Yobido v CA (Torts)
As Article 1174 provides, no person shall be responsible for a fortuitous event which could
YOBIDO v CA [G.R. No. 113003. October 17, 1997.] ALBERTA YOBIDO and
CRESENCIO YOBIDO, petitioners, vs. COURT OF APPEALS, LENY TUMBOY, ARDEE
TUMBOY and JASMIN TUMBOY, respondents.
FACTS:
On April 26, 1988, spouses Tito and Leny Tumboy and their minor children, Ardee and
Jasmin, boarded at Mangagoy, Surigao del Sur, a Yobido bus bound for Davao City. Along
Picop road in Km. 17, Sta. Maria, Agusan del Sur, the left front tire of the bus suddenly
exploded. The bus fell into a ravine around three (3) feet from the road and struck a tree
which resulted in the death of Tito Tumboy and physical injuries to other passengers.
Thereafter, a complaint for breach of contract of carriage, damages and attorney's fees
was filed by Leny and her children against Alberta Yobido, the owner of the bus, and
Cresencio Yobido, its driver in the Regional Trial Court of Davao City.
Defenses:
Abundio Salce, who was the bus conductor when the incident happened, testified that 1.
the 42-seater bus was not full as there were only 32 passengers, such that he himself
managed to get a seat;
2. the bus was running at a speed of "60 to 50" and that it was going slow because of the
zigzag road.
3. the left front tire that exploded was a "brand new tire" that he mounted on the bus on
April 21, 1988 or only five (5) days before the incident.
DECISION:
(1) Trial Court: dismissing the action for lack of merit
(2) Court of Appeals: rendered a decision reversing that of the lower court
ISSUE:
Whether the tire blow-out is a fortuitous event
RULING:
No.
A fortuitous event is possessed of the following characteristics:
(a) the cause of the unforeseen and unexpected occurrence, or the failure of the debtor to
comply with his obligations must be independent of human will;
(b) it must be impossible to foresee the event which constitutes the caso fortuito, or if it
can be foreseen, it must be impossible to avoid;
(c) the occurrence must be such as to render it impossible for the debtor to fulfill his
obligation in a normal manner; and
(d) the obligor must be free from any participation in the aggravation of the injury resulting
to the creditor.
not be foreseen, or which, though foreseen was inevitable. In other words, there must be
an entire exclusion of human agency from the cause of injury or loss.
There is no reason to overturn the findings and conclusions of the Court of Appeals.
Petitioners' contention that they are exempted from liability because the tire blowout was a
fortuitous event that could not have been foreseen, must fail. It is settled that an accident
caused either by defects in the automobile or through the negligence of its driver is not a
caso fortuito that would exempt the carrier from liability for damages. Accordingly, the
challenged decision is affirmed subject to modification that petitioners shall additionally
pay herein, respondents P20,000.00 as exemplary damages.
The explosion of the new tire may not be considered a fortuitous event. There are human
factors involved in the situation. The fact that the tire was new did not imply that it was
entirely free from manufacturing defects or that it was properly mounted on the vehicle.
Neither may the fact that the tire bought and used in the vehicle is of a brand name noted
for quality, resulting in the conclusion that it could not explode within five days' use. Be
that as it may, it is settled that an accident caused either by defects in the automobile or
through the negligence of its driver is not a caso fortuito that would exempt the carrier
from liability for damages.
It was incumbent upon the defense to establish that it took precautionary measures
considering partially dangerous condition of the road. As stated above, proof that the tire
was new and of good quality is not sufficient proof that it was not negligent. Petitioners
should have shown that it undertook extraordinary diligence in the care of its carrier such
as conducting daily routinary check-ups of the vehicle's parts. As the late Justice J.B.L.
Reyes said: "It may be impracticable, as appellee argues, to require of carriers to test the
strength of each and every part of its vehicles before each trip, but we are of the opinion
that a due regard for the carrier's obligations toward the traveling public demands
adequate periodical tests to determine the condition and strength of those vehicle portions
the failure of which may endanger the safety of the passengers."
It is interesting to note that petitioners proved through the bus conductor, Salce, that the
bus was running at "60-50" kilometers per hour only within the prescribed lawful speed
limit. However, they failed to rebut the testimony of Leny Tumboy that the bus was running
so fast that she cautioned the driver to slow down. These contradictory facts must,
therefore, be resolved in favor of liability in view of the presumption of negligence of the
carrier in the law.
SULPICIO LINES, INC., petitioner, vs. FIRST LEPANTO-TAISHO INSURANCE
CORPORATION, respondent.
G.R. No. 140349. June 29, 2005

FACTS: Taiyo Yuden Philippines, Inc. (owner of the goods) and Delbros, Inc. (shipper)
entered into a contract, evidenced by Bill of Lading issued by the latter in favor of the
owner of the goods, for Delbros, Inc. to transport a shipment of goods consisting of 3
wooden crates containing 136 cartons of inductors and LC compound on board the V
Singapore V20 from Cebu City to Singapore in favor of the consignee, Taiyo Yuden
Singapore Pte, Ltd.
For the carriage of said shipment from Cebu City to Manila, Delbros, Inc. engaged the
services of the vessel M/V Philippine Princess, owned and operated by petitioner Sulpicio
Lines, Inc. (carrier). During the unloading of the shipment, one crate containing 42
cartons dropped from the cargo hatch to the pier apron. The owner of the goods
examined the dropped cargo, and upon an alleged finding that the contents of the crate
were no longer usable for their intended purpose, they were rejected as a total loss and
returned to Cebu City.
Delbros, Inc. filed on 15 April 1993 its Answer with Counterclaim and Cross-claim, alleging
that assuming the contents of the crate in question were truly in bad order, fault is with
herein petitioner-carrier which was responsible for the unloading of the crates.
Petitioner-carrier filed its Answer to Delbros, Inc.s cross-claim asserting that it observed
extraordinary diligence in the handling, storage and general care of the shipment and that
subsequent inspection of the shipment by the Manila Adjusters and Surveyors Company
showed that the contents of the third crate that had fallen were found to be in apparent
sound condition, except that 2 cello bags each of 50 pieces ferri inductors No. LC FL
112270K-60 (c) were unaccounted for and missing as per packaging list.
After hearing, the trial court dismissed the complaint for damages as well as the
counterclaim filed by therein defendant Sulpicio Lines, Inc. and the cross-claim filed by
Delbros, Inc on the grounds that plaintiff has failed to prove its case.

The owner of the goods filed a claim with herein petitioner-carrier for the recovery of the
value of the rejected cargo which was refused by the latter. Thereafter, the owner of the
goods sought payment from respondent First Lepanto-Taisho Insurance Corporation
(insurer) under a marine insurance policy issued to the former. Respondent-insurer paid
the claim less thirty-five percent (35%) salvage value or P194, 220.31.
The CA reversed the RTC decision and ordered Delbros and Sulpicio Lines to pay, jointly
and severally, plaintiff-appellant the sum of P194,220.31 representing actual damages,
plus legal interest counted from the filing of the complaint until fully paid.

The payment of the insurance claim of the owner of the goods by the respondent-insurer
subrogated the latter to whatever right or legal action the owner of the goods may have
against Delbros, Inc. and petitioner-carrier, Sulpicio Lines, Inc. Thus, respondent-insurer
then filed claims for reimbursement from Delbros, Inc. and petitioner-carrier Sulpicio
Lines, Inc. which were subsequently denied.
ISSUE: whether or not, based on the evidence presented during the trial, the owner of the
goods, respondent-insurers predecessor-in-interest, did incur damages, and if so,
whether or not petitioner-carrier is liable for the same

RULING:

In 1992, respondent-insurer filed a suit for damages with the trial court against Delbros,
Inc. and herein petitioner-carrier.
It cannot be denied that the shipment sustained damage while in the custody of petitioner-
carrier. It is not disputed that one of the 3 crates did fall from the cargo hatch to the pier
apron while petitioner-carrier was unloading the cargo from its vessel. Neither is it
impugned that upon inspection, it was found that 2 cartons were torn on the side and the
top flaps were open and that 2 cello bags, each of 50 pieces ferri inductors, were missing
from the cargo.
Petitioner-carrier contends that its liability, if any, is only to the extent of the cargo damage
or loss and should not include the lack of fitness of the shipment for transport to
Singapore due to the damaged packing. This is erroneous. Petitioner-carrier seems to
belabor under the misapprehension that a distinction must be made between the cargo
packaging and the contents of the cargo. According to it, damage to the packaging is not
tantamount to damage to the cargo. It must be stressed that in the case at bar, the
damage sustained by the packaging of the cargo while in petitioner-carriers custody
resulted in its unfitness to be transported to its consignee in Singapore. Such failure to
ship the cargo to its final destination because of the ruined packaging, indeed,
resulted in damages on the part of the owner of the goods.
The falling of the crate during the unloading is evidence of petitioner-carriers negligence
in handling the cargo. As a common carrier, it is expected to observe extraordinary
diligence in the handling of goods placed in its possession for transport. [12] The standard
of extraordinary diligence imposed upon common carriers is considerably more
demanding than the standard of ordinary diligence, i.e., the diligence of a
good paterfamilias established in respect of the ordinary relations between
members of society.[13] A common carrier is bound to transport its cargo and its
passengers safely "as far as human care and foresight can provide, using
the utmost diligence of a very cautious person, with due regard to all
circumstances.[14] The extraordinary diligence in the vigilance over the goods
tendered for shipment requires the common carrier to know and to follow the
required precaution for avoiding the damage to, or destruction of, the goods
entrusted to it for safe carriage and delivery.[15] It requires common carriers to
render service with the greatest skill and foresight and to use all reasonable
means to ascertain the nature and characteristic of goods tendered for shipment,
and to exercise due care in the handling and stowage, including such methods as
their nature requires.[16]
Thus, when the shipment suffered damages as it was being unloaded, petitioner-
carrier is presumed to have been negligent in the handling of the damaged cargo.
