Yu Biao Sontua vs. Ossorio 6, where this Court held the
defendant liable for damages arising from a fire caused by the negligence of the defendant's employees while loading cases of
gasoline and petroleon products. But unlike in the said case, there is not a shred of proof in the present case that the cause of
the fire that broke out in the Custom's warehouse was in any way attributable to the negligence of the appellant or its
employees. Under the circumstances, the appellant is plainly not responsible.
WHEREFORE, the judgment appealed from is hereby set aside. No costs.
SO ORDERED.
Facts:
1. Clara UyBico and AmparoServando loaded on board a vessel of Philippine Steam Navigation Co. for carriage from Manila to
Negros Occidental 1,528 cavans of rice and 44 cartons of colored paper, toys and general merchandise.
2. The contract of carriage of cargo was evidenced by a Bill of Lading (B/L). There was a stipulation limiting the responsibility
of the carrier for loss or damage that may be caused to the shipment
a. “carrier shall not be responsible for loss or damage to shipments billed ‘owner’s risk’ unless such loss or damage is due
to the negligence of the carrier. Nor shall the carrier be responsible for loss or damage caused by force majeure, dangers or
accidents of the sea, war, public enemies, fire”.
3. Upon arrival of the vessel at its destination, the cargoes were discharged in good condition and placed inside the
warehouse of the Bureau of Customs.
4. UyBico was able to take delivery of 907 cavans of rice.
5. Unfortunately, the warehouse was razed by fire of unknown origin later that same day destroying the remaining cargoes.
6. UyBico and Servando filed a claim for the value of the goods against the carrier.
7. The lower court ruled in their favor. It held that the delivery of the shipment to the warehouse is not the delivery
contemplated by Art. 1736 of the CC. And since the burning of the warehouse occurred prior to the actual or constructive
delivery of the goods, the loss is chargeable against the vessel.
Issue:Whether or not the carrier is liable for the loss of the goods.
Held:No.
56
1. Article 1736 of the CC imposes upon common carriers the duty to observe extraordinary diligence from the moment the
goods are unconditionally placed in their possession "until the same are delivered, actually or constructively, by the carrier to
the consignee or to the person who has a right to receive them, without prejudice to the provisions of Article 1738.” The court
a quo held that the delivery of the shipment in question to the warehouse of the Bureau of Customs is not the delivery
contemplated by Article 1736; and since the burning of the warehouse occurred before actual or constructive delivery of the
goods to the appellees, the loss is chargeable against the appellant.
2. It should be pointed out, however, that in the bills of lading issued for the cargoes in question, the parties agreed to limit
the responsibility of the carrier. The stipulation is valid not being contrary to law, morals or public policy.
3. The petitioners however, contend that the stipulation does not bind them since it was printed at the back of the B/L and
that they did not sign the same. However, as the Court held in OngYiu vs. CA, while it may be true that a passenger had not
signed the plane ticket, he is nevertheless bound by the provisions thereof. Such provisions have been held to be a part of the
contract of carriage, and valid and binding upon the passenger regardless of the latter's lack of knowledge or assent to the
regulation.
4. Also, where fortuitous event is the immediate and proximate cause of the loss, the obligor is exempt from liability for non-
performance.In the case at bar, the burning of the customs warehouse was an extraordinary event which happened
independently of the will of the appellant. The latter could not have foreseen the event.
5. There is nothing in the record to show that the carrier incurred in delay in the performance of its obligation. It appears that
it had not only notified UyBico and Servando of the arrival of their shipment, but had demanded that the same be withdrawn.
In fact, pursuant to such demand, UyBico had taken delivery of 907 cavans of rice before the burning of the warehouse.
6. Nor can the carrier or its employees be charged with negligence. The storage of the goods in the Customs warehouse
pending withdrawal thereof by UyBico and Servando was undoubtedly made with their knowledge and consent. Since the
warehouse belonged to and was maintained by the government, it would be unfair to impute negligence to the carrier, the
latter having no control whatsoever over the same.
Facts:
Servando and Bico loaded on board PSN’s vessel certain cargoes to be transported from Manila to Negros Occidental. Upon
arrival of the vessel at the destination, the cargoes were discharged, complete and in good order, unto the warehouse of the
Bureau of Customs. Said warehouse, however, was burned by a fire with unknown origin destroying the cargoes. Before the
fire, Bico was able to discharge some of her cargoes.
Issue: WON the common carrier should be held responsible for the damage.
Held:
The burning of the customs warehouse was an extraordinary event which happened independently of the will of PSN. PSN
could not have foreseen the event. Where fortuitous event or force majeure is the immediate and proximate cause of the loss,
the obligor is exempt from liability for non-performance. This is true only because there is nothing in the record to show that
PSN, incurred in delay in the performance of its obligation nor can PSN or its employees be charged with negligence
Edgar Cokaliong Shipping Lines vs. UCPB General Insurance Company, June 25, 2003;
THIRD DIVISION
G.R. No. 146018 June 25, 2003
EDGAR COKALIONG SHIPPING LINES, INC., Petitioner,
vs.
UCPB GENERAL INSURANCE COMPANY, INC., Respondent.
DECISION
PANGANIBAN, J.:
The liability of a common carrier for the loss of goods may, by stipulation in the bill of lading, be limited to the value declared by
the shipper. On the other hand, the liability of the insurer is determined by the actual value covered by the insurance policy and
the insurance premiums paid therefor, and not necessarily by the value declared in the bill of lading.
The Case
Before the Court is a Petition for Review 1 under Rule 45 of the Rules of Court, seeking to set aside the August 31, 2000
Decision2 and the November 17, 2000 Resolution3 of the Court of Appeals4 (CA) in CA-GR SP No. 62751. The dispositive part of
the Decision reads:
"IN THE LIGHT OF THE FOREGOING, the appeal is GRANTED. The Decision appealed from is REVERSED. [Petitioner] is hereby
condemned to pay to [respondent] the total amount of ₱148,500.00, with interest thereon, at the rate of 6% per annum, from
date of this Decision of the Court. [Respondent’s] claim for attorney’s fees [is] DISMISSED. [Petitioner’s] counterclaims
are DISMISSED."5
The assailed Resolution denied petitioner’s Motion for Reconsideration.
6 7
On the other hand, the disposition of the Regional Trial Court’s Decision, which was later reversed by the CA, states:
"WHEREFORE, premises considered, the case is hereby DISMISSED for lack of merit.
"No cost."8
The Facts
The facts of the case are summarized by the appellate court in this wise:
"Sometime on December 11, 1991, Nestor Angelia delivered to the Edgar Cokaliong Shipping Lines, Inc. (now Cokaliong
Shipping Lines), [petitioner] for brevity, cargo consisting of one (1) carton of Christmas décor and two (2) sacks of plastic toys,
to be transported on board the M/V Tandag on its Voyage No. T-189 scheduled to depart from Cebu City, on December 12,
1991, for Tandag, Surigao del Sur. [Petitioner] issued Bill of Lading No. 58, freight prepaid, covering the cargo. Nestor Angelia
was both the shipper and consignee of the cargo valued, on the face thereof, in the amount of ₱6,500.00. Zosimo Mercado
likewise delivered cargo to [petitioner], consisting of two (2) cartons of plastic toys and Christmas decor, one (1) roll of floor mat
and one (1) bundle of various or assorted goods for transportation thereof from Cebu City to Tandag, Surigao del Sur, on board
the said vessel, and said voyage. [Petitioner] issued Bill of Lading No. 59 covering the cargo which, on the face thereof, was
valued in the amount of ₱14,000.00. Under the Bill of Lading, Zosimo Mercado was both the shipper and consignee of the
cargo.
57
"On December 12, 1991, Feliciana Legaspi insured the cargo, covered by Bill of Lading No. 59, with the UCPB General Insurance
Co., Inc., [respondent] for brevity, for the amount of ₱100,000.00 ‘against all risks’ under Open Policy No. 002/9 1/254 for
which she was issued, by [respondent], Marine Risk Note No. 18409 on said date. She also insured the cargo covered by Bill of
Lading No. 58, with [respondent], for the amount of ₱50,000.00, under Open Policy No. 002/9 1/254 on the basis of which
[respondent] issued Marine Risk Note No. 18410 on said date.
"When the vessel left port, it had thirty-four (34) passengers and assorted cargo on board, including the goods of Legaspi. After
the vessel had passed by the Mandaue-Mactan Bridge, fire ensued in the engine room, and, despite earnest efforts of the
officers and crew of the vessel, the fire engulfed and destroyed the entire vessel resulting in the loss of the vessel and the
cargoes therein. The Captain filed the required Marine Protest.
"Shortly thereafter, Feliciana Legaspi filed a claim, with [respondent], for the value of the cargo insured under Marine Risk Note
No. 18409 and covered by Bill of Lading No. 59. She submitted, in support of her claim, a Receipt, dated December 11, 1991,
purportedly signed by Zosimo Mercado, and Order Slips purportedly signed by him for the goods he received from Feliciana
Legaspi valued in the amount of ₱110,056.00. [Respondent] approved the claim of Feliciana Legaspi and drew and issued UCPB
Check No. 612939, dated March 9, 1992, in the net amount of ₱99,000.00, in settlement of her claim after which she executed
a Subrogation Receipt/Deed, for said amount, in favor of [respondent]. She also filed a claim for the value of the cargo covered
by Bill of Lading No. 58. She submitted to [respondent] a Receipt, dated December 11, 1991 and Order Slips, purportedly
signed by Nestor Angelia for the goods he received from Feliciana Legaspi valued at ₱60,338.00. [Respondent] approved her
claim and remitted to Feliciana Legaspi the net amount of ₱49,500.00, after which she signed a Subrogation Receipt/Deed,
dated March 9, 1992, in favor of [respondent].
"On July 14, 1992, [respondent], as subrogee of Feliciana Legaspi, filed a complaint anchored on torts against [petitioner], with
the Regional Trial Court of Makati City, for the collection of the total principal amount of ₱148,500.00, which it paid to Feliciana
Legaspi for the loss of the cargo, praying that judgment be rendered in its favor and against the [petitioner] as follows:
‘WHEREFORE, it is respectfully prayed of this Honorable Court that after due hearing, judgment be rendered ordering
[petitioner] to pay [respondent] the following.
1. Actual damages in the amount of ₱148,500.00 plus interest thereon at the legal rate from the time of filing of this
complaint until fully paid;
2. Attorney’s fees in the amount of ₱10,000.00; and
3. Cost of suit.
‘[Respondent] further prays for such other reliefs and remedies as this Honorable Court may deem just and equitable under the
premises.’
"[Respondent] alleged, inter alia, in its complaint, that the cargo subject of its complaint was delivered to, and received by,
[petitioner] for transportation to Tandag, Surigao del Sur under ‘Bill of Ladings,’ Annexes ‘A’ and ‘B’ of the complaint; that the
loss of the cargo was due to the negligence of the [petitioner]; and that Feliciana Legaspi had executed Subrogation
Receipts/Deeds in favor of [respondent] after paying to her the value of the cargo on account of the Marine Risk Notes it
issued in her favor covering the cargo.
"In its Answer to the complaint, [petitioner] alleged that: (a) [petitioner] was cleared by the Board of Marine Inquiry of any
negligence in the burning of the vessel; (b) the complaint stated no cause of action against [petitioner]; and (c) the
shippers/consignee had already been paid the value of the goods as stated in the Bill of Lading and, hence, [petitioner] cannot
be held liable for the loss of the cargo beyond the value thereof declared in the Bill of Lading.
"After [respondent] rested its case, [petitioner] prayed for and was allowed, by the Court a quo, to take the depositions of
Chester Cokaliong, the Vice-President and Chief Operating Officer of [petitioner], and a resident of Cebu City, and of Noel
Tanyu, an officer of the Equitable Banking Corporation, in Cebu City, and a resident of Cebu City, to be given before the
Presiding Judge of Branch 106 of the Regional Trial Court of Cebu City. Chester Cokaliong and Noel Tanyu did testify, by way of
deposition, before the Court and declared inter alia, that: [petitioner] is a family corporation like the Chester Marketing, Inc.;
Nestor Angelia had been doing business with [petitioner] and Chester Marketing, Inc., for years, and incurred an account with
Chester Marketing, Inc. for his purchases from said corporation; [petitioner] did issue Bills of Lading Nos. 58 and 59 for the
cargo described therein with Zosimo Mercado and Nestor Angelia as shippers/consignees, respectively; the engine room of
the M/V Tandag caught fire after it passed the Mandaue/Mactan Bridge resulting in the total loss of the vessel and its cargo; an
investigation was conducted by the Board of Marine Inquiry of the Philippine Coast Guard which rendered a Report, dated
February 13, 1992 absolving [petitioner] of any responsibility on account of the fire, which Report of the Board was approved
by the District Commander of the Philippine Coast Guard; a few days after the sinking of the vessel, a representative of the
Legaspi Marketing filed claims for the values of the goods under Bills of Lading Nos. 58 and 59 in behalf of the
shippers/consignees, Nestor Angelia and Zosimo Mercado; [petitioner] was able to ascertain, from the shippers/consignees and
the representative of the Legaspi Marketing that the cargo covered by Bill of Lading No. 59 was owned by Legaspi Marketing
and consigned to Zosimo Mercado while that covered by Bill of Lading No. 58 was purchased by Nestor Angelia from the
Legaspi Marketing; that [petitioner] approved the claim of Legaspi Marketing for the value of the cargo under Bill of Lading No.
59 and remitted to Legaspi Marketing the said amount under Equitable Banking Corporation Check No. 20230486 dated August
12, 1992, in the amount of ₱14,000.00 for which the representative of the Legaspi Marketing signed Voucher No. 4379, dated
August 12, 1992, for the said amount of ₱14,000.00 in full payment of claims under Bill of Lading No. 59; that [petitioner]
approved the claim of Nestor Angelia in the amount of ₱6,500.00 but that since the latter owed Chester Marketing, Inc., for
some purchases, [petitioner] merely set off the amount due to Nestor Angelia under Bill of Lading No. 58 against his account
with Chester Marketing, Inc.; [petitioner] lost/[misplaced] the original of the check after it was received by Legaspi Marketing,
hence, the production of the microfilm copy by Noel Tanyu of the Equitable Banking Corporation; [petitioner] never knew,
before settling with Legaspi Marketing and Nestor Angelia that the cargo under both Bills of Lading were insured with
[respondent], or that Feliciana Legaspi filed claims for the value of the cargo with [respondent] and that the latter approved the
claims of Feliciana Legaspi and paid the total amount of ₱148,500.00 to her; [petitioner] came to know, for the first time, of the
payments by [respondent] of the claims of Feliciana Legaspi when it was served with the summons and complaint, on October
8, 1992; after settling his claim, Nestor Angelia x x x executed the Release and Quitclaim, dated July 2, 1993, and Affidavit,
dated July 2, 1993 in favor of [respondent]; hence, [petitioner] was absolved of any liability for the loss of the cargo covered
by Bills of Lading Nos. 58 and 59; and even if it was, its liability should not exceed the value of the cargo as stated in the Bills of
Lading.
"[Petitioner] did not anymore present any other witnesses on its evidence-in-chief. x x x"9 (Citations omitted)
Ruling of the Court of Appeals
The CA held that petitioner had failed "to prove that the fire which consumed the vessel and its cargo was caused by something
other than its negligence in the upkeep, maintenance and operation of the vessel." 10
Petitioner had paid ₱14,000 to Legaspi Marketing for the cargo covered by Bill of Lading No. 59. The CA, however, held that the
payment did not extinguish petitioner’s obligation to respondent, because there was no evidence that Feliciana Legaspi (the
insured) was the owner/proprietor of Legaspi Marketing. The CA also pointed out the impropriety of treating the claim under
Bill of Lading No. 58 -- covering cargo valued therein at ₱6,500 -- as a setoff against Nestor Angelia’s account with Chester
Enterprises, Inc.
Finally, it ruled that respondent "is not bound by the valuation of the cargo under the Bills of Lading, x x x nor is the value of the
cargo under said Bills of Lading conclusive on the [respondent]. This is so because, in the first place, the goods were insured
with the [respondent] for the total amount of ₱150,000.00, which amount may be considered as the face value of the goods." 11
Hence this Petition.12
Issues
58
Petitioner raises for our consideration the following alleged errors of the CA:
"I
"The Honorable Court of Appeals erred, granting arguendo that petitioner is liable, in holding that petitioner’s liability should
be based on the ‘actual insured value’ of the goods and not from actual valuation declared by the shipper/consignee in the bill
of lading.
"II
"The Court of Appeals erred in not affirming the findings of the Philippine Coast Guard, as sustained by the trial court a quo,
holding that the cause of loss of the aforesaid cargoes under Bill of Lading Nos. 58 and 59 was due to force majeure and due
diligence was [exercised] by petitioner prior to, during and immediately after the fire on [petitioner’s] vessel.
"III
"The Court of Appeals erred in not holding that respondent UCPB General Insurance has no cause of action against the
petitioner."13
In sum, the issues are: (1) Is petitioner liable for the loss of the goods? (2) If it is liable, what is the extent of its liability?
This Court’s Ruling
The Petition is partly meritorious.
First Issue: Liability for Loss
Petitioner argues that the cause of the loss of the goods, subject of this case, was force majeure. It adds that its exercise of due
diligence was adequately proven by the findings of the Philippine Coast Guard.
We are not convinced. The uncontroverted findings of the Philippine Coast Guard show that the M/V Tandag sank due to a fire,
which resulted from a crack in the auxiliary engine fuel oil service tank. Fuel spurted out of the crack and dripped to the heating
exhaust manifold, causing the ship to burst into flames. The crack was located on the side of the fuel oil tank, which had a mere
two-inch gap from the engine room walling, thus precluding constant inspection and care by the crew.
Having originated from an unchecked crack in the fuel oil service tank, the fire could not have been caused by force majeure.
Broadly speaking, force majeure generally applies to a natural accident, such as that caused by a lightning, an earthquake, a
tempest or a public enemy.14 Hence, fire is not considered a natural disaster or calamity. In Eastern Shipping Lines, Inc. v.
Intermediate Appellate Court,15 we explained:
"x x x. This must be so as it arises almost invariably from some act of man or by human means. It does not fall within the
category of an act of God unless caused by lighting or by other natural disaster or calamity. It may even be caused by the actual
fault or privity of the carrier.
"Article 1680 of the Civil Code, which considers fire as an extraordinary fortuitous event refers to leases or rural lands where a
reduction of the rent is allowed when more than one-half of the fruits have been lost due to such event, considering that the
law adopts a protective policy towards agriculture.
"As the peril of fire is not comprehended within the exceptions in Article 1734, supra, Article 1735 of the Civil Code provides
that in all cases other than those mentioned in Article 1734, the common carrier shall be presumed to have been at fault or to
have acted negligently, unless it proves that it has observed the extraordinary diligence required by law."
Where loss of cargo results from the failure of the officers of a vessel to inspect their ship frequently so as to discover the
existence of cracked parts, that loss cannot be attributed to force majeure, but to the negligence of those officials. 16
The law provides that a common carrier is presumed to have been negligent if it fails to prove that it exercised extraordinary
vigilance over the goods it transported. Ensuring the seaworthiness of the vessel is the first step in exercising the required
vigilance. Petitioner did not present sufficient evidence showing what measures or acts it had undertaken to ensure the
seaworthiness of the vessel. It failed to show when the last inspection and care of the auxiliary engine fuel oil service tank was
made, what the normal practice was for its maintenance, or some other evidence to establish that it had exercised
extraordinary diligence. It merely stated that constant inspection and care were not possible, and that the last time the vessel
was dry-docked was in November 1990. Necessarily, in accordance with Article 1735 17 of the Civil Code, we hold petitioner
responsible for the loss of the goods covered by Bills of Lading Nos. 58 and 59.
Second Issue: Extent of Liability
Respondent contends that petitioner’s liability should be based on the actual insured value of the goods, subject of this case.
On the other hand, petitioner claims that its liability should be limited to the value declared by the shipper/consignee in the Bill
of Lading.
The records18 show that the Bills of Lading covering the lost goods contain the stipulation that in case of claim for loss or for
damage to the shipped merchandise or property, "[t]he liability of the common carrier x x x shall not exceed the value of the
goods as appearing in the bill of lading."19 The attempt by respondent to make light of this stipulation is unconvincing. As it had
the consignees’ copies of the Bills of Lading,20 it could have easily produced those copies, instead of relying on mere allegations
and suppositions. However, it presented mere photocopies thereof to disprove petitioner’s evidence showing the existence of
the above stipulation.
A stipulation that limits liability is valid21 as long as it is not against public policy. In Everett Steamship Corporation v. Court of
Appeals,22 the Court stated:
"A stipulation in the bill of lading limiting the common carrier’s liability for loss or destruction of a cargo to a certain sum, unless
the shipper or owner declares a greater value, is sanctioned by law, particularly Articles 1749 and 1750 of the Civil Code which
provides:
‘Art. 1749. A stipulation that the common carrier’s liability is limited to the value of the goods appearing in the bill of lading,
unless the shipper or owner declares a greater value, is binding.’
‘Art. 1750. A contract fixing the sum that may be recovered by the owner or shipper for the loss, destruction, or deterioration
of the goods is valid, if it is reasonable and just under the circumstances, and has been freely and fairly agreed upon.’
"Such limited-liability clause has also been consistently upheld by this Court in a number of cases. Thus, in Sea-Land Service,
Inc. vs. Intermediate Appellate Court, we ruled:
‘It seems clear that even if said section 4 (5) of the Carriage of Goods by Sea Act did not exist, the validity and binding effect of
the liability limitation clause in the bill of lading here are nevertheless fully sustainable on the basis alone of the cited Civil Code
Provisions. That said stipulation is just and reasonable is arguable from the fact that it echoes Art. 1750 itself in providing a limit
to liability only if a greater value is not declared for the shipment in the bill of lading. To hold otherwise would amount to
questioning the justness and fairness of the law itself, and this the private respondent does not pretend to do. But over and
above that consideration, the just and reasonable character of such stipulation is implicit in it giving the shipper or owner the
option of avoiding accrual of liability limitation by the simple and surely far from onerous expedient of declaring the nature and
value of the shipment in the bill of lading.’
"Pursuant to the afore-quoted provisions of law, it is required that the stipulation limiting the common carrier’s liability for loss
must be ‘reasonable and just under the circumstances, and has been freely and fairly agreed upon.
59
"The bill of lading subject of the present controversy specifically provides, among others:
’18. All claims for which the carrier may be liable shall be adjusted and settled on the basis of the shipper’s net invoice cost plus
freight and insurance premiums, if paid, and in no event shall the carrier be liable for any loss of possible profits or any
consequential loss.
‘The carrier shall not be liable for any loss of or any damage to or in any connection with, goods in an amount exceeding One
Hundred Thousand Yen in Japanese Currency (¥100,000.00) or its equivalent in any other currency per package or customary
freight unit (whichever is least) unless the value of the goods higher than this amount is declared in writing by the shipper
before receipt of the goods by the carrier and inserted in the Bill of Lading and extra freight is paid as required.’
"The above stipulations are, to our mind, reasonable and just.1avvphi1 In the bill of lading, the carrier made it clear that its
liability would only be up to One Hundred Thousand (Y100,000.00) Yen. However, the shipper, Maruman Trading, had the
option to declare a higher valuation if the value of its cargo was higher than the limited liability of the carrier. Considering that
the shipper did not declare a higher valuation, it had itself to blame for not complying with the stipulations." (Italics supplied)
In the present case, the stipulation limiting petitioner’s liability is not contrary to public policy. In fact, its just and reasonable
character is evident. The shippers/consignees may recover the full value of the goods by the simple expedient of declaring the
true value of the shipment in the Bill of Lading. Other than the payment of a higher freight, there was nothing to stop them
from placing the actual value of the goods therein. In fact, they committed fraud against the common carrier by deliberately
undervaluing the goods in their Bill of Lading, thus depriving the carrier of its proper and just transport fare.
Concededly, the purpose of the limiting stipulation in the Bill of Lading is to protect the common carrier. Such stipulation
obliges the shipper/consignee to notify the common carrier of the amount that the latter may be liable for in case of loss of the
goods. The common carrier can then take appropriate measures -- getting insurance, if needed, to cover or protect itself. This
precaution on the part of the carrier is reasonable and prudent. Hence, a shipper/consignee that undervalues the real worth of
the goods it seeks to transport does not only violate a valid contractual stipulation, but commits a fraudulent act when it seeks
to make the common carrier liable for more than the amount it declared in the bill of lading.
Indeed, Zosimo Mercado and Nestor Angelia misled petitioner by undervaluing the goods in their respective Bills of Lading.
Hence, petitioner was exposed to a risk that was deliberately hidden from it, and from which it could not protect itself.
It is well to point out that, for assuming a higher risk (the alleged actual value of the goods) the insurance company was paid
the correct higher premium by Feliciana Legaspi; while petitioner was paid a fee lower than what it was entitled to for
transporting the goods that had been deliberately undervalued by the shippers in the Bill of Lading. Between the two of them,
the insurer should bear the loss in excess of the value declared in the Bills of Lading. This is the just and equitable solution.
In Aboitiz Shipping Corporation v. Court of Appeals,23 the description of the nature and the value of the goods shipped were
declared and reflected in the bill of lading, like in the present case. The Court therein considered this declaration as the basis of
the carrier’s liability and ordered payment based on such amount. Following this ruling, petitioner should not be held liable for
more than what was declared by the shippers/consignees as the value of the goods in the bills of lading.
We find no cogent reason to disturb the CA’s finding that Feliciana Legaspi was the owner of the goods covered by Bills of
Lading Nos. 58 and 59. Undoubtedly, the goods were merely consigned to Nestor Angelia and Zosimo Mercado, respectively;
thus, Feliciana Legaspi or her subrogee (respondent) was entitled to the goods or, in case of loss, to compensation therefor.
There is no evidence showing that petitioner paid her for the loss of those goods. It does not even claim to have paid her.
On the other hand, Legaspi Marketing filed with petitioner a claim for the lost goods under Bill of Lading No. 59, for which the
latter subsequently paid ₱14,000. But nothing in the records convincingly shows that the former was the owner of the goods.
Respondent was, however, able to prove that it was Feliciana Legaspi who owned those goods, and who was thus entitled to
payment for their loss. Hence, the claim for the goods under Bill of Lading No. 59 cannot be deemed to have been extinguished,
because payment was made to a person who was not entitled thereto.
With regard to the claim for the goods that were covered by Bill of Lading No. 58 and valued at ₱6,500, the parties have not
convinced us to disturb the findings of the CA that compensation could not validly take place. Thus, we uphold the appellate
court’s ruling on this point.
WHEREFORE, the Petition is hereby PARTIALLY GRANTED. The assailed Decision is MODIFIED in the sense that petitioner
is ORDERED to pay respondent the sums of ₱14,000 and ₱6,500, which represent the value of the goods stated in Bills of Lading
Nos. 59 and 58, respectively. No costs.
from placing the actual value of the goods therein. In fact, they committed fraud against the common carrier by deliberately
undervaluing the goods in their Bill of Lading, thus depriving the carrier of its proper and just transport fare. It is well to point
out that, for assuming a higher risk (the alleged actual value of the goods) the insurance company was paid the correct higher
premium by Feliciana Legaspi; while petitioner was paid a fee lower than what it was entitled to for transporting the goods that
had been deliberately undervalued by the shippers in the Bill of Lading. Between the two of them, the insurer should bear the
loss in excess of the value declared in the Bills of Lading.

SO ORDERED. M/V Tandag sank due to a fire which resulted from a crack in the auxiliary engine fuel oil service tank. Fuel spurted out of the
crack and dripped to the heating exhaust manifold, causing the ship to burst into flames. The crack was located on the side of
DOCTRINE:
the fuel oil tank, which had a mere two-inch gap from the engine room walling, thus precluding constant inspection and care by
the crew. The vessel sank as a consequence.
The liability of a common carrier for the loss of goods may, by stipulation in the bill of lading, be limited to the value declared by
ISSUE: Was the sinking of the vessel due to fortuitous event?
the shipper. On the other hand, the liability of the insurer is determined by the actual value covered by the insurance policy and
the insurance premiums paid therefor, and not necessarily by the value declared in the bill of lading.
HELD:
FACTS:
No. Having originated from an unchecked crack in the fuel oil service tank, the fire could not have been caused by force
majeure. Broadly speaking, force majeure generally applies to a natural accident, such as that caused by a lightning, an
Shipper: ZosimaMercardo, Nestor Amelia Carrier: EDGAR COKALIONG SHIPPING LINES, INC. Vessel: M/V Tandag Insurer: UCPB
earthquake, a tempest or a public enemy. Hence, fire is not considered a natural disaster or calamity.
General Insurance Co. Inc. (Feliciana Legaspi insured the cargoes) Event: FIRE Edgar did not pay UCPB. UCPB filed a complaint.
RTC absolved Edgar of any liability. CA affirmed.

ISSUE: 1. W/N Edgar is liable 2. What is the basis of liability? Amount in the bill of lading or actual amount?

RULING:

1. Yes. The uncontroverted findings of the Philippine Coast Guard show that the M/V Tandag
sank due to a fire, which resulted from a crack in the auxiliary engine fuel oil service tank. Fuel spurted out of the crack and
dripped to the heating exhaust manifold, causing the ship to burst into flames. The crack was located on the side of the fuel oil
tank, which had a mere two-inch gap from the engine room walling, thus precluding constant inspection and care by the crew.
Having originated from an unchecked crack in the fuel oil service tank, the fire could not have been caused by force majeure.
May refer to Eastern Shipping Lines, Inc. v. Intermediate Appellate Court.

A stipulation that limits liability is valid as long as it is not against public policy. Art. 1749. A stipulation that the common
carrier’s liability is limited to the value of the goods appearing in the bill of lading, unless the shipper or owner declares a
greater value, is binding.’

‘Art. 1750. A contract fixing the sum that may be recovered by the owner or shipper for the loss, destruction,
or deterioration of the goods is valid, if it is reasonable and just under the circumstances, and has been freely
and fairly agreed upon.’

2. Bill of lading. The bill of lading subject of the present controversy specifically provides, among others:
’18. All claims for which the carrier may be liable shall be adjusted and settled on the basis of the shipper’s net
invoice cost plus freight and insurance premiums, if paid, and in no event shall the carrier be liable for any loss of possible
profits or any consequential loss.

‘The carrier shall not be liable for any loss of or any damage to or in any connection with, goods in an amount
exceeding One Hundred Thousand Yen in Japanese Currency (¥100,000.00) or its equivalent in any other currency per package
or customary freight unit (whichever is least) unless the value of the goods higher than this amount is declared in writing by the
shipper before receipt of the goods by the carrier and inserted in the Bill of Lading and extra freight is paid as required. In the
presen t case, the stipulation limiting petitioner’s liability is not contrary to public policy. In fact, its just and reasonable
character is evident. The shippers/consignees may recover the full value of the goods by the simple expedient of declaring the
true value of the shipment in the Bill of Lading. Other than the payment of a higher freight, there was nothing to stop them

60
Eastern Shipping Lines vs. IAC, 150 SCRA 469; the cargo lost with the then Court of First Instance of Manila, Branch 11 (Civil Case No. 116151), imputing unseaworthiness of
the ship and non-observance of extraordinary diligence by petitioner Carrier.
FIRST DIVISION
Petitioner Carrier denied liability on the principal grounds that the fire which caused the sinking of the ship is an exempting
circumstance under Section 4(2) (b) of the Carriage of Goods by Sea Act (COGSA); and that when the loss of fire is established,
G.R. No. L-69044 May 29, 1987
the burden of proving negligence of the vessel is shifted to the cargo shipper.
EASTERN SHIPPING LINES, INC., petitioner,
On September 15, 1980, the Trial Court rendered judgment in favor of NISSHIN and DOWA in the amounts of US $46,583.00
vs.
and US $11,385.00, respectively, with legal interest, plus attorney's fees of P5,000.00 and costs. On appeal by petitioner, the
INTERMEDIATE APPELLATE COURT and DEVELOPMENT INSURANCE & SURETY CORPORATION, respondents..
then Court of Appeals on September 10, 1984, affirmed with modification the Trial Court's judgment by decreasing the amount
recoverable by DOWA to US $1,000.00 because of $500 per package limitation of liability under the COGSA.
MELENCIO-HERRERA, J.:
Hence, this Petition for Review on certiorari by Petitioner Carrier.
These two cases, both for the recovery of the value of cargo insurance, arose from the same incident, the sinking of the M/S
ASIATICA when it caught fire, resulting in the total loss of ship and cargo.
Both Petitions were initially denied for lack of merit. G.R. No. 69044 on January 16, 1985 by the First Division, and G. R. No.
71478 on September 25, 1985 by the Second Division. Upon Petitioner Carrier's Motion for Reconsideration, however, G.R. No.
The basic facts are not in controversy:
69044 was given due course on March 25, 1985, and the parties were required to submit their respective Memoranda, which
they have done.
In G.R. No. 69044, sometime in or prior to June, 1977, the M/S ASIATICA, a vessel operated by petitioner Eastern Shipping Lines,
Inc., (referred to hereinafter as Petitioner Carrier) loaded at Kobe, Japan for transportation to Manila, 5,000 pieces of calorized
On the other hand, in G.R. No. 71478, Petitioner Carrier sought reconsideration of the Resolution denying the Petition for
lance pipes in 28 packages valued at P256,039.00 consigned to Philippine Blooming Mills Co., Inc., and 7 cases of spare parts
Review and moved for its consolidation with G.R. No. 69044, the lower-numbered case, which was then pending resolution
valued at P92,361.75, consigned to Central Textile Mills, Inc. Both sets of goods were insured against marine risk for their stated
with the First Division. The same was granted; the Resolution of the Second Division of September 25, 1985 was set aside and
value with respondent Development Insurance and Surety Corporation.
the Petition was given due course.
In G.R. No. 71478, during the same period, the same vessel took on board 128 cartons of garment fabrics and accessories, in
At the outset, we reject Petitioner Carrier's claim that it is not the operator of the M/S Asiatica but merely a charterer thereof.
two (2) containers, consigned to Mariveles Apparel Corporation, and two cases of surveying instruments consigned to Aman
We note that in G.R. No. 69044, Petitioner Carrier stated in its Petition:
Enterprises and General Merchandise. The 128 cartons were insured for their stated value by respondent Nisshin Fire & Marine
Insurance Co., for US $46,583.00, and the 2 cases by respondent Dowa Fire & Marine Insurance Co., Ltd., for US $11,385.00.
There are about 22 cases of the "ASIATICA" pending in various courts where various plaintiffs are
represented by various counsel representing various consignees or insurance companies. The common
Enroute for Kobe, Japan, to Manila, the vessel caught fire and sank, resulting in the total loss of ship and cargo. The respective
defendant in these cases is petitioner herein, being the operator of said vessel. ... 1
respondent Insurers paid the corresponding marine insurance values to the consignees concerned and were thus subrogated
unto the rights of the latter as the insured.
Petitioner Carrier should be held bound to said admission. As a general rule, the facts alleged in a party's pleading are deemed
admissions of that party and binding upon it. 2 And an admission in one pleading in one action may be received in evidence
G.R. NO. 69044
against the pleader or his successor-in-interest on the trial of another action to which he is a party, in favor of a party to the
latter action. 3
On May 11, 1978, respondent Development Insurance & Surety Corporation (Development Insurance, for short), having been
subrogated unto the rights of the two insured companies, filed suit against petitioner Carrier for the recovery of the amounts it
The threshold issues in both cases are: (1) which law should govern — the Civil Code provisions on Common carriers or the
had paid to the insured before the then Court of First instance of Manila, Branch XXX (Civil Case No. 6087).
Carriage of Goods by Sea Act? and (2) who has the burden of proof to show negligence of the carrier?
Petitioner-Carrier denied liability mainly on the ground that the loss was due to an extraordinary fortuitous event, hence, it is
On the Law Applicable
not liable under the law.
The law of the country to which the goods are to be transported governs the liability of the common carrier in case of their loss,
On August 31, 1979, the Trial Court rendered judgment in favor of Development Insurance in the amounts of P256,039.00 and
destruction or deterioration. 4 As the cargoes in question were transported from Japan to the Philippines, the liability of
P92,361.75, respectively, with legal interest, plus P35,000.00 as attorney's fees and costs. Petitioner Carrier took an appeal to
Petitioner Carrier is governed primarily by the Civil Code. 5 However, in all matters not regulated by said Code, the rights and
the then Court of Appeals which, on August 14, 1984, affirmed.
obligations of common carrier shall be governed by the Code of Commerce and by special laws. 6 Thus, the Carriage of Goods
by Sea Act, a special law, is suppletory to the provisions of the Civil Code. 7
Petitioner Carrier is now before us on a Petition for Review on Certiorari.
On the Burden of Proof
G.R. NO. 71478
Under the Civil Code, common carriers, from the nature of their business and for reasons of public policy, are bound to observe
On June 16, 1978, respondents Nisshin Fire & Marine Insurance Co. NISSHIN for short), and Dowa Fire & Marine Insurance Co.,
extraordinary diligence in the vigilance over goods, according to all the circumstances of each case. 8Common carriers are
Ltd. (DOWA, for brevity), as subrogees of the insured, filed suit against Petitioner Carrier for the recovery of the insured value of
responsible for the loss, destruction, or deterioration of the goods unless the same is due to any of the following causes only:

61
 (1) Flood, storm, earthquake, lightning or other natural disaster or calamity;
Petitioner Carrier claims that the loss of the vessel by fire exempts it from liability under the phrase "natural disaster or
calamity. " However, we are of the opinion that fire may not be considered a natural disaster or calamity. This must be so as it
arises almost invariably from some act of man or by human means. 10 It does not fall within the category of an act of God
unless caused by lightning 11 or by other natural disaster or calamity. 12 It may even be caused by the actual fault or privity of
the carrier. 13
Article 1680 of the Civil Code, which considers fire as an extraordinary fortuitous event refers to leases of rural lands where a
reduction of the rent is allowed when more than one-half of the fruits have been lost due to such event, considering that the
law adopts a protection policy towards agriculture. 14
As the peril of the fire is not comprehended within the exception in Article 1734, supra, Article 1735 of the Civil Code provides
that all cases than those mention in Article 1734, the common carrier shall be presumed to have been at fault or to have acted
negligently, unless it proves that it has observed the extraordinary deligence required by law.
In this case, the respective Insurers. as subrogees of the cargo shippers, have proven that the transported goods have been lost.
Petitioner Carrier has also proved that the loss was caused by fire. The burden then is upon Petitioner Carrier to proved that it
has exercised the extraordinary diligence required by law. In this regard, the Trial Court, concurred in by the Appellate Court,
made the following Finding of fact:
The cargoes in question were, according to the witnesses defendant placed in hatches No, 2 and 3 cf the
vessel, Boatswain Ernesto Pastrana noticed that smoke was coming out from hatch No. 2 and hatch No.
3; that where the smoke was noticed, the fire was already big; that the fire must have started twenty-
four 24) our the same was noticed; that carbon dioxide was ordered released and the crew was ordered
to open the hatch covers of No, 2 tor commencement of fire fighting by sea water: that all of these effort
were not enough to control the fire.
Pursuant to Article 1733, common carriers are bound to extraordinary diligence in the vigilance over the
goods. The evidence of the defendant did not show that extraordinary vigilance was observed by the
vessel to prevent the occurrence of fire at hatches numbers 2 and 3. Defendant's evidence did not
likewise show he amount of diligence made by the crew, on orders, in the care of the cargoes. What
appears is that after the cargoes were stored in the hatches, no regular inspection was made as to their
condition during the voyage. Consequently, the crew could not have even explain what could have
caused the fire. The defendant, in the Court's mind, failed to satisfactorily show that extraordinary
vigilance and care had been made by the crew to prevent the occurrence of the fire. The defendant, as a
common carrier, is liable to the consignees for said lack of deligence required of it under Article 1733 of
the Civil Code. 15
Having failed to discharge the burden of proving that it had exercised the extraordinary diligence required by law, Petitioner
Carrier cannot escape liability for the loss of the cargo.
And even if fire were to be considered a "natural disaster" within the meaning of Article 1734 of the Civil Code, it is required
under Article 1739 of the same Code that the "natural disaster" must have been the "proximate and only cause of the loss,"
and that the carrier has "exercised due diligence to prevent or minimize the loss before, during or after the occurrence of the
disaster. " This Petitioner Carrier has also failed to establish satisfactorily.
Nor may Petitioner Carrier seek refuge from liability under the Carriage of Goods by Sea Act, It is provided therein that:
Sec. 4(2). Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from
(b) Fire, unless caused by the actual fault or privity of the carrier.
62
In this case, both the Trial Court and the Appellate Court, in effect, found, as a fact, that there was "actual fault" of the carrier
shown by "lack of diligence" in that "when the smoke was noticed, the fire was already big; that the fire must have started
twenty-four (24) hours before the same was noticed; " and that "after the cargoes were stored in the hatches, no regular
inspection was made as to their condition during the voyage." The foregoing suffices to show that the circumstances under
which the fire originated and spread are such as to show that Petitioner Carrier or its servants were negligent in connection
therewith. Consequently, the complete defense afforded by the COGSA when loss results from fire is unavailing to Petitioner
Carrier.
On the US $500 Per Package Limitation:
Petitioner Carrier avers that its liability if any, should not exceed US $500 per package as provided in section 4(5) of the COGSA,
which reads:
(5) Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in
connection with the transportation of goods in an amount exceeding $500 per package lawful money of
the United States, or in case of goods not shipped in packages, per customary freight unit, or the
equivalent of that sum in other currency, unless the nature and value of such goods have been declared
by the shipper before shipment and inserted in bill of lading. This declaration if embodied in the bill of
lading shall be prima facie evidence, but all be conclusive on the carrier.
By agreement between the carrier, master or agent of the carrier, and the shipper another maximum
amount than that mentioned in this paragraph may be fixed: Provided, That such maximum shall not be
less than the figure above named. In no event shall the carrier be Liable for more than the amount of
damage actually sustained.
Article 1749 of the New Civil Code also allows the limitations of liability in this wise:
Art. 1749. A stipulation that the common carrier's liability as limited to the value of the goods appearing
in the bill of lading, unless the shipper or owner declares a greater value, is binding.
It is to be noted that the Civil Code does not of itself limit the liability of the common carrier to a fixed amount per package
although the Code expressly permits a stipulation limiting such liability. Thus, the COGSA which is suppletory to the provisions
of the Civil Code, steps in and supplements the Code by establishing a statutory provision limiting the carrier's liability in the
absence of a declaration of a higher value of the goods by the shipper in the bill of lading. The provisions of the Carriage of
Goods by.Sea Act on limited liability are as much a part of a bill of lading as though physically in it and as much a part thereof as
though placed therein by agreement of the parties. 16
In G.R. No. 69044, there is no stipulation in the respective Bills of Lading (Exhibits "C-2" and "I-3") 1 7 limiting the carrier's
liability for the loss or destruction of the goods. Nor is there a declaration of a higher value of the goods. Hence, Petitioner
Carrier's liability should not exceed US $500 per package, or its peso equivalent, at the time of payment of the value of the
goods lost, but in no case "more than the amount of damage actually sustained."
The actual total loss for the 5,000 pieces of calorized lance pipes was P256,039 (Exhibit "C"), which was exactly the amount of
the insurance coverage by Development Insurance (Exhibit "A"), and the amount affirmed to be paid by respondent Court. The
goods were shipped in 28 packages (Exhibit "C-2") Multiplying 28 packages by $500 would result in a product of $14,000 which,
at the current exchange rate of P20.44 to US $1, would be P286,160, or "more than the amount of damage actually sustained."
Consequently, the aforestated amount of P256,039 should be upheld.
With respect to the seven (7) cases of spare parts (Exhibit "I-3"), their actual value was P92,361.75 (Exhibit "I"), which is
likewise the insured value of the cargo (Exhibit "H") and amount was affirmed to be paid by respondent Court. however,
multiplying seven (7) cases by $500 per package at the present prevailing rate of P20.44 to US $1 (US $3,500 x P20.44) would
yield P71,540 only, which is the amount that should be paid by Petitioner Carrier for those spare parts, and not P92,361.75.
In G.R. No. 71478, in so far as the two (2) cases of surveying instruments are concerned, the amount awarded to DOWA which
was already reduced to $1,000 by the Appellate Court following the statutory $500 liability per package, is in order.
In respect of the shipment of 128 cartons of garment fabrics in two (2) containers and insured with NISSHIN, the Appellate
Court also limited Petitioner Carrier's liability to $500 per package and affirmed the award of $46,583 to NISSHIN. it multiplied
128 cartons (considered as COGSA packages) by $500 to arrive at the figure of $64,000, and explained that "since this amount is
more than the insured value of the goods, that is $46,583, the Trial Court was correct in awarding said amount only for the 128
cartons, which amount is less than the maximum limitation of the carrier's liability."
We find no reversible error. The 128 cartons and not the two (2) containers should be considered as the shipping unit.
In Mitsui & Co., Ltd. vs. American Export Lines, Inc. 636 F 2d 807 (1981), the consignees of tin ingots and the shipper of floor
covering brought action against the vessel owner and operator to recover for loss of ingots and floor covering, which had been
shipped in vessel — supplied containers. The U.S. District Court for the Southern District of New York rendered judgment for
the plaintiffs, and the defendant appealed. The United States Court of Appeals, Second Division, modified and affirmed holding
that:
When what would ordinarily be considered packages are shipped in a container supplied by the carrier
and the number of such units is disclosed in the shipping documents, each of those units and not the
container constitutes the "package" referred to in liability limitation provision of Carriage of Goods by Sea
Act. Carriage of Goods by Sea Act, 4(5), 46 U.S.C.A.& 1304(5).
Even if language and purposes of Carriage of Goods by Sea Act left doubt as to whether carrier-furnished
containers whose contents are disclosed should be treated as packages, the interest in securing
international uniformity would suggest that they should not be so treated. Carriage of Goods by Sea Act,
4(5), 46 U.S.C.A. 1304(5).
... After quoting the statement in Leather's Best, supra, 451 F 2d at 815, that treating a container as a
package is inconsistent with the congressional purpose of establishing a reasonable minimum level of
liability, Judge Beeks wrote, 414 F. Supp. at 907 (footnotes omitted):
Although this approach has not completely escaped criticism, there is,
nonetheless, much to commend it. It gives needed recognition to the responsibility
of the courts to construe and apply the statute as enacted, however great might be
the temptation to "modernize" or reconstitute it by artful judicial gloss. If COGSA's
package limitation scheme suffers from internal illness, Congress alone must
undertake the surgery. There is, in this regard, obvious wisdom in the Ninth
Circuit's conclusion in Hartford that technological advancements, whether or not
forseeable by the COGSA promulgators, do not warrant a distortion or artificial
construction of the statutory term "package." A ruling that these large reusable
metal pieces of transport equipment qualify as COGSA packages — at least where,
as here, they were carrier owned and supplied — would amount to just such a
distortion.
Certainly, if the individual crates or cartons prepared by the shipper and containing
his goods can rightly be considered "packages" standing by themselves, they do
not suddenly lose that character upon being stowed in a carrier's container. I would
liken these containers to detachable stowage compartments of the ship. They
simply serve to divide the ship's overall cargo stowage space into smaller, more
serviceable loci. Shippers' packages are quite literally "stowed" in the containers
utilizing stevedoring practices and materials analogous to those employed in
traditional on board stowage.
63
In Yeramex International v. S.S. Tando,, 1977 A.M.C. 1807 (E.D. Va.) rev'd on other grounds, 595 F 2nd 943
(4 Cir. 1979), another district with many maritime cases followed Judge Beeks' reasoning in Matsushita
and similarly rejected the functional economics test. Judge Kellam held that when rolls of polyester goods
are packed into cardboard cartons which are then placed in containers, the cartons and not the
containers are the packages.
xxx xxx xxx
The case of Smithgreyhound v. M/V Eurygenes, 18 followed the Mitsui test:
Eurygenes concerned a shipment of stereo equipment packaged by the shipper into cartons which were
then placed by the shipper into a carrier- furnished container. The number of cartons was disclosed to the
carrier in the bill of lading. Eurygenes followed the Mitsui test and treated the cartons, not the container,
as the COGSA packages. However, Eurygenes indicated that a carrier could limit its liability to $500 per
container if the bill of lading failed to disclose the number of cartons or units within the container, or if
the parties indicated, in clear and unambiguous language, an agreement to treat the container as the
package.
(Admiralty Litigation in Perpetuum: The Continuing Saga of Package Limitations and
Third World Delivery Problems by Chester D. Hooper & Keith L. Flicker, published in
Fordham International Law Journal, Vol. 6, 1982-83, Number 1) (Emphasis
supplied)
In this case, the Bill of Lading (Exhibit "A") disclosed the following data:
2 Containers
(128) Cartons)
Men's Garments Fabrics and Accessories Freight Prepaid
Say: Two (2) Containers Only.
Considering, therefore, that the Bill of Lading clearly disclosed the contents of the containers, the number of cartons or units,
as well as the nature of the goods, and applying the ruling in the Mitsui and Eurygenes cases it is clear that the 128 cartons, not
the two (2) containers should be considered as the shipping unit subject to the $500 limitation of liability.
True, the evidence does not disclose whether the containers involved herein were carrier-furnished or not. Usually, however,
containers are provided by the carrier. 19 In this case, the probability is that they were so furnished for Petitioner Carrier was at
liberty to pack and carry the goods in containers if they were not so packed. Thus, at the dorsal side of the Bill of Lading (Exhibit
"A") appears the following stipulation in fine print:
11. (Use of Container) Where the goods receipt of which is acknowledged on the face of this Bill of Lading
are not already packed into container(s) at the time of receipt, the Carrier shall be at liberty to pack and
carry them in any type of container(s).
The foregoing would explain the use of the estimate "Say: Two (2) Containers Only" in the Bill of Lading, meaning that the
goods could probably fit in two (2) containers only. It cannot mean that the shipper had furnished the containers for if so, "Two
(2) Containers" appearing as the first entry would have sufficed. and if there is any ambiguity in the Bill of Lading, it is a cardinal
principle in the construction of contracts that the interpretation of obscure words or stipulations in a contract shall not favor
the party who caused the obscurity. 20 This applies with even greater force in a contract of adhesion where a contract is already
prepared and the other party merely adheres to it, like the Bill of Lading in this case, which is draw. up by the carrier. 21
On Alleged Denial of Opportunity to Present Deposition of Its Witnesses: (in G.R. No. 69044 only)
Petitioner Carrier claims that the Trial Court did not give it sufficient time to take the depositions of its witnesses in Japan by
written interrogatories.
We do not agree. petitioner Carrier was given- full opportunity to present its evidence but it failed to do so. On this point, the
Trial Court found:
Indeed, since after November 6, 1978, to August 27, 1979, not to mention the time from June 27, 1978,
when its answer was prepared and filed in Court, until September 26, 1978, when the pre-trial
conference was conducted for the last time, the defendant had more than nine months to prepare its
evidence. Its belated notice to take deposition on written interrogatories of its witnesses in Japan, served
upon the plaintiff on August 25th, just two days before the hearing set for August 27th, knowing fully
well that it was its undertaking on July 11 the that the deposition of the witnesses would be dispensed
with if by next time it had not yet been obtained, only proves the lack of merit of the defendant's motion
for postponement, for which reason it deserves no sympathy from the Court in that regard. The
defendant has told the Court since February 16, 1979, that it was going to take the deposition of its
witnesses in Japan. Why did it take until August 25, 1979, or more than six months, to prepare its written
interrogatories. Only the defendant itself is to blame for its failure to adduce evidence in support of its
defenses.
Petitioner Carrier was afforded ample time to present its side of the case. 23 It cannot complain now that it was denied due
process when the Trial Court rendered its Decision on the basis of the evidence adduced. What due process abhors is absolute
lack of opportunity to be heard. 24
On the Award of Attorney's Fees:
Petitioner Carrier questions the award of attorney's fees. In both cases, respondent Court affirmed the award by the Trial Court
of attorney's fees of P35,000.00 in favor of Development Insurance in G.R. No. 69044, and P5,000.00 in favor of NISSHIN and
DOWA in G.R. No. 71478.
Courts being vested with discretion in fixing the amount of attorney's fees, it is believed that the amount of P5,000.00 would be
more reasonable in G.R. No. 69044. The award of P5,000.00 in G.R. No. 71478 is affirmed.
WHEREFORE, 1) in G.R. No. 69044, the judgment is modified in that petitioner Eastern Shipping Lines shall pay the
Development Insurance and Surety Corporation the amount of P256,039 for the twenty-eight (28) packages of calorized lance
pipes, and P71,540 for the seven (7) cases of spare parts, with interest at the legal rate from the date of the filing of the
complaint on June 13, 1978, plus P5,000 as attorney's fees, and the costs.
2) In G.R.No.71478,the judgment is hereby affirmed.
SO ORDERED.
Facts:
- 13 coils of uncoated 7-wire stress relived wire strand for prestressed concrete were shipped on board the vessel “Japri
Venture” (owned by Easter Shipping Lines) for delivery to Stresstek Post-Tensioning Phils. in Manila. The cargo was insured by
First Nationwide Assurance Corporation (FNAC).
- The vessel arrived in Manila and discharged the cargo to the custody of E.Razon Inc., from whom the consignee’s customs
broker received it for delivery to the consignee’s warehouse.
- It appears that while en route to Manila, the vessel encountered very rough seas and stormy weather and the cargo stored
64
in the lower hatch of the vessel was flooded with water about one foot deep. That upon survey, it was found that several coils
were rusty on one side and that the wetting of the cargo was caused by fresh water that entered the hatch when the vessel
encountered heavy weather.
- FNAC paid Stresstek about Php 172K for damage and loss to the insured cargo.
- Being subrogated to the rights of Stresstek, FNAC now seeks o recover from Eastern what it has indemnified Stresstek less
the salvage value of the goods, or the total of about Php 124K.
- The RTC ordered for the dismissal of the case.
Upon appeal, the CA held that Eastern is liable to FNAC.
Issue: Whether Easter should be held liable even if it claims that the shipment was discharged and delivered complete into the
custody of the arrastre operator under clean tally sheets.
Held:
- YES. In arriving at the decision, the SC agreed with the CA on its findings and conclusions.
- The heavy seas and rains referred to in the master’s report were not caso fortuito, but normal occurrences that an ocean
going vessel, particularly in the month of September which, in our area, is a month of rains and heavy seas would encounter as
a matter of routine. They are not unforeseen nor unforeseeable. These are conditions that ocean-going vessels would
encounter and provide for, in the ordinary course of voyage.
- The rain water (not sea water) found its way into Japri Venture is a clear indication that care and foresight did not attend the
closing of the ship’s hatches so that rain water would not find its way into the cargo,
- Since Easter has failed to establish any caso fortuito, the presumption of fault or negligence on the part of the carrier
applies; and the carrier must present evidence that it has observed the extraordinary diligence required in Art. 1733 to escape
liability.
The SC held that the presumption that the cargo was in apparent good condition when it was delivered by the vessel to the
arrastre operation by the clean tally sheets has been overturned. The evidence is clear to the effect that the damage to the
cargo was suffered while aboard petitioner’s vessel.
FACTS:
(G.R. No. L-69044): a vessel operated by petitioner Eastern Shipping Lines, Inc., loaded
atK o b e , J a p a n f o r t r a n s p o r t a ti o n t o M a n i l a , 5 0 0 0 p i e c e s o f c a l o r i z e d l a n c e p i p e s i n 2 8 packa
ges consigned to Philippine Blooming Mills Co., Inc., and 7 cases of spare parts consigned to Central Textile
Mills, Inc.; both sets of goods were insured with DevelopmentInsurance and Surety Corp.
(G. R. N o. 71478 ): th e same ve ssel too k o n b oard 128 car to ns o f gar me nt fabr ic s
a n d accessories, in 2 containers, consigned to Mariveles Apparel Corporation, and two cases of surveying instruments
consigned to Aman Enterprises and General Merchandise
The vessel caught fire and sank, resulting in the total loss of ship and cargo
ISSUES:
1. which law should govern — the Civil Code provisions on Common carriers or theCarriage of Goods by Sea Act?;
2. who has the burden of proof to show negligence of the carrier?
3. what is the extent of the carrier’s liability?
HELD:
1 . T h e l a w o f t h e c o u n t r y t o w h i c h t h e g o o d s a r e t o b e t r a n s p o r t e d g o v e r n s t h e liability of
the common carrier in case of their loss, destructi on or deteriorati on. As the cargoes were transported from
Japan to the Philippines, the liability of Petitioner Carrier isgoverned primarily by the Civil Code. However, in all matters not
regulated by said Code,the rights and obligations of common carrier shall be governed by the Code of Commerceand by special
laws. Thus, the Carriage of Goods by Sea Act, a special law, is suppletory tothe provisions of the Civil Code.

2. Article 1735 of the Civil Code provides that all cases than those mention in Article 1734,the common carrier shall be
presumed to have been at fault or to have acted negligently,unless it proves that it has observed the extraordinar y
diligence required by law. Theburden is upon Eastern Shipping Lines to prove that it has exercised the
extraordinar y diligence required by law.

Note: fi re –not considered a natural disaster or calamity within the contemplati on of Art. 1734 for it arises
almost invariably from some act of man or by human means; it does notfall within the category of an act of God
unless caused by lightning or by other natural disaster or calamity

having failed to discharge the burden of proving that it had exercised the extraordinar y diligence required by
law, Eastern Shipping Lines cannot escape liability for the loss of thecargo

As it was at fault, it cannot seek the protective mantle of Sec. 4(2) of Carriage of Goods bySea Act which provides:
“Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from x x x (b) Fire,
unless caused by the actual fault or privity of the carrier.”

there was actual fault of the carrier shown by lack of diligence in that when the smoke wasnoticed, the fire was already big;
that the fire must have started 24 hours before the samewas noticed; and that after the cargoes were stored in the hatches, no
regular inspectionwas made as to their condition during the voyage.

3. See Art. 1749.G.R. No. 69044: no stipulation in the Bills of Lading limiting the carrier’s liability for the lossor destruction of
the goods; no declaration of a higher value of the goods; Hence, Eastern

Shipping Lines’ liability should not exceed US $500 per package (as provided in 4(5) of theCOGSA), or its peso equivalent, at the
time of payment of the value of the goods lost, but inno case more than the amount of damage actually sustained

Facts:

On the way to Manila, M/S Asiatica caught fire and sank. This resulted to the loss of the ship and its cargoes. The Insurers of the
cargoes paid the corresponding marine insurance values and were thus subrogated to the rights of the insured. When the
insurers filed a suit against the petitioner carrier for recovery of the amounts paid to the insured, petitioner contends that it is
not liable on the ground that the loss was due to an extraordinary fortuitous event.

ISSUE: Is fire considered a natural disaster?

HELD:

No. This must be so as it arises almost invariably from some act of man or by human means. It does not fall within the category
of an act of God unless caused by lightning or by other natural disaster or calamity. It may even be caused by the actual fault or
privity of the carrier

65
Bascos vs. CA, Apr. 7, 1993; 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.
SECOND DIVISION
6. ID.; ID.; AFFIDAVITS NOT CONSIDERED BEST EVIDENCE IF AFFIANTS AVAILABLE AS WITNESSES. — While the affidavit of
G.R. No. 101089. April 7, 1993.
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
ESTRELLITA M. BASCOS, petitioners,
witnesses.
vs.
COURT OF APPEALS and RODOLFO A. CIPRIANO, respondents.
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
SYLLABUS
contract is what the law defines it to be and not what it is called by the contracting parties.
1. CIVIL LAW; COMMON CARRIERS; DEFINED; TEST TO DETERMINE COMMON CARRIER. — Article 1732 of the Civil Code defines
DECISION
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
CAMPOS, JR., J p:
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
This is a petition for review on certiorari of the decision ** of the Court of Appeals in "RODOLFO A. CIPRIANO, doing business
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
under the name CIPRIANO TRADING ENTERPRISES plaintiff-appellee, vs. ESTRELLITA M. BASCOS, doing business under the name
above article makes no distinction between one whose principal business activity is the carrying of persons or goods or both,
of BASCOS TRUCKING, defendant-appellant," C.A.-G.R. CV No. 25216, the dispositive portion of which is quoted hereunder:
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
"PREMISES considered, We find no reversible error in the decision appealed from, which is hereby affirmed in toto. Costs
offering such service on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguished between a carrier
against appellant." 1
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
The facts, as gathered by this Court, are as follows:
such distinctions."
Rodolfo A. Cipriano representing Cipriano Trading Enterprise (CIPTRADE for short) entered into a hauling contract 2 with Jibfair
2. ID.; ID.; DILIGENCE REQUIRED IN VIGILANCE OVER GOODS TRANSPORTED; WHEN PRESUMPTION OF NEGLIGENCE ARISES;
Shipping Agency Corporation whereby the former bound itself to haul the latter's 2,000 m/tons of soya bean meal from
HOW PRESUMPTION OVERCAME; WHEN PRESUMPTION MADE ABSOLUTE. — Common carriers are obliged to observe
Magallanes Drive, Del Pan, Manila to the warehouse of Purefoods Corporation in Calamba, Laguna. To carry out its obligation,
extraordinary diligence in the vigilance over the goods transported by them. Accordingly, they are presumed to have been at
CIPTRADE, through Rodolfo Cipriano, subcontracted with Estrellita Bascos (petitioner) to transport and to deliver 400 sacks of
fault or to have acted negligently if the goods are lost, destroyed or deteriorated. There are very few instances when the
soya bean meal worth P156,404.00 from the Manila Port Area to Calamba, Laguna at the rate of P50.00 per metric ton.
presumption of negligence does not attach and these instances are enumerated in Article 1734. In those cases where the
Petitioner failed to deliver the said cargo. As a consequence of that failure, Cipriano paid Jibfair Shipping Agency the amount of
presumption is applied, the common carrier must prove that it exercised extraordinary diligence in order to overcome the
the lost goods in accordance with the contract which stated that:
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
"1. CIPTRADE shall be held liable and answerable for any loss in bags due to theft, hijacking and non-delivery or damages to the
adduce sufficient proof of extraordinary diligence made the presumption conclusive against her.
cargo during transport at market value, . . ." 3
3. ID.; ID.; HIJACKING OF GOODS; CARRIER PRESUMED NEGLIGENT; HOW CARRIER ABSOLVED FROM LIABILITY. — In De Guzman
Cipriano demanded reimbursement from petitioner but the latter refused to pay. Eventually, Cipriano filed a complaint for a
vs. Court of Appeals, the Court held that hijacking, not being included in the provisions of Article 1734, must be dealt with
sum of money and damages with writ of preliminary attachment 4 for breach of a contract of carriage. The prayer for a Writ of
under the provisions of Article 1735 and thus, the common carrier is presumed to have been at fault or negligent. To exculpate
Preliminary Attachment was supported by an affidavit 5 which contained the following allegations:
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 "4. That this action is one of those specifically mentioned in Sec. 1, Rule 57 the Rules of Court, whereby a writ of preliminary
carrier's liability for acts committed by thieves, or of robbers who do not act with grave or irresistible threat, violences or force, attachment may lawfully issue, namely:
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 "(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
thieves or robbers, except where such thieves or robbers in fact acted "with grave of irresistible threat, violence of force," We creditors;"
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." 5. That there is no sufficient security for the claim sought to be enforced by the present action;

4. REMEDIAL LAW; EVIDENCE; JUDICIAL ADMISSIONS CONCLUSIVE. — In this case, petitioner herself has made the admission 6. That the amount due to the plaintiff in the above-entitled case is above all legal counterclaims;"
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. The trial court granted the writ of preliminary attachment on February 17, 1987.

66
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.
67
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;
(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.
was a common carrier(2) WON the hijacking referred to a force majeure
RULING:
The petition is DISMISSED and the decision of the Court of Appeals is hereby AFFIRMED.1. YES. 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.” In this case,
petitioner herself has ma de the admission that she was in the truckingbusiness, offering her trucks to those with cargo to
move. Judicial admissions are conclusive and noevidence is required to prove the same.
The above article makes no distinction between one whose principal business activity is the carrying ofpersons 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
68
and one offering such service on anoccasional, 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 whooffers services or
solicits business only from a narrow segment of the general population.2. NO. Common carriers are obliged to observe
extraordinary diligence in the vigilance over the goodstransported 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 ofnegligence does not attach and these instances are enumerated in
Article 1734. In those cases wherethe presumption is applied, the common carrier must prove that it exercised extraordinary
diligence inorder to overcome the presumption.The presumption of negligence was raised against petitioner (Bascos). It was
petitioner's burden toovercome it. Thus, contrary to her assertion, private respondent need not introduce any evidence
toprove her negligence. Her own failure to adduce sufficient proof of extraordinary diligence made thepresumption conclusive
against her.In this case, petitioner alleged that hijacking constituted force majeure which exculpated her fromliability for the
loss of the cargo. In De Guzman vs. Court of Appeals, the Court held that hijacking, notbeing included in the provisions of
Article 1734, must be dealt with under the provisions of Article 1735and thus, the common carrier is presumed to have been at
fault or negligent. To exculpate the carrierfrom liability arising from hijacking, he must prove that the robbers or the hijackers
acted with grave orirresistible threat, violence, or force.
FACTS: Rodolfo A. Cipriano representing Cipriano Trading Enterprise (CIPTRADE for short) entered into a hauling contract with
Jibfair Shipping Agency Corp whereby the former bound itself to haul the latter’s 2,000 m/tons of soya bean meal to the
warehouse in Calamba, Laguna. To carry out its obligation, CIPTRADE, through Cipriano, subcontracted with Bascos to transport
and to deliver 400 sacks of soya bean meal from the Manila Port Area to Calamba, Laguna. 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
their contract.
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 for breach of a contract of carriage. The trial court granted the
writ of preliminary attachment.
In her answer, petitioner interposed the defense that there was no contract of carriage since CIPTRADE leased her cargo truck
to load the cargo from Manila Port Area to Laguna and that the truck carrying the cargo was hijacked and being a force
majeure, exculpated petitioner from any liability
After trial, the trial court rendered a decision in favor of Cipriano and against Bascos ordering the latter to pay the former for
actual damages for attorney’s fees and cost of suit.
The “Urgent Motion To Dissolve/Lift preliminary Attachment” Bascos is DENIED for being moot and academic.
Petitioner appealed to the Court of Appeals but respondent Court affirmed the trial court’s judgment.
Hence this petition for review on certiorari
ISSUE:
(1) WON petitioner a common carrier
(2) WON the hijacking referred to a force majeure
HELD:
The petition is DISMISSED and the decision of the Court of Appeals is hereby AFFIRMED.
1. YES
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 Cipriano was lease of the truck. 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.
transaction was referred to as a lease contract. 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. 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.

We agree with the respondent Court in its finding that petitioner is a common carrier. 2. 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
Article 1732 of the Civil Code defines a common carrier as “(a) person, corporation or firm, or association engaged in the decision on the merits.
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.
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.”

2. NO

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.
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. 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, 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; xx

(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;” xx

NOTES:

1. She cited as evidence certain affidavits which referred to the contract as “lease”. These affidavits were made by Jesus Bascos
and by petitioner herself and Cipriano and CIPTRADE did not object to the presentation of affidavits by petitioner where the

69
Ganzon vs. CA, May 30, 1988; 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
SECOND DIVISION
The petitioner, in his first assignment of error, insists that the scrap iron had not been unconditionally placed under his custody
G.R. No. L-48757 May 30, 1988
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,
MAURO GANZON, petitioner,
thru his employees, actually received the scraps is freely admitted. Significantly, there is not the slightest allegation or showing
vs.
of any condition, qualification, or restriction accompanying the delivery by the private respondent-shipper of the scraps, or the
COURT OF APPEALS and GELACIO E. TUMAMBING, respondents.
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.
SARMIENTO, J.:
By the said act of delivery, the scraps were unconditionally placed in the possession and control of the common carrier, and
The private respondent instituted in the Court of First Instance of Manila 1 an action against the petitioner for damages based
upon their receipt by the carrier for transportation, the contract of carriage was deemed perfected. Consequently, the
on culpa contractual. The antecedent facts, as found by the respondent Court, 2 are undisputed:
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
On November 28, 1956, Gelacio Tumambing contracted the services of Mauro B. Ganzon to haul 305 tons of scrap iron from 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
Mariveles, Bataan, to the port of Manila on board the lighter LCT "Batman" (Exhibit 1, Stipulation of Facts, Amended Record on the lighter did not impair the said contract of transportation as the goods remained in the custody and control of the carrier,
Appeal, p. 38). Pursuant to that agreement, Mauro B. Ganzon sent his lighter "Batman" to Mariveles where it docked in three albeit still unloaded.
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
The petitioner has failed to show that the loss of the scraps was due to any of the following causes enumerated in Article 1734
lighter under the captain's supervision. When about half of the scrap iron was already loaded (t.s.n., December 14, 1972, p. 20),
of the Civil Code, namely:
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
(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;
(t.s.n., March 19, 1971, p. 9; September 28, 1972, pp. 6-7).<äre||anº•1àw> 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).
(2) Act of the public enemy in war, whether international or civil;
After sometime, the loading of the scrap iron was resumed. But on December 4, 1956, Acting Mayor Basilio Rub, accompanied
(3) Act or omission of the shipper or owner of the goods;
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
(4) The character of the goods or defects in the packing or in the containers;
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.)
(5) Order or act of competent public authority.
On the basis of the above findings, the respondent Court rendered a decision, the dispositive portion of which states:
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
WHEREFORE, the decision appealed from is hereby reversed and set aside and a new one entered
breach of the contract of carriage. Still, the petitioner could have been exempted from any liability had he been able to prove
ordering defendant-appellee Mauro Ganzon to pay plaintiff-appellant Gelacio E. Tumambimg the sum of
that he observed extraordinary diligence in the vigilance over the goods in his custody, according to all the circumstances of the
P5,895.00 as actual damages, the sum of P5,000.00 as exemplary damages, and the amount of P2,000.00
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
as attorney's fees. Costs against defendant-appellee Ganzon. 3
of the petitioner to prove that he exercised such extraordinary diligence.
In this petition for review on certiorari, the alleged errors in the decision of the Court of Appeals are:
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
I
as defined in Article 1174 of the Civil Code. 7
THE COURT OF APPEALS FINDING THE HEREIN PETITIONER GUILTY OF BREACH OF THE CONTRACT OF TRANSPORTATION AND IN
We cannot sustain the theory of caso fortuito. In the courts below, the petitioner's defense was that the loss of the scraps was
IMPOSING A LIABILITY AGAINST HIM COMMENCING FROM THE TIME THE SCRAP WAS PLACED IN HIS CUSTODY AND CONTROL
due to an "order or act of competent public authority," and this contention was correctly passed upon by the Court of Appeals
HAVE NO BASIS IN FACT AND IN LAW.
which ruled that:
II
... 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
THE APPELLATE COURT ERRED IN CONDEMNING THE PETITIONER FOR THE ACTS OF HIS EMPLOYEES IN DUMPING THE SCRAP
Mayor Basilio Rub had the power to issue the disputed order, or that it was lawful, or that it was issued
INTO THE SEA DESPITE THAT IT WAS ORDERED BY THE LOCAL GOVERNMENT OFFICIAL WITHOUT HIS PARTICIPATION.
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
III
70
 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.
Ganzon v. CA
Facts:
Tumambing contracted the services of Ganzon for the latter to haul 305 tons of scrap iron from Mariveles, Bataan to the port of
Manila on board the lighter LCT “Batman”. Accordingly, Ganzon sent his lighter “Batman” to Mariveles. Tumambing then
delivered the scrap iron for loading to Filomeno Niza, the lighter’s captain. However, when about half of the scrap iron was
being loaded, Mayor Advincula of Mariveles, Bataan, demanded P5,000 from Tumambing. The latter refused, an altercation
started, until Mayor Advincula fired his gun at Tumambing, who was later brought to a hospital in Balanga, Bataan. After
sometime, the loading of the scrap iron resumed. However, Acting Mayor Basilio Rub, accompanied by 3 policemen, ordered
Captain Niza and its crew to dump the scrap iron where the lighter was docked. The remaining scrap iron was confiscated and
brought to the compound of NASSCO. A receipt was issued by the Acting Mayor stating that he had taken custody of the scrap
iron. Hence, Tumambing filed an action against Ganzon for damages based on culpa contractual. Ganzon claims that he should
not be liable because the scrap iron has not been unconditionally placed under his custody and control.
Issue: Whether or not Ganzon is liable for Tumambing’s loss.
Ruling:
71
Yes, Ganzon is liable. Ratio Decidendi There is no dispute that the scrap iron was already delivered to Ganzon’s carrier and
received by Captain Niza and the crew. By the said act of delivery, the scrap iron was already deemed to be unconditionally
placed in the possession and control of the common carrier and upon their receipt, the \ contract of carriage was deemed
perfected. Consequently, petitioner- carrier’s extraordinary responsibility for the loss or deterioration of the goods commenced.
According to Art 1736 of the NCC, such responsibility will only cease upon the actual or constructive delivery to the consignee
or any person who has a right to receive the goods. However, in this case, the same is not true since the scrap iron remained in
the custody and control of the carrier, albeit still unloaded. Ganzon may be exempt from liability if the loss of the scrap iron was
due to any of the causes enumerated under Art. 1734 of the NCC. However, Ganzon was not able to prove the same. Art 1743
provides as follows: Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of the goods, unless
the same is due to any of the following causes only: (1) Flood, storm, earthquake, lightning, or other natural disaster or
calamity; (2) Act of the public enemy in war, whether international or civil; (3) Act of omission of the shipper or owner of the
goods; (4) The character of the goods or defects in the packing or in the containers; (5) Order or act of competent public
authority.
Lastly, the SC cannot sustain Ganzon’s claim that the cause of the loss was a caso fortuito considering that in the courts below,
his defense was that the loss of the scrap iron was due to an “order or act of a competent public authority”. Such change in
theory on appeal cannot be allowed. In any case, the intervention of the municipal
officials is not of such character as would render the fulfilment of Ganzon’s obligation impossible. According to
the SC, the scrap iron could have still been delivered in accordance with the contract of carriage after the dispute has been
settled.
FACTS:
The private respondent Tumambing instituted an action against the petitioner Ganzon for damages based on culpa contractual
of a service contract between Tumambing and Ganzon to haul scrap iron from Mariveles, Bataan, to the port of Manila.
Tumambing in his defense alleged that the Municipality of Mariveles had taken custody of the scrap iron when he fails to obey
an illegal order to unload the scrap iron.
ISSUE: Whether the loss of the scraps was due mainly to the intervention of the municipal officials of Mariveles which
constitutes a caso fortuito.
HELD:
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, 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.
Philamgen vs. MCG Marine Services, March 8, 2002; 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 Corporation's cargo and ordering them to pay petitioner the full amount of the lost cargo plus legal
interest, attorney's fees and costs of suit.4
FIRST DIVISION
Private respondents appealed the trial court's decision to the Court of Appeals. On September 23, 1998, the appellate court
G.R. No. 135645 March 8, 2002
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 Corporation's cargo because said loss occurred as a consequence of a fortuitous event, and that such
THE PHILIPPINE AMERICAN GENERAL INSURANCE CO., INC., petitioner,
fortuitous event was the proximate and only cause of the loss.5
vs.
MGG MARINE SERVICES, INC. and DOROTEO GAERLAN, respondents.
Petitioner thus filed the present petition, contending that:
KAPUNAN, J.:
(A)
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.
IN REVERSING AND SETTING ASIDE THE DECISION OF RTC BR. 134 OF MAKATI CITY ON THE BASIS OF THE FINDINGS
43915,1 which absolved private respondents MCG Marine Services, Inc. and Doroteo Gaerlan of any liability regarding the loss
OF THE BOARD OF MARINE INQUIRY, APPELLATE COURT DECIDED THE CASE AT BAR NOT IN ACCORD WITH LAW OR
of the cargo belonging to San Miguel Corporation due to the sinking of the M/V Peatheray Patrick-G owned by Gaerlan with
WITH THE APPLICABLE DECISIONS OF THE HONORABLE COURT;
MCG Marine Services, Inc. as agent.
(B)
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
IN REVERSING THE TRIAL COURT'S DECISION, THE APPELLATE COURT GRAVELY ERRED IN CONTRADICTING AND IN
be transported from Mandaue City to Bislig, Surigao del Sur.
DISTURBING THE FINDINGS OF THE FORMER;
After having been cleared by the Coast Guard Station in Cebu the previous day, the vessel left the port of Mandaue City for
(C)
Bislig, Surigao del Sur on March 2, 1987. The weather was calm when the vessel started its voyage.
THE APPELLATE COURT GRAVELY ERRED IN REVERSING THE DECISION OF THE TRIAL COURT AND IN DISMISSING THE
The following day, March 3, 1987, M/V Peatheray Patrick-G listed and subsequently sunk off Cawit Point, Cortes, Surigao del Sur.
COMPLAINT.6
As a consequence thereof, the cargo belonging to San Miguel Corporation was lost.
Common carriers, from the nature of their business and for reasons of public policy, are mandated to observe extraordinary
Subsequently, San Miguel Corporation claimed the amount of its loss from petitioner.
diligence in the vigilance over the goods and for the safety of the passengers transported by them.7Owing 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
Upon petitioner's request, on March 18, 1987, Mr. Eduardo Sayo, a surveyor from the Manila Adjusters and Surveyors Co., went
transported by them are lost, destroyed or if the same deteriorated. 8
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
However, this presumption of fault or negligence does not arise in the cases enumerated under Article 1734 of the Civil Code:
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
Common carriers are responsible for the loss, destruction, or deterioration of the goods, unless the same is due to
Patrick-G.
any of the following causes only:
Thereafter, petitioner paid San Miguel Corporation the full amount of P5,836,222.80 pursuant to the terms of their insurance
(1) Flood, storm, earthquake, lightning or other natural disaster or calamity;
contract.1âwphi1.nêt
(2) Act of the public enemy in war, whether international or civil;
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
(3) Act or omission of the shipper or owner of the goods;
latter's cargo.
(4) The character of the goods or defects in the packing or in the containers;
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,
(5) Order or act of competent public authority.
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 for seen at the time the M/V Peatheray Patrick-G left the port of Mandaue City. It In order that a common carrier may be absolved from liability where the loss, destruction or deterioration of the goods is due
was further held by the Board that said fortuitous event was the proximate and only cause of the vessel's sinking. 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

72
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 demand12 -- 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 vessel's 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:
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 accessible
(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
73
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. xxx16
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, 1987.1âwphi1.nêt
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.
Lessons Applicable: Charter Party (Transportation)
FACTS:
Davao Union Marketing Corporation (DUMC) contracted the services of PKS Shipping Company (PKS Shipping) for the shipment
to Tacloban City of 75,000 bags of cement worth P3,375,000.
DUMC insured the goods for its full value with Philippine American General Insurance Company (Philamgen).
The goods were loaded aboard the dumb barge Limar I belonging to PKS Shipping.
December 22, 1988 9 pm: While Limar I was being towed by PKS’ tugboat MT Iron Eagle, the barge sank a couple of miles off
the coast of Dumagasa Point, in Zamboanga del Sur, bringing down with it the entire cargo of 75,000 bags of cement.
DUMC filed a formal claim with Philamgen for the full amount of the insurance. Philamgen promptly made payment; it then
sought reimbursement from PKS Shipping of the sum paid to DUMC but the shipping company refused to pay so Philamgen to
file suit against PKS Shipping
RTC: dismissed the complaint - fortuitous event
CA:Affirmed - not a common carrier but a casual occupation
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 distinction between: common or public carrier
private or special carrier - character of the business, such that if the undertaking is an isolated transaction , not a part of the
business or occupation, and the carrier does not hold itself out to carry the goods for the general public or to a limited
clientele, although involving the carriage of goods for a fee
EX: charter party which includes both the vessel and its crew, such as in a bareboat or demise, where the charterer obtains the
use and service of all or some part of a ship for a period of time or a voyage or voyages and gets the control of the vessel and its
crew.
The regularity of its activities in this area indicates more than just a casual activity on its part. The appellate court ruled,
gathered from the testimonies and sworn marine protests of the respective vessel masters ofLimar I and MT Iron Eagle, that
there was no way by which the barge’s or the tugboat’s crew could have prevented the sinking of Limar I. The vessel was
suddenly tossed by waves of extraordinary height of 6 to 8 feet and buffeted by strong winds of 1.5 knots resulting in the entry
of water into the barge’s hatches. The official Certificate of Inspection of the barge issued by the Philippine Coastguard and the
Coastwise Load Line Certificate would attest to the seaworthiness of Limar I and should strengthen the factual findings of the
appellate court.
Findings of fact of the Court of Appeals generally conclude this Court; none of the recognized exceptions from the rule - (1)
when the factual findings of the Court of Appeals and the trial court are contradictory; (2) when the conclusion is a finding
grounded entirely on speculation, surmises, or conjectures; (3) when the inference made by the Court of Appeals from its
findings of fact is manifestly mistaken, absurd, or impossible; (4) when there is a grave abuse of discretion in the appreciation of
facts; (5) when the appellate court, in making its findings, went beyond the issues of the case and such findings are contrary to
the admissions of both appellant and appellee; (6) when the judgment of the Court of Appeals is premised on a
misapprehension of facts; (7) when the Court of Appeals failed to notice certain relevant facts which, if properly considered,
would justify a different conclusion; (8) when the findings of fact are themselves conflicting; (9) when the findings of fact are
conclusions without citation of the specific evidence on which they are based; and (10) when the findings of fact of the Court of
Appeals are premised on the absence of evidence but such findings are contradicted by the evidence on record – would appear
to be clearly extant in this instance.

ISSUE: W/N PKS Shipping is NOT liable since it was NOT a common carrier

HELD: NO. Petition is DENIED

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
Complementary is Section 13, paragraph (b), of the Public Service Act

public service" to be –
"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, 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, 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 communication systems, wire or wireless broadcasting
stations and other similar public services.

74
Calvo vs. UCPB General Insurance 379 SCRA 510;
SECOND DIVISION
[G.R. No. 148496. March 19, 2002]
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
75
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:
76
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.
FACTS:
Virgines Calvo, owner of Transorient Container Terminal Services Inc
– a sole proprietorship customsbroker Contract with San Miguel Corporation transfer of 114 reels of semi-chemical fluting
paper and 124 reels of Kraft liner board from Manila Port Area to SMC’s warehouse in Tabacalera Compound, Romuladez St.,
Ermita, Manila
Cargo insured with UCPB General Insurance Co.
July 14, 1990
shipment contained in 30 metal vans on board MV Hayakawa Maru arrived in Manila
July 15
unloaded to the custody of the arrastre operator
Manila Port Services Inc
July 23
July 25
withdrew cargo and delivered according to the contract
July 25
cargo inspected by Marine Cargo Surveyors
15 reels of semi-chemical fluting paper wet/stained/torn
3 reels of kraft liner boars were torn
77
Damage cost: Php 93,112

SMC collected from UCPB
December 20 - UCPB, as subvrogee of SMC, brought a suit against TCTSI in Makati RTC Brancg 148
Makati RTC: it has been held that the mere proof of delivery of goods in good order to a carrier, and oftheir arrival at the place
of destination in bad order, makes out a prima facie case against the carrier, sothat if no explanation is given as to how the
injury occurred, the carrier must be held responsible. It isincumbent upon the carrier to prove that the loss was due to accident
or some other circumstancesinconsistent with its liability.
Pay Php 93
,112 + 25% as lawyer’s fee + cost of suit
Calvo: Not a common carrier but a private carrier because, as a customs broker and warehouseman, shedoes not
indiscriminately hold her services out to the public but only offers the same to select partieswith whom she may contract in the
conduct of her business.
CA affirmed RTC decision.
ISSUE: WON she is a common carrier?
HELD:
Yes
The above article makes no distinction between one whose principal business activity is the carrying ofpersons or goods or
both, and one who does such carrying only as an ancillary
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 petitioner’s contention would be to deprive
those withwhom 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 petitioner’s business.
When Calvo's employees withdrew the cargo from the arrastre operator, they did so without exception orprotest either with
regard to the condition of container vans or their contents
Calvo must do more than merely show the possibility that some other party could be responsible for thedamage. It must prove
that it used "all reasonable means to ascertain the nature and characteristic ofgoods tendered for transport and that it
exercised due care in the handlingFor 1734(4) to apply, the rule is that if the improper packaging or, in this case, the defects in
the container, is/areknown to the carrier or his employees or apparent upon ordinary obserobservation he nevertheless
accepts thesame without protest or exception notwithstanding such condition, he is not relieved of liability for damageresulting
therefrom.
Lessons Applicable: Legal Effect (Transportation)
FACTS:
At the time material to this case, Transorient Container Terminal Services, Inc. (TCTSI) owned by Virgines Calvo 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 SMC's warehouse at the Tabacalera Compound, Romualdez St., Ermita, Manila.
The cargo was insured by respondent UCPB General Insurance Co., Inc.
July 14, 1990: arrived in Manila on board "M/V Hayakawa Maru" and later on unloaded from the vessel to the custody of the
arrastre operator, Manila Port Services, Inc
July 23 to July 25, 1990: Calvo withdrew the cargo from the arrastre operator and delivered it to SMC's warehouse in Ermita,
Manila July 25, 1990: 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 SMC collected payment from UCPB the total
damage of P93,112 under its insurance contract UCPB brought suit against Calvo as subrogee of SMC

Calvo: Art. 1734(4) The character of the goods or defects in the packing or in the containers
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 9 days notwithstanding the fact that some of the containers were deformed, cracked, or otherwise damaged Trial
Court: Calvo liable

CA: affirmed

ISSUE: W/N Calvo can be exempted from liability under Art. 1734(4)

HELD:

NO. CA AFFIRMED.
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 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 sam 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.

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" when Calvo's 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 Calvo 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 exercised due care in
the handling

78
Belgian Overseas Chartering vs. Phil. First Insurance Co., 383 SCRA 23 "Despite receipt of a formal demand, defendants-appellees refused to submit to the consignee's claim.
Consequently, plaintiff-appellant paid the consignee five hundred six thousand eighty six & 50/100 pesos
(P506,086.50), and was subrogated to the latter's rights and causes of action against defendants-appellees.
THIRD DIVISION
Subsequently, plaintiff-appellant instituted this complaint for recovery of the amount paid by them, to the consignee
as insured.
G.R. No. 143133 June 5, 2002
"Impugning the propriety of the suit against them, defendants-appellees imputed that the damage and/or loss was
BELGIAN OVERSEAS CHARTERING AND SHIPPING N.V. and JARDINE DAVIES TRANSPORT SERVICES, INC., petitioners,
due to pre-shipment damage, to the inherent nature, vice or defect of the goods, or to perils, danger and accidents
vs.
of the sea, or to insufficiency of packing thereof, or to the act or omission of the shipper of the goods or their
PHILIPPINE FIRST INSURANCE CO., INC., respondents.
representatives. In addition thereto, defendants-appellees argued that their liability, if there be any, should not
exceed the limitations of liability provided for in the bill of lading and other pertinent laws. Finally, defendants-
PANGANIBAN, J.:
appellees averred that, in any event, they exercised due diligence and foresight required by law to prevent any
damage/loss to said shipment."6
Proof of the delivery of goods in good order to a common carrier and of their arrival in bad order at their destination
constitutes prima facie fault or negligence on the part of the carrier. If no adequate explanation is given as to how the loss, the
Ruling of the Trial Court
destruction or the deterioration of the goods happened, the carrier shall be held liable therefor.
The RTC dismissed the Complaint because respondent had failed to prove its claims with the quantum of proof required by
Statement of the Case
law.7
Before us is a Petition for Review under Rule 45 of the Rules of Court, assailing the July 15, 1998 Decision 1 and the May 2, 2000
It likewise debunked petitioners' counterclaim, because respondent's suit was not manifestly frivolous or primarily intended to
Resolution2 of the Court of Appeals3 (CA) in CA-GR CV No. 53571. The decretal portion of the Decision reads as follows:
harass them.8
"WHEREFORE, in the light of the foregoing disquisition, the decision appealed from is hereby REVERSED and SET
Ruling of the Court of Appeals
ASIDE. Defendants-appellees are ORDERED to jointly and severally pay plaintiffs-appellants the following:
In reversing the trial court, the CA ruled that petitioners were liable for the loss or the damage of the goods shipped, because
'1) FOUR Hundred Fifty One Thousand Twenty-Seven Pesos and 32/100 (P451,027.32) as actual damages,
they had failed to overcome the presumption of negligence imposed on common carriers.
representing the value of the damaged cargo, plus interest at the legal rate from the time of filing of the
complaint on July 25, 1991, until fully paid;
The CA further held as inadequately proven petitioners' claim that the loss or the deterioration of the goods was due to pre-
shipment damage.9 It likewise opined that the notation "metal envelopes rust stained and slightly dented" placed on the Bill of
'2) Attorney's fees amounting to 20% of the claim; and
Lading had not been the proximate cause of the damage to the four (4) coils. 10
'3) Costs of suit.'"4
As to the extent of petitioners' liability, the CA held that the package limitation under COGSA was not applicable, because the
words "L/C No. 90/02447" indicated that a higher valuation of the cargo had been declared by the shipper. The CA, however,
The assailed Resolution denied petitioner's Motion for Reconsideration. affirmed the award of attorney's fees.
The CA reversed the Decision of the Regional Trial Court (RTC) of Makati City (Branch 134), which had disposed as follows: Hence, this Petition.11
"WHEREFORE, in view of the foregoing, judgment is hereby rendered, dismissing the complaint, as well as Issues
defendant's counterclaim."5
In their Memorandum, petitioners raise the following issues for the Court's consideration:
The Facts
I
The factual antecedents of the case are summarized by the Court of Appeals in this wise:
"Whether or not plaintiff by presenting only one witness who has never seen the subject shipment and
"On June 13, 1990, CMC Trading A.G. shipped on board the M/V 'Anangel Sky' at Hamburg, Germany 242 coils of whose testimony is purely hearsay is sufficient to pave the way for the applicability of Article 1735 of the Civil Code;
various Prime Cold Rolled Steel sheets for transportation to Manila consigned to the Philippine Steel Trading
Corporation. On July 28, 1990, M/V Anangel Sky arrived at the port of Manila and, within the subsequent days,
II
discharged the subject cargo. Four (4) coils were found to be in bad order B.O. Tally sheet No. 154974. Finding the
four (4) coils in their damaged state to be unfit for the intended purpose, the consignee Philippine Steel Trading
"Whether or not the consignee/plaintiff filed the required notice of loss within the time required by law;
Corporation declared the same as total loss.1âwphi1.nêt
III

79
 "Whether or not a notation in the bill of lading at the time of loading is sufficient to show pre-shipment damage and given as to how the deterioration, the loss or the destruction of the goods happened, the transporter shall be held
to exempt herein defendants from liability; responsible.24

IV That petitioners failed to rebut the prima facie presumption of negligence is revealed in the case at bar by a review of the
records and more so by the evidence adduced by respondent.25
"Whether or not the "PACKAGE LIMITATION" of liability under Section 4 (5) of COGSA is applicable to the case at
bar."12 First, as stated in the Bill of Lading, petitioners received the subject shipment in good order and condition in Hamburg,
Germany.26
In sum, the issues boil down to three:
Second, prior to the unloading of the cargo, an Inspection Report 27 prepared and signed by representatives of both parties
1. Whether petitioners have overcome the presumption of negligence of a common carrier showed the steel bands broken, the metal envelopes rust-stained and heavily buckled, and the contents thereof exposed and
rusty.
2. Whether the notice of loss was timely filed
Third, Bad Order Tally Sheet No. 15497928 issued by Jardine Davies Transport Services, Inc., stated that the four coils were in bad
3. Whether the package limitation of liability is applicable order and condition. Normally, a request for a bad order survey is made in case there is an apparent or a presumed loss or
damage.29
This Court's Ruling
Fourth, the Certificate of Analysis30 stated that, based on the sample submitted and tested, the steel sheets found in bad order
The Petition is partly meritorious. were wet with fresh water.

First Issue: Fifth, petitioners -- in a letter31 addressed to the Philippine Steel Coating Corporation and dated October 12, 1990 -- admitted
that they were aware of the condition of the four coils found in bad order and condition.
Proof of Negligence
These facts were confirmed by Ruperto Esmerio, head checker of BM Santos Checkers Agency. Pertinent portions of his
Petitioners contend that the presumption of fault imposed on common carriers should not be applied on the basis of the lone testimony are reproduce hereunder:
testimony offered by private respondent. The contention is untenable.
"Q. Mr. Esmerio, you mentioned that you are a Head Checker. Will you inform the Honorable Court with what
Well-settled is the rule that common carriers, from the nature of their business and for reasons of public policy, are bound to company you are connected?
observe extraordinary diligence and vigilance with respect to the safety of the goods and the passengers they transport.13 Thus,
common carriers are required to render service with the greatest skill and foresight and "to use all reason[a]ble means to A. BM Santos Checkers Agency, sir.
ascertain the nature and characteristics of the goods tendered for shipment, and to exercise due care in the handling and
stowage, including such methods as their nature requires."14 The extraordinary responsibility lasts from the time the goods are Q. How is BM Santos checkers Agency related or connected with defendant Jardine Davies Transport Services?
unconditionally placed in the possession of and received for transportation by the carrier until they are delivered, actually or
constructively, to the consignee or to the person who has a right to receive them.15 A. It is the company who contracts the checkers, sir.

This strict requirement is justified by the fact that, without a hand or a voice in the preparation of such contract, the riding Q. You mentioned that you are a Head Checker, will you inform this Honorable Court your duties and
public enters into a contract of transportation with common carriers. 16 Even if it wants to, it cannot submit its own stipulations responsibilities?
for their approval.17 Hence, it merely adheres to the agreement prepared by them.
A. I am the representative of BM Santos on board the vessel, sir, to supervise the discharge of cargoes.
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 they transported deteriorated or got lost or destroyed. 18 That is, unless they prove that they exercised Q. On or about August 1, 1990, were you still connected or employed with BM Santos as a Head Checker?
extraordinary diligence in transporting the goods.19 In order to avoid responsibility for any loss or damage, therefore, they have
the burden of proving that they observed such diligence.20 A. Yes, sir.

However, the presumption of fault or negligence will not arise 21 if the loss is due to any of the following causes: (1) flood, storm, Q. And, on or about that date, do you recall having attended the discharging and inspection of cold steel sheets
earthquake, lightning, or other natural disaster or calamity; (2) an act of the public enemy in war, whether international or civil; in coil on board the MV/AN ANGEL SKY?
(3) an act or omission of the shipper or owner of the goods; (4) the character of the goods or defects in the packing or the
container; or (5) an order or act of competent public authority. 22 This is a closed list. If the cause of destruction, loss or A. Yes, sir, I was there.
deterioration is other than the enumerated circumstances, then the carrier is liable therefor. 23
Q. Based on your inspection since you were also present at that time, will you inform this Honorable Court the
Corollary to the foregoing, mere proof of delivery of the goods in good order to a common carrier and of their arrival in bad condition or the appearance of the bad order cargoes that were unloaded from the MV/ANANGEL SKY?
order at their destination constitutes a prima facie case of fault or negligence against the carrier. If no adequate explanation is

80
 ATTY. MACAMAY:
Objection, Your Honor, I think the document itself reflects the condition of the cold steel sheets and the
best evidence is the document itself, Your Honor that shows the condition of the steel sheets.
COURT:
Let the witness answer.
A. The scrap of the cargoes is broken already and the rope is loosen and the cargoes are dent on the sides." 32
All these conclusively prove the fact of shipment in good order and condition and the consequent damage to the four coils
while in the possession of petitioner,33 who notably failed to explain why.34
Further, petitioners failed to prove that they observed the extraordinary diligence and precaution which the law requires a
common carrier to know and to follow to avoid damage to or destruction of the goods entrusted to it for safe carriage and
delivery.35
True, the words "metal envelopes rust stained and slightly dented" were noted on the Bill of Lading; however, there is no
showing that petitioners exercised due diligence to forestall or lessen the loss. 36 Having been in the service for several years, the
master of the vessel should have known at the outset that metal envelopes in the said state would eventually deteriorate when
not properly stored while in transit.37 Equipped with the proper knowledge of the nature of steel sheets in coils and of the
proper way of transporting them, the master of the vessel and his crew should have undertaken precautionary measures to
avoid possible deterioration of the cargo. But none of these measures was taken. 38 Having failed to discharge the burden of
proving that they have exercised the extraordinary diligence required by law, petitioners cannot escape liability for the damage
to the four coils.39
In their attempt to escape liability, petitioners further contend that they are exempted from liability under Article 1734(4) of
the Civil Code. They cite the notation "metal envelopes rust stained and slightly dented" printed on the Bill of Lading as
evidence that the character of the goods or defect in the packing or the containers was the proximate cause of the damage. We
are not convinced.
From the evidence on record, it cannot be reasonably concluded that the damage to the four coils was due to the condition
noted on the Bill of Lading.40 The aforecited exception refers to cases when goods are lost or damaged while in transit as a
result of the natural decay of perishable goods or the fermentation or evaporation of substances liable therefor, the necessary
and natural wear of goods in transport, defects in packages in which they are shipped, or the natural propensities of
animals.41 None of these is present in the instant case.
Further, even if the fact of improper packing was known to the carrier or its crew or was apparent upon ordinary observation, it
is not relieved of liability for loss or injury resulting therefrom, once it accepts the goods notwithstanding such
condition.42 Thus, petitioners have not successfully proven the application of any of the aforecited exceptions in the present
case.43
Second Issue:
Notice of Loss
Petitioners claim that pursuant to Section 3, paragraph 6 of the Carriage of Goods by Sea Act44 (COGSA), respondent should
have filed its Notice of Loss within three days from delivery. They assert that the cargo was discharged on July 31, 1990, but
that respondent filed its Notice of Claim only on September 18, 1990.45
81
We are not persuaded. First, the above-cited provision of COGSA provides that the notice of claim need not be given if the state
of the goods, at the time of their receipt, has been the subject of a joint inspection or survey. As stated earlier, prior to
unloading the cargo, an Inspection Report46 as to the condition of the goods was prepared and signed by representatives of
both parties.47
Second, as stated in the same provision, a failure to file a notice of claim within three days will not bar recovery if it is
nonetheless filed within one year.48 This one-year prescriptive period also applies to the shipper, the consignee, the insurer of
the goods or any legal holder of the bill of lading.49
In Loadstar Shipping Co., Inc, v. Court of Appeals,50 we ruled that a claim is not barred by prescription as long as the one-year
period has not lapsed. Thus, in the words of the ponente, Chief Justice Hilario G. Davide Jr.:
"Inasmuch as the neither the Civil Code nor the Code of Commerce states a specific prescriptive period on the
matter, the Carriage of Goods by Sea Act (COGSA)--which provides for a one-year period of limitation on claims for
loss of, or damage to, cargoes sustained during transit--may be applied suppletorily to the case at bar."
In the present case, the cargo was discharged on July 31, 1990, while the Complaint 51 was filed by respondent on July 25, 1991,
within the one-year prescriptive period.
Third Issue:
Package Limitation
Assuming arguendo they are liable for respondent's claims, petitioners contend that their liability should be limited to US$500
per package as provided in the Bill of Lading and by Section 4(5)52 of COGSA.53
On the other hand, respondent argues that Section 4(5) of COGSA is inapplicable, because the value of the subject shipment
was declared by petitioners beforehand, as evidenced by the reference to and the insertion of the Letter of Credit or "L/C No.
90/02447" in the said Bill of Lading.54
A bill of lading serves two functions. First, it is a receipt for the goods shipped.53 Second, it is a contract by which three parties --
namely, the shipper, the carrier, and the consignee -- undertake specific responsibilities and assume stipulated obligations. 56 In a
nutshell, the acceptance of the bill of lading by the shipper and the consignee, with full knowledge of its contents, gives rise to
the presumption that it constituted a perfected and binding contract.57
Further, a stipulation in the bill of lading limiting to a certain sum the common carrier's liability for loss or destruction of a cargo
-- unless the shipper or owner declares a greater value 58 -- is sanctioned by law.59 There are, however, two conditions to be
satisfied: (1) the contract is reasonable and just under the circumstances, and (2) it has been fairly and freely agreed upon by
the parties.60 The rationale for this rule is to bind the shippers by their agreement to the value (maximum valuation) of their
goods.61
It is to be noted, however, that the Civil Code does not limit the liability of the common carrier to a fixed amount per
package.62 In all matters not regulated by the Civil Code, the right and the obligations of common carriers shall be governed by
the Code of Commerce and special laws. 63 Thus, the COGSA, which is suppletory to the provisions of the Civil Code,
supplements the latter by establishing a statutory provision limiting the carrier's liability in the absence of a shipper's
declaration of a higher value in the bill of lading.64 The provisions on limited liability are as much a part of the bill of lading as
though physically in it and as though placed there by agreement of the parties.65
In the case before us, there was no stipulation in the Bill of Lading66 limiting the carrier's liability. Neither did the shipper
declare a higher valuation of the goods to be shipped. This fact notwithstanding, the insertion of the words "L/C No. 90/02447
cannot be the basis for petitioners' liability.
First, a notation in the Bill of Lading which indicated the amount of the Letter of Credit obtained by the shipper for the
importation of steel sheets did not effect a declaration of the value of the goods as required by the bill. 67 That notation was
made only for the convenience of the shipper and the bank processing the Letter of Credit.68
Second, in Keng Hua Paper Products v. Court of Appeals,69 we held that a bill of lading was separate from the Other Letter of
Credit arrangements. We ruled thus:
"(T)he contract of carriage, as stipulated in the bill of lading in the present case, must be treated independently of
the contract of sale between the seller and the buyer, and the contract of issuance of a letter of credit between the
amount of goods described in the commercial invoice in the contract of sale and the amount allowed in the letter of
credit will not affect the validity and enforceability of the contract of carriage as embodied in the bill of lading. As
the bank cannot be expected to look beyond the documents presented to it by the seller pursuant to the letter of
credit, neither can the carrier be expected to go beyond the representations of the shipper in the bill of lading and
to verify their accuracy vis-à-vis the commercial invoice and the letter of credit. Thus, the discrepancy between the
amount of goods indicated in the invoice and the amount in the bill of lading cannot negate petitioner's obligation to
private respondent arising from the contract of transportation."70
In the light of the foregoing, petitioners' liability should be computed based on US$500 per package and not on the per metric
ton price declared in the Letter of Credit.71 In Eastern Shipping Lines, Inc. v. Intermediate Appellate Court,72 we explained the
meaning of packages:
"When what would ordinarily be considered packages are shipped in a container supplied by the carrier and the
number of such units is disclosed in the shipping documents, each of those units and not the container constitutes
the 'package' referred to in the liability limitation provision of Carriage of Goods by Sea Act."
Considering, therefore, the ruling in Eastern Shipping Lines and the fact that the Bill of Lading clearly disclosed the contents of
the containers, the number of units, as well as the nature of the steel sheets, the four damaged coils should be considered as
the shipping unit subject to the US$500 limitation.1âwphi1.nêt
WHEREFORE, the Petition is partly granted and the assailed Decision MODIFIED. Petitioners' liability is reduced to US$2,000
plus interest at the legal rate of six percent from the time of the filing of the Complaint on July 25, 1991 until the finality of this
Decision, and 12 percent thereafter until fully paid. No pronouncement as to costs.
SO ORDERED.
Facts:
- CMC Trading A.G. shipped on board the M/V Anangel Sky at Hamburg, Germany 242 coils of various Prime Cold Rolled Steel
sheets for transportation to Manila consigned to the Philippine Steel Trading Corporation.
- On July 28, 1990, M/V Anangel Sky arrived at the port of Manila and, within the subsequent days, discharged the subject
cargo. Four (4) coils were found to be in bad order.
- Finding the four (4) coils in their damaged state to be unfit for the intended purpose, the consignee Philippine Steel Trading
Corporation declared the same as total loss.
- Philippine First Insurance paid the claim of Philippine Steel and was thus subrogated.
- Philippine First then instituted a complaint for recovery of the amount paid to the consignee as insured.
- Belgian claims that the damage and/or loss was due to pre-shipment damage, to the inherent nature, vice or defect of the
goods, or to perils, danger and accidents of the sea, or to insufficiency of packing thereof, or to the act or omission of the
shipper of the goods or their representatives. Belgian further argued that their liability, if there be any, should not exceed the
limitations of liability provided for in the bill of lading and other pertinent laws. Finally, Belgian averred that, in any event, they
exercised due diligence and foresight required by law to prevent any damage/loss to said shipment.
- The RTC dismissed the complaint.
- The CA reversed and ruled that Belgian were liable for the loss or the damage of the goods shipped, because they had failed
82
to overcome the presumption of negligence imposed on common carriers. As to the extent of Belgian’s liability, the CA held
that the package limitation under COGSA was not applicable, because the words "L/C No. 90/02447" indicated that a higher
valuation of the cargo had been declared by the shipper
Issues:
- Whether the notice of loss was timely filed. (Belgian claims that pursuant to Section 3, paragraph 6 of COGSA, respondent
should have filed its Notice of Loss within three days from delivery. They assert that the cargo was discharged on July 31, 1990,
but that respondent filed its Notice of Claim only on September 18, 1990.)
Whether the package limitation of liability under COGSA is applicable. (Belgian contends that assuming that they are liable their
liability should be limited to US$500 per package as provided in the Bill of Lading and by Section 4(5)of COGS
Held:
- NO. Mere proof of delivery of the goods in good order to a common carrier and of their arrival in bad order at their
destination constitutes a prima facie case of fault or negligence against the carrier.
- In this case, Belgian failed to rebut the prima facie presumption of negligence. First, as stated in the Bill of Lading, Belgian
received the subject shipment in good order and condition in Germany. Second, prior to the unloading of the cargo, an
Inspection Report prepared and signed by representatives of both parties showed the steel bands broken, the metal envelopes
rust-stained and heavily buckled, and the contents thereof exposed and rusty. Third, Bad Order Tally Sheet issued by Jardine
Davies Transport Services stated that the four coils were in bad order and condition. Normally, a request for a bad order survey
is made in case there is an apparent or a presumed loss or damage.Fourth, the Certificate of Analysis stated that, based on the
sample submitted and tested, the steel sheets found in bad order were wet with fresh water. Fifth, Belgian -- in a
letteraddressed to the Philippine Steel --admitted that they were aware of the condition of the four coils found in bad order and
condition.
- YES. First, the provision of COGSA provides that the notice of claim need not be given if the state of the goods, at the time of
their receipt, has been the subject of a joint inspection or survey. Here, prior to unloading the cargo, an Inspection Report as to
the condition of the goods was prepared and signed by representatives of both parties. Second, as stated in the same provision,
a failure to file a notice of claim within three days will not bar recovery if it is nonetheless filed within one year. This one-year
prescriptive period also applies to the shipper, the consignee, the insurer of the goods or any legal holder of the bill of lading.
- A claim is not barred by prescription as long as the one-year period has not lapsed. In the present case, the cargo was
discharged on July 31, 1990, while the Complaint51 was filed by respondent on July 25, 1991, within the one-year prescriptive
period.
- YES. In this case, there was no stipulation in the Bill of Lading limiting the carrier's liability. Neither did the shipper declare a
higher valuation of the goods to be shipped. This fact notwithstanding, the insertion of the words "L/C No. 90/02447 cannot be
the basis for Belgian’s liability.
-
First, a notation in the Bill of Lading which indicated the amount of the Letter of Credit obtained by the shipper for the
importation of steel sheets did not effect a declaration of the value of the goods as required by the bill. That notation was made
only for the convenience of the shipper and the bank processing the Letter of Credit.
-
Second, a bill of lading is separate from the Other Letter of Credit arrangements. Thus, Belgian’s liability should be computed
based on US$500 per package and not on the per metric ton price declared in the Letter of Credit.
Aboitiz Shipping Corporation vs. CA, 179 SCRA 95; 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
SECOND DIVISION
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
G.R. No. 84458 November 6, 1989
employee of Aboitiz, the latter cannot be held liable under the fellow-servant rule.
ABOITIZ SHIPPING CORPORATION, petitioner,
Thereafter, Aboitiz, as third-party plaintiff, filed a third-party complaint 5 against Pioneer imputing liability thereto for Anacleto
vs.
Viana's death as having been allegedly caused by the negligence of the crane operator who was an employee of Pioneer under
HON. COURT OF APPEALS, ELEVENTH DIVISION, LUCILA C. VIANA, SPS. ANTONIO VIANA and GORGONIA VIANA, and
its exclusive control and supervision.
PIONEER STEVEDORING CORPORATION, respondents.
Pioneer, in its answer to the third-party complaint, 6 raised the defenses that Aboitiz had no cause of action against Pioneer
REGALADO, J.:
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 this appeal by certiorari, petitioner Aboitiz Shipping Corporation seeks a review of the decision 1 of respondent Court of
in the prevention of damage or injury to anyone including the victim Anacleto Viana; that Anacleto Viana's gross negligence was
Appeals, dated July 29, 1988, the decretal portion of which reads:
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.
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
In a decision rendered on April 17, 1980 by the trial court, 7 Aboitiz was ordered to pay the Vianas for damages incurred, and
the amount of P30,000.00 for the death of Anacleto Viana; actual damages of P9,800.00; P150,000.00 for
Pioneer was ordered to reimburse Aboitiz for whatever amount the latter paid the Vianas. The dispositive portion of said
unearned income; P7,200.00 as support for deceased's parents; P20,000.00 as moral damages;
decision provides:
P10,000.00 as attorney's fees; and to pay the costs.
WHEREFORE, judgment is hereby rendered in favor of the plantiffs:
The undisputed facts of the case, as found by the court a quo and adopted by respondent court, are as follows: .
(1) ordering defendant Aboitiz Shipping Corporation to pay to plaintiffs the sum of P12,000.00 for the
The evidence disclosed that on May 11, 1975, Anacleto Viana boarded the vessel M/V Antonia, owned by
death of Anacleto Viana P9,800.00 as actual damages; P533,200.00 value of the 10,664 cavans of palay
defendant, at the port at San Jose, Occidental Mindoro, bound for Manila, having purchased a ticket (No.
computed at P50.00 per cavan; P10,000.00 as attorney's fees; F 5,000.00, value of the 100 cavans of
117392) in the sum of P23.10 (Exh. 'B'). On May 12, 1975, said vessel arrived at Pier 4, North Harbor,
palay as support for five (5) years for deceased (sic) parents, herein plaintiffs Antonio and Gorgonia Viana
Manila, and the passengers therein disembarked, a gangplank having been provided connecting the side
computed at P50.00 per cavan; P7,200.00 as support for deceased's parents computed at P120.00 a
of the vessel to the pier. Instead of using said gangplank Anacleto Viana disembarked on the third deck
month for five years pursuant to Art. 2206, Par. 2, of the Civil Code; P20,000.00 as moral damages, and
which was on the level with the pier. After said vessel had landed, the Pioneer Stevedoring Corporation
costs; and
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
(2) ordering the third party defendant Pioneer Stevedoring Corporation to reimburse defendant and third
Corporation and defendant Aboitiz Shipping Corporation.
party plaintiff Aboitiz Shipping Corporation the said amounts that it is ordered to pay to herein plaintiffs.
The crane owned by the third party defendant and operated by its crane operator Alejo Figueroa was
Both Aboitiz and Pioneer filed separate motions for reconsideration wherein they similarly raised the trial court's failure to
placed alongside the vessel and one (1) hour after the passengers of said vessel had disembarked, it
declare that Anacleto Viana acted with gross negligence despite the overwhelming evidence presented in support thereof. In
started operation by unloading the cargoes from said vessel. While the crane was being operated,
addition, Aboitiz alleged, in opposition to Pioneer's motion, that under the memorandum of agreement the liability of Pioneer
Anacleto Viana who had already disembarked from said vessel obviously remembering that some of his
as contractor is automatic for any damages or losses whatsoever occasioned by and arising from the operation of its arrastre
cargoes were still loaded in the vessel, went back to the vessel, and it was while he was pointing to the
and stevedoring service.
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
In an order dated October 27, 1982, 8 the trial court absolved Pioneer from liability for failure of the Vianas and Aboitiz to
expired three (3) days thereafter, on May 15, 1975, the cause of his death according to the Death
preponderantly establish a case of negligence against the crane operator which the court a quo ruled is never presumed, aside
Certificate (Exh. "C") being "hypostatic pneumonia secondary to traumatic fracture of the pubic bone
from the fact that the memorandum of agreement supposedly refers only to Pioneer's liability in case of loss or damage to
lacerating the urinary bladder" (See also Exh. "B"). For his hospitalization, medical, burial and other
goods handled by it but not in the case of personal injuries, and, finally that Aboitiz cannot properly invoke the fellow-servant
miscellaneous expenses, Anacleto's wife, herein plaintiff, spent a total of P9,800.00 (Exhibits "E", "E-1", to
rule simply because its liability stems from a breach of contract of carriage. The dispositive portion of said order reads:
"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
WHEREFORE, judgment is hereby modified insofar as third party defendant Pioneer Stevedoring
annually. His parents, herein plaintiffs Antonio and Gorgonia Viana, prior to his death had been recipient
Corporation is concerned rendered in favor of the plaintiffs-,:
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
83
 (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:
84
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 negligence foisted on, common carriers like Aboitiz. This, of course, does not detract from what we have said that no
time of his tragic death. 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.
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 WHEREFORE, the petition is DENIED and the judgment appealed from is hereby AFFIRMED in toto.
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 SO ORDERED.
circumstances. 16 Thus, where a passenger dies or is injured, the common carrier is presumed to have been at fault or to have
Facts:
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
On May 11, 1975, Anacleto Viana boarded M/|V Antoniofrom Occidental Mindoro bound for Manila. Upon arrival on May12,
passenger safely to his destination, 18which, in the instant case, necessarily includes its failure to safeguard its passenger with
1975, the passengers therein disembarked through agangplank connecting the vessel to the pier. Viana, instead ofdisembarking
extraordinary diligence while such relation subsists.
through the gangplank, disembarked through thethird deck, which was at the same level with the pier. An hourafter the
passengers disembarked, Pioneer stevedoring startedto operate in unloading the cargo from the ship. Viana then wentback,
The presumption is, therefore, established by law that in case of a passenger's death or injury the operator of the vessel was at
remembering some of his cargoes left at the vessel. Atthat time, while he was pointing at the crew of the vessel towhere his
fault or negligent, having failed to exercise extraordinary diligence, and it is incumbent upon it to rebut the same. This is in
cargoes were loaded, the crane hit him, pinning himbetween the crane and the side of the vessel. He was broughtto the
consonance with the avowed policy of the State to afford full protection to the passengers of common carriers which can be
hospital where he died 3 days after (May 15). The parentsof Anacleto filed a complaint against Aboitiz for breach ofcontract of
carried out only by imposing a stringent statutory obligation upon the latter. Concomitantly, this Court has likewise adopted a
carriage.The trial court ruled in favor of the plaintiffs. Then both Aboitizand Pioneer filed a motion for reconsideration, upon
rigid posture in the application of the law by exacting the highest degree of care and diligence from common carriers, bearing
which thetrial court issued an order absolving Pioneer from liability but not Aboitiz. On appeal, CA affirmed the trial court
utmost in mind the welfare of the passengers who often become hapless victims of indifferent and profit-oriented carriers. We
ruling. Hence, thispetition.
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
Issue: Whether or not Viana is still considered a passenger atthe time of the incident?
from happening.
Held:
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
Yes. The La Mallorca case is applicable in the case atbar.The rule is that the relation of carrier and passenger continuesuntil the
disputable and not indubitably established. Thus, we are not inclined to accept petitioner's explanation that the victim and
passenger has been landed at the port of destination and has left the vessel owner’s dock or premises. Once created, the
other passengers were sufficiently warned that merely venturing into the area in question was fraught with serious peril.
relationship will not ordinarily terminate until the passengerhas, after reaching his destination, safely alighted from the carrier’s
Definitely, even assuming the existence of the supposed cordon of drums loosely placed around the unloading area and the
conveyance or had a reasonable opportunity to leavethe carrier’s premises. All persons who remain on the premises a
guard's admonitions against entry therein, these were at most insufficient precautions which pale into insignificance if
reasonable time after leaving the conveyance are to bedeemed passengers, and what is a reasonable time or areasonable delay
considered vis-a-vis the gravity of the danger to which the deceased was exposed. There is no showing that petitioner was
within this rule is to be determined from all thecircumstances, and includes a reasonable time to see after hisbaggage and
extraordinarily diligent in requiring or seeing to it that said precautionary measures were strictly and actually enforced to
prepare for his departure. The carrier-passengerrelationship is not terminated merely by the fact that the persontransported
subserve their purpose of preventing entry into the forbidden area. By no stretch of liberal evaluation can such perfunctory acts
has been carried to his destination if, for example, such person remains in the carrier’s premises to claim his
approximate the "utmost diligence of very cautious persons" to be exercised "as far as human care and foresight can provide"
baggage.The reasonableness of the time should be made to depend onthe attending circumstances of the case, such as the kind
which is required by law of common carriers with respect to their passengers.
ofcommon carrier, the nature of its business, the customs of theplace, and so forth, and therefore precludes a consideration
ofthe time element per se without taking into account such other factors.Where a passenger dies or is injured, the common
While the victim was admittedly contributorily negligent, still petitioner's aforesaid failure to exercise extraordinary diligence
carrier ispresumed to have been at fault or to have acted negligently.This gives rise to an action for breach of contract where all
was the proximate and direct cause of, because it could definitely have prevented, the former's death. Moreover, in paragraph
thatis required of plaintiff is to prove the existence of the contract ofcarriage and its non-performance by the carrier, that is,
5.6 of its petition, at bar, 19 petitioner has expressly conceded the factual finding of respondent Court of Appeals that petitioner
thefailure of the carrier to carry the passenger safely to hisdestination, which, in the instant case, necessarily includes itsfailure
did not present sufficient evidence in support of its submission that the deceased Anacleto Viana was guilty of gross
to safeguard its passenger with extraordinary diligencewhile such relation subsists.
negligence. Petitioner cannot now be heard to claim otherwise.
Facts:
No excepting circumstance being present, we are likewise bound by respondent court's declaration that there was no
On May 11, 1975, Anacleto Viana boarded M/|V Antonio from Occidental Mindoro bound for Manila. Upon arrival on May 12,
negligence on the part of Pioneer Stevedoring Corporation, a confirmation of the trial court's finding to that effect, hence our
1975, the passengers therein disembarked through a gangplank connecting the vessel to the pier. Viana, instead of
conformity to Pioneer's being absolved of any liability.
disembarking through the gangplank, disembarked through the third deck, which was at the same level with the pier. An hour
after the passengers disembarked, Pioneer stevedoring started to operate in unloading the cargo from the ship. Viana then
As correctly observed by both courts, Aboitiz joined Pioneer in proving the alleged gross negligence of the victim, hence its went back, remembering some of his cargoes left at the vessel. At that time, while he was pointing at the crew of the vessel to
present contention that the death of the passenger was due to the negligence of the crane operator cannot be sustained both where his cargoes were loaded, the crane hit him, pinning him between the crane and the side of the vessel. He was brought to
on grounds, of estoppel and for lack of evidence on its present theory. Even in its answer filed in the court below it readily the hospital where he died 3 days after (May 15). The parents of Anacleto filed a complaint against Aboitiz for breach of
alleged that Pioneer had taken the necessary safeguards insofar as its unloading operations were concerned, a fact which contract of carriage.
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

85
The trial court ruled in favor of the plaintiffs. Then both Aboitiz and Pioneer filed a motion for reconsideration, upon which the the carrier, that is, the failure of the carrier to carry the passenger safely to his destination, which, in the instant case,
trial court issued an order absolving Pioneer from liability but not Aboitiz. On appeal, CA affirmed the trial court ruling. Hence, necessarily includes its failure to safeguard its passenger with extraordinary diligence while such relation subsists.
this petition.

Issue: Whether or not Viana is still considered a passenger at the time of the incident?

Held:

Yes. The La Mallorca case is applicable in 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. 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. 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.

The reasonableness of the 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.

Where a passenger dies or is injured, the common carrier is presumed to have been at fault or to have acted negligently. This
gives rise to an action for breach of contract 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,
which, in the instant case, necessarily includes its failure to safeguard its passenger with extraordinary diligence while such
relation subsists.

Facts:
Anacleto Viana boarded M/V Antonio from Occidental Mindoro bound for Manila. Upon arrival, the passengers therein
disembarked through a gangplank connecting the vessel to the pier. Viana, instead of disembarking through the gangplank,
disembarked through the third deck, which was at the same level with the pier. An hour after the passengers disembarked,
Pioneer stevedoring started to operate in unloading the cargo from the ship. Viana then went back, remembering some of his
cargoes left at the vessel. At that time, while he was pointing at the crew of the vessel to where his cargoes were loaded, the
crane hit him, pinning him between the crane and the side of the vessel.

Issue: Whether or not Viana is still considered a passenger at the time of the incident?

HELD:
Yes. The La Mallorca case is applicable in 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. 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 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. 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. The reasonableness of the 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. Where a passenger dies or is injured,
the common carrier is presumed to have been at fault or to have acted negligently. This gives rise to an action for breach of
contract where all that is required of plaintiff is to prove the existence of the contract of carriage and its non-performance by

86
Dangwa Transportation vs. CA, 202 SCRA 574;
SECOND DIVISION
G.R. No. 95582 October 7, 1991
DANGWA TRANSPORTATION CO., INC. and THEODORE LARDIZABAL y MALECDAN, petitioners,
vs.
COURT OF APPEALS, INOCENCIA CUDIAMAT, EMILIA CUDIAMAT BANDOY, FERNANDO CUDLAMAT, MARRIETA CUDIAMAT,
NORMA CUDIAMAT, DANTE CUDIAMAT, SAMUEL CUDIAMAT and LIGAYA CUDIAMAT, all Heirs of the late Pedrito Cudiamat
represented by Inocencia Cudiamat, respondents.
REGALADO, J.:
On May 13, 1985, private respondents filed a complaint 1 for damages against petitioners for the death of Pedrito Cudiamat as
a result of a vehicular accident which occurred on March 25, 1985 at Marivic, Sapid, Mankayan, Benguet. Among others, it was
alleged that on said date, while petitioner Theodore M. Lardizabal was driving a passenger bus belonging to petitioner
corporation in a reckless and imprudent manner and without due regard to traffic rules and regulations and safety to persons
and property, it ran over its passenger, Pedrito Cudiamat. However, instead of bringing Pedrito immediately to the nearest
hospital, the said driver, in utter bad faith and without regard to the welfare of the victim, first brought his other passengers
and cargo to their respective destinations before banging said victim to the Lepanto Hospital where he expired.
On the other hand, petitioners alleged that they had observed and continued to observe the extraordinary diligence required in
the operation of the transportation company and the supervision of the employees, even as they add that they are not
absolute insurers of the safety of the public at large. Further, it was alleged that it was the victim's own carelessness and
negligence which gave rise to the subject incident, hence they prayed for the dismissal of the complaint plus an award of
damages in their favor by way of a counterclaim.
On July 29, 1988, the trial court rendered a decision, effectively in favor of petitioners, with this decretal portion:
IN VIEW OF ALL THE FOREGOING, judgment is hereby pronounced that Pedrito Cudiamat was negligent, which negligence was
the proximate cause of his death. Nonetheless, defendants in equity, are hereby ordered to pay the heirs of Pedrito Cudiamat
the sum of P10,000.00 which approximates the amount defendants initially offered said heirs for the amicable settlement of
the case. No costs.
SO ORDERED. 2
Not satisfied therewith, private respondents appealed to the Court of Appeals which, in a decision 3 in CA-G.R. CV No. 19504
promulgated on August 14, 1990, set aside the decision of the lower court, and ordered petitioners to pay private respondents:
1. The sum of Thirty Thousand (P30,000.00) Pesos by way of indemnity for death of the victim Pedrito Cudiamat;
2. The sum of Twenty Thousand (P20,000.00) by way of moral damages;
3. The sum of Two Hundred Eighty Eight Thousand (P288,000.00) Pesos as actual and compensatory damages;
4. The costs of this suit. 4
Petitioners' motion for reconsideration was denied by the Court of Appeals in its resolution dated October 4, 1990, 5 hence this
petition with the central issue herein being whether respondent court erred in reversing the decision of the trial court and in
finding petitioners negligent and liable for the damages claimed.
It is an established principle that the factual findings of the Court of Appeals as a rule are final and may not be reviewed by this
Court on appeal. However, this is subject to settled exceptions, one of which is when the findings of the appellate court are
contrary to those of the trial court, in which case a reexamination of the facts and evidence may be undertaken. 6
In the case at bar, the trial court and the Court of Appeal have discordant positions as to who between the petitioners an the
victim is guilty of negligence. Perforce, we have had to conduct an evaluation of the evidence in this case for the prope
calibration of their conflicting factual findings and legal conclusions.
The lower court, in declaring that the victim was negligent, made the following findings:
This Court is satisfied that Pedrito Cudiamat was negligent in trying to board a moving vehicle, especially with one of his hands
holding an umbrella. And, without having given the driver or the conductor any indication that he wishes to board the bus. But
87
defendants can also be found wanting of the necessary diligence. In this connection, it is safe to assume that when the
deceased Cudiamat attempted to board defendants' bus, the vehicle's door was open instead of being closed. This should be
so, for it is hard to believe that one would even attempt to board a vehicle (i)n motion if the door of said vehicle is closed. Here
lies the defendant's lack of diligence. Under such circumstances, equity demands that there must be something given to the
heirs of the victim to assuage their feelings. This, also considering that initially, defendant common carrier had made overtures
to amicably settle the case. It did offer a certain monetary consideration to the victim's heirs. 7
However, respondent court, in arriving at a different opinion, declares that:
From the testimony of appellees'own witness in the person of Vitaliano Safarita, it is evident that the subject bus was at full
stop when the victim Pedrito Cudiamat boarded the same as it was precisely on this instance where a certain Miss Abenoja
alighted from the bus. Moreover, contrary to the assertion of the appellees, the victim did indicate his intention to board the
bus as can be seen from the testimony of the said witness when he declared that Pedrito Cudiamat was no longer walking and
made a sign to board the bus when the latter was still at a distance from him. It was at the instance when Pedrito Cudiamat was
closing his umbrella at the platform of the bus when the latter made a sudden jerk movement (as) the driver commenced to
accelerate the bus.
Evidently, the incident took place due to the gross negligence of the appellee-driver in prematurely stepping on the accelerator
and in not waiting for the passenger to first secure his seat especially so when we take into account that the platform of the bus
was at the time slippery and wet because of a drizzle. The defendants-appellees utterly failed to observe their duty and
obligation as common carrier to the end that they should observe extra-ordinary diligence in the vigilance over the goods and
for the safety of the passengers transported by them according to the circumstances of each case (Article 1733, New Civil
Code). 8
After a careful review of the evidence on record, we find no reason to disturb the above holding of the Court of Appeals. Its
aforesaid findings are supported by the testimony of petitioners' own witnesses. One of them, Virginia Abalos, testified on
cross-examination as follows:
Q It is not a fact Madam witness, that at bunkhouse 54, that is before the place of the incident, there is a crossing?
A The way going to the mines but it is not being pass(ed) by the bus.
Q And the incident happened before bunkhouse 56, is that not correct?
A It happened between 54 and 53 bunkhouses.
The bus conductor, Martin Anglog, also declared:
Q When you arrived at Lepanto on March 25, 1985, will you please inform this Honorable Court if there was anv unusual
incident that occurred?
A When we delivered a baggage at Marivic because a person alighted there between Bunkhouse 53 and 54.
Q What happened when you delivered this passenger at this particular place in Lepanto?
A When we reached the place, a passenger alighted and I signalled my driver. When we stopped we went out because I saw an
umbrella about a split second and I signalled again the driver, so the driver stopped and we went down and we saw Pedrito
Cudiamat asking for help because he was lying down.
Q How far away was this certain person, Pedrito Cudiamat, when you saw him lying down — from the bus how far was he?
A It is about two to three meters.
Q On what direction of the bus was he found about three meters from the bus, was it at the front or at the back?

A At the back, sir. 10 (Emphasis supplied.)
The foregoing testimonies show that the place of the accident and the place where one of the passengers alighted were both
between Bunkhouses 53 and 54, hence the finding of the Court of Appeals that the bus was at full stop when the victim
boarded the same is correct. They further confirm the conclusion that the victim fell from the platform of the bus when it
suddenly accelerated forward and was run over by the rear right tires of the vehicle, as shown by the physical evidence on
where he was thereafter found in relation to the bus when it stopped. Under such circumstances, it cannot be said that the
deceased was guilty of negligence.
The contention of petitioners that the driver and the conductor had no knowledge that the victim would ride on the bus, since
the latter had supposedly not manifested his intention to board the same, does not merit consideration. When the bus is not in
motion there is no necessity for a person who wants to ride the same to signal his intention to board. A public utility bus, once
it stops, is in effect making a continuous offer to bus riders. Hence, it becomes the duty of the driver and the conductor, every
time the bus stops, to do no act that would have the effect of increasing the peril to a passenger while he was attempting to
board the same. The premature acceleration of the bus in this case was a breach of such duty. 11
It is the duty of common carriers of passengers, including common carriers by railroad train, streetcar, or motorbus, to stop
their conveyances a reasonable length of time in order to afford passengers an opportunity to board and enter, and they are
liable for injuries suffered by boarding passengers resulting from the sudden starting up or jerking of their conveyances while
they are doing so. 12
Further, even assuming that the bus was moving, the act of the victim in boarding the same cannot be considered negligent
under the circumstances. As clearly explained in the testimony of the aforestated witness for petitioners, Virginia Abalos, th bus
had "just started" and "was still in slow motion" at the point where the victim had boarded and was on its platform. 13
It is not negligence per se, or as a matter of law, for one attempt to board a train or streetcar which is moving slowly. 14 An
ordinarily prudent person would have made the attempt board the moving conveyance under the same or similar
circumstances. The fact that passengers board and alight from slowly moving vehicle is a matter of common experience both
the driver and conductor in this case could not have been unaware of such an ordinary practice.
The victim herein, by stepping and standing on the platform of the bus, is already considered a passenger and is entitled all the
rights and protection pertaining to such a contractual relation. Hence, it has been held that the duty which the carrier
passengers owes to its patrons extends to persons boarding cars as well as to those alighting therefrom. 15
Common carriers, from the nature of their business and reasons of public policy, are bound to observe extraordina diligence for
the safety of the passengers transported by the according to all the circumstances of each case. 16 A common carrier is bound
to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence very cautious persons,
with a due regard for all the circumstances. 17
It has also been repeatedly held that in an action based on a contract of carriage, the court need not make an express finding of
fault or negligence on the part of the carrier in order to hold it responsible to pay the damages sought by the passenger. By
contract of carriage, the carrier assumes the express obligation to transport the passenger to his destination safely and observe
extraordinary diligence with a due regard for all the circumstances, and any injury that might be suffered by the passenger is
right away attributable to the fault or negligence of the carrier. This is an exception to the general rule that negligence must be
proved, and it is therefore incumbent upon the carrier to prove that it has exercised extraordinary diligence as prescribed in
Articles 1733 and 1755 of the Civil Code. 18
Moreover, the circumstances under which the driver and the conductor failed to bring the gravely injured victim immediately to
the hospital for medical treatment is a patent and incontrovertible proof of their negligence. It defies understanding and can
even be stigmatized as callous indifference. The evidence shows that after the accident the bus could have forthwith turned at
Bunk 56 and thence to the hospital, but its driver instead opted to first proceed to Bunk 70 to allow a passenger to alight and to
deliver a refrigerator, despite the serious condition of the victim. The vacuous reason given by petitioners that it was the wife of
the deceased who caused the delay was tersely and correctly confuted by respondent court:
88
... The pretension of the appellees that the delay was due to the fact that they had to wait for about twenty minutes for
Inocencia Cudiamat to get dressed deserves scant consideration. It is rather scandalous and deplorable for a wife whose
husband is at the verge of dying to have the luxury of dressing herself up for about twenty minutes before attending to help her
distressed and helpless husband. 19
Further, it cannot be said that the main intention of petitioner Lardizabal in going to Bunk 70 was to inform the victim's family
of the mishap, since it was not said bus driver nor the conductor but the companion of the victim who informed his family
thereof. 20 In fact, it was only after the refrigerator was unloaded that one of the passengers thought of sending somebody to
the house of the victim, as shown by the testimony of Virginia Abalos again, to wit:
Q Why, what happened to your refrigerator at that particular time?
A I asked them to bring it down because that is the nearest place to our house and when I went down and asked somebody to
bring down the refrigerator, I also asked somebody to call the family of Mr. Cudiamat.
COURT:
Q Why did you ask somebody to call the family of Mr. Cudiamat?
A Because Mr. Cudiamat met an accident, so I ask somebody to call for the family of Mr. Cudiamat.
Q But nobody ask(ed) you to call for the family of Mr. Cudiamat?
A No sir. 21
With respect to the award of damages, an oversight was, however, committed by respondent Court of Appeals in computing
the actual damages based on the gross income of the victim. The rule is that the amount recoverable by the heirs of a victim of
a tort is not the loss of the entire earnings, but rather the loss of that portion of the earnings which the beneficiary would have
received. In other words, only net earnings, not gross earnings, are to be considered, that is, the total of the earnings less
expenses necessary in the creation of such earnings or income and minus living and other incidental expenses. 22
We are of the opinion that the deductible living and other expense of the deceased may fairly and reasonably be fixed at
P500.00 a month or P6,000.00 a year. In adjudicating the actual or compensatory damages, respondent court found that the
deceased was 48 years old, in good health with a remaining productive life expectancy of 12 years, and then earning
P24,000.00 a year. Using the gross annual income as the basis, and multiplying the same by 12 years, it accordingly awarded
P288,000. Applying the aforestated rule on computation based on the net earnings, said award must be, as it hereby is,
rectified and reduced to P216,000.00. However, in accordance with prevailing jurisprudence, the death indemnity is hereby
increased to P50,000.00. 23
WHEREFORE, subject to the above modifications, the challenged judgment and resolution of respondent Court of Appeals are
hereby AFFIRMED in all other respects.
SO ORDERED.
Lessons Applicable: Actionable Document (Transportation)
Laws Applicable: Art. 1733, Art. 1755
FACTS:
May 13, 1985: Theodore M. Lardizabal was driving a passenger bus belonging to Dangwa Transportation Co. Inc. (Dangwa)
The bus was at full stop bet. Bunkhouses 53 and 54 when Pedro alighted
Pedro Cudiamat fell from the platform of the bus when it suddenly accelerated forward
Pedro was ran over by the rear right tires of the vehicle
Theodore first brought his other passengers and cargo to their respective destinations before bringing Pedro to Lepanto
Hospital where he expired
Private respondents filed a complaint for damages against Dangwa for the death of Pedro Cudiamat
Dangwa: observed and continued to observe the extraordinary diligence required in the operation of the co. and the
supervision of the employees even as they are not absolute insurers of the public at large
RTC: in favour of Dangwa holding Pedrito as negligent and his negligence was the cause of his death but still ordered to pay in
equity P 10,000 to the heirs of Pedrito
CA: reversed and ordered to pay Pedrito indemnity, moral damages, actual and compensatory damages and cost of the suit

ISSUE: W/N Dangwa should be held liable for the negligence of its driver Theodore

HELD:

YES. CA affirmed.
A public utility once it stops, is in effect making a continuous offer to bus riders (EVEN when moving as long as it is still slow in
motion)

Duty of the driver: do NOT make acts that would have the effect of increasing peril to a passenger while he is attempting to
board the same

Premature acceleration of the bus in this case = breach of duty

Stepping and standing on the platform of the bus is already considered a passenger and is entitled all the rights and protection
pertaining to such a contractual relation

Duty extends to boarding and alighting

GR: By contract of carriage, the carrier assumes the express obligation to transport the passenger to his destination safely and
observe extraordinary diligence with a due regard for all the circumstances, and any injury that might be suffered by the
passenger is right away attributable to the fault or negligence of the carrier

EX: carrier to prove that it has exercised extraordinary diligence as prescribed in Art. 1733 and 1755 of the Civil Code
Failure to immediately bring Pedrito to the hospital despite his serious condition = patent and incontrovertible proof of their
negligence

Hospital was in Bunk 56

1st proceeded to Bunk 70 to allow a passenger (who later called the family of Pedrito on his own will) to alight and deliver a
refrigerator
In tort, actual damages is based on net earnings

Facts:
Pedrito Cudiamat fell from the platform of the bus when it suddenly accelerated forward and was run over by the rear right
tires of the vehicle causing his death. In a complaint filed against them, petitioners raised that the driver and the conductor had
no knowledge that the Cudiamat would ride on the bus, since the latter had supposedly not manifested his intention to board
the same.

ISSUE: Whether the victim is considered a passenger by stepping and standing on the platform of the bus.

HELD:
The victim was considered a passenger by stepping and standing on the platform of the bus. The duty which the carrier owes to
its patrons extends to persons boarding the carrier as well as those alighting therefrom. While the carrier is not in motion there
is no necessity for a person who wants to ride the same to signal his intention to board. A public utility bus, once it stops, is in
effect making a continuous offer to bus riders.

89
LRT vs. Navidad, Feb. 6, 2003; "The complaint against defendants LRTA and Rodolfo Roman are dismissed for lack of merit.

"The compulsory counterclaim of LRTA and Roman are likewise dismissed." 1

FIRST DIVISION
Prudent appealed to the Court of Appeals. On 27 August 2000, the appellate court promulgated its now assailed decision
G.R. No. 145804 February 6, 2003
exonerating Prudent from any liability for the death of Nicanor Navidad and, instead, holding the LRTA and Roman jointly and
severally liable thusly:
LIGHT RAIL TRANSIT AUTHORITY & RODOLFO ROMAN, petitioners,
vs.
"WHEREFORE, the assailed judgment is hereby MODIFIED, by exonerating the appellants from any liability for the death of
MARJORIE NAVIDAD, Heirs of the Late NICANOR NAVIDAD & PRUDENT SECURITY AGENCY, respondents.
Nicanor Navidad, Jr. Instead, appellees Rodolfo Roman and the Light Rail Transit Authority (LRTA) are held liable for his death
and are hereby directed to pay jointly and severally to the plaintiffs-appellees, the following amounts:
DECISION
a) P44,830.00 as actual damages;
VITUG, J.:
b) P50,000.00 as nominal damages;
The case before the Court is an appeal from the decision and resolution of the Court of Appeals, promulgated on 27 April 2000
and 10 October 2000, respectively, in CA-G.R. CV No. 60720, entitled "Marjorie Navidad and Heirs of the Late Nicanor Navidad
c) P50,000.00 as moral damages;
vs. Rodolfo Roman, et. al.," which has modified the decision of 11 August 1998 of the Regional Trial Court, Branch 266, Pasig
City, exonerating Prudent Security Agency (Prudent) from liability and finding Light Rail Transit Authority (LRTA) and Rodolfo
d) P50,000.00 as indemnity for the death of the deceased; and
Roman liable for damages on account of the death of Nicanor Navidad.
e) P20,000.00 as and for attorney’s fees."2
On 14 October 1993, about half an hour past seven o’clock in the evening, Nicanor Navidad, then drunk, entered the EDSA LRT
station after purchasing a "token" (representing payment of the fare). While Navidad was standing on the platform near the LRT
The appellate court ratiocinated that while the deceased might not have then as yet boarded the train, a contract of carriage
tracks, Junelito Escartin, the security guard assigned to the area approached Navidad. A misunderstanding or an altercation
theretofore had already existed when the victim entered the place where passengers were supposed to be after paying the fare
between the two apparently ensued that led to a fist fight. No evidence, however, was adduced to indicate how the fight
and getting the corresponding token therefor. In exempting Prudent from liability, the court stressed that there was nothing to
started or who, between the two, delivered the first blow or how Navidad later fell on the LRT tracks. At the exact moment that
link the security agency to the death of Navidad. It said that Navidad failed to show that Escartin inflicted fist blows upon the
Navidad fell, an LRT train, operated by petitioner Rodolfo Roman, was coming in. Navidad was struck by the moving train, and
victim and the evidence merely established the fact of death of Navidad by reason of his having been hit by the train owned
he was killed instantaneously.
and managed by the LRTA and operated at the time by Roman. The appellate court faulted petitioners for their failure to
present expert evidence to establish the fact that the application of emergency brakes could not have stopped the train.
On 08 December 1994, the widow of Nicanor, herein respondent Marjorie Navidad, along with her children, filed a complaint
for damages against Junelito Escartin, Rodolfo Roman, the LRTA, the Metro Transit Organization, Inc. (Metro Transit), and
The appellate court denied petitioners’ motion for reconsideration in its resolution of 10 October 2000.
Prudent for the death of her husband. LRTA and Roman filed a counterclaim against Navidad and a cross-claim against Escartin
and Prudent. Prudent, in its answer, denied liability and averred that it had exercised due diligence in the selection and
In their present recourse, petitioners recite alleged errors on the part of the appellate court; viz:
supervision of its security guards.
"I.
The LRTA and Roman presented their evidence while Prudent and Escartin, instead of presenting evidence, filed a demurrer
contending that Navidad had failed to prove that Escartin was negligent in his assigned task. On 11 August 1998, the trial court
rendered its decision; it adjudged: THE HONORABLE COURT OF APPEALS GRAVELY ERRED BY DISREGARDING THE FINDINGS OF FACTS BY THE TRIAL COURT

"WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the defendants Prudent Security and Junelito "II.
Escartin ordering the latter to pay jointly and severally the plaintiffs the following:
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT PETITIONERS ARE LIABLE FOR THE DEATH OF NICANOR
"a) 1) Actual damages of P44,830.00; NAVIDAD, JR.

2) Compensatory damages of P443,520.00; "III.

3) Indemnity for the death of Nicanor Navidad in the sum of P50,000.00; THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT RODOLFO ROMAN IS AN EMPLOYEE OF LRTA." 3

"b) Moral damages of P50,000.00; Petitioners would contend that the appellate court ignored the evidence and the factual findings of the trial court by holding
them liable on the basis of a sweeping conclusion that the presumption of negligence on the part of a common carrier was not
overcome. Petitioners would insist that Escartin’s assault upon Navidad, which caused the latter to fall on the tracks, was an act
"c) Attorney’s fees of P20,000;
of a stranger that could not have been foreseen or prevented. The LRTA would add that the appellate court’s conclusion on the
"d) Costs of suit.
90
existence of an employer-employee relationship between Roman and LRTA lacked basis because Roman himself had testified
being an employee of Metro Transit and not of the LRTA.
Respondents, supporting the decision of the appellate court, contended that a contract of carriage was deemed created from
the moment Navidad paid the fare at the LRT station and entered the premises of the latter, entitling Navidad to all the rights
and protection under a contractual relation, and that the appellate court had correctly held LRTA and Roman liable for the
death of Navidad in failing to exercise extraordinary diligence imposed upon a common carrier.
Law and jurisprudence dictate that a common carrier, both from the nature of its business and for reasons of public policy, is
burdened with the duty of exercising utmost diligence in ensuring the safety of passengers. 4 The Civil Code, governing the
liability of a common carrier for death of or injury to its passengers, provides:
"Article 1755. A common carrier is bound to carry the passengers safely as far as human care and foresight can provide, using
the utmost diligence of very cautious persons, with a due regard for all the circumstances.
"Article 1756. In case of death of or injuries to passengers, common carriers are presumed to have been at fault or to have
acted negligently, unless they prove that they observed extraordinary diligence as prescribed in articles 1733 and 1755."
"Article 1759. Common carriers are liable for the death of or injuries to passengers through the negligence or willful acts of the
former’s employees, although such employees may have acted beyond the scope of their authority or in violation of the orders
of the common carriers.
"This liability of the common carriers does not cease upon proof that they exercised all the diligence of a good father of a family
in the selection and supervision of their employees."
"Article 1763. A common carrier is responsible for injuries suffered by a passenger on account of the willful acts or negligence
of other passengers or of strangers, if the common 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."
The law requires common carriers to carry passengers safely using the utmost diligence of very cautious persons with due
regard for all circumstances.5 Such duty of a common carrier to provide safety to its passengers so obligates it not only during
the course of the trip but for so long as the passengers are within its premises and where they ought to be in pursuance to the
contract of carriage.6 The statutory provisions render a common carrier liable for death of or injury to passengers (a) through
the negligence or wilful acts of its employees or b) on account of wilful acts or negligence of other passengers or of strangers if
the common carrier’s employees through the exercise of due diligence could have prevented or stopped the act or omission. 7 In
case of such death or injury, a carrier is presumed to have been at fault or been negligent, and 8 by simple proof of injury, the
passenger is relieved of the duty to still establish the fault or negligence of the carrier or of its employees and the burden shifts
upon the carrier to prove that the injury is due to an unforeseen event or to force majeure. 9 In the absence of satisfactory
explanation by the carrier on how the accident occurred, which petitioners, according to the appellate court, have failed to
show, the presumption would be that it has been at fault, 10 an exception from the general rule that negligence must be
proved.11
The foundation of LRTA’s liability is the contract of carriage and its obligation to indemnify the victim arises from the breach of
that contract by reason of its failure to exercise the high diligence required of the common carrier. In the discharge of its
commitment to ensure the safety of passengers, a carrier may choose to hire its own employees or avail itself of the services of
an outsider or an independent firm to undertake the task. In either case, the common carrier is not relieved of its
responsibilities under the contract of carriage.
Should Prudent be made likewise liable? If at all, that liability could only be for tort under the provisions of Article 2176 12 and
related provisions, in conjunction with Article 2180,13 of the Civil Code. The premise, however, for the employer’s liability is
negligence or fault on the part of the employee. Once such fault is established, the employer can then be made liable on the
basis of the presumption juris tantum that the employer failed to exercise diligentissimi patris families in the selection and
91
supervision of its employees. The liability is primary and can only be negated by showing due diligence in the selection and
supervision of the employee, a factual matter that has not been shown. Absent such a showing, one might ask further, how
then must the liability of the common carrier, on the one hand, and an independent contractor, on the other hand, be
described? It would be solidary. A contractual obligation can be breached by tort and when the same act or omission causes the
injury, one resulting in culpa contractual and the other in culpa aquiliana, Article 219414 of the Civil Code can well apply.15 In fine,
a liability for tort may arise even under a contract, where tort is that which breaches the contract. 16 Stated differently, when an
act which constitutes a breach of contract would have itself constituted the source of a quasi-delictual liability had no contract
existed between the parties, the contract can be said to have been breached by tort, thereby allowing the rules on tort to
apply.17
Regrettably for LRT, as well as perhaps the surviving spouse and heirs of the late Nicanor Navidad, this Court is concluded by the
factual finding of the Court of Appeals that "there is nothing to link (Prudent) to the death of Nicanor (Navidad), for the reason
that the negligence of its employee, Escartin, has not been duly proven x x x." This finding of the appellate court is not without
substantial justification in our own review of the records of the case.
There being, similarly, no showing that petitioner Rodolfo Roman himself is guilty of any culpable act or omission, he must also
be absolved from liability. Needless to say, the contractual tie between the LRT and Navidad is not itself a juridical relation
between the latter and Roman; thus, Roman can be made liable only for his own fault or negligence.
The award of nominal damages in addition to actual damages is untenable. Nominal damages are adjudicated in order that a
right of the plaintiff, which has been violated or invaded by the defendant, may be vindicated or recognized, and not for the
purpose of indemnifying the plaintiff for any loss suffered by him.18 It is an established rule that nominal damages cannot co-
exist with compensatory damages.19
WHEREFORE, the assailed decision of the appellate court is AFFIRMED with MODIFICATION but only in that (a) the award of
nominal damages is DELETED and (b) petitioner Rodolfo Roman is absolved from liability. No costs.
SO ORDERED.
Lessons Applicable: Actionable Document (transportation)
Laws Cited: Art. 1755,Art. 1756,Art. 1759,Art. 1763
FACTS:
October 14, 1993, 7:30 p.m. : Drunk Nicanor Navidad (Nicanor) entered the EDSA LRT station after purchasing a “token”.
While Nicanor was standing at the platform near the LRT tracks, the guard Junelito Escartin approached him.
Due to misunderstanding, they had a fist fight
Nicanor fell on the tracks and killed instantaneously upon being hit by a moving train operated by Rodolfo Roman
December 8, 1994: The widow of Nicanor, along with her children, filed a complaint for damages against Escartin, Roman,
LRTA, Metro Transit Org. Inc. and Prudent (agency of security guards) for the death of her husband.
LRTA and Roman filed a counter-claim against Nicanor and a cross-claim against Escartin and Prudent
Prudent: denied liability – averred that it had exercised due diligence in the selection and surpervision of its security
guards
LRTA and Roman: presented evidence
Prudent and Escartin: demurrer contending that Navidad had failed to prove that Escartin was negligent in his assigned
task
RTC: In favour of widow and against Prudent and Escartin, complaint against LRT and Roman were dismissed for lack of
merit
CA: reversed by exonerating Prudent and held LRTA and Roman liable
ISSUE: W/N LRTA and Roman should be liable according to the contract of carriage
HELD:
NO. Affirmed with Modification: (a) nominal damages is DELETED (CANNOT co-exist w/ compensatory damages) (b) Roman is
absolved.
Law and jurisprudence dictate that a common carrier, both from the nature of its business and for reasons of public policy,
is burdened with the duty off exercising utmost diligence in ensuring the safety of passengers
Civil Code:
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 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
Art. 1759. Common carriers are liable for the death of or injuries to passengers through the negligence or wilful acts of
the former’s employees, although such employees may have acted beyond the scope of their authority or in violation of
the orders of the common carriers
This liability of the common carriers does NOT cease upon proof that they
Exercised all the diligence of a good father of a family in the selection and
supervision of their employees

Art. 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.
Carriers presumed to be at fault or been negligent and by simple proof of injury, the passenger is relieaved of the duty to
still establish the fault or negligence of the carrier or of its employees and the burden shifts upon the carrier to prove that
the injury is due to an unforeseen event or to force majeure
Where it hires its own employees or avail itself of the services of an outsider or an independent firm to undertake the
task, the common carrier is NOT relieved of its responsibilities under the contract of carriage
GR: Prudent can be liable only for tort under Art. 2176 and related provisions in conjunction with Art. 2180 of the Civil
Code. (Tort may arise even under a contract, where tort [quasi-delict liability] is that which breaches the contract)
EX: if employer’s liability is negligence or fault on the part of the employee, employer can be made liable on the basis of
the presumption juris tantum that the employer failed to exercise diligentissimi patris families in the selection and
supervision of its employees.
EX to the EX: Upon showing due diligence in the selection and supervision of the employee
Factual finding of the CA: NO link bet. Prudent and the death of Nicanor for the reason that the negligence of Escartin was
NOT proven
NO showing that Roman himself is guilty of any culpable act or omission, he must also be absolved from liability
Contractual tie bet. LRT and Nicanor is NOT itself a juridical relation bet. Nicanor and Roman
Roman can be liable only for his own fault or negligence

FACTS:
Nicanor Navidad died after he fell on the LRT tracks and was struck by a moving train which was coming in at the exact moment
that Navidad fell from the platform.

ISSUE: Whether the victim is considered a passenger by being on the platform.

HELD:
Navidad is a passenger because he entered the LRT station after having purchased a token and he fell while he was on the
platform waiting for a train. Thus, he was where he was supposed to be with the intention of boarding a train.

92
La Mallorca vs. CA, July 27, 17 SCRA 739;
EN BANC
G.R. No. L-20761 July 27, 1966
LA MALLORCA, petitioner,
vs.
HONORABLE COURT OF APPEALS, MARIANO BELTRAN, ET AL., respondents.
BARRERA, J.:
La Mallorca seeks the review of the decision of the Court of Appeals in CA-G.R. No. 23267-R, holding it liable for quasi-delict
and ordering it to pay to respondents Mariano Beltran, et al., P6,000.00 for the death of his minor daughter Raquel Beltran,
plus P400.00 as actual damages.
The facts of the case as found by the Court of Appeals, briefly are:
On December 20, 1953, at about noontime, plaintiffs, husband and wife, together with their minor daughters,
namely, Milagros, 13 years old, Raquel, about 4½ years old, and Fe, over 2 years old, boarded the Pambusco Bus No.
352, bearing plate TPU No. 757 (1953 Pampanga), owned and operated by the defendant, at San Fernando,
Pampanga, bound for Anao, Mexico, Pampanga. At the time, they were carrying with them four pieces of baggages
containing their personal belonging. The conductor of the bus, who happened to be a half-brother of plaintiff
Mariano Beltran, issued three tickets (Exhs. A, B, & C) covering the full fares of the plaintiff and their eldest child,
Milagros. No fare was charged on Raquel and Fe, since both were below the height at which fare is charged in
accordance with the appellant's rules and regulations.
After about an hour's trip, the bus reached Anao whereat it stopped to allow the passengers bound therefor, among
whom were the plaintiffs and their children to get off. With respect to the group of the plaintiffs, Mariano Beltran,
then carrying some of their baggages, was the first to get down the bus, followed by his wife and his children.
Mariano led his companions to a shaded spot on the left pedestrians side of the road about four or five meters away
from the vehicle. Afterwards, he returned to the bus in controversy to get his other bayong, which he had left
behind, but in so doing, his daughter Raquel followed him, unnoticed by her father. While said Mariano Beltran was
on the running board of the bus waiting for the conductor to hand him his bayong which he left under one of its
seats near the door, the bus, whose motor was not shut off while unloading, suddenly started moving forward,
evidently to resume its trip, notwithstanding the fact that the conductor has not given the driver the customary
signal to start, since said conductor was still attending to the baggage left behind by Mariano Beltran. Incidentally,
when the bus was again placed into a complete stop, it had travelled about ten meters from the point where the
plaintiffs had gotten off.
Sensing that the bus was again in motion, Mariano Beltran immediately jumped from the running board without
getting his bayong from the conductor. He landed on the side of the road almost in front of the shaded place where
he left his wife and children. At that precise time, he saw people beginning to gather around the body of a child lying
prostrate on the ground, her skull crushed, and without life. The child was none other than his daughter Raquel,
who was run over by the bus in which she rode earlier together with her parents.
For the death of their said child, the plaintiffs commenced the present suit against the defendant seeking to recover
from the latter an aggregate amount of P16,000 to cover moral damages and actual damages sustained as a result
thereof and attorney's fees. After trial on the merits, the court below rendered the judgment in question.
On the basis of these facts, the trial court found defendant liable for breach of contract of carriage and sentenced it to pay
P3,000.00 for the death of the child and P400.00 as compensatory damages representing burial expenses and costs.
93
On appeal to the Court of Appeals, La Mallorca claimed that there could not be a breach of contract in the case, for the reason
that when the child met her death, she was no longer a passenger of the bus involved in the incident and, therefore, the
contract of carriage had already terminated. Although the Court of Appeals sustained this theory, it nevertheless found the
defendant-appellant guilty of quasi-delict and held the latter liable for damages, for the negligence of its driver, in accordance
with Article 2180 of the Civil Code. And, the Court of Appeals did not only find the petitioner liable, but increased the damages
awarded the plaintiffs-appellees to P6,000.00, instead of P3,000.00 granted by the trial court.
In its brief before us, La Mallorca contends that the Court of Appeals erred (1) in holding it liable for quasi-delict, considering
that respondents complaint was one for breach of contract, and (2) in raising the award of damages from P3,000.00 to
P6,000.00 although respondents did not appeal from the decision of the lower court.
Under the facts as found by the Court of Appeals, we have to sustain the judgement holding petitioner liable for damages for
the death of the child, Raquel Beltran. It may be pointed out that although it is true that respondent Mariano Beltran, his wife,
and their children (including the deceased child) had alighted from the bus at a place designated for disembarking or unloading
of passengers, it was also established that the father had to return to the vehicle (which was still at a stop) to get one of his
bags or bayong that was left under one of the seats of the bus. There can be no controversy that as far as the father is
concerned, when he returned to the bus for his bayongwhich was not unloaded, the relation of passenger and carrier between
him and the petitioner remained subsisting. For, the relation of carrier and passenger does not necessarily cease where the
latter, after alighting from the car, aids the carrier's servant or employee in removing his baggage from the car. 1 The issue to be
determined here is whether as to the child, who was already led by the father to a place about 5 meters away from the bus, the
liability of the carrier for her safety under the contract of carriage also persisted.
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.2 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 and company and its agents.3
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. Raquel, the child that she was, must have followed the father. However, although the father was still on the running
board of the bus awaiting 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
cautions 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. In the first place, the driver, although stopping the bus, nevertheless did not put
off the engine. Secondly, he started to run the bus even before the bus conductor gave him the signal to go and while the latter
was still unloading part of the baggages of the passengers Mariano Beltran and family. 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.
But even assuming arguendo that the contract of carriage has already terminated, herein petitioner can be held liable for the
negligence of its driver, as ruled by the Court of Appeals, pursuant to Article 2180 of the Civil Code. Paragraph 7 of the
complaint, which reads —
That aside from the aforesaid breach of contract, the death of Raquel Beltran, plaintiffs' daughter, was caused by the
negligence and want of exercise of the utmost diligence of a very cautious person on the part of the defendants and
their agent, necessary to transport plaintiffs and their daughter safely as far as human care and foresight can provide
in the operation of their vehicle.
is clearly an allegation for quasi-delict. The inclusion of this averment for quasi-delict, while incompatible with the other claim HELD:
under the contract of carriage, is permissible under Section 2 of Rule 8 of the New Rules of Court, which allows a plaintiff to There is a breach of duty to exercise extra ordinary diligence with respect to the 4 year old child and the carrier is liable as a
allege causes of action in the alternative, be they compatible with each other or not, to the end that the real matter in consequence. The presence of passengers near the bus was not unreasonable and they were, therefore, to be considered still
controversy may be resolved and determined.4 as passengers of the carrier, entitled to the protection under their contract.

