G.R. No.

L-47822 December 22, 1988

PEDRO DE GUZMAN, petitioner, vs. COURT OF APPEALS and
ERNESTO CENDANA, respondents.
FELICIANO, J.:
Respondent Ernesto Cendana, a junk dealer, was engaged in
buying up used bottles and scrap metal in Pangasinan. Upon
gathering sufficient quantities of such scrap material, respondent
would bring such material to Manila for resale. He utilized two (2)
six-wheeler trucks which he owned for hauling the material to
Manila. On the return trip to Pangasinan, respondent would load his
vehicles with cargo which various merchants wanted delivered to
differing establishments in Pangasinan. For that service, respondent
charged freight rates which were commonly lower than regular
commercial rates.
Sometime in November 1970, petitioner Pedro de Guzman a
merchant and authorized dealer of General Milk Company
(Philippines), Inc. in Urdaneta, Pangasinan, contracted with
respondent for the hauling of 750 cartons of Liberty filled milk from
a warehouse of General Milk in Makati, Rizal, to petitioner's
establishment in Urdaneta on or before 4 December 1970.
Accordingly, on 1 December 1970, respondent loaded in Makati the
merchandise on to his trucks: 150 cartons were loaded on a truck
driven by respondent himself, while 600 cartons were placed on
board the other truck which was driven by Manuel Estrada,
respondent's driver and employee.
Only 150 boxes of Liberty filled milk were delivered to petitioner.
The other 600 boxes never reached petitioner, since the truck
which carried these boxes was hijacked somewhere along the
MacArthur Highway in Paniqui, Tarlac, by armed men who took with
them the truck, its driver, his helper and the cargo.
On 6 January 1971, petitioner commenced action against private
respondent in the Court of First Instance of Pangasinan, demanding
payment of P 22,150.00, the claimed value of the lost merchandise,
plus damages and attorney's fees. Petitioner argued that private
respondent, being a common carrier, and having failed to exercise

the extraordinary diligence required of him by the law, should be

held liable for the value of the undelivered goods.
In his Answer, private respondent denied that he was a common
carrier and argued that he could not be held responsible for the
value of the lost goods, such loss having been due to force
majeure.
On 10 December 1975, the trial court rendered a Decision 1 finding
private respondent to be a common carrier and holding him liable
for the value of the undelivered goods (P 22,150.00) as well as for P
4,000.00 as damages and P 2,000.00 as attorney's fees.
On appeal before the Court of Appeals, respondent urged that the
trial court had erred in considering him a common carrier; in finding
that he had habitually offered trucking services to the public; in not
exempting him from liability on the ground of force majeure; and in
ordering him to pay damages and attorney's fees.
The Court of Appeals reversed the judgment of the trial court and
held that respondent had been engaged in transporting return
loads of freight "as a casual occupation a sideline to his scrap
iron business" and not as a common carrier. Petitioner came to this
Court by way of a Petition for Review assigning as errors the
following conclusions of the Court of Appeals:
1. that private respondent was not a common carrier;
2. that the hijacking of respondent's truck was force
majeure; and
3. that respondent was not liable for the value of the
undelivered cargo. (Rollo, p. 111)
We consider first the issue of whether or not private respondent
Ernesto Cendana may, under the facts earlier set forth, be properly
characterized as a common carrier.
The Civil Code defines "common carriers" in the following terms:

Article 1732. Common carriers are persons,

corporations, firms or associations engaged in the
business of carrying or transporting passengers or
goods or both, by land, water, or air for
compensation, offering their services to the public.
The above article makes no distinction between one
whose principal business activity is the carrying of persons or
goods or both, and one who does such carrying only as
an ancillary activity (in local Idiom as "a sideline"). Article 1732 also
carefully avoids making any distinction between a person or
enterprise offering transportation service on a regular or scheduled
basis and one offering such service on an occasional, episodic or
unscheduled basis. Neither does Article 1732 distinguish between a
carrier offering its services to the "general public," i.e., the general
community or population, and one who offers services or solicits
business only from a narrow segment of the general population. We
think that Article 1733 deliberaom making such distinctions.
So understood, the concept of "common carrier" under Article 1732
may be seen to coincide neatly with the notion of "public service,"
under the Public Service Act (Commonwealth Act No. 1416, as
amended) which at least partially supplements the law on common
carriers set forth in the Civil Code. Under Section 13, paragraph (b)
of the Public Service Act, "public service" includes:
... every person that now or hereafter may own,
operate, manage, or control in the Philippines, for
hire or compensation, with general or limited
clientele,
whether
permanent,
occasional
or
accidental, and done for general business purposes,
any common carrier, railroad, street railway, traction
railway, subway motor vehicle, either for freight or
passenger, or both, with or without fixed route and
whatever may be its classification, freight or carrier
service of any class, express service, steamboat, or
steamship line, pontines, ferries and water craft,
engaged in the transportation of passengers or
freight or both, shipyard, marine repair shop, wharf
or
dock,
ice
plant,

ice-refrigeration plant, canal, irrigation system, gas,

electric light, heat and power, water supply and
power petroleum, sewerage system, wire or wireless
communications
systems,
wire
or
wireless
broadcasting stations and other similar public
services. ... (Emphasis supplied)
It appears to the Court that private respondent is properly
characterized as a common carrier even though he merely "backhauled" goods for other merchants from Manila to Pangasinan,
although such back-hauling was done on a periodic or occasional
rather than regular or scheduled manner, and even though private
respondent'sprincipal occupation was not the carriage of goods for
others. There is no dispute that private respondent charged his
customers a fee for hauling their goods; that fee frequently fell
below commercial freight rates is not relevant here.
The Court of Appeals referred to the fact that private respondent
held no certificate of public convenience, and concluded he was not
a common carrier. This is palpable error. A certificate of public
convenience is not a requisite for the incurring of liability under the
Civil Code provisions governing common carriers. That liability
arises the moment a person or firm acts as a common carrier,
without regard to whether or not such carrier has also complied
with the requirements of the applicable regulatory statute and
implementing regulations and has been granted a certificate of
public convenience or other franchise. To exempt private
respondent from the liabilities of a common carrier because he has
not secured the necessary certificate of public convenience, would
be offensive to sound public policy; that would be to reward private
respondent precisely for failing to comply with applicable statutory
requirements. The business of a common carrier impinges directly
and intimately upon the safety and well being and property of
those members of the general community who happen to deal with
such carrier. The law imposes duties and liabilities upon common
carriers for the safety and protection of those who utilize their
services and the law cannot allow a common carrier to render such
duties and liabilities merely facultative by simply failing to obtain
the necessary permits and authorizations.

We turn then to the liability of private respondent as a common

carrier.

extraordinary diligence as required in Article 1733.

(Emphasis supplied)

Common carriers, "by the nature of their business and for reasons
of public policy" 2 are held to a very high degree of care and
diligence ("extraordinary diligence") in the carriage of goods as well
as of passengers. The specific import of extraordinary diligence in
the care of goods transported by a common carrier is, according to
Article 1733, "further expressed in Articles 1734,1735 and 1745,
numbers 5, 6 and 7" of the Civil Code.

Applying the above-quoted Articles 1734 and 1735, we note firstly

that the specific cause alleged in the instant case the hijacking
of the carrier's truck does not fall within any of the five (5)
categories of exempting causes listed in Article 1734. It would
follow, therefore, that the hijacking of the carrier's vehicle must be
dealt with under the provisions of Article 1735, in other words, that
the private respondent as common carrier is presumed to have
been at fault or to have acted negligently. This presumption,
however, may be overthrown by proof of extraordinary diligence on
the part of private respondent.

Article 1734 establishes the general rule that common carriers are
responsible for the loss, destruction or deterioration of the goods
which they carry, "unless the same is due to any of the following
causes only:
(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;
and
(5) Order or act of competent public
authority.
It is important to point out that the above list of causes of loss,
destruction or deterioration which exempt the common carrier for
responsibility therefor, is a closed list. Causes falling outside the
foregoing list, even if they appear to constitute a species of force
majeure fall within the scope of Article 1735, which provides as
follows:
In all cases other than those mentioned in numbers
1, 2, 3, 4 and 5 of the preceding article, if the goods
are lost, destroyed or deteriorated, common carriers
are presumed to have been at fault or to have acted
negligently, unless they prove that they observed

Petitioner insists that private respondent had not observed

extraordinary diligence in the care of petitioner's goods. Petitioner
argues that in the circumstances of this case, private respondent
should have hired a security guard presumably to ride with the
truck carrying the 600 cartons of Liberty filled milk. We do not
believe, however, that in the instant case, the standard of
extraordinary diligence required private respondent to retain a
security guard to ride with the truck and to engage brigands in a
firelight at the risk of his own life and the lives of the driver and his
helper.
The precise issue that we address here relates to the specific
requirements of the duty of extraordinary diligence in the vigilance
over the goods carried in the specific context of hijacking or armed
robbery.
As noted earlier, the duty of extraordinary diligence in the vigilance
over goods is, under Article 1733, given additional specification not
only by Articles 1734 and 1735 but also by Article 1745, numbers
4, 5 and 6, Article 1745 provides in relevant part:
Any of the following or similar stipulations shall be
considered unreasonable, unjust and contrary to
public policy:
xxx xxx xxx

(5) that the common carrier shall not

be responsible for the acts or
omissions of his or its employees;
(6) that the common carrier's liability
for acts committed by thieves, or of
robbers who donot act with grave or
irresistible threat, violence or force, is
dispensed with or diminished; and
(7) that the common carrier shall not
responsible for the loss, destruction or
deterioration of goods on account of
the defective condition of the car
vehicle, ship, airplane or other
equipment used in the contract of
carriage. (Emphasis supplied)
Under Article 1745 (6) above, a common carrier is held responsible
and will not be allowed to divest or to diminish such
responsibility even for acts of strangers like thieves or
robbers, except where such thieves or robbers in fact acted "with
grave or irresistible threat, violence or force." We believe and so
hold that the limits of the duty of extraordinary diligence in the
vigilance over the goods carried are reached where the goods are
lost as a result of a robbery which is attended by "grave or
irresistible threat, violence or force."
In the instant case, armed men held up the second truck owned by
private respondent which carried petitioner's cargo. The record
shows that an information for robbery in band was filed in the Court
of First Instance of Tarlac, Branch 2, in Criminal Case No. 198
entitled "People of the Philippines v. Felipe Boncorno, Napoleon
Presno, Armando Mesina, Oscar Oria and one John Doe." There, the
accused were charged with willfully and unlawfully taking and
carrying away with them the second truck, driven by Manuel
Estrada and loaded with the 600 cartons of Liberty filled milk
destined for delivery at petitioner's store in Urdaneta, Pangasinan.
The decision of the trial court shows that the accused acted with
grave, if not irresistible, threat, violence or force. 3 Three (3) of the

five (5) hold-uppers were armed with firearms. The robbers not only
took away the truck and its cargo but also kidnapped the driver and
his helper, detaining them for several days and later releasing
them in another province (in Zambales). The hijacked truck was
subsequently found by the police in Quezon City. The Court of First
Instance convicted all the accused of robbery, though not of
robbery in band. 4
In these circumstances, we hold that the occurrence of the loss
must reasonably be regarded as quite beyond the control of the
common carrier and properly regarded as a fortuitous event. It is
necessary to recall that even common carriers are not made
absolute insurers against all risks of travel and of transport of
goods, and are not held liable for acts or events which cannot be
foreseen or are inevitable, provided that they shall have complied
with the rigorous standard of extraordinary diligence.
We, therefore, agree with the result reached by the Court of
Appeals that private respondent Cendana is not liable for the value
of the undelivered merchandise which was lost because of an event
entirely beyond private respondent's control.
ACCORDINGLY, the Petition for Review on certiorari is hereby
DENIED and the Decision of the Court of Appeals dated 3 August
1977 is AFFIRMED. No pronouncement as to costs.
SO ORDERED.

G.R. No. 131166 September 30, 1999

CALTEX (PHILIPPINES), INC., petitioner, vs. SULPICIO LINES,
INC., GO SIOC SO, ENRIQUE S. GO, EUSEBIO S. GO, CARLOS
S. GO, VICTORIANO S. GO, DOMINADOR S. GO, RICARDO S.
GO, EDWARD S. GO, ARTURO S. GO, EDGAR S. GO, EDMUND
S. GO, FRANCISCO SORIANO, VECTOR SHIPPING
CORPORATION, TERESITA G. CAEZAL, AND SOTERA E.
CAEZAL, respondents.
PARDO, J.:
Is the charterer of a sea vessel liable for damages resulting from a
collision between the chartered vessel and a passenger ship?
When MT Vector left the port of Limay, Bataan, on December 19,
1987 carrying petroleum products of Caltex (Philippines), Inc.

(hereinafter Caltex) no one could have guessed that it would collide

with MV Doa Paz, killing almost all the passengers and crew
members of both ships, and thus resulting in one of the country's
worst maritime disasters.
The petition before us seeks to reverse the Court of Appeals
decision 1 holding petitioner jointly liable with the operator of MT
Vector for damages when the latter collided with Sulpicio Lines,
Inc.'s passenger ship MV Doa Paz.
The facts are as follows:
On December 19, 1987, motor tanker MT Vector left Limay, Bataan,
at about 8:00 p.m., enroute to Masbate, loaded with 8,800 barrels
of petroleum products shipped by petitioner Caltex. 2 MT Vector is
a tramping motor tanker owned and operated by Vector Shipping
Corporation, engaged in the business of transporting fuel products
such as gasoline, kerosene, diesel and crude oil. During that
particular voyage, the MT Vector carried on board gasoline and
other oil products owned by Caltex by virtue of a charter contract
between
them. 3
On December 20, 1987, at about 6:30 a.m., the passenger ship MV
Doa Paz left the port of Tacloban headed for Manila with a
complement of 59 crew members including the master and his
officers, and passengers totaling 1,493 as indicated in the Coast
Guard Clearance. 4 The MV Doa Paz is a passenger and cargo
vessel owned and operated by Sulpicio Lines, Inc. plying the route
of Manila/ Tacloban/ Catbalogan/ Manila/ Catbalogan/ Tacloban/
Manila, making trips twice a week.
At about 10:30 p.m. of December 20, 1987, the two vessels collided
in the open sea within the vicinity of Dumali Point between
Marinduque and Oriental Mindoro. All the crewmembers of MV Doa
Paz died, while the two survivors from MT Vector claimed that they
were sleeping at the time of the incident.1wphi1.nt
The MV Doa Paz carried an estimated 4,000 passengers; many
indeed, were not in the passenger manifest. Only 24 survived the

tragedy after having been rescued from the burning waters by

vessels that responded to distress calls. 5 Among those who
perished were public school teacher Sebastian Caezal (47 years
old) and his daughter Corazon Caezal (11 years old), both
unmanifested passengers but proved to be on board the vessel.
On March 22, 1988, the board of marine inquiry in BMI Case No.
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 Doa Paz. 6
On February 13, 1989, Teresita Caezal and Sotera E. Caezal,
Sebastian Caezal'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 Doa
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:
1. For the death of Sebastian E. Caezal and his 11year old daughter Corazon G. Caezal, including loss
of future earnings of said Sebastian, moral and
exemplary damages, attorney's fees, in the total
amount of P 1,241,287.44 and finally;
2. The statutory costs of the proceedings.

Likewise, the 3rd party complaint is hereby

DISMISSED for want of substantiation and with costs
against the 3rd party plaintiff.
IT IS SO ORDERED.
DONE IN MANILA, this 15th day of September 1992.
ARSENIO M. GONONG
Judge 7
On appeal to the Court of Appeals interposed by Sulpicio Lines, Inc.,
on April 15, 1997, the Court of Appeal modified the trial court's
ruling and included petitioner Caltex as one of the those liable for
damages. Thus:

5. Costs of the suit.

Third party defendants Vector Shipping Co. and
Caltex (Phils.), Inc. are held equally liable under the
third party complaint to reimburse/indemnify
defendant Sulpicio Lines, Inc. of the abovementioned 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).
SO ORDERED.
JORGE S. IMPERIAL

WHEREFORE, in view of all the foregoing, the

judgment rendered by the Regional Trial Court is
hereby MODIFIED as follows:

Associate Justice
WE CONCUR:

WHEREFORE, defendant Sulpicio Lines, Inc., is

ordered to pay the heirs of Sebastian E. Caezal and
Corazon Caezal:
1. Compensatory damages for the death of Sebastian
E. Caezal and Corazon Caezal the total amount of
ONE HUNDRED THOUSAND PESOS (P100,000);
2.
Compensatory
damages
representing
the
unearned income of Sebastian E. Caezal, in the total
amount of THREE HUNDRED SIX THOUSAND FOUR
HUNDRED EIGHTY (P306,480.00) PESOS;
3. Moral damages in the amount of THREE HUNDRED
THOUSAND PESOS (P300,000.00);
4. Attorney's fees in the concept of actual damages
in the amount of FIFTY THOUSAND PESOS
(P50,000.00);

RAMON
U.
MABUTAS,
HERMACHUELOS

JR.

PORTIA

ALIO

Associate Justice Associate Justice. 8

Hence, this petition.
We find the petition meritorious.
First: The charterer has no
liability for damages under
Philippine Maritime laws.
The respective rights and duties of a shipper and the carrier
depends not on whether the carrier is public or private, but on
whether the contract of carriage is a bill of lading or equivalent
shipping documents on the one hand, or a charter party or similar
contract on the other. 9

Petitioner and Vector entered into a contract of affreightment, also

known as a voyage charter. 10

voyage charter, which retains the character of the vessel as a

common carrier.

A charter party is a contract by which an entire ship, or some

principal part thereof, is let by the owner to another person for a
specified time or use; a contract of affreightment is one by which
the owner of a ship or other vessel lets the whole or part of her to a
merchant or other person for the conveyance of goods, on a
particular voyage, in consideration of the payment of freight. 11

In Planters Products, Inc. vs. Court of Appeals, 14 we said:

A contract of affreightment may be either time charter, wherein the

leased vessel is leased to the charterer for a fixed period of time,
or voyage charter, wherein the ship is leased for a single voyage. In
both cases, the charter-party provides for the hire of the vessel
only, either for a determinate period of time or for a single or
consecutive voyage, the ship owner to supply the ship's store, pay
for the wages of the master of the crew, and defray the expenses
for the maintenance of the ship. 12
Under a demise or bareboat charter on the other hand, the
charterer mans the vessel with his own people and becomes, in
effect, the owner for the voyage or service stipulated, subject to
liability for damages caused by negligence.
If the charter is a contract of affreightment, which leaves the
general owner in possession of the ship as owner for the voyage,
the rights and the responsibilities of ownership rest on the owner.
The charterer is free from liability to third persons in respect of the
ship. 13
Second: MT Vector is a common carrier
Charter parties fall into three main categories: (1) Demise or
bareboat, (2) time charter, (3) voyage charter. Does a charter party
agreement turn the common carrier into a private one? We need to
answer this question in order to shed light on the responsibilities of
the parties.
In this case, the charter party agreement did not convert the
common carrier into a private carrier. The parties entered into a

It is therefore imperative that a public carrier shall

remain as such, notwithstanding the charter of the
whole portion of a vessel of one or more persons,
provided the charter is limited to the ship only, as in
the case of a time-charter or the voyage charter. It is
only when the charter includes both the vessel and
its crew, as in a bareboat or demise that a common
carrier becomes private, at least insofar as the
particular voyage covering the charter-party is
concerned. Indubitably, a ship-owner in a time or
voyage charter retains possession and control of the
ship, although her holds may, for the moment, be the
property of the charterer.
Later, we ruled in Coastwise Lighterage Corporation vs. Court of
Appeals: 15
Although a charter party may transform a common
carrier into a private one, the same however is not
true in a contract of affreightment . . .
A common carrier is a person or corporation whose regular
business is to carry passengers or property for all persons who may
choose to employ and to remunerate him. 16 MT Vector fits the
definition of a common carrier under Article 1732 of the Civil Code.
In Guzman vs. Court of Appeals, 17 we ruled:
The Civil Code defines "common carriers" in the
following terms:
Art.
1732.
Common
carriers
are
persons,
corporations, firms or associations engaged in the
business of carrying or transporting passengers for
passengers or goods or both, by land, water, or air

for compensation, offering their services to the

public.

(b) Properly man, equip, and supply the ship;

xxx xxx xxx

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 :

Thus, the carriers are deemed to warrant impliedly the

seaworthiness of the ship. For a vessel to be seaworthy, it must be
adequately equipped for the voyage and manned with a sufficient
number of competent officers and crew. The failure of a common
carrier to maintain in seaworthy condition the vessel involved in its
contract of carriage is a clear breach of its duty prescribed in Article
1755 of the Civil Code. 18
The provisions owed their conception to the nature of the business
of common carriers. This business is impressed with a special
public duty. The public must of necessity rely on the care and skill
of common carriers in the vigilance over the goods and safety of
the passengers, especially because with the modern development
of science and invention, transportation has become more rapid,
more complicated and somehow more hazardous. 19 For these
reasons, a passenger or a shipper of goods is under no obligation to
conduct an inspection of the ship and its crew, the carrier being
obliged by law to impliedly warrant its seaworthiness.
This aside, we now rule on whether Caltex is liable for damages
under the Civil Code.
Third: Is Caltex liable for damages under the Civil Code?
We rule that it is not.
Sulpicio argues that Caltex negligently shipped its highly
combustible fuel cargo aboard an unseaworthy vessel such as the
MT Vector when Caltex:

Sec. 3. (1) The carrier shall be bound before and at

the beginning of the voyage to exercise due diligence
to

1. Did not take steps to have M/T Vector's certificate of inspection

and coastwise license renewed;

(a) Make the ship seaworthy;

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 quasidelict and is governed by the provisions of this
Chapter.
And what is negligence?
The Civil Code provides:

Art. 1173. The fault or negligence of the obligor

consists in the omission of that diligence which is
required by the nature of the obligation and
corresponds with the circumstances of the persons,
of the time and of the place. When negligence shows
bad faith, the provisions of Article 1171 and 2201
paragraph 2, shall apply.
If the law does not state the diligence which is to be
observed in the performance, that which is expected
of a good father of a family shall be required.
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.1wphi1.nt
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.

A: On the first week of December, I

again made a follow-up from Mr.
Abalos, and said they were going to
send me a copy as soon as possible,
sir. 24
xxx xxx xxx

Thus, the nature of the obligation of Caltex demands ordinary

diligence like any other shipper in shipping his cargoes.

Q: What did you do with the C.I.?

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.

A: We did not insist on getting a copy

of the C.I. from Mr. Abalos on the first
place, because of our long business
relation, we trust Mr. Abalos and the
fact that the vessel was able to sail
indicates that the documents are in
order. . . . 25

Atty. Poblador: Mr. Witness, I direct your attention to

this portion here containing the entries here under
"VESSEL'S DOCUMENTS
1. Certificate of Inspection No. 129085, issued December 21, 1986, and
Expires December 7, 1987", Mr.
Witness, what steps did you take
regarding the impending expiry of the
C.I. or the Certificate of Inspection No.
1290-85 during the hiring of MT
Vector?
Apolinario Ng: At the time when I
extended the Contract, I did nothing
because the tanker has a valid C.I.
which will expire on December 7, 1987
but on the last week of November, I
called the attention of Mr. Abalos to
ensure that the C.I. be renewed and
Mr. Abalos, in turn, assured me they
will renew the same.
Q: What happened after that?

On cross examination
Atty. Sarenas: This being the case, and
this being an admission by you, this
Certificate of Inspection has expired on
December 7. Did it occur to you not to
let the vessel sail on that day because
of the very approaching date of
expiration?
Apolinar Ng: No sir, because as I said
before, the operation Manager assured
us that they were able to secure a
renewal of the Certificate of Inspection
and that they will in time submit us a
copy. 26
Finally, on Mr. Ng's redirect examination:
Atty. Poblador: Mr. Witness, were you
aware of the pending expiry of the
Certificate of Inspection in the

coastwise license on December 7,

1987. What was your assurance for the
record that this document was
renewed by the MT Vector?

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.

Atty. Sarenas: . . .

Clearly, as a mere voyage charterer, Caltex had the right to

presume that the ship was seaworthy as even the Philippine Coast
Guard itself was convinced of its seaworthiness. All things
considered, we find no legal basis to hold petitioner liable for
damages.

Atty. Poblador:
Inspection?

The

certificate

of

A: As I said, firstly, we trusted Mr.

Abalos as he is a long time business
partner; secondly, those three years;
they were allowed to sail by the Coast
Guard. That are some that make me
believe that they in fact were able to
secure the necessary renewal.
Q: If the Coast Guard clears a vessel to
sail, what would that mean?
Atty. Sarenas: Objection.
Court: He already answered that in the
cross examination to the effect that if
it was allowed, referring to MV Vector,
to sail, where it is loaded and that it
was scheduled for a destination by the
Coast Guard, it means that it has
Certificate of Inspection extended as
assured to this witness by Restituto
Abalos. That in no case MV Vector will
be allowed to sail if the Certificate of
inspection is, indeed, not to be
extended. That was his repeated
explanation to the cross-examination.
So, there is no need to clarify the same
in the re-direct examination. 27

As Vector Shipping Corporation did not appeal from the Court of

Appeals' decision, we limit our ruling to the liability of Caltex alone.
However, we maintain the Court of Appeals' ruling insofar as Vector
is concerned.
WHEREFORE, the Court hereby GRANTS the petition and SETS
ASIDE the decision of the Court of Appeals in CA-G.R. CV No. 39626,
promulgated on April 15, 1997, insofar as it held Caltex liable under
the third party complaint to reimburse/indemnify defendant
Sulpicio Lines, Inc. the damages the latter is adjudged to pay
plaintiffs-appellees. The Court AFFIRMS the decision of the Court of
Appeals insofar as it orders Sulpicio Lines, Inc. to pay the heirs of
Sebastian E. Caezal and Corazon Caezal damages as set forth
therein.
Third-party
defendant-appellee
Vector
Shipping
Corporation and Francisco Soriano are held liable to
reimburse/indemnify defendant Sulpicio Lines, Inc. whatever
damages, attorneys' fees and costs the latter is adjudged to pay
plaintiffs-appellees in the case.1wphi1.nt
No costs in this instance.
SO ORDERED.

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.

G.R. No. 114167 July 12, 1995

COASTWISE LIGHTERAGE CORPORATION, petitioner, vs.
COURT OF APPEALS and the PHILIPPINE GENERAL
INSURANCE COMPANY, respondents.
RESOLUTION

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.

FRANCISCO, R., J.:

This is a petition for review of a Decision rendered by the Court of
Appeals, dated December 17, 1993, affirming Branch 35 of the
Regional Trial Court, Manila in holding that herein petitioner is liable
to pay herein private respondent the amount of P700,000.00, plus
legal interest thereon, another sum of P100,000.00 as attorney's
fees and the cost of the suit.
The factual background of this case is as follows:
Pag-asa Sales, Inc. entered into a contract to transport molasses
from the province of Negros to Manila with Coastwise Lighterage
Corporation (Coastwise for brevity), using the latter's dumb barges.
The barges were towed in tandem by the tugboat MT Marica, which
is likewise owned by Coastwise.
Upon reaching Manila Bay, while approaching Pier 18, one of the
barges, "Coastwise 9", struck an unknown sunken object. The
forward buoyancy compartment was damaged, and water gushed
in through a hole "two inches wide and twenty-two inches
long" 1 As a consequence, the molasses at the cargo tanks were
contaminated and rendered unfit for the use it was intended. This

The RTC awarded the amount prayed for by PhilGen. On Coastwise

Lighterage's appeal to the Court of Appeals, the award was
affirmed.
Hence, this petition.
There are two main issues to be resolved herein. First, whether or
not petitioner Coastwise Lighterage was transformed into a private
carrier, by virtue of the contract of affreightment which it entered
into with the consignee, Pag-asa Sales, Inc. Corollarily, if it were in
fact transformed into a private carrier, did it exercise the ordinary
diligence to which a private carrier is in turn bound? Second,
whether or not the insurer was subrogated into the rights of the
consignee against the carrier, upon payment by the insurer of the
value of the consignee's goods lost while on board one of the
carrier's vessels.
On the first issue, petitioner contends that the RTC and the Court of
Appeals erred in finding that it was a common carrier. It stresses
the fact that it contracted with Pag-asa Sales, Inc. to transport the
shipment of molasses from Negros Oriental to Manila and refers to
this contract as a "charter agreement". It then proceeds to cite the

case ofHome Insurance Company vs. American Steamship

Agencies, Inc. 2 wherein this Court held: ". . . a common carrier
undertaking to carry a special cargo or chartered to a special
person only becomes a private carrier."
Petitioner's reliance on the aforementioned case is misplaced. In its
entirety, the conclusions of the court are as follows:
Accordingly, the charter party contract is one of
affreightment over the whole vessel, rather than a
demise. As such, the liability of the shipowner for
acts or negligence of its captain and crew, would
remain in the absence of stipulation. 3
The distinction between the two kinds of charter parties (i.e.
bareboat or demise and contract of affreightment) is more clearly
set out in the case of Puromines, Inc. vs. Court of
Appeals, 4 wherein we ruled:
Under the demise or bareboat charter of the vessel,
the charterer will generally be regarded as the owner
for the voyage or service stipulated. The charterer
mans the vessel with his own people and becomes
the owner pro hac vice, subject to liability to others
for damages caused by negligence. To create a
demise, the owner of a vessel must completely and
exclusively relinquish possession, command and
navigation thereof to the charterer, anything short of
such a complete transfer is a contract of
affreightment (time or voyage charter party) or not a
charter party at all.
On the other hand a contract of affreightment is one
in which the owner of the vessel leases part or all of
its space to haul goods for others. It is a contract for
special service to be rendered by the owner of the
vessel and under such contract the general owner
retains the possession, command and navigation of
the ship, the charterer or freighter merely having use

of the space in the vessel in return for his payment of

the charter hire. . . . .
. . . . An owner who retains possession of the ship
though the hold is the property of the charterer,
remains liable as carrier and must answer for any
breach of duty as to the care, loading and unloading
of the cargo. . . .
Although a charter party may transform a common carrier into a
private one, the same however is not true in a contract of
affreightment on account of the aforementioned distinctions
between the two.
Petitioner admits that the contract it entered into with the
consignee was one of affreightment. 5 We agree. Pag-asa Sales,
Inc. only leased three of petitioner's vessels, in order to carry cargo
from one point to another, but the possession, command and
navigation of the vessels remained with petitioner Coastwise
Lighterage.
Pursuant therefore to the ruling in the aforecited Puromines case,
Coastwise Lighterage, by the contract of affreightment, was not
converted into a private carrier, but remained a common carrier
and was still liable as such.
The law and jurisprudence on common carriers both hold that the
mere proof of delivery of goods in good order to a carrier and the
subsequent arrival of the same goods at the place of destination in
bad order makes for a prima facie case against the carrier.
It follows then that the presumption of negligence that attaches to
common carriers, once the goods it transports are lost, destroyed
or deteriorated, applies to the petitioner. This presumption, which is
overcome only by proof of the exercise of extraordinary diligence,
remained unrebutted in this case.
The records show that the damage to the barge which carried the
cargo of molasses was caused by its hitting an unknown sunken
object as it was heading for Pier 18. The object turned out to be a

submerged derelict vessel. Petitioner contends that this

navigational hazard was the efficient cause of the accident. Further
it asserts that the fact that the Philippine Coastguard "has not
exerted any effort to prepare a chart to indicate the location of
sunken derelicts within Manila North Harbor to avoid navigational
accidents" 6 effectively contributed to the happening of this
mishap. Thus, being unaware of the hidden danger that lies in its
path, it became impossible for the petitioner to avoid the same.
Nothing could have prevented the event, making it beyond the pale
of even the exercise of extraordinary diligence.
However, petitioner's assertion is belied by the evidence on record
where it appeared that far from having rendered service with the
greatest skill and utmost foresight, and being free from fault, the
carrier was culpably remiss in the observance of its duties.
Jesus R. Constantino, the patron of the vessel "Coastwise 9"
admitted that he was not licensed. The Code of Commerce, which
subsidiarily governs common carriers (which are primarily governed
by the provisions of the Civil Code) provides:
Art. 609. Captains, masters, or patrons of vessels
must be Filipinos, have legal capacity to contract in
accordance with this code, and prove the skill
capacity and qualifications necessary to command
and direct the vessel, as established by marine and
navigation laws, ordinances or regulations, and must
not be disqualified according to the same for the
discharge of the duties of the position. . . .
Clearly, petitioner Coastwise Lighterage's embarking on a voyage
with an unlicensed patron violates this rule. It cannot safely claim
to have exercised extraordinary diligence, by placing a person
whose navigational skills are questionable, at the helm of the
vessel which eventually met the fateful accident. It may also
logically, follow that a person without license to navigate, lacks not
just the skill to do so, but also the utmost familiarity with the usual
and safe routes taken by seasoned and legally authorized ones.
Had the patron been licensed, he could be presumed to have both

the skill and the knowledge that would have prevented the vessel's
hitting the sunken derelict ship that lay on their way to Pier 18.
As a common carrier, petitioner is liable for breach of the contract
of carriage, having failed to overcome the presumption of
negligence with the loss and destruction of goods it transported, by
proof of its exercise of extraordinary diligence.
On the issue of subrogation, which petitioner contends as
inapplicable in this case, we once more rule against the petitioner.
We have already found petitioner liable for breach of the contract of
carriage it entered into with Pag-asa Sales, Inc. However, for the
damage sustained by the loss of the cargo which petitioner-carrier
was transporting, it was not the carrier which paid the value thereof
to Pag-asa Sales, Inc. but the latter's insurer, herein private
respondent PhilGen.
Article 2207 of the Civil Code is explicit on this point:
Art. 2207. If the plaintiffs property has been insured,
and he has received indemnity from the insurance
company for the injury or loss arising out of the
wrong or breach of contract complained of, the
insurance company shall be subrogated to the rights
of the insured against the wrongdoer or the person
who violated the contract. . . .
This legal provision containing the equitable principle of
subrogation has been applied in a long line of cases
including Compania Maritima v. Insurance Company of North
America; 7 Fireman's Fund Insurance Company v. Jamilla &
Company, Inc., 8 and Pan Malayan Insurance Corporation v. Court
of Appeals, 9 wherein this Court explained:
Article 2207 of the Civil Code is founded on the wellsettled principle of subrogation. If the insured
property is destroyed or damaged through the fault
or negligence of a party other than the assured, then
the insurer, upon payment to the assured will be
subrogated to the rights of the assured to recover

from the wrongdoer to the extent that the insurer has

been obligated to pay. Payment by the insurer to the
assured operated as an equitable assignment to the
former of all remedies which the latter may have
against the third party whose negligence or wrongful
act caused the loss. The right of subrogation is not
dependent upon, nor does it grow out of, any privity
of contract or upon written assignment of claim. It
accrues simply upon payment of the insurance claim
by the insurer.
Undoubtedly, upon payment by respondent insurer PhilGen of the
amount of P700,000.00 to Pag-asa Sales, Inc., the consignee of the
cargo of molasses totally damaged while being transported by
petitioner Coastwise Lighterage, the former was subrogated into all
the rights which Pag-asa Sales, Inc. may have had against the
carrier, herein petitioner Coastwise Lighterage.
WHEREFORE, premises considered, this petition is DENIED and the
appealed decision affirming the order of Branch 35 of the Regional
Trial Court of Manila for petitioner Coastwise Lighterage to pay
respondent Philippine General Insurance Company the "principal
amount of P700,000.00 plus interest thereon at the legal rate
computed from March 29, 1989, the date the complaint was filed
until fully paid and another sum of P100,000.00 as attorney's fees
and costs" 10 is likewise hereby AFFIRMED
SO ORDERED.
G.R. No. 186312

June 29, 2010

SPOUSES DANTE CRUZ and LEONORA CRUZ, Petitioners,

vs.
SUN HOLIDAYS, INC., Respondent.
DECISION
CARPIO MORALES, J.:
Spouses Dante and Leonora Cruz (petitioners) lodged a Complaint
on January 25, 20011 against Sun Holidays, Inc. (respondent) with
the Regional Trial Court (RTC) of Pasig City for damages arising from

the death of their son Ruelito C. Cruz (Ruelito) who perished with
his wife on September 11, 2000 on board the boat M/B Coco Beach
III that capsized en route to Batangas from Puerto Galera, Oriental
Mindoro where the couple had stayed at Coco Beach Island Resort
(Resort) owned and operated by respondent.

Help came after about 45 minutes when two boats owned by Asia
Divers in Sabang, Puerto Galera passed by the capsized M/B Coco
Beach III. Boarded on those two boats were 22 persons, consisting
of 18 passengers and four crew members, who were brought to Pisa
Island. Eight passengers, including petitioners son and his wife,
died during the incident.

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

At the time of Ruelitos death, he was 28 years old and employed

as a contractual worker for Mitsui Engineering & Shipbuilding
Arabia, Ltd. in Saudi Arabia, with a basic monthly salary of $900. 3

Miguel C. Matute (Matute),2 a scuba diving instructor and one of the

survivors, gave his account of the incident that led to the filing of
the complaint as follows:

Petitioners,
by
letter
of
October
26,
2000, 4 demanded
indemnification from respondent for the death of their son in the
amount of at least P4,000,000.

Matute stayed at the Resort from September 8 to 11, 2000. He was

originally scheduled to leave the Resort in the afternoon of
September 10, 2000, but was advised to stay for another night
because of strong winds and heavy rains.

Replying, respondent, by letter dated November 7, 2000, 5 denied

any responsibility for the incident which it considered to be a
fortuitous event. It nevertheless offered, as an act of
commiseration, the amount of P10,000 to petitioners upon their
signing of a waiver.

On September 11, 2000, as it was still windy, Matute and 25 other

Resort guests including petitioners son and his wife trekked to the
other side of the Coco Beach mountain that was sheltered from the
wind where they boarded M/B Coco Beach III, which was to ferry
them to Batangas.
Shortly after the boat sailed, it started to rain. As it moved farther
away from Puerto Galera and into the open seas, the rain and wind
got stronger, causing the boat to tilt from side to side and the
captain to step forward to the front, leaving the wheel to one of the
crew members.
The waves got more unwieldy. After getting hit by two big waves
which came one after the other, M/B Coco Beach III capsized
putting all passengers underwater.
The passengers, who had put on their life jackets, struggled to get
out of the boat. Upon seeing the captain, Matute and the other
passengers who reached the surface asked him what they could do
to save the people who were still trapped under the boat. The
captain replied "Iligtas niyo na lang ang sarili niyo" (Just save
yourselves).

As petitioners declined respondents offer, they filed the Complaint,

as earlier reflected, alleging that respondent, as a common carrier,
was guilty of negligence in allowing M/B Coco Beach III to sail
notwithstanding storm warning bulletins issued by the Philippine
Atmospheric,
Geophysical
and
Astronomical
Services
Administration (PAGASA) as early as 5:00 a.m. of September 11,
2000.6
In its Answer,7 respondent denied being a common carrier, alleging
that its boats are not available to the general public as they only
ferry Resort guests and crew members. Nonetheless, it claimed that
it exercised the utmost diligence in ensuring the safety of its
passengers; contrary to petitioners allegation, there was no storm
on September 11, 2000 as the Coast Guard in fact cleared the
voyage; and M/B Coco Beach III was not filled to capacity and had
sufficient life jackets for its passengers. By way of Counterclaim,
respondent alleged that it is entitled to an award for attorneys fees
and litigation expenses amounting to not less than P300,000.
Carlos Bonquin, captain of M/B Coco Beach III, averred that the
Resort customarily requires four conditions to be met before a boat
is allowed to sail, to wit: (1) the sea is calm, (2) there is clearance
from the Coast Guard, (3) there is clearance from the captain and
(4) there is clearance from the Resorts assistant manager. 8 He

added that M/B Coco Beach III met all four conditions on September
11, 2000,9 but a subasco or squall, characterized by strong winds
and big waves, suddenly occurred, causing the boat to capsize. 10

Petitioners correctly rely on De Guzman v. Court of Appeals 17 in

characterizing respondent as a common carrier.
The Civil Code defines "common carriers" in the following terms:

By Decision of February 16, 2005, 11 Branch 267 of the Pasig RTC

dismissed petitioners Complaint and respondents Counterclaim.
Petitioners Motion for Reconsideration having been denied by
Order dated September 2, 2005,12 they appealed to the Court of
Appeals.
By Decision of August 19, 2008, 13 the appellate court denied
petitioners appeal, holding, among other things, that the trial court
correctly ruled that respondent is a private carrier which is only
required to observe ordinary diligence; that respondent in fact
observed extraordinary diligence in transporting its guests on board
M/B Coco Beach III; and that the proximate cause of the incident
was a squall, a fortuitous event.
Petitioners Motion for Reconsideration having been denied by
Resolution dated January 16, 2009,14 they filed the present Petition
for Review.15
Petitioners maintain the position they took before the trial court,
adding that respondent is a common carrier since by its tour
package, the transporting of its guests is an integral part of its
resort business. They inform that another division of the appellate
court in fact held respondent liable for damages to the other
survivors of the incident.
Upon the other hand, respondent contends that petitioners failed to
present evidence to prove that it is a common carrier; that the
Resorts ferry services for guests cannot be considered as ancillary
to its business as no income is derived therefrom; that it exercised
extraordinary diligence as shown by the conditions it had imposed
before allowing M/B Coco Beach III to sail; that the incident was
caused by a fortuitous event without any contributory negligence
on its part; and that the other case wherein the appellate court
held it liable for damages involved different plaintiffs, issues and
evidence.16
The petition is impressed with merit.

Article 1732. Common carriers are persons, corporations, firms or

associations engaged in the business of carrying or transporting
passengers or goods or both, by land, water, or air for
compensation, offering their services to the public.
The
above
article
makes no
distinction between one
whose principal business activity is the carrying of persons or
goods or both, and one who does such carrying only as an ancillary
activity (in local idiom, as "a sideline"). Article 1732 also carefully
avoids making any distinction between a person or enterprise
offering transportation service on a regular or scheduled basis and
one offering such service on an occasional, episodic or unscheduled
basis. Neither does Article 1732 distinguish between a carrier
offering its services to the "general public," i.e., the general
community or population, and one who offers services or solicits
business only from a narrow segment of the general population. We
think that Article 1733 deliberately refrained from making such
distinctions.
So understood, the concept of "common carrier" under Article 1732
may be seen to coincide neatly with the notion of "public service,"
under the Public Service Act (Commonwealth Act No. 1416, as
amended) which at least partially supplements the law on common
carriers set forth in the Civil Code. Under Section 13, paragraph (b)
of the Public Service Act, "public service" includes:
. . . every person that now or hereafter may own, operate, manage,
or control in the Philippines, for hire or compensation, with general
or limited clientele, whether permanent, occasional or accidental,
and done for general business purposes, any common carrier,
railroad, street railway, traction railway, subway motor vehicle,
either for freight or passenger, or both, with or without fixed route
and whatever may be its classification, freight or carrier service of
any class, express service, steamboat, or steamship line, pontines,
ferries and water craft, engaged in the transportation of passengers
or freight or both, shipyard, marine repair shop, wharf or dock, ice
plant, ice-refrigeration plant, canal, irrigation system, gas, electric
light, heat and power, water supply and power petroleum,
sewerage system, wire or wireless communications systems, wire

or wireless broadcasting stations and other similar

services . . .18 (emphasis and underscoring supplied.)

public

Indeed, respondent is a common carrier. Its ferry services are so

intertwined with its main business as to be properly considered
ancillary thereto. The constancy of respondents ferry services in its
resort operations is underscored by its having its own Coco Beach
boats. And the tour packages it offers, which include the ferry
services, may be availed of by anyone who can afford to pay the
same. These services are thus available to the public.
That respondent does not charge a separate fee or fare for its ferry
services is of no moment. It would be imprudent to suppose that it
provides said services at a loss. The Court is aware of the practice
of beach resort operators offering tour packages to factor the
transportation fee in arriving at the tour package price. That guests
who opt not to avail of respondents ferry services pay the same
amount is likewise inconsequential. These guests may only be
deemed to have overpaid.
As De Guzman instructs, Article 1732 of the Civil Code defining
"common carriers" has deliberately refrained from making
distinctions on whether the carrying of persons or goods is the
carriers principal business, whether it is offered on a regular basis,
or whether it is offered to the general public. The intent of the law
is thus to not consider such distinctions. Otherwise, there is no
telling how many other distinctions may be concocted by
unscrupulous businessmen engaged in the carrying of persons or
goods in order to avoid the legal obligations and liabilities of
common carriers.

Respondent nevertheless harps on its strict compliance with the

earlier mentioned conditions of voyage before it allowed M/B Coco
Beach III to sail on September 11, 2000. Respondents position does
not impress.
The evidence shows that PAGASA issued 24-hour public weather
forecasts and tropical cyclone warnings for shipping on September
10 and 11, 2000 advising of tropical depressions in Northern Luzon
which would also affect the province of Mindoro. 22 By the testimony
of Dr. Frisco Nilo, supervising weather specialist of PAGASA, squalls
are to be expected under such weather condition.23
A very cautious person exercising the utmost diligence would thus
not brave such stormy weather and put other peoples lives at risk.
The extraordinary diligence required of common carriers demands
that they take care of the goods or lives entrusted to their hands as
if they were their own. This respondent failed to do.
Respondents insistence that the incident was caused by a
fortuitous event does not impress either.
The elements of a "fortuitous event" are: (a) the cause of the
unforeseen and unexpected occurrence, or the failure of the
debtors to comply with their obligations, must have been
independent of human will; (b) the event that constituted the caso
fortuito must have been impossible to foresee or, if foreseeable,
impossible to avoid; (c) the occurrence must have been such as to
render it impossible for the debtors to fulfill their obligation in a
normal manner; and (d) the obligor must have been free from any
participation in the aggravation of the resulting injury to the
creditor.24

Under the Civil Code, common carriers, from the nature of their
business and for reasons of public policy, are bound to observe
extraordinary diligence for the safety of the passengers transported
by them, according to all the circumstances of each case. 19 They
are bound to carry the passengers safely as far as human care and
foresight can provide, using the utmost diligence of very cautious
persons, with due regard for all the circumstances.20

To fully free a common carrier from any liability, the fortuitous

event must have been the proximate and only causeof the loss.
And it should have exercised due diligence to prevent or minimize
the loss before, during and after the occurrence of the fortuitous
event.25

When a passenger dies or is injured in the discharge of a contract

of carriage, it is presumed that the common carrier is at fault or
negligent. In fact, there is even no need for the court to make an
express finding of fault or negligence on the part of the common
carrier. This statutory presumption may only be overcome by
evidence that the carrier exercised extraordinary diligence. 21

Respondent cites the squall that occurred during the voyage as the
fortuitous event that overturned M/B Coco Beach III. As reflected
above, however, the occurrence of squalls was expected under the
weather condition of September 11, 2000. Moreover, evidence
shows that M/B Coco Beach III suffered engine trouble before it
capsized and sank.26 The incident was, therefore, not completely
free from human intervention.

The Court need not belabor how respondents evidence likewise

fails to demonstrate that it exercised due diligence to prevent or
minimize the loss before, during and after the occurrence of the
squall.
Article 176427 vis--vis Article 220628 of the Civil Code holds the
common carrier in breach of its contract of carriage that results in
the death of a passenger liable to pay the following: (1) indemnity
for death, (2) indemnity for loss of earning capacity and (3) moral
damages.
Petitioners are entitled to indemnity for the death of Ruelito which
is fixed at P50,000.29
As for damages representing unearned income, the formula for its
computation is:
Net Earning Capacity = life expectancy x (gross annual income reasonable and necessary living expenses).
Life expectancy is determined in accordance with the formula:
2 / 3 x [80 age of deceased at the time of death]30
The first factor, i.e., life expectancy, is computed by applying the
formula (2/3 x [80 age at death]) adopted in the American
Expectancy Table of Mortality or the Actuarial of Combined
Experience Table of Mortality.31
The second factor is computed by multiplying the life expectancy
by the net earnings of the deceased, i.e., the total earnings less
expenses necessary in the creation of such earnings or income and
less living and other incidental expenses. 32 The loss is not
equivalent to the entire earnings of the deceased, but only such
portion as he would have used to support his dependents or heirs.
Hence, to be deducted from his gross earnings are the necessary
expenses supposed to be used by the deceased for his own
needs.33
In computing the third factor necessary living expense, Smith Bell
Dodwell Shipping Agency Corp. v. Borja 34teaches that when, as in
this case, there is no showing that the living expenses constituted
the smaller percentage of the gross income, the living expenses are
fixed at half of the gross income.

Applying the above guidelines, the Court determines Ruelito's life

expectancy as follows:
Life
=

expectancy 2/3 x [80 - age of deceased at the time of

death]
2/3
x
[80
28]
2/3 x [52]

Life
=

expectancy

35

Documentary evidence shows that Ruelito was earning a basic

monthly salary of $90035 which, when converted to Philippine peso
applying the annual average exchange rate of $1 = P44 in
2000,36 amounts to P39,600. Ruelitos net earning capacity is thus
computed as follows:
Net
Earning = life expectancy x (gross annual income Capacity
reasonable and necessary living expenses).
=
35
x
(P475,200
- P237,600)
= 35 x (P237,600)
Net
Earning
= P8,316,000
Capacity
Respecting the award of moral damages, since respondent common
carriers breach of contract of carriage resulted in the death of
petitioners son, following Article 1764 vis--vis Article 2206 of the
Civil Code, petitioners are entitled to moral damages.
Since respondent failed to prove that it exercised the extraordinary
diligence required of common carriers, it is presumed to have acted
recklessly, thus warranting the award too of exemplary damages,
which are granted in contractual obligations if the defendant acted
in a wanton, fraudulent, reckless, oppressive or malevolent
manner.37
Under the circumstances, it is reasonable to award petitioners the
amount of P100,000 as moral damages andP100,000 as exemplary
damages.381avvphi1
Pursuant to Article 220839 of the Civil Code, attorney's fees may
also be awarded where exemplary damages are awarded. The

Court finds that 10% of the total amount adjudged against

respondent is reasonable for the purpose.
Finally, Eastern Shipping Lines, Inc. v. Court of Appeals 40 teaches
that when an obligation, regardless of its source, i.e., law,
contracts, quasi-contracts, delicts or quasi-delicts is breached, the
contravenor can be held liable for payment of interest in the
concept of actual and compensatory damages, subject to the
following rules, to wit
1. When the obligation is breached, and it consists in the
payment of a sum of money, i.e., a loan or forbearance of
money, the interest due should be that which may have
been stipulated in writing. Furthermore, the interest due
shall itself earn legal interest from the time it is judicially
demanded. In the absence of stipulation, the rate of interest
shall be 12% per annum to be computed from default, i.e.,
from judicial or extrajudicial demand under and subject to
the provisions of Article 1169 of the Civil Code.

Since the amounts payable by respondent have been determined

with certainty only in the present petition, the interest due shall be
computed upon the finality of this decision at the rate of 12% per
annum until satisfaction, in accordance with paragraph number 3 of
the immediately cited guideline in Easter Shipping Lines, Inc.
WHEREFORE, the Court of Appeals Decision of August 19, 2008 is
REVERSED and SET ASIDE. Judgment is rendered in favor of
petitioners ordering respondent to pay petitioners the following:
(1) P50,000 as indemnity for the death of Ruelito Cruz;
(2) P8,316,000 as indemnity for Ruelitos loss of earning capacity;
(3) P100,000 as moral damages; (4) P100,000 as exemplary
damages; (5) 10% of the total amount adjudged against
respondent as attorneys fees; and (6) the costs of suit.
The total amount adjudged against respondent shall earn interest
at the rate of 12% per annum computed from the finality of this
decision until full payment.
SO ORDERED.

2. When an obligation, not constituting a loan or

forbearance of money, is breached, an interest on the
amount of damages awarded may be imposed at the
discretion of the court at the rate of 6% per annum. No
interest, however, shall be adjudged on unliquidated claims
or damages except when or until the demand can be
established with reasonable certainty. Accordingly, where
the demand is established with reasonable certainty, the
interest shall begin to run from the time the claim is made
judicially or extrajudicially (Art. 1169, Civil Code) but when
such certainty cannot be so reasonably established at the
time the demand is made, the interest shall begin to run
only from the date the judgment of the court is made (at
which time the quantification of damages may be deemed
to have been reasonably ascertained). The actual base for
the computation of legal interest shall, in any case, be on
the amount finally adjudged.
3. When the judgment of the court awarding a sum of
money becomes final and executory, the rate of legal
interest, whether the case falls under paragraph 1 or
paragraph 2, above, shall be 12% per annum from such
finality until its satisfaction, this interim period being
deemed to be by then an equivalent to a forbearance of
credit. (emphasis supplied).

This petition for review on certiorari assails the Decision of the

Court of Appeals dated November 29, 1995, in CA-G.R. SP No.
36801, affirming the decision of the Regional Trial Court of
Batangas City, Branch 84, in Civil Case No. 4293, which dismissed
petitioners' complaint for a business tax refund imposed by the City
of Batangas.
Petitioner is a grantee of a pipeline concession under Republic Act
No. 387, as amended, to contract, install and operate oil pipelines.
The original pipeline concession was granted in 1967 1 and
renewed by the Energy Regulatory Board in 1992. 2
Sometime in January 1995, petitioner applied for a mayor's permit
with the Office of the Mayor of Batangas City. However, before the
mayor's permit could be issued, the respondent City Treasurer
required petitioner to pay a local tax based on its gross receipts for
the fiscal year 1993 pursuant to the Local Government Code 3. The
respondent City Treasurer assessed a business tax on the petitioner
amounting to P956,076.04 payable in four installments based on
the gross receipts for products pumped at GPS-1 for the fiscal year
1993 which amounted to P181,681,151.00. In order not to hamper
its operations, petitioner paid the tax under protest in the amount
of P239,019.01 for the first quarter of 1993.
On January 20, 1994, petitioner filed a letter-protest addressed to
the respondent City Treasurer, the pertinent portion of which reads:

G.R. No. 125948 December 29, 1998

FIRST PHILIPPINE INDUSTRIAL CORPORATION, petitioner, vs.
COURT OF APPEALS, HONORABLE PATERNO V. TAC-AN,
BATANGAS CITY and ADORACION C. ARELLANO, in her
official capacity as City Treasurer of Batangas, respondents.
MARTINEZ, J.:

Please note that our Company (FPIC) is a pipeline

operator with a government concession granted
under the Petroleum Act. It is engaged in the
business of transporting petroleum products from the
Batangas refineries, via pipeline, to Sucat and JTF
Pandacan Terminals. As such, our Company is exempt
from paying tax on gross receipts under Section 133
of the Local Government Code of 1991 . . . .
Moreover, Transportation contractors are not
included in the enumeration of contractors under
Section 131, Paragraph (h) of the Local Government
Code. Therefore, the authority to impose tax "on

contractors and other independent contractors"

under Section 143, Paragraph (e) of the Local
Government Code does not include the power to levy
on transportation contractors.
The imposition and assessment cannot be
categorized as a mere fee authorized under Section
147 of the Local Government Code. The said section
limits the imposition of fees and charges on business
to such amounts as may be commensurate to the
cost of regulation, inspection, and licensing. Hence,
assuming arguendo that FPIC is liable for the license
fee, the imposition thereof based on gross receipts is
violative of the aforecited provision. The amount of
P956,076.04 (P239,019.01 per quarter) is not
commensurate to the cost of regulation, inspection
and licensing. The fee is already a revenue raising
measure, and not a mere regulatory imposition. 4
On March 8, 1994, the respondent City Treasurer denied the protest
contending that petitioner cannot be considered engaged in
transportation business, thus it cannot claim exemption under
Section 133 (j) of the Local Government Code. 5
On June 15, 1994, petitioner filed with the Regional Trial Court of
Batangas City a complaint 6 for tax refund with prayer for writ of
preliminary injunction against respondents City of Batangas and
Adoracion Arellano in her capacity as City Treasurer. In its
complaint, petitioner alleged, inter alia, that: (1) the imposition and
collection of the business tax on its gross receipts violates Section
133 of the Local Government Code; (2) the authority of cities to
impose and collect a tax on the gross receipts of "contractors and
independent contractors" under Sec. 141 (e) and 151 does not
include the authority to collect such taxes on transportation
contractors for, as defined under Sec. 131 (h), the term
"contractors" excludes transportation contractors; and, (3) the City
Treasurer illegally and erroneously imposed and collected the said
tax, thus meriting the immediate refund of the tax paid. 7

Traversing the complaint, the respondents argued that petitioner

cannot be exempt from taxes under Section 133 (j) of the Local
Government Code as said exemption applies only to "transportation
contractors and persons engaged in the transportation by hire and
common carriers by air, land and water." Respondents assert that
pipelines are not included in the term "common carrier" which
refers solely to ordinary carriers such as trucks, trains, ships and
the like. Respondents further posit that the term "common carrier"
under the said code pertains to the mode or manner by which a
product is delivered to its destination. 8
On October 3, 1994, the trial court rendered a decision dismissing
the complaint, ruling in this wise:
. . . Plaintiff is either
independent contractor.

contractor

or

other

. . . the exemption to tax claimed by the plaintiff has

become unclear. It is a rule that tax exemptions are
to be strictly construed against the taxpayer, taxes
being the lifeblood of the government. Exemption
may therefore be granted only by clear and
unequivocal provisions of law.
Plaintiff claims that it is a grantee of a pipeline
concession under Republic Act 387. (Exhibit A) whose
concession was lately renewed by the Energy
Regulatory Board (Exhibit B). Yet neither said law nor
the deed of concession grant any tax exemption
upon the plaintiff.
Even the Local Government Code imposes a tax on
franchise holders under Sec. 137 of the Local Tax
Code. Such being the situation obtained in this case
(exemption being unclear and equivocal) resort to
distinctions or other considerations may be of help:
1. That the exemption granted under
Sec. 133 (j) encompasses onlycommon
carriers so as not to overburden the

riding public or commuters with

taxes. Plaintiff is not a common carrier,
but a special carrier extending its
services and facilities to a single
specific or "special customer" under a
"special contract."

There is merit in the petition.

2. The Local Tax Code of 1992 was

basically enacted to give more and
effective local autonomy to local
governments
than
the
previous
enactments,
to
make
them
economically and financially viable to
serve the people and discharge their
functions
with
a
concomitant
obligation to accept certain devolution
of powers, . . . So, consistent with this
policy even franchise grantees are
taxed (Sec. 137) and contractors are
also taxed under Sec. 143 (e) and 151
of the Code. 9

Art. 1732 of the Civil Code defines a "common carrier" as "any

person, corporation, firm or association engaged in the business of
carrying or transporting passengers or goods or both, by land,
water, or air, for compensation, offering their services to the
public."

Petitioner assailed the aforesaid decision before this Court via a

petition for review. On February 27, 1995, we referred the case to
the respondent Court of Appeals for consideration and
adjudication. 10On November 29, 1995, the respondent court
rendered a decision 11 affirming the trial court's dismissal of
petitioner's complaint. Petitioner's motion for reconsideration was
denied on July 18, 1996. 12

2. He must undertake to carry goods of the kind to

which his business is confined;

Hence, this petition. At first, the petition was denied due course in a
Resolution dated November 11, 1996. 13 Petitioner moved for a
reconsideration which was granted by this Court in a
Resolution 14 of January 22, 1997. Thus, the petition was
reinstated.
Petitioner claims that the respondent Court of Appeals erred in
holding that (1) the petitioner is not a common carrier or a
transportation contractor, and (2) the exemption sought for by
petitioner is not clear under the law.

A "common carrier" may be defined, broadly, as one who holds

himself out to the public as engaged in the business of transporting
persons or property from place to place, for compensation, offering
his services to the public generally.

The test for determining whether a party is a common carrier of

goods is:
1. He must be engaged in the business of carrying
goods for others as a public employment, and must
hold himself out as ready to engage in the
transportation of goods for person generally as a
business and not as a casual occupation;

3. He must undertake to carry by the method by

which his business is conducted and over his
established roads; and
4. The transportation must be for hire. 15
Based on the above definitions and requirements, there is no doubt
that petitioner is a common carrier. It is engaged in the business of
transporting or carrying goods, i.e. petroleum products, for hire as
a public employment. It undertakes to carry for all persons
indifferently, that is, to all persons who choose to employ its
services, and transports the goods by land and for compensation.
The fact that petitioner has a limited clientele does not exclude it
from the definition of a common carrier. In De Guzman vs. Court of
Appeals 16 we ruled that:

The above article (Art. 1732, Civil Code) makes no

distinction between one whose principal business activity is
the carrying of persons or goods or both, and one who does
such carrying only as an ancillary activity (in local idiom, as
a "sideline"). Article 1732 . . . 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 1877
deliberately refrained from making such distinctions.
So understood, the concept of "common carrier" under
Article 1732 may be seen to coincide neatly with the notion
of "public service," under the Public Service Act
(Commonwealth Act No. 1416, as amended) which at least
partially supplements the law on common carriers set forth
in the Civil Code. Under Section 13, paragraph (b) of the
Public Service Act, "public service" includes:
every person that now or hereafter may own,
operate. manage, or control in the Philippines, for
hire or compensation, with general or limited
clientele,
whether
permanent,
occasional
or
accidental, and done for general business purposes,
any common carrier, railroad, street railway, traction
railway, subway motor vehicle, either for freight or
passenger, or both, with or without fixed route and
whatever may be its classification, freight or carrier
service of any class, express service, steamboat, or
steamship line, pontines, ferries and water
craft, engaged in the transportation of passengers or
freight or both, shipyard, marine repair shop, wharf
or dock, ice plant, ice-refrigeration plant, canal,
irrigation system gas, electric light heat and power,
water
supply
and power
petroleum, sewerage
system, wire or wireless communications systems,

wire or wireless broadcasting stations and other

similar public services. (Emphasis Supplied)
Also, respondent's argument that the term "common carrier" as
used in Section 133 (j) of the Local Government Code refers only to
common carriers transporting goods and passengers through
moving vehicles or vessels either by land, sea or water, is
erroneous.
As correctly pointed out by petitioner, the definition of "common
carriers" in the Civil Code makes no distinction as to the means of
transporting, as long as it is by land, water or air. It does not
provide that the transportation of the passengers or goods should
be by motor vehicle. In fact, in the United States, oil pipe line
operators are considered common carriers. 17
Under the Petroleum Act of the Philippines (Republic Act 387),
petitioner is considered a "common carrier." Thus, Article 86 thereof
provides that:
Art. 86. Pipe line concessionaire as common carrier. A
pipe line shall have the preferential right to utilize
installations for the transportation of petroleum owned by
him, but is obligated to utilize the remaining transportation
capacity pro rata for the transportation of such other
petroleum as may be offered by others for transport, and to
charge without discrimination such rates as may have been
approved by the Secretary of Agriculture and Natural
Resources.
Republic Act 387 also regards petroleum operation as a public
utility. Pertinent portion of Article 7 thereof provides:
that everything relating to the exploration for and
exploitation of petroleum . . . and everything relating to the
manufacture, refining, storage, or transportation by special
methods of petroleum, is hereby declared to be a public
utility. (Emphasis Supplied)

The Bureau of Internal Revenue likewise considers the petitioner a

"common carrier." In BIR Ruling No. 069-83, it declared:
. . . since [petitioner] is a pipeline concessionaire that is
engaged only in transporting petroleum products, it is
considered a common carrier under Republic Act No. 387 . . .
. Such being the case, it is not subject to withholding tax
prescribed by Revenue Regulations No. 13-78, as amended.
From the foregoing disquisition, there is no doubt that petitioner is
a "common carrier" and, therefore, exempt from the business tax
as provided for in Section 133 (j), of the Local Government Code, to
wit:
Sec. 133. Common Limitations on the Taxing Powers of
Local Government Units. Unless otherwise provided
herein, the exercise of the taxing powers of provinces, cities,
municipalities, and barangays shall not extend to the levy of
the following:
xxx xxx xxx
(j)
Taxes
on
the
gross
receipts
of
transportation
contractors
and
persons
engaged in the transportation of passengers
or freight by hire and common carriers by air,
land or water, except as provided in this Code.
The deliberations conducted in the House of Representatives on the
Local Government Code of 1991 are illuminating:
MR. AQUINO (A). Thank you, Mr. Speaker.
Mr. Speaker, we would like to proceed to page 95,
line
1. It states: "SEC. 121 [now Sec. 131]. Common
Limitations on the Taxing Powers of Local
Government Units." . . .

MR. AQUINO (A.). Thank you Mr. Speaker.

Still on page 95, subparagraph 5, on taxes on the
business of transportation. This appears to be one of
those being deemed to be exempted from the taxing
powers of the local government units. May we know
the reason why the transportation business is being
excluded from the taxing powers of the local
government units?
MR. JAVIER (E.). Mr. Speaker, there is an exception
contained in Section 121 (now Sec. 131), line 16,
paragraph 5. It states that local government units
may not impose taxes on the business of
transportation, except as otherwise provided in this
code.
Now, Mr. Speaker, if the Gentleman would care to go
to page 98 of Book II, one can see there that
provinces have the power to impose a tax on
business enjoying a franchise at the rate of not more
than one-half of 1 percent of the gross annual
receipts. So, transportation contractors who are
enjoying a franchise would be subject to tax by the
province. That is the exception, Mr. Speaker.
What we want to guard against here, Mr. Speaker, is
the imposition of taxes by local government units on
the carrier business. Local government units may
impose taxes on top of what is already being
imposed by the National Internal Revenue Code
which is the so-called "common carriers tax." We do
not want a duplication of this tax, so we just provided
for an exception under Section 125 [now Sec. 137]
that a province may impose this tax at a specific
rate.
MR. AQUINO (A.). Thank you for that clarification, Mr.
Speaker. . . . 18

It is clear that the legislative intent in excluding from the taxing

power of the local government unit the imposition of business tax
against common carriers is to prevent a duplication of the so-called
"common carrier's tax."
Petitioner is already paying three (3%) percent common carrier's
tax on its gross sales/earnings under the National Internal Revenue
Code. 19 To tax petitioner again on its gross receipts in its
transportation of petroleum business would defeat the purpose of
the Local Government Code.
WHEREFORE, the petition is hereby GRANTED. The decision of the
respondent Court of Appeals dated November 29, 1995 in CA-G.R.
SP No. 36801 is REVERSED and SET ASIDE.
SO ORDERED.

MELENCIO-HERRERA, J.:
These two cases, both for the recovery of the value of cargo
insurance, arose from the same incident, the sinking of the M/S
ASIATICA when it caught fire, resulting in the total loss of ship and
cargo.
The basic facts are not in controversy:
In G.R. No. 69044, sometime in or prior to June, 1977, the M/S
ASIATICA, a vessel operated by petitioner Eastern Shipping Lines,
Inc., (referred to hereinafter as Petitioner Carrier) loaded at Kobe,
Japan for transportation to Manila, 5,000 pieces of calorized lance
pipes in 28 packages valued at P256,039.00 consigned to Philippine
Blooming Mills Co., Inc., and 7 cases of spare parts valued at
P92,361.75, consigned to Central Textile Mills, Inc. Both sets of
goods were insured against marine risk for their stated value with
respondent Development Insurance and Surety Corporation.
In G.R. No. 71478, during the same period, the same vessel took on
board 128 cartons of garment fabrics and accessories, in two (2)
containers, consigned to Mariveles Apparel Corporation, and two
cases of surveying instruments consigned to Aman Enterprises and
General Merchandise. The 128 cartons were insured for their stated
value by respondent Nisshin Fire & Marine Insurance Co., for US
$46,583.00, and the 2 cases by respondent Dowa Fire & Marine
Insurance Co., Ltd., for US $11,385.00.

G.R. No. L-69044 May 29, 1987

EASTERN SHIPPING LINES, INC., petitioner, vs. INTERMEDIATE
APPELLATE COURT and DEVELOPMENT INSURANCE &
SURETY CORPORATION,respondents.
No. 71478 May 29, 1987
EASTERN SHIPPING LINES, INC., petitioner, vs. THE NISSHIN
FIRE AND MARINE INSURANCE CO., and DOWA FIRE &
MARINE INSURANCE CO., LTD.,respondents.

Enroute for Kobe, Japan, to Manila, the vessel caught fire and sank,
resulting in the total loss of ship and cargo. The respective
respondent Insurers paid the corresponding marine insurance
values to the consignees concerned and were thus subrogated unto
the rights of the latter as the insured.
G.R. NO. 69044
On May 11, 1978, respondent Development Insurance & Surety
Corporation (Development Insurance, for short), having been
subrogated unto the rights of the two insured companies, filed suit
against petitioner Carrier for the recovery of the amounts it had

paid to the insured before the then Court of First instance of Manila,
Branch XXX (Civil Case No. 6087).

DOWA to US $1,000.00 because of $500 per package limitation of

liability under the COGSA.

Petitioner-Carrier denied liability mainly on the ground that the loss

was due to an extraordinary fortuitous event, hence, it is not liable
under the law.

Hence, this Petition for Review on certiorari by Petitioner Carrier.

On August 31, 1979, the Trial Court rendered judgment in favor of

Development Insurance in the amounts of P256,039.00 and
P92,361.75, respectively, with legal interest, plus P35,000.00 as
attorney's fees and costs. Petitioner Carrier took an appeal to the
then Court of Appeals which, on August 14, 1984, affirmed.
Petitioner Carrier is now before us on a Petition for Review on
Certiorari.
G.R. NO. 71478
On June 16, 1978, respondents Nisshin Fire & Marine Insurance Co.
NISSHIN for short), and Dowa Fire & Marine Insurance Co., Ltd.
(DOWA, for brevity), as subrogees of the insured, filed suit against
Petitioner Carrier for the recovery of the insured value of the cargo
lost with the then Court of First Instance of Manila, Branch 11 (Civil
Case No. 116151), imputing unseaworthiness of the ship and nonobservance of extraordinary diligence by petitioner Carrier.
Petitioner Carrier denied liability on the principal grounds that the
fire which caused the sinking of the ship is an exempting
circumstance under Section 4(2) (b) of the Carriage of Goods by
Sea Act (COGSA); and that when the loss of fire is established, the
burden of proving negligence of the vessel is shifted to the cargo
shipper.
On September 15, 1980, the Trial Court rendered judgment in favor
of NISSHIN and DOWA in the amounts of US $46,583.00 and US
$11,385.00, respectively, with legal interest, plus attorney's fees of
P5,000.00 and costs. On appeal by petitioner, the then Court of
Appeals on September 10, 1984, affirmed with modification the
Trial Court's judgment by decreasing the amount recoverable by

Both Petitions were initially denied for lack of merit. G.R. No. 69044
on January 16, 1985 by the First Division, and G. R. No. 71478 on
September 25, 1985 by the Second Division. Upon Petitioner
Carrier's Motion for Reconsideration, however, G.R. No. 69044 was
given due course on March 25, 1985, and the parties were required
to submit their respective Memoranda, which they have done.
On the other hand, in G.R. No. 71478, Petitioner Carrier sought
reconsideration of the Resolution denying the Petition for Review
and moved for its consolidation with G.R. No. 69044, the lowernumbered case, which was then pending resolution with the First
Division. The same was granted; the Resolution of the Second
Division of September 25, 1985 was set aside and the Petition was
given due course.
At the outset, we reject Petitioner Carrier's claim that it is not the
operator of the M/S Asiatica but merely a charterer thereof. We note
that in G.R. No. 69044, Petitioner Carrier stated in its Petition:
There are about 22 cases of the "ASIATICA" pending
in various courts where various plaintiffs are
represented by various counsel representing various
consignees or insurance companies. The common
defendant in these cases is petitioner herein, being
the operator of said vessel. ... 1
Petitioner Carrier should be held bound to said admission. As a
general rule, the facts alleged in a party's pleading are deemed
admissions of that party and binding upon it. 2 And an admission in
one pleading in one action may be received in evidence against the
pleader or his successor-in-interest on the trial of another action to
which he is a party, in favor of a party to the latter action. 3
The threshold issues in both cases are: (1) which law should govern
the Civil Code provisions on Common carriers or the Carriage of

Goods by Sea Act? and (2) who has the burden of proof to show
negligence of the carrier?

a reduction of the rent is allowed when more than one-half of the

fruits have been lost due to such event, considering that the law
adopts a protection policy towards agriculture. 14

On the Law Applicable

The law of the country to which the goods are to be transported
governs the liability of the common carrier in case of their loss,
destruction or deterioration. 4 As the cargoes in question were
transported from Japan to the Philippines, the liability of Petitioner
Carrier is governed primarily by the Civil Code. 5 However, in all
matters not regulated by said Code, the rights and obligations of
common carrier shall be governed by the Code of Commerce and
by special laws. 6 Thus, the Carriage of Goods by Sea Act, a special
law, is suppletory to the provisions of the Civil Code. 7
On the Burden of Proof
Under the Civil Code, common carriers, from the nature of their
business and for reasons of public policy, are bound to observe
extraordinary diligence in the vigilance over goods, according to all
the circumstances of each case. 8 Common carriers are responsible
for the loss, destruction, or deterioration of the goods unless the
same is due to any of the following causes only:
(1) Flood, storm, earthquake, lightning or other
natural disaster or calamity;
xxx xxx xxx 9
Petitioner Carrier claims that the loss of the vessel by fire exempts
it from liability under the phrase "natural disaster or calamity. "
However, we are of the opinion that fire may not be considered a
natural disaster or calamity. This must be so as it arises almost
invariably from some act of man or by human means. 10 It does
not fall within the category of an act of God unless caused by
lightning 11 or by other natural disaster or calamity. 12 It may
even be caused by the actual fault or privity of the carrier. 13
Article 1680 of the Civil Code, which considers fire as an
extraordinary fortuitous event refers to leases of rural lands where

As the peril of the fire is not comprehended within the exception in

Article 1734, supra, Article 1735 of the Civil Code provides that all
cases than those mention in Article 1734, the common carrier shall
be presumed to have been at fault or to have acted negligently,
unless it proves that it has observed the extraordinary deligence
required by law.
In this case, the respective Insurers. as subrogees of the cargo
shippers, have proven that the transported goods have been lost.
Petitioner Carrier has also proved that the loss was caused by fire.
The burden then is upon Petitioner Carrier to proved that it has
exercised the extraordinary diligence required by law. In this
regard, the Trial Court, concurred in by the Appellate Court, made
the following Finding of fact:
The cargoes in question were, according to the
witnesses defendant placed in hatches No, 2 and 3 cf
the vessel, Boatswain Ernesto Pastrana noticed that
smoke was coming out from hatch No. 2 and hatch
No. 3; that where the smoke was noticed, the fire
was already big; that the fire must have started
twenty-four 24) our the same was noticed; that
carbon dioxide was ordered released and the crew
was ordered to open the hatch covers of No, 2 tor
commencement of fire fighting by sea water: that all
of these effort were not enough to control the fire.
Pursuant to Article 1733, common carriers are bound
to extraordinary diligence in the vigilance over the
goods. The evidence of the defendant did not show
that extraordinary vigilance was observed by the
vessel to prevent the occurrence of fire at hatches
numbers 2 and 3. Defendant's evidence did not
likewise show he amount of diligence made by the
crew, on orders, in the care of the cargoes. What
appears is that after the cargoes were stored in the

hatches, no regular inspection was made as to their

condition during the voyage. Consequently, the crew
could not have even explain what could have caused
the fire. The defendant, in the Court's mind, failed to
satisfactorily show that extraordinary vigilance and
care had been made by the crew to prevent the
occurrence of the fire. The defendant, as a common
carrier, is liable to the consignees for said lack of
deligence required of it under Article 1733 of the Civil
Code. 15
Having failed to discharge the burden of proving that it had
exercised the extraordinary diligence required by law, Petitioner
Carrier cannot escape liability for the loss of the cargo.
And even if fire were to be considered a "natural disaster" within
the meaning of Article 1734 of the Civil Code, it is required under
Article 1739 of the same Code that the "natural disaster" must
have been the "proximate and only cause of the loss," and that the
carrier has "exercised due diligence to prevent or minimize the loss
before, during or after the occurrence of the disaster. " This
Petitioner Carrier has also failed to establish satisfactorily.
Nor may Petitioner Carrier seek refuge from liability under the
Carriage of Goods by Sea Act, It is provided therein that:
Sec. 4(2). Neither the carrier nor the ship shall be
responsible for loss or damage arising or resulting
from
(b) Fire, unless caused by the actual fault or privity of
the carrier.
xxx xxx xxx
In this case, both the Trial Court and the Appellate Court, in effect,
found, as a fact, that there was "actual fault" of the carrier shown
by "lack of diligence" in that "when the smoke was noticed, the fire
was already big; that the fire must have started twenty-four (24)
hours before the same was noticed; " and that "after the cargoes

were stored in the hatches, no regular inspection was made as to

their condition during the voyage." The foregoing suffices to show
that the circumstances under which the fire originated and spread
are such as to show that Petitioner Carrier or its servants were
negligent in connection therewith. Consequently, the complete
defense afforded by the COGSA when loss results from fire is
unavailing to Petitioner Carrier.
On the US $500 Per Package Limitation:
Petitioner Carrier avers that its liability if any, should not exceed US
$500 per package as provided in section 4(5) of the COGSA, which
reads:
(5) Neither the carrier nor the ship shall in any event
be or become liable for any loss or damage to or in
connection with the transportation of goods in an
amount exceeding $500 per package lawful money of
the United States, or in case of goods not shipped in
packages, per customary freight unit, or the
equivalent of that sum in other currency, unless the
nature and value of such goods have been declared
by the shipper before shipment and inserted in bill of
lading. This declaration if embodied in the bill of
lading shall be prima facie evidence, but all be
conclusive on the carrier.
By agreement between the carrier, master or agent
of the carrier, and the shipper another maximum
amount than that mentioned in this paragraph may
be fixed: Provided, That such maximum shall not be
less than the figure above named. In no event shall
the carrier be Liable for more than the amount of
damage actually sustained.
xxx xxx xxx
Article 1749 of the New Civil Code also allows the limitations of
liability in this wise:

Art. 1749. A stipulation that the common carrier's

liability as limited to the value of the goods
appearing in the bill of lading, unless the shipper or
owner declares a greater value, is binding.

by $500 per package at the present prevailing rate of P20.44 to US

$1 (US $3,500 x P20.44) would yield P71,540 only, which is the
amount that should be paid by Petitioner Carrier for those spare
parts, and not P92,361.75.

It is to be noted that the Civil Code does not of itself limit the
liability of the common carrier to a fixed amount per package
although the Code expressly permits a stipulation limiting such
liability. Thus, the COGSA which is suppletory to the provisions of
the Civil Code, steps in and supplements the Code by establishing a
statutory provision limiting the carrier's liability in the absence of a
declaration of a higher value of the goods by the shipper in the bill
of lading. The provisions of the Carriage of Goods by.Sea Act on
limited liability are as much a part of a bill of lading as though
physically in it and as much a part thereof as though placed therein
by agreement of the parties. 16

In G.R. No. 71478, in so far as the two (2) cases of surveying

instruments are concerned, the amount awarded to DOWA which
was already reduced to $1,000 by the Appellate Court following the
statutory $500 liability per package, is in order.

In G.R. No. 69044, there is no stipulation in the respective Bills of

Lading (Exhibits "C-2" and "I-3") 1 7 limiting the carrier's liability for
the loss or destruction of the goods. Nor is there a declaration of a
higher value of the goods. Hence, Petitioner Carrier's liability should
not exceed US $500 per package, or its peso equivalent, at the
time of payment of the value of the goods lost, but in no case
"more than the amount of damage actually sustained."
The actual total loss for the 5,000 pieces of calorized lance pipes
was P256,039 (Exhibit "C"), which was exactly the amount of the
insurance coverage by Development Insurance (Exhibit "A"), and
the amount affirmed to be paid by respondent Court. The goods
were shipped in 28 packages (Exhibit "C-2") Multiplying 28
packages by $500 would result in a product of $14,000 which, at
the current exchange rate of P20.44 to US $1, would be P286,160,
or "more than the amount of damage actually sustained."
Consequently, the aforestated amount of P256,039 should be
upheld.
With respect to the seven (7) cases of spare parts (Exhibit "I-3"),
their actual value was P92,361.75 (Exhibit "I"), which is likewise the
insured value of the cargo (Exhibit "H") and amount was affirmed to
be paid by respondent Court. however, multiplying seven (7) cases

In respect of the shipment of 128 cartons of garment fabrics in two

(2) containers and insured with NISSHIN, the Appellate Court also
limited Petitioner Carrier's liability to $500 per package and
affirmed the award of $46,583 to NISSHIN. it multiplied 128 cartons
(considered as COGSA packages) by $500 to arrive at the figure of
$64,000, and explained that "since this amount is more than the
insured value of the goods, that is $46,583, the Trial Court was
correct in awarding said amount only for the 128 cartons, which
amount is less than the maximum limitation of the carrier's
liability."
We find no reversible error. The 128 cartons and not the two (2)
containers should be considered as the shipping unit.
In Mitsui & Co., Ltd. vs. American Export Lines, Inc. 636 F 2d 807
(1981), the consignees of tin ingots and the shipper of floor
covering brought action against the vessel owner and operator to
recover for loss of ingots and floor covering, which had been
shipped in vessel supplied containers. The U.S. District Court for
the Southern District of New York rendered judgment for the
plaintiffs, and the defendant appealed. The United States Court of
Appeals, Second Division, modified and affirmed holding that:
When what would ordinarily be considered packages
are shipped in a container supplied by the carrier and
the number of such units is disclosed in the shipping
documents, each of those units and not the container
constitutes the "package" referred to in liability
limitation provision of Carriage of Goods by Sea Act.