Under Articles 1735[17] and 1752[18] of the Civil Code, common carriers are presumed
to have been at fault or to have acted negligently in case the goods transported by
them are lost, destroyed or had deteriorated. To overcome the presumption of
liability for loss, destruction or deterioration of goods under Article 1735, the
common carrier must prove that they observed extraordinary diligence as required
in Article 1733[19] of the Civil Code.[20]
Petitioner-carrier miserably failed to adduce any shred of evidence of the required
extraordinary diligence to overcome the presumption that it was negligent in transporting
the cargo.
Coming now to the issue of the extent of petitioner-carriers liability, it is undisputed that
respondent-insurer paid the owner of the goods under the insurance policy the amount of
P194,220.31 for the alleged damages the latter has incurred. Neither is there dispute as
to the fact that Delbros, Inc. paid P194,220.31 to respondent-insurer in satisfaction of the
whole amount of the judgment rendered by the Court of Appeals. The question then is: To
what extent is Sulpicio Lines, Inc., as common carrier, liable for the damages
suffered by the owner of the goods?
Upon respondent-insurers payment of the alleged amount of loss suffered by the insured
(the owner of the goods), the insurer is entitled to be subrogated pro tanto to any
right of action which the insured may have against the common carrier whose
negligence or wrongful act caused the loss.[21] Subrogation is the substitution of one
person in the place of another with reference to a lawful claim or right, so that he who is
substituted succeeds to the rights of the other in relation to a debt or claim, including its
remedies or securities.[22]The rights to which the subrogee succeeds are the same as, but
not greater than, those of the person for whom he is substituted, that is, he cannot acquire
any claim, security or remedy the subrogor did not have.[23] In other words, a subrogee
cannot succeed to a right not possessed by the subrogor.[24] A subrogee in effect steps
into the shoes of the insured and can recover only if the insured likewise could have
recovered.[25]
As found by the Court of Appeals, there was damage suffered by the goods which
consisted in the destruction of one wooden crate and the tearing of two (2) cardboard
boxes therein which rendered them unfit to be sent to Singapore. [26] The falling of the
crate was negligence on the part of Sulpicio Lines, Inc. for which it cannot
exculpate itself from liability because it failed to prove that it exercised
extraordinary diligence.[27]
Hence, we uphold the ruling of the appellate court that herein petitioner-carrier is
liable to pay the amount paid by respondent-insurer for the damages sustained by
the owner of the goods.
As stated in the manifestation filed by Delbros, Inc., however, respondent-insurer had
already been paid the full amount granted by the Court of Appeals, hence, it will be
tantamount to unjust enrichment for respondent-insurer to again recover damages
from herein petitioner-carrier.
With respect to Delbros, Inc.s prayer contained in its manifestation that, in case the
decision in the instant case be adverse to petitioner-carrier, a pronouncement as to the
matter of reimbursement, indemnification or contribution in favor of Delbros, Inc. be
included in the decision, this Court will not pass upon said issue since Delbros, Inc. has
no personality before this Court, it not being a party to the instant case. Notwithstanding,
this shall not bar any action Delbros, Inc. may institute against petitioner-carrier Sulpicio
Lines, Inc. with respect to the damages the latter is liable to pay.
WHEREFORE, premises considered, the assailed Decision of the Court of Appeals dated
26 May 1999 and its Resolution dated 13 October 1999 are hereby AFFIRMED. No costs.
SO ORDERED.
EASTERN SHIPPING LINES, INC., vs.
BPI/MS INSURANCE CORP., & MITSUI SUMITOMO INSURANCE CO., LTD.
G.R. No. 182864, January 12, 2015
FACTS:
For two separate transactions in 2004, Sumitomo Corporation, a corporation
based in Yokohama, Japan shipped on board the vessels of petitioner Eastern Shipping
Lines Inc. (ESLI) coils of various steel sheet for transportation and delivery at the port of
Manila in favor of consignee Calamba Steel Center located in Saimsim, Calamba,
Laguna. The Shipments were insured with the respondents BPI/MS Insurance
Corporation (BPI/MS) and Mitsui Sumitomo Insurance Company (Mitsui) against all risks.
The first shipment arrived at the port of Manila in an unknown condition and was
turned over to Asian Terminals Inc. (ATI) for safekeeping. Upon withdrawal of the
shipment by Calamba Steel, it was found out that part of the shipment was damaged and
was in bad order condition such that there was a Request for Bad Order Survey. It was
found out that the damage amounted to US$4,598.85 prompting Calamba Steel to reject
the damaged shipment for being unfit for the intended purpose.
Sumitomo Corporation again shipped on board ESLIs vessel coils of various
Steel for transportation to and delivery at the port of Manila in favor of Calamba Steel.
Again, the shipment was insured by respondents against all risk. The second shipment
arrived at the port of Manila partly damaged and in bad order. The coils sustained further
damage during the discharge from vessel to shore until its turnover to ATIs custody for
safekeeping. Upon withdrawal from ATI and delivery to Calamba Steel, As it did before,
Calamba Steel rejected the damaged shipment for being unfit for the intended purpose.
Calamba Steel attributed the damages on both shipments to ESLI as the carrier
and ATI as the arrastre operator in charge of the handling and discharge of the coils and
filed a claim against them. When ESLI and ATI refused to pay, Calamba Steel filed an
insurance claim for the total amount of the cargo against BPI/MS and Mitsui as cargo
insurers. As a result, BPI/MS and Mitsui became subrogated in place of and with all the
rights and defenses accorded by law in favor of Calamba Steel.
 Opposing the complaint, ATI denied the allegations and insisted that the coils in
two shipments were already damaged upon receipt from ESLIs vessels. It likewise
insisted that it exercised due diligence in the handling of the shipments and invoked that
in case of adverse decision, its liability should not exceed P5,000.00 pursuant to Section
7.01, Article VII of the Contract for Cargo Handling Services between Philippine Ports
Authority (PPA) and ATI.
On its part, ESLI denied the allegations of the complainants and averred that the
damage to both shipments was incurred while the same were in the possession and
custody of ATI and/or of the consignee or its representatives.
The RTC Makati City rendered a decision finding both the ESLI and ATI liable for
the damages sustained by the two shipments. Upon appeal, Both ESLI and ATI invoked
the limitation of liability of US$500.00 per package as provided in Commonwealth Act No.
65 or the Carriage of Goods by Sea Act (COGSA). The CA absolved ATI from liability in
its decision.
ISSUE:
1 Whether or not ESLI is liable for the damaged shipment transported and
delivered by its vessels.
2 Whether or not ESLI can invoke the limitation of liability of US$500.00 per
package as provided in Commonwealth Act No. 65 or the Carriage of Goods
by Sea Act (COGSA).
HELD:
Common carriers, from the nature of their business and on public policy
considerations, are bound to observe extra ordinary diligence in the vigilance over the
goods transported by them. Subject to certain exceptions enumerated under Article
1734 of the Civil Code, common carriers are responsible for the loss, destruction, or
deterioration of the goods. The extraordinary responsibility of the common carrier lasts
from the time the goods are unconditionally placed in the possession of, and received by
the carrier for transportation until the same are delivered, actually or constructively, by the
carrier to the consignee, or to the person who has a right to receive them.
In maritime transportation, a bill of lading is issued by a common carrier as a
contract, receipt and symbol of the goods covered by it. If it has no notation of any defect
or damage in the goods, it is considered as a "clean bill of lading." A clean bill of lading
constitutes prima facie evidence of the receipt by the carrier of the goods as therein
described.
Based on the bills of lading issued, it is undisputed that ESLI received the two
shipments of coils from shipper Sumitomo Corporation in good condition at the ports of
Yokohama and Kashima, Japan. However, upon arrival at the port of Manila, some coils
from the two shipments were partly dented and crumpled as evidenced by the Turn Over
Survey of Bad Order Cargoes prior to turnover to ATI. 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, loss, or destruction of the goods
happened, the transporter shall be held responsible. From the foregoing, the fault is
attributable to ESLI. While no longer an issue, it may be nonetheless state that ATI was
correctly absolved of liability for the damage.
In the issue of limitation of liability, the law of the country to which the goods are
to be transported shall govern the liability of the common carrier for their loss, destruction
or deterioration. The Code takes precedence as the primary law over the rights and
obligations of common carriers with the Code of Commerce and COGSA applying
suppletorily. The New Civil Code provides that a stipulation limiting a common carriers
liability to the value of the goods appearing in the bill of lading is binding, unless the
shipper or owner declares a greater value. In addition, 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.
COGSA, on the other hand, provides under Section 4, Subsection 5 that an
amount recoverable in case of loss or damage shall not exceed US$500.00 per package
or per customary freight unless the nature and value of such goods have been declared
by the shipper before shipment and inserted in the bill of lading. Accordingly, the issue
whether or not ESLI has limited liability as a carrier is determined by either absence or
presence of proof that the nature and value of the goods have been declared by
Sumitomo Corporation and inserted in the bills of lading.
There is no question about the declaration of the nature, weight and description
of the goods on the first bill of lading. The bills of lading represent the formal expression of
the parties rights, duties and obligations. It is the best evidence of the intention of the
parties which is to be deciphered from the language used in the contract, not from the
unilateral post facto assertions of one of the parties, or of third parties who are strangers
to the contract. Thus, when the terms of an agreement have been reduced to writing, it is
deemed to contain all the terms agreed upon and there can be, between the parties and
their successors in interest, no evidence of such terms other than the contents of the
written agreement.
As to the non-declaration of the value of the goods on the second bill of lading,
we see no error on the part of the appellate court when it ruled that there was a
compliance of the requirement provided by COGSA. The declaration requirement does
not require that all the details must be written down on the very bill of lading itself. It must
be emphasized that all the needed details are in the invoice, which "contains the itemized
list of goods shipped to a buyer, stating quantities, prices, shipping charges," and other
details which may contain numerous sheets. Compliance can be attained by incorporating
the invoice, by way of reference, to the bill of lading provided that the former containing
the description of the nature, value and/or payment of freight charges is as in this case
duly admitted as evidence.
Wherefore, the petition for review on certiorari of ESLI was denied and the
decision of the CA was affirmed.
