G.R. No.

186312

June 29, 2010

SPOUSES DANTE CRUZ and LEONORA CRUZ, Petitioners,

vs.
SUN HOLIDAYS, INC., Respondent.
DECISION
CARPIO MORALES, J.:
Spouses Dante and Leonora Cruz (petitioners) lodged a Complaint on
January 25, 20011 against Sun Holidays, Inc. (respondent) with the Regional
Trial Court (RTC) of Pasig City for damages arising from the death of their
son Ruelito C. Cruz (Ruelito) who perished with his wife on September 11,
2000 on board the boat M/B Coco Beach III that capsized en route to
Batangas from Puerto Galera, Oriental Mindoro where the couple had stayed
at Coco Beach Island Resort (Resort) owned and operated by respondent.
The stay of the newly wed Ruelito and his wife at the Resort from September
9 to 11, 2000 was by virtue of a tour package-contract with respondent that
included transportation to and from the Resort and the point of departure in
Batangas.
Miguel C. Matute (Matute),2 a scuba diving instructor and one of the
survivors, gave his account of the incident that led to the filing of the
complaint as follows:
Matute stayed at the Resort from September 8 to 11, 2000. He was
originally scheduled to leave the Resort in the afternoon of September 10,
2000, but was advised to stay for another night because of strong winds and
heavy rains.
On September 11, 2000, as it was still windy, Matute and 25 other Resort
guests including petitioners son and his wife trekked to the other side of the
Coco Beach mountain that was sheltered from the wind where they boarded
M/B Coco Beach III, which was to ferry them to Batangas.
Shortly after the boat sailed, it started to rain. As it moved farther away
from Puerto Galera and into the open seas, the rain and wind got stronger,
causing the boat to tilt from side to side and the captain to step forward to
the front, leaving the wheel to one of the crew members.
The waves got more unwieldy. After getting hit by two big waves which
came one after the other, M/B Coco Beach III capsized putting all
passengers underwater.

The passengers, who had put on their life jackets, struggled to get out of the
boat. Upon seeing the captain, Matute and the other passengers who
reached the surface asked him what they could do to save the people who
were still trapped under the boat. The captain replied "Iligtas niyo na lang
ang sarili niyo" (Just save yourselves).
Help came after about 45 minutes when two boats owned by Asia Divers in
Sabang, Puerto Galera passed by the capsized M/B Coco Beach III. Boarded
on those two boats were 22 persons, consisting of 18 passengers and four
crew members, who were brought to Pisa Island. Eight passengers, including
petitioners son and his wife, died during the incident.
At the time of Ruelitos death, he was 28 years old and employed as a
contractual worker for Mitsui Engineering & Shipbuilding Arabia, Ltd. in Saudi
Arabia, with a basic monthly salary of $900.3
Petitioners, by letter of October 26, 2000,4 demanded indemnification from
respondent for the death of their son in the amount of at least P4,000,000.
Replying, respondent, by letter dated November 7, 2000,5 denied any
responsibility for the incident which it considered to be a fortuitous event. It
nevertheless offered, as an act of commiseration, the amount of P10,000 to
petitioners upon their signing of a waiver.
As petitioners declined respondents offer, they filed the Complaint, as
earlier reflected, alleging that respondent, as a common carrier, was guilty
of negligence in allowing M/B Coco Beach III to sail notwithstanding storm
warning bulletins issued by the Philippine Atmospheric, Geophysical and
Astronomical Services Administration (PAGASA) as early as 5:00 a.m. of
September 11, 2000.6
In its Answer,7 respondent denied being a common carrier, alleging that its
boats are not available to the general public as they only ferry Resort guests
and crew members. Nonetheless, it claimed that it exercised the utmost
diligence in ensuring the safety of its passengers; contrary to petitioners
allegation, there was no storm on September 11, 2000 as the Coast Guard
in fact cleared the voyage; and M/B Coco Beach III was not filled to capacity
and had sufficient life jackets for its passengers. By way of Counterclaim,
respondent alleged that it is entitled to an award for attorneys fees and
litigation expenses amounting to not less than P300,000.
Carlos Bonquin, captain of M/B Coco Beach III, averred that the Resort
customarily requires four conditions to be met before a boat is allowed to
sail, to wit: (1) the sea is calm, (2) there is clearance from the Coast Guard,
(3) there is clearance from the captain and (4) there is clearance from the
Resorts assistant manager.8 He added that M/B Coco Beach III met all four

conditions on September 11, 2000,9 but a subasco or squall, characterized

by strong winds and big waves, suddenly occurred, causing the boat to
capsize.10
By Decision of February 16, 2005,11 Branch 267 of the Pasig RTC dismissed
petitioners Complaint and respondents Counterclaim.
Petitioners Motion for Reconsideration having been denied by Order dated
September 2, 2005,12 they appealed to the Court of Appeals.
By Decision of August 19, 2008,13 the appellate court denied petitioners
appeal, holding, among other things, that the trial court correctly ruled that
respondent is a private carrier which is only required to observe ordinary
diligence; that respondent in fact observed extraordinary diligence in
transporting its guests on board M/B Coco Beach III; and that the proximate
cause of the incident was a squall, a fortuitous event.
Petitioners Motion for Reconsideration having been denied by Resolution
dated January 16, 2009,14 they filed the present Petition for Review.15
Petitioners maintain the position they took before the trial court, adding that
respondent is a common carrier since by its tour package, the transporting
of its guests is an integral part of its resort business. They inform that
another division of the appellate court in fact held respondent liable for
damages to the other survivors of the incident.
Upon the other hand, respondent contends that petitioners failed to present
evidence to prove that it is a common carrier; that the Resorts ferry
services for guests cannot be considered as ancillary to its business as no
income is derived therefrom; that it exercised extraordinary diligence as
shown by the conditions it had imposed before allowing M/B Coco Beach III
to sail; that the incident was caused by a fortuitous event without any
contributory negligence on its part; and that the other case wherein the
appellate court held it liable for damages involved different plaintiffs, issues
and evidence.16
The petition is impressed with merit.
Petitioners correctly rely on De Guzman v.
characterizing respondent as a common carrier.

Court

of

Appeals17 in

The Civil Code defines "common carriers" in the following terms:

Article 1732. Common carriers are persons, corporations, firms or
associations engaged in the business of carrying or transporting passengers

or goods or both, by land, water, or air for compensation, offering their

services to the public.
The above article makes no distinction between one whose principal
business activity is the carrying of persons or goods or both, and one who
does such carrying only as an ancillary activity (in local idiom, as "a
sideline"). Article 1732 also carefully avoids making any distinction between
a person or enterprise offering transportation service on a regular or
scheduled basis and one offering such service on an occasional, episodic or
unscheduled basis. Neither does Article 1732 distinguish between a carrier
offering its services to the "general public," i.e., the general community or
population, and one who offers services or solicits business only from
a narrow segment of the general population. We think that Article 1733
deliberately refrained from making such distinctions.
So understood, the concept of "common carrier" under Article 1732 may be
seen to coincide neatly with the notion of "public service," under the Public
Service Act (Commonwealth Act No. 1416, as amended) which at least
partially supplements the law on common carriers set forth in the Civil Code.
Under Section 13, paragraph (b) of the Public Service Act, "public service"
includes:
. . . every person that now or hereafter may own, operate, manage, or
control in the Philippines, for hire or compensation, with general or limited
clientele, whether permanent, occasional or accidental, and done for general
business purposes, any common carrier, railroad, street railway, traction
railway, subway motor vehicle, either for freight or passenger, or both, with
or without fixed route and whatever may be its classification, freight or
carrier service of any class, express service, steamboat, or steamship line,
pontines, ferries and water craft, engaged in the transportation of
passengers or freight or both, shipyard, marine repair shop, wharf or dock,
ice plant, ice-refrigeration plant, canal, irrigation system, gas, electric light,
heat and power, water supply and power petroleum, sewerage system, wire
or wireless communications systems, wire or wireless broadcasting stations
and other similar public services . . .18 (emphasis and underscoring
supplied.)
Indeed, respondent is a common carrier. Its ferry services are so intertwined
with its main business as to be properly considered ancillary thereto. The
constancy of respondents ferry services in its resort operations is
underscored by its having its own Coco Beach boats. And the tour packages
it offers, which include the ferry services, may be availed of by anyone who
can afford to pay the same. These services are thus available to the public.
That respondent does not charge a separate fee or fare for its ferry services
is of no moment. It would be imprudent to suppose that it provides said

services at a loss. The Court is aware of the practice of beach resort

operators offering tour packages to factor the transportation fee in arriving
at the tour package price. That guests who opt not to avail of respondents
ferry services pay the same amount is likewise inconsequential. These
guests may only be deemed to have overpaid.
As De Guzman instructs, Article 1732 of the Civil Code defining "common
carriers" has deliberately refrained from making distinctions on whether the
carrying of persons or goods is the carriers principal business, whether it is
offered on a regular basis, or whether it is offered to the general public. The
intent of the law is thus to not consider such distinctions. Otherwise, there is
no telling how many other distinctions may be concocted by unscrupulous
businessmen engaged in the carrying of persons or goods in order to avoid
the legal obligations and liabilities of common carriers.
Under the Civil Code, common carriers, from the nature of their business
and for reasons of public policy, are bound to observe extraordinary
diligence for the safety of the passengers transported by them, according to
all the circumstances of each case.19 They are bound to carry the passengers
safely as far as human care and foresight can provide, using the utmost
diligence of very cautious persons, with due regard for all the
circumstances.20
When a passenger dies or is injured in the discharge of a contract of
carriage, it is presumed that the common carrier is at fault or negligent. In
fact, there is even no need for the court to make an express finding of fault
or negligence on the part of the common carrier. This statutory presumption
may only be overcome by evidence that the carrier exercised extraordinary
diligence.21
Respondent nevertheless harps on its strict compliance with the earlier
mentioned conditions of voyage before it allowed M/B Coco Beach III to sail
on September 11, 2000. Respondents position does not impress.
The evidence shows that PAGASA issued 24-hour public weather forecasts
and tropical cyclone warnings for shipping on September 10 and 11, 2000
advising of tropical depressions in Northern Luzon which would also affect
the province of Mindoro.22 By the testimony of Dr. Frisco Nilo, supervising
weather specialist of PAGASA, squalls are to be expected under such
weather condition.23
A very cautious person exercising the utmost diligence would thus not brave
such stormy weather and put other peoples lives at risk. The extraordinary
diligence required of common carriers demands that they take care of the
goods or lives entrusted to their hands as if they were their own. This
respondent failed to do.

Respondents insistence that the incident was caused by a fortuitous event

does not impress either.
The elements of a "fortuitous event" are: (a) the cause of the unforeseen
and unexpected occurrence, or the failure of the debtors to comply with their
obligations, must have been independent of human will; (b) the event that
constituted the caso fortuito must have been impossible to foresee or, if
foreseeable, impossible to avoid; (c) the occurrence must have been such as
to render it impossible for the debtors to fulfill their obligation in a normal
manner; and (d) the obligor must have been free from any participation in
the aggravation of the resulting injury to the creditor.24
To fully free a common carrier from any liability, the fortuitous event must
have been the proximate and only cause of the loss. And it should have
exercised due diligence to prevent or minimize the loss before, during and
after the occurrence of the fortuitous event.25
Respondent cites the squall that occurred during the voyage as the
fortuitous event that overturned M/B Coco Beach III. As reflected above,
however, the occurrence of squalls was expected under the weather
condition of September 11, 2000. Moreover, evidence shows that M/B Coco
Beach III suffered engine trouble before it capsized and sank.26 The incident
was, therefore, not completely free from human intervention.
The Court need not belabor how respondents evidence likewise fails to
demonstrate that it exercised due diligence to prevent or minimize the loss
before, during and after the occurrence of the squall.
Article 176427 vis--vis Article 220628 of the Civil Code holds the common
carrier in breach of its contract of carriage that results in the death of a
passenger liable to pay the following: (1) indemnity for death, (2) indemnity
for loss of earning capacity and (3) moral damages.
Petitioners are entitled to indemnity for the death of Ruelito which is fixed
at P50,000.29
As for damages representing unearned income, the formula for its
computation is:
Net Earning Capacity = life expectancy x (gross annual income - reasonable
and necessary living expenses).
Life expectancy is determined in accordance with the formula:
2 / 3 x [80 age of deceased at the time of death]30

The first factor, i.e., life expectancy, is computed by applying the formula
(2/3 x [80 age at death]) adopted in the American Expectancy Table of
Mortality or the Actuarial of Combined Experience Table of Mortality.31
The second factor is computed by multiplying the life expectancy by the net
earnings of the deceased, i.e., the total earnings less expenses necessary in
the creation of such earnings or income and less living and other incidental
expenses.32 The loss is not equivalent to the entire earnings of the deceased,
but only such portion as he would have used to support his dependents or
heirs. Hence, to be deducted from his gross earnings are the necessary
expenses supposed to be used by the deceased for his own needs.33
In computing the third factor necessary living expense, Smith Bell Dodwell
Shipping Agency Corp. v. Borja34teaches that when, as in this case, there is
no showing that the living expenses constituted the smaller percentage of
the gross income, the living expenses are fixed at half of the gross income.
Applying the above guidelines, the Court determines Ruelito's life expectancy
as follows:
Life expectancy = 2/3 x [80 - age of deceased at the time of death]
2/3
x
[80
28]
2/3 x [52]
Life expectancy = 35
Documentary evidence shows that Ruelito was earning a basic monthly
salary of $90035 which, when converted to Philippine peso applying the
annual average exchange rate of $1 = P44 in 2000,36 amounts to P39,600.
Ruelitos net earning capacity is thus computed as follows:
Net
Earning = life expectancy x (gross annual income - reasonable
Capacity
and
necessary
living
expenses).
=
35
x
(P475,200
- P237,600)
= 35 x (P237,600)
Net
Earning
= P8,316,000
Capacity
Respecting the award of moral damages, since respondent common carriers
breach of contract of carriage resulted in the death of petitioners son,
following Article 1764 vis--vis Article 2206 of the Civil Code, petitioners are
entitled to moral damages.

Since respondent failed to prove that it exercised the extraordinary diligence

required of common carriers, it is presumed to have acted recklessly, thus
warranting the award too of exemplary damages, which are granted in
contractual obligations if the defendant acted in a wanton, fraudulent,
reckless, oppressive or malevolent manner.37
Under the circumstances, it is reasonable to award petitioners the amount
of P100,000
as
moral
damages
and P100,000
as
exemplary
38
damages. 1avvphi1
Pursuant to Article 220839 of the Civil Code, attorney's fees may also be
awarded where exemplary damages are awarded. The Court finds that 10%
of the total amount adjudged against respondent is reasonable for the
purpose.
Finally, Eastern Shipping Lines, Inc. v. Court of Appeals40 teaches that when
an obligation, regardless of its source, i.e., law, contracts, quasi-contracts,
delicts or quasi-delicts is breached, the contravenor can be held liable for
payment of interest in the concept of actual and compensatory damages,
subject to the following rules, to wit
1. When the obligation is breached, and it consists in the payment of a
sum of money, i.e., a loan or forbearance of money, the interest due
should be that which may have been stipulated in writing.
Furthermore, the interest due shall itself earn legal interest from the
time it is judicially demanded. In the absence of stipulation, the rate of
interest shall be 12% per annum to be computed from default, i.e.,
from judicial or extrajudicial demand under and subject to the
provisions of Article 1169 of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of
money, is breached, an interest on the amount of damages awarded
may be imposed at the discretion of the court at the rate of 6% per
annum. No interest, however, shall be adjudged on unliquidated claims
or damages except when or until the demand can be established with
reasonable certainty. Accordingly, where the demand is established
with reasonable certainty, the interest shall begin to run from the time
the claim is made judicially or extrajudicially (Art. 1169, Civil Code)
but when such certainty cannot be so reasonably established at the
time the demand is made, the interest shall begin to run only from the
date the judgment of the court is made (at which time the
quantification of damages may be deemed to have been reasonably
ascertained). The actual base for the computation of legal interest
shall, in any case, be on the amount finally adjudged.

3. When the judgment of the court awarding a sum of money becomes

final and executory, the rate of legal interest, whether the case falls
under paragraph 1 or paragraph 2, above, shall be 12% per annum
from such finality until its satisfaction, this interim period being
deemed to be by then an equivalent to a forbearance of credit.
(emphasis supplied).
Since the amounts payable by respondent have been determined with
certainty only in the present petition, the interest due shall be computed
upon the finality of this decision at the rate of 12% per annum until
satisfaction, in accordance with paragraph number 3 of the immediately
cited guideline in Easter Shipping Lines, Inc.
WHEREFORE, the Court of Appeals Decision of August 19, 2008 is REVERSED
and SET ASIDE. Judgment is rendered in favor of petitioners ordering
respondent to pay petitioners the following: (1) P50,000 as indemnity for
the death of Ruelito Cruz; (2) P8,316,000 as indemnity for Ruelitos loss of
earning capacity; (3) P100,000 as moral damages; (4) P100,000 as
exemplary damages; (5) 10% of the total amount adjudged against
respondent as attorneys fees; and (6) the costs of suit.
The total amount adjudged against respondent shall earn interest at the rate
of 12% per annum computed from the finality of this decision until full
payment.
SO ORDERED.
Footnotes
27
Art. 1764. Damages in cases comprised in this Section shall be awarded in accordance
with Title XVIII of this Book concerning Damages. Article 2206 shall also apply to the death
of a passenger caused by the breach of contract by a common carrier.
28
Art. 2206. The amount of damages for death caused by a crime or quasi-delict shall be at
least three thousand pesos, even though there may have been mitigating circumstances. In
addition:
(1) The defendant shall be liable for the loss of the earning capacity of the deceased,
and the indemnity shall be paid to the heirs of the latter; such indemnity shall in
every case be assessed and awarded by the court, unless the deceased on account of
permanent physical disability not caused by the defendant, had no earning capacity
at the time of his death;
(2) If the deceased was obliged to give support according to the provisions of article
291, the recipient who is not an heir called to the decedent's inheritance by the law
of testate or intestate succession, may demand support from the person causing the
death, for a period not exceeding five years, the exact duration to be fixed by the
court;
(3) The spouse, legitimate and illegitimate descendants and ascendants of the
deceased may demand moral damages for mental
39
Art. 2208. In the absence of stipulation, attorney's fees and expenses of litigation, other
than judicial costs, cannot be recovered, except:
(1) When exemplary damages are awarded;

THIRD DIVISION [G.R. No. 147079. December 21, 2004]