Carriage of Goods by Sea Act, 4(5), 46 U.S.C.A.&

1304(5).
Even if language and purposes of Carriage of Goods
by Sea Act left doubt as to whether carrier-furnished
containers whose contents are disclosed should be
treated as packages, the interest in securing
international uniformity would suggest that they
should not be so treated. Carriage of Goods by Sea
Act, 4(5), 46 U.S.C.A. 1304(5).
... After quoting the statement in Leather's Best,
supra, 451 F 2d at 815, that treating a container as a
package is inconsistent with the congressional
purpose of establishing a reasonable minimum level
of liability, Judge Beeks wrote, 414 F. Supp. at 907
(footnotes omitted):
Although this approach has not completely
escaped criticism, there is, nonetheless, much
to commend it. It gives needed recognition to
the responsibility of the courts to construe
and apply the statute as enacted, however
great might be the temptation to "modernize"
or reconstitute it by artful judicial gloss. If
COGSA's package limitation scheme suffers
from internal illness, Congress alone must
undertake the surgery. There is, in this regard,
obvious wisdom in the Ninth Circuit's
conclusion in Hartford that technological
advancements, whether or not forseeable by
the COGSA promulgators, do not warrant a
distortion or artificial construction of the
statutory term "package." A ruling that these
large reusable metal pieces of transport
equipment qualify as COGSA packages at
least where, as here, they were carrier owned
and supplied would amount to just such a
distortion.

Certainly, if the individual crates or cartons

prepared by the shipper and containing his
goods can rightly be considered "packages"
standing by themselves, they do not suddenly
lose that character upon being stowed in a
carrier's container. I would liken these
containers
to
detachable
stowage
compartments of the ship. They simply serve
to divide the ship's overall cargo stowage
space into smaller, more serviceable loci.
Shippers' packages are quite literally "stowed"
in the containers utilizing stevedoring
practices and materials analogous to those
employed in traditional on board stowage.
In Yeramex International v. S.S. Tando,, 1977 A.M.C.
1807 (E.D. Va.) rev'd on other grounds, 595 F 2nd
943 (4 Cir. 1979), another district with many
maritime cases followed Judge Beeks' reasoning in
Matsushita and similarly rejected the functional
economics test. Judge Kellam held that when rolls of
polyester goods are packed into cardboard cartons
which are then placed in containers, the cartons and
not the containers are the packages.
xxx xxx xxx
The case of Smithgreyhound v. M/V Eurygenes, 18 followed the
Mitsui test:
Eurygenes concerned a shipment of stereo
equipment packaged by the shipper into cartons
which were then placed by the shipper into a carrierfurnished container. The number of cartons was
disclosed to the carrier in the bill of lading.
Eurygenes followed the Mitsui test and treated the
cartons, not the container, as the COGSA
packages. However, Eurygenes indicated that a
carrier could limit its liability to $500 per container if
the bill of lading failed to disclose the number of

cartons or units within the container, or if the parties

indicated, in clear and unambiguous language, an
agreement to treat the container as the package.
(Admiralty Litigation in Perpetuum: The
Continuing
Saga
of
Package
Limitations and Third World Delivery
Problems by Chester D. Hooper & Keith
L. Flicker, published in Fordham
International Law Journal, Vol. 6, 198283, Number 1) (Emphasis supplied)

11. (Use of Container) Where the goods receipt

which is acknowledged on the face of this Bill
Lading are not already packed into container(s)
the time of receipt, the Carrier shall be at liberty
pack and carry them in any type of container(s).

of
of
at
to

(128) Cartons)

The foregoing would explain the use of the estimate "Say: Two (2)
Containers Only" in the Bill of Lading, meaning that the goods could
probably fit in two (2) containers only. It cannot mean that the
shipper had furnished the containers for if so, "Two (2) Containers"
appearing as the first entry would have sufficed. and if there is any
ambiguity in the Bill of Lading, it is a cardinal principle in the
construction of contracts that the interpretation of obscure words or
stipulations in a contract shall not favor the party who caused the
obscurity. 20 This applies with even greater force in a contract of
adhesion where a contract is already prepared and the other party
merely adheres to it, like the Bill of Lading in this case, which is
draw. up by the carrier. 21

Men's Garments Fabrics and Accessories Freight

Prepaid

On Alleged Denial of Opportunity to Present Deposition of Its

Witnesses: (in G.R. No. 69044 only)

Say: Two (2) Containers Only.

Petitioner Carrier claims that the Trial Court did not give it sufficient
time to take the depositions of its witnesses in Japan by written
interrogatories.

In this case, the Bill of Lading (Exhibit "A") disclosed the following
data:
2 Containers

Considering, therefore, that the Bill of Lading clearly disclosed the

contents of the containers, the number of cartons or units, as well
as the nature of the goods, and applying the ruling in
the Mitsui and Eurygenes cases it is clear that the 128 cartons, not
the two (2) containers should be considered as the shipping unit
subject to the $500 limitation of liability.

We do not agree. petitioner Carrier was given- full opportunity to

present its evidence but it failed to do so. On this point, the Trial
Court found:
xxx xxx xxx

True, the evidence does not disclose whether the containers

involved herein were carrier-furnished or not. Usually, however,
containers are provided by the carrier. 19 In this case, the
probability is that they were so furnished for Petitioner Carrier was
at liberty to pack and carry the goods in containers if they were not
so packed. Thus, at the dorsal side of the Bill of Lading (Exhibit "A")
appears the following stipulation in fine print:

Indeed, since after November 6, 1978, to August 27,

1979, not to mention the time from June 27, 1978,
when its answer was prepared and filed in Court,
until September 26, 1978, when the pre-trial
conference was conducted for the last time, the
defendant had more than nine months to prepare its
evidence. Its belated notice to take deposition on
written interrogatories of its witnesses in Japan,

served upon the plaintiff on August 25th, just two

days before the hearing set for August 27th, knowing
fully well that it was its undertaking on July 11 the
that the deposition of the witnesses would be
dispensed with if by next time it had not yet been
obtained, only proves the lack of merit of the
defendant's motion for postponement, for which
reason it deserves no sympathy from the Court in
that regard. The defendant has told the Court since
February 16, 1979, that it was going to take the
deposition of its witnesses in Japan. Why did it take
until August 25, 1979, or more than six months, to
prepare its written interrogatories. Only the
defendant itself is to blame for its failure to adduce
evidence in support of its defenses.

twenty-eight (28) packages of calorized lance pipes, and P71,540

for the seven (7) cases of spare parts, with interest at the legal rate
from the date of the filing of the complaint on June 13, 1978, plus
P5,000 as attorney's fees, and the costs.
2) In G.R.No.71478,the judgment is hereby affirmed.
SO ORDERED.

xxx xxx xxx 22

Petitioner Carrier was afforded ample time to present its side of the
case. 23 It cannot complain now that it was denied due process
when the Trial Court rendered its Decision on the basis of the
evidence adduced. What due process abhors is absolute lack of
opportunity to be heard. 24
On the Award of Attorney's Fees:
Petitioner Carrier questions the award of attorney's fees. In both
cases, respondent Court affirmed the award by the Trial Court of
attorney's fees of P35,000.00 in favor of Development Insurance in
G.R. No. 69044, and P5,000.00 in favor of NISSHIN and DOWA in
G.R. No. 71478.
Courts being vested with discretion in fixing the amount of
attorney's fees, it is believed that the amount of P5,000.00 would
be more reasonable in G.R. No. 69044. The award of P5,000.00 in
G.R. No. 71478 is affirmed.
WHEREFORE, 1) in G.R. No. 69044, the judgment is modified in that
petitioner Eastern Shipping Lines shall pay the Development
Insurance and Surety Corporation the amount of P256,039 for the

G.R. No. L-49407 August 19, 1988

NATIONAL DEVELOPMENT COMPANY, petitioner-appellant, vs.

THE COURT OF APPEALS and DEVELOPMENT INSURANCE &
SURETY CORPORATION, respondents-appellees.
No. L-49469 August 19, 1988
MARITIME COMPANY OF THE PHILIPPINES, petitionerappellant, vs. THE COURT OF APPEALS and DEVELOPMENT
INSURANCE & SURETY CORPORATION, respondents- appellees.
PARAS, J.:
These are appeals by certiorari from the decision * of the Court of
Appeals in CA G.R. No: L- 46513-R entitled "Development Insurance
and Surety Corporation plaintiff-appellee vs. Maritime Company of
the Philippines and National Development Company defendantappellants," affirmingin toto the decision ** in Civil Case No. 60641
of the then Court of First Instance of Manila, Sixth Judicial District,
the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered ordering
the defendants National Development Company and
Maritime Company of the Philippines, to pay jointly
and severally, to the plaintiff Development Insurance
and Surety Corp., the sum of THREE HUNDRED SIXTY
FOUR THOUSAND AND NINE HUNDRED FIFTEEN
PESOS AND EIGHTY SIX CENTAVOS (364,915.86) with
the legal interest thereon from the filing of plaintiffs
complaint on April 22, 1965 until fully paid, plus TEN
THOUSAND PESOS (Pl0,000.00) by way of damages
as and for attorney's fee.
On defendant Maritime Company of the Philippines'
cross-claim
against
the
defendant
National
Development
Company,
judgment
is
hereby
rendered, ordering the National Development
Company to pay the cross-claimant Maritime
Company of the Philippines the total amount that the
Maritime Company of the Philippines may voluntarily
or by compliance to a writ of execution pay to the
plaintiff pursuant to the judgment rendered in this
case.

With costs against the defendant Maritime Company

of the Philippines.
(pp. 34-35, Rollo, GR No. L-49469)
The facts of these cases as found by the Court of Appeals, are as
follows:
The evidence before us shows that in accordance
with a memorandum agreement entered into
between defendants NDC and MCP on September 13,
1962, defendant NDC as the first preferred
mortgagee of three ocean going vessels including
one with the name 'Dona Nati' appointed defendant
MCP as its agent to manage and operate said vessel
for and in its behalf and account (Exh. A). Thus, on
February 28, 1964 the E. Philipp Corporation of New
York loaded on board the vessel "Dona Nati" at San
Francisco, California, a total of 1,200 bales of
American raw cotton consigned to the order of Manila
Banking Corporation, Manila and the People's Bank
and Trust Company acting for and in behalf of the
Pan Asiatic Commercial Company, Inc., who
represents Riverside Mills Corporation (Exhs. K-2 to
K7-A & L-2 to L-7-A). Also loaded on the same vessel
at Tokyo, Japan, were the cargo of Kyokuto Boekui,
Kaisa, Ltd., consigned to the order of Manila Banking
Corporation consisting of 200 cartons of sodium
lauryl sulfate and 10 cases of aluminum foil (Exhs. M
& M-1). En route to Manila the vessel Dofia Nati
figured in a collision at 6:04 a.m. on April 15, 1964 at
Ise Bay, Japan with a Japanese vessel 'SS Yasushima
Maru' as a result of which 550 bales of aforesaid
cargo of American raw cotton were lost and/or
destroyed, of which 535 bales as damaged were
landed and sold on the authority of the General
Average Surveyor for Yen 6,045,-500 and 15 bales
were not landed and deemed lost (Exh. G). The
damaged and lost cargoes was worth P344,977.86
which amount, the plaintiff as insurer, paid to the

Riverside Mills Corporation as holder of the

negotiable bills of lading duly endorsed (Exhs. L-7-A,
K-8-A, K-2-A, K-3-A, K-4-A, K-5-A, A- 2, N-3 and R-3}.
Also considered totally lost were the aforesaid
shipment of Kyokuto, Boekui Kaisa Ltd., consigned to
the order of Manila Banking Corporation, Manila,
acting for Guilcon, Manila, The total loss was
P19,938.00 which the plaintiff as insurer paid to
Guilcon as holder of the duly endorsed bill of lading
(Exhibits M-1 and S-3). Thus, the plaintiff had paid as
insurer the total amount of P364,915.86 to the
consignees or their successors-in-interest, for the
said lost or damaged cargoes. Hence, plaintiff filed
this complaint to recover said amount from the
defendants-NDC and MCP as owner and ship agent
respectively, of the said 'Dofia Nati' vessel. (Rollo, L49469, p.38)
On April 22, 1965, the Development Insurance and Surety
Corporation filed before the then Court of First Instance of Manila
an action for the recovery of the sum of P364,915.86 plus
attorney's fees of P10,000.00 against NDC and MCP (Record on
Appeal), pp. 1-6).

dated August 14, 1965 allowing the inspection or photographing of

the memorandum of agreement it executed with MCP. Said order of
October 16, 1965 likewise declared NDC in default (Record on
Appeal, p. 44). On August 31, 1966, NDC filed a motion to set aside
the order of October 16, 1965, but the trial court denied it in its
order dated September 21, 1966.
On November 12, 1969, after DISC and MCP presented their
respective evidence, the trial court rendered a decision ordering
the defendants MCP and NDC to pay jointly and solidarity to DISC
the sum of P364,915.86 plus the legal rate of interest to be
computed from the filing of the complaint on April 22, 1965, until
fully paid and attorney's fees of P10,000.00. Likewise, in said
decision, the trial court granted MCP's crossclaim against NDC.
MCP interposed its appeal on December 20, 1969, while NDC filed
its appeal on February 17, 1970 after its motion to set aside the
decision was denied by the trial court in its order dated February
13,1970.
On November 17,1978, the Court of Appeals promulgated its
decision affirming in toto the decision of the trial court.
Hence these appeals by certiorari.

Interposing the defense that the complaint states no cause of

action and even if it does, the action has prescribed, MCP filed on
May 12, 1965 a motion to dismiss (Record on Appeal, pp. 7-14).
DISC filed an Opposition on May 21, 1965 to which MCP filed a reply
on May 27, 1965 (Record on Appeal, pp. 14-24). On June 29, 1965,
the trial court deferred the resolution of the motion to dismiss till
after the trial on the merits (Record on Appeal, p. 32). On June 8,
1965, MCP filed its answer with counterclaim and cross-claim
against NDC.
NDC, for its part, filed its answer to DISC's complaint on May 27,
1965 (Record on Appeal, pp. 22-24). It also filed an answer to MCP's
cross-claim on July 16, 1965 (Record on Appeal, pp. 39-40).
However, on October 16, 1965, NDC's answer to DISC's complaint
was stricken off from the record for its failure to answer DISC's
written interrogatories and to comply with the trial court's order

NDC's appeal was docketed as G.R. No. 49407, while that of MCP
was docketed as G.R. No. 49469. On July 25,1979, this Court
ordered the consolidation of the above cases (Rollo, p. 103). On
August 27,1979, these consolidated cases were given due course
(Rollo, p. 108) and submitted for decision on February 29, 1980
(Rollo, p. 136).
In its brief, NDC cited the following assignments of error:
I
THE COURT OF APPEALS ERRED IN APPLYING ARTICLE 827 OF THE
CODE
OF
COMMERCE
AND
NOT
SECTION
4(2a)
OF
COMMONWEALTH ACT NO. 65, OTHERWISE KNOWN AS THE
CARRIAGE OF GOODS BY SEA ACT IN DETERMINING THE LIABILITY

FOR LOSS OF CARGOES RESULTING FROM THE COLLISION OF ITS

VESSEL "DONA NATI" WITH THE YASUSHIMA MARU"OCCURRED AT
ISE BAY, JAPAN OR OUTSIDE THE TERRITORIAL JURISDICTION OF
THE PHILIPPINES.

COMPLEMENTS OF THE YASUSHIMA MARU WITHOUT THE FAULT OR

NEGLIGENCE OF THE COMPLEMENT OF THE SS DONA NATI

II

THE RESPONDENT COURT OF APPEALS ERRED IN HOLDING THAT

UNDER THE CODE OF COMMERCE PETITIONER APPELLANT
MARITIME COMPANY OF THE PHILIPPINES IS A SHIP AGENT OR
NAVIERO OF SS DONA NATI OWNED BY CO-PETITIONER APPELLANT
NATIONAL DEVELOPMENT COMPANY AND THAT SAID PETITIONERAPPELLANT IS SOLIDARILY LIABLE WITH SAID CO-PETITIONER FOR
LOSS OF OR DAMAGES TO CARGO RESULTING IN THE COLLISION OF
SAID VESSEL, WITH THE JAPANESE YASUSHIMA MARU.

THE COURT OF APPEALS ERRED IN NOT DISMISSING THE

C0MPLAINT FOR REIMBURSEMENT FILED BY THE INSURER, HEREIN
PRIVATE RESPONDENT-APPELLEE, AGAINST THE CARRIER, HEREIN
PETITIONER-APPELLANT. (pp. 1-2, Brief for Petitioner-Appellant
National Development Company; p. 96, Rollo).

IV

On its part, MCP assigned the following alleged errors:

V
I
THE RESPONDENT COURT OF APPEALS ERRED IN NOT HOLDING
THAT RESPONDENT DEVELOPMENT INSURANCE AND SURETY
CORPORATION HAS NO CAUSE OF ACTION AS AGAINST PETITIONER
MARITIME COMPANY OF THE PHILIPPINES AND IN NOT DISMISSING
THE COMPLAINT.
II
THE RESPONDENT COURT OF APPEALS ERRED IN NOT HOLDING
THAT THE CAUSE OF ACTION OF RESPONDENT DEVELOPMENT
INSURANCE AND SURETY CORPORATION IF ANY EXISTS AS AGAINST
HEREIN PETITIONER MARITIME COMPANY OF THE PHILIPPINES IS
BARRED BY THE STATUTE OF LIMITATION AND HAS ALREADY
PRESCRIBED.
III
THE RESPONDENT COURT OF APPEALS ERRED IN ADMITTING IN
EVIDENCE PRIVATE RESPONDENTS EXHIBIT "H" AND IN FINDING ON
THE BASIS THEREOF THAT THE COLLISION OF THE SS DONA NATI
AND THE YASUSHIMA MARU WAS DUE TO THE FAULT OF BOTH
VESSELS INSTEAD OF FINDING THAT THE COLLISION WAS CAUSED
BY THE FAULT, NEGLIGENCE AND LACK OF SKILL OF THE

THE RESPONDENT COURT OF APPEALS ERRED IN FINDING THAT THE

LOSS OF OR DAMAGES TO THE CARGO OF 550 BALES OF AMERICAN
RAW COTTON, DAMAGES WERE CAUSED IN THE AMOUNT OF
P344,977.86 INSTEAD OF ONLY P110,000 AT P200.00 PER BALE AS
ESTABLISHED IN THE BILLS OF LADING AND ALSO IN HOLDING THAT
PARAGRAPH 1O OF THE BILLS OF LADING HAS NO APPLICATION IN
THE INSTANT CASE THERE BEING NO GENERAL AVERAGE TO SPEAK
OF.
VI
THE RESPONDENT COURT OF APPEALS ERRED IN HOLDING THE
PETITIONERS NATIONAL DEVELOPMENT COMPANY AND COMPANY
OF THE PHILIPPINES TO PAY JOINTLY AND SEVERALLY TO HEREIN
RESPONDENT
DEVELOPMENT
INSURANCE
AND
SURETY
CORPORATION THE SUM OF P364,915.86 WITH LEGAL INTEREST
FROM THE FILING OF THE COMPLAINT UNTIL FULLY PAID PLUS
P10,000.00 AS AND FOR ATTORNEYS FEES INSTEAD OF
SENTENCING SAID PRIVATE RESPONDENT TO PAY HEREIN
PETITIONERS ITS COUNTERCLAIM IN THE AMOUNT OF P10,000.00
BY WAY OF ATTORNEY'S FEES AND THE COSTS. (pp. 1-4, Brief for
the Maritime Company of the Philippines; p. 121, Rollo)

The pivotal issue in these consolidated cases is the determination

of which laws govern loss or destruction of goods due to collision of
vessels outside Philippine waters, and the extent of liability as well
as the rules of prescription provided thereunder.
The main thrust of NDC's argument is to the effect that the
Carriage of Goods by Sea Act should apply to the case at bar and
not the Civil Code or the Code of Commerce. Under Section 4 (2) of
said Act, the carrier is not responsible for the loss or damage
resulting from the "act, neglect or default of the master, mariner,
pilot or the servants of the carrier in the navigation or in the
management of the ship." Thus, NDC insists that based on the
findings of the trial court which were adopted by the Court of
Appeals, both pilots of the colliding vessels were at fault and
negligent, NDC would have been relieved of liability under the
Carriage of Goods by Sea Act. Instead, Article 287 of the Code of
Commerce was applied and both NDC and MCP were ordered to
reimburse the insurance company for the amount the latter paid to
the consignee as earlier stated.
This issue has already been laid to rest by this Court of Eastern
Shipping Lines Inc. v. IAC (1 50 SCRA 469-470 [1987]) where it was
held under similar circumstance "that the law of the country to
which the goods are to be transported governs the liability of the
common carrier in case of their loss, destruction or deterioration"
(Article 1753, Civil Code). Thus, the rule was specifically laid down
that for cargoes transported from Japan to the Philippines, the
liability of the carrier is governed primarily by the Civil Code and in
all matters not regulated by said Code, the rights and obligations of
common carrier shall be governed by the Code of commerce and by
laws (Article 1766, Civil Code). Hence, the Carriage of Goods by Sea
Act, a special law, is merely suppletory to the provision of the Civil
Code.
In the case at bar, it has been established that the goods in
question are transported from San Francisco, California and Tokyo,
Japan to the Philippines and that they were lost or due to a collision
which was found to have been caused by the negligence or fault of
both captains of the colliding vessels. Under the above ruling, it is
evident that the laws of the Philippines will apply, and it is

immaterial that the collision actually occurred in foreign waters,

such as Ise Bay, Japan.
Under Article 1733 of the Civil Code, common carriers from the
nature of their business and for reasons of public policy are bound
to observe extraordinary diligence in the vigilance over the goods
and for the safety of the passengers transported by them according
to all circumstances of each case. Accordingly, under Article 1735
of the same Code, in all other than those mentioned is Article 1734
thereof, the common carrier shall be presumed to have been at
fault or to have acted negigently, unless it proves that it has
observed the extraordinary diligence required by law.
It appears, however, that collision falls among matters not
specifically regulated by the Civil Code, so that no reversible error
can be found in respondent courses application to the case at bar
of Articles 826 to 839, Book Three of the Code of Commerce, which
deal exclusively with collision of vessels.
More specifically, Article 826 of the Code of Commerce provides
that where collision is imputable to the personnel of a vessel, the
owner of the vessel at fault, shall indemnify the losses and
damages incurred after an expert appraisal. But more in point to
the instant case is Article 827 of the same Code, which provides
that if the collision is imputable to both vessels, each one shall
suffer its own damages and both shall be solidarily responsible for
the losses and damages suffered by their cargoes.
Significantly, under the provisions of the Code of Commerce,
particularly Articles 826 to 839, the shipowner or carrier, is not
exempt from liability for damages arising from collision due to the
fault or negligence of the captain. Primary liability is imposed on
the shipowner or carrier in recognition of the universally accepted
doctrine that the shipmaster or captain is merely the representative
of the owner who has the actual or constructive control over the
conduct of the voyage (Y'eung Sheng Exchange and Trading Co. v.
Urrutia & Co., 12 Phil. 751 [1909]).
There is, therefore, no room for NDC's interpretation that the Code
of Commerce should apply only to domestic trade and not to

foreign trade. Aside from the fact that the Carriage of Goods by Sea
Act (Com. Act No. 65) does not specifically provide for the subject
of collision, said Act in no uncertain terms, restricts its application
"to all contracts for the carriage of goods by sea to and from
Philippine ports in foreign trade." Under Section I thereof, it is
explicitly provided that "nothing in this Act shall be construed as
repealing any existing provision of the Code of Commerce which is
now in force, or as limiting its application." By such incorporation, it
is obvious that said law not only recognizes the existence of the
Code of Commerce, but more importantly does not repeal nor limit
its application.
On the other hand, Maritime Company of the Philippines claims that
Development Insurance and Surety Corporation, has no cause of
action against it because the latter did not prove that its alleged
subrogers have either the ownership or special property right or
beneficial interest in the cargo in question; neither was it proved
that the bills of lading were transferred or assigned to the alleged
subrogers; thus, they could not possibly have transferred any right
of action to said plaintiff- appellee in this case. (Brief for the
Maritime Company of the Philippines, p. 16).
The records show that the Riverside Mills Corporation and Guilcon,
Manila are the holders of the duly endorsed bills of lading covering
the shipments in question and an examination of the invoices in
particular, shows that the actual consignees of the said goods are
the aforementioned companies. Moreover, no less than MCP itself
issued a certification attesting to this fact. Accordingly, as it is
undisputed that the insurer, plaintiff appellee paid the total amount
of P364,915.86 to said consignees for the loss or damage of the
insured cargo, it is evident that said plaintiff-appellee has a cause
of action to recover (what it has paid) from defendant-appellant
MCP (Decision, CA-G.R. No. 46513-R, p. 10; Rollo, p. 43).
MCP next contends that it can not be liable solidarity with NDC
because it is merely the manager and operator of the vessel Dona
Nati not a ship agent. As the general managing agent, according to
MCP, it can only be liable if it acted in excess of its authority.

As found by the trial court and by the Court of Appeals, the

Memorandum Agreement of September 13, 1962 (Exhibit 6,
Maritime) shows that NDC appointed MCP as Agent, a term broad
enough to include the concept of Ship-agent in Maritime Law. In
fact, MCP was even conferred all the powers of the owner of the
vessel, including the power to contract in the name of the NDC
(Decision, CA G.R. No. 46513, p. 12; Rollo, p. 40). Consequently,
under the circumstances, MCP cannot escape liability.
It is well settled that both the owner and agent of the offending
vessel are liable for the damage done where both are impleaded
(Philippine Shipping Co. v. Garcia Vergara, 96 Phil. 281 [1906]); that
in case of collision, both the owner and the agent are civilly
responsible for the acts of the captain (Yueng Sheng Exchange and
Trading Co. v. Urrutia & Co., supra citing Article 586 of the Code of
Commerce; Standard Oil Co. of New York v. Lopez Castelo, 42 Phil.
256, 262 [1921]); that while it is true that the liability of
the naviero in the sense of charterer or agent, is not expressly
provided in Article 826 of the Code of Commerce, it is clearly
deducible from the general doctrine of jurisprudence under the Civil
Code but more specially as regards contractual obligations in
Article 586 of the Code of Commerce. Moreover, the Court held that
both the owner and agent (Naviero) should be declared jointly and
severally liable, since the obligation which is the subject of the
action had its origin in a tortious act and did not arise from contract
(Verzosa and Ruiz, Rementeria y Cia v. Lim, 45 Phil. 423 [1923]).
Consequently, the agent, even though he may not be the owner of
the vessel, is liable to the shippers and owners of the cargo
transported by it, for losses and damages occasioned to such
cargo, without prejudice, however, to his rights against the owner
of the ship, to the extent of the value of the vessel, its equipment,
and the freight (Behn Meyer Y Co. v. McMicking et al. 11 Phil. 276
[1908]).
As to the extent of their liability, MCP insists that their liability
should be limited to P200.00 per package or per bale of raw cotton
as stated in paragraph 17 of the bills of lading. Also the MCP argues
that the law on averages should be applied in determining their
liability.

MCP's contention is devoid of merit. The declared value of the

goods was stated in the bills of lading and corroborated no less by
invoices offered as evidence ' during the trial. Besides, common
carriers, in the language of the court in Juan Ysmael & Co., Inc. v.
Barrette et al., (51 Phil. 90 [1927]) "cannot limit its liability for
injury to a loss of goods where such injury or loss was caused by its
own negligence." Negligence of the captains of the colliding vessel
being the cause of the collision, and the cargoes not being
jettisoned to save some of the cargoes and the vessel, the trial
court and the Court of Appeals acted correctly in not applying the
law on averages (Articles 806 to 818, Code of Commerce).
MCP's claim that the fault or negligence can only be attributed to
the pilot of the vessel SS Yasushima Maru and not to the Japanese
Coast pilot navigating the vessel Dona Nati need not be discussed
lengthily as said claim is not only at variance with NDC's posture,
but also contrary to the factual findings of the trial court affirmed
no less by the Court of Appeals, that both pilots were at fault for
not changing their excessive speed despite the thick fog
obstructing their visibility.
Finally on the issue of prescription, the trial court correctly found
that the bills of lading issued allow trans-shipment of the cargo,
which simply means that the date of arrival of the ship Dona Nati
on April 18,1964 was merely tentative to give allowances for such
contingencies that said vessel might not arrive on schedule at
Manila and therefore, would necessitate the trans-shipment of
cargo, resulting in consequent delay of their arrival. In fact,
because of the collision, the cargo which was supposed to arrive in
Manila on April 18, 1964 arrived only on June 12, 13, 18, 20 and July
10, 13 and 15, 1964. Hence, had the cargoes in question been
saved, they could have arrived in Manila on the above-mentioned
dates. Accordingly, the complaint in the instant case was filed on
April 22, 1965, that is, long before the lapse of one (1) year from
the date the lost or damaged cargo "should have been delivered" in
the light of Section 3, sub-paragraph (6) of the Carriage of Goods
by Sea Act.

PREMISES CONSIDERED, the subject petitions are DENIED for lack

of merit and the assailed decision of the respondent Appellate
Court is AFFIRMED.
SO ORDERED.

G.R. No. L-30212 September 30, 1987

BIENVENIDO GELISAN, petitioner, vs. BENITO ALDAY,
respondent.
PADILLA, J.:
Review on certiorari of the judgment * rendered by the Court of
Appeals, dated 11 October 1968, as amended by its resolution,
dated 11 February 1969, in CA-G.R. No. 32670-R, entitled: "Benito
Alday, plaintiff-appellant, vs. Roberto Espiritu and Bienvenido
Gelisan, defendants-appellees," which ordered the herein petitioner
Bienvenido Gelisan to pay, jointly and severally, with Roberto
Espiritu, the respondent Benito Alday the amount of P5,397.30,
with. legal interest thereon from the filing of the complaint, and the
costs of suit; and for the said Roberto Espiritu to pay or refund the
petitioner Bienvenido Gelisan whatever amount the latter may
have paid to the respondent Benito Alday by virtue of the
judgment.
The uncontroverted facts of the case are, as follows:

Defendant Bienvenido Gelisan is the owner of a

freight truck bearing plate No. TH-2377. On January
31, 1962, defendant Bienvenido Gelisan and Roberto
Espiritu entered into a contract marked Exhibit 3Gelisan under which Espiritu hired the same freight
truck of Gelisan for the purpose of hauling rice,
sugar, flour and fertilizer at an agreed price of P18.00
per trip within the limits of the City of Manila
provided the loads shall not exceed 200 sacks. It is
also agreed that Espiritu shall bear and pay all losses
and damages attending the carriage of the goods to
be hauled by him. The truck was taken by a driver of
Roberto Espiritu on February 1, 1962. Plaintiff Benito
Alday, a trucking operator, and who owns about 15
freight trucks, had known the defendant Roberto
Espiritu since 1948 as a truck operator. Plaintiff had a
contract to haul the fertilizers of the Atlas Fertilizer
Corporation from Pier 4, North Harbor, to its
Warehouse in Mandaluyong. Alday met Espiritu at the
gate of Pier 4 and the latter offered the use of his
truck with the driver and helper at 9 centavos per
bag of fertilizer. The offer was accepted by plaintiff
Alday and he instructed his checker Celso Henson to
let Roberto Espiritu haul the fertilizer. Espiritu made
two hauls of 200 bags of fertilizer per trip. The
fertilizer was delivered to the driver and helper of
Espiritu with the necessary way bill receipts, Exhibits
A and B. Espiritu, however, did not deliver the
fertilizer to the Atlas Fertolizer bodega at
Mandaluyong. The signatures appearing in the way
bill receipts Exhibits A and B of the Alday
Transportation admittedly not the signature of any
representative or employee of the Atlas Fertilizer
Corporation. Roberto Espiritu could not be found, and
plaintiff reported the loss to the Manila Police
Department. Roberto Espiritu was later arrested and
booked for theft. ...
Subsequently, plaintiff Aiday saw the truck in
question on Sto. Cristo St. and he notified the Manila

Police Department, and it was impounded by the

police. It was claimed by Bienvenido Gelisan from the
Police Department after he had been notified by his
employees that the truck had been impounded by
the police; but as he could not produce at the time
the registration papers, the police would not release
the truck to Gelisan. As a result of the impounding of
the truck according to Gelisan, ... and that for the
release of the truck he paid the premium of P300 to
the surety company. 1
Benito Alday was compelled to pay the value of the 400 bags of
fertilizer, in the amount of P5,397.33, to Atlas Fertilizer Corporation
so that, on 12 February 1962, he (Alday) filed a complaint against
Roberto Espiritu and Bienvenido Gelisan with the Court of First
Instance of Manila, docketed therein as Civil Case No. 49603, for
the recovery of damages suffered by him thru the criminal acts
committed by the defendants.
The defendant, Roberto Espiritu failed to file an answer and was,
accordingly, declared in default.
The defendant, Bienvenido Gelisan, upon the other hand, disowned
responsibility. He claimed that he had no contractual relations with
the plaintiff Benito Alday as regards the hauling and/or delivery of
the 400 bags of fertilizer mentioned in the complaint; that the
alleged misappropriation or nondelivery by defendant Roberto
Espiritu of plaintiff's 400 bags of fertilizer, was entirely beyond his
(Gelisan's) control and knowledge, and which fact became known
to him, for the first time, on 8 February 1962 when his freight truck,
with plate No. TH-2377, was impounded by the Manila Police
Department, at the instance of the plaintiff; and that in his written
contract of hire with Roberto Espiritu, it was expressly provided that
the latter will bear and pay all loss and damages attending the
carriage of goods to be hauled by said Roberto Espiritu.
After trial, the Court of First Instance of Manila ruled that Roberto
Espiritu alone was liable to Benito Alday, since Bienvenido Gelisan
was not privy to the contract between Espiritu and Alday. The
dispositive portion of the decision reads, as follows:

WHEREFORE, judgment is hereby rendered in favor of

the plaintiff and against the defendant Roberto
Espiritu for the sum of P6,000 with interest at the
legal rate from the time of the filing of the complaint,
and the costs of the suit. Plantiff's complaint is
dismissed with respect to defendant Bienvenido
Gelisan, and judgment is rendered in favor of
defendant Bienvenido Gelisan and against the
plaintiff for the sum of P350. 2
On appeal, however, the Court of Appeals, citing the case
of Montoya vs. Ignacio, 3 found that Bienvenido Gelisan is likewise
liable for being the registered owner of the truck; and that the lease
contract, executed by and between Bienvenido Gelisan and Roberto
Espiritu, is not binding upon Benito Alday for not having been
previously approved by the Public Service Commission. Accordingly,
it sentenced Bienvenido Gelisan to pay, jointly and severally with
Roberto Espiritu, Benito Alday the amount of P5,397.30, with legal
interest thereon from the filing of the complaint; and to pay the
costs. Roberto Espiritu, in turn, was ordered to pay or refund
Bienvenido Gelisan whatever amount the latter may have paid to
Benito Alday by virtue of the judgment. 4
Hence, the present recourse by Bienvenido Gelisan.
The petition is without merit. The judgment rendered by the Court
of Appeals, which is sought to be reviewed, is in accord with the
facts and the law on the case and we find no cogent reason to
disturb the same. The Court has invariably held in several decisions
that the registered owner of a public service vehicle is responsible
for damages that may arise from consequences incident to its
operation or that may be caused to any of the passengers
therein. 5 The claim of the petitioner that he is not hable in view of
the lease contract executed by and between him and Roberto
Espiritu which exempts him from liability to third persons, cannot
be sustained because it appears that the lease contract, adverted
to, had not been approved by the Public Service Commission. It is
settled in our jurisprudence that if the property covered by a
franchise is transferred or leased to another without obtaining the

requisite approval, the transfer is not binding upon the public and
third persons. 6
We also find no merit in the petitioner's argument that the rule
requiring the previous approval by the Public Service Commission,
of the transfer or lease of the motor vehicle, may be applied only in
cases where there is no positive Identification of the owner or
driver, or where there are very scant means of Identification, but
not in those instances where the person responsible for damages
has been fixed or determined beforehand, as in the case at bar. The
reason for the rule we reiterate in the present case, was explained
by the Court in Montoya vs. Ignacio, 7thus:
There is merit in this contention. The law really
requires the approval of the Public Service
Commission in order that a franchise, or any privilege
pertaining thereto, may be sold or leased without
infringing the certificate issued to the grantee. The
reason is obvious. Since a franchise is personal in
nature any transfer or lease thereof should be
notified to the Public Service Commission so that the
latter mav take proper safeguards to protect the
interest of the public. In fact, the law requires that,
before the approval is granted, there should be a
public hearing, with notice to all interested parties, in
order that the Commission may determine if there
are good and reasonable grounds justifying the
transfer or lease of the property covered by the
franchise, or if the sale or lease is detrimental to
public interest. Such being the reason and philosophy
behind this requirement, it follows that if the
property covered by the franchise is transferred, or
leased to another without obtaining the requisite
approval, the transfer is not binding against the
Public Service Commission and in contemplation of
law the grantee continues to be responsible under
the franchise in relation to the Commission and to
the Public. Since the lease of the jeepney in question
was made without such approval the only conclusion
that can be drawn is that Marcelino Ignacio still

continues to be its operator in contemplation of law,

and as such is responsible for the consequences
incident to its operation, one of them being the
collision under consideration.
Bienvenido Gelisan, the registered owner, is not however without
recourse. He has a right to be indemnified by Roberto Espiritu for
the amount titat he may be required to pay as damages for the
injury caused to Benito Alday, since the lease contract in question,
although not effective against the public for not having been
approved by the Public Service Commission, is valid and binding
between the contracting parties. 8
We also find no merit in the petitioner's contention that his liability
is only subsidiary. The Court has consistently considered the
registered owner/operator of a public service vehicle to be jointly
and severally liable with the driver for damages incurred by
passengers or third persons as a consequence of injuries sustained
in the operation of said vehicles. Thus, in the case of Vargas vs.
Langcay, 9 the Court said:
We hold that the Court of Appeals erred in
considering appellant-petitioner Diwata Vargas only
subsidiarily liable under Article 103 of the Revised
Penal Code. This court, in previous decisions, has
always considered the registered owner/operator of a
passenger vehicle, jointly and severally liable with
the driver, for damages incurred by passengers or
third persons as a consequence of injuries (or death)
sustained in the operation of said vehicles. (Montoya
vs. Ignacio, 94 Phil., 182; Timbol vs. Osias, G.R. No. L7547, April 30, 1955; Vda. de Medina vs. Cresencia,
99 Phil., 506; Necesito vs. Paras, 104 Phil., 75; Erezo
vs. Jepte, 102 Phil., 103; Tamayo vs. Aquino and
Rayos vs Tamayo, 105 Phil., 949; 56 Off. Gaz. [36]
5617.) In the case of Erezo vs. Jepte, Supra, We held:
* * * In synthesis, we hold that the registered owner,
the
defendant-appellant
herein,
is
primarily

responsible for the damage caused * * * (Emphasis

supplied)
In the case of Tamayo vs. Aquino, supra, We said:
* * * As Tamayo is the registered owner of the truck,
his responsibffity to the public or to any passenger
riding in the vehicle or truck must be direct * * *
(Emphasis supplied)
WHEREFORE, the petition is hereby DENIED. With costs against the
petitioner.
SO ORDERED.

G.R. No. 82318 May 18, 1989

GILBERTO M. DUAVIT, petitioner, vs. THE HON. COURT OF
APPEALS, Acting through the Third Division, as Public
Respondent, and ANTONIO SARMIENTO, SR. & VIRGILIO
CATUAR respondents.
GUTIERREZ, JR., J.:

This petition raises the sole issue of whether or not the owner of a
private vehicle which figured in an accident can be held liable
under Article 2180 of the Civil Code when the said vehicle was
neither driven by an employee of the owner nor taken with the
consent of the latter.

Orthopedic Hospital; that while plaintiff Catuar was

not confined in the hospital, his wrist was in a plaster
cast for a period of one month, and the contusions on
his head were under treatment for about two (2)
weeks; that for hospitalization, medicine and allied
expenses, plaintiff Catuar spent P5,000.00.

The facts are summarized in the contested decision, as follows:

From the evidence adduced by the plaintiffs,
consisting of the testimonies of witnesses Virgilio
Catuar, Antonio Sarmiento, Jr., Ruperto Catuar, Jr. and
Norberto Bernarte it appears that on July 28, 1971
plaintiffs Antonio Sarmiento, Sr. and Virgilio Catuar
were aboard a jeep with plate number 77-99-F-I
Manila, 1971, owned by plaintiff, Ruperto Catuar was
driving the said jeep on Ortigas Avenue, San Juan,
Rizal; that plaintiff's jeep, at the time, was running
moderately at 20 to 35 kilometers per hour and while
approaching Roosevelt Avenue, Virgilio Catuar slowed
down; that suddenly, another jeep with plate number
99-97-F-J Manila 1971 driven by defendant Oscar
Sabiniano hit and bumped plaintiff's jeep on the
portion near the left rear wheel, and as a result of the
impact plaintiff's jeep fell on its right and skidded by
about 30 yards; that as a result plaintiffs jeep was
damaged, particularly the windshield, the differential,
the part near the left rear wheel and the top cover of
the jeep; that plaintiff Virgilio Catuar was thrown to
the middle of the road; his wrist was broken and he
sustained contusions on the head; that likewise
plaintiff Antonio Sarmiento, Sr. was trapped inside
the fallen jeep, and one of his legs was fractured.
Evidence also shows that the plaintiff Virgilio Catuar
spent a total of P2,464.00 for repairs of the jeep, as
shown by the receipts of payment of labor and spare
parts (Exhs. H to H-7 Plaintiffs likewise tried to prove
that plaintiff Virgilio Catuar, immediately after the
accident was taken to Immaculate Concepcion
Hospital, and then was transferred to the National

Evidence also shows that as a result of the incident,

plaintiff Antonio Sarmiento, Sr. sustained injuries on
his leg; that at first, he was taken to the National
Orthopedic Hospital (Exh. K but later he was confined
at the Makati Medical Center from July 29, to August
29, 1971 and then from September 15 to 25, 1971;
that his leg was in a plaster cast for a period of eight
(8) months; and that for hospitalization and medical
attendance, plaintiff Antonio Sarmiento, Sr. spent no
less than P13,785.25 as evidenced by receipts in his
possession. (Exhs. N to N-1).
Proofs were adduced also to show that plaintiff
Antonio sarmiento Sr. is employed as Assistant
Accountant of the Canlubang Sugar Estate with a
salary of P1,200.00 a month; that as sideline he also
works as accountant of United Haulers Inc. with a
salary of P500.00 a month; and that as a result of
this incident, plaintiff Sarmiento was unable to
perform his normal work for a period of at least 8
months. On the other hand, evidence shows that the
other plaintiff Virgilio Catuar is a Chief Clerk in
Canlubang Sugar Estate with a salary of P500.00 a
month, and as a result of the incident, he was
incapacitated to work for a period of one (1) month.
The plaintiffs have filed this case both against Oscar
Sabiniano as driver, and against Gualberto Duavit as
owner of the jeep.
Defendant Gualberto Duavit, while admitting
ownership of the other jeep (Plate No. 99-07-F-J
Manila, 1971), denied that the other defendant

(Oscar Sabiniano) was his employee. Duavit claimed

that he has not been an employer of defendant Oscar
Sabiniano at any time up to the present.
On the other hand documentary and testimonial
evidence show that defendant Oscar Sabiniano was
an employee of the Board of Liquidators from
November 14, 1966 up to January 4, 1973 (Annex A
of Answer).
Defendant Sabiniano, in his testimony, categorically
admitted that he took the jeep from the garage of
defendant Duavit without the consent or authority of
the latter (TSN, September 7, 1978, p. 8). He testified
further, that Duavit even filed charges against him
for theft of the jeep, but which Duavit did not push
through as his (Sabiniano's) parents apologized to
Duavit on his behalf.
Defendant Oscar Sabiniano, on the other hand in an
attempt to exculpate himself from liability, makes it
appear that he was taking all necessary precaution
while driving and the accident occurred due to the
negligence of Virgilio Catuar. Sabiniano claims that it
was plaintiffs vehicle which hit and bumped their
jeep. (Reno, pp. 21-23)
The trial court found Oscar Sabiniano negligent in driving the
vehicle but found no employer-employee relationship between him
and the petitioner because the latter was then a government
employee and he took the vehicle without the authority and
consent of the owner. The petitioner was, thus, absolved from
liability under Article 2180 of the Civil Code.
The private respondents appealed the case.
On January 7, 1988, the Court of Appeals rendered the questioned
decision holding the petitioner jointly and severally liable with
Sabiniano. The appellate court in part ruled:

We cannot go along with appellee's argument. It will

be seen that in Vargas v. Langcay, supra, it was held
that it is immaterial whether or not the driver was
actually employed by the operator of record or
registered owner, and it is even not necessary to
prove who the actual owner of the vehicle and who
the employer of the driver is. When the Supreme
Court ruled, thus: 'We must hold and consider such
owner-operator of record (registered owner) as the
employer in contemplation of law, of the driver,' it
cannot be construed other than that the registered
owner is the employer of the driver in contemplation
of law. It is a conclusive presumption of fact and law,
and is not subject to rebuttal of proof to the contrary.
Otherwise, as stated in the decision, we quote:
The purpose of the principles evolved by the
decisions in these matters will be defeated and
thwarted if we entertain the argument of petitioner
that she is not liable because the actual owner and
employer was established by the evidence. . . .
Along the same vein, the defendant-appellee Gualberto Duavit
cannot be allowed to prove that the driver Sabiniano was not his
employee at the time of the vehicular accident.
The ruling laid down in Amar V. Soberano (1966), 63
O.G. 6850, by this Court to the effect that the burden
of proving the non-existence of an employeremployee relationship is upon the defendant and this
he must do by a satisfactory preponderance of
evidence, has to defer to the doctrines evolved by
the Supreme Court in cases of damages arising from
vehicular mishaps involving registered motor vehicle.
(See Tugade v. Court of Appeals, 85 SCRA 226, 230).
(Rollo, pp. 26-27)
The appellate court also denied the petitioner's motion for
reconsideration. Hence, this petition.

The petitioner contends that the respondent appellate court

committed grave abuse of discretion in holding him jointly and
severally liable with Sabiniano in spite of the absence of an
employer-employee relationship between them and despite the fact
that the petitioner's jeep was taken out of his garage and was
driven by Sabiniano without his consent.
As early as in 1939, we have ruled that an owner of a vehicle
cannot be held liable for an accident involving the said vehicle if
the same was driven without his consent or knowledge and by a
person not employed by him. Thus, in Duquillo v. Bayot (67 Phil.
131-133-134) [1939] we said:
Under the facts established, the defendant cannot be
held liable for anything. At the time of the accident,
James McGurk was driving the truck, and he was not
an employee of the defendant, nor did he have
anything to do with the latter's business; neither the
defendant nor Father Ayson, who was in charge of
her business, consented to have any of her trucks
driven on the day of the accident, as it was a holy
day, and much less by a chauffeur who was not in
charge of driving it; the use of the defendant's truck
in the circumstances indicated was done without her
consent or knowledge; it may, therefore, be said,
that there was not the remotest contractual relation
between the deceased Pio Duquillo and the
defendant. It necessarily follows from all this that
articles 1101 and following of the Civil Code, cited by
the appellant, have no application in this case, and,
therefore, the errors attributed to the inferior court
are without basis.
The Court upholds the above ruling as still relevant and better
applicable to present day circumstances.
The respondent court's misplaced reliance on the cases of Erezo v.
Jepte (102 Phil. 103 [1957] and Vargas v. Langcay (6 SCRA 174
[1962]) cannot be sustained. In the Erezo case, Jepte, the
registered owner of the truck which collided with a taxicab, and

which resulted in the killing of Erezo, claimed that at the time of the
accident, the truck belonged to the Port Brokerage in an
arrangement with the corporation but the same was not known to
the Motor Vehicles Office. This Court sustained the trial court's
ruling that since Jepte represented himself to be the owner of the
truck and the Motor Vehicles Office, relying on his representation,
registered the vehicle in his name, the Government and all persons
affected by the representation had the right to rely on his
declaration of ownership and registration. Thus, even if Jepte were
not the owner of the truck at the time of the accident, he was still
held liable for the death of Erezo significantly, the driver of the
truck was fully authorized to drive it.
Likewise, in the Vargas case, just before the accident occurred
Vargas had sold her jeepney to a third person, so that at the time of
the accident she was no longer the owner of the jeepney. This
court, nevertheless, affirmed Vargas' liability since she failed to
surrender to the Motor Vehicles Office the corresponding AC plates
in violation of the Revised Motor Vehicle Law and Commonwealth
Act No. 146. We further ruled that the operator of record continues
to be the operator of the vehicle in contemplation of law, as
regards the public and third persons, and as such is responsible for
the consequences incident to its operator. The vehicle involved was
a public utility jeepney for hire. In such cases, the law does not only
require the surrender of the AC plates but orders the vendor
operator to stop the operation of the jeepney as a form of public
transportation until the matter is reported to the authorities.
As can be seen, the circumstances of the above cases are entirely
different from those in the present case. Herein petitioner does not
deny ownership of the vehicle involved in tire mishap but
completely denies having employed the driver Sabiniano or even
having authorized the latter to drive his jeep. The jeep was virtually
stolen from the petitioner's garage. To hold, therefore, the
petitioner liable for the accident caused by the negligence of
Sabiniano who was neither his driver nor employee would be
absurd as it would be like holding liable the owner of a stolen
vehicle for an accident caused by the person who stole such
vehicle. In this regard, we cannot ignore the many cases of vehicles
forcibly taken from their owners at gunpoint or stolen from garages

and parking areas and the instances of service station attendants

or mechanics of auto repair shops using, without the owner's
consent, vehicles entrusted to them for servicing or repair.
We cannot blindly apply absolute rules based on precedents whose
facts do not jibe four square with pending cases. Every case must
be determined on its own peculiar factual circumstances. Where, as
in this case, the records of the petition fail to indicate the slightest
indicia of an employer-employee relationship between the owner
and the erring driver or any consent given by the owner for the
vehicle's use, we cannot hold the owner liable.
We, therefore, find that the respondent appellate court committed
reversible error in holding the petitioner jointly and severally liable
with Sabiniano to the private respondent.
WHEREFORE, the petition is GRANTED and the decision and
resolution appealed from are hereby ANNULLED and SET ASIDE.
The decision of the then Court of First Instance (now Regional Trial
Court) of Laguna, 8th Judicial District, Branch 6, dated July 30, 1981
is REINSTATED.
SO ORDERED.

G.R. No. 143360. September 5, 2002]

EQUITABLE LEASING CORPORATION, petitioner, vs. LUCITA
SUYOM, MARISSA ENANO, MYRNA TAMAYO and FELIX
OLEDAN, respondents.
DECISION
PANGANIBAN, J.:
In an action based on quasi delict, the registered owner of a
motor vehicle is solidarily liable for the injuries and damages
caused by the negligence of the driver, in spite of the fact that the
vehicle may have already been the subject of an unregistered Deed
of Sale in favor of another person. Unless registered with the Land
Transportation Office, the sale -- while valid and binding between
the parties -- does not affect third parties, especially the victims of
accidents involving the said transport equipment. Thus, in the
present case, petitioner, which is the registered owner, is liable for
the acts of the driver employed by its former lessee who has
become the owner of that vehicle by virtue of an unregistered Deed
of Sale.
Statement of the Case
Before us is a Petition for Review under Rule 45 of the Rules of
Court, assailing the May 12, 2000 Decision [1] of the Court of
Appeals[2] (CA) in CA-GR CV No. 55474. The decretal portion of the
Decision reads as follows:
WHEREFORE, premises considered, the instant appeal is
hereby DISMISSED for lack of merit. The assailed decision, dated

May 5, 1997, of the Regional Trial Court of Manila, Branch 14, in

Civil Case No. 95-73522, is
hereby AFFIRMED with MODIFICATION that the award of
attorneys fees is DELETED.[3]
On the other hand, in Civil Case No. 95-73522, the Regional
Trial Court (RTC) of Manila (Branch 14) had earlier disposed in this
wise:
WHEREFORE, judgment is hereby rendered in favor of the plaintiffs
and against the defendant Equitable Leasing Corporation ordering
said defendant to pay to the plaintiffs the following:
A. TO MYRNA TAMAYO

The Facts
On July 17, 1994, a Fuso Road Tractor driven by Raul Tutor
rammed into the house cum store of Myrna Tamayo located at Pier
18, Vitas, Tondo, Manila. A portion of the house was
destroyed. Pinned to death under the engine of the tractor were
Respondent Myrna Tamayos son, Reniel Tamayo, and Respondent
Felix Oledans daughter, Felmarie Oledan. Injured were Respondent
Oledan himself, Respondent Marissa Enano, and two sons of
Respondent Lucita Suyom.
Tutor was charged with and later convicted of reckless
imprudence resulting in multiple homicide and multiple physical
injuries in Criminal Case No. 296094-SA, Metropolitan Trial Court of
Manila, Branch 12.[5]

1. the sum of P50,000.00 for the death of Reniel Tamayo;

2. P50,000.00 as moral damages; and
3. P56,000.00 for the damage to the store and its contents, and
funeral expenses.
B. TO FELIX OLEDAN
1. the sum of P50,000.00 for the death of Felmarie Oledan;
2. P50,000.00 as moral damages; and
3. P30,000.00 for medical expenses, and funeral expenses.
C. TO MARISSA ENANO
1. P7,000.00 as actual damages
D. TO LUCITA SUYOM
1. The sum of P5,000.00 for the medical treatment of her two sons.
The sum of P120,000.00 as and for attorneys fees.[4]

Upon verification with the Land Transportation Office,

respondents were furnished a copy of Official Receipt No.
62204139[6] and Certificate of Registration No. 08262797,
[7]
showing that the registered owner of the tractor was Equitable
Leasing Corporation/leased to Edwin Lim. On April 15, 1995,
respondents filed against Raul Tutor, Ecatine Corporation
(Ecatine) and Equitable Leasing Corporation (Equitable) a
Complaint[8] for damages docketed as Civil Case No. 95-73522 in
the RTC of Manila, Branch 14.
The trial court, upon motion of plaintiffs counsel, issued an
Order dropping Raul Tutor, Ecatine and Edwin Lim from the
Complaint, because they could not be located and served with
summonses.[9] On the other hand, in its Answer with Counterclaim,
[10]
petitioner alleged that the vehicle had already been sold to
Ecatine and that the former was no longer in possession and
control thereof at the time of the incident. It also claimed that
Tutor was an employee, not of Equitable, but of Ecatine.
After trial on the merits, the RTC rendered its Decision ordering
petitioner to pay actual and moral damages and attorneys fees to
respondents. It held that since the Deed of Sale between petitioner
and Ecatine had not been registered with the Land Transportation

Office (LTO), the legal owner was still Equitable. [11] Thus, petitioner
was liable to respondents.[12]

This Courts Ruling

The Petition has no merit.

Ruling of the Court of Appeals

First Issue:
Sustaining the RTC, the CA held that petitioner was still to be
legally deemed the owner/operator of the tractor, even if that
vehicle had been the subject of a Deed of Sale in favor of Ecatine
on December 9, 1992. The reason cited by the CA was that the
Certificate of Registration on file with the LTO still remained in
petitioners name.[13] In order that a transfer of ownership of a
motor vehicle can bind third persons, it must be duly recorded in
the LTO.[14]
The CA likewise upheld respondents claim for moral damages
against petitioner because the appellate court considered Tutor, the
driver of the tractor, to be an agent of the registered
owner/operator.[15]

Liability for Wrongful Acts

Petitioner contends that it should not be held liable for the
damages sustained by respondents and that arose from the
negligence of the driver of the Fuso Road Tractor, which it had
already sold to Ecatine at the time of the accident. Not having
employed Raul Tutor, the driver of the vehicle, it could not have
controlled or supervised him.[18]
We are not persuaded. In negligence cases, the aggrieved
party may sue the negligent party under (1) Article 100 [19] of the
Revised Penal Code, for civil liability ex delicto; or (2) under Article
2176[20] of the Civil Code, for civil liability ex quasi delicto.[21]

Hence, this Petition.[16]

Issues
In its Memorandum, petitioner raises the following issues for
the Courts consideration:
I
Whether or not the Court of Appeals and the trial court gravely
erred when they decided and held that petitioner [was] liable for
damages suffered by private respondents in an action based on
quasi delict for the negligent acts of a driver who [was] not the
employee of the petitioner.
II
Whether or not the Court of Appeals and the trial court gravely
erred when they awarded moral damages to private respondents
despite their failure to prove that the injuries they suffered were
brought by petitioners wrongful act.[17]

Furthermore, under Article 103 of the Revised Penal Code,

employers may be held subsidiarily liable for felonies committed by
their employees in the discharge of the latters duties. [22] This
liability attaches when the employees who are convicted of crimes
committed in the performance of their work are found to be
insolvent and are thus unable to satisfy the civil liability adjudged.
[23]

On the other hand, under Article 2176 in relation to Article

2180[24] of the Civil Code, an action predicated on quasi delict may
be instituted against the employer for an employees act or
omission. The liability for the negligent conduct of the subordinate
is direct and primary, but is subject to the defense of due diligence
in the selection and supervision of the employee.[25] The
enforcement of the judgment against the employer for an action
based on Article 2176 does not require the employee to be
insolvent, since the liability of the former is solidary -- the latter
being statutorily considered a joint tortfeasor. [26] To sustain a claim
based on quasi delict, the following requisites must be proven: (a)
damage suffered by the plaintiff, (b) fault or negligence of the

defendant, and (c) connection of cause and effect between the

fault or negligence of the defendant and the damage incurred by
the plaintiff.[27]
These two causes of action (ex delicto or ex quasi delicto) may
be availed of, subject to the caveat[28] that the offended party
cannot recover damages twice for the same act or omission or
under both causes.[29] Since these two civil liabilities are distinct
and independent of each other, the failure to recover in one will not
necessarily preclude recovery in the other.[30]
In the instant case, respondents -- having failed to recover
anything in the criminal case -- elected to file a separate civil action
for damages, based on quasi delict under Article 2176 of the Civil
Code.[31] The evidence is clear that the deaths and the injuries
suffered by respondents and their kins were due to the fault of the
driver of the Fuso tractor.
Dated June 4, 1991, the Lease Agreement[32] between petitioner
and Edwin Lim stipulated that it is the intention of the parties to
enter into a FINANCE LEASE AGREEMENT.[33] Under such scheme,
ownership of the subject tractor was to be registered in the name
of petitioner, until the value of the vehicle has been fully paid by
Edwin Lim.[34] Further, in the Lease Schedule, [35]the monthly rental
for the tractor was stipulated, and the term of the Lease was
scheduled to expire on December 4, 1992. After a few months, Lim
completed the payments to cover the full price of the tractor.
[36]
Thus, on December 9, 1992, a Deed of Sale [37] over the tractor
was executed by petitioner in favor of Ecatine represented by
Edwin Lim. However, the Deed was not registered with the LTO.
We hold petitioner liable for the deaths and the injuries
complained of, because it was the registered owner of the tractor
at the time of the accident on July 17, 1994. [38] The Court has
consistently ruled that, regardless of sales made of a motor vehicle,
the registered owner is the lawful operator insofar as the public and
third persons are concerned; consequently, it is directly and
primarily responsible for the consequences of its operation. [39] In
contemplation of law, the owner/operator of record is the employer
of the driver, the actual operator and employer being considered as

merely its agent.[40] The same principle applies even if the

registered owner of any vehicle does not use it for public service. [41]
Since Equitable remained the registered owner of the tractor, it
could not escape primary liability for the deaths and the injuries
arising from the negligence of the driver.[42]
The finance-lease agreement between Equitable on the one
hand and Lim or Ecatine on the other has already been superseded
by the sale. In any event, it does not bind third persons. The
rationale for this rule has been aptly explained in Erezo v. Jepte,
[43]
which we quote hereunder:
x x x. The main aim of motor vehicle registration is to identify the
owner so that if any accident happens, or that any damage or
injury is caused by the vehicle on the public highways,
responsibility therefor can be fixed on a definite individual, the
registered owner. Instances are numerous where vehicles running
on public highways caused accidents or injuries to pedestrians or
other vehicles without positive identification of the owner or
drivers, or with very scant means of identification. It is to forestall
these circumstances, so inconvenient or prejudicial to the public,
that the motor vehicle registration is primarily ordained, in the
interest of the determination of persons responsible for damages or
injuries caused on public highways.[44]
Further, petitioners insistence on FGU Insurance Corp. v. Court
of Appeals is misplaced.[45] First, in FGU Insurance, the registered
vehicle owner, which was engaged in a rent-a-car business, rented
out the car. In this case, the registered owner of the truck, which is
engaged in the business of financing motor vehicle acquisitions,
has actually sold the truck to Ecatine, which in turn employed
Tutor. Second, in FGU Insurance, the registered owner of the
vehicle was not held responsible for the negligent acts of the
person who rented one of its cars, because Article 2180 of the Civil
Code was not applicable. We held that no vinculum juris as
employer and employee existed between the owner and the driver.
[46]
In this case, the registered owner of the tractor is considered
under the law to be the employer of the driver, while the actual
operator is deemed to be its agent.[47] Thus, Equitable, the

registered owner of the tractor, is -- for purposes of the law on

quasi delict -- the employer of Raul Tutor, the driver of the
tractor. Ecatine, Tutors actual employer, is deemed as merely an
agent of Equitable.[48]
True, the LTO Certificate of Registration, dated 5/31/91,
qualifies the name of the registered owner as EQUITABLE LEASING
CORPORATION/Leased to Edwin Lim. But the lease agreement
between Equitable and Lim has been overtaken by the Deed of Sale
on December 9, 1992, between petitioner and Ecatine. While this
Deed does not affect respondents in this quasi delict suit, it
definitely binds petitioner because, unlike them, it is a party to it.
We must stress that the failure of Equitable and/or Ecatine to
register the sale with the LTO should not prejudice respondents,
who have the legal right to rely on the legal principle that the
registered vehicle owner is liable for the damages caused by the
negligence of the driver. Petitioner cannot hide behind its
allegation that Tutor was the employee of Ecatine. This will
effectively prevent respondents from recovering their losses on the
basis of the inaction or fault of petitioner in failing to register the
sale. The non-registration is the fault of petitioner, which should
thus face the legal consequences thereof.
Second Issue:

[52]

This is so because moral damages are in the category of an

award designed to compensate the claimant for actual injury
suffered, not to impose a penalty on the wrongdoer. [53]
Viewed as an action for quasi delict, the present case falls
squarely within the purview of Article 2219 (2), [54] which provides
for the payment of moral damages in cases of quasi delict.
[55]
Having established the liability of petitioner as the registered
owner of the vehicle,[56] respondents have satisfactorily shown the
existence of the factual basis for the award [57] and its causal
connection to the acts of Raul Tutor, who is deemed as petitioners
employee.[58] Indeed, the damages and injuries suffered by
respondents were the proximate result of petitioners tortious act or
omission.[59]
Further, no proof of pecuniary loss is necessary in order that
moral damages may be awarded, the amount of indemnity being
left to the discretion of the court. [60] The evidence gives no ground
for doubt that such discretion was properly and judiciously
exercised by the trial court.[61] The award is in fact consistent with
the rule that moral damages are not intended to enrich the injured
party, but to alleviate the moral suffering undergone by that party
by reason of the defendants culpable action.[62]
WHEREFORE, the Petition is DENIED and
Decision AFFIRMED. Costs against petitioner.

Moral Damages
SO ORDERED.
Petitioner further claims that it is not liable for moral damages,
because respondents failed to establish or show the causal
connection or relation between the factual basis of their claim and
their wrongful act or omission, if any. [49]
Moral damages are not punitive in nature, but are designed to
compensate[50] and alleviate in some way the physical suffering,
mental anguish, fright, serious anxiety, besmirched reputation,
wounded feelings, moral shock, social humiliation, and similar
injury unjustly caused a person. [51] Although incapable of pecuniary
computation, moral damages must nevertheless be somehow
proportional to and in approximation of the suffering inflicted.

the

assailed

G.R. No. L-64693 April 27, 1984

LITA ENTERPRISES, INC., petitioner, vs. SECOND CIVIL CASES
DIVISION, INTERMEDIATE APPELLATE COURT, NICASIO M.
OCAMPO and FRANCISCA P. GARCIA, respondents.
ESCOLIN, J.:
"Ex pacto illicito non oritur actio" [No action arises out of an illicit
bargain] is the tune-honored maxim that must be applied to the
parties in the case at bar. Having entered into an illegal contract,
neither can seek relief from the courts, and each must bear the
consequences of his acts.
The factual background of this case is undisputed.
Sometime in 1966, the spouses Nicasio M. Ocampo and Francisca
Garcia, herein private respondents, purchased in installment from
the Delta Motor Sales Corporation five (5) Toyota Corona Standard
cars to be used as taxicabs. Since they had no franchise to operate
taxicabs, they contracted with petitioner Lita Enterprises, Inc.,
through its representative, Manuel Concordia, for the use of the
latter's certificate of public convenience in consideration of an
initial payment of P1,000.00 and a monthly rental of P200.00 per
taxicab unit. To effectuate Id agreement, the aforesaid cars were
registered in the name of petitioner Lita Enterprises, Inc,
Possession, however, remained with tile spouses Ocampo who
operated and maintained the same under the name Acme Taxi,
petitioner's trade name.
About a year later, on March 18, 1967, one of said taxicabs driven
by their employee, Emeterio Martin, collided with a motorcycle
whose driver, one Florante Galvez, died from the head injuries
sustained therefrom. A criminal case was eventually filed against
the driver Emeterio Martin, while a civil case for damages was
instituted by Rosita Sebastian Vda. de Galvez, heir of the victim,
against Lita Enterprises, Inc., as registered owner of the taxicab in
the latter case, Civil Case No. 72067 of the Court of First Instance of
Manila, petitioner Lita Enterprises, Inc. was adjudged liable for

damages in the amount of P25,000.00 and P7,000.00 for attorney's

fees.
This decision having become final, a writ of execution was issued.
One of the vehicles of respondent spouses with Engine No. 2R914472 was levied upon and sold at public auction for 12,150.00 to
one Sonnie Cortez, the highest bidder. Another car with Engine No.
2R-915036 was likewise levied upon and sold at public auction for
P8,000.00 to a certain Mr. Lopez.
Thereafter, in March 1973, respondent Nicasio Ocampo decided to
register his taxicabs in his name. He requested the manager of
petitioner Lita Enterprises, Inc. to turn over the registration papers
to him, but the latter allegedly refused. Hence, he and his wife filed
a complaint against Lita Enterprises, Inc., Rosita Sebastian Vda. de
Galvez, Visayan Surety & Insurance Co. and the Sheriff of Manila for
reconveyance of motor vehicles with damages, docketed as Civil
Case No. 90988 of the Court of First Instance of Manila. Trial on the
merits ensued and on July 22, 1975, the said court rendered a
decision, the dispositive portion of which reads: t.hqw

Petitioner Lita Enterprises, Inc. moved for reconsideration of the

decision, but the same was denied by the court a quo on October
27, 1975. (p. 121, Ibid.)
On appeal by petitioner, docketed as CA-G.R. No. 59157-R, the
Intermediate Appellate Court modified the decision by including as
part of its dispositive portion another paragraph, to wit: t.
hqw
In the event the condition of the three Toyota rears
will no longer serve the purpose of the deed of
conveyance because of their deterioration, or
because they are no longer serviceable, or because
they are no longer available, then Lita Enterprises,
Inc. is ordered to pay the plaintiffs their fair market
value as of July 22, 1975. (Annex "D", p. 167, Rollo.)
Its first and second motions for reconsideration having been
denied, petitioner came to Us, praying that: t.hqw
1. ...

WHEREFORE, the complaint is hereby dismissed as

far as defendants Rosita Sebastian Vda. de Galvez,
Visayan Surety & Insurance Company and the Sheriff
of Manila are concerned.
Defendant Lita Enterprises, Inc., is ordered to
transfer the registration certificate of the three
Toyota cars not levied upon with Engine Nos. 2R230026, 2R-688740 and 2R-585884 [Exhs. A, B, C
and D] by executing a deed of conveyance in favor of
the plaintiff.
Plaintiff is, however, ordered to pay Lita Enterprises,
Inc., the rentals in arrears for the certificate of
convenience from March 1973 up to May 1973 at the
rate of P200 a month per unit for the three cars.
(Annex A, Record on Appeal, p. 102-103, Rollo)

2. ... after legal proceedings, decision be rendered or

resolution be issued, reversing, annulling or
amending the decision of public respondent so that:
(a) the additional paragraph added by the public
respondent to the DECISION of the lower court (CFI)
be deleted;
(b) that private respondents be declared liable to
petitioner for whatever amount the latter has paid or
was declared liable (in Civil Case No. 72067) of the
Court of First Instance of Manila to Rosita Sebastian
Vda. de Galvez, as heir of the victim Florante Galvez,
who died as a result ot the gross negligence of
private respondents' driver while driving one private
respondents' taxicabs. (p. 39, Rollo.)

Unquestionably, the parties herein operated under an arrangement,

comonly known as the "kabit system", whereby a person who has
been granted a certificate of convenience allows another person
who owns motors vehicles to operate under such franchise for a
fee. A certificate of public convenience is a special privilege
conferred by the government . Abuse of this privilege by the
grantees thereof cannot be countenanced. The "kabit system" has
been Identified as one of the root causes of the prevalence of graft
and corruption in the government transportation offices. In the
words of Chief Justice Makalintal, 1 "this is a pernicious system that
cannot be too severely condemned. It constitutes an imposition
upon the goo faith of the government.
Although not outrightly penalized as a criminal offense, the "kabit
system" is invariably recognized as being contrary to public policy
and, therefore, void and inexistent under Article 1409 of the Civil
Code, It is a fundamental principle that the court will not aid either
party to enforce an illegal contract, but will leave them both where
it finds them. Upon this premise, it was flagrant error on the part of
both the trial and appellate courts to have accorded the parties
relief from their predicament. Article 1412 of the Civil Code denies
them such aid. It provides:t.hqw

prevails. Under American jurisdiction, the doctrine is stated thus:

"The proposition is universal that no action arises, in equity or at
law, from an illegal contract; no suit can be maintained for its
specific performance, or to recover the property agreed to be sold
or delivered, or damages for its property agreed to be sold or
delivered, or damages for its violation. The rule has sometimes
been laid down as though it was equally universal, that where the
parties are in pari delicto, no affirmative relief of any kind will be
given to one against the other." 3 Although certain exceptions to
the rule are provided by law, We see no cogent reason why the full
force of the rule should not be applied in the instant case.
WHEREFORE, all proceedings had in Civil Case No. 90988 entitled
"Nicasio Ocampo and Francisca P. Garcia, Plaintiffs, versus Lita
Enterprises, Inc., et al., Defendants" of the Court of First Instance of
Manila and CA-G.R. No. 59157-R entitled "Nicasio Ocampo and
Francisca P. Garica, Plaintiffs-Appellees, versus Lita Enterprises,
Inc., Defendant-Appellant," of the Intermediate Appellate Court, as
well as the decisions rendered therein are hereby annuleled and set
aside. No costs.
SO ORDERED.

ART. 1412. if the act in which the unlawful or

forbidden cause consists does not constitute a
criminal offense, the following rules shall be
observed;
(1) when the fault, is on the part of both contracting
parties, neither may recover what he has given by
virtue of the contract, or demand the performance of
the other's undertaking.
The defect of inexistence of a contract is permanent and incurable,
and cannot be cured by ratification or by prescription. As this Court
said in Eugenio v. Perdido, 2 "the mere lapse of time cannot give
efficacy to contracts that are null void."
The principle of in pari delicto is well known not only in this
jurisdiction but also in the United States where common law

G.R. No. L-16790

April 30, 1963

URBANO MAGBOO and EMILIA C. MAGBOO, plaintiffsappellees, vs. DELFIN BERNARDO, defendant-appellant.
MAKALINTAL, J.:
Appeal from the Court of First Instance of Manila to the Court of
Appeals, and certified by the latter to this Court on the ground that
only questions of law are involved.
The action of the spouses Urbano Magboo and Emilia C. Magboo
against Delfin Bernardo is for enforcement of his subsidiary liability
as employer in accordance with Article 103, Revised Penal Code.
The trial court ordered defendant to pay plaintiffs P3,000.00 and
costs upon the following stipulated facts:
1. That plaintiffs are the parents of Cesar Magboo, a child of
8 years old, who lived with them and was under their
custody until his death on October 24,1956 when he was
killed in a motor vehicle accident, the fatal vehicle being a
passenger jeepney with Plate No, AC-1963 (56) owned by
the defendant;
2. That at the time of the accident, said passenger jeepney
was driven by Conrado Roque;
3. That the contract between Conrado Roque and defendant
Delfin Bernardo was that Roque was to pay to defendant the
sum of P8.00, which he paid to said defendant, for privilege
of driving the jeepney on October 24, 1956, it being their
agreement that whatever earnings Roque could make out of
the use of the jeepney in transporting passengers from one
point to another in the City of Manila would belong entirely
to Conrado Roque;
4. That as a consequence of the accident and as a result of
the death of Cesar Magboo in said accident, Conrado Roque
was prosecuted for homicide thru reckless imprudence
before the Court of First Instance of Manila, the information
having been docketed as Criminal Case No. 37736, and that
upon arraignment Conrado Roque pleaded guilty to the

information and was sentenced to six (6) months of arresto

mayor, with the accessory penalties of the law; to indemnify
the heirs of the deceased in the sum of P3,000.00, with
subsidiary imprisonment in case of insolvency, and to pay
the costs;
5. That pursuant to said judgment Conrado Roque served his
sentence but he was not able to pay the indemnity because
he was insolvent."
Appellant assails said decision, assigning three errors which boil
down to the question of whether or not an employer-employee
relationship exists between a jeepney-owner and a driver under a
"boundary system" arrangement. Appellant contends that the
relationship is essentially that of lessor and lessee.
A similar contention has been rejected by this Court in several
cases. In National Labor Union v. Dinglasan, 52 O.G., No. 4, 1933, it
was held that the features which characterize the "boundary
system" namely, the fact that the driver does not receive a fixed
wage but gets only the excess of the receipt of fares collected by
him over the amount he pays to the jeep-owner and that the
gasoline consumed by the jeep is for the account of the driver
are not sufficient to withdraw the relationship between them from
that of employer and employee. The ruling was subsequently cited
and applied in Doce v. Workmen's Compensation Commission, L9417, December 22, 1958, which involved the liability of a bus
owner for injury compensation to a conductor working under the
"boundary system."
The same principle applies with greater reason in negligence cases
concerning the right of third parties to recover damages for injuries
sustained. In Montoya v. Ignacio, L-5868, December 29, 1953, the
owner and operator of a passenger jeepney leased it to another,
but without the approval of the Public Service Commission. In a
subsequent collision a passenger died. We ruled that since the
lease was made without such approval, which was required by law,
the owner continued to be the operator of the vehicle in legal
contemplation and as such was responsible for the consequences
incident to its operation. The same responsibility was held to attach

in a case where the injured party was not a passenger but a third
person, who sued on the theory of culpa aquiliana (Timbol vs.
Osias, L-7547, April 30, 1955). There is no reason why a different
rule should be applied in a subsidiary liability case under Article
103 of the Revised Penal Code. As in the existence of an employeremployee relationship between the owner of the vehicle and the
driver. Indeed to exempt from liability the owner of a public vehicle
who operates it under the "boundary system" on the ground that
he is a mere lessor would be not only to abet flagrant violations of
the Public Service law but also to place the riding public at the
mercy of reckless and irresponsible drivers - reckless because the
measure of their earnings depends largely upon the number of trips
they make and, hence, the speed at which they drive; and
irresponsible because most if not all of them are in no position to
pay the damages they might cause. (See Erezo vs. Jepte, L-9605,
September 30, 1957).
Wherefore, the parties respectfully pray that the foregoing
stipulation of facts be admitted and approved by this Honorable
Court, without prejudice to the parties adducing other evidence to
prove their case not covered by this stipulation of
facts. 1wph1.t
Appellant further argues that he should not have been held
subsidiarily liable because Conrado Roque (the driver of the
jeepney) pleaded guilty to the charge in the criminal case without
appellant's knowledge and contrary to the agreement between
them that such plea would not be entered but, instead evidence
would be presented to prove Roque's innocence. On this point we
quote with approval the pertinent portion of the decision appealed
from:
"'With respect to the contention of the defendant that he
was taken unaware by the spontaneous plea of guilt entered
by the driver Conrado Roque, and that he did not have a
chance to prove the innocence of said Conrado Roque, the
Court holds that at this stage, it is already too late to try the
criminal case all over again. Defendant's allegation that he
relied on his belief that Conrado Roque would defend
himself and they had sufficient proof to show that Roque

was not guilty of the crime charged cannot be entertained.

Defendant should have taken it to himself to aid in the
defense of Conrado Roque. Having failed to take this step
and the accused having been declared guilty by final
judgment of the crime of homicide thru reckless
imprudence, there appears no more way for the defendant
to escape his subsidiary liability as provided for in Article
103 of the Revised Penal Code."'
WHEREFORE, the judgment appealed from, being in accordance
with law, is hereby affirmed, with costs against defendantappellant.

On November 28, 1956, Gelacio Tumambing contracted the

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

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

MAURO GANZON, petitioner, vs. COURT OF APPEALS and
GELACIO E. TUMAMBING, respondents.
SARMIENTO, J.:
The private respondent instituted in the Court of First Instance of
Manila 1 an action against the petitioner for damages based on
culpa contractual. The antecedent facts, as found by the
respondent Court, 2 are undisputed:

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

delivered to, and received by the petitioner-common carrier,

loading was commenced.

In this petition for review on certiorari, the alleged errors in the

decision of the Court of Appeals are:

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.