Torts And Damages Case Digest: Valenzuela V. CA (1996)
Lessons Applicable:
Calculation of Risk (Torts and Damages)
Factors in Determining Amount (Torts and Damages)
FACTS:
June 24, 1990 2 am: While driving from her restaurant at Araneta avenue
towards the direction of Manila, Ma. Lourdes Valenzuela noticed that she had a flat
tire so she parked along the sidewalk about 1 1/2 feet away, place her emergency
lights and seeked help
She was with her companion Cecilia Ramon
While she was pointing her tools to the man who will help her fixed the tires, she
was suddenly hit by another Mitsubishi Lancer driven by Richard Li who was
intoxicated and she slammed accross his windshield and fell to the ground
She was sent to UERM where she stayed for 20 days and her leg was
amputated and was replaced with an artificial one.
Her expenses totalled 147, 000 [120,000 php (confinement) + 27, 000
(aritificial leg)]
RTC: Richard Li guilty of gross negligence and liable for damages under Article
2176 of the Civil Code. Alexander Commercial, Inc., Lis employer, jointly and
severally liable for damages pursuant to Article 2180 P41,840 actual
damages, P37,500 unrealized profits because of the stoppage of plaintiffs Bistro La
Conga restaurant 3 weeks after the accident on June 24, 1990, P20,000 a month as
unrealized profits of Bistro La Conga restaurant, from August, 1990 until the date of
this judgment, P30,000.00, a month, for unrealized profits in 2 Beauty
salons, P1,000,000 in moral damages, P50,000, as exemplary damages, P60,000,
as reasonable attorneys fees and costs.
CA: there was ample evidence that the car was parked at the side but absolved
Li's employer
Li: 55 kph - self serving and uncorraborated
Rogelio Rodriguez, the owner-operator of an establishment located just
across the scene of the accident: Valenzuelas car parked parallel and very near the
sidewalk and Li was driving on a very fast speed and there was only a drizzle (NOT
heavy rain)
ISSUE:
1. W/N Li was driving at 55 kph - NO
2. W/N Valenzuela was guilty of contributory negligence - NO
3. W/N Alexander Commercial, Inc. as Li's employer should be held liable - YES
4. W/N the awarding of damages is proper. - YES.
HELD: CA modified with reinstating the RTC decision
1. NO
If Li was running at only about 55 kph then despite the wet and slippery road, he
could have avoided hitting the Valenzuela by the mere expedient or applying his
brakes at the proper time and distance
it was not even necessary for him to swerve a little to the right in order to safely
avoid a collision with the on-coming car since there is plenty of space for both cars,
since Valenzuela car was running at the right lane going towards Manila and the on-
coming car was also on its right lane going to Cubao
2. NO.
Contributory negligence is conduct on the part of the injured party, contributing
as a legal cause to the harm he has suffered, which falls below the standard to which
he is required to conform for his own protection
emergency rule
 an individual who suddenly finds himself in a situation of danger and is
required to act without much time to consider the best means that may be adopted to
avoid the impending danger, is not guilty of negligence if he fails to undertake what
subsequently and upon reflection may appear to be a better solution, unless the
emergency was brought by his own negligence
She is not expected to run the entire boulevard in search for a
parking zone or turn on a dark Street or alley where she would likely find no one to
help her
She stopped at a lighted place where there were people, to
verify whether she had a flat tire and to solicit help if needed
she parked along the sidewalk, about 1 feet away, behind a
Toyota Corona Car
3. YES.
Not the principle of respondeat superior, which holds the master liable for acts of
the servant (must be in the course of business), but that of pater familias, in which
the liability ultimately falls upon the employer, for his failure to exercise the diligence
of a good father of the family in the selection and supervision of his employees
Ordinarily, evidence demonstrating that the employer has exercised diligent
supervision of its employee during the performance of the latters assigned tasks
would be enough to relieve him of the liability imposed by Article 2180 in relation to
Article 2176 of the Civil Code.
situation is of a different character, involving a practice utilized by large
companies with either their employees of managerial rank or their representatives.
Moreover, Lis claim that he happened to be on the road on the night of the
accident because he was coming from a social visit with an officemate in Paraaque
was a bare allegation which was never corroborated in the court below. It was
obviously self-serving. Assuming he really came from his officemates place, the
same could give rise to speculation that he and his officemate had just been from a
work-related function, or they were together to discuss sales and other work related
strategies.
Alexander Commercial, Inc. has not demonstrated, to our satisfaction, that it
exercised the care and diligence of a good father of the family in entrusting its
company car to Li
4. YES.
As the amount of moral damages are subject to this Courts discretion, we are of
the opinion that the amount of P1,000,000.00 granted by the trial court is in greater
accord with the extent and nature of the injury -. physical and psychological - suffered
by Valenzuela as a result of Lis grossly negligent driving of his Mitsubishi Lancer in
the early morning hours of the accident.
the damage done to her would not only be permanent and lasting, it
would also be permanently changing and adjusting to the physiologic changes which
her body would normally undergo through the years. The replacements, changes,
and adjustments will require corresponding adjustive physical and occupational
therapy. All of these adjustments, it has been documented, are painful.
Tiu vs Arriesgado
At about 10:00 p.m. of March 15, 1987, a cargo truck marked "Condor Hollow Blocks and
General Merchandise" was loaded with firewood in Bogo, Cebu and left for Cebu City.
Upon reaching Sitio Aggies, Poblacion, Compostela, Cebu, just as the truck passed over a
bridge, one of its rear tires exploded. The driver, Sergio Pedrano, then parked along the
right side of the national highway and removed the damaged tire to have it vulcanized at a
nearby shop, about 700 meters away. Pedrano left his helper, Jose Mitante, Jr. to keep
watch over the stalled vehicle, and instructed the latter to place a spare tire six fathoms
away behind the stalled truck to serve as a warning for oncoming vehicles. The trucks tail
lights were also left on. It was about 12:00 a.m.
At about 4:45 a.m., D Rough Riders passenger bus driven by Virgilio Te Laspias was
cruising along the national highway of Sitio Aggies, Poblacion, Compostela, Cebu. The
passenger bus was also bound for Cebu City, and had come from Maya, Daanbantayan,
Cebu. Among its passengers were the Spouses Pedro A. Arriesgado and Felisa Pepito
Arriesgado, who were seated at the right side of the bus.
As the bus was approaching the bridge, Laspias saw the stalled truck, which was then
about 25 meters away. He applied the breaks and tried to swerve to the left to avoid hitting
the truck. But it was too late; the bus rammed into the trucks left rear. The impact
damaged the right side of the bus and left several passengers injured. Pedro Arriesgado
lost consciousness and suffered a fracture in his right colles. His wife, Felisa, was brought
to the Danao City Hospital. She was later transferred to the Southern Island Medical
Center where she died shortly thereafter.
Respondent Pedro A. Arriesgado then filed a complaint for breach of contract of carriage
before the RTC., against D Rough Riders bus operator William Tiu and his driver, Virgilio
Te Laspias. The respondent alleged that the passenger bus in question was cruising at a
fast and high speed along the national road, and that petitioner Laspias did not take
precautionary measures to avoid the accident.
The petitioners, for their part, filed a Third-Party Complaint against the following:
respondent Philippine Phoenix Surety and Insurance, Inc. (PPSII), petitioner Tius insurer;
respondent Benjamin Condor, the registered owner of the cargo truck; and respondent
Sergio Pedrano, the driver of the truck. They alleged that petitioner Laspias was
negotiating the uphill climb along the national highway of Sitio Aggies, Poblacion,
Compostela, in a moderate and normal speed. It was further alleged that the truck was
parked in a slanted manner, its rear portion almost in the middle of the highway, and that
no early warning device was displayed. Petitioner Laspias promptly applied the brakes
and swerved to the left to avoid hitting the truck head-on, but despite his efforts to avoid
damage to property and physical injuries on the passengers, the right side portion of the
bus hit the cargo trucks left rear.
Issue:
Whether or not Laspinas is liable as being the driver of the bus.
Whether or not Tiu, as bus operator, overcame the presumption of negligence being the
operator of a common carrier.
Whether or not the doctrine of last clear chance is applicable.
Whether or not Pedrano and Condor are liable as well.
What then would be the liability of the insurer.
Held:
1) Yes. In his testimony before the trial court, petitioner Laspias claimed that he was
traversing the two-lane road at Compostela, Cebu at a speed of only forty (40) to fifty (50)
kilometers per hour before the incident occurred. He also admitted that he saw the truck
which was parked in an oblique position at about 25 meters before impact, and tried to
avoid hitting it by swerving to the left. However, even in the absence of expert evidence,
the damage sustained by the truck itself supports the finding of both the trial court and the
appellate court, that the D Rough Rider bus driven by petitioner Laspias was traveling at
a fast pace. Since he saw the stalled truck at a distance of 25 meters, petitioner Laspias
had more than enough time to swerve to his left to avoid hitting it; that is, if the speed of
the bus was only 40 to 50 kilometers per hour as he claimed. As found by the Court of
Appeals, it is easier to believe that petitioner Laspias was driving at a very fast speed,
since at 4:45 a.m., the hour of the accident, there were no oncoming vehicles at the
opposite direction. Petitioner Laspias could have swerved to the left lane with proper
clearance, and, thus, could have avoided the truck
Indeed, petitioner Laspias negligence in driving the bus is apparent in the records. By
his own admission, he had just passed a bridge and was traversing the highway of
Compostela, Cebu at a speed of 40 to 50 kilometers per hour before the collision
occurred. The maximum speed allowed by law on a bridge is only 30 kilometers per hour.
And, as correctly pointed out by the trial court, petitioner Laspias also violated Section 35
of the Land Transportation and Traffic Code, Republic Act No. 4136, as amended:
Sec. 35. Restriction as to speed. (a) Any person driving a motor vehicle on a highway
shall drive the same at a careful and prudent speed, not greater nor less than is
reasonable and proper, having due regard for the traffic, the width of the highway, and or
any other condition then and there existing; and no person shall drive any motor vehicle
upon a highway at such speed as to endanger the life, limb and property of any person,
nor at a speed greater than will permit him to bring the vehicle to a stop within the assured
clear distance ahead.
Under Article 2185 of the Civil Code, a person driving a vehicle is presumed negligent if at
the time of the mishap, he was violating any traffic regulation
2) No. Upon the happening of the accident, the presumption of negligence at once arises,
and it becomes the duty of a common carrier to prove that he observed extraordinary
diligence in the care of his passengers.
