PROVIDENT INSURANCE vs. CA
Consequently, the only issue left
FACTS
On or about June 5, 1989, the vessel MV "Eduardo II" took and received on
board at Sangi, Toledo City a shipment of 32,000 plastic woven bags of
various fertilizer in good order and condition for transportation to Cagayan
de Oro City. The subject shipment was consigned to Atlas Fertilizer
Corporation, and covered by Bill of Lading No. 01 and Marine Insurance
Policy No. CMI-211/89-CB.
Upon its arrival at General Santos City on June 7, 1989, the vessel MV
"Eduardo II" was instructed by the consignee's representative to proceed
to Davao City and deliver the shipment to its Davao Branch in Tabigao.
On June 10, 1989, the MV "Eduardo II" arrived in Davao City where the
subject shipment was unloaded. In the process of unloading the shipment,
three bags of fertilizer fell overboard and 281 bags were considered to be
unrecovered spillages. Because of the mishandling of the cargo, it was
determined that the consignee incurred actual damages in the amount of
P68,196.16.
As the claims were not paid, petitioner Provident Insurance Corporation
indemnified the consignee Atlas Fertilizer Corporation for its damages.
Thereafter, petitioner, as subrogee of the consignee, filed on June 3, 1991
a complaint against respondent carrier seeking reimbursement for the
value of the losses/damages to the cargo.
ISSUE
Whether stipulation No. 7 in the bill of lading which limited the time to file
a claim in case of loss or spillage was valid and therefore absolves the
carrier from liability?
RULING
It is a fact admitted by both parties that the losses and damages were
caused by the mishandling of the cargo by respondent carrier. There is also
no dispute that the consignee failed to strictly comply with Stipulation No.
7 of the Bill of Lading in not making claims for damages to the goods within
the twenty-four hour period from the time of delivery, and that there was
no exterior sign of damage of the goods.
to be resolved is whether the failure to make the prompt notice of claim as
required is fatal to the right of petitioner to claim indemnification for
damages.
The bill of lading defines the rights and liabilities of the parties in reference
to the contract of carriage. Stipulations therein are valid and binding in the
absence of any showing that the same are contrary to law, morals,
customs, public order and public policy. Where the terms of the contract
are clear and leave no doubt upon the intention of the contracting parties,
the literal meaning of the stipulations shall control.
A bill of lading is in the nature of a contract of adhesion, defined as one
where one of the parties imposes a ready-made form of contract which the
other party may accept or reject, but which the latter cannot modify. One
party prepares the stipulation in the contract, while the other party merely
affixes his signature or his "adhesion" thereto, giving no room for
negotiation and depriving the latter of the opportunity to bargain on equal
footing. Nevertheless, these types of contracts have been declared as
binding as ordinary contracts, the reason being that the party who adheres
to the contract is free to reject it entirely.
In light of the foregoing, there can be no question about the validity and
enforceability of Stipulation No. 7 in the bill of lading. The twenty-four
hour requirement under the said stipulation is, by agreement of the
contracting parties, a sine qua non for the accrual of the right of action to
recover damages against the carrier.
ORENZO SHIPPING CORPORATION V. CHUBB AND SONS
G.R. NO. 147724 JUNE 8, 2004
FACTS:
1
Petitioner Lorenzo Shipping Corporation is a domestic corporation engaged
in coast wise shipping of steel pipes. This case is on appeal in CA which
favored the respondent Chubb and Sons Corporation, a foreign
corporation not licensed to do business in the Philippines. they complaint
about the rust information, thinning, and several holes at different places
of pipes on board after shipment made by Lorenzo Shipping to Davao City.
The court found the petitioner guilty to pay all the damages and attorney’s
fees.
ISSUE:
Whether or not Chubb and Sons can validly claim the damages?
HELD:
No, foreign corporations transacting business in the Philippines without
license or its successor or assigns shall be permitted to maintain or
intervene any action, suit or proceedings in any court or administrative
agency of the Philippines; but such corporation maybe sued or proceed
against before the Philippine courts or administrative tribunals or any valid
cause recognized under Philippine laws. The decision of the lower court
was affirmed. Cost against petitioners.
Spouses Hernandez vs Spouses Dolor
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
2
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.
3
2) To Spouses Francisco Valmocina and Virginia Valmocina: 3. Whether the Court of Appeals was correct in increasing the award of
moral damages to respondents, Spouses Dolor, Spouses Valmocina and
a) P50,000.00 civil indemnity for the death of their Fred Panopio;
son, Oscar Valmocina;
b) P100,000.00 as moral damages; 4. Whether the Court of Appeals was correct in affirming the grant of
c) P10,000.00 as temperate damages; attorneys fees to Spouses Dolor and to Spouses Valmocina although the
d) P10,000.00 as reasonable litigation expenses and lower court did not specify the fact and the law on which it is based.
attorneys fees.
Petitioners contend that the absence of the Hernandez spouses
3) To Spouses Victor Panopio and Martina Panopio: inside the passenger jeepney at the time of the collision militates against
holding them solidarily liable with their co-petitioner, Juan Gonzales,
a) P10,352.59 as actual hospitalization and medical expenses; invoking Article 2184 of the Civil Code, which provides:
b) P5,000.00 as temperate damages.
ARTICLE 2184. In motor vehicle mishaps, the owner is solidarily liable with
4) To Fred Panopio: 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) P50,000.00 as moral damages. 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.
5) To Joseph Sandoval:

If the owner was not in the motor vehicle, the provisions of article 2180
a) P3,000.00 as temperate damages.
are applicable.
SO ORDERED.[11]
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
Hence the present petition raising the following issues:
Civil Code, which does not provide for solidary liability between employers
and employees, should be applied.
1. Whether the Court of Appeals was correct when it pronounced the
Hernandez spouses as solidarily liable with Juan Gonzales, although it is of We are not persuaded.
record that they were not in the passenger jeepney driven by latter when
Article 2180 provides:
the accident occurred;
ARTICLE 2180. The obligation imposed by article 2176 is demandable not
2. Whether the Court of Appeals was correct in awarding temperate
only for one's own acts or omissions, but also for those of persons for
damages to private respondents namely the Spouses Dolor, Spouses
whom one is responsible.
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;

4
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.
5
 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.
6
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.
Tiu vs. Arriesgado
G.R. No. 138060, September 1, 2004
Facts: At about 10:00 p.m. of March 15, 1987, the cargo truck marked
"Condor Hollow Blocks and General Merchandise" bearing plate number
GBP-675 was loaded with firewood in Bogo, Cebu and left for Cebu City.
Upon reaching Sitio Aggies, Poblacion, Compostela, Cebu, just as the truck
passed over a bridge, one of its rear tires exploded. The driver, Sergio
Pedrano, then parked along the right side of the national highway and
removed the damaged tire to have it vulcanized at a nearby shop, about
700 meters away. Pedrano left his helper, Jose Mitante, Jr. to keep watch
over the stalled vehicle, and instructed the latter to place a spare tire six
fathoms away behind the stalled truck to serve as a warning for oncoming
vehicles. The trucks tail lights were also left on. It was about 12:00 a.m.,
March 16, 1987.
At about 4:45 a.m., D Rough Riders passenger bus with plate number PBP-
724 driven by Virgilio Te Laspiñas was cruising along the national highway
of Sitio Aggies, Poblacion, Compostela, Cebu. The passenger bus was also
bound for Cebu City, and had come from Maya, Daanbantayan, Cebu.
Among its passengers were the Spouses Pedro A. Arriesgado and Felisa
Pepito Arriesgado, who were seated at the right side of the bus, about
three (3) or four (4) places from the front seat.
As the bus was approaching the bridge, Laspiñas saw the stalled truck,
which was then about 25 meters away. He applied the breaks and tried to
swerve to the left to avoid hitting the truck. But it was too late; the bus
rammed into the trucks left rear. The impact damaged the right side of the
bus and left several passengers injured. Pedro Arriesgado lost
consciousness and suffered a fracture in his right colles. His wife, Felisa,
was brought to the Danao City Hospital. She was later transferred to the
Southern Island Medical Center where she died shortly thereafter.
Respondent Pedro A. Arriesgado then filed a complaint for breach of
contract of carriage, damages and attorneys fees before the Regional Trial
Court of Cebu City, Branch 20, against the petitioners, D Rough Riders bus
operator William Tiu and his driver, Virgilio Te Laspiñas on May 27, 1987.
The respondent alleged that the passenger bus in question was cruising at
a fast and high speed along the national road, and that petitioner Laspiñas
did not take precautionary measures to avoid the accident.
The petitioners, for their part, filed a Third-Party Complaint against the
following: respondent Philippine Phoenix Surety and Insurance, Inc. (PPSII),
petitioner Tiu’s insurer; respondent Benjamin Condor, the registered
owner of the cargo truck; and respondent Sergio Pedrano, the driver of the
truck. They alleged that petitioner Laspiñas was negotiating the uphill
climb along the national highway of Sitio Aggies, Poblacion, Compostela, in
a moderate and normal speed. It was further alleged that the truck was
parked in a slanted manner, its rear portion almost in the middle of the
highway, and that no early warning device was displayed. Petitioner
Laspiñas promptly applied the brakes and swerved to the left to avoid
hitting the truck head-on, but despite his efforts to avoid damage to
property and physical injuries on the passengers, the right side portion of
the bus hit the cargo truck’s left rear.
HELD: The rules which common carriers should observe as to the safety of
their passengers are set forth in the Civil Code, Articles 1733, 1755and
1756. It is undisputed that the respondent and his wife were not safely
transported to the destination agreed upon. In actions for breach of
7
contract, only the existence of such contract, and the fact that the obligor,
in this case the common carrier, failed to transport his passenger safely to
his destination are the matters that need to be proved. This is because
under the said contract of carriage, the petitioners assumed the express
obligation to transport the respondent and his wife to their destination
safely and to observe extraordinary diligence with due regard for all
circumstances. Any injury suffered by the passengers in the course thereof
is immediately attributable to the negligence of the carrier. Upon the
happening of the accident, the presumption of negligence at once arises,
and it becomes the duty of a common carrier to prove that he observed
extraordinary diligence in the care of his passengers. It must be stressed
that in requiring the highest possible degree of diligence from common
carriers and in creating a presumption of negligence against them, the law
compels them to curb the recklessness of their drivers. While evidence
may be submitted to overcome such presumption of negligence, it must be
shown that the carrier observed the required extraordinary diligence,
which means that the carrier must show the utmost diligence of very
cautious persons as far as human care and foresight can provide, or that
the accident was caused by fortuitous event. As correctly found by the trial
court, petitioner Tiu failed to conclusively rebut such presumption. The
negligence of petitioner Laspiñas as driver of the passenger bus is, thus,
binding against petitioner Tiu, as the owner of the passenger bus engaged