The plaintiffs sufficiently pleaded the culpa or negligence upon which the claim was predicated when it was alleged in the
complaint that "the death of Raquel Beltran, plaintiffs' daughter, was caused by the negligence and want of exercise of the
utmost diligence of a very cautious person on the part of the defendants and their agent." This allegation was also proved when
it was established during the trial that the driver, even before receiving the proper signal from the conductor, and while there
were still persons on the running board of the bus and near it, started to run off the vehicle. The presentation of proof of the
negligence of its employee gave rise to the presumption that the defendant employer did not exercise the diligence of a good
father of the family in the selection and supervision of its employees. And this presumption, as the Court of Appeals found,
petitioner had failed to overcome. Consequently, petitioner must be adjudged peculiarily liable for the death of the child
Raquel Beltran.

The increase of the award of damages from P3,000.00 to P6,000.00 by the Court of Appeals, however, cannot be sustained.
Generally, the appellate court can only pass upon and consider questions or issues raised and argued in appellant's brief.
Plaintiffs did not appeal from that portion of the judgment of the trial court awarding them on P3,000.00 damages for the
death of their daughter. Neither does it appear that, as appellees in the Court of Appeals, plaintiffs have pointed out in their
brief the inadequacy of the award, or that the inclusion of the figure P3,000.00 was merely a clerical error, in order that the
matter may be treated as an exception to the general rule.5Herein petitioner's contention, therefore, that the Court of Appeals
committed error in raising the amount of the award for damages is, evidently, meritorious.1äwphï1.ñët

Wherefore, the decision of the Court of Appeals is hereby modified by sentencing, the petitioner to pay to the respondents
Mariano Beltran, et al., the sum of P3,000.00 for the death of the child, Raquel Beltran, and the amount of P400.00 as actual
damages. No costs in this instance. So ordered.
Facts:

Mariano Beltran and his family rode a bus owned by petitioner. Upon reaching their desired destination, they alighted from the
bus. But Mariano returned to get their baggage. His youngest daughter followed him without his knowledge. When he stepped
into the bus again, it suddenly accelerated. Mariano’s daughter was found dead. The bus ran over her.

Issue: Whether the liability of a common carrier extends even after the passenger had alighted

Held:

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 reasonable
opportunity to leave the current premises.

FACTS:
Plaintiffs, husband and wife, together with their three minor daughters were the first to go down the bus that they were riding
when it reached their destination. The husband led his wife and children to a shaded spot on the left pedestrian side of the
road about 4 or 5 meters away from the vehicle. The husband returned to the bus to get his other baggage and he did not
notice that his 4 yr old daughter followed him. While he was on the running board of the bus waiting for the conductor to hand
him his baggage, the bus moved although the conductor had not yet signaled the driver to start off. The bus hit the 4 year old
child as a consequence.

ISSUE: Whether the carrier is liable for the death of the 4 year old child?

94
Japan Airlines vs. CA, Aug. 7, 1998; Undaunted, JAL appealed the decision before the Court of Appeals, which, however, with the exception of lowering the
damages awarded affirmed the trial court's finding, 3 thus:
THIRD DIVISION
Thus, the award of moral damages should be as it is hereby reduced to P200,000.00 for each of the
G.R. No. 118664 August 7, 1998
plaintiffs, the exemplary damages to P300,000.00 and the attorney's fees to P100,000.00 plus the costs.
JAPAN AIRLINES, petitioner,
WHEREFORE, with the foregoing Modification, the judgment appealed from is hereby AFFIRMED in all
vs.
other respects.
THE COURT OF APPEALS, ENRIQUE AGANA., MARIA ANGELA NINA AGANA, ADALIA B. FRANCISCO and JOSE
MIRANDA, respondents.
JAL filed a motion for reconsideration which proved futile and
unavailing. 4
ROMERO, J.:
Failing in its bid to reconsider the decision, JAL has now filed this instant petition.
Before us is an appeal by certiorari filed by petitioner Japan Airlines, Inc. (JAL) seeking the reversal of the decision of the Court
of Appeals, 1 which affirmed with modification the award of damages made by the trial court in favor of herein private
The issue to be resolved is whether JAL, as a common carrier has the obligation to shoulder the hotel and meal expenses of its
respondents Enrique Agana, Maria Angela Nina Agana, Adelia Francisco and Jose Miranda.
stranded passengers until they have reached their final destination, even if the delay were caused by "force majeure."
On June 13, 1991, private respondent Jose Miranda boarded JAL flight No. JL 001 in San Francisco, California bound for Manila.
To begin with, there is no dispute that the Mt. Pinatubo eruption prevented JAL from proceeding to Manila on schedule.
Likewise, on the same day private respondents Enrique Agana, Maria Angela Nina Agana and Adelia Francisco left Los Angeles,
Likewise, private respondents concede that such event can be considered as "force majeure" since their delayed arrival in
California for Manila via JAL flight No. JL 061. As an incentive for travelling on the said airline, both flights were to make an
Manila was not imputable to JAL. 5
overnight stopover at Narita, Japan, at the airlines' expense, thereafter proceeding to Manila the following day.
However, private respondents contend that while JAL cannot be held responsible for the delayed arrival in Manila, it was
Upon arrival at Narita, Japan on June 14, 1991, private respondents were billeted at Hotel Nikko Narita for the night. The next
nevertheless liable for their living expenses during their unexpected stay in Narita since airlines have the obligation to ensure
day, private respondents, on the final leg of their journey, went to the airport to take their flight to Manila. However, due to the
the comfort and convenience of its passengers. While we sympathize with the private respondents' plight, we are unable to
Mt. Pinatubo eruption, unrelenting ashfall blanketed Ninoy Aquino International Airport (NAIA), rendering it inaccessible to
accept this contention.
airline traffic. Hence, private respondents' trip to Manila was cancelled indefinitely.
We are not unmindful of the fact that in a plethora of cases we have consistently ruled that a contract to transport passengers
To accommodate the needs of its stranded passengers, JAL rebooked all the Manila-bound passengers on flight No. 741 due to
is quite different in kind, and degree from any other contractual relation. It is safe to conclude that it is a relationship imbued
depart on June 16, 1991 and also paid for the hotel expenses for their unexpected overnight stay. On June 16, 1991, much to
with public interest. Failure on the part of the common carrier to live up to the exacting standards of care and diligence renders
the dismay of the private respondents, their long anticipated flight to Manila was again cancelled due to NAIA's indefinite
it liable for any damages that may be sustained by its passengers. However, this is not to say that common carriers are
closure. At this point, JAL informed the private respondents that it would no longer defray their hotel and accommodation
absolutely responsible for all injuries or damages even if the same were caused by a fortuitous event. To rule otherwise would
expense during their stay in Narita.
render the defense of "force majeure," as an exception from any liability, illusory and ineffective.
Since NAIA was only reopened to airline traffic on June 22, 1991, private respondents were forced to pay for their
Accordingly, there is no question that when a party is unable to fulfill his obligation because of "force majeure," the general rule
accommodations and meal expenses from their personal funds from June 16 to June 21, 1991. Their unexpected stay in Narita
is that he cannot be held liable for damages for non-performance.6 Corollarily, when JAL was prevented from resuming its flight
ended on June 22, 1991 when they arrived in Manila on board JL flight No. 741.
to Manila due to the effects of Mt. Pinatubo eruption, whatever losses or damages in the form of hotel and meal expenses the
stranded passengers incurred, cannot be charged to JAL. Yet it is undeniable that JAL assumed the hotel expenses of
Obviously, still reeling from the experience, private respondents, on July 25, 1991, commenced an action for damages against
respondents for their unexpected overnight stay on June 15, 1991.
JAL before the Regional Trial Court of Quezon City, Branch 104. 2 To support their claim, private respondents asserted that JAL
failed to live up to its duty to provide care and comfort to its stranded passengers when it refused to pay for their hotel and
Admittedly, to be stranded for almost a week in a foreign land was an exasperating experience for the private respondents. To
accommodation expenses from June 16 to 21, 1991 at Narita, Japan. In other words, they insisted that JAL was obligated to
be sure, they underwent distress and anxiety during their unanticipated stay in Narita, but their predicament was not due to
shoulder their expenses as long as they were still stranded in Narita. On the other hand, JAL denied this allegation and averred
the fault or negligence of JAL but the closure of NAIA to international flights. Indeed, to hold JAL, in the absence of bad faith or
that airline passengers have no vested right to these amenities in case a flight is cancelled due to "force majeure."
negligence, liable for the amenities of its stranded passengers by reason of a fortuitous event is too much of a burden to
assume.
On June 18, 1992, the trial court rendered its judgment in favor of private respondents holding JAL liable for damages, viz.:
Furthermore, it has been held that airline passengers must take such risks incident to the mode of travel. 7 In this regard,
WHEREFORE, judgment is rendered in favor of plaintiffs ordering the defendant Japan Airlines to pay the
adverse weather conditions or extreme climatic changes are some of the perils involved in air travel, the consequences of
plaintiffs Enrique Agana, Adalia B. Francisco and Maria Angela Nina Agana the sum of One million Two
which the passenger must assume or expect. After all, common carriers are not the insurer of all risks. 8
Hundred forty-six Thousand Nine Hundred Thirty-Six Pesos (P1,246,936.00) and Jose Miranda the sum of
Three Hundred Twenty Thousand Six Hundred sixteen and 31/100 (P320,616.31) as actual, moral and
Paradoxically, the Court of Appeals, despite the presence of "force majeure," still ruled against JAL relying in our decision in PAL
exemplary damages and pay attorney's fees in the amount of Two Hundred Thousand Pesos
v. Court of Appeals, 9 thus:
(P200,000.00), and to pay the costs of suit.

95
 The position taken by PAL in this case clearly illustrates its failure to grasp the exacting standard required
by law. Undisputably, PAL's diversion of its flight due to inclement weather was a fortuitous event.
Nonetheless, such occurrence did not terminate PAL's contract with its passengers. Being in the business
of air carriage and the sole one to operate in the country, PAL is deemed equipped to deal with situations
as in the case at bar. What we said in one case once again must be stressed, i.e., the relation of carrier
and passenger continues until the latter has been landed at the port of destination and has left the
carrier's premises. Hence, PAL necessarily would still have to exercise extraordinary diligence in
safeguarding the comfort, convenience and safety of its stranded passengers until they have reached
their final destination. On this score, PAL grossly failed considering the then ongoing battle between
government forces and Muslim rebels in Cotabato City and the fact that the private respondent was a
stranger to the place.
The reliance is misplaced. The factual background of the PAL case is different from the instant petition. In that case there was
indeed a fortuitous event resulting in the diversion of the PAL flight. However, the unforeseen diversion was worsened when
"private respondents (passenger) was left at the airport and could not even hitch a ride in a Ford Fiera loaded with PAL
personnel," 10 not to mention the apparent apathy of the PAL station manager as to the predicament of the stranded
passengers. 11 In light of these circumstances, we held that if the fortuitous event was accompanied by neglect and malfeasance
by the carrier's employees, an action for damages against the carrier is permissible. Unfortunately, for private respondents,
none of these conditions are present in the instant petition.
We are not prepared, however, to completely absolve petitioner JAL from any liability. It must be noted that private
respondents bought tickets from the United States with Manila as their final destination. While JAL was no longer required to
defray private respondents' living expenses during their stay in Narita on account of the fortuitous event, JAL had the duty to
make the necessary arrangements to transport private respondents on the first available connecting flight to Manila. Petitioner
JAL reneged on its obligation to look after the comfort and convenience of its passengers when it declassified private
respondents from "transit passengers" to "new passengers" as a result of which private respondents were obliged to make the
necessary arrangements themselves for the next flight to Manila. Private respondents were placed on the waiting list from June
20 to June 24. To assure themselves of a seat on an available flight, they were compelled to stay in the airport the whole day of
June 22, 1991 and it was only at 8:00 p.m. of the aforesaid date that they were advised that they could be accommodated in
said flight which flew at about 9:00 a.m. the next day.
We are not oblivious to the fact that the cancellation of JAL flights to Manila from June 15 to June 21, 1991 caused considerable
disruption in passenger booking and reservation. In fact, it would be unreasonable to expect, considering NAIA's closure, that
JAL flight operations would be normal on the days affected. Nevertheless, this does not excuse JAL from its obligation to make
the necessary arrangements to transport private respondents on its first available flight to Manila. After all, it had a contract to
transport private respondents from the United States to Manila as their final destination.
Consequently, the award of nominal damages is in order. Nominal damages are adjudicated in order that a right of a plaintiff,
which has been violated or invaded by the defendant, may be vindicated or recognized and not for the purpose of indemnifying
any loss suffered by him. 12 The court may award nominal damages in every obligation arising from any source enumerated in
article 1157, or in every case where any property right has been invaded. 13
WHEREFORE, in view of the foregoing, the decision of the Court of Appeals dated December 22, 1993 is hereby MODIFIED. The
award of actual, moral and exemplary damages is hereby DELETED. Petitioner JAL is ordered to pay each of the private
respondents nominal damages in the sum of P100,000.00 each including attorney' s fees of P50,000.00 plus costs.
SO ORDERED.
FACTS:
Private respondents boarded Japan Airlines, Inc. (JAL) in San Francisco, California bound for Manila. On the final leg of the
journey, Japan to Manila, private respondents’ trip was cancelled due to the Mt. Pinatubo eruption. To accommodate the needs
of its stranded passengers, JAL rebooked all the Manila-bound passengers and also paid for the hotel expenses for their
unexpected overnight stay. On the following day, the flight was again cancelled due to NAIA’s indefinite closure. At this point,
96
JAL informed the private respondents that it would no longer defray their hotel and accommodation expense during their stay
in Narita.
ISSUE: Whether JAL, as a common carrier has the obligation to shoulder the hotel and meal expenses of its stranded
passengers until they have reached their final destination, even if the delay were caused by “force majeure.”
HELD:
When JAL was prevented from resuming its flight to Manila due to the effects of Mt. Pinatubo eruption, whatever losses or
damages in the form of hotel and meal expenses the stranded passengers incurred, cannot be charged to JAL. To hold JAL, in
the absence of bad faith or negligence, liable for the amenities of its stranded passengers by reason of a fortuitous event is too
much of a burden to assume. Furthermore, it has been held that airline passengers must take such risks incident to the mode
of travel. In this regard, adverse weather conditions or extreme climatic changes are some of the perils involved in air travel,
the consequences of which the passenger must assume or expect. After all, common carriers are not the insurer of all risks.
FACTS:
This petition for review seeks to reverse and set aside the October 9, 2002 decision of the Court of Appeals and its January 12,
2004 resolution, which affirmed in toto the June 10, 1997 decision of the Regional Trial Court of Makati City, Branch 61 in Civil
Case No. 92-3635.
On March 27, 1992, respondents Michael and Jeanette Asuncion left Manila on board Japan Airlines’ (JAL) Flight 742 bound for
Los Angeles. Their itinerary included a stop-over in Narita and an overnight stay at Hotel Nikko Narita. Upon arrival at Narita,
Mrs. Noriko Etou-Higuchi of JAL endorsed their applications for shore pass and directed them to the Japanese immigration
official. A shore pass is required of a foreigner aboard a vessel or aircraft who desires to stay in the neighborhood of the port of
call for not more than 72 hours.
During their interview, the Japanese immigration official noted that Michael appeared shorter than his height as indicated in his
passport. Because of this inconsistency, respondents were denied shore pass entries and were brought instead to the Narita
Airport Rest House where they were billeted overnight.
Mr. Atsushi Takemoto of the International Service Center (ISC), the agency tasked by Japan’s Immigration Department to handle
passengers who were denied shore pass entries, brought respondents to the Narita Airport Rest House where they stayed
overnight until their departure the following day for Los Angeles. Respondents were charged US$400.00 each for their
accommodation, security service and meals.
On December 12, 1992, respondents filed a complaint for damages claiming that JAL did not fully apprise them of their travel
requirements and that they were rudely and forcibly detained at Narita Airport.
Issue: Whether or not JAL is liable of breach of contract of carriage.
Side Issues:
· Whether or not JAL is liable for moral, exemplary damages,
· Whether or not the plaintiff is liable for attorney’s fee and cost of suit incurred (JAL counterclaim)
Ruling:
The court finds that JAL did not breach its contract of carriage with respondents. It may be true that JAL has the duty to inspect
whether its passengers have the necessary travel documents, however, such duty does not extend to checking the veracity of
every entry in these documents. JAL could not vouch for the authenticity of a passport and the correctness of the entries
therein. The power to admit or not an alien into the country is a sovereign act which cannot be interfered with even by JAL. This
is not within the ambit of the contract of carriage entered into by JAL and herein respondents. As such, JAL should not be
faulted for the denial of respondents’ shore pass applications.
In the Respondents claim that petitioner breached its contract of carriage when it failed to explain to the immigration
authorities that they had overnight vouchers at the Hotel Nikko Narita. They imputed that JAL did not exhaust all means to
prevent the denial of their shore pass entry applications. JAL or any of its representatives have no authority to interfere with or
influence the immigration authorities. The most that could be expected of JAL is to endorse respondents’ applications, which
Mrs. Higuchi did immediately upon their arrival in Narita.

Moral damages may be recovered in cases where one willfully causes injury to property, or in cases of breach of contract where
the other party acts fraudulently or in bad faith. Exemplary damages are imposed by way of example or correction for the
public good, when the party to a contract acts in wanton, fraudulent, oppressive or malevolent manner. Attorney’s fees are
allowed when exemplary damages are awarded and when the party to a suit is compelled to incur expenses to protect his
interest.[17] There being no breach of contract nor proof that JAL acted in wanton, fraudulent or malevolent manner, there is
no basis for the award of any form of damages.

Neither should JAL be held liable to reimburse respondents the amount of US$800.00. It has been sufficiently proven that the
amount pertained to ISC, an agency separate and distinct from JAL, in payment for the accommodations provided to
respondents. The payments did not in any manner accrue to the benefit of JAL.

However, we find that the Court of Appeals correctly dismissed JAL’s counterclaim for litigation expenses, exemplary damages
and attorney’s fees. The action was filed by respondents in utmost good faith and not manifestly frivolous. Respondents
honestly believed that JAL breached its contract. A person’s right to litigate should not be penalized by holding him liable for
damages. This is especially true when the filing of the case is to enforce what he believes to be his rightful claim against another
although found to be erroneous.[

WHEREFORE, in view of the foregoing, the instant petition is PARTLY GRANTED. The October 9, 2002 decision of the Court of
Appeals and its January 12, 2004 resolution in CA-G.R. CV No. 57440, are REVERSED and SET ASIDE insofar as the finding of
breach on the part of petitioner and the award of damages, attorney’s fees and costs of the suit in favor of respondents is
concerned. Accordingly, there being no breach of contract on the part of petitioner, the award of actual, moral and exemplary
damages, as well as attorney’s fees and costs of the suit in favor of respondents Michael and Jeanette Asuncion, is DELETED for
lack of basis. However, the dismissal for lack of merit of petitioner’s counterclaim for litigation expenses, exemplary damages
and attorney’s fees, is SUSTAINED. No pronouncement as to costs.

97
 on Flight 477 chose to take Flight 560; that its Station Agent explained in a courteous and polite manner to all passengers the
reason for PAL's inability to transport all of them back to Cebu; that the stranded passengers agreed to avail of the options and
Phil. Airlines vs. CA, 226 SCRA 423; had their respective tickets exchanged for their onward trips; that it was
only the private respondent who insisted on being given priority in the accommodation; that pieces of checked-in baggage and
FIRST DIVISION
had carried items of the Ozamiz City passengers were removed from the aircraft; that the reason for their pilot's inability to
land at Ozamis City airport was because the runway was wet due to rains thus posing a threat to the safety of both passengers
G.R. No. L-82619 September 15, 1993
and aircraft; and, that such reason of force majeure was a valid justification for the pilot to bypass Ozamiz City and proceed
directly to Cotabato City.
PHILIPPINE AIRLINES, INC., petitioner,
vs.
On 4 June 1981, the trial court rendered its decision 10 the dispositive portion of which states:
COURT OF APPEALS and PEDRO ZAPATOS, respondents.
WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendant Philippine
BELLOSILLO, J.:
AirLines, Inc. ordering the latter to pay:
This petition for review in certiorari seeks to annul and set aside the decision of the then Intermediate Appellant Court,1 now
(1) As actual damages, the sum of Two Hundred Pesos (P200.00) representing plaintiff's expenses for
Court of Appeals, dated 28 February 1985, in AC-G.R. CV No. 69327 ("Pedro Zapatos v. Philippine Airlines, Inc.") affirming the
transportation, food and accommodation during his stranded stay at Cotabato City; the sum of Forty-
decision of the then Court of first Instance, now Regional Trial Court, declaring Philippine Airlines, Inc., liable in damages for
Eight Pesos (P48.00) representing his flight fare from Cotabato City to Iligan city; the sum of Five Hundred
breach of contract.
Pesos (P500.00) representing plaintiff's transportation expenses from Iligan City to Ozamiz City; and the
sum of Five Thousand Pesos (P5,000.00) as loss of business opportunities during his stranded stay in
On 25 November 1976, private respondent filed a complaint for damages for breach of contract of carriage 2 against Philippine
Cotabato City;
Airlines, Inc. (PAL), before the then Court of First Instance, now Regional Trial Court, of Misamis Occidental, at Ozamiz City.
According to him, on 2 August 1976, he was among the twenty-one (21) passengers of PAL Flight 477 that took off from Cebu
(2) As moral damages, the sum of Fifty Thousand Pesos (P50,000.00) for plaintiff's hurt feelings, serious
bound for Ozamiz City. The routing of this flight was Cebu-Ozamiz-Cotabato. While on flight and just about fifteen (15) minutes
anxiety, mental anguish and unkind and discourteous treatment perpetrated by defendant's employees
before landing at Ozamiz City, the pilot received a radio message that the airport was closed due to heavy rains and inclement
during his stay as stranded passenger in Cotabato City;
weather and that he should proceed to Cotabato City instead.
(3) As exemplary damages, the sum of Ten Thousand Pesos (P10,000.00) to set a precedent to the
Upon arrival at Cotabato City, the PAL Station Agent informed the passengers of their options to return to Cebu on flight 560 of
defendant airline that it shall provide means to give comfort and convenience to stranded passengers;
the same day and thence to Ozamiz City on 4 August 1975, or take the next flight to Cebu the following day, or remain at
Cotabato and take the next available flight to Ozamiz City on 5 August 1975.3 The Station Agent likewise informed them that
(4) The sum of Three Thousand Pesos (P3,000.00) as attorney's fees;
Flight 560 bound for Manila would make a stop-over at Cebu to bring some of the diverted passengers; that there were only six
(6) seats available as there were already confirmed passengers for Manila; and, that the basis for priority would be the check-in
(5) To pay the costs of this suit.
sequence at Cebu.
PAL appealed to the Court of Appeals which on 28 February 1985, finding no reversible error, affirmed the judgment of the
Private respondent chose to return to Cebu but was not accommodated because he checked-in as passenger No. 9 on Flight
court a quo. 11
477. He insisted on being given priority over the confirmed passengers in the accommodation, but the Station Agent refused
private respondent's demand explaining that the latter's predicament was not due to PAL's own doing but to be a force
PAL then sought recourse to this Court by way of a petition for review on certiorari 12 upon the following issues: (1) Can the
majeure.4
Court of Appeals render a decision finding petitioner (then defendant-appellant in the court below) negligent and,
consequently, liable for damages on a question of substance which was neither raised on a question nor proved at the trial? (2)
Private respondent tried to stop the departure of Flight 560 as his personal belongings, including a package containing a camera
Can the Court of Appeals award actual and moral damages contrary to the evidence and established jurisprudence? 13
which a certain Miwa from Japan asked him to deliver to Mrs. Fe Obid of Gingoog City, were still on board. His plea fell on deaf
ears. PAL then issued to private respondent a free ticket to Iligan city, which the latter received under protest. 5 Private
An assiduous examination of the records yields no valid reason for reversal of the judgment on appeal; only a modification of its
respondent was left at the airport and could not even hitch a ride in the Ford Fiera loaded with PAL personnel. 6 PAL neither
disposition.
provided private respondent with transportation from the airport to the city proper nor food and accommodation for his stay in
Cotabato City.
In its petition, PAL vigorously maintains that private respondent's principal cause of action was its alleged denial of private
respondent's demand for priority over the confirmed passengers on Flight 560. Likewise, PAL points out that the complaint did
The following day, private respondent purchased a PAL ticket to Iligan City. He informed PAL personnel that he would not use
not impute to PAL neglect in failing to attend to the needs of the diverted passengers; and, that the question of negligence was
the free ticket because he was filing a case against PAL.7 In Iligan City, private respondent hired a car from the airport to
not and never put in issue by the pleadings or proved at the trial.
Kolambugan, Lanao del Norte, reaching Ozamiz City by crossing the bay in a launch. 8 His personal effects including the camera,
which were valued at P2,000.00 were no longer recovered.
Contrary to the above arguments, private respondent's amended complaint touched on PAL's indifference and inattention to his
predicament. The pertinent portion of the amended complaint 14 reads:
On 13 January 1977, PAL filed its answer denying that it unjustifiably refused to accommodate private respondent. 9It alleged
that there was simply no more seat for private respondent on Flight 560 since there were only six (6) seats available and the
priority of accommodation on Flight 560 was based on the check-in sequence in Cebu; that the first six (6) priority passengers
98
 10. That by virtue of the refusal of the defendant through its agent in Cotabato to accommodate (sic) and
allow the plaintiff to take and board the plane back to Cebu, and by accomodating (sic) and allowing
passengers from Cotabato for Cebu in his stead and place, thus forcing the plaintiff against his will, to be
left and stranded in Cotabato, exposed to the peril and danger of muslim rebels plundering at the time,
the plaintiff, as a consequence, (have) suffered mental anguish, mental torture, social humiliation,
bismirched reputation and wounded feeling, all amounting to a conservative amount of thirty thousand
(P30,000.00) Pesos.
To substantiate this aspect of apathy, private respondent testified 15
A I did not even notice that I was I think the last passenger or the last person out of the PAL employees and army personnel that
were left there. I did not notice that when I was already outside of the building after our conversation.
Q What did you do next?
A I banished (sic) because it seems that there was a war not far from the airport. The sound of guns and the soldiers were
plenty.
Q After that what did you do?
A I tried to look for a transportation that could bring me down to the City of Cotabato.
Q Were you able to go there?
A I was at about 7:00 o'clock in the evening more or less and it was a private jeep that I boarded. I was even questioned why I
and who am (sic) I then. Then I explained my side that I am (sic) stranded passenger. Then they brought me downtown at
Cotabato.
Q During your conversation with the Manager were you not offered any vehicle or transportation to Cotabato airport
downtown?
A In fact I told him (Manager) now I am by-passed passenger here which is not my destination what can you offer me. Then
they answered, "it is not my fault. Let us forget that."
Q In other words when the Manager told you that offer was there a vehicle ready?
A Not yet. Not long after that the Ford Fiera loaded with PAL personnel was passing by going to the City of Cotabato and I
stopped it to take me a ride because there was no more available transportation but I was not accommodated.
Significantly, PAL did not seem to mind the introduction of evidence which focused on its alleged negligence in caring for its
stranded passengers. Well-settled is the rule in evidence that the protest or objection against the admission of evidence should
be presented at the time the evidence is offered, and that the proper time to make protest or objection to the admissibility of
evidence is when the question is presented to the witness or at the time the answer thereto is given. 16 There being no
objection, such evidence becomes property of the case and all the parties are amenable to any favorable or unfavorable effects
resulting from the evidence. 17
PAL instead attempted to rebut the aforequoted testimony. In the process, it failed to substantiate its counter allegation for
want of concrete proof 18 —
Atty. Rubin O. Rivera — PAL's counsel:
Q You said PAL refused to help you when you were in Cotabato, is that right?
99
Private respondent:
A Yes.
Q Did you ask them to help you regarding any offer of transportation or of any other matter asked of them?
A Yes, he (PAL PERSONNEL) said what is? It is not our fault.
Q Are you not aware that one fellow passenger even claimed that he was given Hotel accommodation because they have no
money?
A No, sir, that was never offered to me. I said, I tried to stop them but they were already riding that PAL pick-up jeep, and I was
not accommodated.
Having joined in the issue over the alleged lack of care it exhibited towards its passengers, PAL cannot now turn around and
feign surprise at the outcome of the case. When issues not raised by the pleadings are tried by express or implied consent of
the parties, they shall be treated in all respects as if they had been raised in the pleadings. 19
With regard to the award of damages affirmed by the appellate court, PAL argues that the same is unfounded. It asserts that it
should not be charged with the task of looking after the passengers' comfort and convenience because the diversion of the
flight was due to a fortuitous event, and that if made liable, an added burden is given to PAL which is over and beyond its duties
under the contract of carriage. It submits that granting arguendo that negligence exists, PAL cannot be liable in damages in the
absence of fraud or bad faith; that private respondent failed to apprise PAL of the nature of his trip and possible business
losses; and, that private respondent himself is to be blamed for unreasonably refusing to use the free ticket which PAL issued.
The contract of air carriage is a peculiar one. Being imbued with public interest, the law requires common carriers to carry the
passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with due
regard for all the circumstances. 20 In Air France v. Carrascoso, 21 we held that —
A contract to transport passengers is quite different in kind and degree from any other contractual
relation. And this, because of the relation which an air carrier sustains with the public. Its business is
mainly with the travelling public. It invites people to avail of the comforts and advantages it offers. The
contract of air carriage, therefore, generates a relation attended with a public duty . . . . ( emphasis
supplied).
The position taken by PAL in this case clearly illustrates its failure to grasp the exacting standard required by law. Undisputably,
PAL's diversion of its flight due to inclement weather was a fortuitous event. Nonetheless, such occurrence did not terminate
PAL's contract with its passengers. Being in the business of air carriage and the sole one to operate in the country, PAL is
deemed equipped to deal with situations as in the case at bar. What we said in one case once again must be stressed, i.e., the
relation of carrier and passenger continues until the latter has been landed at the port of destination and has left the carrier's
premises. 22 Hence, PAL necessarily would still have to exercise extraordinary diligence in safeguarding the comfort,
convenience and safety of its stranded passengers until they have reached their final destination. On this score, PAL grossly
failed considering the then ongoing battle between government forces and Muslim rebels in Cotabato City and the fact that the
private respondent was a stranger to the place. As the appellate court correctly ruled —
While the failure of plaintiff in the first instance to reach his destination at Ozamis City in accordance with
the contract of carriage was due to the closure of the airport on account of rain and inclement weather
which was radioed to defendant 15 minutes before landing, it has not been disputed by defendant airline
that Ozamis City has no all-weather airport and has to cancel its flight to Ozamis City or by-pass it in the
event of inclement weather. Knowing this fact, it becomes the duty of defendant to provide all means of
comfort and convenience to its passengers when they would have to be left in a strange place in case of
such by-passing. The steps taken by defendant airline company towards this end has not been put in
 evidence, especially for those 7 others who were not accommodated in the return trip to Cebu, only 6 of
the 21 having been so accommodated. It appears that plaintiff had to leave on the next flight 2 days later.
If the cause of non-fulfillment of the contract is due to a fortuitous event, it has to be the sole and only
cause (Art. 1755 CC., Art. 1733 C.C.) Since part of the failure to comply with the obligation of common
carrier to deliver its passengers safely to their destination lay in the defendant's failure to provide
comfort and convenience to its stranded passengers using extra-ordinary diligence, the cause of non-
fulfillment is not solely and exclusively due to fortuitous event, but due to something which defendant
airline could have prevented, defendant becomes liable to plaintiff. 23
While we find PAL remiss in its duty of extending utmost care to private respondent while being stranded in Cotabato City,
there is no sufficient basis to conclude that PAL failed to inform him about his non-accommodation on Flight 560, or that it was
inattentive to his queries relative thereto.
On 3 August 1975, the Station Agent reported to his Branch Manager in Cotabato City that —
3. Of the fifteen stranded passengers two pax elected to take F478 on August 05, three pax opted to take
F442 August 03. The remaining ten (10) including subject requested that they be instead accommodated
(sic) on F446 CBO-IGN the following day where they intended to take the surface transportation to OZC.
Mr. Pedro Zapatos had by then been very vocal and boiceterous (sic) at the counter and we tactfully
managed to steer him inside the Station Agent's office. Mr. Pedro Zapatos then adamantly insisted that
all the diverted passengers should have been given priority over the originating passengers of F560
whether confirmed or otherwise. We explained our policies and after awhile he seemed pacified and
thereafter took his ticket (in-lieued (sic) to CBO-IGN, COCON basis), at the counter in the presence of five
other passengers who were waiting for their tickets too. The rest of the diverted pax had left earlier after
being assured their tickets will be ready the following day. 24
Aforesaid Report being an entry in the course of business is prima facie evidence of the facts therein stated. Private
respondent, apart from his testimony, did not offer any controverting evidence. If indeed PAL omitted to give information about
the options available to its diverted passengers, it would have been deluged with complaints. But, only private respondent
complained —
Atty. Rivera (for PAL)
Q I understand from you Mr. Zapatos that at the time you were waiting at Cotabato Airport for the decision of PAL, you were
not informed of the decision until after the airplane left is that correct?
A Yes.
COURT:
Q What do you mean by "yes"? You meant you were not informed?
A Yes, I was not informed of their decision, that they will only accommodate few passengers.
Q Aside from you there were many other stranded passengers?
A I believed, yes.
Q And you want us to believe that PAL did not explain (to) any of these passengers about the decision regarding those who will
board the aircraft back to Cebu?
A No, Sir.
100
Q Despite these facts Mr. Zapatos did any of the other passengers complained (sic) regarding that incident?
A There were plenty of argument and I was one of those talking about my case.
Q Did you hear anybody complained (sic) that he has not been informed of the decision before the plane left for Cebu?
A No. 25
Admittedly, private respondent's insistence on being given priority in accommodation was unreasonable considering the
fortuitous event and that there was a sequence to be observed in the booking, i.e., in the order the passengers checked-in at
their port of origin. His intransigence in fact was the main cause for his having to stay at the airport longer than was necessary.
Atty. Rivera:
Q And, you were saying that despite the fact that according to your testimony there were at least 16 passengers who were
stranded there in Cotabato airport according to your testimony, and later you said that there were no other people left there at
that time, is that correct?
A Yes, I did not see anyone there around. I think I was the only civilian who was left there.
Q Why is it that it took you long time to leave that place?
A Because I was arguing with the PAL personnel. 26
Anent the plaint that PAL employees were disrespectful and inattentive toward private respondent, the records are bereft of
evidence to support the same. Thus, the ruling of respondent Court of Appeals in this regard is without basis. 27 On the
contrary, private respondent was attended to not only by the personnel of PAL but also by its Manager." 28
In the light of these findings, we find the award of moral damages of Fifty Thousand Pesos (P50,000.00) unreasonably
excessive; hence, we reduce the same to Ten Thousand Pesos (P10,000.00). Conformably herewith, the award of exemplary
damages is also reduced to five Thousand Pesos (5,000.00). Moral damages are not intended to enrich the private respondent.
They are awarded only to enable the injured party to obtain means, diversion or amusements that will serve to alleviate the
moral suffering he has undergone by reason of the defendant's culpable action. 29
With regard to the award of actual damages in the amount of P5,000.00 representing private respondent's alleged business
losses occasioned by his stay at Cotabato City, we find the same unwarranted. Private respondent's testimony that he had a
scheduled business "transaction of shark liver oil supposedly to have been consummated on August 3, 1975 in the morning"
and that "since (private respondent) was out for nearly two weeks I missed to buy about 10 barrels of shark liver oil," 30 are
purely speculative. Actual or compensatory damages cannot be presumed but must be duly proved with reasonable degree of
certainty. A court cannot rely on speculation, conjecture or guesswork as to the fact and amount of damages, but must depend
upon competent proof that they have suffered and on evidence of the actual amount thereof. 31
WHEREFORE the decision appealed from is AFFIRMED with modification however that the award of moral damages of Fifty
Thousand Pesos (P50,000.00) is reduced to Ten Thousand Pesos (P10,000.00) while the exemplary damages of Ten Thousand
Pesos (P10,000.00) is also reduced to Five Thousand Pesos (P5,000.00). The award of actual damages in the amount Five
Thousand Pesos (P5,000.00) representing business losses occasioned by private respondent's being stranded in Cotabato City is
deleted.
SO ORDERED.
Facts:

Zapatos purchased a ticket from Philippine Air Lines (PAL) wherein it was agreed that the latter would transport him to Ozamiz
City. The plane’s route was from Cebu -Ozamiz-Cotabato. However, due to unfavoarable weather conditions and the fact that
PAL did nothave an all-weather airport, PAL had bypassed Ozamiz City. PAL then informed Zapatos ofhis options, to return to
Cebu on the same day, or take the next flight to Cebu the followingday, or to take the next available flight to Ozamiz City.

Zapatos chose to return to OzamizCity on the same day. However, there were only six (6) seats available and, the seats
weregiven to the passengers according to their check-in sequence at Cebu. Consequently,Zapatos was stranded in Cotabato
City, where a battle between the government and theMuslims was ongoing.During his stay in Cotabato City, PAL also failed to
provide accomodations for Zapatos. Italso refused to have the latter hitch a ride with its employees on a ford truck bound for
the City. It also failed to return Zapatos’ luggage.

This prompted Zapatos to file a complaint for damages against Philippine Air Lines forbreach of contract.PAL claimed that
it should not be charged with the task of looking after the passengers'comfort and convenience because the diversion of the
flight was due to a fortuitous event,and that if made liable, an added burden is given to PAL which is over and beyond its
dutiesunder the contract of carriage.

Issue: w/n the occurrence of a fortuitous event extinguished PAL’s duty to observe extraordinary diligence towards its
passengers?

Ruling:

No. The SC ruled in favor of Zapatos.

The contract of air carriage is a peculiar one. Being imbued with public interest, the lawrequires common carriers to carry
the passengers safely as far as human care and foresightcan provide, using the utmost diligence of very cautious persons, with
due regard for all thecircumstances.

In Air France v. Carrascoso,

we held that
—
A contract to transport passengers is quite different in kind and degree fromany other contractual relation. And this, because
of the relation which an aircarrier sustains with the public. Its business is mainly with the travelling public. It invites people to
avail of the comforts and advantages it offers. Thecontract of air carriage, therefore, generates a relation attended with a
publicduty . . . . ( emphasis supplied).

101
 Civil Case No. 1701 —
Gacal vs. PAL, 183 SCRA 189;
City Fiscal Franklin G. Gacal and Mrs. Corazon M. Gacal — actual damages: P245.60 for hospital and medical expenses of Mrs
SECOND DIVISION
Gacal; P8,995.00 for their personal belongings which were lost and not recovered; P50,000.00 each for moral damages; and
P5,000.00 for attorney's fees, apart from the prayer for an award of exemplary damages (Record, pp. 4-6, Civil Case No. 1701).
G.R. No. L-55300 March 15, 1990
Civil Case No. 1773 —
FRANKLIN G. GACAL and CORAZON M. GACAL, the latter assisted by her husband, FRANKLIN G. GACAL, petitioners,
vs.
Civil Case No. 1797 —
PHILIPPINE AIR LINES, INC., and THE HONORABLE PEDRO SAMSON C. ANIMAS, in his capacity as PRESIDING JUDGE of the
COURT OF FIRST INSTANCE OF SOUTH COTABATO, BRANCH I, respondents.
The trial court, on August 26, 1980, dismissed the complaints finding that all the damages sustained in the premises were
attributed to force majeure.
PARAS, J.:
On September 12, 1980 the spouses Franklin G. Gacal and Corazon M. Gacal, plaintiffs in Civil Case No. 1701, filed a notice of
appeal with the lower court on pure questions of law (Rollo, p. 55) and the petition for review on certiorari was filed with this
This is a, petition for review on certiorari of the decision of the Court of First Instance of South Cotabato, Branch
Court on October 20, 1980 (Rollo, p. 30).
1, *promulgated on August 26, 1980 dismissing three (3) consolidated cases for damages: Civil Case No. 1701, Civil Case No.
1773 and Civil Case No. 1797 (Rollo, p. 35).
The Court gave due course to the petition (Rollo, p. 147) and both parties filed their respective briefs but petitioner failed to file
reply brief which was noted by the Court in the resolution dated May 3, 1982 (Rollo, p. 183).
The facts, as found by respondent court, are as follows:
Petitioners alleged that the main cause of the unfortunate incident is the gross, wanton and inexcusable negligence of
Plaintiffs Franklin G. Gacal and his wife, Corazon M. Gacal, Bonifacio S. Anislag and his wife, Mansueta L.
respondent Airline personnel in their failure to frisk the passengers adequately in order to discover hidden weapons in the
Anislag, and the late Elma de Guzman, were then passengers boarding defendant's BAC 1-11 at Davao
bodies of the six (6) hijackers. They claimed that despite the prevalence of skyjacking, PAL did not use a metal detector which is
Airport for a flight to Manila, not knowing that on the same flight, Macalinog, Taurac Pendatum known as
the most effective means of discovering potential skyjackers among the passengers (Rollo, pp. 6-7).
Commander Zapata, Nasser Omar, Liling Pusuan Radia, Dimantong Dimarosing and Mike Randa, all of
Marawi City and members of the Moro National Liberation Front (MNLF), were their co-passengers, three
Respondent Airline averred that in the performance of its obligation to safely transport passengers as far as human care and
(3) armed with grenades, two (2) with .45 caliber pistols, and one with a .22 caliber pistol. Ten (10)
foresight can provide, it has exercised the utmost diligence of a very cautious person with due regard to all circumstances, but
minutes after take off at about 2:30 in the afternoon, the hijackers brandishing their respective firearms
the security checks and measures and surveillance precautions in all flights, including the inspection of baggages and cargo and
announced the hijacking of the aircraft and directed its pilot to fly to Libya. With the pilot explaining to
frisking of passengers at the Davao Airport were performed and rendered solely by military personnel who under appropriate
them especially to its leader, Commander Zapata, of the inherent fuel limitations of the plane and that
authority had assumed exclusive jurisdiction over the same in all airports in the Philippines.
they are not rated for international flights, the hijackers directed the pilot to fly to Sabah. With the same
explanation, they relented and directed the aircraft to land at Zamboanga Airport, Zamboanga City for
Similarly, the negotiations with the hijackers were a purely government matter and a military operation, handled by and subject
refueling. The aircraft landed at 3:00 o'clock in the afternoon of May 21, 1976 at Zamboanga Airport.
to the absolute and exclusive jurisdiction of the military authorities. Hence, it concluded that the accident that befell RP-C1161
When the plane began to taxi at the runway, it was met by two armored cars of the military with machine
was caused by fortuitous event, force majeure and other causes beyond the control of the respondent Airline.
guns pointed at the plane, and it stopped there. The rebels thru its commander demanded that a DC-
aircraft take them to Libya with the President of the defendant company as hostage and that they be
The determinative issue in this case is whether or not hijacking or air piracy during martial law and under the circumstances
given $375,000 and six (6) armalites, otherwise they will blow up the plane if their demands will not be
obtaining herein, is a caso fortuito or force majeure which would exempt an aircraft from payment of damages to its passengers
met by the government and Philippine Air Lines. Meanwhile, the passengers were not served any food
whose lives were put in jeopardy and whose personal belongings were lost during the incident.
nor water and it was only on May 23, a Sunday, at about 1:00 o'clock in the afternoon that they were
served 1/4 slice of a sandwich and 1/10 cup of PAL water. After that, relatives of the hijackers were
allowed to board the plane but immediately after they alighted therefrom, an armored car bumped the Under the Civil Code, common carriers are required to exercise extraordinary diligence in their vigilance over the goods and for
stairs. That commenced the battle between the military and the hijackers which led ultimately to the the safety of passengers transported by them, according to all the circumstances of each case (Article 1733). They are
liberation of the surviving crew and the passengers, with the final score of ten (10) passengers and three presumed at fault or to have acted negligently whenever a passenger dies or is injured (Philippine Airlines, Inc. v. National Labor
(3) hijackers dead on the spot and three (3) hijackers captured. Relations Commission, 124 SCRA 583 [1983]) or for the loss, destruction or deterioration of goods in cases other than those
enumerated in Article 1734 of the Civil Code (Eastern Shipping Lines, Inc. v. Intermediate Appellate Court, 150 SCRA 463
[1987]).
City Fiscal Franklin G. Gacal was unhurt. Mrs. Corazon M. Gacal suffered injuries in the course of her
jumping out of the plane when it was peppered with bullets by the army and after two (2) hand grenades
exploded inside the plane. She was hospitalized at General Santos Doctors Hospital, General Santos City, The source of a common carrier's legal liability is the contract of carriage, and by entering into said contract, it binds itself to
for two (2) days, spending P245.60 for hospital and medical expenses, Assistant City Fiscal Bonifacio S. carry the passengers safely as far as human care and foresight can provide. There is breach of this obligation if it fails to exert
Anislag also escaped unhurt but Mrs. Anislag suffered a fracture at the radial bone of her left elbow for extraordinary diligence according to all the circumstances of the case in exercise of the utmost diligence of a very cautious
which she was hospitalized and operated on at the San Pedro Hospital, Davao City, and therefore, at person (Isaac v. Ammen Transportation Co., 101 Phil. 1046 [1957]; Juntilla v. Fontanar, 136 SCRA 624 [1985]).
Davao Regional Hospital, Davao City, spending P4,500.00. Elma de Guzman died because of that battle.
Hence, the action of damages instituted by the plaintiffs demanding the following damages, to wit:
102
It is the duty of a common carrier to overcome the presumption of negligence (Philippine National Railways v. Court of Appeals,
139 SCRA 87 [1985]) and it must be shown that the carrier had observed the required extraordinary diligence of a very cautious
person as far as human care and foresight can provide or that the accident was caused by a fortuitous event (Estrada v.
Consolacion, 71 SCRA 523 [1976]). Thus, as ruled by this Court, no person shall be responsible for those "events which could
not be foreseen or which though foreseen were inevitable. (Article 1174, Civil Code). The term is synonymous with caso
fortuito (Lasam v. Smith, 45 Phil. 657 [1924]) which is of the same sense as "force majeure" (Words and Phrases Permanent
Edition, Vol. 17, p. 362).
In order to constitute a caso fortuito or force majeure that would exempt a person from liability under Article 1174 of the Civil
Code, it is necessary that the following elements must concur: (a) the cause of the breach of the obligation must be
independent of the human will (the will of the debtor or the obligor); (b) the event must be either unforeseeable or
unavoidable; (c) the event must be such as to render it impossible for the debtor to fulfill his obligation in a normal manner;
and (d) the debtor must be free from any participation in, or aggravation of the injury to the creditor (Lasam v. Smith, 45 Phil.
657 [1924]; Austria v. Court of Appeals, 39 SCRA 527 [1971]; Estrada v. Consolacion, supra; Vasquez v. Court of Appeals, 138
SCRA 553 [1985]; Juan F. Nakpil & Sons v. Court of Appeals, 144 SCRA 596 [1986]). Caso fortuito or force majeure, by definition,
are extraordinary events not foreseeable or avoidable, events that could not be foreseen, or which, though foreseen, are
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. The mere difficulty to foresee the happening is not impossibility to foresee
the same (Republic v. Luzon Stevedoring Corporation, 21 SCRA 279 [1967]).
Applying the above guidelines to the case at bar, the failure to transport petitioners safely from Davao to Manila was due to the
skyjacking incident staged by six (6) passengers of the same plane, all members of the Moro National Liberation Front (MNLF),
without any connection with private respondent, hence, independent of the will of either the PAL or of its passengers.
Under normal circumstances, PAL might have foreseen the skyjacking incident which could have been avoided had there been a
more thorough frisking of passengers and inspection of baggages as authorized by R.A. No. 6235. But the incident in question
occurred during Martial Law where there was a military take-over of airport security including the frisking of passengers and
the inspection of their luggage preparatory to boarding domestic and international flights. In fact military take-over was
specifically announced on October 20, 1973 by General Jose L. Rancudo, Commanding General of the Philippine Air Force in a
letter to Brig. Gen. Jesus Singson, then Director of the Civil Aeronautics Administration (Rollo, pp. 71-72) later confirmed shortly
before the hijacking incident of May 21, 1976 by Letter of Instruction No. 399 issued on April 28, 1976 (Rollo, p. 72).
Otherwise stated, these events rendered it impossible for PAL to perform its obligations in a nominal manner and obviously it
cannot be faulted with negligence in the performance of duty taken over by the Armed Forces of the Philippines to the
exclusion of the former.
Finally, there is no dispute that the fourth element has also been satisfied. Consequently the existence of force majeure has
been established exempting respondent PAL from the payment of damages to its passengers who suffered death or injuries in
their persons and for loss of their baggages.
PREMISES CONSIDERED, the petition is hereby DISMISSED for lack of merit and the decision of the Court of First Instance of
South Cotabato, Branch I is hereby AFFIRMED.
SO ORDERED.
GACAL v. PAL
NATURE
Petition for review on certiorari of the decision of the Court of First Instance
FACTS:
Franklin G. Gacal and his wife, Corazon, Bonifacio S. Anislag and his wife, Mansueta, and the late Elma de Guzman, boarded a
PAL flight to Manila from the Davao Airport. Commander Zapata, and five other armed members of the Moro National
103
Liberation Front (MNLF), all passengers of the same flight, hijacked the aircraft ten minutes after take off. The hijackers directed
the pilot to fly to Libya but upon the pilot’s explanation of the fuel limitations, they relented and directed the aircraft to
land at Zamboanga Airport.
At the runway of the Zamboanga Airport, the aircraft was met by two armored cars of the military with machine guns pointed
at the plane. The rebels demanded that a DC-aircraft take them to Libya with the President of PAL as hostage and that they be
given $375,000 and 6 armalites, otherwise they will blow up the plane. The negotiations lasted for three days and it was only
on the third day that the passengers were served 1/4 slice of a sandwich and 1/10 cup of PAL water. On the same day, relatives
of the hijackers were allowed to board the plane but immediately after they alighted therefrom, a battle between the military
and the hijackers ensued, culminating in the liberation of the surviving crew and passengers, the death of 10 passengers and 3
hijackers, and the capture of the 3 others.
Franklin G. Gacal was unhurt but his wife suffered injuries and was hospitalized for 2 days. Bonifacio S. Anislag also escaped
unhurt but Mrs. Anislag suffered a fracture at the radial bone of her left elbow for which she was hospitalized and operated on.
Elma de Guzman died because of that battle.
The plaintiffs filed an action for damages demanding from PAL actual damages for hospital and medical expenses and the value
of lost personal belongings, moral damages, attorney’s fees and exemplary damages. The trial court dismissed the
complaints finding that all the damages sustained in the premises were attributed to force majeure. Hence, this petition.
ISSUE: Whether or not PAL is liable for damages
HELD:
NO. Under Art 1733 of the Civil Code, common carriers are required to exercise extraordinary diligence in their vigilance over
the goods and for the safety of passengers transported by them, according so all the circumstances of each case. They are
presumed at fault or to have acted negligently whenever a passenger dies or is injured or for the loss, destruction or
deterioration of goods in cases other than those enumerated in Article 1734 of the Civil Code.
The source of a common carrier's legal liability is the contract of carriage, and by entering into said contract, it binds itself to
carry the passengers safely as far as human care and foresight can provide. There is breach of this obligation if it fails to exert
extraordinary diligence according to all the circumstances of the case in exercise of the utmost diligence of a very cautious
person.
It is the duty of a common carrier to overcome the presumption of negligence and it must be shown that the carrier had
observed the required extraordinary diligence of a very cautious person as far as human care and foresight can provide or that
the accident was caused by a fortuitous event. Thus, as ruled by this Court, no person shall be responsible for those "events
which could not be foreseen or which though foreseen were inevitable." (Article 1174, Civil Code). The term is synonymous
with caso fortuito which is of the same sense as "force majeure".
In order to constitute a caso fortuito or force majeure that would exempt a person from liability under Article 1174 of the Civil
Code, it is necessary that the following elements must concur: (a) the cause of the breach of the obligation must be
independent of the human will (the will of the debtor or the obligor); (b) the event must be either unforeseeable or
unavoidable; (c) the event must be such as to render it impossible for the debtor to fulfill his obligation in a normal manner;
and (d) the debtor must be free from any participation in, or aggravation of the injury to the creditor. Caso fortuito or force
majeure, by definition, are extraordinary events not foreseeable or avoidable, events that could not be foreseen, or which,
though foreseen, are inevitable. It is, therefore, not enough that the event should not have been foreseen or anticipated, as is
Facts:
Plaintiffs Franklin Gacal, his wife and three others were passengers of PAL plane at Davao Airport for a flight to Manila, not
knowing that the flight, were Commander Zapata with other members of Moro National Liberation Front. They were armed
with grenades and pistols. After take off, the members of MNLF announced a hijacking and directed the pilot to fly directly to
Libya, later to Sabah. They were, however, forced to land in Zamboanga airport for refueling, because the plane did not have
enough fuel to make direct flight to Sabah. When the plane began to taxi at the runaway of Zamboanga airport, it was met by
two armored cars of the military.

An armored car subsequently bumped the stairs leading inside the plane. That commenced the battle between the military and
the hijackers, which led ultimately to the liberation of the plane’s surviving crew and passengers with the final score of ten
passengers and three hijackers dead.

Issue: Whether or not hijacking is a case fortuito or force majeure, which would exempt an aircraft from liability for, damages to
its passengers and personal belongings that were lost during the incident?

Held:

In order to constitute a caso fortuito that would exempt from liability under Art 1174 of the civil code, it is necessary that the
following elements must occur: (a) the cause of the breach of obligation must be independent of human will; (b) the event
must be unforeseeable or unavoidable; (c) the event must be such as to render it impossible for the debtor to fulfill his
obligation in a normal manner; (d) the debtor must be free from any participation in or aggravation of the injury to the
creditor.

Applying the above guidelines, the failure to transport the petitioners safely from Davao to Manila was due to the skyjacking
incident staged buy the MNLF without connection to the private respondent, hence, independent of will of PAL or its
passengers.

The events rendered it impossible for PAL to perform its obligation in a normal manner and it cannot be faulted for negligence
on the duty performed by the military. The existence of force majeure has been established thus exempting PAL from payment
of damages.

104
 The private respondents brought this suit for breach of contract of carriage in the Regional Trial Court, Branch VI, Iligan City. In
its decision, dated December 28, 1990, the trial court dismissed the complaint, holding as follows:
Fortune Express, Inc. vs. CA, March 18, 1999;
The fact that defendant, through Operations Manager Diosdado Bravo, was informed of the "rumors"
SECOND DIVISION
that the Moslems intended to take revenge by burning five buses of defendant is established since the
latter also utilized Crisanto Generalao as a witness. Yet despite this information, the plaintiffs charge,
G.R. No. 119756 March 18, 1999
defendant did not take proper precautions. . . . Consequently, plaintiffs now fault the defendant for
ignoring the report. Their position is that the defendant should have provided its buses with security
FORTUNE EXPRESS, INC., petitioner,
guards. Does the law require common carriers to install security guards in its buses for the protection and
vs.
safety of its passengers? Is the failure to post guards on omission of the duty to "exercise the diligence of
COURT OF APPEALS, PAULIE U.CAORONG, and minor childrenYASSER KING CAORONG, ROSE HEINNI and PRINCE ALEXANDER,
a good father of the family" which could have prevented the killing of Atty. Caorong? To our mind, the
all surnamed CAORONG, and represented by their mother PAULIE U. CAORONG, respondents.
diligence demanded by law does not include the posting of security guard in buses. It is an obligation that
properly belongs to the State. Besides, will the presence of one or two security guards suffice to deter a
MENDOZA, J.:
determined assault of the lawless and thus prevent the injury complained of? Maybe so, but again,
perhaps not. In other words, the presence of a security guard is not a guarantee that the killing of Atty.
This is an appeal by petition for review on certiorari of the decision, dated July 29, 1994, of the Court of Appeals, which Caorong would have been definitely avoided.
reversed the decision of the Regional Trial Court, Branch VI, Iligan City. The aforesaid decision of the trial court dismissed the
complaint of public respondents against petitioner for damages for breach of contract of carriage filed on the ground that
Accordingly, the failure of defendant to accord faith and credit to the report of Mr. Generalao and the
petitioner had not exercised the required degree of diligence in the operation of one of its buses. Atty. Talib Caorong, whose
fact that it did not provide security to its buses cannot, in the light of the circumstances, be characterized
heirs are private respondents herein, was a passenger of the bus and was killed in the ambush involving said bus.
as negligence.
The facts of the instant case are as follows:
Finally, the evidence clearly shows that the assalants did not have the least intention of the harming any
of the passengers. They ordered all the passengers to alight and set fire on the bus only after all the
Petitioner is a bus company in northern Mindanao. Private respondent Paulie Caorong is the widow of Atty. Caorong, while passengers were out of danger. The death of Atty. Caorong was an unexpected and unforseen occurrense
private respondents Yasser King, Rose Heinni, and Prince Alexander are their minor children. over which defendant had no control. Atty. Caorong performed an act of charity and heroism in coming
to the succor of the driver even in the face of danger. He deserves the undying gratitude of the driver
On November 18, 1989, a bus of petitioner figured in an accident with a jeepney in Kauswagan, Lanao del Norte, resulting in whose life he saved. No one should blame him for an act of extraordinary charity and altruism which cost
the death of several passengers of the jeepney, including two Maranaos. Crisanto Generalao, a volunteer field agent of the his life. But neither should any blame be laid on the doorstep of defendant. His death was solely due to
Constabulary Regional Security Unit No. X, conducted an investigation of the accident. He found that the owner of the jeepney the willfull acts of the lawless which defendant could neither prevent nor to stop.
was a Maranao residing in Delabayan, Lanao del Norte and that certain Maranaos were planning to take revenge on the
petitioner by burning some of its buses. Generalao rendered a report on his findings to Sgt. Reynaldo Bastasa of the Philippine WHEREFORE, in view of the foregoing, the complaint is hereby dismissed. For lack of merit, the counter-
Constabulary Regional Headquarters at Cagayan de Oro. Upon the instruction of Sgt. Bastasa, he went to see Diosdado Bravo, claim is likewise dismissed. No costs.4
operations manager of petitioner, its main office in Cagayan de Oro City. Bravo assured him that the necessary precautions to
insure the safety of lives and property would be taken.1
On appeal, however, the Court of Appeals reversed. It held:
At about 6:45 P.M. on November 22, 1989, three armed Maranaos who pretended to be passengers, seized a bus of petitioner
In the case at bench, how did defendant-appellee react to the tip or information that certain Maranao
at Linamon, Lanao del Norte while on its way to Iligan City. Among the passengers of the bus was Atty. Caorong. The leader of
hotheads were planning to burn five of its buses out of revenge for the deaths of two Maranaos in an
the Maranaos, identified as one Bashier Mananggolo, ordered the driver, Godofredo Cabatuan, to stop the bus on the side of
earlier collision involving appellee's bus? Except for the remarks of appellee's operations manager that
the highway. Mananggolo then shot Cabatuan on the arm, which caused him to slump on the steering wheel. The one of the
"we will have our action . . . . and I'll be the one to settle it personally," nothing concrete whatsoever was
companions of Mananggolo started pouring gasoline inside the bus, as the other held the passenger at bay with a handgun.
taken by appellee or its employees to prevent the execution of the threat. Defendant-appellee never
Mananggolo then ordered the passenger to get off the bus. The passengers, including Atty. Caorong, stepped out of the bus and
adopted even a single safety measure for the protection of its paying passengers. Were there available
went behind the bushes in a field some distance from the highway. 2
safeguards? Of course, there were: one was frisking passengers particularly those en route to the area
where the threats were likely to be carried out such as where the earlier accident occurred or the place
However, Atty. Caorong returned to the bus to retrieve something from the overhead rack. at that time, one of the armed men of influence of the victims or their locality. If frisking was resorted to, even temporarily, . . . . appellee
was pouring gasoline on the head of the driver. Cabatuan, who had meantime regained consciousness, heard Atty. Caorong might be legally excused from liabilty. Frisking of passengers picked up along the route could have been
pleading with the armed men to spare the driver as he was innocent of any wrong doing and was only trying to make a living. implemented by the bus conductor; for those boarding at the bus terminal, frisking could have been
The armed men were, however, adamant as they repeated the warning that they were going to burn the bus along with its conducted by him and perhaps by additional personnel of defendant-appellee. On hindsight, the
driver. During this exchange between Atty. Caorong and the assailants, Cabatuan climbed out of the left window of the bus and handguns and especially the gallon of gasoline used by the felons all of which were brought inside the
crawled to the canal on the opposite side of the highway. He heard shots from inside the bus. Larry de la Cruz, one of the bus would have been discovered, thus preventing the burning of the bus and the fatal shooting of the
passengers, saw that Atty. Caorong was hit. Then the bus was set on fire. Some of the passengers were able to pull Atty. victim.
Caorong out of the burning bus and rush him to the Mercy Community Hospital in Iligan City, but he died while undergoing
operation.3

105
 Appellee's argument that there is no law requiring it to provide guards on its buses and that the safety of
citizens is the duty of the government, is not well taken. To be sure, appellee is not expected to assign
security guards on all its buses; if at all, it has the duty to post guards only on its buses plying
predominantly Maranaos areas. As discussed in the next preceding paragraph, least appellee could have
done in response to the report was to adopt a system of verification such as the frisking of passengers
boarding at its buses. Nothing, and no repeat, nothing at all, was done by defendant-appellee to protect
its innocent passengers from the danger arising from the "Maranao threats." It must be observed that
frisking is not a novelty as a safety measure in our society. Sensitive places — in fact, nearly all important
places — have applied this method of security enhancement. Gadgets and devices are avilable in the
market for this purpose. It would not have weighed much against the budget of the bus company if such
items were made available to its personnel to cope up with situations such as the "Maranaos threats."
In view of the constitutional right to personal privacy, our pronouncement in this decision should not be
construed as an advocacy of mandatory frisking in all public conveyances. What we are saying is that
given the circumstances obtaining in the case at bench that: (a) two Maranaos died because of a
vehicular collision involving one of appellee's vehicles; (b) appellee received a written report from a
member of the Regional Security Unit, Constabulary Security Group, that the tribal/ethnic group of the
two deceased were planning to burn five buses of appellee out of revenge; and (c) appelle did nothing —
absolutely nothing — for the safety of its passengers travelling in the area of influence of the victims,
appellee has failed to exercise the degree of dilegence required of common carriers. Hence, appellee
must be adjudge liable.
WHEREFORE the decision appealed from is hereby REVERSED and another rendered ordering defendant-
appellee to pay plaintiffs-appellants the following:
1) P3,399,649.20 as death indemnity;
2) P50,000.00 and P500.00 per appearance as attorney's fee and
Costs against defendant-appellee.5
Hence, this appeal. Petitioner contends:
(A) THAT PUBLIC RESPONDENT ERRED IN REVERSING THE DECISION OF THE REGIONAL TRIAL COURT DATED DECEMBER 28,
1990 DISMISSING THE COMPLAINT AS WELL AS THE COUNTERCLAIM, AND FINDING FOR PRIVATE RESPONDENTS BY ORDERING
PETITIONER TO PAY THE GARGANTUAN SUM OF P3,449,649.20 PLUS P500.00 PER APPEARANCE AS ATTORNEY'S FEES, AS WELL
AS DENYING PETITIONERS MOTION FRO RECONSIDERATION AND THE SUPPLEMENT TO SAID MOTION, WHILE HOLDING,
AMONG OTHERS, THAT THE PETITIONER BREACHED THE CONTRACT OF THE CARRIAGE BY ITS FAILURE TO EXCERCISE THE
REQUIRED DEGREE OF DILIGENCE;
(B) THAT THE ACTS OF THE MARANAO OUTLAWS WERE SO GRAVE, IRRESISTABLE, VIOLENT, AND FORCEFULL, AS TO BE
REGARDED AS CASO FORTUITO; AND
(C) THAT PUBLIC RESPONDENT COURT OF APPEALS SERIOUSLY ERRED IN HOLDING THAT PETITIONER COULD HAVE PROVIDED
ADEQUATE SECURITY IN PREDOMINANTLY MUSLIM AREAS AS PART OF ITS DUTY TO OBSERVE EXTRA-ORDINARY DILIGENCE AS A
COMMON CARRIER.
The instant has no merit.
First. Petitioner's Breach of the Contract of Carriage.
106
Art. 1763 of the Civil Code provides that a common carrier is responsible for injuries suffered by a passenger on account of
wilfull acts of other passengers, if the employees of the common carrier could have prevented the act through the exercise of
the diligence of a good father of a family. In the present case, it is clear that because of the negligence of petitioner's
employees, the seizure of the bus by Mananggolo and his men was made possible.
Despite warning by the Philippine Constabulary at Cagayan de Oro that the Maranaos were planning to take revenge on the
petitioner by burning some of its buses and the assurance of petitioner's operation manager, Diosdado Bravo, that the
necessary precautions would be taken, petitioner did nothing to protect the safety of its passengers.
Had petitioner and its employees been vigilant they would not have failed to see that the malefactors had a large quantity of
gasoline with them. Under the circumstances, simple precautionary measures to protect the safety of passengers, such as
frisking passengers and inspecting their baggages, preferably with non-intrusive gadgets such as metal detectors, before
allowing them on board could have been employed without violating the passenger's constitutional rights. As this Court
amended in Gacal v. Philippine Air Lines, Inc., 6 a common carrier can be held liable for failing to prevent a hijacking by frisking
passengers and inspecting their baggages.
From the foregoing, it is evident that petitioner's employees failed to prevent the attack on one of petitioner's buses because
they did not exercise the diligence of a good father of a family. Hence, petitioner should be held liable for the death of Atty.
Caorong.
Second. Seizure of Petitioner's Bus not a Case of Force Majeure
The petitioner contends that the seizure of its bus by the armed assailants was a fortuitous event for which it could not be held
liable.
Art. 1174 of the Civil Code defines a fortuitous event as an occurence which could not be foreseen, is inevitable. In Yobido v.
Court of Appeals, 7 we held that to considered as force majeure, it is necessary that (1) the cause of the breach of the obligation
must be independent of the human will; (2) the event must be either unforeseeable or unavoidable; (3) the occurence must be
render it impossible for the debtor to fulfill the obligation in a normal manner; and (4) the obligor must be free of participation
in, or aggravation of, the injury to the creditor. The absence of any of the requisites mentioned above would prevent the obligor
from being excused from liability.
Thus, in Vasquez v. Court of Appeals, 8 it was held that the common carrier was liable for its failure to take the necessary
precautions against an approaching typhoon, of which it was warned, resulting in the loss of the lives of several passengers. The
event was forseeable, and, thus, the second requisite mentioned above was not fulfilled. This ruling applies by analogy to the
present case. Despite the report of PC agent Generalao that the Maranaos were going to attack its buses, petitioner took no
steps to safeguard the lives and properties of its passengers. The seizure of the bus of the petitioner was foreseeable and,
therefore, was not a fortuitous event which would exempt petitioner from liabilty.
Petitioner invokes the ruling in Pilapil v. Court of Appeals, 9 and De Guzman v. Court of Appeals, 10 in support of its contention
that the seizure of its bus by the assailants constitutes force majeure. In Pilapil v. Court of Appeals, 11 it was held that a common
carrier is not liable for failing to install window grills on its buses to protect the passengers from injuries cause by rocks hurled
at the bus by lawless elements. On the other hand, in De Guzman v. Court of Appeals, 12 it was ruled that a common carriers is
not responsible for goods lost as a result of a robbery which is attended by grave or irresistable threat, violence, or force.
It is clear that the cases of Pilapil and De Guzman do not apply to the prensent case. Art. 1755 of the Civil Code provides that "a
common carrier is bound to carry the passengers as far as human care and foresight can provide, using the utmost diligence of
very cautious persons, with due regard for all the circumstances." Thus, we held in Pilapil and De Guzman that the respondents
therein were not negligent in failing to take special precautions against threats to the safety of passengers which could not be
foreseen, such as tortious or criminal acts of third persons. In the present case, this factor of unforeseeability (the second
requisite for an event to be considered force majeure) is lacking. As already stated, despite the report of PC agent Generalao
that the Maranaos were planning to burn some of petitioner's buses and the assurance of petitioner's operation manager
(Diosdado Bravo) that the necessary precautions would be taken, nothing was really done by petitioner to protect the safety of
passengers.
Third. Deceased not Guilty of Contributory Negligence
The petitioner contends that Atty. Caorong was guilty of contributory negligence in returning to the bus to retrieve something.
But Atty. Caorong did not act recklessly. It should be pointed out that the intended targets of the violence were petitioners and
its employees, not its passengers. The assailant's motive was to retaliate for the loss of life of two Maranaos as a result of the
collision between petitioner's bus and the jeepney in which the two Maranaos were riding. Mananggolo, the leader of the
group which had hijacked the bus, ordered the passengers to get off the bus as they intended to burn it and its driver. The
armed men actually allowed Atty. Caorong to retrieve something from the bus. What apparently angered them was his attempt
to help the driver of the bus by pleading for his life. He was playing the role of the good Samaritan. Certainly, this act cannot
considered an act of negligence, let alone recklessness.
Fourth. Petitioner Liable to Private Respaondents for Damages
We now consider the question of damages that the heirs of Atty. Caorong, private respondents herein, are entitled to recover
from the petitioner.
Indemnity for Death. Art. 1764 of the Civil Code, in relation to Art. 2206 thereof, provides for the payment of indemnity for the
death of passengers caused by the breach of contract of carriage by a common carrier. Initially fixed in Art. 2206 at P3,000.00,
the amount of the said indemnity for death has through the years been gradually increased in view of the declining value of the
peso. It is presently fixed at P50,000.00. 13 Private respondents are entitled to this amount.
Actual Damages. Art. 2199 provides that "except as provided by law or by stipulation, one is entitled to an adequate
compensation only for such pecuniary loss suffered by him as has duly proved." The trial court found that the private
respondents spent P30,000.00 for the wake and burial of Atty. Caorong. 14 Since petitioner does not question this finding of the
trial court, it is liable to private respondent in the said amount as actual damages.
Moral Damages. Under Art. 2206, the "spouse, legitimate and illegitimate descendants and ascendants of the deceased may
demand moral damages for mental anguish by reason of the death of the deceased." The trial court found that private
respondent Paulie Caorong suffered pain from the death of her husband and worry on how to provide support for their minor
children, private respondents Yasser King, Rose Heinni, and Prince Alexander. 15 The petitioner likewise does not question this
finding of the trial court. Thus, in accordance with recent decisions of this Court, 16 we hold that the petitioner is liable to the
private respondents in the amount of P100,000.00 as moral damages for the death of Atty. Caorong.
Exemplary Damages. Art. 2232 provides that "in contracts and quasi-contracts, the court may award exemplary damages if the
defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent reckless manner." In the present case, the
petitioner acted in a wanton and reckless manner. Despite warning that the Maranaos were planning to take revenge against
the petitioner by burning some of its buses, and contary to the assurance made by its operations manager that the necessary
precautions would be take, the petitioner and its employees did nothing to protect the safety of passengers. Under the
circumtances, we deem it reasonable to award private respondents exemplary damages in the amount of P100,000.00. 17
Attorney's Fees. Pursuant to Art. 2208, attorney's fees may be recovered when, as in the instant case, exemplary damages are
awarded. In the recent case of Sulpicio Lines, Inc. v. Court of Appeals, 18 we held an award of P50,000.00 as attorney's fees to be
reasonable. Hence, the private respondents are entitled to attorney's fees in that amount.
Compensation for Loss of Earning Capacity. Art. 1764 of the Civil Code, in relation to Art. 2206 thereof, provides that in addition
to the indemnity for death arising from the breach of contrtact of carriage by a common carrier, the "defendant shall be liable
for the loss of the earning capacity of the deceased, and the indemnity shall be paid to the heirs of the latter." The formula
established in decided cases for computing net earning capacity is as follows: 19
107
Gross Necessary
Net Earning = Life x Annual — Living
Capacity Expectancy Income Expenses
Life expectancy is equivalent to two thirds (2/3) multiplied by the difference of eighty (80) and the age of the deceased. 20 Since
Atty. Caorong was 37 years old at that time of his death, 21 he had a life expectancy of 28 2/3 more years. 22 His projected gross
annual income, computed based on his monthly salary of P11,385.00. 23 as a lawyer in the Department of Agrarian Reform at
the time of his death, was P148,005.00. 24 Allowing for necessary living expenses of fifty percent (50%) 25 of his projected gross
annual income, his total earning capacity amounts to P2,121,404.90. 26 Hence, the petitioner is liable to the private respondents
in the said amount as a compensation for loss of earning capacity.
WHEREFORE, the decision, dated July 29, 1994, of the Court of Appeals is hereby AFFIRMED with the MODIFICATION that
petitioner Fortune Express, Inc. is ordered to pay the following amounts to private respondents Paulie, Yasser King, Rose Heinni,
and Prince Alexander Caorong:
1. death indemnity in the amount of fifty thousand pesos (P50,000.00);
2. actual damages in the amount of thirty thousand pesos (P30,000.00);
3. moral damages in the amount of one hundred thousand pesos (P100,000.00);
4. exemplary damages in the amount of one hundred thousand pesos (P100,000.00);
5. attorney's fees in the amount of fifty thousand pesos (P50,000.00);
6. compensation for loss of earning capacity in the amount of two million one hundred twenty-one thousand four hundred four
pesos and ninety centavos (P2,121,404.90); and
7. cost of suits.
SO ORDERED.
FACTS:
On November 22, 1989, Atty. Caorong boarded a bus of petitioner going to Iligan City.Three armed Maranaos who pretended to
be passengers, seized the bus at Linamon,Lanao del Norte at around 6:45PM. The leader of the Maranaos, identified as
oneBashier Mananggolo, ordered the driver, Godofredo Cabatuan, to stop the bus on theside of the highway. Mananggolo then
shot Cabatuan on the arm, which caused him toslump on the steering wheel. Then one of the companions of Mananggolo
startedpouring gasoline inside the bus, as the other held the passengers at bay with ahandgun. Mananggolo then ordered the
passengers to get off the bus. Thepassengers, including Atty. Caorong, stepped out of the bus and went behind thebushes in a
field some distance from the highway.
However, Atty. Caorong returned to the bus to retrieve something from the overheadrack. At that time, one of the armed men
was pouring gasoline on the head of thedriver. Cabatuan, who had meantime regained consciousness, heard Atty.
Caorongpleading with the armed men to spare the driver as he was innocent of any wrong doingand was only trying to make a
living. The armed men were adamant as they repeatedtheir warning that they were going to burn the bus along with its driver.
During thisexchange between Atty. Caorong and the assailants, Cabatuan climbed out of the leftwindow of the bus and crawled
to the canal on the opposite side of the highway. Heheard shots from inside the bus. Larry de la Cruz, one of the passengers,
saw that Atty.Caorong was hit. Then the bus was set on fire. Some of the passengers were able topull Atty. Caorong out of the
burning bus and rush him to the Mercy Community Hospitalin Iligan City, but he died while undergoing operation.
The private respondents brought this suit for breach of contract of carriage in theRegional Trial Court, Branch VI, Iligan City. In
the decision, dated December 28, 1990,the trial dismissed the case on the following grounds: first argument is that the
petitioner should have placed security guards knowing that their buses are subject to threats- the trial court’s stand is that the
diligence demanded by law does not include the posting of security guards and it is not a guarantee that the killing would have
been definitelyavoided. Also, that obligation belongs to the state, second argument is that there isfailure on the part of
defendant to accord faith and credit to the report of Generalao andthe fact that it did not provide security to its buses cannot,
in the light of thecircumstances, be characterized as negligence.

Finally, the evidence clearly shows that the assailants did not have the least intention of harming any of the passengers. They
ordered all the passengers to alight and set fireon the bus only after all the passengers were out of danger. The death of Atty.
Caorongwas an unexpected and unforseen occurrence over which defendant had no control.

His death was solely due to the willful acts of the lawless which defendant could neither prevent nor stop.

Issue:
1. Did the petitioner breach the contract of carriage therefore liable to damages?
2. Is the seizure of the bus a case of force majeure?
3. Was the deceased guilty of contributory negligence?

HELD:
The case was decided by the court of Appeals based on the following rulings:First, Art. 1763 of the Civil Code provides that a
common carrier is responsible for injuries suffered by a passenger on account of the willful acts of other passengers, if
theemployees of the common carrier could have prevented the act the exercise of thediligence of a good father of a family. In
the present case, it is clear that because of the negligence of petitioner’s employees, the seizure of the bus by Mananggolo and
his men was made possible.Second, Art. 1174 of the Civil Code defines a fortuitous even as an occurrence whichcould not be
foreseen or which though foreseen, is inevitable.

In Yobido v. Court of Appeals, we held that to be considered as force majeure, it is necessary that: (1) thecause of the breach of
the obligation must be independent of the human will; (2) theevent must be either unforeseeable or unavoidable; (3) the
occurrence must be such asto render it impossible for the debtor to fulfill the obligation in a normal manner; and (4)the obligor
must be free of participation in, or aggravation of, the injury to the creditor.The absence of any of the requisites mentioned
above would prevent the obligor frombeing excused from liability.The petitioner contends that Atty. Caorong was guilty of
contributory negligence inreturning to the bus to retrieve something. But Atty. Caorong did not act recklessly. Itshould be
pointed out that the intended targets of the violence were petitioner and its employees, not its passengers. The assailant’s
motive was to retaliate for the loss of life of two Maranaos as a result of the collision between petitioner’s bus and the jeepney
in which the two Maranaos were riding. Mananggolo, the leader of the group which hadhijacked the bus, ordered the
passengers to get off the bus as they intended to burn itand its driver. The armed men actually allowed Atty. Caorong to
retrieve somethingfrom the bus. What apparently angered them was his attempt to help the driver of thebus by pleading for
his life. He was playing the role of the good Samaritan. Certainly,this act cannot be considered an act of negligence, let alone
recklessness.

108
 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
Pilapil vs. CA, Dec, 22, 1989; the judgment of the court a quo.
SECOND DIVISION
Hence the present petition.
G.R. No. 52159 December 22, 1989
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
JOSE PILAPIL, petitioner,
assumption of certain risks, and the stoning of the bus by a stranger resulting in injury to petitioner-passenger is one such risk
vs.
from which the common carrier may not exempt itself from liability.
HON. COURT OF APPEALS and ALATCO TRANSPORTATION COMPANY, INC., respondents.
We do not agree.
PADILLA, J.:
In consideration of the right granted to it by the public to engage in the business of transporting passengers and goods, a
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.
common carrier does not give its consent to become an insurer of any and all risks to passengers and goods. It merely
57354-R entitled "Jose Pilapil, plaintiff-appellee versus Alatco Transportation Co., Inc., defendant-appellant," which reversed
undertakes to perform certain duties to the public as the law imposes, and holds itself liable for any breach thereof.
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).
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
The record discloses the following facts:
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
Petitioner-plaintiff Jose Pilapil, a paying passenger, boarded respondent-defendant's bus bearing No. 409 at San Nicolas, Iriga
circumstances." Further, in case of death of or injuries to passengers, the law presumes said common carriers to be at fault or
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
to have acted negligently. 2
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
While the law requires the highest degree of diligence from common carriers in the safe transport of their passengers and
petitioner above his left eye. Private respondent's personnel lost no time in bringing the petitioner to the provincial hospital in
creates a presumption of negligence against them, it does not, however, make the carrier an insurer of the absolute safety of its
Naga City where he was confined and treated.
passengers. 3
Considering that the sight of his left eye was impaired, petitioner was taken to Dr. Malabanan of Iriga City where he was treated
Article 1755 of the Civil Code qualifies the duty of extraordinary care, vigilance and precaution in the carriage of passengers by
for another week. Since there was no improvement in his left eye's vision, petitioner went to V. Luna Hospital, Quezon City
common carriers to only such as human care and foresight can provide. what constitutes compliance with said duty is adjudged
where he was treated by Dr. Capulong. Despite the treatment accorded to him by Dr. Capulong, petitioner lost partially his left
with due regard to all the circumstances.
eye's vision and sustained a permanent scar above the left eye.
Article 1756 of the Civil Code, in creating a presumption of fault or negligence on the part of the common carrier when its
Thereupon, petitioner instituted before the Court of First Instance of Camarines Sur, Branch I an action for recovery of damages
passenger is injured, merely relieves the latter, for the time being, from introducing evidence to fasten the negligence on the
sustained as a result of the stone-throwing incident. After trial, the court a quo rendered judgment with the following
former, because the presumption stands in the place of evidence. Being a mere presumption, however, the same is rebuttable
dispositive part:
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
Wherefore, judgment is hereby entered:
In fine, we can only infer from the law the intention of the Code Commission and Congress to curb the recklessness of drivers
1. Ordering defendant transportation company to pay plaintiff Jose Pilapil the sum
and operators of common carriers in the conduct of their business.
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;
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
2. Ordering further defendant transportation company to pay the sum of P
exercise the degree of diligence that the law requires. 5
5,000.00, Philippine Currency, to the plaintiff as moral and exemplary damages;
Petitioner contends that respondent common carrier failed to rebut the presumption of negligence against it by proof on its
3. Ordering furthermore, defendant transportation company to reimburse plaintiff
part that it exercised extraordinary diligence for the safety of its passengers.
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
We do not agree.
4. To pay the costs.
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
SO ORDERED 1

109
injury suffered by the passenger was due to a fortuitous event. Where, as in the instant case, the injury sustained by the granted. On appeal, the Court of Appeals reversed said decision.
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 ISSUE:
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 Whether or not common carriers assume risks to passengers such as the stoning in this case?
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. HELD:

Second, while as a general rule, common carriers are bound to exercise extraordinary diligence in the safe transport of their In consideration of the right granted to it by the public to engage in the business of transporting passengers and goods, a
passengers, it would seem that this is not the standard by which its liability is to be determined when intervening acts of common carrier does not give its consent to become an insurer of any and all risks to passengers and goods. It merely
strangers is to be determined directly cause the injury, while the contract of carriage Article 1763 governs: undertakes to perform certain duties to the public as the law imposes, and holds itself liable for any breach thereof.

Article 1763. A common carrier is responsible for injuries suffered by a passenger on account of the wilful While the law requires the highest degree of diligence from common carriers in the safe transport of their passengers and
acts or negligence of other passengers or of strangers, if the common carrier's employees through the creates a presumption of negligence against them, it does not, however, make the carrier an insurer of the absolute safety of its
exercise of the diligence of a good father of a family could have prevented or stopped the act or passengers.
omission.
Article 1763. A common carrier is responsible for injuries suffered by a passenger on account of the wilful acts or negligence of
Clearly under the above provision, a tort committed by a stranger which causes injury to a passenger does not accord the latter other passengers or of strangers, if the common carrier's employees through the exercise of the diligence of a good father of a
a cause of action against the carrier. The negligence for which a common carrier is held responsible is the negligent omission by family could have prevented or stopped the act or omission.
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 Clearly under the above provision, a tort committed by a stranger which causes injury to a passenger does not accord the latter
strangers, as in the instant case, the degree of care essential to be exercised by the common carrier for the protection of its a cause of action against the carrier. The negligence for which a common carrier is held responsible is the negligent omission by
passenger is only that of a good father of a family. 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
Petitioner has charged respondent carrier of negligence on the ground that the injury complained of could have been strangers, as in the instant case, the degree of care essential to be exercised by the common carrier for the protection of its
prevented by the common carrier if something like mesh-work grills had covered the windows of its bus. passenger is only that of a good father of a family.

We do not agree. FACTS:

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.
Jose Pilapil on board Alatco Transportation Co’s bus was injured because a bystander outside the bus hurled a stone.
ISSUE: Is the bus company liable?
HELD:
No. There is no showing that any such incident previously happened so as to impose an obligation on the part of the personnel
of the bus company to warn the passengers and to take the necessary precaution. Such hurling of a stone constitutes fortuitous
event in this case. The bus company is not an insurer of the absolute safety of its passengers.

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.
FACTS:

Petitioner Pilapil, on board respondent’s bus was hit above his eye by a stone hurled by an unidentified bystander.
Respondent’s personnel lost no time in bringing him to a hospital, but eventually petitioner partially lost his left eye’s vision and
sustained a permanent scar.

Thus, Petitioner lodged an action for recovery of damages before the Court of First Instance of Camarines Sur which the latter
110
 Moreover, the Gillaco case was decided under the provisions of the Civil Code of 1889 which, unlike the present Civil Code, did
not impose upon common carriers absolute liability for the safety of passengers against wilful assaults or negligent acts
Maranan vs. Perez, 20 SCRA 412; committed by their employees. The death of the passenger in the Gillaco case was truly a fortuitous event which exempted the
carrier from liability. It is true that Art. 1105 of the old Civil Code on fortuitous events has been substantially reproduced in Art.
1174 of the Civil Code of the Philippines but both articles clearly remove from their exempting effect the case where the law
EN BANC
expressly provides for liability in spite of the occurrence of force majeure. And herein significantly lies the statutory difference
between the old and present Civil Codes, in the backdrop of the factual situation before Us, which further accounts for a
G.R. No. L-22272 June 26, 1967
different result in the Gillaco case. Unlike the old Civil Code, the new Civil Code of the Philippines expressly makes the common
carrier liable for intentional assaults committed by its employees upon its passengers, by the wording of Art. 1759 which
ANTONIA MARANAN, plaintiff-appellant,
categorically states that
vs.
PASCUAL PEREZ, ET AL., defendants.
Common carriers are liable for the death of or injuries to passengers through the negligence or willful acts of the
PASCUAL PEREZ, defendant appellant.
former's employees, although such employees may have acted beyond the scope of their authority or in violation of
the orders of the common carriers.
BENGZON, J.P., J.:
The Civil Code provisions on the subject of Common Carriers1 are new and were taken from Anglo-American Law.2There, the
Rogelio Corachea, on October 18, 1960, was a passenger in a taxicab owned and operated by Pascual Perez when he was
basis of the carrier's liability for assaults on passengers committed by its drivers rests either on (1) the doctrine of respondeat
stabbed and killed by the driver, Simeon Valenzuela.
superior or (2) the principle that it is the carrier's implied duty to transport the passenger safely.3
Valenzuela was prosecuted for homicide in the Court of First Instance of Batangas. Found guilty, he was sentenced to suffer
Under the first, which is the minority view, the carrier is liable only when the act of the employee is within the scope of his
imprisonment and to indemnify the heirs of the deceased in the sum of P6,000. Appeal from said conviction was taken to the
authority and duty. It is not sufficient that the act be within the course of employment only. 4
Court of Appeals.1äwphï1.ñët
Under the second view, upheld by the majority and also by the later cases, it is enough that the assault happens within the
On December 6 1961, while appeal was pending in the Court of Appeals, Antonia Maranan, Rogelio's mother, filed an action in
course of the employee's duty. It is no defense for the carrier that the act was done in excess of authority or in disobedience of
the Court of First Instance of Batangas to recover damages from Perez and Valenzuela for the death of her son. Defendants
the carrier's orders.5 The carrier's liability here is absolute in the sense that it practically secures the passengers from assaults
asserted that the deceased was killed in self-defense, since he first assaulted the driver by stabbing him from behind.
committed by its own employees.6
Defendant Perez further claimed that the death was a caso fortuito for which the carrier was not liable.
As can be gleaned from Art. 1759, the Civil Code of the Philippines evidently follows the rule based on the second view. At least
The court a quo, after trial, found for the plaintiff and awarded her P3,000 as damages against defendant Perez. The claim
three very cogent reasons underlie this rule. As explained in Texas Midland R.R. v. Monroe, 110 Tex. 97, 216 S.W. 388, 389-390,
against defendant Valenzuela was dismissed. From this ruling, both plaintiff and defendant Perez appealed to this Court, the
and Haver v. Central Railroad Co., 43 LRA 84, 85: (1) the special undertaking of the carrier requires that it furnish its passenger
former asking for more damages and the latter insisting on non-liability. Subsequently, the Court of Appeals affirmed the
that full measure of protection afforded by the exercise of the high degree of care prescribed by the law, inter alia from
judgment of conviction earlier mentioned, during the pendency of the herein appeal, and on May 19, 1964, final judgment was
violence and insults at the hands of strangers and other passengers, but above all, from the acts of the carrier's own servants
entered therein. (Rollo, p. 33).
charged with the passenger's safety; (2) said liability of the carrier for the servant's violation of duty to passengers, is the result
of the formers confiding in the servant's hands the performance of his contract to safely transport the passenger, delegating
Defendant-appellant relies solely on the ruling enunciated in Gillaco v. Manila Railroad Co., 97 Phil. 884, that the carrier is therewith the duty of protecting the passenger with the utmost care prescribed by law; and (3) as between the carrier and the
under no absolute liability for assaults of its employees upon the passengers. The attendant facts and controlling law of that passenger, the former must bear the risk of wrongful acts or negligence of the carrier's employees against passengers, since it,
case and the one at bar are very different however. In the Gillaco case, the passenger was killed outside the scope and the and not the passengers, has power to select and remove them.
course of duty of the guilty employee. As this Court there found:
Accordingly, it is the carrier's strict obligation to select its drivers and similar employees with due regard not only to their
x x x when the crime took place, the guard Devesa had no duties to discharge in connection with the transportation technical competence and physical ability, but also, no less important, to their total personality, including their patterns of
of the deceased from Calamba to Manila. The stipulation of facts is clear that when Devesa shot and killed Gillaco, behavior, moral fibers, and social attitude.
Devesa was assigned to guard the Manila-San Fernando (La Union) trains, and he was at Paco Station awaiting
transportation to Tutuban, the starting point of the train that he was engaged to guard. In fact, his tour of duty was
Applying this stringent norm to the facts in this case, therefore, the lower court rightly adjudged the defendant carrier liable
to start at 9:00 two hours after the commission of the crime. Devesa was therefore under no obligation to safeguard
pursuant to Art. 1759 of the Civil Code. The dismissal of the claim against the defendant driver was also correct. Plaintiff's
the passengers of the Calamba-Manila train, where the deceased was riding; and the killing of Gillaco was not done
action was predicated on breach of contract of carriage 7 and the cab driver was not a party thereto. His civil liability is covered
in line of duty. The position of Devesa at the time was that of another would be passenger, a stranger also awaiting
in the criminal case wherein he was convicted by final judgment.
transportation, and not that of an employee assigned to discharge any of the duties that the Railroad had assumed
by its contract with the deceased. As a result, Devesa's assault can not be deemed in law a breach of Gillaco's
In connection with the award of damages, the court a quo granted only P3,000 to plaintiff-appellant. This is the minimum
contract of transportation by a servant or employee of the carrier. . . . (Emphasis supplied)
compensatory damages amount recoverable under Art. 1764 in connection with Art. 2206 of the Civil Code when a breach of
contract results in the passenger's death. As has been the policy followed by this Court, this minimal award should be increased
Now here, the killing was perpetrated by the driver of the very cab transporting the passenger, in whose hands the carrier had
to P6,000. As to other alleged actual damages, the lower court's finding that plaintiff's evidence thereon was not
entrusted the duty of executing the contract of carriage. In other words, unlike the Gillaco case, the killing of the passenger
convincing,8 should not be disturbed. Still, Arts. 2206 and 1764 award moral damages in addition to compensatory damages, to
here took place in the course of duty of the guilty employee and when the employee was acting within the scope of his duties.
111
the parents of the passenger killed to compensate for the mental anguish they suffered. A claim therefor, having been properly
made, it becomes the court's duty to award moral damages. 9 Plaintiff demands P5,000 as moral damages; however, in the
circumstances, We consider P3,000 moral damages, in addition to the P6,000 damages afore-stated, as sufficient. Interest upon
such damages are also due to plaintiff-appellant. 10
Wherefore, with the modification increasing the award of actual damages in plaintiff's favor to P6,000, plus P3,000.00 moral
damages, with legal interest on both from the filing of the complaint on December 6, 1961 until the whole amount is paid, the
judgment appealed from is affirmed in all other respects. No costs. So ordered.
HELD:
The basis of the carrier's liability for assaults on passengers committed by its drivers rests on the principle that it is the carrier's
implied duty to transport the passenger safely. As between the carrier and the passenger, the former must bear the risk of
wrongful acts or negligence of the carrier's employees against passengers, since it, and not the passengers, has power to select
and remove them.

Facts:

Rogelio Corachea, a passenger in a taxicab owned and operated by Pascual Perez, was stabbed andkilled by the driver, Simeon
Valenzuela. Valenzuela was found guilty for homicide by the Court ofFirst Instance and was sentenced to suffer Imprisonment
and to indemnify the heirs of thedeceased in the sum of P6000. While pending appeal, mother of deceased filed an action in
theCourt of First Instance of Batangas to recover damages from Perez and Valenzuela. Defendant Perezclaimed that the death
was a caso fortuito for which the carrier was not liable. The court a quo, aftertrial, found for the plaintiff and awarded her
P3,000 as damages against defendant Perez. The claimagainst defendant Valenzuela was dismissed. From this ruling, both
plaintiff and defendant Perezappealed to this Court, the former asking for more damages and the latter insisting on non-
liability.Defendant-appellant relied solely on the ruling enunciated in Gillaco vs. Manila Railroad Co. that thecarrier is under no
absolute liability for assaults of its employees upon the passengers.

Issue:Whether or not Perez should be held liable for the death of the passenger?

Held:

Yes. The basis of the carrier's liability for assaults on passengers committed by its drivers rests onthe principle that it is the
carrier's implied duty to transport the passenger safely. As between thecarrier and the passenger, the former must bear the risk
of wrongful acts or negligence of thecarrier's employees against passengers, since it, and not the passengers, has power to
select andremove them. Common carriers are liable for the death of or injuries to passengers through the negligence or willful
acts of the former’s employees, although such employees may have actedbeyond the scope of their authority or in violation of
the orders of the common carriers. Theliability of the common carriers does not cease upon proof that they exercised all the
diligence of agood father of a family in the selection and supervision of their employees. (Art. 1759)The attendant facts and
controlling law of that case and the one at bar were very different. In theGillaco case, the passenger was killed outside the
scope and the course of duty of the guiltyemployee. The Gillaco case was decided under the provisions of the Civil Code of
1889 which, unlikethe present Civil Code, did not impose upon common carriers absolute liability for the safety ofpassengers
against willfull assaults or negligent acts committed by their employees. The death ofthe passenger in the Gillaco case was truly
a fortuitous event which exempted the carrier fromliability. It is true that Art. 1105 of the old Civil Code on fortuitous events
has been substantiallyreproduced in Art. 1174 of the Civil Code of the Philippines but both articles clearly remove fromtheir
exempting effect the case where the law expressly provides for liability in spite of theoccurrence of force majeure. The Civil
Code provisions on the subject of Common Carriers are newand were taken from Anglo-American Law. The basis of the carrier's
liability for assaults onpassengers committed by its drivers rested either on the doctrine of respondent superior or theprinciple
that it was the carrier's implied duty to transport the passenger safely. Under the secondview, upheld by the majority and also
by the later cases, it was enough that the assault happenswithin the course of the employee's duty. It was no defense for the
carrier that the act was done in excess of authority or in disobedience of the carrier's orders. The carrier's liability here
wasabsolute in the sense that it practically secured the passengers from assaults committed by its ownemployees.
FACTS:
Corachea, a passenger in a taxicab owned and operated by Perez, was stabbed and killed by the driver.The carrier was charged
for damages.

ISSUE: Whether the death was caso foruito which means Perez, the carrier is not liable for the damages done.

112
Singapore Airlines vs. Andion Fernandez, 10 December 2003;
SECOND DIVISION
[G.R. No. 142305. December 10, 2003]
SINGAPORE AIRLINES LIMITED, petitioner, vs. ANDION FERNANDEZ, respondent.
DECISION
CALLEJO, SR., J.:
This is a petition for review on certiorari assailing the Decision[1] of the Court of Appeals which affirmed in toto the decision[2] of
the Regional Trial Court of Pasig City, Branch 164 in Civil Case No. 60985 filed by the respondent for damages.
The Case for the Respondent
Respondent Andion Fernandez is an acclaimed soprano here in the Philippines and abroad. At the time of the incident, she was
availing an educational grant from the Federal Republic of Germany, pursuing a Masters Degree in Music majoring in Voice. [3]
She was invited to sing before the King and Queen of Malaysia on February 3 and 4, 1991. For this singing engagement, an
airline passage ticket was purchased from petitioner Singapore Airlines which would transport her
to Manila from Frankfurt, Germany on January 28, 1991. From Manila, she would proceed to Malaysia on the next day.[4] It was
necessary for the respondent to pass by Manila in order to gather her wardrobe; and to rehearse and coordinate with her
pianist her repertoire for the aforesaid performance.
The petitioner issued the respondent a Singapore Airlines ticket for Flight No. SQ 27, leaving Frankfurt, Germany on January 27,
1991 bound for Singapore with onward connections from Singapore to Manila. Flight No. SQ 27 was scheduled to
leave Frankfurt at 1:45 in the afternoon of January 27, 1991, arriving at Singapore at 8:50 in the morning of January 28,
1991.The connecting flight from Singapore to Manila, Flight No. SQ 72, was leaving Singapore at 11:00 in the morning
of January 28, 1991, arriving in Manila at 2:20 in the afternoon of the same day.[5]
On January 27, 1991, Flight No. SQ 27 left Frankfurt but arrived in Singapore two hours late or at about 11:00 in the morning
of January 28, 1991. By then, the aircraft bound for Manilahad left as scheduled, leaving the respondent and about 25 other
passengers stranded in the Changi Airport in Singapore.[6]
Upon disembarkation at Singapore, the respondent approached the transit counter who referred her to the nightstop counter
and told the lady employee thereat that it was important for her to reach Manila on that day, January 28, 1991. The lady
employee told her that there were no more flights to Manila for that day and that respondent had no choice but to stay
in Singapore. Upon respondents persistence, she was told that she can actually fly to Hong Kong going to Manila but since her
ticket was non-transferable, she would have to pay for the ticket. The respondent could not accept the offer because she had
no money to pay for it.[7] Her pleas for the respondent to make arrangements to transport her to Manila were unheeded.[8]
The respondent then requested the lady employee to use their phone to make a call to Manila. Over the employees reluctance,
the respondent telephoned her mother to inform the latter that she missed the connecting flight. The respondent was able to
contact a family friend who picked her up from the airport for her overnight stay in Singapore.[9]
The next day, after being brought back to the airport, the respondent proceeded to petitioners counter which says: Immediate
Attention To Passengers with Immediate Booking. There were four or five passengers in line. The respondent approached
petitioners male employee at the counter to make arrangements for immediate booking only to be told: Cant you see I am
doing something. She explained her predicament but the male employee uncaringly retorted: Its your problem, not ours. [10]
The respondent never made it to Manila and was forced to take a direct flight from Singapore to Malaysia on January 29, 1991,
through the efforts of her mother and travel agency in Manila. Her mother also had to travel to Malaysia bringing with her
respondents wardrobe and personal things needed for the performance that caused them to incur an expense of about
P50,000.[11]
113
As a result of this incident, the respondents performance before the Royal Family of Malaysia was below par. Because of the
rude and unkind treatment she received from the petitioners personnel in Singapore, the respondent was engulfed with fear,
anxiety, humiliation and embarrassment causing her to suffer mental fatigue and skin rashes. She was thereby compelled to
seek immediate medical attention upon her return to Manila for acute urticaria.[12]
On June 15, 1993, the RTC rendered a decision with the following dispositive portion:
ACCORDINGLY and as prayed for, defendant Singapore Airlines is ordered to pay herein plaintiff Andion H. Fernandez the sum
of:
1. FIFTY THOUSAND (P50,000.00) PESOS as compensatory or actual damages;
2. TWO HUNDRED and FIFTY THOUSAND (P250,000.00) PESOS as moral damages considering plaintiffs professional standing in
the field of culture at home and abroad;
3. ONE HUNDRED THOUSAND (P100,000.00) PESOS as exemplary damages;
4. SEVENTY-FIVE THOUSAND (P75,000.00) PESOS as attorneys fees; and
5. To pay the costs of suit.
SO ORDERED.[13]
The petitioner appealed the decision to the Court of Appeals.
On June 10, 1998, the CA promulgated the assailed decision finding no reversible error in the appealed decision of the trial
court.[14]
Forthwith, the petitioner filed the instant petition for review, raising the following errors:
I
THE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING IN TOTO THE DECISION OF THE TRIAL COURT THAT AWARDED
DAMAGES TO RESPONDENT FOR THE ALLEGED FAILURE OF THE PETITIONER TO EXERCISE EXTRAORDINARY DILIGENCE.
II
THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE PETITIONER ACTED IN BAD FAITH.
III
THE HONORABLE COURT OF APPEALS ERRED IN DISMISSING THE PETITIONERS COUNTERCLAIMS. [15]
The petitioner assails the award of damages contending that it exercised the extraordinary diligence required by law under the
given circumstances. The delay of Flight No. SQ 27 from Frankfurt to Singapore on January 28, 1991 for more than two hours
was due to a fortuitous event and beyond petitioners control. Inclement weather prevented the petitioners plane coming
from Copenhagen, Denmark to arrive in Frankfurt on time on January 27, 1991. The plane could not take off from the airport as
the place was shrouded with fog. This delay caused a snowball effect whereby the other flights were consequently delayed. The
plane carrying the respondent arrived in Singapore two (2) hours behind schedule.[16] The delay was even compounded when
the plane could not travel the normal route which was through the Middle East due to the raging Gulf War at that time. It had
to pass through the restricted Russian airspace which was more congested.[17]
Under these circumstances, petitioner therefore alleged that it cannot be faulted for the delay in arriving
in Singapore on January 28, 1991 and causing the respondent to miss her connecting flight to Manila.
The petitioner further contends that it could not also be held in bad faith because its personnel did their best to look after the
needs and interests of the passengers including the respondent. Because the respondent and the other 25 passengers missed
their connecting flight to Manila, the petitioner automatically booked them to the flight the next day and gave them free hotel
accommodations for the night. It was respondent who did not take petitioners offer and opted to stay with a family friend
in Singapore.
The petitioner also alleges that the action of the respondent was baseless and it tarnished its good name and image earned
through the years for which, it was entitled to damages in the amount of P1,000,000; exemplary damages of P500,000; and
attorneys fees also in the amount of P500,000.[18]
The petition is barren of merit.
When an airline issues a ticket to a passenger, confirmed for a particular flight on a certain date, a contract of carriage
arises. The passenger then has every right to expect that he be transported on that flight and on that date. If he does not, then
the carrier opens itself to a suit for a breach of contract of carriage. [19]
The contract of air carriage is a peculiar one. Imbued with public interest, the law requires common carriers to carry the
passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons with due
regard for all the circumstances.[20] In an action for breach of contract of carriage, the aggrieved party does not have to prove
that the common carrier was at fault or was negligent. All that is necessary to prove is the existence of the contract and the fact
of its non-performance by the carrier. [21]
In the case at bar, it is undisputed that the respondent carried a confirmed ticket for the two-legged trip
from Frankfurt to Manila: 1) Frankfurt-Singapore; and 2) Singapore-Manila. In her contract of carriage with the petitioner, the
respondent certainly expected that she would fly to Manila on Flight No. SQ 72 on January 28, 1991. Since the petitioner did
not transport the respondent as covenanted by it on said terms, the petitioner clearly breached its contract of carriage with the
respondent. The respondent had every right to sue the petitioner for this breach. The defense that the delay was due to
fortuitous events and beyond petitioners control is unavailing. In PAL vs. CA,[22] we held that:
.... Undisputably, PALs diversion of its flight due to inclement weather was a fortuitous event. Nonetheless, such occurrence did
not terminate PALs contract with its passengers. Being in the business of air carriage and the sole one to operate in the country,
PAL is deemed to be equipped to deal with situations as in the case at bar. What we said in one case once again must be
stressed, i.e., the relation of carrier and passenger continues until the latter has been landed at the port of destination and has
left the carriers premises. Hence, PAL necessarily would still have to exercise extraordinary diligence in safeguarding the
comfort, convenience and safety of its stranded passengers until they have reached their final destination...
...If the cause of non-fulfillment of the contract is due to a fortuitous event, it has to be the sole and only cause (Art. 1755 C.C.,
Art. 1733 C.C.). Since part of the failure to comply with the obligation of common carrier to deliver its passengers safely to their
destination lay in the defendants failure to provide comfort and convenience to its stranded passengers using extraordinary
diligence, the cause of non-fulfillment is not solely and exclusively due to fortuitous event, but due to something which
defendant airline could have prevented, defendant becomes liable to plaintiff.
Indeed, in the instant case, petitioner was not without recourse to enable it to fulfill its obligation to transport the respondent
safely as scheduled as far as human care and foresight can provide to her destination. Tagged as a premiere airline as it claims
to be and with the complexities of air travel, it was certainly well-equipped to be able to foresee and deal with such
situation. The petitioners indifference and negligence by its absence and insensitivity was exposed by the trial court, thus:
(a) Under Section 9.1 of its Traffic Manual (Exhibit 4) flights can be delayed to await the uplift of connecting cargo and
passengers arriving on a late in-bound flight As adverted to by the trial court,Flight SQ-27/28 maybe delayed for about half an
hour to transfer plaintiff to her connecting flight. As pointed out above, delay is normal in commercial air transportation (RTC
Decision, p. 22); or
(b) Petitioner airlines could have carried her on one of its flights bound for Hongkong and arranged for a connecting flight from
Hongkong to Manila all on the same date. But then the airline personnel who informed her of such possibility told her that she
has to pay for that flight. Regrettably, respondent did not have sufficient funds to pay for it. (TSN, 30 March 1992, pp.8-9; RTC
Decision, pp. 22-23) Knowing the predicament of the respondent, petitioner did not offer to shoulder the cost of the ticket for
that flight; or
114
(c) As noted by the trial court from the account of petitioners witness, Bob Khkimyong, that a passenger such as the plaintiff
could have been accommodated in another international airline such as Lufthansa to bring the plaintiff to Singapore early
enough from Frankfurt provided that there was prior communication from that station to enable her to catch the connecting
flight to Manila because of the urgency of her business in Manila(RTC Decision, p. 23)
The petitioners diligence in communicating to its passengers the consequences of the delay in their flights was wanting. As
elucidated by the trial court:
It maybe that delay in the take off and arrival of commercial aircraft could not be avoided and may be caused by diverse factors
such as those testified to by defendants pilot. However, knowing fully well that even before the plaintiff boarded defendants
Jumbo aircraft in Frankfurt bound for Singapore, it has already incurred a delay of two hours. Nevertheless, defendant did not
take the trouble of informing plaintiff, among its other passengers of such a delay and that in such a case, the usual practice of
defendant airline will be that they have to stay overnight at their connecting airport; and much less did it inquire from the
plaintiff and the other 25 passengers bound for Manila whether they are amenable to stay overnight in Singapore and to take
the connecting flight to Manila the next day. Such information should have been given and inquiries made in Frankfurt because
even the defendant airlines manual provides that in case of urgency to reach his or her destination on the same date, the head
office of defendant in Singapore must be informed by telephone or telefax so as the latter may make certain arrangements with
other airlines in Frankfurt to bring such a passenger with urgent business to Singapore in such a manner that the latter can
catch up with her connecting flight such as S-27/28 without spending the night in Singapore [23]
The respondent was not remiss in conveying her apprehension about the delay of the flight when she was still
in Frankfurt. Upon the assurance of petitioners personnel in Frankfurt that she will be transported to Manila on the same date,
she had every right to expect that obligation fulfilled. She testified, to wit:
Q: Now, since you were late, when the plane that arrived from Frankfurt was late, did you not make arrangements so that your
flight from Singapore to Manila would be adjusted?
A: I asked the lady at the ticket counter, the one who gave the boarding pass in Frankfurt and I asked her, Since my flight going
to Singapore would be late, what would happen to my Singapore-Manila flight? and then she said, Dont worry, Singapore
Airlines would be responsible to bring you to Manila on the same date. And then they have informed the name of the officer, or
whatever, that our flight is going to be late.[24]
When a passenger contracts for a specific flight, he has a purpose in making that choice which must be respected. This choice,
once exercised, must not be impaired by a breach on the part of the airline without the latter incurring any liability. [25] For
petitioners failure to bring the respondent to her destination, as scheduled, we find the petitioner clearly liable for the breach
of its contract of carriage with the respondent.
We are convinced that the petitioner acted in bad faith. Bad faith means a breach of known duty through some motive of
interest or ill will. Self-enrichment or fraternal interest, and not personal ill will, may well have been the motive; but it is malice
nevertheless.[26] Bad faith was imputed by the trial court when it found that the petitioners employees at the Singapore airport
did not accord the respondent the attention and treatment allegedly warranted under the circumstances. The lady employee at
the counter was unkind and of no help to her. The respondent further alleged that without her threats of suing the company,
she was not allowed to use the companys phone to make long distance calls to her mother in Manila. The male employee at the
counter where it says: Immediate Attention to Passengers with Immediate Booking was rude to her when he curtly retorted
that he was busy attending to other passengers in line. The trial court concluded that this inattentiveness and rudeness of
petitioners personnel to respondents plight was gross enough amounting to bad faith. This is a finding that is generally binding
upon the Court which we find no reason to disturb.
Article 2232 of the Civil Code provides that in a contractual or quasi-contractual relationship, exemplary damages may be
awarded only if the defendant had acted in a wanton, fraudulent, reckless, oppressive or malevolent manner. In this case,
petitioners employees acted in a wanton, oppressive or malevolent manner. The award of exemplary damages is, therefore,
warranted in this case.
WHEREFORE, the Petition is DENIED. The Decision of the Court of Appeals is AFFIRMED. RULING:
Yes, when an airline issues a ticket to a passenger, confirmed for a particular flight on a certain date, a contract of carriage
SO ORDERED. arises. The passenger has every right to expect that he be transported on that flight and on that date. If he does not, then the
carrier opens itself to a suit for a breach of contract of carriage.In an action for breach of contract of carriage, the aggrieved
FACTS: party does not have to prove that the common carrier was at fault or was negligent. All that is necessary to prove is the
existence of the contract and the fact of its non-performance by the carrier.
Respondent Andion Fernandez is an acclaimed soprano in the Philippines andabroad. At the time of the incident she was
availing of an educational grant from the Federal Republic of Germany pursuing a Master’s Degree in Music major in Voice. She
was invited to sing before the King and Queen of Malaysiaon Feb. 3-4, 1991. For this purpose, she took an airline ticket from
SingaporeAirlines (SAL) FOR THE Frankfurt-Manila-Malaysia route. Respondent had to passby Manila in order to gather her
wardrobe and rehearse with the pianist. SALissued ticket for Flight SQ 27 leaving Frankfurt on Jan. 27, 1991 for Singapore
withconnections to Manila in the morning of Jan. 28, 1991. On Jan. 27, 1991 SQ 27LEFT Frankfurt but arrived two hours late in
Singapore on Jan. 28, 1991. By then,the aircraft bound for Manila had already left. Upon deplaning in Singapore,Fernandez
approached the transit counter at Changi Airport and was told by alady employee that there were no more flights to Manila on
that day and thatshe had to stay in Singapore, if she wanted, she could fly to HK but at her ownexpense. Respondent stayed
with a relative in Singapore for the night. The nextday, she was brought back to the airport and approached a counter for
immediate booking but was told by a male employee: “Can’t you see I amdoing something.” She explained her predicament but
was told: “It’s yourproblem, not ours.”

The respondent never made it to Manila and was forced to take a direct flightto Malaysia on Jan. 29, 1991 through the efforts
of her mother and a travelagency in Manila. Her mother had to travel to Malaysia with the wardrobewhich caused them to
incur expenses of ₱50,000.RTC Manila ordered SAL to pay respondent, ₱ 50k as actual damages, ₱ 250k asmoral damages,
₱ 100k as exemplary damages, ₱ 5k as attorney’s fees and costs of suit.CA affirmed RTC decision.ISSUE:Did SAL break the
contract of carriage?RULING:Yes, when an airline issues a ticket to a passenger, confirmed for a particularflight on a certain
date, a contract of carriage arises. The passenger has everyright to expect that he be transported on that flight and on that
date. If he does not, then the carrier opens itself to a suit for a breach of contract of carriage. Acontract of carriage requires
common carriers to transport passengers safely ashuman care and foresight can provide (Art. 1755, NCC). In an action for
brechof a contract of carriage, the aggrieved party does not have to prove that thecommon carrier was at fault or was
negligent. All that is necessary is to provethe existence of the contract and the fact of its non-performance by the carrier.SAL
failed to inform of the delay in the turnaround aircraft in Frankfurt, neitherdid it ask if the respondent and 25 other delayed
passengers are amenable to stay in Singapore. Even SAL’s manual mandates that in cases of urgent connections the head office
of defendant in Singapore has to be informed ofdelays so as to make needed arrangements for connecting passengers.When
respondent conveyed her apprehension in Frankfurt of the impending delay, she was assured by petitioner’s personnel in
Frankfurt that she will be transported to Manila on the same date. The lady employee at the counter inSingapore only allowed
respondent to use the phone upon threat of suit, the male employee at the counter marked “Immediate Attention to
Passengers withImmediate Booking” was rude to her.

Petition is denied. CA decision affirmed.

FACTS:
Respondent Andion Fernandez took an airline ticket from Singapore Airlines (SAL) for the Frankfurt-Manila-Malaysia route.
Andion had to pass by Manila in order to gather her wardrobe and rehearse with the pianist for she was invited to sing before
the King and Queen of Malaysia. The airline left Frankfurt but arrived in Singapore two hours late. By then, the aircraft bound
for Manila had already left. Andion never made it to Manila because there were no more flights to Manila for that day, and was
forced to take a direct flight to Malaysia. Her mother had to travel to Malaysia with the wardrobe which caused them to incur
expenses.

ISSUE:
Did SAL break the contract of carriage?

115
Fortune Express vs. CA, March 18, 1999;
its decision, dated December 28, 1990, the trial court dismissed the complaint, holding as follows:
SECOND DIVISION
G.R. No. 119756 March 18, 1999
FORTUNE EXPRESS, INC., petitioner,
vs.
COURT OF APPEALS, PAULIE U.CAORONG, and minor childrenYASSER KING CAORONG, ROSE HEINNI and PRINCE ALEXANDER,
all surnamed CAORONG, and represented by their mother PAULIE U. CAORONG, respondents.
MENDOZA, J.:
This is an appeal by petition for review on certiorari of the decision, dated July 29, 1994, of the Court of Appeals, which
reversed the decision of the Regional Trial Court, Branch VI, Iligan City. The aforesaid decision of the trial court dismissed the
complaint of public respondents against petitioner for damages for breach of contract of carriage filed on the ground that
petitioner had not exercised the required degree of diligence in the operation of one of its buses. Atty. Talib Caorong, whose
heirs are private respondents herein, was a passenger of the bus and was killed in the ambush involving said bus.
The facts of the instant case are as follows:
Petitioner is a bus company in northern Mindanao. Private respondent Paulie Caorong is the widow of Atty. Caorong, while
private respondents Yasser King, Rose Heinni, and Prince Alexander are their minor children.
On November 18, 1989, a bus of petitioner figured in an accident with a jeepney in Kauswagan, Lanao del Norte, resulting in
the death of several passengers of the jeepney, including two Maranaos. Crisanto Generalao, a volunteer field agent of the
Constabulary Regional Security Unit No. X, conducted an investigation of the accident. He found that the owner of the jeepney
was a Maranao residing in Delabayan, Lanao del Norte and that certain Maranaos were planning to take revenge on the
petitioner by burning some of its buses. Generalao rendered a report on his findings to Sgt. Reynaldo Bastasa of the Philippine
Constabulary Regional Headquarters at Cagayan de Oro. Upon the instruction of Sgt. Bastasa, he went to see Diosdado Bravo,
operations manager of petitioner, its main office in Cagayan de Oro City. Bravo assured him that the necessary precautions to
insure the safety of lives and property would be taken.1
On appeal, however, the Court of Appeals reversed. It held:
At about 6:45 P.M. on November 22, 1989, three armed Maranaos who pretended to be passengers, seized a bus of petitioner
at Linamon, Lanao del Norte while on its way to Iligan City. Among the passengers of the bus was Atty. Caorong. The leader of
the Maranaos, identified as one Bashier Mananggolo, ordered the driver, Godofredo Cabatuan, to stop the bus on the side of
the highway. Mananggolo then shot Cabatuan on the arm, which caused him to slump on the steering wheel. The one of the
companions of Mananggolo started pouring gasoline inside the bus, as the other held the passenger at bay with a handgun.
Mananggolo then ordered the passenger to get off the bus. The passengers, including Atty. Caorong, stepped out of the bus and
went behind the bushes in a field some distance from the highway. 2
However, Atty. Caorong returned to the bus to retrieve something from the overhead rack. at that time, one of the armed men
was pouring gasoline on the head of the driver. Cabatuan, who had meantime regained consciousness, heard Atty. Caorong
pleading with the armed men to spare the driver as he was innocent of any wrong doing and was only trying to make a living.
The armed men were, however, adamant as they repeated the warning that they were going to burn the bus along with its
driver. During this exchange between Atty. Caorong and the assailants, Cabatuan climbed out of the left window of the bus and
crawled to the canal on the opposite side of the highway. He heard shots from inside the bus. Larry de la Cruz, one of the
passengers, saw that Atty. Caorong was hit. Then the bus was set on fire. Some of the passengers were able to pull Atty.
Caorong out of the burning bus and rush him to the Mercy Community Hospital in Iligan City, but he died while undergoing
operation.3
116
The private respondents brought this suit for breach of contract of carriage in the Regional Trial Court, Branch VI, Iligan City. In
The fact that defendant, through Operations Manager Diosdado Bravo, was informed of the "rumors"
that the Moslems intended to take revenge by burning five buses of defendant is established since the
latter also utilized Crisanto Generalao as a witness. Yet despite this information, the plaintiffs charge,
defendant did not take proper precautions. . . . Consequently, plaintiffs now fault the defendant for
ignoring the report. Their position is that the defendant should have provided its buses with security
guards. Does the law require common carriers to install security guards in its buses for the protection and
safety of its passengers? Is the failure to post guards on omission of the duty to "exercise the diligence of
a good father of the family" which could have prevented the killing of Atty. Caorong? To our mind, the
diligence demanded by law does not include the posting of security guard in buses. It is an obligation that
properly belongs to the State. Besides, will the presence of one or two security guards suffice to deter a
determined assault of the lawless and thus prevent the injury complained of? Maybe so, but again,
perhaps not. In other words, the presence of a security guard is not a guarantee that the killing of Atty.
Caorong would have been definitely avoided.
Accordingly, the failure of defendant to accord faith and credit to the report of Mr. Generalao and the
fact that it did not provide security to its buses cannot, in the light of the circumstances, be characterized
as negligence.
Finally, the evidence clearly shows that the assalants did not have the least intention of the harming any
of the passengers. They ordered all the passengers to alight and set fire on the bus only after all the
passengers were out of danger. The death of Atty. Caorong was an unexpected and unforseen occurrense
over which defendant had no control. Atty. Caorong performed an act of charity and heroism in coming
to the succor of the driver even in the face of danger. He deserves the undying gratitude of the driver
whose life he saved. No one should blame him for an act of extraordinary charity and altruism which cost
his life. But neither should any blame be laid on the doorstep of defendant. His death was solely due to
the willfull acts of the lawless which defendant could neither prevent nor to stop.
WHEREFORE, in view of the foregoing, the complaint is hereby dismissed. For lack of merit, the counter-
claim is likewise dismissed. No costs.4
In the case at bench, how did defendant-appellee react to the tip or information that certain Maranao
hotheads were planning to burn five of its buses out of revenge for the deaths of two Maranaos in an
earlier collision involving appellee's bus? Except for the remarks of appellee's operations manager that
"we will have our action . . . . and I'll be the one to settle it personally," nothing concrete whatsoever was
taken by appellee or its employees to prevent the execution of the threat. Defendant-appellee never
adopted even a single safety measure for the protection of its paying passengers. Were there available
safeguards? Of course, there were: one was frisking passengers particularly those en route to the area
where the threats were likely to be carried out such as where the earlier accident occurred or the place
of influence of the victims or their locality. If frisking was resorted to, even temporarily, . . . . appellee
might be legally excused from liabilty. Frisking of passengers picked up along the route could have been
implemented by the bus conductor; for those boarding at the bus terminal, frisking could have been
conducted by him and perhaps by additional personnel of defendant-appellee. On hindsight, the
handguns and especially the gallon of gasoline used by the felons all of which were brought inside the
bus would have been discovered, thus preventing the burning of the bus and the fatal shooting of the
victim.
 Appellee's argument that there is no law requiring it to provide guards on its buses and that the safety of
citizens is the duty of the government, is not well taken. To be sure, appellee is not expected to assign
security guards on all its buses; if at all, it has the duty to post guards only on its buses plying
predominantly Maranaos areas. As discussed in the next preceding paragraph, least appellee could have
done in response to the report was to adopt a system of verification such as the frisking of passengers
boarding at its buses. Nothing, and no repeat, nothing at all, was done by defendant-appellee to protect
its innocent passengers from the danger arising from the "Maranao threats." It must be observed that
frisking is not a novelty as a safety measure in our society. Sensitive places — in fact, nearly all important
places — have applied this method of security enhancement. Gadgets and devices are avilable in the
market for this purpose. It would not have weighed much against the budget of the bus company if such
items were made available to its personnel to cope up with situations such as the "Maranaos threats."
In view of the constitutional right to personal privacy, our pronouncement in this decision should not be
construed as an advocacy of mandatory frisking in all public conveyances. What we are saying is that
given the circumstances obtaining in the case at bench that: (a) two Maranaos died because of a
vehicular collision involving one of appellee's vehicles; (b) appellee received a written report from a
member of the Regional Security Unit, Constabulary Security Group, that the tribal/ethnic group of the
two deceased were planning to burn five buses of appellee out of revenge; and (c) appelle did nothing —
absolutely nothing — for the safety of its passengers travelling in the area of influence of the victims,
appellee has failed to exercise the degree of dilegence required of common carriers. Hence, appellee
must be adjudge liable.
WHEREFORE the decision appealed from is hereby REVERSED and another rendered ordering defendant-
appellee to pay plaintiffs-appellants the following:
1) P3,399,649.20 as death indemnity;
2) P50,000.00 and P500.00 per appearance as attorney's fee and
Costs against defendant-appellee.5
Hence, this appeal. Petitioner contends:
(A) THAT PUBLIC RESPONDENT ERRED IN REVERSING THE DECISION OF THE REGIONAL TRIAL COURT DATED DECEMBER 28,
1990 DISMISSING THE COMPLAINT AS WELL AS THE COUNTERCLAIM, AND FINDING FOR PRIVATE RESPONDENTS BY ORDERING
PETITIONER TO PAY THE GARGANTUAN SUM OF P3,449,649.20 PLUS P500.00 PER APPEARANCE AS ATTORNEY'S FEES, AS WELL
AS DENYING PETITIONERS MOTION FRO RECONSIDERATION AND THE SUPPLEMENT TO SAID MOTION, WHILE HOLDING,
AMONG OTHERS, THAT THE PETITIONER BREACHED THE CONTRACT OF THE CARRIAGE BY ITS FAILURE TO EXCERCISE THE
REQUIRED DEGREE OF DILIGENCE;
(B) THAT THE ACTS OF THE MARANAO OUTLAWS WERE SO GRAVE, IRRESISTABLE, VIOLENT, AND FORCEFULL, AS TO BE
REGARDED AS CASO FORTUITO; AND
(C) THAT PUBLIC RESPONDENT COURT OF APPEALS SERIOUSLY ERRED IN HOLDING THAT PETITIONER COULD HAVE PROVIDED
ADEQUATE SECURITY IN PREDOMINANTLY MUSLIM AREAS AS PART OF ITS DUTY TO OBSERVE EXTRA-ORDINARY DILIGENCE AS A
COMMON CARRIER.
The instant has no merit.
First. Petitioner's Breach of the Contract of Carriage.
117
Art. 1763 of the Civil Code provides that a common carrier is responsible for injuries suffered by a passenger on account of
wilfull acts of other passengers, if the employees of the common carrier could have prevented the act through the exercise of
the diligence of a good father of a family. In the present case, it is clear that because of the negligence of petitioner's
employees, the seizure of the bus by Mananggolo and his men was made possible.
Despite warning by the Philippine Constabulary at Cagayan de Oro that the Maranaos were planning to take revenge on the
petitioner by burning some of its buses and the assurance of petitioner's operation manager, Diosdado Bravo, that the
necessary precautions would be taken, petitioner did nothing to protect the safety of its passengers.
Had petitioner and its employees been vigilant they would not have failed to see that the malefactors had a large quantity of
gasoline with them. Under the circumstances, simple precautionary measures to protect the safety of passengers, such as
frisking passengers and inspecting their baggages, preferably with non-intrusive gadgets such as metal detectors, before
allowing them on board could have been employed without violating the passenger's constitutional rights. As this Court
amended in Gacal v. Philippine Air Lines, Inc., 6 a common carrier can be held liable for failing to prevent a hijacking by frisking
passengers and inspecting their baggages.
From the foregoing, it is evident that petitioner's employees failed to prevent the attack on one of petitioner's buses because
they did not exercise the diligence of a good father of a family. Hence, petitioner should be held liable for the death of Atty.
Caorong.
Second. Seizure of Petitioner's Bus not a Case of Force Majeure
The petitioner contends that the seizure of its bus by the armed assailants was a fortuitous event for which it could not be held
liable.
Art. 1174 of the Civil Code defines a fortuitous event as an occurence which could not be foreseen, is inevitable. In Yobido v.
Court of Appeals, 7 we held that to considered as force majeure, it is necessary that (1) the cause of the breach of the obligation
must be independent of the human will; (2) the event must be either unforeseeable or unavoidable; (3) the occurence must be
render it impossible for the debtor to fulfill the obligation in a normal manner; and (4) the obligor must be free of participation
in, or aggravation of, the injury to the creditor. The absence of any of the requisites mentioned above would prevent the obligor
from being excused from liability.
Thus, in Vasquez v. Court of Appeals, 8 it was held that the common carrier was liable for its failure to take the necessary
precautions against an approaching typhoon, of which it was warned, resulting in the loss of the lives of several passengers. The
event was forseeable, and, thus, the second requisite mentioned above was not fulfilled. This ruling applies by analogy to the
present case. Despite the report of PC agent Generalao that the Maranaos were going to attack its buses, petitioner took no
steps to safeguard the lives and properties of its passengers. The seizure of the bus of the petitioner was foreseeable and,
therefore, was not a fortuitous event which would exempt petitioner from liabilty.
Petitioner invokes the ruling in Pilapil v. Court of Appeals, 9 and De Guzman v. Court of Appeals, 10 in support of its contention
that the seizure of its bus by the assailants constitutes force majeure. In Pilapil v. Court of Appeals, 11 it was held that a common
carrier is not liable for failing to install window grills on its buses to protect the passengers from injuries cause by rocks hurled
at the bus by lawless elements. On the other hand, in De Guzman v. Court of Appeals, 12 it was ruled that a common carriers is
not responsible for goods lost as a result of a robbery which is attended by grave or irresistable threat, violence, or force.
It is clear that the cases of Pilapil and De Guzman do not apply to the prensent case. Art. 1755 of the Civil Code provides that "a
common carrier is bound to carry the passengers as far as human care and foresight can provide, using the utmost diligence of
very cautious persons, with due regard for all the circumstances." Thus, we held in Pilapil and De Guzman that the respondents
therein were not negligent in failing to take special precautions against threats to the safety of passengers which could not be
foreseen, such as tortious or criminal acts of third persons. In the present case, this factor of unforeseeability (the second
requisite for an event to be considered force majeure) is lacking. As already stated, despite the report of PC agent Generalao
that the Maranaos were planning to burn some of petitioner's buses and the assurance of petitioner's operation manager
(Diosdado Bravo) that the necessary precautions would be taken, nothing was really done by petitioner to protect the safety of
passengers.
Third. Deceased not Guilty of Contributory Negligence
The petitioner contends that Atty. Caorong was guilty of contributory negligence in returning to the bus to retrieve something.
But Atty. Caorong did not act recklessly. It should be pointed out that the intended targets of the violence were petitioners and
its employees, not its passengers. The assailant's motive was to retaliate for the loss of life of two Maranaos as a result of the
collision between petitioner's bus and the jeepney in which the two Maranaos were riding. Mananggolo, the leader of the
group which had hijacked the bus, ordered the passengers to get off the bus as they intended to burn it and its driver. The
armed men actually allowed Atty. Caorong to retrieve something from the bus. What apparently angered them was his attempt
to help the driver of the bus by pleading for his life. He was playing the role of the good Samaritan. Certainly, this act cannot
considered an act of negligence, let alone recklessness.
Fourth. Petitioner Liable to Private Respaondents for Damages
We now consider the question of damages that the heirs of Atty. Caorong, private respondents herein, are entitled to recover
from the petitioner.
Indemnity for Death. Art. 1764 of the Civil Code, in relation to Art. 2206 thereof, provides for the payment of indemnity for the
death of passengers caused by the breach of contract of carriage by a common carrier. Initially fixed in Art. 2206 at P3,000.00,
the amount of the said indemnity for death has through the years been gradually increased in view of the declining value of the
peso. It is presently fixed at P50,000.00. 13 Private respondents are entitled to this amount.
Actual Damages. Art. 2199 provides that "except as provided by law or by stipulation, one is entitled to an adequate
compensation only for such pecuniary loss suffered by him as has duly proved." The trial court found that the private
respondents spent P30,000.00 for the wake and burial of Atty. Caorong. 14 Since petitioner does not question this finding of the
trial court, it is liable to private respondent in the said amount as actual damages.
Moral Damages. Under Art. 2206, the "spouse, legitimate and illegitimate descendants and ascendants of the deceased may
demand moral damages for mental anguish by reason of the death of the deceased." The trial court found that private
respondent Paulie Caorong suffered pain from the death of her husband and worry on how to provide support for their minor
children, private respondents Yasser King, Rose Heinni, and Prince Alexander. 15 The petitioner likewise does not question this
finding of the trial court. Thus, in accordance with recent decisions of this Court, 16 we hold that the petitioner is liable to the
private respondents in the amount of P100,000.00 as moral damages for the death of Atty. Caorong.
Exemplary Damages. Art. 2232 provides that "in contracts and quasi-contracts, the court may award exemplary damages if the
defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent reckless manner." In the present case, the
petitioner acted in a wanton and reckless manner. Despite warning that the Maranaos were planning to take revenge against
the petitioner by burning some of its buses, and contary to the assurance made by its operations manager that the necessary
precautions would be take, the petitioner and its employees did nothing to protect the safety of passengers. Under the
circumtances, we deem it reasonable to award private respondents exemplary damages in the amount of P100,000.00. 17
Attorney's Fees. Pursuant to Art. 2208, attorney's fees may be recovered when, as in the instant case, exemplary damages are
awarded. In the recent case of Sulpicio Lines, Inc. v. Court of Appeals, 18 we held an award of P50,000.00 as attorney's fees to be
reasonable. Hence, the private respondents are entitled to attorney's fees in that amount.
Compensation for Loss of Earning Capacity. Art. 1764 of the Civil Code, in relation to Art. 2206 thereof, provides that in addition
to the indemnity for death arising from the breach of contrtact of carriage by a common carrier, the "defendant shall be liable
for the loss of the earning capacity of the deceased, and the indemnity shall be paid to the heirs of the latter." The formula
established in decided cases for computing net earning capacity is as follows: 19
118
Gross Necessary
Net Earning = Life x Annual — Living
Capacity Expectancy Income Expenses
Life expectancy is equivalent to two thirds (2/3) multiplied by the difference of eighty (80) and the age of the deceased. 20 Since
Atty. Caorong was 37 years old at that time of his death, 21 he had a life expectancy of 28 2/3 more years. 22 His projected gross
annual income, computed based on his monthly salary of P11,385.00. 23 as a lawyer in the Department of Agrarian Reform at
the time of his death, was P148,005.00. 24 Allowing for necessary living expenses of fifty percent (50%) 25 of his projected gross
annual income, his total earning capacity amounts to P2,121,404.90. 26 Hence, the petitioner is liable to the private respondents
in the said amount as a compensation for loss of earning capacity.
WHEREFORE, the decision, dated July 29, 1994, of the Court of Appeals is hereby AFFIRMED with the MODIFICATION that
petitioner Fortune Express, Inc. is ordered to pay the following amounts to private respondents Paulie, Yasser King, Rose Heinni,
and Prince Alexander Caorong:
1. death indemnity in the amount of fifty thousand pesos (P50,000.00);
2. actual damages in the amount of thirty thousand pesos (P30,000.00);
3. moral damages in the amount of one hundred thousand pesos (P100,000.00);
4. exemplary damages in the amount of one hundred thousand pesos (P100,000.00);
5. attorney's fees in the amount of fifty thousand pesos (P50,000.00);
6. compensation for loss of earning capacity in the amount of two million one hundred twenty-one thousand four hundred four
pesos and ninety centavos (P2,121,404.90); and
7. cost of suits.
SO ORDERED.
FORTUNE EXPRESS, INC. vs. COURT OF APPEALS G.R. No. 119756. March 18, 1999
FACTS:
On November 22, 1989, Atty. Caorong boarded a bus of petitioner going to Iligan City.Three armed Maranaos who pretended to
be passengers, seized the bus at Linamon,Lanao del Norte at around 6:45PM. The leader of the Maranaos, identified as
oneBashier Mananggolo, ordered the driver, Godofredo Cabatuan, to stop the bus on theside of the highway. Mananggolo
then shot Cabatuan on the arm, which caused him toslump on the steering wheel. Then one of the companions of
Mananggolo startedpouring gasoline inside the bus, as the other held the passengers at bay with ahandgun.
Mananggolo then ordered the passengers to get off the bus. Thepassengers, including Atty. Caorong, stepped
out of the bus and went behind thebushes in a field some distance from the highway.However, Atty. Caorong returned
to the bus to retrieve something from the overheadrack. At that time, one of the armed men was pouring gasoline on the
head of thedriver. Cabatuan, who had meantime regained consciousness, heard Atty. Caorongpleading with the armed men to
spare the driver as he was innocent of any wrong doingand was only trying to make a living. The armed men were adamant as
they repeatedtheir warning that they were going to burn the bus along with its driver. During thisexchange between Atty.
Caorong and the assailants, Cabatuan climbed out of the leftwindow of the bus and crawled to the canal on the opposite side
of the highway. Heheard shots from inside the bus. Larry de la Cruz, one of the passengers, saw that Atty.Caorong was hit.
Then the bus was set on fire. Some of the passengers were able topull Atty. Caorong out of the burning bus and rush him to the
Mercy Community Hospitalin Iligan City, but he died while undergoing operation.The private respondents brought this suit
for breach of contract of carriage in theRegional Trial Court, Branch VI, Iligan City. In the decision, dated December 28,
1990,the trial dismissed the case on the following grounds: first argument is that the petitionershould have placed security
guards knowing that their buses are subject to threats- thetrial court’s stand is that the diligence demanded by law does not
include the posting ofsecurity guards and it is not a guarantee that the killing would have been definitelyavoided. Also, that
obligation belongs to the state, second argument is that there isfailure on the part of defendant to accord faith and credit to the
report of Generalao andthe fact that it did not provide security to its buses cannot, in the light of
thecircumstances, be characterized as negligence.Finally, the evidence clearly shows that the assailants did not have the least
intention ofharming any of the passengers. They ordered all the passengers to alight and set fireon the bus only after all the
passengers were out of danger. The death of Atty. Caorongwas an unexpected and unforseen occurrence over which defendant
had no control.

His death was solely due to the willful acts of the lawless which defendant could neitherprevent nor stop.

Issue:
1. Did the petitioner breach the contract of carriage therefore liable to damages?
2. Is the seizure of the bus a case of force majeure?·
3. Was the deceased guilty of contributory negligence?

HELD:
The case was decided by the court of Appeals based on the following rulings:First, Art. 1763 of the Civil Code provides that a
common carrier is responsible forinjuries suffered by a passenger on account of the willful acts of other passengers, if
theemployees of the common carrier could have prevented the act the exercise of thediligence of a good father of a family.
In the present case, it is clear that because of thenegligence of petitioner’s employees, the seizure of the bus by Mananggolo
and hismen was made possible.Second, Art. 1174 of the Civil Code defines a fortuitous even as an occurrence whichcould not
be foreseen or which though foreseen, is inevitable. In Yobido v. Court ofAppeals, we held that to be considered as force
majeure, it is necessary that: (1) thecause of the breach of the obligation must be independent of the human will; (2) theevent
must be either unforeseeable or unavoidable; (3) the occurrence must be such asto render it impossible for the debtor to fulfill
the obligation in a normal manner; and (4)the obligor must be free of participation in, or aggravation of, the injury to the
creditor.The absence of any of the requisites mentioned above would prevent the obligor frombeing excused from liability.The
petitioner contends that Atty. Caorong was guilty of contributory negligence inreturning to the bus to retrieve
something. But Atty. Caorong did not act recklessly. Itshould be pointed out that the intended targets of the violence were
petitioner and itsemployees, not its passengers. The assailant’s motive was to retaliate for the loss oflife of two Maranaos as a
result of the collision between petitioner’s bus and the jeepneyin which the two Maranaos were riding. Mananggolo, the
leader of the group which hadhijacked the bus, ordered the passengers to get off the bus as they intended to burn itand its
driver. The armed men actually allowed Atty. Caorong to retrieve somethingfrom the bus. What apparently angered them was
his attempt to help the driver of thebus by pleading for his life. He was playing the role of the good Samaritan. Certainly,this
act cannot be considered an act of negligence, let alone recklessness

119
Bachelor Express vs. CA, July 31, 1990; 2) To the heirs of Narcisa Rautraut, the amount of Forty Five Thousand Pesos (P45,000.00) for straight
death indemnity, moral damages and attorney's fees. Costs against appellees. (Rollo, pp. 71-72)
THIRD DIVISION
The petitioners now pose the following questions
G.R. No. 85691 July 31, 1990
What was the proximate cause of the whole incident? Why were the passengers on board the bus
panicked (sic) and why were they shoving one another? Why did Narcisa Rautraut and Ornominio Beter
BACHELOR EXPRESS, INCORPORATED, and CRESENCIO RIVERA, petitioners,
jump off from the running bus?
vs.
THE HONORABLE COURT OF APPEALS (Sixth Division), RICARDO BETER, SERGIA BETER, TEOFILO RAUTRAUT and ZOETERA
The petitioners opine that answers to these questions are material to arrive at "a fair, just and equitable judgment." (Rollo, p. 5)
RAUTRAUT, respondents.
They claim that the assailed decision is based on a misapprehension of facts and its conclusion is grounded on speculation,
surmises or conjectures.
GUTIERREZ, JR., J.:
As regards the proximate cause of the death of Ornominio Beter and Narcisa Rautraut, the petitioners maintain that it was the
This is a petition for review of the decision of the Court of Appeals which reversed and set aside the order of the Regional Trial
act of the passenger who ran amuck and stabbed another passenger of the bus. They contend that the stabbing incident
Court, Branch I, Butuan City dismissing the private respondents' complaint for collection of "a sum of money" and finding the
triggered off the commotion and panic among the passengers who pushed one another and that presumably out of fear and
petitioners solidarily liable for damages in the total amount of One Hundred Twenty Thousand Pesos (P120,000.00). The
moved by that human instinct of self-preservation Beter and Rautraut jumped off the bus while the bus was still running
petitioners also question the appellate court's resolution denying a motion for reconsideration.
resulting in their untimely death." (Rollo, p. 6) Under these circumstances, the petitioners asseverate that they were not
negligent in the performance of their duties and that the incident was completely and absolutely attributable to a third person,
On August 1, 1980, Bus No. 800 owned by Bachelor Express, Inc. and driven by Cresencio Rivera was the situs of a stampede
the passenger who ran amuck, for without his criminal act, Beter and Rautraut could not have been subjected to fear and shock
which resulted in the death of passengers Ornominio Beter and Narcisa Rautraut.
which compelled them to jump off the running bus. They argue that they should not be made liable for damages arising from
acts of third persons over whom they have no control or supervision.
The evidence shows that the bus came from Davao City on its way to Cagayan de Oro City passing Butuan City; that while at
Tabon-Tabon, Butuan City, the bus picked up a passenger; that about fifteen (15) minutes later, a passenger at the rear portion
Furthermore, the petitioners maintain that the driver of the bus, before, during and after the incident was driving cautiously
suddenly stabbed a PC soldier which caused commotion and panic among the passengers; that when the bus stopped,
giving due regard to traffic rules, laws and regulations. The petitioners also argue that they are not insurers of their passengers
passengers Ornominio Beter and Narcisa Rautraut were found lying down the road, the former already dead as a result of head
as ruled by the trial court.
injuries and the latter also suffering from severe injuries which caused her death later. The passenger assailant alighted from
the bus and ran toward the bushes but was killed by the police. Thereafter, the heirs of Ornominio Beter and Narcisa Rautraut,
The liability, if any, of the petitioners is anchored on culpa contractual or breach of contract of carriage. The applicable
private respondents herein (Ricardo Beter and Sergia Beter are the parents of Ornominio while Teofilo Rautraut and Zoetera
provisions of law under the New Civil Code are as follows:
[should be Zotera] Rautraut are the parents of Narcisa) filed a complaint for "sum of money" against Bachelor Express, Inc. its
alleged owner Samson Yasay and the driver Rivera.
ART. 1732. Common carriers are persons, corporations, firms or associations engaged in the business of
carrying or transporting passengers or goods or both by land, water, or air, for compensation, offering
In their answer, the petitioners denied liability for the death of Ornominio Beter and Narcisa Rautraut. They alleged that ... the
their services to the public.
driver was able to transport his passengers safely to their respective places of destination except Ornominio Beter and Narcisa
Rautraut who jumped off the bus without the knowledge and consent, much less, the fault of the driver and conductor and the
ART. 1733. Common carriers, from the nature of their business and for reasons of public policy, are
defendants in this case; the defendant corporation had exercised due diligence in the choice of its employees to avoid as much
bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the
as possible accidents; the incident on August 1, 1980 was not a traffic accident or vehicular accident; it was an incident or event
passengers transported by them, according to all the circumstances of each case.
very much beyond the control of the defendants; defendants were not parties to the incident complained of as it was an act of
a third party who is not in any way connected with the defendants and of which the latter have no control and supervision; ..."
xxx xxx xxx
(Rollo, pp. 112-113).i•t•c-aüsl
ART. 1755. A common carrier is bound to carry the passengers safely as far as human care and foresight
After due trial, the trial court issued an order dated August 8, 1985 dismissing the complaint.
can provide, using the utmost diligence of very cautious persons, with a due regard for all the
circumstances.
Upon appeal however, the trial court's decision was reversed and set aside. The dispositive portion of the decision of the Court
of Appeals states:
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
WHEREFORE, the Decision appealed from is REVERSED and SET ASIDE and a new one entered finding the
prescribed in Articles 1733 and 1755.
appellees jointly and solidarily liable to pay the plaintiffs-appellants the following amounts:
There is no question that Bachelor Express, Inc. is a common carrier. Hence, from the nature of its business and for reasons of
1) To the heirs of Ornominio Beter, the amount of Seventy Five Thousand Pesos (P75,000.00) in loss of
public policy Bachelor Express, Inc. is bound to carry its passengers safely as far as human care and foresight can provide using
earnings and support, moral damages, straight death indemnity and attorney's fees; and,
the utmost diligence of very cautious persons, with a due regard for all the circumstances.

120
In the case at bar, Ornominio Beter and Narcisa Rautraut were passengers of a bus belonging to petitioner Bachelor Express,
Inc. and, while passengers of the bus, suffered injuries which caused their death. Consequently, pursuant to Article 1756 of the
Civil Code, petitioner Bachelor Express, Inc. is presumed to have acted negligently unless it can prove that it had observed
extraordinary diligence in accordance with Articles 1733 and 1755 of the New Civil Code.
Bachelor Express, Inc. denies liability for the death of Beter and Rautraut on its posture that the death of the said passengers
was caused by a third person who was beyond its control and supervision. In effect, the petitioner, in order to overcome the
presumption of fault or negligence under the law, states that the vehicular incident resulting in the death of passengers Beter
and Rautraut was caused by force majeure or caso fortuito over which the common carrier did not have any control.
Article 1174 of the present Civil Code states:
Except in cases expressly specified by law, or when it is otherwise declared by stipulations, or when the
nature of the obligation requires the assumption of risk, no person shall be responsible for those events
which could not be foreseen, or which though foreseen, were inevitable.
The above-mentioned provision was substantially copied from Article 1105 of the old Civil Code which states"
No one shall be liable for events which could not be foreseen or which, even if foreseen, were inevitable,
with the exception of the cases in which the law expressly provides otherwise and those in which the
obligation itself imposes liability.
In the case of Lasam v. Smith (45 Phil. 657 [1924]), we defined "events" which cannot be foreseen and which, having been
foreseen, are inevitable in the following manner:
... The Spanish authorities regard the language employed as an effort to define the term 'caso fortuito'
and hold that the two expressions are synonymous. (Manresa Comentarios al Codigo Civil Español, vol. 8,
pp. 88 et seq.; Scaevola, Codigo Civil, vol. 19, pp. 526 et seq.)
The antecedent to Article 1105 is found in Law II, Title 33, Partida 7, which defines caso fortuito as
'occasion que acaese por aventura de que non se puede ante ver. E son estos, derrivamientos de casas e
fuego que enciende a so ora, e quebrantamiento de navio, fuerca de ladrones' (An event that takes place
by incident and could not have been foreseen. Examples of this are destruction of houses, unexpected
fire, shipwreck, violence of robbers ...)
Escriche defines caso fortuito as an unexpected event or act of God which could neither be foreseen nor
resisted, such as floods, torrents, shipwrecks, conflagrations, lightning, compulsion, insurrections,
destruction of buildings by unforeseen accidents and other occurrences of a similar nature.
In discussing and analyzing the term caso fortuito the Enciclopedia Juridica Española says: 'In a 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 occurrence, 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 (debtor) must be free from any participation in the aggravation of
the injury resulting to the creditor. (5) Enciclopedia Juridica Española, 309)
As will be seen, these authorities agree that some extraordinary circumstance independent of the will of
the obligor or of his employees, is an essential element of a caso fortuito. ...
121
The running amuck of the passenger was the proximate cause of the incident as it triggered off a commotion and panic among
the passengers such that the passengers started running to the sole exit shoving each other resulting in the falling off the bus
by passengers Beter and Rautraut causing them fatal injuries. The sudden act of the passenger who stabbed another passenger
in the bus is within the context of force majeure.
However, in order that a common carrier may be absolved from liability in case of force majeure, it is not enough that the
accident was caused by force majeure. The common carrier must still prove that it was not negligent in causing the injuries
resulting from such accident. Thus, as early as 1912, we ruled:
From all the foregoing, it is concluded that the defendant is not liable for the loss and damage of the
goods shipped on the lorcha Pilar by the Chinaman, Ong Bien Sip, inasmuch as such loss and damage
were the result of a fortuitous event or force majeure, and there was no negligence or lack of care and
diligence on the part of the defendant company or its agents. (Tan Chiong Sian v. Inchausti & Co., 22 Phil.
152 [1912]; Emphasis supplied).
This principle was reiterated in a more recent case, Batangas Laguna Tayabas Co. v. Intermediate Appellate Court(167 SCRA 379
[1988]), wherein we ruled:
... [F]or their defense of force majeure or act of God to prosper the accident must be due to natural
causes and exclusively without human intervention. (Emphasis supplied)
Therefore, the next question to be determined is whether or not the petitioner's common carrier observed extraordinary
diligence to safeguard the lives of its passengers.
In this regard the trial court and the appellate court arrived at conflicting factual findings.
The trial court found the following facts:
The parties presented conflicting evidence as to how the two deceased Narcisa Rautruat and Ornominio
Beter met their deaths.
However, from the evidence adduced by the plaintiffs, the Court could not see why the two deceased
could have fallen off the bus when their own witnesses testified that when the commotion ensued inside
the bus, the passengers pushed and shoved each other towards the door apparently in order to get off
from the bus through the door. But the passengers also could not pass through the door because
according to the evidence the door was locked.
On the other hand, the Court is inclined to give credence to the evidence adduced by the defendants that
when the commotion ensued inside the bus, the two deceased panicked and, in state of shock and fear,
they jumped off from the bus by passing through the window.
It is the prevailing rule and settled jurisprudence that transportation companies are not insurers of their
passengers. The evidence on record does not show that defendants' personnel were negligent in their
duties. The defendants' personnel have every right to accept passengers absent any manifestation of
violence or drunkenness. If and when such passengers harm other passengers without the knowledge of
the transportation company's personnel, the latter should not be faulted. (Rollo, pp. 46-47)
A thorough examination of the records, however, show that there are material facts ignored by the trial court which were
discussed by the appellate court to arrive at a different conclusion. These circumstances show that the petitioner common
carrier was negligent in the provision of safety precautions so that its passengers may be transported safely to their
destinations. The appellate court states:
A critical eye must be accorded the lower court's conclusions of fact in its tersely written ratio decidendi. The lower court
concluded that the door of the bus was closed; secondly, the passengers, specifically the two deceased, jumped out of the
window. The lower court therefore concluded that the defendant common carrier is not liable for the death of the said
passengers which it implicitly attributed to the unforeseen acts of the unidentified passenger who went amuck.
There is nothing in the record to support the conclusion that the solitary door of the bus was locked as to prevent the
passengers from passing through. Leonila Cullano, testifying for the defense, clearly stated that the conductor opened the door
when the passengers were shouting that the bus stop while they were in a state of panic. Sergia Beter categorically stated that
she actually saw her son fall from the bus as the door was forced open by the force of the onrushing passengers.
Pedro Collango, on the other hand, testified that he shut the door after the last passenger had boarded the bus. But he had
quite conveniently neglected to say that when the passengers had panicked, he himself panicked and had gone to open the
door. Portions of the testimony of Leonila Cullano, quoted below, are illuminating:
Q When you said the conductor opened the door, the door at the front or rear portion of the bus?
A Front door.
Q And these two persons whom you said alighted, where did they pass, the fron(t) door or rear door?
A Front door.
Q What happened after there was a commotion at the rear portion of the bus?
A When the commotion occurred, I stood up and I noticed that there was a passenger who was sounded (sic). The conductor
panicked because the passengers were shouting 'stop, stop'. The conductor opened the bus.'
Accordingly, there is no reason to believe that the deceased passengers jumped from the window when it was entirely possible
for them to have alighted through the door. The lower court's reliance on the testimony of Pedro Collango, as the conductor
and employee of the common carrier, is unjustified, in the light of the clear testimony of Leonila Cullano as the sole
uninterested eyewitness of the entire episode. Instead we find Pedro Collango's testimony to be infused by bias and fraught
with inconsistencies, if not notably unreliable for lack of veracity. On direct examination, he testified:
Q So what happened to the passengers inside your bus?
A Some of the passengers jumped out of the window.
COURT:
Q While the bus was in motion?
A Yes, your Honor, but the speed was slow because we have just picked up a passenger.
Atty. Gambe:
Q You said that at the time of the incident the bus was running slow because you have just picked up a passenger. Can you
estimate what was your speed at that time?
Atty. Calo: No basis, your Honor, he is neither a driver nor a conductor.
122
COURT: Let the witness answer. Estimate only, the conductor experienced.
Witness: Not less than 30 to 40 miles.
COURT: Kilometers or miles?
A Miles.
Atty. Gambe:
Q That is only your estimate by your experience?
A Yes, sir, estimate.
At such speed of not less than 30 to 40 miles ..., or about 48 to 65 kilometers per hour, the speed of the bus could scarcely be
considered slow considering that according to Collango himself, the bus had just come from a full stop after picking a passenger
(Tsn, p. 4, Id.) and that the bus was still on its second or third gear (Tsn., p. 12, Id.).
In the light of the foregoing, the negligence of the common carrier, through its employees, consisted of the lack of
extraordinary diligence required of common carriers, in exercising vigilance and utmost care of the safety of its passengers,
exemplified by the driver's belated stop and the reckless opening of the doors of the bus while the same was travelling at an
appreciably fast speed. At the same time, the common carrier itself acknowledged, through its administrative officer, Benjamin
Granada, that the bus was commissioned to travel and take on passengers and the public at large, while equipped with only a
solitary door for a bus its size and loading capacity, in contravention of rules and regulations provided for under the Land
Transportation and Traffic Code (RA 4136 as amended.) (Rollo, pp. 23-26)
Considering the factual findings of the Court of Appeals-the bus driver did not immediately stop the bus at the height of the
commotion; the bus was speeding from a full stop; the victims fell from the bus door when it was opened or gave way while the
bus was still running; the conductor panicked and blew his whistle after people had already fallen off the bus; and the bus was
not properly equipped with doors in accordance with law-it is clear that the petitioners have failed to overcome the
presumption of fault and negligence found in the law governing common carriers.
The petitioners' argument that the petitioners "are not insurers of their passengers" deserves no merit in view of the failure of
the petitioners to prove that the deaths of the two passengers were exclusively due to force majeure and not to the failure of
the petitioners to observe extraordinary diligence in transporting safely the passengers to their destinations as warranted by
law. (See Batangas Laguna Tayabas Co. v. Intermediate Appellate Court, supra).
The petitioners also contend that the private respondents failed to show to the court that they are the parents of Ornominio
Beter and Narcisa Rautraut respectively and therefore have no legal personality to sue the petitioners. This argument deserves
scant consideration. We find this argument a belated attempt on the part of the petitioners to avoid liability for the deaths of
Beter and Rautraut. The private respondents were Identified as the parents of the victims by witnesses during the trial and the
trial court recognized them as such. The trial court dismissed the complaint solely on the ground that the petitioners were not
negligent.
Finally, the amount of damages awarded to the heirs of Beter and Rautraut by the appellate court is supported by the evidence.
The appellate court stated:
Ornominio Beter was 32 years of age at the time of his death, single, in good health and rendering
support and service to his mother. As far as Narcisa Rautraut is concerned, the only evidence adduced is
to the effect that at her death, she was 23 years of age, in good health and without visible means of
support.
 In accordance with Art. 1764 in conjunction with Art. 2206 of the Civil Code, and established ISSUE: Whether Bachelor Express be made liable for damages arising from acts of third persons over whom they have no
jurisprudence, several factors may be considered in determining the award of damages, namely: 1) life control or supervision.
expectancy (considering the state of health of the deceased and the mortality tables are deemed
conclusive) and loss of earning capacity; (2) pecuniary loss, loss of support and service; and (3) moral and Held:
mental suffering (Alcantara, et al. v. Surro, et al., 93 Phil. 470).
While the sudden stabbing by a passenger of another passenger inside the bus may be considered as force majeure as to
In the case of People v. Daniel (No. L-66551, April 25, 1985, 136 SCRA 92, at page 104), the High Tribunal, absolved the carrier from liability, the carrier must prove that it was not at fault of negligent causing the injuries.
reiterating the rule in Villa Rey Transit, Inc. v. Court of Appeals (31 SCRA 511), stated that the amount of
loss of earring capacity is based mainly on two factors, namely, (1) the number of years on the basis of It was shown that the bus’s door is not properly kept in that the mere push makes it opens easily causing some of the
which the damages shall be computed; and (2) the rate at which the losses sustained by the heirs should passengers fell during the commotion and despite of the panic inside the bus caused by the stabbing, the conductor failed to
be fixed. blow his whistle to signal the driver to stop and the driver continued driving unminding the commotion going on. Clearly the
carriers employees failed to exercise the extra ordinary diligence in preventing or minimizing the injuries during and after the
As the formula adopted in the case of Davila v. Philippine Air Lines, 49 SCRA 497, at the age of 30 one's incident. The carrier failed to rebut the presumption of being at fault or acted negligently.
normal life expectancy is 33-1/3 years based on the American Expectancy Table of Mortality (2/3 x 80-
32).i•t•c-aüsl By taking into account the pace and nature of the life of a carpenter, it is reasonable to
make allowances for these circumstances and reduce the life expectancy of the deceased Ornominio
Beter to 25 years (People v. Daniel, supra). To fix the rate of losses it must be noted that Art. 2206 refers
to gross earnings less necessary living expenses of the deceased, in other words, only net earnings are to
be considered (People v. Daniel, supra; Villa Rey Transit, Inc. v. Court of Appeals, supra).

