THIRD DIVISION
towards the consignee's wharf on September 5, 1990. Upon reaching the
[G.R. No. 147246. August 19, 2003]
ASIA LIGHTERAGE AND SHIPPING, INC., petitioner, vs. COURT OF
APPEALS and PRUDENTIAL GUARANTEE AND ASSURANCE,
INC., respondents.
DECISION
PUNO, J.:
On appeal is the Court of Appeals May 11, 2000 Decision[1] in CA-G.R. CV
No. 49195 and February 21, 2001 Resolution [2] affirming with modification
the April 6, 1994 Decision[3] of the Regional Trial Court of Manila which
found petitioner liable to pay private respondent the amount of indemnity
and attorney's fees.
First, the facts.
On June 13, 1990, 3,150 metric tons of Better Western White Wheat in
bulk, valued at US$423,192.35[4] was shipped by Marubeni American
Corporation of Portland, Oregon on board the vessel M/V NEO CYMBIDIUM
V-26 for delivery to the consignee, General Milling Corporation in Manila,
evidenced by Bill of Lading No. PTD/Man-4.[5] The shipment was insured by
the private respondent Prudential Guarantee and Assurance, Inc. against
loss or damage for P14,621,771.75 under Marine Cargo Risk Note RN
11859/90.[6]
On July 25, 1990, the carrying vessel arrived in Manila and the cargo was
transferred to the custody of the petitioner Asia Lighterage and Shipping,
Inc. The petitioner was contracted by the consignee as carrier to deliver
the cargo to consignee's warehouse at Bo. Ugong, Pasig City.
On August 15, 1990, 900 metric tons of the shipment was loaded on barge
PSTSI III, evidenced by Lighterage Receipt No. 0364 [7] for delivery to
consignee. The cargo did not reach its destination.
It appears that on August 17, 1990, the transport of said cargo was
suspended due to a warning of an incoming typhoon. On August 22, 1990,
the petitioner proceeded to pull the barge to Engineering Island off Baseco
to seek shelter from the approaching typhoon. PSTSI III was tied down to
other barges which arrived ahead of it while weathering out the storm that
night. A few days after, the barge developed a list because of a hole it
sustained after hitting an unseen protuberance underneath the water. The
petitioner filed a Marine Protest on August 28, 1990. [8] It likewise secured
the services of Gaspar Salvaging Corporation which refloated the barge.
[9]
The hole was then patched with clay and cement.
The barge was then towed to ISLOFF terminal before it finally headed
Sta. Mesa spillways, the barge again ran aground due to strong current. To
avoid the complete sinking of the barge, a portion of the goods was
transferred to three other barges.[10]
The next day, September 6, 1990, the towing bits of the barge broke. It
sank completely, resulting in the total loss of the remaining cargo. [11] A
second Marine Protest was filed on September 7, 1990. [12]
On September 14, 1990, a bidding was conducted to dispose of the
damaged wheat retrieved and loaded on the three other barges. [13] The
total proceeds from the sale of the salvaged cargo was P201,379.75.[14]
On the same date, September 14, 1990, consignee sent a claim letter to
the petitioner, and another letter dated September 18, 1990 to the private
respondent for the value of the lost cargo.
On January 30, 1991, the private respondent indemnified the consignee in
the amount of P4,104,654.22.[15] Thereafter, as subrogee, it sought
recovery of said amount from the petitioner, but to no avail.
On July 3, 1991, the private respondent filed a complaint against the
petitioner for recovery of the amount of indemnity, attorney's fees and
cost of suit.[16] Petitioner filed its answer with counterclaim.[17]
The Regional Trial Court ruled in favor of the private respondent. The
dispositive portion of its Decision states:
WHEREFORE, premises considered, judgment is hereby rendered ordering
defendant Asia Lighterage & Shipping, Inc. liable to pay plaintiff Prudential
Guarantee & Assurance Co., Inc. the sum of P4,104,654.22 with interest
from the date complaint was filed on July 3, 1991 until fully satisfied plus
10% of the amount awarded as and for attorney's fees. Defendant's
counterclaim is hereby DISMISSED. With costs against defendant.[18]
Petitioner appealed to the Court of Appeals insisting that it is not a
common carrier. The appellate court affirmed the decision of the trial court
with modification. The dispositive portion of its decision reads:
WHEREFORE, the decision appealed from is hereby AFFIRMED with
modification in the sense that the salvage value of P201,379.75 shall be
deducted from the amount of P4,104,654.22. Costs against appellant.
SO ORDERED.
Petitioners Motion for Reconsideration dated June 3, 2000 was likewise
denied by the appellate court in a Resolution promulgated on February 21,
2001.
Hence, this petition. Petitioner submits the following errors allegedly
committed by the appellate court, viz:[19]
(1) THE COURT OF APPEALS DECIDED THE CASE A QUO IN A WAY NOT IN
ACCORD WITH LAW AND/OR WITH THE APPLICABLE DECISIONS OF THE
SUPREME COURT WHEN IT HELD THAT PETITIONER IS A COMMON CARRIER.
(2) THE COURT OF APPEALS DECIDED THE CASE A QUO IN A WAY NOT IN
ACCORD WITH LAW AND/OR WITH THE APPLICABLE DECISIONS OF THE
SUPREME COURT WHEN IT AFFIRMED THE FINDING OF THE LOWER
COURT A QUO THAT ON THE BASIS OF THE PROVISIONS OF THE CIVIL
CODE APPLICABLE TO COMMON CARRIERS, THE LOSS OF THE CARGO IS,
THEREFORE, BORNE BY THE CARRIER IN ALL CASES EXCEPT IN THE FIVE
(5) CASES ENUMERATED.
(3) THE COURT OF APPEALS DECIDED THE CASE A QUO IN A WAY NOT IN
ACCORD WITH LAW AND/OR WITH THE APPLICABLE DECISIONS OF THE
SUPREME COURT WHEN IT EFFECTIVELY CONCLUDED THAT PETITIONER
FAILED TO EXERCISE DUE DILIGENCE AND/OR WAS NEGLIGENT IN ITS CARE
AND CUSTODY OF THE CONSIGNEES CARGO.
The issues to be resolved are:
(1) Whether the petitioner is a common carrier; and,
(2) Assuming the petitioner is a common carrier, whether it exercised
extraordinary diligence in its care and custody of the consignees cargo.
On the first issue, we rule that petitioner is a common carrier.
Article 1732 of the Civil Code defines common carriers as persons,
corporations, firms or associations engaged in the business of carrying or
transporting passengers or goods or both, by land, water, or air, for
compensation, offering their services to the public.
Petitioner contends that it is not a common carrier but a private
carrier. Allegedly, it has no fixed and publicly known route, maintains no
terminals, and issues no tickets. It points out that it is not obliged to carry
indiscriminately for any person. It is not bound to carry goods unless it
consents. In short, it does not hold out its services to the general public. [20]
We disagree.
In De Guzman vs. Court of Appeals,[21] we held that the definition
of common carriers in Article 1732 of the Civil Code makes no distinction
between one whose principal business activity is the carrying of persons or
goods or both, and one who does such carrying only as an ancillary
activity. We also did not distinguish between a person or enterprise
offering transportation service on a regular or scheduled basis and one
offering such service on an occasional, episodic or unscheduled
basis. Further, we ruled that Article 1732 does not distinguish between a
carrier offering its services to the general public, and one who offers
services or solicits business only from a narrow segment of the general
population.
In the case at bar, the principal business of the petitioner is that of
lighterage and drayage[22]and it offers its barges to the public for carrying
or transporting goods by water for compensation.Petitioner is clearly a
common carrier. In De Guzman, supra,[23] we considered private
respondent Ernesto Cendaa to be a common carrier even if his principal
occupation was not the carriage of goods for others, but that of buying
used bottles and scrap metal in Pangasinan and selling these items in
Manila.
We therefore hold that petitioner is a common carrier whether its carrying
of goods is done on an irregular rather than scheduled manner, and with
an only limited clientele. A common carrier need not have fixed and
publicly known routes. Neither does it have to maintain terminals or issue
tickets.
To be sure, petitioner fits the test of a common carrier as laid down
in Bascos vs. Court of Appeals.[24] The test to determine a common
carrier is whether the given undertaking is a part of the business engaged
in by the carrier which he has held out to the general public as his
occupation rather than the quantity or extent of the business transacted.
[25]
In the case at bar, the petitioner admitted that it is engaged in the
business of shipping and lighterage,[26] offering its barges to the public,
despite its limited clientele for carrying or transporting goods by water for
compensation.[27]
On the second issue, we uphold the findings of the lower courts that
petitioner failed to exercise extraordinary diligence in its care and custody
of the consignees goods.
Common carriers are bound to observe extraordinary diligence in the
vigilance over the goods transported by them.[28] They are presumed to
have been at fault or to have acted negligently if the goods are lost,
destroyed or deteriorated.[29] To overcome the presumption of negligence
in the case of loss, destruction or deterioration of the goods, the common
carrier must prove that it exercised extraordinary diligence. There are,
however, exceptions to this rule. Article 1734 of the Civil Code enumerates
the instances when the presumption of negligence does not attach:
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.
In the case at bar, the barge completely sank after its towing bits broke,
resulting in the total loss of its cargo. Petitioner claims that this was
caused by a typhoon, hence, it should not be held liable for the loss of the
cargo. However, petitioner failed to prove that the typhoon is the
proximate and only cause of the loss of the goods, and that it has
exercised due diligence before, during and after the occurrence of the
typhoon to prevent or minimize the loss.[30] The evidence show that, even
before the towing bits of the barge broke, it had already previously
sustained damage when it hit a sunken object while docked at the
Engineering Island. It even suffered a hole. Clearly, this could not be solely
attributed to the typhoon. The partly-submerged vessel was refloated but
its hole was patched with only clay and cement. The patch work was
merely a provisional remedy, not enough for the barge to sail safely. Thus,
when petitioner persisted to proceed with the voyage, it recklessly
exposed the cargo to further damage. A portion of the cross-examination
of Alfredo Cunanan, cargo-surveyor of Tan-Gatue Adjustment Co., Inc.,
states:
[31]
CROSS-EXAMINATION BY ATTY. DONN LEE:
xxxxxxxxx
q - Can you tell us what else transpired after that incident?
a - After the first accident, through the initiative of the barge owners, they
tried to pull out the barge from the place of the accident, and bring it to
the anchor terminal for safety, then after deciding if the vessel is
stabilized, they tried to pull it to the consignees warehouse, now while on
route another accident occurred, now this time the barge totally hitting
something in the course.
q - You said there was another accident, can you tell the court the nature
of the second accident?
a - The sinking, sir.
q - Can you tell the nature . . . can you tell the court, if you know what
caused the sinking?
a - Mostly it was related to the first accident because there was already a
whole (sic) on the bottom part of the barge.
xxxxxxxxx
This is not all. Petitioner still headed to the consignees wharf despite
knowledge of an incoming typhoon. During the time that the barge was
heading towards the consignee's wharf on September 5, 1990, typhoon
Loleng has already entered the Philippine area of responsibility. [32] A part of
the testimony of Robert Boyd, Cargo Operations Supervisor of the
petitioner, reveals:
DIRECT-EXAMINATION BY ATTY. LEE:[33]
xxxxxxxxx
q - Now, Mr. Witness, did it not occur to you it might be safer to just allow
the Barge to lie where she was instead of towing it?
a - Since that time that the Barge was refloated, GMC (General Milling
Corporation, the consignee) as I have said was in a hurry for their goods to
be delivered at their Wharf since they needed badly the wheat that was
loaded in PSTSI-3. It was needed badly by the consignee.
q - And this is the reason why you towed the Barge as you did?
a - Yes, sir.
xxxxxxxxx
CROSS-EXAMINATION BY ATTY. IGNACIO:[34]
xxxxxxxxx
q - And then from ISLOFF Terminal you proceeded to the premises of the
GMC? Am I correct?
a - The next day, in the morning, we hired for additional two (2) tugboats
as I have stated.
q - Despite of the threats of an incoming typhoon as you testified a while
ago?
a - It is already in an inner portion of Pasig River. The typhoon would be
coming and it would be dangerous if we are in the vicinity of Manila Bay.
q - But the fact is, the typhoon was incoming? Yes or no?
a - Yes.
q - And yet as a standard operating procedure of your Company, you have
to secure a sort of Certification to determine the weather condition, am I
correct?

a - Yes, sir.

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

a - Yes, sir.

q - And yet you proceeded to the premises of the GMC?

a - ISLOFF Terminal is far from Manila Bay and anytime even with the
typhoon if you are already inside the vicinity or inside Pasig entrance, it is
a safe place to tow upstream.

Accordingly, the petitioner cannot invoke the occurrence of the typhoon as

force majeure to escape liability for the loss sustained by the private
respondent. Surely, meeting a typhoon head-on falls short of due diligence
required from a common carrier. More importantly, the officers/employees
themselves of petitioner admitted that when the towing bits of the vessel
broke that caused its sinking and the total loss of the cargo upon reaching
the Pasig River, it was no longer affected by the typhoon. The typhoon
then is not the proximate cause of the loss of the cargo; a human
factor, i.e., negligence had intervened.

IN VIEW THEREOF, the petition is DENIED. The Decision of the Court of

Appeals in CA-G.R. CV No. 49195 dated May 11, 2000 and its Resolution
dated February 21, 2001 are hereby AFFIRMED. Costs against petitioner.

SO ORDERED.

Panganiban, and Sandoval-Gutierrez, JJ., concu

Corona, and Carpio-Morales, JJ., on official leave.

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

ESTELA L. CRISOSTOMO, petitioner, vs. THE COURT OF
APPEALS andCARAVAN 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
non-refundable.[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 therefore, neither a private nor a common carrier. Respondent did not
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
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 Davide, Jr., C.J., (Chairman), Vitug, Carpio, and Azcuna, JJ., concur.
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%
[G.R. No. 147079. December 21, 2004]
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 A.F. SANCHEZ BROKERAGE INC., petitioners, vs. THE HON. COURT
credit.[23] OF APPEALS and FGU INSURANCE CORPORATION, respondents.
SO ORDERED. 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-0731-
1538/92[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 thus issued Subrogation Receipt[30] in favor of FGU Insurance.
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 WITNESS:
employees only examined the cargoes outside the PSI warehouse and
found some to be wet, they would certainly have gone back to PSI, showed A: We experienced, there was a time that we experienced that there was a
to the warehouseman the damage, and demanded then and there for Bad cartoon (sic) wetted (sic) up to the bottom are wet specially during rainy
Order documents or a certification confirming the damage. [58] Or, season.[62]
petitioner would have presented, as witness, the employees of the PSI
Since petitioner received all the cargoes in good order and condition at the
from whom Morales and Domingo took delivery of the cargo to prove that,
time they were turned over by the PSI warehouseman, and upon their
indeed, part of the cargoes was already damaged when the container was
delivery to Hizon Laboratories, Inc. a portion thereof was found to be in
allegedly opened outside the warehouse.[59]
bad order, it was incumbent on petitioner to prove that it exercised
Petitioner goes on to posit that contrary to the report of Elite Surveyors, no extraordinary diligence in the carriage of the goods. It did not, however.
rain fell that day. Instead, it asserts that some of the cargoes were already Hence, its presumed negligence under Article 1735 of the Civil Code
wet on delivery by PSI outside the PSI warehouse but such notwithstanding remains unrebutted.
Calicdan directed Morales to proceed with the delivery to Hizon
WHEREFORE, the August 10, 2000 Decision of the Court of Appeals is
Laboratories, Inc.
hereby AFFIRMED.
While Calicdan testified that he received the purported telephone call of
Costs against petitioner.
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 SO ORDERED.
when the shipment was stripped from the airport containers, or when the
cargoes were already in transit to Antipolo, it is not determinable. Aside Panganiban, (Chairman), Sandoval-Gutierrez, and Garcia, JJ., concur.
from that phone call, petitioner admitted that it had no documentary
Corona, J., on leave.
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: [G.R. No. 150255. April 22, 2005]

A: Yes sir, there was an instance that one cartoon (sic) were wetted (sic) SCHMITZ TRANSPORT & BROKERAGE CORPORATION, petitioner,
but Wyeth-Suaco did not claim anything against us. vs. TRANSPORT VENTURE, INC., INDUSTRIAL INSURANCE
ATTY. FLORES: COMPANY, LTD., and BLACK SEA SHIPPING AND DODWELL now
INCHCAPE SHIPPING SERVICES, respondents.
Q: HOW IS IT?
DECISION
CARPIO-MORALES, J.:
On petition for review is the June 27, 2001 Decision [1] of the Court of
Appeals, as well as its Resolution [2] dated September 28, 2001 denying the
motion for reconsideration, which affirmed that of Branch 21 of the
Regional Trial Court (RTC) of Manila in Civil Case No. 92-63132[3] holding
petitioner Schmitz Transport Brokerage Corporation (Schmitz Transport),
together with Black Sea Shipping Corporation (Black Sea), represented by
its ship agent Inchcape Shipping Inc. (Inchcape), and Transport Venture
(TVI), solidarily liable for the loss of 37 hot rolled steel sheets in coil that
were washed overboard a barge.
On September 25, 1991, SYTCO Pte Ltd. Singapore shipped from the port
of Ilyichevsk, Russia on board M/V Alexander Saveliev (a vessel of Russian
registry and owned by Black Sea) 545 hot rolled steel sheets in coil
weighing 6,992,450 metric tons.
The cargoes, which were to be discharged at the port of Manila in favor of
the consignee, Little Giant Steel Pipe Corporation (Little Giant), [4] were
insured against all risks with Industrial Insurance Company Ltd. (Industrial
Insurance) under Marine Policy No. M-91-3747-TIS.[5]
The vessel arrived at the port of Manila on October 24, 1991 and the
Philippine Ports Authority (PPA) assigned it a place of berth at the outside
breakwater at the Manila South Harbor.[6]
Schmitz Transport, whose services the consignee engaged to secure the
requisite clearances, to receive the cargoes from the shipside, and to
deliver them to its (the consignees) warehouse at Cainta, Rizal, [7] in turn
engaged the services of TVI to send a barge and tugboat at shipside.
On October 26, 1991, around 4:30 p.m., TVIs tugboat Lailani towed the
barge Erika V to shipside.[8]
By 7:00 p.m. also of October 26, 1991, the tugboat, after positioning the
barge alongside the vessel, left and returned to the port terminal. [9] At 9:00
p.m., arrastre operator Ocean Terminal Services Inc. commenced to unload
37 of the 545 coils from the vessel unto the barge.
By 12:30 a.m. of October 27, 1991 during which the weather condition had
become inclement due to an approaching storm, the unloading unto the
barge of the 37 coils was accomplished.[10] No tugboat pulled the barge
back to the pier, however.
At around 5:30 a.m. of October 27, 1991, due to strong waves, [11] the crew
of the barge abandoned it and transferred to the vessel. The barge pitched
and rolled with the waves and eventually capsized, washing the 37 coils
into the sea.[12] At 7:00 a.m., a tugboat finally arrived to pull the already
empty and damaged barge back to the pier. [13]
Earnest efforts on the part of both the consignee Little Giant and Industrial
Insurance to recover the lost cargoes proved futile.[14]
Little Giant thus filed a formal claim against Industrial Insurance which
paid it the amount of P5,246,113.11. Little Giant thereupon executed a
subrogation receipt[15] in favor of Industrial Insurance.
Industrial Insurance later filed a complaint against Schmitz Transport, TVI,
and Black Sea through its representative Inchcape (the defendants) before
the RTC of Manila, for the recovery of the amount it paid to Little Giant
plus adjustment fees, attorneys fees, and litigation expenses. [16]
Industrial Insurance faulted the defendants for undertaking the unloading
of the cargoes while typhoon signal No. 1 was raised in Metro Manila. [17]
By Decision of November 24, 1997, Branch 21 of the RTC held all the
defendants negligent for unloading the cargoes outside of the breakwater
notwithstanding the storm signal.[18] The dispositive portion of the decision
reads:
WHEREFORE, premises considered, the Court renders judgment in favor of
the plaintiff, ordering the defendants to pay plaintiff jointly and severally
the sum of P5,246,113.11 with interest from the date the complaint was
filed until fully satisfied, as well as the sum of P5,000.00 representing the
adjustment fee plus the sum of 20% of the amount recoverable from the
defendants as attorneys fees plus the costs of suit. The counterclaims and
cross claims of defendants are hereby DISMISSED for lack of [m]erit. [19]
To the trial courts decision, the defendants Schmitz Transport and TVI filed
a joint motion for reconsideration assailing the finding that they are
common carriers and the award of excessive attorneys fees of more
than P1,000,000. And they argued that they were not motivated by gross
or evident bad faith and that the incident was caused by a fortuitous
event. [20]
By resolution of February 4, 1998, the trial court denied the motion for
reconsideration. [21]
All the defendants appealed to the Court of Appeals which, by decision of
June 27, 2001, affirmed in toto the decision of the trial court, [22] it finding
that all the defendants were common carriers Black Sea and TVI for
engaging in the transport of goods and cargoes over the seas as a regular
business and not as an isolated transaction,[23] and Schmitz Transport for
entering into a contract with Little Giant to transport the cargoes from ship
to port for a fee.[24]
In holding all the defendants solidarily liable, the appellate court ruled that
each one was essential such that without each others contributory
negligence the incident would not have happened and so much so that the
person principally liable cannot be distinguished with sufficient accuracy.
[25]
In discrediting the defense of fortuitous event, the appellate court held
that although defendants obviously had nothing to do with the force of
nature, they however had control of where to anchor the vessel, where
discharge will take place and even when the discharging will commence. [26]
The defendants respective motions for reconsideration having been denied
by Resolution[27] of September 28, 2001, Schmitz Transport (hereinafter
referred to as petitioner) filed the present petition against TVI, Industrial
Insurance and Black Sea.
Petitioner asserts that in chartering the barge and tugboat of TVI, it was
acting for its principal, consignee Little Giant, hence, the transportation
contract was by and between Little Giant and TVI.[28]
By Resolution of January 23, 2002, herein respondents Industrial
Insurance, Black Sea, and TVI were required to file their respective
Comments.[29]
By its Comment, Black Sea argued that the cargoes were received by the
consignee through petitioner in good order, hence, it cannot be faulted, it
having had no control and supervision thereover.[30]
For its part, TVI maintained that it acted as a passive party as it merely
received the cargoes and transferred them unto the barge upon the
instruction of petitioner.[31]
In issue then are:
(1) Whether the loss of the cargoes was due to a fortuitous event,
independent of any act of negligence on the part of petitioner Black Sea
and TVI, and
(2) If there was negligence, whether liability for the loss may attach to
Black Sea, petitioner and TVI.
When a fortuitous event occurs, Article 1174 of the Civil Code absolves
any party from any and all liability arising therefrom:
ART. 1174. Except in cases expressly specified by the law, or when it is
otherwise declared by stipulation, or when the nature of the obligation
requires the assumption of risk, no person shall be responsible for those
events which could not be foreseen, or which though foreseen, were
inevitable.
In order, to be considered a fortuitous event, however, (1) the cause of the
unforeseen and unexpected occurrence, or the failure of the debtor to
comply with his obligation, must be independent of human will; (2) it must
be impossible to foresee the event which constitute the caso fortuito, or if
it can be foreseen it must be impossible to avoid; (3) the occurrence must
be such as to render it impossible for the debtor to fulfill his obligation in
any manner; and (4) the obligor must be free from any participation in the
aggravation of the injury resulting to the creditor. [32]
[T]he principle embodied in the act of God doctrine strictly requires that
the act must be occasioned solely by the violence of nature. Human
intervention is to be excluded from creating or entering into the cause of
the mischief. When the effect is found to be in part the result of the
participation of man, whether due to his active intervention or neglect or
failure to act, the whole occurrence is then humanized and removed from
the rules applicable to the acts of God.[33]
The appellate court, in affirming the finding of the trial court that human
intervention in the form of contributory negligence by all the defendants
resulted to the loss of the cargoes,[34] held that unloading outside the
breakwater, instead of inside the breakwater, while a storm signal was up
constitutes negligence.[35] It thus concluded that the proximate cause of
the loss was Black Seas negligence in deciding to unload the cargoes at an
unsafe place and while a typhoon was approaching. [36]
From a review of the records of the case, there is no indication that there
was greater risk in loading the cargoes outside the breakwater. As the
defendants proffered, the weather on October 26, 1991 remained normal
with moderate sea condition such that port operations continued and
proceeded normally.[37]
The weather data report,[38] furnished and verified by the Chief of the
Climate Data Section of PAG-ASA and marked as a common exhibit of the
parties, states that while typhoon signal No. 1 was hoisted over Metro
Manila on October 23-31, 1991, the sea condition at the port of Manila at
5:00 p.m. - 11:00 p.m. of October 26, 1991 was moderate. It cannot,
therefore, be said that the defendants were negligent in not unloading the
cargoes upon the barge on October 26, 1991 inside the breakwater.
That no tugboat towed back the barge to the pier after the cargoes were
completely loaded by 12:30 in the morning [39] is, however, a material fact
which the appellate court failed to properly consider and appreciate [40] the
proximate cause of the loss of the cargoes. Had the barge been towed
back promptly to the pier, the deteriorating sea conditions
notwithstanding, the loss could have been avoided. But the barge was left
floating in open sea until big waves set in at 5:30 a.m., causing it to sink
along with the cargoes.[41] The loss thus falls outside the act of God
doctrine.
The proximate cause of the loss having been determined, who among the
parties is/are responsible therefor?
Contrary to petitioners insistence, this Court, as did the appellate court,
finds that petitioner is a common carrier. For it undertook to transport the
cargoes from the shipside of M/V Alexander Saveliev to the consignees
warehouse at Cainta, Rizal. As the appellate court put it, as long as a
person or corporation holds [itself] to the public for the purpose of
transporting goods as [a] business, [it] is already considered a common
carrier regardless if [it] owns the vehicle to be used or has to hire one.
[42]
That petitioner is a common carrier, the testimony of its own Vice-
President and General Manager Noel Aro that part of the services it offers
to its clients as a brokerage firm includes the transportation of cargoes
reflects so.
Atty. Jubay: Will you please tell us what [are you] functions x x x as
Executive Vice-President and General Manager of said Company?
Mr. Aro: Well, I oversee the entire operation of the brokerage and transport
business of the company. I also handle the various division heads of the
company for operation matters, and all other related functions that the
President may assign to me from time to time, Sir.
Q: Now, in connection [with] your duties and functions as you mentioned,
will you please tell the Honorable Court if you came to know the company
by the name Little Giant Steel Pipe Corporation?
A: Yes, Sir. Actually, we are the brokerage firm of that Company.
Q: And since when have you been the brokerage firm of that company, if
you can recall?
A: Since 1990, Sir.
Q: Now, you said that you are the brokerage firm of this Company. What
work or duty did you perform in behalf of this company?
A: We handled the releases (sic) of their cargo[es] from the Bureau of
Customs. We [are] also in-charged of the delivery of the goods to their
warehouses. We also handled the clearances of their shipment at the
Bureau of Customs, Sir.
xxx
Q: Now, what precisely [was] your agreement with this Little Giant Steel
Pipe Corporation with regards to this shipment? What work did you do with
this shipment?
A: We handled the unloading of the cargo[es] from vessel to lighter and
then the delivery of [the] cargo[es] from lighter to BASECO then to the
truck and to the warehouse, Sir.
Q: Now, in connection with this work which you are doing, Mr. Witness, you
are supposed to perform, what equipment do (sic) you require or did you
use in order to effect this unloading, transfer and delivery to the
warehouse?
A: Actually, we used the barges for the ship side operations, this unloading
[from] vessel to lighter, and on this we hired or we sub-contracted with
[T]ransport Ventures, Inc. which [was] in-charged (sic) of the barges. Also,
in BASECO compound we are leasing cranes to have the cargo unloaded
from the barge to trucks, [and] then we used trucks to deliver [the
cargoes] to the consignees warehouse, Sir.
Q: And whose trucks do you use from BASECO compound to the
consignees warehouse?
A: We utilized of (sic) our own trucks and we have some other contracted
trucks, Sir.
xxx
ATTY. JUBAY: Will you please explain to us, to the Honorable Court why is it
you have to contract for the barges of Transport Ventures Incorporated in
this particular operation?
A: Firstly, we dont own any barges. That is why we hired the services of
another firm whom we know [al]ready for quite sometime, which is
Transport Ventures, Inc. (Emphasis supplied)[43]
It is settled that under a given set of facts, a customs broker may be
regarded as a common carrier. Thus, this Court, in A.F. Sanchez Brokerage,
Inc. v. The Honorable Court of Appeals,[44] held:
The appellate court did not err in finding petitioner, a customs broker, to
be also a common carrier, as defined under Article 1732 of the Civil Code,
to wit,
Art. 1732. Common carriers are persons, corporations, firms or
associations engaged in the business of carrying or transporting
passengers or goods or both, by land, water, or air, for compensation,
offering their services to the public.
xxx
Article 1732 does not distinguish between one whose principal business
activity is the carrying of goods and one who does such carrying only as an
ancillary activity. The contention, therefore, of petitioner that it is not a
common carrier but a customs broker whose principal function is to
prepare the correct customs declaration and proper shipping documents
as required by law is bereft of merit. It suffices that petitioner undertakes
to deliver the goods for pecuniary consideration.[45]
And in Calvo v. UCPB General Insurance Co. Inc.,[46] this Court held that as
the transportation of goods is an integral part of a customs broker, the
customs broker is also a common carrier. For to declare otherwise would
be to deprive those with whom [it] contracts the protection which the law
affords them notwithstanding the fact that the obligation to carry goods
for [its] customers, is part and parcel of petitioners business. [47]
As for petitioners argument that being the agent of Little Giant, any
negligence it committed was deemed the negligence of its principal, it
does not persuade.
True, petitioner was the broker-agent of Little Giant in securing the release
of the cargoes. In effecting the transportation of the cargoes from the
shipside and into Little Giants warehouse, however, petitioner was
discharging its own personal obligation under a contact of carriage.
Petitioner, which did not have any barge or tugboat, engaged the services
of TVI as handler[48] to provide the barge and the tugboat. In their Service
Contract,[49] while Little Giant was named as the consignee, petitioner did
not disclose that it was acting on commission and was chartering the
vessel for Little Giant.[50] Little Giant did not thus automatically become a
party to the Service Contract and was not, therefore, bound by the terms
and conditions therein.
Not being a party to the service contract, Little Giant cannot directly sue
TVI based thereon but it can maintain a cause of action for negligence.[51]
In the case of TVI, while it acted as a private carrier for which it was under
no duty to observe extraordinary diligence, it was still required to observe
ordinary diligence to ensure the proper and careful handling, care and
discharge of the carried goods.
Thus, Articles 1170 and 1173 of the Civil Code provide:
ART. 1170. Those who in the performance of their obligations are guilty of
fraud, negligence, or delay, and those who in any manner contravene the
tenor thereof, are liable for damages.
ART. 1173. The fault or negligence of the obligor consists in the omission of
that diligence which is required by the nature of the obligation and
corresponds with the circumstances of the persons, of the time and of the
place. When negligence shows bad faith, the provisions of articles 1171
and 2202, paragraph 2, shall apply.
If the law or contract does not state the diligence which is to be observed
in the performance, that which is expected of a good father of a family
shall be required.
Was the reasonable care and caution which an ordinarily prudent person
would have used in the same situation exercised by TVI? [52]
This Court holds not.
TVIs failure to promptly provide a tugboat did not only increase the risk
that might have been reasonably anticipated during the shipside
operation, but was the proximate cause of the loss. A man of ordinary
prudence would not leave a heavily loaded barge floating for a
considerable number of hours, at such a precarious time, and in the open
sea, knowing that the barge does not have any power of its own and is
totally defenseless from the ravages of the sea. That it was nighttime and,
therefore, the members of the crew of a tugboat would be charging
overtime pay did not excuse TVI from calling for one such tugboat.
As for petitioner, for it to be relieved of liability, it should, following Article
1739[53] of the Civil Code, prove that it exercised due diligence to prevent
or minimize the loss, before, during and after the occurrence of the storm
in order that it may be exempted from liability for the loss of the goods.
While petitioner sent checkers[54] and a supervisor[55] on board the vessel to
counter-check the operations of TVI, it failed to take all available and
reasonable precautions to avoid the loss. After noting that TVI failed to
arrange for the prompt towage of the barge despite the deteriorating sea
conditions, it should have summoned the same or another tugboat to
extend help, but it did not.
This Court holds then that petitioner and TVI are solidarily liable [56] for the
loss of the cargoes. The following pronouncement of the Supreme Court is
instructive:
The foundation of LRTAs liability is the contract of carriage and its
obligation to indemnify the victim arises from the breach of that contract
by reason of its failure to exercise the high diligence required of the
common carrier. In the discharge of its commitment to ensure the safety of
passengers, a carrier may choose to hire its own employees or avail itself
of the services of an outsider or an independent firm to undertake the
task. In either case, the common carrier is not relieved of its
responsibilities under the contract of carriage.
Should Prudent be made likewise liable? If at all, that liability could only be
for tort under the provisions of Article 2176 and related provisions, in
conjunction with Article 2180 of the Civil Code. x x x [O]ne might ask
further, how then must the liability of the common carrier, on one hand,
and an independent contractor, on the other hand, be described? It would
be solidary. A contractual obligation can be breached by tort and when the
same act or omission causes the injury, one resulting in culpa contractual
and the other in culpa aquiliana, Article 2194 of the Civil Code can well
apply. In fine, a liability for tort may arise even under a contract, where
tort is that which breaches the contract. Stated differently, when an act
which constitutes a breach of contract would have itself constituted the
source of a quasi-delictual liability had no contract existed between the
parties, the contract can be said to have been breached by tort, thereby
allowing the rules on tort to apply.[57]
As for Black Sea, its duty as a common carrier extended only from the time
the goods were surrendered or unconditionally placed in its possession
and received for transportation until they were delivered actually or
constructively to consignee Little Giant.[58]
not from the time the claim is made judicially or extrajudicially but from
the date the judgment of the court is made (at which the time the
quantification of damages may be deemed to have been reasonably
ascertained).[65]
WHEREFORE, judgment is hereby rendered ordering petitioner Schmitz
Transport & Brokerage Corporation, and Transport Venture Incorporation
jointly and severally liable for the amount of P5,246,113.11 with the
MODIFICATION that interest at SIX PERCENT per annum of the amount due
should be computed from the promulgation on November 24, 1997 of the
decision of the trial court.
Costs against petitioner.
SO ORDERED.

Parties to a contract of carriage may, however, agree upon a definition of

delivery that extends the services rendered by the carrier. In the case at
bar, Bill of Lading No. 2 covering the shipment provides that delivery be
made to the port of discharge or so near thereto as she may safely get,
always afloat.[59] The delivery of the goods to the consignee was not from
pier to pier but from the shipside of M/V Alexander Saveliev and into
barges, for which reason the consignee contracted the services of
petitioner. Since Black Sea had constructively delivered the cargoes to
Little Giant, through petitioner, it had discharged its duty. [60]

In fine, no liability may thus attach to Black Sea.

Respecting the award of attorneys fees in an amount over P1,000,000.00

to Industrial Insurance, for lack of factual and legal basis, this Court sets it
aside. While Industrial Insurance was compelled to litigate its rights, such
fact by itself does not justify the award of attorneys fees under Article
2208 of the Civil Code. For no sufficient showing of bad faith would be
reflected in a partys persistence in a case other than an erroneous
conviction of the righteousness of his cause. [61] To award attorneys fees to
a party just because the judgment is rendered in its favor would be THIRD DIVISION
tantamount to imposing a premium on ones right to litigate or seek judicial
redress of legitimate grievances.[62]
SPOUSES DANTE CRUZ and G.R. No. 186312
On the award of adjustment fees: The adjustment fees and expense of LEONORA CRUZ,
divers were incurred by Industrial Insurance in its voluntary but Petitioners, Present:
unsuccessful efforts to locate and retrieve the lost cargo. They do not
CARPIO MORALES, J.,
constitute actual damages.[63]
Chairperson,
As for the court a quos award of interest on the amount claimed, the same BRION,
calls for modification following the ruling in Eastern Shipping Lines, Inc. v. - versus - BERSAMIN,
ABAD,* and
Court of Appeals[64] that when the demand cannot be reasonably
SUN HOLIDAYS, INC., VILLARAMA, JR., JJ.
established at the time the demand is made, the interest shall begin to run
Respondent.
Promulgated:
June 29, 2010
x-------------------------------------------------x
DECISION
CARPIO MORALES, J.:
Spouses Dante and Leonora Cruz (petitioners) lodged a Complaint on
January 25, 2001[1] 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. Court of Appeals[17] in
characterizing respondent as a common carrier.
The Civil Code defines common carriers in the following terms:
Article 1732. Common carriers are persons, corporations, firms or
associations engaged in the business of carrying or transporting
passengers or goods or both, by land, water, or air for compensation,
offering their services to the public.
The above article makes no distinction between one whose principal
business activity is the carrying of persons or goods or both, and
one who does such carrying only as an ancillary activity (in local
idiom, as a sideline). Article 1732 also carefully avoids making any
distinction between a person or enterprise offering transportation
service on a regular or scheduled basis and one offering such service
on an occasional, episodic or unscheduled basis. Neither does
Article 1732 distinguish between a carrier offering its services to
the general public, i.e., the general community or population, and one
who offers services or solicits business only from a narrow segment of
the general population. We think that Article 1733 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 1764[27] vis--vis Article 2206[28] of the Civil Code holds the common
carrier in breach of its contract of carriage that results in the death of a
passenger liable to pay the following: (1) indemnity for death, (2)
indemnity for loss of earning capacity and (3) moral damages.
Petitioners are entitled to indemnity for the death of Ruelito which is fixed
at P50,000.[29]
As for damages representing unearned income, the formula for its
computation is:
Net Earning Capacity = life expectancy x (gross annual income -
reasonable and necessary living expenses).
Life expectancy is determined in accordance with the formula:
2 / 3 x [80 age of deceased at the time of death] [30]
The first factor, i.e., life expectancy, is computed by applying the formula
(2/3 x [80 age at death]) adopted in the American Expectancy Table of
Mortality or the Actuarial of Combined Experience Table of Mortality. [31]
The second factor is computed by multiplying the life expectancy by the
net earnings of the deceased, i.e., the total earnings less expenses
necessary in the creation of such earnings or income and less living and
other incidental expenses.[32] The loss is not equivalent to the entire
earnings of the deceased, but only such portion as he would have used to
support his dependents or heirs. Hence, to be deducted from his gross
earnings are the necessary expenses supposed to be used by the
deceased for his own needs.[33]
In computing the third factor necessary living expense, Smith Bell Dodwell
Shipping Agency Corp. v. Borja[34] teaches 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 $900[35] 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 Capacity = life expectancy x (gross annual income -
reasonable and necessary living expenses).
= 35 x (P475,200 - P237,600)
= 35 x (P237,600)
Net Earning Capacity = P8,316,000
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 damages.[38]
Pursuant to Article 2208[39] of the Civil Code, attorney's fees may also be
awarded where exemplary damages are awarded. The Court finds
that 10% of the total amount adjudged against respondent is reasonable
for the purpose.
Finally, Eastern Shipping Lines, Inc. v. Court of Appeals [40] teaches that
when an obligation, regardless of its source, i.e., law, contracts, quasi-
contracts, delicts or quasi-delicts is breached, the contravenor can be held
liable for payment of interest in the concept of actual and compensatory
damages, subject to the following rules, to wit
1. When the obligation is breached, and it consists in the payment of a
sum of money, i.e., a loan or forbearance of money, the interest due
should be that which may have been stipulated in writing. Furthermore,
the interest due shall itself earn legal interest from the time it is judicially
demanded. In the absence of stipulation, the rate of interest shall be 12%
per annum to be computed from default, i.e., from judicial or extrajudicial
demand under and subject to the provisions of Article 1169 of the Civil
Code.
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.

SECOND DIVISION

LOADMASTERS CUSTOMS SERVICES, G.R. No. 179446

INC.,

Petitioner,
Present:

CARPIO, J., Chairperson,

 NACHURA, THE FACTS:

PERALTA,

- versus - ABAD, and

MENDOZA, JJ. On August 28, 2001, R&B Insurance issued Marine Policy No. MN-
00105/2001 in favor of Columbia to insure the shipment of 132 bundles of
electric copper cathodes against All Risks. On August 28, 2001, the
cargoes were shipped on board the vessel Richard Rey from Isabela, Leyte,
to Pier 10, North Harbor, Manila. They arrived on the same date.
GLODEL BROKERAGE
CORPORATION and
Columbia engaged the services of Glodel for the release and withdrawal of
R&B INSURANCE CORPORATION,
Promulgated: the cargoes from the pier and the subsequent delivery to its
Respondents. warehouses/plants. Glodel, in turn, engaged the services of Loadmasters
for the use of its delivery trucks to transport the cargoes to Columbias
warehouses/plants in Bulacan and Valenzuela City.
January 10, 2011

The goods were loaded on board twelve (12) trucks owned by

X -------------------------------------------------------------------------------------- X Loadmasters, driven by its employed drivers and accompanied by its
employed truck helpers. Six (6) truckloads of copper cathodes were to be
delivered to Balagtas, Bulacan, while the other six (6) truckloads were
DECISION destined for Lawang Bato, Valenzuela City. The cargoes in six truckloads
for Lawang Bato were duly delivered in Columbias warehouses there. Of
the six (6) trucks en route to Balagtas, Bulacan, however, only five (5)
reached the destination. One (1) truck, loaded with 11 bundles or 232
pieces of copper cathodes, failed to deliver its cargo.
MENDOZA, J.:

This is a petition for review on certiorari under Rule 45 of the Revised
Rules of Court assailing the August 24, 2007 Decision [1] of the Court of
Appeals (CA) in CA-G.R. CV No. 82822, entitled R&B Insurance Corporation
v. Glodel Brokerage Corporation and Loadmasters Customs Services, Inc.,
which held petitioner Loadmasters Customs Services,
Inc. (Loadmasters) liable to respondent Glodel Brokerage
Corporation (Glodel)in the amount of P1,896,789.62 representing the
insurance indemnity which R&B Insurance Corporation (R&B
Insurance) paid to the insured-consignee, Columbia Wire and Cable
Corporation (Columbia).
Later on, the said truck, an Isuzu with Plate No. NSD-117, was recovered
but without the copper cathodes. Because of this incident, Columbia filed
with R&B Insurance a claim for insurance indemnity in the amount
of P1,903,335.39. After the requisite investigation and adjustment, R&B
Insurance paid Columbia the amount of P1,896,789.62 as insurance
indemnity.
R&B Insurance, thereafter, filed a complaint for damages against both
Loadmasters and Glodel before the Regional Trial Court, Branch 14, Manila
(RTC), docketed as Civil Case No. 02-103040. It sought reimbursement of
the amount it had paid to Columbia for the loss of the subject cargo. It
claimed that it had been subrogated to the right of the consignee to
recover from the party/parties who may be held legally liable for the loss. [2]
On November 19, 2003, the RTC rendered a decision[3] holding Glodel liable
for damages for the loss of the subject cargo and dismissing Loadmasters
counterclaim for damages and attorneys fees against R&B Insurance.The On August 24, 2007, the CA rendered the assailed decision which reads in
dispositive portion of the decision reads: part:

WHEREFORE, all premises considered, the plaintiff having established by Considering that appellee is an agent of appellant Glodel, whatever
preponderance of evidence its claims against defendant Glodel Brokerage liability the latter owes to appellant R&B Insurance Corporation as
Corporation, judgment is hereby rendered ordering the latter: insurance indemnity must likewise be the amount it shall be paid by
appellee Loadmasters.

WHEREFORE, the foregoing considered, the appeal is PARTLY GRANTED in

1. To pay plaintiff R&B Insurance Corporation the sum of P1,896,789.62 that the appellee Loadmasters is likewise held liable to appellant Glodel in
as actual and compensatory damages, with interest from the date of the amount of P1,896,789.62 representing the insurance indemnity
complaint until fully paid; appellant Glodel has been held liable to appellant R&B Insurance
Corporation.

2. To pay plaintiff R&B Insurance Corporation the amount equivalent to

10% of the principal amount recovered as and for attorneys fees Appellant Glodels appeal to absolve it from any liability is herein
plus P1,500.00 per appearance in Court; DISMISSED.

3. To pay plaintiff R&B Insurance Corporation the sum of P22,427.18 as SO ORDERED.[5]

litigation expenses.

Hence, Loadmasters filed the present petition for review on certiorari

WHEREAS, the defendant Loadmasters Customs Services, Inc.s before this Court presenting the following
counterclaim for damages and attorneys fees against plaintiff are hereby
dismissed.
ISSUES

1. Can Petitioner Loadmasters be held liable to Respondent Glodel

in spite of the fact that the latter respondent Glodel did not file a
cross-claim against it (Loadmasters)?

With costs against defendant Glodel Brokerage Corporation. 2. Under the set of facts established and undisputed in the case,
can petitioner Loadmasters be legally considered as an Agent of
SO ORDERED.[4] respondent Glodel?[6]
Both R&B Insurance and Glodel appealed the RTC decision to the CA.

To totally exculpate itself from responsibility for the lost goods,
Loadmasters argues that it cannot be considered an agent of Glodel
because it never represented the latter in its dealings with the consignee.
At any rate, it further contends that Glodel has no recourse against it for
its (Glodels) failure to file a cross-claim pursuant to Section 2, Rule 9 of the
1997 Rules of Civil Procedure.
Glodel, in its Comment,[7] counters that Loadmasters is liable to it under its
cross-claim because the latter was grossly negligent in the transportation
of the subject cargo. With respect to Loadmasters claim that it is already
estopped from filing a cross-claim, Glodel insists that it can still do so even
for the first time on appeal because there is no rule that provides
otherwise. Finally, Glodel argues that its relationship with Loadmasters is
that of Charter wherein the transporter (Loadmasters) is only hired for the
specific job of delivering the merchandise. Thus, the diligence required in
this case is merely ordinary diligence or that of a good father of the family,
not the extraordinary diligence required of common carriers.
R&B Insurance, for its part, claims that Glodel is deemed to have
interposed a cross-claim against Loadmasters because it was not
prevented from presenting evidence to prove its position even without
amending its Answer. As to the relationship between Loadmasters and
Glodel, it contends that a contract of agency existed between the two
corporations.[8]
Subrogation is the substitution of one person in the place of another with
reference to a lawful claim or right, so that he who is substituted succeeds
to the rights of the other in relation to a debt or claim, including its
remedies or securities.[9] Doubtless, R&B Insurance is subrogated to the
rights of the insured to the extent of the amount it paid the consignee
under the marine insurance, as provided under Article 2207 of the Civil
Code, which reads:
ART. 2207. If the plaintiffs property has been insured, and he has received
indemnity from the insurance company for the injury or loss arising out of
the wrong or breach of contract complained of, the insurance company
shall be subrogated to the rights of the insured against the wrong-doer or
the person who has violated the contract. If the amount paid by the
insurance company does not fully cover the injury or loss, the aggrieved
party shall be entitled to recover the deficiency from the person causing
the loss or injury.
As subrogee of the rights and interest of the consignee, R&B Insurance has
the right to seek reimbursement from either Loadmasters or Glodel or both
for breach of contract and/or tort.
The issue now is who, between Glodel and Loadmasters, is liable to pay
R&B Insurance for the amount of the indemnity it paid Columbia.
At the outset, it is well to resolve the issue of whether Loadmasters and
Glodel are common carriers to determine their liability for the loss of the
subject cargo. Under Article 1732 of the Civil Code, common carriers are
persons, corporations, firms, or associations engaged in the business of
carrying or transporting passenger or goods, or both by land, water or air
for compensation, offering their services to the public.
Based on the aforecited definition, Loadmasters is a common carrier
because it is engaged in the business of transporting goods by land,
through its trucking service. It is a common carrier as distinguished from
a private carrier wherein the carriage is generally undertaken by special
agreement and it does not hold itself out to carry goods for the general
public.[10] The distinction is significant in the sense that the rights and
obligations of the parties to a contract of private carriage are governed
principally by their stipulations, not by the law on common carriers. [11]
In the present case, there is no indication that the undertaking in the
contract between Loadmasters and Glodel was private in character. There
is no showing that Loadmasters solely and exclusively rendered services to
Glodel.
In fact, Loadmasters admitted that it is a common carrier.[12]
In the same vein, Glodel is also considered a common carrier within the
context of Article 1732. In its Memorandum,[13] it states that it is a
corporation duly organized and existing under the laws of the Republic of
the Philippines and is engaged in the business of customs brokering. It
cannot be considered otherwise because as held by this Court in Schmitz
Transport & Brokerage Corporation v. Transport Venture, Inc., [14] a customs
broker is also regarded as a common carrier, the transportation of goods
being an integral part of its business.

Loadmasters and Glodel, being both common carriers, are mandated from
the nature of their business and for reasons of public policy, to observe the
extraordinary diligence in the vigilance over the goods transported by
them according to all the circumstances of such case, as required by
Article 1733 of the Civil Code. When the Court speaks of extraordinary
diligence, it is that extreme measure of care and caution which persons of
unusual prudence and circumspection observe for securing and preserving
their own property or rights.[15] This exacting standard imposed on
common carriers in a contract of carriage of goods is intended to tilt the
scales in favor of the shipper who is at the mercy of the common carrier
once the goods have been lodged for shipment.[16] Thus, in case of loss of
the goods, the common carrier is presumed to have been at fault or to
have acted negligently.[17] This presumption of fault or negligence,
however, may be rebutted by proof that the common carrier has observed
extraordinary diligence over the goods.
With respect to the time frame of this extraordinary responsibility, the Civil
Code provides that the exercise of extraordinary diligence 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.[18]
Premises considered, the Court is of the view that both Loadmasters and
Glodel are jointly and severally liable to R & B Insurance for the loss of the
subject cargo. Under Article 2194 of the New Civil Code, the responsibility
of two or more persons who are liable for a quasi-delict is solidary.
Pertinent is the ruling enunciated in the case of Mindanao Terminal and
Brokerage Service, Inc. v. Phoenix Assurance Company of New
York,/McGee & Co., Inc.[19] where this Court held that a tort may arise
despite the absence of a contractual relationship, to wit:
We agree with the Court of Appeals that the complaint filed
by Phoenix and McGee against Mindanao Terminal, from which the present
case has arisen, states a cause of action. The present action is based
on quasi-delict, arising from the negligent and careless loading and
stowing of the cargoes belonging to Del Monte Produce. Even assuming
that both Phoenix and McGee have only been subrogated in the rights of
Del Monte Produce, who is not a party to the contract of service between
Mindanao Terminal and Del Monte, still the insurance carriers may have a
cause of action in light of the Courts consistent ruling that the act that
breaks the contract may be also a tort. In fine, a liability for tort may
arise even under a contract, where tort is that which breaches the
contract. In the present case, Phoenix and McGee are not suing for
damages for injuries arising from the breach of the contract of
service but from the alleged negligent manner by which Mindanao
Terminal handled the cargoes belonging to Del Monte Produce. Despite the
absence of contractual relationship between Del Monte Produce and
Mindanao Terminal, the allegation of negligence on the part of the
defendant should be sufficient to establish a cause of action arising from
quasi-delict. [Emphases supplied]
In connection therewith, Article 2180 provides:

Loadmasters claim that it was never privy to the contract entered into by
Glodel with the consignee Columbia or R&B Insurance as subrogee, is not
ART. 2180. The obligation imposed by Article 2176 is demandable not only
a valid defense. It may not have a direct contractual relation
for ones own acts or omissions, but also for those of persons for whom one
with Columbia, but it is liable for tort under the provisions of Article 2176
is responsible.
of the Civil Code on quasi-delicts which expressly provide:

xxxx
ART. 2176. Whoever by act or omission causes damage to another, there
being fault or negligence, is obliged to pay for the damage done. Such
fault or negligence, if there is no pre-existing contractual relation between
the parties, is called a quasi-delict and is governed by the provisions of
this Chapter.
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.
It is not disputed that the subject cargo was lost while in the custody of
Loadmasters whose employees (truck driver and helper) were
instrumental in the hijacking or robbery of the shipment. As employer,
Loadmasters should be made answerable for the damages caused by its
employees who acted within the scope of their assigned task of delivering
the goods safely to the warehouse.
Whenever an employees negligence causes damage or injury to another,
there instantly arises a presumption juris tantum that the employer failed
to exercise diligentissimi patris families in the selection (culpa in
eligiendo) or supervision (culpa in vigilando) of its employees.[20] To avoid
liability for a quasi-delict committed by its employee, an employer must
overcome the presumption by presenting convincing proof that he
exercised the care and diligence of a good father of a family in the
selection and supervision of his employee.[21] In this regard, Loadmasters
failed.
Glodel is also liable because of its failure to exercise extraordinary
diligence. It failed to ensure that Loadmasters would fully comply with the
undertaking to safely transport the subject cargo to the designated
destination. It should have been more prudent in entrusting the goods to
Loadmasters by taking precautionary measures, such as providing escorts
to accompany the trucks in delivering the cargoes. Glodel should,
therefore, be held liable with Loadmasters. Its defense of force majeure is
unavailing.
At this juncture, the Court clarifies that there exists no principal-agent
relationship between Glodel and Loadmasters, as erroneously found by the
CA. Article 1868 of the Civil Code provides: By the contract of agency a
person binds himself to render some service or to do something in
representation or on behalf of another, with the consent or authority of the
latter. The elements of a contract of agency are: (1) consent, express or
implied, of the parties to establish the relationship; (2) the object is the
execution of a juridical act in relation to a third person; (3) the agent acts
as a representative and not for himself; (4) the agent acts within the scope
of his authority.[22]
Accordingly, there can be no contract of agency between the
parties. Loadmasters never represented Glodel. Neither was it ever
authorized to make such representation. It is a settled rule that the basis
for agency is representation, that is, the agent acts for and on behalf of
the principal on matters within the scope of his authority and said acts
have the same legal effect as if they were personally executed by the
principal. On the part of the principal, there must be an actual intention to
appoint or an intention naturally inferable from his words or actions, while
on the part of the agent, there must be an intention to accept the
appointment and act on it.[23]Such mutual intent is not obtaining in this
case.
What then is the extent of the respective liabilities of Loadmasters and
Glodel? Each wrongdoer is liable for the total damage suffered by R&B
Insurance. Where there are several causes for the resulting damages, a
party is not relieved from liability, even partially. It is sufficient that the
negligence of a party is an efficient cause without which the damage
would not have resulted. It is no defense to one of the concurrent
tortfeasors that the damage would not have resulted from his negligence
alone, without the negligence or wrongful acts of the other concurrent
tortfeasor. As stated in the case of Far Eastern Shipping v. Court of
Appeals,[24]
X x x. Where several causes producing an injury are concurrent and each
is an efficient cause without which the injury would not have happened,
the injury may be attributed to all or any of the causes and recovery may
be had against any or all of the responsible persons although under the
circumstances of the case, it may appear that one of them was more
culpable, and that the duty owed by them to the injured person was not
the same. No actor's negligence ceases to be a proximate cause merely
because it does not exceed the negligence of other actors. Each
wrongdoer is responsible for the entire result and is liable as though his
acts were the sole cause of the injury.
There is no contribution between joint tortfeasors whose liability is solidary
since both of them are liable for the total damage. Where the concurrent
or successive negligent acts or omissions of two or more persons, although
acting independently, are in combination the direct and proximate cause
of a single injury to a third person, it is impossible to determine in what
proportion each contributed to the injury and either of them is
responsible for the whole injury. Where their concurring negligence
resulted in injury or damage to a third party, they become joint tortfeasors
and are solidarily liable for the resulting damage under Article 2194 of the
Civil Code. [Emphasis supplied]
The Court now resolves the issue of whether Glodel can collect from SO ORDERED.
Loadmasters, it having failed to file a cross-claim against the latter.

Undoubtedly, Glodel has a definite cause of action against Loadmasters for

breach of contract of service as the latter is primarily liable for the loss of
the subject cargo. In this case, however, it cannot succeed in seeking
judicial sanction against Loadmasters because the records disclose that it
did not properly interpose a cross-claim against the latter. Glodel did not
even pray that Loadmasters be liable for any and all claims that it may be
adjudged liable in favor of R&B Insurance. Under the Rules, a compulsory
counterclaim, or a cross-claim, not set up shall be barred.[25] Thus, a cross-
claim cannot be set up for the first time on appeal.

For the consequence, Glodel has no one to blame but itself. The Court
cannot come to its aid on equitable grounds. Equity, which has been aptly
described as a justice outside legality, is applied only in the absence of,
and never against, statutory law or judicial rules of procedure. [26] The Court
cannot be a lawyer and take the cudgels for a party who has been at fault
or negligent.

WHEREFORE, the petition is PARTIALLY GRANTED. The August 24,

2007 Decision of the Court of Appeals is MODIFIED to read as follows:
WHEREFORE, judgment is rendered declaring petitioner Loadmasters
Customs Services, Inc. and respondent Glodel Brokerage Corporation
jointly and severally liable to respondent R&B Insurance Corporation for
the insurance indemnity it paid to consignee Columbia Wire & Cable
Corporation and ordering both parties to pay, jointly and severally, R&B
Insurance Corporation a] the amount of P1,896,789.62 representing the
insurance indemnity; b] the amount equivalent to ten (10%) percent
thereof for attorneys fees; and c] the amount of P22,427.18 for litigation
expenses.
The cross-claim belatedly prayed for by respondent Glodel Brokerage
Corporation against petitioner Loadmasters Customs Services, Inc. is
DENIED.
Spouses Teodoro and Nanette Perena, vs. Spouses Nicolas and
Teresita Zarate
GR no. 157917 August 29, 2012
The facts of the case are as follows:
Spouses Perena were engaged in school bus service, transporting
students from Paranaque to Don Bosco Technical Institute in Makati. In
June 1996, spouses Zarate contracted spouses Perena to transport their
son, Aaron Zarate, from their residence in Paranaque to Don Bosco. As on
the usual days of school in August 22, 1996, the van picked-up Aaron in
their house, he then took the left side seat near the rear door of the said
vehicle. Considering that the students were due by 7:15am at Don Bosco,
and because of heavy traffic at the South Superhighway, the driver,
Clemente Alfaro, decided to take the narrow path underneath the
Magallanes interchange which then is being used by Makati bound
vehicles as short cut. The said narrow path has a railroad crossing, and
while traversing the said narrow path, closely tailing a huge passenger
bus, the driver of the school service decided to overtake the said bus at to have been at fault or to have acted negligently, unless they prove that
about 50 meters away from the railroad crossing. Considering that the they observed extraordinary diligence as prescribed in articles 1733 and
stereo is playing loudly and blinded by the bus, he did not hear the 1755. In this case, Aaron Zarate died, and thus as provided under the
blowing of horn of the oncoming train as a warning to the vehicles. The above-mentioned law, they are negligent.
bus successfully crossed the railroad crossing but the van did not. The
train hit the rear side of the van and the impact threw 9 of the 12 students
including Aaron. His body landed in the path of the train, which dragged
him, severed his head, instantaneously killing him. Devastated by the
sudden death of their son, spouses Zarate commenced this action for
damages. The Regional Trial Court ruled in favor of the spouses Zarate. On
appeal, The Court of Appeals affirmed the decision of the lower court but
lowered the moral damages to php 2,500,000.00.

ISSUE:
Whether or not there is a breach of contract of a common carrier
and whether there is negligence.

HELD:

The Supreme Court ruled in favor spouses Zarate, affirming the

decision of the Court of Appeals.

In this case, the Supreme Court, once and for all lay the matter to
rest that the school service is a common carrier and not a private carrier,
and as such, they are required to observe the extraordinary diligence as
provided under Article 1733 of the Civil Code.