I
THE COURT OF APPEALS FINDING THE HEREIN PETITIONER GUILTY
OF BREACH OF THE CONTRACT OF TRANSPORTATION AND IN
IMPOSING A LIABILITY AGAINST HIM COMMENCING FROM THE TIME
THE SCRAP WAS PLACED IN HIS CUSTODY AND CONTROL HAVE NO
BASIS IN FACT AND IN LAW.
II
THE APPELLATE COURT ERRED IN CONDEMNING THE PETITIONER
FOR THE ACTS OF HIS EMPLOYEES IN DUMPING THE SCRAP INTO
THE SEA DESPITE THAT IT WAS ORDERED BY THE LOCAL
GOVERNMENT OFFICIAL WITHOUT HIS PARTICIPATION.
III
THE APPELLATE COURT FAILED TO CONSIDER THAT THE LOSS OF
THE SCRAP WAS DUE TO A FORTUITOUS EVENT AND THE
PETITIONER IS THEREFORE NOT LIABLE FOR LOSSES AS A
CONSEQUENCE THEREOF. 4
The petitioner, in his first assignment of error, insists that the scrap
iron had not been unconditionally placed under his custody and
control to make him liable. However, he completely agrees with the
respondent Court's finding that on December 1, 1956, the private
respondent delivered the scraps to Captain Filomeno Niza for
loading in the lighter "Batman," That the petitioner, thru his
employees, actually received the scraps is freely admitted.
Significantly, there is not the slightest allegation or showing of any
condition, qualification, or restriction accompanying the delivery by
the private respondent-shipper of the scraps, or the receipt of the
same by the petitioner. On the contrary, soon after the scraps were

The petitioner has failed to show that the loss of the scraps was
due to any of the following causes enumerated in Article 1734 of
the Civil Code, namely:
(1) Flood, storm, earthquake, lightning, or other natural disaster or
calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the
containers;
(5) Order or act of competent public authority.
Hence, the petitioner is presumed to have been at fault or to have
acted negligently. 6 By reason of this presumption, the court is not
even required to make an express finding of fault or negligence
before it could hold the petitioner answerable for the breach of the
contract of carriage. Still, the petitioner could have been exempted
from any liability had he been able to prove that he observed
extraordinary diligence in the vigilance over the goods in his
custody, according to all the circumstances of the case, or that the

loss was due to an unforeseen event or to force majeure. As it was,

there was hardly any attempt on the part of the petitioner to prove
that he exercised such extraordinary diligence.
It is in the second and third assignments of error where the
petitioner maintains that he is exempt from any liability because
the loss of the scraps was due mainly to the intervention of the
municipal officials of Mariveles which constitutes a caso fortuito as
defined in Article 1174 of the Civil Code. 7
We cannot sustain the theory of caso fortuito. In the courts below,
the petitioner's defense was that the loss of the scraps was due to
an "order or act of competent public authority," and this contention
was correctly passed upon by the Court of Appeals which ruled
that:
... In the second place, before the appellee Ganzon
could be absolved from responsibility on the ground
that he was ordered by competent public authority to
unload the scrap iron, it must be shown that Acting
Mayor Basilio Rub had the power to issue the
disputed order, or that it was lawful, or that it was
issued under legal process of authority. The appellee
failed to establish this. Indeed, no authority or power
of the acting mayor to issue such an order was given
in evidence. Neither has it been shown that the cargo
of scrap iron belonged to the Municipality of
Mariveles. What we have in the record is the
stipulation of the parties that the cargo of scrap iron
was accilmillated by the appellant through separate
purchases here and there from private individuals
(Record on Appeal, pp. 38-39). The fact remains that
the order given by the acting mayor to dump the
scrap iron into the sea was part of the pressure
applied by Mayor Jose Advincula to shakedown the
appellant for P5,000.00. The order of the acting
mayor did not constitute valid authority for appellee
Mauro Ganzon and his representatives to carry out.

Now the petitioner is changing his theory to caso fortuito. Such a

change of theory on appeal we cannot, however, allow. In any case,
the intervention of the municipal officials was not In any case, of a
character that would render impossible the fulfillment by the carrier
of its obligation. The petitioner was not duty bound to obey the
illegal order to dump into the sea the scrap iron. Moreover, there is
absence of sufficient proof that the issuance of the same order was
attended with such force or intimidation as to completely
overpower the will of the petitioner's employees. The mere
difficulty in the fullfilment of the obligation is not considered force
majeure. We agree with the private respondent that the scraps
could have been properly unloaded at the shore or at the NASSCO
compound, so that after the dispute with the local officials
concerned was settled, the scraps could then be delivered in
accordance with the contract of carriage.
There is no incompatibility between the Civil Code provisions on
common carriers and Articles 361 8 and 362 9 of the Code of
Commerce which were the basis for this Court's ruling in
Government of the Philippine Islands vs. Ynchausti & Co.10 and
which the petitioner invokes in tills petition. For Art. 1735 of the
Civil Code, conversely stated, means that the shipper will suffer the
losses and deterioration arising from the causes enumerated in Art.
1734; and in these instances, the burden of proving that damages
were caused by the fault or negligence of the carrier rests upon
him. However, the carrier must first establish that the loss or
deterioration was occasioned by one of the excepted causes or was
due to an unforeseen event or to force majeure. Be that as it may,
insofar as Art. 362 appears to require of the carrier only ordinary
diligence, the same is .deemed to have been modified by Art. 1733
of the Civil Code.
Finding the award of actual and exemplary damages to be proper,
the same will not be disturbed by us. Besides, these were not
sufficiently controverted by the petitioner.
WHEREFORE, the petition is DENIED; the assailed decision of the
Court of Appeals is hereby AFFIRMED. Costs against the petitioner.
This decision is IMMEDIATELY EXECUTORY.

G.R. No. 122039 May 31, 2000

VICENTE CALALAS, petitioner, vs. COURT OF APPEALS, ELIZA
JUJEURCHE SUNGA and FRANCISCO SALVA, respondents.
MENDOZA, J.:
This is a petition for review on certiorari of the decision1 of the
Court of Appeals, dated March 31, 1991, reversing the contrary
decision of the Regional Trial Court, Branch 36, Dumaguete City,
and awarding damages instead to private respondent Eliza
Jujeurche Sunga as plaintiff in an action for breach of contract of
carriage.

The facts, as found by the Court of Appeals, are as follows:

At 10 o'clock in the morning of August 23, 1989, private respondent
Eliza Jujeurche G. Sunga, then a college freshman majoring in
Physical Education at the Siliman University, took a passenger
jeepney owned and operated by petitioner Vicente Calalas. As the
jeepney was filled to capacity of about 24 passengers, Sunga was
given by the conductor an "extension seat," a wooden stool at the
back of the door at the rear end of the vehicle.
On the way to Poblacion Sibulan, Negros Occidental, the jeepney
stopped to let a passenger off. As she was seated at the rear of the
vehicle, Sunga gave way to the outgoing passenger. Just as she was
doing so, an Isuzu truck driven by Iglecerio Verena and owned by
Francisco Salva bumped the left rear portion of the jeepney. As a
result, Sunga was injured. She sustained a fracture of the "distal
third of the left tibia-fibula with severe necrosis of the underlying
skin." Closed reduction of the fracture, long leg circular casting, and
case wedging were done under sedation. Her confinement in the
hospital lasted from August 23 to September 7, 1989. Her
attending physician, Dr. Danilo V. Oligario, an orthopedic surgeon,
certified she would remain on a cast for a period of three months
and would have to ambulate in crutches during said period.
On October 9, 1989, Sunga filed a complaint for damages against
Calalas, alleging violation of the contract of carriage by the former
in failing to exercise the diligence required of him as a common
carrier. Calalas, on the other hand, filed a third-party complaint
against Francisco Salva, the owner of the Isuzu truck.
The lower court rendered judgment against Salva as third-party
defendant and absolved Calalas of liability, holding that it was the
driver of the Isuzu truck who was responsible for the accident. It
took cognizance of another case (Civil Case No. 3490), filed by
Calalas against Salva and Verena, for quasi-delict, in which Branch
37 of the same court held Salva and his driver Verena jointly liable
to Calalas for the damage to his jeepney.
On appeal to the Court of Appeals, the ruling of the lower court was
reversed on the ground that Sunga's cause of action was based on
a contract of carriage, not quasi-delict, and that the common
carrier failed to exercise the diligence required under the Civil
Code. The appellate court dismissed the third-party complaint
against Salva and adjudged Calalas liable for damages to Sunga.
The dispositive portion of its decision reads:

WHEREFORE, the decision appealed from is hereby

REVERSED and SET ASIDE, and another one is
entered ordering defendant-appellee Vicente Calalas
to pay plaintiff-appellant:
(1) P50,000.00
damages;

as

actual

and

compensatory

(2) P50,000.00 as moral damages;

(3) P10,000.00 as attorney's fees; and
(4) P1,000.00 as expenses of litigation; and
(5) to pay the costs.
SO ORDERED.
Hence, this petition. Petitioner contends that the ruling in Civil Case
No. 3490 that the negligence of Verena was the proximate cause of
the accident negates his liability and that to rule otherwise would
be to make the common carrier an insurer of the safety of its
passengers. He contends that the bumping of the jeepney by the
truck owned by Salva was a caso fortuito. Petitioner further assails
the award of moral damages to Sunga on the ground that it is not
supported by evidence.
The petition has no merit.
The argument that Sunga is bound by the ruling in Civil Case No.
3490 finding the driver and the owner of the truck liable for quasidelict ignores the fact that she was never a party to that case and,
therefore, the principle ofres judicata does not apply.
Nor are the issues in Civil Case No. 3490 and in the present case
the same. The issue in Civil Case No. 3490 was whether Salva and
his driver Verena were liable for quasi-delict for the damage caused
to petitioner's jeepney. On the other hand, the issue in this case is
whether petitioner is liable on his contract of carriage. The first,
quasi-delict, also known as culpa aquiliana or culpa extra
contractual, has as its source the negligence of the tortfeasor.
The second, breach of contract or culpa contractual, is premised
upon the negligence in the performance of a contractual obligation.

Consequently, in quasi-delict, the negligence or fault should be

clearly established because it is the basis of the action, whereas in
breach of contract, the action can be prosecuted merely by proving
the existence of the contract and the fact that the obligor, in this
case the common carrier, failed to transport his passenger safely to
his destination.2 In case of death or injuries to passengers, Art.
1756 of the Civil Code provides that common carriers are presumed
to have been at fault or to have acted negligently unless they prove
that they observed extraordinary diligence as defined in Arts. 1733
and 1755 of the Code. This provision necessarily shifts to the
common carrier the burden of proof.
There is, thus, no basis for the contention that the ruling in Civil
Case No. 3490, finding Salva and his driver Verena liable for the
damage to petitioner's jeepney, should be binding on Sunga. It is
immaterial that the proximate cause of the collision between the
jeepney and the truck was the negligence of the truck driver. The
doctrine of proximate cause is applicable only in actions for quasidelict, not in actions involving breach of contract. The doctrine is a
device for imputing liability to a person where there is no relation
between him and another party. In such a case, the obligation is
created by law itself. But, where there is a pre-existing contractual
relation between the parties, it is the parties themselves who
create the obligation, and the function of the law is merely to
regulate the relation thus created. Insofar as contracts of carriage
are concerned, some aspects regulated by the Civil Code are those
respecting the diligence required of common carriers with regard to
the safety of passengers as well as the presumption of negligence
in cases of death or injury to passengers. It provides:
Art. 1733. Common carriers, from the nature of their
business and for reasons of public policy, are bound
to observe extraordinary diligence in the vigilance
over the goods and for the safety of the passengers
transported by them, according to all the
circumstances of each case.
Such extraordinary diligence in the vigilance over the
goods is further expressed in articles 1734, 1735,
and 1746, 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 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 by articles 1733 and 1755.
In the case at bar, upon the happening of the accident, the
presumption of negligence at once arose, and it became the duty of
petitioner to prove that he had to observe extraordinary diligence
in the care of his passengers.
Now, did the driver of jeepney carry Sunga "safely as far as human
care and foresight could provide, using the utmost diligence of very
cautious persons, with due regard for all the circumstances" as
required by Art. 1755? We do not think so. Several factors militate
against petitioner's contention.
First, as found by the Court of Appeals, the jeepney was not
properly parked, its rear portion being exposed about two meters
from the broad shoulders of the highway, and facing the middle of
the highway in a diagonal angle. This is a violation of the R.A. No.
4136, as amended, or the Land Transportation and Traffic Code,
which provides:
Sec. 54. Obstruction of Traffic. No person shall
drive his motor vehicle in such a manner as to
obstruct or impede the passage of any vehicle, nor,
while discharging or taking on passengers or loading
or unloading freight, obstruct the free passage of
other vehicles on the highway.
Second, it is undisputed that petitioner's driver took in more
passengers than the allowed seating capacity of the jeepney, a
violation of 32(a) of the same law. It provides:
Exceeding registered capacity. No person
operating any motor vehicle shall allow more
passengers or more freight or cargo in his vehicle
than its registered capacity.

The fact that Sunga was seated in an "extension seat" placed her in
a peril greater than that to which the other passengers were
exposed. Therefore, not only was petitioner unable to overcome the
presumption of negligence imposed on him for the injury sustained
by Sunga, but also, the evidence shows he was actually negligent
in transporting passengers.
We find it hard to give serious thought to petitioner's contention
that Sunga's taking an "extension seat" amounted to an implied
assumption of risk. It is akin to arguing that the injuries to the
many victims of the tragedies in our seas should not be
compensated merely because those passengers assumed a greater
risk of drowning by boarding an overloaded ferry. This is also true of
petitioner's contention that the jeepney being bumped while it was
improperly parked constitutes caso fortuito. A caso fortuito is an
event which could not be foreseen, or which, though foreseen, was
inevitable.3 This requires that the following requirements be
present: (a) the cause of the breach is independent of the debtor's
will; (b) the event is unforeseeable or unavoidable; (c) the event is
such as to render it impossible for the debtor to fulfill his obligation
in a normal manner, and (d) the debtor did not take part in causing
the
injury
to
the
creditor.4 Petitioner should have foreseen the danger of parking his
jeepney with its body protruding two meters into the highway.
Finally, petitioner challenges the award of moral damages alleging
that it is excessive and without basis in law. We find this contention
well taken.
In awarding moral damages, the Court of Appeals stated:
Plaintiff-appellant at the time of the accident was a
first-year college student in that school year 19891990 at the Silliman University, majoring in Physical
Education. Because of the injury, she was not able to
enroll in the second semester of that school year. She
testified that she had no more intention of continuing
with her schooling, because she could not walk and
decided not to pursue her degree, major in Physical
Education "because of my leg which has a defect
already."
Plaintiff-appellant likewise testified that even while
she was under confinement, she cried in pain
because of her injured left foot. As a result of her

injury, the Orthopedic Surgeon also certified that she

has "residual bowing of the fracture side." She
likewise decided not to further pursue Physical
Education as her major subject, because "my left
leg . . . has a defect already."
Those are her physical pains and moral sufferings,
the inevitable bedfellows of the injuries that she
suffered. Under Article 2219 of the Civil Code, she is
entitled to recover moral damages in the sum of
P50,000.00, which is fair, just and reasonable.
As a general rule, moral damages are not recoverable in actions for
damages predicated on a breach of contract for it is not one of the
items enumerated under Art. 2219 of the Civil Code.5 As an
exception, such damages are recoverable: (1) in cases in which the
mishap results in the death of a passenger, as provided in Art.
1764, in relation to Art. 2206(3) of the Civil Code; and (2) in the
cases in which the carrier is guilty of fraud or bad faith, as provided
in Art. 2220.6
In this case, there is no legal basis for awarding moral damages
since there was no factual finding by the appellate court that
petitioner acted in bad faith in the performance of the contract of
carriage. Sunga's contention that petitioner's admission in open
court that the driver of the jeepney failed to assist her in going to a
nearby hospital cannot be construed as an admission of bad faith.
The fact that it was the driver of the Isuzu truck who took her to the
hospital does not imply that petitioner was utterly indifferent to the
plight of his injured passenger. If at all, it is merely implied
recognition by Verena that he was the one at fault for the accident.
WHEREFORE, the decision of the Court of Appeals, dated March 31,
1995, and its resolution, dated September 11, 1995, are AFFIRMED,
with the MODIFICATION that the award of moral damages is
DELETED.
SO ORDERED.

(RTC) of Cagayan de Oro City, Branch 24, 3 as well as the

allegations and arguments adduced by the parties, we find the
petitioner's formulation of the issue imprecise. As this Court sees it,
what stands for resolution is a common carrier's liability for
damages to a passenger who disembarked from the vessel upon its
return to the port of origin, after it suffered engine trouble and had
to stop at sea, having commenced the contracted voyage on one
engine.
The antecedents are summarized by the Court of Appeals as
follows:

G.R. No. 118126 March 4, 1996

TRANS-ASIA SHIPPING LINES, INC., petitioner, vs. COURT OF
APPEALS and ATTY. RENATO T. ARROYO, respondents.
DAVIDE, JR., J.:p
As formulated by the petitioner, the issue in this petition for review
on certiorari under Rule 45 of the Rules of Court is as follows:
In case of interruption of a vessel's voyage and the
consequent delay in that vessel's arrival at its port of
destination, is the right of a passenger affected
thereby to be determined and governed by the
vague Civil Code provision on common carriers, or
shall it be, in the absence of a specific provision
thereon governed by Art. 698 of the Code of
Commerce? 1
The petitioner considers it a "novel question of law."
Upon a closer evaluation, however, of the challenged decision of
the Court of Appeals of 23 November 1994, 2 vis-a-vis, the decision
of 29 June 1992 in Civil Case No. 91-491 of the Regional Trial Court

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 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 decision 7 and ruled that
the action was only for breach of contract, with Articles 1170, 1172,
and 1173 of the Civil Code as applicable law not Article 2180 of
the same Code. It was of the opinion that Article 1170 made a
person liable for damages if, in the performance of his obligation,
he was guilty of fraud, negligence, or delay, or in any manner
contravened the tenor thereof; moreover, pursuant to Article 2201

of the same Code, to be entitled to damages, the non-performance

of the obligation must have been tainted not only by fraud,
negligence, or delay, but also bad faith, malice, and wanton
attitude. It then disposed of the case as follows:
WHEREFORE, it not appearing from the evidence that
plaintiff was left in the Port of Cebu because of the
fault, negligence, malice or wanton attitude of
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:
WHEREFORE, premises considered, the appealed
decision is hereby REVERSED and SET ASIDE and
another one is rendered ordering defendant-appellee
to pay plaintiff-appellant:
1. P20,000.00 as moral damages;
2. P10,000.00 as exemplary damages;
3. P5,000.00 as attorney's fees;
4. Cost of suit.
SO ORDERED. 12
It did not, however, allow the grant of damages for the delay in the
performance of the 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 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.

the vessel which from the very beginning of the

voyage was known to defendant-appellee.

To justify its award of damages, the Court of Appeals ratiocinated

as follows:

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
passengers.

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:

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, defendantappellee still proceeded to sail with only one engine
running.

Article 1755 of the New Civil Code provides:

. . . 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:
2330 HRS STBD ENGINE' EMERGENCY STOP
2350 HRS DROP ANCHOR DUE TO ENGINE TROUBLE,
2 ENGINE STOP.
The stoppage was not to start and synchronized [sic]
the engines of the vessel as claimed by defendantappellee. It was because one of the engines of the
vessel broke down; it was because of the disability of

Art. 1755. A common carrier is bound

to carry the passengers safely as far as
human care and foresight can provide,
using the utmost diligence of very
cautious persons, with a due regard for
all the circumstances.
Utmost diligence of a VERY CAUTIOUS person
dictates that defendant-appellee should have
pursued the voyage only when its vessel was already
fit to sail. Defendant-appellee should have made
certain that the vessel [could] complete the voyage
before starting [to] sail. Anything less than this, the
vessel [could not] sail . . . 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

Art. 2201.
xxx xxx xxx
In case of fraud, bad faith, malice or
wanton attitude, the obligor shall be
responsible for all damages which may
be reasonably attributed to the nonperformance of the obligation.
Plaintiff-appellant is entitled to moral damages for
the mental anguish, fright and serious anxiety he
suffered during the voyage when the 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
Moral damages are recoverable in a damage suit
predicated upon a breach of contract of carriage
where it is proved that the carrier was guilty of fraud
or bad faith even if death does not result. 15
Fraud and bad faith by defendant-appellee having
been established, the award of moral damages is in
order. 16

xxx xxx xxx

As to the second assigned error, we find that plaintiffappellant is entitled to the award of moral and
exemplary damages for the breach committed by
defendant-appellee.
As discussed, defendant-appellee in sailing to
Cagayan de Oro City with only one engine and with
full knowledge of the true condition of the vessel,
acted. in bad faith with malice, in complete disregard
for the safety of the passengers and only for its own
personal advancement/interest.
The Civil Code provides:

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

The petitioner then instituted this petition and submitted the

question of law earlier adverted to.
Undoubtedly, there was, between the petitioner and the private
respondent, a contract of common carriage. The laws of primary
application then are the provisions on common carriers under
Section 4, Chapter 3, Title VIII, Book IV of the Civil Code, while for
all other matters not regulated thereby, the Code of Commerce and
special laws. 20
Under Article 1733 of the Civil Code, the petitioner was bound to
observe extraordinary diligence in ensuring the safety of the
private respondent. That meant that the petitioner was, pursuant to
Article 1755 of the said Code, bound to carry the private
respondent safely as far as human care and foresight could
provide, using the utmost diligence of very cautious persons, with
due regard for all the circumstances. In this case, we are in full
accord with the Court of Appeals that the petitioner failed to
discharge this obligation.
Before commencing the contracted voyage, the petitioner
undertook some repairs on the cylinder head of one of the 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:

Art. 1764. Damages in cases comprised in this

Section shall be awarded in accordance with Title
XVIII of this Book, concerning Damages. Article 2206
shall also apply to the death of a passenger caused
by the breach of contract by common carrier.
The damages comprised in Title XVIII of the Civil Code are
actual or compensatory, moral, nominal, temperate or
moderate, liquidated, and exemplary.
In his complaint, the private respondent claims
compensatory, moral, and exemplary damages.

actual

or

Actual or compensatory damages represent the adequate

compensation for pecuniary loss suffered and for profits the obligee
failed to obtain. 22
In contracts or quasi-contracts, the obligor is liable for all the
damages which may be reasonably attributed to the nonperformance of the obligation if he is guilty of fraud, bad faith,
malice, or wanton attitude. 23
Moral damages include moral suffering, mental anguish, fright,
serious anxiety, besmirched reputation, wounded feelings, moral
shock, social humiliation, or similar injury. They may be recovered
in the cases enumerated in Article 2219 of the Civil Code, likewise,
if they are the proximate result of, as in this case, the petitioner's
breach of the contract of carriage. 24 Anent a breach of a contract
of common carriage, moral damages may be awarded if the
common carrier, like the petitioner, acted fraudulently or in bad
faith. 25
Exemplary damages are imposed by way of example or correction
for the public good, in addition to moral, temperate, liquidated or
compensatory damages. 26 In contracts and quasi-contracts,
exemplary damages may be awarded if the defendant acted in a
wanton,
fraudulent,
reckless,
oppressive
or
malevolent
manner. 27 It cannot, however, be considered as a matter of right;
the court having to decide whether or not they should be
adjudicated. 28 Before the court may consider an award for

exemplary damages, the plaintiff must first show that he is entitled

to moral, temperate or compensatory damages; but it is not
necessary that he prove the monetary value thereof. 29
The Court of Appeals did not grant the private respondent actual or
compensatory damages, reasoning that no delay was incurred
since there was no demand, as required by Article 1169 of the Civil
Code. This article, however, finds no application in this case
because, as found by the respondent Court, there was in fact no
delay in the commencement of the contracted voyage. If any delay
was incurred, it was after the commencement of such voyage,
more specifically, when the voyage was subsequently interrupted
when the vessel had to stop near 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.
We cannot, however, give our affirmance to the award of attorney's
fees. Under Article 2208 of the Civil Code, these are recoverable
only in the concept of actual damages, 32 not as moral
damages 33 nor judicial costs. 34Hence, to merit such an award, it
is settled that the amount thereof must be proven. 35 Moreover,
such must be specifically prayed for as was not done in this case
and may not be deemed incorporated within a general prayer for
"such other relief and remedy as this court may deem just and
equitable." 36 Finally, it must be noted that aside from the
following, the body of the respondent Court's decision was devoid
of any statement regarding attorney's fees:

litigate with third persons or to incur

expenses to protect his interest.
This Court holds that the above does not satisfy the
benchmark of "factual, legal and equitable justification"
needed as basis for an award of attorney's fees. 37 In sum,
for lack of factual and legal basis, the award of attorney's
fees must be deleted.
WHEREFORE, the instant petition is DENIED and the challenged
decision of the Court of Appeals in CA-G.R. CV No. 39901 is
AFFIRMED subject to the modification as to the award for attorney's
fees which is hereby SET ASIDE.
Costs against the petitioner.
SO ORDERED.

Plaintiff-appellant was forced to litigate in order that

he can claim moral and exemplary damages for the
suffering he encurred [sic]. He is entitled to
attorney's fees pursuant to Article 2208 of the Civil
Code. It states:
Art. 2208. In the absence of stipulation, attorney's
fees and expenses of litigation, other than judicial
costs cannot be recovered except:
1. When
awarded;

exemplary

damages

are

2. When the defendant's act or

omission has compelled the plaintiff to

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.
PANGANIBAN, J.:

Proof of the delivery of goods in good order to a common carrier

and of their arrival in bad order at their destination constitutes
prima facie fault or negligence on the part of the carrier. If no
adequate explanation is given as to how the loss, the destruction or
the deterioration of the goods happened, the carrier shall be held
liable therefor.
Statement of the Case
Before us is a Petition for Review under Rule 45 of the Rules of
Court, assailing the July 15, 1998 Decision1 and the May 2, 2000
Resolution2 of the Court of Appeals3 (CA) in CA-GR CV No. 53571.
The decretal portion of the Decision reads as follows:
"WHEREFORE, in the light of the foregoing disquisition, the
decision appealed from is hereby REVERSED and SET ASIDE.
Defendants-appellees are ORDERED to jointly and severally
pay plaintiffs-appellants the following:
'1) FOUR Hundred Fifty One Thousand Twenty-Seven
Pesos and 32/100 (P451,027.32) as actual damages,
representing the value of the damaged cargo, plus
interest at the legal rate from the time of filing of the
complaint on July 25, 1991, until fully paid;
'2) Attorney's fees amounting to 20% of the claim;
and
'3) Costs of suit.'"4
The
assailed
Resolution
Reconsideration.

denied

petitioner's

Motion

for

The CA reversed the Decision of the Regional Trial Court (RTC) of

Makati City (Branch 134), which had disposed as follows:
"WHEREFORE, in view of the foregoing, judgment is hereby
rendered, dismissing the complaint, as well as defendant's
counterclaim."5

The Facts
The factual antecedents of the case are summarized by the Court
of Appeals in this wise:
"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.1wphi1.nt
"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,
plaintiffappellant 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
It
likewise
debunked
petitioners'
counterclaim,
because
respondent's suit was not manifestly frivolous or primarily intended
to harass them.8

whose testimony is purely hearsay is sufficient to pave the

way for the applicability of Article 1735 of the Civil Code;
II
"Whether or not the consignee/plaintiff filed the required
notice of loss within the time required by law;
III

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.
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.

"Whether or not a notation in the bill of lading at the time of

loading is sufficient to show pre-shipment damage and to
exempt herein defendants from liability;
IV
"Whether or not the "PACKAGE LIMITATION" of liability under
Section 4 (5) of COGSA is applicable to the case at bar."12
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

Hence, this Petition.11

This Court's Ruling

Issues

The Petition is partly meritorious.

In their Memorandum, petitioners raise the following issues for the

Court's consideration:

First Issue:

I
"Whether or not plaintiff by presenting only one
witness who has never seen the subject shipment and

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.

list. If the cause of destruction, loss or deterioration is other than

the enumerated circumstances, then the carrier is liable therefor.23

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

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

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.

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.

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

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.26

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
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:

"Q.
Mr. Esmerio, you mentioned that you are a Head
Checker. Will you inform the Honorable Court with what
company you are connected?
A.

Objection, Your Honor, I think the document itself

reflects the condition of the cold steel sheets and the
best evidence is the document itself, Your Honor that
shows the condition of the steel sheets.

BM Santos Checkers Agency, sir.

COURT:

Q.
How is BM Santos checkers Agency related or
connected with defendant Jardine Davies Transport
Services?
A.

It is the company who contracts the checkers, sir.

Q.
You mentioned that you are a Head Checker, will you
inform this Honorable Court your duties and responsibilities?
A.
I am the representative of BM Santos on board the
vessel, sir, to supervise the discharge of cargoes.
xxx

xxx

xxx

Q.
On or about August 1, 1990, were you still connected
or employed with BM Santos as a Head Checker?
A.

Yes, sir.

Q.
And, on or about that date, do you recall having
attended the discharging and inspection of cold steel sheets
in coil on board the MV/AN ANGEL SKY?
A.
xxx

Yes, sir, I was there.

xxx

xxx

Q.
Based on your inspection since you were also present
at that time, will you inform this Honorable Court the
condition or the appearance of the bad order cargoes that
were unloaded from the MV/ANANGEL SKY?
ATTY. MACAMAY:

Let the witness answer.

A.
The scrap of the cargoes is broken already and the
rope is loosen and the cargoes are dent on the sides."32
All these conclusively prove the fact of shipment in good order and
condition and the consequent damage to the four coils while in the
possession of petitioner,33 who notably failed to explain why.34
Further, petitioners failed to prove that they observed the
extraordinary diligence and precaution which the law requires a
common carrier to know and to follow to avoid damage to or
destruction of the goods entrusted to it for safe carriage and
delivery.35
True, the words "metal envelopes rust stained and slightly dented"
were noted on the Bill of Lading; however, there is no showing that
petitioners exercised due diligence to forestall or lessen the
loss.36 Having been in the service for several years, the master of
the vessel should have known at the outset that metal envelopes in
the said state would eventually deteriorate when not properly
stored while in transit.37 Equipped with the proper knowledge of
the nature of steel sheets in coils and of the proper way of
transporting them, the master of the vessel and his crew should
have undertaken precautionary measures to avoid possible
deterioration of the cargo. But none of these measures was
taken.38 Having failed to discharge the burden of proving that they
have exercised the extraordinary diligence required by law,
petitioners cannot escape liability for the damage to the four
coils.39
In their attempt to escape liability, petitioners further contend that
they are exempted from liability under Article 1734(4) of the Civil

Code. They cite the notation "metal envelopes rust stained and
slightly dented" printed on the Bill of Lading as evidence that the
character of the goods or defect in the packing or the containers
was the proximate cause of the damage. We are not convinced.
From the evidence on record, it cannot be reasonably concluded
that the damage to the four coils was due to the condition noted on
the Bill of Lading.40 The aforecited exception refers to cases when
goods are lost or damaged while in transit as a result of the natural
decay of perishable goods or the fermentation or evaporation of
substances liable therefor, the necessary and natural wear of goods
in transport, defects in packages in which they are shipped, or the
natural propensities of animals.41 None of these is present in the
instant case.

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."

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

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.

Second Issue:

Third Issue:

Notice of Loss

Package Limitation

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

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

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

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--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.1wphi1.nt
WHEREFORE, the Petition is partly granted and the assailed
Decision MODIFIED. Petitioners' liability is reduced to US$2,000
plus interest at the legal rate of six percent from the time of the
filing of the Complaint on July 25, 1991 until the finality of this
Decision, and 12 percent thereafter until fully paid. No
pronouncement as to costs.
SO ORDERED.

G.R. No. 147246

August 19, 2003
ASIA LIGHTERAGE AND SHIPPING, INC., petitioner, vs. COURT
OF APPEALS and PRUDENTIAL GUARANTEE AND
ASSURANCE, INC., respondents.
PUNO, J.:
On appeal is the Court of Appeals' May 11, 2000 Decision1 in CAG.R. CV No. 49195 and February 21, 2001 Resolution2 affirming
with modification the April 6, 1994 Decision3 of the Regional Trial
Court of Manila which found petitioner liable to pay private
respondent the amount of indemnity and attorney's fees.
First, the facts.
On June 13, 1990, 3,150 metric tons of Better Western White Wheat
in bulk, valued at US$423,192.354 was shipped by Marubeni
American Corporation of Portland, Oregon on board the vessel M/V
NEO CYMBIDIUM V-26 for delivery to the consignee, General Milling
Corporation in Manila, evidenced by Bill of Lading No. PTD/Man4.5The shipment was insured by the private respondent Prudential
Guarantee and Assurance, Inc. against loss or damage
for P14,621,771.75 under Marine Cargo Risk Note RN 11859/90.6
On July 25, 1990, the carrying vessel arrived in Manila and the
cargo was transferred to the custody of the petitioner Asia
Lighterage and Shipping, Inc. The petitioner was contracted by the
consignee as carrier to deliver the cargo to consignee's warehouse
at Bo. Ugong, Pasig City.
On August 15, 1990, 900 metric tons of the shipment was loaded
on barge PSTSI III, evidenced by Lighterage Receipt No. 03647 for
delivery to consignee. The cargo did not reach its destination.
It appears that on August 17, 1990, the transport of said cargo was
suspended due to a warning of an incoming typhoon. On August 22,
1990, the petitioner proceeded to pull the barge to Engineering
Island off Baseco to seek shelter from the approaching typhoon.

PSTSI III was tied down to other barges which arrived ahead of it
while weathering out the storm that night. A few days after, the
barge developed a list because of a hole it sustained after hitting
an unseen protuberance underneath the water. The petitioner filed
a Marine Protest on August 28, 1990.8 It likewise secured the
services of Gaspar Salvaging Corporation which refloated the
barge.9 The hole was then patched with clay and cement.
The barge was then towed to ISLOFF terminal before it finally
headed towards the consignee's wharf on September 5, 1990. Upon
reaching the Sta. Mesa spillways, the barge again ran aground due
to strong current. To avoid the complete sinking of the barge, a
portion of the goods was transferred to three other barges.10
The next day, September 6, 1990, the towing bits of the barge
broke. It sank completely, resulting in the total loss of the
remaining cargo.11 A second Marine Protest was filed on
September 7, 1990.12
On September 14, 1990, a bidding was conducted to dispose of the
damaged wheat retrieved and loaded on the three other
barges.13 The total proceeds from the sale of the salvaged cargo
was P201,379.75.14
On the same date, September 14, 1990, consignee sent a claim
letter to the petitioner, and another letter dated September 18,
1990 to the private respondent for the value of the lost cargo.
On January 30, 1991, the private respondent indemnified the
consignee in the amount of P4,104,654.22.15Thereafter, as
subrogee, it sought recovery of said amount from the petitioner,
but to no avail.
On July 3, 1991, the private respondent filed a complaint against
the petitioner for recovery of the amount of indemnity, attorney's
fees and cost of suit.16 Petitioner filed its answer with
counterclaim.17
The Regional Trial Court ruled in favor of the private respondent.
The dispositive portion of its Decision states:

WHEREFORE, premises considered, judgment is hereby

rendered ordering defendant Asia Lighterage & Shipping,
Inc. liable to pay plaintiff Prudential Guarantee & Assurance
Co., Inc. the sum of P4,104,654.22 with interest from the
date complaint was filed on July 3, 1991 until fully satisfied
plus 10% of the amount awarded as and for attorney's fees.
Defendant's counterclaim is hereby DISMISSED. With costs
against defendant.18
Petitioner appealed to the Court of Appeals insisting that it is not a
common carrier. The appellate court affirmed the decision of the
trial court with modification. The dispositive portion of its decision
reads:
WHEREFORE, the decision appealed from is hereby
AFFIRMED with modification in the sense that the salvage
value of P201,379.75 shall be deducted from the amount
of P4,104,654.22. Costs against appellant.

CARGO IS, THEREFORE, BORNE BY THE CARRIER IN ALL

CASES EXCEPT IN THE FIVE (5) CASES ENUMERATED."
(3) THE COURT OF APPEALS DECIDED THE CASE A QUO IN A
WAY NOT IN ACCORD WITH LAW AND/OR WITH THE
APPLICABLE DECISIONS OF THE SUPREME COURT WHEN IT
EFFECTIVELY CONCLUDED THAT PETITIONER FAILED TO
EXERCISE DUE DILIGENCE AND/OR WAS NEGLIGENT IN ITS
CARE AND CUSTODY OF THE CONSIGNEE'S CARGO.
The issues to be resolved are:
(1) Whether the petitioner is a common carrier; and,
(2) Assuming the petitioner is a common carrier, whether it
exercised extraordinary diligence in its care and custody of
the consignee's cargo.
On the first issue, we rule that petitioner is a common carrier.

SO ORDERED.
Petitioner's Motion for Reconsideration dated June 3, 2000 was
likewise denied by the appellate court in a Resolution promulgated
on February 21, 2001.
Hence, this petition. Petitioner submits the following errors
allegedly committed by the appellate court, viz:19
(1) THE COURT OF APPEALS DECIDED THE CASE A QUO IN A
WAY NOT IN ACCORD WITH LAW AND/OR WITH THE
APPLICABLE DECISIONS OF THE SUPREME COURT WHEN IT
HELD THAT PETITIONER IS A COMMON CARRIER.

Article 1732 of the Civil Code defines common carriers as persons,

corporations, firms or associations engaged in the business of
carrying or transporting passengers or goods or both, by land,
water, or air, for compensation, offering their services to the public.
Petitioner contends that it is not a common carrier but a private
carrier. Allegedly, it has no fixed and publicly known route,
maintains no terminals, and issues no tickets. It points out that it is
not obliged to carry indiscriminately for any person. It is not bound
to carry goods unless it consents. In short, it does not hold out its
services to the general public.20
We disagree.

(2) THE COURT OF APPEALS DECIDED THE CASE A QUO IN A

WAY NOT IN ACCORD WITH LAW AND/OR WITH THE
APPLICABLE DECISIONS OF THE SUPREME COURT WHEN IT
AFFIRMED THE FINDING OF THE LOWER COURT A QUO THAT
ON THE BASIS OF THE PROVISIONS OF THE CIVIL CODE
APPLICABLE TO COMMON CARRIERS, "THE LOSS OF THE

In De Guzman vs. Court of Appeals,21 we held that the

definition of common carriers in Article 1732 of the Civil Code
makes no distinction between one whose principal business activity
is the carrying of persons or goods or both, and one who does such
carrying only as an ancillary activity. We also did not distinguish
between a person or enterprise offering transportation service on a

regular or scheduled basis and one offering such service on an

occasional, episodic or unscheduled basis. Further, we ruled that
Article 1732 does not distinguish between a carrier offering its
services to the general public, and one who offers services or
solicits business only from a narrow segment of the general
population.

goods are lost, destroyed or deteriorated.29 To overcome the

presumption of negligence in the case of loss, destruction or
deterioration of the goods, the common carrier must prove that it
exercised extraordinary diligence. There are, however, exceptions
to this rule. Article 1734 of the Civil Code enumerates the instances
when the presumption of negligence does not attach:

In the case at bar, the principal business of the petitioner is that of

lighterage and drayage22 and it offers its barges to the public for
carrying or transporting goods by water for compensation.
Petitioner is clearly a common carrier. In De Guzman, supra,23 we
considered private respondent Ernesto Cendaa to be a common
carrier even if his principal occupation was not the carriage of
goods for others, but that of buying used bottles and scrap metal in
Pangasinan and selling these items in Manila.

Art. 1734. Common carriers are responsible for the loss,

destruction, or deterioration of the goods, unless the same
is due to any of the following causes only:

We therefore hold that petitioner is a common carrier whether its

carrying of goods is done on an irregular rather than scheduled
manner, and with an only limited clientele. A common carrier need
not have fixed and publicly known routes. Neither does it have to
maintain terminals or issue tickets.
To be sure, petitioner fits the test of a common carrier as laid down
in Bascos vs. Court of Appeals.24 The test to determine a
common carrier is "whether the given undertaking is a part of the
business engaged in by the carrier which he has held out to the
general public as his occupation rather than the quantity or extent
of the business transacted."25 In the case at bar, the petitioner
admitted that it is engaged in the business of shipping and
lighterage,26 offering its barges to the public, despite its limited
clientele for carrying or transporting goods by water for
compensation.27
On the second issue, we uphold the findings of the lower courts
that petitioner failed to exercise extraordinary diligence in its care
and custody of the consignee's goods.
Common carriers are bound to observe extraordinary diligence in
the vigilance over the goods transported by them.28 They are
presumed to have been at fault or to have acted negligently if the

(1) Flood, storm, earthquake, lightning, or other

natural disaster or calamity;
(2) Act of the public enemy in war, whether
international or civil;
(3) Act or omission of the shipper or owner of the
goods;
(4) The character of the goods or defects in the
packing or in the containers;
(5) Order or act of competent public authority.
In the case at bar, the barge completely sank after its towing bits
broke, resulting in the total loss of its cargo. Petitioner claims that
this was caused by a typhoon, hence, it should not be held liable
for the loss of the cargo. However, petitioner failed to prove that
the typhoon is the proximate and only cause of the loss of the
goods, and that it has exercised due diligence before, during and
after the occurrence of the typhoon to prevent or minimize the
loss.30 The evidence show that, even before the towing bits of the
barge broke, it had already previously sustained damage when it
hit a sunken object while docked at the Engineering Island. It even
suffered a hole. Clearly, this could not be solely attributed to the
typhoon. The partly-submerged vessel was refloated but its hole
was patched with only clay and cement. The patch work was
merely a provisional remedy, not enough for the barge to sail
safely. Thus, when petitioner persisted to proceed with the voyage,

it recklessly exposed the cargo to further damage. A portion of the

cross-examination of Alfredo Cunanan, cargo-surveyor of Tan-Gatue
Adjustment Co., Inc., states:
CROSS-EXAMINATION BY ATTY. DONN LEE:31
xxx

xxx

q
incident?

xxx

Can you tell us what else transpired after that

a
After the first accident, through the initiative of the
barge owners, they tried to pull out the barge from the place
of the accident, and bring it to the anchor terminal for
safety, then after deciding if the vessel is stabilized, they
tried to pull it to the consignee's warehouse, now while on
route another accident occurred, now this time the barge
totally hitting something in the course.
q
You said there was another accident, can you tell
the court the nature of the second accident?

DIRECT-EXAMINATION BY ATTY. LEE:33

xxx

xxx

xxx

q
Now, Mr. Witness, did it not occur to you it might be
safer to just allow the Barge to lie where she was instead of
towing it?
a
Since that time that the Barge was refloated, GMC
(General Milling Corporation, the consignee) as I have said
was in a hurry for their goods to be delivered at their Wharf
since they needed badly the wheat that was loaded in
PSTSI-3. It was needed badly by the consignee.
q
And this is the reason why you towed the Barge as
you did?
a

xxx

Yes, sir.
xxx

xxx

CROSS-EXAMINATION BY ATTY. IGNACIO:34

a

The sinking, sir.

xxx

q
Can you tell the nature . . . can you tell the court, if
you know what caused the sinking?
a
Mostly it was related to the first accident because
there was already a whole (sic) on the bottom part of the
barge.
xxx

xxx

xxx

This is not all. Petitioner still headed to the consignee's wharf

despite knowledge of an incoming typhoon. During the time that
the barge was heading towards the consignee's wharf on
September 5, 1990, typhoon "Loleng" has already entered the
Philippine area of responsibility.32 A part of the testimony of Robert
Boyd, Cargo Operations Supervisor of the petitioner, reveals:

xxx

xxx

q
And then from ISLOFF Terminal you proceeded to
the premises of the GMC? Am I correct?
a
The next day, in the morning, we hired for
additional two (2) tugboats as I have stated.
q
Despite of the threats of an incoming typhoon as
you testified a while ago?
a
It is already in an inner portion of Pasig River. The
typhoon would be coming and it would be dangerous if we
are in the vicinity of Manila Bay.

q
no?
a

But the fact is, the typhoon was incoming? Yes or

Yes.

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

Yes, sir.

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

Yes, sir.

And yet you proceeded to the premises of the GMC?

a
ISLOFF Terminal is far from Manila Bay and anytime
even with the typhoon if you are already inside the vicinity
or inside Pasig entrance, it is a safe place to tow upstream.
Accordingly, the petitioner cannot invoke the occurrence of the
typhoon as force majeure to escape liability for the loss sustained
by the private respondent. Surely, meeting a typhoon head-on falls
short of due diligence required from a common carrier. More
importantly, the officers/employees themselves of petitioner
admitted that when the towing bits of the vessel broke that caused
its sinking and the total loss of the cargo upon reaching the Pasig
River, it was no longer affected by the typhoon. The typhoon then
is not the proximate cause of the loss of the cargo; a human
factor, i.e., negligence had intervened.
IN VIEW THEREOF, the petition is DENIED. The Decision of the
Court of Appeals in CA-G.R. CV No. 49195 dated May 11, 2000 and
its Resolution dated February 21, 2001 are hereby AFFIRMED. Costs
against petitioner.
SO ORDERED.

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.
REGALADO, J.:
Assailed in this petition for review on certiorari is the decision in
CA-G.R. CV No. 20951 of respondent Court of Appeals 1 which
affirmed the decision of the trial court 2 dismissing for lack of

evidence herein petitioners' complaint in Civil Case No R-2101 of

the then Court of First Instance of Southern Leyte, Branch I.

PAL Flight 149 of October 29, 1976 (See Exh. E., Also
Exh. 1-PAL).

The facts, as recounted by the court a quo and adopted by

respondent court after "considering the evidence on record," are as
follows:

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.

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

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. 6TWA).

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-aPAL).
What transpired at the Chicago (A)irport is explained
in a memo or incident report by Pomierski (Exh. 6TWA) to Pomierski's lawyers who in turn referred to
said' memo and enclosed it in their (Pomierski's
lawyers) answer dated July 18, 1981 to herein
plaintiff's counsel (See Exh. 5-TWA). In that memo or
incident report (Exh. 6-TWA), it is stated that the
remains (of Crispina Saludo) were taken to CMAS at
the airport; that there were two bodies at the
(Chicago Airport) terminal, and somehow they were
switched, that the remains (of Crispina Saludo) were
on a plane to Mexico City; that CMAS is a national
service used by undertakers throughout the nation
(U.S.A.), makes all the necessary arrangements, such
as flights, transfers, etc., and see(s) to it that the
remains are taken to the proper air freight terminal.
The following day October 28, 1976, the shipment or
remains of Crispina Saludo arrived (in) San Francisco
from Mexico on board American Airlines. This
shipment was transferred to or received by PAL at
1945H or 7:45 p.m. (Exh. 2-PAL, Exh. 2-a-PAL). This
casket bearing the remains of Crispina Saludo, which
was mistakenly sent to Mexico and was opened
(there), was resealed by Crispin F. Patagas for

shipment to the Philippines (See Exh. B-1). The

shipment was immediately loaded on PAL flight for
Manila that same evening and arrived (in) Manila on
October 30, 1976, a day after its expected arrival on
October 29, 1976. 3
In a letter dated December 15, 1976, 4 petitioners' counsel
informed private respondent Trans World Airlines (TWA) of the
misshipment and eventual delay in the delivery of the cargo
containing the remains of the late Crispin Saludo, and of the
discourtesy of its employees to petitioners Maria Salvacion Saludo
and Saturnino Saludo. In a separate letter on June 10, 1977
addressed to co-respondent Philippine Airlines (PAL), 5 petitioners
stated that they were holding PAL liable for said delay in delivery
and would commence judicial action should no favorable
explanation be given.
Both private respondents denied liability. Thus, a damage
suit 6 was filed by petitioners before the then Court of First
Instance, Branch III, Leyte, praying for the award of actual damages
of P50,000.00, moral damages of P1,000,000.00, exemplary
damages, attorney's fees and costs of suit.
As earlier stated, the court below absolved the two respondent
airlines companies of liability. The Court of Appeals affirmed the
decision of the lower court in toto, and in a subsequent
resolution, 7 denied herein petitioners' motion for reconsideration
for lack of merit.
In predictable disagreement and dissatisfaction with the
conclusions reached by respondent appellate court, petitioners now
urge this Court to review the appealed decision and to resolve
whether or not (1) the delay in the delivery of the casketed remains
of petitioners' mother was due to the fault of respondent airline
companies, (2) the one-day delay in the delivery of the same
constitutes contractual breach as would entitle petitioners to
damages, (3) damages are recoverable by petitioners for the
humiliating, arrogant and indifferent acts of the employees of TWA
and PAL, and (4) private respondents should be held liable for

actual, moral and exemplary damages, aside from attorney's fees

and litigation expenses. 8
At the outset and in view of the spirited exchanges of the parties on
this aspect, it is to be stressed that only questions of law may be
raised in a petition filed in this Court to review on certiorari the
decision of the Court of Appeals. 9 This being so, the factual
findings of the Court of Appeals are final and conclusive and cannot
be reviewed by the Supreme Court. The rule, however, admits of
established exceptions, to wit: (a) where there is grave abuse of
discretion; (b) when the finding is grounded entirely on
speculations, surmises or conjectures;(c) when the inference made
is manifestly-mistaken, absurd or impossible; (d) when the
judgment of the Court of Appeals was based on a misapprehension
of facts; (e) when the factual findings are conflicting; (f) when the
Court of Appeals, in making its findings, went beyond the issues of
the case and the same are contrary to the admissions of both
appellant and appellee; 10 (g) when the Court of Appeals
manifestly overlooked certain relevant facts not disputed by the
parties and which, if properly considered, would justify a different
conclusion; 11 and (h) where the findings of fact of the Court of
Appeals are contrary to those of the trial court, or are mere
conclusions without citation of specific evidence, or where the facts
of set forth by the petitioner are not disputed by the respondent, or
where the findings of fact of the Court of Appeals are premised on
the absence of evidence and are contradicted by the evidence on
record. 12
To distinguish, a question of law is one which involves a doubt or
controversy on what the law is on a certain state of facts; and, a
question of fact, contrarily, is one in which there is a doubt or
difference as to the truth or falsehood of the alleged facts. 13 One
test, it has been held, is whether the appellate court can determine
the issue raised without reviewing or evaluating the evidence, in
which case it is a question of law, otherwise it will be a question of
fact. 14
Respondent airline companies object to the present recourse of
petitioners on the ground that this petition raises only factual
questions. 15 Petitioners maintain otherwise or, alternatively, they

are of the position that, assuming that the petition raises factual
questions, the same are within the recognized exceptions to the
general rule as would render the petition cognizable and worthy of
review by the Court. 16
Since it is precisely the soundness of the inferences or conclusions
that may be drawn from the factual issues which are here being
assayed, we find that the issues raised in the instant petition
indeed warrant a second look if this litigation is to come to a
reasonable denouement. A discussion seriatim of said issues will
further reveal that the sequence of the events involved is in effect
disputed. Likewise to be settled is whether or not the conclusions of
the Court of Appeals subject of this review indeed find evidentiary
and legal support.
I. Petitioners fault respondent court for "not finding that private
respondents failed to exercise extraordinary diligence required by
law which resulted in the switching and/or misdelivery of the
remains of Crispina Saludo to Mexico causing gross delay in its
shipment to the Philippines, and consequently, damages to
petitioners." 17
Petitioner allege that private respondents received the casketed
remains of petitioners' mother on October 26, 1976, as evidenced
by the issuance of PAL Air Waybill No. 079-01180454 18 by Air Care
International as carrier's agent; and from said date, private
respondents were charged with the responsibility to exercise
extraordinary diligence so much so that for the alleged switching of
the caskets on October 27, 1976, or one day after private
respondents received the cargo, the latter must necessarily be
liable.
To support their assertion, petitioners rely on the jurisprudential
dictum, both under American and Philippine law, that "(t)he
issuance of a bill of lading carries the presumption that the goods
were delivered to the carrier issuing the bill, for immediate
shipment, and it is nowhere questioned that a bill of lading is prima
facie evidence of the receipt of the goods by the carrier. . . . In the
absence of convincing testimony establishing mistake, recitals in

the bill of lading showing that the carrier received the goods for
shipment on a specified date control (13 C.J.S. 235)."19

essence a receipt alone, is not conclusive, but may be explained,

varied or contradicted by parol or other evidence. 24

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

While we agree with petitioners' statement that "an airway bill

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

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

For this reason, we must perforce allow explanation by private

respondents why, despite the issuance of the airway bill and the
date thereof, they deny having received the remains of Crispina
Saludo on October 26, 1976 as alleged by petitioners.
The findings of the trial court, as favorably adopted by the Court of
Appeals and which we have earner quoted, provide us with the
explanation that sufficiently over comes the presumption relied on
by petitioners in insisting that the remains of their mother were
delivered to and received by private respondents on October 26,
1976. Thus
. . . Philippine Vice Consul in Chicago, Illinois,
Bienvenido M. Llaneta, at 3:00 p.m. on October 26,
1976 at the Pomierski & Son Funeral Home, sealed
the shipping case containing a hermetically sealed
casket that is airtight and waterproof wherein was
contained the remains of Crispina Saludo Galdo (sic)
(Exh. B). On the same date October 26, 1976,
Pomierski brought the remains to C.M.A.S.
(Continental Mortuary Air Services) at the airport
(Chicago) which made the necessary arrangements

such as flights, transfers, etc; C.M.A.S. is a national

service used by undertakers throughout the nation
(U.S.A.), they furnish the air pouch which the casket
is enclosed in, and they see that the remains are
taken to the proper air freight terminal (Exh. G-TWA).
C.M.A.S. booked the shipment with PAL thru the
carrier's agent Air Care International, with Pomierski
F.H. as the shipper and Mario (Maria) Saludo as the
consignee. PAL Airway Bill No. 079- 01180454
Ordinary was issued wherein the requested routing
was from Chicago to San Francisco on board TWA
Flight-131 of October 27;1976, and from San
Francisco to Manila on board PAL Flight No. 107 of
the same date, and from Manila to Cebu on board
PAL Flight 149 of October 29, 1976 (See Exh. E, also
Exh. 1-PAL). 26(Emphasis ours.)
Moreover, we are persuaded to believe private respondent PAL's
account as to what transpired October 26, 1976:
. . . Pursuant thereto, on 26 October 1976, CMAS
acting upon the instruction of Pomierski, F.H., the
shipper requested booking of the casketed remains
of Mrs. Cristina (sic) Saludo on board PAL's San
Francisco-Manila Flight No. PR 107 on October 27,
1976.
2. To signify acceptance and confirmation of said
booking, PAL issued to said Pomierski F.H., PAL
Airway Bill No. 079-01180454 dated October 27,
1976 (sic, "10/26/76"). PAL confirmed the booking
and transporting of the shipment on board of its
Flight PR 107 on October 27, 1976 on the basis of the
representation of the shipper and/or CMAS that the
said cargo would arrive in San Francisco from
Chicago on board United Airlines Flight US 121 on 27
October 1976. 27
In other words, on October 26, 1976 the cargo containing the
casketed remains of Crispina Saludo was booked for PAL Flight

Number PR-107 leaving San Francisco for Manila on October 27,

1976, PAL Airway Bill No. 079-01180454 was issued, not as
evidence of receipt of delivery of the cargo on October 26, 1976,
but merely as a confirmation of the booking thus made for the San
Francisco-Manila flight scheduled on October 27, 1976. Actually, it
was not until October 28, 1976 that PAL received physical delivery
of the body at San Francisco, as duly evidenced by the Interline
Freight Transfer Manifest of the American Airline Freight System and
signed for by Virgilio Rosales at 1945H, or 7:45 P.M. on said
date. 28
Explicit is the rule under Article 1736 of the Civil Code that the
extraordinary responsibility of the common carrier begins from the
time the goods are delivered to the carrier. This responsibility
remains in full force and effect even when they are temporarily
unloaded or stored in transit, unless the shipper or owner exercises
the right of stoppage in transitu, 29 and terminates only after the
lapse of a reasonable time for the acceptance, of the goods by the
consignee or such other person entitled to receive them. 30 And,
there is delivery to the carrier when the goods are ready for and
have been placed in the exclusive possession, custody and control
of the carrier for the purpose of their immediate transportation and
the carrier has accepted them. 31 Where such a delivery has thus
been accepted by the carrier, the liability of the common carrier
commences eo instanti. 32
Hence, while we agree with petitioners that the extraordinary
diligence statutorily required to be observed by the carrier
instantaneously commences upon delivery of the goods thereto, for
such duty to commence there must in fact have been delivery of
the cargo subject of the contract of carriage. Only when such fact
of delivery has been unequivocally established can the liability for
loss, destruction or deterioration of goods in the custody of the
carrier, absent the excepting causes under Article 1734, attach and
the presumption of fault of the carrier under Article 1735 be
invoked.
As already demonstrated, the facts in the case at bar belie the
averment that there was delivery of the cargo to the carrier on
October 26, 1976. Rather, as earlier explained, the body intended

to be shipped as agreed upon was really placed in the possession

and control of PAL on October 28, 1976 and it was from that date
that private respondents became responsible for the agreed cargo
under their undertakings in PAL Airway Bill No. 079-01180454.
Consequently, for the switching of caskets prior thereto which was
not caused by them, and subsequent events caused thereby,
private respondents cannot be held liable.
Petitioners, proceeding on the premise that there was delivery of
the cargo to private respondents on October 26,1976 and that the
latter's extraordinary responsibility had by then become operative,
insist on foisting the blame on private respondents for the
switching of the two caskets which occurred on October 27, 1976. It
is argued that since there is no clear evidence establishing the fault
Continental Mortuary Air Services (CMAS) for the mix-up, private
respondents are presumably negligent pursuant to Article 1735 of
the Civil Code and, for failure to rebut such presumption, they must
necessarily be held liable; or, assuming that CMAS was at fault, the
same does not absolve private respondents of liability because
whoever brought the cargo to the airport or loaded it on the plane
did so as agent of private respondents.
This contention is without merit. As pithily explained by the Court of
Appeals:
The airway bill expressly provides that "Carrier
certifies goods described below were received for
carriage", and said cargo was "casketed human
remains of Crispina Saludo," with "Maria Saludo as
Consignee; Pomierski F.H. as Shipper; Air Care
International as carrier's agent." On the face of the
said airway bill, the specific flight numbers, specific
routes of shipment and dates of departure and arrival
were typewritten, to wit: Chicago TWA Flight 131/27
to San Francisco and from San Francisco by PAL 107
on, October 27, 1976 to Philippines and to Cebu via
PAL Flight 149 on October 29, 1976. The airway bill
also contains the following typewritten words, as
follows: all documents have been examined (sic).

Human remains of Crispina Saludo. Please return

back (sic) first available flight to SFO.
But, as it turned out and was discovered later the
casketed human remains which was issued PAL
Airway Bill #079-1180454 was not the remains of
Crispina Saludo, the casket containing her remains
having been shipped to Mexico City.
However, it should be noted that, Pomierski F.H., the
shipper of Mrs. Saludo's remains, hired Continental
Mortuary Services (hereafter referred to as C.M.A.S.),
which is engaged in the business of transporting and
forwarding human remains. Thus, C.M.A.S. made all
the necessary arrangements such as flights,
transfers, etc. for shipment of the remains of
Crispina Saludo.
The remains were taken on October
26th, 1976, to C.M.A.S. at the airport.
These people made all the necessary
arrangements,
such
as
flights,
transfers, etc. This is a national service
used by undertakers throughout the
nation. They furnished the air pouch
which the casket is enclosed in, and
they see that the remains are taken to
the proper air frieght terminal. I was
very surprised when Miss Saludo called
me to say that the remains were not at
the west coast terminal. I immediately
called C.M.A.S. They called me back in
a matter of ten minutes to inform me
that the remains were on a plane to
Mexico City. The man said that there
were two bodies at the terminal, and
somehow they were switched. . . .
(Exb. 6 "TWA", which is the memo or
incident report enclosed in the

stationery of Walter Pomierski & Sons

Ltd.)

7:45 P.M., per American Airlines Interline Freight Transfer Manifest

No. AA204312. 36

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.

Witness the deposition of TWA's ramp serviceman, Michael Giosso,

on this matter:

Thus, under said circumstances, no fault and/or

negligence can be attributed to PAL (even if Air Care
International should be considered as an agent of
PAL) and/or TWA, the entire fault or negligence being
exclusively with C.M.A.S. 33 (Emphasis supplied.)
It can correctly and logically be concluded, therefore, that the
switching occurred or, more accurately, was discovered on October
27, 1976; and based on the above findings of the Court of appeals,
it happened while the cargo was still with CMAS, well before the
same was place in the custody of private respondents.
Thus, while the Air Cargo Transfer Manifest of TWA of October 27,
1976 34 was signed by Garry Marcial of PAL at 1400H, or 2:00 P.M.,
on the same date, thereby indicating acknowledgment by PAL of
the transfer to them by TWA of what was in truth the erroneous
cargo, said misshipped cargo was in fact withdrawn by CMAS from
PAL as shown by the notation on another copy of said
manifest 35 stating "Received by CMAS Due to switch in Chicago
10/27-1805H," the authenticity of which was never challenged. This
shows that said misshipped cargo was in fact withdrawn by CMAS
from PAL and the correct shipment containing the body of Crispina
Saludo was received by PAL only on October 28, 1976, at 1945H, or

ATTY. JUAN COLLAS, JR.:

On that date, do (sic) you have
occasion to handle or deal with the
transfer of cargo from TWA Flight No.
603 to PAL San Francisco?
MICHAEL GIOSSO:
Yes, I did.
ATTY. JUAN COLLAS, JR.:
What was your participation with the
transfer of the cargo?
MICHAEL GIOSSO:
I manifested the freight on a transfer
manifest and physically moved it to
PAL and concluded the transfer by
signing it off.
ATTY. JUAN COLLAS, JR.:
You brought it there yourself?
MICHAEL GIOSSO:
Yes sir.
ATTY. JUAN COLIAS, JR.:

Do you have anything to show that PAL

received the cargo from TWA on
October 27, 1976?

The deposition of Alberto A. Lim, PAL's cargo supervisor at San

Francisco, as deponent-witness for PAL, makes this further
clarification:

MICHAEL GIOSSO:

ATTY. CESAR P. MANALAYSAY:

Yes, I do.

You mentioned Airway Bill, Mr. Lim. I

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

(Witness presenting a document)

ATTY. JUAN COLLAS, JR.:
For purposes of clarity, Exhibit I is
designated as Exhibit I-TWA.

xxx xxx xxx

In what circumstances
encounter Exhibit I-PAL?

xxx xxx xxx

did

you

ATTY. JUAN COLLAS, JR.:

ALBERTO A. LIM:
This Exhibit I-TWA, could you tell what
it is, what it shows?

If I recall correctly, I was queried by

Manila, our Manila office with regard to
a certain complaint that a consignee
filed that this shipment did not arrive
on the day that the consignee expects
the shipment to arrive.

MICHAEL GIOSSO:
It shows transfer of manifest on 10-2776 to PAL at 1400 and verified with two
signatures as it completed the transfer.

ATTY CESAR P. MANALAYSAY:

ATTY. JUAN COLLAS, JR.:

Okay. Now, upon receipt of that query

from your Manila office, did you
conduct any investigation to pinpoint
the possible causes of mishandling?

Very good,. Who was the PAL employee

who received the cargo?
MICHAEL GIOSSO:

ALBERTO A. LIM:

The name is Garry Marcial." 37

Yes.
xxx xxx xxx

ATTY. CESAR P. MANALAYSAY:

What
is
the
investigation?

result

If I recall correctly, approximately 7:45

of October 28, 1976.
of

your
ATTY. CESAR P. MANALAYSAY:

ALBERTO A. LIM:

Do you have any proof with you to

back the statement?

In the course of my investigation, I

found that we received the body on
October 28, 1976, from American
Airlines.

ALBERTO A. LIM:
Yes. We have on our records a Transfer
Manifest
from
American
Airlines
Number 204312 showing that we
received a human remains shipment
belong to Mrs. Cristina (sic) Saludo or
the human remains of Mrs. Cristina
(sic) Saludo.

ATTY. CESAR P. MANALAYSAY:

What body are you referring to?
xxx xxx xxx
ALBERTO A. LIM:

ATTY. CESAR P. MAIALAYSAY:

The remains of Mrs. Cristina (sic)

Saludo.

At this juncture, may I request that the

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

ATTY. CESAR P. MANALAYSAY:

Is that the same body mentioned in
this Airway Bill?

xxx xxx xxx

What time did you receive said body

on October 28, 1976?

Mr. Lim, yesterday your co-defendant

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

ALBERTO A. LIM:

ATTY. ALBERTO C. MENDOZA:

ALBERTO A. LIM:
Yes.
ATTY. CESAR P. MANALAYSAY:

That is a vague question. I would

rather request that counsel propound
specific questions rather than asking
for comments on Exhibit I-TWA.

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

ATTY. CESAR P. MANALAYSAY:

In that case, I will reform my question.
Could you tell us whether TWA in fact
delivered to you the human remains as
indicated in that Transfer Manifest?
ALBERTO A. LIM:
Yes, they did.
ATTY. CESAR P. MANALAYSAY:
I noticed that the Transfer Manifest of
TWA marked as Exhibit I-TWA bears the
same numbers or the same entries as
the Airway Bill marked as Exhibit I-A
PAL tending to show that this is the
human remains of Mrs Cristina (sic)
Saludo. Could you tell us whether this
is true?
ALBERTO A. LIM:
It is true that we received human
remains shipment from TWA as
indicated on this Transfer Manifest. But
in the course of investigation, it was
found out that the human remains
transferred to us is not the remains of
Mrs. Cristina (sic) Saludo this is the
reason why we did not board it on our
flight. 38

We upbold the favorable consideration by the Court of Appeals of

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

The foregoing points at C.M.A.S., not defendant TWA

much less defendant PAL, as the ONE responsible for
the switching or mix-up of the two bodies at the
Chicago Airport terminal, and started a chain
reaction of the misshipment of the body of Crispina
Saludo and a one-day delay in the delivery thereof to
its destination. 40
Verily, no amount of inspection by respondent airline companies
could have guarded against the switching that had already taken
place. Or, granting that they could have opened the casket to
inspect its contents, private respondents had no means of
ascertaining whether the body therein contained was indeed that of
Crispina Saludo except, possibly, if the body was that of a male
person and such fact was visually apparent upon opening the
casket. However, to repeat, private respondents had no authority to
unseal and open the same nor did they have any reason or
justification to resort thereto.
It is the right of the carrier to require good faith on the part of those
persons who deliver goods to be carried, or enter into contracts
with it, and inasmuch as the freight may depend on the value of the
article to be carried, the carrier ordinarily has the right to inquire as
to its value. Ordinarily, too, it is the duty of the carrier to make
inquiry as to the general nature of the articles shipped and of their
value before it consents to carry them; and its failure to do so
cannot defeat the shipper's right to recovery of the full value of the
package if lost, in the absence of showing of fraud or deceit on the
part of the shipper. In the absence of more definite information, the
carrier has a the right to accept shipper's marks as to the contents
of the package offered for transportation and is not bound to
inquire particularly about them in order to take advantage of a false
classification and where a shipper expressly represents the
contents of a package to be of a designated character, it is not the
duty of the carrier to ask for a repetition of the statement nor
disbelieve it and open the box and see for itself. 41 However,
where a common carrier has reasonable ground to suspect that the
offered goods are of a dangerous or illegal character, the carrier
has the right to know the character of such goods and to insist on

an inspection, if reasonable and practical under the circumstances,

as a condition of receiving and transporting such goods. 42
It can safely be said then that a common carrier is entitled to fair
representation of the nature and value of the goods to be carried,
with the concomitant right to rely thereon, and further noting at
this juncture that a carrier has no obligation to inquire into the
correctness or sufficiency of such information. 43 The consequent
duty to conduct an inspection thereof arises in the event that there
should be reason to doubt the veracity of such representations.
Therefore, to be subjected to unusual search, other than the
routinary inspection procedure customarily undertaken, there must
exist proof that would justify cause for apprehension that the
baggage is dangerous as to warrant exhaustive inspection, or even
refusal to accept carriage of the same; and it is the failure of the
carrier to act accordingly in the face of such proof that constitutes
the basis of the common carrier's liability. 44
In the case at bar, private respondents had no reason whatsoever
to doubt the truth of the shipper's representations. The airway bill
expressly providing that "carrier certifies goods received below
were received for carriage," and that the cargo contained "casketed
human remains of Crispina Saludo," was issued on the basis of such
representations. The reliance thereon by private respondents was
reasonable and, for so doing, they cannot be said to have acted
negligently. Likewise, no evidence was adduced to suggest even an
iota of suspicion that the cargo presented for transportation was
anything other than what it was declared to be, as would require
more than routine inspection or call for the carrier to insist that the
same be opened for scrutiny of its contents per declaration.
Neither can private respondents be held accountable on the basis
of petitioners' preposterous proposition that whoever brought the
cargo to the airport or loaded it on the airplane did so as agent of
private respondents, so that even if CMAS whose services were
engaged for the transit arrangements for the remains was indeed
at fault, the liability therefor would supposedly still be attributable
to private respondents.

While we agree that the actual participation of CMAS has been

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

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

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

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

Undeniably, petitioners' grief over the death of their mother was

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

At this point, it can be categorically stated that, as culled from the

findings of both the trial court and appellate courts, the entire chain
of events which culminated in the present controversy was not due
to the fault or negligence of private respondents. Rather, the facts
of the case would point to CMAS as the culprit. Equally telling of the
more likely possibility of CMAS' liability is petitioners' letter to and
demanding an explanation from CMAS regarding the statement of
private respondents laying the blame on CMAS for the incident,
portions of which, reading as follows:
. . . we were informed that the unfortunate a mix-up
occurred due to your negligence. . . .
Likewise, the two airlines pinpoint the responsibility
upon your agents. Evidence were presented to prove
that allegation.
On the face of this overwhelming evidence we could
and should have filed a case against you. . . . 47

Neither are we prepared to delve into, much less definitively rule

on, the possible liability of CMAS as the evaluation and adjudication
of the same is not what is presently at issue here and is best
deferred to another time and addressed to another forum.
II. Petitioners further fault the Court of Appeals for ruling that there
was no contractual breach on the part of private respondents as
would entitle petitioners to damages.
Petitioners hold that respondent TWA, by agreeing to transport the
remains of petitioners' mother on its Flight 131 from Chicago to San
Francisco on October 27, 1976, made itself a party to the contract
of carriage and, therefore, was bound by the terms of the issued
airway bill. When TWA undertook to ship the remains on its Flight
603, ten hours earlier than scheduled, it supposedly violated the
express agreement embodied in the airway bill. It was allegedly this
breach of obligation which compounded, if not directly caused, the
switching of the caskets.
In addition, petitioners maintain that since there is no evidence as
to who placed the body on board Flight 603, or that CMAS actually
put the cargo on that flight, or that the two caskets at the Chicago
airport were to be transported by the same airline, or that they

came from the same funeral home, or that both caskets were
received by CMAS, then the employees or agents of TWA
presumably caused the mix-up by loading the wrong casket on the
plane. For said error, they contend, TWA must necessarily be
presumed negligent and this presumption of negligence stands
undisturbed unless rebutting evidence is presented to show that
the switching or misdelivery was due to circumstances that would
exempt the carrier from liability.
Private respondent TWA professes otherwise. Having duly delivered
or transferred the cargo to its co-respondent PAL on October 27,
1976 at 2:00 P.M., as supported by the TWA Transfer Manifest, TWA
faithfully complied with its obligation under the airway bill. Said
faithful compliance was not affected by the fact that the remains
were shipped on an earlier flight as there was no fixed time for
completion of carriage stipulated on. Moreover, the carrier did not
undertake to carry the cargo aboard any specified aircraft, in view
of the condition on the back of the airway bill which provides:
CONDITIONS OF CONTRACT
xxx xxx xxx
It is agreed that no time is fixed for the completion of
carriage hereunder and that Carrier may without
notice substitute alternate carriers or aircraft. Carrier
assumes no obligation to carry the goods by any
specified aircraft or over any particular route or
routes or to make connection at any point according
to any particular schedule, and Carrier is hereby
authorized to select, or deviate from the route or
routes of shipment, notwithstanding that the same
may be stated on the face hereof. The shipper
guarantees payment of all charges and advances. 48
Hence, when respondent TWA shipped the body on earlier flight
and on a different aircraft, it was acting well within its rights. We
find this argument tenable.

The contention that there was contractual breach on the part of

private respondents is founded on the postulation that there was
ambiguity in the terms of the airway bill, hence petitioners'
insistence on the application of the rules on interpretation of
contracts and documents. We find no such ambiguity. The terms
are clear enough as to preclude the necessity to probe beyond the
apparent intendment of the contractual provisions.
The hornbook rule on interpretation of contracts consecrates the
primacy of the intention of the parties, the same having the force of
law between them. When the terms of the agreement are clear and
explicit, that they do not justify an attempt to read into any alleged
intention of the parties, the terms are to be understood literally just
as they appear on the face of the contract. 49 The various
stipulations of a contract shall be interpreted together 50 and such
a construction is to be adopted as will give effect to all provisions
thereof. 51 A contract cannot be construed by parts, but its clauses
should be interpreted in relation to one another. The whole contract
must be interpreted or read together in order to arrive at its true
meaning. Certain stipulations cannot be segregated and then made
to control; neither do particular words or phrases necessarily
determine the character of a contract. The legal effect of the
contract is not to be determined alone by any particular provision
disconnected from all others, but in the ruling intention of the
parties as gathered from all the language they have used and from
their contemporaneous and subsequent acts. 52
Turning to the terms of the contract at hand, as presented by PAL
Air Waybill No. 079-01180454, respondent court approvingly
quoted the trial court's disquisition on the aforequoted condition
appearing on the reverse side of the airway bill and its disposition
of this particular assigned error:
The foregoing stipulation fully answers plaintiffs'
objections to the one-day delay and the shipping of
the remains in TWA Flight 603 instead of TWA Flight
131. Under the stipulation, parties agreed that no
time was fixed to complete the contract of carriage
and that the carrier may, without notice, substitute
alternate carriers or aircraft. The carrier did not

assume the obligation to carry the shipment on any

specified aircraft.
xxx xxx xxx
Furthermore, contrary to the claim of plaintiffsappellants, the conditions of the Air Waybill are big
enough to be read and noticed. Also, the mere fact
that the cargo in question was shipped in TWA Flight
603, a flight earlier on the same day than TWA Flight
131, did not in any way cause or add to the one-day
delay complained of and/or the switching or mix-up
of the bodies. 53
Indubitably, that private respondent can use substitute aircraft
even without notice and without the assumption of any obligation
whatsoever to carry the goods on any specified aircraft is clearly
sanctioned by the contract of carriage as specifically provided for
under the conditions thereof.
Petitioners' invocation of the interpretative rule in the Rules of
Court that written words control printed words in documents, 54 to
bolster their assertion that the typewritten provisions regarding the
routing and flight schedule prevail over the printed conditions, is
tenuous. Said rule may be considered only when there is
inconsistency between the written and printed words of the
contract.
As previously stated, we find no ambiguity in the contract subject
of this case that would call for the application of said rule. In any
event, the contract has provided for such a situation by explicitly
stating that the above condition remains effective "notwithstanding
that the same (fixed time for completion of carriage, specified
aircraft, or any particular route or schedule) may be stated on the
face hereof." While petitioners hinge private respondents'
culpability on the fact that the carrier "certifies goods described
below were received for carriage," they may have overlooked that
the statement on the face of the airway bill properly and
completely reads

Carrier certifies goods described below were received

for carriage subject to the Conditions on the reverse
hereof the goods then being in apparent good order
and condition except as noted hereon.55 (Emphasis
ours.)
Private respondents further aptly observe that the carrier's
certification regarding receipt of the goods for carriage "was of a
smaller print than the condition of the Air Waybill, including
Condition No. 5 and thus if plaintiffs-appellants had recognized
the former, then with more reason they were aware of the latter. 56
In the same vein, it would also be incorrect to accede to the
suggestion of petitioners that the typewritten specifications of the
flight, routes and dates of departures and arrivals on the face of the
airway bill constitute a special contract which modifies the printed
conditions at the back thereof. We reiterate that typewritten
provisions of the contract are to be read and understood subject to
and in view of the printed conditions, fully reconciling and giving
effect to the manifest intention of the parties to the agreement.
The oft-repeated rule regarding a carrier's liability for delay is that
in the absence of a special contract, a carrier is not an insurer
against delay in transportation of goods. When a common carrier
undertakes to convey goods, the law implies a contract that they
shall be delivered at destination within a reasonable time, in the
absence, of any agreement as to the time of delivery. 57 But where
a carrier has made an express contract to transport and deliver
property within a specified time, it is bound to fulfill its contract and
is liable for any delay, no matter from what cause it may have
arisen. 58 This result logically follows from the well-settled rule that
where the law creates a duty or charge, and the party is disabled
from performing it without any default in himself, and has no
remedy over, then the law will excuse him, but where the party by
his own contract creates a duty or charge upon himself, he is bound
to make it good notwithstanding any accident or delay by
inevitable necessity because he might have provided against it by
contract. Whether or not there has been such an undertaking on
the part of the carrier to be determined from the circumstances

surrounding the case and by application of the ordinary rules for

the interpretation of contracts. 59

the carrier duties and/or obligations which it may not have been
ready or willing to assume had it been timely, advised thereof.

Echoing the findings of the trial court, the respondent court

correctly declared that

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.

In a similar case of delayed delivery of air cargo

under a very similar stipulation contained in the
airway bill which reads: "The carrier does not
obligate itself to carry the goods by any specified
aircraft or on a specified time. Said carrier being
hereby authorized to deviate from the route of the
shipment without any liability therefor", our Supreme
Court ruled that common carriers are not obligated
by law to carry and to deliver merchandise, and
persons are not vested with the right to prompt
delivery, unless such common carriers previously
assume the obligation. Said rights and obligations
are created by a specific contract entered into by the
parties (Mendoza vs. PAL, 90 Phil. 836).

And this special contract for prompt delivery should

call the attention of the carrier to the circumstances
surrounding the case and the approximate amount of
damages to be suffered in case of delay (See
Mendoza vs. PAL, supra). There was no such contract
entered into in the instant case.60

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

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

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

There is no showing by plaintiffs that such a special

or specific contract had been entered into between
them and the defendant airline companies.

opportunity to bargain on equal footing. 62However, Ong Yiu vs.

Court of Appeals, et al 63 instructs us that contracts of adhesion
are not entirely prohibited. The one who adheres to the contract is
in reality free to reject it entirely; if he adheres, be gives his
consent. Accordingly, petitioners, far from being the weaker party
in this situation, duly signified their presumed assent to all terms of
the contract through their acceptance of the airway bill and are
consequently bound thereby. It cannot be gainsaid that petitioners'
were not without several choices as to carriers in Chicago with its
numerous airways and airliner servicing the same.
We wish to allay petitioners' apprehension that Condition No. 5 of
the airway bill is productive of mischief as it would validate delay in
delivery, sanction violations of contractual obligations with
impunity or put a premium on breaches of contract.
Just because we have said that condition No. 5 of the airway bill is
binding upon the parties to and fully operative in this transaction, it
does not mean, and let this serve as fair warning to respondent
carriers, that they can at all times whimsically seek refuge from
liability in the exculpatory sanctuary of said Condition No. 5 or
arbitrarily vary routes, flights and schedules to the prejudice of
their customers. This condition only serves to insulate the carrier
from liability in those instances when changes in routes, flights and
schedules are clearly justified by the peculiar circumstances of a
particular case, or by general transportation practices, customs and
usages, or by contingencies or emergencies in aviation such as
weather turbulence, mechanical failure, requirements of national
security and the like. And even as it is conceded that specific
routing and other navigational arrangements for a trip, flight or
voyage, or variations therein, generally lie within the discretion of
the carrier in the absence of specific routing instructions or
directions by the shipper, it is plainly incumbent upon the carrier to
exercise its rights with due deference to the rights, interests and
convenience of its customers.
A common carrier undertaking to transport property has the
implicit duty to carry and deliver it within reasonable time, absent
any particular stipulation regarding time of delivery, and to guard
against delay. In case of any unreasonable delay, the carrier shall

be liable for damages immediately and proximately resulting from

such neglect of duty. 64 As found by the trial court, the delay in the
delivery of the remains of Crispina Saludo, undeniable and
regrettable as it was, cannot be attributed to the fault, negligence
or malice of private respondents, 65 a conclusion concurred in by
respondent court and which we are not inclined to disturb.
We are further convinced that when TWA opted to ship the remains
of Crispina Saludo on an earlier flight, it did so in the exercise of
sound discretion and with reasonable prudence, as shown by the
explanation of its counsel in his letter of February 19, 1977 in
response to petitioners' demand letter:
Investigation of TWA's handling of this matter reveals
that although the shipment was scheduled on TWA
Flight 131 of October 27, 1976, it was actually
boarded on TWA Flight 603 of the same day,
approximately 10 hours earlier, in order to assure
that the shipment would be received in San Francisco
in sufficient time for transfer to PAL. This transfer was
effected in San Francisco at 2:00 P.M. on October 27,
1976. 66
Precisely, private respondent TWA knew of the urgency of the
shipment by reason of this notation on the lower portion of the
airway bill: "All documents have been certified. Human remains of
Cristina (sic) Saludo. Please return bag first available flight to SFO."
Accordingly, TWA took it upon itself to carry the remains of Crispina
Saludo on an earlier flight, which we emphasize it could do under
the terms of the airway bill, to make sure that there would be
enough time for loading said remains on the transfer flight on board
PAL.
III. Petitioners challenge the validity of respondent court's finding
that private respondents are not liable for tort on account of the
humiliating, arrogant and indifferent acts of their officers and
personnel. They posit that since their mother's remains were
transported ten hours earlier than originally scheduled, there was
no reason for private respondents' personnel to disclaim knowledge
of the arrival or whereabouts of the same other than their sheer

arrogance, indifference and extreme insensitivity to the feelings of

petitioners. Moreover, being passengers and not merely consignors
of goods, petitioners had the right to be treated with courtesy,
respect, kindness and due consideration.
In riposte, TWA claims that its employees have always dealt politely
with all clients, customers and the public in general. PAL, on the
other hand, declares that in the performance of its obligation to the
riding public, other customers and clients, it has always acted with
justice, honesty, courtesy and good faith.
Respondent appellate court found merit in and reproduced the trial
court's refutation of this assigned error:
About the only evidence of plaintiffs that may have
reference to the manner with which the personnel of
defendants treated the two plaintiffs at the San Francisco
Airport are the following pertinent portions of Maria Saludo's
testimony:

A Right after we got off the plane.