It is undisputed that the respondent and his wife were not safely transported to the
destination agreed upon. In actions for breach of contract, only the existence of such
contract, and the fact that the obligor, in this case the common carrier, failed to transport
his passenger safely to his destination are the matters that need to be proved. The
negligence of petitioner Laspias as driver of the passenger bus is, thus, binding against
petitioner Tiu, as the owner of the passenger bus engaged as a common carrier.
3) No. Contrary to the petitioners contention, the principle of last clear chance is
inapplicable in the instant case, as it only applies in a suit between the owners and drivers
of two colliding vehicles. It does not arise where a passenger demands responsibility from
the carrier to enforce its contractual obligations, for it would be inequitable to exempt the
negligent driver and its owner on the ground that the other driver was likewise guilty of
negligence.
4) Yes. The manner in which the truck was parked clearly endangered oncoming traffic on
both sides, considering that the tire blowout which stalled the truck in the first place
occurred in the wee hours of the morning. The Court can only now surmise that the
unfortunate incident could have been averted had respondent Condor, the owner of the
truck, equipped the said vehicle with lights, flares, or, at the very least, an early warning
device. Hence, we cannot subscribe to respondents Condor and Pedranos claim that they
should be absolved from liability.
5) As can be gleaned from the Certificate of Cover, such insurance contract was issued
pursuant to the Compulsory Motor Vehicle Liability Insurance Law. It was expressly
provided therein that the limit of the insurers liability for each person was P12,000, while
the limit per accident was pegged at P50,000. An insurer in an indemnity contract for third
party liability is directly liable to the injured party up to the extent specified in the
agreement but it cannot be held solidarily liable beyond that amount. The respondent
PPSII could not then just deny petitioner Tius claim; it should have paid P12,000 for the
death of Felisa Arriesgado, and respondent Arriesgados hospitalization expenses of
P1,113.80, which the trial court found to have been duly supported by receipts. The total
amount of the claims, even when added to that of the other injured passengers which the
respondent PPSII claimed to have settled, would not exceed the P50,000 limit under the
insurance agreement.
Indeed, the nature of Compulsory Motor Vehicle Liability Insurance is such that it is
primarily intended to provide compensation for the death or bodily injuries suffered by
innocent third parties or passengers as a result of the negligent operation and use of
motor vehicles. The victims and/or their dependents are assured of immediate financial
assistance, regardless of the financial capacity of motor vehicle owners.
LRT vs. NAVIDAD
G.R. No. 145804. February 6, 2003
FACTS:
Navidad was drunk when he entered the boarding platform of the LRT. He got into an
altercation with the SG Escartin. They had a fistfight and Navidad fell onto the tracks and
was killed when a train came and ran over him.
The Heirs of Navidad filed a complaint for damages against Escartin, the train driver,
(Roman) the LRTA, the Metro Transit Organization and Prudent Security Agency
(Prudent). The trial court found Prudent and Escartin jointly and severally liable for
damages to the heirs. The CA exonerated Prudent and instead held the LRTA and the
train driver Romero jointly and severally liable as well as removing the award for
compensatory damages and replacing it with nominal damages.
The reasoning of the CA was that a contract of carriage already existed between Navidad
and LRTA (by virtue of his havA ing purchased train tickets and the liability was caused by
the mere fact of Navidad's death after being hit by the train being managed by the LRTA
and operated by Roman. The CA also blamed LRTA for not having presented expert
evidence showing that the emergency brakes could not have stopped the train on time.
ISSUES:
(1) Whether or not LRTA and/or Roman is liable for the death.
(2) Whether or not Escartin and/or Prudent are liable.
(3) Whether or not nominal damages may coexist with compensatory damages.
HELD:
(1) Yes. The foundation of LRTA's liability is the contract of carriage and its obligation to
indemnify the victim arising from the breach of that contract by reason of its failure to
exercise the high diligence required of a common carrier.
(2) Fault was not established. Liability will be based on Tort under Art. 2176 of the New
Civil Code.
(3) No. It is an established rule that nominal damages cannot co-exist with compensatory
damages.
RATIO:
Liability of LRTA Read Arts. 1755,1756, 1759 and 1763 of the New Civil Code
A common carrier is required by these above statutory provisions to use utmost diligence
in carrying passengers with due regard for all circumstances. This obligation exists not
only during the course of the trip but for so long as the passengers are within its premises
where they ought to be in pursuance to then contract of carriage.
Art. 1763 renders 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 willful acts or
negligence of other passengers or of strangers if the common carriers employees
through theexercise of due diligence could have prevented or stopped the act or omission.
In case of such death or injury, a carrier is presumed to have been at fault or been
negligent, and 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.
Liability of Security Agency If Prudent is to be held liable, it would be for a tort under
Art. 2176 in conjunction with Art. 2180. Once the fault of the employee Escartin is
established, the employer, Prudent, would be held liable on the presumption that it did not
exercise the diligence of a good father of the family in the selection and supervision of its
employees.
Relationship between contractual and non-contractual breach 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 2194 of the Civil Code can well apply.
In fine, a liability for tort may arise even under a contract, where tort is that which
breaches the contract. Stated differently, when an act which constitutes a breach of
ontract 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.
Nominal Damages - 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. It is
an established rule that nominal damages cannot co-exist with compensatory damages.
The award was deleted/\
METRO MANILA TRANSIT CORPORATION vs. REYNALDO CUEVAS
G.R. No. 167797, June 15, 2015
FACTS: Metro Manila Transit Corporation (MMTC) and Minas Transit Corporation
(Minas Transit) entered into an agreement to sell dated August 31, 1990, whereby the
latter bought several bus units from the former at a stipulated price. They agreed that
MMTC would retain the ownership of the buses until certain conditions were met, but in
the meantime Minas Transit could operate the buses within Metro Manila.
On October 14, 1994, one of the buses subject of the agreement to sell hit and damaged
a Honda Motorcycle owned by Reynaldo and driven by Junnel. Reynaldo and Junnel sued
MMTC and Minas Transit for damages in the Regional Trial Court (RTC).
MMTC denied liability claiming that although it retained the ownership of the bus, the
actual operator and employer of the bus driver was Minas Transit; and that, in support of
its cross-claim against Minas Transit, a provision in the agreement to sell mandated
Minas Transport to hold it free from liability arising from the use and operation of the bus
units.
ISSUE1: Whether or not MMTC is liable considering that it was not the actual operator
and employer of the bus driver
HELD1: YES. In view of MMTCs admission in its pleadings that it had remained the
registered owner of the bus at the time of the incident, it could not escape liability for the
personal injuries and property damage suffered by the Cuevases. This is because of the
registered-owner rule, whereby the registered owner of the motor vehicle involved in a
vehicular accident could be held liable for the consequences.
The Court has reiterated the registered-owner rule in other rulings, like in Filcar Transport
Services v. Espinas, to wit:
x x x It is well settled that in case of motor vehicle mishaps, the registered owner of the
motor vehicle is considered as the employer of the tortfeasor-driver, and is made primarily
liable for the tort committed by the latter under Article 2176, in relation with Article 2180, of
the Civil Code.
In Equitable Leasing Corporation v. Suyom, we ruled that in so far as third persons are
concerned, the registered owner of the motor vehicle is the employer of the negligent
driver, and the actual employer is considered merely as an agent of such owner.
MMTC could not evade liability by passing the buck to Minas Transit. The stipulation in PHILAM INSURANCE COMPANY, INC. (now CHARTIS PHILIPPINES INSURANCE,
INC.*), Petitioner,
the agreement to sell did not bind third parties like the Cuevases, who were expected to vs.
simply rely on the data contained in the registration certificate of the erring bus. HEUNG-A SHIPPING CORPORATION and WALLEM PHILIPPINES SHIPPING,
INC., Respondents.

ISSUE2: May MMTC recover from Minas Transit (the actual employer of the negligent x-----------------------x
driver)?
G.R. No. 187812
HELD2: YES. Although the registered-owner rule might seem to be unjust towards MMTC,
HEUNG-A SHIPPING CORPORATION and WALLEM PHILIPPINES SHIPPING,
the law did not leave it without any remedy or recourse. According to Filcar Transport INC., Petitioners,
Services v. Espinas, MMTC could recover from Minas Transit, the actual employer of the vs.
PHILAM INSURANCE COMPANY, INC. (now CHARTIS PHILIPPINES INSURANCE,
negligent driver, under the principle of unjust enrichment, by means of a cross-claim INC.), Respondent.
seeking reimbursement of all the amounts that it could be required to pay as damages
DECISION
arising from the drivers negligence. A cross-claim is a claim by one party against a co-
party arising out of the transaction or occurrence that is the subject matter either of the REYES, J.:
original action or of a counterclaim therein, and may include a claim that the party against
At bar are consolidated petitions for review on certiorari1 under Rule 45 of the Rules of
whom it is asserted is or may be liable to the cross-claimant for all or part of a claim
Court assailing the Decision2 dated January 30, 2009 of the Court of Appeals (CA) in CA-
asserted in the action against the cross-claimant. G.R. CV No. 89482 affirming with modifications the Decision3 dated February 26, 2007 of
the Regional Trial Court (RTC) of Makati City, Branch 148, in Civil Case No. 01-889.

The Factual Antecedents

On December 19, 2000, Novartis Consumer Health Philippines, Inc. (NOVARTIS)

imported from Jinsuk Trading Co. Ltd., (JINSUK) in South Korea, 19 pallets of 200 rolls of
Ovaltine Power 18 Glaminated plastic packaging material.

In order to ship the goods to the Philippines, JINSUK engaged the services of Protop
Shipping Corporation (PROTOP), a freight forwarder likewise based in South Korea, to
forward the goods to their consignee, NOVARTIS.

Based on Bill of Lading No. PROTAS 200387 issued by PROTOP, the cargo was on
freight prepaid basis and on "shippers load and count" which means that the "container
[was] packed with cargo by one shipper where the quantity, description and condition of
the cargo is the sole responsibility of the shipper."4 Likewise stated in the bill of lading is
the name Sagawa Express Phils., Inc., (SAGAWA) designated as the entity in the
Philippines which will obtain the delivery contract.