According to the Supreme Court, the true test for a common

carrier is not the quantity or extent of the business actually transacted, or
the number and character of the conveyances used in the activity, but
whether the undertaking is a part of the activity engaged in by the carrier SUPREME COURT
that he has held out to the general public as his business or occupation. Manila
Otherwise stated, making the activity or holding himself or itself out to the
public as a ready to act for all who may desire his or its services to THIRD DIVISION
transport goods or persons for a fee.
G.R. No. 200289 November 25, 2013

Applying the considerations mentioned above, there is no question WESTWIND SHIPPING CORPORATION, Petitioner,
that Perenas as the operators of a school service were: a) engaged in vs.
transporting passengers generally as a business not just as a casual UCPB GENERAL INSURANCE CO., INC. and ASIAN TERMINALS
occupation; b) undertaking to carry passengers over established roads; c) INC., Respondents.
transporting students for a fee. Despite catering limited clientele, the
Perenas operated as a common carrier because they hold themselves out x-----------------------x
as a ready transportation indiscriminately to the students of a particular
school living within or near where they operated the service and for a fee. G.R. No. 200314

On the second issue, Article 1756 of the Civil code provides that, In ORIENT FREIGHT INTERNATIONAL INC., Petitioner,
case of death of or injuries to passengers, common carriers are presumed vs.
UCPB GENERAL INSURANCE CO., INC. and ASIAN TERMINALS
INC., Respondents.
DECISION
PERALTA, J.:
These two consolidated cases challenge, by way of petition for certiorari
under Rule 45 of the 1997 Rules of Civil Procedure, September 13, 2011
Decision1 and January 19, 2012 Resolution2 of the Court of Appeals (CA) in
CA-G.R. CV No. 86752, which reversed and set aside the January 27, 2006
Decision3 of the Manila City Regional Trial Court Branch (RTC) 30. The facts,
as established by the records, are as follows:
On August 23, 1993, Kinsho-Mataichi Corporation shipped from the port of
Kobe, Japan, 197 metal containers/skids of tin-free steel for delivery to the
consignee, San Miguel Corporation (SMC). The shipment, covered by Bill of
Lading No. KBMA-1074,4 was loaded and received clean on board M/V
Golden Harvest Voyage No. 66, a vessel owned and operated by Westwind
Shipping Corporation (Westwind).
SMC insured the cargoes against all risks with UCPB General Insurance Co.,
Inc. (UCPB) for US Dollars: One Hundred Eighty-Four Thousand Seven
Hundred Ninety-Eight and Ninety-Seven Centavos (US$184,798.97), which,
at the time, was equivalent to Philippine Pesos: Six Million Two Hundred
Nine Thousand Two Hundred Forty-Five and Twenty-Eight Centavos
(₱6,209,245.28).
The shipment arrived in Manila, Philippines on August 31, 1993 and was
discharged in the custody of the arrastre operator, Asian Terminals, Inc.
(ATI), formerly Marina Port Services, Inc.5 During the unloading operation,
however, six containers/skids worth Philippine Pesos: One Hundred
Seventeen Thousand Ninety-Three and Twelve Centavos (₱117,093.12)
sustained dents and punctures from the forklift used by the stevedores of
Ocean Terminal Services, Inc. (OTSI) in centering and shuttling the
containers/skids. As a consequence, the local ship agent of the vessel,
Baliwag Shipping Agency, Inc., issued two Bad Order Cargo Receipt dated
September 1, 1993.
On September 7, 1993, Orient Freight International, Inc. (OFII), the
customs broker of SMC, withdrew from ATI the 197 containers/skids,
including the six in damaged condition, and delivered the same at SMC’s
warehouse in Calamba, Laguna through J.B. Limcaoco Trucking (JBL). It was
discovered upon discharge that additional nine containers/skids valued at
Philippine Pesos: One Hundred Seventy-Five Thousand Six Hundred Thirty-
Nine and Sixty-Eight Centavos (₱175,639.68) were also damaged due to
the forklift operations; thus, making the total number of 15
containers/skids in bad order.
Almost a year after, on August 15, 1994, SMC filed a claim against UCPB,
Westwind, ATI, and OFII to recover the amount corresponding to the
damaged 15 containers/skids. When UCPB paid the total sum of Philippine
Pesos: Two Hundred Ninety-Two Thousand Seven Hundred Thirty-Two and
Eighty Centavos (₱292,732.80), SMC signed the subrogation receipt.
Thereafter, in the exercise of its right of subrogation, UCPB instituted on
August 30, 1994 a complaint for damages against Westwind, ATI, and
OFII.6
After trial, the RTC dismissed UCPB’s complaint and the counterclaims of
Westwind, ATI, and OFII. It ruled that the right, if any, against ATI already
prescribed based on the stipulation in the 16 Cargo Gate Passes issued, as
well as the doctrine laid down in International Container Terminal Services,
Inc. v. Prudential Guarantee & Assurance Co. Inc. 7 that a claim for
reimbursement for damaged goods must be filed within 15 days from the
date of consignee’s knowledge. With respect to Westwind, even if the
action against it is not yet barred by prescription, conformably with
Section 3 (6) of the Carriage of Goods by Sea Act (COGSA) and Our rulings
in E.E. Elser, Inc., et al. v. Court of Appeals, et al. 8 and Belgian Overseas
Chartering and Shipping N.V. v. Phil. First Insurance Co., Inc., 9 the court a
quo still opined that Westwind is not liable, since the discharging of the
cargoes were done by ATI personnel using forklifts and that there was no
allegation that it (Westwind) had a hand in the conduct of the stevedoring
operations. Finally, the trial court likewise absolved OFII from any liability,
reasoning that it never undertook the operation of the forklifts which
caused the dents and punctures, and that it merely facilitated the release
and delivery of the shipment as the customs broker and representative of
SMC.
On appeal by UCPB, the CA reversed and set aside the trial court. The fallo
of its September 13, 2011 Decision directed:
WHEREFORE, premises considered, the instant appeal is hereby GRANTED.
The Decision dated January 27, 2006 rendered by the court a quo is
REVERSED AND SET ASIDE. Appellee Westwind Shipping Corporation is
hereby ordered to pay to the appellant UCPB General Insurance Co., Inc.,
the amount of One Hundred Seventeen Thousand and Ninety-Three Pesos
and Twelve Centavos (Php117,093.12), while Orient Freight International,
Inc. is hereby ordered to pay to UCPB the sum of One Hundred Seventy-
Five Thousand Six Hundred Thirty-Nine Pesos and Sixty-Eight Centavos
(Php175,639.68). Both sums shall bear interest at the rate of six (6%)
percent per annum, from the filing of the complaint on August 30, 1994
until the judgment becomes final and executory. Thereafter, an interest
rate of twelve (12%) percent per annum shall be imposed from the time
this decision becomes final and executory until full payment of said
amounts.
SO ORDERED.10
While the CA sustained the RTC judgment that the claim against ATI
already prescribed, it rendered a contrary view as regards the liability of
Westwind and OFII. For the appellate court, Westwind, not ATI, is
responsible for the six damaged containers/skids at the time of its
unloading. In its rationale, which substantially followed Philippines First
Insurance Co., Inc. v. Wallem Phils. Shipping, Inc., 11 it concluded that the
common carrier, not the arrastre operator, is responsible during the
unloading of the cargoes from the vessel and that it is not relieved from
liability and is still bound to exercise extraordinary diligence at the time in
order to see to it that the cargoes under its possession remain in good
order and condition. The CA also considered that OFII is liable for the
additional nine damaged containers/skids, agreeing with UCPB’s
contention that OFII is a common carrier bound to observe extraordinary
diligence and is presumed to be at fault or have acted negligently for such
damage. Noting the testimony of OFII’s own witness that the delivery of
the shipment to the consignee is part of OFII’s job as a cargo forwarder,
the appellate court ruled that Article 1732 of the New Civil Code (NCC)
does not distinguish between one whose principal business activity is the
carrying of persons or goods or both and one who does so as an ancillary
activity. The appellate court further ruled that OFII cannot excuse itself
from liability by insisting that JBL undertook the delivery of the cargoes to
SMC’s warehouse. It opined that the delivery receipts signed by the
inspector of SMC showed that the containers/skids were received from
OFII, not JBL. At the most, the CA said, JBL was engaged by OFII to supply
the trucks necessary to deliver the shipment, under its supervision, to
SMC.
Only Westwind and OFII filed their respective motions for reconsideration,
which the CA denied; hence, they elevated the case before Us via petitions
docketed as G.R. Nos. 200289 and 200314, respectively.
Westwind argues that it no longer had actual or constructive custody of
the containers/skids at the time they were damaged by ATI’s forklift
operator during the unloading operations. In accordance with the
stipulation of the bill of lading, which allegedly conforms to Article 1736 of
the NCC, it contends that its responsibility already ceased from the
moment the cargoes were delivered to ATI, which is reckoned from the
moment the goods were taken into the latter’s custody. Westwind adds
that ATI, which is a completely independent entity that had the right to
receive the goods as exclusive operator of stevedoring and arrastre
functions in South Harbor, Manila, had full control over its employees and
stevedores as well as the manner and procedure of the discharging
operations.
As for OFII, it maintains that it is not a common carrier, but only a customs
broker whose participation is limited to facilitating withdrawal of the
shipment in the custody of ATI by overseeing and documenting the
turnover and counterchecking if the quantity of the shipments were in tally
with the shipping documents at hand, but without participating in the
physical withdrawal and loading of the shipments into the delivery trucks
of JBL. Assuming that it is a common carrier, OFII insists that there is no
need to rely on the presumption of the law – that, as a common carrier, it
is presumed to have been at fault or have acted negligently in case of
damaged goods – considering the undisputed fact that the damages to the
containers/skids were caused by the forklift blades, and that there is no
evidence presented to show that OFII and Westwind were the
owners/operators of the forklifts. It asserts that the loading to the trucks
were made by way of forklifts owned and operated by ATI and the
unloading from the trucks at the SMC warehouse was done by way of
forklifts owned and operated by SMC employees. Lastly, OFII avers that
neither the undertaking to deliver nor the acknowledgment by the
consignee of the fact of delivery makes a person or entity a common
carrier, since delivery alone is not the controlling factor in order to be
considered as such.
Both petitions lack merit.
The case of Philippines First Insurance Co., Inc. v. Wallem Phils. Shipping,
Inc.12 applies, as it settled the query on which between a common carrier
and an arrastre operator should be responsible for damage or loss incurred
by the shipment during its unloading. We elucidated at length:
Common carriers, from the nature of their business and for reasons of
public policy, are bound to observe extraordinary diligence in the vigilance
over the goods transported by them. Subject to certain exceptions
enumerated under Article 1734 of the Civil Code, common carriers are
responsible for the loss, destruction, or deterioration of the goods. The
extraordinary responsibility of the common carrier lasts from the time the
goods are unconditionally placed in the possession of, and received by the
carrier for transportation until the same are delivered, actually or
constructively, by the carrier to the consignee, or to the person who has a
right to receive them.
For marine vessels, Article 619 of the Code of Commerce provides that the
ship captain is liable for the cargo from the time it is turned over to him at
the dock or afloat alongside the vessel at the port of loading, until he
delivers it on the shore or on the discharging wharf at the port of
unloading, unless agreed otherwise. In Standard Oil Co. of New York v.
Lopez Castelo, the Court interpreted the ship captain’s liability as
ultimately that of the shipowner by regarding the captain as the
representative of the shipowner.
Lastly, Section 2 of the COGSA provides that under every contract of
carriage of goods by sea, the carrier in relation to the loading, handling,
stowage, carriage, custody, care, and discharge of such goods, shall be
subject to the responsibilities and liabilities and entitled to the rights and
immunities set forth in the Act. Section 3 (2) thereof then states that
among the carriers’ responsibilities are to properly and carefully load,
handle, stow, carry, keep, care for, and discharge the goods carried.
xxxx
On the other hand, the functions of an arrastre operator involve the
handling of cargo deposited on the wharf or between the establishment of
the consignee or shipper and the ship's tackle. Being the custodian of the
goods discharged from a vessel, an arrastre operator's duty is to take good
care of the goods and to turn them over to the party entitled to their
possession.
Handling cargo is mainly the arrastre operator's principal work so its
drivers/operators or employees should observe the standards and
measures necessary to prevent losses and damage to shipments under its
custody.
In Fireman’s Fund Insurance Co. v. Metro Port Service, Inc., the Court
explained the relationship and responsibility of an arrastre operator to a
consignee of a cargo, to quote:
The legal relationship between the consignee and the arrastre operator is
akin to that of a depositor and warehouseman. The relationship between
the consignee and the common carrier is similar to that of the consignee
and the arrastre operator. Since it is the duty of the ARRASTRE to take
good care of the goods that are in its custody and to deliver them in good
condition to the consignee, such responsibility also devolves upon the
CARRIER. Both the ARRASTRE and the CARRIER are therefore charged with
and obligated to deliver the goods in good condition to the consignee.
(Emphasis supplied) (Citations omitted)
The liability of the arrastre operator was reiterated in Eastern Shipping
Lines, Inc. v. Court of Appeals with the clarification that the arrastre
operator and the carrier are not always and necessarily solidarily liable as
the facts of a case may vary the rule.
Thus, in this case, the appellate court is correct insofar as it ruled that an
arrastre operator and a carrier may not be held solidarily liable at all
times. But the precise question is which entity had custody of the
shipment during its unloading from the vessel?
The aforementioned Section 3 (2) of the COGSA states that among the
carriers’ responsibilities are to properly and carefully load, care for and
discharge the goods carried. The bill of lading covering the subject
shipment likewise stipulates that the carrier’s liability for loss or damage
to the goods ceases after its discharge from the vessel. Article 619 of the
Code of Commerce holds a ship captain liable for the cargo from the time
it is turned over to him until its delivery at the port of unloading.
In a case decided by a U.S. Circuit Court, Nichimen Company v. M/V
Farland, it was ruled that like the duty of seaworthiness, the duty of care of
the cargo is non-delegable, and the carrier is accordingly responsible for
the acts of the master, the crew, the stevedore, and his other agents. It
has also been held that it is ordinarily the duty of the master of a vessel to
unload the cargo and place it in readiness for delivery to the consignee,
and there is an implied obligation that this shall be accomplished with
sound machinery, competent hands, and in such manner that no
unnecessary injury shall be done thereto. And the fact that a consignee is
required to furnish persons to assist in unloading a shipment may not
relieve the carrier of its duty as to such unloading.
xxxx
It is settled in maritime law jurisprudence that cargoes while being
unloaded generally remain under the custody of the carrier x x x. 13
In Regional Container Lines (RCL) of Singapore v. The Netherlands
Insurance Co. (Philippines), Inc.14 and Asian Terminals, Inc. v. Philam
Insurance Co., Inc.,15 the Court echoed the doctrine that cargoes, while
being unloaded, generally remain under the custody of the carrier. We
cannot agree with Westwind’s disputation that "the carrier in Wallem
clearly exercised supervision during the discharge of the shipment and
that is why it was faulted and held liable for the damage incurred by the
shipment during such time." What Westwind failed to realize is that the
extraordinary responsibility of the common carrier lasts until the time the
goods are actually or constructively delivered by the carrier to the
consignee or to the person who has a right to receive them. There is actual
delivery in contracts for the transport of goods when possession has been
turned over to the consignee or to his duly authorized agent and a
reasonable time is given him to remove the goods.16 In this case, since the
discharging of the containers/skids, which were covered by only one bill of
lading, had not yet been completed at the time the damage occurred,
there is no reason to imply that there was already delivery, actual or
constructive, of the cargoes to ATI. Indeed, the earlier case of Delsan
Transport Lines, Inc. v. American Home Assurance Corp. 17 serves as a
useful guide, thus:
Delsan’s argument that it should not be held liable for the loss of diesel oil
due to backflow because the same had already been actually and legally
delivered to Caltex at the time it entered the shore tank holds no water. It
had been settled that the subject cargo was still in the custody of Delsan
because the discharging thereof has not yet been finished when the
backflow occurred. Since the discharging of the cargo into the depot has
not yet been completed at the time of the spillage when the backflow
occurred, there is no reason to imply that there was actual delivery of the
cargo to the consignee. Delsan is straining the issue by insisting that when
the diesel oil entered into the tank of Caltex on shore, there was legally, at
that moment, a complete delivery thereof to Caltex. To be sure, the
extraordinary responsibility of common carrier lasts from the time the
goods are unconditionally placed in the possession of, and received by, the
carrier for transportation until the same are delivered, actually or
constructively, by the carrier to the consignee, or to a person who has the
right to receive them. The discharging of oil products to Caltex Bulk Depot
has not yet been finished, Delsan still has the duty to guard and to
preserve the cargo. The carrier still has in it the responsibility to guard and
preserve the goods, a duty incident to its having the goods transported.
To recapitulate, common carriers, from the nature of their business and for
reasons of public policy, are bound to observe extraordinary diligence in
vigilance over the goods and for the safety of the passengers transported
by them, according to all the circumstances of each case. The mere proof
of delivery of goods in good order to the carrier, and their arrival in the
place of destination in bad order, make out a prima facie case against the
carrier, so that if no explanation is given as to how the injury occurred, the
carrier must be held responsible. It is incumbent upon the carrier to prove
that the loss was due to accident or some other circumstances
inconsistent with its liability.18
The contention of OFII is likewise untenable. A customs broker has been
regarded as a common carrier because transportation of goods is an
integral part of its business.19 In Schmitz Transport & Brokerage
Corporation v. Transport Venture, Inc.,20 the Court already reiterated: It is
settled that under a given set of facts, a customs broker may be regarded
as a common carrier.1âwphi1 Thus, this Court, in A.F. Sanchez Brokerage,
Inc. v. The Honorable Court of Appeals held:
The appellate court did not err in finding petitioner, a customs broker, to
be also a common carrier, as defined under Article 1732 of the Civil Code,
to wit, Art. 1732. Common carriers are persons, corporations, firms or
associations engaged in the business of carrying or transporting
passengers or goods or both, by land, water, or air, for compensation,
offering their services to the public.
xxxx
Article 1732 does not distinguish between one whose principal business
activity is the carrying of goods and one who does such carrying only as an
ancillary activity. The contention, therefore, of petitioner that it is not a
common carrier but a customs broker whose principal function is to
prepare the correct customs declaration and proper shipping documents
as required by law is bereft of merit. It suffices that petitioner undertakes
to deliver the goods for pecuniary consideration.
And in Calvo v. UCPB General Insurance Co. Inc., this Court held that as the
transportation of goods is an integral part of a customs broker, the
customs broker is also a common carrier. For to declare otherwise "would
be to deprive those with whom [it] contracts the protection which the law
affords them notwithstanding the fact that the obligation to carry goods
for [its] customers, is part and parcel of petitioner’s business." 21
That OFII is a common carrier is buttressed by the testimony of its own
witness, Mr. Loveric Panganiban Cueto, that part of the services it offers to
clients is cargo forwarding, which includes the delivery of the shipment to
the consignee.22 Thus, for undertaking the transport of cargoes from ATI to
SMC’s warehouse in Calamba, Laguna, OFII is considered a common
carrier. As long as a person or corporation holds itself to the public for the
purpose of transporting goods as a business, it is already considered a
common carrier regardless of whether it owns the vehicle to be used or
has to actually hire one.
As a common carrier, OFII is mandated to observe, under Article 1733 of
the Civil Code,23 extraordinary diligence in the vigilance over the goods 24 it
transports according to the peculiar circumstances of each case. In the
event that the goods are lost, destroyed or deteriorated, it is presumed to
have been at fault or to have acted negligently unless it proves that it
observed extraordinary diligence.25 In the case at bar it was established
that except for the six containers/skids already damaged OFII received the
cargoes from ATI in good order and condition; and that upon its delivery to
SMC additional nine containers/skids were found to be in bad order as
noted in the Delivery Receipts issued by OFII and as indicated in the
Report of Cares Marine Cargo Surveyors. Instead of merely excusing itself
from liability by putting the blame to ATI and SMC it is incumbent upon
OFII to prove that it actively took care of the goods by exercising
extraordinary diligence in the carriage thereof. It failed to do so. Hence its
presumed negligence under Article 1735 of the Civil Code remains
unrebutted.
WHEREFORE, premises considered the petitions of Westwind and OFII in
G.R. Nos. 200289 and 200314 respectively are DENIED. The September 13
2011 Decision and January 19 2012 Resolution of the Court of Appeals in
CA-G.R. CV No. 86752 which reversed and set aside the January 27 2006
Decision of the Manila City Regional Trial Court Branch 30 are AFFIRMED.
SO ORDERED.
SECOND DIVISION

February 8, 2017

G.R. No. 212038

SPOUSES JESUS FERNANDO and ELIZABETH S.

FERNANDO, Petitioners
vs.
NORTHWEST AIRLINES, INC., Respondent

x-----------------------x

G.R. No. 212043

NORTHWEST AIRLINES, INC., Petitioner,

vs.
SPOUSES JESUS FERNANDO and ELIZABETH S.
FERNANDO, Respondents.

DECISION

PERALTA, J.:
Before us are consolidated petitions for review on certiorari under Rule 45
of the Rules of Court assailing the Decision 1 dated August 30, 2013, and
Resolution2 dated March 31, 2014 of the Court of Appeals (CA) in CA-G.R.
CV No. 93496 which affirmed the Decision 3 dated September 9, 2008 of
the Regional Trial Court (RTC), Branch 97, Quezon City in Civil Case No. Q-
N-02-46727 finding Northwest Airlines, Inc. (Northwest) liable for breach of
contract of carriage.
The spouses Jesus and Elizabeth S. Fernando (Fernandos) are frequent
flyers of Northwest Airlines, Inc. and are holders of Elite Platinum World
Perks Card, the highest category given to frequent flyers of the
carrier.4 They are known in the musical instruments and sports equipments
industry in the Philippines being the owners of JB Music and JB Sports with
outlets all over the country. They likewise own the five (5) star Hotel
Elizabeth in Baguio City and Cebu City, and the chain of Fersal Hotels and
Apartelles in the country.5
The Fernandos initiated the filing of the instant case which arose from two
(2) separate incidents: first, when Jesus Fernando arrived at Los
Angeles (LA) Airport on December 20, 2001; second, when the Fernandos
were to depart from the LA Airport on January 29, 2002. The factual
antecedents are as follows:
Version of Spouses Jesus and Elizabeth S. Fernando:
a.) The arrival at Los Angeles Airport on December 20, 2001
Sometime on December 20, 2001, Jesus Fernando arrived at the LA
Airport via Northwest Airlines Flight No. NW02 to join his family who flew
earlier to the said place for a reunion for the Christmas holidays. 6
When Jesus Fernando presented his documents at the immigration
counter, he was asked by the Immigration Officer to have his return ticket
verified and validated since the date reflected thereon is August 2001. So
he approached a Northwest personnel who was later identified as Linda
Puntawongdaycha, but the latter merely glanced at his ticket without
checking its status with the computer and peremptorily said that the ticket
has been used and could not be considered as valid. He then explained to
the personnel that he was about to use the said ticket on August 20 or 21,
2001 on his way back to Manila from LA but he could not book any seat
because of some ticket restrictions so he, instead, purchased new business
class ticket on the said date.7 Hence, the ticket remains unused and
perfectly valid.
To avoid further arguments, Jesus Fernando gave the personnel the
number of his Elite Platinum World Perks Card for the latter to access the
ticket control record with the airline's computer and for her to see that the
ticket is still valid. But Linda Puntawongdaycha refused to check the
validity of the ticket in the computer but, instead, looked at Jesus Fernando
with contempt, then informed the Immigration Officer that the ticket is not
valid because it had been used.8
The Immigration Officer brought Jesus Fernando to the interrogation room
of the Immigration and Naturalization Services (INS) where he was asked
humiliating questions for more than two (2) hours. When he was finally
cleared by the Immigration Officer, he was granted only a twelve (12)-day
stay in the United States (US), instead of the usual six (6) months.9
When Jesus Fernando was finally able to get out of the airport, to the relief
of his family, Elizabeth Fernando proceeded to a Northwest Ticket counter
to verify the status of the ticket. The personnel manning the counter
courteously assisted her and confirmed that the ticket remained unused
and perfectly valid. To avoid any future problems that may be encountered
on the validity of the ticket, a new ticket was issued to Jesus Fernando. 10
Since Jesus Fernando was granted only a twelve (12)-day stay in the US,
his scheduled plans with his family as well as his business commitments
were disrupted. He was supposed to stay with his family for the entire
duration of the Christmas season because his son and daughter were then
studying at Pepperton University in California. But he was forced to fly
back to Manila before the twelve (12)-day stay expired and flew back to
the US on January 15, 2002. The Fernandos were, likewise, scheduled to
attend the Musical Instrument Trade Show in LA on January 1 7, 2002 and
the Sports Equipment Trade Show in Las Vegas on January 21 to 23, 2002
which were both previously scheduled. Hence, Jesus Fernando had to
spend additional expenses for plane fares and other related expenses, and
missed the chance to be with his family for the whole duration of the
Christmas holidays.11
b.) The departure from the Los Angeles Airport on January 29, 2002.
On January 29, 2002, the Fernandos were on their way back to the
Philippines. They have confirmed bookings on Northwest Airlines NW Flight
No. 001 for Narita, Japan and NW 029 for Manila. They checked in with
their luggage at the LA Airport and were given their respective boarding
passes for business class seats and claim stubs for six (6) pieces of
luggage. With boarding passes, tickets and other proper travel documents,
they were allowed entry to the departure area and joined their business
associates from Japan and the Philippines who attended the Musical
Instrument Trade Show in LA on January 17, 2002 and the Sports
Equipment Trade Show in Las Vegas on January 21 to 23, 2002. When it
was announced that the plane was ready for boarding, the Fernandos
joined the long queue of business class passengers along with their
business associates.12
When the Fernandos reached the gate area where boarding passes need
to be presented, Northwest supervisor Linda Tang stopped them and
demanded for the presentation of their paper tickets (coupon type). They
failed to present the same since, according to them, Northwest issued
electronic tickets (attached to the boarding passes) which they showed to
the supervisor.13 In the presence of the other passengers, Linda Tang
rudely pulled them out of the queue. Elizabeth Fernando explained to
Linda Tang that the matter could be sorted out by simply verifying their
electronic tickets in her computer and all she had to do was click and
punch in their Elite Platinum World Perks Card number. But Linda Tang
arrogantly told them that if they wanted to board the plane, they should
produce their credit cards and pay for their new tickets, otherwise
Northwest would order their luggage off-loaded from the plane.
Exasperated and pressed for time, the Fernandos rushed to the Northwest
Airline Ticket counter to clarify the matter. They were assisted by
Northwest personnel Jeanne Meyer who retrieved their control number
from her computer and was able to ascertain that the Fernandos'
electronic tickets were valid and they were confirmed passengers on both
NW Flight No. 001 for Narita Japan and NW 029 for Manila on that day. To
ensure that the Fernandos would no longer encounter any problem with
Linda Tang, Jeanne Meyer printed coupon tickets for them who were then
advised to rush back to the boarding gates since the plane was about to
depart. But when the Fernandos reached the boarding gate, the plane had
already departed. They were able to depart, instead, the day after, or on
January 30, 2002, and arrived in the Philippines on January 31,2002. 14
Version of Northwest Airlines, Inc.:
a.) The arrival at the Los Angeles Airport on December 20, 2001.
Northwest claimed that Jesus Fernando travelled from Manila to LA on
Northwest Airlines on December 20, 2001. At the LA Airport, it was
revealed that Jesus Fernando's return ticket was dated August 20 or 21,
2001 so he encountered a problem in the Immigration Service. About an
hour after the aircraft had arrived, Linda Puntawongdaycha, Northwest
Customer Service Agent, was called by a US Immigration Officer named
"Nicholas" to help verify the ticket of Jesus Fernando. Linda
Puntawongdaycha then asked Jesus Fernando to "show" her "all the
papers." Jesus Fernando only showed her the passenger receipt of his
ticket without any ticket coupon attached to it. The passenger receipt
which was labelled "Passenger Receipt" or "Customer Receipt" was dated
August 2001. Linda Puntawongdaycha asked Jesus Fernando several times
whether he had any other ticket, but Jesus Fernando insisted that the
"receipt" was "all he has", and the passenger receipt was his ticket. He
failed to show her any other document, and was not able to give any other
relevant information about his return ticket. Linda Puntawongdaycha then
proceeded to the Interline Department and checked Jesus Fernando's
Passenger Name Record (PNR) and his itinerary. The itinerary only showed
his coming from Manila to Tokyo and Los Angeles; nothing would indicate
about his flight back to Manila. She then looked into his record and
checked whether he might have had an electronic ticket but she could not
find any. For failure to find any other relevant information regarding
Fernando's return ticket, she then printed out Jesus Fernando's PNR and
gave the document to the US Immigration Officer. Linda Puntawongdaycha
insisted that she did her best to help Jesus Fernando get through the US
Immigration.15
b.) The departure from the Los Angeles Airport on January 29, 2002.
On January 29, 2002, the Fernandos took Northwest for their flight back to
Manila. In the trip, the Fernandos used electronic tickets but the tickets
were dated January 26, 2002 and August 21, 2001. They reached the
boarding gate few minutes before departure. Northwest personnel Linda
Tang was then the one assigned at the departure area. As a standard
procedure, Linda Tang scanned the boarding passes and collected tickets
while the passengers went through the gate. When the Fernandos
presented their boarding passes, Linda Tang asked for their tickets
because there were no tickets stapled on their boarding passes. She
explained that even though the Fernandos had electronic tickets, they had
made "several changes on their ticket over and over". And when they
made the booking/reservation at Northwest, they never had any ticket
number or information on the reservation.16
When the Fernandos failed to show their tickets, Linda Tang called Yong
who was a supervisor at the ticket counter to verify whether the Fernandos
had checked in, and whether there were any tickets found at the ticket
counter. Upon verification, no ticket was found at the ticket counter, so
apparently when the Fernandos checked in, there were no tickets
presented. Linda Tang also checked with the computer the reservation of
the Fernandos, but again, she failed to see any electronic ticket number of
any kind, and/or any ticket record. So as the Fernandos would be able to
get on with the flight considering the amount of time left, she told them
that they could purchase tickets with their credit cards and deal with the
refund later when they are able to locate the tickets and when they reach
Manila. Linda Tang believed that she did the best she could under the
circumstances.17
However, the Fernandos did not agree with the solution offered by Linda
Tang. Instead, they went back to the Northwest ticket counter and were
attended to by Jeanne Meyer who was "courteous" and "was very kind
enough" to assist them. Jeanne Meyer verified their bookings and "printed
paper tickets" for them. Unfortunately, when they went back to the
boarding gate, the plane had departed. Northwest offered alternative
arrangements for them to be transported to Manila on the same day on
another airline, either through Philippine Airlines or Cathay Pacific Airways,
but they refused. Northwest also offered them free hotel accommodations
but they, again, rejected the offer18 Northwest then made arrangements
for the transportation of the Fernandos from the airport to their house in
LA, and booked the Fernandos on a Northwest flight that would leave the
next day, January 30, 2002. On January 30, 2002, the Fernandos flew to
Manila on business class seats.19
On April 30, 2002, a complaint for damages20 was instituted by the
Fernandos against Northwest before the RTC, Branch 97, Quezon City.
During the trial of the case, the Fernandos testified to prove their claim.
On the part of Northwest, Linda Tang-Mochizuki and Linda
Puntawongdaycha testified through oral depositions taken at the Office of
the Consulate General, Los Angeles City. The Northwest Manager for HR-
Legal Atty. Cesar Veneracion was also presented and testified on the
investigation conducted by Northwest as a result of the letters sent by
Elizabeth Fernando and her counsel prior to the filing of the complaint
before the RTC.21
On September 9, 2008, the RTC issued a Decision, the dispositive portion
of which states, thus:
WHEREFORE, in view of the foregoing, this Court rendered judgment in
favor of the plaintiffs and against defendant ordering defendant to pay the
plaintiffs, the following:
1. Moral damages in the amount of Two Hundred Thousand Pesos
(₱200,000.00);
2. Actual or compensatory damages in the amount of Two Thousand US
Dollars ($2,000.00) or its corresponding Peso equivalent at the time the
airline ticket was purchased;
3. Attorney's fees in the amount of Fifty Thousand pesos (₱50,000.00);
and,
4. Cost of suit.
SO ORDERED.22
Both parties filed their respective appeals which were dismissed by the CA
in a Decision dated August 30, 2013, and affirmed the RTC Decision.
The Fernandos and Northwest separately filed motions for a
reconsideration of the Decision, both of which were denied by the CA on
March 31, 2014.
The Fernandos filed a petition for review on certiorari23before this court
docketed as G.R. No. 212038. Northwest followed suit and its
petition24 was docketed as G.R. No. 212043. Considering that both
petitions involved similar parties, emanated from the same Civil Case No.
Q-N-02-46727 and assailed the same CA judgment, they were ordered
consolidated in a Resolution25 dated June 18, 2014.
In G.R. No. 212038, the Fernandos raised the following issues:
WHETHER OR NOT THE ACTS OF THE PERSONNEL AND THAT OF
DEFENDANT NORTHWEST ARE WANTON, MALICIOUS, RECKLESS,
DELIBERATE AND OPPRESSIVE IN CHARACTER, AMOUNTING TO FRAUD AND
BAD FAITH;
WHETHER OR NOT PETITIONER SPOUSES ARE ENTITLED TO MORAL
DAMAGES IN AN AMOUNT MORE THAN THAT AWARDED BY THE TRIAL
COURT;
WHETHER OR NOT DEFENDANT NORTHWEST IS LIABLE TO PETITIONER
SPOUSES FOR EXEMPLARY DAMAGES; [AND]
WHETHER OR NOT THE PETITIONER SPOUSES ARE ENTITLED TO
ATTORNEY'S FEES IN AN AMOUNT MORE THAN THAT AWARDED BY THE
TRIAL COURT.26
In G.R. No. 212043, Northwest anchored its petition on the following
assigned errors:
I
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN RULING THAT
NORTHWEST COMMITTED A BREACH OF CONTRACT OF CARRIAGE;
II
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN RULING THAT
NORTHWEST IS LIABLE FOR DAMAGES AND THE AWARDS FOR MORAL
DAMAGES AND ATTORNEY'S FEES ARE APPROPRIATE;
III
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN RULING THAT
NORTHWEST IS NOT ENTITLED TO RECOVER ON ITS COUNTERCLAIMS. 27
The Issues
The arguments proffered by the parties can be summed up into the
following issues: (1) whether or not there was breach of contract of
carriage and whether it was done in a wanton, malevolent or reckless
manner amounting to bad faith; (2) whether or not Northwest is liable for
the payment of moral damages and attorney's fees and whether it is liable
to pay more than that awarded by the RTC; (3) whether or not Northwest is
liable for the payment of exemplary damages; and (4) whether or not
Northwest Airlines is entitled to recover on its counterclaim.
In their petition, the Fernandos contended that it was the personal
misconduct, gross negligence and the rude and abusive attitude of
Northwest employees Linda Puntawongdaycha and Linda Tang which
subjected them to indignities, humiliation and embarrassment. The
attitude of the aforesaid employees was wanton and malevolent allegedly
amounting to fraud and bad faith. According to the Fernandos, if only Linda
Puntawongdaycha had taken the time to verify the validity of the ticket in
the computer, she would have not given the wrong information to the
Immigration Officer because the August 2001 return ticket remained
unused and valid for a period of one (1) year, or until August 2002. The
wrong information given by Linda Puntawongdaycha aroused doubts and
suspicions on Jesus Fernando's travel plans. The latter was then subjected
to two (2) hours of questioning which allegedly humiliated him. He was
even suspected of being an "illegal alien". The negligence of Linda
Puntawongdaycha was allegedly so gross and reckless amounting to
malice or bad faith.
As to the second incident, the Fernandos belied the accusation of
Northwest that they did not present any tickets. They presented their
electronic tickets which were attached to their boarding passes. If they had
no tickets, the personnel at the check-in counter would have not issued
them their boarding passes and baggage claim stubs. That's why they
could not understand why the coupon-type ticket was still demanded by
Northwest.
On the award of moral damages, the Fernandos referred to the testimony
of Elizabeth Fernando that she could not sleep and had a fever the night
after the second incident. Thus, the Fernandos demanded that they should
be given more than the "token amount" granted by the RTC which was
affirmed by the CA. They stated that their status in the society and in the
business circle should also be considered as a factor in awarding moral
damages. They averred that they are well-known in the musical
instruments and sports equipment industry in the country being the
owners of JB Music and JB Sports with outlets all over the country. They
own hotels, a chain of apartelles and a parking garage building in Indiana,
USA. And since the breach of contract allegedly amounted to fraud and
bad faith, they likewise demanded for the payment of exemplary damages
and attorney's fees more than the amount awarded by the RTC.
On the other hand, Northwest stated in its petition that Linda
Puntawongdaycha tried her best to help Jesus Fernando get through the
US Immigration. Notwithstanding that Linda Puntawongdaycha was not
able to find any relevant information on Jesus Fernando's return ticket, she
still went an extra mile by printing the PNR of Jesus Fernando and handling
the same personally to the Immigration Officer. It pointed out that the
Immigration Officer "noticed in the ticket that it was dated sometime
August 20 or 21, 2001, although it was already December 2001."
As to the incident with Linda Tang, Northwest explained that she was only
following Northwest standard boarding procedures when she asked the
Fernandos for their tickets even if they had boarding passes. Thus, the
conduct cannot be construed as bad faith. The dates indicated on the
tickets did not match the booking. Elizabeth Fernando was using an
electronic ticket dated August 21, 2001, while the electronic ticket of Jesus
Fernando was dated January 26, 2002. According to Northwest, even if the
Fernandos had electronic tickets, the same did not discount the fact that,
on the face of the tickets, they were for travel on past dates. Also, the
electronic tickets did not contain the ticket number or any information
regarding the reservation. Hence, the alleged negligence of the Fernandos
resulted in the confusion in the procedure in boarding the plane and the
eventual failure to take their flight.
Northwest averred that the award of moral damages and attorney's fees
were exorbitant because such must be proportionate to the suffering
inflicted. It argued that it is not obliged to give any "special treatment" to
the Fernandos just because they are good clients of Northwest, because
the supposed obligation does not appear in the contract of carriage. It
further averred that it is entitled to its counterclaim in the amount of
₱500,000.00 because the Fernandos allegedly acted in bad faith in
prosecuting the case which it believed are baseless and unfounded.
In the Comment28 of Northwest, it insisted that assuming a mistake was
committed by Linda Tang and Linda Puntawongdaycha, such mistake
alone, without malice or ill will, is not equivalent to fraud or bad faith that
would entitle the Fernandos to the payment of moral damages.
In the Reply29 of the Fernandos, they asserted that it was a lie on the part
of Linda Puntawongdaycha to claim that she checked the passenger name
or PNR of Jesus Fernando from the computer and, as a result, she was not
allegedly able to find any return ticket for him. According to Jesus
Fernando, Linda Puntawongdaycha merely looked at his ticket and
declared the same to be invalid. The Fernandos reiterated that after Jesus
Fernando was released by the US Immigration Service, Elizabeth Fernando
proceeded to a Northwest Ticket counter to verify the status of the ticket.
The personnel manning the counter courteously assisted her and
confirmed that the ticket remained unused and perfectly valid. The
personnel merely punched the Elite Platinum World Perks Card number of
Jesus Fernando and was able to verify the status of the ticket. The
Fernandos further argued that if there was a discrepancy with the tickets
or reservations, they would not have been allowed to check in, and since
they were allowed to check in then they were properly booked and were
confirmed passengers of Northwest.
Our Ruling
We find merit in the petition of the Spouses Jesus and Elizabeth Fernando.
The Fernandos' cause of action against Northwest stemmed from a breach
of contract of carriage. A contract is a meeting of minds between two
persons whereby one agrees to give something or render some service to
another for a consideration. There is no contract unless the following
requisites concur: (1) consent of the contracting parties; (2) an object
certain which is the subject of the contract; and (3) the cause of the
obligation which is established. 30
A contract of carriage is defined as one whereby a certain person or
association of persons obligate themselves to transport persons, things, or
goods from one place to another for a fixed price. Under Article 1732 of
the Civil Code, this "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"
is called a common carrier. 31 Undoubtedly, a contract of carriage existed
between Northwest and the Fernandos. They voluntarily and freely gave
their consent to an agreement whose object was the transportation of the
Fernandos from LA to Manila, and whose cause or consideration was the
fare paid by the Fernandos to Northwest.32
In Alitalia Airways v. CA, et al.,33 We held that when an airline issues a
ticket to a passenger confirmed for a particular flight on a certain date, a
contract of carriage arises. The passenger then has every right to expect
that he would fly on that flight and on that date. If he does not, then the
carrier. opens itself to a suit for breach of contract of carriage. 34
When Northwest confirmed the reservations of the Fernandos, it bound
itself to transport the Fernandos on their flight on 29 January 2002.
We note that the witness35 of Northwest admitted on cross-examination
that based on the documents submitted by the Fernandos, they were
confirmed
passengers on the January 29, 2002 flight.36
In an action based on a breach of contract of carriage, the aggrieved party
does not have to prove that the common carrier was at fault or was
negligent. All that he has to prove is the existence of the contract and the
fact of its non-performance by the carrier.37 As the aggrieved party, the
Fernandos only had to prove the existence of the contract and the fact of
its non-performance by Northwest, as carrier, in order to be awarded
compensatory and actual damages.38
Therefore, having proven the existence of a contract of carriage between
Northwest and the Fernandos, and the fact of non-performance by
Northwest of its obligation as a common carrier, it is clear that Northwest
breached its contract of carriage with the Fernandos. Thus, Northwest
opened itself to claims for compensatory, actual, moral and exemplary
damages, attorney's fees and costs of suit.39
Moreover, Article 1733 of the New Civil Code provides that 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. Also, Article 1755 of the same Code
states that a common carrier is bound to carry the passengers safely as
far as human care and foresight can provide, using the utmost diligence of
very cautious persons, with due regard for all the circumstances.
We, thus, sustain the findings of the CA and the RTC that Northwest
committed a breach of contract "in failing to provide the spouses with the
proper assistance to avoid any inconvenience" and that the actuations of
Northwest in both subject incidents "fall short of the utmost diligence of a
very cautious person expected of it". Both ruled that considering that the
Fernandos are not just ordinary passengers but, in fact, frequent flyers of
Northwest, the latter should have been more courteous and
accommodating to their needs so that the delay and inconveniences they
suffered could have been avoided. Northwest was remiss in its duty to
provide the proper and adequate assistance to them.
Nonetheless, We are not in accord with the common finding of the CA and
the RTC when both ruled out bad faith on the part of Northwest. While We
agree that the discrepancy between the date of actual travel and the date
appearing on the tickets of the Fernandos called for some verification,
however, the Northwest personnel failed to exercise the utmost diligence
in assisting the Fernandos. The actuations of Northwest personnel in both
subject incidents are constitutive of bad faith.
On the first incident, Jesus Fernando even gave the Northwest personnel
the number of his Elite Platinum World Perks Card for the latter to access
the ticket control record with the airline's computer for her to see that the
ticket is still valid. But Linda Puntawongdaycha refused to check the
validity of the ticket in the computer. As a result, the Immigration Officer
brought Jesus Fernando to the interrogation room of the INS where he was
interrogated for more than two (2) hours. When he was finally cleared by
the Immigration Officer, he was granted only a twelve (12)-day stay in the
United States (US), instead of the usual six (6) months. 40
As in fact, the RTC awarded actual or compensatory damages because of
the testimony of Jesus Fernando that he had to go back to Manila and then
return again to LA, USA, two (2) days after requiring him to purchase
another round trip ticket from Northwest in the amount of $2,000.00 which
was not disputed by Northwest.41 In ignoring Jesus Fernando's pleas to
check the validity of the tickets in the computer, the Northwest personnel
exhibited an indifferent attitude without due regard for the inconvenience
and anxiety Jesus Fernando might have experienced.
Passengers do not contract merely for transportation. They have a right to
be treated by the carrier's employees with kindness, respect, courtesy and
due consideration. They are entitled to be protected against personal
misconduct, injurious language, indignities and abuses from such
employees. So it is, that any rule or discourteous conduct on the part of
employees towards a passenger gives the latter an action for damages
against the carrier.42
In requiring compliance with the standard of extraordinary diligence, a
standard which is, in fact, that of the highest possible degree of diligence,
from common carriers and in creating a presumption of negligence against
them, the law seeks to compel them to control their employees, to tame
their reckless instincts and to force them to take adequate care of human
beings and their property.43
Notably, after the incident, the Fernandos proceeded to a Northwest Ticket
counter to verify the status of the ticket and they were assured that the
ticked remained unused and perfectly valid. And, to avoid any future
problems that may be encountered on the validity of the ticket, a new
ticket was issued to Jesus Fernando. The failure to promptly verify the
validity of the ticket connotes bad faith on the part of Northwest.
Bad faith does not simply connote bad judgment or negligence. It imports
a dishonest purpose or some moral obliquity and conscious doing of a
wrong. It means breach of a known duty through some motive, interest or
ill will that partakes of the nature of fraud. A finding of bad faith entitles
the offended party to moral damages.44
As to the second incident, there was likewise fraud or bad faith on the part
of Northwest when it did not allow the Fernandos to board their flight for
Manila on January 29, 2002, in spite of confirmed tickets. We need to
stress that they have confirmed bookings on Northwest Airlines NW Flight
No. 001 for Narita, Japan and NW 029 for Manila. They checked in with
their luggage at LA Airport and were given their respective boarding
passes for business class seats and claim stubs for six (6) pieces of
luggage. With boarding passes and electronic tickets, apparently, they
were allowed entry to the departure area; and, they eventually joined the
long queue of business class passengers along with their business
associates.
However, in the presence of the other passengers, Northwest personnel
Linda Tang pulled the Fernandos out of the queue and asked for paper
tickets (coupon type). Elizabeth Fernando explained to Linda Tang that the
matter could be sorted out by simply verifying their electronic tickets in
her computer and all she had to do was click and punch in their Elite
Platinum World Perks Card number. Again, the Northwest personnel
refused to do so; she, instead, told them to pay for new tickets so they
could board the plane. Hence, the Fernandos rushed to the Northwest
Airline Ticket counter to clarify the matter. They were assisted by
Northwest personnel Jeanne Meyer who retrieved their control number
from her computer and was able to ascertain that the Fernandos'
electronic tickets were valid, and they were confirmed passengers on both
NW Flight No. 001 for Narita Japan and NW 029 for Manila on that day.
In Ortigas, Jr. v. Lufthansa German Airlines,45 this Court declared that "(i)n
contracts of common carriage, in attention and lack of care on the part of
the carrier resulting in the failure of the passenger to be accommodated in
the class contracted for amounts to bad faith or fraud which entitles the
passengers to the award of moral damages in accordance with Article
2220 of the Civil Code."
In Pan American World Airways, Inc. v. Intermediate Appellate
Court,46 where a would-be passenger had the necessary ticket, baggage
claim and clearance from immigration, all clearly and unmistakably
showing that she was, in fact, included in the passenger manifest of said
flight, and yet was denied accommodation in said flight, this Court did not
hesitate to affirm the lower court's finding awarding her damages on the
ground that the breach of contract of carriage amounted to bad faith. 47 For
the indignity and inconvenience of being refused a confirmed seat on the
last minute, said passenger is entitled to an award of moral damages. 48
In this case, We need to stress that the personnel who assisted the
Fernandos even printed coupon tickets for them and advised them to rush
back to the boarding gates since the plane was about to depart. But when
the Fernandos reached the boarding gate, the plane had already departed.
They were able to depart, instead, the day after, or on January 30, 2002.
In Japan Airlines v. Jesus Simangan, 49 this Court held that the acts
committed by Japan Airlines against Jesus Simangan amounted to bad
faith, thus:
x x x JAL did not allow respondent to fly. It informed respondent that
there was a need to first check the authenticity of his travel
documents with the U.S. Embassy. As admitted by JAL, "the flight
could not wait for Mr. Simangan because it was ready to depart."
Since JAL definitely declared that the flight could not wait for respondent, it
gave respondent no choice but to be left behind. The latter was
unceremoniously bumped off despite his protestations and valid travel
documents and notwithstanding his contract of carriage with JAL. Damage
had already been done when respondent was offered to fly the
next day on July 30, 1992. Said offer did not cure JAL's default.50
Similarly, in Korean Airlines Co., Ltd. v. Court of Appeals,51 where private
respondent was not allowed to board the plane because her seat had
already been given to another passenger even before the allowable period
for passengers to check in had lapsed despite the fact that she had a
confirmed ticket and she had arrived on time, this Court held that
petitioner airline acted in bad faith in violating private respondent's rights
under their contract of carriage and is, therefore, liable for the injuries she
has sustained as a result.52
Under Article 222053 of the Civil Code of the Philippines, an award of moral
damages, in breaches of contract, is in order upon a showing that the
defendant acted fraudulently or in bad faith.54 Clearly, in this case, the
Fernandos are entitled to an award of moral damages. The purpose of
awarding moral damages is to enable the injured party to obtain means,
diversion or amusement that will serve to alleviate the moral suffering he
has undergone by reason of defendant's culpable action. 55
We note that even if both the CA and the RTC ruled out bad faith on the
part of Northwest, the award of "some moral damages" was recognized.
Both courts believed that considering that the Fernandos are good clients
of Northwest for almost ten (10) years being Elite Platinum World Perks
Card holders, and are known in their business circle, they should have
been given by Northwest the corresponding special treatment. 56 They own
hotels and a chain of apartelles in the country, and a parking garage
building in Indiana, USA. From this perspective, We adopt the said view.
We, thus, increase the award of moral damages to the Fernandos in the
amount of ₱3,000,000.00.
As held in Kierulf v. Court of Appeals,57 the social and financial standing of
a claimant may be considered if he or she was subjected to contemptuous
conduct despite the offender's knowledge of his or her social and financial
standing.
In Trans World Airlines v. Court of Appeals,58 this Court considered the
social standing of the aggrieved passenger:
At the time of this unfortunate incident, the private respondent was
a practicing lawyer, a senior partner of a big law firm in Manila. He
was a director of several companies and was active in civic and
social organizations in the Philippines. Considering the circumstances
of this case and the social standing of private respondent in the
community, he is entitled to the award of moral and exemplary
damages. x x x This award should be reasonably sufficient to indemnify
private respondent for the humiliation and embarrassment that
he suffered and to serve as an example to discourage the
repetition of similar oppressive and discriminatory acts.59
Exemplary damages, which are awarded by way of example or correction
for the public good, may be recovered in contractual obligations, if
defendant acted in wanton, fraudulent, reckless, oppressive, or malevolent
manner.60 They are designed by our civil law to permit the courts to
reshape behavior that is socially deleterious in its consequence by
creating negative incentives or deterrents against such behavior. 61 Hence,
given the facts and circumstances of this case, We hold Northwest liable
for the payment of exemplary damages in the amount of ₱2,000,000.00.
In the case of Northwest Airlines, Inc. v. Chiong,62 Chiong was given the
run-around at the Northwest check-in counter, instructed to deal with a
man in barong to obtain a boarding pass, and eventually barred from
boarding a Northwest flight to accommodate an American passenger
whose name was merely inserted in the Flight Manifest, and did not even
personally check-in at the counter. Under the foregoing circumstances, the
award of moral and exemplary damages was given by this Court.
Time and again, We have declared that a contract of carriage, in this case,
air transport, is primarily intended to serve the traveling public and thus,
imbued with public interest. The law governing common carriers
consequently imposes an exacting standard of conduct. 63 A contract to
transport passengers is quite different in kind and degree from any other
contractual relation because of the relation which an air-carrier sustains
with the public. Its business is mainly with the travelling public. It invites
people to avail of the comforts and advantages it offers. The contract of air
carriage, therefore, generates a relation attended with a public duty.
Neglect or malfeasance of the carrier's employees, naturally, could give
ground for an action or damages.64
As to the payment of attorney's fees, We sustain the award thereof on the
ground that the Fernandos were ultimately compelled to litigate and
incurred expenses to protect their rights and interests, and because the
Fernandos are entitled to an award for exemplary damages. Pursuant to
Article 2208 of the Civil Code, attorney's fees may be awarded when
exemplary damages are awarded, or a party is compelled to litigate or
incur expenses to protect his interest, or where the defendant acted in
gross and evident bad faith in refusing to satisfy the plaintiff's plainly valid,
just and demandable claim.
Records show that the Fernandos demanded payment for damages from
Northwest even before the filing of this case in court.1âwphi1 Clearly, the
Fernandos were forced to obtain the services of counsel to enforce a just
claim, for which they should be awarded attorney's fees. 65 We deem it just
and equitable to grant an award of attorney's fees equivalent to 10% of
the damages awarded.
Lastly, the counterclaim of Northwest in its Answer66 is a compulsory
counterclaim for damages and attorney's fees arising from the filing of the
complaint. This compulsory counterclaim of Northwest arising from the
filing of the complaint may not be granted inasmuch as the complaint
against it is obviously not malicious or unfounded. It was filed by the
Fernandos precisely to claim their right to damages against Northwest.
Well-settled is the rule that the commencement of an action does not per
se make the action wrongful and subject the action to damages, for the
law could not have meant to impose a penalty on the right to litigate. 67
WHEREFORE, the Decision dated August 30, 2013 and the Resolution
dated March 31, 2014 of the Court of Appeals, in CA-G.R. CV No. 93496 are
hereby AFFIRMED WITH MODIFICATION. The award of moral damages
and attorney's fees are hereby increased to ₱3,000,000.00 and ten
percent (10%) of the damages awarded, respectively. Exemplary damages
in the amount of ₱2,000,000.00 is also awarded. Costs against Northwest
Airlines.

The total amount adjudged shall earn legal interest at the rate of twelve
percent (12%) per annum computed from judicial demand or from April 30,
2002 to June 30 2013, and six percent (6%) per annum from July 1, 2013
until their full satisfaction.

SO ORDERED.
THIRD DIVISION

G.R. No. 184513, March 09, 2016

DESIGNER BASKETS, INC., Petitioner, v. AIR SEA TRANSPORT, INC.

AND ASIA CARGO CONTAINER LINES, INC., Respondents.

DECISION

JARDELEZA, J.:

This is a Petition for Review on Certiorari1 of the August 16, 2007

Decision2 and September 2, 2008 Resolution3 of the Court of Appeals (CA)
in CA-G.R. CV No. 79790, absolving respondents Air Sea Transport, Inc.
(ASTI) and Asia Cargo Container Lines, Inc. (ACCLI) from liability in the
complaint for sum of money and damages filed by petitioner Designer
Baskets, Inc. (DBI).
The Facts

DBI is a domestic corporation engaged in the production of housewares

and handicraft items for export.4Sometime in October 1995, Ambiente, a
foreign-based company, ordered from DBI5 223 cartons of assorted
wooden items (the shipment).6 The shipment was worth Twelve Thousand
Five Hundred Ninety and Eighty-Seven Dollars (US$12,590.87) and payable
through telegraphic transfer.7 Ambiente designated ACCLI as the
forwarding agent that will ship out its order from the Philippines to the
United States (US). ACCLI is a domestic corporation acting as agent of
ASTI, a US based corporation engaged in carrier transport business, in the
Philippines.8

On January 7, 1996, DBI delivered the shipment to ACCLI for sea transport
from Manila and delivery to Ambiente at 8306 Wilshire Blvd., Suite 1239,
Beverly Hills, California. To acknowledge receipt and to serve as the
contract of sea carriage, ACCLI issued to DBI triplicate copies of ASTI Bill of
Lading No. AC/MLLA601317.9 DBI retained possession of the originals of
the bills of lading pending the payment of the goods by Ambiente. 10
On January 23, 1996, Ambiente and ASTI entered into an Indemnity
Agreement (Agreement).11 Under the Agreement, Ambiente obligated ASTI
to deliver the shipment to it or to its order "without the surrender of the
relevant bill(s) of lading due to the non-arrival or loss thereof." 12 In
exchange, Ambiente undertook to indemnify and hold ASTI and its agent
free from any liability as a result of the release of the
shipment.13 Thereafter, ASTI released the shipment to Ambiente without
the knowledge of DBI, and without it receiving payment for the total cost
of the shipment.14
DBI then made several demands to Ambiente for the payment of the
shipment, but to no avail. Thus, on October 7, 1996, DBI filed the Original
Complaint against ASTI, ACCLI and ACCLFs incorporators-stockholders 15 for
the payment of the value of the shipment in the amount of US$12,590.87
or Three Hundred Thirty-Three and Six Flundred Fifty-Eight Pesos
(P333,658.00), plus interest at the legal rate from January 22, 1996,
exemplary damages, attorney's fees and cost of suit.16
In its Original Complaint, DBI claimed that under Bill of Lading Number
AC/MLLA601317, ASTI and/or ACCLI is "to release and deliver the
cargo/shipment to the consignee, x x x, only after the original copy or
copies of [the] Bill of Lading is or are surrendered to them; otherwise, they
become liable to the shipper for the value of the shipment." 17 DBI also
averred that ACCLI should be jointly and severally liable with its co-
defendants because ACCLI failed to register ASTI as a foreign corporation
doing business in the Philippines. In addition, ACCLI failed to secure a
license to act as agent of ASTI.18
On February 20, 1997, ASTI, ACCLI, and ACCLI's incorporators-stockholders
filed a Motion to Dismiss.19They argued that: (a) they are not the real
parties-in-interest in the action because the cargo was delivered and
accepted by Ambiente. The case, therefore, was a simple case of non-
payment of the buyer; (b) relative to the incorporators-stockholders of
ACCLI, piercing the corporate veil is misplaced; (c) contrary to the
allegation of DBI, the bill of lading covering the shipment does not contain
a proviso exposing ASTI to liability in case the shipment is released without
the surrender of the bill of lading; and (d) the Original Complaint did not
attach a certificate of non-forum shopping.20
DBI filed an Opposition to the Motion to Dismiss,21 asserting that ASTI and
ACCLI failed to exercise the required extraordinary diligence when they
allowed the cargoes to be withdrawn by the consignee without the
surrender of the original bill of lading. ASTI, ACCLI, and ACCLI's
incorporators-stockholders countered that it is DBI who failed to exercise
extraordinary diligence in protecting its own interest. They averred that
whether or not the buyer-consignee pays the seller is already outside of
their concern.22
Before the trial court could resolve the motion to dismiss, DBI filed an
Amended Complaint23 impleading Ambiente as a new defendant and
praying that it be held solidarity liable with ASTI, ACCLI, and ACCLFs
incorporators-stockholders for the payment of the value of the shipment.
DBI alleged that it received reliable information that the shipment was
released merely on the basis of a company guaranty of
Ambiente.24 Further, DBI asserted that ACCLI's incorporators-stockholders
have not yet fully paid their stock subscriptions; thus, "under the
circumstance of [the] case," they should be held liable to the extent of the
balance of their subscriptions.25cralawred
In their Answer,26 ASTI, ACCLI, and ACCLI's incorporators-stockholders
countered that DBI has no cause of action against ACCLI and its
incorporators-stockholders because the Amended Complaint, on its face, is
for collection of sum of money by an unpaid seller against a buyer. DBI did
not allege any act of the incorporators-stockholders which would
constitute as a ground for piercing the veil of corporate fiction. 27ACCLI also
reiterated that there is no stipulation in the bill of lading restrictively
subjecting the release of the cargo only upon the presentation of the
original bill of lading.28 It regarded the issue of ASTI's lack of license to do
business in the Philippines as "entirely foreign and irrelevant to the issue
of liability for breach of contract" between DBI and Ambiente. It stated that
the purpose of requiring a license (to do business in the Philippines) is to
subject the foreign corporation to the jurisdiction of Philippine courts. 29
On July 22, 1997, the trial court directed the service of summons to
Ambiente through the Department of Trade and Industry.30 The summons
was served on October 6, 199731 and December 18, 1997.32Ambiente
failed to file an Answer. Hence, DBI moved to declare Ambiente in default,
which the trial court granted in its Order dated September 15, 1998. 33
The Ruling of the Trial Court
In a Decision34 dated July 25, 2003, the trial court found ASTI, ACCLI, and
Ambiente solidarity liable to DBI for the value of the shipment. It awarded
DBI the following:
chanRoblesvirtualLawlibrary
1. US$12,590.87, or the equivalent of [P]333,658.00 at the time of
the shipment, plus 12% interest per annum from 07 January 1996
until the same is fully paid;
2. [P]50,000.00 in exemplary damages;
3. [P]47,000.00 as and for attorney's fees; and,
4. [P]10,000.00 as cost of suit.35
The trial court declared that the liability of Ambiente is "very clear." As the
buyer, it has an obligation to pay for the value of the shipment. The trial
court noted that "[the case] is a simple sale transaction which had been
perfected especially since delivery had already been effected and with
only the payment for the shipment remaining left to be done." 36
With respect to ASTI, the trial court held that as a common carrier, ASTI is
bound to observe extraordinary diligence in the vigilance over the goods.
However, ASTI was remiss in its duty when it allowed the unwarranted
release of the shipment to Ambiente. 37 The trial court found that the
damages suffered by DBI was due to ASTI's release of the merchandise
despite the non-presentation of the bill of lading. That ASTI entered into an
Agreement with Ambiente to release the shipment without the surrender
of the bill of lading is of no moment.38 The Agreement cannot save ASTI
from liability because in entering into such, it violated the law, the terms
of the bill of lading and the right of DBI over the goods. 39
The trial court also added that the Agreement only involved Ambiente and
ASTI. Since DBI is not privy to the Agreement, it is not bound by its
terms.40cralawred
The trial court found that ACCLI "has not done enough to prevent the
defendants Ambiente and [ASTI] from agreeing among themselves the
release of the goods in total disregard of [DBFs] rights and in
contravention of the country's civil and commercial laws." 41 As the
forwarding agent, ACCLI was "well aware that the goods cannot be
delivered to the defendant Ambiente since [DBI] retained possession of
the originals of the bill of lading."42 Consequently, the trial court held
ACCLI solidarily liable with ASTI.
As regards ACCLFs incorporators-stockholders, the trial court absolved
them from liability. The trial court ruled that the participation of ACCLFs
incorporators-stockholders in the release of the cargo is not as direct as
that of ACCLI.43
DBI, ASTI and ACCLI appealed to the CA. On one hand, DBI took issue with
the order of the trial court awarding the value of the shipment in Philippine
Pesos instead of US Dollars. It also alleged that even assuming that the
shipment may be paid in Philippine Pesos, the trial court erred in pegging
its value at the exchange rate prevailing at the time of the shipment,
rather than at the exchange rate prevailing at the time of payment.44
On the other hand, ASTI and ACCLI questioned the trial court's decision
finding them solidarily liable with DBI for the value of the shipment. They
also assailed the trial court's award of interest, exemplary damages,
attorney's fees and cost of suit in DBFs favor.45
The Ruling of the Court of Appeals
The CA affirmed the trial court's finding that Ambiente is liable to DBI, but
absolved ASTI and ACCLI from liability. The CA found that the pivotal issue
is whether the law requires that the bill of lading be surrendered by the
buyer/consignee before the carrier can release the goods to the former. It
then answered the question in the negative, thus:
chanRoblesvirtualLawlibrary
There is nothing in the applicable laws that require the surrender
of bills of lading before the goods may be released to the
buyer/consignee. In fact, Article 353 of the Code of Commerce suggests
a contrary conclusion, viz —
"Art. 353. After the contract has been complied with, the bill of lading
which the carrier has issued shall be returned to him, and by virtue of the
exchange of this title with the thing transported, the respective obligations
shall be considered canceled xxx In case the consignee, upon receiving
the goods, cannot return the bill of lading subscribed by the carrier
because of its loss or of any other cause, he must give the latter a receipt
for the goods delivered, this receipt producing the same effects as the
return of the bill of lading."
The clear import of the above article is that the surrender of the bill of
lading is not an absolute and mandatory requirement for the release of the
goods to the consignee. The fact that the carrier is given the
alternative option to simply require a receipt for the goods
delivered suggests that the surrender of the bill of lading may be
dispensed with when it cannot be produced by the consignee for
whatever cause.46 (Emphasis supplied.)
The CA stressed that DBI failed to present evidence to prove its assertion
that the surrender of the bill of lading upon delivery of the goods is a
common mercantile practice.47 Further, even assuming that such practice
exists, it cannot prevail over law and jurisprudence. 48
As for ASTI, the CA explained that its only obligation as a common carrier
was to deliver the shipment in good condition. It did not include looking
beyond the details of the transaction between the seller and the
consignee, or more particularly, ascertaining the payment of the goods by
the buyer Ambiente.49
Since the agency between ASTI and ACCLI was established and not
disputed by any of the parties, neither can ACCLI, as a mere agent of ASTI,
be held liable. This must be so in the absence of evidence that the agent
exceeded its authority.50
The CA, thus, ruled:
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WHEREFORE, in view of the foregoing, the Decision dated July 25, 2003 of
Branch 255 of the Regional Trial court of Las [Piñas] City in Civil Case No.
LP-96-0235 is hereby AFFIRMED with the following MODIFICATIONS:
 1. Defendants-appellants Air Sea Transport, Inc. and Asia Cargo
Container Lines, Inc. are hereby ABSOLVED from all liabilities;
2. The actual damages to be paid by defendant Ambiente shall be in
the amount of US$12,590.87. Defendant Ambiente's liability may
be paid in Philippine currency, computed at the exchange rate
prevailing at the time of payment;51 and
3. The rate of interest to be imposed on the total amount of
US$12,590.87 shall be 6% per annum computed from the filing of
the complaint on October 7, 1996 until the finality of this decision.
After this decision becomes final and executory, the applicable
rate shall be 12% per annum until its full satisfaction.
SO ORDERED.52ChanRoblesVirtualawlibrary
Hence, this petition for review, which raises the sole issue of whether ASTI
and ACCLI may be held solidarily liable to DBI for the value of the
shipment.
Our Ruling
We deny the petition.
A common carrier may release the goods to the consignee even
without the surrender of the hill of lading.
This case presents an instance where an unpaid seller sues not only the
buyer, but the carrier and the carrier's agent as well, for the payment of
the value of the goods sold. The basis for ASTI and ACCLI's liability, as
pleaded by DBI, is the bill of lading covering the shipment.
A bill of lading is defined as "a written acknowledgment of the receipt of
goods and an agreement to transport and to deliver them at a specified
place to a person named or on his order."53 It may also be defined as an
instrument in writing, signed by a carrier or his agent, describing the
freight so as to identify it, stating the name of the consignor, the terms of
the contract of carriage, and agreeing or directing that the freight be
delivered to bearer, to order or to a specified person at a specified place. 54
Under Article 350 of the Code of Commerce, "the shipper as well as the
carrier of the merchandise or goods may mutually demand that a bill of
lading be made." A bill of lading, when issued by the carrier to the shipper,
is the legal evidence of the contract of carriage between the former and
the latter. It defines the rights and liabilities of the parties in reference to
the contract of carriage. The stipulations in the bill of lading are valid and
binding unless they are contrary to law, morals, customs, public order or
public policy.55
Here, ACCLI, as agent of ASTI, issued Bill of Lading No. AC/MLLA601317 to
DBI. This bill of lading governs the rights, obligations and liabilities of DBI
and ASTI. DBI claims that Bill of Lading No. AC/MLLA601317 contains a
provision stating that ASTI and ACCLI are "to release and deliver the
cargo/shipment to the consignee, x x x, only after the original copy or
copies of the said Bill of Lading is or are surrendered to them; otherwise
they become liable to [DBI] for the value of the shipment." 56Quite tellingly,
however, DBI does not point or refer to any specific clause or provision on
the bill of lading supporting this claim. The language of the bill of lading
shows no such requirement. What the bill of lading provides on its face is:
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Received by the Carrier in apparent good order and condition unless
otherwise indicated hereon, the Container(s) and/or goods hereinafter
mentioned to be transported and/or otherwise forwarded from the Place of
Receipt to the intended Place of Delivery upon and [subject] to all the
terms and conditions appearing on the face and back of this Bill of
Lading. If required by the Carrier this Bill of Lading duly endorsed
must be surrendered in exchange for the Goods of delivery
order.57 (Emphasis supplied.)
There is no obligation, therefore, on the part of ASTI and ACCLI to release
the goods only upon the surrender of the original bill of lading.
Further, a carrier is allowed by law to release the goods to the consignee
even without the latter's surrender of the bill of lading. The third
paragraph of Article 353 of the Code of Commerce is enlightening:
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Article 353. The legal evidence of the contract between the shipper and
the carrier shall be the bills of lading, by the contents of which the
disputes which may arise regarding their execution and performance shall
be decided, no exceptions being admissible other than those of falsity and
material error in the drafting.
After the contract has been complied with, the bill of lading which the
carrier has issued shall be returned to him, and by virtue of the exchange
of this title with the thing transported, the respective obligations and
actions shall be considered cancelled, unless in the same act the claim
which the parties may wish to reserve be reduced to writing, with the
exception of that provided for in Article 366.
In case the consignee, upon receiving the goods, cannot return
the bill of lading subscribed by the carrier, because of its loss or
any other cause, he must give the latter a receipt for the goods
delivered, this receipt producing the same effects as the return of
the bill of lading. (Emphasis supplied.)
The general rule is that upon receipt of the goods, the consignee
surrenders the bill of lading to the carrier and their respective obligations
are considered canceled. The law, however, provides two exceptions
where the goods may be released without the surrender of the bill of
lading because the consignee can no longer return it. These exceptions are
when the bill of lading gets lost or for other cause. In either case, the
consignee must issue a receipt to the carrier upon the release of the
goods. Such receipt shall produce the same effect as the surrender of the
bill of lading.
We have already ruled that the non-surrender of the original bill of lading
does not violate the carrier's duty of extraordinary diligence over the
goods.58 In Republic v. Lorenzo Shipping Corporation,59 we found that the
carrier exercised extraordinary diligence when it released the shipment to
the consignee, not upon the surrender of the original bill of lading, but
upon signing the delivery receipts and surrender of the certified true
copies of the bills of lading. Thus, we held that the surrender of the original
bill of lading is not a condition precedent for a common carrier to be
discharged of its contractual obligation.
Under special circumstances, we did not even require presentation of any
form of receipt by the consignee, in lieu of the original bill of lading, for the
release of the goods. In Macam v. Court of Appeals,60 we absolved the
carrier from liability for releasing the goods to the consignee without the
bills of lading despite this provision on the bills of lading:
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"One of the Bills of Lading must be surrendered duly endorsed in exchange
for the goods or delivery order."61 (Citations omitted.)
In clearing the carrier from liability, we took into consideration that the
shipper sent a telex to the carrier after the goods were shipped. The telex
instructed the carrier to deliver the goods without need of presenting the
bill of lading and bank guarantee per the shipper's request since "for
prepaid shipt ofrt charges already fully paid our end x x x." 62 We also noted
the usual practice of the shipper to request the shipping lines to
immediately release perishable cargoes through telephone calls.
Also, in Eastern Shipping Lines v. Court of Appeals,63 we absolved the
carrier from liability for releasing the goods to the supposed consignee,
Consolidated Mines, Inc. (CMI), on the basis of an Undertaking for Delivery
of Cargo but without the surrender of the original bill of lading presented
by CMI. Similar to the factual circumstance in this case, the Undertaking
in Eastern Shipping Lines guaranteed to hold the carrier "harmless from all
demands, claiming liabilities, actions and expenses."64 Though the central
issue in that case was who the consignee was in the bill of lading, it is
noteworthy how we gave weight to the Undertaking in ruling in favor of
the carrier:
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But assuming that CMI may not be considered consignee, the petitioner
cannot be faulted for releasing the goods to CMI under the circumstances,
due to its lack of knowledge as to who was the real consignee in view of
CMI's strong representations and letter of undertaking wherein it stated
that the bill of lading would be presented later. This is precisely the
situation covered by the last paragraph of Art. 353 of the [Code of
Commerce] to wit:
chanRoblesvirtualLawlibrary
"If in case of loss or for any other reason whatsoever, the consignee
cannot return upon receiving the merchandise the bill of lading subscribed
by the carrier, he shall give said carrier a receipt of the goods delivered
this receipt producing the same effects as the return of the bill of
lading."65ChanRoblesVirtualawlibrary
Clearly, law and jurisprudence is settled that the surrender of the original
bill of lading is not absolute; that in case of loss or any other cause, a
common carrier may release the goods to the consignee even without it.
Here, Ambiente could not produce the bill of lading covering the shipment
not because it was lost, but for another cause: the bill of lading was
retained by DBI pending Ambiente's full payment of the shipment.
Ambiente and ASTI then entered into an Indemnity Agreement, wherein
the former asked the latter to release the shipment even without the
surrender of the bill of lading. The execution of this Agreement, and the
undisputed fact that the shipment was released to Ambiente pursuant to
it, to our mind, operates as a receipt in substantial compliance with the
last paragraph of Article 353 of the Code of Commerce.
Articles 1733, 1734, and 1735 of the Civil Code are not applicable.
DBI, however, challenges the Agreement, arguing that the carrier released
the goods pursuant to it, notwithstanding the carrier's knowledge that the
bill of lading should first be surrendered. As such, DBI claims that ASTI and
ACCLI are liable for damages because they failed to exercise extraordinary
diligence in the vigilance over the goods pursuant to Articles 1733, 1734,
and 1735 of the Civil Code.66
DBI is mistaken.
Articles 1733, 1734, and 1735 of the Civil Code are not applicable in this
case. The Articles state:
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Article 1733. Common carriers, from the nature of their business and for
reasons of public policy, are bound to observe extraordinary diligence in
the vigilance over the goods and for the safety of the passengers
transported by them, according to all the circumstances of each case.
Such extraordinary diligence in vigilance over the goods is further
expressed in Articles 1734, 1735, and 1745, Nos. 5, 6, and 7, while the
extraordinary diligence for the safety of the passengers is further set forth
in Articles 1755 and 1756.
Article 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:
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(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.
Article 1735. In all cases other than those mentioned in Nos. 1, 2, 3, 4, and
5 of the preceding article, if the goods are lost, destroyed or deteriorated,
common carriers are presumed to have been at fault or to have acted
negligently, unless they prove that they observed extraordinary diligence
as required in Article 1733.
Articles 1733, 1734, and 1735 speak of the common carrier's responsibility
over the goods. They refer to the general liability of common carriers in
case of loss, destruction or deterioration of goods and the
presumption of negligence against them. This responsibility or duty 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. 67 It is, in fact,
undisputed that the goods were timely delivered to the proper consignee
or to the one who was authorized to receive them. DBFs only cause of
action against ASTI and ACCLI is the release of the goods to Ambiente
without the surrender of the bill of lading, purportedly in violation of the
terms of the bill of lading. We have already found that Bill of Lading No.
AC/MLLA601317 does not contain such express prohibition. Without any
prohibition, therefore, the carrier had no obligation to withhold release of
the goods. Articles 1733, 1734, and 1735 do not give ASTI any such
obligation.
The applicable provision instead is Article 353 of the Code of Commerce,
which we have previously discussed. To reiterate, the Article allows the
release of the goods to the consignee even without his surrender of the
original bill of lading. In such case, the duty of the carrier to exercise
extraordinary diligence is not violated. Nothing, therefore, prevented the
consignee and the carrier to enter into an indemnity agreement of the
same nature as the one they entered here. No law or public policy is
contravened upon its execution.
Article 1503 of the Civil Code does not apply to contracts for
carriage of goods.
In its petition, DBI continues to assert the wrong application of Article 353
of the Code of Commerce to its Amended Complaint. It alleges that the
third paragraph of Article 1503 of the Civil Code is the applicable provision
because: (a) Article 1503 is a special provision that deals particularly with
the situation of the seller retaining the bill of lading; and (b) Article 1503 is
a law which is later in point of time to Article 353 of the Code of
Commerce.68 DBI posits that being a special provision, Article 1503 of the
Civil Code should prevail over Article 353 of the Code of Commerce, a
general provision that makes no reference to the seller retaining the bill of
lading.69
DBFs assertion is untenable. Article 1503 is an exception to the general
presumption provided in the first paragraph of Article 1523, which reads:
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Article 1523. Where, in pursuance of a contract of sale, the seller is
authorized or required to send the goods to the buyer, delivery of
the goods to a carrier, whether named by the buyer or not, for the
purpose of transmission to the buyer is deemed to be a delivery
of the goods to the buyer, except in the cases provided for in
Articles 1503, first, second and third paragraphs, or unless a
contrary intent appears.
Unless otherwise authorized by the buyer, the seller must make such
contract with the carrier on behalf of the buyer as may be reasonable,
having regard to the nature of the goods and the other circumstances of
the case. If the seller omit so to do, and the goods are lost or damaged in
the course of transit, the buyer may decline to treat the delivery to the
carrier as a delivery to himself, or may hold the seller responsible in
damages.
Unless otherwise agreed, where goods are sent by the seller to the buyer
under circumstances in which the seller knows or ought to know that it is
usual to insure, the seller must give such notice to the buyer as may
enable him to insure them during their transit, and, if the seller fails to do
so, the goods shall be deemed to be at his risk during such transit.
(Emphasis supplied.)
Article 1503, on the other hand, provides:
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Article 1503. When there is a contract of sale of specific goods, the
seller may, by the terms of the contract, reserve the right of possession or
ownership in the goods until certain conditions have been fulfilled. The
right of possession or ownership may be thus reserved notwithstanding
the delivery of the goods to the buyer or to a carrier or other bailee for the
purpose of transmission to the buyer.
Where goods are shipped, and by the bill of lading the goods are
deliverable to the seller or his agent, or to the order of the seller or of his
agent, the seller thereby reserves the ownership in the goods. But, if
except for the form of the bill of lading, the ownership would have passed
to the buyer on shipment of the goods, the seller's property in the goods
shall be deemed to be only for the purpose of securing performance by the
buyer of his obligations under the contract.
Where goods are shipped, and by the bill of lading the goods are
deliverable to order of the buyer or of his agent, but possession of
the bill of lading is retained by the seller or his agent, the seller
thereby reserves a right to the possession of the goods as against
the buyer.
Where the seller of goods draws on the buyer for the price and transmits
the bill of exchange and bill of lading together to the buyer to secure
acceptance or payment of the bill of exchange, the buyer is bound to
return the bill of lading if he does not honor the bill of exchange, and if he
wrongfully retains the bill of lading he acquires no added right thereby. If,
however, the bill of lading provides that the goods are deliverable to the
buyer or to the order of the buyer, or is indorsed in blank, or to the buyer
by the consignee named therein, one who purchases in good faith, for
value, the bill of lading, or goods from the buyer will obtain the ownership
in the goods, although the bill of exchange has not been honored,
provided that such purchaser has received delivery of the bill of lading
indorsed by the consignee named therein, or of the goods, without notice
of the facts making the transfer wrongful. (Emphasis supplied.)
Articles 1523 and 1503, therefore, refer to a contract of sale between a
seller and a buyer. In particular, they refer to who between the seller and
the buyer has the right of possession or ownership over the goods subject
of the sale. Articles 1523 and 1503 do not apply to a contract of carriage
between the shipper and the common carrier. The third paragraph of
Article 1503, upon which DBI relies, does not oblige the common carrier to
withhold delivery of the goods in the event that the bill of lading is
retained by the seller. Rather, it only gives the seller a better right to the
possession of the goods as against the mere inchoate right of the buyer.
Thus, Articles 1523 and 1503 find no application here. The case before us
does not involve an action where the seller asserts ownership over the
goods as against the buyer. Instead, we are confronted with a complaint
for sum of money and damages filed by the seller against the buyer and
the common carrier due to the non-payment of the goods by the buyer,
and the release of the goods by the carrier despite non-surrender of the
bill of lading. A contract of sale is separate and distinct from a contract of
carriage. They involve different parties, different rights, different
obligations and liabilities. Thus, we quote with approval the ruling of the
CA, to wit:
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On the third assigned error, [w]e rule for the defendants-appellants [ASTI
and ACCLI]. They are correct in arguing that the nature of their
obligation with plaintiff [DBI] is separate and distinct from the
transaction of the latter with defendant Ambiente. As carrier of
the goods transported by plaintiff, its obligation is simply to
ensure that such goods are delivered on time and in good
condition. In the case [Macam v. Court of Appeals], the Supreme Court
emphasized that "the extraordinary responsibility of the common carriers
lasts until actual or constructive delivery of the cargoes to the consignee
or to the person who has the right to receive them." x x x
It is therefore clear that the moment the carrier has delivered the
subject goods, its responsibility ceases to exist and it is thereby
freed from all the liabilities arising from the transaction. Any
question regarding the payment of the buyer to the seller is no
longer the concern of the carrier. This easily debunks plaintiffs theory
of joint liability.70 x x x (Emphasis supplied; citations omitted.)
The contract between DBI and ASTI is a contract of carriage of goods;
hence, ASTI's liability should be pursuant to that contract and the law on
transportation of goods. Not being a party to the contract of sale between
DBI and Ambiente, ASTI cannot be held liable for the payment of the value
of the goods sold. In this regard, we cite Loadstar Shipping Company,
Incorporated v. Malayan Insurance Company, Incorporated,71 thus:
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Malayan opposed the petitioners' invocation of the Philex-PASAR purchase
agreement, stating that the contract involved in this case is a contract of
affreightment between the petitioners and PASAR, not the agreement
between Philex and PASAR, which was a contract for the sale of copper
concentrates.
On this score, the Court agrees with Malayan that contrary to the trial
court's disquisition, the petitioners cannot validly invoke the penalty
clause under the Philex-PASAR purchase agreement, where penalties are
to be imposed by the buyer PASAR against the seller Philex if some
elements exceeding the agreed limitations are found on the copper
concentrates upon delivery. The petitioners are not privy to the
contract of sale of the copper concentrates. The contract between
PASAR and the petitioners is a contract of carriage of goods and
not a contract of sale. Therefore, the petitioners and PASAR are
bound by the laws on transportation of goods and their contract
of affreightment. Since the Contract of Affreightment between the
petitioners and PASAR is silent as regards the computation of damages,
whereas the bill of lading presented before the trial court is
undecipherable, the New Civil Code and the Code of Commerce shall
govern the contract between the parties.72 (Emphasis supplied; citations
omitted.)