as a common carrier.
Central Shipping Company, Inc v Insurance Company of North America
FACTS:
On July 25, 1990 at Puerto Princesa, Palawan, Central Shipping Company
received on board its vessel, the M/V ‘Central Bohol’, 376 pieces [of]
Philippine Apitong Round Logs and undertook to transport said shipment
to Manila for delivery to Alaska Lumber Co., Inc.
“The cargo was insured for P3,000,000.00 against total loss under
Insurance Company of North America’s Marine Cargo Policy No. MCPB-
00170. The vessel completely sank. Due to the sinking of the vessel, the
cargo was totally lost. The consignee, Alaska Lumber Co. Inc., presented a
claim for the value of the shipment to Central Shipping but the latter failed
and refused to settle the claim, hence Insurance company, being the
insurer, paid said claim and now seeks to be subrogated to all the rights
and actions of the consignee as against Central Shipping. Central Shipping
raised as its main defense that the proximate and only cause of the sinking
of its vessel and the loss of its cargo was a natural disaster, a tropical storm
which neither Central Shipping nor the captain of its vessel could have
foreseen.
DECISION OF LOWER COURTS:
(1) RTC: Central Shipping Liable. RTC was unconvinced that the sinking
of M/V Central Bohol had been caused by the weather or any other caso
fortuito. It noted that monsoons, which were common occurrences during
the months of July to December, could have been foreseen and provided
for by an ocean-going vessel.
(2) CA: affirmed RTC. Given the season of rains and monsoons, the ship
captain and his crew should have anticipated the perils of the sea. The CA
found no merit in petitioner’s assertion of the vessel’s seaworthiness. It
held that the Certificates of Inspection and Drydocking were not conclusive
proofs thereof. In order to consider a vessel to be seaworthy, it must be fit
to meet the perils of the sea.
ISSUES & RULING:
(1) Whether the carrier is liable for the loss of the cargo; and
Yes.
A common carrier is presumed to be at fault or negligent. It shall be liable
for the loss, destruction or deterioration of its cargo, unless it can prove
that the sole and proximate cause of such event is one of the causes
enumerated in Article 1734 of the Civil Code, or that it exercised
extraordinary diligence to prevent or minimize the loss. In the present
case, the weather condition encountered by petitioner’s vessel was not a
“storm” or a natural disaster comprehended in the law. Given the known
weather condition prevailing during the voyage, the manner of stowage
employed by the carrier was insufficient to secure the cargo from the
rolling action of the sea. The carrier took a calculated risk in improperly
securing the cargo. Having lost that risk, it cannot now disclaim any liability
for the loss.
Established is the fact that between 10:00 p.m. on July 25, 1990 and 1:25
a.m. on July 26, 1990, M/V Central Bohol encountered a southwestern
8
monsoon in the course of its voyage. Having made such factual
representation in its Note of Marine Protest, petitioner cannot now be
allowed to retreat and claim that the southwestern monsoon was a
“storm.” Normally expected on sea voyages, however, were such
monsoons, during which strong winds were not unusual.
According to PAGASA, a storm has a wind force of 48 to 55 knots,
equivalent to 55 to 63 miles per hour or 10 to 11 in the Beaufort Scale. The
second mate of the vessel stated that the wind was blowing around force 7
to 8 on the Beaufort Scale. Consequently, the strong winds accompanying
the southwestern monsoon could not be classified as a “storm.” Such
winds are the ordinary vicissitudes of a sea voyage.
Also, even if it were a storm, it was not the proximate and only cause of
the loss. The loss of the vessel was caused not only by the southwestern
monsoon, but also by the shifting of the logs in the hold. Such shifting
could been due only to improper stowage.
(2) Whether the doctrine of limited liability is applicable
No. The doctrine of limited liability under Article 587 of the Code of
Commerce is not applicable to the present case. This rule does not apply to
situations in which the loss or the injury is due to the concurrent
negligence of the shipowner and the captain.
Victory Liner v Gammad
Assailed in this petition for review on certiorari is the April 11, 2003
decision[1] of the Court of Appeals in CA-G.R. CV No. 63290 which affirmed
with modification the November 6, 1998 decision[2] of the Regional Trial
Court of Tuguegarao, Cagayan, Branch 5 finding petitioner Victory Liner,
Inc. liable for breach of contract of carriage in Civil Case No. 5023.
The facts as testified by respondent Rosalito Gammad show that on March
14, 1996, his wife Marie Grace Pagulayan-Gammad,[3] was on board an
air-conditioned Victory Liner bus bound for Tuguegarao, Cagayan from
Manila. At about 3:00 a.m., the bus while running at a high speed fell on a
ravine somewhere in Barangay Baliling, Sta. Fe, Nueva Vizcaya, which
resulted in the death of Marie Grace and physical injuries to other
passengers.[4]
On May 14, 1996, respondent heirs of the deceased filed a complaint[5] for
damages arising from culpa contractual against petitioner. In its answer,[6]
the petitioner claimed that the incident was purely accidental and that it
has always exercised extraordinary diligence in its 50 years of operation.
After several re-settings,[7] pre-trial was set on April 10, 1997.[8] For
failure to appear on the said date, petitioner was declared as in default.[9]
However, on petitioners motion[10] to lift the order of default, the same
was granted by the trial court.[11]
At the pre-trial on May 6, 1997, petitioner did not want to admit the
proposed stipulation that the deceased was a passenger of the Victory
Liner Bus which fell on the ravine and that she was issued Passenger Ticket
No. 977785. Respondents, for their part, did not accept petitioners
proposal to pay P50,000.00.[12]
After respondent Rosalito Gammad completed his direct testimony, cross-
examination was scheduled for November 17, 1997[13] but moved to
December 8, 1997,[14] because the parties and the counsel failed to
appear. On December 8, 1997, counsel of petitioner was absent despite
9
due notice and was deemed to have waived right to cross-examine 4. Compensatory Damages ---------- 1,500,000.00
respondent Rosalito.[15]