A.F. SANCHEZ BROKERAGE INC., petitioners,
vs.
THE HON. COURT OF APPEALS and FGU INSURANCE
CORPORATION, respondents.
DECISION
CARPIO MORALES, J.:
Before this Court on a petition for Certiorari is the appellate courts
Decision[1] of August 10, 2000 reversing and setting aside the judgment of
Branch 133, Regional Trial Court of Makati City, in Civil Case No. 93-76B
which dismissed the complaint of respondent FGU Insurance Corporation
(FGU Insurance) against petitioner A.F. Sanchez Brokerage, Inc. (Sanchez
Brokerage).
On July 8, 1992, Wyeth-Pharma GMBH shipped on board an aircraft of
KLM Royal Dutch Airlines at Dusseldorf, Germany oral contraceptives
consisting of 86,800 Blisters Femenal tablets, 14,000 Blisters Nordiol tablets
and 42,000 Blisters Trinordiol tablets for delivery to Manila in favor of the
consignee, Wyeth-Suaco Laboratories, Inc.[2] The Femenal tablets were
placed in 124 cartons and the Nordiol tablets were placed in 20 cartons
which were packed together in one (1) LD3 aluminum container, while the
Trinordial tablets were packed in two pallets, each of which contained 30
cartons.[3]
Wyeth-Suaco insured the shipment against all risks with FGU Insurance
which issued Marine Risk Note No. 4995 pursuant to Marine Open Policy No.
138.[4]
Upon arrival of the shipment on July 11, 1992 at the Ninoy Aquino
International Airport (NAIA),[5] it was discharged without exception[6] and
delivered to the warehouse of the Philippine Skylanders, Inc. (PSI) located
also at the NAIA for safekeeping.[7]
In order to secure the release of the cargoes from the PSI and the
Bureau of Customs, Wyeth-Suaco engaged the services of Sanchez
Brokerage which had been its licensed broker since 1984.[8] As its customs
broker, Sanchez Brokerage calculates and pays the customs duties, taxes
and storage fees for the cargo and thereafter delivers it to Wyeth-Suaco.[9]
On July 29, 1992, Mitzi Morales and Ernesto Mendoza, representatives of
Sanchez Brokerage, paid PSI storage fee amounting to P8,572.35 a receipt
for which, Official Receipt No. 016992,[10] was issued. On the receipt,
another representative of Sanchez Brokerage, M. Sison,[11] acknowledged
that he received the cargoes consisting of three pieces in good
condition.[12]

Wyeth-Suaco being a regular importer, the customs examiner did not

inspect the cargoes[13] which were thereupon stripped from the aluminum
containers[14] and loaded inside two transport vehicles hired by Sanchez
Brokerage.[15]
Among those who witnessed the release of the cargoes from the PSI
warehouse were Ruben Alonso and Tony Akas,[16] employees of Elite
Adjusters and Surveyors Inc. (Elite Surveyors), a marine and cargo surveyor
and insurance claim adjusters firm engaged by Wyeth-Suaco on behalf of
FGU Insurance.
Upon instructions of Wyeth-Suaco, the cargoes were delivered to Hizon
Laboratories Inc. in Antipolo City for quality control check.[17] The delivery
receipt, bearing No. 07037 dated July 29, 1992, indicated that the delivery
consisted of one container with 144 cartons of Femenal and Nordiol and 1
pallet containing Trinordiol.[18]
On July 31, 1992, Ronnie Likas, a representative of Wyeth-Suaco,
acknowledged the delivery of the cargoes by affixing his signature on the
delivery receipt.[19] Upon inspection, however, he, together with Ruben
Alonzo of Elite Surveyors, discovered that 44 cartons containing Femenal
and Nordiol tablets were in bad order.[20] He thus placed a note above his
signature on the delivery receipt stating that 44 cartons of oral
contraceptives were in bad order. The remaining 160 cartons of oral
contraceptives were accepted as complete and in good order.
Ruben Alonzo thus prepared and signed, along with Ronnie Likas, a
survey report[21] dated July 31, 1992 stating that 41 cartons of Femenal
tablets and 3 cartons of Nordiol tablets were wetted (sic).[22]
The
Elite
Surveyors
later
issued
Certificate
No.
CS-07311538/92[23] attached to which was an Annexed Schedule whereon it was
indicated that prior to the loading of the cargoes to the brokers trucks at the
NAIA, they were inspected and found to be in apparent good
condition.[24] Also noted was that at the time of delivery to the warehouse of
Hizon Laboratories Inc., slight to heavy rains fell, which could account for
the wetting of the 44 cartons of Femenal and Nordiol tablets.[25]
On August 4, 1992, the Hizon Laboratories Inc. issued a Destruction
Report[26] confirming that 38 x 700 blister packs of Femenal tablets, 3 x 700
blister packs of Femenal tablets and 3 x 700 blister packs of Nordiol tablets
were heavily damaged with water and emitted foul smell.
On August 5, 1992, Wyeth-Suaco issued a Notice of Materials
Rejection[27] of 38 cartons of Femenal and 3 cartons of Nordiol on the ground
that they were delivered to Hizon Laboratories with heavy water damaged
(sic) causing the cartons to sagged (sic) emitting a foul order and easily
attracted flies.[28]

Wyeth-Suaco later demanded, by letter[29] of August 25, 1992, from

Sanchez Brokerage the payment of P191,384.25 representing the value of
its loss arising from the damaged tablets.
As the Sanchez Brokerage refused to heed the demand, Wyeth-Suaco
filed an insurance claim against FGU Insurance which paid Wyeth-Suaco the
amount of P181,431.49 in settlement of its claim under Marine Risk Note
Number 4995.
Wyeth-Suaco
Insurance.

thus

issued

Subrogation Receipt[30] in favor

of FGU

On demand by FGU Insurance for payment of the amount

of P181,431.49 it paid Wyeth-Suaco, Sanchez Brokerage, by letter[31] of
January 7, 1993, disclaimed liability for the damaged goods, positing that
the damage was due to improper and insufficient export packaging; that
when the sealed containers were opened outside the PSI warehouse, it was
discovered that some of the loose cartons were wet,[32] prompting its
(Sanchez Brokerages) representative Morales to inform the Import-Export
Assistant of Wyeth-Suaco, Ramir Calicdan, about the condition of the
cargoes but that the latter advised to still deliver them to Hizon Laboratories
where an adjuster would assess the damage.[33]
Hence, the filing by FGU Insurance of a complaint for damages before
the Regional Trial Court of Makati City against the Sanchez Brokerage.
The trial court, by Decision[34] of July 29, 1996, dismissed the complaint,
holding that the Survey Report prepared by the Elite Surveyors is bereft of
any evidentiary support and a mere product of pure guesswork.[35]
On appeal, the appellate court reversed the decision of the trial court, it
holding that the Sanchez Brokerage engaged not only in the business of
customs brokerage but also in the transportation and delivery of the cargo of
its clients, hence, a common carrier within the context of Article 1732 of the
New Civil Code.[36]
Noting that Wyeth-Suaco adduced evidence that the cargoes were
delivered to petitioner in good order and condition but were in a damaged
state when delivered to Wyeth-Suaco, the appellate court held that Sanchez
Brokerage is presumed negligent and upon it rested the burden of proving
that it exercised extraordinary negligence not only in instances when
negligence is directly proven but also in those cases when the cause of the
damage is not known or unknown.[37]
The appellate court thus disposed:
IN THE LIGHT OF ALL THE FOREGOING, the appeal of the Appellant is
GRANTED. The Decision of the Court a quo is REVERSED. Another Decision is
hereby rendered in favor of the Appellant and against the Appellee as
follows:

1. The Appellee is hereby ordered to pay the Appellant the

principal amount of P181, 431.49, with interest thereupon at
the rate of 6% per annum, from the date of the Decision of
the Court, until the said amount is paid in full;
2. The Appellee is hereby ordered to pay to the Appellant the
amount of P20,000.00 as and by way of attorneys fees; and
3. The counterclaims of the Appellee are DISMISSED.[38]
Sanchez Brokerages Motion for Reconsideration having been denied by
the appellate courts Resolution of December 8, 2000 which was received by
petitioner on January 5, 2001, it comes to this Court on petition for certiorari
filed on March 6, 2001.
In the main, petitioner asserts that the appellate court committed grave
and reversible error tantamount to abuse of discretion when it found
petitioner a common carrier within the context of Article 1732 of the New
Civil Code.
Respondent FGU Insurance avers in its Comment that the proper course
of action which petitioner should have taken was to file a petition for review
on certiorari since the sole office of a writ of certiorari is the correction of
errors of jurisdiction including the commission of grave abuse of discretion
amounting to lack or excess of jurisdiction and does not include correction of
the appellate courts evaluation of the evidence and factual findings thereon.
On the merits, respondent FGU Insurance contends that petitioner, as a
common carrier, failed to overcome the presumption of negligence, it being
documented that petitioner withdrew from the warehouse of PSI the subject
shipment entirely in good order and condition.[39]
The petition fails.
Rule 45 is clear that decisions, final orders or resolutions of the Court of
Appeals in any case, i.e., regardless of the nature of the action or
proceedings involved, may be appealed to this Court by filing a petition for
review, which would be but a continuation of the appellate process over the
original case.[40]
The Resolution of the Court of Appeals dated December 8, 2000 denying
the motion for reconsideration of its Decision of August 10, 2000 was
received by petitioner on January 5, 2001. Since petitioner failed to appeal
within 15 days or on or before January 20, 2001, the appellate courts
decision had become final and executory. The filing by petitioner of a
petition for certiorari on March 6, 2001 cannot serve as a substitute for the
lost remedy of appeal.

In another vein, the rule is well settled that in a petition for certiorari,
the petitioner must prove not merely reversible error but also grave abuse of
discretion amounting to lack or excess of jurisdiction.
Petitioner alleges that the appellate court erred in reversing and setting
aside the decision of the trial court based on its finding that petitioner is
liable for the damage to the cargo as a common carrier. What petitioner is
ascribing is an error of judgment, not of jurisdiction, which is properly the
subject of an ordinary appeal.
Where the issue or question involves or affects the wisdom or legal
soundness of the decision not the jurisdiction of the court to render said
decision the same is beyond the province of a petition for certiorari.[41] The
supervisory jurisdiction of this Court to issue a cert writ cannot be exercised
in order to review the judgment of lower courts as to its intrinsic
correctness, either upon the law or the facts of the case.[42]
Procedural technicalities aside, the petition still fails.
The appellate court did not err in finding petitioner, a customs broker, to
be also a common carrier, as defined under Article 1732 of the Civil Code, to
wit:
Art. 1732. Common carriers are persons, corporations, firms or associations
engaged in the business of carrying or transporting passengers or goods or
both, by land, water, or air, for compensation, offering their services to the
public.
Anacleto F. Sanchez, Jr., the Manager and Principal Broker of Sanchez
Brokerage, himself testified that the services the firm offers include the
delivery of goods to the warehouse of the consignee or importer.
ATTY. FLORES:
Q: What are the functions of these license brokers, license customs
broker?
WITNESS:
As customs broker, we calculate the taxes that has to be paid in
cargos, and those upon approval of the importer, we prepare the
entry together for processing and claims from customs and
finally deliver the goods to the warehouse of the importer.[43]
Article 1732 does not distinguish between one whose principal business
activity is the carrying of goods and one who does such carrying only as an
ancillary activity.[44] The contention, therefore, of petitioner that it is not a
common carrier but a customs broker whose principal function is to prepare
the correct customs declaration and proper shipping documents as required

by law is bereft of merit. It suffices that petitioner undertakes to deliver the

goods for pecuniary consideration.
In this light, petitioner as a common carrier is mandated to observe,
under Article 1733[45] of the Civil Code, extraordinary diligence in the
vigilance over the goods it transports according to all the circumstances of
each case. In the event that the goods are lost, destroyed or deteriorated, it
is presumed to have been at fault or to have acted negligently, unless it
proves that it observed extraordinary diligence.[46]
The concept of extra-ordinary diligence was explained in Compania
Maritima v. Court of Appeals:[47]
The extraordinary diligence in the vigilance over the goods tendered for
shipment requires the common carrier to know and to follow the required
precaution for avoiding damage to, or destruction of the goods entrusted to
it for sale, carriage and delivery. It requires common carriers to render
service with the greatest skill and foresight and to use all reasonable means
to ascertain the nature and characteristics of goods tendered for shipment,
and to exercise due care in the handling and stowage, including such
methods as their nature requires.[48]
In the case at bar, it was established that petitioner received the cargoes
from the PSI warehouse in NAIA in good order and condition;[49] and that
upon delivery by petitioner to Hizon Laboratories Inc., some of the cargoes
were found to be in bad order, as noted in the Delivery Receipt[50] issued by
petitioner, and as indicated in the Survey Report of Elite Surveyors[51] and
the Destruction Report of Hizon Laboratories, Inc.[52]
In an attempt to free itself from responsibility for the damage to the
goods, petitioner posits that they were damaged due to the fault or
negligence of the shipper for failing to properly pack them and to the
inherent characteristics of the goods[53]; and that it should not be faulted for
following the instructions of Calicdan of Wyeth-Suaco to proceed with the
delivery despite information conveyed to the latter that some of the cartons,
on examination outside the PSI warehouse, were found to be wet.[54]
While paragraph No. 4 of Article 1734[55] of the Civil Code exempts a
common carrier from liability if the loss or damage is due to the character of
the goods or defects in the packing or in the containers, the rule is that if
the improper packing is known to the carrier or his employees or is apparent
upon ordinary observation, but he nevertheless accepts the same without
protest or exception notwithstanding such condition, he is not relieved of
liability for the resulting damage.[56]
If the claim of petitioner that some of the cartons were already damaged
upon delivery to it were true, then it should naturally have received the

cargo under protest or with reservations duly noted on the receipt issued by
PSI. But it made no such protest or reservation.[57]
Moreover, as observed by the appellate court, if indeed petitioners
employees only examined the cargoes outside the PSI warehouse and found
some to be wet, they would certainly have gone back to PSI, showed to the
warehouseman the damage, and demanded then and there for Bad Order
documents or a certification confirming the damage.[58] Or, petitioner would
have presented, as witness, the employees of the PSI from whom Morales
and Domingo took delivery of the cargo to prove that, indeed, part of the
cargoes was already damaged when the container was allegedly opened
outside the warehouse.[59]
Petitioner goes on to posit that contrary to the report of Elite Surveyors,
no rain fell that day. Instead, it asserts that some of the cargoes were
already wet on delivery by PSI outside the PSI warehouse but such
notwithstanding Calicdan directed Morales to proceed with the delivery to
Hizon Laboratories, Inc.
While Calicdan testified that he received the purported telephone call of
Morales on July 29, 1992, he failed to specifically declare what time he
received the call. As to whether the call was made at the PSI warehouse
when the shipment was stripped from the airport containers, or when the
cargoes were already in transit to Antipolo, it is not determinable. Aside
from that phone call, petitioner admitted that it had no documentary
evidence to prove that at the time it received the cargoes, a part of it was
wet, damaged or in bad condition.[60]
The 4-page weather data furnished by PAGASA[61] on request of Sanchez
Brokerage hardly impresses, no witness having identified it and interpreted
the technical terms thereof.
The possibility on the other hand that, as found by Hizon Laboratories,
Inc., the oral contraceptives were damaged by rainwater while in transit to
Antipolo City is more likely then. Sanchez himself testified that in the past,
there was a similar instance when the shipment of Wyeth-Suaco was also
found to be wet by rain.
ATTY. FLORES:
Q: Was there any instance that a shipment of this nature, oral
contraceptives, that arrived at the NAIA were damaged and
claimed by the Wyeth-Suaco without any question?
WITNESS:
A: Yes sir, there was an instance that one cartoon (sic) were wetted
(sic) but Wyeth-Suaco did not claim anything against us.
ATTY. FLORES:

Q: HOW IS IT?
WITNESS:
A: We experienced, there was a time that we experienced that there
was a cartoon (sic) wetted (sic) up to the bottom are wet
specially during rainy season.[62]
Since petitioner received all the cargoes in good order and condition at
the time they were turned over by the PSI warehouseman, and upon their
delivery to Hizon Laboratories, Inc. a portion thereof was found to be in bad
order, it was incumbent on petitioner to prove that it exercised extraordinary
diligence in the carriage of the goods. It did not, however. Hence, its
presumed negligence under Article 1735 of the Civil Code remains
unrebutted.
WHEREFORE, the August 10, 2000 Decision of the Court of Appeals is
hereby AFFIRMED.
Costs against petitioner.
SO ORDERED.
Panganiban, (Chairman), Sandoval-Gutierrez, and Garcia, JJ., concur.
Corona, J., on leave.

[45]

Art. 1733. Common carriers, from the nature of their business and for
reasons of public policy, are bound to observe extraordinary diligence
in the vigilance over the goods and for the safety of the passengers
transported by them, according to all the circumstances of each case.
xxx

[46]

Art. 1735. In all cases other than those mentioned in Nos. 1, 2, 3, 4, and
5 of the preceding article, if the goods are lost, destroyed or
deteriorated, common carriers are presumed to have been at fault or
to have acted negligently, unless they prove that they observed
extraordinary diligence as required on Article 1733.

[55]

Art. 1734. Common carriers are responsible for the loss, destruction, or
deterioration of the goods, unless the same is due to any of the
following causes only:
xxx
(4) The character of the goods or defects in the packing or in the
containers;

FIRST DIVISION [G.R. No. 138334. August 25, 2003]

ESTELA L. CRISOSTOMO, petitioner,
vs.
THE
COURT
OF
APPEALS and CARAVAN
TRAVEL
TOURS INTERNATIONAL, INC., respondents.

&

DECISION
YNARES-SANTIAGO, J.:
In May 1991, petitioner Estela L. Crisostomo contracted the services of
respondent Caravan Travel and Tours International, Inc. to arrange and
facilitate her booking, ticketing and accommodation in a tour dubbed Jewels
of Europe. The package tour included the countries of England, Holland,
Germany, Austria, Liechstenstein, Switzerland and France at a total cost of
P74,322.70. Petitioner was given a 5% discount on the amount, which
included airfare, and the booking fee was also waived because petitioners
niece, Meriam Menor, was respondent companys ticketing manager.
Pursuant to said contract, Menor went to her aunts residence on June 12,
1991 a Wednesday to deliver petitioners travel documents and plane
tickets. Petitioner, in turn, gave Menor the full payment for the package
tour. Menor then told her to be at the Ninoy Aquino International Airport
(NAIA) on Saturday, two hours before her flight on board British Airways.
Without checking her travel documents, petitioner went to NAIA on
Saturday, June 15, 1991, to take the flight for the first leg of her journey
from Manila to Hongkong. To petitioners dismay, she discovered that the
flight she was supposed to take had already departed the previous day. She
learned that her plane ticket was for the flight scheduled on June 14, 1991.
She thus called up Menor to complain.
Subsequently, Menor prevailed upon petitioner to take another tour the
British Pageant which included England, Scotland and Wales in its itinerary.
For this tour package, petitioner was asked anew to pay US$785.00 or
P20,881.00 (at the then prevailing exchange rate of P26.60). She gave
respondent US$300 or P7,980.00 as partial payment and commenced the
trip in July 1991.
Upon petitioners return from Europe, she demanded from respondent the
reimbursement of P61,421.70, representing the difference between the sum
she paid for Jewels of Europe and the amount she owed respondent for the
British Pageant tour. Despite several demands, respondent company refused
to reimburse the amount, contending that the same was nonrefundable.[1] Petitioner was thus constrained to file a complaint against
respondent for breach of contract of carriage and damages, which was
docketed as Civil Case No. 92-133 and raffled to Branch 59 of the Regional
Trial Court of Makati City.