In view of the foregoing, we hold that under Bill of Lading No.

AC/MLLA601317 and the pertinent law and jurisprudence, ASTI and ACCLI
are not liable to DBI. We sustain the finding of the CA that only Ambiente,
as the buyer of the goods, has the obligation to pay for the value of the
shipment. However, in view of our ruling in Nacar v. Gallery Frames,73 we
modify the legal rate of interest imposed by the CA. Instead of 12% per
annum from the finality of this judgment until its full satisfaction, the rate
of interest shall only be 6% per annum.chanrobleslaw
FIRST DIVISION
WHEREFORE, the petition is DENIED for lack of merit. The August 16,
2007 Decision and the September 2, 2008 Resolution of the Court of G.R. No. 190271, September 14, 2016
Appeals in CA-G.R. CV No. 79790 are hereby AFFIRMEDwith
the MODIFICATION that from the finality of this decision until its full TRANSIMEX CO., Petitioner, v. MAFRE ASIAN INSURANCE
satisfaction, the applicable rate of interest shall be 6% per annum. CORP., Respondent.

SO ORDERED.cralawlawlibrary DECISION

SERENO, C.J.:

This case involves a money claim filed by an insurance company against

the ship agent of a common carrier. The dispute stemmed from an alleged
shortage in a shipment of fertilizer delivered by the carrier to a consignee.
Before this Court, the ship agent insists that the shortage was caused by
bad weather, which must be considered either a storm under Article 1734
of the Civil Code or a peril of the sea under the Carriage of Goods by Sea
Act (COGSA).1chanrobleslaw

In the Decision2 and the Resolution3 assailed in this Petition for Review
on Certiorari,4 the Court of Appeals (CA) affirmed the Decision5 of the
Regional Trial Court (RTC). The RTC ordered petitioner Transimex Co.
(Transimex) to pay respondent Mafre Asian Insurance Corp.6 the amount of
P1,617,527.37 in addition to attorney's fees and costs. Petitioner is the
local ship agent of the vessel, while respondent is the subrogee of Fertiphil
Corporation (Fertiphil),7 the consignee of a shipment of Prilled Urea
Fertilizer transported by M/V Meryem Ana.
FACTUAL ANTECEDENTS

On 21 May 1996, M/V Meryem Ana received a shipment consisting of

21,857 metric tons of Prilled Urea Fertilizer from Helm Duengemittel GMBH
at Odessa, Ukraine.8 The shipment was covered by two separate bills of
lading and consigned to Fertiphil for delivery to two ports - one in Poro
Point, San Fernando, La Union; and the other in Tabaco, Albay. 9 Fertiphil
insured the cargo against all risks under Marine Risk Note Nos. MN-MAR-
HO-0001341 and MN-MAR-HO-0001347 issued by
respondent.10chanrobleslaw
On 20 June 1996, M/V Meryem Ana arrived at Poro Point, La Union, and
discharged 14,339.507 metric tons of fertilizer under the first bill of
lading.11 The ship sailed on to Tabaco, Albay, to unload the remainder of
the cargo. The fertilizer unloaded at Albay appeared to have a gross
weight of 7,700 metric tons.12 The present controversy involves only this
second delivery.
As soon as the vessel docked at the Tabaco port, the fertilizer was bagged
and stored inside a warehouse by employees of the consignee. 13 When the
cargo was subsequently weighed, it was discovered that only 7,350.35
metric tons of fertilizer had been delivered.14 Because of the alleged
shortage of 349.65 metric tons, Fertiphil filed a claim with respondent for
P1,617,527.37,15 which was found compensable.16chanrobleslaw
After paying the claim of Fertiphil, respondent demanded reimbursement
from petitioner on the basis of the right of subrogation. The claim was
denied, prompting respondent to file a Complaint with the RTC for recovery
of sum of money.17 In support of its claim, respondent presented a Report
of Survey18 and a Certification19 from David Cargo Survey Services to prove
the shortage. In addition, respondent submitted an Adjustment
Report20 prepared by Adjustment Standards Corporation (ASC) to establish
the outturn quantity and condition of the fertilizer discharged from the
vessel at the Tabaco port.21 In the report, the adjuster also stated that the
shortage was attributable to the melting of the fertilizer while inside the
hatches, when the vessel took on water because of the bad weather
experienced at sea.22 Two witnesses were then presented by respondent to
buttress its documentary evidence.23chanrobleslaw
Petitioner, on the other hand, denied that there was loss or damage to the
cargo.24 It submitted survey certificates and presented the testimony of a
marine surveyor to prove that there was, in fact, an excess of 3.340 metric
tons of fertilizer delivered to the consignee.25cralawred Petitioner also
alleged that defendants had exercised extraordinary diligence in the
transport and handling of the cargo.26chanrobleslaw
THE RTC RULING
The RTC ruled in favor of respondent and ordered petitioner to pay the
claim of P1,617,527.37. In its Decision,27 the trial court found that there
was indeed a shortage in the cargo delivered, for which the common
carrier must be held responsible under Article 1734 of the Civil Code. The
RTC also refused to give credence to petitioner's claim of overage and
noted that the presumption of fault and/or negligence on the part of the
carrier remained unrebutted. The trial court
explained:ChanRoblesVirtualawlibrary
The defendants' defense is that there was no loss/damage to the cargo
because instead of a shortage there was an overage of 3.340, invoking the
findings of Raul Pelagio, a marine surveyor connected with Survey
Specialists, Inc. whose services were engaged by the defendants.
However, the Court notes that what was loaded in the vessel M/V Meryem
Ana at Odessa, Ukraine on May 21, 1996 was 21,857 metric tons of prilled
urea fertilizer (Draft Survey Report, Exhibit F). How the quantity loaded
had increased to 21,860.34 has not been explained by the defendants.
Thus, the Court finds incredible the testimony of Raul Pelagio that he
found an overage of 3.340 metric tons. The Court is inclined to give
credence to the testimonies of witness Jaime David, the cargo surveyor
engaged by consignee Fertiphil Corporation, and witness Fabian Bon, a
cargo surveyor of Adjustment Standards Corporation, whose services were
engaged by plaintiff Mafre Asian Insurance Corporation, there being no
reason for the Court to disregard their findings which jibe with one
another.
Thus, it appears crystal clear that on the vessel M/V Meryem Ana was
loaded in bulk on May 21, 1996 at Odessa, Ukraine a cargo consisting of
21,857 metric tons of prilled urea fertilizer bound for delivery at Poro Point,
San Fernando, La Union and at Tabaco, Albay; that the cargo unloaded at
said ports of destination had a shortage of 349.65 metric tons.
xxxx
As to the defense that defendants had supposedly exercised extraordinary
care and diligence in the transport and handling of the cargo, the Court
finds that the evidence presented by the defendants is absolutely and
completely bereft of anything to support their claim of having exercised
extraordinary care and diligence.
Hence, the presumption of fault and/or negligence as provided in Art. 1735
of the Civil Code on the part of the defendants stands unrebutted as
against the latter.28chanroblesvirtuallawlibrary
THE CA RULING
The CA affirmed the ruling of the RTC and denied petitioner's
appeal.29 After evaluating the evidence presented during trial, the
appellate court found no reason to disturb the trial court's conclusion that
there was indeed a shortage in the shipment.30chanrobleslaw
The CA also rejected the assertion that petitioner was not a common
carrier.31 Because the latter offered services to the public for the transport
of goods in exchange for compensation, it was considered a common
carrier in accordance with Article 1732 of the Civil Code. The CA further
noted that petitioner had already admitted this fact in the Answer32 and
even raised the defenses usually invoked by common carriers during trial
and on appeal, i.e., the exercise of extraordinary care and diligence, and
fortuitous event.33 These defenses were, however, found
unmeritorious:ChanRoblesVirtualawlibrary
Defendants-appellants claim that the loss was due to a fortuitous event as
the Survey Report of Jaime David stated that during its voyage, the vessel
encountered bad weather. But to excuse a common carrier fully of any
liability, Article 1739 of the Civil Code requires that the fortuitous event
must have been the proximate and only cause of the loss. Moreover, it
should have exercised due diligence to prevent or minimize the loss
before, during and after the occurrence of the fortuitous event.
xxxx
In the present case, defendants-appellants did not present proof that the
"bad weather" they encountered was a "storm" as contemplated by Article
1734(1). String winds are the ordinary vicissitudes of a sea voyage. Even if
the weather encountered by the ship was to be deemed a natural disaster
under Article 1739 of the Civil Code, defendants-appellants failed to show
that such natural disaster or calamity was the proximate and only cause of
the loss. The shortage must not have been caused or worsened by human
participation. The defense of fortuitous event or natural disaster cannot be
successfully made when the injury could have been avoided by human
precaution.34chanroblesvirtuallawlibrary
Petitioner moved for reconsideration of the CA Decision, but the motion
was denied.35 Not only did the Motion for Reconsideration lack meit
according to the appellate court; it was also filed out of
time.36chanrobleslaw
PROCEEDINGS BEFORE THIS COURT
On 3 December 2009, Transimex filed a Petition for Review
on Certiorari37 before this Court praying for the reversal of the CA Decision
and Resolution.38 Petitioner asserts that the lower courts erred in holding it
liable for the alleged shortage in the shipment of fertilizer. While it no
longer questions the existence of the shortage, it claims that the loss or
damage was caused by bad weather. 39 It then insists that the dispute is
governed by Section 4 of COGSA, which exempts the carrier from liability
for any loss or damage arising from "perils, dangers and accidents of the
sea.40chanrobleslaw
In its Comment,41 respondent maintains that petitioner was correctly held
liable for the shortage of the cargo in accordance with the Civil Code
provisions on common carriers.42 It insists that the factual findings of the
lower courts must be respected43 particularly in this case, since petitioner
failed to timely appeal the Decision of the CA.44chanrobleslaw
Petitioner, in its Reply,45 takes a position different from its initial stance as
to the law applicable to the dispute. It concedes that the Civil Code
primarily governs its liability as a carrier, with COGSA as a suppletory
source.46 Under both laws, petitioner contends that it is exempt from
liability, because damage to the cargo was caused by the bad weather
encountered by the vessel while at sea. This kind of weather supposedly
qualifies as a violent storm under the Civil Code; or as a peril, danger or
accident of the sea under COGSA.47chanrobleslaw
ISSUES
The following issues are presented for resolution by this Court:
1. Whether the CA Decision has become final and executory
2. Whether the transaction is governed by the provisions of the Civil
Code on common carriers or by the provisions of COGSA
3. Whether petitioner is liable for the loss or damage sustained by
the cargo because of bad weather
OUR RULING
We DENY the Petition.
This Court finds that the CA Decision has become final because of the
failure of petitioner to timely file a motion for reconsideration.
Furthermore, contrary to the argument raised by the latter, there is
insufficient evidence to establish that the loss or damage to the cargo was
caused by a storm or a peril of the sea.
The CA Decision has become final and executory.
In the assailed Resolution, in which the CA ruled that petitioner's Motion
for Reconsideration was filed late, it explained:ChanRoblesVirtualawlibrary
Defendants-appellants' motion for reconsideration of the Court's Decision
dated August 7, 2009 was filed out of time, as based on the reply letter
dated October 13, 2009 of the Chief, Administrative Unit, Office of the
Postmaster, Makati City, copy of said Decision was received by
defendants-appellants' counsel on September 4, 2009, not September 14,
2009 as alleged in the motion for reconsideration. Consequently, the
subject Decision dated August 27, 2009 had become final and executory
considering that the motion for reconsideration was filed only on
September 29, 2009, beyond the fifteen (15)-day reglementary period
which lasted until September 19, 2009.48chanroblesvirtuallawlibrary
The Court agrees. The Certification issued by the Office of the Postmaster
of Makati, which states that the Decision was received by respondent's
counsel on 4 September 2009, is entitled to full faith and credence. In the
absence of contradictory evidence, the presumption is that the postmaster
has regularly performed his duty.49 In this case, there is no reason to doubt
his statement as to the date respondent received the CA Decision.
Significantly, Transimex failed to address this matter in its Petition. While it
continued to allege that it received the CA Decision on 14 September
2009, it did not refute the finding of the appellate court that the former's
Motion for Reconsideration had been filed late. It was only after
respondent again asserted the finality of the CA Decision in its Comment
did petitioner attempt to explain the
discrepancy:ChanRoblesVirtualawlibrary
x x x Apparently, the said Decision dated 27 August 2009 was delivered by
the postman to the guard on duty at the ground floor of the building where
undersigned counsel's office is located. It was the guard on duty who
received the said decision on 4 September 2009 but it was only on 14
September 2009 that undersigned counsel actually received the said
decision. Hence, the date of receipt of the decision should be reckoned
from the date of receipt by the counsel of the decision and not from the
date of receipt of the guard who is not an employee of the law office of the
undersigned counsel.
This Court notes that the foregoing account remains unsupported by
evidence. The guard on duty or any employee of the law firm could have
easily substantiated the explanation offered by counsel for petitioner, but
no statement from any of them was ever submitted. Since petitioner was
challenging the official statement of the Office of the Postmaster of Makati
on the matter, the former had the burden of proving its assertions and
presenting countervailing evidence. Unfounded allegations would not
suffice.
In any event, this Court has decided to review the merits of this case in the
interest of justice. After a judicious evaluation of the arguments interposed
by the parties, we find no reason to reverse the CA Decision and
Resolution.
The provisions of the Civil Code on common carriers are
applicable.
As previously discussed, petitioner initially argued that the CA erred in
applying the provisions of the Civil Code to this case. It insisted that the
contract of carriage between the parties was governed by COGSA, 50 the
law applicable to "all contracts for the carriage of goods by sea to and
from Philippine ports in foreign trade."51 This assertion is bereft of merit.
This Court upholds the ruling of the CA with respect to the applicable law.
As expressly provided in Article 1753 of the Civil Code, "[t]he law of the
country to which the goods are to be transported shall govern the liability
of the common carrier for their loss, destruction or deterioration." Since
the cargo in this case was transported from Odessa, Ukraine, to Tabaco,
Albay, the liability of petitioner for the alleged shortage must be
determined in accordance with the provisions of the Civil Code on common
carriers. In Eastern Shipping Lines, Inc. v. BPI/MS Insurance Corp., the
Court declared:ChanRoblesVirtualawlibrary
According to the New Civil Code, the law of the country to which the goods
are to be transported shall govern the liability of the common carrier for
their loss, destruction or deterioration. The Code takes precedence as the
primary law over the rights and obligations of common carriers with the
Code of Commerce and COGSA applying
suppletorily.52chanroblesvirtuallawlibrary
Besides, petitioner itself later conceded in its Reply that the Civil Code
provisions on common carriers are primarily applicable to the present
dispute, while COGSA only applies in a suppletory manner. 53chanrobleslaw
Petitioner is liable for the shortage incurred by the shipment.
Having settled the foregoing preliminary issues, the only argument left for
this Court to resolve is petitioner's assertion that it is exempt from liability
for the loss or damage to the cargo. As grounds for this exemption,
petitioner cites both the Civil Code and COGSA, particularly the provisions
absolving a carrier from loss or damage sustained as the result of a
"storm" or a "peril of the sea."
In its Petition, Transimex summarizes the testimony of one witness for
respondent supposedly proving that the shortage in the shipment was
caused by inclement weather encountered by the vessel at sea. Petitioner
claims that this testimony proves that damage to the cargo was the result
of the melting of the fertilizer after seawater entered Hatch No. 1 of the
vessel as a result of the bad weather conditions at
sea:ChanRoblesVirtualawlibrary
The evidence for the respondent clearly proves that the
loss/damage/shortage [suffered by] the cargo was caused by the bad
weather encountered by the vessel during the voyage from Odessa,
Ukraine to Poro Point, San Fernando, La Union, wherein due to bad
weather[,] sea water found its way inside Hatch No. 1 resulting in the
wetting, melting and discoloration of the prilled urea fertilizer. The fact
that sea water found its way inside Hatch No. 1 was clearly testified to by
the witness for the respondent. Jaime R. Davis testified
that:ChanRoblesVirtualawlibrary
"He was present during the discharging operation, that he saw the
hatches opened whereupon he noticed the presence of water
thereat; accordingly, he informed the master of the vessel of the
presence of water at the hatches to which the master of the
vessel replied that on the way they encountered bad
weather."54 (Emphasis in the original)
Petitioner also cites a portion of the Adjustment Report submitted by
respondent during trial as proof that damage to the cargo was caused by a
storm:ChanRoblesVirtualawlibrary
How the sea water found its way inside Hatch No. 1 was clearly explained
by another witness for the respondent by the name of Fabian Bon who
stated in his Adjustment as follows:ChanRoblesVirtualawlibrary
Our inquiries disclosed that the master of the vessel interviewed by the
consignee's surveyor (David Cargo Survey Services) that during sailing
from Odessa (Ukraine) bound to Poro Point, San Fernando, La Union,
Philippines, the vessel encountered bad weather on June 3, 1996
and was rolling from starboard to portside top of the 1, 2, 3, 4, 5,
6 & 7 hatch covers and sea water were washing over all main
deck.
On the following day, June 4, 1996, wind reading up to 40 knots
and very high swells were coming from south west direction. The
vessel was rolling and pitching heavily. Heavy sea water were
washing all main deck and were jumping from main deck to top of
the seven (7) hatch covers. As a result, the master filed a Marine
Note of Protest on June 19, 1996 at the Port of Poro Point, San
Fernando, La Union, Philippines.55 (Emphases in the original)
The question before this Court therefore comes down to whether there is
sufficient proof that the loss or damage incurred by the cargo was caused
by a "storm" or a "peril of the sea."
We rule in the negative. As will be discussed, petitioner failed to prove the
existence of a storm or a peril of the sea within the context of Article
1734(1) of the Civil Code or Section 4(2)(c) of COGSA. Furthermore, there
was no sufficient proof that the damage to the shipment was solely and
proximately caused by bad weather.
The presence of a "storm" or a "peril of the sea" was not
established.
It must be emphasized that not all instances of bad weather may be
categorized as "storms" or "perils of the sea" within the meaning of the
provisions of the Civil Code and COGSA on common carriers. To be
considered absolutory causes under either statute, bad weather conditions
must reach a certain threshold of severity.
With respect to storms, this Court has explained the difference between a
storm and ordinary weather conditions in Central Shipping Co. Inc. v.
Insurance Company of North America:56
Nonetheless, to our mind it would not be sufficient to categorize the
weather condition at the time as a "storm" within the absolutory causes
enumerated in the law. Significantly, no typhoon was observed within the
Philippine area of responsibility during that period.
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.57 (Emphases supplied; citations omitted)
The phrase "perils of the sea" carries the same connotation. Although the
term has not been definitively defined in Philippine jurisprudence, courts in
the United States of America generally limit the application of the phrase
to weather that is "so unusual, unexpected and catastrophic as to be
beyond reasonable expectation."58 Accordingly, strong winds and waves
are not automatically deemed perils of the sea, if these conditions are not
unusual for that particular sea area at that specific time, or if they could
have been reasonably anticipated or foreseen.59 While cases decided by
U.S. courts are not binding precedents in this jurisdiction, the Court
considers these pronouncements persuasive60 in light of the fact that
COGSA was originally an American statute61 that was merely adopted by
the Philippine Legislature in 1936.62chanrobleslaw
In this case, the documentary and testimonial evidence cited by petitioner
indicate that M/V Meryem Anafaced winds of only up to 40 knots while at
sea. This wind force clearly fell short of the 48 to 55 knots required for
"storms" under Article 1734(1) of the Civil Code based on the threshold
established by PAGASA.63 Petitioner also failed to prove that the inclement
weather encountered by the vessel was unusual, unexpected, or
catastrophic. In particular, the strong winds and waves, which allegedly
assaulted the ship, were not shown to be worse than what should have
been expected in that particular location during that time of the year.
Consequently, this Court cannot consider these weather conditions as
"perils of the sea" that would absolve the carrier from liability.
As a side note, we observe that there are no definite statutory standards
for determining the existence of a "storm" or "peril of the sea" that would
exempt a common carrier from liability. Hence, in marine insurance cases,
courts are constrained to rely upon their own understanding of these
terms of art, or upon imprecise accounts of the speed of the winds
encountered and the strength of the waves experienced by a vessel. To
obviate uncertainty, it may be time for Congress to lay down specific rules
to distinguish "storms" and other "perils of the sea" from the ordinary
action of the wind and waves. While uniform measures of severity may
prove difficult to establish, the legislature may consider providing more
detailed standards to be used by the judiciary in resolving maritime cases.
These may include wind velocity, violence of the seas, the height of the
waves, or even the expected weather conditions in the area involved at
the time of the incident.
Petitioner failed to prove the other requisites for exemption from
liability under Article 1734 of the Civil Code.
Even assuming that the inclement weather encountered by the vessel
amounted to a "storm" under Article 1734(1) of the Civil Code, there are
two other reasons why this Court cannot absolve petitioner from liability
for loss or damage to the cargo under the Civil Code. First, there is no
proof that the bad weather encountered by M/V Meryem Ana was the
proximate and only cause of damage to the shipment. Second, petitioner
failed to establish that it had exercised the diligence required from
common carriers to prevent loss or damage to the cargo.
of a witness that supposedly confirmed the alleged excess in the quantity
of the fertilizer delivered to the consignee in Albay. 68 No other evidence
was presented to demonstrate either the proximate and exclusive cause of
the loss or the extraordinary diligence of the carrier.
Under these circumstances, the Court cannot absolve petitioner from
liability for the shortage incurred by the shipment.
WHEREFORE, the Petition is DENIED. The Court of Appeals Decision and
Resolution dated 27 August 2009 and 10 November 2009, respectively,
are hereby AFFIRMED.
SO ORDERED.chanRoblesvirtualLawlibrary
Leonardo-De Castro, Perlas-Bernabe, and Caguioa, JJ., concur.
Bersamin, J., on official leave

We emphasize that common carriers are automatically presumed to have REGIONAL CONTAINER LINES G.R. No. 168151
been at fault or to have acted negligently if the goods they were (RCL) OF SINGAPORE and
transporting were lost, destroyed or damaged while in transit. 64 This EDSA SHIPPING AGENCY, Present:
presumption can only be rebutted by proof that the carrier exercised Petitioners,
extraordinary diligence and caution to ensure the protection of the QUISUMBING, J., Chairperson,
shipment in the event of foul weather.65 As this Court explained in Fortune CARPIO-MORALES,
Sea Carrier, Inc. v. BPI/MS Insurance Corp.:ChanRoblesVirtualawlibrary BRION,
- versus - DEL CASTILLO, and
While the records of this case clearly establish that M/V Sea Merchant was ABAD, JJ.
damaged as result of extreme weather conditions, petitioner cannot be
absolved from liability. As pointed out by this Court in Lea Mer Industries,
Inc. v. Malayan Insurance, Inc., a common carrier is not liable for loss only THE NETHERLANDS INSURANCE CO. Promulgated:
when (1) the fortuitous event was the only and proximate cause of the loss (PHILIPPINES), INC.,
and (2) it exercised due diligence to prevent or minimize the loss. The Respondent. September 4, 2009
second element is absent here. As a common carrier, petitioner should x -------------------------------------------------------------------------------------- x
have been more vigilant in monitoring weather disturbances within the
country and their (possible) effect on its routes and destination. More DECISION
specifically, it should have been more alert on the possible attenuating
and dysfunctional effects of bad weather on the parts of the ship. It should BRION, J.:
have foreseen the likely prejudicial effects of the strong waves and winds
on the ship brought about by inclement weather and should have taken For our resolution is the petition for review on certiorari filed by petitioners
the necessary precautionary measures through extraordinary diligence to Regional Container Lines of Singapore (RCL) and EDSA Shipping Agency
prevent the weakening or dysfunction of the parts of the ship to avoid or (EDSA Shipping) to annul and set aside the decision[1] and resolution[2] of
prune down the loss to cargo.66 (citations omitted) the Court of Appeals (CA) dated May 26, 2004 and May 10, 2005,
respectively, in CA-G.R. CV No. 76690.
In the instant case, there is absolutely no evidence that petitioner satisfied
the two requisites. Before the trial court, petitioner limited itself to the RCL is a foreign corporation based in Singapore. It does business in
defense of denial. The latter refused to admit that the shipment sustained the Philippines through its agent, EDSA Shipping, a domestic corporation
any loss or damage and even alleged overage of the cargo delivered. 67 As organized and existing under Philippine laws. Respondent Netherlands
a result, the evidence it submitted was severely limited, i.e., the testimony
Insurance Company (Philippines), Inc. (Netherlands Insurance) is likewise a
domestic corporation engaged in the marine underwriting business.
FACTUAL ANTECEDENTS
The pertinent facts, based on the records are summarized below.
On October 20, 1995, 405 cartons of Epoxy Molding Compound were
consigned to be shipped from Singapore to Manila for Temic Telefunken
Microelectronics Philippines (Temic). U-Freight Singapore PTE Ltd.[3] (U-
Freight Singapore), a forwarding agent based in Singapore, contracted the
services of Pacific Eagle Lines PTE. Ltd. (Pacific Eagle) to transport the
subject cargo. The cargo was packed, stored, and sealed by Pacific Eagle in
its Refrigerated Container No. 6105660 with Seal No. 13223. As the cargo
was highly perishable, the inside of the container had to be kept at a
temperature of 0 Celsius. Pacific Eagle then loaded the refrigerated
container on board the M/V Piya Bhum, a vessel owned by RCL, with which
Pacific Eagle had a slot charter agreement. RCL duly issued its own Bill of
Lading in favor of Pacific Eagle.
To insure the cargo against loss and damage, Netherlands Insurance
issued a Marine Open Policy in favor of Temic, as shown by MPO-21-05081-
94 and Marine Risk Note MRN-21 14022, to cover all losses/damages to
the shipment.
On October 25, 1995, the M/V Piya Bhum docked in Manila. After unloading
the refrigerated container, it was plugged to the power terminal of the pier
to keep its temperature constant. Fidel Rocha (Rocha), Vice-President for
Operations of Marines Adjustment Corporation, accompanied by two
surveyors, conducted a protective survey of the cargo. They found that
based on the temperature chart, the temperature reading was constant
from October 18, 1995 to October 25, 1995 at 0 Celsius. However,
at midnight of October 25, 1995 when the cargo had already been
unloaded from the ship the temperature fluctuated with a reading of 33
Celsius. Rocha believed the fluctuation was caused by the burnt condenser
fan motor of the refrigerated container.
On November 9, 1995, Temic received the shipment. It found the cargo
completely damaged. Temic filed a claim for cargo loss against
Netherlands Insurance, with supporting claims documents. The
Netherlands Insurance paid Temic the sum of P1,036,497.00 under the
terms of the Marine Open Policy. Temic then executed a loss and
subrogation receipt in favor of Netherlands Insurance.
Seven months from delivery of the cargo or on June 4, 1996, Netherlands
Insurance filed a complaint for subrogation of insurance settlement with
the Regional Trial Court, Branch 5, Manila, against the unknown owner
of M/V Piya Bhum and TMS Ship Agencies (TMS), the latter thought to be
the local agent of M/V Piya Bhums unknown owner.[4] The complaint was
docketed as Civil Case No. 96-78612.
Netherlands Insurance amended the complaint on January 17, 1997 to
implead EDSA Shipping, RCL, Eagle Liner Shipping Agencies, U-Freight
Singapore, and U-Ocean (Phils.), Inc. (U-Ocean), as additional defendants.
A third amended complaint was later made, impleading Pacific Eagle in
substitution of Eagle Liner Shipping Agencies.
TMS filed its answer to the original complaint. RCL and EDSA Shipping filed
their answers with cross-claim and compulsory counterclaim to the second
amended complaint. U-Ocean likewise filed an answer with compulsory
counterclaim and cross-claim. During the pendency of the case, U-Ocean,
jointly with U-Freight Singapore, filed another answer with compulsory
counterclaim. Only Pacific Eagle and TMS filed their answers to the third
amended complaint.
The defendants all disclaimed liability for the damage caused to the cargo,
citing several reasons why Netherland Insurances claims must be
rejected. Specifically, RCL and EDSA Shipping denied negligence in the
transport of the cargo; they attributed any negligence that may have
caused the loss of the shipment to their co-defendants. They likewise
asserted that no valid subrogation exists, as the payment made by
Netherlands Insurance to the consignee was invalid. By way of affirmative
defenses, RCL and EDSA Shipping averred that the Netherlands Insurance
has no cause of action, and is not the real party-in-interest, and that the
claim is barred by laches/prescription.
After Netherlands Insurance had made its formal offer of evidence, the
defendants including RCL and EDSA Shipping sought leave of court to file
their respective motions to dismiss based on demurrer to evidence.
RCL and EDSA Shipping, in their motion, insisted that Netherlands
Insurance had (1) failed to prove any valid subrogation, and (2) failed to
establish that any negligence on their part or that the loss was sustained
while the cargo was in their custody.
On May 22, 2002, the trial court handed down an Order dismissing Civil
Case No. 96-78612 on demurrer to evidence. The trial court ruled that
while there was valid subrogation, the defendants could not be held liable
for the loss or damage, as their respective liabilities ended at the time of
the discharge of the cargo from the ship at the Port of Manila.
Netherlands Insurance seasonably appealed the order of dismissal to the
CA.
On May 26, 2004, the CA disposed of the appeal as follows:
WHEREFORE, in view of the foregoing, the dismissal of the complaint
against defendants Regional Container Lines and Its local agent,
EDSA Shipping Agency, is REVERSED and SET ASIDE. The dismissal
of the complaint against the other defendants is AFFIRMED. Pursuant to
Section 1, Rule 33 of the 1997 Rules of Civil Procedure, defendants
Regional Container Lines and EDSA Shipping Agency are deemed to have
waived the right to present evidence.
As such, defendants Regional Container Lines and EDSA Shipping
Agency are ordered to reimburse plaintiff in the sum
of P1,036,497.00 with interest from date hereof until fully paid.
No costs.
SO ORDERED. [Emphasis supplied.]
The CA dismissed Netherland Insurances complaint against the other
defendants after finding that the claim had already been barred by
prescription.[5]
Having been found liable for the damage to the cargo, RCL and EDSA
Shipping filed a motion for reconsideration, but the CA maintained its
original conclusions.
The sole issue for our resolution is whether the CA correctly held RCL
and EDSA Shipping liable as common carriers under the theory of
presumption of negligence.
THE COURTS RULING
The present case is governed by the following provisions of the Civil Code:
ART. 1733. Common carriers, from the nature of their business and for
reasons of public policy, are bound to observe extraordinary
diligence in the vigilance over the goods and for the safety of the
passengers transported by them according to all the circumstances of
each case.
Such extraordinary diligence in the vigilance over the goods is further
expressed in articles 1734, 1735, and 1745, Nos. 5, 6, and 7, while the
extraordinary diligence for the safety of the passengers is further set forth
in articles1755 and 1756.
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 of 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.
ART. 1735. In all cases other that 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 by article 1733.
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 sane 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 articles 1738.
ART. 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.
ART. 1742. Even if the loss, destruction, or deterioration of the goods
should be caused by the character of the goods, or the faulty nature of
the packing or of the containers, the common carrier must
exercise due diligence to forestall or lessen the loss.
In Central Shipping Company, Inc. v. Insurance Company of North America,
[6]
we reiterated the rules for the liability of a common carrier for lost or
damaged cargo as follows:
(1) Common carriers are bound to observe extraordinary diligence
over the goods they transport, according to all the circumstances of each
case;
(2) In the event of loss, destruction, or deterioration of the insured
goods, common carriers are responsible, unless they can prove that such
loss, destruction, or deterioration was brought about by, among others,
flood, storm, earthquake, lightning, or other natural disaster or calamity;
and
(3) In all other cases not specified under Article 1734 of the Civil
Code, common carriers are presumed to have been at fault or to have
acted negligently, unless they observed extraordinary diligence. [7]
In the present case, RCL and EDSA Shipping disclaim any responsibility for
the loss or damage to the goods in question. They contend that the cause
of the damage to the cargo was the fluctuation of the temperature in the
reefer van, which fluctuation occurred after the cargo had already been
discharged from the vessel; no fluctuation, they point out, arose when the
cargo was still on board M/V Piya Bhum. As the cause of the damage to the
cargo occurred after the same was already discharged from the vessel and
was under the custody of the arrastre operator (International Container
Terminal Services, Inc. or ICTSI), RCL and EDSA Shipping posit that the
presumption of negligence provided in Article 1735 of the Civil Code
should not apply. What applies in this case is Article 1734, particularly
paragraphs 3 and 4 thereof, which exempts the carrier from liability for
loss or damage to the cargo when it is caused either by an act or omission
of the shipper or by the character of the goods or defects in the packing or
in the containers. Thus, RCL and EDSA Shipping seek to lay the blame at
the feet of other parties.
We do not find the arguments of RCL and EDSA Shipping
meritorious.
A common carrier is presumed to have been negligent if it fails to prove
that it exercised extraordinary vigilance over the goods it transported.
[8]
When the goods shipped are either lost or arrived in damaged condition,
a presumption arises against the carrier of its failure to observe that
diligence, and there need not be an express finding of negligence to hold it
liable.[9]
To overcome the presumption of negligence, the common carrier
must establish by adequate proof that it exercised extraordinary
diligence over the goods. It must do more than merely show that
some other party could be responsible for the damage.[10]
In the present case, RCL and EDSA Shipping failed to prove that they did
exercise that degree of diligence required by law over the goods they
transported. Indeed, there is sufficient evidence showing that the
fluctuation of the temperature in the refrigerated container van, as
recorded in the temperature chart, occurred after the cargo had been
discharged from the vessel and was already under the custody of the
arrastre operator, ICTSI. This evidence, however, does not disprove that
the condenser fan which caused the fluctuation of the temperature in the
refrigerated container was not damaged while the cargo was being
unloaded from the ship. It is settled in maritime law jurisprudence
that cargoes while being unloaded generally remain under the
custody of the carrier;[11] RCL and EDSA Shipping failed to dispute this.
RCL and EDSA Shipping could have offered evidence before the trial court
to show that the damage to the condenser fan did not occur: (1) while the
cargo was in transit; (2) while they were in the act of discharging it from
the vessel; or (3) while they were delivering it actually or constructively to
the consignee. They could have presented proof to show that they
exercised extraordinary care and diligence in the handling of the goods,
but they opted to file a demurrer to evidence. As the order granting
their demurrer was reversed on appeal, the CA correctly ruled
that they are deemed to have waived their right to present
evidence,[12] and the presumption of negligence must stand.
It is for this reason as well that we find RCL and EDSA Shippings claim that
the loss or damage to the cargo was caused by a defect in the packing or
in the containers. To exculpate itself from liability for the loss/damage to
the cargo under any of the causes, the common carrier is burdened to
prove any of the causes in Article 1734 of the Civil Code claimed by it by a
preponderance of evidence. If the carrier succeeds, the burden of evidence
is shifted to the shipper to prove that the carrier is negligent. [13] RCL and
EDSA Shipping, however, failed to satisfy this standard of evidence and in
fact offered no evidence at all on this point; a reversal of a dismissal based
on a demurrer to evidence bars the defendant from presenting evidence
supporting its allegations.
WHEREFORE, we DENY the petition for review on certiorari filed by the
Regional Container Lines of Singapore and EDSA Shipping Agency. The
decision of the Court of Appeals dated May 26, 2004 in CA-G.R. CV No.
76690 is AFFIRMED IN TOTO. Costs against the petitioners. SO
ORDERED.
SECOND DIVISION
G.R. No. 194121, July 11, 2016
TORRES-MADRID BROKERAGE, INC., Petitioner, v. FEB MITSUI
MARINE INSURANCE CO., INC. AND BENJAMIN P. MANALASTAS,
DOING BUSINESS UNDER THE NAME OF BMT TRUCKING
SERVICES, Respondents.
DECISION
BRION, J.:
We resolve the petition for review on certiorari challenging the Court of
Appeals' (CA) October 14, 2010 decision in CA-G.R. CV No.
91829. 1chanrobleslaw
The CA affirmed the Regional Trial Court's (RTC) decision in Civil Case No.
01-1596, and found petitioner Torres-Madrid Brokerage, Inc. (TMBI) and
respondent Benjamin P. Manalastas jointly and solidarily liable to
respondent FEB Mitsui Marine Insurance Co., Inc. (Mitsui) for damages
from the loss of transported cargo.
Antecedents
On October 7, 2000, a shipment of various electronic goods from Thailand
and Malaysia arrived at the Port of Manila for Sony Philippines,
Inc. (Sony). Previous to the arrival, Sony had engaged the services of TMBI
to facilitate, process, withdraw, and deliver the shipment from the port to
its warehouse in Binan, Laguna.2chanrobleslaw
TMBI - who did not own any delivery trucks - subcontracted the services of
Benjamin Manalastas' company, BMT Trucking Services (BMT), to transport
the shipment from the port to the Binan warehouse.3 Incidentally, TMBI
notified Sony who had no objections to the arrangement.4chanrobleslaw
Four BMT trucks picked up the shipment from the port at about 11:00 a.m.
of October 7, 2000. However, BMT could not immediately undertake the
delivery because of the truck ban and because the following day was a
Sunday. Thus, BMT scheduled the delivery on October 9, 2000.
In the early morning of October 9, 2000, the four trucks left BMT's garage
for Laguna.5 However, only three trucks arrived at Sony's Binan
warehouse.
At around 12:00 noon, the truck driven by Rufo Reynaldo Lapesura (NSF-
391) was found abandoned along the Diversion Road in Filinvest, Alabang,
Muntinlupa City.6 Both the driver and the shipment were missing.
Later that evening, BMT's Operations Manager Melchor Manalastas
informed Victor Torres, TMBI's General Manager, of the development. 7 They
went to Muntinlupa together to inspect the truck and to report the matter
to the police.8chanrobleslaw
Victor Torres also filed a complaint with the National Bureau of
Investigation (NBI) against Lapesura for "hijacking." 9 The complaint
resulted in a recommendation by the NBI to the Manila City Prosecutor's
Office to prosecute Lapesura for qualified theft.10chanrobleslaw
TMBI notified Sony of the loss through a letter dated October 10, 2000, 11 It
also sent BMT a letter dated March 29, 2001, demanding payment for the
lost shipment. BMT refused to pay, insisting that the goods
were "hijacked."
In the meantime, Sony filed an insurance claim with the Mitsui, the insurer
of the goods. After evaluating the merits of the claim, Mitsui paid
Sony PHP7,293,386.23 corresponding to the value of the lost
goods.12chanrobleslaw
After being subrogated to Sony's rights, Mitsui sent TMBI a demand letter
dated August 30, 2001 for payment of the lost goods. TMBI refused to pay
Mitsui's claim. As a result, Mitsui filed a complaint against TMBI on
November 6, 2001,
TMBI, in turn, impleaded Benjamin Manalastas, the proprietor of BMT, as a
third-party defendant. TMBI alleged that BMT's driver, Lapesura, was
responsible for the theft/hijacking of the lost cargo and claimed BMT's
negligence as the proximate cause of the loss. TMBI prayed that in the
event it is held liable to Mitsui for the loss, it should be reimbursed by
BMT,
At the trial, it was revealed that BMT and TMBI have been doing business
with each other since the early 80's. It also came out that there had been
a previous hijacking incident involving Sony's cargo in 1997, but neither
Sony nor its insurer filed a complaint against BMT or TMBI. 13chanrobleslaw
On August 5, 2008, the RTC found TMBI and Benjamin Manalastas jointly
and solidarity liable to pay Mitsui PHP 7,293,386.23 as actual damages,
attorney's fees equivalent to 25% of the amount claimed, and the costs of
the suit.14 The RTC held that TMBI and Manalastas were common carriers
and had acted negligently.
Both TMBI and BMT appealed the RTC's verdict.
TMBI denied that it was a common carrier required to
exercise extraordinary diligence. It maintains that it exercised the
diligence of a good father of a family and should be absolved of liability
because the truck was "hijacked" and this was a fortuitous event.
BMT claimed that it had exercised extraordinary diligence over the lost
shipment, and argued as well that the loss resulted from a fortuitous
event.
On October 14, 2010, the CA affirmed the RTC's decision but reduced the
award of attorney's fees to PHP 200,000.
The CA held: (1) that "hijacking" is not necessarily a fortuitous event
because the term refers to the general stealing of cargo during
transit;15 (2) that TMBI is a common carrier engaged in the business of
transporting goods for the general public for a fee; 16 (3) even if
the "hijacking" were a fortuitous event, TMBI's failure to observe
extraordinary diligence in overseeing the cargo and adopting security
measures rendered it liable for the loss; 17 and (4) even if TMBI had not
been negligent in the handling, transport and the delivery of the shipment,
TMBI still breached its contractual obligation to Sony when it failed to
deliver the shipment.18chanrobleslaw
TMBI disagreed with the CA's ruling and filed the present petition on
December 3, 2010.
The Arguments
TMBI's Petition
TMBI insists that the hijacking of the truck was a fortuitous event. It
contests the CA's finding that neither force nor intimidation was used in
the taking of the cargo. Considering Lapesura was never found, the Court
should not discount the possibility that he was a victim rather than a
perpetrator.19chanrobleslaw
TMBI denies being a common carrier because it does not own a single
truck to transport its shipment and it does not offer transport services to
the public for compensation.20 It emphasizes that Sony knew TMBI did not
have its own vehicles and would subcontract the delivery to a third-party.
Further, TMBI now insists that the service it offered was limited to the
processing of paperwork attendant to the entry of Sony's goods. It denies
that delivery of the shipment was a part of its obligation. 21chanrobleslaw
TMBI solely blames BMT as it had full control and custody of the cargo
when it was lost.22 BMT, as a common carrier, is presumed negligent and
should be responsible for the loss.
BhtT's Comment
BMT insists that it observed the required standard of care. 23 Like the
petitioner, BMT maintains that the hijacking was a fortuitous event -
a force majeure - that exonerates it from liability.24 It points out that
Lapesura has never been seen again and his fate remains a mystery. BMT
likewise argues that the loss of the cargo necessarily showed that the
taking was with the use of force or intimidation.25cralawredchanrobleslaw
If there was any attendant negligence, BMT points the finger on TMBI who
failed to send a representative to accompany the shipment.26 BMT further
blamed TMBI for the latter's failure to adopt security measures to protect
Sony's cargo.27chanrobleslaw
Mitsui's Comment
Mitsui counters that neither TMBI nor BMT alleged or proved during the
trial that the taking of the cargo was accompanied with grave or
irresistible threat, violence, or force.28 Hence, the incident cannot be
considered "force majeure" and TMBI remains liable for breach of contract.
Mitsui emphasizes that TMBI's theory - that force or intimidation must
have been used because Lapesura was never found - was only raised for
the first time before this Court.29 It also discredits the theory as a mere
conjecture for lack of supporting evidence.
Mitsui adopts the CA's reasons to conclude that TMBI is a common carrier.
It also points out Victor Torres' admission during the trial that TMBI's
brokerage service includes the eventual delivery of the cargo to the
consignee.30chanrobleslaw
Mitsui invokes as well the legal presumption of negligence against TMBI,
pointing out that TMBI simply entrusted the cargo to BMT without adopting
any security measures despite: (1) a previous hijacking incident, when
TMBI lost Sony's cargo; and (2) TMBI's knowledge that the cargo was worth
more than 10 million pesos.31chanrobleslaw
Mitsui affirms that TMBI breached the contract of carriage through its
negligent handling of the cargo, resulting in its loss.
The Court's Ruling
A brokerage may be considered a common
carrier if it also undertakes to deliver the
goods for its customers
Common carriers are persons, corporations, firms or associations engaged
in the business of transporting passengers or goods or both, by land,
water, or air, for compensation, offering their services to the public. 32 By
the nature of their business and for reasons of public policy, they are
bound to observe extraordinary diligence in the vigilance over the goods
and in the safety of their passengers.33chanrobleslaw
In A.F. Sanchez Brokerage Inc. v. Court of Appeals,34we held that a customs
broker - whose principal business is the preparation of the correct customs
declaration and the proper shipping documents - is still considered a
common carrier if it also undertakes to deliver the goods for its customers.
The law does not distinguish between one whose principal business
activity is the carrying of goods and one who undertakes this task only as
an ancillary activity.35 This ruling has been reiterated in Schmitz Transport
&Brokerage Corp. v. Transport Venture, Inc.,36 Loadmasters
Customs Services, Inc. v. Glodel Brokerage Corporation,37 and Wesrwind
Shipping Corporation v. UCPB General Insurance Co., Inc. 38chanrobleslaw
Despite TMBI's present denials, we find that the delivery of the goods is an
integral, albeit ancillary, part of its brokerage services. TMBI admitted that
it was contracted to facilitate, process, and clear the shipments from the
customs authorities, withdraw them from the pier, then transport and
deliver them to Sony's warehouse in Laguna.39chanrobleslaw
Further, TMBI's General Manager Victor Torres described the nature of its
services as follows:
ATTY. VIRTUDAZO: Could you please tell the court what is the nature of the
business of [TMBI]?
Witness MR. Victor Torres of Torres Madrid: We are engaged in
customs brokerage business. We acquire the release documents from the
Bureau of Customs and eventually deliver the cargoes to
the consignee's warehouse and we are engaged in that kind of
business, sir. 40
That TMBI does not own trucks and has to subcontract the delivery of its
clients' goods, is immaterial. As long as an entity holds itself to the public
for the transport of goods as a business, it is considered a common carrier
regardless of whether it owns the vehicle used or has to actually hire
one.41chanrobleslaw
Lastly, TMBI's customs brokerage services - including the
transport/delivery of the cargo - are available to anyone willing to pay its
fees. Given these circumstances, we find it undeniable that TMBI is a
common carrier.
Consequently, TMBI should be held responsible for the loss, destruction, or
deterioration of the goods it transports unless it results from:
(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 of 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.42chanroblesvirtuallawlibrary
For all other cases - such as theft or robbery - a common carrier is
presumed to have been at fault or to have acted negligently, unless it can
prove that it observed extraordinary diligence.43chanrobleslaw
Simply put, the theft or the robbery of the goods is not considered a
fortuitous event or a force majeure. Nevertheless, a common carrier may
absolve itself of liability for a resulting loss: (1) if it proves that it
exercised extraordinary diligence in transporting and safekeeping the
goods;44 or (2) if it stipulated with the shipper/owner of the goods to limit
its liability for the loss, destruction, or deterioration of the goods to a
degree less than extraordinary diligence.45chanrobleslaw
However, a stipulation diminishing or dispensing with the common
carrier's liability for acts committed by thieves or robbers who do not act
with grave or irresistible threat, violence, or force is void under Article
1745 of the Civil Code for being contrary to public
policy. 46Jurisprudence, too, has expanded Article 1734's five
exemptions. De Guzman v. Court of Appeals47 interpreted Article 1745 to
mean that a robbery attended by "grave or irresistible threat, violence or
force" is a fortuitous event that absolves the common carrier from liability.
In the present case, the shipper, Sony, engaged the services of TMBI, a
common carrier, to facilitate the release of its shipment and deliver the
goods to its warehouse. In turn, TMBI subcontracted a portion of its
obligation - the delivery of the cargo - to another common carrier, BMT.
Despite the subcontract, TMBI remained responsible for the cargo. Under
Article 1736, a common carrier's extraordinary responsibility over the
shipper's goods lasts from the time these goods are unconditionally placed
in the possession of, and received by, the carrier for transportation, until
they are delivered, actually or constructively, by the carrier to the
consignee. 48chanrobleslaw
That the cargo disappeared during transit while under the custody of BMT -
TMBI's subcontractor - did not diminish nor terminate TMBFs responsibility
over the cargo. Article 1735 of the Civil Code presumes that it was at fault.
Instead of showing that it had acted with extraordinary diligence, TMBI
simply argued that it was not a common carrier bound to observe
extraordinary diligence. Its failure to successfully establish this premise
carries with it the presumption of fault or negligence, thus rendering it
liable to Sony/Mitsui for breach of contract.
Specifically, TMBI's current theory - that the hijacking was attended by
force or intimidation - is untenable.
First, TMBI alleged in its Third Party Complaint against BMT that Lapesura
was responsible for hijacking the shipment.49 Further, Victor Torres filed a
criminal complaint against Lapesura with the NBI.50 These actions
constitute direct and binding admissions that Lapesura stole the cargo.
Justice and fair play dictate that TMBI should not be allowed to change its
legal theory on appeal.
Second, neither TMBI nor BMT succeeded in substantiating this theory
through evidence. Thus, the theory remained an unsupported allegation
no better than speculations and conjectures. The CA therefore correctly
disregarded the defense of force majeure.
TMBI and BMT are not solidarity liable
to Mitsui
We disagree with the lower courts" ruling that TMBI and BMT are solidarity
liable to Mitsui for the loss as joint tortfeasors. The ruling was based on
Article 2194 of the Civil Code:
chanRoblesvirtualLawlibrary
Art. 2194. The responsibility of two or more persons who are liable for
quasi-delict is solidary.
Notably, TMBI's liability to Mitsui does not stem from a quasi-delict (culpa
aquiliana) but from its breach of contract (culpa contractual). The tie that
binds TMBI with Mitsui is contractual, albeit one that passed on to Mitsui as
a result of TMBI's contract of carriage with Sony to which Mitsui had been
subrogated as an insurer who had paid Sony's insurance claim. The legal
reality that results from this contractual tie precludes the application of
quasi-delict based Article 2194.
A third party may recover from a
common carrier for quasi-delict
but must prove actual n egligence
We likewise disagree with the finding that BMT is directly liable to
Sony/Mitsui for the loss of the cargo. While it is undisputed that the cargo
was lost under the actual custody of BMT (whose employee is the primary
suspect in the hijacking or robbery of the shipment), no direct contractual
relationship existed between Sony/Mitsui and BMT. If at all, Sony/Mitsui's
cause of action against BMT could only arise from quasi-delict, as a third
party suffering damage from the action of another due to the latter's fault
or negligence, pursuant to Article 2176 of the Civil Code. 51chanrobleslaw
We have repeatedly distinguished between an action for breach of
contract {culpa contractual) and an action for quasi-delict (culpa
aquiliana).
In culpa contractual, the plaintiff only needs to establish the existence of
the contract and the obligor's failure to perform his obligation. It is not
necessary for the plaintiff to prove or even allege that the obligor's non-
compliance was due to fault or negligence because Article 1735 already
presumes that the common carrier is negligent. The common carrier can
only free itself from liability by proving that it
observed extraordinary diligence. It cannot discharge this liability by
shifting the blame on its agents or servants.52chanrobleslaw
On the other hand, the plaintiff in culpa aquiliana must clearly establish
the defendant's fault or negligence because this is the very basis of the
action.53 Moreover, if the injury to the plaintiff resulted from the act or
omission of the defendant's employee or servant, the defendant may
absolve himself by proving that he observed the diligence of a good father
of a family to prevent the damage,54chanrobleslaw
In the present case, Mitsui's action is solely premised on TMBl's breach of
contract. Mitsui did not even sue BMT, much less prove any negligence on
its part. If BMT has entered the picture at all, it 'is because TMBI sued it for
reimbursement for the liability that TMBI might incur from its contract of
carriage with Sony/Mitsui. Accordingly, there is no basis to directly hold
BMT liable to Mitsui for quasi-delict.
BMT is liable to TMBI for breach
of their contract of carriage
We do not hereby say that TMBI must absorb the loss. By subcontracting
the cargo delivery to BMT, TMBI entered into its own contract of carriage
with a fellow common carrier.
The cargo was lost after its transfer to BMT's custody based on its contract
of carriage with TMBI. Following Article 1735, BMT is presumed to be at
fault. Since BMT failed to prove that it observed extraordinary diligence in
the performance of its obligation to TMBI, it is liable to TMBI for breach of
their contract of carriage.
In these lights, TMBI is liable to Sony (subrogated by Mitsui) for breaching
the contract of carriage. In turn, TMBI is entitled to reimbursement from
BMT due to the latter's own breach of its contract of carriage with TMBI.
The proverbial buck stops with BMT who may either: (a) absorb the loss, or
(b) proceed after its missing driver, the suspected culprit, pursuant to
Article 2181,55chanrobleslaw
WHEREFORE, the Court hereby ORDERS petitioner Torres- Madrid
Brokerage, Inc. to pay the respondent FEB Mitsui Marine Insurance Co.,
Inc. the following:
chanRoblesvirtualLawlibrary
a. Actual damages in the amount of PHP 7,293,386.23 plus legal
interest from the time the complaint was filed until it is fully paid;
b. Attorney's fees in the amount of PHP 200,000.00;
and cralawlawlibrary
c. Costs of suit.
Respondent Benjamin P. Manalastas is in
turn ORDERED to REIMBURSE Torres-Madrid Brokerage, Inc. of the
above-mentioned amounts.
SO ORDERED
THIRD DIVISION
[G.R. No. 146018. June 25, 2003]
EDGAR COKALIONG SHIPPING LINES, INC., petitioner, vs. UCPB
GENERAL INSURANCE COMPANY, INC., respondent.
DECISION
PANGANIBAN, J.:
The liability of a common carrier for the loss of goods may, by stipulation
in the bill of lading, be limited to the value declared by the shipper. On the
other hand, the liability of the insurer is determined by the actual value
covered by the insurance policy and the insurance premiums paid
therefor, and not necessarily by the value declared in the bill of lading.
The Case
Before the Court is a Petition for Review[1] under Rule 45 of the Rules of
Court, seeking to set aside the August 31, 2000 Decision [2] and the
November 17, 2000 Resolution[3] of the Court of Appeals[4] (CA) in CA-GR
SP No. 62751.The dispositive part of the Decision reads:
IN THE LIGHT OF THE FOREGOING, the appeal is GRANTED. The Decision
appealed from is REVERSED. [Petitioner] is hereby condemned to pay to
[respondent] the total amount of P148,500.00, with interest thereon, at
the rate of 6% per annum, from date of this Decision of the
Court. [Respondents] claim for attorneys fees
[is] DISMISSED. [Petitioners] counterclaims are DISMISSED.[5]
The assailed Resolution denied petitioners Motion for Reconsideration.
On the other hand, the disposition of the Regional Trial Courts [6] Decision,
[7]
which was later reversed by the CA, states:
WHEREFORE, premises considered, the case is hereby DISMISSED for lack
of merit.
No cost.[8]
The Facts
The facts of the case are summarized by the appellate court in this wise:
Sometime on December 11, 1991, Nestor Angelia delivered to the Edgar
Cokaliong Shipping Lines, Inc. (now Cokaliong Shipping
Lines), [petitioner] for brevity, cargo consisting of one (1) carton of
Christmas dcor and two (2) sacks of plastic toys, to be transported on
board the M/V Tandag on its Voyage No. T-189 scheduled to depart
from Cebu City, on December 12, 1991, for Tandag, Surigao del
Sur. [Petitioner] issued Bill of Lading No. 58, freight prepaid, covering
the cargo. Nestor Angelia was both the shipper and consignee of the cargo
valued, on the face thereof, in the amount of P6,500.00. Zosimo Mercado
likewise delivered cargo to [petitioner], consisting of two (2) cartons of
plastic toys and Christmas decor, one (1) roll of floor mat and one (1)
bundle of various or assorted goods for transportation thereof from Cebu
City to Tandag, Surigao del Sur, on board the said vessel, and said
voyage. [Petitioner] issued Bill of Lading No. 59 covering the cargo
which, on the face thereof, was valued in the amount of P14,000.00. Under
the Bill of Lading, Zosimo Mercado was both the shipper and consignee
of the cargo.
On December 12, 1991, Feliciana Legaspi insured the cargo, covered
by Bill of Lading No. 59, with the UCPB General Insurance Co.,
Inc., [respondent] for brevity, for the amount of P100,000.00 against all
risks under Open Policy No. 002/91/254 for which she was issued, by
[respondent], Marine Risk Note No. 18409 on said date. She also
insured the cargo covered by Bill of Lading No. 58, with [respondent],
for the amount of P50,000.00, under Open Policy No. 002/91/254 on the
basis of which [respondent] issued Marine Risk Note No. 18410 on said
date.
When the vessel left port, it had thirty-four (34) passengers and assorted
cargo on board, including the goods of Legaspi. After the vessel had
passed by the Mandaue-Mactan Bridge, fire ensued in the engine room,
and, despite earnest efforts of the officers and crew of the vessel, the fire
engulfed and destroyed the entire vessel resulting in the loss of the vessel
and the cargoes therein. The Captain filed the required Marine Protest.
Shortly thereafter, Feliciana Legaspi filed a claim, with [respondent], for
the value of the cargo insured under Marine Risk Note No. 18409 and
covered by Bill of Lading No. 59. She submitted, in support of her claim,
a Receipt, dated December 11, 1991, purportedly signed by Zosimo
Mercado, and Order Slips purportedly signed by him for the goods he
received from Feliciana Legaspi valued in the amount
of P110,056.00. [Respondent] approved the claim of Feliciana Legaspi and
drew and issued UCPB Check No. 612939, dated March 9, 1992, in the net
amount of P99,000.00, in settlement of her claim after which she executed
a Subrogation Receipt/Deed, for said amount, in favor of [respondent].
She also filed a claim for the value of the cargo covered by Bill of Lading
No. 58. She submitted to [respondent] a Receipt, dated December 11,
1991 and Order Slips, purportedly signed by Nestor Angelia for the goods
he received from Feliciana Legaspi valued at P60,338.00. [Respondent]
approved her claim and remitted to Feliciana Legaspi the net amount
of P49,500.00, after which she signed a Subrogation Receipt/Deed,
dated March 9, 1992, in favor of [respondent].
On July 14, 1992, [respondent], as subrogee of Feliciana Legaspi, filed a
complaint anchored on torts against [petitioner], with the Regional Trial
Court of Makati City, for the collection of the total principal amount
of P148,500.00, which it paid to Feliciana Legaspi for the loss of the cargo,
praying that judgment be rendered in its favor and against the [petitioner]
as follows:
WHEREFORE, it is respectfully prayed of this Honorable Court that after
due hearing, judgment be rendered ordering [petitioner] to pay
[respondent] the following.
1. Actual damages in the amount of P148,500.00 plus interest thereon at
the legal rate from the time of filing of this complaint until fully paid;
2. Attorneys fees in the amount of P10,000.00; and
3. Cost of suit.
[Respondent] further prays for such other reliefs and remedies as this
Honorable Court may deem just and equitable under the premises.
[Respondent] alleged, inter alia, in its complaint, that the cargo subject of
its complaint was delivered to, and received by, [petitioner] for
transportation to Tandag, Surigao del Sur under Bill of Ladings, Annexes
A and B of the complaint; that the loss of the cargo was due to the
negligence of the [petitioner]; and that Feliciana Legaspi had
executed Subrogation Receipts/Deeds in favor of [respondent] after
paying to her the value of the cargo on account of the Marine Risk
Notes it issued in her favor covering the cargo.
In its Answer to the complaint, [petitioner] alleged that: (a) [petitioner]
was cleared by the Board of Marine Inquiry of any negligence in the
burning of the vessel; (b) the complaint stated no cause of action against
[petitioner]; and (c) the shippers/consignee had already been paid the
value of the goods as stated in the Bill of Lading and, hence, [petitioner]
cannot be held liable for the loss of the cargo beyond the value thereof
declared in the Bill of Lading.
After [respondent] rested its case, [petitioner] prayed for and was allowed,
by the Court a quo, to take the depositions of Chester Cokaliong, the Vice-
President and Chief Operating Officer of [petitioner], and a resident of
Cebu City, and of Noel Tanyu, an officer of the Equitable Banking
Corporation, in Cebu City, and a resident of Cebu City, to be given before
the Presiding Judge of Branch 106 of the Regional Trial Court of Cebu
City. Chester Cokaliong and Noel Tanyu did testify, by way of deposition,
before the Court and declared inter alia, that: [petitioner] is a family
corporation like the Chester Marketing, Inc.; Nestor Angelia had been
doing business with [petitioner] and Chester Marketing, Inc., for years, and
incurred an account with Chester Marketing, Inc. for his purchases from
said corporation; [petitioner] did issue Bills of Lading Nos. 58 and
59 for the cargo described therein with Zosimo Mercado and Nestor
Angelia as shippers/consignees, respectively; the engine room of the M/V
Tandag caught fire after it passed the Mandaue/Mactan Bridge resulting in
the total loss of the vessel and its cargo; an investigation was conducted
by the Board of Marine Inquiry of the Philippine Coast Guard which
rendered a Report, dated February 13, 1992 absolving [petitioner] of any
responsibility on account of the fire, which Report of the Board was
approved by the District Commander of the Philippine Coast Guard; a few
days after the sinking of the vessel, a representative of the Legaspi
Marketing filed claims for the values of the goods under Bills of Lading
Nos. 58 and 59 in behalf of the shippers/consignees, Nestor Angelia and
Zosimo Mercado; [petitioner] was able to ascertain, from the
shippers/consignees and the representative of the Legaspi Marketing that
the cargo covered by Bill of Lading No. 59 was owned by Legaspi
Marketing and consigned to Zosimo Mercado while that covered by Bill of
Lading No. 58 was purchased by Nestor Angelia from the Legaspi
Marketing; that [petitioner] approved the claim of Legaspi Marketing for
the value of the cargo under Bill of Lading No. 59 and remitted to
Legaspi Marketing the said amount under Equitable Banking Corporation
Check No. 20230486 dated August 12, 1992, in the amount of P14,000.00
for which the representative of the Legaspi Marketing signed Voucher No.
4379, dated August 12, 1992, for the said amount of P14,000.00 in full
payment of claims under Bill of Lading No. 59; that [petitioner]
approved the claim of Nestor Angelia in the amount of P6,500.00 but that
since the latter owed Chester Marketing, Inc., for some purchases,
[petitioner] merely set off the amount due to Nestor Angelia under Bill of
Lading No. 58 against his account with Chester Marketing, Inc.;
[petitioner] lost/[misplaced] the original of the check after it was received
by Legaspi Marketing, hence, the production of the microfilm copy by Noel
Tanyu of the Equitable Banking Corporation; [petitioner] never knew,
before settling with Legaspi Marketing and Nestor Angelia that the cargo
under both Bills of Lading were insured with [respondent], or that
Feliciana Legaspi filed claims for the value of the cargo with [respondent]
and that the latter approved the claims of Feliciana Legaspi and paid the
total amount of P148,500.00 to her; [petitioner] came to know, for the first
time, of the payments by [respondent] of the claims of Feliciana Legaspi
when it was served with the summons and complaint, on October 8, 1992;
after settling his claim, Nestor Angelia x x x executed the Release and
Quitclaim, dated July 2, 1993, and Affidavit, dated July 2, 1993 in favor
of [respondent]; hence, [petitioner] was absolved of any liability for the
loss of the cargo covered by Bills of Lading Nos. 58 and 59; and even if
it was, its liability should not exceed the value of the cargo as stated in
the Bills of Lading.
[Petitioner] did not anymore present any other witnesses on its evidence-
in-chief. x x x[9] (Citations omitted)
Ruling of the Court of Appeals
The CA held that petitioner had failed to prove that the fire which
consumed the vessel and its cargo was caused by something other than
its negligence in the upkeep, maintenance and operation of the vessel. [10]
Petitioner had paid P14,000 to Legaspi Marketing for the cargo covered by
Bill of Lading No. 59. The CA, however, held that the payment did not
extinguish petitioners obligation to respondent, because there was no
evidence that Feliciana Legaspi (the insured) was the owner/proprietor of
Legaspi Marketing. The CA also pointed out the impropriety of treating the
claim under Bill of Lading No. 58 -- covering cargo valued therein at P6,500
-- as a setoff against Nestor Angelias account with Chester Enterprises,
Inc.
Finally, it ruled that respondent is not bound by the valuation of the cargo
under the Bills of Lading, x x x nor is the value of the cargo under said Bills
of Lading conclusive on the [respondent]. This is so because, in the first
place, the goods were insured with the [respondent] for the total amount
of P150,000.00, which amount may be considered as the face value of the
goods.[11]
Hence this Petition.[12]
Issues
Petitioner raises for our consideration the following alleged errors of the
CA:
I
The Honorable Court of Appeals erred, granting arguendo that petitioner is
liable, in holding that petitioners liability should be based on the actual
insured value of the goods and not from actual valuation declared by the
shipper/consignee in the bill of lading.
II
The Court of Appeals erred in not affirming the findings of the Philippine
Coast Guard, as sustained by the trial court a quo, holding that the cause
of loss of the aforesaid cargoes under Bill of Lading Nos. 58 and 59 was
due to force majeure and due diligence was [exercised] by petitioner prior
to, during and immediately after the fire on [petitioners] vessel.
III
The Court of Appeals erred in not holding that respondent UCPB General
Insurance has no cause of action against the petitioner. [13]
In sum, the issues are: (1) Is petitioner liable for the loss of the goods? (2)
If it is liable, what is the extent of its liability?
This Courts Ruling
The Petition is partly meritorious.
First Issue:
Liability for Loss
Petitioner argues that the cause of the loss of the goods, subject of this
case, was force majeure. It adds that its exercise of due diligence was
adequately proven by the findings of the Philippine Coast Guard.
We are not convinced. The uncontroverted findings of the Philippine Coast
Guard show that the M/V Tandag sank due to a fire, which resulted from a
crack in the auxiliary engine fuel oil service tank. Fuel spurted out of the
crack and dripped to the heating exhaust manifold, causing the ship to
burst into flames. The crack was located on the side of the fuel oil tank,
which had a mere two-inch gap from the engine room walling, thus
precluding constant inspection and care by the crew.
Having originated from an unchecked crack in the fuel oil service tank, the
fire could not have been caused by force majeure. Broadly speaking, force
majeure generally applies to a natural accident, such as that caused by a
lightning, an earthquake, a tempest or a public enemy. [14] Hence, fire is not
considered a natural disaster or calamity. In Eastern Shipping Lines, Inc. v.
Intermediate Appellate Court,[15] we explained:
x x x. This must be so as it arises almost invariably from some act of man
or by human means. It does not fall within the category of an act of God
unless caused by lighting or by other natural disaster or calamity. It may
even be caused by the actual fault or privity of the carrier.
Article 1680 of the Civil Code, which considers fire as an extraordinary
fortuitous event refers to leases or rural lands where a reduction of the
rent is allowed when more than one-half of the fruits have been lost due to
such event, considering that the law adopts a protective policy towards
agriculture.
As the peril of fire is not comprehended within the exceptions in Article
1734, supra, Article 1735 of the Civil Code provides that in all cases other
than those mentioned in Article 1734, the common carrier shall be
presumed to have been at fault or to have acted negligently, unless it
proves that it has observed the extraordinary diligence required by law.
Where loss of cargo results from the failure of the officers of a vessel to
inspect their ship frequently so as to discover the existence of cracked
parts, that loss cannot be attributed to force majeure, but to the
negligence of those officials.[16]
The law provides that a common carrier is presumed to have been
negligent if it fails to prove that it exercised extraordinary vigilance over
the goods it transported. Ensuring the seaworthiness of the vessel is the
first step in exercising the required vigilance. Petitioner did not present
sufficient evidence showing what measures or acts it had undertaken to
ensure the seaworthiness of the vessel. It failed to show when the last
inspection and care of the auxiliary engine fuel oil service tank was made,
what the normal practice was for its maintenance, or some other evidence
to establish that it had exercised extraordinary diligence. It merely stated
that constant inspection and care were not possible, and that the last time
the vessel was dry-docked was in November 1990. Necessarily, in
accordance with Article 1735[17] of the Civil Code, we hold petitioner
responsible for the loss of the goods covered by Bills of Lading Nos. 58 and
59.
Second Issue:
Extent of Liability
Respondent contends that petitioners liability should be based on the
actual insured value of the goods, subject of this case. On the other hand,
petitioner claims that its liability should be limited to the value declared by
the shipper/consignee in the Bill of Lading.
The records[18] show that the Bills of Lading covering the lost goods contain
the stipulation that in case of claim for loss or for damage to the shipped
merchandise or property, [t]he liability of the common carrier x x x shall
not exceed the value of the goods as appearing in the bill of lading. [19] The
attempt by respondent to make light of this stipulation is unconvincing. As
it had the consignees copies of the Bills of Lading, [20] it could have easily
produced those copies, instead of relying on mere allegations and
suppositions. However, it presented mere photocopies thereof to disprove
petitioners evidence showing the existence of the above stipulation.
A stipulation that limits liability is valid[21] as long as it is not against public
policy. In Everett Steamship Corporation v. Court of Appeals,[22] the Court
stated:
A stipulation in the bill of lading limiting the common carriers liability for
loss or destruction of a cargo to a certain sum, unless the shipper or owner
declares a greater value, is sanctioned by law, particularly Articles 1749
and 1750 of the Civil Code which provides:
Art. 1749. A stipulation that the common carriers liability is limited to the
value of the goods appearing in the bill of lading, unless the shipper or
owner declares a greater value, is binding.
Art. 1750. A contract fixing the sum that may be recovered by the owner
or shipper for the loss, destruction, or deterioration of the goods is valid, if
it is reasonable and just under the circumstances, and has been freely and
fairly agreed upon.
Such limited-liability clause has also been consistently upheld by this
Court in a number of cases. Thus, in Sea-Land Service, Inc. vs.
Intermediate Appellate Court, we ruled:
It seems clear that even if said section 4 (5) of the Carriage of Goods by
Sea Act did not exist, the validity and binding effect of the liability
limitation clause in the bill of lading here are nevertheless fully sustainable
on the basis alone of the cited Civil Code Provisions. That said stipulation is
just and reasonable is arguable from the fact that it echoes Art. 1750 itself
in providing a limit to liability only if a greater value is not declared for the
shipment in the bill of lading. To hold otherwise would amount to
questioning the justness and fairness of the law itself, and this the private
respondent does not pretend to do. But over and above that consideration,
the just and reasonable character of such stipulation is implicit in it giving
the shipper or owner the option of avoiding accrual of liability limitation by
the simple and surely far from onerous expedient of declaring the nature
and value of the shipment in the bill of lading.
Pursuant to the afore-quoted provisions of law, it is required that the
stipulation limiting the common carriers liability for loss must be
reasonable and just under the circumstances, and has been freely and
fairly agreed upon.
The bill of lading subject of the present controversy specifically provides,
among others:
18. All claims for which the carrier may be liable shall be adjusted and
settled on the basis of the shippers net invoice cost plus freight and
insurance premiums, if paid, and in no event shall the carrier be liable for
any loss of possible profits or any consequential loss.
The carrier shall not be liable for any loss of or any damage to or in any
connection with, goods in an amount exceeding One Hundred Thousand
Yen in Japanese Currency (100,000.00) or its equivalent in any other
currency per package or customary freight unit (whichever is least) unless
the value of the goods higher than this amount is declared in writing by
the shipper before receipt of the goods by the carrier and inserted in the
Bill of Lading and extra freight is paid as required.
The above stipulations are, to our mind, reasonable and just. In the bill of
lading, the carrier made it clear that its liability would only be up to One
Hundred Thousand (Y100,000.00) Yen. However, the shipper, Maruman
Trading, had the option to declare a higher valuation if the value of its
cargo was higher than the limited liability of the carrier. Considering that
the shipper did not declare a higher valuation, it had itself to blame for not
complying with the stipulations. (Italics supplied)
In the present case, the stipulation limiting petitioners liability is not
contrary to public policy. In fact, its just and reasonable character is
evident. The shippers/consignees may recover the full value of the goods
by the simple expedient of declaring the true value of the shipment in the
Bill of Lading. Other than the payment of a higher freight, there was
nothing to stop them from placing the actual value of the goods therein. In
fact, they committed fraud against the common carrier by deliberately
undervaluing the goods in their Bill of Lading, thus depriving the carrier of
its proper and just transport fare.
Concededly, the purpose of the limiting stipulation in the Bill of Lading is
to protect the common carrier. Such stipulation obliges the
shipper/consignee to notify the common carrier of the amount that the
latter may be liable for in case of loss of the goods. The common carrier
can then take appropriate measures -- getting insurance, if needed, to
cover or protect itself. This precaution on the part of the carrier is
reasonable and prudent. Hence, a shipper/consignee that undervalues the
real worth of the goods it seeks to transport does not only violate a valid
contractual stipulation, but commits a fraudulent act when it seeks to
make the common carrier liable for more than the amount it declared in
the bill of lading.
Indeed, Zosimo Mercado and Nestor Angelia misled petitioner by
undervaluing the goods in their respective Bills of Lading. Hence,
petitioner was exposed to a risk that was deliberately hidden from it, and
from which it could not protect itself.
It is well to point out that, for assuming a higher risk (the alleged actual
value of the goods) the insurance company was paid the correct higher
premium by Feliciana Legaspi; while petitioner was paid a fee lower than
what it was entitled to for transporting the goods that had been
deliberately undervalued by the shippers in the Bill of Lading. Between the
two of them, the insurer should bear the loss in excess of the value
declared in the Bills of Lading. This is the just and equitable solution.
In Aboitiz Shipping Corporation v. Court of Appeals,[23] the description of
the nature and the value of the goods shipped were declared and reflected
in the bill of lading, like in the present case. The Court therein considered
this declaration as the basis of the carriers liability and ordered payment
based on such amount. Following this ruling, petitioner should not be held
liable for more than what was declared by the shippers/consignees as the
value of the goods in the bills of lading.
We find no cogent reason to disturb the CAs finding that Feliciana Legaspi
was the owner of the goods covered by Bills of Lading Nos. 58 and
59. Undoubtedly, the goods were merely consigned to Nestor Angelia and
Zosimo Mercado, respectively; thus, Feliciana Legaspi or her subrogee
(respondent) was entitled to the goods or, in case of loss, to compensation
therefor. There is no evidence showing that petitioner paid her for the loss
of those goods. It does not even claim to have paid her.
On the other hand, Legaspi Marketing filed with petitioner a claim for the
lost goods under Bill of Lading No. 59, for which the latter subsequently
paid P14,000. But nothing in the records convincingly shows that the
former was the owner of the goods. Respondent was, however, able to
prove that it was Feliciana Legaspi who owned those goods, and who was
thus entitled to payment for their loss. Hence, the claim for the goods
under Bill of Lading No. 59 cannot be deemed to have been extinguished,
because payment was made to a person who was not entitled thereto.
With regard to the claim for the goods that were covered by Bill of Lading
No. 58 and valued at P6,500, the parties have not convinced us to disturb
the findings of the CA that compensation could not validly take
place. Thus, we uphold the appellate courts ruling on this point.
WHEREFORE, the Petition is hereby PARTIALLY GRANTED. The assailed
Decision is MODIFIED in the sense that petitioner is ORDERED to pay
respondent the sums of P14,000 and P6,500, which represent the value of
the goods stated in Bills of Lading Nos. 59 and 58, respectively. No costs.
SO ORDERED.
SECOND DIVISION
[G.R. No. 127897. November 15, 2001]
DELSAN TRANSPORT LINES, INC., petitioner, vs. THE HON. COURT
OF APPEALS and AMERICAN HOME ASSURANCE
CORPORATION, respondents.
DECISION
DE LEON, JR., J.:
Before us is a petition for review on certiorari of the Decision[1] of the Court
of Appeals in CA-G.R. CV No. 39836 promulgated on June 17, 1996,
reversing the decision of the Regional Trial Court of Makati City, Branch
137, ordering petitioner to pay private respondent the sum of Five Million
Ninety-Six Thousand Six Hundred Thirty-Five Pesos and Fifty-Seven
Centavos (P5,096,635.57) and costs and the Resolution[2] dated January
21, 1997 which denied the subsequent motion for reconsideration.
The facts show that Caltex Philippines (Caltex for brevity) entered into a
contract of affreightment with the petitioner, Delsan Transport Lines, Inc.,
for a period of one year whereby the said common carrier agreed to
transport Caltexs industrial fuel oil from the Batangas-Bataan Refinery to
different parts of the country. Under the contract, petitioner took on board
its vessel, MT Maysun, 2,277.314 kiloliters of industrial fuel oil of Caltex to
be delivered to the Caltex Oil Terminal in Zamboanga City. The shipment
was insured with the private respondent, American Home Assurance
Corporation.
On August 14, 1986, MT Maysun set sail from Batangas for Zamboanga
City. Unfortunately, the vessel sank in the early morning of August 16,
1986 near Panay Gulf in the Visayas taking with it the entire cargo of fuel
oil.
Subsequently, private respondent paid Caltex the sum of Five Million
Ninety-Six Thousand Six Hundred Thirty-Five Pesos and Fifty-Seven
Centavos (P5,096,635.57) representing the insured value of the lost
cargo. Exercising its right of subrogation under Article 2207 of the New
Civil Code, the private respondent demanded of the petitioner the same
amount it paid to Caltex.
Due to its failure to collect from the petitioner despite prior demand,
private respondent filed a complaint with the Regional Trial Court of Makati
City, Branch 137, for collection of a sum of money. After the trial and upon
analyzing the evidence adduced, the trial court rendered a decision on
November 29, 1990 dismissing the complaint against herein petitioner
without pronouncement as to cost. The trial court found that the vessel,
MT Maysun, was seaworthy to undertake the voyage as determined by the
Philippine Coast Guard per Survey Certificate Report No. M5-016-MH upon
inspection during its annual dry-docking and that the incident was caused
by unexpected inclement weather condition or force majeure, thus
exempting the common carrier (herein petitioner) from liability for the loss
of its cargo.[3]
The decision of the trial court, however, was reversed, on appeal, by the
Court of Appeals. The appellate court gave credence to the weather report
issued by the Philippine Atmospheric, Geophysical and Astronomical
Services Administration (PAGASA for brevity) which showed that from 2:00
oclock to 8:00 oclock in the morning on August 16, 1986, the wind speed
remained at 10 to 20 knots per hour while the waves measured from .7 to
two (2) meters in height only in the vicinity of the Panay Gulf where the
subject vessel sank, in contrast to herein petitioners allegation that the
waves were twenty (20) feet high. In the absence of any explanation as to
what may have caused the sinking of the vessel coupled with the finding
that the same was improperly manned, the appellate court ruled that the
petitioner is liable on its obligation as common carrier [4] to herein private
respondent insurance company as subrogee of Caltex. The subsequent
motion for reconsideration of herein petitioner was denied by the appellate
court.
Petitioner raised the following assignments of error in support of the
instant petition,[5] to wit:
I vs. CA,[7] the failure of the private respondent to present the insurance
THE COURT OF APPEALS ERRED IN REVERSING THE DECISION OF THE
REGIONAL TRIAL COURT.
II
THE COURT OF APPEALS ERRED AND WAS NOT JUSTIFIED IN REBUTTING
THE LEGAL PRESUMPTION THAT THE VESSEL MT MAYSUN WAS
SEAWORTHY.
III
THE COURT OF APPEALS ERRED IN NOT APPLYING THE DOCTRINE OF THE
SUPREME COURT IN THE CASE OF HOME INSURANCE CORPORATION V.
COURT OF APPEALS.
Petitioner Delsan Transport Lines, Inc. invokes the provision of Section 113
of the Insurance Code of the Philippines, which states that in every marine
insurance upon a ship or freight, or freightage, or upon any thing which is
the subject of marine insurance there is an implied warranty by the
shipper that the ship is seaworthy. Consequently, the insurer will not be
liable to the assured for any loss under the policy in case the vessel would
later on be found as not seaworthy at the inception of the insurance.It
theorized that when private respondent paid Caltex the value of its lost
cargo, the act of the private respondent is equivalent to a tacit recognition
that the ill-fated vessel was seaworthy; otherwise, private respondent was
not legally liable to Caltex due to the latters breach of implied warranty
under the marine insurance policy that the vessel was seaworthy.
The petitioner also alleges that the Court of Appeals erred in ruling that MT
Maysun was not seaworthy on the ground that the marine officer who
served as the chief mate of the vessel, Francisco Berina, was allegedly not
qualified. Under Section 116 of the Insurance Code of the Philippines, the
implied warranty of seaworthiness of the vessel, which the private
respondent admitted as having been fulfilled by its payment of the
insurance proceeds to Caltex of its lost cargo, extends to the vessels
complement.Besides, petitioner avers that although Berina had merely a
2nd officers license, he was qualified to act as the vessels chief officer
under Chapter IV(403), Category III(a)(3)(ii)(aa) of the Philippine Merchant
Marine Rules and Regulations. In fact, all the crew and officers of MT
Maysun were exonerated in the administrative investigation conducted by
the Board of Marine Inquiry after the subject accident.[6]
In any event, petitioner further avers that private respondent failed, for
unknown reason, to present in evidence during the trial of the instant case
the subject marine cargo insurance policy it entered into with Caltex. By
virtue of the doctrine laid down in the case of Home Insurance Corporation
policy in evidence is allegedly fatal to its claim inasmuch as there is no
way to determine the rights of the parties thereto.
Hence, the legal issues posed before the Court are:
I
Whether or not the payment made by the private respondent to Caltex for
the insured value of the lost cargo amounted to an admission that the
vessel was seaworthy, thus precluding any action for recovery against the
petitioner.
II
Whether or not the non-presentation of the marine insurance policy bars
the complaint for recovery of sum of money for lack of cause of action.
We rule in the negative on both issues.
The payment made by the private respondent for the insured value of
the lost cargo operates as waiver of its (private respondent) right to
enforce the term of the implied warranty against Caltex under the marine
insurance policy. However, the same cannot be validly interpreted as an
automatic admission of the vessels seaworthiness by the private
respondent as to foreclose recourse against the petitioner for any liability
under its contractual obligation as a common carrier. The fact of payment
grants the private respondent subrogatory right which enables it to
exercise legal remedies that would otherwise be available to Caltex as
owner of the lost cargo against the petitioner common carrier. [8] Article
2207 of the New Civil Code provides that:
Art. 2207. If the plaintiffs property has been insured, and he has received
indemnity from the insurance company for the injury or loss arising out of
the wrong or breach of contract complained of, the insurance company
shall be subrogated to the rights of the insured against the wrongdoer or
the person who has violated the contract. If the amount paid by the
insurance company does not fully cover the injury or loss, the aggrieved
party shall be entitled to recover the deficiency from the person causing
the loss or injury.
The right of subrogation has its roots in equity. It is designed to promote
and to accomplish justice and is the mode which equity adopts to compel
the ultimate payment of a debt by one who in justice and good conscience
ought to pay.[9] It is not dependent upon, nor does it grow out of, any
privity of contract or upon written assignment of claim. It accrues simply
upon payment by the insurance company of the insurance claim.
[10]
Consequently, the payment made by the private respondent (insurer)
to Caltex (assured) operates as an equitable assignment to the former of
all the remedies which the latter may have against the petitioner.
From the nature of their business and for reasons of public policy, common
carriers are bound to observe extraordinary diligence in the vigilance over
the goods and for the safety of passengers transported by them, according
to all the circumstances of each case.[11] In the event of loss, destruction or
deterioration of the insured goods, common carriers shall be responsible
unless the same is brought about, among others, by flood, storm,
earthquake, lightning or other natural disaster or calamity. [12] In all other
cases, if the goods are lost, destroyed or deteriorated, common carriers
are presumed to have been at fault or to have acted negligently, unless
they prove that they observed extraordinary diligence.[13]
In order to escape liability for the loss of its cargo of industrial fuel oil
belonging to Caltex, petitioner attributes the sinking of MT Maysun to
fortuitous event or force majeure. From the testimonies of Jaime Jarabe
and Francisco Berina, captain and chief mate, respectively of the ill-fated
vessel, it appears that a sudden and unexpected change of weather
condition occurred in the early morning of August 16, 1986; that at around
3:15 oclock in the morning a squall (unos) carrying strong winds with an
approximate velocity of 30 knots per hour and big waves averaging
eighteen (18) to twenty (20) feet high, repeatedly buffeted MT Maysun
causing it to tilt, take in water and eventually sink with its cargo. [14] This
tale of strong winds and big waves by the said officers of the petitioner
however, was effectively rebutted and belied by the weather report [15] from
the Philippine Atmospheric, Geophysical and Astronomical Services
Administration (PAGASA), the independent government agency charged
with monitoring weather and sea conditions, showing that from 2:00
oclock to 8:00 oclock in the morning on August 16, 1986, the wind speed
remained at ten (10) to twenty (20) knots per hour while the height of the
waves ranged from .7 to two (2) meters in the vicinity of Cuyo East Pass
and Panay Gulf where the subject vessel sank. Thus, as the appellate court
correctly ruled, petitioners vessel, MT Maysun, sank with its entire cargo
for the reason that it was not seaworthy. There was no squall or bad
weather or extremely poor sea condition in the vicinity when the said
vessel sank.
The appellate court also correctly opined that the petitioners witnesses,
Jaime Jarabe and Francisco Berina, ship captain and chief mate,
respectively, of the said vessel, could not be expected to testify against
the interest of their employer, the herein petitioner common carrier.
Neither may petitioner escape liability by presenting in evidence
certificates[16] that tend to show that at the time of dry-docking and
inspection by the Philippine Coast Guard, the vessel MT Maysun, was fit for
voyage. These pieces of evidence do not necessarily take into account the
actual condition of the vessel at the time of the commencement of the
voyage. As correctly observed by the Court of appeals:
At the time of dry-docking and inspection, the ship may have appeared
fit. The certificates issued, however, do not negate the presumption of
unseaworthiness triggered by an unexplained sinking. Of certificates
issued in this regard, authorities are likewise clear as to their probative
value, (thus):
Seaworthiness relates to a vessels actual condition. Neither the granting of
classification or the issuance of certificates establishes seaworthiness. (2-A
Benedict on Admiralty, 7-3, Sec. 62)
And also:
Authorities are clear that diligence in securing certificates of
seaworthiness does not satisfy the vessel owners obligation. Also securing
the approval of the shipper of the cargo, or his surveyor, of the condition
of the vessel or her stowage does not establish due diligence if the vessel
was in fact unseaworthy, for the cargo owner has no obligation in relation
to seaworthiness. (Ibid.)[17]
Additionally, the exoneration of MT Maysuns officers and crew by the
Board of Marine Inquiry merely concerns their respective administrative
liabilities. It does not in any way operate to absolve the petitioner common
carrier from its civil liability arising from its failure to observe extraordinary
diligence in the vigilance over the goods it was transporting and for the THIRD DIVISION
negligent acts or omissions of its employees, the determination of which
properly belongs to the courts.[18] In the case at bar, petitioner is liable for
the insured value of the lost cargo of industrial fuel oil belonging to Caltex LEA MER INDUSTRIES, INC., G.R. No. 161745
for its failure to rebut the presumption of fault or negligence as common Petitioner,
carrier[19] occasioned by the unexplained sinking of its vessel, MT Maysun, Present
while in transit.
Panganiban, J.,
Chairman,
Anent the second issue, it is our view and so hold that the presentation in
- versus - Sandoval-Gutierrez,
evidence of the marine insurance policy is not indispensable in this case
Corona,
before the insurer may recover from the common carrier the insured value
of the lost cargo in the exercise of its subrogatory right. The subrogation Carpio Morales, and
receipt, by itself, is sufficient to establish not only the relationship of Garcia, JJ
herein private respondent as insurer and Caltex, as the assured shipper of Promulgated:
the lost cargo of industrial fuel oil, but also the amount paid to settle the MALAYAN INSURANCE CO., INC.,*
insurance claim. The right of subrogation accrues simply upon payment by Respondent. September 30, 2005
the insurance company of the insurance claim.[20] x -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- x