Applying the foregoing rules with respect to Ornominio Beter, it is both just and reasonable, considering
his social standing and position, to fix the deductible, living and incidental expenses at the sum of Four
Hundred Pesos (P400.00) a month, or Four Thousand Eight Hundred Pesos (P4,800.00) annually. As to his
income, considering the irregular nature of the work of a daily wage carpenter which is seasonal, it is safe
to assume that he shall have work for twenty (20) days a month at Twenty Five Pesos (P150,000.00) for
twenty five years. Deducting therefrom his necessary expenses, his heirs would be entitled to Thirty
Thousand Pesos (P30,000.00) representing loss of support and service (P150,000.00 less P120,000.00). In
addition, his heirs are entitled to Thirty Thousand Pesos (P30,000.00) as straight death indemnity
pursuant to Article 2206 (People v. Daniel, supra). For damages for their moral and mental anguish, his
heirs are entitled to the reasonable sum of P10,000.00 as an exception to the general rule against moral
damages in case of breach of contract rule Art. 2200 (Necesito v. Paras, 104 Phil. 75). As attorney's fees,
Beter's heirs are entitled to P5,000.00. All in all, the plaintiff-appellants Ricardo and Sergia Beter as heirs
of their son Ornominio are entitled to an indemnity of Seventy Five Thousand Pesos (P75,000.00).

In the case of Narcisa Rautraut, her heirs are entitled to a straight death indemnity of Thirty Thousand
Pesos (P30,000.00), to moral damages in the amount of Ten Thousand Pesos (P10,000.00) and Five
Thousand Pesos (P5,000.00) as attorney's fees, or a total of Forty Five Thousand Pesos (P45,000.00) as
total indemnity for her death in the absence of any evidence that she had visible means of support.
(Rollo, pp. 30-31)

WHEREFORE, the instant petition is DISMISSED. The questioned decision dated May 19, 1988 and the resolution dated August
1, 1988 of the Court of Appeals are AFFIRMED.

SO ORDERED.
FACTS:
A bus owned by Bachelor Express, Inc. was the situs of a stampede which resulted in the death of 2 passengers. The
commotion started when a passenger at the rear portion suddenly stabbed a PC soldier which caused and panic among the
passengers.

123
De Gillaco vs. Manila Railroad Company, G.R. No. L-8034, Nov. 18, 1955;
EN BANC
G.R. No. L-8034 November 18, 1955
CORNELIA A. DE GILLACO, ET AL., plaintiffs-appellees,
vs.
MANILA RAILROAD COMPANY, defendant-appellant.
REYES, J.B.L., J.:
The Manila Railroad Company has appealed from a judgment of the Court of First Instance of Laguna sentencing it to pay
P4,000 damages to the appellees herein, the widow and children of the late Tomas Gillaco, shot by an employee of the
Company in April, 1946.
The judgment was rendered upon the following stipulation of facts:
That at about 7:30 a.m., on the morning of April 1, 1946, Lieut. Tomas Gillaco, husband of the plaintiff, was a
passenger in the early morning train of the Manila Railroad Company from Calamba, Laguna to Manila;
That when the train reached the Paco Railroad station, Emilio Devesa, a train guard of the Manila Railroad Company
assigned in the Manila-San Fernando, La Union Line, happened to be in said station waiting for the same train which
would take him to Tutuban Station, where he was going to report for duty;
That Emilio Devesa had a long standing personal grudge against Tomas Gillaco, same dating back during the
Japanese occupation;
That because of this personal grudge, Devesa shot Gillaco with the carbine furnished to him by the Manila Railroad
Company for his use as such train guard, upon seeing him inside the train coach;
That Tomas Gillaco died as a result of the would which he sustained from the shot fired by Devesa.
It is also undisputed that Devesa was convicted with homicide by final judgment of the Court of Appeals.
Appellant's contention is that, on the foregoing facts, no liability attaches to it as employer of the killer, Emilio Devesa; that it is
not responsible subsidiary ex delicto, under Art. 103 of the Revised Penal Code, because the crime was not committed while the
slayer was in the actual performance of his ordinary duties and service; nor is it responsible ex contractu, since the complaint
did not aver sufficient facts to establish such liability, and no negligence on appellant's party was shown. The Court below held
the Railroad company responsible on the ground that a contract of transportation implies protection of the passengers against
acts of personal violence by the agents or employees of the carrier.
There can be no quarrel with the principle that a passenger is entitled to protection from personal violence by the carrier or its
agents or employees, since the contract of transportation obligates the carrier to transport a passenger safely to his
destination. But under the law of the case, this responsibility extends only to those that the carrier could foresee or avoid
through the exercise of the degree of car and diligence required of it.
Discussing the basis of a carrier's liability under the old Civil Code of 1889 (which was in force in 1946, when Gillaco was shot)
this Court said in Lasam vs. Smith (45 Phil., 657):
In our opinion, the conclusions of the court below are entirely correct. That upon the facts stated the defendant's
liability, if any, is contractual, is well settled by previous decisions of the court, beginning with the case of
124
Rakes vs. Atlantic, Gulf & Pacific Co. (7 Phil., 359), and the distinction between extra-contractual liability and
contractual liability has been so ably and exhaustively discussed in various other cases that nothing further need
here be said upon that subject. (See Cangco vs. Manila Railroad Co., 38 Phil., 768; Manila Railroad vs. Compañia
Transatlantica and Atlantic, Gulf & Pacific Co., 38 Phil., 875; De Guia vs. Manila Electric Railroad & Light Co., 40 Phil.,
706). It is sufficient to reiterate that the source of the defendant's legal liability is the contract of carriage; that by
entering into that contract he bound himself to carry the plaintiff safely and securely to their destination; and that
having failed to do so he is liable in damages unless he shows that the failure to fulfill his obligation was due to
causes mentioned in article 1105 of the Civil Code, which reads as follows:
"No one shall be liable for events which could not be foreseen or which, even if foreseen, were inevitable, with the
exception of the cases in which the law expressly provides otherwise and those in which the obligation itself
imposes such liability."
The act of guard Devesa in shooting passenger Gillaco (because of a personal grudge nurtured against the latter since the
Japanese occupation) was entirely unforeseeable by the Manila Railroad Co. The latter had no means to ascertain or anticipate
that the two would meet, nor could it reasonably foresee every personal rancor that might exist between each one of its many
employees and any one of the thousands of eventual passengers riding in its trains. The shooting in question was
therefore "caso fortuito" within the definition of article 105 of the old Civil Code, being both unforeseeable and inevitable
under the given circumstances; and pursuant to established doctrine, the resulting breach of appellant's contract of safe
carriage with the late Tomas Gillaco was excused thereby.
No doubt that a common carrier is held to a very high degree of care and diligence in the protection of its passengers; but,
considering the vast and complex activities of modern rail transportation, to require of appellant that it should guard against all
possible misunderstanding between each and every one of its employees and every passenger that might chance to ride in its
conveyances at any time, strikes us as demanding diligence beyond what human care and foresight can provide.
The lower Court and the appellees both relied on the American authorities that particularly hold carriers to be insurers of the
safety of their passengers against willful assault and intentional ill treatment on the part of their servants, it being immaterial
that the act should be one of private retribution on the part of the servant, impelled by personal malice toward the passenger
(10 Am. Jur. 108; Ed. Note to Gassenheimer vs. Wester R. Co. 40 LRA (NS), p. 999, et seq.) But as can be inferred from the
previous jurisprudence of this Court , the Civil Code of 1889 did not impose such absolute liability (Lasam vs. Smith, supra). The
liability of a carrier as an insurer was not recognized in this jurisdiction (Government vs. Inchausti & Co., 40 Phil., 219; Oriental
Comm. Co. vs. Naviera Filipina, 38 Off. Gaz., 1020).
Another very important consideration that must be borne in mind is that, when the crime took place, the guard Devesa had no
duties to discharge in connection with the transportation of the deceased from Calamba to Manila. The stipulation of facts is
clear that when Devesa shot and killed Gillaco, Devesa was assigned to guard the Manila-San Fernando (La Union) trains, and
he was at Paco Station awaiting transportation to Tutuban, the starting point of the train that he was engaged to guard. In fact,
his tour of duty was to start at 9:00 a.m., two hours after the commission of the crime. Devesa was therefore under no
obligation to safeguard the passenger of the Calamba-Manila train, where the deceased was riding; and the killing of Gillaco
was not done in line of duty. The position of Devesa at the time was that of another would be passenger, a stranger also
awaiting transportation, and not that of an employee assigned to discharge any of the duties that the Railroad had assumed by
its contract with the deceased. As a result, Devesa's assault cannot be deemed in law a breach of Gillaco's contract of
transportation by a servant or employee of the carrier. We agree with the position taken by the Supreme Court of Texas in a
similar case, where it held:
The only good reason for making the carrier responsible for the misconduct of the servant perpetrated in his own
interest, and not in that of his employer, or otherwise within the scope of his employment, is that the servant is
clothed with the delegated authority, and charge with the duty by the carrier, to execute his undertaking with the
passenger. And it cannot be said, we think, that there is any such delegation to the employees at a station with
reference to passenger embarking at another or traveling on the train. Of course, we are speaking only of the
principle which holds a carrier responsible for wrong done to passenger by servants acting in their own interest, and
 not in that of the employer. That principle is not the ordinary rule,respondent superior, by which the employer is
held responsible only for act or omissions of the employee in the scope of his employment; but the only reason in HELD:
our opinion for a broader liability arises from the fact that the servant, in mistreating the passenger wholly for some A passenger is entitled to protection from personal violence by the carrier or its agents or employees, since the contract of
private purpose of his own, in the very act, violates the contractual obligation of the employer for the performance transportation obligates the carrier to transport a passenger safely to his destination. But under the law of the case, this
of which he has put the employee in his place. The reason does not exist where the employee who committed the responsibility extends only to those that the carrier could foresee or avoid through the exercise of the degree of care and
assault was never in a position in which it became his duty to his employer to represent him in discharging any duty diligence required of it.
of the latter toward the passenger. The proposition that the carrier clothes every employee engaged in the
transportation business with the comprehensive duty of protecting every passenger with whom he may in any way The act of guard Devesa in shooting passenger Gillaco was entirely unforeseeable by the Manila Railroad Co. The latter had no
come in contact, and hereby makes himself liable for every assault commited by such servant, without regard to the means to ascertain or anticipate that the two would meet, nor could it reasonably foresee every personal rancor that might
inquiry whether or not the passenger has come within the sphere of duty of that servant as indicated by the exist between each one of its many employees and any one of the thousands of eventual passengers riding in its trains. The
employment, is regarded as not only not sustained by the authorities, but as being unsound and oppressive both to shooting in question was therefore “caso fortuito” within the definition of article 1105 of the old Civil Code, being both
the employer and the employee. (Houston & T. C. R. Co. vs. Bush, 32 LRA (NS), p. 1205.) unforeseeable and inevitable under the given circumstances; and pursuant to established doctrine, the resulting breach of
Manila Railroad’s contract of safe carriage with the late Tomas Gillaco was excused thereby.
Wherefore, the judgment appealed from is reversed and the complaint ordered dismissed, without cost. So ordered.
Fact
: About 7:30 on the morning of April 1, 1946, Lieut. Tomas Gillaco, husband of the plaintiff, was a passenger inthe early morning
train of the Manila Railroad Company from Calamba, Laguna to Manila. When the train reachedthe Paco Railroad station,
Emilio Devesa, a train guard of the Manila Railroad Company assigned in the Manila-SanFernando, La Union Line, happened to
be in said station waiting for the same train which would take him to TutubanStation, where he was going to report for
duty. The said guard Devesa had a long standing personal grudge againstTomas Gillaco, during the Japanese occupation and
because of that, Devesa shot Gillaco, upon seeing him inside thetrain coach and Gillaco died as a result of the wound which he
sustained from the shot fired by Devesa.The lower court held that the railroad company is responsible on the ground that a
contract of transportation impliesprotection of the passengers against acts of personal violence by the agents or employees of
the carrier. But onappeal the court reversed the decision. Hence, the plaintiff appeal on CFIs decision.

Issue: Was there a breach of contract of transportation of the victim by the employee of the carrier?

Ruling
: No. Under Article 1105 of the old civil code which states that "No one shall be liable for events which couldnot be foreseen or
which, even if foreseen, were inevitable, with the exception of the cases in which the lawexpressly provides otherwise and
those in which the obligation itself imposes such liability."In the case at bar, the act of guard Devesa in shooting passenger
Gillaco (because of a personal grudge nurturedagainst the latter since the Japanese occupation) was entirely unforeseeable by
the Manila Railroad Co. The latterhad no means to ascertain or anticipate that the two would met, nor could it reasonably
foresee every personalrancor that might exist between each one of its many employees and any one of the thousands of
eventualpassengers riding in its trains. The shooting in question was therefore "caso fortuito" within the definition of
article1105 of the old Civil Code, being both unforeseeable and inevitable under the given circumstances; and pursuant
toestablished doctrine, the resulting breach of appellant's contract of safe carriage with the late Tomas Gillaco wasexcused
because when the crime took place, the guard Devesa had no duties to discharge in connection with thetransportation of the
deceased therefore under no obligation to safeguard the passenger of the Calamba-Manilatrain, where the deceased was
riding; and the killing of Gillaco was not done in line of duty. The position of Devesaat the time was that of another would be
passenger, a stranger also awaiting transportation, and not that of anemployee assigned to discharge any of the duties that the
Railroad had assumed by its contract with the deceased.Thus the act of Devesa was perpetrated by his own interest and not of
the railroad company.

FACTS:

Lt. Tomas Gillaco, was a passenger of the Manila Railroad Company from Calamba, Laguna to Manila. Emilio Devesa, a train
guard of the Manila Railroad Company, shot Gillaco with the carbine furnished to him by the Manila Railroad Company for his
use as such train guard, upon seeing him inside the train coach because of a personal grudge nurtured against the latter since
the Japanese occupation. Gillaco died as a result.

ISSUE: Whether Manila Railroad Company shall be liable for the death of Gillaco.

125
Cathay Pacific Airways vs. CA, March 5, 1993; BELLOSILLO, J p:

This is a petition for review on certiorari of the decision of the Court of Appeals which affirmed with modification that of the
FIRST DIVISION
trial court by increasing the award of damages in favor of private respondent Tomas L. Alcantara.
G.R. No. 60501. March 5, 1993.
The facts are undisputed: On 19 October 1975, respondent Tomas L. Alcantara was a first class passenger of petitioner Cathay
Pacific Airways, Ltd. (CATHAY for brevity) on its Flight No. CX-900 from Manila to Hongkong and onward from Hongkong to
CATHAY PACIFIC AIRWAYS, LTD, petitioner, vs. COURT OF APPEALS and TOMAS L. ALCANTARA, respondents.
Jakarta on Flight No. CX-711. The purpose of his trip was to attend the following day, 20 October 1975, a conference with the
Director General of Trade of Indonesia, Alcantara being the Executive Vice-President and General Manager of Iligan Cement
SYLLABUS
Corporation, Chairman of the Export Committee of the Philippine Cement Corporation, and representative of the Cement
Industry Authority and the Philippine Cement Corporation. He checked in his luggage which contained not only his clothing and
1. CIVIL LAW; CONTRACT OF CARRIAGE; BREACH THEREOF; PETITIONER BREACHED ITS CONTRACT OF CARRIAGE WITH PRIVATE
articles for personal use but also papers and documents he needed for the conference.
RESPONDENT WHEN IT FAILED TO DELIVER HIS LUGGAGE AT THE DESIGNATED PLACE AND TIME. — Petitioner breached its
contract of carriage with private respondent when it failed to deliver his luggage at the designated place and time, it being the
Upon his arrival in Jakarta, respondent discovered that his luggage was missing. When he inquired about his luggage from
obligation of a common carrier to carry its passengers and their luggage safely to their destination, which includes the duty not
CATHAY's representative in Jakarta, private respondent was told that his luggage was left behind in Hongkong. For this,
to delay their transportation, and the evidence shows that petitioner acted fraudulently or in bad faith.
respondent Alcantara was offered $20.00 as "inconvenience money" to buy his immediate personal needs until the luggage
could be delivered to him.
2. DAMAGES; MORAL AND EXEMPLARY DAMAGES PREDICATED UPON A BREACH OF CONTRACT OF CARRIAGE; RECOVERABLE
ONLY IN INSTANCES WHERE THE MISHAP RESULTS IN DEATH OF A PASSENGER, OR WHERE THE CARRIER IS GUILTY OF FRAUD OR
His luggage finally reached Jakarta more than twenty four (24) hours after his arrival. However, it was not delivered to him at his
BAD FAITH; THE CONDUCT OF PETITIONER'S REPRESENTATIVE TOWARDS RESPONDENT JUSTIFIES THE GRANT OF MORAL AND
hotel but was required by petitioner to be picked up by an official of the Philippine Embassy.
EXEMPLARY DAMAGES IN CASE AT BAR. — Moral damages predicated upon a breach of contract of carriage may only be
recoverable in instances where the mishap results in death of a passenger, or where the carrier is guilty of fraud or bad faith.
On 1 March 1976, respondent filed his complaint against petitioner with the Court of First Instance (now Regional Trial Court) of
The language and conduct of petitioner's representative towards respondent Alcantara was discourteous or arbitrary to justify
Lanao del Norte praying for temperate, moral and exemplary damages, plus attorney's fees.
the grant of moral damages. The CATHAY representative was not only indifferent and impatient; he was also rude and insulting.
He simply advised Alcantara to buy anything he wanted. But even that was not sincere because the representative knew that
On 18 April 1976, the trial court rendered its decision ordering CATHAY to pay Plaintiff P20,000.00 for moral damages,
the passenger was limited only to $20.00 which, certainly, was not enough to purchase comfortable clothings appropriate for
P5,000.00 for temperate damages, P10,000.00 for exemplary damages, and P25,000.00 for attorney's fees, and the costs. 1
an executive conference. Considering that Alcantara was not only a revenue passenger but even paid for a first class airline
accommodation and accompanied at the time by the Commercial Attache of the Philippine Embassy who was assisting him in
Both parties appealed to the Court of Appeals. CATHAY assailed the conclusion of the trial court that it was accountable for
his problem, petitioner or its agents should have been more courteous and accommodating to private respondent, instead of
breach of contract and questioned the non-application by the court of the Warsaw Convention as well as the excessive
giving him a curt reply, "What can we do, the baggage is missing. I cannot do anything . . . Anyhow, you can buy anything you
damages awarded on the basis of its finding that respondent Alcantara was rudely treated by petitioner's employees during the
need, charged to Cathay Pacific." Where in breaching the contract of carriage the defendant airline is not shown to have acted
time that his luggage could not be found. For his part, respondent Alcantara assigned as error the failure of the trial court to
fraudulently or in bad faith, liability for damages is limited to the natural and probable consequences of the breach of
grant the full amount of damages sought in his complaint.
obligation which the parties had foreseen or could have reasonably foreseen. In that case, such liability does not include moral
and exemplary damages. Conversely, if the defendant airline is shown to have acted fraudulently or in bad faith, the award of
On 11 November 1981, respondent Court of Appeals rendered its decision affirming the findings of fact of the trial court but
moral and exemplary damages is proper.
modifying its award by increasing the moral damages to P80,000.00, exemplary damages to P20,000.00 and temperate or
moderate damages to P10,000.00. The award of P25,000.00 for attorney's fees was maintained.
3. TEMPERATE DAMAGES; RECOVERABLE ONLY UPON PROOF THAT THE CLAIMANT SUSTAINED SOME PECUNIARY LOSS. —
However, respondent Alcantara is not entitled to temperate damages, contrary to the ruling of the court a quo, in the absence
The same grounds raised by petitioner in the Court of Appeals are reiterated before Us. CATHAY contends that: (1) the Court of
of any showing that he sustained some pecuniary loss. It cannot be gainsaid that respondent's luggage was ultimately delivered
Appeals erred in holding petitioner liable to respondent Alcantara for moral, exemplary and temperate damages as well as
to him without serious or appreciable damage.
attorney's fees; and, (2) the Court of Appeals erred in failing to apply the Warsaw Convention on the liability of a carrier to its
passengers.
4. WARSAW CONVENTION; DOES NOT OPERATE AS AN EXCLUSIVE ENUMERATION OF THE INSTANCES FOR DECLARING A
CARRIER LIABLE FOR BREACH OF CONTRACT OF CARRIAGE OR AS AN ABSOLUTE LIMIT OF THE EXTENT OF THAT LIABILITY; DOES
On its first assigned error, CATHAY argues that although it failed to transport respondent Alcantara's luggage on time, the one-
NOT PRECLUDE THE OPERATION OF THE CIVIL CODE AND OTHER PERTINENT LAWS. — As We have repeatedly held, although
day delay was not made in bad faith so as to justify moral, exemplary and temperate damages. It submits that the conclusion of
the Warsaw Convention has the force and effect of law in this country, being a treaty commitment assumed by the Philippine
respondent appellate court that private respondent was treated rudely and arrogantly when he sought assistance from
government, said convention does not operate as an exclusive enumeration of the instances for declaring a carrier liable for
CATHAY's employees has no factual basis, hence, the award of moral damages has no leg to stand on.
breach of contract of carriage or as an absolute limit of the extent of that liability. The Warsaw Convention declares the carrier
liable for damages in the enumerated cases and under certain limitations. However, it must not be construed to preclude the
Petitioner's first assigned error involves findings of fact which are not reviewable by this Court. 2 At any rate, it is not impressed
operation of the Civil Code and other pertinent laws. It does not regulate, much less exempt, the carrier from liability for
with merit. Petitioner breached its contract of carriage with private respondent when it failed to deliver his luggage at the
damages for violating the rights of its passengers under the contract of carriage, especially if wilfull misconduct on the part of
designated place and time, it being the obligation of a common carrier to carry its passengers and their luggage safely to their
the carrier's employees is found or established, which is clearly the case before Us.
destination, which includes the duty not to delay their transportation, 3 and the evidence shows that petitioner acted
fraudulently or in bad faith.
DECISION
126
Moral damages predicated upon a breach of contract of carriage may only be recoverable in instances where the mishap results
in death of a passenger, 4 or where the carrier is guilty of fraud or bad faith. 5
In the case at bar, both the trial court and the appellate court found that CATHAY was grossly negligent and reckless when it
failed to deliver the luggage of petitioner at the appointed place and time. We agree. CATHAY alleges that as a result of
mechanical trouble, all pieces of luggage on board the first aircraft bound for Jakarta were unloaded and transferred to the
second aircraft which departed an hour and a half later. Yet, as the Court of Appeals noted, petitioner was not even aware that
it left behind private respondent's luggage until its attention was called by the Hongkong Customs authorities. More, bad faith
or otherwise improper conduct may be attributed to the employees of petitioner. While the mere failure of CATHAY to deliver
respondent's luggage at the agreed place and time did not ipso facto amount to willful misconduct since the luggage was
eventually delivered to private respondent, albeit belatedly, 6 We are persuaded that the employees of CATHAY acted in bad
faith. We refer to the deposition of Romulo Palma, Commercial Attache of the Philippine Embassy at Jakarta, who was with
respondent Alcantara when the latter sought assistance from the employees of CATHAY. This deposition was the basis of the
findings of the lower courts when both awarded moral damages to private respondent. Hereunder is part of Palma's testimony
"Q: What did Mr. Alcantara say, if any?
A. Mr. Alcantara was of course . . . . I could understand his position. He was furious for the experience because probably he was
thinking he was going to meet the Director-General the following day and, well, he was with no change of proper clothes and
so, I would say, he was not happy about the situation.
Q: What did Mr. Alcantara say?
A: He was trying to press the fellow to make the report and if possible make the delivery of his baggage as soon as possible.
Q: And what did the agent or duty officer say, if any?
A: The duty officer, of course, answered back saying 'What can we do, the baggage is missing. I cannot do anything.' something
like it. 'Anyhow you can buy anything you need, charged to Cathay Pacific.'
Q: What was the demeanor or comportment of the duty officer of Cathay Pacific when he said to Mr. Alcantara 'You can buy
anything chargeable to Cathay Pacific'?
A: If I had to look at it objectively, the duty officer would like to dismiss the affair as soon as possible by saying indifferently
'Don't worry. It can be found.'" 7
Indeed, the aforequoted testimony shows that the language and conduct of petitioner's representative towards respondent
Alcantara was discourteous or arbitrary to justify the grant of moral damages. The CATHAY representative was not only
indifferent and impatient; he was also rude and insulting. He simply advised Alcantara to buy anything he wanted. But even that
was not sincere because the representative knew that the passenger was limited only to $20.00 which, certainly, was not
enough to purchase comfortable clothings appropriate for an executive conference. Considering that Alcantara was not only a
revenue passenger but even paid for a first class airline accommodation and accompanied at the time by the Commercial
Attache of the Philippine Embassy who was assisting him in his problem, petitioner or its agents should have been more
courteous and accommodating to private respondent, instead of giving him a curt reply, "What can we do, the baggage is
missing. I cannot do anything . . . Anyhow, you can buy anything you need, charged to Cathay Pacific." CATHAY's employees
should have been more solicitous to a passenger in distress and assuaged his anxieties and apprehensions. To compound
matters, CATHAY refused to have the luggage of Alcantara delivered to him at his hotel; instead, he was required to pick it up
himself and an official of the Philippine Embassy. Under the circumstances, it is evident that petitioner was remiss in its duty to
provide proper and adequate assistance to a paying passenger, more so one with first class accommodation.
Where in breaching the contract of carriage the defendant airline is not shown to have acted fraudulently or in bad faith,
liability for damages is limited to the natural and probable consequences of the breach of obligation which the parties had
127
foreseen or could have reasonably foreseen. In that case, such liability does not include moral and exemplary damages. 8
Conversely, if the defendant airline is shown to have acted fraudulently or in bad faith, the award of moral and exemplary
damages is proper.
However, respondent Alcantara is not entitled to temperate damages, contrary to the ruling of the court a quo, in the absence
of any showing that he sustained some pecuniary loss. 9 It cannot be gainsaid that respondent's luggage was ultimately
delivered to him without serious or appreciable damage.
As regards its second assigned error, petitioner airline contends that the extent of its liability for breach of contract should be
limited absolutely to that set forth in the Warsaw Convention. We do not agree. As We have repeatedly held, although the
Warsaw Convention has the force and effect of law in this country, being a treaty commitment assumed by the Philippine
government, said convention does not operate as an exclusive enumeration of the instances for declaring a carrier liable for
breach of contract of carriage or as an absolute limit of the extent of that liability. 10 The Warsaw Convention declares the
carrier liable for damages in the enumerated cases and under certain limitations. 11 However, it must not be construed to
preclude the operation of the Civil Code and other pertinent laws. It does not regulate, much less exempt, the carrier from
liability for damages for violating the rights of its passengers under the contract of carriage, 12 especially if wilfull misconduct
on the part of the carrier's employees is found or established, which is clearly the case before Us. For, the Warsaw Convention
itself provides in Art. 25 that —
"(1) The carrier shall not be entitled to avail himself of the provisions of this convention which exclude or limit his liability, if the
damage is caused by his wilfull misconduct or by such default on his part as, in accordance with the law of the court to which
the case is submitted, is considered to be equivalent to wilfull misconduct."
(2) Similarly the carrier shall not be entitled to avail himself of the said provisions, if the damage is caused under the same
circumstances by any agent of the carrier acting within the scope of his employment."
When petitioner airline misplaced respondent's luggage and failed to deliver it to its passenger at the appointed place and
time, some special species of injury must have been caused to him. For sure, the latter underwent profound distress and
anxiety, and the fear of losing the opportunity to fulfill the purpose of his trip. In fact, for want of appropriate clothings for the
occasion brought about by the delay of the arrival of his luggage, to his embarrassment and consternation respondent
Alcantara had to seek postponement of his pre-arranged conference with the Director General of Trade of the host country.
In one case, 13 this Court observed that a traveller would naturally suffer mental anguish, anxiety and shock when he finds that
his luggage did not travel with him and he finds himself in a foreign land without any article of clothing other than what he has
on.
Thus, respondent is entitled to moral and exemplary damages. We however find the award by the Court of Appeals of
P80,000.00 for moral damages excessive, hence, We reduce the amount to P30,000.00. The exemplary damages of P20,000.00
being reasonable is maintained, as well as the attorney's fees of P25,000.00 considering that petitioner's act or omission has
compelled Alcantara to litigate with third persons or to incur expenses to protect his interest. 14
WHEREFORE, the assailed decision of respondent Court of Appeals is AFFIRMED with the exception of the award of temperate
damages of P10,000.00 which is deleted, while the award of moral damages of P80,000.00 is reduced to P30,000.00. The award
of P20,000.00 for exemplary damages is maintained as reasonable together with the attorney's fees of P25,000.00. The moral
and exemplary damages shall earn interest at the legal rate from 1 March 1976 when the complaint was filed until full payment.
SO ORDERED.
Mapa vs. CA, July 8, 1998
THIRD DIVISION
G.R. No. 122308 July 8, 1997
PURITA S. MAPA, CARMINA S. MAPA and CORNELIO P. MAPA, petitioners,
vs.
COURT OF APPEALS and TRANS-WORLD AIRLINES INC., respondents.
DAVIDE, JR., J.:
The main issue in this petition for review under Rule 45 of the Rules of Court is the applicability of Article 28(1) of the Warsaw
Convention,1 which provides as follows:
Art. 28. (1) An action for damages must be brought, at the option of the plaintiff, in the territory of one of the High
Contracting Parties, either before the court of the domicile of the carrier or of his principal place of business, or
where he has a place of business through which the contract has been made, or before the court at the place of
destination.
We are urged by the petitioners to reverse the 31 May 1995 Decision of the Court of Appeals in CA-G.R. CV No.
398962 affirming the 24 July 1992 Order of the Regional Trial Court of Quezon City, Branch 102, which dismissed Civil Case No.
Q-91-96203 on the ground of lack of jurisdiction in view of the aforementioned Article 28(1) of the Warsaw Convention.
The antecedent facts, as summarized by the Court of Appeals, are as follows:
Plaintiffs Cornelio P. Mapa and Purita S. Mapa are respectable members of the society. Mr. Mapa is an established
businessman and currently the Regional General Manager of Akerlund and Rausing, a multinational packaging
material manufacturer based in Manila. He was previously the Senior Vice President of Phimco Industries, an
affiliate company of Swedish Match Company. Mrs. Mapa is a successful businesswoman engaged in the commercial
transactions of high value antique and oriental arts decor items originating from Asian countries. Carmina S. Mapa is
the daughter of plaintiffs Purita and Cornelio and is a graduate of the International School in Bangkok, Thailand, now
presently enrolled at the Boston University where she is majoring in communication.
Plaintiffs Mapa entered into contract of air transportation with defendant TWA as evidence by TWA ticket Nos.
015:9475:153:304 and 015:9475:153:305, purchased in Bangkok, Thailand. Said TWA tickets are for Los Angeles-
New York-Boston-St. Louis-Chicago. . . .
Domicile of carrier TWA is Kansas City, Missouri, USA. Its principal place of business is Kansas City, Missouri, USA.
TWA's place of business through which the contracts were made is Bangkok, Thailand. The place of destination is
Chicago, USA.
On August 10, 1990, plaintiffs Carmina and Purita left Manila on board PAL flight No. 104 for Los Angeles. Carmina
was to commence schooling and thus was accompanied by Purita to assist her in settling down at the University.
They arrived Los Angeles on the same date and stayed there until August 14, 1990 when they left for New York City.
On August 14, 1990, plaintiffs Purita and Carmina S. Mapa arrived at the John F. Kennedy (JFK) Airport, New York, on
TWA Flight No. 904.
On August 27, 1990, plaintiffs Purita and Carmina S. Mapa departed for Boston, taking a connecting flight on TWA's
carrier, TW 0901, from JFK Airport, New York, to Boston's Logan Airport, checking in seven (7) pieces of luggage at
128
the TWA counter in the JFK Airport. The seven baggages were received by a porter who issued seven TWA baggage
receipts numbered 17-8270, 71, 72, 73, 74, 75, and 76 therefor.
From the entrance gate of the terminal building, plaintiffs Purita and Carmina proceeded to TWA's ticket counter
and presented their confirmed TWA tickets numbered 015:9475:153:304 and 015:9475:153:305 with a 3:00 p.m.
departure time. They were issued their boarding passes and were instructed to proceed to gate 35 for boarding. At
about 2:40 p.m., plaintiffs noticed that there was still no instruction to board the aircraft so they made inquiries. The
TWA ground stewardess informed plaintiffs that they were at the wrong gate because their flight was boarding at
gate 1. Upon hearing this, plaintiffs rushed to gate 1 which was in another building terminal. At gate 1, they were
told by a TWA ground stewardess that flight 901 had just departed. However, they were consoled that another TWA
flight was leaving for Boston after 30 minutes and plaintiffs could use the same boarding pass for the next flight. At
around 3:15 p.m., plaintiffs Purita and Carmina were able to board the next flight. However, the plane was not
immediately cleared for take off on account of a thunderstorm. The passengers were instructed to stay inside the
aircraft until 6:00 p.m. when the plane finally left for Boston.
Upon arriving in Boston, plaintiffs Purita and Carmina proceeded to the carousel to claim their baggages and found
only three out of the seven they checked in, to wit: one Samsonite on the carousel, another Samsonite lying on the
floor near the carousel and a third baggage, an American Tourister, inside the unclaimed baggage office. Plaintiffs
immediately reported the loss of their four baggages to the TWA Baggage Office at Logan Airport. TWA's
representative confidently assured them that their baggages would be located within 24 hours and not more than
48 hours.
On September 2, 1990, plaintiffs received a letter from TWA, signed by Mr. J.A. Butler, Customer Relations-Baggage
Service, apologizing for TWA's failure to locate the missing luggage and requesting plaintiffs to accomplish a
passenger property questionnaire to facilitate a further intensive and computerized search for the lost luggage.
Plaintiffs duly accomplished the passenger property questionnaire, taking pains to write down in detail the contents
of each missing baggage. The total value of the lost items amounted to $11,283.79.
On September 20, 1990, plaintiff's counsel wrote TWA thru its General Sales Manager in the Philippines, Daniel
Tuason, with office address at Ground Floor, Saville Building, Sen. Gil. J. Puyat Avenue corner Paseo de Roxas,
Makati, Metro Manila demanding indemnification for the grave damage and injury suffered by the plaintiffs.
TWA again assured plaintiffs that intensive search was being conducted.
On October 8, 1990, TWA offered to amicably settle the case by giving plaintiffs-appellants two options: (a)
transportation credit for future TWA travel or (b) cash settlement. Five months lapsed without any result on TWA's
intensive search.
On January 3, 1991, plaintiffs-appellant opted for transportation credit for future TWA travel.
On January 11, 1991, TWA disregarded plaintiffs' option and unilaterally declared the payment of $2,560.00 as
constituting full satisfaction of the plaintiffs' claim.
On July 19, 1991, plaintiffs accepted the check for $2,560.00, as partial payment for the actual cost of their lost
baggages and their contents.
Despite demands by plaintiffs, TWA failed and refused without just cause to indemnify and redress plaintiffs for the
grave injury and damages they have suffered.4
Purita S. Mapa, Carmina S. Mapa, and Cornelio P. Mapa (herein petitioners) then filed with the trial court on 1 August 1991 a
complaint 5 for damages,6 which was docketed as Civil Case No. Q-91-9620. Before a responsive pleading was filed, the
petitioners filed an Amended Complaint. 7 They prayed that after due trial private respondent Trans-World Airlines, Inc.
(hereafter, TWA), be ordered to pay them the following amounts: (1) US$8,723.79, or its equivalent in Philippine currency,
representing the cost of the lost luggage and its contents; (2) US$2,949.50, or its equivalent in Philippine currency, representing
the cost of hotel, board and lodging, and communication expenses; (3) P1 million, by way of moral damages; (4) P1 million, by
way of exemplary damages, with legal interest on said amounts from the date of extrajudicial demand thereof; and (5)
P500,000.00 as attorney's fees, costs of the suit, and other expenses of litigation. 8
On 26 February 1992, TWA filed its Answer to the Amended Complaint raising, as special and affirmative defense, lack of
jurisdiction of Philippine courts over the action for damages in the pursuant to Article 28(1) of the Warsaw Convention, the
action could only be brought either in Bangkok where the contract was entered into, or in Boston which was the place of
destination, or in Kansas City which is the carrier's domicile and principal place of business.
TWA further alleged that pursuant to the Warsaw Convention and the Notice of Baggage Limitations at the back of the tickets,
its liability to the petitioners is limited to US$9.07 per pound, or US$20.00 per kilo, which is in lieu of actual and compensatory
damages. Even assuming that petitioners' bag weighed the maximum acceptable weight of 70 pounds, TWA's maximum liability
is $640.00 per bag or $2,560.00 for the four pieces of baggage, which the petitioners have been offered and have accepted.
TWA also submitted that it could not be liable for moral and exemplary damages and attorney's fees because it did not act in a
wanton, fraudulent, reckless, oppressive, or malevolent manner. 9
On 7 February 1992, the petitioners filed their second Amended Complaint 10 to include a claim of US$2,500, or its equivalent in
Philippine Currency, representing the additional replacement cost of the items and personal effects contained in their lost
luggage; and US$4,500 representing the travel expenses, hotel, lodging, food and other expenses of petitioner Cornelio Mapa,
who was constrained to join his family in Boston to extend the necessary assistance in connection with the lost luggage.
After the filing of TWA's Answer to the second Amended Complaint, 11 and petitioners' Reply thereto, the trial court gave TWA
ten days within which to submit a memorandum in support of its affirmative defenses; after which the incident would be
deemed submitted for resolution.12 However, after TWA filed its Memorandum,13 the trial court gave the petitioners five days
within which to file a reply memorandum; and TWA, two days from receipt of the latter to file its comment thereon. 14 The
petitioners then filed their Opposition (by way of Reply Memorandum)15 to which TWA filed a Reply.16 Thereafter, the
petitioners submitted a Rejoinder 17; TWA, a Surrejoinder.18
On 24 July 1992, the trial court issued an Order19 dismissing the case for lack of jurisdiction in light of Article 28(1) of the
Warsaw Convention. Thus:
It is plaintiffs' theory that the Warsaw Convention does not apply to the instant case because plaintiffs' contract of
transportation does not constitute "international transportation" as defined in said convention. This however is
belied by the Passenger Property Questionnaire which is Annex C of plaintiffs' amended complaint. Page two of said
questionnaire accomplished by plaintiffs under the heading "Your Complete Itinerary" shows that the TWA tickets
issued to the plaintiffs form part of the contract of transportation to be performed from Manila to the United States.
Since the Philippines and the United States are parties to the convention, plaintiffs' contracts of transportation come
within the meaning of International Transportation.
On the basis of the foregoing, the Court holds that the Warsaw Convention is applicable to the case at bar, even if
the basis of plaintiffs' present action is breach of contract of carriage under the New Civil Code.
The next question to be resolved is whether or not the Court has jurisdiction to try the present case in the light of
the provision of Art. 28(1) above-quoted.
Under Art. 28(1) supra, a complaint for damages against an air carrier can be instituted only in any of the following
places/courts:
(1) The court of the domicile of the carrier;
129
(2) The court of its principal place of business;
(3) The court where it has a place of business through which the
contract had been made;
(4) The court of the place of destination.
In interpreting the provision of Art. 28(1) of the Warsaw Convention, the Supreme Court in the same case
of Augusto Benedicto Santos vs. Northwest Airlines held:
Whether Article 28(1) refers to jurisdiction or only to venue is a question over which authorities are sharply divided.
While the petitioner cites several cases holding that Article 28(1) refers to venue rather that jurisdiction, there are
later cases cited by the private respondent supporting the conclusion that the provision is jurisdictional.
Venue and jurisdiction are entirely distinct matters. Jurisdiction may not be conferred by consent or waiver upon a
court which otherwise would have no jurisdiction over the subject-matter of an action; but the venue of an action as
fixed by statute may be changed by the consent of the parties and an objection that the plaintiff brought his suit in
the wrong country may be waived by the failure of the defendant to make a timely objection. In either case, the
court may render a valid judgment. Rules as to jurisdiction can never be left to the consent or agreement of the
parties, whether or not prohibition exists against their alteration.
A number of reasons tends to support the characterization of Article 28(1) as a jurisdiction and not a venue
provision. First, the wording of Article 32, which indicates the places where the action for damages "must" be
brought, underscores the mandatory nature of Article 28(1). Second, this characterization is consistent with one of
the objectives of the Convention, which is to "regulate in a uniform manner the conditions of international
transportation by air." Third, the Convention does not contain any provision prescribing rules of jurisdiction other
than Article 28(1), which means that the phrase "rules as to jurisdiction" used in Article 32 must refer only to Article
28(1). In fact, the last sentence of Article 32 specifically deals with the exclusive enumeration in Article 28(1) as
"jurisdictions," which, as such, cannot be left to the will of the parties regardless of the time when the damage
occurred.
It has been shown by the defendant that the domicile of the defendant Trans World Airlines, Inc. is Kansas City,
Missouri, its principal place of business is also in Kansas City, Missouri, the carrier's place of business through which
the contracts were made is Bangkok (Annexes A and A-1, Amended Complaint), and the place of destination was
Boston.
The Philippines not being one of the places specified in Art. 28(1) abovequoted where the complaint may be
instituted, this Court therefore, does not have jurisdiction over the present case.
Evidently discontented with the trial court's order, the petitioners appealed to the Court of Appeals, contending that the lower
court erred in not holding that (1) it has jurisdiction over the instant case and (2) the Warsaw Convention is inapplicable in the
instant case because the subject matter of the case is not included within the coverage of the said convention. 20 They claimed
that their cause of action could be based on breach of contract of air carriage founded on Articles 1733, 1734, 1735, 1755, and
1756 of the New Civil Code governing common carriers or Article 2176 of the same Code governing tort or quasi-delict.
The appellate court disagreed with the petitioners and affirmed the order of the trial court. It held that the Warsaw Convention
is the law which governs the dispute between the petitioners and TWA because what is involved is international
transportation defined by said Convention in Article I(2). This holding is founded on its determination that the two TWA tickets
for Los Angeles-New York-Boston-St. Louis-Chicago purchased in Bangkok, Thailand, were issued in conjunction with, and
therefore formed part of, the contract of transportation performed from Manila, Philippines, to the United States.
The respondent court further held that the cause of action of the petitioners arose from the loss of the four checked pieces of
baggage, which then falls under Article 18(1), Chapter III (Liability of the Carrier) of the Warsaw Conventions. 21 Pursuant to
Article 24(1) of the Convention, all actions for damages, whether based on tort, code law or common law, arising from loss of
baggage under Article 18 of the Warsaw Convention, can only be brought subject to the conditions and limits set forth in the
Warsaw Convention. Article 28(1) thereof sets forth conditions and limits in that the action for damages may be instituted only
in the territory of one of the High Contracting Parties, before the court of (1) the domicile of the carrier, (2) the carrier's
principal place of business, (3) the place of business through which the contract has been made, or (4) the place of destination.
Since the Philippines is not one of these places, a Philippine Court, like the RTC, has no jurisdiction over the complaint for
damages.
Respondent Court of Appeals likewise held that the petitioners could not claim application of Articles 1733, 1734, 1735, 1755,
and 1756 of the New Civil Code on common carriers without taking into consideration Article 1753 of the same Code, which
provides that the law of the country to which the goods are to be transported shall govern the liability of the common carrier
for their loss, destruction, or deterioration. Since the country of ultimate destination is Chicago, the law of Chicago shall govern
the liability of TWA for the loss of the four pieces of baggage. Neither is Article 2176 of the New Civil Code on torts or quasi-
delicts applicable in view of the private international law principle of lex loci delicti commissi.22 In addition, comformably
with Santos III v. Northwest Orient Airlines,23 mere allegation of willful misconduct resulting in a tort is insufficient to exclude
the case from the comprehension of the Warsaw Convention.
Failing in their bid to reconsider the decision, the petitioners filed this petition. They aver that respondent Court of Appeals
gravely erred (1) in holding that the Warsaw Convention is applicable to this case and (2) in applying Article 1753 of the Civil
Code and the principle of lex loci delicti commissi.24
We resolved to give due course to the petitioner after the filing by TWA of its Comment on the petition and noted without
action for the reasons stated in the resolution of 25 September 1996 petitioners' Reply and Rejoinder. We then required the
parties to submit their respective memoranda. They did in due time.
The petitioners insist that the Warsaw Convention is not applicable to their case because the contracts they had with TWA did
not involve an international transportation. Whether the contracts were of international transportation is to be solely
determined from the TWA tickets issued to them in Bangkok, Thailand, which showed that their itinerary was Los Angeles-New
York-Boston-St. Louis-Chicago. Accordingly, since the place of departure (Los Angeles) and the place of destination (Chicago) are
both within the territory of one High Contracting Party, with no agreed stopping place in a territory subject to the sovereignty,
mandate, suzerainty or authority of another Power, the contracts did not constitute 'international transportation' as defined by
the convention. They also claim to be without legal basis the contention of TWA that their transportation contracts were of
international character because of the handwritten notations in the tickets re "INT'S TKT #079-4402956821-2" and "INT'L TKT
#079-4402956819." Notwithstanding such notations, the TWA tickets, viz., (a) No. 015.9475:153:304 and (b) No.
015:9475:153:305 did not cease to be for the itinerary therein designated. Besides, it is a fact that petitioners Purita and
Carmina Mapa traveled from Manila to Los Angeles via Philippine Airlines (PAL) by virtue of PAL tickets issued independently of
the TWA tickets.
The pitch issue to be resolved under the petitioner's first assigned error is whether the contracts of transportation between
Purita and Carmina Mapa, on the one hand, and TWA, on the other, were contracts of "international transportation" under the
Warsaw Convention. If they were, then we should sustain the trial court and the Court of Appeals in light of our ruling in Santos
v. Northwest Orient Airlines.25 It appears clear to us that TWA itself, the trial court, and the Court of Appeals impliedly admit
that if the sole basis were the two TWA tickets for Los Angeles-New York-Boston-St. Louis-Chicago, the contracts cannot be
brought within the term "international transportation," as defined in Article I(2) of the Warsaw Convention. As provided
therein, a contract is one of international transportation only if
according to the contract made by the parties, the place of departure and the place of destination, whether or not
there be a break in the transportation or a transshipment, are situated either within the territories of two High
Contracting Parties, or within the territory of a single High Contracting Party, if there is an agreed stopping place
130
within a territory subject to the sovereignty, mandate or authority of another power, even though that power is not
a party to this convention.
There are then two categories of international transportation, viz., (1) that where the place of departure and the place of
destination are situated within the territories of two High Contracting Parties regardless of whether or not there be a break in
the transportation or a transshipment; and (2) that where the place of departure and the place of destination are within the
territory of a single High Contracting Party if there is an agreed stopping place within a territory subject to the sovereignty,
mandate, or authority of another power, even though the power is not a party of the Convention.
The High Contracting Parties referred to in the Convention are the signatories thereto and those which subsequently adhered
to it. In the case of the Philippines, the Convention was concurred in by the Senate, through Resolution No. 19, on 16 May
1950. The Philippine instrument of accession was signed by President Elpidio Quirino on 13 October 1950 and was deposited
with the Polish Government on 9 November 1950. The Convention became applicable to the Philippines on 9 February 1951.
Then, on 23 September 1955, President Ramon Magsaysay issued Proclamation No. 201, declaring the Philippines' formal
adherence thereto, "to the end that the same and every article and clause thereof may be observed and fulfilled in good faith
by the Republic of the Philippines and the citizens thereof.26
The contracts of transportation in this case are evidenced by the two TWA tickets, No. 015:9475:153:304 and No.
015:9475:153:305, both purchased and issued in Bangkok, Thailand. On the basis alone of the provisions therein, it is obvious
that the place of departure and the place of destination are all in the territory of the United States, or of a single High
Contracting Party. The contracts, therefore, cannot come within the purview of the first category of international
transportation. Neither can it be under the second category since there was NO agreed stopping place within a territory subject
to the sovereignty, mandate, or authority of another power.
The only way to bring the contracts between Purita and Carmina Mapa, on the one hand, and TWA, on the other, within the
first category of "international transportation" is to link them with, or to make them an integral part of, the Manila-Los
Angeles travel of Purita and Carmina through PAL aircraft. The "linkages" which have been pointed out by the TWA, the trial
court, and the Court of Appeals are (1) the handwritten notations, viz., INT'L TKT # 079-4402956821-2 and INT'L TKT # 079-
4402956819, on the two TWA tickets; and (2) the entries made by petitioners Purita and Carmina Mapa in column YOUR
COMPLETE ITINERARY in TWA's Passenger Property Questionnaire, wherein they mentioned their travel from Manila to Los
Angeles in flight PR 102.
The alleged "international tickets" mentioned in the notations in conjunction with which the two TWA tickets were issued were
not presented. Clearly then, there is at all no factual basis of the finding that the TWA tickets were issued in conjunction with
the international tickets, which are even, at least as of now, non-existent.
As regards the petitioner's entry in YOUR COMPLETE ITINERARY column of the Passenger Property Questionnaire wherein they
included the Manila-Los Angeles travel, it must be pointed out that this was made on 4 September 199027 by petitioners Purita
and Carmina Mapa, and only in connection with their claim for their lost pieces of baggage. The loss occurred much earlier, or
on 27 August 1990. The entry can by no means be considered as a part of, or supplement to, their contracts of transportation
evidenced by the TWA tickets which covered transportation within the United States only.
It must be underscored that the first category of international transportation under the Warsaw Convention is based on "the
contract made by the parties." TWA does not claim that the Manila-Los Angeles contracts of transportation which brought
Purita and Carmina to Los Angeles were also its contracts. It does not deny the assertion of the petitioners that those contracts
were independent of the TWA tickets issued in Bangkok, Thailand. No evidence was offered that TWA and PAL had an
agreement concerning transportation of passengers from points of departures not served with aircrafts of one or the other.
There could have been no difficulty for such agreement, since TWA admitted without qualification in paragraph 1 of its
Answer28 to the second Amended Complaint the allegation in paragraph 1.1 of the latter 29 that TWA "is a foreign corporation
licensed to do business in the Philippines with office address at Ground Floor, Saville Building, Sen. Gil. J. Puyat Avenue, corner
Paseo de Roxas, Makati, Metro Manila."
TWA relies on Article I(3) of the Convention, which provides as follows:
3. A carriage to be performed by several successive air carriers is deemed, for the purposes of
this Convention, to be one undivided carriage, if it has been regarded by the parties as a single
operation, whether it had been agreed upon under the form of a single contract or of a series
of contracts, and it shall not lose its international character merely because one contract or a
series of contracts is to be performed entirely within a territory subject to the sovereignty,
suzerainty, mandate, or authority of the same High Contracting Party.
It also points to Article 15 of the IATA Recommend Practice 1724, which provides: Carriage to be performed by a several
successive carriers under one ticket, or under a ticket and any conjunction ticket issued in connection therewith, is regarded as
a single operation."30
The flaw of respondent's position is the presumption that the parties have "regarded" as an "undivided carriage" or as a "single
operation" the carriage from Manila to Los Angeles through PAL then to New York-Boston-St. Louis-Chicago through TWA. The
dismissal then of the second Amended Complaint by the trial court and the Court of Appeals' affirmance of the dismissal were
not based on indubitable facts or grounds, but no inferences without established factual basis.
ISSUE: Whether the contracts of transportation between Purita and Carmina Mapa and TWA were contracts of “international
transportation” under the Warsaw Convention.
HELD:
Article I (2) of the Warsaw Convention provides that a contract is one of international transportation only if according to the
contract made by the parties, the place of departure and the place of destination, whether or not there be a break in the
transportation or a transshipment, are situated either within the territories of two High Contracting Parties, or within the
territory of a single High Contracting Party, if there is an agreed stopping place within a territory subject to the sovereignty,
mandate or authority of another power, even though that power is not a party to this convention.
On the basis alone of the provisions therein, it is obvious that the place of departure and the place of destination are all in the
territory of the United States, or of a single High Contracting Party. The contracts, therefore, cannot come within the purview
of the first category of international transportation. Neither can it be under the second category since there was NO agreed
stopping place within a territory subject to the sovereignty, mandate, or authority of another power.

TWA should have offered evidence for its affirmative defenses at the preliminary hearing therefor. Section 5 of Rule 16 of the
Rules of Court expressly provides:

Sec. 5. Pleading grounds as affirmative defenses. — Any of the grounds for dismissal provided for in this rule, except
improper venue, may be pleaded as an affirmative defense, and a preliminary hearing may be had thereon as if a
motion to dismiss had been filed.

Without any further evidence as earlier discussed, the trial court should have denied the affirmative defense of lack of
jurisdiction because it did not appear to be indubitable. Section 3 of Rule 16 of the Rules of Court provides:

Sec. 3. Hearing and order. — After hearing the court may deny or grant the motion or allow amendment of pleading,
or may defer the hearing and determination of the motion until the trial if the ground alleged therein does not
appear to be indubitable.

WHEREFORE, the instant petition is GRANTED and the challenged decision of 31 May 1995 of respondent Court of Appeals in
CA-G.R. CV No. 39896, as well as the Order of 24 July 1992 of the Regional Trial Court of Quezon City, Branch 102, in Civil Case
No. Q-91-9620, is REVERSED and SET ASIDE.

The Regional Trial Court of Quezon City, Branch 102, is hereby DIRECTED to proceed with the pre-trial, if it has not been
terminated, and with the trial on the merits of the case and then to render judgment thereon, taking into account the foregoing
observations on the issue of jurisdiction.

SO ORDERED.
FACTS:

Purita Mapa and her daughter Carmina purchased in Bangkok, Thailand Trans World Airline tickets for Los Angeles-New York-
Boston-St. Louis-Chicago. 4 of their 7 baggage were lost which prompted the Mapas to file an action against TWA when they
could not come to an agreement as to the indemnification of the lost baggage. TWA set up an affirmative defense of lack of
jurisdiction of Philippine courts over the action for damages in that pursuant to Article 28(1) of the Warsaw Convention, the
action could only be brought either in Bangkok where the contract was entered into, or in Boston which was the place of
destination, or in Kansas City which is the carrier's domicile and principal place of business.

131
Isaac vs. A.L. Ammen Transportation, 101 Phil 1046; 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
EN BANC
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
G.R. No. L-9671 August 23, 1957
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.
CESAR L. ISAAC, plaintiff-appellant,
vs.
We believe that the law concerning the liability of a common carrier has now suffered a substantial modification in view of the
A. L. AMMEN TRANSPORTATION CO., INC., defendant-appellee.
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:
BAUTISTA ANGELO, J.:
ART. 1733. Common carriers, from the nature of their business and for reasons of public policy, are bound to
A. L. Ammen Transportation Co., Inc., hereinafter referred to as defendant, is a corporation engaged in the business of
observe extra ordinary diligence in the vigilance over the goods and for the safety of the passengers transported by
transporting passengers by land for compensation in the Bicol provinces and one of the lines it operates is the one connecting
them according to all the circumstances of each case.
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
Such extraordinary diligence in the vigilance over the goods is further expressed in articles 1734, 1735, and 1745,
before reaching his destination, the bus collided with a motor vehicle of the pick-up type coming from the opposite direction,
Nos. 5, 6, and 7, while the extraordinary diligence for the safety of the passengers is further set forth in articles 1755
as a result of which plaintiff's left arm was completely severed and the severed portion fell inside the bus. Plaintiff was rushed
and 1756.
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
ART. 1755. A common carrier is bound to carry the passengers safely as far as human care and foresight can provide,
Hospital where he was operated on and stayed there for another two months. For these services, he incurred expenses
using the utmost diligence of very cautious persons, with a due regard for all the circumstances.
amounting to P623.40, excluding medical fees which were paid by defendant.
ART. 1756. In case of death of or injuries to passengers, common carriers are presumed to have been at fault or to
As an aftermath, plaintiff brought this action against defendants for damages alleging that the collision which resulted in the
have acted negligently, unless they prove that they observed extraordinary diligence as prescribed in articles 1733
loss of his left arm was mainly due to the gross incompetence and recklessness of the driver of the bus operated by defendant
and 1755.
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,
The Code Commission, in justifying this extraordinary diligence required of a common carrier, says the following:
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.
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
Defendant set up as special defense that the injury suffered by plaintiff was due entirely to the fault or negligence of the driver
required of common carriers is calculated to protect the passengers from the tragic mishaps that frequently occur in
of the pick-up car which collided with the bus driven by its driver and to the contributory negligence of plaintiff himself.
connection with rapid modern transportation. This high standard of care is imperatively demanded by the
Defendant further claims that the accident which resulted in the injury of plaintiff is one which defendant could not foresee or,
precariousness of human life and by the consideration that every person must in every way be safeguarded against
though foreseen, was inevitable.
all injury. (Report of the Code Commission, pp. 35-36)" (Padilla, Civil Code of the Philippines, Vol. IV, 1956 ed., p.
197).
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
From the above legal provisions, we can make the following restatement of the principles governing the liability of a common
was not able to avoid it. As a consequence, the court dismissed complaint, with costs against plaintiff. This is an appeal from
carrier: (1) the liability of a carrier is contractual and arises upon breach of its obligation. There is breach if it fails to exert
said decision.
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
It appears that plaintiff boarded a bus of defendant as paying passenger from Ligao, Albay, bound for Pili, Camarines Sur, but
or to have acted negligently in case of death of, or injury to, passengers, it being its duty to prove that it exercised extraordinary
before reaching his destination, the bus collided with a pick-up car which was coming from the opposite direction and, as a,
diligence; and (4) the carrier is not an insurer against all risks of travel.
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
The question that now arises is: Has defendant observed extraordinary diligence or the utmost diligence of every cautious
destination, it becomes important to determine the nature and extent of the liability of a common carrier to a passenger in the
person, having due regard for all circumstances, in avoiding the collision which resulted in the injury caused to the plaintiff?
light of the law applicable in this jurisdiction.
After examining the evidence in connection with how the collision occurred, the lower court made the following finding:
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
Hemos examinado muy detenidamente las pruebas presentadas en la vista, principalmente, las declaraciones que
thereof, he cites several Philippine cases.1 With the ruling in mind, appellant seems to imply that once the contract of carriage is
hemos acotado arriba, y hernos Ilegado a la conclusion de que el demandado ha hecho, todo cuanto estuviere de su
established and there is proof that the same was broken by failure of the carrier to transport the passenger safely to his
parte para evitar el accidente, pero sin embargo, no ha podido evitarlo.
destination, the liability of the former attaches. On the other hand, appellee claims that is a wrong presentation of the rule. It
132
 EI hecho de que el demandado, antes del choque, tuvo que hacer pasar su truck encima de los montones de grava It is the prevailing rule that it is negligence per se for a passenger on a railroad voluntarily or inadvertently to
que estaban depositados en la orilla del camino, sin que haya ido mas alla, por el grave riesgo que corrian las vidas protrude his arm, hand, elbow, or any other part of his body through the window of a moving car beyond the outer
de sus pasajeros, es prueba concluyente de lo que tenemos dicho, a saber: — que el cuanto esuba de su parte, para edge of the window or outer surface of the car, so as to come in contact with objects or obstacles near the track,
evitar el accidente, sin que haya podidoevitardo, por estar fuera de su control. and that no recovery can be had for an injury which but for such negligence would not have been sustained. (10 C. J.
1139)
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 Plaintiff, (passenger) while riding on an interurban car, to flick the ashes, from his cigar, thrust his hand over the
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- guard rail a sufficient distance beyond the side line of the car to bring it in contact with the trunk of a tree standing
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 beside the track; the force of the blow breaking his wrist. Held, that he was guilty of contributory negligence as a
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 matter of law. (Malakia vs. Rhode Island Co., 89 A., 337.)
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. Wherefore, the decision appealed from is affirmed, with cost against appellant.
FACTS:
Of course, this finding is disputed by appellant who cannot see eye to eye with the evidence for the appellee and insists that
Bus of A.L. Ammen Trans. Co. immediately prior to the collision, was running at a moderate speed while the pick-up car was
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
running outside of its proper lane. The driver of the bus, upon seeing the manner in which the pick-up was then running,
coming from the opposite direction at a distance which allows the use of moderate care and prudence to avoid an accident,
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
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
situated on the rampart of the road. Notwithstanding all these efforts, the rear left side of the bus was hit by the pick-up car.
stopped and waited for the vehicle from the opposite direction to pass, and should have proceeded only after the other vehicle
Passenger Isaac, the only victim of the collision, seated himself on the left side of the bus resting his left arm on the window sill
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
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
squeezing his way through between the oncoming pick-up and the pile of gravel under the circumstances was considered
that the collision resulted in the severance of said left arm from his body thus doing him a great damage.
negligent.
ISSUE: Whether the negligence of the passenger relieves the common carrier from liability.
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
HELD:
on the part of the driver. While the position taken by appellant appeals more to the sense of caution that one should observe in
The driver of the bus has done what a prudent man could have done to avoid the collision and this relieves the transport
a given situation to avoid an accident or mishap, such however can not always be expected from one who is placed suddenly in
company from liability under the law. However, contributory negligence cannot relieve the carrier of its liability but will only
a predicament where he is not given enough time to take the course of action as he should under ordinary circumstances. One
entitle it to a reduction of the amount of damage caused. It is the prevailing rule that it is negligence per se for a passenger on a
who is placed in such a predicament cannot exercise such coolness or accuracy of judgment as is required of him under
railroad voluntarily or inadvertently to protrude his arm, hand, elbow, or any other part of his body through the window of a
ordinary circumstances and he cannot therefore be expected to observe the same judgment, care and precaution as in the
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
latter. For this reason, authorities abound where failure to observe the same degree of care that as ordinary prudent man
near the track, and that no recovery can be had for an injury which but for such negligence would not have been sustained.
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.

133
Compania Maritima vs. CA, Aug. 29, 1988; 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
THIRD DIVISION
After trial, the then Court of First Instance of Manila, Branch VII, dismissed on April 24, 1968 the complaint with costs against
G.R. No. L-31379 August 29, 1988
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
COMPAÑIA MARITIMA, petitioner,
weight of 7.5 tons, which underdeclaration was intended to defraud Compañia Maritima of the payment of the freight charges
vs.
and which likewise led the Chief Officer of the vessel to use the heel block of hatch No. 2 in unloading the payloader. 8
COURT OF APPEALS and VICENTE CONCEPCION, respondents.
From the adverse decision against him, Vicente E. Concepcion appealed to the Court of Appeals which, on December 5, 1965
FERNAN, C.J.:
rendered a decision, the dispositive portion of which reads:
Petitioner Compañia Maritima seeks to set aside through this petition for review on certiorari the decision 1 of the Court of
IN VIEW WHEREOF, judgment must have to be as it is hereby reversed; defendant is condemned to pay
Appeals dated December 5, 1965, adjudging petitioner liable to private respondent Vicente E. Concepcion for damages in the
unto plaintiff the sum in damages of P24,652.07 with legal interest from the date the present decision
amount of P24,652.97 with legal interest from the date said decision shall have become final, for petitioner's failure to deliver
shall have become final; the payloader is declared abandoned to defendant; costs against the latter. 9
safely private respondent's payloader, and for costs of suit. The payloader was declared abandoned in favor of petitioner.
Hence, the instant petition.
The facts of the case are as follows:
The principal issue in the instant case is whether or not the act of private respondent Vicente E. Concepcion in furnishing
Private respondent Vicente E. Concepcion, a civil engineer doing business under the name and style of Consolidated
petitioner Compañia Maritima with an inaccurate weight of 2.5 tons instead of the payloader's actual weight of 7.5 tons was
Construction with office address at Room 412, Don Santiago Bldg., Taft Avenue, Manila, had a contract with the Civil
the proximate and only cause of the damage on the Oliver Payloader OC-12 when it fell while being unloaded by petitioner's
Aeronautics Administration (CAA) sometime in 1964 for the construction of the airport in Cagayan de Oro City Misamis
crew, as would absolutely exempt petitioner from liability for damages under paragraph 3 of Article 1734 of the Civil Code,
Oriental.
which provides:
Being a Manila — based contractor, Vicente E. Concepcion had to ship his construction equipment to Cagayan de Oro City.
Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of the goods,
Having shipped some of his equipment through petitioner and having settled the balance of P2,628.77 with respect to said
unless the same is due to any of the following causes only:
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
(3) Act or omission of the shipper or owner of the goods.
was issued Bill of Lading 113 on the same date upon delivery of the equipment at the Manila North Harbor. 2
Petitioner claims absolute exemption under this provision upon the reasoning that private respondent's act of furnishing it with
These equipment were loaded aboard the MV Cebu in its Voyage No. 316, which left Manila on August 30, 1964 and arrived at
an inaccurate weight of the payloader constitutes misrepresentation within the meaning of "act or omission of the shipper or
Cagayan de Oro City in the afternoon of September 1, 1964. The Reo trucks and water tanks were safely unloaded within a few
owner of the goods" under the above- quoted article. It likewise faults the respondent Court of Appeals for reversing the
hours after arrival, but while the payloader was about two (2) meters above the pier in the course of unloading, the swivel pin
decision of the trial court notwithstanding that said appellate court also found that by representing the weight of the payloader
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
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
thereafter taken to petitioner's compound in Cagayan de Oro City.
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
On September 7, 1964, Consolidated Construction, thru Vicente E. Concepcion, wrote Compañia Maritima to demand a
it must be borne by private respondent Vicente E. Concepcion.
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
The general rule under Articles 1735 and 1752 of the Civil Code is that common carriers are presumed to have been at fault or
letter dated October 2, 1964. 5
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
Meanwhile, petitioner shipped the payloader to Manila where it was weighed at the San Miguel Corporation. Finding that the
prove that they observed extraordinary diligence as required in Article 1733 of the Civil Code. The responsibility of observing
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
extraordinary diligence in the vigilance over the goods is further expressed in Article 1734 of the same Code, the article invoked
Consolidated Construction in its letter dated October 7, 1964, contending that had Vicente E. Concepcion declared the actual
by petitioner to avoid liability for damages.
weight of the payloader, damage to their ship as well as to his payloader could have been prevented. 6
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
To replace the damaged payloader, Consolidated Construction in the meantime bought a new one at P45,000.00 from
of destination in bad order, makes out prima facie case against the common carrier, so that if no explanation is given as to how
Bormaheco Inc. on December 3, 1964, and on July 6, 1965., Vicente E. Concepcion filed an action for damages against
the loss, deterioration or destruction of the goods occurred, the common carrier must be held responsible. 10 Otherwise stated,
petitioner with the then Court of First Instance of Manila, Branch VII, docketed as Civil Case No. 61551, seeking to recover
it is incumbent upon the common carrier to prove that the loss, deterioration or destruction was due to accident or some other
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
circumstances inconsistent with its liability.
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

134
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
135
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.
FACTS:
Vicente E. Concepcion shipped his construction equipment, including a pay loader, to Cagayan de Oro City through Compania
Maritima. While the pay loader was about 2 meters above the pier in the course of unloading, the swivel pin gave way, causing
the pay loader to fall. Concepcion demanded replacement of the pay loader. Compania Maritima denied the claim for damages,
contending that had Concepcion declared the actual weight of the pay loader, damage to their ship as well as to his pay loader
could have been prevented. It was found out that the pay loader weighed 7.5 tons and not 2.5 tons as declared in the Bill of
Lading.
ISSUE: Whether misdeclaration as to weight excuses common carrier from liability
HELD:
Concepcion’s act of furnishing Compania Maritima with an inaccurate weight of the pay loader cannot successfully be used as
an excuse by the latter to avoid liability to the damage thus caused, said act constitutes a contributory circumstance to the
damage caused on the pay loader, which mitigates the liability for damages of the latter, as the same could have been avoided
had the latter utilized the “jumbo” lifting apparatus which has a capacity of lifting 20 to 25tons of heavy cargoes. It is a fact
known to the Chief Officer of MV Cebu that the pay loader was loaded aboard the MV Cebu at the Manila North Harbor by
means of a terminal crane. Even if Compania Maritima chose not to take the necessary precaution to avoid damage by checking
the correct weight of the payl oader, extraordinary care and diligence compel the use of the “jumbo” lifting apparatus as the
most prudent course for Compania Maritima.

136
 a. To do all such other things and to transact all such business directly or indirectly necessary, incidental
or conducive to the attainment of the purpose of the corporation; and
PNR vs. CA, Oct. 4, 1985
b. Generally, to exercise all powers of a corporation under the Corporation Law.
SECOND DIVISION
Under the foregoing section, the PNR has all the powers, the characteristics and attributes of a corporation under the
G.R. No. L-55347 October 4, 1985
Corporation Law. There can be no question then that the PNR may sue and be sued and may be subjected to court processes
just like any other corporation. 2
PHILIPPINE NATIONAL RAILWAYS, petitioner,
vs.
The petitioner's contention that the funds of the PNR are not subject to garnishment or execution hardly raises a question of
THE HONORABLE COURT OF APPEALS and ROSARIO TUPANG, respondents.
first impression. In Philippine National Railways v. Union de Maquinistas, et al., 3 then Justice Fernando, later Chief Justice, said.
"The main issue posed in this certiorari proceeding, whether or not the funds of the Philippine National Railways, could be
ESCOLIN, J.:
garnished or levied upon on execution was resolved in two recent decisions, the Philippine National Bank v. Court of Industrial
Relations [81 SCRA 314] and Philippine National Bank v. Hon. Judge Pabalan [83 SCRA 595]. This Court in both cases answered
Invoking the principle of state immunity from suit, the Philippine National Railways, PNR for short, instituted this petition for
the question in the affirmative. There was no legal bar to garnishment or execution. The argument based on non-suability of a
review on certiorari to set aside the decision of the respondent Appellate Court which held petitioner PNR liable for damages
state allegedly because the funds are governmental in character was unavailing.So it must be again."
for the death of Winifredo Tupang, a paying passenger who fell off a train operated by the petitioner.
In support of the above conclusion, Justice Fernando cited the Court's holding in Philippine National Bank v. Court of Industrial
The pertinent facts are summarized by the respondent court as follows:
Relations, to wit: "The premise that the funds could be spoken of as public in character may be accepted in the sense that the
People's Homesite and Housing Corporation was a government-owned entity. It does not follow though that they were exempt
The facts show that on September 10, 1972, at about 9:00 o'clock in the evening, Winifredo Tupang,
from garnishment. National Shipyard and Steel Corporation v. Court of Industrial Relations is squarely in point. As was explicitly
husband of plaintiff Rosario Tupang, boarded 'Train No. 516 of appellant at Libmanan, Camarines Sur, as a
stated in the opinion of then Justice, later Chief Justice, Concepcion: "The allegation to the effect that the funds of the NASSCO
paying passenger bound for Manila. Due to some mechanical defect, the train stopped at Sipocot,
are public funds of the government, and that, as such, the same may not be garnished, attached or levied upon, is untenable
Camarines Sur, for repairs, taking some two hours before the train could resume its trip to Manila.
for, as a government- owned and controlled corporation, the NASSCO has a personality of its own, distinct and separate from
Unfortunately, upon passing Iyam Bridge at Lucena, Quezon, Winifredo Tupang fell off the train resulting
that of the Government. It has-pursuant to Section 2 of Executive Order No. 356, dated October 23, 1950 * * *, pursuant to
in his death.The train did not stop despite the alarm raised by the other passengers that somebody fell
which the NASSCO has been established- 'all the powers of a corporation under the Corporation Law * * *. 4
from the train. Instead, the train conductor Perfecto Abrazado, called the station agent at Candelaria,
Quezon, and requested for verification of the information. Police authorities of Lucena City were
As far back as 1941, this Court in the case of Manila Hotel Employees Association v. Manila Hotel Co., 5 laid down the rule that
dispatched to the Iyam Bridge where they found the lifeless body of Winifredo Tupang.
"when the government enters into commercial business, it abandons its sovereign capacity and is to be treated like any other
corporation. [Bank of the U.S. v. Planters' Bank, 9 Waitch 904, 6 L. ed. 244]. By engaging in a particular business through the
As shown by the autopsy report, Winifredo Tupang died of cardio-respiratory failure due to massive
instrumentality of a corporation the government divests itself pro hac vice of its sovereign character, so as to render the
cerebral hemorrhage due to traumatic injury [Exhibits B and C, Folder of Exhibits],Tupang was later
corporation subject to the rules of law governing private corporations. 6 Of Similar import is the pronouncement in Prisco v.
buried in the public cemetery of Lucena City by the local police authorities. [Rollo, pp. 91-92]
CIR,' that "when the government engages in business, it abdicates part of its sovereign prerogatives and descends to the level
of a citizen, ... . " In fine, the petitioner PNR cannot legally set up the doctrine of non-suability as a bar to the plaintiff's suit for
Upon complaint filed by the deceased's widow, Rosario Tupang, the then Court of First Instance of Rizal, after trial, held the damages.
petitioner PNR liable for damages for breach of contract of carriage and ordered "to pay the plaintiff the sum of P12,000,00 for
the death of Winifredo Tupang, plus P20,000.00 for loss of his earning capacity and the further sum of P10,000.00 as moral
The appellate court found, the petitioner does not deny, that the train boarded by the deceased Winifredo Tupang was so over-
damages, and P2,000.00 as attorney's fees, and costs. 1
crowded that he and many other passengers had no choice but to sit on the open platforms between the coaches of the train.
It is likewise undisputed that the train did not even slow down when it approached the Iyam Bridge which was under repair at
On appeal, the Appellate Court sustained the holding of the trial court that the PNR did not exercise the utmost diligence the time, Neither did the train stop, despite the alarm raised by other passengers that a person had fallen off the train at lyam
required by law of a common carrier. It further increased the amount adjudicated by the trial court by ordering PNR to pay the Bridge. 7
plaintiff an additional sum of P5,000.00 as exemplary damages.
The petitioner has the obligation to transport its passengers to their destinations and to observe extraordinary diligence in
Moving for reconsideration of the above decision, the PNR raised for the first time, as a defense, the doctrine of state immunity doing so. Death or any injury suffered by any of its passengers gives rise to the presumption that it was negligent in the
from suit. It alleged that it is a mere agency of the Philippine government without distinct or separate personality of its own, performance of its obligation under the contract of carriage. Thus, as correctly ruled by the respondent court, the petitioner
and that its funds are governmental in character and, therefore, not subject to garnishment or execution. The motion was failed to overthrow such presumption of negligence with clear and convincing evidence.
denied; the respondent court ruled that the ground advanced could not be raised for the first time on appeal.
But while petitioner failed to exercise extraordinary diligence as required by law, 8 it appears that the deceased was chargeable
Hence, this petition for review. with contributory negligence. Since he opted to sit on the open platform between the coaches of the train, he should have held
tightly and tenaciously on the upright metal bar found at the side of said platform to avoid falling off from the speeding train.
The petition is devoid of merit. The PNR was created under Rep. Act 4156, as amended. Section 4 of the said Act provides: Such contributory negligence, while not exempting the PNR from liability, nevertheless justified the deletion of the amount
adjudicated as moral damages. By the same token, the award of exemplary damages must be set aside. Exemplary damages
The Philippine national Railways shall have the following powers:
137
may be allowed only in cases where the defendant acted in a wanton, fraudulent, reckless, oppressive or malevolent Issue: Whether there was contributory negligence on the part of Tupang.
manner. 9 There being no evidence of fraud, malice or bad faith on the part of petitioner, the grant of exemplary damages
should be discarded. Held:
PNR has all the powers, the characteristics and attributes of a corporation under the Corporation Law. There can be no question
WHEREFORE, the decision of the respondent appellate court is hereby modified by eliminating therefrom the amounts of then that the PNR may sue and be sued and may be subjected to court processes just like any other corporation.
P10,000.00 and P5,000.00 adjudicated as moral and exemplary damages, respectively. No costs.
PNR has the obligation to transport its passengers to their destinations and to observe extraordinary diligence in doing so.
SO ORDERED. Death or any injury suffered by any of its passengers gives rise to the presumption that it was negligent in the performance of
its obligation under the contract of carriage. Thus, the petitioner failed to overthrow such presumption of negligence with clear
Facts:
and convincing evidence. While PNR failed to exercise extraordinary diligence as required by law, it appears that the deceased
was chargeable with contributory negligence.
On 10 September 1972, at about 9:00 p.m., Winifredo Tupang, husband of Rosario Tupang, boarded Train 516 of the Philippine
National Railways at Libmanan, Camarines Sur, as a paying passenger bound for Manila. Due to some mechanical defect, the
train stopped at Sipocot, Camarines Sur, for repairs, taking some two hours before the train could resume its trip to Manila.
Unfortunately, upon passing Iyam Bridge at Lucena, Quezon, Winifredo Tupang fell off the train resulting in his death. The train
did not stop despite the alarm raised by the other passengers that somebody fell from the train. Instead, the train conductor,
Perfecto Abrazado, called the station agent at Candelaria, Quezon, and requested for verification of the information. Police
authorities of Lucena City were dispatched to the Iyam Bridge where they found the lifeless body of Winifredo Tupang. As
shown by the autopsy report, Winifredo Tupang died of cardio-respiratory failure due to massive cerebral hemorrhage due to
traumatic injury. Tupang was later buried in the public cemetery of Lucena City by the local police authorities. Upon complaint
filed by the deceased’s widow, Rosario Tupang, the then CFI Rizal, after trial, held the PNR liable for damages for breach of
contract of carriage and ordered it to pay Rosario Tupang the sum of P12,000.00 for the death of Winifredo Tupang, plus
P20,000.00 for loss of his earning capacity, and the further sum of P10,000.00 as moral damages, and P2,000.00 as attorney’s
fees, and cost. On appeal, the Appellate Court sustained the holding of the trial court that the PNR did not exercise the utmost
diligence required by law of a common carrier. It further increased the amount adjudicated by the trial court by ordering PNR to
pay the Rosario Tupang an additional sum of P5,000,00 as exemplary damages. Moving for reconsideration of the above
decision, the PNR raised for the first time, as a defense, the doctrine of state immunity from suit. The motion was denied.
Hence the petition for review.

Issue: WON there was contributory negligence on the part of Tupang.

Held:

PNR has the obligation to transport its passengers to their destinations and to observe extraordinary diligence in doing so.
Death or any injury suffered by any of its passengers gives rise to the presumption that it was negligent in the performance of
its obligation under the contract of carriage. PNR failed to overthrow such presumption of negligence with clear and convincing
evidence, inasmuch as PNR does not deny, (1) that the train boarded by the deceased Winifredo Tupang was so overcrowded
that he and many other passengers had no choice but to sit on the open platforms between the coaches of the train, (2) that
the train did not even slow down when it approached the Iyam Bridge which was under repair at the time, and (3) that neither
did the train stop, despite the alarm raised by other passengers that a person had fallen off the train at Iyam Bridge. While PNR
failed to exercise extraordinary diligence as required by law, it appears that the deceased was chargeable with contributory
negligence. Since he opted to sit on the open platform between the coaches of the train, he should have held tightly and
tenaciously on the upright metal bar found at the side of said platform to avoid falling off from the speeding train. Such
contributory negligence, while not exempting the PNR from liability, nevertheless justified the deletion of the amount
adjudicated as moral damages. The Supreme Court modified the decision of the appellate court by eliminating therefrom the
amounts of P10,000.00 and P5,000.00 adjudicated as moral and exemplary damages, respectively; without costs.

Facts:
Invoking the principle of state immunity from suit, the Philippine National Railways (PNR) instituted petition for review on
certiorari to set aside the decision of the respondent Appellate Court which held petitioner PNR liable for damages for the
death of Winifredo Tupang, a paying passenger who fell off a train operated by the petitioner because he opted to sit on the
open platform between the coaches of the train.

138
 Therefore, all damages and impairment suffered by the goods during the transportation, by reason of
Standard Vacuum Oil vs. Luzon Stevedoring, April 18, 1956; accident, force majeure, or by virtue of the nature or defect of the articles, shall be for the account and risk of the
shipper.
EN BANC
The proof of these accidents is incumbent on the carrier.
G.R. No. L-5203 April 18, 1956
It therefore appears that whenever merchandise is transported on the sea by virtue of a contract entered into between the
STANDARD VACUUM OIL COMPANY, plaintiff-appellant,
shipper and the carrier, the merchandise is deemed transported at the risk and venture of the shipper, if the contrary is not
vs.
stipulated, and all damages suffered by the merchandise during the transportation by reason of accident or force majeure shall
LUZON STEVEDORING CO., INC., defendant-appellee.
be for the account and risk of the shipper, but the proof of these accidents is incumbent on the carrier. Implementing this
provision, our Supreme Court has held that all a shipper has to prove in connection with sea carriage is delivery of the
BAUTISTA ANGELO, J.:
merchandise in good condition and its non-delivery at the place of destination in order that the burden of proof may shift to
the carrier to prove any of the accidents above adverted to. Thus, it was held that "Shippers who are forced to ship goods on an
Plantiff entered into a contract with defendant to transport between the ports of Manila and Nin Bay, Sangay, Iloilo, 2,916.44
ocean liner or any other ship have some legal rights, and when goods are delivered on board a ship in good order and
barrels of bulk gasoline belonging to plaintiff. The gasoline was delivered in accordance with the contract but defendant failed
condition, and the shipowner delivers them to the shipper in bad order and condition, it then devolves upon the shipowner to
to transport it to its place of destination and so plaintiff brought his action in the Court of First Instance of Manila to recover the
both allege and prove that the goods were damaged by reason of some fact which legally exempts him from liability" (Mirasol
sum of P75,578.50 as damages.
vs. Robert Dollar Co., 53 Phil., 129).
Defendant, in its answer, pleaded that its failure to deliver the gasoline was due to fortuitous event or caused by circumstances
The issue to be determined is: Has defendant proven that its failure to deliver the gasoline to its place of destination is due to
beyond its control and not to its fault or negligence or that of any of its employees. The court, after receiving the evidence,
accident or force majeure or to a cause beyond its control? This would require an analysis of the facts and circumstances
rendered decision finding that the disaster that had befallen the tugboat was the result of an avoidable accident and the loss of
surrounding the transportation of said gasoline.
the gasoline was due to a fortuitous even which was beyond the control of defendant and, consequently, dismissed the case
with costs against the plaintiff.
It appears that the tugboat "Snapper" was acquired by defendant from the foreign Liquidation Commission. It was a surplus
property. It was a deep-sea tugboat that had been in the service of the United States Armed Forces prior to its purchase by the
The facts as found by the trial court are: "that pursuant to an agreement had between the parties, defendant's barge No. L-522
Luzon Stevedoring Co. The tugboat was put into operation without first submitting it to an overhaul in a dry-dock. It also
was laden with gasoline belonging to the plaintiff to be transported from Manila to the Port of Iloilo; that early in the morning
appears that this tugboat had previously made several trips and each time it had to obtain a special permit from the Bureau of
of February 2, 1947, defendant's tugboat "Snapper" picked up the barge outside the breakwater; that the barge was placed
Customs because it had never been dry-dock and did not have complete equipment to be able to obtain the permanent permit.
behind the tugboat, it being connected to the latter by a tow rope ten inches in circumstances; that behind the barge, three
The special permits that were issued by said Bureau specifically state that they were issued "pending submission of plans and
other barges were likewise placed, one laden with some cargo while the other two containing hardly any cargo at all; that the
load line certificate, including test and final inspection of equipment." It futher appears that, when the tugboat was inspected
weather was good when on that day the tugboat with its tow started on its voyage; that the weather remained good on
by the Bureau of Customs on October 18, 1946, it found it to be inadequately equipped and so the Bureau required defendant
February 3, 1947, when it passed Santiago Point in Batangas; that at about 3:00 o'clock in the morning of February 4, 1947, the
to provide it with the requisite equipment but it was never able to complete it. The fact that the tugboat was a surplus
engine of the tugboat came to a dead stop; that the engineer on board the tugboat found out that the trouble was due to a
property, has not been dry-docked, and was not provided with the requisite equipment to make it seaworthy, shows that
broken idler; that a message was then sent to the defendant's radio station in Manila informing its official of the engine trouble;
defendant did not use reasonable diligence in putting the tugboat in such a condition as would make its use safe for operation.
that upon the receipt of the message the defendant called up several shipping companies in Manila to find out if they had any
It is true, as defendant contends, that there were then no dry-dock facilities in the Philippines, but this does not mean that they
vessels in the vicinity where the "Snapper' had stalled but sais companies replied in the negative; that thereupon the defendant
could not be obtained elsewhere. It being a surplus property, a dry-dock inspection was a must to put the tugboat in a sea
redioed its tugboat Tamban' which was docked at Batangas, ordering it to proceed to the place where the Snapper' was; that at
going condition. It may also be true , as contended, that the deficiency in the equipment was due to the fact that no such
about 6:00 o'clock in the same morning of February 4, 1947, the master of the Snapper' attempted to cast anchor but the water
equipment was available at the time, but this did not justify defendant in putting such tugboat in business even if unequipped
areas around Elefante Island were so deep that the anchor did not touch bottom; that in the afternoon of the same day the
merely to make a profit. Nor could the fact that the tugboat was given a special permit by the Bureau of Customs to make the
weather become worse as the wind increased in intensity and the waves were likewise increased in size and force; that due to
trip relieve defendant from liability.
the rough condition of the sea the anchor chains of the Snapper' and the four barges broke one by one and as a consequence
thereof they were drifted and were finally dashed against the rocks a hole was opened in the hull of the Snapper', which
Where owner buys old tug, licensed coastwise, and equips it for ocean going, it is negligence to send tug out
ultimately caused it to sink, while the barge No. L-522 was so badly damaged that the gasoline it had on board leaked out; and
without stability test, where history and performance with respect to crankiness and tenderness are matters of
that the Tamban arrived at the place after the gasoline had already leaked out.
official record. Sabine Towing Co. vs. Brennan, C.C.A. Tex., 72 F 2d 490, certiorari denied 55 S. Ct. 141, 293 U.S. 632,
79 L. Ed. 717. (80 C.J. S. 803 Footnote).
Defendant is a private stevedoring company engaged in transporting local products, including gasoline in bulk and has a fleet of
about 140 tugboats and about 90 per cent of its business is devoted to transportation. Though it is engaged in a limited
There are other circumstances which show the lack of precaution and diligence taken by defendant to make the travel of the
contract of carriage in the sense that it chooses its customers and is not opened to the public, nevertheless, the continuity of its
tugboat safe. One is the failure to carry on board the necessary spare parts. When the idler was broken, the engineer of the
operation in this kind of business have earned for it the level of a public utility. The contract between the plaintiff and
tugboat examined it for the first time and it was only then that he found that there were no spare parts to use except a worn
defendant comes therefore under the provisions of the Code of Commerce. The pertinent law is article 361 which provides:
out spare driving chain. And the necessity of carrying such spare parts was emphasized by the very defendant's winess, Mr.
Depree, who said that in vessels motored by diesel engines it is necessary always to carry spare chains, ball bearings and chain
ART. 361. The merchandise shall be transported at the risk and venture of the shipper, if the contrary was not
drives. And this was not done.
expressly stipulated.

139
 A tug engaged to tow a barge is liable for damage to the cargo of the barge caused by faulty equipment of the tug. help. Considering these circumstances, and those we have discussed elsewhere, we are persuaded to conclude that defendant
The Raleigh, D.C. Md. 50 F. Supp. 961. (80 C.J.S. Footnote.). has failed to established that it is exempt from liability under the law.

Another circumstance refers to the deficiency or incomplete in the man power of the tug boat. According to law, a tugboat of Wherefore, the decision appealed from is reversed. Defendant is hereby ordered to pay to plaintiff the sum of P75,578.50, with
the tonnage and powers of one like the "Snapper" is required to have a complement composed of one first mate, one second legal interest from the date of the filing of the complaint, with costs.
mate, one third mate, one chief engineer, one second engineer, and one third engineer, (section 1203, Revised Administrative
FACTS:
Code), but when the trip in question was undertaken, it was only manned by one master, who was merely licensed as a bay,
Standard Vacuum Oil Co. entered into a contract with Luzon Stevedoring Co. Inc. to transport barrels of bulk gasoline belonging
river and lake patron, one second mate, who was licensed as a third mate, oner chief engineer who was licensed as third motor
to the former, but LSCI failed to transport it to its place of destination. The tugboat sunk, and the barge was so badly damaged
engineer, one assistant engineer, who was licensed as a bay, river, and lake motor engineer, and one second assistant engineer,
that the gasoline leaked out.It appears that the tugboat "Snapper" was a surplus property and was put into operation without
who was unlicensed. The employment of this crew to perform functions beyond its competence and qualifications is not onl;y
first submitting it to an overhaul in a dry-dock.It was also found out that there were no spare parts to use except a worn out
risky but against the law and if a mishap is caused, as in this case, one cannot but surmise that such incompetence has
spare driving chain when the engineer of the tugboat examined the idlerfor the first time when it was broken prior to the
something to do with the mishap. The fact that the tugboat had undertaken several trips before with practically the same crew
sinking. When the trip was undertaken, it was only manned by one master, who was merely licensed as a bay, river and lake
without any untoward consequence, cannot furnish any justification for continuing in its employ a deficient or incompetent
patron, one second mate, who was licensed as a third mate, oner chief engineer who was licensed as third motor engineer, one
personnel contrary to law and the regulations of the Bureau of Customs.
assistant engineer, who was licensed as a bay, river, and lake motor engineer, and one second assistant engineer, who was
unlicensed.
(1) Generally, seaworthiness is that strength, durability and engineering skill made a part of a ship's construction and
continued maintenance, together with a competent and sufficient crew, which would withstand the vicissitudes and
ISSUE: Whether the failure to deliver the gasoline to its place of destination is due to accident or force majeure or to a cause
dangers of the elements which might reasonably be expected or encountered during her voyage without loss or
beyond its control.
damage to her particular cargo. The Cleveco, D.C. Ohio, 59 F. Supp. 71, 78, affirmed, C.C.A., 154 F. 2d 606. (80 C.J.S.
997, Footnote.).
HELD:
The fact that the tugboat was a surplus property, has not been dry-docked, and was not provided with the requisite equipment
Let us now come to the eeforts exerted by defendant in extending help to the tugboat when it was notified of the breakage of
to make it seaworthy, shows that defendant did not use reasonable diligence in putting the tugboat in such a condition as
the idler. The evidence shows that the idler was broken at about 3:00 o'clock in the morning of February 4, 1947. Within a few
would make its use safe for operation. It being a surplus property, a dry-dock inspection was a must to put the tugboat in a sea
minutes, a massage was sent to defendant by radio informing it of the engine trouble. The weather was good until 12:00
going condition. It may also be true , as contended, that the deficiency in the equipment was due to the fact that no such
o'clock noon when the wind started to blow. According to defendant, since it received the message, it called up different
equipment was available at the time, but this did not justify defendant in putting such tugboat in business even if unequipped
shipping lines in Manila asking them if they had any vessel in the vicinity where the "Snapper" stalled but, unfortunately, none
merely to make a profit. The employment of its crew to perform functions beyond its competence and qualifications is not only
was available at the time,and as its tug "Tamban" was then docked in Batangas, Batangas, which was nearest to the place, it
risky but against the law and if a mishap is caused, as in this case, one cannot but surmise that such incompetence has
radioed said tug to go to the aid of the "Snapper". Accordingly, the tug "Tamban" set sail from Batangas for the rescue only to
something to do with the mishap. The fact that the tugboat had undertaken several trips before with practically the same crew
return to secure a map of the vicinity where the "Snapper" had stalled, which entailed a delay of two hours. In the meantime,
without any untoward consequence, cannot furnish any justification for continuing in its employ a deficient or incompetent
the captain of the "Snapper" attempted to cast anchor. The water areas off Elefante Island were deep and the anchor would not
personnel contrary to law and the regulations of the Bureau of Customs.
touch bottom. Then the sea became rough and the waves increased in size and force and notwithstanding the efforts of the
crew to prevent the tug from drifting away, the force of the wind and the violence of the waves dashed the tug and the barges
Generally, seaworthiness is that strength, durability and engineering skill made a part of a ship's construction and continued
against the rocks. The tug developed a hole in her hull and sank. The barge carrying the gasoline was so badly damaged that the
maintenance, together with a competent and sufficient crew, which would withstand the vicissitudes and dangers of the
gasoline leaked out. The tug "Tamban" was finally able to locate the "Snapper" but it was too late.
elements which might reasonably be expected or encountered during her voyage without loss or damage to her particular
cargo. While the breaking of the idler may be due to an accident, or to something unexpected, the cause of the disaster which
The foregoing acts only serve to emphasize that the efforts made by defeandant fall short of that diligence and precaution that
resulted in the loss of the gasoline can only be attributed to the negligence or lack of precaution to avert it on the part of
are demanded by the situation to save the tugboat and the barge it was towing from disaster for it appears that more than
defendant by undertaking a trip that is not well equipped and properly manned by a competent personnel. The loss of the
twenty-four hours had elapsed befora the tug "Tamban" showed up to extend help. The delay was caused not so much because
gasoline certainly cannot be said to be due to force majeure or unforeseen event but to the failure of defendant to extend
of the lack of available ships in the vicinity where the "Snapper" stalled but because defendant did not have in readiness any
adequate and proper help.
tugboat sufficient in tonnage and equipment to attend to the rescue. The tug "Tamban" that was ordered to extend help was
fully inadequate for the purpose. It was a small vessel that was authorized to operate only within Manila Bay and did not even
have any map of the Visayan Islands. A public utility that is engaged in sea transportation even for a limited service with a fleet
of 140 tugboats should have a competent tug to rush for towing or repairs in the event of untoward happening overseas. If
defendant had only such a tug ready for such an emergency, this disaster would not have happened. Defendant could have
avoided sending a poorly equipped tug whic, as it is to be expected, failed to do job.

While the breaking of the idler may be due to an accident, or to something unexpected, the cause of the disaster which
resulted in the loss of the gasoline can only be attributed to the negligence or lack of precaution to avert it on the part of
defendant. Defendant had enough time to effectuate the rescue if it had only a competent tug for the purpose because the
weather was good from 3:00 o'clock a.m. to 12:00 o'clock noon of February 4, 1947 and it was only in the afternoon that the
wind began to blow with some intensity,1 but failed to do so because of that shortcoming. The loss of the gasoline certainly
cannot be said to be due to force majeure or unforeseen event but to the failure of defendant to extend adequate and proper

140

Planters Products, Inc. vs. CA, Sept. 15, 1993;
FIRST DIVISION
G.R. No. 101503 September 15, 1993
PLANTERS PRODUCTS, INC., petitioner,
vs.
COURT OF APPEALS, SORIAMONT STEAMSHIP AGENCIES AND KYOSEI KISEN KABUSHIKI KAISHA, respondents.
BELLOSILLO, J.:
Does a charter-party1 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
Charter2 was entered into between Mitsubishi as shipper/charterer and KKKK as shipowner, in Tokyo, Japan. 3 Riders 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 holds4 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
141
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
142
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,
143
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.
Lessons Applicable: Charter Party (Transportation)
FACTS:
June 16 1974: Mitsubishi International Corporation (Mitsubishi) of New York, U.S.A., 9,329.7069 M/T of Urea 46% fertilizer
bought by Planters Products, Inc. (PPI) on aboard the cargo vessel M/V "Sun Plum" owned by private 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
May 17 1974: a time charter-party on the vessel M/V "Sun Plum" pursuant to the Uniform General Charter was entered
into between Mitsubishi as shipper/charterer and KKKK as shipowner, in Tokyo, Japan
Before loading the fertilizer aboard the vessel, 4 of her holds were all presumably inspected by the charterer's
representative and found fit
The hatches remained closed and tightly sealed throughout the entire voyage
July 3, 1974: PPI 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 hatches
remained open throughout the duration of the discharge
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 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.
Tarpaulins and GI sheets were placed in-between and alongside the trucks to contain spillages of the ferilizer
It took 11 days for PPI to unload the cargo
Cargo Superintendents Company Inc. (CSCI), private marine and cargo surveyor, was hired by PPI to determine the
"outturn" of the cargo shipped, by taking draft readings of the vessel prior to and after discharge
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
 Certificate of Shortage/Damaged Cargo prepared by PPI short of 94.839 M/T and about 23 M/T were rendered unfit for
commerce, having been polluted with sand, rust and dirt
PPI sent a claim letter 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
SSA: what they received was just a request for shortlanded certificate and not a formal claim, and that they "had nothing
to do with the discharge of the shipment
RTC: failure to destroy the presumption of negligence against them, SSA are liable
CA: REVERSED - failed to prove the basis of its cause of action
ISSUE: W/N a time charter between a shipowner and a charterer transforms 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
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.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. 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.

HELD:

NO. petition is DISMISSED

When PPI 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 carrier has sufficiently overcome, by clear and convincing proof, the prima
facie presumption of negligence. 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.
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
This is a risk the shipper or the owner of the goods has to face. Clearly, KKKK 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.

FACTS:
Prior to the voyage of M/V “Sun Plum”, a timecharter-party on the vessel was entered into between Mitsubishi International
Corporation (Mitsubishi) as shipper/charterer and Kyosei Kisen Kabushiki Kaisha (KKKK) as shipowner for the transport of Urea
fertilizers purchased in bulk by Planters Products, Inc. (PPI). It has been agreed upon by the parties 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.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.The hull was also in good condition.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.After the determination of the "outturn" of the cargo shipped, PPI sent sent a claim letter to KKKK,
for 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.

ISSUE: Whether the shipowner was able to prove that he had exercised that degree of diligence required of him under the law.

HELD:

144
Mecenas, et al. vs. CA, 180 SCRA 83; Negros Navigation, Capt. Santisteban, PNOC and PNOC Shipping appealed the trial court's decision to the Court of Appeals.
Later, PNOC and PNOC Shipping withdrew their appeal citing a compromise agreement reached by them with Negros
THIRD DIVISION
Navigation; the Court of Appeals granted the motion by a resolution dated 5 September 1988, subject to the reservation made
by Lilia Ciocon that she could not be bound by the compromise agreement and would enforce the award granted her by the
G.R. No. 88052 December 14, 1989
trial court.
JOSE P. MECENAS, ROMEO P. MECENAS, LILIA P. MECENAS, ORLANDO P. MECENAS, VIOLETA M. ACERVO, LUZVIMINDA P.
In time, the Court of Appeals rendered a decision dated 26 January 1989 which decreed the following:
MECENAS; and OFELIA M. JAVIER, petitioners,
vs.
WHEREFORE, in view of the foregoing, the decision of the court a quo is hereby affirmed as modified with respect to Civil Case
HON. COURT OF APPEALS, CAPT. ROGER SANTISTEBAN and NEGROS NAVIGATION CO., INC., respondents.
No. 31525, wherein defendant appellant Negros Navigation Co. Inc. and Capt. Roger Santisteban are held jointly and severally
liable to pay the plaintiffs the amount of P100,000. 00 as actual and compensatory damages and P15,000.00 as attorney's fees
FELICIANO, J.:
and the cost of the suit. 2
At 6:20 o'clock in the morning of 22 April 1980, the M/T "Tacloban City," a barge-type oil tanker of Philippine registry, with a
The issue to be resolved in this Petition for Review is whether or not the Court of Appeals had erred in reducing the amount of
gross tonnage of 1,241,68 tons, owned by the Philippine National Oil Company (PNOC) and operated by the PNOC Shipping and
the damages awarded by the trial court to the petitioners from P400,000.00 to P100,000.00.
Transport Corporation (PNOC Shipping), having unloaded its cargo of petroleum products, left Amlan, Negros Occidental, and
headed towards Bataan. At about 1:00 o'clock in the afternoon of that same day, the M/V "Don Juan," an interisland vessel,
We note that the trial court had granted petitioners the sum of P400,000,00 "for the death of [their parents]" plus P15,000.00
also of Philippine registry, of 2,391.31 tons gross weight, owned and operated by the Negros Navigation Co., Inc. (Negros
as attorney's fees, while the Court of Appeals awarded them P100,000.00 "as actual and compensatory damages" and
Navigation) left Manila bound for Bacolod with seven hundred fifty (750) passengers listed in its manifest, and a complete set of
P15,000.00 as attorney's fees. To determine whether such reduction of the damages awarded was proper, we must first
officers and crew members.
determine whether petitioners were entitled to an award of damages other than actual or compensatory damages, that is,
whether they were entitled to award of moral and exemplary damages.
On the evening of that same day, 22 April 1980, at about 10:30 o'clock, the "Tacloban City" and the "Don Juan" collided at the
Talbas Strait near Maestra de Ocampo Island in the vicinity of the island of Mindoro. When the collision occurred, the sea was
We begin by noting that both the trial court and the Court of Appeals considered the action (Civil Case No. Q-31525) brought by
calm, the weather fair and visibility good. As a result of this collision, the M/V "Don Juan" sank and hundreds of its passengers
the sons and daughters of the deceased Mecenas spouses against Negros Navigation as based on quasi-delict. We believed that
perished. Among the ill-fated passengers were the parents of petitioners, the spouses Perfecto Mecenas and Sofia Mecenas,
action is more appropriately regarded as grounded on contract, the contract of carriage between the Mecenas spouses as
whose bodies were never found despite intensive search by petitioners.
regular passengers who paid for their boat tickets and Negros Navigation; the surviving children while not themselves
passengers are in effect suing the carrier in representation of their deceased parents. 3 Thus, the suit (Civil Case No. Q-33932)
On 29 December 1980, petitioners filed a complaint in the then Court- of First Instance of Quezon City, docketed as Civil Case
filed by the widow Lilia Ciocon was correctly treated by the trial and appellate courts as based on contract (vis-a-vis Negros
No. Q-31525, against private respondents Negros Navigation and Capt. Roger Santisteban, the captain of the "Don Juan"
Navigation) and as well on quasi-delict (vis-a-vis PNOC and PNOC Shipping). In an action based upon a breach of the contract of
without, however, impleading either PNOC or PNOC Shipping. In their complaint, petitioners alleged that they were the seven
carriage, the carrier under our civil law is liable for the death of passengers arising from the negligence or willful act of the
(7) surviving legitimate children of Perfecto Mecenas and Sofia Mecenas and that the latter spouses perished in the collision
carrier's employees although such employees may have acted beyond the scope of their authority or even in violation of the
which had resulted from the negligence of Negros Navigation and Capt. Santisteban. Petitioners prayed for actual damages of
instructions of the carrier, 4 which liability may include liability for moral damages. 5 It follows that petitioners would be entitled
not less than P100,000.00 as well as moral and exemplary damages in such amount as the Court may deem reasonable to
to moral damages so long as the collision with the "Tacloban City" and the sinking of the "Don Juan" were caused or attended
award to them.
by negligence on the part of private respondents.
Another complaint, docketed as Civil Case No. Q-33932, was filed in the same court by Lilia Ciocon claiming damages against
In respect of the petitioners' claim for exemplary damages, it is only necessary to refer to Article 2232 of the Civil Code:
Negros Navigation, PNOC and PNOC Shipping for the death of her husband Manuel Ciocon, another of the luckless passengers
of the "Don Juan." Manuel Ciocon's body, too, was never found.
Article 2332. In contracts and quasi-contracts, the court may exemplary damages if the defendant acted
in a wanton, fraudulent, reckless, oppressive or malevolent manner. 6
The two (2) cases were consolidated and heard jointly by the Regional Trial Court of Quezon City, Branch 82. On 17 July 1986,
after trial, the trial court rendered a decision, the dispositive of which read as follows:
Thus, whether petitioners are entitled to exemplary damages as claimed must depend upon whether or not private
respondents acted recklessly, that is, with gross negligence.
WHEREFORE, the Court hereby renders judgment ordering:
We turn, therefore, to a consideration of whether or not Negros Navigation and Capt. Santisteban were grossly negligent during
a) The defendant Negros Navigation Co., Inc. and Capt. Roger Santisteban jointly and severally liable to
the events which culminated in the collision with "Tacloban City" and the sinking of the "Don Juan" and the resulting heavy loss
pay plaintiffs in Civil Case No Q-31525, the sum of P400,000.00 for the death of plaintiffs' parents,
of lives.
Perfecto A. Mecenas and Sofia P. Mecenas; to pay said plaintiff's the sum of P15.000,00 as and for
attorney's fees; plus costs of the suit.
The then Commandant of the Philippine Coast Guard, Commodore B.C. Ochoco, in a decision dated 2 March 1981, held that the
"Tacloban City" was "primarily and solely [sic] at fault and responsible for the collision." 7 Initially, the Minister of National
b) Each of the defendants Negros Navigation Co Inc. and Philippine National Oil Company/PNOC Shipping
Defense upheld the decision of Commodore Ochoco. 8 On Motion for Reconsideration, however, the Minister of National
and Transportation Company, to pay the plaintiff in Civil Case No. Q-33932, the sum of P100,000.00 for
Defense reversed himself and held that both vessels had been at fault:
the death of Manuel Ciocon, to pay said plaintiff jointly and severally, the sum of P1 5,000.00 as and for
attorney's fees, plus costs of the suit. 1
145
 It is therefore evident from a close and thorough review of the evidence that fault is imputable to both
vessels for the collision. Accordingly, the decision dated March 12, 1982, subject of the Motion for
Reconsideration filed by counsel of M/T Tacloban City, is hereby reversed. However, the administrative
penalties imposed oil both vessels and their respective crew concerned are hereby affirmed. 9
The trial court, after a review of the evidence submitted during the trial, arrived at the same conclusion that the Minister of
National Defense had reached that both the "Tacloban City" and the "Don Juan" were at fault in the collision. The trial court
summarized the testimony and evidence of PNOC and PNOC Shipping as well as of Negros Navigation in the following terms:
Defendant PNOC's version of the incident:
M/V Don Juan was first sighted at about 5 or 6 miles from Tacloban City (TSN, January 21, 1985, p. 13); it
was on the starboard (right) side of Tacloban City. This was a visual contact; not picked up by radar (p. 15,
Ibid). Tacloban City was travelling 310 degrees with a speed of 6 knots, estimated speed of Don Juan of
16 knots (TSN, May 9, pp. 5-6). As Don Juan approached, Tacloban City gave a leeway of 1 0 degrees to
the left. 'The purpose was to enable Tacloban to see the direction of Don Juan (p. 19, Ibid). Don Juan
switched to green light, signifying that it will pass Tacloban City's right side; it will be a starboard to
starboard passing (p. 21, Ibid) Tacloban City's purpose in giving a leeway of 10 degrees at this point, is to
give Don Juan more space for her passage (p. 22, Ibid). This was increased by Tacloban City to an
additional 15 degrees towards the left (p. 22, Ibid). The way was clear and Don Juan has not changed its
course (TSN, May 9,1985, p. 39).
When Tacloban City altered its course the second time, from 300 degrees to 285 degrees, Don Juan was
about 4.5 miles away (TSN, May 9,1985, p. 7).
Despite executing a hardport maneuver, the collision nonetheless occurred. Don Juan rammed the
Tacloban City near the starboard bow (p. 7, Ibid)."
NENACO's [Negros Navigation] version.
Don Juan first sighted Tacloban City 4 miles away, as shown by radar (p. 13, May 24, 1983). Tacloban City
showed its red and green lights twice; it proceeded to, and will cross, the path of Don Juan. Tacloban was
on the left side of Don Juan (TSN, April 20,1983, p. 4).
Upon seeing Tacloban's red and green lights, Don Juan executed hard starboard (TSN, p. 4, Ibid.) This
maneuver is in conformity with the rule that 'when both vessels are head on or nearly head on, each
vessel must turn to the right in order to avoid each other. (p. 5, Ibid). Nonetheless, Tacloban appeared to
be heading towards Don Juan (p. 6, Ibid),
When Don Juan executed hard starboard, Tacloban was about 1,500 feet away (TSN, May 24,1983, p. 6).
Don Juan, after execution of hard starboard, will move forward 200 meters before the vessel will respond
to such maneuver (p. 7, Ibid). The speed of Don Juan at that time was 17 knits; Tacloban City 6.3 knots. t
"Between 9 to 15 seconds from execution of hard starboard, collision occurred (p. 8, Ibid). (pp. 3-4
Decision). 10
The trial court concluded:
M/ V Don Juan and Tacloban City became aware of each other's presence in the area by visual contact at
a distance of something like 6 miles from each other. They were fully aware that if they continued on
their course, they will meet head on. Don Juan - steered to the right; Tacloban City continued its course to
the left. There can be no excuse for them not to realize that, with such maneuvers, they will collide. They
executed maneuvers inadequate, and too late, to avoid collision.
146
The Court is of the considered view that the defendants are equally negligent and are liable for damages.
(p. 4, decision). 11
The Court of Appeals, for its part, reached the same conclusion. 12
There is, therefore, no question that the "Don Juan" was at least as negligent as the M/T "Tacloban City" in the events leading
up to the collision and the sinking of the "Don Juan." The remaining question is whether the negligence on the part of the "Don
Juan" reached that level of recklessness or gross negligence that our Civil Code requires for the imposition of exemplary
damages. Our own review of the record in the case at bar requires us to answer this in the affirmative.
In the first place, the report of the Philippine Coast Guard Commandant (Exhibit "l 0"), while holding the "Tacloban City" as
"primarily and solely [sic] at fault and responsible for the collision," did itself set out that there had been fault or negligence on
the part of Capt. Santisteban and his officers and crew before the collision and immediately after contact of the two (2) vessels.
The decision of Commodore Ochoco said:
M/S Don Juan's Master, Capt. Rogelio Santisteban, was playing mahjong before and up to the time of
collision. Moreover, after the collision, he failed to institute appropriate measures to delay the sinking MS
Don Juan and to supervise properly the execution of his order of abandonship. As regards the officer on
watch, Senior 3rd Mate Rogelio Devera, he admitted that he failed or did not call or inform Capt.
Santisteban of the imminent danger of collision and of the actual collision itself Also, he failed to assist
his master to prevent the fast sinking of the ship. The record also indicates that Auxiliary Chief Mate
Antonio Labordo displayed laxity in maintaining order among the passengers after the collision.
We believe that the behaviour of the captain of the "Don Juan" in tills instance-playing mahjong "before and up to the time of
collision constitutes behaviour that is simply unacceptable on the part of the master of a vessel to whose hands the lives and
welfare of at least seven hundred fifty (750) passengers had been entrusted. Whether or not Capt. Santisteban was "off-duty"
or "on-duty" at or around the time of actual collision is quite immaterial; there is, both realistically speaking and in
contemplation of law, no such thing as "off-duty" hours for the master of a vessel at sea that is a common carrier upon whom
the law imposes the duty of extraordinary diligence-
[t]he duty 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. 14
The record does not show that was the first or only time that Capt. Santisteban had entertained himself during a voyage by
playing mahjong with his officers and passengers; Negros Navigation in permitting, or in failing to discover and correct such
behaviour, must be deemed grossly negligent.
Capt. Santisteban was also faulted in the Philippine Coast Guard decision for failing after the collision, "to institute appropriate
measures to delay the sinking of M/V Don Juan." This appears to us to be a euphemism for failure to maintain the sea-
worthiness or the water-tight integrity of the "Don Juan." The record shows that the "Don Juan" sank within ten (10) to fifteen
(15) minutes after initial contact with the "Tacloban City. 15 While the failure of Capt. Santisteban to supervise his officers and
crew in the process of abandoning the ship and his failure to avail of measures to prevent the too rapid sinking of his vessel
after collision, did not cause the collision by themselves, such failures doubtless contributed materially to the consequent loss
of life and, moreover, were indicative of the kind and level of diligence exercised by Capt. Santisteban in respect of his vessel
and his officers and men prior to actual contact between the two (2) vessels. The officer-on-watch in the "Don Juan" admitted
that he had failed to inform Capt. Santisteban not only of the "imminent danger of collision" but even of "the actual collision
itself "
There is also evidence that the "Don Juan" was carrying more passengers than she had been certified as allowed to carry. The
Certificate of Inspection 16 dated 27 August 1979, issued by the Philippine Coast Guard Commander at Iloilo City, the Don Juan's
home port, states:
 Passengers allowed : 810
Total Persons Allowed : 864
The report of the Philippine Coast Guard (Exhibit "10") stated that the "Don Juan" had been "officially cleared with 878
passengers on board when she sailed from the port of Manila on April 22, 1980 at about 1:00 p.m." This head-count of the
passengers "did not include the 126 crew members, children below three (3) years old and two (2) half-paying passengers"
which had been counted as one adult passenger. 17 Thus, the total number of persons on board the "Don Juan" on that ill-
starred night of 22 April 1 980 was 1,004, or 140 persons more than the maximum lumber that could be safely carried by the
"Don Juan," per its own Certificate of Inspection. 18 We note in addition, that only 750 passengers had been listed in its
manifest for its final voyage; in other words, at least 128 passengers on board had not even been entered into the "Don Juan's"
manifest. The "Don Juan's" Certificate of Inspection showed that she carried life boat and life raft accommodations for only 864
persons, the maximum number of persons she was permitted to carry; in other words, she did not carry enough boats and life
rafts for all the persons actually on board that tragic night of 22 April 1980.
We hold that under these circumstances, a presumption of gross negligence on the part of the vessel (her officers and crew)
and of its ship-owner arises; this presumption was never rebutted by Negros Navigation.
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 Juan's" top
speed was 17 knots; while that of the "Tacloban City" was 6.3. knots. 19 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 Juan's" 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. 20In 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.21 The "Tacloban City," when the two (2) vessels were only three-tenths (0.3) of a mile apart, turned
(for the second time) 150 to port side while the "Don Juan" veered hard to starboard. This circumstance, while it may have
made the collision immediately inevitable, cannot, however, be viewed in isolation from the rest of the factual circumstances
obtaining before and up to the collision. In any case, Rule 18 like all other International Rules of the Road, are not to be obeyed
and construed without regard to all the circumstances surrounding a particular encounter between two (2) vessels. 22 In
ordinary circumstances, a vessel discharges her duty to another by a faithful and literal observance of the Rules of
Navigation, 23 and she cannot be held at fault for so doing even though a different course would have prevented the collision.
This rule, however, is not to be applied where it is apparent, as in the instant case, that her captain was guilty of negligence or
of a want of seamanship in not perceiving the necessity for, or in so acting as to create such necessity for, a departure from the
rule and acting accordingly. 24 In other words, "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. 25
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. 26, 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 horn. 26A The "Don Juan " gave
no answering horn blast to signal its own intention and proceeded to turn hatd to starboard. 26B
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
147
passengers. We find no necessity for passing upon the degree of negligence or culpability properly attributable to PNOC and
PNOC Shipping or the master of the "Tacloban City," since they were never impleaded here.
It will be recalled that the trial court had rendered a lump sum of P400,000.00 to petitioners for the death of their parents in
the "Don Juan" tragedy. Clearly, the trial court should have included a breakdown of the lump sum award into its component
parts: compensatory damages, moral damages and exemplary damages. On appeal, the Court of Appeals could have and
should have itself broken down the lump sum award of the trial court into its constituent parts; perhaps, it did, in its own mind.
In any case, the Court of Appeals apparently relying upon Manchester Development Corporation V. Court of Appeals 27 reduced
the P400,000.00 lump sum award into a P100,000.00 for actual and compensatory damages only.
We believe that the Court of Appeals erred in doing so, It is true that the petitioners' complaint before the trial court had in the
body indicated that the petitioner-plaintiffs believed that moral damages in the amount of at least P1,400,000.00 were properly
due to them (not P12,000,000.00 as the Court of Appeals erroneously stated) as well as exemplary damages in the sum of
P100,000.00 and that in the prayer of their complaint, they did not specify the amount of moral and exemplary damages
sought from the trial court. We do not believe, however, that theManchester doctrine, which has been modified and clarified in
subsequent decision by the Court in Sun Insurance Office, Ltd. (SIOL), et al. v. Asuncion, et al. 28 can be applied in the instant
case so as to work a striking out of that portion of the trial court's award which could be deemed nationally to constitute an
award of moral and exemplary damages. Manchester was promulgated by the Court on 7 May 1987. Circular No. 7 of this
Court, which embodied the doctrine in Manchester, is dated 24 March 1988. Upon the other hand, the complaint in the case at
bar was filed on 29 December 1980, that is, long before either Manchester or Circular No. 7 of 24 March 1988 emerged. The
decision of the trial court was itself promulgated on 17 July 1986, again, before Manchester and Circular No. 7 were
promulgated. We do not believe that Manchester should have been applied retroactively to this case where a decision on the
merits had already been rendered by the trial court, even though such decision was then under appeal and had not yet reached
finality. There is no indication at all that petitioners here sought simply to evade payment of the court's filing fees or to mislead
the court in the assessment of the filing fees. In any event, we apply Manchester as clarified and amplified by Sun Insurance
Office Ltd. (SIOL), by holding that the petitioners shall pay the additional filing fee that is properly payable given the award
specified below, and that such additional filing fee shall constitute a lien upon the judgment.
We consider, finally, the amount of damages-compensatory, moral and exemplary-properly imposable upon private
respondents in this case. The original award of the trial court of P400,000.00 could well have been disaggregated by the trial
court and the Court of Appeals in the following manner:
1. actual or compensatory damages proved in the course of trial consisting of actual expenses
incurred by petitioners
in their search for their
parents' bodies- -P126,000.00
2. actual or compensatory
damages in case of
wrongful death
(P30,000.00 x 2) -P60,000.00 29
(3) moral damages -P107,000.00
(4) exemplary damages -P107,000.00
 Total -P400,000.00
Considering that petitioners, legitimate children of the deceased spouses Mecenas, are seven (7) in number and that they lost
both father and mothe in one fell blow of fate, and considering the pain and anxiety they doubtless experienced while
searching for their parents among the survivors and the corpses recovered from the sea or washed ashore, we believe that an
additional amount of P200,000.00 for moral damages, making a total of P307,000.00 for moral damages, making a total of
P307,000.00 as moral damages, would be quite reasonable.
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
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 seels 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 notive 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. Considering
the foregoing, we believe that an additional award in the amount of P200,000.00 as exmplary damages, is quite modest.
The Court is aware that petitioners here merely asked for the restoration of the P 400.000.00 award of the trial court. We
underscore once more, however, the firmly settled doctrine that this Court may consider and resolved all issues which must be
decided in order to render substantial justice to the parties, including issues not explicity raised by the party affected. In the
case at bar, as in Kapalaran Bus Line v. Coronado, et al., 30 both the demands of sustantial justice and the imperious
requirements of public policy compel us to the conclusion that the trial court's implicit award of moral and exemplary damages
was erronoeusly deledted and must be restored and augmented and brought more nearely to the level required by public
policy and substantial justice.
WHEREFORE, the Petition for Review on certiorari is hereby GRANTED and the Decision of the Court of Appeals insofar as it
redurce the amount of damages awarded to petitioners to P100,000.00 is hereby REVERSED and SET ASIDE. The award granted
by the trial court is hereby RESTORED and AUGMENTED as follows:
(a) P 126,000.00 for actual damages;
Petitioner was the parent of the passenger who died. They file an action for damages alleging the negligence of Capt.
Santisteban (captain of Don Juan) and Negros Navigation (owner of Don Juan).
Issue:
1. Who was negligent?
2. Whether or not Capt. Santisteban and Negros Navigation was negligent.
Held:
1. M/V Tacloban was primarily and solely at fault. M/V Don Juan was also at fault.
Rule 18 of the International Rules of the Road which requires 2 power-driven vessels meeting end on or nearly end on each to
alter her course to starboard so that each vessel may pass on the port side of each other.
In the case, M/V Tacloban, as held by the report of the Commandant of the Philippine Coast Guard, failed to follow the Rules.
Hence, she was deemed negligent.
However, 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 skill on her part or even a departure from the rules.
M/V Don Juan having sighted M/V Tacloban when it was still a long way off was negligent in failing to take early preventive
action and in allowing the 2 vessels to come into close quarters as to render the collision inevitable when there was no
necessity for passing so near M/V Tacloban for Don Juan could choose its own distance. It is noteworthy that M/V Tacloban
upon turning hard to port shortly before the moment of collision, signaled its intention to do so by giving 2 short blasts with its
horn. Don Juan gave no answering horn blast to signal it's own intention and proceeded to turn hard to starboard.
2. Yes. The behavior of the captain -playing mahjong "before and up to the time of collision" constituted gross negligence. This
behavior is unacceptable on the part of the master of a vessel to whose hands the lives of at least 750 passengers were
entrusted.
It does not matter that the Captain was off-duty or on-duty. Realistically speaking, there is no such thing as off-duty hours for
the master of the vessel at sea that is a common carrier who is required extraordinary diligence. Hence, Negros Navigation in
permitting or in failing to discover and correct such behavior is also grossly negligent.

(b) P 60,000.00 as compensatory damages for wrongful death;

(c) P 307,000.00 as moral damages;

(d) P 307,000.00 as exemplary damages making a total of P 800,000.00; and

(e) P 15,000.00 as attorney's fees.

Petitioners shall pay the additional filing fees properly due and payable in view of the award here made, which fees shall be
computed by the Clerks of Court of the trial court, and shall constitute a lien upon the judgment here awarded. Cost against
private respondents.

SO ORDERED.
Facts:
M/T Tacloban (barge-type oil tanker) collided with M/V Don Juan ( inter-island vessel carrying 750 passengers). When the
collision occurred, the sea was calm, the weather fair and visibility good. As a result, M/V Don Juan sank and the passengers
perished.

148
Brinas vs. People of the Phils., Nov. 25, 1983; the body of the child to the body of the old woman. Blood, pieces of scattered brain and pieces of clothes
were at the scene. Later, the bodies were Identified as those of Martina Bool and Emelita Gesmundo.
Among the personal effects found on Martina was a train ticket (Exhibits "B").
FIRST DIVISION
On January 7, 1957, the bodies of the deceased were autopsied by Dr. Pastor Huertas, the Municipal Health Officer of Tiaong.
G.R. No. L-30309 November 25, 1983
Dr. Huertas testified on the cause of death of the victims as follows:
CLEMENTE BRIÑAS, petitioner,
FISCAL YNGENTE:
vs.
THE PEOPLE OF THE PHILIPPINES and HONORABLE COURT OF APPEALS, respondents.
Q What could have caused the death of those women?
GUTIERREZ, JR., J.:
A Shock.
This is a petition to review the decision of respondent Court of Appeals, now Intermediate Appellate Court, affirming the
Q What could have caused that shock?
decision of the Court of First Instance of Quezon, Ninth Judicial District, Branch 1, which found the accused Clemente Briñas
guilty of the crime of DOUBLE HOMICIDE THRU RECKLESS IMPRUDENCE prior the deaths of Martina Bool and Emelita
A Traumatic injury.
Gesmundo.
Q What could have caused traumatic injury?
The information charged the accused-appellant. and others as follows:
A The running over by the wheel of the train.
That on or about the 6th day of January, 1957, in the Municipality of Tiaong, Province of Quezon, Philippines, and within the
jurisdiction of this Hon. Court, the said accused Victor Milan, Clemente Briñas and Hermogenes Buencamino, being then
Q With those injuries, has a person a chance to survive?
persons in charge of passenger Train No. 522-6 of the Manila Railroad Company, then running from Tagkawayan to San Pablo
City, as engine driver, conductor and assistant conductor, respectively, wilfully and unlawfully drove and operated the same in a
A No chance to survive.
negligent, careless and imprudent manner, without due regard to existing laws, regulations and ordinances, that although there
were passengers on board the passenger coach, they failed to provide lamps or lights therein, and failed to take the necessary
precautions for the safety of passengers and to prevent accident to persons and damage to property, causing by such Q What would you say death would come?
negligence, carelessness and imprudence, that when said passenger Train No. 522-6 was passing the railroad tracks in the
Municipality of Tiaong, Quezon, two of its passengers, Martina Bool, an old woman, and Emelita Gesmundo, a child about three A Instantaneous.
years of age, fell from the passenger coach of the said train, as a result of which, they were over run, causing their
instantaneous death. " Q How about the girl, the young girl about four years old, what could have caused the death?

The facts established by the prosecution and accepted by the respondent court as basis for the decision are summarized as A Shock too.
follows:
Q What could have caused the shock?
The evidence of the prosecution tends to show that in the afternoon of January 6, 1957, Juanito Gesmundo bought a train
ticket at the railroad station in Tagkawayan, Quezon for his 55-year old mother Martina Bool and his 3-year old daughter A Compound fracture of the skull and going out of the brain.
Emelita Gesmundo, who were bound for Barrio Lusacan, Tiaong, same province. At about 2:00 p.m., Train No. 522 left
Tagkawayan with the old woman and her granddaughter among the passengers. At Hondagua the train's complement were Q What could have caused the fracture of the skull and the going out of the brain?
relieved, with Victor Millan taking over as engineman, Clemente Briñas as conductor, and Hermogenes Buencamino as assistant
conductor. Upon approaching Barrio Lagalag in Tiaong at about 8:00 p.m. of that same night, the train slowed down and the A That is the impact against a steel object. (TSN., pp. 81-82, July 1, 1959)
conductor shouted 'Lusacan', 'Lusacan'. Thereupon, the old woman walked towards the left front door facing the direction of
Tiaong, carrying the child with one hand and holding her baggage with the other. When Martina and Emelita were near the The Court of First Instance of Quezon convicted defendant-appellant Clemente Briñas for double homicide thru reckless
door, the train suddenly picked up speed. As a result the old woman and the child stumbled and they were seen no more. It imprudence but acquitted Hermogenes Buencamino and Victor Millan The dispositive portion of the decision reads:
took three minutes more before the train stopped at the next barrio, Lusacan, and the victims were not among the passengers
who disembarked thereat . WHEREFORE, the court finds the defendant Clemente Briñas guilty beyond doubt of the crime of double
homicide thru reckless imprudence, defined and punished under Article 305 in connection with Article
Next morning, the Tiaong police received a report that two corpses were found along the railroad tracks 249 of the Revised Penal Code, and sentences him to suffer six (6) months and one (1) day ofprision
at Barrio Lagalag. Repairing to the scene to investigate, they found the lifeless body of a female child, correccional to indemnify the heirs of the deceased Martina Bool and Emelita Gesmundo in the amounts
about 2 feet from the railroad tracks, sprawled to the ground with her belly down, the hand resting on of P6,000 and P3,000, respectively, with subsidiary imprisonment in case of insolvency not to exceed
the forehead, and with the back portion of the head crushed. The investigators also found the corpse of one-third of the principal penalty, and to pay the costs.
an old woman about 2 feet away from the railroad tracks with the head and both legs severed and the
left hand missing. The head was located farther west between the rails. An arm was found midway from
149
 For lack of sufficient evidence against the defendant Hermogenes Buencamino and on the ground of
reasonable doubt in the case of defendant Victor Millan the court hereby acquits them of the crime
charged in the information and their bail bonds declared cancelled.
As to the responsibility of the Manila Railroad Company in this case, this will be the subject of court
determination in another proceeding.
On appeal, the respondent Court of Appeals affirmed the judgment of the lower court.
During the pendency of the criminal prosecution in the Court of First Instance of Quezon, the heirs of the deceased victims filed
with the same court, a separate civil action for damages against the Manila Railroad Company entitled "Civil Case No. 5978,
Manaleyo Gesmundo, et al., v. Manila Railroad Company". The separate civil action was filed for the recovery of P30,350.00
from the Manila Railroad Company as damages resulting from the accident.
The accused-appellant alleges that the Court of Appeals made the following errors in its decision:
I têñ.£îhqwâ£
THE HONORABLE COURT OF APPEALS ERRED IN CONVICTING PETITIONER-APPELLANT UNDER THE FACTS
AS FOUND BY SAID COURT; and
II têñ.£îhqwâ£
THE HONORABLE COURT OF APPEALS ERRED IN INCLUDING THE PAYMENT OF DEATH INDEMNITY BY THE
PETITIONER- APPELLANT, WITH SUBSIDIARY IMPRISONMENT IN CASE OF INSOLVENCY, AFTER THE HEIRS
OF THE DECEASED HAVE ALREADY COMMENCED A SEPARATE CIVIL ACTION FOR DAMAGES AGAINST THE
RAILROAD COMPANY ARISING FROM THE SAME MISHAP.
We see no error in the factual findings of the respondent court and in the conclusion drawn from those findings.
It is undisputed that the victims were on board the second coach where the petitioner-appellant was assigned as conductor and
that when the train slackened its speed and the conductor shouted "Lusacan, Lusacan", they stood up and proceeded to the
nearest exit. It is also undisputed that the train unexpectedly resumed its regular speed and as a result "the old woman and the
child stumbled and they were seen no more.
In finding petitioner-appellant negligent, respondent Court
The appellant's announcement was premature and erroneous, for it took a full three minutes more
before the next barrio of Lusacan was reached. In making the erroneous and premature announcement,
appellant was negligent. He ought to have known that train passengers invariably prepare to alight upon
notice from the conductor that the destination was reached and that the train was about to stop. Upon
the facts, it was the appellant's negligent act which led the victims to the door. Said acts virtually exposed
the victims to peril, for had not the appellant mistakenly made the announcement, the victims would be
safely ensconced in their seats when the train jerked while picking up speed, Although it might be argued
that the negligent act of the appellant was not the immediate cause of, or the cause nearest in time to,
the injury, for the train jerked before the victims stumbled, yet in legal contemplation appellant's
negligent act was the proximate cause of the injury. As this Court held in Tucker v. Milan, CA G.R. No.
7059-R, June 3, 1953: 'The proximate cause of the injury is not necessarily the immediate cause of, or the
cause nearest in time to, the injury. It is only when the causes are independent of each other that the
nearest is to be charged with the disaster. So long as there is a natural, direct and continuous sequence
between the negligent act the injury (sic) that it can reasonably be said that but for the act the injury
could not have occurred, such negligent act is the proximate cause of the injury, and whoever is
150
responsible therefore is liable for damages resulting therefrom. One who negligently creates a dangerous
condition cannot escape liability for the natural and probable consequences thereof, although the act of
a third person, or an act of God for which he is not responsible intervenes to precipitate the loss.
It is a matter of common knowledge and experience about common carriers like trains and buses that before reaching a station
or flagstop they slow down and the conductor announces the name of the place. It is also a matter of common experience that
as the train or bus slackens its speed, some passengers usually stand and proceed to the nearest exit, ready to disembark as the
train or bus comes to a full stop. This is especially true of a train because passengers feel that if the train resumes its run before
they are able to disembark, there is no way to stop it as a bus may be stopped.
It was negligence on the conductor's part to announce the next flag stop when said stop was still a full three minutes ahead. As
the respondent Court of Appeals correctly observed, "the appellant's announcement was premature and erroneous.
That the announcement was premature and erroneous is shown by the fact that immediately after the train slowed down, it
unexpectedly accelerated to full speed. Petitioner-appellant failed to show any reason why the train suddenly resumed its
regular speed. The announcement was made while the train was still in Barrio Lagalag.
The proximate cause of the death of the victims was the premature and erroneous announcement of petitioner' appelant
Briñas. This announcement prompted the victims to stand and proceed to the nearest exit. Without said announcement, the
victims would have been safely seated in their respective seats when the train jerked as it picked up speed. The connection
between the premature and erroneous announcement of petitioner-appellant and the deaths of the victims is direct and
natural, unbroken by any intervening efficient causes.
Petitioner-appellant also argues that it was negligence per se for Martina Bool to go to the door of the coach while the train
was still in motion and that it was this negligence that was the proximate cause of their deaths.
We have carefully examined the records and we agree with the respondent court that the negligence of petitioner-appellant in
prematurely and erroneously announcing the next flag stop was the proximate cause of the deaths of Martina Bool and Emelita
Gesmundo. Any negligence of the victims was at most contributory and does not exculpate the accused from criminal liability.
With respect to the second assignment of error, the petitioner argues that after the heirs of Martina Bool and Emelita
Gesmundo had actually commenced the separate civil action for damages in the same trial court during the pendency of the
criminal action, the said court had no more power to include any civil liability in its judgment of conviction.
The source of the obligation sought to be enforced in Civil Case No. 5978 is culpa contractual, not an act or omission punishable
by law. We also note from the appellant's arguments and from the title of the civil case that the party defendant is the Manila
Railroad Company and not petitioner-appellant Briñas Culpa contractual and an act or omission punishable by law are two
distinct sources of obligation.
The petitioner-appellant argues that since the information did not allege the existence of any kind of damages whatsoever
coupled by the fact that no private prosecutors appeared and the prosecution witnesses were not interrogated on the issue of
damages, the trial court erred in awarding death indemnity in its judgment of conviction.
A perusal of the records clearly shows that the complainants in the criminal action for double homicide thru reckless
imprudence did not only reserve their right to file an independent civil action but in fact filed a separate civil action against the
Manila Railroad Company.
The trial court acted within its jurisdiction when, despite the filing with it of the separate civil action against the Manila Railroad
Company, it still awarded death indemnity in the judgment of conviction against the petitioner-appellant.
It is well-settled that when death occurs as a result of the commission of a crime, the following items of damages may be
recovered: (1) an indemnity for the death of the victim; (2) an indemnity for loss of earning capacity of the deceased; (3) moral
damages; (4) exemplary damages; (5) attorney's fees and expenses of litigation, and (6) interest in proper cases.
The indemnity for loss of earning capacity, moral damages, exemplary damages, attorney's fees, and interests are recoverable
separately from and in addition to the fixed slim of P12,000.00 corresponding to the indemnity for the sole fact of death. This
indemnity arising from the fact of death due to a crime is fixed whereas the others are still subject to the determination of the
court based on the evidence presented. The fact that the witnesses were not interrogated on the issue of damages is of no
moment because the death indemnity fixed for death is separate and distinct from the other forms of indemnity for damages.
WHEREFORE, the judgment appealed from is modified in that the award for death indemnity is increased to P12,000.00 for the
death of Martina Bool instead of P6,000.00 and P12,000.00 for the death of Emelita Gesmundo instead of P3,000.00, but
deleting the subsidiary imprisonment in case of insolvency imposed by the lower court. The judgment is AFFIRMED in all other
respects.
"Lusacan, Lusacan", they stood up and proceeded to the nearest exit. The train unexpectedly resumed its regular speed and as
a result "the old woman and the child stumbled and they were seen no more.
Issue: Whether it was negligence per se for the victim to go to the door of the coach while the train was still in motion and that
it was this negligence that was the proximate cause of their deaths.
Held:
The premature announcement prompted the two victims to stand and proceed to the nearest exit. Without said
announcement, the victims would have been safely seated in their respective seats when the train jerked and picked up speed.
The proximate cause of the death of the victims was the premature and erroneous announcement of Brinas. Any negligence of
the victims was at most contributory and does not exculpate the accused from criminal liability.

SO ORDERED.

Facts:

In the afternoon of January 6, 1957, Juanito Gesmundo bought a train ticket at the railroad station in Tagkawayan, Quezon for
his 55-year old mother Martina Bool and his 3-year old daughter Emelita Gesmundo. The two were bound for Lusacan in
Tiaong, Quezon.

They boarded the train of Manila Railroad Company at about 2pm. Upon approaching Barrio Lagalag at 8pm, the train slowed
down and the conductor, accused-appellant, Clemente Brinas, shouted “Lusacan, Lusacan!”

The old woman walked towards the train exit carrying the child with one hand and holding her baggage with the other. When
they were near the door, the train suddenly picked up speed. The old woman and the child stumbled from the train causing
them to fall down the tracks and were hit by an oncoming train, causing their instant death.

A criminal information was filed against Victor Milan, the driver, Hermogenes Buencamino, the assistant conductor and
Clemente Brinas for Double Homicide thru Reckless Imprudence. But the lower court acquitted Milan and Buencamino. On
appeal to the CA, respondent CA affirmed the decision.

Issue: Whether or not the CA erred in ruling the accused-appellant was negligent?

Held:

There was no error in the factual findings of the respondent court and in the conclusion drawn from the findings. It is a matter
of common knowledge and experience about common carriers like trains and buses that before reaching a station or flagstop
they slow down and the conductor announces the name of the place. It is also a matter of common experience that as the train
or bus slackens its speed, some passengers usually stand and proceed to the nearest exit, ready to disembark as the train or bus
comes to a full stop. This is especially true of a train because passengers feel that if the train resumes its run before they are
able to disembark; there is no way to stop it as a bus may be stopped. The appellant was negligent because his announcement
was premature and erroneous, for it took a full 3 minutes more before the next barrio of Lusacan was reached. The premature
announcement prompted the two victims to stand and proceed to the nearest exit. Without said announcement, the victims
would have been safely seated in their respective seats when the train jerked and picked up speed. The proximate cause of the
death of the victims was the premature and erroneous announcement of petitioner-appellant.

FACTS:
The mother and the daughter of Juanito Gesmundo boarded the train of Manila Railroad Company. They were on board the
second coach where Brinas was assigned as conductor and that when the train slackened its speed and the conductor shouted

151
BLTB vs. IAC, Nov. 14, 1988; It is argued by petitioners that if the intention of private respondents were to file an action based on culpa contractual or
breach of contract of carriage, they could have done so by merely impleading BLTB and its driver Pon. As it was in the trial
court, private respondents filed an action against all the defendants basing their action on culpa aquiliana or tort.
SECOND DIVISION
Petitioners' contentions deserve no merit. A reading of the respondent court's decision shows that it anchored petitioners'
G.R. Nos. 74387-90 November 14, 1988
liability both on culpa contractual and culpa aquiliana, to wit:
BATANGAS LAGUNA TAYABAS BUS COMPANY & ARMANDO PON, petitioners,
The proximate cause of the collision resulting in the death of three and injuries to two of the passengers
vs.
of BLTB was the negligence of the driver of the BLTB bus, who recklessly operated and drove said bus by
INTERMEDIATE APPELLATE COURT, THE HEIRS OF PAZ VDA. DE PAMFILO, THE HEIRS OF NORMA NERI, and BAYLON SALES and
overtaking a Ford Fiera car as he was negotiating the ascending bend of the highway (tsn, October 4,
NENA VDA. DE ROSALES, respondents.
1979, pp. 9-10, 35, 36, 61; Exhibit 6 Superlines, p. 47) which was divided into two lanes by a continuous
yellow strip (tsn, October 4, 1979, p. 36). The driver of the BLTB bus admitted in his cross-examination
PARAS, J.:
that the continuous yellow line on the ascending bend of the highway signifies a no-overtaking zone (tsn,
October 4, 1979, p. 36). It is no surprise then that the driver of the Superlines bus was exonerated by the
Before Us is a Petition to Review by Certiorari, the decision 1 of the respondent appellate court which affirmed with
lower court. He had a valid reason to presuppose that no one would overtake in such a dangerous
modification the joint decision of the trial court in four (4) cases involving similar facts and issues, finding favorably for the
situation. These facts show that patient imprudence of the BLTB driver.
plaintiffs (private respondents herein), the dispositive portion of said appellate judgment reading as follows:
It is well settled that a driver abandoning his proper lane for the purpose of overtaking another vehicle in
WHEREFORE, with the modification that the death indemnity is raised to P30,000.00 to each set of the
ordinary situation has the duty to see that the road is clear and not to proceed if he can not do so in
victims' heirs, the rest of the judgment appealed from is hereby affirmed in toto. Costs against the
safety (People v. Enriquez, 40 O.G. No. 5, 984).
defendants-appellants.
... Before attempting to pass the vehicle ahead, the rear driver must see that the road is clear and if there
SO ORDERED. (p. 20, Rollo)
is no sufficient room for a safe passage, or the driver ahead does not turn out so as to afford opportunity
to pass, or if, after attempting to pass, the driver of the overtaking vehicle finds that he cannot make the
From the records of the case We have gathered the following antecedent facts: passage in safety, the latter must slacken his speed so as to avoid the danger of a collision, even bringing
his car to a stop if necessary. (3-4 Huddy Encyclopedia of Automobile Law, Sec. 212, p. 195).
The collision between Bus No. 1046 of the Batangas Laguna Tayabas Bus Company (BLTB, for brevity) driven by Armando Pon
and Bus No. 404 of Superlines Transportation Company (Superlines, for brevity) driven by Ruben Dasco took place at the The above rule becomes more particularly applicable in this case when the overtaking took place on an
highway traversing Barangay Isabong, Tayabas, Quezon in the afternoon of August 11, 1978, which collision resulted in the ascending curved highway divided into two lanes by a continuous yellow line. Appellant Pon should have
death of Aniceto Rosales, Francisco Pamfilo and Romeo Neri and in several injuries to Nena Rosales (wife of Anecito) and Baylon remembered that:
Sales, all passengers of the BLTB Bus No. 1046. The evidence shows that as BLTB Bus No. 1046 was negotiating the bend of the
highway, it tried to overtake a Ford Fiera car just as Bus No. 404 of Superlines was coming from the opposite direction. Seeing
When a motor vehicle is approaching or rounding a curve there is special necessity for keeping to the
thus, Armando Pon (driver of the BLTB Bus) made a belated attempt to slacken the speed of his bus and tried to return to his
right side of the road and the driver has not the right to drive on the left hand side relying upon having
proper lane. It was an unsuccessful try as the two (2) buses collided with each other.
time to turn to the right if a car is approaching from the opposite direction comes into view. (42 C.J. 42
906).
Nena Vda. de Rosales and Baylon Sales and the surviving heirs of the deceased Francisco Pamfilo, Aniceto Rosales and Romeo
Neri instituted separate cases in the Court of First Instance of Marinduque against BLTB and Superlines together with their
Unless there is proof to the contrary, it is presumed that a person driving a motor vehicle has been
respective drivers praying for damages, attorney's fees and litigation expenses plus costs. Criminal cases against the drivers of
negligent if at the time of the mishap, he was violating any traffic regulation. (Art. 2165, Civil Code).
the two buses were filed in the Court of First Instance of Quezon.
In failing to observe these simple precautions, BLTB's driver undoubtedly failed to act with the diligence
Defendants BLTB and Superlines, together with their drivers Pon and Dasco, denied liability by claiming that they exercised due
demanded by the circumstances.
care and diligence and shifted the fault, against each other. They all interposed counterclaims against the plaintiffs and
crossclaims against each other.
We now come to the subject of liability of the appellants.
After trial on the merits, the lower court exonerated defendants Superlines and its driver Dasco from liability and attributed
For his own negligence in recklessly driving the truck owned by his employer, appellant Armando Pon is
sole responsibility to defendants BLTB and its driver Pon, and ordered them jointly and severally to pay damages to the
primarily liable (Article 2176, Civil Code).<äre||anº•1àw>
plaintiffs. Defendants BLTB and Armando Pon appealed from the decision of the lower court to respondent appellate court
which affirmed with modification the judgment of the lower court as earlier stated.
On the other hand the liability of Pon's employer, appellant BLTB, is also primary, direct and immediate in
view of the fact that the death of or injuries to its passengers was through the negligence of its employee
Hence, this petition to review by certiorari of defendant BLTB assigning a lone error, to wit:
(Marahan v. Mendoza, 24 SCRA 888, 894), and such liability does not cease even upon proof that BLTB
had exercised all the diligence of a good father of a family in the selection and supervision of its
THE INTERMEDIATE APPELLATE COURT ERRED IN ADJUDGING THAT THE ACTIONS OF PRIVATE
employees (Article 1759, Civil Code).
RESPONDENTS ARE BASED ON CULPA CONTRACTUAL. (p. 12, Rollo)
152
 The common carrier's liability for the death of or injuries to its passengers is based on its contractual
obligation to carry its passengers safely to their destination. That obligation is so serious that the Civil
Code requires "utmost diligence of very cautious person (Article 1755, Civil Code). They are presumed to
have been at fault or to have acted negligently unless they prove that they have observed extraordinary
diligence" (Article 1756, Civil Code). In the present case, the appellants have failed to prove extraordinary
diligence. Indeed, this legal presumption was confirmed by the fact that the bus driver of BLTB was
negligent. It must follow that both the driver and the owner must answer for injuries or death to its
passengers.
The liability of BLTB is also solidarily with its driver (Viluan v. Court of Appeals, 16 SCRA 742, 747) even
though the liability of the driver springs from quasi delict while that of the bus company from contract.
(pp. 17-19, Rollo)
Conclusively therefore in consideration of the foregoing findings of the respondent appellate court it is settled that the
proximate cause of the collision resulting in the death of three and injuries to two of the passengers of BLTB was the sole
negligence of the driver of the BLTB Bus, who recklessly operated and drove said bus in a lane where overtaking is not allowed
by Traffic Rules and Regulations. Such negligence and recklessness is binding against petitioner BLTB, more so when We
consider the fact that in an action based on a contract of carriage, the court need not make an express finding of fault or
negligence on the part of the carrier in order to hold it responsible for the payment of the damages sought by the passenger. By
the contract of carriage, the carrier BLTB assumed the express obligation to transport the passengers to their destination safely
and to observe extraordinary diligence with a due regard for all the circumstances, and any injury that might be suffered by its
passengers is right away attributable to the fault or negligence of the carrier (Art. 1756, New Civil Code).
HOLDING & RATIO DECIDENDI
IAC anchored its decision on both culpa contractual and culpa aquiliana
The proximate cause of the death and injuries of the passengers was the negligence of the bus driver Pon, who recklessly
overtook a car despite knowing that that the bend of highway he was negotiating on had a continuous yellow line signifying a
“no-overtaking” zone.
It is presumed that a a person driving a motor vehicle has been negligent if at the time of the mishap, he was violating any
traffic regulation.
In the instant case, the driver of the BLTB bus failed to act with diligence demanded by the circumstances. Pon should have
remembered that when a motor vehicle is approaching or rounding a curve there is special necessity for keeping to the right
side of the road and the driver has not the right to drive on the left hand side relying upon having time to turn to the right if a
car is approaching from the opposite direction comes into view.
As to the liability of the petitioners, Pon is primarily liable for his negligence in driving recklessly the truck owned by BLTB. The
liability of the BLTB itself is also primary, direct and immediate in view of the fact that the deat of or injuries to its passengers
was through the negligence of its employee.
The common carrier's liability for the death of or injuries to its passengers is based on its contractual obligation to carry its
passengers safely to their destination. They are presumed to have acted negligently unless they prove that they have observed
extaordinary diligence. In the case at bar, the appellants acted negligently.
BLTB is also solidarly liable with its driver even though the liability of the driver
springs from quasi delict while that of the bus company from contract.

Petitioners also contend that "a common carrier is not an absolute insurer against all risks of travel and are not liable for acts or
accidents which cannot be foreseen or inevitable and that responsibility of a common carrier for the safety of its passenger
prescribed in Articles 1733 and 1755 of the New Civil Code is not susceptible of a precise and definite formulation." (p. 13,
Rollo) Petitioners' contention holds no water because they had totally failed to point out any factual basis for their defense
of force majeure in the light of the undisputed fact that the cause of the collision was the sole negligence and recklessness of
petitioner Armando Pon. For the defense of force majeure or act of God to prosper the accident must be due to natural causes
and exclusively without human intervention.
WHEREFORE, premises considered, the appealed decision is hereby AFFIRMED.
SO ORDERED.
FACTS:
A bus owned by petitioner BLTB collided with a bus owned by Superlines, when the former tried to overtake a car just as the
Superlines' Bus was coming from the opposite direction. The collision resulted in the death of the passengers of the petitioner's
bus.
ISSUE: Whether BLTB be held liable for the death to its passengers.
HELD:
The common carrier's liability for the death of or injuries to its passengers is based on its contractual obligation to carry its
passengers safely to their destination. They are presumed to have acted negligently unless they prove that they have observed
extaordinary diligence. In the case at bar, the appellants acted negligently.

Batangas Laguna Tayabas Bus Company & Armando Pon v. IAC, The Heirs of Paz Vda. De Pamfilo, The Heirs Of Norma Neri, and
Baylon Sales And Nena Vda. De Rosales| Paras
G.R. Nos. 74387-90 November 14, 1988

FACTS
A bus owned by petitioner BLTB and driven by petitioner Pon collided with a bus owned by Superlines, when the former tried to
overtake a car just as the Superlines' Bus was coming from the opposite direction.
The collision resulted in the death of Rosales, Pamfilo and Neri, as well as injuries to the wife of Rosales, and Sales. These
people were passengers of the petitioner's bus.
Rosales and Sales, as well as the surviving heirs of Pamfilo, Rosales and Neri instituted separate cases ih the CFI against BLTB
and Superlines, together with their drivers. Criminal cases against the drivers were also filed in a different CFI.
CFI ruled that only BLTB and Pon should be liable, and they were ordered jointly and severally to pay damages. On appeal, the
IAC affirmed the CFI's ruling.
Petitioners contended that the CFI erred in ruling that the actions of private respondents are based on culpa contractual, since
if it were private respondents' intention to file an action based on culap contractual, they could have done so by merely
impleading BLTB and Pon. Instead the respondents filed an action against all defendants based on culpa aquiliana or tort.

ISSUES & ARGUMENTS: WON erred in ruling that the actions of private respondents are based on culpa contractual

153
Batangas Transportation Company vs. Caguimbal, et al, Jan. 24, 1968;
EN BANC
G.R. No. L-22985 January 24, 1968
BATANGAS TRANSPORTATION COMPANY, petitioner,
vs.
GREGORIO CAGUIMBAL, PANCRACIO CAGUIMBAL, MARIA MARANAN DE CAGUIMBAL, BIÑAN TRANSPORTATION COMPANY
and MARCIANO ILAGAN, respondents.
CONCEPCION, C.J.:
Appeal by certiorari from a decision of the Court of Appeals.
The main facts are set forth in said decision from which we quote:
There is no dispute at all that the deceased Pedro Caguimbal, Barrio Lieutenant of Barrio Calansayan, San Jose,
Batangas, was a paying passenger of BTCO bus, with plate TPU-507, going south on its regular route from Calamba,
Laguna, to Batangas, Batangas, driven by Tomas Perez, its regular driver, at about 5:30 o'clock on the early morning
of April 25, 1954. The deceased's destination was his residence at Calansayan, San Jose, Batangas. The bus of the
Biñan Transportation Company, bearing plate TPU-820, driven by Marciano Ilagan, was coming from the opposite
direction (north-bound). Along the national highway at Barrio Daraza, Tanauan, Batangas, on the date and hour
above indicated, a horse-driven rig (calesa) managed by Benito Makahiya, which was then ahead of the Biñan bus,
was also coming from the opposite direction, meaning proceeding towards the north. As to what transpired
thereafter, the lower court chose to give more credence to defendant Batangas Transportation Company's version
which, in the words of the Court a quo, is as follows: "As the BTCO bus was nearing a house, a passenger requested
the conductor to stop as he was going to alight, and when he heard the signal of the conductor, the driver Tomas
Perez slowed down his bus swerving it farther to the right in order to stop; at this juncture, a calesa, then driven by
Benito Makahiya was at a distance of several meters facing the BTCO bus coming from the opposite direction; that at
the same time the Biñan bus was about 100 meters away likewise going northward and following the direction of
the calesa; that upon seeing the Biñan bus the driver of the BTCO bus dimmed his light as established by Magno
Ilaw, the very conductor of the Biñan bus at the time of the accident; that as the calesa and the BTCO bus were
passing each other from the opposite directions, the Biñan bus following the calesa swerved to its left in an attempt
to pass between the BTCO bus and the calesa; that without diminishing its speed of about seventy (70) kilometers
an hour, the Biñan bus passed through the space between the BTCO bus and the calesahitting first the left side of
the BTCO bus with the left front corner of its body and then bumped and struck the calesa which was completely
wrecked; that the driver was seriously injured and the horse was killed; that the second and all other posts
supporting the top of the left side of the BTCO bus were completely smashed and half of the back wall to the left
was ripped open. (Exhibits 1 and 2). The BTCO bus suffered damages for the repair of its damaged portion.
As a consequence of this occurrence, two (2) passengers of BTCO died, namely, Pedro Caguimbal and Guillermo Tolentino, apart
from others who were injured. The widow and children of Caguimbal instituted the present action, which was tried jointly with
a similar action of the Tolentinos, to recover damages from the Batangas Transportation Company, hereinafter referred to as
BTCO. The latter, in turn, filed a third-party complaint against the Biñan Transportation Company — hereinafter referred to as
Biñan — and its driver, Marciano Ilagan. Subsequently, the Caguimbals amended their complaint, to include therein, as
defendants, said Biñan and Ilagan.
After appropriate proceedings, the Court of First Instance of Batangas rendered a decision dismissing the complaint insofar as
the BTCO is concerned, without prejudice to plaintiff's right to sue Biñan — which had stopped participating in the proceedings
herein, owing apparently, to a case in the Court of First Instance of Laguna for the insolvency of said enterprise — and Ilagan,
and without pronouncement as to costs.
154
On appeal taken by the Caguimbals, the Court of Appeals reversed said decision and rendered judgment for them, sentencing
the BTCO, Biñan and Ilagan to, jointly and severally, pay to the plaintiffs the aggregate sum of P10,500.00 1 and the costs in both
instances. Hence, this appeal by BTCO, upon the ground that the Court of Appeals erred: 1) in finding said appellant liable for
damages; and 2) in awarding attorney's fees.
In connection with the first assignment of error, we note that the recklessness of defendant was, manifestly, a major factor in
the occurrence of the accident which resulted, inter alia, in the death of Pedro Caguimbal. Indeed, as driver of the Biñan bus,
he overtook Benito Makahiya's horse-driven rig or calesa and passed between the same and the BTCO bus despite the fact that
the space available was not big enough therefor, in view of which the Biñan bus hit the left side of the BTCO bus and then
the calesa. This notwithstanding, the Court of Appeals rendered judgment against the BTCO upon the ground that its driver,
Tomas Perez, had failed to exercise the "extraordinary diligence," required in Article 1733 of the new Civil Code, "in the
vigilance for the safety" of his passengers. 2
The record shows that, in order to permit one of them to disembark, Perez drove his BTCO bus partly to the right shoulder of
the road and partly on the asphalted portion thereof. Yet, he could have and should have seen to it — had he exercised
"extraordinary diligence" — that his bus was completely outside the asphalted portion of the road, and fully within the
shoulder thereof, the width of which being more than sufficient to accommodate the bus. He could have and should have done
this, because, when the aforementioned passenger expressed his wish to alight from the bus, Ilagan had seen the
aforementioned "calesa", driven by Makahiya, a few meters away, coming from the opposite direction, with the Biñan bus
about 100 meters behind the rig cruising at a good speed. 3 When Perez slowed down his BTCO bus to permit said passenger to
disembark, he must have known, therefore, that the Biñan bus would overtake the calesa at about the time when the latter and
BTCO bus would probably be on the same line, on opposite sides of the asphalted portions of the road, and that the space
between the BTCO bus and the "calesa" would not be enough to allow the Biñan bus to go through. It is true that the driver of
the Biñan bus should have slowed down or stopped, and, hence, was reckless in not doing so; but, he had no especial
obligations toward the passengers of the BTCO unlike Perez whose duty was to exercise "utmost" or "extraordinary" diligence
for their safety. Perez was thus under obligation to avoid a situation which would be hazardous for his passengers, and, make
their safety dependent upon the diligence of the Biñan driver. Such obligation becomes more patent when we considered the
fact — of which the Court may take judicial cognizance — that our motor vehicle drivers, particularly those of public service
utilities, have not distinguished themselves for their concern over the safety, the comfort or the convenience of others. Besides,
as correctly stated in the syllabus to Brito Sy vs. Malate Taxicab & Garage, Inc., 4
In an action based on a contract of carriage, the court need not make an express finding of fault or negligence on
the part of the carrier in order to hold it responsible to pay the damages sought for by the passenger. By the
contract of carriage, the carrier assumes the express obligation to transport the passenger to his destination safely
and to observe extraordinary diligence with a due regard for all the circumstances, and any injury that might be
suffered by the passenger is right away attributable to the fault or negligence of the carrier (Article 1756, new Civil
Code). This is an exception to the general rule that negligence must be proved, and it is therefore incumbent upon
the carrier to prove that it has exercised extraordinary diligence as prescribed in Articles 1733 and 1755 of the new
Civil Code.
In the case at bar, BTCO has not proven the exercise of extraordinary diligence on its part. For this reason, the case of Isaac vs.
A. L. Ammen Trans. Co., Inc. 5 relied upon by BTCO, is not in point, for, in said case, the public utility driver had done everything
he could to avoid the accident, and could not have possibly avoided it, for he "swerved the bus to the very extreme right of the
road," which the driver, in the present case, had failed to do.
As regards the second assignment of error, appellant argues that the award of attorney's fees is not authorized by law, because,
of the eleven (11) cases specified in Article 1208 of the new Civil Code, only the fifth and the last are relevant to the one under
consideration; but the fifth case requires bad faith, which does not exist in the case at bar. As regards the last case, which
permits the award, "where the court deems it just and equitable that attorney's fees . . . should be recovered," it is urged that
the evidence on record does not show the existence of such just and equitable grounds.
We, however, believe otherwise, for: (1) the accident in question took place on April 25, 1954, and the Caguimbals have been
constrained to litigate for over thirteen (13) years to vindicate their rights; and (2) it is high time to impress effectively upon
public utility operators the nature and extent of their responsibility in respect of the safety of their passengers and their duty to
exercise greater care in the selection of drivers and conductor and in supervising the performance of their duties, in
accordance, not only with Article 1733 of the Civil Code of the Philippines, but, also, with Articles 1755 and 1756 thereof 6 and
the spirit of these provisions, as disclosed by the letter thereof, and elucidated by the Commission that drafted the same. 7
WHEREFORE, the decision appealed from, should be, as it is hereby, affirmed, with the costs of this instance against appellant
Batangas Transportation Company.
Post under case digests, Civil Law at Wednesday, January 25, 2012 Posted by Schizophrenic Mind
"extraordinary diligence" — that his bus was completely outside the asphalted portion of the road, and fully within the
shoulder thereof, the width of which being more than sufficient to accommodate the bus. When the BTCO bus driver slowed
down his BTCO bus to permit said passenger to disembark, he must have known, therefore, that the Biñan bus would overtake
the calesa at about the time when the latter and BTCO bus would probably be on the same line, on opposite sides of the
asphalted portions of the road, and that the space between the BTCO bus and the "calesa" would not be enough to allow the
Biñan bus to go through. It is true that the driver of the Biñan bus should have slowed down or stopped, and, hence, was
reckless in not doing so; but, he had no especial obligations toward the passengers of the BTCO unlike the BTCO bus driver
whose duty was to exercise "utmost" or "extraordinary" diligence for their safety. Perez was thus under obligation to avoid a
situation which would be hazardous for his passengers, and, make their safety dependent upon the diligence of the Biñan
driver.

