1.) [G.R. No. 8095. November 5, 1914 & March 31, 1915.
1915. ] requirements of the Acting Collector of Customs as to the acceptance for carriage of
F. C. FISHER, Plaintiff, v. YANGCO STEAMSHIP COMPANY, J. S. STANLEY, as
Acting Collector of Custom of the Philippine Islands, IGNACIO VILLAMOR, as
Attorney-General of the Philippine Islands, and W. H. BISHOP, as prosecuting
attorney of the city of Manila, Respondents.
[respondent company board made a resolution to reject carrying dynamites and other
explosives- Public respondent demanded otherwise, threatened sanctions and
prosecution per Act No. 98- plaintiff is a stockholder of PR and wants what was
decided with board- plaintiff wants writ of prohibition to enjoin PR to stick with its
resolution and pubR to prohibit them from interfering- plaintiff args that it is taking that
is confiscatory and that it limits their liberty to do business- Issue: WON PR can
declare to prohibit those goods to be carried- Court: Act No. 98 prohibits
unreasonable and unnecessary discrimination in refusing to carry but it should not be
construed literally- The Q is if in a particular case the discrimination is reasonable and
necessary- One is that if there is restriction, it should apply to all and is well-
established not mere whim and caprice- reason is that CC is imbued with public
interest and is subject to public regulation- In this case, the goods are commodities
normally traded and is not illegal, other carriers carry them around the world- it has
not been shown that vessels cannot carry them without reasonable safety or that their
vessels in particular cannot carry it- or any reason that makes the denial of carrying it
in their vessels are reasonable and necessary- absent these allegation the complaint
is dismissed for lack of cause of action.]
Summarized briefly, the complaint alleges that plaintiff is a stockholder in the Yangco
Steamship Company, the owner of a large number of steam vessels, duly licensed to
engage in the coastwise trade of the Philippine Islands; that on or about June 10,
1912, the directors of the company adopted a’ resolution which was thereafter ratified
and affirmed by the shareholders of the company, "expressly declaring and providing
that the classes of merchandise to be carried by the company in its business as a
common carrier do not include dynamite, powder or other explosives, and expressly
prohibiting the officers, agents and servants of the company from offering to carry,
accepting for carriage or carrying said dynamite, powder or other explosives;" that
thereafter the respondent Acting Collector of Customs demanded and required of the
company the acceptance and carriage of such explosives; that he has refused and
suspended the issuance of the necessary clearance documents of the vessels of the
company unless and until the company consents to accept such explosives for
carriage; that plaintiff is advised and believes that should the company decline to
accept such explosives for carriage, the respondent Attorney-General of the
Philippine Islands and the respondent prosecuting attorney of the city of Manila intend
to institute proceedings under the penal provisions of sections 4, 5, and 6 of Act No.
98 of the Philippine Commission against the company, its managers, agents and
servants, to enforce the requirements of the Acting-Collector of Customs as to the
acceptance of such explosives for carriage; that notwithstanding the demands of the
plaintiff stockholder, the manager, agents and servants of the company decline and
refuse to cease the carriage of such explosives, on the ground that by reason of the
severity of the penalties with which they are threatened upon failure to carry such
explosives, they cannot subject themselves to "the ruinous consequences which
would inevitably result" from failure on their part to obey the demands and
TRANSPORTATION LAW – Chapter 2 & 3
explosives; that plaintiff believes that the Acting Collector of Customs erroneously
construes the provisions of Act No. 98 in holding that they require the company to
accept such explosives for carriage notwithstanding the above mentioned resolution
of the directors and stockholders of the company, and that if the Act does in fact
require the company to carry such explosives it is to that extent unconstitutional and
void; that notwithstanding this belief of complainant as to the true meaning of the Act,
the questions involved cannot be raised by the refusal of the company or its agents to
comply with the demands of the Acting Collector of Customs, without the risk of
irreparable loss and damage resulting from his refusal to facilitate the documentation
of the company’s vessels, and without assuming a risk of pains and penalties under
the drastic provisions of the Act which prohibit any attempt on the part of the company
to test the questions involved by refusing to accept such explosives for carriage.
The prayer of the complaint is as follows:
"First. That to the due hearing of the above entitled action be issued a writ of
prohibition perpetually restraining the respondent Yangco Steamship Company, its
appraisers, agents, servants or other representatives from accepting to carry and
from carrying, in steamers of said company dynamite, powder or other explosive
substance, in accordance with the resolution of the board of directors and of the
shareholders of said company.
"Second. That a writ of prohibition be issued perpetually enjoining the respondent J.
S. Stanley as Acting Collector of Customs of the Philippine Islands, his successors,
deputies, servants or other representatives, from obligating the said Yangco
Steamship Company, by any means whatever, to carry dynamite, powder or other
explosive substance.
…
To this complaint the respondents demurred, and we are of opinion that the demurrer
must be sustained, on the ground that the complaint does not set forth facts sufficient
to constitute a cause of action.
…
There are no allegations in the complaint that for some special and sufficient reasons
all or indeed any of the company’s vessels are unsuitable for the business of
transporting explosives; or that shippers have declined or will in future decline to
comply with such reasonable regulations and to take such reasonable precautions as
may be necessary and proper to secure the safety of the vessels of the company in
transporting such explosives. Indeed the contention of petitioner is that a common
carrier in the Philippine Islands may decline to accept for carriage any shipment of
merchandise of a class which it expressly or impliedly declines to accept from all
shippers alike, because, as he contends "the duty of a common carrier to carry for all
who offer arises from the public profession he has made, and is limited by it."
…The duties and liabilities of common carriers in this jurisdiction are defined and fully
set forth in Act No. 98 of the Philippine Commission, and, until and unless that statute
be declared invalid or unconstitutional, we are bound by its provisions.
Sections 2, 3 and 4 of the Act are as follows:
"SEC. 2. It shall be unlawful for any common carrier engaged in the transportation of
passengers or property as above set forth to make or give any unnecessary or
unreasonable preference or advantage to any particular person, company, firm,
corporation or locality, or any particular kind of traffic in any respect whatsoever, or to
subject any particular person, company, firm, corporation or locality, or any particular
kind of traffic, to any undue or unreasonable prejudice or discrimination whatsoever,
and such unjust preference or discrimination is also hereby prohibited and declared to
be unlawful.
"SEC. 3. No common carrier engaged in the carriage of passengers or property as
aforesaid shall, under any pretense whatsoever, fail or refuse to receive for carriage,
and as promptly as it is able to do so without discrimination, to carry any person or
property offering for carriage, and in the order in which such persons or property are
offered for carriage, nor shall any such common carrier enter into any arrangement,
contract or agreement with any other person or corporation whereby the latter is given
an exclusive or preferential privilege over any other person or persons to control or
monopolize the carriage of any class or kind of property to the exclusion or partial
exclusion of any other person or persons, and the entering into any such
arrangement, contract or agreement, under any form or pretense whatsoever, is
hereby prohibited and declared to be unlawful.
… right of the steamship company to elect at will whether or not it will engage in a
The validity of this Act has been questioned on various grounds, and it is vigorously
contended that in so far as it imposes any obligation on a common carrier to accept
for carriage merchandise of a class which he makes no public profession to carry, or
which he has expressly or impliedly announced his intention to decline to accept for
carriage from all shippers alike, it is ultra vires, unconstitutional and void.
We agree with counsel for petitioner that the provision of the Act which prescribes
that, "No common carrier . . . shall, under any pretense whatsoever, fail or refuse to
receive for carriage, and . . . to carry any person or property offering for carriage," is
not to be construed in its literal sense and without regard to the context, so as to
impose an imperative duty on all common carriers to accept for carriage, and to carry
all and any kind of freight which may be offered for carriage without regard to the
facilities which they may have at their disposal. The legislator could not have intended
and did not intend to prescribe that a common carrier running passenger automobiles
for hire must transport coal in his machines; nor that the owner of a tank steamer,
expressly constructed in small watertight compartments for the carriage of crude oil
must accept a load of cattle or of logs in the rough; nor that any common carrier must
accept and carry contraband articles, such as opium, morphine, cocaine, or the like,
the mere possession of which is declared to be a criminal offense; nor that common
carriers must accept eggs offered for transportation in paper parcels or any
merchandise whatever so defectively packed as to entail upon the company
unreasonable and unnecessary care or risks.
Read in connection with its context this, as well as all the other mandatory and
prohibitory provisions of the statute, was clearly intended merely to forbid failures or
refusals to receive persons or property for carriage involving any "unnecessary or
TRANSPORTATION LAW – Chapter 2 & 3
unreasonable preference or advantage to any particular person, company, firm,
corporation or locality, or any particular kind of traffic in any respect whatsoever," or
which would "subject any particular person, company, firm, corporation or locality, or
any particular kind of traffic to any undue or unreasonable prejudice or discrimination
whatsoever."cralaw virtua1aw library
The question, then, of construing and applying the statute, in cases of alleged
violations of its provisions, always involves a consideration as to whether the acts
complained of had the effect of making or giving an "unreasonable or unnecessary
preference or advantage" to any person, locality or particular kind of traffic, or of
subjecting any person, locality, or particular kind of traffic to any undue or
unreasonable prejudice or discrimination. It is very clear therefore that the language
of the statute itself refutes any contention as to its invalidity based on the alleged
unreasonableness of its mandatory or prohibitor provisions.
…"We hold, therefore, that the provisions of the acts relating to the enforcement of
the rates, either for freight or passengers, by imposing such enormous fines and
possible imprisonment as a result of an unsuccessful effort to test the validity of the
laws themselves, are unconstitutional on their face, without regard to the question of
the insufficiency of those rates. (Ex parte Young, 209 U. S., 123, 147, 148.)"
…
Counsel for petitioner contends also that the statute, if construed so as to deny the
particular business, such as that of carrying explosives, is unconstitutional "because it
is a confiscation of property, a taking of the carrier’s property without due process of
law," and because it deprives him of his liberty by compelling him to engage in
business against his will. The argument continues as follows:
"To require of a carrier, as a condition to his continuing in said business, that he must
carry anything and everything is to render useless the facilities he may have for the
carriage of certain lines of freight. It would be almost as complete a confiscation of
such facilities as if the same were destroyed. Their value as a means of livelihood
would be utterly taken away. The law is a prohibition to him to continue in business;
the alternative is to get out or to go into some other business — the same alternative
as was offered in the case of the Chicago & N. W. Ry. v. Dey (35 Fed. Rep., 866,
880), and which was there commented on as follows:jgc:chanrobles.com.ph
"‘Whatever of force there may be in such arguments, as applied to mere personal
property capable of removal and use elsewhere, or in other business, it is wholly
without force as against railroad corporations, so large a proportion of whose
investment is in the soil and fixtures appertaining thereto, which cannot be removed.
For a government, whether that government be a single sovereign or one of the
majority, to say to an individual who has invested his means in so laudable an
enterprise as the construction of a railroad, one which tends so much to the wealth
and prosperity of the community, that, if he finds that the rates imposed will cause him
to do business at a loss, he may quit business, and abandon that road, is the very
irony of despotism. Apples of Sodom were fruit of joy in comparison. Reading, as I do,
in the preamble of the Federal Constitution, that it was ordained to "establish justice,"
I can never believe that it is within the power of state or nation thus practically to
confiscate the property of an individual invested in and used for a purpose in which
even the Argus eyes of the police power can see nothing injurious to public morals,
public health, or the general welfare.…
It is manifest, however, that this contention is directed against a construction of the
statute, which, as we have said, is not warranted by its terms. As we have already
indicated, the statute does not "require of a carrier, as a condition to his continuing in
said business, that he must carry anything and everything," and thereby "render
useless the facilities he may have for the carriage of certain lines of freight." It merely
forbids failures or refusals to receive persons or property for carriage which have the
effect of giving an "unreasonable or unnecessary preference or advantage" to any
person, locality or particular kind of traffic, or of subjecting any person, locality or
particular kind of traffic to any undue or unreasonable prejudice or discrimination.
Counsel expressly admits, that the statute, "as a prohibition against discrimination is a
fair, reasonable and valid exercise of government," and that "it is necessary and
proper that such discrimination be prohibited and prevented," but he contends that
"on the other hand there is no reasonable warrant nor valid excuse for depriving a
person of his liberty by requiring him to engage in business against his will. If he has
a rolling boat, unsuitable and unprofitable for passenger trade, he may devote it to
lumber carrying. To prohibit him from using it unless it is fitted out with doctors and
stewards and staterooms to carry passengers would be an invalid confiscation of his
property. A carrier may limit his business to the branches thereof that suit his
convenience. If his wagon be old, or the route dangerous, he may avoid liability for
loss of passengers’ lives and limbs by carrying freight only. If his vehicles require
expensive pneumatic tires, unsuitable for freight transportation, he may nevertheless
carry passengers. The only limitation upon his action that it is competent for the
governing authority to impose is to require him to treat all alike. His limitations must
apply to all, and they must be established limitations. He cannot refuse to carry a
case of red jusi on the ground that he has carried for others only jusi that was green,
or blue, or black. But he can refuse to carry red jusi, if he has publicly professed such
a limitation upon his business and held himself out as unwilling to carry the same for
anyone.
To this it is sufficient answer to say that there is nothing in the statute which would
deprive any person of his liberty "by requiring him to engage in business against his
will." The prohibitions of the statute against undue, unnecessary or unreasonable
preferences and discriminations are merely the reasonable regulations which the
legislator has seen fit to prescribe for the conduct of the business in which the carrier
is engaged of his own free will and accord. In so far as the self-imposed limitations by
the carrier upon the business conducted by him, in the various examples given by
counsel, do not involve an unreasonable or unnecessary discrimination the statute
would not control his action in any wise whatever. It operates only in cases involving
such unreasonable or unnecessary preferences or discriminations. Thus in the
hypothetical case suggested by the petitioner, a carrier engaged in the carriage of
green, blue or black jusi, and duly equipped therefor would manifestly be guilty of
"giving an unnecessary and unreasonable preference to a particular kind of traffic"
and of subjecting to "an undue and unreasonable prejudice a particular kind of traffic,"
should he decline to carry red jusi, to the prejudice of a particular shipper or of those
engaged in the manufacture of that kind of jusi, basing his refusal on the ground of
TRANSPORTATION LAW – Chapter 2 & 3
"mere whim or caprice" or of mere personal convenience. So a public carrier of
passengers would not be permitted under this statute to absolve himself from liability
for a refusal to carry a Chinaman, a Spaniard, an American, a Filipino, or a mestizo
by proof that from "mere whim or caprice or personal scruple," or to suit his own
convenience, or in the hope of increasing his business and thus making larger profits,
he had publicly announced his intention not to carry one or other of these classes of
passengers.
The nature of the business of a common carrier as a public employment is such that it
is clearly within the power of the state to impose such just and reasonable regulations
thereon in the interest of the public as the legislator’ may deem proper. Of course
such regulations must not have the effect of depriving an owner of his property
without due process of law, nor of confiscating or appropriating private property
without just compensation, nor of limiting or prescribing irrevocably vested rights or
privileges lawfully acquired under a charter or franchise. But aside from such
constitutional limitations, the determination of the nature and extent of the regulations
which should be prescribed rests in the hands of the legislator.
Common carriers exercise a sort of public office, and have duties to perform in which
the public is interested. Their business is, therefore, affected with a public interest,
and is subject of public regulation. (New Jersey Steam Nav. Co. v. Merchants Bank, 6
How., 344, 382; Munn v. Illinois, 94 U. S., 113, 130.) Indeed, this right of regulation is
so far beyond question that it is well settled that the power of the state to exercise
legislative control over railroad companies and other carriers "in all respects
necessary to protect the public against danger, injustice and oppression" may be
exercised through boards of commissioners. (New York etc. R. Co. v. Bristol, 151 U.
S., 556, 571; Connecticut etc. R. Co. v. Woodruff, 153 U. S., 689.)
Regulations limiting the number of passengers that may be carried in a particular
vehicle or steam vessel, or forbidding the loading of a vessel beyond a certain point,
or prescribing the number and qualifications of the personnel in the employ of a
common carrier, or forbidding unjust discrimination as to rates, all tend to limit and
restrict his liberty and to control to some degree the free exercise of his discretion in
the conduct of his business. But since the Granger cases were decided by the
Supreme Court of the United States no one questions the power of the legislator to
prescribe such reasonable regulations upon property clothed with a public interest as
he may deem expedient or necessary to protect the public against danger, injustice or
oppression. (Munn v. Illinois, 94 U. S., 113, 130; Chicago etc. R. Co. v. Cutts, 94 U.
S., 155; Budd v. New York, 143 U. S., 517; Cotting v. Godard, 183 U. S., 79.) The
right to enter the public employment as a common carrier and to offer one’s services
to the public for hire does not carry with it the right to conduct that business as one
pleases, without regard to the interests of the public and free from such reasonable
and just regulations as may be prescribed for the protection of the public from the
reckless or careless indifference of the carrier as to the public welfare and for the
prevention of unjust and unreasonable discrimination of any kind whatsoever in the
performance of the carrier’s duties as a servant of the public.
Business of certain kinds, including the business of a common carrier, holds such a
peculiar relation to the public interest that there is super induced upon it the right of
public regulation. (Budd v. New York, 143 U. S., 517, 533.) When private property is
"affected with a public interest it ceases to be juris privati only." Property becomes
clothed with a public interest when used in a manner to make it of public
consequence and affect the community at large. "When, therefore, one devotes his
property to a use in which the public has an interest, he, in effect, grants to the public
an interest in that use, and must submit to be controlled by the public for the common
good, to the extent of the interest he has thus created. He may withdraw his grant by
discontinuing the use, but so long as he maintains the use he must submit to control."
(Munn v. Illinois, 94 U. S., 113; Georgia R. & Bkg. Co. v. Smith, 128 U. S., 174; Budd
v. New York, 143 U. S., 517; Louisville etc. Ry. Co. v. Kentucky, 161 U. S., 677, 695.)
… carriage would subject some person, company; firm or corporation, or locality, or
Under the common law of England it was early recognized that common carriers owe
to the public the duty of carrying indifferently for all who may employ them, and in the
order in which application is made, and without discrimination as to terms. True, they
were allowed to restrict their business so as to exclude particular classes of goods,
but as to the kinds of property which the carrier was in the habit of carrying in the
prosecution of his business he was bound to serve all customers alike (State v.
Cincinnati etc. R. Co., 47 Ohio St., 130, 134, 138; Louisville etc. Ry. Co. v. Queen
City Coal Co., 13 Ky. L. Rep., 832); and it is to be observed in passing that these
common law rules are themselves regulations controlling, limiting and prescribing the
conditions under which common carriers were permitted to conduct their business.
(Munn v. Illinois, 94 U. S., 113, 133.)
… alleged that all, or indeed any of the defendant steamship company’s vessels are
The power of the Philippine legislator to prohibit and to penalize all and any
unnecessary or unreasonable discriminations by common carriers may be maintained
upon the same reasoning which justified the enactment by the Parliament of England
and the Congress of the United States of the above mentioned statutes prohibiting
and penalizing the granting of certain preferences and discriminations in those
countries. As we have said before, we find nothing confiscatory or unreasonable in
the conditions imposed in the Philippine statute upon the business of common
carriers. Correctly construed they do not force him to engage in any business against
his will or to make use of his facilities in a manner or for a purpose for which they are
not reasonably adapted. It is only when he offers his facilities as a common carrier to
the public for hire, that the statute steps in and prescribes that he must treat all alike,
that he may not pick and choose which customer he will serve, and, specifically, that
he shall not make any undue or unreasonable preferences or discriminations
whatsoever to the prejudice not only of any person or locality but also of any
particular kind of traffic.
The legislator having enacted a regulation prohibiting common carriers from giving
unnecessary or unreasonable preferences or advantages to any particular kind of
traffic or subjecting any particular kind of traffic to any undue or unreasonable
prejudice or discrimination whatsoever, it is clear that whatever may have been the
rule at the common law, common carriers in this jurisdiction cannot lawfully decline to
accept a particular class of goods for carriage, to the prejudice of the traffic in those
goods, unless it appears that for some sufficient reason the discrimination against the
traffic in such goods is reasonable and necessary. Mere whim or prejudice will not
suffice. The grounds for the discrimination must be substantial ones, such as will
TRANSPORTATION LAW – Chapter 2 & 3
justify the courts in holding the discrimination to have been reasonable and necessary
under all the circumstances of the case.
The prayer of the petition in the case at bar cannot be granted unless we hold that the
refusal of the defendant steamship company to accept for carriage on any of its
vessels "dynamite, gunpowder or other explosives" would in no instance involve a
violation of the provisions of this statute. There can be little doubt, however, that
cases may and will arise wherein the refusal of a vessel "engaged in the coastwise
trade of the Philippine Islands as a common carrier" to accept such explosives for
particular kind of traffic to a certain prejudice or discrimination. Indeed it cannot be
doubted that the refusal of a "steamship company, the owner of a large number of
vessels" engaged in that trade to receive for carriage any such explosives on any of
its vessels would subject the traffic in such explosives to a manifest prejudice and
discrimination. The only question to be determined therefore is whether such
prejudice or discrimination might in any case prove to be undue, unnecessary or
unreasonable.
This of course is, in each case, a question of fact, and we are of opinion that the facts
alleged in the complaint are not sufficient to sustain a finding in favor of the
contentions of the petitioner. It is not alleged in the complaint that "dynamite,
gunpowder and other explosives" can in no event be transported with reasonable
safety on board steam vessels engaged in the business of common carriers. It is not
unsuited for the carriage of such explosives. It is not alleged that the nature of the
business in which the steamship company is engaged is such. as to preclude a
finding that a refusal to accept such explosives on any of its vessels would subject the
traffic in such explosives to an undue and unreasonable prejudice and discrimination.
…
We think however that the answer to the question whether such a refusal to carry
explosives involves an unnecessary or unreasonable preference or advantage to any
person, locality or particular kind of traffic or subjects any person, locality or particular
kind of traffic to an undue or unreasonable prejudice or discrimination is by no means
"self-evident," and that it is a question of fact to be determined by the particular
circumstances of each case.
The words "dynamite, powder or other explosives" are broad enough to include
matches, and other articles of like nature, and may fairly be held to include also
kerosene oil, gasoline and similar products of a highly inflammable and explosive
character. Many of these articles of merchandise are in the nature of necessities in
any country open to modern progress and advancement. We are not fully advised as
to the methods of transportation by which they are made commercially available
throughout the world, but certain it is that dynamite, gunpowder, matches, kerosene
oil and gasoline are transported on many vessels sailing the high seas. Indeed it is
matter of common knowledge that common carriers throughout the world transport
enormous quantities of these explosives, on both land and sea, and there can be little
doubt that a general refusal of the common carriers in any country to accept such
explosives for carriage would involve many persons, firms and enterprises in utter
ruin, and would disastrously affect the interests of the public and the general welfare
of the community.
It would be going far to say that a refusal by a steam vessel engaged in the business
of transporting general merchandise as a common carrier to accept for carriage a
shipment of matches, solely on the ground of the dangers incident to the explosive
quality of this class of merchandise, would not subject the traffic in matches to an
unnecessary, undue or unreasonable prejudice or discrimination without proof that for
some special reason the particular vessel is not fitted to carry articles of that nature.
There may be and doubtless are some vessels engaged in business as common
carriers of merchandise, which for, lack of suitable deck space or storage rooms
might be justified in declining to carry kerosene oil, gasoline, and similar products,
even when offered for carriage securely packed in cases; and few vessels are
equipped to transport those products in bulk. But in any case of a refusal to carry
such products which would subject any person, locality or the traffic in such products
to any prejudice or discrimination whatsoever, it would be necessary to hear evidence
before making an affirmative finding that such prejudice or discrimination was or was
not unnecessary, undue or unreasonable. The making of such a finding would involve
a consideration of the suitability of the vessel for the transportation of such products;
the reasonable possibility of danger or disaster resulting from their transportation in
the form and under the conditions in which they are offered for carriage; the general
nature of the business done by the carrier and, in a word, all the attendant
circumstances which might affect the question of the reasonable necessity for the
refusal by the carrier to undertake the transportation of this class of merchandise.
But it is contended that whatever the rule may be as to other explosives, the
exceptional power and violence of dynamite and gunpowder in explosion will always
furnish the owner of a vessel with a reasonable excuse for his failure or refusal to
accept them for carriage or to carry them on board his boat. We think however that
even as to dynamite and gunpowder we would not be justified in making such a
holding unaided by evidence sustaining the proposition that these articles can never
be carried with reasonable safety on any vessel engaged in the business of a
common carrier. It is said that dynamite is so erratic and uncontrollable in its action
that it is impossible to assert that it can be handled with safety in any given case. On
the other hand it is contended that while this may be true of some kinds of dynamite,
it is a fact that dynamite can be and is manufactured so as to eliminate any real
danger from explosion during transportation. These are of course questions of fact
upon which we are not qualified to pass judgment without the assistance of expert
witnesses who have made special studies as to the chemical composition and
reactions of the different kinds of dynamite, or attained a thorough knowledge of its
properties as a result of wide experience in its manufacture and transportation.
…The complaint in the case at bar lacking the necessary allegations under this ruling,
the demurrer must be sustained on the ground that the facts alleged do not constitute
a cause of action.
…We think, however, that we should not finally dispose of the case without indicating
that since the institution of these proceedings the enactment of Acts No. 2307 and
No. 2362 (creating a Board of Public Utility Commissioners and for other purposes)
may have materially modified the right to institute and maintain such proceedings in
TRANSPORTATION LAW – Chapter 2 & 3
this jurisdiction. But the demurrer having been formally submitted for judgment before
the enactment of these statutes, counsel have not been heard in this connection. We
therefore refrain from any comment upon any questions which might be raised as to
whether or not there may be another adequate and appropriate remedy for the
alleged wrong set forth in the complaint. Our disposition of the question raised by the
demurrer renders that unnecessary at this time, though it may not be improper to
observe that a careful examination of those acts confirms us in the holding upon
which we base our ruling on this demurrer, that is to say "That whatever may have
been the rule at the common law, common carriers in this jurisdiction cannot lawfully
decline to accept a particular class of goods for carriage, to the prejudice of the traffic
in those goods, unless it appears that for some sufficient reason the discrimination
against the traffic in such goods is reasonable and necessary. Mere prejudice or
whim will not suffice. The grounds of the discrimination must be substantial ones,
such as will justify the courts in holding the discrimination to have been reasonable
and necessary under all the circumstances of the case."
Unless an amended complaint be filed in the meantime let judgment be entered ten
days hereafter sustaining the demurrer and dismissing the complaint with costs
against the complainant, and twenty days thereafter let the record be filed in the
archives of original actions in this court. So ordered.
2.) G.R. No. 95536 March 23, 1992
ANICETO G. SALUDO, JR., MARIA SALVACION SALUDO, LEOPOLDO G.
SALUDO and SATURNINO G. SALUDO, petitioners,
vs. HON. COURT OF APPEALS, TRANS WORLD AIRLINES, INC., and
PHILIPPINE AIRLINES, INC., respondents.
[missing casket/switched- Issue: Is PAL liable for the delay?- Ruling: No. PAL had no
reason to open a casket and had to rely on the labels. Even if they open it, they won’t
know if that’s the correct body; they did not have to do additional searches as there
were no suspicious circumstances, plus bill of lading has no specific time the
common carrier is not an insurer against delay- PAL absolved but TWA liable for
indifference of employees, damages]
After the death of plaintiffs' mother, Crispina Galdo Saludo, in Chicago Illinois, (on)
October 23, 1976 (Exh. A), Pomierski and Son Funeral Home of Chicago, made the
necessary preparations and arrangements for the shipment, of the remains from
Chicago to the Philippines. The funeral home had the remains embalmed (Exb. D)
and secured a permit for the disposition of dead human body on October 25, 1976
(Exh. C), Philippine Vice Consul in Chicago, Illinois, Bienvenido M. Llaneta, at 3:00
p.m. on October 26, 1976 at the Pomierski & Son Funeral Home, sealed the shipping
case containing a hermetically sealed casket that is airtight and waterproof wherein
was contained the remains of Crispina Saludo Galdo (sic) (Exb. B). On the same
date, October 26, 1976, Pomierski brought the remains to C.M.A.S. (Continental
Mortuary Air Services) at the airport (Chicago) which made the necessary
arrangements such as flights, transfers, etc.; C.M.A.S. is a national service used by
undertakers to throughout the nation (U.S.A.), they furnish the air pouch which the
casket is enclosed in, and they see that the remains are taken to the proper air freight
terminal (Exh. 6-TWA). C.M.A.S. booked the shipment with PAL thru the carrier's
agent Air Care International, with Pomierski F.H. as the shipper and Mario (Maria)
Saludo as the consignee. PAL Airway Bill No. 079-01180454 Ordinary was issued
wherein the requested routing was from Chicago to San Francisco on board TWA
Flight 131 of October 27, 1976 and from San Francisco to Manila on board PAL Flight
No. 107 of the same date, and from Manila to Cebu on board PAL Flight 149 of
October 29, 1976 (See Exh. E., Also Exh. 1-PAL).
In the meantime, plaintiffs Maria Salvacion Saludo and Saturnino Saludo, thru a travel
agent, were booked with United Airlines from Chicago to California, and with PAL
from California to Manila. She then went to the funeral director of Pomierski Funeral
Home who had her mother's remains and she told the director that they were booked
with United Airlines. But the director told her that the remains were booked with TWA
flight to California. This upset her, and she and her brother had to change
reservations from UA to the TWA flight after she confirmed by phone that her
mother's remains should be on that TWA flight. They went to the airport and watched
from the look-out area. She saw no body being brought. So, she went to the TWA
counter again, and she was told there was no body on that flight. Reluctantly, they
took the TWA flight upon assurance of her cousin, Ani Bantug, that he would look into
the matter and inform her about it on the plane or have it radioed to her. But no
confirmation from her cousin reached her that her mother was on the West Coast.
Upon arrival at San Francisco at about 5:00 p.m., she went to the TWA counter there
to inquire about her mother's remains. She was told they did not know anything about
it.
She then called Pomierski that her mother's remains were not at the West Coast
terminal, and Pomierski immediately called C.M.A.S., which in a matter of 10 minutes
informed him that the remains were on a plane to Mexico City, that there were two
bodies at the terminal, and somehow they were switched; he relayed this information
to Miss Saludo in California; later C.M.A.S. called and told him they were sending the
remains back to California via Texas (see Exh. 6-TWA).
It-turned out that TWA had carried a shipment under PAL Airway Bill No. 079-ORD-
01180454 on TWA Flight 603 of October 27, 1976, a flight earlier than TWA Flight
131 of the same date. TWA delivered or transferred the said shipment said to contain
human remains to PAL at 1400H or 2:00 p.m. of the same date, October 27, 1976
(Bee Exh. 1- TWA). "Due to a switch(ing) in Chicago", this shipment was withdrawn
from PAL by CMAS at 1805H (or 6:05 p.m.) of the same date, October 27 (Exh. 3-
PAL, see Exh. 3-a-PAL).
What transpired at the Chicago (A)irport is explained in a memo or incident report by
Pomierski (Exh. 6-TWA) to Pomierski's lawyers who in turn referred to said' memo
and enclosed it in their (Pomierski's lawyers) answer dated July 18, 1981 to herein
plaintiff's counsel (See Exh. 5-TWA). In that memo or incident report (Exh. 6-TWA), it
is stated that the remains (of Crispina Saludo) were taken to CMAS at the airport; that
there were two bodies at the (Chicago Airport) terminal, and somehow they were
switched, that the remains (of Crispina Saludo) were on a plane to Mexico City; that
CMAS is a national service used by undertakers throughout the nation (U.S.A.),
TRANSPORTATION LAW – Chapter 2 & 3
makes all the necessary arrangements, such as flights, transfers, etc., and see(s) to it
that the remains are taken to the proper air freight terminal.
The following day October 28, 1976, the shipment or remains of Crispina Saludo
arrived (in) San Francisco from Mexico on board American Airlines. This shipment
was transferred to or received by PAL at 1945H or 7:45 p.m. (Exh. 2-PAL, Exh. 2-a-
PAL). This casket bearing the remains of Crispina Saludo, which was mistakenly sent
to Mexico and was opened (there), was resealed by Crispin F. Patagas for shipment
to the Philippines (See Exh. B-1). The shipment was immediately loaded on PAL flight
for Manila that same evening and arrived (in) Manila on October 30, 1976, a day after
its expected arrival on October 29, 1976.3
In a letter dated December 15, 1976,4 petitioners' counsel informed private
respondent Trans World Airlines (TWA) of the misshipment and eventual delay in the
delivery of the cargo containing the remains of the late Crispin Saludo, and of the
discourtesy of its employees to petitioners Maria Salvacion Saludo and Saturnino
Saludo. In a separate letter on June 10, 1977 addressed to co-respondent Philippine
Airlines (PAL),5 petitioners stated that they were holding PAL liable for said delay in
delivery and would commence judicial action should no favorable explanation be
given.
Both private respondents denied liability. Thus, a damage suit6 was filed by
petitioners before the then Court of First Instance, Branch III, Leyte, praying for the
award of actual damages of P50,000.00, moral damages of P1,000,000.00,
exemplary damages, attorney's fees and costs of suit.
As earlier stated, the court below absolved the two respondent airlines companies of
liability. The Court of Appeals affirmed the decision of the lower court in toto, and in a
subsequent resolution,7 denied herein petitioners' motion for reconsideration for lack
of merit.
In predictable disagreement and dissatisfaction with the conclusions reached by
respondent appellate court, petitioners now urge this Court to review the appealed
decision and to resolve whether or not (1) the delay in the delivery of the casketed
remains of petitioners' mother was due to the fault of respondent airline companies,
(2) the one-day delay in the delivery of the same constitutes contractual breach as
would entitle petitioners to damages, (3) damages are recoverable by petitioners for
the humiliating, arrogant and indifferent acts of the employees of TWA and PAL, and
(4) private respondents should be held liable for actual, moral and exemplary
damages, aside from attorney's fees and litigation expenses.8
…
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.
…
A bill of lading is a written acknowledgment of the receipt of the goods and an
agreement to transport and deliver them at a specified place to a person named or on
his order. Such instrument may be called a shipping receipt, forwarder's receipt and
receipt for transportation. 20 The designation, however, is immaterial. It has been hold
that freight tickets for bus companies as well as receipts for cargo transported by all
forms of transportation, whether by sea or land, fall within the definition. Under the
Tariff and Customs Code, a bill of lading includes airway bills of lading. 21 The two-fold
character of a bill of lading is all too familiar; it is a receipt as to the quantity and
description of the goods shipped and a contract to transport the goods to the
consignee or other person therein designated, on the terms specified in such
instrument. 22
Logically, since a bill of lading acknowledges receipt of goods to be transported,
delivery of the goods to the carrier normally precedes the issuance of the bill; or, to
some extent, delivery of the goods and issuance of the bill are regarded in
commercial practice as simultaneous acts. 23 However, except as may be prohibited
by law, there is nothing to prevent an inverse order of events, that is, the execution of
the bill of lading even prior to actual possession and control by the carrier of the cargo
to be transported. There is no law which requires that the delivery of the goods for
carriage and the issuance of the covering bill of lading must coincide in point of time
or, for that matter, that the former should precede the latter.
Ordinarily, a receipt is not essential to a complete delivery of goods to the carrier for
transportation but, when issued, is competent and  prima facie, but not conclusive,
evidence of delivery to the carrier. A bill of lading, when properly executed and
delivered to a shipper, is evidence that the carrier has received the goods described
therein for shipment. Except as modified by statute, it is a general rule as to the
parties to a contract of carriage of goods in connection with which a bill of lading is
issued reciting that goods have been received for transportation, that the recital being
in essence a receipt alone, is not conclusive, but may be explained, varied or
contradicted by parol or other evidence. 24
While we agree with petitioners' statement that "an airway bill estops the carrier from
denying receipt of goods of the quantity and quality described in the bill," a further
reading and a more faithful quotation of the authority cited would reveal that "(a) bill of
lading may contain constituent elements of estoppel and thus become something
more than a contract between the shipper and the carrier. . . . (However), as between
the shipper and the carrier, when no goods have been delivered for shipment no
recitals in the bill can estop the carrier from showing the true facts . . . Between the
TRANSPORTATION LAW – Chapter 2 & 3
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:
TRANSPORTATION LAW – Chapter 2 & 3
The airway bill expressly provides that "Carrier certifies goods described below were
received for carriage", and said cargo was "casketed human remains of Crispina
Saludo," with "Maria Saludo as Consignee; Pomierski F.H. as Shipper; Air Care
International as carrier's agent." On the face of the said airway bill, the specific flight
numbers, specific routes of shipment and dates of departure and arrival were
typewritten, to wit: Chicago TWA Flight 131/27 to San Francisco and from San
Francisco by PAL 107 on, October 27, 1976 to Philippines and to Cebu via PAL Flight
149 on October 29, 1976. The airway bill also contains the following typewritten
words, as follows: all documents have been examined (sic). Human remains of
Crispina Saludo. Please return back (sic) first available flight to SFO.
But, as it turned out and was discovered later the casketed human remains which
was issued PAL Airway Bill #079-1180454 was not the remains of Crispina Saludo,
the casket containing her remains having been shipped to Mexico City.
However, it should be noted that, Pomierski F.H., the shipper of Mrs. Saludo's
remains, hired Continental Mortuary Services (hereafter referred to as C.M.A.S.),
which is engaged in the business of transporting and forwarding human remains.
Thus, C.M.A.S. made all the necessary arrangements such as flights, transfers, etc.
— for shipment of the remains of Crispina Saludo.
The remains were taken on October 26th, 1976, to C.M.A.S. at the airport. These
people made all the necessary arrangements, such as flights, transfers, etc. This is a
national service used by undertakers throughout the nation. They furnished the air
pouch which the casket is enclosed in, and they see that the remains are taken to the
proper air frieght terminal. I was very surprised when Miss Saludo called me to say
that the remains were not at the west coast terminal. I immediately called C.M.A.S.
They called me back in a matter of ten minutes to inform me that the remains were on
a plane to Mexico City. The man said that there were two bodies at the terminal, and
somehow they were switched. . . . (Exb. 6 — "TWA", which is the memo or incident
report enclosed in the stationery of Walter Pomierski & Sons Ltd.)
Consequently, when the cargo was received from C.M.A.S. at the Chicago airport
terminal for shipment, which was supposed to contain the remains of Crispina
Saludo, Air Care International and/or TWA, had no way of determining its actual
contents, since the casket was hermetically sealed by the Philippine Vice-Consul in
Chicago and in an air pouch of C.M.A.S., to the effect that Air Care International
and/or TWA had to rely on the information furnished by the shipper regarding the
cargo's content. Neither could Air Care International and/or TWA open the casket for
further verification, since they were not only without authority to do so, but even
prohibited.
Thus, under said circumstances, no fault and/or negligence can be attributed to PAL
(even if Air Care International should be considered as an agent of PAL) and/or TWA,
the entire fault or negligence being exclusively with C.M.A.S.33 (Emphasis supplied.)
It can correctly and logically be concluded, therefore, that the switching occurred or,
more accurately, was discovered on October 27, 1976; and based on the above
findings of the Court of appeals, it happened while the cargo was still with CMAS, well
before the same was place in the custody of private respondents.
Thus, while the Air Cargo Transfer Manifest of TWA of October 27, 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:
… to the general nature of the articles shipped and of their value before it consents to
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
TRANSPORTATION LAW – Chapter 2 & 3
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
carry them; and its failure to do so cannot defeat the shipper's right to recovery of the
full value of the package if lost, in the absence of showing of fraud or deceit on the
part of the shipper. In the absence of more definite information, the carrier has a the
right to accept shipper's marks as to the contents of the package offered for
transportation and is not bound to inquire particularly about them in order to take
advantage of a false classification and where a shipper expressly represents the
contents of a package to be of a designated character, it is not the duty of the carrier
to ask for a repetition of the statement nor disbelieve it and open the box and see for
itself. 41 However, where a common carrier has reasonable ground to suspect that the
offered goods are of a dangerous or illegal character, the carrier has the right to know
the character of such goods and to insist on an inspection, if reasonable and practical
under the circumstances, as a condition of receiving and transporting such goods.42
It can safely be said then that a common carrier is entitled to fair representation of the
nature and value of the goods to be carried, with the concomitant right to rely thereon,
and further noting at this juncture that a carrier has no obligation to inquire into the
correctness or sufficiency of such information. 43 The consequent duty to conduct an
inspection thereof arises in the event that there should be reason to doubt the
veracity of such representations. Therefore, to be subjected to unusual search, other
than the routinary inspection procedure customarily undertaken, there must exist
proof that would justify cause for apprehension that the baggage is dangerous as to
warrant exhaustive inspection, or even refusal to accept carriage of the same; and it
is the failure of the carrier to act accordingly in the face of such proof that constitutes
the basis of the common carrier's liability. 44
In the case at bar, private respondents had no reason whatsoever to doubt the truth
of the shipper's representations. The airway bill expressly providing that "carrier
certifies goods received below were received for carriage," and that the cargo
contained "casketed human remains of Crispina Saludo," was issued on the basis of
such representations. The reliance thereon by private respondents was reasonable
and, for so doing, they cannot be said to have acted negligently. Likewise, no
evidence was adduced to suggest even an iota of suspicion that the cargo presented
for transportation was anything other than what it was declared to be, as would
require more than routine inspection or call for the carrier to insist that the same be
opened for scrutiny of its contents per declaration.
Neither can private respondents be held accountable on the basis of petitioners'
preposterous proposition that whoever brought the cargo to the airport or loaded it on
the airplane did so as agent of private respondents, so that even if CMAS whose
services were engaged for the transit arrangements for the remains was indeed at
fault, the liability therefor would supposedly still be attributable to private respondents.
While we agree that the actual participation of CMAS has been sufficiently and
correctly established, to hold that it acted as agent for private respondents would be
both an inaccurate appraisal and an unwarranted categorization of the legal position it
held in the entire transaction.
… hence petitioners' insistence on the application of the rules on interpretation of
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
TRANSPORTATION LAW – Chapter 2 & 3
xxx xxx xxx
It is agreed that no time is fixed for the completion of carriage hereunder and that
Carrier may without notice substitute alternate carriers or aircraft. Carrier assumes no
obligation to carry the goods by any specified aircraft or over any particular route or
routes or to make connection at any point according to any particular schedule, and
Carrier is hereby authorized to select, or deviate from the route or routes of shipment,
notwithstanding that the same may be stated on the face hereof. The shipper
guarantees payment of all charges and advances.48
Hence, when respondent TWA shipped the body on earlier flight and on a different
aircraft, it was acting well within its rights. We find this argument tenable.
The contention that there was contractual breach on the part of private respondents is
founded on the postulation that there was ambiguity in the terms of the airway bill,
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.
…
Turning to the terms of the contract at hand, as presented by PAL Air Waybill No.
079-01180454, respondent court approvingly quoted the trial court's disquisition on
the aforequoted condition appearing on the reverse side of the airway bill and its
disposition of this particular assigned error:
The foregoing stipulation fully answers plaintiffs' objections to the one-day delay and
the shipping of the remains in TWA Flight 603 instead of TWA Flight 131. Under the
stipulation, parties agreed that no time was fixed to complete the contract of carriage
and that the carrier may, without notice, substitute alternate carriers or aircraft. The
carrier did not assume the obligation to carry the shipment on any specified aircraft.
xxx xxx xxx
Furthermore, contrary to the claim of plaintiffs-appellants, the conditions of the Air
Waybill are big enough to be read and noticed. Also, the mere fact that the cargo in
question was shipped in TWA Flight 603, a flight earlier on the same day than TWA
Flight 131, did not in any way cause or add to the one-day delay complained of and/or
the switching or mix-up of the bodies.53
Indubitably, that private respondent can use substitute aircraft even without notice
and without the assumption of any obligation whatsoever to carry the goods on any
specified aircraft is clearly sanctioned by the contract of carriage as
specifically provided for under the conditions thereof.
…
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
… entirely; if he adheres, be gives his consent. Accordingly, petitioners, far from being
There is no showing by plaintiffs that such a special or specific contract had been
entered into between them and the defendant airline companies.
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.
TRANSPORTATION LAW – Chapter 2 & 3
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. 62 However, 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
the weaker party in this situation, duly signified their presumed assent to all terms of
the contract through their acceptance of the airway bill and are consequently bound
thereby. It cannot be gainsaid that petitioners' were not without several choices as to
carriers in Chicago with its numerous airways and airliner servicing the same.
We wish to allay petitioners' apprehension that Condition No. 5 of the airway bill is
productive of mischief as it would validate delay in delivery, sanction violations of
contractual obligations with impunity or put a premium on breaches of contract.
Just because we have said that condition No. 5 of the airway bill is binding upon the
parties to and fully operative in this transaction, it does not mean, and let this serve as
fair warning to respondent carriers, that they can at all times whimsically seek refuge
from liability in the exculpatory sanctuary of said Condition No. 5 or arbitrarily vary
routes, flights and schedules to the prejudice of their customers. This condition only
serves to insulate the carrier from liability in those instances when changes in routes,
flights and schedules are clearly justified by the peculiar circumstances of a particular
case, or by general transportation practices, customs and usages, or by
contingencies or emergencies in aviation such as weather turbulence, mechanical
failure, requirements of national security and the like. And even as it is conceded that
specific routing and other navigational arrangements for a trip, flight or voyage, or
variations therein, generally lie within the discretion of the carrier in the absence of
specific routing instructions or directions by the shipper, it is plainly incumbent upon
the carrier to exercise its rights with due deference to the rights, interests and
convenience of its customers.
A common carrier undertaking to transport property has the implicit duty to carry and
deliver it within reasonable time, absent any particular stipulation regarding time of
delivery, and to guard against delay. In case of any unreasonable delay, the carrier
shall be liable for damages immediately and proximately resulting from such neglect
of duty. 64 As found by the trial court, the delay in the delivery of the remains of
Crispina Saludo, undeniable and regrettable as it was, cannot be attributed to the
fault, negligence or malice of private respondents,65 a conclusion concurred in by
respondent court and which we are not inclined to disturb.
We are further convinced that when TWA opted to ship the remains of Crispina
Saludo on an earlier flight, it did so in the exercise of sound discretion and with
reasonable prudence, as shown by the explanation of its counsel in his letter of
February 19, 1977 in response to petitioners' demand letter:
Investigation of TWA's handling of this matter reveals that although the shipment was
scheduled on TWA Flight 131 of October 27, 1976, it was actually boarded on TWA
Flight 603 of the same day, approximately 10 hours earlier, in order to assure that the
shipment would be received in San Francisco in sufficient time for transfer to PAL.
This transfer was effected in San Francisco at 2:00 P.M. on October 27, 1976. 66
Precisely, private respondent TWA knew of the urgency of the shipment by reason of
this notation on the lower portion of the airway bill: "All documents have been
certified. Human remains of Cristina (sic) Saludo. Please return bag first available
flight to SFO." Accordingly, TWA took it upon itself to carry the remains of Crispina
Saludo on an earlier flight, which we emphasize it could do under the terms of the
airway bill, to make sure that there would be enough time for loading said remains on
the transfer flight on board PAL.
III. Petitioners challenge the validity of respondent court's finding that private
respondents are not liable for tort on account of the humiliating, arrogant and
indifferent acts of their officers and personnel. They posit that since their mother's
remains were transported ten hours earlier than originally scheduled, there was no
reason for private respondents' personnel to disclaim knowledge of the arrival or
whereabouts of the same other than their sheer arrogance, indifference and extreme
insensitivity to the feelings of petitioners. Moreover, being passengers and not merely
consignors of goods, petitioners had the right to be treated with courtesy, respect,
kindness and due consideration.
In riposte, TWA claims that its employees have always dealt politely with all clients,
customers and the public in general. PAL, on the other hand, declares that in the
performance of its obligation to the riding public, other customers and clients, it has
always acted with justice, honesty, courtesy and good faith.
Respondent appellate court found merit in and reproduced the trial court's refutation
of this assigned error:
TRANSPORTATION LAW – Chapter 2 & 3
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:
…
The foregoing does not show any humiliating or arrogant manner with which the
personnel of both defendants treated the two plaintiffs. Even their alleged indifference
is not clearly established. The initial answer of the TWA personnel at the counter that
they did not know anything about the remains, and later, their answer that they have
not heard anything about the remains, and the inability of the TWA counter personnel
to inform the two plaintiffs of the whereabouts of the remains, cannot be said to be
total or complete indifference to the said plaintiffs. At any rate, it is any rude or
discourteous conduct, malfeasance or neglect, the use of abusive or insulting
language calculated to humiliate and shame passenger or had faith by or on the part
of the employees of the carrier that gives the passenger an action for damages
against the carrier (Zulueta vs. Pan American World Airways, 43 SCRA 397; Air
France vs. Carrascoso, et al., 18 SCRA 155; Lopez, et al. vs. Pan American World
Airways, 16 SCRA 431; Northwest Airlines, Inc. vs. Cuenca, 14 SCRA 1063), and
none of the above is obtaining in the instant case. 67
We stand by respondent court's findings on this point, but only to the extent where it
holds that the manner in which private respondent TWA's employees dealt with
petitioners was not grossly humiliating, arrogant or indifferent as would assume the
proportions of malice or bad faith and lay the basis for an award of the damages
claimed. It must however, be pointed out that the lamentable actuations of respondent
TWA's employees leave much to be desired, particularly so in the face of petitioners'
grief over the death of their mother, exacerbated by the tension and anxiety wrought
by the impasse and confusion over the failure to ascertain over an appreciable period
of time what happened to her remains.
Airline companies are hereby sternly admonished that it is their duty not only to
cursorily instruct but to strictly require their personnel to be more accommodating
towards customers, passengers and the general public. After all, common carriers
such as airline companies are in the business of rendering public service, which is the
primary reason for their enfranchisement and recognition in our law. Because the
passengers in a contract of carriage do not contract merely for transportation, they
have a right to be treated with kindness, respect, courtesy and consideration. 68 A
contract to transport passengers is quite different in kind and degree from any other
contractual relation, and generates a relation attended with public duty. The operation
of a common carrier is a business affected with public interest and must be directed
to serve the comfort and convenience of passengers. 69 Passengers are human
beings with human feelings and emotions; they should not be treated as mere
numbers or statistics for revenue.
The records reveal that petitioners, particularly Maria and Saturnino Saludo, agonized
for nearly five hours, over the possibility of losing their mother's mortal remains,
unattended to and without any assurance from the employees of TWA that they were
doing anything about the situation. This is not to say that petitioners were to be
regaled with extra special attention. They were, however, entitled to the
understanding and humane consideration called for by and commensurate with the
extraordinary diligence required of common carriers, and not the cold insensitivity to
their predicament. It is hard to believe that the airline's counter personnel were totally
helpless about the situation. Common sense would and should have dictated that
they exert a little extra effort in making a more extensive inquiry, by themselves or
through their superiors, rather than just shrug off the problem with a callous and
uncaring remark that they had no knowledge about it. With all the modern
communications equipment readily available to them, which could have easily
facilitated said inquiry and which are used as a matter of course by airline companies
in their daily operations, their apathetic stance while not legally reprehensible is
morally deplorable.

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.

TRANSPORTATION LAW – Chapter 2 & 3

3.) G.R. No. 95529               August 22, 1991
MAGELLAN MANUFACTURING MARKETING CORPORATION,* petitioner,
vs. COURT OF APPEALS, ORIENT OVERSEAS CONTAINER LINES and F.E.
ZUELLIG, INC. respondents.
[Petitioner to export Anahaw to Japan- buyer issued letter of credit, condition is no
transshipment and needs an on-board bill of lading- pet hired Zuellig as shipping
agent who used Orient as the shipper- when shipment arrived, the bank refused
payment due to breach of conditions- goods were shipped back to Manila and
demanded demurrage fees in Japan and Manila- Pet abandoned goods and asked
Orient for damages for the earning they could have done- Resp assert no
transshipment as both ships belong to them and that it issued on-board bill of lading-
Lower courts favor respondents, made pet to pay demurrage- transshipment still
happened, different ships even if same owner- bill of lading was only receiving and
petitioners accepted it without objections, BOL serves as the contract even
transshipment was written there- resp wins but no more damages as the abandoned
goods have been sold by them]
On May 20, 1980, plaintiff-appellant Magellan Manufacturers Marketing Corp.
(MMMC) entered into a contract with Choju Co. of Yokohama, Japan to export
136,000 anahaw fans for and in consideration of $23,220.00. As payment thereof, a
letter of credit was issued to plaintiff MMMC by the buyer. Through its president,
James Cu, MMMC then contracted F.E. Zuellig, a shipping agent, through its solicitor,
one Mr. King, to ship the anahaw fans through the other appellee, Orient Overseas
Container Lines, Inc., (OOCL) specifying that he needed an on-board bill of lading
and that transhipment is not allowed under the letter of credit (Exh. B-1). On June 30,
1980, appellant MMMC paid F.E. Zuellig the freight charges and secured a copy of
the bill of lading which was presented to Allied Bank. The bank then credited the
amount of US$23,220.00 covered by the letter of credit to appellant's account.
However, when appellant's president James Cu, went back to the bank later, he was
informed that the payment was refused by the buyer allegedly because there was no
on-board bill of lading, and there was a transhipment of goods. As a result of the
refusal of the buyer to accept, upon appellant's request, the anahaw fans were
shipped back to Manila by appellees, for which the latter demanded from appellant
payment of P246,043.43. Appellant abandoned the whole cargo and asked appellees
for damages.
In their Partial Stipulation of Facts, the parties admitted that a shipment of 1,047
cartons of 136,000 pieces of Anahaw Fans contained in 1 x 40 and 1 x 20 containers
was loaded at Manila on board the MV 'Pacific Despatcher' freight prepaid, and duly
covered by Bill of Lading No. MNYK201T dated June 27, 1980 issued by OOCL; that
the shipment was delivered at the port of discharge on July 19, 1980, but was
subsequently returned to Manila after the consignee refused to accept/pay the same.4
Elaborating on the above findings of fact of respondent court and without being
disputed by herein private respondents, petitioner additionally avers that:
TRANSPORTATION LAW – Chapter 2 & 3
When petitioner informed private respondents about what happened, the latter issued
a certificate stating that its bill of lading it issued is an on board bill of lading and that
there was no actual transhipment of the fans. According to private respondents when
the goods are transferred from one vessel to another which both belong to the same
owner which was what happened to the Anahaw fans, then there is (no)
transhipment. Petitioner sent this certification to Choju Co., Ltd., but the said
company still refused to accept the goods which arrived in Japan on July 19, 1980.
Private respondents billed petitioner in the amount of P16,342.21 for such shipment
and P34,928.71 for demurrage in Japan from July 26 up to August 31, 1980 or a total
of P51,271.02. In a letter dated March 20, 1981, private respondents gave petitioner
the option of paying the sum of P51,271.02 or to abandon the Anahaw fans to enable
private respondents to sell them at public auction to cover the cost of shipment and
demurrages. Petitioner opted to abandon the goods. However, in a letter dated June
22, 1981 private respondents demanded for payment of P298,150.93 from petitioner
which represents the freight charges from Japan to Manila, demurrage incurred in
Japan and Manila from October 22, 1980 up to May 20, 1981; and charges for
stripping the container van of the Anahaw fans on May 20, 1981.
On July 20, 1981 petitioner filed the complaint in this case praying that private
respondents be ordered to pay whatever petitioner was not able to earn from Choju
Co., Ltd., amounting to P174,150.00 and other damages like attorney's fees since
private respondents are to blame for the refusal of Choju Co., Ltd. to accept the
Anahaw fans. In answer thereto the private respondents alleged that the bill of lading
clearly shows that there will be a transhipment and that petitioner was well aware that
MV (Pacific) Despatcher was only up to Hongkong where the subject cargo will be
transferred to another vessel for Japan. Private respondents also filed a counterclaim
praying that petitioner be ordered to pay freight charges from Japan to Manila and the
demurrages in Japan and Manila amounting to P298,150.93.
The lower court decided the case in favor of private respondents. It dismissed the
complaint on the ground that petitioner had given its consent to the contents of the bill
of lading where it is clearly indicated that there will be transhipment. The lower court
also said that petitioner is liable to pay to private respondent the freight charges from
Japan to Manila and demurrages since it was the former which ordered the
reshipment of the cargo from Japan to Manila.
On appeal to the respondent court, the finding of the lower (court) that petitioner
agreed to a transhipment of the goods was affirmed but the finding that petitioner is
liable for P298,150.93 was modified. It was reduced to P52,102.45 which represents
the freight charges and demurrages incurred in Japan but not for the demurrages
incurred in Marta. According to the respondent (court) the petitioner can not be held
liable for the demurrages incurred in Manila because Private respondents did not
timely inform petitioner that the goods were already in Manila in addition to the fact
that private respondent had given petitioner the option of abandoning the goods in
exchange for the demurrages.5
Petitioner, being dissatisfied with the decision of respondent court and the motion for
reconsideration thereof having been denied, invokes the Court's review powers for
the resolution of the issues as to whether or not respondent court erred (1) in
affirming the decision of the trial court which dismissed petitioner's complaint; and (2)
in holding petitioner liable to private respondents in the amount of P52,102.45.6
I. Petitioner obstinately faults private respondents for the refusal of its buyer, Choju
Co., Ltd., to take delivery of the exported anahaw fans resulting in a loss of
P174,150.00 representing the purchase price of the said export items because of
violation of the terms and conditions of the letter of credit issued in favor of the former
which specified the requirement for an on board bill of lading and the prohibition
against transhipment of goods, inasmuch as the bill of lading issued by the latter bore
the notation "received for shipment" and contained an entry indicating transhipment in
Hongkong.
We find no fault on the part of private respondents. On the matter of transhipment,
petitioner maintains that "... while the goods were transferred in Hongkong from MV
Pacific Despatcher, the feeder vessel, to MV Oriental Researcher, a mother vessel,
the same cannot be considered transhipment because both vessels belong to the
same shipping company, the private respondent Orient Overseas Container Lines,
Inc."7 Petitioner emphatically goes on to say: "To be sure, there was no actual
transhipment of the Anahaw fans. The private respondents have executed a
certification to the effect that while the Anahaw fans were transferred from one vessel
to another in Hong Kong, since the two vessels belong to one and the same company
then there was no transhipment.8
Transhipment, in maritime law, is defined as "the act of taking cargo out of one ship
and loading it in another,"9 or "the transfer of goods from the vessel stipulated in the
contract of affreightment to another vessel before the place of destination named in
the contract has been reached,"10 or "the transfer for further transportation from one
ship or conveyance to another."11 Clearly, either in its ordinary or its strictly legal
acceptation, there is transhipment whether or not the same person, firm or entity
owns the vessels. In other words, the fact of transhipment is not dependent upon the
ownership of the transporting ships or conveyances or in the change of carriers, as
the petitioner seems to suggest, but rather on the fact of actual physical transfer of
cargo from one vessel to another.
That there was transhipment within this contemplation is the inescapable conclusion,
as there unmistakably appears on the face of the bill of lading the entry "Hong Kong"
in the blank space labeled "Transhipment," which can only mean that transhipment
actually took place.12 This fact is further bolstered by the certification13 issued by
private respondent F.E. Zuellig, Inc. dated July 19, 1980, although it carefully used
the term "transfer" instead of transhipment. Nonetheless, no amount of semantic
juggling can mask the fact that transhipment in truth occurred in this case.
Petitioner insists that "(c)onsidering that there was no actual transhipment of the
Anahaw fans, then there is no occasion under which the petitioner can agree to the
transhipment of the Anahaw fans because there is nothing like that to agree to" and
"(i)f there is no actual transhipment but there appears to be a transhipment in the bill
TRANSPORTATION LAW – Chapter 2 & 3
of lading, then there can be no possible reason for it but a mistake on the part of the
private respondents.14
Petitioner, in effect, is saying that since there was a mistake in documentation on the
part of private respondents, such a mistake militates against the conclusiveness of
the bill of lading insofar as it reflects the terms of the contract between the parties, as
an exception to the parol evidence rule, and would therefore permit it to explain or
present evidence to vary or contradict the terms of the written agreement, that is, the
bill of lading involved herein.
It is a long standing jurisprudential rule that a bill of lading operates both as a receipt
and as a contract….
The holding in most jurisdictions has been that a shipper who receives a bill of lading
without objection after an opportunity to inspect it, and permits the carrier to act on it
by proceeding with the shipment is presumed to have accepted it as correctly stating
the contract and to have assented to its terms. …
In the light of the series of events that transpired in the case at bar, there can be no
logical conclusion other than that the petitioner had full knowledge of, and actually
consented to, the terms and conditions of the bill of lading thereby making the same
conclusive as to it, and it cannot now be heard to deny having assented thereto. As
borne out by the records, James Cu himself, in his capacity as president of MMMC,
personally received and signed the bill of lading. On practical considerations, there is
no better way to signify consent than by voluntarry signing the document which
embodies the agreement. As found by the Court of Appeals —
Contrary to appellant's allegation that it did not agree to the transhipment, it could be
gleaned from the record that the appellant actually consented to the transhipment
when it received the bill of lading personally at appellee's (F.E. Zuellig's) office. There
clearly appears on the face of the bill of lading under column "PORT OF
TRANSHIPMENT" an entry "HONGKONG' (Exhibits'G-l'). Despite said entries he still
delivered his voucher (Exh. F) and the corresponding check in payment of the freight
(Exhibit D), implying that he consented to the transhipment (Decision, p. 6, Rollo).19
Furthermore and particularly on the matter of whether or not there was transhipment,
James Cu, in his testimony on crossexamination, categorically stated that he knew for
a fact that the shipment was to be unloaded in Hong Kong from the MV Pacific
Despatcher to be transferred to a mother vessel, the MV Oriental Researcher in this
wise:
…
Petitioner further argues that assuming that there was transhipment, it cannot be
deemed to have agreed thereto even if it signed the bill of lading containing such
entry because it had made known to private respondents from the start that
transhipment was prohibited under the letter of credit and that, therefore, it had no
intention to allow transhipment of the subject cargo. In support of its stand, petitioner
relies on the second paragraph of Article 1370 of the Civil Code which states that "(i)f
the words appear to be contrary to the evident intention of the parties, the latter shall
prevail over the former," as wen as the supposed ruling in Caltex Phil., Inc. vs.
Intermediate Appellate Court, et al.25 that "where the literal interpretation of a contract
is contrary to the evident intention of the parties, the latter shall prevail."
As between such stilted thesis of petitioner and the contents of the bill of lading
evidencing the intention of the parties, it is irremissible that the latter must prevail.
Petitioner conveniently overlooks the first paragraph of the very article that he cites
which provides that "(i)f the terms of the contract are clear and leave no doubt upon
the intention of the contracting parties, the literal meaning of the stipulations shall
control." In addition, Article 1371 of the same Code provides that "(i)n order to judge
the intention of the contracting parties, their contemporaneous and subsequent acts
shall be principally considered."
… Thus, even assuming that by a liberal treatment of the certification it could have the
Another ground for the refusal of acceptance of the cargo of anahaw fans by Choju
Co., Ltd. was that the bill of lading that was issued was not an on board bill of lading,
in clear violation of the terms of the letter of credit issued in favor of petitioner. On
cross-examination, it was likewise established that petitioner, through its aforesaid
president, was aware of this fact, thus:
… afforded by an on board bill of lading, that is, reasonable certainty of shipping the
Undoubtedly, at the outset, petitioner knew that its buyer, Choju Co., Ltd., particularly
required that there be an on board bill of lading, obviously due to the guaranty
afforded by such a bill of lading over any other kind of bill of lading. The buyer could
not have insisted on such a stipulation on a pure whim or caprice, but rather because
of its reliance on the safeguards to the cargo that having an on board bill of lading
ensured. Herein petitioner cannot feign ignorance of the distinction between an "on
board" and a "received for shipment" bill of lading, as manifested by James Cu's
testimony. It is only to be expected that those long engaged in the export industry
should be familiar with business usages and customs.
In its petition, MMMC avers that "when petitioner teamed of what happened, it saw
private respondent F.E. Zuellig which, in turn, issued a certification that as of June 30,
1980, the Anahaw fans were already on board MV Pacific Despatcher (which means
that the bill of lading is an on- board-bill of lading or 'shipped' bill of lading as
distinguished from a 'received for shipment' bill of lading as governed by Sec. 3, par.
7, Carriage of Goods by Sea Act) ...."28 What the petitioner would suggest is that said
certification issued by F.E. Zuellig, Inc., dated July 19, 1980, had the effect of
converting the original "received for shipment only" bill of lading into an "on board" bill
of lading as required by the buyer and was, therefore, by substantial compliance, not
violative of the contract.
An on board bill of lading is one in which it is stated that the goods have been
received on board the vessel which is to carry the goods, whereas a received for
TRANSPORTATION LAW – Chapter 2 & 3
shipment bill of lading is one in which it is stated that the goods have been received
for shipment with or without specifying the vessel by which the goods are to be
shipped. Received for shipment bills of lading are issued whenever conditions are not
normal and there is insufficiency of shipping space.29 An on board bill of lading is
issued when the goods have been actually placed aboard the ship with every
reasonable expectation that the shipment is as good as on its way.30 It is, therefore,
understandable that a party to a maritime contract would require an on board bill of
lading because of its apparent guaranty of certainty of shipping as well as the
seaworthiness of the vessel which is to carry the goods.
It cannot plausibly be said that the aforestated certification of F.E. Zuellig, Inc. can
qualify the bill of lading, as originally issued, into an on board bill of lading as required
by the terms of the letter of credit issued in favor of petitioner. For one, the
certification was issued only on July 19, 1980, way beyond the expiry date of June 30,
1980 specified in the letter of credit for the presentation of an on board bill of lading.
effect of converting the received for shipment bill of lading into an on board of bill of
lading, as petitioner would have us believe, such an effect may be achieved only as of
the date of its issuance, that is, on July 19, 1980 and onwards.
The fact remains, though, that on the crucial date of June 30, 1980 no on board bill of
lading was presented by petitioner in compliance with the terms of the letter of credit
and this default consequently negates its entitlement to the proceeds thereof. Said
certification, if allowed to operate retroactively, would render illusory the guaranty
loaded cargo aboard the vessel specified, not to mention that it would indubitably be
stretching the concept of substantial compliance too far.
Neither can petitioner escape Liability by adverting to the bill of lading as a contract of
adhesion, thus warranting a more liberal consideration in its favor to the extent of
interpreting ambiguities against private respondents as allegedly being the parties
who gave rise thereto. The bill of lading is clear on its face. There is no occasion to
speak of ambiguities or obscurities whatsoever. All of its terms and conditions are
plainly worded and commonly understood by those in the business.
It will be recalled that petitioner entered into the contract with Choju Co., Ltd. way
back on May 20,1980 or over a month before the expiry date of the letter of credit on
June 30, 1980, thus giving it more than ample time to find a carrier that could comply
with the requirements of shipment under the letter of credit. It is conceded that bills of
lading constitute a class of contracts of adhesion. However, as ruled in the earlier
case of Ong Yiu vs. Court of Appeals, et al.31 and reiterated in Servando, et al. vs.
Philippine Steam Navigation Co.,32 plane tickets as well as bills of lading 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. The respondent court correctly
observed in the present case that "when the appellant received the bill of lading, it
was tantamount to appellant's adherence to the terms and conditions as embodied
therein.33
In sum, petitioner had full knowledge that the bill issued to it contained terms and
conditions clearly violative of the requirements of the letter of credit. Nonetheless,
perhaps in its eagerness to conclude the transaction with its Japanese buyer and in a
race to beat the expiry date of the letter of credit, petitioner took the risk of accepting
the bill of lading even if it did not conform with the indicated specifications, possibly
entertaining a glimmer of hope and imbued with a touch of daring that such violations
may be overlooked, if not disregarded, so long as the cargo is delivered on time.
Unfortunately, the risk did not pull through as hoped for. Any violation of the terms
and conditions of the letter of credit as would defeat its right to collect the proceeds
thereof was, therefore, entirely of the petitioner's making for which it must bear the
consequences. As finally averred by private respondents, and with which we agree,
"... the questions of whether or not there was a violation of the terms and conditions of
the letter of credit, or whether or not such violation was the cause or motive for the
rejection by petitioner's Japanese buyer should not affect private respondents therein
since they were not privies to the terms and conditions of petitioner's letter of credit
and cannot therefore be held liable for any violation thereof by any of the parties
thereto."34
II. Petitioner contends that respondent court erred in holding it liable to private
respondents for P52,102.45 despite its exercise of its option to abandon the cargo. It
will be recalled that the trial court originally found petitioner liable for P298,150.93,
which amount consists of P51,271.02 for freight, demurrage and other charges during
the time that the goods were in Japan and for its reshipment to Manila, P831.43 for
charges paid to the Manila International Port Terminal, and P246,043.43 for
demurrage in Manila from October 22, 1980 to June 18, 1981. On appeal, the Court
of Appeals limited petitioner's liability to P52,102.45 when it ruled:
As regards the amount of P51,271.02, which represents the freight charges for the
return shipment to Manila and the demurrage charges in Japan, the same is
supported by appellant's own letter request (Exh. 2) for the return of the shipment to
Manila at its (appellant's) expense, and hence, it should be held liable therefor. The
amount of P831.43 was paid to the Manila International Port Terminal upon arrival of
the shipment in Manila for appellant's account. It should properly be charged to said
appellant.35
However, respondent court modified the trial court's decision by excluding the award
for P246,043.43 for demurrage in Manila from October 22, 1980 to June 18, 1981.
Demurrage, in its strict sense, is the compensation provided for in the contract of
affreightment for the detention of the vessel beyond the time agreed on for loading
and unloading. Essentially, demurrage is the claim for damages for failure to accept
delivery. In a broad sense, every improper detention of a vessel may be considered a
demurrage. Liability for demurrage, using the word in its strictly technical sense,
exists only when expressly stipulated in the contract. Using the term in its broader
sense, damages in the nature of demurrage are recoverable for a breach of the
implied obligation to load or unload the cargo with reasonable dispatch, but only by
the party to whom the duty is owed and only against one who is a party to the
shipping contract.36 Notice of arrival of vessels or conveyances, or of their placement
TRANSPORTATION LAW – Chapter 2 & 3
for purposes of unloading is often a condition precedent to the right to collect
demurrage charges.
Private respondents, admittedly, have adopted the common practice of requiring prior
notice of arrival of the goods shipped before the shipper can be held liable for
demurrage, as declared by Wilfredo Hans, head of the accounting department of F.E.
Zuellig, Inc., on cross-examination as a witness for private respondents:
…
Accordingly, on this score, respondent court ruled:
However, insofar as the demurrage charges of P246,043.43 from October up to May
1980, arriv(al) in Manila, are concerned, We are of the view that appellant should not
be made to shoulder the same, as it was not at fault nor was it responsible for said
demurrage charges. Appellee's own witness (Mabazza) testified that while the goods
arrived in Manila in October 1980, appellant was notified of said arrival only in March
1981. No explanation was given for the delay in notifying appellant. We agree with
appellant that before it could be charged for demurrage charges it should have been
notified of the arrival of the goods first.1âwphi1 Without such notification it could not-
be so charged because there was no way by which it would know that the goods had
already arrived for it to take custody of them. Considering that it was only in March
1981 (Exh. K) that appellant was notified of the arrival of the goods, although the
goods had actually arrived in October 1980 (tsn, Aug. 14, 1986, pp. 10-14), appellant
cannot be charged for demurrage from October 1980 to March 1981. ...38
While being satisfied with the exclusion of demurrage charges in Manila for the period
from October 22,1980 to June 18,1981, petitioner nevertheless assails the Court of
Appeals' award of P52,102.43 in favor of private respondents, consisting of
P51,271.01 as freight and demurrage charges in Japan and P831.43 for charges paid
at the Manila International Port Termninal.
Petitioner asserts that by virtue of the exercise of its option to abandon the goods so
as to allow private respondents to sell the same at a public auction and to apply the
proceeds thereof as payment for the shipping and demurrage charges, it was
released from liability for the sum of P52,102.43 since such amount represents the
shipping and demurrage charges from which it is considered to have been released
due to the abandonment of goods. It further argues that the shipping and demurrage
charges from which it was released by the exercise of the option to abandon the
goods in favor of private respondents could not have referred to the demurrage
charges in Manila because respondent court ruled that the same were not chargeable
to petitioner. Private respondents would rebut this contention by saying in their
memorandum that the abandonment of goods by petitioner was too late and made in
bad faith.39
On this point, we agree with petitioner. Ordinarily, the shipper is liable for freightage
due to the fact that the shipment was made for its benefit or under its direction and,
correspondingly, the carrier is entitled to collect charges for its shipping services. This
is particularly true in this case where the reshipment of the goods was made at the
instance of petitioner in its letter of August 29, 1980.40
However, in a letter dated March 20, 1981,41 private respondents belatedly informed
petitioner of the arrival of its goods from Japan and that if it wished to take delivery of
the cargo it would have to pay P51,271.02, but with the last paragraph thereof stating
as follows:
Please can you advise within 15 days of receipt of this letter whether you intend to
take delivery of this shipment, as alternatively we will have to take legal proceedings
in order to have the cargo auctioned to recover the costs involved, as well as free the
container which are (sic) urgently required for export cargoes.
the cost and expenses of reshipment. And, said choice having been duly
communicated, the same is binding upon the parties on legal and equitable
considerations of estoppel.
WHEREFORE, the judgment of respondent Court of Appeals is AFFIRMED with the
MODIFICATION that petitioner is likewise absolved of any hability and the award of
P52,102.45 with legal interest granted by respondent court on private respondents'
counterclaim is SET ASIDE, said counterclaim being hereby DISMISSED, without
pronouncement as to costs.