The presentation of the insurance policy was necessary in the case DECISION
of Home Insurance Corporation v. CA[21] (a case cited by
petitioner) because the shipment therein (hydraulic engines) passed
through several stages with different parties involved in each stage. First, PANGANIBAN, J.:
from the shipper to the port of departure; second, from the port of
departure to the M/S Oriental Statesman; third, from the M/S Oriental
Statesman to the M/S Pacific Conveyor; fourth, from the M/S Pacific
C ommon carriers are bound to observe extraordinary diligence in their
Conveyor to the port of arrival; fifth, from the port of arrival to the arrastre
vigilance over the goods entrusted to them, as required by the nature of
operator; sixth, from the arrastre operator to the hauler, Mabuhay
Brokerage Co., Inc. (private respondent therein); and lastly, from the their business and for reasons of public policy. Consequently, the law
hauler to the consignee. We emphasized in that case that in the absence presumes that common carriers are at fault or negligent for any loss or
of proof of stipulations to the contrary, the hauler can be liable only for damage to the goods that they transport. In the present case, the
any damage that occurred from the time it received the cargo until it evidence submitted by petitioner to overcome this presumption was sorely
finally delivered it to the consignee. Ordinarily, it cannot be held insufficient.
responsible for the handling of the cargo before it actually received it. The
insurance contract, which was not presented in evidence in that case The Case
would have indicated the scope of the insurers liability, if any, since no
evidence was adduced indicating at what stage in the handling process Before us is a Petition for Review[1] under Rule 45 of the Rules of Court,
the damage to the cargo was sustained. assailing the October 9, 2002 Decision[2] and the December 29, 2003
Resolution[3] of the Court of Appeals (CA) in CA-GR CV No. 66028. The
Hence, our ruling on the presentation of the insurance policy in the said challenged Decision disposed as follows:
case of Home Insurance Corporation is not applicable to the case at bar. In
contrast, there is no doubt that the cargo of industrial fuel oil belonging to
WHEREFORE, the appeal is GRANTED. The December 7, 1999 decision of
Caltex, in the case at bar, was lost while on board petitioners vessel, MT
the Regional Trial Court of Manila, Branch 42 in Civil Case No. 92-63159 is
Maysun, which sank while in transit in the vicinity of Panay Gulf and Cuyo
East Pass in the early morning of August 16, 1986. hereby REVERSED and SET ASIDE. [Petitioner] is ordered to pay the
[herein respondent] the value of the lost cargo in the amount
WHEREFORE, the instant petition is DENIED. The Decision dated June 17, of P565,000.00. Costs against the [herein petitioner]. [4]
1996 of the Court of Appeals in CA-G.R. CV No. 39836 is AFFIRMED. Costs
against the petitioner. SO ORDERED
The assailed Resolution denied reconsideration.
The Facts
Ilian Silica Mining entered into a contract of carriage with Lea Mer
Industries, Inc., for the shipment of 900 metric tons of silica sand valued
at P565,000.[5] Consigned to Vulcan Industrial and Mining Corporation, the
cargo was to be transported from Palawan to Manila. On October 25, 1991,
the silica sand was placed on board Judy VII, a barge leased by Lea Mer.
[6]
During the voyage, the vessel sank, resulting in the loss of the cargo. [7]
Malayan Insurance Co., Inc., as insurer, paid Vulcan the value of the lost
cargo.[8] To recover the amount paid and in the exercise of its right of
subrogation, Malayan demanded reimbursement from Lea Mer, which
refused to comply. Consequently, Malayan instituted a Complaint with the
Regional Trial Court (RTC) of Manila on September 4, 1992, for the
collection of P565,000 representing the amount that respondent had paid
Vulcan.[9]
On October 7, 1999, the trial court dismissed the Complaint, upon finding
that the cause of the loss was a fortuitous event. [10] The RTC noted that the
vessel had sunk because of the bad weather condition brought about by
Typhoon Trining. The court ruled that petitioner had no advance knowledge
of the incoming typhoon, and that the vessel had been cleared by the
Philippine Coast Guard to travel from Palawan to Manila.[11]
Ruling of the Court of Appeals
Reversing the trial court, the CA held that the vessel was not seaworthy
when it sailed for Manila. Thus, the loss of the cargo was occasioned by
petitioners fault, not by a fortuitous event.[12]
Hence, this recourse.[13]
The Issues
Petitioner states the issues in this wise:
A. Whether or not the survey report of the cargo surveyor, Jesus Cortez,
who had not been presented as a witness of the said report during the trial
of this case before the lower court can be admitted in evidence to prove
the alleged facts cited in the said report.
B. Whether or not the respondent, Court of Appeals, had validly or legally
reversed the finding of fact of the Regional Trial Court which clearly and
unequivocally held that the loss of the cargo subject of this case was
caused by fortuitous event for which herein petitioner could not be held
liable.
C. Whether or not the respondent, Court of Appeals, had committed
serious error and grave abuse of discretion in disregarding the testimony
of the witness from the MARINA, Engr. Jacinto Lazo y Villegal, to the effect
that the vessel Judy VII was seaworthy at the time of incident and further
in disregarding the testimony of the PAG-ASA weather specialist, Ms. Rosa
Barba y Saliente, to the effect that typhoon Trining did not hit Metro Manila
or Palawan.[14]
In the main, the issues are as follows: (1) whether petitioner is liable for
the loss of the cargo, and (2) whether the survey report of Jesus Cortez is
admissible in evidence.
The Courts Ruling
The Petition has no merit.
First Issue:
Liability for Loss of Cargo
Question of Fact
The resolution of the present case hinges on whether the loss of the cargo
was due to a fortuitous event. This issue involves primarily a question of
fact, notwithstanding petitioners claim that it pertains only to a question of
law. As a general rule, questions of fact may not be raised in a petition for
review.[15] The present case serves as an exception to this rule, because
the factual findings of the appellate and the trial courts vary. [16] This Court
meticulously reviewed the records, but found no reason to reverse the CA.
Rule on Common Carriers
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 -- when this service is offered to the public for
compensation.[17] Petitioner is clearly a common carrier, because it offers
to the public its business of transporting goods through its vessels. [18]
Thus, the Court corrects the trial courts finding that petitioner became a
private carrier when Vulcan chartered it.[19] Charter parties are classified as
contracts of demise (or bareboat) and affreightment, which are
distinguished as follows:
Under the demise or bareboat charter of the vessel, the charterer will
generally be considered as owner for the voyage or service stipulated. The
charterer mans the vessel with his own people and becomes, in effect, the
owner pro hac vice, subject to liability to others for damages caused by
negligence. To create a demise, the owner of a vessel must completely
and exclusively relinquish possession, command and navigation thereof to
the charterer; anything short of such a complete transfer is a contract of
affreightment (time or voyage charter party) or not a charter party at all.
[20]
The distinction is significant, because a demise or bareboat charter
indicates a business undertaking that is private in
character. [21] Consequently, the rights and obligations of the parties to a
contract of private carriage are governed principally by their stipulations,
not by the law on common carriers.[22]
The Contract in the present case was one of affreightment, as shown by
the fact that it was petitioners crew that manned the tugboat M/V
Ayalit and controlled the barge Judy VII.[23] Necessarily, petitioner was a
common carrier, and the pertinent law governs the present factual
circumstances.
Extraordinary Diligence Required
Common carriers are bound to observe extraordinary diligence in their
vigilance over the goods and the safety of the passengers they transport,
as required by the nature of their business and for reasons of public policy.
[24]
Extraordinary diligence requires rendering service with the greatest skill
and foresight to avoid damage and destruction to the goods entrusted for
carriage and delivery.[25]
Common carriers are presumed to have been at fault or to have acted
negligently for loss or damage to the goods that they have transported.
[26]
This presumption can be rebutted only by proof that they observed
extraordinary diligence, or that the loss or damage was occasioned by any
of the following causes:[27]
(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.[28]
Rule on Fortuitous Events
Article 1174 of the Civil Code provides that no person shall be responsible
for a fortuitous event which could not be foreseen, or which, though
foreseen, was inevitable. Thus, if the loss or damage was due to such an
event, a common carrier is exempted from liability.
Jurisprudence defines the elements of a fortuitous event as follows: (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.[29]
To excuse the common carrier fully of any liability, the fortuitous event
must have been the proximate and only cause of the loss. [30] Moreover, it
should have exercised due diligence to prevent or minimize the loss
before, during and after the occurrence of the fortuitous event.[31]
Loss in the Instant Case
There is no controversy regarding the loss of the cargo in the present case.
As the common carrier, petitioner bore the burden of proving that it had
exercised extraordinary diligence to avoid the loss, or that the loss had
been occasioned by a fortuitous event -- an exempting circumstance.
It was precisely this circumstance that petitioner cited to escape liability.
Lea Mer claimed that the loss of the cargo was due to the bad weather
condition brought about by Typhoon Trining.[32]Evidence was presented to
show that petitioner had not been informed of the incoming typhoon, and
that the Philippine Coast Guard had given it clearance to begin the
voyage.[33] On October 25, 1991, the date on which the voyage
commenced and the barge sank, Typhoon Trining was allegedly far from
Palawan, where the storm warning was only Signal No. 1. [34]
The evidence presented by petitioner in support of its defense of fortuitous
event was sorely insufficient. As required by the pertinent law, it was not
enough for the common carrier to show that there was an unforeseen or
unexpected occurrence. It had to show that it was free from any fault -- a
fact it miserably failed to prove.
First, petitioner presented no evidence that it had attempted to minimize
or prevent the loss before, during or after the alleged fortuitous event.
[35]
Its witness, Joey A. Draper, testified that he could no longer remember
whether anything had been done to minimize loss when water started
entering the barge.[36] This fact was confirmed during his cross-
examination, as shown by the following brief exchange:
Atty. Baldovino, Jr.:
Other than be[a]ching the barge Judy VII, were there other precautionary
measure[s] exercised by you and the crew of Judy VII so as to prevent the
los[s] or sinking of barge Judy VII?
xxxxxxxxx
Atty. Baldovino, Jr.:
Your Honor, what I am asking [relates to the] action taken by the officers
and crew of tugboat Ayalit and barge Judy VII x x x to prevent the sinking
of barge Judy VII?
xxxxxxxxx
Court:
Mr. witness, did the captain of that tugboat give any instruction on how to
save the barge Judy VII?
Joey Draper:
I can no longer remember sir, because that happened [a] long time ago. [37]
Second, the alleged fortuitous event was not the sole and proximate cause
of the loss. There is a preponderance of evidence that the barge was not
seaworthy when it sailed for Manila.[38]Respondent was able to prove that,
in the hull of the barge, there were holes that might have caused or
aggravated the sinking.[39] Because the presumption of negligence or fault
applied to petitioner, it was incumbent upon it to show that there were no
holes; or, if there were, that they did not aggravate the sinking.
Petitioner offered no evidence to rebut the existence of the holes. Its
witness, Domingo A. Luna, testified that the barge was in tip-top or
excellent condition,[40] but that he had not personally inspected it when it
left Palawan.[41]
The submission of the Philippine Coast Guards Certificate of Inspection
of Judy VII, dated July 31, 1991, did not conclusively prove that the barge
was seaworthy.[42] The regularity of the issuance of the Certificate is
disputably presumed.[43] It could be contradicted by competent evidence,
which respondent offered. Moreover, this evidence did not necessarily take
into account the actual condition of
the vessel at the time of the commencement of the voyage. [44]
Second Issue:
Admissibility of the Survey Report
Petitioner claims that the Survey Report[45] prepared by Jesus Cortez, the
cargo surveyor, should not have been admitted in evidence. The Court
partly agrees. Because he did not testify during the trial, [46] then the
Report that he had prepared was hearsay and therefore inadmissible for
the purpose of proving the truth of its contents.
The Survey Report Not the Sole Evidence
The facts reveal that Cortezs Survey Report was used in the testimonies of
respondents witnesses -- Charlie M. Soriano; and Federico S. Manlapig, a
cargo marine surveyor and the vice-president of Toplis and Harding
Company.[47] Soriano testified that the Survey Report had been used in
preparing the final Adjustment Report conducted by their company. [48] The
final Report showed that the barge was not seaworthy because of the
existence of the holes. Manlapig testified that he had prepared that Report
after taking into account the findings of the surveyor, as well as the
pictures and the sketches of the place where the sinking occurred.
[49]
Evidently, the existence of the holes was proved by the testimonies of
the witnesses, not merely by Cortez Survey Report.
Rule on Independently
Relevant Statement
That witnesses must be examined and presented during the trial, [50] and
that their testimonies must be confined to personal knowledge is required
by the rules on evidence, from which we quote:
Section 36. Testimony generally confined to personal knowledge; hearsay
excluded. A witness can testify only to those facts which he knows of his
personal knowledge; that is, which are derived from his own perception,
except as otherwise provided in these rules.[51]
On this basis, the trial court correctly refused to admit Jesus Cortezs
Affidavit, which respondent had offered as evidence.[52] Well-settled is the
rule that, unless the affiant is presented as a witness, an affidavit is
considered hearsay.[53]
An exception to the foregoing rule is that on independently relevant
statements. A report made by a person is admissible if it is intended to
prove the tenor, not the truth, of the statements.[54]Independent of the
truth or the falsity of the statement given in the report, the fact that it has
been made is relevant. Here, the hearsay rule does not apply. [55]
In the instant case, the challenged Survey Report prepared by Cortez was
admitted only as part of the testimonies of respondents witnesses. The
referral to Cortezs Report was in relation to Manlapigs final Adjustment
Report. Evidently, it was the existence of the Survey Report that was
testified to. The admissibility of that Report as part of the testimonies of
the witnesses was correctly ruled upon by the trial court.
At any rate, even without the Survey Report, petitioner has already failed
to overcome the presumption of fault that applies to common carriers.
WHEREFORE, the Petition is DENIED and the assailed Decision and
Resolution are AFFIRMED. Costs against petitioner.
SO ORDERED.
G.R. No. 98243 July 1, 1992
ALEJANDRO ARADA, doing business under the name and style
"SOUTH NEGROS ENTERPRISES", petitioner,
vs.
HONORABLE COURT OF APPEALS, respondents.
PARAS, J.:
This is a petition for review on certiorari which seeks to annul and set
aside the decision * of the Court of Appeals dated April 8, 1991 in CA-G.R.
CV No. 20597 entitled "San Miguel Corporation v. Alejandro Arada, doing
business under the name and style "South Negros Enterprises", reversing
the decision of the RTC, Seventh Judicial Region, Branch XII, Cebu City,
ordering petitioner to pay the private respondent tho amount of
P172,284.80 representing the value of the cargo lost on board the ill-fated,
M/L Maya with interest thereon at the legal rate from the date of the filing
of the complaint on March 25, 1983 until fully paid, and the costs.
The undisputed facts of the case are as follows: Alejandro Arada, herein
petitioner, is the proprietor and operator of the firm South Negros
Enterprises which has been organized and established for more than ten
(10) years. It is engaged in the business of small scale shipping as a
common carrier, servicing the hauling of cargoes of different corporations
and companies with the five (5) vessels it was operating (Rollo, p. 121).
On March 24, 1982. petitioner entered into a contract with private
respondent to safely transport as a common carrier, cargoes of the latter
from San Carlos City, Negros Occidental to Mandaue City using one of
petitioner's vessels, M/L Maya. The cargoes of private respondent
consisted of 9,824 cases of beer empties valued at P176,824.80, were
itemized as follows:
NO. OF CASES CARGO VALUE
7,515 CS PPW STENIE MTS P136.773.00
1,542 CS PLW GRANDE MTS 23,438.40
58 CS G.E. PLASTIC MTS 1,276.00
24 CS PLP MTS 456.00
37 CS CS WOODEN MTS 673.40
8 CS LAGERLITE PLASTIC MTS 128.00
640 CS STENEI PLASTIC MTS 14,080.00
9,824 CS P176,824.80
On March 24, 1982, petitioner thru its crew master, Mr. Vivencio Babao,
applied for a clearance with the Philippine Coast Guard for M/L Maya to
leave the port of San Carlos City, but due to a typhoon, it was denied
clearance by SNI Antonio Prestado PN who was then assigned at San
Carlos City Coast Guard Detachment (Rollo, p. 122).
On March 25, 1982 M/L Maya was given clearance as there was no storm
and the sea was calm. Hence, said vessel left for Mandaue City. While it
was navigating towards Cebu, a typhoon developed and said vessel was
buffeted on all its sides by big waves. Its rudder was destroyed and it
drifted for sixteen (16) hours although its engine was running.
On March 27, 1982 at about 4:00 a.m., the vessel sank with whatever was
left of its cargoes. The crew was rescued by a passing pump boat and was
brought to Calanggaman Island. Later in the afternoon, they were brought
to Palompon, Leyte, where Vivencio Babao filed a marine protest (Rollo, p.
10).
On the basis of such marine protest, the Board of Marine Inquiry
conducted a hearing of the sinking of M/L Maya wherein private
respondent was duly represented. Said Board made its findings and
recommendation dated November 7, 1983, the dispositive portion of which
reads as:
WHEREFORE, premises considered, this Board recommends as it is hereby
recommended that the owner/operator, officers and crew of M/L Maya be
exonerated or absolved from any administrative liability on account of this
incident (Exh. 1).
The Board's report containing its findings and recommendation was then
forwarded to the headquarters of the Philippine Coast Guard for
appropriate action. On the basis of such report, the Commandant of the
Philippine Coast Guard rendered a decision dated December 21, 1984 in
SBMI Adm. Case No. 88-82 exonerating the owner/operator officers and
crew of the ill-fated M/L Maya from any administrative liability on account
of said incident (Exh. 2).
On March 25, 1983, Private respondent filed a complaint in the Regional
Trial Court its first cause of action being for the recovery of the value of
the cargoes anchored on breach of contract of carriage. After due hearing,
said court rendered a decision dated July 18, 1988, the dispositive portion
of which reads
WHEREFORE, judgment is hereby rendered as follows:
(1) With respect to the first cause of action, claim of plaintiff is hereby
dismissed;
(2) Under the second cause of action, defendant must pay plaintiff the
sum of P2,000.00;
(3) In the third cause of action, the defendant must pay plaintiff the sum of
P2,849.20;
(4) Since the plaintiff has withheld the payment of P12,997.47 due the
defendynt, the plaintiff should deduct the amount of P4,849.20 from the
P12,997.47 and the balance of P8,148.27 must be paid to the defendant;
and
(5) Defendant's counterclaim not having been substantiated by evidence
is likewise dismissed. NO COSTS. (Orig. Record, pp. 193-195).
Thereafter, private respondent appealed said decision to the Court of
Appeals claiming that the trial court erred in —
(1) holding that nothing was shown that the defendant, or any of his
employees who manned the M/L Maya was negligent in any way nor did
they fail to observe extraordinary diligence over the cargoes of the
plaintiff; and
(2) holding that the sinking of said vessel was caused by the storm,
consequently, dismissing the claim of plaintiff in its first cause of action for
breach of contract of carriage of goods (Rollo, pp. 33-34; Decision, pp. 3-
4).
In its decision Promulgated on April 8, 1991, the Court of Appeals reversed
the decision of the court a quo, the dispositive portion and the dispositive
part of its decision reads as:
WHEREFORE, that part of the Judgment appeal6d from is REVERSED and
the appellee Aleiandro Arada, doing business by the name and style,
"South Negros Enterprises", ordered (sic) to pay unto the appellant San
Miguel Corporation the amount of P176,824.80 representing the value of
the cargo lost on board the ill-fated vessel, M/L Maya, with interest thereon
at the legal rate from date of the filing of the complaint on March 25,
1983, until fully paid, and the costs. (Rollo, p. 37)
The Court of Appeals ruled that "in view of his failure to observe
extraordinary diligence over the cargo in question and his negligence
previous to the sinking of the carrying vessel, as above shown, the
appellee is liable to the appellant for the value of the lost cargo.
Hence the present recourse.
On November 20, 1991, this Court gave due course to the petition. The
pivotal issue to be resolved is whether or not petitioner is liable for the
value of the lost cargoes.
Petitioner contends that it was not in the exercise of its function as a
common carrier when it entered into a contract with private
respondent,but was then acting as a private carrier not bound by the
requirement of extraordinary diligence (Rollo, p. 15) and that the factual
findings of the Board of Marine Inquiry and the Special Board of Marine
Inquiry are binding and conclusive on the Court (Rollo, pp. 16-17).
Private respondent counters that M/L Maya was in the exercise of its
function as a common carrier and its failure to observe the extraordinary
diligence required of it in the vigilance over their cargoes makes Petitioner
liable for the value of said cargoes.
The petition is devoid of merit.
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
(Art. 1732 of the New Civil Code).
In the case at bar, there is no doubt that petitioner was exercising its
function as a common carrier when it entered into a contract with private
respondent to carry and transport the latter's cargoes. This fact is best
supported by the admission of petitioner's son, Mr. Eric Arada, who
testified as the officer-in-charge for operations of South Negros Enterprises
in Cebu City. In substance his testimony on January 14, 1985 is as follows:
Q. How many vessels are you operating?
A. There were all in all around five (5). denied M/L Maya the issuance of a clearance to sail. Less than 24 hours
Q. And you were entering to service hauling of cargoes to different elapsed since the time of the denial of said clearance and the time a
companies, is that correct? clearance to sail was finally issued on March 25, 1982. Records will show
A. Yes, sir. that Babao did not ascertain where the typhoon was headed by the use of
Q. In one word, the South Negros Enterprises is engaged in the business of his vessel's barometer and radio (Rorlo, p. 142). Neither did the captain of
common carriers, is that correct? the vessel monitor and record the weather conditions everyday as
A. Yes, sir, required by Art, 612 of the Code of Commerce (Rollo, pp. 142-143). Had he
Q. And in fact, at the time of the hauling of the San Miguel Beer, it was done so while navigating for 31 hours, he could have anticipated the
also in the same category as a common carrier? strong winds and big waves and taken shelter (Rollo, pp- 36; 145). His
A. Yes, sir, testimony on May 4, 1982 is as follows:
(TSN. pp. 3-4, Jan. 29, 1985) Q. Did you not check on your own where the typhoon was?
A common carrier, both from the nature of its business and for insistent A. No. sir. (TSN, May 4, 1982, pp. 58-59)
reasons of public policy is burdened by law with the duty of Noteworthy is the fact that as Per official records of the Climatological
exercising extraordinary diligence not only in ensuring the safety of Division of the Philippine Atmospheric, Geophysical and Astronomical
passengers, but in caring for the goods transported by it. The loss or Services Administration (PAG-ASA for brevity) issued by its Chief of
destruction or deterioration of goods turned over to the common carrier Climatological Division, Primitivo G. Ballan, Jr. as to the weather and sea
for the conveyance to a designated destination raises instantly a conditions that prevailed in the vicinity of Catmon, Cebu during the period
presumption of fault or negligence on the part of the carrier, save only March 25-27, 1982, the sea conditions on March 25, 1982 were slight to
where such loss, destruction or damage arises from extreme rough and the weather conditions then prevailing during those times were
circumstances such as a natural disaster or calamity ... (Benedicto v. IAC, cloudy skies with rainshowers and the small waves grew larger and larger,
G.R. No. 70876, July 19, 1990, 187 SCRA 547) (Emphasis supplied). to wit:
In order that the common carrier may be exempted from responsibility, the
SPEED WAVE HT. SEA WEATHER
natural disaster must have been the proximate and only cause of the
loss. However, the common carrier must exercise due diligence to prevent KNOTS (METERS) CONDITIONS
or minimize the loss before, during and after the occurrence of flood,
storm or other natural disaster in order that the common carrier may be March 25
exempted from liability for the destruction or deterioration of the goods
(Article 1739, New Civil Code). 8 AM 15 1-2 slight cloudy skies
In the instant case, the appellate court was correct in finding that
petitioner failed to observe the extraordinary diligence over the cargo in w/ rainshowers
question and he or the master in his employ was negligent previous to the
sinking of the carrying vessel. In substance, the decision reads: 2 PM 20-25 2.0-3.0 moderate overcast skies
... VIVENCIO BABAO, the master of the carrying vessel, knew that there
was a typboon coming before his departure but did not check where it to rough w/ some rains
was.
8 PM 30 3.7 rough sea heaps up
xxx xxx xxx
If only for the fact that he was first denied clearance to depart on March white foam from
24, 1982, obviously because of a typhoon coming, Babao, as master of the
vessel, should have verified first where the typhoon was before departing breaking waves
on March 25, 1982. True, the sea was calm at departure time. But that
might be the calm before the storm. Prudence dictates that he should begin to be blown
have ascertained first where the storm was before departing as it might be
on his path. (Rollo, pp. 35-36) in streaks along
Respondent court's conclusion as to the negligence of petitioner is
supported by evidence. It will be noted that Vivencio Babao knew of the the direction of
impending typhoon on March 24, 1982 when the Philippine Coast Guard
 employees. Such is the function of the Court, not the Special Board of
the wind;
Marine Inquiry." (Rollo, P. 37, Annex A, p. 7)
Spindrift begins The Philippine Merchant Marine Rules and Regulations particularly Chapter
XVI thereof entitled "Marine Investigation and Suspension and Revocation
2 AM 30 3.7 rough sea heaps up Proceedings" prescribes the Rules governing maritime casualties or
accidents, the rules and Procedures in administrative investigation of all
white foam from maritime cases within the jurisdiction or cognizance of the Philippine Coast
Guard and the grounds for suspension and revocation of
breaking waves licenses/certificates of marine officers and seamen (1601 — SCOPE);
clearly, limiting the jurisdiction of the Board of Marine Inquiry and Special
begin to be blown Board of Marine Inquiry to the administrative aspect of marine casualties
in so far as it involves the shipowners and officers.
in streaks along PREMISES CONSIDERED, the appealed decision is AFFIRMED.
SO ORDERED.
the direction of the wind;
Narvasa, C. J., (Chairman), Regalado and Nocon, JJ., concur.
Spindrift begins Padilla, J. took no part.

(Exh. 3)
A common carrier is obliged to observe extraordinary diligence and the
failure of Babao to ascertain the direction of the storm and the weather
condition of the path they would be traversing, constitute lack of foresight
and minimum vigilance over its cargoes taking into account the
surrounding circumstances of the case.
While the goods are in the possession of the carrier, it is but fair that it
exercises extraordinary diligence in protecting them from loss or damage,
and if loss occurs, the law presumes that it was due to the carrier's fault or
negligence; that is necessary to protect the interest of the shipper which is
at the mercy of the carrier (Art. 1756, Civil Code, Aboitiz Shipping
Corporation v. Court of Appeals, G.R. No. 89757, Aug. 6, 1990, 188 SCRA
387).
Furthermore, the records show that the crew of M/L Maya did not have the
required qualifications provided for in P.D. No. 97 or the Philippine
Merchant Marine Officers Law, all of whom were unlicensed. While it is true
that they were given special permit to man the vessel, such permit was
issued at the risk and responsibility of the owner (Rollo, p. 36).
Finally, petitioner claims that the factual findings of the Special Board of
Marine Inquiry exonerating the owner/operator, crew officers of the ill-
fated vessel M/L Maya from any administrative liability is binding on the
court.
In rejecting petitioner's claim, respondent court was correct in ruling that
"such exoneration was but with respect to the administrative liability of
the owner/operator, officers and crew of the ill-fated" vessel. It could not
have meant exoneration of appellee from liability as a common carrier for
his failure to observe extraordinary diligence in the vigilance over the
goods it was transporting and for the negligent acts or omissions of his

G.R. No. L-31379 August 29, 1988
COMPAÑIA MARITIMA, petitioner,
vs.
COURT OF APPEALS and VICENTE CONCEPCION, respondents.
Rafael Dinglasan for petitioner.
Benjamin J. Molina for private respondent.
FERNAN, C.J.:
Petitioner Compañia Maritima seeks to set aside through this petition for
review on certiorari the decision 1 of the Court of Appeals dated December
5, 1965, adjudging petitioner liable to private respondent Vicente E.
Concepcion for damages in the amount of P24,652.97 with legal interest
from the date said decision shall have become final, for petitioner's failure
to deliver safely private respondent's payloader, and for costs of suit. The
payloader was declared abandoned in favor of petitioner.
The facts of the case are as follows:
Private respondent Vicente E. Concepcion, a civil engineer doing business
under the name and style of Consolidated Construction with office address
at Room 412, Don Santiago Bldg., Taft Avenue, Manila, had a contract with
the Civil Aeronautics Administration (CAA) sometime in 1964 for the
construction of the airport in Cagayan de Oro City Misamis Oriental.
Being a Manila — based contractor, Vicente E. Concepcion had to ship his
construction equipment to Cagayan de Oro City. Having shipped some of
his equipment through petitioner and having settled the balance of
P2,628.77 with respect to said shipment, Concepcion negotiated anew
with petitioner, thru its collector, Pacifico Fernandez, on August 28, 1964
for the shipment to Cagayan de Oro City of one (1) unit payloader, four (4)
units 6x6 Reo trucks and two (2) pieces of water tanks. He was issued Bill
of Lading 113 on the same date upon delivery of the equipment at the
Manila North Harbor. 2
These equipment were loaded aboard the MV Cebu in its Voyage No. 316,
which left Manila on August 30, 1964 and arrived at Cagayan de Oro City
in the afternoon of September 1, 1964. The Reo trucks and water tanks
were safely unloaded within a few hours after arrival, but while the
payloader was about two (2) meters above the pier in the course of
unloading, the swivel pin of the heel block of the port block of Hatch No. 2
gave way, causing the payloader to fall. 3 The payloader was damaged and
was thereafter taken to petitioner's compound in Cagayan de Oro City.
On September 7, 1964, Consolidated Construction, thru Vicente E.
Concepcion, wrote Compañia Maritima to demand a replacement of the
payloader which it was considering as a complete loss because of the
extent of damage. 4 Consolidated Construction likewise notified petitioner
of its claim for damages. Unable to elicit response, the demand was
repeated in a letter dated October 2, 1964. 5
Meanwhile, petitioner shipped the payloader to Manila where it was
weighed at the San Miguel Corporation. Finding that the payloader
weighed 7.5 tons and not 2.5 tons as declared in the B-111 of Lading,
petitioner denied the claim for damages of Consolidated Construction in its
letter dated October 7, 1964, contending that had Vicente E. Concepcion
declared the actual weight of the payloader, damage to their ship as well
as to his payloader could have been prevented. 6
To replace the damaged payloader, Consolidated Construction in the
meantime bought a new one at P45,000.00 from Bormaheco Inc. on
December 3, 1964, and on July 6, 1965., Vicente E. Concepcion filed an
action for damages against petitioner with the then Court of First Instance
of Manila, Branch VII, docketed as Civil Case No. 61551, seeking to recover
damages in the amount of P41,225.00 allegedly suffered for the period of
97 days that he was not able to employ a payloader in the construction job
at the rate of P450.00 a day; P34,000.00 representing the cost of the
damaged payloader; Pl 1, 000. 00 representing the difference between the
cost of the damaged payloader and that of the new payloader; P20,000.00
representing the losses suffered by him due to the diversion of funds to
enable him to buy a new payloader; P10,000.00 as attorney's fees;
P5,000.00 as exemplary damages; and cost of the suit. 7
After trial, the then Court of First Instance of Manila, Branch VII, dismissed
on April 24, 1968 the complaint with costs against therein plaintiff, herein
private respondent Vicente E. Concepcion, stating that the proximate
cause of the fall of the payloader was Vicente E. Concepcion's act or
omission in having misrepresented the weight of the payloader as 2.5 tons
instead of its true weight of 7.5 tons, which underdeclaration was intended
to defraud Compañia Maritima of the payment of the freight charges and
which likewise led the Chief Officer of the vessel to use the heel block of
hatch No. 2 in unloading the payloader. 8
From the adverse decision against him, Vicente E. Concepcion appealed to
the Court of Appeals which, on December 5, 1965 rendered a decision, the
dispositive portion of which reads:
IN VIEW WHEREOF, judgment must have to be as it is hereby reversed;
defendant is condemned to pay unto plaintiff the sum in damages of
P24,652.07 with legal interest from the date the present decision shall
have become final; the payloader is declared abandoned to defendant;
costs against the latter. 9
Hence, the instant petition.
The principal issue in the instant case is whether or not the act of private
respondent Vicente E. Concepcion in furnishing petitioner Compañia
Maritima with an inaccurate weight of 2.5 tons instead of the payloader's
actual weight of 7.5 tons was the proximate and only cause of the damage
on the Oliver Payloader OC-12 when it fell while being unloaded by
petitioner's crew, as would absolutely exempt petitioner from liability for
damages under paragraph 3 of Article 1734 of the Civil Code, which
provides:
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 xxx xxx
(3) Act or omission of the shipper or owner of the goods.
Petitioner claims absolute exemption under this provision upon the
reasoning that private respondent's act of furnishing it with an inaccurate
weight of the payloader constitutes misrepresentation within the meaning
of "act or omission of the shipper or owner of the goods" under the above-
quoted article. It likewise faults the respondent Court of Appeals for
reversing the decision of the trial court notwithstanding that said appellate
court also found that by representing the weight of the payloader to be
only 2.5 tons, private respondent had led petitioner's officer to believe that
the same was within the 5 tons capacity of the heel block of Hatch No. 2.
Petitioner would thus insist that the proximate and only cause of the
damage to the payloader was private respondent's alleged
misrepresentation of the weight of the machinery in question; hence, any
resultant damage to it must be borne by private respondent Vicente E.
Concepcion.
The general rule under Articles 1735 and 1752 of the Civil Code is that
common carriers are presumed to have been at fault or to have acted
negligently in case the goods transported by them are lost, destroyed or
had deteriorated. To overcome the presumption of liability for the loss,
destruction or deterioration of the goods under Article 1735, the common
carriers must prove that they observed extraordinary diligence as required
in Article 1733 of the Civil Code. The responsibility of observing
extraordinary diligence in the vigilance over the goods is further expressed
in Article 1734 of the same Code, the article invoked by petitioner to avoid
liability for damages.
Corollary is the rule that 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. 10 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.
In the instant case, We are not persuaded by the proferred explanation of
petitioner alleged to be the proximate cause of the fall of the payloader
while it was being unloaded at the Cagayan de Oro City pier. Petitioner
seems to have overlooked the extraordinary diligence required of common
carriers in the vigilance over the goods transported by them by virtue of
the nature of their business, which is impressed with a special public duty.
Thus, Article 1733 of the Civil Code provides:
Art. 1733. Common carriers, from the nature of their business and for
reason of public policy, are bound to observe extraordinary diligence in the
vigilance over the goods and for the safety of the passengers transported
by them according to all the circumstances of each case.
Such extraordinary diligence in the vigilance over the goods is further
expressed in Articles 1734, 1735 and 1745, Nos. 5, 6 and 7, ...
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 characteristic of goods tendered for
shipment, and to exercise due care in the handling and stowage including
such methods as their nature requires."11 Under Article 1736 of the Civil
Code, the responsibility to observe extraordinary diligence commences
and 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 the right to receive them without prejudice to the
provisions of Article 1738.
Where, as in the instant case, petitioner, upon the testimonies of its own
crew, failed to take the necessary and adequate precautions for avoiding
damage to, or destruction of, the payloader entrusted to it for safe
carriage and delivery to Cagayan de Oro City, it cannot be reasonably
concluded that the damage caused to the payloader was due to the
alleged misrepresentation of private respondent Concepcion as to the
correct and accurate weight of the payloader. As found by the respondent
Court of Appeals, the fact is that petitioner used a 5-ton capacity lifting
apparatus to lift and unload a visibly heavy cargo like a payloader. Private
respondent has, likewise, sufficiently established the laxity and
carelessness of petitioner's crew in their methods of ascertaining the
weight of heavy cargoes offered for shipment before loading and
unloading them, as is customary among careful persons.
It must be noted that the weight submitted by private respondent
Concepcion appearing at the left-hand portion of Exhibit 8 12 as an
addendum to the original enumeration of equipment to be shipped was
entered into the bill of lading by petitioner, thru Pacifico Fernandez, a
company collector, without seeing the equipment to be shipped. 13 Mr.
Mariano Gupana, assistant traffic manager of petitioner, confirmed in his
testimony that the company never checked the information entered in the
bill of lading. 14 Worse, the weight of the payloader as entered in the bill of
lading was assumed to be correct by Mr. Felix Pisang, Chief Officer of MV
Cebu. 15
The weights stated in a bill of lading are prima facie evidence of the
amount received and the fact that the weighing was done by another will
not relieve the common carrier where it accepted such weight and entered
it on the bill of lading. 16 Besides, common carriers can protect themselves
against mistakes in the bill of lading as to weight by exercising diligence
before issuing the same. 17
While petitioner has proven that private respondent Concepcion did
furnish it with an inaccurate weight of the payloader, petitioner is
nonetheless liable, for the damage caused to the machinery could have
been avoided by the exercise of reasonable skill and attention on its part
in overseeing the unloading of such a heavy equipment. And
circumstances clearly show that the fall of the payloader could have been
avoided by petitioner's crew. Evidence on record sufficiently show that the
crew of petitioner had been negligent in the performance of its obligation
by reason of their having failed to take the necessary precaution under the
circumstances which usage has established among careful persons, more
particularly its Chief Officer, Mr. Felix Pisang, who is tasked with the over-
all supervision of loading and unloading heavy cargoes and upon whom
rests the burden of deciding as to what particular winch the unloading of
the payloader should be undertaken. 18 While it was his duty to determine
the weight of heavy cargoes before accepting them. Mr. Felix Pisang took
the bill of lading on its face value and presumed the same to be correct by
merely "seeing" it. 19 Acknowledging that there was a "jumbo" in the MV
Cebu which has the capacity of lifting 20 to 25 ton cargoes, Mr. Felix
Pisang chose not to use it, because according to him, since the ordinary
boom has a capacity of 5 tons while the payloader was only 2.5 tons, he
did not bother to use the "jumbo" anymore. 20
In that sense, therefore, private respondent's act of furnishing petitioner
with an inaccurate weight of the payloader upon being asked by
petitioner's collector, cannot be used by said petitioner as an excuse to
avoid liability for the damage caused, as the same could have been
avoided had petitioner utilized the "jumbo" lifting apparatus which has a
capacity of lifting 20 to 25 tons of heavy cargoes. It is a fact known to the
Chief Officer of MV Cebu that the payloader was loaded aboard the MV
Cebu at the Manila North Harbor on August 28, 1964 by means of a
terminal crane. 21 Even if petitioner chose not to take the necessary
precaution to avoid damage by checking the correct weight of the
payloader, extraordinary care and diligence compel the use of the "jumbo"
lifting apparatus as the most prudent course for petitioner.
While the act of private respondent in furnishing petitioner with an
inaccurate weight of the payloader cannot successfully be used as an
excuse by petitioner to avoid liability to the damage thus caused, said act
constitutes a contributory circumstance to the damage caused on the
payloader, which mitigates the liability for damages of petitioner in
accordance with Article 1741 of the Civil Code, to wit:

Art. 1741. If the shipper or owner merely contributed to the loss,

destruction or deterioration of the goods, the proximate cause thereof
being the negligence of the common carrier, the latter shall be liable in
damages, which however, shall be equitably reduced.

We find equitable the conclusion of the Court of Appeals reducing the

recoverable amount of damages by 20% or 1/5 of the value of the
payloader, which at the time the instant case arose, was valued at
P34,000. 00, thereby reducing the recoverable amount at 80% or 4/5 of
P34,000.00 or the sum of P27,200.00. Considering that the freight charges
for the entire cargoes shipped by private respondent amounting to
P2,318.40 remained unpaid.. the same would be deducted from the
P27,000.00 plus an additional deduction of P228.63 representing the
freight charges for the undeclared weight of 5 tons (difference between
7.5 and 2.5 tons) leaving, therefore, a final recoverable amount of
damages of P24,652.97 due to private respondent Concepcion.

Notwithstanding the favorable judgment in his favor, private respondent

assailed the Court of Appeals' decision insofar as it limited the damages
due him to only P24,652.97 and the cost of the suit. Invoking the
provisions on damages under the Civil Code, more particularly Articles
2200 and 2208, private respondent further seeks additional damages
allegedly because the construction project was delayed and that in spite of
his demands, petitioner failed to take any steps to settle his valid, just and
demandable claim for damages.

We find private respondent's submission erroneous. It is well- settled that

an appellee, who is not an appellant, may assign errors in his brief where
his purpose is to maintain the judgment on other grounds, but he may not
do so if his purpose is to have the judgment modified or reversed, for, in
such case, he must appeal. 22 Since private respondent did not appeal
from the judgment insofar as it limited the award of damages due him, the
reduction of 20% or 1/5 of the value of the payloader stands.

WHEREFORE, in view of the foregoing, the petition is DENIED. The decision

of the Court of Appeals is hereby AFFIRMED in all respects with costs
against petitioner. In view of the length of time this case has been
pending, this decision is immediately executory.

Gutierrez, Jr., Feliciano, Bidin and Cortes JJ., concur.