Facts: In an action based on a contract of carriage, the court need not make an express finding of fault or negligence on the part of
Caguimbal who was a paying pasenger of Batangas Transportation Company (BTCO) bus died when the bus of the Biñan the carrier in order to hold it responsible to pay the damages sought for by the passenger. By the contract of carriage, the
Transportation Company (Binan) which was coming from the opposite direction and a calesa managed by Makahiya, which was carrier assumes the express obligation to transport the passenger to his destination safely and to observe extraordinary
then ahead of the Biñan bus met an accident. diligence with a due regard for all the circumstances, and any injury that might be suffered by the passenger is right away
attributable to the fault or negligence of the carrier (Article 1756, new Civil Code). This is an exception to the general rule that
A passenger requested the conductor of BTCO to stop as he was going to alight, and when he heard the signal of the conductor, negligence must be proved, and it is therefore incumbent upon the carrier to prove that it has exercised extraordinary diligence
the driver slowed down his bus swerving it farther to the right in order to stop; at this juncture, a calesa, then driven by as prescribed in Articles 1733 and 1755 of the new Civil Code
Makahiya was at a distance of several meters facing the BTCO bus coming from the opposite direction; that at the same time
the Biñan bus was about 100 meters away likewise going northward and following the direction of the calesa; that upon seeing
the Biñan bus the driver of the BTCO bus dimmed his light; that as the calesa and the BTCO bus were passing each other from
the opposite directions, the Biñan bus following the calesa swerved to its left in an attempt to pass between the BTCO bus and
the calesa; that without diminishing its speed of about seventy (70) kilometers an hour, the Biñan bus passed through the space
between the BTCO bus and the calesa hitting first the left side of the BTCO bus with the left front corner of its body and then
bumped and struck the calesa which was completely wrecked; that the driver was seriously injured and the horse was killed;
that the second and all other posts supporting the top of the left side of the BTCO bus were completely smashed and half of the
back wall to the left was ripped open. The BTCO bus suffered damages for the repair of its damaged portion.As a consequence
of this occurrence, Caguimbal and Tolentino died, apart from others who were injured.

The widow and children of Caguimbal sued to recover damages from the BTCO. The latter, in turn, filed a third-party complaint
against the Biñan and its driver, Ilagan. Subsequently, the Caguimbals amended their complaint, to include therein, as
defendants, said Biñan and Ilagan.

CFI dismissed the complaint insofar as the BTCO is concerned, without prejudice to plaintiff's right to sue Biñan and Ilagan. CA
reversed said decision and rendered judgment for Caguimbal. BTCO appealed to SC.

Issue: Whether BTCO is liable to pay damages for failure to exercise extraordinary diligence?

Held:

YES. BTCO has not proven the exercise of extraordinary diligence on its part.

The recklessness of the driver of Binan was, manifestly, a major factor in the occurrence of the accident which resultedin the
death of Pedro Caguimbal. Indeed, as driver of the Biñan bus, he overtook Makahiya's horse-driven rig or calesa and passed
between the same and the BTCO bus despite the fact that the space available was not big enough therefor, in view of which the
Biñan bus hit the left side of the BTCO bus and then the calesa.

Article 1733 of the Civil Code provides the general rule that extraordinary diligence must be exercised by the driver of a bus in
the vigilance for the safety of his passengers.

The record shows that, in order to permit one of them to disembark, the BTCO bus driver drove partly to the right shoulder of
the road and partly on the asphalted portion thereof. Yet, he could have and should have seen to it — had he exercised

155
 P1,006,777.50 for loss of earning capacity, P50,000.00 as indemnity for death and P10,000.00 for attorney's fees. It absolved
from any liability respondent BULLETIN, Felix Angeles and N.V. Netherlands Insurance Company. Hence this petition.
Mallari vs. CA, Jan. 31, 2000;
Petitioners contend that there is no evidence to show that petitioner Mallari Jr. overtook a vehicle at a curve on the road at the
SECOND DIVISION
time of the accident and that the testimony of Angeles on the overtaking made by Mallari Jr. was not credible and unreliable.
Petitioner also submits that the trial court was in a better position than the Court of Appeals to assess the evidence and
G.R. No. 128607 January 31, 2000
observe the witnesses as well as determine their credibility; hence, its finding that the proximate cause of the collision was the
negligence of respondent Angeles, driver of the delivery van owned by respondent BULLETIN, should be given more weight and
ALFREDO MALLARI, SR. and ALFREDO MALLARI, JR., petitioners,
consideration.
vs.
COURT OF APPEALS and BULLETIN PUBLISHING CORPORATION, respondents.
We cannot sustain petitioners. Contrary to their allegation that there was no evidence whatsoever that petitioner Mallari Jr.
overtook a vehicle at a curve on the road at the time of or before the accident, the same petitioner himself testified that such
BELLOSILLO, J.:
fact indeed did occur —
ALFREDO MALLARI SR. and ALFREDO MALLARI JR. in this petition for review on certiorari seek to set aside the Decision of the
Q: And what was that accident all about?
Court of Appeals1 which reversed the court a quo and adjudged petitioners to be liable for damages due to negligence as a
common carrier resulting in the death of a passenger.
A: Well, what happened, sir, is that at about that time 5:00 o'clock in that morning of October 14 while I was negotiating on the
highway at San Pablo, Dinalupihan, Bataan, I was then following a blue Ford Fierra and my distance behind was about twenty
On 14 October 1987, at about 5:00 o'clock in the morning, the passenger jeepney driven by petitioner Alfredo Mallari Jr. and
(20) feet and then I passed that blue Ford Fierra. I overtook and when I was almost on the right lane of the highway towards
owned by his co-petitioner Alfredo Mallari Sr. collided with the delivery van of respondent Bulletin Publishing Corp. (BULLETIN,
Olongapo City there was an oncoming delivery van of the Bulletin Publishing Corporation which bumped the left rear portion of
for brevity) along the National Highway in Barangay San Pablo, Dinalupihan, Bataan. Petitioner Mallari Jr. testified that he went
the jeepney which I was driving and as a result of which the jeepney . . . turned around and fell on its left side and as a result of
to the left lane of the highway and overtook a Fiera which had stopped on the right lane. Before he passed by the Fiera, he saw
which some of my passengers including me were injured, sir . . . .
the van of respondent BULLETIN coming from the opposite direction. It was driven by one Felix Angeles. The sketch of the
accident showed that the collision occurred after Mallari Jr. overtook the Fiera while negotiating a curve in the highway. The
Q: Before you overtook the Ford Fierra jeepney did you look . . . whether there was any vehicle coming towards you?
points of collision were the and the left rear portion of the passenger jeepney and the left front side of the delivery van of
BULLETIN. The two (2) right wheels of the delivery van were on the right shoulder of the road and pieces of debris from the
A: Yes, sir.
accident were found scattered along the shoulder of the road up to a certain portion of the lane travelled by the passenger
jeepney. The impact caused the jeepney to turn around and fall on its left side resulting in injuries to its passengers one of
Q: Did you see the Bulletin van or the Press van coming towards you?
whom was Israel Reyes who eventually died due to the gravity of his injuries.1âwphi1.nêt
A: Yes, sir.
On 16 December 1987 Claudia G. Reyes, the widow of Israel M. Reyes, filed a complaint for damages with the Regional Trial
Court of Olongapo City against Alfredo Mallari Sr. and Alfredo Mallari Jr., and also against BULLETIN, its driver Felix Angeles, and
Q: At the moment the Ford Fierra . . . stop(ped) and in overtaking the Fierra, did you not have an option to stop and not to
the N.V. Netherlands Insurance Company. The complaint alleged that the collision which resulted in the death of Israel Reyes
overtake the Ford Fierra?
was caused by the fault and negligence of both drivers of the passenger jeepney and the Bulletin Isuzu delivery van. The
complaint also prayed that the defendants be ordered jointly and severally to pay plaintiff P1,006,777.40 in compensatory
A: Well, at the time when the Ford Fierra stopped in front of me I slowed down with the intention of applying the brake,
damages, P40,000.00 for hospital and medical expenses, P18,270.00 for burial expenses plus such amounts as may be fixed by
however, when I saw the oncoming vehicle which is the Press van is very far. . . which is 100 feet distance, . . . it is sufficient to
the trial court for exemplary damages and attorney's fees.
overtake the Ford Fierra so I overt(ook) it . . . .
The trial court found that the proximate cause of the collision was the negligence of Felix Angeles, driver of the Bulletin delivery
Q: You said that you took into consideration the speed of the oncoming Press van but you also could not estimate the speed of
van, considering the fact that the left front portion of the delivery truck driven by Felix Angeles hit and bumped the left rear
the press van because it was dark at that time, which of these statements are true?
portion of the passenger jeepney driven by Alfredo Mallari Jr. Hence, the trial court ordered BULLETIN and Felix Angeles to pay
jointly and severally Claudia G. Reyes, widow of the deceased victim, the sums of P42,106.93 for medical expenses; P8,600.00
for funeral and burial expenses; P1,006,777.40 for loss of earning capacity; P5,000.00 for moral damages and P10,000.00 for A: What I wanted to say, I took into consideration the speed of the oncoming vehicle, the Press van, although at the moment I
attorney's fees. The trial court also ordered N.V. Netherlands Insurance Company to indemnify Claudia G. Reyes P12,000.00 as could not estimate the speed of the oncoming vehicle . . . .2
death indemnity and P2,500.00 for funeral expenses which when paid should be deducted from the liabilities of respondent
BULLETIN and its driver Felix Angeles to the plaintiff. It also dismissed the complaint against the other defendants Alfredo The Court of Appeals correctly found, based on the sketch and spot report of the police authorities which were not disputed by
Mallari Sr. and Alfredo Mallari Jr. petitioners, that the collision occurred immediately after petitioner Mallari Jr. overtook a vehicle in front of it while traversing a
curve on the highway.3 This act of overtaking was in clear violation of Sec. 41, pars. (a) and (b), of RA 4136 as amended,
On appeal the Court of Appeals modified the decision of the trial court and found no negligence on the part of Angeles and otherwise known as The Land Transportation and Traffic Code which provides:
consequently of his employer, respondent BULLETIN. Instead, the appellate court ruled that the collision was caused by the sole
negligence of petitioner Alfredo Mallari Jr. who admitted that immediately before the collision and after he rounded a curve on Sec. 41. Restrictions on overtaking and passing. — (a) The driver of a vehicle shall not drive to the left side of the
the highway, he overtook a Fiera which had stopped on his lane and that he had seen the van driven by Angeles before center line of a highway in overtaking or passing another vehicle proceeding in the same direction, unless such left
overtaking the Fiera. The Court of Appeals ordered petitioners Mallari Jr. and Mallari Sr. to compensate Claudia G. Reyes
156
 side is clearly visible and is free of oncoming traffic for a sufficient distance ahead to permit such overtaking or
passing to be made in safety.
(b) The driver of a vehicle shall not overtake or pass another vehicle proceeding in the same direction when
approaching the crest of a grade, nor upon a curve in the highway, where the driver's view along the highway is
obstructed within a distance of five hundred feet ahead except on a highway having two or more lanes for
movement of traffic in one direction where the driver of a vehicle may overtake or pass another
vehicle: Provided That on a highway, within a business or residential district, having two or more lanes for
movement of traffic in one direction, the driver of a vehicle may overtake or pass another vehicle on the right.
The rule is settled that a driver abandoning his proper lane for the purpose of overtaking another vehicle in an ordinary
situation has the duty to see to it that the road is clear and not to proceed if he cannot do so in safety. 4When a motor vehicle is
approaching or rounding a curve, there is special necessity for keeping to the right side of the road and the driver does not have
the right to drive on the left hand side relying upon having time to turn to the right if a car approaching from the opposite
direction comes into view.5
In the instant case, by his own admission, petitioner Mallari Jr. already saw that the BULLETIN delivery van was coming from the
opposite direction and failing to consider the speed thereof since it was still dark at 5:00 o'clock in the morning mindlessly
occupied the left lane and overtook two (2) vehicles in front of it at a curve in the highway. Clearly, the proximate cause of the
collision resulting in the death of Israel Reyes, a passenger of the jeepney, was the sole negligence of the driver of the
passenger jeepney, petitioner Alfredo Mallari Jr., who recklessly operated and drove his jeepney in a lane where overtaking was
not allowed by traffic rules. Under Art. 2185 of the Civil Code, unless there is proof to the contrary, it is presumed that a person
driving a motor vehicle has been negligent if at the time of the mishap he was violating a traffic regulation. As found by the
appellate court, petitioners failed to present satisfactory evidence to overcome this legal presumption.
The negligence and recklessness of the driver of the passenger jeepney is binding against petitioner Mallari Sr., who admittedly
was the owner of the passenger jeepney engaged as a common carrier, considering the fact that in an action based on contract
of carriage, the court need not make an express finding of fault or negligence on the part of the carrier in order to hold it
responsible for the payment of damages sought by the passenger. Under Art. 1755 of the Civil Code, a common carrier is bound
to carry the passengers safely as far as human care and foresight can provide using the utmost diligence of very cautious
persons with due regard for all the circumstances. Moreover, under Art. 1756 of the Civil Code, in case of death or injuries to
passengers, a common carrier is presumed to have been at fault or to have acted negligently, unless it proves that it observed
extraordinary diligence. Further, pursuant to Art. 1759 of the same Code, it is liable for the death of or injuries to passengers
through the negligence or willful acts of the former's employees. This liability of the common carrier does not cease upon proof
that it exercised all the diligence of a good father of a family in the selection of its employees. Clearly, by the contract of
carriage, the carrier jeepney owned by Mallari Sr. assumed the express obligation to transport the passengers to their
destination safely and to observe extraordinary diligence with due regard for all the circumstances, and any injury or death that
might be suffered by its passengers is right away attributable to the fault or negligence of the carrier.
The monetary award ordered by the appellate court to be paid by petitioners to the widow of the deceased passenger Israel M.
Reyes of P1,006,777.50 for loss of earning capacity, P50,000.00 as civil indemnity for death, and P10,000.00 for attorney's fees,
all of which were not disputed by petitioners, is a factual matter binding and conclusive upon this Court.1âwphi1.nêt
WHEREFORE, the Petition is DENIED and the Decision of the Court of Appeals dated 20 September 1995 reversing the decision
of the trial court being in accord with law and evidence is AFFIRMED. Consequently, petitioners are ordered jointly and severally
to pay Claudia G. Reyes P1,006,777.50 for loss of earning capacity, P50,000.00 as civil indemnity for death, and P10,000.00 for
attorney's fees. Costs against petitioners.
SO ORDERED.
FACTS:
157
The passenger jeepney driven by Mallari Jr. and owned by Mallari Sr. collided with thedelivery
van of Bulleti n along the Nati onal Highway in Brgy. San Pablo, Dinalupihan,Bataan. Mallar i Jr. testi fi ed
that he went to the left lane of the highway and overtook a Fiera which had stopped on the right lane. Before he
passed by the Fiera, he saw the vanof Bulleti n coming from the opposite directi on. It was driven by one Felix
Angeles. Thecollision occurred aft er Mallari Jr. overtook the Fiera while negoti ati ng a curve in thehighway.
The impact caused the jeepney to turn around and fall on its left side resulting ininjuries to its passengers one of whom
was Israel Reye s who eventually died due to the gravity of his injuries.
Claudia Reyes, the widow of Israel Reyes, filed a complaint for damages against Mallari Sr.and Mallari Jr., and also against
Bulletin, its driver Felix Angeles, and the N.V. NetherlandsInsurance Co. The complaint alleged that the collision which resulted
in the death of Israelwas caused by the fault and negligence of both drivers of the passenger jeepney and theBulletin Isuzu
delivery van.
ISSUE: WON Mallari Jr. and Mallari Sr. are liable for the death of Israel
HELD:
Yes. The collision occurred immediately after Mallari Jr. overtook a vehicle in front of it whiletraversing a curve on the highway.
This act of overtaking was in clear violation of Sec. 41,pars. (a) and (b), of RA 4136 as amended, otherwise known
as The Land Transportati on a n d Tr a ffi c C o d e . A d r i v e r a b a n d o n i n g h i s p r o p e r l a n e f o r
t h e p u r p o s e o f o v e r t a k i n g another vehicle in an ordinary situation has the duty to see to it that the road is clear
andn o t t o p r o c e e d i f h e c a n n o t d o s o i n s a f e t y. W h e n a m o t o r v e h i c l e i s a p p r o a c h i n g
o r rounding a curve, there is special necessity for keeping to the right side of the road andthe driver does not have the right to
drive on the left hand side relying upon having timeto turn to the right if a car approaching from the opposite direction comes
into view.
M a l l a r i J r. a l r e a d y s a w t h a t t h e B u l l e ti n d e l i v e r y v a n w a s c o m i n g f r o m t h e o p p o s i t e direction
and failing to consider the speed thereof since it was still dark at 5:00 o'clock inthe morning mindlessly occupied the
left lane and overtook 2 vehicles in front of it at a curve in the highway. Clearly, the proximate cause of the collision
resulting in the death of Israel was the sole negligence of the driver of the passenger jeepney, Mallari Jr.,
whorecklessly operated and drove his jeepney in a lane where overtaking was not allowed bytraffi c rules. Under Art.
2185 of the Civil Code, unless there is proof to the contrary, it ispresumed that a person driving a motor
vehicle has been negligent if at the ti me of the mishap he was violating a traffic regulation. Mallaris failed to present
satisfactory evidenceto overcome this legal presumption.
The negligence and recklessness of the driver of the passenger jeepney is binding againstMallari Sr., who admittedly was the
owner of the passenger jeepney engaged as a commoncarrier, considering the fact that in an action based on contract
of carriage, the court neednot make an express fi nding of fault or negligence on the part of the carrier in
order tohold it responsible for the payment of damages sought by the passenger. (See Arts. 1755,1756 and 1759 for the
rationale of common carrier’s liability.)

Nocum vs. Laguna Tayabas Bus Company, Oct. 31, 1969;
EN BANC
G.R. No. L-23733 October 31, 1969
HERMINIO L. NOCUM, plaintiff-appellee,
vs.
LAGUNA TAYABAS BUS COMPANY, defendant-appellant.
BARREDO, J.:
Appeal of the Laguna Tayabas Bus Co., defendant in the Court below, from a judgment of the said court (Court of First Instance
of Batangas) in its Civil Case No. 834, wherein appellee Herminio L. Nocum was plaintiff, sentencing appellant to pay appellee
the sum of P1,351.00 for actual damages and P500.00 as attorney's fees with legal interest from the filing of the complaint plus
costs. Appellee, who was a passenger in appellant's Bus No. 120 then making a trip within the barrio of Dita, Municipality of
Bay, Laguna, was injured as a consequence of the explosion of firecrackers, contained in a box, loaded in said bus and declared
to its conductor as containing clothes and miscellaneous items by a co-passenger. The findings of fact of the trial court are not
assailed. The appeal is purely on legal questions.
Appellee has not filed any brief. All that We have before Us is appellant's brief with the following assignment of errors:
I
BASED ON THE FACTS THE LOWER COURT FOUND AS ESTABLISHED, IT ERRED AS A MATTER OF LAW IN NOT
ABSOLVING APPELLANT FROM LIABILITY RESULTING FROM THE EXPLOSION OF FIRECRACKERS CONTAINED IN A
PACKAGE, THE CONTENTS OF WHICH WERE MISREPRESENTED BY A PASSENGER.
II
THE LOWER COURT ERRED, AS A MATTER OF LAW, IN AWARDING DAMAGES WITH LEGAL INTEREST IN FAVOR OF THE
APPELLEE.
III
THE LOWER COURT ERRED IN NOT DISMISSING THE COMPLAINT, WITH COSTS AGAINST THE APPELLEE.
Upon consideration of the points raised and discussed by appellant, We find the appeal to be well taken.
The main basis of the trial court's decision is that appellant did not observe the extraordinary or utmost diligence of a very
cautious person required by the following articles of the Civil Code:
ART. 1733. Common carriers, from the nature of their business and for reasons of public policy, are bound to
observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by
them, according to all the circumstances of each case.
Such extraordinary diligence in the vigilance over the goods is further expressed in articles 1734, 1735, and 1745,
Nos. 5, 6, and 7, while the extraordinary diligence for the safety of the passengers is further set forth in 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.
158
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.
Analyzing the evidence presented by the parties, His Honor found:
According to Severino Andaya, a witness for the plaintiff, a man with a box went up the baggage compartment of the
bus where he already was and said box was placed under the seat. They left Azcarraga at about 11:30 in the morning
and when the explosion occurred, he was thrown out. PC investigation report states that thirty seven (37)
passengers were injured (Exhibits "O" and "2").
The bus conductor, Sancho Mendoza, testified that the box belonged to a passenger whose name he does not know
and who told him that it contained miscellaneous items and clothes. He helped the owner in loading the baggage
which weighed about twelve (12) kilos and because of company regulation, he charged him for it twenty-five
centavos (P0.25). From its appearance there was no indication at all that the contents were explosives or
firecrackers. Neither did he open the box because he just relied on the word of the owner.
Dispatcher Nicolas Cornista of defendant company corroborrated the testimony of Mendoza and he said, among
other things, that he was present when the box was loaded in the truck and the owner agreed to pay its fare. He
added that they were not authorized to open the baggages of passengers because instruction from the management
was to call the police if there were packages containing articles which were against regulations.
There is no question that Bus No. 120 was road worthy when it left its Manila Terminal for Lucena that morning of
December 5, 1960. The injuries suffered by the plaintiff were not due to mechanical defects but to the explosion of
firecrackers inside the bus which was loaded by a co-passenger.
... Turning to the present case, it is quite clear that extraordinary or utmost diligence of a very cautious person was
not observed by the defendant company. The service manual, exhibits "3" and "3-A," prohibits the employees to
allow explosives, such as dynamite and firecrackers to be transported on its buses. To implement this particular rule
for 'the safety of passengers, it was therefore incumbent upon the employees of the company to make the proper
inspection of all the baggages which are carried by the passengers.
But then, can it not be said that the breach of the contract was due to fortuitous event? The Supreme Court in the
case of Lasam vs. Smith, 45 Phil. 657, quoted Escriche's definition of caso fortuito as "an unexpected event or act of
God which could neither be foreseen nor resisted, such as floods, torrents, shipwrecks, conflagrations, lightning,
compulsions, insurrections, destructions of buildings by unforeseen accidents and other occurrences of a similar
nature." In other words, the cause of the unexpected event must be independent of the will of man or something
which cannot be avoided. This cannot be said of the instant case. If proper and rigid inspection were observed by
the defendant, the contents of the box could have been discovered and the accident avoided. Refusal by the
passenger to have the package opened was no excuse because, as stated by Dispatcher Cornista, employees should
call the police if there were packages containing articles against company regulations. Neither was failure by
employees of defendant company to detect the contents of the packages of passengers because like the rationale in
the Necesito vs. Paras case (supra), a passenger has neither choice nor control in the exercise of their discretion in
determining what are inside the package of co-passengers which may eventually prove fatal.
We cannot agree. No doubt, the views of His Honor do seem to be in line with the reasons that the Code Commission had for
incorporating the above-quoted provisions in its draft of the Civil Code. Indeed, in approving the said draft, Congress must have
concurred with the Commission that by requiring the highest degree of diligence from common carriers in the safe transport of
their passengers and by creating a presumption of negligence against them, the recklessness of their drivers which is a common
sight even in crowded areas and, particularly, on the highways throughout the country may, somehow, if not in a large measure,
be curbed. We are not convinced, however, that the exacting criterion of said provisions has not been met by appellant in the
circumstances of this particular case.
It is undisputed that before the box containing the firecrackers were allowed to be loaded in the bus by the conductor, inquiry
was made with the passenger carrying the same as to what was in it, since its "opening ... was folded and tied with abaca."
(Decision p. 16, Record on Appeal.) According to His Honor, "if proper and rigid inspection were observed by the defendant, the
contents of the box could have been discovered and the accident avoided. Refusal by the passenger to have the package
opened was no excuse because, as stated by Dispatcher Cornista, employees should call the police if there were packages
containing articles against company regulations." That may be true, but it is Our considered opinion that the law does not
require as much. Article 1733 is not as unbending as His Honor has held, for it reasonably qualifies the extraordinary diligence
required of common carriers for the safety of the passengers transported by them to be "according to all the circumstances of
each case." In fact, Article 1755 repeats this same qualification: "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."
In this particular case before Us, it must be considered that while it is true the passengers of appellant's bus should not be
made to suffer for something over which they had no control, as enunciated in the decision of this Court cited by His
Honor,1 fairness demands that in measuring a common carrier's duty towards its passengers, allowance must be given to the
reliance that should be reposed on the sense of responsibility of all the passengers in regard to their common safety. It is to be
presumed that a passenger will not take with him anything dangerous to the lives and limbs of his co-passengers, not to speak
of his own. Not to be lightly considered must be the right to privacy to which each passenger is entitled. He cannot be
subjected to any unusual search, when he protests the innocuousness of his baggage and nothing appears to indicate the
contrary, as in the case at bar. In other words, inquiry may be verbally made as to the nature of a passenger's baggage when
such is not outwardly perceptible, but beyond this, constitutional boundaries are already in danger of being transgressed.
Calling a policeman to his aid, as suggested by the service manual invoked by the trial judge, in compelling the passenger to
submit to more rigid inspection, after the passenger had already declared that the box contained mere clothes and other
miscellaneous, could not have justified invasion of a constitutionally protected domain. Police officers acting without judicial
authority secured in the manner provided by law are not beyond the pale of constitutional inhibitions designed to protect
individual human rights and liberties. Withal, what must be importantly considered here is not so much the infringement of the
fundamental sacred rights of the particular passenger herein involved, but the constant threat any contrary ruling would pose
on the right of privacy of all passengers of all common carriers, considering how easily the duty to inspect can be made an
excuse for mischief and abuse. Of course, when there are sufficient indications that the representations of the passenger
regarding the nature of his baggage may not be true, in the interest of the common safety of all, the assistance of the police
authorities may be solicited, not necessarily to force the passenger to open his baggage, but to conduct the needed
investigation consistent with the rules of propriety and, above all, the constitutional rights of the passenger. It is in this sense
that the mentioned service manual issued by appellant to its conductors must be understood.
Decisions in other jurisdictions cited by appellant in its brief, evidently because of the paucity of local precedents squarely in
point, emphasize that there is need, as We hold here, for evidence of circumstances indicating cause or causes for
apprehension that the passenger's baggage is dangerous and that it is failure of the common carrier's employee to act in the
face of such evidence that constitutes the cornerstone of the common carrier's liability in cases similar to the present one.
The principle that must control the servants of the carrier in a case like the one before us is correctly stated in the
opinion in the case of Clarke v. Louisville & N.R. Co. 20 Ky L. Rep. 839, 49 S.W. 1120. In that case Clarke was a
passenger on the defendant's train. Another passenger took a quantity of gasoline into the same coach in which
Clarke was riding. It ignited and exploded, by reason of which he was severely injured. The trial court peremptorily
instructed the jury to find for the defendant. In the opinion, affirming the judgment, it is said: "It may be stated
briefly, in assuming the liability of a railroad to its passengers for injury done by another passenger, only where the
conduct of this passenger had been such before the injury as to induce a reasonably prudent and vigilant conductor
to believe that there was reasonable ground to apprehend violence and danger to the other passengers, and in that
case asserting it to be the duty of the conductor of the railroad train to use all reasonable means to prevent such
injury, and if he neglects this reasonable duty, and injury is done, that then the company is responsible; that
otherwise the railroad is not responsible."
159
The opinion quotes with approval from the case of Gulf, C. & S. F. R. Co. vs. Shields, 9 Tex. Civ. App. 652, 29 S. W. 652,
in which case the plaintiff was injured by alcohol which had been carried upon the train by another passenger. In the
opinion in that case it is said: "It was but a short period of time after the alcohol was spilt when it was set on fire and
the accident occurred, and it was not shown that appellant's employees knew that the jug contained alcohol. In fact,
it is not shown that the conductor or any other employee knew that Harris had a jug with him until it fell out of the
sack, though the conductor had collected ... (his) fare, and doubtless knew that he had the sack on the seat with
him. ... It cannot be successfully denied that Harris had the right as a passenger to carry baggage on the train, and
that he had a right to carry it in a sack if he chose to do so. We think it is equally clear that, in the absence of some
intimation or circumstance indicating that the sack contained something dangerous to other passengers, it was not
the duty of appellant's conductor or any other employee to open the sack and examine its contents." Quinn v.
Louisville & N. R. Co. 98 Ky. 231, 32 S. W. 742; Wood v. Louisville & N. R. Co. 101 Ky. 703, 42 S. W. 349; Louisville & N.
R. Co. v. Vincent, 29 Ky. L. Rep. 1049, 96 S. W. 898; Louisville & N. R. Co. v. Renfro, 142 Ky. 590, 33 L. R. A. (N. S.) 133,
135 S. W. 266.2 (Emphasis supplied)
Explosive or Dangerous Contents. — A carrier is ordinarily not liable for injuries to passengers from fires or
explosions caused by articles brought into its conveyances by other passengers, in the absence of any evidence that
the carrier, through its employees, was aware of the nature of the article or had any reason to anticipate danger
therefrom. (Bogard v. Illinois C. R Co. 144 Ky. 649, 139 S. W. 855, 36 L. R. A.[N. S.] 337; Clarke v. Louisville & N. R. Co.
101 Ky. 34, 39 S. W. 840, 36 L. R. A. 123 [explosion of can of gasoline]; East Indian R. Co. v. Mukerjee [1901] A. C.
[Eng.] 396, 3 B. R. C. 420 — P. C. [explosion of fireworks]; Annotation: 37 L. R. A. [N. S.] 725.)3
Appellant further invokes Article 1174 of the Civil Code which relieves all obligors, including, of course, common carriers like
appellant, from the consequence of fortuitous events. The court a quo held that "the breach of contract (in this case) was not
due to fortuitous event and that, therefore, the defendant is liable in damages." Since We hold that appellant has succeeded in
rebutting the presumption of negligence by showing that it has exercised extraordinary diligence for the safety of its
passengers, "according to the circumstances of the (each) case", We deem it unnecessary to rule whether or not there was any
fortuitous event in this case.
ACCORDINGLY, the appealed judgment of the trial court is reversed and the case is dismissed, without costs.
FACTS: Appellee (Nocum), who was a passenger in appellant's (Laguna Tayabas Bus Co.) Bus No. 120 then making a trip within
the barrio of Dita, Municipality of Bay, Laguna, was injured as a consequence of the explosion of firecrackers, contained in a
box, loaded in said bus. A total of 37 passengers were injured. The bus conductor testified that the box belonged to a passenger
whose name he does not know and who told him that it contained miscellaneous items and clothes. He also said that from its
appearance there was no indication at all that the contents were explosives or firecrackers. Neither did he open the box
because he just relied on the word of the owner. Dispatcher Nicolas Cornista added that they were not authorized to open the
baggages of passengers because instruction from the management was to call the police if there were packages containing
articles which were against regulations. The trial court's decision is that appellant(LTBC) did not observe the extraordinary or
utmost diligence of a very cautious person as required by the articles 1733, 1755, & 1756 of the Civil Code. Hence, this case.
ISSUE: Whether or not Laguna Tayabas Bus Co. failed to exercise extraordinary diligence.
HELD:
NO. We are not convinced that the exacting criterion of said provisions has not been met by appellant in the circumstances of
this particular case. Article 1755 provides: "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." In this
particular case before Us, it must be considered that while it is true the passengers of appellant's bus should not be made to
suffer for something over which they had no control, as enunciated in the decision of this Court cited by His Honor, fairness
demands that in measuring a common carrier's duty towards its passengers, allowance must be given to the reliance that
should be reposed on the sense of responsibility of all the passengers in regard to their common safety. It is to be presumed
that a passenger will not take with him anything dangerous to the lives and limbs of his co-passengers, not to speak of his own.
Not to be lightly considered must be the right to privacy to which each passenger is entitled. He cannot be subjected to any
unusual search, when he protests the innocuousness of his baggage and nothing appears to indicate the contrary, as in the case
at bar. In other words, inquiry may be verbally made as to the nature of a passenger's baggage when such is not outwardly
perceptible, but beyond this, constitutional boundaries are already in danger of being transgressed. Since We hold that
appellant has succeeded in rebutting the presumption of negligence by showing that it has exercised extraordinary diligence for
the safety of its passengers, "according to the circumstances of the (each) case", We deem it unnecessary to rule whether or
not there was any fortuitous event in this case. The appealed judgment of the trial court is reversed and the case is dismissed.

FACTS:

In a jeepney, Angela, a passenger, was injured because of the flammable material brought by Antonette, another passenger.
Antonette denied her baggage to be inspected invoking her right to privacy.

ISSUE: Should the jeepney operator be held liable for damages?

HELD:

No. The operator is not liable for damages. In overland transportation, the common carrier is not bound nor empowered to
make an examination on the contents of packages or bags, particularly those hand carried by passengers.

160
 reason for PAL's inability to transport all of them back to Cebu; that the stranded passengers agreed to avail of the options and
PAL vs. CA, Sept. 15, 1993; had their respective tickets exchanged for their onward trips; that it was
only the private respondent who insisted on being given priority in the accommodation; that pieces of checked-in baggage and
FIRST DIVISION
had carried items of the Ozamiz City passengers were removed from the aircraft; that the reason for their pilot's inability to
land at Ozamis City airport was because the runway was wet due to rains thus posing a threat to the safety of both passengers
G.R. No. L-82619 September 15, 1993
and aircraft; and, that such reason of force majeure was a valid justification for the pilot to bypass Ozamiz City and proceed
directly to Cotabato City.
PHILIPPINE AIRLINES, INC., petitioner,
vs.
On 4 June 1981, the trial court rendered its decision 10 the dispositive portion of which states:
COURT OF APPEALS and PEDRO ZAPATOS, respondents.
WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendant Philippine
BELLOSILLO, J.:
AirLines, Inc. ordering the latter to pay:
This petition for review in certiorari seeks to annul and set aside the decision of the then Intermediate Appellant Court,1 now
(1) As actual damages, the sum of Two Hundred Pesos (P200.00) representing plaintiff's expenses for
Court of Appeals, dated 28 February 1985, in AC-G.R. CV No. 69327 ("Pedro Zapatos v. Philippine Airlines, Inc.") affirming the
transportation, food and accommodation during his stranded stay at Cotabato City; the sum of Forty-
decision of the then Court of first Instance, now Regional Trial Court, declaring Philippine Airlines, Inc., liable in damages for
Eight Pesos (P48.00) representing his flight fare from Cotabato City to Iligan city; the sum of Five Hundred
breach of contract.
Pesos (P500.00) representing plaintiff's transportation expenses from Iligan City to Ozamiz City; and the
sum of Five Thousand Pesos (P5,000.00) as loss of business opportunities during his stranded stay in
On 25 November 1976, private respondent filed a complaint for damages for breach of contract of carriage 2 against Philippine
Cotabato City;
Airlines, Inc. (PAL), before the then Court of First Instance, now Regional Trial Court, of Misamis Occidental, at Ozamiz City.
According to him, on 2 August 1976, he was among the twenty-one (21) passengers of PAL Flight 477 that took off from Cebu
(2) As moral damages, the sum of Fifty Thousand Pesos (P50,000.00) for plaintiff's hurt feelings, serious
bound for Ozamiz City. The routing of this flight was Cebu-Ozamiz-Cotabato. While on flight and just about fifteen (15) minutes
anxiety, mental anguish and unkind and discourteous treatment perpetrated by defendant's employees
before landing at Ozamiz City, the pilot received a radio message that the airport was closed due to heavy rains and inclement
during his stay as stranded passenger in Cotabato City;
weather and that he should proceed to Cotabato City instead.
(3) As exemplary damages, the sum of Ten Thousand Pesos (P10,000.00) to set a precedent to the
Upon arrival at Cotabato City, the PAL Station Agent informed the passengers of their options to return to Cebu on flight 560 of
defendant airline that it shall provide means to give comfort and convenience to stranded passengers;
the same day and thence to Ozamiz City on 4 August 1975, or take the next flight to Cebu the following day, or remain at
Cotabato and take the next available flight to Ozamiz City on 5 August 1975.3 The Station Agent likewise informed them that
(4) The sum of Three Thousand Pesos (P3,000.00) as attorney's fees;
Flight 560 bound for Manila would make a stop-over at Cebu to bring some of the diverted passengers; that there were only six
(6) seats available as there were already confirmed passengers for Manila; and, that the basis for priority would be the check-in
(5) To pay the costs of this suit.
sequence at Cebu.
PAL appealed to the Court of Appeals which on 28 February 1985, finding no reversible error, affirmed the judgment of the
Private respondent chose to return to Cebu but was not accommodated because he checked-in as passenger No. 9 on Flight
court a quo. 11
477. He insisted on being given priority over the confirmed passengers in the accommodation, but the Station Agent refused
private respondent's demand explaining that the latter's predicament was not due to PAL's own doing but to be a force
PAL then sought recourse to this Court by way of a petition for review on certiorari 12 upon the following issues: (1) Can the
majeure.4
Court of Appeals render a decision finding petitioner (then defendant-appellant in the court below) negligent and,
consequently, liable for damages on a question of substance which was neither raised on a question nor proved at the trial? (2)
Private respondent tried to stop the departure of Flight 560 as his personal belongings, including a package containing a camera
Can the Court of Appeals award actual and moral damages contrary to the evidence and established jurisprudence? 13
which a certain Miwa from Japan asked him to deliver to Mrs. Fe Obid of Gingoog City, were still on board. His plea fell on deaf
ears. PAL then issued to private respondent a free ticket to Iligan city, which the latter received under protest. 5 Private
An assiduous examination of the records yields no valid reason for reversal of the judgment on appeal; only a modification of its
respondent was left at the airport and could not even hitch a ride in the Ford Fiera loaded with PAL personnel. 6 PAL neither
disposition.
provided private respondent with transportation from the airport to the city proper nor food and accommodation for his stay in
Cotabato City.
In its petition, PAL vigorously maintains that private respondent's principal cause of action was its alleged denial of private
respondent's demand for priority over the confirmed passengers on Flight 560. Likewise, PAL points out that the complaint did
The following day, private respondent purchased a PAL ticket to Iligan City. He informed PAL personnel that he would not use
not impute to PAL neglect in failing to attend to the needs of the diverted passengers; and, that the question of negligence was
the free ticket because he was filing a case against PAL.7 In Iligan City, private respondent hired a car from the airport to
not and never put in issue by the pleadings or proved at the trial.
Kolambugan, Lanao del Norte, reaching Ozamiz City by crossing the bay in a launch. 8 His personal effects including the camera,
which were valued at P2,000.00 were no longer recovered.
Contrary to the above arguments, private respondent's amended complaint touched on PAL's indifference and inattention to his
9 predicament. The pertinent portion of the amended complaint 14 reads:
On 13 January 1977, PAL filed its answer denying that it unjustifiably refused to accommodate private respondent. It alleged
that there was simply no more seat for private respondent on Flight 560 since there were only six (6) seats available and the
10. That by virtue of the refusal of the defendant through its agent in Cotabato to accommodate (sic) and
priority of accommodation on Flight 560 was based on the check-in sequence in Cebu; that the first six (6) priority passengers
allow the plaintiff to take and board the plane back to Cebu, and by accomodating (sic) and allowing
on Flight 477 chose to take Flight 560; that its Station Agent explained in a courteous and polite manner to all passengers the
161
 passengers from Cotabato for Cebu in his stead and place, thus forcing the plaintiff against his will, to be
left and stranded in Cotabato, exposed to the peril and danger of muslim rebels plundering at the time,
the plaintiff, as a consequence, (have) suffered mental anguish, mental torture, social humiliation,
bismirched reputation and wounded feeling, all amounting to a conservative amount of thirty thousand
(P30,000.00) Pesos.
To substantiate this aspect of apathy, private respondent testified 15
A I did not even notice that I was I think the last passenger or the last person out of the PAL employees and army personnel that
were left there. I did not notice that when I was already outside of the building after our conversation.
Q What did you do next?
A I banished (sic) because it seems that there was a war not far from the airport. The sound of guns and the soldiers were
plenty.
Q After that what did you do?
A I tried to look for a transportation that could bring me down to the City of Cotabato.
Q Were you able to go there?
A I was at about 7:00 o'clock in the evening more or less and it was a private jeep that I boarded. I was even questioned why I
and who am (sic) I then. Then I explained my side that I am (sic) stranded passenger. Then they brought me downtown at
Cotabato.
Q During your conversation with the Manager were you not offered any vehicle or transportation to Cotabato airport
downtown?
A In fact I told him (Manager) now I am by-passed passenger here which is not my destination what can you offer me. Then
they answered, "it is not my fault. Let us forget that."
Q In other words when the Manager told you that offer was there a vehicle ready?
A Not yet. Not long after that the Ford Fiera loaded with PAL personnel was passing by going to the City of Cotabato and I
stopped it to take me a ride because there was no more available transportation but I was not accommodated.
Significantly, PAL did not seem to mind the introduction of evidence which focused on its alleged negligence in caring for its
stranded passengers. Well-settled is the rule in evidence that the protest or objection against the admission of evidence should
be presented at the time the evidence is offered, and that the proper time to make protest or objection to the admissibility of
evidence is when the question is presented to the witness or at the time the answer thereto is given. 16 There being no
objection, such evidence becomes property of the case and all the parties are amenable to any favorable or unfavorable effects
resulting from the evidence. 17
PAL instead attempted to rebut the aforequoted testimony. In the process, it failed to substantiate its counter allegation for
want of concrete proof 18 —
Atty. Rubin O. Rivera — PAL's counsel:
Q You said PAL refused to help you when you were in Cotabato, is that right?
Private respondent:
162
A Yes.
Q Did you ask them to help you regarding any offer of transportation or of any other matter asked of them?
A Yes, he (PAL PERSONNEL) said what is? It is not our fault.
Q Are you not aware that one fellow passenger even claimed that he was given Hotel accommodation because they have no
money?
A No, sir, that was never offered to me. I said, I tried to stop them but they were already riding that PAL pick-up jeep, and I was
not accommodated.
Having joined in the issue over the alleged lack of care it exhibited towards its passengers, PAL cannot now turn around and
feign surprise at the outcome of the case. When issues not raised by the pleadings are tried by express or implied consent of
the parties, they shall be treated in all respects as if they had been raised in the pleadings. 19
With regard to the award of damages affirmed by the appellate court, PAL argues that the same is unfounded. It asserts that it
should not be charged with the task of looking after the passengers' comfort and convenience because the diversion of the
flight was due to a fortuitous event, and that if made liable, an added burden is given to PAL which is over and beyond its duties
under the contract of carriage. It submits that granting arguendo that negligence exists, PAL cannot be liable in damages in the
absence of fraud or bad faith; that private respondent failed to apprise PAL of the nature of his trip and possible business
losses; and, that private respondent himself is to be blamed for unreasonably refusing to use the free ticket which PAL issued.
The contract of air carriage is a peculiar one. Being imbued with public interest, the law requires common carriers to carry the
passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with due
regard for all the circumstances. 20 In Air France v. Carrascoso, 21 we held that —
A contract to transport passengers is quite different in kind and degree from any other contractual
relation. And this, because of the relation which an air carrier sustains with the public. Its business is
mainly with the travelling public. It invites people to avail of the comforts and advantages it offers. The
contract of air carriage, therefore, generates a relation attended with a public duty . . . . ( emphasis
supplied).
The position taken by PAL in this case clearly illustrates its failure to grasp the exacting standard required by law. Undisputably,
PAL's diversion of its flight due to inclement weather was a fortuitous event. Nonetheless, such occurrence did not terminate
PAL's contract with its passengers. Being in the business of air carriage and the sole one to operate in the country, PAL is
deemed equipped to deal with situations as in the case at bar. What we said in one case once again must be stressed, i.e., the
relation of carrier and passenger continues until the latter has been landed at the port of destination and has left the carrier's
premises. 22 Hence, PAL necessarily would still have to exercise extraordinary diligence in safeguarding the comfort,
convenience and safety of its stranded passengers until they have reached their final destination. On this score, PAL grossly
failed considering the then ongoing battle between government forces and Muslim rebels in Cotabato City and the fact that the
private respondent was a stranger to the place. As the appellate court correctly ruled —
While the failure of plaintiff in the first instance to reach his destination at Ozamis City in accordance with
the contract of carriage was due to the closure of the airport on account of rain and inclement weather
which was radioed to defendant 15 minutes before landing, it has not been disputed by defendant airline
that Ozamis City has no all-weather airport and has to cancel its flight to Ozamis City or by-pass it in the
event of inclement weather. Knowing this fact, it becomes the duty of defendant to provide all means of
comfort and convenience to its passengers when they would have to be left in a strange place in case of
such by-passing. The steps taken by defendant airline company towards this end has not been put in
evidence, especially for those 7 others who were not accommodated in the return trip to Cebu, only 6 of
the 21 having been so accommodated. It appears that plaintiff had to leave on the next flight 2 days later.
 If the cause of non-fulfillment of the contract is due to a fortuitous event, it has to be the sole and only
cause (Art. 1755 CC., Art. 1733 C.C.) Since part of the failure to comply with the obligation of common
carrier to deliver its passengers safely to their destination lay in the defendant's failure to provide
comfort and convenience to its stranded passengers using extra-ordinary diligence, the cause of non-
fulfillment is not solely and exclusively due to fortuitous event, but due to something which defendant
airline could have prevented, defendant becomes liable to plaintiff. 23
While we find PAL remiss in its duty of extending utmost care to private respondent while being stranded in Cotabato City,
there is no sufficient basis to conclude that PAL failed to inform him about his non-accommodation on Flight 560, or that it was
inattentive to his queries relative thereto.
On 3 August 1975, the Station Agent reported to his Branch Manager in Cotabato City that —
3. Of the fifteen stranded passengers two pax elected to take F478 on August 05, three pax opted to take
F442 August 03. The remaining ten (10) including subject requested that they be instead accommodated
(sic) on F446 CBO-IGN the following day where they intended to take the surface transportation to OZC.
Mr. Pedro Zapatos had by then been very vocal and boiceterous (sic) at the counter and we tactfully
managed to steer him inside the Station Agent's office. Mr. Pedro Zapatos then adamantly insisted that
all the diverted passengers should have been given priority over the originating passengers of F560
whether confirmed or otherwise. We explained our policies and after awhile he seemed pacified and
thereafter took his ticket (in-lieued (sic) to CBO-IGN, COCON basis), at the counter in the presence of five
other passengers who were waiting for their tickets too. The rest of the diverted pax had left earlier after
being assured their tickets will be ready the following day. 24
Aforesaid Report being an entry in the course of business is prima facie evidence of the facts therein stated. Private
respondent, apart from his testimony, did not offer any controverting evidence. If indeed PAL omitted to give information about
the options available to its diverted passengers, it would have been deluged with complaints. But, only private respondent
complained —
Atty. Rivera (for PAL)
Q I understand from you Mr. Zapatos that at the time you were waiting at Cotabato Airport for the decision of PAL, you were
not informed of the decision until after the airplane left is that correct?
A Yes.
COURT:
Q What do you mean by "yes"? You meant you were not informed?
A Yes, I was not informed of their decision, that they will only accommodate few passengers.
Q Aside from you there were many other stranded passengers?
A I believed, yes.
Q And you want us to believe that PAL did not explain (to) any of these passengers about the decision regarding those who will
board the aircraft back to Cebu?
A No, Sir.
Q Despite these facts Mr. Zapatos did any of the other passengers complained (sic) regarding that incident?
163
A There were plenty of argument and I was one of those talking about my case.
Q Did you hear anybody complained (sic) that he has not been informed of the decision before the plane left for Cebu?
A No. 25
Admittedly, private respondent's insistence on being given priority in accommodation was unreasonable considering the
fortuitous event and that there was a sequence to be observed in the booking, i.e., in the order the passengers checked-in at
their port of origin. His intransigence in fact was the main cause for his having to stay at the airport longer than was necessary.
Atty. Rivera:
Q And, you were saying that despite the fact that according to your testimony there were at least 16 passengers who were
stranded there in Cotabato airport according to your testimony, and later you said that there were no other people left there at
that time, is that correct?
A Yes, I did not see anyone there around. I think I was the only civilian who was left there.
Q Why is it that it took you long time to leave that place?
A Because I was arguing with the PAL personnel. 26
Anent the plaint that PAL employees were disrespectful and inattentive toward private respondent, the records are bereft of
evidence to support the same. Thus, the ruling of respondent Court of Appeals in this regard is without basis. 27 On the
contrary, private respondent was attended to not only by the personnel of PAL but also by its Manager." 28
In the light of these findings, we find the award of moral damages of Fifty Thousand Pesos (P50,000.00) unreasonably
excessive; hence, we reduce the same to Ten Thousand Pesos (P10,000.00). Conformably herewith, the award of exemplary
damages is also reduced to five Thousand Pesos (5,000.00). Moral damages are not intended to enrich the private respondent.
They are awarded only to enable the injured party to obtain means, diversion or amusements that will serve to alleviate the
moral suffering he has undergone by reason of the defendant's culpable action. 29
With regard to the award of actual damages in the amount of P5,000.00 representing private respondent's alleged business
losses occasioned by his stay at Cotabato City, we find the same unwarranted. Private respondent's testimony that he had a
scheduled business "transaction of shark liver oil supposedly to have been consummated on August 3, 1975 in the morning"
and that "since (private respondent) was out for nearly two weeks I missed to buy about 10 barrels of shark liver oil," 30 are
purely speculative. Actual or compensatory damages cannot be presumed but must be duly proved with reasonable degree of
certainty. A court cannot rely on speculation, conjecture or guesswork as to the fact and amount of damages, but must depend
upon competent proof that they have suffered and on evidence of the actual amount thereof. 31
WHEREFORE the decision appealed from is AFFIRMED with modification however that the award of moral damages of Fifty
Thousand Pesos (P50,000.00) is reduced to Ten Thousand Pesos (P10,000.00) while the exemplary damages of Ten Thousand
Pesos (P10,000.00) is also reduced to Five Thousand Pesos (P5,000.00). The award of actual damages in the amount Five
Thousand Pesos (P5,000.00) representing business losses occasioned by private respondent's being stranded in Cotabato City is
deleted.
SO ORDERED.
Facts:
On 25 November 1976, private respondent filed a complaint for damages for breach of contract ofcarriage2against Philippine
Airlines, Inc. (PAL), before the then Court of First Instance. Zapatospurchased a ticket from Philippine Air Lines (PAL) wherein it
was agreed that the latter would transport him to Ozamiz City. The plane’s route was from Cebu -Ozamiz-Cotabato. However,
due to unfavoarableweather conditions and the fact that PAL did nothave an all-weather airport, PAL had bypassed OzamizCity.
PAL then informed Zapatos ofhis options, to return to Cebu on the same day, or take the nextflight to Cebu the followingday, or
to take the next available flight to Ozamiz City. Zapatos chose toreturn to OzamizCity on the same day. However, there were
only six (6) seats available and, the seatsweregiven to the passengers according to their check-in sequence at Cebu.
Consequently,Zapatos wasstranded in Cotabato City, where a battle between the government and theMuslims was
ongoing.Duringhis stay in Cotabato City, PAL also failed to provide accomodations for Zapatos. Italso refused to havethe latter
hitch a ride with its employees on a ford truck bound for the City. It also failed to return Zapatos’ luggage. This prompted
Zapatos to file a complaint for damages against

Philippine Air Linesforbreach of contract.PAL claimed that it should not be charged with the task of looking afterthe
passengers'comfort and convenience because the diversion of the flight was due to a fortuitousevent,and that if made liable,
an added burden is given to PAL which is over and beyond its dutiesunderthe contract of carriage

Issue: Is PAL liable for the breach of contract of carriage?

Held:

YES. Undisputably, PAL's diversion of its flight due to inclement weather was a fortuitous event.Nonetheless, such occurrence
did not terminate PAL's contract with its passengers. Being in the businessof air carriage and the sole one to operate in the
country, PAL is deemed equipped to deal with situationsas in the case at bar. What we said in one case once again must be
stressed, i.e., the relation of carrierand passenger continues until the latter has been landed at the port of destination and has
left thecarrier's premises. Hence, PAL necessarily would still have to exercise extraordinary diligence insafeguarding the
comfort, convenience and safety of its stranded passengers until they have reachedtheir final destination. On this score, PAL
grossly failed considering the then ongoing battle betweengovernment forces and Muslim rebels in Cotabato City and the fact
that the private respondent was astranger to the place. While we find PAL remiss in its duty of extending utmost care to private
respondentwhile being stranded in Cotabato City, there is no sufficient basis to conclude that PAL failed to informhim about his
non-accommodation on Flight 560, or that it was inattentive to his queries relative thereto.

164
 When defendant-appellant would not hear demands for settlement of damages, plaintiffs-appellees were compelled to hire
Vda. De Abeto vs. PAL, July 30, 1982; counsel for the institution and prosecution of this case.
FIRST DIVISION
Defendant-appellant tried to prove that the plane crash at Mt. Baco was beyond the control of the pilot. The plane at the time
of the crash was airworthy for the purpose of conveying passengers across the country as shown by the certificate of
G.R. No. L-28692 July 30, 1982
airworthiness issued by the Civil Aeronautics Administration (CAA). There was navigational error but no negligence or
malfeasance on the part of the pilot. The plane had undergone 1,822 pre- flight checks, 364 thorough checks, 957 terminating
CONRADA VDA. DE ABETO, CARME0000LO ABETO, CECILIA ABETO, CONCEPCION ABETO, MARIA ABETO, ESTELA ABETO,
checks and 501 after maintenance checks. These checks were part of the quality control operation of defendant airline Further,
PERLA ABETO, PATRIA ABETO and ALBERTO ABETO, plaintiffs-appellees,
deviation from its prescribed route was due to the bad weather conditions between Mt. Baco and Romblon and strong winds
vs.
which caused the plane to drift to Mt. Baco. Under the circumstances, appellant argues that the crash was a fortuitous event
PHILIPPINE AIR LINES, INCORPORATED, defendant-appellant.
and, therefore, defendant-appellant cannot be held liable under the provisions of Article 1174 of the New Civil Code. Besides,
appellant tried to prove that it had exercised all the cares, skill and diligence required by law on that particular flight in
RELOVA, J..
question.
Appeal from the decision of the Court of First Instance of Iloilo finding that defendant-appellant "did not exercise extraordinary
The trial court, finding for the plaintiffs, said:
diligence or prudence as far as human foresight can provide ... but on the contrary showed negligence and indifference for the
safety of the passengers that it was bound to transport, …" and for the death of Judge Quirico Abeto, defendant- appellant was
The Court after a thorough perusal of the evidences, testimonial and documentaries submitted by both
ordered to pay plaintiffs, the heirs of Judge Abeto, the following:
parties has come into the conclusion that the evidence introduced by the plaintiffs have established the
following significant facts which proved the negligence of the defendant's pilot of the plane on that flight-
1st — For the death of Judge Quirico Abeto, the amount of P6,000.00;
in question.
2nd — For the loss of his earning capacity, for 4.75 (4 ¾) years at the rate of P7,200.00 per annum in the
1st — That the Pilot of the plane disobeyed instruction given in not following the route of Amber 1
amount of P34,200.00;
prescribed by the CAA in Violation of Standard Regulation.
3rd — For moral damages in favor of the plaintiffs in the sum of P10,000.00;
Second — The defendant failed to perform the pre-flight test on plane PIC-133 before the same took off
from Mandurriao Airport to Manila in order to find out a possible defect of the plane.
4th — For actual damages in the sum of P2,000.00 minus P400.00 received under Voucher Exhibit 'H' the
amount of Pl,600.00;
Third — When the defendant allowed during the flight in question, student Officer Rodriguez on training
as proved when his body was found on the plane's cockpit with its microphone hanging still on his left
5th — For attorney's fees, the sum of P6,000.00 and/or the total sum of P57,800.00 and; To pay the costs leg.
of this proceedings.
Fourth — When the Pilot during the flight in question failed or did not report his position over or abeam
Plaintiff's evidence shows that about 5:30 in the afternoon of November 23, 1960, Judge Quirico Abeto, with the necessary Romblon which is a compulsory reporting point.
tickets, boarded the Philippine Air Lines' PI-C133 plane at the Mandurriao Airport, Iloilo City for Manila. He was listed as the No.
18 passenger in its Load Manifest (Exhibit A). The plane which would then take two hours from Iloilo to Manila did not reach its
These facts as established by the evidence of the plaintiff lead to the inevitable conclusion that the
destination and the next day there was news that the plane was missing. After three weeks, it was ascertained that the plane
defendant did not exercise extraordinary diligence or prudence as far as human foresight can provide
crashed at Mt. Baco, Province of Mindoro. All the passengers, including Judge Abeto, must have been killed instantly and their
imposed upon by the Law, but on the contrary showed negligence and indifference for the safety of the
remains were scattered all over the area. Among the articles recovered on the site of the crash was a leather bag with the name
passengers that it was bound to transport. By the very evidence of the defendant, as shown by the
"Judge Quirico Abeto. " (Exhibit C.)
deposition of one Jose Abanilla, dated December 13, 1963, Section Chief of the Actuarial Department of
the Insular Life Insurance Company regarding life expectancy through American experience, the late
Judge Abeto, prior to the plane crash, was a Technical Assistant in the Office of the President receiving an annual compensation Judge Abeto at the age of 79 would still live or have a life expectancy of 4.75 years.
of P7,200.00; and before that, has held the various positions in the government, namely: Municipal President of Iloilo;
Provincial Fiscal of Antique, Negros Occidental and Cebu; Judge of the Court of First Instance of Manila, and Secretary of
Appealing to this Court, defendant claimed that the trial court erred:
Justice. He was in good health before the incident even if he was already 79 years old at that time.
I
Plaintiff-appellee Conrada Vda. de Abeto was appointed administratrix of the estate of Judge Abeto. The other plaintiffs-
appellees are the children of the deceased. When they received the news of the plane crash, Mrs. Abeto was shocked and until
... in finding, contrary to the evidence, that the appellant was negligent;
it was ascertained that the plane had crashed three weeks after, she could not sleep and eat. She felt sick and was miserable
after that. The members of the family also suffered.
III
Personal belongings which were lost amounted to P300.00. Burial expenses of the late judge was P1,700.00.
... in not finding that the appellant, in the conduct and operation of PI-C133, exercised its statutory
obligation over the passengers of PI C133 of extraordinary diligence as far as human care and foresight

165
 can provide, using the utmost diligence of a very cautious person with due regard for all the
circumstances and in not finding that the crash of PI-C133 was caused by fortuitous events;
... in awarding damages to the appellees; and
IV
... in not finding that appellant acted in good faith and exerted efforts to minimize damages.
The issue before Us in this appeal is whether or not the defendant is liable for violation of its contract of carriage.
The provisions of the Civil Code on this question of liability are clear and explicit. Article 1733 binds common carriers, "from the
nature of their business and by reasons of public policy, ... to observe extraordinary diligence in the vigilance ... for the safety of
the passengers transported by them according to all the circumstances of each case." Article 1755 establishes the standard of
care required of a common carrier, which is, "to carry the passengers safely as far as human care and foresight can provide,
using the utmost diligence of very cautious persons, with due regard for all the circumstances." Article 1756 fixes the burden of
proof by providing that "in case of death of or injuries to passengers, common carriers are presumed to have been at fault or to
have acted negligently, unless they prove that they observed extra-ordinary diligence as prescribed in Articles 1733 and 1755."
Lastly, Article 1757 states that "the responsibility of a common carrier for the safety of passengers ... cannot be dispensed with
or lessened by stipulation, by the posting of notices, by statements on tickets, or otherwise."
The prescribed airway of plane PI-C133 that afternoon of November 23, 1960, with Capt. de Mesa, as the pilot, was Iloilo-
Romblon-Manila, denominated as airway "Amber l," and the prescribed elevation of the flight was 6,000 ft. The fact is, the
plane did not take the designated route because it was some 30 miles to the west when it crashed at Mt. Baco. According to
defendant's witness, Ramon A. Pedroza, Administrative Assistant of the Philippine Air Lines, Inc., this tragic crash would have
not happened had the pilot continued on the route indicated. Hereunder is Mr. Pedroza's testimony on this point:
Q Had the pilot continued on the route indicated, Amber A-1 there would have
been no crash, obviously?
A Yes, Your Honor
ATTY. HILADO:
(To the witness)
Q Because Mt. Baco is 30 miles from Amber I?
A Yes,sir.(TSN,p.75,Oct.22,1963 hearing)
And, Assistant Director Cesar Mijares of the Civil Aeronautics Administration testified that the pilot of said plane was "off
course."
Q But the fact is that you found him out, that he was off course?
A Yes, sir.
Q And off course, you mean that he did not follow the route prescribed for him?
A Yes, sir.
Q And the route for him to follow was Amber A-l?
166
A Yes, sir.
Q And the route for Iloilo direct to Manila, is passing Romblon to Manila?
A Yes, passing Romblon to Manila.
Q And you found that he was not at all following the route to Romblon to Manila?
A Yes, sir.
Q You know Mr. Witness that a disregard or, violation, or disregard of instruction is
punishable by law?
A Yes,sir. (TSN,pp.247-248,Dec. 20, 1963)
It is clear that the pilot did not follow the designated route for his flight between Romblon and Manila.
The weather was clear and he was supposed to cross airway "Amber I" over Romblon; instead, he made a
straight flight to Manila in violation of air traffic rules.
At any rate, in the absence of a satisfactory explanation by appellant as to how the accident occurred, the presumption is, it is
at fault.
In an action based on a contract of carriage, the court need not make an express finding of fault or
negligence on the part of the carrier in order to hold it responsible to pay the damages sought for by the
passenger. By the contract of carriage, the carrier assumes the express obligation to transport the
passenger to his destination safely and to observe extraordinary diligence with a due regard for all the
circumstances, and any injury that might be suffered by the passenger is right away attributable to the
fault or negligence of the carrier (Art. 1756, New Civil Code). This is an exception to the general rule that
negligence must be proved. (Batangas Transportation Company vs. Caguimbal, 22 SCRA 171.)
The total of the different items which the lower court adjudged herein appellant to pay the plaintiffs is P57,800.00. The
judgment of the court a quo is modified in the sense that the defendant is hereby ordered to pay the said amount to the
plaintiffs, with legal interest thereon from the finality of this judgment. With costs against defendant-appellant.
ENTITIES INVOLVED:
PAL –carrier
JUDGE QURICO ABATO – passenger/deceased
CONDRADA VDA. DE ABETO - plaintiff
FACTS:
1. Judge Quirico Abato boarded the Philippine Airline' PI-C133 plane at the Mandurriao Airport, Iloilo City forManila
2. The plane did not reach its destination and there wasnews that the plane went missing.
3. After 3 weeks, it was ascertained that the planecrashed at Mt. Baco, Province of Mindoro.
4. All the passengers have been killed including JudgeQuirico Abeto5. Condrada Vda. de Abeto , the wife of the deceased,was
appointed administratrix of the estate of JudgeAbeto.6. Condrada, together with her children filed acomplaint for damages
against Philippine Airlines forthe death of Judge Abeto.7. Philippine Airlines, on the other hand, contends thatthe plane crash
was das due to a fortuitous event.8. The trial court ruled in favor of Abeto and herchildren.
DEFENSES:
Plane Crash was beyond the control of the pilot.
The plane was airworthy for the purpose of conveying passengers across the country as shownby the certificate of
airworthiness issued by the CivilAeronautics Administration.
 The weather during that time was clear and the pilot was supposed to cross airway "Amber I", the designated route which was
There was navigational error but no negligence ormalfeasance on the part of the pilot. Iloilo-Romblon-Manila, instead he made a straight flight to Manila in violation of air traffic rules. Since there’s no satisfactory
explanation by PAL with regard to the accident, then the presumption is it is at fault.
The plane had undergone pre-flight checks, thoroughchecks, terminating checks and after-maintenancechecks.

The deviation from its prescribed route was due tobad weather condition.

ISSUE: Is Philippine Airlines liable for violation of its contract of carriage?

RULING:
Yes. The Civil Code, as the law governing the liability of common carriers, is clear and explicit:

Art. 1773
- binds common carriers from the natureof their business and by reason of public policy toobserve extraordinary in vigilance for
the safety of the passengers transported by them according to allthe circumstances of each case.

Art. 1755
- a common carrier is required to carrythe passengers safely as far as human care andforesight can provide, using the utmost
diligence of every cautious persons, with due regard for all thecircumstances.

Art. 1756
- in case of death of or injuries topassengers, common carriers are presumed to havebeen at fault or to have acted negligently,
unlessproved that they observed extra ordinary diligence.

Art. 1757
- the responsibility of a common carrierfor the safety of passengers cannot be dispensedwith or lessened by stipulation, by
posting of notices,by statements on tickets, or otherwise,
PAL is liable for the death of Judge Abeto:

The plane did not take the designated route whichwas Iloilo-Romblon-Manila or "Amber I", if it had taken this route, then the
crash would have nothappened.

This was even supported by the statements of Ramon Peroza (Administrative assistant of PhilippineAir Lines Inc.)and Cesar
Mijares (Assistant Director of the Civil Aeronautics Administration)

The weather during that time was clear and the pilotwas supposed to cross airway "Amber I"' instead hemade a straight flight
to Manila in violation of airtraffic rules.

Since there’s no satisfactory explanation by PAL withregard to the accident, then the presumption is it isat fault.

FACTS:
Judge Quirico Abeto boarded the Philippine Airline. The plane crashed, all the passengers have been killed including Judge
Quirico Abeto. Condrada Vda. de Abeto filed a complaint for damages against Philippine Airlines for the death of Judge Abeto.
Philippine Airlines contends that the plane crash was das due to a fortuitous event.

ISSUE: Whether PAL is liable for the death of Judge Abeto.

HELD:

167
 3. the amount of P100,000.00 for each plaintiff as exemplary damages;
Japan Airlines vs. Michael Asuncion et al, G.R. No. 161730, January 28, 2005
4. the amount of P100,000.00 as attorney’s fees; and
FIRST DIVISION
5. costs of suit.
G.R. No. 161730 January 28, 2005
SO ORDERED.8
JAPAN AIRLINES, petitioner,
vs.
The trial court dismissed JAL’s counterclaim for litigation expenses, exemplary damages and attorney’s fees.
MICHAEL ASUNCION and JEANETTE ASUNCION, respondents.
On October 9, 2002, the Court of Appeals affirmed in toto the decision of the trial court. Its motion for reconsideration having
DECISION
been denied,9 JAL now files the instant petition.
YNARES-SANTIAGO, J.:
The basic issue for resolution is whether JAL is guilty of breach of contract.
This petition for review seeks to reverse and set aside the October 9, 2002 decision of the Court of Appeals and its January 12,
1
Under Article 1755 of the Civil Code, a common carrier such as JAL is bound to carry its passengers safely as far as human care
2004 resolution,2 which affirmed in toto the June 10, 1997 decision of the Regional Trial Court of Makati City, Branch 61 in Civil
and foresight can provide, using the utmost diligence of very cautious persons, with due regard for all the circumstances. When
Case No. 92-3635.3
an airline issues a ticket to a passenger, confirmed for a particular flight on a certain date, a contract of carriage arises. The
passenger has every right to expect that he be transported on that flight and on that date and it becomes the carrier’s
On March 27, 1992, respondents Michael and Jeanette Asuncion left Manila on board Japan Airlines’ (JAL) Flight 742 bound for
obligation to carry him and his luggage safely to the agreed destination.10 If the passenger is not so transported or if in the
Los Angeles. Their itinerary included a stop-over in Narita and an overnight stay at Hotel Nikko Narita. Upon arrival at Narita,
process of transporting he dies or is injured, the carrier may be held liable for a breach of contract of carriage. 11
Mrs. Noriko Etou-Higuchi of JAL endorsed their applications for shore pass and directed them to the Japanese immigration
official.4 A shore pass is required of a foreigner aboard a vessel or aircraft who desires to stay in the neighborhood of the port of
We find that JAL did not breach its contract of carriage with respondents. It may be true that JAL has the duty to inspect
call for not more than 72 hours.
whether its passengers have the necessary travel documents, however, such duty does not extend to checking the veracity of
every entry in these documents. JAL could not vouch for the authenticity of a passport and the correctness of the entries
During their interview, the Japanese immigration official noted that Michael appeared shorter than his height as indicated in his
therein. The power to admit or not an alien into the country is a sovereign act which cannot be interfered with even by JAL. This
passport. Because of this inconsistency, respondents were denied shore pass entries and were brought instead to the Narita
is not within the ambit of the contract of carriage entered into by JAL and herein respondents. As such, JAL should not be
Airport Rest House where they were billeted overnight.
faulted for the denial of respondents’ shore pass applications.
The immigration official also handed Mrs. Higuchi a Notice5 where it was stated that respondents were to be "watched so as
Prior to their departure, respondents were aware that upon arrival in Narita, they must secure shore pass entries for their
not to escape".
overnight stay. Respondents’ mother, Mrs. Imelda Asuncion, insisted though that Ms. Linda Villavicencio of JAL assured her that
her children would be granted the passes.12 This assertion was satisfactorily refuted by Ms. Villavicencio’s testimony during the
Mr. Atsushi Takemoto of the International Service Center (ISC), the agency tasked by Japan’s Immigration Department to handle
cross examination, to wit:
passengers who were denied shore pass entries, brought respondents to the Narita Airport Rest House where they stayed
overnight until their departure the following day for Los Angeles. Respondents were charged US$400.00 each for their
ATTY. GONZAGA:
accommodation, security service and meals.
Q I will show to you Exh. 9 which is the TIM and on page 184 hereof, particularly number 10, and I quote, "Those
On December 12, 1992, respondents filed a complaint for damages 6 claiming that JAL did not fully apprise them of their travel
holding tickets with confirmed seats and other documents for their onward journey and continuing their journey to
requirements and that they were rudely and forcibly detained at Narita Airport.
a third country provided that they obtain an indorsement with an application of shore pass or transit pass from the
airline ground personnel before clearing the immigration formality?"
JAL denied the allegations of respondents. It maintained that the refusal of the Japanese immigration authorities to issue shore
passes to respondents is an act of state which JAL cannot interfere with or prevail upon. Consequently, it cannot impose upon
WITNESS:
the immigration authorities that respondents be billeted at Hotel Nikko instead of the airport resthouse. 7
A Yes, Sir.
On June 10, 1997, the trial court rendered its decision, the dispositive portion of which reads:
Q Did you tell this provision to Mrs. Asuncion?
WHEREFORE PREMISES CONSIDERED, judgment is hereby rendered in favor of plaintiffs ordering defendant JAL to pay plaintiffs
as follows:
A Yes, Sir. I did.
1. the sum of US$800.00 representing the expenses incurred at the Narita Airport with interest at 12% per annum
Q Are you sure?
from March 27, 1992 until the sum is fully paid;
A Yes, Sir.
2. the sum of P200,000.00 for each plaintiff as moral damages;
168
 Q Did you give a copy? A: This notice is evidence which shows the decision of immigration authorities. It shows there that the immigration
inspector also designated Room 304 of the Narita Airport Resthouse as the place where the passengers were going
A No, Sir, I did not give a copy but verbally I explained to her the procedure they have to undergo when they get to to wait for their outbound flight.1awphi1.nét I cannot interfere with that decision.15
narita airport.
Mrs. Higuchi did all she could to assist the respondents. Upon being notified of the denial of respondents’ applications, Mrs.
…. Higuchi immediately made reservations for respondents at the Narita Airport Rest House which is really more a hotel than a
detention house as claimed by respondents.16
Q And you read the contents of this [TIM]?
More importantly, nowhere in respondent Michael’s testimony did he state categorically that Mrs. Higuchi or any other
A No, Sir, I did not read it to her but I explained to her the procedure that each passenger has to go through before employee of JAL treated them rudely or exhibited improper behavior throughout their stay. We therefore find JAL not remiss in
when they get to narita airport before they line up in the immigration counter. its obligations as a common carrier.1awphi1.nét

Q In other words, you told Mrs. Asuncion the responsibility of securing shore passes bears solely on the passengers Moral damages may be recovered in cases where one willfully causes injury to property, or in cases of breach of contract where
only? the other party acts fraudulently or in bad faith. Exemplary damages are imposed by way of example or correction for the
public good, when the party to a contract acts in wanton, fraudulent, oppressive or malevolent manner. Attorney’s fees are
A Yes, Sir. allowed when exemplary damages are awarded and when the party to a suit is compelled to incur expenses to protect his
interest.17 There being no breach of contract nor proof that JAL acted in wanton, fraudulent or malevolent manner, there is no
Q That the airline has no responsibility whatsoever with regards (sic) to the application for shore passes? basis for the award of any form of damages.

A Yes, Sir.13
Next, respondents claimed that petitioner breached its contract of carriage when it failed to explain to the immigration
authorities that they had overnight vouchers at the Hotel Nikko Narita. They imputed that JAL did not exhaust all means to
prevent the denial of their shore pass entry applications.
To reiterate, JAL or any of its representatives have no authority to interfere with or influence the immigration authorities. The
most that could be expected of JAL is to endorse respondents’ applications, which Mrs. Higuchi did immediately upon their
arrival in Narita.
Neither should JAL be held liable to reimburse respondents the amount of US$800.00. It has been sufficiently proven that the
amount pertained to ISC, an agency separate and distinct from JAL, in payment for the accommodations provided to
respondents. The payments did not in any manner accrue to the benefit of JAL.
However, we find that the Court of Appeals correctly dismissed JAL’s counterclaim for litigation expenses, exemplary damages
and attorney’s fees. The action was filed by respondents in utmost good faith and not manifestly frivolous. Respondents
honestly believed that JAL breached its contract. A person’s right to litigate should not be penalized by holding him liable for
damages. This is especially true when the filing of the case is to enforce what he believes to be his rightful claim against another
although found to be erroneous.18

As Mrs. Higuchi stated during her deposition: WHEREFORE, in view of the foregoing, the instant petition is PARTLY GRANTED. The October 9, 2002 decision of the Court of
Appeals and its January 12, 2004 resolution in CA-G.R. CV No. 57440, are REVERSED and SET ASIDE insofar as the finding of
ATTY. QUIMBO breach on the part of petitioner and the award of damages, attorney’s fees and costs of the suit in favor of respondents is
concerned. Accordingly, there being no breach of contract on the part of petitioner, the award of actual, moral and exemplary
Q: Madam Witness, what assistance did you give, if any, to the plaintiffs during this interview? damages, as well as attorney’s fees and costs of the suit in favor of respondents Michael and Jeanette Asuncion, is DELETED for
lack of basis. However, the dismissal for lack of merit of petitioner’s counterclaim for litigation expenses, exemplary damages
A: No, I was not present during their interview. I cannot assist. and attorney’s fees, is SUSTAINED. No pronouncement as to costs.

Q: Why not? SO ORDERED.

A: It is forbidden for a civilian personnel to interfere with the Immigration agent’s duties.14
….
Q: During the time that you were in that room and you were given this notice for you to sign, did you tell the
immigration agent that Michael and Jeanette Asuncion should be allowed to stay at the Hotel Nikko Narita because,
as passengers of JAL, and according to the plaintiff, they had vouchers to stay in that hotel that night?
A: No, I couldn’t do so.
Q: Why not?
FACTS:
This petition for review seeks to reverse and set aside the October 9, 2002 decision of the Court of Appeals and its January 12,
2004 resolution, which affirmed in toto the June 10, 1997 decision of the Regional Trial Court of Makati City, Branch 61 in Civil
Case No. 92-3635.
On March 27, 1992, respondents Michael and Jeanette Asuncion left Manila on board Japan Airlines’ (JAL) Flight 742 bound for
Los Angeles. Their itinerary included a stop-over in Narita and an overnight stay at Hotel Nikko Narita. Upon arrival at Narita,
Mrs. Noriko Etou-Higuchi of JAL endorsed their applications for shore pass and directed them to the Japanese immigration
official. A shore pass is required of a foreigner aboard a vessel or aircraft who desires to stay in the neighborhood of the port of
call for not more than 72 hours.

169
During their interview, the Japanese immigration official noted that Michael appeared shorter than his height as indicated in his
passport. Because of this inconsistency, respondents were denied shore pass entries and were brought instead to the Narita
Airport Rest House where they were billeted overnight.
Mr. Atsushi Takemoto of the International Service Center (ISC), the agency tasked by Japan’s Immigration Department to handle
passengers who were denied shore pass entries, brought respondents to the Narita Airport Rest House where they stayed
overnight until their departure the following day for Los Angeles. Respondents were charged US$400.00 each for their
accommodation, security service and meals.
On December 12, 1992, respondents filed a complaint for damages claiming that JAL did not fully apprise them of their travel
requirements and that they were rudely and forcibly detained at Narita Airport.
Issue: Whether or not JAL is liable of breach of contract of carriage.
Side Issues:
· Whether or not JAL is liable for moral, exemplary damages,
· Whether or not the plaintiff is liable for attorney’s fee and cost of suit incurred (JAL counterclaim)
concerned. Accordingly, there being no breach of contract on the part of petitioner, the award of actual, moral and exemplary
damages, as well as attorney’s fees and costs of the suit in favor of respondents Michael and Jeanette Asuncion, is DELETED for
lack of basis. However, the dismissal for lack of merit of petitioner’s counterclaim for litigation expenses, exemplary damages
and attorney’s fees, is SUSTAINED. No pronouncement as to costs.
FACTS:
The respondent left Manila on board an aircraft being operated by the petitioner. Part of the itinerary of the respondent is a
stop-over in Narita where they will have an overnight stay in Narita Hotel. However, the laws of Japan require them to apply for
a shore pass wherein they have to be interviewed by immigration officials of Japan. During the interview, the immigration
officials denied their application for shore pass because there appears to be errors in the travel documents. His height recorded
in the documents appears to be taller than his actual height. Therefore, the petitioners were not allowed to stay in Narita Hotel
but rather spent their nights uncomfortably at the airport. As a result, petitioners sued the airlines claiming that they did not
exercise extra-ordinary diligence required in the contract of carriage. They contend that JAL should have appraised them of the
requirement needed to obtain a shore pass.
ISSUE: Is JAL liable?

Ruling: HELD:
The court finds that JAL did not breach its contract of carriage with respondents. It may be true that JAL has the duty to inspect JAL is not liable and did not breach its contract of carriage with the petitioners. While it may be true that JAL are required to
whether its passengers have the necessary travel documents, however, such duty does not extend to checking the veracity of appraise their clients with all the necessary travel documents to obtain a shore pass, this duty does not extend to verification as
every entry in these documents. JAL could not vouch for the authenticity of a passport and the correctness of the entries to whether or not the information/entries in these travel documents are correct.
therein. The power to admit or not an alien into the country is a sovereign act which cannot be interfered with even by JAL. This
is not within the ambit of the contract of carriage entered into by JAL and herein respondents. As such, JAL should not be
faulted for the denial of respondents’ shore pass applications.

In the Respondents claim that petitioner breached its contract of carriage when it failed to explain to the immigration
authorities that they had overnight vouchers at the Hotel Nikko Narita. They imputed that JAL did not exhaust all means to
prevent the denial of their shore pass entry applications. JAL or any of its representatives have no authority to interfere with or
influence the immigration authorities. The most that could be expected of JAL is to endorse respondents’ applications, which
Mrs. Higuchi did immediately upon their arrival in Narita.

Moral damages may be recovered in cases where one willfully causes injury to property, or in cases of breach of contract where
the other party acts fraudulently or in bad faith. Exemplary damages are imposed by way of example or correction for the
public good, when the party to a contract acts in wanton, fraudulent, oppressive or malevolent manner. Attorney’s fees are
allowed when exemplary damages are awarded and when the party to a suit is compelled to incur expenses to protect his
interest.[17] There being no breach of contract nor proof that JAL acted in wanton, fraudulent or malevolent manner, there is
no basis for the award of any form of damages.

Neither should JAL be held liable to reimburse respondents the amount of US$800.00. It has been sufficiently proven that the
amount pertained to ISC, an agency separate and distinct from JAL, in payment for the accommodations provided to
respondents. The payments did not in any manner accrue to the benefit of JAL.

However, we find that the Court of Appeals correctly dismissed JAL’s counterclaim for litigation expenses, exemplary damages
and attorney’s fees. The action was filed by respondents in utmost good faith and not manifestly frivolous. Respondents
honestly believed that JAL breached its contract. A person’s right to litigate should not be penalized by holding him liable for
damages. This is especially true when the filing of the case is to enforce what he believes to be his rightful claim against another
although found to be erroneous.[

WHEREFORE, in view of the foregoing, the instant petition is PARTLY GRANTED. The October 9, 2002 decision of the Court of
Appeals and its January 12, 2004 resolution in CA-G.R. CV No. 57440, are REVERSED and SET ASIDE insofar as the finding of
breach on the part of petitioner and the award of damages, attorney’s fees and costs of the suit in favor of respondents is

170

HE Heacock Company vs. Macondray, Oct. 3, 1921;
EN BANC
G.R. No. L-16598 October 3, 1921
H. E. HEACOCK COMPANY, plaintiff-appellant,
vs.
MACONDRAY & COMPANY, INC., defendant-appellant.
JOHNSON, J.:
This action was commenced in the Court of First Instance of the City of Manila to recover the sum of P240 together with
interest thereon. The facts are stipulated by the parties, and are, briefly, as follows:
(1) On or about the 5th day of June, 1919, the plaintiff caused to be delivered on board of steamship Bolton Castle,
then in the harbor of New York, four cases of merchandise one of which contained twelve (12) 8-day Edmond clocks
properly boxed and marked for transportation to Manila, and paid freight on said clocks from New York to Manila in
advance. The said steampship arrived in the port of Manila on or about the 10th day of September, 1919, consigned
to the defendant herein as agent and representative of said vessel in said port. Neither the master of said vessel nor
the defendant herein, as its agent, delivered to the plaintiff the aforesaid twelve 8-day Edmond clocks, although
demand was made upon them for their delivery.
(2) The invoice value of the said twelve 8-day Edmond clocks in the city of New York was P22 and the market value
of the same in the City of Manila at the time when they should have been delivered to the plaintiff was P420.
(3) The bill of lading issued and delivered to the plaintiff by the master of the said steamship Bolton
Castle contained, among others, the following clauses:
1. It is mutually agreed that the value of the goods receipted for above does not exceed $500 per freight
ton, or, in proportion for any part of a ton, unless the value be expressly stated herein and ad valorem
freight paid thereon.
9. Also, that in the event of claims for short delivery of, or damage to, cargo being made, the carrier shall
not be liable for more than the net invoice price plus freight and insurance less all charges saved, and any
loss or damage for which the carrier may be liable shall be adjusted pro rata on the said basis.
(4) The case containing the aforesaid twelve 8-day Edmond clocks measured 3 cubic feet, and the freight ton value
thereof was $1,480, U. S. currency.
(5) No greater value than $500, U. S. currency, per freight ton was declared by the plaintiff on the aforesaid clocks,
and no ad valorem freight was paid thereon.
(6) On or about October 9, 1919, the defendant tendered to the plaintiff P76.36, the proportionate freight ton value
of the aforesaid twelve 8-day Edmond clocks, in payment of plaintiff's claim, which tender plaintiff rejected.
The lower court, in accordance with clause 9 of the bill of lading above quoted, rendered judgment in favor of the plaintiff
against the defendant for the sum of P226.02, this being the invoice value of the clocks in question plus the freight and
insurance thereon, with legal interest thereon from November 20, 1919, the date of the complaint, together with costs. From
that judgment both parties appealed to this court.
171
The plaintiff-appellant insists that it is entitled to recover from the defendant the market value of the clocks in question, to wit:
the sum of P420. The defendant-appellant, on the other hand, contends that, in accordance with clause 1 of the bill of lading,
the plaintiff is entitled to recover only the sum of P76.36, the proportionate freight ton value of the said clocks. The claim of the
plaintiff is based upon the argument that the two clause in the bill of lading above quoted, limiting the liability of the carrier,
are contrary to public order and, therefore, null and void. The defendant, on the other hand, contends that both of said clauses
are valid, and the clause 1 should have been applied by the lower court instead of clause 9.
I. The appeal of the plaintiff presents this question; May a common carrier, by stipulations inserted in the bill of lading, limit its
liability for the loss of or damage to the cargo to an agreed valuation of the latter? 1awph!l.net
Three kinds of stipulations have often been made in a bill of lading. The first is one exempting the carrier from any and all
liability for loss or damage occasioned by its own negligence. The second is one providing for an unqualified limitation of such
liability to an agreed valuation. And the third is one limiting the liability of the carrier to an agreed valuation unless the shipper
declares a higher value and pays a higher rate of freight. According to an almost uniform weight of authority, the first and
second kinds of stipulations are invalid as being contrary to public policy, but the third is valid and enforceable.
The authorities relied upon by the plaintiff-appellant (the Harter Act [Act of Congress of February 13, 1893]: Louisville Ry.
Co. vs. Wynn, 88 Tenn., 320; and Galt vs. Adams Express Co., 4 McAr., 124; 48 Am. Rep., 742) support the proposition that the
first and second stipulations in a bill of lading are invalid which either exempt the carrier from liability for loss or damage
occasioned by its negligence, or provide for an unqualified limitation of such liability to an agreed valuation.
A reading of clauses 1 and 9 of the bill of lading here in question, however, clearly shows that the present case falls within the
third stipulation, to wit: That a clause in a bill of lading limiting the liability of the carrier to a certain amount unless the shipper
declares a higher value and pays a higher rate of freight, is valid and enforceable. This proposition is supported by a uniform
lien of decisions of the Supreme Court of the United States rendered both prior and subsequent to the passage of the Harter
Act, from the case of Hart vs. Pennsylvania R. R. Co. (decided Nov. 24, 1884; 112 U. S., 331), to the case of the Union Pacific Ry.
Co. vs. Burke (decided Feb. 28, 1921, Advance Opinions, 1920-1921, p. 318).
In the case of Hart vs. Pennsylvania R. R. Co., supra, it was held that "where a contract of carriage, signed by the shipper, is
fairly made with a railroad company, agreeing on a valuation of the property carried, with the rate of freight based on the
condition that the carrier assumes liability only to the extent of the agreed valuation, even in case of loss or damage by the
negligence of the carrier, the contract will be upheld as proper and lawful mode of securing a due proportion between the
amount for which the carrier may be responsible and the freight he receives, and protecting himself against extravagant and
fanciful valuations."
In the case of Union Pacific Railway Co. vs. Burke, supra, the court said: "In many cases, from the decision in
Hart vs. Pennsylvania R. R. Co. (112 U. S. 331; 28 L. ed., 717; 5 Sup. Ct. Rep., 151, decided in 1884), to Boston and M. R.
Co. vs. Piper (246 U. S., 439; 62 L. ed., 820; 38 Sup. Ct. Rep., 354; Ann. Cas. 1918 E, 469, decided in 1918), it has been declared
to be the settled Federal law that if a common carrier gives to a shipper the choice of two rates, the lower of the conditioned
upon his agreeing to a stipulated valuation of his property in case of loss, even by the carrier's negligence, if the shipper makes
such a choice, understandingly and freely, and names his valuation, he cannot thereafter recover more than the value which he
thus places upon his property. As a matter of legal distinction, estoppel is made the basis of this ruling, — that, having accepted
the benefit of the lower rate, in common honesty the shipper may not repudiate the conditions on which it was obtained, —
but the rule and the effect of it are clearly established."
The syllabus of the same case reads as follows: "A carrier may not, by a valuation agreement with a shipper, limit its liability in
case of the loss by negligence of an interstate shipment to less than the real value thereof, unless the shipper is given a choice
of rates, based on valuation."
A limitation of liability based upon an agreed value to obtain a lower rate does not conflict with any sound principle
of public policy; and it is not conformable to plain principles of justice that a shipper may understate value in order
to reduce the rate and then recover a larger value in case of loss. (Adams Express Co. vs.Croninger 226 U. S. 491,
 492.) See also Reid vs. Farbo (130 C. C. A., 285); Jennings vs. Smith (45 C. C. A., 249); George N. Pierce Co. vs. Wells,
Fargo and Co. (227 U. S., 278); Wells, Fargo & Co. vs. Neiman-Marcus Co. (227 U. S., 469).
It seems clear from the foregoing authorities that the clauses (1 and 9) of the bill of lading here in question are not contrary to
public order. Article 1255 of the Civil Code provides that "the contracting parties may establish any agreements, terms and
conditions they may deem advisable, provided they are not contrary to law, morals or public order." Said clauses of the bill of
lading are, therefore, valid and binding upon the parties thereto.
A limitation of liability based upon an agreed value to obtain a lower rate does not conflict with any sound principle of public
policy; and it is not conformable to plain principles of justice that a shipper may understate value in order to reduce the rate
and then recover a larger value in case of loss. The clauses of the bill of lading here in question are not contrary to public order.
Article 1255 of the Civil Code provides that "the contracting parties may establish any agreements, terms and conditions they
may deem advisable, provided they are not contrary to law, morals or public order." Said clauses of the bill of lading are,
therefore, valid and binding upon the parties thereto.

II. The question presented by the appeal of the defendant is whether clause 1 or clause 9 of the bill of lading here in question is
to be adopted as the measure of defendant's liability. Clause 1 provides as follows:

1. It is mutually agreed that the value of the goods receipted for above does not exceed $500 per freight ton, or, in
proportion for any part of a ton, unless the value be expressly stated herein and ad valorem freight paid thereon.
Clause 9 provides:

9. Also, that in the even of claims for short delivery of, or damage to, cargo being made, the carrier shall not be
liable for more than the net invoice price plus freight and insurance less all charges saved, and any loss or damage
for which the carrier may be liable shall be adjusted pro rata on the said basis.

The defendant-appellant contends that these two clauses, if construed together, mean that the shipper and the carrier stipulate
and agree that the value of the goods receipted for does not exceed $500 per freight ton, but should the invoice value of the
goods be less than $500 per freight ton, then the invoice value governs; that since in this case the invoice value is more than
$500 per freight ton, the latter valuation should be adopted and that according to that valuation, the proportionate value of the
clocks in question is only P76.36 which the defendant is ready and willing to pay to the plaintiff.

It will be noted, however, that whereas clause 1 contains only an implied undertaking to settle in case of loss on the basis of not
exceeding $500 per freight ton, clause 9 contains an express undertaking to settle on the basis of the net invoice price plus
freight and insurance less all charges saved. "Any loss or damage for which the carrier may be liable shall be adjusted pro
rata on the said basis," clause 9 expressly provides. It seems to us that there is an irreconcilable conflict between the two
clauses with regard to the measure of defendant's liability. It is difficult to reconcile them without doing violence to the
language used and reading exceptions and conditions into the undertaking contained in clause 9 that are not there. This being
the case, the bill of lading in question should be interpreted against the defendant carrier, which drew said contract. "A written
contract should, in case of doubt, be interpreted against the party who has drawn the contract." (6 R. C. L. 854.) It is a well-
known principle of construction that ambiguity or uncertainty in an agreement must be construed most strongly against the
party causing it. (6 R. C. L., 855.) These rules as applicable to contracts contained in bills of lading. "In construing a bill of lading
given by the carrier for the safe transportation and delivery of goods shipped by a consignor, the contract will be construed
most strongly against the carrier, and favorably to the consignor, in case of doubt in any matter of construction." (Alabama, etc.
R. R. Co. vs. Thomas, 89 Ala., 294; 18 Am. St. Rep., 119.)

It follows from all of the foregoing that the judgment appealed from should be affirmed, without any finding as to costs. So
ordered.
FACTS:
HE Heacock and steamship Bolton Castle entered into a contract of transportation of goods. HE Heacock commenced an action
to recover the sum of the market value of the goods at the time when they should have been delivered to them. Macondray,
agent of the steamship, contends that, in accordance with the bill of lading, HEH is entitled to recover only the proportionate
freight ton value of the said clocks. The claim of HEH is based upon the argument that two clauses in the bill of lading, limiting
the liability of the carrier, are contrary to public order and, therefore, null and void.

ISSUE: May a common carrier, by stipulations inserted in the bill of lading, limit its liability for the loss of or damage to the cargo
to an agreed valuation of the latter?

HELD:
172
Ong Yiu vs. CA, June 29, 1979; Meanwhile, petitioner asked for postponement of the hearing of Civil Case No. 1005 due to loss of his documents, which was
granted by the Court (Exhs. "C" and "C-1"). Petitioner returned to Cebu City on August 28, 1967. In a letter dated August 29,
FIRST DIVISION
1967 addressed to PAL, Cebu, petitioner called attention to his telegram (Exh. "D"), demanded that his luggage be produced
intact, and that he be compensated in the sum of P250,000,00 for actual and moral damages within five days from receipt of
G.R. No. L-40597 June 29, 1979
the letter, otherwise, he would be left with no alternative but to file suit (Exh. "D").
AGUSTINO B. ONG YIU, petitioner,
On August 31, 1967, Messrs. de Leon, Navarsi, and Agustin, all of PAL Cebu, went to petitioner's office to deliver the "maleta".
vs.
In the presence of Mr. Jose Yap and Atty. Manuel Maranga the contents were listed and receipted for by petitioner (Exh. "E").
HONORABLE COURT OF APPEALS and PHILIPPINE AIR LINES, INC., respondents.
On September 5, 1967, petitioner sent a tracer letter to PAL Cebu inquiring about the results of the investigation which Messrs.
MELENCIO-HERRERA, J.:
de Leon, Navarsi, and Agustin had promised to conduct to pinpoint responsibility for the unauthorized opening of the "maleta"
(Exh. "F").
In this Petition for Review by Certiorari, petitioner, a practicing lawyer and businessman, seeks a reversal of the Decision of the
Court of Appeals in CA-G.R. No. 45005-R, which reduced his claim for damages for breach of contract of transportation.
The following day, September 6, 1967, PAL sent its reply hereinunder quoted verbatim:
The facts are as follows:
Dear Atty. Ong Yiu:
On August 26, 1967, petitioner was a fare paying passenger of respondent Philippine Air Lines, Inc. (PAL), on board Flight No.
This is with reference to your September 5, 1967, letter to Mr. Ricardo G. Paloma, Acting Manager,
463-R, from Mactan Cebu, bound for Butuan City. He was scheduled to attend the trial of Civil Case No. 1005 and Spec. Procs.
Southern Philippines.
No. 1125 in the Court of First Instance, Branch II, thereat, set for hearing on August 28-31, 1967. As a passenger, he checked in
one piece of luggage, a blue "maleta" for which he was issued Claim Check No. 2106-R (Exh. "A"). The plane left Mactan
First of all, may we apologize for the delay in informing you of the result of our investigation since we
Airport, Cebu, at about 1:00 o'clock P.M., and arrived at Bancasi airport, Butuan City, at past 2:00 o'clock P.M., of the same day.
visited you in your office last August 31, 1967. Since there are stations other than Cebu which are
Upon arrival, petitioner claimed his luggage but it could not be found. According to petitioner, it was only after reacting
involved in your case, we have to communicate and await replies from them. We regret to inform you
indignantly to the loss that the matter was attended to by the porter clerk, Maximo Gomez, which, however, the latter denies,
that to date we have not found the supposedly lost folder of papers nor have we been able to pinpoint
At about 3:00 o'clock P.M., PAL Butuan, sent a message to PAL, Cebu, inquiring about the missing luggage, which message was,
the personnel who allegedly pilferred your baggage.
in turn relayed in full to the Mactan Airport teletype operator at 3:45 P.M. (Exh. "2") that same afternoon. It must have been
transmitted to Manila immediately, for at 3:59 that same afternoon, PAL Manila wired PAL Cebu advising that the luggage had
You must realize that no inventory was taken of the cargo upon loading them on any plane.
been over carried to Manila aboard Flight No. 156 and that it would be forwarded to Cebu on Flight No. 345 of the same day.
Consequently, we have no way of knowing the real contents of your baggage when same was loaded.
Instructions were also given that the luggage be immediately forwarded to Butuan City on the first available flight (Exh. "3"). At
5:00 P.M. of the same afternoon, PAL Cebu sent a message to PAL Butuan that the luggage would be forwarded on Fright No.
We realized the inconvenience you encountered of this incident but we trust that you will give us another
963 the following day, August 27, 196'(. However, this message was not received by PAL Butuan as all the personnel had already
opportunity to be of better service to you.
left since there were no more incoming flights that afternoon.
PHILIPPINE AIR LINES, INC. (Sgd) JEREMIAS S. AGUSTIN Branch Supervisor Cebu
In the meantime, petitioner was worried about the missing luggage because it contained vital documents needed for trial the
next day. At 10:00 o'clock that evening, petitioner wired PAL Cebu demanding the delivery of his baggage before noon the next
On September 13, 1967, petitioner filed a Complaint against PAL for damages for breach of contract of transportation with the
day, otherwise, he would hold PAL liable for damages, and stating that PAL's gross negligence had caused him undue
Court of First Instance of Cebu, Branch V, docketed as Civil Case No. R-10188, which PAL traversed. After due trial, the lower
inconvenience, worry, anxiety and extreme embarrassment (Exh. "B"). This telegram was received by the Cebu PAL supervisor
Court found PAL to have acted in bad faith and with malice and declared petitioner entitled to moral damages in the sum of
but the latter felt no need to wire petitioner that his luggage had already been forwarded on the assumption that by the time
P80,000.00, exemplary damages of P30,000.00, attorney's fees of P5,000.00, and costs.
the message reached Butuan City, the luggage would have arrived.
Both parties appealed to the Court of Appeals — petitioner in so far as he was awarded only the sum of P80,000.00 as moral
Early in the morning of the next day, August 27, 1967, petitioner went to the Bancasi Airport to inquire about his luggage. He
damages; and defendant because of the unfavorable judgment rendered against it.
did not wait, however, for the morning flight which arrived at 10:00 o'clock that morning. This flight carried the missing
luggage. The porter clerk, Maximo Gomez, paged petitioner, but the latter had already left. A certain Emilio Dagorro a driver of
On August 22, 1974, the Court of Appeals,* finding that PAL was guilty only of simple negligence, reversed the judgment of the
a "colorum" car, who also used to drive for petitioner, volunteered to take the luggage to petitioner. As Maximo Gomez knew
trial Court granting petitioner moral and exemplary damages, but ordered PAL to pay plaintiff the sum of P100.00, the baggage
Dagorro to be the same driver used by petitioner whenever the latter was in Butuan City, Gomez took the luggage and placed it
liability assumed by it under the condition of carriage printed at the back of the ticket.
on the counter. Dagorro examined the lock, pressed it, and it opened. After calling the attention of Maximo Gomez, the
"maleta" was opened, Gomez took a look at its contents, but did not touch them. Dagorro then delivered the "maleta" to
petitioner, with the information that the lock was open. Upon inspection, petitioner found that a folder containing certain Hence, this Petition for Review by Certiorari, filed on May 2, 1975, with petitioner making the following Assignments of Error:
exhibits, transcripts and private documents in Civil Case No. 1005 and Sp. Procs. No. 1126 were missing, aside from two gift
items for his parents-in-law. Petitioner refused to accept the luggage. Dagorro returned it to the porter clerk, Maximo Gomez, I. THE HONORABLE COURT OF APPEALS ERRED IN HOLDING RESPONDENT PAL GUILTY ONLY OF SIMPLE
who sealed it and forwarded the same to PAL Cebu. NEGLIGENCE AND NOT BAD FAITH IN THE BREACH OF ITS CONTRACT OF TRANSPORTATION WITH
PETITIONER.

173
 II. THE HONORABLE COURT OF APPEALS MISCONSTRUED THE EVIDENCE AND THE LAW WHEN IT
REVERSED THE DECISION OF THE LOWER COURT AWARDING TO PETITIONER MORAL DAMAGES IN THE
AMOUNT OF P80,000.00, EXEMPLARY DAMAGES OF P30,000.00, AND P5,000.00 REPRESENTING
ATTORNEY'S FEES, AND ORDERED RESPONDENT PAL TO COMPENSATE PLAINTIFF THE SUM OF P100.00
ONLY, CONTRARY TO THE EXPLICIT PROVISIONS OF ARTICLES 2220, 2229, 2232 AND 2234 OF THE CIVIL
CODE OF THE PHILIPPINES.
On July 16, 1975, this Court gave due course to the Petition.
There is no dispute that PAL incurred in delay in the delivery of petitioner's luggage. The question is the correctness of
respondent Court's conclusion that there was no gross negligence on the part of PAL and that it had not acted fraudulently or in
bad faith as to entitle petitioner to an award of moral and exemplary damages.
From the facts of the case, we agree with respondent Court that PAL had not acted in bad faith. Bad faith means a breach of a
known duty through some motive of interest or ill will. 2 It was the duty of PAL to look for petitioner's luggage which had been
miscarried. PAL exerted due diligence in complying with such duty.
As aptly stated by the appellate Court:
We do not find any evidence of bad faith in this. On the contrary, We find that the defendant had exerted
diligent effort to locate plaintiff's baggage. The trial court saw evidence of bad faith because PAL sent the
telegraphic message to Mactan only at 3:00 o'clock that same afternoon, despite plaintiff's indignation
for the non-arrival of his baggage. The message was sent within less than one hour after plaintiff's
luggage could not be located. Efforts had to be exerted to locate plaintiff's maleta. Then the Bancasi
airport had to attend to other incoming passengers and to the outgoing passengers. Certainly, no
evidence of bad faith can be inferred from these facts. Cebu office immediately wired Manila inquiring
about the missing baggage of the plaintiff. At 3:59 P.M., Manila station agent at the domestic airport
wired Cebu that the baggage was over carried to Manila. And this message was received in Cebu one
minute thereafter, or at 4:00 P.M. The baggage was in fact sent back to Cebu City that same afternoon.
His Honor stated that the fact that the message was sent at 3:59 P.M. from Manila and completely
relayed to Mactan at 4:00 P.M., or within one minute, made the message appear spurious. This is a
forced reasoning. A radio message of about 50 words can be completely transmitted in even less than
one minute depending upon atmospheric conditions. Even if the message was sent from Manila or other
distant places, the message can be received within a minute. that is a scientific fact which cannot be
questioned. 3
Neither was the failure of PAL Cebu to reply to petitioner's rush telegram indicative of bad faith, The telegram (Exh. B) was
dispatched by petitioner at around 10:00 P.M. of August 26, 1967. The PAL supervisor at Mactan Airport was notified of it only
in the morning of the following day. At that time the luggage was already to be forwarded to Butuan City. There was no bad
faith, therefore, in the assumption made by said supervisor that the plane carrying the bag would arrive at Butuan earlier than
a reply telegram. Had petitioner waited or caused someone to wait at the Bancasi airport for the arrival of the morning flight,
he would have been able to retrieve his luggage sooner.
In the absence of a wrongful act or omission or of fraud or bad faith, petitioner is not entitled to moral damages.
Art. 2217. Moral damages include physical suffering, mental anguish, fright, serious anxiety, besmirched
reputation, wounded feelings, moral shock, social humiliation, and similar injury. Though incapable of
pecuniary computation, moral damages may be recovered if they are the proximate result of the
defendant's wrongful act of omission.
174
Art. 2220. Willful injury to property may be a legal ground for awarding moral damages if the court
should find that, under the circumstances, such damages are justly due. The same rule applies to
breaches of contract where the defendant acted fraudulently or in bad faith.
Petitioner is neither entitled to exemplary damages. In contracts, as provided for in Article 2232 of the Civil Code, exemplary
damages can be granted if the defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner, which has
not been proven in this case.
Petitioner further contends that respondent Court committed grave error when it limited PAL's carriage liability to the amount
of P100.00 as stipulated at the back of the ticket. In this connection, respondent Court opined:
As a general proposition, the plaintiff's maleta having been pilfered while in the custody of the
defendant, it is presumed that the defendant had been negligent. The liability, however, of PAL for the
loss, in accordance with the stipulation written on the back of the ticket, Exhibit 12, is limited to P100.00
per baggage, plaintiff not having declared a greater value, and not having called the attention of the
defendant on its true value and paid the tariff therefor. The validity of this stipulation is not questioned
by the plaintiff. They are printed in reasonably and fairly big letters, and are easily readable. Moreover,
plaintiff had been a frequent passenger of PAL from Cebu to Butuan City and back, and he, being a lawyer
and businessman, must be fully aware of these conditions. 4
We agree with the foregoing finding. The pertinent Condition of Carriage printed at the back of the plane ticket reads:
8. BAGGAGE LIABILITY ... The total liability of the Carrier for lost or damaged baggage of the passenger is
LIMITED TO P100.00 for each ticket unless a passenger declares a higher valuation in excess of P100.00,
but not in excess, however, of a total valuation of P1,000.00 and additional charges are paid pursuant to
Carrier's tariffs.
There is no dispute that petitioner did not declare any higher value for his luggage, much less did he pay any additional
transportation charge.
But petitioner argues that there is nothing in the evidence to show that he had actually entered into a contract with PAL
limiting the latter's liability for loss or delay of the baggage of its passengers, and that Article 1750* of the Civil Code has not
been complied with.
While it may be true that petitioner had not signed the plane ticket (Exh. "12"), he is nevertheless bound by the provisions
thereof. "Such provisions have been held to be a part of the contract of carriage, and valid and binding upon the passenger
regardless of the latter's lack of knowledge or assent to the regulation". 5 It is what is known as a contract of "adhesion", in
regards which it has been said that contracts of adhesion wherein one party imposes a ready made form of contract on the
other, as the plane ticket in the case at bar, are contracts not entirely prohibited. The one who adheres to the contract is in
reality free to reject it entirely; if he adheres, he gives his consent. 6 And as held in Randolph v. American Airlines, 103 Ohio
App. 172, 144 N.E. 2d 878; Rosenchein vs. Trans World Airlines, Inc., 349 S.W. 2d 483, "a contract limiting liability upon an
agreed valuation does not offend against the policy of the law forbidding one from contracting against his own negligence.
Considering, therefore, that petitioner had failed to declare a higher value for his baggage, he cannot be permitted a recovery
in excess of P100.00.Besides, passengers are advised not to place valuable items inside their baggage but "to avail of our V-
cargo service " (Exh. "1"). I t is likewise to be noted that there is nothing in the evidence to show the actual value of the goods
allegedly lost by petitioner.
There is another matter involved, raised as an error by PAL — the fact that on October 24, 1974 or two months after the
promulgation of the Decision of the appellate Court, petitioner's widow filed a Motion for Substitution claiming that petitioner
died on January 6, 1974 and that she only came to know of the adverse Decision on October 23, 1974 when petitioner's law
partner informed her that he received copy of the Decision on August 28, 1974. Attached to her Motion was an Affidavit of
petitioner's law partner reciting facts constitutive of excusable negligence. The appellate Court noting that all pleadings had
been signed by petitioner himself allowed the widow "to take such steps as she or counsel may deem necessary." She then filed
a Motion for Reconsideration over the opposition of PAL which alleged that the Court of Appeals Decision, promulgated on
August 22, 1974, had already become final and executory since no appeal had been interposed therefrom within the
reglementary period.

Under the circumstances, considering the demise of petitioner himself, who acted as his own counsel, it is best that technicality
yields to the interests of substantial justice. Besides, in the 'last analysis, no serious prejudice has been caused respondent PAL.

In fine, we hold that the conclusions drawn by respondent Court from the evidence on record are not erroneous.

WHEREFORE, for lack of merit, the instant Petition is hereby denied, and the judgment sought to be reviewed hereby
affirmed in toto.

No costs.

SO ORDERED.
FACTS:
Lawyer Ong Yiu filed a complaint against Philippine Airlines for damages for breach of contract of transportation due to the loss
of the content of his luggage. In the decision promulgated by the court of appeals, he contends that respondent Court
committed grave error when it limited PAL's carriage liability to the amount of P100.00 as stipulated at the back of the ticket.
He argues that there is nothing in the evidence to show that he had actually entered into a contract with PAL limiting the
latter's liability for loss or delay of the baggage of its passengers.

ISSUE: Whether the stipulation at the back of the ticket may operate so as to limit the liability of the common carrier.

HELD:
While it may be true that petitioner had not signed the plane ticket, he is nevertheless bound by the provisions thereof. Such
provisions have been held to be a part of the contract of carriage, and valid and binding upon the passenger regardless of the
latter's lack of knowledge or assent to the regulation. It is what is known as a contract of "adhesion", in regards which it has
been said that contracts of adhesion wherein one party imposes a readymade form of contract on the other, as the plane ticket
in the case at bar, are contracts not entirely prohibited. The one who adheres to the contract is in reality free to reject it
entirely; if he adheres, he gives his consent. Considering, therefore, that petitioner had failed to declare a higher value for his
baggage, he cannot be permitted a recovery in excess of P100.00.

175
Sea-Land Service vs. IAC, Aug. 31, 1987;
FIRST DIVISION
G.R. No. 75118 August 31, 1987
SEA-LAND SERVICE, INC., petitioner,
vs.
INTERMEDIATE APPELLATE COURT and PAULINO CUE, doing business under the name and style of "SEN HIAP
HING," respondents.
NARVASA, J.:
The main issue here is whether or not the consignee of seaborne freight is bound by stipulations in the covering bill of lading
limiting to a fixed amount the liability of the carrier for loss or damage to the cargo where its value is not declared in the bill.
The factual antecedents, for the most part, are not in dispute.
On or about January 8, 1981, Sea-Land Service, Inc. (Sea-Land for brevity), a foreign shipping and forwarding company licensed
to do business in the Philippines, received from Seaborne Trading Company in Oakland, California a shipment consigned to Sen
Hiap Hing the business name used by Paulino Cue in the wholesale and retail trade which he operated out of an establishment
located on Borromeo and Plaridel Streets, Cebu City.
The shipper not having declared the value of the shipment, no value was indicated in the bill of lading. The bill described the
shipment only as "8 CTNS on 2 SKIDS-FILES. 1 Based on volume measurements Sea-land charged the shipper the total amount
of US$209.28 2 for freight age and other charges. The shipment was loaded on board the MS Patriot, a vessel owned and
operated by Sea-Land, for discharge at the Port Of Cebu.
The shipment arrived in Manila on February 12, 1981, and there discharged in Container No. 310996 into the custody of the
arrastre contractor and the customs and port authorities. 3 Sometime between February 13 and 16, 1981, after the shipment
had been transferred, along with other cargoes to Container No. 40158 near Warehouse 3 at Pier 3 in South Harbor, Manila,
awaiting trans-shipment to Cebu, it was stolen by pilferers and has never been recovered. 4
On March 10, 1981, Paulino Cue, the consignee, made formal claim upon Sea-Land for the value of the lost shipment allegedly
amounting to P179,643.48. 5 Sea-Land offered to settle for US$4,000.00, or its then Philippine peso equivalent of P30,600.00.
asserting that said amount represented its maximum liability for the loss of the shipment under the package limitation clause in
the covering bill of lading.6 Cue rejected the offer and thereafter brought suit for damages against Sea-Land in the then Court of
First Instance of Cebu, Branch X.7 Said Court, after trial, rendered judgment in favor of Cue, sentencing Sea-Land to pay him
P186,048.00 representing the Philippine currency value of the lost cargo, P55,814.00 for unrealized profit with one (1%)
percent monthly interest from the filing of the complaint until fully paid, P25,000.00 for attorney's fees and P2,000.00 as
litigation expenses.8
Sea-Land appealed to the Intermediate Appellate Court.9 That Court however affirmed the decision of the Trial Court xxx in all
its parts ... . 10 Sea-Land thereupon filed the present petition for review which, as already stated, poses the question of
whether, upon the facts above set forth, it can be held liable for the loss of the shipment in any amount beyond the limit of
US$600.00 per package stipulated in the bill of lading.
To begin with, there is no question of the right, in principle, of a consignee in a bill of lading to recover from the carrier or
shipper for loss of, or damage to, goods being transported under said bill ,although that document may have been — as in
practice it oftentimes is — drawn up only by the consignor and the carrier without the intervention of
the consignee. In Mendoza vs. Philippine Air Lines, Inc. 11 the Court delved at some length into the reasons behind this when,
upon a claim made by the consignee of a motion picture film shipped by air that he was never a party to the contract of
transportation and was a complete stranger thereto, it said:
176
But appellant now contends that he is not suing on a breach of contract but on a tort as provided for in
Art. 1902 of the Civil Code. We are a little perplexed as to this new theory of the appellant. First, he
insists that the articles of the Code of Commerce should be applied: that he invokes the provisions of aid
Code governing the obligations of a common carrier to make prompt delivery of goods given to it under a
contract of transportation. Later, as already said, he says that he was never a party to the contract of
transportation and was a complete stranger to it, and that he is now suing on a tort or a violation of his
rights as a stranger (culpa aquiliana) If he does not invoke the contract of carriage entered into with the
defendant company, then he would hardly have any leg to stand on. His right to prompt delivery of the
can of film at the Phil. Air Port stems and is derived from the contract of carriage under which contract,
the PAL undertook to carry the can of film safely and to deliver it to him promptly. Take away or ignore
that contract and the obligation to carry and to deliver and right to prompt delivery disappear. 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. In the present case, the findings
of the trial court which as already stated, are accepted by the parties and which we must accept are to
the effect that the LVN Pictures Inc. and Jose Mendoza on one side, and the defendant company on the
other, entered into a contract of transportation (p. 29, Rec. on Appeal). One interpretation of said finding
is that the LVN Pictures Inc. through previous agreement with Mendoza acted as the latter's agent. When
he negotiated with the LVN Pictures Inc. to rent the film "Himala ng Birhen" and show it during the Naga
town fiesta, he most probably authorized and enjoined the Picture Company to ship the film for him on
the PAL on September 17th. Another interpretation is that even if the LVN Pictures Inc. as consignor of its
own initiative, and acting independently of Mendoza for the time being, made Mendoza as consignee, a
stranger to the contract if that is possible, nevertheless when he, Mendoza appeared at the Phil Air Port
armed with the copy of the Air Way Bill (Exh. 1) demanding the delivery of the shipment to him, he
thereby made himself a party to the contract of transportation. The very citation made by appellant in his
memorandum supports this view. Speaking of the possibility of a conflict between the order of the
shipper on the one hand and the order of the consignee on the other, as when the shipper orders the
shipping company to return or retain the goods shipped while the consignee demands their delivery,
Malagarriga in his book Codigo de Comercio Comentado, Vol. 1, p. 400, citing a decision of the Argentina
Court of Appeals on commercial matters, cited by Tolentino in Vol. II of his book entitled "Commentaries
and Jurisprudence on the Commercial Laws of the Philippines" p. 209, says that the right of the shipper
to countermand the shipment terminates when the consignee or legitimate holder of the bill of lading
appears with such big of lading before the carrier and makes himself a party to the contract. Prior to that
time he is a stranger to the contract.
Still another view of this phase of the case is that contemplated in Art. 1257, paragraph 2, of the old Civil
Code (now Art, 1311, second paragraph) which reads thus:
Should the contract contain any stipulation in favor of a third person, he may
demand its fulfillment provided he has given notice of his acceptance to the person
bound before the stipulation has been revoked.
Here, the contract of carriage between the LVN Pictures Inc. and the defendant carrier contains the
stipulations of delivery to Mendoza as consignee. His demand for the delivery of the can of film to him at
the Phil Air Port may be regarded as a notice of his acceptance of the stipulation of the delivery in his
favor contained in the contract of carriage and delivery. In this case he also made himself a party to the
contract, or at least has come to court to enforce it. His cause of action must necessarily be founded on
its breach.
Since the liability of a common carrier for loss of or damage to goods transported by it under a contract of carriage is governed
by the laws of the country of destination 12 and the goods in question were shipped from the United States to the Philippines,
the liability of petitioner Sea-Land to the respondent consignee is governed primarily by the Civil Code, and as ordained by the
said Code, suppletorily, in all matters not determined thereby, by the Code of Commerce and special laws. 13 One of these
suppletory special laws is the Carriage of Goods by Sea Act, U.S. Public Act No. 521 which was made applicable to all contracts
for the carriage of goods by sea to and from Philippine ports in foreign trade by Commonwealth Act No. 65, approved on
October 22, 1936. Sec. 4(5) of said Act in part reads:
(5) Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in
connection with the transportation of goods in an amount exceeding $500 per package lawful money of
the United States, or in case of goods not shipped in packages, per customary freight unit, or the
equivalent of that sum in other currency, unless the nature and value of such goods have been declared
by the shipper before shipment and inserted in the bill of lading. This declaration, if embodied in the bill
of lading, shall be prima facie evidence, but shall not be conclusive on the carrier.
By agreement between the carrier, master, or agent of the carrier, and the shipper another maximum
amount than that mentioned in this paragraph may be fixed: Provided, That such maximum shall not be
less than the figure above named. In no event shall the carrier be liable for more than the amount of
damage actually sustained.
xxx xxx xxx
Clause 22, first paragraph, of the long form bill of lading customarily issued by Sea-Land to its shipping clients 14 is a virtual
copy of the first paragraph of the foregoing provision. It says:
22. VALUATION. In the event of any loss, damage or delay to or in connection with goods exceeding in
actual value $500 per package, lawful money of the United States, or in case of goods not shipped in
packages, per customary freight unit, the value of the goods shall be deemed to be $500 per package or
per customary freight unit, as the case may be, and the carrier's liability, if any, shall be determined on
the basis of a value of $500 per package or customary freight unit, unless the nature and a higher value
shall be declared by the shipper in writing before shipment and inserted in this Bill of Lading.
And in its second paragraph, the bill states:
If a value higher than $500 shag have been declared in writing by the shipper upon delivery to the carrier
and inserted in this bill of lading and extra freight paid, if required and in such case if the actual value of
the goods per package or per customary freight unit shall exceed such declared value, the value shall
nevertheless be deemed to be declared value and the carrier's liability, if any, shall not exceed the
declared value and any partial loss or damage shall be adjusted pro rata on the basis of such declared
value.
Since, as already pointed out, Article 1766 of the Civil Code expressly subjects the rights and obligations of common carriers to
the provisions of the Code of Commerce and of special laws in matters not regulated by said (Civil) Code, the Court fails to
fathom the reason or justification for the Appellate Court's pronouncement in its appealed Decision that the Carriage of Goods
by Sea Act " ... has no application whatsoever in this case. 15 Not only is there nothing in the Civil Code which absolutely
prohibits agreements between shipper and carrier limiting the latter's liability for loss of or damage to cargo shipped under
contracts of carriage; it is also quite clear that said Code in fact has agreements of such character in contemplation in providing,
in its Articles 1749 and 1750, that:
ART. 1749 A stipulation that the common carrier's liability is limited to the value of the goods appearing
in the bill of lading, unless the shipper or owner declares a greater value, is binding.
ART. 1750. A contract fixing the sum that may be recovered by the owner or shipper for the loss,
destruction, or deterioration of the goods is valid, if it is reasonable and just under the circumstances,
and has been fairly and freely agreed upon.
177
Nothing contained in section 4(5) of the Carriage of Goods by Sea Act already quoted is repugnant to or inconsistent with any
of the just-cited provisions of the Civil Code. Said section merely gives more flesh and greater specificity to the rather general
terms of Article 1749 (without doing any violence to the plain intent thereof) and of Article 1750, to give effect to just
agreements limiting carriers' liability for loss or damage which are freely and fairly entered into.
It seems clear that even if said section 4(5) of the Carriage of Goods by Sea Act did not exist, the validity and binding effect of
the liability limitation clause in the bill of lading here are nevertheless fully sustainable on the basis alone of the cited Civil Code
provisions. That said stipulation is just and reasonable is arguable from the fact that it echoes Art. 1750 itself in providing a limit
to liability only if a greater value is not declared for the shipment in the bill of lading. To hold otherwise would amount to
questioning the justice and fairness of that law itself, and this the private respondent does not pretend to do. But over and
above that consideration, the lust and reasonable character of such stipulation is implicit in it giving the shipper or owner the
option of avoiding acrrual of liability limitation by the simple and surely far from onerous expedient of declaring the nature and
value of the shipment in the bill of lading. And since the shipper here has not been heard to complaint of having been "rushed,"
imposed upon or deceived in any significant way into agreeing to ship the cargo under a bill of lading carrying such a stipulation
— in fact, it does not appear that said party has been heard from at all insofar as this dispute is concerned — there is simply no
ground for assuming that its agreement thereto was not as the law would require, freely and fairly sought and given.
The private respondent had no direct part or intervention in the execution of the contract of carriage between the shipper and
the carrier as set forth in the bill of lading in question. As pointed out in Mendoza vs. PAL, supra, the right of a party in the same
situation as respondent here, to recover for loss of a shipment consigned to him under a bill of lading drawn up only by and
between the shipper and the carrier, springs from either a relation of agency that may exist between him and the shipper or
consignor, or his status as a stranger in whose favor some stipulation is made in said contract, and who becomes a party thereto
when he demands fulfillment of that stipulation, in this case the delivery of the goods or cargo shipped. In neither capacity can
he assert personally, in bar to any provision of the bill of lading, the alleged circumstance that fair and free agreement to such
provision was vitiated by its being in such fine print as to be hardly readable. Parenthetically, it may be observed that in one
comparatively recent case 16where this Court found that a similar package limitation clause was "(printed in the smallest type
on the back of the bill of lading, it nonetheless ruled that the consignee was bound thereby on the strength of authority holding
that such provisions on liability limitation are as much a part of a bill of lading as though physically in it and as though placed
therein by agreement of the parties.
There can, therefore, be no doubt or equivocation about the validity and enforceability of freely-agreed-upon stipulations in a
contract of carriage or bill of lading limiting the liability of the carrier to an agreed valuation unless the shipper declares a
higher value and inserts it into said contract or bill. This pro position, moreover, rests upon an almost uniform weight of
authority. 17
The issue of alleged deviation is also settled by Clause 13 of the bill of lading which expressly authorizes trans-shipment of the
goods at any point in the voyage in these terms:
13. THROUGH CARGO AND TRANSSHIPMENT. The carrier or master, in the exercise of its or his discretion
and although transshipment or forwarding of the goods may not have been contemplated or provided for
herein, may at port of discharge or any other place whatsoever transship or forward the goods or any
part thereof by any means at the risk and expense of the goods and at any time, whether before or after
loading on the ship named herein and by any route, whether within or outside the scope of the voyage or
beyond the port of discharge or destination of the goods and without notice to the shipper or consignee.
The carrier or master may delay such transshipping or forwarding for any reason, including but not
limited to awaiting a vessel or other means of transportation whether by the carrier or others.
Said provision obviates the necessity to offer any other justification for offloading the shipment in question in Manila for
transshipment to Cebu City, the port of destination stipulated in the bill of lading. Nonetheless, the Court takes note of Sea-
Land's explanation that it only directly serves the Port of Manila from abroad in the usual course of voyage of its carriers, hence
its maintenance of arrangements with a local forwarder. Aboitiz and Company, for delivery of its imported cargo to the agreed
final point of destination within the Philippines, such arrangements not being prohibited, but in fact recognized, by law. 18
Furthermore, this Court has also ruled 19 that the Carriage of Goods by Sea Act is applicable up to the final port of destination
and that the fact that transshipment was made on an interisland vessel did not remove the contract of carriage of goods from
the operation of said Act.
Private respondent also contends that the aforecited Clauses 22 and 13 of the bill of lading relied upon by petitioner Sea Land
form no part of the short-form bill of lading attached to his complaint before the Trial Court and appear only in the long form of
that document which, he claims. SeaLand offered (as its Exhibit 2) as an unused blank form with no entries or signatures
therein. He, however, admitted in the Trial Court that several times in the past shipments had been delivered to him through
Sea-Land, 20 from which the assumption may fairly follow that by the time of the consignment now in question, he was already
reasonably apprised of the usual terms covering contracts of carriage with said petitioner.
At any rate, as observed earlier, it has already been held that the provisions of the Carriage of Goods by Sea Act on package
limitation [sec 4(5) of the Act hereinabove referred to] are as much a part of a bill of lading as though actually placed therein by
agreement of the parties. 21
Private respondent, by making claim for loss on the basis of the bill of lading, to all intents and purposes accepted said bill.
Having done so, he —
... becomes bound by all stipulations contained therein whether on the front or the back thereof.
Respondent cannot elude its provisions simply because they prejudice him and take advantage of those
that are beneficial. Secondly, the fact that respondent shipped his goods on board the ship of petitioner
and paid the corresponding freight thereon shows that he impliedly accepted the bill of lading which was
issued in connection with the shipment in question, and so it may be said that the same is finding upon
him as if it had been actually signed by him or by any other person in his behalf. ... 22.
There is one final consideration. The private respondent admits 23 that as early as on April 22, 1981, Sea-Land had offered to
settle his claim for US$4,000.00, the limit of said carrier's liability for loss of the shipment under the bill of lading. This Court
having reached the conclusion that said sum is all that is justly due said respondent, it does not appear just or equitable that
Sea-Land, which offered that amount in good faith as early as six years ago, should, by being made to pay at the current
conversion rate of the dollar to the peso, bear for its own account all of the increase in said rate since the time of the offer of
settlement. The decision of the Regional Trial Court awarding the private respondent P186,048.00 as the peso value of the lost
shipment is clearly based on a conversion rate of P8.00 to US$1.00, said respondent having claimed a dollar value of $23,256.00
for said shipment.24 All circumstances considered, it is just and fair that Sea-Land's dollar obligation be convertible at the same
rate.
WHEREFORE, the Decision of the Intermediate Appellate Court complained of is reversed and set aside. The stipulation in the
questioned bill of lading limiting Sea-Land's liability for loss of or damage to the shipment covered by said bill to US$500.00 per
package is held valid and binding on private respondent. There being no question of the fact that said shipment consisted of
eight (8) cartons or packages, for the loss of which Sea-Land is therefore liable in the aggregate amount of US$4,000.00, it is the
judgment of the Court that said petitioner discharge that obligation by paying private respondent the sum of P32,000.00, the
equivalent in Philippine currency of US$4,000.00 at the conversion rate of P8.00 to $1.00. Costs against private respondent.
SO ORDERED.
FACTS
On or about January 8, 1981, Sea-Land Service, Inc. (Sea-Land), a foreign shipping and forwarding company licensed to do
business in the Philippines, received from Seaborne Trading Company in Oakland, California a shipment consigned to
SenHiapHing the business name used by Paulino Cue in the wholesale and retail trade which he operated out of an
establishment located on Borromeo and Plaridel Streets, Cebu City.The shipper did not declare the value of the shipmen and no
value was indicated in the bill of lading. The bill described the shipment only as "8 CTNS on 2 SKIDS-FILES.”
The shipment arrived in Manila on February 12, 1981, and there discharged into the custody of the arrastre contractor and the
customs and port authorities. Sometime between February 13 and 16, 1981, after the shipment had been transferred near
178
Warehouse 3 at Pier 3 in South Harbor, Manila, awaiting trans-shipment to Cebu, it was stolen by pilferers and has never been
recovered.
On March 10, 1981, Paulino Cue, the consignee, made formal claim upon Sea-Land for the value of the lost shipment allegedly
amounting to P179,643.48. Sea-Land offered to settle for US$4,000.00, or its then Philippine peso equivalent of P30,600.00,
asserting that said amount represented its maximum liability for the loss of the shipment under the package limitation clause in
the covering bill of lading. Cue rejected the offer and thereafter brought suit for damages against Sea-Land in the then Court of
First Instance of Cebu.
The trial court rendered judgment in favor of Cue, sentencing Sea-Land to pay him P186,048.00 representing the Philippine
currency value of the lost cargo, P55,814.00 for unrealized profit with one (1%) percent monthly interest from the filing of the
complaint until fully paid, P25,000.00 for attorney's fees and P2,000.00 as litigation expenses.The Intermediate Appellate Court
affirmed said decision.
ISSUE/S.: Whether or not the “package limitation clause,” a stipulation limiting theliability of the carrier for loss and damage to
the shipment to the amount fixed inthe bill of lading, is valid and binding against the shipper and the consignee in viewof the
shipper’s failure to declare the actual value of the shipment. -YES
RATIO
There is nothing in the Civil Code which absolutely prohibits agreements between shipper and carrier limiting the latter's
liability for loss of or damage to cargo shipped under contracts of carriage. The Civil Code in fact has agreements of such
character in contemplation in providing, in its Articles 1749 and 1750, that:
ART. 1749 A stipulation that the common carrier's liability is limited to the value of the goods appearing in the bill of lading,
unless the shipper or owner declares a greater value, is binding.
ART. 1750. A contract fixing the sum that may be recovered by the owner or shipperfor the loss, destruction, or deterioration of
the goods is valid, if it is reasonable and just under the circumstances, and has been fairly and freely agreed upon.
Here, the just and reasonable character of the questioned stipulation is implicit from the fact that the shipper or owner is given
the option under Article 1749 of avoiding accrual of liability limitation by simply declaring the nature and value of the shipment
in the bill of lading. Also, the shipper here did not complain of having been "rushed," imposed upon or deceived in any
significant way into agreeing to ship the cargo under a bill of lading carrying such a stipulation; therefore, there is no ground to
assume that its agreement to the said stipulation was not freely and fairly sought and given.
Furthermore, since the liability of a common carrier for loss of or damage to goodstransported by it under a contract of carriage
is governed by the laws of the country of destination and the goods in question were shipped from the United States to the
Philippines, the liability of petitioner Sea-Land to the respondent consignee while governed primarily by the Civil Code may
suppletorily be governed, in all matters not determined thereby, by the Code of Commerce and special laws. One of these
suppletory special laws is the Carriage of Goods by Sea Act (COGSA)and Sec. 4(5) of the said act provides that:
“Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with the
transportation of goods in an amount exceeding $500 per package lawful money of the United States, or in case of goods not
shipped in packages, per customary freight unit, or the equivalent of that sum in other currency, unless the nature and value of
such goods have been declared by the shipper before shipment and inserted in the bill of lading. This declaration, if embodied
in the bill of lading, shall be prima facie evidence, but shall not be conclusive on the carrier.
By agreement between the carrier, master, or agent of the carrier, and the shipper another maximum amount than that
mentioned in this paragraph may be fixed: Provided That such maximum shall not be less than the figure above named. In no
event shall the carrier be liable for more than the amount of damage actually sustained.”
The package limitation clause of the bill of lading in question is a virtual copy of the first paragraph of the foregoing provision.
Therefore, there can be no question as to the validity of such clause for it is in conformity with the said provision of law. Verily,
nothing contained in section 4(5) of the Carriage of Goods by Sea Act is repugnant to or inconsistent with any of the just-cited
provisions of the Civil Code. Said section merely gives more flesh and greater specificity to the rather general terms of Article
1749 (without doing any violence to the plain intent thereof) and of Article 1750, to give effect to just agreements limiting
carriers' liability for loss or damage which are freely and fairly entered into.

Therefore, there can be no doubt or equivocation about the validity and enforceability of freely-agreed-upon stipulations in a
contract of carriage or bill of lading limiting the liability of the carrier to an agreed valuation unless the shipper declares a
higher value and inserts it into said contract or bill. This pro position, moreover, rests upon an almost uniform weight of
authority.

RULING
WHEREFORE, the Decision of the Intermediate Appellate Court complained of is reversed and set aside. The stipulation in the
questioned bill of lading limiting Sea-Land's liability for loss of or damage to the shipment covered by said bill to US$500.00 per
package is held valid and binding on private respondent.

FACTS:
Sea-Land, a foreign shipping and forwarding company licensed to do business in the Philippines, received from Sea-borne
Trading Company in California, a shipment consigned to Sen Hiap Hing, the business name used by Cue. The shipper not having
declared the value of the shipment, no value was indicated in the bill of lading. The shipment was discharged in Manila, and
while awaiting transshipment to Cebu, the cargo was stolen and never recovered.

Issue: Whether or not the consignee of seaborne freight is bound by stipulations in the covering bill of lading limiting to a fixed
amount the liability of the carrier for loss or damage to the cargo where its value is not declared in the bill.

HELD:
The validity and binding effect of the liability limitation clause in the bill of lading are fully sustainable on the basis alone of Civil
Code provisions. That said stipulation is just and reasonable is arguable from the fact that it echoes Art. 1750 itself in providing
a limit to liability only if a greater value is not declared for the shipment in the bill of lading. The reasonable character of such
stipulation is implicit in it giving the shipper or owner the option of avoiding accrual of liability limitation by the simple and
surely far from onerous expedient of declaring the nature and value of the shipment in the bill of lading. And since the shipper
here has not been heard to complaint of having been "rushed," imposed upon or deceived in any significant way into agreeing
to ship the cargo under a bill of lading carrying such a stipulation, there is simply no ground for assuming that its agreement
thereto was not as the law would require, freely and fairly sought and given.

179
Citadel Lines vs. CA, Apr. 25, 1990; After trial, the lower court rendered a decision on August 30, 1985, exonerating the ARRASTRE of any liability on the ground
that the subject container van was not formally turned over to its custody, and adjudging the CARRIER liable for the principal
SECOND DIVISION
amount of P312,480.00 representing the market value of the lost shipment, and the sum of P30,000.00 as and for attorney's
fees and the costs of suit.
G.R. No. 88092 April 25, 1990
As earlier stated, the court of Appeals affirmed the decision of the court a quo but deleted the award of attorney's fees and
CITADEL LINES, INC., petitioner,
costs of suit.
vs.
COURT OF APPEALS* and MANILA WINE MERCHANTS, INC., respondents.
The two main issues for resolution are:
REGALADO, J.:
1. Whether the loss occurred while the cargo in question was in the custody of E. Razon, Inc. or of Citadel Lines, Inc; and
Through this petition, we are asked to review the decision of the Court of Appeals dated December 20, 1988, in CA-G.R. No. CV-
2. Whether the stipulation limiting the liability of the carrier contained in the bill of lading is binding on the consignee.
10070, 1 which affirmed the August 30, 1985 decision of the Regional Trial Court of Manila, Branch 27, in Civil Case No. 126415,
entitled Manila Wine Merchants, Inc. vs. Citadel Lines, Inc. and E. Razon, Inc., with a modification by deleting the award of
The first issue is factual in nature. The Court of Appeals declared in no uncertain terms that, on the basis of the evidence
attorney's fees and costs of suit.
presented, the subject cargo which was placed in a container van, padlocked and sealed by the representative of the CARRIER
was still in its possession and control when the loss occurred, there having been no formal turnover of the cargo to the
The following recital of the factual background of this case is culled from the findings in the decision of the court a quo and
ARRASTRE. Besides, there is the categorical admission made by two witnesses, namely, Atty. Lope M. Velasco and Ruben
adopted by respondent court based on the evidence of record.
Ignacio, Claims Manager and Head Checker, respectively, of the CARRIER, 10 that for lack of space the containers were not
turned over to and as the responsibility of E. Razon Inc. The CARRIER is now estopped from claiming otherwise.
Petitioner Citadel Lines, Inc. (hereafter referred to as the CARRIER) is the general agent of the vessel "Cardigan Bay/Strait
Enterprise," while respondent Manila Wine Merchants, Inc. (hereafter, the CONSIGNEE) is the importer of the subject shipment
Common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary
of Dunhill cigarettes from England.
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. 11 If the goods are lost, destroyed or deteriorated, common carriers are presumed to have been at
On or about March 17, 1979, the vessel "Cardigan Bay/Strait Enterprise" loaded on board at Southampton, England, for
fault or to have acted negligently, unless they prove that they observed extra ordinary diligence as required in Article 1733 of
carriage to Manila, 180 Filbrite cartons of mixed British manufactured cigarettes called "Dunhill International Filter" and
the Civil Code. 12 The duty of the consignee is to prove merely that the goods were lost. Thereafter, the burden is shifted to the
"Dunhill International Menthol," as evidenced by Bill of Lading No. 70621374 2 and Bill of Lading No. 70608680 3 of the Ben Line
carrier to prove that it has exercised the extraordinary diligence required by law. And, its extraordinary responsibility lasts from
Containers Ltd. The shipment arrived at the Port of Manila Pier 13, on April 18, 1979 in container van No. BENU 204850-9. The
the time the goods are unconditionally placed in the possession of, and received by the carrier for transportation until the same
said container was received by E. Razon, Inc. (later known as Metro Port Service, Inc. and referred to herein as the ARRASTRE)
are delivered, actually or constructively, by the carrier to the consignee or to the person who has the right to receive them. 13
under Cargo Receipt No. 71923 dated April 18, 1979. 4
Considering, therefore, that the subject shipment was lost while it was still in the custody of herein petitioner CARRIER, and
On April 30, 1979, the container van, which contained two shipments was stripped. One shipment was delivered and the other
considering further that it failed to prove that the loss was occasioned by an excepted cause, the inescapable conclusion is that
shipment consisting of the imported British manufactured cigarettes was palletized. Due to lack of space at the Special Cargo
the CARRIER was negligent and should be held liable therefor.
Coral, the aforesaid cigarettes were placed in two containers with two pallets in container No. BENU 204850-9, the original
container, and four pallets in container No. BENU 201009-9, with both containers duly padlocked and sealed by the
The cases cited by petitioner in support of its allegations to the contrary do not find proper application in the case at bar simply
representative of the CARRIER.
because those cases involve a situation wherein the shipment was turned over to the custody and possession of the arrastre
operator.
In the morning of May 1, 1979, the CARRIER'S headchecker discovered that container van No. BENU 201009-9 had a different
padlock and the seal was tampered with. The matter was reported to Jose G. Sibucao, Pier Superintendent, Pier 13, and upon
We, however, find the award of damages in the amount of P312,800.00 for the value of the goods lost, based on the alleged
verification, it was found that 90 cases of imported British manufactured cigarettes were missing. This was confirmed in the
market value thereof, to be erroneous. It is clearly and expressly provided under Clause 6 of the aforementioned bills of lading
report of said Superintendent Sibucao to Ricardo Cosme, Assistant Operations Manager, dated May 1, 1979 5 and the Official
issued by the CARRIER that its liability is limited to $2.00 per kilo. Basic is the rule, long since enshrined as a statutory provision,
Report/Notice of Claim of Citadel Lines, Inc. to E. Razon, Inc. dated May 8, 1979. 6 Per investigation conducted by the
that a stipulation limiting the liability of the carrier to the value of the goods appearing in the bill of lading, unless the shipper
ARRASTRE, it was revealed that the cargo in question was not formally turned over to it by the CARRIER but was kept inside
or owner declares a greater value, is binding. 14 Further, a contract fixing the sum that may be recovered by the owner or
container van No. BENU 201009-9 which was padlocked and sealed by the representatives of the CARRIER without any
shipper for the loss, destruction or deterioration of the goods is valid, if it is reasonable and just under the circumstances, and
participation of the ARRASTRE.
has been fairly and freely agreed upon. 15
When the CONSIGNEE learned that 90 cases were missing, it filed a formal claim dated May 21, 1979, 7 with the CARRIER,
The CONSIGNEE itself admits in its memorandum that the value of the goods shipped does not appear in the bills of
demanding the payment of P315,000.00 representing the market value of the missing cargoes. The CARRIER, in its reply letter
lading. 16 Hence, the stipulation on the carrier's limited liability applies. There is no question that the stipulation is just and
dated May 23, 1979, 8 admitted the loss but alleged that the same occurred at Pier 13, an area absolutely under the control of
reasonable under the circumstances and have been fairly and freely agreed upon. In Sea-land Service, Inc.vs. Intermediate
the ARRASTRE. In view thereof, the CONSIGNEE filed a formal claim, dated June 4, 1979, 9 with the ARRASTRE, demanding
Appellate Court, et al. 17 we there explained what is a just and reasonable, and a fair and free, stipulation, in this wise:
payment of the value of the goods but said claim was denied.

180
 . . . That said stipulation is just and reasonable arguable from the fact that it echoes Art. 1750 itself in providing a admitted in its memorandum that the value of the goods shipped does not appear in the bills of lading. Hence, the stipulation
limit to liability only if a greater value is not declared for the shipment in the bill of lading. To hold otherwise would on the carrier's limited liability applies. Petitioner was ordered to pay respondent the sum of US$4,465.60.
amount to questioning the justice and fairness of that law itself, and this the private respondent does not pretend to
do. But over and above that consideration the just and reasonable character of such stipulation is implicit in it giving
the shipper or owner the option of avoiding accrual of liability limitation by the simple and surely far from onerous
expedient of declaring the nature and value of the shipment in the bill of lading. And since the shipper here has not
been heard to complain of having been "rushed," imposed upon or deceived in any significant way into agreeing to
ship the cargo under a bill of lading carrying such a stipulation — in fact, it does not appear, that said party has been
heard from at all insofar as this dispute is concerned — there is simply no ground for assuming that its agreement
thereto was not as the law would require, freely and fairly sought and well.

The bill of lading shows that 120 cartons weigh 2,978 kilos or 24.82 kilos per carton. Since 90 cartons were lost and the weight
of said cartons is 2,233.80 kilos, at $2.00 per kilo the CARRIER's liability amounts to only US$4,467.60.

WHEREFORE, the judgment of respondent court is hereby MODIFIED and petitioner Citadel Lines, Inc. is ordered to pay private
respondent Manila Wine Merchants, Inc. the sum of US$4,465.60. or its equivalent in Philippine currency at the exchange rate
obtaining at the time of payment thereof. In all other respects, said judgment of respondent Court is AFFIRMED.

SO ORDERED.

Facts

Petitioner Citadel Lines, Inc. (carrier) is the general agent of the vessel Cardigan Bay/Strait Enterprise. Respondent Manila Wine
Merchants, Inc. (consignee) is the importer of the subject shipment of Dunhill cigarettes from England. On March 17, 1979, the
vessel loaded on board at England 180 Filbrite cartons of mixed British manufactured cigarettes. The shipment arrived at the
Port of Manila Pier in container vans received by E. Razon Inc (arrastre). Due to lack of space, the representatives of the carrier
kept the cigarettes in containers, padlocked and sealed. The next morning, the head checker of the carrier discovered that 90
cases of imported British manufactured cigarettes were missing.

The consignee sought to recover from the carrier the market value of the missing cargoes in the amount of Php 315,000 but the
carrier argued that the arrastre operator should be held liable as the incident occurred in an area absolutely under the control
of the latter. The trial court and the appellate court adjudged the carrier as the party liable for the loss of cargoes. Hence, the
present recourse by Citadel.

II. Issues
1. Whether the loss occurred while the cargo in question was in the custody of Citadel Lines

2. Whether the stipulation limiting the liability of the carrier contained in the bill of lading is binding on the consignee

III. Ruling

1. Yes. On the basis of the evidence presented, further bolstered by the testimonies of Citadel’s Claims Manager and Head
Checker, the subject cargo which was placed in a container van, padlocked and sealed by the representative of the carrier was
still in its possession and control when the loss occurred, there having been no formal turnover of the cargo to the arrastre.
Considering, therefore, that the subject shipment was lost while it was still in the custody of herein petitioner carrier, and
considering further that it failed to prove that the loss was occasioned by an excepted cause, the inescapable conclusion is that
the carrier was negligent and should be held liable therefor.

2. Yes. Basic is the rule, long since enshrined as a statutory provision, that a stipulation limiting the liability of the carrier to the
value of the goods appearing in the bill of lading, unless the shipper or owner declares a greater value, is binding. Further, a
contract fixing the sum that may be recovered by the owner or shipper for the loss, destruction or deterioration of the goods is
valid, if it is reasonable and just under the circumstances, and has been fairly and freely agreed upon. The consignee itself

181
Everett Steamship Corporation vs. CA, Oct. 8, 1998; reasonable and just under the circumstances, and has been fairly and freely agreed
upon."
SECOND DIVISION
It is required, however, that the contract must be reasonable and just under the circumstances and has
G.R. No. 122494 October 8, 1998
been fairly and freely agreed upon. The requirements provided in Art. 1750 of the New Civil Code must
be complied with before a common carrier can claim a limitation of its pecuniary liability in case of loss,
EVERETT STEAMSHIP CORPORATION, petitioner,
destruction or deterioration of the goods it has undertaken to transport.
vs.
COURT OF APPEALS and HERNANDEZ TRADING CO. INC., respondents.
In the case at bar, the Court is of the view that the requirements of said article have not been met. The
fact that those conditions are printed at the back of the bill of lading in letters so small that they are hard
MARTINEZ, J.:
to read would not warrant the presumption that the plaintiff or its supplier was aware of these
conditions such that he had "fairly and freely agreed" to these conditions. It can not be said that the
Petitioner Everett Steamship Corporation, through this petition for review, seeks the reversal of the decision 1 of the Court of
plaintiff had actually entered into a contract with the defendant, embodying the conditions as printed at
Appeals, dated June 14, 1995, in CA-G.R. No. 428093, which affirmed the decision of the Regional Trial Court of Kalookan City,
the back of the bill of lading that was issued by the defendant to plaintiff.
Branch 126, in Civil Case No. C-15532, finding petitioner liable to private respondent Hernandez Trading Co., Inc. for the value
of the lost cargo.
On appeal, the Court of Appeals deleted the award of attorney's fees but affirmed the trial court's findings with the additional
observation that private respondent can not be bound by the terms and conditions of the bill of lading because it was not privy
Private respondent imported three crates of bus spare parts marked as MARCO C/No. 12, MARCO C/No. 13 and MARCO C/No.
to the contract of carriage. It said:
14, from its supplier, Maruman Trading Company, Ltd. (Maruman Trading), a foreign corporation based in Inazawa, Aichi, Japan.
The crates were shipped from Nagoya, Japan to Manila on board "ADELFAEVERETTE," a vessel owned by petitioner's principal,
As to the amount of liability, no evidence appears on record to show that the appellee (Hernandez
Everett Orient Lines. The said crates were covered by Bill of Lading No. NGO53MN.
Trading Co.) consented to the terms of the Bill of Lading. The shipper named in the Bill of Lading is
Maruman Trading Co., Ltd. whom the appellant (Everett Steamship Corp.) contracted with for the
Upon arrival at the port of Manila, it was discovered that the crate marked MARCO C/No. 14 was missing. This was confirmed
transportation of the lost goods.
and admitted by petitioner in its letter of January 13, 1992 addressed to private respondent, which thereafter made a formal
claim upon petitioner for the value of the lost cargo amounting to One Million Five Hundred Fifty Two Thousand Five Hundred
Even assuming arguendo that the shipper Maruman Trading Co., Ltd. accepted the terms of the bill of
(Y1,552,500.00) Yen, the amount shown in an Invoice No. MTM-941, dated November 14, 1991. However, petitioner offered to
lading when it delivered the cargo to the appellant, still it does not necessarily follow that appellee
pay only One Hundred Thousand (Y100,000.00) Yen, the maximum amount stipulated under Clause 18 of the covering bill of
Hernandez Trading, Company as consignee is bound thereby considering that the latter was never privy
lading which limits the liability of petitioner.
to the shipping contract.
Private respondent rejected the offer and thereafter instituted a suit for collection docketed as Civil Case No. C-15532, against
Never having entered into a contract with the appellant, appellee should therefore not be bound by any
petitioner before the Regional Trial Court of Caloocan City, Branch 126.
of the terms and conditions in the bill of lading.
At the pre-trial conference, both parties manifested that they have no testimonial evidence to offer and agreed instead to file
Hence, it follows that the appellee may recover the full value of the shipment lost, the basis of which is
their respective memoranda.
not the breach of contract as appellee was never a privy to the any contract with the appellant, but is
based on Article 1735 of the New Civil Code, there being no evidence to prove satisfactorily that the
On July 16, 1993, the trial court rendered judgment 2 in favor of private respondent, ordering petitioner to pay: (a)
appellant has overcome the presumption of negligence provided for in the law.
Y1,552,500.00; (b) Y20,000.00 or its peso equivalent representing the actual value of the lost cargo and the material and
packaging cost; (c) 10% of the total amount as an award for and as contingent attorney's fees; and (d) to pay the cost of the
Petitioner now comes to us arguing that the Court of Appeals erred (1) in ruling that the consent of the consignee to the terms
suit. The trial court ruled:
and conditions of the bill of lading is necessary to make such stipulations binding upon it; (2) in holding that the carrier's limited
package liability as stipulated in the bill of lading does not apply in the instant case; and (3) in allowing private respondent to
Considering defendant's categorical admission of loss and its failure to overcome the presumption of
fully recover the full alleged value of its lost cargo.
negligence and fault, the Court conclusively finds defendant liable to the plaintiff. The next point of
inquiry the Court wants to resolve is the extent of the liability of the defendant. As stated earlier, plaintiff
We shall first resolve the validity of the limited liability clause in the bill of lading.
contends that defendant should be held liable for the whole value for the loss of the goods in the amount
of Y1,552,500.00 because the terms appearing at the back of the bill of lading was so written in fine
A stipulation in the bill of lading limiting the common carrier's liability for loss or destruction of a cargo to a certain sum, unless
prints and that the same was not signed by plaintiff or shipper thus, they are not bound by clause stated
the shipper or owner declares a greater value, is sanctioned by law, particularly Articles 1749 and 1750 of the Civil Code which
in paragraph 18 of the bill of lading. On the other hand, defendant merely admitted that it lost the
provide:
shipment but shall be liable only up to the amount of Y100,000.00.
Art. 1749. A stipulation that the common carrier's liability is limited to the value of the goods appearing
The Court subscribes to the provisions of Article 1750 of the New Civil Code —
in the bill of lading, unless the shipper or owner declares a greater value, is binding.
Art. 1750. "A contract fixing the sum that may be recovered by the owner or
shipper for the loss, destruction or deterioration of the goods is valid, if it is
182
 Art. 1750. A contract fixing the sum that may be recovered by the owner or shipper for the loss,
destruction, or deterioration of the goods is valid, if it is reasonable and just under the circumstances,
and has been freely and fairly agreed upon.
Such limited-liability clause has also been consistently upheld by this Court in a number of cases. 3 Thus, inSea Land Service, Inc.
vs. Intermediate Appellate Court 4, we ruled:
It seems clear that even if said section 4 (5) of the Carriage of Goods by Sea Act did not exist, the validity
and binding effect of the liability limitation clause in the bill of lading here are nevertheless fully
sustainable on the basis alone of the cited Civil Code Provisions. That said stipulation is just and
reasonable is arguable from the fact that it echoes Art. 1750 itself in providing a limit to liability only if a
greater value is not declared for the shipment in the bill of lading. To hold otherwise would amount to
questioning the justness and fairness of the law itself, and this the private respondent does not pretend
to do. But over and above that consideration, the just and reasonable character of such stipulation is
implicit in it giving the shipper or owner the option of avoiding accrual of liability limitation by the simple
and surely far from onerous expedient of declaring the nature and value of the shipment in the bill of
lading.
Pursuant to the afore-quoted provisions of law, it is required that the stipulation limiting the common carrier's liability for loss
must be "reasonable and just under the circumstances, and has been freely and fairly agreed upon."
The bill of lading subject of the present controversy specifically provides, among others:
18. All claims for which the carrier may be liable shall be adjusted and settled on the basis of the
shipper's net invoice cost plus freight and insurance premiums, if paid, and in no event shall the carrier
be liable for any loss of possible profits or any consequential loss.
The carrier shall not be liable for any loss of or any damage to or in any connection with, goods in an
amount exceeding One Hundred thousand Yen in Japanese Currency (Y100,000.00) or its equivalent in
any other currency per package or customary freight unit (whichever is least)unless the value of the
goods higher than this amount is declared in writing by the shipper before receipt of the goods by the
carrier and inserted in the Bill of Lading and extra freight is paid as required. (Emphasis supplied)
The above stipulations are, to our mind, reasonable and just. In the bill of lading, the carrier made it clear that its liability would
only be up to One Hundred Thousand (Y100,000.00) Yen. However, the shipper, Maruman Trading, had the option to declare a
higher valuation if the value of its cargo was higher than the limited liability of the carrier. Considering that the shipper did not
declare a higher valuation, it had itself to blame for not complying with the stipulations.
The trial court's ratiocination that private respondent could not have "fairly and freely" agreed to the limited liability clause in
the bill of lading because the said conditions were printed in small letters does not make the bill of lading invalid.
We ruled in PAL, Inc. vs. Court of Appeals 5 that the "jurisprudence on the matter reveals the consistent holding of the court that
contracts of adhesion are not invalid per se and that it has on numerous occasions upheld the binding effect thereof." Also,
in Philippine American General Insurance Co., Inc. vs. Sweet Lines, Inc. 6 this Court, speaking through the learned Justice Florenz
D. Regalado, held:
. . . Ong Yiu vs. Court of Appeals, et. al., instructs us that "contracts of adhesion wherein one party
imposes a ready-made form of contract on the other . . . are contracts not entirely prohibited. The one
who adheres to the contract is in reality free to reject it entirely; if the adheres he gives his consent." In
the present case, not even an allegation of ignorance of a party excuses non-compliance with the
contractual stipulations since the responsibility for ensuring full comprehension of the provisions of a
183
contract of carriage devolves not on the carrier but on the owner, shipper, or consignee as the case may
be. (Emphasis supplied)
It was further explained in Ong Yiu vs. Court of Appeals 7 that stipulations in contracts of adhesion are valid and binding.
While it may be true that petitioner had not signed the plane
ticket . . ., he is nevertheless bound by the provisions thereof. "Such provisions have been held to be a
part of the contract of carriage, and valid and binding upon the passenger regardless of the latter's lack of
knowledge or assent to the regulation." It is what is known as a contract of "adhesion," in regards which
it has been said that contracts of adhesion wherein one party imposes a ready-made form of contract on
the other, as the plane ticket in the case at bar, are contracts not entirely prohibited. The one who
adheres to the contract is in reality free to reject it entirely; if he adheres, he gives his consent. . . ., a
contract limiting liability upon an agreed valuation does not offend against the policy of the law
forbidding one from contracting against his own negligence. (Emphasis supplied)
Greater vigilance, however, is required of the courts when dealing with contracts of adhesion in that the said contracts must be
carefully scrutinized "in order to shield the unwary (or weaker party) from deceptive schemes contained in ready-made
covenants,"8 such as the bill of lading in question. The stringent requirement which the courts are enjoined to observe is in
recognition of Article 24 of the Civil Code which mandates that "(i)n all contractual, property or other relations, when one of
the parties is at a disadvantage on account of his moral dependence, ignorance, indigence, mental weakness, tender age or
other handicap, the courts must be vigilant for his protection."
The shipper, Maruman Trading, we assume, has been extensively engaged in the trading business. It can not be said to be
ignorant of the business transactions it entered into involving the shipment of its goods to its customers. The shipper could not
have known, or should know the stipulations in the bill of lading and there it should have declared a higher valuation of the
goods shipped. Moreover, Maruman Trading has not been heard to complain that it has been deceived or rushed into agreeing
to ship the cargo in petitioner's vessel. In fact, it was not even impleaded in this case.
The next issue to be resolved is whether or not private respondent, as consignee, who is not a signatory to the bill of lading is
bound by the stipulations thereof.
Again, in Sea-Land Service, Inc. vs. Intermediate Appellate Court (supra), we held that even if the consignee was not a signatory
to the contract of carriage between the shipper and the carrier, the consignee can still be bound by the contract. Speaking
through Mr. Chief Justice Narvasa, we ruled:
To begin with, there is no question of the right, in principle, of a consignee in a bill of lading to recover
from the carrier or shipper for loss of, or damage to goods being transported under said bill, although
that document may have been-as in practice it oftentimes is-drawn up only by the consignor and the
carrier without the intervention of the
onsignee. . . . .
. . . the right of a party in the same situation as respondent here, to recover for loss of a shipment
consigned to him under a bill of lading drawn up only by and between the shipper and the carrier, springs
from either a relation of agency that may exist between him and the shipper or consignor, or his status as
stranger in whose favor some stipulation is made in said contract, and who becomes a party thereto
when he demands fulfillment of that stipulation, in this case the delivery of the goods or cargo shipped.
In neither capacity can he assert personally, in bar to any provision of the bill of lading, the alleged
circumstance that fair and free agreement to such provision was vitiated by its being in such fine print as
to be hardly readable. Parenthetically, it may be observed that in one comparatively recent case (Phoenix
Assurance Company vs. Macondray & Co., Inc., 64 SCRA 15) where this Court found that a similar package
limitation clause was "printed in the smallest type on the back of the bill of lading," it nonetheless ruled
that the consignee was bound thereby on the strength of authority holding that such provisions on
 liability limitation are as much a part of a bill of lading as through physically in it and as though placed
therein by agreement of the parties.
There can, therefore, be no doubt or equivocation about the validity and enforceability of freely-agreed-
upon stipulations in a contract of carriage or bill of lading limiting the liability of the carrier to an agreed
valuation unless the shipper declares a higher value and inserts it into said contract or bill. This
proposition, moreover, rests upon an almost uniform weight of authority. (Emphasis supplied).
When private respondent formally claimed reimbursement for the missing goods from petitioner and subsequently filed a case
against the latter based on the very same bill of lading, it (private respondent) accepted the provisions of the contract and
thereby made itself a party thereto, or at least has come to court to enforce it.9 Thus, private respondent cannot now reject or
disregard the carrier's limited liability stipulation in the bill of lading. In other words, private respondent is bound by the whole
stipulations in the bill of lading and must respect the same.
Private respondent, however, insists that the carrier should be liable for the full value of the lost cargo in the amount of
Y1,552,500.00, considering that the shipper, Maruman Trading, had "fully declared the shipment . . ., the contents of each
crate, the dimensions, weight and value of the contents," 10 as shown in the commercial Invoice No. MTM-941.
This claim was denied by petitioner, contending that it did not know of the contents, quantity and value of "the shipment which
consisted of three pre-packed crates described in Bill of Lading No. NGO-53MN merely as '3 CASES SPARE PARTS.'" 11
The bill of lading in question confirms petitioner's contention. To defeat the carrier's limited liability, the aforecited Clause 18 of
the bill of lading requires that the shipper should have declared in writing a higher valuation of its goods before receipt thereof
by the carrier and insert the said declaration in the bill of lading, with extra freight paid. These requirements in the bill of lading
were never complied with by the shipper, hence, the liability of the carrier under the limited liability clause stands. The
commercial Invoice No. MTM-941 does not in itself sufficiently and convincingly show that petitioner has knowledge of the
value of the cargo as contended by private respondent. No other evidence was proffered by private respondent to support is
contention. Thus, we are convinced that petitioner should be liable for the full value of the lost cargo.
In fine, the liability of petitioner for the loss of the cargo is limited to One Hundred Thousand (Y100,000.00) Yen, pursuant to
Clause 18 of the bill of lading.
WHEREFORE, the decision of the Court of Appeals dated June 14, 1995 in C.A.-G.R. CV No. 42803 is hereby REVERSED and SET
ASIDE.
SO ORDERED.
FACTS
Private respondent imported 3 crates of bus spare parts marked as MARCO C/No. 12,MARCO C/No. 13 and MARCO C/No. 14,
from its supplier, Maruman Trading Company,Ltd. (Maruman Trading), a foreign corporation based in Inazawa, Aichi, Japan. The
crates were shipped from Nagoya, Japan to Manila on board “ADELFAEVERETTE,” a vessel owned by petitioner’s principal,
Everett Orient Lines. Upon arrival at the port of Manila, it was discovered that the crate marked MARCO C/No. 14 was missing.
Privaterespondent claim upon petitioner for the value of the lost cargo amounting to One Million Five Hundred Fifty Two
Thousand Five Hundred (Y1, 552,500.00) Yen, theamount shown in an Invoice No. MTM-941, dated November 14, 1991.
However,petitioner offered to pay only One Hundred Thousand (Y100,000.00) Yen, the maximum amount stipulated under
Clause 18 of the covering bill of lading which limits the liability of petitioner. Private respondent rejected the offer and
thereafter instituted a suit for collection. The trial court rendered a decision in favour of the private respondents and this was
affirmed by the Court of Appeals. Thus, this instant petition.
ISSUE: Is private respondent, as consignee, who is not a signatory to the bill of lading bound by the stipulations thereof?
HELD
184
Yes. The consignee who is not a signatory to the contract of carriage between the shipper and the carrier, the consignee can still
be bound by the contract.
The next issue to be resolved is whether or not private respondent, as consignee, who is not a signatory to the bill of lading is
bound by the stipulations thereof. Again, in Sea-land Service, Inc. vs. Intermediate Appellate Court (Supra), we held that even in
the consignee between the shipper and the carrier, the consignee can still be bound by the contract. Speaking through Mr.
Chief Justice Narvasa, we ruled: “To begin with, there is no question of the right, in the principle, of a consignee in a bill of
lading to recover from the carrier or shipper for loss of, or damage to goods being transported under the said bill, although that
document may have been-as in practice it oftentimes is-drawn up only by the consignor and the carrier without the
intervention of the consignee.
When private respondent formally claimed reimbursement for the missing goods from petitioner and subsequently filed a case
against the latter based on the very same bill of lading, it (private respondent) accepted the provisions of the contract and
thereby made itself a party thereto, or at least has come to court to enforce it. Thus private respondent cannot now reject or
disregard the carrier’s limited liability stipulation in the bill of lading. In other words, private respondents is bound by the whole
stipulations in the bill of lading and must respect the same.
FACTS:
Hernandez Trading Co., Inc. (Hernandez) imported 3 crates of bus spare parts (MARCO C/No. 12, MARCO C/No. 13 and
MARCO C/No. 14), from Maruman Trading Company, Ltd. (Maruman), a foreign corporation based in Japan.
The crates (covered by Bill of Lading No. NGO53MN) were shipped on board “ADELFAEVERETTE,” a vessel owned by Everett
Orient Lines Upon arrival at the port of Manila, it was discovered that the crate marked MARCO C/No. 14 was missing
Hernandez made a formal claim for Y1,552,500.00, as shown in an Invoice No. MTM-941, dated November 14, 1991
Everett Streamship Corp. offered to pay only Y100,000.00 the maximum amount stipulated under Clause 18 of the covering bill
of lading Hernandez rejected the offer and thereafter instituted a suit for collection
Trial Court: in favor of Hernandez
CA: Affirmed but deleted the award of attorney’s fees
ISSUE:
W/N the limited liability clause in the Bill of Lading is valid
W/N Hernandez as consignee, who is not a signatory to the bill of lading is bound by the stipulations thereof
HELD:
1. YES.
A stipulation in the bill of lading limiting the common carrier’s liability for loss or destruction of a cargo to a certain sum, unless
the shipper or owner declares a greater value, is sanctioned by law, particularly Articles 1749 and 1750 of the Civil Code which
provide:
ART. 1749. A stipulation that the common carrier’s liability is limited to the value of the goods appearing in the bill of lading,
unless the shipper or owner declares a greater value, is binding.
ART. 1750. A contract fixing the sum that may be recovered by the owner or shipper for the loss, destruction, or deterioration
of the goods is valid, if it is reasonable and just under the circumstances, and has been freely and fairly agreed upon.
Maruman Trading, had the option to declare a higher valuation if the value of its cargo was higher than the limited liability of
the carrier. Considering that the shipper did not declare a higher valuation, it had itself to blame for not complying with the
stipulations.
The trial court’s ratiocination that private respondent could not have “fairly and freely” agreed to the limited liability clause in
the bill of lading because the said conditions were printed in small letters does not make the bill of lading invalid.
contracts of adhesion are valid and binding
Greater vigilance, however, is required of the courts when dealing with contracts of adhesion in that the said contracts must be
carefully scrutinized “in order to shield the unwary (or weaker party) from deceptive schemes contained in ready-made
covenant

Article 24 of the Civil Code which mandates that “(i)n all contractual, property or other relations, when one of the parties is at a
disadvantage on account of his moral dependence, ignorance, indigence, mental weakness, tender age or other handicap, the
courts must be vigilant for his protection
Maruman Trading, we assume, has been extensively engaged in the trading business. It can not be said to be ignorant of the
business transactions it entered into involving the shipment of its goods to its customers. The shipper could not have known,
or should know the stipulations in the bill of lading and there it should have declared a higher valuation of the goods shipped.
Moreover, Maruman Trading has not been heard to complain that it has been deceived or rushed into agreeing to ship the
cargo in petitioner’s vessel. In fact, it was not even impleaded in this case.