5. Attorneys Fees ------------ 10% of the total amount granted

Petitioners motion to reset the presentation of its evidence to March 25,
1998[16] was granted. However, on March 24, 1998, the counsel of
petitioner sent the court a telegram[17] requesting postponement but the
6. Cost of the Suit.
telegram was received by the trial court on March 25, 1998, after it had
issued an order considering the case submitted for decision for failure of
petitioner and counsel to appear.[18]
SO ORDERED.[19]

On November 6, 1998, the trial court rendered its decision in favor of

respondents, the dispositive portion of which reads: On appeal by petitioner, the Court of Appeals affirmed the decision of the
trial court with modification as follows:

WHEREFORE, premises considered and in the interest of justice, judgment

is hereby rendered in favor of the plaintiffs and against the defendant [T]he Decision dated 06 November 1998 is hereby MODIFIED to reflect that
Victory Liner, Incorporated, ordering the latter to pay the following: the following are hereby adjudged in favor of plaintiffs-appellees:

1. Actual Damages -------------------- P 122,000.00 1. Actual Damages in the amount of P88,270.00;

2. Death Indemnity --------------------- 50,000.00 2. Compensatory Damages in the amount of P1,135,536,10;

3. Exemplary and Moral Damages----- 400,000.00 3. Moral and Exemplary Damages in the amount of P400,000.00; and

10
4. Attorneys fees equivalent to 10% of the sum of the actual,
compensatory, moral, and exemplary damages herein adjudged.
The court a quos judgment of the cost of the suit against defendant-
appellant is hereby AFFIRMED.
SO ORDERED.[20]
Represented by a new counsel, petitioner on May 21, 2003 filed a motion
for reconsideration praying that the case be remanded to the trial court for
cross- examination of respondents witness and for the presentation of its
evidence; or in the alternative, dismiss the respondents complaint.[21]
Invoking APEX Mining, Inc. v. Court of Appeals,[22] petitioner argues, inter
alia, that the decision of the trial court should be set aside because the
negligence of its former counsel, Atty. Antonio B. Paguirigan, in failing to
appear at the scheduled hearings and move for reconsideration of the
orders declaring petitioner to have waived the right to cross-examine
respondents witness and right to present evidence, deprived petitioner of
its day in court.
On August 21, 2003, the Court of Appeals denied petitioners motion for
reconsideration.[23]
Hence, this petition for review principally based on the fact that the
mistake or gross negligence of its counsel deprived petitioner of due
process of law. Petitioner also argues that the trial courts award of
damages were without basis and should be deleted.
The issues for resolution are: (1) whether petitioners counsel was guilty of
gross negligence; (2) whether petitioner should be held liable for breach of
contract of carriage; and (3) whether the award of damages was proper.
It is settled that the negligence of counsel binds the client. This is based on
the rule that any act performed by a counsel within the scope of his
general or implied authority is regarded as an act of his client.
Consequently, the mistake or negligence of counsel may result in the
rendition of an unfavorable judgment against the client. However, the
application of the general rule to a given case should be looked into and
adopted according to the surrounding circumstances obtaining. Thus,
exceptions to the foregoing have been recognized by the court in cases
where reckless or gross negligence of counsel deprives the client of due
process of law, or when its application will result in outright deprivation of
the clients liberty or property or where the interests of justice so require,
and accord relief to the client who suffered by reason of the lawyers gross
or palpable mistake or negligence.[24]
The exceptions, however, are not present in this case. The record shows
that Atty. Paguirigan filed an Answer and Pre-trial Brief for petitioner.
Although initially declared as in default, Atty. Paguirigan successfully
moved for the setting aside of the order of default. In fact, petitioner was
represented by Atty. Paguirigan at the pre-trial who proposed settlement
for P50,000.00. Although Atty. Paguirigan failed to file motions for
reconsideration of the orders declaring petitioner to have waived the right
to cross-examine respondents witness and to present evidence, he
11
nevertheless, filed a timely appeal with the Court of Appeals assailing the
decision of the trial court. Hence, petitioners claim that it was denied due
process lacks basis.
Petitioner too is not entirely blameless. Prior to the issuance of the order
declaring it as in default for not appearing at the pre-trial, three notices
(dated October 23, 1996,[25] January 30, 1997,[26] and March 26,
1997,[27]) requiring attendance at the pre-trial were sent and duly
received by petitioner. However, it was only on April 27, 1997, after the
issuance of the April 10, 1997 order of default for failure to appear at the
pre-trial when petitioner, through its finance and administrative manager,
executed a special power of attorney[28] authorizing Atty. Paguirigan or
any member of his law firm to represent petitioner at the pre-trial.