In her complaint,[2] petitioner alleged that her failure to join Jewels of

Europe was due to respondents fault since it did not clearly indicate the
departure date on the plane ticket. Respondent was also negligent in
informing her of the wrong flight schedule through its employee Menor. She
insisted that the British Pageant was merely a substitute for the Jewels of
Europe tour, such that the cost of the former should be properly set-off
against the sum paid for the latter.
For its part, respondent company, through its Operations Manager,
Concepcion Chipeco, denied responsibility for petitioners failure to join the
first tour. Chipeco insisted that petitioner was informed of the correct
departure date, which was clearly and legibly printed on the plane ticket.
The travel documents were given to petitioner two days ahead of the
scheduled trip. Petitioner had only herself to blame for missing the flight, as
she did not bother to read or confirm her flight schedule as printed on the
ticket.
Respondent explained that it can no longer reimburse the amount paid
for Jewels of Europe, considering that the same had already been remitted
to its principal in Singapore, Lotus Travel Ltd., which had already billed the
same even if petitioner did not join the tour. Lotus European tour organizer,
Insight International Tours Ltd., determines the cost of a package tour based
on a minimum number of projected participants. For this reason, it is
accepted industry practice to disallow refund for individuals who failed to
take a booked tour.[3]
Lastly, respondent maintained that the British Pageant was not a
substitute for the package tour that petitioner missed. This tour was
independently procured by petitioner after realizing that she made a mistake
in missing her flight for Jewels of Europe. Petitioner was allowed to make a
partial payment of only US$300.00 for the second tour because her niece
was then an employee of the travel agency. Consequently, respondent
prayed that petitioner be ordered to pay the balance of P12,901.00 for the
British Pageant package tour.
After due proceedings, the trial court rendered a decision, [4] the
dispositive part of which reads:
WHEREFORE, premises considered, judgment is hereby rendered as follows:
1. Ordering the defendant to return and/or refund to the plaintiff the
amount of Fifty Three Thousand Nine Hundred Eighty Nine Pesos
and Forty Three Centavos (P53,989.43) with legal interest
thereon at the rate of twelve percent (12%) per annum starting
January 16, 1992, the date when the complaint was filed;
2. Ordering the defendant to pay the plaintiff the amount of Five
Thousand (P5,000.00) Pesos as and for reasonable attorneys
fees;
3. Dismissing the defendants counterclaim, for lack of merit; and

4. With costs against the defendant.

SO ORDERED.[5]
The trial court held that respondent was negligent in erroneously
advising petitioner of her departure date through its employee, Menor, who
was not presented as witness to rebut petitioners testimony. However,
petitioner should have verified the exact date and time of departure by
looking at her ticket and should have simply not relied on Menors verbal
representation. The trial court thus declared that petitioner was guilty of
contributory negligence and accordingly, deducted 10% from the amount
being claimed as refund.
Respondent appealed to the Court of Appeals, which likewise found both
parties to be at fault. However, the appellate court held that petitioner is
more negligent than respondent because as a lawyer and well-traveled
person, she should have known better than to simply rely on what was told
to her. This being so, she is not entitled to any form of damages. Petitioner
also forfeited her right to the Jewels of Europe tour and must therefore pay
respondent the balance of the price for the British Pageant tour. The
dispositive portion of the judgment appealed from reads as follows:
WHEREFORE, premises considered, the decision of the Regional Trial Court
dated October 26, 1995 is hereby REVERSED and SET ASIDE. A new
judgment is hereby ENTERED requiring the plaintiff-appellee to pay to the
defendant-appellant the amount of P12,901.00, representing the balance of
the price of the British Pageant Package Tour, the same to earn legal
interest at the rate of SIX PERCENT (6%) per annum, to be computed from
the time the counterclaim was filed until the finality of this decision. After
this decision becomes final and executory, the rate of TWELVE PERCENT
(12%) interest per annum shall be additionally imposed on the total
obligation until payment thereof is satisfied. The award of attorneys fees is
DELETED. Costs against the plaintiff-appellee.
SO ORDERED.[6]
Upon denial of her motion for reconsideration,[7] petitioner filed the
instant petition under Rule 45 on the following grounds:
I
It is respectfully submitted that the Honorable Court of Appeals committed a
reversible error in reversing and setting aside the decision of the trial court
by ruling that the petitioner is not entitled to a refund of the cost of
unavailed Jewels of Europe tour she being equally, if not more, negligent
than the private respondent, for in the contract of carriage the common
carrier is obliged to observe utmost care and extra-ordinary diligence which
is higher in degree than the ordinary diligence required of the passenger.

Thus, even if the petitioner and private respondent were both negligent, the
petitioner cannot be considered to be equally, or worse, more guilty than the
private respondent. At best, petitioners negligence is only contributory while
the private respondent [is guilty] of gross negligence making the principle of
pari delicto inapplicable in the case;
II
The Honorable Court of Appeals also erred in not ruling that the Jewels of
Europe tour was not indivisible and the amount paid therefor refundable;
III
The Honorable Court erred in not granting to the petitioner the
consequential damages due her as a result of breach of contract of
carriage.[8]
Petitioner contends that respondent did not observe the standard of care
required of a common carrier when it informed her wrongly of the flight
schedule. She could not be deemed more negligent than respondent since
the latter is required by law to exercise extraordinary diligence in the
fulfillment of its obligation. If she were negligent at all, the same is merely
contributory and not the proximate cause of the damage she suffered. Her
loss could only be attributed to respondent as it was the direct consequence
of its employees gross negligence.
Petitioners contention has no merit.
By definition, a contract of carriage or transportation is one whereby a
certain person or association of persons obligate themselves to transport
persons, things, or news from one place to another for a fixed price.[9] Such
person or association of persons are regarded as carriers and are classified
as private or special carriers and common or public carriers.[10] A common
carrier is defined under Article 1732 of the Civil Code as persons,
corporations, firms or associations engaged in the business of carrying or
transporting passengers or goods or both, by land, water or air, for
compensation, offering their services to the public.
It is obvious from the above definition that respondent is not an entity
engaged in the business of transporting either passengers or goods and is
therefore, neither a private nor a common carrier. Respondent did not
undertake to transport petitioner from one place to another since its
covenant with its customers is simply to make travel arrangements in their
behalf. Respondents services as a travel agency include procuring tickets
and facilitating travel permits or visas as well as booking customers for
tours.

While petitioner concededly bought her plane ticket through the efforts of
respondent company, this does not mean that the latter ipso facto is a
common carrier. At most, respondent acted merely as an agent of the
airline, with whom petitioner ultimately contracted for her carriage to
Europe. Respondents obligation to petitioner in this regard was simply to see
to it that petitioner was properly booked with the airline for the appointed
date and time. Her transport to the place of destination, meanwhile,
pertained directly to the airline.
The object of petitioners contractual relation with respondent is the
latters service of arranging and facilitating petitioners booking, ticketing
and accommodation in the package tour. In contrast, the object of a contract
of carriage is the transportation of passengers or goods. It is in this sense
that the contract between the parties in this case was an ordinary one for
services and not one of carriage. Petitioners submission is premised on a
wrong assumption.
The nature of the contractual relation between petitioner and respondent
is determinative of the degree of care required in the performance of the
latters obligation under the contract. For reasons of public policy, a common
carrier in a contract of carriage is bound by law to carry passengers as far as
human care and foresight can provide using the utmost diligence of very
cautious persons and with due regard for all the circumstances.[11] As earlier
stated, however, respondent is not a common carrier but a travel agency. It
is thus not bound under the law to observe extraordinary diligence in the
performance of its obligation, as petitioner claims.
Since the contract between the parties is an ordinary one for services,
the standard of care required of respondent is that of a good father of a
family under Article 1173 of the Civil Code.[12] This connotes reasonable care
consistent with that which an ordinarily prudent person would have observed
when confronted with a similar situation. The test to determine whether
negligence attended the performance of an obligation is: did the defendant
in doing the alleged negligent act use that reasonable care and caution
which an ordinarily prudent person would have used in the same
situation? If not, then he is guilty of negligence.[13]
In the case at bar, the lower court found Menor negligent when she
allegedly informed petitioner of the wrong day of departure. Petitioners
testimony was accepted as indubitable evidence of Menors alleged negligent
act since respondent did not call Menor to the witness stand to refute the
allegation. The lower court applied the presumption under Rule 131, Section
3 (e)[14] of the Rules of Court that evidence willfully suppressed would be
adverse if produced and thus considered petitioners uncontradicted
testimony to be sufficient proof of her claim.
On the other hand, respondent has consistently denied that Menor was
negligent and maintains that petitioners assertion is belied by the evidence

on record. The date and time of departure was legibly written on the plane
ticket and the travel papers were delivered two days in advance precisely so
that petitioner could prepare for the trip. It performed all its obligations to
enable petitioner to join the tour and exercised due diligence in its dealings
with the latter.
We agree with respondent.
Respondents failure to present Menor as witness to rebut petitioners
testimony could not give rise to an inference unfavorable to the former.
Menor was already working in France at the time of the filing of the
complaint,[15] thereby making it physically impossible for respondent to
present her as a witness. Then too, even if it were possible for respondent to
secure Menors testimony, the presumption under Rule 131, Section 3(e)
would still not apply. The opportunity and possibility for obtaining Menors
testimony belonged to both parties, considering that Menor was not just
respondents employee, but also petitioners niece. It was thus error for the
lower court to invoke the presumption that respondent willfully suppressed
evidence under Rule 131, Section 3(e). Said presumption would logically be
inoperative if the evidence is not intentionally omitted but is simply
unavailable, or when the same could have been obtained by both parties.[16]
In sum, we do not agree with the finding of the lower court that Menors
negligence concurred with the negligence of petitioner and resultantly
caused damage to the latter. Menors negligence was not sufficiently proved,
considering that the only evidence presented on this score was petitioners
uncorroborated narration of the events. It is well-settled that the party
alleging a fact has the burden of proving it and a mere allegation cannot
take the place of evidence.[17] If the plaintiff, upon whom rests the burden of
proving his cause of action, fails to show in a satisfactory manner facts upon
which he bases his claim, the defendant is under no obligation to prove his
exception or defense.[18]
Contrary to petitioners claim, the evidence on record shows that
respondent exercised due diligence in performing its obligations under the
contract and followed standard procedure in rendering its services to
petitioner. As correctly observed by the lower court, the plane
ticket[19] issued to petitioner clearly reflected the departure date and time,
contrary to petitioners contention. The travel documents, consisting of the
tour itinerary, vouchers and instructions, were likewise delivered to
petitioner two days prior to the trip. Respondent also properly booked
petitioner for the tour, prepared the necessary documents and procured the
plane tickets. It arranged petitioners hotel accommodation as well as food,
land transfers and sightseeing excursions, in accordance with its avowed
undertaking.
Therefore, it is clear that respondent performed its prestation under the
contract as well as everything else that was essential to book petitioner for

the tour. Had petitioner exercised due diligence in the conduct of her affairs,
there would have been no reason for her to miss the flight. Needless to say,
after the travel papers were delivered to petitioner, it became incumbent
upon her to take ordinary care of her concerns. This undoubtedly would
require that she at least read the documents in order to assure herself of the
important details regarding the trip.
The negligence of the obligor in the performance of the obligation
renders him liable for damages for the resulting loss suffered by the obligee.
Fault or negligence of the obligor consists in his failure to exercise due care
and prudence in the performance of the obligation as the nature of the
obligation so demands.[20] There is no fixed standard of diligence applicable
to each and every contractual obligation and each case must be determined
upon its particular facts. The degree of diligence required depends on the
circumstances of the specific obligation and whether one has been negligent
is a question of fact that is to be determined after taking into account the
particulars of each case.[21]
The lower court declared that respondents employee was negligent. This
factual finding, however, is not supported by the evidence on record. While
factual findings below are generally conclusive upon this court, the rule is
subject to certain exceptions, as when the trial court overlooked,
misunderstood, or misapplied some facts or circumstances of weight and
substance which will affect the result of the case.[22]
In the case at bar, the evidence on record shows that respondent
company performed its duty diligently and did not commit any contractual
breach. Hence, petitioner cannot recover and must bear her own damage.
WHEREFORE, the instant petition is DENIED for lack of merit. The
decision of the Court of Appeals in CA-G.R. CV No. 51932 is
AFFIRMED. Accordingly, petitioner is ordered to pay respondent the amount
of P12,901.00 representing the balance of the price of the British Pageant
Package Tour, with legal interest thereon at the rate of 6% per annum, to be
computed from the time the counterclaim was filed until the finality of this
Decision. After this Decision becomes final and executory, the rate of 12%
per annum shall be imposed until the obligation is fully settled, this interim
period being deemed to be by then an equivalent to a forbearance of
credit.[23]
SO ORDERED.
Davide, Jr., C.J., (Chairman), Vitug, Carpio, and Azcuna, JJ., concur.

THIRD DIVISION [G.R. No. 144274. September 20, 2004]

NOSTRADAMUS VILLANUEVA petitioner, vs.
PRISCILLA
R.
DOMINGO
DOMINGO, respondents.

and

LEANDRO

LUIS

R.

DECISION
CORONA, J.:
This is a petition to review the decision[1] of the Court of Appeals in CAG.R. CV No. 52203 affirming in turn the decision of the trial court finding
petitioner liable to respondent for damages. The dispositive portion read:
WHEREFORE, the appealed decision is hereby AFFIRMED except the award of
attorneys fees including appearance fees which is DELETED.
SO ORDERED.[2]
The facts of the case, as summarized by the Court of Appeals, are as
follows:
[Respondent] Priscilla R. Domingo is the registered owner of a silver
Mitsubishi Lancer Car model 1980 bearing plate No. NDW 781 91 with [corespondent] Leandro Luis R. Domingo as authorized driver. [Petitioner]
Nostradamus Villanueva was then the registered owner of a green Mitsubishi
Lancer bearing Plate No. PHK 201 91.
On 22 October 1991 at about 9:45 in the evening, following a green traffic
light, [respondent] Priscilla Domingos silver Lancer car with Plate No. NDW
781 91 then driven by [co-respondent] Leandro Luis R. Domingo was
cruising along the middle lane of South Superhighway at moderate speed
from north to south. Suddenly, a green Mitsubishi Lancer with plate No. PHK
201 91 driven by Renato Dela Cruz Ocfemia darted from Vito Cruz Street
towards the South Superhighway directly into the path of NDW 781 91
thereby hitting and bumping its left front portion. As a result of the impact,
NDW 781 91 hit two (2) parked vehicles at the roadside, the second hitting
another parked car in front of it.
Per Traffic Accident Report prepared by Traffic Investigator Pfc. Patrocinio N.
Acido, Renato dela Cruz Ocfemia was driving with expired license and
positive for alcoholic breath. Hence, Manila Assistant City Prosecutor Oscar
A. Pascua recommended the filing of information for reckless imprudence
resulting to (sic) damage to property and physical injuries.
The original complaint was amended twice: first, impleading Auto Palace Car
Exchange as commercial agent and/or buyer-seller and second, impleading

Albert Jaucian as principal defendant doing business under the name and
style of Auto Palace Car Exchange.
Except for Ocfemia, all the defendants filed separate answers to the
complaint. [Petitioner] Nostradamus Villanueva claimed that he was no
longer the owner of the car at the time of the mishap because it was
swapped with a Pajero owned by Albert Jaucian/Auto Palace Car Exchange.
For her part, Linda Gonzales declared that her presence at the scene of the
accident was upon the request of the actual owner of the Mitsubishi Lancer
(PHK 201 91) [Albert Jaucian] for whom she had been working as
agent/seller. On the other hand, Auto Palace Car Exchange represented by
Albert Jaucian claimed that he was not the registered owner of the car.
Moreover, it could not be held subsidiary liable as employer of Ocfemia
because the latter was off-duty as utility employee at the time of the
incident. Neither was Ocfemia performing a duty related to his
employment.[3]
After trial, the trial court found petitioner liable and ordered him to pay
respondent actual, moral and exemplary damages plus appearance and
attorneys fees:
WHEREFORE, judgment is hereby rendered for the plaintiffs, ordering
Nostradamus Villanueva to pay the amount of P99,580 as actual
damages, P25,000.00 as moral damages, P25,000.00 as exemplary
damages and attorneys fees in the amount of P10,000.00 plus appearance
fees of P500.00 per hearing with legal interest counted from the date of
judgment. In conformity with the law on equity and in accordance with the
ruling in First Malayan Lending and Finance Corporation vs. Court of Appeals
(supra), Albert Jaucian is hereby ordered to indemnify Nostradamus
Villanueva for whatever amount the latter is hereby ordered to pay under
the judgment.
SO ORDERED.[4]
The CA upheld the trial courts decision but deleted the award for
appearance and attorneys fees because the justification for the grant was
not stated in the body of the decision. Thus, this petition for review which
raises a singular issue:
MAY THE REGISTERED OWNER OF A MOTOR VEHICLE BE HELD LIABLE FOR
DAMAGES ARISING FROM A VEHICULAR ACCIDENT INVOLVING HIS MOTOR
VEHICLE WHILE BEING OPERATED BY THE EMPLOYEE OF ITS BUYER
WITHOUT THE LATTERS CONSENT AND KNOWLEDGE?[5]
Yes.

We have consistently ruled that the registered owner of any vehicle is

directly and primarily responsible to the public and third persons while it is
being operated.[6] The rationale behind such doctrine was explained way
back in 1957 in Erezo vs. Jepte[7]:
The principle upon which this doctrine is based is that in dealing with
vehicles registered under the Public Service Law, the public has the right to
assume or presume that the registered owner is the actual owner thereof,
for it would be difficult for the public to enforce the actions that they may
have for injuries caused to them by the vehicles being negligently operated
if the public should be required to prove who the actual owner is. How would
the public or third persons know against whom to enforce their rights in case
of subsequent transfers of the vehicles? We do not imply by his doctrine,
however, that the registered owner may not recover whatever amount he
had paid by virtue of his liability to third persons from the person to whom
he had actually sold, assigned or conveyed the vehicle.
Under the same principle the registered owner of any vehicle, even if not used for a
public service, should primarily be responsible to the public or to third persons for
injuries caused the latter while the vehicle is being driven on the highways or
streets. The members of the Court are in agreement that the defendant-appellant
should be held liable to plaintiff-appellee for the injuries occasioned to the latter
because of the negligence of the driver, even if the defendant-appellant was no
longer the owner of the vehicle at the time of the damage because he had
previously sold it to another. What is the legal basis for his (defendant-appellants)
liability?