2. YES. the right of a party in the same situation as Hernandez, to recover for loss of a shipment consigned to him under a bill of
lading drawn up only by and between the shipper and the carrier, springs from either a relation of agency that may exist
between him and the shipper or consignor, or his status as stranger in whose favor some stipulation is made in said contract,
and who becomes a party thereto when he demands fulfillment of that stipulation, in this case the delivery of the goods or
cargo shipped. When Hernandez formally claimed reimbursement for the missing goods from Everett and subsequently filed a
case against the it based on the very same bill of lading, it accepted the provisions of the contract and thereby made itself a
party thereto, or at least has come to court to enforce it. The commercial Invoice No. MTM-941 does not in itself sufficiently
and convincingly show that Everett has knowledge of the value of the cargo as contended by Hernandez

185
Saludo, Jr. vs. CA, 207 SCRA 498; 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
SECOND DIVISION
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
G.R. No. 95536 March 23, 1992
the remains back to California via Texas (see Exh. 6-TWA).
ANICETO G. SALUDO, JR., MARIA SALVACION SALUDO, LEOPOLDO G. SALUDO and SATURNINO G. SALUDO, petitioners,
It-turned out that TWA had carried a shipment under PAL Airway Bill No. 079-ORD-01180454 on TWA
vs.
Flight 603 of October 27, 1976, a flight earlier than TWA Flight 131 of the same date. TWA delivered or
HON. COURT OF APPEALS, TRANS WORLD AIRLINES, INC., and PHILIPPINE AIRLINES, INC., respondents.
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
REGALADO, J.:
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).
Assailed in this petition for review on certiorari is the decision in CA-G.R. CV No. 20951 of respondent Court of Appeals1 which
affirmed the decision of the trial court2 dismissing for lack of evidence herein petitioners' complaint in Civil Case No R-2101 of
What transpired at the Chicago (A)irport is explained in a memo or incident report by Pomierski (Exh. 6-
the then Court of First Instance of Southern Leyte, Branch I.
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
The facts, as recounted by the court a quo and adopted by respondent court after "considering the evidence on record," are as incident report (Exh. 6-TWA), it is stated that the remains (of Crispina Saludo) were taken to CMAS at the
follows: 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
After the death of plaintiffs' mother, Crispina Galdo Saludo, in Chicago Illinois, (on) October 23, 1976 by undertakers throughout the nation (U.S.A.), makes all the necessary arrangements, such as flights,
(Exh. A), Pomierski and Son Funeral Home of Chicago, made the necessary preparations and transfers, etc., and see(s) to it that the remains are taken to the proper air freight terminal.
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 The following day October 28, 1976, the shipment or remains of Crispina Saludo arrived (in) San
25, 1976 (Exh. C), Philippine Vice Consul in Chicago, Illinois, Bienvenido M. Llaneta, at 3:00 p.m. on Francisco from Mexico on board American Airlines. This shipment was transferred to or received by PAL
October 26, 1976 at the Pomierski & Son Funeral Home, sealed the shipping case containing a at 1945H or 7:45 p.m. (Exh. 2-PAL, Exh. 2-a-PAL). This casket bearing the remains of Crispina Saludo,
hermetically sealed casket that is airtight and waterproof wherein was contained the remains of Crispina which was mistakenly sent to Mexico and was opened (there), was resealed by Crispin F. Patagas for
Saludo Galdo (sic) (Exb. B). On the same date, October 26, 1976, Pomierski brought the remains to shipment to the Philippines (See Exh. B-1). The shipment was immediately loaded on PAL flight for Manila
C.M.A.S. (Continental Mortuary Air Services) at the airport (Chicago) which made the necessary that same evening and arrived (in) Manila on October 30, 1976, a day after its expected arrival on
arrangements such as flights, transfers, etc.; C.M.A.S. is a national service used by undertakers to October 29, 1976.3
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
In a letter dated December 15, 1976,4 petitioners' counsel informed private respondent Trans World Airlines (TWA) of the
with PAL thru the carrier's agent Air Care International, with Pomierski F.H. as the shipper and Mario
misshipment and eventual delay in the delivery of the cargo containing the remains of the late Crispin Saludo, and of the
(Maria) Saludo as the consignee. PAL Airway Bill No. 079-01180454 Ordinary was issued wherein the
discourtesy of its employees to petitioners Maria Salvacion Saludo and Saturnino Saludo. In a separate letter on June 10, 1977
requested routing was from Chicago to San Francisco on board TWA Flight 131 of October 27, 1976 and
addressed to co-respondent Philippine Airlines (PAL),5 petitioners stated that they were holding PAL liable for said delay in
from San Francisco to Manila on board PAL Flight No. 107 of the same date, and from Manila to Cebu on
delivery and would commence judicial action should no favorable explanation be given.
board PAL Flight 149 of October 29, 1976 (See Exh. E., Also Exh. 1-PAL).
Both private respondents denied liability. Thus, a damage suit 6 was filed by petitioners before the then Court of First Instance,
In the meantime, plaintiffs Maria Salvacion Saludo and Saturnino Saludo, thru a travel agent, were
Branch III, Leyte, praying for the award of actual damages of P50,000.00, moral damages of P1,000,000.00, exemplary damages,
booked with United Airlines from Chicago to California, and with PAL from California to Manila. She then
attorney's fees and costs of suit.
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
As earlier stated, the court below absolved the two respondent airlines companies of liability. The Court of Appeals affirmed
booked with TWA flight to California. This upset her, and she and her brother had to change reservations
the decision of the lower court in toto, and in a subsequent resolution,7 denied herein petitioners' motion for reconsideration
from UA to the TWA flight after she confirmed by phone that her mother's remains should be on that
for lack of merit.
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.
In predictable disagreement and dissatisfaction with the conclusions reached by respondent appellate court, petitioners now
Reluctantly, they took the TWA flight upon assurance of her cousin, Ani Bantug, that he would look into
urge this Court to review the appealed decision and to resolve whether or not (1) the delay in the delivery of the casketed
the matter and inform her about it on the plane or have it radioed to her. But no confirmation from her
remains of petitioners' mother was due to the fault of respondent airline companies, (2) the one-day delay in the delivery of
cousin reached her that her mother was on the West Coast.
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
Upon arrival at San Francisco at about 5:00 p.m., she went to the TWA counter there to inquire about her
liable for actual, moral and exemplary damages, aside from attorney's fees and litigation expenses. 8
mother's remains. She was told they did not know anything about it.

186
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
187
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.
188
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, 197634 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 manifest35 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.
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.
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.
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?
ALBERTO A. LIM: The remains of Mrs. Cristina (sic) Saludo.
ATTY. CESAR P. MANALAYSAY: Is that the same body mentioned in this Airway Bill?
189
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.
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.
190
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
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 together50 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.
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
191
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
192
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 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).
A I think 5 o'clock. Somewhere around that in the afternoon.
The foregoing does not show any humiliating or arrogant manner with which the personnel of both
Q You made inquiry it was immediately thereafter? 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
A Right after we got off the plane. 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
Q Up to what time did you stay in the airport to wait until the TWA people could tell you the whereabouts? 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
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. passenger or had faith by or on the part of the employees of the carrier that gives the passenger an
They did not say anything. 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
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 Airlines, Inc. vs. Cuenca, 14 SCRA 1063), and none of the above is obtaining in the instant case. 67
could not tell you where the remains of your mother were?
We stand by respondent court's findings on this point, but only to the extent where it holds that the manner in which private
A Yes sir. 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
Q And after nine o'clock, what did you do? 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
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 failure to ascertain over an appreciable period of time what happened to her remains.
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. 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
Q What did you find? 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
A We learned, Yes, my Mom would be on the flight. 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
Q Who was that brother? 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
A Saturnino Saludo. statistics for revenue.

Q And did you find what was your flight from San Francisco to the Philippines? 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
A I do not know the number. It was the evening flight of the Philippine Airline(s) from San Francisco to Manila. 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
Q You took that flight with your mother? 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
A We were scheduled to, Sir. 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
Q Now, you could not locate the remains of your mother in San Francisco could you tell us what did you feel? 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
A After we were told that my mother was not there? deplorable.

Q After you learned that your mother could not fly with you from Chicago to California? 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
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
fraction of time, was especially condemnable particularly in the hour of bereavement of the family of Crispina Saludo,
hours from Chicago to California. We waited anxiously all that time on the plane. I wanted to be assured about my mother's
intensified by anguish due to the uncertainty of the whereabouts of their mother's remains. Hence, it is quite apparent that
remains. But there was nothing and we could not get any assurance from anyone about it.
private respondents' personnel were remiss in the observance of that genuine human concern and professional attentiveness
required and expected of them.
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?

193
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.
FACTS:
194
The mother of the petitioners died in Chicago, Illinois. Pomierski Funeral Home of Chicagomade the necessary preparations and
arrangements for the shipment of the remains to thePhilippines. Pomierski brought the remains to Continental Mortuary Air
Services (CMAS) at theChicago Airport which made the necessary arrangements. CMAS booked the shipment with PAL.PAL
Airway Bill was issued wherein the requested routing was from Chicago to San Francisco onboard Trans World Airline (TWA) and
from San Francisco to Manila on board PAL. Salvacion, one ofthe petitioners, upon arrival at San Francisco, went to the TWA to
inquire about her mother’s remains. But 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. Pomierski immediately called CMAS which informed that the remains
were on a plane to Mexico City, that there were two bodies at theterminal, and somehow they were switched.
Petitioners filed a complaint against TWA and PAL forthe erroneous shipment and delay of the cargo. Petitioners alleged that
private respondentsreceived the casketed remains of the deceased on October 26, 1976, as evidenced by the issuance ofPAL
Airway Bill and from said date, private respondents were charged with the responsibility toexercise extraordinary diligence so
much so that the alleged switching of the caskets on October 27,the latter must be liable. PAL contended that it was October 28
when they received the physicaldelivery of the body, thus, it is not liable for the switching which happened the day before.
ISSUE: Is the Airway Bill a bill of lading?2) Was there delivery of the cargo upon mere issuance of the Airway Bill?
HELD:
YES. A bill of lading is a written acknowledgement of the receipt of the goods and an agreementto transport and deliver them at
a specified place to a person named or on his order. It may be called a shipping receipt, forwarder’s receipt and receipt for
transportation. Designation isimmaterial. It was held that freight tickets for bus companies as well as receipts for
cargotransported by all forms of transportation, whether by sea or land, fall within the definition. Underthe Tariff and Customs
Code, a bill of lading includes airway bills of lading.
2) NO. While delivery of the goods to the carrier normally precedes the issuance of the bill, ordelivery of the goods and
issuance of the bill are regarded in commercial practice as simultaneousacts, there is nothing to prevent an inverse order of
events. It is a general rule to the parties to acontract of carriage of goods where a bill of lading is issued, that the recital being in
essence areceipt alone, is not conclusive but may be explained, varied, or contradicted by parol or otherevidence. For instance,
when no goods have been delivered for shipment, no recitals in the bill canestop the carrier from showing the true facts. It only
raises a rebuttable presumption that the goodswere delivered for shipment but the fact must always outweigh the recital. Here,
the explanation ofprivate respondents that the Airway Bill was issued, not as evidence of receipt of delivery butmerely as a
confirmation of the book made sufficiently overcomes the presumption relied on bypetitioners that the remains of their
mother were delivered to and received by private respondentson October 26. The Court is convinced that private respondent
received the physical delivery of thebody only on October 28 as evidenced by the Interline Freight Transfer Manifest of the
AmericanAirline Freight System. It was from that date that private respondents became responsible for theagreed cargo under
their undertakings in PAL Airway Bill. Consequently, for the switching ofcaskets prior thereto which was not caused by them,
private respondents cannot be held liable
FACTS:
Shipper - Pomierski and Son Funeral Home
Consignee – Maria Saludo
Carrier - Transworld Airlines (TWA) Chicago
San Francisco, and Philippine Airlines (PAL)- San Francisco –Manila
After the death of petitioner's mother, Crispina Galdo Saludo, in Chicago Illinois, Pomierski and Son Funeral Home of Chicago,
made the necessary preparations and arrangements for the shipment, of the remains from Chicago to the Philippines.
Philippine Vice Consul in Chicago, Illinois, Bienvenido M. Llaneta, at the Pomierski & Son Funeral Home, sealed the shipping
case containing a hermetically sealed casket that is airtight and waterproof wherein was contained the remains of Crispina
Saludo Galdo). 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.). 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. 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. Maria Saludo upon
arriving at San Francisco Airport, 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. 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.
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. Where such a
delivery has thus been accepted by the carrier, the liability of the common carrier commences eo instanti. 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.

Aggrieved by the incident, the petitioners instituted an action against respondents and were asked to pay for damages.
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 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.

RTC - absolved the two respondent airlines companies of liability.

CA - affirmed the decision of the lower court in toto, and in a subsequent resolution, denied herein petitioners' motion for
reconsideration for lack of merit.

ISSUE: W/N the delay in the delivery of the casketed remains of petitioners' mother was due to the fault of respondent airline
companies,

HELD:
NO. 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. According to foreign and local jurisprudence, "the 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 controls. 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. 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."

In the case at bar, it was 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. 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, 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.

195
Northwest Airlines vs. Cuenca, Aug. 31, 1965;
EN BANC
G.R. No. L-22425 August 31, 1965
NORTHWEST AIRLINES, INC., petitioner,
vs.
NICOLAS L. CUENCA and COURT OF APPEALS (SPECIAL SIXTH DIVISION), respondents.
CONCEPCION, J.:
This is an action for damages for alleged breach of contract. After appropriate proceedings the Court of First Instance of Manila,
in which the case was originally filed, rendered judgment sentencing defendant Northwest Airlines, Inc. — hereinafter referred
to as petitioner — to pay to plaintiff Cuenca — hereinafter referred to as respondent — the sum of P20,000 as moral damages,
together with the sum of P5,000 as exemplary damages, with legal interest thereon from the date of the filing of complaint,"
December 12, 1959, "until fully paid, plus the further sum of P2,000 as attorney's fees and expenses of litigation." On appeal
taken by petitioner, said decision was affirmed by the Court of Appeals, except as to the P5,000.00 exemplary damages, which
was eliminated, and the P20,000.00 award for moral damages, which was converted into nominal damages. The case is now
before us on petition for review by certiorari filed by petitioner, upon the ground that the lower court has erred: (1) in holding
that the Warsaw Convention of October 12, 1929, relative to transportation by air is not in force in the Philippines; (2) in not
holding that respondent has no cause of action; and (3) in awarding P20,000 as nominal damages.
We deem it unnecessary to pass upon the first assignment of error because the same is the basis of the second assignment of
error, and the latter is devoid of merit, even if we assumed the former to be well-taken. Indeed the second assignment of error
is predicated upon Articles 17, 18 and 19 of said Convention, reading:
ART. 17. The carrier shall be liable for damages sustained in the event of the death or wounding of a passenger or
any other bodily injury suffered by a passenger, if the accident which caused the damage so sustained took place on
board the aircraft or in the course of any of the operations of embarking or disembarking.
ART. 18. (1) The carrier shall be liable for damage sustained in the event of the destruction or loss of, or of damage
to, any checked baggage, or any goods, if the occurrence which caused the damage so sustained took place during
the transportation by air.
(2) The transportation by air within the meaning of the preceding paragraph shall comprise the period during which
the baggage or goods are in charge of the carrier, whether in an airport or on board an aircraft, or, in the case of a
landing outside an airport, in any place whatsoever.
(3) The period of the transportation by air shall not extend to any transportation by land, by sea, or by river
performed outside an airport. If, however, such transportation takes place in the performance of a contract for
transportation by air, for the purpose of loading, delivery, or transhipment, any damage is presumed, subject to
proof to the contrary, to have been the result of an event which took place during the transportation by air.
ART. 19. The carrier shall be liable for damage occasioned by delay in the transportation by air of passengers,
baggage, or goods.
Petitioner argues that pursuant to those provisions, an air "carrier is liable only" in the event of death of a passenger or injury
suffered by him, or of destruction or loss of, or damage to any checked baggage or any goods, or of delay in the transportation
by air of passengers, baggage or goods. This pretense is not borne out by the language of said Articles. The same merely
declare the carrier liable for damages in the enumerated cases, if the conditions therein specified are present. Neither said
provisions nor others in the aforementioned Convention regulate or exclude liability for other breaches of contract by the
196
carrier. Under petitioner's theory, an air carrier would be exempt from any liability for damages in the event of its absolute
refusal, in bad faith, to comply with a contract of carriage, which is absurd.
The third assignment of error is based upon Medina vs. Cresencia (52 Off. Gaz. 4606), and Quijano vs. Philippine Air Lines (CA-
G.R. No. 21804-R). Neither case is, however, in point, aside from the fact that the latter is not controlling upon us. In the first
case, this Court eliminated a P10,000 award for nominal damages, because the aggrieved party had already been awarded
P6,000 as compensatory damages, P30,000 as moral damages and P10,000 as exemplary damages, and "nominal damages
cannot co-exist with compensatory damages." In the case at bar, the Court of Appeals has adjudicated no such compensatory,
moral and exemplary damages to respondent herein.
Moreover, there are special reasons why the P20,000.00 award in favor of respondent herein is justified, even if said award
were characterized as nominal damages. When his contract of carriage was violated by the petitioner, respondent held the
office of Commissioner of Public Highways of the Republic of the Philippines. Having boarded petitioner's plane in Manila with a
first class ticket to Tokyo, he was, upon arrival at Okinawa, transferred to the tourist class compartment. Although he revealed
that he was traveling in his official capacity as official delegate of the Republic to a conference in Tokyo, an agent of petitioner
rudely compelled him in the presence of other passengers to move, over his objection, to the tourist class, under threat of
otherwise leaving him in Okinawa. In order to reach the conference on time, respondent had no choice but to obey.
It is true that said ticket was marked "W/L," but respondent's attention was not called thereto. Much less was he advised that
"W/L" meant "wait listed." Upon the other hand, having paid the first class fare in full and having been given first class
accommodation as he took petitioner's plane in Manila, respondent was entitled to believe that this was a confirmation of his
first class reservation and that he would keep the same until his ultimate destination, Tokyo. Then, too, petitioner has not tried
to explain or even alleged that the person to whom respondent's first class seat was given had a better right thereto. In other
words, since the offense had been committed with full knowledge of the fact that respondent was an official representative of
the Republic of the Philippines, the sum of P20,000 awarded as damages may well be considered as merely nominal. At any
rate, considering that petitioner's agent had acted in a wanton, reckless and oppressive manner, said award may also be
considered as one for exemplary damages.
WHEREFORE, the decision appealed from is hereby affirmed, with costs against the petitioner. It is so ordered.
When his contract of carriage was violated by the petitioner, respondentheld theoffice of Commissioner of Public Highways of
the Republic of thePhilippines.Having boarded petitioner's plane in Manila with a first classticket to Tokyo, he was, upon
arrival at Okinawa, transferred to thetourist class compartment. Although he revealed that he was traveling inhis official
capacity as official delegateof the Republic to a conference inTokyo, an agent of petitioner rudely compelledhim in the presence
of other passengers to move, over his objection, to the touristclass, underthreat of otherwise leaving him in Okinawa. In order
to reachtheconference on time, respondent had no choice but to obey.
This is an action for damages for alleged breach of contract. Afterappropriateproceedings the Court of First Instance of Manila,
in whichthe case was originally filed, rendered judgment sentencing defendantNorthwest Airlines, Inc. hereinafter referred to
as petitioner to payto plaintiff Cuenca hereinafterreferred to as respondent the sum of P20,000 as moral damages, together
withthe sum of P5,000 as exemplarydamages, with legal interest thereon from the dateof the filing of complaint," December
12, 1959, "until fully paid, plus the furthersum of P2,000 as attorney's fees and expenses of litigation." On appeal takenby
petitioner, said decision was affirmed by the Court of Appeals, exceptas to theP5,000.00 exemplary damages, which was
eliminated, and theP20,000.00 award formoral damages, which was converted into nominaldamages.ISSUES & ARGUMENTS
Whether or not the court erred in awardingnominal damage?HOLDING & RATIO DECIDENDINo.Nominal damages cannot co-
exist with compensatory damages." In thecase at bar, theCourt of Appeals has adjudicated no such compensatory,moral and
exemplary damagesto respondent herein. There are specialreasons why the P20,000.00 award in favor of respondent herein
is justified, even if said award were characterized as nominal damages.It istrue that said ticket was marked "W/L," but
respondent's attention wasnot calledthereto. Much less was he advised that "W/L" meant "waitlisted." Upon the other
hand,having paid the first class fare in full andhaving been given first class accommodation ashe took petitioner's planein
Manila, respondent was entitled to believe that this was aconfirmationof his first class reservation and that he would keep the
same untilhisultimate destination, Tokyo. Then, too, petitioner has not tried toexplain or even allegedthat the person to whom
respondent's first classseat was given had a better right thereto.In other words, since theoffense had been committed with
full knowledge of the factthatrespondent was an official representative of the Republic of thePhilippines, the sumof P20,000
awarded as damages may well beconsidered as merely nominal. At any rate,considering that petitioner'sagent had acted in a
wanton, reckless and oppressivemanner, said awardmay also be considered as one for exemplary damages. WHEREFORE,
thedecision appealed from is hereby affirmed, with costs againstthepetitioner. It is so ordered

FACTS:
Commissioner of Public Highways of the Republic of the Philippines Cuenca filed an action for damages against Northwest
Airlines for alleged breach of contract. Having boarded petitioner's plane in Manila with a first class ticket to Tokyo, he was,
upon arrival at Okinawa, transferred to the tourist class compartment because his plane ticket bears a “W/L “ mark.

ISSUE: Whether there was really a breach of contract.

HELD:
It is true that said ticket was marked "W/L," but respondent Cuenca's attention was not called thereto. Much less was he
advised that "W/L" meant "wait listed." Upon the other hand, having paid the first class fare in full and having been given first
class accommodation as he took petitioner's plane in Manila, respondent was entitled to believe that this was a confirmation of
his first class reservation and that he would keep the same until his ultimate destination, Tokyo.

197
Alitalia vs. IAC, Dec. 4, 1990; (2) The method of calculating the period of limitation shall be determined by the law of the court to
which the case is submitted.
SECOND DIVISION
Respondent countered that par. (1) of Art. 29 of the Warsaw Convention must be reconciled with par. (2) thereof which states
G.R. No. 127768 November 19, 1999
that "the method of calculating the period of limitation shall be determined by the law of the court to which the case is
submitted." Interpreting thus, respondent noted that according to Philippine laws the prescription of actions is interrupted
UNITED AIRLINES, petitioner,
"when they are filed before the court, when there is a written extrajudicial demand by the creditors, and when there is any
vs.
written acknowledgment of the debt by the debtor." 4 Since he made several demands upon United Airlines: first, through his
WILLIE J. UY, respondent.
personal letter dated 16 October 1989; second, through a letter dated 4 January 1990 from Atty. Pesigan; and, finally, through a
letter dated 28 October 1991 written for him by Atty. Ampil, the two (2)-year period of limitation had not yet been exhausted.
BELLOSILLO, J.:
On 2 August 1992 the trial court ordered the dismissal of the action holding that the language of Art. 29 is clear that the action
UNITED AIRLINES assails in this petition for review on certiorari under Rule 45 the 29 August 1995 Decision of the Court of
must be brought within two (2) years from the date of arrival at the destination. It held that although the second paragraph of
Appeals in CA-G.R. CV No. 39761 which reversed the 7 August 1992 order issued by the trial court in Civil Case No. Q-92-
Art. 29 speaks of deference to the law of the local court in "calculating the period of limitation," the same does not refer to the
12410 1 granting petitioner's motion to dismiss based on prescription of cause of action. The issues sought to be resolved are
local forum's rules in interrupting the prescriptive period but only to the rules of determining the time in which the action may
whether the notice of appeal to the appellate court was timely filed, and whether Art. 29 of the Warsaw Convention 2 should
be deemed commenced, and within our jurisdiction the action shall be deemed "brought" or commenced by the filing of a
apply to the case at bar.
complaint. Hence, the trial court concluded that Art. 29 excludes the application of our interruption rules.
On 13 October 1989 respondent Willie J. Uy, a revenue passenger on United Airlines Flight No. 819 for the San Francisco —
Respondent received a copy of the dismissal order on 17 August 1992. On 31 August 1992, or fourteen (14) days later, he
Manila route, checked in together with his luggage one piece of which was found to be overweight at the airline counter. To his
moved for the reconsideration of the trial court's order. The trial court denied the motion and respondent received copy of the
utter humiliation, an employee of petitioner rebuked him saying that he should have known the maximum weight allowance to
denial order on 28 September 1992. Two (2) days later, on 1 October 1992 respondent filed his notice of appeal.
be 70 kgs. per bag and that he should have packed his things accordingly. Then, in a loud voice in front of the milling crowd, she
told respondent to repack his things and transfer some of them from the overweight luggage to the lighter ones. Not wishing to
United Airlines once again moved for the dismissal of the case this time pointing out that respondent's fifteen (15)-day period
create further scene, respondent acceded only to find his luggage still overweight. The airline then billed him overweight
to appeal had already elapsed. Petitioner argued that having used fourteen (14) days of the reglementary period for appeal,
charges which he offered to pay with a miscellaneous charge order (MCO) or an airline pre-paid credit. However, the airline's
respondent Uy had only one (1) day remaining to perfect his appeal, and since he filed his notice of appeal two (2) days later, he
employee, and later its airport supervisor, adamantly refused to honor the MCO pointing out that there were conflicting figures
failed to meet the deadline.
listed on it. Despite the explanation from respondent that the last figure written on the MCO represented his balance,
petitioner's employees did not accommodate him. Faced with the prospect of leaving without his luggage, respondent paid the
In its questioned Decision dated 29 August 1995 5 the appellate court gave due course to the appeal holding that respondent's
overweight charges with his American Express credit card.
delay of two (2) days in filing his notice of appeal did not hinder it from reviewing the appealed order of dismissal since
jurisprudence dictates that an appeal may be entertained despite procedural lapses anchored on equity and justice.
Respondent's troubles did not end there. Upon arrival in Manila, he discovered that one of his bags had been slashed and its
contents stolen. He particularized his losses to be around US $5,310.00. In a letter dated 16 October 1989 respondent bewailed
On the applicability of the Warsaw Convention, the appellate court ruled that the Warsaw Convention did not preclude the
the insult, embarrassment and humiliating treatment he suffered in the hands of United Airlines employees, notified petitioner
operation of the Civil Code and other pertinent laws. Respondent's failure to file his complaint within the two (2)-year limitation
of his loss and requested reimbursement thereof. Petitioner United Airlines, through Central Baggage Specialist Joan Kroll, did
provided in the Warsaw Convention did not bar his action since he could still hold petitioner liable for breach of other
not refute any of respondent's allegations and mailed a check representing the payment of his loss based on the maximum
provisions of the Civil Code which prescribe a different period or procedure for instituting an action. Further, under Philippine
liability of US $9.70 per pound. Respondent, thinking the amount to be grossly inadequate to compensate him for his losses, as
laws, prescription of actions is interrupted where, among others, there is a written extrajudicial demand by the creditors, and
well as for the indignities he was subjected to, sent two (2) more letters to petitioner airline, one dated 4 January 1990 through
since respondent Uy sent several demand letters to petitioner United Airlines, the running of the two (2)-year prescriptive
a certain Atty. Pesigan, and another dated 28 October 1991 through Atty. Ramon U. Ampil demanding an out-of-court
period was in effect suspended. Hence, the appellate court ruled that respondent's cause of action had not yet prescribed and
settlement of P1,000,000.00. Petitioner United Airlines did not accede to his demands.
ordered the records remanded to the Quezon City trial court for further proceedings.
Consequently, on 9 June 1992 respondent filed a complaint for damages against United Airlines alleging that he was a person of
Petitioner now contends that the appellate court erred in assuming jurisdiction over respondent's appeal since it is clear that
good station, sitting in the board of directors of several top 500 corporations and holding senior executive positions for such
the notice of appeal was filed out of time. It argues that the courts relax the stringent rule on perfection of appeals only when
similar firms; 3 that petitioner airline accorded him ill and shabby treatment to his extreme embarrassment and humiliation;
there are extraordinary circumstances, e.g., when the Republic stands to lose hundreds of hectares of land already titled and
and, as such he should be paid moral damages of at least P1,000,000.00, exemplary damages of at least P500,000.00, plus
used for educational purposes; when the counsel of record was already dead; and wherein appellant was the owner of the
attorney's fees of at least P50,000.00. Similarly, he alleged that the damage to his luggage and its stolen contents amounted to
trademark for more than thirty (30) years, and the circumstances of the present case do not compare to the above exceptional
around $5,310.00, and requested reimbursement therefor.
cases. 6
United Airlines moved to dismiss the complaint on the ground that respondent's cause of action had prescribed, invoking Art.
Sec. 1 of Rule 45 of the 1997 Rules of Civil Procedure provides that "a party may appeal by certiorari, from a judgment of the
29 of the Warsaw Convention which provides —
Court of Appeals, by filing with the Supreme Court a petition for certiorari, within fifteen (15) days from notice of judgment or
of the denial of his motion for reconsideration filed in due time . . . ." This Rule however should not be interpreted as "to
Art. 29 (1) The right to damages shall be extinguished if an action is not brought within two (2) years,
sacrifice the substantial right of the appellant in the sophisticated altar of technicalities with impairment of the sacred
reckoned from the date of arrival at the destination, or from the date on which the aircraft ought to have
principles of justice." 7 It should be borne in mind that the real purpose behind the limitation of the period of appeal is to
arrived, or from the date on which the transportation stopped.
198
forestall or avoid an unreasonable delay in the administration of justice. Thus, we have ruled that delay in the filing of a notice
of appeal does not justify the dismissal of the appeal where the circumstances of the case show that there is no intent to delay
the administration of justice on the part of appellant's counsel, 8 or when there are no substantial rights affected, 9 or when
appellant's counsel committed a mistake in the computation of the period of appeal, an error not attributable to negligence or
bad faith. 10
In the instant case, respondent filed his notice of appeal two (2) days later than the prescribed period. Although his counsel
failed to give the reason for the delay, we are inclined to give due course to his appeal due to the unique and peculiar facts of
the case and the serious question of law it poses. In the now almost trite but still good principle, technicality, when it deserts its
proper office as an aid to justice and becomes its great hindrance and chief enemy, deserves scant consideration. 11
Petitioner likewise contends that the appellate court erred in ruling that respondent's cause of action has not prescribed since
delegates to the Warsaw Convention clearly intended the two (2)-year limitation incorporated in Art. 29 as an absolute bar to
suit and not to be made subject to the various tolling provisions of the laws of the forum. Petitioner argues that in construing
the second paragraph of Art. 29 private respondent cannot read into it Philippine rules on interruption of prescriptive periods
and state that his extrajudicial demand has interrupted the period of prescription. 12 American jurisprudence has declared that
"Art. 29 (2) was not intended to permit forums to consider local limitation tolling provisions but only to let local law determine
whether an action had been commenced within the two-year period, since the method of commencing a suit varies from
country to country." 13
Within our jurisdiction we have held that the Warsaw Convention can be applied, or ignored, depending on the peculiar facts
presented by each case. 14 Thus, we have ruled that the Convention's provisions do not regulate or exclude liability for other
breaches of contract by the carrier or misconduct of its officers and employees, or for some particular or exceptional type of
damage. 15 Neither may the Convention be invoked to justify the disregard of some extraordinary sort of damage resulting to a
passenger and preclude recovery therefor beyond the limits set by said Convention. 16 Likewise, we have held that the
Convention does not preclude the operation of the Civil Code and other pertinent laws. 17 It does not regulate, much less
exempt, the carrier from liability for damages for violating the rights of its passengers under the contract of carriage, especially
if willful misconduct on the part of the carrier's employees is found or established. 18
Respondent's complaint reveals that he is suing on two (2) causes of action: (a) the shabby and humiliating treatment he
received from petitioner's employees at the San Francisco Airport which caused him extreme embarrassment and social
humiliation; and, (b) the slashing of his luggage and the loss of his personal effects amounting to US $5,310.00.
While his second cause of action — an action for damages arising from theft or damage to property or goods — is well within
the bounds of the Warsaw Convention, his first cause of action — an action for damages arising from the misconduct of the
airline employees and the violation of respondent's rights as passenger — clearly is not.
Consequently, insofar as the first cause of action is concerned, respondent's failure to file his complaint within the two (2)-year
limitation of the Warsaw Convention does not bar his action since petitioner airline may still be held liable for breach of other
provisions of the Civil Code which prescribe a different period or procedure for instituting the action, specifically, Art. 1146
thereof which prescribes four (4) years for filing an action based on torts.
As for respondent's second cause of action, indeed the travaux preparatories of the Warsaw Convention reveal that the
delegates thereto intended the two (2)-year limitation incorporated in Art. 29 as an absolute bar to suit and not to be made
subject to the various tolling provisions of the laws of the forum. This therefore forecloses the application of our own rules on
interruption of prescriptive periods. Article 29, par. (2), was intended only to let local laws determine whether an action had
been commenced within the two (2)-year period, and within our jurisdiction an action shall be deemed commenced upon the
filing of a complaint. Since it is indisputable that respondent filed the present action beyond the two (2)-year time frame his
second cause of action must be barred. Nonetheless, it cannot be doubted that respondent exerted efforts to immediately
convey his loss to petitioner, even employed the services of two (2) lawyers to follow up his claims, and that the filing of the
action itself was delayed because of petitioner's evasion.
199
In this regard, Philippine Airlines, Inc. v. Court of Appeals 19 is instructive. In this case of PAL, private respondent filed an action
for damages against petitioner airline for the breakage of the front glass of the microwave oven which she shipped under PAL
Air Waybill No. 0-79-1013008-3. Petitioner averred that, the action having been filed seven (7) months after her arrival at her
port of destination, she failed to comply with par. 12, subpar. (a) (1), of the Air Waybill which expressly provided that the person
entitled to delivery must make a complaint to the carrier in writing in case of visible damage to the goods, immediately after
discovery of the damage and at the latest within 14 days from receipt of the goods. Despite non-compliance therewith the
Court held that by private respondent's immediate submission of a formal claim to petitioner, which however was not
immediately entertained as it was referred from one employee to another, she was deemed to have substantially complied with
the requirement. The Court noted that with private respondent's own zealous efforts in pursuing her claim it was clearly not
her fault that the letter of demand for damages could only be filed, after months of exasperating follow-up of the claim, on 13
August 1990, and that if there was any failure at all to file the formal claim within the prescriptive period contemplated in the
Air Waybill, this was largely because of the carrier's own doing, the consequences of which could not in all fairness be
attributed to private respondent.
In the same vein must we rule upon the circumstances brought before us. Verily, respondent filed his complaint more than two
(2) years later, beyond the period of limitation prescribed by the Warsaw Convention for filing a claim for damages. However, it
is obvious that respondent was forestalled from immediately filing an action because petitioner airline gave him the runaround,
answering his letters but not giving in to his demands. True, respondent should have already filed an action at the first instance
when his claims were denied by petitioner but the same could only be due to his desire to make an out-of-court settlement for
which he cannot be faulted. Hence, despite the express mandate of Art. 29 of the Warsaw Convention that an action for
damages should be filed within two (2) years from the arrival at the place of destination, such rule shall not be applied in the
instant case because of the delaying tactics employed by petitioner airline itself. Thus, private respondent's second cause of
action cannot be considered as time-barred under Art. 29 of the Warsaw Convention.
WHEREFORE, the assailed Decision of the Court of Appeals reversing and setting aside the appealed order of the trial court
granting the motion to dismiss the complaint, as well as its Resolution denying reconsideration, is AFFIRMED. Let the records of
the case be remanded to the court of origin for further proceedings taking its bearings from this disquisition.
SO ORDERED.
Facts:
Dr. Felipa Pablo —an associate professor in the University of the Philippines, and a research grantee of the Philippine Atomic
Energy Agency— was invited to take part at a meeting of the Department of Researchand Isotopes of the United Nations in
Ispra, Italy. To fulfill this engagement, Dr. Pablo booked passage onpetitioner airline, ALITALIA.She arrived in Milan on the day
before the meeting. She was however told by the ALITALIA personnel there at Milan that her luggage was "delayed inasmuch as
the same . . . (was) in one of the succeeding flights from Rometo Milan." Her luggage consisted of two (2) suitcases: one
contained her clothing and other personal items; theother, her scientific papers, slides and other research material. But the
other flights arriving from Rome did not have her baggage on board. By then feeling desperate, she went to Rome to try to
locate her bags herself.However, her baggage could not be found. Completely distraught and discouraged, she returned to
Manilawithout attending the meeting in Ispra, Italy.Once back in Manila she demanded that ALITALIA make reparation for the
damages thus suffered by her. She rejected Alitalia’s offer of free airline tickets and commenced an action for damages. As it
turned out, the luggage was actually forwarded to Ispra, but only a day after the scheduled appearance. It was returned to
herafter 11 months. The trial court ruled in favor of Dr. Pablo awarding P20,000 as nominal damages, theAppellate Court not
only affirmed the Trial Court's decision but also increased the award of nominal damagespayable by ALITALIA to P40,000.
Issue: Whether or not the Warsaw Convention should have been applied to limit ALITALIA'S liability.
Held:
NO.
Under the Warsaw Convention, an air carrier is made liable for damages for:
 a. The death, wounding or other bodily injury of a passenger if the accident causing it took place on boardthe aircraft
or I the course of its operations of embarking or disembarking; Held:
b. The destruction or loss of, or damage to, any registered luggage or goods, if the occurrence causing it took place
during the carriage by air; and YES. The opportunity to claim this honor or distinction was irretrievably lost to Dr. Pablo because of Alitalia's breach of its
c. Delay in the transportation by air of passengers, luggage or goods.The Convention also purports to limit the liability contract.Apart from this, there can be no doubt that Dr. Pablo underwent profound distress and anxiety, whichgradually turned
of the carriers in the following manner:1. to panic and finally despair, from the time she learned that her suitcases were missing up tothe time when, having gone to
Rome, she finally realized that she would no longer be able to take part in theconference. As she herself put it, she "was really
In the carriage of passengers the liability of the carrier for each passenger is limited to the sum of 250,000 francs . . . shocked and distraught and confused."Certainly, the compensation for the injury suffered by Dr. Pablo cannot under the
Nevertheless, by special contract, the carrier and the passenger may agree to ahigher limit of liability.2. circumstances be restrictedto that prescribed by the Warsaw Convention for delay in the transport of baggage.

(a) In the carriage of registered baggage and of cargo, the liability of the carrier is limited to a sum of 250 francs per FACTS:
kilogramme, unless the passenger or consignor has made, at the time when the packagewas handed over to the carrier, a Dr. Pablo booked a flight to Italy with Alitalia airlines, petitioner herein. She had arrived in Milan the day before the meeting
special declaration of interest in delivery at destination and has paid asupplementary sum if the case so requires. In that case however her luggage did not arrive with her. The airline informed her that her luggage was delayed because it was placed in
the carrier will be liable to pay a sum not exceeding the declared sum, unless he proves that sum is greater than the actual one of the succeeding flights to Italy. She never got her luggage.
value to the consignorat delivery. (b)In the case of loss, damage or delay of part of registered baggage or cargo, or of anyobject
contained therein, the weight to be taken into consideration in determining the amount to whichthe carrier's liability is limited ISSUE: Whether or not Alitalia is liable for damages incurred by Dr. Pablo.
shall be only the total weight of the package or packages concerned.Nevertheless, when the loss, damage or delay of a part of
the registered baggage or cargo, or of anobject contained therein, affects the value of other packages covered by the same Held:
baggage check or thesame air way bill, the total weight of such package or packages shall also be taken into consideration The Warsaw Convention provides that an air carrier is made liable for damages when: (1) the death, wounding or other bodily
indetermining the limit of liability. injury of a passenger if the accident causing it took place on board the aircraft or in the course of its operations of embarking or
disembarking; (2) the destruction or loss of, or damage to, any registered luggage or goods, if the occurrence causing it took
As regards objects of which the passenger takes charge himself the liability of the carrier is limited to5000 francs per place during the carriage by air"; and (3) delay in the transportation by air of passengers, luggage or goods. However, the claim
passenger.4. for damages may be brought subject to limitations provided in the said convention. Thus, Alitalia is liable to pay Dr. Pablo for
damages.
The limits prescribed . . shall not prevent the court from awarding, in accordance with its own law, inaddition, the whole or part
of the court costs and of the other expenses of litigation incurred by theplaintiff. The foregoing provision shall not apply if the
amount of the damages awarded, excluding court costs and other expenses of the litigation, does not exceed the sum which
the carrier has offered inwriting to the plaintiff within a period of six months from the date of the occurrence causing
thedamage, or before the commencement of the action, if that is later.The Warsaw Convention however denies to the carrier
availment "of the provisions which exclude orlimit his liability, if the damage is caused by his wilful misconduct or by such
default on his part as, inaccordance with the law of the court seized of the case, is considered to be equivalent to willful
misconduct," or "if the damage is (similarly) caused . . by any agent of the carrier acting within the scope
of hisemployment."The Hague Protocol amended the Warsaw Convention
by removing the provision that if the airline took allnecessary steps to avoid the damage, it could exculpate itself completely,
and declaring the stated limits of liability not applicable "if it is proved that the damage resulted from an act or omission of the
carrier, itsservants or agents, done with intent to cause damage or recklessly and with knowledge that damage wouldprobably
result." The same deletion was effected by the Montreal Agreement of 1966, with the result that a passenger could recover
unlimited damages upon proof of wilful misconduct.

The Convention's provisions, in short, do not "regulate or exclude liability for other breaches of contract by thecarrier" or
misconduct of its officers and employees, or for some particular or exceptional type of damage. Onthe other hand,
the Warsaw Convention has invariably been held inapplicable, or as not restrictive of thecarrier's liability, where there was
satisfactory evidence of malice or bad faith attributable to itsofficers and employees.

In the case at bar, no bad faith or otherwise improper conduct may be ascribed to the employees of petitioner airline; and Dr.
Pablo's luggage was eventually returned to her, belatedly, it is true, but without appreciable damage. The fact is, nevertheless,
that some species of injury was caused to Dr. Pablobecause petitioner ALITALIA misplaced her baggage and failed to deliver
it to her at the time appointed- a breach of its contract of carriage.
Certainly, the compensation for the injury suffered by Dr. Pablo cannot under the circumstances be restricted to that prescribed
by the Warsaw Convention for delay in the transport of baggage.

Issue : Whether or not Dr. Pablo is entitled to nominal damages.

200
Pan American World Airways vs. IAC, Aug. 11, 1988; first class because he wanted to be on time in Guam to comply with his commitment, paying an
additional sum of $112.00.
THIRD DIVISION
When plaintiff Pangan arrived in Guam on the date of May 27, 1978, his two luggages did not arrive with
G.R. No. 70462 August 11, 1988
his flight, as a consequence of which his agreements with Slutchnick and Quesada for the exhibition of
the films in Guam and in the United States were cancelled (Exh. L). Thereafter, he filed a written claim
PAN AMERICAN WORLD AIRWAYS, INC., petitioner,
(Exh. J) for his missing luggages.
vs.
INTERMEDIATE APPELLATE COURT, RENE V. PANGAN, SOTANG BASTOS PRODUCTIONS and ARCHER
Upon arrival in the Philippines, Pangan contacted his lawyer, who made the necessary representations to
PRODUCTIONS, respondents.
protest as to the treatment which he received from the employees of the defendant and the loss of his
two luggages (Exh. M, O, Q, S, and T). Defendant Pan Am assured plaintiff Pangan that his grievances
CORTES, J.:
would be investigated and given its immediate consideration (Exhs. N, P and R). Due to the defendant's
failure to communicate with Pangan about the action taken on his protests, the present complaint was
Before the Court is a petition filed by an international air carrier seeking to limit its liability for lost baggage, containing
filed by the plaintiff. (Pages 4-7, Record On Appeal). [Rollo, pp. 27-29.]
promotional and advertising materials for films to be exhibited in Guam and the U.S.A., clutch bags, barong tagalogs and
personal belongings, to the amount specified in the airline ticket absent a declaration of a higher valuation and the payment of
On the basis of these facts, the Court of First Instance found petitioner liable and rendered judgment as follows:
additional charges.
(1) Ordering defendant Pan American World Airways, Inc. to pay all the plaintiffs the sum of P83,000.00,
The undisputed facts of the case, as found by the trial court and adopted by the appellate court, are as follows:
for actual damages, with interest thereon at the rate of 14% per annum from December 6, 1978, when
the complaint was filed, until the same is fully paid, plus the further sum of P10,000.00 as attorney's fees;
On April 25, 1978, plaintiff Rene V. Pangan, president and general manager of the plaintiffs Sotang Bastos
and Archer Production while in San Francisco, Califonia and Primo Quesada of Prime Films, San Francisco,
(2) Ordering defendant Pan American World Airways, Inc. to pay plaintiff Rene V. Pangan the sum of
California, entered into an agreement (Exh. A) whereby the former, for and in consideration of the
P8,123.34, for additional actual damages, with interest thereon at the rate of 14% per annum from
amount of US $2,500.00 per picture, bound himself to supply the latter with three films. 'Ang Mabait,
December 6, 1978, until the same is fully paid;
Masungit at ang Pangit,' 'Big Happening with Chikiting and Iking,' and 'Kambal Dragon' for exhibition in
the United States. It was also their agreement that plaintiffs would provide the necessary promotional
(3) Dismissing the counterclaim interposed by defendant Pan American World Airways, Inc.; and
and advertising materials for said films on or before May 30, 1978.
(4) Ordering defendant Pan American World Airways, Inc. to pay the costs of suit. [Rollo, pp. 106-107.]
On his way home to the Philippines, plaintiff Pangan visited Guam where he contacted Leo Slutchnick of
the Hafa Adai Organization. Plaintiff Pangan likewise entered into a verbal agreement with Slutchnick for
On appeal, the then Intermediate Appellate Court affirmed the trial court decision.
the exhibition of two of the films above-mentioned at the Hafa Adai Theater in Guam on May 30, 1978
for the consideration of P7,000.00 per picture (p. 11, tsn, June 20, 1979). Plaintiff Pangan undertook to
Hence, the instant recourse to this Court by petitioner.
provide the necessary promotional and advertising materials for said films on or before the exhibition
date on May 30,1978.
The petition was given due course and the parties, as required, submitted their respective memoranda. In due time the case
was submitted for decision.
By virtue of the above agreements, plaintiff Pangan caused the preparation of the requisite promotional
handbills and still pictures for which he paid the total sum of P12,900.00 (Exhs. B, B-1, C and C1). Likewise
In assailing the decision of the Intermediate Appellate Court petitioner assigned the following errors:
in preparation for his trip abroad to comply with his contracts, plaintiff Pangan purchased fourteen clutch
bags, four capiz lamps and four barong tagalog, with a total value of P4,400.00 (Exhs. D, D-1, E, and F).
1. The respondent court erred as a matter of law in affirming the trial court's award of actual damages beyond the limitation of
liability set forth in the Warsaw Convention and the contract of carriage.
On May 18, 1978, plaintiff Pangan obtained from defendant Pan Am's Manila Office, through the Your
Travel Guide, an economy class airplane ticket with No. 0269207406324 (Exh. G) for passage from Manila
2. The respondent court erred as a matter of law in affirming the trial court's award of actual damages consisting of alleged lost
to Guam on defendant's Flight No. 842 of May 27,1978, upon payment by said plaintiff of the regular
profits in the face of this Court's ruling concerning special or consequential damages as set forth in Mendoza v.
fare. The Your Travel Guide is a tour and travel office owned and managed by plaintiffs witness Mila de la
Philippine Airlines [90 Phil. 836 (1952).]
Rama.
The assigned errors shall be discussed seriatim
On May 27, 1978, two hours before departure time plaintiff Pangan was at the defendant's ticket counter
at the Manila International Airport and presented his ticket and checked in his two luggages, for which he
was given baggage claim tickets Nos. 963633 and 963649 (Exhs. H and H-1). The two luggages contained 1. The airline ticket (Exh. "G') contains the following conditions:
the promotional and advertising materials, the clutch bags, barong tagalog and his personal belongings.
Subsequently, Pangan was informed that his name was not in the manifest and so he could not take Flight NOTICE
No. 842 in the economy class. Since there was no space in the economy class, plaintiff Pangan took the

201
 If the passenger's journey involves an ultimate destination or stop in a country other than the country of
departure the Warsaw Convention may be applicable and the Convention governs and in most cases
limits the liability of carriers for death or personal injury and in respect of loss of or damage to baggage.
See also notice headed "Advice to International Passengers on Limitation of Liability.
CONDITIONS OF CONTRACT
1. As used in this contract "ticket" means this passenger ticket and baggage check of which these
conditions and the notices form part, "carriage" is equivalent to "transportation," "carrier" means all air
carriers that carry or undertake to carry the passenger or his baggage hereunder or perform any other
service incidental to such air carriage. "WARSAW CONVENTION" means the convention for the
Unification of Certain Rules Relating to International Carriage by Air signed at Warsaw, 12th October
1929, or that Convention as amended at The Hague, 28th September 1955, whichever may be applicable.
2. Carriage hereunder is subject to the rules and limitations relating to liability established by the Warsaw
Convention unless such carriage is not "international carriage" as defined by that Convention.
3. To the extent not in conflict with the foregoing carriage and other services performed by each carrier
are subject to: (i) provisions contained in this ticket, (ii) applicable tariffs, (iii) carrier's conditions of
carriage and related regulations which are made part hereof (and are available on application at the
offices of carrier), except in transportation between a place in the United States or Canada and any place
outside thereof to which tariffs in force in those countries apply.
NOTICE OF BAGGAGE LIABILITY LIMITATIONS
Liability for loss, delay, or damage to baggage is limited as follows unless a higher value is declared in
advance and additional charges are paid: (1)for most international travel (including domestic portions of
international journeys) to approximately $9.07 per pound ($20.00 per kilo) for checked baggage and $400
per passenger for unchecked baggage: (2) for travel wholly between U.S. points, to $750 per passenger
on most carriers (a few have lower limits). Excess valuation may not be declared on certain types of
valuable articles. Carriers assume no liability for fragile or perishable articles. Further information may be
obtained from the carrier. [Emphasis supplied.].
On the basis of the foregoing stipulations printed at the back of the ticket, petitioner contends that its liability for the lost
baggage of private respondent Pangan is limited to $600.00 ($20.00 x 30 kilos) as the latter did not declare a higher value for his
baggage and pay the corresponding additional charges.
To support this contention, petitioner cites the case of Ong Yiu v. Court of Appeals [G.R. No. L-40597, June 29, 1979, 91 SCRA
223], where the Court sustained the validity of a printed stipulation at the back of an airline ticket limiting the liability of the
carrier for lost baggage to a specified amount and ruled that the carrier's liability was limited to said amount since the
passenger did not declare a higher value, much less pay additional charges.
We find the ruling in Ong Yiu squarely applicable to the instant case. In said case, the Court, through Justice Melencio Herrera,
stated:
Petitioner further contends that respondent Court committed grave error when it limited PAL's carriage
liability to the amount of P100.00 as stipulated at the back of the ticket....
We agree with the foregoing finding. The pertinent Condition of Carriage printed at the back of the plane
ticket reads:
202
8. BAGGAGE LIABILITY ... The total liability of the Carrier for lost or damage
baggage of the passenger is LIMITED TO P100.00 for each ticket unless a passenger
declares a higher valuation in excess of P100.00, but not in excess, however, of a
total valuation of Pl,000.00 and additional charges are paid pursuant to Carrier's
tariffs.
There is no dispute that petitioner did not declare any higher value for his luggage, much less (lid he pay
any additional transportation charge.
But petitioner argues that there is nothing in the evidence to show that he had actually entered into a
contract with PAL limiting the latter's liability for loss or delay of the baggage of its passengers, and that
Article 1750 * of the Civil Code has not been complied with.
While it may be true that petitioner had not signed the plane ticket (Exh. "12"), he is nevertheless bound
by the provisions thereof. "Such provisions have been held to be a part of the contract of carriage, and
valid and binding upon the passenger regardless of the latter's lack of knowledge or assent to the
regulation." [Tannebaum v. National Airline, Inc., 13 Misc. 2d 450,176 N.Y.S. 2d 400; Lichten v. Eastern
Airlines, 87 Fed. Supp. 691; Migoski v. Eastern Air Lines, Inc., Fla., 63 So. 2d 634.] It is what is known as a
contract of "adhesion," in regards which it has been said that contracts of adhesion wherein one party
imposes a ready made form of contract on the other, as the plane ticket in the case at bar, are contracts
not entirely prohibited. The one who adheres to the contract is in reality free to reject it entirely; if he
adheres, he gives his consent,[Tolentino, Civil Code, Vol. IV, 1962 ed., p. 462, citing Mr. Justice J.B.L.
Reyes, Lawyer's Journal, Jan. 31, 1951, p. 49]. And as held in Randolph v. American Airlines, 103 Ohio
App. 172,144 N.E. 2d 878; Rosenchein v. Trans World Airlines, Inc., 349 S.W. 2d 483.] "a contract limiting
liability upon an agreed valuation does not offend against the policy of the law forbidding one from
contracting against his own negligence."
Considering, therefore, that petitioner had failed to declare a higher value for his baggage, he cannot be
permitted a recovery in excess of P100.00....
On the other hand, the ruling in Shewaram v. Philippine Air Lines, Inc. [G.R. No. L-20099, July 2, 1966, 17 SCRA 606], where the
Court held that the stipulation limiting the carrier's liability to a specified amount was invalid, finds no application in the instant
case, as the ruling in said case was premised on the finding that the conditions printed at the back of the ticket were so small
and hard to read that they would not warrant the presumption that the passenger was aware of the conditions and that he had
freely and fairly agreed thereto. In the instant case, similar facts that would make the case fall under the exception have not
been alleged, much less shown to exist.
In view thereof petitioner's liability for the lost baggage is limited to $20.00 per kilo or $600.00, as stipulated at the back of the
ticket.
At this juncture, in order to rectify certain misconceptions the Court finds it necessary to state that the Court of Appeal's
reliance on a quotation from Northwest Airlines, Inc. v. Cuenca [G.R. No. L-22425, August 31, 1965, 14 SCRA 1063] to sustain
the view that "to apply the Warsaw Convention which limits a carrier's liability to US$9.07 per pound or US$20.00 per kilo in
cases of contractual breach of carriage ** is against public policy" is utterly misplaced, to say the least. In said case, while the
Court, as quoted in the Intermediate Appellate Court's decision, said:
Petitioner argues that pursuant to those provisions, an air "carrier is liable only" in the event of death of
a passenger or injury suffered by him, or of destruction or loss of, or damages to any checked baggage or
any goods, or of delay in the transportation by air of passengers, baggage or goods. This pretense is not
borne out by the language of said Articles. The same merely declare the carrier liable for damages in
enumerated cases, if the conditions therein specified are present. Neither said provisions nor others in
the aforementioned Convention regulate or exclude liability for other breaches of contract by the carrier.
 Under petitioner's theory, an air carrier would be exempt from any liability for damages in the event of its
absolute refusal, in bad faith, to comply with a contract of carriage, which is absurd.
it prefaced this statement by explaining that:
...The case is now before us on petition for review by certiorari, upon the ground that the lower court has
erred: (1) in holding that the Warsaw Convention of October 12, 1929, relative to transportation by air is
not in force in the Philippines: (2) in not holding that respondent has no cause of action; and (3) in
awarding P20,000 as nominal damages.
We deem it unnecessary to pass upon the First assignment of error because the same is the basis of the
second assignment of error, and the latter is devoid of merit, even if we assumed the former to be well
taken. (Emphasis supplied.)
Thus, it is quite clear that the Court never intended to, and in fact never did, rule against the validity of provisions of the
Warsaw Convention. Consequently, by no stretch of the imagination may said quotation from Northwest be considered as
supportive of the appellate court's statement that the provisions of the Warsaw Convention limited a carrier's liability are
against public policy.
2. The Court finds itself unable to agree with the decision of the trial court, and affirmed by the Court of Appeals, awarding
private respondents damages as and for lost profits when their contracts to show the films in Guam and San Francisco,
California were cancelled.
The rule laid down in Mendoza v. Philippine Air Lines, Inc. [90 Phil. 836 (1952)] cannot be any clearer:
...Under Art.1107 of the Civil Code, a debtor in good faith like the defendant herein, may be held liable
only for damages that were foreseen or might have been foreseen at the time the contract of
transportation was entered into. The trial court correctly found that the defendant company could not
have foreseen the damages that would be suffered by Mendoza upon failure to deliver the can of film on
the 17th of September, 1948 for the reason that the plans of Mendoza to exhibit that film during the
town fiesta and his preparations, specially the announcement of said exhibition by posters and
advertisement in the newspaper, were not called to the defendant's attention.
In our research for authorities we have found a case very similar to the one under consideration. In the case of Chapman vs.
Fargo, L.R.A. (1918 F) p. 1049, the plaintiff in Troy, New York, delivered motion picture films to the defendant Fargo, an express
company, consigned and to be delivered to him in Utica. At the time of shipment the attention of the express company was
called to the fact that the shipment involved motion picture films to be exhibited in Utica, and that they should be sent to their
destination, rush. There was delay in their delivery and it was found that the plaintiff because of his failure to exhibit the film in
Utica due to the delay suffered damages or loss of profits. But the highest court in the State of New York refused to award him
special damages. Said appellate court observed:
But before defendant could be held to special damages, such as the present alleged loss of profits on
account of delay or failure of delivery, it must have appeared that he had notice at the time of delivery to
him of the particular circumstances attending the shipment, and which probably would lead to such
special loss if he defaulted. Or, as the rule has been stated in another form, in order to purpose on the
defaulting party further liability than for damages naturally and directly, i.e., in the ordinary course of
things, arising from a breach of contract, such unusual or extraordinary damages must have been
brought within the contemplation of the parties as the probable result of breach at the time of or prior to
contracting. Generally, notice then of any special circumstances which will show that the damages to be
anticipated from a breach would be enhanced has been held sufficient for this effect.
203
As may be seen, that New York case is a stronger one than the present case for the reason that the attention of the common
carrier in said case was called to the nature of the articles shipped, the purpose of shipment, and the desire to rush the
shipment, circumstances and facts absent in the present case. [Emphasis supplied.]
Thus, applying the foregoing ruling to the facts of the instant case, in the absence of a showing that petitioner's attention was
called to the special circumstances requiring prompt delivery of private respondent Pangan's luggages, petitioner cannot be
held liable for the cancellation of private respondents' contracts as it could not have foreseen such an eventuality when it
accepted the luggages for transit.
The Court is unable to uphold the Intermediate Appellate Court's disregard of the rule laid down in Mendoza and affirmance of
the trial court's conclusion that petitioner is liable for damages based on the finding that "[tlhe undisputed fact is that the
contracts of the plaintiffs for the exhibition of the films in Guam and California were cancelled because of the loss of the two
luggages in question." [Rollo, p. 36] The evidence reveals that the proximate cause of the cancellation of the contracts was
private respondent Pangan's failure to deliver the promotional and advertising materials on the dates agreed upon. For this
petitioner cannot be held liable. Private respondent Pangan had not declared the value of the two luggages he had checked in
and paid additional charges. Neither was petitioner privy to respondents' contracts nor was its attention called to the condition
therein requiring delivery of the promotional and advertising materials on or before a certain date.
3. With the Court's holding that petitioner's liability is limited to the amount stated in the ticket, the award of attorney's fees,
which is grounded on the alleged unjustified refusal of petitioner to satisfy private respondent's just and valid claim, loses
support and must be set aside.
WHEREFORE, the Petition is hereby GRANTED and the Decision of the Intermediate Appellate Court is SET ASIDE and a new
judgment is rendered ordering petitioner to pay private respondents damages in the amount of US $600.00 or its equivalent in
Philippine currency at the time of actual payment.
SO ORDERED.
FACTS:
Jose Rapaldas is on board a flight for Pan Am Flight 841 from Guam to Manila. While standingin line to board the flight at the
Guam airport, Rapadas was ordered by Pan Am's handcarrycontrol agent to check-in his Samsonite attache case. Rapadas
protested pointed to the fact thatother co-passengers were permitted to handcarry bulkier baggages. But for fear that he
wouldmiss the flight, he agreed to check it in. He gave his attache case to his brother who happened tobe around without
declaring its contents or the value of its contents.Upon his arrival in Manila, he was given all his check-in baggages except the
attache case.Because Rapadas felt ill, he sent his son to request for search of the missing luggage. Eventually,Rapadas received
a letter from Pan Am's counsel offering to settle the claim for the sum of $160.00 representing Pan Am's alleged limit of liability
for loss or damage to a passenger'spersonal property under the contract of carriage between Rapadas and Pan Am.
ISSUE: Is Pan American Airways liable for the lost check-in baggage?
COURT RULING:
Notice of limited liability in airline tickets
On page 2 of the airline ticket, it states that the Warsaw Convention governsin case of death orinjury to the passenger or of
loss, damage or destruction to a passenger's luggage. It says:"If the passenger's journey involves an ultimate destination or stop
in a country, the WarsawConvention may be applicable and the conversation governs and in most cases, limits theliability of
carriers for death or personal injury and in respect of loss or damage to baggage."
Passenger is expected to be vigilant with respect to his baggages
In this case, Rapadas actually manifested a disregard with the airline rules insofar as hisbaggagesareconcerned. He failed to
state the value of the said check-in baggage and failed toremove whatever check-in valuables he had in which should have been
placed in his allowablehand-carry baggage instead.
China Airlines vs. Daniel Chiok, July 30, 2003;

FACTS:

Daniel Chiok purchased from China Airlines (CAL), airline passenger ticket for air transportationcovering Manila-Taipei-
Hong Kong- Manila. Said ticket was exclusively endorseable to PAL.Before leaving for said trips, those were pre-scheduled and
confirmed by Chiok. When he arrivedin Taipei, he went to CAL office and confirmed his HK-MLA trip on board PR 311. CAL
officeattached a yellow sticker appropriately indicating that his flight status was OK. When Chiok reached HK, he went to PAL
office to reconfirm his flight back to MLA. PAL confirmed his returntrip on board PR 311 and attached its own sticker. When
Chiok proceeded on Nov 24, 1981 toHKIA, he saw a poster stating that PR 311 was cancelled because of a typhoon in
Manila. He wasthen informed that all ticket holder of PR 311 were automatically booked for its next flight (PR307) leaving the
next day. He informed PAL personnel that he needed to reach Manila on Nov 25because of a business option which had to be
executed on said date.
Chiok was not permitted to board PR 307 because his name did not appear in PAL’s computer list of passengers. Thereafter, he
proceeded to PAL’s HK office and confronted the reser
vation officerwho previously confirmed his flight back to MLA. The reservation officer told him that his namewas on the list as
evidence by the PAL confirmation sticker attached to his plane ticket. He thendecided to use another CAL ticket, which was then
booked and scheduled to depart that evening.

ISSUE: WON CAL should be held liable.

HELD:

YES. Despite all points pointing to the negligence of PAL’s employees, CAL should be held
liable. By the very nature of their contract, CAL is clearly liable under the contract of carriage withChiok and remains to be so
regardless of those instances when actual carriage is to be performedby another carrier.The contract of air transportation was
between CAL and Chiok with the former endorsing to PALthe HK-MLA segment of the journey. Such contract of carriage has
always been treated as a singleoperation. This is supported by the Warsaw Convention to which Philippines is a party and by
theexisting practices of the IATA (International Air Transportation Association).Article 1, Section 3 of the Warsaw Convention states:
“Transportation to be performed by several successive air carriers shall be deemed, for the
purposes of this Convention, to be one undivided transportation, if it has been regarded by theparties as a single operation, whether it has been agreed upon
under the form of a single contract orof a series of contracts, and it shall not lose its international character merely because one contract or a series of contracts is
to be performed entirely within a territory subject to the sovereignty, suzerainty, mandate, or authority of the same High Contracting Party.”
Article 15 of IATA-Recommended Practice similarly provides:
“Carriage to be performed by several successive carriers under one ticket, or under a ticket and any conjunction ticket issued therewith, is
regarded as a single operation.”
CAL cannot evade liability to Chiok even though it may have been only a ticket user for the HK-MLAsegment.

FACTS:
Chiok purchased from China Airlines, Ltd. airline passenger ticket for air transportation covering Manila-Taipei-Hongkong-
Manila. Said ticket was exclusively endorseable to Philippine Airlines, Ltd. Chiok filed a complaint against PAL and CAL. He
alleged therein that despite several confirmations of his flight, defendant PAL refused to accommodate him in his supposed
flight.

ISSUE: Whether CAL is liable for damages

HELD:
The contract of air transportation was between petitioner and respondent, with the former endorsing to PAL the Hong Kong-to-
Manila segment of the journey. Such contract of carriage has always been treated in this jurisdiction as a single operation. For
reasons of public interest and policy, the ticket-issuing airline acts as principal in a contract of carriage and is thus liable for the
acts and the omissions of any errant carrier to which it may have endorsed any sector of the entire, continuous trip.

204
Santos III vs. Northwest Airlines, June 23, 1992; (1) the constitutionality of Article 28(1) of the Warsaw Convention; and
EN BANC
(2) the jurisdiction of Philippine courts over the case.
G.R. No. 101538 June 23, 1992
The petitioner also invokes Article 24 of the Civil Code on the protection of minors.
AUGUSTO BENEDICTO SANTOS III, represented by his father and legal guardian, Augusto Benedicto Santos, petitioner,
I
vs.
NORTHWEST ORIENT AIRLINES and COURT OF APPEALS, respondents.
THE ISSUE OF CONSTITUTIONALITY
CRUZ, J.:
A. The petitioner claims that the lower court erred in not ruling that Article 28(1) of the Warsaw
Convention violates the constitutional guarantees of due process and equal protection.
This case involves the Proper interpretation of Article 28(1) of the Warsaw Convention, reading as follows:
The Republic of the Philippines is a party to the Convention for the Unification of Certain Rules Relating to International
Art. 28. (1) An action for damage must be brought at the option of the plaintiff, in the territory of one of
Transportation by Air, otherwise known as the Warsaw Convention. It took effect on February 13, 1933. The Convention was
the High Contracting Parties, either before the court of the domicile of the carrier or of his principal place
concurred in by the Senate, through its Resolution No. 19, on May 16, 1950. The Philippine instrument of accession was signed
of business, or where he has a place of business through which the contract has been made, or before
by President Elpidio Quirino on October 13, 1950, and was deposited with the Polish government on November 9, 1950. The
the court at the place of destination.
Convention became applicable to the Philippines on February 9, 1951. On September 23, 1955, President Ramon Magsaysay
issued Proclamation No. 201, declaring our formal adherence thereto. "to the end that the same and every article and clause
The petitioner is a minor and a resident of the Philippines. Private respondent Northwest Orient Airlines (NOA) is a foreign
thereof may be observed and fulfilled in good faith by the Republic of the Philippines and the citizens thereof." 5
corporation with principal office in Minnesota, U.S.A. and licensed to do business and maintain a branch office in the
Philippines.
The Convention is thus a treaty commitment voluntarily assumed by the Philippine government and, as such, has the force and
effect of law in this country.
On October 21, 1986, the petitioner purchased from NOA a round-trip ticket in San Francisco. U.S.A., for his flight from San
Francisco to Manila via Tokyo and back. The scheduled departure date from Tokyo was December 20, 1986. No date was
The petitioner contends that Article 28(1) cannot be applied in the present case because it is unconstitutional. He argues that
specified for his return to San Francisco. 1
there is no substantial distinction between a person who purchases a ticket in Manila and a person who purchases his ticket in
San Francisco. The classification of the places in which actions for damages may be brought is arbitrary and irrational and thus
On December 19, 1986, the petitioner checked in at the NOA counter in the San Francisco airport for his scheduled departure
violates the due process and equal protection clauses.
to Manila. Despite a previous confirmation and re-confirmation, he was informed that he had no reservation for his flight from
Tokyo to Manila. He therefore had to be wait-listed.
It is well-settled that courts will assume jurisdiction over a constitutional question only if it is shown that the essential requisites
of a judicial inquiry into such a question are first satisfied. Thus, there must be an actual case or controversy involving a conflict
On March 12, 1987, the petitioner sued NOA for damages in the Regional Trial Court of Makati. On April 13, 1987, NOA moved
of legal rights susceptible of judicial determination; the constitutional question must have been opportunely raised by the
to dismiss the complaint on the ground of lack of jurisdiction. Citing the above-quoted article, it contended that the complaint
proper party; and the resolution of the question is unavoidably necessary to the decision of the case itself. 6
could be instituted only in the territory of one of the High Contracting Parties, before:
Courts generally avoid having to decide a constitutional question. This attitude is based on the doctrine of separation of
1. the court of the domicile of the carrier;
powers, which enjoins upon the departments of the government a becoming respect for each other's acts.
2. the court of its principal place of business;
The treaty which is the subject matter of this petition was a joint legislative-executive act. The presumption is that it was first
carefully studied and determined to be constitutional before it was adopted and given the force of law in this country.
3. the court where it has a place of business through which the contract had been made;
The petitioner's allegations are not convincing enough to overcome this presumption. Apparently, the Convention considered
4. the court of the place of destination.
the four places designated in Article 28 the most convenient forums for the litigation of any claim that may arise between the
airline and its passenger, as distinguished from all other places. At any rate, we agree with the respondent court that this case
The private respondent contended that the Philippines was not its domicile nor was this its principal place of business. Neither
can be decided on other grounds without the necessity of resolving the constitutional issue.
was the petitioner's ticket issued in this country nor was his destination Manila but San Francisco in the United States.
B. The petitioner claims that the lower court erred in not ruling that Art. 28(1) of the Warsaw Convention
On February 1, 1988, the lower court granted the motion and dismissed the case. 2 The petitioner appealed to the Court of
is inapplicable because of a fundamental change in the circumstances that served as its basis.
Appeals, which affirmed the decision of the lower court. 3 On June 26, 1991, the petitioner filed a motion for reconsideration,
but the same was denied. 4 The petitioner then came to this Court, raising substantially the same issues it submitted in the
The petitioner goes at great lengths to show that the provisions in the Convention were intended to protect airline companies
Court of Appeals.
under "the conditions prevailing then and which have long ceased to exist." He argues that in view of the significant
developments in the airline industry through the years, the treaty has become irrelevant. Hence, to the extent that it has lost
The assignment of errors may be grouped into two major issues, viz:
its basis for approval, it has become unconstitutional.

205
The petitioner is invoking the doctrine of rebus sic stantibus. According to Jessup, "this doctrine constitutes an attempt to
formulate a legal principle which would justify non-performance of a treaty obligation if the conditions with relation to which
the parties contracted have changed so materially and so unexpectedly as to create a situation in which the exaction of
performance would be unreasonable." 7 The key element of this doctrine is the vital change in the condition of the contracting
parties that they could not have foreseen at the time the treaty was concluded.
The Court notes in this connection the following observation made in Day v. Trans World Airlines, Inc.: 8
The Warsaw drafters wished to create a system of liability rules that would cover all the hazards of air
travel . . . The Warsaw delegates knew that, in the years to come, civil aviation would change in ways that
they could not foresee. They wished to design a system of air law that would be both durable and flexible
enough to keep pace with these changes . . . The ever-changing needs of the system of civil aviation can
be served within the framework they created.
It is true that at the time the Warsaw Convention was drafted, the airline industry was still in its infancy. However, that
circumstance alone is not sufficient justification for the rejection of the treaty at this time. The changes recited by the petitioner
were, realistically, not entirely unforeseen although they were expected in a general sense only. In fact, the Convention itself,
anticipating such developments, contains the following significant provision:
Article 41. Any High Contracting Party shall be entitled not earlier than two years after the coming into
force of this convention to call for the assembling of a new international conference in order to consider
any improvements which may be made in this convention. To this end, it will communicate with the
Government of the French Republic which will take the necessary measures to make preparations for
such conference.
But the more important consideration is that the treaty has not been rejected by the Philippine government. The doctrine
of rebus sic stantibus does not operate automatically to render the treaty inoperative. There is a necessity for a formal act of
rejection, usually made by the head of State, with a statement of the reasons why compliance with the treaty is no longer
required.
In lieu thereof, the treaty may be denounced even without an expressed justification for this action. Such denunciation is
authorized under its Article 39, viz:
Article 39. (1) Any one of the High Contracting Parties may denounce this convention by a notification
addressed to the Government of the Republic of Poland, which shall at once inform the Government of
each of the High Contracting Parties.
(2) Denunciation shall take effect six months after the notification of denunciation, and shall operate only
as regards the party which shall have proceeded to denunciation.
Obviously. rejection of the treaty, whether on the ground of rebus sic stantibus or pursuant to Article 39, is not a function of the
courts but of the other branches of government. This is a political act. The conclusion and renunciation of treaties is the
prerogative of the political departments and may not be usurped by the judiciary. The courts are concerned only with the
interpretation and application of laws and treaties in force and not with their wisdom or efficacy.
C. The petitioner claims that the lower court erred in ruling that the plaintiff must sue in the United
States, because this would deny him the right to access to our courts.
The petitioner alleges that the expenses and difficulties he will incur in filing a suit in the United States would constitute a
constructive denial of his right to access to our courts for the protection of his rights. He would consequently be deprived of
this vital guaranty as embodied in the Bill of Rights.
206
Obviously, the constitutional guaranty of access to courts refers only to courts with appropriate jurisdiction as defined by law. It
does not mean that a person can go to any court for redress of his grievances regardless of the nature or value of his claim. If
the petitioner is barred from filing his complaint before our courts, it is because they are not vested with the appropriate
jurisdiction under the Warsaw Convention, which is part of the law of our land.
II
THE ISSUE OF JURISDICTION.
A. The petitioner claims that the lower court erred in not ruling that Article 28(1) of the Warsaw
Convention is a rule merely of venue and was waived by defendant when it did not move to dismiss on
the ground of improper venue.
By its own terms, the Convention applies to all international transportation of persons performed by aircraft for hire.
International transportation is defined in paragraph (2) of Article 1 as follows:
(2) For the purposes of this convention, the expression "international transportation" shall mean any
transportation in which, according to the contract made by the parties, the place of departure and the
place of destination, whether or not there be a break in the transportation or a transshipment, are
situated [either] within the territories of two High Contracting Parties . . .
Whether the transportation is "international" is determined by the contract of the parties, which in the case of passengers is
the ticket. When the contract of carriage provides for the transportation of the passenger between certain designated
terminals "within the territories of two High Contracting Parties," the provisions of the Convention automatically apply and
exclusively govern the rights and liabilities of the airline and its passenger.
Since the flight involved in the case at bar is international, the same being from the United States to the Philippines and back to
the United States, it is subject to the provisions of the Warsaw Convention, including Article 28(1), which enumerates the four
places where an action for damages may be brought.
Whether Article 28(1) refers to jurisdiction or only to venue is a question over which authorities are sharply divided. While the
petitioner cites several cases holding that Article 28(1) refers to venue rather than jurisdiction, 9 there are later cases cited by
the private respondent supporting the conclusion that the provision is jurisdictional. 10
Venue and jurisdiction are entirely distinct matters. Jurisdiction may not be conferred by consent or waiver upon d court which
otherwise would have no jurisdiction over the subject-matter of an action; but the venue of an action as fixed by statute may
be changed by the consent of the parties and an objection that the plaintiff brought his suit in the wrong county may be waived
by the failure of the defendant to make a timely objection. In either case, the court may render a valid judgment. Rules as to
jurisdiction can never be left to the consent or agreement of the parties, whether or not a prohibition exists against their
alteration. 11
A number of reasons tends to support the characterization of Article 28(1) as a jurisdiction and not a venue provision. First, the
wording of Article 32, which indicates the places where the action for damages "must" be brought, underscores the mandatory
nature of Article 28(1). Second, this characterization is consistent with one of the objectives of the Convention, which is to
"regulate in a uniform manner the conditions of international transportation by air." Third, the Convention does not contain any
provision prescribing rules of jurisdiction other than Article 28(1), which means that the phrase "rules as to jurisdiction" used in
Article 32 must refer only to Article 28(1). In fact, the last sentence of Article 32 specifically deals with the exclusive
enumeration in Article 28(1) as "jurisdictions," which, as such, cannot be left to the will of the parties regardless of the time
when the damage occurred.
This issue was analyzed in the leading case of Smith v. Canadian Pacific Airways, Ltd., 12 where it was held:
 . . . Of more, but still incomplete, assistance is the wording of Article 28(2), especially when considered in
the light of Article 32. Article 28(2) provides that "questions of procedure shall be governed by the law of
the court to which the case is submitted" (Emphasis supplied). Section (2) thus may be read to leave for
domestic decision questions regarding the suitability and location of a particular Warsaw Convention
case.
In other words, where the matter is governed by the Warsaw Convention, jurisdiction takes on a dual concept. Jurisdiction in
the international sense must be established in accordance with Article 28(1) of the Warsaw Convention, following which the
jurisdiction of a particular court must be established pursuant to the applicable domestic law. Only after the question of which
court has jurisdiction is determined will the issue of venue be taken up. This second question shall be governed by the law of
the court to which the case is submitted.
The petitioner submits that since Article 32 states that the parties are precluded "before the damages occurred" from
amending the rules of Article 28(1) as to the place where the action may be brought, it would follow that the Warsaw
Convention was not intended to preclude them from doing so "after the damages occurred."
Article 32 provides:
Art. 32. Any clause contained in the contract and all special agreements entered into before the damage
occurred by which the parties purport to infringe the rules laid down by this convention, whether by
deciding the law to be applied, or by altering the rules as to jurisdiction, shall be null and void.
Nevertheless for the transportation of goods, arbitration clauses shall be allowed, subject to this
convention, if the arbitration is to take place within one of the jurisdictions referred to in the first
paragraph of Article 28.
His point is that since the requirements of Article 28(1) can be waived "after the damages (shall have) occurred," the article
should be regarded as possessing the character of a "venue" and not of a "jurisdiction" provision. Hence, in moving to dismiss
on the ground of lack of jurisdiction, the private respondent has waived improper venue as a ground to dismiss.
The foregoing examination of Article 28(1) in relation to Article 32 does not support this conclusion. In any event, we agree that
even granting arguendo that Article 28(1) is a venue and not a jurisdictional provision, dismissal of the case was still in order.
The respondent court was correct in affirming the ruling of the trial court on this matter, thus:
Santos' claim that NOA waived venue as a ground of its motion to dismiss is not correct. True it is that
NOA averred in its MOTION TO DISMISS that the ground thereof is "the Court has no subject matter
jurisdiction to entertain the Complaint" which SANTOS considers as equivalent to "lack of jurisdiction
over the subject matter . . ." However, the gist of NOA's argument in its motion is that the Philippines is
not the proper place where SANTOS could file the action — meaning that the venue of the action is
improperly laid. Even assuming then that the specified ground of the motion is erroneous, the fact is the
proper ground of the motion — improper venue — has been discussed therein.
Waiver cannot be lightly inferred. In case of doubt, it must be resolved in favor of non-waiver if there are special circumstances
justifying this conclusion, as in the petition at bar. As we observed in Javier vs. Intermediate Court of Appeals: 13
Legally, of course, the lack of proper venue was deemed waived by the petitioners when they failed to
invoke it in their original motion to dismiss. Even so, the motivation of the private respondent should
have been taken into account by both the trial judge and the respondent court in arriving at their
decisions.
The petitioner also invokes KLM Royal Dutch Airlines v. RTC, 14 a decision of our Court of Appeals, where it was held that Article
28(1) is a venue provision. However, the private respondent avers that this was in effect reversed by the case of Aranas v.
United Airlines, 15 where the same court held that Article 28(1) is a jurisdictional provision. Neither of these cases is binding on
207
this Court, of course, nor was either of them appealed to us. Nevertheless, we here express our own preference for the later
case of Aranas insofar as its pronouncements on jurisdiction conform to the judgment we now make in this petition.
B. The petitioner claims that the lower court erred in not ruling that under Article 28(1) of the Warsaw
Convention, this case was properly filed in the Philippines, because Manila was the destination of the
plaintiff.
The Petitioner contends that the facts of this case are analogous to those in Aanestad v. Air Canada. 16 In that case, Mrs.
Silverberg purchased a round-trip ticket from Montreal to Los Angeles and back to Montreal. The date and time of departure
were specified but not of the return flight. The plane crashed while on route from Montreal to Los Angeles, killing Mrs.
Silverberg. Her administratrix filed an action for damages against Air Canada in the U.S. District Court of California. The
defendant moved to dismiss for lack of jurisdiction but the motion was denied thus:
. . . It is evident that the contract entered into between Air Canada and Mrs. Silverberg as evidenced by
the ticket booklets and the Flight Coupon No. 1, was a contract for Air Canada to carry Mrs. Silverberg to
Los Angeles on a certain flight, a certain time and a certain class, but that the time for her to return
remained completely in her power. Coupon No. 2 was only a continuing offer by Air Canada to give her a
ticket to return to Montreal between certain dates. . . .
The only conclusion that can be reached then, is that "the place of destination" as used in the Warsaw
Convention is considered by both the Canadian C.T.C. and the United States C.A.B. to describe at least
two "places of destination," viz., the "place of destination" of a particularflight either an "outward
destination" from the "point of origin" or from the "outward point of destination" to any place in Canada.
Thus the place of destination under Art. 28 and Art. 1 of the Warsaw Convention of the flight on which
Mrs. Silverberg was killed, was Los Angeles according to the ticket, which was the contract between the
parties and the suit is properly filed in this Court which has jurisdiction.
The Petitioner avers that the present case falls squarely under the above ruling because the date and time of his return flight to
San Francisco were, as in the Aanestad case, also left open. Consequently, Manila and not San Francisco should be considered
the petitioner's destination.
The private respondent for its part invokes the ruling in Butz v. British Airways, 17 where the United States District Court
(Eastern District of Pennsylvania) said:
. . . Although the authorities which addressed this precise issue are not extensive, both the cases and the
commentators are almost unanimous in concluding that the "place of destination" referred to in the
Warsaw Convention "in a trip consisting of several parts . . . is the ultimate destination that is accorded
treaty jurisdiction." . . .
But apart from that distinguishing feature, I cannot agree with the Court's analysis in Aanestad; whether
the return portion of the ticket is characterized as an option or a contract, the carrier was legally bound
to transport the passenger back to the place of origin within the prescribed time and. the passenger for
her part agreed to pay the fare and, in fact, did pay the fare. Thus there was mutuality of obligation and a
binding contract of carriage, The fact that the passenger could forego her rights under the contract does
not make it any less a binding contract. Certainly, if the parties did not contemplate the return leg of the
journey, the passenger would not have paid for it and the carrier would not have issued a round trip
ticket.
We agree with the latter case. The place of destination, within the meaning of the Warsaw Convention, is determined by the
terms of the contract of carriage or, specifically in this case, the ticket between the passenger and the carrier. Examination of
the petitioner's ticket shows that his ultimate destination is San Francisco. Although the date of the return flight was left open,
the contract of carriage between the parties indicates that NOA was bound to transport the petitioner to San Francisco from
Manila. Manila should therefore be considered merely an agreed stopping place and not the destination.
The petitioner submits that the Butz case could not have overruled the Aanestad case because these decisions are from
different jurisdictions. But that is neither here nor there. In fact, neither of these cases is controlling on this Court. If we have
preferred the Butz case, it is because, exercising our own freedom of choice, we have decided that it represents the better, and
correct, interpretation of Article 28(1).
Article 1(2) also draws a distinction between a "destination" and an "agreed stopping place." It is the "destination" and not an
"agreed stopping place" that controls for purposes of ascertaining jurisdiction under the Convention.
The contract is a single undivided operation, beginning with the place of departure and ending with the ultimate destination.
The use of the singular in this expression indicates the understanding of the parties to the Convention that every contract of
carriage has one place of departure and one place of destination. An intermediate place where the carriage may be broken is
not regarded as a "place of destination."
C. The petitioner claims that the lower court erred in not ruling that under Art. 28(1) of the Warsaw
Convention, this case was properly filed in the Philippines because the defendant has its domicile in the
Philippines.
The petitioner argues that the Warsaw Convention was originally written in French and that in interpreting its provisions,
American courts have taken the broad view that the French legal meaning must govern. 18 In French, he says, the "domicile" of
the carrier means every place where it has a branch office.
The private respondent notes, however, that in Compagnie Nationale Air France vs. Giliberto, 19 it was held:
The plaintiffs' first contention is that Air France is domiciled in the United States. They say that the
domicile of a corporation includes any country where the airline carries on its business on "a regular and
substantial basis," and that the United States qualifies under such definition. The meaning of domicile
cannot, however, be so extended. The domicile of a corporation is customarily regarded as the place
where it is incorporated, and the courts have given the meaning to the term as it is used in article 28(1)
of the Convention. (See Smith v. Canadian Pacific Airways, Ltd. (2d Cir. 1971), 452 F2d 798, 802; Nudo v.
Societe Anonyme Belge d' Exploitation de la Navigation Aerienne Sabena Belgian World Airlines (E.D. pa.
1962). 207 F. Supp, 191; Karfunkel v. Compagnie Nationale Air France (S.D.N.Y. 1977), 427 F. Suppl. 971,
974). Moreover, the structure of article 28(1), viewed as a whole, is also incompatible with the plaintiffs'
claim. The article, in stating that places of business are among the bases of the jurisdiction, sets out two
places where an action for damages may be brought; the country where the carrier's principal place of
business is located, and the country in which it has a place of business through which the particular
contract in question was made, that is, where the ticket was bought, Adopting the plaintiffs' theory
would at a minimum blur these carefully drawn distinctions by creating a third intermediate category. It
would obviously introduce uncertainty into litigation under the article because of the necessity of having
to determine, and without standards or criteria, whether the amount of business done by a carrier in a
particular country was "regular" and "substantial." The plaintiff's request to adopt this basis of
jurisdiction is in effect a request to create a new jurisdictional standard for the Convention.
Furthermore, it was argued in another case 20 that:
. . . In arriving at an interpretation of a treaty whose sole official language is French, are we bound to
apply French law? . . . We think this question and the underlying choice of law issue warrant some
discussion
. . . We do not think this statement can be regarded as a conclusion that internal French law is to be
"applied" in the choice of law sense, to determine the meaning and scope of the Convention's terms. Of
208
course, French legal usage must be considered in arriving at an accurate English translation of the French.
But when an accurate English translation is made and agreed upon, as here, the inquiry into meaning
does not then revert to a quest for a past or present French law to be "applied" for revelation of the
proper scope of the terms. It does not follow from the fact that the treaty is written in French that in
interpreting it, we are forever chained to French law, either as it existed when the treaty was written or in
its present state of development. There is no suggestion in the treaty that French law was intended to
govern the meaning of Warsaw's terms, nor have we found any indication to this effect in its legislative
history or from our study of its application and interpretation by other courts. Indeed, analysis of the
cases indicates that the courts, in interpreting and applying the Warsaw Convention, have, not
considered themselves bound to apply French law simply because the Convention is written in
French. . . .
We agree with these rulings.
Notably, the domicile of the carrier is only one of the places where the complaint is allowed to be filed under Article 28(1). By
specifying the three other places, to wit, the principal place of business of the carrier, its place of business where the contract
was made, and the place of destination, the article clearly meant that these three other places were not comprehended in the
term "domicile."
D. The petitioner claims that the lower court erred in not ruling that Art. 28(1) of the Warsaw Convention
does not apply to actions based on tort.
The petitioner alleges that the gravamen of the complaint is that private respondent acted arbitrarily and in bad faith,
discriminated against the petitioner, and committed a willful misconduct because it canceled his confirmed reservation and
gave his reserved seat to someone who had no better right to it. In short. the private respondent committed a tort.
Such allegation, he submits, removes the present case from the coverage of the Warsaw Convention. He argues that in at least
two American cases, 21 it was held that Article 28(1) of the Warsaw Convention does not apply if the action is based on tort.
This position is negated by Husserl v. Swiss Air Transport Company, 22 where the article in question was interpreted thus:
. . . Assuming for the present that plaintiff's claim is "covered" by Article 17, Article 24 clearly excludes
any relief not provided for in the Convention as modified by the Montreal Agreement. It does not,
however, limit the kind of cause of action on which the relief may be founded; rather it provides that any
action based on the injuries specified in Article 17 "however founded," i.e., regardless of the type of
action on which relief is founded, can only be brought subject to the conditions and limitations
established by the Warsaw System. Presumably, the reason for the use of the phrase "however founded,"
in two-fold: to accommodate all of the multifarious bases on which a claim might be founded in different
countries, whether under code law or common law, whether under contract or tort, etc.; and to include
all bases on which a claim seeking relief for an injury might be founded in any one country. In other
words, if the injury occurs as described in Article 17, any relief available is subject to the conditions and
limitations established by the Warsaw System, regardless of the particular cause of action which forms
the basis on which a plaintiff could seek
relief . . .
The private respondent correctly contends that the allegation of willful misconduct resulting in a tort is insufficient to exclude
the case from the comprehension of the Warsaw Convention. The petitioner has apparently misconstrued the import of Article
25(l) of the Convention, which reads as follows:
Art. 25 (1). The carrier shall not be entitled to avail himself of the provisions of this Convention which
exclude or limit his liability. if the damage is caused by his willful misconduct or by such default on his
 part as, in accordance with the law of the court to which the case is submitted, is considered to be
equivalent to willful misconduct.
It is understood under this article that the court called upon to determine the applicability of the limitation provision must first
be vested with the appropriate jurisdiction. Article 28(1) is the provision in the Convention which defines that jurisdiction.
Article 22 23 merely fixes the monetary ceiling for the liability of the carrier in cases covered by the Convention. If the carrier is
indeed guilty of willful misconduct, it can avail itself of the limitations set forth in this article. But this can be done only if the
action has first been commenced properly under the rules on jurisdiction set forth in Article 28(1).
III
THE ISSUE OF PROTECTION TO MINORS
The petitioner calls our attention to Article 24 of the Civil Code, which states:
Art. 24. In all contractual property or other relations, when one of the parties is at a disadvantage on
account of his moral dependence, ignorance, indigence, mental weakness, tender age or other handicap,
the courts must be vigilant for his protection.
Application of this article to the present case is misplaced. The above provision assumes that the court is vested with
jurisdiction to rule in favor of the disadvantaged minor, As already explained, such jurisdiction is absent in the case at bar.
CONCLUSION
A number of countries have signified their concern over the problem of citizens being denied access to their own courts
because of the restrictive provision of Article 28(1) of the Warsaw Convention. Among these is the United States, which has
proposed an amendment that would enable the passenger to sue in his own domicile if the carrier does business in that
jurisdiction. The reason for this proposal is explained thus:
In the event a US citizen temporarily residing abroad purchases a Rome to New York to Rome ticket on a
foreign air carrier which is generally subject to the jurisdiction of the US, Article 28 would prevent that
person from suing the carrier in the US in a "Warsaw Case" even though such a suit could be brought in
the absence of the Convention.
The proposal was incorporated in the Guatemala Protocol amending the Warsaw Convention, which was adopted at Guatemala
City on March 8,
1971. 24 But it is still ineffective because it has not yet been ratified by the required minimum number of contracting parties.
Pending such ratification, the petitioner will still have to file his complaint only in any of the four places designated by Article
28(1) of the Warsaw Convention.
The proposed amendment bolsters the ruling of this Court that a citizen does not necessarily have the right to sue in his own
courts simply because the defendant airline has a place of business in his country.
The Court can only sympathize with the petitioner, who must prosecute his claims in the United States rather than in his own
country at least inconvenience. But we are unable to grant him the relief he seeks because we are limited by the provisions of
the Warsaw Convention which continues to bind us. It may not be amiss to observe at this point that the mere fact that he will
have to litigate in the American courts does not necessarily mean he will litigate in vain. The judicial system of that country in
known for its sense of fairness and, generally, its strict adherence to the rule of law.
WHEREFORE, the petition is DENIED, with costs against the petitioner. It is so ordered.
Facts
209
The peti ti oner, a minor and a resident of the Philippines, purchased from private respondent Northwest
Orient Airlines (NOA), a foreign corporation with principal office in Minnesota, U.S.A.
andl i c e n s e d t o d o b u s i n e s s a n d m a i n t a i n a b r a n c h o ffi c e i n t h e P h i l i p p i n e s , a r o u n d -
t r i p ti c k e t i n S a n Francisco. U.S.A., for his fl ight from San Francisco to Manila via Tokyo and back. The
scheduleddeparture date from Tokyo was December 20, 1986 and no date was specifi ed for his return to
SanFrancisco.Petitioner checked in at the NOA counter in the San Francisco airport for his scheduled departureto Manila.
However, despite a previous confirmation and re-confirmation, he was informed that he had noreservation for his flight from
Tokyo to Manila. He therefore had to be wait-listed.Peti ti oner then sued NOA for damages in the Regional Trial
Court of Makati .
NOA moved todismiss the complaint on the ground of lack of jurisdicti on invoking Arti cle 28 (1) of the
WarsawConvention.
Art. 28. (1) An acti on for damage must be brought at the opti on of the plainti ff , in the territory of one of
the High Contracti ng Parti es, either before the court of the domicile of the carrier or of his principal place of business, or
where he has a place of business through which the contract has been made, or before the court at the place of destination.
Respondent contended that the Philippines was not its domicile nor was this its principal place of business. Neither was the
petitioner's ticket issued in this country nor was his destination Manila but SanFrancisco in the United States.The lower court
granted the motion and dismissed the case. However, the petitioner appealed tothe Court of Appeals, which affi rmed
the decision of the lower court. Peti ti oner fi led a moti on for reconsideration, but the same was denied. Petitioner
then came to Supreme Court, raising the same issuesit submitted in the Court of Appeals.
Issue: Whether or not Article 28 (1) of the Warsaw Convention is constitutional?
Held
Yes, Article 28 (1) of the Warsaw Convention is
constitutionalT h e W a r s a w C o n v e n ti o n i s a t r e a t y c o m m i t m e n t v o l u n t a r i l y a s s u m e d b y t h e P h i l i p p i
n e government and, as such, has the force and effect of law in this country.According to the Supreme Court, “ The
treaty which is the subject matt er of this peti ti on was a joint legislative-executive act.
The presumption is that it was first carefully studied and determined to be
constitutional before it was adopted and given the force of law in this country.
The petitioner's allegations are not convincing enough to overcome this presumption. Apparently,the Convention considered
the four places designated in Article 28 the most convenient forums for thelitigation of any claim that may arise between the
airline and its passenger, as distinguished from all other places.
At any rate, we agree with the respondent court that this case can be decided on other grounds without
the necessity of resolving the constitutional issue.
”More over, “It is well-settled that courts will assume jurisdiction over a constitutional questiononly if it is shown that the
essential requisites of a judicial inquiry into such a question are first satisfied.Thus, there must be an actual case or
controversy involving a confl ict of legal rights suscepti ble of judicial determination; the constitutional question
must have been opportunely raised by the proper party;and the resolution of the question is unavoidably necessary to
the decision of the case itself.
Courts generally avoid having to decide a constitutional question. This attitude is based onthe doctrine of separati on of
powers, which enjoins upon the departments of the government a becoming respect for each other's acts.”
FACTS:
Minor Santos III bought a round trip ticket from Northwest Orient Airlines in San Francisco. His flight would be from San
Francisco to Manila via Tokyo and back to San Francisco. A day before his departure he checked with NOA and NOA said he
made no reservation and that he bought no ticket. Due to the incident, he sued NOA for damages in Manila. NOA argued that
Philippine courts have no jurisdiction over the matter pursuant to Article 28(1) of the Warsaw Convention, which provides that
complaints against international carriers can only be instituted in:
1. the court of the domicile of the carrier
2. the court of its principal place of business
3. the court where it has a place of business through which the contract had been made
4. the court of the place of destination

ISSUE: Whether or not Philippine courts have jurisdiction over the matter to conduct judicial review.

HELD:
The contract is a single undivided operation, beginning with the place of departure and ending with the ultimate destination.
An intermediate place where the carriage may be broken is not regarded as a "place of destination."The place of destination,
within the meaning of the Warsaw Convention, is determined by the terms of the contract of carriage or, specifically in this
case, the ticket between the passenger and the carrier. Examination of the petitioner's ticket shows that his ultimate
destination is San Francisco. Although the date of the return flight was left open, the contract of carriage between the parties
indicates that NOA was bound to transport the petitioner to San Francisco from Manila. Manila should therefore be considered
merely an agreed stopping place and not the destination.

The Supreme Court cannot rule over the matter for the SC is bound by the provisions of the Warsaw Convention which was
ratified by the Senate. Until & unless there would be amendment to the Warsaw Convention, the only remedy for Santos III is to
sue in any of the place indicated in the Convention such as in San Francisco, USA.

210
United Airlines vs. Willie Uy, Nov. 19, 1999 (2) The method of calculating the period of limitation shall be determined by the law of the court to
which the case is submitted.
SECOND DIVISION
Respondent countered that par. (1) of Art. 29 of the Warsaw Convention must be reconciled with par. (2) thereof which states
G.R. No. 127768 November 19, 1999
that "the method of calculating the period of limitation shall be determined by the law of the court to which the case is
submitted." Interpreting thus, respondent noted that according to Philippine laws the prescription of actions is interrupted
UNITED AIRLINES, petitioner,
"when they are filed before the court, when there is a written extrajudicial demand by the creditors, and when there is any
vs.
written acknowledgment of the debt by the debtor." 4 Since he made several demands upon United Airlines: first, through his
WILLIE J. UY, respondent.
personal letter dated 16 October 1989; second, through a letter dated 4 January 1990 from Atty. Pesigan; and, finally, through a
letter dated 28 October 1991 written for him by Atty. Ampil, the two (2)-year period of limitation had not yet been exhausted.
BELLOSILLO, J.:
On 2 August 1992 the trial court ordered the dismissal of the action holding that the language of Art. 29 is clear that the action
UNITED AIRLINES assails in this petition for review on certiorari under Rule 45 the 29 August 1995 Decision of the Court of
must be brought within two (2) years from the date of arrival at the destination. It held that although the second paragraph of
Appeals in CA-G.R. CV No. 39761 which reversed the 7 August 1992 order issued by the trial court in Civil Case No. Q-92-
Art. 29 speaks of deference to the law of the local court in "calculating the period of limitation," the same does not refer to the
12410 1 granting petitioner's motion to dismiss based on prescription of cause of action. The issues sought to be resolved are
local forum's rules in interrupting the prescriptive period but only to the rules of determining the time in which the action may
whether the notice of appeal to the appellate court was timely filed, and whether Art. 29 of the Warsaw Convention 2 should
be deemed commenced, and within our jurisdiction the action shall be deemed "brought" or commenced by the filing of a
apply to the case at bar.
complaint. Hence, the trial court concluded that Art. 29 excludes the application of our interruption rules.
On 13 October 1989 respondent Willie J. Uy, a revenue passenger on United Airlines Flight No. 819 for the San Francisco —
Respondent received a copy of the dismissal order on 17 August 1992. On 31 August 1992, or fourteen (14) days later, he
Manila route, checked in together with his luggage one piece of which was found to be overweight at the airline counter. To his
moved for the reconsideration of the trial court's order. The trial court denied the motion and respondent received copy of the
utter humiliation, an employee of petitioner rebuked him saying that he should have known the maximum weight allowance to
denial order on 28 September 1992. Two (2) days later, on 1 October 1992 respondent filed his notice of appeal.
be 70 kgs. per bag and that he should have packed his things accordingly. Then, in a loud voice in front of the milling crowd, she
told respondent to repack his things and transfer some of them from the overweight luggage to the lighter ones. Not wishing to
United Airlines once again moved for the dismissal of the case this time pointing out that respondent's fifteen (15)-day period
create further scene, respondent acceded only to find his luggage still overweight. The airline then billed him overweight
to appeal had already elapsed. Petitioner argued that having used fourteen (14) days of the reglementary period for appeal,
charges which he offered to pay with a miscellaneous charge order (MCO) or an airline pre-paid credit. However, the airline's
respondent Uy had only one (1) day remaining to perfect his appeal, and since he filed his notice of appeal two (2) days later, he
employee, and later its airport supervisor, adamantly refused to honor the MCO pointing out that there were conflicting figures
failed to meet the deadline.
listed on it. Despite the explanation from respondent that the last figure written on the MCO represented his balance,
petitioner's employees did not accommodate him. Faced with the prospect of leaving without his luggage, respondent paid the
In its questioned Decision dated 29 August 1995 5 the appellate court gave due course to the appeal holding that respondent's
overweight charges with his American Express credit card.
delay of two (2) days in filing his notice of appeal did not hinder it from reviewing the appealed order of dismissal since
jurisprudence dictates that an appeal may be entertained despite procedural lapses anchored on equity and justice.
Respondent's troubles did not end there. Upon arrival in Manila, he discovered that one of his bags had been slashed and its
contents stolen. He particularized his losses to be around US $5,310.00. In a letter dated 16 October 1989 respondent bewailed
On the applicability of the Warsaw Convention, the appellate court ruled that the Warsaw Convention did not preclude the
the insult, embarrassment and humiliating treatment he suffered in the hands of United Airlines employees, notified petitioner
operation of the Civil Code and other pertinent laws. Respondent's failure to file his complaint within the two (2)-year limitation
of his loss and requested reimbursement thereof. Petitioner United Airlines, through Central Baggage Specialist Joan Kroll, did
provided in the Warsaw Convention did not bar his action since he could still hold petitioner liable for breach of other
not refute any of respondent's allegations and mailed a check representing the payment of his loss based on the maximum
provisions of the Civil Code which prescribe a different period or procedure for instituting an action. Further, under Philippine
liability of US $9.70 per pound. Respondent, thinking the amount to be grossly inadequate to compensate him for his losses, as
laws, prescription of actions is interrupted where, among others, there is a written extrajudicial demand by the creditors, and
well as for the indignities he was subjected to, sent two (2) more letters to petitioner airline, one dated 4 January 1990 through
since respondent Uy sent several demand letters to petitioner United Airlines, the running of the two (2)-year prescriptive
a certain Atty. Pesigan, and another dated 28 October 1991 through Atty. Ramon U. Ampil demanding an out-of-court
period was in effect suspended. Hence, the appellate court ruled that respondent's cause of action had not yet prescribed and
settlement of P1,000,000.00. Petitioner United Airlines did not accede to his demands.
ordered the records remanded to the Quezon City trial court for further proceedings.
Consequently, on 9 June 1992 respondent filed a complaint for damages against United Airlines alleging that he was a person of
Petitioner now contends that the appellate court erred in assuming jurisdiction over respondent's appeal since it is clear that
good station, sitting in the board of directors of several top 500 corporations and holding senior executive positions for such
the notice of appeal was filed out of time. It argues that the courts relax the stringent rule on perfection of appeals only when
similar firms; 3 that petitioner airline accorded him ill and shabby treatment to his extreme embarrassment and humiliation;
there are extraordinary circumstances, e.g., when the Republic stands to lose hundreds of hectares of land already titled and
and, as such he should be paid moral damages of at least P1,000,000.00, exemplary damages of at least P500,000.00, plus
used for educational purposes; when the counsel of record was already dead; and wherein appellant was the owner of the
attorney's fees of at least P50,000.00. Similarly, he alleged that the damage to his luggage and its stolen contents amounted to
trademark for more than thirty (30) years, and the circumstances of the present case do not compare to the above exceptional
around $5,310.00, and requested reimbursement therefor.
cases. 6
United Airlines moved to dismiss the complaint on the ground that respondent's cause of action had prescribed, invoking Art.
Sec. 1 of Rule 45 of the 1997 Rules of Civil Procedure provides that "a party may appeal by certiorari, from a judgment of the
29 of the Warsaw Convention which provides —
Court of Appeals, by filing with the Supreme Court a petition for certiorari, within fifteen (15) days from notice of judgment or
of the denial of his motion for reconsideration filed in due time . . . ." This Rule however should not be interpreted as "to
Art. 29 (1) The right to damages shall be extinguished if an action is not brought within two (2) years,
sacrifice the substantial right of the appellant in the sophisticated altar of technicalities with impairment of the sacred
reckoned from the date of arrival at the destination, or from the date on which the aircraft ought to have
principles of justice." 7 It should be borne in mind that the real purpose behind the limitation of the period of appeal is to
arrived, or from the date on which the transportation stopped.
211
forestall or avoid an unreasonable delay in the administration of justice. Thus, we have ruled that delay in the filing of a notice
of appeal does not justify the dismissal of the appeal where the circumstances of the case show that there is no intent to delay
the administration of justice on the part of appellant's counsel, 8 or when there are no substantial rights affected, 9 or when
appellant's counsel committed a mistake in the computation of the period of appeal, an error not attributable to negligence or
bad faith. 10
In the instant case, respondent filed his notice of appeal two (2) days later than the prescribed period. Although his counsel
failed to give the reason for the delay, we are inclined to give due course to his appeal due to the unique and peculiar facts of
the case and the serious question of law it poses. In the now almost trite but still good principle, technicality, when it deserts its
proper office as an aid to justice and becomes its great hindrance and chief enemy, deserves scant consideration. 11
Petitioner likewise contends that the appellate court erred in ruling that respondent's cause of action has not prescribed since
delegates to the Warsaw Convention clearly intended the two (2)-year limitation incorporated in Art. 29 as an absolute bar to
suit and not to be made subject to the various tolling provisions of the laws of the forum. Petitioner argues that in construing
the second paragraph of Art. 29 private respondent cannot read into it Philippine rules on interruption of prescriptive periods
and state that his extrajudicial demand has interrupted the period of prescription. 12 American jurisprudence has declared that
"Art. 29 (2) was not intended to permit forums to consider local limitation tolling provisions but only to let local law determine
whether an action had been commenced within the two-year period, since the method of commencing a suit varies from
country to country." 13
Within our jurisdiction we have held that the Warsaw Convention can be applied, or ignored, depending on the peculiar facts
presented by each case. 14 Thus, we have ruled that the Convention's provisions do not regulate or exclude liability for other
breaches of contract by the carrier or misconduct of its officers and employees, or for some particular or exceptional type of
damage. 15 Neither may the Convention be invoked to justify the disregard of some extraordinary sort of damage resulting to a
passenger and preclude recovery therefor beyond the limits set by said Convention. 16 Likewise, we have held that the
Convention does not preclude the operation of the Civil Code and other pertinent laws. 17 It does not regulate, much less
exempt, the carrier from liability for damages for violating the rights of its passengers under the contract of carriage, especially
if willful misconduct on the part of the carrier's employees is found or established. 18
Respondent's complaint reveals that he is suing on two (2) causes of action: (a) the shabby and humiliating treatment he
received from petitioner's employees at the San Francisco Airport which caused him extreme embarrassment and social
humiliation; and, (b) the slashing of his luggage and the loss of his personal effects amounting to US $5,310.00.
While his second cause of action — an action for damages arising from theft or damage to property or goods — is well within
the bounds of the Warsaw Convention, his first cause of action — an action for damages arising from the misconduct of the
airline employees and the violation of respondent's rights as passenger — clearly is not.
Consequently, insofar as the first cause of action is concerned, respondent's failure to file his complaint within the two (2)-year
limitation of the Warsaw Convention does not bar his action since petitioner airline may still be held liable for breach of other
provisions of the Civil Code which prescribe a different period or procedure for instituting the action, specifically, Art. 1146
thereof which prescribes four (4) years for filing an action based on torts.
As for respondent's second cause of action, indeed the travaux preparatories of the Warsaw Convention reveal that the
delegates thereto intended the two (2)-year limitation incorporated in Art. 29 as an absolute bar to suit and not to be made
subject to the various tolling provisions of the laws of the forum. This therefore forecloses the application of our own rules on
interruption of prescriptive periods. Article 29, par. (2), was intended only to let local laws determine whether an action had
been commenced within the two (2)-year period, and within our jurisdiction an action shall be deemed commenced upon the
filing of a complaint. Since it is indisputable that respondent filed the present action beyond the two (2)-year time frame his
second cause of action must be barred. Nonetheless, it cannot be doubted that respondent exerted efforts to immediately
convey his loss to petitioner, even employed the services of two (2) lawyers to follow up his claims, and that the filing of the
action itself was delayed because of petitioner's evasion.
212
In this regard, Philippine Airlines, Inc. v. Court of Appeals 19 is instructive. In this case of PAL, private respondent filed an action
for damages against petitioner airline for the breakage of the front glass of the microwave oven which she shipped under PAL
Air Waybill No. 0-79-1013008-3. Petitioner averred that, the action having been filed seven (7) months after her arrival at her
port of destination, she failed to comply with par. 12, subpar. (a) (1), of the Air Waybill which expressly provided that the person
entitled to delivery must make a complaint to the carrier in writing in case of visible damage to the goods, immediately after
discovery of the damage and at the latest within 14 days from receipt of the goods. Despite non-compliance therewith the
Court held that by private respondent's immediate submission of a formal claim to petitioner, which however was not
immediately entertained as it was referred from one employee to another, she was deemed to have substantially complied with
the requirement. The Court noted that with private respondent's own zealous efforts in pursuing her claim it was clearly not
her fault that the letter of demand for damages could only be filed, after months of exasperating follow-up of the claim, on 13
August 1990, and that if there was any failure at all to file the formal claim within the prescriptive period contemplated in the
Air Waybill, this was largely because of the carrier's own doing, the consequences of which could not in all fairness be
attributed to private respondent.
In the same vein must we rule upon the circumstances brought before us. Verily, respondent filed his complaint more than two
(2) years later, beyond the period of limitation prescribed by the Warsaw Convention for filing a claim for damages. However, it
is obvious that respondent was forestalled from immediately filing an action because petitioner airline gave him the runaround,
answering his letters but not giving in to his demands. True, respondent should have already filed an action at the first instance
when his claims were denied by petitioner but the same could only be due to his desire to make an out-of-court settlement for
which he cannot be faulted. Hence, despite the express mandate of Art. 29 of the Warsaw Convention that an action for
damages should be filed within two (2) years from the arrival at the place of destination, such rule shall not be applied in the
instant case because of the delaying tactics employed by petitioner airline itself. Thus, private respondent's second cause of
action cannot be considered as time-barred under Art. 29 of the Warsaw Convention.
WHEREFORE, the assailed Decision of the Court of Appeals reversing and setting aside the appealed order of the trial court
granting the motion to dismiss the complaint, as well as its Resolution denying reconsideration, is AFFIRMED. Let the records of
the case be remanded to the court of origin for further proceedings taking its bearings from this disquisition.
SO ORDERED.
Facts:
On October 13, 1989, respondent, a passenger of United Airlines, checked in together with his luggage one piece of which was
found to be overweight at the airline counter. To his utter humiliation, an employee of petitioner rebuked him saying that he
should have known the maximum weight allowance per bag and that he should have packed his things accordingly. Then, in a
loud voice in front of the milling crowd, she told respondent to repair his things and transfer some of them to the light ones.
Respondent acceded but his luggage was still overweight. Petitioner billed him overweight charges but its employee reused to
honor the miscellaneous charges under MCD which he offered to pay with. Not wanting to leave without his luggage, he paid
with his credit card. Upon arrival in manila, he discovered that one of his bags had been slashed and its contents stolen. In a
letter dated October 16, 1989, he notified petitioner of his loss and requested reimbursement. Petitioner paid for his loss based
on the maximum liability per pound. Respondent considered the amount grossly inadequate. He sent two more letters to
petition but to no avail. On June 9, 1992, respondent filed a complaint for damages against petitioner Airline. Petitioner moved
to dismiss the complaint invoking the provisions of Article 29 of the Warsaw Convention. Respondent countered that according
to par. 2 of Article 29, “the method of calculating the period of limitation shall be determined by the law of the court to which
the case is submitted.”
Issues:
1) Does the Warsaw Convention preclude the operation of the Civil Code and other pertinent laws?
2) Has the respondent’s cause of action prescribed?
Held:
1) No. Within our jurisdiction we have held that the Warsaw Convention can be applied, or ignored, depending on the peculiar
facts presented by each case. Convention provisions do not regulate or exclude liabilities for other breaches of contract by the
carrier or misconduct of its officers and employees, or for some particular or exceptional type of damage. Neither may the
Convention be invoked to justify the disregard of some extraordinary type of damage. Neither may the Convention be invoked
to justify the disregard of some extraordinary sort of damage resulting to a passenger and preclude recovery therefore3 beyond
the limits et by said convention. Likewise, we have held that the Convention does not preclude the operation of the Civil Code
and other pertinent laws. It does not regulate, much less exempt, the carrier from liability for damages for violating the rights
of its passengers under the contract of carriage, especially if willful misconduct on the part of the carriers employees is found
or established.
2) No. While his 2nd cause of action (an action for damages arising from theft or damage to property or goods) is well within
the bounds of the Warsaw convention, his 1st cause of action (an action for damages arising from the misconduct of the airline
employees and the violation of respondent’s rights as passengers) clearly is not.
The 2-yr limitation incorporated in Art. 29 of the Warsaw Convention as an absolute bar to suit and not to be made subject to
the various tolling provisions of the laws of the forum, forecloses the application of our own rules on interruption of
prescriptive periods. (Art. 29, par. 2 was indented only to let local laws determine whether an action shall be deemed
commenced upon the filing of a complaint.) Since, it is indisputable that respondent filed the present action beyond the 2-yr
time frame his 2nd cause of action must be barred.
However, it is obvious that respondent was forestalled from immediately filing an action because petitioner gave him the
runaround, answering his letters but not giving in to his demands. True, respondent should have already filed an action at the
first instance when petitioner denied his claims but the same could only be due to his desire to make an out-of-court
settlement for which he cannot be faulted. Hence, despite the express mandate of Article 29 of the Warsaw Convention that an
action for damages should be filed within 2 years from the arrival at the place of destination, such rule shall not be applied in
the instant case because of the delaying tactics employed by petitioner airlines itself. Thus, respondent’s 2nd cause of action
cannot be considered as time barred.
United Airlines vs. Uy
G.R. No. 127768, Nov. 19, 1999
INTERNATIONAL LAW: Applicability of the Warsaw Convention: the Convention's provisions do not regulate or exclude liability
for other breaches of contract by the carrier or misconduct of its officers and employees, or for some particular or exceptional
type of damage. Neither may the Convention be invoked to justify the disregard of some extraordinary sort of damage resulting
to a passenger and preclude recovery therefor beyond the limits set by said Convention. Likewise, we have held that the
Convention does not preclude the operation of the Civil Code and other pertinent laws. It does not regulate, much less exempt,
the carrier from liability for damages for violating the rights of its passengers under the contract of carriage, especially if willful
misconduct on the part of the carrier's employees is found or established
FACTS:
October 13, 1989 – Respondent Willie Uy is a passenger of petitioner United Airlines, bound from San Francisco to Manila.
While in San Francisco, it was found that one piece of his luggage was over the maximum weight allowance of 70 kg. per bag. A
United Airlines employee rebuked him and in a loud voice, in front of the milling crowd, ordered him to repack his things
accordingly. Wishing not to create a scene, Willie did as asked. Unfortunately, his luggage was still overweight so the airline
billed him overweight charges. Willie offered to pay the charges with a Miscellaneous Charge Order (MCO) or an airline pre-
paid credit but the same employee, and an airline supervisor, refused to honor it, contending that there were discrepancies in
the figures. Thus, Willie was forced to pay the charges with his American Express credit card. Upon arrival in Manila, Willie
discovered that one of his bags had been slashed and its contents, amounting to US$5,310.00, stolen.
October 16, 1989 – he sent his first letter of demand to United Airlines. The airline did not refute Willie’s allegations and mailed
a check representing payment of his loss based on the maximum liability of US$9.70 per pound. Willie, thinking the amount to
213
be grossly inadequate to compensate him for his losses as well as for the indignities he was subjected to, sent two more letters
to petitioner airline, one dated January 4, 1990 and the other dated October 28, 1991, demanding out-of-court settlement of
P1,000,000.00.
June 9, 1992 – Willie filed a complaint for damages before the Philippine courts. He had two causes of action: (1) the shabby
and humiliating treatment he received from petitioner’s employees at the San Francisco Airport which caused him extreme
embarrassment and social humiliation; and (2) the slashing of his luggage and the loss of personal effects amounting to
US$5,310.00.
For its part, United Airlines moved to dismiss the complaint on the ground that it was filed out of time. Under Art. 29 of the
Warsaw Convention, the right to damages shall be extinguished if an action is not brought within 2 years. However, the second
paragraph of the said provision stated that the method of calculating the period of limitation shall be determined by the law of
the court to which the case is submitted. It is Willie’s position that our rules on interruption of prescriptive period should apply.
When he sent his letters of demand, the 2-year period was tolled, giving him ample time to file his complaint.
The trial court ordered the dismissal of the case, holding that Art. 29(2) refers not to the local forum’s rules in interrupting the
prescriptive period but only to the rules of determining the time in which the action was deemed commenced (meaning
“filed”). Willie filed his motion for reconsideration of the order of dismissal only on the 14th day. The trial court denied his
motion and 2 days later Willie filed his notice of appeal. United Airlines this time contended that the notice of appeal was filed
beyond the 15-day reglementary period and should therefore be dismissed. The CA, however, took cognizance of the case in
the interest of justice and ruled in favour of respondent. Hence, this petition for certiorari.
ISSUE: Whether or not the action for damages is barred by the lapse of the 2-year prescriptive period under Art. 29 of the
Warsaw Convention
HELD:
Supreme Court held that although the 2-year prescriptive period under the Warsaw Convention has lapsed, it did not preclude
the application of other pertinent provisions of the Civil Code. Thus, the action for damages could still be filed based on tort
which can be filed within 4 years from the time cause of action accrued. As for the action pertaining to the loss of the contents
of the luggage, while it was well within the bounds of the Warsaw Convention, the Supreme Court found that there was an
exception to the applicability of the 2-year prescriptive period – that is when the airline employed delaying tactics and gave the
passenger the run-around.
Applicability of the Warsaw Convention: Courts have discretion whether to apply them or not
Within our jurisdiction we have held that the Warsaw Convention can be applied, or ignored, depending on the peculiar facts
presented by each case. Thus, we have ruled that the Convention's provisions do not regulate or exclude liability for other
breaches of contract by the carrier or misconduct of its officers and employees, or for some particular or exceptional type of
damage. Neither may the Convention be invoked to justify the disregard of some extraordinary sort of damage resulting to a
passenger and preclude recovery therefor beyond the limits set by said Convention. Likewise, we have held that the Convention
does not preclude the operation of the Civil Code and other pertinent laws. It does not regulate, much less exempt, the carrier
from liability for damages for violating the rights of its passengers under the contract of carriage, especially if willful misconduct
on the part of the carrier's employees is found or established.
Respondent's complaint reveals that he is suing on two (2) causes of action: (a) the shabby and humiliating treatment he
received from petitioner's employees at the San Francisco Airport which caused him extreme embarrassment and social
humiliation; and, (b) the slashing of his luggage and the loss of his personal effects amounting to US $5,310.00.
While his second cause of action - an action for damages arising from theft or damage to property or goods - is well within the
bounds of the Warsaw Convention, his first cause of action -an action for damages arising from the misconduct of the airline
employees and the violation of respondent's rights as passenger - clearly is not.
Action for damages arising from the misconduct of the airline employees and the violation of the respondent’s rights as
passengers is covered under the Civil Code

Consequently, insofar as the first cause of action is concerned, respondent's failure to file his complaint within the two (2)-year
limitation of the Warsaw Convention does not bar his action since petitioner airline may still be held liable for breach of other
provisions of the Civil Code which prescribe a different period or procedure for instituting the action, specifically, Art. 1146
thereof which prescribes four (4) years for filing an action based on torts.

Exception to the Application of the 2-year prescriptive period: When airline employed delaying tactics

As for respondent's second cause of action, indeed the travauxpreparatories of the Warsaw Convention reveal that the
delegates thereto intended the two (2)-year limitation incorporated in Art. 29 as an absolute bar to suit and not to be made
subject to the various tolling provisions of the laws of the forum. This therefore forecloses the application of our own rules on
interruption of prescriptive periods. Article 29, par. (2), was intended only to let local laws determine whether an action had
been commenced within the two (2)-year period, and within our jurisdiction an action shall be deemed commenced upon the
filing of a complaint. Since it is indisputable that respondent filed the present action beyond the two (2)-year time frame his
second cause of action must be barred. Nonetheless, it cannot be doubted that respondent exerted efforts to immediately
convey his loss to petitioner, even employed the services of two (2) lawyers to follow up his claims, and that the filing of the
action itself was delayed because of petitioner's evasion.

Verily, respondent filed his complaint more than two (2) years later, beyond the period of limitation prescribed by the Warsaw
Convention for filing a claim for damages. However, it is obvious that respondent was forestalled from immediately filing an
action because petitioner airline gave him the runaround, answering his letters but not giving in to his demands. True,
respondent should have already filed an action at the first instance when his claims were denied by petitioner but the same
could only be due to his desire to make an out-of-court settlement for which he cannot be faulted. Hence, despite the express
mandate of Art. 29 of the Warsaw Convention that an action for damages should be filed within two (2) years from the arrival
at the place of destination, such rule shall not be applied in the instant case because of the delaying tactics employed by
petitioner airline itself. Thus, private respondent's second cause of action cannot be considered as time-barred under Art. 29 of
the Warsaw Convention.

WHEREFORE, the assailed Decision of the Court of Appeals reversing and setting aside the appealed order of the trial court
granting the motion to dismiss the complaint, as well as its Resolution denying reconsideration, is AFFIRMED. Let the records of
the case be remanded to the court of origin for further proceedings taking its bearings from this disquisition.

SO ORDERED.

214
Fabre vs. CA, July 26, 1996; The Lingayen police investigated the incident the next day, November 3, 1984. On the basis of their finding they filed a criminal
complaint against the driver, Porfirio Cabil. The case was later filed with the Lingayen Regional Trial Court. Petitioners Fabre paid
SECOND DIVISION
Jesus Escano P1,500.00 for the damage to the latter's fence. On the basis of Escano's affidavit of desistance the case against
petitioners Fabre was dismissed.
G.R. No. 111127 July 26, 1996
Amyline Antonio, who was seriously injured, brought this case in the RTC of Makati, Metro Manila. As a result of the accident,
MR. & MRS. ENGRACIO FABRE, JR. and PORFIRIO CABIL, petitioners,
she is now suffering from paraplegia and is permanently paralyzed from the waist down. During the trial she described the
vs.
operations she underwent and adduced evidence regarding the cost of her treatment and therapy. Immediately after the
COURT OF APPEALS, THE WORD FOR THE WORLD CHRISTIAN FELLOWSHIP, INC., AMYLINE ANTONIO, JOHN RICHARDS,
accident, she was taken to the Nazareth Hospital in Baay, Lingayen. As this hospital was not adequately equipped, she was
GONZALO GONZALES, VICENTE V. QUE, JR., ICLI CORDOVA, ARLENE GOJOCCO, ALBERTO ROXAS CORDERO, RICHARD
transferred to the Sto. Niño Hospital, also in the town of Ba-ay, where she was given sedatives. An x-ray was taken and the
BAUTISTA, JOCELYN GARCIA, YOLANDA CORDOVA, NOEL ROQUE, EDWARD TAN, ERNESTO NARCISO, ENRIQUETA LOCSIN,
damage to her spine was determined to be too severe to be treated there. She was therefore brought to Manila, first to the
FRANCIS NORMAN O. LOPES, JULIUS CAESAR, GARCIA, ROSARIO MA. V. ORTIZ, MARIETTA C. CLAVO, ELVIE SENIEL, ROSARIO
Philippine General Hospital and later to the Makati Medical Center where she underwent an operation to correct the
MARA-MARA, TERESITA REGALA, MELINDA TORRES, MARELLA MIJARES, JOSEFA CABATINGAN, MARA NADOC, DIANE MAYO,
dislocation of her spine.
TESS PLATA, MAYETTE JOCSON, ARLENE Y. MORTIZ, LIZA MAYO, CARLOS RANARIO, ROSAMARIA T. RADOC and BERNADETTE
FERRER, respondents.
In its decision dated April 17, 1989, the trial court found that:
MENDOZA, J.:p
No convincing evidence was shown that the minibus was properly checked for travel to a long distance trip and that the driver
was properly screened and tested before being admitted for employment. Indeed, all the evidence presented have shown the
This is a petition for review on certiorari of the decision of the Court of Appeals in CA-GR No. 28245, dated September 30,
1
negligent act of the defendants which ultimately resulted to the accident subject of this case.
1992, which affirmed with modification the decision of the Regional Trial Court of Makati, Branch 58, ordering petitioners
jointly and severally to pay damages to private respondent Amyline Antonio, and its resolution which denied petitioners'
Accordingly, it gave judgment for private respondents holding:
motion for reconsideration for lack of merit.
Considering that plaintiffs Word for the World Christian Fellowship, Inc. and Ms. Amyline Antonio were the only ones who
Petitioners Engracio Fabre, Jr. and his wife were owners of a 1982 model Mazda minibus. They used the bus principally in
adduced evidence in support of their claim for damages, the Court is therefore not in a position to award damages to the other
connection with a bus service for school children which they operated in Manila. The couple had a driver, Porfirio J. Cabil,
plaintiffs.
whom they hired in 1981, after trying him out for two weeks, His job was to take school children to and from the St.
Scholastica's College in Malate, Manila.
WHEREFORE, premises considered, the Court hereby renders judgment against defendants Mr. & Mrs. Engracio Fabre, Jr. and
Porfirio Cabil y Jamil pursuant to articles 2176 and 2180 of the Civil Code of the Philippines and said defendants are ordered to
On November 2, 1984 private respondent Word for the World Christian Fellowship Inc. (WWCF) arranged with petitioners for
pay jointly and severally to the plaintiffs the following amount:
the transportation of 33 members of its Young Adults Ministry from Manila to La Union and back in consideration of which
private respondent paid petitioners the amount of P3,000.00.
1) P93,657.11 as compensatory and actual damages;
The group was scheduled to leave on November 2, 1984, at 5:00 o'clock in the afternoon. However, as several members of the
2) P500,000.00 as the reasonable amount of loss of earning capacity of plaintiff Amyline Antonio;
party were late, the bus did not leave the Tropical Hut at the corner of Ortigas Avenue and EDSA until 8:00 o'clock in the
evening. Petitioner Porfirio Cabil drove the minibus.
3) P20,000.00 as moral damages;
The usual route to Caba, La Union was through Carmen, Pangasinan. However, the bridge at Carmen was under repair, sot hat
4) P20,000.00 as exemplary damages; and
petitioner Cabil, who was unfamiliar with the area (it being his first trip to La Union), was forced to take a detour through the
town of Baay in Lingayen, Pangasinan. At 11:30 that night, petitioner Cabil came upon a sharp curve on the highway, running on
5) 25% of the recoverable amount as attorney's fees;
a south to east direction, which he described as "siete." The road was slippery because it was raining, causing the bus, which
was running at the speed of 50 kilometers per hour, to skid to the left road shoulder. The bus hit the left traffic steel brace and
6) Costs of suit.
sign along the road and rammed the fence of one Jesus Escano, then turned over and landed on its left side, coming to a full
stop only after a series of impacts. The bus came to rest off the road. A coconut tree which it had hit fell on it and smashed its
front portion. SO ORDERED.

Several passengers were injured. Private respondent Amyline Antonio was thrown on the floor of the bus and pinned down by a The Court of Appeals affirmed the decision of the trial court with respect to Amyline Antonio but dismissed it with respect to
wooden seat which came down by a wooden seat which came off after being unscrewed. It took three persons to safely remove the other plaintiffs on the ground that they failed to prove their respective claims. The Court of Appeals modified the award of
her from this portion. She was in great pain and could not move. damages as follows:

The driver, petitioner Cabil, claimed he did not see the curve until it was too late. He said he was not familiar with the area and 1) P93,657.11 as actual damages;
he could not have seen the curve despite the care he took in driving the bus, because it was dark and there was no sign on the
road. He said that he saw the curve when he was already within 15 to 30 meters of it. He allegedly slowed down to 30 2) P600,000.00 as compensatory damages;
kilometers per hour, but it was too late.
215
 3) P50,000.00 as moral damages;
4) P20,000.00 as exemplary damages;
5) P10,000.00 as attorney's fees; and
6) Costs of suit.
The Court of Appeals sustained the trial court's finding that petitioner Cabil failed to exercise due care and precaution in the
operation of his vehicle considering the time and the place of the accident. The Court of Appeals held that the Fabres were
themselves presumptively negligent. Hence, this petition. Petitioners raise the following issues:
I. WHETHER OR NOT PETITIONERS WERE NEGLIGENT.
II. WHETHER OF NOT PETITIONERS WERE LIABLE FOR THE INJURIES SUFFERED BY
PRIVATE RESPONDENTS.
III WHETHER OR NOT DAMAGES CAN BE AWARDED AND IN THE POSITIVE, UP TO
WHAT EXTENT.
Petitioners challenge the propriety of the award of compensatory damages in the amount of P600,000.00. It is insisted that, on
the assumption that petitioners are liable an award of P600,000.00 is unconscionable and highly speculative. Amyline Antonio
testified that she was a casual employee of a company called "Suaco," earning P1,650.00 a month, and a dealer of Avon
products, earning an average of P1,000.00 monthly. Petitioners contend that as casual employees do not have security of
tenure, the award of P600,000.00, considering Amyline Antonio's earnings, is without factual basis as there is no assurance that
she would be regularly earning these amounts.
With the exception of the award of damages, the petition is devoid of merit.
First, it is unnecessary for our purpose to determine whether to decide this case on the theory that petitioners are liable for
breach of contract of carriage or culpa contractual or on the theory of quasi delict or culpa aquiliana as both the Regional Trial
Court and the Court of Appeals held, for although the relation of passenger and carrier is "contractual both in origin and
nature," nevertheless "the act that breaks the contract may be also a tort." 2 In either case, the question is whether the bus
driver, petitioner Porfirio Cabil, was negligent.
The finding that Cabil drove his bus negligently, while his employer, the Fabres, who owned the bus, failed to exercise the
diligence of a good father of the family in the selection and supervision of their employee is fully supported by the evidence on
record. These factual findings of the two courts we regard as final and conclusive, supported as they are by the evidence.
Indeed, it was admitted by Cabil that on the night in question, it was raining, and as a consequence, the road was slippery, and
it was dark. He averred these facts to justify his failure to see that there lay a sharp curve ahead. However, it is undisputed that
Cabil drove his bus at the speed of 50 kilometers per hour and only slowed down when he noticed the curve some 15 to 30
meters ahead. 3 By then it was too late for him to avoid falling off the road. Given the conditions of the road and considering
that the trip was Cabil's first one outside of Manila, Cabil should have driven his vehicle at a moderate speed. There is
testimony 4 that the vehicles passing on that portion of the road should only be running 20 kilometers per hour, so that at 50
kilometers per hour, Cabil was running at a very high speed.
Considering the foregoing — the fact that it was raining and the road was slippery, that it was dark, that he drove his bus at 50
kilometers an hour when even on a good day the normal speed was only 20 kilometers an hour, and that he was unfamiliar with
the terrain, Cabil was grossly negligent and should be held liable for the injuries suffered by private respondent Amyline
Antonio.
216
Pursuant to Arts. 2176 and 2180 of the Civil Code his negligence gave rise to the presumption that his employers, the Fabres,
were themselves negligent in the selection and supervisions of their employee.
Due diligence in selection of employees is not satisfied by finding that the applicant possessed a professional driver's license.
The employer should also examine the applicant for his qualifications, experience and record of service. 5 Due diligence in
supervision, on the other hand, requires the formulation of rules and regulations for the guidance of employees and issuance
of proper instructions as well as actual implementation and monitoring of consistent compliance with the rules. 6
In the case at bar, the Fabres, in allowing Cabil to drive the bus to La Union, apparently did not consider the fact that Cabil had
been driving for school children only, from their homes to the St. Scholastica's College in Metro Manila. 7They had hired him
only after a two-week apprenticeship. They had hired him only after a two-week apprenticeship. They had tested him for
certain matters, such as whether he could remember the names of the children he would be taking to school, which were
irrelevant to his qualification to drive on a long distance travel, especially considering that the trip to La Union was his first. The
existence of hiring procedures and supervisory policies cannot be casually invoked to overturn the presumption of negligence
on the part of an employer. 8
Petitioners argue that they are not liable because (1) an earlier departure (made impossible by the congregation's delayed
meeting) could have a averted the mishap and (2) under the contract, the WWCF was directly responsible for the conduct of
the trip. Neither of these contentions hold water. The hour of departure had not been fixed. Even if it had been, the delay did
not bear directly on the cause of the accident. With respect to the second contention, it was held in an early case that:
[A] person who hires a public automobile and gives the driver directions as to the place to which he wishes to be conveyed, but
exercises no other control over the conduct of the driver, is not responsible for acts of negligence of the latter or prevented
from recovering for injuries suffered from a collision between the automobile and a train, caused by the negligence or the
automobile driver. 9
As already stated, this case actually involves a contract of carriage. Petitioners, the Fabres, did not have to be engaged in the
business of public transportation for the provisions of the Civil Code on common carriers to apply to them. As this Court has
held: 10
Art. 1732. Common carriers are persons, corporations, firms or associations engaged in the business of
carrying or transporting passengers or goods or both, by land, water, or air for compensation, offering
their services to the public.
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.
As common carriers, the Fabres were found to exercise "extraordinary diligence" for the safe
transportation of the passengers to their destination. This duty of care is not excused by proof that they
exercise the diligence of a good father of the family in the selection and supervision of their employee. As
Art. 1759 of the Code provides:
Common carriers are liable for the death of or injuries to passengers through the negligence or willful
acts of the former's employees although such employees may have acted beyond the scope of their
authority or in violation of the orders of the common carriers.
 This liability of the common carriers does not cease upon proof that they exercised all the diligence of a
good father of a family in the selection and supervision of their employees.
The same circumstances detailed above, supporting the finding of the trial court and of the appellate court that petitioners are
liable under Arts. 2176 and 2180 for quasi delict, fully justify findings them guilty of breach of contract of carriage under Arts.
1733, 1755 and 1759 of the Civil Code.
Secondly, we sustain the award of damages in favor of Amyline Antonio. However, we think the Court of Appeals erred in
increasing the amount of compensatory damages because private respondents did not question this award as inadequate. 11 To
the contrary, the award of P500,000.00 for compensatory damages which the Regional Trial Court made is reasonable
considering the contingent nature of her income as a casual employee of a company and as distributor of beauty products and
the fact that the possibility that she might be able to work again has not been foreclosed. In fact she testified that one of her
previous employers had expressed willingness to employ her again.
With respect to the other awards, while the decisions of the trial court and the Court of Appeals do not sufficiently indicate the
factual and legal basis for them, we find that they are nevertheless supported by evidence in the records of this case. Viewed as
an action for quasi delict, this case falls squarely within the purview of Art. 2219(2) providing for the payment of moral
damages in cases of quasi delict. On the theory that petitioners are liable for breach of contract of carriage, the award of moral
damages is authorized by Art. 1764, in relation to Art. 2220, since Cabil's gross negligence amounted to bad faith. 12 Amyline
Antonio's testimony, as well as the testimonies of her father and copassengers, fully establish the physical suffering and mental
anguish she endured as a result of the injuries caused by petitioners' negligence.
The award of exemplary damages and attorney's fees was also properly made. However, for the same reason that it was error
for the appellate court to increase the award of compensatory damages, we hold that it was also error for it to increase the
award of moral damages and reduce the award of attorney's fees, inasmuch as private respondents, in whose favor the awards
were made, have not appealed. 13
As above stated, the decision of the Court of Appeals can be sustained either on the theory of quasi delict or on that of breach
of contract. The question is whether, as the two courts below held, petitioners, who are the owners and driver of the bus, may
be made to respond jointly and severally to private respondent. We hold that they may be. In Dangwa Trans. Co. Inc. v. Court of
Appeals, 14 on facts similar to those in this case, this Court held the bus company and the driver jointly and severally liable for
damages for injuries suffered by a passenger. Again, in Bachelor Express, Inc. v. Court of
Appeals 15 a driver found negligent in failing to stop the bus in order to let off passengers when a fellow passenger ran amuck,
as a result of which the passengers jumped out of the speeding bus and suffered injuries, was held also jointly and severally
liable with the bus company to the injured passengers.
The same rule of liability was applied in situations where the negligence of the driver of the bus on which plaintiff was riding
concurred with the negligence of a third party who was the driver of another vehicle, thus causing an accident. In Anuran
v. Buño, 16 Batangas Laguna Tayabas Bus Co. v. Intermediate Appellate Court, 17 and Metro Manila Transit Corporation v. Court
of Appeals, 18 the bus company, its driver, the operator of the other vehicle and the driver of the vehicle were jointly and
severally held liable to the injured passenger or the latters' heirs. The basis of this allocation of liability was explained in Viluan
v. Court of Appeals, 19 thus:
Nor should it make any difference that the liability of petitioner [bus owner] springs from contract while
that of respondents [owner and driver of other vehicle] arises from quasi-delict. As early as 1913, we
already ruled in Gutierrez vs. Gutierrez, 56 Phil. 177, that in case of injury to a passenger due to the
negligence of the driver of the bus on which he was riding and of the driver of another vehicle, the
drivers as well as the owners of the two vehicles are jointly and severally liable for damages. Some
members of the Court, though, are of the view that under the circumstances they are liable on quasi-
delict. 20
217
It is true that in Philippine Rabbit Bus Lines, Inc. v. Court of Appeals 21 this Court exonerated the jeepney driver from liability to
the injured passengers and their families while holding the owners of the jeepney jointly and severally liable, but that is
because that case was expressly tried and decided exclusively on the theory of culpa contractual. As this Court there explained:
The trial court was therefore right in finding that Manalo (the driver) and spouses Mangune and Carreon (the jeepney owners)
were negligent. However, its ruling that spouses Mangune and Carreon are jointly and severally liable with Manalo is
erroneous. The driver cannot be held jointly and severally liable with carrier in case of breach of the contract of carriage. The
rationale behind this is readily discernible. Firstly, the contract of carriage is between the carrier is exclusively responsible
therefore to the passenger, even if such breach be due to the negligence of his driver (see Viluan v. The Court of Appeals, et al.,
G.R. Nos. L-21477-81, April 29, 1966, 16 SCRA 742). 22
As in the case of BLTB, private respondents in this case and her coplaintiffs did not stake out their claim against the carrier and
the driver exclusively on one theory, much less on that of breach of contract alone. After all, it was permitted for them to allege
alternative causes of action and join as many parties as may be liable on such causes of action 23 so long as private respondent
and her coplaintiffs do not recover twice for the same injury. What is clear from the cases is the intent of the plaintiff there to
recover from both the carrier and the driver, thus, justifying the holding that the carrier and the driver were jointly and
severally liable because their separate and distinct acts concurred to produce the same injury.
WHEREFORE, the decision of the Court of Appeals is AFFIRMED with MODIFICATION as to award of damages. Petitioners are
ORDERED to PAY jointly and severally the private respondent Amyline Antonio the following amounts:
1) P93,657.11 as actual damages;
2) P500,000.00 as the reasonable amount of loss of earning capacity of plaintiff Amyline Antonio;
3) P20,000.00 as moral damages;
4) P20,000.00 as exemplary damages;
5) 25% of the recoverable amount as attorney's fees; and
6) costs of suit.
SO ORDERED.
Facts:
Petitioners Engracio Fabre, Jr. and his wife were owners of a Mazda minibus. They used the bus principally in connection with a
bus service for school children which they operated in Manila. It was driven by Porfirio Cabil.
On November 2, 1984 private respondent Word for the World Christian Fellowship Inc. (WWCF) arranged with the petitioners
for the transportation of 33 members of its Young Adults Ministry from Manila to La Union and back in consideration of which
private respondent paid petitioners the amount of P3,000.00.
The usual route to Caba, La Union was through Carmen, Pangasinan. However, the bridge at Carmen was under repair, so that
petitioner Cabil, who was unfamiliar with the area (it being his first trip to La Union), was forced to take a detour through the
town of Ba-ay in Lingayen, Pangasinan. At 11:30 that night, petitioner Cabil came upon a sharp curve on the highway. The road
was slippery because it was raining, causing the bus, which was running at the speed of 50 kilometers per hour, to skid to the
left road shoulder. The bus hit the left traffic steel brace and sign along the road and rammed the fence of one Jesus Escano,
then turned over and landed on its left side, coming to a full stop only after a series of impacts. The bus came to rest off the
road. A coconut tree which it had hit fell on it and smashed its front portion. Because of the mishap, several passengers were
injured particularly Amyline Antonio.
Criminal complaint was filed against the driver and the spouses were also made jointly liable. Spouses Fabre on the other hand
contended that they are not liable since they are not a common carrier. The RTC of Makati ruled in favor of the plaintiff and the
defendants were ordered to pay jointly and severally to the plaintiffs. The Court of Appeals affirmed the decision of the trial
court.

Issue: Whether the spouses Fabre are common carriers?

Held:
Petition was denied. Spouses Fabre are common carriers. The Supreme Court held that this case actually involves a contract of
carriage. Petitioners, the Fabres, did not have to be engaged in the business of public transportation for the provisions of the
Civil Code on common carriers to apply to them. As this Court has held: 10 Art. 1732, Common carriers are persons,
corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both, by land,
water, or air for compensation, offering their services to the public.

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.

FACTS:
A school bus owned by spouses Fabre was hired by the private respondents. The minibus figured in a mishap resulting injury to
several passengers. Antonio, who was seriously injured, filed an action for damages against the driver and spouses Fabre.

ISSUE: Whether owners and driver of the bus, may be made to respond jointly and severally to private respondent.

HELD:
An award for damages can be sustained either on the theory of quasi delict or culpa aquiliana or on the theory of breach of
contract of carriage or culpa contractual, for although the relation of passenger and carrier is “contractual both in origin and
nature,” nevertheless “the act that breaks the contract may be also a tort.” Private respondents in this case and her co-
plaintiffs did not stake out their claim against the carrier and the driver exclusively on one theory, much less on that of breach
of contract alone. Thus, the carrier and the driver are jointly and severally liable because their separate and distinct acts
concurred to produce the same injury.