Petitioner is guilty, at the least, of contributory negligence and fault cannot
be imputed solely on previous counsel.
The case of APEX Mining, Inc., invoked by petitioner is not on all fours with
the case at bar. In APEX, the negligent counsel not only allowed the
adverse decision against his client to become final and executory, but
deliberately misrepresented in the progress report that the case was still
pending with the Court of Appeals when the same was dismissed 16
months ago.[29] These circumstances are absent in this case because Atty.
Paguirigan timely filed an appeal from the decision of the trial court with
the Court of Appeals.
In Gold Line Transit, Inc. v. Ramos,[30] the Court was similarly confronted
with the issue of whether or not the client should bear the adverse
consequences of its counsels negligence. In that case, Gold Line Transit,
Inc. (Gold Line) and its lawyer failed to appear at the pre-trial despite
notice and was declared as in default. After the plaintiffs presentation of
evidence ex parte, the trial court rendered decision ordering Gold Line to
pay damages to the heirs of its deceased passenger. The decision became
final and executory because counsel of Gold Line did not file any appeal.
Finding that Goldline was not denied due process of law and is thus bound
by the negligence of its lawyer, the Court held as follows
This leads us to the question of whether the negligence of counsel was so
gross and reckless that petitioner was deprived of its right to due process
of law. We do not believe so. It cannot be denied that the requirements of
due process were observed in the instant case. Petitioner was never
deprived of its day in court, as in fact it was afforded every opportunity to
be heard. Thus, it is of record that notices were sent to petitioner and that
its counsel was able to file a motion to dismiss the complaint, an answer to
the complaint, and even a pre-trial brief. What was irretrievably lost by
petitioner was its opportunity to participate in the trial of the case and to
adduce evidence in its behalf because of negligence.
In the application of the principle of due process, what is sought to be
safeguarded against is not the lack of previous notice but the denial of the
opportunity to be heard. The question is not whether petitioner succeeded
in defending its rights and interests, but simply, whether it had the
opportunity to present its side of the controversy. Verily, as petitioner
retained the services of counsel of its choice, it should, as far as this suit is
concerned, bear the consequences of its choice of a faulty option. Its plea
that it was deprived of due process echoes on hollow ground and certainly
cannot elicit approval nor sympathy.
12
To cater to petitioners arguments and reinstate its petition for relief from end. It would be a clear mockery if it were otherwise. Access to the courts
judgment would put a premium on the negligence of its former counsel is guaranteed, but there must be a limit to it.
and encourage the non-termination of this case by reason thereof. This is
one case where petitioner has to bear the adverse consequences of its
counsels act, for a client is bound by the action of his counsel in the
Viewed vis--vis the foregoing jurisprudence, to sustain petitioners
conduct of a case and he cannot thereafter be heard to complain that the
argument that it was denied due process of law due to negligence of its
result might have been different had his counsel proceeded differently.
counsel would set a dangerous precedent. It would enable every party to
The rationale for the rule is easily discernible. If the negligence of counsel
render inutile any adverse order or decision through the simple expedient
be admitted as a reason for opening cases, there would never be an end to
of alleging gross negligence on the part of its counsel. The Court will not
a suit so long as a new counsel could be hired every time it is shown that
countenance such a farce which contradicts long-settled doctrines of trial
the prior counsel had not been sufficiently diligent, experienced or
and procedure.[33]
learned.[31]

Anent the second issue, petitioner was correctly found liable for breach of
Similarly, in Macalalag v. Ombudsman,[32] a Philippine Postal Corporation
contract of carriage. A common carrier is bound to carry its passengers
employee charged with dishonesty was not able to file an answer and
safely as far as human care and foresight can provide, using the utmost
position paper. He was found guilty solely on the basis of complainants
diligence of very cautious persons, with due regard to all the
evidence and was dismissed with forfeiture of all benefits and
circumstances. In a contract of carriage, it is presumed that the common
disqualification from government service. Challenging the decision of the
carrier was at fault or was negligent when a passenger dies or is injured.
Ombudsman, the employee contended that the gross negligence of his
Unless the presumption is rebutted, the court need not even make an
counsel deprived him of due process of law. In debunking his contention,
express finding of fault or negligence on the part of the common carrier.
the Court said
This statutory presumption may only be overcome by evidence that the
carrier exercised extraordinary diligence.[34]