Q Up to what time did you stay in the airport
to wait until the TWA people could tell you the
whereabouts?
A Sorry, Sir, but the TWA did not tell us
anything. We stayed there until about 9
o'clock. They have not heard anything about
it. They did not say anything.
Q Do you want to convey to the Court that
from 5 up to 9 o'clock in the evening you
yourself went back to the TWA and they could
not tell you where the remains of your mother
were?
A Yes sir.
Q And after nine o'clock, what did you do?

Q When you arrived there, what did you do, if

any?
A I immediately went to the TWA counter and
I inquired about whether my mother was
there or if' they knew anything about it.
Q What was the answer?

A I told my brother my Mom was supposed to

be on the Philippine Airlines flight. "Why
don't" we check with PAL instead to see if she
was there?" We tried to comfort each other. I
told him anyway that was a shortest flight
from Chicago to California. We will be with our
mother on this longer flight. So, we checked
with the PAL.

A They said they do not know. So, we waited.

Q What did you find?
Q About what time was that when you
reached San Francisco from Chicago?
A I think 5 o'clock. Somewhere around that in
the afternoon.
Q You made inquiry it was immediately
thereafter?

A We learned, Yes, my Mom would be on the

flight.
Q Who was that brother?
A Saturnino Saludo.

Q And did you find what was your flight from

San Francisco to the Philippines?

want to live through again. (Inting, t.s.n., Aug.

9, 1983, pp. 14-18).

A I do not know the number. It was the

evening flight of the Philippine Airline(s) from
San Francisco to Manila.

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

Q You took that flight with your mother?

A We were scheduled to, Sir.
Q Now, you could not locate the remains of
your mother in San Francisco could you tell us
what did you feel?
A After we were told that my mother was not
there?
Q After you learned that your mother could
not fly with you from Chicago to California?
A Well, I was very upset. Of course, I wanted
the confirmation that my mother was in the
West Coast. The fliqht was about 5 hours from
Chicago to California. We waited anxiously all
that time on the plane. I wanted to be assured
about my mother's remains. But there was
nothing and we could not get any assurance
from anyone about it.
Q Your feeling when you reached San
Francisco and you could not find out from the
TWA the whereabouts of the remains, what
did you feel?
A Something nobody would be able to
describe unless he experiences it himself. It is
a kind of panic. I think it's a feeling you are
about to go crazy. It is something I do not

We stand by respondent court's findings on this point, but only to

the extent where it holds that the manner in which private
respondent TWA's employees dealt with petitioners was not grossly
humiliating, arrogant or indifferent as would assume the
proportions of malice or bad faith and lay the basis for an award of
the damages claimed. It must however, be pointed out that the
lamentable actuations of respondent TWA's employees leave much
to be desired, particularly so in the face of petitioners' grief over
the death of their mother, exacerbated by the tension and anxiety
wrought by the impasse and confusion over the failure to ascertain
over an appreciable period of time what happened to her remains.
Airline companies are hereby sternly admonished that it is their
duty not only to cursorily instruct but to strictly require their
personnel to be more accommodating towards customers,
passengers and the general public. After all, common carriers such

as airline companies are in the business of rendering public service,

which is the primary reason for their enfranchisement and
recognition in our law. Because the passengers in a contract of
carriage do not contract merely for transportation, they have a
right to be treated with kindness, respect, courtesy and
consideration. 68 A contract to transport passengers is quite
different in kind and degree from any other contractual relation,
and generates a relation attended with public duty. The operation
of a common carrier is a business affected with public interest and
must be directed to serve the comfort and convenience of
passengers. 69 Passengers are human beings with human feelings
and emotions; they should not be treated as mere numbers or
statistics for revenue.
The records reveal that petitioners, particularly Maria and Saturnino
Saludo, agonized for nearly five hours, over the possibility of losing
their mother's mortal remains, unattended to and without any
assurance from the employees of TWA that they were doing
anything about the situation. This is not to say that petitioners were
to be regaled with extra special attention. They were, however,
entitled to the understanding and humane consideration called for
by and commensurate with the extraordinary diligence required of
common carriers, and not the cold insensitivity to their
predicament. It is hard to believe that the airline's counter
personnel were totally helpless about the situation. Common sense
would and should have dictated that they exert a little extra effort
in making a more extensive inquiry, by themselves or through their
superiors, rather than just shrug off the problem with a callous and
uncaring remark that they had no knowledge about it. With all the
modern communications equipment readily available to them,
which could have easily facilitated said inquiry and which are used
as a matter of course by airline companies in their daily operations,
their apathetic stance while not legally reprehensible is morally
deplorable.
Losing a loved one, especially one's, parent, is a painful experience.
Our culture accords the tenderest human feelings toward and in
reverence to the dead. That the remains of the deceased were
subsequently delivered, albeit belatedly, and eventually laid in her
final resting place is of little consolation. The imperviousness

displayed by the airline's personnel, even for just that fraction of

time, was especially condemnable particularly in the hour of
bereavement of the family of Crispina Saludo, intensified by
anguish due to the uncertainty of the whereabouts of their
mother's remains. Hence, it is quite apparent that private
respondents' personnel were remiss in the observance of that
genuine human concern and professional attentiveness required
and expected of them.
The foregoing observations, however, do not appear to be
applicable or imputable to respondent PAL or its employees. No
attribution of discourtesy or indifference has been made against
PAL by petitioners and, in fact, petitioner Maria Saludo testified that
it was to PAL that they repaired after failing to receive proper
attention from TWA. It was from PAL that they received
confirmation that their mother's remains would be on the same
flight to Manila with them.
We find the following substantiation on this particular episode from
the deposition of Alberto A. Lim, PAL's cargo supervisor earlier
adverted to, regarding their investigation of and the action taken
on learning of petitioner's problem:
ATTY. ALBERTO C. MENDOZA:
Yes.
Mr. Lim, what exactly was your procedure adopted in
your so called investigation?
ALBERTO A. LIM:
I called the lead agent on duty at that time and
requested for a copy of airway bill, transfer manifest and
other documents concerning the shipment.
ATTY ALBERTO C. MENDOZA:
Then, what?

ALBERTO A. LIM:
They proceeded to analyze exactly where PAL failed, if
any, in forwarding the human remains of Mrs. Cristina
(sic) Saludo. And I found out that there was not (sic)
delay in shipping the remains of Mrs. Saludo to Manila.
Since we received the body from American Airlines on 28
October at 7:45 and we expedited the shipment so that
it could have been loaded on our flight leaving at 9:00 in
the evening or just barely one hour and 15 minutes prior
to the departure of the aircraft. That is so (sic) being the
case, I reported to Manila these circumstances. 70
IV. Finally, petitioners insist, as a consequence of the delay in the
shipment of their mother's remains allegedly caused by wilful
contractual breach, on their entitlement to actual, moral and
exemplary damages as well as attorney's fees, litigation expenses,
and legal interest.
The uniform decisional tenet in our jurisdiction bolds that moral
damages may be awarded for wilful or fraudulent breach of
contract 71 or when such breach is attended by malice or bad
faith. 72 However, in the absence of strong and positive evidence
of fraud, malice or bad faith, said damages cannot be
awarded. 73 Neither can there be an award of exemplary
damages 74 nor of attorney's fees 75 as an item of damages in the
absence of proof that defendant acted with malice, fraud or bad
faith.
The censurable conduct of TWA's employees cannot, however, be
said to have approximated the dimensions of fraud, malice or bad
faith. It can be said to be more of a lethargic reaction produced and
engrained in some people by the mechanically routine nature of
their work and a racial or societal culture which stultifies what
would have been their accustomed human response to a human
need under a former and different ambience.
Nonetheless, the facts show that petitioners' right to be treated
with due courtesy in accordance with the degree of diligence
required by law to be exercised by every common carrier was

violated by TWA and this entitles them, at least, to nominal

damages from TWA alone. Articles 2221 and 2222 of the Civil Code
make it clear that nominal damages are not intended for
indemnification of loss suffered but for the vindication or
recognition of a right violated of invaded. They are recoverable
where some injury has been done but the amount of which the
evidence fails to show, the assessment of damages being left to the
discretion of the court according to the circumstances of the
case. 76 In the exercise of our discretion, we find an award of
P40,000.00 as nominal damages in favor of, petitioners to be a
reasonable amount under the circumstances of this case.
WHEREFORE, with the modification that an award of P40,000.00 as
and by way of nominal damages is hereby granted in favor of
petitioners to be paid by respondent Trans World Airlines, the
appealed decision is AFFIRMED in all other respects.
SO ORDERED.

ordering the appellant to pay the appellee only the sum of P373.00
as actual damages, with legal interest from May 6, 1960 and the
sum of P150.00 as attorney's fees, eliminating the award of
exemplary damages.
From the decision of the Court of First Instance of Zamboanga City,
appellant appeals to this Court on a question of law, assigning two
errors allegedly committed by the lower court a quo, to wit:
1. The lower court erred in not holding that plaintiff-appellee
was bound by the provisions of the tariff regulations filed by
defendant-appellant with the civil aeronautics board and the
conditions of carriage printed at the back of the plane ticket
stub.
2. The lower court erred in not dismissing this case or
limiting the liability of the defendant-appellant to P100.00.
The facts of this case, as found by the trial court, quoted from the
decision appealed from, are as follows:

G.R. No. L-20099

July 7, 1966
PARMANAND SHEWARAM, plaintiff and appellee, vs. PHILIPPINE
AIR LINES, INC., defendant and appellant.
ZALDIVAR, J.:
Before the municipal court of Zamboanga City, plaintiff-appellee
Parmanand Shewaram instituted an action to recover damages
suffered by him due to the alleged failure of defendant-appellant
Philippines Air Lines, Inc. to observe extraordinary diligence in the
vigilance and carriage of his luggage. After trial the municipal court
of Zamboanga City rendered judgment ordering the appellant to
pay appellee P373.00 as actual damages, P100.00 as exemplary
damages, P150.00 as attorney's fees, and the costs of the action.
Appellant Philippine Air Lines appealed to the Court of First Instance
of Zamboanga City. After hearing the Court of First Instance of
Zamboanga City modified the judgment of the inferior court by

That Parmanand Shewaram, the plaintiff herein, was on

November 23, 1959, a paying passenger with ticket No. 430976, on defendant's aircraft flight No. 976/910 from
Zamboanga City bound for Manila; that defendant is a
common carrier engaged in air line transportation in the
Philippines, offering its services to the public to carry and
transport passengers and cargoes from and to different
points in the Philippines; that on the above-mentioned date
of November 23, 1959, he checked in three (3) pieces of
baggages a suitcase and two (2) other pieces; that the
suitcase was mistagged by defendant's personnel in
Zamboanga City, as I.G.N. (for Iligan) with claim check No.
B-3883, instead of MNL (for Manila). When plaintiff
Parmanand Shewaram arrived in Manila on the date of
November 23, 1959, his suitcase did not arrive with his flight
because it was sent to Iligan. So, he made a claim with
defendant's personnel in Manila airport and another suitcase
similar to his own which was the only baggage left for that
flight, the rest having been claimed and released to the

other passengers of said flight, was given to the plaintiff for

him to take delivery but he did not and refused to take
delivery of the same on the ground that it was not his,
alleging that all his clothes were white and the National
transistor 7 and a Rollflex camera were not found inside the
suitcase, and moreover, it contained a pistol which he did
not have nor placed inside his suitcase; that after inquiries
made by defendant's personnel in Manila from different
airports where the suitcase in question must have been
sent, it was found to have reached Iligan and the station
agent of the PAL in Iligan caused the same to be sent to
Manila for delivery to Mr. Shewaram and which suitcase
belonging to the plaintiff herein arrived in Manila airport on
November 24, 1959; that it was also found out that the
suitcase shown to and given to the plaintiff for delivery
which he refused to take delivery belonged to a certain Del
Rosario who was bound for Iligan in the same flight with Mr.
Shewaram; that when the plaintiff's suitcase arrived in
Manila as stated above on November 24, 1959, he was
informed by Mr. Tomas Blanco, Jr., the acting station agent of
the Manila airport of the arrival of his suitcase but of course
minus his Transistor Radio 7 and the Rollflex Camera; that
Shewaram made demand for these two (2) items or for the
value thereof but the same was not complied with by
defendant.
xxx

xxx

xxx

It is admitted by defendant that there was mistake in

tagging the suitcase of plaintiff as IGN. The tampering of the
suitcase is more apparent when on November 24, 1959,
when the suitcase arrived in Manila, defendant's personnel
could open the same in spite of the fact that plaintiff had it
under key when he delivered the suitcase to defendant's
personnel in Zamboanga City. Moreover, it was established
during the hearing that there was space in the suitcase
where the two items in question could have been placed. It
was also shown that as early as November 24, 1959, when
plaintiff was notified by phone of the arrival of the suitcase,
plaintiff asked that check of the things inside his suitcase be

made and defendant admitted that the two items could not
be found inside the suitcase. There was no evidence on
record sufficient to show that plaintiff's suitcase was never
opened during the time it was placed in defendant's
possession and prior to its recovery by the plaintiff.
However, defendant had presented evidence that it had
authority to open passengers' baggage to verify and find its
ownership or identity. Exhibit "1" of the defendant would
show that the baggage that was offered to plaintiff as his
own was opened and the plaintiff denied ownership of the
contents of the baggage. This proven fact that baggage may
and could be opened without the necessary authorization
and presence of its owner, applied too, to the suitcase of
plaintiff which was mis-sent to Iligan City because of
mistagging. The possibility of what happened in the
baggage of Mr. Del Rosario at the Manila Airport in his
absence could have also happened to plaintiffs suitcase at
Iligan City in the absence of plaintiff. Hence, the Court
believes that these two items were really in plaintiff's
suitcase and defendant should be held liable for the same
by virtue of its contract of carriage.
It is clear from the above-quoted portions of the decision of the trial
court that said court had found that the suitcase of the appellee
was tampered, and the transistor radio and the camera contained
therein were lost, and that the loss of those articles was due to the
negligence of the employees of the appellant. The evidence shows
that the transistor radio cost P197.00 and the camera cost P176.00,
so the total value of the two articles was P373.00.
There is no question that the appellant is a common carrier.1 As
such common carrier the appellant, from the nature of its business
and for reasons of public policy, is bound to observe extraordinary
diligence in the vigilance over the goods and for the safety of the
passengers transported by it according to the circumstances of
each case. 2 It having been shown that the loss of the transistor
radio and the camera of the appellee, costing P373.00, was due to
the negligence of the employees of the appellant, it is clear that
the appellant should be held liable for the payment of said loss.3

It is, however, contended by the appellant that its liability should be

limited to the amount stated in the conditions of carriage printed at
the back of the plane ticket stub which was issued to the appellee,
which conditions are embodied in Domestic Tariff Regulations No. 2
which was filed with the Civil Aeronautics Board. One of those
conditions, which is pertinent to the issue raised by the appellant in
this case provides as follows:
The liability, if any, for loss or damage to checked baggage
or for delay in the delivery thereof is limited to its value and,
unless the passenger declares in advance a higher valuation
and pay an additional charge therefor, the value shall be
conclusively deemed not to exceed P100.00 for each ticket.
The appellant maintains that in view of the failure of the appellee to
declare a higher value for his luggage, and pay the freight on the
basis of said declared value when he checked such luggage at the
Zamboanga City airport, pursuant to the abovequoted condition,
appellee can not demand payment from the appellant of an amount
in excess of P100.00.
The law that may be invoked, in this connection is Article 1750 of
the New Civil Code which provides as follows:
A contract fixing the sum that may be recovered by the
owner or shipper for the loss, destruction, or deterioration of
the goods is valid, if it is reasonable and just under the
circumstances, and has been fairly and freely agreed upon.
In accordance with the above-quoted provision of Article 1750 of
the New Civil Code, the pecuniary liability of a common carrier
may, by contract, be limited to a fixed amount. It is required,
however, that the contract must be "reasonable and just under the
circumstances and has been fairly and freely agreed upon."
The requirements provided in Article 1750 of the New Civil Code
must be complied with before a common carrier can claim a
limitation of its pecuniary liability in case of loss, destruction or
deterioration of the goods it has undertaken to transport. In the
case before us We believe that the requirements of said article

have not been met. It can not be said that the appellee had
actually entered into a contract with the appellant, embodying the
conditions as printed at the back of the ticket stub that was issued
by the appellant to the appellee. The fact that those conditions are
printed at the back of the ticket stub in letters so small that they
are hard to read would not warrant the presumption that the
appellee was aware of those conditions such that he had "fairly and
freely agreed" to those conditions. The trial court has categorically
stated in its decision that the "Defendant admits that passengers
do not sign the ticket, much less did plaintiff herein sign his ticket
when he made the flight on November 23, 1959." We hold,
therefore, that the appellee is not, and can not be, bound by the
conditions of carriage found at the back of the ticket stub issued to
him when he made the flight on appellant's plane on November 23,
1959.
The liability of the appellant in the present case should be
governed by the provisions of Articles 1734 and 1735 of the New
Civil Code, which We quote as follows:
ART. 1734. Common carries are responsible for the loss,
destruction, or deterioration of the goods, unless the same
is due to any of the following causes only:
(1) Flood, storm, earthquake, or other natural disaster or
calamity;
(2) Act of the public enemy in war, whether international or
civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or
in the containers;
(5) Order or act of competent public authority.1wph1.t
ART. 1735. In all cases other than those mentioned in Nos. 1,
2, 3, 4 and 5 of the preceding article, if the goods are lost,
destroyed or deteriorated, common carriers are presumed to

have been at fault or to have acted negligently, unless they

prove that they observed extraordinary diligence as required
in Article 1733.
It having been clearly found by the trial court that the transistor
radio and the camera of the appellee were lost as a result of the
negligence of the appellant as a common carrier, the liability of the
appellant is clear it must pay the appellee the value of those two
articles.
In the case of Ysmael and Co. vs. Barreto, 51 Phil. 90, cited by the
trial court in support of its decision, this Court had laid down the
rule that the carrier can not limit its liability for injury to or loss of
goods shipped where such injury or loss was caused by its own
negligence.
Corpus Juris, volume 10, p. 154, says:
"Par. 194, 6. Reasonableness of Limitations. The validity
of stipulations limiting the carrier's liability is to be
determined by their reasonableness and their conformity to
the sound public policy, in accordance with which the
obligations of the carrier to the public are settled. It cannot
lawfully stipulate for exemption from liability, unless such
exemption is just and reasonable, and unless the contract is
freely and fairly made. No contractual limitation is
reasonable which is subversive of public policy.
"Par. 195. 7. What Limitations of Liability Permissible. a.
Negligence (1) Rule in America (a) In Absence of
Organic or Statutory Provisions Regulating Subject aa.
Majority Rule. In the absence of statute, it is settled by
the weight of authority in the United States, that whatever
limitations against its common-law liability are permissible
to a carrier, it cannot limit its liability for injury to or loss of
goods shipped, where such injury or loss is caused by its
own negligence. This is the common law doctrine and it
makes no difference that there is no statutory prohibition
against contracts of this character.

"Par. 196. bb. Considerations on which Rule Based. The

rule, it is said, rests on considerations of public policy. The
undertaking is to carry the goods, and to relieve the shipper
from all liability for loss or damage arising from negligence
in performing its contract is to ignore the contract itself. The
natural effect of a limitation of liability against negligence is
to induce want of care on the part of the carrier in the
performance of its duty. The shipper and the common carrier
are not on equal terms; the shipper must send his freight by
the common carrier, or not at all; he is therefore entirely at
the mercy of the carrier unless protected by the higher
power of the law against being forced into contracts limiting
the carrier's liability. Such contracts are wanting in the
element of voluntary assent.
"Par.
197.
cc. Application
and
Extent
of
Rule
(aa) Negligence of Servants. The rule prohibiting
limitation of liability for negligence is often stated as a
prohibition of any contract relieving the carrier from loss or
damage caused by its own negligence or misfeasance, or
that of its servants; and it has been specifically decided in
many cases that no contract limitation will relieve the carrier
from responsibility for the negligence, unskillfulness, or
carelessness of its employer." (Cited in Ysmael and Co. vs.
Barreto, 51 Phil. 90, 98, 99).
In view of the foregoing, the decision appealed from is affirmed,
with costs against the appellant.

G.R. No. L-40597 June 29, 1979

AGUSTINO B. ONG YIU, petitioner,
vs.
HONORABLE COURT OF APPEALS and PHILIPPINE AIR LINES,
INC., respondents.
MELENCIO-HERRERA, J.:
In this Petition for Review by Certiorari, petitioner, a practicing
lawyer and businessman, seeks a reversal of the Decision of the
Court of Appeals in CA-G.R. No. 45005-R, which reduced his claim
for damages for breach of contract of transportation.
The facts are as follows:
On August 26, 1967, petitioner was a fare paying passenger of
respondent Philippine Air Lines, Inc. (PAL), on board Flight No. 463R, from Mactan Cebu, bound for Butuan City. He was scheduled to
attend the trial of Civil Case No. 1005 and Spec. Procs. No. 1125 in
the Court of First Instance, Branch II, thereat, set for hearing on
August 28-31, 1967. As a passenger, he checked in one piece of
luggage, a blue "maleta" for which he was issued Claim Check No.
2106-R (Exh. "A"). The plane left Mactan Airport, Cebu, at about
1:00 o'clock P.M., and arrived at Bancasi airport, Butuan City, at
past 2:00 o'clock P.M., of the same day. Upon arrival, petitioner
claimed his luggage but it could not be found. According to
petitioner, it was only after reacting indignantly to the loss that the
matter was attended to by the porter clerk, Maximo Gomez, which,
however, the latter denies, At about 3:00 o'clock P.M., PAL Butuan,
sent a message to PAL, Cebu, inquiring about the missing luggage,
which message was, in turn relayed in full to the Mactan Airport
teletype operator at 3:45 P.M. (Exh. "2") that same afternoon. It
must have been transmitted to Manila immediately, for at 3:59 that
same afternoon, PAL Manila wired PAL Cebu advising that the
luggage had been over carried to Manila aboard Flight No. 156 and

that it would be forwarded to Cebu on Flight No. 345 of the same

day. Instructions were also given that the luggage be immediately
forwarded to Butuan City on the first available flight (Exh. "3"). At
5:00 P.M. of the same afternoon, PAL Cebu sent a message to PAL
Butuan that the luggage would be forwarded on Fright No. 963 the
following day, August 27, 196'(. However, this message was not
received by PAL Butuan as all the personnel had already left since
there were no more incoming flights that afternoon.
In the meantime, petitioner was worried about the missing luggage
because it contained vital documents needed for trial the next day.
At 10:00 o'clock that evening, petitioner wired PAL Cebu
demanding the delivery of his baggage before noon the next day,
otherwise, he would hold PAL liable for damages, and stating that
PAL's gross negligence had caused him undue inconvenience,
worry, anxiety and extreme embarrassment (Exh. "B"). This
telegram was received by the Cebu PAL supervisor but the latter
felt no need to wire petitioner that his luggage had already been
forwarded on the assumption that by the time the message
reached Butuan City, the luggage would have arrived.
Early in the morning of the next day, August 27, 1967, petitioner
went to the Bancasi Airport to inquire about his luggage. He did not
wait, however, for the morning flight which arrived at 10:00 o'clock
that morning. This flight carried the missing luggage. The porter
clerk, Maximo Gomez, paged petitioner, but the latter had already
left. A certain Emilio Dagorro a driver of a "colorum" car, who also
used to drive for petitioner, volunteered to take the luggage to
petitioner. As Maximo Gomez knew Dagorro to be the same driver
used by petitioner whenever the latter was in Butuan City, Gomez
took the luggage and placed it on the counter. Dagorro examined
the lock, pressed it, and it opened. After calling the attention of
Maximo Gomez, the "maleta" was opened, Gomez took a look at its
contents, but did not touch them. Dagorro then delivered the
"maleta" to petitioner, with the information that the lock was open.
Upon inspection, petitioner found that a folder containing certain
exhibits, transcripts and private documents in Civil Case No. 1005
and Sp. Procs. No. 1126 were missing, aside from two gift items for
his parents-in-law. Petitioner refused to accept the luggage.

Dagorro returned it to the porter clerk, Maximo Gomez, who sealed

it and forwarded the same to PAL Cebu.

of papers nor have we been able to pinpoint the

personnel who allegedly pilferred your baggage.

Meanwhile, petitioner asked for postponement of the hearing of

Civil Case No. 1005 due to loss of his documents, which was
granted by the Court (Exhs. "C" and "C-1"). Petitioner returned to
Cebu City on August 28, 1967. In a letter dated August 29, 1967
addressed to PAL, Cebu, petitioner called attention to his telegram
(Exh. "D"), demanded that his luggage be produced intact, and that
he be compensated in the sum of P250,000,00 for actual and moral
damages within five days from receipt of the letter, otherwise, he
would be left with no alternative but to file suit (Exh. "D").

You must realize that no inventory was taken of the

cargo
upon
loading
them
on
any
plane.
Consequently, we have no way of knowing the real
contents of your baggage when same was loaded.
We realized the inconvenience you encountered of
this incident but we trust that you will give us
another opportunity to be of better service to you.
Very truly yours,

On August 31, 1967, Messrs. de Leon, Navarsi, and Agustin, all of

PAL Cebu, went to petitioner's office to deliver the "maleta". In the
presence of Mr. Jose Yap and Atty. Manuel Maranga the contents
were listed and receipted for by petitioner (Exh. "E").
On September 5, 1967, petitioner sent a tracer letter to PAL Cebu
inquiring about the results of the investigation which Messrs. de
Leon, Navarsi, and Agustin had promised to conduct to pinpoint
responsibility for the unauthorized opening of the "maleta" (Exh.
"F").
The following day, September 6, 1967, PAL sent its reply
hereinunder quoted verbatim:
Dear Atty. Ong Yiu:
This is with reference to your September 5, 1967,
letter to Mr. Ricardo G. Paloma, Acting Manager,
Southern Philippines.
First of all, may we apologize for the delay in
informing you of the result of our investigation since
we visited you in your office last August 31, 1967.
Since there are stations other than Cebu which are
involved in your case, we have to communicate and
await replies from them. We regret to inform you that
to date we have not found the supposedly lost folder

PHILIPPINE AIR LINES, INC.

(Sgd) JEREMIAS S. AGUSTIN
Branch Supervisor
Cebu
(Exhibit G, Folder of Exhibits)

On September 13, 1967, petitioner filed a Complaint against PAL for

damages for breach of contract of transportation with the Court of
First Instance of Cebu, Branch V, docketed as Civil Case No. R10188, which PAL traversed. After due trial, the lower Court found
PAL to have acted in bad faith and with malice and declared
petitioner entitled to moral damages in the sum of P80,000.00,
exemplary damages of P30,000.00, attorney's fees of P5,000.00,
and costs.
Both parties appealed to the Court of Appeals petitioner in so far
as he was awarded only the sum of P80,000.00 as moral damages;
and defendant because of the unfavorable judgment rendered
against it.
On August 22, 1974, the Court of Appeals,* finding that PAL was
guilty only of simple negligence, reversed the judgment of the trial
Court granting petitioner moral and exemplary damages, but
ordered PAL to pay plaintiff the sum of P100.00, the baggage

liability assumed by it under the condition of carriage printed at the

back of the ticket.
Hence, this Petition for Review by Certiorari, filed on May 2, 1975,
with petitioner making the following Assignments of Error:
I. THE HONORABLE COURT OF APPEALS ERRED IN
HOLDING RESPONDENT PAL GUILTY ONLY OF SIMPLE
NEGLIGENCE AND NOT BAD FAITH IN THE BREACH OF
ITS
CONTRACT
OF
TRANSPORTATION
WITH
PETITIONER.
II.
THE
HONORABLE
COURT
OF
APPEALS
MISCONSTRUED THE EVIDENCE AND THE LAW WHEN
IT REVERSED THE DECISION OF THE LOWER COURT
AWARDING TO PETITIONER MORAL DAMAGES IN THE
AMOUNT OF P80,000.00, EXEMPLARY DAMAGES OF
P30,000.00,
AND
P5,000.00
REPRESENTING
ATTORNEY'S FEES, AND ORDERED RESPONDENT PAL
TO COMPENSATE PLAINTIFF THE SUM OF P100.00
ONLY, CONTRARY TO THE EXPLICIT PROVISIONS OF
ARTICLES 2220, 2229, 2232 AND 2234 OF THE CIVIL
CODE OF THE PHILIPPINES.
On July 16, 1975, this Court gave due course to the Petition.
There is no dispute that PAL incurred in delay in the delivery of
petitioner's luggage. The question is the correctness of respondent
Court's conclusion that there was no gross negligence on the part
of PAL and that it had not acted fraudulently or in bad faith as to
entitle petitioner to an award of moral and exemplary damages.
From the facts of the case, we agree with respondent Court that
PAL had not acted in bad faith. Bad faith means a breach of a
known duty through some motive of interest or ill will. 2 It was the
duty of PAL to look for petitioner's luggage which had been
miscarried. PAL exerted due diligence in complying with such duty.
As aptly stated by the appellate Court:

We do not find any evidence of bad faith in this. On

the contrary, We find that the defendant had exerted
diligent effort to locate plaintiff's baggage. The trial
court saw evidence of bad faith because PAL sent the
telegraphic message to Mactan only at 3:00 o'clock
that same afternoon, despite plaintiff's indignation
for the non-arrival of his baggage. The message was
sent within less than one hour after plaintiff's
luggage could not be located. Efforts had to be
exerted to locate plaintiff's maleta. Then the Bancasi
airport had to attend to other incoming passengers
and to the outgoing passengers. Certainly, no
evidence of bad faith can be inferred from these
facts. Cebu office immediately wired Manila inquiring
about the missing baggage of the plaintiff. At 3:59
P.M., Manila station agent at the domestic airport
wired Cebu that the baggage was over carried to
Manila. And this message was received in Cebu one
minute thereafter, or at 4:00 P.M. The baggage was
in fact sent back to Cebu City that same afternoon.
His Honor stated that the fact that the message was
sent at 3:59 P.M. from Manila and completely relayed
to Mactan at 4:00 P.M., or within one minute, made
the message appear spurious. This is a forced
reasoning. A radio message of about 50 words can be
completely transmitted in even less than one minute
depending upon atmospheric conditions. Even if the
message was sent from Manila or other distant
places, the message can be received within a
minute. that is a scientific fact which cannot be
questioned. 3
Neither was the failure of PAL Cebu to reply to petitioner's rush
telegram indicative of bad faith, The telegram (Exh. B) was
dispatched by petitioner at around 10:00 P.M. of August 26, 1967.
The PAL supervisor at Mactan Airport was notified of it only in the
morning of the following day. At that time the luggage was already
to be forwarded to Butuan City. There was no bad faith, therefore,
in the assumption made by said supervisor that the plane carrying
the bag would arrive at Butuan earlier than a reply telegram. Had

petitioner waited or caused someone to wait at the Bancasi airport

for the arrival of the morning flight, he would have been able to
retrieve his luggage sooner.
In the absence of a wrongful act or omission or of fraud or bad
faith, petitioner is not entitled to moral damages.
Art. 2217. Moral damages include physical suffering,
mental anguish, fright, serious anxiety, besmirched
reputation, wounded feelings, moral shock, social
humiliation, and similar injury. Though incapable of
pecuniary computation, moral damages may be
recovered if they are the proximate result of the
defendant's wrongful act of omission.
Art. 2220. Willful injury to property may be a legal
ground for awarding moral damages if the court
should find that, under the circumstances, such
damages are justly due. The same rule applies to
breaches of contract where the defendant acted
fraudulently or in bad faith.
Petitioner is neither entitled to exemplary damages. In contracts, as
provided for in Article 2232 of the Civil Code, exemplary damages
can be granted if the defendant acted in a wanton, fraudulent,
reckless, oppressive, or malevolent manner, which has not been
proven in this case.
Petitioner further contends that respondent Court committed grave
error when it limited PAL's carriage liability to the amount of
P100.00 as stipulated at the back of the ticket. In this connection,
respondent Court opined:
As a general proposition, the plaintiff's maleta having
been pilfered while in the custody of the defendant, it
is presumed that the defendant had been negligent.
The liability, however, of PAL for the loss, in
accordance with the stipulation written on the back
of the ticket, Exhibit 12, is limited to P100.00 per
baggage, plaintiff not having declared a greater

value, and not having called the attention of the

defendant on its true value and paid the tariff
therefor. The validity of this stipulation is not
questioned by the plaintiff. They are printed in
reasonably and fairly big letters, and are easily
readable. Moreover, plaintiff had been a frequent
passenger of PAL from Cebu to Butuan City and back,
and he, being a lawyer and businessman, must be
fully aware of these conditions. 4
We agree with the foregoing finding. The pertinent Condition of
Carriage printed at the back of the plane ticket reads:
8. BAGGAGE LIABILITY ... The total liability of the
Carrier for lost or damaged baggage of the
passenger is LIMITED TO P100.00 for each ticket
unless a passenger declares a higher valuation in
excess of P100.00, but not in excess, however, of a
total valuation of P1,000.00 and additional charges
are paid pursuant to Carrier's tariffs.
There is no dispute that petitioner did not declare any higher value
for his luggage, much less did he pay any additional transportation
charge.
But petitioner argues that there is nothing in the evidence to show
that he had actually entered into a contract with PAL limiting the
latter's liability for loss or delay of the baggage of its passengers,
and that Article 1750* of the Civil Code has not been complied with.
While it may be true that petitioner had not signed the plane ticket
(Exh. "12"), he is nevertheless bound by the provisions thereof.
"Such provisions have been held to be a part of the contract of
carriage, and valid and binding upon the passenger regardless of
the latter's lack of knowledge or assent to the regulation". 5 It is
what is known as a contract of "adhesion", in regards which it has
been said that contracts of adhesion wherein one party imposes a
ready made form of contract on the other, as the plane ticket in the
case at bar, are contracts not entirely prohibited. The one who
adheres to the contract is in reality free to reject it entirely; if he

adheres, he gives his consent. 6 And as held in Randolph v.

American Airlines, 103 Ohio App. 172, 144 N.E. 2d 878; Rosenchein
vs. Trans World Airlines, Inc., 349 S.W. 2d 483, "a contract limiting
liability upon an agreed valuation does not offend against the policy
of the law forbidding one from contracting against his own
negligence.

WHEREFORE, for lack of merit, the instant Petition is hereby denied,

and the judgment sought to be reviewed hereby affirmed in toto.
No costs.
SO ORDERED.

Considering, therefore, that petitioner had failed to declare a higher

value for his baggage, he cannot be permitted a recovery in excess
of P100.00.Besides, passengers are advised not to place valuable
items inside their baggage but "to avail of our V-cargo service "
(Exh. "1"). I t is likewise to be noted that there is nothing in the
evidence to show the actual value of the goods allegedly lost by
petitioner.
There is another matter involved, raised as an error by PAL the
fact that on October 24, 1974 or two months after the promulgation
of the Decision of the appellate Court, petitioner's widow filed a
Motion for Substitution claiming that petitioner died on January 6,
1974 and that she only came to know of the adverse Decision on
October 23, 1974 when petitioner's law partner informed her that
he received copy of the Decision on August 28, 1974. Attached to
her Motion was an Affidavit of petitioner's law partner reciting facts
constitutive of excusable negligence. The appellate Court noting
that all pleadings had been signed by petitioner himself allowed the
widow "to take such steps as she or counsel may deem necessary."
She then filed a Motion for Reconsideration over the opposition of
PAL which alleged that the Court of Appeals Decision, promulgated
on August 22, 1974, had already become final and executory since
no appeal had been interposed therefrom within the reglementary
period.
Under the circumstances, considering the demise of petitioner
himself, who acted as his own counsel, it is best that technicality
yields to the interests of substantial justice. Besides, in the 'last
analysis, no serious prejudice has been caused respondent PAL.
In fine, we hold that the conclusions drawn by respondent Court
from the evidence on record are not erroneous.

G.R. No. L-36481-2 October 23, 1982

AMPARO C. SERVANDO, CLARA UY BICO, plaintiffsappellees, vs. PHILIPPINE STEAM NAVIGATION CO., defendantappellant.

ESCOLIN, J.:
This appeal, originally brought to the Court of Appeals, seeks to set
aside the decision of the Court of First Instance of Negros
Occidental in Civil Cases Nos. 7354 and 7428, declaring appellant
Philippine Steam Navigation liable for damages for the loss of the
appellees' cargoes as a result of a fire which gutted the Bureau of
Customs' warehouse in Pulupandan, Negros Occidental.
The Court of Appeals certified the case to Us because only pure
questions of law are raised therein.
The facts culled from the pleadings and the stipulations submitted
by the parties are as follows:
On November 6, 1963, appellees Clara Uy Bico and Amparo
Servando loaded on board the appellant's vessel, FS-176, for
carriage from Manila to Pulupandan, Negros Occidental, the
following cargoes, to wit:
Clara Uy Bico

2:00 in the afternoon of the same day, said warehouse was razed
by a fire of unknown origin, destroying appellees' cargoes. Before
the fire, however, appellee Uy Bico was able to take delivery of 907
cavans of rice 2 Appellees' claims for the value of said goods were
rejected by the appellant.
On the bases of the foregoing facts, the lower court rendered a
decision, the decretal portion of which reads as follows:
WHEREFORE, judgment is rendered as follows:
1. In case No. 7354, the defendant is hereby ordered
to pay the plaintiff Amparo C. Servando the
aggregate sum of P1,070.50 with legal interest
thereon from the date of the filing of the complaint
until fully paid, and to pay the costs.
2. In case No. 7428, the defendant is hereby ordered
to pay to plaintiff Clara Uy Bico the aggregate sum of
P16,625.00 with legal interest thereon from the date
of the filing of the complaint until fully paid, and to
pay the costs.

1,528 cavans of rice valued

at P40,907.50;
Amparo Servando
44 cartons of colored paper,
toys and general merchandise valued
at P1,070.50;
as evidenced by the corresponding bills of lading issued by the
appellant. 1
Upon arrival of the vessel at Pulupandan, in the morning of
November 18, 1963, the cargoes were discharged, complete and in
good order, unto the warehouse of the Bureau of Customs. At about

Article 1736 of the Civil Code imposes upon common carriers the
duty to observe extraordinary diligence from the moment the
goods are unconditionally placed in their possession "until the
same are delivered, actually or constructively, by the carrier to the
consignee or to the person who has a right to receive them, without
prejudice to the provisions of Article 1738. "
The court a quo held that the delivery of the shipment in question
to the warehouse of the Bureau of Customs is not the delivery
contemplated by Article 1736; and since the burning of the
warehouse occurred before actual or constructive delivery of the
goods to the appellees, the loss is chargeable against the
appellant.
It should be pointed out, however, that in the bills of lading issued
for the cargoes in question, the parties agreed to limit the
responsibility of the carrier for the loss or damage that may be

caused to the
stipulation:

shipment by inserting therein the

following

Clause 14. Carrier shall not be responsible for loss or

damage to shipments billed 'owner's risk' unless such
loss or damage is due to negligence of carrier. Nor
shall carrier be responsible for loss or damage
caused by force majeure, dangers or accidents of the
sea or other waters; war; public enemies; . . . fire . ...
We sustain the validity of the above stipulation; there is nothing
therein that is contrary to law, morals or public policy.
Appellees would contend that the above stipulation does not bind
them because it was printed in fine letters on the back-of the bills
of lading; and that they did not sign the same. This argument
overlooks the pronouncement of this Court in Ong Yiu vs. Court of
Appeals, promulgated June 29, 1979, 3 where the same issue was
resolved in this wise:
While it may be true that petitioner had not signed
the plane ticket (Exh. '12'), he is nevertheless bound
by the provisions thereof. 'Such provisions have been
held to be a part of the contract of carriage, and valid
and binding upon the passenger regardless of the
latter's lack of knowledge or assent to the
regulation'. It is what is known as a contract of
'adhesion', in regards which it has been said that
contracts of adhesion wherein one party imposes a
ready made form of contract on the other, as the
plane ticket in the case at bar, are contracts not
entirely prohibited. The one who adheres to the
contract is in reality free to reject it entirely; if he
adheres, he gives his consent." (Tolentino, Civil Code,
Vol. IV, 1962 Ed., p. 462, citing Mr. Justice J.B.L.
Reyes, Lawyer's Journal, Jan. 31, 1951, p. 49).
Besides, the agreement contained in the above quoted Clause 14 is
a mere iteration of the basic principle of law written in Article 1 1 7
4 of the Civil Code:

Article 1174. Except in cases expressly specified by

the law, or when it is otherwise declared by
stipulation, or when the nature of the obligation
requires the assumption of risk, no person shall be
responsible for those events which could not be
foreseen, or which, though foreseen, were inevitable.
Thus, where fortuitous event or force majeure is the immediate and
proximate cause of the loss, the obligor is exempt from liability for
non-performance. The Partidas, 4 the antecedent of Article 1174 of
the Civil Code, defines 'caso fortuito' as 'an event that takes place
by accident and could not have been foreseen. Examples of this are
destruction of houses, unexpected fire, shipwreck, violence of
robbers.'
In its dissertation of the phrase 'caso fortuito' the Enciclopedia
Juridicada Espanola 5 says: "In a legal sense and, consequently,
also in relation to contracts, a 'caso fortuito' presents the following
essential characteristics: (1) the cause of the unforeseen and
unexpected occurrence, or of the failure of the debtor to comply
with his obligation, must be independent of the human will; (2) it
must be impossible to foresee the event which constitutes the 'caso
fortuito', or if it can be foreseen, it must be impossible to avoid; (3)
the occurrence must be such as to render it impossible for the
debtor to fulfill his obligation in a normal manner; and (4) the
obligor must be free from any participation in the aggravation of
the injury resulting to the creditor." In the case at bar, the burning
of the customs warehouse was an extraordinary event which
happened independently of the will of the appellant. The latter
could not have foreseen the event.
There is nothing in the record to show that appellant carrier
,incurred in delay in the performance of its obligation. It appears
that appellant had not only notified appellees of the arrival of their
shipment, but had demanded that the same be withdrawn. In fact,
pursuant to such demand, appellee Uy Bico had taken delivery of
907 cavans of rice before the burning of the warehouse.
Nor can the appellant or its employees be charged with negligence.
The storage of the goods in the Customs warehouse pending

withdrawal thereof by the appellees was undoubtedly made with

their knowledge and consent. Since the warehouse belonged to and
was maintained by the government, it would be unfair to impute
negligence to the appellant, the latter having no control
whatsoever over the same.
The lower court in its decision relied on the ruling laid down in Yu
Biao Sontua vs. Ossorio 6, where this Court held the defendant
liable for damages arising from a fire caused by the negligence of
the defendant's employees while loading cases of gasoline and
petroleon products. But unlike in the said case, there is not a shred
of proof in the present case that the cause of the fire that broke out
in the Custom's warehouse was in any way attributable to the
negligence of the appellant or its employees. Under the
circumstances, the appellant is plainly not responsible.
WHEREFORE, the judgment appealed from is hereby set aside. No
costs.
SO ORDERED.

G.R. No. L-50076 September 14, 1990

NORBERTO QUISUMBING, SR., and GUNTHER
LOEFFLER petitioners, vs. COURT OF APPEALS and PHILIPPINE
AIR LINES, INC., respondents.
NARVASA, J.:

Having met with no success in the Court of First Instance of Rizal

and in the Court of Appeals, the petitioners are now in this Court in
a third and final attempt to recover from the Philippine Airlines, Inc.
(hereafter, simply PAL) the value of jewelry, other valuables and
money taken from them by four (4) armed robbers on board one of
the latter's airplanes while on a flight from Mactan City to Manila,
as well as moral and exemplary damages, attorney's fees and
expenses of litigation.
The petitioners accept the correctness of the basic facts adopted by
the Court of Appeals from the judgment of the Court of First
Instance, to wit: 1
1. . . . Norberto Quisumbing, Sr. and Gunther Leoffler
were among the of ... (PAL's) Fokker 'Friendship' PIC536 plane in its flight of November 6,1968 which left
Mactan City at about 7:30 in the evening with Manila
for its destination.
2. After the plane had taken off, Florencio O. Villarin,
a Senior NBI Agent who was also a passenger of the
said plane, noticed a certain 'Zaldy,' a suspect in the
killing of Judge Valdez, seated at the front seat near
the door leading to the cockpit of the plane. A check
by Villarin with the passenger's ticket in the
possession of flight Stewardess Annie Bontigao, who
was seated at the last seat right row, revealed that
'Zaldy' had used the name 'Cardente,' one of his
aliases known to Villarin. Villarin also came to know
from the stewardess that 'Zaldy' had three
companions on board the plane."
3. Villarin then scribbled a note addressed to the pilot
of the plane requesting the latter to contact NBI duty
agents in Manila for the said agents to ask the
Director of the NBI to send about six NBI agents to
meet the plane because the suspect in the killing of
Judge Valdez was on board (Exh. 'G'). The said note
was handed by Villarin to the stewardess who in tum
gave the same to the pilot.

4. After receiving the note, which was about 15

minutes after take off, the pilot of the plane, Capt.
Luis Bonnevie, Jr., came out of the cockpit and sat
beside Villarin at the rear portion of the plane and
explained that he could not send the message
because it would be heard by all ground aircraft
stations. Villarin, however, told the pilot of the
danger of commission of violent acts on board the
plane by the notorious 'Zaldy' and his three
companions.
5. While the pilot and Villarin were talking, 'Zaldy'
and one of his companions walked to the rear and
stood behind them. Capt. Bonnevie then stood up
and went back to the cockpit. 'Zaldy' and his
companions returned to their seats, but after a few
minutes they moved back to the rear throwing ugly
looks at Villarin who, sensing danger, stood up and
went back to his original seat across the aisle on the
second to the last seat near the window. 'Zaldy and
his companion likewise went back to their respective
seats in front.
6. Soon thereafter an exchange of gunshots ensued
between Villarin and 'Zaldy' and the latter's
companions. 'Zaldy' announced to the passengers
and the pilots in the cockpit that it was a hold-up and
ordered the pilot not to send any SOS. The holduppers divested passengers of their belongings.
7. Specifically, ... Norberto Quisumbing, Sr. was
divested of jewelries and cash in the total amount of
P18,650.00 out of which recoveries were made
amounting to P4,550.00. . . Gunther Leoffler was
divested of a wrist watch, cash and a wallet in the
total of P1,700.00. As a result of the incident ...
Quisumbing, Sr.suffered shock, because a gun had
been pointed at him by one of the holduppers.

8. Upon landing at the Manila International Airport.

'Zaldy' and his three companions succeeded in
escaping.
Demands were thereafter made on PAL by Quisumbing and Loeffler
"to indemnify ... (them) on their aforesaid loss, but ... (PAL)
refused ... (averring that) it is not liable to (them) in law or in
fact." 2
Contending that the "aforesaid loss is a result of breach of ... (PAL's)
contractual obligation to carry ... (them) and their belongings and
effects to their Manila destination without loss or damage, and
constitutes a serious dereliction of ... (PAL's) legal duty to exercise
extraordinary diligence in the vigilance over the same." ,
Quisumbing and Loeffler brought suit against PAL in the Court of
First Instance of Rizal, as stated in this opinion's opening
paragraph, to recover the value of the property lost by them to the
robbers as well as moral and exemplary damages, attorney's fees
and expenses of litigation. 3 The plaintiffs declared that their suit
was instituted "... pursuant to Civil Code articles 1754, 998, 2000
and 2001 and on the ground that in relation to said Civil Code
article 2001 the complained-of act of the armed robbers is not
a force majeure, as the 'use of arms' or 'irresistible force' was not
taken advantage of by said armed robbers in gaining entrance to
defendant's ill-fated plane in questions. And, with respect to said
Civil Code article 1998, it is not essential that the lost effects and
belongings of plaintiffs were actually delivered to defendant's plane
personnel or that the latter were notified thereof (De los Santos v.
Tamn Khey, [CA] 58 O.G. 7693)." 4
PAL filed answer denying liability, alleging inter alia that the
robbery during the flight and after the aircraft was forcibly landed
at the Manila Airport did indeed constitute force majeure, and
neither of the plaintiffs had notified PAL "or its crew or employees
that they were in possession of cash, German marks and valuable
jewelries and watches" or surrendered said items to "the crew or
personnel on board the aircraft." 5
After trial, the Court of First Instance rendered judgment 'dismissing
plaintiffs' complaint with costs against ... (them)." 6 The Court

opined that since the plaintiffs "did not notify defendant or its
employees that they were in possession of the cash, jewelries, and
the wallet they are now claiming," the very provision of law invoked
by them, Article 1998 of the Civil Code, denies them any recourse
against PAL. The Court also pointed out that... while it is true that the use of gems was not taken
advantage of by the robbers in gaining entrance to
defendant's ill-fated plane, the armed robbery that
took place constitutes force majeure for which
defendant is not liable because the robbers were
able to gain entrance to the plane with the guns they
used already in their possession, which fact could not
have been prevented nor avoided by the defendant
since it was not authorized to search its passengers
for firearms and deadly weapons as shown in Exhibits
'6', '7', '8,' and '8-A.' As its robbery constitutes force
majeure, defendant is not liable.
The plaintiffs appealed to the Court of Appeals. 7 The Court
affirmed the trial court's judgment. 8 It rejected the argument that
"the use of arms or ... irresistible force" referred to in Article 2001
constitutes force majeure only if resorted to gain entry into the
airplane, and not if it attends "the robbery itself." The Court ruled
that under the facts, "the highjacking-robbery was force majeure,"
observing that
... hijackers do not board an airplane through a
blatant display of firepower and violent fury.
Firearms, hand-grenades, dynamite, and explosives
are introduced into the airplane surreptitiously and
with the utmost cunning and stealth, although there
is an occasional use of innocent hostages who will be
coldly murdered unless a plane is given to the
hijackers' complete disposal. The objective of
modern-day hijackers is to display the irresistible
force amounting to force majeure only when it is
most effective and that is when the jetliner is winging
its way at Himalayan altitudes and ill-advised heroics
by either crew or passengers would send the multi-

million peso airplane and the priceless lives of all its

occupants into certain death and destruction. ...
The Appellate Court also ruled that in light of the evidence PAL
could not be faulted for want of diligence, particularly for failing "to
take positive measures to implement Civil Aeronautics
Administration regulations prohibiting civilians from carrying
firearms on board aircrafts;" and that "the absence of coded
transmissions, the amateurish behaviour of the pilot in dealing with
the NBI agent, the allegedly open cockpit door, and the failure to
return to Mactan, in the light of the circumstances of the case ...,
were not negligent acts sufficient to overcome the force majeure
nature of the armed robbery." In fact, the Court went on to says, 9
... it is illusive to assume that had these precautions
been taken, the hijacking or the robbery would not
have succeeded. The mandatory use of the most
sophisticated electronic detection devices and
magnetometers, the imposition of severe penalties,
the development of screening procedures, the
compilation of hijacker behavioural profiles, the
assignment of sky marshals, and the weight of
outraged world opinion may have minimized
hijackings but all these have proved ineffective
against truly determined hijackers. World experience
shows that if a group of armed hijackers want to take
over a plane in flight, they can elude the latest
combined government and airline industry measures.
And as our own experience in Zamboanga City
illustrates, the use of force to overcome hijackers,
results in the death and injury of innocent
passengers and crew members. We are not in the
least bit suggesting that the Philippine Airlines should
not do everything humanly possible to protect
passengers from hijackers' acts. We merely state that
where the defendant has faithfully complied with the
requirements of government agencies and adhered
to the established procedures and precautions of the
airline industry at any particular time, its failure to
take certain steps that a passenger in hindsight

believes should have been taken is not the

negligence or misconduct which mingles with force
majeure as an active and cooperative cause.
Under the circumstance of the instant case, the acts
of the airline and its crew cannot be faulted as
negligence. The hijackers had already shown their
willingness to kill. One passenger was in fact killed
and another survived gunshot wounds. The lives of
the rest of the passengers and crew were more
important than their properties. Cooperation with the
hijackers until they released their hostages at the
runway end near the South Superhighway was
dictated by the circumstances.
Insisting that the evidence demonstrates negligence on the part of
the PAL crew "occurring before and exposing them to hijacking,"
Quisumbing and Loeffler have come up to this Court praying that
the judgments of the trial Court and the Court of Appeals be
reversed and another rendered in their favor. Once again, the issue
will be resolved against them.
A careful analysis of the record in relation to the memoranda and
other pleadings of the parties, convinces this Court of the
correctness of the essential conclusion of both the trial and
appellate courts that the evidence does indeed fail to prove any
want of diligence on the part of PAL, or that, more specifically, it
had failed to comply with applicable regulations or universally
accepted and observed procedures to preclude hijacking; and that
the particular acts singled out by the petitioners as supposedly
demonstrative of negligence were, in the light of the circumstances
of the case, not in truth negligent acts "sufficient to overcome the
force majeure nature of the armed robbery." The Court quite
agrees, too, with the Appellate Tribunal's wry observation that PAL's
"failure to take certain steps that a passenger in hindsight believes
should have been taken is not the negligence or misconduct which
mingles with force majeure as an active and cooperative cause."
No success can therefore attend petitioners' appeal, not only
because they wish to have a review and modification of factual

conclusions of the Court of Appeals, which established and

uniformly observed axiom proscribes, 10 but also because those
factual conclusions have in this Court's view been correctly drawn
from the proofs on record.
WHEREFORE, the petition is DENIED and the appealed Decision of
the Court of Appeals is AFFIRMED, with costs against petitioners.
SO ORDERED.

check-in his Samsonite attache case. Rapadas protested pointing to

the fact that other co-passengers were permitted to handcarry
bulkier baggages. He stepped out of the line only to go back again
at the end of it to try if he can get through without having to
register his attache case. However, the same man in charge of
handcarry control did not fail to notice him and ordered him again
to register his baggage. For fear that he would miss the plane if he
insisted and argued on personally taking the valise with him, he
acceded to checking it in. He then gave his attache case to his
brother who happened to be around and who checked it in for him,
but without declaring its contents or the value of its contents. He
was given a Baggage Claim Tag No. P-749-713. (Exhibit "B" for the
plaintiff-respondent)
G.R. No. 60673 May 19, 1992
PAN AMERICAN WORLD AIRWAYS, INC., petitioner, vs. JOSE K.
RAPADAS and THE COURT OF APPEALS, respondents.
GUTIERREZ, JR., J.:
This is a petition for review assailing the decision of the respondent
Court of Appeals which affirmed in toto the trial court decision on
the liability of petitioner Pan American World Airways for damages
due to private respondent. The trial court ruled that the petitioner
can not avail of a limitation of liabilities for lost baggages of a
passenger. The dispositive portion of the trial court decision reads:
WHEREFORE, in view of the foregoing considerations,
judgment is hereby rendered ordering defendant to
pay plaintiff by way of actual damages the equivalent
peso value of the amount of $5,228.90 and 100
paengs, nominal damages in the amount of
P20,000.00 and attorney's fees of P5,000.00, and the
costs of the suit. Defendant's counterclaim is
dismissed. (Rollo, p. 13)
On January 16, 1975, private respondent Jose K. Rapadas held
Passenger Ticket and Baggage Claim Check No. 026-394830084-5
for petitioner's Flight No. 841 with the route from Guam to Manila.
While standing in line to board the flight at the Guam airport,
Rapadas was ordered by petitioner's handcarry control agent to

Upon arriving in Manila on the same date, January 16, 1975,

Rapadas claimed and was given all his checked-in baggages except
the attache case. Since Rapadas felt ill on his arrival, he sent his
son, Jorge Rapadas to request for the search of the missing
luggage. The petitioner exerted efforts to locate the luggage
through the Pan American World Airways-Manila International
Airport (PAN AM-MIA) Baggage Service.
On January 30, 1975, the petitioner required the private respondent
to put the request in writing. The respondent filled in a Baggage
Claim Blank Form. Thereafter, Rapadas personally followed up his
claim. For several times, he called up Mr. Panuelos, the head of the
Baggage Section of PAN AM. He also sent letters demanding and
reminding the petitioner of his claim.
Rapadas received a letter from the petitioner's counsel dated
August 2, 1975 offering to settle the claim for the sum of one
hundred sixty dollars ($160.00) representing the petitioner's
alleged limit of liability for loss or damage to a passenger's
personal property under the contract of carriage between Rapadas
and PAN AM. Refusing to accept this kind of settlement, Rapadas
filed the instant action for damages on October 1, 1975. Rapadas
alleged that PAN AM discriminated or singled him out in ordering
that his luggage be checked in. He also alleged that PAN AM
neglected its duty in the handling and safekeeping of his attache
case from the point of embarkation in Guam to his destination in

Manila. He placed the value of the lost attache case and its
contents at US$42,403.90. According to him, the loss resulted in his
failure to pay certain monetary obligations, failure to remit money
sent through him to relatives, inability to enjoy the fruits of his
retirement and vacation pay earned from working in Tonga
Construction Company (he retired in August 1974) and inability to
return to Tonga to comply with then existing contracts.

The lower court ruled in favor of complainant Rapadas after finding

no stipulation giving notice to the baggage liability limitation. The
court rejected the claim of defendant PANAM that its liability under
the terms of the passenger ticket is only up to $160.00. However, it
scrutinized all the claims of the plaintiff. It discredited insufficient
evidence to show discriminatory acts or bad faith on the part of
petitioner PANAM.

In its answer, petitioner-defendant PAN AM acknowledged

responsibility for the loss of the attache case but asserted that the
claim was subject to the "Notice of Baggage Liability Limitations"
allegedly attached to and forming part of the passenger ticket. The
petitioner argued that the same notice was also conspicuously
posted in its offices for the guidance of the passengers.

On appeal, the Court of Appeals affirmed the trial court decision.

Hence, this petition.

At the trial, private respondent showed proof of his retirement

award and vacation pay amounting to $4,750.00. He claimed that
the attache case also contained other money consisting of $1,400
allegedly given to him by his son, Jaime, as a round trip fare of his
(plaintiff-respondent) wife, but which amount was later found to be
actually intended by Jaime as payment for arrears of a lot
purchased from Tropical Homes, Inc.; $3,000 allegedly given by his
brothers for payment of taxes and for constructing improvements
on the Rapadas estates; and $300.00 birthday present of the
spouses Mr. and Mrs. Ruben Canonizado to plaintiff-respondent's
wife. He also claimed having kept several items in the attache case,
namely (1) contracts and records of employment, letters of
commendation, testimonials and newspaper clippings on his
achievement for 13 years in Tonga, New Zealand and Australia,
drafts of manuscripts, photographs and drivers license alleged to
be worth $20,000.00; a Polaroid camera, films, calculator, and
other personal items worth $403.90; memorabilia, autographs
personally acquired from Charles Lindberg, Lawrence Rockefeller
and Ryoichi Sasakawa, a commemorative palladium coin worth
Tongan 100 paengs and unused Tongan stamps, all totalling
$7,500.00; and a plan worth $5,000.00 drawn by his son Jaime,
who is an architect, for the construction of a residential house and
a 6-story commercial building. Rapadas claimed the amount of the
attache case itself to be $25.50. (See Decision in Civil Case No.
99564 in Amended Record on Appeal, pp. 61-85)

The main issue raised in the case at bar is whether or not a

passenger is bound by the terms of a passenger ticket declaring
that the limitations of liability set forth in the Warsaw Convention
(October 12, 1929; 137 League of Nations Treaty Series II; See
Proclamation No. 201 [1955], 51 O.G. 4933 [October, 1955]) as
amended by the Hague Protocol (September 28, 1955; 478 UNTS
373; III PTS 515), shall apply in case of loss, damage or destruction
to a registered luggage of a passenger.
The petitioner maintains that its liability for the lost baggage of
respondent Rapadas was limited to $160.00 since the latter did not
declare a higher value for his baggage and did not pay the
corresponding additional charges.
The private respondent, on the other hand, insists that he is
entitled to as much damages as those awarded by the court and
affirmed by the respondent appellate court.
After a review of the various arguments of the opposing parties as
well as the records of the case, the Court finds sufficient basis
under the particular facts of this case for the availment of the
liability limitations under the Warsaw Convention.
There is no dispute, and the courts below admit, that there was
such a Notice appearing on page two (2) of the airline ticket stating
that the Warsaw Convention governs in case of death or injury to a
passenger or of loss, damage or destruction to a passenger's
luggage.

The Notice states:

No. 026-394830084-5). The issuance of these tickets was facilitated

by Mr. Faupula on credit.

If the passenger's journey involves an ultimate

destination or stop in a country other than the
country of departure the Warsaw Convention may be
applicable and the Convention governs and in most
cases limits the liability of carriers for death or
personal injury and in respect of loss of or damage to
baggage. See also notice headed "Advice to
International Passengers on Limitation of Liability."
(The latter notice refers to limited liability for death
or personal injury to passengers with proven
damages not exceeding US $75,000 per passenger;
Exhibit "K" for plaintiff respondent, Table of Exhibits,
p. 19)
Furthermore, paragraph 2 of the "Conditions of Contract" also
appearing on page 2 of the ticket states:
2. Carriage hereunder is subject to the rules
limitations relating to liability established by
Warsaw Convention unless such carriage is
"international carriage" as defined by
Convention. (Exhibit "K", supra)

and
the
not
that

We note that plaintiff-respondent Rapadas presented as proof of

the Passenger Ticket and Baggage Check No. 026-394830084-5 a
xerox copy of its page 2 which contains the Notice and Conditions
of Contract, and also page 3 which recites the Advice to
International Passengers on Limitation of Liability. He also
presented two xerox copies of Flight Coupon No. 3 of the same
passenger ticket showing the fares paid for the trips Honolulu to
Guam, Guam to Manila, and Manila to Honolulu to prove his
obligations which remained unpaid because of the unexpected loss
of money allegedly placed inside the missing attache case.
Rapadas explained during the trial that the same passenger ticket
was returned by him to one Mr. S.L. Faupula of the Union Steam
Ship Company of New Zealand, Ltd., Tonga who demanded the
payment of the fares or otherwise, the return of the unused plane
tickets (including the subject Passenger Ticket & Baggage Check

Meanwhile, the petitioner offered as evidence Exhibit "1" also

showing page 2 of the passenger ticket to prove the notice and the
conditions of the contract of carriage. It likewise offered Exhibit "1A", a xerox copy of a "Notice of Baggage Liability Limitations" which
the trial court disregarded and held to be non-existent. The same
Exhibit "1-A" contained the following stipulations:
NOTICE OF BAGGAGE LIABILITY LIMITATIONS
Liability for loss, delay, or damage to baggage is
limited as follows unless a higher value is declared in
advance and additional charges are paid: (1) for most
international travel (including domestic portions of
international journeys) to approximately $8.16 per
pound ($18.00 per kilo; now $20.00 per Exhibit "13")
for checked baggage and $360 (now $400 per Exhibit
"13") per passenger for unchecked baggage; (2) for
travel wholly between U.S. points, to $500 per
passenger on most carriers (a few have lower limits).
Excess valuation may not be declared on certain
types of valuable articles. Carriers assume no liability
for fragile or perishable articles. Further information
may be obtained from the carrier. (Table of Exhibits,
p. 45)
The original of the Passenger Ticket and Baggage Check No. 026394830084-5 itself was not presented as evidence as it was among
those returned to Mr. Faupula. Thus, apart from the evidence
offered by the defendant airline, the lower court had no other basis
for determining whether or not there was actually a stipulation on
the specific amounts the petitioner had expressed itself to be liable
for loss of baggage.
Although the trial court rejected the evidence of the defendantpetitioner of a stipulation particularly specifying what amounts it
had bound itself to pay for loss of luggage, the Notice and
paragraph 2 of the "Conditions of Contract" should be sufficient
notice showing the applicability of the Warsaw limitations.

The Warsaw Convention, as amended, specifically provides that it is

applicable to international carriage which it defines in Article 1, par.
2 as follows:
(2) For the purposes of this Convention, the
expression "international carriage" means any
carriage in which, according to the agreement
between the parties, the place of departure and the
place of destination, whether or not there be a
breach in the carriage or a transhipment, are
situated either within the territories of two High
Contracting Parties or within the territory of a single
High Contracting Party if there is an agreed stopping
place within the territory of another State, even if
that State is not a High Contracting Party. Carriage
between two points within the territory of a single
High Contracting Party without an agreed stopping
place within the territory of another State is not
international carriage for the purposes of this
Convention. ("High Contracting Party" refers to a
state which has ratified or adhered to the
Convention, or which has not effectively denounced
the Convention [Article 40A(l)]).
Nowhere in the Warsaw Convention, as amended, is such a detailed
notice of baggage liability limitations required. Nevertheless, it
should become a common, safe and practical custom among air
carriers to indicate beforehand the precise sums equivalent to
those fixed by Article 22 (2) of the Convention.
The Convention governs the availment of the liability limitations
where the baggage check is combined with or incorporated in the
passenger ticket which complies with the provisions of Article 3,
par. l (c). (Article 4, par. 2) In the case at bar, the baggage check is
combined with the passenger ticket in one document of carriage.
The passenger ticket complies with Article 3, par. l (c) which
provides:
(l) In respect of the carriage of passengers a ticket
shall be delivered containing:

(a) . . .
(b) . . .
(c) a notice to the effect that, if the
passenger's
journey
involves
an
ultimate destination or stop in a
country other than the country of
departure, the Warsaw Convention
may be applicable and that the
Convention governs and in most cases
limits the liability of carriers for death
or personal injury and in respect of loss
of or damage to baggage.
We have held in the case of Ong Yiu v. Court of Appeals, supra, and
reiterated in a similar case where herein petitioner was also sued
for damages, Pan American World Airways v. Intermediate
Appellate Court (164 SCRA 268 [1988]) that:
It (plane ticket) is what is known as a contract of
"adhesion", in regards which it has been said that
contracts of adhesion wherein one party imposes a
ready made form of contract on the other, as the
plane ticket in the case at bar, are contracts not
entirely prohibited. The one who adheres to the
contract is in reality free to reject it entirely; if he
adheres, he gives his consent. (Tolentino, Civil Code,
Vol. IV, 1962 ed., p. 462, citing Mr. Justice J.B.L.
Reyes, Lawyer's Journal, January 31, 1951, p. 49) And
as held in Randolph v. American Airlines, 103 Ohio
App. 172, 144 N.E. 2d 878; Rosenchein v. Trans World
Airlines, Inc., 349 S.W. 2d 483, "a contract limiting
liability upon an agreed valuation does not offend
against the policy of the law forbidding one from
contracting against his own negligence.
Considering, therefore, that petitioner had failed to
declare a higher value for his baggage, he cannot be

permitted a recovery in excess of P100.00 . . . (91

SCRA 223 at page 231)
We hasten to add that while contracts of adhesion are not entirely
prohibited, neither is a blind reliance on them encouraged. In the
face of facts and circumstances showing they should be ignored
because of their basically one sided nature, the Court does not
hesitate to rule out blind adherence to their terms. (See Sweet
Lines, Inc. v. Teves, 83 SCRA 361, 368-369[1978])
The arguments of the petitioner do not belie the fact that it was
indeed accountable for the loss of the attache case. What the
petitioner is concerned about is whether or not the notice, which it
did not fail to state in the plane ticket and which it deemed to have
been read and accepted by the private respondent will be
considered by this Court as adequate under the circumstances of
this case. As earlier stated, the Court finds the provisions in the
plane ticket sufficient to govern the limitations of liabilities of the
airline for loss of luggage. The passenger, upon contracting with
the airline and receiving the plane ticket, was expected to be
vigilant insofar as his luggage is concerned. If the passenger fails to
adduce evidence to overcome the stipulations, he cannot avoid the
application of the liability limitations.
The facts show that the private respondent actually refused to
register the attache case and chose to take it with him despite
having been ordered by the PANAM agent to check it in. In
attempting to avoid registering the luggage by going back to the
line, private respondent manifested a disregard of airline rules on
allowable handcarried baggages. Prudence of a reasonably careful
person also dictates that cash and jewelry should be removed from
checked-in-luggage and placed in one's pockets or in a handcarried
Manila-paper or plastic envelope.
The alleged lack of enough time for him to make a declaration of a
higher value and to pay the corresponding supplementary charges
cannot justify his failure to comply with the requirement that will
exclude the application of limited liability. Had he not wavered in
his decision to register his luggage, he could have had enough time
to disclose the true worth of the articles in it and to pay the extra

charges or remove them from the checked-in-luggage. Moreover,

an airplane will not depart meantime that its own employee is
asking a passenger to comply with a safety regulation.
Passengers are also allowed one handcarried bag each provided it
conforms to certain prescribed dimensions. If Mr. Rapadas was not
allowed to handcarry the lost attache case, it can only mean that
he was carrying more than the allowable weight for all his luggages
or more than the allowable number of handcarried items or more
than the prescribed dimensions for the bag or valise. The evidence
on any arbitrary behavior of a Pan Am employee or inexcusable
negligence on the part of the carrier is not clear from the petition.
Absent such proof, we cannot hold the carrier liable because of
arbitrariness, discrimination, or mistreatment.
We are not by any means suggesting that passengers are always
bound to the stipulated amounts printed on a ticket, found in a
contract of adhesion, or printed elsewhere but referred to in
handouts or forms. We simply recognize that the reasons behind
stipulations on liability limitations arise from the difficulty, if not
impossibility, of establishing with a clear preponderance of
evidence the contents of a lost valise or suitcase. Unless the
contents are declared, it will always be the word of a passenger
against that of the airline. If the loss of life or property is caused by
the gross negligence or arbitrary acts of the airline or the contents
of the lost luggage are proved by satisfactory evidence other than
the self-serving declarations of one party, the Court will not
hesitate to disregard the fine print in a contract of adhesion. (See
Sweet Lines Inc. v. Teves, supra) Otherwise, we are constrained to
rule that we have to enforce the contract as it is the only
reasonable basis to arrive at a just award.
We note that the finding on the amount lost is more of a probability
than a proved conclusion.
The trial court stated:
xxx xxx xxx

We come now to the actual loss of $4,750.00 which

the plaintiff claims was the amount of his retirement
award and vacation pay. According to the plaintiff,
this was in cash of $100 denominations and was
placed in an envelope separate from the other
money he was carrying. Plaintiff presented the
memorandum award, Exhibit T-1 and the vouchers of
payment, Exhibits T-2 and T-3. Under the
circumstances, recited by the plaintiff in which the
loss occurred, the Court believes that plaintiff could
really have placed this amount in the attache
case considering that he was originally handcarrying
said attache case and the same was looked, and he
did not expect that he would be required to check it
in. . . . (Amended Record on Appeal, p. 75; Emphasis
ours)
The above conclusion of the trial court does not arise from the
facts. That the attache case was originally handcarried does not
beg the conclusion that the amount of $4,750.00 in cash could
have been placed inside. It may be noted that out of a claim for
US$42,403.90 as the amount lost, the trial court found for only
US$5,228.90 and 100 paengs. The court had doubts as to the total
claim.
The lost luggage was declared as weighing around 18 pounds or
approximately 8 kilograms. At $20.00 per kilogram, the petitioner
offered to pay $160.00 as a higher value was not declared in
advance and additional charges were not paid. We note, however,
that an amount of $400.00 per passenger is allowed for unchecked
luggage. Since the checking-in was against the will of the
respondent, we treat the lost bag as partaking of involuntarily and
hurriedly checked-in luggage and continuing its earlier status as
unchecked luggage. The fair liability under the petitioner's own
printed terms is $400.00. Since the trial court ruled out
discriminatory acts or bad faith on the part of Pan Am or other
reasons warranting damages, there is no factual basis for the grant
of P20,000.00 damages.

As to the question of whether or not private respondent should be

paid attorney's fees, the Court sustains the finding of the trial court
and the respondent appellate court that it is just and equitable for
the private respondent to recover expenses for litigation in the
amount of P5,000.00. Article 22(4) of the Warsaw Convention, as
amended does not preclude an award of attorney's fees. That
provision states that the limits of liability prescribed in the
instrument "shall not prevent the court from awarding, in
accordance with its own law, in addition, the whole or part of the
court costs and other expenses of litigation incurred by the
plaintiff." We, however, raise the award to P10,000.00 considering
the resort to the Court of Appeals and this Court.
WHEREFORE, the petition is hereby GRANTED and the decision of
the respondent Court of Appeals is REVERSED and SET ASIDE. The
petitioner is ordered to pay the private respondent damages in the
amount of US$400.00 or its equivalent in Philippine Currency at the
time of actual payment, P10,000.00 in attorney's fees, and costs of
the suit.
SO ORDERED.

KAPALARAN BUS LINE, petitioner, vs. ANGEL CORONADO,

LOPE GRAJERA, DIONISIO SHINYO, and THE COURT OF
APPEALS, respondents,
FELICIANO, J.:
Petitioner Kapalaran Bus Line ("Kapalaran") seeks the reversal or
modification of the Court of Appeals' decision in CA G.R. CV No.
12476 and the absolution of petitioner from all liability arising from
the collision between one of petitioner's buses and a jeepney
owned by respondent Coronado, driven by respondent Grajera and
in which jeepney respondent Shinyo was a passenger.
The facts of this case as found by the trial court and adopted by the
Court of Appeals, are summarized in the trial court's decision and
quoted in the Court of Appeals' own judgment in the following
terms:
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.
G.R. No. 85331 August 25, 1989

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-ofway 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 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
(a) to pay Angel Coronado the sum of P40,000.00 as
compensation for the totally wrecked jeepney, plus
the sum of P5,000.00 as attorney's fees and litigation
expenses, and
(b) to Dionisio Shinyo the sum of P35,000.00
representing the expenses incurred by said
intervenor for his treatment including his car-hire, the
further sum of P30,000.00 representing the expenses

said defendant will incur for his second operation to

remove the intramedulary nail from his femur, the
additional sum of P50,000.00 to serve as moral
damages for the pain and suffering inflicted on said
defendant, plus the sum of P10,000.00 in the
concept of exemplary damages to serve as a
deterrent to others who, like the plaintiff, may be
minded to induce accident victims to perjure
themselves in a sworn statement, and the sum of
P15,000.00 as attorney's fees and litigation
expenses.
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. It must be remembered that it is not the
function of this Court to analyze and weigh evidence presented by
the parties all over again and that our jurisdiction is in principle
limited to reviewing errors of law that might have been committed
by the Court of Appeals. Kapalaran has made no compelling
showing of any misapprehension of facts on the part of the Court of
Appeals that would require us to review and overturn the factual
findings of that court. On the contrary, examination of the record
shows that not only are the conclusions of fact of the Court of
Appeals and the trial court on who the bus driver or the jeepney
driver had acted negligently and was at fault in the collision of
their vehicles, amply supported by the evidence of record, but also
that Kapalaran's bus driver was grossly negligent and had acted

wantonly and in obvious disregard of the applicable rules on safety

on the highway.
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.
xxx xxx xxx
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.

xxx xxx xxx

(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.
xxx xxx xxx
(Emphasis supplied)
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
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.
In much the same vein, we believe that the award by the trial court
of P15,000.00 as attorney's fees and litigation expenses, deleted by
the Court of Appeals, should similarly be restored, being both
authorized by law 14 and demanded by substantial justice in the
instant case.
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.
SO ORDERED.