218
PhilAmGen Insurance vs. Sweetlines 212 SCRA 194; Therefore, of said shipment totalling 7,000 bags, originally contained in 175 pallets, only a total of 5,820 bags were
delivered to the consignee in good order condition, leaving a balance of 1,080 bags. Such loss from this particular
SECOND DIVISION
shipment is what any or all defendants may be answerable to (sic).
G.R. No. 87434 August 5, 1992
As already stated, some bags were either shortlanded or were missing, and some of the 1,080 bags were torn, the
contents thereof partly spilled or were fully/partially emptied, but, worse, the contents thereof contaminated with
PHILIPPINE AMERICAN GENERAL INSURANCE CO., INC. and TAGUM PLASTICS, INC., petitioners,
foreign matters and therefore could no longer serve their intended purpose. The position taken by the consignee
vs.
was that even those bags which still had some contents were considered as total losses as the remaining contents
SWEET LINES, INC., DAVAO VETERANS ARRASTRE AND PORT SERVICES, INC. and HON. COURT OF APPEALS, respondents.
were contaminated with foreign matters and therefore did not (sic) longer serve the intended purpose of the
material. Each bag was valued, taking into account the customs duties and other taxes paid as well as charges and
REGALADO, J.:
the conversion value then of a dollar to the peso, at P110.28 per bag (see Exhs. L and L-1 M and O). 2
A maritime suit 1 was commenced on May 12, 1978 by herein Petitioner Philippine American General Insurance Co., Inc.
Before trial, a compromise agreement was entered into between petitioners, as plaintiffs, and defendants S.C.I. Line and F.E.
(Philamgen) and Tagum Plastics, Inc. (TPI) against private respondents Sweet Lines, Inc. (SLI) and Davao Veterans Arrastre and
Zuellig, upon the latter's payment of P532.65 in settlement of the claim against them. Whereupon, the trial court in its order of
Port Services, Inc. (DVAPSI), along with S.C.I. Line (The Shipping Corporation of India Limited) and F.E. Zuellig, Inc., as co-
August 12, 1981 3 granted plaintiffs' motion to dismiss grounded on said amicable settlement and the case as to S.C.I. Line and
defendants in the court a quo, seeking recovery of the cost of lost or damaged shipment plus exemplary damages, attorney's
F.E. Zuellig was consequently "dismissed with prejudice and without pronouncement as to costs."
fees and costs allegedly due to defendants' negligence, with the following factual backdrop yielded by the findings of the court
below and adopted by respondent court:
The trial court thereafter rendered judgment in favor of herein petitioners on this dispositive portion:
It would appear that in or about March 1977, the vessel SS "VISHVA YASH" belonging to or operated by the foreign common
WHEREFORE, judgment is hereby rendered in favor of the plaintiff Philippine General American Insurance
carrier, took on board at Baton Rouge, LA, two (2) consignments of cargoes for shipment to Manila and later for transhipment
Company Inc. and against the remaining defendants, Sweet Lines Inc. and Davao Veterans Arrastre Inc. as
to Davao City, consisting of 600 bags Low Density Polyethylene 631 and another 6,400 bags Low Density Polyethylene 647, both
follows:
consigned to the order of Far East Bank and Trust Company of Manila, with arrival notice to Tagum Plastics, Inc., Madaum,
Tagum, Davao City. Said cargoes were covered, respectively, by Bills of Lading Nos. 6 and 7 issued by the foreign common carrier
Defendant Sweet Lines, Inc. is ordered to pay said plaintiff the sum of P34,902.00, with legal interest
(Exhs. E and F). The necessary packing or Weight List (Exhs. A and B), as well as the Commercial Invoices (Exhs. C and D)
thereon from date of extrajudicial demand on April 28, 1978 (Exh. M) until fully paid;
accompanied the shipment. The cargoes were likewise insured by the Tagum Plastics Inc. with plaintiff Philippine American
General Insurance Co., Inc., (Exh. G).
Defendant Sweet Lines Inc. and Davao Veterans Arrastre and (Port) Services Inc. are directed to pay
jointly and severally, the plaintiff the sum of P49,747.55, with legal interest thereon from April 28, 1978
In the course of time, the said vessel arrived at Manila and discharged its cargoes in the Port of Manila for transhipment to
until fully paid;
Davao City. For this purpose, the foreign carrier awaited and made use of the services of the vessel called M/V "Sweet Love"
owned and operated by defendant interisland carrier.
Each of said defendants are ordered to pay the plaintiffs the additional sum of P5,000 is reimbursable
attorney's fees and other litigation expenses;
Subject cargoes were loaded in Holds Nos. 2 and 3 of the interisland carrier. These were commingled with similar cargoes
belonging to Evergreen Plantation and also Standfilco.
Each of said defendants shall pay one-fourth (1/4) costs. 4
On May 15, 1977, the shipment(s) were discharged from the interisland carrier into the custody of the consignee. A later survey
Due to the reversal on appeal by respondent court of the trial court's decision on the ground of prescription, 5 in effect
conducted on July 8, 1977, upon the instance of the plaintiff, shows the following:
dismissing the complaint of herein petitioners, and the denial of their motion for reconsideration, 6 petitioners filed the instant
petition for review on certiorari, faulting respondent appellate court with the following errors: (1) in upholding, without proof,
Of the cargo covered by Bill of Lading No. 25 or (2)6, supposed to contain 6,400 bags of Low Density Polyethylene 647 originally
the existence of the so-called prescriptive period; (2) granting arguendo that the said prescriptive period does exist, in not
inside 160 pallets, there were delivered to the consignee 5,413 bags in good order condition. The survey shows shortages,
finding the same to be null and void; and (3) assuming arguendo that the said prescriptive period is valid and legal, in failing to
damages and losses to be as follows:
conclude that petitioners substantially complied therewith. 7
Undelivered/Damaged bags as tallied during discharge from vessel-173 bags; undelivered and damaged as noted
Parenthetically, we observe that herein petitioners are jointly pursuing this case, considering their common interest in the
and observed whilst stored at the pier-699 bags; and shortlanded-110 bags (Exhs. P and P-1).
shipment subject of the present controversy, to obviate any question as to who the real party in interest is and to protect their
respective rights as insurer and insured. In any case, there is no impediment to the legal standing of Petitioner Philamgen, even
Of the 600 bags of Low Density Polyethylene 631, the survey conducted on the same day shows an actual delivery to the
if it alone were to sue herein private respondents in its own capacity as insurer, it having been subrogated to all rights of
consignee of only 507 bags in good order condition. Likewise noted were the following losses, damages and shortages, to wit:
recovery for loss of or damage to the shipment insured under its Marine Risk Note No. 438734 dated March 31, 1977 8 in view
of the full settlement of the claim thereunder as evidenced by the subrogation receipt 9 issued in its favor by Far East Bank and
Undelivered/damaged bags and tally sheets during discharge from vessel-17 bags.
Trust Co., Davao Branch, for the account of petitioner TPI.
Undelivered and damaged as noted and observed whilst stored at the pier-66 bags; Shortlanded-10 bags.
Upon payment of the loss covered by the policy, the insurer's entitlement to subrogation pro tanto, being of the highest equity,
equips it with a cause of action against a third party in case of contractual breach. 10 Further, the insurer's subrogatory right to

219
sue for recovery under the bill of lading in case of loss of or damage to the cargo is jurisprudentially upheld. 11 However, if an
insurer, in the exercise of its subrogatory right, may proceed against the erring carrier and for all intents and purposes stands in
the place and in substitution of the consignee, a fortiori such insurer is presumed to know and is just as bound by the
contractual terms under the bill of lading as the insured.
On the first issue, petitioners contend that it was error for the Court of Appeals to reverse the appealed decision on the
supposed ground of prescription when SLI failed to adduce any evidence in support thereof and that the bills of lading said to
contain the shortened periods for filing a claim and for instituting a court action against the carrier were never offered in
evidence. Considering that the existence and tenor of this stipulation on the aforesaid periods have allegedly not been
established, petitioners maintain that it is inconceivable how they can possibly comply therewith. 12 In refutation, SLI avers that
it is standard practice in its operations to issue bills of lading for shipments entrusted to it for carriage and that it in fact issued
bills of lading numbered MD-25 and MD-26 therefor with proof of their existence manifest in the records of the case. 13 For its
part, DVAPSI insists on the propriety of the dismissal of the complaint as to it due to petitioners' failure to prove its direct
responsibility for the loss of and/or damage to the cargo. 14
On this point, in denying petitioner's motion for reconsideration, the Court of Appeals resolved that although the bills of lading
were not offered in evidence, the litigation obviously revolves on such bills of lading which are practically the documents or
contracts sued upon, hence, they are inevitably involved and their provisions cannot be disregarded in the determination of the
relative rights of the parties thereto. 15
Respondent court correctly passed upon the matter of prescription, since that defense was so considered and controverted by
the parties. This issue may accordingly be taken cognizance of by the court even if not inceptively raised as a defense so long as
its existence is plainly apparent on the face of relevant pleadings. 16 In the case at bar, prescription as an affirmative defense
was seasonably raised by SLI in its answer, 17 except that the bills of lading embodying the same were not formally offered in
evidence, thus reducing the bone of contention to whether or not prescription can be maintained as such defense and, as in
this case, consequently upheld on the strength of mere references thereto.
As petitioners are suing upon SLI's contractual obligation under the contract of carriage as contained in the bills of lading, such
bills of lading can be categorized as actionable documents which under the Rules must be properly pleaded either as causes of
action or defenses, 18 and the genuineness and due execution of which are deemed admitted unless specifically denied under
oath by the adverse party. 19 The rules on actionable documents cover and apply to both a cause of action or defense based on
said documents. 20
In the present case and under the aforestated assumption that the time limit involved is a prescriptive period, respondent
carrier duly raised prescription as an affirmative defense in its answer setting forth paragraph 5 of the pertinent bills of lading
which comprised the stipulation thereon by parties, to wit:
5. Claims for shortage, damage, must be made at the time of delivery to consignee or agent, if container shows
exterior signs of damage or shortage. Claims for non-delivery, misdelivery, loss or damage must be filed within 30
days from accrual. Suits arising from shortage, damage or loss, non-delivery or misdelivery shall be instituted within
60 days from date of accrual of right of action. Failure to file claims or institute judicial proceedings as herein
provided constitutes waiver of claim or right of action. In no case shall carrier be liable for any delay, non-delivery,
misdelivery, loss of damage to cargo while cargo is not in actual custody of carrier. 21
In their reply thereto, herein petitioners, by their own assertions that —
2. In connection with Pars. 14 and 15 of defendant Sweet Lines, Inc.'s Answer, plaintiffs state that such agreements
are what the Supreme Court considers as contracts of adhesion (see Sweet Lines, Inc. vs. Hon. Bernardo Teves, et al.,
G.R. No. L-37750, May 19, 1978) and, consequently, the provisions therein which are contrary to law and public
policy cannot be availed of by answering defendant as valid defenses. 22
220
thereby failed to controvert the existence of the bills of lading and the aforequoted provisions therein, hence they impliedly
admitted the same when they merely assailed the validity of subject stipulations.
Petitioners' failure to specifically deny the existence, much less the genuineness and due execution, of the instruments in
question amounts to an admission. Judicial admissions, verbal or written, made by the parties in the pleadings or in the course
of the trial or other proceedings in the same case are conclusive, no evidence being required to prove the same, and cannot be
contradicted unless shown to have been made through palpable mistake or that no such admission was made. 23 Moreover,
when the due execution and genuineness of an instrument are deemed admitted because of the adverse party's failure to make
a specific verified denial thereof, the instrument need not be presented formally in evidence for it may be considered an
admitted fact. 24
Even granting that petitioners' averment in their reply amounts to a denial, it has the procedural earmarks of what in the law
on pleadings is called a negative pregnant, that is, a denial pregnant with the admission of the substantial facts in the pleading
responded to which are not squarely denied. It is in effect an admission of the averment it is directed to. 25 Thus, while
petitioners objected to the validity of such agreement for being contrary to public policy, the existence of the bills of lading and
said stipulations were nevertheless impliedly admitted by them.
We find merit in respondent court's comments that petitioners failed to touch on the matter of the non-presentation of the
bills of lading in their brief and earlier on in the appellate proceedings in this case, hence it is too late in the day to now allow
the litigation to be overturned on that score, for to do so would mean an over-indulgence in technicalities. Hence, for the
reasons already advanced, the non-inclusion of the controverted bills of lading in the formal offer of evidence cannot, under
the facts of this particular case, be considered a fatal procedural lapse as would bar respondent carrier from raising the defense
of prescription. Petitioners' feigned ignorance of the provisions of the bills of lading, particularly on the time limitations for
filing a claim and for commencing a suit in court, as their excuse for non-compliance therewith does not deserve serious
attention.
It is to be noted that the carriage of the cargo involved was effected pursuant to an "Application for Delivery of Cargoes without
Original Bill of Lading" issued on May 20, 1977 in Davao City 26 with the notation therein that said application corresponds to
and is subject to the terms of bills of lading MD-25 and MD-26. It would be a safe assessment to interpret this to mean that,
sight unseen, petitioners acknowledged the existence of said bills of lading. By having the cargo shipped on respondent carrier's
vessel and later making a claim for loss on the basis of the bills of lading, petitioners for all intents and purposes accepted said
bills. Having done so they are bound by all stipulations contained therein. 27 Verily, as petitioners are suing for recovery on the
contract, and in fact even went as far as assailing its validity by categorizing it as a contract of adhesion, then they necessarily
admit that there is such a contract, their knowledge of the existence of which with its attendant stipulations they cannot now
be allowed to deny.
On the issue of the validity of the controverted paragraph 5 of the bills of lading above quoted which unequivocally prescribes a
time frame of thirty (30) days for filing a claim with the carrier in case of loss of or damage to the cargo and sixty (60) days from
accrual of the right of action for instituting an action in court, which periods must concur, petitioners posit that the alleged
shorter prescriptive period which is in the nature of a limitation on petitioners' right of recovery is unreasonable and that SLI
has the burden of proving otherwise, citing the earlier case of Southern Lines, Inc. vs. Court of Appeals, et al. 28 They postulate
this on the theory that the bills of lading containing the same constitute contracts of adhesion and are, therefore, void for being
contrary to public policy, supposedly pursuant to the dictum in Sweet Lines, Inc. vs. Teves, et al. 29
Furthermore, they contend, since the liability of private respondents has been clearly established, to bar petitioners' right of
recovery on a mere technicality will pave the way for unjust enrichment. 30 Contrarily, SLI asserts and defends the
reasonableness of the time limitation within which claims should be filed with the carrier; the necessity for the same, as this
condition for the carrier's liability is uniformly adopted by nearly all shipping companies if they are to survive the concomitant
rigors and risks of the shipping industry; and the countervailing balance afforded by such stipulation to the legal presumption of
negligence under which the carrier labors in the event of loss of or damage to the cargo. 31
It has long been held that Article 366 of the Code of Commerce applies not only to overland and river transportation but also to
maritime
transportation. 32 Moreover, we agree that in this jurisdiction, as viewed from another angle, it is more accurate to state that
the filing of a claim with the carrier within the time limitation therefor under Article 366 actually constitutes a condition
precedent to the accrual of a right of action against a carrier for damages caused to the merchandise. The shipper or the
consignee must allege and prove the fulfillment of the condition and if he omits such allegations and proof, no right of action
against the carrier can accrue in his favor. As the requirements in Article 366, restated with a slight modification in the assailed
paragraph 5 of the bills of lading, are reasonable conditions precedent, they are not limitations of action. 33 Being conditions
precedent, their performance must precede a suit for enforcement 34and the vesting of the right to file spit does not take place
until the happening of these conditions. 35
Now, before an action can properly be commenced all the essential elements of the cause of action must be in existence, that
is, the cause of action must be complete. All valid conditions precedent to the institution of the particular action, whether
prescribed by statute, fixed by agreement of the parties or implied by law must be performed or complied with before
commencing the action, unless the conduct of the adverse party has been such as to prevent or waive performance or excuse
non-performance of the condition. 36
It bears restating that a right of action is the right to presently enforce a cause of action, while a cause of action consists of the
operative facts which give rise to such right of action. The right of action does not arise until the performance of all conditions
precedent to the action and may be taken away by the running of the statute of limitations, through estoppel, or by other
circumstances which do not affect the cause of action. 37 Performance or fulfillment of all conditions precedent upon which a
right of action depends must be sufficiently alleged, 38considering that the burden of proof to show that a party has a right of
action is upon the person initiating the suit. 39
More particularly, where the contract of shipment contains a reasonable requirement of giving notice of loss of or injury to the
goods, the giving of such notice is a condition precedent to the action for loss or injury or the right to enforce the carrier's
liability. Such requirement is not an empty formalism. The fundamental reason or purpose of such a stipulation is not to relieve
the carrier from just liability, but reasonably to inform it that the shipment has been damaged and that it is charged with
liability therefor, and to give it an opportunity to examine the nature and extent of the injury. This protects the carrier by
affording it an opportunity to make an investigation of a claim while the matter is fresh and easily investigated so as to
safeguard itself from false and fraudulent claims. 40
Stipulations in bills of lading or other contracts of shipment which require notice of claim for loss of or damage to goods
shipped in order to impose liability on the carrier operate to prevent the enforcement of the contract when not complied with,
that is, notice is a condition precedent and the carrier is not liable if notice is not given in accordance with the stipulation, 41 as
the failure to comply with such a stipulation in a contract of carriage with respect to notice of loss or claim for damage bars
recovery for the loss or damage suffered. 42
On the other hand, the validity of a contractual limitation of time for filing the suit itself against a carrier shorter than the
statutory period therefor has generally been upheld as such stipulation merely affects the shipper's remedy and does not affect
the liability of the carrier. In the absence of any statutory limitation and subject only to the requirement on the reasonableness
of the stipulated limitation period, the parties to a contract of carriage may fix by agreement a shorter time for the bringing of
suit on a claim for the loss of or damage to the shipment than that provided by the statute of limitations. Such limitation is not
contrary to public policy for it does not in any way defeat the complete vestiture of the right to recover, but merely requires the
assertion of that right by action at an earlier period than would be necessary to defeat it through the operation of the ordinary
statute of limitations. 43
In the case at bar, there is neither any showing of compliance by petitioners with the requirement for the filing of a notice of
claim within the prescribed period nor any allegation to that effect. It may then be said that while petitioners may possibly have
a cause of action, for failure to comply with the above condition precedent they lost whatever right of action they may have in
their favor or, token in another sense, that remedial right or right to relief had prescribed. 44
221
The shipment in question was discharged into the custody of the consignee on May 15, 1977, and it was from this date that
petitioners' cause of action accrued, with thirty (30) days therefrom within which to file a claim with the carrier for any loss or
damage which may have been suffered by the cargo and thereby perfect their right of action. The findings of respondent court
as supported by petitioners' formal offer of evidence in the court below show that the claim was filed with SLI only on April 28,
1978, way beyond the period provided in the bills of lading 45 and violative of the contractual provision, the inevitable
consequence of which is the loss of petitioners' remedy or right to sue. Even the filing of the complaint on May 12, 1978 is of
no remedial or practical consequence, since the time limits for the filing thereof, whether viewed as a condition precedent or as
a prescriptive period, would in this case be productive of the same result, that is, that petitioners had no right of action to begin
with or, at any rate, their claim was time-barred.
What the court finds rather odd is the fact that petitioner TPI filed a provisional claim with DVAPSI as early as June 14,
1977 46 and, as found by the trial court, a survey fixing the extent of loss of and/or damage to the cargo was conducted on July
8, 1977 at the instance of petitioners. 47 If petitioners had the opportunity and awareness to file such provisional claim and to
cause a survey to be conducted soon after the discharge of the cargo, then they could very easily have filed the necessary
formal, or even a provisional, claim with SLI itself 48 within the stipulated period therefor, instead of doing so only on April 28,
1978 despite the vessel's arrival at the port of destination on May 15, 1977. Their failure to timely act brings us to no inference
other than the fact that petitioners slept on their rights and they must now face the consequences of such inaction.
The ratiocination of the Court of Appeals on this aspect is worth reproducing:
It must be noted, at this juncture, that the aforestated time limitation in the presentation of claim for loss or damage, is but a
restatement of the rule prescribed under Art. 366 of the Code of Commerce which reads as follows:
Art. 366. Within the twenty-four hours following the receipt of the merchandise, the claim against the carrier for damage or
average which may be found therein upon opening the packages, may be made, provided that the indications of the damage or
average which gives rise to the claim cannot be ascertained from the outside part of the packages, in which case the claims
shall be admitted only at the time of the receipt.
After the periods mentioned have elapsed, or the transportation charges have been paid, no claim shall be admitted against the
carrier with regard to the condition in which the goods transported were delivered.
Gleanable therefrom is the fact that subject stipulation even lengthened the period for presentation of claims thereunder. Such
modification has been sanctioned by the Supreme Court. In the case of Ong Yet (M)ua Hardware Co., Inc. vs. Mitsui Steamship
Co., Ltd., et al., 59 O.G. No. 17, p. 2764, it ruled that Art. 366 of the Code of Commerce can be modified by a bill of lading
prescribing the period of 90 days after arrival of the ship, for filing of written claim with the carrier or agent, instead of the 24-
hour time limit after delivery provided in the aforecited legal provision.
Tested, too, under paragraph 5 of said Bill of Lading, it is crystal clear that the commencement of the instant suit on May 12,
1978 was indeed fatally late. In view of the express provision that "suits arising from
. . . damage or loss shall be instituted within 60 days from date of accrual of right of action," the present action necessarily fails
on ground of prescription.
In the absence of constitutional or statutory prohibition, it is usually held or recognized that it is competent for the
parties to a contract of shipment to agree on a limitation of time shorter than the statutory period, within which
action for breach of the contract shall be brought, and such limitation will be enforced if reasonable . . . (13 C.J.S.
496-497)
A perusal of the pertinent provisions of law on the matter would disclose that there is no constitutional or statutory
prohibition infirming paragraph 5 of subject Bill of Lading. The stipulated period of 60 days is reasonable enough for
appellees to ascertain the facts and thereafter to sue, if need be, and the 60-day period agreed upon by the parties
which shortened the statutory period within which to bring action for breach of contract is valid and binding. . . .
(Emphasis in the original text.) 49
As explained above, the shortened period for filing suit is not unreasonable and has in fact been generally recognized to be a
valid business practice in the shipping industry. Petitioners' advertence to the Court's holding in the Southern Lines case, supra,
is futile as what was involved was a claim for refund of excess payment. We ruled therein that non-compliance with the
requirement of filing a notice of claim under Article 366 of the Code of Commerce does not affect the consignee's right of
action against the carrier because said requirement applies only to cases for recovery of damages on account of loss of or
damage to cargo, not to an action for refund of overpayment, and on the further consideration that neither the Code of
Commerce nor the bills of lading therein provided any time limitation for suing for refund of money paid in excess, except only
that it be filed within a reasonable time.
The ruling in Sweet Lines categorizing the stipulated limitation on venue of action provided in the subject bill of lading as a
contract of adhesion and, under the circumstances therein, void for being contrary to public policy is evidently likewise
unavailing in view of the discrete environmental facts involved and the fact that the restriction therein was unreasonable. In
any case, Ong Yiu vs. Court of Appeals, et al., 50 instructs us that "contracts of adhesion wherein one party imposes a ready-
made form of contract on the other . . . are contracts not entirely prohibited. The one who adheres to the contract is in reality
free to reject it entirely; if he adheres he gives his consent." In the present case, not even an allegation of ignorance of a party
excuses non-compliance with the contractual stipulations since the responsibility for ensuring full comprehension of the
provisions of a contract of carriage devolves not on the carrier but on the owner, shipper, or consignee as the case may be.
While it is true that substantial compliance with provisions on filing of claim for loss of or damage to cargo may sometimes
suffice, the invocation of such an assumption must be viewed vis-a-vis the object or purpose which such a provision seeks to
attain and that is to afford the carrier a reasonable opportunity to determine the merits and validity of the claim and to protect
itself against unfounded impositions. 51 Petitioners' would nevertheless adopt an adamant posture hinged on the issuance by
SLI of a "Report on Losses and Damages," dated May 15, 1977, 52 from which petitioners theorize that this charges private
respondents with actual knowledge of the loss and damage involved in the present case as would obviate the need for or
render superfluous the filing of a claim within the stipulated period.
Withal, it has merely to be pointed out that the aforementioned report bears this notation at the lower part thereof: "Damaged
by Mla. labor upon unloading; B/L noted at port of origin," as an explanation for the cause of loss of and/or damage to the
cargo, together with an iterative note stating that "(t)his Copy should be submitted together with your claim invoice or receipt
within 30 days from date of issue otherwise your claim will not be honored."
Moreover, knowledge on the part of the carrier of the loss of or damage to the goods deducible from the issuance of said
report is not equivalent to nor does it approximate the legal purpose served by the filing of the requisite claim, that is, to
promptly apprise the carrier about a consignee's intention to file a claim and thus cause the prompt investigation of the
veracity and merit thereof for its protection. It would be an unfair imposition to require the carrier, upon discovery in the
process of preparing the report on losses or damages of any and all such loss or damage, to presume the existence of a claim
against it when at that time the carrier is expectedly concerned merely with accounting for each and every shipment and
assessing its condition. Unless and until a notice of claim is therewith timely filed, the carrier cannot be expected to presume
that for every loss or damage tallied, a corresponding claim therefor has been filed or is already in existence as would alert it to
the urgency for an immediate investigation of the soundness of the claim. The report on losses and damages is not the claim
referred to and required by the bills of lading for it does not fix responsibility for the loss or damage, but merely states the
condition of the goods shipped. The claim contemplated herein, in whatever form, must be something more than a notice that
the goods have been lost or damaged; it must contain a claim for compensation or indicate an intent to claim. 53
Thus, to put the legal effect of respondent carrier's report on losses or damages, the preparation of which is standard
procedure upon unloading of cargo at the port of destination, on the same level as that of a notice of claim by imploring
substantial compliance is definitely farfetched. Besides, the cited notation on the carrier's report itself makes it clear that the
filing of a notice of claim in any case is imperative if carrier is to be held liable at all for the loss of or damage to cargo.
Turning now to respondent DVAPSI and considering that whatever right of action petitioners may have against respondent
carrier was lost due to their failure to seasonably file the requisite claim, it would be awkward, to say the least, that by some
convenient process of elimination DVAPSI should proverbially be left holding the bag, and it would be pure speculation to
222
assume that DVAPSI is probably responsible for the loss of or damage to cargo. Unlike a common carrier, an arrastre operator
does not labor under a presumption of negligence in case of loss, destruction or deterioration of goods discharged into its
custody. In other words, to hold an arrastre operator liable for loss of and/or damage to goods entrusted to it there must be
preponderant evidence that it did not exercise due diligence in the handling and care of the goods.
Petitioners failed to pinpoint liability on any of the original defendants and in this seemingly wild goose-chase, they cannot
quite put their finger down on when, where, how and under whose responsibility the loss or damage probably occurred, or as
stated in paragraph 8 of their basic complaint filed in the court below, whether "(u)pon discharge of the cargoes from the
original carrying vessel, the SS VISHVA YASH," and/or upon discharge of the cargoes from the interisland vessel the MV "SWEET
LOVE," in Davao City and later while in the custody of defendant arrastre operator. 54
The testimony of petitioners' own witness, Roberto Cabato, Jr., Marine and Aviation Claims Manager of petitioner Philamgen,
was definitely inconclusive and the responsibility for the loss or damage could still not be ascertained therefrom:
Q In other words, Mr. Cabato, you only computed the loss on the basis of the figures submitted to you and based on the
documents like the survey certificate and the certificate of the arrastre?
A Yes, sir.
Q Therefore, Mr. Cabato, you have no idea how or where these losses were incurred?
A No, sir.
Q Mr. Witness, you said that you processed and investigated the claim involving the shipment in question. Is it not a fact that in
your processing and investigation you considered how the shipment was transported? Where the losses could have occurred
and what is the extent of the respective responsibilities of the bailees and/or carriers involved?
A With respect to the shipment being transported, we have of course to get into it in order to check whether the shipment
coming in to this port is in accordance with the policy condition, like in this particular case, the shipment was transported to
Manila and transhipped through an interisland vessel in accordance with the policy. With respect to the losses, we have a
general view where losses could have occurred. Of course we will have to consider the different bailees wherein the shipment
must have passed through, like the ocean vessel, the interisland vessel and the arrastre, but definitely at that point and time we
cannot determine the extent of each liability. We are only interested at that point and time in the liability as regards the
underwriter in accordance with the policy that we issued.
Q Mr. Witness, from the documents, namely, the survey of Manila Adjusters and Surveyors Company, the survey of Davao
Arrastre contractor and the bills of lading issued by the defendant Sweet Lines, will you be able to tell the respective liabilities
of the bailees and/or carriers concerned?
A No, sir. (Emphasis ours.) 55
Neither did nor could the trial court, much less the Court of Appeals, precisely establish the stage in the course of the shipment
when the goods were lost, destroyed or damaged. What can only be inferred from the factual findings of the trial court is that
by the time the cargo was discharged to DVAPSI, loss or damage had already occurred and that the same could not have
possibly occurred while the same was in the custody of DVAPSI, as demonstrated by the observations of the trial court quoted
at the start of this opinion.
ACCORDINGLY, on the foregoing premises, the instant petition is DENIED and the dismissal of the complaint in the court a
quo as decreed by respondent Court of Appeals in its challenged judgment is hereby AFFIRMED.
SO ORDERED.
Ang vs. American Steamship Agencies, 125 SCRA 543;
 EN BANC
G.R. No. L-22491 January 27, 1967
DOMINGO ANG, plaintiff-appellant,
vs.
AMERICAN STEAMSHIP AGENCIES, INC., defendant-appellee.
BENGZON, J.P., J.:
Yau Yue Commercial Bank Ltd. of Hongkong, referred to hereafter as Yau Yue agreed to sell 140 packages of galvanized steel
durzinc sheets to one Herminio G. Teves (the date of said agreement is not shown in the record here) for the sum of $32,458.26
(US). Said agreement was subject to the following terms and arrangements: (a) the purchase price should be covered by a bank
draft for the corresponding amount which should be paid by Herminio G. Teves in exchange for the delivery to him of the
corresponding bill of lading to be deposited with a local bank, the Hongkong & Shanghai Bank of Manila (b) upon arrival of the
articles in Manila, Teves would be notified and he would have to pay the amount called for in the corresponding demand draft,
after which the bill of lading would be delivered to him; and (c) Teves would present said bill of lading to the carrier's agent,
American Steamship Agencies, Inc. which would then issue the corresponding "Permit To Deliver Imported Articles" to be
presented to the Bureau of Customs to obtain the release of the articles.
Pursuant to said terms and arrangements, Yau Yue through Tokyo Boeki Ltd. of Tokyo, Japan, shipped the articles at Yawata,
Japan, on April 30, 1961 aboard the S.S. TENSAI MARU, Manila, belonging to the Nissho Shipping Co., Ltd. of Japan, of which the
American Steamship Agencies, Inc. is the agent in the Philippines, under a shipping agreement, Bill of Lading No. WM-2 dated
April 30, 1961, consigned "to order of the shipper with Herminio G. Teves as the party to be notified of the arrival of the 140
packages of galvanized steel durzinc sheets in Manila.
The bill of lading was indorsed to the order of and delivered to Yau Yue by the shipper. Upon receipt thereof, Yau Yue drew a
demand draft together with the bill of lading against Herminio G. Teves, through the Hongkong & Shanghai Bank.
When the articles arrived in Manila on or about May 9, 1961, Hongkong & Shanghai Bank notified Teves, the "notify party"
under the bill of lading, of the arrival of the goods and requested payment of the demand draft representing the purchase price
of the articles. Teves, however, did not pay the demand draft, prompting the bank to make the corresponding protest. The bank
likewise returned the bill of lading and demand draft to Yau Yue which indorsed the said bill of lading to Domingo Ang.
Meanwhile, despite his non-payment of the purchase price of the articles, Teves was able to obtain a bank guaranty in favor of
the American Steamship Agencies, Inc., as carrier's agent, to the effect that he would surrender the original and negotiable bill
of lading duly indorsed by Yau Yue. On the strength of this guaranty, Teves succeeded in securing a "Permit To Deliver Imported
Articles" from the carrier's agent, which he presented to the Bureau of Customs which in turn released to him the articles
covered by the bill of lading.
Subsequently, Domingo Ang claimed for the articles from American Steamship Agencies, Inc., by presenting the indorsed bill of
lading, but he was informed by the latter that it had delivered the articles to Teves.
On October 30, 1963 Domingo Ang filed a complaint in the Court of First Instance of Manila against the American Steamship
Agencies, Inc., for having allegedly wrongfully delivered and/or converted the goods covered by the bill of lading belonging to
plaintiff Ang, to the damage and prejudice of the latter.
On December 2, 1963, defendant filed a motion to dismiss upon the ground that plaintiff's cause of action has prescribed under
the Carriage of Goods by Sea Act (Commonwealth Act No. 65), more particularly Section 3 (6), paragraph 4, which provides:
In any event, the carrier and the ship shall be discharged from all liability in respect to loss or damage unless suit is
brought within one year, after delivery of the goods or the date when the goods should have been delivered.
223
It argued that the cargo should have been delivered to the person entitled to the delivery thereof (meaning the
plaintiff) on May 9, 1961, the date of the vessel's arrival in Manila, and that even allowing a reasonable time (even
one month) after such arrival within which to make delivery, still, the action commenced on October 30, 1963 was
filed beyond the prescribed period of one year.
By order dated December 21, 1963, copy of which was received by plaintiff on December 26, 1963, the lower court dismissed
the action on the ground of prescription. His motion for reconsideration dated December 26, 1963 having been denied by the
lower court in its order dated January 13, 1964, plaintiff appealed directly to this Court on a question of law: Has plaintiff-
appellant's cause of action prescribed under Section 3(6), paragraph 4 of the Carriage of Goods by Sea Act?
The provision of law involved in this case speaks of "loss or damage". That there was no damage caused to the goods which
were delivered intact to Herminio G. Teves who did not file any notice of damage, is admitted by both parties in this case. What
is to be resolved — in order to determine the applicability of the prescriptive period of one year to the case at bar — is whether
or not there was "loss" of the goods subject matter of the complaint.
Nowhere is "loss" defined in the Carriage of Goods by Sea Act. Therefore, recourse must be had to the Civil Code which
provides in Article 18 thereof that, "In matters which are governed by the Code of Commerce and special laws, their deficiency
shall be supplied by the provisions of this Code."
Article 1189 of the Civil Code defines the word "loss" in cases where conditions have been imposed with the intention of
suspending the efficacy of an obligation to give. The contract of carriage under consideration entered into by and between
American Steamship Agencies, Inc. and the Yau Yue (which later on endorsed the bill of lading covering the shipment to plaintiff
herein Domingo Ang), is one involving an obligation to give or to deliver the goods "to the order of shipper", that is, upon the
presentation and surrender of the bill of lading. This being so, said article can be applied to the present controversy, more
specifically paragraph 2 thereof which provides that, "... it is understood that a thing is lost when it perishes, or goes out of
commerce, or disappears in such a way that its existence unknown or it cannot be recovered."
As defined in the Civil Code and as applied to Section 3 (6) paragraph 4 of the Carriage of Goods by Sea Act, "loss" contemplates
merely a situation where no delivery at all was made by the shipper of the goods because the same had perished, gone out of
commerce, or disappeared that their existence is unknown or they cannot be recovered. It does not include a situation where
there was indeed delivery — but delivery to the wrong person, or a misdelivery, as alleged in the complaint in this case.
The distinction between non-delivery and misdelivery has reference to bills of lading. As this Court shall in Tan Pho vs.
Hassamal Dalamal, 67 Phil. 555, 557-558:
Considering that the bill of lading covering the goods in question has been made to order, which means that said
goods cannot be delivered without previous payment of the value thereof, it is evident that, the said goods having
been delivered to Aldeguer without paying the price of the same, these facts constitute misdelivery and not
nondelivery, because their was in fact delivery of merchandise. We do not believe it can be seriously and reasonably
argued that what took place, as contended of by the petitioner, is a case of misdelivery with respect to Aldeguer and
at the same time nondelivery with respect to the PNB who had the bill of lading, because the only thing to consider
in this question is whether Enrique Aldeguer was entitled to get the merchandise or whether, on the contrary, the
PNB is the one entitled thereto. Under the facts, the defendant petitioner should not have delivered the goods to
Aldeguer but to the Philippine National Bank. Having made the delivery to Aldeguer, the delivery is a case of
misdelivery. If the goods have been delivered, it cannot at the same time be said that they have not been delivered.
According to the bill of lading which was issued in the case at bar to the order of the shipper, the carrier was under a
duty not to deliver the merchandise mentioned in the bill of lading except upon presentation of the bill of lading
duly endorsed by the shipper. (10 C.J., 259) Hence, the defendant-petitioner Tan Pho having delivered the goods to
Enrique Aldeguer without the presentation by the latter of the bill of lading duly endorsed to him by the shipper, the
said defendant made a misdelivery and violated the bill of lading, because his duty was not only to transport the
goods entrusted to him safely, but to deliver them to the person indicated in the bill of lading. (Emphasis supplied)
Now, it is well settled in this jurisdiction that when a defendant files a motion to dismiss, he thereby hypothetically admits the
truth of the allegations of fact contained in the complaint (Philippine National Bank v. Hipolito, et al., L-16463, Jan. 30, 1965;
Republic v. Ramos, L-15484, Jan. 31, 1963; Pascual v. Secretary of Public Works & Communications, L-10405, Dec. 29, 1960;
Pangan v. Evening News Publishing Co., Inc., L-13308, Dec. 29, 1960). Thus, defendant-appellant having filed a motion to
dismiss, it is deemed to have admitted, hypothetically, paragraphs 6, 7 and 8 of the complaint, and these alleges:
6. — That, when the said articles arrived in Manila, the defendant authorized the delivery thereof to Herminio G.
Teves, through the issuance of the corresponding Permit To Deliver Imported Articles, without the knowledge and
consent of the plaintiff, who is the holder in due course of said bill of lading, notwithstanding the fact that the said
Herminio G. Teves could not surrender the corresponding bill of lading; .
7. — That, without any evidence of the fact that Herminio G. Teves is the holder of the corresponding bill of lading in
due course; without the surrender of the bill of lading without the knowledge and consent of the plaintiff, as holder
thereof in due course, and in violation of the provision on the bill of lading which requires that the articles are only
to be delivered to the person who is the holder in due course of the said bill of lading, or his order, the defendant
issued the corresponding 'Permit To Deliver Imported Articles' in favor of the defendant, without the knowledge and
consent of the plaintiff as holder in due course of said bill of lading, which, originally was Yau Yue subsequently, the
plaintiff Domingo Ang;
8. — That, as a result of the issuance by the defendant of said permit, Herminio G. Teves was able to secure the
release of the articles from the Bureau of Customs, which is not legally possible without the presentation of said
permit to the said Bureau; ...
From the allegations of the complaint, therefore, the goods cannot be deemed "lost". They were delivered to Herminio G.
Teves, so that there can only be either delivery, if Teves really was entitled to receive them, or misdelivery, if he was not so
entitled. It is not for Us now to resolve whether or not delivery of the goods to Teves was proper, that is, whether or not there
was rightful delivery or misdelivery.
The point that matters here is that the situation is either delivery or misdelivery, but not nondelivery. Thus, the goods were
either rightly delivered or misdelivered, but they were not lost. There being no loss or damage to the goods, the aforequoted
provision of the Carriage of Good by Sea Act stating that "In any event, the carrier and the ship shall be discharged from all
liability in respect of loss or damage unless suit is brought within one year after delivery of the goods or the date when the
goods should have been delivered," does not apply. The reason is not difficult to see. Said one-year period of limitation is
designed to meet the exigencies of maritime hazards. In a case where the goods shipped were neither last nor damaged in
transit but were, on the contrary, delivered in port to someone who claimed to be entitled thereto, the situation is different,
and the special need for the short period of limitation in cases of loss or damage caused by maritime perils does not obtain.
It follows that for suits predicated not upon loss or damage but on alleged misdelivery (or conversion) of the goods, the
applicable rule on prescription is that found in the Civil Code, namely, either ten years for breach of a written contract or four
years for quasi-delict. (Arts. 1144[1], 1146, Civil Code) In either case, plaintiff's cause of action has not vet prescribed, since his
right of action would have accrued at the earliest on May 9, 1961 when the ship arrived in Manila and he filed suit on October
30, 1963.
Wherefore, the dismissal order appealed from is hereby reversed and set aside and this case is remanded to the court a quo for
further proceedings. No costs. So ordered.
FACTS:
Yau Yae comerical Bank LTD of Hongkong represented by Yau Yae agreed to sell 140 packsges of galvanized steel dursink sheets
to one Herminio G Teves. Said agreement was subject to the terms and arrangements.
224
Pursuant to said terms and arrangements, Yau Yae through Tokyo boeki LTD of Tokyo Japan, shipped the articles at Yakata,
Japan and later to Manila which was processed by American Staemship Agencies INC. in which under a shipping agreement or
bill of lading it consigned to order of the shipper with Mr Teves.
On May 9, 1961 the article arrived in manila, and under the bill of lading of the arrival of the goods and requested payments of
the demand draft representing the purchased price of the article, however, Mr Teves did not pay the demand draft to Hongkong
and Shanghai bank where it was to be processed the payments. Prompting the bank to make corresponding protest and the
bank likewise returned the bill of lading and demand draft to Yau Yae which later endorsed the bill of lading to Domingo Ang.
Meanwhile, despite his non-payments of the purchase price of the articles. Teves was able to obtain a bank guaranty in favor of
American Steamship agencies INC. as carriers agent to the effect that he would surrender the negotiable bill of lading duly
endorsed by Yau Yae on the strength of this guaranty. Teves succeded in securing a permit to deliver imported goods from the
carriers agent, which he presented to Bureau of customs which in turn release to him the articles covered by the bill of lading
Subsequently, Domingo Ang claimed for the articles from the American steamship agencies Inc. by presenting the indorsed bill
of lading, but he was informed by the latter that the articled he claimed was already delivered to Mr. Teves.
ISSUE: Whether or not the American Steamship Agencies Inc. punishable under carriage of goods by Sea act for misdelivery of
goods?
HELD:
When the delivery of articles carried by the herein defendant-appellee (American steamship agencies Inc) on May 9, 1961 to
Herminio Teves but supposedly to Mr Domingo Ang ,plaintiff-appellant and upon knowing by the plaintiff-appellant that the
articles intended to him was misdelivered to other person, he filed in court of first instance of Manila on October 30, 1963
against American Steamship agencies Inc for allegedly wrongful delivery of goods belonging to him. The defendant-appellee
filed motion to dismissed with the contention that the ground of the plaitiff’s caused of action is prescribed under the carriage
of goods by sea act particular section 3(6) paragraph 4, which provides that;
“In any event, the carrier and the ship shall be discharge from all liability in respect to loss or damage unless suit is brought
within one year, after delivery of the goods or date when the goods should have been delivered”
The defendant further contented that the action of the plaintiff-appellant even allowing a reasonable time from the date of
delivery on May 9, 1961, still initiated his action on October 30, 1963 which beyond the prescribed period of One (1) year under
the preceding paragraph. The court rendered it decision dismissing the complaint of the plaintiff, appellant for the ground of
prescription, however the provision involved in this case as mentioned earlier speaks ”loss or damage” despite that the
plaintiff filed motion for reconsideration and it has been denied by the lower court, afterwards, the plaintiff directly appealed to
the higher court for the matter that; has plaintiff-appellant cause of action prescribed under section 3(6) paragraph 4 of the
carriage of goods by sea act?
The court ruled that, the word” loss or damage “as speaks to the provision in this case was not transpired because only the
misdelivery of goods occurred to the defendant, and upon admitted by the defendant in motion to dismissed that the articles
belongs for Mr. Ang has been misdelivered to Mr. Teves.
Therefore it clearly shows that the defendant violates the provision of civil code of the Philppines particular in Article 1144,
which provides; the following actions must be brought within ten (10) years from the time the right of the action accrues,
paragraph (1) upon a written contract and Article 1146, the following action must be instituted within four(4) years, paragraph
(2) quasi delict, wherein it supplies the deficiency provided in article 18 of the same code. To read” in matters which are
governed by the code of commerce and special laws, their deficiency shall be supplied by the provision of this code.”

Wherefore, suits predicated not upon loss or damage but misdelivery of goodsthat so, the defendant was not held liable
for carriage of goods by sea act and the court hereby reversed the dismissal order afterwards remanded to the lower court for
further proceedings.

Facts:
Yau Yue Commercial Bank of Hongkong agreed to sell 140 packages of galvanized steel durzinc sheets to
Herminio Teves for $32,458.26. Said agreement was subject to the following terms: the purchase price should be covered
by a bank draft which should be paidby Teves in exchange for the delivery to him of the bill of lading to be deposited with
honking and Shanghai Bank of Manila; that Teves wouldpresent said bill of lading to carrier’s agent, American Steamship
Agencies which would then issue the “permit to deliver imported articles” tobe presented to the Bureau of customs to obtain
the release of the articles.Yau Yue shipped the articles aboard S.S. Tensai Maru owned by Nissho Shipping Co., of which the
American Shipping is the agent in thePhilippines.When the Articles arrived in manila, Honkong Shanghai’s Bank notified Teves of
the arrival of the goods and requested for the payment of the demand draft. Teves, however, failed to pay the demand draft.
So, the bank returned the bill of lading and the demand draft to Yau Yuewhich endorsed the bill of lading to Domingo
Ang.Despite his non-payment, Teves was able to obtain a bank guarantee in favor of the American Steamship Agencies, the
carrier’s agent.Thus, Teves succeeded in securing a “ permit to deliver imported arti cles” from the carrier ’s
agent, which he presented to the Bureau of Customs, that released the said articles to him.Subsequently, Domingo
Ang claimed the articles from American Steamship, by presenting the indorsed bill of lading, but he was informedthat it had
delivered the articles to Teves. Ang filed a complaint in the Court of First Instance of Manila against American shipping
agencies,for having wrongfully delivered the goods.The American Steamship filed for a motion to dismiss, citing the carriage of
Goods by Sea Act, section 3 paragraph 4, which states: in anyevent, the carrier and the ship shall be discharged from all liability
in respect to loss or damage unless suit is brought within one year, after delivery of goods or the date when the goods should
have been delivered.Thus, the lower court dismissed the action, on the ground of prescription.

Issue: Whether or not the Carriage of Goods by Sea Act Section 3, Paragraph 4, applies to the case at bar?

Held:
The provision of the law speaks of “loss or damage”. But there was no damage caused to the goods which were delivered intact
toHerminio Teves. As defined by the Civil Code and as applied to section 3, paragraph 4, of the Carriage of Goods by sea
Act, “loss” contemplates a situationwhere no delivery at all was made by the shipper of the goods because the same had
perished, gone out of commerce, or disappeared thattheir existence is unknown or they cannot be recovered. It does not
include a situation where there was indeed delivery, but delivery to thewrong person.The applicable rule on prescription is that
found in the Civil Code, either: ten years for breach of contract or four years for quasi-delict. Ineither case, the plaintiff’s cause
of action has not yet prescribed. Thus, the case is remanded to the court a quo for further proceedings

225
Mitsui vs. CA, 287 SCRA 366; (6) Unless notice of loss or damage and the general nature of such loss or damage be given in writing to
the carrier or his agent at the port of discharge or at the time of the removal of the goods into the
custody of the person entitled to delivery thereof under the contract of carriage, such removal shall
SECOND DIVISION
beprima facie evidence of the delivery by the carrier of the goods as described in the bill of lading. If the
loss or damage is not apparent, the notice must be given within three days of the delivery.
G.R. No. 119571 March 11, 1998
Said notice of loss or damage may be endorsed upon the receipt for the goods given by the person taking
MITSUI O.S.K. LINES LTD., represented by MAGSAYSAY AGENCIES, INC., petitioner,
delivery thereof.
vs.
COURT OF APPEALS and LAVINE LOUNGEWEAR MFG. CORP., respondents.
The notice in writing need not be given if the state of the goods has at the time of their receipt been the
subject of joint survey or inspection.
MENDOZA, J.:
In any event the carrier and the ship shall be discharged from all liability in respect of loss or damage
This is a petition for review on certiorari of the January 25, 1995 decision of the Court of Appeals1 and its resolution of March
unless suit is brought within one year after delivery of the goods or the date when the goods should have
22, 1995 denying petitioner's motion for reconsideration. The appellate court upheld orders of Branch 68 (Pasig) of the
been delivered: Provided, that, if a notice of loss or damage, either apparent or concealed, is not given as
Regional Trial Court, National Capital Judicial Region, denying petitioner's motion to dismiss in the original action filed against
provided for in this section, that fact shall not affect or prejudice the right of the shipper to bring suit
petitioner by private respondent.
within one year after the delivery of the goods or the date when the goods should have been delivered.
The facts are not in dispute.2
In the case of any actual or apprehended loss or damage, the carrier and the receiver shall give all
reasonable facilities to each other for inspecting and tallying the goods.
Petitioner Mitsui O.S.K. Lines Ltd. is a foreign corporation represented in the Philippines by its agent, Magsaysay Agencies. It
entered into a contract of carriage through Meister Transport, Inc., an international freight forwarder, with private respondent
In Ang v. American Steamship Agencies, Inc., the question was whether an action for the value of goods which had been
Lavine Loungewear Manufacturing Corporation to transport goods of the latter from Manila to Le Havre, France. Petitioner
delivered to a party other than the consignee is for "loss or damage" within the meaning of §3(6) of the COGSA. It was held that
undertook to deliver the goods to France 28 days from initial loading. On July 24, 1991, petitioner's vessel loaded private
there was no loss because the goods had simply been misdelivered. "Loss" refers to the deterioration or disappearance of
respondent's container van for carriage at the said port of origin.
goods.3
However, in Kaoshiung, Taiwan the goods were not transshipped immediately, with the result that the shipment arrived in Le
As defined in the Civil Code and as applied to Section 3(6), paragraph 4 of the Carriage of Goods by Sea
Havre only on November 14, 1991. The consignee allegedly paid only half the value of the said goods on the ground that they
Act, "loss" contemplates merely a situation where no delivery at all was made by the shipper of the
did not arrive in France until the "off season" in that country. The remaining half was allegedly charged to the account of private
goods because the same had perished, gone out of commerce, or disappeared in such a way that their
respondent which in turn demanded payment from petitioner through its agent.
existence is unknown or they cannot be recovered.4
As petitioner denied private respondent's claim, the latter filed a case in the Regional Trial Court on April 14, 1992. In the
Conformably with this concept of what constitutes "loss" or "damage," this Court held in another case 5 that the deterioration of
original complaint, private respondent impleaded as defendants Meister Transport, Inc. and Magsaysay Agencies, Inc., the latter
goods due to delay in their transportation constitutes "loss" or "damage" within the meaning of §3(6), so that as suit was not
as agent of petitioner Mitsui O.S.K. Lines Ltd. On May 20, 1993, it amended its complaint by impleading petitioner as defendant
brought within one year the action was barred:
in lieu of its agent. The parties to the case thus became private respondent as plaintiff, on one side, and Meister Transport Inc.
and petitioner Mitsui O.S.K. Lines Ltd. as represented by Magsaysay Agencies, Inc., as defendants on the other.
Whatever damage or injury is suffered by the goods while in transit would result in loss or damage to
either the shipper or the consignee. As long as it is claimed, therefore, as it is done here, that the losses
Petitioner filed a motion to dismiss alleging that the claim against it had prescribed under the Carriage of Goods by Sea Act.
or damages suffered by the shipper or consignee were due to the arrival of the goods in damaged or
deteriorated condition, the action is still basically one for damage to the goods, and must be filed within
The Regional Trial Court, as aforesaid, denied petitioner's motion as well as its subsequent motion for reconsideration. On
the period of one year from delivery or receipt, under the above-quoted provision of the Carriage of
petition for certiorari, the Court of Appeals sustained the trial court's orders. Hence this petition containing one assignment of
Goods by Sea Act.6
error:
But the Court allowed that —
THE RESPONDENT COURT OF APPEALS COMMITTED A SERIOUS ERROR OF LAW IN RULING THAT PRIVATE
RESPONDENT'S AMENDED COMPLAINT IS (sic) NOT PRESCRIBED PURSUANT TO SECTION 3(6) OF THE
There would be some merit in appellant's insistence that the damages suffered by him as a result of the
CARRIAGE OF GOODS BY SEA ACT.
delay in the shipment of his cargo are not covered by the prescriptive provision of the Carriage of Goods
by Sea Act above referred to, if such damages were due, not to the deterioration and decay of the goods
The issue raised by the instant petition is whether private respondent's action is for "loss or damage" to goods shipped, within
while in transit, but to other causes independent of the condition of the cargo upon arrival, like a drop in
the meaning of §3(6) of the Carriage of Goods by Sea Act (COGSA).
their market value. . . .7
Section 3 provides:
The rationale behind limiting the said definitions to such parameters is not hard to find or fathom. As this Court held in Ang:

226
 Said one-year period of limitation is designed to meet the exigencies of maritime hazards. In a case
where the goods shipped were neither lost nor damaged in transit but were, on the contrary, delivered in
port to someone who claimed to be entitled thereto, the situation is different, and the special need for
the short period of limitation in cases of loss or damage caused by maritime perils does not obtain. 8
In the case at bar, there is neither deterioration nor disappearance nor destruction of goods caused by the carrier's breach of
contract. Whatever reduction there may have been in the value of the goods is not due to their deterioration or disappearance
because they had been damaged in transit.
Petitioner contends:
Although we agree that there are places in the section (Article III) in which the phrase need have no
broader meaning than loss or physical damage to the goods, we disagree with the conclusion that it must
so be limited wherever it is used. We take it that the phrase has a uniform meaning, not merely in
Section 3, but throughout the Act; and there are a number of places in which the restricted
interpretation suggested would be inappropriate. For example Section 4(2) [Article IV(2) (sic) exempts
exempts (sic) the carrier, the ship (sic), from liability "loss or damage" (sic) resulting from certain courses
beyond their control.9
Indeed, what is in issue in this petition is not the liability of petitioner for its handling of goods as provided by §3(6)
of the COGSA, but its liability under its contract of carriage with private respondent as covered by laws of more
general application.
Precisely, the question before the trial court is not the particular sense of "damages" as it refers to the physical loss or damage
of a shipper's goods as specifically covered by §3(6) of COGSA but petitioner's potential liability for the damages it has caused in
the general sense and, as such, the matter is governed by the Civil Code, the Code of Commerce and COGSA, for the breach of
its contract of carriage with private respondent.
Code and as applied to Section 3(6), paragraph 4 of the Carriage of Goods by Sea Act, "loss" contemplates merely a situation
where no delivery at all was made by the shipper of the goods because the same had perished, gone out of commerce, or
disappeared in such a way that their existence is unknown or they cannot be recovered. There would be some merit in
appellant's insistence that the damages suffered by him as a result of the delay in the shipment of his cargo are not covered by
the prescriptive provision of the Carriage of Goods by Sea Act above referred to, if such damages were due, not to the
deterioration and decay of the goods while in transit, but to other causes independent of the condition of the cargo upon
arrival, like a drop in their market value.
FACTS:
Mitsui Lines entered into a contract of carriage with Lavine Longewear Manufacturing to transport goods the latter
from Manila to France. The consignee allegedly paid only half the value of the said goods on the ground that they did not
arrive in France until the "off season" in that country because the goods were not transshipped immediately in Taiwan and the
remaining half was allegedly charged to the account of Lavine which in turn demanded payment from Mitsui. As Mitsui denied
LAvine’s claim, the latter filed a case. Mitsui filed a motion to dismiss alleging that the claim against it had prescribed under the
Carriage of Goods by Sea Act.
ISSUE:
Whether the action is one for damage to the goods, and must be filed within the period of one year from delivery or
receipt, under Section 3(6), of the Carriage of Goods by Sea Act
HELD:
Deterioration of goods due to delay in their transportation constitutes "loss" or "damage" within the meaning of
Sec. 3(6) of COGSA. However, the question before the trial court is not the particular sense of “damages” as it refers to the
physical loss or damage of a shipper’s goods as specifically covered by §3(6) of COGSA but petitioner’s potential liability for the
damages it has caused in the general sense and, as such, the matter is governed by the Civil Code, the Code of Commerce and
COGSA, for the breach of its contract of carriage with private respondent. Thus, the question of prescription of action is
governed not by the COGSA but by Art. 1144 of the Civil Code which provides for a prescriptive period of ten years.

We conclude by holding that as the suit below is not for "loss or damage" to goods contemplated in §3(6), the question of
prescription of action is governed not by the COGSA but by Art. 1144 of the Civil Code which provides for a prescriptive period
of ten years.

WHEREFORE, the decision of the Court of Appeals is AFFIRMED.

SO ORDERED.
Facts:
Petitioner Mitsui O.S.K. Lines Ltd. is a foreign corporation represented in the Philippines by its agent, Magsaysay Agencies. It
entered into a contract of carriage through Meister Transport, Inc., an international freight forwarder, with private respondent
Lavine Loungewear Manufacturing Corporation to transport goods of the latter from Manila to Le Havre, France. Petitioner
undertook to deliver the goods to France 28 days from initial loading. On July 24, 1991, petitioner's vessel loaded private
respondent's container van for carriage at the said port of origin. However, in Kaoshiung, Taiwan the goods were not
transshipped immediately, with the result that the shipment arrived in Le Havre only on November 14, 1991. The consignee
allegedly paid only half the value of the said goods on the ground that they did not arrive in France until the "off season" in that
country. The remaining half was allegedly charged to the account of private respondent which in turn demanded payment from
petitioner through its agent.

Issue: Whether or not private respondent's action is for "loss or damage" to goods shipped, within the meaning of the Carriage
of Goods by Sea Act (COGSA).

Ruling:
No. The suit is not for "loss or damage" to goods contemplated in §3(6), the question of prescription of action is governed not
by the COGSA but by Art. 1144 of the Civil Code which provides for a prescriptive period of ten years. As defined in the Civil
227
Fil Merchants vs. Alejandro, 145 SCRA 42; The petitioner maintains that the one-year prescriptive period cannot cover an insurer which has not settled the claim of its
insured because it cannot be considered as the person referred to in the applicable provision of the said Act that has the duty
SECOND DIVISION
or right to give notice of loss or damage to the carrier or to sue such carrier within the period of one year and that where an
insurer does not settle the claim of its insured it cannot be considered as subrogated to the rights of said insured that would
G.R. No. L-54140 October 14, 1986
then authorize it to sue the carrier within the time-bar of one year. The petitioner further contends that the period for the filing
of a third-party complaint must be reckoned from the date when the principal action was filed, that is, from the time the
FILIPINO MERCHANTS INSURANCE COMPANY, INC., petitioner,
insured filed a suit against the petitioner, because the third-party complaint is merely an incident of the main action.
vs.
HONORABLE JOSE ALEJANDRO, Presiding Judge of Branch XXVI of the Court of First Instance of Manila and FROTA OCEANICA
On the other hand, the respondents argue that the one-year prescriptive period within which to file a case against the carrier
BRASILIERA, respondents.
also applies to a claim filed by an insurer who stands as a subrogee to the insured and that the third-party complaint filed by
the petitioner cannot be reckoned from the firing of the main action because such complaint is independent of, and separate
and distinct from the insured's action against the petitioner.
GUTIERREZ, JR., J.:
The lower courts did not err.
These consolidated petitions raise the issue of whether or not the one-year period within which to file a suit against the carrier
and theship, in case of damage or loss as provided for in the Carriage of Goods by Sea Act applies to the insurer of the goods.
Section 3(b) of the Carriage of Goods by Sea Act provides:
On August 3, 1977, plaintiff Choa Tiek Seng filed a complaint, docketed as Civil Case No. 109911, against the petitioner before
(6) Unless notice of loss or damage and the general nature of such loss or damage be given in writing to
the then Court of First Instance of Manila for recovery of a sum of money under the marine insurance policy on cargo. Mr. Choa
the carrier or his agent at the port of discharge before or at the time of the removal of the goods into the
alleged that the goods he insured with the petitioner sustained loss and damage in the amount of P35,987.26. The vessel SS
custody of the person entitled to delivery thereof under the contract of carriage, such removal shall be
Frotario which was owned and operated by private respondent Frota Oceanica Brasiliera, (Frota) discharged the goods at the
prima facie evidence of the delivery by the carrier of the goods as described in the bill of lading. If the
port of Manila on December 13, 1976. The said goods were delivered to the arrastre operator E. Razon, Inc., on December 17,
loss or damage is not apparent, the notice must be given within three days of the delivery.
1976 and on the same date were received by the consignee-plaintiff.
Said notice of loss or damage may be endorsed upon the receipt for the goods given by the person taking
On December 19, 1977, the petitioner filed its amended answer disclaiming liability, imputing against the plaintiff the
delivery thereof.
commission of fraud and counterclaiming for damages.
The notice in writing need not be given if the state of the goods has at the time of their receipt been the
On January 9, 1978, the petitioner filed a third-party complaint against the carrier, private respondent Frota and the arrastre
subject of joint survey or inspection.
contractor, E. Razon, Inc. for indemnity, subrogation, or reimbursement in the event that it is held liable to the plaintiff.
In any event the carrier and the ship shall be discharged from all liability in respect of loss or damage
Meanwhile, on August 10, 1977, Joseph Benzon Chua filed a similar complaint against the petitioner which was docketed as
unless suit is brought within one year after delivery of the goods or the date when the goods should have
Civil Case No. 110061, for recovery under the marine insurance policy for cargo alleging that the goods insured with the
been delivered: Provided, that if a notice of loss or damage, either apparent or concealed, is not given as
petitioner sustained loss and damage in the sum of P55,996.49.
provided for in this section, that fact shall not affect or prejudice the right of the shipper to bring the suit
within one year after the delivery of the goods or the date when the goods should have been delivered.
The goods were delivered to the plaintiff-consignee on or about January 25-28, 1977.
In the case of any actual or apprehended loss or damage, the carrier and the receiver shall give all
On May 31, 1978, the petitioner filed its answer. On September 28, 1978, it filed an amended third-party complaint against
reasonable facilities to each other for inspecting and tallying the goods. (Emphasis supplied) Philippine
respondent carrier, the Australia-West Pacific Line (Australia-West).
Permanent and General Statutes (Revised Edition, Vol. 1, pp. 663-666).
In both cases, the private respondents filed their respective answers and subsequently filed a motion for preliminary hearing on
Chua Kuy v. Everett Steamship Corporation (93 Phil 207, 213-214), expounds on the extent of the applicability of the
their affirmative defense of prescription. The private respondents alleged in their separate answers that the petitioner is
aforequoted provision. We ruled:
already barred from filing a claim because under the Carriage of Goods by Sea Act, the suit against the carrier must be filed
within one year after delivery of the goods or the date when the goods should have been delivered...
Neither do we find tenable the claim that the prescriptive period contained in said act can only be
invoked by the shipper, excluding all other parties to the transaction. While apparently the proviso
The petitioner contended that the provision relied upon by the respondents applies only to the shipper and not to the insurer
contained in the portion of section 3(6) of the act we have quoted gives the impression that the right to
of the goods.
file suit within one year after delivery of the goods applies to the shipper alone, however, reading the
proviso in conjunction with the rest of section 3(6), it at once becomes apparent that the conclusion
On April 30, 1980, the respondent judge in Civil Case No. 109911, upheld respondent Frota and dismissed the petitioner's third- drawn by petitioner is unwarranted. In the first place, said section provides that the notice of loss or
party complaint. Likewise, on August 31, 1982, the respondent judge in Civil Case No. 110061 dismissed the petitioner's third- damage for which a claim for indemnity may be made should be given in writing to the carrier at the port
party complaint against respondent Australia-West on the ground that the same was filed beyond the prescriptive period of discharge before or at the time of the removal of the goods, and if the loss or damage is not apparent
provide in Section 3 (6) of the Carriage of Goods by Sea Act of 1936. These both cases, the petitioner appealed to us on a pure said notice should be given 'within three days on delivery.' From the language of this section, it seems
question of law, raising the issue of whether or not the prescriptive period of one year under the said Act also applies to an clear that the notice of loss or damage is required to be filed not necessarily by the shipper but also by
insurer such as herein petitioner.
228
 the consignee or any legal holder of the bill of lading. In fact, said section requires that the notice be
given at the port of discharge and the most logical party to file the notice is either the consignee or the
endorsee of the bill of lading. In the second place, a study of the historical background of this particular
provision will show that although the word shipper is used in the proviso referred to by the petitioner,
the intention of the law was not to exclude the consignee or endorsee of the bill of lading from bringing
the action but merely to limit the filing of the same within one year after the delivery of the goods at the
port of discharge. [The Southern Cross, 1940, A. M. C. 59 (SDNY); Lindgren v. Farley, 1938 A. M. C. 805
(SDNY)].
Arnold W. Knauth, an eminent authority on admiralty, commenting on this proviso, says:
xxx xxx xxx
It seems evident that this language does not alter the sense of the text of the Hague Rules; it merely
reiterates in another form the rule already laid down. Curiously, the proviso seems limited to the
rights of shippers, and might strictly be construed not to give any rights to consignees, representatives, or
subrogated parties; whereas the Hague Rules phraseology is broader. As the Act contains both phrases, it
would seem to be as broad as the broader of the two forms of words. (Ocean Bills of Lading, by Knauth,
p. 229).
Clearly, the coverage of the Act includes the insurer of the goods. Otherwise, what the Act intends to prohibit after the lapse of
the one-year prescriptive period can be done indirectly by the shipper or owner of the goods by simply filing a claim against the
insurer even after the lapse of one year. This would be the result if we follow the petitioner's argument that the insurer can, at
any time, proceed against the carrier and the ship since it is not bound by the time-bar provision. In this situation, the one-year
limitation will be practically useless. This could not have been the intention of the law which has also for its purpose the
protection of the carrier and the ship from fraudulent claims by having "matters affecting transportation of goods by sea be
decided in as short a time as possible" and by avoiding incidents which would "unnecessarily extend the period and permit
delays in the settlement of questions affecting the transportation." (See The Yek Tong Fire and Marine Insurance Co., Ltd., v.
American President Lines, Inc., 103 Phil. 1125-1126).
In the case of Aetna Insurance Co. v. Luzon Stevedoring Corporation (62 SCRA 11, 15), we denied the appeal of an insurance
company which filed a suit against the carrier after the lapse of one year. We ruled:
There is no merit in the appeal. The trial court correctly held that the one-year statutory and contractual
prescriptive period had already expired when appellant company filed on April 7, 1965 its action against
Barber Line Far East Service. The one-year period commenced on February 25, 1964 when the damaged
cargo was delivered to the consignee. (See Chua Kuy v. Everrett Steamship Corporation, 93 Phil. 207; Yek
Tong Fire & Marine Insurance Co., Ltd. v. American President Lines, Inc., 103 Phil. 1125).
We likewise agree with the respondents that the third-party complaint of the petitioner cannot be considered to have been
filed upon the filing of the main action because although it can be said that a third-party complaint is but ancilliary to the main
action (Eastern Assurance and Surety Corporation v. Cui 105 SCRA 622), it cannot abridge, enlarge, nor modify the substantive
rights of any litigant. It creates no substantive rights. Thus, unless there is some substantive basis for the third-party Plaintiff's
claim, he cannot utilized the filing of such action to acquire any right of action against the third-party defendant. (See also
Francisco, The Revised Rules of Court in the Philippines, Vol. 1, 1973 Ed., p. 507). The petitioner can only rightfully file a third-
party complaint against the respondents if, in the first place, it can still validly maintain an action against the latter.
In the case at bar, the petitioner's action has prescribed under the provisions of the Carriage of Goods by Sea Act. Hence,
whether it files a third-party complaint or chooses to maintain an independent action against herein respondents is of no
moment. Had the plaintiffs in the civil cases below filed an action against the petitioner after the one-year prescriptive period,
then the latter could have successfully denied liability on the ground that by their own doing, the plaintiffs had prevented the
petitioner from being subrogated to their respective rights against the herein respondents by filing a suit after the one-year
229
prescriptive period. The situation, however, does not obtain in the present case. The plaintiffs in the civil cases below gave
extra-judicial notice to their respective carriers and filed suit against the petitioner well within one year from their receipt of
the goods. The petitioner had plenty of time within which to act. In Civil Case No. 109911, the petitioner had more than four
months to file a third-party complaint while in Civil Case No. 110061, it had more than five months to do so. In both instances,
however, the petitioner failed to file the appropriate action.
WHEREFORE, IN VIEW OF THE FOREGOING, the petitions in G. R. No. 54140 and G. R. No. 62001 are hereby DISMISSED for lack
of merit. Costs against the petitioner.
SO ORDERED.
145 SCRA 42 – Mercantile Law – Insurance Law – The Policy – Prescription of Filing of Insurance Cases
In 1976, Choa Tiek Seng contracted Frota Oceanica Brasiliera for the latter to deliver goods. Choa Tiek Seng insured the goods
with Filipino Merchants Insurnace Company. The goods left the port of Manila on December 13, 1976 and reached its point of
destination on December 17, 1976. The goods were however damaged.
Choa Tiek Seng then filed an insurance claim. Filipino Merchants refused to pay so in August 1977, it was sued by Choa Tiek
Seng. In January 1978, Filipino Merchants filed a third party complaint against the carrier Frota Oceanica Brasiliera as it alleged
that it is the carrier who is liable to pay damages to Choa Tiek Seng. Judge Jose Alejandro of the trial court ruled against Filipino
Merchants. The Court of Appeals affirmed the ruling of the judge. The lower courts ruled that Filipino Merchants is already
barred from filing a claim because under the Carriage of Goods by Sea Act, the suit against the carrier must be filed “within one
year after delivery of the goods or the date when the goods should have been delivered” or one year from December 17, 1976.
The insurance company is already barred for it filed its third party complaint only in January 1978.
ISSUE: Whether or not Filipino Merchants is precluded by the said time-bar rule.
HELD:
Yes. The pertinent provision of the Carriage of Goods by Sea Act does not only apply to the shipper but also applies to the
insurer. The coverage of the Carriage of Goods by Sea Act includes the insurer of the goods. Otherwise, what the Act intends to
prohibit after the lapse of the one year prescriptive period can be done indirectly by the shipper or owner of the goods by
simply filing a claim against the insurer even after the lapse of one year. This would be the result if the insurer can, at any time,
proceed against the carrier and the ship since it is not bound by the time-bar provision. In this situation, the one year limitation
will be practically useless. This could not have been the intention of the law which has also for its purpose the protection of the
carrier and the ship from fraudulent claims by having “matters affecting transportation of goods by sea be decided in as short a
time as possible” and by avoiding incidents which would “unnecessarily extend the period and permit delays in the settlement
of questions affecting the transportation.”
Facts: Plaintiff Choa Tiek Seng filed a complaint against the petitioner before the then Court of First Instance of Manila for
recovery of a sum of money under the marine insurance policy on cargo. Mr. Choa alleged that the goods he insured with the
petitioner sustained loss and damage in the amount of P35, 987.26. The said goods were delivered to the arrastre operator E.
Razon, Inc., on December 17, 1976 and on the same date were received by the consignee-plaintiff.
Petitioner disclaims liability and imputes against plaintiff the commission of fraud. A similar complaint was filed by Joseph
Benzon Chua against the petitioner for recovery under the marine insurance policy for cargo alleging that the goods insured
with the petitioner sustained loss and damage in the sum of P55,996.49. The goods were delivered to the plaintiff-consignee on
or about January 25-28, 1977.
Petitioner filed third-party complaints against private respondents for indemnity, subrogation, or reimbursement in the event
that it is held liable to the plaintiff.
The private respondents, carriers Frota Oceanica Brasiliera and Australia-West Pacific Line alleged in their separate answers that
the petitioner is already barred from filing a claim because under the Carriage of Goods by Sea Act, the suit against the carrier
must be filed within one year after delivery of the goods or the date when the goods should have been delivered
Petitioner contended that provision relied upon by the respondents applies only to the shipper and not to the insurer of the
goods.

Respondent judge dismissed both third-party complaints.

Issue: Whether or not the one-year period within which to file a suit against the carrier and the ship, in case of damage or loss
as provided for in the Carriage of Goods by Sea Act applies to the insurer of the goods.

Held:
The coverage of the Act includes the insurer of the goods. Otherwise, what the Act intends to prohibit after the lapse of the
one-year prescriptive period can be done indirectly by the shipper or owner of the goods by simply filing a claim against the
insurer even after the lapse of one year. This would be the result if we follow the petitioner's argument that the insurer can, at
any time, proceed against the carrier and the ship since it is not bound by the time-bar provision. In this situation, the one-year
limitation will be practically useless. This could not have been the intention of the law which has also for its purpose the
protection of the carrier and the ship from fraudulent claims by having "matters affecting transportation of goods by sea be
decided in as short a time as possible" and by avoiding incidents which would "unnecessarily extend the period and permit
delays in the settlement of questions affecting the transportation."

In the case at bar, the petitioner's action has prescribed under the provisions of the Carriage of Goods by Sea Act. Hence,
whether it files a third-party complaint or chooses to maintain an independent action against herein respondents is of no
moment.

FACTS:
In a suit filed by Choa Tiek Seng, Filipino Merchants filed a third party complaint against the carrier Frota Oceanica Brasiliera as
it alleged that it is the carrier who is liable to pay damages to Choa Tiek Seng. The lower courts ruled that Filipino Merchants is
already barred from filing a claim because under the Carriage of Goods by Sea Act, the suit against the carrier must be filed
“within one year after delivery of the goods or the date when the goods should have been delivered.

ISSUE: Does the one-year prescriptive period within which to file a case against the carrier also apply to a claim filed by an
insurer who stands as a subrogee to the insured?

HELD:
Yes, it includes the insurer of goods. Also, whether the insurer files a third party complaint or maintains an independent action
is of no moment.

230
Mayer Steel Pipe Corp. vs. CA, 274 SCRA 432; 3. costs of suit.
SECOND DIVISION
SO ORDERED. 5
G.R. No. 124050 June 19, 1997
Private respondents elevated the case to respondent Court of Appeals.
MAYER STEEL PIPE CORPORATION and HONGKONG GOVERNMENT SUPPLIES DEPARTMENT, petitioners,
Respondent court affirmed the finding of the trial court that the damage is not due to factory defect and that it was covered by
vs.
the "all risks" insurance policies issued by private respondents to petitioner Mayer. However, it set aside the decision of the trial
COURT OF APPEALS, SOUTH SEA SURETY AND INSURANCE CO., INC. and the CHARTER INSURANCE
court and dismissed the complaint on the ground of prescription. It held that the action is barred under Section 3(6) of the
CORPORATION, respondents.
Carriage of Goods by Sea Act since it was filed only on April 17, 1986, more than two years from the time the goods were
unloaded from the vessel. Section 3(6) of the Carriage of Goods by Sea Act provides that "the carrier and the ship shall be
PUNO, J.:
discharged from all liability in respect of loss or damage unless suit is brought within one year after delivery of the goods or the
date when the goods should have been delivered." Respondent court ruled that this provision applies not only to the carrier
This is a petition for review on certiorari to annul and set aside the Decision of respondent Court of Appeals dated December
but also to the insurer, citing Filipino Merchants Insurance Co., Inc. v. Alejandro. 6
14, 1995 1 and its Resolution dated February 22, 1996 2 in CA-G.R. CV No. 45805 entitled Mayer Steel Pipe Corporation and
Hongkong Government Supplies Department v. South Sea Surety Insurance Co., Inc. and The Charter Insurance Corporation. 3
Hence this petition with the following assignments of error:
In 1983, petitioner Hongkong Government Supplies Department (Hongkong) contracted petitioner Mayer Steel Pipe
1. The respondent Court of Appeals erred in holding that petitioners' cause of action had already
Corporation (Mayer) to manufacture and supply various steel pipes and fittings. From August to October, 1983, Mayer shipped
prescribed on the mistaken application of the Carriage of Goods by Sea Act and the doctrine of Filipino
the pipes and fittings to Hongkong as evidenced by Invoice Nos. MSPC-1014, MSPC-1015, MSPC-1025, MSPC-1020, MSPC-1017
Merchants Co., Inc. v. Alejandro (145 SCRA 42); and
and MSPC-1022. 4
2. The respondent Court of Appeals committed an error in dismissing the complaint. 7
Prior to the shipping, petitioner Mayer insured the pipes and fittings against all risks with private respondents South Sea Surety
and Insurance Co., Inc. (South Sea) and Charter Insurance Corp. (Charter). The pipes and fittings covered by Invoice Nos. MSPC-
The petition is impressed with merit. Respondent court erred in applying Section 3(6) of the Carriage of Goods by Sea Act.
1014, 1015 and 1025 with a total amount of US$212,772.09 were insured with respondent South Sea, while those covered by
Invoice Nos. 1020, 1017 and 1022 with a total amount of US$149,470.00 were insured with respondent Charter.
Section 3(6) of the Carriage of Goods by Sea Act states that the carrier and the ship shall be discharged from all liability for loss
or damage to the goods if no suit is filed within one year after delivery of the goods or the date when they should have been
Petitioners Mayer and Hongkong jointly appointed Industrial Inspection (International) Inc. as third-party inspector to examine
delivered. Under this provision, only the carrier's liability is extinguished if no suit is brought within one year. But the liability of
whether the pipes and fittings are manufactured in accordance with the specifications in the contract. Industrial Inspection
the insurer is not extinguished because the insurer's liability is based not on the contract of carriage but on the contract of
certified all the pipes and fittings to be in good order condition before they were loaded in the vessel. Nonetheless, when the
insurance. A close reading of the law reveals that the Carriage of Goods by Sea Act governs the relationship between the carrier
goods reached Hongkong, it was discovered that a substantial portion thereof was damaged.
on the one hand and the shipper, the consignee and/or the insurer on the other hand. It defines the obligations of the carrier
under the contract of carriage. It does not, however, affect the relationship between the shipper and the insurer. The latter case
Petitioners filed a claim against private respondents for indemnity under the insurance contract. Respondent Charter paid
is governed by the Insurance Code.
petitioner Hongkong the amount of HK$64,904.75. Petitioners demanded payment of the balance of HK$299,345.30
representing the cost of repair of the damaged pipes. Private respondents refused to pay because the insurance surveyor's
Our ruling in Filipino Merchants Insurance Co., Inc. v. Alejandro 8 and the other cases 9 cited therein does not support
report allegedly showed that the damage is a factory defect.
respondent court's view that the insurer's liability prescribes after one year if no action for indemnity is filed against the carrier
or the insurer. In that case, the shipper filed a complaint against the insurer for recovery of a sum of money as indemnity for
On April 17, 1986, petitioners filed an action against private respondents to recover the sum of HK$299,345.30. For their
the loss and damage sustained by the insured goods. The insurer, in turn, filed a third-party complaint against the carrier for
defense, private respondents averred that they have no obligation to pay the amount claimed by petitioners because the
reimbursement of the amount it paid to the shipper. The insurer filed the third-party complaint on January 9, 1978, more than
damage to the goods is due to factory defects which are not covered by the insurance policies.
one year after delivery of the goods on December 17, 1977. The court held that the insurer was already barred from filing a
claim against the carrier because under the Carriage of Goods by Sea Act, the suit against the carrier must be filed within one
The trial court ruled in favor of petitioners. It found that the damage to the goods is not due to manufacturing defects. It also
year after delivery of the goods or the date when the goods should have been delivered. The court said that "the coverage of
noted that the insurance contracts executed by petitioner Mayer and private respondents are "all risks" policies which insure
the Act includes the insurer of the goods." 10
against all causes of conceivable loss or damage. The only exceptions are those excluded in the policy, or those sustained due to
fraud or intentional misconduct on the part of the insured. The dispositive portion of the decision states:
The Filipino Merchants case is different from the case at bar. In Filipino Merchants, it was the insurer which filed a claim against
the carrier for reimbursement of the amount it paid to the shipper. In the case at bar, it was the shipper which filed a claim
WHEREFORE, judgment is hereby rendered ordering the defendants jointly and severally, to pay the
against the insurer. The basis of the shipper's claim is the "all risks" insurance policies issued by private respondents to
plaintiffs the following:
petitioner Mayer.
1. the sum equivalent in Philippine currency of HK$299,345.30, with legal rate of interest as of the filing
The ruling in Filipino Merchants should apply only to suits against the carrier filed either by the shipper, the consignee or the
of the complaint;
insurer. When the court said in Filipino Merchants that Section 3(6) of the Carriage of Goods by Sea Act applies to the insurer, it
meant that the insurer, like the shipper, may no longer file a claim against the carrier beyond the one-year period provided in
2. P100,000.00 as and for attorney's fees; and
231
the law. But it does not mean that the shipper may no longer file a claim against the insurer because the basis of the insurer's
liability is the insurance contract. An insurance contract is a contract whereby one party, for a consideration known as the
premium, agrees to indemnify another for loss or damage which he may suffer from a specified peril. 11 An "all risks" insurance
policy covers all kinds of loss other than those due to willful and fraudulent act of the insured. 12 Thus, when private
respondents issued the "all risks" policies to petitioner Mayer, they bound themselves to indemnify the latter in case of loss or
damage to the goods insured. Such obligation prescribes in ten years, in accordance with Article 1144 of the New Civil Code. 13
IN VIEW WHEREOF, the petition is GRANTED. The Decision of respondent Court of Appeals dated December 14, 1995 and its
Resolution dated February 22, 1996 are hereby SET ASIDE and the Decision of the Regional Trial Court is hereby REINSTATED.
No costs.
SO ORDERED.
74 SCRA 432 – Mercantile Law – Insurance Law – The Policy – Prescription of Filing of Insurance Cases
In 1983, Hongkong Government Supplies Department (HGSD) contracted Mayer Steel Pipe Corporation for the latter to
manufacture and deliver various steel pipes and fittings. Before Mayer Steel shipped the said pipes, it insured them with two
insurance companies namely, South Sea Surety and Insurance Co., Inc. and Charter Insurance Corporation – each insurer
covering different portions of the shipment. The insurance policies cover “all risks” which include all causes of conceivable loss
or damage.
When the pipes reached Hongkong, the pipes were discovered to have been damaged. The insurance companies refused to
make payment. On April 17 1986, Mayer Steel sued the insurance companies. The case reached the Court of Appeals. The CA
ruled that the case filed by Mayer Steel should be dismissed. It held that the action is barred under Section 3(6) of the Carriage
of Goods by Sea Act since it was filed only on April 17, 1986, more than two years from the time the goods were unloaded from
the vessel. Section 3(6) of the Carriage of Goods by Sea Act provides that “the carrier and the ship shall be discharged from all
liability in respect of loss or damage unless suit is brought within one year after delivery of the goods or the date when the
goods should have been delivered.” The CA ruled that this provision applies not only to the carrier but also to the insurer, citing
the case of Filipino Merchants Insurance Co., Inc. vs Alejandro.
ISSUE: Whether or not the Court of Appeals is correct.
HELD:
No. Section 3(6) of the Carriage of Goods by Sea Act states that the carrier and the ship shall be discharged from all liability for
loss or damage to the goods if no suit is filed within one year after delivery of the goods or the date when they should have
been delivered. Under this provision, only the carrier’s liability is extinguished if no suit is brought within one year. But the
liability of the insurer is not extinguished because the insurer’s liability is based not on the contract of carriage but on the
contract of insurance. A close reading of the law reveals that the Carriage of Goods by Sea Act governs the relationship
between the carrier on the one hand and the shipper, the consignee and/or the insurer on the other hand. It defines the
obligations of the carrier under the contract of carriage. It does not, however, affect the relationship between the shipper and
the insurer. The latter case is governed by the Insurance Code.
The Filipino Merchants case is different from the case at bar. In Filipino Merchants, it was the insurer which filed a claim against
the carrier for reimbursement of the amount it paid to the shipper. In the case at bar, it was the shipper which filed a claim
against the insurer. The basis of the shipper’s claim is the “all risks” insurance policies issued by the insurers to Mayer Steel.
The ruling in Filipino Merchants should apply only to suits against the carrier filed either by the shipper, the consignee or the
insurer.
FACTS:
1983: Hongkong Government Supplies Department (Hongkong) contracted Mayer Steel Pipe Corporation (Mayer) to
manufacture and supply various steel pipes and fittings
232
August to October, 1983: Mayer shipped the pipes and fittings to Hongkong as evidenced by Invoice Nos. MSPC-1014, MSPC-
1015, MSPC-1025, MSPC-1020, MSPC-1017 and MSPC-1022
Prior to the shipping, Mayer insured the pipes and fittings against all risks with South Sea Surety and Insurance Co., Inc. (South
Sea) and Charter Insurance Corp. (Charter)
South Sea:Invoice Nos. MSPC-1014, 1015 and 1025 for US$212,772.09
Charter: Invoice Nos. 1020, 1017 and 1022 for US$149,470.00
Mayer and Hongkong jointly appointed Industrial Inspection (International) Inc. as third-party inspector to examine whether
the pipes and fittings are manufactured in accordance with the specifications in the contract
Industrial Inspection certified all the pipes and fittings to be in good order condition before they were loaded in the vessel
When the goods reached Hongkong, it was discovered that a substantial portion thereof was damaged
Mayer and Hongkong a claim against private respondents for indemnity under the insurance contract
Charter paid petitioner Hongkong the amount of HK$64,904.75 demanded payment of the balance of HK$299,345.30 which
was refused
April 17, 1986: filed an action to recover HK$299,345.30
Defense: insurance surveyor's report allegedly showed that the damage is a factory defect
Trial Court: in favor of Mayer and Hongkong
CA: reversed affirmed the finding of the trial court that the damage is not due to factory defect and that it was covered by the
"all risks" insurance policies
BUT held that Section 3(6) of the Carriage of Goods by Sea Act provides that "the carrier and the ship shall be discharged from
all liability in respect of loss or damage unless suit is brought within one year after delivery of the goods or the date when the
goods should have been delivered applies not only to the carrier but also to the insurer
ISSUE: W/N Section 3(6) of the Carriage of Goods by Sea also applies to insurer
HELD:
NO. Petition is granted. CA reversed. RTC reinstated
Section 3(6) of the Carriage of Goods by Sea Act states that the carrier and the ship shall be discharged from all liability for loss
or damage to the goods if no suit is filed within one year after delivery of the goods or the date when they should have been
delivered. Under this provision, only the carrier's liability is extinguished if no suit is brought within one year. But the liability
of the insurer is not extinguished because the insurer's liability is based not on the contract of carriage but on the contract of
insurance - governed by the Insurance Code
An insurance contract is a contract whereby one party, for a consideration known as the premium, agrees to indemnify another
for loss or damage which he may suffer from a specified peril
"all risks" insurance policy covers all kinds of loss other than those due to willful and fraudulent act of the insured
prescribes in ten years, in accordance with Article 1144 of the New Civil Code
Facts:
Mayer Steel Pipe Corporation contracted insurance policies covering “all risks” which include all causes of conceivable loss or
damage with South Sea Surety and Insurance Co., Inc. and Charter Insurance Corporation. When the pipes were discovered to
have been damaged, Mayer Steel sued the insurance companies. It was however dismissed on the ground that the action is
barred under Section 3(6) of the Carriage of Goods by Sea Act since it was filed, more than two years from the time the goods
were unloaded from the vessel.
ISSUE: Whether the action has already prescribed
HELD:
No. Section 3(6) of the Carriage of Goods by Sea Act states that the carrier and the ship shall be discharged from all liability for
loss or damage to the goods if no suit is filed within one year after delivery of the goods or the date when they should have
been delivered. Under this provision, only the carrier’s liability is extinguished if no suit is brought within one year. But the
liability of the insurer is not extinguished because the insurer’s liability is based not on the contract of carriage but on the
contract of insurance. The Carriage of Goods by Sea Act governs the relationship between the carrier on the one hand and the
shipper, the consignee and/or the insurer on the other hand. It defines the obligations of the carrier under the contract of
carriage. It does not, however, affect the relationship between the shipper and the insurer. The latter case is governed by the
Insurance Code.

233
Dole Phils. vs. Maritime Company of the Phils. Feb. 27, 1987
FIRST DIVISION
G.R. No. L-61352 February 27, 1987
DOLE PHILIPPINES, INC., plaintiff-appellant,
vs.
MARITIME COMPANY OF THE PHILIPPINES, defendant-appellee.
NARVASA, J.:
This appeal, which was certified to the Court by the Court of Appeals as involving only questions of law, 1 relates to a claim for
loss and/or damage to a shipment of machine parts sought to be enforced by the consignee, appellant Dole Philippines, Inc.
(hereinafter caged Dole) against the carrier, Maritime Company of the Philippines (hereinafter called Maritime), under the
provisions of the Carriage of Goods by Sea Act. 2
The basic facts are succinctly stated in the order of the Trial Court 3 dated March 16, 1977, the relevant portion of which reads:
Before the plaintiff started presenting evidence at today's trial at the instance of the Court the lawyers
entered into the following stipulation of facts:
1. The cargo subject of the instant case was discharged in Dadiangas unto the custody of the consignee
on December 18, 1971;
2. The corresponding claim for the damages sustained by the cargo was filed by the plaintiff with the
defendant vessel on May 4, 1972;
3. On June 11, 1973 the plaintiff filed a complaint in the Court of First Instance of Manila, docketed
therein as Civil Case No. 91043, embodying three (3) causes of action involving three (3) separate and
different shipments. The third cause of action therein involved the cargo now subject of this present
litigation;
4. On December 11, 1974, Judge Serafin Cuevas issued an Order in Civil Case No. 91043 dismissing the
first two causes of action in the aforesaid case with prejudice and without pronouncement as to costs
because the parties had settled or compromised the claims involved therein. The third cause of action
which covered the cargo subject of this case now was likewise dismissed but without prejudice as it was
not covered by the settlement. The dismissal of that complaint containing the three causes of action was
upon a joint motion to dismiss filed by the parties;
5. Because of the dismissal of the (complaint in Civil Case No. 91043 with respect to the third cause of
action without prejudice, plaintiff instituted this present complaint on January 6, 1975.
To the complaint in the subsequent action Maritime filed an answer pleading inter alia the affirmative defense of prescription
under the provisions of the Carriage of Goods by Sea Act, 5 and following pre-trial, moved for a preliminary hearing on said
defense. 6 The Trial Court granted the motion, scheduling the preliminary hearing on April 27, 1977. 7 The record before the
Court does not show whether or not that hearing was held, but under date of May 6, 1977, Maritime filed a formal motion to
dismiss invoking once more the ground of prescription. 8 The motion was opposed by Dole 9 and the Trial Court, after due
consideration, resolved the matter in favor of Maritime and dismissed the complaint 10 Dole sought a reconsideration, which
was denied, 11 and thereafter took the present appeal from the order of dismissal.
234
The pivotal issue is whether or not Article 1155 of the Civil Code providing that the prescription of actions is interrupted by the
making of an extrajudicial written demand by the creditor is applicable to actions brought under the Carriage of Goods by Sea
Act which, in its Section 3, paragraph 6, provides that:
*** the carrier and the ship shall be discharged from all liability in respect of loss or damage unless suit is
brought within one year after delivery of the goods or the date when the goods should have been
delivered; Provided, That, if a notice of loss or damage, either apparent or conceded, is not given as
provided for in this section, that fact shall not affect or prejudice the right of the shipper to bring suit
within one year after the delivery of the goods or the date when the goods should have been delivered.
Dole concedes that its action is subject to the one-year period of limitation prescribe in the above-cited provision. 12The
substance of its argument is that since the provisions of the Civil Code are, by express mandate of said Code, suppletory of
deficiencies in the Code of Commerce and special laws in matters governed by the latter, 13 and there being "*** a patent
deficiency *** with respect to the tolling of the prescriptive period ***" provided for in the Carriage of Goods by Sea
Act, 14 prescription under said Act is subject to the provisions of Article 1155 of the Civil Code on tolling and because Dole's
claim for loss or damage made on May 4, 1972 amounted to a written extrajudicial demand which would toll or interrupt
prescription under Article 1155, it operated to toll prescription also in actions under the Carriage of Goods by Sea Act. To much
the same effect is the further argument based on Article 1176 of the Civil Code which provides that the rights and obligations of
common carriers shag be governed by the Code of Commerce and by special laws in all matters not regulated by the Civil Code.
These arguments might merit weightier consideration were it not for the fact that the question has already received a definitive
answer, adverse to the position taken by Dole, in The Yek Tong Lin Fire & Marine Insurance Co., Ltd. vs. American President
Lines, Inc. 15 There, in a parallel factual situation, where suit to recover for damage to cargo shipped by vessel from Tokyo to
Manila was filed more than two years after the consignee's receipt of the cargo, this Court rejected the contention that an
extrajudicial demand toiled the prescriptive period provided for in the Carriage of Goods by Sea Act, viz:
In the second assignment of error plaintiff-appellant argues that it was error for the court a quo not to
have considered the action of plaintiff-appellant suspended by the extrajudicial demand which took
place, according to defendant's own motion to dismiss on August 22, 1952. We notice that while plaintiff
avoids stating any date when the goods arrived in Manila, it relies upon the allegation made in the
motion to dismiss that a protest was filed on August 22, 1952 — which goes to show that plaintiff-
appellant's counsel has not been laying the facts squarely before the court for the consideration of the
merits of the case. We have already decided that in a case governed by the Carriage of Goods by Sea Act,
the general provisions of the Code of Civil Procedure on prescription should not be made to apply. (Chua
Kuy vs. Everett Steamship Corp., G.R. No. L-5554, May 27, 1953.) Similarly, we now hold that in such a
case the general provisions of the new Civil Code (Art. 1155) cannot be made to apply, as such
application would have the effect of extending the one-year period of prescription fixed in the law. It is
desirable that matters affecting transportation of goods by sea be decided in as short a time as possible;
the application of the provisions of Article 1155 of the new Civil Code would unnecessarily extend the
period and permit delays in the settlement of questions affecting transportation, contrary to the clear
intent and purpose of the law. * * *
Moreover, no different result would obtain even if the Court were to accept the proposition that a written extrajudicial demand
does toll prescription under the Carriage of Goods by Sea Act. The demand in this instance would be the claim for damage-filed
by Dole with Maritime on May 4, 1972. The effect of that demand would have been to renew the one- year prescriptive period
from the date of its making. Stated otherwise, under Dole's theory, when its claim was received by Maritime, the one-year
prescriptive period was interrupted — "tolled" would be the more precise term — and began to run anew from May 4, 1972,
affording Dole another period of one (1) year counted from that date within which to institute action on its claim for damage.
Unfortunately, Dole let the new period lapse without filing action. It instituted Civil Case No. 91043 only on June 11, 1973, more
than one month after that period has expired and its right of action had prescribed.
Dole's contention that the prescriptive period "*** remained tolled as of May 4, 1972 *** (and that) in legal contemplation ***
(the) case (Civil Case No. 96353) was filed on January 6, 1975 *** well within the one-year prescriptive period in Sec. 3(6) of the
Carriage of Goods by Sea Act." 16 equates tolling with indefinite suspension. It is clearly fallacious and merits no consideration.

WHEREFORE, the order of dismissal appealed from is affirmed, with costs against the appellant, Dole Philippines, Inc.

SO ORDERED.
FACTS:
In a claim for loss and/or damage to a shipment of machine parts sought to be enforced by Dole Philippines, Inc. against the
carrier, Maritime Company of the Philippines, the latter filed a formal motion to dismiss invoking the ground of prescription.
Dole avers that its claim for loss or damage made before this action was filed amounted to a written extrajudicial demand
which would toll or interrupt prescription under Article 1155, it operated to toll prescription also in actions under the Carriage
of Goods by Sea Act.

ISSUE: Whether or not Article 1155 of the Civil Code providing that the prescription of actions is interrupted by the making of
an extrajudicial written demand by the creditor is applicable to actions brought under the Carriage of Goods by Sea Act.

HELD:
In a case governed by the Carriage of Goods by Sea Act, the general provisions of the Code of Civil Procedure on prescription
should not be made to apply. Similarly, we now hold that in such a case the general provisions of the new Civil Code cannot be
made to apply, as such application would have the effect of extending the one-year period of prescription fixed in the law. It is
desirable that matters affecting transportation of goods by sea be decided in as short a time as possible; the application of the
provisions of Article 1155 of the new Civil Code would unnecessarily extend the period and permit delays in the settlement of
questions affecting transportation, contrary to the clear intent and purpose of the law.

235
Aboitiz Shipping Corporation vs. General Accident Fire and Life Assurance Corporation, 217 SCRA 359; 1. The Limited Liability Rule warrants immediate stay of execution of judgment to prevent impairment of
other creditors' shares;
THIRD DIVISION
2. The finding of unseaworthiness of a vessel is not necessarily attributable to the shipowner; and
G.R. No. 100446 January 21, 1993
3 The principle of "Law of the Case" is not applicable to the present petition. (pp. 2-26, Rollo.)
ABOITIZ SHIPPING CORPORATION, petitioner,
vs.
On the other hand, private respondent opposes the foregoing contentions, arguing that:
GENERAL ACCIDENT FIRE AND LIFE ASSURANCE CORPORATION, LTD., respondent.
1. There is no limited liability to speak of or applicable real and hypothecary rule under Article 587, 590,
MELO, J.:
and 837 of the Code of Commerce in the face of the facts found by the lower court (Civil Case No.
144425), upheld by the Appellate Court (CA G.R. No. 10609), and affirmed in toto by the Supreme Court
This refers to a petition for review which seeks to annul and set aside the decision of the Court of Appeals dated June 21, 1991,
in G.R. No. 89757 which cited G.R. No. 88159 as the Law of the Case; and
in CA G.R. SP No. 24918. The appellate court dismissed the petition for certiorari filed by herein petitioner, Aboitiz Shipping
Corporation, questioning the Order of April 30, 1991 issued by the Regional Trial Court of the National Capital Judicial Region
2. Under the doctrine of the Law of the Case, cases involving the same incident, parties similarly situated
(Manila, Branch IV) in its Civil Case No. 144425 granting private respondent's prayer for execution for the full amount of the
and the same issues litigated should be decided in conformity therewith following the maxim stare
judgment award. The trial court in so doing swept aside petitioner's opposition which was grounded on the real and
decisis et non quieta movere. (pp. 225 to 279, Rollo.)
hypothecary nature of petitioner's liability as ship owner. The application of this established principle of maritime law would
necessarily result in a probable reduction of the amount to be recovered by private respondent, since it would have to share
Before proceeding to the main bone of contention, it is important to determine first whether or not the Resolution of this Court
with a number of other parties similarly situated in the insurance proceeds on the vessel that sank.
in G.R. No. 88159, Aboitiz Shipping, Corporation vs. The Honorable Court of Appeals and Allied Guaranty Insurance Company,
Inc., dated November 13, 1989 effectively bars and precludes the instant petition as argued by respondent GAFLAC.
The basic facts are not disputed.
An examination of the November 13, 1989 Resolution in G.R. No. 88159 (pp. 280 to 282, Rollo) shows that the same settles two
Petitioner is a corporation organized and operating under Philippine laws and engaged in the business of maritime trade as a
principal matters, first of which is that the doctrine of primary administrative jurisdiction is not applicable therein; and second is
carrier. As such, it owned and operated the ill-fated "M/V P. ABOITIZ," a common carrier which sank on a voyage from
that a limitation of liability in said case would render inefficacious the extraordinary diligence required by law of common
Hongkong to the Philippines on October 31, 1980. Private respondent General Accident Fire and Life Assurance Corporation,
carriers.
Ltd. (GAFLAC), on the other hand, is a foreign insurance company pursuing its remedies as a subrogee of several cargo
consignees whose respective cargo sank with the said vessel and for which it has priorly paid.
It should be pointed out, however, that the limited liability discussed in said case is not the same one now in issue at bar, but an
altogether different aspect. The limited liability settled in G.R. No. 88159 is that which attaches to cargo by virtue of stipulations
The incident of said vessel's sinking gave rise to the filing of suits for recovery of lost cargo either by the shippers, their
in the Bill of Lading, popularly known as package limitation clauses, which in that case was contained in Section 8 of the Bill of
successor-in-interest, or the cargo insurers like GAFLAC as subrogees. The sinking was initially investigated by the Board of
Lading and which limited the carrier's liability to US$500.00 for the cargo whose value was therein sought to be recovered. Said
Marine Inquiry (BMI Case No. 466, December 26, 1984), which found that such sinking was due toforce majeure and that
resolution did not tackle the matter of the Limited Liability Rule arising out of the real and hypothecary nature of maritime law,
subject vessel, at the time of the sinking was seaworthy. This administrative finding notwithstanding, the trial court in said Civil
which was not raised therein, and which is the principal bone of contention in this case. While the matters threshed out in G.R.
Case No. 144425 found against the carrier on the basis that the loss subject matter therein did not occur as a result of force
No. 88159, particularly those dealing with the issues on primary administrative jurisdiction and the package liability limitation
majeure. Thus, in said case, plaintiff GAFLAC was allowed to prove, and. was later awarded, its claim. This decision in favor of
provided in the Bill of Lading are now settled and should no longer be touched, the instant case raises a completely different
GAFLAC was elevated all the way up to this Court in G.R. No. 89757 (Aboitiz v. Court of Appeals, 188 SCRA 387 [1990]), with
issue. It appears, therefore, that the resolution in G.R. 88159 adverted to has no bearing other than factual to the instant case.
Aboitiz, like its ill-fated vessel, encountering rough sailing. The attempted execution of the judgment award in said case in the
amount of P1,072,611.20 plus legal interest has given rise to the instant petition.
This brings us to the primary question herein which is whether or not respondent court erred in granting execution of the full
judgment award in Civil Case No. 14425 (G.R. No. 89757), thus effectively denying the application of the limited liability
On the other hand, other cases have resulted in findings upholding the conclusion of the BMI that the vessel was seaworthy at
enunciated under the appropriate articles of the Code of Commerce. The articles may be ancient, but they are timeless and
the time of the sinking, and that such sinking was due to force majeure. One such ruling was likewise elevated to this Court in
have remained to be good law. Collaterally, determination of the question of whether execution of judgments which have
G.R. No. 100373, Country Bankers Insurance Corporation v. Court of Appeals, et al., August 28, 1991 and was sustained. Part of
become final and executory may be stayed is also an issue.
the task resting upon this Court, therefore, is to reconcile the resulting apparent contrary findings in cases originating out of a
single set of facts.
We shall tackle the latter issue first. This Court has always been consistent in its stand that the very purpose for its existence is
to see to the accomplishment of the ends of justice. Consistent with this view, a number of decisions have originated herefrom,
It is in this factual milieu that the instant petition seeks a pronouncement as to the applicability of the doctrine of limited
the tenor of which is that no procedural consideration is sacrosanct if such shall result in the subverting of substantial justice.
liability on the totality of the claims vis a vis the losses brought about by the sinking of the vessel M/V P. ABOITIZ, as based on
The right to an execution after finality of a decision is certainly no exception to this. Thus, in Cabrias v. Adil (135 SCRA 355
the real and hypothecary nature of maritime law. This is an issue which begs to be resolved considering that a number of suits
[1985]), this Court ruled that:
alleged in the petition number about 110 (p. 10 and pp. 175 to 183, Rollo) still pend and whose resolution shall well-nigh result
in more confusion than presently attends the instant case.
. . . It is a truism that every court has the power "to control, in the furtherance of justice, the conduct of
its ministerial officers, and of all other persons in any manner connected with a case before it, in every
In support of the instant petition, the following arguments are submitted by the petitioner:
manner appertaining thereto. It has also been said that:

236
 . . . every court having jurisdiction to render a particular judgment has inherent
power to enforce it, and to exercise equitable control over such enforcement. The
court has authority to inquire whether its judgment has been executed, and will
remove obstructions to the enforcement thereof. Such authority extends not only
to such orders and such writs as may be necessary to carry out the judgment into
effect and render it binding and operative, but also to such orders and such writs
as may be necessary to prevent an improper enforcement of the judgment. If a
judgment is sought to be perverted and made a medium of consummating a wrong
the court on proper application can prevent it. (at p. 359)
and again in the case of Lipana v. Development Bank of Rizal (154 SCRA 257 [1987]), this Court found that:
The rule that once a decision becomes final and executory, it is the ministerial duty of the court to order
its execution, admits of certain exceptions as in cases of special and exceptional nature where it becomes
the imperative in the higher interest of justice to direct the suspension of its execution (Vecine v.
Geronimo, 59 OG 579); whenever it is necessary to accomplish the aims of justice (Pascual v Tan, 85 Phil.
164); or when certain facts and circumstances transpired after the judgment became final which would
render the execution of the judgment unjust (Cabrias v. Adil, 135 SCRA 354). (at p. 201)
We now come to the determination of the principal issue as to whether the Limited Liability Rule arising out of the real and
hypothecary nature of maritime law should apply in this and related cases. We rule in the affirmative.
In deciding the instant case below, the Court of Appeals took refuge in this Court's decision in G.R. No. 89757 upholding private
respondent's claims in that particular case, which the Court of Appeals took to mean that this Court has "considered, passed
upon and resolved Aboitiz's contention that all claims for the losses should first be determined before GAFLAC's judgment may
be satisfied," and that such ruling "in effect necessarily negated the application of the limited liability principle" (p. 175, Rollo).
Such conclusion is not accurate. The decision in G.R. No. 89757 considered only the circumstances peculiar to that particular
case, and was not meant to traverse the larger picture herein brought to fore, the circumstances of which heretofore were not
relevant. We must stress that the matter of the Limited Liability Rule as discussed was never in issue in all prior cases, including
those before the RTCs and the Court of Appeals. As discussed earlier, the "limited liability" in issue before the trial courts
referred to the package limitation clauses in the bills of lading and not the limited liability doctrine arising from the real and
hypothecary nature of maritime trade. The latter rule was never made a matter of defense in any of the cases a quo, as
properly it could not have been made so since it was not relevant in said cases. The only time it could come into play is when
any of the cases involving the mishap were to be executed, as in this case. Then, and only then, could the matter have been
raised, as it has now been brought before the Court.
The real and hypothecary nature of maritime law simply means that the liability of the carrier in connection with losses related
to maritime contracts is confined to the vessel, which is hypothecated for such obligations or which stands as the guaranty for
their settlement. It has its origin by reason of the conditions and risks attending maritime trade in its earliest years when such
trade was replete with innumerable and unknown hazards since vessels had to go through largely uncharted waters to ply their
trade. It was designed to offset such adverse conditions and to encourage people and entities to venture into maritime
commerce despite the risks and the prohibitive cost of shipbuilding. Thus, the liability of the vessel owner and agent arising
from the operation of such vessel were confined to the vessel itself, its equipment, freight, and insurance, if any, which
limitation served to induce capitalists into effectively wagering their resources against the consideration of the large profits
attainable in the trade.
It might be noteworthy to add in passing that despite the modernization of the shipping industry and the development of high-
technology safety devices designed to reduce the risks therein, the limitation has not only persisted, but is even practically
absolute in well-developed maritime countries such as the United States and England where it covers almost all maritime
casualties. Philippine maritime law is of Anglo-American extraction, and is governed by adherence to both international
maritime conventions and generally accepted practices relative to maritime trade and travel. This is highlighted by the following
excerpts on the limited liability of vessel owners and/or agents;
237
Sec. 183. The liability of the owner of any vessel, whether American or foreign, for any embezzlement,
loss, or destruction by any person of any person or any property, goods, or merchandise shipped or put
on board such vessel, or for any loss, damage, or forfeiture, done, occasioned, or incurred, without the
privity or knowledge of such owner or owners shall not exceed the amount or value of the interest of
such owner in such vessel, and her freight then pending. (Section 183 of the US Federal Limitation of
Liability Act).
—and—
1. The owner of a sea-going ship may limit his liability in accordance with Article 3 of this Convention in
respect of claims arising, from any of the following occurrences, unless the occurrence giving rise to the
claim resulted from the actual fault or privity of the owner;
(a) loss of life of, or personal injury to, any person being carried in the ship, and loss of, or damage to, any
property on board the ship.
(b) loss of life of, or personal injury to, any other person, whether on land or on water, loss of or damage
to any other property or infringement of any rights caused by the act, neglect or default the owner is
responsible for, or any person not on board the ship for whose act, neglect or default the owner is
responsible: Provided, however, that in regard to the act, neglect or default of this last class of person,
the owner shall only be entitled to limit his liability when the act, neglect or default is one which occurs
in the navigation or the management of the ship or in the loading, carriage or discharge of its cargo or in
the embarkation, carriage or disembarkation of its passengers.
(c) any obligation or liability imposed by any law relating to the removal of wreck and arising from or in
connection with the raising, removal or destruction of any ship which is sunk, stranded or abandoned
(including anything which may be on board such ship) and any obligation or liability arising out of damage
caused to harbor works, basins and navigable waterways. (Section 1, Article I of the Brussels International
Convention of 1957)
In this jurisdiction, on the other hand, its application has been well-nigh constricted by the very statute from which it
originates. The Limited Liability Rule in the Philippines is taken up in Book III of the Code of Commerce, particularly in Articles
587, 590, and 837, hereunder quoted in toto:
Art. 587. The ship agent shall also be civilly liable for the indemnities in favor of third persons which may
arise from the conduct of the captain in the care of the goods which he loaded on the vessel; but he may
exempt himself therefrom by abandoning the vessel with all her equipment and the freight it may have
earned during the voyage.
Art. 590. The co-owners of a vessel shall be civilly liable in the proportion of their interests in the
common fund for the results of the acts of the captain referred to in Art. 587.
Each co-owner may exempt himself from this liability by the abandonment, before a notary, of the part of
the vessel belonging to him.
Art. 837. The civil liability incurred by shipowners in the case prescribed in this section (on collisions),
shall be understood as limited to the value of the vessel with all its appurtenances and freightage served
during the voyage. (Emphasis supplied)
Taken together with related articles, the foregoing cover only liability for injuries to third parties (Art. 587), acts of the captain
(Art. 590) and collisions (Art. 837).
In view of the foregoing, this Court shall not take the application of such limited liability rule, which is a matter of near absolute
application in other jurisdictions, so lightly as to merely "imply" its inapplicability, because as could be seen, the reasons for its
being are still apparently much in existence and highly regarded.
We now come to its applicability in the instant case. In the few instances when the matter was considered by this Court, we
have been consistent in this jurisdiction in holding that the only time the Limited Liability Rule does not apply is when there is
an actual finding of negligence on the part of the vessel owner or agent (Yango v. Laserna, 73 Phil. 330 [1941]; Manila
Steamship Co., Inc. v. Abdulhanan, 101 Phil. 32 [1957]; Heirs of Amparo delos Santos v. Court of Appeals, 186 SCRA 649 [1967]).
The pivotal question, thus, is whether there is a finding of such negligence on the part of the owner in the instant case.
A careful reading of the decision rendered by the trial court in Civil Case No. 144425 (pp. 27-33, Rollo) as well as the entirety of
the records in the instant case will show that there has been no actual finding of negligence on the part of petitioner. In its
Decision, the trial court merely held that:
. . . Considering the foregoing reasons, the Court holds that the vessel M/V "Aboitiz" and its cargo were
not lost due to fortuitous event or force majeure." (p. 32, Rollo)
The same is true of the decision of this Court in G.R. No. 89757 (pp. 71-86, Rollo) affirming the decision of the Court of Appeals
in CA-G.R. CV No. 10609 (pp. 34-50, Rollo) since both decisions did not make any new and additional finding of fact. Both
merely affirmed the factual findings of the trial court, adding that the cause of the sinking of the vessel was because of
unseaworthiness due to the failure of the crew and the master to exercise extraordinary diligence. Indeed, there appears to
have been no evidence presented sufficient to form a conclusion that petitioner shipowner itself was negligent, and no
tribunal, including this Court will add or subtract to such evidence to justify a conclusion to the contrary.
The qualified nature of the meaning of "unseaworthiness," under the peculiar circumstances of this case is underscored by the
fact that in the Country Banker's case, supra, arising from the same sinking, the Court sustained the decision of the Court of
Appeals that the sinking of the M/V P. Aboitiz was due to force majeure.
On this point, it should be stressed that unseaworthiness is not a fault that can be laid squarely on petitioner's lap, absent a
factual basis for such a conclusion. The unseaworthiness found in some cases where the same has been ruled to exist is directly
attributable to the vessel's crew and captain, more so on the part of the latter since Article 612 of the Code of Commerce
provides that among the inherent duties of a captain is to examine a vessel before sailing and to comply with the laws of
navigation. Such a construction would also put matters to rest relative to the decision of the Board of Marine Inquiry. While the
conclusion therein exonerating the captain and crew of the vessel was not sustained for lack of basis, the finding therein
contained to the effect that the vessel was seaworthy deserves merit. Despite appearances, it is not totally incompatible with
the findings of the trial court and the Court of Appeals, whose finding of "unseaworthiness" clearly did not pertain to the
structural condition of the vessel which is the basis of the BMI's findings, but to the condition it was in at the time of the sinking,
which condition was a result of the acts of the captain and the crew.
The rights of a vessel owner or agent under the Limited Liability Rule are akin to those of the rights of shareholders to limited
liability under our corporation law. Both are privileges granted by statute, and while not absolute, must be swept aside only in
the established existence of the most compelling of reasons. In the absence of such reasons, this Court chooses to exercise
prudence and shall not sweep such rights aside on mere whim or surmise, for even in the existence of cause to do so, such
incursion is definitely punitive in nature and must never be taken lightly.
More to the point, the rights of parties to claim against an agent or owner of a vessel may be compared to those of creditors
against an insolvent corporation whose assets are not enough to satisfy the totality of claims as against it. While each individual
creditor may, and in fact shall, be allowed to prove the actual amounts of their respective claims, this does not mean that they
shall all be allowed to recover fully thus favoring those who filed and proved their claims sooner to the prejudice of those who
come later. In such an instance, such creditors too would not also be able to gain access to the assets of the individual
shareholders, but must limit their recovery to what is left in the name of the corporation. Thus, in the case of Lipana v.
Development Bank of Rizal earlier cited, We held that:
238
In the instant case, the stay of execution of judgment is warranted by the fact that the respondent bank
was placed under receivership. To execute the judgment would unduly deplete the assets of respondent
bank to the obvious prejudice of other depositors and creditors, since, as aptly stated in Central Bank v.
Morfe (63 SCRA 114), after the Monetary Board has declared that a bank is insolvent and has ordered it
to cease operations, the Board becomes the trustee of its assets for the equal benefit of all creditors, and
after its insolvency, one cannot obtain an advantage or preference over another by an attachment,
execution or otherwise. (at p. 261).
In both insolvency of a corporation and the sinking of a vessel, the claimants or creditors are limited in their recovery to the
remaining value of accessible assets. In the case of an insolvent corporation, these are the residual assets of the corporation
left over from its operations. In the case of a lost vessel, these are the insurance proceeds and pending freightage for the
particular voyage.
In the instant case, there is, therefore, a need to collate all claims preparatory to their satisfaction from the insurance proceeds
on the vessel M/V P. Aboitiz and its pending freightage at the time of its loss. No claimant can be given precedence over the
others by the simple expedience of having filed or completed its action earlier than the rest. Thus, execution of judgment in
earlier completed cases, even those already final and executory, must be stayed pending completion of all cases occasioned by
the subject sinking. Then and only then can all such claims be simultaneously settled, either completely or pro-rata should the
insurance proceeds and freightage be not enough to satisfy all claims.
Finally, the Court notes that petitioner has provided this Court with a list of all pending cases (pp. 175 to 183, Rollo), together
with the corresponding claims and the pro-rated share of each. We likewise note that some of these cases are still with the
Court of Appeals, and some still with the trial courts and which probably are still undergoing trial. It would not, therefore, be
entirely correct to preclude the trial courts from making their own findings of fact in those cases and deciding the same by
allotting shares for these claims, some of which, after all, might not prevail, depending on the evidence presented in each. We,
therefore, rule that the pro-rated share of each claim can only be found after all the cases shall have been decided.
In fairness to the claimants, and as a matter of equity, the total proceeds of the insurance and pending freightage should now
be deposited in trust. Moreover, petitioner should institute the necessary limitation and distribution action before the proper
admiralty court within 15 days from the finality of this decision, and thereafter deposit with it the proceeds from the insurance
company and pending freightage in order to safeguard the same pending final resolution of all incidents, for final pro-rating and
settlement thereof.
ACCORDINGLY, the petition is hereby GRANTED, and the Orders of the Regional Trial Court of Manila, Branch IV dated April 30,
1991 and the Court of Appeals dated June 21, 1991 are hereby set aside. The trial court is hereby directed to desist from
proceeding with the execution of the judgment rendered in Civil Case No. 144425 pending determination of the totality of
claims recoverable from the petitioner as the owner of the M/V P. Aboitiz. Petitioner is directed to institute the necessary
action and to deposit the proceeds of the insurance of subject vessel as above-described within fifteen (15) days from finality of
this decision. The temporary restraining order issued in this case dated August 7, 1991 is hereby made permanent.
SO ORDERED.
Facts:
On October 28, 1980, M/V P/ Aboitiz took on board in Hong Kong for shipment to Manila one twenty-footer container holding
281 rolls of goods and one twenty-footer container holding 447 rolls, 10 bulk and 95 carbons of goods for apparel covered by
bill of lading No. 575-M. Both shipment were consigned to the Philippines Apparel, Inc an insured with the general Accident
Fire and Life Assurance Corporation, Ltd (GAFLAC). The vessel is owned aned operated to manila, the vessel sank and it was
declared lost wit all its cargoes. CAFLAC was subrogated to all the rights, interests of action of the consignee against Aboitiz, it
filed an action for damages against Abiotiz in the RTC of Manila alleging that the loss was due to the fault or negligence of
Aboitiz and the master and crew of its vessel in that they did not observe extraordinary diligence required by law as regards to
common carrier.
Issue: Whether or not the loss was due to fortuitous event.

Held:

The trial court and the appellee court found that the sinking of M/V P.Aboitiz was not due to waves caused by tropical storm
Yooning but due to the fault and negligence of petitioner, its master and crew.

Facts:
Petitioner is a corporation engaged in the business of maritime trade as a carrier. As such, it owned and operated the M/V P.
ABOITIZ, a common carrier that sank on voyage from Hong Kong to Manila. Private respondent GAFLAC is a foreign insurance
company pursuing its remedy as a subrogee of several cargo consignees whose respective cargo sank with the said vessel and
for which it has priory paid. The sinking of vessel gave rise to filing of suit to recover the lost cargo either by shippers, their
successors-in-interest, or the cargo insurers like GAFLAC as subrogees. The sinking was initially investigated by the Board of
Marine Inquiry, which found that such sinking was due to fortuitous event.

Issue: Whether or not the doctrine of limited liability is applicable to the case?

Held:
The real and hypothecary nature of maritime law simply means that the liability of the carrier in connection with losses related
to maritime contracts is confined to the vessel, which is hypothecated for such obligations or which stands as the guaranty for
their settlement. The liability of the vessel owner and agent arising from the operation of such vessel were confined to the
vessel itself, its equipment, freight and insurance, if any, which limitation served to inducecapitalist into effectively wagering
their resources against consideration of the large attainable in the trade. The only time the Limited Liability Rule does not apply
is when there is an actual finding of negligence on the part of the vessel owner or agent. In the case at bar, since the cause of
the sinking of the vessel was because of unseaworthiness due to the failure of the crew and the master to exercise
extraordinary diligence, and that there appears to have been no evidence presented sufficient to form a conclusion that
petitioner shipowner itself was negligent, therefore the Limited Liability Rule applies.

239
Chua Yek Hong vs. IAC, Dec. 14, 1988;
SECOND DIVISION
G.R. No. L-74811 December 14, 1988
CHUA YEK HONG, petitioner,
vs.
INTERMEDIATE APPELLATE COURT, MARIANO GUNO and DOMINADOR OLIT, respondents.
MELENCIO-HERRERA, J.:
Before us is a Motion for Reconsideration of our Decision dated 30 September 1988 affirming the judgment of the Court of
Appeals dismissing the complaint against private respondents and absolving them from any and all liability arising from the loss
of 1000 sacks of copra shipped by petitioner aboard private respondents' vessel. Private respondents filed an opposition
thereto.
Petitioner argues that this Court failed to consider the Trial Court's finding that the loss of the vessel with its cargo was due to
the fault of the shipowner or to the concurring negligence of the shipowner and the captain.
The Appellate Court Decision, however, mentions only the ship captain as having been negligent in the performance of his
duties (p. 3, Court of Appeals Decision, p. 15, Rollo). This is a factual finding binding on this Court. For the exception to the
limited liability rule (Article 587, Code of Commerce) to apply, the loss must be due to the fault of the shipowner, or to the
concurring negligence of the shipowner and the captain. As we held, there is nothing in the records showing such negligence
(p. 6, Decision.)
The invocation by petitioners of Articles 1733 and 1735 of the Civil Code is misplaced. As was stated in the Decision sought to
be reconsidered, while the primary law governing the instant case is the Civil Code, in all matters not regulated by said Code,
the Code of Commerce and other special laws shall govern. Since the Civil Code contains no provisions regulating liability of
shipowners or agents in the event of total loss or destruction of the vessel, it is the provisions of the Code of Commerce,
particularly Article 587, that governs.
Petitioner further contends that the ruling laid down in Eastern Shipping Lines vs. IAC, et al. (150 SCRA 464 [1987]) should be
made to apply in the instant case. That case, however, involved foreign maritime trade while the present case involves local
inter-island shipping. The environmental set-up in the two cases, therefore, is not on all fours.
ACCORDINGLY, petitioner's Motion for Reconsideration is hereby DENIED and this denial is FINAL.
SO ORDERED.
Facts:
Petitioner Chua loaded sacks of copra on board a vessel owned by private respondents Guno and Olit, for shipment from
Puerto Galera to Manila. Along its way, the vessel capsized and sank. Petitioner filed an action for damages for breach of
contract of carriage.
Issue: Whether respondents can avail of the limited liability
Held:
The ship owner’s or agent’s liability is merely co-extensive with his interests in the vessel such that the total loss thereof results
in its extinction. The total destruction of the vessel extinguishes maritime liens as there is no longer any res to which it can
attach.
240
The primary law is the Civil Code and in default thereof, the Code of Commerce and other special laws are applied.
Since the Civil Code contains no provisions regulating liability of ship owners or agents in the event of total loss or destruction
of the vessel, it is the provisions of the Code of Commerce that govern in this case.
FACTS:
Petitioner contracted with the herein private respondent to deliver 1,000 sacks of copra, valued at P101,227.40, on board the
vessel M/V Luzviminda I owned by the latter. However it did not reach its destination, the vessel capsized and sank with all its
cargo. Petitioner instituted a complaint against private respondent for breach of contract incurring damages. Private
respondent’s defense is that even assuming that the alleged cargo was truly loaded aboard their vessel, their liability had been
extinguished by reason of the total loss of said vessel.
RTC rendered judgment in favor of Chua Yek Hong however CA reversed the decision by applying Article 587 of the Code of
Commerce and the doctrine in Yangco vs. Lasema (73 Phil. 330 [1941]) and held that private respondents' liability, as ship
owners, for the loss of the cargo is merely co-extensive with their interest in the vessel such that a total loss thereof results in
its extinction.
ISSUE: Whether or not respondent Appellate Court erred in applying the doctrine of limited liability under Article 587 of the
Code of Commerce as expounded in Yangco vs. Laserna, supra.
HELD:
As this Court held:
If the ship owner or agent may in any way be held civilly liable at all for injury to or death of passengers arising from the
negligence of the captain in cases of collisions or shipwrecks, his liability is merely co-extensive with his interest in the vessel
such that a total loss thereof results in its extinction. (Yangco vs. Laserna, et al., supra).
The limited liability rule, however, is not without exceptions, namely: (1) where the injury or death to a passenger is due either
to the fault of the ship owner, or to the concurring negligence of the ship owner and the captain (Manila Steamship Co., Inc. vs.
Abdulhaman supra); (2) where the vessel is insured; and (3) in workmen's compensation claims Abueg vs. San Diego, supra). In
this case, there is nothing in the records to show that the loss of the cargo was due to the fault of the private respondent as
shipowners, or to their concurrent negligence with the captain of the vessel. The judgment sought to be reviewed is hereby
AFFIRMED
Facts:
Petitioner loaded 1,000 sacks of copra on board a vessel owned by respondents, for shipment from Puerto Galera to Manila.
Along its way, the vessel capsized and sank. Petitioner filed an action for damages for breach of contract of carriage.
Issue: Whether respondents can avail of the limited liability
Held:
The shipowner’s or agent’s liability is merely co-extensive with his interests in the vessel such that the total loss thereof results
in its extinction. The total destruction of the vessel extinguishes maritime liens as there is no longer any res to which it can
attach. The primary law is the Civil Code and in default thereof, the Code of Commerce and other special laws are applied. Since
the Civil Code contains no provisions regulating liability of shipowners or agents in the event of total loss or destruction of the
vessel, it is the provisions of the Code of Commerce that govern in this case.
Monarch Insurance vs. CA, 281 SCRA 534; closers and P42,254.00 representing the value of eighteen (18) cases of plastic spangle, plus attorney's fees of not less than
P50,000.00 and cost of suit. 5 In Civil Case No. 82-2769, Tabacalera claimed from Hong Kong Island Shipping Co., Ltd., Citadel
SECOND DIVISION
Lines and Aboitiz indemnification in the amount of P75,058.00 for the value of four (4) cartons of motor vehicle parts
foundered with the M/V P. Aboitiz, plus attorney's fees of not less than P20,000.00 and cost of suit. 6
G.R. No. 92735 June 8, 2000
In its answer with counterclaim, Aboitiz rejected responsibility for the claims on the ground that the sinking of its cargo vessel
MONARCH INSURANCE CO., INC., TABACALERA INSURANCE CO., INC and Hon. Judge AMANTE PURISIMA, petitioners,
was due to force majeure or an act of God. 7 Aboitiz was subsequently declared as in default for its failure to appear during the
vs.
pre-trial. Its counsel fried a motion to set aside the order of default with notice of his withdrawal as such counsel. Before the
COURT OF APPEALS and ABOITIZ SHIPPING CORPORATION, respondents.
motion could be acted upon, Judge Bienvenido Ejercjto, the presiding judge of the trial court, was promoted to the then
intermediate Appellate Court. The cases were thus re-raffled to Branch VII of the RTC of Manila presided by Judge Amante P.
DE LEON, JR., J.:
Purisima, the co-petitioner in G.R. No. 92735. Without resolving the pending motion to set aside the order of default, the trial
court set the cases for hearing. However, since Aboitiz had repeatedly failed to appear in court, the trial court denied the said
Before us are three consolidated petitions. G.R. No. 92735 is a petition for review filed under Rule 45 of the Rules of Court motion and allowed Monarch and Tabacalera to present evidence ex-parte. 8
assailing the decision of the Court of Appeals dated March 29, 1990 in CA-G.R. SP. Case No. 17427 which set aside the writ of
execution issued by the lower court for the full indemnification of the claims of the petitioners, Monarch Insurance Company
Monarch and Tabacalera proffered in evidence the survey of Perfect Lambert, a surveyor commissioned to investigate the
(hereafter "Monarch") and Tabacalera Insurance Company, Incorporated (hereafter "Tabacalera") against private respondent,
possible cause of the sinking of the cargo vessel. The survey established that on her voyage to Manila from Hong Kong, the
Aboitiz Shipping Corporation (hereafter "Aboitiz") on the ground that the latter is entitled to the benefit of the limited liability
vessel did not encounter weather so inclement that Aboitiz would be exculpated from liability for losses. In his note of protest,
rule in maritime law; G.R. No. 94867 is a petition for certiorari under Rule 65 of the Rules of Court to annul and set aside the
the master of M/V P. Aboitiz described the wind force encountered by the vessel as from ten (10) to fifteen (15) knots, a
decision of the Court of Appeals dated August 15, 1990 in CA-G.R. SP No. 20844 which ordered the lower court to stay the
weather condition classified as typical and moderate in the South China Sea at that particular time of the year. The survey
execution of the judgment in favor of the petitioner, Allied Guarantee Insurance Company (hereafter "Allied") against Aboitiz
added that the seaworthiness of the vessel was in question especially because the breaches of the hull and the serious flooding
insofar as it impairs the rights of the other claimants to their pro-rata share in the insurance proceeds from the sinking of the
of two (2) cargo holds occurred simultaneously in "seasonal weather." 9
M/V P. Aboitiz, in accordance with the rule on limited liability; and G.R. No. 95578 is a petition for review under Rule 45 of the
Rules of Court seeking a reversal of the decision of the Court of Appeals dated August 24, 1990 and its resolution dated
In due course, the trial court rendered judgment against Aboitiz but the complaint against all the other defendants was
October 4, 1990 in C.A. G.R. Civil Case No. 15071 which modified the judgment of the lower court's award of actual damages to
dismissed. Aboitiz was held liable for the following: (a) in Civil Case No. 82-2767, P29,719.88 with legal interest from the filing
petitioner Equitable Insurance Corporation (hereafter "Equitable") to its pro-rata share in the insurance proceeds from the
of the complaint until fully paid plus attorney's fees of P30,000.00 and cost of suit; (b) in Civil Case No. 82-2768, P539,679.00
sinking of the M/V P. Aboitiz.
with legal interest of 12% per annum from date of filing of the complaint until fully paid, plus attorney's fees of P30,000.00,
litigation expenses and cost of suit; (c) in Civil Case No. 82-2769, P75,058.00 with legal interest of 12% per annum from date of
All cases arose from the loss of cargoes of various shippers when the M/V P. Aboitiz, a common carrier owned and operated by
filing of the complaint until-fully paid, plus P5,000.00 attorney's fees, litigation expenses and cost of suit, and (d) in Civil Case
Aboitiz, sank on her voyage from Hong Kong to Manila on October 31, 1980. Seeking indemnification for the loss of their
No. 82-2770, P39,579.66 with legal interest of 12%per annum from date of filing of the complaint until fully paid, plus
cargoes, the shippers, their successors-in-interest, and the cargo insurers such as the instant petitioners filed separate suits
attorney's fees of P5,000.00, litigation expenses and cost of suit.
against Aboitiz before the Regional Trial Courts. The claims numbered one hundred and ten (110) for the total amount of
P41,230,115.00 which is almost thrice the amount of the insurance proceeds of P14,500,000.00 plus earned freight of
Aboitiz filed a motion for reconsideration of the decision and/or for new trial to lift the order of default. The court denied the
500,000.00 according to Aboitiz. To this day, some of these claims, including those of herein petitioners, have not yet been
motion on August 27, 1986. 10 Aboitiz appealed to the Court of Appeals but the appeal was dismissed for its failure to file
settled.
appellant's brief. It subsequently filed an urgent motion for reconsideration of the dismissal with prayer for the admission of its
attached appellant's brief. The appellate court denied that motion for lack of merit in a Resolution dated July 8, 1988. 11
G.R. No. 92735.
Aboitiz thus filed a petition for review before this Court. Docketed as G.R. No. 84158, the petition was denied in the Resolution
Monarch and Tabacalera are insurance carriers of lost cargoes. They indemnified the shippers and were consequently
of October 10, 1988 for being filed out of time. Aboitiz's motion for the reconsideration of said Resolution was similarly
subrogated to their rights, interests and actions against Aboitiz, the cargo carrier. 1 Because Aboitiz refused to compensate
denied. 12 Entry of judgment was made in the case. 13
Monarch, it filed two complaints against Aboitiz, docketed as Civil Cases Nos. 82-2767 and 82-2770. For its part, Tabacalera also
filed two complaints against the same defendant, docketed as Civil Cases Nos. 82-2768 and 82-2769. As these four (4) cases had
Consequently, Monarch and Tabacalera moved for execution of judgment. The trial court granted the motion on April 4,
common causes of action, they were consolidated and jointly tried. 2
1989 14 and issued separate writs of execution. However, on April 12, 1989, Aboitiz, invoking the real and hypothecary nature of
liability in maritime law, filed an urgent motion to quash the writs of execution. 15 According to Aboitiz, since its liability is
In Civil Case No. 82-2767 where Monarch also named Malaysian International Shipping Corporation and Litonja Merchant
limited to the value of the vessel which was insufficient to satisfy the aggregate claims of all 110 claimants, to indemnify
Shipping Agency as Aboitiz's co-defendants, Monarch sough recovery of P29,719.88 representing the value of three (3) pallets
Monarch and Tabacalera ahead of the other claimants would be prejudicial to the latter. Monarch and Tabacalera opposed the
of glass tubing that sank with the M/V P. Aboitiz, plus attorney's fees of not less than P5,000.00, litigation expenses, interest at
motion to quash. 16
the legal rate on all these amounts, and the cost of suit. 3 Civil Case. No. 82-2770 was a complaint filed by Monarch against
Aboitiz and co-defendants Compagnie Maritime des Chargeurs Reunis and F.E. Zuellig (M), Inc. for the recovery of P39,597.00
On April 17, 1989, before the motion to quash could be heard, the sheriff levied upon five (5) heavy equipment owned by
representing the value of the one case motor vehicle parts which was lost when the M/V P. Aboitiz sank on her way to Manila,
Aboitiz for the public auction sale. At said sale, Monarch was the highest bidder for one (1) unit FL-151 Fork Lift (big) and one
plus Attorney's fees of not less than P10,000.00 and cost of suit. 4
(1) unit FL-25 Fork Lift (small). Tabacalera was also the highest bidder for one (1) unit TCH TL-251 Hyster Container Lifter, one (1)
unit Hyster Top Lifter (out of order), and one (1) unit ER-353 Crane. The corresponding certificates of sale 17 were issued to
Tabacalera sought against Franco Belgian Services, F.E. Zuellig and Aboitiz in Civil Case No. 82-2768 the recovery of P284,218.00
Monarch and Tabacalera.
corresponding to the value of nine (9) cases of Renault spare parts, P213,207.00 for the value of twenty-five (25) cases of door
241
On April 18, 1989, the day before the hearing of the motion to quash, Aboitiz filed a supplement to its motion, to add the fact
that an auction sale had taken place. On April 19, 1989, Judge Purisima issued an order denying the motion to quash but
freezing execution proceedings for ten (10) days to give Aboitiz time to secure a restraining order from a higher
court. 18 Execution was scheduled to resume to fully satisfy the judgment when the grace period shall have lapsed without such
restraining order having been obtained by Aboitiz.
Aboitiz filed with the Court of Appeals a petition for certiorari and prohibition with prayer for preliminary injunction and/or
temporary restraining order under CA-G.R. No. SP-17427. 19 On March 29, 1990, the appellate court rendered a Decision the
dispositive portion of which reads:
WHEREFORE, the writ of certiorari is hereby granted, annulling the subject writs of execution, auction sale,
certificates of sale, and the assailed orders of respondent Judge dated April 4 and April 19, 1989 insofar as the
money value of those properties of Aboitiz, levied on execution and sold at public auction, has exceeded the pro-
rata shares of Monarch and Tabacalera in the insurance proceeds of Aboitiz in relation to the pro-rata shares of the
106 other claimants.
The writ of prohibition is also granted to enjoin respondent Judge, Monarch and Tabacalera from proceeding further
with execution of the judgments in question insofar as the execution would satisfy the claims of Monarch and
Tabacalera in excess of their pro-rata shares and in effect reduce the balance of the proceeds for distribution to the
other claimants to their prejudice.
The question of whether or how much of the claims of Monarch and Tabacalera against the insurance proceeds has
already been settled through the writ of execution and auction sale in question, being factual issues, shall be
threshed out before respondent judge.
The writ of preliminary injunction issued in favor of Aboitiz, having served its purpose, is hereby lifted. No
pronouncement as to costs.
SO ORDERED. 20
Hence, the instant petition for review on certiorari where petitioners Monarch, Tabacalera and Judge Purisima raise the
following assignment of errors:
1. The appellate court grievously erred in re-opening the Purisima decisions, already final and executory, on the
alleged ground that the issue of real and hypothecary liability had not been previously resolved by Purisima, the
appellate court, and this Hon. Supreme Court;
2. The appellate court erred when it resolved that Aboitiz is entitled to the limited real and hypothecary liability of a
ship owner, considering the facts on record and the law on the matter.
3. The appellate court erred when it concluded that Aboitiz does not have to present evidence to prove its
entitlement to the limited real and hypothecary liability.
4. The appellate court erred in ignoring the case of "Aboitiz Shipping Corporation v. CA and Allied Guaranty
Insurance Co., Inc. (G.R. No. 88159), decided by this Honorable Supreme Court as early as November 13, 1989,
considering that said case, now factual and executory, is in pari materia with the instant case.
5. The appellate court erred in not concluding that irrespective of whether Aboitiz is entitled to limited hypothecary
liability or not, there are enough funds to satisfy all the claimants.
6. The appellate court erred when it concluded that Aboitiz had made an "abandonment" as envisioned by Art. 587
of the Code of Commerce.
242
7. The appellate court erred when it concluded that other claimants would suffer if Tabacalera and Monarch would
be fully paid.
8. The appellate court erred in concluding that certiorari was the proper remedy for Aboitiz. 21
G.R. NOS. 94867 & 95578
Allied as insurer-subrogee of consignee Peak Plastic and Metal Products Limited, filed a complaint against Aboitiz for the
recovery of P278,536.50 representing the value of 676 bags of PVC compound and 10 bags of ABS plastic lost on board the M/V
P. Aboitiz, with legal interest from the date of filing of the complaint, plus attorney's fees, exemplary damages and
costs. 22 Docketed as Civil Case No. 138643, the case was heard before the Regional Trial Court of Manila, Branch XXIV, presided
by Judge Sergio D. Mabunay.
On the other hand, Equitable, as insurer-subrogee of consignee-assured Axel Manufacturing Corporation, filed an amended
complaint against Franco Belgian Services, F.E. Zuellig, Inc. and Aboitiz for the recovery of P194,794.85 representing the value
of 76 drums of synthetic organic tanning substances and 1,000 kilograms of optical bleaching agents which were also lost on
board the M/V P. Aboitiz, with legal interest from the date of filing of the complaint, plus 25% attorney's fees, exemplary
damages, litigation expenses and costs of suit.23 Docketed as Civil Case No. 138396, the complaint was assigned to the Regional
Trial Court of Manila, Branch VIII.
In its answer with counterclaim in the two cases, Aboitiz disclaimed responsibility for the amounts being recovered, alleging
that the loss was due to a fortuitous event or an act of God. It prayed for the dismissal of the cases and the payment of
attorney's fees, litigation expenses plus costs of suit. It similarly relied on the defenses of force mejeure, seaworthiness of the
vessel and exercise of due diligence in the carriage of goods as regards the cross-claim of its co-defendants. 24
In support of its position, Aboitiz presented the testimonies of Capt. Gerry N. Racines, master mariner of the M/V P. Aboitiz,
and Justo C. Iglesias, a meteorologist of the Philippine Atmospheric Geophysical and Astronomical Services Administration
(PAGASA). The gist of the testimony of Capt. Racines in the two cases follows:
The M/V P. Aboitiz left Hong Kong for Manila at about 7:30 in the evening of October 29, 1980 after securing a departure
clearance from the Hong Kong Port Authority. The departure was delayed for two hours because he (Capt. Racines) was
observing the direction of the storm that crossed the Bicol Region. He proceeded with the voyage only after being informed
that the storm had abated. At about 8:00 o'clock in the morning of October 30, 1980, after more than twelve (12) hours of
navigation, the vessel suddenly encountered rough seas with waves about fifteen to twenty-five feet high. He ordered his chief
engineer to check the cargo holds. The latter found that sea water had entered cargo hold Nos. 1 and 2. He immediately
directed that water be pumped out by means of the vessel's bilge pump, a device capable of ejecting 180 gallons of water per
minute. They were initially successful in pumping out the water.
At 6:00 a.m. of October 31, 1980, however, Capt. Racines received a report from his chief engineer that the water level in the
cargo holds was rapidly rising. He altered the vessel's course and veered towards the northern tip of Luzon to prevent the vessel
from being continuously pummeled by the waves. Despite diligent efforts of the officers and crew, however, the vessel, which
was approximately 250 miles away from the eye of the storm, began to list on starboard side at 27 degrees. Capt. Racines and
his crew were not able to make as much headway as they wanted because by 12:00 noon of the same day, the cargo holds were
already flooded with sea water that rose from three to twelve feet, disabling the bilge pump from containing the water.
The M/V P. Aboitiz sank at about 7:00 p.m. of October 31, 1980 at latitude 18 degrees North, longitude 170 degrees East in the
South China Sea in between Hong Kong, the Philippines and Taiwan with the nearest land being the northern tip of Luzon,
around 270 miles from Cape Bojeador, Bangui, Ilocos Norte. Responding to the captain's distress call, the M/V Kapuas (Capuas)
manned by Capt. Virgilio Gonzales rescued the officers and crew of the ill-fated M/V P. Aboitiz and brought them to Waileen,
Taiwan where Capt. Racines lodged his marine protest dated November 3, 1980.
Justo Iglesias, meteorologist of PAGASA and another witness of Aboitiz, testified in both cases that during the inclusive dates of
October 28-31, 1980, a stormy weather condition prevailed within the Philippine area of responsibility, particularly along the
sea route from Hong Kong to Manila, because of tropical depression "Yoning." 25PAGASA issued weather bulletins from October
28-30, 1980 while the storm was still within Philippine territory. No domestic bulletins were issued the following day when the
storm which hit Eastern Samar, Southern Quezon and Southern Tagalog provinces, had made its exit to the South China Sea
through Bataan.
Allied and Equitable refuted the allegation that the M/V P. Aboitiz and its cargo were lost due to force majeure, relying mainly
on the marine protest filed by Capt. Racines as well as on the Beaufort Scale of Wind. In his marine protest under oath, Capt.
Racines affirmed that the wind force an October 29-30, 1980 was only ten (10) to fifteen (15) knots. Under the Beaufort Scale
of Wind, said wind velocity falls under scale No. 4 that describes the sea condition as "moderate breeze," and "small waves
becoming longer, fairly frequent white horses." 26
To fortify its position, Equitable presented Rogelio T. Barboza who testified that as claims supervisor and processor of Equitable,
he recommended payment to Axel Manufacturing Corporation as evidenced by the cash voucher, return check and subrogation
receipt. Barboza also presented a letter of demand to Aboitiz which, however, the latter ignored. 27
On April 24, 1984, the trial court rendered a decision that disposed of Civil Case No. 138643 as follows:
WHEREFORE, judgment is hereby rendered ordering defendant Aboitiz Shipping Company to pay plaintiff Allied
Guarantee Insurance Company, Inc. the sum of P278,536.50, with legal interest thereon from March 10, 1981, then
date of the filing of the complaint, until fully paid, plus P30,000.00 as attorney's fees, with costs of suit.
SO ORDERED. 28
A similar decision was arrived at in Civil Case No. 138396, the dispositive portion of which reads:
WHEREFORE, in view of the foregoing, this Court hereby renders judgment in favor of plaintiff and against defendant
Aboitiz Shipping Corporation, to pay the sum of P194,794.85 with legal rate of interest thereon from February 27,
1981 until fully paid; attorney's fees of twenty-five (25%) percent of the total claim, plus litigation expenses and
costs of litigation.
SO ORDERED. 29
In Civil Case No. 138643, Aboitiz appealed to the Court of Appeals under CA-G.R. CV No. 04121. On March 23, 1987, the Court
of Appeals affirmed the decision of the lower court. A motion for reconsideration of the said decision was likewise denied by
the Court of Appeals on May 3, 1989. Aggrieved, Aboitiz then filed a petition for review with this Court docketed as G.R. No.
88159 which was denied for lack merit. Entry of judgment was made and the lower court's decision in Civil Case No. 138643
became final and executory. Allied prayed for the issuance of a writ of execution in the lower court which was granted by the
latter on April 4, 1990. To stay the execution of the judgment of the lower court, Aboitiz filed a petition for certiorari and
prohibition with preliminary injunction with the Court of Appeals docketed as CA-G.R. SP No. 20844. 30 On August 15, 1990, the
Court of Appeals rendered the assailed decision, the dispositive portion of which reads as follows.
WHEREFORE, the challenged order of the respondent Judge dated April 4, 1990 granting the execution is hereby set
aside. The respondent Judge is further ordered to stay the execution of the judgment insofar as it impairs the rights
of the 100 other claimants to the insurance proceeds including the rights of the petitioner to pay more than the
value of the vessel or the insurance proceeds and to desist from executing the judgment insofar as it prejudices the
pro-rata share of all claimants to the insurance proceeds. No pronouncement as to costs.
SO ORDERED. 31
243
Hence, Allied filed the instant petition for certiorari, mandamus and injunction with preliminary injunction and/or restraining
order before this Court alleging the following assignment of errors:
1. Respondent Court of Appeals gravely erred in staying the immediate execution of the judgment of the lower court
as it has no authority nor jurisdiction to directly or indirectly alter, modify, amend, reverse or invalidate a final
judgment as affirmed by the Honorable Supreme Court in G.R. No. 88159.
2. Respondent Court of Appeals with grave abuse of discretion amounting to lack or excess of jurisdiction, brushed
aside the doctrine in G.R. No. 88159 which is now the law of the case and observance of time honored principles
of stare decisis, res adjudicata and estoppel by judgment.
3. Real and hypothecary rule under Articles 587, 590 and 837 of the Code of Commerce which is the basis of the
questioned decision (Annex "C" hereof) is without application in the face of the facts found by the lower court,
sustained by the Court of Appeals in CA-G.R. No. 04121 and affirmed in toto by the Supreme Court in G.R. No.
88159.
4. Certiorari as a special remedy is unavailing for private respondent as there was no grave abuse of discretion nor
lack or excess of jurisdiction for Judge Mabunay to issue the order of April 4, 1990 which was in accord with law and
jurisprudence, nor were there intervening facts and/or supervening events that will justify respondent court to issue
a writ of certiorari or a restraining order on a final and executory judgment of the Honorable Supreme Court. 32
From the decision of the trial court in Civil Case No. 138396 that favored Equitable, Aboitiz likewise appealed to the Court of
Appeals through CA-G.R. CV No. 15071. On August 24, 1990, the Court of Appeals rendered the Decision quoting extensively its
Decision in CA-G.R. No. SP-17427 (now G.R. No. 92735) and disposing of the appeal as follows:
WHEREFORE, we hereby affirm the trial court's awards of actual damages, attorney's fees and litigation expenses,
with the exception of legal interest, in favor of plaintiff-appellee Equitable Insurance Corporation as subrogee of the
consignee for the loss of its shipment aboard the M/V "P. Aboitiz" and against defendant-appellant Aboitiz Shipping
Corporation. However, the amount and payment of those awards shall be subject to a determination of the pro-rata
share of said appellee in relation to the pro-rata shares of the 109 other claimants, which determination shall be
made by the trial court. This case is therefore hereby ordered remanded to the trial court which shall reopen the
case and receive evidence to determine appellee's pro-rata share as aforesaid. No pronouncement as to costs.
SO ORDERED. 33
On September 12, 1990, Equitable moved to reconsider the Court of Appeals' Decision. The Court of Appeals denied the
motion for reconsideration on October 4, 1990. 34 Consequently, Equitable filed with this Court a petition for review alleging the
following assignment of errors:
1. Respondent Court of Appeals, with grave abuse of discretion amounting to lack or excess of jurisdiction,
erroneously brushed aside the doctrine in G.R. No. 88159 which is now the law of the case as held in G.R. No. 89757
involving the same and identical set of facts and cause of action relative to the sinking of the M/V "P. Aboitiz" and
observance of the time honored principles of stare decisis, and estoppel by judgment.
2. Real and hypothecary rule under Articles 587, 590 and 837 of the Code of Commerce which is the basis of the
assailed decision and resolution is without application in the face of the facts found by the trial court which
conforms to the conclusion and finding of facts arrived at in a similar and identical case involving the same incident
and parties similarly situated in G.R. No. 88159 already declared as the "law of the case" in a subsequent decision of
this Honorable Court in G.R. No. 89757 promulgated on August 6, 1990.
3. Respondent Court of Appeals gravely erred in concluding that limited liability rule applies in case of loss of cargoes
when the law itself does not distinguish; fault of the shipowner or privity thereto constitutes one of the exceptions
 to the application of limited liability under Article 587, 590 and 837 of the Code of Commerce, Civil Code provisions
on common carriers for breach of contract of carriage prevails. 35
These three petitions in G.R. Nos. 92735, 94867 and 95578 were consolidated in the Resolution of August 5, 1991 on the
ground that the petitioners "have identical causes of action against the same respondent and similar reliefs are prayed for." 36
The threshold issue in these consolidated petitions is the applicability of the limited liability rule in maritime law in favor of
Aboitiz in order to stay the execution of the judgments for full indemnification of the losses suffered by the petitioners as a
result of the sinking of the M/V P. Aboitiz. Before we can address this issue, however, there are procedural matters that need to
be threshed out.
First. At the outset, the Court takes note of the fact that in G.R. No. 92735, Judge Amante Purisima, whose decision in the
Regional Trial Court is sought to be upheld, is named as a co-petitioner. In Calderon v. Solicitor General, 37where the petitioner
in the special civil action of certiorari and mandamus was also the judge whose order was being assailed, the Court held that
said judge had no standing to file the petition because he was merely a nominal or formal party-respondent under Section 5 of
Rule 65 of the Rules of Court. He should not appear as a party seeking the reversal of a decision that is unfavorable to the
action taken by him. The Court there said:
Judge Calderon should be-reminded of the well-known doctrine that a judge should detach himself from cases
where his decision is appealed to a higher court for review. The raison d'etre for such doctrine is the fact that a
judge is not an active combatant in such proceeding and must leave the opposing parties to contend their individual
positions and for the appellate court to decide the issues without his active participation. By filing this case,
petitioner in a way ceased to be judicial and has become adversarial instead. 38
While the petition in G.R. No. 92735 does not expressly show whether or not Judge Purisima himself is personally interested in
the disposition of this petition or he was just inadvertently named as petitioner by the real parties in interest, the fact that
Judge Purisima is named as petitioner has not escaped this Court's notice. Judges and litigants should be reminded of the basic
rule that courts or individual judges are not supposed to be interested "combatants" in any litigation they resolve.
Second. The petitioners contend that the inapplicability of the limited liability rule to Aboitiz has already been decided on by no
less than this Court in G.R. No. 88159 as early as November 13, 1989 which was subsequently declared as "law of the case" in
G.R. No. 89757 on August 6, 1990. Herein petitioners cite the aforementioned cases in support of their theory that the limited
liability rule based on the real and hypothecary nature of maritime law has no application in the cases at bar.
The existence of what petitioners insist is already the "law of the case" on the matter of limited liability is at best illusory.
Petitioners are either deliberately misleading this Court or profoundly confused. As elucidated in the case of Aboitiz Shipping
Corporation vs. General Accident Fire and Life Assurance Corporation, 39
An examination of the November 13, 1989 Resolution in G.R. No. 88159 (pp. 280-282, Rollo) shows that the same
settles two principal matters, first of which is that the doctrine of primary administrative jurisdiction is not
applicable therein; and second is that a limitation of liability in said case would render inefficacious the
extraordinary diligence required by law of common carriers.
It should be pointed out, however, that the limited liability discussed in said case is not the same one now in issue at
bar, but an altogether different aspect. The limited liability settled in G.R. No. 88159 is that which attaches to cargo
by virtue of stipulations in the Bill of Lading, popularly known as package limitation clauses, which in that case was
contained in Section 8 of the Bill of Lading and which limited the carrier's liability to US$500.00 for the cargo whose
value was therein sought to be recovered. Said resolution did not tackle the matter of the Limited Liability Rule
arising out of the real and hypothecary nature of maritime law, which was not raised therein, and which is the
principal bone of contention in this case. While the matters threshed out in G.R. No. 88159, particularly those
dealing with the issues on primary administrative jurisdiction and the package liability limitation provided in the Bill
of Lading are now settled and should no longer be touched, the instant case raises a completely different issue. 40
244
Third. Petitioners asseverate that the judgments of the lower courts, already final and executory, cannot be directly or indirectly
altered, modified, amended, reversed or invalidated.
The rule that once a decision becomes final and executory, it is the ministerial duty of the court to order its execution, is not an
absolute one: We have allowed the suspension of execution in cases of special and exceptional nature when it becomes
imperative in the higher interest of justice. 41 The unjust and inequitable effects upon various other claimants against Aboitiz
should we allow the execution of judgments for the full indemnification of petitioners' claims impel us to uphold the stay of
execution as ordered by the respondent Court of Appeals. We reiterate our pronouncement in Aboitiz Shipping Corporation vs.
General Accident Fire and Life Assurance Corporation on this very same issue.
This brings us to the primary question herein which is whether or not respondent court erred in granting execution
of the full judgment award in Civil Case No. 14425 (G.R. No. 89757), thus effectively denying the application of the
limited liability enunciated under the appropriate articles of the Code of Commerce. . . . . Collaterally, determination
of the question of whether execution of judgments which have become final and executory may be stayed is also an
issue.
We shall tackle the latter issue first. This Court has always been consistent in its stand that the very purpose for its
existence is to see the accomplishment of the ends of justice. Consistent with this view, a number of decisions have
originated herefrom, the tenor of which is that no procedural consideration is sancrosanct if such shall result in the
subverting of justice. The right to execution after finality of a decision is certainly no exception to this. Thus,
in Cabrias v. Adil (135 SCRA 355 [1885]), this Court ruled that:
. . . every court having jurisdiction to render a particular judgment has inherent power to enforce it, and
to exercise equitable control over such enforcement. The court has authority to inquire whether its
judgment has been executed, and will remove obstructions to the enforcement thereof. Such authority
extends not only to such orders and such writs as may be necessary to prevent an improper enforcement
of the judgment. If a judgment is sought to be perverted and made a medium of consummating a wrong
the court on proper application can prevent it. 42
Fourth. Petitioners in G.R. No. 92735 ever that it was error for the respondent Court of Appeals to allow Aboitiz the benefit of
the limited liability rule despite its failure to present evidence to prove its entitlement thereto in the court below. Petitioners
Monarch and Tabacalera remind this Court that from the inception of G.R. No. 92735 in the lower court and all the way to the
Supreme Court, Aboitiz had not presented an iota of evidence to exculpate itself from the charge of negligence for the simple
reason that it was declared as in default. 43
It is true that for having been declared in default, Aboitiz was precluded from presenting evidence to prove its defenses in the
court a quo. We cannot, however, agree with petitioners that this circumstance prevents the respondent Court of Appeals from
taking cognizance of Aboitiz' defenses on appeal.
It should be noted that Aboitiz was declared as in default not for its failure to file an answer but for its absence during pre-trial
and the trial proper. In Aboitiz' answer with counterclaim, it claimed that the sinking of the M/V P. Aboitiz was due to an act of
God or unforeseen event and that the said ship had been seaworthy and fit for the voyage. Aboitiz also alleged that it exercised
the due diligence required by law, and that considering the real and hypothecary nature of maritime trade, the sinking justified
the extinguishment of its liability for the lost shipment. 44
A judgment of default does not imply a waiver of rights except that of being heard and presenting evidence in defendant's
favor. It does not imply admission by the defendant of the facts and causes of action of the plaintiff, because the codal
section 45 requires the latter to adduce evidence in support of his allegations as an indispensable condition before final
judgment could be given in his favor. Nor could it be interpreted as an admission by the defendant that the plaintiff's causes of
action find support in the law or that the latter is entitled to the relief prayed for. 46 This is especially true with respect to a
defendant who had filed his answer but had been subsequently declared in default for failing to appear at the trial since he has
had an opportunity to traverse, via his answer, the material averments contained in the complaint. Such defendant has a better
standing than a defendant who has neither answered nor appeared at trial. 47 The former should be allowed to reiterate all
affirmative defenses pleaded in his answer before the Court of Appeals. Likewise, the Court of Appeals may review the
correctness of the evaluation of the plaintiffs evidence by the lower court.
It should also be pointed out that Aboitiz is not raising the issue of its entitlement to the limited liability rule for the first time
on appeal thus, the respondent Court of Appeals may properly rule on the same.
However, whether or not the respondent Court of Appeals erred in finding, upon review, that Aboitiz is entitled to the benefit
of the limited liability rule is an altogether different matter which shall be discussed below.1awphi1
Rule on Limited Liability. The petitioners assert in common that the vessel M/V P. Aboitiz did not sink by reason offorce
majeure but because of its unseaworthiness and the concurrent fault and/or negligence of Aboitiz, the captain and its crew,
thereby barring Aboitiz from availing of the benefit of the limited liability rule.
The principle of limited liability is enunciated in the following provisions of the Code of Commerce:
Art. 587. The shipagent shall also be civilly liable for the indemnities in favor of third persons which may arise from
the conduct of the captain in the care of goods which he loaded on the vessel; but he may exempt himself
therefrom by abandoning the vessel with all the equipments and the freight it may have earned during the voyage.
Art. 590. The co-owners of a vessel shall be civilly liable in the proportion of their interests in the common fund for
the results of the acts of the captain referred to in Art. 587.
Each co-owner may exempt himself from his liability by the abandonment, before a notary, of the part of the vessel
belonging to him.
Art. 837. The civil liability incurred by shipowners in the case prescribed in this section, shall be understood as
limited to the value of the vessel with all its appurtenances and the freightage served during the voyage.
Art. 837 appeals the principle of limited liability in cases of collision hence, Arts. 587 and 590 embody the universal principle of
limited liability in all cases. In Yangco v. Laserna, 48 this Court elucidated on the import of Art. 587 as follows:
The provision accords a shipowner or agent the right of abandonment; and by necessary implication, his liability is
confined to that which he is entitled as of right to abandon-"the vessel with all her equipments and the freight it
may have earned during the voyage." It is true that the article appears to deal only with the limited liability of the
shipowners or agents for damages arising from the misconduct of the captain in the care of the goods which the
vessel carries, but this is a mere deficiency of language and in no way indicates the true extent of such liability. The
consensus of authorities is to the effect that notwithstanding the language of the aforequoted provision, the benefit
of limited liability therein provided for, applies in all cases wherein the shipowner or agent may properly be held
liable for the negligent or illicit acts of the captain. 49
"No vessel, no liability," expresses in a nutshell the limited liability rule. The shipowner's or agent's liability is merely co-
extensive with his interest in the vessel such that a total loss thereof results in its extinction. The total destruction of the vessel
extinguishes maritime liens because there is no longer any res to which it can attach. 50 This doctrine is based on the real and
hypothecary nature of maritime law which has its origin in the prevailing conditions of the maritime trade and sea voyages
during the medieval ages, attended by innumerable hazards and perils. To offset against these adverse conditions and to
encourage shipbuilding and maritime commerce, it was deemed necessary to confine the liability of the owner or agent arising
from the operation of a ship to the vessel, equipment, and freight, or insurance, if any. 51
Contrary to the petitioners' theory that the limited liability rule has been rendered obsolete by the advances in modern
technology which considerably lessen the risks involved in maritime trade, this Court continues to apply the said rule in
appropriate cases. This is not to say, however, that the limited liability rule is without exceptions, namely: (1) where the injury
245
or death to a passenger is due either to the fault of the shipowner, or to the concurring negligence of the shipowner and the
captain; 52 (2) where the vessel is insured; and (3) in workmen's compensation claims. 53
We have categorically stated that Article 587 speaks only of situations where the fault or negligence is committed solely by the
captain. In cases where the ship owner is likewise to be blamed, Article 587 does not apply. Such a situation will be covered by
the provisions of the Civil Code on common carriers. 54
A finding that a fortuitous event was the sole cause of the loss of the M/V P. Aboitiz would absolve Aboitiz from any and all
liability pursuant to Article 1734(1) of the Civil Code which provides in part that common carriers are responsible for the loss,
destruction, or deterioration of the goods they carry, unless the same is due to flood, storm, earthquake, lightning, or other
natural disaster or calamity. On the other hand, a finding that the M/V P. Aboitiz sank by reason of fault and/or negligence of
Aboitiz, the ship captain and crew of the M/V P. Aboitiz would render inapplicable the rule on limited liability. These issues are
therefore ultimately questions of fact which have been subject of conflicting determinations by the trial courts, the Court of
Appeals and even this Court.
In Civil Cases Nos. 82-2767-82-2770 (now G.R. No. 92735), after receiving Monarch's and Tabacalera's evidence, the trial court
found that the complete loss of the shipment on board the M/V P. Aboitiz when it sank was neither due to a fortuitous event
nor a storm or natural cause. For Aboitiz' failure to present controverting evidence, the trial court also upheld petitioners'
allegation that the M/V P. Aboitiz was unseaworthy. 55 However, on appeal, respondent Court of Appeals exculpated Aboitiz
from fault or negligence and ruled that:
. . ., even if she (M/V P. Aboitiz) was found to be unseaworthy, this fault (distinguished from civil liability) cannot be
laid on the shipowner's door. Such fault was directly attributable to the captain. This is so, because under Art. 612 of
the Code of Commerce, among the inherent duties of a captain, are to examine the vessel before sailing and to
comply with the laws on navigation. 56
and that:
. . . although the shipowner may be held civilly liable for the captain's fault . . . having abandoned the vessel in
question, even if the vessel was unseaworthy due to the captain's fault, Aboitiz is still entitled to the benefit under
the rule of limited liability accorded to shipowners by the Code of Commerce. 57
Civil Case No. 138396 (now G.R. No. 95578) was similarly resolved by the trial court, which found that the sinking of the M/V P.
Aboitiz was not due to an act of God or force majeure. It added that the evidence presented by the petitioner Equitable
demonstrated the negligence of Aboitiz Shipping Corporation in the management and operation of its, vessel M/V P. Aboitiz. 58
However, Aboitiz' appeal was favorably acted upon by the respondent Court of Appeals which reiterated its ruling in G.R. No.
92735 that the unseaworthiness of the M/V P. Aboitiz was not a fault directly attributable to Aboitiz but to the captain, and that
Aboitiz is entitled to the benefit of the limited liability rule for having abandoned its ship. 59
Finally, in Civil Case No. 138643 (now G.R. No. 94867), the trial court held that the M/V P. Aboitiz was not lost due to a
fortuitous event or force majeure, and that Aboitiz had failed to satisfactorily establish that it had observed extraordinary
diligence in the vigilance over the goods transported by it. 60
In CA-G.R. CV No. 04121, the Court of Appeals initially ruled against Aboitiz and found that the sinking of the vessel was due to
its unseaworthiness and the failure of its crew and master to exercise extraordinary diligence. 61Subsequently, however, Aboitiz'
petition before the Court of Appeals, docketed as CA-G.R. SP No. 20844 (now G.R. No. 94867) to annul and set aside the order
of execution issued by the lower court was resolved in favor of Aboitiz. The Court of Appeals brushed aside the issue of Aboitiz'
negligence and/or fault and proceeded to allow the application of the limited liability rule "to accomplish the aims of
justice." 62 It elaborated thus: "To execute the judgment in this case would prejudice the substantial right of other claimants
who have filed suits to claim their cargoes that was lost in the vessel that sank and also against the petitioner to be ordered to
pay more than what the law requires." 63
It should be pointed out that the issue of whether or not the M/V P. Aboitiz sank by reason of force majeure is not a novel one
for that question has already been the subject of conflicting pronouncements by the Supreme Court. In Aboitiz Shipping
Corporation v. Court of Appeals, 64 this Court approved the findings of the trial court and the appellate court that the sinking of
the M/V P. Aboitiz was not due to the waves caused by tropical storm "Yoning" but due to the fault and negligence of Aboitiz, its
master and crew. 65 On the other hand, in the later case of Country Bankers Insurance Corporation v. Court of Appeals, 66 this
Court issued a Resolution on August 28, 1991 denying the petition for review on the ground that the Court of Appeals
committed no reversible error, thereby affirming and adopting as its own, the findings of the Court of Appeals that force
majeure had caused the M/V P. Aboitiz to founder.
In view of these conflicting pronouncements, we find that now is the opportune time to settle once and for all the issue or
whether or not force mejeure had indeed caused the M/V P. Aboitiz to sink. After reviewing the records of the instant cases, we
categorically state that by the facts on record, the M/V P. Aboitiz did not go under water because of the storm "Yoning."
It is true that as testified by Justo Iglesias, meteorologist of Pag-Asa, during the inclusive dates of October 28-31, 1980, a stormy
weather condition prevailed within the Philippine area of responsibility, particularly along the sea route from Hong Kong to
Manila, because of tropical depression "Yoning". 67 But even Aboitiz' own evidence in the form of the marine protest filed by
Captain Racines affirmed that the wind force when the M/V P. Aboitiz foundered on October 31, 1980 was only ten (10) to
fifteen (15) knots which, under the Beaufort Scale or Wind, falls within scale No. 4 that describes the wind velocity as
"moderate breeze," and characterizes the waves as "small . . . becoming longer, fairly frequent white horses." 68 Captain Racines
also testified in open court that the ill-fated M/V P. Aboitiz was two hundred (200) miles away from storm "Yoning" when it
sank. 69
The issue of negligence on the part of Aboitiz, and the captain and crew of the M/V P. Aboitiz has also been subject of
conflicting rulings by this Court. In G.R. No. 100373, Country Bankers Insurance Corporation v. Court of Appeals, this Court
found no error in the findings of the Court of Appeals that the M/V P. Aboitiz sank by reason of force majeure, and that there
was no negligence on the part of its officers and crew. In direct contradiction is this Court's categorical declaration in Aboitiz
Shipping Corporation v. Court of Appeals," 70 to wit:
The trial court and the appellate court found that the sinking of the M/V P. Aboitiz was not due to the waves caused
by tropical storm "Yoning" but due to the fault and negligence of petitioner, its master and crew. The court
reproduces with approval said findings . . . . 71
However, in the subsequent case of Aboitiz Shipping Corporation v. General Accident Fire and Life Assurance Corporation,
Ltd., 72 this Court exculpated Aboitiz from fault and/or negligence while holding that the unseaworthiness of the M/V P. Aboitiz
was only attributable to the negligence of its captain and crew. Thus,
On this point, it should be stressed that unseaworthiness is not a fault that can be laid squarely on petitioner's lap,
absent a factual basis for such conclusion. The unseaworthiness found in some cases where the same has been ruled
to exist is directly attributable to the vessel's crew and captain, more so on the part of the latter since Article 612 of
the Code of Commerce provides that among the inherent duties of a captain is to examine a vessel before sailing
and to comply with the laws of navigation. Such a construction would also put matters to rest relative to the decision
of the Board of Marine Inquiry. While the conclusion therein exonerating the captain and crew of the vessel was not
sustained for lack of basis, the finding therein contained to the effect that the vessel was seaworthy deserves merit.
Despite appearances, it is not totally incompatible with the findings of the trial court and the Court of Appeals,
whose finding of "unseaworthiness" clearly did not pertain to the structural condition of the vessel which is the
basis of the BMI's findings, but to the condition it was in at the time of the sinking, which condition was a result of
the acts of the captain and the crew. 73
It therefore becomes incumbent upon this Court to answer with finality the nagging question of whether or not it was the
concurrent fault and/or negligence of Aboitiz and the captain and crew of the ill-fated vessel that had caused it to go under
water.
246
Guided by our previous pronouncements and illuminated by the evidence now on record, we reiterate our findings in Aboitiz
Shipping Corporation v. General Accident Fire and Life Assurance Corporation, Ltd. 74 , that the unseaworthiness of the M/V P.
Aboitiz had caused it to founder. We, however, take exception to the pronouncement therein that said unseaworthiness could
not be attributed to the ship owner but only to the negligent acts of the captain and crew of the M/V P. Aboitiz. On the matter
of Aboitiz' negligence, we adhere to our ruling in Aboitiz Shipping Corporation v. Court of Appeals, 75 that found Aboitiz, and the
captain and crew of the M/V P. Aboitiz to have been concurrently negligent.
During the trial of Civil Case Nos. 82-2767-82-2770 (now G.R. No. 92735), petitioners Monarch and Tabacalera presented a
survey from Perfect Lambert, a surveyor based in Hong Kong that conducted an investigation on the possible cause of the
sinking of the vessel. The said survey established that the cause of the sinking of the vessel was the leakage of water into the
M/V P. Aboitiz which probably started in the forward part of the No. 1 hull, although no explanation was proffered as to why
the No. 2 hull was likewise flooded. Perfect Lambert surmised that the flooding was due to a leakage in the shell plating or a
defect in the water tight bulk head between the Nos. 1 and 2 holds which allowed the water entering hull No. 1 to pass through
hull No. 2. The surveyor concluded that whatever the cause of the leakage of water into these hulls, the seaworthiness of the
vessel was definitely in question because the breaches of the hulls and serious flooding of the two cargo holds occurred
simultaneously in seasonal weather. 76
We agree with the uniform finding of the lower courts that Aboitiz had failed to prove that it observed the extraordinary
diligence required of it as a common carrier. We therefore reiterate our pronouncement in Aboitiz Corporation v. Court of
Appeals 77 on the issue of Aboitiz' liability in the sinking of its vessel, to wit:
In accordance with Article 1732 of the Civil Code, the defendant common carrier from the nature of its business and
for reasons of public policy, is bound to observe extraordinary diligence in the vigilance over the goods and for the
safety of the passengers transported by it according to all circumstances of the case. While the goods are in the
possession of the carrier, it is but fair that it exercise extraordinary diligence in protecting them from loss or damage,
and if loss occurs, the law presumes that it was due to the carrier's fault or negligence; that is necessary to protect
the interest of the shipper which is at the mercy of the carrier . . . In the case at bar, the defendant failed to prove
hat the loss of the subject cargo was not due to its fault or negligence. 78
The failure of Aboitiz to present sufficient evidence to exculpate itself from fault and/or negligence in the sinking of its vessel in
the face of the foregoing expert testimony constrains us to hold that Aboitiz was concurrently at fault and/or negligent with the
ship captain and crew of the M/V P. Aboitiz. This is in accordance with the rule that in cases involving the limited liability of
shipowners, the initial burden of proof of negligence or unseaworthiness rests on the claimants. However, once the vessel
owner or any party asserts the right to limit its liability, the burden of proof as to lack of privity or knowledge on its part with
respect to the matter of negligence or unseaworthiness is shifted to it. 79 This burden, Aboitiz had unfortunately failed to
discharge. That Aboitiz failed to discharge the burden of proving that the unseaworthiness of its vessel was not due to its fault
and/or negligence should not however mean that the limited liability rule will not be applied to the present cases. The peculiar
circumstances here demand that there should be no strict adherence to procedural rules on evidence lest the just claims of
shippers/insurers be frustrated. The rule on limited liability should be applied in accordance with the latest ruling in Aboitiz
Shipping Corporation v. General Accident Fire and Life Assurance Corporation, Ltd., 80 promulgated on January 21, 1993, that
claimants be treated as "creditors in an insolvent corporation whose assets are not enough to satisfy the totality of claims
against it." 81 To do so, the Court set out in that case the procedural guidelines:
In the instant case, there is, therefore, a need to collate all claims preparatory to their satisfaction from the
insurance proceeds on the vessel M/V P. Aboitiz and its pending freightage at the time of its loss. No claimant can be
given precedence over the others by the simple expedience of having completed its action earlier than the rest.
Thus, execution of judgment in earlier completed cases, even these already final and executory must be stayed
pending completion of all cases occasioned by the subject sinking. Then and only then can all such claims be
simultaneously settled, either completely or pro-rata should the insurance proceeds and freightage be not enough
to satisfy all claims.
 In fairness to the claimants and as a matter of equity, the total proceeds of the insurance and pending freightage
should now be deposited in trust. Moreover, petitioner should institute the necessary limitation and distribution
action before the proper admiralty court within 15 days from finality of this decision, and thereafter deposit with it
the proceeds from the insurance company and pending freightage in order to safeguard the same pending final
resolution of all incidents, for final pro-rating and settlement thereof. 82 (Emphasis supplied.)
There is no record that Aboitiz. has instituted such action or that it has deposited in trust the insurance proceeds and freightage
earned. The pendency of the instant cases before the Court is not a reason for Aboitiz to disregard the aforementioned order of
the Court. In fact, had Aboitiz complied therewith, even these cases could have been terminated earlier. We are inclined to
believe that instead of filing the suit as directed by this Court, Aboitiz tolerated the situation of several claimants waiting to gel
hold of its insurance proceeds, which, if correctly handled must have multiplied in amount by now. By its failure to abide by the
order of this Court, it had caused more damage to the claimants over and above that which they have endured as a direct
consequence of the sinking of the M/V P. Aboitiz. It was obvious that from among the many cases filed against it over the years,
Aboitiz was waiting for a judgment that might prove favorable to it, in blatant violation of the basic provisions of the Civil Code
on abuse of rights.
Well aware of the 110 claimants against it, Aboitiz preferred to litigate the claims singly rather than exert effort towards the
consolidation of all claims. Consequently, courts have arrived at conflicting decisions while claimants waited over the years for a
resolution of any of the cases that would lead to the eventual resolution of the rest. Aboitiz failed to give the claimants their
due and to observe honesty and good faith in the exercise of its rights. 83
Aboitiz' blatant disregard of the order of this Court in Aboitiz Shipping Corporation v. General Accident Fire and Life Assurance
Corporation, Ltd. 84 cannot be anything but, willful on its part. An act is considered willful if it is done with knowledge of its
injurious effect; it is not required that the act be done purposely to produce the injury. 85 Aboitiz is well aware that by not
instituting the said suit, it caused the delay in the resolution of all claims against it. Having willfully caused loss or injury to the
petitioners in a manner that is contrary to morals, good customs or public policy, Aboitiz is liable for damages to the latter. 86
Thus, for its contumacious act of defying the order of this Court to file the appropriate action to consolidate all claims for
settlement, Aboitiz must be held liable for moral damages which may be awarded in appropriate cases under the Chapter on
human relations of the Civil Code (Articles 19 to 36). 87
On account of Aboitiz' refusal to satisfy petitioners' claims in accordance with the directive of the Court in Aboitiz Shipping
Corporation v. General Accident Fire and Life Assurance Corporation, Ltd., it acted in gross and evident bad faith. Accordingly,
pursuant to Article 2208 of the Civil Code, 88 petitioners should be granted attorney's fees.
WHEREFORE, the petitions in G.R. Nos. 92735, 94867, and 95578 are DENIED. The decisions of the Court of Appeals in CA-G.R.
No. SP-17427 dated March 29, 1990, CA-G.R. SP No. 20844 dated August 15, 1990, and CA-G.R. CV No. 15071 dated August 24,
1990 are AFFIRMED with the MODIFICATION that respondent Aboitiz Shipping Corporation is ordered to pay each of the
respective petitioners the amounts of P100,000.00 as moral damages and P50,000.00 as attorney's fees, and treble the cost of
suit.
Respondent Aboitiz Shipping Corporation is further directed to comply with the Order promulgated by this Court on January 21,
1993 in Aboitiz Shipping Corporation v. General Accident Fire and Life Assurance Corporation, Ltd., G.R. No. 100446, January 21,
1993, to (a) institute the necessary limitation and distribution action before the proper Regional Trial Court, acting as admiralty
court, within fifteen (15) days from the finality of this decision, and (b) thereafter to deposit with the said court the insurance
proceeds from the loss of the vessel, M/V P. Aboitiz, and the freightage earned in order to safeguard the same pending final
resolution of all incidents relative to the final pro-rating thereof and to the settlement of all claims.1âwphi1.nêt
SO ORDERED.
FACTS:
3 cases arose from the loss of cargoes of various shippers when the M/V P. Aboitiz, a common carrier owned and operated by
Aboitiz, sank on her voyage from Hong Kong to Manila. Seeking indemnification for the loss of their cargoes, the shippers and
247
the cargo insurers filed separate suits against Aboitiz. The court of appeals modified the judgment of the lower court by
applying the hypothecary rule on limited liability.
ISSUE: Whether the application of limited liability rule in maritime law stays the execution of the judgments for full
indemnification of the losses suffered by the petitioners as a result of the sinking of the M/V P. Aboitiz.
HELD:
In the rule on limited liability, that claimants be treated as "creditors in an insolvent corporation whose assets are not enough
to satisfy the totality of claims against it. There is, therefore, a need to collate all claims preparatory to their satisfaction from
the insurance proceeds on the vessel M/V P. Aboitiz and its pending freightage at the time of its loss. No claimant can be given
precedence over the others by the simple expedience of having completed its action earlier than the rest. Thus, execution of
judgment in earlier completed cases, even those already final and executory must be stayed pending completion of all cases
occasioned by the subject sinking. Then and only then can all such claims be simultaneously settled, either completely or pro-
rata should the insurance proceeds and freightage be not enough to satisfy all claims.
FACTS:
Monarch and Tabacalera are insurance carriers of lost cargoes. They indemnified the shippers and were consequently
subrogated to their rights, interests and actions against Aboitiz, the cargo carrier. Because Aboitiz refused to compensate
Monarch, it filed two complaints against Aboitiz which were consolidated and jointly tried.
Aboitiz rejected responsibility for the claims on the ground that the sinking of its cargo vessel was due to force majeure or an
act of God. Aboitiz was subsequently declared as in default and allowed Monarch and Tabacalera to present evidence ex-parte.
ISSUE: Whether or not the doctrine of limited liability applies in the instant case.
HELD:
Yes. The failure of Aboitiz to present sufficient evidence to exculpate itself from fault and/or negligence in the sinking of its
vessel in the face of the foregoing expert testimony constrains us to hold that Aboitiz was concurrently at fault and/or negligent
with the ship captain and crew of the M/V P. Aboitiz. [This is in accordance with the rule that in cases involving the limited
liability of shipowners, the initial burden of proof of negligence or unseaworthiness rests on the claimants. However, once the
vessel owner or any party asserts the right to limit its liability, the burden of proof as to lack of privity or knowledge on its part
with respect to the matter of negligence or unseaworthiness is shifted to it. This burden, Aboitiz had unfortunately failed to
discharge.] That Aboitiz failed to discharge the burden of proving that the unseaworthiness of its vessel was not due to its fault
and/or negligence should not however mean that the limited liability rule will not be applied to the present cases. The peculiar
circumstances here demand that there should be no strict adherence to procedural rules on evidence lest the just claims of
shippers/insurers be frustrated. The rule on limited liability should be applied in accordance with the latest ruling in Aboitiz
Shipping Corporation v. General Accident Fire and Life Assurance Corporation, Ltd.,] promulgated on January 21, 1993, that
claimants be treated as "creditors in an insolvent corporation whose assets are not enough to satisfy the totality of claims
against it."
PhilAmGen vs. CA, 273 SCRA 262;
FIRST DIVISION
G.R. No. 116940 June 11, 1997
THE PHILIPPINE AMERICAN GENERAL INSURANCE COMPANY, INC., petitioner,
vs.
COURT OF APPEALS and FELMAN SHIPPING LINES, respondents.
BELLOSILLO, J.:
This case deals with the liability, if any, of a shipowner for loss of cargo due to its failure to observe the extraordinary diligence
required by Art. 1733 of the Civil Code as well as the right of the insurer to be subrogated to the rights of the insured upon
payment of the insurance claim.
On 6 July 1983 Coca-Cola Bottlers Philippines, Inc., loaded on board "MV Asilda," a vessel owned and operated by respondent
Felman Shipping Lines (FELMAN for brevity), 7,500 cases of 1-liter Coca-Cola softdrink bottles to be transported from
Zamboanga City to Cebu City for consignee Coca-Cola Bottlers Philippines, Inc., Cebu. 1 The shipment was insured with
petitioner Philippine American General Insurance Co., Inc. (PHILAMGEN for brevity), under Marine Open Policy No. 100367-
PAG.
"MV Asilda" left the port of Zamboanga in fine weather at eight o'clock in the evening of the same day. At around eight forty-
five the following morning, 7 July 1983, the vessel sank in the waters of Zamboanga del Norte bringing down her entire cargo
with her including the subject 7,500 cases of 1-liter Coca-Cola softdrink bottles.
On 15 July 1983 the consignee Coca-Cola Bottlers Philippines, Inc., Cebu plant, filed a claim with respondent FELMAN for
recovery of damages it sustained as a result of the loss of its softdrink bottles that sank with "MV Asilda." Respondent denied
the claim thus prompting the consignee to file an insurance claim with PHILAMGEN which paid its claim of P755,250.00.
Claiming its right of subrogation PHILAMGEN sought recourse against respondent FELMAN which disclaimed any liability for the
loss. Consequently, on 29 November 1983 PHILAMGEN sued the shipowner for sum of money and damages.
In its complaint PHILAMGEN alleged that the sinking and total loss of "MV Asilda" and its cargo were due to the vessel's
unseaworthiness as she was put to sea in an unstable condition. It further alleged that the vessel was improperly manned and
that its officers were grossly negligent in failing to take appropriate measures to proceed to a nearby port or beach after the
vessel started to list.
On 15 February 1985 FELMAN filed a motion to dismiss based on the affirmative defense that no right of subrogation in favor of
PHILAMGEN was transmitted by the shipper, and that, in any event, FELMAN had abandoned all its rights, interests and
ownership over "MV Asilda" together with her freight and appurtenances for the purpose of limiting and extinguishing its
liability under Art. 587 of the Code of Commerce.2
On 17 February 1986 the trial court dismissed the complaint of PHILAMGEN. On appeal the Court of Appeals set aside the
dismissal and remanded the case to the lower court for trial on the merits. FELMAN filed a petition for certiorari with this Court
but it was subsequently denied on 13 February 1989.
On 28 February 1992 the trial court rendered judgment in favor of FELMAN.3 It ruled that "MV Asilda" was seaworthy when it
left the port of Zamboanga as confirmed by certificates issued by the Philippine Coast Guard and the shipowner's surveyor
attesting to its seaworthiness. Thus the loss of the vessel and its entire shipment could only be attributed to either a fortuitous
event, in which case, no liability should attach unless there was a stipulation to the contrary, or to the negligence of the captain
and his crew, in which case, Art. 587 of the Code of Commerce should apply.
248
The lower court further ruled that assuming "MV Asilda" was unseaworthy, still PHILAMGEN could not recover from FELMAN
since the assured (Coca-Cola Bottlers Philippines, Inc.) had breached its implied warranty on the vessel's seaworthiness.
Resultantly, the payment made by PHILAMGEN to the assured was an undue, wrong and mistaken payment. Since it was not
legally owing, it did not give PHILAMGEN the right of subrogation so as to permit it to bring an action in court as a subrogee.
On 18 March 1992 PHILAMGEN appealed the decision to the Court of Appeals. On 29 August 1994 respondent appellate court
rendered judgment finding "MV Asilda" unseaworthy for being top-heavy as 2,500 cases of Coca-Cola softdrink bottles were
improperly stowed on deck. In other words, while the vessel possessed the necessary Coast Guard certification indicating its
seaworthiness with respect to the structure of the ship itself, it was not seaworthy with respect to the cargo. Nonetheless, the
appellate court denied the claim of PHILAMGEN on the ground that the assured's implied warranty of seaworthiness was not
complied with. Perfunctorily, PHILAMGEN was not properly subrogated to the rights and interests of the shipper. Furthermore,
respondent court held that the filing of notice of abandonment had absolved the shipowner/agent from liability under the
limited liability rule.
The issues for resolution in this petition are: (a) whether "MV Asilda" was seaworthy when it left the port of Zamboanga; (b)
whether the limited liability under Art. 587 of the Code of Commerce should apply; and, (c) whether PHILAMGEN was properly
subrogated to the rights and legal actions which the shipper had against FELMAN, the shipowner.
"MV Asilda" was unseaworthy when it left the port of Zamboanga. In a joint statement, the captain as well as the chief mate of
the vessel confirmed that the weather was fine when they left the port of Zamboanga. According to them, the vessel was
carrying 7,500 cases of 1-liter Coca-Cola softdrink bottles, 300 sacks of seaweeds, 200 empty CO2 cylinders and an
undetermined quantity of empty boxes for fresh eggs. They loaded the empty boxes for eggs and about 500 cases of Coca-Cola
bottles on deck.4 The ship captain stated that around four o'clock in the morning of 7 July 1983 he was awakened by the officer
on duty to inform him that the vessel had hit a floating log. At that time he noticed that the weather had deteriorated with
strong southeast winds inducing big waves. After thirty minutes he observed that the vessel was listing slightly to starboard and
would not correct itself despite the heavy rolling and pitching. He then ordered his crew to shift the cargo from starboard to
portside until the vessel was balanced. At about seven o'clock in the morning, the master of the vessel stopped the engine
because the vessel was listing dangerously to portside. He ordered his crew to shift the cargo back to starboard. The shifting of
cargo took about an hour afterwhich he rang the engine room to resume full speed.
At around eight forty-five, the vessel suddenly listed to portside and before the captain could decide on his next move, some of
the cargo on deck were thrown overboard and seawater entered the engine room and cargo holds of the vessel. At that
instance, the master of the vessel ordered his crew to abandon ship. Shortly thereafter, "MV Asilda" capsized and sank. He
ascribed the sinking to the entry of seawater through a hole in the hull caused by the vessel's collision with a partially
submerged log.5
The Elite Adjusters, Inc., submitted a report regarding the sinking of "MV Asilda." The report, which was adopted by the Court
of Appeals, reads —
We found in the course of our investigation that a reasonable explanation for the series of lists
experienced by the vessel that eventually led to her capsizing and sinking, was that the vessel was top-
heavy which is to say that while the vessel may not have been overloaded, yet the distribution or
stowage of the cargo on board was done in such a manner that the vessel was in top-heavy condition at
the time of her departure and which condition rendered her unstable and unseaworthy for that
particular voyage.
In this connection, we wish to call attention to the fact that this vessel was designed as a fishing
vessel . . . and it was not designed to carry a substantial amount or quantity of cargo on deck. Therefore,
we believe strongly that had her cargo been confined to those that could have been accommodated
under deck, her stability would not have been affected and the vessel would not have been in any danger
of capsizing, even given the prevailing weather conditions at that time of sinking.
 But from the moment that the vessel was utilized to load heavy cargo on its deck, the vessel was
rendered unseaworthy for the purpose of carrying the type of cargo because the weight of the deck
cargo so decreased the vessel's metacentric height as to cause it to become unstable.
Finally, with regard to the allegation that the vessel encountered big waves, it must be pointed out that
ships are precisely designed to be able to navigate safely even during heavy weather and frequently we
hear of ships safely and successfully weathering encounters with typhoons and although they may
sustain some amount of damage, the sinking of ship during heavy weather is not a frequent occurrence
and is not likely to occur unless they are inherently unstable and unseaworthy . . . .
We believe, therefore, and so hold that the proximate cause of the sinking of the M/V "Asilda" was her
condition of unseaworthiness arising from her having been top-heavy when she departed from the Port
of Zamboanga. Her having capsized and eventually sunk was bound to happen and was therefore in the
category of an inevitable occurrence (emphasis supplied).6
We subscribe to the findings of the Elite Adjusters, Inc., and the Court of Appeals that the proximate cause of the sinking of
"MV Asilda" was its being top-heavy. Contrary to the ship captain's allegations, evidence shows that approximately 2,500 cases
of softdrink bottles were stowed on deck. Several days after "MV Asilda" sank, an estimated 2,500 empty Coca-Cola plastic
cases were recovered near the vicinity of the sinking. Considering that the ship's hatches were properly secured, the empty
Coca-Cola cases recovered could have come only from the vessel's deck cargo. It is settled that carrying a deck cargo raises the
presumption of unseaworthiness unless it can be shown that the deck cargo will not interfere with the proper management of
the ship. However, in this case it was established that "MV Asilda" was not designed to carry substantial amount of cargo on
deck. The inordinate loading of cargo deck resulted in the decrease of the vessel's metacentric height 7 thus making it unstable.
The strong winds and waves encountered by the vessel are but the ordinary vicissitudes of a sea voyage and as such merely
contributed to its already unstable and unseaworthy condition.
On the second issue, Art. 587 of the Code of Commerce is not applicable to the case at bar. 8 Simply put, the ship agent is liable
for the negligent acts of the captain in the care of goods loaded on the vessel. This liability however can be limited through
abandonment of the vessel, its equipment and freightage as provided in Art. 587. Nonetheless, there are exceptional
circumstances wherein the ship agent could still be held answerable despite the abandonment, as where the loss or injury was
due to the fault of the shipowner and the captain.9 The international rule is to the effect that the right of abandonment of
vessels, as a legal limitation of a shipowner's liability, does not apply to cases where the injury or average was occasioned by
the shipowner's own fault. 10 It must be stressed at this point that Art. 587 speaks only of situations where the fault or
negligence is committed solely by the captain. Where the shipowner is likewise to be blamed, Art. 587 will not apply, and such
situation will be covered by the provisions of the Civil Code on common carrier. 11
It was already established at the outset that the sinking of "MV Asilda" was due to its unseaworthiness even at the time of its
departure from the port of Zamboanga. It was top-heavy as an excessive amount of cargo was loaded on deck. Closer
supervision on the part of the shipowner could have prevented this fatal miscalculation. As such, FELMAN was equally
negligent. It cannot therefore escape liability through the expedient of filing a notice of abandonment of the vessel by virtue of
Art. 587 of the Code of Commerce.
Under Art 1733 of the Civil Code, "(c)ommon 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 the event of loss of goods, common carriers are presumed to have
acted negligently. FELMAN, the shipowner, was not able to rebut this presumption.
In relation to the question of subrogation, respondent appellate court found "MV Asilda" unseaworthy with reference to the
cargo and therefore ruled that there was breach of warranty of seaworthiness that rendered the assured not entitled to the
payment of is claim under the policy. Hence, when PHILAMGEN paid the claim of the bottling firm there was in effect a
"voluntary payment" and no right of subrogation accrued in its favor. In other words, when PHILAMGEN paid it did so at its own
risk.
249
It is generally held that in every marine insurance policy the assured impliedly warrants to the assurer that the vessel is
seaworthy and such warranty is as much a term of the contract as if expressly written on the face of the policy. 12 Thus Sec. 113
of the Insurance Code provides that "(i)n every marine insurance upon a ship or freight, or freightage, or upon anything which
is the subject of marine insurance, a warranty is implied that the ship is seaworthy." Under Sec. 114, a ship is "seaworthy when
reasonably fit to perform the service, and to encounter the ordinary perils of the voyage, contemplated by the parties to the
policy." Thus it becomes the obligation of the cargo owner to look for a reliable common carrier which keeps its vessels in
seaworthy condition. He may have no control over the vessel but he has full control in the selection of the common carrier that
will transport his goods. He also has full discretion in the choice of assurer that will underwrite a particular venture.
We need not belabor the alleged breach of warranty of seaworthiness by the assured as painstakingly pointed out by FELMAN
to stress that subrogation will not work in this case. In policies where the law will generally imply a warranty of seaworthiness,
it can only be excluded by terms in writing in the policy in the clearest language. 13 And where the policy stipulates that the
seaworthiness of the vessel as between the assured and the assurer is admitted, the question of seaworthiness cannot be
raised by the assurer without showing concealment or misrepresentation by the assured. 14
The marine policy issued by PHILAMGEN to the Coca-Cola bottling firm in at least two (2) instances has dispensed with the
usual warranty of worthiness. Paragraph 15 of the Marine Open Policy No. 100367-PAG reads "(t)he liberties as per Contract of
Affreightment the presence of the Negligence Clause and/or Latent Defect Clause in the Bill of Lading and/or Charter Party
and/or Contract of Affreightment as between the Assured and the Company shall not prejudice the insurance. The
seaworthiness of the vessel as between the Assured and the Assurers is hereby admitted." 15
The same clause is present in par. 8 of the Institute Cargo Clauses (F.P.A.) of the policy which states "(t)he seaworthiness of the
vessel as between the Assured and Underwriters in hereby admitted . . . ." 16
The result of the admission of seaworthiness by the assurer PHILAMGEN may mean one or two things: (a) that the warranty of
the seaworthiness is to be taken as fulfilled; or, (b) that the risk of unseaworthiness is assumed by the insurance
company. 17 The insertion of such waiver clauses in cargo policies is in recognition of the realistic fact that cargo owners cannot
control the state of the vessel. Thus it can be said that with such categorical waiver, PHILAMGEN has accepted the risk of
unseaworthiness so that if the ship should sink by unseaworthiness, as what occurred in this case, PHILAMGEN is liable.
Having disposed of this matter, we move on to the legal basis for subrogation. PHILAMGEN's action against FELMAN is squarely
sanctioned by Art. 2207 of the Civil Code which provides:
Art. 2207. If the plaintiff's property has been insured, and he has received indemnity from the insurance
company for the injury or loss arising out of the wrong or breach of contract complained of, the
insurance company shall be subrogated to the rights of the insured against the wrongdoer or the person
who has violated the contract. If the amount paid by the insurance company does not fully cover the
injury or loss, the aggrieved party shall be entitled to recover the deficiency from the person causing the
loss or injury.
In Pan Malayan Insurance Corporation v. Court of Appeals, 18 we said that payment by the assurer to the assured operates as an
equitable assignment to the assurer of all the remedies which the assured 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 payment by the insurance company of the insurance claim. It accrues simply upon payment by the insurance company
of the insurance claim.
The doctrine of subrogation has its roots in equity. It is designed to promote and to accomplish justice and is the mode which
equity adopts to compel the ultimate payment of a debt by one who in justice, equity and good conscience ought to
pay. 19 Therefore, the payment made by PHILAMGEN to Coca-Cola Bottlers Philippines, Inc., gave the former the right to bring
an action as subrogee against FELMAN. Having failed to rebut the presumption of fault, the liability of FELMAN for the loss of
the 7,500 cases of 1-liter Coca-Cola softdrink bottles is inevitable.
WHEREFORE, the petition is GRANTED. Respondent FELMAN SHIPPING LINES is ordered to pay petitioner PHILIPPINE The result of the admission of seaworthiness by Philamgen may mean two things: (1) the warranty of seaworthiness is fulfilled
AMERICAN GENERAL INSURANCE CO., INC., Seven Hundred Fifty-five Thousand Two Hundred and Fifty Pesos (P755,250.00) plus and (2) the risk of unseaworthiness is assumed by the insurance company. This waiver clause would mean that Philamgen has
legal interest thereon counted from 29 November 1983, the date of judicial demand, pursuant to Arts. 2212 and 2213 of the accepted the risk of unseaworthiness, therefore Philamgen is liable.
Civil Code. 20
On the matter of subrogation, it is provided that;
SO ORDERED.
Art. 2207. If the plaintiff's property has been insured, and he has received indemnity from the insurance company for the
Facts:
injury or loss arising out of the wrong or breach of contract complained of, the insurance company shall be subrogated to the
July 6, 1983 Coca-cola loaded on board MV Asilda, owned and operated by Felman, 7,500 cases of 1-liter Coca-Cola soft drink
rights of the insured against the wrongdoer or the person who has violated the contract. If the amount paid by the insurance
bottles to be transported to Zamboanga City to Cebu. The shipment was insured with Philamgen.
company does not fully cover the injury or loss, the aggrieved party shall be entitled to recover the deficiency from the person
causing the loss or injury.
July 7, the vessel sank in Zamboanga del Norte. July 15, cocacola filed a claim with respondent Felman for recovery of damages.
Felman denied thus prompted cocacola to file an insurance claim with Philamgen. Philamgen later on claimed its right of
Pan Malayan Insurance Corp. vs CA: The right of subrogation is not dependent upon, nor does it grow out of any privity of
subrogation against Felman which disclaimed any liability for the loss.
contract or upon payment by the insurance company of the insurance claim. It accrues simply upon payment by the insurance
company of the insurance claim.
Philamgen alleged that the sinking and loss were due to the vessel's unseaworthiness, that the vessel was improperly manned
and its officers were grossly negligent. Felman filed a motion to dismiss saying that there is no right of subrogation in favor of
Therefore, the payment made by PHILAMGEN to Coca-Cola Bottlers Philippines, Inc., gave the former the right to bring an
Philamgen was transmitted by the shipper.
action as subrogee against FELMAN. Having failed to rebut the presumption of fault, the liability of FELMAN for the loss of the
7,500 cases of 1-liter Coca-Cola soft drink bottles is inevitable.
RTC dismissed the complaint of Philamgen. CA set aside the dismissal and remanded the case to the lower court for trial on the
merits. Felman filed a petition for certiorari but was denied.
WHEREFORE, the petition is GRANTED. Respondent FELMAN SHIPPING LINES is ordered to pay petitioner PHILIPPINE
RTC rendered judgment in favor of Felman. it ruled that the vessel was seaworthy when it left the port of Zamboanga as
AMERICAN GENERAL INSURANCE CO., INC
evidenced by the certificate issued by the Phil. Coast Guard and the ship owner’s surveyor. Thus, the loss is due to a fortuitous
event, in which, no liability should attach unless there is stipulation or negligence.