 Plaintiff's version of the accident is as follows: At around 2:00 in the
morning of June 24, 1990, plaintiff Ma. Lourdes Valenzuela was driving a
blue Mitsubishi lancer with Plate No. FFU 542 from her restaurant at
Marcos highway to her home at Palanza Street, Araneta Avenue. She was
travelling along Aurora Blvd. with a companion, Cecilia Ramon, heading
towards the direction of Manila. Before reaching A. Lake Street, she
noticed something wrong with her tires; she stopped at a lighted place
where there were people, to verify whether she had a flat tire and to solicit
help if needed. Having been told by the people present that her rear right
tire was flat and that she cannot reach her home in that car's condition,
she parked along the sidewalk, about 1-1/2 feet away, put on her
emergency lights, alighted from the car, and went to the rear to open the
trunk. She was standing at the left side of the rear of her car pointing to
the tools to a man who will help her fix the tire when she was suddenly
bumped by a 1987 Mitsubishi Lancer driven by defendant Richard Li and
registered in the name of defendant Alexander Commercial, Inc. Because
of the impact plaintiff was thrown against the windshield of the car of the
defendant, which was destroyed, and then fell to the ground. She was
pulled out from under defendant's car. Plaintiff's left leg was severed up to
the middle of her thigh, with only some skin and sucle connected to the
G.R. No. 115024 February 7, 1996
rest of the body. She was brought to the UERM Medical Memorial Center
MA. LOURDES VALENZUELA, petitioner, where she was found to have a "traumatic amputation, leg, left up to distal
vs. thigh (above knee)". She was confined in the hospital for twenty (20) days
COURT OF APPEALS, RICHARD LI and ALEXANDER COMMERCIAL, and was eventually fitted with an artificial leg. The expenses for the
INC., respondents. hospital confinement (P120,000.00) and the cost of the artificial leg
(P27,000.00) were paid by defendants from the car insurance.
x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x
In her complaint, plaintiff prayed for moral damages in the amount of P1
G.R. No. 117944 February 7, 1996 million, exemplary damages in the amount of P100,000.00 and other
medical and related expenses amounting to a total of P180,000.00,
RICHARD LI, petitioner, including loss of expected earnings.
vs.
COURT OF APPEALS and LOURDES VALENZUELA, respondents. Defendant Richard Li denied that he was negligent. He was on his way
home, travelling at 55 kph; considering that it was raining, visibility was
DECISION affected and the road was wet. Traffic was light. He testified that he was
KAPUNAN, J.: driving along the inner portion of the right lane of Aurora Blvd. towards the
direction of Araneta Avenue, when he was suddenly confronted, in the
These two petitions for review on certiorari under Rule 45 of the Revised vicinity of A. Lake Street, San Juan, with a car coming from the opposite
Rules of Court stem from an action to recover damages by petitioner direction, travelling at 80 kph, with "full bright lights". Temporarily blinded,
Lourdes Valenzuela in the Regional Trial Court of Quezon City for injuries he instinctively swerved to the right to avoid colliding with the oncoming
sustained by her in a vehicular accident in the early morning of June 24, vehicle, and bumped plaintiff's car, which he did not see because it was
1990. The facts found by the trial court are succinctly summarized by the midnight blue in color, with no parking lights or early warning device, and
Court of Appeals below: the area was poorly lighted. He alleged in his defense that the left rear
portion of plaintiff's car was protruding as it was then "at a standstill
This is an action to recover damages based on quasi-delict, for serious diagonally" on the outer portion of the right lane towards Araneta Avenue
physical injuries sustained in a vehicular accident. (par. 18, Answer). He confirmed the testimony of plaintiff's witness that
after being bumped the car of the plaintiff swerved to the right and hit
another car parked on the sidewalk. Defendants counterclaimed for
damages, alleging that plaintiff was reckless or negligent, as she was not a
licensed driver.
The police investigator, Pfc. Felic Ramos, who prepared the vehicular
accident report and the sketch of the three cars involved in the accident,
testified that the plaintiff's car was "near the sidewalk"; this witness did
not remember whether the hazard lights of plaintiff's car were on, and did
not notice if there was an early warning device; there was a street light at
the corner of Aurora Blvd. and F. Roman, about 100 meters away. It was
not mostly dark, i.e. "things can be seen" (p. 16, tsn, Oct. 28, 1991).
A witness for the plaintiff, Rogelio Rodriguez, testified that after plaintiff
alighted from her car and opened the trunk compartment, defendant's car
came approaching very fast ten meters from the scene; the car was
"zigzagging". The rear left side of plaintiff's car was bumped by the front
right portion of defendant's car; as a consequence, the plaintiff's car
swerved to the right and hit the parked car on the sidewalk. Plaintiff was
thrown to the windshield of defendant's car, which was destroyed, and
landed under the car. He stated that defendant was under the influence of
liquor as he could "smell it very well" (pp. 43, 79, tsn, June 17, 1991).
After trial, the lower court sustained the plaintiff's submissions and found
defendant Richard Li guilty of gross negligence and liable for damages
under Article 2176 of the Civil Code. The trial court likewise held Alexander
Commercial, Inc., Li's employer, jointly and severally liable for damages
pursuant to Article 2180. It ordered the defendants to jointly and severally
pay the following amounts:
1. P41,840.00, as actual damages, representing the miscellaneous
expenses of the plaintiff as a result of her severed left leg;
2. The sums of (a) P37,500.00, for the unrealized profits because of the
stoppage of plaintiff's Bistro La Conga restaurant three (3) weeks after the
accident on June 24, 1990; (b) P20,000.00, a month, as unrealized profits
of the plaintiff in her Bistro La Conga restaurant, from August, 1990 until
the date of this judgment and (c) P30,000.00, a month for unrealized
profits in plaintiff's two (2) beauty salons from July, 1990 until the date of
this decision;
3. P1,000,000.00, in moral damages;
4. P50,000.00, as exemplary damages;
5. P60,000.00, as reasonable attorney's fees; and
6. Costs.
As a result of the trial court's decision, defendants filed an Omnibus Motion
for New Trial and for Reconsideration, citing testimony in Criminal Case
O.C. No. 804367 (People vs. Richard Li), tending to show that the point of
impact, as depicted by the pieces of glass/debris from the parties' cars,
appeared to be at the center of the right lane of Aurora Blvd. The trial
court denied the motion. Defendants forthwith filed an appeal with the
respondent Court of Appeals. In a Decision rendered March 30, 1994, the
Court of Appeals found that there was "ample basis from the evidence of
record for the trial court's finding that the plaintiff's car was properly
parked at the right, beside the sidewalk when it was bumped by
defendant's car."1 Dismissing the defendants' argument that the plaintiff's
car was improperly parked, almost at the center of the road, the
respondent court noted that evidence which was supposed to prove that
the car was at or near center of the right lane was never presented during
the trial of the case.2 The respondent court furthermore observed that:
Defendant Li's testimony that he was driving at a safe speed of 55
km./hour is self serving; it was not corroborated. It was in fact contradicted
by eyewitness Rodriguez who stated that he was outside his beerhouse
located at Aurora Boulevard after A. Lake Street, at or about 2:00 a.m. of
June 24, 1990 when his attention was caught by a beautiful lady (referring
to the plaintiff) alighting from her car and opening the trunk compartment;
he noticed the car of Richard Li "approaching very fast ten (10) meters
away from the scene"; defendant's car was zigzagging", although there
were no holes and hazards on the street, and "bumped the leg of the
plaintiff" who was thrown against the windshield of defendant's care,
causing its destruction. He came to the rescue of the plaintiff, who was
pulled out from under defendant's car and was able to say "hurting words"
to Richard Li because he noticed that the latter was under the influence of
liquor, because he "could smell it very well" (p. 36, et. seq., tsn, June 17,
1991). He knew that plaintiff owned a beerhouse in Sta. Mesa in the
1970's, but did not know either plaintiff or defendant Li before the
accident.
In agreeing with the trial court that the defendant Li was liable for the
injuries sustained by the plaintiff, the Court of Appeals, in its decision,
however, absolved the Li's employer, Alexander Commercial, Inc. from any
liability towards petitioner Lourdes Valenzuela and reduced the amount of
moral damages to P500,000.00. Finding justification for exemplary
damages, the respondent court allowed an award of P50,000.00 for the
same, in addition to costs, attorney's fees and the other damages. The
Court of Appeals, likewise, dismissed the defendants' counterclaims. 3
Consequently, both parties assail the respondent court's decision by filing
two separate petitions before this Court. Richard Li, in G.R. No. 117944,
contends that he should not be held liable for damages because the
proximate cause of the accident was Ma. Lourdes Valenzuela's own
negligence. Alternatively, he argues that in the event that this Court finds
him negligent, such negligence ought to be mitigated by the contributory
negligence of Valenzuela.
On the other hand, in G.R. No. 115024, Ma. Lourdes Valenzuela assails the
respondent court's decision insofar as it absolves Alexander Commercial,
Inc. from liability as the owner of the car driven by Richard Li and insofar
as it reduces the amount of the actual and moral damages awarded by the
trial court.4
As the issues are intimately related, both petitions are hereby
consolidated.
It is plainly evident that the petition for review in G.R. No. 117944 raises
no substantial questions of law. What it, in effect, attempts to have this
Court review are factual findings of the trial court, as sustained by the
Court of Appeals finding Richard Li grossly negligent in driving the
Mitsubishi Lancer provided by his company in the early morning hours of
June 24, 1990. This we will not do. As a general rule, findings of fact of the
Court of Appeals are binding and conclusive upon us, and this Court will
not normally disturb such factual findings unless the findings of fact of the
said court are palpably unsupported by the evidence on record or unless
the judgment itself is based on a misapprehension of facts. 5
In the first place, Valenzuela's version of the incident was fully
corroborated by an uninterested witness, Rogelio Rodriguez, the owner-
operator of an establishment located just across the scene of the accident.
On trial, he testified that he observed a car being driven at a "very fast"
speed, racing towards the general direction of Araneta Avenue. 6 Rodriguez
further added that he was standing in front of his establishment, just ten
to twenty feet away from the scene of the accident, when he saw the car
hit Valenzuela, hurtling her against the windshield of the defendant's
Mitsubishi Lancer, from where she eventually fell under the defendant's
car. Spontaneously reacting to the incident, he crossed the street, noting
that a man reeking with the smell of liquor had alighted from the offending
vehicle in order to survey the incident.7 Equally important, Rodriguez
declared that he observed Valenzuela's car parked parallel and very near
the sidewalk,8 contrary to Li's allegation that Valenzuela's car was close to
the center of the right lane. We agree that as between Li's "self-serving"
asseverations and the observations of a witness who did not even know
the accident victim personally and who immediately gave a statement of
the incident similar to his testimony to the investigator immediately after
the incident, the latter's testimony deserves greater weight. As the court
emphasized:
The issue is one of credibility and from Our own examination of the
transcript, We are not prepared to set aside the trial court's reliance on the
testimony of Rodriguez negating defendant's assertion that he was driving
at a safe speed. While Rodriguez drives only a motorcycle, his perception
of speed is not necessarily impaired. He was subjected to cross-
examination and no attempt was made to question .his competence or the
accuracy of his statement that defendant was driving "very fast". This was
the same statement he gave to the police investigator after the incident,
as told to a newspaper report (Exh. "P"). We see no compelling basis for
disregarding his testimony.
The alleged inconsistencies in Rodriguez' testimony are not borne out by
an examination of the testimony. Rodriguez testified that the scene of the
accident was across the street where his beerhouse is located about ten to
twenty feet away (pp. 35-36, tsn, June 17, 1991). He did not state that the
accident transpired immediately in front of his establishment. The
ownership of the Lambingan se Kambingan is not material; the business is
registered in the name of his mother, but he explained that he owns the
establishment (p. 5, tsn, June 20, 1991). Moreover, the testimony that the
streetlights on his side of Aurora Boulevard were on the night the accident
transpired (p. 8) is not necessarily contradictory to the testimony of Pfc.
Ramos that there was a streetlight at the corner of Aurora Boulevard and F.
Roman Street (p. 45, tsn, Oct. 20, 1991).
With respect to the weather condition, Rodriguez testified that there was
only a drizzle, not a heavy rain and the rain has stopped and he was
outside his establishment at the time the accident transpired (pp. 64-65,
tsn, June 17, 1991). This was consistent with plaintiff's testimony that it
was no longer raining when she left Bistro La Conga (pp. 10-11, tsn, April
29, 1991). It was defendant Li who stated that it was raining all the way in
an attempt to explain why he was travelling at only 50-55 kph. (p. 11, tsn,
Oct. 14, 1991). As to the testimony of Pfc. Ramos that it was raining, he
arrived at the scene only in response to a telephone call after the accident
had transpired (pp. 9-10, tsn, Oct. 28, 1991). We find no substantial
inconsistencies in Rodriguez's testimony that would impair the essential
integrity of his testimony or reflect on his honesty. We are compelled to
affirm the trial court's acceptance of the testimony of said eyewitness.
Against the unassailable testimony of witness Rodriguez we note that Li's
testimony was peppered with so many inconsistencies leading us to
conclude that his version of the accident was merely adroitly crafted to
provide a version, obviously self-serving, which would exculpate him from
any and all liability in the incident. Against Valenzuela's corroborated
claims, his allegations were neither backed up by other witnesses nor by
the circumstances proven in the course of trial. He claimed that he was
driving merely at a speed of 55 kph. when "out of nowhere he saw a dark
maroon lancer right in front of him, which was (the) plaintiff's car". He
alleged that upon seeing this sudden "apparition" he put on his brakes to
no avail as the road was slippery.9
One will have to suspend disbelief in order to give credence to Li's
disingenuous and patently self-serving asseverations. The average
motorist alert to road conditions will have no difficulty applying the brakes
to a car traveling at the speed claimed by Li. Given a light rainfall, the
visibility of the street, and the road conditions on a principal metropolitan
thoroughfare like Aurora Boulevard, Li would have had ample time to react
to the changing conditions of the road if he were alert - as every driver
should be - to those conditions. Driving exacts a more than usual toll on
the senses. Physiological "fight or flight" 10 mechanisms are at work,
provided such mechanisms were not dulled by drugs, alcohol, exhaustion,
drowsiness, etc.11 Li's failure to react in a manner which would have
avoided the accident could therefore have been only due to either or both
of the two factors: 1) that he was driving at a "very fast" speed as testified
by Rodriguez; and 2) that he was under the influence of alcohol. 12 Either
factor working independently would have diminished his responsiveness to
road conditions, since normally he would have slowed down prior to
reaching Valenzuela's car, rather than be in a situation forcing him to
suddenly apply his brakes. As the trial court noted (quoted with approval
by respondent court):
Secondly, as narrated by defendant Richard Li to the San Juan Police
immediately after the incident, he said that while driving along Aurora
Blvd., out of nowhere he saw a dark maroon lancer right in front of him
which was plaintiff's car, indicating, again, thereby that, indeed, he was
driving very fast, oblivious of his surroundings and the road ahead of him,
because if he was not, then he could not have missed noticing at a still far
distance the parked car of the plaintiff at the right side near the sidewalk
which had its emergency lights on, thereby avoiding forcefully bumping at
the plaintiff who was then standing at the left rear edge of her car.
Since, according to him, in his narration to the San Juan Police, he put on
his brakes when he saw the plaintiff's car in front of him, but that it failed
as the road was wet and slippery, this goes to show again, that, contrary
to his claim, he was, indeed, running very fast. For, were it otherwise, he
could have easily completely stopped his car, thereby avoiding the
bumping of the plaintiff, notwithstanding that the road was wet and
slippery. Verily, since, if, indeed, he was running slow, as he claimed, at
only about 55 kilometers per hour, then, inspite of the wet and slippery
road, he could have avoided hitting the plaintiff by the mere expedient or
applying his brakes at the proper time and distance.
It could not be true, therefore, as he now claims during his testimony,
which is contrary to what he told the police immediately after the accident
and is, therefore, more believable, that he did not actually step on his
brakes but simply swerved a little to the right when he saw the on-coming
car with glaring headlights, from the opposite direction, in order to avoid
it.
For, had this been what he did, he would not have bumped the car of the
plaintiff which was properly parked at the right beside the sidewalk. And, it
was not even necessary for him to swerve a little to the right in order to
safely avoid a collision with the on-coming car, considering that Aurora
Blvd. is a double lane avenue separated at the center by a dotted white
paint, and there is plenty of space for both cars, since her car was running
at the right lane going towards Manila on the on-coming car was also on
its right lane going to Cubao.13
Having come to the conclusion that Li was negligent in driving his
company-issued Mitsubishi Lancer, the next question for us to determine is
whether or not Valenzuela was likewise guilty of contributory negligence in
parking her car alongside Aurora Boulevard, which entire area Li points
out, is a no parking zone.
We agree with the respondent court that Valenzuela was not guilty of
contributory negligence.
Contributory negligence is conduct on the part of the injured party,
contributing as a legal cause to the harm he has suffered, which falls
below the standard to which he is required to conform for his own
protection.14 Based on the foregoing definition, the standard or act to
which, according to petitioner Li, Valenzuela ought to have conformed for
her own protection was not to park at all at any point of Aurora Boulevard,
a no parking zone. We cannot agree.
Courts have traditionally been compelled to recognize that an actor who is
confronted with an emergency is not to be held up to the standard of
conduct normally applied to an individual who is in no such situation. The
law takes stock of impulses of humanity when placed in threatening or
dangerous situations and does not require the same standard of thoughtful
and reflective care from persons confronted by unusual and oftentimes
threatening conditions.15
Under the "emergency rule" adopted by this Court in Gan vs. Court of
Appeals,16 an individual who suddenly finds himself in a situation of danger
and is required to act without much time to consider the best means that
may be adopted to avoid the impending danger, is not guilty of negligence
if he fails to undertake what subsequently and upon reflection may appear
to be a better solution, unless the emergency was brought by his own
negligence.17
Applying this principle to a case in which the victims in a vehicular
accident swerved to the wrong lane to avoid hitting two children suddenly
darting into the street, we held, in Mc Kee vs. Intermediate Appellate
Court,18 that the driver therein, Jose Koh, "adopted the best means possible
in the given situation" to avoid hitting the children. Using the "emergency
rule" the Court concluded that Koh, in spite of the fact that he was in the
wrong lane when the collision with an oncoming truck occurred, was not
guilty of negligence.19
While the emergency rule applies to those cases in which reflective
thought, or the opportunity to adequately weigh a threatening situation is
absent, the conduct which is required of an individual in such cases is
dictated not exclusively by the suddenness of the event which absolutely
negates thoroughful care, but by the over-all nature of the circumstances.
A woman driving a vehicle suddenly crippled by a flat tire on a rainy night
will not be faulted for stopping at a point which is both convenient for her
to do so and which is not a hazard to other motorists. She is not expected
to run the entire boulevard in search for a parking zone or turn on a dark
street or alley where she would likely find no one to help her. It would be
hazardous for her not to stop and assess the emergency (simply because
the entire length of Aurora Boulevard is a no-parking zone) because the
hobbling vehicle would be both a threat to her safety and to other
motorists. In the instant case, Valenzuela, upon reaching that portion of
Aurora Boulevard close to A. Lake St., noticed that she had a flat tire. To
avoid putting herself and other motorists in danger, she did what was best
under the situation. As narrated by respondent court: "She stopped at a
lighted place where there were people, to verify whether she had a flat tire
and to solicit help if needed. Having been told by the people present that
her rear right tire was flat and that she cannot reach her home she parked
along the sidewalk, about 1 1/2 feet away, behind a Toyota Corona
Car."20 In fact, respondent court noted, Pfc. Felix Ramos, the investigator
on the scene of the accident confirmed that Valenzuela's car was parked
very close to the sidewalk.21 The sketch which he prepared after the
incident showed Valenzuela's car partly straddling the sidewalk, clear and
at a convenient distance from motorists passing the right lane of Aurora
Boulevard. This fact was itself corroborated by the testimony of witness
Rodriguez.22
Under the circumstances described, Valenzuela did exercise the standard
reasonably dictated by the emergency and could not be considered to
have contributed to the unfortunate circumstances which eventually led to
the amputation of one of her lower extremities. The emergency which led
her to park her car on a sidewalk in Aurora Boulevard was not of her own
making, and it was evident that she had taken all reasonable precautions.
Obviously in the case at bench, the only negligence ascribable was the
negligence of Li on the night of the accident. "Negligence, as it is
commonly understood is conduct which creates an undue risk of harm to
others."23 It is the failure to observe that degree of care, precaution, and
vigilance which the circumstances justly demand, whereby such other
person suffers injury.24 We stressed, in Corliss vs. Manila Railroad
Company,25 that negligence is the want of care required by the
circumstances.
The circumstances established by the evidence adduced in the court
below plainly demonstrate that Li was grossly negligent in driving his
Mitsubishi Lancer. It bears emphasis that he was driving at a fast speed at
about 2:00 A.M. after a heavy downpour had settled into a drizzle
rendering the street slippery. There is ample testimonial evidence on
record to show that he was under the influence of liquor. Under these
conditions, his chances of effectively dealing with changing conditions on
the road were significantly lessened. As Presser and Keaton emphasize:
[U]nder present day traffic conditions, any driver of an automobile must be
prepared for the sudden appearance of obstacles and persons on the
highway, and of other vehicles at intersections, such as one who sees a
child on the curb may be required to anticipate its sudden dash into the
street, and his failure to act properly when they appear may be found to
amount to negligence.26
Li's obvious unpreparedness to cope with the situation confronting him on
the night of the accident was clearly of his own making.
We now come to the question of the liability of Alexander Commercial, Inc.
Li's employer. In denying liability on the part of Alexander Commercial, the
respondent court held that:
There is no evidence, not even defendant Li's testimony, that the visit was
in connection with official matters. His functions as assistant manager
sometimes required him to perform work outside the office as he has to
visit buyers and company clients, but he admitted that on the night of the
accident he came from BF Homes Paranaque he did not have "business
from the company" (pp. 25-26, ten, Sept. 23, 1991). The use of the
company car was partly required by the nature of his work, but the
privilege of using it for non-official business is a "benefit", apparently
referring to the fringe benefits attaching to his position.
Under the civil law, an employer is liable for the negligence of his
employees in the discharge of their respective duties, the basis of which
liability is not respondeat superior, but the relationship of pater familias,
which theory bases the liability of the master ultimately on his own
negligence and not on that of his servant (Cuison v. Norton and Harrison
Co., 55 Phil. 18). Before an employer may be held liable for the negligence
of his employee, the act or omission which caused damage must have
occurred while an employee was in the actual performance of his assigned
tasks or duties (Francis High School vs. Court of Appeals, 194 SCRA 341).
In defining an employer's liability for the acts done within the scope of the
employee's assigned tasks, the Supreme Court has held that this includes
any act done by an employee, in furtherance of the interests of the
employer or for the account of the employer at the time of the infliction of
the injury or damage (Filamer Christian Institute vs. Intermediate Appellate
Court, 212 SCRA 637). An employer is expected to impose upon its
employees the necessary discipline called for in the performance of any
act "indispensable to the business and beneficial to their employer" (at p.
645).
In light of the foregoing, We are unable to sustain the trial court's finding
that since defendant Li was authorized by the company to use the
company car "either officially or socially or even bring it home", he can be
considered as using the company car in the service of his employer or on
the occasion of his functions. Driving the company car was not among his
functions as assistant manager; using it for non-official purposes would
appear to be a fringe benefit, one of the perks attached to his position. But
to impose liability upon the employer under Article 2180 of the Civil Code,
earlier quoted, there must be a showing that the damage was caused by
their employees in the service of the employer or on the occasion of their
functions. There is no evidence that Richard Li was at the time of the
accident performing any act in furtherance of the company's business or
its interests, or at least for its benefit. The imposition of solidary liability
against defendant Alexander Commercial Corporation must therefore fail. 27
We agree with the respondent court that the relationship in question is not
based on the principle of respondeat superior, which holds the master
liable for acts of the servant, but that of pater familias, in which the
liability ultimately falls upon the employer, for his failure to exercise the
diligence of a good father of the family in the selection and supervision of
his employees. It is up to this point, however, that our agreement with the
respondent court ends. Utilizing the bonus pater familias standard
expressed in Article 2180 of the Civil Code, 28 we are of the opinion that Li's
employer, Alexander Commercial, Inc. is jointly and solidarily liable for the
damage caused by the accident of June 24, 1990.
First, the case of St. Francis High School vs. Court of Appeals29 upon which
respondent court has placed undue reliance, dealt with the subject of a
school and its teacher's supervision of students during an extracurricular
activity. These cases now fall under the provision on special parental
authority found in Art. 218 of the Family Code which generally
encompasses all authorized school activities, whether inside or outside
school premises.
Second, the employer's primary liability under the concept of pater
familias embodied by Art 2180 (in relation to Art. 2176) of the Civil Code is
quasi-delictual or tortious in character. His liability is relieved on a showing
that he exercised the diligence of a good father of the family in the
selection and supervision of its employees. Once evidence is introduced
showing that the employer exercised the required amount of care in
selecting its employees, half of the employer's burden is overcome. The
question of diligent supervision, however, depends on the circumstances
of employment.
Ordinarily, evidence demonstrating that the employer has exercised
diligent supervision of its employee during the performance of the latter's
assigned tasks would be enough to relieve him of the liability imposed by
Article 2180 in relation to Article 2176 of the Civil Code. The employer is
not expected to exercise supervision over either the employee's private
activities or during the performance of tasks either unsanctioned by the
former or unrelated to the employee's tasks. The case at bench presents a
situation of a different character, involving a practice utilized by large
companies with either their employees of managerial rank or their
representatives.
It is customary for large companies to provide certain classes of their
employees with courtesy vehicles. These company cars are either wholly
owned and maintained by the company itself or are subject to various
plans through which employees eventually acquire their vehicles after a
given period of service, or after paying a token amount. Many companies
provide liberal "car plans" to enable their managerial or other employees
of rank to purchase cars, which, given the cost of vehicles these days, they
would not otherwise be able to purchase on their own.
Under the first example, the company actually owns and maintains the car
up to the point of turnover of ownership to the employee; in the second
example, the car is really owned and maintained by the employee himself.
In furnishing vehicles to such employees, are companies totally absolved
of responsibility when an accident involving a company-issued car occurs
during private use after normal office hours?
Most pharmaceutical companies, for instance, which provide cars under
the first plan, require rigorous tests of road worthiness from their agents
prior to turning over the car (subject of company maintenance) to their
representatives. In other words, like a good father of a family, they entrust
the company vehicle only after they are satisfied that the employee to
whom the car has been given full use of the said company car for
company or private purposes will not be a threat or menace to himself, the
company or to others. When a company gives full use and enjoyment of a
company car to its employee, it in effect guarantees that it is, like every
good father, satisfied that its employee will use the privilege reasonably
and responsively.
In the ordinary course of business, not all company employees are given
the privilege of using a company-issued car. For large companies other
than those cited in the example of the preceding paragraph, the privilege
serves important business purposes either related to the image of success
an entity intends to present to its clients and to the public in general, or -
for practical and utilitarian reasons - to enable its managerial and other
employees of rank or its sales agents to reach clients conveniently. In most
cases, providing a company car serves both purposes. Since important
business transactions and decisions may occur at all hours in all sorts of
situations and under all kinds of guises, the provision for the unlimited use
of a company car therefore principally serves the business and goodwill of
a company and only incidentally the private purposes of the individual who
actually uses the car, the managerial employee or company sales agent.
As such, in providing for a company car for business use and/or for the
purpose of furthering the company's image, a company owes a
responsibility to the public to see to it that the managerial or other
employees to whom it entrusts virtually unlimited use of a company issued
car are able to use the company issue capably and responsibly.
In the instant case, Li was an Assistant Manager of Alexander Commercial,
Inc. In his testimony before the trial court, he admitted that his functions
as Assistant Manager did not require him to scrupulously keep normal
office hours as he was required quite often to perform work outside the
office, visiting prospective buyers and contacting and meeting with
company clients. 30 These meetings, clearly, were not strictly confined to
routine hours because, as a managerial employee tasked with the job of
representing his company with its clients, meetings with clients were both
social as well as work-related functions. The service car assigned to Li by
Alexander Commercial, Inc. therefore enabled both Li - as well as the
corporation - to put up the front of a highly successful entity, increasing
the latter's goodwill before its clientele. It also facilitated meeting between
Li and its clients by providing the former with a convenient mode of travel.
Moreover, Li's claim that he happened to be on the road on the night of
the accident because he was coming from a social visit with an officemate
in Paranaque was a bare allegation which was never corroborated in the
court below. It was obviously self-serving. Assuming he really came from
his officemate's place, the same could give rise to speculation that he and
his officemate had just been from a work-related function, or they were
together to discuss sales and other work related strategies.
In fine, Alexander Commercial, inc. has not demonstrated, to our
satisfaction, that it exercised the care and diligence of a good father of the
family in entrusting its company car to Li. No allegations were made as to
whether or not the company took the steps necessary to determine or
ascertain the driving proficiency and history of Li, to whom it gave full and
unlimited use of a company car.31 Not having been able to overcome the
burden of demonstrating that it should be absolved of liability for
entrusting its company car to Li, said company, based on the principle
of bonus pater familias, ought to be jointly and severally liable with the
former for the injuries sustained by Ma. Lourdes Valenzuela during the
accident.
Finally, we find no reason to overturn the amount of damages awarded by
the respondent court, except as to the amount of moral damages. In the
case of moral damages, while the said damages are not intended to enrich
the plaintiff at the expense of a defendant, the award should nonetheless
be commensurate to the suffering inflicted. In the instant case we are of
the opinion that the reduction in moral damages from an amount of
P1,000,000.00 to P800,000,00 by the Court of Appeals was not justified
considering the nature of the resulting damage and the
predictable sequelae of the injury.
As a result of the accident, Ma. Lourdes Valenzuela underwent a traumatic
amputation of her left lower extremity at the distal left thigh just above the
knee. Because of this, Valenzuela will forever be deprived of the full
ambulatory functions of her left extremity, even with the use of state of
the art prosthetic technology. Well beyond the period of hospitalization
(which was paid for by Li), she will be required to undergo adjustments in
her prosthetic devise due to the shrinkage of the stump from the process
of healing.
These adjustments entail costs, prosthetic replacements and months of
physical and occupational rehabilitation and therapy. During her lifetime,
the prosthetic devise will have to be replaced and re-adjusted to changes
in the size of her lower limb effected by the biological changes of middle-
age, menopause and aging. Assuming she reaches menopause, for
example, the prosthetic will have to be adjusted to respond to the changes
in bone resulting from a precipitate decrease in calcium levels observed in
the bones of all post-menopausal women. In other words, the damage
done to her would not only be permanent and lasting, it would also be
permanently changing and adjusting to the physiologic changes which her
body would normally undergo through the years. The replacements,
changes, and adjustments will require corresponding adjustive physical
and occupational therapy. All of these adjustments, it has been
documented, are painful.
The foregoing discussion does not even scratch the surface of the nature
of the resulting damage because it would be highly speculative to
estimate the amount of psychological pain, damage and injury which goes
with the sudden severing of a vital portion of the human body. A prosthetic
device, however technologically advanced, will only allow a reasonable
amount of functional restoration of the motor functions of the lower limb.
The sensory functions are forever lost. The resultant anxiety,
sleeplessness, psychological injury, mental and physical pain are
inestimable.
As the amount of moral damages are subject to this Court's discretion, we
are of the opinion that the amount of P1,000,000.00 granted by the trial
court is in greater accord with the extent and nature of the injury -
physical and psychological - suffered by Valenzuela as a result of Li's
grossly negligent driving of his Mitsubishi Lancer in the early morning
hours of the accident.
WHEREFORE, PREMISES CONSIDERED, the decision of the Court of Appeals
is modified with the effect of REINSTATING the judgment of the Regional
Trial Court.
SO ORDERED.
2000. The Resolution held respondents liable for damages to petitioner
subject to the limited-liability provision in the bill of lading.
The facts are as follows:
On September 30, 1993, L.T. Garments Manufacturing Corp. Ltd. shipped
from Hong Kong three sets of warp yarn on returnable beams aboard
respondent Neptune Orient Lines vessel, M/V Baltimar Orion, for transport
and delivery to Fukuyama Manufacturing Corporation (Fukuyama) of No. 7
Jasmin Street, AUV Subdivision, Metro Manila.

The said cargoes were loaded in Container No. IEAU-4592750 in good

condition under Bill of Lading No. HKG-0396180. Fukuyama insured the
shipment against all risks with petitioner Philippine Charter Insurance
Corporation (PCIC) under Marine Cargo Policy No. RN55581 in the amount
of P228,085.

FIRST DIVISION During the course of the voyage, the container with the cargoes fell
overboard and was lost.
PHILIPPINE CHARTER INSURANCE G.R. No. 145044
CORPORATION, Thus, Fukuyama wrote a letter to respondent Overseas Agency Services,
Petitioner, Inc. (Overseas Agency), the agent of Neptune Orient Lines in Manila, and
claimed for the value of the lost cargoes. However, Overseas Agency
Present: ignored the claim. Hence, Fukuyama sought payment from its insurer,
PCIC, for the insured value of the cargoes in the amount of P228,085,
- versus - PUNO, C.J., Chairperson, which claim was fully satisfied by PCIC.
CARPIO,
CORONA, On February 17, 1994, Fukuyama issued a Subrogation Receipt to
AZCUNA, and petitioner PCIC for the latter to be subrogated in its right to recover its
LEONARDO-DE CASTRO, JJ. losses from respondents.

NEPTUNE ORIENT LINES/OVERSEAS PCIC demanded from respondents reimbursement of the entire amount it
AGENCY SERVICES, INC., paid to Fukuyama, but respondents refused payment.
Respondents. Promulgated:
June 12, 2008 On March 21, 1994, PCIC filed a complaint for damages against
respondents with the Regional Trial Court (RTC) of Manila, Branch 35.
X -------------------------------------------------------------------------------------- Respondents filed an Answer with Compulsory Counterclaim denying
X liability. They alleged that during the voyage, the vessel encountered
strong winds and heavy seas making the vessel pitch and roll, which
DECISION caused the subject container with the cargoes to fall
overboard. Respondents contended that the occurrence was a fortuitous
AZCUNA, J.: event which exempted them from any liability, and that their liability, if
any, should not exceed US$500 or the limit of liability in the bill of lading,
This is a petition for review on certiorari[1] of the Resolution of the Court of whichever is lower.
Appeals (CA) in CA-G.R. CV No. 52855 promulgated on April 13,
2000 granting respondents motion for reconsideration dated March 9, In a Decision dated January 12, 1996, the RTC held that respondents, as
common carrier,[2] failed to prove that they observed the required
extraordinary diligence to prevent loss of the subject cargoes in
accordance with the pertinent provisions of the Civil Code. [3] The
dispositive portion of the Decision reads:
WHEREFORE, judgment is rendered ordering the defendants, jointly and
severally, to pay the plaintiff the Peso equivalent as of February 17,
1994 of HK$55,000.00 or the sum of P228,085.00, whichever is lower, with
costs against the defendants.[4]
Respondents motion for reconsideration was denied by the RTC in an Order
dated February 19, 1996.
Respondents appealed the RTC Decision to the CA.
In a Decision promulgated on February 15, 2000, the CA affirmed the RTC
Decision with modification, thus:
WHEREFORE, the assailed decision is hereby
MODIFIED. Appellants Neptune and Overseas are hereby ordered to pay
jointly and severally appellee PCIC P228,085.00, representing the amount
it paid Fukuyama. Costs against the appellants.[5]
Respondents moved for reconsideration of the Decision of the CA arguing,
among others, that their liability was only US$1,500 or US$500 per
package under the limited liability provision of the Carriage of Goods by
Sea Act (COGSA).
In its Resolution dated April 13, 2000, the CA found the said argument of
respondents to be meritorious. The dispositive portion of the Resolution
reads:
WHEREFORE, the motion is partly granted in the sense that appellants
shall be liable to pay appellee PCIC the value of the three packages lost
computed at the rate of US$500 per package or a total of US$1,500.00. [6]
Hence, this petition raising this lone issue:
THE COURT OF APPEALS ERRED IN AWARDING RESPONDENTS DAMAGES
SUBJECT TO THE US$500 PER PACKAGE LIMITATION.
Petitioner contends that the CA erred in awarding damages to respondents
subject to the US$500 per package limitation since the vessel committed a
quasi deviation which is a breach of the contract of carriage when
it intentionally threw overboard the container with the subject shipment
during the voyage to Manila for its own benefit or preservation based on a
Survey Report[7] conducted by Mariners Adjustment Corporation, which
firm was tasked by petitioner to investigate the loss of the subject
cargoes. According to petitioner, the breach of contract resulted in the
abrogation of respondents rights under the contract and COGSA including
the US$500 per package limitation. Hence, respondents cannot invoke the
benefit of the US$500 per package limitation and the CA erred in
considering the limitation and modifying its decision accordingly.
The contention lacks merit.
The facts as found by the RTC do not support the new allegation of facts by
petitioner regarding the intentional throwing overboard of the subject
cargoes and quasi deviation. The Court notes that in petitionersComplaint
before the RTC, petitioner alleged as follows:
xxx xxx xxx
2.03 In the course of the maritime voyage from Hongkong
to Manila subject shipment fell overboard while in the custody of the
defendants and were never recovered; it was part of the LCL cargoes
packed by defendants in container IEAU-4592750 that fell overboard
during the voyage.[8]
Moreover, the same Survey Report cited by petitioner stated:
From the investigation conducted, we noted that Capt. S.L. Halloway,
Master of MV BALTIMAR ORION filed a Note of Protest in the City of Manila,
and was notarized on 06 October 1993.
Based on Note of Protest, copy attached hereto for your reference, carrier
vessel sailed from Hongkong on 1st October 1993 carrying containers
bound for Manila.
Apparently, at the time the vessel [was] sailing at about 2400 hours
of 2nd October 1993, she encountered winds and seas such as to cause
occasional moderate to heavy pitching and rolling deeply at times. At 0154
hours, same day, while in position Lat. 20 degrees, 29 minutes North,
Long. 115 degrees, 49 minutes East, four (4) x 40 ft. containers were
lost/fell overboard. The numbers of these containers are NUSU-
3100789, TPHU -5262138, IEAU-4592750, NUSU-4515404.
xxx xxx xxx
Furthermore, during the course of voyage, high winds and heavy seas
were encountered causing the ship to roll and pitch heavily. The course
and speed was altered to ease motion of the vessel, causing delay and
loss of time on the voyage.
xxx xxx xxx
SURVEYORS REMARKS:
In view of the foregoing incident, we are of the opinion that the shipment
of 3 cases of Various Warp Yarn on Returnable Beams which were
containerized onto 40 feet LCL (no. IEAU-4592750) and fell
overboard the subject vessel during heavy weather is an Actual Total
Loss.[9]
The records show that the subject cargoes fell overboard the ship and
petitioner should not vary the facts of the case on appeal. This Court is not
a trier of facts, and, in this case, the factual finding of the RTC and the CA,
which is supported by the evidence on record, is conclusive upon this
Court.
As regards the issue on the limited liability of respondents, the Court
upholds the decision of the CA.
Since the subject cargoes were lost while being transported by respondent
common carrier from Hong Kong to the Philippines, Philippine law applies
pursuant to the Civil Code which provides:
Art. 1753. The law of the country to which the goods are to be transported
shall govern the liability of the common carrier for their loss, destruction or
deterioration.
Art. 1766. In all matters not regulated by this Code, the rights and
obligations of common carriers shall be governed by the Code of
Commerce and by special laws.
The rights and obligations of respondent common carrier are thus
governed by the provisions of the Civil Code, and the COGSA, [10] which is a
special law, applies suppletorily.
The pertinent provisions of the Civil Code applicable to this case are as
follows:
Art. 1749. A stipulation that the common carriers liability is limited to the
value of the goods appearing in the bill of lading, unless the shipper or
owner declares a greater value, is binding.
Art. 1750. A contract fixing the sum that may be recovered by the owner
or shipper for the loss, destruction, or deterioration of the goods is valid, if
it is reasonable and just under the circumstances, and has been fairly and
freely agreed upon.
In addition, Sec. 4, paragraph (5) of the COGSA, which is applicable to all
contracts for the carriage of goods by sea to and from Philippine ports in
foreign trade, provides:
Neither the carrier nor the ship shall in any event be or become liable for
any loss or damage to or in connection with the transportation of goods in
an amount exceeding $500 per package lawful money of the United
States, or in case of goods not shipped in packages, per customary freight
unit, or the equivalent of that sum in other currency, unless the nature and
value of such goods have been declared by the shipper before shipment
and inserted in the bill of lading. This declaration, if embodied in the bill of
lading shall be prima facie evidence, but shall be conclusive on the carrier.
In this case, Bill of Lading No. 0396180 stipulates:
Neither the Carrier nor the vessel shall in any event become liable for any
loss of or damage to or in connection with the transportation of Goods in
an amount exceeding US$500 (which is the package or shipping unit
limitation under U.S. COGSA) per package or in the case of Goods not
shipped in packages per shipping unit or customary freight, unless the
nature and value of such Goods have been declared by the
Shipper before shipment and inserted in this Bill of Lading and
the Shipper has paid additional charges on such declared value. . .
.
The bill of lading[11] submitted in evidence by petitioner did not show that
the shipper in Hong Kong declared the actual value of the goods as insured
by Fukuyama before shipment and that the said value was inserted in the
Bill of Lading, and so no additional charges were paid. Hence,
the stipulation in the bill of lading that the carriers liability shall not exceed
US$500 per package applies.
Such stipulation in the bill of lading limiting respondents liability for the
loss of the subject cargoes is allowed under Art. 1749 of the Civil Code,
and Sec. 4, paragraph (5) of the COGSA. Everett Steamship Corporation v.
Court of Appeals[12] held:
A stipulation in the bill of lading limiting the common carriers liability for
loss or destruction of a cargo to a certain sum, unless the shipper or owner
declares a greater value, is sanctioned by law, particularly Articles 1749
and 1750 of the Civil Code which provide:

Art. 1749. A stipulation that the common carriers liability is limited to the
value of the goods appearing in the bill of lading, unless the shipper or
owner declares a greater value, is binding.

Art. 1750. A contract fixing the sum that may be recovered by the owner
or shipper for the loss, destruction, or deterioration of the goods is valid, if
it is reasonable and just under the circumstances, and has been fairly and
freely agreed upon.

Such limited-liability clause has also been consistently upheld by this court
in a number of cases. Thus, in Sea-Land Service, Inc. vs. Intermediate
Appellate Court, we ruled:

It seems clear that even if said section 4 (5) of the Carriage of Goods by
Sea Act did not exist, the validity and binding effect of the liability
limitation clause in the bill of lading here are nevertheless fully sustainable
on the basis alone of the cited Civil Code Provisions. That said stipulation is
just and reasonable is arguable from the fact that it echoes Art. 1750 itself
in providing a limit to liability only if a greater value is not declared for the
shipment in the bill of lading. To hold otherwise would amount to
questioning the justness and fairness of the law itself.... But over and
above that consideration, the just and reasonable character of such
stipulation is implicit in it giving the shipper or owner the option of
avoiding accrual of liability limitation by the simple and surely far from
onerous expedient of declaring the nature and value of the shipment in
the bill of lading.

The CA, therefore, did not err in holding respondents liable for damages to
petitioner subject to the US$500 per package limited- liability provision in
the bill of lading.

WHEREFORE, the petition is DENIED. The Resolution of the Court of

Appeals in CA-G.R. CV No. 52855 promulgated on April 13, 2000 is
hereby AFFIRMED.

Costs against petitioner.

SO ORDERED.

FIRST DIVISION
G.R. No. 172682, July 27, 2016
SULPICIO LINES, INC., Petitioner, v. NAPOLEON SESANTE, NOW
SUBSTITUTED BY MARIBEL ATILANO, KRISTEN MARIE, CHRISTIAN
IONE, KENNETH KERRN AND KARISNA KATE, ALL SURNAMED
SESANTE, Respondent.
DECISION
BERSAMIN, J.:
Moral damages are meant to enable the injured party to obtain the means,
diversions or amusements in order to alleviate the moral suffering.
Exemplary damages are designed to permit the courts to reshape behavior
that is socially deleterious in its consequence by creating negative
incentives or deterrents against such behavior.
The Case
This appeal seeks to undo and reverse the adverse decision promulgated
on June 27, 2005,1 whereby the Court of Appeals (CA) affirmed with
modification the judgment of the Regional Trial Court (RTC), Branch 91, in
Quezon City holding the petitioner liable to pay temperate and moral
damages due to breach of contract of carriage.2chanrobleslaw
Antecedents
On September 18, 1998, at around 12:55 p.m., the M/V Princess of the
Orient, a passenger vessel owned and operated by the petitioner, sank
near Fortune Island in Batangas. Of the 388 recorded passengers, 150
were lost.3 Napoleon Sesante, then a member of the Philippine National
Police (PNP) and a lawyer, was one of the passengers who survived the
sinking. He sued the petitioner for breach of contract and
damages.4chanrobleslaw
Sesante alleged in his complaint that the M/V Princess of the Orient left the
Port of Manila while Metro Manila was experiencing stormy weather; that
at around 11:00 p.m., he had noticed the vessel listing starboard, so he
had gone to the uppermost deck where he witnessed the strong winds and
big waves pounding the vessel; that at the same time, he had seen how
the passengers had been panicking, crying for help and frantically
scrambling for life jackets in the absence of the vessel's officers and crew;
that sensing danger, he had called a certain Vency Ceballos through his
cellphone to request him to inform the proper authorities of the situation;
that thereafter, big waves had rocked the vessel, tossing him to the floor
where he was pinned by a long steel bar; that he had freed himself only
after another wave had hit the vessel;5 that he had managed to stay afloat
after the vessel had sunk, and had been carried by the waves to the
coastline of Cavite and Batangas until he had been rescued; that he had
suffered tremendous hunger, thirst, pain, fear, shock, serious anxiety and
mental anguish; that he had sustained injuries,6 and had lost money,
jewelry, important documents, police uniforms and the .45 caliber pistol
issued to him by the PNP; and that because it had committed bad faith in
allowing the vessel to sail despite the storm signal, the petitioner should
pay him actual and moral damages of P500,000.00 and P1,000,000.00,
respectively.7chanrobleslaw
In its defense, the petitioner insisted on the seaworthiness of the M/V
Princess of the Orient due to its having been cleared to sail from the Port
of Manila by the proper authorities; that the sinking had been due to force
majeure; that it had not been negligent; and that its officers and crew had
also not been negligent because they had made preparations to abandon
the vessel because they had launched life rafts and had provided the
passengers assistance in that regard.8chanrobleslaw
Decision of the RTC
On October 12, 2001, the RTC rendered its judgment in favor of the
respondent,9 holding as follows:ChanRoblesVirtualawlibrary
WHEREFORE, judgment is hereby rendered in favor of plaintiff Napoleon
Sesante and against defendant Sulpicio Lines, Inc., ordering said
defendant to pay plaintiff:
1. Temperate damages in the amount of P400,000.00;
2. Moral damages in the amount of One Million Pesos
(P1,000,000.00);
3. Costs of suit.
SO ORDERED.10chanroblesvirtuallawlibrary
The RTC observed that the petitioner, being negligent, was liable to
Sesante pursuant to Articles 1739 and 1759 of the Civil Code; that the
petitioner had not established its due diligence in the selection and
supervision of the vessel crew; that the ship officers had failed to inspect
the stowage of cargoes despite being aware of the storm signal; that the
officers and crew of the vessel had not immediately sent a distress signal
to the Philippine Coast Guard; that the ship captain had not called for then
"abandon ship" protocol; and that based on the report of the Board of
Marine Inquiry (BMI), the erroneous maneuvering of the vessel by the
captain during the extreme weather condition had been the immediate
and proximate cause of the sinking.
The petitioner sought reconsideration, but the RTC only partly granted its
motion by reducing the temperate damages from P500,000.00 to
P300,000.00.11chanrobleslaw
Dissatisfied, the petitioner appealed. 12 It was pending the appeal in the CA
when Sesante passed away. He was substituted by his
heirs.13chanrobleslaw
Judgment of the CA
On June 27, 2005, the CA promulgated its assailed decision. It lowered the
temperate damages to P120,000.00, which approximated the cost of
Sesante's lost personal belongings; and held that despite the
seaworthiness of the vessel, the petitioner remained civilly liable because
its officers and crew had been negligent in performing their
duties.14chanrobleslaw
Sttill aggrieved, Sulpicio Lines moved for reconsideration, but the CA
denied the motion.15chanrobleslaw
Hence, this appeal.
Issues
The petitioner attributes the following errors to the CA, to
wit:ChanRoblesVirtualawlibrary
I The petitioner urges that Sesante's complaint for damages was purely
THE ASSAILED DECISION ERRED IN SUSTAINING THE AWARD OF MORAL
DAMAGES, AS THE INSTANT CASE IS FOR ALLEGED PERSONAL INJURIES
PREDICATED ON BREACH OF CONTRACT OF CARRIAGE, AND THERE BEING
NO PROOF OF BAD FAITH ON THE PART OF SULPICIO
II
THE ASSAILED DECISION ERRED IN SUSTAINING THE AMOUNT OF MORAL
DAMAGES AWARDED, THE SAME BEING UNREASONABLE, EXCESSIVE AND
UNCONSCIONABLE, AND TRANSLATES TO UNJUST ENRICHMENT AGAINST
SULPICIO
III
THE ASSAILED DECISION ERRED IN SUSTAINING THE AWARD OF
TEMPERATE DAMAGES AS THE SAME CANNOT SUBSTITUTE FOR A FAILED
CLAIM FOR ACTUAL DAMAGES, THERE BEING NO COMPETENT PROOF TO
WARRANT SAID AWARD
IV
THE AWARD OF TEMPERATE DAMAGES IS UNTENABLE AS THE REQUISITE
NOTICE UNDER THE LAW WAS NOT GIVEN TO SULPICIO IN ORDER TO HOLD
IT LIABLE FOR THE ALLEGED LOSS OF SESANTE'S PERSONAL BELONGINGS
V of due process.17 It protects the right of due process belonging to any
THE ASSAILED DECISION ERRED IN SUBSTITUTING THE HEIRS OF
RESPONDENT SESANTE IN THE INSTANT CASE, THE SAME BEING A
PERSONAL ACTION WHICH DOES NOT SURVIVE
VI
THE ASSAILED DECISION ERRED IN APPLYING ARTICLE 1759 OF THE NEW
CIVIL CODE AGAINST SULPICIO SANS A CLEAR-CUT FINDING OF SULPICIO'S
BAD FAITH IN THE INCIDENT16chanroblesvirtuallawlibrary
In other words, to be resolved are the following, namely: (1) Is the
complaint for breach of contract and damages a personal action that does
not survive the death of the plaintiff?; (2) Is the petitioner liable for
damages under Article 1759 of the Civil Code?; and (3) Is there sufficient
basis for awarding moral and temperate damages?
Ruling of the Court
The appeal lacks merit.
I
An action for breach of contract of carriage survives the death of
the plaintiff
personal and cannot be transferred to his heirs upon his death. Hence, the
complaint should be dismissed because the death of the plaintiff abates a
personal action.
The petitioner's urging is unwarranted.
Section 16, Rule 3 of the Rules of Court lays down the proper procedure in
the event of the death of a litigant, viz.:ChanRoblesVirtualawlibrary
Section 16. Death of party; duty of counsel. - Whenever a party to a
pending action dies, and the claim is not thereby extinguished, it
shall be the duty of his counsel to inform the court within thirty (30) days
after such death of the fact thereof, and to give the name and address of
his legal representative or representatives. Failure of counsel to comply
with his duty shall be a ground for disciplinary action.
The heirs of the deceased may be allowed to be substituted for
the deceased, without requiring the appointment of an executor or
administrator and the court may appoint a guardian ad litem for the minor
heirs.
xxxx
Substitution by the heirs is not a matter of jurisdiction, but a requirement
party, that in the event of death the deceased litigant continues to be
protected and properly represented in the suit through the duly appointed
legal representative of his estate.18chanrobleslaw
The application of the rule on substitution depends on whether or not the
action survives the death of the litigant. Section 1, Rule 87 of the Rules of
Court enumerates the following actions that survive the death of a party,
namely: (1) recovery of real or personal property, or an interest from the
estate; (2) enforcement of liens on the estate; and (3) recovery of
damages for an injury to person or property. On the one hand, Section 5,
Rule 86 of the Rules of Court lists the actions abated by death as
including: (1) claims for funeral expenses and those for the last sickness of
the decedent; (2) judgments for money; and (3) all claims for money
against the deceased, arising from contract, express or implied.
A contract of carriage generates a relation attended with public duty,
neglect or malfeasance of the carrier's employees and gives ground for an
action for damages.19 Sesante's claim against the petitioner involved his
personal injury caused by the breach of the contract of carriage. Pursuant
to the aforecited rules, the complaint survived his death, and could be
continued by his heirs following the rule on substitution.
II
The petitioner is liable for breach of contract of carriage
The petitioner submits that an action for damages based on breach of
contract of carriage under Article 1759 of the Civil Code should be read in
conjunction with Article 2201 of the same code; that although Article 1759
only provides for a presumption of negligence, it does not envision
automatic liability; and that it was not guilty of bad faith considering that
the sinking of M/V Princess of the Orient had been due to a fortuitous
event, an exempting circumstance under Article 1174 of the Civil Code.
The submission has no substance.
Article 1759 of the Civil Code does not establish a presumption of
negligence because it explicitly makes the common carrier liable in the
event of death or injury to passengers due to the negligence or fault of the
common carrier's employees. It reads:ChanRoblesVirtualawlibrary
Article 1759. Common carriers are liable for the death or injuries to
passengers through the negligence or willful acts of the former's
employees, although such employees may have acted beyond the scope
of their authority or in violation of the orders of the common carriers.
This liability of the common carriers does not cease upon proof that they
exercised all the diligence of a good father of a family in the selection and
supervision of their employees.
The liability of common carriers under Article 1759 is demanded by the
duty of extraordinary diligence required of common carriers in safely
carrying their passengers.20chanrobleslaw
On the other hand, Article 1756 of the Civil Code lays down the
presumption of negligence against the common carrier in the event of
death or injury of its passenger, viz.:ChanRoblesVirtualawlibrary
Article 1756. In case of death of or injuries to passengers, common carriers
are presumed to have been at fault or to have acted negligently, unless
they prove that they observed extraordinary diligence as prescribed in
Articles 1733 and 1755.
Clearly, the trial court is not required to make an express finding of the
common carrier's fault or negligence.21 Even the mere proof of injury
relieves the passengers from establishing the fault or negligence of the
carrier or its employees.22 The presumption of negligence applies so long
as there is evidence showing that: (a) a contract exists between the
passenger and the common carrier; and (b) the injury or death took place
during the existence of such contract.23 In such event, the burden shifts to
the common carrier to prove its observance of extraordinary diligence, and
that an unforeseen event or force majeure had caused the
injury.24chanrobleslaw
Sesante sustained injuries due to the buffeting by the waves and
consequent sinking of M/V Princess of the Orient where he was a
passenger. To exculpate itself from liability, the common carrier vouched
for the seaworthiness of M/V Princess of the Orient, and referred to the BMI
report to the effect that the severe weather condition - a force majeure -
had brought about the sinking of the vessel.
The petitioner was directly liable to Sesante and his heirs.
A common carrier may be relieved of any liability arising from a fortuitous
event pursuant to Article 117425cralawred of the Civil Code. But while it
may free a common carrier from liability, the provision still requires
exclusion of human agency from the cause of injury or loss. 26 Else stated,
for a common carrier to be absolved from liability in case of force majeure,
it is not enough that the accident was caused by a fortuitous event. The
common carrier must still prove that it did not contribute to the occurrence
of the incident due to its own or its employees' negligence. 27 We explained
in Schmitz Transport & Brokerage Corporation v. Transport Venture,
Inc.,28 as follows:ChanRoblesVirtualawlibrary
In order to be considered a fortuitous event, however, (1) the cause of the
unforeseen and unexpected occurrence, or the failure of the debtor to
comply with his obligation, must be independent of human will; (2) it must
be impossible to foresee the event which constitute the caso fortuito, or if
it can be foreseen it must be impossible to avoid; (3) the occurrence must
be such as to render it impossible for the debtor to fulfill his obligation in
any manner; and (4) the obligor must be free from any participation in the
aggravation of the injury resulting to the creditor.
[T]he principle embodied in the act of God doctrine strictly requires
that the act must be occasioned solely by the violence of nature.
Human intervention is to be excluded from creating or entering
into the cause of the mischief. When the effect is found to be in
part the result of the participation of man, whether due to his
active intervention or neglect or failure to act, the whole
occurrence is then humanized and removed from the rules
applicable to the acts of God.29 (bold underscoring supplied for
emphasis)
The petitioner has attributed the sinking of the vessel to the storm
notwithstanding its position on the seaworthiness of M/V Princess of the
Orient. Yet, the findings of the BMI directly contradicted the petitioner's
attribution, as follows:ChanRoblesVirtualawlibrary
7. The Immediate and the Proximate Cause of the Sinking
The Captain's erroneous maneuvers of the M/V Princess of the
Orient minutes before she sunk [sic] had caused the accident. It should be
noted that during the first two hours when the ship left North Harbor, she
was navigating smoothly towards Limbones Point. During the same period,
the ship was only subjected to the normal weather stress prevailing at the
time. She was then inside Manila Bar. The waves were observed to be
relatively small to endanger the safety of the ship. It was only when
the MV Princess of the Orient had cleared Limbones Pt. while navigating
towards the direction of the Fortune Island when this agonizing misfortune
struck the ship.
Initially, a list of three degrees was observed. The listing of the ship to her
portside had continuously increased. It was at this point that the captain
had misjudged the situation. While the ship continuously listed to her
portside and was battered by big waves, strong southwesterly winds,
prudent judgement [sic] would dictate that the Captain should have
considerably reduced the ship's speed. He could have immediately
ordered the Chief Engineer to slacken down the speed. Meanwhile,
the winds and waves continuously hit the ship on her starboard side. The
waves were at least seven to eight meters in height and the wind velocity
was a[t] 25 knots. The MV Princess of the Orient being a close-type ship
(seven decks, wide and high superstructure) was vulnerable and exposed
to the howling winds and ravaging seas. Because of the excessive
movement, the solid and liquid cargo below the decks must have shifted
its weight to port, which could have contributed to the tilted position of the
ship.
Minutes later, the Captain finally ordered to reduce the speed of the ship
to 14 knots. At the same time, he ordered to put ballast water to the
starboard-heeling tank to arrest the continuous listing of the ship. This was
an exercise in futility because the ship was already listing between 15 to
20 degrees to her portside. The ship had almost reached the maximum
angle of her loll. At this stage, she was about to lose her stability.
Despite this critical situation, the Captain executed several starboard
maneuvers. Steering the course of the Princess to starboard had greatly
added to her tilting. In the open seas, with a fast speed of 14 knots,
advance maneuvers such as this would tend to bring the body of the ship
in the opposite side. In navigational terms, this movement is described as
the centripetal force. This force is produced by the water acting on the
side of the ship away from the center of the turn. The force is considered
to act at the center of lateral resistance which, in this case, is the centroid
of the underwater area of the ship's side away from the center of the turn.
In the case of the Princess, when the Captain maneuvered her to
starboard, her body shifted its weight to port. Being already inclined to an
angle of 15 degrees, coupled with the instantaneous movement of the
ship, the cargoes below deck could have completely shifted its position
and weight towards portside. By this time, the ship being ravaged
simultaneously by ravaging waves and howling winds on her starboard
side, finally lost her grip.30chanroblesvirtuallawlibrary
Even assuming the seaworthiness of the MA/ Princess of the Orient, the
petitioner could not escape liability considering that, as borne out by the
aforequoted findings of the BMI, the immediate and proximate cause of
the sinking of the vessel had been the gross negligence of its captain in
maneuvering the vessel.
The Court also notes that Metro Manila was experiencing Storm Signal No.
1 during the time of the sinking.31 The BMI observed that a vessel like the
M/V Princess of the Orient, which had a volume of 13.734 gross tons,
should have been capable of withstanding a Storm Signal No. 1
considering that the responding fishing boats of less than 500 gross tons
had been able to weather through the same waves and winds to go to the
succor of the sinking vessel and had actually rescued several of the
latter's distressed passengers.32chanrobleslaw
III
The award of moral damages and temperate damages is proper
The petitioner argues that moral damages could be meted against a
common carrier only in the following instances, to wit: (1) in the situations
enumerated by Article 2201 of the Civil Code; (2) in cases of the death of a
passenger; or (3)where there was bad faith on the part of the common
carrier. It contends that none of these instances obtained herein; hence,
the award should be deleted.
We agree with the petitioner that moral damages may be recovered in an
action upon breach of contract of carriage only when: (a) death of a
passenger results, or (b) it is proved that the carrier was guilty of fraud
and bad faith, even if death does not result.33 However, moral damages
may be awarded if the contractual breach is found to be wanton and
deliberately injurious, or if the one responsible acted fraudulently or with
malice or bad faith.34chanrobleslaw
The CA enumerated the negligent acts committed by the officers and crew
of M/V Princess of the Orient, viz.:ChanRoblesVirtualawlibrary
x x x. [W]hile this Court yields to the findings of the said investigation
report, yet it should be observed that what was complied with by Sulpicio
Lines were only the basic and minimal safety standards which would
qualify the vessel as seaworthy. In the same report however it also
revealed that the immediate and proximate cause of the sinking of the M/V
Princess of the Orient was brought by the following: erroneous
maneuvering command of Captain Esrum Mahilum and due to the weather
condition prevailing at the time of the tragedy. There is no doubt that
under the circumstances the crew of the vessel were negligent in manning
it. In fact this was clearly established by the investigation of the Board of
Marine Inquiry where it was found that:ChanRoblesVirtualawlibrary
The Chief Mate, when interviewed under oath, had attested that he was
not able to make stability calculation of the ship vis-a-vis her cargo. He did
not even know the metacentric height (GM) of the ship whether it be
positive or negative.
As cargo officer of the ship, he failed to prepare a detailed report of the
ship's cargo stowage plan.
He likewise failed to conduct the soundings (measurement) of the ballast
tanks before the ship departed from port. He readily presumed that the
ship was full of ballast since the ship was fully ballasted when she left
Cebu for Manila on 16 September 1998 and had never discharge[d] its
contents since that time.
Being the officer-in-charge for emergency situation (sic) like this, he failed
to execute and supervise the actual abandonship (sic) procedure. There
was no announcement at the public address system of abandonship (sic),
no orderly distribution of life jackets and no orderly launching of life rafts.
The witnesses have confirmed this finding on their sworn statements.
There was miscalculation in judgment on the part of the Captain when he
erroneously navigated the ship at her last crucial moment. x x x
To aggravate his case, the Captain, having full command and responsibility
of the MV Princess of the Orient, had failed to ensure the proper execution
of the actual abandoning of the ship.
The deck and engine officers (Second Mate, Third Mate, Chief Engineers,
Second Engineer, Third Engineer and Fourth Engineer), being in charge of
their respective abandonship (sic) post, failed to supervise the crew and
passengers in the proper execution of abandonship (sic) procedure.
The Radio Officer (spark) failed to send the SOS message in the
internationally accepted communication network (VHF Channel 16).
Instead, he used the Single Side Band (SSB) radio in informing the
company about the emergency situation. x x x
x35chanroblesvirtuallawlibrary
The aforestated negligent acts of the officers and crew of M/V Princess of
the Orient could not be ignored in view of the extraordinary duty of the
common carrier to ensure the safety of the passengers. The totality of the
negligence by the officers and crew of M/V Princess of the Orient, coupled
with the seeming indifference of the petitioner to render assistance to
Sesante,36 warranted the award of moral damages.
While there is no hard-and-fast rule in determining what is a fair and
reasonable amount of moral damages, the discretion to make the
determination is lodged in the trial court with the limitation that the
amount should not be palpably and scandalously excessive. The trial court
then bears in mind that moral damages are not intended to impose a
penalty on the wrongdoer, or to enrich the plaintiff at the expense of the
defendant.37 The amount of the moral damages must always reasonably
approximate the extent of injury and be proportional to the wrong
committed.38chanrobleslaw
The Court recognizes the mental anguish, agony and pain suffered by
Sesante who fought to survive in the midst of the raging waves of the sea
while facing the immediate prospect of losing his life. His claim for moral
and economic vindication is a bitter remnant of that most infamous
tragedy that left hundreds of families broken in its wake. The anguish and
moral sufferings he sustained after surviving the tragedy would always
include the memory of facing the prospect of his death from drowning, or
dehydration, or being preyed upon by sharks. Based on the established
circumstances, his survival could only have been a miracle wrought by
God's grace, by which he was guided in his desperate swim for the safety
of the shore. But even with the glory of survival, he still had to grapple
with not just the memory of having come face to face with almost certain
death, but also with having to answer to the instinctive guilt for the rest of
his days of being chosen to live among the many who perished in the
tragedy.39chanrobleslaw
While the anguish, anxiety, pain and stress experienced by Sesante during
and after the sinking cannot be quantified, the moral damages to be
awarded should at least approximate the reparation of all the
consequences of the petitioner's negligence. With moral damages being
meant to enable the injured party to obtain the means, diversions or
amusements in order to alleviate his moral and physical sufferings, 40 the
Court is called upon to ensure that proper recompense be allowed to him,
through his heirs. For this purpose, the amount of P1,000,000.00, as
granted by the RTC and affirmed by the CA, is maintained.
The petitioner contends that its liability for the loss of Sesante's personal
belongings should conform with Article 1754, in relation to Articles 1998,
2000 to 2003 of the Civil Code, which provide:ChanRoblesVirtualawlibrary
Article 1754. The provisions of Articles 1733 to 1753 shall apply to the
passenger's baggage which is not in his personal custody or in that of his
employees. As to other baggage, the rules in Articles 1998 and 2000 to
2003 concerning the responsibility of hotel-keepers shall be applicable.
xxxx
Article 1998. The deposit of effects made by travellers in hotels or inns
shall also be regarded as necessary. The keepers of hotels or inns shall be
responsible for them as depositaries, provided that notice was given to
them, or to their employees, of the effects brought by the guests and that,
on the part of the latter, they take the precautions which said hotel-
keepers or their substitutes advised relative to the care and vigilance of
their effects.
xxxx
Article 2000. The responsibility referred to in the two preceding articles
shall include the loss of, or injury to the personal property of the guests
caused by the servants or employees of the keepers of hotels or inns as
well as by strangers; but not that which may proceed from any force
majeure. The fact that travellers are constrained to rely on the vigilance of
the keeper of the hotel or inn shall be considered in determining the
degree of care required of him.
Article 2001. The act of a thief or robber, who has entered the hotel is not
deemed force majeure, unless it is done with the use of arms or through
an irresistible force.
Article 2002. The hotel-keeper is not liable for compensation if the loss is
due to the acts of the guest, his family, servants or visitors, or if the loss
arises from the character of the things brought into the hotel.
Article 2003. The hotel-keeper cannot free himself from responsibility by
posting notices to the effect that he is not liable for the articles brought by
the guest. Any stipulation to the contrary between the hotel-keeper and
the guest whereby the responsibility of the former as set forth in Articles
1998 to 2001 is suppressed or diminished shall be void.
The petitioner denies liability because Sesante's belongings had remained
in his custody all throughout the voyage until the sinking, and he had not
notified the petitioner or its employees about such belongings. Hence,
absent such notice, liability did not attach to the petitioner.
Is notification required before the common carrier becomes liable for lost
belongings that remained in the custody of the passenger?
We answer in the negative.
The rule that the common carrier is always responsible for the passenger's
baggage during the voyage needs to be emphasized. Article 1754 of
the Civil Code does not exempt the common carrier from liability in case of
loss, but only highlights the degree of care required of it depending on
who has the custody of the belongings. Hence, the law requires the
common carrier to observe the same diligence as the hotel keepers in
case the baggage remains with the passenger; otherwise, extraordinary
diligence must be exercised. 41 Furthermore, the liability of the common
carrier attaches even if the loss or damage to the belongings resulted from
the acts of the common carrier's employees, the only exception being
where such loss or damages is due to force majeure.42chanrobleslaw
In YHT Realty Corporation v. Court of Appeals,43 we declared the actual
delivery of the goods to the innkeepers or their employees as unnecessary
before liability could attach to the hotelkeepers in the event of loss of
personal belongings of their guests considering that the personal effects
were inside the hotel or inn because the hotelkeeper shall remain
accountable.44 Accordingly, actual notification was not necessary to render
the petitioner as the common carrier liable for the lost personal belongings
of Sesante. By allowing him to board the vessel with his belongings
without any protest, the petitioner became sufficiently notified of such
belongings. So long as the belongings were brought inside the premises of
the vessel, the petitioner was thereby effectively notified and
consequently duty-bound to observe the required diligence in ensuring the
safety of the belongings during the voyage. Applying Article 2000 of
the Civil Code, the petitioner assumed the liability for loss of the
belongings caused by the negligence of its officers or crew. In view of our
finding that the negligence of the officers and crew of the petitioner was
the immediate and proximate cause of the sinking of the M/V Princess of
the Orient, its liability for Sesante's lost personal belongings was beyond
question.
The petitioner claims that temperate damages were erroneously awarded
because Sesante had not proved pecuniary loss; and that the CA merely
relied on his self-serving testimony.
The award of temperate damages was proper.
Temperate damages may be recovered when some pecuniary loss has
been suffered but the amount cannot, from the nature of the case, be
proven with certainty.45 Article 222446 of the Civil Codeexpressly authorizes
the courts to award temperate damages despite the lack of certain proof
of actual damages.47chanrobleslaw
Indubitably, Sesante suffered some pecuniary loss from the sinking of the
vessel, but the value of the loss could not be established with certainty.
The CA, which can try facts and appreciate evidence, pegged the value of
the lost belongings as itemized in the police report at P120,000.00. The
valuation approximated the costs of the lost belongings. In that context,
the valuation of P120,000.00 is correct, but to be regarded as temperate
damages.
In fine, the petitioner, as a common carrier, was required to observe
extraordinary diligence in ensuring the safety of its passengers and their
personal belongings. It being found herein short of the required diligence
rendered it liable for the resulting injuries and damages sustained by
Sesante as one of its passengers.
Should the petitioner be further held liable for exemplary damages?
In contracts and quasi-contracts, the Court has the discretion to award
exemplary damages if the defendant acted in a wanton, fraudulent,
reckless, oppressive, or malevolent manner.48 Indeed, exemplary damages
cannot be recovered as a matter of right, and it is left to the court to
decide whether or not to award them.49 In consideration of these legal
premises for the exercise of the judicial discretion to grant or deny
exemplary damages in contracts and quasi-contracts against a defendant
who acted in a wanton, fraudulent,' reckless, oppressive, or malevolent
manner, the Court hereby awards exemplary damages to Sesante.
First of all, exemplary damages did not have to be specifically pleaded or
proved, because the courts had the discretion to award them for as long as
the evidence so warranted. In Marchan v. Mendoza,50 the Court has
relevantly discoursed:ChanRoblesVirtualawlibrary
x x x. It is argued that this Court is without jurisdiction to
adjudicate this exemplary damages since there was no allegation
nor prayer, nor proof, nor counterclaim of error for the same by
the appellees. It is to be observed however, that in the complaint,
plaintiffs "prayed for such other and further relief as this Court
may deem just and equitable." Now, since the body of the
complaint sought to recover damages against the defendant-
carrier wherein plaintiffs prayed for indemnification for the
damages they suffered as a result of the negligence of said
Silverio Marchan who is appellant's employee; and since
exemplary damages is intimately connected with general
damages, plaintiffs may not be expected to single out by express
term the kind of damages they are trying to recover against the
defendant's carrier. Suffice it to state that when plaintiffs prayed
in their complaint for such other relief and remedies that may be
availed of under the premises, in effect, therefore, the court is
called upon to exercise and use its discretion whether the
imposition of punitive or exemplary damages even though not
expressly prayed or pleaded in the plaintiffs' complaint.
x x x It further appears that the amount of exemplary damages
need not be proved, because its determination depends upon the
amount of compensatory damages that may be awarded to the
claimant. If the amount of exemplary damages need not be
proved, it need not also be alleged, and the reason is obvious
because it is merely incidental or dependent upon what the court
may award as compensatory damages. Unless and until this
premise is determined and established, what may be claimed as
exemplary damages would amount to a mere surmise or
speculation. It follows as a necessary consequence that the
amount of exemplary damages need not be pleaded in the
complaint because the same cannot be predetermined. One can
merely ask that it be determined by the court if in the use of its
discretion the same is warranted by the evidence, and this is just
what appellee has done. (Bold underscoring supplied for emphasis)
And, secondly, exemplary damages are designed by our civil law to
"permit the courts to reshape behavior that is socially deleterious in its
consequence by creating negative incentives or deterrents against such
behavior."51 The nature and purpose for this kind of damages have been
well-stated in People v. Dalisay,52 to wit:ChanRoblesVirtualawlibrary
Also known as 'punitive' or 'vindictive' damages, exemplary or
corrective damages are intended to serve as a deterrent to
serious wrong doings, and as a vindication of undue sufferings
and wanton invasion of the rights of an injured or a punishment
for those guilty of outrageous conduct. These terms are generally,
but not always, used interchangeably. In common law, there is preference
in the use of exemplary damages when the award is to account for injury
to feelings and for the sense of indignity and humiliation suffered by a
person as a result of an injury that has been maliciously and wantonly
inflicted, the theory being that there should be compensation for the hurt
caused by the highly reprehensible conduct of the defendant - associated
with such circumstances as willfulness, wantonness, malice, gross
negligence or recklessness, oppression, insult or fraud or gross fraud - that
intensifies the injury. The terms punitive or vindictive damages are often
used to refer to those species of damages that may be awarded against a
person to punish him for his outrageous conduct. In either case, these
damages are intended in good measure to deter the wrongdoer
and others like him from similar conduct in the future. (Bold
underscoring supplied for emphasis)
The BMI found that the "erroneous maneuvers" during the ill-fated voyage
by the captain of the petitioner's vessel had caused the sinking. After the
vessel had cleared Limbones Point while navigating towards the direction
of Fortune Island, the captain already noticed the listing of the vessel by
three degrees to the portside of the vessel, but, according to the BMI, he
did not exercise prudence as required by the situation in which his vessel
was suffering the battering on the starboard side by big waves of seven to
eight meters high and strong southwesterly winds of 25 knots. The BMI
pointed out that he should have considerably reduced the speed of the
vessel based on his experience about the vessel - a close-type ship of
seven decks, and of a wide and high superstructure - being vulnerable if
exposed to strong winds and high waves. He ought to have also known
that maintaining a high speed under such circumstances would have
shifted the solid and liquid cargo of the vessel to port, worsening the tilted
position of the vessel. It was only after a few minutes thereafter that he
finally ordered the speed to go down to 14 knots, and to put ballast water
to the starboard-heeling tank to arrest the continuous listing at portside.
By then, his moves became an exercise in futility because, according to
the BMI, the vessel was already listing to her portside between 15 to 20
degrees, which was almost the maximum angle of the vessel's loll. It then
became inevitable for the vessel to lose her stability.
The BMI concluded that the captain had executed several starboard
maneuvers despite the critical situation of the vessel, and that the
maneuvers had greatly added to the tilting of the vessel. It
observed:ChanRoblesVirtualawlibrary
x x x In the open seas, with a fast speed of 14 knots, advance
maneuvers such as this would tend to bring the body of the ship
in the opposite side. In navigational terms, this movement is
described as the centripetal force. This force is produced by the
water acting on the side of the ship away from the center of the
turn. The force is considered to act at the center of lateral
resistance which, in this case, is the centroid of the underwater
area of the ship's side away from the center of the turn. In the
case of the Princess, when the Captain maneuvered her to
starboard, her body shifted its weight to port. Being already
inclined to an angle of 15 degrees, coupled with the
instantaneous movement of the ship, the cargoes below deck
could have completely shifted its position and weight towards
portside. By this time, the ship being ravaged simultaneously by
ravaging waves and howling winds on her starboard side, finally
lost her grip.53chanroblesvirtuallawlibrary
Clearly, the petitioner and its agents on the scene acted wantonly and
recklessly. Wanton and recklessare virtually synonymous in meaning as
respects liability for conduct towards others.54Wanton means characterized
by extreme recklessness and utter disregard for the rights of others; or
marked by or manifesting arrogant recklessness of justice or of rights or
feelings of others.55 Conduct is reckless when it is an extreme departure
from ordinary care, in a situation in which a high degree of danger is
apparent. It must be more than any mere mistake resulting from
inexperience, excitement, or confusion, and more than mere
thoughtlessness or inadvertence, or simple inattention. 56chanrobleslaw
The actuations of the petitioner and its agents during the incident
attending the unfortunate sinking of the M/V Princess of the Orient were
far below the standard of care and circumspection that the law on
common carriers demanded. Accordingly, we hereby fix the sum of
P1,000,000.00 in order to serve fully the objective of exemplarity among
those engaged in the business of transporting passengers and cargo by
sea. The amount would not be excessive, but proper. As the Court put it
in Pereña v. Zarate:57
Anent the P1,000,000.00 allowed as exemplary damages, we should not
reduce the amount if only to render effective the desired example for the
public good. As a common carrier, the Perenas needed to be vigorously
reminded to observe their duty to exercise extraordinary diligence to
prevent a similarly senseless accident from happening again. Only by an
award of exemplary damages in that amount would suffice to instill in
them and others similarly situated like them the ever-present need for
greater and constant vigilance in the conduct of a business imbued with
public interest.58 (Bold underscoring supplied for emphasis)
WHEREFORE, the Court AFFIRMS the decision promulgated on June 27,
2005 with the MODIFICATIONS that: (a) the amount of moral damages is
fixed at P1,000,000.00; (b) the amount of P1,000,000.00 is granted as
exemplary damages; and (c) the sum of P120,000.00 is allowed as
temperate damages, all to be paid to the heirs of the late Napoleon
Sesante. In addition, all the amounts hereby awarded shall earn interest of
6% per annum from the finality of this decision until fully paid. Costs of
suit to be paid by the petitioner.
SO ORDERED.chanRoblesvirtualLawlibrary
 Petitioner Herminio Mariano, Jr. is the surviving spouse of Dr.
Sereno, C.J., Leonardo-De Castro, Perlas-Bernabe, and Caguioa, JJ., concur. Frelinda Mariano who was a passenger of a Celyrosa Express bus bound for
Endnotes: Tagaytay when she met her death. Respondent Ildefonso C. Callejas is the
registered owner of Celyrosa Express, while respondent Edgar de Borja
was the driver of the bus on which the deceased was a passenger.