Clearly, therefore, private respondents unequivocally offered petitioner the option of

paying the shipping and demurrage charges in order to take delivery of the goods or
of abandoning the same so that private respondents could sell them at public auction
and thereafter apply the proceeds in payment of the shipping and other charges.

Responding thereto, in a letter dated April 3, 1981, petitioner seasonably

communicated its decision to abandon to the goods in favor of private respondents
with the specific instruction that any excess of the proceeds over the legal costs and
charges be turned over to petitioner. Receipt of said letter was acknowledged by
private respondents, as revealed by the testimony of Edwin Mabazza, a claim officer
of F.E. Zuellig, Inc., on cross-examination.42

Despite petitioner's exercise of the option to abandon the cargo, however, private
respondents sent a demand letter on June 22, 198143 insisting that petitioner should
pay the entire amount of P298,150.93 and, in another letter dated Apiril 30,
1981,44 they stated that they win not accept the abandonment of the goods and
demanded that the outstanding account be settled. The testimony of said Edwin
Mabazza definitely admits and bears this out.45

Now, there is no dispute that private respondents expressly and on their own volition
granted petitioner an option with respect to the satisfaction of freightage and
demurrage charges. Having given such option, especially since it was accepted by
petitioner, private respondents are estopped from reneging thereon. Petitioner, on its
part, was well within its right to exercise said option. Private respondents, in giving the
option, and petitioner, in exercising that option, are concluded by their respective
actions. To allow either of them to unilaterally back out on the offer and on the
exercise of the option would be to countenance abuse of rights as an order of the
day, doing violence to the long entrenched principle of mutuality of contracts.

It will be remembered that in overland transportation, an unreasonable delay in the

delivery of transported goods is sufficient ground for the abandonment of goods. By
analogy, this can also apply to maritime transportation. Further, with much more
reason can petitioner in the instant case properly abandon the goods, not only
because of the unreasonable delay in its delivery but because of the option which
was categorically granted to and exercised by it as a means of settling its liability for
TRANSPORTATION LAW – Chapter 2 & 3
4.) G.R. No. L-3678             February 29, 1952
JOSE MENDOZA, plaintiff-appellant, vs. PHILIPPINE AIR LINES, INC., defendant-
appellee.
[petitioner ordered films from Naga to Manila due to fiesta for Sept 17 and 18- Was
shipped but was not unloaded- was delayed and only delivered Sept 20- pet filed
damages for missed earnings- LC dimissed- resps assert Way Bill did not stip
specific time- Issue: is PAL liable for the missed earnings due to delay?- Ruling: what
pet is asking is not ordinary damages but special damages, given such for PAL to be
liable, the specific time it was needed should have been given notice- this is because
PAL cannot have had foreseen the damages that may be brought to petitioner
without them raising it- and that he cant say he was suing on a quasi-delict because
he became a party to the contract when he claimed with the bill of lading thus if ever
his COA is breach of contract but there is none as there was no notice that it was
needed at a specific time and the Way Bill did not specify so- PAL wins]
In the year 1948, appellant Jose Mendoza was the owner of the Cita Theater located
in the City of Naga, Camarines Sur, where he used to exhibit movie pictures booked
from movie producers or film owners in Manila. The fiesta or town holiday of the City
of Naga, held on September 17 and 18, yearly, was usually attended by a great many
people, mostly from the Bicol region, especially since the Patron Saint Virgin of Peña
Francia was believed by many to be miraculous. As a good businessman, appellant,
taking advantage of these circumstances, decided to exhibit a film which would fit the
occasion and have a special attraction and significance to the people attending said
fiesta. A month before the holiday, that is to say, August 1948, he contracted with the
LVN pictures, Inc., a movie producer in Manila for him to show during the town fiesta
the Tagalog film entitled "Himala ng Birhen" or Miracle of the Virgin. He made
extensive preparations; he had two thousand posters printed and later distributed not
only in the City of Naga but also in the neighboring towns. He also advertised in a
weekly of general circulation in the province. The posters and advertisement stated
that the film would be shown in the Cita theater on the 17th and 18th of September,
corresponding to the eve and day of the fiesta itself.
In pursuance of the agreement between the LVN Pictures Inc. and Mendoza, the
former on September 17th, 1948, delivered to the defendant Philippine Airlines (PAL)
whose planes carried passengers and cargo and made regular trips from Manila to
the Pili Air Port near Naga, Camarines Sur, a can containing the film "Himala ng
Birhen" consigned to the Cita Theater. For this shipment the defendant issued its Air
Way Bill No. 317133 marked Exhibit "1". This can of films was loaded on flight 113 of
the defendant, the plane arriving at the Air Port at Pili a little after four o'clock in the
afternoon of the same day, September 17th. For reasons not explained by the
defendant, but which would appear to be the fault of its employees or agents, this can
of film was not unloaded at Pili Air Port and it was brought back to Manila. Mendoza
who had completed all arrangements for the exhibition of the film beginning in the
evening of September 17th, to exploit the presence of the big crowd that came to
attend the town fiesta, went to the Air Port and inquired from the defendant's station
master there about the can of film. Said station master could not explain why the film
TRANSPORTATION LAW – Chapter 2 & 3
was not unloaded and sent several radiograms to his principal in Manila making
inquiries and asking that the film be sent to Naga immediately. After investigation and
search in the Manila office, the film was finally located the following day, September
18th, and then shipped to the Pili Air Port on September 20th. Mendoza received it
and exhibited the film but he had missed his opportunity to realize a large profit as he
expected for the people after the fiesta had already left for their towns. To recoup his
losses, Mendoza brought this action against the PAL. After trial, the lower court found
that because of his failure to exhibit the film "Himala ng Birhen" during the town fiesta,
Mendoza suffered damages or rather failed to earn profits in the amount of
P3,000.00, but finding the PAL not liable for said damages, dismissed the complaint.
To avoid liability, defendant-appellee, called the attention of the trial court to the terms
and conditions of paragraph 6 of the Way Bill printed on the back thereof which
paragraph reads as follows:
6. 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.
It claimed that since there was no obligation on its part to carry the film in question on
any specified time, it could not be held accountable for the delay of about three days.
The trial court, however, found and held that although the defendant was not
obligated to load the film on any specified plane or on any particular day, once said
can film was loaded and shipped on one of its planes making trip to Camarines, then
it assumed the obligation to unload it at its point of destination and deliver it to the
consignee, and its unexplained failure to comply with this duty constituted negligence.
If however found that fraud was not involved and that the defendant was a debtor in
good faith.
The trial court presided over by Judge Jose N. Leuterio in a well-considered decision
citing authorities, particularly the case of Daywalt vs. Corporacion de PP. Agustinos
Recoletos, 39 Phil. 587, held that not because plaintiff failed to realize profits in the
sum of P3,000.00 due to the negligence of the defendant, should the latter be made
to reimburse him said sum. Applying provisions of Art. 1107 of the Civil Code which
provides that losses and those foreseen, or which might have been foreseen, at the
time of constituting the obligation, and which are a necessary consequence of the
failure to perform it, the trial court held that inasmuch as these damages suffered by
Mendoza were not foreseen or could not have been foreseen at the time that the
defendant accepted the can of film for shipment, for the reason that neither the
shipper LVN Pictures Inc. nor the consignee Mendoza had called its attention to the
special circumstances attending the shipment and the showing of the film during the
town fiesta of Naga, plaintiff may not recover the damages sought.
Counsel for appellant insists that the articles of the Code of Commerce rather than
those of the Civil Code should have been applied in deciding this case for the reason
that the shipment of the can of film is an act of commerce; that the contract of
transportation in this case should be considered commercial under Art. 349 of the
Code of Commerce because it only involves merchandise or an object of commerce
but also the transportation company, the defendant herein, was a common carrier,
that is to say, customarily engaged in transportation for the public, and that although
the contract of transportation was not by land or waterways as defined in said Art.
349, nevertheless, air transportation being analogous to land and water
transportation, should be considered as included, especially in view of the second
paragraph of Art. 2 of the same Code which says that transactions covered by the
Code of Commerce and all others of analogous character shall be deemed acts of
commerce. The trial court, however, disagreed to this contention and opined that air
transportation not being expressly covered by the Code of Commerce, cannot be
governed by its provisions.
We believe that whether or not transportation by air should be regarded as a
commercial contract under Art. 349, would be immaterial in the present case, as will
be explained later. Without making a definite ruling on the civil or commercial nature
of transportation by air, it being unnecessary, we are inclined to believe and to hold
that a contract of transportation by air may be regarded as commercial. The reason is
that at least in the present case the transportation company (PAL) is a common
carrier; besides, air transportation is clearly similar or analogous to land and water
transportation. The obvious reason for its non-inclusion in the Code of Commerce
was that at the time of its promulgation, transportation by air on a commercial basis
was not yet known. In the United Sates where air transportation has reached its
highest development, an airline company engaged in the transportation business is
regarded as a common carrier.
When Aircraft Operator is Common Carrier. — That aircraft and the industry of
carriage by aircraft are new is no reason why one in fact employing aircraft as
common-carrier vehicles should not be classified as a common carrier and charged
with liability as such. There can be no doubt, under the general law of common
carriers, that those air lines and aircraft owners engaged in the passenger service on
regular schedules on definite routes, who solicit the patronage of the traveling public,
advertise schedules for routes, time of leaving, and rates of fare, and make the usual
stipulation as to baggage, are common carriers by air. A flying service company
which, according to its printed advertising, will take anyone anywhere at any time,
though not operating on regular routes or schedules, and basing its charges not on
the number of passengers, but on the operating cost of the plane per mile, has been
held to be a common carrier. It is not necessary, in order to make one carrying
passengers by aircraft a common carrier of passengers that the passengers can be
carried from one point to another; the status and the liability as a common carrier may
exist notwithstanding the passenger's ticket issued by an airplane carrier of
passengers for hire contains a statement that it is not a common carrier, etc., or a
stipulation that it is to be held only for its proven negligence. But an airplane owner
cannot be classed as a common carrier of passengers unless he undertakes, for hire,
to carry all persons who apply for passage indiscriminately as long as there is room
and no legal excuse for refusing. . . . 6 Am. Jur., Aviation, Sec. 58, pp. 34-35.
The rules governing the business of a common carrier by airship or flying machine
may be readily assimilated to those applied to other common carriers. 2 C.J.S., 1951,
Cumulative Pocket Part, Aerial Navigation, Sec. 38, p. 99.
TRANSPORTATION LAW – Chapter 2 & 3
The test of whether one is a common carrier by air is whether he holds out that he will
carry for hire, so long as he has room, goods for everyone bringing goods to him for
carriage, not whether he is carrying as a public employment or whether he carries to
a fixed place. (Ibid., Sec. 39, p. 99.)
Appellant contends that Art. 358 of the Code of Commerce should govern the award
of the damages in his favor. Said article provides that if there is no period fixed for the
delivery of the goods, the carrier shall be bound to forward them in the first shipment
of the same or similar merchandise which he may make to the point of delivery, and
that upon failure to do so, the damages caused by the delay should be suffered by
the carrier. This is a general provision for ordinary damages and is no different from
the provisions of the Civil Code, particularly Art. 1101 thereof, providing for the
payment of damages caused by the negligence or delay in the fulfillment of one's
obligation. Even applying the provisions of the Code of Commerce, as already stated,
the pertinent provisions regarding damages only treats of ordinary damages or
damages in general, not special damages like those suffered by the plaintiff herein.
Article 2 of the Code of Commerce provides that commercial transactions are to be
governed by the provisions of the Code of Commerce, but in the absence of
applicable provisions, they will be governed by the usages of commerce generally
observed in each place; and in default of both, by those of the Civil Law. So that
assuming that the present case involved a commercial transaction, still inasmuch as
the special damages herein claimed finds no applicable provision in the Code of
Commerce, neither has it been shown that there are any commercial usages
applicable thereto, then in the last analysis, the rules of the civil law would have to
come into play. 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 the 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 picture films to the defendant Fargo, an express
company, consigned and to be delivered to him in Utica. At the time of the 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 impose 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 a 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.
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.
But appellants 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 said 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 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 Pili 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 the 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 of
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 Pili 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 the 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. I, p. 400, citing a decision of
Argentina Court of Appeals on commercial matters, cited by Tolentino in Vol. II of his
TRANSPORTATION LAW – Chapter 2 & 3
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 bill of lading before the carrier and makes himself a party to the contract. Prior to
that time, he is 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 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 the delivery to Mendoza as consignee. His demand
for the delivery of the can of film to him at the Pili 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, such demand being one of the fulfillment of 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.
One can readily sympathize with the appellant herein for his loss of profits which he
expected to realize. But he overlooked the legal angle. In situations like the present
where failure to exhibit films on a certain day would spell substantial damages or
considerable loss of profits, including waste of efforts on preparations and expenses
incurred in advertisements, exhibitors, for their security, may either get hold of the
films well ahead of the time of exhibition in order to make allowance for any hitch in
the delivery, or else enter into a special contract or make a suitable arrangement with
the common carrier for the prompt delivery of the films, calling the attention of the
carrier to the circumstances surrounding the case and the approximate amount of
damages to be suffered in case of delay.
Finding no reversible error in the decision appealed from, the same is hereby
affirmed. No pronouncement as to costs. So ordered.
5.) G.R. No. 118126 March 4, 1996
TRANS-ASIA SHIPPING LINES, INC., petitioner, vs. COURT OF APPEALS and
ATTY. RENATO T. ARROYO, respondents.
[PR bought ticket from Pet for Cebu to Cagayan trip- when he boarded 1 engine was
being repaired, only 1 was running- slow voyage- vessel stopped and passengers
demanded to return to Cebu- he eventually boarded the next day- he filed this action
for damages due to delay not being able to be at destination by November 12 for loss
of income and living expenses for 1 day- LC dismissed for lack of fault, negligence
etc.- Issue: Is Pet liable to Arroyo for 1 day loss of income?- Ruling: No. Only half-
day- there was a breach of contract of carriage as Pet sailed even with only 1 engine,
passengers were right to request return given the circumstances- ship was
unseaworthy, extraordinary diligence not done, they are liable for delay then- they are
liable for the earnings the PR could have made had he made it in time- But assuming
PR stayed on board, he would have been only late half a day, it was his fault it was 1
whole day as he chose to board the next day- Pet liable for half-a-day damages]
Plaintiff [herein private respondent Atty. Renato Arroyo], a public attorney, bought a
ticket [from] defendant [herein petitioner], a corporation engaged in . . . inter-island
shipping, for the voyage of M/V Asia Thailand vessel to Cagayan de Oro City from
Cebu City on November 12, 1991.
At around 5:30 in the evening of November 12, 1991, plaintiff boarded the M/V Asia
Thailand vessel. At that instance, plaintiff noticed that some repair works [sic] were
being undertaken on the engine of the vessel. The vessel departed at around 11:00 in
the evening with only one (1) engine running.
After an hour of slow voyage, the vessel stopped near Kawit Island and dropped its
anchor thereat. After half an hour of stillness, some passengers demanded that they
should be allowed to return to Cebu City for they were no longer willing to continue
their voyage to, Cagayan de Oro City. The captain acceeded [sic] to their request and
thus the vessel headed back to Cebu City.
At Cebu City, plaintiff together with the other passengers who requested to be
brought back to Cebu City, were allowed to disembark. Thereafter, the vessel
proceeded to Cagayan de Oro City. Plaintiff, the next day, boarded the M/V Asia
Japan for its voyage to Cagayan de Oro City, likewise a vessel of defendant.
On account of this failure of defendant to transport him to the place of destination on
November 12, 1991, plaintiff filed before the trial court a complaint for damages
against defendant.4
In his complaint, docketed as Civil Case No. 91-491, plaintiff (hereinafter private
respondent) alleged that the engines of the M/V Asia Thailand conked out in the open
sea, and for more than an hour it was stalled and at the mercy of the waves, thus
TRANSPORTATION LAW – Chapter 2 & 3
causing fear in the passengers. It sailed back to Cebu City after it regained power, but
for unexplained reasons, the passengers, including the private respondent, were
arrogantly told to disembark without the necessary precautions against possible injury
to them. They were thus unceremoniously dumped, which only exacerbated the
private respondent's mental distress. He further alleged that by reason of the
petitioner's wanton, reckless, and willful acts, he was unnecessarily exposed to
danger and, having been stranded in Cebu City for a day, incurred additional
expenses and loss of income. He then prayed that he be awarded P1,100.00,
P50,000.00, and P25,000.00 as compensatory, moral; and exemplary damages,
respectively.5
In his pre-trial brief, the private respondent asserted that his complaint was "an action
for damages arising from bad faith, breach of contract and from tort," with the former
arising from the petitioner's "failure to carry [him] to his place of destination as
contracted," while the latter from the "conduct of the [petitioner] resulting [in] the
infliction of emotional distress" to the private respondent.6
After due trial, the trial court rendered its decision7 and ruled that the action was only
for breach of contract, with Articles 1170, 1172, and 1173 of the Civil Code as
applicable law — not Article 2180 of the same Code. It was of the opinion that Article
1170 made a person liable for damages if, in the performance of his obligation, he
was guilty of fraud, negligence, or delay, or in any manner contravened the tenor
thereof; moreover, pursuant to Article 2201 of the same Code, to be entitled to
damages, the non-performance of the obligation must have been tainted not only by
fraud, negligence, or delay, but also bad faith, malice, and wanton attitude. It then
disposed of the case as follows:
WHEREFORE, it not appearing from the evidence that plaintiff was left in the Port of
Cebu because of the fault, negligence, malice or wanton attitude of defendant's
employees, the complaint is DISMISSED. Defendant's counterclaim is likewise
dismissed it not appearing also that filing of the case by plaintiff was motivated by
malice or bad faith.8
The trial court made the following findings to support its disposition:
In the light of the evidence adduced by the parties and of the above provisions of the
New Civil Code, the issue to be resolved, in the resolution of this case is whether or
not, defendant thru its employees in [sic] the night of November 12, 1991, committed
fraud, negligence, bad faith or malice when it left plaintiff in the Port of Cebu when it
sailed back to Cagayan de Oro City after it has [sic] returned from Kawit Island.
Evaluation of the evidence of the parties tended to show nothing that defendant
committed fraud. As early as 3:00 p.m. of November 12, 1991, defendant did not hide
the fact that the cylinder head cracked. Plaintiff even saw during its repair. If he had
doubts as to the vessel's capacity to sail, he had time yet to take another boat. The
ticket could be returned to defendant and corresponding cash [would] be returned to
him.
Neither could negligence, bad faith or malice on the part of defendant be inferred from
the evidence of the parties. When the boat arrived at [the] Port of Cebu after it
returned from Kawit Island, there was an announcement that passengers who would
like to disembark were given ten (10) minutes only to do so. By this announcement, it
could be inferred that the boat will [sic] proceed to Cagayan de Oro City. If plaintiff
entertained doubts, he should have asked a member of the crew of the boat or better
still, the captain of the boat. But as admitted by him, he was of the impression only
that the boat will not proceed to Cagayan de Oro that evening so he disembarked. He
was instead, the ones [sic] negligent. Had he been prudent, with the announcement
that those who will disembark were given ten minutes only, he should have lingered a
little by staying in his cot and inquired whether the boat will proceed to Cagayan de
Oro City or not. Defendant cannot be expected to be telling [sic] the reasons to each
passenger. Announcement by microphone was enough.
The court is inclined to believe that the story of defendant that the boat returned to the
Port of Cebu because of the request of the passengers in view of the waves. That it
did not return because of the defective engines as shown by the fact that fifteen (15)
minutes after the boat docked [at] the Port of Cebu and those who wanted to proceed
to Cagayan de Oro disembarked, it left for Cagayan de Oro City.
The defendant got nothing when the boat returned to Cebu to let those who did not
want to proceed to Cagayan de Oro City including plaintiff disembarked. On the
contrary, this would mean its loss instead because it will have to refund their tickets or
they will use it the next trip without paying anymore. It is hard therefore, to imagine
how defendant by leaving plaintiff in Cebu could have acted in bad faith, negligently,
wantonly and with malice.
If plaintiff, therefore, was not able to [m]ake the trip that night of November 12, 1991,
it was not because defendant maliciously did it to exclude him [from] the trip. If he
was left, it was because of his fault or negligence.9
Unsatisfied, the private respondent appealed to the Court of Appeals (CA-G.R. CV
No. 39901) and submitted for its determination the following assignment of errors: (1)
the trial court erred in not finding that the defendant-appellee was guilty of fraud,
delay, negligence, and bad faith; and (2) the trial court. erred in not awarding moral
and exemplary damages.10
In its decision of 23 November 1994,11 the Court of Appeals reversed the trial court's
decision by applying Article 1755 in relation to Articles 2201, 2208, 2217, and 2232 of
the Civil Code and, accordingly, awarded compensatory, moral, and exemplary
damages as follows:
… passengers.
It did not, however, allow the grant of damages for the delay in the performance of the
petitioner's obligation as the requirement of demand set forth in Article 1169 of the
Civil Code had not been met by the private respondent. Besides, it found that the
private respondent offered no evidence to prove that his contract of carriage with the
TRANSPORTATION LAW – Chapter 2 & 3
petitioner provided for liability in case of delay in departure, nor that a designation of
the time of departure was the controlling motive for the establishment of the contract.
On the latter, the court a quo observed that the private respondent even admitted he
was unaware of the vessel's departure time, and it was only when he boarded the
vessel that he became aware of such. Finally, the respondent Court found no
reasonable basis for the private respondent's belief that demand was useless
because the petitioner had rendered it beyond its power to perform its obligation; on
the contrary, he even admitted that the petitioner had been assuring the passengers
that the vessel would leave on time, and that it could still perform its obligation to
transport them as scheduled.
To justify its award of damages, the Court of Appeals ratiocinated as follows:
It is an established and admitted fact that the vessel before the voyage had
undergone some repair work on the cylinder head of the engine. It is likewise
admitted by defendant-appellee that it left the port of Cebu City with only one engine
running. Defendant-appellee averred:
. . . The dropping of the vessel's anchor after running slowly on only one engine  when
it departed earlier must have alarmed some nervous passengers . . .
The entries in the logbook which defendant-appellee itself offered as evidence
categorically stated therein that the vessel stopped at Kawit Island because of engine
trouble. It reads:
…
The stoppage was not to start and synchronized [sic] the engines of the vessel as
claimed by defendant-appellee. It was because one of the engines of the vessel
broke down; it was because of the disability of the vessel which from the very
beginning of the voyage was known to defendant-appellee.
Defendant-appellee from the very start of the voyage knew for a fact that the vessel
was not yet in its sailing condition because the second engine was still being
repaired. Inspite of this knowledge, defendant-appellee still proceeded to sail with
only one engine running.
Defendant-appellee at that instant failed to exercise the diligence which all common
carriers should exercise in transporting or carrying passengers. The law does not
merely require extraordinary diligence in the performance of the obligation. The law
mandates that common carrier[s] should exercise utmost diligence  the transport of
Utmost diligence of a VERY CAUTIOUS person dictates that defendant-appellee
should have pursued the voyage only when its vessel was already fit to sail.
Defendant-appellee should have made certain that the vessel [could] complete the
voyage before starting [to] sail. Anything less than this, the vessel [could not] sail . . .
with so many passengers on board it.
However, defendant-appellant [sic] in complete disregard of the safety of the
passengers, chose to proceed with its voyage even if only one engine was running as
the second engine was still being repaired during the voyage. Defendant-appellee
disregarded the not very remote possibility that because of the disability of the vessel,
other problems might occur which would endanger the lives of the passengers sailing
with a disabled vessel.
As expected, . . . engine trouble occurred. Fortunate[ly] for defendant-appellee, such
trouble only necessitated the stoppage of the vessel and did not cause the vessel to
capsize. No wonder why some passengers requested to be brought back to Cebu
City. Common carriers which are mandated to exercise utmost diligence should not
be taking these risks.
On this premise, plaintiff-appellant should not be faulted why he chose to disembark
from the vessel with the other passengers when it returned back to Cebu City.
Defendant-appellee may call him a very "panicky passenger" or a "nervous person",
but this will not relieve defendant-appellee from the liability it incurred for its failure to
exercise utmost diligence.13
xxx xxx xxx
As to the second assigned error, we find that plaintiff-appellant is entitled to the award
of moral and exemplary damages for the breach committed by defendant-appellee.
As discussed, defendant-appellee in sailing to Cagayan de Oro City with only one
engine and with full knowledge of the true condition of the vessel, acted. in bad faith
with malice, in complete disregard for the safety of the passengers and only for its
own personal advancement/interest.
Plaintiff-appellant is entitled to moral damages for the mental anguish, fright and
serious anxiety he suffered during the voyage when the vessel's engine broke down
and when he disembarked from the vessel during the wee hours of the morning at
Cebu City when it returned.14
To serve as a deterrent to the commission of similar acts in the future, exemplary
damages should be imposed upon defendant-appellee. 17 Exemplary damages are
designed by our civil law to permit the courts to reshape behavior that is socially
deleterious in its consequence by creating . . . negative incentives or deterrents
against such behavior.18
Moral damages having been awarded, exemplary damages maybe properly awarded.
When entitlement to moral damages has been established, the award of exemplary
damages is proper.19
TRANSPORTATION LAW – Chapter 2 & 3
The petitioner then instituted this petition and submitted the question of law earlier
adverted to.
Before commencing the contracted voyage, the petitioner undertook some repairs on
the cylinder head of one of the vessel's engines. But even before it could finish these
repairs, it allowed the vessel to leave the port of origin on only one functioning engine,
instead of two. Moreover, even the lone functioning engine was not in perfect
condition as sometime after it had run its course, it conked out. This caused the
vessel to stop and remain a drift at sea, thus in order to prevent the ship from
capsizing, it had to drop anchor. Plainly, the vessel was unseaworthy even before the
voyage began. For a vessel to be seaworthy, it must be adequately equipped for the
voyage and manned with a sufficient number of competent officers and crew. 21 The
failure of a common carrier to maintain in seaworthy condition its vessel involved in a
contract of carriage is a clear breach of its duty prescribed in Article 1755 of the Civil
Code.
As to its liability for damages to the private respondent, Article 1764 of the Civil Code
expressly provides:
In contracts or quasi-contracts, the obligor is liable for all the damages which may be
reasonably attributed to the non-performance of the obligation if he is guilty of fraud,
bad faith, malice, or wanton attitude.23
The Court of Appeals did not grant the private respondent actual or compensatory
damages, reasoning that no delay was incurred since there was no demand, as
required by Article 1169 of the Civil Code. This article, however, finds no application
in this case because, as found by the respondent Court, there was in fact no delay in
the commencement of the contracted voyage. If any delay was incurred, it was after
the commencement of such voyage, more specifically, when the voyage was
subsequently interrupted when the vessel had to stop near Kawit Island after the only
functioning engine conked out.
As to the rights and duties of the parties strictly arising out of such delay, the Civil
Code is silent. However, as correctly pointed out by the petitioner, Article 698 of the
Code of Commerce specifically provides for such a situation. It reads:
In case a voyage already begun should be interrupted, the passengers shall be
obliged to pay the fare in proportion to the distance covered, without right to recover
for losses and damages if the interruption is due to fortuitous event or force majeure,
but with a right to indemnity if the interruption should have been caused by the
captain exclusively. If the interruption should be caused by the disability of the vessel
and a passenger should agree to await the repairs, he may not be required to pay any
increased price of passage, but his living expenses during the stay shall be for his
own account.
This article applies suppletorily pursuant to Article 1766 of the Civil Code.
Of course, this does not suffice for a resolution of the case at bench for, as earlier
stated, the cause of the delay or interruption was the petitioner's failure to observe
extraordinary diligence. Article 698 must then be read together with Articles 2199,
2200, 2201, and 2208 in relation to Article 21 of the Civil Code. So read, it means that
the petitioner is liable for any pecuniary loss or loss of profits which the private
respondent may have suffered by reason thereof. For the private respondent, such
would be the loss of income if unable to report to his office on the day he was
supposed to arrive were it not for the delay. This, however, assumes that he stayed
on the vessel and was with it when it thereafter resumed its voyage; but he did not.
As he and some passengers resolved not to complete the voyage, the vessel had to
return to its port of origin and allow them to disembark. The private respondent then
took the petitioner's other vessel the following day, using the ticket he had purchased
for the previous day's voyage.

Any further delay then in the private respondent's arrival at the port of destination was
caused by his decision to disembark. Had he remained on the first vessel, he would
have reached his destination at noon of 13 November 1991, thus been able to report
to his office in the afternoon. He, therefore, would have lost only the salary for half of
a day. But actual or compensatory damages must be proved,30 which the private
respondent failed to do. There is no convincing evidence that he did not receive his
salary for 13 November 1991 nor that his absence was not excused.

We likewise fully agree with the Court of Appeals that the petitioner is liable for moral
and exemplary damages. In allowing its unseaworthy M/V Asia Thailand to leave the
port of origin and undertake the contracted voyage, with full awareness that it was
exposed to perils of the sea, it deliberately disregarded its solemn duty to exercise
extraordinary diligence and obviously acted with bad faith and in a wanton and
reckless manner. On this score, however, the petitioner asserts that the safety or the
vessel and passengers was never at stake because the sea was "calm" in the vicinity
where it stopped as faithfully recorded in the vessel's log book (Exhibit "4"). Hence,
the petitioner concludes, the private respondent was merely "over-reacting" to the
situation obtaining then.31

We hold that the petitioner's defense cannot exculpate it nor mitigate its liability. On
the contrary, such a claim demonstrates beyond cavil the petitioner's lack of genuine
concern for the safety of its passengers. It was, perhaps, only providential then the
sea happened to be calm. Even so, the petitioner should not expect its passengers to
act in the manner it desired. The passengers were not stoics; becoming alarmed,
anxious, or frightened at the stoppage of a vessel at sea in an unfamiliar zone as
nighttime is not the sole prerogative of the faint-hearted. More so in the light of the
many tragedies at sea resulting in the loss of lives of hopeless passengers and
damage to property simply because common carriers failed in their duty to exercise
extraordinary diligence in the performance of their obligations.

WHEREFORE, the instant petition is DENIED and the challenged decision of the
Court of Appeals in CA-G.R. CV No. 39901 is AFFIRMED subject to the modification
as to the award for attorney's fees which is hereby SET ASIDE.

TRANSPORTATION LAW – Chapter 2 & 3

6.) G.R. No. 168402             August 6, 2008
ABOITIZ SHIPPING CORPORATION, petitioner,
vs. INSURANCE COMPANY OF NORTH AMERICA, respondent.
[]
On June 20, 1993, MSAS Cargo International Limited and/or Associated and/or
Subsidiary Companies (MSAS) procured a marine insurance policy from respondent
ICNA UK Limited of London. The insurance was for a transshipment of certain
wooden work tools and workbenches purchased for the consignee Science Teaching
Improvement Project (STIP), Ecotech Center, Sudlon Lahug, Cebu City,
Philippines.3 ICNA issued an "all-risk" open marine policy,4 stating:
The cargo, packed inside one container van, was shipped "freight prepaid" from
Hamburg, Germany on board M/S Katsuragi. A clean bill of lading6 was issued by
Hapag-Lloyd which stated the consignee to be STIP, Ecotech Center, Sudlon Lahug,
Cebu City.
The container van was then off-loaded at Singapore and transshipped on board M/S
Vigour Singapore. On July 18, 1993, the ship arrived and docked at the Manila
International Container Port where the container van was again off-loaded. On July
26, 1993, the cargo was received by petitioner Aboitiz Shipping Corporation (Aboitiz)
through its duly authorized booking representative, Aboitiz Transport System. The bill
of lading7 issued by Aboitiz contained the notation "grounded outside warehouse."
The container van was stripped and transferred to another crate/container van without
any notation on the condition of the cargo on the Stuffing/Stripping Report.8 On
August 1, 1993, the container van was loaded on board petitioner's vessel, MV Super
Concarrier I. The vessel left Manila en route to Cebu City on August 2, 1993.
On August 3, 1993, the shipment arrived in Cebu City and discharged onto a
receiving apron of the Cebu International Port. It was then brought to the Cebu
Bonded Warehousing Corporation pending clearance from the Customs authorities.
In the Stripping Report9 dated August 5, 1993, petitioner's checker noted that the
crates were slightly broken or cracked at the bottom.
On August 11, 1993, the cargo was withdrawn by the representative of the consignee,
Science Teaching Improvement Project (STIP) and delivered to Don Bosco Technical
High School, Punta Princesa, Cebu City. It was received by Mr. Bernhard Willig. On
August 13, 1993, Mayo B. Perez, then Claims Head of petitioner, received a
telephone call from Willig informing him that the cargo sustained water damage.
Perez, upon receiving the call, immediately went to the bonded warehouse and
checked the condition of the container and other cargoes stuffed in the same
container. He found that the container van and other cargoes stuffed there were
completely dry and showed no sign of wetness.10
TRANSPORTATION LAW – Chapter 2 & 3
Perez found that except for the bottom of the crate which was slightly broken, the
crate itself appeared to be completely dry and had no water marks. But he confirmed
that the tools which were stored inside the crate were already corroded. He further
explained that the "grounded outside warehouse" notation in the bill of lading referred
only to the container van bearing the cargo.11
In a letter dated August 15, 1993, Willig informed Aboitiz of the damage noticed upon
opening of the cargo.12 The letter stated that the crate was broken at its bottom part
such that the contents were exposed. The work tools and workbenches were found to
have been completely soaked in water with most of the packing cartons already
disintegrating. The crate was properly sealed off from the inside with tarpaper sheets.
On the outside, galvanized metal bands were nailed onto all the edges. The letter
concluded that apparently, the damage was caused by water entering through the
broken parts of the crate.
The consignee contacted the Philippine office of ICNA for insurance claims. On
August 21, 1993, the Claimsmen Adjustment Corporation (CAC) conducted an ocular
inspection and survey of the damage. CAC reported to ICNA that the goods sustained
water damage, molds, and corrosion which were discovered upon delivery to
consignee.13
On September 21, 1993, the consignee filed a formal claim14 with Aboitiz in the
amount of P276,540.00 for the damaged condition of the following goods:
…
In a Supplemental Report dated October 20, 1993,15 CAC reported to ICNA that
based on official weather report from the Philippine Atmospheric, Geophysical and
Astronomical Services Administration, it would appear that heavy rains on July 28 and
29, 1993 caused water damage to the shipment. CAC noted that the shipment was
placed outside the warehouse of Pier No. 4, North Harbor, Manila when it was
delivered on July 26, 1993. The shipment was placed outside the warehouse as can
be gleaned from the bill of lading issued by Aboitiz which contained the notation
"grounded outside warehouse." It was only on July 31, 1993 when the shipment was
stuffed inside another container van for shipment to Cebu.
Aboitiz refused to settle the claim. On October 4, 1993, ICNA paid the amount
of P280,176.92 to consignee. A subrogation receipt was duly signed by Willig. ICNA
formally advised Aboitiz of the claim and subrogation receipt executed in its favor.
Despite follow-ups, however, no reply was received from Aboitiz.
RTC Disposition
ICNA filed a civil complaint against Aboitiz for collection of actual damages in the sum
of P280,176.92, plus interest and attorney's fees.16 ICNA alleged that the damage
sustained by the shipment was exclusively and solely brought about by the fault and
negligence of Aboitiz when the shipment was left grounded outside its warehouse
prior to delivery.
Aboitiz disavowed any liability and asserted that the claim had no factual and legal
bases. It countered that the complaint stated no cause of action, plaintiff ICNA had no
personality to institute the suit, the cause of action was barred, and the suit was
premature there being no claim made upon Aboitiz.
On November 14, 2003, the RTC rendered judgment against ICNA. The dispositive
portion of the decision17 states:
The RTC ruled that ICNA failed to prove that it is the real party-in-interest to pursue
the claim against Aboitiz. The trial court noted that Marine Policy No. 87GB 4475 was
issued by ICNA UK Limited with address at Cigna House, 8 Lime Street, London
EC3M 7NA. However, complainant ICNA Phils. did not present any evidence to show
that ICNA UK is its predecessor-in-interest, or that ICNA UK assigned the insurance
policy to ICNA Phils. Moreover, ICNA Phils.' claim that it had been subrogated to the
rights of the consignee must fail because the subrogation receipt had no probative
value for being hearsay evidence. The RTC reasoned:
Plaintiff, further, claims that it has been subrogated to the rights and interest of
Science Teaching Improvement Project as shown by the Subrogation Form (Exhibit
"K") allegedly signed by a representative of Science Teaching Improvement Project.
Such representative, however, was not presented on the witness stand. Hence, the
Subrogation Form is self-serving and has no probative value.19 (Emphasis supplied)
The trial court also found that ICNA failed to produce evidence that it was a foreign
corporation duly licensed to do business in the Philippines. Thus, it lacked the
capacity to sue before Philippine Courts, to wit:
CA Disposition
ICNA appealed to the CA. It contended that the trial court failed to consider that its
cause of action is anchored on the right of subrogation under Article 2207 of the Civil
Code. ICNA said it is one and the same as the ICNA UK Limited as made known in
the dorsal portion of the Open Policy.20
On the other hand, Aboitiz reiterated that ICNA lacked a cause of action. It argued
that the formal claim was not filed within the period required under Article 366 of the
Code of Commerce; that ICNA had no right of subrogation because the subrogation
receipt should have been signed by MSAS, the assured in the open policy, and not
Willig, who is merely the representative of the consignee.
On March 29, 2005, the CA reversed and set aside the RTC ruling, disposing as
follows:
TRANSPORTATION LAW – Chapter 2 & 3
WHEREFORE, premises considered, the present appeal is hereby GRANTED. The
appealed decision of the Regional Trial Court of Makati City in Civil Case No. 94-1590
is hereby REVERSED and SET ASIDE. A new judgment is hereby rendered ordering
defendant-appellee Aboitiz Shipping Corporation to pay the plaintiff-appellant
Insurance Company of North America the sum of P280,176.92 with interest thereon
at the legal rate from the date of the institution of this case until fully paid, and
attorney's fees in the sum of P50,000, plus the costs of suit.21
The CA opined that the right of subrogation accrues simply upon payment by the
insurance company of the insurance claim. As subrogee, ICNA is entitled to
reimbursement from Aboitiz, even assuming that it is an unlicensed foreign
corporation. The CA ruled:
…
The CA ruled that the presumption that the carrier was at fault or that it acted
negligently was not overcome by any countervailing evidence. Hence, the trial court
erred in dismissing the complaint and in not finding that based on the evidence on
record and relevant provisions of law, Aboitiz is liable for the loss or damage
sustained by the subject cargo.
Issues
The following issues are up for Our consideration:
…
Elsewise stated, the controversy rotates on three (3) central questions: (a) Is
respondent ICNA the real party-in-interest that possesses the right of subrogation to
claim reimbursement from petitioner Aboitiz? (b) Was there a timely filing of the notice
of claim as required under Article 366 of the Code of Commerce? (c) If so, can
petitioner be held liable on the claim for damages?
Our Ruling
We answer the triple questions in the affirmative.
A foreign corporation not licensed to do business in the Philippines is not
absolutely incapacitated from filing a suit in local courts.…
In any case, We uphold the CA observation that while it was the ICNA UK Limited
which issued the subject marine policy, the present suit was filed by the said
company's authorized agent in Manila. It was the domestic corporation that brought
the suit and not the foreign company. Its authority is expressly provided for in the
open policy which includes the ICNA office in the Philippines as one of the foreign
company's agents.
As found by the CA, the RTC erred when it ruled that there was no proper
indorsement of the insurance policy by MSAS, the shipper, in favor of STIP of Don
Bosco Technical High School, the consignee.
… loss or injury or the right to enforce the carrier's liability. Circumstances
Likewise, the Open Policy expressly provides that:
The Company, in consideration of a premium as agreed and subject to the terms and
conditions printed hereon, does insure MSAS Cargo International Limited &/or
Associates &/or Subsidiary Companies in behalf of the title holder: - Loss, if any,
payable to the Assured or Order.
The policy benefits any subsequent assignee, or holder, including the consignee, who
may file claims on behalf of the assured. This is in keeping with Section 57 of the
Insurance Code which states:
A policy may be so framed that it will inure to the benefit of whosoever, during the
continuance of the risk, may become the owner of the interest insured. (Emphasis
added)
Respondent's cause of action is founded on it being subrogated to the rights of
the consignee of the damaged shipment. The right of subrogation springs from
Article 2207 of the Civil Code, which states:
Article 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. (Emphasis added)
As this Court held in the case of Pan Malayan Insurance Corporation v. Court of
Appeals,28 payment by the insurer to the assured operates as an equitable
assignment of all remedies the assured may have against the third party who caused
the damage. Subrogation is not dependent upon, nor does it grow out of, any privity
of contract or upon written assignment of claim. It accrues simply upon payment of
the insurance claim by the insurer.29
Upon payment to the consignee of indemnity for damage to the insured goods,
ICNA's entitlement to subrogation equipped it with a cause of action against petitioner
in case of a contractual breach or negligence.30 This right of subrogation, however,
has its limitations. First, both the insurer and the consignee are bound by the
TRANSPORTATION LAW – Chapter 2 & 3
contractual stipulations under the bill of lading.31 Second, the insurer can be
subrogated only to the rights as the insured may have against the wrongdoer. If by its
own acts after receiving payment from the insurer, the insured releases the
wrongdoer who caused the loss from liability, the insurer loses its claim against the
latter.32
The giving of notice of loss or injury is a condition precedent to the action for
peculiar to this case lead Us to conclude that the notice requirement was
complied with. As held in the case of Philippine American General Insurance Co.,
Inc. v. Sweet Lines, Inc.,33 this notice requirement protects the carrier by affording it
an opportunity to make an investigation of the claim while the matter is still fresh and
easily investigated. It is meant to safeguard the carrier from false and fraudulent
claims.
Under the Code of Commerce, the notice of claim must be made within twenty four
(24) hours from receipt of the cargo if the damage is not apparent from the outside of
the package. For damages that are visible from the outside of the package, the claim
must be made immediately. The law provides:
Article 366. Within twenty four hours following the receipt of the merchandise, the
claim against the carrier for damages or average which may be found therein upon
opening the packages, may be made, provided that the indications of the damage or
average which give rise to the claim cannot be ascertained from the outside part of
such packages, in which case the claim shall be admitted only at the time of 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. (Emphasis supplied)
The periods above, as well as the manner of giving notice may be modified in the
terms of the bill of lading, which is the contract between the parties. Notably, neither
of the parties in this case presented the terms for giving notices of claim under the bill
of lading issued by petitioner for the goods.
…
The call to petitioner was made two days from delivery, a reasonable period
considering that the goods could not have corroded instantly overnight such that it
could only have sustained the damage during transit. Moreover, petitioner was able to
immediately inspect the damage while the matter was still fresh. In so doing, the main
objective of the prescribed time period was fulfilled. Thus, there was substantial
compliance with the notice requirement in this case.
To recapitulate, We have found that respondent, as subrogee of the consignee, is the
real party in interest to institute the claim for damages against petitioner; and pro hac
vice, that a valid notice of claim was made by respondent.
We now discuss petitioner's liability for the damages sustained by the shipment. The
rule as stated in Article 1735 of the Civil Code is that in cases where 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 required by law.38 Extraordinary diligence is that extreme
measure of care and caution which persons of unusual prudence and circumspection
use for securing and preserving their own property rights.39 This standard is intended
to grant favor to the shipper who is at the mercy of the common carrier once the
goods have been entrusted to the latter for shipment.40
Here, the shipment delivered to the consignee sustained water damage. We agree
with the findings of the CA that petitioner failed to overturn this presumption:
x x x upon delivery of the cargo to the consignee Don Bosco Technical High School
by a representative from Trabajo Arrastre, and the crates opened, it was discovered
that the workbenches and work tools suffered damage due to "wettage" although by
then they were already physically dry. Appellee carrier having failed to discharge the
burden of proving that it exercised extraordinary diligence in the vigilance over such
goods it contracted for carriage, the presumption of fault or negligence on its part
from the time the goods were unconditionally placed in its possession (July 26, 1993)
up to the time the same were delivered to the consignee (August 11, 1993), therefore
stands. The presumption that the carrier was at fault or that it acted negligently was
not overcome by any countervailing evidence. x x x41 (Emphasis added)
The shipment arrived in the port of Manila and was received by petitioner for carriage
on July 26, 1993. On the same day, it was stripped from the container van. Five days
later, on July 31, 1993, it was re-stuffed inside another container van. On August 1,
1993, it was loaded onto another vessel bound for Cebu. During the period between
July 26 to 31, 1993, the shipment was outside a container van and kept in storage by
petitioner.
The bill of lading issued by petitioner on July 31, 1993 contains the notation
"grounded outside warehouse," suggesting that from July 26 to 31, the goods were
kept outside the warehouse. And since evidence showed that rain fell over Manila
during the same period, We can conclude that this was when the shipment sustained
water damage.
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 the goods tendered for transport and that it exercised due care in
handling them.42 Extraordinary diligence must include safeguarding the shipment from
damage coming from natural elements such as rainfall.
Aside from denying that the "grounded outside warehouse" notation referred not to
the crate for shipment but only to the carrier van, petitioner failed to mention where
exactly the goods were stored during the period in question. It failed to show that the
TRANSPORTATION LAW – Chapter 2 & 3
crate was properly stored indoors during the time when it exercised custody before
shipment to Cebu. As amply explained by the CA:
On the other hand, the supplemental report submitted by the surveyor has confirmed
that it was rainwater that seeped into the cargo based on official data from the
PAGASA that there was, indeed, rainfall in the Port Area of Manila from July 26 to 31,
1993. The Surveyor specifically noted that the subject cargo was under the custody of
appellee carrier from the time it was delivered by the shipper on July 26, 1993 until it
was stuffed inside Container No. ACCU-213798-4 on July 31, 1993. No other
inevitable conclusion can be deduced from the foregoing established facts that
damage from "wettage" suffered by the subject cargo was caused by the negligence
of appellee carrier in grounding the shipment outside causing rainwater to seep into
the cargoes.
Appellee's witness, Mr. Mayo tried to disavow any responsibility for causing "wettage"
to the subject goods by claiming that the notation "GROUNDED OUTSIDE WHSE."
actually refers to the container and not the contents thereof or the cargoes. And yet it
presented no evidence to explain where did they place or store the subject goods
from the time it accepted the same for shipment on July 26, 1993 up to the time the
goods were stripped or transferred from the container van to another container and
loaded into the vessel M/V Supercon Carrier I on August 1, 1993 and left Manila for
Cebu City on August 2, 1993. x x x If the subject cargo was not grounded outside
prior to shipment to Cebu City, appellee provided no explanation as to where said
cargo was stored from July 26, 1993 to July 31, 1993. What the records showed is
that the subject cargo was stripped from the container van of the shipper and
transferred to the container on August 1, 1993 and finally loaded into the appellee's
vessel bound for Cebu City on August 2, 1993. The Stuffing/Stripping Report (Exhibit
"D") at the Manila port did not indicate any such defect or damage, but when the
container was stripped upon arrival in Cebu City port after being discharged from
appellee's vessel, it was noted that only one (1) slab was slightly broken at the bottom
allegedly hit by a forklift blade (Exhibit "F").43 (Emphasis added)
Petitioner is thus liable for the water damage sustained by the goods due to its failure
to satisfactorily prove that it exercised the extraordinary diligence required of common
carriers.
WHEREFORE, the petition is DENIED and the appealed Decision AFFIRMED.
7.) G.R. No. 200289               November 25, 2013
WESTWIND SHIPPING CORPORATION, Petitioner,
vs. UCPB GENERAL INSURANCE CO., INC. and ASIAN TERMINALS
INC., Respondents.
On August 23, 1993, Kinsho-Mataichi Corporation shipped from the port of Kobe,
Japan, 197 metal containers/skids of tin-free steel for delivery to the consignee, San
Miguel Corporation (SMC). The shipment, covered by Bill of Lading No. KBMA-
1074,4 was loaded and received clean on board M/V Golden Harvest Voyage No. 66,
a vessel owned and operated by Westwind Shipping Corporation (Westwind).
SMC insured the cargoes against all risks with UCPB General Insurance Co., Inc.
(UCPB) for US Dollars: One Hundred Eighty-Four Thousand Seven Hundred Ninety-
Eight and Ninety-Seven Centavos (US$184,798.97), which, at the time, was
equivalent to Philippine Pesos: Six Million Two Hundred Nine Thousand Two
Hundred Forty-Five and Twenty-Eight Centavos (₱6,209,245.28).
The shipment arrived in Manila, Philippines on August 31, 1993 and was discharged
in the custody of the arrastre operator, Asian Terminals, Inc. (ATI), formerly Marina
Port Services, Inc.5 During the unloading operation, however, six containers/skids
worth Philippine Pesos: One Hundred Seventeen Thousand Ninety-Three and Twelve
Centavos (₱117,093.12) sustained dents and punctures from the forklift used by the
stevedores of Ocean Terminal Services, Inc. (OTSI) in centering and shuttling the
containers/skids. As a consequence, the local ship agent of the vessel, Baliwag
Shipping Agency, Inc., issued two Bad Order Cargo Receipt dated September 1,
1993.
On September 7, 1993, Orient Freight International, Inc. (OFII), the customs broker of
SMC, withdrew from ATI the 197 containers/skids, including the six in damaged
condition, and delivered the same at SMC’s warehouse in Calamba, Laguna through
J.B. Limcaoco Trucking (JBL). It was discovered upon discharge that additional nine
containers/skids valued at Philippine Pesos: One Hundred Seventy-Five Thousand
Six Hundred Thirty-Nine and Sixty-Eight Centavos (₱175,639.68) were also damaged
due to the forklift operations; thus, making the total number of 15 containers/skids in
bad order.
Almost a year after, on August 15, 1994, SMC filed a claim against UCPB, Westwind,
ATI, and OFII to recover the amount corresponding to the damaged 15
containers/skids. When UCPB paid the total sum of Philippine Pesos: Two Hundred
Ninety-Two Thousand Seven Hundred Thirty-Two and Eighty Centavos
(₱292,732.80), SMC signed the subrogation receipt. Thereafter, in the exercise of its
right of subrogation, UCPB instituted on August 30, 1994 a complaint for damages
against Westwind, ATI, and OFII.6
After trial, the RTC dismissed UCPB’s complaint and the counterclaims of Westwind,
ATI, and OFII. It ruled that the right, if any, against ATI already prescribed based on
TRANSPORTATION LAW – Chapter 2 & 3
the stipulation in the 16 Cargo Gate Passes issued, as well as the doctrine laid down
in International Container Terminal Services, Inc. v. Prudential Guarantee &
Assurance Co. Inc.7 that a claim for reimbursement for damaged goods must be filed
within 15 days from the date of consignee’s knowledge. With respect to Westwind,
even if the action against it is not yet barred by prescription, conformably with Section
3 (6) of the Carriage of Goods by Sea Act (COGSA) and Our rulings in E.E. Elser,
Inc., et al. v. Court of Appeals, et al.8 and Belgian Overseas Chartering and Shipping
N.V. v. Phil. First Insurance Co., Inc.,9 the court a quo still opined that Westwind is not
liable, since the discharging of the cargoes were done by ATI personnel using forklifts
and that there was no allegation that it (Westwind) had a hand in the conduct of the
stevedoring operations. Finally, the trial court likewise absolved OFII from any liability,
reasoning that it never undertook the operation of the forklifts which caused the dents
and punctures, and that it merely facilitated the release and delivery of the shipment
as the customs broker and representative of SMC.
On appeal by UCPB, the CA reversed and set aside the trial court. The fallo of its
September 13, 2011 Decision directed:
WHEREFORE, premises considered, the instant appeal is hereby GRANTED. The
Decision dated January 27, 2006 rendered by the court a quo is REVERSED AND
SET ASIDE. Appellee Westwind Shipping Corporation is hereby ordered to pay to the
appellant UCPB General Insurance Co., Inc., the amount of One Hundred Seventeen
Thousand and Ninety-Three Pesos and Twelve Centavos (Php117,093.12), while
Orient Freight International, Inc. is hereby ordered to pay to UCPB the sum of One
Hundred Seventy-Five Thousand Six Hundred Thirty-Nine Pesos and Sixty-Eight
Centavos (Php175,639.68). Both sums shall bear interest at the rate of six (6%)
percent per annum, from the filing of the complaint on August 30, 1994 until the
judgment becomes final and executory. Thereafter, an interest rate of twelve (12%)
percent per annum shall be imposed from the time this decision becomes final and
executory until full payment of said amounts.
While the CA sustained the RTC judgment that the claim against ATI already
prescribed, it rendered a contrary view as regards the liability of Westwind and OFII.
For the appellate court, Westwind, not ATI, is responsible for the six damaged
containers/skids at the time of its unloading. In its rationale, which substantially
followed Philippines First Insurance Co., Inc. v. Wallem Phils. Shipping, Inc.,11 it
concluded that the common carrier, not the arrastre operator, is responsible during
the unloading of the cargoes from the vessel and that it is not relieved from liability
and is still bound to exercise extraordinary diligence at the time in order to see to it
that the cargoes under its possession remain in good order and condition. The CA
also considered that OFII is liable for the additional nine damaged containers/skids,
agreeing with UCPB’s contention that OFII is a common carrier bound to observe
extraordinary diligence and is presumed to be at fault or have acted negligently for
such damage. Noting the testimony of OFII’s own witness that the delivery of the
shipment to the consignee is part of OFII’s job as a cargo forwarder, the appellate
court ruled that Article 1732 of the New Civil Code (NCC) does not distinguish
between one whose principal business activity is the carrying of persons or goods or
both and one who does so as an ancillary activity. The appellate court further ruled
that OFII cannot excuse itself from liability by insisting that JBL undertook the delivery
of the cargoes to SMC’s warehouse. It opined that the delivery receipts signed by the
inspector of SMC showed that the containers/skids were received from OFII, not JBL.
At the most, the CA said, JBL was engaged by OFII to supply the trucks necessary to
deliver the shipment, under its supervision, to SMC.
Only Westwind and OFII filed their respective motions for reconsideration, which the
CA denied; hence, they elevated the case before Us via petitions docketed as G.R.
Nos. 200289 and 200314, respectively.
Westwind argues that it no longer had actual or constructive custody of the
containers/skids at the time they were damaged by ATI’s forklift operator during the
unloading operations. In accordance with the stipulation of the bill of lading, which
allegedly conforms to Article 1736 of the NCC, it contends that its responsibility
already ceased from the moment the cargoes were delivered to ATI, which is
reckoned from the moment the goods were taken into the latter’s custody. Westwind
adds that ATI, which is a completely independent entity that had the right to receive
the goods as exclusive operator of stevedoring and arrastre functions in South
Harbor, Manila, had full control over its employees and stevedores as well as the
manner and procedure of the discharging operations.
As for OFII, it maintains that it is not a common carrier, but only a customs broker
whose participation is limited to facilitating withdrawal of the shipment in the custody
of ATI by overseeing and documenting the turnover and counterchecking if the
quantity of the shipments were in tally with the shipping documents at hand, but
without participating in the physical withdrawal and loading of the shipments into the
delivery trucks of JBL. Assuming that it is a common carrier, OFII insists that there is
no need to rely on the presumption of the law – that, as a common carrier, it is
presumed to have been at fault or have acted negligently in case of damaged goods
– considering the undisputed fact that the damages to the containers/skids were
caused by the forklift blades, and that there is no evidence presented to show that
OFII and Westwind were the owners/operators of the forklifts. It asserts that the
loading to the trucks were made by way of forklifts owned and operated by ATI and
the unloading from the trucks at the SMC warehouse was done by way of forklifts
owned and operated by SMC employees. Lastly, OFII avers that neither the
undertaking to deliver nor the acknowledgment by the consignee of the fact of
delivery makes a person or entity a common carrier, since delivery alone is not the
controlling factor in order to be considered as such.
Both petitions lack merit.
The case of Philippines First Insurance Co., Inc. v. Wallem Phils. Shipping,
Inc.12 applies, as it settled the query on which between a common carrier and an
arrastre operator should be responsible for damage or loss incurred by the shipment
during its unloading. We elucidated at length:
Common carriers, from the nature of their business and for reasons of public policy,
are bound to observe extraordinary diligence in the vigilance over the goods
TRANSPORTATION LAW – Chapter 2 & 3
transported by them. Subject to certain exceptions enumerated under Article 1734 of
the Civil Code, common carriers are responsible for the loss, destruction, or
deterioration of the goods. The extraordinary responsibility of the common carrier
lasts from the time the goods are unconditionally placed in the possession of,and
received by the carrier for transportation until the same are delivered, actually or
constructively, by the carrier to the consignee, or to the person who has a right to
receive them.
For marine vessels, Article 619 of the Code of Commerce provides that the ship
captain is liable for the cargo from the time it is turned over to him at the dock or
afloat alongside the vessel at the port of loading, until he delivers it on the shore or on
the discharging wharf at the port of unloading, unless agreed otherwise. In Standard
Oil Co. of New York v. Lopez Castelo, the Court interpreted the ship captain’s liability
as ultimately that of the shipowner by regarding the captain as the representative of
the shipowner.
Lastly, Section 2 of the COGSA provides that under every contract of carriage of
goods by sea, the carrier in relation to the loading, handling, stowage, carriage,
custody, care, and discharge of such goods, shall be subject to the responsibilities
and liabilities and entitled to the rights and immunities set forth in the Act. Section 3
(2) thereof then states that among the carriers’ responsibilities are to properly and
carefully load, handle, stow, carry, keep, care for, and discharge the goods carried.
xxxx
On the other hand, the functions of an arrastre operator involve the handling of cargo
deposited on the wharf or between the establishment of the consignee or shipper and
the ship's tackle. Being the custodian of the goods discharged from a vessel, an
arrastre operator's duty is to take good care of the goods and to turn them over to the
party entitled to their possession.
Handling cargo is mainly the arrastre operator's principal work so its drivers/operators
or employees should observe the standards and measures necessary to prevent
losses and damage to shipments under its custody.
In Fireman’s Fund Insurance Co. v. Metro Port Service, Inc., the Court explained the
relationship and responsibility of an arrastre operator to a consignee of a cargo, to
quote:
The legal relationship between the consignee and the arrastre operator is akin to that
of a depositor and warehouseman. The relationship between the consignee and the
common carrier is similar to that of the consignee and the arrastre operator. Since it is
the duty of the ARRASTRE to take good care of the goods that are in its custody and
to deliver them in good condition to the consignee, such responsibility also devolves
upon the CARRIER. Both the ARRASTRE and the CARRIER are therefore charged
with and obligated to deliver the goods in good condition to the consignee. (Emphasis
supplied) (Citations omitted)
The liability of the arrastre operator was reiterated in Eastern Shipping Lines, Inc. v.
Court of Appeals with the clarification that the arrastre operator and the carrier are not
always and necessarily solidarily liable as the facts of a case may vary the rule.
Thus, in this case, the appellate court is correct insofar as it ruled that an arrastre
operator and a carrier may not be held solidarily liable at all times. But the precise
question is which entity had custody of the shipment during its unloading from the
vessel?
The aforementioned Section 3 (2) of the COGSA states that among the carriers’
responsibilities are to properly and carefully load, care for and discharge the goods
carried. The bill of lading covering the subject shipment likewise stipulates that the
carrier’s liability for loss or damage to the goods ceases after its discharge from the
vessel. Article 619 of the Code of Commerce holds a ship captain liable for the cargo
from the time it is turned over to him until its delivery at the port of unloading.
In a case decided by a U.S. Circuit Court, Nichimen Company v. M/V Farland, it was
ruled that like the duty of seaworthiness, the duty of care of the cargo is non-
delegable, and the carrier is accordingly responsible for the acts of the master, the
crew, the stevedore, and his other agents. It has also been held that it is ordinarily the
duty of the master of a vessel to unload the cargo and place it in readiness for
delivery to the consignee, and there is an implied obligation that this shall be
accomplished with sound machinery, competent hands, and in such manner that no
unnecessary injury shall be done thereto. And the fact that a consignee is required to
furnish persons to assist in unloading a shipment may not relieve the carrier of its
duty as to such unloading.
xxxx
It is settled in maritime law jurisprudence that cargoes while being unloaded generally
remain under the custody of the carrier x x x.13
In Regional Container Lines (RCL) of Singapore v. The Netherlands Insurance Co.
(Philippines), Inc.14 and Asian Terminals, Inc. v. Philam Insurance Co., Inc.,15 the
Court echoed the doctrine that cargoes, while being unloaded, generally remain
under the custody of the carrier. We cannot agree with Westwind’s disputation that
"the carrier in Wallem clearly exercised supervision during the discharge of the
shipment and that is why it was faulted and held liable for the damage incurred by the
shipment during such time." What Westwind failed to realize is that the extraordinary
responsibility of the common carrier lasts until the time the goods are actually or
constructively delivered by the carrier to the consignee or to the person who has a
right to receive them. There is actual delivery in contracts for the transport of goods
when possession has been turned over to the consignee or to his duly authorized
agent and a reasonable time is given him to remove the goods.16 In this case, since
the discharging of the containers/skids, which were covered by only one bill of lading,
had not yet been completed at the time the damage occurred, there is no reason to
imply that there was already delivery, actual or constructive, of the cargoes to ATI.
TRANSPORTATION LAW – Chapter 2 & 3
Indeed, the earlier case of Delsan Transport Lines, Inc. v. American Home Assurance
Corp.17 serves as a useful guide, thus:
Delsan’s argument that it should not be held liable for the loss of diesel oil due to
backflow because the same had already been actually and legally delivered to Caltex
at the time it entered the shore tank holds no water. It had been settled that the
subject cargo was still in the custody of Delsan because the discharging thereof has
not yet been finished when the backflow occurred. Since the discharging of the cargo
into the depot has not yet been completed at the time of the spillage when the
backflow occurred, there is no reason to imply that there was actual delivery of the
cargo to the consignee. Delsan is straining the issue by insisting that when the diesel
oil entered into the tank of Caltex on shore, there was legally, at that moment, a
complete delivery thereof to Caltex. To be sure, the extraordinary responsibility of
common carrier lasts from the time the goods are unconditionally placed in the
possession of, and received by, the carrier for transportation until the same are
delivered, actually or constructively, by the carrier to the consignee, or to a person
who has the right to receive them. The discharging of oil products to Caltex Bulk
Depot has not yet been finished, Delsan still has the duty to guard and to preserve
the cargo. The carrier still has in it the responsibility to guard and preserve the goods,
a duty incident to its having the goods transported.
To recapitulate, common carriers, from the nature of their business and for reasons of
public policy, are bound to observe extraordinary diligence in vigilance over the goods
and for the safety of the passengers transported by them, according to all the
circumstances of each case. The mere proof of delivery of goods in good order to the
carrier, and their arrival in the place of destination in bad order, make out a prima
facie case against the carrier, so that if no explanation is given as to how the injury
occurred, the carrier must be held responsible. It is incumbent upon the carrier to
prove that the loss was due to accident or some other circumstances inconsistent
with its liability.18
The contention of OFII is likewise untenable. A customs broker has been regarded as
a common carrier because transportation of goods is an integral part of its
business.19 In Schmitz Transport & Brokerage Corporation v. Transport Venture,
Inc.,20 the Court already reiterated: It is settled that under a given set of facts, a
customs broker may be regarded as a common carrier.1âwphi1 Thus, this Court, in
A.F. Sanchez Brokerage, Inc. v. The Honorable Court of Appeals held:
The appellate court did not err in finding petitioner, a customs broker, to be also a
common carrier, as defined under Article 1732 of the Civil Code, to wit, Art. 1732.
Common carriers are persons, corporations, firms or associations engaged in the
business of carrying or transporting passengers or goods or both, by land, water, or
air, for compensation, offering their services to the public.
xxxx
Article 1732 does not distinguish between one whose principal business activity is the
carrying of goods and one who does such carrying only as an ancillary activity. The
contention, therefore, of petitioner that it is not a common carrier but a customs
broker whose principal function is to prepare the correct customs declaration and
proper shipping documents as required by law is bereft of merit. It suffices that
petitioner undertakes to deliver the goods for pecuniary consideration.

And in Calvo v. UCPB General Insurance Co. Inc., this Court held that as the
transportation of goods is an integral part of a customs broker, the customs broker is
also a common carrier. For to declare otherwise "would be to deprive those with
whom [it] contracts the protection which the law affords them notwithstanding the fact
that the obligation to carry goods for [its] customers, is part and parcel of petitioner’s
business."21

That OFII is a common carrier is buttressed by the testimony of its own witness, Mr.
Loveric Panganiban Cueto, that part of the services it offers to clients is cargo
forwarding, which includes the delivery of the shipment to the consignee.22 Thus, for
undertaking the transport of cargoes from ATI to SMC’s warehouse in Calamba,
Laguna, OFII is considered a common carrier. As long as a person or corporation
holds itself to the public for the purpose of transporting goods as a business, it is
already considered a common carrier regardless of whether it owns the vehicle to be
used or has to actually hire one.

As a common carrier, OFII is mandated to observe, under Article 1733 of the Civil
Code,23 extraordinary diligence in the vigilance over the goods24 it transports
according to the peculiar circumstances of each case. In the event that the goods are
lost, destroyed or deteriorated, it is presumed to have been at fault or to have acted
negligently unless it proves that it observed extraordinary diligence.25 In the case at
bar it was established that except for the six containers/skids already damaged OFII
received the cargoes from ATI in good order and condition; and that upon its delivery
to SMC additional nine containers/skids were found to be in bad order as noted in the
Delivery Receipts issued by OFII and as indicated in the Report of Cares Marine
Cargo Surveyors. Instead of merely excusing itself from liability by putting the blame
to ATI and SMC it is incumbent upon OFII to prove that it actively took care of the
goods by exercising extraordinary diligence in the carriage thereof. It failed to do so.
Hence its presumed negligence under Article 1735 of the Civil Code remains
unrebutted.