There is a presumption that the owner of the guilty vehicle is the defendantappellant as he is the registered owner in the Motor Vehicles Office. Should
he not be allowed to prove the truth, that he had sold it to another and thus
shift the responsibility for the injury to the real and actual owner? The
defendant holds the affirmative of this proposition; the trial court held the
negative.
The Revised Motor Vehicle Law (Act No. 3992, as amended) provides that no
vehicle may be used or operated upon any public highway unless the same
is property registered. It has been stated that the system of licensing and
the requirement that each machine must carry a registration number,
conspicuously displayed, is one of the precautions taken to reduce the
danger of injury to pedestrians and other travelers from the careless
management of automobiles. And to furnish a means of ascertaining the
identity of persons violating the laws and ordinances, regulating the speed
and operation of machines upon the highways (2 R.C.L. 1176). Not only are
vehicles to be registered and that no motor vehicles are to be used or
operated without being properly registered for the current year, but that
dealers in motor vehicles shall furnish thee Motor Vehicles Office a report

showing the name and address of each purchaser of motor vehicle during
the previous month and the manufacturers serial number and motor
number. (Section 5(c), Act No. 3992, as amended.)
Registration is required not to make said registration the operative act by
which ownership in vehicles is transferred, as in land registration cases,
because the administrative proceeding of registration does not bear any
essential relation to the contract of sale between the parties (Chinchilla vs.
Rafael and Verdaguer, 39 Phil. 888), but to permit the use and operation of
the vehicle upon any public highway (section 5 [a], Act No. 3992, as
amended). The main aim of motor vehicle registration is to identify the
owner so that if any accident happens, or that any damage or injury is
caused by the vehicle on the public highways, responsibility therefore can be
fixed on a definite individual, the registered owner. Instances are numerous
where vehicles running on public highways caused accidents or injuries to
pedestrians or other vehicles without positive identification of the owner or
drivers, or with very scant means of identification. It is to forestall these
circumstances, so inconvenient or prejudicial to the public, that the motor
vehicle registration is primarily ordained, in the interest of the determination
of persons responsible for damages or injuries caused on public highways:
One of the principal purposes of motor vehicles legislation is identification of
the vehicle and of the operator, in case of accident; and another is that the
knowledge that means of detection are always available may act as a
deterrent from lax observance of the law and of the rules of conservative
and safe operation. Whatever purpose there may be in these statutes, it is
subordinate at the last to the primary purpose of rendering it certain that
the violator of the law or of the rules of safety shall not escape because of
lack of means to discover him. The purpose of the statute is thwarted, and
the displayed number becomes a share and delusion, if courts would
entertain such defenses as that put forward by appellee in this case. No
responsible person or corporation could be held liable for the most
outrageous acts of negligence, if they should be allowed to pace a
middleman between them and the public, and escape liability by the manner
in which they recompense servants. (King vs. Brenham Automobile Co., Inc.
145 S.W. 278, 279.)
With the above policy in mind, the question that defendant-appellant poses
is: should not the registered owner be allowed at the trial to prove who the
actual and real owner is, and in accordance with such proof escape or evade
responsibility by and lay the same on the person actually owning the
vehicle? We hold with the trial court that the law does not allow him to do
so; the law, with its aim and policy in mind, does not relieve him directly of
the responsibility that the law fixes and places upon him as an incident or
consequence of registration. Were a registered owner allowed to evade
responsibility by proving who the supposed transferee or owner is, it would

be easy for him, by collusion with others or otherwise, to escape said

responsibility and transfer the same to an indefinite person, or to one who
possesses no property with which to respond financially for the damage or
injury done. A victim of recklessness on the public highways is usually
without means to discover or identify the person actually causing the injury
or damage. He has no means other than by a recourse to the registration in
the Motor Vehicles Office to determine who is the owner. The protection that
the law aims to extend to him would become illusory were the registered
owner given the opportunity to escape liability by disproving his ownership.
If the policy of the law is to be enforced and carried out, the registered
owner should not be allowed to prove the contrary to the prejudice of the
person injured, that is, to prove that a third person or another has become
the owner, so that he may thereby be relieved of the responsibility to the
injured person.
The above policy and application of the law may appear quite harsh and
would seem to conflict with truth and justice. We do not think it is so. A
registered owner who has already sold or transferred a vehicle has the
recourse to a third-party complaint, in the same action brought against him
to recover for the damage or injury done, against the vendee or transferee
of the vehicle. The inconvenience of the suit is no justification for relieving
him of liability; said inconvenience is the price he pays for failure to comply
with the registration that the law demands and requires.
In synthesis, we hold that the registered owner, the defendant-appellant
herein, is primarily responsible for the damage caused to the vehicle of the
plaintiff-appellee, but he (defendant-appellant) has a right to be indemnified
by the real or actual owner of the amount that he may be required to pay as
damage for the injury caused to the plaintiff-appellant.[8]
Petitioner insists that he is not liable for damages since the driver of the
vehicle at the time of the accident was not an authorized driver of the new
(actual) owner of the vehicle. He claims that the ruling in First Malayan
Leasing and Finance Corporation vs. CA[9] implies that to hold the registered
owner liable for damages, the driver of the vehicle must have been
authorized, allowed and permitted by its actual owner to operate and drive
it. Thus, if the vehicle is driven without the knowledge and consent of the
actual owner, then the registered owner cannot be held liable for damages.
He further argues that this was the underlying theory behind Duavit vs.
CA
wherein the court absolved the registered owner from liability after
finding that the vehicle was virtually stolen from the owners garage by a
person who was neither authorized nor employed by the owner. Petitioner
concludes that the ruling in Duavit and not the one in First Malayan should
be applicable to him.
[10]

Petitioners argument lacks merit. Whether the driver is authorized or not

by the actual owner is irrelevant to determining the liability of the registered
owner who the law holds primarily and directly responsible for any accident,
injury or death caused by the operation of the vehicle in the streets and
highways. To require the driver of the vehicle to be authorized by
the actual owner before the registered owner can be held accountable is to
defeat the very purpose why motor vehicle legislations are enacted in the
first place.
Furthermore, there is nothing in First Malayan which even remotely
suggests that the driver must be authorized before the registered owner can
be held accountable. In First Malayan, the registered owner, First Malayan
Corporation, was held liable for damages arising from the accident even if
the vehicle involved was already owned by another party:
This Court has consistently ruled that regardless of who the actual owner is
of a motor vehicle might be, the registered owner is the operator of the
same with respect to the public and third persons, and as such, directly and
primarily responsible for the consequences of its operation. In contemplation
of law, the owner/operator of record is the employer of the driver, the actual
operator and employer being considered merely as his agent (MYC-AgroIndustrial Corporation vs. Vda. de Caldo, 132 SCRA 10, citing Vargas vs.
Langcay, 6 SCRA 174; Tamayo vs. Aquino, 105 Phil. 949).
We believe that it is immaterial whether or not the driver was actually
employed by the operator of record. It is even not necessary to prove who
the actual owner of the vehicle and the employer of the driver is. Granting
that, in this case, the father of the driver is the actual owner and that he is
the actual employer, following the well-settled principle that the operator of
record continues to be the operator of the vehicle in contemplation of law, as
regards the public and third person, and as such is responsible for the
consequences incident to its operation, we must hold and consider such
owner-operator of record as the employer, in contemplation of law, of the
driver. And, to give effect to this policy of law as enunciated in the above
cited decisions of this Court, we must now extend the same and consider the
actual operator and employer as the agent of the operator of record.[11]
Contrary to petitioners position, the First Malayan ruling is applicable to
him since the case involves the same set of facts the registered owner
had previously sold the vehicle to someone else and was being driven by an
employee of the new (actual) owner. Duavit is inapplicable since the vehicle
there was not transferred to another; the registered and the actual owner
was one and the same person. Besides, in Duavit, the defense of the
registered owner, Gilberto Duavit, was that the vehicle was practically stolen
from his garage by Oscar Sabiano, as affirmed by the latter:

Defendant Sabiano, in his testimony, categorically admitted that he took the

jeep from the garage of defendant Duavit without the consent and authority
of the latter. He testified further that Duavit even filed charges against him
for the theft of the jeep but which Duavit did not push through as his
(Sabianos) parents apologized to Duavit on his behalf.[12]
As correctly pointed out by the CA, the Duavit ruling is not applicable to
petitioners case since the circumstance of unauthorized use was not present.
He in fact voluntarily delivered his car to Albert Jaucian as part of the
downpayment for a vehicle he purchased from Jaucian. Thus, he could not
claim that the vehicle was stolen from him since he voluntarily ceded
possession thereof to Jaucian. It was the latter, as the new (actual) owner,
who could have raised the defense of theft to prove that he was not liable
for the acts of his employee Ocfemia. Thus, there is no reason to apply
the Duavit ruling to this case.
The ruling in First Malayan has been reiterated in BA Finance Corporation
vs. CA[13] and more recently in Aguilar, Sr. vs. Commercial Savings
Bank.[14] In BA Finance, we held the registered owner liable even if, at the
time of the accident, the vehicle was leased by another party and was driven
by the lessees employee. In Aguilar, the registered owner-bank answered
for damages for the accident even if the vehicle was being driven by the
Vice-President of the Bank in his private capacity and not as an officer of the
Bank, as claimed by the Bank. We find no reason to deviate from these
decisions.
The main purpose of vehicle registration is the easy identification of the
owner who can be held responsible for any accident, damage or injury
caused by the vehicle. Easy identification prevents inconvenience and
prejudice to a third party injured by one who is unknown or unidentified. To
allow a registered owner to escape liability by claiming that the driver was
not authorized by the new (actual) owner results in the public detriment the
law seeks to avoid.
Finally, the issue of whether or not the driver of the vehicle during the
accident was authorized is not at all relevant to determining the liability of
the registered owner. This must be so if we are to comply with the rationale
and principle behind the registration requirement under the motor vehicle
law.
WHEREFORE, the petition is hereby DENIED. The January 26, 2000
decision of the Court of Appeals is AFFIRMED.
SO ORDERED.
FIRST DIVISION [G.R. No. 160286. July 30, 2004]
SPOUSES FRANCISCO M. HERNANDEZ and ANICETA ABELHERNANDEZ and JUAN GONZALES, petitioners,

vs.
SPOUSES LORENZO DOLOR and MARGARITA DOLOR, FRED PANOPIO,
JOSEPH SANDOVAL, RENE CASTILLO, SPOUSES FRANCISCO
VALMOCINA and VIRGINIA VALMOCINA, SPOUSES VICTOR PANOPIO
and MARTINA PANOPIO, and HON. COURT OF APPEALS, respondents.
DECISION
YNARES-SANTIAGO, J.:
This is a petition for review under Rule 45 of the Rules of Court seeking
the reversal of the decision[1] of the Court of Appeals, dated April 29, 2003,
in CA-G.R. CV No. 60357, which affirmed with modification the amount of
damages awarded in the November 24, 1997 decision[2] of the Regional Trial
Court of Batangas City, Branch IV.
The undisputed facts are as follows:
At about 3:00 p.m. of December 19, 1986, Lorenzo Menard Boyet Dolor,
Jr. was driving an owner-type jeepney with plate no. DEB 804 owned by her
mother, Margarita, towards Anilao, Batangas. As he was traversing the road
at Barangay Anilao East, Mabini, Batangas, his vehicle collided with a
passenger jeepney bearing plate no. DEG 648, driven by petitioner Juan
Gonzales and owned by his co-petitioner Francisco Hernandez, which was
travelling towards Batangas City.
Boyet Dolor and his passenger, Oscar Valmocina, died as a result of the
collision. Fred Panopio, Rene Castillo and Joseph Sandoval, who were also on
board the owner-type jeep, which was totally wrecked, suffered physical
injuries. The collision also damaged the passenger jeepney of Francisco
Hernandez and caused physical injuries to its passengers, namely, Virgie
Cadavida, Fiscal Artemio Reyes and Francisca Corona.[3]
Consequently, respondents commenced an action[4] for damages against
petitioners before the Regional Trial Court of Batangas City, alleging that
driver Juan Gonzales was guilty of negligence and lack of care and that the
Hernandez spouses were guilty of negligence in the selection and supervision
of their employees.[5]
Petitioners countered that the proximate cause of the death and injuries
sustained by the passengers of both vehicles was the recklessness of Boyet
Dolor, the driver of the owner-type jeepney, who was driving in a zigzagging
manner under the influence of alcohol. Petitioners also alleged that Gonzales
was not the driver-employee of the Hernandez spouses as the former only
leased the passenger jeepney on a daily basis. The Hernandez spouses
further claimed that even if an employer-employee relationship is found to
exist between them, they cannot be held liable because as employers they
exercised due care in the selection and supervision of their employee.

During the trial of the case, it was established that the drivers of the two
vehicles were duly licensed to drive and that the road where the collision
occurred was asphalted and in fairly good condition.[6] The owner-type jeep
was travelling uphill while the passenger jeepney was going downhill. It was
further established that the owner-type jeep was moderately moving and
had just passed a road bend when its passengers, private respondents
Joseph Sandoval and Rene Castillo, saw the passenger jeepney at a distance
of three meters away. The passenger jeepney was traveling fast when it
bumped the owner type jeep.[7] Moreover, the evidence presented by
respondents before the trial court showed that petitioner Juan Gonzales
obtained his professional drivers license only on September 24, 1986, or
three months before the accident. Prior to this, he was holder of a student
drivers permit issued on April 10, 1986.[8]
On November 24, 1997, the trial court rendered a decision in favor of
respondents, the dispositive portion of which states:
Premises duly considered and the plaintiffs having satisfactorily convincingly
and credibly presented evidence clearly satisfying the requirements of
preponderance of evidence to sustain the complaint, this Court hereby
declares judgment in favor of the plaintiffs and against the defendants.
Defendants-spouses Francisco Hernandez and Aniceta Abel Hernandez and
Juan Gonzales are therefore directed to pay jointly and severally, the
following:
1) To spouses Lorenzo Dolor and Margarita Dolor:
a) P50,000.00 for the death of their son, Lorenzo Menard Boyet Dolor,
Jr.;
b) P142,000.00 as actual and necessary funeral expenses;
c) P50,000.00 reasonable value of the totally wrecked owner-type
jeep with plate no. DEB 804 Phil 85;
d) P20,000.00 as moral damages;
e) P20,000.00 as reasonable litigation expenses and attorneys fees.
2) To spouses Francisco Valmocina and Virginia Valmocina:
a) P50,000.00 for the death of their son, Oscar Balmocina (sic);
b) P20,000.00 as moral damages;
c) P18,400.00 for funeral expenses;
d) P10,000.00 for litigation expenses and attorneys fees.
3) To spouses Victor Panopio and Martina Panopio:
a) P10,450.00 for the cost of the artificial leg and crutches being used
by their son Fred Panopio;
b) P25,000.00 for hospitalization and medical expenses they incurred
for the treatment of their son, Fred Panopio.
4) To Fred Panopio:
a) P25,000.00 for the loss of his right leg;
b) P10,000.00 as moral damages.
5) To Joseph Sandoval:

a) P4,000.00 for medical treatment.

The defendants are further directed to pay the costs of this proceedings.
SO ORDERED.[9]
Petitioners appealed[10] the decision to the Court of Appeals, which
affirmed the same with modifications as to the amount of damages, actual
expenses and attorneys fees awarded to the private respondents. The
decretal portion of the decision of the Court of Appeals reads:
WHEREFORE, the foregoing premises considered, the appealed decision
is AFFIRMED. However, the award for damages, actual expenses and
attorneys fees shall be MODIFIED as follows:
1) To spouses Lorenzo Dolor and Margarita Dolor:
a) P50,000.00 civil indemnity for their son Lorenzo Menard Dolor, Jr.;
b) P58,703.00 as actual and necessary funeral expenses;
c) P25,000,00 as temperate damages;
d) P100,000.00 as moral damages;
e) P20,000.00 as reasonable litigation expenses and attorneys fees.
2) To Spouses Francisco Valmocina and Virginia Valmocina:
a) P50,000.00 civil indemnity for the death of their son, Oscar
Valmocina;
b) P100,000.00 as moral damages;
c) P10,000.00 as temperate damages;
d) P10,000.00 as reasonable litigation expenses and attorneys fees.
3) To Spouses Victor Panopio and Martina Panopio:
a) P10,352.59 as actual hospitalization and medical expenses;
b) P5,000.00 as temperate damages.
4) To Fred Panopio:
a) P50,000.00 as moral damages.
5) To Joseph Sandoval:
a) P3,000.00 as temperate damages.
SO ORDERED.[11]
Hence the present petition raising the following issues:
1. Whether the Court of Appeals was correct when it pronounced the
Hernandez spouses as solidarily liable with Juan Gonzales, although it is of
record that they were not in the passenger jeepney driven by latter when
the accident occurred;
2. Whether the Court of Appeals was correct in awarding temperate
damages to private respondents namely the Spouses Dolor, Spouses
Valmocina and Spouses Panopio and to Joseph Sandoval, although the grant
of temperate damages is not provided for in decision of the court a quo;

3. Whether the Court of Appeals was correct in increasing the award of

moral damages to respondents, Spouses Dolor, Spouses Valmocina and Fred
Panopio;
4. Whether the Court of Appeals was correct in affirming the grant of
attorneys fees to Spouses Dolor and to Spouses Valmocina although the
lower court did not specify the fact and the law on which it is based.
Petitioners contend that the absence of the Hernandez spouses inside the
passenger jeepney at the time of the collision militates against holding them
solidarily liable with their co-petitioner, Juan Gonzales, invoking Article 2184
of the Civil Code, which provides:
ARTICLE 2184. In motor vehicle mishaps, the owner is solidarily liable with
his driver, if the former, who was in the vehicle, could have, by the use of
the due diligence, prevented the misfortune. It is disputably presumed that a
driver was negligent, if he had been found guilty of reckless driving or
violating traffic regulations at least twice within the next preceding two
months.
If the owner was not in the motor vehicle, the provisions of article 2180 are
applicable.
The Hernandez spouses argues that since they were not inside the
jeepney at the time of the collision, the provisions of Article 2180 of the Civil
Code, which does not provide for solidary liability between employers and
employees, should be applied.
We are not persuaded.
Article 2180 provides:
ARTICLE 2180. The obligation imposed by article 2176 is demandable not
only for one's own acts or omissions, but also for those of persons for whom
one is responsible.
The father and, in case of his death or incapacity, the mother, are
responsible for the damages caused by the minor children who live in their
company.
Guardians are liable for damages caused by the minors or incapacitated
persons who are under their authority and live in their company.
The owners and managers of an establishment or enterprise are likewise
responsible for damages caused by their employees in the service of the
branches in which the latter are employed or on the occasion of their
functions.