Republic of the Philippines At around 6:30 p.m. on November 12, 1991, along Aguinaldo
Supreme Court Highway, San Agustin, Dasmarias, Cavite, the Celyrosa Express bus,
Manila carrying Dr. Mariano as its passenger, collided with an Isuzu truck with
trailer bearing plate numbers PJH 906 and TRH 531. The passenger bus
FIRST DIVISION was bound for Tagaytay while the trailer truck came from the opposite
direction, bound for Manila. The trailer truck bumped the passenger bus on
its left middle portion. Due to the impact, the passenger bus fell on its
HERMINIO MARIANO, JR., G.R. No. 166640 right side on the right shoulder of the highway and caused the death of Dr.
Petitioner, Mariano and physical injuries to four other passengers. Dr. Mariano was 36
years old at the time of her death. She left behind three minor children,
aged four, three and two years.
Present:
PUNO, C.J., Chairperson,
CARPIO, Petitioner filed a complaint for breach of contract of carriage and
- versus - damages against respondents for their failure to transport his wife and
CORONA,
LEONARDO-DE CASTRO, and mother of his three minor children safely to her destination. Respondents
BERSAMIN, JJ. denied liability for the death of Dr. Mariano. They claimed that the
proximate cause of the accident was the recklessness of the driver of the
trailer truck which bumped their bus while allegedly at a halt on the
ILDEFONSO C. CALLEJAS and shoulder of the road in its rightful lane. Thus, respondent Callejas filed a
EDGAR DE BORJA, Promulgated:
third-party complaint against Liong Chio Chang, doing business under the
Respondents. name and style of La Perla Sugar Supply, the owner of the trailer truck, for
July 31, 2009
indemnity in the event that he would be held liable for damages to
petitioner.
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
-----x
Other cases were filed. Callejas filed a complaint, [4] docketed as
Civil Case No. NC-397 before the RTC of Naic, Cavite, against La Perla
DECISION Sugar Supply and Arcadio Arcilla, the truck driver, for damages he incurred
due to the vehicular accident. On September 24, 1992, the said court
dismissed the complaint against La Perla Sugar Supply for lack of
PUNO, C.J.: evidence. It, however, found Arcilla liable to pay Callejas the cost of the
repairs of his passenger bus, his lost earnings, exemplary damages and
attorneys fees.[5]
On appeal are the Decision[1] and Resolution[2] of the Court of
Appeals in CA-G.R. CV No. 66891, dated May 21, 2004 and January 7, 2005 A criminal case, Criminal Case No. 2223-92, was also filed against
respectively, which reversed the Decision[3] of the Regional Trial Court truck driver Arcilla in the RTC of Imus, Cavite. On May 3, 1994, the said
(RTC) of Quezon City, dated September 13, 1999, which found respondents court convicted truck driver Arcadio Arcilla of the crime of reckless
jointly and severally liable to pay petitioner damages for the death of his imprudence resulting to homicide, multiple slight physical injuries and
wife. damage to property.[6]

First, the facts:

 In the case at bar, the trial court, in its Decision dated September would make the common carrier the insurer of the
13, 1999, found respondents Ildefonso Callejas and Edgar de Borja, absolute safety of its passengers which is not the intention
together with Liong Chio Chang, jointly and severally liable to pay of the lawmakers.[8]
petitioner damages and costs of suit. The dispositive portion of the
Decision reads:
The dispositive portion of the Decision reads:
ACCORDINGLY, the defendants are ordered to pay as
follows: WHEREFORE, the decision appealed from, insofar
as it found defendants-appellants Ildefonso Callejas and
1. The sum of P50,000.00 as civil Edgar de Borja liable for damages to plaintiff-appellee
indemnity for the loss of life; Herminio E. Mariano, Jr., is REVERSED and SET ASIDE and
another one entered absolving them from any liability for
2. The sum of P40,000.00 as actual and
the death of Dr. Frelinda Cargo Mariano.[9]
compensatory damages;
3. The sum of P1,829,200.00 as foregone
income; The appellate court also denied the motion for reconsideration
filed by petitioner.
4. The sum of P30,000.00 as moral
damages;
Hence, this appeal, relying on the following ground:
5. The sum of P20,000.00 as exemplary
damages; THE DECISION OF THE HONORABLE COURT OF APPEALS,
SPECIAL FOURTEENTH DIVISION IS NOT IN ACCORD WITH
6. The costs of suit. THE FACTUAL BASIS OF THE CASE.[10]
SO ORDERED.[7]
The following are the provisions of the Civil Code pertinent to the
case at bar:
ART. 1733. Common carriers, from the nature of
Respondents Callejas and De Borja appealed to the Court of Appeals, their business and for reasons of public policy, are bound
contending that the trial court erred in holding them guilty of breach of to observe extraordinary diligence in the vigilance over the
contract of carriage. goods and for the safety of the passengers transported by
them, according to all the circumstances of each case.
On May 21, 2004, the Court of Appeals reversed the decision of ART. 1755. A common carrier is bound to carry the
the trial court. It reasoned: passengers safely as far as human care and foresight can
. . . the presumption of fault or negligence against the provide, using the utmost diligence of very cautious
carrier is only a disputable presumption. It gives in where persons, with a due regard for all the circumstances.
contrary facts are established proving either that the ART. 1756. In case of death of or injuries to
carrier had exercised the degree of diligence required by passengers, common carriers are presumed to have been
law or the injury suffered by the passenger was due to a at fault or to have acted negligently, unless they prove
fortuitous event. Where, as in the instant case, the injury that they observed extraordinary diligence as prescribed in
sustained by the petitioner was in no way due to any articles 1733 and 1755.
defect in the means of transport or in the method of
transporting or to the negligent or wilful acts of private
respondent's employees, and therefore involving no issue In accord with the above provisions, Celyrosa Express, a common
of negligence in its duty to provide safe and suitable cars carrier, through its driver, respondent De Borja, and its registered owner,
as well as competent employees, with the injury arising respondent Callejas, has the express obligation to carry the passengers
wholly from causes created by strangers over which the safely as far as human care and foresight can provide, using the utmost
carrier had no control or even knowledge or could not have diligence of very cautious persons, with a due regard for all the
prevented, the presumption is rebutted and the carrier is circumstances,[11] and to observe extraordinary diligence in the discharge
not and ought not to be held liable. To rule otherwise of its duty. The death of the wife of the petitioner in the course of
transporting her to her destination gave rise to the presumption of
negligence of the carrier. To overcome the presumption, respondents have
to show that they observed extraordinary diligence in the discharge of
their duty, or that the accident was caused by a fortuitous event.
This Court interpreted the above quoted provisions in Pilapil v.
Court of Appeals.[12] We elucidated:
While the law requires the highest degree of
diligence from common carriers in the safe transport of
their passengers and creates a presumption of negligence
against them, it does not, however, make the carrier
an insurer of the absolute safety of its passengers.
Article 1755 of the Civil Code qualifies the duty of
extraordinary care, vigilance and precaution in the
carriage of passengers by common carriers to only such as
human care and foresight can provide. What constitutes
compliance with said duty is adjudged with due regard to
all the circumstances.
Article 1756 of the Civil Code, in creating a
presumption of fault or negligence on the part of the
common carrier when its passenger is injured, merely
relieves the latter, for the time being, from introducing
evidence to fasten the negligence on the former, because
the presumption stands in the place of evidence. Being a
mere presumption, however, the same is rebuttable
by proof that the common carrier had exercised
extraordinary diligence as required by law in the
performance of its contractual obligation, or that
the injury suffered by the passenger was solely due
to a fortuitous event.
In fine, we can only infer from the law the intention
of the Code Commission and Congress to curb the
recklessness of drivers and operators of common carriers
in the conduct of their business.
Thus, it is clear that neither the law nor the
nature of the business of a transportation company
makes it an insurer of the passenger's safety, but
that its liability for personal injuries sustained by its
passenger rests upon its negligence, its failure to exercise
the degree of diligence that the law requires.
In the case at bar, petitioner cannot succeed in his contention that
respondents failed to overcome the presumption of negligence against
them. The totality of evidence shows that the death of petitioners spouse
was caused by the reckless negligence of the driver of the Isuzu trailer
truck which lost its brakes and bumped the Celyrosa Express bus, owned
and operated by respondents.
First, we advert to the sketch prepared by PO3 Magno S. de Villa,
who investigated the accident. The sketch[13] shows the passenger bus
facing the direction of Tagaytay City and lying on its right side on the
shoulder of the road, about five meters away from the point of impact. On
the other hand, the trailer truck was on the opposite direction, about 500
meters away from the point of impact. PO3 De Villa stated that he
interviewed De Borja, respondent driver of the passenger bus, who said
that he was about to unload some passengers when his bus was bumped
by the driver of the trailer truck that lost its brakes. PO3 De Villa checked
out the trailer truck and found that its brakes really failed. He testified
before the trial court, as follows:
ATTY. ESTELYDIZ:
q You pointed to the Isuzu truck beyond the point of
impact. Did you investigate why did (sic) the Isuzu
truck is beyond the point of impact?
a Because the truck has no brakes.
COURT:
q What is the distance between that circle which is marked
as Exh. 1-c to the place where you found the same?
a More or less 500 meters.
q Why did you say that the truck has no brakes?
a I tested it.
q And you found no brakes?
a Yes, sir.
xxx
q When you went to the scene of accident, what was the
position of Celyrosa bus?
a It was lying on its side.
COURT:
q Right side or left side?
a Right side.
 ATTY. ESTELYDIZ:
q On what part of the road was it lying?
a On the shoulder of the road.

COURT:
q How many meters from the point of impact?
a Near, about 5 meters.[14]

His police report bolsters his testimony and states:

Said vehicle 1 [passenger bus] was running from
Manila toward south direction when, in the course of its
travel, it was hit and bumped by vehicle 2 [truck with
trailer] then running fast from opposite direction, causing
said vehicle 1 to fall on its side on the road shoulder,
causing the death of one and injuries of some passengers
thereof, and its damage, after collission (sic), vehicle 2
continiously (sic) ran and stopped at approximately 500
meters away from the piont (sic) of impact.[15]

In fine, the evidence shows that before the collision, the passenger bus
was cruising on its rightful lane along the Aguinaldo Highway when
the trailer truck coming from the opposite direction, on full speed,
suddenly swerved and encroached on its lane, and bumped the passenger
bus on its left middle portion. Respondent driver De Borja had every right
to expect that the trailer truck coming from the opposite direction would
stay on its proper lane. He was not expected to know that the trailer truck
had lost its brakes. The swerving of the trailer truck was abrupt and it was
running on a fast speed as it was found 500 meters away from the point of
collision.Secondly, any doubt as to the culpability of the driver of the
trailer truck ought to vanish when he pleaded guilty to the charge of
reckless imprudence resulting to multiple slight physical injuries and
damage to property in Criminal Case No. 2223-92, involving the same
incident.

IN VIEW WHEREOF, the petition is DENIED. The Decision dated

May 21, 2004 and the Resolution dated January 7, 2005 of the Court of
Appeals in CA-G.R. CV No. 66891 are AFFIRMED.

SO ORDERED.

[G.R. No. 119756. March 18, 1999]
FORTUNE EXPRESS, INC., petitioner, vs. COURT OF
APPEALS, PAULIE U. CAORONG, and minor children YASSER KING
CAORONG, ROSE HEINNI and PRINCE ALEXANDER, all surnamed
CAORONG, and represented by their mother PAULIE U.
CAORONG, respondents.
DECISION
MENDOZA, J.:
This is an appeal by petition for review on certiorari of the
decision, dated July 29, 1994, of the Court of Appeals, which reversed the
decision of the Regional Trial Court, Branch VI, Iligan City. The aforesaid
decision of the trial court dismissed the complaint of private respondents
against petitioner for damages for breach of contract of carriage filed on
the ground that petitioner had not exercised the required degree of
diligence in the operation of one of its buses. Atty. Talib Caorong, whose
heirs are private respondents herein, was a passenger of the bus and was
killed in the ambush involving said bus.
The facts of the instant case are as follows:
Petitioner is a bus company in northern Mindanao. Private
respondent Paulie Caorong is the widow of Atty. Caorong, while private
respondents Yasser King, Rose Heinni, and Prince Alexander are their
minor children.
On November 18, 1989, a bus of petitioner figured in an accident
with a jeepney in Kauswagan, Lanao del Norte, resulting in the death of
several passengers of the jeepney, including two Maranaos. Crisanto
Generalao, a volunteer field agent of the Constabulary Regional Security
Unit No. X, conducted an investigation of the accident. He found that the
owner of the jeepney was a Maranao residing in Delabayan, Lanao del
Norte and that certain Maranaos were planning to take revenge on the
petitioner by burning some of its buses. Generalao rendered a report on
his findings to Sgt. Reynaldo Bastasa of the Philippine Constabulary
Regional Hearquarters at Cagayan de Oro. Upon the instruction of Sgt.
Bastasa, he went to see Diosdado Bravo, operations manager of petitioner,
at its main office in Cagayan de Oro City. Bravo assured him that the
necessary precautions to insure the safety of lives and property would be
taken.[1]
At about 6:45 P.M. on November 22, 1989, three armed Maranaos
who pretended to be passengers, seized a bus of petitioner at Linamon,
Lanao del Norte while on its way to Iligan City. Among the passengers of
the bus was Atty. Caorong. The leader of the Maranaos, identified as one
Bashier Mananggolo, ordered the driver, Godofredo Cabatuan, to stop the
bus on the side of the highway. Mananggolo then shot Cabatuan on the
arm, which caused him to slump on the steering wheel. Then one of the
companions of Mananggolo started pouring gasoline inside the bus, as the
other held the passengers at bay with a handgun. Mananggolo then
ordered the passengers to get off the bus. The passengers, including Atty.
Caorong, stepped out of the bus and went behind the bushes in a field
some distance from the highway.[2]
However, Atty. Caorong returned to the bus to retrieve something
from the overhead rack. At that time, one of the armed men was pouring
gasoline on the head of the driver. Cabatuan, who had meantime regained
consciousness, heard Atty. Caorong pleading with the armed men to spare
the driver as he was innocent of any wrong doing and was only trying to
make a living. The armed men were, however, adamant as they repeated
their warning that they were going to burn the bus along with its
driver.During this exchange between Atty. Caorong and the assailants,
Cabatuan climbed out of the left window of the bus and crawled to the
canal on the opposite side of the highway. He heard shots from inside the
bus. Larry de la Cruz, one of the passengers, saw that Atty. Caorong was
hit. Then the bus was set on fire. Some of the passengers were able to pull
Atty. Caorong out of the burning bus and rush him to the Mercy
Community Hospital in Iligan City, but he died while undergoing operation.
[3]
The private respondents brought this suit for breach of contract of
carriage in the Regional Trial Court, Branch VI, Iligan City. In his decision,
dated December 28, 1990, the trial court dismissed the complaint, holding
as follows:
The fact that defendant, through Operations Manager Diosdado
Bravo, was informed of the rumors that the Moslems intended to take
revenge by burning five buses of defendant is established since the latter
also utilized Crisanto Generalaos as a witness. Yet despite this information,
the plaintiffs charge, defendant did not take proper
precautions. . . . Consequently, plaintiffs now fault the defendant for
ignoring the report. Their position is that the defendant should have
provided its buses with security guards. Does the law require common
carriers to install security guards in its buses for the protection and safety
of its passengers? Is the failure to post guards an omission of the duty to
exercise the diligence of a good father of the family which could have
prevented the killing of Atty. Caorong? To our mind, the diligence
demanded by law does not include the posting of security guards in
buses. It is an obligation that properly belongs to the State. Besides, will
the presence of one or two security guards suffice to deter a determined
assault of the lawless and thus prevent the injury complained of? Maybe
so, but again, perhaps not. In other words, the presence of a security
guard is not a guarantee that the killing of Atty. Caorong would have been
definitely avoided.
. by additional personnel of defendant-appellee. On hindsight, the handguns
Accordingly, the failure of defendant to accord faith and credit to
the report of Mr. Generalao and the fact that it did not provide security to
its buses cannot, in the light of the circumstances, be characterized as
negligence.
Finally, the evidence clearly shows that the assailants did not have
the least intention of harming any of the passengers. They ordered all the
passengers to alight and set fire on the bus only after all the passengers
were out of danger. The death of Atty. Caorong was an unexpected and
unforseen occurrence over which defendant had no control. Atty. Caorong
performed an act of charity and heroism in coming to the succor of the
driver even in the face of danger. He deserves the undying gratitude of the
driver whose life he saved. No one should blame him for an act of
extraordinary charity and altruism which cost his life. But neither should
any blame be laid on the doorstep of defendant. His death was solely due
to the willful acts of the lawless which defendant could neither prevent nor
stop.
.
WHEREFORE, in view of the foregoing, the complaint is hereby
dismissed. For lack of merit, the counter-claim is likewise dismissed. No
cost.[4]
On appeal, however, the Court of Appeals reversed. It held:
In the case at bench, how did defendant-appellee react to the tip
or information that certain Maranao hotheads were planning to burn five of
its buses out of revenge for the deaths of two Maranaos in an earlier
collision involving appellees bus? Except for the remarks of appellees
operations manager that we will have our action . . . . and Ill be the one to
settle it personally, nothing concrete whatsoever was taken by appellee or
its employees to prevent the execution of the threat. Defendant-appellee
never adopted even a single safety measure for the protection of its
paying passengers. Were there available safeguards? Of course, there
were: one was frisking passengers particularly those en route to the area
where the threats were likely to be carried out such as where the earlier
accident occurred or the place of influence of the victims or their locality. If
frisking was resorted to, even temporarily, . . . . appellee might be legally
excused from liability. Frisking of passengers picked up along the route
could have been implemented by the bus conductor; for those boarding at
the bus terminal, frisking could have been conducted by him and perhaps
and especially the gallon of gasoline used by the felons all of which were
brought inside the bus would have been discovered, thus preventing the
burning of the bus and the fatal shooting of the victim.
Appellees argument that there is no law requiring it to provide
guards on its buses and that the safety of citizens is the duty of the
government, is not well taken. To be sure, appellee is not expected to
assign security guards on all of its buses; if at all, it has the duty to post
guards only on its buses plying predominantly Maranao areas. As
discussed in the next preceding paragraph, the least appellee could have
done in response to the report was to adopt a system of verification such
as frisking of passengers boarding its buses. Nothing, and to repeat,
nothing at all, was done by defendant-appellee to protect its innocent
passengers from the danger arising from the Maranao threats. It must be
observed that frisking is not a novelty as a safety measure in our
society. Sensitive places in fact, nearly all important places have applied
this method of security enhancement. Gadgets and devices are available
in the market for this purpose. It would not have weighed much against
the budget of the bus company if such items were made available to its
personnel to cope up with situations such as the Maranao threats.
In view of the constitutional right to personal privacy, our
pronouncement in this decision should not be construed as an advocacy of
mandatory frisking in all public conveyances. What we are saying is that
given the circumstances obtaining in the case at bench that: (a) two
Maranaos died because of a vehicular collision involving one of appellees
vehicles; (b) appellee received a written report from a member of the
Regional Security Unit, Constabulary Security Group, that the tribal/ethnic
group of the two deceased were planning to burn five buses of appellee
out of revenge; and (c) appellee did nothing absolutely nothing for the
safety of its passengers travelling in the area of influence of the victims,
appellee has failed to exercise the degree of diligence required of common
carriers. Hence, appellee must be adjudged liable.
. family. In the present case, it is clear that because of the negligence of
WHEREFORE, the decision appealed from is hereby REVERSED and
another rendered ordering defendant-appellee to pay plaintiffs-appellants
the following:
1) P3,399,649.20 as death indemnity;
2) P50,000.00 and P500.00 per appearance as attorneys fees; and
Costs against defendant-appellee.[5]
Hence, this appeal. Petitioner contends:
(A) THAT PUBLIC RESPONDENT ERRED IN REVERSING THE
DECISION OF THE REGIONAL TRIAL COURT DATED DECEMBER 28, 1990
DISMISSING THE COMPLAINT AS WELL AS THE COUNTERCLAIM, AND
FINDING FOR PRIVATE RESPONDENTS BY ORDERING PETITIONER TO PAY
THE GARGANTUAN SUM OF P3,449,649.20 PLUS P500.00 PER APPEARANCE
AS ATTORNEYS FEES, AS WELL AS DENYING PETITIONERS MOTION
FOR RECONSIDERATION AND THE SUPPLEMENT TO SAID MOTION, WHILE
HOLDING, AMONG OTHERS, THAT PETITIONER BREACHED THE CONTRACT
OF CARIAGE BY ITS FAILURE TO EXERCISE THE REQUIRED DEGREE OF
DILIGENCE;
(B) THAT THE ACTS OF THE MARANAO OUTLAWS WERE SO GRAVE,
IRRESISTIBLE, VIOLENT, AND FORCEFUL, AS TO BE REGARDED AS CASO
FORTUITO; AND
(C) THAT PUBLIC RESPONDENT COURT OF APPEALS SERIOUSLY
ERRED IN HOLDING THAT PETITIONER COULD HAVE PROVIDED ADEQUATE
SECURITY IN PREDOMINANTLY MUSLIM AREAS AS PART OF ITS DUTY TO
OBSERVE EXTRA-ORDINARY DILIGENCE AS A COMMON CARRIER.
The instant petition has no merit.
First. Petitioners Breach of the Contract of Carriage
Art. 1763 of the Civil Code provides that a common carrier is
responsible for injuries suffered by a passenger on account of the wilful
acts of other passengers, if the employees of the common carrier could
have prevented the act the exercise of the diligence of a good father of a
petitioners employees, the seizure of the bus by Mananggolo and his men
was made possible.
Despite warning by the Philippine Constabulary at Cagayan de Oro
that the Maranaos were planning to take revenge on the petitioner by
burning some of its buses and the assurance of petitioners operation
manager, Diosdado Bravo, that the necessary precautions would be taken,
petitioner did nothing to protect the safety of its passengers.
Had petitioner and its employees been vigilant they would not
have failed to see that the malefactors had a large quantity of gasoline
with them. Under the circumstances, simple precautionary measures to
protect the safety of passengers, such as frisking passengers and
inspecting their baggages, preferably with non-intrusive gadgets such as
metal detectors, before allowing them on board could have been
employed without violating the passengers constitutional rights. As this
Court intimated in Gacal v. Philippine Air Lines, Inc., [6] a common carrier
can be held liable for failing to prevent a hijacking by frisking passengers
and inspecting their baggages.
From the foregoing, it is evident that petitioners employees failed
to prevent the attack on one of petitioners buses because they did not
exercise the diligence of a good father of a family. Hence, petitioner should
be held liable for the death of Atty. Caorong.
Second. Seizure of Petitioners Bus not a Case of Force Majeure
The petitioner contends that the seizure of its bus by the armed
assailants was a fortuitous event for which it could not be held liable.
Art. 1174 of the Civil Code defines a fortuitous even as an
occurrence which could not be foreseen or which though foreseen, is
inevitable. In Yobido v. Court of Appeals,[7] we held that to be considered as
force majeure, it is necessary that: (1) the cause of the breach of the
obligation must be independent of the human will; (2) the event must be
either unforeseeable or unavoidable; (3) the occurrence must be such as
to render it impossible for the debtor to fulfill the obligation in a normal
manner; and (4) the obligor must be free of participation in, or aggravation
of, the injury to the creditor. The absence of any of the requisites
mentioned above would prevent the obligor from being excused from
liability.
Thus, in Vasquez v. Court of Appeals,[8] it was held that the
common carrier was liable for its failure to take the necessary precautions
against an approaching typhoon, of which it was warned, resulting in the
loss of the lives of several passengers. The event was foreseeable, and,
thus, the second requisite mentioned above was not fulfilled. This ruling
applies by analogy to the present case. Despite the report of PC agent
Generalao that the Maranaos were going to attack its buses, petitioner
took no steps to safeguard the lives and properties of its passengers. The
seizure of the bus of the petitioner was foreseeable and, therefore, was not
a fortuitous event which would exempt petitioner from liability.
Petitioner invokes the ruling in Pilapil v. Court of Appeals[9] and De
Guzman v. Court of Appeals[10] in support of its contention that the seizure
of its bus by the assailants constitutes force majeure. In Pilapil v. Court of
Appeals,[11] it was held that a common carrier is not liable for failing to
install window grills on its buses to protect passengers from injuries
caused by rocks hurled at the bus by lawless elements. On the other hand,
in De Guzman v. Court of Appeals, [12] it was ruled that a common carrier is
not responsible for goods lost as a result of a robbery which is attended by
grave or irresistible threat, violence, or force.
It is clear that the cases of Pilapil and De Guzman do not apply to
the present case. Art. 1755 of the Civil Code provides that a common
carrier is bound to carry the passengers as far as human care and
foresight can provide, using the utmost diligence of very cautious person,
with due regard for all the circumstances. Thus, we held in Pilapil and De
Guzman that the respondents therein were not negligent in failing to take
special precautions against threats to the safety of passengers which
could not be foreseen, such as tortious or criminal acts of third persons. In
the present case, this factor of unforeseeablility (the second requisite for
an event to be considered force majeure) is lacking. As already stated,
despite the report of PC agent Generalao that the Maranaos were planning
to burn some of petitioners buses and the assurance of petitioners
operations manager (Diosdado Bravo) that the necessary precautions
would be taken, nothing was really done by petitioner to protect the safety
of passengers.
Third. Deceased not Guilty of Contributory Negligence
The petitioner contends that Atty. Caorong was guilty of
contributory negligence in returning to the bus to retrieve something. But
Atty. Caorong did not act recklessly. It should be pointed out that the
intended targets of the violence were petitioner and its employees, not its
passengers. The assailants motive was to retaliate for the loss of life of
two Maranaos as a result of the collision between petitioners bus and the
jeepney in which the two Maranaos were riding. Mananggolo, the leader of
the group which had hijacked the bus, ordered the passengers to get off
the bus as they intended to burn it and its driver. The armed men actually
allowed Atty. Caorong to retrieve something from the bus. What apparently
angered them was his attempt to help the driver of the bus by pleading for
his life. He was playing the role of the good Samaritan. Certainly, this act
cannot be considered an act of negligence, let alone recklessness.
Fourth. Petitioner Liable to Private Respondents for Damages
We now consider the question of damages that the heirs of Atty.
Caorong, private respondents herein, are entitled to recover from the
petitioner.
Indemnity for Death. Art. 1764 of the Civil Code, in relation to Art.
2206 thereof, provides for the payment of indemnity for the death of
passengers caused by the breached of contract of carriage by a common
carrier. Initially fixed in Art. 2206 at P3,000.00, the amount of the said
indemnity for death has through the years been gradually increased in
view of the declining value of the peso. It is presently fixed at P50,000.00.
[13]
Private respondents are entitled to this amount.
Actual damages. Art. 2199 provides that Except as provided by law
or by stipulation, one is entitled to an adequate compensation only for
such pecuniary loss suffered by him as he has duly proved. The trial court
found that the private respondents spent P30,000.00 for the wake and
burial of Atty. Caorong.[14] Since petitioner does not question this finding of
the trial court, it is liable to private respondents in the said amount as
actual damages.
Moral Damages. Under Art. 2206, the spouse, legitimate and
illegitimate descendants and ascendants of the deceased may demand
moral damages for mental anguish by reason of the death of the
deceased. The trial court found that private respondent Paulie Caorong
suffered pain from the death of her husband and worry on how to provide
support for their minor children, private respondents Yasser King, Rose
Heinni, and Prince Alexander.[15] The petitioner likewise does not question
this finding of the trial court. Thus, in accordance with recent decisions of
this Court,[16] we hold that the petitioner is liable to the private
respondents in the amount of P100,000.00 as moral damages for the
death of Atty. Caorong.
 Exemplary Damages. Art. 2232 provides that in contracts and WHEREFORE, the decision, dated July 29, 1994, of the Court of
quasi-contracts, the court may award exemplary damages if the defendant Appeals is hereby AFFIRMED with the MODIFICATION that petitioner
acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner. Fortune Express, Inc. is ordered to pay the following amounts to private
In the present case, the petitioner acted in a wanton and reckless respondents Paulie, Yasser King, Rose Heinni, and Prince Alexander
manner. Despite warning that the Maranaos were planning to take revenge Caorong:
against the petitioner by burning some of its buses, and contrary to the
assurance made by its operations manager that the necessary precautions
would be taken, the petitioner and its employees did nothing to protect the 1. death indemnity in the amount of fifty thousand pesos
safety of passengers. Under the circumstances, we deem it reasonable to (P50,000.00);
award private respondents exemplary damages in the amount
of P100,000.00.[17] 2. actual damages in the amount of thirty thousand pesos
(P30,000.00);
Attorneys Fees. Pursuant to Art. 2208, attorneys fees may be
recovered when, as in the instant case, exemplary damages are 3. moral damages in the amount of one hundred thousand
awarded. In the recent case of Sulpicio Lines, Inc. v. Court of Appeals,
[18] pesos(P100,000.00);
we held an award of P50,000.00 as attorneys fees to be
reasonable. Hence, the private respondents are entitled to attorneys fees
in that amount. 4. exemplary damages in the amount of one hundred thousand
pesos (P100,000.00);
Compensation for Loss of Earning Capacity. Art. 1764 of the Civil
Code, in relation to Art. 2206 thereof, provides that in addition to the 5. attorneys fees in the amount of fifty thousand pesos
indemnity for death arising from the breach of contract of carriage by a (P50,000.00);
common carrier, 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. The formula established in decided cases for computing net 6. compensation for loss of earning capacity in the amount of two
earning capacity is as follows:[19] million one hundred twenty-one thousand four hundred four pesos and
ninety centavos (P2,121,404.90); and

Gross Necessary
7) costs of suits.

Net earning = Life x Annual - Living

SO ORDERED.

Capacity Expectancy Income Expenses

Bellosillo, (Chairman), Puno, and Buena, JJ., concur.

Life expectancy is equivalent to two thirds (2/3) multiplied by the

difference of eighty (80) and the age of the deceased. [20] Since Atty. Quisumbing, J., on official business abroad.
Caorong was 37 years old at the time of his death, [21] he had a life
expectancy of 28 2/3 more years. [22] His projected gross annual income,
computed based on his monthly salary of P11,385.00[23] as a lawyer in the
Department of Agrarian Reform at the time of his death, was P148,005.00.
[24]
allowing for necessary living expenses of fifty percent (50%) [25]of his
projected gross annual income, his total earning capacity amounts
to P2,121,404.90.[26] Hence, the petitioner is liable to the private
respondents in the said amount as compensation for loss of earning
capacity.

G.R. No. 52159 December 22, 1989
JOSE PILAPIL, petitioner,
vs.
HON. COURT OF APPEALS and ALATCO TRANSPORTATION
COMPANY, INC., respondents.
Martin Badong, Jr. for petitioner.
Eufronio K. Maristela for private respondent.
PADILLA, J.:
This is a petition to review on certiorari the decision* rendered by
the Court of Appeals dated 19 October 1979 in CA-G.R. No. 57354-R
entitled "Jose Pilapil, plaintiff-appellee versus Alatco Transportation Co.,
Inc., defendant-appellant," which reversed and set aside the judgment of
the Court of First Instance of Camarines Sur in Civil Case No. 7230 ordering
respondent transportation company to pay to petitioner damages in the
total sum of sixteen thousand three hundred pesos (P 16,300.00).
The record discloses the following facts:
Petitioner-plaintiff Jose Pilapil, a paying passenger, boarded
respondent-defendant's bus bearing No. 409 at San Nicolas, Iriga City on
16 September 1971 at about 6:00 P.M. While said bus No. 409 was in due
course negotiating the distance between Iriga City and Naga City, upon
reaching the vicinity of the cemetery of the Municipality of Baao,
Camarines Sur, on the way to Naga City, an unidentified man, a bystander
along said national highway, hurled a stone at the left side of the bus,
which hit petitioner above his left eye. Private respondent's personnel lost
no time in bringing the petitioner to the provincial hospital in Naga City
where he was confined and treated.
Considering that the sight of his left eye was impaired, petitioner
was taken to Dr. Malabanan of Iriga City where he was treated for another
week. Since there was no improvement in his left eye's vision, petitioner
went to V. Luna Hospital, Quezon City where he was treated by Dr.
Capulong. Despite the treatment accorded to him by Dr. Capulong,
petitioner lost partially his left eye's vision and sustained a permanent scar
above the left eye.
Thereupon, petitioner instituted before the Court of First Instance
of Camarines Sur, Branch I an action for recovery of damages sustained as
a result of the stone-throwing incident. After trial, the court a quo rendered
judgment with the following dispositive part:
Wherefore, judgment is hereby entered:
1. Ordering defendant transportation company to pay plaintiff Jose
Pilapil the sum of P 10,000.00, Philippine Currency, representing actual
and material damages for causing a permanent scar on the face and
injuring the eye-sight of the plaintiff;
2. Ordering further defendant transportation company to pay the
sum of P 5,000.00, Philippine Currency, to the plaintiff as moral and
exemplary damages;
3. Ordering furthermore, defendant transportation company to
reimburse plaintiff the sum of P 300.00 for his medical expenses and
attorney's fees in the sum of P 1,000.00, Philippine Currency; and
4. To pay the costs.
SO ORDERED 1
From the judgment, private respondent appealed to the Court of
Appeals where the appeal was docketed as CA-G.R. No. 57354R. On 19
October 1979, the Court of Appeals, in a Special Division of Five, rendered
judgment reversing and setting aside the judgment of the court a quo.
 Hence the present petition.
In seeking a reversal of the decision of the Court of Appeals,
petitioner contends that said court has decided the issue not in accord
with law. Specifically, petitioner argues that the nature of the business of a
transportation company requires the assumption of certain risks, and the
stoning of the bus by a stranger resulting in injury to petitioner-passenger
is one such risk from which the common carrier may not exempt itself from
liability.
We do not agree.
In consideration of the right granted to it by the public to engage
in the business of transporting passengers and goods, a common carrier
does not give its consent to become an insurer of any and all risks to
passengers and goods. It merely undertakes to perform certain duties to
the public as the law imposes, and holds itself liable for any breach
thereof.
Under Article 1733 of the Civil Code, common carriers are required
to observe extraordinary diligence for the safety of the passenger
transported by them, according to all the circumstances of each case. The
requirement of extraordinary diligence imposed upon common carriers is
restated in Article 1755: "A common carrier is bound to carry the
passengers safely as far as human care and foresight can provide, using
the utmost diligence of very cautious persons, with due regard for all the
circumstances." Further, in case of death of or injuries to passengers, the
law presumes said common carriers to be at fault or to have acted
negligently. 2
While the law requires the highest degree of diligence from
common carriers in the safe transport of their passengers and creates a
presumption of negligence against them, it does not, however, make the
carrier an insurer of the absolute safety of its passengers. 3
Article 1755 of the Civil Code qualifies the duty of extraordinary
care, vigilance and precaution in the carriage of passengers by common
carriers to only such as human care and foresight can provide. what
constitutes compliance with said duty is adjudged with due regard to all
the circumstances.
Article 1756 of the Civil Code, in creating a presumption of fault or
negligence on the part of the common carrier when its passenger is
injured, merely relieves the latter, for the time being, from introducing
evidence to fasten the negligence on the former, because the presumption
stands in the place of evidence. Being a mere presumption, however, the
same is rebuttable by proof that the common carrier had exercised
extraordinary diligence as required by law in the performance of its
contractual obligation, or that the injury suffered by the passenger was
solely due to a fortuitous event. 4
In fine, we can only infer from the law the intention of the Code
Commission and Congress to curb the recklessness of drivers and
operators of common carriers in the conduct of their business.
Thus, it is clear that neither the law nor the nature of the business
of a transportation company makes it an insurer of the passenger's safety,
but that its liability for personal injuries sustained by its passenger rests
upon its negligence, its failure to exercise the degree of diligence that the
law requires. 5
Petitioner contends that respondent common carrier failed to rebut
the presumption of negligence against it by proof on its part that it
exercised extraordinary diligence for the safety of its passengers.
We do not agree.
First, as stated earlier, the presumption of fault or negligence
against the carrier is only a disputable presumption. It gives in where
contrary facts are established proving either that the carrier had exercised
the degree of diligence required by law or the injury suffered by the
passenger was due to a fortuitous event. Where, as in the instant case, the
injury sustained by the petitioner was in no way due to any defect in the
means of transport or in the method of transporting or to the negligent or
willful acts of private respondent's employees, and therefore involving no
issue of negligence in its duty to provide safe and suitable cars as well as
competent employees, with the injury arising wholly from causes created
by strangers over which the carrier had no control or even knowledge or
could not have prevented, the presumption is rebutted and the carrier is
not and ought not to be held liable. To rule otherwise would make the
common carrier the insurer of the absolute safety of its passengers which
is not the intention of the lawmakers.
Second, while as a general rule, common carriers are bound to
exercise extraordinary diligence in the safe transport of their passengers,
it would seem that this is not the standard by which its liability is to be
determined when intervening acts of strangers is to be determined directly
cause the injury, while the contract of carriage Article 1763 governs:
 Article 1763. A common carrier is responsible for injuries suffered WHEREFORE, the judgment appealed from is hereby AFFIRMED.
by a passenger on account of the wilful acts or negligence of other
passengers or of strangers, if the common carrier's employees through the
exercise of the diligence of a good father of a family could have prevented SO ORDERED.
or stopped the act or omission.
Melencio-Herrera (Chairperson), Sarmiento and Regalado, concur.
Clearly under the above provision, a tort committed by a stranger
which causes injury to a passenger does not accord the latter a cause of Paras, J., took no part.
action against the carrier. The negligence for which a common carrier is
held responsible is the negligent omission by the carrier's employees to
prevent the tort from being committed when the same could have been
foreseen and prevented by them. Further, under the same provision, it is
to be noted that when the violation of the contract is due to the willful acts
of strangers, as in the instant case, the degree of care essential to be
exercised by the common carrier for the protection of its passenger is only
that of a good father of a family.

Petitioner has charged respondent carrier of negligence on the

ground that the injury complained of could have been prevented by the
common carrier if something like mesh-work grills had covered the
windows of its bus.

We do not agree.

Although the suggested precaution could have prevented the

injury complained of, the rule of ordinary care and prudence is not so
exacting as to require one charged with its exercise to take doubtful or
unreasonable precautions to guard against unlawful acts of strangers. The
carrier is not charged with the duty of providing or maintaining vehicles as
to absolutely prevent any and all injuries to passengers. Where the carrier
uses cars of the most approved type, in general use by others engaged in
the same occupation, and exercises a high degree of care in maintaining
them in suitable condition, the carrier cannot be charged with negligence
in this respect. 6

Finally, petitioner contends that it is to the greater interest of the

State if a carrier were made liable for such stone-throwing incidents rather
than have the bus riding public lose confidence in the transportation
system.

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

be better left to the consideration of Congress which is empowered to
enact laws to protect the public from the increasing risks and dangers of
lawlessness in society.

[G.R. No. 145804. February 6, 2003]
LIGHT RAIL TRANSIT AUTHORITY & RODOLFO
ROMAN, petitioners, vs. MARJORIE NAVIDAD, Heirs of the Late
NICANOR NAVIDAD & PRUDENT SECURITY AGENCY, respondents.
DECISION
VITUG, J.:
The case before the Court is an appeal from the decision and
resolution of the Court of Appeals, promulgated on 27 April 2000 and 10
October 2000, respectively, in CA-G.R. CV No. 60720, entitled Marjorie
Navidad and Heirs of the Late Nicanor Navidad vs. Rodolfo Roman, et. al.,
which has modified the decision of 11 August 1998 of the Regional Trial
Court, Branch 266, Pasig City, exonerating Prudent Security Agency
(Prudent) from liability and finding Light Rail Transit Authority (LRTA) and
Rodolfo Roman liable for damages on account of the death of Nicanor
Navidad.
On 14 October 1993, about half an hour past seven oclock in the
evening, Nicanor Navidad, then drunk, entered the EDSA LRT station after
purchasing a token (representing payment of the fare). While Navidad was
standing on the platform near the LRT tracks, Junelito Escartin, the security
guard assigned to the area approached Navidad. A misunderstanding or an
altercation between the two apparently ensued that led to a fist fight. No
evidence, however, was adduced to indicate how the fight started or who,
between the two, delivered the first blow or how Navidad later fell on the
LRT tracks. At the exact moment that Navidad fell, an LRT train, operated
by petitioner Rodolfo Roman, was coming in. Navidad was struck by the
moving train, and he was killed instantaneously.
On 08 December 1994, the widow of Nicanor, herein respondent
Marjorie Navidad, along with her children, filed a complaint for damages
against Junelito Escartin, Rodolfo Roman, the LRTA, the Metro Transit
Organization, Inc. (Metro Transit), and Prudent for the death of her
husband. LRTA and Roman filed a counterclaim against Navidad and a
cross-claim against Escartin and Prudent. Prudent, in its answer, denied
liability and averred that it had exercised due diligence in the selection
and supervision of its security guards.
The LRTA and Roman presented their evidence while Prudent and
Escartin, instead of presenting evidence, filed a demurrer contending that
Navidad had failed to prove that Escartin was negligent in his assigned
task. On 11 August 1998, the trial court rendered its decision; it adjudged:
WHEREFORE, judgment is hereby rendered in favor of the plaintiffs
and against the defendants Prudent Security and Junelito Escartin ordering
the latter to pay jointly and severally the plaintiffs the following:
a) 1) Actual damages of P44,830.00;
2) Compensatory damages of P443,520.00;
3) Indemnity for the death of Nicanor Navidad in the sum of P50,000.00;
b) Moral damages of P50,000.00;
c) Attorneys fees of P20,000;
d) Costs of suit.
The complaint against defendants LRTA and Rodolfo Roman are
dismissed for lack of merit.
The compulsory counterclaim of LRTA and Roman are likewise
dismissed.[1]
Prudent appealed to the Court of Appeals. On 27 August 2000, the
appellate court promulgated its now assailed decision exonerating Prudent
from any liability for the death of Nicanor Navidad and, instead, holding
the LRTA and Roman jointly and severally liable thusly:
WHEREFORE, the assailed judgment is hereby MODIFIED, by
exonerating the appellants from any liability for the death of Nicanor
Navidad, Jr. Instead, appellees Rodolfo Roman and the Light Rail Transit
Authority (LRTA) are held liable for his death and are hereby directed to
pay jointly and severally to the plaintiffs-appellees, the following amounts:
a) P44,830.00 as actual damages;
 b) P50,000.00 as nominal damages;
c) P50,000.00 as moral damages;
d) P50,000.00 as indemnity for the death of the deceased; and
e) P20,000.00 as and for attorneys fees.[2]
The appellate court ratiocinated that while the deceased might not
have then as yet boarded the train, a contract of carriage theretofore had
already existed when the victim entered the place where passengers were
supposed to be after paying the fare and getting the corresponding token
therefor. In exempting Prudent from liability, the court stressed that there
was nothing to link the security agency to the death of Navidad. It said
that Navidad failed to show that Escartin inflicted fist blows upon the
victim and the evidence merely established the fact of death of Navidad
by reason of his having been hit by the train owned and managed by the
LRTA and operated at the time by Roman. The appellate court faulted
petitioners for their failure to present expert evidence to establish the fact
that the application of emergency brakes could not have stopped the train.
The appellate court denied petitioners motion for reconsideration
in its resolution of 10 October 2000.
In their present recourse, petitioners recite alleged errors on the
part of the appellate court; viz:
I.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED BY
DISREGARDING THE FINDINGS OF FACTS BY THE TRIAL COURT
II.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING
THAT PETITIONERS ARE LIABLE FOR THE DEATH OF NICANOR NAVIDAD, JR.
III.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING
THAT RODOLFO ROMAN IS AN EMPLOYEE OF LRTA.[3]
Petitioners would contend that the appellate court ignored the
evidence and the factual findings of the trial court by holding them liable
on the basis of a sweeping conclusion that the presumption of negligence
on the part of a common carrier was not overcome. Petitioners would insist
that Escartins assault upon Navidad, which caused the latter to fall on the
tracks, was an act of a stranger that could not have been foreseen or
prevented. The LRTA would add that the appellate courts conclusion on the
existence of an employer-employee relationship between Roman and LRTA
lacked basis because Roman himself had testified being an employee of
Metro Transit and not of the LRTA.
Respondents, supporting the decision of the appellate court,
contended that a contract of carriage was deemed created from the
moment Navidad paid the fare at the LRT station and entered the premises
of the latter, entitling Navidad to all the rights and protection under a
contractual relation, and that the appellate court had correctly held LRTA
and Roman liable for the death of Navidad in failing to exercise
extraordinary diligence imposed upon a common carrier.
Law and jurisprudence dictate that a common carrier, both from
the nature of its business and for reasons of public policy, is burdened with
the duty of exercising utmost diligence in ensuring the safety of
passengers.[4] The Civil Code, governing the liability of a common carrier
for death of or injury to its passengers, provides:
Article 1755. A common carrier is bound to carry the passengers
safely as far as human care and foresight can provide, using the utmost
diligence of very cautious persons, with a due regard for all the
circumstances.
Article 1756. In case of death of or injuries to passengers, common
carriers are presumed to have been at fault or to have acted negligently,
unless they prove that they observed extraordinary diligence as prescribed
in articles 1733 and 1755.
Article 1759. Common carriers are liable for the death of or injuries
to passengers through the negligence or willful acts of the formers
employees, although such employees may have acted beyond the scope
of their authority or in violation of the orders of the common carriers.
This liability of the common carriers does not cease upon proof
that they exercised all the diligence of a good father of a family in the
selection and supervision of their employees.
 Article 1763. A common carrier is responsible for injuries suffered
by a passenger on account of the willful acts or negligence of other
passengers or of strangers, if the common carriers employees through the
exercise of the diligence of a good father of a family could have prevented
or stopped the act or omission.
The law requires common carriers to carry passengers safely using
the utmost diligence of very cautious persons with due regard for all
circumstances.[5] Such duty of a common carrier to provide safety to its
passengers so obligates it not only during the course of the trip but for so
long as the passengers are within its premises and where they ought to be
in pursuance to the contract of carriage. [6] The statutory provisions render
a common carrier liable for death of or injury to passengers (a) through
the negligence or wilful acts of its employees or b) on account of
wilful acts or negligence of other passengers or of strangers if the
common carriers employees through the exercise of due diligence
could have prevented or stopped the act or omission.[7] In case of
such death or injury, a carrier is presumed to have been at fault or been
negligent, and[8] by simple proof of injury, the passenger is relieved of the
duty to still establish the fault or negligence of the carrier or of its
employees and the burden shifts upon the carrier to prove that the injury
is due to an unforeseen event or to force majeure. [9] In the absence of
satisfactory explanation by the carrier on how the accident occurred,
which petitioners, according to the appellate court, have failed to show,
the presumption would be that it has been at fault, [10] an exception from
the general rule that negligence must be proved.[11]
The foundation of LRTAs liability is the contract of carriage and its
obligation to indemnify the victim arises from the breach of that contract
by reason of its failure to exercise the high diligence required of the
common carrier. In the discharge of its commitment to ensure the safety of
passengers, a carrier may choose to hire its own employees or avail itself
of the services of an outsider or an independent firm to undertake the
task. In either case, the common carrier is not relieved of its
responsibilities under the contract of carriage.
Should Prudent be made likewise liable? If at all, that liability could
only be for tort under the provisions of Article 2176 [12] and related
provisions, in conjunction with Article 2180, [13] of the Civil Code. The
premise, however, for the employers liability is negligence or fault on the
part of the employee. Once such fault is established, the employer can
then be made liable on the basis of the presumption juris tantum that the
employer failed to exercise diligentissimi patris families in the selection
and supervision of its employees. The liability is primary and can only be
negated by showing due diligence in the selection and supervision of the
employee, a factual matter that has not been shown.Absent such a
showing, one might ask further, how then must the liability of the common
carrier, on the one hand, and an independent contractor, on the other
hand, be described? It would be solidary. A contractual obligation can be
breached by tort and when the same act or omission causes the injury,
one resulting in culpa contractual and the other in culpa aquiliana, Article
2194[14] of the Civil Code can well apply. [15] In fine, a liability for tort may
arise even under a contract, where tort is that which breaches the
contract.[16] Stated differently, when an act which constitutes a breach of
contract would have itself constituted the source of a quasi-delictual
liability had no contract existed between the parties, the contract can be
said to have been breached by tort, thereby allowing the rules on tort to
apply.[17]
Regrettably for LRT, as well as perhaps the surviving spouse and
heirs of the late Nicanor Navidad, this Court is concluded by the factual
finding of the Court of Appeals that there is nothing to link (Prudent) to the
death of Nicanor (Navidad), for the reason that the negligence of its
employee, Escartin, has not been duly proven x x x. This finding of the
appellate court is not without substantial justification in our own review of
the records of the case.
There being, similarly, no showing that petitioner Rodolfo Roman
himself is guilty of any culpable act or omission, he must also be absolved
from liability. Needless to say, the contractual tie between the LRT and
Navidad is not itself a juridical relation between the latter and Roman;
thus, Roman can be made liable only for his own fault or negligence.
The award of nominal damages in addition to actual damages is
untenable. Nominal damages are adjudicated in order that a right of the
plaintiff, which has been violated or invaded by the defendant, may be
vindicated or recognized, and not for the purpose of indemnifying the
plaintiff for any loss suffered by him. [18] It is an established rule that
nominal damages cannot co-exist with compensatory damages. [19]
WHEREFORE, the assailed decision of the appellate court is
AFFIRMED with MODIFICATION but only in that (a) the award of nominal
damages is DELETED and (b) petitioner Rodolfo Roman is absolved from
liability. No costs.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Ynares-Santiago, Carpio and Azcuna,
JJ., concur.

SECOND DIVISION
G.R. No. 208802, October 14, 2015
G.V. FLORIDA TRANSPORT, INC., Petitioner, v. HEIRS OF ROMEO L.
BATTUNG, JR., REPRESENTED BY ROMEO BATTUNG,
SR., Respondents.
DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari1 are the Decision2 dated
May 31, 2013 and the Resolution3 dated August 23, 2013 of the Court of
Appeals (CA) in CA-G.R. CV No. 97757, which affirmed in toto the
Decision4 dated August 29, 2011 of the Regional Trial Court of Cabagan,
Isabela, Branch 22 (RTC) in Civil Case No. 22-1103 finding petitioner G.V.
Florida Transport, Inc. (petitioner), Federico M. Duplio, Jr. (Duplio), and
Christopher Daraoay (Daraoay) jointly and severally liable to respondents
heirs of Romeo L. Battung, Jr. (respondents) for damages arising
from culpa contractual.
The Facts
Respondents alleged that in the evening of March 22, 2003, Romeo L.
Battung, Jr. (Battung) boarded petitioner's bus with body number 037 and
plate number BVJ-525 in Delfin Albano, Isabela, bound for Manila. 5 Battung
was seated at the first row behind the driver and slept during the ride.
When the bus reached the Philippine Carabao Center in Muñoz, Nueva
Ecija, the bus driver, Duplio, stopped the bus and alighted to check the
tires. At this point, a man who was seated at the fourth row of the bus
stood up, shot Battung at his head, and then left with a companion. The
bus conductor, Daraoay, notified Duplio of the incident and thereafter,
brought Romeo to the hospital, but the latter was pronounced dead on
arrival.6 Hence, respondents filed a complaint7 on July 15, 2008 for
damages in the aggregate amount of P1,826,000.008 based on a breach of
contract of carriage against petitioner, Duplio, and Baraoay (petitioner, et
al.) before the RTC, docketed as Civil Case No. 22-1103. Respondents
contended that as a common carrier, petitioner and its employees are
bound to observe extraordinary diligence in ensuring the safety of
passengers; and in case of injuries and/or death on the part of a
passenger, they are presumed to be at fault and, thus, responsible
therefor. As such, petitioner, et al. should be held civilly liable for Battung's
death.9
In their defense, petitioner, et al. maintained that they had exercised the
extraordinary diligence required by law from common carriers. In this
relation, they claimed that a common carrier is not an absolute insurer of
its passengers and that Battung's death should be properly deemed a
fortuitous event. Thus, they prayed for the dismissal of the complaint, as
well as the payment of their counterclaims for damages and attorney's
fees.10
The RTC Ruling
In a Decision11 dated August 29, 2011, the RTC ruled in respondents' favor
and, accordingly, ordered petitioner, et al. to pay respondent the amounts
of: (a) P1,586,000.00 as compensatory damages for unearned income; (b)
P50,000.00 as actual damages; and (c) P50,000.00 as moral damages. 12
The RTC found that petitioner, et al. were unable to rebut the presumed
liability of common carriers in case of injuries/death to its passengers due
to their failure to show that they implemented the proper security
measures to prevent passengers from carrying deadly weapons inside the
bus which, in this case, resulted in the killing of Battung. As such,
petitioner, et al. were held civilly liable for the latter's death based
on culpa contractual.13
Dissatisfied, petitioner, et al. appealed to the CA.14
The CA Ruling
In a Decision15 dated May 31, 2013, the CA affirmed the ruling of the RTC
in toto.16 It held that the killing of Battung cannot be deemed as a
fortuitous event, considering that such killing happened right inside
petitioner's bus and that petitioner, et al. did not take any safety measures
in ensuring that no deadly weapon would be smuggled inside the bus. 17
Aggrieved, only petitioner moved for reconsideration18 which was,
however, denied in a Resolution19dated August 23, 2013; hence, the
instant petition.chanrobleslaw
The Issue Before the Court
The core issue for the Court's resolution is whether or not the CA correctly
affirmed the ruling of the RTC finding petitioner liable for damages to
respondent arising from culpa contractual.
 The Court's Ruling
The petition is meritorious.chanrobleslaw
I.
The law exacts from common carriers (i.e., those 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 public20) the highest degree of diligence
(i.e., extraordinary diligence) in ensuring the safety of its
passengers. Articles 1733 and 1755 of the Civil Code state:
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.
Art. 1755. A common carrier is bound to carry the passengers safely as far
as human care and foresight can provide, using the utmost diligence of
very cautious persons, with a due regard for all the circumstances.
In this relation, Article 1756 of the Civil Code provides that "[i]n case of
death of or injuries to passengers, common carriers are presumed to have
been at fault or to have acted negligently, unless they prove that they
observed extraordinary diligence as prescribed in Articles 1733 and 1755."
This disputable presumption may also be overcome by a showing that the
accident was caused by a fortuitous event.21
The foregoing provisions notwithstanding, it should be pointed out that the
law does not make the common carrier an insurer of the absolute safety of
its passengers. In Mariano, Jr. v. Callejas,22 the Court explained that:
While the law requires the highest degree of diligence from common
carriers in the safe transport of their passengers and creates a
presumption of negligence against them, it does not, however, make
the carrier an insurer of the absolute safety of its passengers.
Article 1755 of the Civil Code qualifies the duty of extraordinary care,
vigilance[,] and precaution in the carriage of passengers by
common carriers to only such as human care and foresight can
provide. What constitutes compliance with said duty is adjudged
with due regard to all the circumstances.
Article 1756 of the Civil Code, in creating a presumption of fault or
negligence on the part of the common carrier when its passenger is
injured, merely relieves the latter, for the time being, from introducing
evidence to fasten the negligence on the former, because the presumption
stands in the place of evidence. Being a mere presumption, however,
the same is rebuttable by proof that the common carrier had
exercised extraordinary diligence as required by law in the
performance of its contractual obligation, or that the injury
suffered by the passenger was solely due to a fortuitous event.
In fine, we can only infer from the law the intention of the Code
Commission and Congress to curb the recklessness of drivers and
operators of common carriers in the conduct of their business.
Thus, it is clear that neither the law nor the nature of the business of a
transportation company makes it an insurer of the passenger's safety, but
that its liability for personal injuries sustained by its passenger
rests upon its negligence, its failure to exercise the degree of
diligence that the law requires.23 (Emphases and underscoring
supplied)ChanRoblesVirtualawlibrary
Therefore, it is imperative for a party claiming against a common carrier
under the above-said provisions to show that the injury or death to the
passenger/s arose from the negligence of the common carrier and/or its
employees in providing safe transport to its passengers.
In Pilapil v. CA,24 the Court clarified that where the injury sustained by the
passenger was in no way due (1) to any defect in the means of transport
or in the method of transporting, or (2) to the negligent or willful acts of
the common carrier's employees with respect to the foregoing - such as
when the injury arises wholly from causes created by strangers which the
carrier had no control of or prior knowledge to prevent — there would be
no issue regarding the common carrier's negligence in its duty to provide
safe and suitable care, as well as competent employees in relation to its
transport business; as such, the presumption of fault/negligence foisted
under Article 1756 of the Civil Code should not apply:
First, as stated earlier, the presumption of fault or negligence against the
carrier is only a disputable presumption.[The presumption] gives in where
contrary facts are established proving either that the carrier had exercised
the degree of diligence required by law or the injury suffered by the
passenger was due to a fortuitous event. Where, as in the instant case,
the injury sustained by the petitioner was in no way due to any
defect in the means of transport or in the method of transporting
or to the negligent or wilful acts of [the common carrier'sl
employees, and therefore involving no issue of negligence in its
duty to provide safe and suitable [care] as well as competent
employees, with the injury arising wholly from causes created by
strangers over which the carrier had no control or even
knowledge or could not have prevented, the presumption is
rebutted and the carrier is not and ought not to be held liable.To
rule otherwise would make the common carrier the insurer of the absolute
safety of its passengers which is not the intention of the lawmakers.
(Emphasis and underscoring supplied)

In this case, Battung's death was neither caused by any defect in the
means of transport or in the method of transporting, or to the negligent or
willful acts of petitioner's employees, namely, that of Duplio and Daraoay,
in their capacities as driver and conductor, respectively. Instead, the case
involves the death of Battung wholly caused by the surreptitious act of a
co-passenger who, after consummating such crime, hurriedly alighted
from the vehicle.25 Thus, there is no proper issue on petitioner's duty to
observe extraordinary diligence in ensuring the safety of the passengers
transported by it, and the presumption of fault/negligence against
petitioner under Article 1756 in relation to Articles 1733 and 1755 of the
Civil Code should not apply.
II.
On the other hand, since Battung's death was caused by a co-passenger,
the applicable provision is Article 1763 of the Civil Code, which states
that "a common carrier is responsible for injuries suffered by a passenger
on account of the willful acts or negligence of other passengers or
of strangers, if the common carrier's employees through the exercise
of the diligence of a good father of a familycould have prevented or
stopped the act or omission." Notably, for this obligation, the law provides
a lesser degree of diligence, i.e., diligence of a good father of a family, in
assessing the existence of any culpability on the common carrier's part.
Case law states that the concept of diligence of a good father of a family
"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." 26
In ruling on this case, the CA cited Fortune Express, Inc. v. Court of
Appeals27 (Fortune) in ascribing negligence on the part of petitioner,
ratiocinating that it failed to implement measures to detect if its
passengers were carrying firearms or deadly weapons which would pose a
danger to the other passengers.28 However, the CA's reliance was plainly
misplaced in view of Fortune's factual variance with the case at bar.
In Fortune, the common carrier had already received intelligence reports
from law enforcement agents that certain lawless elements were planning
to hijack and burn some of its buses; and yet, it failed to implement the
necessary precautions to ensure the safety of its buses and its passengers.
A few days later, one of the company's buses was indeed hijacked and
burned by the lawless elements pretending as mere passengers, resulting
in the death of one of the bus passengers. Accordingly, the Court held that
the common carrier's failure to take precautionary measures to protect the
safety of its passengers despite warnings from law enforcement agents
showed that it failed to exercise the diligence of a good father of a family
in preventing the attack against one of its buses; thus, the common carrier
was rightfully held liable for the death of the aforementioned passenger.
In contrast, no similar danger was shown to exist in this case so as to
impel petitioner or its employees to implement heightened security
measures to ensure the safety of its passengers. There was also no
showing that during the course of the trip, Battung's killer made suspicious
actions which would have forewarned petitioner's employees of the need
to conduct thorough checks on him or any of the passengers. Relevantly,
the Court, in Nocum v. Laguna Tayabas Bus Company,29 has held that
common carriers should be given sufficient leeway in assuming that the
passengers they take in will not bring anything that would prove
dangerous to himself, as well as his co-passengers, unless there is
something that will indicate that a more stringent inspection should be
made, viz.:
In this particular case before Us, it must be considered that while it is true
the passengers of appellant's bus should not be made to suffer for
something over which they had no control, as enunciated in the decision of
this Court cited by His Honor, fairness demands that in measuring a
common carrier's duty towards its passengers, allowance must be
given to the reliance that should be reposed on the sense of
responsibility of all the passengers in regard to their common
safety. It is to be presumed that a passenger will not take with
him anything dangerous to the lives and limbs of his co-
passengers, not to speak of his own. Not to be lightly considered must
be the right to privacy to which each passenger is entitled. He cannot be
subjected to any unusual search, when he protests the
innocuousness of his baggage and nothing appears to indicate the
contrary, as in the case at bar. In other words, inquiry may be
verbally made as to the nature of a passenger's baggage when
such is not outwardly perceptible, but beyond this, constitutional
boundaries are already in danger of being transgressed. Calling a
policeman to his aid, as suggested by the service manual invoked by the
trial judge, in compelling the passenger to submit to more rigid inspection,
after the passenger had already declared that the box contained mere
clothes and other miscellaneous, could not have justified invasion of a
constitutionally protected domain. Police officers acting without judicial
authority secured in the manner provided by law are not beyond the pale
of constitutional inhibitions designed to protect individual human rights
and liberties. Withal, what must be importantly considered here is not so
much the infringement of the fundamental sacred rights of the particular
passenger herein involved, but the constant threat any contrary ruling
would pose on the right of privacy of all passengers of all common
carriers, considering how easily the duty to inspect can be made an
excuse for mischief and abuse. Of course, when there are sufficient
indications that the representations of the passenger regarding
the nature of his baggage may not be true, in the interest of the
common safety of all, the assistance of the police authorities may
be solicited, not necessarily to force the passenger to open his
baggage, but to conduct the needed investigation consistent with
the rules of propriety and, above all, the constitutional rights of
the passenger. It is in this sense that the mentioned service manual
issued by appellant to its conductors must be understood. 30(Emphases and
underscoring supplied)

In this case, records reveal that when the bus stopped at San Jose City to
let four (4) men ride petitioner's bus (two [2] of which turned out to be
Battung's murderers), the bus driver, Duplio, saw them get on the bus and
even took note of what they were wearing. Moreover, Duplio made the bus
conductor, Daraoay, approach these men and have them pay the
corresponding fare, which Daraoay did.31 During the foregoing, both Duplio
and Daraoay observed nothing which would rouse their suspicion that the
men were armed or were to carry out an unlawful activity. With no such
indication, there was no need for them to conduct a more stringent search
(i.e., bodily search) on the aforesaid men. By all accounts, therefore, it
cannot be concluded that petitioner or any of its employees failed to
employ the diligence of a good father of a family in relation to its
responsibility under Article 1763 of the Civil Code. As such, petitioner
cannot altogether be held civilly liable.