On appeal, CA rendered judgment finding the vessel unseaworthy for the cargo for being top-heavy and the cocacola bottles
were also improperly stored on deck. Nonetheless, the CA denied the claim of Philamgen, saying that Philamgen was not
properly subrogated to the rights and interests of the shipper plus the filing of notice of abandonment had absolved the ship
owner from liability under the limited liability rule.

Issues: (a) Whether the vessel was seaworthy, (b) whether limited liability rule should apply and (c) whether Philamgen was
properly subrogated to the rights against Felman.

Ruling:
(a) The vessel was unseaworthy. The proximate cause thru the findings of the Elite Adjusters, Inc., is the vessel's being top-
heavy. Evidence shows that days after the sinking coca-cola bottles were found near the vicinity of the sinking which would
mean that the bottles were in fact stowed on deck which the vessel was not designed to carry substantial amount of cargo on
deck. The inordinate loading of cargo deck resulted in the decrease of the vessel's metacentric height thus making it unstable.

(b) Art. 587 of the Code of Commerce is not applicable, the agent is liable for the negligent acts of the captain in the care of the
goods. This liability however can be limited through abandonment of the vessel, its equipment and freightage. Nonetheless,
there are exceptions wherein the ship agent could still be held answerable despite the abandonment, as where the loss or
injury was due to the fault of the ship owner and the captain. The international rule is that the right of abandonment of vessels,
as legal limitation of liability, does not apply to cases where the injury was occasioned by the fault of the ship owner. Felman
was negligent, it cannot therefore escape liability.

(c) Generally, in marine insurance policy, the assured impliedly warrants to the assurer that the vessel is seaworthy and such
warranty is as much a term of the contract as if expressly written on the face of the policy. However, the implied warranty of
seaworthiness can be excluded by terms in writing in the policy of the clearest language. The marine policy issued by Philamgen
to cocacola has dispensed that the "seaworthiness of the vessel as between the assured and the underwriters in hereby
admitted."

250
Vasquez vs. CA, 138 SCRA 553; the typhoon by facing the winds and the waves in the open. Unfortunately, at about noontime on May 16, 1966, the vessel
struck a reef near Malapascua island, sustained leaks and eventually sunk, bringing with her Captain Floro Yap who was in
FIRST DIVISION
command of the vessel.
G.R. No. L-42926 September 13, 1985
Due to the loss of their children, petitioners sued for damages before the Court of First Instance of Manila (Civil Case No.
67139). Respondent defended on the plea of force majeure, and the extinction of its liability by the actual total loss of the
PEDRO VASQUEZ, SOLEDAD ORTEGA, CLETO B. BAGAIPO, AGUSTINA VIRTUDES, ROMEO VASQUEZ and MAXIMINA
vessel.
CAINAY, petitioners,
vs.
After proper proceedings, the trial Court awarded damages, thus:
THE COURT OF APPEALS and FILIPINAS PIONEER LINES, INC., respondents..
WHEREFORE, judgment is hereby rendered ordering the defendant to pay:
MELENCIO-HERRERA, J.:
(a) Plaintiffs Pedro Vasquez and Soledad Ortega the sums of P15,000.00 for the loss of earning capacity of
This litigation involves a claim for damages for the loss at sea of petitioners' respective children after the shipwreck of MV
the deceased Alfonso Vasquez, P2,100.00 for support, and P10,000.00 for moral damages;
Pioneer Cebu due to typhoon "Klaring" in May of 1966.
(b) Plaintiffs Cleto B. Bagaipo and Agustina Virtudes the sum of P17,000.00 for loss of earning capacity of
The factual antecedents, as summarized by the trial Court and adopted by respondent Court, and which we find supported by
deceased Filipinas Bagaipo, and P10,000.00 for moral damages; and
the record, read as follows:
(c) Plaintiffs Romeo Vasquez and Maximina Cainay the sum of P10,000.00 by way of moral damages by
When the inter-island vessel MV "Pioneer Cebu" left the Port of Manila in the early morning of May 15, 1966 bound for Cebu, it
reason of the death of Mario Marlon Vasquez.
had on board the spouses Alfonso Vasquez and Filipinas Bagaipo and a four-year old boy, Mario Marlon Vasquez, among her
passengers. The MV "Pioneer Cebu" encountered typhoon "Klaring" and struck a reef on the southern part of Malapascua
On appeal, respondent Court reversed the aforementioned judgment and absolved private respondent from any and all liability.
Island, located somewhere north of the island of Cebu and subsequently sunk. The aforementioned passengers were unheard
from since then.
Hence, this Petition for Review on Certiorari, the basic issue being the liability for damages of private respondent for the
presumptive death of petitioners' children.
Plaintiffs Pedro Vasquez and Soledad Ortega are the parents of Alfonso Vasquez; plaintiffs Cleto Bagaipo and Agustina Virtudes
are the parents of Filipinas Bagaipo; and plaintiffs Romeo Vasquez and Maxima Cainay are the parents of the child, Mario
The trial Court found the defense of caso fortuito untenable due to various decisive factors, thus:
Marlon Vasquez. They seek the recovery of damages due to the loss of Alfonso Vasquez, Filipinas Bagaipo and Mario Marlon
Vasquez during said voyage.
... It is an admitted fact that even before the vessel left on its last voyage, its officers and crew were
already aware of the typhoon brewing somewhere in the same general direction to which the vessel was
At the pre-trial, the defendant admitted its contract of carriage with Alfonso Vasquez, Filipinas Bagaipo and Mario Marlon
going. The crew of the vessel took a calculated risk when it proceeded despite the typhoon advisory. This
Vasquez, and the fact of the sinking of the MV "Pioneer Cebu". The issues of the case were limited to the defenses alleged by
is quite evident from the fact that the officers of the vessel had to conduct conferences amongst
the defendant that the sinking of the vessel was caused by force majeure, and that the defendant's liability had been
themselves to decide whether or not to proceed. The crew assumed a greater risk when, instead of
extinguished by the total loss of the vessel.
seeking shelter in Romblon and other islands the vessel passed en route, they decided to take a change
on the expected continuation of the good weather the vessel was encountering, and the possibility that
The evidence on record as to the circumstances of the last voyage of the MV "Pioneer Cebu" came mainly, if not exclusively,
the typhoon would veer to some other directions. The eagerness of the crew of the vessel to proceed on
from the defendant. The MV "Pioneer Cebu" was owned and operated by the defendant and used in the transportation of
its voyage and to arrive at its destination is readily understandable. It is undeniably lamentable, however,
goods and passengers in the inter-island shipping. Scheduled to leave the Port of Manila at 9:00 p.m. on May 14, 1966, it
that they did so at the risk of the lives of the passengers on board.
actually left port at 5:00 a.m. the following day, May 15, 1966. It had a passenger capacity of three hundred twenty-two (322)
including the crew. It undertook the said voyage on a special permit issued by the Collector of Customs inasmuch as, upon
Contrariwise, respondent Appellate Court believed that the calamity was caused solely and proximately by fortuitous event
inspection, it was found to be without an emergency electrical power system. The special permit authorized the vessel to carry
which not even extraordinary diligence of the highest degree could have guarded against; and that there was no negligence on
only two hundred sixty (260) passengers due to the said deficiency and for lack of safety devices for 322 passengers (Exh. 2). A
the part of the common carrier in the discharge of its duties.
headcount was made of the passengers on board, resulting on the tallying of 168 adults and 20 minors, although the
passengers manifest only listed 106 passengers. It has been admitted, however, that the headcount is not reliable inasmuch as
Upon the evidence and the applicable law, we sustain the trial Court. "To constitute a caso fortuito that would exempt a person
it was only done by one man on board the vessel.
from responsibility, it is necessary that (1) the event must be independent of the human will; (2) the occurrence must render it
impossible for the debtor to fulfill the obligation in a normal manner; and that (3) the obligor must be free of participation in,
When the vessel left Manila, its officers were already aware of the typhoon Klaring building up somewhere in Mindanao. There
or aggravation of, the injury to the creditor." 1 In the language of the law, the event must have been impossible to foresee, or if
being no typhoon signals on the route from Manila to Cebu, and the vessel having been cleared by the Customs authorities, the
it could be foreseen, must have been impossible to avoid. 2 There must be an entire exclusion of human agency from the cause
MV "Pioneer Cebu" left on its voyage to Cebu despite the typhoon. When it reached Romblon Island, it was decided not to seek
of injury or loss. 3
shelter thereat, inasmuch as the weather condition was still good. After passing Romblon and while near Jintotolo island, the
barometer still indicated the existence of good weather condition continued until the vessel approached Tanguingui island.
Turning to this case, before they sailed from the port of Manila, the officers and crew were aware of typhoon "Klaring" that was
Upon passing the latter island, however, the weather suddenly changed and heavy rains felt Fearing that due to zero visibility,
reported building up at 260 kms. east of Surigao. In fact, they had lashed all the cargo in the hold before sailing in anticipation
the vessel might hit Chocolate island group, the captain ordered a reversal of the course so that the vessel could 'weather out'
251
of strong winds and rough waters.4 They proceeded on their way, as did other vessels that day. Upon reaching Romblon, they
received the weather report that the typhoon was 154 kms. east southeast of Tacloban and was moving west northwest. 5 Since
The Supreme Court held the Filipinas Pioneer Lines failed to observe that extraordinary diligencerequired of them by law for
they were still not within the radius of the typhoon and the weather was clear, they deliberated and decided to proceed with the safety of the passengers transported by them with due regard for allnecessary circumstance and unnecessarily exposed the
the course. At Jintotolo Island, the typhoon was already reported to be reaching the mainland of Samar. 6 They still decided to
vessel to tragic mishap. Despite knowledge of the fact that there was a typhoon, they still proceeded with their voyage relying
proceed noting that the weather was still "good" although, according to the Chief Forecaster of the Weather Bureau, they were only on the forecastthat the typhoon would weaken upon crossing the island of Samar. The defense of caso fortuito
already within the typhoon zone. 7 At Tanguingui Island, about 2:00 A.M. of May 16, 1966, the typhoon was in an area quite
isuntenable. To constitute caso fortuito to exempt a person from liability it necessary that the event must be independent from
close to Catbalogan, placing Tanguingui also within the typhoon zone. Despite knowledge of that fact, they again decided to human will, the occurrence must render it impossible for the debtor to fulfill hisobligation in a normal manner, the obligor must
proceed relying on the forecast that the typhoon would weaken upon crossing the mainland of Samar. 8 After about half an
be free from any participation or aggravation to theinjury of the creditor. Filipina Pioneer Lines failed to overcome that
hour of navigation towards Chocolate Island, there was a sudden fall of the barometer accompanied by heavy downpour, big presumption o fault or negligencethat arises in cases of death or injuries to passengers.
waves, and zero visibility. The Captain of the vessel decided to reverse course and face the waves in the open sea but because
the visibility did not improve they were in total darkness and, as a consequence, the vessel ran aground a reef and sank on May
16, 1966 around 12:45 P.M. near Malapascua Island somewhere north of the island of Cebu.

Under the circumstances, while, indeed, the typhoon was an inevitable occurrence, yet, having been kept posted on the course
of the typhoon by weather bulletins at intervals of six hours, the captain and crew were well aware of the risk they were taking
as they hopped from island to island from Romblon up to Tanguingui. They held frequent conferences, and oblivious of the
utmost diligence required of very cautious persons, 9 they decided to take a calculated risk. In so doing, they failed to observe
that extraordinary diligence required of them explicitly by law for the safety of the passengers transported by them with due
regard for an circumstances 10 and unnecessarily exposed the vessel and passengers to the tragic mishap. They failed to
overcome that presumption of fault or negligence that arises in cases of death or injuries to passengers. 11

While the Board of Marine Inquiry, which investigated the disaster, exonerated the captain from any negligence, it was because
it had considered the question of negligence as "moot and academic," the captain having "lived up to the true tradition of the
profession." While we are bound by the Board's factual findings, we disagree with its conclusion since it obviously had not
taken into account the legal responsibility of a common carrier towards the safety of the passengers involved.

With respect to private respondent's submission that the total loss of the vessel extinguished its liability pursuant to Article 587
of the Code of Commerce12 as construed in Yangco vs. Laserna, 73 Phil. 330 [1941], suffice it to state that even in the cited case,
it was held that the liability of a shipowner is limited to the value of the vessel or to the insurance thereon. Despite the total
loss of the vessel therefore, its insurance answers for the damages that a shipowner or agent may be held liable for by reason
of the death of its passengers.

WHEREFORE, the appealed judgment is hereby REVERSED and the judgment of the then Court of First Instance of Manila,
Branch V, in Civil Case No. 67139, is hereby reinstated. No costs.

SO ORDERED
Facts:

MV Pioneer Cebu left the port of Manila and bounded for Cebu. Its officers were aware of theupcoming typhoon Klaring that is
already building up somewhere in Mindanao. There being notyphoon signals on their route, they proceeded with their voyage.
When they reached the island of Romblon, the captain decided not to seek shelter since the weather was still good. They
continued their journey until the vessel reached the island of Tanguingui, while passing through the island the
weather suddenly changed and heavy rains fell. Fearing that they might hit Chocolate island due to zerovisibility, the captain
ordered to reverse course the vessel so that they could weather out the typhoon byfacing the strong winds and waves.
Unfortunately, the vessel struck a reef near Malapascua Island, itsustained a leak and eventually sunk.The parents of the
passengers who were lost due to that incident filed an action against FilipinasPioneer Lines for damages. The defendant
pleaded force majeure but the Trial Court ruled in favor of the plaintiff. On appeal to the Court of Appeals, it reversed the
decision of the lower stating that theincident was a force majeure and absolved the defendants from liability.
Issue: Whether of not Filipinas Pioneer Lines is liable for damages and presumed to be at fault for thedeath of its passenger?

Held:

252
Abueg vs. San Diego, 77 Phil 730;
SECOND DIVISION
G.R. No. 74811 September 30, 1988
CHUA YEK HONG, petitioner,
vs.
INTERMEDIATE APPELLATE COURT, MARIANO GUNO, and DOMINADOR OLIT, respondents.
MELENCIO-HERRERA, J.:
In this Petition for Review on certiorari petitioner seeks to set aside the Decision of respondent Appellate Court in AC G.R. No.
01375 entitled "Chua Yek Hong vs. Mariano Guno, et al.," promulgated on 3 April 1986, reversing the Trial Court and relieving
private respondents (defendants below) of any liability for damages for loss of cargo.
The basic facts are not disputed:
Petitioner is a duly licensed copra dealer based at Puerta Galera, Oriental Mindoro, while private respondents are the owners of
the vessel, "M/V Luzviminda I," a common carrier engaged in coastwise trade from the different ports of Oriental Mindoro to
the Port of Manila.
In October 1977, petitioner loaded 1,000 sacks of copra, valued at P101,227.40, on board the vessel "M/V Luzviminda I" for
shipment from Puerta Galera, Oriental Mindoro, to Manila. Said cargo, however, did not reach Manila because somewhere
between Cape Santiago and Calatagan, Batangas, the vessel capsized and sank with all its cargo.
On 30 March 1979, petitioner instituted before the then Court of First Instance of Oriental Mindoro, a Complaint for damages
based on breach of contract of carriage against private respondents (Civil Case No. R-3205).
In their Answer, private respondents averred that even assuming that the alleged cargo was truly loaded aboard their vessel,
their liability had been extinguished by reason of the total loss of said vessel.
On 17 May 1983, the Trial Court rendered its Decision, the dispositive portion of which follows:
WHEREFORE, in view of the foregoing considerations, the court believes and so holds that the
preponderance of evidence militates in favor of the plaintiff and against the defendants by ordering the
latter, jointly and severally, to pay the plaintiff the sum of P101,227.40 representing the value of the
cargo belonging to the plaintiff which was lost while in the custody of the defendants; P65,550.00
representing miscellaneous expenses of plaintiff on said lost cargo; attorney's fees in the amount of
P5,000.00, and to pay the costs of suit. (p. 30, Rollo).
On appeal, respondent Appellate Court ruled to the contrary when it applied Article 587 of the Code of Commerce and the
doctrine in Yangco vs. Lasema (73 Phil. 330 [1941]) and held that private respondents' liability, as ship owners, for the loss of
the cargo is merely co-extensive with their interest in the vessel such that a total loss thereof results in its extinction. The
decretal portion of that Decision 1 reads:
IN VIEW OF THE FOREGOING CONSIDERATIONS, the decision appealed from is hereby REVERSED, and
another one entered dismissing the complaint against defendants-appellants and absolving them from
any and all liabilities arising from the loss of 1,000 sacks of copra belonging to plaintiff-appellee. Costs
against appellee.
(p. 19, Rollo).
Unsuccessful in his Motion for Reconsideration of the aforesaid Decision, petitioner has availed of the present recourse.
253
The basic issue for resolution is whether or not respondent Appellate Court erred in applying the doctrine of limited liability
under Article 587 of the Code of Commerce as expounded in Yangco vs. Laserna, supra.
Article 587 of the Code of Commerce provides:
Art. 587. The ship agent shall also be civilly liable for the indemnities in favor of third persons which may
arise from the conduct of the captain in the care of the goods which he loaded on the vessel; but he may
exempt himself therefrom by abandoning the vessel with all the equipments and the freight it may have
earned during the voyage.
The term "ship agent" as used in the foregoing provision is broad enough to include the ship owner (Standard Oil Co. vs. Lopez
Castelo, 42 Phil. 256 [1921]). Pursuant to said provision, therefore, both the ship owner and ship agent are civilly and directly
liable for the indemnities in favor of third persons, which may arise from the conduct of the captain in the care of goods
transported, as well as for the safety of passengers transported Yangco vs. Laserna, supra; Manila Steamship Co., Inc. vs.
Abdulhaman et al., 100 Phil. 32 [1956]).
However, under the same Article, this direct liability is moderated and limited by the ship agent's or ship owner's right of
abandonment of the vessel and earned freight. This expresses the universal principle of limited liability under maritime law.
The most fundamental effect of abandonment is the cessation of the responsibility of the ship agent/owner (Switzerland
General Insurance Co., Ltd. vs. Ramirez, L-48264, February 21, 1980, 96 SCRA 297). It has thus been held that by necessary
implication, the ship agent's or ship owner's liability is confined to that which he is entitled as of right to abandon the vessel
with all her equipment and the freight it may have earned during the voyage," and "to the insurance thereof if any" (Yangco vs.
Lasema, supra). In other words, the ship owner's or agent's liability is merely co-extensive with his interest in the vessel such
that a total loss thereof results in its extinction. "No vessel, no liability" expresses in a nutshell the limited liability rule. The total
destruction of the vessel extinguishes maritime liens as there is no longer any res to which it can attach (Govt. Insular Maritime
Co. vs. The Insular Maritime, 45 Phil. 805, 807 [1924]).
As this Court held:
If the ship owner or agent may in any way be held civilly liable at all for injury to or death of passengers
arising from the negligence of the captain in cases of collisions or shipwrecks, his liability is merely co-
extensive with his interest in the vessel such that a total loss thereof results in its extinction. (Yangco vs.
Laserna, et al., supra).
The rationale therefor has been explained as follows:
The real and hypothecary nature of the liability of the ship owner or agent embodied in the provisions of
the Maritime Law, Book III, Code of Commerce, had its origin in the prevailing conditions of the maritime
trade and sea voyages during the medieval ages, attended by innumerable hazards and perils. To offset
against these adverse conditions and to encourage ship building and maritime commerce, it was deemed
necessary to confine the liability of the owner or agent arising from the operation of a ship to the vessel,
equipment, and freight, or insurance, if any, so that if the ship owner or agent abandoned the ship,
equipment, and freight, his liability was extinguished. (Abueg vs. San Diego, 77 Phil. 730 [1946])
—0—
Without the principle of limited liability, a ship owner and investor in maritime commerce would run the
risk of being ruined by the bad faith or negligence of his captain, and the apprehension of this would be
fatal to the interest of navigation." Yangco vs. Lasema, supra).
—0—
 As evidence of this real nature of the maritime law we have (1) the limitation of the liability of the agents
to the actual value of the vessel and the freight money, and (2) the right to retain the cargo and the
embargo and detention of the vessel even in cases where the ordinary civil law would not allow more
than a personal action against the debtor or person liable. It will be observed that these rights are
correlative, and naturally so, because if the agent can exempt himself from liability by abandoning the
vessel and freight money, thus avoiding the possibility of risking his whole fortune in the business, it is
also just that his maritime creditor may for any reason attach the vessel itself to secure his claim without
waiting for a settlement of his rights by a final judgment, even to the prejudice of a third person. (Phil.
Shipping Co. vs. Vergara, 6 Phil. 284 [1906]).
The limited liability rule, however, is not without exceptions, namely: (1) where the injury or death to a passenger is due either
to the fault of the ship owner, or to the concurring negligence of the ship owner and the captain (Manila Steamship Co., Inc. vs.
Abdulhaman supra); (2) where the vessel is insured; and (3) in workmen's compensation claims Abueg vs. San Diego, supra). In
this case, there is nothing in the records to show that the loss of the cargo was due to the fault of the private respondent as
shipowners, or to their concurrent negligence with the captain of the vessel.
What about the provisions of the Civil Code on common carriers? Considering the "real and hypothecary nature" of liability
under maritime law, these provisions would not have any effect on the principle of limited liability for ship owners or ship
agents. As was expounded by this Court:
In arriving at this conclusion, the fact is not ignored that the illfated, S.S. Negros, as a vessel engaged in
interisland trade, is a common carrier, and that the relationship between the petitioner and the
passengers who died in the mishap rests on a contract of carriage. But assuming that petitioner is liable
for a breach of contract of carriage, the exclusively 'real and hypothecary nature of maritime law
operates to limit such liability to the value of the vessel, or to the insurance thereon, if any. In the instant
case it does not appear that the vessel was insured. (Yangco vs. Laserila, et al., supra).
Moreover, Article 1766 of the Civil Code provides:
Art. 1766. In all matters not regulated by this Code, the rights and obligations of common carriers shall be
governed by the Code of Commerce and by special laws.
In other words, the primary law is the Civil Code (Arts. 17321766) and in default thereof, the Code of Commerce and other
special laws are applied. Since the Civil Code contains no provisions regulating liability of ship owners or agents in the event of
total loss or destruction of the vessel, it is the provisions of the Code of Commerce, more particularly Article 587, that govern in
this case.
In sum, it will have to be held that since the ship agent's or ship owner's liability is merely co-extensive with his interest in the
vessel such that a total loss thereof results in its extinction (Yangco vs. Laserna, supra), and none of the exceptions to the rule
on limited liability being present, the liability of private respondents for the loss of the cargo of copra must be deemed to have
been extinguished. There is no showing that the vessel was insured in this case.
WHEREFORE, the judgment sought to be reviewed is hereby AFFIRMED. No costs.
SO ORDERED.
ACTS:1.
Dionisia, Marciana and Rosario are widows of machinists working in themotor ships/fishing boats (San Diego II and Bartolome
S), who perishedwhen the boats sank (they were caught in a typhoon on Oct. 1, 1941 whilearound Mindoro Island, filed a case
against the owner, San Diego forcompensation2.
CFI Manila granted the petition, and awarded compensation provided for inthe Workmen
254
’s Compensation Act. San Diego appealed
3.
CA forwarded to SC, since there were no questions of fact.4.
Claims of the owner:a.
Article 587-Code of Commerce =if the vessel together with all hertackle and freight money earned during the voyage are
abandoned,the agent's liability to third persons for tortious acts of the captain inthe care of the goods which the ship carried is
extinguished (Yangcovs. Laserna, 73 Phil., 330)b.
Article 837- CoC= in cases of collision, the ship owners' liability islimited to the value of the vessel with all her equipment and
freightearned during the voyage (Philippine Shipping Company vs. Garcia, 6Phil., 281)c.
Article 643-CoC= if the vessel and freight are totally lost, the agent'sliability for wages of the crew is extinguished5.
ISSUE/S:W/N the owner of the ships which sank as a result of a typhoon is liable forcompensation? YESHELD:

Provisions of the Code of Commerce invoked have no room in the applicationof the Workmen's Compensation Act (WCA) which
seeks to improve, andaims at the amelioration of, the condition of laborers and employees.

It is not the liability for the damage or loss of the cargo or injury to, or deathof, a passenger by or through the misconduct
of the captain or master of theship; nor the liability for the loss of the ship as result of collision; nor theresponsibility for wages
of the crew,
but a liability created by a statute tocompensate employees and laborers in cases of injury received by or inflictedupon them,
while engaged in the performance of their work or employment, orthe heirs and dependents and laborers and employees in the
event of deathcaused by their employment
.
FACTS:
The widows of machinists working in the motor ships/fishing boats, who perished when the boats sank filed a case
against the fishing boat owner. As a defenses, the owner invokes Article 587 of the Code of Commerce which states that - if the
vessel together with all her tackle and freight money earned during the voyage are abandoned, the agent's liability to third
persons for tortious acts of the captain in the care of the goods which the ship carried is extinguished.
ISSUE:
Whether the liability of the ship owner is extinguished by the total loss of the ship?
HELD:
The provisions of the Code of Commerce invoked by appellant have no room in the application of the Workmen's
Compensation Act which seeks to improve, and aims at the amelioration of, the condition of laborers and employees. It is not
the liability for the damage or loss of the cargo or injury to, or death of, a passenger by or through the misconduct of the
captain or master of the ship; nor the liability for the loss of the ship as result of collision; nor the responsibility for wages of the
crew, but a liability created by a statute to compensate employees and laborers in cases of injury received by or inflicted upon
them, while engaged in the performance of their work or employment.Such compensation has nothing to do with the
provisions of the Code of Commerce regarding maritime commerce. It is an item in the cost of production which must be
included in the budget of any well managed industry.
Luzon Stevedoring vs. CA, Dec. 3, 1987; THE LOWER COURT ERRED IN NOT FINDING THAT THE COLLISION BETWEEN THE M/V "FERNANDO
ESCANO" AND THE LSCO "CAVITE" WAS DUE SOLELY AND EXCLUSIVELY TO THE FAULT, NEGLIGENCE AND
FIRST DIVISION
LACK OF SKILL OF THE MASTER OF THE FORMER VESSEL.
G.R. No. L-58897 December 3, 1987
III
LUZON STEVEDORING CORPORATION, petitioner,
THE LOWER COURT ERRED IN NOT RULING THAT THE CIVIL LIABILITY OF THE PETITIONER, IF ANY THERE
vs.
BE, SHOULD BE LIMITED TO THE VALUE OF THE LSCO "CAVITE" WITH ALL ITS APPURTENANCES AND
COURT OF APPEALS, HIJOS DE F. ESCANO, INC., and DOMESTIC INSURANCE COMPANY OF THE PHILIPPINES, respondents.
FREIGHT- AGE WHEN THE COLLISION TOOK PLACE. 3

In a resolution of February 26, 1982 this Court denied the petition for lack of merit.
GANCAYCO, J.:
A motion for reconsideration of said resolution was filed by petitioner limiting the issue to the legal question of whether under
On May 30, 1968 at past 6:00 in the morning a maritime collision occurred within the vicinity of the entrance to the North
Art. 837 of the Code of Commerce abandonment of vessel at fault is necessary in order that the liability of owner of said vessel
Harbor, Manila between the tanker LSCO "Cavite" owned by Luzon Stevedoring Corporation and MV "Fernando Escano" a
shall be limited only to the extent of the value thereof, its appurtenances and freightage earned in the voyage. After
passenger ship owned by Hijos de F. Escano, Inc. as a result of which said passenger ship sunk. An action in admiralty was filed
respondents submitted their comment to the motion as required, on September 29, 1982 this Court denied the motion for
by Hijos de F. Escano, Inc. and Domestic Insurance Company of the Philippines against the Luzon Stevedoring Company (LSC) in
reconsideration for lack of merit.
the Court of First Instance of Cebu. In the course of the trial, the trial court appointed two commissioners representing the
plaintiffs and defendant to determine the value of the LSCO "CAVITE." Said commissioners found the value thereof to be
With leave of court petitioner filed a second motion for reconsideration of said resolution raising the following issues:
P180,000.00.
1. Whether abandonment is required under Article 837 of the Code of Commerce. The decisions of this
After trial on the merits, a decision was rendered on January 24, 1974 finding that LSCO "Cavite" was solely to blame for the
Honorable Court cited by the parties in support of their respective positions only imply the answer to the
collision, thus its dispositive portion reads as follows:
question, and the implied answers are contradictory.
WHEREFORE, based on all the foregoing considerations, the Court renders judgment in favor of the
2. If abandonment is required under Article 837 of the Code of Commerce, when should it be made? The
plaintiffs and against the defendant ordering the latter to pay to the plaintiff Domestic Insurance
Code of Commerce is silent on the matter. The decision of this Honorable Court in Yangco v. Laserna, 13
Company of the Philippines the sum of P514,000.00, and to the plaintiff Hijos de F. Escano, Inc. the sum
Phil. 330, left the question open and no other decision, as far as petitioner can ascertain, has resolved
of P68,819.00, with interest on both sums at the legal rate, from the date the complaint was filed and the
the question.
further sum of P252,346.70, with interest at the legal rate from August 7, 1972 and the sum of
P163,721.91, without interest in trust for, and with direction that it pay the same to, the claimants
3. Is the decision of this Honorable Court in Manila Steamship Co., Inc. v. Abdulhama,n 100 Phil. 32,
concerned.
wherein it was held that "(t)he international rule to the effect that the right of abandonment of vessels,
as a legal station of a shipowner's own fault," invoked by private respondents and apparently a major
With costs against the defendant. 1
consideration in the denial of the motion for reconsideration, applicable to petitioner under the
circumstances of the case at bar?4
In the penultimate paragraph of the decision the trial court held:
The respondents were required to comment thereto and after said comment was submitted petitioners submitted a reply
With respect to the defense that defendant's liability is limited to the value of the LSCO "Cavite" and
thereto to which the respondents filed a rejoinder.
freight earned, invoking Art. 837 of the Code of Commerce, the Court believes and so holds that the
defense has not been established. Moreover, the evidence is such that in principle Art. 837 does not
On November 28, 1983, the Court gave due course to the petition for review and considered the respondents' comment
apply here. The counterclaim of the defendant is likewise ordered dismissed for lack of merit. 2
thereto as the Answer. The parties were required to file their briefs. Both parties having filed their briefs the case is now
submitted for decision.
Not satisfied therewith the defendant interposed an appeal therefrom to the Court of Appeals wherein in due course a decision
was rendered on June 30, 1981 affirming the decision of the court a quo in toto with costs against appellant. The motion for
Articles 587, 590, and 837 of the Code of Commerce provide as follows:
reconsideration filed by the defendant of the decision was denied in a resolution of the Court of Appeals of November 7, 1981.
Hence said defendant filed a petition for certiorari in this Court based on the following grounds:
ART. 587. The ship agent shall also be civilly liable for the indemnities in favor of third persons which arise
from the conduct of the captain in the vigilance over the goods which the vessel carried; but he may
I
exempt himself therefrom by abandoning the vessel with all her equipment and the freight he may have
earned during the voyage.
THE LOWER COURT ERRED IN FINDING THAT THE LSCO "CAVITE" WAS THE VESSEL AT FAULT IN THE
COLLISION.
xxx xxx xxx
II

255
 ART. 590. The co-owners of the vessel shall be civilly liable in the proportion of their contribution to the
common fund for the results of the acts of the captain, referred to in Article 587.
Each co-owner may exempt himself from this liability by the abandonment, before a notary, of that part
of the vessel belonging to him.
xxx xxx xxx
ART. 837. The civil liability incurred by the shipowners in the cases prescribed in this section, shall be
understood as limited to the value of the vessel with all her appurtenances and freight earned during the
voyage.5
In the case of Philippine Shipping Company vs. Garcia, 6 which is an action for damages instituted by the Philippine Shipping
Company for the loss of Steamship "Ntra. Sra. de Lourdes" as a result of the collision with the Steamship "Navarra" of Garcia, it
was found that the "Navarra" was responsible for the collision. The claim of the Philippine Shipping is that the defendant should
pay P18,000.00, the value of the "Navarro" at the time of its loss, in accordance with the provision of Article 837 of the Code of
Commerce, and that it was immaterial that the "Navarro" had been entirely lost provided the value could be ascertained since
the extent of liability of the owner of the colliding vessel resulting from the collision is to be determined by its value.
This Court speaking through the then Chief Justice Arellano held:
Article 837 of the Code of Commerce provides: "The civil liability contracted by the shipowners in the
cases prescribed in this section shall be understood as limited to the value of the vessel with all her
equipment and all the freight money earned during the voyage "
"This section is a necessary consequence of the right to abandon the vessel given to the shipowner in
article 587 of the code, and it is one of the many superfluities contained in the code." (Lorenzo Benito,
"Lecciones," 352.)
ART. 587. The agent shall also be civilly liable for the indemnities in favor of third persons which arise
from the conduct of the captain in the care of the goods which the vessel carried but he may exempt
himself therefrom by abandoning the vessel with all her equipments and the freight he may have earned
during the trip.
ART. 590. The part owners of a vessel shall be civilly liable, in the proportion of their contribution to the
common fund, for the results of the acts of the captain referred to in Article 587. Each part owner may
exempt himself from this liability by the abandonment, before a notary, of the part of the vessel
belonging to him.
The "Exposicion de motivos" of the Code of Commerce contains the following: "The present code (1829)
does not determine the juridical status of the agent where such agent is not himself the owner of the
vessel. This omission is supplied by the proposed code, which provides in accordance with the principles
of maritime law that by agent it is to be understood the person intrusted with the provisioning of the
vessel, or the one who represents her in the port in which she happens to be. This person is the only one
who represents the vessel that is to say, the only one who represents the interests of the owner of the
vessel. This provision has therefore cleared the doubt which existed as to the extent of the liability, both
of the agent and of the owner of the vessel. Such liability is limited by the proposed code to the value of
the vessel and other things appertaining thereto."
There is no doubt that if the Navarro had not been entirely lost, the agent, having been held liable for the
negligence of the captain of the vessel could have abandoned her with all her equipment and the freight
money earned during the voyage, thus bringing himself within the provisions of article 837 in so far as
256
the subsidiary civil liability is concerned This abandonment which would have amounted to an offer of the
value of the vessel, of her equipment, and freight money earned could not have been refused, and the
agent could not have been personally compelled, under such circumstances, to pay the 18,000 pesos, the
estimated value of the vessel at the time of the collision.
This is the difference which exists between the lawful acts and lawful obligations of the captain and the
liability which he incurs on account of any unlawful act committed by him. In the first case, the lawful
acts and obligations of the captain beneficial to the vessel may be enforced as against the agent for the
reason that such obligations arise from the contract of agency (provided, however, that the captain does
not exceed his authority), while as to any liability incurred by the captain through his unlawful acts, the
ship agent is simply subsidiarily civilly liable. This liability of the agent is limited to the vessel and it does
not extend further. For this reason the Code of Commerce makes the agent liable to the extent of the
value of the vessel, as the codes of the principal maritime nations provide, with the vessel, and not
individually. Such is also the spirit of our code.
The spirit of our code is accurately set forth in a treatise on maritime law, from which we deem proper to
quote the following as the basis of this decision:
That which distinguishes the maritime from the civil law and even from the mercantile law in general is
the real and hypothecary nature of the former, and the many securities of a real nature that maritime
customs from time immemorial the laws, the codes, and the later jurisprudence, have provided for the
protection of the various and conflicting interests which are ventured and risked in maritime expeditions,
such as the interests of the vessel and of the agent, those of the owners of the cargo and consignees,
those who salvage the ship, those who make loans upon the cargo, those of the sailors and members of
the crew as to their wages, and those of a constructor as to repairs made to the vessel.
As evidence of this "real" nature of the maritime law we have (1) the limitation of the liability of the
agents to the actual value of the vessel and the freight money, and (2) the right to retain the cargo and
the embargo and detention of the vessel even in cases where the ordinary civil law would not allow more
than a personal action against the debtor or person liable. It will be observed that these rights are
correlative, and naturally so, because if the agent can exempt himself from liability by abandoning the
vessel and freight money, thus avoiding the possibility of risking his whole fortune in the business, it is
also just that his maritime creditor may for any reason attach the vessel itself to secure his claim without
waiting for a settlement of his rights by a final judgment, even to the prejudice of a third person.
This repeals the civil law to such an extent that, in certain cases, where the mortgaged property is lost no
personal action lies against the owner or agent of the vessel. For instance, where the' vessel is lost the
sailors and members of the crew can not recover their wages; in case of collision, the liability of the agent
is limited as aforesaid, and in case of shipwreck, those who loan their money on the vessel and cargo lose
all their rights and can not claim reimbursement under the law.
There are two reasons why it is impossible to do away with these privileges, to wit: (1) The risk to which
the thing is exposed, and (2) the "real" nature of the maritime law, exclusively "real," according to which
the liability of the parties is limited to a thing which is at the mercy of the waves. If the agent is only liable
with the vessel and freight money and both may be lost through the accidents of navigation it is only just
that the maritime creditor have some means of obviating this precarious nature of his rights by detaining
the ship, his only security, before it is lost.
The liens tacit or legal, which may exist upon the vessel and which a purchaser of the same would be
obliged to respect and recognize are — in addition to those existing in favor of the State by virtue of the
privileges which are granted to it by all the laws — pilot, tonnage, and port dues and other similar
charges, the wages of the crew earned during the last voyage as provided in article 646 of the Code of
 Commerce, salvage dues under article 842, the indemnification due to the captain of the vessel in case
his contract is terminated on account of the voluntary sale of the ship and the insolvency of the owner as
provided in article 608, and all other liabilities arising from collisions under Articles 837 and 838.'
(Madariaga pp. 60, 62, 63, 85.
We accordingly hold that the defendant is liable for the indemnification to which the plaintiff is entitled
by reason of the collision but he is not required to pay such indemnification for the reason that the
obligation thus incurred has been extinguished on account of the loss of the thing bound for the payment
thereof and in this respect the judgment of the court below is affirmed except in so far as it requires the
plaintiff to pay the costs of this action, which is not exactly proper. No special order is made as to costs of
this appeal. After the expiration of twenty days let judgment be entered in accordance herewith and ten
days thereafter the record be remanded to the Court of First Instance for execution. So ordered. 7
From the foregoing the rule is that in the case of collision, abandonment of the vessel is necessary in order to limit the liability
of the shipowner or the agent to the value of the vessel, its appurtenances and freightage earned in the voyage in accordance
with Article 837 of the Code of Commerce. The only instance where such abandonment is dispensed with is when the vessel
was entirely lost. In such case, the obligation is thereby extinguished.
In the case of Government of the Philippines vs. Maritime this Court citing Philippine Shipping stated the exception thereto in
that while "the total destruction of the vessel extinguishes a maritime lien, as there is no longer any risk to which it can
attach, but the total destruction of the vessel does not affect the liability of the owner for repairs of the vessel completed before
its loss,8 interpreting the provision of Article 591 of the Code of Commerce in relation with the other Articles of the same Code.
In Ohta Development Company vs. Steamship "Pompey" 9 it appears that at the pier sunk and the merchandise was lost due to
the fault of the steamship "Pompey" that was then docked at said pier. This Court ruled that the liability of the owner of
"Pompey" may not be limited to its value under Article 587 of the Code of Commerce as there was no abandonment of the
ship. We also held that Article 837 cannot apply as it refers to collisions which is not the case here. 10
In the case of Guison vs. Philippine Shipping Company 11 involving the collision at the mouth of the Pasig river between the
motor launches Martha and Manila H in which the latter was found to be at fault, this Court, applying Article 837 of the Code of
Commerce limited the liability of the agent to its value.
In the case of Yangco vs. Laserna 12 which involved the steamers SS "Negros" belonging to Yangco which after two hours of
sailing from Romblon to Manila encountered rough seas as a result of which it capsized such that many of its passengers died in
the mishap, several actions for damages were filed against Yangco, by a verified pleading, he sought to abandon the vessel to
the plaintiffs in the three cases together with all the equipment without prejudice to the right to appeal. This Court in resolving
the issue held as follows:
Brushing aside the incidental issues, the fundamental question here raised is: May the shipowner or
agent, notwithstanding the total loss of the vessel as a result of the negligence of its captain, be properly
held liable in damages for the consequent death of its passengers? We are of the opinion and so hold
that this question is controlled by the provision of article 587 of the Code of Commerce. Said article
reads:
The agent shall also be civilly liable for the indemnities in favor of third persons which arise from the
conduct of the captain in the. care of the goods which the vessel carried; but he may exempt himself
therefrom by abandoning the vessel with all her equipments and the freight he may have earned during
the voyage.
The provision accords a shipowner or agent the right of abandonment; and by necessary implication, his
liability is confined to that which he is entitled as of right to -abandon — "the vessel with all her
equipments and the freight it may have earned during the voyage." It is true that the article apears to
257
deal only with the limited liability of shipowners or agents for damages arising from the misconduct of
the captain in the care of the goods which the vessel carries, but this is a mere deficiency of language and
in no way indicates the true extent of such liability. The consensus of authorities is to the effect that
notwithstanding the language of the afore-quoted provision, the benefit of limited liability therein
provided for, applies in all cases wherein the shipowner or agent may properly be held liable for the
negligent or illicit acts of the captain. Dr. Jose Ma. Gonzalez de Echavarri y Vivanco commenting on said
article, said:
La letra del Codigo, en el articulo 587, presenta una gravisima cuestion. El derecho de abandono, si se
atiende a lo escrito, solo se refiere a las indemnizaciones a que diere lugar la conducta del Capitan en la
custodia de los efectos que cargo en el buque.
Es ese el espiritu del legislador? No; habra derecho de abandono en las responsabilidades nacidas de
obligaciones contraidas por el Capitan y de otros actos de este? Lo reputamos evidente y, para fortalecer
nuestra opinion, basta copiar el siguiente parrafo de la Exposicion de motivos:
El proyecto, al aplicar estos principios, se inspira tambien en los intereses del comercio maritimo que
quedaran mas asegurados ofreciendo a todo el que contrata con el naviero o Capitan del buque, la
garantia real del mismo, cualesquiera que sean las facultades o atribuciones de que se hallen investidos;
(Echavarri, Codigo de Comercio, Tomo 4, 2. ed., pags. 483- 484.)
A cursory examination will disclose that the principle of limited liability of a shipowner or agent is
provided for in but three articles of the Code of Commerce — Article 587 aforequoted and articles 590
and 837. Article 590 merely reiterates the principle embodied in article 587, where the vessel is owned by
several person Article 837 applies the same principle in cases of collision and it has been observed that
said article is but 'a necessary consequence of the right to abandon the vessel given to the shipowner in
Article 587 to the Code, and it is one of the many superfluities contained in the Code. (Lorenzo Benito,
Lecciones 352, quoted in Philippine Shipping Co. vs. Garcia, 6 Phil. 281, 282.) In effect therefore, only
Articles 587 and 590 are the provisions contained in our Code of Commerce on the matter, and the
framers of said code had intended those provisions to embody the universal principle of limited liability
in all cases. ... . 13
In the said case We invoked our ruling in Philippine Shipping and concluded as follows:
In the light of all the foregoing, we therefore hold that if the shipowner or agent may in any way be held
civilly liable at all for injury to or death of passengers arising from the negligence of the captain in cases
of collisions or shipwrecks, his liability is merely coextensive with his interest in the vessel such that a
total loss thereof results in its extinction. In arriving at this conclusion, we have not been unmindful of
the fact that the ill-fated steamship Negros, as a vessel engaged in interisland trade, is a common carrier
(De Villata v. Stanely 32 Phil. 541), and that the relationship between the petitioner and the passengers
who died in the mishap rests on a contract of carriage. But assuming that petitioner is liable for a breach
of contract of carriage, the exclusively "real and hypothecary nature" of maritime law operates to limit
such liability to the value of the vessel, or to the insurance thereon, if any. In the instant case it does not
appear that the vessel was insured.
Whether the abandonment of the vessel sought by the petitioner in the instant case was in accordance
with law or not, is immaterial The vessel having totally perished any act of abandonment would be an
Idle ceremony. 14
In the case of Abueg vs. San Diego,15 which involves a claim of compensation under the Workmen's Compensation Act for the
deceased members of the crew of the MS "San Diego II" and MS "Bartolome" which were caught by a typhoon in the vicinity of
Mindoro Island and as a consequence of which they were sunk and totally lost, this Court held as follows:
Counsel for the appellant cite article 7837 of the Code of Commerce which provides that if the vessel
together with all her tackle and freight money earned during the voyage are abandoned, the agent's
liability to third persons for tortious acts of the captain in the care of the goods which the ship carried is
extinguished (Yangco vs. Laserna, 73 Phil. 330) Article 937 of the same Code which provides that in cases
of collision, the shipowners' liability is limited to the value of the vessel with all her equipment and
freight earned during the voyage (Philippine Shipping Company vs. Garcia, 6 Phil. 281); and Article 643 of
the same Code which provides that if the vessel and freight are totally lost, the agent's liability for wages
of the crew is extinguished. From these premises counsel draw the conclusion that appellant's liability, as
owner of the two motor ships lost or sunk as a result of the typhoon that lashed the island of Mindoro on
October 1, 1941, was extinguished.
The real and hypothecary nature of the liability of the shipowner or agent embodied in the provisions of
the Maritime Law, Book III, Code of Commerce, had its origin in the prevailing conditions of the maritime
trade and sea voyages during the medieval ages, attended by innumerable hazards and perils. To offset
against these adverse conditions and to encourage shipbuilding and maritime commerce, it was deemed
necessary to confine the liability of the owner or agent arising from the operation of a ship to the vessel
equipment, and freight, or insurance, if any, so that if the shipowner or agent abandoned the ship,
equipment, and freight, his liability was extinguished
But the provisions of the Code of Commerce invoked by appellant have no room in the application of the
Workmen's Compensation Act which seeks to improve, and aims at the amelioration of, the condition of
laborers and employees. It is not the liability for the damage or loss of the cargo or injury to, or death of,
a passenger by or through the misconduct of the captain or master of the ship; nor the liability for the
loss of the ship as a result of collision; nor the responsibility for wages of the crew, but a liability created
by a statute to compensate employees and laborers in cases of injury received by or inflicted upon them,
while engaged in the performance of their work or employment, or the heirs and dependents of such
laborers and employees in the event of death caused by their employment. Such compensation has
nothing to do with the provisions of the Code of Commerce regarding maritime commerce. It is an item in
the cost of production which must be included in the budget of any well managed industry.
Appellant's assertion that in the case of Enciso vs. Dy-Liaco (57 Phil. 446), and Murillo vs. Mendoza (66
Phil. 689), the question of the extinction of the shipowner's liability due to abandonment of the ship by
him was not fully discussed, as in the case of Yangco vs. Laserna, supra, is not entirely correct. In the last
mentioned case, the limitation of the shipowner's liability to the value of the ship, equipment, freight,
and insurance, if any, was the lis mota In the case of Enciso vs. Dy-Liaco, supra, the application of the
Workmen's Compensation Act to a master or patron who perished as a result of the sinking of the
motorboat of which he was the master, was the controversy submitted to the court for decision. This
Court held in that case that .It has been repeatedly stated that the Workmen's Compensation Act was
enacted to abrogate the common law and our Civil Code upon culpable acts and omissions, and that the
employer need not be guilty of neglect or fault in order that responsibility may attach to him' (pp. 449-
450); and that the shipowner was liable to pay compensation provided for in the Workmen's
Compensation Act, notwithstanding the fact that the motorboat was totally lost. In the case of Murillo vs.
Mendoza, supra, this Court held that 'The rights and responsibilities defined in said Act must be governed
by its own peculiar provisions in complete disregard of other similar provisions of the Civil as well as the
mercantile law. If an accident is compensable under the Workmen's Compensation Act, it must be
compensated even when the workman's right is not recognized by or is in conflict with other provisions
of the Civil Code or of the Code of Commerce. The reason behind this principle is that the Workmen's
Compensation Act was enacted by the Legislature in abrogation of the other existing laws.' This quoted
part of the decision is in answer to the contention that it was not the intention of the Legislature to
repeal Articles 643 and 837 of the Code of Commerce with the enactment of the Workmen's
Compensation Act. 16
258
In said case the Court reiterated that the liability of the shipowner or agent under the provision of Articles 587 and 837 of the
Code of Commerce is limited to the value of the vessel with all her equivalent and freight earned during the voyage if the
shipowner or agent abandoned the ship with all the equipment and freight. However, it does not apply to the liability under the
Workmen's Compensation Act where even as in said case the vessel was lost the liability thereunder is still enforceable against
the employer or shipowner.
The case of Manila Steamship Company, Inc. vs. Insa Abdulhaman and Lim Hong To 17 is a case of collision of the ML "Consuelo
V" and MS "Bowline Knot" as a result of which the ML "Consuelo V" capsized and was lost where nine (9) passengers died or
were missing and all its cargoes were lost. In the action for damages arising from the collision, applying Article 837 of the Code
of Commerce, this Court held that in such case where the collision was imputable to both of them, each vessel shall suffer her
own damages and both shall be solidarily liable for the damages occasioned to their cargoes.18 Thus, We held:
In fact, it is a general principle, well established maritime law and custom, that shipowners and ship
agents are civilly liable for the acts of the captain (Code of Commerce, Article 586) and for the
indemnities due the third persons (Article 587); so that injured parties may immediately look for
reimbursement to the owner of the ship, it being universally recognized that the ship master or captain is
primarily the representative of the owner (Standard Oil Co. vs. Lopez Castelo, 42 Phil. 256, 260). This
direct liability, moderated and limited by the owner's right of abandonment of the vessel and earned
freight (Article 587) has been declared to exist not only in case of breached contracts, but also in cases of
tortious negligence (Yu Biao Sontua vs. Osorio, 43 Phil. 511; 515):
xxx xxx xxx
It is easy to see that to admit the defense of due diligence of a bonus paterfamilias (in the selection and
vigilance of the officers and crew) as exempting the shipowner from any liability for their faults, would
render nugatory the solidary liability established by Article 827 of the Code of Commerce for the greater
protection of injured parties. Shipowners would be able to escape liability in practically every case,
considering that the qualifications and licensing of ship masters and officers are determined by the State,
and that vigilance is practically impossible to exercise over officers and crew of vessels at sea. To compel
the parties prejudiced to look to the crew for indemnity and redress would be an illusory remedy for
almost always its members. are, from captains down, mere wage earners.
We, therefore, find no reversible error in the refusal of the Court of Appeals to consider the defense of
the Manila Steamship Co., that it is exempt from liability for the collision with the M L "Consuelo V " due
to the absence of negligence on its part in the selection and supervision of the officers and crew of the
M/S "Bowline Knot. 19
However, insofar as respondent Lim Hong To, owner of M L "Consuelo V" who admittedly employed an unlicensed master and
engineer and who in his application for permission to operate expressly assumed full risk and responsibility thereby (Exh. 2) this
Court held that the liability of Lim Hong To cannot be limited to the value of his motor launch by abandonment of the vessel as
invoked in Article 587 of the Code of Commerce, We said:
The international rule is to the effect that the right of abandonment of vessels, as a legal limitation of a
shipowner's liability, does not apply to cases where the injury or the average is due to shipowner's own
fault. Farina (Derecho Commercial Maritima Vol. 1, pp. 122-123), on the authority of judicial precedents
from various nations, sets the rule to be as follows:
xxx xxx xxx 20
From the foregoing, it is clear that in case of collision of vessels, in order to avail of the benefits of Article 837 of the Code of
Commerce the shipowner or agent must abandon the vessel. In such case the civil liability shall be limited to the value of the
vessel with all the appurtenances and freight earned during the voyage. However, where the injury or average is due to the
ship-owner's fault as in said case, the shipowner may not avail of his right to limited liability by abandoning the vessel.
We reiterate what We said in previous decisions that the real and hypothecary nature of the liability of the shipowner or agent
is embodied in the provisions of the Maritime Law, Book III, Code of Commerce. 21 Articles 587, 590 and 837 of the same code
are precisely intended to limit the liability of the shipowner or agent to the value of the vessel, its appurtenances and
freightage earned in the voyage, provided that owner or agent abandons the vessel. Although it is not specifically provided for
in Article 837 of the same code that in case of collision there should be such abandonment to enjoy such limited liability, said
article on collision of vessels is a mere amplification of the provisions of Articles 587 and 590 of same code where
abandonment of the vessel is a pre-condition. Even without said article, the parties may avail of the provisions of Articles 587
and 590 of same code in case of collision. This is the reason why Article 837 of the same code is considered a superfluity. 22
Hence the rule is that in case of collision there should be abandonment of the vessel by the shipowner or agent in order to
enjoy the limited liability provided for under said Article 837.
The exception to this rule is when the vessel is totally lost in which case there is no vessel to abandon so abandonment is not
required. Because of such total loss the liability of the shipowner or agent for damages is extinguished. Nevertheless, the
shipowner or agent is personally liable for claims under the Workmen's Compensation Act and for repairs of the vessel before
its loss. 23
In case of illegal or tortious acts of the captain the liability of the shipowner and agent is subsidiary. In such instance the
shipowner or agent may avail of the provisions of Article 837 of the Code by abandoning the vessel. 24
However, if the injury or damage is caused by the shipowner's fault as where he engages the services of an inexperienced and
unlicensed captain or engineer, he cannot avail of the provisions of Article 837 of the Code by abandoning the vessel. 25 He is
personally liable for the damages arising thereby.
In the case now before the Court there is no question that the action arose from a collision and the fault is laid at the doorstep
of LSCO "Cavite" of petitioner. Undeniably petitioner has not abandoned the vessel. Hence petitioner can not invoke the benefit
of the provisions of Article 837 of the Code of Commerce to limit its liability to the value of the vessel, all the appurtenances
and freightage earned during the voyage.
In the light of the foregoing conclusion, the issue as to when abandonment should be made need not be resolved.
WHEREFORE, the petition is DENIED with costs against petitioner.
SO ORDERED.
Facts:
A maritime collision occurred between the tanker CAVITE owned by LSCO and MV Fernando Escano (a passenger ship) owned
by Escano, as a result the passenger ship sunk. An action in admiralty was filed by Escano against Luzon. The trial court held
that LSCO Cavite was solely to blame for the collision and held that Luzon’s claim that its liability should be limited under Article
837 of the Code of Commerce has not been established. The Court of Appeals affirmed the trial court. The SC also affirmed the
CA. Upon two motions for reconsideration, the Supreme Court gave course to the petition.
Issue: Whether or not in order to claim limited liability under Article 837 of the Code of Commerce, it is necessary that the
owner abandon the vessel
Held:
Yes, abandonment is necessary to claim the limited liability wherein it shall be limited to the value of the vessel with all the
appurtenances and freightage earned in the voyage. However, if the injury was due to the ship owner’s fault, the ship owner
may not avail of his right to avail of limited liability by abandoning the vessel.
259
The real nature of the liability of the ship owner or agent is embodied in the Code of Commerce. Articles 587, 590 and 837 are
intended to limit the liability of the ship owner, provided that the owner or agent abandons the vessel. Although Article 837
does not specifically provide that in case of collision there should be abandonment, to enjoy such limited liability, said article is
a mere amplification of the provisions of Articles 587 and 590 which makes it a mere superfluity.
The exception to this rule in Article 837 is when the vessel is totally lost in which case there is no vessel to abandon, thus
abandonment is not required. Because of such loss, the liability of the owner or agent is extinguished. However, they are still
personally liable for claims under the Workmen’s Compensation Act and for repairs on the vessel prior to its loss.
In case of illegal or tortious acts of the captain, the liability of the owner and agent is subsidiary. In such cases, the owner or
agent may avail of Article 837 by abandoning the vessel. But if the injury is caused by the owner’s fault as where he engages the
services of an inexperienced captain or engineer, he cannot avail of the provisions of Article 837 by abandoning the vessel. He is
personally liable for such damages.
In this case, the Court held that the petitioner is a t fault and since he did not abandon the vessel, he cannot invoke the benefit
of Article 837 to limit his liability to the value of the vessel, all appurtenances and freightage earned during the voyage.
FACTS:
A decision, was rendered finding that LSCO "Cavite" was solely to blame for the collision between the tanker LSCO
"Cavite" owned by Luzon Stevedoring Corporation and MV "Fernando Escano" a passenger ship owned by Hijos de F. Escano,
Inc. and that the LSCO's claim that its liability should be limited under Article 837 of the Code of Commerce has not been
established. The same was affirmed by the appellate court, thus this petition alleging that the lower court erred in not ruling
that the civil liability of the petitioner, if any there be, should be limited to the value of the LSCO "Cavite" with all its
appurtenances and freightage when the collision took place.
ISSUE: Whether or not in order to claim limited liability under Article 837 of the Code of Commerce, it is necessary that the
owner abandon the vessel.
HELD:
In case of collision, abandonment of the vessel is necessary in order to limit the liability of the shipowner or the
agent to the value of the vessel, its appurtenances and freightage earned in the voyage in accordance with Art.837 of the Code
of Commerce. The only instance where such abandonment is dispensed with is when the vessel was entirely lost. However, if
the injury or damage is caused by the shipowner's fault as where he engages the services of an inexperienced and unlicensed
captain or engineer, he cannot avail of the provisions of Article 837 of the Code by abandoning the vessel. He is personally
liable for the damages arising thereby.
There is no question that the action arose from a collision and the fault is laid at the doorstep of LSCO "Cavite" of
petitioner. Undeniably petitioner has not abandoned the vessel. Hence petitioner cannot invoke the benefit of the provisions of
Article 837 of the Code of Commerce to limit its liability to the value of the vessel, all the appurtenances and freightage earned
during the voyage.
Yangco vs. Laserna, Oct. 29, 1941; La letra del Codigo, en el articulo 587, presenta una gravisima cuestion. El derecho de abandono, si se atiende a lo
escrito, solo se refiere a las indemnizaciones a que dierQe lugar la conducta del Capitan en la custodia de los efectos
EN BANC
que cargo en el buque.
G.R. No. L-47447-47449 October 29, 1941
¿Es ese el espiritu del legislador? No; ¿habra derecho de abandono en las responsabilidades nacidas de obligaciones
contraidas por el Capitan y de otros actos de este? Lo reputamos evidente y, para fortalecer nuestra opinion, basta
TEODORO R. YANGCO, ETC., petitioner,
copiar el siguiente parrafo de la Exposicion de motivos:
vs.
MANUEL LASERNA, ET AL., respondents.
"El proyecto, al aplicar estos principios, se inspira tambien en los intereses del comercio maritimo, que
quedaran mas asegurados ofreciendo a todo el que contrata con el naviero o Capitan del buque, la
MORAN, J.:
garantia real del mismo, cualesquiera que sean las facultades o atribuciones de que se hallen investidos."
(Echavarri, Codigo de Comercio, Tomo 4, 2. a ed., pags. 483-484.)
At about one o'clock in the afternoon of May 26, 1927, the steamer S.S. Negros, belonging to petitioner here, Teodoro R.
Yangco, left the port of Romblon on its retun trip to Manila. Typhoon signal No. 2 was then up, of which fact the captain was
A cursory examination will disclose that the principle of liomited liability of a shipowner or agent is provided for in but three
duly advised and his attention thereto called by the passengers themselves before the vessel set sail. The boat was overloaded
articles of the Code of Commerce — article 587 aforequoted and article 590 and 837. Article 590 merely reiterates the principle
as indicated by the loadline which was 6 to 7 inches below the surface of the water. Baggage, trunks and other equipments
embodied in article 587, applies the same principle in cases of collision, and it has been observed that said article is but "a
were heaped on the upper deck, the hold being packed to capacity. In addition, the vessel carried thirty sacks of crushed
necessary consequences of the right to abandon the vessel given to the shipowner in article 587 of the Code, and it is one of
marble and about one hundred sacks of copra and some lumber. The passengers, numbering about 180, were overcrowded,
the many superfluities contained in the Code." (Lorenzo Benito, Lecciones 352, quoted in Philippine Shipping Co. vs. Garcia, 6
the vessel's capacity being limited to only 123 passengers. After two hours of sailing, the boat encountered strong winds and
Phil. 281, 282.) In effect, therefore, only articles 587 and 590 are the provisions conatined in our Code of Commerce on the
rough seas between the islands of Banton and Simara, and as the waves splashed the ladies' dresses, the awnings were
matter, and the framers of said code had intended those provisions to embody the universal principle of limited liability in all
lowered. As the sea became increasingly violent, the captain ordered the vessel to turn left, evidently to return to port, but in
cases. Thus, in the "Exposicon de Motivos" of the Code of Commerce, we read:
the manuever, the vessel was caught sidewise by a big wave which caused it to capsize and sink. Many of the passengers died in
the mishap, among them being Antolin Aldaña and his son Victorioso, husband and son, respectively, of Emilia Bienvenida who,
The present code (1829) does not determine the juridical status of the agent where such agent is not himself the
together with her other children and a brother-in-law, are respondents in G.R. No. 47447; Casiana Laserna, the daughter of
owner of the vessel. This omission is supplied by the proposed code, which provides in accordance with the
respondents Manuel Laserna and P.A. de Laserna in G.R. 47448; and Genaro Basaña, son of Filomeno Basaña, respondent in
principles of maritime law that by agent it is to be understood the person intrusted with the provisioning of the
G.R. No. 47449. These respondents instituted in the Court of First Instance of Capiz separate civil actions against petitioner here
vessel, or the one who represents her in the port in which she happens to be. This person is the only one who
to recover damages for the death of the passengers aforementioned. The court awarded the heirs of Antolin and Victorioso
represents the vessel — that is to say, the only one who represents the interests of the owner of the vessel. This
Aldana the sum of P2,000; the heirs of Casiana Laserna, P590; and those of Genaro Basana, also P590. After the rendition of the
provision has therefore cleared the doubt which existed as to the extent of the liability, both of the agent and of the
judgment to this effcet, petitioner, by a verified pleading, sought to abandon th evessel to the plainitffs in the three cases,
owner of the vessel. Such liability is limited by the proposed code to the value of the vesseland other things
together with all its equipments, without prejudice to his right to appeal. The abandonment having been denied, an appeal was
appertaining thereto.
taken to the Court of Appeals, wherein all the judgmnets were affirmed except that which sums was increased to P4,000.
Petitioner, now deceased, appealed and is here represented by his legal representative.
In Philippine Shipping Co. vs. Garcia (6 Phil., 281, 284-286), we have expressed ourselves in such a comprehensive manner as to
leave no room for doubt on the applicability of our ratio decidendi not only to cases of collision but also to those of shipwrecks,
Brushing aside the incidental issues, the fundamental question here raised is: May the shipowner or agent, notwithstanding the
etc. We said:
total loss of the vessel as a result of the negligence of its captain, be properly held liable in damages for the consequent death
of its passengers? We are of the opinion and so hold that this question is controlled by the provisions of article 587 of the Code
This is the difference which exists between the lawful acts and lawful obligations of the captain and the liability
of Commerce. Said article reads:
which he incurs on account of any unlawful act committed by him. In the first case, the lawful acts and obligations of
the captain beneficial to the vessel may be enforced as against the agent for the reason that such obligations arise
The agent shall also be civilly liable for the indemnities in favor of third persons which arise from the conduct of the
from te the contract of agency (provided, however, that the captain does not exceed his authority), while as to any
captain in the care of the goods which the vessel carried; but he may exempt himself therefrom by abandoning the
liability incurred by the captain through his unlawful acts, the ship agent is simply subsidiarily civilly liable. This
vessel with all her equipments and the freight he may have earned during the voyage.
liability of the agent is limited to the vessel and it does not extend further. For this reason the Code of Commerce
makes the agent liable to the extent of the value of the vessel, as the codes of the principal maritime nations
The provisions accords a shipowner or agent the right of abandonment; and by necessary implication, his liability is confined to
provide with the vessel, and not individually. Such is also the spirit of our Code.
that which he is entitled as of right to abandon — "the vessel with all her equipments and the freight it may have earned during
the voyage." It is true that the article appears to deal only with the limited liability of shipowners or agents for damages arising
The spirit of our code s accurately set forth in a treatise on maritime law, from which we deem proper to quote the
from the misconduct of the captain in the care of the goods which the vessel carries, but this is a mere deficiency of language
following as the basis of this decision:lawphil.net
and in no way indicates the true extent of such liability. The consensus of authorities is to the effect that notwithstanding the
language of the aforequoted provision, the benefit of limited liability therein provided for, applies in all cases wherein the
"That which distinguishes the maritime from the civil law and even from the mercantile law in general is
shipowner or agent may properly be held liable for the negligent or illicit acts of the captain. Dr. Jose Ma. Gonzalez de Echavarri
the real and hypothecary nature of the former, and the many securities of a real nature that maritime
y Vivanco, commenting on said article, said:
customs from time immemorial, the laws, the codes, and the later jurisprudence, have provided for the
protection of the various and conflicting interests which are ventured and risked in maritime expeditions,
such as the interests of the vessel and of the agent, those of the owners of the cargo and consignees,

260
 those who salvage the ship, those who make loans upon the cargo, those of the sailors and members of
the crew as to their wages, and those of a constructor as to repairs made to the vessel.
"As evidence of this real nature of the maritime law we have (1) the limitation of the liability of the
agents to the actual value of the vessel and the freight money, and (2) the right to retain the cargo and
the embargo and detention of the vessel even in cases where the ordinary civil law would not allow more
than a personal action against the debtor or person liable. It will be observed that these rights are
correlative, and naturally so, because if the agent can exempt himself from liability by abandoning the
vessel and freight money, thus avoiding the possibility of risking his whole fortune in the business, it is
also just that his maritime creditor may for any reason attach the vessel itself to secure his claim without
waiting for a settlement of his rights by a final judgment, even to the prejudice of a third person.
"This repeals the civil law to such an extent that, in certain cases, where the mortgaged property is lostno
personal action lies against the owner or agent of the vessel. For instance, where the vessel is lost the
sailors and members of the crew cannot recover their wages; in case of collision, the liability of the agent
is limited as aforesaid, and in case of shipwreck, those who loan their money on the vessel and cargo lose
all their rights and cannot claim reimbursement under the law.
"There are two reasons why it is impossible to do away with these privileges, to wit: (1) The risk to which
the thing is exposed, and (2) the real nature of the maritime law, exclusively real, according to which the
liability of the parties is limited to a thing which is at the mercy of the waves. If the agent is only liable
with the vessel and freight money and both may be lost through the accidents of navigation it is only just
that the maritime creditor have some means to obviating this precarious nature of his rights by detaining
the ship, his only security, before it is lost.
"The liens, tacit or legal, which may exist upon the vessel and which a purchaser of the same would be
obliged to respect and recognize are — in addition to those existing in favor of the State by virtue of the
privileges which are granted to it by all the laws — pilot, tonnate, and port dues and other similar
charges, the wages of the crew earned during the last voyage as provided in article 646 of the Code of
Commerce, salvage dues under article 842, the indemnification due to the captain of the vessel in case
his contract is terminated on account of the voluntary sale of the ship and the insolvency of the owner as
provided in article 608, and all other liabilities arising from collisions under articles 837 and 838."
We are shared in this conclusion by the eminent commentators on the subject. Agustin Vicente y Gella, asserting, in his
"Introduccion al Derecho Mercantil Comparado" 1929 (pages 374-375), the like principle of limited liability of shipowners or
agent in cases of accidents, collisions, shipwrecks, etc., said:
De las responsabilities que pueden resultar como consequencia del comercio maritimo, y no solo por hechos
propios sino tambien por las que se ocasionen por los del capitan y la tripulacion, responde frente a tercero el
naviero que representa el buque; pero el derecho maritimo es sobre todo tradicional y siguiendo un viejo principio
de la Edad Media la responsabilidad del naviero se organiza de un modo especifico y particularisimo que no
encuentra similar en el derecho general de las obligaciones.
Una forma corrientisima de verificarse el comercio maritimo durante la epoca medieval, era prestar un propietario
su navio para que cargase en el mercancias determinada persona, y se hiciese a la mar, yendo al frente de la
expedicion un patron del buque, que llegado al puerto de destino se encargaba de venderlas y retornaba al de salida
despues de adquirir en aquel otros efectos que igualmente revendia a su regreso, verificado lo cual los beneficios de
la expedicion se repartian entre el dueño del buque, el cargador y el capitan y tripulantes en la proporcion
estipulada. El derecho maritimo empezo a considerar la asociacion asi formada como una verdadera sociedad
mercantil, de responsabilidad limitada, y de acuerdo con los principios que gobiernan aquella en los casos de
accidentes, abordajes, naufragios, etc., se resolvia que el dueño del buque perdia la nave, el cargador las mercancias
embarcadas y el capitan y la tripulacion su trabajo, sin que en ningun caso el tercer acreedor pudiese reclamar
261
mayor cantidad de ninguno de ellos, porque su responsabilidad quedaba limitada a lo que cada uno aporto a la
sociedad. Recogidas estas ideas en el derecho comercial de tiempos posteriores, la responsabilidad del naviero se
edifico sobre aquellos principios, y derogando la norma general civil de que del cumplimiento de sus obligaciones
responde el deudor con todos sus bienes presentes y futuros, la responsabilidad maritima se considero siempre
limitada ipso jure al patrimonio de mar. Y este es el origen de la regla trascendental de derecho maritimo segun la
cual el naviero se libera de toda responsabilidad abandonando el buque y el flete a favor de los acreedores.
From the Enciclopedia Juridica Española, Vol. 23, p. 347, we read:
Ahora bien: ¿hasta donde se extiende esta responsabilidad del naviero? ¿sobre que bienes pueden los acreedores
resarcirse? Esta es otra especialidad del Derecho maritimo; en el Derecho comun la responsabilidad es limitada;
tambien lo era en el antiguo Derecho maritimo romano; es daba la actio exercitoria contra el exercitor navis sin
ninguna restriccion, pero en la Edad Media una idea nueva se introdujo en los usos maritimos. Las cargas resultantes
de las expediciones maritimas se consideraron limitadas por los propietarios de las naves a los valores
comprometidos por ellos en cada expedicion; se separo ficticiamente el patrimonio de los navieros en dos partes
que todavia se designan de una manera bastante exacta; fortuna de tierra y fortuna de mar o flotante; y se admitio
la teoria de que esta era la que respondia solo de las deudas provinientes de los actos del capitan o de la tripulacion,
es decir, que el conjunto del patrimonio del naviero escaparia a estas cargas desde el momento en que abandonara
la nave y los fletes a los acreedores. . . .
Escriche in his Diccionario de la Legislacion y Jurisprudencia, Vol. 1, p. 38, observes:
La responsabilidad del naviero, en el caso expuesto, se funda en el principio de derecho comun de ser responsable
todo el que pone al frente de un establecimiento a una persona, de los daños o perjuicios que ocasionare esta
desempeñando su cometido, y en que estando facultado el naviero para la eleccion de capitan de la nave, viene a
tener indirectamente culpa en la negligencia o actos de este que o casionaron daños o perjuicios, puesto que no se
aseguro de su pericia o buena fe. Limitase, sin embargo, la responsabilidad del naviero a la perdida de la nave, sus
aparejos, y fletes devengados durante el viaje; porque no pudiendo vigilar de un modo directo e inmediato la
conducta del capitan, hubiera sido duro hacerla extensiva a todos sus bienes que podria comprometer el capitan con
sus faltas o delitos.
The views of these learned commentators, including those of Estasen (Derecho Mercantil, Vol. 4, 259) and Supino (Derecho
Mercantil, pp. 463-464), leave nothing to be desired and nothing to be doubted on the principle. It only remains to be noted
that the rule of limited liability provided for in our Code of Commerce reflects merely, or is but a restatement, imperfect though
it is, of the almost universal principle on the subject. While previously under the civil or common law, the owner of a vessel was
liable to the full amount for damages caused by the misconduct of the master, by the general maritime law of modern Europe,
the liability of the shipowner was subsequently limited to his interest in the vessel. (Norwich & N. Y. Trans. Co. v. Wright, 80 U.
S. 104, 20 Law. ed. 585.) A similar limitation was placed by the British Parliament upon the liability of Englosh shipowners
through a series of statutes beginning in 1734 with the Act of 7 George II, chapter 15. The legislatures of Massachusetts and
Maine followed suit in 1818 and 1821, and finally, Congress enacted the Limited Liability Act of March 3, 1851, embodying most
of the provisions contained in the British Statutes (see 24 R. C. L. pp. 1387-1389). Section 4283 of the Revised Statutes (sec.
183, Tit. 46, Code of Laws of U. S. A.) reads:
LIABILITY OF OWNER NOT TO EXCEED INTEREST. — The liability of the owner of any vessel, for any embezzlement,
loss, or destruction, by any person, of any property, goods, or merchandise, shipped or put on board of such vessel,
or for any loss, damage, or injury by collision, or for any act, matter or thing, loss, damage, or forfeiture, done,
occasioned, or incurred without the privity, or knowledge of such owner or owners, shall in no case exceed the
amount or value of the interest of such owner in such vessel, and her freight then pending.
The policy which the rule is designed to promote is the encouragement of shipbuilding and investment in maritime commerce.
(Vide: Norwich & N. Y. Trans. Co. v. Wright, supra; The Main v. Williams, 152 U. S. 122; 58 C. J. 634.) And it is in that spirit that
the American courts construed the Limited Liability Act of Congress whereby the immunities of the Act were applied to claims
not only for lost goods but also for injuries and "loss of life of passengers, whether arising under the general law of admiralty, or
under Federal or State statutes." (The City of Columbus, 22 Fed. 460; The Longfellow, 104 Fed. 360; Butler v. Boston & Savannah
Steamship Co., 32 Law. ed. 1017; Craig v. Continental Insurance Co., 35 Law. ed. 836.) The Supreme Court of the United States
in Norwich & N. Y. Trans. Co. v. Wright, 80 U. S. 104, 20 Law. ed. 585, 589-590, accounting for the history of the principle,
clinches our exposition of the supporting authorities:
The history of the limitation of liability of shipowners is matter of common knowledge. The learned opinion
of Judge Ware in the case of The Rebecca, 1 Ware, 187-194, leaves little to be desired on the subject. He shows that
it originated in the maritime law of modern Europe; that whilst the civil, as well as the common law, made the
owner responsible to the whole extent of damage caused by the wrongful act or negligence of the matter or crew,
the maritime law only made then liable (if personally free from blame) to the amount of their interest in the ship. So
that, if they surrendered the ship, they were discharged.
Grotius, in his law of War and Peace, says that men would be deterred from investing in ships if they thereby
incurred the apprehension of being rendered liable to an indefinite amount by the acts of the master and, therefore,
in Holland, they had never observed the Roman Law on that subject, but had a regulation that the ship owners
should be bound no farther than the value of their ship and freight. His words are: Navis et eorum quae in navi
sunt," "the ship and goods therein." But he is speaking of the owner's interest; and this, as to the cargo, is the freight
thereon, and in that sense he is understood by the commentators. Boulay Paty, Droit Maritime, tit. 3, sec. 1, p. 276;
Book II, c. XI, sec. XIII. The maritime law, as codified in the celebrated French Ordonance de la Marine, in 1681,
expressed the rule thus: 'The proprietors of vessels shall be responsible for the acts of the master, but they shall be
discharged by abandoning the ship and freight.' Valin, in his commentary on this passage, lib. 2, tit. 8, art. 2, after
specifying certain engagements of the master which are binding on the owners, without any limit of responsibility,
such as contracts for the benefit of the vessel, made during the voyage (except contracts of bottomry) says: "With
these exceptions it is just that the owner should not be bound for the acts of the master, except to the amount of
the ship and freight. Otherwise he would run the risk of being ruined by the bad faith or negligence of his captain,
and the apprehension of this would be fatal to the interests of navigation. It is quite sufficient that he be exposed to
the loss of his ship and of the freight, to make it his interest, independently of any goods he may have on board to
select a reliable captain." Pardessus says: 'The owner is bound civilly for all delinquencies committed by the captain
within the scope of his authority, but he may discharge himself therefrom by abandoning the ship and freight; and, if
they are lost, it suffices for his discharge, to surrender all claims in respect of the ship and its freight," such as
insurance, etc. Droit Commercial, part 3, tit. 2, c. 3, sec. 2.
The same general doctrine is laid down by many other writers on maritime law. So that it is evident that, by this law,
the owner's liability was coextensive with his interest in the vessel and its freight, and ceased by his abandonment
and surrender of these to the parties sustaining loss.
In the light of all the foregoing, we therefore hold that if the shipowner or agent may in any way be held civilly liable at all for
injury to or death of passengers arising from the negligence of the captain in cases of collisions or shipwrecks, his liability is
merely co-extensive with his interest in the vessel such that a total loss thereof results in its extinction. In arriving at this
conclusion, we have not been unmindful of the fact that the ill-fated steamship Negros, as a vessel engaged in interisland trade,
is a common carrier (De Villata v. Stanely, 32 Phil., 541), and that the as a vessel engaged in interisland trade, is a common
carrier (De Villata v. Stanely, 32 Phil., 541), and that the relationship between the petitioner and the passengers who died in the
mishap rests on a contract of carriage. But assuming that petitioner is liable for a breach of contract of carriage, the exclusively
"real and hypothecary nature" of maritime law operates to limit such liability to the value of the vessel, or to the insurance
thereon, if any. In the instant case it does not appear that the vessel was insured.
Whether the abandonment of the vessel sought by the petitioner in the instant case was in accordance with law of not, is
immaterial. The vessel having totally perished, any act of abandonment would be an idle ceremony.
Judgement is reversed and petitioner is hereby absolved of all the complaints, without costs.
262
Facts: On the afternoon of May 26, 1927, the steamer SS Negros left the port of Romblon on its return trip to Manila. Typhoon
signal no. 2 was then up and in fact, the passengers duly advised the captain before sailing. The boat was overloaded. After 2
hours of sailing, the boat encountered strong winds and rough seas between the islands of Banton and Simara. While in the act
of maneuvering, the vessel was caught sidewise by a big wave which caused it to capsize and sink. Many of the passengers died
on the mishap. Civil actions were instituted in the CFI of Capiz, the petitioner sought to abandon the vessel to the plaintiffs in
three cases.
Issue: Whether the shipowner or agent is liable for damages for the consequent death of its passengers notwithstanding the
total loss of the vessel?
Held: The petitioner is absolved from all complaints.
Under Article 587 – “the ship agent shall also be civilly liable for indemnities in favor of third persons which arise from the
conduct of the captain in the vigilance over the goods which the vessels carried; BUT he may exempt himself therefrom by
abandoning the vessel with all her equipment and the freight he may have earned during the voyage.”
Whether the abandonment of the vessel sought by the petitioner in the case was in accordance with the law or not, is
immaterial. The vessel having totally perished, any act of abandonment would be idle ceremony.
“NO VESSEL, NO LIABILITY.”
FACTS:
The steamer S.S. Negros, owned by Yangco set sail even when the captain was aware that typhoon signal No. 2 was
then up. As the sea became increasingly violent, the captain ordered the vessel to return to port, but the vessel was caught
sidewise by a big wave which caused it to capsize and sink. Many of the passengers died in the mishap.
ISSUE:
May the ship owner or agent, notwithstanding the total loss of the vessel as a result of the negligence of its captain,
be properly held liable in damages for the consequent death of its passengers?
HELD:
Article 587 of the Code of Commerceapears to deal only with the limited liability of shipowners or agents for
damages arising from the misconduct of the captain in the care of the goods which the vessel carries, but this is a mere
deficiency of language and in no way indicates the true extent of such liability. Notwithstanding the language of the afore-
quoted provision, the benefit of limited liability therein provided for, applies in all cases wherein the shipowner or agent may
properly be held liable for the negligent or illicit acts of the captain.
If the ship owner or agent may in any way be held civilly liable at all for injury to or death of passengers arising from
the negligence of the captain in cases of collisions or shipwrecks, his liability is merely co-extensive with his interest in the
vessel such that a total loss thereof results in its extinction. He may exempt himself therefrom by abandoning the vessel with
all her equipment and the freight he may have earned during the voyage.
Yu Con vs. Ipil, G.R. No. L-10195, Dec. 29, 1916; of which Glicerio Ipil was master and Justo Solamo, supercargo, for the transportation of certain merchandise and some money
to and from the said town and the port of Cebu, that, on or about the 17th of October, 1911, the plaintiff chartered the
YU CON, plaintiff-appellee, vs. GLICERIO IPIL, NARCISO LAURON, and JUSTO SOLAMO, defendants-appellants.
said banca from the defendant Lauron for the transportation of various merchandise from the port of Cebu to Catmon, at the
price of P45 for the round trip, which merchandise was loaded on board the said craft which was then at anchor in front of one
The purpose of the action brought in these proceedings is to enable the plaintiff to recover from the defendants jointly and
of the graded fills of the wharf of said port; that in the afternoon of the following day, he delivered to the other two
severally the sum of P450, which had been delivered by the plaintiff to the first and third of the above-named defendants,
defendants, Ipil, and Solamo, master and supercargo, respectively, of the afore-named banca, the sum of P450, which was in a
master and supercargo, respectively, of a banca named Maria belonging to the second defendant, to be carried, together with
trunk belonging to the plaintiff and was taken charge of by said two defendants, who received this money from the plaintiff, for
various merchandise belonging to the plaintiff, from the port of Cebu to the town of Catmon of the Province of Cebu. By virtue
the purpose of its delivery to the latter's shop in Catmon for the purchase of corn in this town; that while the money was still in
of the contract executed between the said second defendant and the plaintiff, the money and merchandise were to be
said truck abroad the vessel, on the night of the said 18th of October, the time scheduled for the departure of the Maria from
transported by the said craft between the points above-named in consideration of the payment of a certain sum for each
the port of Cebu, said master and said supercargo transferred the P450 from the plaintiff's trunk, where it was, to theirs, which
voyage. The money disappeared from said craft during the night of October 18, 1911, while it was anchored in the port of Cebu
was in a stateroom of the banca, from which stateroom both the trunk and the money disappeared during that same night, and
and ready to sail for its destination, Catmon, and was not afterwards found. The plaintiff based his action on the charge that the
that the investigations, made to ascertain their whereabouts, produced no result.
disappearance of said sum was due to the abandonment, negligence, or voluntary breach, on the part of the defendants, of the
duty they had in respect to the safe-keeping of the aforementioned sum.
The facts are also admitted by the aforementioned master and supercargo, two of the defendants, that they received from the
plaintiff said P450, which sum was in the latter's own trunk which was placed outside the stateroom of the banca, for the
The defendants, besides denying the allegations of the complaint, pleaded in special defense that the plaintiff, at his own
reason, as they said, that there was no room for it inside the stateroom; that these defendants therefore transferred said
expense and under his exclusive responsibility, chartered the said banca, the property of the defendant Lauron, for the fixed
money to their trunk, which was inside the stateroom, and that this trunk and the P450 therein contained disappeared from
period of three days, at the price of P10 per diem, and that, through the misfortune, negligence, or abandonment of the
the boat during the night of that same day; that said sum had not been found or returned to the plaintiff; that the plaintiff,
plaintiff himself, the loss complained of occurred, while said banca was at anchor in the port of Cebu, and was caused by theft
being on the banca in the afternoon of that day, when his trunk containing the P450 was carried aboard, and seeing that said
committed by unknown thieves. They further alleged that said defendant Lauron, the owner of the banca merely placed this
two defendants, who had the key of the trunk, has removed said sum to their trunk inside the stateroom, charged them to take
craft at the disposal of the plaintiff for the price and period agreed upon, and did not go with the banca on its voyage from
special care of the money; that the master Ipil assured the plaintiff that there was no danger of the money being lost; and that,
Catmon to Cebu. As a counterclaim, the defendants also asked that the plaintiff be ordered to pay the freight agreed upon,
final, during the night in question, both the master and the supercargo and four cabin-boys were aboard the banca.
which had not yet been paid, amounting to P80, plus the sum of P70, as an indemnity for the losses and damages caused them
by the attachment of the banca, issued at the instance of the plaintiff upon filing his complaint. They also prayed for the
It was likewise proven by the affidavits made by the master Ipil, the supercargo Solamo, and the cabin-boys of said vessel, Juan
additional sum of P100, for the deterioration of the said banca, and also that of P200 for other deterioration suffered by the
Quiamco and Gabriel Basang, before the provincial fiscal of Cebu on the day following the commission of the theft, which
same since November, 1911, and which had not bee paid for. Finally, the defendants asked to be absolved from the complaint.
affidavits were presented at the trial as Exhibits A, 3, 4, and 5, and by the testimony given at the trial by the defendants Ipil and
Solamo, that both said cabin-boys and the other two, Simeon Solamo, and said cabin-boys ad the other two, Simeon Solamo,
Before commencing the hearing of this case, the defendants made a verbal motion asking that the plaintiff be declared in
and Eulalio Quiamco, knew of the existence of the money in the trunk inside the stateroom and witnessed its removal to said
default, with respect to the counterclaim filed by them in their answer. On the same date, the plaintiff presented his answer to
trunk from the plaintiff's; that the last two cabin- boys above-named, in company with the master and the supercargo,
said counter claim, denying each and all of the allegations thereof and of the defendants' special defense. The aforementioned
conveyed the plaintiff's trunk, in which the money was previously contained, from the plaintiff's shop to the banca; and that no
motion was overruled by the court, and the defendants excepted.
person not belonging to the vessel knew that the money was in the trunk inside said stateroom.
At the termination of the trial, the court, in view of the evidence adduced, held that there was no room to doubt that the sole
According to the testimony of the master Ipil himself he slept outside the stateroom that night, but a cabin-boy named Gabriel
cause of the disappearance of the money from the said banca was the negligence of the master and the supercargo, the
slept inside. The latter, however, was not presented by the defendants to be examined in regard to this point, nor does it
defendants Ipil and Solamo, respectively, and that the defendant Narciso Lauron was responsible for that negligence, as owner
appear that he testified in respect thereto in his affidavit, Exhibit 5, before referred to, presented by the defendant's own
of the banca, pursuant to articles 589, 587, and 618 of the Code of Commerce, the plaintiff therefore being entitled to recover
counsel. The master Ipil and the supercargo Solamo also testified that they left the cabin-boy Simeon Solamo on guard that
the amount lost. Judgment was rendered on April 20, 1914, in favor of the plaintiff and against the defendants jointly and
night; but this affirmation was not corroborated by Solamo at the trial, for he was not introduced as a witness, and only his
severally for the sum of P450, with interest thereon at the rage of 6 per cent per annum from the date of filing of the
affidavit, Exhibit 2, taken before the fiscal of Cebu on the day following the commission of the crime, was presented by the
complaint, October 24, 1911, with costs. The plaintiff was absolved from the defendant's counterclaim. From this judgment the
defendants. This affidavit, which should have been admitted and not rejected, as was done by the court and excepted to by the
defendants excepted and at the same time moved for a new trial. Their motion was denied, to which ruling they also excepted,
defendants, shows that Simeon Solamo stated that he was not designated to do guard duty that night, but that on the morning
and, through the proper bill of exceptions, entered and appeal to this Supreme Court. In their brief they allege that the trial
of the said 19th of October, that is, the next day, all agreed that affiant should say that he was on guard, though it was not true
court erred:
that he was.
1. In applying articles 586, 587, and 618 of the Code of Commerce in favor of the plaintiff;
Finally, said two defendants, the master and the supercargo, gave no satisfactory explanation in regard to the disappearance of
the trunk and the money therein contained, from the stateroom in which the trunk was, nor as to who stole or might have
2. In overruling the motion for default presented by the defendants and in sentencing the defendants jointly and severally to
stolen it. The master of the banca merely testified that they, he and the supercargo, did to know who the robbers were, for,
pay the plaintiff the amount mentioned in the judgment; and
when the robbery was committed, they were sound asleep, as they were tired, and that he believed that the guard Simeon also
fell asleep because he, too, was tired. The second defendant gave the same testimony. Both of them testified that the small
3. In absolving the plaintiff from the defendant's counterclaim. window of the stateroom had been broken, and the first of them, i.e., the master, stated that all the window-blinds had been
removed from the windows, as well as part of the partition in which they were, and that the trunk in which the money was
The evidence shows that the plaintiff Yu Con, a merchant and a resident of the town of San Nicolas, of the city of Cebu, contained could have been passed through said small window, because, as this witness himself had verified, the Chinaman's
engaged in the sale of cloth and domestic articles and having a share in a shop, or small store, situated in the town of Catmon, trunk, which differed but a little from the one stolen, could be passed through the same opening. The chief pilot of the harbor
of said province, had several times chartered from the defendant Narciso Lauron, a banca named Maria belonging to the latter,
263
of Cebu, Placido Sepeda, who officially visited the said banca, also stated that the small wooden window of the stateroom was
broken, and that he believed that in breaking it much noise must have been produced. However, no evidence whatever was
offered by counsel for the defendants to prove that it might have been possible to remove the trunk from the stateroom
through the opening made by the breaking of the small window, neither was the size of the trunk proven, in relation to the
Chinaman's to which the defendant master referred in his testimony, so that it might be verified whether the statement made
by the latter was true, viz., that it might have been possible to remove from the stateroom through said opening the trunk in
which the P450 were contained, which sum, the same as the trunk, its container, had not been found, in spite of the
investigation made for the purpose. Furthermore, it was not proven, nor is there any circumstantial evidence to show, that the
robbery in question was committed by persons not belonging to the craft.
It is therefore beyond all doubt that the loss or disappearance, on the night aforementioned, of the P450, the property of the
plaintiff, which, were in the possession of the defendants, the master and the supercargo of the banca Maria, occurred through
the manifest fault and negligence of said defendants, for, not only did they fail to take the necessary precautions in order that
the stateroom containing the trunk in which they kept the money should be properly guarded by members of the crew and put
in such condition that it would be impossible to steal the trunk from it or that persons not belonging to the vessel might force
an entrance into the stateroom from the outside, but also they did not expressly station some person inside the stateroom for
the guarding and safe-keeping of the trunk, for it was not proven that the cabin-boy Gabriel slept there, as the master of the
vessel, Ipil, stated, nor that the other Cabin-boy, Simeon Solamo, was on guard that night, for the latter contradicted the
statements made by the two defendants on this point. On the contrary, it was proven by the master's own statement that all
the people of the vessel, including himself and the supercargo Solamo, slept soundly that night; which fact cannot, in any
manner, serve them as an excuse, nor can it be accepted as an explanation of the statement that they were not aware of what
was then occuring on board, if the trunk was actually stolen by outsiders and removed through the small window of the
stateroom, a detail which also was not proven, but, on the contrary, increases their liability, because it is very strange that none
of them, who were six and were around or near the stateroom, should have heard the noise which the robbers must have
made in breaking its window. All of these circumstances, together with that of its having been impossible to know who took the
trunk and the money and the failure to recover the one or the other make the conduct of the two defendants and of the other
members of the crew of banca, eminently supicious and prevent our holding that the disappearance or loss of the money was
due to a fortuitous event, to force majeure, or that it was an occurrence which could not have been foreseen, or which, if
foreseen, was inevitable.
It is unquestionable that the defendants Glicerio Ipil and Justo Solamo were the carriers of the said P450 belonging to the
plaintiff, and that they received this sum from the latter for the purpose of delivering it to the store of the town of Catmon, to
which it had been consigned. Under such circumstances, said defendants were the depositaries of the money.lawphi1.net
Manresa, in his Commentaries on the Civil Code (Vol. 10, p. 773), in treating of the provisions of the said code concerning
transportation by sea and by land of both persons and things, says:
Liability of carriers. — In order that a thing may be transported, it must be delivered to the carrier, as the Code says. From the
time it is delivered to the carrier or shipper until it is received by the consignee, the carrier has it in his possession, as a
necessary condition for its transportation, and is obliged to preserve and guard it; wherefore it is but natural and logical that he
should be responsible for it.
The Code discovers in the relation of all these elements the factors which go to make up the conception of a trust, and, taking
into account that the delivery of the thing on the part of the shipper is unavoidable, if the transportation is to take place,
esteem that, at least in certain respects, such trusts are necessary.
The said two defendants being the depositaries of the sum in question, and they having failed to exercise for its safe-keeping
the diligence required by the nature of the obligation assumed by them and by the circumstances of the time and the place, it
is evident that, in pursuance of the provisions of articles 1601 and 1602, in their relation to articles 1783 and 1784, and as
prescribed in articles 1770, of the Civil Code, they are liable for its loss or misplacement and must restore it to the plaintiff,
together with the corresponding interest thereon as an indemnity for the losses and damages caused him through the loss of
the said sum.
264
With respect to the other defendant, Narciso Lauron, as he was the owner of the vessel in which the loss or misplacement of
the P450 occurred, of which vessel, as aforestated, Glicerio Ipil was master and Justo Solamo, supercargo, both of whom were
appointed to, or chosen for, the positions they held, by the defendant himself, and, as the aforementioned sum was delivered
to the said master, Ipil, and the merchandise to be transported by means of said vessel from the port of Cebu to the town of
Catmon was laden by virtue of a contract executed by and between the plaintiff and the owner of the vessel, Narciso Lauron, it
behooves us to examine whether the latter, also, should be held to be liable, as requested by the plaintiff in his complaint.
Said vessel was engaged in the transportation of merchandise by sea and made voyages to and from the port of Cebu to
Catmon, and had been equipped and victualed for this purpose by its owner, Narciso Lauron, with whom, as aforesaid, the
plaintiff contracted for the transportation of the merchandise which was to be carried, on the date hereinabove mentioned,
from the port of Cebu to the town of Catmon.
For legal purposes, that is, for the determination of the nature and effect of the relations created between the plaintiff, as
owner of the merchandise laden on said craft and of the money that was delivered to the master, Ipil, and the defendant
Lauron, as owner of the craft, the latter was a vessel, according to the meaning and construction given to the word vessel in the
Mercantile Code, in treating of maritime commerce, under Title 1,
Book 3.
The word vessel serves to designate every kind of craft by whatever particular or technical name it may now be known or which
nautical advancements may give it in the future. (Commentaries on the Code of Commerce, in the General Review of
Legislation and Jurisprudence, founded by D. Jose Reus y Garcia, Vol., 2 p. 136.)
According to the Dictionary of Legislation and Jurisprudence by Escriche, a vessel is any kind of craft, considering solely the hull.
Blanco, the commentator on mercantile law, in referring to the grammatical meaning of the word "ship" and "vessels," says, in
his work aforecited, that these terms designate every kind of craft, large or small, whether belonging to the merchant marine or
to the navy. And referring to their juridical meaning, he adds: "This does not differ essentially from the grammatical meaning;
the words "ship" and "vessel" also designate every craft, large or small, so long as it be not an accessory of another, such as the
small boat of a vessel, of greater or less tonnage. This definition comprises both the craft intended for ocean or for coastwise
navigation, as well as the floating docks, mud lighters, dredges, dumpscows or any other floating apparatus used in the service
of an industry or in that of maritime commerce. . . ." (Vol. 1, p. 389.)
According to the foregoing definitions, then, we should that the banca called Maria, chartered by the plaintiff Yu Con from the
defendant Narciso Lauron, was a "vessel", pursuant to the meaning this word has in mercantile law, that is, in accordance with
the provisions of the Code of Commerce in force.
Glicerio Ipil, the master of the said banca Maria, must also be considered as its captain, in the legal acceptation of this word.
The same Code of Commerce in force in these Islands compares, in its article 609, masters with captains. It is to be noted that
in the Code of Commerce of Spain the denomination of arraeces is not included in said article as equivalent to that of masters,
as it is in the Code of these Islands.
Commenting on said article, the aforementioned General Review of Legislation and Jurisprudence says:
The name of captain or master is given, according to the kind of vessel, to the person in charge of it.
The first denomination is applied to those who govern vessels that navigate the high seas or ships of large dimensions and
importance, although they be engaged in the coastwise trade.
Masters are those who command smaller ships engaged exclusively in the coastwise trade.
For the purposes of maritime commerce, the words "captain" and "master" have the same meaning; both being the chiefs or
commanders of ships. (Vol. 2, p. 168.)
Article 587 of the Code of Commerce in force provides:
The agent shall be civilly liable for the indemnities in favor of third persons which arise from the conduct of the captain in the
care of the goods which the vessel carried; but he may exempt himself therefrom by abandoning the vessel with all her
equipments and the freight he may have earned during the trip.
Article 618 of the same Code also prescribes:
The captain shall be civilly liable to the agent and the latter to the third persons who may have made contracts with the former
1. For all the damages suffered by the vessel and its cargo by reason of want of skill or negligence on his part, If a misdemeanor
or crime has been committed he shall be liable in accordance with the Penal Code.
2. For all the thefts committed by the crew, reserving his right of action against the guilty parties.
The Code of Commerce previous to the one now in force, to wit, that of 1829, in its article 624, provided that the agent or
shipowner should not be liable for any excesses which, during the navigation, might be committed by the captain and crew, and
that, for the reason of such excesses, it was only proper to bring action against the persons and property of those found guilty.
Estasen, in his work on the Institutes of Mercantile Law (Vol. 4, p. 280), makes the following remarks, in referring to the
exposition of reasons presented by the Code Commission which prepared and presented for approval the Code of Commerce
now in force, in which exposition of reasons were set forth the fundamental differences between the provisions contained in
both codes, with respect to the subject-matter now under discussion. He says:
Another very important innovation introduced by the Code is that relative to the liability for misdemeanors and crimes
committed by the captain or by members of the crew. This is a matter of the greatest importance on which a variety of opinions
has been expressed by different juris-consults.
The old code declares the captain civilly liable for all damage sustained by the vessel or its cargo through lack of skill or care on
his part, through violations of the law, or through unlawful acts committed by the crew. As regards the agent or shipowners, it
declares in unmistakeable terms that he shall in no wise be liable for any excesses which, during the navigation, may be
committed by the captain and the crew.
Upon an examination, in the light of the principles of modern law, of the standing legal doctrine on the non-liability of the
shipowner for the unlawful acts, that is, the crimes or quasi crimes, committed by the captain and the crew, it is observed that
it cannot be maintained in the absolute and categorical terms in which it is formulated.
It is well and good that the shipowner be not held criminally liable for such crimes or quasi crimes; but the cannot be excused
from liability for the damage and harm which, in consequence of those acts, may be suffered by the third parties who
contracted with the captain, in his double capacity of agent and subordinate of the shipowner himself. In maritime commerce,
the shippers and passengers in making contracts with the captain do so through the confidence they have in the shipowner
who appointed him; they presume that the owner made a most careful investigation before appointing him, and, above all,
they themselves are unable to make such an investigation, and even though they should do so, they could not obtain complete
security, inasmuch as the shipowner can, whenever he sees fir, appoint another captain instead.
The shipowner is in the same case with respect to the members of the crew, for, though he does not appoint directly, yet,
expressly or tacitly, he contributes to their appointment.
265
On the other hand, if the shipowner derives profits from the results of the choice of the captain and the crew, when the choice
turns out successful, it is also just that he should suffer the consequences of an unsuccessful appointment, by application of the
rule of natural law contained in the Partidas, viz., that he who enjoys the benefits derived from a thing must likewise suffer the
losses that ensue therefrom.
Moreover, the Penal Code contains a general principle that resolves the question under consideration, for it declares that such
persons as undertake and carry on any iondustry shall be civilly liable, in default of those who may be criminally liable, for the
misdemeanors and crimes committed by their subordinates in the discharge of their duties.
The Code of Commerce in force omits the declaration of non-liability contained in the old code, and clearly makes the
shipowner liable civilly for the loss suffered by those who contracted with the captain, in consequence of the misdemeanors
and crimes committed by the latter or by the members of the crew.
It is therefore evident that, in accordance with the provisions of the Code of Commerce in force, which are applicable to the
instance case, the defendant Narciso Lauron, as the proprietor and owner of the craft of which Glicerio Ipil was the master and
in which, through the fault and negligence of the latter and of the supercago Justo Solamo, there occurred the loss, theft, or
robbery of the P450 that belonged to the plaintiff and were delivered to said master and supercargo, a theft which, on the
other hand, as shown by the evidence, does not appear to have been committed by a person not belonging to the craft, should,
for said loss or theft, be held civilly liable to the plaintiff, who executed with said defendant Lauron the contract for the
transportation of the merchandise and money aforementioned between the port of Cebu and the town of Catmon, by means
of the said craft. Therefore, the trial court did not err in so holding in the judgement appealed from.
The plaintiff having filed his answer to the cross-complaint as soon as the defendant presented their motion for] a declaration
of the plaintiff's default in connection with said cross-complaint, and it being optional with the court to make in such cases the
declaration of default, as provided in section 129 of the Code of Civil Procedure, the said court did not incur the second error
assigned by the appellants in their brief.
Lastly, as the banca Maria did not make the trip she should have made from the port of Cebu to the town of Catmon, on the
occasion in question, through cases chargeable, as has been seen, to the captain and the supercargo of said banca, to wit,
because of the loss, theft of robbery of the P450 belonging to the plaintiff, and as a contract was made for the transportation of
the said sum and the merchandise from one of said points to the other, for the round trip, and not through payment by the
plaintiff of the wages due the crew for each day, as alleged by the defendants, for the proofs presented by the latter in regard to
this point were insufficient, as the trial court so held, neither did the latter incur error in overruling the cross-complaint
formulated by the defendants in their answer against the plaintiff.
Therefore, and for all the reasons above set forth, we affirm the judgment appealed from, with the costs of this instance against
the appellants. So ordered.
FACTS: Yu Con chartered the banca “Maria” owned by Narciso Lauron with Gilcerio Ipil as its master and Juto Solamo as it
supercargo to transport certain merchandise and money from the port of Cebu to Catmon. Before the ship could sail, the trunk
and the money placed therein disappeared. It is beyond all doubt that the loss of the money occurred through the manifest
fault and negligence of Ipil and Solamo.
ISSUE: Whether the ship owner be also made liable for the loss of the money?
HELD: In maritime commerce, the shippers and passengers in making contracts with the captain do so through the confidence
they have in the shipowner who appointed him; they presume that the owner made a most careful investigation before
appointing him, and, above all, they themselves are unable to make such an investigation, and even though they should do so,
they could not obtain complete security, inasmuch as the shipowner can, whenever he sees fit, appoint another captain
instead. Thus, it is only proper that the shipowner should be made liable.
Inter-Orient Maritime Enterprises vs. CA, 235 SCRA 267; According to Captain Tayong, however, he communicated to Sea Horse his reservations regarding proceeding to South Africa
without the requested supplies,11 and was advised by Sea Horse to wait for the supplies at 0800 hrs. of 1 August 1989, which
THIRD DIVISION
Sea Horse had arranged to be delivered on board the Oceanic Mindoro.12 At 0800 hours on 1 August 1989, the requisitioned
supplies were delivered and Captain Tayong immediately sailed for Richard Bay.
G.R. No. 115286 August 11, 1994
When the vessel arrived at the port of Richard Bay, South Africa on 16 August 1989, Captain Tayong was instructed to turn-over
INTER-ORIENT MARITIME ENTERPRISES, INC., SEA HORSE SHIP, INC. and TRENDA WORLD SHIPPING (MANILA),
his post to the new captain. He was thereafter repatriated to the Philippines, after serving petitioners for a little more than two
INC., petitioners,
weeks.13 He was not informed of the charges against him.14
vs.
NATIONAL LABOR RELATIONS COMMISSION and RIZALINO D. TAYONG, respondents.
On 5 October 1989, Captain Tayong instituted a complaint for illegal dismissal before the Philippine Overseas Employment
Administration ("POEA"), claiming his unpaid salary for the unexpired portion of the written employment contract, plus
FELICIANO, J.:
attorney's fees.
Private respondent Captain Rizalino Tayong, a licensed Master Mariner with experience in commanding ocean-going vessels,
Petitioners, in their answer to the complaint, denied that they had illegally dismissed Captain Tayong. Petitioners alleged that
was employed on 6 July 1989 by petitioners Trenda World Shipping (Manila), Inc. and Sea Horse Ship Management, Inc. through
he had refused to sail immediately to South Africa to the prejudice and damage of petitioners. According to petitioners, as a
petitioner Inter-Orient Maritime Enterprises, Inc. as Master of the vessel M/V Oceanic Mindoro, for a period of one (1) year, as
direct result of Captain Tayong's delay, petitioners' vessel was placed "off-hire" by the charterers for twelve (12) hours. This
evidenced by an employment contract. On 15 July 1989, Captain Tayong assumed command of petitioners' vessel at the port of
meant that the charterers refused to pay the charter hire or compensation corresponding to twelve (12) hours, amounting to
Hongkong. His instructions were to replenish bunker and diesel fuel, to sail forthwith to Richard Bay, South Africa, and there to
US$15,500.00, due to time lost in the voyage. They stated that they had dismissed private respondent for loss of trust and
load 120,000 metric tons of coal.
confidence.
On 16 July 1989, while at the Port of Hongkong and in the process of unloading cargo, Captain Tayong received a weather
The POEA dismissed Captain Tayong's complaint and held that there was valid cause for his untimely repatriation. The decision
report that a storm code-named "Gordon" would shortly hit Hongkong. Precautionary measures were taken to secure the
of the POEA placed considerable weight on petitioners' assertion that all the time lost as a result of the delay was caused by
safety of the vessel, as well as its crew, considering that the vessel's turbo-charger was leaking and the vessel was fourteen (14)
Captain Tayong and that his concern for the oxygen and acetylene was not legitimate as these supplies were not necessary or
years old.
indispensable for running the vessel. The POEA believed that the Captain had unreasonably refused to follow the instructions of
petitioners and their representative, despite petitioners' firm assurances that the vessel was seaworthy for the voyage to South
On 21 July 1989, Captain Tayong followed-up the requisition by the former captain of the Oceanic Mindoro for supplies of
Africa.
oxygen and acetylene, necessary for the welding-repair of the turbo-charger and the economizer. 1 This requisition had been
made upon request of the Chief Engineer of the vessel and had been approved by the shipowner. 2
On appeal, the National Labor Relations Commission ("NLRC") reversed and set aside the decision of the POEA. The NLRC found
that Captain Tayong had not been afforded an opportunity to be heard and that no substantial evidence was adduced to
On 25 July 1989, the vessel sailed from Hong Kong for Singapore. In the Master's sailing message, Captain Tayong reported a
establish the basis for petitioners' loss of trust or confidence in the Captain. The NLRC declared that he had only acted in
water leak from M.E. Turbo Charger No. 2 Exhaust gas casing. He was subsequently instructed to blank off the cooling water
accordance with his duties to maintain the seaworthiness of the vessel and to insure the safety of the ship and the crew. The
and maintain reduced RPM unless authorized by the owners.3
NLRC directed petitioners to pay the Captain (a) his salary for the unexpired portion of the contract at US$1,900.00 a month,
plus one (1) month leave benefit; and (b) attorney's fees equivalent to ten percent (10%) of the total award due.
On 29 July 1989, while the vessel was en route to Singapore, Captain Tayong reported that the vessel had stopped in mid-ocean
for six (6) hours and forty-five (45) minutes due to a leaking economizer. He was instructed to shut down the economizer and
Petitioners, before this Court, claim that the NLRC had acted with grave abuse of discretion. Petitioners allege that they had
use the auxiliary boiler instead.4
adduced sufficient evidence to establish the basis for private respondent's discharge, contrary to the conclusion reached by the
NLRC. Petitioners insist that Captain Tayong, who must protect the interest of petitioners, had caused them unnecessary
On 31 July 1989 at 0607 hrs., the vessel arrived at the port of Singapore. 5 The Chief Engineer reminded Captain Tayong that the damage, and that they, as owners of the vessel, cannot be compelled to keep in their employ a captain of a vessel in whom
oxygen and acetylene supplies had not been delivered. 6 Captain Tayong inquired from the ship's agent in Singapore about the they have lost their trust and confidence. Petitioners finally contend that the award to the Captain of his salary corresponding
supplies. The ship agent stated that these could only be delivered at 0800 hours on August 1, 1989 as the stores had closed. 7 to the unexpired portion of the contract and one (1) month leave pay, including attorney's fees, also constituted grave abuse of
discretion.
Captain Tayong called the shipowner, Sea Horse Ship Management, Ltd., in London and informed them that the departure of
the vessel for South Africa may be affected because of the delay in the delivery of the supplies. 8 The petition must fail.
Sea Horse advised Captain Tayong to contact its Technical Director, Mr. Clark, who was in Tokyo and who could provide a We note preliminarily that petitioners failed to attach a clearly legible, properly certified, true copy of the decision of the NLRC
solution for the supply of said oxygen and acetylene.9 dated 23 April 1994, in violation of requirement no. 3 of Revised Circular No. 1-88. On this ground alone, the petition could
have been dismissed. But the Court chose not to do so, in view of the nature of question here raised and instead required
On the night of 31 July 1989, Mr. Clark received a call from Captain Tayong informing him that the vessel cannot sail without the private respondent to file a comment on the petition. Captain Tayong submitted his comment. The Office of the Solicitor
oxygen and acetylene for safety reasons due to the problems with the turbo charger and economizer. Mr. Clark responded that General asked for an extension of thirty (30) days to file its comment on behalf of the NLRC. We consider that the Solicitor
by shutting off the water to the turbo chargers and using the auxiliary boiler, there should be no further problems. According to General's comment may be dispensed with in this case.
Mr. Clark, Captain Tayong agreed with him that the vessel could sail as scheduled on 0100 hours on 1 August 1989 for South
Africa.10

266
It is well settled in this jurisdiction that confidential and managerial employees cannot be arbitrarily dismissed at any time, and
without cause as reasonably established in an appropriate investigation.15 Such employees, too, are entitled to security of
tenure, fair standards of employment and the protection of labor laws.
The captain of a vessel is a confidential and managerial employee within the meaning of the above doctrine. A master or
captain, for purposes of maritime commerce, is one who has command of a vessel. A captain commonly performs three (3)
distinct roles: (1) he is a general agent of the shipowner; (2) he is also commander and technical director of the vessel; and (3)
he is a representative of the country under whose flag he navigates. 16 Of these roles, by far the most important is the role
performed by the captain as commander of the vessel; for such role (which, to our mind, is analogous to that of "Chief
Executive Officer" [CEO] of a present-day corporate enterprise) has to do with the operation and preservation of the vessel
during its voyage and the protection of the passengers (if any) and crew and cargo. In his role as general agent of the
shipowner, the captain has authority to sign bills of lading, carry goods aboard and deal with the freight earned, agree upon
rates and decide whether to take cargo. The ship captain, as agent of the shipowner, has legal authority to enter into contracts
with respect to the vessel and the trading of the vessel, subject to applicable limitations established by statute, contract or
instructions and regulations of the shipowner.17 To the captain is committed the governance, care and management of the
vessel.18 Clearly, the captain is vested with both management and fiduciary functions.
It is plain from the records of the present petition that Captain Tayong was denied any opportunity to defend himself.
Petitioners curtly dismissed him from his command and summarily ordered his repatriation to the Philippines without
informing him of the charge or charges levelled against him, and much less giving him a chance to refute any such charge. In
fact, it was only on 26 October 1989 that Captain Tayong received a telegram dated 24 October 1989 from Inter-Orient
requiring him to explain why he delayed sailing to South Africa.
We also find that the principal contention of petitioners against the decision of the NLRC pertains to facts, that is, whether or
not there was actual and sufficient basis for the alleged loss of trust or confidence. We have consistently held that a question of
"fact" is, as a general rule, the concern solely of an administrative body, so long as there is substantial evidence of record to
sustain its action.
The record requires us to reject petitioners' claim that the NLRC's conclusions of fact were not supported by substantial
evidence. Petitioners rely on self-serving affidavits of their own officers and employees predictably tending to support
petitioners' allegation that Captain Tayong had performed acts inimical to petitioners' interests for which, supposedly, he was
discharged. The official report of Mr. Clark, petitioners' representative, in fact supports the NLRC's conclusion that private
respondent Captain did not arbitrarily and maliciously delay the voyage to South Africa. There had been, Mr. Clark stated, a
disruption in the normal functioning of the vessel's turbo-charger 19 and economizer and that had prevented the full or regular
operation of the vessel. Thus, Mr. Clark relayed to Captain Tayong instructions to "maintain reduced RPM" during the voyage to
South Africa, instead of waiting in Singapore for the supplies that would permit shipboard repair of the malfunctioning
machinery and equipment.
More importantly, a ship's captain must be accorded a reasonable measure of discretionary authority to decide what the safety
of the ship and of its crew and cargo specifically requires on a stipulated ocean voyage. The captain is held responsible, and
properly so, for such safety. He is right there on the vessel, in command of it and (it must be presumed) knowledgeable as to
the specific requirements of seaworthiness and the particular risks and perils of the voyage he is to embark upon. The
applicable principle is that the captain has control of all departments of service in the vessel, and reasonable discretion as to its
navigation.20 It is the right and duty of the captain, in the exercise of sound discretion and in good faith, to do all things with
respect to the vessel and its equipment and conduct of the voyage which are reasonably necessary for the protection and
preservation of the interests under his charge, whether those be of the shipowners, charterers, cargo owners or of
underwriters.21 It is a basic principle of admiralty law that in navigating a merchantman, the master must be left free to exercise
his own best judgment. The requirements of safe navigation compel us to reject any suggestion that the judgment and
discretion of the captain of a vessel may be confined within a straitjacket, even in this age of electronic
communications.22 Indeed, if the ship captain is convinced, as a reasonably prudent and competent mariner acting in good faith
that the shipowner's or ship agent's instructions (insisted upon by radio or telefax from their offices thousands of miles away)
267
will result, in the very specific circumstances facing him, in imposing unacceptable risks of loss or serious danger to ship or
crew, he cannot casually seek absolution from his responsibility, if a marine casualty occurs, in such instructions. 23
Compagnie de Commerce v. Hamburg24 is instructive in this connection. There, this Court recognized the discretionary authority
of the master of a vessel and his right to exercise his best judgment, with respect to navigating the vessel he commands.
In Compagnie de Commerce, a charter party was executed between Compagnie de Commerce and the owners of the
vessel Sambia, under which the former as charterer loaded on board the Sambia, at the port of Saigon, certain cargo destined
for the Ports of Dunkirk and Hamburg in Europe. The Sambia, flying the German flag, could not, in the judgment of its master,
reach its ports of destination because war (World War I) had been declared between Germany and France. The master of
the Sambia decided to deviate from the stipulated voyage and sailed instead for the Port of Manila. Compagnie de
Commerce sued in the Philippines for damages arising from breach of the charter party and unauthorized sale of the cargo. In
affirming the decision of the trial court dismissing the complaint, our Supreme Court held that the master of the Sambia had
reasonable grounds to apprehend that the vessel was in danger of seizure or capture by the French authorities in Saigon and
was justified by necessity to elect the course which he took — i.e., to flee Saigon for the Port of Manila — with the result that
the shipowner was relieved from liability for the deviation from the stipulated route and from liability for damage to the cargo.
The Court said:
The danger from which the master of the Sambia fled was a real and not merely an imaginary one as
counsel for shipper contends. Seizure at the hands of an "enemy of the King" though not inevitable, was
a possible outcome of a failure to leave the port of Saigon; and we cannot say that under the conditions
existing at the time when the master elected to flee from that port, there were no grounds for a
"reasonable apprehension of danger" from seizure by the French authorities, and therefore no necessity
for flight.
The word "necessity" when applied to mercantile affairs, where the judgment must in the nature of
things be exercised, cannot, of course, mean an irresistible compelling power. What is meant by it in such
cases is the force of circumstances which determine the course a man ought to take. Thus, where by the
force of circumstances, a man has the duty cast upon him of taking some action for another, and under
that obligation adopts a course which, to the judgment of a wise and prudent man, is apparently the best
for the interest of the persons for whom he acts in a given emergency, it may properly be said of the
course so taken that it was in a mercantile sense necessary to take it. 25 (Emphasis supplied)
Compagnie de Commerce contended that the shipowner should, at all events, be held responsible for the deterioration in the
value of the cargo incident to its long stay on board the vessel from the date of its arrival in Manila until the cargo was sold. The
Supreme Court, in rejecting this contention also, declared that:
But it is clear that the master could not be required to act on the very day of his arrival; or before he had
a reasonable opportunity to ascertain whether he could hope to carry out his contract and earn his
freight; and that he should not be held responsible for a reasonable delay incident to an effort to
ascertain the wishes of the freighter, and upon failure to secure prompt advice, to decide for himself as
to the course which he should adopt to secure the interests of the absent owner of the property aboard
the vessel.
The master is entitled to delay for such a period as may be reasonable under the circumstances, before
deciding on the course he will adopt. He may claim a fair opportunity of carrying out a contract, and
earning the freight, whether by repairing or transhipping. Should the repair of the ship be undertaken, it
must be proceeded with diligently; and if so done, the freighter will have no ground of complaint,
although the consequent delay be a long one, unless, indeed, the cargo is perishable, and likely to be
injured by the delay. Where that is the case, it ought to be forwarded, or sold, or given up, as the case
may be, without waiting for repairs.
 A shipowner or shipmaster (if communication with the shipowner is impossible), will be allowed a
reasonable time in which to decide what course he will adopt in such cases as those under discussion;
time must be allowed to him to ascertain the facts, and to balance the conflicting interests involved, of
shipowner, cargo owner, underwriter on ship and freight. But once the time has elapsed, he is bound to
act promptly according as he has elected either to repair, or abandon the voyage, or tranship. If he
delays, and owing to that delay a perishable cargo suffers damage, the shipowner will be liable for that
damage; he cannot escape that obligation by pleading the absence of definite instructions from the
owners of the cargo or their underwriters, since he has control of the cargo and is entitled to
elect.26(Emphasis supplied)
The critical question, therefore, is whether or not Captain Tayong had reasonable grounds to believe that the safety of the
vessel and the crew under his command or the possibility of substantial delay at sea required him to wait for the delivery of the
supplies needed for the repair of the turbo-charger and the economizer before embarking on the long voyage from Singapore
to South Africa.
In this connection, it is specially relevant to recall that, according to the report of Mr. Robert Clark, Technical Director of
petitioner Sea Horse Ship Management, Inc., the Oceanic Mindoro had stopped in mid-ocean for six (6) hours and forty-five (45)
minutes on its way to Singapore because of its leaking economizer.27 Equally relevant is the telex dated 2 August 1989 sent by
Captain Tayong to Sea Horse after Oceanic Mindoro had left Singapore and was en route to South Africa. In this telex, Captain
Tayong explained his decision to Sea Horse in the following terms:
This is a case of illegal dismissal filed by Capt. Tayong against Inter-Orient Maritime Enterprises, Inc. Capt. Tayong is
the master of the vessel M/V Oceanic Mindoro owned by the petitioner, to sail forthwith to South Africa. When the vessel
arrived in Singapore,Captain Tayong discovered that the supplies earlier requisitioned cannot be delivered because the store
was already closed at the time of their arrival. He then called the Technical director, Mr. Clark, informing him that the vessel
cannot sail without the oxygen and acetylene for safety reasons due to the problems with the turbo charger and economizer.
Mr. Clark responded that by shutting off the water to the turbo chargers and using the auxiliary boiler, there should be no
further problems. Captain Tayong, in consultation with the vessel's Chief Engineer, decided to wait for the delivery of the
requisitioned supplies that would permit shipboard repair of the malfunctioning machinery and equipment. Upon arrival at the
port of Richard Bay, South Africa, Captain Tayong was instructed to turn-over his post to the new captain and was repatriated to
the Philippines.
ISSUE:
Whether the captain arbitrarily and maliciously delay the voyage to South Africa.
HELD:
A ship’s captain must be accorded a reasonable measure of discretionary authority to decide what the safety of the
ship and of its crew and cargo specifically requires on a stipulated ocean voyage. Captain Tayong's decision to wait 7 hours in
Singapore for the delivery on board the Oceanic Mindoro of the requisitioned supplies needed for the welding-repair, on board
the ship, of the turbo-charger and the economizer equipment of the vessel, did not constitute a legal basis for the summary
dismissal of Captain Tayong.

I CAPT. R.D. TAYONG RE: UR PROBLEM IN SPORE (SINGAPORE) I EXPLAIN AGN TO YOU THAT WE ARE
INSECURITY/DANGER TO SAIL IN SPORE W/OUT HAVING SUPPLY OF OXY/ACET. PLS UNDERSTAND HV
PLENTY TO BE DONE REPAIR FM MAIN ENGINE LIKE TURBO CHARGER PIPELINE, ECONOMIZER LEAKAGE N
ETC WE COULD NOT FIX IT W/OUT OXY/ACET ONBOARD. I AND MR. CLARK WE CONTACTED EACH OTHER
BY PHONE IN PAPAN N HE ADVSED US TO SAIL TO RBAY N WILL SUPPLY OXY/ACET UPON ARRIVAL
RBAY HE ALSO EXPLAINED TO MY C/E HOW TO FIND THE REMEDY W/OUT OXY/ACET BUT C/E HE
DISAGREED MR. CLARK IDEA, THAT IS WHY WE URG REQUEST[ED] YR KIND OFFICE TO ARRANGE SUPPLY
OXY/ACET BEFORE SAILING TO AVOID RISK/DANGER OR DELAY AT SEA N WE TOOK PRECAUTION UR TRIP
FOR 16 DAYS FM SPORE TO RBAY. PLS. UNDERSTAND UR SITUATION.28 (Emphasis partly in source and
partly supplied)

Under all the circumstances of this case, we, along with the NLRC, are unable to hold that Captain Tayong's decision (arrived at
after consultation with the vessel's Chief Engineer) to wait seven (7) hours in Singapore for the delivery on board the Oceanic
Mindoro of the requisitioned supplies needed for the welding-repair, on board the ship, of the turbo-charger and the
economizer equipment of the vessel, constituted merely arbitrary, capricious or grossly insubordinate behavior on his part. In
the view of the NLRC, that decision of Captain Tayong did not constitute a legal basis for the summary dismissal of Captain
Tayong and for termination of his contract with petitioners prior to the expiration of the term thereof. We cannot hold this
conclusion of the NLRC to be a grave abuse of discretion amounting to an excess or loss of jurisdiction; indeed, we share that
conclusion and make it our own.

Clearly, petitioners were angered at Captain Tayong's decision to wait for delivery of the needed supplies before sailing from
Singapore, and may have changed their estimate of their ability to work with him and of his capabilities as a ship captain.
Assuming that to be petitioners' management prerogative, that prerogative is nevertheless not to be exercised, in the case at
bar, at the cost of loss of Captain Tayong's rights under his contract with petitioners and under Philippine law.

ACCORDINGLY, petitioners having failed to show grave abuse of discretion amounting to loss or excess of jurisdiction on the part
of the NLRC in rendering its assailed decision, the Petition for Certiorari is hereby DISMISSED, for lack of merit. Costs against
petitioners.