Employers shall be liable for the damages caused by their employees

and household helpers acting within the scope of their assigned
tasks, even though the former are not engaged in any business or
industry.
The State is responsible in like manner when it acts through a special agent;
but not when the damage has been caused by the official to whom the task
done properly pertains, in which case what is provided in article 2176 shall
be applicable.
Lastly, teachers or heads of establishments of arts and trades shall be liable
for damages caused by their pupils and students or apprentices, so long as
they remain in their custody.
The responsibility treated of in this article shall cease when the persons
herein mentioned prove that they observed all the diligence of a good father
of a family to prevent damage. (Underscoring supplied)
On the other hand, Article 2176 provides
Whoever by act or omission causes damage to another, there being fault or
negligence, is obliged to pay for the damage done. Such fault or negligence,
if there is no pre-existing contractual relation between the parties, is called a
quasi-delict and is governed by the provisions of this Chapter.
While the above provisions of law do not expressly provide for solidary
liability, the same can be inferred from the wordings of the first paragraph of
Article 2180 which states that the obligation imposed by article 2176 is
demandable not only for one's own acts or omissions, but also for those of
persons for whom one is responsible.
Moreover, Article 2180 should be read with Article 2194 of the same
Code, which categorically states that the responsibility of two or more
persons who are liable for quasi-delict is solidary. In other words, the liability
of joint tortfeasors is solidary.[12] Verily, under Article 2180 of the Civil Code,
an employer may be held solidarily liable for the negligent act of his
employee.[13]
The solidary liability of employers with their employees for quasi-delicts
having been established, the next question is whether Julian Gonzales is an
employee of the Hernandez spouses. An affirmative answer will put to rest
any issue on the solidary liability of the Hernandez spouses for the acts of
Julian Gonzales. The Hernandez spouses maintained that Julian Gonzales is
not their employee since their relationship relative to the use of the jeepney
is that of a lessor and a lessee. They argue that Julian Gonzales pays them a
daily rental of P150.00 for the use of the jeepney.[14] In essence, petitioners

are practicing the boundary system of jeepney operation albeit disguised as

a lease agreement between them for the use of the jeepney.
We hold that an employer-employee relationship exists between the
Hernandez spouses and Julian Gonzales.
Indeed to exempt from liability the owner of a public vehicle who
operates it under the boundary system on the ground that he is a mere
lessor would be not only to abet flagrant violations of the Public Service Law,
but also to place the riding public at the mercy of reckless and irresponsible
drivers reckless because the measure of their earnings depends largely upon
the number of trips they make and, hence, the speed at which they drive;
and irresponsible because most if not all of them are in no position to pay
the damages they might cause.[15]
Anent the award of temperate damages to the private respondents, we
hold that the appellate court committed no reversible error in awarding the
same to the respondents.
Temperate or moderate damages are damages which are more than
nominal but less than compensatory which may be recovered when the court
finds that some pecuniary loss has been suffered but its amount cannot,
from the nature of the case, be proved with certainty.[16] Temperate
damages are awarded for those cases where, from the nature of the case,
definite proof of pecuniary loss cannot be offered, although the court is
convinced that there has been such loss. A judge should be empowered to
calculate moderate damages in such cases, rather than the plaintiff should
suffer, without redress, from the defendants wrongful act.[17] The
assessment of temperate damages is left to the sound discretion of the court
provided that such an award is reasonable under the circumstances.[18]
We have gone through the records of this case and we find that, indeed,
respondents suffered losses which cannot be quantified in monetary
terms. These losses came in the form of the damage sustained by the owner
type jeep of the Dolor spouses; the internment and burial of Oscar
Valmocina; the hospitalization of Joseph Sandoval on account of the injuries
he sustained from the collision and the artificial leg and crutches that
respondent Fred Panopio had to use because of the amputation of his right
leg. Further, we find that the amount of temperate damages awarded to the
respondents were reasonable under the circumstances.
As to the amount of moral damages which was awarded to respondents,
a review of the records of this case shows that there exists no cogent reason
to overturn the action of the appellate court on this aspect.
Under Article 2206, the spouse, legitimate and illegitimate descendants
and ascendants of the deceased may demand moral damages for mental
anguish for the death of the deceased. The reason for the grant of moral
damages has been explained, thus:

. . . the award of moral damages is aimed at a restoration, within the limits

possible, of the spiritual status quo ante; and therefore, it must be
proportionate to the suffering inflicted. The intensity of the pain experienced
by the relatives of the victim is proportionate to the intensity of affection for
him and bears no relation whatsoever with the wealth or means of the
offender.[19]
Moral damages are emphatically not intended to enrich a plaintiff at the
expense of the defendant. They are awarded to allow the former to obtain
means, diversion or amusements that will serve to alleviate the moral
suffering he has undergone due to the defendants culpable action and must,
perforce, be proportional to the suffering inflicted.[20]
Truly, the pain of the sudden loss of ones offspring, especially of a son
who was in the prime of his youth, and who holds so much promise waiting
to be fulfilled is indeed a wellspring of intense pain which no parent should
be made to suffer.While it is true that there can be no exact or uniform rule
for measuring the value of a human life and the measure of damages cannot
be arrived at by a precise mathematical calculation,[21] we hold that the
Court of Appeals award of moral damages of P100,000.00 each to the
Spouses Dolor and Spouses Valmocina for the death of their respective sons,
Boyet Dolor and Oscar Valmocina, is in full accord with prevailing
jurisprudence.[22]
With respect to the award of attorneys fees to respondents, no sufficient
basis was established for the grant thereof.
It is well settled that attorneys fees should not be awarded in the
absence of stipulation except under the instances enumerated in Article
2208 of the Civil Code. As we have held in Rizal Surety and Insurance
Company v. Court of Appeals:[23]
Article 2208 of the Civil Code allows attorneys fees to be awarded by a court
when its claimant is compelled to litigate with third persons or to incur
expenses to protect his interest by reason of an unjustified act or omission
of the party from whom it is sought. While judicial discretion is here extant,
an award thereof demands, nevertheless, a factual, legal or equitable
justification. The matter cannot and should not be left to speculation and
conjecture (Mirasol vs. De la Cruz, 84 SCRA 337; Stronghold Insurance
Company, Inc. vs. Court of Appeals, 173 SCRA 619).
In the case at bench, the records do not show enough basis for sustaining
the award for attorneys fees and to adjudge its payment by petitioner. x x x.
Likewise, this Court held in Stronghold Insurance Company, Inc. vs. Court of
Appeals that:

In Abrogar v. Intermediate Appellate Court [G.R. No. 67970, January 15,

1988, 157 SCRA 57], the Court had occasion to state that [t]he reason for
the award of attorneys fees must be stated in the text of the courts decision,
otherwise, if it is stated only in the dispositive portion of the decision, the
same must be disallowed on appeal. x x x.[24]
WHEREFORE, the petition is DENIED. The assailed decision of the Court
of Appeals is AFFIRMED with the MODIFICATION that the grant of attorneys
fees is DELETED for lack of basis.
Costs against petitioners.
SO ORDERED.

SECOND DIVISION [G.R. No. 181398 : June 29, 2011]

FEB LEASING AND FINANCE CORPORATION (NOW BPI LEASING
CORPORATION), PETITIONER,
VS.
SPOUSES SERGIO P. BAYLON AND MARITESS VILLENA-BAYLON, BG
HAULER, INC., AND MANUEL Y. ESTILLOSO, RESPONDENTS.
DECISION
CARPIO, J.:

The Case
This is a petition for review on certiorari[1] of the 9 October 2007
Decision[2] and the 18 January 2008 Resolution[3] of the Court of Appeals in
CA-G.R. CV No. 81446. The 9 October 2007 Decision affirmed the 30
October 2003 Decision[4] of the Regional Trial Court (Branch 35) of Gapan
City in Civil Case No. 2334 ordering petitioner to pay respondents damages.
The 18 January 2008 Resolution denied petitioner's motion for
reconsideration.
The Facts
On 2 September 2000, an Isuzu oil tanker running along Del Monte Avenue
in Quezon City and bearing plate number TDY 712 hit Loretta V. Baylon
(Loretta), daughter of respondent spouses Sergio P. Baylon and Maritess
Villena-Baylon (spouses Baylon). At the time of the accident, the oil tanker
was registered[5]in the name of petitioner FEB Leasing and Finance
Corporation[6] (petitioner). The oil tanker was leased[7]to BG Hauler, Inc. (BG
Hauler) and was being driven by the latter's driver, Manuel Y. Estilloso. The
oil tanker was insured[8] by FGU Insurance Corp. (FGU Insurance).
The accident took place at around 2:00 p.m. as the oil tanker was coming
from Balintawak and heading towards Manila. Upon reaching the intersection
of Bonifacio Street and Del Monte Avenue, the oil tanker turned left. While
the driver of the oil tanker was executing a left turn side by side with
another vehicle towards Del Monte Avenue, the oil tanker hit Loretta who
was then crossing Del Monte Avenue coming from Mayon Street. Due to the
strong impact, Loretta was violently thrown away about three to five meters
from the point of impact. She fell to the ground unconscious. She was
brought for treatment to the Chinese General Hospital where she remained
in a coma until her death two days after.[9]
The spouses Baylon filed with the RTC (Branch 35) of Gapan City a
Complaint[10] for damages against petitioner, BG Hauler, the driver, and FGU
Insurance. Petitioner filed its answer with compulsory counterclaim while
FGU Insurance filed its answer with counterclaim. On the other hand, BG

Hauler filed its answer with compulsory counterclaim and cross-claim against
FGU Insurance.
Petitioner claimed that the spouses Baylon had no cause of action against it
because under its lease contract with BG Hauler, petitioner was not liable for
any loss, damage, or injury that the leased oil tanker might cause. Petitioner
claimed that no employer-employee relationship existed between petitioner
and the driver.
BG Hauler alleged that neither do the spouses Baylon have a cause of action
against it since the oil tanker was not registered in its name. BG Hauler
contended that the victim was guilty of contributory negligence in crossing
the street. BG Hauler claimed that even if its driver was at fault, BG Hauler
exercised the diligence of a good father of a family in the selection and
supervision of its driver. BG Hauler also contended that FGU Insurance is
obliged to assume all liabilities arising from the use of the insured oil tanker.
For its part, FGU Insurance averred that the victim was guilty of contributory
negligence. FGU Insurance concluded that the spouses Baylon could not
expect to be paid the full amount of their claims. FGU Insurance pointed out
that the insurance policy covering the oil tanker limited any claim to a
maximum of P400,000.00.
During trial, FGU Insurance moved that (1) it be allowed to deposit in court
the amount of P450,000.00 in the joint names of the spouses Baylon,
petitioner, and BG Hauler and (2) it be released from further participating in
the proceedings. After the RTC granted the motion, FGU Insurance deposited
in the Branch Clerk of Court a check in the names of the spouses Baylon,
petitioner, and BG Hauler. The RTC then released FGU Insurance from its
contractual obligations under the insurance policy.
The Ruling of the RTC
After weighing the evidence submitted by the parties, the RTC found that the
death of Loretta was due to the negligent act of the driver. The RTC held
that BG Hauler, as the employer, was solidarily liable with the driver. The
RTC further held that petitioner, as the registered owner of the oil tanker,
was also solidarily liable.
The RTC found that since FGU Insurance already paid the amount of
P450,000.00 to the spouses Baylon, BG Hauler, and petitioner, the insurer's
obligation has been satisfactorily fulfilled. The RTC thus dismissed the crossclaim of BG Hauler against FGU Insurance. The decretal part of the RTC's
decision reads:

Wherefore, premises considered, judgment is hereby rendered in favor of

the plaintiffs and against defendants FEB Leasing (now BPI Leasing), BG
Hauler, and Manuel Estilloso, to wit
1. Ordering the defendants, jointly and severally, to pay plaintiffs the
following:
a. the amount of P62,000.00 representing actual expenses incurred by
the plaintiffs;
b. the amount of P50,000.00 as moral damages;
c. the amount of P2,400,000.00 for loss of earning capacity of the
deceased victim, Loretta V. Baylon;
d. the sum of P50,000.00 for death indemnity;
e. the sum of P50,000.00 for and as attorney's fees; and
f. with costs against the defendants.
2. Ordering the dismissal of defendants' counter-claim for lack of merit and
the cross claim of defendant BG Hauler against defendant FGU Insurance.
SO ORDERED.[11]
Petitioner, BG Hauler, and the driver appealed the RTC Decision to the Court
of Appeals. Petitioner claimed that as financial lessor, it is exempt from
liability resulting from any loss, damage, or injury the oil tanker may cause
while being operated by BG Hauler as financial lessee.
On the other hand, BG Hauler and the driver alleged that no sufficient
evidence existed proving the driver to be at fault. They claimed that the RTC
erred in finding BG Hauler negligent despite the fact that it had exercised the
diligence of a good father of a family in the selection and supervision of its
driver and in the maintenance of its vehicles. They contended that
petitioner, as the registered owner of the oil tanker, should be solely liable
for Loretta's death.
The Ruling of the Court of Appeals
The Court of Appeals held that petitioner, BG Hauler, and the driver are
solidarily liable for damages arising from Loretta's death. Petitioner's liability
arose from the fact that it was the registered owner of the oil tanker while
BG Hauler's liability emanated from a provision in the lease contract
providing that the lessee shall be liable in case of any loss, damage, or
injury the leased oil tanker may cause.
Thus, the Court of Appeals affirmed the RTC Decision but with the
modification that the award of attorney's fees be deleted for being
speculative. The dispositive part of the appellate court's Decision reads:

WHEREFORE, in the light of the foregoing, the instant appeal is DENIED.

Consequently, the assailed Decision of the lower court is AFFIRMED with the
MODIFICATION that the award of attorney's fees is DELETED.
IT IS SO ORDERED.[12]
Dissatisfied, petitioner and BG Hauler, joined by the driver, filed two
separate motions for reconsideration. In its 18 January 2008 Resolution, the
Court of Appeals denied both motions for lack of merit.
Unconvinced, petitioner alone filed with this Court the present petition for
review on certiorari impleading the spouses Baylon, BG Hauler, and the
driver as respondents.[13]
The Issue
The sole issue submitted for resolution is whether the registered owner of a
financially leased vehicle remains liable for loss, damage, or injury caused by
the vehicle notwithstanding an exemption provision in the financial lease
contract.
The Court's Ruling
Petitioner contends that the lease contract between BG Hauler and petitioner
specifically provides that BG Hauler shall be liable for any loss, damage, or
injury the leased oil tanker may cause even if petitioner is the registered
owner of the said oil tanker. Petitioner claims that the Court of Appeals erred
in holding petitioner solidarily liable with BG Hauler despite having found the
latter liable under the lease contract.
For their part, the spouses Baylon counter that the lease contract between
petitioner and BG Hauler cannot bind third parties like them. The spouses
Baylon maintain that the existence of the lease contract does not relieve
petitioner of direct responsibility as the registered owner of the oil tanker
that caused the death of their daughter.
On the other hand, BG Hauler and the driver argue that at the time
petitioner and BG Hauler entered into the lease contract, Republic Act No.
5980[14] was still in effect. They point out that the amendatory law, Republic
Act No. 8556,[15] which exempts from liability in case of any loss, damage, or
injury to third persons the registered owners of vehicles financially leased to
another, was not yet enacted at that time.
In point is the 2008 case of PCI Leasing and Finance, Inc. v. UCPB General
Insurance Co., Inc.[16] There, we held liable PCI Leasing and Finance, Inc.,
the registered owner of an 18-wheeler Fuso Tanker Truck leased to Superior
Gas & Equitable Co., Inc. (SUGECO) and being driven by the latter's driver,
for damages arising from a collision. This despite an express provision in the
lease contract to the effect that the lessee, SUGECO, shall indemnify and

hold the registered owner free from any liabilities, damages, suits, claims, or
judgments arising from SUGECO's use of the leased motor vehicle.
In the instant case, Section 5.1 of the lease contract between petitioner and
BG Hauler provides:
Sec. 5.1. It is the principle of this Lease that while the title or ownership of
the EQUIPMENT, with all the rights consequent thereof, are retained by the
LESSOR, the risk of loss or damage of the EQUIPMENT from whatever source
arising, as well as any liability resulting from the ownership, operation
and/or possession thereof, over and above those actually
compensated by insurance, are hereby transferred to and assumed
by the LESSEE hereunder which shall continue in full force and
effect.[17] (Emphasis supplied)
If it so wishes, petitioner may proceed against BG Hauler to seek
enforcement of the latter's contractual obligation under Section 5.1 of the
lease contract. In the present case, petitioner did not file a cross-claim
against BG Hauler. Hence, this Court cannot require BG Hauler to reimburse
petitioner for the latter's liability to the spouses Baylon. However, as the
registered owner of the oil tanker, petitioner may not escape its liability to
third persons.
Under Section 5 of Republic Act No. 4136,[18] as amended, all motor vehicles
used or operated on or upon any highway of the Philippines must be
registered with the Bureau of Land Transportation (now Land Transportation
Office) for the current year.[19] Furthermore, any encumbrances of motor
vehicles must be recorded with the Land Transportation Office in order to be
valid against third parties.[20]
In accordance with the law on compulsory motor vehicle registration, this
Court has consistently ruled that, with respect to the public and third
persons, the registered owner of a motor vehicle is directly and primarily
responsible for the consequences of its operation regardless of who the
actual vehicle owner might be.[21] Well-settled is the rule that the registered
owner of the vehicle is liable for quasi-delicts resulting from its use. Thus,
even if the vehicle has already been sold, leased, or transferred to another
person at the time the vehicle figured in an accident, the registered vehicle
owner would still be liable for damages caused by the accident. The sale,
transfer or lease of the vehicle, which is not registered with the Land
Transportation Office, will not bind third persons aggrieved in an accident
involving the vehicle. The compulsory motor vehicle registration underscores
the importance of registering the vehicle in the name of the actual owner.

The policy behind the rule is to enable the victim to find redress by the
expedient recourse of identifying the registered vehicle owner in the records
of the Land Transportation Office. The registered owner can be reimbursed
by the actual owner, lessee or transferee who is known to him. Unlike the
registered owner, the innocent victim is not privy to the lease, sale, transfer
or encumbrance of the vehicle. Hence, the victim should not be prejudiced
by the failure to register such transaction or encumbrance. As the Court held
in PCI Leasing:
The burden of registration of the lease contract is minuscule compared to
the chaos that may result if registered owners or operators of vehicles are
freed from such responsibility. Petitioner pays the price for its failure to obey
the law on compulsory registration of motor vehicles for registration is a prerequisite for any person to even enjoy the privilege of putting a vehicle on
public roads.[22]
In the landmark case of Erezo v. Jepte,[23] the Court succinctly laid down the
public policy behind the rule, thus:
The main aim of motor vehicle registration is to identify the owner so that if
any accident happens, or that any damage or injury is caused by the vehicle
on the public highways, responsibility therefor can be fixed on a definite
individual, the registered owner. Instances are numerous where vehicles
running on public highways caused accidents or injuries to pedestrians or
other vehicles without positive identification of the owner or drivers, or with
very scant means of identification. It is to forestall these circumstances, so
inconvenient or prejudicial to the public, that the motor vehicle registration
is primarily ordained, in the interest of the determination of persons
responsible for damages or injuries caused on public highways.
xxx
Were a registered owner allowed to evade responsibility by proving who the
supposed transferee or owner is, it would be easy for him, by collusion with
others or, or otherwise, to escape said responsibility and transfer the same
to an indefinite person, or to one who possesses no property with which to
respond financially for the damage or injury done. A victim of recklessness
on the public highways is usually without means to discover or identify the
person actually causing the injury or damage. He has no means other than
by a recourse to the registration in the Motor Vehicles Office to determine
who is the owner. The protection that the law aims to extend to him would
become illusory were the registered owner given the opportunity to escape
liability by disproving his ownership. If the policy of the law is to be enforced
and carried out, the registered owner should not be allowed to prove the
contrary to the prejudice of the person injured, that is to prove that a third

person or another has become the owner, so that he may be thereby be

relieved of the responsibility to the injured person.[24]
In this case, petitioner admits that it is the registered owner of the oil tanker
that figured in an accident causing the death of Loretta. As the registered
owner, it cannot escape liability for the loss arising out of negligence in the
operation of the oil tanker. Its liability remains even if at the time of the
accident, the oil tanker was leased to BG Hauler and was being driven by the
latter's driver, and despite a provision in the lease contract exonerating the
registered owner from liability.
As a final point, we agree with the Court of Appeals that the award of
attorney's fees by the RTC must be deleted for lack of basis. The RTC failed
to justify the award of P50,000 attorney's fees to respondent spouses
Baylon. The award of attorney's fees must have some factual, legal and
equitable
bases
and
cannot
be
left
to
speculations
and
[25]
[26]
conjectures.
Consistent with prevailing jurisprudence,
attorney's fees
as part of damages are awarded only in the instances enumerated in Article
2208 of the Civil Code.[27] Thus, the award of attorney's fees is the exception
rather than the rule. Attorney's fees are not awarded every time a party
prevails in a suit because of the policy that no premium should be placed on
the right to litigate.[28]
WHEREFORE, we DENY the petition. We AFFIRM the 9 October 2007
Decision and the 18 January 2008 Resolution of the Court of Appeals in CAG.R. CV No. 81446 affirming with modification the 30 October 2003 Decision
of the Regional Trial Court (Branch 35) of Gapan City in Civil Case No. 2334
ordering petitioner FEB Leasing and Finance Corporation, BG Hauler, Inc.,
and driver Manuel Y. Estilloso to solidarily pay respondent spouses Sergio P.
Baylon and Maritess Villena-Baylon the following amounts:
a. P62,000.00 representing actual expenses incurred by the plaintiffs;
b. P50,000.00 as moral damages;
c. P2,400,000.00 for loss of earning capacity of the deceased victim,
Loretta V. Baylon; and
d. P50,000.00 for death indemnity.
Costs against petitioner.
SO ORDERED.
Leonardo-De Castro,* Brion, Perez, and Sereno, JJ., concur.
Endnotes:

"SEC. 12. Liability of Lessors. ? Financing companies shall not be liable for
loss, damage or injury caused by a motor vehicle, aircraft, vessel,
equipment or other property leased to a third person or entity except where
the motor vehicle, aircraft, vessel, equipment or other property is operated
by the financing company, its employees or agents at the time of the loss,
damage or injury.