WHEREFORE, premises considered the petitions of Westwind and OFII in G.R. Nos.
200289 and 200314 respectively are DENIED. The September 13 2011 Decision and
January 19 2012 Resolution of the Court of Appeals in CA-G.R. CV No. 86752 which
reversed and set aside the January 27 2006 Decision of the Manila City Regional
Trial Court Branch 30 are AFFIRMED.

TRANSPORTATION LAW – Chapter 2 & 3

8.) [G.R. No. 165266 : December 15, 2010]
AIR FRANCE, PETITIONER, VS. BONIFACIO H. GILLEGO, SUBSTITUTED BY HIS
SURVIVING HEIRS REPRESENTED BY DOLORES P. GILLEGO, RESPONDENT.
Sometime in April 1993, respondent Bonifacio H. Gillego,[3]  then incumbent
Congressman of the Second District of Sorsogon and Chairman of the House of
Representatives Committee on Civil, Political and Human Rights, was invited to
participate as one of the keynote speakers at the 89th Inter-Parliamentary
Conference Symposium on Parliament Guardian of Human Rights to be held in
Budapest, Hungary and Tokyo, Japan from May 19 to 22, 1993.  The Philippines is a
member of the Inter-Parliamentary Union which organized the event.[4]
On May 16, 1993, respondent left Manila on board petitioner Air France's aircraft
bound for Paris, France.   He arrived in Paris early morning of May 17, 1993 (5:00
a.m.). While waiting at the De' Gaulle International Airport for his connecting flight to
Budapest scheduled at 3:15 p.m. that same day, respondent learned that petitioner
had another aircraft bound for Budapest with an earlier departure time (10:00 a.m.)
than his scheduled flight.  He then went to petitioner's counter at the airport and made
arrangements for the change in his booking.  He was given a corresponding ticket
and boarding pass for Flight No. 2024 and also a new baggage claim stub for his
checked-in luggage.[5]
However, upon arriving in Budapest, respondent was unable to locate his luggage at
the claiming section. He sought assistance from petitioner's counter at the airport
where petitioner's representative verified from their computer that he had indeed a
checked-in luggage.  He was advised to just wait for his luggage at his hotel and that
petitioner's representatives would take charge of delivering the same to him that
same day. But said luggage was never delivered by petitioner's representatives
despite follow-up inquiries by respondent.
Upon his return to the Philippines, respondent's lawyer immediately wrote petitioner's
Station Manager complaining about the lost luggage and the resulting damages he
suffered while in Budapest.  Respondent claimed that his single luggage contained
his personal effects such as clothes, toiletries, medicines for his hypertension, and
the speeches he had prepared, including the notes and reference materials he
needed for the conference.  He was thus left with only his travel documents, pocket
money and the clothes he was wearing. Because petitioner's representatives in
Budapest failed to deliver his luggage despite their assurances and his repeated
follow-ups, respondent was forced to shop for personal items including new clothes
and his medicines.  Aside from these unnecessary expenditures of about $1,000,
respondent had to prepare another speech, in which he had difficulty due to lack of
data and information. Respondent thus demanded the sum of P1,000,000.00 from the
petitioner as compensation for his loss, inconvenience and moral damages.[6]   On January 3, 1996, the trial court rendered its decision in favor of respondent and
Petitioner, however, continued to ignore respondent's repeated follow-ups regarding
his lost luggage.
On July 13, 1993, respondent filed a complaint[7]  for damages against the petitioner
alleging that by reason of its negligence and breach of obligation to transport and
TRANSPORTATION LAW – Chapter 2 & 3
deliver his luggage, respondent suffered inconvenience, serious anxiety, physical
suffering and sleepless nights. It was further alleged that due to the physical, mental
and emotional strain resulting from the loss of his luggage, aggravated by the fact that
he failed to take his regular medication, respondent had to be taken to a medical
clinic in Tokyo, Japan for emergency treatment. Respondent asserted that as a
common carrier which advertises and offers its services to the public, petitioner is
under obligation to observe extraordinary diligence in the vigilance over checked-in
luggage and to see to it that respondent's luggage entrusted to petitioner's custody
would accompany him on his flight and/or could be claimed by him upon arrival at his
point of destination or delivered to him without delay.  Petitioner should therefore be
held liable for actual damages ($2,000.00 or P40,000.00), moral damages
(P1,000,000.00), exemplary damages (P500,000.00), attorney's fees (P50,000.00)
and costs of suit.
Petitioner filed its answer[8]  admitting that respondent was issued tickets for the flights
mentioned, his subsequent request to be transferred to another flight while at the
Paris airport and the loss of his checked-in luggage upon arrival at Budapest, which
luggage has not been retrieved to date and the respondent's repeated follow-ups
ignored.  However, as to the rest of respondent's allegations, petitioner said it has no
knowledge and information sufficient to form a belief as to their truth.  As special and
affirmative defense, petitioner contended that its liability for lost checked-in baggage
is governed by the Warsaw Convention for the Unification of Certain Rules Relating to
International Carriage.  Under the said treaty, petitioner's liability for lost or delayed
registered baggage of respondent is limited to 250 francs per kilogram or US$20.00,
which constitutes liquidated damages and hence respondent is not entitled to any
further damage.
Petitioner averred that it has taken all necessary measures to avoid loss of
respondent's baggage, the contents of which respondent did not declare, and that it
has no intent to cause such loss, much less knew that such loss could occur. The
loss of respondent's luggage is due to or occasioned by force majeure or fortuitous
event or other causes beyond the carrier's control. Diligent, sincere and timely efforts
were exerted by petitioner to locate respondent's missing luggage and attended to his
problem with utmost courtesy, concern and dispatch.  Petitioner further asserted that
it exercised due diligence in the selection and supervision of its employees and acted
in good faith in denying respondent's demand for damages.  The claims for actual,
moral and exemplary damages and attorney's fees therefore have no basis in fact
and in law, and are, moreover speculative and unconscionable.
In his Reply,[9]  respondent maintained that the loss of his luggage cannot be
attributed to anything other than petitioner's simple negligence and its failure to
perform the diligence required of a common carrier.
against the petitioner, as follows:
…
The trial court found there was gross negligence on the part of petitioner which failed
to retrieve respondent's checked-in luggage up to the time of the filing of the
complaint and as admitted in its answer, ignored respondent's repeated follow-ups. It
likewise found petitioner guilty of willful misconduct as it persistently disregarded the
rights of respondent who was no ordinary individual but a high government official. As
to the applicability of the limited liability for lost baggage under the Warsaw
Convention, the trial court rejected the argument of petitioner citing the case
of Alitalia v. Intermediate Appellate Court.[11]   was not subjected to humiliating treatment or comments as in the case of Lopez, et
Petitioner appealed to the CA, which affirmed the trial court's decision.  The CA noted
that in the memorandum submitted by petitioner before the trial court it was
mentioned that respondent's luggage was eventually found and delivered to him,
which was not denied by respondent and thus resulted in the withdrawal of the claim
for actual damages.  As to the trial court's finding of gross negligence, bad faith and
willful misconduct which justified the award of moral and exemplary damages, the CA
sustained the same, stating thus:
It bears stressing that defendant-appellant committed a breach of contract by its
failure to deliver the luggage of plaintiff-appellee on time despite demand from
plaintiff-appellee.  The unreasonable delay in the delivery of the luggage has not
been satisfactorily explained by defendant-appellant, either in its memorandum
or in its appellant's brief.  Instead of justifying the delay, defendant-appellant took
refuge under the provisions of the Warsaw Convention to escape liability. Neither was
there any showing of apology on the part of defendant-appellant as to the
delay.  Furthermore, the unapologetic defendant-appellant even faulted plaintiff-
appellee for not leaving a local address in Budapest in order for the defendant-
appellant to contact him (plaintiff-appellee) in the event the luggage is found.  and dispatch. Respondent, moreover, never alleged that petitioner's employees were
This actuation of defendant-appellant is a clear showing of willful misconduct
and a deliberate design to avoid liability.  It amounts to bad faith…
Its motion for reconsideration having been denied, petitioner filed the present Rule
45 petition raising the following grounds: …
Petitioner assails the trial and appellate courts for awarding extravagant sums to
respondent that already tend to punish the petitioner and enrich the respondent,
which is not the function at all of moral damages.  Upon the facts established, the
damages awarded are definitely not proportionate or commensurate to the wrong or
injury supposedly inflicted.  Without belittling the problems respondent experienced in
Budapest after losing his luggage, petitioner points out that despite the unfortunate
incident, respondent was able to reconstruct the speeches, notes and study guides
he had earlier prepared for the conference in Budapest and Tokyo, and to attend,
speak and participate therein as scheduled.  Since he prepared the research and
wrote his speech, considering his acknowledged and long-standing expertise in the
field of human rights in the Philippines, respondent should have had no difficulty
delivering his speech even without his notes.  In addition, there is no evidence that
members of the Inter-Parliamentary Union made derogatory statements or even knew
that he was unprepared for the conference. Bearing in mind that the actual damages
sought by respondent was only $2,000.00, then clearly the trial court went way
beyond that amount in determining the appropriate damages, inspite of the fact that
TRANSPORTATION LAW – Chapter 2 & 3
the respondent eventually got back his baggage.[14]
Comparing the situation in this case to other cases awarding similar damages to the
aggrieved passenger as a result of breaches of contract by international carriers,
petitioner argues that even assuming that respondent was entitled to moral and
exemplary damages, the sums adjudged should be modified or reduced. It is stressed
that petitioner or its agents were never rude or discourteous toward respondent; he
al. v. Pan American World Airways,[15] Ortigas, Jr. v. Lufthansa German Airlines[16] 
and Zulueta v. Pan American World Airways, Inc.[17] .   The mere fact that respondent
was a Congressman should not result in an automatic increase in the moral and
exemplary damages recoverable.  As held in Kierulf v. Court of Appeals[18]  the social
and financial standing of a claimant may be considered only if he or she was
subjected to contemptuous conduct despite the offender's knowledge of his or her
social and financial standing.[19]
…
Petitioner reiterates that there was no bad faith or negligence on its part and the
burden is on the respondent to prove by clear and convincing evidence that it acted in
bad faith.  Respondent in his testimony miserably failed to prove that bad faith, fraud
or ill will motivated or caused the delay of his baggage.  This Court will surely agree
that mere failure of a carrier to deliver a passenger's baggage at the agreed place
and time did not ipso facto amount to willful misconduct as to make it liable for moral
and exemplary damages.  Petitioner adduced evidence showing that it exerted
diligent, sincere and timely efforts to locate the missing baggage, eventually leading
to its recovery.  It attended to respondent's problem with utmost courtesy, concern
at anytime rude, mistreated him or in anyway showed improper behavior.[21]
The petition is partly meritorious.
A business intended to serve the travelling public primarily, a contract of carriage is
imbued with public interest.[22]   The law governing common carriers consequently
imposes an exacting standard. Article 1735 of the Civil Code provides that in case of
lost or damaged goods, common carriers are presumed to have been at fault or to
have acted negligently, unless they prove that they observed extraordinary diligence
as required by Article 1733.  Thus, in an action based on a breach of contract of
carriage, the aggrieved party does not have to prove that the common carrier was at
fault or was negligent. All that he has to prove is the existence of the contract and the
fact of its non-performance by the carrier.[23]
That respondent's checked-in luggage was not found upon arrival at his destination
and was not returned to him until about two years later[24]  is not disputed.  The action
filed by the respondent is founded on such breach of the contract of carriage with
petitioner who offered no satisfactory explanation for the unreasonable delay in the
delivery of respondent's baggage. The presumption of negligence was not overcome
by the petitioner and hence its liability for the delay was sufficiently established. 
However, upon receipt of the said luggage during the pendency of the case in the trial
court, respondent did not anymore press on his claim for actual or compensatory
damages and neither did he adduce evidence of the actual amount of loss and
damage incurred by such delayed delivery of his luggage.  Consequently, the trial
court proceeded to determine only the propriety of his claim for moral and exemplary
damages, and attorney's fees.
In awarding moral damages for breach of contract of carriage, the breach must be
wanton and deliberately injurious or the one responsible acted fraudulently or with
malice or bad faith.[25]   Not every case of mental anguish, fright or serious anxiety
calls for the award of moral damages.[26]   Where in breaching the contract of carriage
the 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 the obligation
which the parties had foreseen or could have reasonably foreseen. In such a case the
liability does not include moral and exemplary damages.[27]
Bad faith should be established by clear and convincing evidence.  The settled rule is
that the law always presumes good faith such that any person who seeks to be
awarded damages due to the acts of another has the burden of proving that the latter
acted in bad faith or with ill motive.[28]
In the case of Tan v. Northwest Airlines, Inc.,[29]  we sustained the CA's deletion of
moral and exemplary damages awarded to a passenger whose baggage were loaded
to another plane with the same expected date and time of arrival but nevertheless not
delivered to her on time. We found that respondent carrier was not motivated by
malice or bad faith in doing so due to weight and balance restrictions as a safety
measure.  In another case involving the off-loading of private respondents' baggage
to another destination, taken together with petitioner airline's neglect in providing the
necessary accommodations and assistance to its stranded passengers, aggravated
by the discourteous acts of its employees, we upheld the CA in sustaining the trial
court's decision awarding moral and exemplary damages and attorney's fees. We
pointed out that it is PAL's duty to provide assistance to private respondents and to
any other passenger similarly inconvenienced due to delay in the completion of the
transport and the receipt of their baggage.[30]
After a careful review, we find that petitioner is liable for moral damages.
Petitioner's station manager, Ma. Lourdes Reyes, testified that upon receiving the
letter-complaint of respondent's counsel, she immediately began working on the PIR
from their computerized data.  Based on her testimony, a PIR is issued at the airline
station upon complaint by a passenger concerning missing baggage. From the
information obtained in the computer-printout, it appears that a PIR[31]  was initiated at
petitioner's Budapest counter.  A search telex for the missing luggage was sent out
on the following dates: May 17, May 21 and May 23, 1993.   As shown in the PIR
printout, the information respondent supposedly furnished to petitioner was only his
Philippine address and telephone number, and not the address and contact number
of the hotel where he was billeted at Budapest.  According to the witness, PIR usually
is printed in two originals, one is kept by the station manager and the other copy
given to the passenger.  The witness further claimed that there was no record or entry
in the PIR of any follow-up call made by the respondent while in Budapest.[32]  The purpose of awarding moral damages is to enable the injured party to obtain
Respondent, on the other hand, claimed that he was not given a copy of this PIR and
that his repeated telephone calls to inquire about his lost luggage were ignored.
We hold that the trial and appellate courts did not err in finding that petitioner acted in
TRANSPORTATION LAW – Chapter 2 & 3
bad faith in repeatedly ignoring respondent's follow-up calls.  The alleged entries in
the PIR deserve scant consideration, as these have not been properly identified or
authenticated by the airline station representative in Budapest who initiated and
inputed the said entries. Furthermore, this Court cannot accept the convenient excuse
given by petitioner that respondent should be faulted in allegedly not giving his hotel
address and telephone number.  It is difficult to believe that respondent, who had just
lost his single luggage containing all his necessities for his stay in a foreign land and
his reference materials for a speaking engagement, would not give an information so
vital such as his hotel address and contact number to the airline counter where he
had promptly and frantically filed his complaint.  And even assuming arguendo  that
his Philippine address and contact number were the only details respondent had
provided for the PIR, still there was no explanation as to why petitioner never
communicated with respondents concerning his lost baggage long after respondent
had already returned to the Philippines.  While the missing luggage was eventually
recovered, it was returned to respondent only after the trial of this case.
Furthermore, the alleged copy of the PIR confirmed that the only action taken by the
petitioner to locate respondent's luggage were telex searches allegedly made on May
17, 21 and 23, 1993.  There was not even any attempt to explain the reason for the
loss of respondent's luggage.  Clearly, petitioner did not give the attention and care
due to its passenger whose baggage was not transported and delivered to him at his
travel destination and scheduled time.  Inattention to and lack of care for the interest
of its passengers who are entitled to its utmost consideration, particularly as to their
convenience, amount to bad faith which entitles the passenger to an award of moral
damages.[33]  What the law considers as bad faith which may furnish the ground for an
award of moral damages would be bad faith in securing the contract and in the
execution thereof, as well as in the enforcement of its terms, or any other kind of
deceit.[34]
While respondent failed to cite any act of discourtesy, discrimination or rudeness by
petitioner's employees, this did not make his loss and moral suffering insignificant and
less deserving of compensation. In repeatedly ignoring respondent's inquiries,
petitioner's employees exhibited an indifferent attitude without due regard for the
inconvenience and anxiety he experienced after realizing that his luggage was
missing.  Petitioner was thus guilty of bad faith in breaching its contract of carriage
with the respondent, which entitles the latter to the award of moral damages.
However, we agree with petitioner that the sum of P1,000,000.00  awarded by the
trial court is excessive and not proportionate to the loss or suffering inflicted on the
passenger under the circumstances.  As in Trans World Airlines v. Court of
Appeals[35]  where this Court after considering the social standing of the aggrieved
passenger who is a lawyer and director of several companies, the amount of
P500,000.00 awarded by the trial court as moral damages was still reduced to
P300,000.00, the moral damages granted to herein respondent should likewise be
adjusted.
means, diversion or amusement that will serve to alleviate the moral suffering he has
undergone by reason of defendant's culpable action. On the other hand, the aim of
awarding exemplary damages is to deter serious wrongdoings.[36]  Article 2216 of
the Civil Code provides that assessment of damages is left to the discretion of the
court according to the circumstances of each case. This discretion is limited by the
principle that the amount awarded should not be palpably excessive as to indicate
that it was the result of prejudice or corruption on the part of the trial court. Simply put,
the amount of damages must be fair, reasonable and proportionate to the injury
suffered.[37]

Where as in this case the air carrier failed to act timely on the passenger's
predicament caused by its employees' mistake and more than ordinary inadvertence
or inattention, and the passenger failed to show any act of arrogance, discourtesy or
rudeness committed by the air carrier's employees, the amounts of P200,000.00,
P50,000.00 and P30,000.00 as moral damages, exemplary damages and attorney's
fees  would be sufficient and justified.[38]

WHEREFORE, the petition is DENIED.   The Decision dated June 30, 2004 of the
Court of Appeals in CA-G.R. CV No. 56587 is
hereby AFFIRMED with MODIFICATION in that the award of moral damages,
exemplary damages and attorney's fees are hereby reduced to P200,000.00,
P50,000.00 and P30,000.00, respectively.

TRANSPORTATION LAW – Chapter 2 & 3

9.) [G.R. NO. 159636 : November 25, 2004]
VICTORY LINER, INC., Petitioner, v. ROSALITO GAMMAD, APRIL ROSSAN P.
GAMMAD, ROI ROZANO P. GAMMAD and DIANA FRANCES P.
GAMMAD, Respondents.
The facts as testified by respondent Rosalito Gammad show that on March 14, 1996,
his wife Marie Grace Pagulayan-Gammad,3 was on board an air-conditioned Victory
Liner bus bound for Tuguegarao, Cagayan from Manila. At about 3:00 a.m., the bus
while running at a high speed fell on a ravine somewhere in Barangay Baliling, Sta.
Fe, Nueva Vizcaya, which resulted in the death of Marie Grace and physical injuries
to other passengers.4
On May 14, 1996, respondent heirs of the deceased filed a complaint5 for damages
arising from culpa contractual against petitioner. In its answer,6 the petitioner claimed
that the incident was purely accidental and that it has always exercised extraordinary
diligence in its 50 years of operation.
… failing to appear at the scheduled hearings and move for reconsideration of the orders
Petitioner's motion to reset the presentation of its evidence to March 25, 199816 was
granted. However, on March 24, 1998, the counsel of petitioner sent the court a
telegram17 requesting postponement but the telegram was received by the trial court
on March 25, 1998, after it had issued an order considering the case submitted for
decision for failure of petitioner and counsel to appear.18
On November 6, 1998, the trial court rendered its decision in favor of respondents,
the dispositive portion of which reads:
1. Actual Damages - - - - - - - - - - - - - - - - - - - - P 122,000.00
2. Death Indemnity - - - - - - - - - - - - - - - - - - - - - 50,000.00
3. Exemplary and Moral Damages - - - - - 400,000.00
4. Compensatory Damages - - - - - - - - - - 1,500,000.00
5. Attorney's Fees - - - - - - - - - - - - - - - - - - - - - 10% of the total amount granted
6. Cost of the Suit.
On appeal by petitioner, the Court of Appeals affirmed the decision of the trial court
with modification as follows:
TRANSPORTATION LAW – Chapter 2 & 3
[T]he Decision dated 06 November 1998 is hereby MODIFIED to reflect that the
following are hereby adjudged in favor of plaintiffs-appellees:
1. Actual Damages in the amount of P88,270.00;
2. Compensatory Damages in the amount of P1,135,536,10;
3. Moral and Exemplary Damages in the amount of P400,000.00; andcralawlibrary
4. Attorney's fees equivalent to 10% of the sum of the actual, compensatory, moral,
and exemplary damages herein adjudged.
Represented by a new counsel, petitioner on May 21, 2003 filed a motion for
reconsideration praying that the case be remanded to the trial court for cross -
examination of respondents' witness and for the presentation of its evidence; or in the
alternative, dismiss the respondents' complaint.21 Invoking APEX Mining, Inc. v. Court
of Appeals,22 petitioner argues, inter alia, that the decision of the trial court should be
set aside because the negligence of its former counsel, Atty. Antonio B. Paguirigan, in
declaring petitioner to have waived the right to cross-examine respondents' witness
and right to present evidence, deprived petitioner of its day in court.
On August 21, 2003, the Court of Appeals denied petitioner's motion for
reconsideration.23
Hence, this Petition for Review principally based on the fact that the mistake or gross
negligence of its counsel deprived petitioner of due process of law. Petitioner also
argues that the trial court's award of damages were without basis and should be
deleted.
The issues for resolution are: (1) whether petitioner's counsel was guilty of gross
negligence; (2) whether petitioner should be held liable for breach of contract of
carriage; and (3) whether the award of damages was proper.
It is settled that the negligence of counsel binds the client. This is based on the rule
that any act performed by a counsel within the scope of his general or implied
authority is regarded as an act of his client. Consequently, the mistake or negligence
of counsel may result in the rendition of an unfavorable judgment against the client.
However, the application of the general rule to a given case should be looked into and
adopted according to the surrounding circumstances obtaining. Thus, exceptions to
the foregoing have been recognized by the court in cases where reckless or gross
negligence of counsel deprives the client of due process of law, or when its
application will result in outright deprivation of the client's liberty or property or where
the interests of justice so require, and accord relief to the client who suffered by
reason of the lawyer's gross or palpable mistake or negligence.24
The exceptions, however, are not present in this case. The record shows that Atty.
Paguirigan filed an Answer and Pre-trial Brief for petitioner. Although initially declared
as in default, Atty. Paguirigan successfully moved for the setting aside of the order of
default. In fact, petitioner was represented by Atty. Paguirigan at the pre-trial who
proposed settlement for P50,000.00. Although Atty. Paguirigan failed to file motions
for reconsideration of the orders declaring petitioner to have waived the right to cross-
examine respondents' witness and to present evidence, he nevertheless, filed a
timely appeal with the Court of Appeals assailing the decision of the trial court.
Hence, petitioner's claim that it was denied due process lacks basis.
Petitioner too is not entirely blameless. Prior to the issuance of the order declaring it
as in default for not appearing at the pre-trial, three notices (dated October 23,
1996,25 January 30, 1997,26 and March 26, 1997,27 ) requiring attendance at the pre-
trial were sent and duly received by petitioner. However, it was only on April 27, 1997,
after the issuance of the April 10, 1997 order of default for failure to appear at the pre-
trial when petitioner, through its finance and administrative manager, executed a
special power of attorney28 authorizing Atty. Paguirigan or any member of his law firm
to represent petitioner at the pre-trial. Petitioner is guilty, at the least, of contributory
negligence and fault cannot be imputed solely on previous counsel.
… with certainty.
Anent the second issue, petitioner was correctly found liable for breach of contract of
carriage. A common carrier is bound to carry its passengers safely as far as human
care and foresight can provide, using the utmost diligence of very cautious persons,
with due regard to all the circumstances. In a contract of carriage, it is presumed that
the common carrier was at fault or was negligent when a passenger dies or is injured.
Unless the presumption is rebutted, the court need not even make an express finding
of fault or negligence on the part of the common carrier. This statutory presumption
may only be overcome by evidence that the carrier exercised extraordinary
diligence.34
In the instant case, there is no evidence to rebut the statutory presumption that the
proximate cause of Marie Grace's death was the negligence of petitioner. Hence, the
courts below correctly ruled that petitioner was guilty of breach of contract of carriage.
Nevertheless, the award of damages should be modified.
Article 176435 in relation to Article 220636 of the Civil Code, holds the common carrier
in breach of its contract of carriage that results in the death of a passenger liable to
pay the following: (1) indemnity for death, (2) indemnity for loss of earning capacity,
and (3) moral damages.
In the present case, respondent heirs of the deceased are entitled to indemnity for the
death of Marie Grace which under current jurisprudence is fixed at P50,000.00.37
The award of compensatory damages for the loss of the deceased's earning capacity
should be deleted for lack of basis. As a rule, documentary evidence should be
TRANSPORTATION LAW – Chapter 2 & 3
presented to substantiate the claim for damages for loss of earning capacity. By way
of exception, damages for loss of earning capacity may be awarded despite the
absence of documentary evidence when (1) the deceased is self-employed earning
less than the minimum wage under current labor laws, and judicial notice may be
taken of the fact that in the deceased's line of work no documentary evidence is
available; or (2) the deceased is employed as a daily wage worker earning less than
the minimum wage under current labor laws.38
Here, the trial court and the Court of Appeals computed the award of compensatory
damages for loss of earning capacity only on the basis of the testimony of respondent
Rosalito that the deceased was 39 years of age and a Section Chief of the Bureau of
Internal Revenue, Tuguergarao District Office with a salary of P83,088.00 per annum
when she died.41 No other evidence was presented. The award is clearly erroneous
because the deceased's earnings does not fall within the exceptions.
However, the fact of loss having been established, temperate damages in the amount
of P500,000.00 should be awarded to respondents. Under Article 2224 of the Civil
Code, temperate or moderate damages, which are more than nominal but less than
compensatory damages, may be recovered when the court finds that some pecuniary
loss has been suffered but its amount can not, from the nature of the case, be proved
…
We rule that the lower court's awards of damages are more consonant with the
factual circumstances of the instant case. The trial court's findings of facts are clear
and well-developed. Each item of damages is adequately supported by evidence on
record.
Article 2224 of the Civil Code was likewise applied in the recent cases of People v.
Singh43 and People v. Almedilla,44 to justify the award of temperate damages in lieu of
damages for loss of earning capacity which was not substantiated by the required
documentary proof.
Anent the award of moral damages, the same cannot be lumped with exemplary
damages because they are based on different jural foundations.45 These damages
are different in nature and require separate determination.46 In culpa contractual or
breach of contract, moral damages may be recovered when the defendant acted in
bad faith or was guilty of gross negligence (amounting to bad faith) or in wanton
disregard of contractual obligations and, as in this case, when the act of breach of
contract itself constitutes the tort that results in physical injuries. By special rule in
Article 1764 in relation to Article 2206 of the Civil Code, moral damages may also be
awarded in case the death of a passenger results from a breach of carriage.47 On the
other hand, exemplary damages, which are awarded by way of example or correction
for the public good may be recovered in contractual obligations if the defendant acted
in wanton, fraudulent, reckless, oppressive, or malevolent manner.48
Respondents in the instant case should be awarded moral damages to compensate
for the grief caused by the death of the deceased resulting from the petitioner's
breach of contract of carriage. Furthermore, the petitioner failed to prove that it
exercised the extraordinary diligence required for common carriers, it is presumed to
have acted recklessly.49 Thus, the award of exemplary damages is proper. Under the
circumstances, we find it reasonable to award respondents the amount of
P100,000.00 as moral damages and P100,000.00 as exemplary damages. These
amounts are not excessive.50
The actual damages awarded by the trial court reduced by the Court of Appeals
should be further reduced. In People v. Duban,51 it was held that only substantiated
and proven expenses or those that appear to have been genuinely incurred in
connection with the death, wake or burial of the victim will be recognized. A list of
expenses (Exhibit "J"),52 and the contract/receipt for the construction of the tomb
(Exhibit "F")53 in this case, cannot be considered competent proof and cannot replace
the official receipts necessary to justify the award. Hence, actual damages should be
further reduced to P78,160.00,54 which was the amount supported by official receipts.
Pursuant to Article 220855 of the Civil Code, attorney's fees may also be recovered in
the case at bar where exemplary damages are awarded. The Court finds the award of
attorney's fees equivalent to 10% of the total amount adjudged against petitioner
reasonable.
Finally, in Eastern Shipping Lines, Inc. v. Court of Appeals,56 it was held that when an
obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or
quasi-delicts is breached, the contravenor can be held liable for payment of interest in
the concept of actual and compensatory damages, subject to the following rules, to
wit '
3. When the judgment of the court awarding a sum of money becomes final and
executory, the rate of legal interest, whether the case falls under paragraph 1 or
paragraph 2, above, shall be 12% per annum from such finality until its satisfaction,
this interim period being deemed to be by then an equivalent to a forbearance of
credit. (Emphasis supplied).
In the instant case, petitioner should be held liable for payment of interest as
damages for breach of contract of carriage. Considering that the amounts payable by
petitioner has been determined with certainty only in the instant petition, the interest
due shall be computed upon the finality of this decision at the rate of 12% per annum
until satisfaction, per paragraph 3 of the aforecited rule.57
WHEREFORE, in view of all the foregoing, the petition is partially granted. The April
11, 2003 decision of the Court of Appeals in CA-G.R. CV No. 63290, which modified
the decision of the Regional Trial Court of Tuguegarao, Cagayan in Civil Case No.
5023, is AFFIRMED with MODIFICATION. As modified, petitioner Victory Liner, Inc.,
is ordered to pay respondents the following: (1) P50,000.00 as indemnity for the
death of Marie Grace Pagulayan-Gammad; (2) P100,000.00 as moral damages; (3)
P100,000.00 as exemplary damages; (4) P78,160.00 as actual damages; (5)
P500,000.00 as temperate damages; (6) 10% of the total amount as attorneys fees;
and the costs of suit.
Furthermore, the total amount adjudged against petitioner shall earn interest at the
rate of 12% per annum computed from the finality of this decision until fully paid.

1. When the obligation is breached, and it consists in the payment of a sum of money,
i.e., a loan or forbearance of money, the interest due should be that which may have
been stipulated in writing. Furthermore, the interest due shall itself earn legal interest
from the time it is judicially demanded. In the absence of stipulation, the rate of
interest shall be 12% per annum to be computed from default, i.e., from judicial or
extrajudicial demand under and subject to the provisions of Article 1169 of the Civil
Code.

2. When an obligation, not constituting a loan or forbearance of money, is breached,

an interest on the amount of damages awarded may be imposed at the discretion of
the court at the rate of 6% per annum. No interest, however, shall be adjudged on
unliquidated claims or damages except when or until the demand can be established
with reasonable certainty. Accordingly, where the demand is established with
reasonable certainty, the interest shall begin to run from the time the claim is made
judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be
so reasonably established at the time the demand is made, the interest shall begin to
run only from the date the judgment of the court is made (at which time the
quantification of damages may be deemed to have been reasonably ascertained).
The actual base for the computation of legal interest shall, in any case, be on the
amount finally adjudged.
TRANSPORTATION LAW – Chapter 2 & 3
10.) G.R. No. 106664 March 8, 1995
PHILIPPINE AIR LINES, petitioner, vs. FLORANTE A. MIANO, respondent.
On August 31, 1988, private respondent took petitioner's flight PR 722, Mabuhay
Class, bound for Frankfurt, Germany. He had an immediate onward connecting flight
via Lufthansa flight LH 1452 to Vienna, Austria. At the Ninoy Aquino International
Airport, he checked-in one brown suitcase weighing twenty (20) kilograms2 but did not
declare a higher valuation. He claimed that his suitcase contained money,
documents, one Nikkon camera with zoom lens, suits, sweaters, shirts, pants, shoes,
and other accessories.3
Upon private respondent's arrival at Vienna via Lufthansa flight LH 1452, his
checked-in baggage was missing. He reported the matter to the Lufthansa authorities.
After three (3) hours of waiting in vain, he proceeded to Piestany, Czechoslovakia.
Eleven (11) days after or on September 11, 1988, his suitcase was delivered to him in
his hotel in Piestany, Czechoslovakia. He claimed that because of the delay in the
delivery of his suitcase, he was forced to borrow money to buy some clothes, to pay
$200.00 for the transportation of his baggage from Vienna to Piestany, and lost his
Nikkon camera.4
In November 1988, private respondent wrote to petitioner a letter demanding: (1)
P10,000.00 cost of allegedly lost Nikkon camera; (2) $200.00 for alleged cost of
transporting luggage from Vienna to Piestany; and (3) P100,000.00 as damages. In
its reply, petitioner informed private respondent that his letter was forwarded to its
legal department for investigation.
Private respondent felt his demand letter was left unheeded. He instituted an action
for Damages docketed as Civil Case No. 89-3496 before the Regional Trial Court of
Makati.
Petitioner contested the complaint. It disclaimed any liability on the ground that there
was neither a report of mishandled baggage on flight PR 722 nor a tracer telex
received from its Vienna Station. It, however, contended that if at all liable its
obligation is limited by the Warsaw Convention rate.
Petitioner filed a Third-Party Complaint against Lufthansa German Airlines imputing
the mishandling of private respondent's baggage, but was dismissed for its failure to
prosecute.
In its decision, the trial court observed that petitioner's actuation was not attended by
bad faith. Nevertheless, it awarded private respondent damages and attorney's fees,
the dispositive portion of which reads:
TRANSPORTATION LAW – Chapter 2 & 3
WHEREFORE, judgment is hereby rendered in favor of the plaintiff (private
respondent) and against the defendant (petitioner), thereby ordering the latter to pay
the following:
(a) U.S. $200.00 as cost of transporting the suitcase from Vienna to Czechoslovakia;
(b) P40,000.00 as moral damages;
(c) P20,000.00 as exemplary damages; and
(d) P15,000.00 as attorney's fees.
Hence, this petition for review.
In breach of contract of carriage by air, moral damages are awarded only if the
defendant acted fraudulently or in bad faith.6 Bad faith means a breach of a known
duty through same motive of interest or ill will.7
The trial court erred in awarding moral damages to private respondent. The
established facts evince that petitioner's late delivery of the baggage for eleven (11)
days was not motivated by ill will or bad faith. In fact, it immediately coordinated with
its Central Baggage Services to trace private respondent's suitcase and succeeded in
finding it. At the hearing, petitioner's Manager for Administration of Airport Services
Department Miguel Ebio testified that their records disclosed that Manila, the
originating station, did not  receive any tracer telex.8 A tracer telex, an airline lingo, is
an action of any station that the airlines operate from whom a passenger may
complain or have not received his baggage upon his arrival.9 It was reasonable to
presume that the handling of the baggage was normal and regular. Upon inquiry from
their Frankfurt Station, it was however discovered that the interline tag of private
respondent's baggage was accidentally taken off. According to Mr. Ebio, it was
customary for destination stations to hold a tagless baggage until properly identified.
The tracer telex, which contained information on the baggage, is matched with the
tagless luggage for identification. Without the tracer telex, the color and the type of
baggage are used as basis for the matching. Thus, the delay.
Worthy to stress, the trial court made an unequivocal conclusion that petitioner did not
act in bad faith or with malice,  viz.:
xxx xxx xxx
Absent a finding as to the bad intention of defendant (petitioner) PAL, this court finds
it appropriate to apply the Warsaw Convention with respect to the liability of Air
Carriers.10
xxx xxx xxx
The mere fact that defendant (petitioner) exerted effort to assist plaintiff (private
respondent) in his predicament as shown in defendant's (petitioner's) letter to plaintiff
(private respondent) (Exh. "E") and likewise the letter from Mr. Miguel Ebio, Manager-
Airport Services Administration of defendant (petitioner) PAL to its Senior Counsel-
Litigation, Atty. Marceliano Calica (Exh. "3") which reveals the fact that an
investigation was conducted as to mishandled baggage, coupled with the fact that
said information were then relayed to plaintiff (private respondent) as evidenced by a
letter of defendant (petitioner) to plaintiff (private respondent) (Exh. "4") does not
warrant a showing of malice on the part of defendant
(  petitioner). 11

xxx xxx xxx

Under the circumstances obtaining, considering that defendant's (petitioner's)

actuation was not attendant with bad faith, the award of moral damages in the amount
of P40,000.00 is but just and fair. 12

Bad faith must be substantiated by evidence. In LBC vs.  Court of

Appeals,13 we ruled:

Bad faith under the law cannot be presumed; it must be established by clear and
convincing evidence. Again, the unbroken jurisprudence is that in breach of contract
cases where the defendant 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 the obligation which the parties had foreseen or could reasonably have
foreseen. The damages, however, will not include liability far moral damages.
(Citations omitted)

We can neither sustain the award of exemplary damages. The prerequisite for the
award of exemplary damages in cases of contract or quasi-contract14 is that the
defendant acted in wanton, fraudulent, reckless, oppressive, or malevolent
manner. 15 The undisputed facts do not so warrant the characterization of the action
of petitioner.

The award of attorney's fees must also be disallowed for lack of legal leg to stand on.
The fact that private respondent was compelled to litigate and incur expenses to
protect and enforce his claim did not justify the award of attorney's fees. The general
rule is that attorney's fees cannot be recovered as part of damages because of the
policy that no premium should be placed on the right to litigate.16 Petitioner is willing
to pay the just claim of $200.00 as a result of the delay in the transportation of the
luggage in accord with the Warsaw Convention. Needless to say, the award of
attorney's fees must be deleted where the award of moral and exemplary damages
are eliminated.

IN VIEW WHEREOF, the assailed Decision of July 29, 1992 is MODIFIED deleting
the award of moral and exemplary damages and attorney's fees. No costs.

TRANSPORTATION LAW – Chapter 2 & 3

11.) G.R. No. 170071               March 9, 2011
HEIRS OF JOSE MARCIAL K. OCHOA namely: RUBY B. OCHOA, MICAELA B.
OCHOA and JOMAR B. OCHOA, Petitioners,
vs. G & S TRANSPORT CORPORATION, Respondent.
Jose Marcial K. Ochoa (Jose Marcial) died on the night of March 10, 1995 while on
board an Avis taxicab owned and operated by G & S Transport Corporation (G & S),
a common carrier. As narrated by the trial court, the circumstances attending Jose
Marcial’s death are as follows:
It appears that sometime in the evening of March 10, 1995, at the Manila Domestic
Airport, the late Jose Marcial K. Ochoa boarded and rode a taxicab with Plate No.
PKR-534, a passenger vehicle for hire owned and operated by defendant corporation
under the business name "Avis Coupon Taxi" (Avis) and driven by its employee and
authorized driver Bibiano Padilla, Jr. on his way home to Teacher’s Village, Diliman,
Quezon City.
At about 11:00 p.m., the taxicab was cruising along Epifanio delos Santos Avenue
[EDSA], in front of Camp Aguinaldo in Quezon City at high speed. While going up the
Boni Serrano (Santolan) fly-over, it overtook another cab driven by Pablo Clave and
tried to pass another vehicle, a ten-wheeler cargo truck. Because of the narrow space
between the left side railing of the fly-over and the ten-wheeler truck, the Avis cab
was unable to pass and because of its speed, its driver (Padilla) was unable to control
it. To avoid colliding with the truck, Padilla turned the wheel to the left causing his
taxicab to ram the railing throwing itself off the fly-over and fell on the middle surface
of EDSA below. The forceful drop of the vehicle on the floor of the road broke and
split it into two parts. Both driver Padilla and passenger Jose Marcial K. Ochoa were
injured and rushed to the hospital. At the East Avenue Medical Center, Ochoa was
not as lucky as Padilla who was alive. He was declared dead on arrival from the
accident. The death certificate issued by the Office of the Civil Registrar of Quezon
City cited the cause of his death as vehicular accident.3
On May 13, 1999, Jose Marcial’s wife, Ruby Bueno Ochoa, and his two minor
children, Micaela B. Ochoa and Jomar B. Ochoa (the heirs), through counsel, sent G
& S a letter4 demanding that the latter indemnify them for Jose Marcial’s death, his
loss of earning capacity, and funeral expenses in the total amount of ₱15,000,000.00.
As G & S failed to heed the same, the heirs filed a Complaint5 for Damages before
the Regional Trial Court (RTC) of Pasig City which was raffled to Branch 164 of said
court.
The heirs alleged that G & S, as a common carrier, is under legal obligation to
observe and exercise extraordinary diligence in transporting its passengers to their
destination safely and securely. However, G & S failed to observe and exercise this
extraordinary diligence because its employee failed to transport Jose Marcial to his
destination safely. They averred that G & S is liable to them for having breached the
contract of common carriage. As an alternative cause of action, they asserted that G
TRANSPORTATION LAW – Chapter 2 & 3
& S is likewise liable for damages based on quasi-delict pursuant to Article 21806 in
relation to Article 21767 of the Civil Code. The heirs thus prayed for G & S to pay
them actual damages, moral damages, exemplary damages, and attorney’s fees and
expenses of litigation.
In its Answer With Compulsory Counterclaims,8  G & S claimed that Jose Marcial
boarded an Avis taxicab driven by its employee, Bibiano Padilla (Padilla), at the
Domestic Airport to bring him to Teacher’s Village in Quezon City. While passing the
Santolan fly-over, however, the Avis taxicab was bumped by an on-rushing delivery
van at the right portion causing the taxicab to veer to the left, ram through the left side
of the railings of the fly-over and fall to the center of the island below. The taxicab was
split into two and Jose Marcial was thrown 10 meters away. G & S posited that the
proximate cause of Jose Marcial’s death is a fortuitous event and/or the fault or
negligence of the driver of the delivery van that hit the taxicab. It likewise claimed that
it exercised the diligence required of a good father of a family in the selection and
supervision of its employees including Padilla. By way of compulsory counterclaim, G
& S sought to recover from the heirs the amount of ₱300,000.00 as attorney’s fees
and costs of suit.
Ruling of the Regional Trial Court
On December 27, 2001, the trial court rendered a Decision9 finding the vehicular
mishap not caused by a fortuitous event but by the negligence of Padilla. It likewise
found the evidence adduced by G & S to show that it exercised the diligence of a
good father of a family in the selection and supervision of its employees as
insufficient. Hence, the trial court declared G & S civilly liable to the heirs. However,
for lack of receipts or any proof of funeral expenses and other actual damages, the
trial court denied the heirs’ claim for actual damages. It also denied them moral and
exemplary damages for lack of legal basis. The dispositive portion of said Decision
reads:
G & S filed a Notice of Appeal11 while the heirs filed a Motion for Partial
Reconsideration.12 The heirs averred that they are entitled to moral damages
pursuant to Article 176413 in relation to Article 2206(3)14 of the Civil Code. They also
cited applicable jurisprudence providing that moral damages are recoverable in a
damage suit predicated upon a breach of contract of carriage where the mishap
results in the death of the passenger. With respect to their claim for exemplary
damages, the heirs relied upon Article 2232 of the Civil Code which provides that in
contracts and quasi-contracts, the court may award exemplary damages if the
defendant acted in a wanton, fraudulent, reckless, oppressive or malevolent manner.
And, since Padilla was declared by the trial court to have been grossly negligent in
driving the taxicab, the heirs claimed that they are likewise entitled to exemplary
damages.
After G & S filed its Opposition (To Plaintiffs’ Motion for Partial Reconsideration),15 the
trial court issued an Order16  on March 5, 2002. It found merit in the heirs’ Motion for
Partial Reconsideration and thus declared them entitled to moral and exemplary
damages, viz:
… At any rate, the heirs contended that regardless of whether G & S observed due
Because of this, G & S filed another Notice of Appeal18 and same was given due
course by the trial court in an Order19 dated April 23, 2002.
Ruling of the Court of Appeals
Before the CA, G & S continued to insist that it exercised the diligence of a good
father of the family in the selection and supervision of its employees. It averred that it
has been carrying out not only seminars for its drivers even before they were made to
work, but also periodic evaluations for their performance. Aside from these, it has also
been conducting monthly check-up of its automobiles and has regularly issued rules
regarding the conduct of its drivers. G & S claimed that it was able to establish a good
name in the industry and maintain a clientele.
In an effort to build up Padilla’s character as an experienced and careful driver, G & S
averred that: (1) before G & S employed Padilla, he was a delivery truck driver of Inter
Island Gas Service for 11 years; (2) Padilla has been an employee of G & S from
1989 to 1996 and during said period, there was no recorded incident of his being a
negligent driver; (3) despite his qualifications, G & S still required Padilla to submit an
NBI clearance, driver’s license and police clearance; (4) Padilla’s being a good driver-
employee was manifest in his years of service with G & S, as in fact, he has received
congratulatory messages from the latter as shown by the inter-office memos dated
August 23, 1990 and February 1, 1993; and that (5) Padilla attended a seminar at the
Pope Pius Center sometime in December 1999 as part of the NAIA Taxi Operation
Program.
… on Certiorari before this Court. The heirs’ petition was docketed as G.R. No. 170071
On the other hand, the heirs maintained that Padilla was grossly negligent in driving
the Avis taxicab on the night of March 10, 1995. They claimed that Padilla, while
running at a very high speed, acted negligently when he tried to overtake a ten-
wheeler truck at the foot of the fly-over. This forced him to swerve to the left and as a
consequence, the Avis taxicab hit the center of the railing and was split into two upon
hitting the ground. The manner by which Padilla drove the taxicab clearly showed that
he acted without regard to the safety of his passenger.
The heirs also averred that in order for a fortuitous event to exempt one from liability,
it is necessary that he has committed no negligence or conduct that may have
occasioned the loss. Thus, to be exempt from liability for the death of Jose Marcial on
this ground, G & S must clearly show that the proximate cause of the casualty was
entirely independent of human will and that it was impossible to avoid. And since in
the case at bar it was Padilla’s inexcusable poor judgment, utter lack of foresight and
extreme negligence which were the immediate and proximate causes of the accident,
same cannot be considered to be due to a fortuitous event. This is bolstered by the
TRANSPORTATION LAW – Chapter 2 & 3
fact that the court trying the case for criminal negligence arising from the same
incident convicted Padilla for said charge.20
diligence in the selection of its employees, it should nonetheless be held liable for the
death of Jose Marcial pursuant to Article 1759 of the Civil Code which provides:
…
In sum, the heirs prayed that the appeal be dismissed for lack of merit and the
assailed Decision and Order of the trial court be affirmed in toto.
In a Decision21 dated June 29, 2005, the CA ruled in favor of the heirs. The appellate
court gave weight to their argument that in order for a fortuitous event to exempt one
from liability, it is necessary that he committed no negligence or misconduct that may
have occasioned the loss. In this case, the CA noted that Padilla failed to employ
reasonable foresight, diligence and care needed to exempt G & S from liability for
Jose Marcial’s death. Said court also quoted pertinent portions of the MTC decision
convicting Padilla of reckless imprudence resulting in homicide to negate G & S’ claim
that the proximate cause of the accident was the fault of the driver of the delivery van
who allegedly hit the right side of the taxicab. And just like the trial court, the CA
found insufficient the evidence adduced by G & S to support its claim that it exercised
due diligence in the selection and supervision of its employees.
…
Both parties moved for reconsideration24 but the CA denied their respective motions
for reconsideration in a Resolution25 dated October 12, 2005.
Hence, G & S and the heirs filed their respective Petitions for Review
and that of G & S as G.R. No. 170125. These petitions were later consolidated
pursuant to this Court’s Resolution of November 21, 2005.26
G.R. No. 170125
G & S anchors its petition on the following grounds:
…
G & S reiterates its arguments that the proximate cause of the accident is a fortuitous
event and/or the negligence of the driver of the delivery van which bumped the right
portion of its taxicab and, that it exercised the diligence of a good father of a family in
the selection and supervision of its employees. It faults the CA when it overlooked the
fact that the MTC Decision convicting Padilla of reckless imprudence has already
been reversed on appeal by the RTC with Padilla having been accordingly acquitted
of the crime charged. Moreover, it claims that the appellate court erred in according
respect to the testimony of the lone prosecution witness, Pablo Clave (Clave), when it
concluded that Padilla was driving negligently at the time of the accident. It asserts
that Clave is not a credible witness and so is his testimony. Thus, G & S prays that
the assailed CA Decision and Resolution be reversed and set aside.
On the other hand, the heirs posit that the determination of the issues raised by G & S
necessarily entails a re-examination of the factual findings which this Court cannot do
in this petition for review on certiorari. At any rate, they maintain that the trial court
itself is convinced of Clave’s credibility. They stress the settled rule that the evaluation
of the credibility of witnesses is a matter that particularly falls within the authority of
the trial court because it had the opportunity to observe the demeanor of the
witnesses on the stand.
The heirs assert that fortuitous event was not the proximate cause of the mishap.
They point out that as correctly found by the trial court, Padilla was running at an
extremely high speed. This was why the impact was so strong when the taxicab
rammed the fly-over railings and was split into two when it hit the ground. Also, while
it is true that the MTC Decision in the criminal case for reckless imprudence has been
reversed by the RTC, this does not excuse G & S from its liability to the heirs because
its liability arises from its breach of contract of carriage and from its negligence in the
selection and supervision of its employees. Also, since the acquittal of Padilla is
based on reasonable doubt, same does not in any way rule out his negligence as this
may merely mean that the prosecution failed to meet the requisite quantum of
evidence to sustain his conviction. Therefore, G & S cannot bank on said acquittal to
disprove its liability.
G.R. No. 170071
The heirs, on the other hand, advance the following grounds in support of their
petition:
The focal point of the heirs’ petition is the CA’s deletion of the award of
₱6,537,244.96 for Jose Marcial’s loss of earning capacity as well as the reduction of
the award of moral damages from ₱300,000.00 to ₱200,000.00.
Our Ruling
We shall first tackle the issues raised by G & S in its petition.
The first, third and fourth issues raised by G & S involve questions of fact
We have reviewed said issues and we find that the determination of the first, third and
fourth issues raised entails re-examination of the evidence presented because they
all involve questions of fact. In Microsoft Corporation v. Maxicorp, Inc.,32  we held that:
TRANSPORTATION LAW – Chapter 2 & 3
In this case, the said three issues boil down to the determination of the following
questions: What is the proximate cause of the death of Jose Marcial? Is the testimony
of prosecution witness Clave credible? Did G & S exercise the diligence of a good
father of a family in the selection and supervision of its employees? Suffice it to say
that these are all questions of fact which require this Court to inquire into the
probative value of the evidence presented before the trial court. As we have
consistently held, "[t]his Court is not a trier of facts. It is not a function of this court to
analyze or weigh evidence. When we give due course to such situations, it is solely
by way of exception. Such exceptions apply only in the presence of extremely
meritorious circumstances."…
There is a contract of carriage between G & S and Jose Marcial
What is clear from the records is that there existed a contract of carriage between G
& S, as the owner and operator of the Avis taxicab, and Jose Marcial, as the
passenger of said vehicle. As a common carrier, G & S "is bound to carry [Jose
Marcial] 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."37 However, Jose Marcial was not able to reach his destination safely
as he died during the course of the travel. "In a contract of carriage, it is presumed
that the common carrier is at fault or is negligent when a passenger dies or is injured.
In fact, there is even no need for the court to make an express finding of fault or
negligence on the part of the common carrier. This statutory presumption may only be
overcome by evidence that the carrier exercised extraordinary
diligence."38 Unfortunately, G & S miserably failed to overcome this presumption. Both
the trial court and the CA found that the accident which led to Jose Marcial’s death
was due to the reckless driving and gross negligence of G & S’ driver, Padilla, thereby
holding G & S liable to the heirs of Jose Marcial for breach of contract of carriage.
The acquittal of Padilla in the criminal case is immaterial to the instant case for
breach of contract
This thus now leaves us with the remaining issue raised by G & S, that is, whether
the CA gravely erred in not taking note of the fact that Padilla has already been
acquitted of the crime of reckless imprudence resulting in homicide, a charge which
arose from the same incident subject of this case.
Article 31 of the Civil Code provides, viz:
When the civil action is based on an obligation not arising from the act or omission
complained of as a felony, such civil action may proceed independently of the criminal
proceedings and regardless of the result of the latter.
Thus, in Cancio, Jr. v. Isip,39 we declared:
In the instant case, it must be stressed that the action filed by petitioner is an
independent civil action, which remains separate and distinct from any criminal
prosecution based on the same act. Not being deemed instituted in the criminal action
based on culpa criminal, a ruling on the culpability of the offender will have no
bearing on said independent civil action based on an entirely different cause of
action, i.e., culpa contractual." (Emphasis supplied; Citations omitted.)
In this case, the action filed by the heirs is primarily for the recovery of damages
arising from breach of contract of carriage allegedly committed by G & S. Clearly, it is
an independent civil action arising from contract which is separate and distinct from
the criminal action for reckless imprudence resulting in homicide filed by the heirs
against Padilla by reason of the same incident. Hence, regardless of Padilla’s
acquittal or conviction in said criminal case, same has no bearing in the resolution of
the present case. There was therefore no error on the part of the CA when it resolved
this case without regard to the fact that Padilla has already been acquitted by the
RTC in the criminal case. Moreover, while the CA quoted some portions of the MTC
Decision in said criminal case, we however find that those quoted portions were only
meant to belie G & S’ claim that the proximate cause of the accident was the
negligence of the driver of the delivery van which allegedly hit the Avis taxicab. Even
without those quoted portions, the appellate court’s ultimate finding that it was
Padilla’s negligence which was the proximate cause of the mishap would still be the
same. This is because the CA has, in fact, already made this declaration in the earlier
part of its assailed Decision. The fact that the MTC Decision from which the subject
quoted portions were lifted has already been reversed by the RTC is therefore
immaterial.
In view of the foregoing, we deny G & S’ petition for lack of merit.
The denial by the CA of the heirs’ claim for lost earnings is unwarranted
Going now to the petition filed by the heirs, we note at the outset that the issues of
whether the CA erred in deleting the award for loss of earning capacity and in
reducing the award for moral damages made by the trial court likewise raise
questions of fact as they "involve an examination of the probative value of the
evidence presented by the parties…
In Ereño, we denied the claim for loss of income because the handwritten estimate of
the deceased’s daily income as a self-employed vendor was not supported by
competent evidence like income tax returns or receipts. This was in view of the rule
that compensation for lost income is in the nature of damages and as such requires
due proof of damages suffered. We reiterated this rule in People v. Yrat43 where we
likewise denied the same claim because the only evidence presented to show that the
deceased was earning ₱50,000.00 a month was the testimony of the wife. There we
stated that for lost income due to death, there must be unbiased proof of the
deceased’s average income. Self-serving, hence, unreliable statement is not enough.
In People v. Caraig,44 we declared that "documentary evidence should be presented
to substantiate the claim for damages for loss of earning capacity. By way of
exception, damages therefor may be awarded despite the absence of documentary
evidence, provided that there is testimony that the victim was either (1) self-employed
earning less than the minimum wage under current labor laws, and judicial notice
may be taken of the fact that in the victim’s line of work no documentary evidence is
available; or (2) employed as a daily-wage worker earning less than the minimum
TRANSPORTATION LAW – Chapter 2 & 3
wage under current labor laws". However, we subsequently ruled in Pleyto v.
Lomboy45 that "failure to present documentary evidence to support a claim for loss of
earning capacity of the deceased need not be fatal to its cause. Testimonial evidence
suffices to establish a basis for which the court can make a fair and reasonable
estimate of the loss of earning capacity". Hence, we held as sufficient to establish a
basis for an estimate of damages for loss of earning capacity the testimony of the
victim’s widow that her husband was earning a monthly income of ₱8,000.00…
In all of the cases mentioned except for Ereño, the sole basis for the claim for loss of
earning capacity were the testimonies of the claimants. This is not the case here. Just
like in Ereño where the testimony of the mother of the deceased was accompanied
by a handwritten estimate of her daughter’s alleged income as a fish vendor, the
testimony of Jose Marcial’s wife that he was earning around ₱450,000.00 a year was
corroborated by a Certification issued by the USAID. However in Ereño, we declared
as self-serving the handwritten estimate submitted by the mother hence we denied
the claim for such award. Based on said ruling, the CA in this case deleted the award
for lost income after it found the USAID Certification to be self-serving and unreliable.
…
Verily, the USAID certification cannot be said to be self-serving because it does not
refer to an act or declaration made out of court by the heirs themselves as parties to
this case.
Clearly, the CA erred in deleting the award for lost income on the ground that the
USAID Certification supporting such claim is self-serving and unreliable. On the
contrary, we find said certification sufficient basis for the court to make a fair and
reasonable estimate of Jose Marcial’s loss of earning capacity just like in Tamayo v.
Señora52 where we based the victim’s gross annual income on his pay slip from the
Philippine National Police. Hence, we uphold the trial court’s award for Jose Marcial’s
loss of earning capacity.
The award of moral damages should be modified
While we deemed it proper to modify the amount of moral damages awarded by the
trial court as discussed below, we nevertheless agree with the heirs that the CA
should not have pegged said award in proportion to the award of exemplary
damages. Moral and exemplary damages are based on different jural
foundations.57 They are different in nature and require separate determination.58 The
amount of one cannot be made to depend on the other.
In Victory Liner Inc. v. Gammad59 we awarded ₱100,000.00 by way of moral damages
to the husband and three children of the deceased, a 39-year old Section Chief of the
Bureau of Internal Revenue, to compensate said heirs for the grief caused by her
death. This is pursuant to the provisions of Articles 1764 and 2206(3) which provide:
Art. 1764. Damages in cases comprised in this Section shall be awarded in
accordance with Title XVIII of this Book, concerning Damages. Articles 2206 shall
also apply to the death of a passenger caused by the breach of contract by a
common carrier.

Art. 2206. x x x

(3) The spouse, legitimate and illegitimate descendants and the ascendants of the
deceased may demand moral damages for mental anguish by reason of the death of
the deceased.

Here, there is no question that the heirs are likewise entitled to moral damages
pursuant to the above provisions, considering the mental anguish suffered by them by
reason of Jose Marcial’s untimely death, as can be deduced from the following
testimony of his wife Ruby:

From the above discussion, we, thus, partly grant the heirs’ petition.

WHEREFORE, the petition for review on certiorari in G.R. No. 170071 is PARTLY
GRANTED while the petition in G.R. No. 170125 is DENIED. The assailed Decision
and Resolution dated June 29, 2005 and October 12, 2005 of the Court of Appeals in
CA-G.R. CV No. 75602 are AFFIRMED with the MODIFICATIONS that G & S is
ordered to pay the heirs of Jose Marcial K. Ochoa the sum of ₱6,611,634.59 for loss
of earning capacity of the deceased and ₱100,000.00 as moral damages.

TRANSPORTATION LAW – Chapter 2 & 3

12.) G.R. No. L-48757 May 30, 1988
MAURO GANZON, petitioner, vs. COURT OF APPEALS and GELACIO E.
TUMAMBING, respondents.
On November 28, 1956, Gelacio Tumambing contracted the services of Mauro B.
Ganzon to haul 305 tons of scrap iron from Mariveles, Bataan, to the port of Manila
on board the lighter LCT "Batman" (Exhibit 1, Stipulation of Facts, Amended Record
on Appeal, p. 38). Pursuant to that agreement, Mauro B. Ganzon sent his lighter
"Batman" to Mariveles where it docked in three feet of water (t.s.n., September 28,
1972, p. 31). On December 1, 1956, Gelacio Tumambing delivered the scrap iron to
defendant Filomeno Niza, captain of the lighter, for loading which was actually begun
on the same date by the crew of the lighter under the captain's supervision. When
about half of the scrap iron was already loaded (t.s.n., December 14, 1972, p. 20),
Mayor Jose Advincula of Mariveles, Bataan, arrived and demanded P5,000.00 from
Gelacio Tumambing. The latter resisted the shakedown and after a heated argument
between them, Mayor Jose Advincula drew his gun and fired at Gelacio Tumambing
(t.s.n., March 19, 1971, p. 9; September 28, 1972, pp. 6-7).  The gunshot was not fatal
but Tumambing had to be taken to a hospital in Balanga, Bataan, for treatment (t.s.n.,
March 19, 1971, p. 13; September 28, 1972, p. 15).
After sometime, the loading of the scrap iron was resumed. But on December 4,
1956, Acting Mayor Basilio Rub, accompanied by three policemen, ordered captain
Filomeno Niza and his crew to dump the scrap iron (t.s.n., June 16, 1972, pp. 8-9)
where the lighter was docked (t.s.n., September 28, 1972, p. 31). The rest was
brought to the compound of NASSCO (Record on Appeal, pp. 20-22). Later on Acting
Mayor Rub issued a receipt stating that the Municipality of Mariveles had taken
custody of the scrap iron (Stipulation of Facts, Record on Appeal, p. 40; t.s.n.,
September 28, 1972, p. 10.)
On the basis of the above findings, the respondent Court rendered a decision, the
dispositive portion of which states:
WHEREFORE, the decision appealed from is hereby reversed and set aside and a
new one entered ordering defendant-appellee Mauro Ganzon to pay plaintiff-appellant
Gelacio E. Tumambimg the sum of P5,895.00 as actual damages, the sum of
P5,000.00 as exemplary damages, and the amount of P2,000.00 as attorney's fees.
Costs against defendant-appellee Ganzon. 3
In this petition for review on certiorari, the alleged errors in the decision of the Court of
Appeals are:…
The petitioner, in his first assignment of error, insists that the scrap iron had not been
unconditionally placed under his custody and control to make him liable. However, he
completely agrees with the respondent Court's finding that on December 1, 1956, the
private respondent delivered the scraps to Captain Filomeno Niza for loading in the
lighter "Batman," That the petitioner, thru his employees, actually received the scraps
TRANSPORTATION LAW – Chapter 2 & 3
is freely admitted. Significantly, there is not the slightest allegation or showing of any
condition, qualification, or restriction accompanying the delivery by the private
respondent-shipper of the scraps, or the receipt of the same by the petitioner. On the
contrary, soon after the scraps were delivered to, and received by the petitioner-
common carrier, loading was commenced.
By the said act of delivery, the scraps were unconditionally placed in the possession
and control of the common carrier, and upon their receipt by the carrier for
transportation, the contract of carriage was deemed perfected. Consequently, the
petitioner-carrier's extraordinary responsibility for the loss, destruction or deterioration
of the goods commenced. Pursuant to Art. 1736, such extraordinary responsibility
would cease only upon the delivery, actual or constructive, by the carrier to the
consignee, or to the person who has a right to receive them. 5 The fact that part of the
shipment had not been loaded on board the lighter did not impair the said contract of
transportation as the goods remained in the custody and control of the carrier, albeit
still unloaded.
The petitioner has failed to show that the loss of the scraps was due to any of the
following causes enumerated in Article 1734 of the Civil Code, namely:
(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the containers;
(5) Order or act of competent public authority.
Hence, the petitioner is presumed to have been at fault or to have acted
negligently. 6 By reason of this presumption, the court is not even required to make an
express finding of fault or negligence before it could hold the petitioner answerable for
the breach of the contract of carriage. Still, the petitioner could have been exempted
from any liability had he been able to prove that he observed extraordinary diligence
in the vigilance over the goods in his custody, according to all the circumstances of
the case, or that the loss was due to an unforeseen event or to force majeure. As it
was, there was hardly any attempt on the part of the petitioner to prove that he
exercised such extraordinary diligence.
It is in the second and third assignments of error where the petitioner maintains that
he is exempt from any liability because the loss of the scraps was due mainly to the
intervention of the municipal officials of Mariveles which constitutes a caso fortuito as
defined in Article 1174 of the Civil Code. 7
We cannot sustain the theory of caso fortuito. In the courts below, the petitioner's WHEREFORE, the petition is DENIED; the assailed decision of the Court of Appeals
defense was that the loss of the scraps was due to an "order or act of competent is hereby AFFIRMED. Costs against the petitioner.
public authority," and this contention was correctly passed upon by the Court of
Appeals which ruled that:

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

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

There is no incompatibility between the Civil Code provisions on common carriers and
Articles 361 8 and 362 9 of the Code of Commerce which were the basis for this
Court's ruling in Government of the Philippine Islands vs. Ynchausti & Co.10 and
which the petitioner invokes in tills petition. For Art. 1735 of the Civil Code, conversely
stated, means that the shipper will suffer the losses and deterioration arising from the
causes enumerated in Art. 1734; and in these instances, the burden of proving that
damages were caused by the fault or negligence of the carrier rests upon him.
However, the carrier must first establish that the loss or deterioration was occasioned
by one of the excepted causes or was due to an unforeseen event or to force
majeure. Be that as it may, insofar as Art. 362 appears to require of the carrier only
ordinary diligence, the same is deemed to have been modified by Art. 1733 of the
Civil Code.

Finding the award of actual and exemplary damages to be proper, the same will not
be disturbed by us. Besides, these were not sufficiently controverted by the petitioner.