G.R. No. 187701 July 23, 2014
PROTOP shipped the cargo through Dongnama Shipping Co. Ltd. (DONGNAMA) which
in turn loaded the same on M/V Heung-A Bangkok V-019 owned and operated by Heung-
A Shipping Corporation, (HEUNG-A), a Korean corporation, pursuant to a slot charter
agreement whereby a space in the latters vessel was reserved for the exclusive use of
the former. Wallem Philippines Shipping, Inc. (WALLEM) is the ship agent of HEUNG-A in
the Philippines. NOVARTIS insured the shipment with Philam Insurance Company, Inc.
(PHILAM, now Chartis Philippines Insurance, Inc.) under All Risk Marine Open Insurance
Policy No. MOP-0801011828 against all loss, damage, liability, or expense before, during
transit and even after the discharge of the shipment from the carrying vessel until its
complete delivery to the consignees premises. The vessel arrived at the port ofManila,
South Harbor, on December 27, 2000 and the subject shipment contained in Sea Van
Container No. DNAU 420280-9 was discharged without exception into the possession,
custody and care of Asian Terminals, Inc. (ATI) as the customs arrastre operator.
The shipment was thereafter withdrawn on January 4, 2001, by NOVARTIS appointed
broker, Stephanie Customs Brokerage Corporation (STEPHANIE) from ATIs container
yard.
The shipment reached NOVARTIS premises on January 5, 2001 and was thereupon
inspected by the companys Senior Laboratory Technician, Annie Rose Caparoso
(Caparoso).5
Upon initial inspection, Caparoso found the container van locked with its load intact. After
opening the same, she inspected its contents and discovered that the boxes of the
shipment were wet and damp. The boxes on one side of the van were in disarray while
others were opened or damaged due to the dampness. Caparoso further observed that
parts of the container van were damaged and rusty. There were also water droplets on the
walls and the floor was wet. Since the damaged packaging materials might contaminate
the product they were meant to hold, Caparoso rejected the entire shipment.
Renato Layug and Mario Chin, duly certified adjusters of the Manila Adjusters and
Surveyors Company wereforthwith hailed to inspect and conduct a survey of the
shipment.6 Their Certificate of Survey7 dated January 17, 2001 yielded results similar to
the observations of Caparoso, thus:
[T]he sea van panels/sidings and roofing were noted with varying degrees of indentations
and partly corroded/rusty. Internally, water bead clung along the roofs from rear to front
section. The mid section dented/sagged with affected area was noted withminutes hole
evidently due to thinning/corroded rusty metal plates. The shipment was noted with
several palletized cartons already in collapsed condition due to wetting. The vans entire
floor length was also observed wet.8
All 17 pallets of the 184 cartons/rolls contained in the sea van were found wet/water
damaged. Sixteen (16)cartons/rolls supposedly contained in 2 pallets were unaccounted
for although the surveyors remarked that this may be due to short shipment by the
supplier considering that the sea van was fully loaded and can no longer accommodate
the said unaccounted items. The survey report further stated that the "wetting sustained
by the shipment may have reasonably be attributed to the water seepage that gain entry
into the sea van container damageroofs (minutes hole) during transit period[sic]."9
Samples from the wet packing materials/boxes were submitted to the chemist of Precision
Analytical Services, Inc. (PRECISION), Virgin Hernandez (Hernandez), and per
Laboratory Report No. 042-07 dated January 16, 2001, the cause of wetting in the carton
boxes and kraft paper/lining materials as well as the aluminum foil laminated plastic
packaging material, was salt water.10
Aggrieved, NOVARTIS demanded indemnification for the lost/damaged shipment from
PROTOP, SAGAWA, ATI and STEPHANIE but was denied. Insurance claims were, thus,
filed with PHILAM which paid the insured value of the shipment inthe adjusted amount of
One Million Nine Hundred Four Thousand Six Hundred Thirteen Pesos and Twenty
Centavos (P1,904,613.20). Claiming that after such payment, it was subrogated to all the
rights and claims of NOVARTIS against the parties liable for the lost/damaged shipment,
PHILAM filed on June 4, 2001, a complaint for damages against PROTOP, as the issuer
of Bill of Lading No. PROTAS 200387, its ship agent in the Philippines, SAGAWA,
consignee, ATI and the broker, STEPHANIE.
On October 12, 2001, PHILAM sent a demand letter to WALLEM for reimbursement of the
insurance claims paid to NOVARTIS.11 When WALLEM ignored the demand, PHILAM
impleaded it as additional defendant in an Amended Complaint duly admitted by the trial
court on October 19, 2001.12
On December 11, 2001, PHILAM filed a Motion to Admit Second Amended Complaint this
time designating PROTOP as the owner/operator of M/V Heung-A Bangkok V-019 and
adding HEUNG-A as party defendant for being the registered owner of the vessel.13 The
motion was granted and the second amended complaint was admitted by the trial court on
December 14, 2001.14
PROTOP, SAGAWA, ATI, STEPHANIE, WALLEM and HEUNG-A denied liability for the
lost/damaged shipment.
SAGAWA refuted the allegation that it is the ship agent of PROTOP and argued that a
ship agent represents the owner of the vessel and not a mere freight forwarder like
PROTOP. SAGAWA averred that its only role with respect to the shipment was to inform
NOVARTIS of its arrival in the Philippines and to facilitate the surrender of the original bill
of lading issued by PROTOP.
SAGAWA further remarked that it was deprived an opportunity to examine and investigate
the nature and extent of the damage while the matter was still fresh so as tosafeguard
itself from false/fraudulent claims because NOVARTIS failed totimely give notice about the
loss/damage.15
SAGAWA admitted that it has a non-exclusive agency agreement with PROTOP to serve
as the latters delivery contact person in the Philippines with respect to the subject
shipment. SAGAWA is also a freight forwarding company and that PROTOPwas not
charged any fee for the services rendered by SAGAWA with respect to the subject
shipment and instead the latter was given US$10 as commission.16 For having been
dragged into court on a baseless cause, SAGAWA counterclaimed for damages in the
form of attorneys fees.
ATI likewise interposed a counterclaim for damages against PHILAM for its allegedly
baseless complaint. ATI averred that it exercised due care and diligence in handling the
subject container. Also, NOVARTIS, through PHILAM, is now barred from filing any claim
for indemnification because the latter failed to file the same within 15 days from receipt of
the shipment.17 Meanwhile, STEPHANIE asserted that its only role with respect to the
shipment was its physical retrieval from ATI and thereafter its delivery to NOVARTIS. That
entire time, the sealwas intact and not broken. Also, based on the Certificate of Survey,
the damage to the shipment was due to salt water which means that it could not have
occurred while STEPHANIE was in possession thereof during its delivery from ATIs
container yard to NOVARTIS premises. STEPHANIE counterclaimed for moral damages
and attorneys fees.18
WALLEM alleged that the damageand shortages in the shipment were the responsibility of
the shipper, JINSUK, because it was taken on board on a "shippers load and count" basis
which means that it was the shipper that packed, contained and stuffed the shipment in
the container van without the carriers participation. The container van was already sealed
when it was loadedon the vessel and hence, the carrier was in no position to verify the
condition and other particulars of the shipment.
WALLEM also asserted that the shipment was opened long after it was discharged from
the vessel and that WALLEM or HEUNG-A were not present during the inspection,
examination and survey.
WALLEM pointed the blame to PROTOP because its obligation to the shipper as freight
forwarder carried the concomitant responsibility of ensuring the shipments safety from the
port of loading until the final place of delivery. WALLEM claimed to haveexercised due
care and diligence in handling the shipment.
In the alternative, WALLEM averred that any liability which may be imputed to it is limited
only to US$8,500.00 pursuant to the Carriage of Goods by Sea Act (COGSA).19
HEUNG-A argued that it is not the carrier insofar as NOVARTIS is concerned. The carrier
was either PROTOP, a freight forwarder considered as a non-vessel operating common
carrier or DONGNAMA which provided the container van to PROTOP.20 HEUNG-A denied
being the carrier of the subjectshipment and asserted that its only obligation was to
provide DONGNAMA a space on board M/V Heung-A Bangkok V-019.
PROTOP failed to file an answer to the complaint despite having been effectively served
with alias summons. It was declared in default in the RTC Order dated June 6, 2002.21
Ruling of the RTC
In a Decision22 dated February 26, 2007, the RTC ruled that the damage to the shipment
occurred onboard the vessel while in transit from Korea to the Philippines.
HEUNG-A was adjudged as the common carrier of the subject shipment by virtue of the
admissions of WALLEMs witness, Ronald Gonzales (Gonzales) that despite the slot
charter agreement with DONGNAMA, it was still the obligation of HEUNG-A to transport
the cargo from Busan, Korea to Manila and thus any damage to the shipment is the
responsibility of the carrier to the consignee.
The RTC further observed that HEUNG-A failed to present evidence showing that it
exercised the diligence required of a common carrier in ensuring the safety of the
shipment.
The RTC discounted the slot charter agreement between HEUNG-A and DONGNAMA,
and held that it did not bind the consignee who was not a party thereto. Further, it was
HEUNG-As duty to ensure that the container van was in good condition by taking an
initiative to state in its contract and demand from the owner of the container van that it
should be in a good condition all the time. Such initiative cannot be shifted to the shipper
because it is in no position to demand the same from the owner of the container van.
WALLEM was held liable as HEUNG-As ship agent in the Philippines while PROTOP was
adjudged liable because the damage sustained by the shipment was due to the bad
condition of the container van. Also, based on the statement at the backof the bill of
lading, it assumed responsibility for loss and damage as freight forwarder, viz:
6.1 The responsibility of the Freight Forwarder for the goods under these conditions
covers the period from the time the Freight Forwarder has taken the goods in his charge
to the time of the delivery.
6.2 The Freight Forwarde[r] shall beliable for loss or damage to the goods as well as for
delay in delivery if the occurrence which caused the loss, damage, delay in delivery took
place while the goods were in his charge as defined in clause 2.1.a unless the Freight
Forwarder proves that no fault or neglect of his own servants or agents or any other
person referred to in Clause 2.2 has caused or contributed to such loss, damage or delay.