G.R. No. 88052 December 14, 1989

JOSE P. MECENAS, ROMEO P. MECENAS, LILIA P. MECENAS,
ORLANDO P. MECENAS, VIOLETA M. ACERVO, LUZVIMINDA P.
MECENAS; and OFELIA M. JAVIER, petitioners, vs. HON. COURT
OF APPEALS, CAPT. ROGER SANTISTEBAN and NEGROS
NAVIGATION CO., INC., respondents.
FELICIANO, J.:
At 6:20 o'clock in the morning of 22 April 1980, the M/T "Tacloban
City," a barge-type oil tanker of Philippine registry, with a gross
tonnage of 1,241,68 tons, owned by the Philippine National Oil
Company (PNOC) and operated by the PNOC Shipping and
Transport Corporation (PNOC Shipping), having unloaded its cargo
of petroleum products, left Amlan, Negros Occidental, and headed
towards Bataan. At about 1:00 o'clock in the afternoon of that same
day, the M/V "Don Juan," an interisland vessel, also of Philippine
registry, of 2,391.31 tons gross weight, owned and operated by the
Negros Navigation Co., Inc. (Negros Navigation) left Manila bound
for Bacolod with seven hundred fifty (750) passengers listed in its
manifest, and a complete set of officers and crew members.
On the evening of that same day, 22 April 1980, at about 10:30
o'clock, the "Tacloban City" and the "Don Juan" collided at the
Talbas Strait near Maestra de Ocampo Island in the vicinity of the
island of Mindoro. When the collision occurred, the sea was calm,
the weather fair and visibility good. As a result of this collision, the
M/V "Don Juan" sank and hundreds of its passengers perished.
Among the ill-fated passengers were the parents of petitioners, the
spouses Perfecto Mecenas and Sofia Mecenas, whose bodies were
never found despite intensive search by petitioners.
On 29 December 1980, petitioners filed a complaint in the then
Court- of First Instance of Quezon City, docketed as Civil Case No.
Q-31525, against private respondents Negros Navigation and Capt.
Roger Santisteban, the captain of the "Don Juan" without, however,
impleading either PNOC or PNOC Shipping. In their complaint,
petitioners alleged that they were the seven (7) surviving
legitimate children of Perfecto Mecenas and Sofia Mecenas and that
the latter spouses perished in the collision which had resulted from
the negligence of Negros Navigation and Capt. Santisteban.
Petitioners prayed for actual damages of not less than P100,000.00

as well as moral and exemplary damages in such amount as the

Court may deem reasonable to award to them.
Another complaint, docketed as Civil Case No. Q-33932, was filed in
the same court by Lilia Ciocon claiming damages against Negros
Navigation, PNOC and PNOC Shipping for the death of her husband
Manuel Ciocon, another of the luckless passengers of the "Don
Juan." Manuel Ciocon's body, too, was never found.
The two (2) cases were consolidated and heard jointly by the
Regional Trial Court of Quezon City, Branch 82. On 17 July 1986,
after trial, the trial court rendered a decision, the dispositive of
which read as follows:
WHEREFORE, the Court hereby renders judgment
ordering:
a) The defendant Negros Navigation Co., Inc. and
Capt. Roger Santisteban jointly and severally liable to
pay plaintiffs in Civil Case No Q-31525, the sum of
P400,000.00 for the death of plaintiffs' parents,
Perfecto A. Mecenas and Sofia P. Mecenas; to pay
said plaintiff's the sum of P15.000,00 as and for
attorney's fees; plus costs of the suit.
b) Each of the defendants Negros Navigation Co Inc.
and Philippine National Oil Company/PNOC Shipping
and Transportation Company, to pay the plaintiff in
Civil Case No. Q-33932, the sum of P100,000.00 for
the death of Manuel Ciocon, to pay said plaintiff
jointly and severally, the sum of P1 5,000.00 as and
for attorney's fees, plus costs of the suit. 1
Negros Navigation, Capt. Santisteban, PNOC and PNOC Shipping
appealed the trial court's decision to the Court of Appeals. Later,
PNOC and PNOC Shipping withdrew their appeal citing a
compromise agreement reached by them with Negros Navigation;
the Court of Appeals granted the motion by a resolution dated 5
September 1988, subject to the reservation made by Lilia Ciocon
that she could not be bound by the compromise agreement and
would enforce the award granted her by the trial court.
In time, the Court of Appeals rendered a decision dated 26 January
1989 which decreed the following:

WHEREFORE, in view of the foregoing, the decision of the court a

quo is hereby affirmed as modified with respect to Civil Case No.
31525, wherein defendant appellant Negros Navigation Co. Inc. and
Capt. Roger Santisteban are held jointly and severally liable to pay
the plaintiffs the amount of P100,000. 00 as actual and
compensatory damages and P15,000.00 as attorney's fees and the
cost of the suit. 2
The issue to be resolved in this Petition for Review is whether or not
the Court of Appeals had erred in reducing the amount of the
damages awarded by the trial court to the petitioners from
P400,000.00 to P100,000.00.
We note that the trial court had granted petitioners the sum of
P400,000,00 "for the death of [their parents]" plus P15,000.00 as
attorney's fees, while the Court of Appeals awarded them
P100,000.00 "as actual and compensatory damages" and
P15,000.00 as attorney's fees. To determine whether such
reduction of the damages awarded was proper, we must first
determine whether petitioners were entitled to an award of
damagesother than actual or compensatory damages, that is,
whether they were entitled to award of moral and exemplary
damages.
We begin by noting that both the trial court and the Court of
Appeals considered the action (Civil Case No. Q-31525) brought by
the sons and daughters of the deceased Mecenas spouses against
Negros Navigation as based on quasi-delict. We believed that action
is more appropriately regarded as grounded on contract, the
contract of carriage between the Mecenas spouses as regular
passengers who paid for their boat tickets and Negros Navigation;
the surviving children while not themselves passengers are in
effect suing the carrier in representation of their deceased
parents. 3 Thus, the suit (Civil Case No. Q-33932) filed by the
widow Lilia Ciocon was correctly treated by the trial and appellate
courts as based on contract (vis-a-vis Negros Navigation) and as
well on quasi-delict (vis-a-vis PNOC and PNOC Shipping). In an
action based upon a breach of the contract of carriage, the carrier
under our civil law is liable for the death of passengers arising from
the negligence or willful act of the carrier's employees although
such employees may have acted beyond the scope of their
authority or even in violation of the instructions of the
carrier, 4which liability may include liability for moral damages. 5 It
follows that petitioners would be entitled to moral damages so long
as the collision with the "Tacloban City" and the sinking of the "Don

Juan" were caused or attended by negligence on the part of private

respondents.
In respect of the petitioners' claim for exemplary damages, it is
only necessary to refer to Article 2232 of the Civil Code:
Article 2332. In contracts and quasi-contracts, the
court may exemplary damages if the defendant
acted in a wanton, fraudulent, reckless, oppressive or
malevolent manner. 6
Thus, whether petitioners are entitled to exemplary damages as
claimed must depend upon whether or not private respondents
acted recklessly, that is, with gross negligence.
We turn, therefore, to a consideration of whether or not Negros
Navigation and Capt. Santisteban were grossly negligent during the
events which culminated in the collision with "Tacloban City" and
the sinking of the "Don Juan" and the resulting heavy loss of lives.
The then Commandant of the Philippine Coast Guard, Commodore
B.C. Ochoco, in a decision dated 2 March 1981, held that the
"Tacloban City" was "primarily and solely [sic] at fault and
responsible for the collision." 7Initially, the Minister of National
Defense upheld the decision of Commodore Ochoco. 8 On Motion
for Reconsideration, however, the Minister of National Defense
reversed himself and held that both vessels had been at fault:
It is therefore evident from a close and thorough
review of the evidence that fault is imputable to both
vessels for the collision. Accordingly, the decision
dated March 12, 1982, subject of the Motion for
Reconsideration filed by counsel of M/T Tacloban City,
is hereby reversed. However, the administrative
penalties imposed oil both vessels and their
respective crew concerned are hereby affirmed. 9
The trial court, after a review of the evidence submitted during the
trial, arrived at the same conclusion that the Minister of National
Defense had reached that both the "Tacloban City" and the "Don
Juan" were at fault in the collision. The trial court summarized the
testimony and evidence of PNOC and PNOC Shipping as well as of
Negros Navigation in the following terms:

Defendant PNOC's version of the incident:

M/V Don Juan was first sighted at about 5 or 6 miles
from Tacloban City (TSN, January 21, 1985, p. 13); it
was on the starboard (right) side of Tacloban City.
This was a visual contact; not picked up by radar (p.
15, Ibid). Tacloban City was travelling 310 degrees
with a speed of 6 knots, estimated speed of Don Juan
of 16 knots (TSN, May 9, pp. 5-6). As Don Juan
approached, Tacloban City gave a leeway of 1 0
degrees to the left. 'The purpose was to enable
Tacloban to see the direction of Don Juan (p. 19, Ibid).
Don Juan switched to green light, signifying that it
will pass Tacloban City's right side; it will be a
starboard to starboard passing (p. 21, Ibid) Tacloban
City's purpose in giving a leeway of 10 degrees at
this point, is to give Don Juan more space for her
passage (p. 22, Ibid). This was increased by Tacloban
City to an additional 15 degrees towards the left (p.
22, Ibid). The way was clear and Don Juan has not
changed its course (TSN, May 9,1985, p. 39).
When Tacloban City altered its course the second
time, from 300 degrees to 285 degrees, Don Juan
was about 4.5 miles away (TSN, May 9,1985, p. 7).
Despite executing a hardport maneuver, the collision
nonetheless occurred. Don Juan rammed the
Tacloban City near the starboard bow (p. 7, Ibid)."
NENACO's [Negros Navigation] version.
Don Juan first sighted Tacloban City 4 miles away, as
shown by radar (p. 13, May 24, 1983). Tacloban City
showed its red and green lights twice; it proceeded
to, and will cross, the path of Don Juan. Tacloban was
on the left side of Don Juan (TSN, April 20,1983, p. 4).
Upon seeing Tacloban's red and green lights, Don
Juan executed hard starboard (TSN, p. 4, Ibid.) This
maneuver is in conformity with the rule that 'when
both vessels are head on or nearly head on, each
vessel must turn to the right in order to avoid each
other. (p. 5, Ibid). Nonetheless, Tacloban appeared to
be heading towards Don Juan (p. 6, Ibid),

When Don Juan executed hard starboard, Tacloban

was about 1,500 feet away (TSN, May 24,1983, p. 6).
Don Juan, after execution of hard starboard, will
move forward 200 meters before the vessel will
respond to such maneuver (p. 7, Ibid). The speed of
Don Juan at that time was 17 knits; Tacloban City 6.3
knots. t "Between 9 to 15 seconds from execution of
hard starboard, collision occurred (p. 8, Ibid). (pp. 3-4
Decision). 10
The trial court concluded:
M/ V Don Juan and Tacloban City became aware of
each other's presence in the area by visual contact at
a distance of something like 6 miles from each
other. They were fully aware that if they continued
on their course, they will meet head on. Don Juan steered to the right; Tacloban City continued its
course to the left. There can be no excuse for them
not to realize that, with such maneuvers, they will
collide. They executed maneuvers inadequate, and
too late, to avoid collision.
The Court is of the considered view that the
defendants are equally negligent and are liable for
damages. (p. 4, decision). 11
The Court of Appeals, for its part, reached the same
conclusion. 12
There is, therefore, no question that the "Don Juan" was at least as
negligent as the M/T "Tacloban City" in the events leading up to the
collision and the sinking of the "Don Juan." The remaining question
is whether the negligence on the part of the "Don Juan" reached
that level of recklessness or gross negligence that our Civil Code
requires for the imposition of exemplary damages. Our own review
of the record in the case at bar requires us to answer this in the
affirmative.

In the first place, the report of the Philippine Coast Guard

Commandant (Exhibit "l 0"), while holding the "Tacloban City" as
"primarily and solely [sic] at fault and responsible for the collision,"
did itself set out that there had been fault or negligence on the part
of Capt. Santisteban and his officers and crew before the collision
and immediately after contact of the two (2) vessels. The decision
of Commodore Ochoco said:
xxxxxxxxx
M/S Don Juan's Master, Capt. Rogelio Santisteban,
was playing mahjong before and up to the time of
collision. Moreover, after the collision, he failed to
institute appropriate measures to delay the sinking
MS Don Juan and to supervise properly the execution
of his order of abandonship. As regards the officer on
watch, Senior 3rd Mate Rogelio Devera, he admitted
that he failed or did not call or inform Capt.
Santisteban of the imminent danger of collision and
of the actual collision itself Also, he failed to assist
his master to prevent the fast sinking of the ship. The
record also indicates that Auxiliary Chief Mate
Antonio Labordo displayed laxity in maintaining order
among the passengers after the collision.
x x x x x x x x x. 13
We believe that the behaviour of the captain of the "Don Juan" in
tills instance-playing mahjong "before and up to the time of
collision constitutes behaviour that is simply unacceptable on the
part of the master of a vessel to whose hands the lives and welfare
of at least seven hundred fifty (750) passengers had been
entrusted. Whether or not Capt. Santisteban was "off-duty" or "onduty" at or around the time of actual collision is quite immaterial;
there is, both realistically speaking and in contemplation of law, no
such thing as "off-duty" hours for the master of a vessel at sea that
is a common carrier upon whom the law imposes the duty of
extraordinary diligence[t]he duty to carry the passengers safely as far as
human care and foresight can provide, using the
utmost diligence of very cautious persons, with a due
regard for all the circumstances. 14

The record does not show that was the first or only time that Capt.
Santisteban had entertained himself during a voyage by playing
mahjong with his officers and passengers; Negros Navigation in
permitting, or in failing to discover and correct such behaviour,
must be deemed grossly negligent.
Capt. Santisteban was also faulted in the Philippine Coast Guard
decision for failing after the collision, "to institute appropriate
measures to delay the sinking of M/V Don Juan." This appears to us
to be a euphemism for failure to maintain the sea-worthiness or the
water-tight integrity of the "Don Juan." The record shows that the
"Don Juan" sank within ten (10) to fifteen (15) minutes after initial
contact with the "Tacloban City. 15 While the failure of Capt.
Santisteban to supervise his officers and crew in the process of
abandoning the ship and his failure to avail of measures to prevent
the too rapid sinking of his vessel after collision, did not cause the
collision by themselves, such failures doubtless contributed
materially to the consequent loss of life and, moreover, were
indicative of the kind and level of diligence exercised by Capt.
Santisteban in respect of his vessel and his officers and men prior
to actual contact between the two (2) vessels. The officer-on-watch
in the "Don Juan" admitted that he had failed to inform Capt.
Santisteban not only of the "imminent danger of collision" but even
of "the actual collision itself "
There is also evidence that the "Don Juan" was carrying more
passengers than she had been certified as allowed to carry. The
Certificate of Inspection 16 dated 27 August 1979, issued by the
Philippine Coast Guard Commander at Iloilo City, the Don Juan's
home port, states:
Passengers
810

allowed

Total Persons Allowed :

864
The report of the Philippine Coast Guard (Exhibit "10") stated that
the "Don Juan" had been "officially cleared with 878 passengers on
board when she sailed from the port of Manila on April 22, 1980 at
about 1:00 p.m." This head-count of the passengers "did not
include the 126 crew members, children below three (3) years old
and two (2) half-paying passengers" which had been counted as
one adult passenger. 17 Thus, the total number of persons on
board the "Don Juan" on that ill-starred night of 22 April 1 980

was 1,004, or 140 persons more than the maximum lumber that
could be safely carried by the "Don Juan," per its own Certificate of
Inspection. 18 We note in addition, that only 750 passengers had
been listed in its manifest for its final voyage; in other words, at
least 128 passengers on board had not even been entered into the
"Don Juan's" manifest. The "Don Juan's" Certificate of Inspection
showed that she carried life boat and life raft accommodations for
only 864 persons, the maximum number of persons she was
permitted to carry; in other words, she did not carry enough boats
and life rafts for all the persons actually on board that tragic night
of 22 April 1980.
We hold that under these circumstances, a presumption of gross
negligence on the part of the vessel (her officers and crew) and of
its ship-owner arises; this presumption was never rebutted by
Negros Navigation.
The grossness of the negligence of the "Don Juan" is underscored
when one considers the foregoing circumstances in the context of
the following facts: Firstly, the "Don Juan" was more than twice as
fast as the "Tacloban City." The "Don Juan's" top speed was 17
knots; while that of the "Tacloban City" was 6.3. knots. 19Secondly,
the "Don Juan" carried the full complement of officers and crew
members specified for a passenger vessel of her class. Thirdly, the
"Don Juan" was equipped with radar which was functioning that
night. Fourthly, the "Don Juan's" officer on-watch had sighted the
"Tacloban City" on his radar screen while the latter was still four (4)
nautical miles away. Visual confirmation of radar contact was
established by the "Don Juan" while the "Tacloban City" was still 2.7
miles away. 20 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. 21 The "Tacloban City," when the two (2) vessels
were only three-tenths (0.3) of a mile apart, turned (for the second
time) 150 to port side while the "Don Juan" veered hard to
starboard. This circumstance, while it may have made the collision
immediately inevitable, cannot, however, be viewed in isolation

from the rest of the factual circumstances obtaining before and up

to the collision. In any case, Rule 18 like all other International
Rules of the Road, are not to be obeyed and construed without
regard to all the circumstances surrounding a particular encounter
between two (2) vessels. 22 In ordinary circumstances, a vessel
discharges her duty to another by a faithful and literal observance
of the Rules of Navigation, 23 and she cannot be held at fault for so
doing even though a different course would have prevented the
collision. This rule, however, is not to be applied where it is
apparent, as in the instant case, that her captain was guilty of
negligence or of a want of seamanship in not perceiving the
necessity for, or in so acting as to create such necessity for, a
departure from the rule and acting accordingly. 24 In other words,
"route observance" of the International Rules of the Road will not
relieve a vessel from responsibility if the collision could have been
avoided by proper care and skill on her part or even by a departure
from the rules. 25
In the petition at bar, the "Don Juan" having sighted the "Tacloban
City" when it was still a long way off was negligent in failing to take
early preventive action and in allowing the two (2) vessels to come
to such close quarters as to render the collision inevitable when
there was no necessity for passing so near to the "Tacloban City" as
to create that hazard or inevitability, for the "Don Juan" could
choose its own distance. 26, It is noteworthy that the "Tacloban
City," upon turning hard to port shortly before the moment of
collision, signalled its intention to do so by giving two (2) short
blasts with horn. 26A The "Don Juan " gave no answering horn blast
to signal its own intention and proceeded to turn hatd to
starboard. 26B
We conclude that Capt. Santisteban and Negros Navigation are
properly held liable for gross negligence in connection with the
collision of the "Don Juan" and "Tacloban City" and the sinking of
the "Don Juan" leading to the death of hundreds of passengers. We
find no necessity for passing upon the degree of negligence or
culpability properly attributable to PNOC and PNOC Shipping or the
master of the "Tacloban City," since they were never impleaded
here.
It will be recalled that the trial court had rendered a lump sum of
P400,000.00 to petitioners for the death of their parents in the
"Don Juan" tragedy. Clearly, the trial court should have included a
breakdown of the lump sum award into its component parts:
compensatory damages, moral damages and exemplary damages.

On appeal, the Court of Appeals could have and should have itself
broken down the lump sum award of the trial court into its
constituent parts; perhaps, it did, in its own mind. In any case, the
Court of Appeals apparently relying uponManchester Development
Corporation V. Court of Appeals 27 reduced the P400,000.00 lump
sum award into a P100,000.00 for actual and compensatory
damages only.
We believe that the Court of Appeals erred in doing so, It is true
that the petitioners' complaint before the trial court had in the body
indicated that the petitioner-plaintiffs believed that moral damages
in the amount of at least P1,400,000.00 were properly due to them
(not P12,000,000.00 as the Court of Appeals erroneously stated) as
well as exemplary damages in the sum of P100,000.00 and that in
the prayer of their complaint, they did not specify the amount of
moral and exemplary damages sought from the trial court. We do
not believe, however, that the Manchester doctrine, which has
been modified and clarified in subsequent decision by the Court
in Sun Insurance Office, Ltd. (SIOL), et al. v. Asuncion, et al. 28 can
be applied in the instant case so as to work a striking out of that
portion of the trial court's award which could be deemed nationally
to
constitute
an
award
of
moral
and
exemplary
damages. Manchester was promulgated by the Court on 7 May
1987. Circular No. 7 of this Court, which embodied the doctrine
in Manchester, is dated 24 March 1988. Upon the other hand, the
complaint in the case at bar was filed on 29December 1980, that is,
long before either Manchester or Circular No. 7 of 24 March 1988
emerged. The decision of the trial court was itself promulgated on
17 July 1986, again, before Manchester and Circular No. 7 were
promulgated. We do not believe that Manchester should have been
applied retroactively to this case where a decision on the merits
had already been rendered by the trial court, even though such
decision was then under appeal and had not yet reached finality.
There is noindication at all that petitioners here sought simply to
evade payment of the court's filing fees or to mislead the court in
the assessment of the filing fees. In any event, we
apply Manchester as clarified and amplified by Sun Insurance
Office Ltd. (SIOL), by holding that the petitioners shall pay the
additional filing fee that is properly payable given the award
specified below, and that such additional filing fee shall constitute a
lien upon the judgment.
We consider, finally, the amount of damages-compensatory, moral
and exemplary-properly imposable upon private respondents in this
case. The original award of the trial court of P400,000.00 could well

have been disaggregated by the trial court and the Court of

Appeals in the following manner:
1. actual or compensatory damages proved in the
course of trial consisting of actual expenses
incurred by petitioners
in their search for their
parents' bodies- -P126,000.00
2. actual or compensatory
damages in case of
wrongful death
(P30,000.00 x 2) -P60,000.00 29
(3) moral damages -P107,000.00
(4) exemplary damages -P107,000.00
Total -P400,000.00
Considering that petitioners, legitimate children of the deceased
spouses Mecenas, are seven (7) in number and that they lost both
father and mothe in one fell blow of fate, and considering the pain
and anxiety they doubtless experienced while searching for their
parents among the survivors and the corpses recovered from the
sea or washed ashore, we believe that an additional amount of
P200,000.00 for moral damages, making a total of P307,000.00 for
moral damages, making a total of P307,000.00 as moral damages,
would be quite reasonable.

employees, to tame their reckless instincts and to force them to

take adequate care of human beings and their property. The Court
will take judicial notive of the dreadful regularity with which
grievous maritime disasters occur in our waters with massive loss
of life. The bulk of our population is too poor to afford domestic air
transportation. So it is that notwithstanding the frequent sinking of
passenger vessels in our waters, crowds of people continue to
travel by sea. This Court is prepared to use the instruments given
to it by the law for securing the ends of law and public policy. One
of those instruments is the institution of exemplary damages; one
of those ends, of special importance in an archipelagic state like
the Philippines, is the safe and reliable carriage of people and
goods by sea. Considering the foregoing, we believe that an
additional award in the amount of P200,000.00 as exmplary
damages, is quite modest.
The Court is aware that petitioners here merely asked for the
restoration of the P 400.000.00 award of the trial court. We
underscore once more, however, the firmly settled doctrine that
this Court may consider and resolved all issues which must be
decided in order to render substantial justice to the parties,
including issues not explicity raised by the party affected. In the
case at bar, as in Kapalaran Bus Line v. Coronado, et al., 30 both
the demands of sustantial justice and the imperious requirements
of public policy compel us to the conclusion that the trial court's
implicit award of moral and exemplary damages was erronoeusly
deledted and must be restored and augmented and brought more
nearely to the level required by public policy and substantial
justice.
WHEREFORE, the Petition for Review on certiorari is hereby
GRANTED and the Decision of the Court of Appeals insofar as it
redurce the amount of damages awarded to petitioners to
P100,000.00 is hereby REVERSED and SET ASIDE. The award
granted by the trial court is hereby RESTORED and AUGMENTED as
follows:
(a) P 126,000.00 for actual damages;

Exemplary damages are designed by our civil law to permit the

courts to reshape behaviour that is socially deleterious in its
consequence by creating negative incentives or deterrents against
such behaviour. In requiring compliance with the standard which is
in fact that of the highest possible degree of diligence, from
common carriers and in creating a presumption of negligence
against them, the law seels to compel them to control their

(b) P 60,000.00 as compensatory damages for

wrongful death;
(c) P 307,000.00 as moral damages;

(d) P 307,000.00 as exemplary damages making a

total of P 800,000.00; and
(e) P 15,000.00 as attorney's fees.
Petitioners shall pay the additional filing fees properly due and
payable in view of the award here made, which fees shall be
computed by the Clerks of Court of the trial court, and shall
constitute a lien upon the judgment here awarded. Cost against
private respondents.
SO ORDERED.

G.R. No. L-55300 March 15, 1990

FRANKLIN G. GACAL and CORAZON M. GACAL, the latter
assisted by her husband, FRANKLIN G. GACAL,petitioners, vs.
PHILIPPINE AIR LINES, INC., and THE HONORABLE PEDRO
SAMSON C. ANIMAS, in his capacity as PRESIDING JUDGE of
the COURT OF FIRST INSTANCE OF SOUTH COTABATO,
BRANCH I, respondents.
PARAS, J.:

This is a, petition for review on certiorari of the decision of the

Court of First Instance of South Cotabato, Branch 1,* promulgated
on August 26, 1980 dismissing three (3) consolidated cases for
damages: Civil Case No. 1701, Civil Case No. 1773 and Civil Case
No. 1797 (Rollo, p. 35).
The facts, as found by respondent court, are as follows:
Plaintiffs Franklin G. Gacal and his wife, Corazon M.
Gacal, Bonifacio S. Anislag and his wife, Mansueta L.
Anislag, and the late Elma de Guzman, were then
passengers boarding defendant's BAC 1-11 at Davao
Airport for a flight to Manila, not knowing that on the
same flight, Macalinog, Taurac Pendatum known as
Commander Zapata, Nasser Omar, Liling Pusuan
Radia, Dimantong Dimarosing and Mike Randa, all of
Marawi City and members of the Moro National
Liberation Front (MNLF), were their co-passengers,
three (3) armed with grenades, two (2) with .45
caliber pistols, and one with a .22 caliber pistol. Ten
(10) minutes after take off at about 2:30 in the
afternoon, the hijackers brandishing their respective
firearms announced the hijacking of the aircraft and
directed its pilot to fly to Libya. With the pilot
explaining to them especially to its leader,
Commander Zapata, of the inherent fuel limitations
of the plane and that they are not rated for
international flights, the hijackers directed the pilot
to fly to Sabah. With the same explanation, they
relented and directed the aircraft to land at
Zamboanga Airport, Zamboanga City for refueling.
The aircraft landed at 3:00 o'clock in the afternoon of
May 21, 1976 at Zamboanga Airport. When the plane
began to taxi at the runway, it was met by two
armored cars of the military with machine guns
pointed at the plane, and it stopped there. The rebels
thru its commander demanded that a DC-aircraft
take them to Libya with the President of the
defendant company as hostage and that they be
given $375,000 and six (6) armalites, otherwise they

will blow up the plane if their demands will not be

met by the government and Philippine Air Lines.
Meanwhile, the passengers were not served any food
nor water and it was only on May 23, a Sunday, at
about 1:00 o'clock in the afternoon that they were
served 1/4 slice of a sandwich and 1/10 cup of PAL
water. After that, relatives of the hijackers were
allowed to board the plane but immediately after
they alighted therefrom, an armored car bumped the
stairs. That commenced the battle between the
military and the hijackers which led ultimately to the
liberation of the surviving crew and the passengers,
with the final score of ten (10) passengers and three
(3) hijackers dead on the spot and three (3) hijackers
captured.
City Fiscal Franklin G. Gacal was unhurt. Mrs. Corazon
M. Gacal suffered injuries in the course of her
jumping out of the plane when it was peppered with
bullets by the army and after two (2) hand grenades
exploded inside the plane. She was hospitalized at
General Santos Doctors Hospital, General Santos
City, for two (2) days, spending P245.60 for hospital
and medical expenses, Assistant City Fiscal Bonifacio
S. Anislag also escaped unhurt but Mrs. Anislag
suffered a fracture at the radial bone of her left
elbow for which she was hospitalized and operated
on at the San Pedro Hospital, Davao City, and
therefore, at Davao Regional Hospital, Davao City,
spending P4,500.00. Elma de Guzman died because
of that battle. Hence, the action of damages
instituted by the plaintiffs demanding the following
damages, to wit:
Civil Case No. 1701
City Fiscal Franklin G. Gacal and Mrs.
Corazon M. Gacal actual damages:
P245.60 for hospital and medical
expenses of Mrs Gacal; P8,995.00 for

their personal belongings which were

lost and not recovered; P50,000.00
each
for
moral
damages;
and
P5,000.00 for attorney's fees, apart
from the prayer for an award of
exemplary damages (Record, pp. 4-6,
Civil Case No. 1701).
Civil Case No. 1773
xxx xxx xxx
Civil Case No. 1797
xxx xxx xxx
The trial court, on August 26, 1980, dismissed the complaints
finding that all the damages sustained in the premises were
attributed to force majeure.
On September 12, 1980 the spouses Franklin G. Gacal and Corazon
M. Gacal, plaintiffs in Civil Case No. 1701, filed a notice of appeal
with the lower court on pure questions of law (Rollo, p. 55) and the
petition for review oncertiorari was filed with this Court on October
20, 1980 (Rollo, p. 30).
The Court gave due course to the petition (Rollo, p. 147) and both
parties filed their respective briefs but petitioner failed to file reply
brief which was noted by the Court in the resolution dated May 3,
1982 (Rollo, p. 183).
Petitioners alleged that the main cause of the unfortunate incident
is the gross, wanton and inexcusable negligence of respondent
Airline personnel in their failure to frisk the passengers adequately
in order to discover hidden weapons in the bodies of the six (6)
hijackers. They claimed that despite the prevalence of skyjacking,
PAL did not use a metal detector which is the most effective means
of discovering potential skyjackers among the passengers (Rollo,
pp. 6-7).

Respondent Airline averred that in the performance of its obligation

to safely transport passengers as far as human care and foresight
can provide, it has exercised the utmost diligence of a very
cautious person with due regard to all circumstances, but the
security checks and measures and surveillance precautions in all
flights, including the inspection of baggages and cargo and frisking
of passengers at the Davao Airport were performed and rendered
solely by military personnel who under appropriate authority had
assumed exclusive jurisdiction over the same in all airports in the
Philippines.
Similarly, the negotiations with the hijackers were a purely
government matter and a military operation, handled by and
subject to the absolute and exclusive jurisdiction of the military
authorities. Hence, it concluded that the accident that befell RPC1161 was caused by fortuitous event, force majeure and other
causes beyond the control of the respondent Airline.
The determinative issue in this case is whether or not hijacking or
air piracy during martial law and under the circumstances obtaining
herein, is a caso fortuito or force majeure which would exempt an
aircraft from payment of damages to its passengers whose lives
were put in jeopardy and whose personal belongings were lost
during the incident.
Under the Civil Code, common carriers are required to exercise
extraordinary diligence in their vigilance over the goods and for the
safety of passengers transported by them, according to all the
circumstances of each case (Article 1733). They are presumed at
fault or to have acted negligently whenever a passenger dies or is
injured (Philippine Airlines, Inc. v. National Labor Relations
Commission, 124 SCRA 583 [1983]) or for the loss, destruction or
deterioration of goods in cases other than those enumerated in
Article 1734 of the Civil Code (Eastern Shipping Lines, Inc. v.
Intermediate Appellate Court, 150 SCRA 463 [1987]).
The source of a common carrier's legal liability is the contract of
carriage, and by entering into said contract, it binds itself to carry
the passengers safely as far as human care and foresight can
provide. There is breach of this obligation if it fails to exert

extraordinary diligence according to all the circumstances of the

case in exercise of the utmost diligence of a very cautious person
(Isaac v. Ammen Transportation Co., 101 Phil. 1046 [1957]; Juntilla
v. Fontanar, 136 SCRA 624 [1985]).
It is the duty of a common carrier to overcome the presumption of
negligence (Philippine National Railways v. Court of Appeals, 139
SCRA 87 [1985]) and it must be shown that the carrier had
observed the required extraordinary diligence of a very cautious
person as far as human care and foresight can provide or that the
accident was caused by a fortuitous event (Estrada v. Consolacion,
71 SCRA 523 [1976]). Thus, as ruled by this Court, no person shall
be responsible for those "events which could not be foreseen or
which though foreseen were inevitable. (Article 1174, Civil Code).
The term is synonymous with caso fortuito (Lasam v. Smith, 45 Phil.
657 [1924]) which is of the same sense as "force majeure" (Words
and Phrases Permanent Edition, Vol. 17, p. 362).
In order to constitute a caso fortuito or force majeure that would
exempt a person from liability under Article 1174 of the Civil Code,
it is necessary that the following elements must concur: (a) the
cause of the breach of the obligation must be independent of the
human will (the will of the debtor or the obligor); (b) the event must
be either unforeseeable or unavoidable; (c) the event must be such
as to render it impossible for the debtor to fulfill his obligation in a
normal manner; and (d) the debtor must be free from any
participation in, or aggravation of the injury to the creditor (Lasam
v. Smith, 45 Phil. 657 [1924]; Austria v. Court of Appeals, 39 SCRA
527 [1971]; Estrada v. Consolacion, supra; Vasquez v. Court of
Appeals, 138 SCRA 553 [1985]; Juan F. Nakpil & Sons v. Court of
Appeals, 144 SCRA 596 [1986]). Caso fortuito or force majeure, by
definition, are extraordinary events not foreseeable or avoidable,
events that could not be foreseen, or which, though foreseen, are
inevitable. It is, therefore, not enough that the event should not
have been foreseen or anticipated, as is commonly believed, but it
must be one impossible to foresee or to avoid. The mere difficulty
to foresee the happening is not impossibility to foresee the same
(Republic v. Luzon Stevedoring Corporation, 21 SCRA 279 [1967]).

Applying the above guidelines to the case at bar, the failure to

transport petitioners safely from Davao to Manila was due to the
skyjacking incident staged by six (6) passengers of the same plane,
all members of the Moro National Liberation Front (MNLF), without
any connection with private respondent, hence, independent of the
will of either the PAL or of its passengers.
Under normal circumstances, PAL might have foreseen the
skyjacking incident which could have been avoided had there been
a more thorough frisking of passengers and inspection of baggages
as authorized by R.A. No. 6235. But the incident in question
occurred during Martial Law where there was a military take-over of
airport security including the frisking of passengers and the
inspection of their luggage preparatory to boarding domestic and
international flights. In fact military take-over was specifically
announced on October 20, 1973 by General Jose L. Rancudo,
Commanding General of the Philippine Air Force in a letter to Brig.
Gen. Jesus Singson, then Director of the Civil Aeronautics
Administration (Rollo, pp. 71-72) later confirmed shortly before the
hijacking incident of May 21, 1976 by Letter of Instruction No. 399
issued on April 28, 1976 (Rollo, p. 72).
Otherwise stated, these events rendered it impossible for PAL to
perform its obligations in a nominal manner and obviously it cannot
be faulted with negligence in the performance of duty taken over
by the Armed Forces of the Philippines to the exclusion of the
former.
Finally, there is no dispute that the fourth element has also been
satisfied. Consequently the existence of force majeure has been
established exempting respondent PAL from the payment of
damages to its passengers who suffered death or injuries in their
persons and for loss of their baggages.
PREMISES CONSIDERED, the petition is hereby DISMISSED for lack
of merit and the decision of the Court of First Instance of South
Cotabato, Branch I is hereby AFFIRMED.
SO ORDERED.

1975. 3 The Station Agent likewise informed them that Flight 560
bound for Manila would make a stop-over at Cebu to bring some of
the diverted passengers; that there were only six (6) seats
available as there were already confirmed passengers for Manila;
and, that the basis for priority would be the check-in sequence at
Cebu.

G.R. No. L-82619 September 15, 1993

PHILIPPINE AIRLINES, INC., petitioner,
vs.
COURT OF APPEALS and PEDRO ZAPATOS, respondents.
BELLOSILLO, J.:
This petition for review in certiorari seeks to annul and set aside
the decision of the then Intermediate Appellant Court, 1 now Court
of Appeals, dated 28 February 1985, in AC-G.R. CV No. 69327
("Pedro Zapatos v. Philippine Airlines, Inc.") affirming the decision of
the then Court of first Instance, now Regional Trial Court, declaring
Philippine Airlines, Inc., liable in damages for breach of contract.
On 25 November 1976, private respondent filed a complaint for
damages for breach of contract of carriage 2against Philippine
Airlines, Inc. (PAL), before the then Court of First Instance, now
Regional Trial Court, of Misamis Occidental, at Ozamiz City.
According to him, on 2 August 1976, he was among the twenty-one
(21) passengers of PAL Flight 477 that took off from Cebu bound for
Ozamiz City. The routing of this flight was Cebu-Ozamiz-Cotabato.
While on flight and just about fifteen (15) minutes before landing at
Ozamiz City, the pilot received a radio message that the airport
was closed due to heavy rains and inclement weather and that he
should proceed to Cotabato City instead.
Upon arrival at Cotabato City, the PAL Station Agent informed the
passengers of their options to return to Cebu on flight 560 of the
same day and thence to Ozamiz City on 4 August 1975, or take the
next flight to Cebu the following day, or remain at Cotabato and
take the next available flight to Ozamiz City on 5 August

Private respondent chose to return to Cebu but was not

accommodated because he checked-in as passenger No. 9 on Flight
477. He insisted on being given priority over the confirmed
passengers in the accommodation, but the Station Agent refused
private respondent's demand explaining that the latter's
predicament was not due to PAL's own doing but to be a force
majeure. 4
Private respondent tried to stop the departure of Flight 560 as his
personal belongings, including a package containing a camera
which a certain Miwa from Japan asked him to deliver to Mrs. Fe
Obid of Gingoog City, were still on board. His plea fell on deaf ears.
PAL then issued to private respondent a free ticket to Iligan city,
which the latter received under protest. 5 Private respondent was
left at the airport and could not even hitch a ride in the Ford Fiera
loaded with PAL personnel. 6 PAL neither provided private
respondent with transportation from the airport to the city proper
nor food and accommodation for his stay in Cotabato City.
The following day, private respondent purchased a PAL ticket to
Iligan City. He informed PAL personnel that he would not use the
free ticket because he was filing a case against PAL. 7 In Iligan City,
private respondent hired a car from the airport to Kolambugan,
Lanao del Norte, reaching Ozamiz City by crossing the bay in a
launch. 8 His personal effects including the camera, which were
valued at P2,000.00 were no longer recovered.
On 13 January 1977, PAL filed its answer denying that it
unjustifiably refused to accommodate private respondent. 9 It
alleged that there was simply no more seat for private respondent
on Flight 560 since there were only six (6) seats available and the
priority of accommodation on Flight 560 was based on the check-in
sequence in Cebu; that the first six (6) priority passengers on Flight

477 chose to take Flight 560; that its Station Agent explained in a
courteous and polite manner to all passengers the reason for PAL's
inability to transport all of them back to Cebu; that the stranded
passengers agreed to avail of the options and had their respective
tickets exchanged for their onward trips; that it was only the private
respondent who insisted on being given priority in the
accommodation; that pieces of checked-in baggage and had carried
items of the Ozamiz City passengers were removed from the
aircraft; that the reason for their pilot's inability to land at Ozamis
City airport was because the runway was wet due to rains thus
posing a threat to the safety of both passengers and aircraft; and,
that such reason of force majeure was a valid justification for the
pilot to bypass Ozamiz City and proceed directly to Cotabato City.
On 4 June 1981, the trial court rendered its decision
dispositive portion of which states:

10

the

WHEREFORE, judgment is hereby rendered in favor of

the plaintiff and against the defendant Philippine
AirLines, Inc. ordering the latter to pay:
(1) As actual damages, the sum of Two Hundred
Pesos (P200.00) representing plaintiff's expenses for
transportation, food and accommodation during his
stranded stay at Cotabato City; the sum of FortyEight Pesos (P48.00) representing his flight fare from
Cotabato City to Iligan city; the sum of Five Hundred
Pesos
(P500.00)
representing
plaintiff's
transportation expenses from Iligan City to Ozamiz
City; and the sum of Five Thousand Pesos
(P5,000.00) as loss of business opportunities during
his stranded stay in Cotabato City;
(2) As moral damages, the sum of Fifty Thousand
Pesos (P50,000.00) for plaintiff's hurt feelings,
serious anxiety, mental anguish and unkind and
discourteous treatment perpetrated by defendant's
employees during his stay as stranded passenger in
Cotabato City;

(3) As exemplary damages, the sum of Ten Thousand

Pesos (P10,000.00) to set a precedent to the
defendant airline that it shall provide means to give
comfort and convenience to stranded passengers;
(4) The sum of Three Thousand Pesos (P3,000.00) as
attorney's fees;
(5) To pay the costs of this suit.
PAL appealed to the Court of Appeals which on 28 February 1985,
finding no reversible error, affirmed the judgment of the court a
quo. 11
PAL then sought recourse to this Court by way of a petition for
review on certiorari 12 upon the following issues: (1) Can the Court
of Appeals render a decision finding petitioner (then defendantappellant in the court below) negligent and, consequently, liable for
damages on a question of substance which was neither raised on a
question nor proved at the trial? (2) Can the Court of Appeals award
actual and moral damages contrary to the evidence and
established jurisprudence? 13
An assiduous examination of the records yields no valid reason for
reversal of the judgment on appeal; only a modification of its
disposition.
In its petition, PAL vigorously maintains that private respondent's
principal cause of action was its alleged denial of private
respondent's demand for priority over the confirmed passengers on
Flight 560. Likewise, PAL points out that the complaint did not
impute to PAL neglect in failing to attend to the needs of the
diverted passengers; and, that the question of negligence was not
and never put in issue by the pleadings or proved at the trial.
Contrary to the above arguments, private respondent's amended
complaint touched on PAL's indifference and inattention to his
predicament.
The
pertinent
portion
of
the
amended
14
complaint reads:

10. That by virtue of the refusal of the defendant

through its agent in Cotabato to accommodate (sic)
and allow the plaintiff to take and board the plane
back to Cebu, and by accomodating (sic) and
allowing passengers from Cotabato for Cebu in his
stead and place, thus forcing the plaintiff against his
will, to be left and stranded in Cotabato, exposed to
the peril and danger of muslim rebels plundering at
the time, the plaintiff, as a consequence, (have)
suffered mental anguish, mental torture, social
humiliation, bismirched reputation and wounded
feeling, all amounting to a conservative amount of
thirty thousand (P30,000.00) Pesos.
To substantiate this aspect of apathy, private respondent testified

15

A I did not even notice that I was I think the

last passenger or the last person out of the
PAL employees and army personnel that were
left there. I did not notice that when I was
already outside of the building after our
conversation.
Q What did you do next?
A I banished (sic) because it seems that there
was a war not far from the airport. The sound
of guns and the soldiers were plenty.
Q After that what did you do?
A I tried to look for a transportation that could
bring me down to the City of Cotabato.
Q Were you able to go there?
A I was at about 7:00 o'clock in the evening
more or less and it was a private jeep that I
boarded. I was even questioned why I and
who am (sic) I then. Then I explained my side

that I am (sic) stranded passenger. Then they

brought me downtown at Cotabato.
Q During your conversation with the Manager
were you not offered any vehicle or
transportation to Cotabato airport downtown?
A In fact I told him (Manager) now I am bypassed passenger here which is not my
destination what can you offer me. Then they
answered, "it is not my fault. Let us forget
that."
Q In other words when the Manager told you
that offer was there a vehicle ready?
A Not yet. Not long after that the Ford Fiera
loaded with PAL personnel was passing by
going to the City of Cotabato and I stopped it
to take me a ride because there was no more
available transportation but I was not
accommodated.
Significantly, PAL did not seem to mind the introduction of evidence
which focused on its alleged negligence in caring for its stranded
passengers. Well-settled is the rule in evidence that the protest or
objection against the admission of evidence should be presented at
the time the evidence is offered, and that the proper time to make
protest or objection to the admissibility of evidence is when the
question is presented to the witness or at the time the answer
thereto is given. 16 There being no objection, such evidence
becomes property of the case and all the parties are amenable to
any favorable or unfavorable effects resulting from the evidence. 17
PAL instead attempted to rebut the aforequoted testimony. In the
process, it failed to substantiate its counter allegation for want of
concrete proof 18
Atty. Rubin O. Rivera PAL's counsel:

Q You said PAL refused to help you when you

were in Cotabato, is that right?
Private respondent:
A Yes.
Q Did you ask them to help you regarding any
offer of transportation or of any other matter
asked of them?
A Yes, he (PAL PERSONNEL) said what is? It is
not our fault.
Q Are you not aware that one fellow
passenger even claimed that he was given
Hotel accommodation because they have no
money?
xxx xxx xxx
A No, sir, that was never offered to me. I said,
I tried to stop them but they were already
riding that PAL pick-up jeep, and I was not
accommodated.
Having joined in the issue over the alleged lack of care it exhibited
towards its passengers, PAL cannot now turn around and feign
surprise at the outcome of the case. When issues not raised by the
pleadings are tried by express or implied consent of the parties,
they shall be treated in all respects as if they had been raised in
the pleadings. 19
With regard to the award of damages affirmed by the appellate
court, PAL argues that the same is unfounded. It asserts that it
should not be charged with the task of looking after the
passengers' comfort and convenience because the diversion of the
flight was due to a fortuitous event, and that if made liable, an
added burden is given to PAL which is over and beyond its duties
under
the
contract
of
carriage.
It
submits
that

granting arguendo that negligence exists, PAL cannot be liable in

damages in the absence of fraud or bad faith; that private
respondent failed to apprise PAL of the nature of his trip and
possible business losses; and, that private respondent himself is to
be blamed for unreasonably refusing to use the free ticket which
PAL issued.
The contract of air carriage is a peculiar one. Being imbued with
public interest, the law requires common carriers to carry the
passengers safely as far as human care and foresight can provide,
using the utmost diligence of very cautious persons, with due
regard
for
all
the
circumstances. 20 In Air
France
21
v. Carrascoso, we held that
A contract to transport passengers is quite different
in kind and degree from any other contractual
relation. And this, because of the relation which an
air carrier sustains with the public. Its business is
mainly with the travelling public. It invites people to
avail of the comforts and advantages it offers. The
contract of air carriage, therefore, generates a
relation attended with a public duty . . . . ( emphasis
supplied).
The position taken by PAL in this case clearly illustrates its failure to
grasp the exacting standard required by law. Undisputably, PAL's
diversion of its flight due to inclement weather was a fortuitous
event. Nonetheless, such occurrence did not terminate PAL's
contract with its passengers. Being in the business of air carriage
and the sole one to operate in the country, PAL is deemed equipped
to deal with situations as in the case at bar. What we said in one
case once again must be stressed, i.e., the relation of carrier and
passenger continues until the latter has been landed at the port of
destination and has left the carrier's premises. 22 Hence, PAL
necessarily would still have to exercise extraordinary diligence in
safeguarding the comfort, convenience and safety of its stranded
passengers until they have reached their final destination. On this
score, PAL grossly failed considering the then ongoing battle
between government forces and Muslim rebels in Cotabato City and

the fact that the private respondent was a stranger to the place. As
the appellate court correctly ruled

On 3 August 1975, the Station Agent reported to his Branch

Manager in Cotabato City that

While the failure of plaintiff in the first instance to

reach his destination at Ozamis City in accordance
with the contract of carriage was due to the closure
of the airport on account of rain and inclement
weather which was radioed to defendant 15 minutes
before landing, it has not been disputed by
defendant airline that Ozamis City has no all-weather
airport and has to cancel its flight to Ozamis City or
by-pass it in the event of inclement weather. Knowing
this fact, it becomes the duty of defendant to provide
all means of comfort and convenience to its
passengers when they would have to be left in a
strange place in case of such by-passing. The steps
taken by defendant airline company towards this end
has not been put in evidence, especially for those 7
others who were not accommodated in the return trip
to Cebu, only 6 of the 21 having been so
accommodated. It appears that plaintiff had to leave
on the next flight 2 days later. If the cause of nonfulfillment of the contract is due to a fortuitous event,
it has to be the sole and only cause (Art. 1755 CC.,
Art. 1733 C.C.) Since part of the failure to comply
with the obligation of common carrier to deliver its
passengers safely to their destination lay in the
defendant's failure to provide comfort and
convenience to its stranded passengers using extraordinary diligence, the cause of non-fulfillment is not
solely and exclusively due to fortuitous event, but
due to something which defendant airline could have
prevented, defendant becomes liable to plaintiff. 23

3. Of the fifteen stranded passengers two pax

elected to take F478 on August 05, three pax opted
to take F442 August 03. The remaining ten (10)
including subject requested that they be instead
accommodated (sic) on F446 CBO-IGN the following
day where they intended to take the surface
transportation to OZC. Mr. Pedro Zapatos had by then
been very vocal and boiceterous (sic) at the counter
and we tactfully managed to steer him inside the
Station Agent's office. Mr. Pedro Zapatos then
adamantly insisted that all the diverted passengers
should have been given priority over the originating
passengers of F560 whether confirmed or otherwise.
We explained our policies and after awhile he
seemed pacified and thereafter took his ticket (inlieued (sic) to CBO-IGN, COCON basis), at the counter
in the presence of five other passengers who were
waiting for their tickets too. The rest of the diverted
pax had left earlier after being assured their tickets
will be ready the following day. 24

While we find PAL remiss in its duty of extending utmost care to

private respondent while being stranded in Cotabato City, there is
no sufficient basis to conclude that PAL failed to inform him about
his non-accommodation on Flight 560, or that it was inattentive to
his queries relative thereto.

Aforesaid Report being an entry in the course of business is prima

facie evidence of the facts therein stated. Private respondent, apart
from his testimony, did not offer any controverting evidence. If
indeed PAL omitted to give information about the options available
to its diverted passengers, it would have been deluged with
complaints. But, only private respondent complained
Atty. Rivera (for PAL)
Q I understand from you Mr. Zapatos that at
the time you were waiting at Cotabato Airport
for the decision of PAL, you were not informed
of the decision until after the airplane left is
that correct?
A Yes.

COURT:
Q What do you mean by "yes"? You meant you
were not informed?

booking, i.e., in the order the passengers checked-in at their port of

origin. His intransigence in fact was the main cause for his having
to stay at the airport longer than was necessary.
Atty. Rivera:

A Yes, I was not informed of their decision,

that they will only accommodate few
passengers.
Q Aside from you there were many other
stranded passengers?
A I believed, yes.
Q And you want us to believe that PAL did not
explain (to) any of these passengers about
the decision regarding those who will board
the aircraft back to Cebu?
A No, Sir.
Q Despite these facts Mr. Zapatos did any of
the other passengers complained (sic)
regarding that incident?
xxx xxx xxx
A There were plenty of argument and I was
one of those talking about my case.
Q Did you hear anybody complained (sic) that
he has not been informed of the decision
before the plane left for Cebu?
A No.

25

Admittedly, private respondent's insistence on being given priority

in accommodation was unreasonable considering the fortuitous
event and that there was a sequence to be observed in the

Q And, you were saying that despite the fact

that according to your testimony there were
at least 16 passengers who were stranded
there in Cotabato airport according to your
testimony, and later you said that there were
no other people left there at that time, is that
correct?
A Yes, I did not see anyone there around. I
think I was the only civilian who was left
there.
Q Why is it that it took you long time to leave
that place?
A Because I was arguing with the PAL
personnel. 26
Anent the plaint that PAL employees were disrespectful and
inattentive toward private respondent, the records are bereft of
evidence to support the same. Thus, the ruling of respondent Court
of Appeals in this regard is without basis. 27 On the contrary, private
respondent was attended to not only by the personnel of PAL but
also by its Manager." 28
In the light of these findings, we find the award of moral damages
of Fifty Thousand Pesos (P50,000.00) unreasonably excessive;
hence, we reduce the same to Ten Thousand Pesos (P10,000.00).
Conformably herewith, the award of exemplary damages is also
reduced to five Thousand Pesos (5,000.00). Moral damages are not
intended to enrich the private respondent. They are awarded only
to enable the injured party to obtain means, diversion or
amusements that will serve to alleviate the moral suffering he has
undergone by reason of the defendant's culpable action. 29

With regard to the award of actual damages in the amount of

P5,000.00 representing private respondent's alleged business
losses occasioned by his stay at Cotabato City, we find the same
unwarranted. Private respondent's testimony that he had a
scheduled business "transaction of shark liver oil supposedly to
have been consummated on August 3, 1975 in the morning" and
that "since (private respondent) was out for nearly two weeks I
missed to buy about 10 barrels of shark liver oil," 30 are purely
speculative. Actual or compensatory damages cannot be presumed
but must be duly proved with reasonable degree of certainty. A
court cannot rely on speculation, conjecture or guesswork as to the
fact and amount of damages, but must depend upon competent
proof that they have suffered and on evidence of the actual amount
thereof. 31
WHEREFORE the decision appealed from is AFFIRMED with
modification however that the award of moral damages of Fifty
Thousand Pesos (P50,000.00) is reduced to Ten Thousand Pesos
(P10,000.00) while the exemplary damages of Ten Thousand Pesos
(P10,000.00) is also reduced to Five Thousand Pesos (P5,000.00).
The award of actual damages in the amount Five Thousand Pesos
(P5,000.00) representing business losses occasioned by private
respondent's being stranded in Cotabato City is deleted.

Marivic, Sapid, Mankayan, Benguet. Among others, it was alleged

that on said date, while petitioner Theodore M. Lardizabal was
driving a passenger bus belonging to petitioner corporation in a
reckless and imprudent manner and without due regard to traffic
rules and regulations and safety to persons and property, it ran
over its passenger, Pedrito Cudiamat. However, instead of bringing
Pedrito immediately to the nearest hospital, the said driver, in utter
bad faith and without regard to the welfare of the victim, first
brought his other passengers and cargo to their respective
destinations before banging said victim to the Lepanto Hospital
where he expired.
On the other hand, petitioners alleged that they had observed and
continued to observe the extraordinary diligence required in the
operation of the transportation company and the supervision of the
employees, even as they add that they are not absolute insurers of
the safety of the public at large. Further, it was alleged that it was
the victim's own carelessness and negligence which gave rise to
the subject incident, hence they prayed for the dismissal of the
complaint plus an award of damages in their favor by way of a
counterclaim.
On July 29, 1988, the trial court rendered a decision, effectively in
favor of petitioners, with this decretal portion:

SO ORDERED.
G.R. No. 95582 October 7, 1991
DANGWA TRANSPORTATION CO., INC. and THEODORE
LARDIZABAL y MALECDAN, petitioners, vs. COURT OF
APPEALS, INOCENCIA CUDIAMAT, EMILIA CUDIAMAT BANDOY,
FERNANDO CUDLAMAT, MARRIETA CUDIAMAT, NORMA
CUDIAMAT, DANTE CUDIAMAT, SAMUEL CUDIAMAT and
LIGAYA CUDIAMAT, all Heirs of the late Pedrito Cudiamat
represented by Inocencia Cudiamat, respondents.

IN VIEW OF ALL THE FOREGOING, judgment is hereby

pronounced that Pedrito Cudiamat was negligent,
which negligence was the proximate cause of his
death. Nonetheless, defendants in equity, are hereby
ordered to pay the heirs of Pedrito Cudiamat the sum
of P10,000.00 which approximates the amount
defendants initially offered said heirs for the
amicable settlement of the case. No costs.
SO ORDERED. 2

REGALADO, J.:p
On May 13, 1985, private respondents filed a complaint 1 for
damages against petitioners for the death of Pedrito Cudiamat as a
result of a vehicular accident which occurred on March 25, 1985 at

Not satisfied therewith, private respondents appealed to the Court

of Appeals which, in a decision 3 in CA-G.R. CV No. 19504
promulgated on August 14, 1990, set aside the decision of the
lower court, and ordered petitioners to pay private respondents:

1. The sum of Thirty Thousand (P30,000.00) Pesos by

way of indemnity for death of the victim Pedrito
Cudiamat;
2. The sum of Twenty Thousand (P20,000.00) by way
of moral damages;
3. The sum of Two Hundred Eighty Eight Thousand
(P288,000.00) Pesos as actual and compensatory
damages;
4. The costs of this suit. 4
Petitioners' motion for reconsideration was denied by the Court of
Appeals in its resolution dated October 4, 1990,5 hence this
petition with the central issue herein being whether respondent
court erred in reversing the decision of the trial court and in finding
petitioners negligent and liable for the damages claimed.
It is an established principle that the factual findings of the Court of
Appeals as a rule are final and may not be reviewed by this Court
on appeal. However, this is subject to settled exceptions, one of
which is when the findings of the appellate court are contrary to
those of the trial court, in which case a reexamination of the facts
and evidence may be undertaken. 6
In the case at bar, the trial court and the Court of Appeal have
discordant positions as to who between the petitioners an the
victim is guilty of negligence. Perforce, we have had to conduct an
evaluation of the evidence in this case for the prope calibration of
their conflicting factual findings and legal conclusions.
The lower court, in declaring that the victim was negligent, made
the following findings:
This Court is satisfied that Pedrito Cudiamat was
negligent in trying to board a moving vehicle,
especially with one of his hands holding an umbrella.
And, without having given the driver or the conductor
any indication that he wishes to board the bus. But

defendants can also be found wanting of the

necessary diligence. In this connection, it is safe to
assume that when the deceased Cudiamat
attempted to board defendants' bus, the vehicle's
door was open instead of being closed. This should
be so, for it is hard to believe that one would even
attempt to board a vehicle (i)n motion if the door of
said vehicle is closed. Here lies the defendant's lack
of diligence. Under such circumstances, equity
demands that there must be something given to the
heirs of the victim to assuage their feelings. This,
also considering that initially, defendant common
carrier had made overtures to amicably settle the
case. It did offer a certain monetary consideration to
the victim's heirs. 7
However, respondent court, in arriving at a different opinion,
declares that:
From the testimony of appellees'own witness in the
person of Vitaliano Safarita, it is evident that the
subject bus was at full stop when the victim Pedrito
Cudiamat boarded the same as it was precisely on
this instance where a certain Miss Abenoja alighted
from the bus. Moreover, contrary to the assertion of
the appellees, the victim did indicate his intention to
board the bus as can be seen from the testimony of
the said witness when he declared that Pedrito
Cudiamat was no longer walking and made a sign to
board the bus when the latter was still at a distance
from him. It was at the instance when Pedrito
Cudiamat was closing his umbrella at the platform of
the bus when the latter made a sudden jerk
movement (as) the driver commenced to accelerate
the bus.
Evidently, the incident took place due to the gross
negligence of the appellee-driver in prematurely
stepping on the accelerator and in not waiting for the
passenger to first secure his seat especially so when

we take into account that the platform of the bus was

at the time slippery and wet because of a drizzle. The
defendants-appellees utterly failed to observe their
duty and obligation as common carrier to the end
that they should observe extra-ordinary diligence in
the vigilance over the goods and for the safety of the
passengers transported by them according to the
circumstances of each case (Article 1733, New Civil
Code). 8
After a careful review of the evidence on record, we find no reason
to disturb the above holding of the Court of Appeals. Its aforesaid
findings are supported by the testimony of petitioners' own
witnesses. One of them, Virginia Abalos, testified on crossexamination as follows:
Q It is not a fact Madam witness, that at bunkhouse
54, that is before the place of the incident, there is a
crossing?
A The way going to the mines but it is not being
pass(ed) by the bus.
Q And the incident happened before bunkhouse 56, is
that not correct?
A It happened between 54 and 53 bunkhouses. 9
The bus conductor, Martin Anglog, also declared:
Q When you arrived at Lepanto on March 25, 1985,
will you please inform this Honorable Court if there
was anv unusual incident that occurred?
A When we delivered a baggage at Marivic because a
person alighted there between Bunkhouse 53 and
54.
Q What happened when you delivered this passenger
at this particular place in Lepanto?

A When we reached the place, a passenger alighted

and I signalled my driver. When we stopped we went
out because I saw an umbrella about a split second
and I signalled again the driver, so the driver stopped
and we went down and we saw Pedrito Cudiamat
asking for help because he was lying down.
Q How far away was this certain person, Pedrito
Cudiamat, when you saw him lying down from the
bus how far was he?
A It is about two to three meters.
Q On what direction of the bus was he found about
three meters from the bus, was it at the front or at
the back?
A At the back, sir. 10 (Emphasis supplied.)
The foregoing testimonies show that the place of the accident and
the place where one of the passengers alighted were both between
Bunkhouses 53 and 54, hence the finding of the Court of Appeals
that the bus was at full stop when the victim boarded the same is
correct. They further confirm the conclusion that the victim fell
from the platform of the bus when it suddenly accelerated forward
and was run over by the rear right tires of the vehicle, as shown by
the physical evidence on where he was thereafter found in relation
to the bus when it stopped. Under such circumstances, it cannot be
said that the deceased was guilty of negligence.
The contention of petitioners that the driver and the conductor had
no knowledge that the victim would ride on the bus, since the latter
had supposedly not manifested his intention to board the same,
does not merit consideration. When the bus is not in motion there is
no necessity for a person who wants to ride the same to signal his
intention to board. A public utility bus, once it stops, is in effect
making a continuous offer to bus riders. Hence, it becomes the duty
of the driver and the conductor, every time the bus stops, to do no
act that would have the effect of increasing the peril to a passenger

while he was attempting to board the same. The premature

acceleration of the bus in this case was a breach of such duty. 11
It is the duty of common carriers of passengers, including common
carriers by railroad train, streetcar, or motorbus, to stop their
conveyances a reasonable length of time in order to afford
passengers an opportunity to board and enter, and they are liable
for injuries suffered by boarding passengers resulting from the
sudden starting up or jerking of their conveyances while they are
doing so. 12
Further, even assuming that the bus was moving, the act of the
victim in boarding the same cannot be considered negligent under
the circumstances. As clearly explained in the testimony of the
aforestated witness for petitioners, Virginia Abalos, th bus had "just
started" and "was still in slow motion" at the point where the victim
had boarded and was on its platform. 13
It is not negligence per se, or as a matter of law, for one attempt to
board a train or streetcar which is moving slowly. 14 An ordinarily
prudent person would have made the attempt board the moving
conveyance under the same or similar circumstances. The fact that
passengers board and alight from slowly moving vehicle is a matter
of common experience both the driver and conductor in this case
could not have been unaware of such an ordinary practice.
The victim herein, by stepping and standing on the platform of the
bus, is already considered a passenger and is entitled all the rights
and protection pertaining to such a contractual relation. Hence, it
has been held that the duty which the carrier passengers owes to
its patrons extends to persons boarding cars as well as to those
alighting therefrom. 15
Common carriers, from the nature of their business and reasons of
public policy, are bound to observe extraordina diligence for the
safety of the passengers transported by the according to all the
circumstances of each case. 16 A common carrier is bound to carry
the passengers safely as far as human care and foresight can
provide, using the utmost diligence very cautious persons, with a
due regard for all the circumstances. 17

It has also been repeatedly held that in an action based on a

contract of carriage, the court need not make an express finding of
fault or negligence on the part of the carrier in order to hold it
responsible to pay the damages sought by the passenger. By
contract of carriage, the carrier assumes the express obligation to
transport the passenger to his destination safely and observe
extraordinary diligence with a due regard for all the circumstances,
and any injury that might be suffered by the passenger is right
away attributable to the fault or negligence of the carrier. This is an
exception to the general rule that negligence must be proved, and
it is therefore incumbent upon the carrier to prove that it has
exercised extraordinary diligence as prescribed in Articles 1733 and
1755 of the Civil Code. 18
Moreover, the circumstances under which the driver and the
conductor failed to bring the gravely injured victim immediately to
the hospital for medical treatment is a patent and incontrovertible
proof of their negligence. It defies understanding and can even be
stigmatized as callous indifference. The evidence shows that after
the accident the bus could have forthwith turned at Bunk 56 and
thence to the hospital, but its driver instead opted to first proceed
to Bunk 70 to allow a passenger to alight and to deliver a
refrigerator, despite the serious condition of the victim. The
vacuous reason given by petitioners that it was the wife of the
deceased who caused the delay was tersely and correctly confuted
by respondent court:
... The pretension of the appellees that the delay was
due to the fact that they had to wait for about twenty
minutes for Inocencia Cudiamat to get dressed
deserves scant consideration. It is rather scandalous
and deplorable for a wife whose husband is at the
verge of dying to have the luxury of dressing herself
up for about twenty minutes before attending to help
her distressed and helpless husband. 19
Further, it cannot be said that the main intention of petitioner
Lardizabal in going to Bunk 70 was to inform the victim's family of
the mishap, since it was not said bus driver nor the conductor but
the companion of the victim who informed his family thereof. 20 In

fact, it was only after the refrigerator was unloaded that one of the
passengers thought of sending somebody to the house of the
victim, as shown by the testimony of Virginia Abalos again, to wit:
Q Why, what happened to your refrigerator at that
particular time?
A I asked them to bring it down because that is the
nearest place to our house and when I went down
and asked somebody to bring down the refrigerator, I
also asked somebody to call the family of Mr.
Cudiamat.

compensatory damages, respondent court found that the deceased

was 48 years old, in good health with a remaining productive life
expectancy of 12 years, and then earning P24,000.00 a year. Using
the gross annual income as the basis, and multiplying the same by
12 years, it accordingly awarded P288,000. Applying the
aforestated rule on computation based on the net earnings, said
award must be, as it hereby is, rectified and reduced to
P216,000.00. However, in accordance with prevailing jurisprudence,
the death indemnity is hereby increased to P50,000.00. 23
WHEREFORE, subject to the above modifications, the challenged
judgment and resolution of respondent Court of Appeals are hereby
AFFIRMED in all other respects.

COURT:
SO ORDERED.
Q Why did you ask somebody to call the family of Mr.
Cudiamat?
A Because Mr. Cudiamat met an accident, so I ask
somebody to call for the family of Mr. Cudiamat.
Q But nobody ask(ed) you to call for the family of Mr.
Cudiamat?
A No sir. 21
With respect to the award of damages, an oversight was, however,
committed by respondent Court of Appeals in computing the actual
damages based on the gross income of the victim. The rule is that
the amount recoverable by the heirs of a victim of a tort is not the
loss of the entire earnings, but rather the loss of that portion of the
earnings which the beneficiary would have received. In other
words, only net earnings, not gross earnings, are to be considered,
that is, the total of the earnings less expenses necessary in the
creation of such earnings or income and minus living and other
incidental expenses. 22
We are of the opinion that the deductible living and other expense
of the deceased may fairly and reasonably be fixed at P500.00 a
month or P6,000.00 a year. In adjudicating the actual or

between the two apparently ensued that led to a fist fight. No

evidence, however, was adduced to indicate how the fight started
or who, between the two, delivered the first blow or how Navidad
later fell on the LRT tracks. At the exact moment that Navidad fell,
an LRT train, operated by petitioner Rodolfo Roman, was coming in.
Navidad was struck by the moving train, and he was killed
instantaneously.

G.R. No. 145804

February 6, 2003
LIGHT RAIL TRANSIT AUTHORITY & RODOLFO
ROMAN, petitioners, vs. MARJORIE NAVIDAD, Heirs of the Late
NICANOR NAVIDAD & PRUDENT SECURITY
AGENCY, respondents.
DECISION
VITUG, J.:
The case before the Court is an appeal from the decision and
resolution of the Court of Appeals, promulgated on 27 April 2000
and 10 October 2000, respectively, in CA-G.R. CV No. 60720,
entitled "Marjorie Navidad and Heirs of the Late Nicanor Navidad
vs. Rodolfo Roman, et. al.," which has modified the decision of 11
August 1998 of the Regional Trial Court, Branch 266, Pasig City,
exonerating Prudent Security Agency (Prudent) from liability and
finding Light Rail Transit Authority (LRTA) and Rodolfo Roman liable
for damages on account of the death of Nicanor Navidad.
On 14 October 1993, about half an hour past seven oclock in the
evening, Nicanor Navidad, then drunk, entered the EDSA LRT
station after purchasing a "token" (representing payment of the
fare). While Navidad was standing on the platform near the LRT
tracks, Junelito Escartin, the security guard assigned to the area
approached Navidad. A misunderstanding or an altercation

On 08 December 1994, the widow of Nicanor, herein respondent

Marjorie Navidad, along with her children, filed a complaint for
damages against Junelito Escartin, Rodolfo Roman, the LRTA, the
Metro Transit Organization, Inc. (Metro Transit), and Prudent for the
death of her husband. LRTA and Roman filed a counterclaim against
Navidad and a cross-claim against Escartin and Prudent. Prudent, in
its answer, denied liability and averred that it had exercised due
diligence in the selection and supervision of its security guards.
The LRTA and Roman presented their evidence while Prudent and
Escartin, instead of presenting evidence, filed a demurrer
contending that Navidad had failed to prove that Escartin was
negligent in his assigned task. On 11 August 1998, the trial court
rendered its decision; it adjudged:
"WHEREFORE, judgment is hereby rendered in favor of the plaintiffs
and against the defendants Prudent Security and Junelito Escartin
ordering the latter to pay jointly and severally the plaintiffs the
following:
"a) 1) Actual damages of P44,830.00;
2) Compensatory damages of P443,520.00;
3) Indemnity for the death of Nicanor Navidad in the sum of
P50,000.00;
"b) Moral damages of P50,000.00;
"c) Attorneys fees of P20,000;
"d) Costs of suit.

"The complaint against defendants LRTA and Rodolfo Roman are

dismissed for lack of merit.
"The compulsory counterclaim of LRTA and Roman are likewise
dismissed."1
Prudent appealed to the Court of Appeals. On 27 August 2000, the
appellate court promulgated its now assailed decision exonerating
Prudent from any liability for the death of Nicanor Navidad and,
instead, holding the LRTA and Roman jointly and severally liable
thusly:

and operated at the time by Roman. The appellate court faulted

petitioners for their failure to present expert evidence to establish
the fact that the application of emergency brakes could not have
stopped the train.
The appellate court denied petitioners motion for reconsideration
in its resolution of 10 October 2000.
In their present recourse, petitioners recite alleged errors on the
part of the appellate court; viz:
"I.

"WHEREFORE, the assailed judgment is hereby MODIFIED, by

exonerating the appellants from any liability for the death of
Nicanor Navidad, Jr. Instead, appellees Rodolfo Roman and the Light
Rail Transit Authority (LRTA) are held liable for his death and are
hereby directed to pay jointly and severally to the plaintiffsappellees, the following amounts:
a) P44,830.00 as actual damages;

THE HONORABLE COURT OF APPEALS GRAVELY ERRED

DISREGARDING THE FINDINGS OF FACTS BY THE TRIAL COURT

BY

"II.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING
THAT PETITIONERS ARE LIABLE FOR THE DEATH OF NICANOR
NAVIDAD, JR.

b) P50,000.00 as nominal damages;

"III.
c) P50,000.00 as moral damages;
d) P50,000.00 as indemnity for the death of the
deceased; and
e) P20,000.00 as and for attorneys fees."2
The appellate court ratiocinated that while the deceased might not
have then as yet boarded the train, a contract of carriage
theretofore had already existed when the victim entered the place
where passengers were supposed to be after paying the fare and
getting the corresponding token therefor. In exempting Prudent
from liability, the court stressed that there was nothing to link the
security agency to the death of Navidad. It said that Navidad failed
to show that Escartin inflicted fist blows upon the victim and the
evidence merely established the fact of death of Navidad by reason
of his having been hit by the train owned and managed by the LRTA

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING

THAT RODOLFO ROMAN IS AN EMPLOYEE OF LRTA."3
Petitioners would contend that the appellate court ignored the
evidence and the factual findings of the trial court by holding them
liable on the basis of a sweeping conclusion that the presumption
of negligence on the part of a common carrier was not overcome.
Petitioners would insist that Escartins assault upon Navidad, which
caused the latter to fall on the tracks, was an act of a stranger that
could not have been foreseen or prevented. The LRTA would add
that the appellate courts conclusion on the existence of an
employer-employee relationship between Roman and LRTA lacked
basis because Roman himself had testified being an employee of
Metro Transit and not of the LRTA.

Respondents, supporting the decision of the appellate court,

contended that a contract of carriage was deemed created from the
moment Navidad paid the fare at the LRT station and entered the
premises of the latter, entitling Navidad to all the rights and
protection under a contractual relation, and that the appellate court
had correctly held LRTA and Roman liable for the death of Navidad
in failing to exercise extraordinary diligence imposed upon a
common carrier.
Law and jurisprudence dictate that a common carrier, both from the
nature of its business and for reasons of public policy, is burdened
with the duty of exercising utmost diligence in ensuring the safety
of passengers.4 The Civil Code, governing the liability of a common
carrier for death of or injury to its passengers, provides:
"Article 1755. A common carrier is bound to carry the passengers
safely as far as human care and foresight can provide, using the
utmost diligence of very cautious persons, with a due regard for all
the circumstances.
"Article 1756. In case of death of or injuries to passengers, common
carriers are presumed to have been at fault or to have acted
negligently, unless they prove that they observed extraordinary
diligence as prescribed in articles 1733 and 1755."
"Article 1759. Common carriers are liable for the death of or injuries
to passengers through the negligence or willful acts of the formers
employees, although such employees may have acted beyond the
scope of their authority or in violation of the orders of the common
carriers.
"This liability of the common carriers does not cease upon proof
that they exercised all the diligence of a good father of a family in
the selection and supervision of their employees."
"Article 1763. A common carrier is responsible for injuries suffered
by a passenger on account of the willful acts or negligence of other
passengers or of strangers, if the common carriers employees
through the exercise of the diligence of a good father of a family
could have prevented or stopped the act or omission."

The law requires common carriers to carry passengers safely using

the utmost diligence of very cautious persons with due regard for
all circumstances.5 Such duty of a common carrier to provide
safety to its passengers so obligates it not only during the course of
the trip but for so long as the passengers are within its premises
and where they ought to be in pursuance to the contract of
carriage.6 The statutory provisions render a common carrier liable
for death of or injury to passengers (a) through the negligence or
wilful acts of its employees or b) on account of wilful acts or
negligence of other passengers or of strangers if the common
carriers employees through the exercise of due diligence could
have prevented or stopped the act or omission.7 In case of such
death or injury, a carrier is presumed to have been at fault or been
negligent, and8 by simple proof of injury, the passenger is relieved
of the duty to still establish the fault or negligence of the carrier or
of its employees and the burden shifts upon the carrier to prove
that the injury is due to an unforeseen event or to force
majeure.9 In the absence of satisfactory explanation by the carrier
on how the accident occurred, which petitioners, according to the
appellate court, have failed to show, the presumption would be that
it has been at fault,10 an exception from the general rule that
negligence must be proved.11
The foundation of LRTAs liability is the contract of carriage and its
obligation to indemnify the victim arises from the breach of that
contract by reason of its failure to exercise the high diligence
required of the common carrier. In the discharge of its commitment
to ensure the safety of passengers, a carrier may choose to hire its
own employees or avail itself of the services of an outsider or an
independent firm to undertake the task. In either case, the common
carrier is not relieved of its responsibilities under the contract of
carriage.
Should Prudent be made likewise liable? If at all, that liability could
only be for tort under the provisions of Article 217612 and related
provisions, in conjunction with Article 2180,13 of the Civil Code.
The premise, however, for the employers liability is negligence or
fault on the part of the employee. Once such fault is established,
the employer can then be made liable on the basis of the
presumption juris tantum that the employer failed to exercise

diligentissimi patris families in the selection and supervision of its

employees. The liability is primary and can only be negated by
showing due diligence in the selection and supervision of the
employee, a factual matter that has not been shown. Absent such a
showing, one might ask further, how then must the liability of the
common carrier, on the one hand, and an independent contractor,
on the other hand, be described? It would be solidary. A contractual
obligation can be breached by tort and when the same act or
omission causes the injury, one resulting in culpa contractual and
the other in culpa aquiliana, Article 219414 of the Civil Code can
well apply.15 In fine, a liability for tort may arise even under a
contract, where tort is that which breaches the contract.16 Stated
differently, when an act which constitutes a breach of contract
would have itself constituted the source of a quasi-delictual liability
had no contract existed between the parties, the contract can be
said to have been breached by tort, thereby allowing the rules on
tort to apply.17

WHEREFORE, the assailed decision of the appellate court is

AFFIRMED with MODIFICATION but only in that (a) the award of
nominal damages is DELETED and (b) petitioner Rodolfo Roman is
absolved from liability. No costs.
SO ORDERED.

Regrettably for LRT, as well as perhaps the surviving spouse and

heirs of the late Nicanor Navidad, this Court is concluded by the
factual finding of the Court of Appeals that "there is nothing to link
(Prudent) to the death of Nicanor (Navidad), for the reason that the
negligence of its employee, Escartin, has not been duly proven x x
x." This finding of the appellate court is not without substantial
justification in our own review of the records of the case.
There being, similarly, no showing that petitioner Rodolfo Roman
himself is guilty of any culpable act or omission, he must also be
absolved from liability. Needless to say, the contractual tie between
the LRT and Navidad is not itself a juridical relation between the
latter and Roman; thus, Roman can be made liable only for his own
fault or negligence.

G.R. Nos. 66102-04 August 30, 1990

PHILIPPINE RABBIT BUS LINES, INC., petitioner, vs. THE
HONORABLE INTERMEDIATE APPELLATE COURT AND
CASIANO PASCUA, ET AL., respondents.

The award of nominal damages in addition to actual damages is

untenable. Nominal damages are adjudicated in order that a right
of the plaintiff, which has been violated or invaded by the
defendant, may be vindicated or recognized, and not for the
purpose of indemnifying the plaintiff for any loss suffered by
him.18 It is an established rule that nominal damages cannot coexist with compensatory damages.19

This is a petition for review on certiorari of the decision of the

Intermediate Appellate Court (now Court of Appeals) dated July 29,
1983 in AC-G.R. Nos. CV-65885, CV-65886 and CV-65887 which
reversed the decision of the Court of First Instance (now Regional
Trial Court) of Pangasinan dated December 27, 1978; and its
resolution dated November 28, 1983 denying the motion for
reconsideration.

MEDIALDEA, J.:

It is an established principle that the factual findings of the Court of

Appeals are final and may not be reviewed by this Court on appeal.
However, this principle is subject to certain exceptions. One of
these is when the findings of the appellate court are contrary to
those of the trial court (see Sabinosa v. The Honorable Court of
Appeals, et al., G.R. No. L-47981, July 24, 1989) in which case, a reexamination of the facts and evidence may be undertaken. This is
Our task now.
The antecedent facts are as follows:
About 11:00 o'clock in the morning on December 24, 1966, Catalina
Pascua, Caridad Pascua, Adelaida Estomo, Erlinda Meriales,
Mercedes Lorenzo, Alejandro Morales and Zenaida Parejas boarded
the jeepney owned by spouses Isidro Mangune and Guillerma
Carreon and driven by Tranquilino Manalo at Dau, Mabalacat,
Pampanga bound for Carmen, Rosales, Pangasinan to spend
Christmas at their respective homes. Although they usually ride in
buses, they had to ride in a jeepney that day because the buses
were full. Their contract with Manalo was for them to pay P24.00 for
the trip. The private respondents' testimonial evidence on this
contractual relationship was not controverted by Mangune, Carreon
and Manalo, nor by Filriters Guaranty Assurance Corporation, Inc.,
the insurer of the jeepney, with contrary evidence. Purportedly
riding on the front seat with Manalo was Mercedes Lorenzo. On the
left rear passenger seat were Caridad Pascua, Alejandro Morales
and Zenaida Parejas. On the right rear passenger seat were
Catalina Pascua, Adelaida Estomo, and Erlinda Meriales. After a
brief stopover at Moncada, Tarlac for refreshment, the jeepney
proceeded towards Carmen, Rosales, Pangasinan.
Upon reaching barrio Sinayoan, San Manuel, Tarlac, the right rear
wheel of the jeepney was detached, so it was running in an
unbalanced position. Manalo stepped on the brake, as a result of
which, the jeepney which was then running on the eastern lane (its
right of way) made a U-turn, invading and eventually stopping on
the western lane of the road in such a manner that the jeepney's
front faced the south (from where it came) and its rear faced the
north (towards where it was going). The jeepney practically
occupied and blocked the greater portion of the western lane,

which is the right of way of vehicles coming from the north, among
which was Bus No. 753 of petitioner Philippine Rabbit Bus Lines,
Inc. (Rabbit) driven by Tomas delos Reyes. Almost at the time when
the jeepney made a sudden U-turn and encroached on the western
lane of the highway as claimed by Rabbit and delos Reyes, or after
stopping for a couple of minutes as claimed by Mangune, Carreon
and Manalo, the bus bumped from behind the right rear portion of
the jeepney. As a result of the collision, three passengers of the
jeepney (Catalina Pascua, Erlinda Meriales and Adelaida Estomo)
died while the other jeepney passengers sustained physical
injuries. What could have been a festive Christmas turned out to be
tragic.
The causes of the death of the three jeepney passengers were as
follows (p. 101, Record on Appeal):
The deceased Catalina Pascua suffered the following
injuries, to wit: fracture of the left parietal and
temporal regions of the skull; fracture of the left
mandible; fracture of the right humenous; compound
fracture of the left radious and ullma middle third
and lower third; fracture of the upper third of the
right tibia and fillnea; avulsion of the head, left
internal; and multiple abrasions. The cause of her
death was shock, secondary to fracture and multiple
hemorrhage. The fractures were produced as a result
of the hitting of the victim by a strong force. The
abrasions could be produced when a person falls
from a moving vehicles (sic) and rubs parts of her
body against a cement road pavement. . . .
Erlinda Mariles (sic) sustained external lesions such
as contusion on the left parietal region of the skull;
hematoma on the right upper lid; and abrasions (sic)
on the left knee. Her internal lesions were:
hematoma on the left thorax; multiple lacerations of
the left lower lobe of the lungs; contusions on the left
lower lobe of the lungs; and simple fractures of the
2nd, 3rd, 4th, 5th, 6th, 7th, and 8th ribs, left. The

forcible impact of the jeep caused the above injuries

which resulted in her death. . . .
The cause of death of Erlinda or Florida Estomo (also
called as per autopsy of Dr. Panlasiqui was due to
shock due to internal hemorrhage, ruptured spleen
and trauma. . . .
Caridad Pascua suffered physical injuries as follows (p. 101, Record
on Appeal):
. . . lacerated wound on the forehead and occipital
region, hematoma on the forehead, multiple
abrasions on the forearm, right upper arm, back and
right leg. . . .
The police investigators of Tacpal and policemen of San Manuel,
Tarlac, Tarlac, upon arrival at the scene of the mishap, prepared a
sketch (common exhibit "K" for private respondents "19" for Rabbit)
showing the relative positions of the two vehicles as well as the
alleged point of impact (p. 100, Record on Appeal):
. . . The point of collision was a cement pave-portion
of the Highway, about six (6) meters wide, with
narrow shoulders with grasses beyond which are
canals on both sides. The road was straight and
points 200 meters north and south of the point of
collision are visible and unobstructed. Purportedly,
the point of impact or collision (Exh. "K-4", Pascua on
the sketch Exh. "K"-Pascua) was on the western lane
of the highway about 3 feet (or one yard) from the
center line as shown by the bedris (sic), dirt and soil
(obviously from the undercarriage of both vehicles)
as well as paint, marron (sic) from the Rabbit bus and
greenish from the jeepney. The point of impact
encircled and marked with the letter "X" in Exh. "K"-4
Pascua, had a diameter of two meters, the center of
which was about two meters from the western edge
of cement pavement of the roadway. Pictures taken
by witness Bisquera in the course of the investigation

showed the relative positions of the point of impact

and center line (Exh. "P"-Pascua) the back of the
Rabbit bus (Exh. "P"-1-Pascua"), the lifeless body of
Catalina Pascua (Exh. "P-2 Pascua"), and the
damaged front part of the Rabbit bus (Exh. "P-3
Pascua"). No skid marks of the Rabbit bus was found
in the vicinity of the collision, before or after the
point of impact. On the other hand, there was a skid
mark about 45 meters long purportedly of the
jeepney from the eastern shoulder of the road south
of, and extending up to the point of impact.
At the time and in the vicinity of the accident, there were no
vehicles following the jeepney, neither were there oncoming
vehicles except the bus. The weather condition of that day was fair.
After conducting the investigation, the police filed with the
Municipal Court of San Manuel, Tarlac, a criminal complaint against
the two drivers for Multiple Homicide. At the preliminary
investigation, a probable cause was found with respect to the case
of Manalo, thus, his case was elevated to the Court of First
Instance. However, finding no sufficiency of evidence as regards
the case of delos Reyes, the Court dismissed it. Manalo was
convicted and sentenced to suffer imprisonment. Not having
appealed, he served his sentence.
Complaints for recovery of damages were then filed before the
Court of First Instance of Pangasinan. In Civil Case No. 1136,
spouses Casiano Pascua and Juana Valdez sued as heirs of Catalina
Pascua while Caridad Pascua sued in her behalf. In Civil Case No.
1139, spouses Manuel Millares and Fidencia Arcica sued as heirs of
Erlinda Meriales. In Civil Case No. 1140, spouses Mariano Estomo
and Dionisia Sarmiento also sued as heirs of Adelaida Estomo.