TRANSPORTATION LAW – Chapter 2 & 3

13.) G.R. No. 153563             February 07, 2005
NATIONAL TRUCKING AND FORWARDING CORPORATION, petitioner,
vs. LORENZO SHIPPING CORPORATION, Respondent.
On June 5, 1987, the Republic of the Philippines, through the Department of Health
(DOH), and the Cooperative for American Relief Everywhere, Inc. (CARE) signed an
agreement wherein CARE would acquire from the United States government
donations of non-fat dried milk and other food products from January 1, 1987 to
December 31, 1989. In turn, the Philippines would transport and distribute the
donated commodities to the intended beneficiaries in the country.
The government entered into a contract of carriage of goods with herein petitioner
National Trucking and Forwarding Corporation (NTFC). Thus, the latter shipped 4,868
bags of non-fat dried milk through herein respondent Lorenzo Shipping Corporation
(LSC) from September to December 1988. The consignee named in the bills of lading
issued by the respondent was Abdurahman Jama, petitioner’s branch supervisor in
Zamboanga City.
On reaching the port of Zamboanga City, respondent’s agent, Efren Ruste4 Shipping
Agency, unloaded the 4,868 bags of non-fat dried milk and delivered the goods to
petitioner’s warehouse. Before each delivery, Rogelio Rizada and Ismael Zamora,
both delivery checkers of Efren Ruste Shipping Agency, requested Abdurahman to
surrender the original bills of lading, but the latter merely presented certified true
copies thereof. Upon completion of each delivery, Rogelio and Ismael asked
Abdurahman to sign the delivery receipts. However, at times when Abdurahman had
to attend to other business before a delivery was completed, he instructed his
subordinates to sign the delivery receipts for him.
Notwithstanding the precautions taken, the petitioner allegedly did not receive the
subject goods. Thus, in a letter dated March 11, 1989, petitioner NTFC filed a formal
claim for non-delivery of the goods shipped through respondent.
In its letter of April 26, 1989, the respondent explained that the cargo had already
been delivered to Abdurahman Jama. The petitioner then decided to investigate the
loss of the goods. But before the investigation was over, Abdurahman Jama resigned
as branch supervisor of petitioner.
Noting but disbelieving respondent’s insistence that the goods were delivered, the
government through the DOH, CARE, and NTFC as plaintiffs filed an action for
breach of contract of carriage, against respondent as defendant, with the RTC of
Manila.
After trial, the RTC resolved the case as follows:
TRANSPORTATION LAW – Chapter 2 & 3
WHEREFORE, judgment is hereby rendered in favor of the defendant and against the
plaintiffs, dismissing the latter’s complaint, and ordering the plaintiffs, pursuant to the
defendant’s counterclaim, to pay, jointly and solidarily, to the defendant, actual
damages in the amount of ₱50,000.00, and attorney’s fees in the amount of
₱70,000.00, plus the costs of suit.
Dissatisfied with the foregoing ruling, herein petitioner appealed to the Court of
Appeals. It faulted the lower court for not holding that respondent failed to deliver the
cargo, and that respondent failed to exercise the extraordinary diligence required of
common carriers. Petitioner also assailed the lower court for denying its claims for
actual, moral, and exemplary damages, and for awarding actual damages and
attorney’s fees to the respondent.6
The Court of Appeals found that the trial court did not commit any reversible error. It
dismissed the appeal, and affirmed the assailed decision in toto.
Undaunted, petitioner now comes to us, assigning the following errors:
…
The issues for our resolution are: (1) Is respondent presumed at fault or negligent as
common carrier for the loss or deterioration of the goods? and (2) Are damages and
attorney’s fees due respondent?
Anent the first issue, petitioner contends that the respondent is presumed negligent
and liable for failure to abide by the terms and conditions of the bills of lading; that
Abdurahman Jama’s failure to testify should not be held against petitioner; and that
the testimonies of Rogelio Rizada and Ismael Zamora, as employees of respondent’s
agent, Efren Ruste Shipping Agency, were biased and could not overturn the legal
presumption of respondent’s fault or negligence.
For its part, the respondent avers that it observed extraordinary diligence in the
delivery of the goods. Prior to releasing the goods to Abdurahman, Rogelio and
Ismael required the surrender of the original bills of lading, and in their absence, the
certified true copies showing that Abdurahman was indeed the consignee of the
goods. In addition, they required Abdurahman or his designated subordinates to sign
the delivery receipts upon completion of each delivery.
We rule for respondent.
Article 17338 of the Civil Code demands that a common carrier observe extraordinary
diligence over the goods transported by it. Extraordinary diligence is that extreme
measure of care and caution which persons of unusual prudence and circumspection
use for securing and preserving their own property or rights.9 This exacting standard
imposed on common carriers in a contract of carriage of goods is intended to tilt the
scales in favor of the shipper who is at the mercy of the common carrier once the
goods have been lodged for shipment. Hence, in case of loss of goods in transit, the
common carrier is presumed under the law to have been at fault or
negligent.10 However, the presumption of fault or negligence, may be overturned by
competent evidence showing that the common carrier has observed extraordinary
diligence over the goods.
In the instant case, we agree with the court a quo that the respondent adequately
proved that it exercised extraordinary diligence. Although the original bills of lading
remained with petitioner, respondent’s agents demanded from Abdurahman the
certified true copies of the bills of lading. They also asked the latter and in his
absence, his designated subordinates, to sign the cargo delivery receipts.
This practice, which respondent’s agents testified to be their standard operating
procedure, finds support in Article 353 of the Code of Commerce:
ART. 353. . . .
After the contract has been complied with, the bill of lading which the carrier has
issued shall be returned to him, and by virtue of the exchange of this title with the
thing transported, the respective obligations and actions shall be considered
cancelled, ….
In case the consignee, upon receiving the goods, cannot return the bill of
lading subscribed by the carrier, because of its loss or of any other cause, he
must give the latter a receipt for the goods delivered, this receipt producing the
same effects as the return of the bill of lading. (Emphasis supplied)
Conformably with the aforecited provision, the surrender of the original bill of lading is
not a condition precedent for a common carrier to be discharged of its contractual
obligation. If surrender of the original bill of lading is not possible, acknowledgment of
the delivery by signing the delivery receipt suffices. This is what respondent did.
We also note that some delivery receipts were signed by Abdurahman’s subordinates
and not by Abdurahman himself as consignee. Further, delivery checkers Rogelio and
Ismael testified that Abdurahman was always present at the initial phase of each
delivery, although on the few occasions when Abdurahman could not stay to witness
the complete delivery of the shipment, he authorized his subordinates to sign the
delivery receipts for him. This, to our mind, is sufficient and substantial compliance
with the requirements.
We further note that, strangely, petitioner made no effort to disapprove Abdurahman’s
resignation until after the investigation and after he was cleared of any responsibility
for the loss of the goods. With Abdurahman outside of its reach, petitioner cannot now
pass to respondent what could be Abdurahman’s negligence, if indeed he were
responsible.
TRANSPORTATION LAW – Chapter 2 & 3
On the second issue, petitioner submits there is no basis for the award of actual
damages and attorney’s fees. It maintains that its original complaint for sum of money
with damages for breach of contract of carriage was not fraudulent, in bad faith, nor
malicious. Neither was the institution of the action rash nor precipitate. Petitioner
avers the filing of the action was intended to protect the integrity and interest of the
government and its relationship and credibility with international relief agencies and
donor states.
On the other hand, respondent maintains that petitioner’s suit was baseless and
malicious because instead of going after its absconding employee, petitioner wanted
to recoup its losses from respondent. The trial court and the Court of Appeals were
justified in granting actual damages and reasonable attorney’s fees to respondent.
On this point, we agree with petitioner.
The right to litigate should bear no premium. An adverse decision does not ipso
facto justify an award of attorney’s fees to the winning party.11 When, as in the instant
case, petitioner was compelled to sue to protect the credibility of the government with
international organizations, we are not inclined to grant attorney’s fees. We find no ill
motive on petitioner’s part, only an erroneous belief in the righteousness of its claim.
Moreover, an award of attorney’s fees, in the concept of damages under Article 2208
of the Civil Code,12 requires factual and legal justifications. While the law allows some
degree of discretion on the part of the courts in awarding attorney’s fees and
expenses of litigation, the discretion must be exercised with great care approximating
as closely as possible, the instances exemplified by the law.13 We have searched but
found nothing in petitioner’s suit that justifies the award of attorney’s fees.
Respondent failed to show proof of actual pecuniary loss, hence, no actual damages
are due in favor of respondent.14
WHEREFORE, the petition is PARTIALLY GRANTED. The assailed decision and
resolution of the Court of Appeals in CA-G.R. CV No. 48349 dated January 16, 2002
and May 13, 2002 respectively, denying petitioner’s claim for actual, moral and
exemplary damages are AFFIRMED. The award of actual damages and attorney’s
fees to respondent pursuant to the latter’s counterclaim in the trial court is DELETED.
14.) G.R. No. L-9840             April 22, 1957
LU DO & LU YM CORPORATION, petitioner-defendant,
vs. I. V. BINAMIRA, respondent-plaintiff.
On August 10, 1951, the Delta Photo Supply Company of New York shipped on board
the M/S "FERNSIDE" at New York, U.S.A., six cases of films and/or photographic
supplies consigned to the order of respondent I. V. Binamira. For this shipment, Bill of
Lading No. 29 was issued. The ship arrived at the port of Cebu on September 23,
1951 and discharged her cargo on September 23, and 24, 1951, including the
shipment in question, placing it in the possession and custody of the arrastre operator
of said port, the Visayan Cebu Terminal Company, Inc.
Petitioner, as agent of the carrier, hired the Cebu Stevedoring Company, Inc. to
unload its cargo. During the discharge, good order cargo was separated from the bad
order cargo on board the ship, and a separate list of bad order cargo was prepared by
Pascual Villamor, checker of the stevedoring company. All the cargo unloaded was
received at the pier by the Visayan Cebu Terminal Company Inc, arrastre operator of
the port. This terminal company had also its own checker, Romeo Quijano, who also
recorded and noted down the good cargo from the bad one. The shipment in
question, was not included in the report of bad order cargo of both checkers,
indicating that it was discharged from the, ship in good order and condition.
On September 26, 1951, three days after the goods were unloaded from the ship,
respondent took delivery of his six cases of photographic supplies from the arrastre
operator. He discovered that the cases showed signs of pilferage and, consequently,
he hired marine surveyors, R. J. del Pan & Company, Inc., to examine them. The
surveyors examined the cases and made a physical count of their contents in the
presence of representatives of petitioner, respondent and the stevedoring company.
The surveyors examined the cases and made a physical count of their contents in the
presence of representatives of petitioner, respondent and the stevedoring company.
The finding of the surveyors showed that some films and photographic supplies were
missing valued at P324.63.
It appears from the evidence that the six cases of films and photographic supplies
were discharged from the ship at the port of Cebu by the stevedoring company hired
by petitioner as agent of the carrier. All the unloaded cargo, including the shipment in
question, was received by the Visayan Cebu Terminal Company Inc., the arrastre
operator appointed by the Bureau of Customs. It also appears that during the
discharge, the cargo was checked both by the stevedoring company hired by
petitioner as well as by the arrastre operator of the port, and the shipment in question,
when discharged from the ship, was found to be in good order and condition. But after
it was delivered to respondent three days later, the same was examined by a marine
surveyor who found that some films and supplies were missing valued at P324.63.
TRANSPORTATION LAW – Chapter 2 & 3
The question now to be considered is: Is the carrier responsible for the loss
considering that the same occurred after the shipment was discharged from the ship
and placed in the possession and custody of the customs authorities?
The Court of Appeals found for the affirmative, making on this point the following
comment:
In this jurisdiction, a common carrier has the legal duty to deliver goods to a
consignee in the same condition in which it received them. Except where the loss,
destruction or deterioration of the merchandise was due to any of the cases
enumerated in Article 1734 of the new Civil Code, a carrier is presumed to have been
at fault and to have acted negligently, unless it could prove that it observed
extraordinary diligence in the care and handling of the goods (Article 1735, supra).
Such presumption and the liability of the carrier attach until the goods are delivered
actually or constructively, to the consignee, or to the person who has a right to
receive them (Article 1736, supra), and we believe delivery to the customs authorities
is not the delivery contemplated by Article 1736, supra, in connection with second
paragraph of Article 1498, supra, because, in such a case, the goods are then still in
the hands of the Government and their owner could not exercise dominion whatever
over them until the duties are paid. In the case at bar, the presumption against the
carrier, represented appellant as its agent, has not been successfully rebutted.
It is now contended that the Court of Appeals erred in its finding not only because it
made wrong interpretation of the law on the matter, but also because it ignored the
provisions of the bill of lading covering the shipment wherein it was stipulated that the
responsibility of the carrier is limited only to losses that may occur while the cargo is
still under its custody and control.
We believe this contention is well taken. It is true that, as a rule, a common carrier is
responsible for the loss, destruction or deterioration of the goods it assumes to carry
from one place to another unless the same is due to any to any of the causes
mentioned in Article 1734 on the new Civil Code, and that, if the goods are lost,
destroyed or deteriorated, for causes other that those mentioned, the common carrier
is presumed to have been at fault or to have acted negligently, unless it proves that it
has observed extraordinary diligence in their care (Article 1735, Idem.), and that this
extraordinary liability lasts from the time the goods are placed in the possession of the
carrier until they are delivered to the consignee, or "to the person who has the right to
receive them" (Article 1736, Idem.), but these provisions only apply when the loss,
destruction or deterioration takes place while the goods are in the possession of the
carrier, and not after it has lost control of them. The reason is obvious. While the
goods are in its possession, it is but fair that it exercise extraordinary diligence in
protecting them from damage, and if loss occurs, the law presumes that it was due to
its fault or negligence. This is necessary to protect the interest the interest of the
owner who is at its mercy. The situation changes after the goods are delivered to the
consignee.
While we agree with the Court of Appeals that while delivery of the cargo to the (if the bill of lading was not made, would the CC be liable? Technically, the arrastre is
consignee, or to the person who has a right to receive them", contemplated in Article not the consignee as per the Civil Code, and thus the responsibility has not ceased)
1736, because in such case the goods are still in the hands of the Government and
the owner cannot exercise dominion over them, we believe however that the parties
may agree to limit the liability of the carrier considering that the goods have still to
through the inspection of the customs authorities before they are actually turned over
to the consignee. This is a situation where we may say that the carrier losses control
of the goods because of a custom regulation and it is unfair that it be made
responsible for what may happen during the interregnum. And this is precisely what
was done by the parties herein. In the bill of lading that was issued covering the
shipment in question, both the carrier and the consignee have stipulated to limit the
responsibility of the carrier for the loss or damage that may because to the goods
before they are actually delivered by insert in therein the following provisions:

1. . . . The Carrier shall not be liable in any capacity whatsoever for any delay,
nondelivery or misdelivery, or loss of or damage to the goods occurring while the
goods are not in the actual custody of the Carrier. . . . (Emphasis ours.)

(Paragraph 1, Exhibit "1")

2. . . . The responsibility of the Carrier in any capacity shall altogether cease and the
goods shall be considered to be delivered and at their own risk and expense in every
respect when taken into the custody of customs or other authorities. The Carrier shall
not be required to give any notification of disposition of the goods. . . . (Emphasis
ours.)

(Paragraph 12, Exhibit "1")

3. Any provisions herein to the contrary notwithstanding, goods may be . . . by Carrier

at ship's tackle . . . and delivery beyond ship's tackle shall been tirely at the option of
the Carrier and solely at the expense of the shipper or consignee.

(Paragraph 22, Exhibit "1")

It therefore appears clear that the carrier does not assume liability for any loss or
damage to the goods once they have been "taken into the custody of customs or
other authorities", or when they have been delivered at ship's tackle. These
stipulations are clear. They have been adopted precisely to mitigate the responsibility
of the carrier considering the present law on the matter, and we find nothing therein
that is contrary to morals or public policy that may justify their nullification. We are
therefore persuaded to conclude that the carrier is not responsible for the loss in
question, it appearing that the same happened after the shipment had been delivered
to the customs authorities.

Wherefore, the decision appealed from is reversed, without pronouncement as to

costs.

TRANSPORTATION LAW – Chapter 2 & 3

15.) G.R. No. L-20761             July 27, 1966
LA MALLORCA, petitioner, vs. HONORABLE COURT OF APPEALS, MARIANO
BELTRAN, ET AL., respondents.
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.
TRANSPORTATION LAW – Chapter 2 & 3
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.
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 bayong which 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.
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.5 Herein 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.

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 under the contract of carriage, is permissible
under Section 2 of Rule 8 of the New Rules of Court, which allows a plaintiff to allege
causes of action in the alternative, be they compatible with each other or not, to the
end that the real matter in controversy may be resolved and determined.4

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.

TRANSPORTATION LAW – Chapter 2 & 3

16.) ABOITIZ SHIPPING CORPORATION, petitioner,
vs. HON. COURT OF APPEALS, ELEVENTH DIVISION, LUCILA C. VIANA, SPS.
ANTONIO VIANA and GORGONIA VIANA, and PIONEER STEVEDORING
CORPORATION, respondents.
The evidence disclosed that on May 11, 1975, Anacleto Viana boarded the vessel
M/V Antonia, owned by defendant, at the port at San Jose, Occidental Mindoro,
bound for Manila, having purchased a ticket (No. 117392) in the sum of P23.10 (Exh.
'B'). On May 12, 1975, said vessel arrived at Pier 4, North Harbor, Manila, and the
passengers therein disembarked, a gangplank having been provided connecting the
side of the vessel to the pier. Instead of using said gangplank Anacleto Viana
disembarked on the third deck which was on the level with the pier. After said vessel
had landed, the Pioneer Stevedoring Corporation took over the exclusive control of
the cargoes loaded on said vessel pursuant to the Memorandum of Agreement dated
July 26, 1975 (Exh. '2') between the third party defendant Pioneer Stevedoring
Corporation and defendant Aboitiz Shipping Corporation.
The crane owned by the third party defendant and operated by its crane operator
Alejo Figueroa was placed alongside the vessel and one (1) hour after the
passengers of said vessel had disembarked, it started operation by unloading the
cargoes from said vessel. While the crane was being operated, Anacleto Viana who
had already disembarked from said vessel obviously remembering that some of his
cargoes were still loaded in the vessel, went back to the vessel, and it was while he
was pointing to the crew of the said vessel to the place where his cargoes were
loaded that the crane hit him, pinning him between the side of the vessel and the
crane. He was thereafter brought to the hospital where he later expired three (3) days
thereafter, on May 15, 1975, the cause of his death according to the Death Certificate
(Exh. "C") being "hypostatic pneumonia secondary to traumatic fracture of the pubic
bone lacerating the urinary bladder" (See also Exh. "B"). For his hospitalization,
medical, burial and other miscellaneous expenses, Anacleto's wife, herein plaintiff,
spent a total of P9,800.00 (Exhibits "E", "E-1", to "E-5"). Anacleto Viana who was only
forty (40) years old when he met said fateful accident (Exh. 'E') was in good health.
His average annual income as a farmer or a farm supervisor was 400 cavans of palay
annually. His parents, herein plaintiffs Antonio and Gorgonia Viana, prior to his death
had been recipient of twenty (20) cavans of palay as support or P120.00 monthly.
Because of Anacleto's death, plaintiffs suffered mental anguish and extreme worry or
moral damages. For the filing of the instant case, they had to hire a lawyer for an
agreed fee of ten thousand (P10,000.00) pesos. 2
3
Private respondents Vianas filed a complaint   for damages against petitioner
corporation (Aboitiz, for brevity) for breach of contract of carriage.
In its answer. 4 Aboitiz denied responsibility contending that at the time of the
accident, the vessel was completely under the control of respondent Pioneer
Stevedoring Corporation (Pioneer, for short) as the exclusive stevedoring contractor
of Aboitiz, which handled the unloading of cargoes from the vessel of Aboitiz. It is also
averred that since the crane operator was not an employee of Aboitiz, the latter
cannot be held liable under the fellow-servant rule.
TRANSPORTATION LAW – Chapter 2 & 3
Thereafter, Aboitiz, as third-party plaintiff, filed a third-party complaint 5 against
Pioneer imputing liability thereto for Anacleto Viana's death as having been allegedly
caused by the negligence of the crane operator who was an employee of Pioneer
under its exclusive control and supervision.
Pioneer, in its answer to the third-party complaint, 6 raised the defenses that Aboitiz
had no cause of action against Pioneer considering that Aboitiz is being sued by the
Vianas for breach of contract of carriage to which Pioneer is not a party; that Pioneer
had observed the diligence of a good father of a family both in the selection and
supervision of its employees as well as in the prevention of damage or injury to
anyone including the victim Anacleto Viana; that Anacleto Viana's gross negligence
was the direct and proximate cause of his death; and that the filing of the third-party
complaint was premature by reason of the pendency of the criminal case for homicide
through reckless imprudence filed against the crane operator, Alejo Figueroa.
In a decision rendered on April 17, 1980 by the trial court, 7 Aboitiz was ordered to
pay the Vianas for damages incurred, and Pioneer was ordered to reimburse Aboitiz
for whatever amount the latter paid the Vianas. The dispositive portion of said
decision provides:
Both Aboitiz and Pioneer filed separate motions for reconsideration wherein they
similarly raised the trial court's failure to declare that Anacleto Viana acted with gross
negligence despite the overwhelming evidence presented in support thereof. In
addition, Aboitiz alleged, in opposition to Pioneer's motion, that under the
memorandum of agreement the liability of Pioneer as contractor is automatic for any
damages or losses whatsoever occasioned by and arising from the operation of its
arrastre and stevedoring service.
In an order dated October 27, 1982, 8 the trial court absolved Pioneer from liability for
failure of the Vianas and Aboitiz to preponderantly establish a case of negligence
against the crane operator which the court a quo ruled is never presumed, aside from
the fact that the memorandum of agreement supposedly refers only to Pioneer's
liability in case of loss or damage to goods handled by it but not in the case of
personal injuries, and, finally that Aboitiz cannot properly invoke the fellow-servant
rule simply because its liability stems from a breach of contract of carriage. The
dispositive portion of said order reads:
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:
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:
… to all the circumstances of each case. 15 More particularly, a common carrier is bound
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
TRANSPORTATION LAW – Chapter 2 & 3
bus passenger can easily get off the bus and retrieve his luggage in a very short
period of time. Verily, petitioner cannot categorically claim, through the bare
expedient of comparing the period of time entailed in getting the passenger's cargoes,
that the ruling in La Mallorca is inapplicable to the case at bar. On the contrary, if we
are to apply the doctrine enunciated therein to the instant petition, we cannot in
reason doubt that the victim Anacleto Viana was still a passenger at the time of the
incident. When the accident occurred, the victim was in the act of unloading his
cargoes, which he had every right to do, from petitioner's vessel. As earlier stated, a
carrier is duty bound not only to bring its passengers safely to their destination but
also to afford them a reasonable time to claim their baggage.
It is not definitely shown that one (1) hour prior to the incident, the victim had already
disembarked from the vessel. Petitioner failed to prove this. What is clear to us is that
at the time the victim was taking his cargoes, the vessel had already docked an hour
earlier. In consonance with common shipping procedure as to the minimum time of
one (1) hour allowed for the passengers to disembark, it may be presumed that the
victim had just gotten off the vessel when he went to retrieve his baggage. Yet, even
if he had already disembarked an hour earlier, his presence in petitioner's premises
was not without cause. The victim had to claim his baggage which was possible only
one (1) hour after the vessel arrived since it was admittedly standard procedure in the
case of petitioner's vessels that the unloading operations shall start only after that
time. Consequently, under the foregoing circumstances, the victim Anacleto Viana is
still deemed a passenger of said carrier at the time of his tragic death.
II. Under the law, common carriers are, from the nature of their business and for
reasons of public policy, bound to observe extraordinary diligence in the vigilance
over the goods and for the safety of the passengers transported by them, according
to carry the passengers safely as far as human care and foresight can provide, using
the utmost diligence of very cautious persons, with a due regard for all the
circumstances. 16 Thus, where a passenger dies or is injured, the common carrier is
presumed to have been at fault or to have acted negligently. 17 This gives rise to an
action for breach of contract of carriage where all that is required of plaintiff is to
prove the existence of the contract of carriage and its non-performance by the carrier,
that is, the failure of the carrier to carry the passenger safely to his
destination, 18 which, in the instant case, necessarily includes its failure to safeguard
its passenger with extraordinary diligence while such relation subsists.
The presumption is, therefore, established by law that in case of a passenger's death
or injury the operator of the vessel was at fault or negligent, having failed to exercise
extraordinary diligence, and it is incumbent upon it to rebut the same. This is in
consonance with the avowed policy of the State to afford full protection to the
passengers of common carriers which can be carried out only by imposing a stringent
statutory obligation upon the latter. Concomitantly, this Court has likewise adopted a
rigid posture in the application of the law by exacting the highest degree of care and
diligence from common carriers, bearing utmost in mind the welfare of the
passengers who often become hapless victims of indifferent and profit-oriented
carriers. We cannot in reason deny that petitioner failed to rebut the presumption
against it. Under the facts obtaining in the present case, it cannot be gainsaid that
petitioner had inadequately complied with the required degree of diligence to prevent WHEREFORE, the petition is DENIED and the judgment appealed from is hereby
the accident from happening. AFFIRMED  in toto.

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

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

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

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

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

TRANSPORTATION LAW – Chapter 2 & 3

17.) G.R. No. L-45637 May 31, 1985
ROBERTO JUNTILLA, petitioner,
vs. CLEMENTE FONTANAR, FERNANDO BANZON and BERFOL
CAMORO, respondents.
The facts established after trial show that the plaintiff was a passenger of the public
utility jeepney bearing plate No. PUJ-71-7 on the course of the trip from Danao City to
Cebu City. The jeepney was driven by defendant Berfol Camoro. It was registered
under the franchise of defendant Clemente Fontanar but was actually owned by
defendant Fernando Banzon. When the jeepney reached Mandaue City, the right rear
tire exploded causing the vehicle to turn turtle. In the process, the plaintiff who was
sitting at the front seat was thrown out of the vehicle. Upon landing on the ground, the
plaintiff momentarily lost consciousness. When he came to his senses, he found that
he had a lacerated wound on his right palm. Aside from this, he suffered injuries on
his left arm, right thigh and on his back. (Exh. "D"). Because of his shock and injuries,
he went back to Danao City but on the way, he discovered that his "Omega" wrist
watch was lost. Upon his arrival in Danao City, he immediately entered the Danao
City Hospital to attend to his injuries, and also requested his father-in-law to proceed
immediately to the place of the accident and look for the watch. In spite of the efforts
of his father-in-law, the wrist watch, which he bought for P 852.70 (Exh. "B") could no
longer be found.
xxx xxx xxx
Petitioner Roberto Juntilla filed Civil Case No. R-17378 for breach of contract with
damages before the City Court of Cebu City, Branch I against Clemente Fontanar,
Fernando Banzon and Berfol Camoro.
The respondents filed their answer, alleging inter alia that the accident that caused
losses to the petitioner was beyond the control of the respondents taking into account
that the tire that exploded was newly bought and was only slightly used at the time it
blew up.
After trial, Judge Romulo R. Senining of the Civil Court of Cebu rendered judgment in
favor of the petitioner and against the respondents. The dispositive portion of the
decision reads:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the
defendants and the latter are hereby ordered, jointly and severally, to pay the plaintiff
the sum of P750.00 as reimbursement for the lost Omega wrist watch, the sum of
P246.64 as unrealized salary of the plaintiff from his employer, the further sum of
P100.00 for the doctor's fees and medicine, an additional sum of P300.00 for
attorney's fees and the costs.
The respondents appealed to the Court of First Instance of Cebu, Branch XIV.
TRANSPORTATION LAW – Chapter 2 & 3
Judge Leonardo B. Canares reversed the judgment of the City Court of Cebu upon a
finding that the accident in question was due to a fortuitous event. The dispositive
portion of the decision reads:
WHEREFORE, judgment is hereby rendered exonerating the defendants from any
liability to the plaintiff without pronouncement as to costs.
A motion for reconsideration was denied by the Court of First Instance.
The petitioner raises the following alleged errors committed by the Court of First
Instance of Cebu on appeal—
a. The Honorable Court below committed grave abuse of discretion in failing to take
cognizance of the fact that defendants and/or their employee failed to exercise
"utmost and/or extraordinary diligence" required of common carriers contemplated
under Art. 1755 of the Civil Code of the Philippines.
b. The Honorable Court below committed grave abuse of discretion by deciding the
case contrary to the doctrine laid down by the Honorable Supreme Court in the case
of Necesito et al. v. Paras, et al.
We find the petition impressed with merit.
The City Court and the Court of First Instance of Cebu found that the right rear tire of
the passenger jeepney in which the petitioner was riding blew up causing the vehicle
to fall on its side. The petitioner questions the conclusion of the respondent court
drawn from this finding of fact.
The Court of First Instance of Cebu erred when it absolved the carrier from any
liability upon a finding that the tire blow out is a fortuitous event. The Court of First
Instance of Cebu ruled that:
After reviewing the records of the case, this Court finds that the accident in question
was due to a fortuitous event. A tire blow-out, such as what happened in the case at
bar, is an inevitable accident that exempts the carrier from liability, there being
absence of a showing that there was misconduct or negligence on the part of the
operator in the operation and maintenance of the vehicle involved. The fact that the
right rear tire exploded, despite being brand new, constitutes a clear case of caso
fortuito which can be a proper basis for exonerating the defendants from liability. ...
The Court of First Instance relied on the ruling of the Court of Appeals in Rodriguez v.
Red Line Transportation Co.,  CA G.R. No. 8136, December 29, 1954, where the
Court of Appeals ruled that:
A tire blow-out does not constitute negligence unless the tire was already old and
should not have been used at all. Indeed, this would be a clear case of fortuitous
event.
The foregoing conclusions of the Court of First Instance of Cebu are based on a
misapprehension of overall facts from which a conclusion should be drawn. The
reliance of the Court of First Instance on the Rodriguez case is not in order. In La
Mallorca and Pampanga Bus Co. v. De Jesus, et al. (17 SCRA 23), we held that:
Petitioner maintains that a tire blow-out is a fortuitous event and gives rise to no
liability for negligence, citing the rulings of the Court of Appeals in Rodriguez v. Red
Line Transportation Co., CA G.R. No. 8136, December 29, 1954, and People v.
Palapad, CA-G.R. No. 18480, June 27, 1958. These rulings, however, not only are
not binding on this Court but were based on considerations quite different from those
that obtain in the case at bar. The appellate court there made no findings of any
specific acts of negligence on the part of the defendants and confined itself to the
question of whether or not a tire blow-out, by itself alone and without a showing as to
the causative factors, would generate liability. ...
In the case at bar, there are specific acts of negligence on the part of the
respondents. The records show that the passenger jeepney turned turtle and jumped
into a ditch immediately after its right rear tire exploded. The evidence shows that the
passenger jeepney was running at a very fast speed before the accident. We agree
with the observation of the petitioner that a public utility jeep running at a regular and
safe speed will not jump into a ditch when its right rear tire blows up. There is also
evidence to show that the passenger jeepney was overloaded at the time of the
accident. The petitioner stated that there were three (3) passengers in the front seat
and fourteen (14) passengers in the rear.
While it may be true that the tire that blew-up was still good because the grooves of
the tire were still visible, this fact alone does not make the explosion of the tire a
fortuitous event. No evidence was presented to show that the accident was due to
adverse road conditions or that precautions were taken by the jeepney driver to
compensate for any conditions liable to cause accidents. The sudden blowing-up,
therefore, could have been caused by too much air pressure injected into the tire
coupled by the fact that the jeepney was overloaded and speeding at the time of the
accident.
In Lasam v. Smith (45 Phil. 657), we laid down the following essential characteristics
of caso fortuito:
xxx xxx xxx
... 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
TRANSPORTATION LAW – Chapter 2 & 3
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 Encyclopedia Juridica Espanola, 309.)
In the case at bar, the cause of the unforeseen and unexpected occurrence was not
independent of the human will. The accident was caused either through the
negligence of the driver or because of mechanical defects in the tire. Common
carriers should teach their drivers not to overload their vehicles, not to exceed safe
and legal speed limits, and to know the correct measures to take when a tire blows up
thus insuring the safety of passengers at all times. Relative to the contingency of
mechanical defects, we held in Necesito, et al. v. Paras, et al. (104 Phil. 75), that:
... The preponderance of authority is in favor of the doctrine that a passenger is
entitled to recover damages from a carrier for an injury resulting from a defect in an
appliance purchased from a manufacturer, whenever it appears that the defect would
have been discovered by the carrier if it had exercised the degree of care which
under the circumstances was incumbent upon it, with regard to inspection and
application of the necessary tests. For the purposes of this doctrine, the manufacturer
is considered as being in law the agent or servant of the carrier, as far as regards the
work of constructing the appliance. According to this theory, the good repute of the
manufacturer will not relieve the carrier from liability' (10 Am. Jur. 205, s, 1324; see
also Pennsylvania R. Co. v. Roy, 102 U.S. 451; 20 L. Ed. 141; Southern R. Co. v.
Hussey, 74 ALR 1172; 42 Fed. 2d 70; and Ed Note, 29 ALR 788.: Ann. Cas. 1916E
929).
The rationale of the carrier's liability is the fact that the passenger has neither choice
nor control over the carrier in the selection and use of the equipment and appliances
in use by the carrier. Having no privity whatever with the manufacturer or vendor of
the defective equipment, the passenger has no remedy against him, while the carrier
usually has. It is but logical, therefore, that the carrier, while not an insurer of the
safety of his passengers, should nevertheless be held to answer for the flaws of his
equipment if such flaws were at all discoverable. ...
It is sufficient to reiterate that the source of a common carrier's legal liability is the
contract of carriage, and by entering into the said contract, it binds itself to carry the
passengers safely as far as human care and foresight can provide, using the utmost
diligence of a very cautious person, with a due regard for all the circumstances. The
records show that this obligation was not met by the respondents.
The respondents likewise argue that the petitioner cannot recover any amount for
failure to prove such damages during the trial. The respondents submit that if the
petitioner was really injured, why was he treated in Danao City and not in Mandaue
City where the accident took place. The respondents argue that the doctor who
issued the medical certificate was not presented during the trial, and hence not cross-
examined. The respondents also claim that the petitioner was not wearing any wrist
watch during the accident.
It should be noted that the City Court of Cebu found that the petitioner had a
lacerated wound on his right palm aside from injuries on his left arm, right thigh and
on his back, and that on his way back to Danao City, he discovered that his "Omega"
wrist watch was lost. These are findings of facts of the City Court of Cebu which we
find no reason to disturb. More so when we consider the fact that the Court of First
Instance of Cebu impliedly concurred in these matters when it confined itself to the
question of whether or not the tire blow out was a fortuitous event.

WHEREFORE, the decision of the Court of First Instance of Cebu, Branch IV

appealed from is hereby REVERSED and SET ASIDE, and the decision of the City
Court of Cebu, Branch I is REINSTATED, with the modification that the damages
shall earn interest at 12% per annum and the attorney's fees are increased to SIX
HUNDRED PESOS (P600.00). Damages shall earn interests from January 27, 1975.

TRANSPORTATION LAW – Chapter 2 & 3

18.) PHILIPPINE AIR LINES, INC., Petitioner,  vs. THE COURT OF APPEALS
and JESUS V. SAMSON, Respondents.
The complaint filed on July 1, 1954 by plaintiff Jesus V. Samson, private respondent
herein, averred that on January 8, 1951, he flew as co-pilot on a regular flight from
Manila to Legaspi with stops at Daet, Camarines Norte and Pili, Camarines Sur, with
Captain Delfin Bustamante as commanding pilot of a C-47 plane belonging to
defendant Philippine Air Lines, Inc., now the herein petitioner; that on attempting to
land the plane at Daet airport, Captain Delfin Bustamante due to his very slow
reaction and poor judgment overshot the airfield and as a result, notwithstanding the
diligent efforts of the plaintiff co-pilot to avert an accident, the airplane crashlanded
beyond the runway; that the jolt caused the head of the plaintiff to hit and break
through the thick front windshield of the airplane causing him severe brain
concussion, wounds and abrasions on the forehead with intense pain and
suffering cranad
The complaint further alleged that instead of giving plaintiff expert and proper medical
treatment called for by the nature and severity of his injuries, defendant simply
referred him to a company physician, a general medical practitioner, who limited the
treatment to the exterior injuries without examining the severe brain concussion of
plaintiff cranad(par. 7, complaint); that several days after the accident, defendant
Philippine Air Lines called back the plaintiff to active duty as co-pilot, and inspite of
the latter’s repeated request for expert medical assistance, defendant had not given
him any cranad(par. 8, complaint); that as a consequence of the brain injury
sustained by plaintiff from the crash, he had been having periodic dizzy spells and
had been suffering from general debility and nervousness; that defendant airline
company instead of submitting the plaintiff to expert medical treatment, discharged
the latter from its employ on December 21, 1953 on grounds of physical disability,
thereby causing plaintiff not only to lose his job but to become physically unfit to
continue as aviator due to defendant’s negligence in not giving him the proper
medical attention cranad(pars. 10-11, complaint). Plaintiff prayed for damages in the
amount of P180,000.00 representing his unearned income, P50,000.00 as moral
damages, P20,000.00 as attorney’s fees and P5,000.00 as expenses, or a total of
P255,000.00.
In its answer filed on July 28, 1954, defendant PAL denied the substantial averments
in the complaint, alleging among others, that the accident was due solely and
exclusively to inevitable unforeseen circumstances whereby plaintiff sustained only
superficial wounds and minor injuries which were promptly treated by defendant’s
medical personnel; that plaintiff did not sustain brain injury or cerebral concussion
from the accident since he passed the annual physical and medical examination
given thereafter on April 24, 1951; that the headaches and dizziness experienced by
plaintiff were due to emotional disturbance over his inability to pass the required up-
grading or promotional course given by defendant company cranad(par. 6, answer),
and that, as confirmed by an expert neuro-surgeon, plaintiff was suffering-from
neurosis and in view of this unfitness and disqualification from continuing as a pilot,
defendant had to terminate plaintiff’s employment cranad(pars. 7, 9, answer).
TRANSPORTATION LAW – Chapter 2 & 3
Further, defendant alleged that by the very nature of its business as a common
carrier, it is bound to employ only pilots who are proficient and in good mental,
emotional and physical condition; that the pilot, Captain Delfin Bustamante, was a
competent and proficient pilot, and although he was already afflicted with a tumor of
the nasopharynx even before the accident of January 8, 1951, the Civil Aeronautics
Administration, in passing upon the fitness of pilots, gave Capt. Bustamante a waiver
of physical standards to enable him to retain his first class airman certificate since the
affliction had not in the least affected his proficiency; By way of counterclaim,
defendant prayed for P10,000.00 as expenses for the litigation.
On March 25, 1958, defendant filed a Motion to Dismiss on the ground that the
complaint is essentially a Workmen’s Compensation claim, stating a cause of action
not cognizable within the general jurisdiction of the court. The Motion to Dismiss was
denied in the order of April 14, 1958. After the reception of evidence, the trial court
rendered on January 15, 1973 the decision, the dispositive portion of which has been
earlier cited.
The defendant Philippine Air Lines, Inc. appealed the decision to the Court of Appeals
as being contrary to law and unsupported by the evidence. It raised as errors of the
trial court: (a) the holding that the damages allegedly suffered by plaintiff are
attributable to the accident of January 8, 1951 which was due to the negligence of
defendant in having allowed Capt. Delfin Bustamante to continue flying despite his
alleged slow reaction and poor judgment; (b) the finding that defendant was negligent
in not having given plaintiff proper and adequate expert medical treatment and
assistance for the injuries allegedly sustained in the accident of January 8, 1951; and;
(c) in ordering defendant to pay actual or compensatory damages, moral damages
and attorney’s fees to the plaintiff.
On April 18, 1977, the Court of Appeals rendered its decision affirming the judgment
of the lower court but modified the award of damages by imposing legal rate of
interest on the P198,000.00 unearned income from the filing of the complaint, citing
Sec. 8, Rule 51 of the Rules of Court.
Its motion for reconsideration of the above judgment having been denied, Philippine
Air Lines, Inc. filed this instant petition for Certiorari on the ground that the decision is
not in accord with law or with the applicable jurisprudence, aside from its being
replete with findings in the nature of speculation, surmises and conjectures not borne
out by the evidence on record thereby resulting to misapprehension of facts and
amounting to a grave abuse of discretion cranad(p. 7, Petition).
Petitioner raises the fundamental question in the case at bar as follows: Is there a
causal connection between the injuries suffered by private respondent during the
accident on 8 January 1951 and the subsequent “periodic dizzy spells, headache and
general debility” of which private respondent complained every now and then, on the
one hand, and such “periodic dizzy spells, headache and general debility” allegedly
caused by the accident and private respondent’s eventual discharge from
employment, on the other? PAL submits that respondent court’s award of damages to
private respondent is anchored on findings in the nature of speculations, surmises
and conjectures and not borne out by the evidence on record, thereby resulting in a
misapprehension of facts and amounting to a grave abuse of discretion.
Petitioner’s submission is without merit.
As found by the respondent court, the following are the essential facts of the case:
“It appears that plaintiff, a licensee aviator, was employed by defendant a few years
prior to January 8, 1951 as a regular co-pilot on a guaranteed basic salary of P750.00
a month. He was assigned to and/or paired with pilot Delfin Bustamante.
Sometime in December 1950, he complained to defendant through its authorized
official about the slow reaction and poor judgment of pilot Delfin Bustamante.
Notwithstanding said complaint, defendant allowed the pilot to continue flying.
On January 8, 1951, the two manned the regular afternoon flight of defendant’s plane
from Manila to Legaspi, with stops at Daet, Camarines Norte, and Pili, Camarines
Sur. Upon making a landing at Daet, the pilot, with his slow reaction and poor
judgment, overshot the airfield and, as a result of and notwithstanding diligent efforts
of plaintiff to avert an accident, the airplane crash-landed beyond the runway into a
mangrove. The jolt and impact caused plaintiff to hit his head upon the front
windshield of the plane thereby causing his brain concussions and wounds on the
forehead, with concomittant intense pain.
Plaintiff was not given proper medical attention and treatment demanded by the
nature and severity of his injuries. Defendant merely referred him to its clinic attended
by general practitioners on his external injuries. His brain injury was never examined,
much less treated. On top of that negligence, defendant recalled plaintiff to active
duty as a co-pilot, completely ignoring his plea for expert medical assistance.
Suffering periodic dizzy spells, headache and general debility, plaintiff every now and
then complained to defendant. To make matters worst for plaintiff, defendant
discharged him from his employment on December 21, 1953. In consequence,
plaintiff has been beset with additional worries, basically financial. He is now a liability
instead of a provider, of his family.
On July 1, 1954, plaintiff filed a complaint for damages. Defendant vainly sought to
dismiss the complaint after filing an answer. Then, the judgment and this appeal.”
Continuing, the respondent Court of Appeals further held:
“There is no question about the employment of plaintiff by defendant, his age and
salary, the overshooting by pilot Bustamante of the airfield and crashlanding in a
mangrove, his hitting his head on the front windshield of the plane, his intermittent
dizzy spells, headache and general debility for which he was discharged from his
employment on December 21, 1953. As the lower court aptly stated:
TRANSPORTATION LAW – Chapter 2 & 3
‘From the evidence adduced by the parties, the Court finds the following facts to be
uncontroverted: That the plaintiff Jesus V. Samson, on January 8, 1951 and a few
years prior thereto, December 21, 1953, was a duly licensed pilot employed as a
regular co-pilot of the defendant with assignment in its domestic air service in the
Philippines; that on January 8, 1951, the defendant’s airplane met an accident in
crashlanding at the Daet Airport, Camarines Norte by overshooting the runway and
reaching the mangroves at the edge of the landing strip; that the jolt caused plaintiff’s
head to hit the front windshield of the airplane causing him to suffer wounds and
abrasion on the forehead; that the defendant, instead of giving the plaintiff expert and
proper medical treatment called for by the nature and severity of the injuries of the
plaintiff, simply referred him to the clinic of the defendant’s physicians who are only
general medical practitioners and not brain specialists; that the defendant’s
physicians limited their treatment to the exterior injuries on the forehead of the plaintiff
and made no examination of the severe concussion of the brain of the plaintiff; that
the Medical Director and Flight Surgeon of the defendant were not able to definitely
determine the cause of the complaint of the plaintiff as to the periodic attack of
dizziness, spells and headache; that due to this laxity of the defendant’s physician
and the continuous suffering of the ailment of the plaintiff complained of, he
demanded for expert medical assistance for his brain injury and to send him to the
United States, which demand was turned down and in effect denied by the defendant;
that instead the defendant referred the plaintiff to a neurologist, Dr. Victor Reyes; that
from the time that said accident occurred on January 21, 1953, he was ordered
grounded on several occasions because of his complaint of dizzy spells and
headache; that instead of submitting the plaintiff to expert medical treatment as
demanded by him and denied by the defendant, he was discharged from its
employment on December 21, 1953 on the ground of physical disability, and that the
plaintiff, at the time when the defendant’s plane met the accident, up to the time he
was discharged, was regularly employed as a co-pilot and receiving a basic salary of
P750.00 a month plus extra pay for flying time, and bonuses amounting to P300.00 a
month.’
Even defendant-appellant itself admits as not controverted the following facts which
generally admit what have been stated above as not controverted.
“In the case at bar, the following facts are not the subject of controversy:
‘(1) First, that from July 1950 to 21 December 1953, plaintiff was employed with
defendant company as a first officer or co-pilot and served in that capacity in
defendant’s domestic services.
(2) Second, that on January 1951, plaintiff did fly on defendant’s PI-C 94, as first
officer or co-pilot, with the late Capt. Delfin Bustamante in command as pilot; that
while making a landing at the Daet airport on that date, PI-C 94 did meet an accident
as stated above.
(3) Third, that at or about the time of the discharge from defendant company, plaintiff
had complained of “spells of dizziness,” “headaches” and “nervousness”, by reason of
which he was grounded from flight duty. In short, that at that time, or approximately
from November 1953 up to the date of his discharge on 21 December 1953, plaintiff
was actually physically unfit to discharge his duties as pilot.
(4) Fourth, that plaintiff’s unfitness for flight duty was properly established after a
thorough medical examination by competent medical experts.’cralaw cranad(pp. 11-
12, appellant’s brief)
hence, there can hardly be an issue, factual, legal or medical.”
Taking exception from “the rest of the essential facts of the case as found by the
respondent court” PAL claims said facts are not fully borne out by the evidence on
record and insists that the injuries suffered by private respondent during the accident
on January 8, 1951 were superficial in nature; that the “periodic spells, headache, and
general debility” complaint of every now and then by private respondent subsequent
to the Jan. 8, 1951 incident were due to emotional disturbances and that no
negligence can be attributed to Capt. Delfin Bustamante much less to PAL for the
occurrence on January 8, 1951, hence PAL cannot be held liable for damages.
Petitioner claims absence of any causal connection between private respondent’s
superficial injuries and his alleged subsequent “periodic spells, headache and general
debility,” pointing out that these subsequent ailments were found by competent
physician, including an expert neuro-surgeon, to be due to emotional disturbances
insights the conclusions of Dr. Trajano V. Bernardo that respondent’s complaints
were “psychosomatic symptoms” on the basis of declarations made by respondent
himself, which conclusions are supported by similar diagnosis made by Drs.
Damaceno J. Ago and Villaraza stating that respondent Samson was suffering from
neurosis as well as the report of Dr. Victor Reyes, a neurological specialist, indicating
that the symptoms were probably, most probably due to psychogenic factors and
have no organic basis.
In claiming that there is no factual basis for the finding of the respondent court that
the crash-landing caused respondent’s “brain concussion with concomittant intense
pain, for on the contrary, testimonial evidence establish the superficiality of the
injuries sustained by respondent during the accident of January 8, 1951,” petitioner
quotes portions of the testimony of Dr. Manuel S. Sayas, who declared that he
removed the band-aid on the forehead of respondent and that he found out after
removal that the latter had two contussed superficial wounds over the supra orbiter
regions or just above the eyes measuring one centimeter long and one millimeter
deep. He examined and found his blood pressure normal, no discharges from the
nose and ears. Dr. Trajano V. Bernardo also testified that when he examined
respondent Samson three days after the accident, the wound was already healed and
found nothing wrong with his ears, nose and throat so that he was declared fit for duty
after the sixth day.
Petitioner goes further. It contends that there is no causal connection between
respondent’s superficial injuries sustained during the accident on January 8, 1951
and plaintiff’s discharge from employment with PAL on December 21, 1953.
According to PAL, it was the repeated recurrence of respondent’s neurasthenic
TRANSPORTATION LAW – Chapter 2 & 3
symptoms cranad(dizzy spells, headache, nervousness) which prompted PAL’s Flight
Surgeon, Dr. Bernardo, to recommend that plaintiff be grounded permanently as
respondent was “psychologically unfit to resume his duties as pilot.” PAL concludes
that respondent’s eventual discharge from employment with PAL was effected for
absolutely valid reasons, and only after he was thoroughly examined and found unfit
to carry out his responsibilities and duties as a pilot.:onad
We agree with the respondent court in finding that the dizzy spells, headache and
general debility of private respondent Samson was an after-effect of the crash-landing
and We find that such holding is supported by substantial evidence, which We quote
from the court’s decision, to wit:
“Defendant would imply that plaintiff suffered only superficial wounds which were
treated and not brain injury. It would, by the opinion of its company doctors, Dr.
Bernardo and Dr. Reyes, attribute the dizzy spells and headache to organic or as
phychosomatic, neurasthenic or psychogenic, which we find outlandishly
exaggerated.
…
The admitted difficulty of defendant’s doctors in determining the cause of the dizzy
spells and headache cannot be a sound basis for finding against the plaintiff and in
favor of defendant. Whatever it might be, the fact is that such dizzy spells, headache
and general debility was an after-effect of the crash-landing. Be it brain injury or
psychosomatic, neurasthenic or psychogenic, there is no gainsaying the fact that it
was caused by the crash-landing. As an effect of the cause, not fabricated or
concocted, plaintiff has to be indemnified. The fact is that such effect caused his
discharge.
We are prone to believe the testimony of the plaintiff’s doctors.
Dr. Morales, a surgeon, found that blood was coming from plaintiff’s ears and nose.
Even the doctors presented by defendant admit vital facts about plaintiff’s brain injury.
…
We also find the imputation of gross negligence by respondent court to PAL for
having allowed Capt. Delfin Bustamante to fly on that fateful day of the accident on
January 8, 1951 to be correct, and We affirm the same, duly supported as it is by
substantial evidence, clearly established and cited in the decision of said court which
states as follows:
“The pilot was sick. He admittedly had tumor of the nasopharynx cranad(nose). He is
now in the Great Beyond. The spot is very near the brain and the eyes. Tumor on the
spot will affect the sinus, the breathing, the eyes which are very near it. No one will
certify the fitness to fly a plane of one suffering from the disease.
… For having allowed Bustamante to fly as a First Officer on January 8, 1951,
defendant is guilty of gross negligence and therefore should be made liable for the
resulting accident.
…
One month prior to the crash-landing, when the pilot was preparing to land in Daet,
plaintiff warned him that they were not in the vicinity of Daet but above the town of
Ligao. The plane hit outside the airstrip. In another instance, the pilot would hit the
Mayon Volcano had not plaintiff warned him. These more than prove what plaintiff
had complained of. Disregard thereof by defendant is condemnable.
… the sum of P60,000.00 in the form of salaries and another P18,000.00 as bonuses
Assuming that the pilot was not sick or that the tumor did not affect the pilot in
managing the plane, the evidence shows that the overshooting of the runway and
crash-landing at the mangrove was caused by the pilot for which acts the defendant
must answer for damages caused thereby. And for this negligence of defendant’s
employee, it is liable. At least, the law presumes the employer negligent imposing
upon it the burden of proving that it exercised the diligence of a good father of a
family in the supervision of its employees.
… injury.”  chanroblesvirtualawlibrary(Decision, CFI, pp. 98-99, Record on Appeal)
Petitioner is a common carrier 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, as defined in Art. 1732, New Civil Code. The law is clear in
requiring a common carrier to exercise the highest degree of care in the discharge of
its duty and business of carriage and transportation under Arts. 1733, 1755 and 1756
of the New Civil Code. These Articles provide:
… secondly, the award of P300.00 a month as extra pay for extra flying time from 1954
The duty to exercise the utmost diligence on the part of common carriers is for the
safety of passengers as well as for the members of the crew or the complement
operating the carrier, the airplane in the case at bar. And this must be so for any
omission, lapse or neglect thereof will certainly result to the damage, prejudice, nay
injuries and even death to all aboard the plane, passengers and crew members alike.
Now to the damages. The Court of Appeals affirmed the award of damages made by
the trial court, stating that “the damages awarded plaintiff by the lower court are in
accordance with the facts, law and jurisprudence.” The court further observed that
“defendant-appellant is still fortunate, considering that the unearned income was
reckoned with only up to 1968 and not up to the present as plaintiff-appellee is still
living. Whatever mathematical error defendant-appellant could show by abstract
argumentation, the same must be compensated by such deficiency of the damages
awarded to plaintiff-appellee.”
TRANSPORTATION LAW – Chapter 2 & 3
As awarded by the trial court, private respondent was entitled to P198,000.00 as
unearned income or compensatory damages; P50,000.00 for moral damages,
P20,000.00 as attorney’s fees and P5,000.00 as expenses of litigation, or a total of
P273,000.00.
The trial court arrived at the sum of P198,000.00 as unearned income or damages by
considering that respondent Samson “could have continued to work as airline pilot for
fifteen more years, he being only 38 years at the time the services were terminated by
the defendant cranad(PAL) and he would have earned P120,000.00 from 1954 to
1963 or a period of ten cranad(10) years at the rate of one thousand per
month cranad(P750.00 basic salary plus P300.00 extra pay for extra flying time and
bonuses; and considering further that in 1964 the basic pay of defendant’s pilot was
increased to P12,000.00 annually, the plaintiff could have earned from 1964 to 1968
and extra pay for extra flying time at the same rate of P300 a month, or a grand total
of P198,000.00 for the entire period. This claim of the plaintiff for loss or impairment
of earning capacity is based on the provision of Article 2205 of the New Civil Code of
the Philippines which provides that “damages may be recovered for loss or
impairment of earning capacity in cases of temporary or permanent personal injury.”
This provision of law has been construed and interpreted in the case of Aureliano
Ropato, et al. vs. La Mallorca General Partnership, 56 O.G., 7812, which rules that
law allows the recovery of damages for loss or impairment of earning capacity in
cases of temporary or permanent personal
The respondent appellate court modified the above award by ordering payment of
legal interest on the P198,000.00 unearned income from the filing of the claim, citing
Sec. 8, Rule 51 of the Rules of Court.
Petitioner assails the award of the total sum of P198,000.00 as unearned income up
to 1968 as being tenuous because firstly, the trial court’s finding affirmed by the
respondent court is allegedly based on pure speculation and conjecture and
to 1968 is likewise speculative. PAL likewise rejects the award of moral damages in
the amount of P50,000.00 on the ground that private respondent’s action before the
trial court does not fall under any of the cases enumerated in the law cranad(Art.
2219 of the New Civil Code) for which moral damages are recoverable and that
although private respondent’s action gives the appearance that it is covered under
quasi-delict as provided in Art. 21 of the New Civil Code, the definition of quasi-delict
in Art. 2176 of the New Civil Code expressly excludes cases where there is a pre-
existing contractual relation between the parties, as in the case under consideration,
where an employer-employee relationship existed between PAL and private
respondent. It is further argued that private respondent’s action cannot be deemed to
be covered by Art. 21, inasmuch as there is no evidence on record to show that PAL
“wilfully cause(d) loss or injury to cranad(private respondent) in a manner that is
contrary to morals, good customs or public policy . cra .” Nor can private respondent’s
action be considered “analogous” to either of the foregoing, for the reasons are
obvious that it is not.”  chanroblesvirtualawlibrary(Memorandum of petitioner, pp. 418-
421, Records)
Having affirmed the gross negligence of PAL in allowing Capt. Delfin Bustamante to
fly the plane to Daet on January 8, 1951 whose slow reaction and poor judgment was
the cause of the crash-landing of the plane which resulted in private respondent
Samson hitting his head against the windshield and causing him injuries for which
reason PAL terminated his services and employment as pilot after refusing to provide
him with the necessary medical treatment of respondent’s periodic spells, headache
and general debility produced from said injuries, We must necessarily affirm likewise
the award of damages or compensation under the provisions of Art. 1711 and Art.
1712 of the New Civil Code which provide:
Art. 1711. Owners of enterprises and other employers are obliged to pay
compensation for the death or injuries to their laborers, workmen, mechanics or other
employees, even though the event may have been purely accidental or entirely due to
a fortuitous cause, if the death or personal injury arose out of and in the course of the
employment. The employer is also liable for compensation if the employee contracts
any illness or disease caused by such employment or as the result of the nature of
the employment. If the mishap was due to the employee’s own notorious negligence,
or voluntary act, or drunkenness, the employer shall not be liable for compensation.
When the employee’s lack of due care contributed to his death or injury, the
compensation shall be equitably reduced.
Art. 1712. If the death or injury is due to the negligence of a fellow-worker, the latter
and the employer shall be solidarily liable for compensation. If a fellow-worker’s
intentional or malicious act is the only cause of the death or injury, the employer shall
not be answerable, unless it should be shown that the latter did not exercise due
diligence in the selection or supervision of the plaintiffs fellow-worker.
The grant of compensatory damages to the private respondent made by the trial court
and affirmed by the appellate court by computing his basic salary per annum at
P750.00 a month as basic salary and P300.00 a month for extra pay for extra flying
time including bonus given in December every year is justified. The correct
computation however should be P750 plus P300 x 12 months = P12,600 per annum x
10 years = P126,000.00 cranad(not P120,000.00 as computed by the court a quo).
The further grant of increase in the basic pay of the pilots to P12,000 annually for
1964 to 1968 totalling P60,000.00 and another P18,000.00 as bonuses and extra pay
for extra flying time at the same rate of P300.00 a month totals P78,000.00. Adding
P126,000.00 cranad(1964 to 1968 compensation) makes a grand total of
P204,000.00 cranad(not P198,000.00 as originally computed).
As to the grant of moral damages in the sum of P50,000.00 We also approve the
same. We have noted and considered the holding of the appellate court in the matter
of bad faith on the part of PAL, stated hereunder, this wise:
“None of the essential facts material to the determination of the case have been
seriously assailed: the overshooting of runway and crash-landing into the mangroves;
the hitting of plaintiff’s head to the front windshield of the plane; the oozing of blood
out of his ears, nose and mouth; the intermittent dizzy spells, headaches and general
debility thereafter for which he was discharged from his employment; the condition of
not to attribute the cause of the ailment to the crash-landing imposed in bad faith for a
TRANSPORTATION LAW – Chapter 2 & 3
demanded special medical service abroad; and the resultant brain injury which
defendant’s doctors could not understand nor diagnose.”
xxx
“The act of defendant-appellant in unjustly refusing plaintiff-appellee’s demand for
special medical service abroad for the reason that plaintiff-appellee’s deteriorating
physical condition was not due to the accident violates the provisions of Article 19 of
the Civil Code on human relations “to act with justice, give everyone his due, and
observe honesty and good faith.”  chanroblesvirtualawlibrary(CA Resolution, pp. 151-
152, Records)
We reject the theory of petitioner that private respondent is not entitled to moral
damages. Under the facts found by the trial court and affirmed by the appellate court
and under the law and jurisprudence cited and applied, the grant of moral damages in
the amount of P50,000.00 is proper and justified.
The fact that private respondent suffered physical injuries in the head when the plane
crash-landed due to the negligence of Capt. Bustamante is undeniable. The
negligence of the latter is clearly a quasi-delict and therefore Article 2219, cranad(2)
New Civil Code is applicable, justifying the recovery of moral damages.
Even from the standpoint of the petitioner that there is an employer-employee
relationship between it and private respondent arising from the contract of
employment, private respondent is still entitled to moral damages in view of the
finding of bad faith or malice by the appellate court, which finding We hereby affirm,
applying the provisions of Art. 2220, New Civil Code which provides that 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.
The justification in the award of moral damages under Art. 19 of the New Civil Code
on Human Relations which requires that every person must, in the exercise of his
rights and in the performance of his duties, act with justice, give everyone his due,
and observe honesty and good faith, as applied by respondent court is also well-
taken and We hereby give Our affirmance thereto.
With respect to the award of attorney’s fees in the sum of P20,000.00 the same is
likewise correct. As pointed out in the decision of the Court of Appeals, “the plaintiff is
entitled to attorney’s fees because he was forced to litigate in order to enforce his
valid claim cranad(Ganaban vs. Bayle, 30 SCRA 365; De la Cruz vs. De la Cruz, 22
SCRA 33; and many others); defendant acted in bad faith in refusing plaintiff’s valid
claim cranad(Filipino Pipe Foundry Corporation vs. Central Bank, 23 SCRA 1044);
and plaintiff was dismissed and was forced to go to court to vindicate his
right cranad(Nadura vs. Benguet Consolidated, Inc., 5 SCRA 879).”
We also agree with the modification made by the appellate court in ordering payment
of legal interest from the date judicial demand was made by Pilot Samson against
PAL with the filing of the complaint in the lower court. We affirm the ruling of the
respondent court which reads:

“Lastly, the defendant-appellant claims that the legal rate of interest on the unearned
compensation should be computed from the date of the judgment in the lower court,
not from the filing of the complaint, citing a case where the issue raised in the
Supreme Court was limited to when the judgment was rendered in the lower court or
in the appellate court, which does not mean that it should not be computed from the
filing of the complaint.

Articles 1169, 2209 and 2212 of the Civil Code govern when interest shall be
computed. Thereunder interest begins to accrue upon demand, extrajudicial or
judicial. A complaint is a judicial demand cranad(Cabarroguis vs. Vicente, 107 Phil.
340). Under Article 2212 of the Civil Code, interest due shall earn legal interest from
the time it is judicially demanded, although the obligation may be silent upon this
point.”  chanroblesvirtualawlibrary(CA Resolution, pp. 153-154, Records).

The correct amount of compensatory damages upon which legal interest shall accrue
from the filing of the complaint is P204,000.00 as herein computed and not
P198,000.00.

WHEREFORE, in view of all the foregoing, the judgment of the appellate court is
hereby affirmed with slight modification in that the correct amount of compensatory
damages is P204,000.00. With costs against petitioner.

TRANSPORTATION LAW – Chapter 2 & 3

19.) G.R. No. L-12191             October 14, 1918
JOSE CANGCO, plaintiff-appellant, vs. MANILA RAILROAD CO., defendant-
appellee.
At the time of the occurrence which gave rise to this litigation the plaintiff, Jose
Cangco, was in the employment of Manila Railroad Company in the capacity of clerk,
with a monthly wage of P25. He lived in the pueblo of San Mateo, in the province of
Rizal, which is located upon the line of the defendant railroad company; and in
coming daily by train to the company's office in the city of Manila where he worked, he
used a pass, supplied by the company, which entitled him to ride upon the company's
trains free of charge. Upon the occasion in question, January 20, 1915, the plaintiff
arose from his seat in the second class-car where he was riding and, making, his exit
through the door, took his position upon the steps of the coach, seizing the upright
guardrail with his right hand for support.
On the side of the train where passengers alight at the San Mateo station there is a
cement platform which begins to rise with a moderate gradient some distance away
from the company's office and extends along in front of said office for a distance
sufficient to cover the length of several coaches. As the train slowed down another
passenger, named Emilio Zuñiga, also an employee of the railroad company, got off
the same car, alighting safely at the point where the platform begins to rise from the
level of the ground. When the train had proceeded a little farther the plaintiff Jose
Cangco stepped off also, but one or both of his feet came in contact with a sack of
watermelons with the result that his feet slipped from under him and he fell violently
on the platform. His body at once rolled from the platform and was drawn under the
moving car, where his right arm was badly crushed and lacerated. It appears that
after the plaintiff alighted from the train the car moved forward possibly six meters
before it came to a full stop.
The explanation of the presence of a sack of melons on the platform where the
plaintiff alighted is found in the fact that it was the customary season for harvesting
these melons and a large lot had been brought to the station for the shipment to the
market. They were contained in numerous sacks which has been piled on the
platform in a row one upon another. The testimony shows that this row of sacks was
so placed of melons and the edge of platform; and it is clear that the fall of the plaintiff
was due to the fact that his foot alighted upon one of these melons at the moment he
stepped upon the platform. His statement that he failed to see these objects in the
darkness is readily to be credited.
The plaintiff was drawn from under the car in an unconscious condition, and it
appeared that the injuries which he had received were very serious. He was therefore
brought at once to a certain hospital in the city of Manila where an examination was
made and his arm was amputated. The result of this operation was unsatisfactory,
and the plaintiff was then carried to another hospital where a second operation was
performed and the member was again amputated higher up near the shoulder. It
appears in evidence that the plaintiff expended the sum of P790.25 in the form of
TRANSPORTATION LAW – Chapter 2 & 3
medical and surgical fees and for other expenses in connection with the process of
his curation.
Upon August 31, 1915, he instituted this proceeding in the Court of First Instance of
the city of Manila to recover damages of the defendant company, founding his action
upon the negligence of the servants and employees of the defendant in placing the
sacks of melons upon the platform and leaving them so placed as to be a menace to
the security of passenger alighting from the company's trains. At the hearing in the
Court of First Instance, his Honor, the trial judge, found the facts substantially as
above stated, and drew therefrom his conclusion to the effect that, although
negligence was attributable to the defendant by reason of the fact that the sacks of
melons were so placed as to obstruct passengers passing to and from the cars,
nevertheless, the plaintiff himself had failed to use due caution in alighting from the
coach and was therefore precluded form recovering. Judgment was accordingly
entered in favor of the defendant company, and the plaintiff appealed.
It can not be doubted that the employees of the railroad company were guilty of
negligence in piling these sacks on the platform in the manner above stated; that their
presence caused the plaintiff to fall as he alighted from the train; and that they
therefore constituted an effective legal cause of the injuries sustained by the plaintiff.
It necessarily follows that the defendant company is liable for the damage thereby
occasioned unless recovery is barred by the plaintiff's own contributory negligence. In
resolving this problem it is necessary that each of these conceptions of liability, to-wit,
the primary responsibility of the defendant company and the contributory negligence
of the plaintiff should be separately examined.
It is important to note that the foundation of the legal liability of the defendant is the
contract of carriage, and that the obligation to respond for the damage which plaintiff
has suffered arises, if at all, from the breach of that contract by reason of the failure of
defendant to exercise due care in its performance. That is to say, its liability is direct
and immediate, differing essentially, in legal viewpoint from that presumptive
responsibility for the negligence of its servants, imposed by article 1903 of the Civil
Code, which can be rebutted by proof of the exercise of due care in their selection
and supervision. Article 1903 of the Civil Code is not applicable to obligations arising
ex contractu, but only to extra-contractual obligations — or to use the technical form
of expression, that article relates only to culpa  aquiliana and not to culpa contractual.
…
This distinction is of the utmost importance. The liability, which, under the Spanish
law, is, in certain cases imposed upon employers with respect to damages
occasioned by the negligence of their employees to persons to whom they are not
bound by contract, is not based, as in the English Common Law, upon the principle
of respondeat superior —  if it were, the master would be liable in every case and
unconditionally — but upon the principle announced in article 1902 of the Civil Code,
which imposes upon all persons who by their fault or negligence, do injury to another,
the obligation of making good the damage caused. One who places a powerful
automobile in the hands of a servant whom he knows to be ignorant of the method of
managing such a vehicle, is himself guilty of an act of negligence which makes him
liable for all the consequences of his imprudence. The obligation to make good the
damage arises at the very instant that the unskillful servant, while acting within the
scope of his employment causes the injury. The liability of the master is personal and
direct. But, if the master has not been guilty of any negligence whatever in the
selection and direction of the servant, he is not liable for the acts of the latter,
whatever done within the scope of his employment or not, if the damage done by the
servant does not amount to a breach of the contract between the master and the
person injured.
…The opinion there expressed by this Court, to the effect that in case of extra-
contractual culpa  based upon negligence, it is necessary that there shall have been
some fault attributable to the defendant personally, and that the last paragraph of
article 1903 merely establishes a rebuttable presumption, is in complete accord with
the authoritative opinion of Manresa, who says (vol. 12, p. 611) that the liability
created by article 1903 is imposed by reason of the breach of the duties inherent in
the special relations of authority or superiority existing between the person called
upon to repair the damage and the one who, by his act or omission, was the cause of
it.
On the other hand, the liability of masters and employers for the negligent acts or
omissions of their servants or agents, when such acts or omissions cause damages
which amount to the breach of a contact, is not based upon a mere presumption of
the master's negligence in their selection or control, and proof of exercise of the
utmost diligence and care in this regard does not relieve the master of his liability for
the breach of his contract.
Every legal obligation must of necessity be extra-contractual or contractual. Extra-
contractual obligation has its source in the breach or omission of those mutual duties
which civilized society imposes upon it members, or which arise from these relations,
other than contractual, of certain members of society to others, generally embraced in
the concept of status. The legal rights of each member of society constitute the
measure of the corresponding legal duties, mainly negative in character, which the
existence of those rights imposes upon all other members of society. The breach of
these general duties whether due to willful intent or to mere inattention, if productive
of injury, give rise to an obligation to indemnify the injured party. The fundamental
distinction between obligations of this character and those which arise from contract,
rests upon the fact that in cases of non-contractual obligation it is the wrongful or
negligent act or omission itself which creates the vinculum juris, whereas in
contractual relations the vinculum exists independently of the breach of the voluntary
duty assumed by the parties when entering into the contractual relation.
… of carriage, and an examination of the pleadings and of the briefs shows that the
The position of a natural or juridical person who has undertaken by contract to render
service to another, is wholly different from that to which article 1903 relates. When the
sources of the obligation upon which plaintiff's cause of action depends is a negligent
act or omission, the burden of proof rests upon plaintiff to prove the negligence — if
TRANSPORTATION LAW – Chapter 2 & 3
he does not his action fails. But when the facts averred show a contractual
undertaking by defendant for the benefit of plaintiff, and it is alleged that plaintiff has
failed or refused to perform the contract, it is not necessary for plaintiff to specify in
his pleadings whether the breach of the contract is due to willful fault or to negligence
on the part of the defendant, or of his servants or agents. Proof of the contract and of
its nonperformance is sufficient  prima facie  to warrant a recovery.
…
This distinction between culpa aquiliana, as the source  of an obligation, and culpa
contractual as a mere incident to the performance of a contract has frequently been
recognized by the supreme court of Spain. (Sentencias  of June 27, 1894; November
20, 1896; and December 13, 1896.) In the decisions of November 20, 1896, it
appeared that plaintiff's action arose ex contractu, but that defendant sought to avail
himself of the provisions of article 1902 of the Civil Code as a defense. The Spanish
Supreme Court rejected defendant's contention, saying:
These are not cases of injury caused, without any pre-existing obligation, by fault or
negligence, such as those to which article 1902 of the Civil Code relates, but of
damages caused by the defendant's failure to carry out the undertakings imposed by
the contracts . . . .
A brief review of the earlier decision of this court involving the liability of employers for
damage done by the negligent acts of their servants will show that in no case has the
court ever decided that the negligence of the defendant's servants has been held to
constitute a defense to an action for damages for breach of contract.
…
In the case of Yamada vs. Manila Railroad Co. and Bachrach Garage & Taxicab Co.
(33 Phil. Rep., 8), it is true that the court rested its conclusion as to the liability of the
defendant upon article 1903, although the facts disclosed that the injury complaint of
by plaintiff constituted a breach of the duty to him arising out of the contract of
transportation. The express ground of the decision in this case was that article 1903,
in dealing with the liability of a master for the negligent acts of his servants "makes
the distinction between private individuals and public enterprise;" that as to the latter
the law creates a rebuttable presumption of negligence in the selection or direction of
servants; and that in the particular case the presumption of negligence had not been
overcome.
It is evident, therefore that in its decision Yamada case, the court treated plaintiff's
action as though founded in tort rather than as based upon the breach of the contract
questions of law were in fact discussed upon this theory. Viewed from the standpoint
of the defendant the practical result must have been the same in any event. The proof
disclosed beyond doubt that the defendant's servant was grossly negligent and that
his negligence was the proximate cause of plaintiff's injury. It also affirmatively
appeared that defendant had been guilty of negligence in its failure to exercise proper
discretion in the direction of the servant. Defendant was, therefore, liable for the injury
suffered by plaintiff, whether the breach of the duty were to be regarded as
constituting culpa aquiliana or culpa contractual. As Manresa points out (vol. 8, pp. 29
and 69) whether negligence occurs an incident in the course of the performance of a
contractual undertaking or its itself the source of an extra-contractual undertaking
obligation, its essential characteristics are identical. There is always an act or
omission productive of damage due to carelessness or inattention on the part of the
defendant. Consequently, when the court holds that a defendant is liable in damages
for having failed to exercise due care, either directly, or in failing to exercise proper
care in the selection and direction of his servants, the practical result is identical in
either case. Therefore, it follows that it is not to be inferred, because the court held in
the Yamada case that defendant was liable for the damages negligently caused by its
servants to a person to whom it was bound by contract, and made reference to the
fact that the defendant was negligent in the selection and control of its servants, that
in such a case the court would have held that it would have been a good defense to
the action, if presented squarely upon the theory of the breach of the contract, for
defendant to have proved that it did in fact exercise care in the selection and control
of the servant.
The true explanation of such cases is to be found by directing the attention to the
relative spheres of contractual and extra-contractual obligations. The field of non-
contractual obligation is much more broader than that of contractual obligations,
comprising, as it does, the whole extent of juridical human relations. These two fields,
figuratively speaking, concentric; that is to say, the mere fact that a person is bound
to another by contract does not relieve him from extra-contractual liability to such
person. When such a contractual relation exists the obligor may break the contract
under such conditions that the same act which constitutes the source of an extra-
contractual obligation had no contract existed between the parties.
The contract of defendant to transport plaintiff carried with it, by implication, the duty
to carry him in safety and to provide safe means of entering and leaving its trains (civil
code, article 1258). That duty, being contractual, was direct and immediate, and its
non-performance could not be excused by proof that the fault was morally imputable
to defendant's servants.
The railroad company's defense involves the assumption that even granting that the
negligent conduct of its servants in placing an obstruction upon the platform was a
breach of its contractual obligation to maintain safe means of approaching and
leaving its trains, the direct and proximate cause of the injury suffered by plaintiff was
his own contributory negligence in failing to wait until the train had come to a
complete stop before alighting. Under the doctrine of comparative negligence
announced in the Rakes case (supra), if the accident was caused by plaintiff's own
negligence, no liability is imposed upon defendant's negligence and plaintiff's
negligence merely contributed to his injury, the damages should be apportioned. It is,
therefore, important to ascertain if defendant was in fact guilty of negligence.
It may be admitted that had plaintiff waited until the train had come to a full stop
before alighting, the particular injury suffered by him could not have occurred.
Defendant contends, and cites many authorities in support of the contention, that it is
TRANSPORTATION LAW – Chapter 2 & 3
negligence per se for a passenger to alight from a moving train. We are not disposed
to subscribe to this doctrine in its absolute form. We are of the opinion that this
proposition is too badly stated and is at variance with the experience of every-day life.
In this particular instance, that the train was barely moving when plaintiff alighted is
shown conclusively by the fact that it came to stop within six meters from the place
where he stepped from it. Thousands of person alight from trains under these
conditions every day of the year, and sustain no injury where the company has kept
its platform free from dangerous obstructions. There is no reason to believe that
plaintiff would have suffered any injury whatever in alighting as he did had it not been
for defendant's negligent failure to perform its duty to provide a safe alighting place.
We are of the opinion that the correct doctrine relating to this subject is that
expressed in Thompson's work on Negligence (vol. 3, sec. 3010) as follows:
The test by which to determine whether the passenger has been guilty of negligence
in attempting to alight from a moving railway train, is that of ordinary or reasonable
care. It is to be considered whether an ordinarily prudent person, of the age, sex and
condition of the passenger, would have acted as the passenger acted under the
circumstances disclosed by the evidence. This care has been defined to be, not the
care which may or should be used by the prudent man generally, but the care which a
man of ordinary prudence would use under similar circumstances, to avoid injury."
(Thompson, Commentaries on Negligence, vol. 3, sec. 3010.)
Or, it we prefer to adopt the mode of exposition used by this court in Picart vs. Smith
(37 Phil. rep., 809), we may say that the test is this; Was there anything in the
circumstances surrounding the plaintiff at the time he alighted from the train which
would have admonished a person of average prudence that to get off the train under
the conditions then existing was dangerous? If so, the plaintiff should have desisted
from alighting; and his failure so to desist was contributory negligence.
As the case now before us presents itself, the only fact from which a conclusion can
be drawn to the effect that plaintiff was guilty of contributory negligence is that he
stepped off the car without being able to discern clearly the condition of the platform
and while the train was yet slowly moving. In considering the situation thus presented,
it should not be overlooked that the plaintiff was, as we find, ignorant of the fact that
the obstruction which was caused by the sacks of melons piled on the platform
existed; and as the defendant was bound by reason of its duty as a public carrier to
afford to its passengers facilities for safe egress from its trains, the plaintiff had a right
to assume, in the absence of some circumstance to warn him to the contrary, that the
platform was clear. The place, as we have already stated, was dark, or dimly lighted,
and this also is proof of a failure upon the part of the defendant in the performance of
a duty owing by it to the plaintiff; for if it were by any possibility concede that it had
right to pile these sacks in the path of alighting passengers, the placing of them
adequately so that their presence would be revealed.
As pertinent to the question of contributory negligence on the part of the plaintiff in
this case the following circumstances are to be noted: The company's platform was
constructed upon a level higher than that of the roadbed and the surrounding ground.
The distance from the steps of the car to the spot where the alighting passenger
would place his feet on the platform was thus reduced, thereby decreasing the risk
incident to stepping off. The nature of the platform, constructed as it was of cement
material, also assured to the passenger a stable and even surface on which to alight.
Furthermore, the plaintiff was possessed of the vigor and agility of young manhood,
and it was by no means so risky for him to get off while the train was yet moving as
the same act would have been in an aged or feeble person. In determining the
question of contributory negligence in performing such act — that is to say, whether
the passenger acted prudently or recklessly — the age, sex, and physical condition of
the passenger are circumstances necessarily affecting the safety of the passenger,
and should be considered. Women, it has been observed, as a general rule are less
capable than men of alighting with safety under such conditions, as the nature of their
wearing apparel obstructs the free movement of the limbs. Again, it may be noted that
the place was perfectly familiar to the plaintiff as it was his daily custom to get on and
of the train at this station. There could, therefore, be no uncertainty in his mind with
regard either to the length of the step which he was required to take or the character
of the platform where he was alighting. Our conclusion is that the conduct of the
plaintiff in undertaking to alight while the train was yet slightly under way was not
characterized by imprudence and that therefore he was not guilty of contributory
negligence.