SO ORDERED.
FACTS:
268
Far Eastern Shipping vs. CA, Oct. 1, 1998; (Exhibit "1-Pilot") who referred the report to the Philippine Ports Authority (Exhibit 2-Pilot"). Abellana likewise submitted his
report of the incident (Exhibit "B").
EN BANC
Per contract and supplemental contract of the Philippine Ports Authority and the contractor for the rehabilitation of the
G.R. No. 130068 October 1, 1998
damaged pier, the same cost the Philippine Ports Authority the amount of P1,126,132.25 (Exhibits "D" and "E").3
FAR EASTERN SHIPPING COMPANY, petitioner,
On January 10, 1983, the Philippine Ports Authority (PPA, for brevity), through the Solicitor General, filed before the Regional
vs.
Trial Court of Manila, Branch 39, a complaint for a sum of money against Far Eastern Shipping Co., Capt. Senen C. Gavino and
COURT OF APPEALS and PHILIPPINE PORTS AUTHORITY, respondents.
the Manila Pilots' Association, docketed as Civil Case No. 83-14958,4 praying that the defendants therein be held jointly and
severally liable to pay the plaintiff actual and exemplary damages plus costs of suit. In a decision dated August 1, 1985, the trial
G.R. No. 130150 October, 1998
court ordered the defendants therein jointly and severally to pay the PPA the amount of P1,053,300.00 representing actual
damages and the costs of suit.5
MANILA PILOTS ASSOCIATION, petitioner,
vs.
The defendants appealed to the Court of Appeals and raised the following issues: (1) Is the pilot of a commercial vessel, under
PHILIPPINE PORTS AUTHORITY and FAR EASTERN SHIPPING COMPANY, respondents.
compulsory pilotage, solely liable for the damage caused by the vessel to the pier, at the port of destination, for his negligence?
and (2) Would the owner of the vessel be liable likewise if the damage is caused by the concurrent negligence of the master of
the vessel and the pilot under a compulsory pilotage?
REGALADO, J.:
As stated at the outset, respondent appellate court affirmed the findings of the court a quo except that if found no employer-
These consolidated petitions for review on certiorari seek in unison to annul and set aside the decision1 of respondent Court of
employee relationship existing between herein private respondents Manila Pilots' Association (MPA, for short) and Capt.
Appeals of November 15, 1996 and its resolution 2 dated July 31, 1997 in CA-G.R. CV No. 24072, entitled "Philippine Ports
Gavino.6 This being so, it ruled instead that the liability of MPA is anchored, not on Article 2180 of the Civil Code, but on the
Authority, Plaintiff-Appellee vs. Far Eastern Shipping Company, Senen C. Gavino and Manila Pilots' Association, Defendants-
provisions of Customs Administrative Order No. 15-65, 7 and accordingly modified said decision of the trial court by holding
Appellants," which affirmed with modification the judgment of the trial court holding the defendants-appellants therein
MPA, along with its co-defendants therein, still solidarily liable to PPA but entitled MPA to reimbursement from Capt. Gavino for
solidarily liable for damages in favor of herein private respondent.
such amount of the adjudged pecuniary liability in excess of the amount equivalent to seventy-five percent (75%) of its
prescribed reserve
There is no dispute about the facts as found by the appellate court, fund. 8
thus —
Neither Far Eastern Shipping Co. (briefly, FESC) nor MPA was happy with the decision of the Court of Appeals and both of them
. . . On June 20, 1980, the M/V PAVLODAR, flying under the flagship of the USSR, owned and operated by the Far Eastern elevated their respective plaints to us via separate petitions for review oncertiorari.
Shipping Company (FESC for brevity's sake), arrived at the Port of Manila from Vancouver, British Columbia at about 7:00
o'clock in the morning. The vessel was assigned Berth 4 of the Manila International Port, as its berthing space. Captain Roberto
In G. R. No. 130068, which was assigned to the Second Division of this Court, FESC imputed that the Court of Appeals seriously
Abellana was tasked by the Philippine Port Authority to supervise the berthing of the vessel. Appellant Senen Gavino was
erred:
assigned by the Appellant Manila Pilots' Association (MPA for brevity's sake) to conduct docking maneuvers for the safe
berthing of the vessel to Berth No. 4.
1. in not holding Senen C. Gavino and the Manila Pilots' Association as the parties solely responsible for the resulting damages
sustained by the pier deliberately ignoring the established jurisprudence on the matter;
Gavino boarded the vessel at the quarantine anchorage and stationed himself in the bridge, with the master of the vessel,
Victor Kavankov, beside him. After a briefing of Gavino by Kavankov of the particulars of the vessel and its cargo, the vessel
2. in holding that the master had not exercised the required diligence demanded from him by the circumstances at the time the
lifted anchor from the quarantine anchorage and proceeded to the Manila International Port. The sea was calm and the wind
incident happened;
was ideal for docking maneuvers.
3. in affirming the amount of damages sustained by the respondent Philippine Ports Authority despite a strong and convincing
When the vessel reached the landmark (the big church by the Tondo North Harbor) one-half mile from the pier, Gavino ordered
evidence that the amount is clearly exorbitant and unreasonable;
the engine stopped. When the vessel was already about 2,000 feet from the pier, Gavino ordered the anchor dropped.
Kavankov relayed the orders to the crew of the vessel on the bow. The left anchor, with two (2) shackles, were dropped.
4. in not awarding any amount of counterclaim prayed for by the petitioner in its answer; and
However, the anchor did not take hold as expected. The speed of the vessel did not slacken. A commotion ensued between the
crew members. A brief conference ensued between Kavankov and the crew members. When Gavino inquired what was all the
5. in not granting herein petitioner's claim against pilot Senen C. Gavino and Manila Pilots' Association in the event that it be
commotion about, Kavankov assured Gavino that there was nothing to it.
held
liable. 9
After Gavino noticed that the anchor did not take hold, he ordered the engines half-astern. Abellana, who was then on the pier
apron, noticed that the vessel was approaching the pier fast. Kavankov likewise noticed that the anchor did not take hold.
Petitioner asserts that since the MV PAVLODAR was under compulsory pilotage at the time of the incident, it was the
Gavino thereafter gave the "full-astern" code. Before the right anchor and additional shackles could be dropped, the bow of the
compulsory pilot, Capt. Gavino, who was in command and had complete control in the navigation and docking of the vessel. It
vessel rammed into the apron of the pier causing considerable damage to the pier. The vessel sustained damage too, (Exhibit
is the pilot who supersedes the master for the time being in the command and navigation of a ship and his orders must be
"7-Far Eastern Shipping). Kavankov filed his sea protest (Exhibit "1-Vessel"). Gavino submitted his report to the Chief Pilot
obeyed in all respects connected with her navigation. Consequently, he was solely responsible for the damage caused upon the

269
pier apron, and not the owners of the vessel. It claims that the master of the boat did not commit any act of negligence when
he failed to countermand or overrule the orders of the pilot because he did not see any justifiable reason to do so. In other
words, the master cannot be faulted for relying absolutely on the competence of the compulsory pilot. If the master does not
observe that a compulsory pilot is incompetent or physically incapacitated, the master is justified in relying on the pilot. 10
Respondent PPA, in its comment, predictably in full agreement with the ruling of respondent court on the solidary liability of
FESC, MPA and Capt. Gavino, stresses the concurrent negligence of Capt. Gavino, the harbor pilot, and Capt. Viktor
Kabankov, * shipmaster of MV Pavlodar, as the basis of their solidary liability for damages sustained by PPA. It posits that the
vessel was being piloted by Capt. Gavino with Capt. Kabankov beside him all the while on the bridge of the vessel, as the former
took over the helm of MV Pavlodar when it rammed and damaged the apron of the pier of Berth No. 4 of the Manila
International Port. Their concurrent negligence was the immediate and proximate cause of the collision between the vessel and
the pier — Capt. Gavino, for his negligence in the conduct of docking maneuvers for the safe berthing of the vessel; and Capt.
Kabankov, for failing to countermand the orders of the harbor pilot and to take over and steer the vessel himself in the face of
imminent danger, as well as for merely relying on Capt. Gavino during the berthing procedure. 11
On the other hand, in G.R. No. 130150, originally assigned to the Court's First Division and later transferred to the Third
Division. MPA, now as petitioner in this case, avers that respondent court's errors consisted in disregarding and misinterpreting
Customs Administrative Order No. 15-65 which limits the liability of MPA. Said pilots' association asseverates that it should not
be held solidarily liable with Capt. Gavino who, as held by respondent court is only a member, not an employee, thereof. There
being no employer-employee relationship, neither can MPA be held liable for any vicarious liability for the respective exercise of
profession by its members nor be considered a joint tortfeasor as to be held jointly and severally liable. 12 It further argues that
there was erroneous reliance on Customs Administrative Order No. 15-65 and the constitution and by-laws of MPA, instead of
the provisions of the Civil Code on damages which, being a substantive law, is higher in category than the aforesaid constitution
and by-laws of a professional organization or an administrative order which bears no provision classifying the nature of the
liability of MPA for the negligence its member pilots. 13
As for Capt. Gavino, counsel for MPA states that the former had retired from active pilotage services since July 28, 1994 and has
ceased to be a member of petitioner pilots' association. He is not joined as a petitioner in this case since his whereabouts are
unknown. 14
FESC's comment thereto relied on the competence of the Court of Appeals in construing provisions of law or administrative
orders as bases for ascertaining the liability of MPA, and expressed full accord with the appellate court's holding of solidary
liability among itself, MPA and Capt. Gavino. It further avers that the disputed provisions of Customs Administrative Order No.
15-65 clearly established MPA's solidary liability. 15
On the other hand, public respondent PPA, likewise through representations by the Solicitor General, assumes the same
supportive stance it took in G.R. No. 130068 in declaring its total accord with the ruling of the Court of Appeals that MPA is
solidarily liable with Capt. Gavino and FESC for damages, and in its application to the fullest extent of the provisions of Customs
Administrative Order No. 15-65 in relation to MPA's constitution and by-laws which spell out the conditions of and govern their
respective liabilities. These provisions are clear and unambiguous as regards MPA's liability without need for interpretation or
construction. Although Customs Administrative Order No. 15-65 is a mere regulation issued by an administrative agency
pursuant to delegated legislative authority to fix details to implement the law, it is legally binding and has the same statutory
force as any valid statute. 16
Upon motion 17 by FESC dated April 24, 1998 in G.R. No. 130150, said case was consolidated with G.R. No. 130068. 18
Prefatorily, on matters of compliance with procedural requirements, it must be mentioned that the conduct of the respective
counsel for FESC and PPA leaves much to be desired, to the displeasure and disappointment of this Court.
Sec. 2, Rule 42 of the 1997 Rules of Civil Procedure 19 incorporates the former Circular No. 28-91 which provided for what has
come to be known as the certification against forum shopping as an additional requisite for petitions filed with the Supreme
Court and the Court of Appeals, aside from the other requirements contained in pertinent provisions of the Rules of Court
270
therefor, with the end in view of preventing the filing of multiple complaints involving the same issues in the Supreme Court,
Court of Appeals or different divisions thereof or any other tribunal or agency.
More particularly, the second paragraph of Section 2, Rule 42 provides:
The petitioner shall also submit together with the petition a certification under oath that he has not
theretofore commenced any other action involving the same issues in the Supreme Court, the Court of
Appeals or different divisions thereof, or any other tribunal or agency; if there is such other action or
proceeding, he must state the status of the same; and if he should thereafter learn that a similar action
or proceeding has been filed or is pending before the Supreme Court, the Court of Appeals or different
divisions thereof, or any other tribunal or agency, he undertakes to promptly inform the aforesaid courts
and other tribunal or agency thereof within five (5) days therefrom. (Emphasis ours.)
For petitions for review filed before the Supreme Court, Section 4(e), Rule 45 specifically requires that such petition
shall contain a sworn certification against forum shopping as provided in the last paragraph of Section 2, Rule 42.
The records show that the law firm of Del Rosario and Del Rosario through its associate, Atty. Herbert A. Tria, is the counsel of
record for FESC in both G.R. No. 130068 and G.R. No. 130150.
G.R. No. 130068, which is assigned to the Court's Second Division, commenced with the filing by FESC through counsel on
August 22, 1997 of a verified motion for extension of time to file its petition for thirty (30) days from August 28, 1997 or until
September 27, 1997. 20 Said motion contained the following certification against forum shopping 21 signed by Atty. Herbert A.
Tria as affiant:
CERTIFICATION
AGAINST FORUM SHOPPING
I/we hereby certify that I/we have not commenced any other action or proceeding involving the same
issues in the Supreme Court, the Court of Appeals, or any other tribunal or agency; that to the best of my
own knowledge, no such action or proceeding is pending in the Supreme Court, the Court of Appeals, or
any other tribunal or agency; that if I/we should thereafter learn that a similar action or proceeding has
been filed or is pending before the Supreme Court, the Court of Appeals, or any other tribunal or agency,
I/we undertake to report that fact within five (5) days therefrom to this Honorable Court.
This motion having been granted, FESC subsequently filed its petition on September 26, 1997, this time bearing a
"verification and certification against forum-shopping" executed by one Teodoro P. Lopez on September 24,
1997, 22 to wit:
VERIFICATION AND CERTIFICATION AGAINST FORUM SHOPPING in compliance with Section 4(e), Rule 45
in relation to Section 2, Rule 42 of the Revised Rules of Civil Procedure
I, Teodoro P. Lopez, of legal age, after being duly sworn, depose and state:
1. That I am the Manager, Claims Department of Filsov Shipping Company, the local agent of petitioner in this case.
2. That I have caused the preparation of this Petition for Review on Certiorari.
3. That I have read the same and the allegations therein contained are true and correct based on the records of this case.
4. That I certify that petitioner has not commenced any other action or proceeding involving the same issues in the Supreme
Court or Court of Appeals, or any other tribunal or agency, that to the best of my own knowledge, no such action or proceeding
is pending in the Supreme Court, the Court of Appeals or any other tribunal or agency, that if I should thereafter learn that a
similar action or proceeding has been filed or is pending before the Supreme Court, the Court of Appeals, or any other tribunal
or agency, I undertake to report the fact within five (5) days therefrom to this Honorable Court. (Italics supplied for emphasis.)
Reviewing the records, we find that the petition filed by MPA in G.R. No. 130150 then pending with the Third Division was duly
filed on August 29, 1997 with a copy thereof furnished on the same date by registered mail to counsel for FESC. 23 Counsel of
record for MPA. Atty. Jesus P. Amparo, in his verification accompanying said petition dutifully revealed to the Court that —
3. Petitioner has not commenced any other action or proceeding involving the same issues in this
Honorable Court, the Court of Appeals or different Divisions thereof, or any other tribunal or agency, but
to the best of his knowledge, there is an action or proceeding pending in this Honorable Court, entitled
Far Eastern Shipping Co., Petitioner, vs. Philippine Ports Authority and Court of Appeals with a Motion for
Extension of time to file Petition For Review by Certiorari filed sometime on August 18, 1987. If
undersigned counsel will come to know of any other pending action or claim filed or pending he
undertakes to report such fact within five (5) days to this Honorable Court.24 (Emphasis supplied.)
Inasmuch as MPA's petition in G.R. No. 130150 was posted by registered mail on August 29, 1997 and taking judicial notice of
the average period of time it takes local mail to reach its destination, by reasonable estimation it would be fair to conclude that
when FESC filed its petition in G.R. No. 130068 on September 26, 1997, it would already have received a copy of the former and
would then have knowledge of the pendency of the other petition initially filed with the First Division. It was therefore
incumbent upon FESC to inform the Court of that fact through its certification against forum shopping. For failure to make such
disclosure, it would appear that the aforequoted certification accompanying the petition in G.R. No. 130068 is defective and
could have been a ground for dismissal thereof.
Even assuming that FESC had not yet received its copy of MPA's petition at the time it filed its own petition and executed said
certification, its signatory did state "that if I should thereafter learn that a similar action or proceeding has been filed or is
pending before the Supreme Court, the Court of Appeals or any other tribunal or agency, I undertake to report the fact within
five (5) days therefrom to this Honorable Court." 25Scouring the records page by page in this case, we find that no manifestation
concordant with such undertaking was then or at any other time thereafter ever filed by FESC nor was there any attempt to
bring such matter to the attention of the Court. Moreover, it cannot feign non-knowledge of the existence of such other
petition because FESC itself filed the motion for consolidation in G.R. No. 130150 of these two cases on April 24, 1998.
It is disturbing to note that counsel for FESC, the law firm of Del Rosario and Del Rosario, displays an unprofessional tendency of
taking the Rules for granted, in this instance exemplified by its pro forma compliance therewith but apparently without full
comprehension of and with less than faithful commitment to its undertakings to this Court in the interest of just, speedy and
orderly administration of court proceedings.
As between the lawyer and the courts, a lawyer owes candor, fairness and good faith to the court. 26 He is an officer of the court
exercising a privilege which is indispensable in the administration of justice. 27Candidness, especially towards the courts, is
essential for the expeditious administration of justice. Courts are entitled to expect only complete honesty from lawyers
appearing and pleading before them. 28 Candor in all dealings is the very essence of honorable membership in the legal
profession. 29 More specifically, a lawyer is obliged to observe the rules of procedure and not to misuse them to defeat the ends
of justice. 30 It behooves a lawyer, therefore, to exert every effort and consider it his duty to assist in the speedy and efficient
administration of justice. 31 Being an officer of the court, a lawyer has a responsibility in the proper administration of justice.
Like the court itself, he is an instrument to advance its ends — the speedy, efficient, impartial, correct and inexpensive
adjudication of cases and the prompt satisfaction of final judgments. A lawyer should not only help attain these objectives but
should likewise avoid any unethical or improper practices that impede, obstruct or prevent their realization, charged as he is
with the primary task of assisting in the speedy and efficient administration of justice.32
Sad to say, the members of said law firm sorely failed to observe their duties as responsible members of the Bar. Their
actuations are indicative of their predisposition to take lightly the avowed duties of officers of the Court to promote respect for
law and for legal processes. 33 We cannot allow this state of things to pass judicial muster.
271
In view of the fact that at around the time these petitions were commenced, the 1997 Rules of Civil Procedure had just taken
effect, the Court treated infractions of the new Rules then with relative liberality in evaluating full compliance therewith.
Nevertheless, it would do well to remind all concerned that the penal provisions of Circular No. 28-91 which remain operative
provides, inter alia:
3. Penalties. —
(c) The submission of a false certification under Par. 2 of the Circular shall likewise constitute contempt
of court, without prejudice to the filing of criminal action against the guilty party. The lawyer may also be
subjected to disciplinary proceedings.
It must be stressed that the certification against forum shopping ordained under the Rules is to be executed by the petitioner,
and not by counsel. Obviously it is the petitioner, and not always the counsel whose professional services have been retained
for a particular case, who is in the best position to know whether he or it actually filed or caused the filing of a petition in that
case. Hence, a certification against forum shopping by counsel is a defective certification. It is clearly equivalent to non-
compliance with the requirement under Section 2, Rule 42 in relation to Section 4, Rule 45, and constitutes a valid cause for
dismissal of the petition.
Hence, the initial certification appended to the motion for extension of time to file petition in G.R. No. 130068 executed in
behalf of FESC by Atty. Tria is procedurally deficient. But considering that it was a superfluity at that stage of the proceeding, it
being unnecessary to file such a certification with a mere motion for extension, we shall disregard such error. Besides, the
certification subsequently executed by Teodoro P. Lopez in behalf of FESC cures that defect to a certain extent, despite the
inaccuracies earlier pointed out. In the same vein, we shall consider the verification signed in behalf of MPA by its counsel, Atty.
Amparo, in G.R. No. 130150 as substantial compliance inasmuch as it served the purpose of the Rules of informing the Court of
the pendency of another action or proceeding involving the same issues.
It bears stressing that procedural rules are instruments in the speedy and efficient administration of justice. They should be
used to achieve such end and not to derail it. 34
Counsel for PPA did not make matters any better. Despite the fact that, save for the Solicitor General at the time, the same legal
team of the Office of the Solicitor General (OSG, for short) composed of Assistant Solicitor General Roman G. Del Rosario and
Solicitor Luis F. Simon, with the addition of Assistant Solicitor General Pio C. Guerrero very much later in the proceedings,
represented PPA throughout the appellate proceedings in both G.R. No. 130068 and G.R. No. 130150 and was presumably fully
acquainted with the facts and issues of the case, it took the OSG an inordinately and almost unreasonably long period of time
to file its comment, thus unduly delaying the resolution of these cases. It took several changes of leadership in the OSG — from
Silvestre H. Bello III to Romeo C. dela Cruz and, finally, Ricardo P. Galvez — before the comment in behalf of PPA was finally
filed.
In G.R. No. 130068, it took eight (8) motions for extension of time totaling 210 days, a warning that no further extensions shall
be granted, and personal service on the Solicitor General himself of the resolution requiring the filing of such comment before
the OSG indulged the Court with the long required comment on July 10, 1998. 35 This, despite the fact that said office was
required to file its comment way back on November 12, 1997. 36 A closer scrutiny of the records likewise indicates that
petitoner FESC was not even furnished a copy of said comment as required by Section 5, Rule 42. Instead, a copy thereof was
inadvertently furnished to MPA which, from the point of view of G.R. No. 130068, was a non-party. 37 The OSG fared slightly
better in G.R. No. 130150 in that it took only six (6) extensions, or a total of 180 days, before the comment was finally
filed. 38 And while it properly furnished petitioner MPA with a copy of its comment, it would have been more desirable and
expedient in this case to have furnished its therein co-respondent FESC with a copy thereof, if only as a matter of professional
courtesy. 39
This undeniably dilatory disinclination of the OSG to seasonably file required pleadings constitutes deplorable disservice to the
tax-paying public and can only be categorized as censurable inefficiency on the part of the government law office. This is most
certainly professionally unbecoming of the OSG.
Another thing that baffles the Court is why the OSG did not take the inititive of filing a motion for consolidation in either G.R.
No. 130068 or G.R. No. 130150, considering its familiarity with the background of the case and if only to make its job easier by
having to prepare and file only one comment. It could not have been unaware of the pendency of one or the other petition
because, being counsel for respondent in both cases, petitioner is required to furnish it with a copy of the petition under pain
of dismissal of the petition for failure otherwise. 40
Besides, in G.R. 130068, it prefaces its discussions thus —
Incidentally, the Manila Pilots' Association (MPA), one of the defendants-appellants in the case before the
respondent Court of Appeals, has taken a separate appeal from the said decision to this Honorable Court,
which was docketed as G.R. No. 130150 and entitled "Manila Pilots' Association, Petitioner, versus
Philippine Ports Authority and Far Eastern Shipping Co., Respondents." 41
Similarly, in G.R. No. 130150, it states —
Incidentally, respondent Far Eastern Shipping Co. (FESC) had also taken an appeal from the said decision
to this Honorable Court, docketed as G.R. No. 130068, entitled "Far Eastern Shipping Co. vs. Court of
Appeals and Philippine Ports Authority." 42
We find here a lackadaisical attitude and complacency on the part of the OSG in the handling of its cases and an almost
reflexive propensity to move for countless extensions, as if to test the patience of the Court, before favoring it with the timely
submission of required pleadings.
It must be emphasized that the Court can resolve cases only as fast as the respective parties in a case file the necessary
pleadings. The OSG, by needlessly extending the pendency of these cases through its numerous motions for extension, came
very close to exhausting this Court's forbearance and has regrettably fallen short of its duties as the People's Tribune.
The OSG is reminded that just like other members of the Bar, the canons under the Code of Professional Responsibility apply
with equal force on lawyers in government service in the discharge of their official tasks. 43 These ethical duties are rendered
even more exacting as to them because, as government counsel, they have the added duty to abide by the policy of the State to
promote a high standard of ethics in public service. 44 Furthermore, it is incumbent upon the OSG, as part of the government
bureaucracy, to perform and discharge its duties with the highest degree of professionalism, intelligence and skill 45 and to
extend prompt, courteous and adequate service to the public. 46
Now, on the merits of the case. After a judicious examination of the records of this case, the pleadings filed, and the evidence
presented by the parties in the two petitions, we find no cogent reason to reverse and set aside the questioned decision. While
not entirely a case of first impression, we shall discuss the issues seriatim and, correlatively by way of a judicial once-over,
inasmuch as the matters raised in both petitions beg for validation and updating of well-worn maritime jurisprudence. Thereby,
we shall write finis to the endless finger-pointing in this shipping mishap which has been stretched beyond the limits of judicial
tolerance.
The Port of Manila is within the Manila Pilotage District which is under compulsory pilotage pursuant to Section 8, Article III of
Philippine Ports Authority Administrative Order No. 03-85, 47 which provides that:
Sec. 8. Compulsor Pilotage Service. — For entering a harbor and anchoring thereat, or passing through rivers or straits within a
pilotage district, as well as docking and undocking at any pier/wharf, or shifting from one berth or another, every vessel
engaged in coastwise and foreign trade shall be under compulsory pilotage. . . .
In case of compulsory pilotage, the respective duties and responsibilities of the compulsory pilot and the master have been
specified by the same regulation in this wise:
272
Sec. 11. Control of vessels and liability for damage. — On compulsory pilotage grounds, the Harbor Pilot
providing the service to a vessel shall be responsible for the damage caused to a vessel or to life and
property at ports due to his negligence or fault. He can only be absolved from liability if the accident is
caused by force majeure or natural calamities provided he has exercised prudence and extra diligence to
prevent or minimize damage.
The Master shall retain overall command of the vessel even on pilotage grounds whereby he can
countermand or overrule the order or command of the Harbor Pilot on beard. In such event, any damage
caused to a vessel or to life and property at ports by reason of the fault or negligence of the Master shall
be the responsibility and liability of the registered owner of the vessel concerned without prejudice to
recourse against said Master.
Such liability of the owner or Master of the vessel or its pilots shall be determined by competent
authority in appropriate proceedings in the light of the facts and circumstances of each particular case.
Sec. 32. Duties and responsibilities of the Pilot or Pilots' Association. — The duties and responsibilities of
the Harbor Pilot shall be as follows:
f) a pilot shall be held responsible for the direction of a vessel from the time he assumes his work as a
pilot thereof until he leaves it anchored or berthed safely; Provided, however, that his responsibility shall
cease at the moment the Master neglects or refuses to carry out hisorder.
Customs Administrative Order No. 15-65 issued twenty years earlier likewise provided in Chapter I thereof for the
responsibilities of pilots:
Par. XXXIX. — A Pilot shall be held responsible for the direction of a vessel from the time he assumes
control thereof until he leaves it anchored free from shoal: Provided, That his responsibility shall cease at
the moment the master neglects or refuses to carry out his instructions.
Par. XLIV. — Pilots shall properly and safely secure or anchor vessels under their control when requested
to do so by the master of such vessels.
I. G.R. No. 130068
Petitioner FESC faults the respondent court with serious error in not holding MPA and Capt. Gavino solely responsible for the
damages cause to the pier. It avers that since the vessel was under compulsory pilotage at the time with Capt. Gavino in
command and having exclusive control of the vessel during the docking maneuvers, then the latter should be responsible for
damages caused to the pier. 48 It likewise holds the appellate court in error for holding that the master of the ship, Capt.
Kabankov, did not exercise the required diligence demanded by the circumstances. 49
We start our discussion of the successive issues bearing in mind the evidentiary rule in American jurisprudence that there is a
presumption of fault against a moving vessel that strikes a stationary object such as a dock or navigational aid. In admiralty, this
presumption does more than merely require the ship to go forward and produce some evidence on the presumptive matter.
The moving vessel must show that it was without fault or that the collision was occasioned by the fault of the stationary object
or was the result of inevitable accident. It has been held that such vessel must exhaust every reasonable possibility which the
circumstances admit and show that in each, they did all that reasonable care required. 50 In the absence of sufficient proof in
rebuttal, the presumption of fault attaches to a moving vessel which collides with a fixed object and makes a prima facie case of
fault against the vessel. 51 Logic and experience support this presumption:
The common sense behind the rule makes the burden a heavy one. Such accidents simply do not occur in
the ordinary course of things unless the vessel has been mismanaged in some way. It is nor sufficient for
the respondent to produce witnesses who testify that as soon as the danger became apparent everything
 possible was done to avoid an accident. The question remains, How then did the collision occur? The
answer must be either that, in spite of the testimony of the witnesses, what was done was too little or
too late or, if not, then the vessel was at fault for being in a position in which an unavoidable collision
would occur. 52
The task, therefore, in these cases is to pinpoint who was negligent — the master of the ship, the harbor pilot or
both.
A pilot, in maritime law, is a person duly qualified, and licensed, to conduct a vessel into or out of ports, or in certain waters. In
a broad sense, the term "pilot" includes both (1) those whose duty it is to guide vessels into or out of ports, or in particular
waters and (2) those entrusted with the navigation of vessels on the high seas. 53 However, the term "pilot" is more generally
understood as a person taken on board at a particular place for the purpose of conducting a ship through a river, road or
channel, or from a port. 54
Under English and American authorities, generally speaking, the pilot supersedes the master for the time being in the
command and navigation of the ship, and his orders must be obeyed in all matters connected with her navigation. He becomes
the master pro hac vice and should give all directions as to speed, course, stopping and reversing anchoring, towing and the
like. And when a licensed pilot is employed in a place where pilotage is compulsory, it is his duty to insist on having effective
control of the vessel, or to decline to act as pilot. Under certain systems of foreign law, the pilot does not take entire charge of
the vessel, but is deemed merely the adviser of the master, who retains command and control of the navigation even in
localities where pilotage is compulsory. 55
It is quite common for states and localities to provide for compulsory pilotage, and safety laws have been enacted requiring
vessels approaching their ports, with certain exceptions, to take on board pilots duly licensed under local law. The purpose of
these laws is to create a body of seamen thoroughly acquainted with the harbor, to pilot vessels seeking to enter or depart, and
thus protect life and property from the dangers of navigation. 56
In line with such established doctrines, Chapter II of Customs Administrative Order No. 15-65 prescribes the rules for
compulsory pilotage in the covered pilotage districts, among which is the Manila Pilotage District,
viz. —
PARAGRAPH I. — Pilotage for entering a harbor and anchoring thereat, as well as docking and undocking
in any pier or shifting from one berth to another shall be compulsory, except Government vessels and
vessels of foreign governments entitled to courtesy, and other vessels engaged solely in river or harbor
work, or in a daily ferry service between ports which shall be exempt from compulsory pilotage
provisions of these regulations: provided, however, that compulsory pilotage shall not apply in pilotage
districts whose optional pilotage is allowed under these regulations.
Pursuant thereto, Capt. Gavino was assigned to pilot MV Pavlodar into Berth 4 of the Manila International Port. Upon assuming
such office as compulsory pilot, Capt. Gavino is held to the universally accepted high standards of care and diligence required of
a pilot, whereby he assumes to have skill and knowledge in respect to navigation in the particular waters over which his license
extends superior to and more to be trusted than that of the master. 57 A pilot 57 should have a thorough knowledge of general
and local regulations and physical conditions affecting the vessel in his charge and the waters for which he is licensed, such as a
particular harbor or river.
He is not held to the highest possible degree of skill and care, but must have and exercise the ordinary skill and care demanded
by the circumstances, and usually shown by an expert in his profession. Under extraordinary circumstancesm, a pilot must
exercise extraordinary care. 58
In Atlee vs. The Northwesrern Union Packet Company. 59 Mr. Justice Miller spelled out in great detail the duties of a pilot:
273
. . . (T)he pilot of a river steamer, like the harbor pilot, is selected for his personal knowledge of the
topography through which he steers his vessel. In the long course of a thousand miles in one of these
rivers, he must be familiar with the appearance of the shore on each side of the river as he goes along. Its
banks, towns, its landings, its houses and trees, are all landmarks by which he steers his vessel. The
compass is of little use to him. He must know where the navigable channel is, in its relation to all these
external objects, especially in the night. He must also be familiar with all dangers that are permanently
located in the course of the river, as sand-bars, snags, sunken rocks or trees or abandoned vessels
orbarges. All this he must know and remember and avoid. To do this, he must be constantly informed of
the changes in the current of the river, of the sand-bars newly made,of logs or snags, or other objects
newly presented, against which his vessel might be injured.
It may be said that this is exacting a very high order of ability in a pilot. But when we consider the value
of the lives and property committed to their control, for in this they are absolute masters, the high
compensation they receive, the care which Congress has taken to secure by rigid and frequent
examinations and renewal of licenses, this very class of skill, we do not think we fix the standard too high.
Tested thereby, we affirm respondent court's finding that Capt. Gavino failed to measure up to such strict standard of care and
diligence required of pilots in the performance of their duties. Witness this testimony of Capt. Gavino:
Court: You have testified before that the reason why the vessel bumped the pier was because the anchor was not released
immediately or as soon as you have given the order. Do you remember having srated that?
A Yes, your Honor.
Q And you gave this order to the captain of the vessel?
A Yes, your Honor.
Q By that testimony, you are leading the Court to understand that if that anchor was released immediately at the time you gave
the order, the incident would not have happened. Is that correct?
A Yes, sir, but actually it was only a presumption on my part because there was a commotion between the officers who are in
charge of the dropping of the anchor and the captain. I could not understand their language, it was in Russian, so I presumed
the anchor was not dropped on time.
Q So, you are not sure whether it was really dropped on time or not?
A I am not sure, your Honor.
Q You are not even sure what could have caused the incident. What factor could have caused the incident?
A Well, in this case now, because either the anchor was not dropped on time or the anchor did not hold, that was the cause of
the incident, your Honor. 60
It is disconcertingly riddled with too much incertitude and manifests a seeming indifference for the possibly injurious
consequences his commands as pilot may have. Prudence required that he, as pilot, should have made sure that his directions
were promptly and strictly followed. As correctly noted by the trial court —
Moreover, assuming that he did indeed give the command to drop the anchor on time, as pilot he should have seen to it that
the order was carried out, and he could have done this in a number of ways, one of which was to inspect the bow of the vessel
where the anchor mechanism was installed. Of course, Captain Gavino makes reference to a commotion among the crew
members which supposedly caused the delay in the execution of the command. This account was reflected in the pilot's report
prepared four hours later, but Capt. Kavankov, while not admitting whether or not such a commotion occurred, maintained that
the command to drop anchor was followed "immediately and precisely." Hence, the Court cannot give much weight or
consideration to this portion of Gavino's testimony." 61
An act may be negligent if it is done without the competence that a reasonable person in the position of the actor would
recognize as necessary to prevent it from creating an unreasonable risk of harm to another. 62Those who undertake any work
calling for special skills are required not only to exercise reasonable care in what they do but also possess a standard minimum
of special knowledge and ability. 63
Every man who offers his services to another, and is employed, assumes to exercise in the employment such skills he possesses,
with a reasonable degree of diligence. In all these employments where peculiar skill is requisite, if one offers his services he is
understood as holding himself out to the public as possessing the degree of skill commonly possessed by others in the same
employment, and if his pretensions are unfounded he commits a species of fraud on every man who employs him in reliance on
his public profession. 64
Furthermore, there is an obligation on all persons to take the care which, under ordinary circumstances of the case, a
reasonable and prudent man would take, and the omission of that care constitutes negligence. 65Generally, the degree of care
required is graduated according to the danger a person or property attendant upon the activity which the actor pursues or the
instrumentality which he uses. The greater the danger the greater the degree of care required. What is ordinary under
extraordinary of conditions is dictated by those conditions; extraordinary risk demands extraordinary care. Similarly, the more
imminent the danger, the higher the degree of care. 66
We give our imprimatur to the bases for the conclusion of the Court of Appeals that Capt. Gavino was indeed negligent in the
performance of his duties:
. . . As can be gleaned from the logbook, Gavino ordered the left anchor and two (2) shackles dropped at
8:30 o'clock in the morning. He ordered the engines of the vessel stopped at 8:31 o'clock. By then,Gavino
must have realized that the anchor did not hit a hard object and was not clawed so as to reduce the
momentum of the vessel. In point of fact, the vessel continued travelling towards the pier at the same
speed. Gavino failed to react, At 8:32 o'clock, the two (2) tugboats began to push the stern part of the
vessel from the port side bur the momentum of the vessel was not contained. Still, Gavino did not react.
He did not even order the other anchor and two (2) more shackles dropped to arrest the momentum of
the vessel. Neither did he order full-astern. It was only at 8:34 o'clock, or four (4) minutes, after the
anchor was dropped that Gavino reacted. But his reaction was even (haphazard) because instead of
arresting fully the momentum of the vessel with the help of the tugboats, Gavino ordered merely "half-
astern". It took Gavino another minute to order a "full-astern". By then, it was too late. The vessel's
momentum could no longer be arrested and, barely a minute thereafter, the bow of the vessel hit the
apron of the pier. Patently, Gavino miscalculated. He failed to react and undertake adequate measures to
arrest fully the momentum of the vessel after the anchor failed to claw to the seabed. When he reacted,
the same was even (haphazard). Gavino failed to reckon the bulk of the vessel, its size and its cargo. He
erroneously believed that only one (1) anchor would suffice and even when the anchor failed to claw into
the seabed or against a hard object in the seabed, Gavino failed to order the other anchor dropped
immediately. His claim that the anchor was dropped when the vessel was only 1,000 feet from the pier is
but a belated attempt to extricate himself from the quagmire of his own insouciance and negligence. In
sum, then, Appellants' claim that the incident was caused by "force majeure" is barren of factual basis.
The harbor pilots are especially trained for this job. In the Philippines, one may not be a harbor pilot
unless he passed the required examination and training conducted then by the Bureau of Custom, under
Customs Administrative Order No. 15-65, now under the Philippine Ports Authority under PPA
Administrative Order 63-85, Paragraph XXXIX of the Customs Administrative Order No. 15-65 provides
that "the pilot shall be held responsible for the direction of the vessel from the time he assumes control
thereof, until he leaves it anchored free from shoal: Provided, that his responsibility shall cease at
274
the.moment the master neglects or refuse(s) to carry out his instructions." The overall direction
regarding the procedure for docking and undocking the vessel emanates from the harbor pilot. In the
present recourse, Gavino failed to live up to his responsibilities and exercise reasonable care or that
degree of care required by the exigencies of the occasion. Failure on his part to exercise the degree of
care demanded by the circumstances is negligence (Reese versus Philadelphia & RR Co. 239 US 363, 60 L
ed. 384, 57 Am Jur, 2d page 418). 67
This affirms the findings of the trial court regarding Capt. Gavino's negligence:
This discussion should not however, divert the court from the fact that negligence in manuevering the
vessel must be attributed to Capt. Senen Gavino. He was an experienced pilot and by this time should
have long familiarized himself with the depth of the port and the distance he could keep between the
vessel and port in order to berth safely. 68
The negligence on the part of Capt. Gavino is evident; but Capt. Kabancov is no less responsible for the allision. His
unconcerned lethargy as master of the ship in the face of troublous exigence constitutes negligence.
While it is indubitable that in exercising his functions a pilot is in sole command of the ship 69 and supersedes the master for the
time being in the command and navigation of a ship and that he becomes master pro hac vice of a vessel piloted by
him, 70 there is overwhelming authority to the effect that the master does not surrender his vessel to the pilot and the pilot is
not the master. The master is still in command of the vessel notwithstanding the presence of a pilot. There are occasions when
the master may and should interfere and even displace the pilot, as when the pilot is obviously incompetent or intoxicated and
the circumstances may require the master to displace a compulsory pilot because of incompetency or physical incapacity. If,
however, the master does nor observe that a compulsory pilot is incompetent or physically incapacitated, the master is justified
in relying on the pilot, but not blindly. 71
The master is not wholly absolved from his duties while a pilot is on board his vessel, and may advise with or offer suggestions
to him. He is still in command of the vessel, except so far as her navigation is concerned, and must cause the ordinary work of
the vessel to be properly carried on and the usual precaution taken. Thus, in particular, he is bound to see that there is
sufficient watch on deck, and that the men are attentive to their duties, also that engines are stopped, towlines cast off, and the
anchors clear and ready to go at the pilot's order. 72
A perusal of Capt. Kabankov's testimony makes it apparent that he was remiss in the discharge of his duties as master of the
ship, leaving the entire docking procedure up to the pilot, instead of maintaining watchful vigilance over this risky maneuver:
Q Will you please tell us whether you have the right to intervene in docking of your ship in the harbor?
A No sir, I have no right to intervene in time of docking, only in case there is imminent danger to the vessel and to the pier.
Q Did you ever intervene during the time that your ship was being docked by Capt. Gavino?
A No sir, I did not intervene at the time when the pilot was docking my ship.
Q Up to the time it was actually docked at the pier, is that correct?
A No sir, I did not intervene up to the very moment when the vessel was docked.
Atty. Del Rosario (to the witness)
Q Mr. Witness, what happened, if any, or was there anything unusual that happened during the docking?
A Yes sir, our ship touched ihe pier and the pier was damaged.
Court (to the witness) Q Did you know that the 2 shackles were dropped?

Q When you said touched the pier, are you leading the court to understand that your ship bumped the pier? A Yes sir, I knew that.

A I believe that my vessel only touched the pier but the impact was very weak. Q If you knew that the shackles were not enough to hold the ship, did you not make any protest to the pilot?

Q Do you know whether the pier was damaged as a result of that slight or weak impact? A No sir, after the incident, that was my assumption.

A Yes sir, after the pier was damaged. Q Did you come to know later whether that presumption is correct?

Q Being most concerned with the safety of your vessel, in the maneuvering of your vessel to the port, did you observe anything
irregular in the maneuvering by Capt. Gavino at the time he was trying to cause the vessel to be docked at the pier?
A You mean the action of Capt. Gavino or his condition?
Court:
A I still don't know the ground in the harbor or the depths.
Q So from the beginning, you were not competent whether the 2 shackles were also dropped to hold the ship?
A No sir, at the beginning, I did not doubt it because I believe Capt. Gavino to be an experienced pilot and he should be more
aware as to the depths of the harbor and the ground and I was confident in his actions.

Q Not the actuation that conform to the safety maneuver of the ship to the harbor? Solicitor Abad (to the witness)

A No sir, it was a usual docking. Q Now, you were standing with the pilot on the bridge of the vessel before the inicident happened, were you not?

Q By that statement of yours, you are leading the court to understand that there was nothing irregular in the docking of the A Yes sir, all the time, I was standing with the pilot.
ship?
Q And so whatever the pilot saw, you could also see from that point of view?
A Yes sir, during the initial period of the docking, there was nothing unusual that happened.
A That is right.
Q What about in the last portion of the docking of the ship, was there anything unusual or abnormal that happened?
Q Whatever the piler can read from the panel of the bridge, you also could read, is that correct?
A None Your Honor, I believe that Capt. Gavino thought that the anchor could keep or hold the vessel.
A What is the meaning of panel?
Q You want us to understand, Mr. Witness, that the dropping of the anchor of the vessel was nor timely?
Q All indications necessary for men on the bridge to be informed of the movements of the ship?
A I don't know the depth of this port but I think, if the anchor was dropped earlier and with more shackles, there could not
have been an incident. A That is right.

Q So you could not precisely tell the court that the dropping of the anchor was timery because you are not well aware of the Q And whatever sound the captain . . . Capt. Gavino would hear from the bridge, you could also hear?
seabed, is that correct?
A That is right.
A Yes sir, that is right.
Q Now, you said that when the command to lower the anchor was given, it was obeyed, is that right?
Q Alright, Capt. Kavankov, did you come to know later whether the anchor held its ground so much so that the vessel could not
travel? A This command was executed by the third mate and boatswain.

A It is difficult for me to say definitely. I believe that the anchor did not hold the ship. Court (to the witness)

Q You mean you don't know whether the anchor blades stuck to the ground to stop the ship from further moving? Q Mr. Witness, earlier in today's hearing, you said that you did not intervene with the duties of the pilot and that, in your
opinion, you can only intervene if the ship is placed in imminent danger, is that correct?
A Yes sir, it is possible.
A That is right, I did say that.
Q What is possible?
Q In your observation before the incident actually happened, did you observe whether or not the ship, before the actual
A I think, the 2 shackles were not enough to hold the vessel. incident, the ship was placed in imminent danger?

275
A No sir, I did not observe. Q You were in full accord with the steps being taken by Capt. Gavino because you relied on his knowledge, on his familiarity of
the seabed and shoals and other surroundings or conditions under the sea, is that correct?
Q By that answer, are you leading the court to understand that because you did not intervene and because you believed that it
was your duty to intervene when the vessel is placed in imminent danger to which you did not observe any imminent danger A Yes sir, that is right.
thereof, you have not intervened in any manner to the command of the pilot?
Solicitor Abad (to the witness)
A That is right, sir.
Q And so after the anchors were ordered dropped and they did not take hold of the seabed, you were alerted that there was
Q Assuminp that you disagreed with the pilot regarding the step being taken by the pilot in maneuvering the vessel, whose danger already on hand?
command will prevail, in case of imminent danger to the vessel?
A No sir, there was no imminent danger to the vessel.
A I did nor consider the situation as having an imminent danger. I believed that the vessel will dock alongside the pier.
Q Do you mean to tell us that even if the anchor was supposed to take hold of the bottom and it did not, there was no danger
Q You want us to understand that you did not see an imminent danger to your ship, is that what you mean? to the ship?

A Yes sir, up to the very last moment, I believed that there was no imminent danger. A Yes sir, because the anchor dragged on the ground later.

Q Because of that, did you ever intervene in the command of the pilot? Q And after a few moments when the anchor should have taken hold the seabed bur not done (sic), as you expected, you
already were alerted that there was danger to the ship, is that correct?
A Yes sir, I did not intervene because I believed that the command of the pilot to be correct.
A Yes sir, I was alerted but there was no danger.
Solicitor Abad (to the witness)
Q And you were alerted that somebody was wrong?
Q As a captain of M/V Pavlodar, you consider docking maneuvers a serious matter, is it not?
A Yes sir, I was alerted.
A Yes sir, that is right.
Q And this alert vou assumed was the ordinary alertness that you have for normal docking?
Q Since it affects not only the safety of the port or pier, but also the safety of the vessel and the cargo, is it not?
A Yes sir, I mean that it was usual condition of any man in time of docking to be alert.
A That is right.
Q And that is the same alertness when the anchor did not hold onto the ground, is that correct?
Q So that, I assume that you were watching Capt. Gavino very closely at the time he was making his commands?
A Yes sir, me and Capt. Gavino (thought) that the anchor will hold the ground.
A I was close to him, I was hearing his command and being executed.
Q Since, as you said that you agreed all the while with the orders of Capt. Gavino, you also therefore agreed with him in his
Q And that you were also alert for any possible mistakes he might commit in the maneuvering of the vessel? failure to take necessary precaution against the eventuality that the anchor will not hold as expected?

A Yes sir, that is right. Atty. Del Rosario: May I ask that the question . . .

Q But at no time during the maneuver did you issue order contrary to the orders Capt. Gavino made? Solicitor Abad: Never mind, I will reform the question.

A No sir. Solicitor Abad (to the witness)

Q So that you were in full accord with all of Capt. Gavino's orders? Q Is it not a fact that the vessel bumped the pier?

A Yes sir. A That is right, it bumped the pier.

Q Because, otherwise, you would have issued order that would supersede his own order? Q For the main reason that the anchor of the vessel did not hold the ground as expected?

A In that case, I should t,ke him away from his command or remove the command from him. A Yes sir, that is my opinion. 73

Court (to the witness) Further, on redirect examination, Capt. Kabankov fortified his apathetic assessment of the situation:

276
Q Now, after the anchor was dropped, was there any point in time that you felt that the vessel was in imminent danger. For, while the pilot Gavino may indeed have been charged with the task of docking the vessel in the berthing space,
it is undisputed that the master of the vessel had the corresponding duty to countermand any of the orders made by
A No, at that time, the vessel was not in imminent, danger, sir. 74 the pilot, and even maneuver the vessel himself, in case of imminent danger to the vessel and the port.

This cavalier appraisal of the event by Capt. Kabankov is disturbingly antipodal to Capt. Gavino's anxious assessment of the
situation:
Q When a pilot is on board a vessel, it is the piler's command which should be followed at that moment until the vessel is, or
goes to port or reaches port?
A Yes, your Honor, but it does not take away from the Captain his prerogative to countermand the pilot.
Q In what way?
A In any case, which he thinks the pilot is not maneuvering correctly, the Captain always has the prerogative to countermand
the pilot's order.
Q But insofar as competence, efficiency and functional knowledee of the seabed which are vital or decisive in the safety (sic)
bringing of a vessel to the port, he is not competent?
In fact, in his testimony, Capt. Kavankov admitted that all throughour the man(eu)vering procedures he did not
notice anything was going wrong, and even observed that the order given to drop the anchor was done at the
proper time. He even ventured the opinion that the accident occurred because the anchor failed to take hold but
that this did not alarm him because.there was still time to drop a second anchor.
Under normal circumstances, the abovementioned facts would have caused the master of a vessel to take charge of
the situation and see to the man(eu)vering of the vessel himself. Instead, Capt. Kavankov chose to rely blindly upon
his pilot, who by this time was proven ill-equipped to cope with the situation.
It is apparent that Gavino was negligent but Far Eastern's employee Capt. Kavankov was no lesss responsible for as
master of the vessel he stood by the pilot during the man(eu)vering procedures and was privy to every move the
latter made, as well as the vessel's response to each of the commands. His choice to rely blindly upon the pilot's
skills, to the point that despite being appraised of a notice of alert he continued to relinquish control of the vessel to
Gavino, shows indubitably that he was not performing his duties with the diligence required of him and therefore
may be charged with negligence along with defend;int Gavino. 76

A Yes, your Honor. That is why they hire a pilot in an advisory capacity, but still, the safety of the vessel rest(s) upon the Captain,
the Master of the vessel.
Q In this case, there was not a disagreement between you and the Captain of the vessel in the bringing of the vessel to port?
A No, your Honor.
Court: May proceed.
Atty. Catris: In fact, the Master of the vessel testified here that he was all along in conformity with the orders you, gave to him,
and, as matter of fact, as he said, he obeyed all your orders. Can you tell, if in the course of giving such normal orders for the
saf(e) docking of the MV Pavlodar, do you remember of any instance that the Master of the vessel did not obey your command
for the safety docking of the MV Pavlodar?
Atty. del Rosario: Already answered, he already said yes sir.
Court: Yes, he has just answered yes sir to the Court that there was no disagreement insofar as the bringing of the vessel safely
to the port.
Atty. Catris: But in this instance of docking of the MV Pavlodar, do you remember of a time during the course of the docking
that the MV Pavlodar was in imminent danger of bumping the pier?
A When we were about more than one thousand meters from the pier, I think, the anchor was not holding, so I immediately
ordered to push the bow at a fourth quarter, at the back of the vessel in order to swing the bow away from the pier and at the
same time, I ordered for a full astern of the engine. 75
As correctly affirmed by the Court of Appeals —
We are in full accord with the findings and disquisitions of the Court a quo.
In the present recourse, Captain Viktor Kavankov had been a mariner for thirty-two years before the incident. When
Gavino was (in) the command of the vessel, Kavankov was beside Gavino, relaying the commands or orders of
Gavino to the crewmembers-officers of the vessel concerned. He was thus fully aware of the docking maneuvers and
procedure Gavino undertook to dock the vessel. Irrefragably, Kavankov was fully aware of the bulk and size of the
vessel and its cargo as well as the weight of the vessel. Kavankov categorically admitted that, when the anchor and
two (2) shackles were dropped to the sea floor, the claws of the anchor did not hitch on to any hard object in the
seabed. The momentum of the vessel was not arrested. The use of the two (2) tugboats was insufficient. The
momentum of the vessel, although a little bit arrested, continued (sic) the vessel going straightforward with its bow
towards the port (Exhibit "A-1 ). There was thus a need for the vessel to move "full-astern" and to drop the other
anchor with another shackle or two (2), for the vessel to avoid hitting the pier. Kavankov refused to act even as
Gavino failed to act. Even as Gavino gave mere "half-astern" order, Kavankov supinely stood by. The vessel was
already about twenty (20) meters away from the pier when Gavino gave the "full-astern" order. Even then, Kavankov
did nothing to prevent the vessel from hitting the pier simply because he relied on the competence and plan of
Gavino. While the "full-astern'' maneuver momentarily arrested the momentum of the vessel, it was, by then, too
late. All along, Kavankov stood supinely beside Gavino, doing nothing but relay the commands of Gavino.
Inscrutably, then, Kavankov was negligent.
The stark incompetence of Kavankov is competent evidence to prove the unseaworthiness of the vessel. It has been
held that the incompetence of the navigator, the master of the vessel or its crew makes the vessel unseaworthy (Tug
Ocean Prince versus United States of America, 584 F. 2nd, page 1151). Hence, the Appellant FESC is likewise liable
for the damage sustained by the Appellee. 77

These conflicting reactions can only imply, at the very least, unmindful disregard or, worse, neglectful relinquishment of duty by We find strong and well-reasoned support in time-tested American maritime jurisprudence, on which much of our laws and
the shipmaster, tantamount to negligence. jurisprudence on the matter are based, for the conclusions of the Court of Appeals adjudging both Capt. Gavino and Capt.
Kabankov negligent.
The findings of the trial court on this aspect is noteworthy:
As early as 1869, the U.S. Supreme Court declared, through Mr. Justice Swayne, in The Steamship China vs. Walsh, 78 that it is
the duty of the master to interfere in cases of the pilot's intoxication or manifest incapacity, in cases of danger which he does

277
not foresee, and in all cases of great necessity. The master has the same power to displace the pilot that he has to remove any
subordinate officer of the vessel, at his discretion.
In 1895, the U.S. Supreme Court, this time through Mr. Justice Brown, emphatically ruled that:
Nor are rye satisfied with the conduct of the master in leaving the pilot in sole charge of the vessel. While the pilot
doubtless supersedes the master for the time being in the command and navigation of the ship, and his orders must
be obeyed in all matters connected with her navigation, the master is not wholly absolved from his duties while the
pilot is on board, and may advise with him, and even displace him in case he is intoxicated or manifestly
incompetent. He is still in command of the vessel, except so far as her navigation is concerned, and bound to see
that there is a sufficient watch on deck, and that the men are attentive to their duties.
. . . (N)orwithstanding the pilot has charge, it is the duty of the master to prevent accident, and not to abandon the
vessel entirely to the pilot; but that there are certain duties he has to discharge (notwithstanding there is a pilot on
board) for the benefit of the owners. . . . that in well conducted ships the master does not regard the presence of a
duly licensed pilot in compulsory pilot waters as freeing him from every, obligation to attend to the safety of the
vessel; but that, while the master sees that his officers and crew duly attend to the pilot's orders, he himself is
bound to keep a vigilant eye on the navigation of the vessel, and, when exceptional circumstances exist, not only to
urge upon the pilot to use every precaution, but to insist upon such being taken. 79 (Italics for emphasis.)
In Jure vs. United Fruit Co., 80 which, like the present petitions, involved compulsory pilotage, with a similar scenario where at
and prior to the time of injury, the vessel was in the charge of a pilot with the master on the bridge of the vessel beside said
pilot, the court therein ruled:
The authority of the master of a vessel is not in complete abeyance while a pilot, who is required by law to be
accepted, is in discharge of his functions. . . . It is the duty of the master to interfere in cases of the pilot's
intoxication or manifest incapacity, in cases of danger which he does not foresee, and in all cases of great necessity.
The master has the same power to displace the pilot that he has to remove any subordinate officer of the vessel. He
may exercise it, or not, according to his discretion. There was evidence to support findings that piaintiff's injury was
due to the negligent operation of the Atenas, and that the master of that vessel was negligent in failing to take
action to avoid endangering a vessel situated as the City of Canton was and persons or property thereon.
A phase of the evidence furnished support for the inferences . . . that he negligently failed to suggest to the pilot the
danger which was disclosed, and means of avoiding such danger; and that the master's negligence in failing to give
timelt admonition to the pilot proximately contributed to the injury complained of. We are of opinion that the
evidence mentioned tended to prove conduct of the pilot, known to the master, giving rise to a case of danger or
great necessity, calling for the intervention of the master. A master of a vessel is not without fault in acquiescing in
canduct of a pilot which involves apparent and avoidable danger, whether such danger is to the vessel upon which
the pilot is, or to another vessel, or persons or property thereon or on shore. (Emphasis ours.)
Still in another case involving a nearly identical setting, the captain of a vessel alongside the compulsory pilot was deemed to
be negligent, since, in the words of the court, "he was in a position to exercise his superior authority if he had deemed the
speed excessive on the occasion in question. I think it was clearly negligent of him not to have recognized the danger to any
craft moored at Gravell Dock and that he should have directed the pilot to reduce his speed as required by the local
governmental regulations. His failure amounted to negligence and renders the respondent liable." 81 (Emphasis supplied.)
Though a compulsory pilot might be regarded as an independent contractor, he is at all times subject to the ultimate control of
the ship's master. 82
In sum, where a compulsory pilot is in charge of a ship, the master being required to permit him to navigate it, if the master
observes that the pilot is incompetent or physically incapable, then it is the dury of the master to refuse to permit the pilot to
act. But if no such reasons are present, then the master is justified in relying upon the pilot, but not blindly. Under the
circumstances of this case, if a situation arose where the master, exercising that reasonable vigilance which the master of a ship
278
should exercise, observed, or should have observed, that the pilot was so navigating the vessel that she was going, or was likely
to go, into danger, and there was in the exercise of reasonable care and vigilance an opportunity for the master to intervene so
as to save the ship from danger, the master should have acted accordingly. 83 The master of a vessel must exercise a degree of
vigilance commensurate with the circumstances. 84
Inasmuch as the matter of negligence is a question of fact, 85 we defer to the findings of the trial court, especially as this is
affirmed by the Court of Appeals. 86 But even beyond that, our own evaluation is that Capt. Kabankov's shared liability is due
mainly to the fact that he failed to act when the perilous situation should have spurred him into quick and decisive action as
master of the ship. In the face of imminent or actual danger, he did not have to wait for the happenstance to occur before
countermanding or overruling the pilot. By his own admission, Capt. Kabankov concurred with Capt. Gavino's decisions, and
this is precisely the reason why he decided not to countermand any of the latter's orders. Inasmuch as both lower courts found
Capt. Gavino negligent, by expressing full agreement therewith Capt. Kabankov was just as negligent as Capt. Gavino.
In general, a pilot is personally liable for damages caused by his own negligence or default to the owners of the vessel, and to
third parties for damages sustained in a collision. Such negligence of the pilot in the performance of duty constitutes a
maritime tort. 87 At common law, a shipowner is not liable for injuries inflicted exclusively by the negligence of a pilot accepted
by a vessel compulsorily. 88 The exemption from liability for such negligence shall apply if the pilot is actually in charge and
solely in fault. Since, a pilot is responsible only for his own personal negligence, he cannot be held accountable for damages
proximately caused by the default of others, 89 or, if there be anything which concurred with the fault of the pilot in producing
the accident, the vessel master and owners are liable.
Since the colliding vessel is prima facie responsible, the burden of proof is upon the party claiming benefit of the exemption
from liability. It must be shown affirmatively that the pilot was at fault, and that there was no fault on the part of the officers or
crew, which might have been conducive to the damage. The fact that the law compelled the master to take the pilot does not
exonerate the vessel from liability. The parties who suffer are entitled to have their remedy against the vessel that occasioned
the damage, and are not under necessity to look to the pilot from whom redress is not always had for compensation. The
owners of the vessel are responsible to the injured party for the acts of the pilot, and they must be left to recover the amount
as well as they can against him. It cannot be maintained that the circumstance of having a pilot on board, and acting in
conformity to his directions operate as a discharge of responsibility of the owners. 90Except insofar as their liability is limited or
exempted by statute, the vessel or her owner are liable for all damages caused by the negligence or other wrongs of the
owners or those in charge of the vessel. Where the pilot of a vessel is not a compulsory one in the sense that the owner or
master of the vessel are bound to accept him, but is employed voluntarily, the owners of the vessel are, all the more, liable for
his negligent act. 91
In the United States, the owners of a vessel are not personally liable for the negligent acts of a compulsory pilot, but by
admiralty law, the fault or negligence of a compulsory pilot is imputable to the vessel and it may be held liable therefor in rem.
Where, however, by the provisions of the statute the pilot is compulsory only in the sense that his fee must be paid, and is not
in compulsory charge of the vessel, there is no exemption from liability. Even though the pilot is compulsory, if his negligence
was not the sole cause of the injury, but the negligence of the master or crew contributed thereto, the owners are liable. 92 But
the liability of the ship in rem does not release the pilot from the consequences of his own negligence. 93 The rationale for this
rule is that the master is not entirely absolved of responsibility with respect to navigation when a compulsory pilot is in
charge. 94
By way of validation and in light of the aforecited guidepost rulings in American maritime cases, we declare that our rulings
during the early years of this century in City of Manila vs. Gambe, 95 China Navigation Co., Ltd. vs. Vidal, 96 and Yap Tica & Co. vs.
Anderson, et al. 97 have withstood the proverbial test of time and remain good and relevant case law to this day.
City of Manila stands for the doctrine that the pilot who was in command and complete control of a vessel, and not the owners,
must be held responsible for an accident which was solely the result of the mistake of the pilot in not giving proper orders, and
which did not result from the failure of the owners to equip the vessel with the most modern and improved machinery.
In China Navigation Co., the pilot deviated from the ordinary and safe course, without heeding the warnings of the ship captain.
It was this careless deviation that caused the vessel to collide with a pinnacle rock which, though uncharted, was known to
pilots and local navigators. Obviously, the captain was blameless. It was the negligence of the pilot alone which was the
proximate cause of the collision. The Court could not but then rule that —
The pilot in the case at bar having deviated from the usual and ordinary course followed by navigators in passing
through the strait in question, without a substantial reason, was guilty of negligence, and that negligence having
been the proximate cause of the damages, he is liable for such damages as usually and naturally flow therefrom. . . .
. . . (T)he defendant should have known of the existence and location of the rock upon which the vessel struck while
under his control and management. . . . .
Consistent with the pronouncements in these two earlier cases, but on a slightly different tack, the Court in Yap Tico & Co.
exonerated the pilot from liability for the accident where the orders of the pilot in the handling of the ship were disregarded by
the officers and crew of the ship. According to the Court, a pilot is ". . . responsible for a full knowledge of the channel and the
navigation only so far as he can accomplish it through the officers and crew of the ship, and I don't see chat he can be held
responsible for damage when the evidence shows, as it does in this case, that the officers and crew of the ship failed to obey
his orders." Nonetheless, it is possible for a compulsory pilot and the master of the vessel to be concurrently negligent and thus
share the blame for the resulting damage as joint tortfeasors, 98 but only under the circumstances obtaining in and
demonstrated by the instant petitions.
It may be said, as a general rule, that negligence in order to render a person liable need not be the sole cause of an injury. It is
sufficient that his negligence, concurring with one or more efficient causes other than piaintiff's, is the proximate cause of the
injury. Accordingly, where several causes combine to produce injuries, a person is not relieved from liability because he is
responsible for only one of them, it being sufficient that the negligence of the person charged with injury is an efficient cause
without which the injury would not have resulted to as great an extent, and that such cause is not attributable to the person
injured. It is no defense to one of the concurrent tortfeasors that the injury would not have resulted from his negligence alone,
without the negligence or wrongful acts of the other concurrent rortfeasor. 99 Where several causes producing an injury are
concurrent and each is an efficient cause without which the injury would not have happened, the injury may be attributed to all
or any of the causes and recovery may be had against any or all of the responsible persons although under the circumstances of
the case, it may appear that one of them was more culpable, and that the duty owed by them to the injured person was not
the same. No actor's negligence ceases to be a proximate cause merely because it does not exceed the negligence of other
actors. Each wrongdoer is responsible for the entire result and is liable as though his acts were the sole cause of the injury. 100
There is no contribution between joint tortfeasors whose liability is solidary since both of them are liable for the total damage.
Where the concurrent or successive negligent acts or omissions of two or more persons, although acting independently, are in
combination the direct and proximate cause of a single injury to a third person, it is impossible to determine in what proportion
each contributed to the injury and either of them is responsible for the whole injury. Where their concurring negligence
resulted in injury or damage to a third party, they become joint tortfeasors and are solidarily liable for the resulting damage
under Article 2194 101 of the Civil Code. 102
As for the amount of damages awarded by the trial court, we find the same to be reasonable. The testimony of Mr. Pascual
Barral, witness for PPA, on cross and redirect examination, appears to be grounded on practical considerations:
Q So that the cost of the two additional piles as well as the (two) square meters is already included in this P1,300,999.77.
A Yes sir, everything. It is (the) final cost already.
Q For the eight piles.
A Including the reduced areas and other reductions.
Q (A)nd the two square meters.
279
A Yes sir.
Q In other words, this P1,300,999.77 does not represent only for the six piles that was damaged as well as the corresponding
two piles.
A The area was corresponding, was increased by almost two in the actual payment. That was why the contract was decreased,
the real amount was P1,124,627.40 and the final one is P1,300,999.77.
Q Yes, but that P1,300,999.77 included the additional two new posts.
A It was increased.
Q Why was it increased?
A The original was 48 and the actual was 46.
Q Now, the damage was somewhere in 1980. It took place in 1980 and you started the repair and reconstruction in 1982, that
took almost two years?
A Yes sir.
Q May it not happen that by natural factors, the existing damage in 1980 was aggravated for the 2 year period that the damage
portion was not repaired?
A I don't think so because that area was at once marked and no vehicles can park, it was closed.
Q Even if or even natural elements cannot affect the damage?
A Cannot, sir.
Q You said in the cross-examination that there were six piles damaged by the accident, but that in the reconstruction of the
pier, PPA drove and constructed 8 piles. Will you explain to us why there was change in the number of piles from the original
number?
A In piers where the piles are withdrawn or pulled out, you cannot re-drive or drive piles at the same point. You have to
redesign the driving of the piles. We cannot drive the piles at the same point where the piles are broken or damaged or pulled
out. We have to redesign, and you will note that in the reconstruction, we redesigned such that it necessitated 8 plies.
Q Why not, why could you not drive the same number of piles and on the same spot?
A The original location was already disturbed. We cannot get required bearing capacity. The area is already disturbed.
Q Nonetheless, if you drove the original number of piles, six, on different places, would not that have sustained the same load?
A It will not suffice, sir. 103
We quote the findings of the lower court with approval.
With regards to the amount of damages that is to be awarded to plaintiff, the Court finds that the
amount of P1,053,300.00 is justified. Firstly, the doctrine of res ipsa loquitur best expounded upon in the
landmark case of Republic vs. Luzon Stevedoring Corp. (21 SCRA 279) establishes the presumption that in
the ordinary course of events the ramming of the dock would not have occurred if proper care was used.
 Secondly, the various estimates and plans justify the cost of the port construction price. The new
structure constructed not only replaced the damaged one but was built of stronger materials to forestall
the possibility of any similar accidents in the future.
The Court inevitably finds that the plaintiff is entitled to an award of P1,053,300.00 which represents
actual damages caused by the damage to Berth 4 of the Manila International Port. Co-defendants Far
Eastern Shipping, Capt. Senen Gavino and Manila Pilots Association are solidariiy liable to pay this
amount to plaintiff. 104
The Solicitor General rightly commented that the adjudicated amount of damages represents the proportional cost
of repair and rehabilitation of the damaged section of the pier. 105
Except insofar as their liability is limited or exempted by statute, the vessel or her owners are liable for all damages caused by
the negligence or other wrongs of the owners or those in charge of the vessel. As a general rule, the owners or those in
possession and control of a vessel and the vessel are liable for all natural and proximate damages caused to persons or property
by reason of her negligent management or navigation. 106
FESC's imputation of PPA's failure to provide a safe and reliable berthing place is obtuse, not only because it appears to be a
mere afterthought, being tardily raised only in this petition, but also because there is no allegation or evidence on record about
Berth No. 4 being unsafe and unreliable, although perhaps it is a modest pier by international standards. There was, therefore,
no error on the part of the Court of Appeals in dismissing FESC's counterclaim.
II. G.R. No. 130150
This consolidated case treats on whether the Court of Appeals erred in holding MPA jointly and solidarily liable with its member
pilot. Capt. Gavino, in the absence of employer-employee relationship and in applying Customs Administrative Order No. 15-65,
as basis for the adjudged solidary liability of MPA and Capt. Gavino.
The pertinent provisions in Chapter I of Customs Administrative Order No. 15-65 are:
PAR. XXVII. — In all pilotage districts where pilotage is compulsory, there shall be created and maintained by the pilots or pilots'
association, in the manner hereinafter prescribed, a reserve fund equal to P1,000.00 for each pilot thereof for the purpose of
paying claims for damages to vessels or property caused through acts or omissions of its members while rendered in
compulsory pilotage service. In Manila, the reserve fund shall be P2,000.00 for each pilot.
PAR. XXVIII. — A pilots' association shall not be liable under these regulations for damage to any vessel, or other property,
resulting from acts of a member of an association in the actual performance of his duty for a greater amount than seventy-five
per centum (75%) of its prescribed reserve fund; it being understood that if the association is held liable for an amount greater
than the amount above-stated, the excess shall be paid by the personal funds of the member concerned.
PAR. XXXI. — If a payment is made from the reserve fund of an association on account of damages caused by a member
thereof, and he shall have been found at fault, such member shall reimburse the association in the amount so paid as soon as
practicable; and for this purpose, not less than twenty-five per centum of his dividends shall be retained each month until the
full amount has been returned to the reserve fund.
PAR. XXXIV. — Nothing in these regulations shall relieve any pilots' association or members thereof, individually or collectively,
from civil responsibility for damages to life or property resulting from the acts of members in the performance of their duties.
Correlatively, the relevant provisions of PPA Administrative Order No. 03-85, which timery amended this applicable maritime
regulation, state:
Art. IV
280
Sec. 17. Pilots' Association — The Pilots in a Pilotage District shall organize themselves into a Pilots' Association or firm, the
members of which shall promulgate their own By-Laws not in conflict with the rules and regulations promulgated by the
Authority. These By-Laws shall be submitted not later than one (1) month after the organization of the Pilots' Association for
approval by the General Manager of the Authority. Subsequent amendments thereto shall likewise be submitted for approval.
Sec. 25. Indemnity Insurance and Reserve Fund —
a) Each Pilots' Association shall collectively insure its membership at the rate of P50,000.00 each member to cover in whole or
in part any liability arising from any accident resulting in damage to vessel(s), port facilities and other properties and/or injury
to persons or death which any member may have caused in the course of his performance of pilotage duties. . . . .
b) The Pilotage Association shall likewise set up and maintain a reserve fund which shall answer for any part of the liability
referred to in the immediately preceding paragraph which is left unsatisfied by the insurance proceeds, in the following
manner:
1) Each pilot in the Association shall contribute from his own account an amount of P4,000.00 (P6,000.00 in the Manila Pilotage
District) to the reserve fund. This fund shall not be considered part of the capital of the Association nor charged as an expense
thereof.
2) Seventy-five percent (75 %) of the reserve fund shall be set aside for use in the payment of damages referred to above
incurred in the actual performance of pilots' duties and the excess shall be paid from the personal funds of the member
concerned.
5) If payment is made from the reserve fund of an Association on account of damage caused by a member thereof who is found
at fault, he shall reimburse the Association in the amount so paid as soon as practicable; and for this purpose, not less than
twenty-five percentum (25 %) of his dividend shall be retained each month until the full amount has been returned to the
reserve fund. Thereafter, the pilot involved shall be entitled to his full dividend.
6) When the reimbursement has been completed as prescribed in the preceding paragraph, the ten percentum (10%) and the
interest withheld from the shares of the other pilots in accordance with paragraph (4) hereof shall be returned to them.
c) Liability of Pilots' Association — Nothing in these regulations shall relieve any Pilots' Association or members thereof,
individually or collectively, from any civil, administrative and/or criminal responsibility for damages to life or property resulting
from the individual acts of its members as well as those of the Association's employees and crew in the performance of their
duties.
The Court of Appeals, while affirming the trial court's finding of solidary liability on the part of FESC, MPA and Capt. Gavino,
correctly based MPA' s liability not on the concept of employer-employee relationship between Capt. Gavino and itself, but on
the provisions of Customs Administrative Order No. 15-65:
The Appellant MPA avers that, contrary to the findings and disquisitions of the Court a quo, the Appellant
Gavino was not and has never been an employee of the MPA but was only a member thereof. The
Court a quo, it is noteworthy, did not state the factual basis on which it anchored its finding that Gavino
was the employee of MPA. We are in accord with MPA's pose. Case law teaches Us that, for an employer-
employee relationship to exist, the confluence of the following elements must be established: (1)
selection and engagement of employees; (2) the payment of wages; (3) the power of dismissal; (4) the
employer's power to control the employees with respect to the means and method by which the work is
to be performed (Ruga versus NLRC, 181 SCRA 266).
The liability of MPA for damages is not anchored on Article 2180 of the New Civil Code as erroneously
found and declared by the Court a quo but under the provisions of Customs Administrative Order No. 15-
65, supra, in tandem with the by-laws of the MPA. 107
There being no employer-employee relationship, clearly Article 2180 108 of the Civil Code is inapplicable since there is no only up to seventy-five per centum (75 %) of the reserve fund because in such instance it has the right to
vicarious liability of an employer to speak of. It is so stated in American law, as follows: be reimbursed by the offending member pilot for the excess. 113

The well established rule is that pilot associations are immune to vicarious liability for the tort of their
members. They are not the employer of their members and exercise no control over them once they take
the helm of the vessel. They are also not partnerships because the members do not function as agents
for the association or for each other. Pilots' associations are also not liable for negligently assuring the
competence of their members because as professional associations they made no guarantee of the
professional conduct of their members to the general public. 109
WHEREFORE, in view of all of the foregoing, the consolidated petitions for review are DENIED and the assailed decision of the
Court of Appeals is AFFIRMED in toto.
Counsel for FESC, the law firm of Del Rosario and Del Rosario, specifically its associate, Atty. Herbert A. Tria, is REPRIMANDED
and WARNED that a repetition of the same or similar acts of heedless disregard of its undertakings under the Rules shall be
dealt with more severely.

Where under local statutes and regulations, pilot associations lack the necessary legal incidents of responsibility, they have
been held not liable for damages caused by the default of a member pilot. 110 Whether or not the members of a pilots'
association are in legal effect a copartnership depends wholly on the powers and duties of the members in relation to one
another under the provisions of the governing statutes and regulations. The relation of a pilot to his association is not that of a
servant to the master, but of an associate assisting and participating in a common purpose. Ultimately, the rights and liabilities
between a pilots' association and an individual member depend largely upon the constitution, articles or by-laws of the
association, subject to appropriate government regulations. 111
The original members of the legal team of the Office of the Solicitor General assigned to this case, namely, Assistant Solicitor
General Roman G. Del Rosario and Solicitor Luis F. Simon, are ADMONISHED and WARNED that a repetition of the same or
similar acts of unduly delaying proceedings due to delayed filing of required pleadings shall also be dealt with more stringently.
The Solicitor Genral is DIRECTED to look into the circumstances of this case and to adopt provident measures to avoid a
repetition of this incident and which would ensure prompt compliance with orders of this Court regarding the timely filing of
requisite pleadings, in the interest of just, speedy and orderly administration of justice.

No reliance can be placed by MPA on the cited American rulings as to immunity from liability of a pilots' association in ljght of Let copies of this decision be spread upon the personal records of the lawyers named herein in the Office of the Bar Confidant.
existing positive regulation under Philippine law. The Court of Appeals properly applied the clear and unequivocal provisions of
Customs Administrative Order No. 15-65. In doing so, it was just being consistent with its finding of the non-existence of SO ORDERED.
employer-employee relationship between MPA and Capt. Gavino which precludes the application of Article 2180 of the Civil
FACTS:
Code.
M/V PAVLODAR, owned and operated by the Far Eastern Shipping Company (FESC), arrived at the Port of Manila and was
assigned Berth 4 of the Manila International Port, as its berthing space. Gavino, who was assigned by the Appellant Manila
True. Customs Administrative Order No. 15-65 does not categorically characterize or label MPA's liability as solidary in nature.
Pilots' Association to conduct the docking maneuvers for the safe berthing, boarded the vessel at the quarantine anchorage and
Nevertheless, a careful reading and proper analysis of the correlated provisions lead to the conclusion that MPA is solidarily
stationed himself in the bridge, with the master of the vessel, Victor Kavankov, beside him. After a briefing of Gavino by
liable for the negligence of its member pilots, without prejudice to subsequent reimbursement from the pilot at fault.
Kavankov of the particulars of the vessel and its cargo, the vessel lifted anchor from the quarantine anchorage and proceeded
to the Manila International Port. The sea was calm and the wind was ideal for docking maneuvers. When the vessel reached the
Art. 1207 of the Civil Code provides that there is solidary liability only when the obligation expressly so states, or when the law
landmark, one-half mile from the pier, Gavino ordered the engine stopped. When the vessel was already about 2,000 feet from
or the nature of the obligation requires solidarity. Plainly, Customs Administrative Order No. 15-65, which as an implementing
the pier, Gavino ordered the anchor dropped. Kavankov relayed the orders to the crew of the vessel on the bow. The left
rule has the force and effect of law, can validly provide for solidary liability.We note the Solicitor General's comment hereon, to
anchor, with two (2) shackles, were dropped. However, the anchor did not take hold as expected. The speed of the vessel did
wit:
not slacken. A commotion ensued between the crew members. After Gavino noticed that the anchor did not take hold, he
ordered the engines half-astern. Abellana, who was then on the pier apron, noticed that the vessel was approaching the pier
. . . Customs Administrative Order No. 15-65 may be a mere rule and regulation issued by an
fast. Kavankov likewise noticed that the anchor did not take hold. Gavino thereafter gave the "full-astern" code. Before the right
administrative agency pursuant to a delegated authority to fix "the details" in the execution or
anchor and additional shackles could be dropped, the bow of the vessel rammed into the apron of the pier causing
enforcement of a policy set out in the law itself. Nonetheless, said administrative order, which adds to the
considerable damage to the pier as well as the vessel.
procedural or enforcing provisions of substantive law, is legally binding and receives the same statutory
force upon going into effect. In that sense, it has equal, not lower, statutory force and effect as a regular
ISSUES:
statute passed by the legislature. 112
(1) Is the pilot of a commercial vessel, under compulsory pilotage, solely liable for the damage caused by the vessel to the pier,
at the port of destination, for his negligence?;
MPA's prayer for modification of the appellate court's decision under review by exculpating petitioner MPA "from liability
(2) Would the owner of the vessel be liable likewise if the damage is caused by the concurrent negligence of the master of the
beyond seventy-five percent (75 %) of Reserve Fund" is unnecessary because the liability of MPA under Par. XXVIII of Customs
vessel and the pilot under a compulsory pilotage?
Administrative Order No. 15-65 is in fact limited to seventy-five percent (75 %) of its prescribed reserve fund, any amount of
liability beyond that being for the personal account of the erring pilot and subject to reimbursement in case of a finding of fault
HELD:
by the member concerned. This is clarified by the Solicitor General:
(1) Generally speaking, the pilot supersedes the master for the time being in the command and navigation of the ship, and his
orders must be obeyed in all matters connected with her navigation. He becomes the master pro hac vice and should give all
Moreover, contrary to petitioner's pretensions, the provisions of Customs Administrative Order No. 15-65
directions as to speed, course, stopping and reversing anchoring, towing and the like. And when a licensed pilot is employed in
do not limit the liability of petitioner as a pilots' association to an absurdly small amount of seventy-five
a place where pilotage is compulsory, it is his duty to insist on having effective control of the vessel, or to decline to act as pilot.
per centum (75 %) of the member pilots' contribution of P2,000.00 to the reserve fund. The law speaks
Under certain systems of foreign law, the pilot does not take entire charge of the vessel, but is deemed merely the adviser of
of the entire reserve fund required to be maintained by the pilots' association to answer (for) whatever
the master, who retains command and control of the navigation even in localities where pilotage is compulsory. It is quite
liability arising from the tortious act of its members. And even if the association is held liable for an
common for states and localities to provide for compulsory pilotage, and safety laws have been enacted requiring vessels
amount greater than the reserve fund, the association may not resist the liability by claiming to be liable
approaching their ports, with certain exceptions, to take on board pilots duly licensed under local law. The purpose of these
281
laws is to create a body of seamen thoroughly acquainted with the harbor, to pilot vessels seeking to enter or depart, and thus
protect life and property from the dangers of navigation. Upon assuming such office as compulsory pilot, Capt. Gavino is held to
the universally accepted high standards of care and diligence required of a pilot, whereby he assumes to have skill and
knowledge in respect to navigation in the particular waters over which his license extends superior to and more to be trusted
than that of the master. He is not held to the highest possible degree of skill and care, but must have and exercise the ordinary
skill and care demanded by the circumstances, and usually shown by an expert in his profession. Under extraordinary
circumstances, a pilot must exercise extraordinary care. In this case, Capt. Gavino failed to measure up to such strict standard of
care and diligence required of pilots in the performance of their duties. As pilot, he should have made sure that his directions
were promptly and strictly followed.

(2) The negligence on the part of Capt. Gavino is evident; but Capt. Kabancov is no less responsible for the allision. The master
is still in command of the vessel notwithstanding the presence of a pilot. A perusal of Capt. Kabankov's testimony makes it
apparent that he was remiss in the discharge of his duties as master of the ship, leaving the entire docking procedure up to the
pilot, instead of maintaining watchful vigilance over this risky maneuver. The owners of a vessel are not personally liable for the
negligent acts of a compulsory pilot, but by admiralty law, the fault or negligence of a compulsory pilot is imputable to the
vessel and it may be held liable therefor in rem. Where, however, by the provisions of the statute the pilot is compulsory only in
the sense that his fee must be paid, and is not in compulsory charge of the vessel, there is no exemption from liability. Even
though the pilot is compulsory, if his negligence was not the sole cause of the injury, but the negligence of the master or crew
contributed thereto, the owners are liable. But the liability of the ship in rem does not release the pilot from the consequences
of his own negligence. The master is not entirely absolved of responsibility with respect to navigation when a compulsory pilot
is in charge. Except insofar as their liability is limited or exempted by statute, the vessel or her owners are liable for all damages
caused by the negligence or other wrongs of the owners or those in charge of the vessel. As a general rule, the owners or those
in possession and control of a vessel and the vessel are liable for all natural and proximate damages caused to persons or
property by reason of her negligent management or navigation.
FACTS:
USSR shipM/V PAVLODAR, owned and operated by the Far Eastern Shipping Company (FESC), arrived at the Port of
Manila from Vancouver. Captain Senen Gavino was assigned by the Manila Pilots' Association (MPA) to conduct docking
maneuvers for the safe berthing of the vessel. Gavino boarded the vessel and stationed himself in the bridge, with the master
of the vessel, Victor Kavankov, beside him. During the process, the bow of the vessel rammed into the apron of the pier causing
considerable damage to the pier. The vessel sustained damage too.
ISSUE:
Whether the master of the vessel be held liable in compulsory pilotage?
HELD:
While in exercising his functions, a pilot is in sole command of the ship and supersedes the master for the time being
in the command and navigation of the ship, the master does not surrender his vessel to the pilot and the pilot is not the master.
There are occasions when the master may and should interfere and even displace the pilot, as when the pilot is obviously
incompetent or intoxicated.
Based on Capt. Kavankov’s testimony, he never sensed any danger even when the anchor didn’t hold and they were
approaching the dock too fast. He blindly trusted the pilot. This is negligence on his part. He was right beside the pilot during
the docking, so he could see and hear everything that the pilot was seeing and hearing. The master’s negligence translates to
unseaworthiness of the vessel, and in turn means negligence on the part of FESC.

282
Caltex Phils. vs. Sulpicio Lines, Inc., 315 SCRA 709; 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
FIRST DIVISION
result, it rammed against MV Doña Paz in the open sea setting MT Vector's highly flammable cargo ablaze.
G.R. No. 131166 September 30, 1999
On September 15, 1992, the trial court rendered decision dismissing, the third party complaint against petitioner. The
dispositive portion reads:
CALTEX (PHILIPPINES), INC., petitioner,
vs.
WHEREFORE, judgment is hereby rendered in favor of plaintiffs and against defendant-3rd party plaintiff
SULPICIO LINES, INC., GO SIOC SO, ENRIQUE S. GO, EUSEBIO S. GO, CARLOS S. GO, VICTORIANO S. GO, DOMINADOR S. GO,
Sulpicio Lines, Inc., to wit:
RICARDO S. GO, EDWARD S. GO, ARTURO S. GO, EDGAR S. GO, EDMUND S. GO, FRANCISCO SORIANO, VECTOR SHIPPING
CORPORATION, TERESITA G. CAÑEZAL, AND SOTERA E. CAÑEZAL, respondents.
1. For the death of Sebastian E. Cañezal and his 11-year old daughter Corazon G. Cañezal, including loss
of future earnings of said Sebastian, moral and exemplary damages, attorney's fees, in the total amount
PARDO, J.:
of P 1,241,287.44 and finally;
Is the charterer of a sea vessel liable for damages resulting from a collision between the chartered vessel and a passenger ship?
2. The statutory costs of the proceedings.
When MT Vector left the port of Limay, Bataan, on December 19, 1987 carrying petroleum products of Caltex (Philippines), Inc.
Likewise, the 3rd party complaint is hereby DISMISSED for want of substantiation and with costs against
(hereinafter Caltex) no one could have guessed that it would collide with MV Doña Paz, killing almost all the passengers and
the 3rd party plaintiff.
crew members of both ships, and thus resulting in one of the country's worst maritime disasters.
IT IS SO ORDERED.
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 Doña Paz.
DONE IN MANILA, this 15th day of September 1992.
The facts are as follows:
On appeal to the Court of Appeals interposed by Sulpicio Lines, Inc., on April 15, 1997, the Court of Appeal modified the trial
court's ruling and included petitioner Caltex as one of the those liable for damages. Thus:
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
WHEREFORE, in view of all the foregoing, the judgment rendered by the Regional Trial Court is hereby
Vector Shipping Corporation, engaged in the business of transporting fuel products such as gasoline, kerosene, diesel and crude
MODIFIED as follows:
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
WHEREFORE, defendant Sulpicio Lines, Inc., is ordered to pay the heirs of Sebastian E. Cañezal and
them. 3
Corazon Cañezal:
On December 20, 1987, at about 6:30 a.m., the passenger ship MV Doña Paz left the port of Tacloban headed for Manila with a
1. Compensatory damages for the death of Sebastian E. Cañezal and Corazon Cañezal the total amount of
complement of 59 crew members including the master and his officers, and passengers totaling 1,493 as indicated in the Coast
ONE HUNDRED THOUSAND PESOS (P100,000);
Guard Clearance. 4 The MV Doña 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.
2. Compensatory damages representing the unearned income of Sebastian E. Cañezal, in the total
amount of THREE HUNDRED SIX THOUSAND FOUR HUNDRED EIGHTY (P306,480.00) PESOS;
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 Doña Paz died, while the two survivors from MT Vector
3. Moral damages in the amount of THREE HUNDRED THOUSAND PESOS (P300,000.00);
claimed that they were sleeping at the time of the incident.1âwphi1.nêt
4. Attorney's fees in the concept of actual damages in the amount of FIFTY THOUSAND PESOS
The MV Doña Paz carried an estimated 4,000 passengers; many indeed, were not in the passenger manifest. Only 24 survived
(P50,000.00);
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 Cañezal (47 years old) and his daughter Corazon Cañezal (11 years old), both
5. Costs of the suit.
unmanifested passengers but proved to be on board the vessel.
Third party defendants Vector Shipping Co. and Caltex (Phils.), Inc. are held equally liable under the third
On March 22, 1988, the board of marine inquiry in BMI Case No. 659-87 after investigation found that the MT Vector, its
party complaint to reimburse/indemnify defendant Sulpicio Lines, Inc. of the above-mentioned damages,
registered operator Francisco Soriano, and its owner and actual operator Vector Shipping Corporation, were at fault and
attorney's fees and costs which the latter is adjudged to pay plaintiffs, the same to be shared half by
responsible for its collision with MV Doña Paz. 6
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
On February 13, 1989, Teresita Cañezal and Sotera E. Cañezal, Sebastian Cañezal's wife and mother respectively, filed with the
vessel).
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
283
 SO ORDERED.
WE CONCUR:
RAMON U. MABUTAS, JR. PORTIA ALIÑO 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
ship's 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 portion of a vessel
of one or more persons, provided the charter is limited to the ship only, as in the case of a time-charter or the 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
284
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 . . .
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:
Art. 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
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 respondent's 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;
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 Vector's 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 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 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:
Art. 20. — Every person who contrary to law, willfully or negligently causes damage to another, shall indemnify the latter for the
same.
Art. 2176. — Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the
damage done. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is called a quasi-
delict and is governed by the provisions of this Chapter.
And what is negligence?
The Civil Code provides:
Art. 1173. The fault or negligence of the obligor consists in the omission of that diligence which is required by the nature of the
obligation and corresponds with the circumstances of the persons, of the time and of the place. When negligence shows bad
faith, the provisions of 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.
285
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, liability as
found by the Court of Appeals is without basis.1âwphi1.nêt
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 vessel's
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 carrier's 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 "VESSEL'S
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?
Apolinario 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
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. . . . 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. Ng's 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: . . .
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. Cañezal and Corazon Cañezal
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.1âwphi1.nêt
No costs in this instance.
SO ORDERED.
Lessons Applicable: Charter Party (Transportation)
FACTS:
286
December 19, 1987 8 pm: motor tanker MT Vector owned and operated by Vector Shipping Corporation carried 8,800 barrels of
petroleum products of Caltex by virtue of a charter contract
December 20, 1987 6:30 am: MV Doña Paz passenger and cargo vessel owned and operated by Sulpicio Lines, Inc. left the port
of Tacloban headed for Manila with 1,493 passengers indicated in the Coast Guard Clear
December 20, 1987: MT Vector collided with MV Doña Paz in the open sea within the vicinity of Dumali Point between
Marinduque and Oriental Mindoro, killing almost all the passengers and crew members of both ships except for 24 survivors
MV Doña Paz carried an estimated 4,000 passengers most were not in the passenger manifest 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 Doña Paz
February 13, 1989: Teresita Cañezal and Sotera E. Cañezal, Sebastian Cañezal’s wife and mother respectively, filed a complaint
for “Damages Arising from Breach of Contract of Carriage” against Sulpicio Lines, Inc. for the death of Sebastian E.
Cañezal (public school teacher 47 years old) and his 11-year old daughter Corazon G. Cañezal
Sulpicio, in turn, filed a 3rd party complaint against Francisco Soriano, Vector Shipping Corporation and Caltex
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
RTC: dismissed the third party complaint and favored the Cañezal's against Sulpicio Lines
CA: included Caltex as liable party
ISSUE: W/N Caltex as a voyage charterer of a sea vessel liable for damages resulting from a collision between the chartered
vessel and a passenger ship
HELD:
NO. Grants Petition. CA set aside 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:
bill of lading or equivalent shipping documents; or charter party or similar contract on the other
Caltex and Vector entered into a contract of affreightment, also known as a voyage charter charter party 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
Charter parties fall into three main categories:
(1) Demise or bareboat
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 common carrier becomes private contract of affreightment 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 may be either:
(2)time charter - wherein the leased vessel is leased to the charterer for a fixed period of time
(3) voyage charter - wherein the ship is leased for a single voyage 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 charterer is free from liability to third
persons in respect of the ship does not convert the common carrier into a private carrier
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;
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
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 nature of the obligation of Caltex demands ordinary diligence like any
other shipper in shipping his cargoes
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.
Caltex had the right to presume that the ship was seaworthy as even the Philippine Coast Guard itself was convinced of its
seaworthiness
Facts:
On December 20, 1987, motor tanker MV Vector, carrying petroleum products of Caltex, collided in the open sea with
passenger ship MV Doña Paz, causing the death of all but 25 of the latter’s passengers. Among those who died were Sebastian
Canezal and his daughter Corazon Canezal. On March 22, 1988, the board of marine inquiry found that Vector Shipping
Corporation was at fault. On February 13, 1989, Teresita Cañezal and Sotera E. Cañezal, Sebastian Cañezal’s wife and mother
respectively, filed with the Regional Trial Court of Manila a complaint for damages arising from breach of contract of carriage
against Sulpicio Lines. Sulpicio filed a third-party complaint against Vector and Caltex. The trial court dismissed the complaint
against Caltex, but the Court of Appeals included the same in the liability. Hence, Caltex filed this petition.
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. 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.
Third: Is Caltex liable for damages under the Civil Code?
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." The relationship
between the parties in this case is governed by special laws. Because of the implied warranty of seaworthiness, shippers of
goods, when transacting with common carriers, are not expected to inquire into the vessel’s 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. 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.

Issue: Is the charterer of a sea vessel liable for damages resulting from a collision between the chartered vessel and a passenger
ship?

Held:

First: The charterer has no liability for damages under Philippine Maritime laws.

Petitioner and Vector entered into a contract of affreightment, also known as a voyage charter.

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. 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 ship’s store, pay for the wages of the master of the crew, and defray the expenses for the maintenance of the ship. 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.

Second: MT Vector is a common carrier

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. It is 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. 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.

287
Planters Products vs. CA, 226 SCRA 478;
FIRST DIVISION
G.R. No. 101503 September 15, 1993
PLANTERS PRODUCTS, INC., petitioner,
vs.
COURT OF APPEALS, SORIAMONT STEAMSHIP AGENCIES AND KYOSEI KISEN KABUSHIKI KAISHA, respondents.
BELLOSILLO, J.:
Does a charter-party1 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
Charter2 was entered into between Mitsubishi as shipper/charterer and KKKK as shipowner, in Tokyo, Japan. 3 Riders 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 holds4 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
288
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
289
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 report to PPI was just an approximation or estimate made by them after the fertilizer was discharged from the vessel and
evidence showing that defendant carrier was not negligent in performing its obligations. Particularly, the segregated from the rest of the cargo.
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 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
nobody could open the same except in the presence of the owner of the cargo and the representatives of time at the harbor area while the cargo was being discharged according to the supply officer of PPI, who also testified that it
the vessel (TSN, 20 July 1977, p. 14); that the cover of the hatches was made of steel and it was overlaid was windy at the waterfront and along the shoreline where the dump trucks passed enroute to the consignee's warehouse.
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 Indeed, we agree with respondent carrier that bulk shipment of highly soluble goods like fertilizer carries with it the risk of loss
seals were found to be intact (TSN, 20 July 1977, pp. 15-16) (emphasis supplied). 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
The period during which private respondent was to observe the degree of diligence required of it as a public carrier began from goods which makes it highly vulnerable to deterioration; as well as the inadequacy of its packaging which further contributed to
the time the cargo was unconditionally placed in its charge after the vessel's holds were duly inspected and passed scrutiny by the loss. On the other hand, no proof was adduced by the petitioner showing that the carrier was remise in the exercise of due
the shipper, up to and until the vessel reached its destination and its hull was reexamined by the consignee, but prior to diligence in order to minimize the loss or damage to the goods it carried.
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 WHEREFORE, the petition is DISMISSED. The assailed decision of the Court of Appeals, which reversed the trial court,
done by the charterer, free from all risk and expense to the carrier. 35 Moreover, a shipowner is liable for damage to the cargo is AFFIRMED. Consequently, Civil Case No. 98623 of the then Court of the First Instance, now Regional Trial Court, of Manila
resulting from improper stowage only when the stowing is done by stevedores employed by him, and therefore under his should be, as it is hereby DISMISSED.
control and supervision, not when the same is done by the consignee or stevedores under the employ of the latter. 36
Costs against petitioner.
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 SO ORDERED.
also provides that all losses and deterioration which the goods may suffer during the transportation by reason of fortuitous
Lessons Applicable: Charter Party (Transportation)
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
FACTS:
the preceding causes if it is proved, as against him, that they arose through his negligence or by reason of his having failed to
June 16 1974: Mitsubishi International Corporation (Mitsubishi) of New York, U.S.A., 9,329.7069 M/T of Urea 46% fertilizer
take the precautions which usage has established among careful persons. 38
bought by Planters Products, Inc. (PPI) on aboard the cargo vessel M/V "Sun Plum" owned by private 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
Respondent carrier presented a witness who testified on the characteristics of the fertilizer shipped and the expected risks of
May 17 1974: a time charter-party on the vessel M/V "Sun Plum" pursuant to the Uniform General Charter was entered into
bulk shipping. Mr. Estanislao Chupungco, a chemical engineer working with Atlas Fertilizer, described Urea as a chemical
between Mitsubishi as shipper/charterer and KKKK as shipowner, in Tokyo, Japan
compound consisting mostly of ammonia and carbon monoxide compounds which are used as fertilizer. Urea also contains 46%
Before loading the fertilizer aboard the vessel, 4 of her holds were all presumably inspected by the charterer's representative
nitrogen and is highly soluble in water. However, during storage, nitrogen and ammonia do not normally evaporate even on a
and found fit
long voyage, provided that the temperature inside the hull does not exceed eighty (80) degrees centigrade. Mr. Chupungco
The hatches remained closed and tightly sealed throughout the entire voyage
further added that in unloading fertilizer in bulk with the use of a clamped shell, losses due to spillage during such operation
July 3, 1974: PPI unloaded the cargo from the holds into its steelbodied dump trucks which were parked alongside the berth,
amounting to one percent (1%) against the bill of lading is deemed "normal" or "tolerable." The primary cause of these
using metal scoops attached to the ship, pursuant to the terms and conditions of the charter-partly hatches remained open
spillages is the clamped shell which does not seal very tightly. Also, the wind tends to blow away some of the materials during
throughout the duration of the discharge Each time a dump truck was filled up, its load of Urea was covered with tarpaulin
the unloading process.
before it was transported to the consignee's warehouse located some 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 dissipation of quantities of fertilizer, or its daterioration in value, is caused either by an extremely high temperature in its
the purpose of ascertaining the net weight of the cargo.
place of storage, or when it comes in contact with water. When Urea is drenched in water, either fresh or saline, some of its
The port area was windy, certain portions of the route to the warehouse were sandy and the weather was variable, raining
particles dissolve. But the salvaged portion which is in liquid form still remains potent and usable although no longer saleable in
occasionally while the discharge was in progress.
its original market value.
Tarpaulins and GI sheets were placed in-between and alongside the trucks to contain spillages of the ferilizer
It took 11 days for PPI to unload the cargo
The probability of the cargo being damaged or getting mixed or contaminated with foreign particles was made greater by the
Cargo Superintendents Company Inc. (CSCI), private marine and cargo surveyor, was hired by PPI to determine the "outturn" of
fact that the fertilizer was transported in "bulk," thereby exposing it to the inimical effects of the elements and the grimy
the cargo shipped, by taking draft readings of the vessel prior to and after discharge shortage in the cargo of 106.726 M/T and
condition of the various pieces of equipment used in transporting and hauling it.
that a portion of the Urea fertilizer approximating 18 M/T was contaminated with dirt Certificate of Shortage/Damaged
Cargo prepared by PPI short of 94.839 M/T and about 23 M/T were rendered unfit for commerce, having been polluted with
The evidence of respondent carrier also showed that it was highly improbable for sea water to seep into the vessel's holds
sand, rust and dirt
during the voyage since the hull of the vessel was in good condition and her hatches were tightly closed and firmly sealed,
PPI sent a claim letter 1974 to Soriamont Steamship Agencies (SSA), the resident agent of the carrier, KKKK, for P245,969.31
making the M/V "Sun Plum" in all respects seaworthy to carry the cargo she was chartered for. If there was loss or
representing the cost of the alleged shortage in the goods shipped and the diminution in value of that portion said to have
contamination of the cargo, it was more likely to have occurred while the same was being transported from the ship to the
been contaminated with dirt
dump trucks and finally to the consignee's warehouse. This may be gleaned from the testimony of the marine and cargo
SSA: what they received was just a request for shortlanded certificate and not a formal claim, and that they "had nothing to do
surveyor of CSCI who supervised the unloading. He explained that the 18 M/T of alleged "bar order cargo" as contained in their
with the discharge of the shipment

290
RTC: failure to destroy the presumption of negligence against them, SSA are liable
CA: REVERSED - failed to prove the basis of its cause of action

ISSUE: W/N a time charter between a shipowner and a charterer transforms 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

HELD:
NO. petition is DISMISSED
When PPI 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 carrier has sufficiently overcome, by clear and convincing proof, the prima facie presumption of negligence.
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.
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
This is a risk the shipper or the owner of the goods has to face. Clearly, KKKK 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.

FACTS:
Prior to the voyage of M/V “Sun Plum”, a timecharter-party on the vessel was entered into between Mitsubishi
International Corporation (Mitsubishi) as shipper/charterer and Kyosei Kisen Kabushiki Kaisha (KKKK) as shipowner
for the transport of Urea fertilizers purchased in bulk by Planters Products, Inc. (PPI). KKKK is now being demanded
for 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.

ISSUE: Whether a common carrier becomes a private carrier by reason of a charter-party.

HELD:
By the terms of which the whole vessel is let to the charterer which transfers to him its entire command and
possession and consequential control over navigation, including the master and the crew who are his servants. The
charterer is treated as owner pro hac vice of the vessel. In such a case, a common carrier becomes a private carrier.
In case of loss, destruction or deterioration of the goods, common carriers are presumed to have beenat fault or to
have acted negligently, and the burden of proving otherwise rests on them. 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.

291
A. Magsaysay, Inc. vs. Agan, Jan. 31, 1955; Let us now see whether the expenses here in question could come within the legal concept of the general average. Tolentino, in
his commentaries on the Code of Commerce, gives the following requisites for general average:
EN BANC
First, there must be a common danger. This means, that both the ship and the cargo, after has been loaded, are
G.R. No. L-6393 January 31, 1955
subject to the same danger, whether during the voyage, or in the port of loading or unloading; that the danger
arises from the accidents of the sea, dispositions of the authority, or faults of men, provided that the circumstances
A. MAGSAYSAY INC., plaintiff-appellee,
producing the peril should be ascertained and imminent or may rationally be said to be certain and imminent. This
vs.
last requirement exclude measures undertaken against a distant peril.
ANASTACIO AGAN, defendant-appellant.
Second, that for the common safety part of the vessel or of the cargo or both is sacrificed deliberately.
REYES, A. J.:
Third, that from the expenses or damages caused follows the successful saving of the vessel and cargo.
The S S "San Antonio", vessel owned and operated by plaintiff, left Manila on October 6, 1949, bound for Basco, Batanes, vis
Aparri, Cagayan, with general cargo belonging to different shippers, among them the defendant. The vessel reached Aparri on
Fourth, that the expenses or damages should have been incurred or inflicted after taking proper legal steps and
the 10th of that month, and after a day's stopover in that port, weighed anchor to proceed to Basco. But while still in port, it
authority. (Vol. 1, 7th ed., p. 155.)
ran aground at the mouth of the Cagayan river, and, attempts to refloat it under its own power having failed, plaintiff have it
refloated by the Luzon Stevedoring Co. at an agreed compensation. Once afloat the vessel returned to Manila to refuel and
With respect to the first requisite, the evidence does not disclose that the expenses sought to be recovered from defendant
then proceeded to Basco, the port of destination. There the cargoes were delivered to their respective owners or consignees,
were incurred to save vessel and cargo from a common danger. The vessel ran aground in fine weather inside the port at the
who, with the exception of defendant, made a deposit or signed a bond to answer for their contribution to the average.
mouth of a river, a place described as "very shallow". It would thus appear that vessel and cargo were at the time in no
imminent danger or a danger which might "rationally be sought to be certain and imminent." It is, of course, conceivable that, if
On the theory that the expenses incurred in floating the vessel constitute general average to which both ship and cargo should
left indefinitely at the mercy of the elements, they would run the risk of being destroyed. But as stated at the above quotation,
contribute, plaintiff brought the present action in the Court of First Instance of Manila to make defendant pay his contribution,
"this last requirement excludes measures undertaken against a distant peril." It is the deliverance from an immediate,
which, as determined by the average adjuster, amounts to P841.40. Defendant, in his answer, denies liability to his amount,
impending peril, by a common sacrifice, that constitutes the essence of general average. (The Columbian Insurance Company of
alleging, among other things, that the stranding of the vessel was due to the fault, negligence and lack of skill of its master, that
Alexandria vs. Ashby & Stribling et al., 13 Peters 331; 10 L. Ed., 186). In the present case there is no proof that the vessel had to
the expenses incurred in putting it afloat did not constitute general average, and that the liquidation of the average was not
be put afloat to save it from imminent danger. What does appear from the testimony of plaintiff's manager is that the vessel
made in accordance with law. After trial, the lower court found for plaintiff and rendered judgment against the defendant for
had to be salvaged in order to enable it "to proceed to its port of destination." But as was said in the case just cited it is the
the amount of the claim, with legal interests. From this judgment defendant had appealed directly to this Court.
safety of the property, and not of the voyage, which constitutes the true foundation of the general average.
Although appellant assigns various errors, under our view of the case only the following need be considered:
As to the second requisite, we need only repeat that the expenses in question were not incurred for the common safety of
vessel and cargo, since they, or at least the cargo, were not in imminent peril. The cargo could, without need of expensive
The trial court erred in allowing the general average for floating a vessel unintentionally stranded inside a port and
salvage operation, have been unloaded by the owners if they had been required to do so.
at the mouth of a river during a fine weather.
With respect to the third requisite, the salvage operation, it is true, was a success. But as the sacrifice was for the benefit of the
For the purposes of this assignment of error we may well accept the finding below that the stranding of plaintiff's vessel was
vessel — to enable it to proceed to destination — and not for the purpose of saving the cargo, the cargo owners are not in law
due to the sudden shifting of the sandbars at the mouth of the river which the port pilot did not anticipate. The standing may,
bound to contribute to the expenses.
therefore, be regarded as accidental, and the question is whether the expenses incurred in floating a vessel so stranded should
be considered general average and shared by the cargo owners.
The final requisite has not been proved, for it does not appear that the expenses here in question were incurred after following
the procedure laid down in article 813 et seq.
The law on averages is contained in the Code of Commerce. Under that law, averages are classified into simple or particular and
general or gross. Generally speaking, simple or particular averages include all expenses and damages caused to the vessel or
In conclusion we found that plaintiff not made out a case for general average, with the result that its claim for contribution
cargo which have not inured to the common benefit (Art. 809), and are, therefore, to be borne only by the owner of the
against the defendant cannot be granted.
property gave rise to same (Art. 810); while general or gross averages include "all the damages and expenses which are
deliberately caused in order to save the vessel, its cargo, or both at the same time, from a real and known risk" (Art. 811). Being
Wherefore, the decision appealed from is reversed and plaintiff's complaint ordered dismissed with costs.
for the common benefit, gross averages are to be borne by the owners of the articles saved (Art. 812).
Facts: The S S “San Antonio” vessel (plaintiff) with general cargo for different ship owners left Manila and was bound for Basco,
In classifying averages into simple o particular and general or gross and defining each class, the Code (Art. 809 and 811) at the
same time enumerates certain specific cases as coming specially under one or the other denomination. Going over the specific Batanes, vis Aparri, Cagayan. It reached Aparri, had a stopover, and as it would proceed to Basco but still in port, it accidentally
cases enumerated we find that, while the expenses incurred in putting plaintiff's vessel afloat may well come under number 2
of article 809-which refers to expenses suffered by the vessel "by reason of an accident of the sea of the force majuere" — and ran aground at the mouth of the Cagayan River. Plaintiff have it refloated by the Luzon Stevedoring Co.. The vessel returned to
should therefore be classified as particular average, the said expenses do not fit into any of the specific cases of general average Manila to refuel and then proceeded to Basco, where the cargoes were delivered to their respective owners or consignees,
enumerated in article 811. No. 6 of this article does mention "expenses caused in order to float a vessel," but it specifically
refers to "a vessel intentionally stranded for the purpose of saving it" and would have no application where, as in the present who, with the exception of defendant, made a deposit or signed a bond to answer for their contribution to the average. Thus,
case, the stranding was not intentional.
292
the plaintiff brought an action to make defendant pay his contribution. Defendant denies liability. The lower court decided
against the defendant, thus the appeal.

Issue: Whether the expenses incurred in floating a vessel so stranded should be considered general average and shared by the
cargo owners.
Held: The expenses should not be considered as general average.

The said expenses do not fit into any of the specific cases of general average enumerated in article 811. No. 6 of this article
does mention “expenses caused in order to float a vessel,” but it specifically refers to “a vessel intentionally stranded for the
purpose of saving it.” In the present case, the stranding was not intentional.

The expenses also lack the requisites of general average. First, the expenses sought to be recovered from defendant were not
incurred to save vessel and cargo from a common danger. The vessel ran aground in fine weather inside the port at the mouth
of a river, a place described as “very shallow”. There was no imminent danger. It is, of course, conceivable that, if left
indefinitely at the mercy of the elements, they would run the risk of being destroyed. But as stated at the above quotation,
“this last requirement excludes measures undertaken against a distant peril.” What does appear from the testimony of
plaintiff’s manager is that the vessel had to be salvaged in order to enable it “to proceed to its port of destination.” But as was
said in the case just cited it is the safety of the property, and not of the voyage, which constitutes the true foundation of the
general average. Second, the cargo could, without need of expensive salvage operation, have been unloaded by the owners if
they had been required to do so. Third, the sacrifice was for the benefit of the vessel and not for the purpose of saving the
cargo, the cargo owners are not in law bound to contribute to the expenses. And fourth, the procedure was not followed.

Transportation – General Averages – Stranding of a Vessel

In 1949, SS San Antonio, owned by AMInc, embarked on its voyage to Batanes via Aparri. It was carrying various cargoes, one of
which was owned by Agan. One fine weather day, it accidentally ran aground the mouth of the Cagayan River due to the
sudden shifting of the sands below. SS San Antonio then needed the services of Luzon Stevedoring Co. to tow the ship and
make it afloat so that it can continue its journey. Later, AMInc required the cargo owners to pay the expenses incurred in
making the ship afloat (P841.40 each). The expenses, AMInc claims, fall under the General Averages Rule under the Code of
Commerce, which is to be shared by ship owner and cargo owners as well.
ISSUE: Whether or not general averages exist in the case at bar.
HELD: No. General averages contemplate that the stranding of the vessel is intentionally done in order to save the vessel itself
from a certain and imminent danger. Here, the stranding was accidental and it was made afloat for the purpose of saving the
voyage and not the vessel. Note that this happened on a fine weather day. Also, it cannot be said that the towing was made to
save the cargos, for the cargos were not in danger imminent danger.

293
American Home Assurance vs. CA, May 5, 1992; On the other hand, petitioner countered that Article 848 does not apply as it refers to averages and that a particular average
presupposes that the loss or damages is due to an inherent defect of the goods, an accident of the sea, or a force majeure or
SECOND DIVISION
the negligence of the crew of the carrier, while claims for damages due to the negligence of the common carrier are governed
by the Civil Code provisions on Common Carriers.
G.R. No. 94149 May 5, 1992
In its order dated November 23, 1989, the Regional Trial Court sustained private respondent's contention. In part it stated:
AMERICAN HOME ASSURANCE, COMPANY, petitioner,
vs.
Before the Court for resolution is a motion for reconsideration filed by defendant through counsel dated October 6, 1989.
THE COURT OF APPEALS and NATIONAL MARINE CORPORATION and/or NATIONAL MARINE CORPORATION
(Manila), respondents.
The record shows that last August 8, 1989, defendant through counsel filed a motion to dismiss plaintiff's complaint.
PARAS, J.:
Resolving the said motion last September 18, 1989, the court ruled to defer resolution thereof until after trial on the merits. In
1 the motion now under consideration, defendant prays for the reconsideration of the order of September 18, 1989 and in lieu
This is a petition for review on certiorari which seeks to annul and set aside the (a) decision dated May 30, 1990 of the Court
thereof, another order be entered dismissing plaintiff's complaint.
of Appeals in C.A. G.R. SP. No. 20043 entitled "American Home Assurance Company v. Hon. Domingo D. Panis, Judge of the
Regional Trial Court of Manila, Branch 41 and National Marine Corporation and/or National Marine Corporation (Manila)",
There appears to be good reasons for the court to take a second look at the issues raised by the defendant.
dismissing petitioner's petition for certiorari, and (b) resolution 2 dated June 29, 1990 of the Court of Appeals denying
petitioner's motion for reconsideration.
It is not disputed defendants that the loss suffered by the shipment is only .18% or less that 1% of the interest of the consignee
on the cargo Invoking the provision of the Article 848 of the Code of Commerce which reads:
The undisputed facts of the case are follows:
Claims for average shall not be admitted if they do not exceed five percent of the interest which the claimant may have in the
Both petitioner American Home Assurance Co. and the respondent National Marine Corporation are foreign corporations
vessels or cargo if it is gross average, and one percent of the goods damaged if particular average, deducting in both cases the
licensed to do business in the Philippines, the former through its branch. The American Home Assurance Company
expenses of appraisal, unless there is an agreement to the contrary. (Emphasis supplied)
(Philippines), Inc. and the latter through its branch. The National Marine Corporation (Manila) (Rollo, p. 20, Annex L, p.1).
defendant claims that plaintiff is barred from suing for recovery.
That on or about June 19, 1988, Cheng Hwa Pulp Corporation shipped 5,000 bales (1,000 ADMT) of bleached kraft pulp from
Haulien, Taiwan on board "SS Kaunlaran", which is owned and operated by herein respondent National Marine Corporation
Decisive in this case in whether the loss suffered by the cargo in question is a "particular average."
with Registration No. PID-224. The said shipment was consigned to Mayleen Paper, Inc. of Manila, which insured the shipment
with herein petitioner American Home Assurance Co. as evidenced by Bill of Lading No. HLMN-01.
Particular average, is a loss happening to the ship, freight, or cargo which is not be (sic) shared by contributing among all those
interested, but must be borne by the owner of the subject to which it occurs. (Black's Law Dictionary, Revised Fourth Edition, p.
On June 22, 1988, the shipment arrived in Manila and was discharged into the custody of the Marina Port Services, Inc., for
172, citing Bargett v. Insurance Co. 3 Bosw. [N.Y.] 395).
eventual delivery to the consignee-assured. However, upon delivery of the shipment to Mayleen Paper, Inc., it was found that
122 bales had either been damaged or lost. The loss was calculated to be 4,360 kilograms with an estimated value of
as distinguished from general average which
P61,263.41.
is a contribution by the several interests engaged in the maritime venture to make good the loss of one of them for the
Mayleen Paper, Inc. then duly demanded indemnification from respondent National Marine Corporation for the aforesaid
voluntary sacrifice of a part of the ship or cargo to save the residue of the property and the lives of those on board, or for
damages/losses in the shipment but, for apparently no justifiable reason, said demand was not heeded (Petition, p. 4).
extraordinary expenses necessarily incurred for the common benefit and safety of all (Ibid., citing California Canneries Co. v.
Canton Ins. Office 25 Cal. App. 303, 143 p. 549-553).
As the shipment was insured with petitioner in the amount of US$837,500.00, Mayleen Paper, Inc. sought recovery from the
former. Upon demand and submission of proper documentation, American Home Assurance paid Mayleen Paper, Inc. the
From the foregoing definition, it is clear that the damage on the cargo in question, is in the nature of the "particular average."
adjusted amount of P31,506.75 for the damages/losses suffered by the shipment, hence, the former was subrogated to the
Since the loss is less than 1% to the value of the cargo and there appears to be no allegations as to any agreement defendants
rights and interests on Mayleen Paper, Inc.
and the consignee of the goods to the contrary, by express provision of the law, plaintiff is barred from suing for recovery.
On June 6, 1989, the petitioner, as subrogee, then brought suit against respondent for the recovery of the amount of
WHEREOF, plaintiff's complaint is hereby dismissed for lack of cause of action. (Rollo, p. 27; Annex A, pp. 3-4).
P31.506.75 and 25% of the total amount due as attorney's fees, by filing a complaint for recovery of sum of money (Petition, p.
4).
The petitioner then filed a motion for reconsideration of the order of dismissal but same was denied by the court in its order
dated January 26, 1990 (supra).
Respondent, National Marine Corporation, filed a motion to dismiss dated August 7, 1989 stating that American Home
Assurance Company had no cause of action based on Article 848 of the Code of Commerce which provides "that claims for
Instead of filing an appeal from the order of the court a quo dismissing the complaint for recovery of a sum of money, American
averages shall not be admitted if they do not exceed 5% of the interest which the claimant may have in the vessel or in the
Home Assurance Company filed a petition for certiorari with the Court of Appeals to set aside the two orders or respondent
cargo if it be gross average and 1% of the goods damaged if particular average, deducting in both cases the expenses of
judge in said court (Rollo, p. 25).
appraisal, unless there is an agreement to the contrary." It contended that based on the allegations of the complaint, the loss
sustained in the case was P35,506.75 which is only .18% of P17,420,000.00, the total value of the cargo.
294
But the Court of Appeals in its decision dated May 30, 1990, dismissed the petition as constituting plain errors of law and not
grave abuse of discretion correctible by certiorari (a Special Civil Action). If at all, respondent court ruled that there are errors of
judgment subject to correction by certiorari as a mode of appeal but the appeal is to the Supreme Court under Section 17 of
the Judiciary Act of 1948 as amended by Republic Act No. 5440. Otherwise stated, respondent Court opined that the proper
remedy is a petition for review on certiorari with the Supreme Court on pure questions of law (Rollo, p. 30).
Hence, this petition.
In a resolution dated December 10, 1990, this Court gave due course to the petition and required both parties to file their
respective memoranda (Rollo, p. 58).
The procedural issue in this case is whether or not certiorari was the proper remedy in the case before the Court of Appeals.
The Court of Appeals ruled that appeal is the proper remedy, for aside from the fact that the two orders dismissing the
complaint for lack of cause of action are final orders within the meaning of Rule 41, Section 2 of the Rules of Court, subject
petition raised questions which if at all, constituting grave abuse of discretion correctible by certiorari.
Evidently, the Court of Appeals did not err in dismissing the petition for certiorari for as ruled by this Court, an order of
dismissal whether right or wrong is a final order, hence, a proper subject of appeal, not certiorari (Marahay v. Melicor, 181 SCRA
811 (1990]). However, where the fact remains that respondent Court of Appeals obviously in the broader interests of justice,
nevertheless proceeded to decide the petition for certiorari and ruled on specific points raised therein in a manner akin to what
would have been done on assignments of error in a regular appeal, the petition therein was therefore disposed of on the merits
and not on a dismissal due to erroneous choice of remedies or technicalities (Cruz v. I.A.C., 169 SCRA 14 (1989]). Hence, a
review of the decision of the Court of Appeals on the merits against the petitioner in this case is in order.
On the main controversy, the pivotal issue to be resolved is the application of the law on averages (Articles 806, 809 and 848 of
the Code of Commerce).
Petitioner avers that respondent court failed to consider that respondent National Marine Corporation being a common carrier,
in conducting its business is regulated by the Civil Code primarily and suppletorily by the Code of Commerce; and that
respondent court refused to consider the Bill of Lading as the law governing the parties.
Private respondent countered that in all matters not covered by the Civil Code, the rights and obligations of the parties shall be
governed by the Code of Commerce and by special laws as provided for in Article 1766 of the Civil Code; that Article 806, 809
and 848 of the Code of Commerce should be applied suppletorily as they provide for the extent of the common carriers'
liability.
This issue has been resolved by this Court in National Development Co. v. C.A. (164 SCRA 593 [1988]; citing Eastern Shipping
Lines, Inc. v. I.A.C., 150 SCRA 469, 470 [1987] where it was held that "the law of the country to which the goods are to be
transported persons the liability of the common carrier in case of their loss, destruction or deterioration." (Article 1753, Civil
Code). Thus, for cargoes transported to the Philippines as in the case at bar, the liability of the carrier is governed primarily by
the Civil Code and in all matters not regulated by said Code, the rights and obligations of common carrier shall be governed by
the Code of Commerce and by special laws (Article 1766, Civil Code).
Corollary thereto, the Court held further that under Article 1733 of the Civil Code, 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 passengers transported by them according to all circumstances of each case. Thus, under Article 1735 of the same
Code, in all cases other than those mentioned in Article 1734 thereof, the common carrier shall be presumed to have been at
fault or to have acted negligently, unless it proves that it has observed the extraordinary diligence required by law (Ibid., p.
595).
295
But more importantly, the Court ruled that common carriers cannot limit their liability for injury or loss of goods where such
injury or loss was caused by its own negligence. Otherwise stated, the law on averages under the Code of Commerce cannot be
applied in determining liability where there is negligence (Ibid., p. 606).
Under the foregoing principle and in line with the Civil Code's mandatory requirement of extraordinary diligence on common
carriers in the car care of goods placed in their stead, it is but reasonable to conclude that the issue of negligence must first be
addressed before the proper provisions of the Code of Commerce on the extent of liability may be applied.
The records show that upon delivery of the shipment in question of Mayleen's warehouse in Manila, 122 bales were found to
be damaged/lost with straps cut or loose, calculated by the so-called "percentage method" at 4,360 kilograms and amounting
to P61,263.41 (Rollo, p. 68). Instead of presenting proof of the exercise of extraordinary diligence as required by law, National
Marine Corporation (NMC) filed its Motion to Dismiss dated August 7, 1989, hypothetically admitting the truth of the facts
alleged in the complaint to the effect that the loss or damage to the 122 bales was due to the negligence or fault of NMC (Rollo,
p. 179). As ruled by this Court, the filing of a motion to dismiss on the ground of lack of cause of action carries with it the
admission of the material facts pleaded in the complaint (Sunbeam Convenience Foods, Inc. v. C.A., 181 SCRA 443 [1990]). Such
being the case, it is evident that the Code of Commerce provisions on averages cannot apply.
On the other hand, Article 1734 of the Civil Code provides that common carriers are responsible for loss, destruction or
deterioration of the goods, unless due to any of the causes enumerated therein. It is obvious that the case at bar does not fall
under any of the exceptions. Thus, American Home Assurance Company is entitled to reimbursement of what it paid to
Mayleen Paper, Inc. as insurer.
Accordingly, it is evident that the findings of respondent Court of Appeals, affirming the findings and conclusions of the court a
quo are not supported by law and jurisprudence.
PREMISES CONSIDERED, (1) the decisions of both the Court of Appeals and the Regional Trial Court of Manila, Branch 41,
appealed from are REVERSED; and (2) private respondent National Marine Corporation is hereby ordered to reimburse the
subrogee, petitioner American Home Assurance Company, the amount of P31,506.75.
SO ORDERED.
208 SCRA 343 – Civil Law – Transportation – Civil Code vs Code of Commerce (which is to be applied in the presence of
negligence in cases of lost of goods)
Mayleen Paper, Inc. contracted the services of the National Marine Corporation (NMC) to transport 5,000 bales of paper from
Taiwan to the Philippines. Upon arrival in Manila, it was discovered that 122 bales were lost. Mayleen demanded payment of
losses from NMC but NMC did not respond. As the papers were insured by the American Home Assurance Company (AHAC),
Mayleen recovered insurance from AHAC which AHAC promptly paid. AHAC then filed suit for recovery against NMC. NMC filed
a motion to dismiss claiming lack of cause of action on the part of AHAC. NMC argued that under the Code of Commerce,
claims for general averages cannot be granted if the claim does not exceed 5% of the total value of the cargo. Accordingly, 122
bales is just amounting to 0.18% worth of damage. AHAC argued that the Code of Commerce is not applicable but rather it is
the Civil Code.
ISSUE: Whether or not the applicable rule is the Code of Commerce.
HELD: No. In the Philippines, the liability of the carrier is governed primarily by the Civil Code and in all matters not regulated
by said Code, the rights and obligations of common carrier shall be governed by the Code of Commerce and by special laws.
Liability here is present due to NMC’s negligence which it hypothetically admitted when it filed a Motion to Dismiss due to lack
of cause action before the lower court. Thus, American Home Assurance Company is entitled to reimbursement of what it paid
to Mayleen Paper, Inc. as insurer.
National Development Company vs. Ca, Aug. 19, 1988; 3}. Also considered totally lost were the aforesaid shipment of Kyokuto, Boekui Kaisa Ltd., consigned to
the order of Manila Banking Corporation, Manila, acting for Guilcon, Manila, The total loss was
SECOND DIVISION
P19,938.00 which the plaintiff as insurer paid to Guilcon as holder of the duly endorsed bill of lading
(Exhibits M-1 and S-3). Thus, the plaintiff had paid as insurer the total amount of P364,915.86 to the
G.R. No. L-49407 August 19, 1988
consignees or their successors-in-interest, for the said lost or damaged cargoes. Hence, plaintiff filed this
complaint to recover said amount from the defendants-NDC and MCP as owner and ship agent
NATIONAL DEVELOPMENT COMPANY, petitioner-appellant,
respectively, of the said 'Dofia Nati' vessel. (Rollo, L-49469, p.38)
vs.
THE COURT OF APPEALS and DEVELOPMENT INSURANCE & SURETY CORPORATION, respondents-appellees.
On April 22, 1965, the Development Insurance and Surety Corporation filed before the then Court of First Instance of Manila an
action for the recovery of the sum of P364,915.86 plus attorney's fees of P10,000.00 against NDC and MCP (Record on Appeal),
PARAS, J.:
pp. 1-6).
These are appeals by certiorari from the decision * of the Court of Appeals in CA G.R. No: L- 46513-R entitled "Development
Interposing the defense that the complaint states no cause of action and even if it does, the action has prescribed, MCP filed on
Insurance and Surety Corporation plaintiff-appellee vs. Maritime Company of the Philippines and National Development
May 12, 1965 a motion to dismiss (Record on Appeal, pp. 7-14). DISC filed an Opposition on May 21, 1965 to which MCP filed a
Company defendant-appellants," affirming in toto the decision ** in Civil Case No. 60641 of the then Court of First Instance of
reply on May 27, 1965 (Record on Appeal, pp. 14-24). On June 29, 1965, the trial court deferred the resolution of the motion to
Manila, Sixth Judicial District, the dispositive portion of which reads:
dismiss till after the trial on the merits (Record on Appeal, p. 32). On June 8, 1965, MCP filed its answer with counterclaim and
cross-claim against NDC.
WHEREFORE, judgment is hereby rendered ordering the defendants National Development Company and
Maritime Company of the Philippines, to pay jointly and severally, to the plaintiff Development Insurance
NDC, for its part, filed its answer to DISC's complaint on May 27, 1965 (Record on Appeal, pp. 22-24). It also filed an answer to
and Surety Corp., the sum of THREE HUNDRED SIXTY FOUR THOUSAND AND NINE HUNDRED FIFTEEN
MCP's cross-claim on July 16, 1965 (Record on Appeal, pp. 39-40). However, on October 16, 1965, NDC's answer to DISC's
PESOS AND EIGHTY SIX CENTAVOS (364,915.86) with the legal interest thereon from the filing of plaintiffs
complaint was stricken off from the record for its failure to answer DISC's written interrogatories and to comply with the trial
complaint on April 22, 1965 until fully paid, plus TEN THOUSAND PESOS (Pl0,000.00) by way of damages
court's order dated August 14, 1965 allowing the inspection or photographing of the memorandum of agreement it executed
as and for attorney's fee.
with MCP. Said order of October 16, 1965 likewise declared NDC in default (Record on Appeal, p. 44). On August 31, 1966, NDC
filed a motion to set aside the order of October 16, 1965, but the trial court denied it in its order dated September 21, 1966.
On defendant Maritime Company of the Philippines' cross-claim against the defendant National
Development Company, judgment is hereby rendered, ordering the National Development Company to
On November 12, 1969, after DISC and MCP presented their respective evidence, the trial court rendered a decision ordering
pay the cross-claimant Maritime Company of the Philippines the total amount that the Maritime
the defendants MCP and NDC to pay jointly and solidarity to DISC the sum of P364,915.86 plus the legal rate of interest to be
Company of the Philippines may voluntarily or by compliance to a writ of execution pay to the plaintiff
computed from the filing of the complaint on April 22, 1965, until fully paid and attorney's fees of P10,000.00. Likewise, in said
pursuant to the judgment rendered in this case.
decision, the trial court granted MCP's crossclaim against NDC.
With costs against the defendant Maritime Company of the Philippines.
MCP interposed its appeal on December 20, 1969, while NDC filed its appeal on February 17, 1970 after its motion to set aside
the decision was denied by the trial court in its order dated February 13,1970.
(pp. 34-35, Rollo, GR No. L-49469)
On November 17,1978, the Court of Appeals promulgated its decision affirming in toto the decision of the trial court.
The facts of these cases as found by the Court of Appeals, are as follows:
Hence these appeals by certiorari.
The evidence before us shows that in accordance with a memorandum agreement entered into between
defendants NDC and MCP on September 13, 1962, defendant NDC as the first preferred mortgagee of
NDC's appeal was docketed as G.R. No. 49407, while that of MCP was docketed as G.R. No. 49469. On July 25,1979, this Court
three ocean going vessels including one with the name 'Dona Nati' appointed defendant MCP as its agent
ordered the consolidation of the above cases (Rollo, p. 103). On August 27,1979, these consolidated cases were given due
to manage and operate said vessel for and in its behalf and account (Exh. A). Thus, on February 28, 1964
course (Rollo, p. 108) and submitted for decision on February 29, 1980 (Rollo, p. 136).
the E. Philipp Corporation of New York loaded on board the vessel "Dona Nati" at San Francisco,
California, a total of 1,200 bales of American raw cotton consigned to the order of Manila Banking
In its brief, NDC cited the following assignments of error:
Corporation, Manila and the People's Bank and Trust Company acting for and in behalf of the Pan Asiatic
Commercial Company, Inc., who represents Riverside Mills Corporation (Exhs. K-2 to K7-A & L-2 to L-7-A).
I
Also loaded on the same vessel at Tokyo, Japan, were the cargo of Kyokuto Boekui, Kaisa, Ltd., consigned
to the order of Manila Banking Corporation consisting of 200 cartons of sodium lauryl sulfate and 10
THE COURT OF APPEALS ERRED IN APPLYING ARTICLE 827 OF THE CODE OF COMMERCE AND NOT SECTION 4(2a) OF
cases of aluminum foil (Exhs. M & M-1). En route to Manila the vessel Dofia Nati figured in a collision at
COMMONWEALTH ACT NO. 65, OTHERWISE KNOWN AS THE CARRIAGE OF GOODS BY SEA ACT IN DETERMINING THE LIABILITY
6:04 a.m. on April 15, 1964 at Ise Bay, Japan with a Japanese vessel 'SS Yasushima Maru' as a result of
FOR LOSS OF CARGOES RESULTING FROM THE COLLISION OF ITS VESSEL "DONA NATI" WITH THE YASUSHIMA
which 550 bales of aforesaid cargo of American raw cotton were lost and/or destroyed, of which 535
MARU"OCCURRED AT ISE BAY, JAPAN OR OUTSIDE THE TERRITORIAL JURISDICTION OF THE PHILIPPINES.
bales as damaged were landed and sold on the authority of the General Average Surveyor for Yen 6,045,-
500 and 15 bales were not landed and deemed lost (Exh. G). The damaged and lost cargoes was worth
II
P344,977.86 which amount, the plaintiff as insurer, paid to the Riverside Mills Corporation as holder of
the negotiable bills of lading duly endorsed (Exhs. L-7-A, K-8-A, K-2-A, K-3-A, K-4-A, K-5-A, A- 2, N-3 and R-
296
THE COURT OF APPEALS ERRED IN NOT DISMISSING THE C0MPLAINT FOR REIMBURSEMENT FILED BY THE INSURER, HEREIN
PRIVATE RESPONDENT-APPELLEE, AGAINST THE CARRIER, HEREIN PETITIONER-APPELLANT. (pp. 1-2, Brief for Petitioner-
Appellant National Development Company; p. 96, Rollo).
On its part, MCP assigned the following alleged errors:
I were ordered to reimburse the insurance company for the amount the latter paid to the consignee as earlier stated.
THE RESPONDENT COURT OF APPEALS ERRED IN NOT HOLDING THAT RESPONDENT DEVELOPMENT INSURANCE AND SURETY
CORPORATION HAS NO CAUSE OF ACTION AS AGAINST PETITIONER MARITIME COMPANY OF THE PHILIPPINES AND IN NOT
DISMISSING THE COMPLAINT.
II
THE RESPONDENT COURT OF APPEALS ERRED IN NOT HOLDING THAT THE CAUSE OF ACTION OF RESPONDENT DEVELOPMENT
INSURANCE AND SURETY CORPORATION IF ANY EXISTS AS AGAINST HEREIN PETITIONER MARITIME COMPANY OF THE
PHILIPPINES IS BARRED BY THE STATUTE OF LIMITATION AND HAS ALREADY PRESCRIBED.
III
THE RESPONDENT COURT OF APPEALS ERRED IN ADMITTING IN EVIDENCE PRIVATE RESPONDENTS EXHIBIT "H" AND IN
FINDING ON THE BASIS THEREOF THAT THE COLLISION OF THE SS DONA NATI AND THE YASUSHIMA MARU WAS DUE TO THE
FAULT OF BOTH VESSELS INSTEAD OF FINDING THAT THE COLLISION WAS CAUSED BY THE FAULT, NEGLIGENCE AND LACK OF
SKILL OF THE COMPLEMENTS OF THE YASUSHIMA MARU WITHOUT THE FAULT OR NEGLIGENCE OF THE COMPLEMENT OF THE
SS DONA NATI
IV
THE RESPONDENT COURT OF APPEALS ERRED IN HOLDING THAT UNDER THE CODE OF COMMERCE PETITIONER APPELLANT
MARITIME COMPANY OF THE PHILIPPINES IS A SHIP AGENT OR NAVIERO OF SS DONA NATI OWNED BY CO-PETITIONER
APPELLANT NATIONAL DEVELOPMENT COMPANY AND THAT SAID PETITIONER-APPELLANT IS SOLIDARILY LIABLE WITH SAID CO-
PETITIONER FOR LOSS OF OR DAMAGES TO CARGO RESULTING IN THE COLLISION OF SAID VESSEL, WITH THE JAPANESE
YASUSHIMA MARU.
V suffer its own damages and both shall be solidarily responsible for the losses and damages suffered by their cargoes.
THE RESPONDENT COURT OF APPEALS ERRED IN FINDING THAT THE LOSS OF OR DAMAGES TO THE CARGO OF 550 BALES OF
AMERICAN RAW COTTON, DAMAGES WERE CAUSED IN THE AMOUNT OF P344,977.86 INSTEAD OF ONLY P110,000 AT P200.00
PER BALE AS ESTABLISHED IN THE BILLS OF LADING AND ALSO IN HOLDING THAT PARAGRAPH 1O OF THE BILLS OF LADING HAS
NO APPLICATION IN THE INSTANT CASE THERE BEING NO GENERAL AVERAGE TO SPEAK OF.
VI
THE RESPONDENT COURT OF APPEALS ERRED IN HOLDING THE PETITIONERS NATIONAL DEVELOPMENT COMPANY AND
COMPANY OF THE PHILIPPINES TO PAY JOINTLY AND SEVERALLY TO HEREIN RESPONDENT DEVELOPMENT INSURANCE AND
SURETY CORPORATION THE SUM OF P364,915.86 WITH LEGAL INTEREST FROM THE FILING OF THE COMPLAINT UNTIL FULLY
PAID PLUS P10,000.00 AS AND FOR ATTORNEYS FEES INSTEAD OF SENTENCING SAID PRIVATE RESPONDENT TO PAY HEREIN
PETITIONERS ITS COUNTERCLAIM IN THE AMOUNT OF P10,000.00 BY WAY OF ATTORNEY'S FEES AND THE COSTS. (pp. 1-4, Brief
for the Maritime Company of the Philippines; p. 121, Rollo)
The pivotal issue in these consolidated cases is the determination of which laws govern loss or destruction of goods due to
collision of vessels outside Philippine waters, and the extent of liability as well as the rules of prescription provided thereunder.
297
The main thrust of NDC's argument is to the effect that the Carriage of Goods by Sea Act should apply to the case at bar and
not the Civil Code or the Code of Commerce. Under Section 4 (2) of said Act, the carrier is not responsible for the loss or
damage resulting from the "act, neglect or default of the master, mariner, pilot or the servants of the carrier in the navigation
or in the management of the ship." Thus, NDC insists that based on the findings of the trial court which were adopted by the
Court of Appeals, both pilots of the colliding vessels were at fault and negligent, NDC would have been relieved of liability
under the Carriage of Goods by Sea Act. Instead, Article 287 of the Code of Commerce was applied and both NDC and MCP
This issue has already been laid to rest by this Court of Eastern Shipping Lines Inc. v. IAC (1 50 SCRA 469-470 [1987]) where it
was held under similar circumstance "that the law of the country to which the goods are to be transported governs the liability
of the common carrier in case of their loss, destruction or deterioration" (Article 1753, Civil Code). Thus, the rule was
specifically laid down that for cargoes transported from Japan to the Philippines, the liability of the carrier is governed primarily
by the Civil Code and in all matters not regulated by said Code, the rights and obligations of common carrier shall be governed
by the Code of commerce and by laws (Article 1766, Civil Code). Hence, the Carriage of Goods by Sea Act, a special law, is
merely suppletory to the provision of the Civil Code.
In the case at bar, it has been established that the goods in question are transported from San Francisco, California and Tokyo,
Japan to the Philippines and that they were lost or due to a collision which was found to have been caused by the negligence or
fault of both captains of the colliding vessels. Under the above ruling, it is evident that the laws of the Philippines will apply,
and it is immaterial that the collision actually occurred in foreign waters, such as Ise Bay, Japan.
Under Article 1733 of the Civil Code, 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 circumstances of each case. Accordingly, under Article 1735 of the same Code, in all other than those
mentioned is Article 1734 thereof, the common carrier shall be presumed to have been at fault or to have acted negigently,
unless it proves that it has observed the extraordinary diligence required by law.
It appears, however, that collision falls among matters not specifically regulated by the Civil Code, so that no reversible error
can be found in respondent courses application to the case at bar of Articles 826 to 839, Book Three of the Code of Commerce,
which deal exclusively with collision of vessels.
More specifically, Article 826 of the Code of Commerce provides that where collision is imputable to the personnel of a vessel,
the owner of the vessel at fault, shall indemnify the losses and damages incurred after an expert appraisal. But more in point to
the instant case is Article 827 of the same Code, which provides that if the collision is imputable to both vessels, each one shall
Significantly, under the provisions of the Code of Commerce, particularly Articles 826 to 839, the shipowner or carrier, is not
exempt from liability for damages arising from collision due to the fault or negligence of the captain. Primary liability is imposed
on the shipowner or carrier in recognition of the universally accepted doctrine that the shipmaster or captain is merely the
representative of the owner who has the actual or constructive control over the conduct of the voyage (Y'eung Sheng Exchange
and Trading Co. v. Urrutia & Co., 12 Phil. 751 [1909]).
There is, therefore, no room for NDC's interpretation that the Code of Commerce should apply only to domestic trade and not
to foreign trade. Aside from the fact that the Carriage of Goods by Sea Act (Com. Act No. 65) does not specifically provide for
the subject of collision, said Act in no uncertain terms, restricts its application "to all contracts for the carriage of goods by sea
to and from Philippine ports in foreign trade." Under Section I thereof, it is explicitly provided that "nothing in this Act shall be
construed as repealing any existing provision of the Code of Commerce which is now in force, or as limiting its application." By
such incorporation, it is obvious that said law not only recognizes the existence of the Code of Commerce, but more
importantly does not repeal nor limit its application.
On the other hand, Maritime Company of the Philippines claims that Development Insurance and Surety Corporation, has no
cause of action against it because the latter did not prove that its alleged subrogers have either the ownership or special
property right or beneficial interest in the cargo in question; neither was it proved that the bills of lading were transferred or trans-shipment of cargo, resulting in consequent delay of their arrival. In fact, because of the collision, the cargo which was
assigned to the alleged subrogers; thus, they could not possibly have transferred any right of action to said plaintiff- appellee in supposed to arrive in Manila on April 18, 1964 arrived only on June 12, 13, 18, 20 and July 10, 13 and 15, 1964. Hence, had the
this case. (Brief for the Maritime Company of the Philippines, p. 16). cargoes in question been saved, they could have arrived in Manila on the above-mentioned dates. Accordingly, the complaint in
the instant case was filed on April 22, 1965, that is, long before the lapse of one (1) year from the date the lost or damaged
The records show that the Riverside Mills Corporation and Guilcon, Manila are the holders of the duly endorsed bills of lading cargo "should have been delivered" in the light of Section 3, sub-paragraph (6) of the Carriage of Goods by Sea Act.
covering the shipments in question and an examination of the invoices in particular, shows that the actual consignees of the
said goods are the aforementioned companies. Moreover, no less than MCP itself issued a certification attesting to this fact. PREMISES CONSIDERED, the subject petitions are DENIED for lack of merit and the assailed decision of the respondent
Accordingly, as it is undisputed that the insurer, plaintiff appellee paid the total amount of P364,915.86 to said consignees for Appellate Court is AFFIRMED.
the loss or damage of the insured cargo, it is evident that said plaintiff-appellee has a cause of action to recover (what it has
paid) from defendant-appellant MCP (Decision, CA-G.R. No. 46513-R, p. 10; Rollo, p. 43). SO ORDERED.
Facts:
MCP next contends that it can not be liable solidarity with NDC because it is merely the manager and operator of the vessel
Dona Nati not a ship agent. As the general managing agent, according to MCP, it can only be liable if it acted in excess of its
National Development Company (NDC) appointed Maritime Company of the Philippines (MCP) as its agent to manage and
authority.
operate its vessel, ‘Dona Nati’, for and in behalf of its account. In 1964, while en route to Japan from San Francisco, Dona Nati
collided with a Japanese vessel, ‘SS Yasushima Maru’, causing its cargo to be damaged and lost. The private respondent, as
As found by the trial court and by the Court of Appeals, the Memorandum Agreement of September 13, 1962 (Exhibit 6,
insurer to the consigners, paid almost Php400,000.00 for said lost and damaged cargo. Hence, the private respondent instituted
Maritime) shows that NDC appointed MCP as Agent, a term broad enough to include the concept of Ship-agent in Maritime
an action to recover from NDC.
Law. In fact, MCP was even conferred all the powers of the owner of the vessel, including the power to contract in the name of
the NDC (Decision, CA G.R. No. 46513, p. 12; Rollo, p. 40). Consequently, under the circumstances, MCP cannot escape liability.
Issue:
It is well settled that both the owner and agent of the offending vessel are liable for the damage done where both are
Which laws govern the loss and destruction of goods due to collision of vessels outside Philippine waters?
impleaded (Philippine Shipping Co. v. Garcia Vergara, 96 Phil. 281 [1906]); that in case of collision, both the owner and the
agent are civilly responsible for the acts of the captain (Yueng Sheng Exchange and Trading Co. v. Urrutia & Co., supra citing
Ruling:
Article 586 of the Code of Commerce; Standard Oil Co. of New York v. Lopez Castelo, 42 Phil. 256, 262 [1921]); that while it is
true that the liability of the naviero in the sense of charterer or agent, is not expressly provided in Article 826 of the Code of
In a previously decided case, it was held that the law of the country to which the goods are to be transported governs the
Commerce, it is clearly deducible from the general doctrine of jurisprudence under the Civil Code but more specially as regards
liability of the common carrier in case of their loss, destruction or deterioration pursuant to Article 1753 of the Civil Code. It is
contractual obligations in Article 586 of the Code of Commerce. Moreover, the Court held that both the owner and agent
immaterial that the collision actually occurred in foreign waters, such as Ise Bay, Japan.
(Naviero) should be declared jointly and severally liable, since the obligation which is the subject of the action had its origin in a
tortious act and did not arise from contract (Verzosa and Ruiz, Rementeria y Cia v. Lim, 45 Phil. 423 [1923]). Consequently, the
It appears, however, that collision falls among matters not specifically regulated by the Civil Code, hence, we apply Articles 826
agent, even though he may not be the owner of the vessel, is liable to the shippers and owners of the cargo transported by it,
to 839, Book Three of the Code of Commerce, which deal exclusively with collision of vessels.
for losses and damages occasioned to such cargo, without prejudice, however, to his rights against the owner of the ship, to the
extent of the value of the vessel, its equipment, and the freight (Behn Meyer Y Co. v. McMicking et al. 11 Phil. 276 [1908]).

As to the extent of their liability, MCP insists that their liability should be limited to P200.00 per package or per bale of raw
cotton as stated in paragraph 17 of the bills of lading. Also the MCP argues that the law on averages should be applied in
determining their liability.

MCP's contention is devoid of merit. The declared value of the goods was stated in the bills of lading and corroborated no less
by invoices offered as evidence ' during the trial. Besides, common carriers, in the language of the court in Juan Ysmael & Co.,
Inc. v. Barrette et al., (51 Phil. 90 [1927]) "cannot limit its liability for injury to a loss of goods where such injury or loss was
caused by its own negligence." Negligence of the captains of the colliding vessel being the cause of the collision, and the
cargoes not being jettisoned to save some of the cargoes and the vessel, the trial court and the Court of Appeals acted correctly
in not applying the law on averages (Articles 806 to 818, Code of Commerce).

MCP's claim that the fault or negligence can only be attributed to the pilot of the vessel SS Yasushima Maru and not to the
Japanese Coast pilot navigating the vessel Dona Nati need not be discussed lengthily as said claim is not only at variance with
NDC's posture, but also contrary to the factual findings of the trial court affirmed no less by the Court of Appeals, that both
pilots were at fault for not changing their excessive speed despite the thick fog obstructing their visibility.

Finally on the issue of prescription, the trial court correctly found that the bills of lading issued allow trans-shipment of the
cargo, which simply means that the date of arrival of the ship Dona Nati on April 18,1964 was merely tentative to give
allowances for such contingencies that said vessel might not arrive on schedule at Manila and therefore, would necessitate the

298
Macondray vs. Provident Insurance Corporation, GR No. 154305, December 9, 2004 "Defendant MACONDRAY filed ANSWER, denying liability over the losses, having NO absolute relation with
defendant TRADE AND TRANSPORT, the alleged operator of the vessel who transported the subject shipment; that
accordingly, MACONDRAY is the local representative of the SHIPPER; the charterer of M/V TRADE CARRIER and not
THIRD DIVISION
party to this case; that it has no control over the acts of the captain and crew of the Carrier and cannot be held
responsible for any damage arising from the fault or negligence of said captain and crew; that upon arrival at the
G.R. No. 154305 December 9, 2004
port of Sangi, Toledo City, Cebu, the M/V Trade Carrier discharged the full amount of shipment, as shown by the
draft survey with a total quantity of 5,033.59 metric tons discharged from the vessel and delivered to the
MACONDRAY & CO., INC., petitioner,
CONSIGNEE.
vs.
PROVIDENT INSURANCE CORPORATION, respondent.
"ISSUES: Whether or not Macondray and Co. Inc., as an agent is responsible for any loss sustained by any party from
the vessel owned by defendant Trade and Transport. "Whether or not Macondray is liable for loss which was
DECISION
allegedly sustained by the plaintiff in this case.
PANGANIBAN, J.:
"EVIDENCE FOR THE PLAINTIFF
Hornbook is the doctrine that the negligence of counsel binds the client. Also settled is the rule that clients should take the
"Plaintiff presented the testimonies of Marina Celerina P. Aguas and depositions of Alberto Milan and Alfonso Picson
initiative of periodically checking the progress of their cases, so that they could take timely steps to protect their interest.
submitted as additional witnesses for PROVIDENT to prove the material facts of the complaint are deemed admitted
by defendant MACONDRAY, on their defense that it is not an agent of TRADE AND TRANSPORT.
The Case
"EVIDENCE FOR THE DEFENDANT MACONDRAY:
Before us is a Petition for Review 1 under Rule 45 of the Rules of Court, seeking to set aside the February 28, 2002 Decision 2 and
the July 12, 2002 Resolution3 of the Court of Appeals (CA) in CA-GR CV No. 57077. The dispositive portion of the Decision reads
"Witness Ricardo de la Cruz testified as Supercargo of MACONDRAY, that MACONDRAY was not an agent of
as follows:
defendant TRADE AND TRANSPORT; that his functions as Supercargo was to prepare a notice of readiness, statement
of facts, sailing notice and custom's clearance in order to attend to the formalities and the need of the vessel; that
"WHEREFORE, premises considered, the assailed Decision dated September 17, 1996 is hereby REVERSED and SET MACONDRAY is performing functions in behalf of CANPOTEX and was appointed as local agent of the vessel, which
ASIDE. Accordingly, [Petitioner] Macondray & Co., Inc., is hereby ORDERED to pay the [respondent] the amount duty includes arrangement of the entrance and clearance of the vessel."
of P1,657,700.95."
The trial court, in the decision dated September 17, 1996 earlier adverted to, ruled in favor of the [petitioner] x x x,
The assailed Resolution denied petitioner's Motion for Reconsideration. the dispositive portion of which reads:
The Facts "WHEREFORE, PREMISES CONSIDERED, the case as against [petitioner] MACONDRAY is hereby DISMISSED.
The CA adopted the factual antecedents narrated by the trial court, as follows: "No pronouncement as to costs."4
"x x x. On February 16, 1991, at Vancouver, B.C. Canada, CANPOTEX SHIPPING SERVICES LIMITED INC., of Saskatoon, Ruling of the Court of Appeals
Saskatchewan, (hereinafter the SHIPPER), shipped and loaded on board the vessel M/V 'Trade Carrier', 5000 metric
tons of Standard Grade Muriate of Potash in bulk for transportation to and delivery at the port of Sangi, Toledo City,
The CA affirmed the trial court's finding that petitioner was not the agent of Trade and Transport. The appellate court ruled,
Cebu, in favor of ATLAS FERTILIZER CORPORATION, (hereinafter CONSIGNEE) covered by B/L Nos. VAN-SAN-1 for the
however, that petitioner could still be held liable for the shortages of the shipment, because the latter was the ship agent of
815.96 metric tons and VAN-SAN-2 for the 4,184.04 metric tons. Subject shipments were insured with [respondent]
Canpotex Shipping Services Ltd. -- the shipper and charterer of the vessel M/V Trade Carrier.
against all risks under and by virtue of an Open Marine Policy No. MOP-00143 and Certificate of Marine Insurance
No. CMI-823-91.
All told, the CA held petitioner "liable for the losses incurred in the shipment of the subject cargoes to the [respondent], who,
being the insurer of the risk, was subrogated to the rights and causes of action which the consignee, Atlas Fertilizer
"When the shipment arrived, CONSIGNEE discovered that the shipment sustained losses/shortage of 476.140 metric
Corporation, had against the [petitioner]."5
tons valued at One Million Six Hundred Fifty Seven Thousand Seven Hundred Pesos and Ninety Five Centavos
(P1,657,700.95), Philippine Currency. Provident paid losses. Formal claims was then filed with Trade & Transport and
Hence, this Petition.6
Macondray but the same refused and failed to settle the same. Hence, this complaint.
The Issues
"As per Officer's Return dated 4 June 1992, summons was UNSERVED to defendant TRADE AND TRANSPORT at the
given address for reason that TRADE AND TRANSPORT is no longer connected with Macondray & Co. Inc., and is not
Petitioner raises the following issues for our consideration:
holding office at said address as alleged by Ms. Guadalupe Tan. For failure to effect service of summons the case
against TRADE & TRANSPORT was considered dismissed without prejudice.
"Whether or not liability attached to petitioner despite the unequivocal factual findings, that it was not a ship agent.

299
 "Whether or not the 28 February 2002 Decision of the Court of Appeals has attained finality.
"Whether or not by filing the instant Petition for Review on Certiorari, petitioner is guilty of forum-shopping." 7
The Court's Ruling
The Petition has no merit.
First Issue:
Petitioner's Liability
As a rule, factual findings of the Court of Appeals -- when not in conflict with those of the trial court -- are not disturbed by this
Court,8 to which only questions of law may be raised in an appeal by certiorari. 9
In the present case, we find no compelling reason to overturn the Court of Appeals in its categorical finding that petitioner was
the ship agent. Such factual finding was not in conflict with the trial court's ruling, which had merely stated that petitioner was
not the agent of Trade and Transport. Indeed, although it is not an agent of Trade and Transport, petitioner can still be the ship
agent of the vessel M/V Trade Carrier.
Article 586 of the Code of Commerce states that a ship agent is "the person entrusted with provisioning or representing the
vessel in the port in which it may be found."
Hence, whether acting as agent of the owner 10 of the vessel or as agent of the charterer,11 petitioner will be considered as the
ship agent12 and may be held liable as such, as long as the latter is the one that provisions or represents the vessel.
The trial court found that petitioner "was appointed as local agent of the vessel, which duty includes arrangement for the
entrance and clearance of the vessel."13 Further, the CA found and the evidence shows that petitioner represented the vessel.
The latter prepared the Notice of Readiness, the Statement of Facts, the Completion Notice, the Sailing Notice and Custom's
Clearance.14 Petitioner's employees were present at Sangi, Toledo City, one day before the arrival of the vessel, where they
stayed until it departed. They were also present during the actual discharging of the cargo. 15 Moreover, Mr. de la Cruz, the
representative of petitioner, also prepared for the needs of the vessel, like money, provision, water and fuel. 16
These acts all point to the conclusion that it was the entity that represented the vessel in the Port of Manila and was the ship
agent17 within the meaning and context of Article 586 of the Code of Commerce.
As ship agent, it may be held civilly liable in certain instances. The Code of Commerce provides:
"Article 586. The shipowner and the ship agent shall be civilly liable for the acts of the captain and for the
obligations contracted by the latter to repair, equip, and provision the vessel, provided the creditor proves that the
amount claimed was invested for the benefit of the same."
"Article 587. The ship agent shall also be civilly liable for the indemnities in favor of third persons which may arise
from the conduct of the captain in the care of the goods which he loaded on the vessel; but he may exempt himself
therefrom by abandoning the vessel with all her equipments and the freight it may have earned during the voyage."
Petitioner does not dispute the liabilities of the ship agent for the loss/shortage of 476.140 metric tons of standard-grade
Muriate of Potash valued at P1,657,700.95. Hence, we find no reason to delve further into the matter or to disturb the finding
of the CA holding petitioner, as ship agent, liable to respondent for the losses sustained by the subject shipment.
Second Issue:
300
Finality of the CA Decision
Petitioner claims that it picked up the February 28, 2002 Decision of the CA on May 14, 2002, after receiving the postal notice
the day before. It further attributes gross negligence to its previous counsel for not informing the CA of his change of address. It
thus contends that notice of the assailed Decision given to the previous counsel cannot be considered as notice to petitioner.
We are not persuaded. "It is well-settled that when a party is represented by counsel, notice should be made upon the counsel
of record at his given address to which notices of all kinds emanating from the court should be sent in the absence of a proper
and adequate notice to the court of a change of address." 18
In the present case, service of the assailed Decision was made on petitioner's counsels of record, Attys. Moldez and Galoz, on
March 6, 2002. That copy of the Decision was, however, returned to the sender for the reason that the addressee had "move[d]
out." If counsel moves to another address without informing the court of that change, such omission or neglect is inexcusable
and will not stay the finality of the decision.19 "The court cannot be expected to take judicial notice of the new address of a
lawyer who has moved or to ascertain on its own whether or not the counsel of record has been changed and who the new
counsel could possibly be or where he probably resides or holds office."20
It is unfortunate that the lawyer of petitioner neglected his duties to the latter. Be that as it may, the negligence of counsel
binds the client.21 Service made upon the present counsel of record at his given address is service to petitioner. Hence, the
assailed Decision has already become final and unappealable.
In the present case, there is no compelling reason to overturn well-settled jurisprudence or to interpret the rules liberally in
favor of petitioner, who is not entirely blameless. It should have taken the initiative of periodically keeping in touch with its
counsel, checking with the court, and inquiring about the status of its case.22 In so doing, it could have taken timely steps to
neutralize the negligence of its chosen counsel and to protect its interests. "Litigants represented by counsel should not expect
that all they need to do is sit back, relax and await the outcome of their case." 23
In view of the foregoing, there is no necessity of passing upon the third issue raised by petitioner.
WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED. Costs against petitioner.
SO ORDERED.
Facts:
CANPOTEX SHIPPING SERVICES LIMITED INC., shipped on board the vessel M/V Trade carrier certain goods in favor of ATLAS
FERTILIZER CORPORATION. Subject shipments were insured with Provident Insurance Corp. against all risks.
When the shipment arrived, consignee discovered that the shipment sustained losses. Provident paid for said losses. Formal
claims were then filed with Trade & Transport but MACONDRAY refused and failed to settle the same. MACONDRAY denies
liability over the losses, it, having no absolute relation with Trade & Transport, the alleged operator of the vessel who
transported the shipment; that accordingly, MACONDRAY is the local representative of the shipper; the charterer of M/V Trade
Carrier and not party to this case; that it has no control over the acts of the captain and crew of the carrier and cannot be held
responsible for any damage arising from the fault or negligence of said captain and crew; that upon arrival at the port, M/V
Trade Carrier discharged the full amount of shipment as shown by the draft survey.
Issue: Whether or not MACONDRAY & CO. INC., as an agent, is responsible for any loss sustained by any party from the vessel
owned by Trade & Transport.
Held: Although petitioner is not an agent of Trade & Transport, it can still be the ship agent of the vessel M/V Trade Carrier. A
ship agent is the person entrusted with provisioning or representing the vessel in the port in which it may be found. Hence,
whether acting as agent of the owner of the vessel or as agent of the charterer, petitioner will be considered as the ship agent
and may be held liable as such, as long as the latter is the one that provisions or represents the vessel.
The trial court found that petitioner was appointed as local agent of the vessel, which duty includes arrangement for the
entrance and clearance of the vessel. Further, the CA found that the evidence shows that petitioner represented the vessel. The
latter prepared the Notice of Readiness, the Statement of Facts, the Completion Notice, the Sailing Notice and Custom’s
Clearance. Petitioner’s employees were present at the port of destination one day before the arrival of the vessel, where they
stayed until it departed. They were also present during the actual discharging of the cargo. Moreover, Mr. de la Cruz, the
representative of petitioner, also prepared for the needs of the vessel. These acts all point to the conclusion that it was the
entity that represented the vessel at the port of destination and was the ship agent within the meaning and context of Article
586 of the Code of Commerce.

FACTS:
CANPOTEX Shipping Services Limited Inc., shipped on board the vessel M/V Trade Carrier certain goods in favor of
ATLAS Fertilizer Corporation. Subject shipments were insured with Provident Insurance Corp. against all risks. When the
shipment arrived, consignee discovered that the shipment sustained losses. Provident paid for said losses. Formal claims were
then filed with Trade & Transport but Macondray denies liability over the losses, it, having no absolute relation with Trade &
Transport, the alleged operator of the vessel who transported the shipment; that Macondray is the local representative of the
shipper, the charterer of M/V Trade Carrier and not party to this case and that it has no control over the acts of the captain and
crew of the carrier thus cannot be held responsible for any damage arising from the fault or negligence of said captain and
crew.

Issue: Whether or not MACONDRAY & CO. INC., as an agent, is responsible for any loss sustained by any party from the vessel
owned by Trade & Transport.

Held:
Although petitioner is not an agent of Trade & Transport, it can still be the ship agent of the vessel M/V Trade
Carrier. A ship agent is the person entrusted with provisioning or representing the vessel in the port in which it may be found.
Hence, whether acting as agent of the owner of the vessel or as agent of the charterer, petitioner will be considered as the ship
agent and may be held liable as such, as long as the latter is the one that provisions or represents the vessel.
Macondray was appointed as local agent of the vessel, which duty includes arrangement for the entrance and
clearance of the vessel. Petitioner’s employees were present at the port of destination one day before the arrival of the vessel,
where they stayed until it departed. They were also present during the actual discharging of the cargo. These acts all point to
the conclusion that it was the entity that represented the vessel at the port of destination and was the ship agent within the
meaning and context of Article 586 of the Code of Commerce.

301