In all three cases, spouses Mangune and Carreon, Manalo, Rabbit

and delos Reyes were all impleaded as defendants. Plaintiffs
anchored their suits against spouses Mangune and Carreon and
Manalo on their contractual liability. As against Rabbit and delos
Reyes, plaintiffs based their suits on their culpability for a quasidelict. Filriters Guaranty Assurance Corporation, Inc. was also
impleaded as additional defendant in Civil Case No. 1136 only.
For the death of Catalina Pascua, plaintiffs in Civil Case No. 1136
sought to collect the aggregate amount of P70,060.00 in damages,
itemized as follows: P500.00 for burial expenses; P12,000.00 for
loss of wages for 24 years; P10,000.00 for exemplary damages;
P10,000.00 for moral damages; and P3,000.00 for attorney's fees.
In the same case, plaintiff Caridad Pascua claimed P550.00 for
medical expenses; P240.00 for loss of wages for two months;
P2,000.00 for disfigurement of her face; P3,000.00 for physical pain
and suffering; P2,500.00 as exemplary damages and P2,000.00 for
attorney's fees and expenses of litigation.
In Civil Case No. 1139, plaintiffs demanded P500.00 for burial
expenses; P6,000.00 for the death of Erlinda, P63,000.00 for loss of
income; P10,000.00 for moral damages and P3,000.00 for
attorney's fees or total of P80,000.00.
In Civil Case No. 1140, plaintiffs claimed P500.00 for burial
expenses; P6,000.00 for the death of Adelaide, P56,160.00 for loss
of her income or earning capacity; P10,000.00 for moral damages;
and P3,000.00 for attorney's fees.
Rabbit filed a cross-claim in the amount of P15,000.00 for
attorney's fees and expenses of litigation. On the other hand,
spouses Mangune and Carreon filed a cross-claim in the amount of
P6,168.00 for the repair of the jeepney and P3,000.00 for its nonuse during the period of repairs.
On December 27, 1978, the trial court rendered its decision finding
Manalo negligent, the dispositive portion of which reads (pp. 113114, Record on Appeal):
PREMISES CONSIDERED, this Court is of the opinion and so holds:

1) That defendants Isidro Mangune, Guillerma

Carreon
and
Tranquilino
Manalo
thru
their
negligence, breached contract of carriage with their
passengers the plaintiffs' and/or their heirs, and this
Court renders judgment ordering said defendants,
jointly and severally, to pay the plaintiffs
a) In Civil Case No. 1136, for the death of Catalina
Pascua, to pay her heirs the amounts of P12,000.00
for indemnity for loss of her life; P41,760.00 for loss
of earnings; P324.40 for actual expenses and
P2,000.00 for moral damages;
b) In the same Civil Case No.1136 for the injuries of
Caridad Pascua, to pay her the amounts of P240.00
for loss of wages, P328.20 for actual expenses and
P500.00 for moral damages;
c) In Civil Case No.1139 for the death of Erlinda
Meriales, to pay her heirs (the plaintiffs) the amount
of P12,000.00 for indemnity for loss of her life;
P622.00 for actual expenses, P60,480.00 for loss of
wages or income and P2,000.00 for moral damages;
d) In Civil Case No. 1140, for the death of Erlinda
(also called Florida or Adelaida Estomo), to pay her
heirs (the plaintiff the amount of P12,000.00 for
indemnity for the loss of her life; P580.00 for actual
expenses; P53,160.00 for loss of wages or income
and P2,000.00 for moral damages.
2) The defendant Filriters Guaranty Insurance Co.,
having contracted to ensure and answer for the
obligations of defendants Mangune and Carreon for
damages due their passengers, this Court renders
judgment against the said defendants Filriters
Guaranty Insurance Co., jointly and severally with
said defendants (Mangune and Carreon) to pay the
plaintiffs the amount herein above adjudicated in
their favor in Civil Case No. 1136 only. All the

amounts awarded said plaintiff, as set forth in

paragraph one (1) hereinabove;

For the death of Catalina Pascua, the parents and/or

heirs are awarded

3) On the cross claim of Phil. Rabbit Bus Lines, Inc.

ordering the defendant, Isidro Mangune, Guillerma
Carreon and Tranquilino Manalo, to pay jointly and
severally, cross-claimant Phil. Rabbit Bus Lines, Inc.,
the amounts of P216.27 as actual damages to its Bus
No. 753 and P2,173.60 for loss of its earning.

Civil Case No. 1136

a) Indemnity for the loss of life P12,000.00
b) Loss of Salaries or earning capacity
14,000.00

All of the above amount, shall bear legal interest

from the filing of the complaints.

c) Actual
800.00

Costs are adjudged against defendants Mangune,

Carreon and Manalo and Filriters Guaranty.

d) For moral damages 10,000.00

damages

(burial

expenses)

e) Exemplary damages 3,000.00

SO ORDERED
f) For attorney's fees 3,000.00
On appeal, the Intermediate Appellate Court reversed the abovequoted decision by finding delos Reyes negligent, the dispositive
portion of which reads (pp. 55-57, Rollo):
WHEREFORE, PREMISES CONSIDERED, the lower
court's decision is hereby REVERSED as to item No. 3
of the decision which reads:
3) On the cross claim of Philippine Rabbit Bus Lines,
Inc. ordering the defendants Isidro Mangune,
Guillerma Carreon and Tranquilino Manalo, to pay
jointly and severally, the amounts of P216.27 as
actual damages to its Bus No. 753 and P2,173.60 for
loss of its earnings.
and another judgment is hereby rendered in favor of
plaintiffs-appellants Casiana Pascua, Juan Valdez and
Caridad Pascua, ordering the Philippine Rabbit Bus
Lines, Inc. and its driver Tomas delos Reyes to pay
the former jointly and severally damages in amounts
awarded as follows:

Total P38,200.00 (sic)

For the physical injuries suffered by Caridad Pascua:
Civil Case No. 1136
a) Actual damages (hospitalization expenses)
P550.00
b) Moral damages (disfigurement of the
face and physical suffering 8,000.00
c) Exemplary damages 2,000.00

Total P10,550.00

For the death of Erlinda Arcega Meriales. the parents

and/or heirs:

Total P41,500.00

Civil Case No. 1139

With costs against the Philippine Rabbit Bus Lines,
Inc.

a) Indemnity for loss of life P12,000.00

b) Loss of Salary or Earning Capacity
20,000.00
c) Actual
500.00

damages

(burial

expenses)

d) Moral damages 15,000.00

e) Exemplary damages 15,000.00

SO ORDERED.
The motion for reconsideration was denied. Hence, the
present petition.
The issue is who is liable for the death and physical injuries
suffered by the passengers of the jeepney?
The trial court, in declaring that Manalo was negligent, considered
the following (p. 106, Record on Appeal):

f) Attorney's fees 3,000.00

Total P65,500.00
For the death of Florida Sarmiento Estomo:
Civil Case No. 1140
a) Indemnity for loss of life P12,000.00
b) Loss of Salary or Earning capacity 20,000.00
c) Actual damages (burial expenses) 500.00
d) Moral damages 3,000.00
e) Exemplary damages 3,000.00
f) Attorney's fees 3,000.00

(1) That the unrebutted testimony of his passenger

plaintiff Caridad Pascua that a long ways (sic) before
reaching the point of collision, the Mangune jeepney
was "running fast" that his passengers cautioned
driver Manalo to slow down but did not heed the
warning: that the right rear wheel was detached
causing the jeepney to run to the eastern shoulder of
the road then back to the concrete pavement; that
driver Manalo applied the brakes after which the
jeepney made a U-turn (half-turn) in such a manner
that it inverted its direction making it face South
instead of north; that the jeepney stopped on the
western lane of the road on the right of way of the
oncoming Phil. Rabbit Bus where it was bumped by
the latter;
(2) The likewise unrebutted testimony of Police
Investigator Tacpal of the San Manuel (Tarlac) Police
who, upon responding to the reported collission,
found the real evidence thereat indicate in his sketch
(Exh. K, Pascua ), the tracks of the jeepney of
defendant Mangune and Carreon running on the

Eastern shoulder (outside the concrete paved road)

until it returned to the concrete road at a sharp
angle, crossing the Eastern lane and the (imaginary)
center line and encroaching fully into the western
lane where the collision took place as evidenced by
the point of impact;
(3) The observation of witness Police Corporal
Cacalda also of the San Manuel Police that the path
of the jeepney they found on the road and indicated
in the sketch (Exh. K-Pascua) was shown by skid
marks which he described as "scratches on the road
caused by the iron of the jeep, after its wheel was
removed;"
(4) His conviction for the crime of Multiple Homicide
and Multiple Serious Physical Injuries with Damage to
Property thru Reckless Imprudence by the Court of
First Instance of Tarlac (Exh. 24-Rabbit) upon the
criminal Information by the Provincial Fiscal of Tarlac
(Exh. 23-Rabbit), as a result of the collision, and his
commitment to prison and service of his sentence
(Exh. 25-Rabbit) upon the finality of the decision and
his failure to appeal therefrom; and
(5) The application of the doctrine of res-ipsa
loquitar (sic) attesting to the circumstance that the
collision occured (sic) on the right of way of the Phil.
Rabbit Bus.
The respondent court had a contrary opinion. Applying primarily (1)
the doctrine of last clear chance, (2) the presumption that drivers
who bump the rear of another vehicle guilty and the cause of the
accident unless contradicted by other evidence, and (3) the
substantial factor test. concluded that delos Reyes was negligent.
The misappreciation of the facts and evidence and the
misapplication of the laws by the respondent court warrant a
reversal of its questioned decision and resolution.

We reiterate that "[t]he principle about "the last clear" chance,

would call for application in a suit between the owners and drivers
of the 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 of the jeepney and its owners on the ground that the other
driver was likewise guilty of negligence." This was Our ruling
in Anuran, et al. v. Buo et al., G.R. Nos. L-21353 and L-21354, May
20, 1966, 17 SCRA 224. 1 Thus, the respondent court erred in
applying said doctrine.
On the presumption that drivers who bump the rear of another
vehicle guilty and the cause of the accident, unless contradicted by
other evidence, the respondent court said (p. 49, Rollo):
. . . the jeepney had already executed a complete
turnabout and at the time of impact was already
facing the western side of the road. Thus the jeepney
assumed a new frontal position vis a vis, the bus, and
the bus assumed a new role of defensive driving. The
spirit behind the presumption of guilt on one who
bumps the rear end of another vehicle is for the
driver following a vehicle to be at all times prepared
of a pending accident should the driver in front
suddenly come to a full stop, or change its course
either through change of mind of the front driver,
mechanical trouble, or to avoid an accident. The rear
vehicle is given the responsibility of avoiding a
collision with the front vehicle for it is the rear vehicle
who has full control of the situation as it is in a
position to observe the vehicle in front of it.
The above discussion would have been correct were it not for the
undisputed fact that the U-turn made by the jeepney was abrupt
(Exhibit "K," Pascua). The jeepney, which was then traveling on the
eastern shoulder, making a straight, skid mark of approximately 35
meters, crossed the eastern lane at a sharp angle, making a skid
mark of approximately 15 meters from the eastern shoulder to the
point of impact (Exhibit "K" Pascua). Hence, delos Reyes could not
have anticipated the sudden U-turn executed by Manalo. The

respondent court did not realize that the presumption was rebutted
by this piece of evidence.
With regard to the substantial factor test, it was the opinion of the
respondent court that (p. 52, Rollo):
. . . It is the rule under the substantial factor test that
if the actor's conduct is a substantial factor in
bringing about harm to another, the fact that the
actor neither foresaw nor should have foreseen the
extent of the harm or the manner in which it
occurred does not prevent him from being liable
(Restatement, Torts, 2d). Here, We find defendant
bus running at a fast speed when the accident
occurred and did not even make the slightest effort
to avoid the accident, . . . . The bus driver's conduct
is thus a substantial factor in bringing about harm to
the passengers of the jeepney, not only because he
was driving fast and did not even attempt to avoid
the mishap but also because it was the bus which
was the physical force which brought about the injury
and death to the passengers of the jeepney.
The speed of the bus was calculated by respondent court as follows
(pp. 54-55, Rollo):
According to the record of the case, the bus departed
from Laoag, Ilocos Norte, at 4:00 o'clock A.M. and the
accident took place at approximately around 12:30
P.M., after travelling roughly for 8 hours and 30
minutes. Deduct from this the actual stopover time of
two Hours (computed from the testimony of the
driver that he made three 40-minute stop-overs), We
will have an actual travelling time of 6 hours and 30
minutes.
Under the circumstances, We calculate that the
Laoag-Tarlac route (365 kms.) driving at an average
of 56 km. per hour would take 6 hours and 30
minutes. Therefore, the average speed of the bus,

give and take 10 minutes, from the point of impact

on the highway with excellent visibility factor would
be 80 to 90 kms. per hour, as this is the place where
buses would make up for lost time in traversing busy
city streets.
Still, We are not convinced. It cannot be said that the bus was
travelling at a fast speed when the accident occurred because the
speed of 80 to 90 kilometers per hour, assuming such calculation to
be correct, is yet within the speed limit allowed in highways. We
cannot even fault delos Reyes for not having avoided the collision.
As aforestated, the jeepney left a skid mark of about 45 meters,
measured from the time its right rear wheel was detached up to the
point of collision. Delos Reyes must have noticed the perilous
condition of the jeepney from the time its right rear wheel was
detached or some 90 meters away, considering that the road was
straight and points 200 meters north and south of the point of
collision, visible and unobstructed. Delos Reyes admitted that he
was running more or less 50 kilometers per hour at the time of the
accident. Using this speed, delos Reyes covered the distance of 45
meters in 3.24 seconds. If We adopt the speed of 80 kilometers per
hour, delos Reyes would have covered that distance in only 2.025
seconds. Verily, he had little time to react to the situation. To
require delos Reyes to avoid the collision is to ask too much from
him. Aside from the time element involved, there were no options
available to him. As the trial court remarked (pp. 107-108, Record
on Appeal):
. . . They (plaintiffs) tried to impress this Court that
defendant de los Reyes, could have taken either of
two options: (1) to swerve to its right (western
shoulder) or (2) to swerve to its left (eastern lane),
and thus steer clear of the Mangune jeepney. This
Court does not so believe, considering the existing
exigencies of space and time.
As to the first option, Phil. Rabbit's evidence is
convincing and unrebutted that the Western shoulder
of the road was narrow and had tall grasses which
would indicate that it was not passable. Even

plaintiffs own evidence, the pictures (Exhs. P and P-2,

Pascua) are mute confirmation of such fact. Indeed, it
can be noticed in the picture (Exh. P-2, Pascua) after
the Rabbit bus came to a full stop, it was tilted to
right front side, its front wheels resting most
probably on a canal on a much lower elevation that
of the shoulder or paved road. It too shows that all of
the wheels of the Rabbit bus were clear of the
roadway except the outer left rear wheel. These
observation appearing in said picture (Exh P-2,
Pascua) clearly shows coupled with the finding the
Rabbit bus came to a full stop only five meters from
the point of impact (see sketch, Exh. K-Pascua)
clearly show that driver de los Reyes veered his
Rabbit bus to the right attempt to avoid hitting the
Mangune's jeepney. That it was not successful in fully
clearing the Mangune jeepney as its (Rabbit's) left
front hit said jeepney (see picture Exh. 10-A-Rabbit)
must have been due to limitations of space and time.

failed to exercise the precautions that are needed precisely pro hac
vice.

Plaintiffs alternatively claim that defendant delos

Reyes of the Rabbit bus could also have swerved to
its left (eastern lane) to avoid bumping the Mangune
jeepney which was then on the western lane. Such a
claim is premised on the hypothesis (sic) that the
eastern lane was then empty. This claim would
appear to be good copy of it were based alone on the
sketch made after the collision. Nonetheless, it loses
force it one were to consider the time element
involved, for moments before that, the Mangune
jeepney was crossing that very eastern lane at a
sharp angle. Under such a situation then, for driver
delos Reyes to swerve to the eastern lane, he would
run the greater risk of running smack in the Mangune
jeepney either head on or broadside.

To escape liability, defendants Mangune and Carreon

offered to show thru their witness Natalio Navarro, an
alleged mechanic, that he periodically checks and
maintains the jeepney of said defendants, the last on
Dec. 23, the day before the collision, which included
the tightening of the bolts. This notwithstanding the
right rear wheel of the vehicle was detached while in
transit. As to the cause thereof no evidence was
offered. Said defendant did not even attempt to
explain, much less establish, it to be one caused by
a caso fortuito. . . .

After a minute scrutiny of the factual matters and duly proven

evidence, We find that the proximate cause of the accident was the
negligence of Manalo and spouses Mangune and Carreon. They all

In culpa contractual, the moment a passenger dies or is injured, the

carrier is presumed to have been at fault or to have acted
negligently, and this disputable presumption may only be
overcome by evidence that he had observed extra-ordinary
diligence as prescribed in Articles 1733, 1755 and 1756 of the New
Civil Code 2 or that the death or injury of the passenger was due to
a fortuitous event 3 (Lasam v. Smith, Jr., 45 Phil. 657).
The negligence of Manalo was proven during the trial by the
unrebutted testimonies of Caridad Pascua, Police Investigator
Tacpal, Police Corporal Cacalda, his (Manalo's) conviction for the
crime of Multiple Homicide and Multiple Serious Injuries with
Damage to Property thru Reckless Imprudence, and the application
of the doctrine ofres ipsa loquitur supra. The negligence of spouses
Mangune and Carreon was likewise proven during the trial (p. 110,
Record on Appeal):

In any event, "[i]n an action for damages against the carrier

for his failure to safely carry his passenger to his
destination, an accident caused either by defects in the
automobile or through the negligence of its driver, is not
a caso fortuito which would avoid the carriers liability for
damages (Son v. Cebu Autobus Company, 94 Phil. 892 citing
Lasam, et al. v. Smith, Jr., 45 Phil. 657; Necesito, etc. v.
Paras, et al., 104 Phil. 75).

The trial court was therefore right in finding that Manalo and
spouses Mangune and Carreon were negligent. However, its ruling
that spouses Mangune and Carreon are jointly and severally liable
with Manalo is erroneous The driver cannot be held jointly and
severally liable with the carrier in case of breach of the contract of
carriage. The rationale behind this is readily discernible. Firstly, the
contract of carriage is between the carrier and the passenger, and
in the event of contractual liability, the carrier is exclusively
responsible therefore to the passenger, even if such breach be due
to the negligence of his driver (see Viluan v. The Court of Appeals,
et al., G.R. Nos. L-21477-81, April 29, 1966, 16 SCRA 742). In other
words, the carrier can neither shift his liability on the contract to his
driver nor share it with him, for his driver's negligence is
his. 4 Secondly, if We make the driver jointly and severally liable
with the carrier, that would make the carrier's liability personal
instead of merely vicarious and consequently, entitled to recover
only the share which corresponds to the driver, 5 contradictory to
the explicit provision of Article 2181 of the New Civil Code. 6

G.R. No. L-9907

June 30, 1958
LOURDES J. LARA, ET AL., plaintiffs-appellants, vs. BRIGIDO R.
VALENCIA, defendant-appellant.
BAUTISTA ANGELO, J.:

We affirm the amount of damages adjudged by the trial court,

except with respect to the indemnity for loss of life. Under Article
1764 in relation to Article 2206 of the New Civil Code, the amount
of damages for the death of a passenger is at least three thousand
pesos (P3,000.00). The prevailing jurisprudence has increased the
amount of P3,000.00 to P30,000.00 (see Heirs of Amparo delos
Santos, et al. v. Honorable Court of Appeals, et al., G.R. No. 51165,
June 21, 1990 citing De Lima v. Laguna Tayabas Co., G.R. Nos. L35697-99, April 15, 1988, 160 SCRA 70).
ACCORDINGLY, the petition is hereby GRANTED. The decision of the
Intermediate Appellate Court dated July 29, 1983 and its resolution
dated November 28, 1983 are SET ASIDE. The decision of the Court
of First Instance dated December 27, 1978 is REINSTATED
MODIFICATION that only Isidro Mangune, Guillerma Carreon and
Filriters Guaranty Assurance Corporation, Inc. are liable to the
victims or their heirs and that the amount of indemnity for loss of
life is increased to thirty thousand pesos (P30,000.00).
SO ORDERED.

This is an action for damages brought by plaintiffs against

defendant in the Court of First Instance of Davao for the death of
one Demetrio Lara, Sr. allegedly caused by the negligent act of
defendant. Defendant denied the charge of negligence and set up
certain affirmative defenses and a counterclaim.
The court after hearing rendered judgment ordering defendant to
pay the plaintiffs the following amount: (a) P10,000 as moral
damages; (b) P3,000 as exemplary damages; and (c) P1,000 as
attorney's fees, in addition to the costs of action. Both parties
appealed to this Court because the damages claimed in the
complaint exceed the sum of P50,000.
In their appeal, plaintiffs claim that the court a quo erred in
disregarding their claim of P41,400 as actual or compensatory
damages and in awarding as attorneys' fees only the sum of P1,000
instead of P3,000 as agreed upon between plaintiffs and their
counsel. Defendant, on the other hand, disputes the finding of the
court a quo that the oath of Demetrio Lara, Sr. was due to the
negligence of defendant and the portion of the judgment which

orders dependant to pay to plaintiffs moral and exemplary

damages as well as attorneys' fees, said defendant contending that
the court should have declared that the death of Lara was due to
unavoidable accident.
The deceased was an inspector of the Bureau of Forestry stationed
in Davao with an annual salary of P1,800. The defendant is
engaged in the business of exporting logs from his lumber
concession in Cotabato. Lara went to said concession upon
instructions of his chief to classify the logs of defendant which were
about to be loaded on a ship anchored in the port of Parang. The
work Lara of lasted for six days during which he contracted malaria
fever. In the morning of January 9, 1954, Lara who then in a hurry
to return to Davao asked defendant if he could take him in his pickup as there was then no other means of transportation, to which
defendant agreed, and in that same morning the pick-up left
Parang bound for Davao taking along six passengers, including
Lara.
The pick-up has a front seat where the driver and two passengers
can be accommodated and the back has a steel flooring enclosed
with a steel walling of 16 to 17 inches tall on the sides and with a
19 inches tall walling at the back. Before leaving Parang, the sitting
arrangement was as follows: defendant was at the wheel and
seated with him in the front seat were Mrs. Valencia and Nicanor
Quinain; on the back of the pick-up were two improvised benches
placed on each side, and seated on the right bench were Ricardo
Alojipan and Antonio Lagahit, and on the left one Bernardo and
Pastor Geronimo. A person by the name of Leoning was seated on a
box located on the left side while in the middle Lara sat on a bag.
Before leaving Parang, defendant invited Lara to sit with him on the
front seat but Lara declined. It was their understanding that upon
reaching barrio Samoay, Cotabato, the passengers were to alight
and take a bus bound for Davao, but when they arrived at that
place, only Bernardo alighted and the other passengers requested
defendant to allow them to ride with him up to Davao because
there was then no available bus that they could take in going to
that place. Defendant again accommodated the passengers.

When they continued their trip, the sitting arrangement of the

passengers remained the same, Lara being seated on a bag in the
middle with his arms on a suitcase and his head cove red by a
jacket. Upon reaching Km. 96, barrio Catidtuan, Lara accidentally
fell from the pick-up and as a result he suffered serious injuries.
Valencia stopped the pick-up to see what happened to Lara. He
sought the help of the residents of that place and applied water to
Lara but to no avail. They brought Lara to the nearest place where
they could find a doctor and not having found any they took him to
St. Joseph's Clinic of Kidapawan. But when Lara arrived he was
already dead. From there they proceeded to Davao City and
immediately notified the local authorities. An investigation was
made regarding the circumstances surrounding the death of Lara
but no criminal action was taken against defendant.
It should be noted that the deceased went to the lumber
concession of defendant in Parang, Cotabato upon instructions of
his chief in order to classify the logs of defendant which were then
ready to be exported and to be loaded on a ship anchored in the
port of Parang. It took Lara six days to do his work during which he
contracted malaria fever and for that reason he evinced a desire to
return immediately to Davao. At that time, there was no available
bus that could take him back to Davao and so he requested the
defendant if he could take him in his own pick-up. Defendant
agreed and, together with Lara, other passengers tagged along,
most of them were employees of the Government. Defendant
merely accommodated them and did not charge them any fee for
the service. It was also their understanding that upon reaching
barrio Samoay, the passengers would alight and transfer to a bus
that regularly makes the trip to Davao but unfortunately there was
none available at the time and so the same passengers, including
Lara, again requested the defendant to drive them to Davao.
Defendant again accommodated them and upon reaching Km. 96,
Lara accidentally fell suffering fatal injuries.
It therefore appears that the deceased, as well his companions who
rode in the pick-up of defendant, were merely accommodation
passengers who paid nothing for the service and so they can be
considered as invited guests within the meaning of the law. As
accommodation passengers or invited guests, defendant as owner

and driver of the pick-up owes to them merely the duty to exercise
reasonable care so that they may be transported safely to their
destination. Thus, "The rule is established by the weight of
authority that the owner or operator of an automobile owes the
duty to an invited guest to exercise reasonable care in its
operation, and not unreasonably to expose him to danger and
injury by increasing the hazard of travel. This rule, as frequently
stated by the courts, is that an owner of an automobile owes a
guest the duty to exercise ordinary or reasonable care to avoid
injuring him. Since one riding in an automobile is no less a guest
because he asked for the privilege of doing so, the same obligation
of care is imposed upon the driver as in the case of one expressly
invited to ride" (5 Am. Jur., 626-627). Defendant, therefore, is only
required to observe ordinary care, and is not in duty bound to
exercise extraordinary diligence as required of a common carrier by
our law (Articles 1755 and 1756, new Civil Code).
The question that now arises is: Is there enough evidence to show
that defendant failed to observe ordinary care or diligence in
transporting the deceased from Parang to Davao on the date in
question?
The trial court answered the question in the affirmative but in so
doing it took into account only the following facts:
No debe perderse de vista el hecho, que los negocios de
exportacion de trozos del demandado tiene un volumen de
P1,200. Lara era empleado de la Oficina de Montes,
asalariado por el gobierno, no pagado por el demandado
para classificar los trozos exportados; debido a los trabajos
de classificacion que duro 6 dias, en su ultimo dia Lara no
durmio toda la noche, al dia siguiente, Lara fue atacado de
malaria, tenia inflamada la cara y cuerpo, sufria dolores de
cabeza con erupciones en la cara y cuerpo; que en la
manana, del dia 2 de enero de 1954, fecha en que Lara salio
de Davao para Parang, en aeroplano para clasificar los
trozos del demandado, el automobil de este condujo a aquel
al aerodromo de Davao.
xxx

xxx

xxx

El viaje de Cotabato a Davao no es menos de 8 horas, su

carretera esta en malas condiciones, desnivelada, con
piedras salientes y baches, que hacen del vehiculo no
estable en su marcha. Lara estaba enfermo de cierta
gravedad, tenia el cuerpo y cara inflamados, atacado de
malaria, con dolores de cabeza y con erupciones en la cara
y cuerpo.
A la vista de estos hechos, el demandado debia de saber
que era sumamente peligroso llevar 5 pasajeros en la parte
trasera del pick-up; particularmente, para la salud de Lara;
el permitirlo, el demandado no ha tomado las precausiones,
para evitar un posible accidente fatal. La negative de Lara
de ocupar el asiento delantero del pick-up no constituye a
juicio del Juzgado una defensa, pues el demendado
conociendo el estado delicado de salud de Lara, no debio de
haber permitido que aquel regrese a Davao en su pick-up; si
querria prestar a aquel un favor, debio de haver provisto a
Lara de un automobil para su regrese a Davao, ya que el
demendado es un millionario; si no podia prestar a aquel
este favor, debio de haver dejado a Lara en Samuay para
coger aquel un camion de pasajero de Cotabato a Davao.
Even if we admit as true the facts found by the trial court, still we
find that the same are not sufficient to show that defendant has
failed to take the precaution necessary to conduct his passengers
safely to their place of destination for there is nothing there to
indicate that defendant has acted with negligence or without taking
the precaution that an ordinary prudent man would have taken
under similar circumstances. It should be noted that Lara went to
the lumber concession of defendant in answer to a call of duty
which he was bound to perform because of the requirement of his
office and he contracted the malaria fever in the course of the
performance of that duty. It should also be noted that defendant
was not in duty bound to take the deceased in his own pick-up to
Davao because from Parang to Cotabato there was a line of
transportation that regularly makes trips for the public, and if
defendant agreed to take the deceased in his own car, it was only
to accommodate him considering his feverish condition and his
request that he be so accommodated. It should also be noted that

the passengers who rode in the pick-up of defendant took their

respective seats therein at their own choice and not upon indication
of defendant with the particularity that defendant invited the
deceased to sit with him in the front seat but which invitation the
deceased declined. The reason for this can only be attributed to his
desire to be at the back so that he could sit on a bag and travel in a
reclining position because such was more convenient for him due to
his feverish condition. All the circumstances therefore clearly
indicate that defendant had done what a reasonable prudent man
would have done under the circumstances.
There is every reason to believe that the unfortunate happening
was only due to an unforeseen accident accused by the fact that at
the time the deceased was half asleep and must have fallen from
the pick-up when it ran into some stones causing it to jerk
considering that the road was then bumpy, rough and full of stones.
The finding of the trial court that the pick-up was running at more
than 40 kilometers per hour is not supported by the evidence. This
is a mere surmise made by the trial court considering the time the
pick-up left barrio Samoay and the time the accident occured in
relation to the distance covered by the pick-up. And even if this is
correct, still we say that such speed is not unreasonable
considering that they were traveling on a national road and the
traffic then was not heavy. We may rather attribute the incident to
lack of care on the part of the deceased considering that the pickup was open and he was then in a crouching position. Indeed, the
law provides that "A passenger must observe the diligence of a
good father of a family to avoid injury to himself" (Article 1761, new
Civil Code), which means that if the injury to the passenger has
been proximately caused by his own negligence, the carrier cannot
be held liable.
All things considered, we are persuaded to conclude that the
accident occurred not due to the negligence of defendant but to
circumstances beyond his control and so he should be exempt from
liability.
Wherefore, the decision appealed from is reversed, without
pronouncement as to costs.

to petitioner damages in the total sum of sixteen thousand three

hundred pesos (P 16,300.00).
The record discloses the following facts:
Petitioner-plaintiff Jose Pilapil, a paying passenger, boarded
respondent-defendant's bus bearing No. 409 at San Nicolas, Iriga
City on 16 September 1971 at about 6:00 P.M. While said bus No.
409 was in due course negotiating the distance between Iriga City
and Naga City, upon reaching the vicinity of the cemetery of the
Municipality of Baao, Camarines Sur, on the way to Naga City, an
unidentified man, a bystander along said national highway, hurled
a stone at the left side of the bus, which hit petitioner above his left
eye. Private respondent's personnel lost no time in bringing the
petitioner to the provincial hospital in Naga City where he was
confined and treated.
Considering that the sight of his left eye was impaired, petitioner
was taken to Dr. Malabanan of Iriga City where he was treated for
another week. Since there was no improvement in his left eye's
vision, petitioner went to V. Luna Hospital, Quezon City where he
was treated by Dr. Capulong. Despite the treatment accorded to
him by Dr. Capulong, petitioner lost partially his left eye's vision
and sustained a permanent scar above the left eye.

G.R. No. 52159 December 22, 1989

JOSE PILAPIL, petitioner, vs. HON. COURT OF APPEALS and
ALATCO TRANSPORTATION COMPANY, INC., respondents.
PADILLA, J.:
This is a petition to review on certiorari the decision* rendered by
the Court of Appeals dated 19 October 1979 in CA-G.R. No. 57354-R
entitled "Jose Pilapil, plaintiff-appellee versus Alatco Transportation
Co., Inc., defendant-appellant," which reversed and set aside the
judgment of the Court of First Instance of Camarines Sur in Civil
Case No. 7230 ordering respondent transportation company to pay

Thereupon, petitioner instituted before the Court of First Instance of

Camarines Sur, Branch I an action for recovery of damages
sustained as a result of the stone-throwing incident. After trial, the
court a quo rendered judgment with the following dispositive part:
Wherefore, judgment is hereby entered:
1.
Ordering
defendant
transportation
company to pay plaintiff Jose Pilapil the sum
of
P
10,000.00,
Philippine
Currency,
representing actual and material damages for
causing a permanent scar on the face and
injuring the eye-sight of the plaintiff;

2. Ordering further defendant transportation

company to pay the sum of P 5,000.00,
Philippine Currency, to the plaintiff as moral
and exemplary damages;
3.
Ordering
furthermore,
defendant
transportation company to reimburse plaintiff
the sum of P 300.00 for his medical expenses
and attorney's fees in the sum of P 1,000.00,
Philippine Currency; and
4. To pay the costs.
SO ORDERED 1
From the judgment, private respondent appealed to the Court of
Appeals where the appeal was docketed as CA-G.R. No. 57354R. On
19 October 1979, the Court of Appeals, in a Special Division of Five,
rendered judgment reversing and setting aside the judgment of the
court a quo.
Hence the present petition.
In seeking a reversal of the decision of the Court of Appeals,
petitioner contends that said court has decided the issue not in
accord with law. Specifically, petitioner argues that the nature of
the business of a transportation company requires the assumption
of certain risks, and the stoning of the bus by a stranger resulting in
injury to petitioner-passenger is one such risk from which the
common carrier may not exempt itself from liability.
We do not agree.
In consideration of the right granted to it by the public to engage in
the business of transporting passengers and goods, a common
carrier does not give its consent to become an insurer of any and
all risks to passengers and goods. It merely undertakes to perform
certain duties to the public as the law imposes, and holds itself
liable for any breach thereof.

Under Article 1733 of the Civil Code, common carriers are required
to observe extraordinary diligence for the safety of the passenger
transported by them, according to all the circumstances of each
case. The requirement of extraordinary diligence imposed upon
common carriers is restated in Article 1755: "A common carrier is
bound to carry the passengers safely as far as human care and
foresight can provide, using the utmost diligence of very cautious
persons, with due regard for all the circumstances." Further, in case
of death of or injuries to passengers, the law presumes said
common carriers to be at fault or to have acted negligently. 2
While the law requires the highest degree of diligence from
common carriers in the safe transport of their passengers and
creates a presumption of negligence against them, it does not,
however, make the carrier an insurer of the absolute safety of its
passengers. 3
Article 1755 of the Civil Code qualifies the duty of extraordinary
care, vigilance and precaution in the carriage of passengers by
common carriers to only such as human care and foresight can
provide. what constitutes compliance with said duty is adjudged
with due regard to all the circumstances.
Article 1756 of the Civil Code, in creating a presumption of fault or
negligence on the part of the common carrier when its passenger is
injured, merely relieves the latter, for the time being, from
introducing evidence to fasten the negligence on the former,
because the presumption stands in the place of evidence. Being a
mere presumption, however, the same is rebuttable by proof that
the common carrier had exercised extraordinary diligence as
required by law in the performance of its contractual obligation, or
that the injury suffered by the passenger was solely due to a
fortuitous event. 4
In fine, we can only infer from the law the intention of the Code
Commission and Congress to curb the recklessness of drivers and
operators of common carriers in the conduct of their business.
Thus, it is clear that neither the law nor the nature of the business
of a transportation company makes it an insurer of the passenger's

safety, but that its liability for personal injuries sustained by its
passenger rests upon its negligence, its failure to exercise the
degree of diligence that the law requires. 5
Petitioner contends that respondent common carrier failed to rebut
the presumption of negligence against it by proof on its part that it
exercised extraordinary diligence for the safety of its passengers.
We do not agree.
First, as stated earlier, the presumption of fault or negligence
against the carrier is only a disputable presumption. It gives in
where contrary facts are established proving either that the carrier
had exercised the degree of diligence required by law or the injury
suffered by the passenger was due to a fortuitous event. Where, as
in the instant case, the injury sustained by the petitioner was in no
way due to any defect in the means of transport or in the method
of transporting or to the negligent or willful acts of private
respondent's employees, and therefore involving no issue of
negligence in its duty to provide safe and suitable cars as well as
competent employees, with the injury arising wholly from causes
created by strangers over which the carrier had no control or even
knowledge or could not have prevented, the presumption is
rebutted and the carrier is not and ought not to be held liable. To
rule otherwise would make the common carrier the insurer of the
absolute safety of its passengers which is not the intention of the
lawmakers.
Second, while as a general rule, common carriers are bound to
exercise extraordinary diligence in the safe transport of their
passengers, it would seem that this is not the standard by which its
liability is to be determined when intervening acts of strangers is to
be determined directly cause the injury, while the contract of
carriage Article 1763 governs:
Article 1763. A common carrier is responsible for
injuries suffered by a passenger on account of the
wilful acts or negligence of other passengers or of
strangers, if the common carrier's employees
through the exercise of the diligence of a good father

of a family could have prevented or stopped the act

or omission.
Clearly under the above provision, a tort committed by a stranger
which causes injury to a passenger does not accord the latter a
cause of action against the carrier. The negligence for which a
common carrier is held responsible is the negligent omission by the
carrier's employees to prevent the tort from being committed when
the same could have been foreseen and prevented by them.
Further, under the same provision, it is to be noted that when the
violation of the contract is due to the willful acts of strangers, as in
the instant case, the degree of care essential to be exercised by the
common carrier for the protection of its passenger is only that of a
good father of a family.
Petitioner has charged respondent carrier of negligence on the
ground that the injury complained of could have been prevented by
the common carrier if something like mesh-work grills had covered
the windows of its bus.
We do not agree.
Although the suggested precaution could have prevented the injury
complained of, the rule of ordinary care and prudence is not so
exacting as to require one charged with its exercise to take doubtful
or unreasonable precautions to guard against unlawful acts of
strangers. The carrier is not charged with the duty of providing or
maintaining vehicles as to absolutely prevent any and all injuries to
passengers. Where the carrier uses cars of the most approved type,
in general use by others engaged in the same occupation, and
exercises a high degree of care in maintaining them in suitable
condition, the carrier cannot be charged with negligence in this
respect. 6
Finally, petitioner contends that it is to the greater interest of the
State if a carrier were made liable for such stone-throwing incidents
rather than have the bus riding public lose confidence in the
transportation system.

Sad to say, we are not in a position to so hold; such a policy would

be better left to the consideration of Congress which is empowered
to enact laws to protect the public from the increasing risks and
dangers of lawlessness in society.
WHEREFORE, the judgment appealed from is hereby AFFIRMED.
SO ORDERED.

G.R. No. L-20761

July 27, 1966
LA MALLORCA, petitioner, vs. HONORABLE COURT OF
APPEALS, MARIANO BELTRAN, ET AL., respondents.
BARRERA, J.:
La Mallorca seeks the review of the decision of the Court of Appeals
in CA-G.R. No. 23267-R, holding it liable for quasi-delict and
ordering it to pay to respondents Mariano Beltran, et al., P6,000.00

for the death of his minor daughter Raquel Beltran, plus P400.00 as
actual damages.

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.

The facts of the case as found by the Court of Appeals, briefly are:
On December 20, 1953, at about noontime, plaintiffs,
husband and wife, together with their minor daughters,
namely, Milagros, 13 years old, Raquel, about 4 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

Sensing that the bus was again in motion, Mariano Beltran

immediately jumped from the running board without getting
his bayong from the conductor. He landed on the side of the
road almost in front of the shaded place where he left his
wife and children. At that precise time, he saw people
beginning to gather around the body of a child lying
prostrate on the ground, her skull crushed, and without life.
The child was none other than his daughter Raquel, who was
run over by the bus in which she rode earlier together with
her parents.
For the death of their said child, the plaintiffs commenced
the present suit against the defendant seeking to recover
from the latter an aggregate amount of P16,000 to cover
moral damages and actual damages sustained as a result
thereof and attorney's fees. After trial on the merits, the
court below rendered the judgment in question.
On the basis of these facts, the trial court found defendant liable for
breach of contract of carriage and sentenced it to pay P3,000.00 for
the death of the child and P400.00 as compensatory damages
representing burial expenses and costs.
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 defendantappellant 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 hisbayong 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.
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.
The increase of the award of damages from P3,000.00 to P6,000.00
by the Court of Appeals, however, cannot be sustained. Generally,
the appellate court can only pass upon and consider questions or
issues raised and argued in appellant's brief. Plaintiffs did not
appeal from that portion of the judgment of the trial court awarding
them on P3,000.00 damages for the death of their daughter.
Neither does it appear that, as appellees in the Court of Appeals,
plaintiffs have pointed out in their brief the inadequacy of the
award, or that the inclusion of the figure P3,000.00 was merely a
clerical error, in order that the matter may be treated as an
exception to the general rule.5Herein petitioner's contention,
therefore, that the Court of Appeals committed error in raising the
amount
of
the
award
for
damages
is,
evidently,
meritorious.1wph1.t

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.

G.R. No. 84458 November 6, 1989

ABOITIZ SHIPPING CORPORATION, petitioner, vs. HON. COURT
OF APPEALS, ELEVENTH DIVISION, LUCILA C. VIANA, SPS.
ANTONIO VIANA and GORGONIA VIANA, and PIONEER
STEVEDORING CORPORATION, respondents.
REGALADO, J.:
In this appeal by certiorari, petitioner Aboitiz Shipping Corporation
seeks a review of the decision 1 of respondent Court of Appeals,
dated July 29, 1988, the decretal portion of which reads:
WHEREFORE, the judgment appealed from as
modified by the order of October 27, 1982, is hereby
affirmed with the modification that appellant Aboitiz
Shipping is hereby ordered to pay plaintiff-appellees
the amount of P30,000.00 for the death of Anacleto
Viana; actual damages of P9,800.00; P150,000.00 for
unearned income; P7,200.00 as support for
deceased's parents; P20,000.00 as moral damages;
P10,000.00 as attorney's fees; and to pay the costs.
The undisputed facts of the case, as found by the court a quo and
adopted by respondent court, are as follows: .
The evidence disclosed that on May 11, 1975,
Anacleto Viana boarded the vessel M/V Antonia,
owned by defendant, at the port at San Jose,
Occidental Mindoro, bound for Manila, having
purchased a ticket (No. 117392) in the sum of P23.10
(Exh. 'B'). On May 12, 1975, said vessel arrived at
Pier 4, North Harbor, Manila, and the passengers
therein disembarked, a gangplank having been
provided connecting the side of the vessel to the
pier. Instead of using said gangplank Anacleto Viana
disembarked on the third deck which was on the
level with the pier. After said vessel had landed, the
Pioneer Stevedoring Corporation took over the

exclusive control of the cargoes loaded on said

vessel pursuant to the Memorandum of Agreement
dated July 26, 1975 (Exh. '2') between the third party
defendant Pioneer Stevedoring Corporation and
defendant Aboitiz Shipping Corporation.
The crane owned by the third party defendant and
operated by its crane operator Alejo Figueroa was
placed alongside the vessel and one (1) hour after
the passengers of said vessel had disembarked, it
started operation by unloading the cargoes from said
vessel. While the crane was being operated, Anacleto
Viana who had already disembarked from said vessel
obviously remembering that some of his cargoes
were still loaded in the vessel, went back to the
vessel, and it was while he was pointing to the crew
of the said vessel to the place where his cargoes
were loaded that the crane hit him, pinning him
between the side of the vessel and the crane. He was
thereafter brought to the hospital where he later
expired three (3) days thereafter, on May 15, 1975,
the cause of his death according to the Death
Certificate (Exh. "C") being "hypostatic pneumonia
secondary to traumatic fracture of the pubic bone
lacerating the urinary bladder" (See also Exh. "B").
For his hospitalization, medical, burial and other
miscellaneous expenses, Anacleto's wife, herein
plaintiff, spent a total of P9,800.00 (Exhibits "E", "E1", to "E-5"). Anacleto Viana who was only forty (40)
years old when he met said fateful accident (Exh. 'E')
was in good health. His average annual income as a
farmer or a farm supervisor was 400 cavans of palay
annually. His parents, herein plaintiffs Antonio and
Gorgonia Viana, prior to his death had been recipient
of twenty (20) cavans of palay as support or P120.00
monthly. Because of Anacleto's death, plaintiffs
suffered mental anguish and extreme worry or moral
damages. For the filing of the instant case, they had
to hire a lawyer for an agreed fee of ten thousand
(P10,000.00) pesos. 2

Private respondents Vianas filed a complaint 3 for damages against

petitioner corporation (Aboitiz, for brevity) for breach of contract of
carriage.
In its answer. 4 Aboitiz denied responsibility contending that at the
time of the accident, the vessel was completely under the control
of respondent Pioneer Stevedoring Corporation (Pioneer, for short)
as the exclusive stevedoring contractor of Aboitiz, which handled
the unloading of cargoes from the vessel of Aboitiz. It is also
averred that since the crane operator was not an employee of
Aboitiz, the latter cannot be held liable under the fellow-servant
rule.
Thereafter, Aboitiz, as third-party plaintiff, filed a third-party
complaint 5 against Pioneer imputing liability thereto for Anacleto
Viana's death as having been allegedly caused by the negligence of
the crane operator who was an employee of Pioneer under its
exclusive control and supervision.
Pioneer, in its answer to the third-party complaint, 6 raised the
defenses that Aboitiz had no cause of action against Pioneer
considering that Aboitiz is being sued by the Vianas for breach of
contract of carriage to which Pioneer is not a party; that Pioneer
had observed the diligence of a good father of a family both in the
selection and supervision of its employees as well as in the
prevention of damage or injury to anyone including the victim
Anacleto Viana; that Anacleto Viana's gross negligence was the
direct and proximate cause of his death; and that the filing of the
third-party complaint was premature by reason of the pendency of
the criminal case for homicide through reckless imprudence filed
against the crane operator, Alejo Figueroa.
In a decision rendered on April 17, 1980 by the trial court, 7 Aboitiz
was ordered to pay the Vianas for damages incurred, and Pioneer
was ordered to reimburse Aboitiz for whatever amount the latter
paid the Vianas. The dispositive portion of said decision provides:
WHEREFORE, judgment is hereby rendered in favor of
the plantiffs:

(1) ordering defendant Aboitiz Shipping Corporation

to pay to plaintiffs the sum of P12,000.00 for the
death of Anacleto Viana P9,800.00 as actual
damages; P533,200.00 value of the 10,664 cavans of
palay computed at P50.00 per cavan; P10,000.00 as
attorney's fees; F 5,000.00, value of the 100 cavans
of palay as support for five (5) years for deceased
(sic) parents, herein plaintiffs Antonio and Gorgonia
Viana computed at P50.00 per cavan; P7,200.00 as
support for deceased's parents computed at P120.00
a month for five years pursuant to Art. 2206, Par. 2,
of the Civil Code; P20,000.00 as moral damages, and
costs; and
(2) ordering the third party defendant Pioneer
Stevedoring Corporation to reimburse defendant and
third party plaintiff Aboitiz Shipping Corporation the
said amounts that it is ordered to pay to herein
plaintiffs.
Both Aboitiz and Pioneer filed separate motions for reconsideration
wherein they similarly raised the trial court's failure to declare that
Anacleto Viana acted with gross negligence despite the
overwhelming evidence presented in support thereof. In addition,
Aboitiz alleged, in opposition to Pioneer's motion, that under the
memorandum of agreement the liability of Pioneer as contractor is
automatic for any damages or losses whatsoever occasioned by
and arising from the operation of its arrastre and stevedoring
service.
In an order dated October 27, 1982, 8 the trial court absolved
Pioneer from liability for failure of the Vianas and Aboitiz to
preponderantly establish a case of negligence against the crane
operator which the court a quo ruled is never presumed, aside from
the fact that the memorandum of agreement supposedly refers
only to Pioneer's liability in case of loss or damage to goods
handled by it but not in the case of personal injuries, and, finally
that Aboitiz cannot properly invoke the fellow-servant rule simply
because its liability stems from a breach of contract of carriage.
The dispositive portion of said order reads:

WHEREFORE, judgment is hereby modified insofar as

third
party
defendant
Pioneer
Stevedoring
Corporation is concerned rendered in favor of the
plaintiffs-,:
(1) Ordering defendant Aboitiz Shipping Corporation
to pay the plaintiffs the sum of P12,000.00 for the
death of Anacleto Viana; P9,000.00 (sic) as actual
damages; P533,200.00 value of the 10,664 cavans of
palay computed at P50.00 per cavan; P10,000.00 as
attorney's fees; P5,000.00 value of the 100 cavans of
palay as support for five (5) years for deceased's
parents, herein plaintiffs Antonio and Gorgonia
Viana,computed at P50.00 per cavan; P7,200.00 as
support for deceased's parents computed at P120.00
a month for five years pursuant to Art. 2206, Par. 2,
of the Civil Code; P20,000.00 as moral damages, and
costs; and
(2)
Absolving
third-party
defendant
Pioneer
Stevedoring Corporation for (sic) any liability for the
death of Anacleto Viana the passenger of M/V
Antonia owned by defendant third party plaintiff
Aboitiz Shipping Corporation it appearing that the
negligence of its crane operator has not been
established therein.
Not satisfied with the modified judgment of the trial court, Aboitiz
appealed the same to respondent Court of Appeals which affirmed
the findings of of the trial court except as to the amount of
damages awarded to the Vianas.
Hence, this petition wherein petitioner Aboitiz postulates that
respondent court erred:
(A) In holding that the doctrine laid down by this
honorable Court in La Mallorca vs. Court of Appeals,
et al. (17 SCRA 739, July 27, 1966) is applicable to
the case in the face of the undisputable fact that the
factual situation under the La Mallorca case is

radically different from the facts obtaining in this

case;
(B) In holding petitioner liable for damages in the
face of the finding of the court a quo and confirmed
by the Honorable respondent court of Appeals that
the deceased, Anacleto Viana was guilty of
contributory negligence, which, We respectfully
submit contributory negligence was the proximate
cause of his death; specifically the honorable
respondent Court of Appeals failed to apply Art. 1762
of the New Civil Code;
(C) In the alternative assuming the holding of the
Honorable respondent Court of Appears that
petitioner may be legally condemned to pay
damages to the private respondents we respectfully
submit that it committed a reversible error when it
dismissed petitioner's third party complaint against
private respondent Pioneer Stevedoring Corporation
instead of compelling the latter to reimburse the
petitioner for whatever damages it may be
compelled to pay to the private respondents
Vianas. 9
At threshold, it is to be observed that both the trial court and
respondent Court of Appeals found the victim Anacleto Viana guilty
of contributory negligence, but holding that it was the negligence
of Aboitiz in prematurely turning over the vessel to the arrastre
operator for the unloading of cargoes which was the direct,
immediate and proximate cause of the victim's death.
I. Petitioner contends that since one (1) hour had already elapsed
from the time Anacleto Viana disembarked from the vessel and that
he was given more than ample opportunity to unload his cargoes
prior to the operation of the crane, his presence on the vessel was
no longer reasonable e and he consequently ceased to be a
passenger. Corollarily, it insists that the doctrine in La Mallorca vs.
Court of Appeals, et al. 10 is not applicable to the case at bar.

The rule is that the relation of carrier and passenger continues until
the passenger has been landed at the port of destination and has
left the vessel owner's dock or premises. 11 Once created, the
relationship will not ordinarily terminate until the passenger has,
after reaching his destination, safely alighted from the carrier's
conveyance or had a reasonable opportunity to leave the carrier's
premises. All persons who remain on the premises a reasonable
time after leaving the conveyance are to be deemed passengers,
and what is a reasonable time or a reasonable delay within this rule
is to be determined from all the circumstances, and includes a
reasonable time to see after his baggage and prepare for his
departure. 12 The carrier-passenger relationship is not terminated
merely by the fact that the person transported has been carried to
his destination if, for example, such person remains in the carrier's
premises to claim his baggage. 13
It was in accordance with this rationale that the doctrine in the
aforesaid case of La Mallorca was enunciated, to wit:
It has been recognized as a rule that the relation of
carrier and passenger does not cease at the moment
the passenger alights from the carrier's vehicle at a
place selected by the carrier at the point of
destination, but continues until the passenger has
had a reasonable time or a reasonable opportunity to
leave the carrier's premises. And, what is a
reasonable time or a reasonable delay within this
rule is to be determined from all the circumstances.
Thus, a person who, after alighting from a train,
walks along the station platform is considered still a
passenger. So also, where a passenger has alighted
at his destination and is proceeding by the usual way
to leave the company's premises, but before actually
doing so is halted by the report that his brother, a
fellow passenger, has been shot, and he in good faith
and without intent of engaging in the difficulty,
returns to relieve his brother, he is deemed
reasonably and necessarily delayed and thus
continues to be a passenger entitled as such to the
protection of the railroad company and its agents.

In the present case, the father returned to the bus to

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

common carriers such as a passenger bus. With respect to the bulk

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

It is 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 Mallorcathere 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 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.

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

II. Under the law, common carriers are, from the nature of their
business and for reasons of public policy, bound to observe
extraordinary diligence in the vigilance over the goods and for the

safety of the passengers transported by them, according to all the

circumstances of each case. 15 More particularly, a common
carrier is bound to carry the passengers safely as far as human
care and foresight can provide, using the utmost diligence of very
cautious
persons,
with
a
due
regard
for
all
the
circumstances. 16 Thus, where a passenger dies or is injured, the
common carrier is presumed to have been at fault or to have acted
negligently. 17 This gives rise to an action for breach of contract of
carriage where all that is required of plaintiff is to prove the
existence of the contract of carriage and its non-performance by
the carrier, that is, the failure of the carrier to carry the passenger
safely to his destination, 18 which, in the instant case, necessarily
includes its failure to safeguard its passenger with extraordinary
diligence while such relation subsists.
The presumption is, therefore, established by law that in case of a
passenger's death or injury the operator of the vessel was at fault
or negligent, having failed to exercise extraordinary diligence, and
it is incumbent upon it to rebut the same. This is in consonance
with the avowed policy of the State to afford full protection to the
passengers of common carriers which can be carried out only by
imposing a stringent statutory obligation upon the latter.
Concomitantly, this Court has likewise adopted a rigid posture in
the application of the law by exacting the highest degree of care
and diligence from common carriers, bearing utmost in mind the
welfare of the passengers who often become hapless victims of
indifferent and profit-oriented carriers. We cannot in reason deny
that petitioner failed to rebut the presumption against it. Under the
facts obtaining in the present case, it cannot be gainsaid that
petitioner had inadequately complied with the required degree of
diligence to prevent the accident from happening.
As found by the Court of Appeals, the evidence does not show that
there was a cordon of drums around the perimeter of the crane, as
claimed by petitioner. It also adverted to the fact that the alleged
presence of visible warning signs in the vicinity was disputable and
not indubitably established. Thus, we are not inclined to accept
petitioner's explanation that the victim and other passengers were
sufficiently warned that merely venturing into the area in question
was fraught with serious peril. Definitely, even assuming the

existence of the supposed cordon of drums loosely placed around

the unloading area and the guard's admonitions against entry
therein, these were at most insufficient precautions which pale into
insignificance if considered vis-a-vis the gravity of the danger to
which the deceased was exposed. There is no showing that
petitioner was extraordinarily diligent in requiring or seeing to it
that said precautionary measures were strictly and actually
enforced to subserve their purpose of preventing entry into the
forbidden area. By no stretch of liberal evaluation can such
perfunctory acts approximate the "utmost diligence of very
cautious persons" to be exercised "as far as human care and
foresight can provide" which is required by law of common carriers
with respect to their passengers.
While the victim was admittedly contributorily negligent, still
petitioner's aforesaid failure to exercise extraordinary diligence was
the proximate and direct cause of, because it could definitely have
prevented, the former's death. Moreover, in paragraph 5.6 of its
petition, at bar, 19 petitioner has expressly conceded the factual
finding of respondent Court of Appeals that petitioner did not
present sufficient evidence in support of its submission that the
deceased Anacleto Viana was guilty of gross negligence. Petitioner
cannot now be heard to claim otherwise.
No excepting circumstance being present, we are likewise bound by
respondent court's declaration that there was no negligence on the
part of Pioneer Stevedoring Corporation, a confirmation of the trial
court's finding to that effect, hence our conformity to Pioneer's
being absolved of any liability.
As correctly observed by both courts, Aboitiz joined Pioneer in
proving the alleged gross negligence of the victim, hence its
present contention that the death of the passenger was due to the
negligence of the crane operator cannot be sustained both on
grounds, of estoppel and for lack of evidence on its present theory.
Even in its answer filed in the court below it readily alleged that
Pioneer had taken the necessary safeguards insofar as its
unloading operations were concerned, a fact which appears to have
been accepted by the plaintiff therein by not impleading Pioneer as
a defendant, and likewise inceptively by Aboitiz by filing its third-

party complaint only after ten (10) months from the institution of
the suit against it. Parenthetically, Pioneer is not within the ambit of
the rule on extraordinary diligence required of, and the
corresponding presumption of negligence foisted on, common
carriers like Aboitiz. This, of course, does not detract from what we
have said that no negligence can be imputed to Pioneer but, that
on the contrary, the failure of Aboitiz to exercise extraordinary
diligence for the safety of its passenger is the rationale for our
finding on its liability.
WHEREFORE, the petition is DENIED and the judgment appealed
from is hereby AFFIRMED in toto.
SO ORDERED.

G.R. No. L-22272

June 26, 1967
ANTONIA MARANAN, plaintiff-appellant, vs. PASCUAL PEREZ,
ET AL., defendants.
PASCUAL PEREZ, defendant appellant.
BENGZON, J.P., J.:
Rogelio Corachea, on October 18, 1960, was a passenger in a
taxicab owned and operated by Pascual Perez when he was
stabbed and killed by the driver, Simeon Valenzuela.

Valenzuela was prosecuted for homicide in the Court of First

Instance of Batangas. Found guilty, he was sentenced to suffer
imprisonment and to indemnify the heirs of the deceased in the
sum of P6,000. Appeal from said conviction was taken to the Court
of Appeals.1wph1.t
On December 6 1961, while appeal was pending in the Court of
Appeals, Antonia Maranan, Rogelio's mother, filed an action in the
Court of First Instance of Batangas to recover damages from Perez
and Valenzuela for the death of her son. Defendants asserted that
the deceased was killed in self-defense, since he first assaulted the
driver by stabbing him from behind. Defendant Perez further
claimed that the death was a caso fortuito for which the carrier was
not liable.
The court a quo, after trial, found for the plaintiff and awarded her
P3,000 as damages against defendant Perez. The claim against
defendant Valenzuela was dismissed. From this ruling, both plaintiff
and defendant Perez appealed to this Court, the former asking for
more damages and the latter insisting on non-liability.
Subsequently, the Court of Appeals affirmed the judgment of
conviction earlier mentioned, during the pendency of the herein
appeal, and on May 19, 1964, final judgment was entered therein.
(Rollo, p. 33).
Defendant-appellant relies solely on the ruling enunciated in Gillaco
v. Manila Railroad Co., 97 Phil. 884, that the carrier is under no
absolute liability for assaults of its employees upon the passengers.
The attendant facts and controlling law of that case and the one at
bar are very different however. In the Gillaco case, the passenger
was killed outside the scope and the course of duty of the guilty
employee. As this Court there found:
x x x 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 two hours after the commission of the
crime. Devesa was therefore under no obligation to
safeguard the passengers 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 can not be deemed in law a breach of
Gillaco's contract of transportation by a servant or employee
of the carrier. . . . (Emphasis supplied)
Now here, the killing was perpetrated by the driver of the very cab
transporting the passenger, in whose hands the carrier had
entrusted the duty of executing the contract of carriage. In other
words, unlike the Gillaco case, the killing of the passenger here
took place in the course of duty of the guilty employee and when
the employee was acting within the scope of his duties.
Moreover, the Gillaco case was decided under the provisions of the
Civil Code of 1889 which, unlike the present Civil Code, did not
impose upon common carriers absolute liability for the safety of
passengers against wilful assaults or negligent acts committed by
their employees. The death of the passenger in the Gillaco case
was truly a fortuitous event which exempted the carrier from
liability. It is true that Art. 1105 of the old Civil Code on fortuitous
events has been substantially reproduced in Art. 1174 of the Civil
Code of the Philippines but both articles clearly remove from their
exempting effect the case where the law expressly provides for
liability in spite of the occurrence of force majeure. And herein
significantly lies the statutory difference between the old and
present Civil Codes, in the backdrop of the factual situation before
Us, which further accounts for a different result in theGillaco case.
Unlike the old Civil Code, the new Civil Code of the Philippines
expressly makes the common carrier liable for intentional assaults
committed by its employees upon its passengers, by the wording of
Art. 1759 which categorically states that

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.

protecting the passenger with the utmost care prescribed by law;

and (3) as between the carrier and the passenger, the former must
bear the risk of wrongful acts or negligence of the carrier's
employees against passengers, since it, and not the passengers,
has power to select and remove them.

The Civil Code provisions on the subject of Common Carriers1 are

new and were taken from Anglo-American Law.2 There, the basis of
the carrier's liability for assaults on passengers committed by its
drivers rests either on (1) the doctrine of respondeat superior or (2)
the principle that it is the carrier's implied duty to transport the
passenger safely.3

Accordingly, it is the carrier's strict obligation to select its drivers

and similar employees with due regard not only to their technical
competence and physical ability, but also, no less important, to
their total personality, including their patterns of behavior, moral
fibers, and social attitude.

Under the first, which is the minority view, the carrier is liable only
when the act of the employee is within the scope of his authority
and duty. It is not sufficient that the act be within the course of
employment only.4
Under the second view, upheld by the majority and also by the later
cases, it is enough that the assault happens within the course of
the employee's duty. It is no defense for the carrier that the act was
done in excess of authority or in disobedience of the carrier's
orders.5 The carrier's liability here is absolute in the sense that it
practically secures the passengers from assaults committed by its
own employees.6
As can be gleaned from Art. 1759, the Civil Code of the Philippines
evidently follows the rule based on the second view. At least three
very cogent reasons underlie this rule. As explained in Texas
Midland R.R. v. Monroe, 110 Tex. 97, 216 S.W. 388, 389-390,
and Haver v. Central Railroad Co., 43 LRA 84, 85: (1) the special
undertaking of the carrier requires that it furnish its passenger that
full measure of protection afforded by the exercise of the high
degree of care prescribed by the law, inter alia from violence and
insults at the hands of strangers and other passengers, but above
all, from the acts of the carrier's own servants charged with the
passenger's safety; (2) said liability of the carrier for the servant's
violation of duty to passengers, is the result of the formers
confiding in the servant's hands the performance of his contract to
safely transport the passenger, delegating therewith the duty of

Applying this stringent norm to the facts in this case, therefore, the
lower court rightly adjudged the defendant carrier liable pursuant
to Art. 1759 of the Civil Code. The dismissal of the claim against the
defendant driver was also correct. Plaintiff's action was predicated
on breach of contract of carriage7 and the cab driver was not a
party thereto. His civil liability is covered in the criminal case
wherein he was convicted by final judgment.
In connection with the award of damages, the court a quo granted
only P3,000 to plaintiff-appellant. This is the minimum
compensatory damages amount recoverable under Art. 1764 in
connection with Art. 2206 of the Civil Code when a breach of
contract results in the passenger's death. As has been the policy
followed by this Court, this minimal award should be increased to
P6,000. As to other alleged actual damages, the lower court's
finding
that
plaintiff's
evidence
thereon
was
not
convincing,8 should not be disturbed. Still, Arts. 2206 and 1764
awardmoral damages in addition to compensatory damages, to the
parents of the passenger killed to compensate for the mental
anguish they suffered. A claim therefor, having been properly
made, it becomes the court's duty to award moral
damages.9 Plaintiff demands P5,000 as moral damages; however,
in the circumstances, We consider P3,000 moral damages, in
addition to the P6,000 damages afore-stated, as sufficient. Interest
upon such damages are also due to plaintiff-appellant. 10
Wherefore, with the modification increasing the award of actual
damages in plaintiff's favor to P6,000, plus P3,000.00 moral

damages, with legal interest on both from the filing of the

complaint on December 6, 1961 until the whole amount is paid, the
judgment appealed from is affirmed in all other respects. No costs.
So ordered.

Winifredo Tupang, a paying passenger who fell off a train operated

by the petitioner.
The pertinent facts are summarized by the respondent court as
follows:
The facts show that on September 10, 1972, at about
9:00 o'clock in the evening, Winifredo Tupang,
husband of plaintiff Rosario Tupang, boarded 'Train
No. 516 of appellant at Libmanan, Camarines Sur, as
a paying passenger bound for Manila. Due to some
mechanical defect, the train stopped at Sipocot,
Camarines Sur, for repairs, taking some two hours
before the train could resume its trip to Manila.
Unfortunately, upon passing Iyam Bridge at Lucena,
Quezon, Winifredo Tupang fell off the train resulting
in his death.The train did not stop despite the alarm
raised by the other passengers that somebody fell
from the train. Instead, the train conductor Perfecto
Abrazado, called the station agent at Candelaria,
Quezon, and requested for verification of the
information. Police authorities of Lucena City were
dispatched to the Iyam Bridge where they found the
lifeless body of Winifredo Tupang.

G.R. No. L-55347 October 4, 1985

PHILIPPINE NATIONAL RAILWAYS, petitioner, vs. THE
HONORABLE COURT OF APPEALS and ROSARIO
TUPANG, respondents.
ESCOLIN, J.:
Invoking the principle of state immunity from suit, the Philippine
National Railways, PNR for short, instituted this petition for review
on certiorari to set aside the decision of the respondent Appellate
Court which held petitioner PNR liable for damages for the death of

As shown by the autopsy report, Winifredo Tupang

died of cardio-respiratory failure due to massive
cerebral hemorrhage due to traumatic injury
[Exhibits B and C, Folder of Exhibits],Tupang was
later buried in the public cemetery of Lucena City by
the local police authorities. [Rollo, pp. 91-92]
Upon complaint filed by the deceased's widow, Rosario Tupang, the
then Court of First Instance of Rizal, after trial, held the petitioner
PNR liable for damages for breach of contract of carriage and
ordered "to pay the plaintiff the sum of P12,000,00 for the death of
Winifredo Tupang, plus P20,000.00 for loss of his earning capacity
and the further sum of P10,000.00 as moral damages, and
P2,000.00 as attorney's fees, and costs. 1

On appeal, the Appellate Court sustained the holding of the trial

court that the PNR did not exercise the utmost diligence required
by law of a common carrier. It further increased the amount
adjudicated by the trial court by ordering PNR to pay the plaintiff an
additional sum of P5,000.00 as exemplary damages.
Moving for reconsideration of the above decision, the PNR raised for
the first time, as a defense, the doctrine of state immunity from
suit. It alleged that it is a mere agency of the Philippine
government without distinct or separate personality of its own, and
that its funds are governmental in character and, therefore, not
subject to garnishment or execution. The motion was denied; the
respondent court ruled that the ground advanced could not be
raised for the first time on appeal.
Hence, this petition for review.
The petition is devoid of merit. The PNR was created under Rep. Act
4156, as amended. Section 4 of the said Act provides:
The Philippine national Railways shall have the
following powers:
a. To do all such other things and to transact all such
business directly or indirectly necessary, incidental or
conducive to the attainment of the purpose of the
corporation; and
b. Generally, to exercise all powers of a corporation
under the Corporation Law.
Under the foregoing section, the PNR has all the powers, the
characteristics and attributes of a corporation under the
Corporation Law. There can be no question then that the PNR may
sue and be sued and may be subjected to court processes just like
any other corporation. 2
The petitioner's contention that the funds of the PNR are not
subject to garnishment or execution hardly raises a question of first
impression. In Philippine National Railways v. Union de Maquinistas,

et al., 3 then Justice Fernando, later Chief Justice, said. "The main
issue posed in this certiorari proceeding, whether or not the funds
of the Philippine National Railways, could be garnished or levied
upon on execution was resolved in two recent decisions,
the Philippine National Bank v. Court of Industrial Relations [81
SCRA 314] and Philippine National Bank v. Hon. Judge Pabalan [83
SCRA 595]. This Court in both cases answered the question in the
affirmative. There was no legal bar to garnishment or execution.
The argument based on non-suability of a state allegedly because
the funds are governmental in character was unavailing.So it must
be again."
In support of the above conclusion, Justice Fernando cited the
Court's holding in Philippine National Bank v. Court of Industrial
Relations, to wit: "The premise that the funds could be spoken of as
public in character may be accepted in the sense that the People's
Homesite and Housing Corporation was a government-owned
entity. It does not follow though that they were exempt from
garnishment. National Shipyard and Steel Corporation v. Court of
Industrial Relations is squarely in point. As was explicitly stated in
the opinion of then Justice, later Chief Justice, Concepcion: "The
allegation to the effect that the funds of the NASSCO are public
funds of the government, and that, as such, the same may not be
garnished, attached or levied upon, is untenable for, as a
government- owned and controlled corporation, the NASSCO has a
personality of its own, distinct and separate from that of the
Government. It has-pursuant to Section 2 of Executive Order No.
356, dated October 23, 1950 * * *, pursuant to which the NASSCO
has been established- 'all the powers of a corporation under the
Corporation Law * * *. 4
As far back as 1941, this Court in the case of Manila Hotel
Employees Association v. Manila Hotel Co., 5 laid down the rule that
"when the government enters into commercial business, it
abandons its sovereign capacity and is to be treated like any other
corporation. [Bank of the U.S. v. Planters' Bank, 9 Waitch 904, 6 L.
ed. 244]. By engaging in a particular business through the
instrumentality of a corporation the government divests itself pro
hac vice of its sovereign character, so as to render the corporation
subject to the rules of law governing private corporations. 6 Of

Similar import is the pronouncement in Prisco v. CIR,' that "when

the government engages in business, it abdicates part of its
sovereign prerogatives and descends to the level of a citizen, ... . "
In fine, the petitioner PNR cannot legally set up the doctrine of nonsuability as a bar to the plaintiff's suit for damages.

P10,000.00 and P5,000.00 adjudicated as moral and exemplary

damages, respectively. No costs.
SO ORDERED.

The appellate court found, the petitioner does not deny, that the
train boarded by the deceased Winifredo Tupang was so overcrowded that he and many other passengers had no choice but to
sit on the open platforms between the coaches of the train. It is
likewise undisputed that the train did not even slow down when it
approached the Iyam Bridge which was under repair at the time,
Neither did the train stop, despite the alarm raised by other
passengers that a person had fallen off the train at lyam Bridge. 7
The petitioner has the obligation to transport its passengers to their
destinations and to observe extraordinary diligence in doing so.
Death or any injury suffered by any of its passengers gives rise to
the presumption that it was negligent in the performance of its
obligation under the contract of carriage. Thus, as correctly ruled
by the respondent court, the petitioner failed to overthrow such
presumption of negligence with clear and convincing evidence.
But while petitioner failed to exercise extraordinary diligence as
required by law, 8 it appears that the deceased was chargeable
with contributory negligence. Since he opted to sit on the open
platform between the coaches of the train, he should have held
tightly and tenaciously on the upright metal bar found at the side of
said platform to avoid falling off from the speeding train. Such
contributory negligence, while not exempting the PNR from liability,
nevertheless justified the deletion of the amount adjudicated as
moral damages. By the same token, the award of exemplary
damages must be set aside. Exemplary damages may be allowed
only in cases where the defendant acted in a wanton, fraudulent,
reckless, oppressive or malevolent manner. 9 There being no
evidence of fraud, malice or bad faith on the part of petitioner, the
grant of exemplary damages should be discarded.
WHEREFORE, the decision of the respondent appellate court is
hereby modified by eliminating therefrom the amounts of

G.R. No. 71238 March 19, 1992

LUFTHANSA GERMAN AIRLINES, petitioner, vs. INTERMEDIATE
APPELLATE COURT and SPOUSES HENRY H. ALCANTARA and
TERESITA ALCANTARA,respondents.
BIDIN, J.:
This is a petition for review on certiorari decision of the then
Intermediate Appellate Court * dated May 31, 1984, affirming with
modification the decision of the then Court of First Instance of
Manila, Sixth Judicial District, Branch XXIV, and the resolution dated

June 18, 1985 denying the motion for reconsideration of the said
decision.
The antecedent facts of this case are as follows:
On January 21, 1979, respondent Henry H. Alcantara shipped
thirteen (13) pieces of luggage through petitioner Lufthansa from
Teheran to Manila as evidenced by Lufthansa Air Waybill No. 2209776-2733 (Exhibit "A", also Exhibit "1"). The Air Waybill discloses
that the actual gross weight of the thirteen (13) pieces of luggage
is 180 kilograms. Respondent Henry H. Alcantara did not declare an
inventory of the contents or the value of the luggages when he
delivered them to Lufthansa.
On March 3, 1979, the thirteen (13) pieces of luggage were
boarded in one of Lufthansa's flights which arrived in Manila on the
same date. After the luggages arrived in Manila, the consignee,
respondent Teresita Alcantara, was able to claim from the cargo
broker Philippine Skylanders, Inc. on March 6, 1979 only twelve (12)
out of the thirteen (13) pieces of luggage with a total weight of 174
kilograms (Exhibits "20" and "20-A").
The private respondents advised Lufthansa of the loss of one of the
luggages and of the contents thereof (Exhibits "B", "C" and "D").
Petitioner Lufthansa sent telex tracing messages to different
stations and to the Philippine Airlines which actually carried the
cargo (Exhibits "3", "5", "7", "9", "11", "12", "13" and "14"). But all
efforts in tracing the missing luggage were fruitless (Exhibits "4",
"6", "8", "10", "12" and "17").
Since efforts to trace the missing luggage yielded negative results,
Lufthansa informed Henry Alcantara accordingly and advised him to
file a claim invoice (Exhibits "18" and "19").

On September 24, 1979, the private respondents wrote the

petitioner demanding the production of the missing luggage within
then (10) days from receipt (Exhibit "E"). Since the petitioner did
not comply with said demand, the private respondents filed a
complaint dated May 7, 1980, for breach of contract with damages
against the petitioner before the Court of First Instance of Manila,
Sixth Judicial District, Branch XXIV.
The petitioner filed its answer to the complaint alleging that the
Warsaw Convention limits the liability of the carrier, if any, with
respect to cargo to a sum of 250 francs per kilo ($20.00 per kilo or
$9.07 per pound), unless a higher value is declared in advance and
additional charges are paid by the passenger and the conditions of
the contract as set forth in the air waybill expressly subject the
contract of carriage of cargo to the Warsaw Convention. The
petitioner also alleged that it never acted fraudulently or in bad
faith so as to entitle respondent spouses to moral damages and
attorney's fees, nor did it act in a wanton, fraudulent, reckless,
oppressive or malevolent manner as to entitle spouses to
exemplary damages.
After trial, on November 18, 1981, the trial court ** rendered its
decision, the dispositive portion of which reads as follows:
WHEREFORE, judgment is hereby rendered in favor of
plaintiffs, spouses Henry H. Alcantara and Teresita
Alcantara, and against Lufthansa German Airlines.
(1) Ordering defendant to pay plaintiffs the sum of
P200,000.00 for actual damages, with interest
thereon at the legal rate from the date of the filing of
the complaint until the principal sum is fully paid;
(2) Ordering defendant to pay plaintiffs the sum of
P20,000.00 as attorney's fees; and
(3) Ordering defendant to pay the costs of suit.
SO ORDERED. (Rollo, pp. 62-63)

The petitioner appealed to the then Intermediate Appellate Court.

On May 31, 1984, the appellate promulgated its decision, the
dispositive portion of which reads:
WHEREFORE, PREMISES CONSIDERED, the decision
appealed from is hereby AFFIRMED with the
modification that the amount of P20,000.00 awarded
as attorney's fees shall be deleted, the costs to be
borne by the respective parties.
SO ORDERED. (Rollo, p. 39).
Its motion for reconsideration having been denied, the petition filed
the instant petition.
The main issue in this case is whether or not the private
respondents are entitled to an award of damages beyond the
liability set forth in the Warsaw Convention and in the Airwaybill of
Lading.
The petitioner contends that the Republic of the Philippines is a
party to the "Convention for the Unification of Certain Rules
Relating to International Transportation by Air," otherwise known as
the Warsaw Convention. After the Senate of the Republic of the
Philippines, by its Resolution No. 19 of May 16, 1950, concurred in
the adherence by the government of the Philippines to the said
Convention, and after the government of the Republic of the
Philippines formally notified the government of the Republic of
Poland of such adherence on November 9, 1950, Presidential
Proclamation No. 201 signed by the late President Ramon
Magsaysay on September 23, 1965 made public the adherence of
the Republic of the Philippines to the said Warsaw Convention
which applies to all international transportation of persons,
baggage or goods performed by aircraft for hire. Since the contract
between the petitioner and respondent Henry H. Alcantara
embodied in Airwaybill No. 220-9776-2733 is one of international
carriage by air, it is subject to the Warsaw Convention, which in
Article 22 limits the liability of the carrier with respect to checked
baggage to a sum of 250 French francs per kilo (equivalent to US
$20.00/kilo) unless a higher value has been declared in advance

and additional charges are paid by the passenger. Respondent

Henry H. Alcantara having admitted that he did not declare the
value or contents of the missing luggage, the liability of the
petitioner is therefore limited by the Warsaw Convention and the
Airwaybill to US$20.00 per kilo.
The petitioner further argues that the award of P200,000.00 as
actual damages is not borne by evidence. It insists that the
testimonial and documentary evidence of respondent spouses
failed to indicate the actual value of the alleged contents of the
missing luggage and have not presented actual proof as to the
contents, total weight and value of the missing luggage as well as
the actual damage they suffered (Rollo, pp. 88-89, 95).
On the other hand, the private respondents maintain that the
petitioner, as found by the trial and appellate courts, waived the
benefits of the Warsaw Convention when it offered a settlement in
the amount of $200.00 which is much higher than what the
Convention prescribes and never raised timely objections during
the trial to the introduction of evidence regarding the actual claims
and damages sustained by respondent Alcantara.
The private respondents also claim that in the trial of the case, they
proved a loss of P200,000.00 and an expense of $15,000.00 in
vainly trying to locate the missing luggage all over Europe and the
trial court awarded less than what was proven (Rollo, p. 118).
The petition is without merit.
The loss of one luggage belonging to the private respondents while
the same was in the custody of the petitioner is not disputed. The
contract of air carriage generates a relation attended with a public
duty. Neglect or malfeasance of the carrier's employees could given
ground for an action for damages (Zulueta v. Pan American World
Airways, Inc., 43 SCRA 37 [1972]). Common carriers are liable for
the missing goods for failure to comply with its duty (American
Insurance Co., Inc. v. Macondray & Co., Inc., 39 SCRA 494 [171]).
In Alitalia vs. Intermediate Appellate Court (192 SCRA 9 [1990])
where petitioner Alitalia as carrier failed to deliver a passenger's

(Dr. Felipa Pablo's) baggage containing the papers she was

scheduled to read and the materials which would have enabled her
to
make
scientific
presentation
(consisting
of
slides,
autoradiograms or films, tables and tabulations ) in a prestigious
international conference in Rome where she was invited to
participate in the conference, extended by the Joint FAO/IAEA
Division of Atomic Energy in Food and Agriculture of the Untied
Nations, as a consequence of which she failed to participate in the
conference, this Court held that the Warsaw Convention does not
exclude liability for other breaches of contract by the carrier. Thus:

carrier's liability to the passenger. Neither may the

Convention invoked to justify the disregard of some
extraordinary sort of damage resulting to a
passenger and preclude recovery therefor beyond
the limits set by said Convention. It is in this sense
that the Convention has been applied, or ignored,
depending on the peculiar facts presented by each
case.

The Convention does not thus operate as an

exclusive enumeration of the instances of an airline's
liability, or as an absolute limit of the extent of that
liability. Such a proposition is not borne out by the
language of the Convention, as this Court has now,
and at an earlier time, pointed out. Moreover, slight
reflection readily leads to the conclusion that it
should be deemed a limit of liability only in those
cases where the cause of the death or injury to
person, or destruction, loss or damage to property or
delay in its transport is not attributable to or
attended by any wilfull misconduct, bad faith,
recklessness, or otherwise improper conduct on the
part of any official or employee for which the carrier
is responsible, and there is otherwise no special or
extraordinary
form
of
resulting
injury.
The
Convention's provisions, in short, do not "regulate or
exclude liability for other breaches of contract by the
carrier" or misconduct of its officers and employees,
or for some particular or exceptional type of damage.
Otherwise, "an air carrier would be exempt from any
liability for damages in the event of its absolute
refusal, in bad faith, to comply with a contract of
carriage, which is absurd." Nor may it for a moment
be supposed that if a member of the aircraft
complement should inflict some physical injury on a
passenger, or maliciously destroy or damage the
latter's property, the Convention might successfully
be pleaded as the sole gauge to determine the

In the case at bar, no bad faith or otherwise improper

conduct may be ascribed to the employees of
petitioner airline; and Dr. Pablo's luggage was
eventually returned to her, belatedly, it is true, but
without
appreciable
damage.
The
fact
is,
nevertheless, that some species of injury was caused
to Dr. Pablo because petitioner ALITALIA misplaced
her baggage and failed to deliver it to her at the time
appointed a breach of its contract of carriage, to
be sure with the result that she was unable to read
the paper and make the scientific presentation
(consisting of slides, autoradiograms or films, tables
and tabulations) that she had painstakingly labored
over, at the prestigious international conference, to
attend which she had traveled hundreds of miles, to
her
chagrin
and
embarrassment
and
the
disappointment and annoyance of the organizers.
She felt, no unreasonably, that the invitation for her
to participate at the conference, extended by the
Joint FAO/IAEA Division of Atomic Energy in Food and
Agriculture of the United Nations, was a singular
honor not only to herself, but to the University of the
Philippines and the country as well, an opportunity to
make some sort of impression among her colleagues
in that field of scientific activity. The opportunity to
claim this honor or distinction was irretrievably lost
to her because of Alitalia's breach of its contract.

xxx xxx xxx

Apart from this, there can be no doubt that Dr. Pablo

underwent profound distress and anxiety, which
gradually turned to panic and finally despair, from
the time she learned that her suitcases were missing
up to the time when, having gone to Rome, she
finally realized that she would no longer be able to
take part in the conference. As she herself put it, she
"was really shocked and distraught and confused."

entitled to moral damages under Article 2220 of the Civil Code

(Rollo, p. 61).