The evidence shows that the plaintiff, at the time of the accident, was earning P25 a
month as a copyist clerk, and that the injuries he has suffered have permanently
disabled him from continuing that employment. Defendant has not shown that any
other gainful occupation is open to plaintiff. His expectancy of life, according to the
standard mortality tables, is approximately thirty-three years. We are of the opinion
that a fair compensation for the damage suffered by him for his permanent disability is
the sum of P2,500, and that he is also entitled to recover of defendant the additional
sum of P790.25 for medical attention, hospital services, and other incidental
expenditures connected with the treatment of his injuries.

The decision of lower court is reversed, and judgment is hereby rendered plaintiff for
the sum of P3,290.25, and for the costs of both instances. So ordered.

TRANSPORTATION LAW – Chapter 2 & 3

20.) KAPALARAN BUS LINE, petitioner,
vs. ANGEL CORONADO, LOPE GRAJERA, DIONISIO SHINYO, and THE COURT
OF APPEALS, respondents,
The accident happened on the National Highway at 10:30 A.M. on August 2, 1982.
The jeepney driven by Lope Grajera was then corning from Pila, Laguna on its way
towards the direction of Sta. Cruz, traversing the old highway. As it reached the
intersection where there is a traffic sign 'yield,' it stopped and cautiously treated the
intersection as a "Thru Stop' street, which it is not. The KBL bus was on its way from
Sta. Cruz, Laguna, driven by its regular driver Virgilio Llamoso, on its way towards
Manila. The regular itinerary of the KBL bus is through the town proper of Pila,
Laguna, but at times it avoids this if a bus is already fully loaded with passengers and
can no longer accommodate additional passengers. As the KBL bus neared the
intersection, Virgilio Llamoso inquired from his conductor if they could still
accommodate passengers and learning that they were already full, he decided to
bypass Pila and instead, to proceed along the national highway. Virgilio Llamoso
admitted that there was another motor vehicle ahead of him.
The general rule is that the vehicle on the national highway has the right-of-way as
against a feeder road. Another general rule is that the vehicle coming from the right
has the right-of-way over the vehicle coming from the left. The general rules on right-
of-way may be invoked only if both vehicles approach the intersection at almost the
same time. In the case at bar, both roads are national roads. Also, the KBL bus was
still far from the intersection when the jeepney reached the same. As testified to by
Atty. Conrado L. Manicad who was driving a Mustang car coming from the direction of
Sta. Cruz and proceeding towards the direction of Manila, he stopped at the
intersection to give way to the jeepney driven by Grajera. Behind Manicad were two
vehicles, a car of his client and another car. A Laguna Transit bus had just entered
the town of Pila ahead of Atty. Manicad.
The sketch marked Exhibit 'E' indicates very clearly that the jeepney had already
traversed the intersection when it met the KBL bus head-on. It is also obvious that the
point of impact was on the right lane of the highway which is the lane properly
belonging to the jeepney. As testified to by Lope Grajera, the KBL bus ignored the
stopped vehicles of Atty. Manicad and the other vehicles behind Atty. Manicad and
overtook both vehicles at the intersection, therefore, causing the accident.
Judging from the testimony of Atty. Conrado L. Manicad and the sketch (Exhibit 'E'),
the sequence of events shows that the first vehicle to arrive at the intersection was
the jeepney. Seeing that the road was clear, the jeepney which had stopped at the
intersection began to move forward, and for his part, Atty. Manicad stopped his car at
the intersection to give way to the jeepney. At about this time, the KBL bus was
approaching the intersection and its driver was engaged in determining from his
conductor if they would still pass through the town proper of Pila. Upon learning that
they were already full, he turned his attention to the road and found the stopped
vehicles at the intersection with the jeepney trying to cross the intersection. The KBL
bus had no more room within which to stop without slamming into the rear of the
vehicle behind the car of Atty. Manicad. The KBL driver chose to gamble on
TRANSPORTATION LAW – Chapter 2 & 3
proceeding on its way, unfortunately, the jeepney driven by Grajera, which had the
right-of-way, was about to cross the center of the highway and was directly on the
path of the KBL bus. The gamble made by Llamoso did not pay off. The impact
indicates that the KBL bus was travelling at a fast rate of speed because, after the
collision, it did not stop; it travelled for another 50 meters and stopped only when it hit
an electric post (pp. 3-4, Decision; pp. 166167, Record). 1
On 14 September 1982, Kapalaran, apparently believing that the best defense was
offense, filed a complaint for damage to property and physical injuries through
reckless imprudence against respondents Angel Coronado and Lope Grajera in the
Regional Trial Court, Branch 27, Sta. Cruz, Laguna. Respondents answered with their
own claims (counter-claims) for damages. A third-party complaint and/or a complaint
for intervention was also filed in the same case against Kapalaran by jeepney
passenger Dionisio Shinyo.
On 15 October 1986, after trial, the trial court rendered a judgment in favor of private
respondents and ordering Kapalaran…
From the above judgment, Kapalaran appealed to the Court of Appeals assailing the
trial court's findings on the issue of fault and the award of damages. The Court of
Appeals, on 28 June 1988, affirmed the decision of the trial court but modified the
award of damages by setting aside the grant of exemplary damages as well as the
award of attomey's fee and litigation expenses made to Dionisio Shinyo. 2
This decision of the Court of Appeals is now before us on a Petition for Review, a
motion for reconsideration by Kapalaran having been denied by that court on 13
October 1988.
Kapalaran assails the findings of fact of the Regional Trial Court and of the Court of
Appeals, and insists before this Court that respondent Grajera, driver of the jeepney,
was at fault and not the driver of Kapalaran's bus…
Kapalaran's driver had become aware that some vehicles ahead of the bus and
travelling in the same direction had already stopped at the intersection obviously to
give way either to pedestrians or to another vehicle about to enter the intersection.
The bus driver, who was driving at a speed too high to be safe and proper at or near
an intersection on the highway, and in any case too high to be able to slow down and
stop behind the cars which had preceded it and which had stopped at the
intersection, chose to swerve to the left lane and overtake such preceding vehicles,
entered the intersection and directly smashed into the jeepney within the intersection.
Immediately before the collision, the bus driver was actually violating the following
traffic rules and regulations, among others, in the Land Transportation and Traffic
Code, Republic Act No. 4136, as amended:
Sec. 35. Restriction as to speed. — (a) Any person driving a motor vehicle on a
highway shall drive the same at a careful and prudent speed, not greater nor less
than is reasonable and proper, having due regard for the traffic, the width of the
highway, and or any other condition then and there existing; and no person shall
drive any motor vehicle upon a highway at such a speed as to endanger the life, limb
and property of any person, nor at a speed greater than will permit him to bring the
vehicle to a stop within the assured clear distance ahead.
Sec. 41. Restrictions on overtaking and passing. _1 (a) The driver of a vehicle shall
not drive to the left side of the center line of a highway in overtaking or passing
another vehicle, proceeding in the same direction, unless such left side is clearly
visible, and is free of oncoming traffic for a sufficient distance ahead to permit such
overtaking or passing to be made in safety.
(c) The driver of a vehicle shall not overtake or pass any other vehicle proceeding in
the same direction, at any railway grade crossing, or at any intersection of highways,
unless such intersection or crossing is controlled by traffic signal, or unless permitted
to do so by a watchman or a peace officer, 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 on the right. Nothing in this section shall be
construed to prohibit a driver overtaking or passing, upon the right, another vehicle
which is making or about to make a left turn.
Thus, a legal presumption arose that the bus driver was negligent 3 a presumption
Kapalaran was unable to overthrow.
Petitioner's contention that the jeepney should have stopped before entering the "Y-
intersection" because of the possibility that another vehicle behind the cars which had
stopped might not similarly stop and might swerve to the left to proceed to the
highway en route  to Manila, is more ingenious than substantial. It also offers
illustration of the familiar litigation tactic of shifting blame from one's own shoulders to
those of the other party. But the jeepney driver, seeing the cars closest to the
intersection on the opposite side of the highway come to a stop to give way to him,
had the right to assume that other vehicles further away and behind the stopped cars
would similarly come to a stop and not seek illegally to overtake the stopped vehicles
and come careening into the intersection at an unsafe speed. 4 Petitioner's bus was
still relatively far away from the intersection when the jeepney entered the same; the
bus collided head on into the jeepney because the bus had been going at an
excessively high velocity immediately before and at the time of overtaking the
stopped cars, and so caught the jeepney within the intersection. It was also the
responsibility of the bus driver to see to it, when it overtook the two (2) cars ahead
which had stopped at the intersection, that the left lane of the road within the
intersection and beyond was clear. The point of impact was on the left side of the
intersection (the light lane so far as concerns the jeepney coming from the opposite
side), which was precisely the lane or side on which the jeepney had a right to be.
Petitioner Kapalaran also assails the award of moral damages against itself, upon the
ground that its own bus driver, third-party defendant, was apparently not held liable by
the trial court . 5 Hence, Kapalaran argues that there was no justification for holding it,
the employer, liable for damages, considering that such liability was premised upon
the bus driver's negligence and that petitioner "as mere employer" was not guilty of
such negligence or imprudence. 6 This contention in thoroughly unpersuasive. The
TRANSPORTATION LAW – Chapter 2 & 3
patent and gross negligence on the part of the petitioner Kapalaran's driver raised the
legal presumption that Kapalaran as employer was guilty of negligence either in the
selection or in the supervision of its bus driver, 7 Where the employer is held liable for
damages, it has of course a right of recourse against its own negligent employee. If
petitioner Kapalaran was interested in maintaining its right of recourse against or
reimbursement from its own driver, 8 it should have appealled from that portion of the
trial court's decision which had failed to hold the bus driver is not "merely subsidiary,"
and is not limited to cases where the employee "cannot pay his liability" nor are
private respondents compelled frist to proceed against the bus driver. The liability of
the employer under Article 2180 of the Civil Code is direct and immediate; it is not
conditioned upon prior recourse against the negligent employee and a prior showing
of the insolvency of such employee. 9 So far as the record shows, petitioner
Kapalaran was unable to rebut the presumption of negligence on its own part. The
award of moral damages against petitioner Kapalaran is not only entirely in order; it is
also quite modest consideirng Dionisio Shinyo's death during the pendency of this
petition, a death hastened by, if not directly due to, the grievous injuries sustained by
him in the violent collision.
The Court of Appeals deleted the award of exemplary damages which the trial court
had granted in order "to serve as a deterrent to others who, like the plaintiff
[Kapalaran], may be minded to induce accident victims to perjure themselves in a
sworn statement." The Court of Appeals held that htere was no basis for this award of
exemplary damages, stating that it was not "such a reprehensible act to try to gather
witnesses for one's cause" and that there was no evidence of use of "presure or
influence" to induce the accident victims to perjure themselves While that might have
been so, both the trial court and the Court of Appeals overlook another and far more
compelling basis for the award of exemplary damages against petitioner Kapalaran in
this case. There is no question that petitioner's bus driver was grossly and very
probably criminally negligent in his reckless disregard of the rights of other vehicles
and their pasangers and of pedestrian as well.
The Court is entitled to take judicial notice of the gross negligence and the appalling
disregard of the physical safety and property of others so commonly exhibited today
by the drivers of passanger bussses and similar vehicles on our highways. The law
requires petitioner as common carrier to exercise extraordinary diligence incarrying
and transporting their passanger safely "as far as human care and foresight can
proved, using the utmost diligence of very cautious persons, with due regard for all
circumstances." 10 In requiring the highest possible degree of diligence from common
carriers and creating a presumption of negligence against them, the law compels
them to curb the recklessness of their drivers. 11 While the immediate beneficiaries of
the standard of extraordinary diligence are, of course, the passengers and owners of
cargo carried by a common carrier, they are not only persons that the law seeks to
benefit. For if common carriers carefully observed the statutory standard of
extraordinary diligence in respect of of their own passengers, they cannot help but
simultaneously benefit pedestrians and the owners and passengers of other vehicles
who are equally entitled to the safe and convenient use of our roads and
highways. 12 The law seeks to stop and prevent the slaughter and maiming of people
(whether passengers or not) and the destruction of property (whether freight or not)
on our highways by buses, the very size and power of which seem often to inflame
the minds of their drivers. Article 2231 of the Civil Code explicitly authorizes the
imposition of exemplary damages in cases of quasi-delicts "if the defendant acted
with gross negligence." Thus we believe that the award of exemplary damages by the
trial court was quite proper, although granted for the wrong reason, and should not
only be restored but augmented in the present case. The Court is aware that
respondent Shinyo did not file a separate petition for review to set aside that portion
of the Court of

Appeals'decision which deleted the grant by the trial court of exemplary damages. It
is settled, however, that issues which must be resolved if substantial justice is to be
rendered to the parties, may and should be considered and decided by this Court
even if those issues had not been explicitly raised by the party affected. 13 In the
instant case, it is not only the demands of substantial justice but also the compelling
considerations of public policy noted above, which impel us to the conclusion that the
trial court's award of exemplary damages was erroneously deleted and must be
restored and brought more nearly to the level which public policy and substantial
justice require.

WHEREFORE, the Petition for Review on certiorari is DENIED for lack of merit and
the Decision of the Court of Appeals is hereby AFFIRMED, except (1) that the award
of exemplary damages to Dionisio Shinyo shall be restored and increased from
P10,000.00 to P25,000.00, and (2) that the grant of attorney's fees and litigation
expenses in the sum of P15,000.00 to Dionisio Shinyo shall similarly be restored.
Costs against petitioner.

TRANSPORTATION LAW – Chapter 2 & 3

21.) G.R. No. 138060             September 1, 2004
WILLIAM TIU, doing business under the name and style of "D’ Rough Riders,"
and VIRGILIO TE LAS PIÑAS petitioners, vs. PEDRO A. ARRIESGADO,
BENJAMIN CONDOR, SERGIO PEDRANO and PHILIPPINE PHOENIX SURETY
AND INSURANCE, INC., respondents.
At about 10:00 p.m. of March 15, 1987, the cargo truck marked "Condor Hollow
Blocks and General Merchandise" bearing plate number GBP-675 was loaded with
firewood in Bogo, Cebu and left for Cebu City. Upon reaching Sitio Aggies, Poblacion,
Compostela, Cebu, just as the truck passed over a bridge, one of its rear tires
exploded. The driver, Sergio Pedrano, then parked along the right side of the national
highway and removed the damaged tire to have it vulcanized at a nearby shop, about
700 meters away.3 Pedrano left his helper, Jose Mitante, Jr. to keep watch over the
stalled vehicle, and instructed the latter to place a spare tire six fathoms away4 behind
the stalled truck to serve as a warning for oncoming vehicles. The truck’s tail lights
were also left on. It was about 12:00 a.m., March 16, 1987.
At about 4:45 a.m., D’ Rough Riders passenger bus with plate number PBP-724
driven by Virgilio Te Laspiñas was cruising along the national highway of Sitio Aggies,
Poblacion, Compostela, Cebu. The passenger bus was also bound for Cebu City, and
had come from Maya, Daanbantayan, Cebu. Among its passengers were the
Spouses Pedro A. Arriesgado and Felisa Pepito Arriesgado, who were seated at the
right side of the bus, about three (3) or four (4) places from the front seat.
As the bus was approaching the bridge, Laspiñas saw the stalled truck, which was
then about 25 meters away.5 He applied the breaks and tried to swerve to the left to
avoid hitting the truck. But it was too late; the bus rammed into the truck’s left rear.
The impact damaged the right side of the bus and left several passengers injured.
Pedro Arriesgado lost consciousness and suffered a fracture in his right colles.6 His
wife, Felisa, was brought to the Danao City Hospital. She was later transferred to the
Southern Island Medical Center where she died shortly thereafter.7
Respondent Pedro A. Arriesgado then filed a complaint for breach of contract of
carriage, damages and attorney’s fees before the Regional Trial Court of Cebu City,
Branch 20, against the petitioners, D’ Rough Riders bus operator William Tiu and his
driver, Virgilio Te Laspiñas on May 27, 1987. The respondent alleged that the
passenger bus in question was cruising at a fast and high speed along the national
road, and that petitioner Laspiñas did not take precautionary measures to avoid the
accident.8 Thus:
… his employment, was insufficient to prove that he observed the diligence of a good
The petitioners, for their part, filed a Third-Party Complaint11 on August 21, 1987
against the following: respondent Philippine Phoenix Surety and Insurance, Inc.
(PPSII), petitioner Tiu’s insurer; respondent Benjamin Condor, the registered owner of
the cargo truck; and respondent Sergio Pedrano, the driver of the truck. They alleged
TRANSPORTATION LAW – Chapter 2 & 3
that petitioner Laspiñas was negotiating the uphill climb along the national highway of
Sitio Aggies, Poblacion, Compostela, in a moderate and normal speed. It was further
alleged that the truck was parked in a slanted manner, its rear portion almost in the
middle of the highway, and that no early warning device was displayed. Petitioner
Laspiñas promptly applied the brakes and swerved to the left to avoid hitting the truck
head-on, but despite his efforts to avoid damage to property and physical injuries on
the passengers, the right side portion of the bus hit the cargo truck’s left rear. The
petitioners further alleged, thus:
…
The respondent PPSII, for its part, admitted that it had an existing contract with
petitioner Tiu, but averred that it had already attended to and settled the claims of
those who were injured during the incident.13 It could not accede to the claim of
respondent Arriesgado, as such claim was way beyond the scheduled indemnity as
contained in the contract of insurance.14
After the parties presented their respective evidence, the trial court ruled in favor of
respondent Arriesgado. The dispositive portion of the decision reads:
WHEREFORE, in view of the foregoing, judgment is hereby rendered in favor of
plaintiff as against defendant William Tiu ordering the latter to pay the plaintiff the
following amounts:
…
According to the trial court, there was no dispute that petitioner William Tiu was
engaged in business as a common carrier, in view of his admission that D’ Rough
Rider passenger bus which figured in the accident was owned by him; that he had
been engaged in the transportation business for 25 years with a sole proprietorship;
and that he owned 34 buses. The trial court ruled that if petitioner Laspiñas had not
been driving at a fast pace, he could have easily swerved to the left to avoid hitting
the truck, thus, averting the unfortunate incident. It then concluded that petitioner
Laspiñas was negligent.
The trial court also ruled that the absence of an early warning device near the place
where the truck was parked was not sufficient to impute negligence on the part of
respondent Pedrano, since the tail lights of the truck were fully on, and the vicinity
was well lighted by street lamps.16 It also found that the testimony of petitioner Tiu,
that he based the selection of his driver Laspiñas on efficiency and in-service training,
and that the latter had been so far an efficient and good driver for the past six years of
father of a family in the selection and supervision of his employees.
…
The appellate court rendered judgment affirming the trial court’s decision with the
modification that the awards for moral and exemplary damages were reduced to
₱25,000. The dispositive portion reads:
WHEREFORE, the appealed Decision dated November 6, 1995 is hereby MODIFIED
such that the awards for moral and exemplary damages are each reduced to
₱25,000.00 or a total of ₱50,000.00 for both. The judgment is AFFIRMED in all other
respects.
According to the appellate court, the action of respondent Arriesgado was based not
on quasi-delict but on breach of contract of carriage. As a common carrier, it was
incumbent upon petitioner Tiu to prove that extraordinary diligence was observed in
ensuring the safety of passengers during transportation. Since the latter failed to do
so, he should be held liable for respondent Arriesgado’s claim. The CA also ruled that
no evidence was presented against the respondent PPSII, and as such, it could not
be held liable for respondent Arriesgado’s claim, nor for contribution, indemnification
and/or reimbursement in case the petitioners were adjudged liable.
The petitioners now come to this Court and ascribe the following errors committed by
the appellate court:
… in the selection and supervision of his employees, and that he was not a party to the
According to the petitioners, the appellate court erred in failing to appreciate the
absence of an early warning device and/or built-in reflectors at the front and back of
the cargo truck, in clear violation of Section 34, par. (g) of the Land Transportation
and Traffic Code. They aver that such violation is only a proof of respondent
Pedrano’s negligence, as provided under Article 2185 of the New Civil Code. They
also question the appellate court’s failure to take into account that the truck was
parked in an oblique manner, its rear portion almost at the center of the road. As
such, the proximate cause of the incident was the gross recklessness and
imprudence of respondent Pedrano, creating the presumption of negligence on the
part of respondent Condor in supervising his employees, which presumption was not
rebutted. The petitioners then contend that respondents Condor and Pedrano should
be held jointly and severally liable to respondent Arriesgado for the payment of the
latter’s claim.
… petitioner Tiu collided with respondent Condor’s stalled truck. This is clearly one of
Finally, the petitioners contend that respondent PPSII admitted in its answer that
while it had attended to and settled the claims of the other injured passengers,
respondent Arriesgado’s claim remained unsettled as it was beyond the scheduled
indemnity under the insurance contract. The petitioners argue that said respondent
PPSII should have settled the said claim in accordance with the scheduled indemnity
instead of just denying the same.
On the other hand, respondent Arriesgado argues that two of the issues raised by the
petitioners involved questions of fact, not reviewable by the Supreme Court: the
TRANSPORTATION LAW – Chapter 2 & 3
finding of negligence on the part of the petitioners and their liability to him; and the
award of exemplary damages, attorney’s fees and litigation expenses in his favor.
Invoking the principle of equity and justice, respondent Arriesgado pointed out that if
there was an error to be reviewed in the CA decision, it should be geared towards the
restoration of the moral and exemplary damages to ₱50,000 each, or a total of
₱100,000 which was reduced by the Court of Appeals to ₱25,000 each, or a total of
only ₱50,000.
Respondent Arriesgado also alleged that respondents Condor and Pedrano, and
respondent Phoenix Surety, are parties with whom he had no contract of carriage,
and had no cause of action against. It was pointed out that only the petitioners
needed to be sued, as driver and operator of the ill-fated bus, on account of their
failure to bring the Arriesgado Spouses to their place of destination as agreed upon in
the contract of carriage, using the utmost diligence of very cautious persons with due
regard for all circumstances.
Respondents Condor and Pedrano point out that, as correctly ruled by the Court of
Appeals, the proximate cause of the unfortunate incident was the fast speed at which
petitioner Laspiñas was driving the bus owned by petitioner Tiu. According to the
respondents, the allegation that the truck was not equipped with an early warning
device could not in any way have prevented the incident from happening. It was also
pointed out that respondent Condor had always exercised the due diligence required
contract of carriage between the petitioners and respondent Arriesgado.
Respondent PPSII, for its part, alleges that contrary to the allegation of petitioner Tiu,
it settled all the claims of those injured in accordance with the insurance contract. It
further avers that it did not deny respondent Arriesgado’s claim, and emphasizes that
its liability should be within the scheduled limits of indemnity under the said contract.
The respondent concludes that while it is true that insurance contracts are contracts
of indemnity, the measure of the insurer’s liability is determined by the insured’s
compliance with the terms thereof.
The Court’s Ruling
The petitioners in this case assail the finding of both the trial and the appellate courts
that petitioner Laspiñas was driving at a very fast speed before the bus owned by
fact, not reviewable by the Court
Petitioner Laspiñas
Was negligent in driving
The Ill-fated bus
In his testimony before the trial court, petitioner Laspiñas claimed that he was
traversing the two-lane road at Compostela, Cebu at a speed of only forty (40) to fifty
(50) kilometers per hour before the incident occurred.23 He also admitted that he saw
the truck which was parked in an "oblique position" at about 25 meters before
impact,24 and tried to avoid hitting it by swerving to the left. However, even in the
absence of expert evidence, the damage sustained by the truck25 itself supports the
finding of both the trial court and the appellate court, that the D’ Rough Rider bus
driven by petitioner Laspiñas was traveling at a fast pace. Since he saw the stalled
truck at a distance of 25 meters, petitioner Laspiñas had more than enough time to
swerve to his left to avoid hitting it; that is, if the speed of the bus was only 40 to 50
kilometers per hour as he claimed. As found by the Court of Appeals, it is easier to
believe that petitioner Laspiñas was driving at a very fast speed, since at 4:45 a.m.,
the hour of the accident, there were no oncoming vehicles at the opposite direction.
Petitioner Laspiñas could have swerved to the left lane with proper clearance, and,
thus, could have avoided the truck.26 Instinct, at the very least, would have prompted
him to apply the breaks to avert the impending disaster which he must have foreseen
when he caught sight of the stalled truck. As we had occasion to reiterate:
A man must use common sense, and exercise due reflection in all his acts; it is his
duty to be cautious, careful and prudent, if not from instinct, then through fear of
recurring punishment. He is responsible for such results as anyone might foresee and
for acts which no one would have performed except through culpable abandon.
Otherwise, his own person, rights and property, and those of his fellow beings, would
ever be exposed to all manner of danger and injury.27
We agree with the following findings of the trial court, which were affirmed by the CA
on appeal:
… conclusively rebut such presumption. The negligence of petitioner Laspiñas as driver
Indeed, petitioner Laspiñas’ negligence in driving the bus is apparent in the records.
By his own admission, he had just passed a bridge and was traversing the highway of
Compostela, Cebu at a speed of 40 to 50 kilometers per hour before the collision
occurred. The maximum speed allowed by law on a bridge is only 30 kilometers per
hour.29 And, as correctly pointed out by the trial court, petitioner Laspiñas also
violated Section 35 of the Land Transportation and Traffic Code, Republic Act No.
4136, as amended:1avvphil.net
Sec. 35. Restriction as to speed. – (a) Any person driving a motor vehicle on a
highway shall drive the same at a careful and prudent speed, not greater nor less
than is reasonable and proper, having due regard for the traffic, the width of the
highway, and or any other condition then and there existing; and no person shall drive
any motor vehicle upon a highway at such speed as to endanger the life, limb and
property of any person, nor at a speed greater than will permit him to bring the vehicle
to a stop within the assured clear distance ahead.30
Petitioner Tiu failed to
Overcome the presumption
Of negligence against him as
One engaged in the business
Of common carriage
TRANSPORTATION LAW – Chapter 2 & 3
The rules which common carriers should observe as to the safety of their passengers
are set forth in the Civil Code, Articles 1733,32 175533 and 1756.34 In this case,
respondent Arriesgado and his deceased wife contracted with petitioner Tiu, as owner
and operator of D’ Rough Riders bus service, for transportation from Maya,
Daanbantayan, Cebu, to Cebu City for the price of ₱18.00.35 It is undisputed that the
respondent and his wife were not safely transported to the destination agreed upon.
In actions for breach of contract, only the existence of such contract, and the fact that
the obligor, in this case the common carrier, failed to transport his passenger safely to
his destination are the matters that need to be proved.36 This is because under the
said contract of carriage, the petitioners assumed the express obligation to transport
the respondent and his wife to their destination safely and to observe extraordinary
diligence with due regard for all circumstances.37 Any injury suffered by the
passengers in the course thereof is immediately attributable to the negligence of the
carrier.38 Upon the happening of the accident, the presumption of negligence at once
arises, and it becomes the duty of a common carrier to prove that he observed
extraordinary diligence in the care of his passengers.39 It must be stressed that in
requiring the highest possible degree of diligence from common carriers and in
creating a presumption of negligence against them, the law compels them to curb the
recklessness of their drivers.40
While evidence may be submitted to overcome such presumption of negligence, it
must be shown that the carrier observed the required extraordinary diligence, which
means that the carrier must show the utmost diligence of very cautious persons as far
as human care and foresight can provide, or that the accident was caused by
fortuitous event.41 As correctly found by the trial court, petitioner Tiu failed to
of the passenger bus is, thus, binding against petitioner Tiu, as the owner of the
passenger bus engaged as a common carrier.42
The Doctrine of
Last Clear Chance
Is Inapplicable in the
Case at Bar
Contrary to the petitioner’s contention, the principle of last clear chance is
inapplicable in the instant case, as it only applies in a suit between the owners and
drivers of two colliding vehicles. It does not arise where a passenger demands
responsibility from the carrier to enforce its contractual obligations, for it would be
inequitable to exempt the negligent driver and its owner on the ground that the other
driver was likewise guilty of negligence.43 The common law notion of last clear chance
permitted courts to grant recovery to a plaintiff who has also been negligent provided
that the defendant had the last clear chance to avoid the casualty and failed to do so.
Accordingly, it is difficult to see what role, if any, the common law of last clear chance
doctrine has to play in a jurisdiction where the common law concept of contributory
negligence as an absolute bar to recovery by the plaintiff, has itself been rejected, as
it has been in Article 2179 of the Civil Code.44
Thus, petitioner Tiu cannot escape liability for the death of respondent Arriesgado’s
wife due to the negligence of petitioner Laspiñas, his employee, on this score.
Respondents Pedrano and
Condor were likewise
Negligent
In Phoenix Construction, Inc. v. Intermediate Appellate Court,45 where therein
respondent Dionisio sustained injuries when his vehicle rammed against a dump truck
parked askew, the Court ruled that the improper parking of a dump truck without any
warning lights or reflector devices created an unreasonable risk for anyone driving
within the vicinity, and for having created such risk, the truck driver must be held
responsible. In ruling against the petitioner therein, the Court elucidated, thus:
… more than one person, the limits of liability shall not exceed the aggregate amount so
In this case, both the trial and the appellate courts failed to consider that respondent
Pedrano was also negligent in leaving the truck parked askew without any warning
lights or reflector devices to alert oncoming vehicles, and that such failure created the
presumption of negligence on the part of his employer, respondent Condor, in
supervising his employees properly and adequately. As we ruled in Poblete v.
Fabros:47
… insurer, the direct liability of the insurer under indemnity contracts against third party
The petitioners were correct in invoking respondent Pedrano’s failure to observe
Article IV, Section 34(g) of the Rep. Act No. 4136, which provides:
(g) Lights when parked or disabled. – Appropriate parking lights or flares visible one
hundred meters away shall be displayed at a corner of the vehicle whenever such
vehicle is parked on highways or in places that are not well-lighted or is placed in
such manner as to endanger passing traffic.
The manner in which the truck was parked clearly endangered oncoming traffic on
both sides, considering that the tire blowout which stalled the truck in the first place
occurred in the wee hours of the morning. The Court can only now surmise that the
unfortunate incident could have been averted had respondent Condor, the owner of
the truck, equipped the said vehicle with lights, flares, or, at the very least, an early
warning device.49 Hence, we cannot subscribe to respondents Condor and Pedrano’s
claim that they should be absolved from liability because, as found by the trial and
appellate courts, the proximate cause of the collision was the fast speed at which
petitioner Laspiñas drove the bus. To accept this proposition would be to come too
close to wiping out the fundamental principle of law that a man must respond for the
foreseeable consequences of his own negligent act or omission. Indeed, our law on
quasi-delicts seeks to reduce the risks and burdens of living in society and to allocate
them among its members. To accept this proposition would be to weaken the very
bonds of society.50
The Liability of
Respondent PPSII
as Insurer
TRANSPORTATION LAW – Chapter 2 & 3
The trial court in this case did not rule on the liability of respondent PPSII, while the
appellate court ruled that, as no evidence was presented against it, the insurance
company is not liable.
...
Petitioner Tiu is insisting that PPSII is liable to him for contribution, indemnification
and/or reimbursement. This has no basis under the contract. Under the contract,
PPSII will pay all sums necessary to discharge liability of the insured subject to the
limits of liability but not to exceed the limits of liability as so stated in the contract.
Also, it is stated in the contract that in the event of accident involving indemnity to
specified by law to all persons to be indemnified.57
…
However, although the victim may proceed directly against the insurer for indemnity,
the third party liability is only up to the extent of the insurance policy and those
required by law. While it is true that where the insurance contract provides for
indemnity against liability to third persons, and such persons can directly sue the
liability does not mean that the insurer can be held liable in solidum with the insured
and/or the other parties found at fault. For the liability of the insurer is based on
contract; that of the insured carrier or vehicle owner is based on tort. …
Obviously, the insurer could be held liable only up to the extent of what was provided
for by the contract of insurance, in accordance with the CMVLI law. At the time of the
incident, the schedule of indemnities for death and bodily injuries, professional fees
and other charges payable under a CMVLI coverage was provided for under the
Insurance Memorandum Circular (IMC) No. 5-78 which was approved on November
10, 1978. As therein provided, the maximum indemnity for death was twelve thousand
(₱12,000.00) pesos per victim. The schedules for medical expenses were also
provided by said IMC, specifically in paragraphs (C) to (G).63
Damages to be
Awarded
The trial court correctly awarded moral damages in the amount of ₱50,000 in favor of
respondent Arriesgado. The award of exemplary damages by way of example or
correction of the public good,64 is likewise in order. As the Court ratiocinated in
Kapalaran Bus Line v. Coronado:65
…While the immediate beneficiaries of the standard of extraordinary diligence are, of
course, the passengers and owners of cargo carried by a common carrier, they are
not the only persons that the law seeks to benefit. For if common carriers carefully
observed the statutory standard of extraordinary diligence in respect of their own
passengers, they cannot help but simultaneously benefit pedestrians and the
passengers of other vehicles who are equally entitled to the safe and convenient use
of our roads and highways. The law seeks to stop and prevent the slaughter and
maiming of people (whether passengers or not) on our highways and buses, the very
size and power of which seem to inflame the minds of their drivers. Article 2231 of the
Civil Code explicitly authorizes the imposition of exemplary damages in cases of
quasi-delicts "if the defendant acted with gross negligence."…66
The respondent Pedro A. Arriesgado, as the surviving spouse and heir of Felisa
Arriesgado, is entitled to indemnity in the amount of ₱50,000.00.67
The petitioners, as well as the respondents Benjamin Condor and Sergio Pedrano are
jointly and severally liable for said amount, conformably with the following
pronouncement of the Court in Fabre, Jr. vs. Court of Appeals:68
The same rule of liability was applied in situations where the negligence of the driver
of the bus on which plaintiff was riding concurred with the negligence of a third party
who was the driver of another vehicle, thus causing an accident. In Anuran v. Buño,
Batangas Laguna Tayabas Bus Co. v. Intermediate Appellate Court, and Metro
Manila Transit Corporation v. Court of Appeals, the bus company, its driver, the
operator of the other vehicle and the driver of the vehicle were jointly and severally
held liable to the injured passenger or the latter’s heirs. The basis of this allocation of
liability was explained in Viluan v. Court of Appeals, thus:
"Nor should it make difference that the liability of petitioner [bus owner] springs from
contract while that of respondents [owner and driver of other vehicle] arises from
quasi-delict. As early as 1913, we already ruled in Gutierrez vs. Gutierrez, 56 Phil.
177, that in case of injury to a passenger due to the negligence of the driver of the
bus on which he was riding and of the driver of another vehicle, the drivers as well as
the owners of the two vehicles are jointly and severally liable for damages. Some
members of the Court, though, are of the view that under the circumstances they are
liable on quasi-delict."69
IN LIGHT OF ALL THE FOREGOING, the petition is PARTIALLY GRANTED. The
Decision of the Court of Appeals is AFFIRMED with MODIFICATIONS:
(1) Respondent Philippine Phoenix Surety and Insurance, Inc. and petitioner William
Tiu are ORDERED to pay, jointly and severally, respondent Pedro A. Arriesgado the
total amount of ₱13,113.80;
(2) The petitioners and the respondents Benjamin Condor and Sergio Pedrano are
ORDERED to pay, jointly and severally, respondent Pedro A. Arriesgado ₱50,000.00
as indemnity; ₱26,441.50 as actual damages; ₱50,000.00 as moral damages;
₱50,000.00 as exemplary damages; and ₱20,000.00 as attorney’s fees.
TRANSPORTATION LAW – Chapter 2 & 3
22.) CALTEX (PHILIPPINES), INC., petitioner, vs. SULPICIO LINES, INC., GO
SIOC SO, ENRIQUE S. GO, EUSEBIO S. GO, CARLOS S. GO, VICTORIANO S.
GO, DOMINADOR S. GO, RICARDO S. GO, EDWARD S. GO, ARTURO S. GO,
EDGAR S. GO, EDMUND S. GO, FRANCISCO SORIANO, VECTOR SHIPPING
CORPORATION, TERESITA G. CAÑEZAL, AND SOTERA E.
CAÑEZAL, respondents.
When MT Vector left the port of Limay, Bataan, on December 19, 1987 carrying
petroleum products of Caltex (Philippines), Inc. (hereinafter Caltex) no one could
have guessed that it would collide with MV Doña Paz, killing almost all the
passengers and crew members of both ships, and thus resulting in one of the
country's worst maritime disasters.
On December 19, 1987, motor tanker MT Vector left Limay, Bataan, at about 8:00
p.m., enroute to Masbate, loaded with 8,800 barrels of petroleum products shipped by
petitioner Caltex. 2 MT Vector is a tramping motor tanker owned and operated by
Vector Shipping Corporation, engaged in the business of transporting fuel products
such as gasoline, kerosene, diesel and crude oil. During that particular voyage, the
MT Vector carried on board gasoline and other oil products owned by Caltex by virtue
of a charter contract between them. 3
On December 20, 1987, at about 6:30 a.m., the passenger ship MV Doña Paz left the
port of Tacloban headed for Manila with a complement of 59 crew members including
the master and his officers, and passengers totaling 1,493 as indicated in the Coast
Guard Clearance. 4 The MV 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.
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 claimed
that they were sleeping at the time of the incident.1âwphi1.nêt
The MV Doña Paz carried an estimated 4,000 passengers; many indeed, were not in
the passenger manifest. Only 24 survived the tragedy after having been rescued from
the burning waters by vessels that responded to distress calls. 5 Among those who
perished were public school teacher Sebastian Cañezal (47 years old) and his
daughter Corazon Cañezal (11 years old), both unmanifested passengers but proved
to be on board the vessel.
On March 22, 1988, the board of marine inquiry in BMI Case No. 659-87 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. 6
On February 13, 1989, Teresita Cañezal and Sotera E. Cañezal, Sebastian Cañezal's
wife and mother respectively, filed with the Regional Trial Court, Branch 8, Manila, a
complaint for "Damages Arising from Breach of Contract of Carriage" against Sulpicio
Lines, Inc. (hereafter Sulpicio). Sulpicio, in turn, filed a third party complaint against
Francisco Soriano, Vector Shipping Corporation and Caltex (Philippines), Inc. Sulpicio
alleged that Caltex chartered MT Vector with gross and evident bad faith knowing
fully well that MT Vector was improperly manned, ill-equipped, unseaworthy and a
hazard to safe navigation; as a result, it rammed against MV Doña Paz in the open
sea setting MT Vector's highly flammable cargo ablaze.
On September 15, 1992, the trial court rendered decision dismissing, the third party
complaint against petitioner. The dispositive portion reads:
WHEREFORE, judgment is hereby rendered in favor of plaintiffs and against
defendant-3rd party plaintiff Sulpicio Lines, Inc., to wit:
… private carrier. The parties entered into a voyage charter, which retains the character
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:
… the charter of the whole portion of a vessel of one or more persons, provided the
Third party defendants Vector Shipping Co. and Caltex (Phils.), Inc. are held equally
liable under the third party complaint to reimburse/indemnify defendant Sulpicio Lines,
Inc. of the above-mentioned damages, attorney's fees and costs which the latter is
adjudged to pay plaintiffs, the same to be shared half by Vector Shipping Co. (being
the vessel at fault for the collision) and the other half by Caltex (Phils.), Inc. (being the
charterer that negligently caused the shipping of combustible cargo aboard an
unseaworthy vessel).
… Although a charter party may transform a common carrier into a private one, the
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
…
TRANSPORTATION LAW – Chapter 2 & 3
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
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
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 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
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;
x x x           x x x          x x x
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?
TRANSPORTATION LAW – Chapter 2 & 3
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 Clearly, as a mere voyage charterer, Caltex had the right to presume that the ship
diligence which is required by the nature of the obligation and corresponds with the was seaworthy as even the Philippine Coast Guard itself was convinced of its
circumstances of the persons, of the time and of the place. When negligence shows seaworthiness. All things considered, we find no legal basis to hold petitioner liable
bad faith, the provisions of Article 1171 and 2201 paragraph 2, shall apply. for damages.

If the law does not state the diligence which is to be observed in the performance,
that which is expected of a good father of a family shall be required.
In Southeastern College, Inc. vs. Court of Appeals, 21 we said that negligence, as
commonly understood, is conduct which naturally or reasonably creates undue risk or
harm to others. It may be the failure to observe that degree of care, precaution, and
vigilance, which the circumstances justly demand, or the omission to do something
which ordinarily regulate the conduct of human affairs, would do.
The charterer of a vessel has no obligation before transporting its cargo to ensure
that the vessel it chartered complied with all legal requirements. The duty rests upon
the common carrier simply for being engaged in "public service." 22 The Civil Code
demands diligence which is required by the nature of the obligation and that which
corresponds with the circumstances of the persons, the time and the place. Hence,
considering the nature of the obligation between Caltex and MT Vector, liability as
found by the Court of Appeals is without basis.
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.

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.

…vessel owner testified and assured them that they will submit Certificate of
Inspection…

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.

TRANSPORTATION LAW – Chapter 2 & 3

23.) G.R. No. 127897      November 15, 2001
DELSAN TRANSPORT LINES, INC., petitioner, vs. THE HON. COURT OF
APPEALS and AMERICAN HOME ASSURANCE CORPORATION, respondents.
Before us is a petition for review on certiorari of the Decision1 of the Court of Appeals
in CA-G.R. CV No. 39836 promulgated on June 17, 1996, reversing the decision of
the Regional Trial Court of Makati City, Branch 137, ordering petitioner to pay private
respondent the sum of Five Million Ninety-Six Thousand Six Hundred Thirty-Five
Pesos and Fifty-Seven Centavos (P5,096,635.57) and costs and the
Resolution2 dated January 21, 1997 which denied the subsequent motion for
reconsideration.
The facts show that Caltex Philippines (Caltex for brevity) entered into a contract of
affreightment with the petitioner, Delsan Transport Lines, Inc., for a period of one year
whereby the said common carrier agreed to transport 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.
On August 14, 1986, MT Maysum set sail from Batangas for Zamboanga City.
Unfortunately, the vessel sank in the early morning of August 16, 1986 near Panay
Gulf in the Visayas taking with it the entire cargo of fuel oil.
Subsequently, private respondent paid Caltex the sum of Five Million Ninety-Six
Thousand Six Hundred Thirty-Five Pesos and Fifty-Seven Centavos (P5,096,635.67)
representing the insured value of the lost cargo. Exercising its right of subrogation
under Article 2207 of the New Civil Code, the private respondent demanded of the
petitioner the same amount it paid to Caltex.
Due to its failure to collect from the petitioner despite prior demand, private
respondent filed a complaint with the Regional Trial Court of Makati City, Branch 137,
for collection of a sum of money. After the trial and upon analyzing the evidence
adduced, the trial court rendered a decision on November 29, 1990 dismissing the
complaint against herein petitioner without pronouncement as to cost. The trial court
found that the vessel, MT Maysum, was seaworthy to undertake the voyage as
determined by the Philippine Coast Guard per Survey Certificate Report No. M5-016-
MH upon inspection during its annual dry-docking and that the incident was caused
by unexpected inclement weather condition or force majeure, thus exempting the
common carrier (herein petitioner) from liability for the loss of its cargo.3
The decision of the trial court, however, was reversed, on appeal, by the Court of
Appeals. The appellate court gave credence to the weather report issued by the
Philippine Atmospheric, Geophysical and Astronomical Services Administration
(PAGASA for brevity) which showed that from 2:00 o’clock to 8:oo o’clock in the
morning on August 16, 1986, the wind speed remained at 10 to 20 knots per hour
TRANSPORTATION LAW – Chapter 2 & 3
while the waves measured from .7 to two (2) meters in height only in the vicinity of the
Panay Gulf where the subject vessel sank, in contrast to herein petitioner’s allegation
that the waves were twenty (20) feet high. In the absence of any explanation as to
what may have caused the sinking of the vessel coupled with the finding that the
same was improperly manned, the appellate court ruled that the petitioner is liable on
its obligation as common carrier4 to herein private respondent insurance company as
subrogee of Caltex. The subsequent motion for reconsideration of herein petitioner
was denied by the appellate court.
Petitioner Delsan Transport Lines, Inc. invokes the provision of Section 113 of the
Insurance Code of the Philippines, which states that in every marine insurance upon
a ship or freight, or freightage, or upon any thin which is the subject of marine
insurance there is an implied warranty by the shipper that the ship is seaworthy.
Consequently, the insurer will not be liable to the assured for any loss under the
policy in case the vessel would later on be found as not seaworthy at the inception of
the insurance. It theorized that when private respondent paid Caltex the value of its
lost cargo, the act of the private respondent is equivalent to a tacit recognition that the
ill-fated vessel was seaworthy; otherwise, private respondent was not legally liable to
Caltex due to the latter’s breach of implied warranty under the marine insurance
policy that the vessel was seaworthy.
The petitioner also alleges that the Court of Appeals erred in ruling that MT Maysun
was not seaworthy on the ground that the marine officer who served as the chief mate
of the vessel, Francisco Berina, was allegedly not qualified. Under Section 116 of the
Insurance Code of the Philippines, the implied warranty of seaworthiness of the
vessel, which the private respondent admitted as having been fulfilled by its payment
of the insurance proceeds to Caltex of its lost cargo, extends to the vessel’s
complement. Besides, petitioner avers that although Berina had merely a 2nd officer’s
license, he was qualified to act as the vessel’s chief officer under Chapter IV(403),
Category III(a)(3)(ii)(aa) of the Philippine Merchant Marine Rules and Regulations. In
fact, all the crew and officers of MT Maysun were exonerated in the administrative
investigation conducted by the Board of Marine Inquiry after the subject accident.6
Hence, the legal issues posed before the Court are:
I
Whether or not the payment made by the private respondent to Caltex for the insured
value of the lost cargo amounted to an admission that the vessel was seaworthy, thus
precluding any action for recovery against the petitioner.
II
Whether or not the non-presentation of the marine insurance policy bars the
complaint for recovery of sum of money for lack of cause of action.
We rule in the negative on both issues.
The payment made by the private respondent for the insured value of the lost cargo
operates as waiver of its (private respondent) right to enforce the term of the implied
warranty against Caltex under the marine insurance policy. However, the same
cannot be validly interpreted as an automatic admission of the 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.8 Article 2207 of the New civil Code provides
that:
…
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.11 In the event of loss, destruction or deterioration of the insured goods,
common carriers shall be responsible unless the same is brought about, among
others, by flood, storm, earthquake, lightning or other natural disaster or calamity.12 In
all other cases, if the goods are lost, destroyed or deteriorated, common carriers are
presumed to have been at fault or to have acted negligently, unless they prove that
they observed extraordinary diligence.13
In order to escape liability for the loss of its cargo of industrial fuel oil belonging to
Caltex, petitioner attributes the sinking of MT Maysun to fortuitous even or force
majeure. From the testimonies of Jaime Jarabe and Francisco Berina, captain and
chief mate, respectively of the ill-fated vessel, it appears that a sudden and
unexpected change of weather condition occurred in the early morning of August 16,
1986; that at around 3:15 o’clock in the morning a squall ("unos") carrying strong
winds with an approximate velocity of 30 knots per hour and big waves averaging
eighteen (18) to twenty (20) feet high, repeatedly buffeted MT Maysun causing it to
tilt, take in water and eventually sink with its cargo.14 This tale of strong winds and big
waves by the said officers of the petitioner however, was effectively rebutted and
belied by the weather report15 from the Philippine Atmospheric, Geophysical and
Astronomical Services Administration (PAGASA), the independent government
agency charged with monitoring weather and sea conditions, showing that from 2:00
o’clock to 8:00 o’clock in the morning on August 16, 1986, the wind speed remained
at ten (10) to twenty (20) knots per hour while the height of the waves ranged from .7
to two (2) meters in the vicinity of Cuyo East Pass and Panay Gulf where the subject
vessel sank. Thus, as the appellate court correctly ruled, 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.
Neither may petitioner escape liability by presenting in evidence certificates16 that
tend to show that at the time of dry-docking and inspection by the Philippine Coast
Guard, the vessel MT Maysun, was fit for voyage. These pieces of evidence do not
TRANSPORTATION LAW – Chapter 2 & 3
necessarily take into account the actual condition of the vessel at the time of the
commencement of the voyage. As correctly observed by the Court of appeals:
At the time of dry-docking and inspection, the ship may have appeared fit. The
certificates issued, however, do not negate the presumption of unseaworthiness
triggered by an unexplained sinking. Of certificates issued in this regard, authorities
are likewise clear as to their probative value, (thus):
Seaworthiness relates to a vessel’s actual condition. Neither the granting of
classification or the issuance of certificates established seaworthiness. (2-A Benedict
on Admiralty, 7-3, Sec. 62).
And also:
Authorities are clear that diligence in securing certificates of seaworthiness does not
satisfy the vessel owner’s obligation. Also securing the approval of the shipper of the
cargo, or his surveyor, of the condition of the vessel or her stowage does not
establish due diligence if the vessel was in fact unseaworthy, for the cargo owner has
no obligation in relation to seaworthiness. (Ibid.)17
Additionally, the exoneration of MT Maysun’s officers and crew by the Board of
Marine Inquiry merely concerns their respective administrative liabilities. It does not in
any way operate to absolve the petitioner common carrier from its civil liabilities. It
does not in any way operate to absolve the petitioner common carrier from its civil
liability arising from its failure to observe extraordinary diligence in the vigilance over
the goods it was transporting and for the negligent acts or omissions of its employees,
the determination of which properly belongs to the courts.18 In the case at bar,
petitioner is liable for the insured value of the lost cargo of industrial fuel oil belonging
to Caltex for its failure to rebut the presumption of fault or negligence as common
carrier19 occasioned by the unexplained sinking of its vessel, MT Maysun, while in
transit.
Anent the second issue, it is our view and so hold that the presentation in evidence of
the marine insurance policy is not indispensable in this case before the insurer may
recover from the common carrier the insured value of the lost cargo in the exercise of
its subrogatory right. The subrogation receipt, by itself, is sufficient to establish not
only the relationship of herein private respondent as insurer and Caltex, as the
assured shipper of the lost cargo of industrial fuel oil, but also the amount paid to
settle the insurance claim. The right of subrogation accrues simply upon payment by
the insurance company of the insurance claim.20
The presentation of the insurance policy was necessary in the case of Home
Insurance Corporation v. CA21 (a case cited by petitioner) because the shipment
therein (hydraulic engines) passed through several stages with different parties
involved in each stage. First, from the shipper to the port of departure; second, from
the port of departure to the M/S Oriental Statesman; third, from the M/S Oriental
Statesman to the M/S Pacific Conveyor; fourth, from the M/S Pacific Conveyor to the
port or arrival; fifth, from the port of arrival to the arrastre operator; sixth, from the
arrastre operator to the hauler, Mabuhay Brokerage Co., Inc. (private respondent
therein); and lastly, from the hauler to the consignee. We emphasized in that case
that in the absence of proof of stipulations to the contrary, the hauler can be liable
only for any damage that occurred from the time it received the cargo until it finally
delivered it to the consignee. Ordinarily, it cannot be held responsible for the handling
of the cargo before it actually received it. The insurance contract, which was not
presented in evidence in that case would have indicated the scope of the insurer’s
liability, if any, since no evidence was adduced indicating at what stage in the
handling process the damage to the cargo was sustained.

Hence, our ruling on the presentation of the insurance policy in the said case of Home
Insurance Corporation is not applicable to the case at bar. In contrast, there is no
doubt that the cargo of industrial fuel oil belonging to Caltex, in the case at bar, was
lost while on board petitioner’s vessel, MT Maysun, which sank while in transit in the
vicinity of Panay Gulf and Cuyo East Pass in the early morning of August 16, 1986.

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

TRANSPORTATION LAW – Chapter 2 & 3

24.) G.R. No. L-5203             April 18, 1956
STANDARD VACUUM OIL COMPANY, plaintiff-appellant, vs. LUZON
STEVEDORING CO., INC., defendant-appellee.
Plantiff entered into a contract with defendant to transport between the ports of Manila
and Nin Bay, Sangay, Iloilo, 2,916.44 barrels of bulk gasoline belonging to plaintiff.
The gasoline was delivered in accordance with the contract but defendant failed 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 sum of P75,578.50 as damages.
Defendant, in its answer, pleaded that its failure to deliver the gasoline was due to
fortuitous event or caused by circumstances beyond its control and not to its fault or
negligence or that of any of its employees. The court, after receiving the evidence,
rendered decision finding that the disaster that had befallen the tugboat was the result
of an avoidable accident and the loss of the gasoline was due to a fortuitous event
which was beyond the control of defendant and, consequently, dismissed the case
with costs against the plaintiff.
The facts as found by the trial court are: "that pursuant to an agreement had between
the parties, defendant's barge No. L-522 was laden with gasoline belonging to the
plaintiff to be transported from Manila to the Port of Iloilo; that early in the morning of
February 2, 1947, defendant's tugboat "Snapper" picked up the barge outside the
breakwater; that the barge was placed behind the tugboat, it being connected to the
latter by a tow rope ten inches in circumstances; that behind the barge, three other
barges were likewise placed, one laden with some cargo while the other two
containing hardly any cargo at all; that the weather was good when on that day the
tugboat with its tow started on its voyage; that the weather remained good on
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 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
broken idler; that a message was then sent to the defendant's radio station in Manila
informing its official of the engine trouble; that upon the receipt of the message the
defendant called up several shipping companies in Manila to find out if they had any
vessels in the vicinity where the "Snapper' had stalled but sais companies replied in
the negative; that thereupon the defendant redioed its tugboat Tamban' which was
docked at Batangas, ordering it to proceed to the place where the Snapper' was; that
at 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 areas around Elefante Island were
so deep that the anchor did not touch bottom; that in the afternoon of the same day
the weather become worse as the wind increased in intensity and the waves were
likewise increased in size and force; that due to 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 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 that the Tamban arrived at the place after the gasoline had already leaked
out.
TRANSPORTATION LAW – Chapter 2 & 3
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 contract
of carriage in the sense that it chooses its customers and is not opened to the public,
nevertheless, the continuity of its operation in this kind of business have earned for it
the level of a public utility. The contract between the plaintiff and defendant comes
therefore under the provisions of the Code of Commerce. The pertinent law is article
361 which provides:
ART. 361. The merchandise shall be transported at the risk and venture of the
shipper, if the contrary was not expressly stipulated.
Therefore, all damages and impairment suffered by the goods during the
transportation, by reason of accident, force majeure, or by virtue of the nature or
defect of the articles, shall be for the account and risk of the shipper.
The proof of these accidents is incumbent on the carrier.
It therefore appears that whenever merchandise is transported on the sea by virtue of
a contract entered into between the shipper and the carrier, the merchandise is
deemed transported at the risk and venture of the shipper, if the contrary is not
stipulated, and all damages suffered by the merchandise during the transportation by
reason of accident or force majeure shall 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 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 ocean liner or any other ship have
some legal rights, and when goods are delivered on board a ship in good order and
condition, and the shipowner delivers them to the shipper in bad order and condition,
it then devolves upon the shipowner to both allege and prove that the goods were
damaged by reason of some fact which legally exempts him from liability" (Mirasol vs.
Robert Dollar Co., 53 Phil., 129).
The issue to be determined is: Has defendant proven that its failure to deliver the
gasoline to its place of destination is due to accident or force majeure or to a cause
beyond its control? This would require an analysis of the facts and circumstances
surrounding the transportation of said gasoline.
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 Luzon Stevedoring Co. The tugboat was put into operation without first submitting
it to an overhaul in a dry-dock. It also appears that this tugboat had previously made
several trips and each time it had to obtain a special permit from the Bureau of
Customs because it had never been dry-dock and did not have complete equipment
to be able to obtain the permanent permit. The special permits that were issued by
said Bureau specifically state that they were issued "pending submission of plans and
load line certificate, including test and final inspection of equipment." It futher appears
that, when the tugboat was inspected by the Bureau of Customs on October 18,
1946, it found it to be inadequately equipped and so the Bureau required defendant to
provide it with the requisite equipment but it was never able to complete it. The fact
that the tugboat was a surplus property, has not been dry-docked, and was not
provided with the requisite equipment to make it seaworthy, shows that defendant did
not use reasonable diligence in putting the tugboat in such a condition as would make
its use safe for operation. It is true, as defendant contends, that there were then no
dry-dock facilities in the Philippines, but this does not mean that they could not be
obtained elsewhere. It being a surplus property, a dry-dock inspection was a must to
put the tugboat in a sea going condition. It may also be true , as contended, that the
deficiency in the equipment was due to the fact that no such equipment was available
at the time, but this did not justify defendant in putting such tugboat in business even
if unequipped 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 trip relieve defendant from
liability.
Where owner buys old tug, licensed coastwise, and equips it for ocean going, it is
negligence to send tug out without stability test, where history and performance with
respect to crankiness and tenderness are matters of 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).
There are other circumstances which show the lack of precaution and diligence taken
by defendant to make the travel of the tugboat safe. One is the failure to carry on
board the necessary spare parts. When the idler was broken, the engineer of the
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 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 drives. And this was not done.
A tug engaged to tow a barge is liable for damage to the cargo of the barge caused
by faulty equipment of the tug. The Raleigh, D.C. Md. 50 F. Supp. 961. (80 C.J.S.
Footnote.).
Another circumstance refers to the deficiency or incomplete in the man power of the
tug boat. According to law, a tugboat of the tonnage and powers of one like the
"Snapper" is required to have a complement composed of one first mate, one second
mate, one third mate, one chief engineer, one second engineer, and one third
engineer, (section 1203, Revised Administrative Code), but when the trip in question
was undertaken, it was only manned by one master, who was merely licensed as a
bay, river and lake patron, one second mate, who was licensed as a third mate, oner
chief engineer who was licensed as third motor engineer, one assistant engineer, who
was licensed as a bay, river, and lake motor engineer, and one second assistant
engineer, who was unlicensed. The employment of this crew to perform functions
beyond its competence and qualifications is not only risky but against the law and if a
TRANSPORTATION LAW – Chapter 2 & 3
mishap is caused, as in this case, one cannot but surmise that such incompetence
has something to do with the mishap. The fact that the tugboat had undertaken
several trips before with practically the same crew without any untoward
consequence, cannot furnish any justification for continuing in its employ a deficient
or incompetent personnel contrary to law and the regulations of the Bureau of
Customs.
(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 dangers of the
elements which might reasonably be expected or encountered during her voyage
without loss or 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.).
Let us now come to the efforts exerted by defendant in extending help to the tugboat
when it was notified of the breakage of 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
minutes, a massage was sent to defendant by radio informing it of the engine trouble.
The weather was good until 12:00 o'clock noon when the wind started to blow.
According to defendant, since it received the message, it called up different shipping
lines in Manila asking them if they had any vessel in the vicinity where the "Snapper"
stalled but, unfortunately, none was available at the time,and as its tug "Tamban" was
then docked in Batangas, Batangas, which was nearest to the place, it radioed said
tug to go to the aid of the "Snapper". Accordingly, the tug "Tamban" set sail from
Batangas for the rescue only to return to secure a map of the vicinity where the
"Snapper" had stalled, which entailed a delay of two hours. In the meantime, the
captain of the "Snapper" attempted to cast anchor. The water areas off Elefante
Island were deep and the anchor would not 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 against the rocks. The tug developed a
hole in her hull and sank. The barge carrying the gasoline was so badly damaged that
the gasoline leaked out. The tug "Tamban" was finally able to locate the "Snapper"
but it was too late.
The foregoing acts only serve to emphasize that the efforts made by defendant fall
short of that diligence and precaution that are demanded by the situation to save the
tugboat and the barge it was towing from disaster for it appears that more than
twenty-four hours had elapsed before a the tug "Tamban" showed up to extend help.
The delay was caused not so much because of the lack of available ships in the
vicinity where the "Snapper" stalled but because defendant did not have in readiness
any 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 help. Considering these circumstances, and those we have discussed
elsewhere, we are persuaded to conclude that defendant has failed to established
that it is exempt from liability under the law.

Wherefore, the decision appealed from is reversed. Defendant is hereby ordered to

pay to plaintiff the sum of P75,578.50, with legal interest from the date of the filing of
the complaint, with costs.