SECOND DIVISION G.R. No. 149019 August 15, 2006

DELSAN TRANSPORT LINES, INC., Petitioner,
vs.
AMERICAN HOME ASSURANCE CORPORATION, Respondent.
DECISION
GARCIA, J.:
By this petition for review on certiorari under Rule 45 of the Rules of Court,
petitioner Delsan Transport Lines, Inc. (Delsan hereafter) assails and seeks
to set aside the Decision, 1 dated July 16, 2001, of the Court of Appeals (CA)
in CA-G.R. CV No. 40951 affirming an earlier decision of the Regional Trial
Court (RTC) of Manila, Branch IX, in two separate complaints for damages
docketed as Civil Case No. 85-29357 and Civil Case No. 85-30559.
The facts:
Delsan is a domestic corporation which owns and operates the vessel MT
Larusan. On the other hand, respondent American Home Assurance
Corporation (AHAC for brevity) is a foreign insurance company duly licensed
to do business in the Philippines through its agent, the AmericanInternational Underwriters, Inc. (Phils.). It is engaged, among others, in
insuring cargoes for transportation within the Philippines.
On August 5, 1984, Delsan received on board MT Larusan a shipment
consisting of 1,986.627 k/l Automotive Diesel Oil (diesel oil) at the Bataan
Refinery Corporation for transportation and delivery to the bulk depot in
Bacolod City of Caltex Phils., Inc. (Caltex), pursuant to a Contract of
Afreightment. The shipment was insured by respondent AHAC against all
risks under Inland Floater Policy No. AH-IF64-1011549P and Marine Risk
Note No. 34-5093-6.
On August 7, 1984, the shipment arrived in Bacolod City. Immediately
thereafter, unloading operations commenced. The discharging of the diesel
oil started at about 1:30 PM of the same day. However, at about 10:30 PM,
the discharging had to be stopped on account of the discovery that the port
bow mooring of the vessel was intentionally cut or stolen by unknown
persons. Because there was nothing holding it, the vessel drifted westward,
dragged and stretched the flexible rubber hose attached to the riser, broke
the elbow into pieces, severed completely the rubber hose connected to the
tanker from the main delivery line at sea bed level and ultimately caused the
diesel oil to spill into the sea. To avoid further spillage, the vessels crew
tried water flushing to clear the line of the diesel oil but to no avail. In the
meantime, the shore tender, who was waiting for the completion of the
water flushing, was surprised when the tanker signaled a "red light" which
meant stop pumping. Unaware of what happened, the shore tender, thinking

that the vessel would, at any time, resume pumping, did not shut the
storage tank gate valve. As all the gate valves remained open, the diesel oil
that was earlier discharged from the vessel into the shore tank backflowed.
Due to non-availability of a pump boat, the vessel could not send somebody
ashore to inform the people at the depot about what happened. After almost
an hour, a gauger and an assistant surveyor from the Caltexs Bulk Depot
Office boarded the vessel. It was only then that they found out what had
happened. Thereafter, the duo immediately went ashore to see to it that the
shore tank gate valve was closed. The loss of diesel oil due to spillage was
placed at 113.788 k/l while some 435,081 k/l thereof backflowed from the
shore tank.
As a result of spillage and backflow of diesel oil, Caltex sought recovery of
the loss from Delsan, but the latter refused to pay. As insurer, AHAC paid
Caltex the sum of P479,262.57 for spillage, pursuant to Marine Risk Note
No. 34-5093-6, and P1,939,575.37 for backflow of the diesel oil pursuant to
Inland Floater Policy No. AH-1F64-1011549P.
On February 19, 1985, AHAC, as Caltexs subrogee, instituted Civil Case No.
85-29357 against Delsan before the Manila RTC, Branch 9, for loss caused
by the spillage. It likewise prayed that it be indemnified for damages
suffered in the amount of P652,432.57 plus legal interest thereon.
Also, on May 5, 1985, in the Manila RTC, Branch 31, AHAC instituted Civil
Case No. 85-30559 against Delsan for the loss caused by the backflow. It
likewise prayed that it be awarded the amount of P1,939,575.37 for
damages and reasonable attorneys fees. As counterclaim in both cases,
AHAC prayed for attorneys fees in the amount of P200,000.00 and P500.00
for every court appearance.
Since the cause of action in both cases arose out of the same incident and
involved the same issues, the two were consolidated and assigned to Branch
9 of the court.
On August 31, 1989, the trial court rendered its decision 2 in favor of AHAC
holding Delsan liable for the loss of the cargo for its negligence in its duty as
a common carrier. Dispositively, the decision reads:
WHEREFORE, judgment is hereby rendered:
A). In Civil Case No. 85-30559:
(1) Ordering the defendant (petitioner Delsan) to pay plaintiff (respondent
AHAC) the sum of P1,939,575.37 with interest thereon at the legal rate from
November 21, 1984 until fully paid and satisfied; and
(2) Ordering defendant to pay plaintiff the sum of P10,000.00 as and for
attorneys fees.
For lack of merit, the counterclaim is hereby dismissed.

B). In Civil Case No. 85-29357:

(1) Ordering defendant to pay plaintiff the sum of P479,262.57 with interest
thereon at the legal rate from February 6, 1985 until fully paid and satisfied;
(2) Ordering defendant to pay plaintiff the sum of P5,000.00 as and for
attorneys fees.
For lack of merit, the counterclaim is hereby dismissed.
Costs against the defendant.
SO ORDERED.
In time, Delsan appealed to the CA whereat its recourse was docketed as
CA-G.R. CV No. 40951.
In the herein challenged decision, 3 the CA affirmed the findings of the trial
court. In so ruling, the CA declared that Delsan failed to exercise the
extraordinary diligence of a good father of a family in the handling of its
cargo. Applying Article 1736 4 of the Civil Code, the CA ruled that since the
discharging of the diesel oil into Caltex bulk depot had not been completed
at the time the losses occurred, there was no reason to imply that there was
actual delivery of the cargo to Caltex, the consignee. We quote the fallo of
the CA decision:
WHEREFORE, premises considered, the appealed Decision of the Regional
Trial Court of Manila, Branch 09 in Civil Case Nos. 85-29357 and 85-30559 is
hereby AFFIRMED with a modification that attorneys fees awarded in Civil
Case Nos. 85-29357 and 85-30559 are hereby DELETED.
SO ORDERED.
Delsan is now before the Court raising substantially the same issues
proffered before the CA.
Principally, Delsan insists that the CA committed reversible error in ruling
that Article 1734 of the Civil Code cannot exculpate it from liability for the
loss of the subject cargo and in not applying the rule on contributory
negligence against Caltex, the shipper-owner of the cargo, and in not taking
into consideration the fact that the loss due to backflow occurred when the
diesel oil was already completely delivered to Caltex.
We are not persuaded.
In resolving this appeal, the Court reiterates the oft-stated doctrine that
factual findings of the CA, affirmatory of those of the trial court, are binding
on the Court unless there is a clear showing that such findings are tainted
with arbitrariness, capriciousness or palpable error. 5

Delsan would have the Court absolve it from liability for the loss of its cargo
on two grounds. First, the loss through spillage was partly due to the
contributory negligence of Caltex; and Second, the loss through backflow
should not be borne by Delsan because it was already delivered to Caltexs
shore tank.
Common carriers are bound to observe extraordinary diligence in the
vigilance over the goods transported by them. They are presumed to have
been at fault or to have acted negligently if the goods are lost, destroyed or
deteriorated. 6 To overcome the presumption of negligence in case of loss,
destruction or deterioration of the goods, the common carrier must prove
that it exercised extraordinary diligence. There are, however, exceptions to
this rule. Article 1734 of the Civil Code enumerates the instances when the
presumption of negligence does not attach:
Art. 1734. Common carriers are responsible for the loss, destruction, or
deterioration of the goods, unless the same is due to any of the following
causes only:
1) Flood storm, earthquake, lightning, or other natural disaster or calamity;
2) Act of the public enemy in war, whether international or civil;
3) Act or omission of the shipper or owner of the goods;
4) The character of the goods or defects in the packing or in the containers;
5) Order or act of competent public authority.
Both the trial court and the CA uniformly ruled that Delsan failed to prove its
claim that there was a contributory negligence on the part of the owner of
the goods Caltex. We see no reason to depart therefrom. As aptly pointed
out by the CA, it had been established that the proximate cause of the
spillage and backflow of the diesel oil was due to the severance of the port
bow mooring line of the vessel and the failure of the shore tender to close
the storage tank gate valve even as a check on the drain cock showed that
there was still a product on the pipeline. To the two courts below, the
actuation of the gauger and the escort surveyor, both personnel from the
Caltex Bulk Depot, negates the allegation that Caltex was remiss in its
duties. As we see it, the crew of the vessel should have promptly informed
the shore tender that the port mooring line was cut off. However, Delsan did
not do so on the lame excuse that there was no available banca. As it is,
Delsans personnel signaled a "red light" which was not a sufficient warning
because such signal only meant that the pumping of diesel oil had been
finished. Neither did the blowing of whistle suffice considering the distance of
more than 2 kilometers between the vessel and the Caltex Bulk Depot, aside
from the fact that it was not the agreed signal. Had the gauger and the
escort surveyor from Caltex Bulk Depot not gone aboard the vessel to make
inquiries, the shore tender would have not known what really happened. The

crew of the vessel should have exerted utmost effort to immediately inform
the shore tender that the port bow mooring line was severed.
To be sure, Delsan, as the owner of the vessel, was obliged to prove that the
loss was caused by one of the excepted causes if it were to seek exemption
from responsibility. 7 Unfortunately, it miserably failed to discharge this
burden by the required quantum of proof.
Delsans argument that it should not be held liable for the loss of diesel oil
due to backflow because the same had already been actually and legally
delivered to Caltex at the time it entered the shore tank holds no water. It
had been settled that the subject cargo was still in the custody of Delsan
because the discharging thereof has not yet been finished when the backflow
occurred. Since the discharging of the cargo into the depot has not yet been
completed at the time of the spillage when the backflow occurred, there is
no reason to imply that there was actual delivery of the cargo to the
consignee. Delsan is straining the issue by insisting that when the diesel oil
entered into the tank of Caltex on shore, there was legally, at that moment,
a complete delivery thereof to Caltex. To be sure, the extraordinary
responsibility of common carrier lasts from the time the goods are
unconditionally placed in the possession of, and received by, the carrier for
transportation until the same are delivered, actually or constructively, by the
carrier to the consignee, or to a person who has the right to receive
them. 8 The discharging of oil products to Caltex Bulk Depot has not yet
been finished, Delsan still has the duty to guard and to preserve the cargo.
The carrier still has in it the responsibility to guard and preserve the goods,
a duty incident to its having the goods transported.
To recapitulate, common carriers, from the nature of their business and for
reasons of public policy, are bound to observe extraordinary diligence in
vigilance over the goods and for the safety of the passengers transported by
them, according to all the circumstances of each case. 9 The mere proof of
delivery of goods in good order to the carrier, and their arrival in the place of
destination in bad order, make out a prima facie case against the carrier, so
that if no explanation is given as to how the injury occurred, the carrier must
be held responsible. It is incumbent upon the carrier to prove that the loss
was due to accident or some other circumstances inconsistent with its
liability. 10
All told, Delsan, being a common carrier, should have exercised
extraordinary diligence in the performance of its duties. Consequently, it is
obliged to prove that the damage to its cargo was caused by one of the
excepted causes if it were to seek exemption from responsibility. 11 Having
failed to do so, Delsan must bear the consequences.

WHEREFORE, petition is DENIED and the assailed decision of the CA is

AFFIRMED in toto.
Cost against petitioner.
SO ORDERED.
Footnotes
4

Art. 1736. The extraordinary responsibility of the common carrier lasts

from the time the goods are unconditionally placed in the possession of, and
received by the carrier for transportation until the same are delivered,
actually or constructively, by the carrier to the consignee, or to the person
who has a right to receive them, without prejudice to the provisions of
Article 1738.

SECOND DIVISION
G.R. No. 149019 August 15, 2006
DELSAN TRANSPORT LINES, INC., Petitioner,
vs.
AMERICAN HOME ASSURANCE CORPORATION, Respondent.
DECISION
GARCIA, J.:
By this petition for review on certiorari under Rule 45 of the Rules of Court,
petitioner Delsan Transport Lines, Inc. (Delsan hereafter) assails and seeks
to set aside the Decision, 1 dated July 16, 2001, of the Court of Appeals (CA)
in CA-G.R. CV No. 40951 affirming an earlier decision of the Regional Trial
Court (RTC) of Manila, Branch IX, in two separate complaints for damages
docketed as Civil Case No. 85-29357 and Civil Case No. 85-30559.
The facts:
Delsan is a domestic corporation which owns and operates the vessel MT
Larusan. On the other hand, respondent American Home Assurance
Corporation (AHAC for brevity) is a foreign insurance company duly licensed
to do business in the Philippines through its agent, the AmericanInternational Underwriters, Inc. (Phils.). It is engaged, among others, in
insuring cargoes for transportation within the Philippines.
On August 5, 1984, Delsan received on board MT Larusan a shipment
consisting of 1,986.627 k/l Automotive Diesel Oil (diesel oil) at the Bataan
Refinery Corporation for transportation and delivery to the bulk depot in
Bacolod City of Caltex Phils., Inc. (Caltex), pursuant to a Contract of
Afreightment. The shipment was insured by respondent AHAC against all
risks under Inland Floater Policy No. AH-IF64-1011549P and Marine Risk
Note No. 34-5093-6.
On August 7, 1984, the shipment arrived in Bacolod City. Immediately
thereafter, unloading operations commenced. The discharging of the diesel
oil started at about 1:30 PM of the same day. However, at about 10:30 PM,
the discharging had to be stopped on account of the discovery that the port
bow mooring of the vessel was intentionally cut or stolen by unknown
persons. Because there was nothing holding it, the vessel drifted westward,
dragged and stretched the flexible rubber hose attached to the riser, broke
the elbow into pieces, severed completely the rubber hose connected to the
tanker from the main delivery line at sea bed level and ultimately caused the
diesel oil to spill into the sea. To avoid further spillage, the vessels crew
tried water flushing to clear the line of the diesel oil but to no avail. In the
meantime, the shore tender, who was waiting for the completion of the
water flushing, was surprised when the tanker signaled a "red light" which
meant stop pumping. Unaware of what happened, the shore tender, thinking
that the vessel would, at any time, resume pumping, did not shut the
storage tank gate valve. As all the gate valves remained open, the diesel oil
that was earlier discharged from the vessel into the shore tank backflowed.