WHEREFORE, the petition is GRANTED. Accordingly, the Decision dated

May 31, 2013 and the Resolution dated August 23, 2013 of the Court of
Appeals in CA-G.R. CV No. 97757 are hereby REVERSED and SET ASIDE.
Accordingly, the complaint for damages filed by respondents heirs of
Romeo L. Battung, Jr. is DISMISSED for lack of merit.

SO ORDERED.chanroblesvirtuallawlibrary

G.R. No. 206468, August 02, 2017
JUDITH D. DARINES AND JOYCE D. DARINES, Petitioners, v. EDUARDO
QUIÑONES AND ROLANDO QUITAN, Respondents.
DECISION
DEL CASTILLO, J.:
This Petition for Review on Certiorari assails the October 29, 2012 Decision1 of
the Court of Appeals (CA) in CA-G.R. CV No. 95638, which reversed and set
aside the July 14, 2010 Decision2 of the Regional Trial Court (RTC) of Baguio
City, Branch 3 in Civil Case No. 6363-R for "Breach of Contract of Carriage &
Damages." Also challenged is the March 6, 2013 CA Resolution 3 denying the
motion for reconsideration on the assailed Decision.
Factual Antecedents
Judith D. Darines (Judith) and her daughter, Joyce D. Darines (Joyce)
(petitioners) alleged in their Complaint4 that on December 31, 2005, they
boarded the Amianan Bus Line with Plate No. ACM 497 and Body No. 808 as
paying passengers enroute from Carmen, Rosales, Pangasinan to Baguio City.
Respondent Rolando M. Quitan (Quitan) was driving the bus at that time.
While travelling on Camp 3, Tuba, Benguet along Kennon Road, the bus
crashed into a truck (with Plate No. XSE 578) which was parked on the
shoulder of Kennon Road. As a result, both vehicles were damaged; two
passengers of the bus died; and the other passengers, including petitioners,
were injured. In particular, Joyce suffered cerebral concussion while Judith had
an eye wound which required an operation.
Petitioners argued that Quitan and respondent Eduardo Quinones (Quinones),
the operator of Amianan Bus Line, breached their contract of carriage as they
failed to bring them safely to their destination. They also contended that
Quitan's reckless and negligent driving caused the collision. Consequently,
they prayed for actual, moral, exemplary and temperate damages, and costs
of suit.
For their part, Quinones and Quitan (respondents) countered in their
Answer5 that, during the December 31, 2005 incident, Quitan was driving in a
careful, prudent, and dutiful manner at the normal speed of 40 kilometers per
hour. According to them, the proximate cause of the incident was the
negligence of the truck driver, Ronald C. Fernandez, who parked the truck at
the roadside right after the curve without having installed any early warning
device. They also claimed that Quinones observed due diligence in the
selection and supervision of his employees as he conducted seminars on road
safety measures; and Quitan attended such seminars including those required
by the government on traffic safety. They likewise averred that Quitan was a
licensed professional driver who, in his 12 years as a public utility driver, had
not figured in any incident like the one at hand.
During the trial, Judith testified that Quitan was driving at a very fast pace
resulting in a collision with the truck parked at the shoulder of the
road.6 Consequently, the bone holding her right eye was fractured and had to
be operated.7 She claimed that, as a result of incident, she failed to report for
work for two months.8
To prove the actual damages that she suffered, Judith presented receipts for
medicine, and a summary of expenses, which included those incurred for the
ritual dao-is. She explained that she and Joyce are Igorots, being members
of Ibaloi, Kankanay-ey, an indigenous tribe;9 and as their customary practice,
when a member who meets an accident is released from the hospital, they
butcher pigs to remove or prevent bad luck from returning to the family. 10
Moreover, to support her claim for moral damages, Judith testified that she
suffered sleepless nights since she worried about the result and possible effect
of her operation.11
On the other hand, respondents presented Ernesto Benitez (Benitez), who, on
behalf of respondents, testified that he bought the medicines and paid
petitioners' hospitalization expenses, as evidenced by receipts he submitted in
court.12
Ruling of the Regional Trial Court
On July 14, 2010, the RTC rendered its Decision ordering respondents to pay
petitioners the following:
1. Moral Damages of One Hundred Thousand Pesos
(P100,000.00);
2. Exemplary Damages of Thirty Thousand Pesos (P30,000.00);
3. Attorney's Fees of Fifteen Percent (15%) of the Damages,
plus Total Appearance Fees of Sixteen Thousand Five Hundred
Pesos (P16,500.00); and
4. Costs of Suit.13
The RTC held that since the respondents already paid the actual damages
relating to petitioners' medical and hospitalization expenses, then the only
remaining matters for resolution were: whether respondents were liable to pay
petitioners a) actual damages representing the expenses incurred during
the dao-isritual; and, Judith's alleged lost income; b) moral and exemplary
damages; and, c) attorney's fees.
The RTC noted that petitioners did not present any receipt as regards the
expenses they incurred during the dao-is ritual. As regards their claim for
Judith's lost income, the RTC held that petitioners similarly failed to
substantiate the same as there was no showing that Judith's failure to report
for work for two months was because of the incident. Thus, the RTC did not
award actual damages for lack of evidence.
However, the RTC awarded moral damages grounded on Judith's testimony
regarding her pain and suffering. It likewise awarded exemplary damages by
way of correction, and to serve as example to common carriers to be
extraordinarily diligent in transporting passengers. It also granted petitioners
attorney's fees plus costs of suit on the ground that petitioners were compelled
to litigate the case.
Aggrieved, respondents appealed to the CA.
Ruling of the Court of Appeals
In its October 29, 2012 Decision, the CA reversed and set aside the RTC
Decision.
The CA stressed that respondents did not dispute that they were liable for
breach of contract of carriage; in fact, they paid for the medical and hospital
expenses of petitioners. Nonetheless, the CA deleted the award of moral
damages because petitioners failed to prove that respondents acted
fraudulently or in bad faith, as shown by the fact that respondents paid
petitioners' medical and hospitalization expenses. The CA held that, since no
moral damages was awarded, then there was no basis to grant exemplary
damages. Finally, it ruled that because moral and exemplary damages were
not granted, then the award of attorney's fees must also be deleted.
On March 6, 2013, the CA denied petitioners' Motion for Reconsideration.
Issues
Hence, petitioners filed this Petition raising the issues as follows: chanRoblesvirtualLawlibrary
1. WHETHER OR NOT THE CASE OF PETITIONERS FALL[S]
UNDER ARTICLES 20,1157,1759, 2176,2180 AND 2219 OF
THE CIVIL CODE THEREBY ENTITL[ING THEM] TO MORAL
AND EXEMPLARY DAMAGES AND ATTORNEY'S FEES;
2. WHETHER OR NOT THE XXX AWARD OF DAMAGES AND
ATTORNEY'S FEES BY THE TRIAL COURT BECAME FINAL AND
EXECUTORY SINCE HEREIN RESPONDENTS DID NOT
QUESTION THE SAME IN THEIR APPEAL BUT MERELY
QUESTIONED THE AMOUNTS OF AWARD [FOR BEING]
EXORBITANT.14
Petitioners' Arguments
Petitioners maintain that respondents are liable to pay them moral and
exemplary damages because the proximate cause of their injuries was the
reckless driving of Quitan. As regards Quinones, his fault is presumed
considering that he did not offer proof that he exercised extraordinary
diligence in the selection and supervision of his employees. They added that
the negligence of respondents resulted in the latter's failure to transport them
to their destination thereby constituting a breach of their contract of carriage.
They also argued that the RTC's grant of damages and attorney's fees in their
favor already attained finality because when respondents appealed to the CA,
they only questioned the amounts given by the RTC for being exorbitant, but
not the award itself.
Respondents' Arguments
Respondents, on their end, posit that they are not liable to pay moral damages
because their acts were not attended by fraud or bad faith. They add that
since petitioners are not entitled to moral damages, then it follows that they
are also not entitled to exemplary damages; and same is true with regard to
the grant of attorney's fees as the same necessitates the grant of moral and
exemplary damages.
Our Ruling
The Court denies the Petition.
First of all, petitioners contend that the awards of moral and exemplary
damages and attorney's fees by the RTC already attained finality because
respondents did not dispute such grants when they appealed to the CA but
only the fact that the amounts were exorbitant.
Such contention is without merit.
A plain reading of the assigned errors15 and issues16 in the Appellants' Brief of
respondents with the CA reveals that they questioned the awards of moral and
exemplary damages as well as attorney's fees made by the RTC to petitioners.
Since respondents timely challenged the awards when they interposed an
appeal to the CA, the same had not yet attained finality.
Going now to the main issue, the Court fully agrees with the CA ruling that in
an action for breach of contract, moral damages may be recovered only when
a) death of a passenger results; or b) the carrier was guilty of fraud and bad
faith even if death does not result; and that neither of these circumstances
were present in the case at bar. The CA correctly held that, since no moral
damages was awarded then, there is no basis to grant exemplary damages
and attorney's fees to petitioners.
To stress, this case is one for breach of contract of carriage (culpa contractual)
where it is necessary to show the existence of the contract between the
parties, and the failure of the common carrier to transport its passenger safely
to his or her destination. An action for breach of contract differs from quasi-
delicts (also referred as culpa aquiliana or culpa extra contractual) as the latter
emanate from the negligence of the tort feasor17 including such instance where
a person is injured in a vehicular accident by a party other than the carrier
where he is a passenger.
The principle that, in an action for breach of contract of carriage, moral
damages may be awarded only in case (1) an accident results in the death of a
passenger; or (2) the carrier is guilty of fraud or bad faith, is pursuant to
Article 1764, in relation to Article 2206(3) of the Civil Code, and Article 2220
thereof,18 as follows:
chanRoblesvirt ualLawlibrary
Article 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. (Emphasis supplied)
Article 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:
xxxx
(3) The spouse, legitimate and illegitimate descendants and ascendants of the
deceased may demand moral damages for mental anguish by reason of the
death of the deceased.
Article 2220. Willful injury to property may be a legal ground for awarding
moral damages if the court should find that, under the circumstances, such
damages are justly due. The same rule applies
to breaches of contract where the defendant acted fraudulently or in bad
faith. (Emphasis supplied)
The aforesaid concepts of fraud or bad faith and negligence are basic as they
are distinctly differentiated by law. Specifically, fraud or bad faith connotes
"deliberate or wanton wrong doing"19 or such deliberate disregard of
contractual obligations20 while negligence amounts to sheer carelessness.21
More particularly, fraud includes "inducement through insidious
machination."22 In turn, insidious machination refers to such deceitful strategy
or such plan with an evil purpose. On the other hand, bad faith does not
merely pertain to bad judgment or negligence but relates to a dishonest
purpose, and a deliberate doing of a wrongful act. Bad faith involves "breach
of a known duty through some motive or interest or ill will that partakes of the
nature of fraud."23
In Viluan v. Court of Appeals,24 and Bulante v. Chu Liante,25 the Court
disallowed the recovery of moral damages in actions for breach of contract for
lack of showing that the common carrier committed fraud or bad faith in
performing its obligation. Similarly, in Verzosa v. Baytan,26 the Court did not
also grant moral damages in an action for breach of contract as there was
neither allegation nor proof that the common carrier committed fraud or bad
faith.27 The Court declared that "[t]o award moral damages for breach of
contract, therefore, without proof of bad faith or malice on the part of the
defendant, as required by [Article 2220 of the Civil Code], would be to violate
the clear provisions of the law, and constitute unwarranted judicial
legislation.28
Meanwhile, in Gatchalian v. Delim,29 and Mr. & Mrs. Fabre, Jr. v. Court of
Appeals,30 the Court found the common carriers liable for breach of contract of
carriage and awarded moral damages to the injured passengers on the ground
that the common carrier committed gross negligence, which amounted to bad
faith. Particularly, in Mr. & Mrs. Fabre, Jr., the gross negligence of the common
carrier was determined from the fact that its driver was not engaged to drive
long distance travels; he was also unfamiliar with the area where he detoured
the bus as it was his first time to ply such route; the road was slippery
because it was raining, yet the bus was running at 50 kilometers per hour
resulting in its skidding to the left shoulder of the road; and the bus hit the
steel brace on the road at past 11:30 p.m. The Court also noted that other
than the imputation of gross negligence, the injured passengers therein
pursued their claim not on the theory of breach of contract of carriage alone
but also on quasi-delicts.
Clearly, unless it is fully established (and not just lightly inferred) that
negligence in an action for breach of contract is so gross as to amount to
malice, then the claim of moral damages is without merit.31
Here, petitioners impute negligence on the part of respondents when, as
paying passengers, they sustained injuries when the bus owned and operated
by respondent Quinones, and driven by respondent Quitan, collided with
another vehicle. Petitioners propounded on the negligence of respondents, but
did not discuss or impute fraud or bad faith, or such gross negligence which
would amount to bad faith, against respondents. There being neither allegation
nor proof that respondents acted in fraud or in bad faith in performing their
duties arising from their contract of carriage, they are then not liable for moral
damages.
The Court also sustains the CA's finding that petitioners are not entitled to
exemplary damages. Pursuant to Articles 2229 and 223432 of the Civil Code,
exemplary damages may be awarded only in addition to moral, temperate,
liquidated, or compensatory damages. Since petitioners are not entitled to
either moral, temperate, liquidated, or compensatory damages, then their
claim for exemplary damages is bereft of merit.
Finally, considering the absence of any of the circumstances under Article
220833 of the Civil Code where attorney's fees may be awarded, the same
cannot be granted to petitioners.
All told, the CA correctly ruled that petitioners are not entitled to moral and
exemplary damages as well as attorney's fees.
WHEREFORE, the Petition is DENIED. The October 29, 2012 Decision and
March 6, 2013 Resolution of the Court of Appeals in CA-G.R. CV No. 95638
are AFFIRMED. SO ORDERED.
July 19, 2017
G.R. No. 203902
SPOUSES DIONISIO ESTRADA and JOVITA R. ESTRADA, Petitioner
vs.
PHILIPPINE RABBIT BUS LINES, INC. and EDUARDO R. SA YLAN,
Respondents
DECISION
DEL CASTILLO, J.:
The Court restates in this petition two principles on the grant of
damages. First, moral damages, as a general rule, are not recoverable in
an action for damages predicated on breach of
contract.1 Second, temperate damages in lieu of actual damages for loss
of earning capacity may be awarded where earning capacity is plainly
established but no evidence was presented to support the allegation of the
injured party's actual income.2
This Petition for Review on Certiorari assails the May 16, 2012
Decision3 and October 1, 2012 Resolution4 of the Court of Appeals (CA) in
CA-G.R. CV No. 95520, which partially granted the appeal filed therewith
by respondent Philippine Rabbit Bus Lines, Inc. (Philippine Rabbit) and
denied petitioners spouses Dionisio C. Estrada (Dionisio) and Jovita R.
Estrada's motion for reconsideration thereto.
Factual Antecedents
On April 13, 2004, petitioners filed with the Regional Trial Court (RTC) of
Urdaneta City, Pangasinan, a Complaint5for Damages against Philippine
Rabbit and respondent Eduardo R. Saylan (Eduardo).
The facts as succinctly summarized by the RTC are as follows:
[A] mishap occurred on April 9, 2002 along the national highway in
Barangay Alipangpang, Pozorrubio, Pangasinan, between the passenger
bus with plate number CVK-964 and body number 3101, driven by
[respondent] Eduardo Saylan and owned by [respondent] Philippine Rabbit
Bus, Lines, Inc., and the Isuzu truck with plate number UPB-974 driven by
Willy U. Urez and registered in the nan1e of Rogelio Cuyton, Jr.. At the time
of the incident, the Philippine Rabbit Bus was going towards the north
direction, while the Isuzu truck was travelling towards the south direction.
The collision happened at the left lane or the lane properly belonging to
the Isuzu truck. The right front portion of the Isuzu Truck appears to have
collided with the right side portion of the body of the Philippine Rabbit bus.
x x x Before the collision, the bus was following closely a jeepney. When
the jeepney stopped, the bus suddenly swerved to the left encroaching
upon the rightful lane of the Isuzu truck, which resulted in the collision of
the two (2) vehicles. x x x The [petitioner] Dionisio Estrada, who was
an1ong the passengers of the Philippine Rabbit bus, as evidenced by the
ticket issued to him, was injured on the [right] arm as a consequence of
the accident. His injured right arm was amputated at the Villaflor Medical
Doctor's Hospital in Dagupan City x x x. For the treatment of his injury, he
incurred expenses as evidenced by x x x various receipts. 6
Dionisio argued that pursuant to the contract of carriage between him and
Philippine Rabbit, respondents were duty-bound to carry him safely as far
as human care and foresight can provide, with utmost diligence of a very
cautious person, and with due regard for all the circumstances from the
point of his origin in Urdaneta City to his destination in Pugo, La Union.
However, through the fault and negligence of Philippine Rabbit's driver,
Eduardo, and without human care, foresight, and due regard for all
circumstances, respondents failed to transport him safely by reason of the
aforementioned collision which resulted in the amputation of Dionisio's
right arm. And since demands for Philippine Rabbit7 to pay him damages
for the injury he sustained remained unheeded, Dionisio filed the said
complaint wherein he prayed for the following awards: moral damages of
₱500,000.00 actual damages of ₱60,000.00, and attorney's fees of
₱25,000.00.
Petitioners' claim for moral damages, in particular, was based on the
following allegations:
9. [The] amount of ₱500,000.00 as moral damages for the amputation of
[Dionisio's] right arm for life including his moral sufferings for such [loss]
of right arm is reasonable. Said amount is computed and derived using the
formula (2/3 x [80- age of the complainant when the injury is sustained] =
life expectancy) adopted in the American Expectancy Table of Mortality or
the actuarial of Combined Experience Table of Mortality. From such
formula, [Dionisio] is expected to live for 18 years, which is equivalent [to]
about 6570 days. For each day, [Dionisio] is claiming ₱80.00 as he is
expected to work for 8 hours a day with his amputated arm or to enjoy the
same for at least 8 hours a day (or is claiming ₱l0.00 for each hour) for 18
years (6570 days). The amount that can be computed thereof would be
₱525,600.00 (6570 days x ₱80.00). [Dionisio] then [rounded] it off to
₱500,000.00, the moral damages consisted [of] his moral sufferings due to
the [loss] of his right arm for life;8
Denying any liability, Philippine Rabbit in its Answer9 averred that it
carried Dionisio safely as far as human care and foresight could provide
with the utmost diligence of a very cautious person and with due regard
for all the circumstances prevailing. While it did not contest that its bus
figured in an accident, Philippine Rabbit nevertheless argued that the
cause thereof was an extraordinary circumstance independent of its
driver's action or a fortuitous event. Hence, it claimed to be exempt from
any liability arising therefrom. In any case, Philippine Rabbit averred that it
was the Isuzu truck coming from the opposite direction which had the last
clear chance to avoid the mishap. Instead of slowing down upon seeing
the bus, the said truck continued its speed such that it bumped into the
right side of the bus. The proximate cause of the accident, therefore, was
the wrongful and negligent manner in which the Isuzu truck was operated
by its driver. In view of this, Philippine Rabbit believed that Dionisio has no
cause of action against it.
With respect to Eduardo, he was declared in default after he failed to file
an Answer despite due notice.10
Ruling of the Regional Trial Court
Treating petitioners' Complaint for damages as one predicated on breach
of contract of carriage, the RTC rendered its Decision 11 on December 1,
2009.
In concluding that Eduardo was negligent in driving the Philippine Rabbit
bus, the said court ratiocinated, viz.:
Evidently, prior to the accident, [Eduardo] was tailgating the jeepney
ahead of him. When the jeepney stopped, [Eduardo] suddenly swerved the
bus to the left, encroaching in the process the rightful lane of the
oncoming Isuzu truck, thereby resulting in the collision. The fact that
[Eduardo] did not apply the brakes, but instead swerved to the other lane,
fairly suggests that he was not only unnecessarily close to the jeepney,
but that he was operating the bus at a speed greater than what was
reasonably necessary for him to be able to bring his vehicle to a full stop
to avoid hitting the vehicle he was then following. Clearly, immediately
before the collision, [Eduardo] was actually violating Section 35 of the
Land Transportation and Traffic Code, Republic Act No. 4136, as amended:
Sec. 35. Restriction as to speed. - (a) Any person driving a motor vehicle
on a highway shall drive the same at a careful and prudent speed, not
greater nor less than [what] is reasonable and proper, having due regard
for the traffic, the width of the highway, and or any other condition then
and there existing; and no person shall drive any motor vehicle upon a
highway at such a speed as to endanger the life, limb and property of any
person, nor at a speed greater than will permit him to bring the vehicle to
a stop within the clear distance ahead.
Too, when [Eduardo] swerved to the left and encroached on the rightful
lane of the Isuzu truck, he was violating Section 41 of the same Traffic
Code:
Sec. 41. Restriction on overtaking and passing. - (a) The driver of a vehicle
shall not drive to the left side of the center line of a highway in overtaking
or passing another vehicle, proceeding in the same direction, unless such
left side is clearly visible, and is free of oncoming traffic for a sufficient
distance ahead to permit such overtaking or passing to be made in safety.
The fact that the collision occurred immediately after the bus swerved on
the left lane clearly [indicates] that the other lane was not clear and free
of oncoming vehicle at the time x x x [Eduardo] tried to overtake the
jeepney to avoid hitting it.
It is presumed that a person driving a motor vehicle has been negligent if
at the time of the mishap, he was violating any traffic regulation, unless
there is proof to the contrary (Article 2185 of the CivilCode). [Eduardo]
failed to rebut this legal presumption as he chose not to answer the
complaint and to testify in court. [Philippine Rabbit was also] unsuccessful
in overthrowing the said legal presumption. x x x
[Eduardo's] failure to observe the proper and safe distance from the
vehicle ahead of him and in running the bus at a speed greater than what
was reasonably necessary to control and stop the vehicle when warranted
by the circumstances, clearly were reflective of his lack of precaution,
vigilance, and foresight in operating his vehicle. As an experienced driver,
he should have known about the danger posed by tailgating another
vehicle and driving his vehicle at an unreasonable speed called for by the
circumstances. For, the sudden stopping of a motor vehicle, for whatever
[reason], is not an uncommon and [unforeseeable] occurrence in the
highway. If only he had exercised diligence, vigilance and foresight, he
would have refrained from tailgating another vehicle at a dangerously
close range. What he should have done instead was to maintain a
reasonable distance from the jeepney and drove his vehicle at a speed not
greater than will permit him to bring the vehicle to a stop within the
assured clear distance ahead. This he failed to do. As a consequence,
when the jeepney stopped, he was unable to control and stop the bus.
Instead, he was forced to swerve the bus to the left lane blocking the path
of the oncoming Isuzu truck. While he averted smashing the jeepney, he
however collided with the Isuzu truck. No doubt, it was [Eduardo's] lack of
precaution, vigilance and foresight that led to the accident. Otherwise
stated, it was his recklessness or negligence that was the proximate cause
of the mishap.
[Philippine Rabbit's] imputation of fault to the driver of the Isuzu truck,
claiming that it was the latter [which] had the last clear chance to avoid
the accident, deserves scant consideration. As the evidence would show,
the impact occurred immediately after the bus swerved and while in the
process of encroaching on the left lane. This is evidenced by the fact that
the front portion of the Isuzu truck collided with the right side portion of
the bus. The driver of the Isuzu truck, before the accident, was cruising on
the lane properly belonging to him. He had every right to expect that all
the vehicles, including the bus coming from the opposite direction would
stay on their proper lane. He certainly was not expected to know what
prompted the bus driver to suddenly swerve his vehicle to the left. The
abruptness by which the bus swerved without a warning could not have
given him the luxury of time to reflect and anticipate the bus'
encroachment of his lane for him to be able to avoid it. Needless to point
out, there was no last clear chance to speak of on the part of the driver of
the Isuzu truck to avoid the accident. Besides, the 'last clear chance'
principle is not applicable in this case since the instant suit is between the
passenger and the common carrier. x x x12
The RTC then proceeded to determine whether Philippine Rabbit, as it
claimed, exercised the diligence of a good father of a family in the
selection and supervision of its drivers as to negate any liability for
damages. The said court, however, was unconvinced after it found that (1)
Philippine Rabbit failed to show that it had taken all the necessary and
actual steps to thoroughly examine the qualifications of Eduardo as a
driver worthy of employment; and (2) no proof relative to the existence of
company rules and regulations, instructions, and policies affecting its
drivers, as well as to their actual implementation and observance, were
presented. Hence, Philippine Rabbit was held jointly and severally liable
with Eduardo for the awards made in favor of Dionisio as follows:
The emotional anguish and suffering of x x x Dionisio Estrada as a
consequence of the injury and amputation of his right arm due to the
reckless driving of x x x Eduardo, which resulted in the accident, cannot be
overemphasized. The loss of the use of his right arm and the humiliation of
being tagged in the public [eye] as a person with only one arn1 would
certainly be borne by him for the rest of his life. The amount of moral
damages he is praying appears to be reasonable under the circumstances.
Too, the award of attorney's fees is proper considering that x xx [Dionisio]
was forced to litigate after x x x [Philippine Rabbit] refused to heed his
demand for the payment of damages as a consequence of the accident.
WHEREFORE, judgment is hereby rendered ordering x x x Philippine Rabbit
Bus Lines, Inc. and Eduardo Saylan to pay jointly and severally x xx
Dionisio Estrada the following amounts:
1. Five Hundred Thousand Pesos (₱500,000.00) as moral damages;
2. Fifty Seven Thousand Seven Hundred Sixty Six Pesos and Twenty Five
Centavos (₱57,766.25), as actual damages; and
3. Twenty Five Thousand Pesos (₱25,000.00), as attorney's fees; and the
costs of suit.
SO ORDERED.13
Philippine Rabbit filed a Motion for Reconsideration14 but the same was
denied for lack of merit in an Order15 dated May 31, 2010.
Ruling of the Court of Appeals
On appeal, Philippine Rabbit imputed error upon the RTC in not finding that
it exercised the diligence of a good father of a family in the selection and
supervision of its drivers. In any case, it argued that moral damages are
not recoverable in an action for damages predicated on breach of contract
except when death results or when the carrier is guilty of fraud or bad
faith. Since none of the two aforementioned circumstances are present in
this case, Philippine Rabbit contended that it is Eduardo alone who should
be held civilly liable.
In a Decision16 dated May 16, 2012, the CA partially granted the appeal on
the following ratiocination:
Based from [sic] the aforecited allegations in the complaint, it was rightly
regarded by the trial court as an action to recover damages arising from
breach of contract of carriage. There was in fact, an admission that
[Dionisio] was a passenger of a bus owned by [Philippine Rabbit]. In an
action for breach of contract of carriage, all that is required is to prove the
existence of such contract and its non-performance by the carrier through
the latter's failure to carry the passenger safely to his destination. In the
present case, it was duly established that there was a collision and as a
result of which, [Dionisio] sustained an injury.
[Philippine Rabbit] was therefore properly found liable for breach of
contract of carriage. A common carrier is bound to carry its passengers
safely as far as human care and foresight can provide, using the utmost
diligence of very cautious persons, with due regard to all the
circumstances. In a contract of carriage, it is presumed that the common
carrier was at fault or was negligent when a passenger dies or is injured.
Unless the presumption is rebutted, the court need not even make an
express finding of fault or negligence on the part of the common carrier.
This presumption may only be overcome by evidence that the carrier
exercised extraordinary diligence, and this presumption remained
unrebutted in this case. The trial court found that the accident which led to
the amputation of [Dionisio's] arm was due to the reckless driving and
negligence of [Philippine Rabbit's] driver and stated that:
No doubt, it was x x x [Eduardo's] lack of precaution, vigilance and
foresight that led to the accident. Otherwise stated, it was his recklessness
or negligence that was the proximate cause of the mishap.
Such negligence and recklessness is binding against [Philippine Rabbit]
pursuant to Article 1759 of the Civil Code which provides:
Common carriers are liable for the death of or injuries to passengers
through the negligence or willful acts of the former' s employees, although
such employees may have acted beyond the scope of their authority or in
violation of the orders of the common carriers.
This liability of the common carriers does not cease upon proof that they
exercised all the diligence of a good father of a family in the selection and
supervision of their employees.
Thus, [Philippine Rabbit's] defense that it acted with the diligence of a
good father of a family in its selection of its driver, Eduardo R. Saylan, is
unavailing. [Philippine Rabbit] however is correct in its contention that
moral damages are not recoverable in actions for damages predicated on
a breach of contract, unless death of a passenger results, or it is proved
that the carrier was guilty of fraud or bad faith, even if death does not
result.
There was no evidence on record indicative of fraud or bad faith on
[Philippine Rabbit's] part. Bad faith should be established by clear and
convincing evidence. The settled rule is that the law always presumes
good faith such that any person who seeks to be awarded damages due to
the acts of another has the burden of proving that the latter acted in bad
faith or with ill motive. The award for attorney's fees must likewise be
deleted considering that moral damages cannot be granted and none of
the instances enumerated in Article 2208 of the Civil Code is present in the
instant case. However, the actual damages awarded by the trial court are
adequately substantiated by official receipts. Therefore, the same shall be
sustained.
The driver on the other hand, may not be held liable under the contract of
carriage, not being a party to the same. The basis of a cause of action of a
passenger against the driver is either culpa criminal or culpa aquiliana. A
passenger may file a criminal case based on culpa criminal punishable
under the Revised Penal Code or a civil case based on culpa aquiliana
under Articles 2176 and 2177 of the Civil Code.
A cause of action based on culpa contractual is also separate and distinct
from a cause of action based on culpa aquiliana. x x x
xxxx
The trial court therefore erred in ruling that [Philippine Rabbit] bus
company and [respondent] driver are jointly and severally liable. The
driver cannot be held jointly and severally liable with the carrier in case of
breach of the contract of carriage. The contract of carriage is between the
carrier and the passenger, and in the event of contractual liability, the
carrier is exclusively responsible [therefor] to the passenger, even if such
breach be due to the negligence of his driver. The carrier can neither shift
his liability on the contract to his driver nor share it with him for his
driver's negligence is his.17
Accordingly, the CA modified the RTC Decision in that it declared Philippine
Rabbit as solely and exclusively liable to Dionisio for actual damages in the
amount of ₱57,766.25 and deleted the award of moral damages and
attorney's fees.
Petitioners filed a Motion for Reconsideration 18 but the same was denied by
the CA for lack of merit in a Resolution19dated October 1, 2012.
Hence, this Petition for Review on Certiorari raising the following issues:
WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN
DECLARING THAT THERE WAS NO EVIDENCE ON RECORD INDICATIVE OF
FRAUD OR BAD FAITH ON [PHILIPPINE RABBIT'S] PART.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN NOT
[CONSIDERING] X X X THE [COST OF THE] REPLACEMENT OF PETITIONER
[DIONISIO'S AMPUTATED RIGHT ARM] WITH [AN] ARTIFICIAL ONE AS
ACTUAL DAMAGES.20
The Parties' Arguments
Petitioners dispute the findings of lack of fraud or bad faith on the part of
Philippine Rabbit as to make it liable for moral damages. According to
them, the assertions of Philippine Rabbit in its Answer, i.e., that it carried
Dionisio safely; that it was not an insurer of all risks; that the accident was
caused by a fortuitous event; that in any event, it was the negligent
manner by which the Isuzu truck was operated which was the proximate
cause of the accident; and that Dionisio has no cause of action against
Philippine Rabbit, were made with the intention to evade liability.
Petitioners claim that the said assertions are clear indication of fraud or
bad faith.
In justifying their claim for moral damages, petitioners aver that in their
Complaint, they did not seek for moral damages in terms of physical
suffering, mental anguish, fright, serious anxiety, besmirched reputation,
wounded feelings, moral shock, social humiliation, and similar injury per
se, but for moral damages based purely on the fact that Dionisio lost his
right arm. They argue that while in a strict sense, Dionisio incurred actual
damages through the amputation of his right arm, such loss may rightly be
considered as falling under moral damages. This is because a right arm is
beyond the commerce of man and loss thereof necessarily brings physical
suffering, mental anguish, besmirched reputation, social humiliation and
similar injury to a person. At any rate, should this Court award the amount
of ₱500,000.00 as actual damages due to the loss of Dionisio's right arm,
petitioners also find the same proper and appropriate under the
circumstances.
Now jointly represented by one counsel, respondents, on the other hand,
reiterate the rule that moral damages are not recoverable in an action for
damages predicated on a breach of contract, as in this case, since breach
of contract is not one of the items enumerated in Article 2219 of the Civil
Code. Only as an exception, moral damages may be recovered in an action
for breach of contract of carriage when the mishap results in death or if
the carrier acted fraudulently or in bad faith. Since Dionisio did not die in
the mishap nor was Philippine Rabbit found guilty of fraud or bad faith,
respondents argue that an award for moral damages is improper for
having no basis in fact and in law.
Our Ruling
The Court modifies the CA ruling.
Moral damages; Instances when
moral damages can be awarded in an
action for breach of contract.
Moral damages include physical suffering, mental anguish, fright, serious
anxiety, besmirched reputation, wounded feelings, moral shock, social
humiliation, and similar injury. Though incapable of pecuniary
computation, moral damages may be recovered if they are the proximate
result of the defendant's wrongful act or omission. 21
Under Article 2219 of the Civil Code, moral damages are recoverable in the
following and analogous cases: (1) a criminal offense resulting in physical
injuries; (2) quasi-delicts causing physical injuries; (3) seduction,
abduction, rape or other lascivious acts; (4) adultery or concubinage; (5)
illegal or arbitrary detention or arrest; (6) illegal search; (7) libel, slander,
or any other form of defamation; (8) malicious prosecution; (9) acts
mentioned in Article 309;22 and (1) acts and actions referred to in Articles
21,23 26,24 27 ,25 28,26 29,27 30,28 32,29 34,30 and 35.31
x x x [C]ase law establishes the following requisites for the award of moral
damages: (1) there must be an injury clearly sustained by the claimant,
whether physical, mental or psychological; (2) there must be a culpable
act or omission factually established; (3) the wrongful act or omission of
the defendant is the proximate cause of the injury sustained by the
claimant; and (4) the award for damages is predicated on any of the cases
stated in Article 2219 of the Civil Code.32
Since breach of contract is not one of the items enumerated under Article
2219, moral damages, as a general rule, are not recoverable in actions for
damages predicated on breach of contract.33
x x x As an exception, such damages are recoverable [in an action for
breach of contract:] (1) in cases in which the mishap results in the death of
a passenger, as provided in Article 1764,34 in relation to Article 2206(3)35 of
the Civil Code; and (2) in x x x cases in which the carrier is guilty of fraud
or bad faith, as provided in Article 222036.37
Moral damages are not recoverable
in this case.
It is obvious that this case does not come under the first of the
abovementioned exceptions since Dionisio did not die in the mishap but
merely suffered an injury. Nevertheless, petitioners contend that it falls
under the second category since they aver that Philippine Rabbit is guilty
of fraud or bad faith.
It has been held, however, that "allegations of bad faith and fraud must be
proved by clear and convincing evidence."38 They are never presumed
considering that they are serious accusations that can be so conveniently
and casually invoked.39 And unless convincingly substantiated by whoever
is alleging them, they amount to mere slogans or mudslinging. 40
In this case, the fraud or bad faith that must be convincingly proved by
petitioners should be one which was committed by Philippine Rabbit in
breaching its contract of carriage with Dionisio. Unfortunately for
petitioners, the Court finds no persuasive proof of such fraud or bad faith.
Fraud has been defined to include an inducement through insidious
machination. Insidious machination refers to a deceitful scheme or plot
with an evil or devious purpose. Deceit exists where the party, with intent
to deceive, conceals or omits to state material facts and, by reason of such
omission or concealment, the other party was induced to give consent that
would not otherwise have been given.41
Bad faith, on the other hand, "does not simply connote bad judgment or
negligence; it imports a dishonest purpose or some moral obliquity and
conscious doing of a wrong, a breach of a known duty through some
motive or interest or ill will that partakes of the nature of fraud." 42
There is no showing here that Philippine Rabbit induced Dionisio to enter
into a contract of carriage with the former through insidious machination.
Neither is there any indication or even an allegation of deceit or
concealment or omission of material facts by reason of which Dionisio
boarded the bus owned by Philippine Rabbit. Likewise, it was not shown
that Philippine Rabbit's breach of its known duty, which was to transport
Dionisio from Urdaneta to La Union,43 was attended by some motive,
interest, or ill will. From these, no fraud or bad faith can be attributed to
Philippine Rabbit.
Still, petitioners insist that since the defenses it pleaded in its Answer were
designed to evade liability, Philippine Rabbit is guilty of fraud or bad faith.
Suffice it to state, however, that the allegations which made up Philippine
Rabbit's defenses are hardly the kind of fraud or bad faith contemplated
by law. Again, it bears to mention that the fraud or bad faith must be one
which attended the contractual breach or one which induced Dionisio to
enter into contract in the first place.
Clearly, moral damages are not recoverable in this case. The CA,
therefore, did not err in deleting the award for moral damages.
Actual damages for loss/impairment
of earning capacity are also not
recoverable. In lieu thereof, the
Court awards temperate damages.
In an attempt to recover the ₱500,000.00 awarded by the RTC as moral
damages but deleted by the CA, petitioners would instead want this Court
to grant them the same amount as just and proper compensation for the
loss of Dionisio's right arm.
It can be recalled that in the Complaint, petitioners justified their claim for
moral damages as follows:
9. [The] amount of ₱500,000.00 as moral damages for the amputation of
[Dionisio's] right arm for life including his moral sufferings for such [loss]
of right arm is reasonable.
Said amount is computed and derived using the formula (2/3 x [80- age of
the complainant when the injury is sustained] = life expectancy) adopted
in the American Expectancy Table of Mortality or the actuarial of Combined
Experience Table of Mortality. From such formula, [Dionisio] is expected to
live for 18 years, which is equivalent [to] about 6570 days. For each day,
[Dionisio] is claiming ₱80.00 as he is expected to work for 8 hours a day
with his amputated arm or to enjoy the same for at least 8 hours a day (or
is claiming ₱l0.00 for each hour) for 18 years (6570 days). The amount
that can be computed thereof would be ₱525,600.00 (6570 days x
₱80.00). [Dionisio] then [rounded] it off to ₱500,000.00, the moral
damages consisted [of] his moral sufferings due to the [loss] of his right
arm for life;44
It thus appears that while petitioners denominated their claim for
₱500,000.00 as moral damages, their computation was actually based on
the supposed loss/impairment of Dionisio's earning capacity.
Loss or impairment of ean1ing capacity finds support under Article 2205
(1) of the Civil Code, to wit:
Art. 2205. Damages may be recovered:
(1) For loss or impairment of earning capacity in cases of temporary or
permanent personal injury;
xxxx
It is, however, settled that "damages for loss [or impairment] of earning
capacity is in the nature of actual damages x x x."45
Actual or compensatory damages are those awarded in order to
compensate a party for an injury or loss he suffered. They arise out of a
sense of natural justice, aimed at repairing the wrong done. To be
recoverable, they must be duly proved with a reasonable degree of
certainty. A court cannot rely on speculation, conjecture, or guesswork as
to the fact and amount of damages, but must depend upon competent
proof that they have suffered, and on evidence of the actual amount
thereof.46
Thus, as a rule, documentary evidence should be presented to
substantiate the claim for damages for loss of earning capacity. By way of
exception, damages for loss [or impairment] of earning capacity may be
awarded despite the absence of documentary evidence when (1) the
deceased [or the injured] was self-employed and earning less than the
minimum wage under current labor laws, in which case, judicial notice
may be taken of the fact that in the deceased's line of work no
documentary evidence is available; or (2) the deceased was employed as
a daily worker earning less than the minimum wage under current labor
laws.47
Here, it is unlikely that petitioners presented evidence to prove a claim for
actual damages based on loss/impairment of earning capacity since what
they were claiming at the outset was an award for moral damages. The
Court has nonetheless gone over the records to find out if they have
sufficiently shown during trial that they are entitled to such compensatory
damages that they are now claiming. Unfortunately, no documentary
evidence supporting Dionisio's actual income is extant on the records. A: If you compute that it is ₱2,400.00 monthly. If I still [live by] about 20-
What it bears is the mere testimony of Dionisio on the matter, viz.: 30 years [more], I can still [earn] that amount.48

COURT: It must be emphasized, though, that documentary proof of Dionisio's

actual income cannot be dispensed with since based on the above
Q: By the way, why did you submit the original copy of your exhibits to the testimony, Dionisio does not fall under any of the two exceptions
GSIS? aforementioned. Thus, as it stands, there is no competent proof
substantiating his actual income and because of this, an award for actual
A: I am claiming my GSIS compensation because I am a government
damages for loss/ impairment of earning capacity cannot be made.
Employee.
Nonetheless, since it was established that Dionisio lost his right arm,
ATTY. SEVILLEJA:
temperate damages in lieu of actual damages for loss/impairment of
Q: What particular government [agency do] you belong? earning capacity may be awarded in his favor. Under Article 2224,
"[t]emperate or moderate damages, which are more than nominal but less
A: DECS. than compensatory damages, may be recovered when the court finds that
some pecuniary loss has been suffered but its amount cannot, from the
Q: You are a teacher?
nature of the case, be proved with certainty."
A: Yes sir.
The case of Tan v. OMC Carriers, Inc.49 enumerates several instances
Q: You are still continuing your profession as a teacher until now? wherein the Court awarded temperate damages in lieu of actual damages
for loss of earning capacity, viz.:
A: Yes sir.
In the past, we awarded temperate damages in lieu of actual damages for
Q: By the way Mr. witness, you are claiming x x x moral damages of loss of earning capacity where earning capacity is plainly established but
₱500,000.00? How did you compute that ₱500,000.00? no evidence was presented to support the allegation of the injured party's
actual income.
A: I based that from [sic] my income which is about ₱80.00 a day or ₱l0.00
per hour. In Pleno v. Court of Appeals, we sustained the award of temperate
damages in the amount of ₱200,000.00 instead of actual damages for loss
Q: Is that x x x gross or not? of earning capacity because the plaintiffs income was not sufficiently
A: Net sir. proven.

Q: What are your other sideline? We did the same in People v. Singh, and People v. Almedilla, granting
temperate damages in place of actual damages for the failure of the
A: I know [how] to drive a tricycle. prosecution to present sufficient evidence of the deceased's income.

Q: Because of [the] amputation of your right arm, you mean to say you
[cannot] drive anymore a tricycle?
A: Yes sir.
Q: By the way Mr. witness, how old are you when you met [the] accident?
A: More than 53 years old sir, less than 54.
Q: If you are claiming for x x x moral damages of P80.00 a day, how come
you are asking for ₱500,000.00?
Similarly, in Victory Liner, Inc. v. Gammad, we deleted the award of
damages for loss of earning capacity for lack of evidentiary basis of the
actual extent of the loss. Nevertheless, because the income-earning
capacity lost was clearly established, we awarded the heirs ₱500,000.00
as temperate damages.50
Accordingly, the Court in Tan awarded to the heirs of the therein deceased
victim, who was working as a tailor at the time of his death, temperate
damages in the amount of ₱300,000.00 in lieu of compensatory
damages.51

In the subsequent case of Orix Metro Leasing and Finance Corporation v.

Mangalinao,52 the Court likewise awarded temperate damages as follows:
While the net income had not been sufficiently established, the Court Legal interest is imposed on the
recognizes the fact that the Mangalinao heirs had suffered loss deserving amounts awarded.
of compensation.1âwphi1 What the CA awarded is in actuality a form of
temperate damages. Such form of damages under Article 2224 of the Civil In addition, the amounts of damages awarded are declared subject to legal
Code is given in the absence of competent proof on the actual damages interest of 6% per annum from the finality of this Decision until full
suffered. In the past, we awarded temperate damages in lieu of actual satisfaction.59
damages for loss of earning capacity where earning capacity is plainly
WHEREFORE, the Petition for Review on Certiorari is DENIED. The
established but no evidence was presented to support the allegation of the
assailed May 16, 2012 Decision and October 1, 2012 Resolution of the
injured party's actual income. In this case, Roberto Mangalinao, the
Court of Appeals in CA-G.R. CV No. 95520 are AFFIRMED with
breadwinner of the family, was a businessman engaged in buying and
MODIFICATIONS as follows: (1) petitioners are declared entitled to
selling palay and agricultural supplies that required high capital in its
temperate damages of ₱500,000.00; (2) the award of actual damages is
operations and was only 37 at the time of his death. Moreover, the
set at the amount of ₱57,658.25; and (3) all damages awarded are subject
Pathfinder which the Mangalinaos own, became a total wreck. Under the
to legal interest of 6% per annum from the finality of this Decision until full
circumstances, we find the award of ₱500,000.00 as temperate damages
satisfaction.
as reasonable.53
SO ORDERED.
And in the more recent case of People v. Salahuddin,54 the lower courts'
award of ₱4,398,000.00 as compensation for loss of earning capacity of a
murdered lawyer was disallowed due to insufficiency of evidence. Again in
lieu thereof, temperate damages of ₱l,000,000.00 was awarded.55

In view of the above rulings and under the circumstances of this case, the
Court finds reasonable to award Dionisio temperate damages of
₱500,000.00 in lieu of actual damages for the loss/impairment of his
earning capacity.

Actual damages by way of medical

expenses must be supported by
official receipts.

Anent petitioners' assertion that actual damages should be awarded to

them for the cost of replacement of Dionisio's amputated right arm, suffice
it to state that petitioners failed to show during trial that the said
amputated right arm was actually replaced by an artificial one. All that
petitioners submitted was a quotation of ₱l60,000.00 for a unit of elbow
prosthesis56 and nothing more. It has been held that actual proof of
expenses incurred for medicines and other medical supplies necessary for
treatment and rehabilitation must be presented by the claimant, in the
form of official receipts, to show the exact cost of his medication and to
prove that he indeed went through medication and rehabilitation. In the
absence of the same, such claim must be negated. 57

At any rate, the RTC already granted petitioners actual damages by way of
medical expenses based on the official hospital receipts submitted. 58 There
is, however, a need to correct the amount, that is, the should be
₱57,658.25 as borne by the receipts and not ₱57,766.25 .
 Before this Court is a petition for review on certiorari under Rule 45 of the
1997 Rules of Civil Procedure, seeking to annul and set aside the
Decision[1] dated July 21, 2009 of the Court of Appeals (CA) in CA-G.R. CV
No. 90021, which affirmed with modification the Decision [2] dated March
20, 2007 of the Regional Trial Court (RTC), Branch 40, Palayan City, and
Resolution[3] dated October 26, 2009, which denied the petitioners motion
for reconsideration
PHILIPPINE NATIONAL RAILWAYS CORPORATION, G.R. No. 190022
JAPHET ESTRANAS and BEN SAGA, The Antecedent Facts

Petitioners,
Present:
On May 14, 2004, at about three oclock in the morning, Reynaldo Vizcara
(Reynaldo) was driving a passenger jeepney headed towards Bicol to
deliver onion crops, with his companions, namely, Cresencio Vizcara
CARPIO, J., (Cresencio), Crispin Natividad (Crispin), Samuel Natividad (Samuel),
-versus- Dominador Antonio (Dominador) and Joel Vizcara (Joel). While crossing the
Chairperson, railroad track in Tiaong, Quezon, a Philippine National Railways (PNR) train,
VILLARAMA, JR.,* then being operated by respondent Japhet Estranas (Estranas), suddenly
turned up and rammed the passenger jeepney. The collision resulted to
PEREZ, the instantaneous death of Reynaldo, Cresencio, Crispin, and Samuel. On
PURIFICACION VIZCARA, the other hand, Dominador and Joel, sustained serious physical injuries. [4]
SERENO, and
MARIVIC VIZCARA,
REYES, JJ.
CRESENCIA A. NATIVIDAD, At the time of the accident, there was no level crossing installed at the
railroad crossing. Additionally, the Stop, Look and Listen signage was
HECTOR VIZCARA, JOEL VIZCARA and DOMINADOR poorly maintained. The Stop signage was already faded while the Listen
ANTONIO, signage was partly blocked by another signboard.[5]
Respondents. Promulgated:

On September 15, 2004, the survivors of the mishap, Joel and Dominador,
February 15, 2012 together with the heirs of the deceased victims, namely, Purificacion
Vizcara, Marivic Vizcara, Cresencia Natividad and Hector Vizcara, filed an
action for damages against PNR, Estranas and Ben Saga, the alternate
driver of the train, before the RTC of Palayan City. The case was raffled to
x------------------------------------------------------------------------------------x Branch 40 and was docketed as Civil Case No. 0365-P. In their complaint,
the respondents alleged that the proximate cause of the
fatalities and serious physical injuries sustained by the victims of the
accident was the petitioners gross negligence in not providing adequate
DECISION
safety measures to prevent injury to persons and properties. They pointed
out that in the railroad track of Tiaong, Quezon where the accident
happened, there was no level crossing bar, lighting equipment or bell
REYES, J.: installed to warn motorists of the existence of the track and of the
approaching train. They concluded their complaint with a prayer for actual,
moral and compensatory damages, as well as attorneys fees. [6]
Nature of the Petition

For their part, the petitioners claimed that they exercised due diligence in
operating the train and monitoring its roadworthiness. They asseverate
that right before the collision, Estranas was driving the train at a moderate d) CRESENCIA NATIVIDAD:
speed. Four hundred (400) meters away from the railroad crossing, he
started blowing his horn to warn motorists of the approaching train. When 1) P50,000.00 as indemnity for the death of Crispin Natividad;
the train was only fifty (50) meters away from the intersection, respondent 2) P200,000.00 as moral damages;
Estranas noticed that all vehicles on both sides of the track were already 3) P100,000.00 as exemplary damages; and
at a full stop. Thus, he carefully proceeded at a speed of twenty-five (25) 4) P20,000.00 for Attorneys fees.
kilometers per hour, still blowing the trains horn. However, when the train
was already ten (10) meters away from the intersection, the passenger e) JOEL VIZCARA
jeepney being driven by Reynaldo suddenly crossed the tracks. Estranas
immediately stepped on the brakes to avoid hitting the jeepney but due to 1) P9,870.00 as reimbursement for his actual expenses;
the sheer weight of the train, it did not instantly come to a complete stop 2) P50,000.00 as moral damages;
until the jeepney was dragged 20 to 30 meters away from the point of 3) P25,000.00 as exemplary damages; and
collision.[7] 4) P10,000.00 for Attorneys fees.

f) DOMINADOR ANTONIO
The Ruling of the Trial Court
1) P63,427.00 as reimbursement for his actual expenses;
[8] 2) P50,000.00 as moral damages;
After trial on the merits, the RTC rendered its Decision dated March 20,
3) P25,000.00 as exemplary damages; and
2007, ruling in favor of the respondents, the dispositive portion of which
4) P10,000.00 for Attorneys fees.
reads:
and
WHEREFORE, premises considered, judgment is hereby rendered ordering
defendants Philippine National Railways Corporation (PNR), Japhet
2. Costs of suit.
Estranas and Ben Saga to, jointly and severally pay the following amounts
to:
SO ORDERED.[9]
1. a) PURIFICACION VIZCARA:
1) P50,000.00, as indemnity for the death of Reynaldo Vizcara;
The Ruling of the CA
2) P35,000.00, for funeral expenses;
3) P5,000.00 for re-embalming expenses;
Unyielding, the petitioners appealed the RTC decision to the
4) P40,000.00 for wake/interment expenses;
CA. Subsequently, on July 21, 2009, the CA rendered the assailed decision,
5) P300,000.00 as reimbursement for the value of the jeepney with
affirming the RTC decision with modification with respect to the amount of
license plate no. DTW-387;
damages awarded to the respondents. The CA disposed, thus:
6) P200,000.00 as moral damages;
7) P100,000.00 as exemplary damages; and
WHEREFORE, instant appeal is PARTIALLY GRANTED. The assailed
8) P20,000.00 for Attorneys fees.
Decision is AFFIRMED WITH MODIFICATION, as follows:
b) MARIVIC VIZCARA:
(1) The award of P5,000.00 for re-embalming expenses and P40,000.00 for
1) P50,000.00, as indemnity for the death of Cresencio Vizcara;
wake/interment expenses to PURIFICACION VIZCARA is deleted. In lieu
2) P200,000.00 as moral damages;
thereof, P25,000.00 as temperate damages is awarded;
3) P100,000.00 as exemplary damages; and
4) P20,000.00 for Attorneys fees.
(2) The award of moral damages to PURIFICACION VIZCARA, MARIVIC
VIZCARA, HECTOR VIZCARA and CRESENCIA NATIVIDAD is
c) HECTOR VIZCARA:
hereby reduced from P200,000.00 to P100,000.00 each while moral
1) P50,000.00 as indemnity for the death of Samuel Vizcara;
damages awarded to JOEL VIZCARA and DOMINADOR ANTONIO are
2) P200,000.00 as moral damages;
likewise reduced from P50,000.00 to P25,000.00;
3) P100,000.00 as exemplary damages; and
4) P20,000.00 for Attorneys fees.
(3) The award of exemplary damages to PURIFICACION VIZCARA,
MARIVIC VIZCARA, HECTOR VIZCARA and CRESENCIA NATIVIDAD is hereby
reduced from P100,000.00 to P50,000.00 each while exemplary damages
awarded to JOEL VIZCARA and DOMINADOR ANTONIO are
likewise reduced from P25,000.00 to P12,500.00; and
(4) The award for attorneys fees in favor of the Appellees as well as the
award of P300,000.00 to Appellee PURIFICACION as reimbursement for the
value of the jeepney is DELETED.
[10]
SO ORDERED.
In the assailed decision, the CA affirmed the RTCs finding of negligence on
the part of the petitioners. It concurred with the trial court's conclusion
that petitioner PNR's failure to install sufficient safety devices in the area,
such as flagbars or safety railroad bars and signage, was the proximate
cause of the accident. Nonetheless, in order to conform with established
jurisprudence, it modified the monetary awards to the victims and the
heirs of those who perished due to the collision.
The petitioners filed a Motion for Reconsideration[11] of the decision of the
CA. However, in a Resolution[12] dated October 26, 2009, the CA denied the
same.
Aggrieved, the petitioners filed the present petition for review
on certiorari, raising the following grounds:
I states:
THE CA ERRED IN FINDING THAT THE PROXIMATE CAUSE OF THE
ACCIDENT WAS THE NEGLIGENCE OF THE PETITIONERS;
II
THE CA ERRED IN HOLDING THAT THE DOCTRINE OF LAST CLEAR
CHANCE FINDS NO APPLICATION IN THE INSTANT CASE;
III
THE CA ERRED IN FINDING NEGLIGENCE ON THE PART OF THE
PETITIONERS OR ERRED IN NOT FINDING AT THE LEAST,
CONTRIBUTORY NEGLIGENCE ON THE PART OF THE RESPONDENTS.
[13]
The petitioners maintain that the proximate cause of the collision was the
negligence and recklessness of the driver of the jeepney. They argue that
as a professional driver, Reynaldo is presumed to be familiar with traffic
rules and regulations, including the right of way accorded to trains at
railroad crossing and the precautionary measures to observe in traversing
the same. However, in utter disregard of the right of way enjoyed by PNR
trains, he failed to bring his jeepney to a full stop before crossing the
railroad track and thoughtlessly followed the ten-wheeler truck ahead of
them. His failure to maintain a safe distance between the jeepney he was
driving and the truck ahead of the same prevented him from seeing the
PNR signage displayed along the crossing.[14]
In their Comment,[15] the respondents reiterate the findings of the RTC and
the CA that the petitioners' negligence in maintaining adequate and
necessary public safety devices in the area of the accident was the
proximate cause of the mishap. They asseverate that if there was only a
level crossing bar, warning light or sound, or flagman in the intersection,
the accident would not have happened. Thus, there is no other party to
blame but the petitioners for their failure to ensure that adequate warning
devices are installed along the railroad crossing.[16]
This Courts Ruling
The petition lacks merit.
The petitioners negligence was the proximate cause of the
accident.
Article 2176 of the New Civil Code prescribes a civil liability for damages
caused by a person's act or omission constituting fault or negligence. It
Article 2176. Whoever by act or omission causes damage to another, there
being fault or negligence, is obliged to pay for the damage done. Such
fault or negligence, if there was no pre-existing contractual relation
between the parties, is called quasi-delict and is governed by the
provisions of this chapter.
In Layugan v. Intermediate Appellate Court,[17] negligence was defined as
the omission to do something which a reasonable man, guided by
considerations which ordinarily regulate the conduct of human affairs,
would do, or the doing of something which a prudent and reasonable man
would not do. It is the failure to observe for the protection of the interests
of another person, that degree of care, precaution, and vigilance which the
circumstances justly demand, whereby such other person suffers injury.
[18]
To determine the existence of negligence, the time-honored test
was: 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.
The law here in effect adopts the standard supposed to be supplied by the
imaginary conduct of the discreet paterfamilias of the Roman law. The
existence of negligence in a given case is not determined by reference to
the personal judgment of the actor in the situation before him. The law
considers what would be reckless, blameworthy, or negligent in the man of
ordinary intelligence and prudence and determines liability by that. [19]
In the instant petition, this Court is called upon to determine whose
negligence occasioned the ill-fated incident. The records however reveal
that this issue had been rigorously discussed by both the RTC and the CA.
To emphasize, the RTC ruled that it was the petitioners failure to install
adequate safety devices at the railroad crossing which proximately caused
the collision. This finding was affirmed by the CA in its July 21, 2009
Decision. It is a well-established rule that factual findings by the CA are
conclusive on the parties and are not reviewable by this Court. They are
entitled to great weight and respect, even finality, especially when, as in
this case, the CA affirmed the factual findings arrived at by the trial court.
[20]
Furthermore, in petitions for review on certiorari, only questions of law
may be put into issue. Questions of fact cannot be entertained. [21] To
distinguish one from the other, a question of law exists when the doubt or
difference centers on what the law is on a certain state of facts. A question
of fact, on the other hand, exists if the doubt centers on the truth or falsity
of the alleged facts.[22] Certainly, the finding of negligence by the RTC,
which was affirmed by the CA, is a question of fact which this Court cannot
pass upon as this would entail going into the factual matters on which the
negligence was based.[23] Moreover, it was not shown that the present case
falls under any of the recognized exceptions [24] to the oft repeated principle
according great weight and respect to the factual findings of the trial court
and the CA.
At any rate, the records bear out that the factual circumstances of the
case were meticulously scrutinized by both the RTC and the CA before
arriving at the same finding of negligence on the part of the petitioners,
and we found no compelling reason to disturb the same. Both courts ruled
that the petitioners fell short of the diligence expected of it, taking into
consideration the nature of its business, to forestall any untoward incident.
In particular, the petitioners failed to install safety railroad bars to prevent
motorists from crossing the tracks in order to give way to an approaching
train. Aside from the absence of a crossing bar, the Stop, Look and Listen
signage installed in the area was poorly maintained, hence, inadequate to
alert the public of the impending danger. A reliable signaling device in
good condition, not just a dilapidated Stop, Look and Listen signage, is
needed to give notice to the public. It is the responsibility of the railroad
company to use reasonable care to keep the signal devices in working
order. Failure to do so would be an indication of negligence. [25] Having
established the fact of negligence on the part of the petitioners, they were
rightfully held liable for damages.
There was no contributory negligence on the part of the
respondents.
As to whether there was contributory negligence on the part of the
respondents, this court rule in the negative. Contributory negligence is
conduct on the part of the injured party, contributing as a legal cause to
the harm he has suffered, which falls below the standard which he is
required to conform for his own protection. It is an act or omission
amounting to want of ordinary care on the part of the person injured
which, concurring with the defendants negligence, is the proximate cause
of the injury.[26] Here, we cannot see how the respondents could have
contributed to their injury when they were not even aware of the
forthcoming danger. It was established during the trial that the jeepney
carrying the respondents was following a ten-wheeler truck which was only
about three to five meters ahead. When the truck proceeded to traverse
the railroad track, Reynaldo, the driver of the jeepney, simply followed
through. He did so under the impression that it was safe to proceed. It
bears noting that the prevailing circumstances immediately before the
collision did not manifest even the slightest indication of an imminent
harm. To begin with, the truck they were trailing was able to safely cross
the track. Likewise, there was no crossing bar to prevent them from
proceeding or, at least, a stoplight or signage to forewarn them of the
approaching peril. Thus, relying on his faculties of sight and hearing,
Reynaldo had no reason to anticipate the impending danger. [27] He
proceeded to cross the track and, all of a sudden, his jeepney was rammed
by the train being operated by the petitioners. Even then, the
circumstances before the collision negate the imputation of contributory
negligence on the part of the respondents. What clearly appears is that
the accident would not have happened had the petitioners installed
reliable and adequate safety devices along the crossing to ensure the
safety of all those who may utilize the same.
At this age of modern transportation, it behooves the PNR to exert serious
efforts to catch up with the trend, including the contemporary standards in
railroad safety. As an institution established to alleviate public
transportation, it is the duty of the PNR to promote the safety and security
of the general riding public and provide for their convenience, which to a
considerable degree may be accomplished by the installation of
precautionary warning devices. Every railroad crossing must be installed
with barriers on each side of the track to block the full width of the road
until after the train runs past the crossing. To even draw closer attention,
the railroad crossing may be equipped with a device which rings a bell or
turns on a signal light to signify the danger or risk of crossing. It is similarly
beneficial to mount advance warning signs at the railroad crossing, such
as a reflectorized crossbuck sign to inform motorists of the existence of
the track, and a stop, look and listen signage to prompt the public to take
caution. These warning signs must be erected in a place where they will
have ample lighting and unobstructed visibility both day and night. If only
these safety devices were installed at the Tiaong railroad crossing and the
accident nevertheless occurred, we could have reached a different
disposition in the extent of the petitioners liability.
The exacting nature of the responsibility of railroad companies to secure
public safety by the installation of warning devices was emphasized
in Philippine National Railways v. Court of Appeals,[28] thus:
[I]t may broadly be stated that railroad companies owe to the public a
duty of exercising a reasonable degree of care to avoid injury to persons
and property at railroad crossings, which duties pertain both to the
operation of trains and to the maintenance of the crossings. Moreover,
every corporation constructing or operating a railway shall make and
construct at all points where such railway crosses any public road, good,
sufficient, and safe crossings, and erect at such points, at sufficient
elevation from such road as to admit a free passage of vehicles of every
kind, a sign with large and distinct letters placed thereon, to give notice of
the proximity of the railway, and warn persons of the necessity of looking
out for trains. The failure of the PNR to put a cross bar, or signal light,
flagman or switchman, or semaphore is evidence of negligence and
disregard of the safety of the public, even if there is no law or ordinance
requiring it, because public safety demands that said device or equipment
be installed.[29]
The responsibility of the PNR to secure public safety does not end with the
installation of safety equipment and signages but, with equal measure of
accountability, with the upkeep and repair of the same. Thus, in Cusi v.
Philippine National Railways,[30] we held:
Jurisprudence recognizes that if warning devices are installed in railroad
crossings, the travelling public has the right to rely on such warning
devices to put them on their guard and take the necessary precautions
before crossing the tracks. A need, therefore, exists for the railroad
company to use reasonable care to keep such devices in good condition
and in working order, or to give notice that they are not operating, since if
such a signal is misunderstood it is a menace. Thus, it has been held that
if a railroad company maintains a signalling device at a crossing to give
warning of the approach of a train, the failure of the device to operate is
generally held to be evidence of negligence, which maybe considered with
all the circumstances of the case in determining whether the railroad
company was negligent as a matter of fact. [31]
The maintenance of safety equipment and warning signals at railroad
crossings is equally important as their installation since poorly maintained
safety warning devices court as much danger as when none was installed
at all. The presence of safety warning signals at railroad crossing carries
with it the presumption that they are in good working condition and that
the public may depend on them for assistance. If they happen to be
neglected and inoperative, the public may be misled into relying on the
impression of safety they normally convey and eventually bring injury to
themselves in doing so.
The doctrine of last clear chance is not applicable.
Finally, the CA correctly ruled that the doctrine of last clear chance is not
applicable in the instant case. The doctrine of last clear chance provides
that where both parties are negligent but the negligent act of one is
appreciably later in point of time than that of the other, or where it is
impossible to determine whose fault or negligence brought about the
occurrence of the incident, the one who had the last clear opportunity to
avoid the impending harm but failed to do so, is chargeable with the
consequences arising therefrom. Stated differently, the rule is that the
antecedent negligence of a person does not preclude recovery of damages
caused by the supervening negligence of the latter, who had the last fair
chance to prevent the impending harm by the exercise of due diligence.
[32]
To reiterate, the proximate cause of the collision was the petitioners
negligence in ensuring that motorists and pedestrians alike may safely
cross the railroad track. The unsuspecting driver and passengers of the
jeepney did not have any participation in the occurrence of the
unfortunate incident which befell them. Likewise, they did not exhibit any
overt act manifesting disregard for their own safety. Thus, absent
preceding negligence on the part of the respondents, the doctrine of last
clear chance cannot be applied.
WHEREFORE, premises considered, the petition is DENIED. The Decision
of the Court of Appeals dated July 21, 2009 in CA-G.R. CV No. 90021 is
hereby AFFIRMED.
SO ORDERED.