However, the Freight Forwarder shall only be liable for loss following from delay in delivery
if the Consignor has made a declaration of interest in timely delivery which has been
accepted by the Freight Forwarder and stated in this FBL.23
PHILAM was declared to havebeen validly subrogated in NOVARTIS stead and thus
entitled to recover the insurance claims it paid to the latter.
ATI and STEPHANIE were exonerated from any liability. SAGAWA was likewise adjudged
not liable for the loss/damage to the shipment by virtue of the phrase "Shippers Load and
Count" reflected in the bill of lading issued by PROTOP. Since the container van was
packed under the sole responsibility of the shipper in Korea, SAGAWA, which is based in
the Philippines, had no chance to check if the contents were in good condition or not. The
RTC concluded that SAGAWA cannot be expected to observe the diligence or care
required of a carrier or ship agent. SAGAWA, ATI and STEPHANIEs counterclaims for
attorneys fees were granted and PHILAM was ordered to pay the same for having been
filed a shotgun case against them. Accordingly, the dispositive portion of the RTC
decision read:
WHEREFORE, premises considered, judgment is hereby rendered declaring defendants
PROTOP SHIPPING CORPORATION, HEUNG-A SHIPPING CORPORATION and
WALLEM PHILIPPINES SHIPPING, INC. solidarily liable to pay x x x PHILAM
INSURANCE COMPANY, INC. the following amounts:
1. [P]1,904,613.20 plus interest of 12% per annum from December 26, 2001
(date of service of summons to defendant Heung-A) until full payment;
2. [P]350,000.00 as attorneys fees; and 3. Cost of suit.
With regards to the counter claims, x x x PHILAM INSURANCE COMPANY, INC. is
hereby ordered to pay defendants SAGAWA EXPRESS PHILIPPINES, INC., ASIAN
TERMINALS, INC., and STEPHANIE CUSTOMS BROKERAGE CORPORATION the
amount of [P]100,000.00 each as attorneys fees.
SO ORDERED.24
Ruling of the CA
An appeal to the CA was interposed by PHILAM, WALLEM and HEUNG-A. In a
Decision25 dated January 30, 2009, the CA agreed with the RTC that PROTOP, HEUNG-A
and WALLEM are liable for the damaged shipment. The fact that HEUNG-A was not a
party to the bill of lading did not negate the existence of a contract of carriage between
HEUNG-A and/or WALLEM and NOVARTIS. A bill of lading is not indispensable for the
creation of a contract of carriage. By agreeing to transport the goods contained in the sea
van providedby DONGNAMA, HEUNG-A impliedly entered into a contract of carriage with
NOVARTIS with whom the goods were consigned. Hence, it assumed the obligations of a
common carrier to observe extraordinary diligence in the vigilance over the goods
transported by it. Further the Slot Charter Agreement did not change HEUNG-As
character as a common carrier.
Moreover, the proximate cause ofthe damage was the failure of HEUNG-A to inspect and
examine the actual condition of the sea van before loading it on the vessel. Also,
propermeasures in handling and stowage should have been adopted to prevent seepage
of sea water into the sea van.
The CA rejected WALLEM and HEUNG-As argument that NOVARTIS failed to comply
with Article 366 of the Code of Commerce requiring that a claim must be made against the
carrier within 24 hours from receipt of the merchandise because such provision applies
only to inter-island shipments within the Philippines.
The CA limited the liability of PROTOP, WALLEM and HEUNG-A to US$8,500.00 pursuant
to the liability limitation under the COGSA since the shipper failed to declare the value of
the subject cargo in the bill of lading and since they could not be made answerable for the
two (2) unaccounted pallets because the shipment was on a "shippers load, count and
seal" basis.
The attorneys fees awarded to SAGAWA, ATI and STEPHANIE were deleted because it
was not shown that PHILAM was motivated by malice and bad faith in impleading them as
defendants. Thus, the CA decision was disposed as follows:
WHEREFORE, premises considered, the appealed Decision is hereby AFFIRMED with
MODIFICATION.Defendants PROTOP SHIPPING CORPORATION, HEUNG-A
SHIPPING CORPORATION [and] WALLEM PHILIPPINES SHIPPING,INC.s solidary
liability to PHILAM INSURANCE COMPANY, INC. is reduced to $8,500.00 plus interest
per annum from26 December 2001 (date ofservice of summons to defendant Heung-A)
until full payment. The award of attorneys fees in the amount of One Hundred Thousand
Pesos ([P]100,000.[00]) each to SAGAWA EXPRESS PHILIPPINES, INC., ASIAN
TERMINALS, INC. and STEPHANIE CUSTOMS BROKERAGE is hereby DELETED.
SO ORDERED.26
The foregoing judgment was reiterated in the CA Resolution27 dated May 8, 2009 which
denied the motions for reconsideration filed by PHILAM, WALLEM and HEUNG-A.
PHILAM thereafter filed a petition for review before the Court docketed as G.R. No.
187701. WALLEM and HEUNG-A followed suit and their petition was docketed as G.R.
No. 187812. Considering that both petitions involved similar parties and issue, emanated
from the same Civil Case No. 01-889 and assailed the same CA judgment, they were
ordered consolidated in a Resolution28 dated January 13, 2010.
In G.R. No. 187701, PHILAM raised the following grounds:
THE HONORABLE [CA] COMMITTED SERIOUS ERROR WHEN IT RULED IN ITS
DECISION OF 30 JANUARY 2009 THAT [HEUNG-A and WALLEM] HAVE THE RIGHT
TO LIMIT THEIR LIABILITY UNDER THE PACKAGE LIMITATION OF LIABILITY OF
SECTION 4(5) OF THE CARRIAGE OF GOODS BY SEA ACT, 1924, IN VIEW OF ITS
OBSERVATION THAT [NOWHERE] IN THE BILL OF LADING DID THE SHIPPER
DECLARE THE VALUE OF THE SUBJECT CARGO;
THE HONORABLE [CA] COMMITTED SERIOUS ERROR WHEN IT COMPLETELY
DISREGARDED THE FUNDAMENTAL BREACHES OF [HEUNG-A and WALLEM] OF
[THEIR] OBLIGATIONS AND RESPONSIBILITIES UNDER THE CONTRACT OF
CARRIAGE AND LAW OF THE CASE AS LEGAL GROUNDS TO PRECLUDE ITS
AVAILMENT OF THE PACKAGE LIMITATION OF LIABILITY UNDER SECTION 4(5) OF
THE CARRIAGE OF GOODS BY SEA ACT, 1924.29
In G.R. No. 187812, HEUNG-A and WALLEM argued that:
THE [CA] COMMITTED A SERIOUS ERROR OF LAW IN RULING THAT THE CODE
OFCOMMERCE, SPECIFICALLY ARTICLE 366 THEREOF, DOES NOT APPLY IN THIS
CASE[;]
THE [CA] COMMITTED A SERIOUS ERROR OF LAW IN RULING THAT THE SO-
CALLED "PARAMOUNT CLAUSE" IN THE BILL OF LADING, WHICH PROVIDED THAT
"COGSA" SHALL GOVERN THE TRANSACTION, RESULTED IN THE EXCLUSION OR
INAPPLICABILITY OF THE CODE OF COMMERCE[;]
THE [CA] COMMITTED A SERIOUS ERROR OF LAW IN NOT RULING THAT [PHILAM]
HAS NO RIGHT OF ACTION AGAINST [HEUNG-A and WALLEM] INSOFAR AS
DAMAGE TO CARGO IS CONCERNED IN VIEW OF THE FACT THAT NO TIMELY
CLAIM WAS FILED PURSUANT TO ARTICLE 366 OF THE CODE OF COMMERCE OR
THE PROVISIONS OF THE BILL OF LADING NO.DNALGOBUM 005019[;]
THE [CA] GRAVELY ABUSED ITS DISCRETION AMOUNTING TO EXCESS OR LACK
OF JURISDICTION IN FINDING THAT THE CONTAINERIZED CARGO WAS DAMAGED
WHILE IN THE POSSESSION OR CUSTODY OF THE VESSEL "HEUNG-A
BANGKOK".30
Issues
The arguments proffered by the parties can be summed up into the following issues: (1)
Whether the shipment sustained damage while in the possession and custody of HEUNG-
A, and if so, whether HEUNG-As liability can be limited to US$500 per package pursuant
tothe COGSA; (2) Whether or not NOVARTIS/PHILAM failed to file a timely claim against
HEUNG-A and/or WALLEM.
Ruling of the Court
It must be stressed that the question on whether the subject shipment sustained damaged
while in the possession and custody of HEUNG-A is a factual matter which has already
beendetermined by the RTC and the CA. The courts a quowere uniform in finding that the
goods inside the container van were damaged by sea water whilein transit on board
HEUNG-As vessel.
Being a factual question, it is notreviewable in the herein petition filed under Rule 45 of
the Rules of Court. It isnot the Courts duty to evaluate and weigh the evidence all over
again as such function is conceded to be within the expertise of the trial court whose
findings, when supported by substantial evidence on record and affirmed by the CA, are
regarded with respect, if not binding effect, by this Court.31
There are certain instances, however, when the Court is compelled to deviate from this
rule, dismantle the factual findings of the courts a quoand conduct a probe into the factual
questions at issue. These circumstances are: (1) the inference made ismanifestly
mistaken, absurd or impossible; (2) there is grave abuse of discretion; (3) the findings are
grounded entirely on speculations, surmises or conjectures; (4) the judgment of the CA is
based on misapprehension of facts; (5) the CA, in making its findings, went beyond the
issues of the case and the same is contrary to the admissions of both appellant and
appellee; (6) the findings of fact are conclusions without citation of specific evidence on
which theyare based; (7) the CA manifestly overlooked certain relevant facts not disputed
by the parties and which, if properly considered, would justify a different conclusion; and
(8) the findings of fact of the CA are premised on the absence ofevidence and are
contradicted by the evidence on record.32
None of the foregoing instances is extant from records of the present case. Instead, the
Court finds that the factual findings of the courts a quo are supported by evidence on
record.
The uncontested results of the inspection survey conducted by Manila Adjusters
Surveyors Company showed that sea water seeped into the panels/sidings and roofing of
the container van. This was confirmed by the examination conducted by Hernandez, the
chemist of PRECISION, on samples from the cartons, boxes, aluminum foil and laminated
plastic packaging materials. Based on the laboratory examination results, the contents of
the van were drenched by sea water, an element which is highly conspicuous in the high
seas. It can thus be reasonably concluded that negligence occurred while the container
van was in transit, in HEUNG-As possession, control and custody as the carrier.