Due to non-availability of a pump boat, the vessel could not send somebody
ashore to inform the people at the depot about what happened. After almost
an hour, a gauger and an assistant surveyor from the Caltexs Bulk Depot
Office boarded the vessel. It was only then that they found out what had
happened. Thereafter, the duo immediately went ashore to see to it that the
shore tank gate valve was closed. The loss of diesel oil due to spillage was
placed at 113.788 k/l while some 435,081 k/l thereof backflowed from the
shore tank.
As a result of spillage and backflow of diesel oil, Caltex sought recovery of
the loss from Delsan, but the latter refused to pay. As insurer, AHAC paid
Caltex the sum of P479,262.57 for spillage, pursuant to Marine Risk Note
No. 34-5093-6, and P1,939,575.37 for backflow of the diesel oil pursuant to
Inland Floater Policy No. AH-1F64-1011549P.
On February 19, 1985, AHAC, as Caltexs subrogee, instituted Civil Case No.
85-29357 against Delsan before the Manila RTC, Branch 9, for loss caused
by the spillage. It likewise prayed that it be indemnified for damages
suffered in the amount of P652,432.57 plus legal interest thereon.
Also, on May 5, 1985, in the Manila RTC, Branch 31, AHAC instituted Civil
Case No. 85-30559 against Delsan for the loss caused by the backflow. It
likewise prayed that it be awarded the amount of P1,939,575.37 for
damages and reasonable attorneys fees. As counterclaim in both cases,
AHAC prayed for attorneys fees in the amount of P200,000.00 and P500.00
for every court appearance.
Since the cause of action in both cases arose out of the same incident and
involved the same issues, the two were consolidated and assigned to Branch
9 of the court.
On August 31, 1989, the trial court rendered its decision 2 in favor of AHAC
holding Delsan liable for the loss of the cargo for its negligence in its duty as
a common carrier. Dispositively, the decision reads:
WHEREFORE, judgment is hereby rendered:
A). In Civil Case No. 85-30559:
(1) Ordering the defendant (petitioner Delsan) to pay plaintiff (respondent
AHAC) the sum of P1,939,575.37 with interest thereon at the legal rate from
November 21, 1984 until fully paid and satisfied; and
(2) Ordering defendant to pay plaintiff the sum of P10,000.00 as and for
attorneys fees.
For lack of merit, the counterclaim is hereby dismissed.
B). In Civil Case No. 85-29357:

(1) Ordering defendant to pay plaintiff the sum of P479,262.57 with interest
thereon at the legal rate from February 6, 1985 until fully paid and satisfied;
(2) Ordering defendant to pay plaintiff the sum of P5,000.00 as and for
attorneys fees.
For lack of merit, the counterclaim is hereby dismissed.
Costs against the defendant.
SO ORDERED.
In time, Delsan appealed to the CA whereat its recourse was docketed as
CA-G.R. CV No. 40951.
In the herein challenged decision, 3 the CA affirmed the findings of the trial
court. In so ruling, the CA declared that Delsan failed to exercise the
extraordinary diligence of a good father of a family in the handling of its
cargo. Applying Article 1736 4 of the Civil Code, the CA ruled that since the
discharging of the diesel oil into Caltex bulk depot had not been completed
at the time the losses occurred, there was no reason to imply that there was
actual delivery of the cargo to Caltex, the consignee. We quote the fallo of
the CA decision:
WHEREFORE, premises considered, the appealed Decision of the Regional
Trial Court of Manila, Branch 09 in Civil Case Nos. 85-29357 and 85-30559 is
hereby AFFIRMED with a modification that attorneys fees awarded in Civil
Case Nos. 85-29357 and 85-30559 are hereby DELETED.
SO ORDERED.
Delsan is now before the Court raising substantially the same issues
proffered before the CA.
Principally, Delsan insists that the CA committed reversible error in ruling
that Article 1734 of the Civil Code cannot exculpate it from liability for the
loss of the subject cargo and in not applying the rule on contributory
negligence against Caltex, the shipper-owner of the cargo, and in not taking
into consideration the fact that the loss due to backflow occurred when the
diesel oil was already completely delivered to Caltex.
We are not persuaded.
In resolving this appeal, the Court reiterates the oft-stated doctrine that
factual findings of the CA, affirmatory of those of the trial court, are binding
on the Court unless there is a clear showing that such findings are tainted
with arbitrariness, capriciousness or palpable error. 5

Delsan would have the Court absolve it from liability for the loss of its cargo
on two grounds. First, the loss through spillage was partly due to the
contributory negligence of Caltex; and Second, the loss through backflow
should not be borne by Delsan because it was already delivered to Caltexs
shore tank.
Common carriers are bound to observe extraordinary diligence in the
vigilance over the goods transported by them. They are presumed to have
been at fault or to have acted negligently if the goods are lost, destroyed or
deteriorated. 6 To overcome the presumption of negligence in case of loss,
destruction or deterioration of the goods, the common carrier must prove
that it exercised extraordinary diligence. There are, however, exceptions to
this rule. Article 1734 of the Civil Code enumerates the instances when the
presumption of negligence does not attach:

Art. 1734. Common carriers are responsible for the loss, destruction,
or deterioration of the goods, unless the same is due to any of the
following causes only:
1) Flood storm, earthquake, lightning, or other natural disaster or
calamity;
2) Act of the public enemy in war, whether international or civil;
3) Act or omission of the shipper or owner of the goods;
4) The character of the goods or defects in the packing or in the
containers;
5) Order or act of competent public authority.
Both the trial court and the CA uniformly ruled that Delsan failed to prove its
claim that there was a contributory negligence on the part of the owner of
the goods Caltex. We see no reason to depart therefrom. As aptly pointed
out by the CA, it had been established that the proximate cause of the
spillage and backflow of the diesel oil was due to the severance of the port
bow mooring line of the vessel and the failure of the shore tender to close
the storage tank gate valve even as a check on the drain cock showed that
there was still a product on the pipeline. To the two courts below, the
actuation of the gauger and the escort surveyor, both personnel from the
Caltex Bulk Depot, negates the allegation that Caltex was remiss in its
duties. As we see it, the crew of the vessel should have promptly informed
the shore tender that the port mooring line was cut off. However, Delsan did
not do so on the lame excuse that there was no available banca. As it is,
Delsans personnel signaled a "red light" which was not a sufficient warning
because such signal only meant that the pumping of diesel oil had been
finished. Neither did the blowing of whistle suffice considering the distance of
more than 2 kilometers between the vessel and the Caltex Bulk Depot, aside
from the fact that it was not the agreed signal. Had the gauger and the

escort surveyor from Caltex Bulk Depot not gone aboard the vessel to make
inquiries, the shore tender would have not known what really happened. The
crew of the vessel should have exerted utmost effort to immediately inform
the shore tender that the port bow mooring line was severed.
To be sure, Delsan, as the owner of the vessel, was obliged to prove that the
loss was caused by one of the excepted causes if it were to seek exemption
from responsibility. 7 Unfortunately, it miserably failed to discharge this
burden by the required quantum of proof.
Delsans argument that it should not be held liable for the loss of diesel oil
due to backflow because the same had already been actually and legally
delivered to Caltex at the time it entered the shore tank holds no water. It
had been settled that the subject cargo was still in the custody of Delsan
because the discharging thereof has not yet been finished when the backflow
occurred. Since the discharging of the cargo into the depot has not yet been
completed at the time of the spillage when the backflow occurred, there is
no reason to imply that there was actual delivery of the cargo to the
consignee. Delsan is straining the issue by insisting that when the diesel oil
entered into the tank of Caltex on shore, there was legally, at that moment,
a complete delivery thereof to Caltex. To be sure, the extraordinary
responsibility of common carrier lasts from the time the goods are
unconditionally placed in the possession of, and received by, the carrier for
transportation until the same are delivered, actually or constructively, by the
carrier to the consignee, or to a person who has the right to receive
them. 8 The discharging of oil products to Caltex Bulk Depot has not yet
been finished, Delsan still has the duty to guard and to preserve the cargo.
The carrier still has in it the responsibility to guard and preserve the goods,
a duty incident to its having the goods transported.
To recapitulate, common carriers, from the nature of their business and for
reasons of public policy, are bound to observe extraordinary diligence in
vigilance over the goods and for the safety of the passengers transported by
them, according to all the circumstances of each case. 9 The mere proof of
delivery of goods in good order to the carrier, and their arrival in the place of
destination in bad order, make out a prima facie case against the carrier, so
that if no explanation is given as to how the injury occurred, the carrier must
be held responsible. It is incumbent upon the carrier to prove that the loss
was due to accident or some other circumstances inconsistent with its
liability. 10
All told, Delsan, being a common carrier, should have exercised
extraordinary diligence in the performance of its duties. Consequently, it is
obliged to prove that the damage to its cargo was caused by one of the
excepted causes if it were to seek exemption from responsibility. 11 Having
failed to do so, Delsan must bear the consequences.

WHEREFORE, petition is DENIED and the assailed decision of the CA is

AFFIRMED in toto.
Cost against petitioner.
SO ORDERED.
Footnotes
4

Art. 1736. The extraordinary responsibility of the common carrier lasts

from the time the goods are unconditionally placed in the possession of, and
received by the carrier for transportation until the same are delivered,
actually or constructively, by the carrier to the consignee, or to the person
who has a right to receive them, without prejudice to the provisions of
Article 1738.

G.R. No. 119197. May 16, 1997

TABACALERA INSURANCE CO., PRUDENTIAL GUARANTEE &
ASSURANCE, INC., and NEW ZEALAND INSURANCE CO.,
LTD., petitioners,
vs.
NORTH FRONT SHIPPING SERVICES, INC., and COURT OF
APPEALS, respondents.
DECISION
BELLOSILLO, J.:
TABACALERA INSURANCE CO., Prudential Guarantee & Assurance, Inc.,
and New Zealand Insurance Co., Ltd., in this petition for review on certiorari,
assail the 22 December 1994 decision of the Court of Appeals and its
Resolution of 16 February 1995 which affirmed the 1 June 1993 decision of
the Regional Trial Court dismissing their complaint for damages against
North Front Shipping Services, Inc.
On 2 August 1990, 20,234 sacks of corn grains valued at P3,500,640.00
were shipped on board North Front 777, a vessel owned by North Front
Shipping Services, Inc. The cargo was consigned to Republic Flour Mills
Corporation in Manila under Bill of Lading No. 001[1] and insured with the
herein mentioned insurance companies. The vessel was inspected prior to
actual loading by representatives of the shipper and was found fit to carry
the merchandise. The cargo was covered with tarpaulins and wooden
boards. The hatches were sealed and could only be opened by
representatives of Republic Flour Mills Corporation.
The vessel left Cagayan de Oro City on 2 August 1990 and arrived Manila
on 16 August 1990. Republic Flour Mills Corporation was advised of its
arrival but it did not immediately commence the unloading operations. There
were days when unloading had to be stopped due to variable weather
conditions and sometimes for no apparent reason at all. When the cargo was
eventually unloaded there was a shortage of 26.333 metric tons. The
remaining merchandise was already moldy, rancid and deteriorating. The
unloading operations were completed on 5 September 1990 or twenty (20)
days after the arrival of the barge at the wharf of Republic Flour Mills
Corporation in Pasig City.
Precision Analytical Services, Inc., was hired to examine the corn grains
and determine the cause of deterioration. A Certificate of Analysis was
issued indicating that the corn grains had 18.56% moisture content and the
wetting was due to contact with salt water. The mold growth was only
incipient and not sufficient to make the corn grains toxic and unfit for
consumption. In fact the mold growth could still be arrested by drying.
Republic Flour Mills Corporation rejected the entire cargo and formally
demanded from North Front Shipping Services, Inc., payment for the

damages suffered by it. The demands however were unheeded. The

insurance companies were perforce obliged to pay Republic Flour Mills
Corporation P2,189,433.40.
By virtue of the payment made by the insurance companies they were
subrogated to the rights of Republic Flour Mills Corporation. Thusly, they
lodged a complaint for damages against North Front Shipping Services, Inc.,
claiming that the loss was exclusively attributable to the fault and negligence
of the carrier. The Marine Cargo Adjusters hired by the insurance companies
conducted a survey and found cracks in the bodega of the barge and heavy
concentration of molds on the tarpaulins and wooden boards. They did not
notice any seals in the hatches. The tarpaulins were not brand new as there
were patches on them, contrary to the claim of North Front Shipping
Services, Inc., thus making it possible for water to seep in.They also
discovered that the bulkhead of the barge was rusty.
North Front Shipping Services, Inc., averred in refutation that it could not
be made culpable for the loss and deterioration of the cargo as it was never
negligent. Captain Solomon Villanueva, master of the vessel, reiterated that
the barge was inspected prior to the actual loading and was found adequate
and seaworthy. In addition, they were issued a permit to sail by the Coast
Guard. The tarpaulins were doubled and brand new and the hatches were
properly sealed. They did not encounter big waves hence it was not possible
for water to seep in. He further averred that the corn grains were farm wet
and not properly dried when loaded.
The court below dismissed the complaint and ruled that the contract
entered into between North Front Shipping Services, Inc., and Republic Flour
Mills Corporation was a charter-party agreement. As such, only ordinary
diligence in the care of goods was required of North Front Shipping Services,
Inc. The inspection of the barge by the shipper and the representatives of
the shipping company before actual loading, coupled with the Permit to
Sail issued by the Coast Guard, sufficed to meet the degree of diligence
required of the carrier.
On the other hand, the Court of Appeals ruled that as a common carrier
required to observe a higher degree of diligence North Front
777 satisfactorily complied with all the requirements hence was issued
a Permit to Sail after proper inspection.Consequently, the complaint was
dismissed and the motion for reconsideration rejected.
The charter-party agreement between North Front Shipping Services, Inc.,
and Republic Flour Mills Corporation did not in any way convert the common
carrier into a private carrier. We have already resolved this issue with finality
in Planters Products, Inc. v. Court of Appeals[2] thus -

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

principal part thereof, is let by the owner to another person for a specified
time or use; a contract of affreightment by which the owner of a ship or
other vessel lets the whole or a part of her to a merchant or other person for
the conveyance of goods, on a particular voyage, in consideration of the
payment of freight x x x x Contract of affreightment may either be time
charter, wherein the vessel is leased to the charterer for a fixed period of
time, or voyage charter, wherein the ship is leased for a single voyage. In
both cases, the charter-party provides for the hire of the vessel only, either
for a determinate period of time or for a single or consecutive voyage, the
ship owner to supply the ship's store, pay for the wages of the master of the
crew, and defray the expenses for the maintenance of the ship.
Upon the other hand, the term 'common or public carrier' is defined in Art.
1732 of the Civil Code. The definition extends to carriers either by land, air
or water which hold themselves out as ready to engage in carrying goods or
transporting passengers or both for compensation as a public employment
and not as a casual occupation x x x x
It is therefore imperative that a public carrier shall remain as such,
notwithstanding the charter of the whole or portion of a vessel by one or
more persons, provided the charter is limited to the ship only, as in the case
of a time-charter or voyage-charter (underscoring supplied).
North Front Shipping Services, Inc., is a corporation engaged in the
business of transporting cargo and offers its services indiscriminately to the
public. It is without doubt a common carrier. As such it is required to
observe extraordinary diligencein its vigilance over the goods it
transports.[3]. When goods placed in its care are lost or damaged, the carrier
is presumed to have been at fault or to have acted negligently.[4] North
Front Shipping Services, Inc., therefore has the burden of proving that it
observed extraordinary diligence in order to avoid responsibility for the lost
cargo.
North Front Shipping Services, Inc., proved that the vessel was inspected
prior to actual loading by representatives of the shipper and was found fit to
take a load of corn grains. They were also issued Permit to Sail by the Coast
Guard. Themaster of the vessel testified that the corn grains were farm wet
when loaded. However, this testimony was disproved by the clean bill of
lading issued by North Front Shipping Services, Inc., which did not contain a
notation that the corn grains were wet and improperly dried. Having been in
the service since 1968, the master of the vessel would have known at
the outset that corn grains that were farm wet and not properly dried would
eventually deteriorate when stored in sealed and hot compartments as in
hatches of a ship. Equipped with this knowledge, the master of the vessel
and his crew should have undertaken precautionary measures to avoid or
lessen the cargo's possible deterioration as they were presumed

knowledgeable about the nature of such cargo. But none of such measures
was taken.
In Compania Maritima v. Court of Appeals[5] we ruled x x x x Mere proof of delivery of the goods in good order to a common
carrier, and of their arrival at the place of destination in bad order, makes
out prima facie case against the common carrier, so that if no explanation is
given as to how the loss, deterioration or destruction of the goods occurred,
the common carrier must be held responsible. Otherwise stated, it is
incumbent upon the common carrier to prove that the loss, deterioration or
destruction was due to accident or some other circumstances inconsistent
with its liability x x x x
The extraordinary diligence in the vigilance over the goods tendered for
shipment requires the common carrier to know and to follow the required
precaution for avoiding damage to, or destruction of the goods entrusted to
it for safe carriage and delivery. It requires common carriers to render
service with the greatest skill and foresight and 'to use all reasonable means
to ascertain the nature and characteristics of goods tendered for shipment,
and to exercise due care in the handling and stowage, including such
methods as their nature requires' (underscoring supplied).
In fine, we
find that the
carrier
failed to
observe
the
required extraordinary diligence in the vigilance over the goods placed in its
care. The proofs presented by North Front Shipping Services, Inc.,
were
insufficient to rebut the prima faciepresumption of private respondent's
negligence, more so if we consider the evidence adduced by petitioners.
It is not denied by the insurance companies that the vessel was indeed
inspected before actual loading and that North Front 777 was issued
a Permit to Sail. They proved the fact of shipment and its consequent loss or
damage while in the actual possession of the carrier. Notably, the carrier
failed to volunteer any explanation why there was spoilage and how it
occurred. On the other hand, it was shown during the trial that the vessel
had rusty bulkheads and the wooden boards and tarpaulins bore heavy
concentration of molds. The tarpaulins used were not new, contrary to the
claim of North Front Shipping Services, Inc., as there were already several
patches on them, hence, making it highly probable for water to enter.
Laboratory analysis revealed that the corn grains were contaminated with
salt water. North Front Shipping Services, Inc., failed to rebut all these
arguments. It did not even endeavor to establish that the loss, destruction
or deterioration of the goods was due to the following: (a) flood, storm,
earthquake, lightning, or other natural disaster or calamity; (b) act of the
public enemy in war, whether international or civil; (c) act or omission of the
shipper or owner of the goods; (d) the character of the goods or defects in

the packing or in the containers; (e) order or act of competent public

authority.[6] This is a closed list. If the cause of destruction, loss or
deterioration is other than the enumerated circumstances, then the carrier is
rightly liable therefor.
However, we cannot attribute the destruction, loss or deterioration of the
cargo solely to the carrier. We find the consignee Republic Flour Mills
Corporation guilty of contributory negligence. It was seasonably notified of
the arrival of the barge but did not immediately start the unloading
operations. No explanation was proffered by the consignee as to why there
was a delay of six (6) days. Had the unloading been commenced
immediately the loss could have been completely avoided or at least
minimized. As testified to by the chemist who analyzed the corn samples,
the mold growth was only at its incipient stage and could still be arrested by
drying. The corn grains were not yet toxic or unfit for consumption. For its
contributory negligence, Republic Flour Mills Corporation should share at
least 40% of the loss.[7]
WHEREFORE, the Decision of the Court of Appeals of 22 December 1994
and
its
Resolution
of
16
February
1995
are
REVERSED and
SET ASIDE. Respondent North Front Shipping Services, Inc., is ordered to
pay petitioners Tabacalera Insurance Co., Prudential Guarantee & Assurance,
Inc., and New Zealand Insurance Co. Ltd., P1,313,660.00 which is 60% of
the amount paid by the insurance companies to Republic Flour Mills
Corporation, plus interest at the rate of 12% per annum from the time this
judgment becomes final until full payment.
SO ORDERED.

G.R. No. L-28673 October 23, 1984

SAMAR MINING COMPANY, INC., plaintiff-appellee,
vs.
NORDEUTSCHER LLOYD and C.F. SHARP & COMPANY,
INC., defendants-appellants.