TRANSPORTATION LAW – Chapter 2 & 3

25.) G.R. No. 114167 July 12, 1995
COASTWISE LIGHTERAGE CORPORATION, petitioner,
vs. COURT OF APPEALS and the PHILIPPINE GENERAL INSURANCE
COMPANY, respondents.
Pag-asa Sales, Inc. entered into a contract to transport molasses from the province of
Negros to Manila with Coastwise Lighterage Corporation (Coastwise for brevity),
using the latter's dumb barges. The barges were towed in tandem by the tugboat MT
Marica, which is likewise owned by Coastwise.
Upon reaching Manila Bay, while approaching Pier 18, one of the barges, "Coastwise
9", struck an unknown sunken object. The forward buoyancy compartment was
damaged, and water gushed in through a hole "two inches wide and twenty-two
inches long"1 As a consequence, the molasses at the cargo tanks were contaminated
and rendered unfit for the use it was intended. This prompted the consignee, Pag-asa
Sales, Inc. to reject the shipment of molasses as a total loss. Thereafter, Pag-asa
Sales, Inc. filed a formal claim with the insurer of its lost cargo, herein private
respondent, Philippine General Insurance Company (PhilGen, for short) and against
the carrier, herein petitioner, Coastwise Lighterage. Coastwise Lighterage denied the
claim and it was PhilGen which paid the consignee, Pag-asa Sales, Inc., the amount
of P700,000.00, representing the value of the damaged cargo of molasses.
In turn, PhilGen then filed an action against Coastwise Lighterage before the
Regional Trial Court of Manila, seeking to recover the amount of P700,000.00 which it
paid to Pag-asa Sales, Inc. for the latter's lost cargo. PhilGen now claims to be
subrogated to all the contractual rights and claims which the consignee may have
against the carrier, which is presumed to have violated the contract of carriage.
The RTC awarded the amount prayed for by PhilGen. On Coastwise Lighterage's
appeal to the Court of Appeals, the award was affirmed.
Hence, this petition.
There are two main issues to be resolved herein. First, whether or not petitioner
Coastwise Lighterage was transformed into a private carrier, by virtue of the contract
of affreightment which it entered into with the consignee, Pag-asa Sales, Inc.
Corollarily, if it were in fact transformed into a private carrier, did it exercise the
ordinary diligence to which a private carrier is in turn bound? Second, whether or not
the insurer was subrogated into the rights of the consignee against the carrier, upon
payment by the insurer of the value of the consignee's goods lost while on board one
of the carrier's vessels.
On the first issue, petitioner contends that the RTC and the Court of Appeals erred in
finding that it was a common carrier. It stresses the fact that it contracted with Pag-
asa Sales, Inc. to transport the shipment of molasses from Negros Oriental to Manila
TRANSPORTATION LAW – Chapter 2 & 3
and refers to this contract as a "charter agreement". It then proceeds to cite the case
of Home Insurance Company vs. American Steamship Agencies, Inc.2 wherein this
Court held: ". . . a common carrier undertaking to carry a special cargo or chartered to
a special person only becomes a private carrier."
Petitioner's reliance on the aforementioned case is misplaced. In its entirety, the
conclusions of the court are as follows:
Accordingly, the charter party contract is one of affreightment over the whole vessel,
rather than a demise. As such, the liability of the shipowner for acts or negligence of
its captain and crew, would remain in the absence of stipulation.3
The distinction between the two kinds of charter parties (i.e. bareboat or demise and
contract of affreightment) is more clearly set out in the case of Puromines, Inc. vs.
Court of Appeals,4 wherein we ruled:
Under the demise or bareboat charter of the vessel, the charterer will generally be
regarded as the owner for the voyage or service stipulated. The charterer mans the
vessel with his own people and becomes the owner  pro hac vice, subject to liability to
others for damages caused by negligence. To create a demise, the owner of a vessel
must completely and exclusively relinquish possession, command and navigation
thereof to the charterer, anything short of such a complete transfer is a contract of
affreightment (time or voyage charter party) or not a charter party at all.
On the other hand a contract of affreightment is one in which the owner of the vessel
leases part or all of its space to haul goods for others. It is a contract for special
service to be rendered by the owner of the vessel and under such contract the
general owner retains the possession, command and navigation of the ship, the
charterer or freighter merely having use of the space in the vessel in return for his
payment of the charter hire. . . . .
. . . . An owner who retains possession of the ship though the hold is the property of
the charterer, remains liable as carrier and must answer for any breach of duty as to
the care, loading and unloading of the cargo. . . .
Although a charter party may transform a common carrier into a private one, the
same however is not true in a contract of affreightment on account of the
aforementioned distinctions between the two.
Petitioner admits that the contract it entered into with the consignee was one of
affreightment.5 We agree. Pag-asa Sales, Inc. only leased three of petitioner's
vessels, in order to carry cargo from one point to another, but the possession,
command and navigation of the vessels remained with petitioner Coastwise
Lighterage.
Pursuant therefore to the ruling in the aforecited Puromines case, Coastwise
Lighterage, by the contract of affreightment, was not converted into a private carrier,
but remained a common carrier and was still liable as such.
The law and jurisprudence on common carriers both hold that the mere proof of
delivery of goods in good order to a carrier and the subsequent arrival of the same
goods at the place of destination in bad order makes for a prima facie case against
the carrier.
It follows then that the presumption of negligence that attaches to common carriers,
once the goods it transports are lost, destroyed or deteriorated, applies to the
petitioner. This presumption, which is overcome only by proof of the exercise of
extraordinary diligence, remained unrebutted in this case.
The records show that the damage to the barge which carried the cargo of molasses
was caused by its hitting an unknown sunken object as it was heading for Pier 18.
The object turned out to be a submerged derelict vessel. Petitioner contends that this
navigational hazard was the efficient cause of the accident. Further it asserts that the
fact that the Philippine Coastguard "has not exerted any effort to prepare a chart to
indicate the location of sunken derelicts within Manila North Harbor to avoid
navigational accidents"6 effectively contributed to the happening of this mishap. Thus,
being unaware of the hidden danger that lies in its path, it became impossible for the
petitioner to avoid the same. Nothing could have prevented the event, making it
beyond the pale of even the exercise of extraordinary diligence.
However, petitioner's assertion is belied by the evidence on record where it appeared
that far from having rendered service with the greatest skill and utmost foresight, and
being free from fault, the carrier was culpably remiss in the observance of its duties.
Jesus R. Constantino, the patron of the vessel "Coastwise 9" admitted that he was
not licensed. The Code of Commerce, which subsidiarily governs common carriers
(which are primarily governed by the provisions of the Civil Code) provides:
Art. 609. — Captains, masters, or patrons of vessels must be Filipinos, have legal
capacity to contract in accordance with this code, and prove the skill capacity and
qualifications necessary to command and direct the vessel, as established by marine
and navigation laws, ordinances or regulations, and must not be disqualified
according to the same for the discharge of the duties of the position. . . .
Clearly, petitioner Coastwise Lighterage's embarking on a voyage with an unlicensed
patron violates this rule. It cannot safely claim to have exercised extraordinary
diligence, by placing a person whose navigational skills are questionable, at the helm
of the vessel which eventually met the fateful accident. It may also logically, follow
that a person without license to navigate, lacks not just the skill to do so, but also the
utmost familiarity with the usual and safe routes taken by seasoned and legally
authorized ones. Had the patron been licensed, he could be presumed to have both
the skill and the knowledge that would have prevented the vessel's hitting the sunken
derelict ship that lay on their way to Pier 18.
TRANSPORTATION LAW – Chapter 2 & 3
As a common carrier, petitioner is liable for breach of the contract of carriage, having
failed to overcome the presumption of negligence with the loss and destruction of
goods it transported, by proof of its exercise of extraordinary diligence.
On the issue of subrogation, which petitioner contends as inapplicable in this case,
we once more rule against the petitioner. We have already found petitioner liable for
breach of the contract of carriage it entered into with Pag-asa Sales, Inc. However, for
the damage sustained by the loss of the cargo which petitioner-carrier was
transporting, it was not the carrier which paid the value thereof to Pag-asa Sales, Inc.
but the latter's insurer, herein private respondent PhilGen.
Article 2207 of the Civil Code is explicit on this point:
Art. 2207. If the plaintiffs property has been insured, and he has received indemnity
from the insurance company for the injury or loss arising out of the wrong or breach of
contract complained of, the insurance company shall be subrogated to the rights of
the insured against the wrongdoer or the person who violated the contract. . . .
This legal provision containing the equitable principle of subrogation has been applied
in a long line of cases including Compania Maritima v. Insurance Company of North
America;7 Fireman's Fund Insurance Company v. Jamilla & Company, Inc.,8 and Pan
Malayan Insurance Corporation v. Court of Appeals,9 wherein this Court explained:
Article 2207 of the Civil Code is founded on the well-settled principle of subrogation. If
the insured property is destroyed or damaged through the fault or negligence of a
party other than the assured, then the insurer, upon payment to the assured will be
subrogated to the rights of the assured to recover from the wrongdoer to the extent
that the insurer has been obligated to pay. Payment by the insurer to the assured
operated as an equitable assignment to the former of all remedies which the latter
may have against the third party whose negligence or wrongful act caused the loss.
The right of subrogation is not dependent upon, nor does it grow out of, any privity of
contract or upon written assignment of claim. It accrues simply upon payment of the
insurance claim by the insurer.
Undoubtedly, upon payment by respondent insurer PhilGen of the amount of
P700,000.00 to Pag-asa Sales, Inc., the consignee of the cargo of molasses totally
damaged while being transported by petitioner Coastwise Lighterage, the former was
subrogated into all the rights which Pag-asa Sales, Inc. may have had against the
carrier, herein petitioner Coastwise Lighterage.
WHEREFORE, premises considered, this petition is DENIED and the appealed
decision affirming the order of Branch 35 of the Regional Trial Court of Manila for
petitioner Coastwise Lighterage to pay respondent Philippine General Insurance
Company the "principal amount of P700,000.00 plus interest thereon at the legal rate
computed from March 29, 1989, the date the complaint was filed until fully paid and
another sum of P100,000.00 as attorney's fees and costs"10 is likewise hereby
AFFIRMED
TRANSPORTATION LAW – Chapter 2 & 3
26.) G.R. No. 110398 November 7, 1997
NEGROS NAVIGATION CO., INC., petitioner,
vs. THE COURT OF APPEALS, RAMON MIRANDA, SPS. RICARDO and VIRGINIA
DE LA VICTORIA, respondents.
In April of 1980, private respondent Ramon Miranda purchased from the Negros
Navigation Co., Inc. four special cabin tickets (#74411, 74412, 74413 and 74414) for
his wife, daughter, son and niece who were going to Bacolod City to attend a family
reunion. The tickets were for Voyage No. 457-A of the M/V Don Juan, leaving Manila
at 1:00 p.m. on April 22, 1980.
The ship sailed from the port of Manila on schedule.
At about 10:30 in the evening of April 22, 1980, the Don Juan collided off the Tablas
Strait in Mindoro, with the M/T Tacloban City, an oil tanker owned by the Philippine
National Oil Company (PNOC) and the PNOC Shipping and Transport Corporation
(PNOC/STC). As a result, the M/V Don Juan sank. Several of her passengers
perished in the sea tragedy. The bodies of some of the victims were found and
brought to shore, but the four members of private respondents' families were never
found.
Private respondents filed a complaint on July 16, 1980 in the Regional Trial Court of
Manila, Branch 34, against the Negros Navigation, the Philippine National Oil
Company (PNOC), and the PNOC Shipping and Transport Corporation (PNOC/STC),
seeking damages for the death of Ardita de la Victoria Miranda, 48, Rosario V.
Miranda, 19, Ramon V. Miranda, Jr., 16, and Elfreda de la Victoria, 26.
In its answer, petitioner admitted that private respondents purchased ticket numbers
74411, 74412, 74413 and 74414; that the ticket numbers were listed in the passenger
manifest; and that the Don Juan left Pier 2, North Harbor, Manila on April 22, 1980
and sank that night after being rammed by the oil tanker M/T Tacloban City, and that,
as a result of the collision, some of the passengers of the M/V Don Juan died.
Petitioner, however, denied that the four relatives of private respondents actually
boarded the vessel as shown by the fact that their bodies were never recovered.
Petitioner further averred that the Don Juan was seaworthy and manned by a full and
competent crew, and that the collision was entirely due to the fault of the crew of the
M/T Tacloban City.
On January 20, 1986, the PNOC and petitioner Negros Navigation Co., Inc. entered
into a compromise agreement whereby petitioner assumed full responsibility for the
payment and satisfaction of all claims arising out of or in connection with the collision
and releasing the PNOC and the PNOC/STC from any liability to it. The agreement
was subsequently held by the trial court to be binding upon petitioner, PNOC and
PNOC/STC. Private respondents did not join in the agreement.
TRANSPORTATION LAW – Chapter 2 & 3
After trial, the court rendered judgment on February 21, 1991, the dispositive portion
of which leads as follows:
WHEREFORE, in view of the foregoing, judgment is hereby rendered in favor of the
plaintiffs, ordering all the defendants to pay jointly and severally to the plaintiffs
damages as follows:
…
On appeal, the Court of Appeals1 affirmed the decision of the Regional Trial Court
with modification —
Hence this petition, raising the following issues:
(1) whether the members of private respondents' families were actually passengers of
the Don Juan;
(2) whether the ruling in Mecenas v. Court of Appeals,2 finding the crew members of
petitioner to be grossly negligent in the performance of their duties, is binding in this
case;
(3) whether the total loss of the M/V Don Juan extinguished petitioner's liability; and
(4) whether the damages awarded by the appellate court are excessive,
unreasonable and unwarranted.
First. The trial court held that the fact that the victims were passengers of the
M/V Don Juan was sufficiently proven by private respondent Ramon Miranda, who
testified that he purchased tickets numbered 74411, 74412, 74413, and 74414 at
P131.30 each from the Makati office of petitioner for Voyage No. 47-A of the M/V Don
Juan, which was leaving Manila on April 22, 1980. This was corroborated by the
passenger manifest (Exh. E) on which the numbers of the tickets and the names of
Ardita Miranda and her children and Elfreda de la Victoria appear.
Petitioner contends that the purchase of the tickets does not necessarily mean that
the alleged victims actually took the trip. Petitioner asserts that it is common
knowledge that passengers purchase tickets in advance but do not actually use them.
Hence, private respondent should also prove the presence of the victims on the ship.
The witnesses who affirmed that the victims were on the ship were biased and
unreliable.
This contention is without merit. Private respondent Ramon Miranda testified that he
personally took his family and his niece to the vessel on the day of the voyage and
stayed with them on the ship until it was time for it to leave. There is no reason he
should claim members of his family to have perished in the accident just to maintain
an action. People do not normally lie about so grave a matter as the loss of dear
ones. It would be more difficult for private respondents to keep the existence of their
relatives if indeed they are alive than it is for petitioner to show the contrary.
Petitioner's only proof is that the bodies of the supposed victims were not among
those recovered from the site of the mishap. But so were the bodies of the other
passengers reported missing not recovered, as this Court noted in
the Mecenas3 case.
… passenger vessel of her class. Thirdly, the "Don Juan" was equipped with radar which
Petitioner also points out that it took Ramirez three (3) days before he finally
contacted private respondent Ramon Miranda to tell him about the fate of his family.
But it is not improbable that it took Ramirez three days before calling on private
respondent Miranda to tell him about the last hours of Mrs. Miranda and her children
and niece, in view of the confusion in the days following the collision as rescue teams
and relatives searched for survivors.
Indeed, given the facts of this case, it is improper for petitioner to even suggest that
private respondents' relatives did not board the ill-fated vessel and perish in the
accident simply because their bodies were not recovered.
Second. In finding petitioner guilty of negligence and in failing to exercise the
extraordinary diligence required of it in the carriage of passengers, both the trial court
and the appellate court relied on the findings of this Court in Mecenas v.  Intermediate
Appellate Court,4 which case was brought for the death of other passengers. In that
case it was found that although the proximate cause of the mishap was the
negligence of the crew of the M/T Tacloban City, the crew of the Don Juan was
equally negligent as it found that the latter's master, Capt. Rogelio Santisteban, was
playing mahjong at the time of collision, and the officer on watch, Senior Third Mate
Rogelio De Vera, admitted that he failed to call the attention of Santisteban to the
imminent danger facing them. This Court found that Capt. Santisteban and the crew
of the M/V Don Juan failed to take steps to prevent the collision or at least delay the
sinking of the ship and supervise the abandoning of the ship.
Petitioner Negros Navigation was found equally negligent in tolerating the playing of
mahjong by the ship captain and other crew members while on board the ship and
failing to keep the M/V Don Juan seaworthy so much so that the ship sank within 10
to 15 minutes of its impact with the M/T Tacloban City.
In addition, the Court found that the Don Juan was overloaded. The Certificate of
Inspection, dated August 27, 1979, issued by the Philippine Coast Guard Commander
at Iloilo City stated that the total number of persons allowed on the ship was 864, of
whom 810 are passengers, but there were actually 1,004 on board the vessel when it
sank, 140 persons more than the maximum number that could be safely carried by it.
Taking these circumstances together, and the fact that the M/V Don Juan, as the
faster and better-equipped vessel, could have avoided a collision with the PNOC
tanker, this Court held that even if the Tacloban City had been at fault for failing to
TRANSPORTATION LAW – Chapter 2 & 3
observe an internationally-recognized rule of navigation, the Don Juan was guilty of
contributory negligence. Through Justice Feliciano, this Court held:
The grossness of the negligence of the "Don Juan" is underscored when one
considers the foregoing circumstances in the context of the following facts: Firstly, the
"Don Juan" was more than twice as fast as the "Tacloban City." The "Don Juan's" top
speed was 17 knots; while that of the "Tacloban City" was 6.3. knots. Secondly, the
"Don Juan" carried the full complement of officers and crew members specified for a
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. In the total set of circumstances which
existed in the instant case, the "Don Juan," had it taken seriously its duty of
extraordinary diligence, could have easily avoided the collision with the "Tacloban
City." Indeed, the "Don Juan" might well have avoided the collision even if it had
exercised ordinary diligence merely.
It is true that the "Tacloban City" failed to follow Rule 18 of the International Rules of
the Road which requires two (2) power-driven vessels meeting end on or nearly end
on each to alter her course to starboard (right) so that each vessel may pass on the
port side (left) of the other. The "Tacloban City," when the two (2) vessels were only
three-tenths (0.3) of a mile apart, turned (for the second time) 15° to port side while
the "Don Juan" veered hard to starboard. . . . [But] "route observance" of the
International Rules of the Road will not relieve a vessel from responsibility if the
collision could have been avoided by proper care and skill on her part or even by a
departure from the rules.
In the petition at bar, the "Don Juan" having sighted the "Tacloban City" when it was
still a long way off was negligent in failing to take early preventive action and in
allowing the two (2) vessels to come to such close quarters as to render the collision
inevitable when there was no necessity for passing so near to the "Tacloban City" as
to create that hazard or inevitability, for the "Don Juan" could choose its own
distance. It is noteworthy that the "Tacloban City," upon turning hard to port shortly
before the moment of collision, signalled its intention to do so by giving two (2) short
blasts with its horn. The "Don Juan" gave no answering horn blast to signal its own
intention and proceeded to turn hard to starboard.
We conclude that Capt. Santisteban and Negros Navigation are properly held liable
for gross negligence in connection with the collision of the "Don Juan" and "Tacloban
City" and the sinking of the "Don Juan" leading to the death of hundreds of
passengers. . . .5
Petitioner criticizes the lower court's reliance on the Mecenas case, arguing that,
although this case arose out of the same incident as that involved in Mecenas, the
parties are different and trial was conducted separately. Petitioner contends that the
decision in this case should be based on the allegations and defenses pleaded and
evidence adduced in it or, in short, on the record of this case.
The contention is without merit. What petitioner contends may be true with respect to
the merits of the individual claims against petitioner but not as to the cause of the
sinking of its ship on April 22, 1980 and its liability for such accident, of which there
can only be one truth. Otherwise, one would be subscribing to the sophistry: truth on
one side of the Pyrenees, falsehood on the other!
Adherence to the Mecenas case is dictated by this Court's policy of maintaining
stability in jurisprudence in accordance with the legal maxim "stare decisis et non
quieta movere" (Follow past precedents and do not disturb what has been settled.)
Where, as in this case, the same questions relating to the same event have been put
forward by parties similarly situated as in a previous case litigated and decided by a
competent court, the rule of stare decisis is a bar to any attempt to relitigate the same
issue.6 In Woulfe v. Associated Realties Corporation,7 the Supreme Court of New
Jersey held that where substantially similar cases to the pending case were
presented and applicable principles declared in prior decisions, the court was bound
by the principle of stare decisis. Similarly, in State ex rel. Tollinger v. Gill,8 it was held
that under the doctrine of stare decisis a ruling is final even as to parties who are
strangers to the original proceeding and not bound by the judgment under the res
judicata doctrine. The Philadelphia court expressed itself in this wise: "Stare decisis
simply declares that, for the sake of certainty, a conclusion reached in one case
should be applied to those which follow, if the facts are substantially the same, even
though the parties may be different."9 Thus, in J.M.  Tuason v.  Mariano, supra, this
Court relied on its rulings in other cases involving different parties in sustaining the
validity of a land title on the principle of "stare decisis et non quieta movere."
Indeed, the evidence presented in this case was the same as those presented in
the Mecenas case, to wit:
…
Nor is it true that the trial court merely based its decision on the Mecenas case. The
trial court made its own independent findings on the basis of the testimonies of
witnesses, such as Senior Third Mate Rogelio de Vera, who incidentally gave
substantially the same testimony on petitioner's behalf before the Board of Marine
Inquiry. The trial court agreed with the conclusions of the then Minister of National
Defense finding both vessels to be negligent.
Third. The next issue is whether petitioner is liable to pay damages notwithstanding
the total loss of its ship. The issue is not one of first impression. The rule is well-
entrenched in our jurisprudence that a shipowner may be held liable for injuries to
passengers notwithstanding the exclusively real and hypothecary nature of maritime
law if fault can be attributed to the shipowner. 15
In Mecenas, this Court found petitioner guilty of negligence in (1) allowing or
tolerating the ship captain and crew members in playing mahjong during the voyage,
(2) in failing to maintain the vessel seaworthy and (3) in allowing the ship to carry
more passengers than it was allowed to carry. Petitioner is, therefore, clearly liable for
damages to the full extent.
TRANSPORTATION LAW – Chapter 2 & 3
Fourth. Petitioner contends that, assuming that the Mecenas case applies, private
respondents should be allowed to claim only P43,857.14 each as moral damages
because in the Mecenas case, the amount of P307,500.00 was awarded to the seven
children of the Mecenas couple. Under petitioner's formula, Ramon Miranda should
receive P43,857.14, while the De la Victoria spouses should receive P97,714.28.
Here is where the principle of stare decisis does not apply in view of differences in the
personal circumstances of the victims. For that matter, differentiation would be
justified even if private respondents had joined the private respondents in
the Mecenas case. The doctrine of stare decisis works as a bar only against issues
litigated in a previous case. Where the issue involved was not raised nor presented to
the court and not passed upon by the court in the previous case, the decision in the
previous case is not stare decisis of the question presently presented. 16 The decision
in the Mecenas case relates to damages for which petitioner was liable to the
claimants in that case.
…
WHEREFORE, the decision of the Court of Appeals is AFFIRMED with modification
and petitioner is ORDERED to pay private respondents damages as follows:
To private respondent Ramon Miranda:
P23,075.00 for actual damages;
P109,038.96 as compensatory damages for loss of
earning capacity of his wife;
P150,000.00 as compensatory damages for wrongful
death of three (3) victims;
P300,000.00 as moral damages;
P300,000.00 as exemplary damages, all in the total
amount of P882,113.96; and
P40,000.00 as attorney's fees.
To private respondents Spouses Ricardo and Virginia de la Victoria:
P12,000.00 for actual damages;
P111,456.00 as compensatory damages for loss of
earning capacity;
P50,000.00 as compensatory damages for wrongful
death;

P100,000.00 as moral damages;

P100,000.00 as exemplary damages, all in the total

amount of P373,456.00; and

P15,000.00 as attorney's fees.

Petitioners are further ordered to pay costs of suit.

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

TRANSPORTATION LAW – Chapter 2 & 3

27.) G.R. No. 106999 June 20, 1996
PHILIPPINE HOME ASSURANCE CORPORATION, petitioner,
vs. COURT OF APPEALS and EASTERN SHIPPING LINES, INC., respondents.
Eastern Shipping Lines, Inc. (ESLI) loaded on board SS Eastern Explorer in Kobe,
Japan, the following shipment for carriage to Manila and Cebu, freight pre-paid and in
good order and condition, viz: (a) two (2) boxes internal combustion engine parts,
consigned to William Lines, Inc. under Bill of Lading No. 042283; (b) ten (l0) metric
ton. (334 bags) ammonium chloride, consigned to Orca's Company under Bill of
Lading No. KCE-I2; (c) two hundred (200) bags Glue 300, consigned to Pan Oriental
Match Company under Bill of Lading No. KCE-8; and (d) garments, consigned to Ding
Velayo under Bills of Lading Nos. KMA-73 and KMA-74.
While the vessel was off Okinawa, Japan, a small flame was detected on the
acetylene cylinder located in the accommodation area near the engine room on the
main deck level. As the crew was trying to extinguish the fire, the acetylene cylinder
suddenly exploded sending a flash of flame throughout the accommodation area, thus
causing death and severe injuries to the crew and instantly setting fire to the whole
superstructure of the vessel. The incident forced the master and the crew to abandon
the ship.
Thereafter, SS Eastern Explorer was found to be a constructive total loss and its
voyage was declared abandoned.
Several hours later, a tugboat under the control of Fukuda Salvage Co. arrived near
the vessel and commenced to tow the vessel for the port of Naha, Japan.
Fire fighting operations were again conducted at the said port. After the fire was
extinguished, the cargoes which were saved were loaded to another vessel for
delivery to their original ports of destination. ESLI charged the consignees several
amounts corresponding to additional freight and salvage charges, as follows: (a) for
the goods covered by Bill of Lading No. 042283, ESLI charged the consignee the sum
of P1,927.65, representing salvage charges assessed against the goods; (b) for the
goods covered by Bill of Lading No. KCE-12, ESLI charged the consignee the sum of
P2,980.64 for additional freight and P826.14 for salvage charges against the goods;
(c) for the goods covered by Bill of Lading No. KCE-8, ESLI charged the consignee
the sum of P3,292.26 for additional freight and P4,130.68 for salvage charges against
the goods; and (d) for the goods under Bills of Lading Nos. KMA-73 and KMA-74,
ESLI charged the consignee the sum of P8,337.06 for salvage charges against the
goods.
The charges were all paid by Philippine Home Assurance Corporation (PHAC) under
protest for and in behalf of the consignees.
TRANSPORTATION LAW – Chapter 2 & 3
PHAC, as subrogee of the consignees, thereafter filed a complaint before the
Regional Trial Court of Manila, Branch 39, against ESLI to recover the sum paid
under protest on the ground that the same were actually damages directly brought
about by the fault, negligence, illegal act and/or breach of contract of ESLI.
In its answer, ESLI contended that it exercised the diligence required by law in the
handling, custody and carriage of the shipment; that the fire was caused by an
unforeseen event; that the additional freight charges are due and demandable
pursuant to the Bill of Lading; 1 and that salvage charges are properly collectible
under Act No. 2616, known as the Salvage Law.
The trial court dismissed PHAC's complaint and ruled in favor of ESLI ratiocinating
thus:
Evidence has been presented that the SS "Eastern Explorer" was a seaworthy vessel
(Deposition of Jumpei Maeda, October 23, 1980, p. 3) and before the ship loaded the
Acetylene Cylinder No. NCW 875, the same has been tested, checked and examined
and was certified to have complied with the required safety measures and
standards…
…
The above elements are all present in the instant case. Salvage charges may thus be
assessed on the cargoes saved from the vessel. As provided for in Section 13 of the
Salvage Law, "The expenses of salvage, as well as the reward for salvage or
assistance, shall be a charge on the things salvaged or their value." In Manila
Railroad Co. v. Macondray Co., 37 Phil. 583, it was also held that "when a ship and
its cargo are saved together, the salvage allowance should be charged against the
ship and cargo in the proportion of their respective values, the same as in a case of
general average . . ." Thus, the "compensation to be paid by the owner of the cargo is
in proportion to the value of the vessel and the value of the cargo saved." (Atlantic
Gulf and Pacific Co. v. Uchida Kisen Kaisha, 42 Phil. 321). (Memorandum for
Defendant, Records, pp. 212-213).
…
On appeal to the Court of Appeals, respondent court affirmed the trial court's findings
and conclusions, 3 hence, the present petition for review before this Court on the
following errors:
…
It is quite evident that the foregoing assignment of errors challenges the findings of
fact and the appreciation of evidence made by the trial court and later affirmed by
respondent court. While it is a well-settled rule that only questions of law may be
raised in a petition for review under Rule 45 of the Rules of Court, it is equally well-
settled that the same admits of the following exceptions, namely: (a) when the
conclusion is a finding grounded entirely on speculation, surmises or conjectures; (b)
when the inference made is manifestly mistaken, absurd or impossible; (c) where
there is a grave abuse of discretion; (d) when the judgment is based on a
misapprehension of facts; (e) when the findings of fact are conflicting; (f) when the
Court of Appeals, in making its findings, went beyond the issues of the case and the
same is contrary to the admissions of both appellant and appellee; (g) when the
findings of the Court of Appeals are contrary to those of the trial court; (h) when the
findings of fact are conclusions without citation of specific evidence on which they are
based;
(i) when the facts set forth in the petition as well as in the petitioners' main and reply
briefs are not disputed by the respondents; and (j) when the finding of fact of the
Court of Appeals is premised on the supposed absence of evidence and is
contradicted by the evidence on record. 5 Thus, if there is a showing, as in the instant
case, that the findings complained of are totally devoid of support in the records, or
that they are so glaringly erroneous as to constitute grave abuse of discretion, the
same may be properly reviewed and evaluated by this Court.
It is worthy to note at the outset that the goods subject of the present controversy
were neither lost nor damaged in transit by the fire that razed the carrier. In fact, the
said goods were all delivered to the consignees, even if the transshipment took longer
than necessary. What is at issue therefore is not whether or not the carrier is liable for
the loss, damage, or deterioration of the goods transported by them but who, among
the carrier, consignee or insurer of the goods, is liable for the additional charges or
expenses incurred by the owner of the ship in the salvage operations and in the
transshipment of the goods via a different carrier.
In absolving respondent carrier of any liability, respondent Court of Appeals sustained
the trial court's finding that the fire that gutted the ship was a natural disaster or
calamity. Petitioner takes exception to this conclusion and we agree.
In our jurisprudence, fire may not be considered a natural disaster or calamity since it
almost always arises from some act of man or by human means.
It cannot be an act of God unless caused by lightning or a natural disaster or casualty
not attributable to human agency. 6
In the case at bar, it is not disputed that a small flame was detected on the acetylene
cylinder and that by reason thereof, the same exploded despite efforts to extinguish
the fire. Neither is there any doubt that the acetylene cylinder, obviously fully loaded,
was stored in the accommodation area near the engine room and not in a storage
area considerably far, and in a safe distance, from the engine room. Moreover, there
was no showing, and none was alleged by the parties, that the fire was caused by a
natural disaster or calamity not attributable to human agency. On the contrary, there
is strong evidence indicating that the acetylene cylinder caught fire because of the
fault and negligence of respondent ESLI, its captain and its crew.
TRANSPORTATION LAW – Chapter 2 & 3
First, the acetylene cylinder which was fully loaded should not have been stored in
the accommodation area near the engine room where the heat generated therefrom
could cause the acetylene cylinder to explode by reason of spontaneous combustion.
Respondent ESLI should have easily foreseen that the acetylene cylinder, containing
highly inflammable material was in real danger of exploding because it was stored in
close proximity to the engine room.
Second, respondent ESLI should have known that by storing the acetylene cylinder in
the accommodation area supposed to be reserved for passengers, it unnecessarily
exposed its passengers to grave danger and injury. Curious passengers, ignorant of
the danger the tank might have on humans and property, could have handled the
same or could have lighted and smoked cigarettes while repairing in the
accommodation area.
Third, the fact that the acetylene cylinder was checked, tested and examined and
subsequently certified as having complied with the safety measures and standards by
qualified experts 7 before it was loaded in the vessel only shows to a great extent that
negligence was present in the handling of the acetylene cylinder after it was loaded
and while it was on board the ship. Indeed, had the respondent and its agents not
been negligent in storing the acetylene cylinder near the engine room, then the same
would not have leaked and exploded during the voyage.
Verily, there is no merit in the finding of the trial court to which respondent court
erroneously agreed that the fire was not the fault or negligence of respondent but a
natural disaster or calamity. The records are simply wanting in this regard.
Anent petitioner's objection to the admissibility of Exhibits "4'' and ''5", the Statement
of Facts and the Marine Note of Protest issued by Captain Tiburcio A. Licaylicay, we
find the same impressed with merit because said documents are hearsay evidence.
Capt. Licaylicay, Master of S.S. Eastern Explorer who issued the said documents,
was not presented in court to testify to the truth of the facts he stated therein; instead,
respondent ESLI presented Junpei Maeda, its Branch Manager in Tokyo and
Yokohama, Japan, who evidently had no personal knowledge of the facts stated in
the documents at issue. It is clear from Section 36, Rule 130 of the Rules of Court
that any evidence, whether oral or documentary, is hearsay if its probative value is
not based on the personal knowledge of the witness but on the knowledge of some
other person not on the witness stand. Consequently, hearsay evidence, whether
objected to or not, has no probative value unless the proponent can show that the
evidence falls within the exceptions to the hearsay evidence rule. 8 It is excluded
because the party against whom it is presented is deprived of his right and
opportunity to cross-examine the persons to whom the statements or writings are
attributed.
On the issue of whether or not respondent court committed an error in concluding that
the expenses incurred in saving the cargo are considered general average, we rule in
the affirmative. As a rule, general or gross averages include all 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 9 While the instant case may technically
fall within the purview of the said provision, the formalities prescribed under Articles
813 10 and 814 11 of the Code of Commerce in order to incur the expenses and cause
the damage corresponding to gross average were not complied with. Consequently,
respondent ESLI's claim for contribution from the consignees of the cargo at the time
of the occurrence of the average turns to naught.

Prescinding from the foregoing premises, it indubitably follows that the cargo
consignees cannot be made liable to respondent carrier for additional freight and
salvage charges. Consequently, respondent carrier must refund to herein petitioner
the amount it paid under protest for additional freight and salvage charges in behalf of
the consignees.

WHEREFORE, the judgment appealed from is hereby REVERSED and SET ASIDE.
Respondent Eastern Shipping Lines, Inc. is ORDERED to return to petitioner
Philippine Home Assurance Corporation the amount it paid under protest in behalf of
the consignees herein.

TRANSPORTATION LAW – Chapter 2 & 3

28.) [G.R. No. 13972. July 28, 1919. ]
G. MARTINI, LTD., Plaintiff-Appellee, v. MACONDRAY & CO. (INC.) , Defendant-
Appellant.
In September of the year 1916, the plaintiff G. Martini, Ltd., arranged with the
defendant company, as agents of the Eastern and Australian Steamship Company,
for the shipment of two hundred and nineteen cases or packages of chemical
products from Manila, Philippine Islands, to Kobe, Japan. The goods were embarked
at Manila on the steamship Eastern, and were carried to Kobe on the deck of that
ship. Upon arrival at the port of destination it was found that the chemicals comprised
in the shipment had suffered damage from the effects of both fresh and salt water;
and the present action was instituted by the plaintiff to recover the amount of the
damage thereby occasioned. In the Court of First Instance judgment was rendered in
favor of the plaintiffs for the sum of P34,997.56, with interest from March 24, 1917,
and costs of the proceeding. From this judgment the defendant appealed.
That the damage was caused by water, either falling in the form of rain or splashing
aboard by the action of wind and waves, is unquestionable; and the contention of the
plaintiff is that it was the duty of the ship’s company to stow this cargo in the hold and
not to place it in an exposed position on the open deck. The defense is that by the
contract of affreightment the cargo in question was to be carried on deck at the
shipper’s risk; and attention is directed to the fact that on the face of each bill of lading
is clearly stamped with a rubber stencil in conspicuous letters the words "on deck at
shipper’s risk." In this connection the defendant relies upon paragraph 19 of the
several bills of lading issued for transportation of this cargo, which reads as
follows:jgc:chanrobles.com.ph
"19. Goods signed for on this bill of lading as carried on deck are entirely at shipper’s
risk, whether carried on deck or under hatches, and the steamer is not liable for any
loss or damage from any cause whatever."
The plaintiff insists that the agreement was that the cargo in question should be
carried in the ordinary manner, that is, in the ship’s hold, and that the plaintiff never
gave its consent for the goods to be carried on deck. The material facts bearing on
this controverted point appear to be these: On September 15, 1916, the plaintiff
applied to the defendant for necessary space on the steamship Eastern, and received
a shipping order, which constituted authority for the ship’s officers to receive the
cargo aboard. One part of this document contained a form which, when signed by the
mate, would constitute the "mate’s receipt," showing that the cargo had been taken
on.
Ordinarily the shipper is supposed to produce the mate’s receipt to the agents of the
ship’s company, who thereupon issue the bill of lading to the shipper. When,
however, the shipper, as not infrequently happens, desires to procure the bill of lading
before he obtains the mate’s receipt, it is customary for him to enter into a written
obligation, binding himself, among other things, to abide by the terms of the mate’s
receipt. In the present instance the mate’s receipt did not come to the plaintiff’s hand
until Monday night, but as the plaintiff was desirous of obtaining the bills of lading on
TRANSPORTATION LAW – Chapter 2 & 3
the Saturday morning preceding in order that he might negotiate them at the bank, a
request was made for the delivery of the bills of lading on that day To effectuate this,
the plaintiff was required to enter into the written obligation, calling itself a "letter of
guarantee," which was introduced in evidence as Exhibit D-C. This document is of the
date of September 16, 1916, and of the following tenor:
"In consideration of your signing us clean B/L for the undermentioned cargo per
above steamer to be shipped on or under deck at ship’s option, for Kobe without
production of the mate’s receipt, we hereby guarantee to hold you free from any
responsibility by your doing so, and for any expense should the whole or part of the
cargo be shut out, or otherwise, and to hand you said mate’s receipt as soon as it
reaches us and to abide by all clauses and notations on the same."
In conformity with the purpose of this document the bills of lading were issued, and
the negotiable copies were, upon the same day, negotiated at the bank by the plaintiff
for 90 per cent of the invoice value of the goods. As already stated these bills of
lading contained on their face, conspicuously stenciled, the words "on deck at
shipper’s risks." The mate’s receipt, received by the plaintiff two days later also bore
the notation "on deck at shipper’s risk," written with pencil, and evidently by the officer
who took the cargo on board and signed the receipt.
The plaintiff insists that it had at no time agreed for the cargo to be carried on deck;
and G. Martini, manager of Martini & Company, says that the first intimation he had of
this was when, at about 4 p.m. on that Saturday afternoon, he examined the
nonnegotiable copies of the bills of lading, which had been retained by the house, and
discovered the words "on deck at shipper’s risk" stamped thereon. Martini says that
upon seeing this, he at once called the attention of S. Codina thereto, the latter being
an employee of the house whose duty it was to attend to all shipments of
merchandise and who in fact had entire control of all matters relating to the shipping
of this cargo. Codina pretends that up to the time when Martini directed his attention
to the fact, he himself was unaware that the cargo was being stowed on deck; and
upon the discovery of this fact the two gentlemen mentioned expressed mutual
surprise and dissatisfaction. Martini says that he told Codina to protest at once to
Macondray & Company over the telephone, while Martini himself proceeded to endite
a letter, which appears in evidence as Exhibit D-T of the defendant and is in its
material part as follows:
…
This letter was followed by another of the same date and of substantially the same
tenor but containing the following additional statement:
The first of these letters was forthwith dispatched by messenger, and upon receiving
it, Macondray & Company called Codina by telephone at about 4.30 p.m. and,
referring to the communication just received, told him that Macondray & Company
could not accept the cargo for transportation otherwise than on deck and that if
Martini & Company were dissatisfied, the cargo could be discharged from the ship.
There is substantial conformity in the testimony of the two parties with respect to the
time of the conversation by telephone and the nature of the message which
Macondray & Company intended to convey, though the witnesses differ as to some
details and in respect to what occurred immediately thereafter. Basa, who was in
charge of the shipping department of Macondray & Company and who conducted the
conversation on the part of the latter, says that he told Codina that if Martini &
Company was unwilling for the cargo to be carried on deck that they could discharge
it and further advised him that Macondray & Company’s empty boats were still at the
ship’s side ready to receive the cargo. In reply Codina stated that Martini, the
manager, was then out and that he would answer in a few minutes, after
communication with Martini. Within the course of half an hour Codina called Basa up
and said that as the cargo was already stowed on deck, Martini & Company were
willing for it to be carried in this way, and that their protest was a mere formality.
Codina admits that he was informed by Basa that the cargo could not be carried
under the hatches, and that if Martini & Company were dissatisfied to have it carried
on deck, they could discharge it. He denies being told that it could be taken off in
Macondray & Company’s boats. Codina further states that when the conversation
was broken off for the purpose of enabling him to communicate with Martini, he
consulted with the latter, and was directed to say that Martini & Company did not
consent for the cargo to be carried on deck and that it must be discharged. Upon
returning to the telephone, he found that the connection had been broken, and he
says that he was thereafter unable to get Macondray & Company by telephone during
that afternoon, although he attempted to do so more than once.
In the light of all the evidence the conclusion seems clear enough that, although
Martini & Company would have greatly preferred for the cargo to be carried under the
hatches, they nevertheless consented for it to go on deck. Codina, if attentive to the
interests of his house, must have known from the tenor of the guaranty to which his
signature is affixed that the defendant had reserved the right to carry it on deck, and
when the bills of lading were delivered to the plaintiff they plainly showed that the
cargo would be so carried.
It must therefore be considered that the plaintiff was duly affected with notice as to
the manner in which the cargo was shipped. No complaint, however, was made until
after the bills of lading had been negotiated at the bank. When the manager of Martini
& Company first had his attention drawn to the fact that the cargo was being carried
on deck, he called Codina to account, and the latter found it to his interest to feign
surprise and pretend that he had been deceived by Macondray & Company. Even
then there was time to stop the shipment, but Martini & Company failed to give the
necessary instructions, thereby manifesting acquiescence in the accomplished fact.
In a later letter of October 25, 1916, addressed to Macondray & Company, Martini,
referring to the incident says: "If previous to the mailing of the documents, you had
actually notified us by phone or otherwise that you could not accept our cargo in any
other way but on deck, we should have promptly given you instructions to leave it on
the lighters and at our disposal."
From this it is inferable that one reason why the plaintiff allowed the cargo to be
carried away without being discharged, was that the bills had been discounted and to
stop the shipment would have entailed the necessity of refunding the money which
the bank had advanced, with the inconveniences incident thereto. Another reason
apparently was that Martini discerned, or thought he discerned the possibility of
TRANSPORTATION LAW – Chapter 2 & 3
shifting the risk so as to make it fall upon the ship’s company.
With reference to the practicability of discharging the cargo in the late afternoon or
evening of Saturday, September 16, before the ship departed, as it did at 8 p.m.
some evidence was introduced tending to show that in order to get the cargo off
certain formalities were necessary which could not be accomplished, as for instance,
the return of the mate’s receipt (which had not yet come to the plaintiff’s hands), the
securing of a permit from the customs authorities, and the securing of an order of
discharge from the steamship company. In view of the fact that the plaintiff did
nothing whatever looking towards the discharge of the cargo, not even so much as to
notify Macondray & Company that the cargo must come off, the proof relative to the
practicability of discharge is inconclusive. If the plaintiff had promptly informed
Macondray & Company of their resolve to have the cargo discharged, and the latter
had nevertheless permitted the ship to sail without discharging it, there would have
been some ground for plaintiff’s contention that its consent had not been given for the
goods to be carried on deck. Needless to say we attach no weight to the statement of
Codina that he was unable to get Macondray & Company by telephone in order to
communicate directions for the discharge of the cargo.
The evidence submitted in behalf of the defendant shows that there was no space in
the hold to take the cargo; and it was therefore unnecessary to consider whether the
chemicals to be shipped were of an explosive or inflammable character, such as to
require stowage on deck. By reason of the fact that the cargo had to be carried on
deck at all events, if carried at all, the guaranty Exhibit D-C was so drawn as to permit
stowage either on or under deck at the ship’s option; and the attention of Codina must
have been drawn to this provision because Macondray & Company refused to issue
the bills of lading upon a guaranty signed by Codina upon another form (Exhibit R),
which contained no such provision. The messenger between the two establishments
who was sent for the bills of lading accordingly had to make a second trip and go
back for a letter of guaranty signed upon the desired form. The pretense of Codina
that he was deceived into signing a document different from that which he supposed
himself to be signing is wholly unsustained.
The result of the discussion is that Martini & Company must be held to have assented
to the shipment of the cargo on deck and that they are bound by the bills of lading in
the form in which they were issued. The trial court in our opinion erred in holding
otherwise, and in particular by ignoring, or failing to give sufficient weight to the
contract of guaranty.
Having determined that the plaintiff consented to the shipment of the cargo on deck,
we proceed to consider whether the defendant can be held liable for the damage
which befell the cargo in question. It of course goes without saying that if a clean bill
of lading had been issued and the plaintiff had not consented for the cargo to go on
deck, the ship’s company would have been liable for all damage which resulted from
the carriage on deck. In the case of The Paragon (1 Ware, 326; 18 Fed. Cas. No.
10708), decided in 1836 in one of the district courts of the United States, it appeared
that cargo was shipped from Boston, Massachusetts, to Portland, Maine, upon what
is called a clean bill of lading, that is, one in the common form without any
memorandum in the margin or on its face showing that the goods are to be carried on
deck. It was proved that the shipper had not given his consent for carriage on deck.
Nevertheless, the master stowed the goods on deck; and a storm having arisen, it
became necessary to jettison them. None of the cargo in the hold was lost. It was
thus evident that although the cargo in question was lost by peril of the sea, it would
not have been lost except for the fact that it was being carried on deck. It was held
that the ship was liable. In the course of the opinion the following language was used:
"It is contended that the goods, in this case, having been lost by the dangers of the
seas, both the master and the vessel are exempted from responsibility within the
common exemption in bills of lading; and the goods having been thrown overboard
from necessity, and for the safety of the vessel and cargo, as well as the lives of the
crew, that it presents a case for a general average or contribution, upon the common
principle that when a sacrifice is made for the benefit of all, that the loss shall be
shared by all. . . . In every contract of affreightment, losses by the dangers of the seas
are excepted from the risks which the master takes upon himself, whether the
exception is expressed in the contract or not. The exception is made by the law, and
falls within the general principle that no one is responsible for fortuitous events and
accidents of major force. Casus fortuitous nemo praestat. But then the general law is
subject to an exception, that when the inevitable accident is preceded by a fault of the
debtor or person bound without which it would not have happened, then he becomes
responsible for it. (Pothier, des Obligations, No. 542; Pret. a Usage, No. 57; Story,
Bailm., c. 4, No. 241; In Majorious casibus si culpa ejus interveniat tenetur; Dig. 44, 7,
1, s. 4.)
"The master is responsible for the safe and proper stowage of the cargo, and there is
no doubt that by the general maritime law he is bound to secure the cargo safely
under deck. . . . If the master carries goods on deck without the consent of the
shipper… he does it at his own risk. If they are damaged or lost in consequence of
their being thus exposed, he cannot protect himself from responsibility by showing
that they were damaged or lost by the dangers of the seas… When the shipper
consents to his goods being carried on deck, he takes the risk upon himself of these
peculiar perils. This is the doctrine of all the authorities, ancient and modern."
Van Horn v. Taylor (2 La. Ann., 587; 46 Am. Dec., 558), was a case where goods
stowed on deck were lost in a collision. The court found that the ship carrying these
goods was not at fault, and that the shipper had notice of the fact that the cargo was
being carried on deck. It was held that the ship was not liable. Said the court:
"It is said that the plaintiff’s goods were improperly stowed on deck; that the deck load
only was thrown overboard by the collision, the cargo in the hold not being injured.
The goods were thus laden with the knowledge and implied approbation of the
plaintiff. He was a passenger on board the steamer, and does not appear to have
made any objection to the goods being thus carried, though the collision occurred
several days after the steamer commenced her voyage."
In the case of The Thomas P. Thorn (8 Ben., 3; 23 Fed., Cas. No. 13927), decided in
the District Court in the State of New York, it appeared that tobacco was received
upon a canal boat, with the understanding that it was to be carried on deck, covered
with tarpaulins. Upon arrival at its destination it was found damaged by water, for the
most part on the top, and evidently as a consequence of rains. At the same time a
TRANSPORTATION LAW – Chapter 2 & 3
quantity of malt stowed below deck on the same voyage was uninjured. In discussing
the question whether upon a contract to carry on deck, the vessel was liable for the
wetting of the tobacco, the court said:
"It is manifest that the injury to the tobacco arose simply from the fact that it was
carried on deck. The malt, carried below, although an article easily injured, received
no damage, and the voyage was performed with usual care, and without disaster.
Indeed, there is evidence of a statement by the libelant, that tobacco must of
necessity be injured by being carried on deck. But, under a contract to carry upon
deck, the risk of any damage resulting from the place of carriage rests upon the
shipper, and, without proof of negligence causing the damage, there can be no
recovery. Here the evidence shows that all reasonable care was taken of the tobacco
during its transportation; that the manner of stowing and covering it was known to and
assented to by the shipper; and the inference is warranted that the injury arose,
without fault of the carrier, from rain, to which merchandise transported on deck must
necessarily be in some degree exposed. Any loss arising from damaged thus
occasioned is to be borne by the shipper."
Lawrence v. Minturn (17 How [U.S,], 100; 15 L ed., 58), was a case where goods
stowed on deck with the consent of the shipper were jettisoned during a storm at sea.
In discussing whether this cargo was entitled to general average, the Supreme Court
of the United States said:
"The maritime codes and writers have recognized the distinction between cargo
placed on deck, with the consent of the shipper, and cargo under deck.
"There is not one of them which gives a recourse against the master, the vessel, or
the owners, if the property lost had been placed on deck with the consent of its
owner, and they afford very high evidence of the general and appropriate usages, in
this particular, of merchants and shipowners.
"So the courts of this country and England, and the writers on this subject, have
treated the owner of goods on deck, with his consent, as not having a claim on the
master or owner of the ship in case of jettison. The received law, on the point, is
expressed by Chancellor Kent, with his usual precision, in 3 Com., 240: ’Nor is the
carrier in that case (Jettison of deck load) responsible to the owner, unless the goods
were stowed on deck without the consent of the owner, or a general custom binding
him, and then he would be chargeable with the loss.’"
In Gould v. Oliver (4 Bing., N. C., 132), decided in the English Court of Common
Pleas in 1837, Tindal, C.J., said:
"Where the loading on deck has taken place with the consent of the merchant, it is
obvious that no remedy against the shipowner or master for a wrongful loading of the
goods on deck can exist. The foreign authorities are indeed express; on that point.
And the general rule of the English law, that no one can maintain an action for a
wrong, where he has consented or contributed to the act which occasioned his loss,
leads to the same conclusion."
The foregoing authorities fully sustain the proposition that where the shipper consents
to have his goods carried on deck he takes the risks of any damage or loss sustained
as a consequence of their being so carried. In the present case it is indisputable that
the goods were injured during the voyage and solely as a consequence of their being
on deck, instead of in the ship’s hold. The loss must therefore fall on the owner. And
this would be true, under the authorities, even though paragraph 19 of the bills of
lading, quoted near the beginning of this opinion, had not been made a term of the
contract.
It is undoubtedly true that, upon general principle, and momentarily ignoring
paragraph 19 of these bills of lading, the ship’s owner might be held liable for any
damage directly resulting from a negligent failure to exercise the care properly
incident to the carriage of the merchandise on deck. For instance, if it had been
improperly placed or secured, and had been swept overboard as a proximate result of
such lack of care, the ship would be liable, to the same extent as if the cargo had
been deliberately thrown over without justification. So, if it had been shown that,
notwithstanding the stowage of these goods on deck, the damage could have been
prevented, by the exercise of proper skill and diligence in the discharge of the duties
incumbent on the ship, the owner might still be held.
To put the point concretely, let it be supposed that a custom had been proved among
mariners to protect deck cargo from the elements by putting a tarpaulin over it; or
approaching still more to imaginable conditions in the present case, let it be supposed
that the persons charged with the duty of transporting this cargo, being cognizant of
the probability of damage by water, had negligently and without good reason failed to
exercise reasonable care to protect it by covering it with tarpaulins. In such case it
could hardly be denied that the ship’s company should be held liable for such damage
as might have been avoided by the use of such precaution.
But it should be borne in mind in this connection that it is incumbent on the plaintiff, if
his cause of action is founded on negligence of this character, to allege and prove
that the damage suffered was due to failure of the persons in charge of the cargo to
use the diligence properly incident to carriage under these conditions.
In Clark v. Barnwell (12 How. [U.S. ], 272; 13 L. ed., 985), the Supreme Court
distinguishes with great precision between the situation where the burden of proof is
upon the shipowner to prove that the loss resulted from an excepted peril and that
where the burden of proof is upon the owner of the cargo to prove that the loss was
caused by negligence on the part of the persons employed in the conveyance of the
goods. The first two syllabi in Clark v. Barnwell read as follows:
"Where goods are shipped and the usual bill of lading given, ’promising to deliver
them in good order, the dangers of the seas excepted,’ and they are found to be
damaged the onus probandi is upon the owners of the vessel, to show that the injury
was occasioned by one of the excepted causes.
"But, although the injury may have been occasioned by one of the excepted causes,
yet still the owners of the vessel are responsible if the injury might have been
avoided, by the exercise of reasonable skill and attention on the part of the persons
employed in the conveyance of the goods. But the onus probandi then becomes
shifted upon the shipper, to show the negligence.
TRANSPORTATION LAW – Chapter 2 & 3
The case just referred to was one where cotton thread, put up in boxes, had
deteriorated during a lengthy voyage in a warm climate, owing to dampness and
humidity. In discussing the question of the responsibility of the ship’s owner, the court
said:
"Notwithstanding, therefore, the proof was clear that the damage was occasioned by
the effect of the humidity and dampness of the vessel, which is one of the dangers of
navigation, it was competent for the libelants to show that the respondents might have
prevented it by proper skill and diligence in the discharge of their duties; but no such
evidence is found in the record. For caught that appears every precaution was taken
that is usual or customary, or known to shipmasters, to avoid the damage in question.
And hence we are obliged to conclude that it is to be attributed exclusively to the
dampness of the atmosphere of the vessel, without negligence or fault on the part of
the master or owners.”
Exactly the same words might be used as applicable to the facts of the present case;
and as it is apparent that the damage here was caused by rain and sea water — the
risk of which is inherently incident to carriage on deck — the defendant cannot be
held liable. It is not permissible for the court, in the absence of any allegation or proof
of negligence, to attribute negligence to the ship’s employees in the matter of
protecting the goods from rains and storms. The complaint on the contrary clearly
indicates that the damage done was due to the mere fact of carriage on deck, no
other fault or delinquency on the part of anybody being alleged.
It will be observed that by the terms of paragraph 19 of the bills of lading, the ship is
not to be held liable, in the case of goods signed for as carried on deck, for any loss
or damage from any cause whatever." We are not to be understood as holding that
this provision would have protected the ship from liability for the consequences of
negligent acts, if negligence had been alleged and proved. From the discussion in
Manila Railroad Co. v. Compania Transatlantica and Atlantic, Gulf & Pacific Co. (38
Phil. Rep., 875), it may be collected that the carrier would be held liable in such case,
notwithstanding the exemption contained in paragraph 19. But however that may be
damages certainly cannot be recovered on the ground of negligence, even from a
carrier, where negligence is neither alleged nor proved.
The judgment appealed from is reversed and the defendant is absolved from the
complaint. No express pronouncement will be made as to the costs of either instance.
So ordered.
29.) [G.R. NO. 150751 : September 20, 2004]
CENTRAL SHIPPING COMPANY, INC., Petitioner, v. INSURANCE COMPANY OF
NORTH AMERICA, Respondent.
A common carrier is presumed to be at fault or negligent. It shall be liable for the loss,
destruction or deterioration of its cargo, unless it can prove that the sole and
proximate cause of such event is one of the causes enumerated in Article 1734 of the
Civil Code, or that it exercised extraordinary diligence to prevent or minimize the loss.
In the present case, the weather condition encountered by petitioner's vessel was not
a "storm" or a natural disaster comprehended in the law. Given the known weather
condition prevailing during the voyage, the manner of stowage employed by the
carrier was insufficient to secure the cargo from the rolling action of the sea. The
carrier took a calculated risk in improperly securing the cargo. Having lost that risk, it
cannot now disclaim any liability for the loss.
The factual antecedents, summarized by the trial court and adopted by the appellate
court, are as follows:
"On July 25, 1990 at Puerto Princesa, Palawan, the [petitioner] received on board its
vessel, the M/V 'Central Bohol', 376 pieces [of] Philippine Apitong Round Logs and
undertook to transport said shipment to Manila for delivery to Alaska Lumber Co., Inc.
"The cargo was insured for P3,000,000.00 against total loss under [respondent's]
Marine Cargo Policy No. MCPB-00170.
"On July 25, 1990, upon completion of loading of the cargo, the vessel left Palawan
and commenced the voyage to Manila.
"At about 0125 hours on July 26, 1990, while enroute to Manila, the vessel listed
about 10 degrees starboardside, due to the shifting of logs in the hold.
"At about 0128 hours, after the listing of the vessel had increased to 15 degrees, the
ship captain ordered his men to abandon ship and at about 0130 hours of the same
day the vessel completely sank. Due to the sinking of the vessel, the cargo was totally
lost.
"[Respondent] alleged that the total loss of the shipment was caused by the fault and
negligence of the [petitioner] and its captain and as direct consequence thereof the
consignee suffered damage in the sum of P3,000,000.00.
"The consignee, Alaska Lumber Co. Inc., presented a claim for the value of the
shipment to the [petitioner] but the latter failed and refused to settle the claim, hence
[respondent], being the insurer, paid said claim and now seeks to be subrogated to all
the rights and actions of the consignee as against the [petitioner].
TRANSPORTATION LAW – Chapter 2 & 3
"[Petitioner], while admitting the sinking of the vessel, interposed the defense that the
vessel was fully manned, fully equipped and in all respects seaworthy; that all the
logs were properly loaded and secured; that the vessel's master exercised due
diligence to prevent or minimize the loss before, during and after the occurrence of
the storm.
"It raised as its main defense that the proximate and only cause of the sinking of its
vessel and the loss of its cargo was a natural disaster, a tropical storm which neither
[petitioner] nor the captain of its vessel could have foreseen."5
The RTC was unconvinced that the sinking of M/V Central Bohol had been caused by
the weather or any other caso fortuito. It noted that monsoons, which were common
occurrences during the months of July to December, could have been foreseen and
provided for by an ocean-going vessel. Applying the rule of presumptive fault or
negligence against the carrier, the trial court held petitioner liable for the loss of the
cargo. Thus, the RTC deducted the salvage value of the logs in the amount
of P200,000 from the principal claim of respondent and found that the latter was
entitled to be subrogated to the rights of the insured. The court a quo disposed as
follows:
"WHEREFORE, premises considered, judgment is hereby rendered in favor of the
[respondent] and against the [petitioner] ordering the latter to pay the following:
…
Ruling of the Court of Appeals
The CA affirmed the trial court's finding that the southwestern monsoon encountered
by the vessel was not unforeseeable. Given the season of rains and monsoons, the
ship captain and his crew should have anticipated the perils of the sea. The appellate
court further held that the weather disturbance was not the sole and proximate cause
of the sinking of the vessel, which was also due to the concurrent shifting of the logs
in the hold that could have resulted only from improper stowage. Thus, the carrier
was held responsible for the consequent loss of or damage to the cargo, because its
own negligence had contributed thereto.
The CA found no merit in petitioner's assertion of the vessel's seaworthiness. It held
that the Certificates of Inspection and Drydocking were not conclusive proofs thereof.
In order to consider a vessel to be seaworthy, it must be fit to meet the perils of the
sea.
Found untenable was petitioner's insistence that the trial court should have given
greater weight to the factual findings of the Board of Marine Inquiry (BMI) in the
investigation of the Marine Protest filed by the ship captain, Enriquito Cahatol. The
CA further observed that what petitioner had presented to the court a quo were mere
excerpts of the testimony of Captain Cahatol given during the course of the
proceedings before the BMI, not the actual findings and conclusions of the agency.
Citing Arada v. CA,7 it said that findings of the BMI were limited to the administrative
liability of the owner/operator, officers and crew of the vessel. However, the
determination of whether the carrier observed extraordinary diligence in protecting the
cargo it was transporting was a function of the courts, not of the BMI.
The CA concluded that the doctrine of limited liability was not applicable, in view of
petitioner's negligence - - particularly its improper stowage of the logs.
Hence, this Petition.8
Issues
…
The issues boil down to two: (1) whether the carrier is liable for the loss of the cargo;
and (2) whether the doctrine of limited liability is applicable. These issues involve a
determination of factual questions of whether the loss of the cargo was due to the
occurrence of a natural disaster; and if so, whether its sole and proximate cause was
such natural disaster or whether petitioner was partly to blame for failing to exercise
due diligence in the prevention of that loss.
The Court's Ruling
The Petition is devoid of merit.
First Issue:
Liability for Lost Cargo
From the nature of their business and for reasons of public policy, common carriers
are bound to observe extraordinary diligence over the goods they transport, according
to all the circumstances of each case.10 In the event of loss, destruction or
deterioration of the insured goods, common carriers are responsible; that is, unless
they can prove that such loss, destruction or deterioration was brought about - -
among others - - by "flood, storm, earthquake, lightning or other natural disaster or
calamity."11 In all other cases not specified under Article 1734 of the Civil Code,
common carriers are presumed to have been at fault or to have acted negligently,
unless they prove that they observed extraordinary diligence.12
In the present case, petitioner disclaims responsibility for the loss of the cargo by
claiming the occurrence of a "storm" under Article 1734(1). It attributes the sinking of
its vessel solely to the weather condition between 10:00 p.m. on July 25, 1990 and
1:25 a.m. on July 26, 1990.
TRANSPORTATION LAW – Chapter 2 & 3
At the outset, it must be stressed that only questions of law13 may be raised in a
Petition for Review on Certiorari under Rule 45 of the Rules of Court. Questions of
fact are not proper subjects in this mode of appeal,14 for "[t]he Supreme Court is not a
trier of facts."15 Factual findings of the CA may be reviewed on appeal16 only under
exceptional circumstances such as, among others, when the inference is manifestly
mistaken,17 the judgment is based on a misapprehension of facts,18 or the CA
manifestly overlooked certain relevant and undisputed facts that, if properly
considered, would justify a different conclusion.19
In the present case, petitioner has not given the Court sufficient cogent reasons to
disturb the conclusion of the CA that the weather encountered by the vessel was not
a "storm" as contemplated by Article 1734(1). Established is the fact that between
10:00 p.m. on July 25, 1990 and 1:25 a.m. on July 26, 1990, M/V Central Bohol
encountered a southwestern monsoon in the course of its voyage.
The Note of Marine Protest,20 which the captain of the vessel issued under oath,
stated that he and his crew encountered a southwestern monsoon about 2200 hours
on July 25, 1990, and another monsoon about 2400 hours on July 26, 1990. Even
petitioner admitted in its Answer that the sinking of M/V Central Bohol had been
caused by the strong southwest monsoon.21 Having made such factual
representation, it cannot now be allowed to retreat and claim that the southwestern
monsoon was a "storm."
The pieces of evidence with respect to the weather conditions encountered by the
vessel showed that there was a southwestern monsoon at the time. Normally
expected on sea voyages, however, were such monsoons, during which strong winds
were not unusual. Rosa S. Barba, weather specialist of the Philippine Atmospheric
Geophysical and Astronomical Services Administration (PAGASA), testified that a
thunderstorm might occur in the midst of a southwest monsoon. According to her, one
did occur between 8:00 p.m. on July 25, 1990, and 2 a.m. on July 26, 1990, as
recorded by the PAGASA Weather Bureau.22
Nonetheless, to our mind it would not be sufficient to categorize the weather condition
at the time as a "storm" within the absolutory causes enumerated in the law.
Significantly, no typhoon was observed within the Philippine area of responsibility
during that period.23
According to PAGASA, a storm has a wind force of 48 to 55 knots,24 equivalent to 55
to 63 miles per hour or 10 to 11 in the Beaufort Scale. The second mate of the vessel
stated that the wind was blowing around force 7 to 8 on the Beaufort
Scale.25 Consequently, the strong winds accompanying the southwestern monsoon
could not be classified as a "storm." Such winds are the ordinary vicissitudes of a sea
voyage.26
Even if the weather encountered by the ship is to be deemed a natural disaster under
Article 1739 of the Civil Code, petitioner failed to show that such natural disaster or
calamity was the proximate and only cause of the loss. Human agency must be
entirely excluded from the cause of injury or loss. In other words, the damaging
effects blamed on the event or phenomenon must not have been caused, contributed
to, or worsened by the presence of human participation.27 The defense of fortuitous
event or natural disaster cannot be successfully made when the injury could have
been avoided by human precaution.28
Hence, if a common carrier fails to exercise due diligence - - or that ordinary care that
the circumstances of the particular case demand - - to prevent or minimize the loss
before, during and after the occurrence of the natural disaster, the carrier shall be
deemed to have been negligent. The loss or injury is not, in a legal sense, due to a
natural disaster under Article 1734(1).29
We also find no reason to disturb the CA's finding that the loss of the vessel was
caused not only by the southwestern monsoon, but also by the shifting of the logs in
the hold. Such shifting could been due only to improper stowage. The assailed
Decision stated:
"Notably, in Master Cahatol's account, the vessel encountered the first southwestern
monsoon at about 1[0]:00 in the evening. The monsoon was coupled with heavy rains
and rough seas yet the vessel withstood the onslaught. The second monsoon attack
occurred at about 12:00 midnight. During this occasion, the master 'felt' that the logs
in the hold shifted, prompting him to order second mate Percival Dayanan to look at
the bodega. Complying with the captain's order, 2nd mate Percival Dayanan found
that there was seawater in the bodega. 2nd mate Dayanan's account was:
… meters.35 Being clearly prone to shifting, the round logs should not have been stowed
"Additionally, [petitioner's] own witnesses, boatswain Eduardo Viñas Castro and oiler
Frederick Perena, are one in saying that the vessel encountered two weather
disturbances, one at around 10 o'clock to 11 o'clock in the evening and the other at
around 12 o'clock midnight. Both disturbances were coupled with waves and heavy
rains, yet, the vessel endured the first and not the second. Why? The reason is plain.
The vessel felt the strain during the second onslaught because the logs in the bodega
shifted and there were already seawater that seeped inside."30
The above conclusion is supported by the fact that the vessel proceeded through the
first southwestern monsoon without any mishap, and that it began to list only during
the second monsoon immediately after the logs had shifted and seawater had
entered the hold. In the hold, the sloshing of tons of water back and forth had created
pressures that eventually caused the ship to sink. Had the logs not shifted, the ship
could have survived and reached at least the port of El Nido. In fact, there was
another motor launch that had been buffeted by the same weather condition within
the same area, yet it was able to arrive safely at El Nido.31
In its Answer, petitioner categorically admitted the allegation of respondent in
paragraph 5 of the latter's Complaint "[t]hat at about 0125 hours on 26 July 1990,
while enroute to Manila, the M/V 'Central Bohol' listed about 10 degrees
starboardside, due to the shifting of logs in the hold." Further, petitioner averred that
"[t]he vessel, while navigating through this second southwestern monsoon, was under
TRANSPORTATION LAW – Chapter 2 & 3
extreme stress. At about 0125 hours, 26 July 1990, a thud was heard in the cargo
hold and the logs therein were felt to have shifted. The vessel thereafter immediately
listed by ten (10) degrees starboardside."32
Yet, petitioner now claims that the CA's conclusion was grounded on mere
speculations and conjectures. It alleges that it was impossible for the logs to have
shifted, because they had fitted exactly in the hold from the port to the starboard side.
After carefully studying the records, we are inclined to believe that the logs did indeed
shift, and that they had been improperly loaded.
According to the boatswain's testimony, the logs were piled properly, and the entire
shipment was lashed to the vessel by cable wire.33 The ship captain testified that out
of the 376 pieces of round logs, around 360 had been loaded in the lower hold of the
vessel and 16 on deck. The logs stored in the lower hold were not secured by cable
wire, because they fitted exactly from floor to ceiling. However, while they were
placed side by side, there were unavoidable clearances between them owing to their
round shape. Those loaded on deck were lashed together several times across by
cable wire, which had a diameter of 60 millimeters, and were secured from starboard
to port.34
It is obvious, as a matter of common sense, that the manner of stowage in the lower
hold was not sufficient to secure the logs in the event the ship should roll in heavy
weather. Notably, they were of different lengths ranging from 3.7 to 12.7
with nothing to hold them securely in place. Each pile of logs should have been
lashed together by cable wire, and the wire fastened to the side of the hold.
Considering the strong force of the wind and the roll of the waves, the loose
arrangement of the logs did not rule out the possibility of their shifting. By force of
gravity, those on top of the pile would naturally roll towards the bottom of the ship.
The adjuster's Report, which was heavily relied upon by petitioner to strengthen its
claim that the logs had not shifted, stated that "the logs were still properly lashed by
steel chains on deck." Parenthetically, this statement referred only to those loaded on
deck and did not mention anything about the condition of those placed in the lower
hold. Thus, the finding of the surveyor that the logs were still intact clearly pertained
only to those lashed on deck.
The evidence indicated that strong southwest monsoons were common occurrences
during the month of July. Thus, the officers and crew of M/V Central Bohol should
have reasonably anticipated heavy rains, strong winds and rough seas. They should
then have taken extra precaution in stowing the logs in the hold, in consonance with
their duty of observing extraordinary diligence in safeguarding the goods. But the
carrier took a calculated risk in improperly securing the cargo. Having lost that risk, it
cannot now escape responsibility for the loss.
Second Issue:
Doctrine of Limited Liability

The doctrine of limited liability under Article 587 of the Code of Commerce36 is not
applicable to the present case. This rule does not apply to situations in which the loss
or the injury is due to the concurrent negligence of the shipowner and the captain.37 It
has already been established that the sinking of M/V Central Bohol had been caused
by the fault or negligence of the ship captain and the crew, as shown by the improper
stowage of the cargo of logs. "Closer supervision on the part of the shipowner could
have prevented this fatal miscalculation."38 As such, the shipowner was equally
negligent. It cannot escape liability by virtue of the limited liability rule.

WHEREFORE, the Petition is DENIED, and the assailed Decision and

Resolution AFFIRMED. Costs against petitioner.

TRANSPORTATION LAW – Chapter 2 & 3

30.) G.R. No. 143133           June 5, 2002
BELGIAN OVERSEAS CHARTERING AND SHIPPING N.V. and JARDINE DAVIES
TRANSPORT SERVICES, INC., petitioners,
vs. PHILIPPINE FIRST INSURANCE CO., INC., respondents.
"On June 13, 1990, 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 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
Corporation declared the same as total loss.
"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. Subsequently,
plaintiff-appellant instituted this complaint for recovery of the amount paid by them, to
the consignee as insured.
"Impugning the propriety of the suit against them, defendants-appellees imputed 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. 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-appellees averred that, in any
event, they exercised due diligence and foresight required by law to prevent any
damage/loss to said shipment."6
Ruling of the Trial Court
The RTC dismissed the Complaint because respondent had failed to prove its claims
with the quantum of proof required by law.7
Ruling of the Court of Appeals
In reversing the trial court, the CA ruled that petitioners were liable for the loss or the
damage of the goods shipped, because they had failed to overcome the presumption
of negligence imposed on common carriers.
TRANSPORTATION LAW – Chapter 2 & 3
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
Lading had not been the proximate cause of the damage to the four (4) coils.10
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,
affirmed the award of attorney's fees.
Hence, this Petition.11
Issues
…
In sum, the issues boil down to three:
1. Whether petitioners have overcome the presumption of negligence of a common
carrier
2. Whether the notice of loss was timely filed
3. Whether the package limitation of liability is applicable
This Court's Ruling
The Petition is partly meritorious.
First Issue:
Proof of Negligence
Petitioners contend that the presumption of fault imposed on common carriers should
not be applied on the basis of the lone testimony offered by private respondent. The
contention is untenable.
Well-settled is the rule that common carriers, from the nature of their business and for
reasons of public policy, are bound to observe extraordinary diligence and vigilance
with respect to the safety of the goods and the passengers they transport.13 Thus,
common carriers are required to render service with the greatest skill and foresight
and "to use all reason[a]ble means to ascertain the nature and characteristics of the
goods tendered for shipment, and to exercise due care in the handling and stowage,
including such methods as their nature requires."14 The extraordinary responsibility
lasts from the time the goods are 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
This strict requirement is justified by the fact that, without a hand or a voice in the
preparation of such contract, the riding public enters into a contract of transportation
with common carriers.16 Even if it wants to, it cannot submit its own stipulations for
their approval.17 Hence, it merely adheres to the agreement prepared by them.
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 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
However, the presumption of fault or negligence will not arise21 if the loss is due to
any of the following causes: (1) flood, storm, earthquake, lightning, or other natural
disaster or calamity; (2) an act of the public enemy in war, whether international or
civil; (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
deterioration is other than the enumerated circumstances, then the carrier is liable
therefor.23
Corollary to the foregoing, 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. If no adequate explanation is
given as to how the deterioration, the loss or the destruction of the goods happened,
the transporter shall be held responsible.24
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
First, as stated in the Bill of Lading, petitioners received the subject shipment in good
order and condition in Hamburg, Germany.
Second, prior to the unloading of the cargo, an Inspection Report27 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 No. 15497928 issued by Jardine Davies Transport
Services, Inc., 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.29
TRANSPORTATION LAW – Chapter 2 & 3
Fourth, the Certificate of Analysis30 stated that, based on the sample submitted and
tested, the steel sheets found in bad order were wet with fresh water.
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.
These facts were confirmed by Ruperto Esmerio, head checker of BM Santos
Checkers Agency. Pertinent portions of his testimony are reproduce hereunder:
…
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
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
Complaint51 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
TRANSPORTATION LAW – Chapter 2 & 3
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 value58 -- 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.