Although the container van had defects, they were not, however, so severe as to
accommodate heavy saturation of sea water. The holes were tiny and the rusty portions
did not cause gaps or tearing. Hence, the van was still in a suitable condition to hold the
goods and protect them from natural weather elements or even the normal flutter of waves
in the seas.
The scale of the damage sustained by the cargo inside the van could have been only
caused by large volume of sea water since not a single package inside was spared. Aside
from the defective condition of the van, some other circumstance or occurrence
contributed to the damages sustained by the shipment. Since the presence of sea water is
highly concentrated in the high seas and considering HEUNG-As failure to demonstrate
how it exercised due diligence in handling and preserving the container van while in
transit, it is liable for the damages sustained thereby.
As the carrier of the subject shipment, HEUNG-A was bound to exercise extraordinary
diligence in conveying the same and its slot charter agreement with DONGNAMA did not
divest it of such characterization nor relieve it of any accountability for the shipment.
Based on the testimony of Gonzales,33 WALLEMs employee and witness, the charter
party between HEUNG-A and DONGNAMA was a contract of affreightment and not a bare
boat or demise charter, viz:
Q: Now, the space charter that you are mentioning is not either a bareboat or a demise?
A: Yes, sir.
Q: Okay. So in other words, that space charter party is only to allow the shipper,
Dongnama, to load its cargo for a certain specified space?
A: Yes, sir.34
35
A charter party has been defined in Planters Products, Inc. v. Court of Appeals as:
[A] contract by which an entire ship, orsome principal part thereof, is let by the owner to
another person for a specified time or use; a contract of affreightment by which the owner
of a ship or other vessel lets the whole or a part of her to a merchant or other person for
the conveyance of goods, on a particular voyage, in consideration of the payment of
freight. x x x.36 (Citations omitted)
A charter party has two types. First, it could be a contract of affreightment whereby the
use of shipping space on vessels is leased in part or as a whole, to carry goods for others.
The charter-party provides for the hire of vessel only, either for a determinate period of
time (time charter) or for a single or consecutive voyage (voyage charter). The shipowner
supplies the ships stores, pay for the wages ofthe master and the crew, and defray the
expenses for the maintenance of the ship.37 The voyage remains under the responsibility
of the carrier and it is answerable for the loss of goods received for transportation. The
charterer is free from liability to third persons in respect of the ship.38
Second, charter by demise or bareboat charter under 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.39 The
charterer mans the vessel with his own people and becomes, in effect, the owner for the
voyage or service stipulated and hence liable for damages or loss sustained by the goods
transported.40
Clearly then, despite its contract of affreightment with DONGNAMA, HEUNG-A remained
responsible as the carrier, hence, answerable for the damages incurred by the goods
received for transportation. "[C]ommon carriers, from the nature of their business and for
reasons of public policy, are bound to observe extraordinary diligenceand vigilance with
respect to the safety of the goods and the passengers they transport. Thus, common
carriers are required to render service with the greatest skill and foresight and to use all
reasonable means to ascertain the nature and characteristics of the goods tendered for
shipment, and toexercise due care in the handling and stowage, including such methods
as their nature requires."41
"[C]ommon 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. That is, unless they
provethat they exercised extraordinary diligence in transporting the goods. Inorder to
avoid responsibility for any loss or damage, therefore, they have the burden of proving
that they observed such diligence."42 Further, under Article 1742 of the Civil Code, even if
the loss, destruction, or deterioration of the goods should be caused by the faulty nature
of the containers, the common carrier must exercise due diligence to forestall or lessen
the loss.
Here, HEUNG-A failed to rebut this prima faciepresumption when it failed to give adequate
explanation as to how the shipment inside the container van was handled, stored and
preserved to forestall or prevent any damage or loss while the same was inits possession,
custody and control.
PROTOP is solidarily liable with HEUNG-A for the lost/damaged shipment in view of the
bill of lading the former issued to NOVARTIS. "A bill of lading is a written
acknowledgement of the receipt of goods and an agreement to transport and to deliver
them at a specified place to a person named or on his or her order. It operates both as a
receipt and as a contract. It is a receipt for the goods shipped and a contract to transport
and deliver the same as therein stipulated."43 PROTOP breached its contract with
NOVARTIS when it failed to deliver the goods in the same quantity, quality and description
as stated in Bill of Lading No. PROTAS 200387.
The CA did not err in applying the provisions of the COGSA specifically, the rule on
Package Liability Limitation.
Under Article 1753 of the Civil Code, the law of the country to which the goods are to be
transported shall govern the liability of the common carrier for their loss, destruction or
deterioration. Since the subject shipment was being transported from South Korea to the
Philippines, the Civil Code provisions shall apply. In all mattersnot regulated by the Civil
Code, the rights and obligations of common carriers shall be governed by the Code of
Commerce and by special laws,44 such as the COGSA.
While the Civil Code contains provisions making the common carrier liable for
loss/damage to the goods transported, it failed to outline the manner of determining the
amount of suchliability. Article372 of the Code of Commerce fills in this gap, thus:
Article 372. The value of the goods which the carrier must pay in cases if loss or
misplacement shall be determined in accordance with that declared in the bill of lading,
the shipper not being allowed to present proof that among the goods declared therein
there were articles of greater value and money.
Horses, vehicles, vessels, equipment and all other principal and accessory means of
transportation shall be especially bound infavor of the shipper, although with respect to
railroads said liability shall be subordinated to the provisions of the laws of concession
with respect to the property, and to what this Code established as to the manner and form
of effecting seizures and attachments against said companies. (Emphasis ours)
In case, however, of the shippers failure to declare the value of the goods in the bill of
lading, Section 4, paragraph 5 of the COGSA provides:
Neither the carrier nor the ship shall in any event be or become liable for any loss or
damage to or in connection with the transportation of goods in an amount exceeding $500
per package lawful money of the United States, or in case of goods not shipped in
packages, per customary freight unit, or the equivalent of that sum in other currency,
unless the nature and value of such goods have been declared by the shipper before
shipment and inserted in the bill of lading. This declaration, if embodied in the bill of lading
shall be prima facieevidence, but shall be conclusive on the carrier.
Hence, when there is a loss/damage to goods covered by contracts of carriage from a
foreign port to a Philippine port and in the absence a shippers declaration of the value of
the goods in the bill of lading, as in the present case, the foregoing provisions of the
COGSA shall apply. The CA, therefore, did not err in ruling that HEUNG-A, WALLEM and
PROTOPs liability is limited to $500 per package or pallet.45
The Court likewise affirms the CA in pronouncing HEUNG-A, WALLEM and PROTOP
liable only for the lost/damaged 17 pallets instead of 19 pallets stated in the bill of lading.
This is because, per the "Shippers Load and Count" arrangement, the contents are not
required to be checked and inventoried by the carrier at the port of loading or before said
carrier enters the port of unloading in the Philippines since it is the shipper who has the
sole responsibility for the quantity, description and condition of the cargoes shipped in
container vans.46 As such, the carrier cannot be held responsible for any discrepancy if
the description in the bill of lading is different from the actual contents of the container.47
Consonant with the ruling in the recent Asian Terminals, Inc. v. Philam Insurance Co.,
Inc.,48 the prescriptive period for filing an action for lost/damaged goods governed by
contracts of carriage by sea to and from Philippine ports in foreign trade is governed by
paragraph 6,Section 3 of the COGSA which states:
(6) Unless notice of loss or damageand the general nature of such loss or damage be
given in writing to the carrier or his agent at the port of discharge before or at the time of
the removal of the goods into the custody of the person entitled to delivery thereof under
the contract of carriage, such removal shall be prima facieevidence of the delivery by the
carrier of the goods as described in the bill of lading. If the loss or damage is not
apparent, the notice must be given within three days of the delivery.
Said notice of loss or damage maybe endorsed upon the receipt for the goods given by
the person taking delivery thereof.
The notice in writing need not be given if the state of the goods has at the time of their
receipt been the subject of joint survey or inspection. In any event the carrier and the ship
shall be discharged from all liability in respect of loss or damage unless suit is brought
withinone year after delivery of the goods or the date when the goods should have been
delivered: Provided, That if a notice of loss or damage, either apparent or concealed, is
not given as provided for in this section, that fact shall not affect or prejudice the right of
the shipper to bring suit within one year after the delivery of the goods or the date when
the goods should have been delivered.
It was further ruled in Asian Terminals that pursuant to the foregoing COGSA prov:sion,
failure to comply with the notice requirement shall not affect or prejudice the right of the
shipper to bring suit within one year after delivery of the goods.
The consignee, NOV ARTIS, received the subject shipment on January 5, 2001. PHILAM,
as the subrogee of NOVARTIS, filed a claim against PROTOP on June 4, 2001, against
WALLEM on October 12, 2001 and against HEUNG-A on December 11, 2001, or all within
the one-year prescriptive period. Verily then, despite NOV AR TIS' failure to comply with
the three-day notice requirement, its subrogee PHILAM is not barred from seeking
reimbursement from PROTOP, HEUNG-A and WALLEM because the demands for
payment were timely filed.
The amount which PHILAM is entitled to receive shall earn a legal interest at the rate of
six percent (6%) per annum from the date of finality of this judgment until its full
satisfaction pursuant to Nacar v. Gallery Frames.49
WHEREFORE, all the foregoing considered, the Decision dated January 30, 2009 of the
Court of Appeals in CA-G.R. CV No. 89482 is hereby AFFlHMED with MODIFICATION in
that the interest rate on the award of US$8,500.00 shall be six percent (6%) per annum
from the date of finality of this judgment until fully paid.
SO ORDERED.
THIRD DIVISION
G.R. No. 188118, November 23, 2015
FEDERAL PHOENIX ASSURANCE CO., LTD., Petitioner, v. FORTUNE SEA CARRIER,
INC., Respondent.