Neither can he claim that he is not bound by his lawyers actions; it is only
in case of gross or palpable negligence of counsel when the courts can step
In the instant case, there is no evidence to rebut the statutory
in and accord relief to a client who would have suffered thereby. If every
presumption that the proximate cause of Marie Graces death was the
perceived mistake, failure of diligence, lack of experience or insufficient
negligence of petitioner. Hence, the courts below correctly ruled that
legal knowledge of the lawyer would be admitted as a reason for the
petitioner was guilty of breach of contract of carriage.
reopening of a case, there would be no end to controversy. Fundamental
to our judicial system is the principle that every litigation must come to an

13
Nevertheless, the award of damages should be modified. minimum wage under the labor laws existing at the time of his death, the
Court held that testimonial evidence alone is insufficient to justify an
award for loss of earning capacity.

Article 1764[35] in relation to Article 2206[36] 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, Likewise, in People v. Caraig,[40] damages for loss of earning capacity was
(2) indemnity for loss of earning capacity, and (3) moral damages. not awarded because the circumstances of the 3 deceased did not fall
within the recognized exceptions, and except for the testimony of their
wives, no documentary proof about their income was presented by the
prosecution. Thus
In the present case, respondent heirs of the deceased are entitled to
indemnity for the death of Marie Grace which under current jurisprudence
is fixed at P50,000.00.[37]
The testimonial evidence shows that Placido Agustin, Roberto Raagas, and
Melencio Castro Jr. were not self-employed or employed as daily-wage
workers earning less than the minimum wage under the labor laws existing
The award of compensatory damages for the loss of the deceaseds earning
at the time of their death. Placido Agustin was a Social Security System
capacity should be deleted for lack of basis. As a rule, documentary
employee who received a monthly salary of P5,000. Roberto Raagas was
evidence should be presented to substantiate the claim for damages for
the President of Sinclair Security and Allied Services, a family owned
loss of earning capacity. By way of exception, damages for loss of earning
corporation, with a monthly compensation of P30,000. Melencio Castro Jr.
capacity may be awarded despite the absence of documentary evidence
was a taxi driver of New Rocalex with an average daily earning of P500 or a
when (1) the deceased is self-employed earning less than the minimum
monthly earning of P7,500. Clearly, these cases do not fall under the
wage under current labor laws, and judicial notice may be taken of the fact
exceptions where indemnity for loss of earning capacity can be given
that in the deceaseds line of work no documentary evidence is available; or
despite lack of documentary evidence. Therefore, for lack of documentary
(2) the deceased is employed as a daily wage worker earning less than the
proof, no indemnity for loss of earning capacity can be given in these
minimum wage under current labor laws.[38]
cases. (Emphasis supplied)

In People v. Oco,[39] the evidence presented by the prosecution to recover

Here, the trial court and the Court of Appeals computed the award of
damages for loss of earning capacity was the bare testimony of the
compensatory damages for loss of earning capacity only on the basis of the
deceaseds wife that her husband was earning P8,000.00 monthly as a legal
testimony of respondent Rosalito that the deceased was 39 years of age
researcher of a private corporation. Finding that the deceased was neither
and a Section Chief of the Bureau of Internal Revenue, Tuguergarao District
self-employed nor employed as a daily-wage worker earning less than the
Office with a salary of P83,088.00 per annum when she died.[41] No other

14
evidence was presented. The award is clearly erroneous because the cannot award actual damages, but, an award of temperate or moderate
deceaseds earnings does not fall within the exceptions. damages may still be made on loss or impairment of earning capacity. That
Pleno sustained a permanent deformity due to a shortened left leg and
that he also suffers from double vision in his left eye is also established.
Because of this, he suffers from some inferiority complex and is no longer
However, the fact of loss having been established, temperate damages in
active in business as well as in social life. In similar cases as in Borromeo v.
the amount of P500,000.00 should be awarded to respondents. Under
Manila Electric Railroad Co., 44 Phil 165; Coriage, et al. v. LTB Co., et al., L-
Article 2224 of the Civil Code, temperate or moderate damages, which are
11037, Dec. 29, 1960, and in Araneta, et al. v. Arreglado, et al., L-11394,
more than nominal but less than compensatory damages, may be
Sept. 9, 1958, the proper award of damages were given.
recovered when the court finds that some pecuniary loss has been
suffered but its amount can not, from the nature of the case, be proved
with certainty.
We rule that the lower courts awards of damages are more consonant with
the factual circumstances of the instant case. The trial courts findings of
facts are clear and well-developed. Each item of damages is adequately
In Pleno v. Court of Appeals,[42] the Court sustained the trial courts award
supported by evidence on record.
of P200,000.00 as temperate damages in lieu of actual damages for loss of
earning capacity because the income of the victim was not sufficiently
proven, thus
Article 2224 of the Civil Code was likewise applied in the recent cases of
People v. Singh[43] and People v. Almedilla,[44] to justify the award of
temperate damages in lieu of damages for loss of earning capacity which
The trial court based the amounts of damages awarded to the petitioner
was not substantiated by the required documentary proof.
on the following circumstances:

Anent the award of moral damages, the same cannot be lumped with
As to the loss or impairment of earning capacity, there is no doubt that
exemplary damages because they are based on different jural
Pleno is an ent[re]preneur and the founder of his own corporation, the
foundations.[45] These damages are different in nature and require
Mayon Ceramics Corporation. It appears also that he is an industrious and
separate determination.[46] In culpa contractual or breach of contract,
resourceful person with several projects in line, and were it not for the
moral damages may be recovered when the defendant acted in bad faith
incident, might have pushed them through. On the day of the incident,
or was guilty of gross negligence (amounting to bad faith) or in wanton
Pleno was driving homeward with geologist Longley after an ocular
disregard of contractual obligations and, as in this case, when the act of
inspection of the site of the Mayon Ceramics Corporation. His actual
breach of contract itself constitutes the tort that results in physical injuries.
income however has not been sufficiently established so that this Court
By special rule in Article 1764 in relation to Article 2206 of the Civil Code,

15
moral damages may also be awarded in case the death of a passenger
results from a breach of carriage.[47] On the other hand, exemplary
damages, which are awarded by way of example or correction for the
public good may be recovered in contractual obligations if the defendant
acted in wanton, fraudulent, reckless, oppressive, or malevolent
manner.[48]
Respondents in the instant case should be awarded moral damages to
compensate for the grief caused by the death of the deceased resulting
from the petitioners breach of contract of carriage. Furthermore, the
petitioner failed to prove that it exercised the extraordinary diligence
required for common carriers, it is presumed to have acted recklessly.[49]
Thus, the award of exemplary damages is proper. Under the
circumstances, we find it reasonable to award respondents the amount of
P100,000.00 as moral damages and P100,000.00 as exemplary damages.
These amounts are not excessive.[50]
The actual damages awarded by the trial court reduced by the Court of
Appeals should be further reduced. In People v. Duban,[51] it was held that
only substantiated and proven expenses or those that appear to have been
genuinely incurred in connection with the death, wake or burial of the
victim will be recognized. A list of expenses (Exhibit J),[52] and the
contract/receipt for the construction of the tomb (Exhibit F)[53] in this
case, cannot be considered competent proof and cannot replace the
official receipts necessary to justify the award. Hence, actual damages
should be further reduced to P78,160.00,[54] which was the amount
supported by official receipts.
Pursuant to Article 2208[55] of the Civil Code, attorneys fees may also be
recovered in the case at bar where exemplary damages are awarded. The
Court finds the award of attorneys fees equivalent to 10% of the total
amount adjudged against petitioner reasonable.
Finally, in Eastern Shipping Lines, Inc. v. Court of Appeals,[56] it was held
that when an obligation, regardless of its source, i.e., law, contracts, quasi-
contracts, delicts or quasi-delicts is breached, the contravenor can be held
liable for payment of interest in the concept of actual and compensatory
damages, subject to the following rules, to wit
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
16
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).
In the instant case, petitioner should be held liable for payment of interest
as damages for breach of contract of carriage. Considering that the
amounts payable by petitioner has been determined with certainty only in
the instant petition, the interest due shall be computed upon the finality of
this decision at the rate of 12% per annum until satisfaction, per paragraph
3 of the aforecited rule.[57]
WHEREFORE, in view of all the foregoing, the petition is PARTIALLY
GRANTED. The April 11, 2003 decision of the Court of Appeals in CA-G.R.
CV No. 63290, which modified the decision of the Regional Trial Court of
Tuguegarao, Cagayan in Civil Case No. 5023, is AFFIRMED with
MODIFICATION. As modified, petitioner Victory Liner, Inc., is ordered to
pay respondents the following: (1) P50,000.00 as indemnity for the death
of Marie Grace Pagulayan-Gammad; (2) P100,000.00 as moral damages; (3)
P100,000.00 as exemplary damages; (4) P78,160.00 as actual damages; (5)
P500,000.00 as temperate damages; (6) 10% of the total amount as
attorneys fees; and the costs of suit.
Furthermore, the total amount adjudged against petitioner shall earn
interest at the rate of 12% per annum computed from the finality of this
decision until fully paid.
SO ORDERED.
OF APPEALS and FGU INSURANCE CORPORATION
447 SCRA 427 (2004)
A common carrier is liable to the resulting damage to the goods if the
improper packaging is known to the carrier or his employees or is apparent
upon ordinary observation, but he nevertheless accepts the same without
protest or exception.
Respondent FGU Insurance Corporation (FGU) brought an action for
reimbursement against petitioner A.F. Sanchez Brokerage Inc. (Sanchez
Brokerage) to collect the amount paid by the former to Wyeth-Suaco
Laboratories Inc. (Wyeth-Suaco) as insurance payment for the goods
delivered in bad condition.
A.F. Brokerage refused to admit liability for the damaged goods which it
delivered from Philippines Skylanders, Inc. (PSI) to Wyeth-Suaco as it
maintained that the damage was due to improper and insufficient export
packaging, discovered when the sealed containers were opened outside
the PSI warehouse.
17