Certainly, the compensation for the injury suffered by

Dr. Pablo cannot under the circumstances be
restricted to that prescribed by the Warsaw
Convention for delay in the transport of baggage.

Under the circumstances, there appears to be no cogent reason to

disturb the factual findings of both the trial court and the Court of
Appeals.

She is not, of course, entitled to be compensated for

loss or damage to her luggage. As already
mentioned, her baggage was ultimately delivered to
her in Manila, tardily, but safely. She is however
entitled to nominal damages which, as the law
says, is adjudicated in order that a right of the
plaintiff, which has been violated or invaded by the
defendant, may be vindicated and recognized, and
not for the purpose of indemnifying the plaintiff that
for any loss suffered and this Court agrees that the
respondent Court of Appeals correctly set the amount
thereof at P40,000.00.
In the case at bar, the trial court found that: (a) petitioners airline
has not successfully refuted the presumption established by Article
1735 of the Civil Code that the loss of the luggage in question was
due to the negligence or fault of its employees; (b) the contents of
the missing luggage of private respondents could not be replaced
and
were
assessed
at
P200,000.00
by
the
latter;
(c) respondent Henry Alcantara spent about $15,000.00 in trying to
locate said luggage in Frankfurt, Germany, London, United Kingdom
and
Hongkong;
(d) there being no evidence to the contrary, the foregoing
assessments made by private respondents were fair and
reasonable; and (e) private respondents were unable to present
ample evidence to prove fraud and bad faith and are therefore not

On the other hand, the Court of Appeals found that the lower
court's award of P200,000.00 as actual compensatory damages is
well based factually and legally (Rollo, p. 37) except as to the
deletion of attorney's fees due to the absence of findings of gross
and evident bad faith (Rollo, p. 39).

Furthermore, the respondent court found that petitioner waived the

applicability of the Warsaw Convention to the case at bar when it
offered private respondent a higher amount than that which
is provided in the said law and failed to raise timely objections
during the trial when questions and answers were brought out
regarding the actual claims and damages sustained by Alcantara
which were even subjected to lengthy cross examination by
Lufthansa's counsel. In Abrenica v. Gonda (34 Phil. 739), this Court
held:
. . . (I)t has been repeatedly laid down as a rule of
evidence that a protest or objection against the
admission of any evidence must be made at the
proper time, and that if not so made it will be
understood to have been waived. The proper time to
make a protest or objection is when, from the
question addressed to the witness, or from the
answer thereto, or from the presentation of proof, the
inadmissibility of evidence is, or may be inferred.
It is also settled that the court cannot disregard evidence which
would ordinarily be incompetent under the rules but has been
rendered admissible by the failure of a party to object thereto.
Thus:
. . . The acceptance of an incompetent witness to
testify in a civil suit, as well as the allowance of

improper questions that may be put to him while on

the stand is a matter resting in the discretion of the
litigant. He may asset his right by timely objection or
he may waive it, expressly or by silence. In any case,
the option rests with him. Once admitted, the
testimony is in the case for what it is worth and the
judge has no power to disregard it for the sole
reason that it could have been excluded, if it had
been objected to, nor to strike it out on its own
motion. (Cruz v. CA, et al., 192 SCRA 209 [1990]
citing Marella vs. Reyes, 12 Phil. 1). (Emphasis
supplied).
WHEREFORE, the petition is Dismissed and the questioned decision
and resolution of the appellate court are Affirmed. No costs.
SO ORDERED.

G.R. Nos. 100374-75 November 27, 1992

RUFINO Y. LUNA, RODOLFO J. ALONSO and PORFIRIO
RODRIGUEZ, petitioners, vs. HON. COURT OF APPEALS, HON.
CRISTINA M. ESTRADA in her capacity as Presiding Judge,
RTC-Pasig, Br. 69, Metro Manila, HON. TERESITA D.
CAPULONG in her capacity as Presiding Judge, RTCValenzuela, Br. 172, Metro Manila, and NORTHWEST
AIRLINES, INC., respondents.
BELLOSILLO, J.:
This joint petition for review on certiorari originated from two (2)
separate complaints arising from an airline's delay in the delivery of

the luggage of its passengers at their destination which respondent

courts dismissed for lack of cause of action. The resulting issue is
whether the application of the Warsaw Convention operates to
exclude the application of the provisions of the New Civil Code and
the other statutes.

172. 3 However, upon motion of private respondent, both

complaints were dismissed 4 for lack of cause of action due to
petitioners' failure to state in their respective complaints that they
filed a prior claim with private respondent within the prescribed
period.

Briefly, the facts: On 19 May 1989, at around 8:00 in the morning,

petitioners Rufino Luna, Rodolfo Alonso and Porfirio Rodriguez
boarded Flight 020 of private respondent Northwest Airlines bound
for Seoul, South Korea, to attend the four-day Rotary International
Convention from the 21st to the 24th of May 1992. They checked in
one (1) piece of luggage each. After boarding, however, due to
engine trouble, they were asked to disembark and transfer to a
Korean Airlines plane scheduled to depart four (4) hours later. They
were assured that their baggage would be with them in the same
flight.

Petitioners Luna and Alonso then filed a petition for certiorari before
the Court of Appeals to set aside the order of respondent Judge
Cristina M. Estrada granting private respondent's motion to dismiss,
while petitioner Rodriquez proceeded directly to this Court
on certiorari for the same purpose. However, in Our resolution of 26
February 1990, We referred his petition to the Court of Appeals.

When petitioners arrived in Seoul, they discovered that their

personal belongings were nowhere to be found instead, they were
allegedly flown to Seattle, U.S.A. It was not until four (4) days later,
and only after repeated representations with Northwest Airlines
personnel at the airport in Korea were petitioners able to retrieve
their luggage. By then the Convention, which they were hardly able
to attend, was almost over.
Petitioners Rufino Y. Luna and Rodolfo J. Alfonso assert that on 6
June 1989, or thirteen (13) days after they recovered their luggage,
they sent a written claim to private respondent's office along Roxas
Blvd., Ermita, Manila. Petitioner Porfirio Rodriquez, on his part,
asserverates that he filed his claim on 13 June 1989. However,
private respondent, is a letter of 21 June 1989, disowned any
liability for the delay and averred that it exerted "its best efforts to
carry the passenger and baggage with reasonable dispatch." 1
Thus, on 14 July 1989, petitioners Luna and Alonso jointly filed a
complaint for breach of contract with damages before the Regional
Trial Court of Pasig, Metro Manila, docketed as Civil Case No. 58390,
subsequently raffled to Br. 69, 2 while petitioner Rodriquez filed his
own complaint with the Regional Trial Court of Valenzuela, Metro
Manila, docketed as Civil Case No. 3194-V-89, assigned to Br.

On 26 March 1991, the Third Division of respondent Court of

Appeals, applying the provisions of the Warsaw Convention and
ruling that certiorari was not a substitute for a lost appeal,
dismissed the petition of Luna and Alonso, 5 and on 7 June 1991
denied their motion for reconsideration. 6 Meanwhile, on 28
February 1991 the Seventh Division of respondent Court of
Appeals, ruling that the questioned order of the trial court had
already become final, similarly rejected the petition of Rodriquez,
and on 6 June 1991 denied his motion for reconsideration. 7 Hence,
this present recourse by petitioners Luna, Alonso and Rodriguez.
Four (4) grounds are relied upon by petitioners which, nevertheless,
may be reduced to three, namely: (a) that respondent appellate
court disregarded Our ruling in Alitalia v. CA 8 where We said that
"[t]he Convention does not thus operate as an exclusive
enumeration of the instances of an airline's liability, or as an
absolute limit of the extent of that liability;" 9 (b) that "petitions to
revoke orders and decisions may be entertained even after the
time to appeal had elapsed, in cases wherein the jurisdiction of the
court had been exceeded;" 10 and, (c) that Art. 26 of the Warsaw
Convention which prescribes the reglementary period within which
to file a claim cannot be invoked if damage is caused by the
carrier's willful misconduct, as provided by Art. 25 of the same
Warsaw Convention.
Private respondent, on the other hand, argues that the dismissal
order of respondent courts had already become final after

petitioners failed to either move for reconsideration or appeal from

the orders within the reglementary period, hence, certiorari is no
substitute for a lost appeal.
Private respondent also maintains that it did not receive any
demand letter from petitioners within the 21-day reglementary
period, as provided in par. 7 of the Conditions of Contract appearing
in the plane ticket. Since Art. 26. par. (4), of the Warsaw Convention
provides that "[f]ailing complaint within the times aforesaid, no
action shall lie against the carrier, save in the case of fraud on his
part," the carrier consequently cannot be held liable for the delay in
the delivery of the baggage. In other words, non-observance of the
prescribed period to file a claim bars claimant's action in court for
recovery.
Private
respondent, citing foreign
jurisprudence, 11 likewise
submits that Art. 25, par. (1), of the Warsaw Convention which
excludes or limits liability of common carriers if the damage is
caused by it willful misconduct, refers only to the monetary ceiling
on damages found in Art. 22.
We find the appeal impressed with merit.
From the facts, it appears that private respondent Northwest
Airlines indeed failed to deliver petitioners' baggage at the
designated time and place. For this, all that respondent carrier
could say was that "[w]e exerted all efforts to comply with this
condition of the contract." 12 Hence, it is evident that petitioners
suffered some special specie of injury for which they should rightly
be compensated. Private respondent cannot be allowed to escape
liability by seeking refuge in the argument that the trial courts'
orders have attained finality due to petitioners failure to move for
reconsideration or to file a timely appeal therefrom. Technicalities
should be disregarded if only to render to the respective parties
that which is their due. Thus, although We have said
that certiorari cannot be a substitute for a lapsed appeal, We have,
time and again, likewise held that where a rigid application of that
rule will result in a manifest failure or miscarriage of justice, the
rule may be relaxed. 13 Hence, considering the broader and
primordial interests of justice, particularly when there is grave

abuse of discretion, thus impelling occasional departure from the

general rule that the extraordinary writ of certiorari cannot
substitute for a lost appeal, respondent appellate court may legally
entertain the special civil action for certiorari. 14
Previously, We ruled that the Warsaw Convention was a treaty
commitment voluntarily assumed by the Philippine government;
consequently, it has the force and effect of law in this
country. 15 But, in the same token, We are also aware of
jurisprudence that the Warsaw Convention does not operate as an
exclusive enumeration of the instances for declaring an airline
liable for breach of contract of carriage or as an absolute limit of
the extent of that liability. 16 The Convention merely declares the
carrier liable for damages in the enumerated cases, if the
conditions therein specified are present. 17 For sure, it does not
regulate the liability, much less exempt, the carrier for violating the
rights of others which must simply be respected in accordance with
their contracts of carriage. The application of the Convention must
not therefore be construed to preclude the operation of the Civil
Code and other pertinent laws. In fact, in Alitalia v. IAC, 18 We
awarded Dr. Felipa Pablo nominal damages, the provisions of the
Convention notwithstanding.
Hence, petitioners' alleged failure to file a claim with the common
carrier as mandated by the provisions of the Warsaw Convention
should not be a ground for the summary dismissal of their
complaints since private respondent may still be held liable for
breach of other relevant laws which may provide a different period
or procedure for filing a claim. Considering that petitioners indeed
filed a claim which private respondent admitted having received on
21 June, 1989, their demand may have very well been filed within
the period prescribed by those applicable laws. Consequently,
respondent trial courts, as well as respondent appellate court, were
in error when they limited themselves to the provisions of the
Warsaw Convention and disregarding completely the provisions of
the Civil Code.
We are unable to agree however with petitioners that Art. 25 of the
Convention operations to exclude the other provisions of the
Convention if damage is caused by the common carrier's willful

misconduct. As correctly pointed out by private respondent, Art. 25

refers only to the monetary ceiling on damages found in Art. 22
should damage be caused by the carrier's willful misconduct.
Hence, only the provisions of Art. 22 limiting the carrier's liability
and imposing a monetary ceiling in case of willful misconduct on its
part that the carrier cannot invoke. 19 This issue however has
become academic in the light of our ruling that the trial courts
erred in dismissing petitioners' respective complaints.
We are not prepared to subscribed to petitioners' argument that the
failure of private respondent to deliver their luggage at the
designated time and place amounted ipso facto to willful
misconduct. For willful misconduct to exist, there must be a
showing that the acts complained of were impelled by an intention
to violate the law, or were in persistent disregard of one's rights. It
must be evidenced by a flagrantly or shamefully wrong or improper
conduct.
WHEREFORE, the assailed decisions and resolutions of respondent
Court of Appeals are REVERSED and SET ASIDE. The complaints for
breach of contract of carriage with damages in Civil Case No. 3194V-89 and Civil Case No. 58390 dismissed by respondent Judges
Teresita D. Capulong and Cristina M. Estrada, respectively, are
ordered REINSTATED and given due course until terminated. No
costs. SO ORDERED.

G.R. No. L-74811 December 14, 1988

CHUA YEK HONG, petitioner, vs. INTERMEDIATE APPELLATE
COURT, MARIANO GUNO and DOMINADOR OLIT, respondents.
MELENCIO-HERRERA, J.:

Before us is a Motion for Reconsideration of our Decision dated 30

September 1988 affirming the judgment of the Court of Appeals
dismissing the complaint against private respondents and
absolving them from any and all liability arising from the loss of
1000 sacks of copra shipped by petitioner aboard private
respondents' vessel. Private respondents filed an opposition
thereto.
Petitioner argues that this Court failed to consider the Trial Court's
finding that the loss of the vessel with its cargo was due to the fault
of the shipowner or to the concurring negligence of the shipowner
and the captain.
The Appellate Court Decision, however, mentions only the ship
captain as having been negligent in the performance of his duties
(p. 3, Court of Appeals Decision, p. 15, Rollo). This is a factual
finding binding on this Court. For the exception to the limited
liability rule (Article 587, Code of Commerce) to apply, the loss
must be due to the fault of the shipowner, or to the concurring
negligence of the shipowner and the captain. As we held, there is
nothing in the records showing such negligence (p. 6, Decision.)
The invocation by petitioners of Articles 1733 and 1735 of the Civil
Code is misplaced. As was stated in the Decision sought to be
reconsidered, while the primary law governing the instant case is
the Civil Code, in all matters not regulated by said Code, the Code
of Commerce and other special laws shall govern. Since the Civil
Code contains no provisions regulating liability of shipowners or
agents in the event of total loss or destruction of the vessel, it is
the provisions of the Code of Commerce, particularly Article 587,
that governs.
Petitioner further contends that the ruling laid down in Eastern
Shipping Lines vs. IAC, et al. (150 SCRA 464 [1987]) should be
made to apply in the instant case. That case, however, involved
foreign maritime trade while the present case involves local interisland shipping. The environmental set-up in the two cases,
therefore, is not on all fours.

ACCORDINGLY, petitioner's Motion for Reconsideration is hereby

DENIED and this denial is FINAL.
SO ORDERED.

G.R. No. 92735

June 8, 2000
MONARCH INSURANCE CO., INC., TABACALERA INSURANCE
CO., INC and Hon. Judge AMANTE PURISIMA,petitioners, vs.
COURT OF APPEALS and ABOITIZ SHIPPING
CORPORATION, respondents.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 94867
ALLIED GUARANTEE INSURANCE COMPANY, petitioner, vs.
COURT OF APPEALS, Presiding Judge, RTC Manila, Br. 24 and
ABOITIZ SHIPPING CORPORATION,respondents.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 95578
EQUITABLE INSURANCE CORPORATION, petitioner, vs. COURT
OF APPEALS, Former First Division Composed of Hon.
Justices RODOLFO NOCON, PEDRO RAMIREZ, and JESUS
ELBINIAS and ABOITIZ SHIPPING CORPORATION, respondents.
DE LEON, JR., J.:
Before us are three consolidated petitions. G.R. No. 92735 is a
petition for review filed under Rule 45 of the Rules of Court
assailing the decision of the Court of Appeals dated March 29, 1990
in CA-G.R. SP. Case No. 17427 which set aside the writ of execution
issued by the lower court for the full indemnification of the claims
of the petitioners, Monarch Insurance Company (hereafter
"Monarch") and Tabacalera Insurance Company, Incorporated
(hereafter "Tabacalera") against private respondent, Aboitiz
Shipping Corporation (hereafter "Aboitiz") on the ground that the
latter is entitled to the benefit of the limited liability rule in
maritime law; G.R. No. 94867 is a petition for certiorari under Rule
65 of the Rules of Court to annul and set aside the decision of the
Court of Appeals dated August 15, 1990 in CA-G.R. SP No. 20844

which ordered the lower court to stay the execution of the

judgment in favor of the petitioner, Allied Guarantee Insurance
Company (hereafter "Allied") against Aboitiz insofar as it impairs
the rights of the other claimants to their pro-rata share in the
insurance proceeds from the sinking of the M/V P. Aboitiz, in
accordance with the rule on limited liability; and G.R. No. 95578 is a
petition for review under Rule 45 of the Rules of Court seeking a
reversal of the decision of the Court of Appeals dated August 24,
1990 and its resolution dated October 4, 1990 in C.A. G.R. Civil
Case No. 15071 which modified the judgment of the lower court's
award of actual damages to petitioner Equitable Insurance
Corporation (hereafter "Equitable") to its pro-rata share in the
insurance proceeds from the sinking of the M/V P. Aboitiz.

In Civil Case No. 82-2767 where Monarch also named Malaysian

International Shipping Corporation and Litonja Merchant Shipping
Agency as Aboitiz's co-defendants, Monarch sough recovery of
P29,719.88 representing the value of three (3) pallets of glass
tubing that sank with the M/V P. Aboitiz, plus attorney's fees of not
less than P5,000.00, litigation expenses, interest at the legal rate
on all these amounts, and the cost of suit. 3 Civil Case. No. 82-2770
was a complaint filed by Monarch against Aboitiz and codefendants Compagnie Maritime des Chargeurs Reunis and F.E.
Zuellig (M), Inc. for the recovery of P39,597.00 representing the
value of the one case motor vehicle parts which was lost when the
M/V P. Aboitiz sank on her way to Manila, plus Attorney's fees of not
less than P10,000.00 and cost of suit. 4

All cases arose from the loss of cargoes of various shippers when
the M/V P. Aboitiz, a common carrier owned and operated by
Aboitiz, sank on her voyage from Hong Kong to Manila on October
31, 1980. Seeking indemnification for the loss of their cargoes, the
shippers, their successors-in-interest, and the cargo insurers such
as the instant petitioners filed separate suits against Aboitiz before
the Regional Trial Courts. The claims numbered one hundred and
ten (110) for the total amount of P41,230,115.00 which is almost
thrice the amount of the insurance proceeds of P14,500,000.00
plus earned freight of 500,000.00 according to Aboitiz. To this day,
some of these claims, including those of herein petitioners, have
not yet been settled.

Tabacalera sought against Franco Belgian Services, F.E. Zuellig and

Aboitiz in Civil Case No. 82-2768 the recovery of P284,218.00
corresponding to the value of nine (9) cases of Renault spare parts,
P213,207.00 for the value of twenty-five (25) cases of door closers
and P42,254.00 representing the value of eighteen (18) cases of
plastic spangle, plus attorney's fees of not less than P50,000.00
and cost of suit. 5 In Civil Case No. 82-2769, Tabacalera claimed
from Hong Kong Island Shipping Co., Ltd., Citadel Lines and Aboitiz
indemnification in the amount of P75,058.00 for the value of four
(4) cartons of motor vehicle parts foundered with the M/V P. Aboitiz,
plus attorney's fees of not less than P20,000.00 and cost of suit. 6

G.R. No. 92735.

Monarch and Tabacalera are insurance carriers of lost cargoes. They
indemnified the shippers and were consequently subrogated to
their rights, interests and actions against Aboitiz, the cargo
carrier. 1 Because Aboitiz refused to compensate Monarch, it filed
two complaints against Aboitiz, docketed as Civil Cases Nos. 822767 and 82-2770. For its part, Tabacalera also filed two complaints
against the same defendant, docketed as Civil Cases Nos. 82-2768
and 82-2769. As these four (4) cases had common causes of action,
they were consolidated and jointly tried. 2

In its answer with counterclaim, Aboitiz rejected responsibility for

the claims on the ground that the sinking of its cargo vessel was
due to force majeure or an act of God. 7 Aboitiz was subsequently
declared as in default for its failure to appear during the pre-trial.
Its counsel fried a motion to set aside the order of default with
notice of his withdrawal as such counsel. Before the motion could
be acted upon, Judge Bienvenido Ejercjto, the presiding judge of the
trial court, was promoted to the then intermediate Appellate Court.
The cases were thus re-raffled to Branch VII of the RTC of Manila
presided by Judge Amante P. Purisima, the co-petitioner in G.R. No.
92735. Without resolving the pending motion to set aside the order
of default, the trial court set the cases for hearing. However, since
Aboitiz had repeatedly failed to appear in court, the trial court

denied the said motion and allowed Monarch and Tabacalera to

present evidence ex-parte. 8
Monarch and Tabacalera proffered in evidence the survey of Perfect
Lambert, a surveyor commissioned to investigate the possible
cause of the sinking of the cargo vessel. The survey established
that on her voyage to Manila from Hong Kong, the vessel did not
encounter weather so inclement that Aboitiz would be exculpated
from liability for losses. In his note of protest, the master of M/V P.
Aboitiz described the wind force encountered by the vessel as from
ten (10) to fifteen (15) knots, a weather condition classified as
typical and moderate in the South China Sea at that particular time
of the year. The survey added that the seaworthiness of the vessel
was in question especially because the breaches of the hull and the
serious flooding of two (2) cargo holds occurred simultaneously in
"seasonal weather." 9
In due course, the trial court rendered judgment against Aboitiz but
the complaint against all the other defendants was dismissed.
Aboitiz was held liable for the following: (a) in Civil Case No. 822767, P29,719.88 with legal interest from the filing of the complaint
until fully paid plus attorney's fees of P30,000.00 and cost of suit;
(b) in Civil Case No. 82-2768, P539,679.00 with legal interest of
12% per annum from date of filing of the complaint until fully paid,
plus attorney's fees of P30,000.00, litigation expenses and cost of
suit; (c) in Civil Case No. 82-2769, P75,058.00 with legal interest of
12% per annum from date of filing of the complaint until-fully paid,
plus P5,000.00 attorney's fees, litigation expenses and cost of suit,
and (d) in Civil Case No. 82-2770, P39,579.66 with legal interest of
12% per annum from date of filing of the complaint until fully paid,
plus attorney's fees of P5,000.00, litigation expenses and cost of
suit.

Aboitiz filed a motion for reconsideration of the decision and/or for

new trial to lift the order of default. The court denied the motion on
August 27, 1986. 10 Aboitiz appealed to the Court of Appeals but
the appeal was dismissed for its failure to file appellant's brief. It
subsequently filed an urgent motion for reconsideration of the
dismissal with prayer for the admission of its attached appellant's
brief. The appellate court denied that motion for lack of merit in a
Resolution dated July 8, 1988. 11
Aboitiz thus filed a petition for review before this Court. Docketed
as G.R. No. 84158, the petition was denied in the Resolution of
October 10, 1988 for being filed out of time. Aboitiz's motion for the
reconsideration of said Resolution was similarly denied. 12 Entry of
judgment was made in the case. 13
Consequently, Monarch and Tabacalera moved for execution of
judgment. The trial court granted the motion on April 4,
1989 14 and issued separate writs of execution. However, on April
12, 1989, Aboitiz, invoking the real and hypothecary nature of
liability in maritime law, filed an urgent motion to quash the writs of
execution. 15 According to Aboitiz, since its liability is limited to the
value of the vessel which was insufficient to satisfy the aggregate
claims of all 110 claimants, to indemnify Monarch and Tabacalera
ahead of the other claimants would be prejudicial to the latter.
Monarch and Tabacalera opposed the motion to quash. 16
On April 17, 1989, before the motion to quash could be heard, the
sheriff levied upon five (5) heavy equipment owned by Aboitiz for
the public auction sale. At said sale, Monarch was the highest
bidder for one (1) unit FL-151 Fork Lift (big) and one (1) unit FL-25
Fork Lift (small). Tabacalera was also the highest bidder for one (1)
unit TCH TL-251 Hyster Container Lifter, one (1) unit Hyster Top
Lifter (out of order), and one (1) unit ER-353 Crane. The
corresponding certificates of sale 17 were issued to Monarch and
Tabacalera.
On April 18, 1989, the day before the hearing of the motion to
quash, Aboitiz filed a supplement to its motion, to add the fact that
an auction sale had taken place. On April 19, 1989, Judge Purisima
issued an order denying the motion to quash but freezing execution

proceedings for ten (10) days to give Aboitiz time to secure a

restraining order from a higher court. 18 Execution was scheduled
to resume to fully satisfy the judgment when the grace period shall
have lapsed without such restraining order having been obtained
by Aboitiz.
Aboitiz filed with the Court of Appeals a petition for certiorari and
prohibition with prayer for preliminary injunction and/or temporary
restraining order under CA-G.R. No. SP-17427. 19 On March 29,
1990, the appellate court rendered a Decision the dispositive
portion of which reads:
WHEREFORE, the writ of certiorari is hereby granted,
annulling the subject writs of execution, auction sale,
certificates of sale, and the assailed orders of respondent
Judge dated April 4 and April 19, 1989 insofar as the money
value of those properties of Aboitiz, levied on execution and
sold at public auction, has exceeded the pro-rata shares of
Monarch and Tabacalera in the insurance proceeds of Aboitiz
in relation to the pro-rata shares of the 106 other claimants.
The writ of prohibition is also granted to enjoin respondent
Judge, Monarch and Tabacalera from proceeding further with
execution of the judgments in question insofar as the
execution would satisfy the claims of Monarch and
Tabacalera in excess of their pro-rata shares and in effect
reduce the balance of the proceeds for distribution to the
other claimants to their prejudice.
The question of whether or how much of the claims of
Monarch and Tabacalera against the insurance proceeds has
already been settled through the writ of execution and
auction sale in question, being factual issues, shall be
threshed out before respondent judge.
The writ of preliminary injunction issued in favor of Aboitiz,
having served its purpose, is hereby lifted. No
pronouncement as to costs.
SO ORDERED. 20

Hence, the instant petition for review on certiorari where

petitioners Monarch, Tabacalera and Judge Purisima raise the
following assignment of errors:
1. The appellate court grievously erred in re-opening the
Purisima decisions, already final and executory, on the
alleged ground that the issue of real and hypothecary
liability had not been previously resolved by Purisima, the
appellate court, and this Hon. Supreme Court;
2. The appellate court erred when it resolved that Aboitiz is
entitled to the limited real and hypothecary liability of a ship
owner, considering the facts on record and the law on the
matter.
3. The appellate court erred when it concluded that Aboitiz
does not have to present evidence to prove its entitlement
to the limited real and hypothecary liability.
4. The appellate court erred in ignoring the case of "Aboitiz
Shipping Corporation v. CA and Allied Guaranty Insurance
Co., Inc. (G.R. No. 88159), decided by this Honorable
Supreme Court as early as November 13, 1989, considering
that said case, now factual and executory, is in pari
materia with the instant case.
5. The appellate court erred in not concluding that
irrespective of whether Aboitiz is entitled to limited
hypothecary liability or not, there are enough funds to
satisfy all the claimants.
6. The appellate court erred when it concluded that Aboitiz
had made an "abandonment" as envisioned by Art. 587 of
the Code of Commerce.
7. The appellate court erred when it concluded that other
claimants would suffer if Tabacalera and Monarch would be
fully paid.

8. The appellate court erred in concluding that certiorari was

the proper remedy for Aboitiz. 21
G.R. NOS. 94867 & 95578
Allied as insurer-subrogee of consignee Peak Plastic and Metal
Products Limited, filed a complaint against Aboitiz for the recovery
of P278,536.50 representing the value of 676 bags of PVC
compound and 10 bags of ABS plastic lost on board the M/V P.
Aboitiz, with legal interest from the date of filing of the complaint,
plus attorney's fees, exemplary damages and costs. 22 Docketed as
Civil Case No. 138643, the case was heard before the Regional Trial
Court of Manila, Branch XXIV, presided by Judge Sergio D. Mabunay.
On the other hand, Equitable, as insurer-subrogee of consigneeassured Axel Manufacturing Corporation, filed an amended
complaint against Franco Belgian Services, F.E. Zuellig, Inc. and
Aboitiz for the recovery of P194,794.85 representing the value of
76 drums of synthetic organic tanning substances and 1,000
kilograms of optical bleaching agents which were also lost on board
the M/V P. Aboitiz, with legal interest from the date of filing of the
complaint, plus 25% attorney's fees, exemplary damages, litigation
expenses and costs of suit.23 Docketed as Civil Case No. 138396,
the complaint was assigned to the Regional Trial Court of Manila,
Branch VIII.
In its answer with counterclaim in the two cases, Aboitiz disclaimed
responsibility for the amounts being recovered, alleging that the
loss was due to a fortuitous event or an act of God. It prayed for the
dismissal of the cases and the payment of attorney's fees, litigation
expenses plus costs of suit. It similarly relied on the defenses
of force mejeure, seaworthiness of the vessel and exercise of due
diligence in the carriage of goods as regards the cross-claim of its
co-defendants. 24
In support of its position, Aboitiz presented the testimonies of Capt.
Gerry N. Racines, master mariner of the M/V P. Aboitiz, and Justo C.
Iglesias, a meteorologist of the Philippine Atmospheric Geophysical
and Astronomical Services Administration (PAGASA). The gist of the
testimony of Capt. Racines in the two cases follows:

The M/V P. Aboitiz left Hong Kong for Manila at about 7:30 in the
evening of October 29, 1980 after securing a departure clearance
from the Hong Kong Port Authority. The departure was delayed for
two hours because he (Capt. Racines) was observing the direction
of the storm that crossed the Bicol Region. He proceeded with the
voyage only after being informed that the storm had abated. At
about 8:00 o'clock in the morning of October 30, 1980, after more
than twelve (12) hours of navigation, the vessel suddenly
encountered rough seas with waves about fifteen to twenty-five
feet high. He ordered his chief engineer to check the cargo holds.
The latter found that sea water had entered cargo hold Nos. 1 and
2. He immediately directed that water be pumped out by means of
the vessel's bilge pump, a device capable of ejecting 180 gallons of
water per minute. They were initially successful in pumping out the
water.
At 6:00 a.m. of October 31, 1980, however, Capt. Racines received
a report from his chief engineer that the water level in the cargo
holds was rapidly rising. He altered the vessel's course and veered
towards the northern tip of Luzon to prevent the vessel from being
continuously pummeled by the waves. Despite diligent efforts of
the officers and crew, however, the vessel, which was
approximately 250 miles away from the eye of the storm, began to
list on starboard side at 27 degrees. Capt. Racines and his crew
were not able to make as much headway as they wanted because
by 12:00 noon of the same day, the cargo holds were already
flooded with sea water that rose from three to twelve feet, disabling
the bilge pump from containing the water.
The M/V P. Aboitiz sank at about 7:00 p.m. of October 31, 1980 at
latitude 18 degrees North, longitude 170 degrees East in the South
China Sea in between Hong Kong, the Philippines and Taiwan with
the nearest land being the northern tip of Luzon, around 270 miles
from Cape Bojeador, Bangui, Ilocos Norte. Responding to the
captain's distress call, the M/V Kapuas (Capuas) manned by Capt.
Virgilio Gonzales rescued the officers and crew of the ill-fated M/V P.
Aboitiz and brought them to Waileen, Taiwan where Capt. Racines
lodged his marine protest dated November 3, 1980.

Justo Iglesias, meteorologist of PAGASA and another witness of

Aboitiz, testified in both cases that during the inclusive dates of
October 28-31, 1980, a stormy weather condition prevailed within
the Philippine area of responsibility, particularly along the sea route
from Hong Kong to Manila, because of tropical depression
"Yoning."25 PAGASA issued weather bulletins from October 28-30,
1980 while the storm was still within Philippine territory. No
domestic bulletins were issued the following day when the storm
which hit Eastern Samar, Southern Quezon and Southern Tagalog
provinces, had made its exit to the South China Sea through
Bataan.

A similar decision was arrived at in Civil Case No. 138396, the

dispositive portion of which reads:
WHEREFORE, in view of the foregoing, this Court hereby
renders judgment in favor of plaintiff and against defendant
Aboitiz Shipping Corporation, to pay the sum of P194,794.85
with legal rate of interest thereon from February 27, 1981
until fully paid; attorney's fees of twenty-five (25%) percent
of the total claim, plus litigation expenses and costs of
litigation.
SO ORDERED. 29

Allied and Equitable refuted the allegation that the M/V P. Aboitiz
and its cargo were lost due to force majeure, relying mainly on the
marine protest filed by Capt. Racines as well as on the Beaufort
Scale of Wind. In his marine protest under oath, Capt. Racines
affirmed that the wind force an October 29-30, 1980 was only ten
(10) to fifteen (15) knots. Under the Beaufort Scale of Wind, said
wind velocity falls under scale No. 4 that describes the sea
condition as "moderate breeze," and "small waves becoming
longer, fairly frequent white horses." 26
To fortify its position, Equitable presented Rogelio T. Barboza who
testified that as claims supervisor and processor of Equitable, he
recommended payment to Axel Manufacturing Corporation as
evidenced by the cash voucher, return check and subrogation
receipt. Barboza also presented a letter of demand to Aboitiz which,
however, the latter ignored. 27
On April 24, 1984, the trial court rendered a decision that disposed
of Civil Case No. 138643 as follows:
WHEREFORE, judgment is hereby rendered ordering
defendant Aboitiz Shipping Company to pay plaintiff Allied
Guarantee Insurance Company, Inc. the sum of
P278,536.50, with legal interest thereon from March 10,
1981, then date of the filing of the complaint, until fully
paid, plus P30,000.00 as attorney's fees, with costs of suit.
SO ORDERED. 28

In Civil Case No. 138643, Aboitiz appealed to the Court of Appeals

under CA-G.R. CV No. 04121. On March 23, 1987, the Court of
Appeals affirmed the decision of the lower court. A motion for
reconsideration of the said decision was likewise denied by the
Court of Appeals on May 3, 1989. Aggrieved, Aboitiz then filed a
petition for review with this Court docketed as G.R. No. 88159
which was denied for lack merit. Entry of judgment was made and
the lower court's decision in Civil Case No. 138643 became final
and executory. Allied prayed for the issuance of a writ of execution
in the lower court which was granted by the latter on April 4, 1990.
To stay the execution of the judgment of the lower court, Aboitiz
filed a petition for certiorari and prohibition with preliminary
injunction with the Court of Appeals docketed as CA-G.R. SP No.
20844. 30 On August 15, 1990, the Court of Appeals rendered the
assailed decision, the dispositive portion of which reads as follows.
WHEREFORE, the challenged order of the respondent Judge
dated April 4, 1990 granting the execution is hereby set
aside. The respondent Judge is further ordered to stay the
execution of the judgment insofar as it impairs the rights of
the 100 other claimants to the insurance proceeds including
the rights of the petitioner to pay more than the value of the
vessel or the insurance proceeds and to desist from
executing the judgment insofar as it prejudices the pro-rata
share of all claimants to the insurance proceeds. No
pronouncement as to costs.

SO ORDERED. 31
Hence, Allied filed the instant petition for certiorari, mandamus and
injunction with preliminary injunction and/or restraining order
before this Court alleging the following assignment of errors:
1. Respondent Court of Appeals gravely erred in staying the
immediate execution of the judgment of the lower court as it
has no authority nor jurisdiction to directly or indirectly
alter, modify, amend, reverse or invalidate a final judgment
as affirmed by the Honorable Supreme Court in G.R. No.
88159.
2. Respondent Court of Appeals with grave abuse of
discretion amounting to lack or excess of jurisdiction,
brushed aside the doctrine in G.R. No. 88159 which is now
the law of the case and observance of time honored
principles of stare decisis, res adjudicata and estoppel by
judgment.
3. Real and hypothecary rule under Articles 587, 590 and
837 of the Code of Commerce which is the basis of the
questioned decision (Annex "C" hereof) is without
application in the face of the facts found by the lower court,
sustained by the Court of Appeals in CA-G.R. No. 04121 and
affirmed in toto by the Supreme Court in G.R. No. 88159.
4. Certiorari as a special remedy is unavailing for private
respondent as there was no grave abuse of discretion nor
lack or excess of jurisdiction for Judge Mabunay to issue the
order of April 4, 1990 which was in accord with law and
jurisprudence, nor were there intervening facts and/or
supervening events that will justify respondent court to
issue a writ of certiorari or a restraining order on a final and
executory judgment of the Honorable Supreme Court. 32
From the decision of the trial court in Civil Case No. 138396 that
favored Equitable, Aboitiz likewise appealed to the Court of Appeals
through CA-G.R. CV No. 15071. On August 24, 1990, the Court of
Appeals rendered the Decision quoting extensively its Decision in

CA-G.R. No. SP-17427 (now G.R. No. 92735) and disposing of the
appeal as follows:
WHEREFORE, we hereby affirm the trial court's awards of
actual damages, attorney's fees and litigation expenses,
with the exception of legal interest, in favor of plaintiffappellee Equitable Insurance Corporation as subrogee of the
consignee for the loss of its shipment aboard the M/V "P.
Aboitiz" and against defendant-appellant Aboitiz Shipping
Corporation. However, the amount and payment of those
awards shall be subject to a determination of the pro-rata
share of said appellee in relation to the pro-rata shares of
the 109 other claimants, which determination shall be made
by the trial court. This case is therefore hereby ordered
remanded to the trial court which shall reopen the case and
receive evidence to determine appellee's pro-rata share as
aforesaid. No pronouncement as to costs.
SO ORDERED. 33
On September 12, 1990, Equitable moved to reconsider the Court
of Appeals' Decision. The Court of Appeals denied the motion for
reconsideration on October 4, 1990. 34 Consequently, Equitable
filed with this Court a petition for review alleging the following
assignment of errors:
1. Respondent Court of Appeals, with grave abuse of
discretion amounting to lack or excess of jurisdiction,
erroneously brushed aside the doctrine in G.R. No. 88159
which is now the law of the case as held in G.R. No. 89757
involving the same and identical set of facts and cause of
action relative to the sinking of the M/V "P. Aboitiz" and
observance of the time honored principles of stare decisis,
and estoppel by judgment.
2. Real and hypothecary rule under Articles 587, 590 and
837 of the Code of Commerce which is the basis of the
assailed decision and resolution is without application in the
face of the facts found by the trial court which conforms to
the conclusion and finding of facts arrived at in a similar and

identical case involving the same incident and parties

similarly situated in G.R. No. 88159 already declared as the
"law of the case" in a subsequent decision of this Honorable
Court in G.R. No. 89757 promulgated on August 6, 1990.
3. Respondent Court of Appeals gravely erred in concluding
that limited liability rule applies in case of loss of cargoes
when the law itself does not distinguish; fault of the
shipowner or privity thereto constitutes one of the
exceptions to the application of limited liability under Article
587, 590 and 837 of the Code of Commerce, Civil Code
provisions on common carriers for breach of contract of
carriage prevails. 35
These three petitions in G.R. Nos. 92735, 94867 and 95578 were
consolidated in the Resolution of August 5, 1991 on the ground that
the petitioners "have identical causes of action against the same
respondent and similar reliefs are prayed for." 36
The threshold issue in these consolidated petitions is the
applicability of the limited liability rule in maritime law in favor of
Aboitiz in order to stay the execution of the judgments for full
indemnification of the losses suffered by the petitioners as a result
of the sinking of the M/V P. Aboitiz. Before we can address this
issue, however, there are procedural matters that need to be
threshed out.
First. At the outset, the Court takes note of the fact that in G.R. No.
92735, Judge Amante Purisima, whose decision in the Regional Trial
Court is sought to be upheld, is named as a co-petitioner.
In Calderon v. Solicitor General, 37 where the petitioner in the
special civil action of certiorari and mandamus was also the judge
whose order was being assailed, the Court held that said judge had
no standing to file the petition because he was merely a nominal or
formal party-respondent under Section 5 of Rule 65 of the Rules of
Court. He should not appear as a party seeking the reversal of a
decision that is unfavorable to the action taken by him. The Court
there said:

Judge Calderon should be-reminded of the well-known

doctrine that a judge should detach himself from cases
where his decision is appealed to a higher court for review.
The raison d'etre for such doctrine is the fact that a judge is
not an active combatant in such proceeding and must leave
the opposing parties to contend their individual positions
and for the appellate court to decide the issues without his
active participation. By filing this case, petitioner in a way
ceased to be judicial and has become adversarial
instead. 38
While the petition in G.R. No. 92735 does not expressly show
whether or not Judge Purisima himself is personally interested in
the disposition of this petition or he was just inadvertently named
as petitioner by the real parties in interest, the fact that Judge
Purisima is named as petitioner has not escaped this Court's notice.
Judges and litigants should be reminded of the basic rule that
courts or individual judges are not supposed to be interested
"combatants" in any litigation they resolve.
Second. The petitioners contend that the inapplicability of the
limited liability rule to Aboitiz has already been decided on by no
less than this Court in G.R. No. 88159 as early as November 13,
1989 which was subsequently declared as "law of the case" in G.R.
No. 89757 on August 6, 1990. Herein petitioners cite the
aforementioned cases in support of their theory that the limited
liability rule based on the real and hypothecary nature of maritime
law has no application in the cases at bar.
The existence of what petitioners insist is already the "law of the
case" on the matter of limited liability is at best illusory. Petitioners
are either deliberately misleading this Court or profoundly
confused. As elucidated in the case of Aboitiz Shipping Corporation
vs. General Accident Fire and Life Assurance Corporation, 39
An examination of the November 13, 1989 Resolution in G.R.
No. 88159 (pp. 280-282, Rollo) shows that the same settles
two principal matters, first of which is that the doctrine of
primary administrative jurisdiction is not applicable therein;
and second is that a limitation of liability in said case would

render inefficacious the extraordinary diligence required by

law of common carriers.
It should be pointed out, however, that the limited liability
discussed in said case is not the same one now in issue at
bar, but an altogether different aspect. The limited liability
settled in G.R. No. 88159 is that which attaches to cargo by
virtue of stipulations in the Bill of Lading, popularly known
as package limitation clauses, which in that case was
contained in Section 8 of the Bill of Lading and which limited
the carrier's liability to US$500.00 for the cargo whose value
was therein sought to be recovered. Said resolution did not
tackle the matter of the Limited Liability Rule arising out of
the real and hypothecary nature of maritime law, which was
not raised therein, and which is the principal bone of
contention in this case. While the matters threshed out in
G.R. No. 88159, particularly those dealing with the issues on
primary administrative jurisdiction and the package liability
limitation provided in the Bill of Lading are now settled and
should no longer be touched, the instant case raises a
completely different issue. 40
Third. Petitioners asseverate that the judgments of the lower
courts, already final and executory, cannot be directly or indirectly
altered, modified, amended, reversed or invalidated.
The rule that once a decision becomes final and executory, it is the
ministerial duty of the court to order its execution, is not an
absolute one: We have allowed the suspension of execution in
cases of special and exceptional nature when it becomes
imperative in the higher interest of justice. 41 The unjust and
inequitable effects upon various other claimants against Aboitiz
should we allow the execution of judgments for the full
indemnification of petitioners' claims impel us to uphold the stay of
execution as ordered by the respondent Court of Appeals. We
reiterate our pronouncement in Aboitiz Shipping Corporation vs.
General Accident Fire and Life Assurance Corporation on this very
same issue.

This brings us to the primary question herein which is

whether or not respondent court erred in granting execution
of the full judgment award in Civil Case No. 14425 (G.R. No.
89757), thus effectively denying the application of the
limited liability enunciated under the appropriate articles of
the Code of Commerce. . . . . Collaterally, determination of
the question of whether execution of judgments which have
become final and executory may be stayed is also an issue.
We shall tackle the latter issue first. This Court has always
been consistent in its stand that the very purpose for its
existence is to see the accomplishment of the ends of
justice. Consistent with this view, a number of decisions
have originated herefrom, the tenor of which is that no
procedural consideration is sancrosanct if such shall result in
the subverting of justice. The right to execution after finality
of a decision is certainly no exception to this. Thus,
in Cabrias v. Adil (135 SCRA 355 [1885]), this Court ruled
that:
xxx

xxx

xxx

. . . every court having jurisdiction to render a

particular judgment has inherent power to enforce it,
and to exercise equitable control over such
enforcement. The court has authority to inquire
whether its judgment has been executed, and will
remove obstructions to the enforcement thereof.
Such authority extends not only to such orders and
such writs as may be necessary to prevent an
improper enforcement of the judgment. If a judgment
is sought to be perverted and made a medium of
consummating a wrong the court on proper
application can prevent it. 42
Fourth. Petitioners in G.R. No. 92735 ever that it was error for the
respondent Court of Appeals to allow Aboitiz the benefit of the
limited liability rule despite its failure to present evidence to prove
its entitlement thereto in the court below. Petitioners Monarch and
Tabacalera remind this Court that from the inception of G.R. No.

92735 in the lower court and all the way to the Supreme Court,
Aboitiz had not presented an iota of evidence to exculpate itself
from the charge of negligence for the simple reason that it was
declared as in default. 43

It should also be pointed out that Aboitiz is not raising the issue of
its entitlement to the limited liability rule for the first time on
appeal thus, the respondent Court of Appeals may properly rule on
the same.

It is true that for having been declared in default, Aboitiz was

precluded from presenting evidence to prove its defenses in the
court a quo. We cannot, however, agree with petitioners that this
circumstance prevents the respondent Court of Appeals from taking
cognizance of Aboitiz' defenses on appeal.

However, whether or not the respondent Court of Appeals erred in

finding, upon review, that Aboitiz is entitled to the benefit of the
limited liability rule is an altogether different matter which shall be
discussed below.1awphi1

It should be noted that Aboitiz was declared as in default not for its
failure to file an answer but for its absence during pre-trial and the
trial proper. In Aboitiz' answer with counterclaim, it claimed that the
sinking of the M/V P. Aboitiz was due to an act of God or unforeseen
event and that the said ship had been seaworthy and fit for the
voyage. Aboitiz also alleged that it exercised the due diligence
required by law, and that considering the real and hypothecary
nature of maritime trade, the sinking justified the extinguishment
of its liability for the lost shipment. 44
A judgment of default does not imply a waiver of rights except that
of being heard and presenting evidence in defendant's favor. It
does not imply admission by the defendant of the facts and causes
of action of the plaintiff, because the codal section 45 requires the
latter to adduce evidence in support of his allegations as an
indispensable condition before final judgment could be given in his
favor. Nor could it be interpreted as an admission by the defendant
that the plaintiff's causes of action find support in the law or that
the latter is entitled to the relief prayed for. 46 This is especially
true with respect to a defendant who had filed his answer but had
been subsequently declared in default for failing to appear at the
trial since he has had an opportunity to traverse, viahis answer, the
material averments contained in the complaint. Such defendant
has a better standing than a defendant who has neither answered
nor appeared at trial. 47 The former should be allowed to reiterate
all affirmative defenses pleaded in his answer before the Court of
Appeals. Likewise, the Court of Appeals may review the correctness
of the evaluation of the plaintiffs evidence by the lower court.

Rule on Limited Liability. The petitioners assert in common that the

vessel M/V P. Aboitiz did not sink by reason offorce majeure but
because of its unseaworthiness and the concurrent fault and/or
negligence of Aboitiz, the captain and its crew, thereby barring
Aboitiz from availing of the benefit of the limited liability rule.
The principle of limited liability is enunciated in the following
provisions of the Code of Commerce:
Art. 587. The shipagent shall also be civilly liable for the
indemnities in favor of third persons which may arise from
the conduct of the captain in the care of goods which he
loaded on the vessel; but he may exempt himself therefrom
by abandoning the vessel with all the equipments and the
freight it may have earned during the voyage.
Art. 590. The co-owners of a vessel shall be civilly liable in
the proportion of their interests in the common fund for the
results of the acts of the captain referred to in Art. 587.
Each co-owner may exempt himself from his liability by the
abandonment, before a notary, of the part of the vessel
belonging to him.
Art. 837. The civil liability incurred by shipowners in the case
prescribed in this section, shall be understood as limited to
the value of the vessel with all its appurtenances and the
freightage served during the voyage.

Art. 837 appeals the principle of limited liability in cases of collision

hence, Arts. 587 and 590 embody the universal principle of limited
liability in all cases. In Yangco v. Laserna, 48 this Court elucidated
on the import of Art. 587 as follows:

exceptions, namely: (1) where the injury or death to a passenger is

due either to the fault of the shipowner, or to the concurring
negligence of the shipowner and the captain; 52 (2) where the
vessel is insured; and (3) in workmen's compensation claims. 53

The provision accords a shipowner or agent the right of

abandonment; and by necessary implication, his liability is
confined to that which he is entitled as of right to
abandon-"the vessel with all her equipments and the freight
it may have earned during the voyage." It is true that the
article appears to deal only with the limited liability of the
shipowners or agents for damages arising from the
misconduct of the captain in the care of the goods which the
vessel carries, but this is a mere deficiency of language and
in no way indicates the true extent of such liability. The
consensus of authorities is to the effect that notwithstanding
the language of the aforequoted provision, the benefit of
limited liability therein provided for, applies in all cases
wherein the shipowner or agent may properly be held liable
for the negligent or illicit acts of the captain. 49

We have categorically stated that Article 587 speaks only of

situations where the fault or negligence is committed solely by the
captain. In cases where the ship owner is likewise to be blamed,
Article 587 does not apply. Such a situation will be covered by the
provisions of the Civil Code on common carriers. 54

"No vessel, no liability," expresses in a nutshell the limited liability

rule. The shipowner's or agent's liability is merely co-extensive with
his interest in the vessel such that a total loss thereof results in its
extinction. The total destruction of the vessel extinguishes
maritime liens because there is no longer any res to which it can
attach. 50This doctrine is based on the real and hypothecary nature
of maritime law which has its origin in the prevailing conditions of
the maritime trade and sea voyages during the medieval ages,
attended by innumerable hazards and perils. To offset against these
adverse conditions and to encourage shipbuilding and maritime
commerce, it was deemed necessary to confine the liability of the
owner or agent arising from the operation of a ship to the vessel,
equipment, and freight, or insurance, if any. 51
Contrary to the petitioners' theory that the limited liability rule has
been rendered obsolete by the advances in modern technology
which considerably lessen the risks involved in maritime trade, this
Court continues to apply the said rule in appropriate cases. This is
not to say, however, that the limited liability rule is without

A finding that a fortuitous event was the sole cause of the loss of
the M/V P. Aboitiz would absolve Aboitiz from any and all liability
pursuant to Article 1734(1) of the Civil Code which provides in part
that common carriers are responsible for the loss, destruction, or
deterioration of the goods they carry, unless the same is due to
flood, storm, earthquake, lightning, or other natural disaster or
calamity. On the other hand, a finding that the M/V P. Aboitiz sank
by reason of fault and/or negligence of Aboitiz, the ship captain and
crew of the M/V P. Aboitiz would render inapplicable the rule on
limited liability. These issues are therefore ultimately questions of
fact which have been subject of conflicting determinations by the
trial courts, the Court of Appeals and even this Court.
In Civil Cases Nos. 82-2767-82-2770 (now G.R. No. 92735), after
receiving Monarch's and Tabacalera's evidence, the trial court
found that the complete loss of the shipment on board the M/V P.
Aboitiz when it sank was neither due to a fortuitous event nor a
storm or natural cause. For Aboitiz' failure to present controverting
evidence, the trial court also upheld petitioners' allegation that the
M/V P. Aboitiz was unseaworthy. 55 However, on appeal, respondent
Court of Appeals exculpated Aboitiz from fault or negligence and
ruled that:
. . ., even if she (M/V P. Aboitiz) was found to be
unseaworthy, this fault (distinguished from civil liability)
cannot be laid on the shipowner's door. Such fault was
directly attributable to the captain. This is so, because under
Art. 612 of the Code of Commerce, among the inherent

duties of a captain, are to examine the vessel before sailing

and to comply with the laws on navigation. 56
and that:
. . . although the shipowner may be held civilly liable for the
captain's fault . . . having abandoned the vessel in question,
even if the vessel was unseaworthy due to the captain's
fault, Aboitiz is still entitled to the benefit under the rule of
limited liability accorded to shipowners by the Code of
Commerce. 57
Civil Case No. 138396 (now G.R. No. 95578) was similarly resolved
by the trial court, which found that the sinking of the M/V P. Aboitiz
was not due to an act of God or force majeure. It added that the
evidence presented by the petitioner Equitable demonstrated the
negligence of Aboitiz Shipping Corporation in the management and
operation of its, vessel M/V P. Aboitiz. 58
However, Aboitiz' appeal was favorably acted upon by the
respondent Court of Appeals which reiterated its ruling in G.R. No.
92735 that the unseaworthiness of the M/V P. Aboitiz was not a
fault directly attributable to Aboitiz but to the captain, and that
Aboitiz is entitled to the benefit of the limited liability rule for
having abandoned its ship. 59
Finally, in Civil Case No. 138643 (now G.R. No. 94867), the trial
court held that the M/V P. Aboitiz was not lost due to a fortuitous
event or force majeure, and that Aboitiz had failed to satisfactorily
establish that it had observed extraordinary diligence in the
vigilance over the goods transported by it. 60
In CA-G.R. CV No. 04121, the Court of Appeals initially ruled against
Aboitiz and found that the sinking of the vessel was due to its
unseaworthiness and the failure of its crew and master to exercise
extraordinary diligence. 61Subsequently, however, Aboitiz' petition
before the Court of Appeals, docketed as CA-G.R. SP No. 20844
(now G.R. No. 94867) to annul and set aside the order of execution
issued by the lower court was resolved in favor of Aboitiz. The
Court of Appeals brushed aside the issue of Aboitiz' negligence

and/or fault and proceeded to allow the application of the limited

liability rule "to accomplish the aims of justice." 62 It elaborated
thus: "To execute the judgment in this case would prejudice the
substantial right of other claimants who have filed suits to claim
their cargoes that was lost in the vessel that sank and also against
the petitioner to be ordered to pay more than what the law
requires." 63
It should be pointed out that the issue of whether or not the M/V P.
Aboitiz sank by reason of force majeure is not a novel one for that
question has already been the
subject of conflicting
pronouncements by the Supreme Court. InAboitiz Shipping
Corporation v. Court of Appeals, 64 this Court approved the findings
of the trial court and the appellate court that the sinking of the M/V
P. Aboitiz was not due to the waves caused by tropical storm
"Yoning" but due to the fault and negligence of Aboitiz, its master
and crew. 65 On the other hand, in the later case ofCountry
Bankers Insurance Corporation v. Court of Appeals, 66 this Court
issued a Resolution on August 28, 1991 denying the petition for
review on the ground that the Court of Appeals committed no
reversible error, thereby affirming and adopting as its own, the
findings of the Court of Appeals that force majeure had caused the
M/V P. Aboitiz to founder.
In view of these conflicting pronouncements, we find that now is
the opportune time to settle once and for all the issue or whether
or not force mejeure had indeed caused the M/V P. Aboitiz to sink.
After reviewing the records of the instant cases, we categorically
state that by the facts on record, the M/V P. Aboitiz did not go under
water because of the storm "Yoning."
It is true that as testified by Justo Iglesias, meteorologist of Pag-Asa,
during the inclusive dates of October 28-31, 1980, a stormy
weather condition prevailed within the Philippine area of
responsibility, particularly along the sea route from Hong Kong to
Manila, because of tropical depression "Yoning". 67 But even
Aboitiz' own evidence in the form of the marine protest filed by
Captain Racines affirmed that the wind force when the M/V P.
Aboitiz foundered on October 31, 1980 was only ten (10) to fifteen
(15) knots which, under the Beaufort Scale or Wind, falls within

scale No. 4 that describes the wind velocity as "moderate breeze,"

and characterizes the waves as "small . . . becoming longer, fairly
frequent white horses." 68 Captain Racines also testified in open
court that the ill-fated M/V P. Aboitiz was two hundred (200) miles
away from storm "Yoning" when it sank. 69
The issue of negligence on the part of Aboitiz, and the captain and
crew of the M/V P. Aboitiz has also been subject of conflicting
rulings by this Court. In G.R. No. 100373, Country Bankers
Insurance Corporation v. Court of Appeals, this Court found no error
in the findings of the Court of Appeals that the M/V P. Aboitiz sank
by reason offorce majeure, and that there was no negligence on the
part of its officers and crew. In direct contradiction is this Court's
categorical declaration in Aboitiz Shipping Corporation v. Court of
Appeals," 70 to wit:
The trial court and the appellate court found that the sinking
of the M/V P. Aboitiz was not due to the waves caused by
tropical storm "Yoning" but due to the fault and negligence
of petitioner, its master and crew. The court reproduces with
approval said findings . . . . 71
However, in the subsequent case of Aboitiz Shipping Corporation v.
General Accident Fire and Life Assurance Corporation, Ltd., 72 this
Court exculpated Aboitiz from fault and/or negligence while holding
that the unseaworthiness of the M/V P. Aboitiz was only attributable
to the negligence of its captain and crew. Thus,
On this point, it should be stressed that unseaworthiness is
not a fault that can be laid squarely on petitioner's lap,
absent a factual basis for such conclusion. The
unseaworthiness found in some cases where the same has
been ruled to exist is directly attributable to the vessel's
crew and captain, more so on the part of the latter since
Article 612 of the Code of Commerce provides that among
the inherent duties of a captain is to examine a vessel
before sailing and to comply with the laws of navigation.
Such a construction would also put matters to rest relative
to the decision of the Board of Marine Inquiry. While the
conclusion therein exonerating the captain and crew of the

vessel was not sustained for lack of basis, the finding

therein contained to the effect that the vessel was
seaworthy deserves merit. Despite appearances, it is not
totally incompatible with the findings of the trial court and
the Court of Appeals, whose finding of "unseaworthiness"
clearly did not pertain to the structural condition of the
vessel which is the basis of the BMI's findings, but to the
condition it was in at the time of the sinking, which condition
was a result of the acts of the captain and the crew. 73
It therefore becomes incumbent upon this Court to answer with
finality the nagging question of whether or not it was the
concurrent fault and/or negligence of Aboitiz and the captain and
crew of the ill-fated vessel that had caused it to go under water.
Guided by our previous pronouncements and illuminated by the
evidence now on record, we reiterate our findings in Aboitiz
Shipping Corporation v. General Accident Fire and Life Assurance
Corporation, Ltd. 74, that the unseaworthiness of the M/V P. Aboitiz
had caused it to founder. We, however, take exception to the
pronouncement therein that said unseaworthiness could not be
attributed to the ship owner but only to the negligent acts of the
captain and crew of the M/V P. Aboitiz. On the matter of Aboitiz'
negligence, we adhere to our ruling in Aboitiz Shipping Corporation
v. Court of Appeals, 75 that found Aboitiz, and the captain and crew
of the M/V P. Aboitiz to have been concurrently negligent.
During the trial of Civil Case Nos. 82-2767-82-2770 (now G.R. No.
92735), petitioners Monarch and Tabacalera presented a survey
from Perfect Lambert, a surveyor based in Hong Kong that
conducted an investigation on the possible cause of the sinking of
the vessel. The said survey established that the cause of the
sinking of the vessel was the leakage of water into the M/V P.
Aboitiz which probably started in the forward part of the No. 1 hull,
although no explanation was proffered as to why the No. 2 hull was
likewise flooded. Perfect Lambert surmised that the flooding was
due to a leakage in the shell plating or a defect in the water tight
bulk head between the Nos. 1 and 2 holds which allowed the water
entering hull No. 1 to pass through hull No. 2. The surveyor
concluded that whatever the cause of the leakage of water into

these hulls, the seaworthiness of the vessel was definitely in

question because the breaches of the hulls and serious flooding of
the two cargo holds occurred simultaneously in seasonal
weather. 76
We agree with the uniform finding of the lower courts that Aboitiz
had failed to prove that it observed the extraordinary diligence
required of it as a common carrier. We therefore reiterate our
pronouncement in Aboitiz Corporation v. Court of Appeals 77 on the
issue of Aboitiz' liability in the sinking of its vessel, to wit:
In accordance with Article 1732 of the Civil Code, the
defendant common carrier from the nature of its business
and for reasons of public policy, is bound to observe
extraordinary diligence in the vigilance over the goods and
for the safety of the passengers transported by it according
to all circumstances of the case. While the goods are in the
possession of the carrier, it is but fair that it exercise
extraordinary diligence in protecting them from loss or
damage, and if loss occurs, the law presumes that it was
due to the carrier's fault or negligence; that is necessary to
protect the interest of the shipper which is at the mercy of
the carrier . . . In the case at bar, the defendant failed to
prove hat the loss of the subject cargo was not due to its
fault or negligence. 78

however mean that the limited liability rule will not be applied to
the present cases. The peculiar circumstances here demand that
there should be no strict adherence to procedural rules on evidence
lest the just claims of shippers/insurers be frustrated. The rule on
limited liability should be applied in accordance with the latest
ruling inAboitiz Shipping Corporation v. General Accident Fire and
Life Assurance Corporation, Ltd., 80 promulgated on January 21,
1993, that claimants be treated as "creditors in an insolvent
corporation whose assets are not enough to satisfy the totality of
claims against it." 81 To do so, the Court set out in that case the
procedural guidelines:
In the instant case, there is, therefore, a need to collate all
claims preparatory to their satisfaction from the insurance
proceeds on the vessel M/V P. Aboitiz and its pending
freightage at the time of its loss. No claimant can be given
precedence over the others by the simple expedience of
having completed its action earlier than the rest. Thus,
execution of judgment in earlier completed cases, even
these already final and executory must be stayed pending
completion of all cases occasioned by the subject sinking.
Then and only then can all such claims be simultaneously
settled, either completely or pro-rata should the insurance
proceeds and freightage be not enough to satisfy all claims.
xxx

The failure of Aboitiz to present sufficient evidence to exculpate

itself from fault and/or negligence in the sinking of its vessel in the
face of the foregoing expert testimony constrains us to hold that
Aboitiz was concurrently at fault and/or negligent with the ship
captain and crew of the M/V P. Aboitiz. This is in accordance with
the rule that in cases involving the limited liability of shipowners,
the initial burden of proof of negligence or unseaworthiness rests
on the claimants. However, once the vessel owner or any party
asserts the right to limit its liability, the burden of proof as to lack
of privity or knowledge on its part with respect to the matter of
negligence or unseaworthiness is shifted to it. 79 This burden,
Aboitiz had unfortunately failed to discharge. That Aboitiz failed to
discharge the burden of proving that the unseaworthiness of its
vessel was not due to its fault and/or negligence should not

xxx

xxx

In fairness to the claimants and as a matter of equity, the

total proceeds of the insurance and pending freightage
should now be deposited in trust. Moreover, petitioner
should institute the necessary limitation and distribution
action before the proper admiralty court within 15 days from
finality of this decision, and thereafter deposit with it the
proceeds from the insurance company and pending
freightage in order to safeguard the same pending final
resolution of all incidents, for final pro-rating and settlement
thereof. 82(Emphasis supplied.)
There is no record that Aboitiz. has instituted such action or that it
has deposited in trust the insurance proceeds and freightage

earned. The pendency of the instant cases before the Court is not a
reason for Aboitiz to disregard the aforementioned order of the
Court. In fact, had Aboitiz complied therewith, even these cases
could have been terminated earlier. We are inclined to believe that
instead of filing the suit as directed by this Court, Aboitiz tolerated
the situation of several claimants waiting to gel hold of its
insurance proceeds, which, if correctly handled must have
multiplied in amount by now. By its failure to abide by the order of
this Court, it had caused more damage to the claimants over and
above that which they have endured as a direct consequence of the
sinking of the M/V P. Aboitiz. It was obvious that from among the
many cases filed against it over the years, Aboitiz was waiting for a
judgment that might prove favorable to it, in blatant violation of the
basic provisions of the Civil Code on abuse of rights.
Well aware of the 110 claimants against it, Aboitiz preferred to
litigate the claims singly rather than exert effort towards the
consolidation of all claims. Consequently, courts have arrived at
conflicting decisions while claimants waited over the years for a
resolution of any of the cases that would lead to the eventual
resolution of the rest. Aboitiz failed to give the claimants their due
and to observe honesty and good faith in the exercise of its
rights. 83
Aboitiz' blatant disregard of the order of this Court in Aboitiz
Shipping Corporation v. General Accident Fire and Life Assurance
Corporation, Ltd. 84 cannot be anything but, willful on its part. An
act is considered willful if it is done with knowledge of its injurious
effect; it is not required that the act be done purposely to produce
the injury.85 Aboitiz is well aware that by not instituting the said
suit, it caused the delay in the resolution of all claims against it.
Having willfully caused loss or injury to the petitioners in a manner
that is contrary to morals, good customs or public policy, Aboitiz is
liable for damages to the latter. 86

On account of Aboitiz' refusal to satisfy petitioners' claims in

accordance with the directive of the Court in Aboitiz Shipping
Corporation v. General Accident Fire and Life Assurance
Corporation, Ltd., it acted in gross and evident bad faith.
Accordingly,
pursuant
to
Article
2208
of
the
Civil
Code, 88 petitioners should be granted attorney's fees.
WHEREFORE, the petitions in G.R. Nos. 92735, 94867, and 95578
are DENIED. The decisions of the Court of Appeals in CA-G.R. No.
SP-17427 dated March 29, 1990, CA-G.R. SP No. 20844 dated
August 15, 1990, and CA-G.R. CV No. 15071 dated August 24, 1990
are AFFIRMED with the MODIFICATION that respondent Aboitiz
Shipping Corporation is ordered to pay each of the respective
petitioners the amounts of P100,000.00 as moral damages and
P50,000.00 as attorney's fees, and treble the cost of suit.
Respondent Aboitiz Shipping Corporation is further directed to
comply with the Order promulgated by this Court on January 21,
1993 in Aboitiz Shipping Corporation v. General Accident Fire and
Life Assurance Corporation, Ltd., G.R. No. 100446, January 21,
1993, to (a) institute the necessary limitation and distribution
action before the proper Regional Trial Court, acting as admiralty
court, within fifteen (15) days from the finality of this decision, and
(b) thereafter to deposit with the said court the insurance proceeds
from the loss of the vessel, M/V P. Aboitiz, and the freightage
earned in order to safeguard the same pending final resolution of
all incidents relative to the final pro-rating thereof and to the
settlement of all claims. SO ORDERED.
G.R. No. 100446 January 21, 1993
ABOITIZ SHIPPING CORPORATION, petitioner, vs. GENERAL
ACCIDENT FIRE AND LIFE ASSURANCE CORPORATION,
LTD., respondent.
MELO, J.:

Thus, for its contumacious act of defying the order of this Court to
file the appropriate action to consolidate all claims for settlement,
Aboitiz must be held liable for moral damages which may be
awarded in appropriate cases under the Chapter on human
relations of the Civil Code (Articles 19 to 36). 87

This refers to a petition for review which seeks to annul and set
aside the decision of the Court of Appeals dated June 21, 1991, in
CA G.R. SP No. 24918. The appellate court dismissed the petition
for certiorari filed
by
herein
petitioner,
Aboitiz
Shipping

Corporation, questioning the Order of April 30, 1991 issued by the

Regional Trial Court of the National Capital Judicial Region (Manila,
Branch IV) in its Civil Case No. 144425 granting private
respondent's prayer for execution for the full amount of the
judgment award. The trial court in so doing swept aside petitioner's
opposition which was grounded on the real and hypothecary nature
of petitioner's liability as ship owner. The application of this
established principle of maritime law would necessarily result in a
probable reduction of the amount to be recovered by private
respondent, since it would have to share with a number of other
parties similarly situated in the insurance proceeds on the vessel
that sank.

said case in the amount of P1,072,611.20 plus legal interest has

given rise to the instant petition.

The basic facts are not disputed.

It is in this factual milieu that the instant petition seeks a

pronouncement as to the applicability of the doctrine of limited
liability on the totality of the claims vis a vis the losses brought
about by the sinking of the vessel M/V P. ABOITIZ, as based on the
real and hypothecary nature of maritime law. This is an issue which
begs to be resolved considering that a number of suits alleged in
the petition number about 110 (p. 10 and pp. 175 to 183, Rollo) still
pend and whose resolution shall well-nigh result in more confusion
than presently attends the instant case.

Petitioner is a corporation organized and operating under Philippine

laws and engaged in the business of maritime trade as a carrier. As
such, it owned and operated the ill-fated "M/V P. ABOITIZ," a
common carrier which sank on a voyage from Hongkong to the
Philippines on October 31, 1980. Private respondent General
Accident Fire and Life Assurance Corporation, Ltd. (GAFLAC), on the
other hand, is a foreign insurance company pursuing its remedies
as a subrogee of several cargo consignees whose respective cargo
sank with the said vessel and for which it has priorly paid.
The incident of said vessel's sinking gave rise to the filing of suits
for recovery of lost cargo either by the shippers, their successor-ininterest, or the cargo insurers like GAFLAC as subrogees. The
sinking was initially investigated by the Board of Marine Inquiry
(BMI Case No. 466, December 26, 1984), which found that such
sinking was due toforce majeure and that subject vessel, at the
time of the sinking was seaworthy. This administrative finding
notwithstanding, the trial court in said Civil Case No. 144425 found
against the carrier on the basis that the loss subject matter therein
did not occur as a result of force majeure. Thus, in said case,
plaintiff GAFLAC was allowed to prove, and. was later awarded, its
claim. This decision in favor of GAFLAC was elevated all the way up
to this Court in G.R. No. 89757 (Aboitiz v. Court of Appeals, 188
SCRA 387 [1990]), with Aboitiz, like its ill-fated vessel, encountering
rough sailing. The attempted execution of the judgment award in

On the other hand, other cases have resulted in findings upholding

the conclusion of the BMI that the vessel was seaworthy at the time
of the sinking, and that such sinking was due to force majeure. One
such ruling was likewise elevated to this Court in G.R. No.
100373, Country Bankers Insurance Corporation v. Court of
Appeals, et al., August 28, 1991 and was sustained. Part of the task
resting upon this Court, therefore, is to reconcile the resulting
apparent contrary findings in cases originating out of a single set of
facts.

In support of the instant petition, the following arguments are

submitted by the petitioner:
1. The Limited Liability Rule warrants immediate stay
of execution of judgment to prevent impairment of
other creditors' shares;
2. The finding of unseaworthiness of a vessel is not
necessarily attributable to the shipowner; and
3 The principle of "Law of the Case" is not applicable
to the present petition. (pp. 2-26, Rollo.)
On the other hand, private respondent opposes the foregoing
contentions, arguing that:

1. There is no limited liability to speak of or

applicable real and hypothecary rule under Article
587, 590, and 837 of the Code of Commerce in the
face of the facts found by the lower court (Civil Case
No. 144425), upheld by the Appellate Court (CA G.R.
No. 10609), and affirmed in toto by the Supreme
Court in G.R. No. 89757 which cited G.R. No. 88159
as the Law of the Case; and
2. Under the doctrine of the Law of the Case, cases
involving the same incident, parties similarly situated
and the same issues litigated should be decided in
conformity therewith following the maximstare
decisis et non quieta movere. (pp. 225 to 279, Rollo.)
Before proceeding to the main bone of contention, it is important to
determine first whether or not the Resolution of this Court in G.R.
No. 88159, Aboitiz Shipping, Corporation vs. The Honorable Court
of Appeals and Allied Guaranty Insurance Company, Inc., dated
November 13, 1989 effectively bars and precludes the instant
petition as argued by respondent GAFLAC.
An examination of the November 13, 1989 Resolution in G.R. No.
88159 (pp. 280 to 282, Rollo) shows that the same settles two
principal matters, first of which is that the doctrine of primary
administrative jurisdiction is not applicable therein; and second is
that a limitation of liability in said case would render inefficacious
the extraordinary diligence required by law of common carriers.
It should be pointed out, however, that the limited liability
discussed in said case is not the same one now in issue at bar, but
an altogether different aspect. The limited liability settled in G.R.
No. 88159 is that which attaches to cargo by virtue of stipulations
in the Bill of Lading, popularly known as package limitation clauses,
which in that case was contained in Section 8 of the Bill of Lading
and which limited the carrier's liability to US$500.00 for the cargo
whose value was therein sought to be recovered. Said resolution
did not tackle the matter of the Limited Liability Rule arising out of
the real and hypothecary nature of maritime law, which was not
raised therein, and which is the principal bone of contention in this

case. While the matters threshed out in G.R. No. 88159, particularly
those dealing with the issues on primary administrative jurisdiction
and the package liability limitation provided in the Bill of Lading are
now settled and should no longer be touched, the instant case
raises a completely different issue. It appears, therefore, that the
resolution in G.R. 88159 adverted to has no bearing other than
factual to the instant case.
This brings us to the primary question herein which is whether or
not respondent court erred in granting execution of the full
judgment award in Civil Case No. 14425 (G.R. No. 89757), thus
effectively denying the application of the limited liability
enunciated under the appropriate articles of the Code of
Commerce. The articles may be ancient, but they are timeless and
have remained to be good law. Collaterally, determination of the
question of whether execution of judgments which have become
final and executory may be stayed is also an issue.
We shall tackle the latter issue first. This Court has always been
consistent in its stand that the very purpose for its existence is to
see to the accomplishment of the ends of justice. Consistent with
this view, a number of decisions have originated herefrom, the
tenor of which is that no procedural consideration is sacrosanct if
such shall result in the subverting of substantial justice. The right to
an execution after finality of a decision is certainly no exception to
this. Thus, in Cabrias v. Adil (135 SCRA 355 [1985]), this Court ruled
that:
. . . It is a truism that every court has the power "to
control, in the furtherance of justice, the conduct of
its ministerial officers, and of all other persons in any
manner connected with a case before it, in every
manner appertaining thereto. It has also been said
that:
. . . every court having jurisdiction to render a
particular judgment has inherent power to
enforce it, and to exercise equitable control
over such enforcement. The court has
authority to inquire whether its judgment has

been executed, and will remove obstructions

to the enforcement thereof. Such authority
extends not only to such orders and such
writs as may be necessary to carry out the
judgment into effect and render it binding and
operative, but also to such orders and such
writs as may be necessary to prevent an
improper enforcement of the judgment. If a
judgment is sought to be perverted and made
a medium of consummating a wrong the court
on proper application can prevent it. (at p.
359)
and again in the case of Lipana v. Development Bank of Rizal (154
SCRA 257 [1987]), this Court found that:
The rule that once a decision becomes final and
executory, it is the ministerial duty of the court to
order its execution, admits of certain exceptions as in
cases of special and exceptional nature where it
becomes the imperative in the higher interest of
justice to direct the suspension of its execution
(Vecine v. Geronimo, 59 OG 579); whenever it is
necessary to accomplish the aims of justice (Pascual
v Tan, 85 Phil. 164); or when certain facts and
circumstances transpired after the judgment became
final which would render the execution of the
judgment unjust (Cabrias v. Adil, 135 SCRA 354). (at
p. 201)
We now come to the determination of the principal issue as to
whether the Limited Liability Rule arising out of the real and
hypothecary nature of maritime law should apply in this and related
cases. We rule in the affirmative.
In deciding the instant case below, the Court of Appeals took refuge
in this Court's decision in G.R. No. 89757 upholding private
respondent's claims in that particular case, which the Court of
Appeals took to mean that this Court has "considered, passed upon
and resolved Aboitiz's contention that all claims for the losses

should first be determined before GAFLAC's judgment may be

satisfied," and that such ruling "in effect necessarily negated the
application of the limited liability principle" (p. 175, Rollo). Such
conclusion is not accurate. The decision in G.R. No. 89757
considered only the circumstances peculiar to that particular case,
and was not meant to traverse the larger picture herein brought to
fore, the circumstances of which heretofore were not relevant. We
must stress that the matter of the Limited Liability Rule as
discussed was never in issue in all prior cases, including those
before the RTCs and the Court of Appeals. As discussed earlier, the
"limited liability" in issue before the trial courts referred to the
package limitation clauses in the bills of lading and not the limited
liability doctrine arising from the real and hypothecary nature of
maritime trade. The latter rule was never made a matter of defense
in any of the cases a quo, as properly it could not have been made
so since it was not relevant in said cases. The only time it could
come into play is when any of the cases involving the mishap were
to be executed, as in this case. Then, and only then, could the
matter have been raised, as it has now been brought before the
Court.
The real and hypothecary nature of maritime law simply means
that the liability of the carrier in connection with losses related to
maritime contracts is confined to the vessel, which is hypothecated
for such obligations or which stands as the guaranty for their
settlement. It has its origin by reason of the conditions and risks
attending maritime trade in its earliest years when such trade was
replete with innumerable and unknown hazards since vessels had
to go through largely uncharted waters to ply their trade. It was
designed to offset such adverse conditions and to encourage
people and entities to venture into maritime commerce despite the
risks and the prohibitive cost of shipbuilding. Thus, the liability of
the vessel owner and agent arising from the operation of such
vessel were confined to the vessel itself, its equipment, freight, and
insurance, if any, which limitation served to induce capitalists into
effectively wagering their resources against the consideration of
the large profits attainable in the trade.
It might be noteworthy to add in passing that despite the
modernization of the shipping industry and the development of

high-technology safety devices designed to reduce the risks

therein, the limitation has not only persisted, but is even practically
absolute in well-developed maritime countries such as the United
States and England where it covers almost all maritime casualties.
Philippine maritime law is of Anglo-American extraction, and is
governed by adherence to both international maritime conventions
and generally accepted practices relative to maritime trade and
travel. This is highlighted by the following excerpts on the limited
liability of vessel owners and/or agents;

the ship for whose act, neglect or default the owner

is responsible: Provided, however, that in regard to
the act, neglect or default of this last class of person,
the owner shall only be entitled to limit his liability
when the act, neglect or default is one which occurs
in the navigation or the management of the ship or in
the loading, carriage or discharge of its cargo or in
the embarkation, carriage or disembarkation of its
passengers.

Sec. 183. The liability of the owner of any vessel,

whether American or foreign, for any embezzlement,
loss, or destruction by any person of any person or
any property, goods, or merchandise shipped or put
on board such vessel, or for any loss, damage, or
forfeiture, done, occasioned, or incurred, without the
privity or knowledge of such owner or owners shall
not exceed the amount or value of the interest of
such owner in such vessel, and her freight then
pending. (Section 183 of the US Federal Limitation of
Liability Act).

(c) any obligation or liability imposed by any law

relating to the removal of wreck and arising from or
in connection with the raising, removal or destruction
of any ship which is sunk, stranded or abandoned
(including anything which may be on board such
ship) and any obligation or liability arising out of
damage caused to harbor works, basins and
navigable waterways. (Section 1, Article I of the
Brussels International Convention of 1957)

and
1. The owner of a sea-going ship may limit his
liability in accordance with Article 3 of this
Convention in respect of claims arising, from any of
the following occurrences, unless the occurrence
giving rise to the claim resulted from the actual fault
or privity of the owner;
(a) loss of life of, or personal injury to, any person
being carried in the ship, and loss of, or damage to,
any property on board the ship.
(b) loss of life of, or personal injury to, any other
person, whether on land or on water, loss of or
damage to any other property or infringement of any
rights caused by the act, neglect or default the
owner is responsible for, or any person not on board

In this jurisdiction, on the other hand, its application has been wellnigh constricted by the very statute from which it originates. The
Limited Liability Rule in the Philippines is taken up in Book III of the
Code of Commerce, particularly in Articles 587, 590, and 837,
hereunder quoted in toto:
Art. 587. The ship agent shall also be civilly liable for
the indemnities in favor of third persons which may
arise from the conduct of the captain in the care of
the goods which he loaded on the vessel; but he may
exempt himself therefrom by abandoning the vessel
with all her equipment and the freight it may have
earned during the voyage.
Art. 590. The co-owners of a vessel shall be civilly
liable in the proportion of their interests in the
common fund for the results of the acts of the
captain referred to in Art. 587.