DECISION
REYES, J.:
This is a Petition for Review on Certiorari1 under Rule 45 of the Rules of Court assailing
the Decision2dated February 10, 2009 and Resolution3 dated May 12, 2009 of the Court of
Appeals (CA) in CA-G.R. CV No. 88607. The assailed decision reversed and set aside the
Decision4 dated May 4, 2006 and the Order5 dated October 26, 2006 of the Regional Trial
Court (RTC) of Makati City, Branch 143 finding respondent Fortune Sea Carrier, Inc.
(Fortune Sea) liable to pay P260,000.00 as actual damages, attorney's fees and cost of
suit.
On March 9, 1994, Fortune Sea agreed to lease its vessel M/V Ricky Rey to Northern
Mindanao Transport Co., Inc. (Northern Transport). The Time Charter Party agreement
executed by the parties provides that the vessel shall be leased to Northern Transport for
90 days to carry bags of cement to different ports of destination. Later on, the parties
extended the period of lease for another 90 days.6
Sometime in June 1994, Northern Transport ordered 2,069 bales of abaca fibers to be
shipped on board M/V Ricky Rey by shipper Manila Hemp Trading Corporation, for
delivery to consignee Newtech Pulp Inc. (Newtech) in Iligan City. The shipment was
covered by Bill of Lading No. 1 and was insured by petitioner Federal Phoenix Assurance
Co.,. Ltd. (Federal Phoenix).7
Upon arrival of M/V Ricky Rey at the Iligan City port on June 16, 1994, the stevedores
started to discharge the abaca shipment the following clay. At about 3:00 p.m., however,
on June 18, 1994, the stevedores noticed smoke coming out of the cargo haul where the
bales of abaca where located. Immediately, the lire was put off" by the Iligan City Fire
Department. Upon investigation, it was discovered that 60 bales of abaca were damaged.8
As a result of the losses, Newtech filed an insurance claim for P260,000.00 with Federal
Phoenix. After evaluation, Federal Phoenix paid Newtech P162,419.25 for the losses it
incurred due to the damaged and undelivered bales of abaca. Upon payment. Federal
Phoenix was subrogated to the rights of Newtech and pursued its claim against Fortune
Sea. Despite several demands to Fortune Sea, however. Federal Phoenix's claims were
not settled. As a result, Federal Phoenix filed a Complaint9 for Sum of Money against
Fortune Sea before the RTC of Makati.10
For its defense, Fortune Sea insisted that it was acting as a private carrier at the time the
incident occurred. It alleged that the Time Charter Party agreement executed by the
parties expressly provided that M/V Ricky Rey shall be under the orders and complete
control of Northern Transport.11
Ruling of the RTC
On May 4, 2006, the RTC rendered a Decision in favor of Federal Phoenix and ordered
Fortune Sea to pay the amount of P260,000.00 as actual damages, attorney's fees and
cost of suit. Fortune Sea filed a Motion for Reconsideration12 but was denied in an Order
dated October 26, 2006.
Aggrieved, Fortune Sea appealed to the CA.
Ruling of the CA
On February 10, 2009, the CA issued a Decision reversing and setting aside the Decision
dated May 4, 2006 of the RTC and ordered the dismissal of the complaint for sum of
money filed by Federal Phoenix against Fortune Sea for lack of merit. According to the
CA, although the agreement between Fortune Sea and Northern Transport was
denominated as Time Charter Party, it found compelling reasons to hold that the contract
was one of bareboat or demise. Hence, Federal Phoenix filed this instant petition.
Ruling of the Court
The main issue in this case is whether or not the CA erred in declaring that Fortune Sea
was converted into a private carrier by virtue of the charter party agreement it entered into
with Northern Transport.13
Admittedly, Fortune Sea is a corporation engaged in the business of transporting cargo by
water and for compensation, offering its services to the public. As such, it is without a
doubt, a common carrier.
Fortune Sea, however, entered into a time-charter with Northern Transport. Now, had the
time-charter converted Fortune Sea into a private carrier?
This Court rules in the affirmative.
Time and again, this Court have ruled that "[i]n determining the nature of a contract, courts
are not bound by the title or name given by the parties. The decisive factor in evaluating
an agreement is the intention of the parties, as shown, not necessarily by the terminology
used in the contract but by their conduct, words, actions and deeds prior to, during and
immediately alter executing the agreement."14
As correctly observed by the CA, the Time Charter Party agreement executed by Fortune
Sea and Northern Transport clearly shows that the charter includes both the vessel and its
crew thereby making Northern Transport the owner pro hac vice of M/V Ricky Rey during
the whole period of the voyage, to wit:chanRoblesvirtualLawlibrary
A perspicacious scrutiny of the Time Charter Party disclosed the following provisions
evincing that Northern Transport became the owner pro hac vice of M/V Ricky Rey during
the whole period of the voyage-
"VI. OTHER TERMS AND CONDITIONS:chanRoblesvirtualLawlibrary
F. Upon delivery of the vessel(s) and during the period of the charter, SECOND PARTY
(Northern Transport) assumes operational control for the dispatch and direction of voyage
of the vessel(s).
H. The Master to prosecute all voyages with the utmost despatch and to render customary
assistance with the vessel(s) crew. The Master to be under the orders of the SECOND
PARTY (Northern Transport) as regards employment of the other arrangements.
N. The SECOND PARTY (Northern Transport) to furnish MASTER with all instructions and
sailing directions and the Master and Engineer to keep full and correct logs accessible to
the SECOND PARTY (Northern Transport) or their Supercargo.
To Our mind, the Time Charier Part[y] unequivocally established that appellant Fortune
Sea had completely and exclusively relinquished possession, command and navigation of
M/V Ricky Rey to Northern Transport.15 (Citation omitted)cralawlawlibrary
Conformably, M/V Ricky Rey was converted into a private carrier notwithstanding the
existence of the Time Charter Party agreement with Northern Transport since the said
agreement was not limited to the ship only but extends even to the control of its crew.
Despite the denomination as Time Charter by the parties, their agreement undoubtedly
reflected that their intention was to enter into a Bareboat Charter Agreement.
Moreover, the CA likewise correctly ruled that the testimony of Captain Alfredo Canon
(Capt. Canon) of M/V Ricky Rey confirmed that when the whole vessel was leased to
Northern Transport, the entire command and control over its navigation was likewise
transferred to it, to wit:chanRoblesvirtualLawlibrary
Q: Mr. Witness, you said awhile ago that as far as you know, the purpose is to
transport cement, now, you also mentioned that in two or three instances
goods other than cement, abaca and fertilizer were transported during your
watch. Now, you mentioned that this was [sic] happened sometime in 1994, my
question was [sic], why did you transport abaca?
A I have [sic] received an order from [Northern Transport] through radio and
through its representative which [sic] was on board our super cargo boat to
proceed to Natu to load abaca fiber and bring it to the port of Iligan, sir.
Q You were ordered by [Northern Transport]?
A Yes, sir, through its representative which [sic] was on board super cargo to pick
up abaca sir at Natu point [sic], Camarines Sur.
Court:
Q Was the order done verbally or in writing?
A Verbally, aside from that Ma'am, we received written through radio.
Q Let us clarify that, was it done verbally or in writing?
A Two ways Ma'am, verbally and in writing Ma'am.
Q And you received the verbal order yourself?
A Ma'am yes.
Q How about the written order?
A The radio operator received the order Ma'am and informed the super cargo
through its representative of the [Northern Transport] Ma'am.
xxxx
Q After being ordered by [Northern Transport], what did you do?
A Sir, I told the super cargo that the abaca is a combustible cargo, sir.
Q So, what was its reaction to your statement?
A He told me just to follow orders. That was the order 'of their company, sir.
Q Mr. Witness, what do you think is the basis of the [Northern Transport] for
giving you such an order?
A I think sir, it was the chartered party sir.16
xxxx
Q Mr. Witness, what happened next after the order was given to you?
A We proceeded to the Natu Port to load abaca fiber sir and bring it to the port of
Iligan sir. Natu Port sir is under the Camarines Sur province sir.
Q Mr. Witness, upon reaching the port of Iligan as you mentioned, do you recall
any unusual incident that happened?
A Yes, [s]ir.
Q What was this incident? February 10, 2009 in CA-G.R. CV No. 88607 finding the Time Charter Party agreement
entered into by Fortune Sea Carrier, Inc. and Northern Mindanao Transport Co., Inc. as in
A A fire broke while unloading the cargo at the port of Iligan, sir. reality a Bareboat Charter which effectively converted the subject M/V Ricky Rey as a
private carrier. As such, this Court likewise AFFIRMS the decision of the CA in dismissing
Q Which portion of the port did the fire occur?
the Complaint for Sum of Money filed by petitioner Federal Phoenix Assurance Co., Ltd.
A At the cargo haul [sic] sir. for lack of merit.
Q Is that part of the ship? SO ORDERED.chanroblesvirtuallawlibrary
A Yes, sir.
Q So, what happened when the lire broke out?
A We tried our best sir to put out the fire. With the help of the Iligan City Firemen,
we put out the fire in about twenty minutes sir.
Q During the twenty minutes, was [sic] there any damaged incurred by the ship or
any to its contents?
A Only the abaca liber sir. Some abaca fibers were partially burned.
Q As far as you know Mr Witness, what was the caused [sic] of this fire?
A The caused [sic] of the lire was the cigarette butts improperly dispatched by
one of the stevedores unloading the cargo sir.
Q Are these stevedores under your employment?
A No, sir.
[A] No, sir. It was under the stevedoring company, sir.
Q Not [Fortune Sea]?
A Yes, sir.17
The above-cited testimonies of Capt. Canon undoubtedly show that Northern Transport
eflectively subjected not only the ship but including its crew under its own exclusive
control.

Moreover, although the master and crew of the vessel were those of the shipowner,
records show that at the time of the execution of the charter party, Fortune Sea had
completely relinquished possession, command, and navigation of M/V Ricky Rey to
Northern Transport.

As such, the master and all the crew of the ship were all made subject to the direct control
and supervision of the charterer. In fact, the instructions on the voyage and other relative
directions or orders were handed out by Northern Transport. Thus, the CA correctly ruled
that the nature of the vessel's charter is one of bareboat or demise charter.

WHEREFORE, the Court hereby AFFIRMS the Decision of the Court of Appeals dated