The Regional Trial Court of Makati dismissed the said complaint; however,
the decision was subsequently reversed and set aside by the Court of
Appeals, finding that Sanchez Brokerage is liable for the carriage of cargo
as a ―common carrier‖ by definition of the New Civil Code.
ISSUE:
Whether or not the FGU Insurance is liable for the delivery of the damaged
goods
HELD:
As defined under Article 1732 of the Civil Code, common carriers are
persons, corporations, firms or associations engaged in the business of
carrying or transporting passengers or goods or both by land, water or air
for compensation, offering their services to the public. It does not
distinguish between one whose principal business activity is the carrying of
goods and one who does such carrying only as an ancillary activity. The
contention therefore of Sanchez Brokerage that it is not a common carrier
but a customs broker whose principal function is to prepare the correct
customs declaration and proper shipping documents as required by law is
bereft of merit. It suffices that petitioner undertakes to deliver the goods
for pecuniary consideration.
In this light, Sanchez Brokerage as a common carrier is mandated to
observe, under Article 1733 of the Civil Code, extraordinary diligence in the
vigilance over the goods it transports according to all the circumstances of
each case. In the event that the goods are lost, destroyed or deteriorated,
it is presumed to have been at fault or to have acted negligently, unless it
proves that it observed extraordinary diligence.
The concept of ―extra-ordinary diligence‖ was explained in Compania
Maritima v. Court of Appeals. The extraordinary diligence in the vigilance
over the goods tendered for shipment requires the common carrier to
know and to follow the required precaution for avoiding damage to or
destruction of the goods entrusted to it for sale, carriage and delivery. It
requires common carriers to render service with the greatest skill and
foresight and ―to use all reasonable means to ascertain the nature and
characteristics of goods tendered for shipment and to exercise due care in
the handling and storage including such methods as their nature requires.
It was established that Sanchez Brokerage received the cargoes from the
PSI warehouse in good order and condition and that upon delivery by
petitioner some of the cargoes were found to be in bad order as noted in
the Delivery Receipt and as indicated in the Survey and Destruction Report.
While paragraph no. 4 of Article 1734 of the Civil Code exempts a common
carrier from liability if the loss or damage is due to the character of the
goods or defects in the packaging or in the containers, the rule is that if the
improper packaging is known to the carrier or his employees or is apparent
upon ordinary observation, but he nevertheless accepts the same without
protest or exception notwithstanding such condition, he is not relieved of
liability for the resulting damage. If the claim of Sanchez Brokerage that
18
some of the cartons were already damaged upon delivery to it were true, provisions or represents the vessel.
then it should naturally have received the cargo under protest or with The trial court found that petitioner was appointed as local agent of the
reservation duly noted on the receipt issued by PSI but it made no such vessel, which duty includes arrangement for the entrance and clearance of
protest or reservation. the vessel. Further, the CA found that the evidence shows that petitioner
represented the vessel. The latter prepared the Notice of Readiness, the
MACONDRAY & CO., INC. VS. PROVIDENT INSURANCE CORPORATION Statement of Facts, the Completion Notice, the Sailing Notice and
February, 2005 Custom’s Clearance. Petitioner’s employees were present at the port of
destination one day before the arrival of the vessel, where they stayed
Facts: CANPOTEX SHIPPING SERVICES LIMITED INC., shipped on board the until it departed. They were also present during the actual discharging of
vessel M/V Trade carrier certain goods in favor of ATLAS FERTILIZER the cargo. Moreover, Mr. de la Cruz, the representative of petitioner, also
CORPORATION. Subject shipments were insured with Provident Insurance prepared for the needs of the vessel. These acts all point to the conclusion
Corp. against all risks. that it was the entity that represented the vessel at the port of destination
When the shipment arrived, consignee discovered that the shipment and was the ship agent within the meaning and context of Article 586 of
sustained losses. Provident paid for said losses. Formal claims were then the Code of Commerce.
filed with Trade & Transport but MACONDRAY refused and failed to settle
the same. MACONDRAY denies liability over the losses, it, having no
absolute relation with Trade & Transport, the alleged operator of the
vessel who transported the shipment; that accordingly, MACONDRAY is the
local representative of the shipper; the charterer of M/V Trade Carrier and
not party to this case; that it has no control over the acts of the captain
and crew of the carrier and cannot be held responsible for any damage
arising from the fault or negligence of said captain and crew; that upon
arrival at the port, M/V Trade Carrier discharged the full amount of
shipment as shown by the draft survey.
Issue: Whether or not MACONDRAY & CO. INC., as an agent, is responsible
for any loss sustained by any party from the vessel owned by Trade &
Transport.
Held: Although petitioner is not an agent of Trade & Transport, it can still
be the ship agent of the vessel M/V Trade Carrier. A ship agent is the
person entrusted with provisioning or representing the vessel in the port in
which it may be found. Hence, whether acting as agent of the owner of the
vessel or as agent of the charterer, petitioner will be considered as the ship
agent and may be held liable as such, as long as the latter is the one that

19