TRANSPORTATION LAW – Chapter 2 & 3

31.) G.R. No. L-23733            October 31, 1969
HERMINIO L. NOCUM, plaintiff-appellee,
vs. LAGUNA TAYABAS BUS COMPANY, defendant-appellant.
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:
…
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.
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:
TRANSPORTATION LAW – Chapter 2 & 3
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.
xxx           xxx           xxx
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
TRANSPORTATION LAW – Chapter 2 & 3
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."
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.

TRANSPORTATION LAW – Chapter 2 & 3

32.) G.R. No. L-8034           November 18, 1955
CORNELIA A. DE GILLACO, ET AL., plaintiffs-appellees,
vs. MANILA RAILROAD COMPANY, defendant-appellant.
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 ha 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.
TRANSPORTATION LAW – Chapter 2 & 3
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 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 Wherefore, the judgment appealed from is reversed and the complaint ordered
impose such absolute liability (Lasam vs. Smith,  supra). The liability of a carrier as an dismissed, without cost. So ordered.
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 our opinion for a
broader liability arises from the fact that the servant, in mistreating the passenger
wholly for some private purpose of his own, in the very act, violates the contractual
obligation of the employer for the performance of which he has put the employee in
his place. The reason does not exist where the employee who committed the assault
was never in a position in which it became his duty to his employer to represent him
in discharging any duty 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
come in contact, and hereby makes himself liable for every assault commited by such
servant, without regard to the inquiry whether or not the passenger has come within
the sphere of duty of that servant as indicated by the employment, is regarded as not
only not sustained by the authorities, but as being unsound and oppressive both to
the employer and the employee. (Houston & T. C. R. Co. vs. Bush, 32 LRA (NS), p.
1205.)

TRANSPORTATION LAW – Chapter 2 & 3

33.) G.R. No. L-30309 November 25, 1983
CLEMENTE BRIÑAS, petitioner,
vs. THE PEOPLE OF THE PHILIPPINES and HONORABLE COURT OF
APPEALS, respondents.
The information charged the accused-appellant. and others as follows:
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 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
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 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 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. "
The facts established by the prosecution and accepted by the respondent court as
basis for the decision are summarized as follows:
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 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 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
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 door,
the train suddenly picked up speed. As a result the old woman and the child stumbled
and they were seen no more. It took three minutes more before the train stopped at
the next barrio, Lusacan, and the victims were not among the passengers who
disembarked thereat:
Next morning, the Tiaong police received a report that two corpses were found along
the railroad tracks at Barrio Lagalag. Repairing to the scene to investigate, they found
TRANSPORTATION LAW – Chapter 2 & 3
the lifeless body of a female child, about 2 feet from the railroad tracks, sprawled to
the ground with her belly down, the hand resting on the forehead, and with the back
portion of the head crushed. The investigators also found the corpse of 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 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").
On January 7, 1957, the bodies of the deceased were autopsied by Dr. Pastor
Huertas, the Municipal Health Officer of Tiaong. Dr. Huertas testified on the cause of
death of the victims as follows: 
…
The Court of First Instance of Quezon convicted defendant-appellant Clemente
Briñas for double homicide thru reckless imprudence but acquitted Hermogenes
Buencamino and Victor Millan The dispositive portion of the decision reads: 
…
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.
The accused-appellant alleges that the Court of Appeals made the following errors in
its decision:
…
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:
xxx xxx xxx
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 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.
xxx xxx xxx
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.
TRANSPORTATION LAW – Chapter 2 & 3
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.

TRANSPORTATION LAW – Chapter 2 & 3

34.) G.R. No. L-29462             March 7, 1929
IGNACIO DEL PRADO, plaintiff-appellee,
vs.
MANILA ELECTRIC CO., defendant-appellant.
Ross, Lawrence and Selph and Antonio T. Carrascoso, jr., for appellant.
Vicente Sotto for appellee.
STREET, J.:
This action was instituted in the Court of First Instance of Manila by Ignacio del Prado
to recover damages in the amount of P50,000 for personal injuries alleged to have
been caused by the negligence of the defendant, the Manila Electric Company, in the
operation of one of its street cars in the City of Manila. Upon hearing the cause the
trial court awarded to the plaintiff the sum of P10,000, as damages, with costs of suit,
and the defendant appealed.
The appellant, the Manila Electric Company, is engaged in operating street cars in the
City for the conveyance of passengers; and on the morning of November 18, 1925,
one Teodorico Florenciano, as appellant's motorman, was in charge of car No. 74
running from east to west on R. Hidalgo Street, the scene of the accident being at a
point near the intersection of said street and Mendoza Street. After the car had
stopped at its appointed place for taking on and letting off passengers, just east of the
intersection, it resumed its course at a moderate speed under the guidance of the
motorman. The car had proceeded only a short distance, however, when the plaintiff,
Ignacio del Prado, ran across the street to catch the car, his approach being made
from the left. The car was of the kind having entrance and exist at either end, and the
movement of the plaintiff was so timed that he arrived at the front entrance of the car
at the moment when the car was passing.
The testimony of the plaintiff and of Ciriaco Guevara, one of his witnesses, tends to
shows that the plaintiff, upon approaching the car, raised his hand as an indication to
the motorman of his desire to board the car, in response to which the motorman
eased up a little, without stopping. Upon this the plaintiff seized, with his hand, the
front perpendicular handspot, at the same time placing his left foot upon the platform.
However, before the plaintiff's position had become secure, and even before his
raised right foot had reached the flatform, the motorman applied the power, with the
result that the car gave a slight lurch forward. This sudden impulse to the car caused
the plaintiff's foot to slip, and his hand was jerked loose from the handpost, He
therefore fell to the ground, and his right foot was caught and crushed by the moving
car. The next day the member had to be amputated in the hospital. The witness,
Ciriaco Guevara, also stated that, as the plaintiff started to board the car, he grasped
the handpost on either side with both right and left hand. The latter statement may
possibly be incorrect as regards the use of his right hand by the plaintiff, but we are of
the opinion that the finding of the trial court to the effect that the motorman slowed up
slightly as the plaintiff was boarding the car that the plaintiff's fall was due in part at
TRANSPORTATION LAW – Chapter 2 & 3
lease to a sudden forward movement at the moment when the plaintiff put his foot on
the platform is supported by the evidence and ought not to be disturbed by us.
The motorman stated at the trial that he did not see the plaintiff attempting to board
the car; that he did not accelerate the speed of the car as claimed by the plaintiff's
witnesses; and that he in fact knew nothing of the incident until after the plaintiff had
been hurt and some one called to him to stop. We are not convinced of the complete
candor of this statement, for we are unable to see how a motorman operating this car
could have failed to see a person boarding the car under the circumstances revealed
in this case. It must be remembered that the front handpost which, as all witness
agree, was grasped by the plaintiff in attempting to board the car, was immediately on
the left side of the motorman.
With respect to the legal aspects of the case we may observe at the outset that there
is no obligation on the part of a street railway company to stop its cars to let on
intending passengers at other points than those appointed for stoppage. In fact it
would be impossible to operate a system of street cars if a company engage in this
business were required to stop any and everywhere to take on people who were too
indolent, or who imagine themselves to be in too great a hurry, to go to the proper
places for boarding the cars. Nevertheless, although the motorman of this car was not
bound to stop to let the plaintiff on, it was his duty to do no act that would have the
effect of increasing the plaintiff's peril while he was attempting to board the car. The
premature acceleration of the car was, in our opinion, a breach of this duty.
The relation between a carrier of passengers for hire and its patrons is of a
contractual nature; and in failure on the part of the carrier to use due care in carrying
its passengers safely is a breach of duty (culpa contructual) under articles 1101, 1103
and 1104 of the Civil Code. Furthermore, the duty that the carrier of passengers owes
to its patrons extends to persons boarding the cars as well as to those alighting
therefrom. The case of Cangco vs. Manila Railroad Co. (38 Phil., 768), supplies an
instance of the violation of this duty with respect to a passenger who was getting off
of a train. In that case the plaintiff stepped off of a moving train, while it was slowing
down in a station, and at the time when it was too dark for him to see clearly where he
was putting his feet. The employees of the company had carelessly left watermelons
on the platform at the place where the plaintiff alighted, with the result that his feet
slipped and he fell under the car, where his right arm badly injured. This court held
that the railroad company was liable for breach positive duty (culpa contractual), and
the plaintiff was awarded damages in the amount of P2,500 for the loss of his arm. In
the opinion in that case the distinction is clearly drawn between a liability for
negligence arising from breach of contructual duty and that arising articles 1902 and
1903 of the Civil Code (culpa aquiliana).
The distiction between these two sorts of negligence is important in this jurisdiction,
for the reason that where liability arises from a mere tort (culpa aquiliana), not
involving a breach of positive obligation, an employer, or master, may exculpate
himself, under the last paragraph of article 1903 of the Civil Code, by providing that
he had exercised due degligence to prevent the damage; whereas this defense is not
available if the liability of the master arises from a breach of contrauctual duty (culpa
contractual). In the case bfore us the company pleaded as a special defense that it It being understood, therefore, that the appealed judgment is modified by reducing the
had used all the deligence of a good father of a family to prevent the damage suffered recovery to the sum of P2,500, the judgment, as thus modified, is affirmed. So
by the plaintiff; and to establish this contention the company introduced testimony ordered, with costs against the appellant.
showing that due care had been used in training and instructing the motorman in
charge of this car in his art. But this proof is irrelevant in view of the fact that the
liability involved was derived from a breach of obligation under article 1101 of the Civil
Code and related provisions. (Manila Railroad Co. vs. Compana Transatlantica and
Atlantic, Gulf & Pacific Co., 38 Phil., 875, 887; De Guia vs. Manila Electric Railroad &
Light Co., 40 Phil., 706, 710.)

Another practical difference between liability for negligence arising under 1902 of the
Civil Code and liability arising from negligence in the performance of a positive duty,
under article 1101 and related provisions of the Civil Code, is that, in dealing with the
latter form of negligence, the court is given a discretion to mitigate liability according
to the circumstances of the case (art 1103). No such general discretion is given by
the Code in dealing with liability arising under article 1902; although possibly the
same end is reached by courts in dealing with the latter form of liability because of the
latitude of the considerations pertinent to cases arising under this article.

As to the contributory negligence of the plaintiff, we are of the opinion that it should be
treated, as in Rakes vs. Atlantic, Gulf and Pacific Co. (7 Phil., 359), as a mitigating
circumstance under article 1103 of the Civil Code. It is obvious that the plaintiff's
negligence in attempting to board the moving car was not the proximate cause of the
injury. The direct and proximate cause of the injury was the act of appellant's
motorman in putting on the power prematurely. A person boarding a moving car must
be taken to assume the risk of injury from boarding the car under the conditions open
to his view, but he cannot fairly be held to assume the risk that the motorman, having
the situation in view, will increase his peril by accelerating the speed of the car before
he is planted safely on the platform. Again, the situation before us is one where the
negligent act of the company's servant succeeded the negligent act of the plaintiff,
and the negligence of the company must be considered the proximate cause of the
injury. The rule here applicable seems to be analogous to, if not identical with that
which is sometimes referred to as the doctrine of "the last clear chance." In
accordance with this doctrine, the contributory negligence of the party injured will not
defeat the action if it be shown that the defendant might, by the exercise of
reasonable care and prudence, have avoided the consequences of the negligence of
the injured party (20 R. C. L., p. 139; Carr vs. Interurban Ry. Co., 185 Iowa, 872; 171
N. W., 167). The negligence of the plaintiff was, however, contributory to the accident
and must be considered as a mitigating circumstance.

With respect to the effect of this injury upon the plaintiff's earning power, we note that,
although he lost his foot, he is able to use an artificial member without great
inconvenience and his earning capacity has probably not been reduced by more than
30 per centum. In view of the precedents found in our decisions with respect to the
damages that ought to be awarded for the loss of limb, and more particularly Rakes
vs. Atlantic, Gulf and Pacific Co. (7 Phil., 359); Cangco vs. Manila Railroad Co. (38
Phil., 768); and Borromeo vs. Manila Electric Railroad and Light Co. (44 Phil., 165),
and in view of all the circumstances connected with the case, we are of the opinion
that the plaintiff will be adequately compensated by an award of P2,500.

TRANSPORTATION LAW – Chapter 2 & 3

35.) G.R. No. L-14335             January 28, 1920
MANUEL DE GUIA, plaintiff-appellant,
vs. THE MANILA ELECTRIC RAILROAD & LIGHT COMPANY, defendant-appellant.
[Plaintiff, a physician, boarded a car (trolley/tram) of the respondent in Caloocan. He
was still at the back platform holding the handle of the right-hand door. The car
entered a switch and upon coming out, the rear wheels of the car derailed. The car
then hit a concrete post to the left. Post was shattered, car stopped, plaintiff was
thrown against the door suffering injuries. Trial court ruled in favor of plaintiff stating
that motorman was negligent for driving at a high speed. Defendant insisted
derailment was due to presence of a stone which is a fortuitous event- Issue: Is the
respondent negligent or is it a fortuitous event?- Ruling: a.) Negligence has not
been disproved. Evidence shows car was behind schedule and that the car was
being driven faster than ordinary, and also the car was practically empty; further, an
experienced motorman should have discovered that something was wrong earlier
before traveling such a distance to hit the post. b.) Their liability as an employer is
out of breach of contract, it was therefore irrelevant to prove that they exercised
due care in selection and supervision of employee. However, they should be
considered a debtor in good faith and their liability given the circumstances
should be limited to those damages that they may have reasonably foreseen.
Proper damages, Loss of income as he had to suspend his practice for 3 months,
inability to accept a position as district health attorney shall not be ground for
damages as it is speculative, Additional medical expenses not proper as he used his
professional knowledge to make it appear that he had suffered more than what he
really suffered, also appointment fees to other doctors not proper as they were given
to him gratuitously- Ratio: Negligent respondent, damages for 1,100 only.]
The accident which gave rise to the litigation occurred on September 4, 1915, near
the end of the street-car line in Caloocan, Rizal, a northern suburb of the city of
Manila. It appears that, at about 8 o'clock p.m., of the date mentioned, the plaintiff
Manuel de Guia, a physician residing in Caloocan, boarded a car at the end of the
line with the intention of coming to the city. At about 30 meters from the starting point
the car entered a switch, the plaintiff remaining on the back platform holding the
handle of the right-hand door. Upon coming out of the switch, the small wheels of the
rear truck left the track, ran for a short distance along the macadam filling, which was
flush with the rails, and struck a concrete post at the left of the tract. The post was
shattered; and as the car stopped the plaintiff was thrown against the door with some
violence, receiving bruises and possibly certain internal injuries, the extent of which is
a subject of dispute.
The trial court found that the motorman of the derailed car was negligent in having
maintained too rapid a speed. This inference appears to be based chiefly upon the
results of the shock, involving the shattering of the post and the bending of the
kingpost of the car. It is insisted for the defendant company that the derailment was
due to the presence of a stone, somewhat larger than a goose egg, which had
become accidentally lodged between the rails at the juncture of the switch and which
TRANSPORTATION LAW – Chapter 2 & 3
was unobserved by the motorman. In this view the derailment of the car is supposed
to be due to casus fortuitos and not chargeable to the negligence of the motorman.
Even supposing that the derailment of the car was due to the accidental presence of
such a stone as suggested, we do not think that the existence of negligence is
disproved. The motorman says that upon approaching the switch he reduced the
electrical energy to the point that the car barely entered the switch under its own
momentum, and this operation was repeated as he passed out. Upon getting again
on the straight tract he put the control successively at points one, two, three and lastly
at point four. At the moment when the control was placed at point four he perceived
that the rear wheels were derailed and applied the brake; but at the same instant the
car struck the post, some 40 meters distant from the exit of the switch. One of the
defendant's witnesses stated in court that the rate of a car propelled by electricity with
the control at point "four" should be about five or 6 miles per hour. There was some
other evidence to the effect that the car was behind schedule time and that it was
being driven after leaving the switch, at a higher rate than would ordinarily be
indicated by the control at point four. This inference is rendered more tenable by the
circumstance that the car was practically empty. On the whole, we are of the opinion
that the finding of negligence in the operation of the car must be sustained, as not
being clearly contrary to the evidence; not so much because of excessive speed as
because of the distance which the car was allowed to run with the front wheels of the
rear truck derailed. It seems to us than an experienced and attentive motorman
should have discovered that something was wrong and would have stopped before
he had driven the car over the entire distance from the point where the wheels left the
track to the place where the post was struck.
The conclusion being accepted that there was negligence on the part of the
motorman in driving the car, it results that the company is liable for the damage
resulting to the plaintiff as a consequence of that negligence. The plaintiff had
boarded the car as a passenger for the city of Manila and the company undertook to
convey him for hire. The relation between the parties was, therefore, of a contractual
nature, and the duty of the carrier is to be determined with reference to the principles
of contract law, that is, the company was bound to convey and deliver the plaintiff
safely and securely with reference to the degree of care which, under the
circumstances, is required by law and custom applicable to the case (art. 1258, Civil
Code). Upon failure to comply with that obligation the company incurred the liability
defined in articles 1103-1107 of the Civil Code. (Cangco vs.  Manila Railroad
Company, 38 Phil. Rep., 768; Manila Railroad Company vs.  Compañia
Transatlantica, and Atlantic, Gulf & Pacific Co., 38 Phil. Rep., 875.)
From the nature of the liability thus incurred, it is clear that the defendant company
can not avail itself of the last paragraph of article 1903 of the Civil Code, since that
provision has reference to liability incurred by negligence in the absence of
contractual relation, that is, to the culpa aquiliana of the civil law. It was therefore
irrelevant for the defendant company to prove, as it did, that the company had
exercised due care in the selection and instruction of the motorman who was in
charge of its car and that he was in fact an experienced and reliable servant.
At this point, however, it should be observed that although in case like this the
defendant must answer for the consequences of the negligence of its employee, the
court has the power to moderate liability according to the circumstances of the case
(art. 1103, Civ. Code): Furthermore, we think it obvious that an employer who has in
fact displayed due diligence in choosing and instructing his servants is entitled to be
considered a debtor in good faith, within the meaning of article 1107 of the same
Code. Construing these two provisions together, applying them to the facts of this
case, it results that the defendant's liability is limited to such damages as might, at the
time of the accident, have been reasonably foreseen as a probable consequence of
the physical injuries inflicted upon the plaintiff and which were in fact a necessary
result of those injuries. There is nothing novel in this proposition, since both the civil
and the common law are agreed upon the point that the damages ordinarily
recoverable for the breach of a contractual obligation, against a person who has
acted in good faith, are such as can reasonably be foreseen at the time the obligation
is contracted. In Daywalt vs. Corporacion de PP. Agustinos Recoletos (39 Phil., 587),
we said: "The extent of the liability for the breach of a contract must be determined in
the light of the situation in existence at the time the contract is made; and the
damages ordinarily recoverable are in all events limited to such as might be
reasonably foreseen in the light of the facts then known to the contracting parties."
This brings us to consider the amount which may be awarded to the plaintiff as
damages. Upon this point the trial judge found that, as a result of the physical and
nervous derangement resulting from the accident, Dr. De Guia was unable properly to
attend to his professional labors for three months and suspended his practice for that
period. It was also proved by the testimony of the plaintiff that his customary income,
as a physician, was about P300 per month. The trial judge accordingly allowed P900,
as damages for loss of professional earnings. This allowance is attacked upon appeal
by the defendant as excessive both as to the period and rate of allowance. Upon
examining the evidence we fell disinclined to disturb this part of the judgment, though
it must be conceded that the estimate of the trial judge on this point was liberal
enough to the plaintiff.
Another item allowed by the trial judge consists of P3,900, which the plaintiff is
supposed to have lost by reason of his inability to accept a position as district health
officer in Occidental Negros. It appears in this connection that Mr. Alunan,
representative from Occidental Negros, had asked Dr. Montinola, who supposedly
had the authority to make the appointment, to nominate the plaintiff to such position.
The job was supposed to be good for two years, with a salary of P1,600 per annum,
and possibility of outside practice worth P350. Accepting these suggestions as true, it
is evident that the damages thus incurred are too speculative to be the basis of
recovery in a civil action. This element of damages must therefore be eliminated. It
goes without saying that damage of this character could not, at the time of the
accident, have been foreseen by the delinquent party as a probable consequence of
the injury inflicted — a circumstance which makes applicable article 1107 of the Civil
Code, as already expounded.
The last element of damages to be considered is the item of the plaintiff's doctor's
bills, a subject which we momentarily pass for discussion further on, since the
TRANSPORTATION LAW – Chapter 2 & 3
controversy on this point can be more readily understood in connection with the
question raised by the plaintiff's appeal.
The plaintiff alleges in the complaint that the damages incurred by him as a result of
the injuries in question ascend to the amount of P40,000. Of this amount the sum of
P10,000 is supposed to represent the cost of medical treatment and other expenses
incident to the plaintiff's cure, while the remainder (P30,000) represents the damage
resulting from the character of his injuries, which are supposedly such as to
incapacitate him for the exercise of the medical profession in the future. In support of
these claims the plaintiff introduced evidence, consisting of his own testimony and
that of numerous medical experts, tending to show that as a result of the injuries in
question he had developed infarct of the liver and traumatic neurosis, accompanied
by nervousness, vertigo, and other disturbing symptoms of a serious and permanent
character, it being claimed that these manifestations of disorder rendered him liable to
a host of other dangerous diseases, such as pleuresy, tuberculosis, pneumonia, and
pulmonary gangrene, and that restoration to health could only be accomplished, if at
all, after long years of complete repose. The trial judge did not take these pretensions
very seriously, and, as already stated, limited the damages to the three items of
professional earnings, expenses of medical treatment, and the loss of the
appointment as medical treatment, and the loss of the appointment as medical
inspector in Occidental Negros. As the appeal of the plaintiff opens the whole case
upon the question of damages, it is desirable to present a somewhat fuller statement
than that already given with respect to extent and character of the injuries in question.
The plaintiff testified that, at the time the car struck against the concrete post, he was
standing on the rear platform, grasping the handle of the right-hand door. The shock
of the impact threw him forward, and the left part of his chest struck against the door
causing him to fall. In falling, the plaintiff says, his head struck one of the seats and
he became unconscious. He was presently taken to his home which was only a short
distance away, where he was seen at about 10 o'clock p. m., by a physician in the
employment of the defendant company. This physician says that the plaintiff was then
walking about and apparently suffering somewhat from bruises on his chest. He said
nothing about his head being injured and refused to go to a hospital. Later, during the
same night Dr. Carmelo Basa was called in to see the plaintiff. This physician says
that he found Doctor De Guia lying in bed and complaining of a severe pain in the
side. During the visit of Doctor Basa the plaintiff several times spit up blood, a
manifestation no doubt due to the effects of the bruises received in his side. The next
day Doctor De Guia went into Manila to consult another physician, Doctor Miciano,
and during the course of a few weeks he called into consultation other doctors who
were introduced as witnesses in his behalf at the trial of this case. According to the
testimony of these witnesses, as well as that of the plaintiff himself, the symptoms of
physical and nervous derangement in the plaintiff speedily developed in portentous
degree.
Other experts were introduced by the defendant whose testimony tended to show that
the plaintiff's injuries, considered in their physical effects, were trivial and that the
attendant nervous derangement, with its complicated train of ailments, was merely
simulated.
Upon this question the opposing medical experts ventilated a considerable mass of
professional learning with reference to the nature and effects of the baffling disease
known as traumatic neurosis, or traumatic hysteria — a topic which has been the
occasion of much controversy in actions of this character in the tribunals of Europe
and America. The subject is one of considerable interest from a medico-legal point of
view, but we deem it unnecessary in this opinion to enter upon a discussion of its
voluminous literature. It is enough to say that in our opinion the plaintiff's case for
large damages in respect to his supposed incapacitation for future professional
practice is not made out. Of course in this jurisdiction damages can not be assessed
in favor of the plaintiff as compensation for the physical or mental pain which he may
have endured (Marcelo vs.  Velasco, 11 Phil. Rep. 287); and the evidence relating to
the injuries, both external and internal, received by him must be examined chiefly in
its bearing upon his material welfare, that is, in its results upon his earning capacity
and the expenses incurred in restoration to the usual condition of health.
The evidence before us shows that immediately after the accident in question Doctor
De Guia, sensing in the situation a possibility of profit, devoted himself with great
assiduity to the promotion of this litigation; and with the aid of his own professional
knowledge, supplemented by suggestions obtained from his professional friends and
associates, he enveloped himself more or less unconsciously in an atmosphere of
delusion which rendered him incapable of appreciating at their true value the
symptoms of disorder which he developed. The trial court was in our opinion fully
justified in rejecting the exaggerated estimate of damages thus created.
We now pass to the consideration of the amount allowed to the plaintiff by the trial
judge as the expense incurred for medical service. In this connection Doctor Montes
testified that he was first called to see the plaintiff upon September 14, 1915, when he
found him suffering from traumatic neurosis. Three months later he was called upon
to treat the same patient for an acute catarrhal condition, involving disturbance in the
pulmonary region. The treatment for this malady was successful after two months, but
at the end of six months the same trouble recurred and required further treatment. In
October of the year 1916, or more than a year after the accident in question occurred,
Doctor Montes was called in consultation with Doctor Guerrero to make an
examination of the plaintiff. Doctor Montes says that his charges altogether for
services rendered to the plaintiff amount to P350, of which the sum of P200 had been
paid by the plaintiff upon bills rendered from time to time. This physician speaks in the
most general terms with respect to the times and extent of the services rendered; and
it is by no means clear that those services which were rendered many months, or
year, after the accident had in fact any necessary or legitimate relation to the injuries
received by the plaintiff. In view of the vagueness and uncertainty of the testimony
relating to Doctor Montes' services, we are of the opinion that the sum of P200, or the
amount actually paid to him by the plaintiff, represents the extent of the plaintiff's
obligation with respect to treatment for said injuries.
With regard to the obligation supposedly incurred by the plaintiff to three other
physicians, we are of the opinion that they are not a proper subject of recovery in this
action; and this for more than one reason. In the first place, it does not appear that
said physicians have in fact made charges for those services with the intention of
imposing obligations on the plaintiff to pay for them. On the contrary it would seem
TRANSPORTATION LAW – Chapter 2 & 3
that said services were gratuitously rendered out of courtesy to the plaintiff as a
member of the medical profession. The suggestions made on the stand by these
physicians to the effect that their services were worth the amounts stated by them are
not sufficient to proved that the plaintiff had incurred the obligation to pay those
amounts. In the second place, we are convinced that in employing so many
physicians the plaintiff must have had in view of the successful promotion of the issue
of this lawsuit rather than the bona fide purpose of effecting the cure of his injuries. In
order to constitute a proper element of recovery in an action of this character, the
medical service for which reimbursement is claimed should not only be such as to
have created a legal obligation upon the plaintiff but such as was reasonably
necessary in view of his actual condition. It can not be permitted that a litigant should
retain an unusual and unnecessary number of professional experts with a view to the
successful promotion of a lawsuit and expect to recover against his adversary the
entire expense thus incurred. His claim for medical services must be limited to such
expenditures as were reasonably suited to the case.
The second error assigned in the brief of the defendant company presents a question
of practice which, though not vital to the solution of this case, is of sufficient general
importance to merit notice. It appears that four of the physicians examined as
witnesses for the plaintiff had made written statements at various dates certifying the
results of their respective examinations into the condition of the plaintiff. When these
witnesses were examined in court the identified their respective signatures to these
certificates and the trial judge, over the defendant's objection, admitted the
documents as primary evidence in the case. This was undoubtedly erroneous. A
document of this character is not primary evidence in any sense, since it is
fundamentally of a hearsay nature; and the only legitimate use to which one of these
certificates could be put, as evidence for the plaintiff, was to allow the physician who
issued it to refer thereto to refresh his memory upon details which he might have
forgotten. In Zwangizer vs. Newman (83 N. Y. Supp., 1071) which was also an action
to recover damages for personal injury, it appeared that a physician, who had been
sent by one of the parties to examine the plaintiff, had made at the time a written
memorandum of the results of the examination; and it was proposed to introduce this
document in evidence at the trial. It was excluded by the trial judge, and it was held
upon appeal that this was proper. Said the court: "There was no failure or exhaustion
of the memory, and no impeachment of the memorandum on cross-examination; and
the document was clearly incompetent as evidence in chief."
It results from the foregoing that the judgment appealed from must be modified by
reducing the amount of the recovery to eleven hundred pesos (1,100), with legal
interest from November 8, 1916. As thus modified the judgment is affirmed, without
any special pronouncement as to costs of this instance. So ordered.
36.) G.R. No. L-10563            March 2, 1916
THE UNITED STATES, plaintiff-appellee,
vs. ANTONIO BONIFACIO, defendant-appellant.
[Eligio Castillo, a deaf-mute, was run down by the train driven by respondent while
attempting to cross a rail-road track. The present case is a criminal case against
respondent train-driver for homicide with simple negligence. Accused first saw
deceased running parallel to his track 175 meters away, he rounded the curve then
blew his whistle twice, he tried slowing down but the pedestrian did not respond to the
warning and crossed the track, he tried to slow down but wasn’t able to and ran over
him, he died- Lower court convicted him of homicide with simple negligence. Issue: Is
he guilty of negligence?- Ruling: a.) presumption of negligence overcame, he was
not negligent given the circumstances and facts of the case, the accident was
unavoidable. The only evidence shows that he was running at 35kmh the max speed
allowed; The train came from a heavy decline after the turn to the place where the
accident took place, evidence suggest he could not have stopped instantly from that
decline; He was not obliged to stop or even to slow down unless there is something in
the appearance or conduct of the person on foot that would cause a prudent man to
believe that the person on foot would not avoid the danger (except when children),
ordinarily what the proper action is to give warning which he did (train-drivers couldn’t
be expected to slow down or stop everytime there is a person near the track as it
would be great inconvenience to the riding public; further, there was nothing in the
appearance or conduct of the victim in this case that would have warned the accused
that he was deaf-mute, the deceased crossed at a point where the driver would not
be able to avoid it anymore, the deaf-mute was negligent and the driver could not
have avoided it. b.) there is presumption of negligence but it could be rebutted (if
there is violation when accident happened), but in this case even if he is slightly
over 35kmh there is no causal connection between his speed and the accident.
Ratio: Acquitted]
The appellant in this case was charged in the court below with homicidio por
imprudencia temeraria (homicide committed with reckless negligence) and was
convicted of homicidio committed with simple negligence and sentenced to four
months and one day of arresto mayor and to pay the costs of the proceedings.
The information charges the commission of the offense as follows:
On or about the 31st day of October of the present year, 1913, in the barrio of Santa
Rita of the municipality of Batangas, Batangas, the accused, being an engineer and
while conducting the freight train which was going to the municipality of Bauan, at
about 10 o'clock in the morning of the said day saw that Eligio Castillo, a deaf-mute,
was traveling along the railroad track, and as the said Castillo did not get off of the
said track in spite of the whistle or warnings given by the accused, the accused did
maliciously and criminally cause the said train to run over the said Castillo, thereby
killing him instantly; an act committed with violation of law.
TRANSPORTATION LAW – Chapter 2 & 3
On the 31st of October, 1913, Eligio Castillo, a deaf-mute, was run down and killed,
while attempting to cross the railroad track in the barrio of Santa Rita, Batangas, by
an engine on which the accused was employed as engineer. The deaf-mute stepped
out on the track from an adjoining field shortly before the accident, walked along one
side of the track for some little distance and was killed as he attempted, for some
unknown reason, to cross over to the other side.
When the accused engineer first saw the deceased, he was walking near the track, in
the same direction as that in which the train was running. The train, a heavy freight
train, had just rounded a curve, and the man in front was about 175 meters ahead of
the engine. The engineer immediately blew his whistle twice, and noticing, a few
moments afterwards, that the man in front did not respond to the warning by stepping
aside from the track, he tried to slow down the engine, but did not succeed in
stopping in time to avoid running down the pedestrian. He did not attempt to stop his
engine when he first saw the man walking along the side of the track; but he claims
that he did all in his power to slow down a few moments afterwards, that is to say
after he had blown his whistle without apparently attracting the attention of the
pedestrian, who, about that time, turned and attempted to cross the track.
The only evidence as to the rate of speed at which the train was running at the time of
the accident was the testimony of the accused himself, who said that his indicator
showed that he was travelling at the rate of 35 kilometers an hour, the maximum
speed permitted under the railroad regulations for freight trains on that road.
There was a heavy decline in the track from the turn at the curve to a point some
distance beyond the place where the accident took place, and the undisputed
evidence discloses that a heavy freight train running at the rate of 35 miles an hour
could not be brought to a stop on that decline in much less than one hundred and fifty
meters.
We think that the meter statement of facts, as disclosed by the undisputed evidence
of record, sufficiently and conclusive demonstrates that the death of the deaf-mute
was the result of a regrettable accident, which was unavoidable so far as this accused
was concerned.
It has been suggested that, had the accused applied his brakes when he first saw the
man walking near the track, after his engine rounded the curve, he might have
stopped the train in time to have avoided the accident, as it is admitted that the
distance from the curve to the point where the accident occurred was about 175
meters.
But there is no obligation on an engine driver to stop, or even to slow down his
engine, when he sees an adult pedestrian standing or walking on or near the track,
unless there is something in the appearance or conduct of the person on foot which
would cause a prudent man to anticipate the possibility that such person could not, or
would not avoid the possibility of danger by stepping aside. Ordinarily, all that may
properly be required of an engine driver under such circumstances is that he give
warning of his approach, by blowing his whistle or ringing his bell until he is assured
that the attention of the pedestrian has been attracted to the oncoming train.
Of course it is the duty of an engine driver to adopt every measure in his power to
avoid the infliction of injury upon any person who may happen to be on the track in
front of his engine, and to slow down, or stop altogether if that be necessary, should
he have reason to believe that only by doing so can an accident be averted.
But an engine driver may fairly assume that all persons walking or standing on or
near the railroad track, except children of tender years, are aware of the danger to
which they are exposed; and that they will take reasonable precautions to avoid
accident, by looking and listening for the approach of trains, and stepping out of the
way of danger when their attention is directed to an oncoming train.
Any other rule would render it impracticable to operate railroads so as to secure the
expeditious transportation of passengers and freight which the public interest
demands. If engine drivers were required to slow down or stop their trains every time
they see a pedestrian on or near the track of the railroad it might well become
impossible for them to maintain a reasonable rate of speed. As a result the general
traveling public would be exposed to great inconvenience and delay which may be,
and is readily avoided by requiring all persons approaching a railroad track, to take
reasonable precautions against danger from trains running at high speed.
There was nothing in the appearance or conduct of the victim of the accident in the
cast at bar which would have warned the accused engine driver that the man walking
along the side of the tract was a deaf-mute, and that despite the blowing of the
whistle and the noise of the engine he was unconscious of his danger. It was not until
the pedestrian attempted to cross the track, just in front of the train, that the accused
had any reason to believe that his warning signals had not been heard, and by that
time it was too late to avoid the accident. Under all the circumstances, we are
satisfied that the accused was without fault; and that the accident must be attributed
wholly to the reckless negligence of the deaf-mute, in walking on the track without
taking the necessary precautions to avoid danger from a train approaching him from
behind.
The trial judge, although he was satisfied that the accused was not guilty of reckless
negligence, held that he was guilty of homicide through simple negligence,
accompanied by a breach of speed regulations, and imposed the penalty prescribed
for that offense in article 568 of the Penal Code.
The only evidence as to the speed at which the train was running at the time of the
accident was the testimony of the accused himself, who said that before the accident
occurred his indicator showed that he was running at the rate of 35 kilometers an
hour, the maximum speed authorized under the railroad regulations. From this
statement of the accused, taken together with the evidence disclosing that the train
was running on a down grade at the time when the accident occurred, the trial judge
inferred that the train must have been running at more than 35 miles an hour at that
TRANSPORTATION LAW – Chapter 2 & 3
moment, that is to say at a speed in excess of that allowed under the railroad
regulations.
We are of opinion, however, that the evidence does not sustain a finding, beyond a
reasonable doubt, that the train was running at more than 35 miles an hour at the
time when the accident occurred. We think that the statement of the accused
engineer that the indicator or his engine showed that he was running at 35 miles an
hour before the accident referred to the time immediately preceding the accident.
Even if it were true, as the trial judge inferred from his evidence, that the accused
looked at the indicator several seconds before the accident, and before the train
entered on the down-grade some 175 yards from the place at which it occurred, it
does not necessarily follow that the speed of travel was increased thereafter beyond
the limit prescribed by regulations. That would depend to some extent on the steam
pressure maintained on the engine, and perhaps upon other factors not developed in
the record.
Mere conjecture, and inferences unsupported by satisfactory evidence, are not
sufficient to establish a material finding of fact upon which a finding of guilt, beyond a
reasonable doubt, can be sustained.
Moreover, even if it were true that the train was running at a speed slightly in excess
of the limit prescribed by regulations, just before the accident took place, that fact
would not justify or require the imposition of the penalty prescribed in article 568 of
the Criminal Code, it affirmatively appearing that the slight excess of speed had no
possible causal relation to the accident.
Granting it to be true, as found by the trial judge, that the train had gained some small
addition in speed beyond the authorized rate of travel, as a result of the fact that it
was running on down grade for about one hundred meters before the accident
occurred, it affirmatively appears from the statement of facts set forth above, that,
under all the circumstances, the accident must have taken place whether the speed
had been slightly under rather than slightly over the limit prescribed by regulation, and
that it was due wholly to the negligent conduct of the deceased. The provisions of
article 568 of the Criminal Code under which the accused was convicted are as
follows:
xxx           xxx           xxx
Any person who, while violating any regulation, shall, by any act of imprudence or
negligence not amounting to reckless imprudence, commit an offense, shall suffer the
penalty of arresto mayor in its medium and maximum degrees.
This does not mean that in every case in which one accidentally injures or kills
another he is criminally liable therefor, if at the moment he happens to be guilty of a
violation of some petty regulation (reglamento). The injury or death must have
resulted from some "imprudence or negligence" (imprudencia o negligencia) on his
part. True it need only be slight negligence, if accompanied by a violation of the
regulations, but the relation of cause and effect must exist between the negligence or
imprudence of the accused and the injury inflicted. If it appears that the injury in no
wise resulted from the violation of the regulations, or the negligent conduct of the
accused, he incurs no criminal liability under the provisions of this article.
Viada, in his commentaries on this article of the Penal Code (vol. 3, p. 685), sets out
the following question and answer which clearly discloses that a conviction
thereunder cannot be maintained, unless there was culpable negligence in the
violation of a duly prescribed regulation; and unless, further, the latter was the
proximate and immediate cause of the injury inflicted:
The evidence of record in the case at bar clearly and satisfactorily discloses that even
if the train was running at a speed slightly in excess of the maximum speed
prescribed in the regulations, that fact had no causal relation to the accident and in no
wise contributed to it.
The judgment convicting and sentencing the appellant in this case should be
reversed, and the accused acquitted of the offense with which he is charged in the
information, and his bail bond exonerated, with the costs of both instances de officio.
So ordered.

Question No. 17. — A pharmacist left his store forgetting and leaving behind the keys
to the case where the most powerful drugs were kept. During his absence his clerk
filled a prescription which he believed was duly made out by a physician but which, in
fact, was signed by an unauthorized person. The prescription called for certain
substances which were afterwards employed to procure an abortion. These
substances, according to a medical report, were of a poisonous and extremely
powerful nature such as should be most carefully safeguarded and only expended
after ratification of the prescription in accordance with article 20 of the ordinance
relating to the practice of pharmacy. Under these circumstances would it be proper to
consider the pharmacist as guilty of the offense of simple imprudence with violation of
the regulation of the said faculty? The Supreme Court has decided this question in
the negative on the ground that the fact of the pharmacist having forgotten and left
behind, during the short time he was out walking, the key of the closet in which in
conformity with the pharmacy ordinances, he kept the most powerful and active
drugs, properly considered, does not constitute the culpable negligence referred to in
article 581 of the Penal Code, nor was it the proximate and immediate cause of the
said prescription being filled in his store without being properly ratified by the
physician who signed it, as required by the said ordinances. The Court held,
therefore, that the trial court committed an error of law in holding the appellant liable.
(Decision of December 23, 19881; Official Gazette of April 14, 1882.)

See also the recent decision of the Tribunal Supremo de España dated July 11, 1906,
wherein the doctrine is reaffirmed in a case involving the alleged negligence of certain
railroad employees in handling railroad cars.

Doubtless a presumption of negligence will frequently arise from the very fact that an
accident occurred at the time when the accused was violating a regulation; especially
if the regulation has for its object the avoidance of such an accident. But this
presumption may, of course, be rebutted in criminal as well as in civil cases by
competent evidence. In the Federal Court of the United States the rule is stated as
follows:

Where a ship at the time of collision is in actual violation of a statutory rule intended to
prevent collisions the burden is upon her of showing that her fault could not have
been a contributory cause of the collision. (7 Cyc., 370 and numerous other cases
there cited.)

TRANSPORTATION LAW – Chapter 2 & 3

37.) G.R. No. L-20047 August 25, 1923
MARCIANO RALLOS, Plaintiff-Appellee, vs. PHILIPPINE RAILWAY
CO., Defendant-Appellant.
[Plaintiff is house owner across the house of that burned that is adjacent to train of
respondent. 2 houses of his got burned- Issue: Is the respondent company liable to
his houses being burned?- Ruling: a.) Respondent was at fault for not having a
spark-arrester at their engine and was the proximate cause of the fire b.) they were
also guilty of negligence for allowing such houses to be built so near their tracks-
Ratio: Respondent liable for damages]
This is an action to recover damages resulting from a fire on June 29, 1921, alleged
to have been caused by sparks emitted from a locomotive of the defendant. The
complaint alleges negligence, first, in allowing dangerous combustible materials to
accumulate on its right of way, and in permitting several nipa houses to be
constructed close to its rail road track; second, in not providing engine No. 33 with a
spark-arrester; third, in using wood in the engine as fuel; and, fourth, in negligently
operating the engine causing large amounts of sparks and cinders to emit from its
chimney, which kindled the fire that destroyed the house of Tomas Diores and the
houses of the plaintiff and other persons.
For answer, the defendant made a general denial, and, as a special defense, alleges
the proper equipment and management of its engine, and the contributory negligence
of the plaintiff in allowing his two houses to stand 19 and 30 meters, respectively,
from the railroad track. The defendant denies the use of wood for fuel in engine No.
33 on the day in question, although it admits it did use wood in all of its other engines.
It also admits that engine No. 33 was not provided with spark-arrester, but claims that
the engine does not need one. The defendant also admits that nipa houses were
constructed very close to its track, and that it had formerly collected rents from the
houses. But at the time in question, it had ceased to collect rents, and had advised
the occupants to vacate the premises. It also admits that the houses of the plaintiff
were not built on defendant's right of way, but on his own lot, and it appears that they
were built long before the existence of the defendant as a corporation. The plaintiff
claims and damages in the sum of P6,127.
As a result of a long and tedious trial, the lower court rendered judgment for the
plaintiff in the sum of P3,000, with interest at the rate of 6 per cent per annum from
the filing of the complaint and costs, from which the defendant appeals, assigning
thirteen different errors, in substance, that the court erred in finding that the fire was
due to the negligence of the defendant in the operation of its engine; to the origin of
the fire was due to the emission of sparks from the engine; that the engine should be
equipped with a spark-arrester; that it emitted sparks, as alleged; that the fuel used
was wood instead of coal; that at or about the time of the fire, sparks were seen to be
emitted from the smoke stack of the locomotive; that at the time the engine was
hauling three loaded cars, and in filing to find that the plaintiff was guilty of
TRANSPORTATION LAW – Chapter 2 & 3
contributory negligence, and that the law of railroads is not a force, and in its
valuation of the property destroyed; and in not finding for the defendant.
The amount involved on this appeal is only P3,000, and costs, but it appears from the
record that a number of other case are pending against the company to recover
damages resulting from the same fire, amounting in the aggregate to more than
P10,000, and, for such reasons, and on account of its importance, this case has been
considered in banc.
Both parties have filed able and exhaustive briefs. In a well- written opinion, his
Honor, Judge Adolph Wislizenus, made the following analysis of the facts:
This is a suit for damages caused by the destruction by fire of two houses belonging
to plaintiff. Plaintiff's houses were built long before the construction of defendant's
railroad and even before defendant's existence as a corporation. They stood on land
not belonging to defendant on the north side of Calle Panganiban in Cebu city facing
south, this street having a general east and west course. On the south of Calle
Panganiban a very few feet south is the track and railway of the defendant, which
runs along and more or less parallel with Calle Panganiban. Near these trucks and on
the railroad road bed stood the house of Tomas Diores which faced Calle Panganiban
and extended to within a few feet of the south of side of Calle Panganiban. Almost
opposite the house and on the north side of Calle Panganiban which is here only
twenty feet wide stood the two houses of plaintiff. "Along the railroad track described
defendant was in the habit of running or operating a switch track with engines with or
without cars, from the wharf in Cebu city to its main station in Cebu and vice versa.
The land between defendant's tracks and the south side of Calle Panganiban was all
of it except a bolt of a few feet in width near the south side of Calle Panganiban the
property of defendant acquired by condemnation proceedings. This land belonging to
the defendant, at the date complained of, was occupied by a number of houses
including the house of Tomas Diores, mostly of light materials, some of them with
wooden partitions, others with a bamboo partitions, but all with nipa thatched roofs.
These houses were some of them of persons owning the land on which they stood
before the defendant acquired the land by condemnation proceedings; others
belonged to people who were allowed to "squat" by defendant.
On June 29, 1921, at about 9.30 a. m., a "pony engine" owned and operated by
defendant passed along the tracks described (also owned and operated by
defendant) going from the Cebu city wharf to the main station in the same place. It
carried three heavily loaded roof freight cars - one loaded with cross ties and the
other two with wood for fuel (called "rajas" in Cebu). There is some testimony that the
engine drew four or five cars but the court finds that they did not exceed three in
number.
As the cars passed along the tracks parallel with Calle Panganiban from a point
known as Forbes Bridge (where Calle Magallanes is carried over the tracks) it passed
the house of one Tomas Diores. This house was situated across Calle Panganiban
(20 feet wide at the place) and on the south side of said street. Opposite to it and on
the north side of Calle Panganiban were plaintiff's houses. Diores' house was almost
in contact with defendant's tracks. It had a nipa roof. A few charred near harigues of
Diores' house are still to be seen within twenty feet of the nearest rail. The eaves of
its roof were (before the fire) within five feet of the near rail. As one witness said "it
was possible from Diores' house to pull off a stick off the cars loaded with wood as
they passed." The rear part of Diores' house stood on defendant's land and a portion
of the front part of Diores' house reached to within a few feet of the south line of
Panganiban street separated from plaintiff's houses which stood on the north side of
Panganiban street by the width of said street, i. e., some twenty
feet.chanroblesvirtualawlibrary chanrobles virtual law library
As the engine and cars passed the house of Tomas Diores clouds of smoke poured
from the smoke stack of the engine which was not provided with a spark-arrester. The
south wind was blowing strongly, and blew the smoke which carried numerous
cinders hot and incandescent to the nipa roof of Tomas Diores' house which almost
touched the tracks. Before the train had proceeded more than a few hundred yards
(toward Calle Colon) the wind had fanned these sparks and cinders into flames, the
roof of Diores' house visibly burning and the cry of "fire!" was raised. The upper part
of the house ("los altos") was locked and unoccupied. The lower part ("los bajos")
was occupied by a lavandera  who had not made any fire in the "fogon" that morning
having made a breakfast of cold rice left over from the evening before. This woman
describes the time which elapsed from the passing of the train till the cry of "fire" was
raised quite graphically. She was counting laundry pieces as the train went by and
had not counted a hundred pieces (laundry is charged for by the hundreds in Cebu)
before the cry of "fire!" was raised. From the house of Diores the fire spread by
sparks carried by the wind to other houses which were standing near (much less than
a stone's throw) from Diores' house. From these houses the fire spread across
Panganiban street (twenty feet wide at that place) to plaintiff's houses on the north
side of Panganiban street which were destroyed by the fire before assistance could
be rendered by the firemen.
Considerable stress was laid in the course of argument whether at the time in
question the engine was using wood or coal as fuel. The court is inclined to believe
that wood was used as fuel, at least immediately before and while passing the house
of Tomas Diores. Whether wood or coal was used as fuel, the court has no doubt that
the fire started in the roof of Diores' house by hot sparks and cinders carried in the
smoke cloud which issued from the smoke stack of engine number 33 unprovided, as
heretofore stated, with a spark-arrester. Furthermore defendant was guilty of
negligence in allowing the house of Tomas Diores ( and those of others) to remain on
its land in such close proximity to its railroad tracks that the only wonder is that the
fire did not happen long ago. Indeed from a remark dropped by one of the witnesses
(though perhaps not relevant in fixing the blame in this case) quite a number of fires
have occurred at the place from the same alleged causes. Of course plaintiff (whose
houses did not stand on defendant's land) is not responsible for negligence in that
regard.
It is true that defendant sent formal notices to Diores and others (no plaintiff) to
remove their houses from its land, but no real effort (by suing defendants in ejectment
in justice's court) was made until after the fire complained of.
TRANSPORTATION LAW – Chapter 2 & 3
There is no attempt to deny that engine 33 was unprovided with a spark-arrester. The
court can take judicial notice of the fact that a locomotive engine unprovided with a
spark-arrester is likely to throw sparks and cause fires. The court takes judicial
knowledge that for many years ordinary caution has exacted the use of spark-arrester
on engines passing near combustible materials. No amount of "expert" testimony can
affect that knowledge.
Defendant has offered an ocular inspection to prove that engine number 33 can go
along its tracks at the site of the fire in question, without emitting sparks or hot cinders
from its smoke stack. This appears to be begging the question. The court has no
doubt that with special care as to fuel and firing (not exercised on June 29, 1921)
engine number 33 can  pass the site of Diore's house without showering the adjoining
houses and territory with dangerous sparks specially if the day appointed for the
"demonstration" be wind-still and not with a strong south wind blowing as on June 29,
19221. In fact defendant's contention that engine 33 could  have avoided throwing out
sparks calls upon it to explain why on June 29, 1921, it did not do so. On that point
testimony of plaintiff's witnesses as to what did happen with engine sparks and
houses on June 29, 1921, outweights - in the court's opinion - the testimony of those
defendant's witnesses calling themselves experts (without being ocular witnesses) as
to what should or even could have happened on that day.
As to the value of plaintiff's two houses destroyed by the fire, started by defendant's
negligence, plaintiff claims one to have been worth P5,000 and the other to have
been worth P1,000 and their furniture to have been worth P154. Before the plaintiff
had valued these properties for taxation purposes at P2,100 and P50 respectively.
Afterwards (before the fire) plaintiff had obtained a reduction of this valuation to
P1,200 and P50. In the United States the veriest "runts" are apt to developed into
pedigreed stock if killed on the railroad tracks. Something of this kind has evidently
happened in this case. As a rule in this jurisdiction the assessed value of property for
taxation purposes is one-half or one-third of its selling value. The court believes that
P3,000 represents the reasonable value of plaintiff's property (two houses and
furniture) destroyed by the fire.
All of such findings are well supported by the evidence. In fact the record shows an
aggravated case of negligence on the part of the defendant. Under the conditions
then and there existing, a fire of this nature could have happened at almost any time.
Among others defenses, the defendant relies upon a Royal Decree promulgated on
the 23d of November, 1877. Article 11 of that Decree provides as follows:
Whenever there are individual rights existing prior to the establishment of a railroad or
to the promulgation of this act which after its passage cannot be created and are to
be abolished of the need or use of the railroads, the rules for condemnation
proceedings on account of public utility provided for in the Act of July 17, 1836, the
provisions of the act on public works and the administrative regulations to enforce it
should be observed.
The record here is conclusive that the plaintiff's houses were on his own property,
and that they were constructed before the railroad was built or even the company was
organized. It is also conclusive that for some time previous to the fire, the defendant
was the owner of land adjoining its track, upon which a number of houses stood
within a few feet of the track, and from which it was collecting rents. In other words,
by its own acts, the defendant was violating the spirit and intent of the Royal Decree
of 1877, to protect railroad property from loss by fire. Where, as in the instant case,
the violation of the Royal Decree by the defendant was the proximate cause of the
injury, it may well be doubted whether the Decree could be invoked as defense to the
action. Be that as it may, article 11 above quoted simply provides that, in such cases,
the property of adjoining owners can be condemned and taken by the payment of its
value. In no event, without condemnation proceedings, could the Royal Decree of
1877 be made to apply to houses which were constructed before the railroad was
built, and which became adjoining property by the building of the railroad.

The proof is conclusive that the fire was caused by sparks emitted from one of
defendant's engines, which set fire to one of its own houses standing within a few feet
of its track, resulting in the destruction of a large amount of adjoining property. The
evidence shows a clear case of negligence on the part of the defendant.

TRANSPORTATION LAW – Chapter 2 & 3

38.) G.R. No. 157658               October 15, 2007
PHILIPPINE NATIONAL RAILWAYS and VIRGILIO J. BORJA, Petitioners,
vs. COURT OF APPEALS (Second Division), CORAZON C. AMORES, MA.
EMILIE A. MOJICA, CECILE C. SISON, DINO C. AMORES, LARISA C. AMORES,
ARMAND JINO C. AMORES and JOHN C. AMORES, Respondents.
[Jose Amores driving a car crossed an intersection then was hit by petitioner train and
died in Pandacan, Manila. PRs are his heirs that filed the complaint for damages.
RTC ruled in favor of PNR, CA reversed- Issue: Is petitioner liable to the family?-
Ruling: a.) Train was running at a fast speed as it stopped quite a distance from the
point of impact b.) PNR did not have a cross-bar, flagman, semaphore, and all they
had was a dilapidated stop look and listen sign (listen was lacking, look was bent) c.)
cars are expected to exercise due diligence in crossing but is not required to stop if
there are no signs for such crossing, in this case it was proven the petitioner did
indeed slowed down and stopped. d.) presumption of negligence of PNR as an
employer vs quasi-delict not overcame- Ratio: petition denied, PNR liable ]
In the early afternoon of April 27, 1992, Jose Amores (Amores) was traversing the
railroad tracks in Kahilum II Street, Pandacan, Manila. Before crossing the railroad
track, he stopped for a while then proceeded accordingly.3 Unfortunately, just as
Amores was at the intersection, a Philippine National Railways’ (PNR) train with
locomotive number T-517 turned up and collided with the car.
At the time of the mishap, there was neither a signal nor a crossing bar at the
intersection to warn motorists of an approaching train. Aside from the railroad track,
the only visible warning sign at that time was the defective standard signboard
"STOP, LOOK and LISTEN" wherein the sign "Listen" was lacking while that of "Look"
was bent.5 No whistle blow from the train was likewise heard before it finally bumped
the car of Amores.6 After impact, the car was dragged about ten (10) meters beyond
the center of the crossing.7 Amores died as a consequence thereof.
On July 22, 1992, the heirs of Amores, consisting of his surviving wife and six
children, herein respondents, filed a Complaint for Damages8 against petitioners PNR
and Virgilio J. Borja (Borja), PNR’s locomotive driver at the time of the incident, before
the RTC of Manila. The case was raffled to Branch 28 and was docketed as Civil
Case No. 92-61987. In their complaint, respondents averred that the train’s
speedometer was defective, and that the petitioners’ negligence was the proximate
cause of the mishap for their failure to take precautions to prevent injury to persons
and property despite the dense population in the vicinity. They then prayed for actual
and moral damages, as well as attorney’s fees.9
In their Answer,10 the petitioners denied the allegations, stating that the train was
railroad-worthy and without any defect. According to them, the proximate cause of the
death of Amores was his own carelessness and negligence, and Amores wantonly
disregarded traffic rules and regulations in crossing the railroad tracks and trying to
beat the approaching train. They admitted that there was no crossing bar at the site of
TRANSPORTATION LAW – Chapter 2 & 3
the accident because it was merely a barangay road.11 PNR stressed that it exercised
the diligence of a good father of a family in the selection and supervision of the
locomotive driver and train engineer, Borja, and that the latter likewise used
extraordinary diligence and caution to avoid the accident. Petitioners further asserted
that respondents had the last clear chance to avoid the accident but recklessly failed
to do so.
After trial on the merits, on August 22, 1996, the RTC rendered judgment in favor of
the petitioners, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered dismissing the complaint of the plaintiffs
and the defendants’ counterclaim.
The counsel for the defendants is hereby ordered to inform this court who is the legal
representative of the deceased defendant, Virgilio Borja, within ten (10) days from
receipt of a copy of this decision.
The RTC rationalized that the proximate cause of the collision was Amores’ fatal
misjudgment and the reckless course of action he took in crossing the railroad track
even after seeing or hearing the oncoming train.
On appeal, the CA reversed the RTC decision, as follows:
In reversing the trial court’s decision, the appellate court found the petitioners
negligent. The court based the petitioners’ negligence on the failure of PNR to install
a semaphore or at the very least, to post a flagman, considering that the crossing is
located in a thickly populated area. Moreover, the signboard "Stop, Look and Listen"
was found insufficient because of its defective condition as described above. Lastly,
no negligence could be attributed to Amores as he exercised reasonable diligence in
crossing the railroad track.
Aggrieved by this reversal, the petitioners filed the present petition for review on
certiorari, raising the following grounds:
…
The petitioners insist that Amores must have heard the train’s whistle and heeded the
warning but, noting that the train was still a distance away and moving slowly, he
must have calculated that he could beat it to the other side of the track before the
train would arrive at the intersection. The petitioners likewise add that the train was
railroad-worthy and that its defective speedometer did not affect the train’s operation.
Lastly, they insist that evidence showed sufficient warning signs strategically installed
at the crossing to alert both motorists and pedestrians.
Respondents, on the other hand, argue that the cause of the accident was petitioners’
carelessness, imprudence and laxity in failing to provide a crossing bar and keeper at
the Kahilum II railway intersection. Considering that Kahilum II Street is in the middle
of a thickly populated squatters’ area, and many pedestrians cross the railroad track,
notwithstanding the fact that it is a public street and a main thoroughfare utilized in
going to Herran Street, the presence of adequate warning signals would have
prevented the untimely death of Amores. Another crucial point raised by the
respondents is the manner in which Borja applied the brakes of the train only when
the locomotive was already very near Amores’ car, as admitted by witness Querimit.
Finally, respondents claim that Borja’s failure to blow the locomotive’s horn, pursuant
to the usual practice of doing the same 100 meters before reaching the Kahilum II
crossing point is an earmark of recklessness on the part of the petitioners.
The petition must fail.
The only issue to be resolved in the present case is whether the appellate court was
correct in ascribing negligence on the part of the petitioners. It was ascertained
beyond quandary that the proximate cause of the collision is the negligence and
imprudence of the petitioner PNR and its locomotive driver, Borja, in operating the
passenger train.
As the action is predicated on negligence, the relevant provision is Article 2176 of the
New Civil Code, which states that:
Whoever by act or omission causes damage to another, there being fault or
negligence, is obliged to pay for the damage done. Such fault or negligence, if there
was no pre-existing contractual relation between the parties, is called quasi-delict and
is governed by the provisions of this chapter.
We have thoroughly reviewed the records of the case and we find no cogent reason
to reverse the appellate court’s decision. Negligence has been defined as "the failure
to observe for the protection of the interests of another person that degree of care,
precaution, and vigilance which the circumstances justly demand, whereby such other
person suffers injury."15 Using the aforementioned philosophy, it may be reliably
concluded that there is no hard and fast rule whereby such degree of care and
vigilance is calibrated; it is dependent upon the circumstances in which a person finds
himself. All that the law requires is that it is perpetually compelling upon a person to
use that care and diligence expected of sensible men under comparable
circumstances.16
We hold that the petitioners were negligent when the collision took place. The
transcript of stenographic notes reveals that the train was running at a fast speed
because notwithstanding the application of the ordinary and emergency brakes, the
train still dragged the car some distance away from the point of impact. Evidence
likewise unveils the inadequate precautions taken by petitioner PNR to forewarn the
public of the impending danger. Aside from not having any crossing bar, no flagman
or guard to man the intersection at all times was posted on the day of the incident. A
reliable signaling device in good condition, not just a dilapidated "Stop, Look and
TRANSPORTATION LAW – Chapter 2 & 3
Listen" signage because of many years of neglect, is needed to give notice to the
public. It is the responsibility of the railroad company to use reasonable care to keep
the signal devices in working order. Failure to do so would be an indication of
negligence.
As held in the case of Philippine National Railway v. Brunty,17 it may broadly be stated
that railroad companies owe to the public a duty of exercising a reasonable degree of
care to avoid injury to persons and property at railroad crossings, which duties pertain
both to the operation of trains and to the maintenance of the crossings. Moreover,
every corporation constructing or operating a railway shall make and construct at all
points where such railway crosses any public road, good, sufficient, and safe
crossings, and erect at such points, at sufficient elevation from such road as to admit
a free passage of vehicles of every kind, a sign with large and distinct letters placed
thereon, to give notice of the proximity of the railway, and warn persons of the
necessity of looking out for trains.18 The failure of the PNR to put a cross bar, or
signal light, flagman or switchman, or semaphore is evidence of negligence and
disregard of the safety of the public, even if there is no law or ordinance requiring it,
because public safety demands that said device or equipment be installed.
The petitioners insist that a train has a right-of-way in a railroad crossing under the
existing laws. They derive their theory from Section 42 (d), Article III of R.A. 4136,
otherwise known as the Land Transportation and Traffic Code, which states that:
The driver of a vehicle upon a highway shall bring to a full stop such vehicle before
traversing any "through highway" or railroad crossing: Provided, That when it is
apparent that no hazard exists, the vehicle may be slowed down to five miles per hour
instead of bringing it to a full stop.
They claim that motorists are enjoined by law to stop, look and listen before crossing
railroad tracks and that a heavier responsibility rests upon the motorists in avoiding
accidents at level crossings.
It is true that one driving an automobile must use his faculties of seeing and hearing
when nearing a railroad crossing. However, the obligation to bring to a full stop
vehicles moving in public highways before traversing any "through street" only
accrues from the time the said "through street" or crossing is so designated and sign-
posted. From the records of the case, it can be inferred that Amores exercised all the
necessary precautions required of him as to avoid injury to himself and to others. The
witnesses’ testimonies showed that Amores slackened his speed, made a full stop,
and then proceeded to cross the tracks when he saw that there was no impending
danger to his life. Under these circumstances, we are convinced that Amores did
everything, with absolute care and caution, to avoid the collision.
It is settled that every person or motorist crossing a railroad track should use ordinary
prudence and alertness to determine the proximity of a train before attempting to
cross. We are persuaded that the circumstances were beyond the control of Amores
for no person would sacrifice his precious life if he had the slightest opportunity to
evade the catastrophe. Besides, the authority in this jurisdiction is that the failure of a
railroad company to install a semaphore or at the very least, to post a flagman or
watchman to warn the public of the passing train amounts to negligence.

In view of the foregoing, We will now discuss the liability of petitioner PNR. Article
218020 of the New Civil Code discusses the liability of the employer once negligence
or fault on the part of the employee has been established. The employer is actually
liable on the assumption of juris tantum that the employer failed to exercise
diligentissimi patris families in the selection and 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
demonstrated.21 Even the existence of hiring procedures and supervisory employees
cannot be incidentally invoked to overturn the presumption of negligence on the part
of the employer.22

WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals dated
March 31, 2003 in CA-G.R. CV No. 54906 is hereby AFFIRMED.