FIRST DIVISION
G.R. No. 169891 November 2, 2006
PHILIPPINE NATIONAL RAILWAYS, Petitioner,
vs.
ETHEL BRUNTY and JUAN MANUEL M. GARCIA, Respondents.
DECISION
CALLEJO, SR., J.:
1
This is a Petition for Review on Certiorari of the Decision of the Court of
Appeals (CA) in CA-G.R. CV No. 47567 and its Resolution 2 denying the
motion for reconsideration thereof. The assailed decision affirmed with
partial modification the ruling3 of the Regional Trial Court (RTC) of Manila,
Branch 20, directing petitioner Philippine National Railways (PNR) to
indemnify respondents Ethel Brunty and Juan Manuel M. Garcia for the
death of Rhonda Brunty, and to pay actual and moral damages, attorney’s
fees and cost of suit.
Rhonda Brunty, daughter of respondent Ethel Brunty and an American
citizen, came to the Philippines for a visit sometime in January 1980. Prior
to her departure, she, together with her Filipino host Juan Manuel M.
Garcia, traveled to Baguio City on board a Mercedes Benz sedan with plate
number FU 799, driven by Rodolfo L. Mercelita. It was about 12:00
midnight, January 25, 1980. By then, PNR Train No. T-71, driven by Alfonso
Reyes, was on its way to Tutuban, Metro Manila4 as it had left the La Union
station at 11:00 p.m., January 24, 1980.
By 2:00 a.m., Rhonda Brunty, Garcia and Mercelita were already
approaching the railroad crossing at Barangay Rizal, Moncada, Tarlac.
Mercelita, driving at approximately 70 km/hr, drove past a vehicle,
unaware of the railroad track up ahead and that they were about to collide
with PNR Train No. T-71. Mercelita was instantly killed when the Mercedes
Benz smashed into the train; the two other passengers suffered serious
physical injuries.5 A certain James Harrow6 brought Rhonda Brunty to the
Central Luzon Doctor’s Hospital in Tarlac, where she was pronounced dead
after ten minutes from arrival. Garcia, who had suffered severe head
injuries, was brought via ambulance to the same hospital. He was
transferred to the Manila Doctor’s Hospital, and later to the Makati Medical
Center for further treatment.7
On July 28, 1981, Ethel Brunty sent a demand letter 8 to the PNR
demanding payment of actual, compensatory, and moral damages, as a
result of her daughter’s death. When PNR did not respond, Ethel Brunty
and Garcia, filed a complaint9 for damages against the PNR before the RTC
of Manila. The case was raffled to Branch 20 and was docketed as Civil
Case No. 83-18645. They alleged that the death of Mercelita and Rhonda
Brunty, as well as the physical injuries suffered by Garcia, were the direct
and proximate result of the gross and reckless negligence of PNR in not
providing the necessary equipment at the railroad crossing in Barangay
Rizal, Municipality of Moncada, Tarlac. They pointed out that there was no
flagbar or red light signal to warn motorists who were about to cross the
railroad track, and that the flagman or switchman was only equipped with
a hand flashlight.10 Plaintiffs likewise averred that PNR failed to supervise
its employees in the performance of their respective tasks and duties,
more particularly the pilot and operator of the train.11 They prayed for the
payment of the following damages:
1.) ₱200,000.00 as actual and compensatory damages to plaintiff Ethel
Brunty;
2.) ₱2,800,000.00 for compensatory damages to plaintiff Ethel Brunty
representing lost or unearned income of Rhonda Brunty;
3.) Such amounts of moral and exemplary damages as may be warranted
by the evidence adduced, to plaintiff Ethel Brunty;
4.) At least ₱64,057.61 as actual damages representing medical expenses
to plaintiff Juan Manuel M. Garcia and at least ₱1,000,000.00 as unearned
or lost income of said plaintiff;
5.) At least ₱72,760.00 as actual damages representing cost of the
Mercedes Benz car to plaintiff Juan Manuel M. Garcia;
6.) Such amounts of moral and exemplary damages as may be warranted
by the evidence adduced, to plaintiff Juan Manuel M. Garcia; and
7.) Attorney’s fees equivalent to at least 15% of the total award to
plaintiffs herein.12
In its Answer,13 PNR claimed that it exercised the diligence of a good father
of a family not only in the selection but also in the supervision of its
employees.14 By way of special and affirmative defense, it stressed that it
had the right of way on the railroad crossing in question, and that it has no
legal duty to put up a bar or red light signal in any such crossing. It
insisted that there were adequate, visible, and clear warning signs
strategically posted on the sides of the road before the railroad crossing. It
countered that the immediate and proximate cause of the accident was
Mercelita’s negligence, and that he had the last clear chance to avoid the
accident. The driver disregarded the warning signs, the whistle blasts of
the oncoming train and the flashlight signals to stop given by the
guard.15 As counterclaim, it prayed that it be awarded actual and
compensatory damages, and litigation expenses.16
Plaintiffs filed an Amended Complaint17 dated July 28, 1986 to include, as
party plaintiff, Chemical Industries of the Philippines, Inc. (Chemphil),
Garcia’s employer, who claimed to have paid for the latter’s medical and
hospitalization expenses, the services rendered by the funeral parlor of the
deceased, and the expenses in transferring the remains of Rhonda Brunty
to the United States.18
After trial on the merits, the RTC rendered its Decision19 on May 21, 1990 in
favor of plaintiffs. The fallo reads:
WHEREFORE, judgment is hereby rendered in favor of the plaintiffs Ethel
Brunty and Juan Manuel M. Garcia and against the defendant Philippine
National Railways directing the latter to pay the former the sum of:
1. Thirty Thousand Pesos (₱30,000.00) Philippine Currency, for the death
of Rhonda Brunty formerly a resident of 1595 Ashland Avenue, Des
Plaines, Illinois, U.S.A.;
2. One Million Pesos (₱1,000,000.00) Philippine Currency for moral and
actual damages due the heirs of Rhonda Brunty;
3. Seventy-Two Thousand Seven Hundred Sixty Pesos (₱72,760.00)
Philippine Currency for damages sustained by the Mercedes Benz;
4. Fifty Thousand Pesos (₱50,000.00) Philippine Currency as and for
attorney's fees, and;
5. Costs of suit.
SO ORDERED.20
Aggrieved, the PNR appealed the case to the CA, raising the following
errors:
I.
THE TRIAL COURT ERRED IN ADJUDGING DEFENDANT-APPELLANT PNR
LIABLE FOR THE DEATH OF RHONDA BRUNTY AND THE CONSEQUENT
AWARD OF DAMAGES DUE THE HEIRS OF RHONDA BRUNTY.
II.
THE TRIAL COURT ERRED IN ADJUDGING DEFENDANT-APPELLANT PNR
LIABLE FOR THE DAMAGES SUFFERED BY PLAINTIFF-APPELLEE’S
MERCEDES BENZ IN THE AMOUNT OF SEVENTY-TWO THOUSAND SEVEN
HUNDRED AND SIXTY PESOS (₱72,760.00).
III.
THE LOWER COURT ERRED IN AWARDING ATTORNEY’S FEES TO THE
PLAINTIFFS-APPELLEES.21
In its Brief, PNR insisted that the sole and proximate cause of the accident
was the negligence and recklessness of Garcia and Mercelita. 22 It insisted
that it had provided adequate warning signals at the railroad
crossing23 and had exercised due care in the selection and supervision of
its employees.24 The RTC erred in awarding damages to Rhonda Brunty as
she cannot be allowed to receive what she is not in a position to give,
having been a non-resident alien who did not own a property in the
Philippines.25 It likewise questioned the award of damages on the Mercedes
Benz as well as the grant of attorney’s fees.26 At the very least, Mercelita
was guilty of contributory negligence.27
For their part, appellees countered that appellant was grossly and
recklessly negligent in not properly providing the necessary equipment at
the railroad crossing in Rizal, Moncada, Tarlac;28 appellant was negligent in
not exercising due diligence of a good father of a family in the supervision
of its employees, particularly the train operator Alfonso Reyes; 29 the car
was driven in a careful and diligent manner, and at a moderate speed,
with due regard to all traffic rules and regulations at that particular
time;30 the doctrine of "last clear chance" is not applicable;31 Ethel Brunty
is a non-resident alien who can rightfully file the instant case; 32 and they
are entitled to recover damages from appellant.33
The CA rendered the assailed Decision 34 on August 15, 2005. The
dispositive portion reads:
WHEREFORE, premises considered, the assailed decision is hereby
AFFIRMED with PARTIAL MODIFICATIONS, increasing the death indemnity
award from ₱30,000.00 to ₱50,000.00, and deleting the award for
damages sustained by the Mercedes Benz.
SO ORDERED.35
The appellate court affirmed the findings of the RTC as to the negligence of
the PNR. Considering the circumstances prevailing at the time of the fatal
accident, it ruled that the alleged safety measures installed by the PNR at
the railroad crossing were not merely inadequate – they did not satisfy the
well-settled safety standards in transportation.36 However, the CA did not
agree with the RTC’s findings on the contributory negligence of Mercelita,
the driver of the Mercedes Benz. It held that Mercelita could not have
foreseen the harm that would befall him and the two other passengers
under the prevailing circumstances, thus, could not be considered guilty of
contributory negligence.37
The PNR, now petitioner, comes before this Court in this Petition for Review
on Certiorari on the following grounds:
I.
THE COURT OF APPEALS ERRED IN MANIFESTLY OVERLOOKING CERTAIN
RELEVANT FACTS NOT DISPUTED BY THE PARTIES AND WHICH, IF
PROPERLY CONSIDERED, WOULD JUSTIFY A DIFFERENT CONCLUSION SUCH
AS:
THE RESPONDENTS’ DRIVER OVERTOOK ANOTHER VEHICLE BY
ACCELERATING AT 70 KILOMETERS PER HOUR WITHIN JUST 50 YARDS AWAY
FROM THE RAILROAD TRACKS.
II.
THE FINDINGS OF FACT OF THE COURT OF APPEALS ARE CONTRARY TO
THOSE OF THE TRIAL COURT REGARDING CONTRIBUTORY NEGLIGENCE OF
THE RESPONDENTS’ DRIVER.
III.
THE COURT OF APPEALS ERRED IN NOT APPLYING THE DOCTRINE OF LAST
CLEAR CHANCE IN THE INSTANT CASE.38
Petitioner insists that the proximate cause of the mishap was Mercelita’s
disregard of traffic rules and regulations. Had the court considered the fact
that Mercelita had overtaken another vehicle a few yards before the
railroad track, it would have reached a different conclusion. 39 Moreover,
petitioner asserts, considering that the decisions of the RTC and the CA
vary as to whether or not Mercelita was guilty of contributory negligence,
the findings of the RTC should prevail. Thus, Mercelita’s contributory
negligence should not have been ignored.40 Lastly, petitioner avers that
since there is freedom of control and greater maneuverability on the part
of motor vehicles, it is obvious that in railroad crossings, they have the last
clear chance to prevent or avoid an unwanted accident from taking
place.41
In their Comment42 on the petition, respondents reiterate the findings of
the RTC and the CA that the breach by petitioner of its legal duty to
provide adequate and necessary public safety device and equipment
within the area or scene of the accident was the proximate cause of the
mishap.43 While it is true that as a general rule, the trial court is in the best
position to evaluate and observe the conduct and demeanor of the
witnesses presented during the trial, the CA, in the exercise of its appellate
jurisdiction, has the vested right to modify, reject, or set aside the trial
court’s evaluation and findings.44 As to the application of the doctrine of
last clear chance, respondents claim that said issue is being raised for the
first time in this petition.45 Lastly, respondents cite foreign jurisprudence
stating that if the violation is one which gives rise to liability per se for any
resulting injury, the defenses ordinarily available in actions for diligence
are barred and the contributory negligence of the person injured is no
defense.46
The Court is thus tasked to answer the following factual questions: (1) As
between petitioner and Mercelita, whose negligence resulted in the
unfortunate collision? (2) Is Mercelita (the driver of the Mercedes Benz)
guilty of contributory negligence? Finally, the application in this case of the
doctrine of last clear chance is likewise in question.
Negligence is the omission to do something which a reasonable man,
guided by those considerations which ordinarily regulate the conduct of
human affairs, would do, or the doing of something which a prudent and
reasonable man would not do.47 In Corliss v. Manila Railroad
Company,48 this Court held that negligence is want of the care required by
the circumstances. It is a relative or comparative, not an absolute, term
and its application depends upon the situation of the parties and the
degree of care and vigilance which the circumstances reasonably
require.49 In determining whether or not there is negligence on the part of
the parties in a given situation, jurisprudence50 has laid down the following
test: Did 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, the person is guilty of negligence.
The law, in effect, adopts the standard supposed to be supplied by the
imaginary conduct of the discreet pater familias of the Roman law.
The issue of who, between the parties, was negligent was thoroughly
discussed by both the RTC and the CA. In petitions for review under Rule
45 of the Revised Rules of Court, only questions of law may be put into
issue, and questions of fact as a general rule, cannot be entertained. The
finding of negligence by the RTC, as affirmed by the CA, is a question of
fact which this Court cannot pass upon as it would entail going into factual
matters on which the finding of negligence was based. 51 The established
rule is that factual findings of the CA affirming those of the trial court are
conclusive and binding on this Court.52
The records of the instant case show that both the RTC and the CA
carefully examined the factual circumstances surrounding the case, and
we find no cogent reason to disturb the same. It is, however, worthy to
emphasize that petitioner was found negligent because of its failure to
provide the necessary safety device to ensure the safety of motorists in
crossing the railroad track. As such, it is liable for damages for violating
the provisions of Article 2176 of the New Civil Code, viz:
Article 2176. Whoever, by act or omission, causes damage to another,
there being fault or negligence, is obliged to pay for the damage done.
Such fault or negligence, if there is no pre-existing contractual relation
between the parties, is called a quasi-delict and is governed by the
provisions of this Chapter.
In a long line of cases, the Court held that in order to sustain a claim based
on quasi-delict, the following requisites must concur: (1) damage to
plaintiff; (2) negligence, by act or omission, of which defendant, or some
person for whose acts he must respond was guilty; and (3) connection of
cause and effect between such negligence and damage. 53 Applying the
foregoing requisites, the CA correctly made the following conclusions:
It was clearly established that plaintiffs-appellees (respondents herein)
sustained damage or injury as a result of the collision. That there was
negligence on the part of PNR is, likewise, beyond cavil. Considering the
circumstances prevailing at the time of the fatal accident, the alleged
safety measures installed by the PNR at the railroad crossing is not only
inadequate but does not satisfy well-settled safety standards in
transportation. x x x
xxxx
x x x An examination of the photographs of the railroad crossing at
Moncada, Tarlac presented as evidence by PNR itself would yield the
following: (1.) absence of flagbars or safety railroad bars; (2.) inadequacy
of the installed warning signals; and (3.) lack of proper lighting within the
area. Thus, even if there was a flagman stationed at the site as claimed by
PNR (petitioner), it would still be impossible to know or see that there is a
railroad crossing/tracks ahead, or that there is an approaching train from
the Moncada side of the road since one’s view would be blocked by a
cockpit arena. x x x54
Moreover, the CA held that a vehicle coming from the Moncada side would
have difficulty in knowing that there is an approaching train because of the
slight curve, more so, at an unholy hour as 2:00 a.m. Thus, it is imperative
on the part of the PNR to provide adequate safety equipment in the area. 55
It may broadly be stated that railroad companies owe to the public a duty
of exercising a reasonable degree of care to avoid injury to persons and
property at railroad crossings, which duties pertain both in the operation of
trains and in the maintenance of the crossings.56 Moreover, every
corporation constructing or operating a railway shall make and construct
at all points where such railway crosses any public road, good, sufficient,
and safe crossings and erect at such points, at a sufficient elevation from
such road as to admit a free passage of vehicles of every kind, a sign with
large and distinct letters placed thereon, to give notice of the proximity of
the railway, and warn persons of the necessity of looking out for trains. 57
This Court has previously determined the liability of the PNR for damages
for its failure to put a cross bar, or signal light, flagman or switchman, or
semaphores. Such failure is evidence of negligence and disregard of the
safety of the public, even if there is no law or ordinance requiring it
because public safety demands that said device or equipment be
installed.58
In view of the foregoing, we affirm the factual findings of the CA as well as
its conclusion on petitioner’s negligence.
As to whether or not Mercelita was guilty of contributory negligence, we
agree with petitioner. Contributory negligence is conduct on the part of the
injured party, contributing as a legal cause to the harm he has suffered,
which falls below the standard to which he is required to conform for his
own protection.59 To hold a person as having contributed to his injuries, it
must be shown that he performed an act that brought about his injuries in
disregard of warning or signs of an impending danger to health and
body.60 To prove contributory negligence, it is still necessary to establish a
causal link, although not proximate, between the negligence of the party
and the succeeding injury. In a legal sense, negligence is contributory only
when it contributes proximately to the injury, and not simply a condition
for its occurrence.61
The court below found that there was a slight curve before approaching
the tracks; the place was not properly illuminated; one’s view was blocked
by a cockpit arena; and Mercelita was not familiar with the road. Yet, it was
also established that Mercelita was then driving the Mercedes Benz at a
speed of 70 km/hr and, in fact, had overtaken a vehicle a few yards before
reaching the railroad track. Mercelita should not have driven the car the
way he did. However, while his acts contributed to the collision, they
nevertheless do not negate petitioner’s liability. Pursuant to Article
217962 of the New Civil Code, the only effect such contributory negligence
could have is to mitigate liability, which, however, is not applicable in this
case, as will be discussed later.1âwphi1
As to whether or not the doctrine of last clear chance is applicable, we rule
in the negative. The doctrine of last clear chance states that where both
parties are negligent but the negligent act of one is appreciably later than
that of the other, or where it is impossible to determine whose fault or
negligence caused the loss, the one who had the last clear opportunity to
avoid the loss but failed to do so, is chargeable with the loss. Stated
differently, the antecedent negligence of plaintiff does not preclude him
from recovering damages caused by the supervening negligence of
defendant, who had the last fair chance to prevent the impending harm by
the exercise of due diligence.63 The proximate cause of the injury having
been established to be the negligence of petitioner, we hold that the
above doctrine finds no application in the instant case.
We note that the damages awarded by the appellate court consist of (1)
₱50,000.00 as indemnity for the death of Rhonda Brunty; (2)
₱1,000,000.00 as actual and moral damages due the heirs of Rhonda
Brunty; and (3) ₱50,000.00 as and by way of attorney’s fees. No damages,
however, were awarded for the injuries suffered by Garcia, yet, the latter
never interposed an appeal before the CA nor even before this Court. The
record is, likewise, bereft of any allegation and proof as to the relationship
between Mercelita (the driver) and Rhonda Brunty. Hence, the earlier
finding of contributory negligence on the part of Mercelita, which generally
has the effect of mitigation of liability, does not apply.
As to the amount of damages awarded, a modification of the same is in
order, specifically on the award of actual and moral damages in the
aggregate amount of ₱1,000,000.00.
Actual or compensatory damages are those awarded in order to
compensate a party for an injury or loss he suffered. They arise out of a
sense of natural justice, aimed at repairing the wrong done. To be
recoverable, they must be duly proved with a reasonable degree of WHEREFORE, premises considered, the Decision of the Court of Appeals
certainty. A court cannot rely on speculation, conjecture, or guesswork as dated August 15, 2005 is AFFIRMED WITH MODIFICATIONS. The award of
to the fact and amount of damages, but must depend upon competent actual damages is deleted, and in lieu thereof, temperate damages of
proof that they have suffered, and on evidence of the actual amount ₱25,000.00 is awarded to the heirs of Rhonda Brunty. The award of moral
thereof.64 Respondents, however, failed to present evidence for such damages is reduced to ₱500,000.00.
damages; hence, the award of actual damages cannot be sustained.
However, as the heirs of Rhonda Brunty undeniably incurred expenses for SO ORDERED.
the wake and burial of the latter, we deem it proper to award temperate
damages in the amount of ₱25,000.00 pursuant to prevailing
jurisprudence.65 This is in lieu of actual damages as it would be unfair for
the victim’s heirs to get nothing, despite the death of their kin, for the
reason alone that they cannot produce receipts.66

The relatives of the victim who incurred physical injuries in a quasi-delict

are not proscribed from recovering moral damages in meritorious
cases.67 We, therefore, sustain the award of moral damages in favor of the
heirs of Rhonda Brunty.

Moral damages are not punitive in nature, but are designed to compensate
and alleviate in some way the physical suffering, mental anguish, fright,
serious anxiety, besmirched reputation, wounded feelings, moral shock,
social humiliation, and similar injury unjustly caused a person. Although
incapable of pecuniary computation, moral damages must nevertheless be
somehow proportional to and in approximation of the suffering
inflicted.68 In the instant case, the moral suffering of the heirs of Rhonda
Brunty was sufficiently established by Ethel Brunty in her deposition, 69 viz:

Q: What have you felt as a result of the death of Rhonda?

A: I felt earnest anguish and mixed feelings of anger and extreme sorrow
because she died so far away and alone, and because her death could so
easily be prevented if there had been adequate and appropriate warning
signals at the railroad crossing and it is just an unbearable and irreparable
loss. In so many ways, she was my life. It seemed to me that losing her
was just like losing my own life, or worst, and even now, there is no end to
our bereavement. I am still on constant medication to be able to sleep and
to be able to perform my duties effectively in my job but it does not take
away the pain of loss.70

In People v. Teehankee, Jr.,71 and in Metro Manila Transit Corporation v.

Court of Appeals,72 we awarded moral damages in the amount of
₱1,000,000.00 to the heirs of the deceased. In Victory Liner, Inc. v. Heirs of
Malecdan,73the award of ₱100,000.00 as moral damages was held in
keeping with the purpose of the law, while in Macalinao v. Ong, 74 the
amount of ₱50,000.00 was held sufficient.1âwphi1

Considering the circumstances attendant in this case, we find that an

award of ₱500,000.00 as moral damages to the heirs of Rhonda Brunty is
proper. In view of recent jurisprudence, indemnity of ₱50,000.00 for the
death of Rhonda Brunty and attorney’s fees amounting to ₱50,000.00 is
likewise proper.

G.R. No. 138060. September 1, 2004]
WILLIAM TIU, doing business under the name and style of D Rough
Riders, and VIRGILIO TE LAS PIAS petitioners, vs. PEDRO A.
ARRIESGADO, BENJAMIN CONDOR, SERGIO PEDRANO and
PHILIPPINE PHOENIX SURETY AND INSURANCE, INC., respondents.
DECISION
CALLEJO, SR., J.:
This is a petition for review on certiorari under Rule 45 of the Rules of
Court from the Decision[1] of the Court of Appeals in CA-G.R. CV No. 54354
affirming with modification the Decision[2] of the Regional Trial Court,
7th Judicial Region, Cebu City, Branch 20, in Civil Case No. CEB-5963 for
breach of contract of carriage, damages and attorneys fees, and the
Resolution dated February 26, 1999 denying the motion for
reconsideration thereof.
The following facts are undisputed:
At about 10:00 p.m. of March 15, 1987, the cargo truck marked Condor
Hollow Blocks and General Merchandise bearing plate number GBP-675
was loaded with firewood in Bogo, Cebu and left for Cebu City. Upon
reaching Sitio Aggies, Poblacion, Compostela, Cebu, just as the truck
passed over a bridge, one of its rear tires exploded. The driver, Sergio
Pedrano, then parked along the right side of the national highway and
removed the damaged tire to have it vulcanized at a nearby shop, about
700 meters away.[3] Pedrano left his helper, Jose Mitante, Jr. to keep watch
over the stalled vehicle, and instructed the latter to place a spare tire six
fathoms away[4] 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 Laspias was cruising along the national highway
of Sitio Aggies, Poblacion, Compostela, Cebu. The passenger bus was also
bound for Cebu City, and had come from Maya, Daanbantayan, Cebu.
Among its passengers were the Spouses Pedro A. Arriesgado and Felisa
Pepito Arriesgado, who were seated at the right side of the bus, about
three (3) or four (4) places from the front seat.
As the bus was approaching the bridge, Laspias saw the stalled truck,
which was then about 25 meters away.[5] He applied the breaks and tried
to swerve to the left to avoid hitting the truck. But it was too late; the bus
rammed into the 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. [6] His wife, Felisa,
was brought to the Danao CityHospital. She was later transferred to the
Southern Island Medical Center where she died shortly thereafter. [7]
Respondent Pedro A. Arriesgado then filed a complaint for breach of
contract of carriage, damages and 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 Laspias 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 Laspias
did not take precautionary measures to avoid the accident. [8] Thus:
6. That the accident resulted to the death of the plaintiffs wife, Felisa
Pepito Arriesgado, as evidenced by a Certificate of Death, a xerox copy of
which is hereto attached as integral part hereof and marked as ANNEX A,
and physical injuries to several of its passengers, including plaintiff himself
who suffered a COLLES FRACTURE RIGHT, per Medical Certificate, a xerox
copy of which is hereto attached as integral part hereof and marked as
ANNEX B hereof.
7. That due to the reckless and imprudent driving by defendant Virgilio Te
Laspias of the said Rough Riders passenger bus, plaintiff and his wife,
Felisa Pepito Arriesgado, failed to safely reach their destination which
was Cebu City, the proximate cause of which was defendant-drivers failure
to observe utmost diligence required of a very cautious person under all
circumstances.
8. That defendant William Tiu, being the owner and operator of the said
Rough Riders passenger bus which figured in the said accident, wherein
plaintiff and his wife were riding at the time of the accident, is therefore
directly liable for the breach of contract of carriage for his failure to
transport plaintiff and his wife safely to their place of destination which
was Cebu City, and which failure in his obligation to transport safely his
passengers was due to and in consequence of his failure to exercise the
diligence of a good father of the family in the selection and supervision
of his employees, particularly defendant-driver Virgilio Te Laspias. [9]
The respondent prayed that judgment be rendered in his favor and that
the petitioners be condemned to pay the following damages:
1). To pay to plaintiff, jointly and severally, the amount of P30,000.00 for
the death and untimely demise of plaintiffs wife, Felisa Pepito Arriesgado;
2). To pay to plaintiff, jointly and severally, the amount of P38,441.50,
representing actual expenses incurred by the plaintiff in connection with
the death/burial of plaintiffs wife;
3). To pay to plaintiff, jointly and severally, the amount of P1,113.80,
representing medical/hospitalization expenses incurred by plaintiff for the
injuries sustained by him;
4). To pay to plaintiff, jointly and severally, the amount of P50,000.00 for
moral damages;
5). To pay to plaintiff, jointly and severally, the amount of P50,000.00 by
way of exemplary damages;
6). To pay to plaintiff, jointly and severally, the amount of P20,000.00 for
attorneys fees;
7). To pay to plaintiff, jointly and severally, the amount of P5,000.00 for
litigation expenses.
PLAINTIFF FURTHER PRAYS FOR SUCH OTHER RELIEFS AND REMEDIES IN
LAW AND EQUITY.[10]
The petitioners, for their part, filed a Third-Party Complaint [11] on August
21, 1987 against the following: respondent Philippine Phoenix Surety and
Insurance, Inc. (PPSII), petitioner Tius insurer; respondent Benjamin
Condor, the registered owner of the cargo truck; and respondent Sergio
Pedrano, the driver of the truck. They alleged that petitioner Laspias was
negotiating the uphill climb along the national highway of Sitio Aggies,
Poblacion, Compostela, in a moderate and normal speed. It was further
alleged that the truck was parked in a slanted manner, its rear portion
almost in the middle of the highway, and that no early warning device was
displayed. Petitioner Laspias promptly applied the brakes and swerved to
the left to avoid hitting the truck head-on, but despite his efforts to avoid
damage to property and physical injuries on the passengers, the right side
portion of the bus hit the cargo trucks left rear. The petitioners further
alleged, thus:
5. That the cargo truck mentioned in the aforequoted paragraph is owned
and registered in the name of the third-party defendant Benjamin Condor
and was left unattended by its driver Sergio Pedrano, one of the third-
party defendants, at the time of the incident;
6. That third-party defendant Sergio Pedrano, as driver of the cargo truck
with marked (sic) Condor Hollow Blocks & General Merchandise, with Plate
No. GBP-675 which was recklessly and imprudently parked along the
national highway of Compostela, Cebu during the vehicular accident in
question, and third-party defendant Benjamin Condor, as the registered
owner of the cargo truck who failed to exercise due diligence in the
selection and supervision of third-party defendant Sergio Pedrano, are
jointly and severally liable to the third-party plaintiffs for whatever liability
that may be adjudged against said third-party plaintiffs or are directly
liable of (sic) the alleged death of plaintiffs wife;
7. That in addition to all that are stated above and in the answer which are
intended to show reckless imprudence on the part of the third-party
defendants, the third-party plaintiffs hereby declare that during the
vehicular accident in question, third-party defendant was clearly violating
Section 34, par. (g) of the Land Transportation and Traffic Code
10. That the aforesaid passenger bus, owned and operated by third-party
plaintiff William Tiu, is covered by a common carrier liability insurance with
Certificate of Cover No. 054940 issued by Philippine Phoenix Surety and
Insurance, Inc., Cebu City Branch, in favor of third-party plaintiff William
Tiu which covers the period from July 22, 1986 to July 22, 1987 and that
the said insurance coverage was valid, binding and subsisting during the
time of the aforementioned incident (Annex A as part hereof);
11. That after the aforesaid alleged incident, third-party plaintiff notified
third-party defendant Philippine Phoenix Surety and Insurance, Inc., of the
alleged incident hereto mentioned, but to no avail;
12. That granting, et arguendo et arguendi, if herein third-party plaintiffs
will be adversely adjudged, they stand to pay damages sought by the
plaintiff and therefore could also look up to the Philippine Phoenix Surety
and Insurance, Inc., for contribution, indemnification and/or
reimbursement of any liability or obligation that they might [be] adjudged
per insurance coverage duly entered into by and between third-party
plaintiff William Tiu and third-party defendant Philippine Phoenix Surety
and Insurance, Inc.;[12]
The respondent PPSII, for its part, admitted that it had an existing contract
with petitioner Tiu, but averred that it had already attended to and settled
the claims of those who were injured during the incident. [13] It could not
accede to the claim of respondent Arriesgado, as such claim was way
beyond the scheduled indemnity as contained in the contract of
insurance. [14]
After the parties presented their respective evidence, the trial court ruled
in favor of respondent Arriesgado. The dispositive portion of the decision
reads:
WHEREFORE, in view of the foregoing, judgment is hereby rendered in
favor of plaintiff as against defendant William Tiu ordering the latter to pay
the plaintiff the following amounts:
1 - The sum of FIFTY THOUSAND PESOS (P50,000.00) as moral damages;
2 - The sum of FIFTY THOUSAND PESOS (P50,000.00) as exemplary
damages;
3 - The sum of THIRTY-EIGHT THOUSAND FOUR HUNDRED FORTY-ONE
PESOS (P38,441.00) as actual damages;
4 - The sum of TWENTY THOUSAND PESOS (P20,000.00) as attorneys fees;
5 - The sum of FIVE THOUSAND PESOS (P5,000.00) as costs of suit;
SO ORDERED.[15]
According to the trial court, there was no dispute that petitioner William
Tiu was engaged in business as a common carrier, in view of his admission
that D Rough Rider passenger bus which figured in the accident was
owned by him; that he had been engaged in the transportation business
for 25 years with a sole proprietorship; and that he owned 34 buses. The
trial court ruled that if petitioner Laspias had not been driving at a fast
pace, he could have easily swerved to the left to avoid hitting the truck,
thus, averting the unfortunate incident. It then concluded that petitioner
Laspias was negligent.
The trial court also ruled that the absence of an early warning device near
the place where the truck was parked was not sufficient to impute
negligence on the part of respondent Pedrano, since the tail lights of the
truck were fully on, and the vicinity was well lighted by street lamps. [16] It
also found that the testimony of petitioner Tiu, that he based the selection
of his driver Laspias on efficiency and in-service training, and that the
latter had been so far an efficient and good driver for the past six years of
his employment, was insufficient to prove that he observed the diligence
of a good father of a family in the selection and supervision of his
employees.
After the petitioners motion for reconsideration of the said decision was
denied, the petitioners elevated the case to the Court of Appeals on the
following issues:
I WHETHER THIRD PARTY DEFENDANT SERGIO PEDRANO WAS RECKLESS
AND IMPRUDENT WHEN HE PARKED THE CARGO TRUCK IN AN OBLIQUE
MANNER;
II WHETHER THE THIRD PARTY DEFENDANTS ARE JOINTLY AND SEVERALLY
LIABLE DIRECTLY TO PLAINTIFF-APPELLEE OR TO DEFENDANTS-
APPELLANTS FOR WHATEVER LIABILITY THAT MAY BE ADJUDGED TO THE
SAID DEFENDANTS-APPELLANTS;
III WHETHER DEFENDANT-APPELLANT VIRGILIO TE LASPIAS WAS GUILTY OF
GROSS NEGLIGENCE;
IV WHETHER DEFENDANT-APPELLANT WILLIAM TIU HAD EXERCISED THE
DUE DILIGENCE OF A GOOD FATHER OF A FAMILY IN THE SELECTION AND
SUPERVISION OF HIS DRIVERS;
V GRANTING FOR THE SAKE OF ARGUMENT THAT DEFENDANT-APPELLANT
WILLIAM TIU IS LIABLE TO PLAINTIFF-APPELLEE, WHETHER THERE IS LEGAL
AND FACTUAL BASIS IN AWARDING EXCESSIVE MORAL DAMAGES,
EX[E]MPLARY DAMAGES, ATTORNEYS FEES AND LITIGATION EXPENSES TO
PLAINTIFF-APPELLEE;
VI WHETHER THIRD PARTY DEFENDANT PHILIPPINE PHOENIX SURETY AND
INSURANCE, INC. IS LIABLE TO DEFENDANT- APPELLANT WILLIAM TIU. [17]
The appellate court rendered judgment affirming the trial courts decision
with the modification that the awards for moral and exemplary damages
were reduced to P25,000. The dispositive portion reads:
WHEREFORE, the appealed Decision dated November 6, 1995 is
hereby MODIFIED such that the awards for moral and exemplary
damages are each reduced to P25,000.00 or a total of P50,000.00 for both.
The judgment is AFFIRMED in all other respects.
SO ORDERED.[18]
According to the appellate court, the action of respondent Arriesgado was
based not on quasi-delict but on breach of contract of carriage. As a
common carrier, it was incumbent upon petitioner Tiu to prove that
extraordinary diligence was observed in ensuring the safety of passengers
during transportation. Since the latter failed to do so, he should be held
liable for respondent Arriesgados claim. The CA also ruled that no
evidence was presented against the respondent PPSII, and as such, it
could not be held liable for respondent Arriesgados claim, nor for
contribution, indemnification and/or reimbursement in case the petitioners
were adjudged liable.
The petitioners now come to this Court and ascribe the following errors
committed by the appellate court:
I. THE HONORABLE COURT OF APPEALS ERRED IN NOT DECLARING
RESPONDENTS BENJAMIN CONDOR AND SERGIO PEDRANO GUILTY OF
NEGLIGENCE AND HENCE, LIABLE TO RESPONDENT PEDRO A.
ARRIESGADO OR TO PETITIONERS FOR WHATEVER LIABILITY THAT MAY BE
ADJUDGED AGAINST THEM.
II. THE HONORABLE COURT OF APPEALS ERRED IN FINDING PETITIONERS
GUILTY OF NEGLIGENCE AND HENCE, LIABLE TO RESPONDENT PEDRO A.
ARRIESGADO.
III. THE HONORABLE COURT OF APPEALS ERRED IN FINDING PETITIONER
WILLIAM TIU LIABLE FOR EXEMPLARY DAMAGES, ATTORNEYS FEES AND
LITIGATION EXPENSES.
IV.THE HONORABLE COURT OF APPEALS ERRED IN NOT FINDING
RESPONDENT PHILIPPINE PHOENIX SURETY AND INSURANCE, INC. LIABLE
TO RESPONDENT PEDRO A. ARRIESGADO OR TO PETITIONER WILLIAM TIU.
[19]
According to the petitioners, the appellate court erred in failing to
appreciate the absence of an early warning device and/or built-in
reflectors at the front and back of the cargo truck, in clear violation of
Section 34, par. (g) of the Land Transportation and Traffic Code. They aver
that such violation is only a proof of respondent Pedranos negligence, as
provided under Article 2185 of the New Civil Code. They also question the
appellate courts failure to take into account that the truck was parked in
an oblique manner, its rear portion almost at the center of the road. As
such, the proximate cause of the incident was the gross recklessness and
imprudence of respondent Pedrano, creating the presumption of
negligence on the part of respondent Condor in supervising his employees,
which presumption was not rebutted. The petitioners then contend that
respondents Condor and Pedrano should be held jointly and severally
liable to respondent Arriesgado for the payment of the latters claim.
The petitioners, likewise, aver that expert evidence should have been
presented to prove that petitioner Laspias was driving at a very fast
speed, and that the CA could not reach such conclusion by merely
considering the damages on the cargo truck. It was also pointed out that
petitioner Tiu presented evidence that he had exercised the diligence of a
good father of a family in the selection and supervision of his drivers.
The petitioners further allege that there is no legal and factual basis to
require petitioner Tiu to pay exemplary damages as no evidence was
presented to show that the latter acted in a fraudulent, reckless and
oppressive manner, or that he had an active participation in the negligent
act of petitioner Laspias.
Finally, the petitioners contend that respondent PPSII admitted in its
answer that while it had attended to and settled the claims of the other
injured passengers, respondent Arriesgados claim remained unsettled as it
was beyond the scheduled indemnity under the insurance contract. The
petitioners argue that said respondent PPSII should have settled the said
claim in accordance with the scheduled indemnity instead of just denying
the same.
On the other hand, respondent Arriesgado argues that two of the issues
raised by the petitioners involved questions of fact, not reviewable by the
Supreme Court: the finding of negligence on the part of the petitioners and However, considering that novel questions of law are likewise involved, the
their liability to him; and the award of exemplary damages, attorneys fees Court resolves to examine and rule on the merits of the case.
and litigation expenses in his favor. Invoking the principle of equity and
justice, respondent Arriesgado pointed out that if there was an error to be Petitioner Laspias
reviewed in the CA decision, it should be geared towards the restoration of
Was negligent in driving
the moral and exemplary damages to P50,000 each, or a total of P100,000
which was reduced by the Court of Appeals to P25,000 each, or a total of The Ill-fated bus
only P50,000.
In his testimony before the trial court, petitioner Laspias claimed that he
Respondent Arriesgado also alleged that respondents Condor and Pedrano, was traversing the two-lane road at Compostela, Cebu at a speed of only
and respondent Phoenix Surety, are parties with whom he had no contract forty (40) to fifty (50) kilometers per hour before the incident occurred.
of carriage, and had no cause of action against. It was pointed out that [23]
He also admitted that he saw the truck which was parked in an oblique
only the petitioners needed to be sued, as driver and operator of the ill- position at about 25 meters before impact,[24] and tried to avoid hitting it
fated bus, on account of their failure to bring the Arriesgado Spouses to by swerving to the left. However, even in the absence of expert evidence,
their place of destination as agreed upon in the contract of carriage, using the damage sustained by the truck[25] itself supports the finding of both the
the utmost diligence of very cautious persons with due regard for all trial court and the appellate court, that the D Rough Rider bus driven by
circumstances. petitioner Laspias was traveling at a fast pace. Since he saw the stalled
truck at a distance of 25 meters, petitioner Laspias had more than enough
Respondents Condor and Pedrano point out that, as correctly ruled by the
time to swerve to his left to avoid hitting it; that is, if the speed of the bus
Court of Appeals, the proximate cause of the unfortunate incident was the
was only 40 to 50 kilometers per hour as he claimed. As found by the
fast speed at which petitioner Laspias was driving the bus owned by
Court of Appeals, it is easier to believe that petitioner Laspias was driving
petitioner Tiu. According to the respondents, the allegation that the truck
at a very fast speed, since at 4:45 a.m., the hour of the accident, there
was not equipped with an early warning device could not in any way have
were no oncoming vehicles at the opposite direction. Petitioner Laspias
prevented the incident from happening. It was also pointed out that
could have swerved to the left lane with proper clearance, and, thus, could
respondent Condor had always exercised the due diligence required in the
have avoided the truck.[26] Instinct, at the very least, would have prompted
selection and supervision of his employees, and that he was not a party to
him to apply the breaks to avert the impending disaster which he must
the contract of carriage between the petitioners and respondent
have foreseen when he caught sight of the stalled truck. As we had
Arriesgado.
occasion to reiterate:
Respondent PPSII, for its part, alleges that contrary to the allegation of
A man must use common sense, and exercise due reflection in all his acts;
petitioner Tiu, it settled all the claims of those injured in accordance with
it is his duty to be cautious, careful and prudent, if not from instinct, then
the insurance contract. It further avers that it did not deny respondent
through fear of recurring punishment. He is responsible for such results as
Arriesgados claim, and emphasizes that its liability should be within the
anyone might foresee and for acts which no one would have performed
scheduled limits of indemnity under the said contract. The respondent
except through culpable abandon. Otherwise, his own person, rights and
concludes that while it is true that insurance contracts are contracts of
property, and those of his fellow beings, would ever be exposed to all
indemnity, the measure of the insurers liability is determined by the
manner of danger and injury.[27]
insureds compliance with the terms thereof.
We agree with the following findings of the trial court, which were affirmed
The Courts Ruling
by the CA on appeal:
At the outset, it must be stressed that this Court is not a trier of facts.
[20] A close study and evaluation of the testimonies and the documentary
Factual findings of the Court of Appeals are final and may not be
proofs submitted by the parties which have direct bearing on the issue of
reviewed on appeal by this Court, except when the lower court and the CA
negligence, this Court as shown by preponderance of evidence that
arrived at diverse factual findings.[21] The petitioners in this case assail the
defendant Virgilio Te Laspias failed to observe extraordinary diligence as a
finding of both the trial and the appellate courts that petitioner Laspias
driver of the common carrier in this case. It is quite hard to accept his
was driving at a very fast speed before the bus owned by petitioner Tiu
version of the incident that he did not see at a reasonable distance ahead
collided with respondent Condors stalled truck. This is clearly one of fact,
the cargo truck that was parked when the Rough Rider [Bus] just came out
not reviewable by the Court in a petition for review under Rule 45. [22]
of the bridge which is on an (sic) [more] elevated position than the place
On this ground alone, the petition is destined to fail. where the cargo truck was parked. With its headlights fully on, defendant
driver of the Rough Rider was in a vantage position to see the cargo truck
ahead which was parked and he could just easily have avoided hitting and
bumping the same by maneuvering to the left without hitting the said
cargo truck. Besides, it is (sic) shown that there was still much room or
space for the Rough Rider to pass at the left lane of the said national
highway even if the cargo truck had occupied the entire right lane thereof.
It is not true that if the Rough Rider would proceed to pass through the left
lane it would fall into a canal considering that there was much space for it
to pass without hitting and bumping the cargo truck at the left lane of said
national highway. The records, further, showed that there was no incoming
vehicle at the opposite lane of the national highway which would have
prevented the Rough Rider from not swerving to its left in order to avoid
hitting and bumping the parked cargo truck. But the evidence showed that
the Rough Rider instead of swerving to the still spacious left lane of the
national highway plowed directly into the parked cargo truck hitting the
latter at its rear portion; and thus, the (sic) causing damages not only to
herein plaintiff but to the cargo truck as well.[28]
Indeed, petitioner Laspias negligence in driving the bus is apparent in the
records. By his own admission, he had just passed a bridge and was
traversing the highway of Compostela, Cebu at a speed of 40 to 50
kilometers per hour before the collision occurred. The maximum speed
allowed by law on a bridge is only 30 kilometers per hour. [29] And, as
correctly pointed out by the trial court, petitioner Laspias also violated
Section 35 of the Land Transportation and Traffic Code, Republic Act No.
4136, as amended:
Sec. 35. Restriction as to speed. (a) Any person driving a motor vehicle on
a highway shall drive the same at a careful and prudent speed, not greater
nor less than is reasonable and proper, having due regard for the traffic,
the width of the highway, and or any other condition then and there
existing; and no person shall drive any motor vehicle upon a highway at
such speed as to endanger the life, limb and property of any person,
nor at a speed greater than will permit him to bring the vehicle to a stop
within the assured clear distance ahead.[30]
Under Article 2185 of the Civil Code, a person driving a vehicle is
presumed negligent if at the time of the mishap, he was violating any
traffic regulation.[31]
Petitioner Tiu failed to
Overcome the presumption
Of negligence against him as
One engaged in the business
Of common carriage
The rules which common carriers should observe as to the safety of their
passengers are set forth in the Civil Code, Articles 1733, [32] 1755[33] and
1756.[34] In this case, respondent Arriesgado and his deceased wife
contracted with petitioner Tiu, as owner and operator of D Rough Riders
bus service, for transportation from Maya, Daanbantayan, Cebu, to Cebu
City for the price of P18.00.[35] It is undisputed that the respondent and his
wife were not safely transported to the destination agreed upon. In actions
for breach of contract, only the existence of such contract, and the fact
that the obligor, in this case the common carrier, failed to transport his
passenger safely to his destination are the matters that need to be proved.
[36]
This is because under the said contract of carriage, the petitioners
assumed the express obligation to transport the respondent and his wife
to their destination safely and to observe extraordinary diligence with due
regard for all circumstances.[37] Any injury suffered by the passengers in
the course thereof is immediately attributable to the negligence of the
carrier.[38] Upon the happening of the accident, the presumption of
negligence at once arises, and it becomes the duty of a common carrier to
prove that he observed extraordinary diligence in the care of his
passengers.[39] It must be stressed that in requiring the highest possible
degree of diligence from common carriers and in creating a presumption of
negligence against them, the law compels them to curb the recklessness
of their drivers.[40]
While evidence may be submitted to overcome such presumption of
negligence, it must be shown that the carrier observed the required
extraordinary diligence, which means that the carrier must show the
utmost diligence of very cautious persons as far as human care and
foresight can provide, or that the accident was caused by fortuitous event.
[41]
As correctly found by the trial court, petitioner Tiu failed to conclusively
rebut such presumption. The negligence of petitioner Laspias as driver of
the passenger bus is, thus, binding against petitioner Tiu, as the owner of
the passenger bus engaged as a common carrier.[42]
The Doctrine of
Last Clear Chance
Is Inapplicable in the
Case at Bar
Contrary to the petitioners contention, the principle of last clear chance is
inapplicable in the instant case, as it only applies in a suit between the
owners and drivers of two colliding vehicles. It does not arise where a
passenger demands responsibility from the carrier to enforce its
contractual obligations, for it would be inequitable to exempt the negligent
driver and its owner on the ground that the other driver was likewise guilty
of negligence.[43] The common law notion of last clear chance permitted
courts to grant recovery to a plaintiff who has also been negligent
provided that the defendant had the last clear chance to avoid the
casualty and failed to do so. Accordingly, it is difficult to see what role, if
any, the common law of last clear chance doctrine has to play in a
jurisdiction where the common law concept of contributory negligence as
an absolute bar to recovery by the plaintiff, has itself been rejected, as it
has been in Article 2179 of the Civil Code.[44]
Thus, petitioner Tiu cannot escape liability for the death of respondent
Arriesgados wife due to the negligence of petitioner Laspias, his employee,
on this score.
Respondents Pedrano and
Condor were likewise
Negligent
In Phoenix Construction, Inc. v. Intermediate Appellate Court,[45] where
therein respondent Dionisio sustained injuries when his vehicle rammed
against a dump truck parked askew, the Court ruled that the improper
parking of a dump truck without any warning lights or reflector devices
created an unreasonable risk for anyone driving within the vicinity, and for
having created such risk, the truck driver must be held responsible. In
ruling against the petitioner therein, the Court elucidated, thus:
In our view, Dionisios negligence, although later in point of time than the
truck drivers negligence, and therefore closer to the accident, was not an
efficient intervening or independent cause. What the petitioners describe
as an intervening cause was no more than a foreseeable consequence of
the risk created by the negligent manner in which the truck driver had
parked the dump truck. In other words, the petitioner truck driver owed a
duty to private respondent Dionisio and others similarly situated not to
impose upon them the very risk the truck driver had created. Dionisios
negligence was not that of an independent and overpowering nature as to
cut, as it were, the chain of causation in fact between the improper
parking of the dump truck and the accident, nor to sever the juris
vinculum of liability.
We hold that private respondent Dionisios negligence was only
contributory, that the immediate and proximate cause of the injury
remained the truck drivers lack of due care.[46]
In this case, both the trial and the appellate courts failed to consider that
respondent Pedrano was also negligent in leaving the truck parked askew
without any warning lights or reflector devices to alert oncoming vehicles,
and that such failure created the presumption of negligence on the part of
his employer, respondent Condor, in supervising his employees properly
and adequately. As we ruled in Poblete v. Fabros:[47]
It is such a firmly established principle, as to have virtually formed part of
the law itself, that the negligence of the employee gives rise to the
presumption of negligence on the part of the employer. This is the
presumed negligence in the selection and supervision of employee. The
theory of presumed negligence, in contrast with the American doctrine
of respondeat superior, where the negligence of the employee
is conclusively presumed to be the negligence of the employer, is clearly
deducible from the last paragraph of Article 2180 of the Civil Code which
provides that the responsibility therein mentioned shall cease if the
employers prove that they observed all the diligence of a good father of a
family to prevent damages. [48]
The petitioners were correct in invoking respondent Pedranos failure to
observe Article IV, Section 34(g) of the Rep. Act No. 4136, which provides:
(g) Lights when parked or disabled. Appropriate parking lights or
flares visible one hundred meters away shall be displayed at a corner of
the vehicle whenever such vehicle is parked on highways or in places that
are not well-lighted or is placed in such manner as to endanger passing
traffic.
The manner in which the truck was parked clearly endangered oncoming
traffic on both sides, considering that the tire blowout which stalled the
truck in the first place occurred in the wee hours of the morning. The Court
can only now surmise that the unfortunate incident could have been
averted had respondent Condor, the owner of the truck, equipped the said
vehicle with lights, flares, or, at the very least, an early warning device.
[49]
Hence, we cannot subscribe to respondents Condor and Pedranos claim
that they should be absolved from liability because, as found by the trial
and appellate courts, the proximate cause of the collision was the fast
speed at which petitioner Laspias drove the bus. To accept this proposition
would be to come too close to wiping out the fundamental principle of law
that a man must respond for the foreseeable consequences of his own
negligent act or omission. Indeed, our law on quasi-delicts seeks to reduce
the risks and burdens of living in society and to allocate them among its
members. To accept this proposition would be to weaken the very bonds of
society.[50]
The Liability of
Respondent PPSII
as Insurer
The trial court in this case did not rule on the liability of respondent PPSII,
while the appellate court ruled that, as no evidence was presented against
it, the insurance company is not liable.
A perusal of the records will show that when the petitioners filed the Third-
Party Complaint against respondent PPSII, they failed to attach a copy of
the terms of the insurance contract itself. Only Certificate of Cover No.
054940[51]issued in favor of Mr. William Tiu, Lahug, Cebu City signed by
Cosme H. Boniel was appended to the third-party complaint. The date of
issuance, July 22, 1986, the period of insurance, from July 22, 1986 to July
22, 1987, as well as the following items, were also indicated therein:
SCHEDULED VEHICLE
MODEL MAKE TYPE OF COLOR BLT FILE
 BODY NO. party plaintiff William Tiu and third party defendant (Philippine Phoenix
Surety and Insurance, Inc.). Third party Plaintiff William Tiu knew all along
Isuzu Forward Bus blue mixed the limitation as earlier stated, he being an old hand in the transportation
business; 55
PLATE SERIAL/CHASSIS MOTOR NO. AUTHORIZED UNLADEN
NO. PBP- NO. SER450- 677836 CAPACITY 50 WEIGHT Considering the admissions made by respondent PPSII, the existence of
724 1584124 6Cyls. Kgs. the insurance contract and the salient terms thereof cannot be dispatched.
It must be noted that after filing its answer, respondent PPSII no longer
SECTION 1/11 *LIMITS OF LIABILITY PREMIUMS objected to the presentation of evidence by respondent Arriesgado and
P50,000.00 PAID the insured petitioner Tiu. Even in its Memorandum56 before the Court,
A. THIRD PARTY LIABILITY respondent PPSII admitted the existence of the contract, but averred as
follows:
B. PASSENGER LIABILITY Per Person Per Accident P540.0052
P12,000.00 P50,000 Petitioner Tiu is insisting that PPSII is liable to him for contribution,
indemnification and/or reimbursement. This has no basis under the
In its Answer53 to the Third-Party Complaint, the respondent PPSII admitted contract. Under the contract, PPSII will pay all sums necessary to
the existence of the contract of insurance, in view of its failure to discharge liability of the insured subject to the limits of liability but not to
specifically deny the same as required under then Section 8(a), Rule 8 of exceed the limits of liability as so stated in the contract. Also, it is stated in
the Rules of Court,54 which reads: the contract that in the event of accident involving indemnity to more than
one person, the limits of liability shall not exceed the aggregate amount so
Sec. 8. How to contest genuineness of such documents. When an action or
specified by law to all persons to be indemnified. 57
defense is founded upon a written instrument copied in or attached to the
corresponding pleading as provided in the preceding section, the As can be gleaned from the Certificate of Cover, such insurance contract
genuineness and due execution of the instrument shall be deemed was issued pursuant to the Compulsory Motor Vehicle Liability Insurance
admitted unless the adverse party, under oath, specifically denies them, Law. It was expressly provided therein that the limit of the insurers liability
and sets forth what he claims to be the facts; but the requirement of an for each person was P12,000, while the limit per accident was pegged
oath does not apply when the adverse party does not appear to be a party at P50,000. An insurer in an indemnity contract for third party liability is
to the instrument or when compliance with an order for inspection of the directly liable to the injured party up to the extent specified in the
original instrument is refused. agreement but it cannot be held solidarily liable beyond that
amount.58 The respondent PPSII could not then just deny petitioner Tius
In fact, respondent PPSII did not dispute the existence of such contract,
claim; it should have paid P12,000 for the death of Felisa Arriesgado,59 and
and admitted that it was liable thereon. It claimed, however, that it had
respondent Arriesgados hospitalization expenses of P1,113.80, which the
attended to and settled the claims of those injured during the incident,
trial court found to have been duly supported by receipts. The total
and set up the following as special affirmative defenses:
amount of the claims, even when added to that of the other injured
Third party defendant Philippine Phoenix Surety and Insurance, Inc. hereby passengers which the respondent PPSII claimed to have settled, 60 would
reiterates and incorporates by way of reference the preceding paragraphs not exceed the P50,000 limit under the insurance agreement.
and further states THAT:-
Indeed, the nature of Compulsory Motor Vehicle Liability Insurance is such
8. It has attended to the claims of Vincent Canales, Asuncion Batiancila that it is primarily intended to provide compensation for the death or
and Neptali Palces who sustained injuries during the incident in question. bodily injuries suffered by innocent third parties or passengers as a result
In fact, it settled financially their claims per vouchers duly signed by them of the negligent operation and use of motor vehicles. The victims and/or
and they duly executed Affidavit[s] of Desistance to that effect, xerox their dependents are assured of immediate financial assistance, regardless
copies of which are hereto attached as Annexes 1, 2, 3, 4, 5, and 6 of the financial capacity of motor vehicle owners.61 As the Court, speaking
respectively; through Associate Justice Leonardo A. Quisumbing, explained
in Government Service Insurance System v. Court of Appeals:62
9. With respect to the claim of plaintiff, herein answering third party
defendant through its authorized insurance adjuster attended to said However, although the victim may proceed directly against the insurer for
claim. In fact, there were negotiations to that effect. Only that it cannot indemnity, the third party liability is only up to the extent of the insurance
accede to the demand of said claimant considering that the claim was way policy and those required by law. While it is true that where the insurance
beyond the scheduled indemnity as per contract entered into with third contract provides for indemnity against liability to third persons, and such
persons can directly sue the insurer, the direct liability of the insurer under
indemnity contracts against third party liability does not mean that the
insurer can be held liable in solidum with the insured and/or the other
parties found at fault. For the liability of the insurer is based on contract;
that of the insured carrier or vehicle owner is based on tort.
Obviously, the insurer could be held liable only up to the extent of what
was provided for by the contract of insurance, in accordance with the
CMVLI law. At the time of the incident, the schedule of indemnities for
death and bodily injuries, professional fees and other charges payable
under a CMVLI coverage was provided for under the Insurance
Memorandum Circular (IMC) No. 5-78 which was approved on November
10, 1978. As therein provided, the maximum indemnity for death was
twelve thousand (P12,000.00) pesos per victim. The schedules for medical
expenses were also provided by said IMC, specifically in paragraphs (C) to
(G).63
v. Intermediate Appellate Court, and Metro Manila Transit Corporation v.
Court of Appeals, the bus company, its driver, the operator of the other
vehicle and the driver of the vehicle were jointly and severally held liable
to the injured passenger or the latters heirs. The basis of this allocation of
liability was explained in Viluan v. Court of Appeals, thus:
Nor should it make difference that the liability of petitioner [bus owner]
springs from contract while that of respondents [owner and driver of other
vehicle] arises from quasi-delict. As early as 1913, we already ruled in
Gutierrez vs. Gutierrez, 56 Phil. 177, that in case of injury to a passenger
due to the negligence of the driver of the bus on which he was riding and
of the driver of another vehicle, the drivers as well as the owners of the
two vehicles are jointly and severally liable for damages. Some members
of the Court, though, are of the view that under the circumstances they
are liable on quasi-delict.69

Damages to be IN LIGHT OF ALL THE FOREGOING, the petition is PARTIALLY

Awarded
The trial court correctly awarded moral damages in the amount of P50,000
in favor of respondent Arriesgado. The award of exemplary damages by
way of example or correction of the public good,64 is likewise in order. As
the Court ratiocinated in Kapalaran Bus Line v. Coronado:65
While the immediate beneficiaries of the standard of extraordinary
diligence are, of course, the passengers and owners of cargo carried by a
common carrier, they are not the only persons that the law seeks to
benefit. For if common carriers carefully observed the statutory standard
of extraordinary diligence in respect of their own passengers, they cannot
help but simultaneously benefit pedestrians and the passengers of other
vehicles who are equally entitled to the safe and convenient use of our
roads and highways. The law seeks to stop and prevent the slaughter and
maiming of people (whether passengers or not) on our highways and
buses, the very size and power of which seem to inflame the minds of their
drivers. Article 2231 of the Civil Code explicitly authorizes the imposition
of exemplary damages in cases of quasi-delicts if the defendant acted with
gross negligence.66
GRANTED. The Decision of the Court of Appeals is AFFIRMED with
MODIFICATIONS:
(1) Respondent Philippine Phoenix Surety and Insurance, Inc. and
petitioner William Tiu are ORDERED to pay, jointly and severally,
respondent Pedro A. Arriesgado the total amount of P13,113.80;
(2) The petitioners and the respondents Benjamin Condor and Sergio
Pedrano are ORDERED to pay, jointly and severally, respondent Pedro A.
Arriesgado P50,000.00 as indemnity; P26,441.50 as actual
damages; P50,000.00 as moral damages; P50,000.00 as exemplary
damages; and P20,000.00 as attorneys fees.
SO ORDERED.
Austria-Martinez, (Acting Chairman), Tinga, and Chico-Nazario, JJ., concur.
Puno J., (Chairman), on official leave.

The respondent Pedro A. Arriesgado, as the surviving spouse and heir of

Felisa Arriesgado, is entitled to indemnity in the amount of P50,000.00.67

The petitioners, as well as the respondents Benjamin Condor and Sergio

Pedrano are jointly and severally liable for said amount, conformably with
the following pronouncement of the Court in Fabre, Jr. vs. Court of
Appeals:68

The same rule of liability was applied in situations where the negligence of
the driver of the bus on which plaintiff was riding concurred with the
negligence of a third party who was the driver of another vehicle, thus
causing an accident. In Anuran v. Buo, Batangas Laguna Tayabas Bus Co.

G.R. No. 153076 June 21, 2007
LAPANDAY AGRICULTURAL and DEVELOPMENT CORPORATION
(LADECO), HENRY BERENGUEL, and APOLONIO R.
DEOCAMPO, petitioners,
vs.
MICHAEL RAYMOND ANGALA, respondent.
DECISION
CARPIO, J.:
The Case
Before the Court is a petition for review1 assailing the 25 July 2001
Decision2 and 11 March 2002 Resolution3 of the Court of Appeals in CA-
G.R. CV No. 51134.
The Antecedent Facts
On 4 May 1993, at about 2:45 p.m., a Datsun crewcab with plate no. PEC-
903 driven by Apolonio Deocampo (Deocampo) bumped into a 1958 Chevy
pick-up with plate no. MAM-475 owned by Michael Raymond Angala
(respondent) and driven by Bernulfo Borres (Borres). Lapanday Agricultural
and Development Corporation (LADECO) owned the crewcab which was
assigned to its manager Manuel Mendez (Mendez). Deocampo was the
driver and bodyguard of Mendez. Both vehicles were running along Rafael
Castillo St., Agdao, Davao City heading north towards Lanang, Davao City.
The left door, front left fender, and part of the front bumper of the pick-up
were damaged.
Respondent filed an action for Quasi-Delict, Damages, and Attorney’s Fees
against LADECO, its administrative officer Henry Berenguel4 (Berenguel)
and Deocampo. Respondent alleged that his pick-up was slowing down to
about five to ten kilometers per hour (kph) and was making a left turn
preparatory to turning south when it was bumped from behind by the
crewcab which was running at around 60 to 70 kph. The crewcab stopped
21 meters from the point of impact. Respondent alleged that he heard a
screeching sound before the impact. Respondent was seated beside the
driver and was looking at the speedometer when the accident took place.
Respondent testified that Borres made a signal because he noticed a
blinking light while looking at the speedometer.5
Respondent sent a demand letter to LADECO for the payment of the
damages he incurred because of the accident but he did not receive any
reply. Thus, respondent filed the case against LADECO, Berenguel, and
Deocampo.
Deocampo alleged that the pick-up and the crewcab he was driving were
both running at about 40 kph. The pick-up was running along the outer
lane. The pick-up was about 10 meters away when it made a U-turn
towards the left. Deocampo testified that he did not see any signal from
the pick-up.6 Deocampo alleged that he tried to avoid the pick-up but he
was unable to avoid the collision. Deocampo stated that he did not apply
the brakes because he knew the collision was unavoidable. Deocampo
admitted that he stepped on the brakes only after the collision.
The Ruling of the Trial Court
In its 3 March 1995 Decision,7 the Regional Trial Court of Davao City,
Branch 15 (trial court) ruled:
WHEREFORE, judgment is hereby rendered ordering the defendants
LADECO and Apolonio Deocampo to solidarily pay the plaintiffs the
following sums:
1. Twenty three thousand two hundred (P23,200.00) pesos as actual
damages.
2. Ten thousand (P10,000.00) pesos as moral damages.
3. Ten thousand (P10,000.00) pesos as attorney’s fees.
4. Costs of suit.
SO ORDERED.8
The trial court found that the crewcab was running very fast while
following the pick-up and that the crewcab’s speed was the proximate
cause of the accident. The trial court observed that the crewcab stopped
21 meters away from the point of impact despite Deocampo’s claim that
he stepped on the brakes moments after the collision. The trial court ruled
that Deocampo had the last opportunity to avoid the accident.
The trial court found that Berenguel was not liable because he was not the
owner of the crewcab.
LADECO and Deocampo (petitioners)9 filed a motion for reconsideration.
The trial court denied petitioners’ motion in its 13 June 1995 Order. 10
Petitioners filed an appeal before the Court of Appeals.
The Ruling of the Court of Appeals
The Court of Appeals affirmed in toto the trial court’s decision.
The Court of Appeals sustained the finding of the trial court that
Deocampo was negligent. The Court of Appeals applied the doctrine of last
clear chance and ruled that Deocampo had the responsibility of avoiding
the pick-up.
The Court of Appeals also sustained the solidary liability of LADECO and
Deocampo. The Court of Appeals ruled that under Article 2180 of the Civil
Code, the negligence of the driver is presumed to be the negligence of the
owner of the vehicle.
The dispositive portion of the Court of Appeals’ Decision reads:
WHEREFORE, premises considered, the appeal is DISMISSED for lack of
merit, and the assailed Decision of the Court a quo in Civil Case No.
22067-93 is AFFIRMED in toto. Costs against defendants-appellants.
SO ORDERED.11
Petitioners filed a motion for reconsideration. In its 11 March 2002
Resolution, the Court of Appeals denied the motion for lack of merit.
Hence, the petition before this Court.
The Issues
The issues before the Court are the following:
1. Whether the provisions of Section 45(b) of Republic Act No. 4136 12 (RA
4136) and Article 2185 of the Civil Code apply to this case; and
2. Whether respondent is entitled to the damages awarded.
The Ruling of this Court
The petition is partly meritorious.
Both Drivers are Negligent
Both the trial court and the Court of Appeals found that Deocampo was at
fault because he was driving very fast prior to the collision. The Court of
Appeals sustained the trial court’s finding that Deocampo was running
more than the normal cruising speed. Both the trial court and the Court of
Appeals noted that the crewcab stopped 21 meters away from the point of
impact. Deocampo admitted that he stepped on the brakes only after the
collision.
Petitioners allege that Borres did not take the proper lane before executing
the U-turn. Petitioners allege that Borres violated Section 45(b) of RA 4136
and it was his recklessness that was the proximate cause of the accident.
Section 45(b) of RA 4136 states:
Sec. 45. Turning at intersections. x x x
(b) The driver of a vehicle intending to turn to the left shall approach such
intersection in the lane for traffic to the right of and nearest to the center
line of the highway, and, in turning, shall pass to the left of the center of
the intersection, except that, upon highways laned for traffic and upon
one-way highways, a left turn shall be made from the left lane of traffic in
the direction in which the vehicle is proceeding.
Petitioners further allege that since Borres was violating a traffic rule at
the time of the accident, respondent and Borres were the parties at fault.
Petitioners cite Article 2185 of the Civil Code, thus:
Art. 2185. Unless there is proof to the contrary, it is presumed that a
person driving a motor vehicle has been negligent if at the time of the
mishap, he was violating any traffic regulation.
We rule that both parties were negligent in this case. Borres was at the
outer lane when he executed a U-turn. Following Section 45(b) of RA 4136,
Borres should have stayed at the inner lane which is the lane nearest to
the center of the highway. However, Deocampo was equally negligent.
Borres slowed down the pick-up preparatory to executing the U-turn.
Deocampo should have also slowed down when the pick-up slowed down.
Deocampo admitted that he noticed the pick-up when it was still about 20
meters away from him.13 Vehicular traffic was light at the time of the
incident. The pick-up and the crewcab were the only vehicles on the
road.14 Deocampo could have avoided the crewcab if he was not driving
very fast before the collision, as found by both the trial court and the Court
of Appeals. We sustain this finding since factual findings of the Court of
Appeals affirming those of the trial court are conclusive and binding on
this Court.15 Further, the crewcab stopped 21 meters from the point of
impact. It would not have happened if Deocampo was not driving very
fast.
Doctrine of Last Clear Chance Applies
Since both parties are at fault in this case, the doctrine of last clear chance
applies.
The doctrine of last clear chance states that where both parties are
negligent but the negligent act of one is appreciably later than that of the
other, or where it is impossible to determine whose fault or negligence
caused the loss, the one who had the last clear opportunity to avoid the
loss but failed to do so is chargeable with the loss. 16 In this case,
Deocampo had the last clear chance to avoid the collision. Since
Deocampo was driving the rear vehicle, he had full control of the situation
since he was in a position to observe the vehicle in front of
him.17 Deocampo had the responsibility of avoiding bumping the vehicle in
front of him.18 A U-turn is done at a much slower speed to avoid skidding
and overturning, compared to running straight ahead.19 Deocampo could
have avoided the vehicle if he was not driving very fast while following the
pick-up. Deocampo was not only driving fast, he also admitted that he did
not step on the brakes even upon seeing the pick-up. He only stepped on
the brakes after the collision.
Petitioners are Solidarily Liable
LADECO alleges that it should not be held jointly and severally liable with
Deocampo because it exercised due diligence in the supervision and
selection of its employees. Aside from this statement, LADECO did not
proffer any proof to show how it exercised due diligence in the supervision
and selection of its employees. LADECO did not show its policy in hiring its
drivers, or the manner in which it supervised its drivers. LADECO failed to
substantiate its allegation that it exercised due diligence in the supervision
and selection of its employees.

Hence, we hold LADECO solidarily liable with Deocampo.

Respondent is Entitled to Moral Damages

We sustain the award of moral damages. Moral damages are awarded to

allow a plaintiff to obtain means, diversion, or amusement that will serve
to alleviate the moral suffering he has undergone due to the defendant’s
culpable action.20 The trial court found that respondent, who was on board
the pick-up when the collision took place, suffered shock, serious anxiety,
and fright when the crewcab bumped his pick-up. We sustain the trial
court and the Court of Appeals in ruling that respondent sufficiently
showed that he suffered shock, serious anxiety, and fright which entitle
him to moral damages.

Both the trial court and the Court of Appeals failed to give any justification
for the award of attorney’s fees. Awards of attorney’s fees must be based
on findings of fact and of law and stated in the decision of the trial
court.21 Further, no premium should be placed on the right to
litigate.22 Hence, we delete the award of attorney’s fees.

WHEREFORE, we AFFIRM the 25 July 2001 Decision and 11 March 2002

Resolution of the Court of Appeals in CA-G.R. CV No. 51134
with MODIFICATION by deleting the award of attorney’s fees.

SO ORDERED.