Each co-owner may exempt himself from this liability

by the abandonment, before a notary, of the part of
the vessel belonging to him.
Art. 837. The civil liability incurred by shipowners in
the case prescribed in this section (on collisions),
shall be understood as limited to the value of the
vessel with all its appurtenances and freightage
served during the voyage. (Emphasis supplied)
Taken together with related articles, the foregoing cover only
liability for injuries to third parties (Art. 587), acts of the captain
(Art. 590) and collisions (Art. 837).
In view of the foregoing, this Court shall not take the application of
such limited liability rule, which is a matter of near absolute
application in other jurisdictions, so lightly as to merely "imply" its
inapplicability, because as could be seen, the reasons for its being
are still apparently much in existence and highly regarded.
We now come to its applicability in the instant case. In the few
instances when the matter was considered by this Court, we have
been consistent in this jurisdiction in holding that the only time the
Limited Liability Rule does not apply is when there is an actual
finding of negligence on the part of the vessel owner or agent
(Yango v. Laserna, 73 Phil. 330 [1941]; Manila Steamship Co., Inc. v.
Abdulhanan, 101 Phil. 32 [1957]; Heirs of Amparo delos Santos v.
Court of Appeals, 186 SCRA 649 [1967]). The pivotal question, thus,
is whether there is a finding of such negligence on the part of the
owner in the instant case.
A careful reading of the decision rendered by the trial court in Civil
Case No. 144425 (pp. 27-33, Rollo) as well as the entirety of the
records in the instant case will show that there has been no actual
finding of negligence on the part of petitioner. In its Decision, the
trial court merely held that:

. . . Considering the foregoing reasons, the Court

holds that the vessel M/V "Aboitiz" and its cargo were
not lost due to fortuitous event or force majeure." (p.
32, Rollo)
The same is true of the decision of this Court in G.R. No. 89757 (pp.
71-86, Rollo) affirming the decision of the Court of Appeals in CAG.R. CV No. 10609 (pp. 34-50, Rollo) since both decisions did not
make any new and additional finding of fact. Both merely affirmed
the factual findings of the trial court, adding that the cause of the
sinking of the vessel was because of unseaworthiness due to the
failure of the crew and the master to exercise extraordinary
diligence. Indeed, there appears to have been no evidence
presented sufficient to form a conclusion that petitioner shipowner
itself was negligent, and no tribunal, including this Court will add or
subtract to such evidence to justify a conclusion to the contrary.
The qualified nature of the meaning of "unseaworthiness," under
the peculiar circumstances of this case is underscored by the fact
that in the Country Banker's case, supra, arising from the same
sinking, the Court sustained the decision of the Court of Appeals
that the sinking of the M/V P. Aboitiz was due to force majeure.
On this point, it should be stressed that unseaworthiness is not a
fault that can be laid squarely on petitioner's lap, absent a factual
basis for such a conclusion. The unseaworthiness found in some
cases where the same has been ruled to exist is directly
attributable to the vessel's crew and captain, more so on the part of
the latter since Article 612 of the Code of Commerce provides that
among the inherent duties of a captain is to examine a vessel
before sailing and to comply with the laws of navigation. Such a
construction would also put matters to rest relative to the decision
of the Board of Marine Inquiry. While the conclusion therein
exonerating the captain and crew of the vessel was not sustained
for lack of basis, the finding therein contained to the effect that the
vessel was seaworthy deserves merit. Despite appearances, it is
not totally incompatible with the findings of the trial court and the
Court of Appeals, whose finding of "unseaworthiness" clearly did
not pertain to the structural condition of the vessel which is the
basis of the BMI's findings, but to the condition it was in at the time

of the sinking, which condition was a result of the acts of the

captain and the crew.
The rights of a vessel owner or agent under the Limited Liability
Rule are akin to those of the rights of shareholders to limited
liability under our corporation law. Both are privileges granted by
statute, and while not absolute, must be swept aside only in the
established existence of the most compelling of reasons. In the
absence of such reasons, this Court chooses to exercise prudence
and shall not sweep such rights aside on mere whim or surmise, for
even in the existence of cause to do so, such incursion is definitely
punitive in nature and must never be taken lightly.
More to the point, the rights of parties to claim against an agent or
owner of a vessel may be compared to those of creditors against an
insolvent corporation whose assets are not enough to satisfy the
totality of claims as against it. While each individual creditor may,
and in fact shall, be allowed to prove the actual amounts of their
respective claims, this does not mean that they shall all be allowed
to recover fully thus favoring those who filed and proved their
claims sooner to the prejudice of those who come later. In such an
instance, such creditors too would not also be able to gain access
to the assets of the individual shareholders, but must limit their
recovery to what is left in the name of the corporation. Thus, in the
case of Lipana v. Development Bank of Rizal earlier cited, We held
that:

In the instant case, the stay of execution of judgment

is warranted by the fact that the respondent bank
was placed under receivership. To execute the
judgment would unduly deplete the assets of
respondent bank to the obvious prejudice of other
depositors and creditors, since, as aptly stated in
Central Bank v. Morfe (63 SCRA 114), after the
Monetary Board has declared that a bank is insolvent
and has ordered it to cease operations, the Board
becomes the trustee of its assets for the equal
benefit of all creditors, and after its insolvency, one
cannot obtain an advantage or preference over
another by an attachment, execution or otherwise.
(at p. 261).
In both insolvency of a corporation and the sinking of a vessel, the
claimants or creditors are limited in their recovery to the remaining
value of accessible assets. In the case of an insolvent corporation,
these are the residual assets of the corporation left over from its
operations. In the case of a lost vessel, these are the insurance
proceeds and pending freightage for the particular voyage.
In the instant case, there is, therefore, a need to collate all claims
preparatory to their satisfaction from the insurance proceeds on the
vessel M/V P. Aboitiz and its pending freightage at the time of its
loss. No claimant can be given precedence over the others by the
simple expedience of having filed or completed its action earlier
than the rest. Thus, execution of judgment in earlier completed
cases, even those already final and executory, must be stayed
pending completion of all cases occasioned by the subject sinking.
Then and only then can all such claims be simultaneously settled,
either completely or pro-rata should the insurance proceeds and
freightage be not enough to satisfy all claims.
Finally, the Court notes that petitioner has provided this Court with
a list of all pending cases (pp. 175 to 183,Rollo), together with the
corresponding claims and the pro-rated share of each. We likewise
note that some of these cases are still with the Court of Appeals,
and some still with the trial courts and which probably are still
undergoing trial. It would not, therefore, be entirely correct to

preclude the trial courts from making their own findings of fact in
those cases and deciding the same by allotting shares for these
claims, some of which, after all, might not prevail, depending on
the evidence presented in each. We, therefore, rule that the prorated share of each claim can only be found after all the cases shall
have been decided.
In fairness to the claimants, and as a matter of equity, the total
proceeds of the insurance and pending freightage should now be
deposited in trust. Moreover, petitioner should institute the
necessary limitation and distribution action before the proper
admiralty court within 15 days from the finality of this decision, and
thereafter deposit with it the proceeds from the insurance company
and pending freightage in order to safeguard the same pending
final resolution of all incidents, for final pro-rating and settlement
thereof.
ACCORDINGLY, the petition is hereby GRANTED, and the Orders of
the Regional Trial Court of Manila, Branch IV dated April 30, 1991
and the Court of Appeals dated June 21, 1991 are hereby set aside.
The trial court is hereby directed to desist from proceeding with the
execution of the judgment rendered in Civil Case No. 144425
pending determination of the totality of claims recoverable from
the petitioner as the owner of the M/V P. Aboitiz. Petitioner is
directed to institute the necessary action and to deposit the
proceeds of the insurance of subject vessel as above-described
within fifteen (15) days from finality of this decision. The temporary
restraining order issued in this case dated August 7, 1991 is hereby
made permanent. SO ORDERED.

G.R. No. 101503 September 15, 1993

PLANTERS PRODUCTS, INC., petitioner, vs. COURT OF
APPEALS, SORIAMONT STEAMSHIP AGENCIES AND KYOSEI
KISEN KABUSHIKI KAISHA,respondents.
BELLOSILLO, J.:
Does a charter-party 1 between a shipowner and a charterer
transform a common carrier into a private one as to negate the civil
law presumption of negligence in case of loss or damage to its
cargo?
Planters Products, Inc. (PPI), purchased from Mitsubishi
International Corporation (MITSUBISHI) of New York, U.S.A.,
9,329.7069 metric tons (M/T) of Urea 46% fertilizer which the latter
shipped in bulk on 16 June 1974 aboard the cargo vessel M/V "Sun
Plum" owned by private respondent Kyosei Kisen Kabushiki Kaisha
(KKKK) from Kenai, Alaska, U.S.A., to Poro Point, San Fernando, La
Union, Philippines, as evidenced by Bill of Lading No. KP-1 signed
by the master of the vessel and issued on the date of departure.
On 17 May 1974, or prior to its voyage, a time charter-party on the
vessel M/V "Sun Plum" pursuant to the Uniform General
Charter 2 was entered into between Mitsubishi as shipper/charterer
and KKKK as shipowner, in Tokyo, Japan. 3Riders to the aforesaid
charter-party starting from par. 16 to 40 were attached to the preprinted agreement. Addenda Nos. 1, 2, 3 and 4 to the charter-party
were also subsequently entered into on the 18th, 20th, 21st and
27th of May 1974, respectively.
Before loading the fertilizer aboard the vessel, four (4) of her
holds 4 were all presumably inspected by the charterer's
representative and found fit to take a load of urea in bulk pursuant
to par. 16 of the charter-party which reads:

16. . . . At loading port, notice of readiness to be

accomplished by certificate from National Cargo
Bureau inspector or substitute appointed by
charterers for his account certifying the vessel's
readiness to receive cargo spaces. The vessel's hold
to be properly swept, cleaned and dried at the
vessel's expense and the vessel to be presented
clean for use in bulk to the satisfaction of the
inspector before daytime commences. (emphasis
supplied)
After the Urea fertilizer was loaded in bulk by stevedores hired by
and under the supervision of the shipper, the steel hatches were
closed with heavy iron lids, covered with three (3) layers of
tarpaulin, then tied with steel bonds. The hatches remained closed
and tightly sealed throughout the entire voyage. 5
Upon arrival of the vessel at her port of call on 3 July 1974, the
steel pontoon hatches were opened with the use of the vessel's
boom. Petitioner unloaded the cargo from the holds into its
steelbodied dump trucks which were parked alongside the berth,
using metal scoops attached to the ship, pursuant to the terms and
conditions of the charter-partly (which provided for an F.I.O.S.
clause). 6 The hatches remained open throughout the duration of
the discharge. 7
Each time a dump truck was filled up, its load of Urea was covered
with tarpaulin before it was transported to the consignee's
warehouse located some fifty (50) meters from the wharf. Midway
to the warehouse, the trucks were made to pass through a
weighing scale where they were individually weighed for the
purpose of ascertaining the net weight of the cargo. The port area
was windy, certain portions of the route to the warehouse were
sandy and the weather was variable, raining occasionally while the
discharge was in progress. 8 The petitioner's warehouse was made
of corrugated galvanized iron (GI) sheets, with an opening at the
front where the dump trucks entered and unloaded the fertilizer on
the warehouse floor. Tarpaulins and GI sheets were placed inbetween and alongside the trucks to contain spillages of the
ferilizer. 9

It took eleven (11) days for PPI to unload the cargo, from 5 July to
18 July 1974 (except July 12th, 14th and 18th).10 A private marine
and cargo surveyor, Cargo Superintendents Company Inc. (CSCI),
was hired by PPI to determine the "outturn" of the cargo shipped,
by taking draft readings of the vessel prior to and after
discharge. 11 The survey report submitted by CSCI to the
consignee (PPI) dated 19 July 1974 revealed a shortage in the cargo
of 106.726 M/T and that a portion of the Urea fertilizer
approximating 18 M/T was contaminated with dirt. The same results
were contained in a Certificate of Shortage/Damaged Cargo dated
18 July 1974 prepared by PPI which showed that the cargo
delivered was indeed short of 94.839 M/T and about 23 M/T were
rendered unfit for commerce, having been polluted with sand, rust
and dirt. 12
Consequently, PPI sent a claim letter dated 18 December 1974 to
Soriamont Steamship Agencies (SSA), the resident agent of the
carrier, KKKK, for P245,969.31 representing the cost of the alleged
shortage in the goods shipped and the diminution in value of that
portion said to have been contaminated with dirt. 13
Respondent SSA explained that they were not able to respond to
the consignee's claim for payment because, according to them,
what they received was just a request for shortlanded certificate
and not a formal claim, and that this "request" was denied by them
because they "had nothing to do with the discharge of the
shipment." 14Hence, on 18 July 1975, PPI filed an action for
damages with the Court of First Instance of Manila. The defendant
carrier argued that the strict public policy governing common
carriers does not apply to them because they have become private
carriers by reason of the provisions of the charter-party. The court a
quo however sustained the claim of the plaintiff against the
defendant carrier for the value of the goods lost or damaged when
it ruled thus: 15
. . . Prescinding from the provision of the law that a
common carrier is presumed negligent in case of loss
or damage of the goods it contracts to transport, all
that a shipper has to do in a suit to recover for loss
or damage is to show receipt by the carrier of the

goods and to delivery by it of less than what it

received. After that, the burden of proving that the
loss or damage was due to any of the causes which
exempt him from liability is shipted to the carrier,
common or private he may be. Even if the provisions
of the charter-party aforequoted are deemed valid,
and the defendants considered private carriers, it
was still incumbent upon them to prove that the
shortage or contamination sustained by the cargo is
attributable to the fault or negligence on the part of
the shipper or consignee in the loading, stowing,
trimming and discharge of the cargo. This they failed
to do. By this omission, coupled with their failure to
destroy the presumption of negligence against them,
the defendants are liable (emphasis supplied).
On appeal, respondent Court of Appeals reversed the lower court
and absolved the carrier from liability for the value of the cargo
that was lost or damaged. 16 Relying on the 1968 case of Home
Insurance Co. v. American Steamship Agencies, Inc., 17 the
appellate court ruled that the cargo vessel M/V "Sun Plum" owned
by private respondent KKKK was a private carrier and not a
common carrier by reason of the time charterer-party. Accordingly,
the Civil Code provisions on common carriers which set forth a
presumption of negligence do not find application in the case at
bar. Thus
. . . In the absence of such presumption, it was
incumbent upon the plaintiff-appellee to adduce
sufficient evidence to prove the negligence of the
defendant carrier as alleged in its complaint. It is an
old and well settled rule that if the plaintiff, upon
whom rests the burden of proving his cause of action,
fails to show in a satisfactory manner the facts upon
which he bases his claim, the defendant is under no
obligation to prove his exception or defense
(Moran, Commentaries on the Rules of Court, Volume
6, p. 2, citing Belen v. Belen, 13 Phil. 202).

But, the record shows that the plaintiff-appellee

dismally failed to prove the basis of its cause of
action, i.e. the alleged negligence of defendant
carrier. It appears that the plaintiff was under the
impression that it did not have to establish
defendant's negligence. Be that as it may, contrary
to the trial court's finding, the record of the instant
case discloses ample evidence showing that
defendant carrier was not negligent in performing its
obligation . . . 18 (emphasis supplied).
Petitioner PPI appeals to us by way of a petition for review assailing
the decision of the Court of Appeals. Petitioner theorizes that
the Home Insurance case has no bearing on the present
controversy because the issue raised therein is the validity of a
stipulation in the charter-party delimiting the liability of the
shipowner for loss or damage to goods cause by want of due
deligence on its part or that of its manager to make the vessel
seaworthy in all respects, and not whether the presumption of
negligence provided under the Civil Code applies only to common
carriers and not to private carriers. 19 Petitioner further argues
that since the possession and control of the vessel remain with the
shipowner, absent any stipulation to the contrary, such shipowner
should made liable for the negligence of the captain and crew. In
fine, PPI faults the appellate court in not applying the presumption
of negligence against respondent carrier, and instead shifting
the onus probandi on the shipper to show want of due deligence on
the part of the carrier, when he was not even at hand to witness
what transpired during the entire voyage.
As earlier stated, the primordial issue here is whether a common
carrier becomes a private carrier by reason of a charter-party; in
the negative, whether the shipowner in the instant case was able to
prove that he had exercised that degree of diligence required of
him under the law.
It is said that etymology is the basis of reliable judicial decisions in
commercial cases. This being so, we find it fitting to first define
important terms which are relevant to our discussion.

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

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

carriers are presumed to have been at fault or to have acted

negligently, and the burden of proving otherwise rests on
them. 26 On the contrary, no such presumption applies to private
carriers, for whosoever alleges damage to or deterioration of the
goods carried has the onus of proving that the cause was the
negligence of the carrier.

Upon the other hand, the term "common or public carrier" is

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

It is therefore imperative that a public carrier shall remain as such,

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

Article 1733 of the New Civil Code mandates that common carriers,
by reason of the nature of their business, should observe
extraordinary diligence in the vigilance over the goods they
carry. 25 In the case of private carriers, however, the exercise of
ordinary diligence in the carriage of goods will suffice. Moreover, in
the case of loss, destruction or deterioration of the goods, common

It is not disputed that respondent carrier, in the ordinary course of

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

Respondent carrier's heavy reliance on the case of Home Insurance

Co. v. American Steamship Agencies, supra, is misplaced for the
reason that the meat of the controversy therein was the validity of
a stipulation in the charter-party exempting the shipowners from
liability for loss due to the negligence of its agent, and not the
effects of a special charter on common carriers. At any rate, the
rule in the United States that a ship chartered by a single shipper to

carry special cargo is not a common carrier, 29 does not find

application in our jurisdiction, for we have observed that the
growing concern for safety in the transportation of passengers
and /or carriage of goods by sea requires a more exacting
interpretation of admiralty laws, more particularly, the rules
governing common carriers.
We quote with approval the observations of Raoul Colinvaux, the
learned barrister-at-law 30
As a matter of principle, it is difficult to find a valid
distinction between cases in which a ship is used to
convey the goods of one and of several persons.
Where the ship herself is let to a charterer, so that he
takes over the charge and control of her, the case is
different; the shipowner is not then a carrier. But
where her services only are let, the same grounds for
imposing a strict responsibility exist, whether he is
employed by one or many. The master and the crew
are in each case his servants, the freighter in each
case is usually without any representative on board
the ship; the same opportunities for fraud or
collusion occur; and the same difficulty in discovering
the truth as to what has taken place arises . . .
In an action for recovery of damages against a common carrier on
the goods shipped, the shipper or consignee should first prove the
fact of shipment and its consequent loss or damage while the same
was in the possession, actual or constructive, of the carrier.
Thereafter, the burden of proof shifts to respondent to prove that
he has exercised extraordinary diligence required by law or that the
loss, damage or deterioration of the cargo was due to fortuitous
event, or some other circumstances inconsistent with its
liability. 31
To our mind, respondent carrier has sufficiently overcome, by clear
and convincing proof, the prima faciepresumption of negligence.
The master of the carrying vessel, Captain Lee Tae Bo, in his
deposition taken on 19 April 1977 before the Philippine Consul and

Legal Attache in the Philippine Embassy in Tokyo, Japan, testified

that before the fertilizer was loaded, the four (4) hatches of the
vessel were cleaned, dried and fumigated. After completing the
loading of the cargo in bulk in the ship's holds, the steel pontoon
hatches were closed and sealed with iron lids, then covered with
three (3) layers of serviceable tarpaulins which were tied with steel
bonds. The hatches remained close and tightly sealed while the
ship was in transit as the weight of the steel covers made it
impossible for a person to open without the use of the ship's
boom. 32
It was also shown during the trial that the hull of the vessel was in
good condition, foreclosing the possibility of spillage of the cargo
into the sea or seepage of water inside the hull of the
vessel. 33 When M/V "Sun Plum" docked at its berthing place,
representatives of the consignee boarded, and in the presence of a
representative of the shipowner, the foreman, the stevedores, and
a cargo surveyor representing CSCI, opened the hatches and
inspected the condition of the hull of the vessel. The stevedores
unloaded the cargo under the watchful eyes of the shipmates who
were overseeing the whole operation on rotation basis. 34
Verily, the presumption of negligence on the part of the respondent
carrier has been efficaciously overcome by the showing of
extraordinary zeal and assiduity exercised by the carrier in the care
of the cargo. This was confirmed by respondent appellate court
thus
. . . Be that as it may, contrary to the trial court's
finding, the record of the instant case discloses
ample evidence showing that defendant carrier was
not negligent in performing its obligations.
Particularly, the following testimonies of plaintiffappellee's own witnesses clearly show absence of
negligence by the defendant carrier; that the hull of
the vessel at the time of the discharge of the cargo
was sealed and nobody could open the same except
in the presence of the owner of the cargo and the
representatives of the vessel (TSN, 20 July 1977, p.
14); that the cover of the hatches was made of steel

and it was overlaid with tarpaulins, three layers of

tarpaulins and therefore their contents were
protected from the weather (TSN, 5 April 1978, p.
24); and, that to open these hatches, the seals would
have to be broken, all the seals were found to be
intact (TSN, 20 July 1977, pp. 15-16) (emphasis
supplied).
The period during which private respondent was to observe the
degree of diligence required of it as a public carrier began from the
time the cargo was unconditionally placed in its charge after the
vessel's holds were duly inspected and passed scrutiny by the
shipper, up to and until the vessel reached its destination and its
hull was reexamined by the consignee, but prior to unloading. This
is clear from the limitation clause agreed upon by the parties in the
Addendum to the standard "GENCON" time charter-party which
provided for an F.I.O.S., meaning, that the loading, stowing,
trimming and discharge of the cargo was to be done by the
charterer,
free
from
all
risk
and
expense
to
the
carrier. 35 Moreover, a shipowner is liable for damage to the cargo
resulting from improper stowage only when the stowing is done by
stevedores employed by him, and therefore under his control and
supervision, not when the same is done by the consignee or
stevedores under the employ of the latter. 36
Article 1734 of the New Civil Code provides that common carriers
are not responsible for the loss, destruction or deterioration of the
goods if caused by the charterer of the goods or defects in the
packaging or in the containers. The Code of Commerce also
provides that all losses and deterioration which the goods may
suffer during the transportation by reason of fortuitous event, force
majeure, or the inherent defect of the goods, shall be for the
account and risk of the shipper, and that proof of these accidents is
incumbent upon the carrier. 37 The carrier, nonetheless, shall be
liable for the loss and damage resulting from the preceding causes
if it is proved, as against him, that they arose through his
negligence or by reason of his having failed to take the precautions
which usage has established among careful persons. 38

Respondent carrier presented a witness who testified on the

characteristics of the fertilizer shipped and the expected risks of
bulk shipping. Mr. Estanislao Chupungco, a chemical engineer
working with Atlas Fertilizer, described Urea as a chemical
compound consisting mostly of ammonia and carbon monoxide
compounds which are used as fertilizer. Urea also contains 46%
nitrogen and is highly soluble in water. However, during storage,
nitrogen and ammonia do not normally evaporate even on a long
voyage, provided that the temperature inside the hull does not
exceed eighty (80) degrees centigrade. Mr. Chupungco further
added that in unloading fertilizer in bulk with the use of a clamped
shell, losses due to spillage during such operation amounting to
one percent (1%) against the bill of lading is deemed "normal" or
"tolerable." The primary cause of these spillages is the clamped
shell which does not seal very tightly. Also, the wind tends to blow
away some of the materials during the unloading process.
The dissipation of quantities of fertilizer, or its daterioration in
value, is caused either by an extremely high temperature in its
place of storage, or when it comes in contact with water. When
Urea is drenched in water, either fresh or saline, some of its
particles dissolve. But the salvaged portion which is in liquid form
still remains potent and usable although no longer saleable in its
original market value.
The probability of the cargo being damaged or getting mixed or
contaminated with foreign particles was made greater by the fact
that the fertilizer was transported in "bulk," thereby exposing it to
the inimical effects of the elements and the grimy condition of the
various pieces of equipment used in transporting and hauling it.
The evidence of respondent carrier also showed that it was highly
improbable for sea water to seep into the vessel's holds during the
voyage since the hull of the vessel was in good condition and her
hatches were tightly closed and firmly sealed, making the M/V "Sun
Plum" in all respects seaworthy to carry the cargo she was
chartered for. If there was loss or contamination of the cargo, it was
more likely to have occurred while the same was being transported
from the ship to the dump trucks and finally to the consignee's
warehouse. This may be gleaned from the testimony of the marine

and cargo surveyor of CSCI who supervised the unloading. He

explained that the 18 M/T of alleged "bar order cargo" as contained
in their report to PPI was just an approximation or estimate made
by them after the fertilizer was discharged from the vessel and
segregated from the rest of the cargo.
The Court notes that it was in the month of July when the vessel
arrived port and unloaded her cargo. It rained from time to time at
the harbor area while the cargo was being discharged according to
the supply officer of PPI, who also testified that it was windy at the
waterfront and along the shoreline where the dump trucks passed
enroute to the consignee's warehouse.
Indeed, we agree with respondent carrier that bulk shipment of
highly soluble goods like fertilizer carries with it the risk of loss or
damage. More so, with a variable weather condition prevalent
during its unloading, as was the case at bar. This is a risk the
shipper or the owner of the goods has to face. Clearly, respondent
carrier has sufficiently proved the inherent character of the goods
which makes it highly vulnerable to deterioration; as well as the
inadequacy of its packaging which further contributed to the loss.
On the other hand, no proof was adduced by the petitioner showing
that the carrier was remise in the exercise of due diligence in order
to minimize the loss or damage to the goods it carried.
WHEREFORE, the petition is DISMISSED. The assailed decision of
the Court of Appeals, which reversed the trial court, is AFFIRMED.
Consequently, Civil Case No. 98623 of the then Court of the First
Instance, now Regional Trial Court, of Manila should be, as it is
hereby DISMISSED.
Costs against petitioner.
SO ORDERED.
G.R. No. L-47447-47449
October 29, 1941
TEODORO R. YANGCO, ETC., petitioner, vs. MANUEL LASERNA,
ET AL., respondents.

MORAN, J.:
At about one o'clock in the afternoon of May 26, 1927, the
steamer S.S. Negros, belonging to petitioner here, Teodoro R.
Yangco, left the port of Romblon on its retun trip to Manila. Typhoon
signal No. 2 was then up, of which fact the captain was duly
advised and his attention thereto called by the passengers
themselves before the vessel set sail. The boat was overloaded as
indicated by the loadline which was 6 to 7 inches below the surface
of the water. Baggage, trunks and other equipments were heaped
on the upper deck, the hold being packed to capacity. In addition,
the vessel carried thirty sacks of crushed marble and about one
hundred sacks of copra and some lumber. The passengers,
numbering about 180, were overcrowded, the vessel's capacity
being limited to only 123 passengers. After two hours of sailing, the
boat encountered strong winds and rough seas between the islands
of Banton and Simara, and as the waves splashed the ladies'
dresses, the awnings were lowered. As the sea became increasingly
violent, the captain ordered the vessel to turn left, evidently to
return to port, but in the manuever, the vessel was caught sidewise
by a big wave which caused it to capsize and sink. Many of the
passengers died in the mishap, among them being Antolin Aldaa
and his son Victorioso, husband and son, respectively, of Emilia
Bienvenida who, together with her other children and a brother-inlaw, are respondents in G.R. No. 47447; Casiana Laserna, the
daughter of respondents Manuel Laserna and P.A. de Laserna in
G.R. 47448; and Genaro Basaa, son of Filomeno Basaa,
respondent in G.R. No. 47449. These respondents instituted in the
Court of First Instance of Capiz separate civil actions against
petitioner here to recover damages for the death of the passengers
aforementioned. The court awarded the heirs of Antolin and
Victorioso Aldana the sum of P2,000; the heirs of Casiana Laserna,
P590; and those of Genaro Basana, also P590. After the rendition of
the judgment to this effcet, petitioner, by a verified pleading,
sought to abandon th evessel to the plainitffs in the three cases,
together with all its equipments, without prejudice to his right to
appeal. The abandonment having been denied, an appeal was
taken to the Court of Appeals, wherein all the judgmnets were
affirmed except that which sums was increased to P4,000.

Petitioner, now deceased, appealed and is here represented by his

legal representative.
Brushing aside the incidental issues, the fundamental question here
raised is: May the shipowner or agent, notwithstanding the total
loss of the vessel as a result of the negligence of its captain, be
properly held liable in damages for the consequent death of its
passengers? We are of the opinion and so hold that this question is
controlled by the provisions of article 587 of the Code of
Commerce. Said article reads:
The agent shall also be civilly liable for the indemnities in
favor of third persons which arise from the conduct of the
captain in the care of the goods which the vessel carried;
but he may exempt himself therefrom by abandoning the
vessel with all her equipments and the freight he may have
earned during the voyage.
The provisions accords a shipowner or agent the right of
abandonment; and by necessary implication, his liability is confined
to that which he is entitled as of right to abandon "the vessel
with all her equipments and the freight it may have earned during
the voyage." It is true that the article appears to deal only with the
limited liability of shipowners or agents for damages arising from
the misconduct of the captain in the care of the goods which the
vessel carries, but this is a mere deficiency of language and in no
way indicates the true extent of such liability. The consensus of
authorities is to the effect that notwithstanding the language of the
aforequoted provision, the benefit of limited liability therein
provided for, applies in all cases wherein the shipowner or agent
may properly be held liable for the negligent or illicit acts of the
captain. Dr. Jose Ma. Gonzalez de Echavarri y Vivanco, commenting
on said article, said:
La letra del Codigo, en el articulo 587, presenta una
gravisima cuestion. El derecho de abandono, si se atiende a
lo escrito, solo se refiere a las indemnizaciones a que dierQe
lugar la conducta del Capitan en la custodia de los efectos
que cargo en el buque.

Es ese el espiritu del legislador? No; habra derecho de

abandono en las responsabilidades nacidas de obligaciones
contraidas por el Capitan y de otros actos de este? Lo
reputamos evidente y, para fortalecer nuestra opinion,
basta copiar el siguiente parrafo de la Exposicion de
motivos:
"El proyecto, al aplicar estos principios, se inspira
tambien en los intereses del comercio maritimo, que
quedaran mas asegurados ofreciendo a todo el que
contrata con el naviero o Capitan del buque, la
garantia real del mismo, cualesquiera que sean las
facultades o atribuciones de que se hallen
investidos." (Echavarri, Codigo de Comercio, Tomo 4,
2. a ed., pags. 483-484.)
A cursory examination will disclose that the principle of liomited
liability of a shipowner or agent is provided for in but three articles
of the Code of Commerce article 587 aforequoted and article 590
and 837. Article 590 merely reiterates the principle embodied in
article 587, applies the same principle in cases of collision, and it
has been observed that said article is but "a necessary
consequences of the right to abandon the vessel given to the
shipowner in article 587 of the Code, and it is one of the many
superfluities
contained
in
the
Code."
(Lorenzo
Benito, Lecciones 352, quoted in Philippine Shipping Co. vs. Garcia,
6 Phil. 281, 282.) In effect, therefore, only articles 587 and 590 are
the provisions conatined in our Code of Commerce on the matter,
and the framers of said code had intended those provisions to
embody the universal principle of limited liability in all cases. Thus,
in the "Exposicon de Motivos" of the Code of Commerce, we read:
The present code (1829) does not determine the juridical
status of the agent where such agent is not himself the
owner of the vessel. This omission is supplied by the
proposed code, which provides in accordance with the
principles of maritime law that by agent it is to be
understood the person intrusted with the provisioning of the
vessel, or the one who represents her in the port in which
she happens to be. This person is the only one who

represents the vessel that is to say, the only one who

represents the interests of the owner of the vessel. This
provision has therefore cleared the doubt which existed as
to the extent of the liability, both of the agent and of the
owner of the vessel. Such liability is limited by the proposed
code to the value of the vessel and other things
appertaining thereto.
In Philippine Shipping Co. vs. Garcia (6 Phil., 281, 284-286), we
have expressed ourselves in such a comprehensive manner as to
leave no room for doubt on the applicability of our ratio
decidendi not only to cases of collision but also to those of
shipwrecks, etc. We said:
This is the difference which exists between the lawful acts
and lawful obligations of the captain and the liability which
he incurs on account of any unlawful act committed by him.
In the first case, the lawful acts and obligations of the
captain beneficial to the vessel may be enforced as against
the agent for the reason that such obligations arise from te
the contract of agency (provided, however, that the captain
does not exceed his authority), while as to any liability
incurred by the captain through his unlawful acts, the ship
agent is simply subsidiarily civilly liable. This liability of the
agent is limited to the vessel and it does not extend further.
For this reason the Code of Commerce makes the agent
liable to the extent of the value of the vessel, as the codes
of the principal maritime nations provide with the vessel,
and not individually. Such is also the spirit of our Code.
The spirit of our code s accurately set forth in a treatise on
maritime law, from which we deem proper to quote the
following as the basis of this decision:lawphil.net
"That which distinguishes the maritime from the civil
law and even from the mercantile law in general is
the real and hypothecary nature of the former, and
the many securities of a real nature that maritime
customs from time immemorial, the laws, the codes,
and the later jurisprudence, have provided for the

protection of the various and conflicting interests

which are ventured and risked in maritime
expeditions, such as the interests of the vessel and
of the agent, those of the owners of the cargo and
consignees, those who salvage the ship, those who
make loans upon the cargo, those of the sailors and
members of the crew as to their wages, and those of
a constructor as to repairs made to the vessel.
"As evidence of this real nature of the maritime law
we have (1) the limitation of the liability of the
agents to the actual value of the vessel and the
freight money, and (2) the right to retain the cargo
and the embargo and detention of the vessel even in
cases where the ordinary civil law would not allow
more than a personal action against the debtor or
person liable. It will be observed that these rights are
correlative, and naturally so, because if the agent
can exempt himself from liability by abandoning the
vessel and freight money, thus avoiding the
possibility of risking his whole fortune in the
business, it is also just that his maritime creditor may
for any reason attach the vessel itself to secure his
claim without waiting for a settlement of his rights by
a final judgment, even to the prejudice of a third
person.
"This repeals the civil law to such an extent that, in
certain
cases,
where
the mortgaged
property islost no personal action lies against the
owner or agent of the vessel. For instance, where the
vessel is lost the sailors and members of the crew
cannot recover their wages; in case of collision, the
liability of the agent is limited as aforesaid, and in
case of shipwreck, those who loan their money on
the vessel and cargo lose all their rights and cannot
claim reimbursement under the law.
"There are two reasons why it is impossible to do
away with these privileges, to wit: (1) The risk to

which the thing is exposed, and (2) the real nature of

the maritime law, exclusively real, according to which
the liability of the parties is limited to a thing which is
at the mercy of the waves. If the agent is only liable
with the vessel and freight money and both may be
lost through the accidents of navigation it is only just
that the maritime creditor have some means to
obviating this precarious nature of his rights by
detaining the ship, his only security, before it is lost.
"The liens, tacit or legal, which may exist upon the
vessel and which a purchaser of the same would be
obliged to respect and recognize are in addition to
those existing in favor of the State by virtue of the
privileges which are granted to it by all the laws
pilot, tonnate, and port dues and other similar
charges, the wages of the crew earned during the
last voyage as provided in article 646 of the Code of
Commerce, salvage dues under article 842, the
indemnification due to the captain of the vessel in
case his contract is terminated on account of the
voluntary sale of the ship and the insolvency of the
owner as provided in article 608, and all other
liabilities arising from collisions under articles 837
and 838."
We are shared in this conclusion by the eminent commentators on
the subject. Agustin Vicente y Gella, asserting, in his "Introduccion
al Derecho Mercantil Comparado" 1929 (pages 374-375), the like
principle of limited liability of shipowners or agent in cases of
accidents, collisions, shipwrecks, etc., said:
De las responsabilities que pueden resultar como
consequencia del comercio maritimo, y no solo por hechos
propios sino tambien por las que se ocasionen por los del
capitan y la tripulacion, responde frente a tercero el naviero
que representa el buque; pero el derecho maritimo es sobre
todo tradicional y siguiendo un viejo principio de la Edad
Media la responsabilidad del naviero se organiza de un

modo especifico y particularisimo que no encuentra similar

en el derecho general de las obligaciones.
Una forma corrientisima de verificarse el comercio maritimo
durante la epoca medieval, era prestar un propietario su
navio para que cargase en el mercancias determinada
persona, y se hiciese a la mar, yendo al frente de la
expedicion un patron del buque, que llegado al puerto de
destino se encargaba de venderlas y retornaba al de salida
despues de adquirir en aquel otros efectos que igualmente
revendia a su regreso, verificado lo cual los beneficios de la
expedicion se repartian entre el dueo del buque, el
cargador y el capitan y tripulantes en la proporcion
estipulada. El derecho maritimo empezo a considerar la
asociacion asi formada como una verdadera sociedad
mercantil, de responsabilidad limitada, y de acuerdo con los
principios que gobiernan aquella en los casos de accidentes,
abordajes, naufragios, etc., se resolvia que el dueo del
buque perdia la nave, el cargador las mercancias
embarcadas y el capitan y la tripulacion su trabajo, sin que
en ningun caso el tercer acreedor pudiese reclamar mayor
cantidad de ninguno de ellos, porque su responsabilidad
quedaba limitada a lo que cada uno aporto a la sociedad.
Recogidas estas ideas en el derecho comercial de tiempos
posteriores, la responsabilidad del naviero se edifico sobre
aquellos principios, y derogando la norma general civil de
que del cumplimiento de sus obligaciones responde el
deudor con todos sus bienes presentes y futuros, la
responsabilidad maritima se considero siempre limitada ipso
jure al patrimonio de mar. Y este es el origen de la regla
trascendental de derecho maritimo segun la cual el naviero
se libera de toda responsabilidad abandonando el buque y
el flete a favor de los acreedores.

tambien lo era en el antiguo Derecho maritimo romano; es

daba la actio exercitoria contra el exercitor navis sin
ninguna restriccion, pero en la Edad Media una idea nueva
se introdujo en los usos maritimos. Las cargas resultantes
de las expediciones maritimas se consideraron limitadas por
los propietarios de las naves a los valores comprometidos
por ellos en cada expedicion; se separo ficticiamente el
patrimonio de los navieros en dos partes que todavia se
designan de una manera bastante exacta; fortuna de tierra
y fortuna de mar o flotante; y se admitio la teoria de que
esta era la que respondia solo de las deudas provinientes de
los actos del capitan o de la tripulacion, es decir, que el
conjunto del patrimonio del naviero escaparia a estas cargas
desde el momento en que abandonara la nave y los fletes a
los acreedores. . . .
Escriche in his Diccionario de la Legislacion y Jurisprudencia, Vol. 1,
p. 38, observes:
La responsabilidad del naviero, en el caso expuesto, se
funda en el principio de derecho comun de ser responsable
todo el que pone al frente de un establecimiento a una
persona, de los daos o perjuicios que ocasionare esta
desempeando su cometido, y en que estando facultado el
naviero para la eleccion de capitan de la nave, viene a tener
indirectamente culpa en la negligencia o actos de este que o
casionaron daos o perjuicios, puesto que no se aseguro de
su pericia o buena fe. Limitase, sin embargo, la
responsabilidad del naviero a la perdida de la nave, sus
aparejos, y fletes devengados durante el viaje; porque no
pudiendo vigilar de un modo directo e inmediato la conducta
del capitan, hubiera sido duro hacerla extensiva a todos sus
bienes que podria comprometer el capitan con sus faltas o
delitos.

From the Enciclopedia Juridica Espaola, Vol. 23, p. 347, we read:

Ahora bien: hasta donde se extiende esta responsabilidad
del naviero? sobre que bienes pueden los acreedores
resarcirse? Esta es otra especialidad del Derecho maritimo;
en el Derecho comun la responsabilidad es limitada;

The views of these learned commentators, including those of

Estasen (Derecho Mercantil, Vol. 4, 259) and Supino (Derecho
Mercantil, pp. 463-464), leave nothing to be desired and nothing to
be doubted on the principle. It only remains to be noted that the
rule of limited liability provided for in our Code of Commerce

reflects merely, or is but a restatement, imperfect though it is, of

the almost universal principle on the subject. While previously
under the civil or common law, the owner of a vessel was liable to
the full amount for damages caused by the misconduct of the
master, by the general maritime law of modern Europe, the liability
of the shipowner was subsequently limited to his interest in the
vessel. (Norwich & N. Y. Trans. Co. v. Wright, 80 U. S. 104, 20 Law.
ed. 585.) A similar limitation was placed by the British Parliament
upon the liability of Englosh shipowners through a series of statutes
beginning in 1734 with the Act of 7 George II, chapter 15. The
legislatures of Massachusetts and Maine followed suit in 1818 and
1821, and finally, Congress enacted the Limited Liability Act of
March 3, 1851, embodying most of the provisions contained in the
British Statutes (see 24 R. C. L. pp. 1387-1389). Section 4283 of the
Revised Statutes (sec. 183, Tit. 46, Code of Laws of U. S. A.) reads:
LIABILITY OF OWNER NOT TO EXCEED INTEREST. The
liability of the owner of any vessel, for any embezzlement,
loss, or destruction, by any person, of any property, goods,
or merchandise, shipped or put on board of such vessel, or
for any loss, damage, or injury by collision, or for any act,
matter or thing, loss, damage, or forfeiture, done,
occasioned, or incurred without the privity, or knowledge of
such owner or owners, shall in no case exceed the amount
or value of the interest of such owner in such vessel, and
her freight then pending.
The policy which the rule is designed to promote is the
encouragement of shipbuilding and investment in maritime
commerce. (Vide: Norwich & N. Y. Trans. Co. v. Wright, supra; The
Main v. Williams, 152 U. S. 122; 58 C. J. 634.) And it is in that spirit
that the American courts construed the Limited Liability Act of
Congress whereby the immunities of the Act were applied to claims
not only for lost goods but also for injuries and "loss of life of
passengers, whether arising under the general law of admiralty, or
under Federal or State statutes." (The City of Columbus, 22 Fed.
460; The Longfellow, 104 Fed. 360; Butler v. Boston & Savannah
Steamship Co., 32 Law. ed. 1017; Craig v. Continental Insurance
Co., 35 Law. ed. 836.) The Supreme Court of the United States in
Norwich & N. Y. Trans. Co. v. Wright, 80 U. S. 104, 20 Law. ed. 585,

589-590, accounting for the history of the principle, clinches our

exposition of the supporting authorities:
The history of the limitation of liability of shipowners is
matter of common knowledge. The learned opinion
ofJudge Ware in the case of The Rebecca, 1 Ware, 187-194,
leaves little to be desired on the subject. He shows that it
originated in the maritime law of modern Europe; that whilst
the civil, as well as the common law, made the owner
responsible to the whole extent of damage caused by the
wrongful act or negligence of the matter or crew, the
maritime law only made then liable (if personally free from
blame) to the amount of their interest in the ship. So that, if
they surrendered the ship, they were discharged.
Grotius, in his law of War and Peace, says that men would be
deterred from investing in ships if they thereby incurred the
apprehension of being rendered liable to an indefinite
amount by the acts of the master and, therefore, in Holland,
they had never observed the Roman Law on that subject,
but had a regulation that the ship owners should be bound
no farther than the value of their ship and freight. His words
are: Navis et eorum quae in navi sunt," "the ship and goods
therein." But he is speaking of the owner's interest; and this,
as to the cargo, is the freight thereon, and in that sense he
is understood by the commentators. Boulay Paty, Droit
Maritime, tit. 3, sec. 1, p. 276; Book II, c. XI, sec. XIII. The
maritime
law,
as
codified
in
the
celebrated
French Ordonance de la Marine, in 1681, expressed the rule
thus: 'The proprietors of vessels shall be responsible for the
acts of the master, but they shall be discharged by
abandoning the ship and freight.' Valin, in his commentary
on this passage, lib. 2, tit. 8, art. 2, after specifying certain
engagements of the master which are binding on the
owners, without any limit of responsibility, such as contracts
for the benefit of the vessel, made during the voyage
(except contracts of bottomry) says: "With these exceptions
it is just that the owner should not be bound for the acts of
the master, except to the amount of the ship and freight.
Otherwise he would run the risk of being ruined by the bad

faith or negligence of his captain, and the apprehension of

this would be fatal to the interests of navigation. It is quite
sufficient that he be exposed to the loss of his ship and of
the freight, to make it his interest, independently of any
goods he may have on board to select a reliable captain."
Pardessus says: 'The owner is bound civilly for all
delinquencies committed by the captain within the scope of
his authority, but he may discharge himself therefrom by
abandoning the ship and freight; and, if they are lost, it
suffices for his discharge, to surrender all claims in respect
of the ship and its freight," such as insurance, etc. Droit
Commercial, part 3, tit. 2, c. 3, sec. 2.
The same general doctrine is laid down by many other
writers on maritime law. So that it is evident that, by this
law, the owner's liability was coextensive with his interest in
the vessel and its freight, and ceased by his abandonment
and surrender of these to the parties sustaining loss.
In the light of all the foregoing, we therefore hold that if the
shipowner or agent may in any way be held civilly liable at all for
injury to or death of passengers arising from the negligence of the
captain in cases of collisions or shipwrecks, his liability is merely coextensive with his interest in the vessel such that a total loss
thereof results in its extinction. In arriving at this conclusion, we
have not been unmindful of the fact that the ill-fated
steamshipNegros, as a vessel engaged in interisland trade, is a
common carrier (De Villata v. Stanely, 32 Phil., 541), and that the
as a vessel engaged in interisland trade, is a common carrier (De
Villata v. Stanely, 32 Phil., 541), and that the relationship between
the petitioner and the passengers who died in the mishap rests on
a contract of carriage. But assuming that petitioner is liable for a
breach of contract of carriage, the exclusively "real and
hypothecary nature" of maritime law operates to limit such liability
to the value of the vessel, or to the insurance thereon, if any. In the
instant case it does not appear that the vessel was insured.

Whether the abandonment of the vessel sought by the petitioner in

the instant case was in accordance with law of not, is immaterial.
The vessel having totally perished, any act of abandonment would
be an idle ceremony.
Judgement is reversed and petitioner is hereby absolved of all the
complaints, without costs.

It should be noted that that legal point is already res judicata. In

1967 it was decided in favor of plaintiff-appellant Domingo Ang
in Ang vs. American Steamship Agencies, Inc., 125 Phil. 543 and
125 Phil. 1040, three cases. As observed by Ang's counsel, the facts
of those cases and the instant case are the same mutatis
mutandis. It was held that Ang has a cause of action against the
carrier which has not prescribed
In the instant case, Ang on September 26, 1963, as the assignee of
a bill of lading held by Yau Yue Commercial Bank, Ltd. of Hongkong,
sued Compania Maritima, Maritime Company of the Philippines and
C.L. Diokno. He prayed that the defendants be ordered to pay him
solidarily the sum of US$130,539.68 with interest from February 9,
1963 plus attorney's fees and damages.
Ang alleged that Yau Yue Commercial Bank agreed to sell to
Herminio G. Teves under certain conditions 559 packages of
galvanized steel, Durzinc sheets. The merchandise was loaded on
May 25, 1961 at Yawata, Japan in the M/S Luzon a vessel owned
and operated by the defendants, to be transported to Manila and
consigned "to order" of the shipper, Tokyo Boeki, Ltd., which
indorsed the bill of lading issued by Compania Maritima to the order
of Yau Yue Commercial Bank.

G.R. No. L-30805 December 26, 1984

DOMINGO ANG, plaintiff-appellant, vs. COMPANIA MARITIMA,
MARITIME COMPANY OF THE PHILIPPINES and C.L.
DIOKNO, defendants-appellees.
AQUINO, J.:
This case involves the recovery of damages by the consignee from
the carrier in case of misdelivery of the cargo which action was
dismissed by the trial court on the grounds of lack of cause of
action and prescription.

Ang further alleged that the defendants, by means of a permit to

deliver imported articles, authorized the delivery of the cargo to
Teves who obtained delivery from the Bureau of Customs without
the surrender of the bill of lading and in violation of the terms
thereof. Teves dishonored the draft drawn by Yau Yue against him.
The Hongkong and Shanghai Banking Corporation made the
corresponding protest for the draft's dishonor and returned the bill
of lading to Yau Yue. The bill of lading was indorsed to Ang.
The defendants filed a motion to dismiss Ang's complaint on the
ground of lack of cause of action. Ang opposed the motion. As
already stated, the trial court on May 22, 1964 dismissed the
complaint on the grounds of lack of cause of action and prescription
since the action was filed beyond the one-year period provided in
the Carriage of Goods by Sea Act.

In the American Steamship Agencies cases, it was held that the

action of Ang is based on misdelivery of the cargo which should be
distinguished from loss thereof. The one-year period provided for in
section 3 (6) of the Carriage of Goods by Sea Act refers to loss of
the cargo. What is applicable is the four-year period of prescription
for quasi-delicts prescribed in article 1146 (2) of the Civil Code or
ten years for violation of a written contract as provided for in article
1144 (1) of the same Code.
As Ang filed the action less than three years from the date of the
alleged misdelivery of the cargo, it has not yet prescribed. Ang, as
indorsee of the bill of lading, is a real party in interest with a cause
of action for damages.
WHEREFORE, the order of dismissal is reversed and set aside. The
case is remanded to the trial court for further proceedings. Costs
against the defendants.
SO ORDERED.

G.R. No. 77638 July 12, 1990

MARITIME AGENCIES & SERVICES, INC., petitioner, vs. COURT
OF APPEALS, and UNION INSURANCE SOCIETY OF CANTON,
LTD., respondents.
G.R. No. 77674 July 12, 1990
UNION INSURANCE SOCIETY OF CANTON, LTD., petitioner, vs.
COURT OF APPEALS, HONGKONG ISLAND CO., LTD.,
MARITIME AGENCIES & SERVICES, INC., and/or VIVA
CUSTOMS BROKERAGE, respondents.
CRUZ, J.:
Transcontinental Fertilizer Company of London chartered from
Hongkong Island Shipping Company of Hongkong the motor vessel
named "Hongkong Island" for the shipment of 8073.35 MT (gross)
bagged urea from Novorossisk, Odessa, USSR to the Philippines, the
parties signing for this purpose a Uniform General Charter dated
August 9, 1979. 1
Of the total shipment, 5,400.04 MT was for the account of Atlas
Fertilizer Company as consignee, 3,400.04 to be discharged in
Manila and the remaining 2,000 MT in Cebu. 2 The goods were
insured by the consignee with the Union Insurance Society of
Canton, Ltd. for P6,779,214.00 against all risks. 3
Maritime Agencies & Services, Inc. was appointed as the charterer's
agent and Macondray Company, Inc. as the owner's agent. 4
The vessel arrived in Manila on October 3, 1979, and unloaded part
of the consignee's goods, then proceeded to Cebu on October 19,
1979, to discharge the rest of the cargo. On October 31, 1979, the
consignee filed a formal claim against Maritime, copy furnished
Macondray, for the amount of P87,163.54, representing C & F value
of the 1,383 shortlanded bags. 5 On January 12, 1980, the
consignee filed another formal claim, this time against Viva

Customs Brokerage, for the amount of P36,030.23, representing the

value of 574 bags of net unrecovered spillage. 6

represented by Macondray Co., Inc. are accordingly

exempted from any liability. 10

These claims having been rejected, the consignee then went to

Union, which on demand paid the total indemnity of P113,123.86
pursuant to the insurance contract. As subrogee of the consignee,
Union then filed on September 19, 1980, a complaint for
reimbursement of this amount, with legal interest and attorney's
fees, against Hongkong Island Company, Ltd., Maritime Agencies &
Services, Inc. and/or Viva Customs Brokerage. 7 On April 20, 1981,
the complaint was amended to drop Viva and implead Macondray
Company, Inc. as a new defendant. 8

Maritime and Union filed separate motions for reconsideration

which were both denied. The movants are now before us to
question the decision of the respondent court.

On January 4, 1984, after trial, the trial court rendered judgment

holding the defendants liable as follows:

In G.R. No. 77674, Union asks for the modification of the decision of
the respondent court so as to make Maritime solidarily and solely
liable, its principal not having been impleaded and so not subject to
the jurisdiction of our courts.

(a) defendants Hongkong Island Co., Ltd., and its

local agent Macondray & Co., Inc. to pay the plaintiff
the sum of P87,163.54 plus 12% interest from April
20, 1981 until the whole amount is fully paid,
P1,000.00 as attorney's fees and to pay one-half
(1/2) of the costs; and
(b) defendant Maritime Agencies & Services, Inc., to
pay the plaintiff the sum of P36,030.23, plus 12%
interest from April 20, 1981 until the whole amount is
fully paid, P600.00 as attorney's fees and to pay onehalf (1/2) of the costs. 9
Petitioner appealed the decision to the Court of Appeals, which
rendered a decision on November 28, 1986, the dispositive portion
of which reads:
WHEREFORE, the decision appealed from is modified,
finding the charterer Transcontinental Fertilizer Co.,
Ltd. represented by its agent Maritime Agencies &
Services, Inc. liable for the amount of P87,163.54
plus interest at 12% plus attorney's fees of
P1,000.00. Defendant Hongkong Island Co., Ltd.

In G.R. No. 77638, Maritime pleads non-liability on the ground that

it was only the charterer's agent and should not answer for
whatever responsibility might have attached to the principal. It also
argues that the respondent court erred in applying Articles 1734
and 1735 of the Civil Code in determining the charterer's liability.

These two cases were consolidated and given due course, the
parties being required to submit simultaneous memoranda. All
complied, including Hongkong Island Company, Ltd., and
Macondray Company, Inc., although they pointed out that they
were not involved in the petitions.
There are three general categories of charters, to wit, the demise or
"bareboat charter," the time charter and the voyage charter.
A demise involves the transfer of full possession and control of the
vessel for the period covered by the contract, the charterer
obtaining the right to use the vessel and carry whatever cargo it
chooses, while manning and supplying the ship as well. 11
A time charter is a contract to use a vessel for a particular period of
time, the charterer obtaining the right to direct the movements of
the vessel during the chartering period, although the owner retains
possession and control. 12

A voyage charter is a contract for the hire of a vessel for one or a

series of voyages usually for the purpose of transporting goods for
the charterer. The voyage charter is a contract of affreightment and
is considered a private carriage. 13
Tested by those definitions, the agreement entered into in the
cases at bar should be considered. This brings us to the basic
question of who, in this kind of charter, shall be liable for the cargo.
A voyage charter being a private carriage, the parties may freely
contract respecting liability for damage to the goods and other
matters. The basic principle is that "the responsibility for cargo loss
falls on the one who agreed to perform the duty involved" in
accordance with the terms of most voyage charters. 14
This is true in the present cases where the charterer was
responsible for loading, stowage and discharging at the ports
visited, while the owner was responsible for the care of the cargo
during the voyage. Thus, Par. 2 of the Uniform General Charter
read:
2. Owners are to be responsible for loss of or damage
to the goods or for delay in delivery of the goods only
in case the loss, damage or delay has been caused
by the improper or negligent stowage of the goods or
by personal want of due diligence on the part of the
Owners or their Manager to make the vessel in all
respects seaworthy and to secure that she is properly
manned, equipped and supplied or by the personal
act or default of the Owners or their Manager.
And the Owners are responsible for no loss or
damage or delay arising from any other cause
whatsoever, even from the neglect or default of the
Captain or crew or some other person employed by
the Owners onboard or ashore for whose acts they
would, but for this clause, be responsible, or from
unseaworthiness of the vessel on loading or
commencement of the voyage or at any time
whatsoever.

Damage caused by contact with or leakage, smell or

evaporation from other goods or by the inflammable
or explosive nature or insufficient package of other
goods not to be considered as caused by improper or
negligent stowage, even if in fact so caused.
while Clause 17 of Additional Clauses to Charter party
provided:
The cargo shall be loaded, stowed and discharged
free of expense to the vessel under the Master's
supervision. However, if required at loading and
discharging ports the vessel is to give free use of
winches and power to drive them gear, runners and
ropes. Also slings, as on board. Shore winchmen are
to be employed and they are to be for Charterers' or
Shippers' or Receivers' account as the case may be.
Vessel is also to give free use of sufficient light, as on
board, if required for night work. Time lost through
breakdown of winches or derricks is not to count as
laytime.
In Home
Insurance
Co. v. American
Steamship
Agencies,
Inc., 15 the trial court rejected similar stipulations as contrary to
public policy and, applying the provisions of the Civil Code on
common carriers and of the Code of Commerce on the duties of the
ship captain, held the vessel liable in damages for loss of part of
the cargo it was carrying. This Court reversed, declaring as follows:
The provisions of our Civil Code on common carriers
were taken from Anglo-American law. Under
American
jurisprudence,
a
common
carrier
undertaking to carry a special cargo or chartered to a
special person only, becomes a private carrier. As a
private carrier, a stipulation exempting the owner
from liability for the negligence of its agent is not
against public policy, and is deemed valid.
Such doctrine we find reasonable. The Civil Code
provisions on common carriers should not be applied

where the carrier is not acting as such but as a

private carrier. The stipulation in the charter party
absolving the owner from liability for loss due to the
negligence of its agent would be void only if the strict
public policy governing common carriers is applied.
Such policy has no force where the public at large is
not involved, as in the case of a ship totally
chartered for the use of a single party.
Nevertheless, this ruling cannot benefit Hongkong, because there
was no showing in that case that the vessel was at fault. In the
cases at bar, the trial court found that 1,383 bags were
shortlanded, which could only mean that they were damaged or
lost on board the vessel before unloading of the shipment. It is not
denied that the entire cargo shipped by the charterer in Odessa
was covered by a clean bill of lading. 16 As the bags were in good
order when received in the vessel, the presumption is that they
were damaged or lost during the voyage as a result of their
negligent improper stowage. For this the ship owner should be held
liable.
But we do agree that the period for filing the claim is one year, in
accordance with the Carriage of Goods by Sea Act. This was
adopted and embodied by our legislature in Com. Act No. 65 which,
as a special law, prevails over the general provisions of the Civil
Code on prescription of actions. Section 3(6) of that Act provides as
follows:
In any event, the carrier and the ship shall be
discharged from all liability in respect of loss or
damage unless suit is brought within one year after
delivery of the goods or the date when the goods
should have been delivered; Provided, that if a notice
of loss for damage; either apparent or concealed, is
not given as provided for in this section, that fact
shall not effect or prejudice the right of the shipper to
bring suit within one year after the delivery of the
goods or the date when the goods should have been
delivered.

This period was applied by the Court in the case of Union Carbide,
Philippines, Inc. v. Manila Railroad Co., 17where it was held:
Under the facts of this case, we held that the oneyear period was correctly reckoned by the trial court
from December 19, 1961, when, as agreed upon by
the parties and as shown in the tally sheets, the
cargo was discharged from the carrying vessel and
delivered to the Manila Port Service. That one-year
period expired on December 19, 1962. Inasmuch as
the action was filed on December 21, 1962, it was
barred by the statute of limitations.
The one-year period in the cases at bar should commence on
October 20, 1979, when the last item was delivered to the
consignee. 18 Union's complaint was filed against Hongkong on
September 19, 1980, but tardily against Macondray on April 20,
1981. The consequence is that the action is considered prescribed
as far as Macondray is concerned but not against its principal,
which is what matters anyway.
As regards the goods damaged or lost during unloading, the
charterer is liable therefor, having assumed this activity under the
charter party "free of expense to the vessel." The difficulty is that
Transcontinental has not been impleaded in these cases and so is
beyond our jurisdiction. The liability imposable upon it cannot be
borne by Maritime which, as a mere agent, is not answerable for
injury caused by its principal. It is a well-settled principle that the
agent shall be liable for the act or omission of the principal only if
the latter is undisclosed. 19
Union seeks to hold Maritime liable as ship agent on the basis of
the ruling of this Court in the case of Switzerland General Insurance
Co., Ltd. v. Ramirez. 20 However, we do not find that case is
applicable.
In that case, the charterer represented itself on the face of the bill
of lading as the carrier. The vessel owner and the charterer did not
stipulate in the Charter party on their separate respective liabilities
for the cargo. The loss/damage to the cargo was sustained while it

was still on board or under the custody of the vessel. As the

charterer was itself the carrier, it was made liable for the acts of
the ship captain who was responsible for the cargo while under the
custody of the vessel.

determination of the question raised by the error

properly assigned is dependent, will be considered by
the appellate court notwithstanding the failure to
assign it as error.

As for the charterer's agent, the evidence showed that it

represented the vessel when it took charge of the unloading of the
cargo and issued cargo receipts (or tally sheets) in its own name.
Claims against the vessel for the losses/damages sustained by that
cargo were also received and processed by it. As a result, the
charterer's agent was also considered a ship agent and so was held
to be solidarily liable with its principal.

At any rate, the Court is clothed with ample authority

to review matters, even if they are not assigned as
errors in their appeal, if it finds that their
consideration is necessary in arriving at a just
decision of the case. 21

The facts in the cases at bar are different. The charterer did not
represent itself as a carrier and indeed assumed responsibility
ability only for the unloading of the cargo, i.e, after the goods were
already outside the custody of the vessel. In supervising the
unloading of the cargo and issuing Daily Operations Report and
Statement of Facts indicating and describing the day-to-day
discharge of the cargo, Maritime acted in representation of the
charterer and not of the vessel. It thus cannot be considered a ship
agent. As a mere charterer's agent, it cannot be held solidarily
liable with Transcontinental for the losses/damages to the cargo
outside the custody of the vessel. Notably, Transcontinental was
disclosed as the charterer's principal and there is no question that
Maritime acted within the scope of its authority.

Issues, though not specifically raised in the pleadings

in the appellate court, may, in the interest of justice,
be properly considered by said court in deciding a
case, if they are questions raised in the trial court
and are matters of record having some bearing on
the issue submitted which the parties failed to raise
or the lower court ignore(d). 22

Hongkong and Macondray point out in their memorandum that the

appealed decision is not assailed insofar as it favors them and so
has become final as to them. We do not think so. First of all, we
note that they were formally impleaded as respondents in G.R No.
77674 and submitted their comment and later their memorandum,
where they discussed at length their position vis-a-vis the claims of
the other parties. Secondly, we reiterate the rule that even if issues
are not formally and specifically raised on appeal, they may
nevertheless be considered in the interest of justice for a proper
decision of the case.itc-asl Thus, we have held that:
Besides, an unassigned error closely related to the
error properly assigned, or upon which the

xxx xxx xxx

xxx xxx xxx

While an assignment of error which is required by law
or rule of court has been held essential to appellate
review, and only those assigned will be considered,
there are a number of cases which appear to accord
to the appellate court a broad discretionary power to
waive this lack of proper assignment of errors and
consider errors not assigned. 23
In his decision dated January 4, 1984, Judge Artemon de Luna of the
Regional Trial Court of Manila held:
The Court, on the basis of the evidence, finds nothing
to disprove the finding of the marine and cargo
surveyors that of the 66,390 bags of urea fertilizer,
65,547 bags were "discharged ex-vessel" and there
were "shortlanded" "1,383 bags", valued at
P87,163.54. This sum should be the principal and

primary liability and responsibility of the carrying

vessel. Under the contract for the transportation of
goods, the vessel's responsibility commence upon
the actual delivery to, and receipt by the carrier or its
authorized agent, until its final discharge at the port
of Manila. Defendant Hongkong Island Co., Ltd., as
"shipowner" and represented by the defendant
Macondray & Co., Inc., as its local agent in the
Philippines, should be responsible for the value of the
bags of urea fertilizer which were shortlanded.
The remainder of the claim in the amount of
P36,030.23, representing the value of the 574 bags
of unrecovered spillages having occurred after the
shipment was discharged from the vessel unto the
ex-lighters as well as during the discharge from the
lighters to the truck which transported the shipment
to the consignee's warehouses should be for the
account of the defendant Maritime Agencies &
Services, Inc.
We affirm the factual findings but must modify the legal
conclusions. As previously discussed, the liability of Macondray can
no longer be enforced because the claim against it has prescribed;
and as for Maritime, it cannot be held liable for the acts of its
known principal resulting in injury to Union. The interest must also
be reduced to the legal rate of 6%, conformably to our ruling
in Reformina v. Tomol 24 and Article 2209 of the Civil Code, and
should commence, not on April 20, 1981, but on September 19,
1980, date of the filing of the original complaint.
WHEREFORE, the decision of the respondent court is SET ASIDE and
that of the trial court is REINSTATED as above modified. The parties
shall bear their respective costs.
SO ORDERED.

G.R. No. L-34978 February 26, 1988

ANGELES C. VDA. DE LAT, CAROLINA LAT PEREZ DE TAGLE,
and PEDRO C. LAT, JR., petitioners, vs. THE PUBLIC SERVICE
COMMISSION and ROBERTO C. DIAZ, respondents.
GANCAYCO, J.:
This is a petition for the review of a Decision of the Public Service
Commission, dated February 24, 1972, granting the application of
the herein private respondent, Roberto C. Diaz, for a Certificate of
Public Convenience.
The facts of the case are as follows:
On May 11, 1970, the herein private respondent Roberto C. Diaz
filed an application with the respondent Public Service Commission
for a Certificate of Public Convenience and Necessity to operate
and maintain an ice plant service in Davao City alleging among
others that he is financially capable to operate and maintain the
proposed service, and that public necessity and convenience will be
promoted in a proper and suitable manner with the approval of his
application. 1 Said application was published in two newspapers of
general circulation namely: El Debate and The Philippine Herald,
and copies thereof were sent to affected operators including the
herein petitioners Angeles C. Vda. de Lat Carolina Lat, Perez de
Tagle and Pedro C. Lat, Jr. Only the petitioners filed an Opposition to
the Application and the same was submitted on July 3,1970.

By agreement of the parties, the hearing of the Application and the

Opposition was set by the respondent Commission for August
17,1970 at 9 o'clock in the morning. However, when the case was
called for hearing as late as 10 o'clock in the morning on the said
date, neither the oppositors nor their counsel was present. Hence,
the respondent Commission declared the case uncontested and
received the evidence of the private respondent.
In this petition, the petitioners contend that they filed an Urgent
Motion for Postponement and of Hearing on August 17, 1970, with
the respondent Commission on the ground that their counsel made
the mistake of noting down in his calendar the hearing on August 6,
1970, a Sunday and that it was already too late when he discovered
the said mistake. 2 On August 18,1970,the petitioners filed a
motion for reopening of the case and allowance to present
evidence but unfortunately, on the same date respondent
Commission issued an Order granting the private respondent
provisional authority to operate the ice plant for six (6) months.
This was based on the findings of the Commission that there was
indeed an urgent need for an ice plant in Davao City as its
population has increased tremendously. Petitioners then filed a
motion for reconsideration but this was denied in a Resolution
signed by all the members of the respondent Commission, said
motion having been heard by the Commission en banc. 3
The above-mentioned provisional authority granted to the private
respondent was extended twice. The first extension was given on
February 12, 1971 and the second, on December 10, 1971. Finally
on February 24, 1972, the respondent Commission handed down a
Decision approving the Application of the private respondent and
granting him a Certificate of Public Convenience to operate a 2-ton
ice plant in Davao City.
In this petition for review, the petitioners are asking that the
Decision rendered by the respondent Commission on February 24,
1972 be set aside and declared null and void, as it has been
rendered without due process. Their claim is that they were
deprived of their day in court when they were not allowed to crossexamine the witnesses of the private respondent and to present
their evidence in support of their Opposition. 4 Furthermore, they

submit that the decision awarding the Certificate of Public

Convenience to the private respondent was based merely on the
latter's uncorroborated testimony and would amount to competition
that would damage their business. 5
Two issues are raised in this petition. The first is whether or not the
petitioners were deprived of their day in Court to make the
proceeding in the respondent Public Service Commission nun and
void. And the other is whether or not the private respondent was
validly awarded the questioned Certificate of Public Convenience to
operate an ice plant in Davao City.
As regards the first issue, We reject the petitioners' assertion that
their right to due process was violated. It is very clear from the
records that the petitioners were given notice and opportunity to be
heard negating the petitioners' declaration that they were deprived
of their day in court.
Going back to the facts of this Case, We find, as the respondent
Commission did, 6 that the private respondent duly complied with
the required notice of hearing. There was publication. 7 The
petitioners could not have been denied the right to be heard
because as their counsel even admits, he agreed to the setting of
the hearing of the case for August 19, 1970 at 9 o'clock in the
morning. 8
The Petitioners should have known about the date of the hearing.
Yet, when the case was called, neither they nor their counsel
showed up. There was not even any word from them. Their lame
excuse that their lawyer made the mistake of noting down the
healing on a Sunday instead of a Monday is unacceptable. There
were three of them who presented themselves as oppositors. It is
unbelievable that no one of them found out about the mistake of
their counsel had they shown any slight interest in the case. Their
negligence cannot now be passed on to the respondent
Commission which only did the right thing of proceeding with the
case, which had become uncontested.
Nor can it be said that the Decision of the respondent Commission
is arbitrary. The application was not outrightly approved upon

reception of the evidence of the private respondent. On the

contrary, the respondent Commission took time to consider and
weigh such evidence as can be seen from the fact that the private
respondent was granted only a provisional authority on August 18,
1970, which was twice extended, before the case was finally
determined on February 24, 1972.
We are convinced that the private respondent deserves to be
awarded the Certificate of Public Convenience. He was able to fully
satisfy the requisites before such a certificate may be granted,
namely: (1) the applicant must be a citizen of the Philippines, or a
corporation or co-partnership, association or joint stock company
constituted and organized under the laws of the Philippines, 60 per
centum at least of the stock or paid-up capital of which belong
entirely to citizens of the Philippines; (2) the applicant must be
financially capable of undertaking the proposed service and
meeting the responsibilities incident to its operations; and (3) the
applicant must prove that the operation of the public service
proposed and the authorization to do business wig promote the
public interest in a proper and suitable manner. 9
There is no question that the private respondent is a Filipino
Citizen. Regarding his financial capacity and public necessity for the
ice plant, the finding of the Public Service Commission on these are
relevant, to wit:
It appears from the evidence adduced by the
applicant, that he is a co-owner of a parcel of land
situated at Barrio Magugpo, Tagum, Davao (Exhibit
"F" & "F-l") with an area of 15,738 square meters and
having a present market value of P25,000.00
(Exhibits "G" & "G-1") with the Bank of the Philippine
Islands; and that, he is engaged in the fishing
business with an investment of P10,000.00 to
P15,000.00 and from which he earns a monthly
income of P2,000.00 to P3,000.00. As regards the
necessity for the service applied for, applicant
testified that the only oppositors here are serving
almost 1/3 of the population of Davao; that Davao
City is a tourist belt and the population has increased

from 225.7 in 1960 to 389.3 in 1970, as evidenced by

Exhibit "1"; that there are two (2) or (3) three barrios
in said city; that being a fishing ground, there are
plenty of fish wherein ice is very much needed in
order to preserve them; that he received a request
from the Barrio Captain of Bo. Buhangin, Davao City
(Exhibit "J") clamoring for ice in behalf of its 9,431
inhabitants; and that there is an urgent need for an
ice plant in Davao City, to serve the requirements for
ice in the said city. 10
Before We end, it is apt to stress the principle that nobody has the
exclusive right to secure a franchise or a Certificate of Public
Convenience. The paramount consideration should always be the
public interest and public convenience. 11
Furthermore, the allegation of the petitioners that the grant of
Certificate of Public Convenience to the private respondent would
result in ruinous competition amounting to damage of their
business 12 is unconvincing. The grant is for the operation of a
mere 2-ton ice plant and only in Davao City whereas the petitioners
are big operators producing no less than 63 tons of ice daily and
who are authorized to operate ice plants not only in the City of
Davao but also in the three Davao provinces. And We have held
before, in order that the opposition based on ruinous competition
may prosper, it must be shown that the opponent would be
deprived of their profits on the capital invested in its business. The
mere possibility of reduction in the earnings of a business is not
sufficient to prove ruinous competition. It must be shown that the
business would not have sufficient gains to pay a fair rate of
interest on its capital investments. 13
WHEREFORE, the decision of the Public Service Commission
appealed from is hereby AFFIRMED, with costs against the
petitioners.
SO ORDERED.

the main purpose of representing plaintiff-appellee

for whatever contract and/or agreement it will have
regarding the ownership of units, and the like, of the
members of the Association . . .

G.R. No. 100727 March 18, 1992

COGEO-CUBAO OPERATORS AND DRIVERS
ASSOCIATION, petitioner, vs. THE COURT OF APPEALS,
LUNGSOD SILANGAN TRANSPORT SERVICES, CORP.,
INC., respondents.
MEDIALDEA, J.:
This is a petition for review on certiorari of the decision of the Court
of Appeals which affirmed with modification the decision of the
Regional Trial Court awarding damages in favor of respondent
Lungsod Silangan Transport Services Corp., Inc. (Lungsod Corp. for
brevity).
The antecedents facts of this case are as follows:
It appears that a certificate of public convenience to
operate a jeepney service was ordered to be issued
in favor of Lungsod Silangan to ply the Cogeo-Cubao
route sometime in 1983 on the justification that
public necessity and convenience will best be served,
and in the absence of existing authorized operators
on the lined apply for . . . On the other hand,
defendant-Association was registered as a non-stock,
non-profit organization with the Securities and
Exchange Commission on October 30, 1985 . . . with

Perturbed by plaintiffs' Board Resolution No. 9 . . .

adopting a Bandera' System under which a member
of the cooperative is permitted to queue for
passenger at the disputed pathway in exchange for
the ticket worth twenty pesos, the proceeds of which
shall be utilized for Christmas programs of the
drivers and other benefits, and on the strength of
defendants' registration as a collective body with the
Securities and Exchange Commission, defendantsappellants, led by Romeo Oliva decided to form a
human barricade on November 11, 1985 and
assumed the dispatching of passenger jeepneys . . .
This development as initiated by defendantsappellants gave rise to the suit for damages.
Defendant-Association's Answer contained vehement
denials to the insinuation of take over and at the
same time raised as a defense the circumstance that
the organization was formed not to compete with
plaintiff-cooperative. It, however, admitted that it is
not authorized to transport passengers . . . (pp. 1516, Rollo)
On July 31, 1989, the trial court rendered a decision in favor of
respondent Lungsod Corp., the dispositive portion of which states:
WHEREFORE
FROM
THE
FOREGOING
CONSIDERATION, the Court hereby renders judgment
in favor of the plaintiff and against the defendants as
follows:
1. Ordering defendants to pay plaintiff the amount of
P50,000.00 as actual damages;

2. Ordering the defendants to pay the plaintiffs the

amount of P10,000.00 as attorney's fees.
SO ORDERED. (P. 39, Rollo)
Not satisfied with the decision, petitioner Association appealed with
the Court of Appeals. On May 27, 1991, respondent appellate court
rendered its decision affirming the findings of the trial court except
with regard to the award of actual damages in the amount of
P50,000.00 and attorney's fees in the amount of P10,000.00. The
Court of Appeals however, awarded nominal damages to petitioner
in the amount of P10,000.00.
Hence, this petition was filed with the petitioner assigning the
following errors of the appellate court:
I. THE RESPONDENT COURT ERRED IN MERELY
MODIFYING THE JUDGMENT OF THE TRIAL COURT.
II. THE RESPONDENT COURT ERRED IN HOLDING
THAT THE PETITIONER USURPED THE PROPERTY
RIGHT OF THE PRIVATE RESPONDENT.
III. AND THE RESPONDENT COURT ERRED IN DENYING
THE MOTION FOR RECONSIDERATION.
Since the assigned errors are interrelated, this Court shall discuss
them jointly. The main issue raised by the petitioner is whether or
not the petitioner usurped the property right of the respondent
which shall entitle the latter to the award of nominal damages.

Petitioner contends that the association was formed not to

complete with the respondent corporation in the latter's operation
as a common carrier; that the same was organized for the common
protection of drivers from abusive traffic officers who extort money
from them, and for the elimination of the practice of respondent
corporation of requiring jeepney owners to execute deed of sale in
favor of the corporation to show that the latter is the owner of the
jeeps under its certificate of public convenience. Petitioner also
argues that in organizing the association, the members thereof are
merely exercising their freedom or right to redress their grievances.
We find the petition devoid of merit.
Under the Public Service Law, a certificate of public convenience is
an authorization issued by the Public Service Commission for the
operation of public services for which no franchise is required by
law. In the instant case, a certificate of public convenience was
issued to respondent corporation on January 24, 1983 to operate a
public utility jeepney service on the Cogeo-Cubao route. As found
by the trial court, the certificate was issued pursuant to a decision
passed by the Board of Transportation in BOT Case No. 82-565.
A certification of public convenience is included in the term
"property" in the broad sense of the term. Under the Public Service
Law, a certificate of public convenience can be sold by the holder
thereof because it has considerable material value and is
considered as valuable asset (Raymundo v. Luneta Motor Co., et al.,
58 Phil. 889). Although there is no doubt that it is private property,
it is affected with a public interest and must be submitted to the
control of the government for the common good (Pangasinan
Transportation Co. v. PSC, 70 Phil 221). Hence, insofar as the
interest of the State is involved, a certificate of public convenience
does not confer upon the holder any proprietary right or interest or
franchise in the route covered thereby and in the public highways
(Lugue v. Villegas, L-22545, Nov . 28, 1969, 30 SCRA 409).
However, with respect to other persons and other public utilities, a
certificate of public convenience as property, which represents the
right and authority to operate its facilities for public service, cannot
be taken or interfered with without due process of law. Appropriate
actions may be maintained in courts by the holder of the certificate

against those who have not been authorized to operate in

competition with the former and those who invade the rights which
the former has pursuant to the authority granted by the Public
Service Commission (A.L. Ammen Transportation Co. v. Golingco. 43
Phil. 280).
In the case at bar, the trial court found that petitioner association
forcibly took over the operation of the jeepney service in the
Cogeo-Cubao route without any authorization from the Public
Service Commission and in violation of the right of respondent
corporation to operate its services in the said route under its
certificate of public convenience. These were its findings which
were affirmed by the appellate court:
The Court from the testimony of plaintiff's witnesses
as well as the documentary evidences presented is
convinced that the actions taken by defendant herein
though it admit that it did not have the authority to
transport passenger did in fact assume the role as a
common carrier engaged in the transport of
passengers within that span of ten days beginning
November 11, 1985 when it unilaterally took upon
itself the operation and dispatching of jeepneys at St.
Mary's St. The president of the defendant
corporation. Romeo Oliva himself in his testimony
confirmed that there was indeed a takeover of the
operations at St. Mary's St. . . . (p. 36, Rollo)
The findings of the trial court especially if affirmed by the appellate
court bear great weight and will not be disturbed on appeal before
this Court. Although there is no question that petitioner can
exercise their constitutional right to redress their grievances with
respondent Lungsod Corp., the manner by which this constitutional
right is to be, exercised should not undermine public peace and
order nor should it violate the legal rights of other persons. Article
21 of the Civil Code provides that any person who wilfully causes
loss or injury to another in a manner that is contrary to morals,
good customs or public policy shall compensate the latter for the
damage. The provision covers a situation where a person has a
legal right which was violated by another in a manner contrary to

morals, good customs or public policy. It presupposes loss or injury,

material or otherwise, which one may suffer as a result of such
violation. It is clear form the facts of this case that petitioner
formed a barricade and forcibly took over the motor units and
personnel of the respondent corporation. This paralyzed the usual
activities and earnings of the latter during the period of ten days
and violated the right of respondent Lungsod Corp. To conduct its
operations thru its authorized officers.
As to the propriety of damages in favor of respondent Lungsod
Corp., the respondent appellate court stated:
. . . it does not necessarily follow that plaintiffappellee is entitled to actual damages and attorney's
fees. While there may have been allegations from
plaintiff-cooperative showing that it did in fact suffer
some from of injury . . . it is legally unprecise to order
the payment of P50,000.00 as actual damages for
lack of concrete proof therefor. There is, however, no
denying of the act of usurpation by defendantsappellants which constituted an invasion of
plaintiffs'-appellees' property right. For this, nominal
damages in the amount of P10,000.00 may be
granted. (Article 2221, Civil Code). (p. 18,Rollo)
No compelling reason exists to justify the reversal of the ruling of
the respondent appellate court in the case at bar. Article 2222 of
the Civil Code states that the court may award nominal damages in
every obligation arising from any source enumerated in Article
1157, or in every case where any property right has been invaded.
Considering the circumstances of the case, the respondent
corporation is entitled to the award of nominal damages.
ACCORDINGLY, the petition is DENIED and the assailed decision of
the respondent appellate court dated May 27, 1991 is AFFIRMED.
SO ORDERED.