TRANSPORTATION LAW – Chapter 2 & 3

39.) G.R. No. 70547 January 22, 1993
PHILIPPINE NATIONAL RAILWAYS and HONORIO CABARDO, petitioners,
vs. INTERMEDIATE APPELLATE COURT, and BALIWAG TRANSIT,
INC., respondents.
[PNR train going from LU to Manila. Baliwag bus going from Manila to Bulacan.
Collided in a busy intersection in Bulacan. 18 died 53 injured. Lower courts ruled in
favor of Baliwag- Issue: who is at fault?- Ruling: a.) bus driver practiced
diligence/precautions before crossing, they stop look and listen before crossing b.)
defendant was running at a fast speed, even if not required they shall regulate their
speed given the circumstances such as this one c.) Given the circumstances as well,
their failure to put a cross-bar, flagman, semaphore, or signal lights shows
negligence as they are required to observe public safety d.) Train has the last clear
chance to avoid, bus was stuck e.) PNR as a GOCC is not immune from suit f.)
PNR is liable for making a person who just finished primary education a
motorman- Ratio: Petition dismissed, PNR liable ]
The imputation of culpa on the part of herein petitioners as a result of the collision
between its train, bound for Manila from La Union, with a Baliwag transit bus at the
railroad crossing on the road going to Hagonoy, Bulacan on August l0, 1974, is the
subject of the petition at bar directed against the judgment of affirmance rendered by
respondent court, through the Fourth Civil Cases Division (Sison, Bidin (P), Veloso,
JJ.), vis-a-vis  the decretal portion handed down by the court of origin in:
1. Ordering the defendants, jointly and severally to pay the plaintiff the amount of
P179,511.52 as actual damages.
…
The case arose from a collision of a passenger express train of defendant Philippine
National Railways, (PNR) coming from San Fernando, La Union and bound for Manila
and a passenger bus of Baliwag Transit, Inc. which was on its way to Hagonoy,
Bulacan, from Manila, but upon reaching the railroad crossing at Barrio Balungao,
Calumpit, Bulacan at about 1:30 in the afternoon of August 10, 1974, got stalled and
was hit by defendant's express train causing damages to plaintiff's bus and its
passengers, eighteen (18) of whom died and fifty-three (53) others suffered physical
injuries. Plaintiff alleging that the proximate cause of the collision was the negligence
and imprudence of defendant PNR and its locomotive engineer, Honorio Cirbado, in
operating its passenger train in a busy intersection without any bars, semaphores,
signal lights, flagman or switchman to warn the public of approaching train that would
pass through the crossing, filed the instant action for Damages against defendants.
The defendants, in their Answer traversed the material allegation of the Complaint
and as affirmative defense alleged that the collision was caused by the negligence,
imprudence and lack of foresight of plaintiff's bus driver, Romeo Hughes.
TRANSPORTATION LAW – Chapter 2 & 3
At the pre-trial conference held on June 23, 1976, the parties agreed on a partial
stipulation of facts and issues which as amplified at the continuation of the pre-trial
conference, on July 12, 1976, are as follows:
1 That plaintiff is a duly constituted corporation registered with the Securities and
Exchange Commission engaged in the business of transportation and operating
public utility buses for the public with lines covering Manila, Caloocan City, Quezon
City, Malabon, Rizal, Bulacan, Pampanga and Nueva Ecija, and particularly from
Manila to Hagonoy, Bulacan and return in the month of August, l974 passing thru the
town of Calumpit Bulacan, temporarily while the bridge at Hagonoy, Bulacan was
under construction;
2 That defendant Philippine National Railways is a purely government owned and
controlled corporation duly registered and existing virtue of Presidential Decree No.
741, with capacity to sue and be sued, and is likewise engaged in transporting
passengers and cargoes by trains and buses and that, it operates a train line between
San Fernando, La Union and Manila particularly Passenger Express Train with Body
No. 73, passing along the intersection of Barrio Balungao, Calumpit, Bulacan, in
going to San Fernando, La Union from Manila and return;
3. That on August 10, 1974, at about 1:20 o'clock in the afternoon, a Baliuag Transit
Bus with Body No. 1066 and Plate No. XS-929 PUB-Bulacan '74 was driven by its
authorized driver Romeo Hughes and PNR Train No. 73 was operated by Train
Engineer Honorio Cabardo alias Honorio Cirbado and at the railroad intersection at
Barrio Balungao, Calumpit, Bulacan, said passenger train No. 73 hit and bumped the
right mid portion of the plaintiff's passenger bus No. 1066, while the rear portion of
said bus was at the railroad track and its direction was towards Hagonoy, Bulacan at
about 1:30 o'clock in the afternoon;
4. That at the time of the collision there was a slight rainfall in the vicinity of the scene
of the accident and that there was at said intersection no bars, semaphores, and
signal lights that would warn the public of the approaching train that was about to
pass through the intersection and likewise there was no warning devices to passing
trains showing that they were about to pass an intersection in going to Manila from
San Fernando, La Union and back;
5. That on account of said collision, the Baliuag Transit Bus with Body No. 1066
driven by Romeo Hughes was damaged and eighteen (18) of its passengers died and
the rest who were more than fifty three (53) passengers suffered physical injuries;
6. That after the investigation the Chief of Police of Calumpit, Bulacan, filed a criminal
case of Reckless Imprudence Causing Multiple Homicide with Multiple Physical
Injuries and Damage to Property against Romeo Hughes y Parfan, driver of the
Baliuag Transit bus docketed under Crim. Case No. 2392; while the train Engineer
Honorio Cabardo alias Honorio Cirbado was not included as an accused in said case,
although his train No. 73 was the one that hit and bumped the right rear portion of the
said bus;
7. That immediately after the said accident Major Manuel A. Macam, Chief of the
Municipal Police of Calumpit, Bulacan, together with some of his policemen
conducted an investigation of the accident;
8. That at the railroad crossing in Calumpit, Bulacan where the accident took place
there is no railroad crossing bar, however, during the pre-war days there was a
railroad crossing bar at said intersection; that, however, there was only one sign of
railroad crossing "Stop, Look and Listen" placed on a concrete slab and attached to a
concrete post existing at the approach of the railroad track from the Highway going
towards Hagonoy, Bulacan and that after the said railroad track there was a
designated jeep parking area at the right side in the direction from the Highway to
Hagonoy Bulacan;
9. That the train No. 73 driven by Train Engineer Honorio Cabardo alias Honorio
Cirbado stopped after passing the railroad crossing at a distance of about 50 meters
from the said intersection after the collision on August, 1974;
10. That the expected time of arrival of said Train No. 73 in Manila was 2:41 P.M. and
its departure time from San Fernando, La Union was 9:00 A.M. and its expected
arrival at Calumpit, Bulacan was 1:41 P.M. with no stop at Calumpit, Bulacan.
SIMPLIFICATION OF ISSUES
11. That the principal issue in the instant case is who between the driver Romeo
Hughes of Baliuag Transit, Incorporated and the train engineer Honorio Cabardo alias
Honorio Cirbado of the Philippine National Railways was negligent or whether or not
both are negligent; that likewise which of said companies was negligent at said
railroad intersection;
12. That another additional issue is whether the Baliuag Transit Incorporated has
exercised the diligence of a good father of the family in the selection and supervision
of its employees. (pp.
85-87, Record on Appeal). ( Annex A, Petition; pp. 79-82, Rollo)
In addition, respondent court deemed it necessary to reflect the salient findings of the
case for damages as formulated by the trial court:
Posed for resolution are the following issues: Who between the driver Romeo Hughes
of the Baliuag Transit Incorporated and Honorio Cabardo, train Engineer of the
Philippine National Railways was negligent in the operation of their respective
vehicles, or whether or both were negligent? Could either of the companies Baliuag
Transit Incorporated and the Philippine National Railways be held accountable for the
collision because of negligence?
… distance in so short a time if it were not running at fast speed.
TRANSPORTATION LAW – Chapter 2 & 3
Defendants endeavored to show that the proximate and immediate cause of the
collision was the negligence of the bus driver because the driver did not make a stop
before ascending the railtrack; he did not heed the warning or shoutings of
bystanders and passengers and proceeded in traversing the railtrack at a fast speed;
that the bus driver was in fact violating Section 42(d) of R.A. 4136, otherwise known
as the Land Transportation and Traffic Code for failure to "stop, look, and listen" at
the intersection, before crossing the railtrack; that it is incumbent upon him to take the
necessary precautions at the intersection because the railroad track is in itself a
warning; and the bus driver ignored such a warning and must assume the
responsibility for the result of the motion taken by him (U.S. v. Mananquil, 42 Phil. 90)
Except the testimony of the train engineer Cabardo, there is no admissible evidence
to show that indeed, the bus driver did not take the necessary precaution in traversing
the track. Note that he first noticed the bus when it was only 15 meters away from
him; he could not have possibly noticed the position of the bus before negotiating the
track.
On the other hand, it was shown by plaintiff that the bus driver Romeo Hughes took
the necessary precautions in traversing the track.
The bus driver had stopped before traversing the track and in fact asked the
conductor to alight and made a "Look and Listen" before proceeding; the conductor
had done just that and made a signal to proceed when he did not see any oncoming
train. (TSN, October 2l, 1976, p. 4); plaintiff's bus drivers and conductors are enjoined
to observe such a precautionary measure in seminars conducted by the company.
(TSN, September 23, 1976. pp. 26-27).
The evidence disclosed that the train was running fast because by his own testimony,
the train engineer had testified that before reaching the station of Calumpit the terrain
was downgrade and levelled only after passing the Calumpit bridge (TSN, July 28,
1976, p. 14 ); the tendency of the train, coming from a high point is to accelerate as
the gravity will necessarily make it so, especially when it is pulling seven coaches
loaded with goods and passengers.
Moreover, upon impact, the bus loaded with passengers was dragged and thrown into
a ditch several meters away; the train had stopped only after the engine portion was
about 190 meters away from the fallen bus; several passengers were injured and at
least 20 died; such facts conclusively indicate that the train was speeding, because if
it were moving at moderate speed, it would not run some 190 meters after impact and
throw the bus at quite a distance especially so when it is claimed that the train's
emergency brakes were applied.
Further, the train was an express train; its departure was 9:00 A.M. at San Fernando,
La Union and expected in Manila at 2:41 P.M.; the collision occurred at 1:30 P.M. or 4
1/2 hours after it left La Union; surely, the train could have not negotiated such a
It may be argued that a railroad is not subject to the same restrictions to the speed of
its train as a motorists (Mckelvey v. Delaware L. and W.R. Co. 253 App. D.V. 109,
300 NYS 1263 ); but it does not follow that a train will be permitted to run fast under
all conditions at any rate of speed it may choose. It must regulate its speed with
proper regard for the safety of human life and property (Johnson v. Southern Pacific
Company (Cal. App. 288 p. 81), considering the surrounding circumstances
particularly the nature of the locality (Atchinson, T. and SFR Co. v. Nicks (Arts) 165 p.
2d 167).
Cabardo's route included the passage over the said intersection; he could have
noticed that it is a very busy intersection because the crossroad leads to the Calumpit
Poblacion as well as to the neighboring town of Hagonoy; there was a parking lot by
the side of the track whereat passengers board jeepneys for the neighboring barrios
and towns; stalls abound in the vicinity and bystanders congregate nearby. A prudent
train operator must, under the circumstances, slacken his speed almost for the
protection of motorists and pedestrians, not only when a collision is inevitable but
even if no hindrance is apparent on the way;
Moreover, there was an intermittent rain at the time of the collision (see stipulation of
facts and photographs); the condition of the weather was such that even if for this
reason alone, the train engineer should have foreseen that danger of collision lurked
because of poor visibility of slippery road; he should have taken extra precaution by
considerably slackening its speed. This he failed to do even if the nature of his job
required him to observe care exercised by a prudent man.
Contributory negligence may not be ascribed to the bus driver; it was evident that he
had taken the necessary precautions before passing over the railway track; if the bus
was hit, it was for reasons beyond the control of the bus driver because he had no
place to go; there were vehicles to his left which prevented him in swerving towards
that direction; his bus stalled in view of the obstructions in his front where a sand and
gravel truck stopped because of a jeep maneuvering into a garage up front. All the
wheels at the bus have already passed the rail portion of the track and only the rear
portion of the bus' body occupied or covered the railtrack. This was evident because
the part of the bus hit by the train was the rear since the bus fell on a nearby ditch.
Otherwise, if the bus was really hit in mid-body, the bus could have been halved into
two because of the force of the impact.
The stipulation of facts between the parties show that there was no crossing bar at
the railroad intersection at Calumpit, Bulacan at the time of collision (par. 8,
Stipulation of Facts); the plaintiff contended and the defendants did not deny, that
there were no signal lights, semaphores, flagman or switchman thereat; the absence
of such devices, the plaintiff argues constitute negligence on the part of the Philippine
National Railways.
A railroad is not required to have a gate (crossing bar) or a flagman, or to maintain
signals at every intersection; only at such places reasonably necessary; what is
considered reasonably necessary will depend on the amount of travel upon the road,
the frequency with which trains pass over it and the view which could be obtained of
trains as they approach the crossing, and other conditions (Pari v. Los Angeles, Ry.
TRANSPORTATION LAW – Chapter 2 & 3
Corporation (Cal A2d) 128 p2d 563; Swdyk v. Indiana Harbor Belt R. Co. 148 F. 2d
795, and others).
As has been amply discussed, the crossroad at the intersection at Calumpit is one
which is a busy thoroughfare; it leads to the Poblacion at Calumpit and other barrios
as well as the town of Hagonoy; the vicinity is utilized as a parking and waiting area
for passengers of jeepneys that ply between the barrios, clearly, the flow of vehicular
traffic thereat is huge. It can be said also that, since there is no other railtrack going
North except that one passing at Calumpit, trains pass over it frequently;
A portion of the intersection is being used as a parking area with stalls and other
obstructions present making it difficult, if not impossible, to see approaching trains
(see photographs).
The failure of the Philippine National Railways to put a cross bar, or signal light,
flagman or switchman, or semaphores is evidence of negligence and disregard of the
safety of the public, even if there is no law or ordinance requiring it, because public
safety demands that said devices or equipments be installed, in the light of aforesaid
jurisprudence. In the opinion of this Court the X sign or the presence of "STOP,
LOOK, LISTEN" warnings would not be sufficient protection of the motoring public as
well as the pedestrians, in the said intersection;
The parties likewise have stipulated that during the pre-war days, there was a railroad
crossing bar at the said intersection (Par-8, Stipulation of Facts). It appears that it was
a self imposed requirement which has been abandoned. In a case it was held that
where the use of a flagman was self imposed, the abandonment thereof may
constitute negligence. (Fleming v. Missouri and A. Ry. Co. 198 ARDC 290, 128 S.W.
2d 286 and others; cited in Sec. 1082 SCRWARTZ, Vol. 2). Similarly, the
abandonment by the PNR of the use of the crossing bar at the intersection at
Calumpit constitutes negligence, as its installation has become imperative, because
of the prevailing circumstances in the place.
On the aspect of whether the Philippine National Railways enjoys immunity from suit,
respondent court initially noted that an exculpation of this nature that was raised for
the first time on appeal may no longer be entertained in view of the proscription under
Section 2, Rule 9 of the Revised Rules of Court, apart from the fact that the lawyer of
petitioner agreed to stipulate inter alia  that the railroad company had capacity to sue
and be sued. This being so, respondent court continued, PNR was perforce estopped
from disavowing the prejudicial repercussion of an admission in judicio. Even as the
laws governing the creation and rehabilitation of the PNR were entirely mute on its
power to sue and be sued, respondent court nonetheless opined that such
prerogative was implied from the general power to transact business pertinent or
indispensable to the attainment of the goals of the railroad company under Section 4
of Republic Act No. 4156 as amended by Republic Act No. 6366:
…
Thus, respondent court utilized the doctrine of implied powers announced in National
Airports Corporation vs. Teodoro, Sr. and Philippine Airlines, Inc. (91 Phil. 203
[1952]), to the effect that the power to sue and be sued is implicit from the faculty to
transact private business. At any rate, respondent court characterized the railroad
company as a private entity created not to discharge a governmental function but,
among other things, to operate a transport service which is essentially a business
concern, and thus barred from invoking immunity from suit.
In brushing aside petitioners' asseveration that the bus driver outraced the train at the
crossing, respondent court observed that the bus was hit by the train at its rear
portion then protruding over the tracks as the bus could not move because another
truck at its front was equally immobile due to a jeep maneuvering into a nearby
parking area. Under these tight conditions, respondent court blamed the train
engineer who admitted to have seen the maneuvering jeep at a distance (TSN, July
28, 1976, page 18) and had the last clear chance to apply the brakes, knowing fully
well that the vehicles following the jeep could not move away from the path of the
train. Apart from these considerations, it was perceived below that the train was
running fast during the entire trip since the train stopped 190 meters from the point of
impact and arrived at Calumpit, Bulacan earlier than its expected time of arrival
thereat.
Moreover, respondent court agreed with the conclusion reached by the trial court that
the absence of a crossing bar, signal light, flagman or switchman to warn the public of
an approaching train constitutes negligence per the pronouncement of this Court
in Lilius vs. Manila Railroad Company  (59 Phil 758 [1934]).
Concerning the exercise of diligence normally expected of an employer in the
selection and supervision of its employees, respondent court expressed the view that
PNR was remiss on this score since it allowed Honorio Cabardo, who finished only
primary education and became an engineer only through sheer experience, to
operate the locomotive, not to mention the fact that such plea in avoidance was not
asserted in the answer and was thus belatedly raised on appeal.
Petitioner moved to reconsider, but respondent court was far from persuaded. Hence,
the petition before Us which, in essence, incorporates similar disputations anent
PNR's immunity from suit and the attempt to toss the burden of negligence from the
train engineer to the bus driver of herein private respondent.
The bone of contention for exculpation is premised on the familiar maxim in political
law that the State, by virtue of its sovereign nature and as reaffirmed by constitutional
precept, is insulated from suits without its consent (Article 16, Section 3, 1987
Constitution). However, equally conceded is the legal proposition that the
acquiescence of the State to be sued can be manifested expressly through a general
or special law, or indicated implicitly, as when the State commences litigation for the
purpose of asserting an affirmative relief or when it enters into a contract
(Cruz, Philippine Political Law, 1991 edition, page 33; Sinco, Philippine Political Law,
Eleventh Edition, 1962, page 34). When the State participates in a covenant, it is
deemed to have descended from its superior position to the level of an ordinary
citizen and thus virtually opens itself to judicial process. Of course, We realize that
TRANSPORTATION LAW – Chapter 2 & 3
this Court qualified this form of consent only to those contracts concluded in a
proprietary capacity and therefore immunity will attach for those contracts entered into
in a governmental capacity, following the ruling in the 1985 case of United States of
America vs. Ruiz (136 SCRA 487 [1985]; cited by Cruz, supra at pages 36-37). But
the restrictive interpretation laid down therein is of no practical worth nor can it give
rise to herein petitioner PNR's exoneration since the case of Malong vs. Philippine
National Railways (138 SCRA 63, [1985]); 3 Padilla, 1987 Constitution with
Comments and Cases, 1991 edition, page 644), decided three months after Ruiz  was
promulgated, was categorical enough to specify that the Philippine National Railways
"is not performing any governmental function" (supra, at page 68).
In Malong, Justice Aquino, speaking for the Court en banc, declared:
The Manila Railroad Company, the PNR's predecessor, as a common carrier, was not
immune from suit under Act No. 1510, its charter.
…
To the pivotal issue of whether the State acted in a sovereign capacity when it
organized the PNR for the purpose of engaging in transportation, Malong  continued
to hold that:
. . . in the instant case the State divested itself of its sovereign capacity when it
organized the PNR which is no different from its predecessor, the Manila Railroad
Company. The PNR did not become immune from suit. It did not remove itself from
the operation of Articles 1732 to 1766 of the Civil Code on common carriers.
The correct rule is that "not all government entities, whether corporate or
noncorporate, are immune from suits. Immunity from suit is determined by the
character of the objects for which the entity was organized."
…
The point is that when the government enters into a commercial business it abandons
its sovereign capacity and is to be treated like any other private corporation (Bank of
the U.S. vs. Planters' Bank, 9 Wheat. 904, 6 L ed. 244, cited in Manila Hotel
Employees Association vs. Manila Hotel Company, et al., 73 Phil. 374, 388). The
Manila Hotel case also relied on the following rulings:
…
When the State acts in its proprietary capacity, it is amenable to all the rules of law
which bind private individuals.
…
It would be unjust if the heirs of the victim of an alleged negligence of the PNR What exacerbates against petitioners' contention is the authority in this jurisdiction to
employees could not sue the PNR for damages. Like any private common carrier, the the effect that the failure of a railroad company to install a semaphore or at the very
PNR is subject to the obligations of persons engaged in that private enterprise. It is least, to post a flagman or watchman to warn the public of the passing train amounts
not performing any governmental function. to negligence (Lilius vs. Manila Railroad Company, 59 Phil. 758 [1934]).

… WHEREFORE, the petition is hereby DISMISSED and the decision of respondent

court AFFIRMED.
We come now to the question of whether respondent court properly agreed with the
trial court in imputing negligence on the part of the train engineer and his employer.

It was demonstrated beyond cavil in the course of the pre-trial hearings held for the
purpose of stipulating on crucial facts that the bus was hit on the rear portion thereof
after it crossed the railroad tracks. Then, too the train engineer was frank enough to
say that he saw the jeep maneuvering into a parking area near the crossing which
caused the obstruction in the flow of traffic such that the gravel and sand truck
including the bus of herein private respondent were not able to move forward or to
take the opposite lane due to other vehicles. The unmindful demeanor of the train
engineer in surging forward despite the obstruction before him is definitely anathema
to the conduct of a prudent person placed under the same set of perceived danger.
Indeed:

When it is apparent, or when in the exercise of reasonable diligence commensurate

with the surroundings it should be apparent, to the company that a person on its track
or to get on its track is unaware of his danger or cannot get out of the way, it becomes
the duty of the company to use such precautions, by warnings, applying brakes, or
otherwise, as may be reasonably necessary to avoid injury to him. (65 Am. Jur.,
Second Edition. p. 649).

Likewise, it was established that the weather condition was characterized with
intermittent rain which should have prompted the train engineer to exercise extra
precaution. Also, the train reached Calumpit, Bulacan ahead of scheduled arrival
thereat, indicating that the train was travelling more than the normal speed of 30
kilometers per hour. If the train were really running at 30 kilometers per hour when it
was approaching the intersection, it would probably not have travelled 190 meters
more from the place of the accident (page 10, Brief for Petitioners). All of these
factors, taken collectively, engendered the concrete and yes, correct conclusion that
the train engineer was negligent who, moreover, despite the last opportunity within his
hands vis-a-vis the weather condition including the presence of people near the
intersection, could have obviated the impending collision had he slackened his speed
and applied the brakes (Picart vs. Smith, 37 Phil. 809 [1918]).Withal, these
considerations were addressed to the trial judge who, unlike appellate magistrates,
was in a better position to assign weight on factual questions. Having resolved the
question of negligence between the train engineer and the bus driver after collating
the mass of evidence, the conclusion reached thereafter thus commands great
respect especially so in this case where respondent court gave its nod of approval to
the findings of the court of origin (Co vs. Court of Appeals, 193 SCRA 198; 206
[1991]); Amigo vs. Teves, 50 O.G. 5799; Regalado, Remedial Law Compendium,
Fifth edition, page 353).

TRANSPORTATION LAW – Chapter 2 & 3

40.) G.R. No. L-37044             March 29, 1933
CONSOLACION JUNIO, plaintiff-appellant, vs. THE MANILA RAILROAD
COMPANY, defendant-appellee.
G.R. No. L-37045             March 29, 1933
BEATRIZ SOLORIA, plaintiff-appellant, vs. THE MANILA RAILROAD
COMPANY, defendant-appellee.
[Junio and Soloria, young women, filed a complant in CFI Pangasinan for an accident
between the automobile they were riding as passengers and a train by respondent
(going from Dagupan to Manila). As a result of the collision Junio’s right leg was
amputated and right arm fractured, Soloria suffered injuries to her head. Lower Court
ruled for defendant. Issue: Can the petitioners claim from the defendant? Is the
defendant negligent?- Ruling: a.) respondent negligent for not closing the gates
they installed by themselves when the collision happened b.) driver of automobile
also negligent for failing to stop look and listen, and for driving in a high speed c.)
If the action was filed by the driver of the automobile against the train, the action
would not prosper as they have contributory negligence. The question then is are
the passengers in this case able to sue the train or is their driver’s negligence
imputable to them barring an action for damages as well?; Negligence of driver
cannot be imputed to the passengers who has no control over him in the
management of the vehicle and where there is no relation of master and servant, thus
they can sue. Ratio: Respondent train owner liable for damages to plaintiffs ]
Consolacion Junio, a young woman 22 years of age, and Beatriz Soloria, another
young woman of 18 years, represented by her father, Faustino Soloria, who was
appointed her guardian ad litem, brought these actions in the Court of First Instance
of Pangasinan to recover from the defendant, Manila Railroad Company, damages
suffered by them in an accident that occurred at the railroad crossing situated at the
outskirts of the town of Calasiao, Pangasinan, when the automobile in which they
were passengers collided with a locomotive belonging to the aforementioned
defendant. This is an appeal taken by them from the judgment rendered by the trial
court absolving the defendant, without costs.
At about 11:40 o'clock on the night of April 13, 1930, the plaintiffs herein with some
other persons were traveling in a PU-Car on the road between Calasiao and Santa
Barbara. When they arrived at the intersection of the road of the defendant's railway,
the car tried to cross the track and collided while the engine of the night express
which left Dagupan for Manila at 11 o'clock that same night and which was then
passing over the crossing in question at great speed. As a result of the collision, the
car was thrown some distance, plaintiff Junio's right leg was amputated and her right
arm fractured, and Soloria received various injuries on her head.
The aforementioned crossing is situated in the town of Calasiao and the same is
presumed to be dangerous due to the fact that gates were required at that crossing.
TRANSPORTATION LAW – Chapter 2 & 3
(Section 83, Act No. 1459, as amended by Act No. 2100.) On the night of the
accident, the gates were not lowered and there was no notice to the effect that they
were not operated at night or that they were temporarily out of order. However, a
notice to the effect that that was a railroad crossing was there.
As a general rule, the rights and obligations between the public and a railroad
company at a public crossing are mutual and reciprocal. Both are under mutual
obligation to exercise due care to avoid causing or receiving injury. Each is in duty
bound to exercise reasonable or ordinary care commensurate with the risk and
danger involved.
In the case under consideration, the driver alleges that he slowed down from 19 miles
an hour, at which rate he was then going, to 16 miles, and that he was on the lookout
for any approaching train, while the engineer insists that he rang the bell and sounded
the whistle before reaching the crossing. Both parties claim to be free from guilt, and
if the defendant company were completely so, the plaintiffs would have no cause of
action against it.
In addition to the facts mentioned above, it has also been proved that the gate in
question was about three hundred (300) meters from the railroad station at Calasiao;
that on each side of the crossing there was a wooden bar operated only during the
daytime by a woman employee of defendant, and that just before the crossing on one
side, of the road leading from the town of Calasiao there was a signpost bearing the
notice, "RAILROAD CROSSING", written crosswise.
The evidence also show that the car driven by the chauffeur, Pedro Talbo, was an old
Ford bearing number plates. PU-3636, which meant that it was a hired car. The plate,
Exhibit 2, was found by the engineer on the side of the engine upon arrival at Paniqui,
the next station, which indicates that it was torn from the front of the radiator when the
auto collided with the right side of the engine of the night express.
The appellants were passengers who took the car in Bayambang and were bound for
Asingan, via Dagupan.
…
From the evidence, it is obvious that the defendant as well as the driver of the car in
which the plaintiffs were passengers were negligent, the former because, by installing
the gates at the place or crossing where the accident occurred, it had voluntarily
imposed upon itself the obligation to operate them even at night and to close them
every time a train passed in order to avoid causing injury to the public. It has been
said that the gates constitute an invitation to the public to pass without fear of danger,
and failure to operate them conveniently constitutes negligence on the part of the
company.
The driver was, likewise, negligent because he did not comply with his duty to slacken
the speed of the car and to "look and listen" before crossing the intersection and
above all, because he did not maintain a reasonable speed so as to permit him to
stop any moment if it were necessary in order to avoid an accident. If, in the present
case, the car had been running at a reasonable speed, there is no doubt that he could
have stopped it instantly upon seeing the train from a distance of five meters.
If the action for damages were brought by the driver, it is certain that it would not
prosper in view of the fact that he had incurred in a notorious contributory negligence.
But the persons who instituted the action are the appellants who were mere
passengers of the car. Therefore, the question raised is whether the driver's
negligence is imputable to them so as to bar them from the right to recover damages
suffered by them by reason of the accident.
Although this question is, perhaps, raised in this jurisdiction for the first time, it is,
nevertheless, a well recognized principle of law that the negligence of a driver, who,
in turn, is guilty of contributory negligence, cannot be imputed to a passenger who
has no control over him in the management of the vehicle and with whom he sustains
no relation of master and servant. This rule is applied more strictly when, as in the
present case, hired cars or those engaged in the public service, are involved.
The doctrine prevails in a few states that the contributory negligence of the driver of a
private conveyance is imputable to a person voluntarily riding with him. But the
general rule is that the negligence of the driver of a vehicle is not to be imputed to an
occupant thereof who is ]injured at a crossing through the combined negligence of the
driver and the railroad company when such occupant is without fault and has no
control over the driver. And the law almost universally now recognized is that when
one accepts an invitation to ride in the vehicle of another, without any authority or
purpose to direct or control the driver or the movements of the team, and without any
reason to doubt the competency of the driver, the contributory negligence of the
owner or driver of the conveyance will not be imputed to the guest or passenger, so
as to bar him of the right to recover damages from a railroad company whose
negligence occasions injury to him at a crossing while he is so riding. This rule has
been applied in a number of cases involving the corresponding relation between the
driver of an automobile and an occupant having no control over him. The rule is not
confined to cases of gratuitous transportation, but has been applied where a
conveyance is hired, and the passenger exercises no further control over the driver
than to direct him to the place to which he wishes to be taken. Nor is any distinction
made between private and public vehicles, such as street cars and stages. (22 R. C.
L., pp. 1047, 1048.)
As a general rule the negligence of a driver of a vehicle approaching a railroad
crossing, in failing to look and listen for approaching trains, cannot be imputed to an
occupant of the vehicle who is without personal fault, unless such driver is the servant
or agent of the occupant, unless they are engaged in a joint enterprise whereby
responsibility for each other's acts exists, or unless the occupant is under the driver's
care or control or has the right to direct and control the driver's actions, or where the
driver is of obvious or known imprudence or incompetency. This rule that negligence
of the driver is not imputable to an occupant only applies to cases in which the
TRANSPORTATION LAW – Chapter 2 & 3
relation of master and servant or principal and agent does not exist between the
parties, or where the occupant has no right to direct or control the driver's action, as
where the occupant is a passenger for hire or is the guest of the owner or driver and
has no reason to believe the driver careless or imprudent, or where the occupant is
seated away from the driver or is separated from him by an inclosure so that he is
without opportunity to discover danger and inform the driver thereof. . . . (52 C.J., pp.
315, 316 and 317.)
A passenger in the automobile of another having no control over the owner driving the
car or the operation of the car which he occupied merely as passenger was not
chargeable with contributory negligence of the owner and driver at a railroad crossing.
(Carpenter vs. Atchison 195 Pac, 1073).
In the case of Little vs. Hackett (116 U.S. 366; 29 Law. ed., 652, 654, 657), the United
States Supreme Court said:
That one cannot recover damages for an injury to the commission of which he has
directly contributed is a rule of established law and a principle of common justice. And
it matters not whether that contribution consists in his participation in the direct cause
of the injury, or in his omission of duties which, if performed, would have prevented it.
If his fault, whether of omission or commission, has been the proximate cause of the
injury, he is without remedy against one also in the wrong. It would seem that the
converse of this doctrine should be accepted as sound; that when one has been
injured by the wrongful act of another, to which he has in no respect contributed, he
should be entitled to compensation in damages from the wrongdoer. And such in the
generally received doctrine, unless a contributory cause of the injury has been the
negligence or fault of some person towards whom he sustains the relation of superior
or master, in which case the negligence is imputed to him, though he may not have
personally participated in or had knowledge of it; and he must bear the
consequences. the doctrine may also be subject to other exceptions growing out of
the relation of parent and child, or guardian and ward, and the like. Such a relation
involves considerations which have no bearing upon the question before us.
There is no distinction in principle whether the passengers be on a public conveyance
like a railroad train or an omnibus or be on a hack hired from a public stand in the
street for a drive. Those on hack do not become responsible for the negligence of the
driver, if they exercise no control over him further than to indicate the route they wish
to travel or the places to which they wish to go. If he is their agent so that this
negligence can be imputed to them to prevent their recovery against a third party, he
must be their agent in all other respects, so far as the management of the carriage is
concerned; and responsibility to third parties would attach to them for injuries caused
by his negligence in the course of his employment. But as we have already stated,
responsibility cannot, within any recognized rules of law, be fastened upon one who
has in no way interfered with and controlled in the matter causing the injury. From the
simple fact of hiring the carriage or riding in it no such liability can arise. The party
hiring or riding must in some way have cooperated in producing the injury complained
of before he incurs any liability for it. "If the law were otherwise," as said by Mr.
Justice Depue in his elaborate opinion in the latest case in New Jersey, "not only the
hirer of the coach but also all the passengers in it would be under a constraint to
mount the box and superintend the conduct of the driver in the management and
control of his team, or be put for remedy exclusively to an action against the
irresponsible driver or equally irresponsible owner of a coach taken, it may be, from a
coach stand, for the consequences of an injury which was the product of the
cooperating wrongful acts of the driver and a third person; and that too, although the
passengers were ignorant of the character of the driver, and of the responsibility of
the owner of the team, and strangers to the route over which they were to be carried."
(18 Vroom, 171.)"

There is nothing of record to show that the appellants herein have incurred in any
negligence imputable to them and we do not see any reason whatsoever why they
should be made responsible for the driver's negligence. The doctrine established in
the cases cited above should be applied to the case at bar and it should be held that
the appellants herein are entitled to recover from the appellee damages occasioned
by the accident of which they were victims.

We shall now proceed to determine the amount of the damages. With respect to
Soloria, we do not find any difficulty because the evidence shows that she spent only
three hundred pesos (P300) for her treatment and stay in the hospital. Her injuries are
not of such a nature as to entitle her to a further indemnity. The damages to which
she is entitled may, therefore, be assessed at the amount stated above.

Such is not the case with respect to Consolacion Junio. According to the evidence
presented, she was a dancer earning from six pesos (P6) to eight pesos (P8) a day
for two or three days every week that she danced. She lost her right leg which was
amputated, suffered a fracture of her right arm and was wounded on her occipital
region. With these details in view, the members of this court are of the opinion that
she may justly be awarded the sum of two thousand five hundred pesos (P2,500) as
damages and five hundred pesos (P500) as indemnity for expenses incurred by her in
her treatment, medical attendance and stay in the hospital, making the total amount
she is entitled to recover aggregating three thousand pesos (P3,000).

Wherefore, the judgment appealed from is hereby reversed and it is ordered that the
appellee pay to Consolacion Junio the sum of three thousand pesos (P3,000) and to
Beatriz Soloria three hundred pesos (P300), with costs of both instances. So ordered.

TRANSPORTATION LAW – Chapter 2 & 3

41.) [ GR No. 9700, Dec 03, 1914 ]
US v. BENITO MANABAT
"That on or about the 22d of August, 1913, in the municipality of Dagupan, Province
of Pangasinan, the said Benito Manabat and Lucas Pasibi, defendants, engineer of
train No. 118 and chauffeur of automobile No. 24, respectively, through lack of due
precaution caused said train and auto mobile to collide with each other at the railroad
crossing situated near the railroad station of said municipality of Dagupan; that said
Manabat failed to blow the whistle and strike the bell before reaching said crossing,
as it was his duty to do in order to avoid accidents or cause injuries to persons
crossing the railroad; that the said Pasibi, on his part, did not stop the automobile
before passing over the said crossing while the train was approaching; but on account
of said lack of precaution the train collided with the said automobile; as a result of the
collision, one of the occupants of the automobile, Lieutenant of Constabulary Frank B.
Jenkins, died from the effects of the contusions and fractures suffered by being rolled
under the engine of the train, and the other occupants of the said automobile were
also injured: facts constituting the crime of reckless negligence, committed within the
jurisdiction of this court of First Instance and in violation of the law."
Upon said complaint the defendants were duly arrested, arraigned, and tried. After
hearing the evidence, the. Honorable J. C. Jenkins, judge, found that the evidence
was insufficient to show that the defendant, Benito Manabat, was guilty of the crime
charged in the complaint and dismissed the complaint against him and discharged
him from the custody of the law, with one-half costs de officio. The lower court found
that the evidence was sufficient to show that the defendant, Lucas Pasibi, was guilty
of the crime charged and sentenced him to be imprisoned for one year and one day
of prision correccional, with the accessory penalties prescribed in article 61 of the
Penal Code and to pay one-half the costs.
The lower court further decreed that the defendant, Lucas Pasibi, should indemnify
the heirs of the deceased, Lieut. Frank B. Jenkins, in the sum of P1,000, and in case
of insolvency to suffer subsidiary imprisonment in accordance with the provisions of
the law. From that sentence the defendant, Lucas Pasibi, appealed to this court.
The only question presented by the appellant is one of fact. The contention of the
appellant is that the evidence adduced during the trial of the cause was insufficient to
show that he was guilty of the crime charged in the complaint.
The lower court based its conclusions largely upon the admissions of the defendant.
The lower court held that the admissions of the defendant and appellant showed,
beyond a reasonable doubt, that his own negligence was the direct cause of the
accident which resulted in the death of Lieut. Frank B. Jenkins.
From the evidence it appears that between 8 and 9 o'clock on the morning of August
22, 1913, the defendant, Lucas Pasibi, was the chauffeur of an automobile belonging
to the Bureau of Public Works; that he made regular trips with said automobile
TRANSPORTATION LAW – Chapter 2 & 3
between the city of Dagupan and the municipality of Magaldan, for the purpose of
carrying passengers from Dagupan to Magaldan; that on the morning in question he
left the hotel at Dagupan to make his regular trip to Magaldan with 8 or 10
passengers in said automobile; that he left the hotel with said automobile, running at
a speed of from 4 to 6 miles an hour; that the railroad track of the Manila Railway
Company crosses the main road running from Dagupan to Magaldan at a distance of
less than 400 yards from said hotel; that there was a moving train on said railroad,
moving in the direction from Magaldan to Dagupan, which reached the said wagon
road at or about the same time that the defendant reached the said railroad with the
automobile; that the relation of the railroad to the wagon road was such that had the
defendant been on the lookout for the train, he might have seen it at some distance
before it reached the wagon road and before he reached the railroad track; that there
were at least two points on the wagon road, between the hotel and the railroad
crossing, from which an approaching train might have been seen by the defendant;
that had the defendant been watching for an approaching train, from either of said
points, he might have seen it before it arrived at the wagon-road crossing, at least for
a distance of several hundred yards; that at the point where the railway crosses the
wagon road, the wagon road was considerably elevated; that the said train and
automobile collided at the crossing and as a result of said collision Lieut. Frank B.
Jenkins, who was riding in the front seat of the automobile beside the chauffeur, was
killed, the automobile was dragged for a short distance by the train, was turned
upside down by the side of the track and several passengers were pinned under the
wrecked automobile, some of whom received slight injuries.
The defendant attempts to show that the engineer in charge of the railroad train failed
and neglected to ring the bell or sound the whistle of his engine; that the engineer in
charge of the train failed to give due warning of the approaching train. Upon that
question there is much conflict in the testimony. Whether or not the engineer failed to
ring the bell or sound the whistle of his engine is a question of little importance when
we consider the negligent acts of the defendant, under his own admissions. The
negligence of the engineer was no excuse for the negligence of the defendant. The
contributory negligence of the engineer might be considered had he been injured, but
it can not be considered as against a third person whose injury resulted from the
admitted negligence of the defendant. The neglect of an engineer to sound the
whistle or ring the bell on nearing a wagon-road crossing does not relieve a person on
the wagon road from the necessity of taking ordinary precautions. Before attempting
to cross the railroad track, he is bound to use his senses, to listen and to look, in
order to avoid any possible accident from an approaching train. If he omits to use
them and walks or drives thoughtlessly upon the track, or if using them he sees the
train approaching, and instead of waiting for it to pass, undertakes to cross the
railroad and receives injury, he so far contributes to his injury as to deprive himself of
any right to complain. If one chooses, in such a position, to take risks, he must suffer
the consequences. His negligence can not be visited upon others. (Railroad
Co. vs. Houston, 95 U. S., 697; Northern Pacific Railroad Co. vs. Freeman, 174 U. S.,
379.)
In the case of Schofield vs. Chicago, etc., Railway Co. (114 U. S., 615), the Supreme
Court of the United States said: "Where the plaintiff was approaching a railway
crossing with which he was familiar and could have seen the on-coming train in plenty
of time to avoid an accident, if he had looked for it, and was struck and injured by the
train, he was guilty of negligence, although the train was not a regular one and was
running at a high rate of speed, and gave no signals by blowing a whistle or ringing a
bell."
After a careful examination of the record brought to this court, we find no reason for
reversing or modifying the sentence of the lower court. The same is, therefore, hereby
affirmed with costs.

The defendant admitted that he had passed over said wagon road with an
automobile, acting as chauffeur, more than one hundred times, carrying passengers
from Dagupan to Magaldan; that he knew of the existence of the railroad crossing and
that on the occasion of the accident he did not see the train and he repeatedly asserts
that he did not try to see it; that he did not look either to the right or to the left, upon
approaching said crossing; that he looked straight ahead neither to the right nor to the
left neither up nor down the track, and that such was his custom before the date of
the accident; that he knew that trains frequently passed said wagon road crossing.

The prosecution presented a plan showing the relation of the railroad and the wagon
road and the place of the accident. An examination of said plan shows clearly that it
was easily possible for one upon the wagon road to see an approaching train upon
the railroad at a distance of several hundred feet, from a point at a distance of 100 or
more feet from the railroad crossing. It was admitted that both the railroad train and
the automobile were traveling at a very slow speed. That being true, it is difficult to
understand how the defendant, without being criminally negligent, did not avoid the
collision. He knew of the existence of the railroad and that trains were frequently
crossing the wagon road. Under these circumstances he should have kept his
automobile under such complete control as to have been able to have stopped it at a
moment's notice, upon the appearance of conditions which made it dangerous to
proceed. A person in control of an automobile who crosses a railroad, even at a
regular road crossing, and who does not exercise that precaution and that control
over it as to be able to stop the same almost immediately upon the appearance of a
train, is guilty of criminal negligence, providing a collision occurs and injury results.
Considering the purposes and the general methods adopted for the management of
railroads and railroad trains, we think it is incumbent upon one approaching a railroad
crossing to use all of his faculties of seeing and hearing. He should approach a
railroad crossing cautiously and carefully. He should look and listen and do everything
that a reasonably prudent man would do before he attempts to cross the track.
(Grand Trunk Railway Co. vs. Ives, 144 U. S., 408; Northern Pacific Railroad Co. vs.
Freeman, 174 U. S., 379.) It is shown clearly in the present case that had the
defendant used just ordinary care and precaution, he might have seen the train long
before he reached the railroad crossing and might easily have avoided the collision.
He admitted that he did not look to see whether there was a train upon the railroad or
not. He admitted that he looked neither to the right nor to the left. A mere glance in
the direction from which the train was approaching would have been sufficient to have
informed the defendant of the approaching train. His ability to have seen the train,
had he exercised ordinary care, is undisputed. Reckless imprudence or criminal
negligence is an act from which injury results, which, had it been done with malice,
would constitute a crime, punishable under article 568 of the Penal Code.

TRANSPORTATION LAW – Chapter 2 & 3

42.) G.R. No. 108897 October 2, 1997
SARKIES TOURS PHILIPPINES, INC., petitioner,
vs. HONORABLE COURT OF APPEALS (TENTH DIVISION), DR. ELINO G.
FORTADES, MARISOL A. FORTADES and FATIMA MINERVA A.
FORTADES, respondents.
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 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.
The case arose from a damage suit filed by private respondents Elino, Marisol, and
Fatima Minerva, all surnamed Fortades, against petitioner for breach of contract of
carriage allegedly attended by bad faith.
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,
trial contact lenses, passport and visa, as well as her mother Marisol's U.S.
immigration (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 her mother who, in turn, went to petitioner's
office in Legazpi City and later at its head office in Manila. Petitioner, however, merely
offered her P1,000.00 for each piece of luggage lost, which she turned down. After
returning to Bicol, disappointed but not defeated, mother and daughter asked
assistance from the radio stations and even from Philtranco bus drivers who plied the
same route on August 31st. The effort paid off when one of Fatima's bags was
recovered. Marisol further reported the incident to the National Bureau of
Investigation's field office in Legazpi City and to the local police.
On September 20, 1984, respondents, through counsel, formally demanded
satisfaction of their complaint from petitioner. In a letter dated October 1, 1984, the
latter apologized for the delay and said that "(a) team has been sent out to Bicol for
the purpose of recovering or at least getting the full detail"1 of the incident.
After more than nine months of fruitless waiting, respondents decided to file the case
below to recover the value of the remaining lost items, as well as moral and
exemplary damages, 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.
TRANSPORTATION LAW – Chapter 2 & 3
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.
On June 15, 1988, after trial on the merits, the court a quo adjudged the case in favor
of respondents, viz.:
…
Its motion for reconsideration was likewise rejected by the Court of Appeals, so
petitioner elevated its case to this Court for a review.
After a careful scrutiny of the records of this case, we are convinced that the trial and
appellate courts resolved the issues judiciously based on the evidence at hand.
Petitioner claims that Fatima did not bring any piece of luggage with her, and even if
she did, none was declared at the start of the trip. The documentary and testimonial
evidence presented at the trial, however, established that Fatima indeed boarded
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 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 driver. In its letter dated October 1, 1984, petitioner tacitly admitted its
liability by apologizing to respondents and assuring them that efforts were being
made to recover the lost items.
The records also reveal that respondents went to great lengths just to salvage their
loss. The incident was reported to the police, the NBI, and the regional and head
offices of petitioner. Marisol even sought the assistance of Philtranco bus drivers and
the radio stations. To expedite the replacement of her 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.
Fatima was not the only one who lost her luggage. Apparently, other passengers had
suffered a similar fate: Dr. Lita Samarista testified that petitioner offered her
P1,000.00 for her lost baggage and she accepted it;4 Carleen Carullo-Magno lost her
chemical engineering review materials, while her brother lost abaca products he was
transporting to Bicol.5
Petitioner's receipt of Fatima's personal luggage having been thus established, it
must now be determined if, as a common 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 them,"6 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,"7 unless the loss is due to any of
the excepted causes under Article 1734 thereof.8
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.

TRANSPORTATION LAW – Chapter 2 & 3

43.) G.R. No. 111127 July 26, 1996
MR. & MRS. ENGRACIO FABRE, JR. and PORFIRIO CABIL, petitioners,
vs. COURT OF APPEALS, THE WORD FOR THE WORLD CHRISTIAN
FELLOWSHIP, INC., AMYLINE ANTONIO, JOHN RICHARDS, GONZALO
GONZALES, VICENTE V. QUE, JR., ICLI CORDOVA, ARLENE GOJOCCO,
ALBERTO ROXAS CORDERO, RICHARD BAUTISTA, JOCELYN GARCIA,
YOLANDA CORDOVA, NOEL ROQUE, EDWARD TAN, ERNESTO NARCISO,
ENRIQUETA LOCSIN, FRANCIS NORMAN O. LOPES, JULIUS CAESAR,
GARCIA, ROSARIO MA. V. ORTIZ, MARIETTA C. CLAVO, ELVIE SENIEL,
ROSARIO MARA-MARA, TERESITA REGALA, MELINDA TORRES, MARELLA
MIJARES, JOSEFA CABATINGAN, MARA NADOC, DIANE MAYO, TESS PLATA,
MAYETTE JOCSON, ARLENE Y. MORTIZ, LIZA MAYO, CARLOS RANARIO,
ROSAMARIA T. RADOC and BERNADETTE FERRER, respondents.
Petitioners Engracio Fabre, Jr. and his wife were owners of a 1982 model Mazda
minibus. They used the bus principally in connection with a bus service for school
children which they operated in Manila. The couple had a driver, Porfirio J. Cabil,
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.
On November 2, 1984 private respondent Word for the World Christian Fellowship
Inc. (WWCF) arranged with 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 group was scheduled to leave on November 2, 1984, at 5:00 o'clock in the
afternoon. However, as several members of the 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.
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 Baay in Lingayen, Pangasinan. At 11:30 that night, petitioner Cabil came
upon a sharp curve on the highway, running on 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 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.
Several passengers were injured. Private respondent Amyline Antonio was thrown on
the floor of the bus and pinned down by a wooden seat which came down by a
wooden seat which came off after being unscrewed. It took three persons to safely
remove her from this portion. She was in great pain and could not move.
TRANSPORTATION LAW – Chapter 2 & 3
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 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 kilometers per hour, but it was too late.
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 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.
Amyline Antonio, who was seriously injured, brought this case in the RTC of Makati,
Metro Manila. As a result of the accident, she is now suffering from paraplegia and is
permanently paralyzed from the waist down. During the trial she described the
operations she underwent and adduced evidence regarding the cost of her treatment
and therapy. Immediately after the accident, she was taken to the Nazareth Hospital
in Baay, Lingayen. As this hospital was not adequately equipped, she was 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 damage to her spine was determined to be too severe to
be treated there. She was therefore brought to Manila, first to the Philippine General
Hospital and later to the Makati Medical Center where she underwent an operation to
correct the dislocation of her spine.
In its decision dated April 17, 1989, the trial court found that:
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
negligent act of the defendants which ultimately resulted to the accident subject of
this case.
Accordingly, it gave judgment for private respondents holding:
Considering that plaintiffs Word for the World Christian Fellowship, Inc. and Ms.
Amyline Antonio were the only ones who adduced evidence in support of their claim
for damages, the Court is therefore not in a position to award damages to the other
plaintiffs.
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 pay jointly and severally to the plaintiffs the following amount:
…
The Court of Appeals affirmed the decision of the trial court with respect to Amyline
Antonio but dismissed it with respect to the other plaintiffs on the ground that they
failed to prove their respective claims. The Court of Appeals modified the award of
damages as follows:
… possessed a professional driver's license. The employer should also examine the
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:
… only, from their homes to the St. Scholastica's College in Metro Manila. 7 They had
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." 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.
TRANSPORTATION LAW – Chapter 2 & 3
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
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
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.
TRANSPORTATION LAW – Chapter 2 & 3
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
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.

TRANSPORTATION LAW – Chapter 2 & 3

44.) G.R. No. 80256 October 2, 1992
BANKERS & MANUFACTURERS ASSURANCE CORP., petitioner,
vs. COURT OS APPEALS, F. E. ZUELLIG & CO., INC. and E. RAZON,
INC., respondents.
After the Court of Appeals in CA-G.R. CV No. 08226 (July 8, 1987, Kapunan, Puno
(P), Marigomen, JJ.) affirmed the dismissal by Branch XVI of the Regional Trial Court
of Manila of petitioner's complaint for recovery of the amount it had paid its insured
concerning the loss of a portion of a shipment, petitioner has interposed the instant
petition for review on certiorari.
Petitioner presents the following bare operative facts: 108 cases of copper tubings
were imported by Ali Trading Company. The tubings were insured by petitioner and
arrived in Manila on board and vessel S/S "Oriental Ambassador" on November 4,
1978, and turned over the private respondent E. Razon, the Manila arrastre operator
upon discharge at the waterfront. The carrying vessel is represented in the
Philippines by its agent, the other private respondent, F. E. Zuellig and Co., Inc.,
Upon inspection by the importer, the shipment was allegedly found to have sustained
loses by way of theft and pilferage for which petitioner, as insurer, compensated the
importer in the amount of P31,014.00.
Petitioner, in subrogation of the importer-consignee and on the basis of what it
asserts had been already established — that a portion of that shipment was lost
through theft and pilferage — forthwith concludes that the burden of proof of proving a
case of non-liability shifted to private respondents, one of whom, the carrier, being
obligated to exercise extraordinary diligence in the transport and care of the
shipment. The implication of petitioner's statement is that private respondents have
not shown why they are not liable. The premises of the argument of petitioner may be
well-taken but the conclusions are not borne out or supported by the record.
It must be underscored that the shipment involved in the case at bar was
"containerized". The goods under this arrangement are stuffed, packed, and loaded
by the shipper at a place of his choice, usually his own warehouse, in the absence of
the carrier. The container is sealed by the shipper and thereafter picked up by the
carrier. Consequently, the recital of the bill of lading for goods thus transported
ordinarily would declare "Said to Contain", "Shipper's Load and Count", "Full
Container Load", and the amount or quantity of goods in the container in a particular
package is only prima facie evidence of the amount or quantity which may be
overthrown by parol evidence.
A shipment under this arrangement is not inspected or inventoried by the carrier
whose duty is only to transport and deliver the containers in the same condition as
when the carrier received and accepted the containers for transport. In the case at
bar, the copper tubings were placed in three containers. Upon arrival in Manila on
November 4, 1978, the shipment was discharged in apparent good order and
condition and from the pier's docking apron, the containers were shifted to the
TRANSPORTATION LAW – Chapter 2 & 3
container yard of Pier 3 for safekeeping. Three weeks later, one of the container
vans, said to contain 19 cases of the cargo, was "stripped" in the presence of
petitioner's surveyors, and three cases were found to be in bad order. The 19 cases
of the van stripped were then kept inside Warehouse No. 3 of Pier 3 pending delivery.
It should be stressed at this point, that the three cases found in bad order are not  the
cases for which the claim below was presented, for although the three cases
appeared to be in bad order, the contents remained good and intact.
The two other container vans were not moved from the container yard and they
were not  stripped. On December 8, 1978, the cargo was released to the care of the
consignee's authorized customs broker, the RGS Customs Brokerage. The broker,
accepting the shipment without exception as to bad order, caused the delivery of the
vans to the consignee's warehouse in Makati. It was at that place, when the contents
of the two containers were removed and inspected, that petitioner's surveyors
reported, that checked against the packing list, the shipment in Container No.
OOLU2552969 was short of seven cases (see p. 18, Rollo).
Under the prevailing circumstances, it is therefore, not surprising why the Court of
Appeals in sustaining the trial court, simply quoted the latter, thus:
It must be also considered that the subject container was not stripped of its content at
the pier zone. The two unstripped containers (together with the 19 cases removed
from the stripped third container) were delivered to, and received by, the customs
broker for the consignee without any exception or notation of bad order of
shortlanding (Exhs. 1, 2 and 3 Vessel). If there was any suspicion or indication of
irregularity or theft or pilferage, plaintiff or consignee's representatives should have
noted the same on the gate passes or insisted that some form of protest form part of
the documents concerning the shipment. Yet, no such step was taken. The shipment
appears to have been delivered to the customs broker in good order and condition
and complete save for the three cases noted as being apparently in bad order.
Consider further that the stripping of the subject container was done at the
consignee's warehouse where, according to plaintiff's surveyor, the loss of the seven
cases was discovered. The evidence is not settled as whether the defendants'
representative were notified of, and were present at, the unsealing and opening of the
container in the bodega. Nor is the evidence clear how much time elapsed between
the release of the shipment from the pier and the stripping of the containers at
consignee bodega. All these fail to discount the possibility that the loss in question
could have taken place after the container had left the pier. (pp. 20-21, Rollo)
Verily, if any of the vans found in bad condition, or if any inspection of the goods was
to be done in order to determine the condition thereof, the same should have been
done at the pierside, the pier warehouse, or at any time and place while the vans
were under the care and custody of the carrier or of the arrastre operator.
Unfortunately for petitioner, even as one of the three vans was inspected and
stripped, the two other vans and the contents of the owner previously stripped were
accepted without exception as to any supposed bad order or condition by petitioner's
own broker. To all appearances, therefore, the shipment was accepted by petitioner
in good order.

It logically follows that the case at bar presents no occasion for the necessity of
discussing the diligence required of a carrier or of the theory of prima facie  liability of
the carrier, for from all indications, the shipment did not suffer loss or damage while it
was under the care of the carrier, or of the arrastre operator, it must be added.

WHEREFORE, the petition is hereby DISMISSED and the decision of the Court of
Appeals AFFIRMED, with costs against petitioner.

TRANSPORTATION LAW – Chapter 2 & 3

45.) G.R. No. 134514 December 8, 1999
INTERNATIONAL CONTAINER TERMINAL SERVICES, INC., petitioner,
vs. PRUDENTIAL GUARANTEE & ASSURANCE CO., INC., respondent.
 When cargo is placed on a vessel at the "shipper's load and count," the arrastre
operator is required only to deliver to the consignee the container van received from
the shipper, not to verify or to compare the contents thereof with those declared by
the shipper. A claim for reimbursement for the loss, damage or misdelivery of goods
must be filed within 15 days from the date the consignee learns of such problem(s).
On April 25, 1990, mother vessel "Tao He" loaded and received on board in San
Francisco, California, a shipment of five (5) lots of canned foodstuff complete and in
good order and condition for transport to Manila in favor of Duel Food Enterprises
("consignee" for brevity). China Ocean Shipping Company issued the corresponding
bill of lading therefor.
Consignee insured the shipment with Prudential Guarantee and Assurance, Inc.
against all risks for P1,921,827.00 under Marine Insurance Policy No. 20RN-3011/90.
On May 30, 1990, the shipment arrived at the Port of Manila and discharged by [the]
vessel MS "Wei He" in favor of International Container Terminal Services, Inc. for
safekeeping.
On June 1, 1990, A. D. Reyna Customs Brokerage ("defendant brokerage" for
brevity) withdrew the shipment and delivered the same to [the] consignee. An
inspection thereof revealed that 161 cartons were missing valued at P85,984.40.
Claim for indemnification of the loss having been denied by [ICTSI] and [the]
brokerage, consignee sought payment from [Prudential] under the marine cargo
policy. Consignee received a compromised sum of P66,730.12 in settlement thereof.
As subrogee, [Prudential] instituted the instant complaint against said defendants
[ICTSI and brokerage].
Traversing the complaint, [ICTSI] counters that it observed extraordinary diligence
over the subject shipment while under its custody; that the loss is not attributable to
its fault or its agent, representative or employee; that consignee failed to file a formal
claim against it in accordance with PPA Administrative Order No. 10-81; and that the
complaint states no cause of action. By way of crossclaim, it sought reimbursement
from defendant brokerage in the event it is adjudged to pay the loss.
In its Order dated March 3, 1992, the court a quo upon [Prudential's] motion, declared
defendant brokerage in default for failure to file [it's] answer within the reglementary
period. Acting on [ICTSI's] motion, the court a quo, in its Order dated May 27, 1992,
allowed the former to present its evidence ex-parte  against defendant brokerage
relative to the cross claim.
TRANSPORTATION LAW – Chapter 2 & 3
On May 19, 1993, the court a quo rendered a decision dismissing the complaint
against defendant brokerage for lack of evidence.
In its Order of July 12, 1993, the court a quo, upon motion of [ICTSI] and [Prudential],
vacated the decision dated May 19, 1993 and set the case for hearing to give [ICTSI]
an opportunity to cross examine [Prudential's] witnesses. 1
On November 8, 1995, the trial court 2 rendered a Decision dismissing Prudential's
Complaint against ICTSI in this wise: 3
Failure on the part of the consignee to comply with the terms and conditions of the
contract with [ICTSI], [Prudential] is not placed in a better position than the consignee
who cannot claim damages against [ICTSI]. Hence, the complaint is hereby
DISMISSED.
Reconsideration was denied by the Regional Trial Court in its Order dated December
27, 1995. 4
Disposing of the appeal, the CA 5 ruled:
WHEREFORE, the decision appealed from is hereby REVERSED and SET ASIDE
and, in lieu thereof, judgment is hereby rendered ordering [appellee] International
[C]ontainer Terminal Services, Inc. (ICTSI) to pay appellant the sum of P66,730.12
with legal interest from May 13, 1991, until fully paid, plus 10% of . . . said claim by
way of attorney's fee. 6
Reconsideration of the CA Decision was denied in the herein challenged June 23,
1998 Resolution. 7
Ruling of the Court of Appeals
The appellate court found ICTSI negligent in its duty to exercise due diligence over
the shipment. It concluded that the shortage was due to pilferage of the shipment
while the sea vans were stored at the container yard of ICTSI.
It also ruled that the filing of a claim depended on the issuance of a certificate of loss
by ICTSI based on the liability clause printed on the back of the arrastre and
wharfage receipt. Since ICTSI did not issue such a certificate despite being informed
of the shortage, the 15-day period given to the consignee for filing a formal claim
never began. By subrogation, Prudential, as insurer of the consignee, was entitled to
hold the ICTSI liable for the shortage.
Assignment of Errors
Petitioner claims that the appellate court committed reversible errors (1) in ruling that
ICTSI failed to adduce convincing evidence to rebut the finding of the independent
adjuster and (2) in allowing the Complaint despite the failure of the consignee to file a
formal claim within the period stated on the dorsal side of the arrastre and wharfage
receipt. 8
This Court's Ruling
The Petition is meritorious.
First Issue:  Proof of Negligence
The legal relationship between an arrastre operator and a consignee is akin to that
between a warehouseman and a depositor. 9 As to both the nature of the functions
and the place of their performance, an arrastre operator's services are clearly not
maritime in character. 10
In a claim for loss filed by a consignee, the burden of proof to show compliance with
the obligation to deliver the goods to the appropriate party devolves upon the arrastre
operator. 11 Since the safekeeping of the goods rests within its knowledge, it must
prove that the losses were not due to its negligence or that of its employees. 12
To discharge this burden, petitioner presented five Arrastre and Wharfage
Bill/Receipts, which also doubled as container yard gate passes, covering the whole
shipment in question. The short-landed shipment was covered by the gate pass
marked "Exhibit 5." 13 The latter bore the signature of a representative of the
consignee, acknowledging receipt of the shipment in good order and condition (Exh.
"5-e"). Thus, we see no reason to dispute the finding of the trial court that "the
evidence adduced by the parties will show that the consignee received the container
vans . . . in good condition (Exhs. 1-6)." 14
By its signature on the gate pass and by its failure to protest on time, the consignee is
deemed to have acknowledged receipt of the goods in good order and condition.
Lamberto Cortez, petitioner's witness, testified that he personally examined the
shipment and identified the gate pass which covered the delivery of the shipment and
which was countersigned by the consignee's representative. He explained the import
of his examination as follows: 15
… pilferage of the shipment was the consignee's lookout. The arrastre operator was, like
The assailed Decision ruled that the petitioner was negligent as evidenced by the loss
of the original seal and padlock of the container, which were subsequently replaced
with safety wire while the shipment was still stored at the ICTSI compound. 16
TRANSPORTATION LAW – Chapter 2 & 3
The appellate court cites, as proof of petitioner's negligence, the Survey/Final Report
of the independent adjuster, Tan-Gatue Adjustment Company, Inc. (Exh. "F"). 17 The
Report stated:
The 3,439 cartons comprising [the] balance of the shipment were found and accepted
by consignee's representative in good order.
In our opinion, shortage sustained by the shipment was due to pilferage whilst the sea
vans containing the shipment were stored at [the] [c]ontainer [y]ard of the [petitioner],
[at] North Harbor, Manila but we cannot categorically state as to when and who
undertook [it] due to the absence of documentary evidence.
The customs safety wire as well as the padlock of Sea Van No. HTMU-803515-6
where the short (missing) cartons discovered may have been tampered [with]/opened
and returned/re-closed with finesse which [was] unfortunately not noticed during
delivery and prior to opening at consignee's warehouse.
All the sea vans were reportedly full of contents when examined by the customs
examiner for tax evaluation of contents.
The [ship agents] and arrastre contractors['] representative reportedly refused the
invitation of the consignee to witness the stripping/withdrawal of the same from the
sea vans at their warehouse averring that the shipment per Bill of Lading was shipped
under ["]Shipper's Load and Count" hence, loss/damage, if any, to the shipment is not
their liability.
We thoroughly investigate[d] this particular case at International Container Terminal
Services, Inc., North Harbor, Manila[,] but up to this time no person(s) and/or group(s)
could be pinpointed liable [for] the shortage of 161 cartons, hence, the delay [in the]
issuance of this report. 18
The adjuster insists that the shipment was complete when the customs examiner
opened the sea vans for tax evaluation. However, the latter's report was not
presented. Hence, there is no basis for comparing the cartons subjected to customs
examination and those which were delivered to the consignee.
More important, the cosigned goods were shipped under "Shipper's Load and Count."
This means that the shipper was solely responsible for the loading of the container,
while the carrier was oblivious to the contents of the shipment. 19 Protection against
any ordinary depositary, duty-bound to take good care of the goods received from the
vessel and to turn the same over to the party entitled to their possession, subject to
such qualifications as may have validly been imposed in the contract between the
parties. 20 The arrastre operator was not required to verify the contents of the
container received and to compare them with those declared by the shipper because,
as earlier stated, the cargo was at the shipper's load and count. The arrastre operator
was expected to deliver to the consignee only the container received from the carrier.
Petitioner claims that the absence of a request for a bad order survey belied the
consignee's assertion that the shipment was filched while in ICTSI's custody, and that
such absence did not stop the 15-day period from running. Normally, a request for a
bad order survey is made in case there is an apparent or presumed loss or damage.
The consignee made no such request despite being provided by the petitioner a form
therefor.
The lack of a bad order survey does not toll the prescriptive period for filing a claim for
loss, because the consignee can always file a provisional claim within 15 days from
the time it discovers the loss or damage. Such a claim would place the arrastre
operator on notice that the shipment sustained damage or loss, even if the exact
amount thereof could not be specified at the moment. In this manner, the arrastre
operator can immediately verify its culpability and liability. A provisional claim
seasonably filed is sufficient compliance with the liability clause. 21
From the foregoing discussion, it is clear that the appellate court erred in concluding
that the shortage was due to the negligence of the arrastre operator.
Second Issue:
Period to File a Claim for Loss
Petitioner contends that the appellate court misconstrued the liability clause printed
on the dorsal side of the Arrastre and Wharfage Bill/Receipt. The contentious
provision of this document reads:
"Liability Clause"
The duly authorized representative of herein named CONSIGNEE, and ICTSI hereby
certify to the correctness of the description of the containerized cargo covered by this
CY GATEPASS, the issuance of which constitutes delivery to and receipt by
Consignee of the containerized cargo as described in this CY GATEPASS, in good
order and condition, unless otherwise indicated. This CY GATEPASS is subject to all
terms and conditions defined in the Existing Management Contract between the PPA
& ICTSI[;] PPA Administrative Order No. 10-81, ICTSI shall, however, be liable to the
extent of the local invoice value of each package but not to exceed P3,500 Philippine
currency for imported cargoes and P1,000 for domestic cargoes (consistent with
Administrative Order 10-81 unless revised), unless the value thereof is otherwise
specified or manifested or communicated in writing together with the invoice value
and supported by a certified packing list to ICTSI by any interested party/ies before
the discharge of the cargo and corresponding port charges ha[ve] been fully paid.
This provision shall only apply upon filing of a formal claim within 15 days from the
date of issuance of the Bad Order Certificate or certificate of loss, damage or non-
delivery by ICTSI. 22
Petitioner argues that the 15-day limitation for filing a claim against the arrastre
operator should run from the time of the delivery of the goods to the consignee, and
TRANSPORTATION LAW – Chapter 2 & 3
that the latter's failure to file a claim within said period is sufficient ground to deny the
claim for loss.
On the other hand, the appellate court overruled the trial court, because the filing of
the claim was dependent upon the issuance of a certificate of loss, damage or
nondelivery. Since the petitioner did not issue such certificate, the 15-day limit, the
CA opined, did not begin to run against the consignee. Private respondent argues
that the clear and unambiguous language of the liability clause does not support
petitioner's construction.
We agree with the petitioner. In order to hold the arrastre operator liable for lost or
damaged goods, the claimant should file with the operator a claim for the value of
said goods "within fifteen (15) days from the date of discharge of the last package
from the carrying vessel . . . ." 23 The filing of the claim for loss within the 15-day
period is in the nature of a prescriptive period for bringing an action and is a condition
precedent to holding the arrastre operator liable. This requirement is a defense made
available to the arrastre operator, who may use or waive it as a matter of personal
discretion. 24
The said requirement is not an empty formality. It gives the arrastre contractor a
reasonable opportunity to check the validity of the claim, while the facts are still fresh
in the minds of the persons who took part in the transaction, and while the pertinent
documents are still available. Such period is sufficient for the consignee to file a
provisional claim after the discharge of the goods from the vessel. 25 For this reason,
we believe that the 15-day limit is reasonable.
We should hasten to add that while a literal reading of the liability clause makes the
time limit run from the moment the shipment is discharged from the carrying vessel,
this Court has chosen to interpret this condition liberally in an endeavor to promote
fairness, equity and justness. 26 A long line of cases has held that the 15-day period
for filing claims should be counted from the date the consignee learns of the loss,
damage or misdelivery of goods. 27
In the case at bar, the consignee had all the time to make a formal claim from the day
it discovered the shortage in the shipment, which was June 4, 1990, as shown by the
records. According to the independent adjuster, the stripping or opening of the sea
vans containing the shipped canned goods was made at the consignee's place upon
receipt of the shipment. After discovering the loss, the consignee asked the adjuster
to investigate the reason for the short-landing of the shipment. By the time the claim
for loss was filed on October 2, 1990, four months had already elapsed from the date
of delivery, June 4, 1990.
Prudential did not explain the delay. It did not even allege or prove that the discovery
of the shortage was made by the consignee only 15-days before October 2, 1990.
The latter had to wait for the independent adjuster's survey report dated September 7,
1990, before filing the claim with the former. By that time, however, it was clearly too
late, as the 15-day period had expired.
In any event, within 15 days from the time the loss was discovered, the consignee
could have filed a provisional claim, which would have constituted substantial
compliance with the rule. 28 Its failure to do so relieved the arrastre operator of any
liability for the nondelivery of the goods. 29 More specifically, the failure to file a
provisional claim bars a subsequent action in court. 30 The rationale behind the time
limit is that, without it, a consignee could too easily concoct or fabricate claims and
deprive the arrastre operator of the best opportunity to probe immediately their
veracity.

WHEREFORE, the Petition is hereby GRANTED. The assailed Decision and

Resolution are SET ASIDE, and the trial court's Decision is REINSTATED. No
pronouncement as to costs.

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46.) [G.R. NO. 188961 : October 13, 2009]
AIR FRANCE PHILIPPINES/KLM AIR FRANCE, Petitioner, v. JOHN ANTHONY DE
CAMILIS, Respondent.
Respondent John Anthony de Camilis filed a case for breach of contract of carriage,
damages and attorney's fees against petitioner Air France Philippines/KLM Air France
(AF) in the Regional Trial Court (RTC) of Makati City, Branch 59.
Respondent alleged that he went on a pilgrimage with a group of Filipinos to selected
countries in Europe. According to respondent: (1) AF's agent in Paris failed to inform
him of the need to secure a transit visa for Moscow, as a result of which he was
denied entry to Moscow and was subjected to humiliating interrogation by the police;
(2) another AF agent (a certain Ms. Soeyesol) rudely denied his request to contact his
travel companions to inform them that he was being sent back to Paris from Moscow
with a police escort; Ms. Soeyesol even reported him as a security threat which
resulted in his being subjected to further interrogation by the police in Paris and
Rome, and worse, also lifted his flight coupons for the rest of his trip; (3) AF agents in
Rome refused to honor his confirmed flight to Paris; (4) upon reaching Paris for his
connecting flight to Manila, he found out that the AF agents did not check in his
baggage and since he had to retrieve his bags at the baggage area, he missed his
connecting flight; (5) he had to shoulder his extended stay in Paris for AF's failure to
make good its representation that he would be given a complimentary motel pass and
(6) he was given a computer print-out of his flight reservation for Manila but when he
went to the airport, he was told that the flight was overbooked. It was only when he
made a scene that the AF agent boarded him on an AF flight to Hongkong and placed
him on a connecting Philippine Airlines flight to Manila.
The RTC found that AF breached its contract of carriage and that it was liable to
pay P200,000 actual damages, P1 million moral damages, P1 million exemplary
damages and P300,000 attorney's fees to respondent.
On appeal, the Court of Appeals (CA)affirmed the RTC decision with modifications.1
The CA ruled that it was respondent (as passenger), and not AF, who was
responsible for having the correct travel documents. However, the appellate court
stated that this fact did not absolve AF from liability for damages.
The CA agreed with the findings of fact of the RTC that AF's agents and
representatives repeatedly subjected respondent to very poor service, verbal abuse
and abject lack of respect and consideration. As such, AF was guilty of bad faith for
which respondent ought to be compensated.
The appellate court affirmed the award of P1 million moral damages and P300,000
attorney's fees. However, it reduced the actual damages to US$906 (or its peso
equivalent). According to the CA, this amount represented the expenses respondent
TRANSPORTATION LAW – Chapter 2 & 3
incurred from the time he was unable to join his group in Rome (due to the unfounded
"communiqué" of Ms. Soeyesol that he was a security threat) up to the time his flight
reservation from Paris to Manila was dishonored for which he was forced to stay in
Paris for two additional days. The appellate court pointed out that, on the other hand,
respondent's expenses for the Moscow leg of the trip must be borne by him as AF
could not be faulted when he was refused entry to Moscow for lack of a transit visa.
The CA also decreased the exemplary damages from P1 million to P300,000. The CA
further imposed interest at the rate of 6% p.a. from the date of extrajudicial
demand2 until full satisfaction, but before judgment becomes final. From the date of
finality of the judgment until the obligation is totally paid, 12% interest p.a. shall be
imposed.
Hence, this recourse.
Essentially, AF assails the CA's award of moral and exemplary damages and
attorney's fees to respondent as the alleged injury sustained was not clearly
established. AF added that, even if respondent was entitled to the same, the amounts
awarded were exorbitant. Lastly, it argued that the interest rate should run not from
the time of respondent's extrajudicial demand but from the time of judgment of the
RTC.
We deny the petition.
Preliminarily, on the issue pertaining to whether or not respondent was entitled to
damages and attorney's fees, the same entails a resort to the parties' respective
evidence. Thus, AF is clearly asking us to consider a question of fact.
Time and again, we have held that the jurisdiction of this Court in a Petition for
Review on Certiorari under Rule 45 is limited only to questions of law,3 save for
certain exceptions,4 none of which are present in this case.
Both the RTC and the CA have competently ruled on the issue of respondent's
entitlement to damages and attorney's fees as they properly laid down both the
factual and legal bases for their respective decisions. We see no reason to disturb
their findings.
The above liabilities of AF shall earn legal interest pursuant to the Court's ruling
in Construction Development Corporation of the Philippines v. Estrella,5 citing Eastern
Shipping Lines, Inc. v. CA
Pursuant to this ruling, the legal interest is 6% p.a. and it shall be reckoned from April
25, 2007 when the RTC rendered its judgment, not from the time of respondent's
extrajudicial demand. This must be so as it was at the time the RTC rendered its
judgment that the quantification of damages may be deemed to have been
reasonably ascertained. Then, from the time this decision becomes final and
executory, the interest rate shall be 12% p.a. until full satisfaction.

WHEREFORE, the petition is hereby DENIED. The decision of the Court of Appeals

in CA-G.R. CV No. 90151 is AFFIRMED. Petitioner is ordered to PAY legal interest of
6% p.a. from the date of promulgation of the decision dated April 25, 2007 of the
Regional Trial Court, Branch 59, Makati City and 12% p.a. from the time the decision
of this Court attains finality, on all sums awarded until their full satisfaction.

TRANSPORTATION LAW – Chapter 2 & 3