CUEVAS, J.:
This is an appeal taken directly to Us on certiorari from the decision of the
defunct Court of First Instance of Manila, finding defendants carrier and
agent, liable for the value of goods never delivered to plaintiff consignee.
The issue raised is a pure question of law, which is, the liability of the
defendants, now appellants, under the bill of lading covering the subject
shipment.
The case arose from an importation made by plaintiff, now appellee,
SAMAR MINING COMPANY, INC., of one (1) crate Optima welded wedge wire
sieves through the M/S SCHWABENSTEIN a vessel owned by defendantappellant NORDEUTSCHER LLOYD, (represented in the Philippines by its
agent, C.F. SHARP & CO., INC.), which shipment is covered by Bill of Lading
No. 18 duly issued to consignee SAMAR MINING COMPANY, INC. Upon
arrival of the aforesaid vessel at the port of Manila, the aforementioned
importation was unloaded and delivered in good order and condition to the
bonded warehouse of AMCYL. 1 The goods were however never delivered to,
nor received by, the consignee at the port of destination Davao.
When the letters of complaint sent to defendants failed to elicit the
desired response, consignee herein appellee, filed a formal claim for
P1,691.93, the equivalent of $424.00 at the prevailing rate of exchange at
that time, against the former, but neither paid. Hence, the filing of the
instant suit to enforce payment. Defendants-appellants brought in AMCYL as
third party defendant.
The trial court rendered judgment in favor of plaintiff, ordering defendants
to pay the amount of P1,691.93 plus attorney's fees and costs. However, the
Court stated that defendants may recoup whatever they may pay plaintiff by
enforcing the judgment against third party defendant AMCYL which had
earlier been declared in default. Only the defendants appealed from said
decision.
The issue at hand demands a close scrutiny of Bill of Lading No. 18 and its
various clauses and stipulations which should be examined in the light of
pertinent legal provisions and settled jurisprudence. This undertaking is not
only proper but necessary as well because of the nature of the bill of lading
which operates both as a receipt for the goods; and more importantly, as a

contract to transport and deliver the same as stipulated therein. 2 Being a

contract, it is the law between the parties thereto 3 who are bound by its
terms and conditions 4 provided that these are not contrary to law, morals,
good customs, public order and public policy. 5
Bill of Lading No. 18 sets forth in page 2 thereof 6 that one (1) crate of
Optima welded wedge wire sieves was received by the carrier
NORDEUTSCHER LLOYD at the "port of loading" which is Bremen, Germany,
while the freight had been prepaid up to the port of destination or the "port
of discharge of goods in this case, Davao, the carrier undertook to transport
the goods in its vessel, M/S SCHWABENSTEIN only up to the "port of
discharge from ship-Manila. Thereafter, the goods were to be transshipped
by the carrier to the port of destination or "port of discharge of goods The
stipulation is plainly indicated on the face of the bill which contains the
following phrase printed below the space provided for the port of discharge
from ship", thus: t.hqw
if goods are to be transshipped at port of discharge, show destination
under the column for "description of contents" 7
As instructed above, the following words appeared typewritten under the
column for "description of contents": t.hqw
PORT
OF
FREIGHT PREPAID

DISCHARGE

OF

GOODS:

DAVAO

It is clear, then, that in discharging the goods from the ship at the port of
Manila, and delivering the same into the custody of AMCYL, the bonded
warehouse, appellants were acting in full accord with the contractual
stipulations contained in Bill of Lading No. 18. The delivery of the goods to
AMCYL was part of appellants' duty to transship the goods from Manila to
their port of destination-Davao. The word "transship" means: t.hqw
to transfer for further transportation from one ship or conveyance to
another 9
The extent of appellant carrier's responsibility and/or liability in the
transshipment of the goods in question are spelled out and delineated under
Section 1, paragraph 3 of Bill of Lading No. 18, to wit: t.hqw
The carrier shall not be liable in any capacity whatsoever for any delay,
loss or damage occurring before the goods enter ship's tackle to be loaded
or after the goods leave ship's tackle to be discharged, transshipped or
forwarded ... (Emphasis supplied)
and in Section 11 of the same Bill, which provides: t.hqw
Whenever the carrier or m aster may deem it advisable or in any case
where the goods are placed at carrier's disposal at or consigned to a point

where the ship does not expect to load or discharge, the carrier or master
may, without notice, forward the whole or any part of the goods before or
after loading at the original port of shipment, ... This carrier, in making
arrangements for any transshipping or forwarding vessels or means of
transportation not operated by this carrier shall be considered solely the
forwarding agent of the shipper and without any other responsibility
whatsoever even though the freight for the whole transport has been
collected by him. ... Pending or during forwarding or transshipping the
carrier may store the goods ashore or afloat solely as agent of the shipper
and at risk and expense of the goods and the carrier shall not be liable for
detention nor responsible for the acts, neglect, delay or failure to act of
anyone to whom the goods are entrusted or delivered for storage, handling
or any service incidental thereto (Emphasis supplied) 10
Defendants-appellants now shirk liability for the loss of the subject goods
by claiming that they have discharged the same in full and good condition
unto the custody of AMCYL at the port of discharge from ship Manila, and
therefore, pursuant to the aforequoted stipulation (Sec. 11) in the bill of
lading, their responsibility for the cargo had ceased. 11
We find merit in appellants' stand. The validity of stipulations in bills of
lading exempting the carrier from liability for loss or damage to the goods
when the same are not in its actual custody has been upheld by Us
in PHOENIX ASSURANCE CO., LTD. vs. UNITED STATES LINES, 22 SCRA 674
(1968). Said case matches the present controversy not only as to the
material facts but more importantly, as to the stipulations contained in the
bill of lading concerned. As if to underline their awesome likeness, the goods
in question in both cases were destined for Davao, but were discharged from
ship in Manila, in accordance with their respective bills of lading.
The stipulations in the bill of lading in the PHOENIX case which are
substantially the same as the subject stipulations before Us,
provides: t.hqw
The carrier shall not be liable in any capacity whatsoever for any loss or
damage to the goods while the goods are not in its actual custody. (Par. 2,
last subpar.)
xxx xxx xxx
The carrier or master, in making arrangements with any person for or in
connection with all transshipping or forwarding of the goods or the use of
any means of transportation or forwarding of goods not used or operated by
the carrier, shall be considered solely the agent of the shipper and consignee
and without any other responsibility whatsoever or for the cost thereof ...
(Par. 16). 12

Finding the above stipulations not contrary to law, morals, good customs,
public order or public policy, We sustained their validity 13 Applying said
stipulations as the law between the parties in the aforecited case, the Court
concluded that: t.hqw
... The short form Bill of Lading ( ) states in no uncertain terms that the
port of discharge of the cargo is Manila, but that the same was to be
transshipped beyond the port of discharge to Davao City. Pursuant to the
terms of the long form Bill of Lading ( ), appellee's responsibility as a
common carrier ceased the moment the goods were unloaded in Manila and
in the matter of transshipment, appellee acted merely as an agent of the
shipper and consignee. ... (Emphasis supplied) 14
Coming now to the case before Us, We hold, that by the authority of the
above pronouncements, and in conformity with the pertinent provisions of
the New Civil Code, Section 11 of Bill of Lading No. 18 and the third
paragraph of Section 1 thereof are valid stipulations between the parties
insofar as they exempt the carrier from liability for loss or damage to the
goods while the same are not in the latter's actual custody.
The liability of the common carrier for the loss, destruction or
deterioration of goods transported from a foreign country to the Philippines
is governed primarily by the New Civil Code. 15 In all matters not regulated
by said Code, the rights and obligations of common carriers shall be
governed by the Code of Commerce and by special laws. 16 A careful
perusal of the provisions of the New Civil Code on common carriers (Section
4, Title VIII, Book IV) directs our attention to Article 1736 thereof, which
reads: t.hqw
Article 1736. The extraordinary responsibility of the common carrier lasts
from the time the goods are unconditionally placed in the possession of, and
received by the carrier for transportation until the same are delivered,
actually or constructively, by the carrier to the consignee, or to the person
who has a right to receive them, without prejudice to the provisions of
article 1738.
Article 1738 referred to in the foregoing provision runs thus: t.hqw
Article 1738. The extraordinary liability of the common carrier continues to
be operative even during the time the goods are stored in a warehouse of
the carrier at the place of destination, until the consignee has been advised
of the arrival of the goods and has had reasonable opportunity thereafter to
remove them or otherwise dispose of them.
There is no doubt that Art. 1738 finds no applicability to the instant case.
The said article contemplates a situation where the goods had already
reached their place of destination and are stored in the warehouse of the
carrier. The subject goods were still awaiting transshipment to their port of

destination, and were stored in the warehouse of a third party when last
seen and/or heard of. However, Article 1736 is applicable to the instant suit.
Under said article, the carrier may be relieved of the responsibility for loss or
damage to the goods upon actual or constructive delivery of the same by the
carrier to the consignee, or to the person who has a right to receive them. In
sales, actual delivery has been defined as the ceding of corporeal possession
by the seller, and the actual apprehension of corporeal possession by the
buyer or by some person authorized by him to receive the goods as his
representative for the purpose of custody or disposal. 17 By the same
token, there is actual delivery in contracts for the transport of goods when
possession has been turned over to the consignee or to his duly authorized
agent and a reasonable time is given him to remove the goods. 18 The
court a quo found that there was actual delivery to the consignee through its
duly authorized agent, the carrier.
It becomes necessary at this point to dissect the complex relationship that
had developed between appellant and appellee in the course of the
transactions that gave birth to the present suit. Two undertakings appeared
embodied and/or provided for in the Bill of Lading 19 in question. The first is
FOR THE TRANSPORT OF GOODS from Bremen, Germany to Manila. The
second, THE TRANSSHIPMENT OF THE SAME GOODS from Manila to Davao,
with appellant acting as agent of the consignee. 20 At the hiatus between
these two undertakings of appellant which is the moment when the subject
goods are discharged in Manila, its personality changes from that of carrier
to that of agent of the consignee. Thus, the character of appellant's
possession also changes, from possession in its own name as carrier, into
possession in the name of consignee as the latter's agent. Such being the
case, there was, in effect, actual delivery of the goods from appellant as
carrier to the same appellant as agent of the consignee. Upon such delivery,
the appellant, as erstwhile carrier, ceases to be responsible for any loss or
damage that may befall the goods from that point onwards. This is the full
import of Article 1736, as applied to the case before Us.
But even as agent of the consignee, the appellant cannot be made
answerable for the value of the missing goods, It is true that the
transshipment of the goods, which was the object of the agency, was not
fully performed. However, appellant had commenced said performance, the
completion of which was aborted by circumstances beyond its control. An
agent who carries out the orders and instructions of the principal without
being guilty of negligence, deceit or fraud, cannot be held responsible for the
failure of the principal to accomplish the object of the agency, 21 This can be
gleaned from the following provisions of the New Civil Code on the
obligations of the agent: t.hqw

Article 1884. The agent is bound by his acceptance to carry out the
agency, and is liable for the damages which, through his non-performance,
the principal may suffer.
xxx xxx xxx
Article 1889. The agent shall be liable for damages if, there being a
conflict between his interests and those of the principal, he should prefer his
own.
Article 1892. The agent may appoint a substitute if the principal has not
prohibited him from doing so; but he shall be responsible for the acts of the
substitute:
(1) When he was not given the power to appoint one;
(2) When he was given such power but without designating the person
and the person appointed was notoriously incompetent or insolvent.
xxx xxx xxx
Article 1909. The agent is responsible not only for fraud, but also for
negligence which shall be judged with more or less rigor by the courts,
according to whether the agency was or was not for a compensation.
The records fail to reveal proof of negligence, deceit or fraud committed
by appellant or by its representative in the Philippines. Neither is there any
showing of notorious incompetence or insolvency on the part of AMCYT,
which acted as appellant's substitute in storing the goods awaiting
transshipment.
The actions of appellant carrier and of its representative in the Philippines
being in full faith with the lawful stipulations of Bill of Lading No. 18 and in
conformity with the provisions of the New Civil Code on common carriers,
agency and contracts, they incur no liability for the loss of the goods in
question.
WHEREFORE, the appealed decision is hereby REVERSED. Plaintiffappellee's complaint is hereby DISMISSED.
No costs.
SO ORDERED.

G.R. No. 108897. October 2, 1997

SARKIES TOURS PHILIPPINES, INC. petitioner
vs.
HONORABLE COURT OF APPEALS (TENTH DIVISION), DR. ELINO G.
FORTADES, MARISOL A. FORTADES and FATIMA A.
FORTADES., respondent.
ROMERO, J.:
This petition for review is seeking the reversal of the decision of the Court
of Appeals in CA-G.R. CV No. 18979 promulgated on January 13, 1993, as
well as its resolution of February 19, 1993, denying petitioners motion for
reconsideration for being a mere rehash of the arguments raised in the
appellantsBRIEF .
The case arose from a damageSUIT filed by private respondents Elino,
Marisol, and Fatima Minerva, all surnamed Fortades, against petitioner for
breach of contract of carriage allegedly attended by bad faith.
On August 31, 1984, Fatima boarded petitioners De Luxe Bus No. 5 in
Manila on her way to Legazpi City. Her brother Raul helped her load three
pieces of luggage containing all of her optometry review books, materials
and equipment, trial lenses, trial contact lenses, passport and visa, as well
as her mother Marisols U.S. immigration (green) card, among
otherIMPORTANT documents and personal belongings. Her belongings was
kept in the baggage compartment of the bus, but during a stopover at Daet,
it was discovered that all but one bag remained in the open
compartment. The others, including Fatimas things, were missing and could
have dropped along the way. Some of the passengers suggested retracing
the route to try to recover the lost items, but the driver ignored them and
proceeded to Legazpi City.
Fatima immediately reported the loss to her mother who, in turn, went to
petitioners office in Legazpi City and later at its head office in Manila. The
latter, however, merely offered her P1,000.00 for each piece of luggage lost,
which she turned down. After returning to Bicol disappointed but not
defeated, they asked assistance from the radio stations and even from
Philtranco bus drivers who plied the same route on August 31st. The effort
paid off when one of Fatimas bags was recovered.Marisol also reported the
incident to the National Bureau of Investigations field office in Legazpi City,
and to the local police.
On September 20, 1984, respondents, through counsel, formally
demanded satisfaction of their complaint from petitioner. In a letter dated
October 1, 1984, the latter apologized for the delay and said that (a) team

has been sent out to Bicol for the purpose of recovering or at least getting
the full detail[1] of the incident.
After more than nine months of fruitless waiting, respondents decided to
file the case below to recover the value of the remaining lost items, as well
as moral and exemplary damages, attorneys fees and expenses of
litigation. They claimed that the loss was due to petitioners failure to
observe extraordinary diligence in the care of Fatimas luggage and that
petitioner dealt with them in bad faith from the start. Petitioner, on the other
hand, disowned any liability for the loss on the ground that Fatima allegedly
did not declare any excess baggage upon boarding its bus.
On June 15, 1988, after trial on the merits, the court a quo adjudged the
case in favor of herein respondents, viz:
PREMISES CONSIDERED, judgment is hereby rendered in favor of the
plaintiffs (herein respondents) and against the herein defendant Sarkies
Tours Philippines, Inc., ordering the latter to pay to the former the following
sums of money, to wit:
1. The sum of P30,000.00 equivalent to the value of the personal
belongings of plaintiff Fatima Minerva Fortades, etc. less the value of
one luggage recovered;
2. The sum of P90,000.00 for the transportation expenses, as well as
moral damages;
3. The sum of P10,000.00 by way of exemplary damages;
4. The sum of P5,000.00 as attorneys fees; and
5. The sum of P5,000.00 as litigation expenses or a total of One Hundred
Forty Thousand (P140,000.00) Pesos to be paid by herein defendant
Sarkies Tours Philippines, Inc. to the herein plaintiffs within 30 days
from receipt of this Decision.
SO ORDERED.
On appeal, the appellate court affirmed the trial courts judgment, but
deleted the award of moral and exemplary damages. Thus,
WHEREFORE, premises considered, except as above modified, fixing the
award for transportation expenses at P30,000.00 and the deletion of the
award for moral and exemplary damages, the decision appealed from is
AFFIRMED, with costs against defendant-appellant.
SO ORDERED."
Its motion for reconsideration having was likewise rejected by the Court of
Appeals, so petitioner elevated its case to this Court for a review.

After a careful scrutiny of the records of this case, we are convinced that
the trial and appellate courts resolved the issues judiciously based on the
evidence at hand.
Petitioner claims that Fatima did not bring any piece of luggage with her,
and even if she did, none was declared at the start of the trip. The
documentary and testimonial evidence presented at the trial, however,
established that Fatima indeed boarded petitioners De Luxe Bus No. 5 in the
evening of August 31, 1984, and she brought three pieces of luggage with
her, as testified by her brother Raul,[2] who helped her pack her things and
load them on said bus. One of the bags was even recovered with the help of
a Philtranco bus driver. In its letter dated October 1, 1984, petitioner tacitly
admitted its liability by apologizing to respondents and assuring them that
efforts were being made to recover the lost items.
The records also reveal that respondents went to great lengths just to
salvage their loss. The incident was reported to the police, the NBI, and the
regional and head offices of petitioner. Marisol even sought the assistance of
Philtranco bus drivers and the radio stations. To expedite the replacement of
her mothers lost U.S. immigration documents, Fatima also had to execute an
affidavit of loss.[3] Clearly, they would not have gone through all that trouble
in pursuit of a fancied loss.
Fatima was not the only one who lost her luggage. Other passengers
suffered a similar fate: Dr. Lita Samarista testified that petitioner offered
her P1,000.00 for her lost baggage and she accepted it;[4] Carleen CarulloMagno also lost her chemical engineering review materials, while her brother
lost abaca products he was transporting to Bicol.[5]
Petitioners receipt of Fatimas personal luggage having been thus
established, it must now be determined if, as a common carrier, it is
responsible for their loss. Under the Civil Code, (c)ommon carriers, from the
NATURE of their business and for reasons of public policy, are bound to
observe extraordinary diligence in the vigilance over the goods x x x
transported by them,[6] and this liability lasts from the time the goods are
unconditionally placed in the possession of, and received by the carrier for
transportation until the same are delivered, actually or constructively, by the
carrier for transportation until the same are delivered, actually or
constructively, by the carrier to x x x the person who has a right to receive
them,[7] unless the loss is due to any of the excepted causes under Article
1734 thereof.[8]
The cause of the loss in the case at bar was petitioners negligence in not
ensuring that the DOORS of the baggage compartment of its bus were
securely fastened. As a result of this lack of care, almost all of the luggage
was lost, to the prejudice of the paying passengers. As the Court of Appeals
correctly observed:

x x x. Where the common carrier accepted its passengers baggage for

transportation and even had it placed in the vehicle by its own employee, its
failure to collect the freight charge is the common carriers own lookout. It is
responsible for the consequent loss of the baggage. In the instant case,
defendant appellants employee even helped Fatima Minerva Fortades and
her brother load the luggages/baggages in the bus baggage compartment,
without asking that they be weighed, declared, receipted or paid for (TSN,
August 4, 1986, pp. 29, 34, 54, 57, 70; December 23, 1987, p. 35). Neither
was this required of the other passengers (TSN, August 4, 1986, p. 104;
February 5, 1988, p. 13).
Finally, petitioner questions the award of actual damages to
respondents. On this point, we likewise agree with the trial and appellate
courts conclusions. There is no dispute that of the three pieces of luggage of
Fatima, only one was recovered.The other two contained optometry books,
materials, EQUIPMENT, as well as vital documents and personal
belongings. Respondents had to shuttle between Bicol and Manila in their
efforts to be compensated for the loss. During the trial, Fatima and Marisol
had to travel from the United States just to be able to testify. Expenses were
also incurred in reconstituting their lost documents. Under these
circumstances, the Court agrees with the Court of Appeals in
awarding P30,000.00 for the lost items and P30,000.00 for the
transportation expenses, but disagrees with the deletion of the award of
moral and exemplary damages which, in view of the foregoing proven facts,
with negligence and bad faith on the fault of petitioner having been duly
established, should be granted to respondents in the amount of P20,000.00
and P5,000.00, respectively.
WHEREFORE, the assailed decision of the Court of Appeals dated January
13, 1993, and its resolution dated February 19, 1993, are hereby AFFIRMED
with the MODIFICATION that petitioner is ordered to pay respondent an
additional P20,000.00 as moral damages and P5,000.00 as exemplary
damages. Costs against petitioner.
SO ORDERED.